ITEM 1. FINANCIAL STATEMENTS
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
|
(unaudited)
|
|
(audited)
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
258,083
|
|
|
$
|
418,181
|
|
|
Accounts receivable, net
|
333,351
|
|
|
254,696
|
|
|
Costs and estimated earnings in excess of billings
|
34,181
|
|
|
8,666
|
|
|
Inventories
|
195,312
|
|
|
200,308
|
|
|
Other current assets
|
13,855
|
|
|
11,428
|
|
|
Total current assets
|
834,782
|
|
|
893,279
|
|
|
Property, plant and equipment, less accumulated depreciation, depletion and amortization (October 2, 2021 - $1,234,171 and January 2, 2021 - $1,132,925)
|
1,841,139
|
|
|
1,850,169
|
|
|
Goodwill
|
1,174,855
|
|
|
1,201,291
|
|
|
Intangible assets, less accumulated amortization (October 2, 2021 - $14,309 and January 2, 2021 - $11,864)
|
70,338
|
|
|
47,852
|
|
|
Deferred tax assets, less valuation allowance (October 2, 2021 - $1,675 and January 2, 2021 - $1,675)
|
210,389
|
|
|
231,877
|
|
|
Operating lease right-of-use assets
|
27,339
|
|
|
28,543
|
|
|
Other assets
|
57,807
|
|
|
55,000
|
|
|
Total assets
|
$
|
4,216,649
|
|
|
$
|
4,308,011
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Current portion of debt
|
$
|
6,354
|
|
|
$
|
6,354
|
|
|
Current portion of acquisition-related liabilities
|
12,809
|
|
|
10,265
|
|
|
Accounts payable
|
155,919
|
|
|
120,813
|
|
|
Accrued expenses
|
137,378
|
|
|
160,570
|
|
|
Current operating lease liabilities
|
6,818
|
|
|
8,188
|
|
|
Billings in excess of costs and estimated earnings
|
11,631
|
|
|
16,499
|
|
|
Total current liabilities
|
330,909
|
|
|
322,689
|
|
|
Long-term debt
|
1,591,989
|
|
|
1,892,347
|
|
|
Acquisition-related liabilities
|
33,223
|
|
|
12,246
|
|
|
Tax receivable agreement liability
|
330,871
|
|
|
321,680
|
|
|
Noncurrent operating lease liabilities
|
21,596
|
|
|
21,500
|
|
|
Other noncurrent liabilities
|
136,297
|
|
|
121,281
|
|
|
Total liabilities
|
2,444,885
|
|
|
2,691,743
|
|
|
Commitments and contingencies (see note 12)
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 118,564,950 and 114,390,595 shares issued and outstanding as of October 2, 2021 and January 2, 2021, respectively
|
1,186
|
|
|
1,145
|
|
|
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of October 2, 2021 and January 2, 2021
|
—
|
|
|
—
|
|
|
Additional paid-in capital
|
1,319,897
|
|
|
1,264,681
|
|
|
Accumulated earnings
|
435,118
|
|
|
326,772
|
|
|
Accumulated other comprehensive income
|
5,670
|
|
|
5,203
|
|
|
Stockholders’ equity
|
1,761,871
|
|
|
1,597,801
|
|
|
Noncontrolling interest in Summit Holdings
|
9,893
|
|
|
18,467
|
|
|
Total stockholders’ equity
|
1,771,764
|
|
|
1,616,268
|
|
|
Total liabilities and stockholders’ equity
|
$
|
4,216,649
|
|
|
$
|
4,308,011
|
|
See notes to unaudited consolidated financial statements.
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Product
|
$
|
561,938
|
|
|
$
|
540,904
|
|
|
$
|
1,443,972
|
|
|
$
|
1,334,471
|
|
|
Service
|
100,321
|
|
|
104,342
|
|
|
235,298
|
|
|
228,421
|
|
|
Net revenue
|
662,259
|
|
|
645,246
|
|
|
1,679,270
|
|
|
1,562,892
|
|
|
Delivery and subcontract revenue
|
54,981
|
|
|
64,373
|
|
|
133,731
|
|
|
144,926
|
|
|
Total revenue
|
717,240
|
|
|
709,619
|
|
|
1,813,001
|
|
|
1,707,818
|
|
|
Cost of revenue (excluding items shown separately below):
|
|
|
|
|
|
|
|
|
Product
|
356,214
|
|
|
354,250
|
|
|
980,045
|
|
|
923,384
|
|
|
Service
|
75,741
|
|
|
82,969
|
|
|
187,570
|
|
|
190,153
|
|
|
Net cost of revenue
|
431,955
|
|
|
437,219
|
|
|
1,167,615
|
|
|
1,113,537
|
|
|
Delivery and subcontract cost
|
54,981
|
|
|
64,373
|
|
|
133,731
|
|
|
144,926
|
|
|
Total cost of revenue
|
486,936
|
|
|
501,592
|
|
|
1,301,346
|
|
|
1,258,463
|
|
|
General and administrative expenses
|
47,364
|
|
|
50,972
|
|
|
146,454
|
|
|
132,385
|
|
|
Depreciation, depletion, amortization and accretion
|
59,082
|
|
|
58,054
|
|
|
173,651
|
|
|
163,760
|
|
|
Gain on sale of property, plant and equipment
|
(1,159)
|
|
|
(1,616)
|
|
|
(4,331)
|
|
|
(5,747)
|
|
|
Operating income
|
125,017
|
|
|
100,617
|
|
|
195,881
|
|
|
158,957
|
|
|
Interest expense
|
24,134
|
|
|
24,623
|
|
|
72,536
|
|
|
78,049
|
|
|
Loss on debt financings
|
6,016
|
|
|
4,064
|
|
|
6,016
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of businesses
|
113
|
|
|
—
|
|
|
(15,319)
|
|
|
—
|
|
|
Other income, net
|
(1,137)
|
|
|
(1,226)
|
|
|
(10,721)
|
|
|
(2,753)
|
|
|
Income from operations before taxes
|
95,891
|
|
|
73,156
|
|
|
143,369
|
|
|
79,597
|
|
|
Income tax expense (benefit)
|
20,513
|
|
|
(19,613)
|
|
|
33,478
|
|
|
(25,333)
|
|
|
Net income
|
75,378
|
|
|
92,769
|
|
|
109,891
|
|
|
104,930
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Summit Holdings
|
1,174
|
|
|
2,039
|
|
|
1,545
|
|
|
2,115
|
|
|
Net income attributable to Summit Inc.
|
$
|
74,204
|
|
|
$
|
90,730
|
|
|
$
|
108,346
|
|
|
$
|
102,815
|
|
|
Earnings per share of Class A common stock:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.63
|
|
|
$
|
0.79
|
|
|
$
|
0.92
|
|
|
$
|
0.90
|
|
|
Diluted
|
$
|
0.62
|
|
|
$
|
0.79
|
|
|
$
|
0.92
|
|
|
$
|
0.90
|
|
|
Weighted average shares of Class A common stock:
|
|
|
|
|
|
|
|
|
Basic
|
118,473,530
|
|
|
114,436,907
|
|
|
117,258,431
|
|
|
114,088,447
|
|
|
Diluted
|
119,291,646
|
|
|
114,472,171
|
|
|
118,360,615
|
|
|
114,457,276
|
|
See notes to unaudited consolidated financial statements.
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Net income
|
$
|
75,378
|
|
|
$
|
92,769
|
|
|
$
|
109,891
|
|
|
$
|
104,930
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(4,076)
|
|
|
2,018
|
|
|
682
|
|
|
(3,395)
|
|
|
|
|
|
|
|
|
|
|
|
Less tax effect of other comprehensive income (loss) items
|
823
|
|
|
(494)
|
|
|
(176)
|
|
|
831
|
|
|
Other comprehensive (loss) income
|
(3,253)
|
|
|
1,524
|
|
|
506
|
|
|
(2,564)
|
|
|
Comprehensive income
|
72,125
|
|
|
94,293
|
|
|
110,397
|
|
|
102,366
|
|
|
Less comprehensive income attributable to Summit Holdings
|
1,117
|
|
|
2,091
|
|
|
1,584
|
|
|
2,024
|
|
|
Comprehensive income attributable to Summit Inc.
|
$
|
71,008
|
|
|
$
|
92,202
|
|
|
$
|
108,813
|
|
|
$
|
100,342
|
|
See notes to unaudited consolidated financial statements.
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Cash flow from operating activities:
|
|
|
|
|
Net income
|
$
|
109,891
|
|
|
$
|
104,930
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
Depreciation, depletion, amortization and accretion
|
177,841
|
|
|
164,397
|
|
|
Share-based compensation expense
|
14,875
|
|
|
23,119
|
|
|
Net gain on asset and business disposals
|
(19,295)
|
|
|
(5,746)
|
|
|
Non-cash loss on debt financings
|
2,116
|
|
|
4,064
|
|
|
Change in deferred tax asset, net
|
19,814
|
|
|
(28,968)
|
|
|
Other
|
(586)
|
|
|
760
|
|
|
Decrease (increase) in operating assets, net of acquisitions and dispositions:
|
|
|
|
|
Accounts receivable, net
|
(78,108)
|
|
|
(48,361)
|
|
|
Inventories
|
(12,002)
|
|
|
(2,829)
|
|
|
Costs and estimated earnings in excess of billings
|
(26,969)
|
|
|
(30,912)
|
|
|
Other current assets
|
(2,556)
|
|
|
(75)
|
|
|
Other assets
|
6,459
|
|
|
8,367
|
|
|
(Decrease) increase in operating liabilities, net of acquisitions and dispositions:
|
|
|
|
|
Accounts payable
|
33,756
|
|
|
21,729
|
|
|
Accrued expenses
|
(15,598)
|
|
|
3,164
|
|
|
Billings in excess of costs and estimated earnings
|
(2,907)
|
|
|
395
|
|
|
Tax receivable agreement liability
|
9,191
|
|
|
993
|
|
|
Other liabilities
|
(8,549)
|
|
|
3,012
|
|
|
Net cash provided by operating activities
|
207,373
|
|
|
218,039
|
|
|
Cash flow from investing activities:
|
|
|
|
|
Acquisitions, net of cash acquired
|
(7,263)
|
|
|
(123,195)
|
|
|
Purchases of property, plant and equipment
|
(170,070)
|
|
|
(140,006)
|
|
|
Proceeds from the sale of property, plant and equipment
|
8,827
|
|
|
8,848
|
|
|
Proceeds from sale of businesses
|
103,649
|
|
|
—
|
|
|
Other
|
(459)
|
|
|
1,395
|
|
|
Net cash used in investing activities
|
(65,316)
|
|
|
(252,958)
|
|
|
Cash flow from financing activities:
|
|
|
|
|
Proceeds from debt issuances
|
—
|
|
|
700,000
|
|
|
Debt issuance costs
|
—
|
|
|
(9,565)
|
|
|
Payments on debt
|
(323,802)
|
|
|
(666,892)
|
|
|
Payments on acquisition-related liabilities
|
(9,755)
|
|
|
(10,391)
|
|
|
|
|
|
|
|
Proceeds from stock option exercises
|
32,416
|
|
|
329
|
|
|
Other
|
(951)
|
|
|
(908)
|
|
|
Net cash (used in) provided by financing activities
|
(302,092)
|
|
|
12,573
|
|
|
Impact of foreign currency on cash
|
(63)
|
|
|
(216)
|
|
|
Net decrease in cash
|
(160,098)
|
|
|
(22,562)
|
|
|
Cash and cash equivalents—beginning of period
|
418,181
|
|
|
311,319
|
|
|
Cash and cash equivalents—end of period
|
$
|
258,083
|
|
|
$
|
288,757
|
|
See notes to unaudited consolidated financial statements.
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit Materials, Inc.
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Class A
|
|
Class B
|
|
Additional
|
|
Noncontrolling
|
|
Total
|
|
|
Accumulated
|
|
Comprehensive
|
|
Common Stock
|
|
Common Stock
|
|
Paid-in
|
|
Interest in
|
|
Stockholders’
|
|
|
Earnings
|
|
income (loss)
|
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
Capital
|
|
Summit Holdings
|
|
Equity
|
|
Balance - January 2, 2021
|
$
|
326,772
|
|
|
$
|
5,203
|
|
|
114,390,595
|
|
|
$
|
1,145
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,264,681
|
|
|
$
|
18,467
|
|
|
$
|
1,616,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(22,517)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(728)
|
|
|
(23,245)
|
|
|
LP Unit exchanges
|
—
|
|
|
—
|
|
|
711,794
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
4,744
|
|
|
(4,751)
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
1,635
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
1,680
|
|
|
Stock option exercises
|
—
|
|
|
—
|
|
|
863,338
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
15,911
|
|
|
—
|
|
|
15,920
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,363
|
|
|
—
|
|
|
5,363
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
678,605
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
(1,432)
|
|
|
—
|
|
|
(1,426)
|
|
|
Balance — April 3, 2021
|
$
|
304,255
|
|
|
$
|
6,838
|
|
|
116,644,332
|
|
|
$
|
1,167
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,289,267
|
|
|
$
|
13,033
|
|
|
$
|
1,614,560
|
|
|
Net loss
|
56,659
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,099
|
|
|
57,758
|
|
|
LP Unit exchanges
|
—
|
|
|
—
|
|
|
445,540
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
3,631
|
|
|
(3,635)
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
2,028
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
2,079
|
|
|
Stock option exercises
|
—
|
|
|
—
|
|
|
847,480
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
15,837
|
|
|
—
|
|
|
15,845
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,827
|
|
|
—
|
|
|
4,827
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
18,536
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(148)
|
|
|
—
|
|
|
(147)
|
|
|
Balance — July 3, 2021
|
$
|
360,914
|
|
|
$
|
8,866
|
|
|
117,955,888
|
|
|
$
|
1,180
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,313,414
|
|
|
$
|
10,548
|
|
|
$
|
1,694,922
|
|
|
Net income
|
74,204
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,174
|
|
|
75,378
|
|
|
LP Unit exchanges
|
—
|
|
|
—
|
|
|
283,649
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
1,769
|
|
|
(1,772)
|
|
|
—
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
(3,196)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(57)
|
|
|
(3,253)
|
|
|
Stock option exercises
|
—
|
|
|
—
|
|
|
33,438
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
651
|
|
|
—
|
|
|
651
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,685
|
|
|
—
|
|
|
4,685
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
291,975
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(622)
|
|
|
—
|
|
|
(619)
|
|
|
Balance - October 2, 2021
|
$
|
435,118
|
|
|
$
|
5,670
|
|
|
118,564,950
|
|
|
$
|
1,186
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,319,897
|
|
|
$
|
9,893
|
|
|
$
|
1,771,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit Materials, Inc.
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Class A
|
|
Class B
|
|
Additional
|
|
Noncontrolling
|
|
Total
|
|
|
Accumulated
|
|
Comprehensive
|
|
Common Stock
|
|
Common Stock
|
|
Paid-in
|
|
Interest in
|
|
Stockholders’
|
|
|
Earnings
|
|
income (loss)
|
|
Shares
|
|
Dollars
|
|
Shares
|
|
Dollars
|
|
Capital
|
|
Summit Holdings
|
|
Equity
|
|
Balance — December 28, 2019
|
$
|
188,805
|
|
|
$
|
3,448
|
|
|
113,309,385
|
|
|
$
|
1,134
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,234,020
|
|
|
$
|
17,366
|
|
|
$
|
1,444,773
|
|
|
Net loss
|
(44,979)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,747)
|
|
|
(46,726)
|
|
|
LP Unit exchanges
|
—
|
|
|
—
|
|
|
196,542
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
1,132
|
|
|
(1,134)
|
|
|
—
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
(6,093)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(220)
|
|
|
(6,313)
|
|
|
Stock option exercises
|
—
|
|
|
—
|
|
|
13,335
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
310
|
|
|
—
|
|
|
310
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,905
|
|
|
—
|
|
|
4,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
591,335
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
(1,096)
|
|
|
—
|
|
|
(1,090)
|
|
|
Balance — March 28, 2020
|
$
|
143,826
|
|
|
$
|
(2,645)
|
|
|
114,110,597
|
|
|
$
|
1,142
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,239,271
|
|
|
$
|
14,265
|
|
|
$
|
1,395,859
|
|
|
Net income
|
57,064
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,823
|
|
|
58,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
2,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
2,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,892
|
|
|
—
|
|
|
4,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
1,351
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance — June 27, 2020
|
$
|
200,890
|
|
|
$
|
(497)
|
|
|
114,111,948
|
|
|
$
|
1,142
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,244,163
|
|
|
$
|
16,165
|
|
|
$
|
1,461,863
|
|
|
Net income
|
90,730
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,039
|
|
|
92,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
1,472
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|
1,524
|
|
|
Stock option exercises
|
—
|
|
|
—
|
|
|
1,069
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,322
|
|
|
—
|
|
|
13,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares redeemed to settle taxes and other
|
—
|
|
|
—
|
|
|
10,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(3)
|
|
|
—
|
|
|
Balance — September 26, 2020
|
$
|
291,620
|
|
|
$
|
975
|
|
|
114,123,911
|
|
|
$
|
1,142
|
|
|
99
|
|
|
$
|
—
|
|
|
$
|
1,257,506
|
|
|
$
|
18,253
|
|
|
$
|
1,569,496
|
|
See notes to unaudited consolidated financial statements.
SUMMIT MATERIALS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts or otherwise noted)
1.SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Summit Materials, Inc. (“Summit Inc.” and, together with its subsidiaries, “Summit,” “we,” “us,” “our” or the “Company”) is a vertically-integrated construction materials company. The Company is engaged in the production and sale of aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, two cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. It is also engaged in paving and related services. The Company’s three operating and reporting segments are the West, East and Cement segments.
Substantially all of the Company’s construction materials, products and services are produced, consumed and performed outdoors, primarily in the spring, summer and fall. Seasonal changes and other weather-related conditions can affect the production and sales volumes of its products and delivery of services. Therefore, the financial results for any interim period are typically not indicative of the results expected for the full year. Furthermore, the Company’s sales and earnings are sensitive to national, regional and local economic conditions, weather conditions and to cyclical changes in construction spending, among other factors.
Summit Inc. is a holding corporation operating and controlling all of the business and affairs of Summit Materials Holdings L.P. (“Summit Holdings”) and its subsidiaries and, through Summit Holdings, conducts its business. Summit Inc. owns the majority of the partnership interests of Summit Holdings (see Note 9, Stockholders’ Equity). Summit Materials, LLC (“Summit LLC”) an indirect wholly owned subsidiary of Summit Holdings, conducts the majority of our operations. Summit Materials Finance Corp. (“Summit Finance”), an indirect wholly owned subsidiary of Summit LLC, has jointly issued our Senior Notes as described below.
Basis of Presentation—These unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto as of and for the year ended January 2, 2021. The Company continues to follow the accounting policies set forth in those audited consolidated financial statements.
Management believes that these consolidated interim financial statements include all adjustments, normal and recurring in nature, that are necessary to present fairly the financial position of the Company as of October 2, 2021, the results of operations for the three and nine months ended October 2, 2021 and September 26, 2020 and cash flows for the nine months ended October 2, 2021 and September 26, 2020.
Principles of Consolidation—The consolidated financial statements include the accounts of Summit Inc. and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated.
For a summary of the changes in Summit Inc.’s ownership of Summit Holdings, see Note 9, Stockholders’ Equity.
Use of Estimates—Preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, tax receivable agreement ("TRA") liability, pension and other postretirement obligations and asset retirement obligations. Estimates also include revenue earned on contracts and costs to complete contracts. Most of the Company’s paving and related services are performed under fixed unit-price contracts with state and local governmental entities. Management regularly evaluates its estimates and assumptions based on historical experience and other factors, including the current economic environment. As future events and their effects cannot be determined with precision, actual results can differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, are reflected in the Company’s consolidated financial statements when the change in estimate occurs.
Business and Credit Concentrations—The Company’s operations are conducted primarily across 21 U.S. states and in British Columbia, Canada, with the most significant revenue generated in Texas, Utah, Kansas and Missouri. The Company’s accounts receivable consist primarily of amounts due from customers within these areas. Therefore, collection of these accounts is dependent on the economic conditions in the aforementioned states, as well as specific situations affecting individual customers. Credit granted within the Company’s trade areas has been granted to many customers, and management does not believe that a significant concentration of credit exists with respect to any individual customer or group of customers. No single customer accounted for more than 10% of the Company’s total revenue in the three and nine months ended October 2, 2021 or September 26, 2020.
Revenue Recognition—We earn revenue from the sale of products, which primarily include aggregates, cement, ready-mix concrete and asphalt, but also include concrete products, and from the provision of services, which are primarily paving and related services.
Products: Revenue for product sales is recognized when evidence of an arrangement exists and when control passes, which generally is when the product is shipped.
Services: We earn revenue from the provision of services, which are primarily paving and related services, which are typically calculated using monthly progress based on the percentage of completion or a customer’s engineer review of progress.
The majority of our construction service contracts are completed within one year, but may occasionally extend beyond this time frame. The majority of our construction service contracts are for work that occurs mostly during the spring, summer and fall. We generally measure progress toward completion on long-term paving and related services contracts based on the proportion of costs incurred to date relative to total estimated costs at completion.
The percentage of completion method of accounting involves the use of various estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes in specifications or other disputes.
Earnings per Share—The Company computes basic earnings per share attributable to stockholders by dividing income attributable to Summit Inc. by the weighted-average shares of Class A common stock outstanding. Diluted earnings per share reflects the potential dilution beyond shares for basic earnings per share that could occur if securities or other contracts to issue common stock were exercised, converted into common stock, or resulted in the issuance of common stock that would have shared in the Company’s earnings. Since the Class B common stock has no economic value, those shares are not included in the weighted-average common share amount for basic or diluted earnings per share. In addition, as the shares of Class A common stock are issued by Summit Inc., the earnings and equity interests of noncontrolling interests are not included in basic earnings per share.
Prior Period Reclassifications — We reclassified $32.6 million and $93.1 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. In addition, we reclassified $1.6 million and $5.7 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating income, also to conform to the current year presentation. Lastly, we reclassified $0.4 million and $1.5 million of transaction costs from its own line item within operating income into general and administrative expenses for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no material impact on previously reported operating income or Adjusted EBITDA, a non-GAAP measure described in Note 14, Segment Information, below.
New Accounting Standards — In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces the accounting complexity of implementing a cloud computing service arrangement. The ASU aligns the capitalization of implementation costs among hosting arrangements and costs incurred to develop internal-use software. We adopted this ASU in the first quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework Changes to The Disclosure Requirements for Defined Benefits Plans, which
modifies the disclosure requirements of employer-sponsored defined benefit and other postretirement benefits plans. The ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We adopted this ASU in the fourth quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.
2.ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLES
The Company has completed numerous acquisitions since its formation, which have been financed through a combination of debt and equity funding and available cash. The operations of each acquisition have been included in the Company’s consolidated results of operations since the respective closing dates of the acquisitions. The Company measures all assets acquired and liabilities assumed at their acquisition-date fair value. Goodwill acquired during a business combination has an indefinite life and is not amortized. The following table summarizes the Company’s acquisitions by region and period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
Year ended
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
West
|
—
|
|
|
2
|
|
|
East
|
2
|
|
|
1
|
|
|
|
|
|
|
The purchase price allocation, primarily the valuation of property, plant and equipment for the acquisitions completed during the nine months ended October 2, 2021, as well as the acquisitions completed during 2020 that occurred after September 26, 2020, have not yet been finalized due to the recent timing of the acquisitions, status of the valuation of property, plant and equipment and finalization of related tax returns. The following table summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
Year ended
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Financial assets
|
$
|
—
|
|
|
$
|
8,696
|
|
|
Inventories
|
173
|
|
|
2,856
|
|
|
Property, plant and equipment
|
7,958
|
|
|
130,042
|
|
|
Intangible assets
|
702
|
|
|
—
|
|
|
Other assets
|
—
|
|
|
2,790
|
|
|
Financial liabilities
|
(121)
|
|
|
(4,469)
|
|
|
Other long-term liabilities
|
(300)
|
|
|
(16,069)
|
|
|
Net assets acquired
|
8,412
|
|
|
123,846
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
Purchase price
|
8,412
|
|
|
123,846
|
|
|
Acquisition-related liabilities
|
(1,149)
|
|
|
—
|
|
|
Other
|
—
|
|
|
(369)
|
|
|
Net cash paid for acquisitions
|
$
|
7,263
|
|
|
$
|
123,477
|
|
Changes in the carrying amount of goodwill, by reportable segment, from January 2, 2021 to October 2, 2021 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
East
|
|
Cement
|
|
Total
|
|
Balance—January 2, 2021
|
$
|
586,209
|
|
|
$
|
410,426
|
|
|
$
|
204,656
|
|
|
$
|
1,201,291
|
|
|
Dispositions (1)
|
(16,222)
|
|
|
(10,520)
|
|
|
—
|
|
|
(26,742)
|
|
|
Foreign currency translation adjustments
|
306
|
|
|
—
|
|
|
—
|
|
|
306
|
|
|
Balance—October 2, 2021
|
$
|
570,293
|
|
|
$
|
399,906
|
|
|
$
|
204,656
|
|
|
$
|
1,174,855
|
|
_______________________________________________________________________
(1) Reflects goodwill derecognition from dispositions completed during the nine months ended October 2, 2021.
The Company’s intangible assets subject to amortization are primarily composed of operating permits, mineral lease agreements and reserve rights. Operating permits relate to permitting and zoning rights acquired outside of a business combination. The assets related to mineral lease agreements reflect the submarket royalty rates paid under agreements, primarily for extracting aggregates. The values were determined as of the respective acquisition dates by a comparison of market-royalty rates. The reserve rights relate to aggregate reserves to which the Company has certain rights of ownership,
but does not own the reserves. The intangible assets are amortized on a straight-line basis over the lives of the leases or permits. The following table shows intangible assets by type and in total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Operating permits
|
$
|
33,671
|
|
|
$
|
(2,206)
|
|
|
$
|
31,465
|
|
|
$
|
33,671
|
|
|
$
|
(1,207)
|
|
|
$
|
32,464
|
|
|
Mineral leases
|
19,927
|
|
|
(8,497)
|
|
|
11,430
|
|
|
19,225
|
|
|
(7,571)
|
|
|
11,654
|
|
|
Reserve rights
|
25,586
|
|
|
(3,123)
|
|
|
22,463
|
|
|
6,234
|
|
|
(2,504)
|
|
|
3,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
5,463
|
|
|
(483)
|
|
|
4,980
|
|
|
586
|
|
|
(582)
|
|
|
4
|
|
|
Total intangible assets
|
$
|
84,647
|
|
|
$
|
(14,309)
|
|
|
$
|
70,338
|
|
|
$
|
59,716
|
|
|
$
|
(11,864)
|
|
|
$
|
47,852
|
|
Amortization expense totaled $0.9 million and $2.8 million for the three and nine months ended October 2, 2021, respectively, and $0.7 million and $2.3 million for the three and nine months ended September 26, 2020, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to October 2, 2021 is as follows:
|
|
|
|
|
|
|
|
2021 (three months)
|
$
|
1,034
|
|
|
2022
|
4,141
|
|
|
2023
|
4,008
|
|
|
2024
|
3,913
|
|
|
2025
|
3,868
|
|
|
2026
|
3,724
|
|
|
Thereafter
|
49,650
|
|
|
Total
|
$
|
70,338
|
|
In the first nine months of 2021, as part of the Company's strategy to rationalize assets, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a total gain on disposition of $15.3 million.
3.REVENUE RECOGNITION
We derive our revenue predominantly by selling construction materials, products and providing paving and related services. Construction materials consist of aggregates and cement. Products consist of related downstream products, including ready-mix concrete, asphalt paving mix and concrete products. Paving and related service revenue is generated primarily from the asphalt paving services that we provide.
Revenue by product for the three and nine months ended October 2, 2021 and September 26, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Revenue by product*:
|
|
|
|
|
|
|
|
|
Aggregates
|
$
|
160,317
|
|
|
$
|
136,396
|
|
|
$
|
431,201
|
|
|
$
|
362,546
|
|
|
Cement
|
87,645
|
|
|
82,698
|
|
|
207,953
|
|
|
188,854
|
|
|
Ready-mix concrete
|
183,114
|
|
|
179,124
|
|
|
525,208
|
|
|
488,710
|
|
|
Asphalt
|
116,364
|
|
|
128,125
|
|
|
238,674
|
|
|
255,992
|
|
|
Paving and related services
|
112,671
|
|
|
136,191
|
|
|
257,966
|
|
|
280,446
|
|
|
Other
|
57,129
|
|
|
47,085
|
|
|
151,999
|
|
|
131,270
|
|
|
Total revenue
|
$
|
717,240
|
|
|
$
|
709,619
|
|
|
$
|
1,813,001
|
|
|
$
|
1,707,818
|
|
*Revenue from liquid asphalt terminals is included in asphalt revenue.
Accounts receivable, net consisted of the following as of October 2, 2021 and January 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Trade accounts receivable
|
$
|
268,188
|
|
|
$
|
191,871
|
|
|
Construction contract receivables
|
53,647
|
|
|
47,179
|
|
|
Retention receivables
|
14,894
|
|
|
18,824
|
|
|
Receivables from related parties
|
877
|
|
|
1,339
|
|
|
Accounts receivable
|
337,606
|
|
|
259,213
|
|
|
Less: Allowance for doubtful accounts
|
(4,255)
|
|
|
(4,517)
|
|
|
Accounts receivable, net
|
$
|
333,351
|
|
|
$
|
254,696
|
|
Retention receivables are amounts earned by the Company but held by customers until paving and related service contracts and projects are near completion or fully completed. Amounts are generally billed and collected within one year.
4.INVENTORIES
Inventories consisted of the following as of October 2, 2021 and January 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Aggregate stockpiles
|
$
|
132,325
|
|
|
$
|
137,938
|
|
|
Finished goods
|
31,334
|
|
|
32,993
|
|
|
Work in process
|
9,189
|
|
|
9,281
|
|
|
Raw materials
|
22,464
|
|
|
20,096
|
|
|
Total
|
$
|
195,312
|
|
|
$
|
200,308
|
|
5.ACCRUED EXPENSES
Accrued expenses consisted of the following as of October 2, 2021 and January 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Interest
|
$
|
8,891
|
|
|
$
|
21,860
|
|
|
Payroll and benefits
|
37,906
|
|
|
46,026
|
|
|
Finance lease obligations
|
17,424
|
|
|
24,601
|
|
|
Insurance
|
19,676
|
|
|
18,355
|
|
|
Non-income taxes
|
23,834
|
|
|
15,669
|
|
|
Deferred asset purchase payments
|
4,538
|
|
|
9,749
|
|
|
Professional fees
|
1,152
|
|
|
828
|
|
|
Other (1)
|
23,957
|
|
|
23,482
|
|
|
Total
|
$
|
137,378
|
|
|
$
|
160,570
|
|
(1)Consists primarily of current portion of asset retirement obligations and miscellaneous accruals.
6.DEBT
Debt consisted of the following as of October 2, 2021 and January 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Term Loan, due 2024:
|
|
|
|
|
$611.5 million and $616.3 million, net of $0.7 million and $0.9 million discount at October 2, 2021 and January 2, 2021, respectively
|
$
|
610,830
|
|
|
$
|
615,425
|
|
|
51⁄8% Senior Notes, due 2025
|
—
|
|
|
300,000
|
|
|
61⁄2% Senior Notes, due 2027
|
300,000
|
|
|
300,000
|
|
|
51⁄4% Senior Notes, due 2029
|
700,000
|
|
|
700,000
|
|
|
Total
|
1,610,830
|
|
|
1,915,425
|
|
|
Current portion of long-term debt
|
6,354
|
|
|
6,354
|
|
|
Long-term debt
|
$
|
1,604,476
|
|
|
$
|
1,909,071
|
|
The contractual payments of long-term debt, including current maturities, for the five years subsequent to October 2, 2021, are as follows:
|
|
|
|
|
|
|
|
2021 (three months)
|
$
|
1,588
|
|
|
2022
|
6,354
|
|
|
2023
|
6,354
|
|
|
2024
|
597,252
|
|
|
2025
|
—
|
|
|
2026
|
—
|
|
|
Thereafter
|
1,000,000
|
|
|
Total
|
1,611,548
|
|
|
Less: Original issue net discount
|
(718)
|
|
|
Less: Capitalized loan costs
|
(12,487)
|
|
|
Total debt
|
$
|
1,598,343
|
|
Senior Notes— On September 27, 2021, Summit LLC and Summit Finance (together, the “Issuers”) redeemed all $300.0 million in aggregate principal amount of their 5.125% senior notes due June 1, 2025 (the "2025 Notes") using existing cash on hand at a price equal to par plus an applicable premium and the indenture under which the 2025 Notes were issued was satisfied and discharged. As a result of the redemption, charges of $6.0 million were recognized in the quarter ended October 2, 2021, which included charges of $3.9 million for the applicable redemption premium and $2.1 million for the write-off of the deferred financing fees.
On August 11, 2020, the Issuers issued $700.0 million in aggregate principal amount of 5.250% senior notes due January 15, 2029 (the “2029 Notes”). The 2029 Notes were issued at 100.0% of their par value with proceeds of $690.4 million, net of related fees and expenses. The 2029 Notes were issued under an indenture dated August 11, 2020 (the "2020 Indenture"). The 2020 Indenture contains covenants limiting, among other things, Summit LLC and its restricted subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The 2020 Indenture also contains customary events of default. Interest on the 2029 Notes is payable semi-annually on January 15 and July 15 of each year commencing on January 15, 2021.
On March 15, 2019, the Issuers issued $300.0 million in aggregate principal amount of 6.500% senior notes due March 15, 2027 (the “2027 Notes”). The 2027 Notes were issued at 100.0% of their par value with proceeds of $296.3 million, net of related fees and expenses. The 2027 Notes were issued under an indenture dated March 25, 2019, the terms of which are generally consistent with the 2020 Indenture. Interest on the 2027 Notes is payable semi-annually on March 15 and September 15 of each year commencing on September 15, 2019.
As of October 2, 2021 and January 2, 2021, the Company was in compliance with all covenants under the applicable indentures.
Senior Secured Credit Facilities— Summit LLC has credit facilities that provide for term loans in an aggregate amount of $650.0 million and revolving credit commitments in an aggregate amount of $345.0 million (the “Senior Secured Credit Facilities”). Under the Senior Secured Credit Facilities, required principal repayments of 0.25% of the refinanced aggregate
amount of term debt are due on the last business day of each March, June, September and December commencing with the March 2018 payment. The unpaid principal balance is due in full on the maturity date, which is November 21, 2024.
The revolving credit facility bears interest per annum equal to, at Summit LLC’s option, either (i) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) LIBOR plus 1.00%, plus an applicable margin of 2.00% for base rate loans or (ii) a LIBOR rate determined by reference to Reuters prior to the interest period relevant to such borrowing adjusted for certain additional costs plus an applicable margin of 3.00% for LIBOR rate loans. The maturity date with respect to revolving credit commitments under the revolving credit facility is February 25, 2024.
There were no outstanding borrowings under the revolving credit facility as of October 2, 2021 and January 2, 2021, with borrowing capacity of $329.1 million remaining as of October 2, 2021, which is net of $15.9 million of outstanding letters of credit. The outstanding letters of credit are renewed annually and support required bonding on construction projects, large leases, workers compensation claims and the Company’s insurance liabilities.
Summit LLC’s Consolidated First Lien Net Leverage Ratio, as such term is defined in the Credit Agreement, should be no greater than 4.75:1.0 as of each quarter-end. As of October 2, 2021 and January 2, 2021, Summit LLC was in compliance with all financial covenants.
Summit LLC’s wholly-owned domestic subsidiary companies, subject to certain exclusions and exceptions, are named as subsidiary guarantors of the Senior Notes and the Senior Secured Credit Facilities. In addition, Summit LLC has pledged substantially all of its assets as collateral, subject to certain exclusions and exceptions, for the Senior Secured Credit Facilities.
The following table presents the activity for the deferred financing fees for the nine months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
Deferred financing fees
|
|
Balance—January 2, 2021
|
$
|
18,367
|
|
|
|
|
|
Amortization
|
(2,510)
|
|
|
Write off of deferred financing fees
|
(2,116)
|
|
|
Balance—October 2, 2021
|
$
|
13,741
|
|
|
|
|
|
|
|
|
Balance—December 28, 2019
|
$
|
15,436
|
|
|
Loan origination fees
|
9,565
|
|
|
Amortization
|
(2,499)
|
|
|
Write off of deferred financing fees
|
(3,338)
|
|
|
Balance—September 26, 2020
|
$
|
19,164
|
|
Other—On January 15, 2015, the Company’s wholly-owned subsidiary in British Columbia, Canada entered into an agreement with HSBC Bank Canada for a (i) $6.0 million Canadian dollar (“CAD”) revolving credit commitment to be used for operating activities that bears interest per annum equal to the bank’s prime rate plus 0.20%, (ii) $0.5 million CAD revolving credit commitment to be used for capital equipment that bears interest per annum at the bank’s prime rate plus 0.90% and (iii) $0.3 million CAD revolving credit commitment to provide guarantees on behalf of that subsidiary. There were no amounts outstanding under this agreement as of October 2, 2021 or January 2, 2021.
7.INCOME TAXES
Summit Inc.’s tax provision includes its proportional share of Summit Holdings’ tax attributes. Summit Holdings’ subsidiaries are primarily limited liability companies but do include certain entities organized as C corporations and a Canadian subsidiary. The tax attributes related to the limited liability companies are passed on to Summit Holdings and then to its partners, including Summit Inc. The tax attributes associated with the C corporation and Canadian subsidiaries are fully reflected in the Company’s accounts.
Our income tax expense was $20.5 million and $33.5 million in the three and nine months ended October 2, 2021, respectively, and our income tax benefit was $(19.6) million and $(25.3) million in the three and nine months ended September 26, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate
primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. In the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million. In the third quarter of 2020, final regulations were issued clarifying portions of the Tax Cuts and Jobs Act of 2017 ("TCJA"). Under the provisions of the final regulations, we reversed unrecognized tax benefits of $32.9 million in the third quarter of 2020.
As of October 2, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.
No material interest or penalties were recognized in income tax expense during the three and nine months ended October 2, 2021 and September 26, 2020.
Tax Receivable Agreement—The Company is party to a TRA with certain current and former holders of LP Units that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA, is deemed to realize) as a result of increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.
In the nine months ended October 2, 2021, 1,440,983 LP Units were acquired by Summit Inc. in exchange for an equal number of newly-issued shares of Summit Inc.’s Class A common stock. These exchanges resulted in net new deferred tax assets of approximately $10.8 million. As we determined that the deferred tax assets created from these exchanges are realizable and payment under the TRA is considered probable, we have recorded 85% of the increase in deferred tax assets as TRA liability and the remainder as an adjustment to additional paid in capital. As of October 2, 2021 and January 2, 2021, we had recorded $330.9 million and $321.7 million of TRA liability, respectively.
Tax Distributions – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate in New York, New York. Summit Holdings did not make any tax distributions in the nine months ended October 2, 2021 and September 26, 2020.
8.EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings by the weighted average common shares outstanding and diluted net earnings is computed by dividing net earnings, adjusted for changes in the earnings allocated to Summit Inc. as a result of the assumed conversion of LP Units, by the weighted-average common shares outstanding assuming dilution.
The following table shows the calculation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Net income attributable to Summit Inc.
|
$
|
74,204
|
|
|
$
|
90,730
|
|
|
$
|
108,346
|
|
|
$
|
102,815
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of Class A stock outstanding
|
118,272,955
|
|
|
114,116,564
|
|
|
117,040,207
|
|
|
113,943,292
|
|
|
Add: Nonvested restricted stock awards of retirement eligible shares
|
200,575
|
|
|
320,343
|
|
|
218,224
|
|
|
145,155
|
|
|
Weighted average basic shares outstanding
|
118,473,530
|
|
|
114,436,907
|
|
|
117,258,431
|
|
|
114,088,447
|
|
|
Basic earnings per share
|
$
|
0.63
|
|
|
$
|
0.79
|
|
|
$
|
0.92
|
|
|
$
|
0.90
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income attributable to Summit Inc.
|
$
|
74,204
|
|
|
$
|
90,730
|
|
|
$
|
108,346
|
|
|
$
|
102,815
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of Class A stock outstanding
|
118,272,955
|
|
|
114,116,564
|
|
|
117,040,207
|
|
|
113,943,292
|
|
|
|
|
|
|
|
|
|
|
|
Add: stock options
|
125,164
|
|
|
—
|
|
|
310,990
|
|
|
—
|
|
|
Add: warrants
|
14,405
|
|
|
—
|
|
|
17,573
|
|
|
—
|
|
|
Add: restricted stock units
|
680,980
|
|
|
263,886
|
|
|
812,702
|
|
|
450,353
|
|
|
Add: performance stock units
|
198,142
|
|
|
91,721
|
|
|
179,143
|
|
|
63,631
|
|
|
Weighted average dilutive shares outstanding
|
119,291,646
|
|
|
114,472,171
|
|
|
118,360,615
|
|
|
114,457,276
|
|
|
Diluted earnings per share
|
$
|
0.62
|
|
|
$
|
0.79
|
|
|
$
|
0.92
|
|
|
$
|
0.90
|
|
Excluded from the above calculations were the shares noted below as they were antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Antidilutive shares:
|
|
|
|
|
|
|
|
|
LP Units
|
1,594,272
|
|
|
3,053,115
|
|
|
2,031,090
|
|
|
3,086,819
|
|
|
Time-vesting stock options
|
—
|
|
|
2,095,929
|
|
|
—
|
|
|
2,095,929
|
|
|
Warrants
|
—
|
|
|
100,037
|
|
|
—
|
|
|
100,037
|
|
|
Time-vesting restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Market-based restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
9.STOCKHOLDERS’ EQUITY
During the nine months ended October 2, 2021 and September 26, 2020, certain limited partners of Summit Holdings exchanged their LP Units for shares of Class A common stock of Summit Inc. The following table summarizes the changes in our ownership of Summit Holdings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit Inc.
Shares (Class A)
|
|
LP Units
|
|
Total
|
|
Summit Inc.
Ownership
Percentage
|
|
Balance — January 2, 2021
|
114,390,595
|
|
|
2,873,170
|
|
|
117,263,765
|
|
|
97.5
|
%
|
|
Exchanges during period
|
1,440,983
|
|
|
(1,440,983)
|
|
|
—
|
|
|
|
|
Stock option exercises
|
1,744,256
|
|
|
—
|
|
|
1,744,256
|
|
|
|
|
Other equity transactions
|
989,116
|
|
|
—
|
|
|
989,116
|
|
|
|
|
Balance — October 2, 2021
|
118,564,950
|
|
|
1,432,187
|
|
|
119,997,137
|
|
|
98.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — December 28, 2019
|
113,309,385
|
|
|
3,249,657
|
|
|
116,559,042
|
|
|
97.2
|
%
|
|
Exchanges during period
|
196,542
|
|
|
(196,542)
|
|
|
—
|
|
|
|
|
Stock option exercises
|
14,404
|
|
|
—
|
|
|
14,404
|
|
|
|
|
Other equity transactions
|
603,580
|
|
|
—
|
|
|
603,580
|
|
|
|
|
Balance — September 26, 2020
|
114,123,911
|
|
|
3,053,115
|
|
|
117,177,026
|
|
|
97.4
|
%
|
Summit Inc. is Summit Holdings’ primary beneficiary and thus consolidates Summit Holdings in its consolidated financial statements with a corresponding noncontrolling interest reclassification, which was 1.2% and 2.5% as of October 2, 2021 and January 2, 2021, respectively.
Accumulated other comprehensive income (loss) —The changes in each component of accumulated other comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
retirement plans
|
|
Foreign currency
translation
adjustments
|
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Balance — January 2, 2021
|
$
|
533
|
|
|
$
|
4,670
|
|
|
|
|
$
|
5,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
—
|
|
|
467
|
|
|
|
|
467
|
|
|
|
|
|
|
|
|
|
|
|
Balance — October 2, 2021
|
$
|
533
|
|
|
$
|
5,137
|
|
|
|
|
$
|
5,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance — December 28, 2019
|
$
|
2,171
|
|
|
$
|
1,277
|
|
|
|
|
$
|
3,448
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
—
|
|
|
(2,473)
|
|
|
|
|
(2,473)
|
|
|
|
|
|
|
|
|
|
|
|
Balance — September 26, 2020
|
$
|
2,171
|
|
|
$
|
(1,196)
|
|
|
|
|
$
|
975
|
|
10.SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Cash payments:
|
|
|
|
|
Interest
|
$
|
77,890
|
|
|
$
|
86,427
|
|
|
Payments for income taxes, net
|
6,694
|
|
|
1,131
|
|
|
Operating cash payments on operating leases
|
7,894
|
|
|
8,372
|
|
|
Operating cash payments on finance leases
|
1,722
|
|
|
2,402
|
|
|
Finance cash payments on finance leases
|
13,739
|
|
|
11,528
|
|
|
Non cash financing activities:
|
|
|
|
|
Right of use assets obtained in exchange for operating lease obligations
|
$
|
6,476
|
|
|
$
|
2,931
|
|
|
Right of use assets obtained in exchange for finance leases obligations
|
600
|
|
|
17,605
|
|
|
Exchange of LP Units to shares of Class A common stock
|
43,796
|
|
|
4,648
|
|
11.LEASES
We lease construction and office equipment, distribution facilities and office space. Leases with an initial term of 12 months or less, including month to month leases, are not recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight line basis over the lease term. For lease agreements we have entered into or reassessed we combine lease and nonlease components. While we also own mineral leases for mining operations, those leases are outside the scope of ASU No. 2016-2, Leases (Topic 842). Assets acquired under finance leases are included in property, plant and equipment.
Many of our leases include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Operating lease cost
|
$
|
1,755
|
|
|
$
|
2,478
|
|
|
$
|
5,175
|
|
|
$
|
7,576
|
|
|
Variable lease cost
|
90
|
|
|
90
|
|
|
263
|
|
|
253
|
|
|
Short-term lease cost
|
12,373
|
|
|
14,335
|
|
|
30,517
|
|
|
33,369
|
|
|
Financing lease cost:
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
2,168
|
|
|
3,439
|
|
|
7,835
|
|
|
9,307
|
|
|
Interest on lease liabilities
|
475
|
|
|
780
|
|
|
1,689
|
|
|
2,329
|
|
|
Total lease cost
|
$
|
16,861
|
|
|
$
|
21,122
|
|
|
$
|
45,479
|
|
|
$
|
52,834
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Supplemental balance sheet information related to leases:
|
|
|
|
|
Operating leases:
|
|
|
|
|
Operating lease right-of-use assets
|
$
|
27,339
|
|
|
$
|
28,543
|
|
|
|
|
|
|
|
Current operating lease liabilities
|
$
|
6,818
|
|
|
$
|
8,188
|
|
|
Noncurrent operating lease liabilities
|
21,596
|
|
|
21,500
|
|
|
Total operating lease liabilities
|
$
|
28,414
|
|
|
$
|
29,688
|
|
|
Finance leases:
|
|
|
|
|
Property and equipment, gross
|
$
|
69,115
|
|
|
$
|
92,679
|
|
|
Less accumulated depreciation
|
(29,387)
|
|
|
(32,828)
|
|
|
Property and equipment, net
|
$
|
39,728
|
|
|
$
|
59,851
|
|
|
|
|
|
|
|
Current finance lease liabilities
|
$
|
17,424
|
|
|
$
|
24,601
|
|
|
Long-term finance lease liabilities
|
18,249
|
|
|
31,727
|
|
|
Total finance lease liabilities
|
$
|
35,673
|
|
|
$
|
56,328
|
|
|
|
|
Weighted average remaining lease term (years):
|
|
Operating leases
|
9.1
|
|
8.7
|
|
Finance lease
|
2.5
|
|
2.4
|
|
|
|
Weighted average discount rate:
|
|
Operating leases
|
5.0
|
%
|
|
5.3
|
%
|
|
Finance leases
|
5.3
|
%
|
|
5.2
|
%
|
|
|
|
Maturities of lease liabilities, as of October 2, 2021, were as follows:
|
|
|
Operating Leases
|
|
Finance Leases
|
|
2021 (three months)
|
$
|
2,103
|
|
|
$
|
3,950
|
|
|
2022
|
7,489
|
|
|
18,668
|
|
|
2023
|
5,830
|
|
|
7,386
|
|
|
2024
|
3,662
|
|
|
3,209
|
|
|
2025
|
2,444
|
|
|
2,583
|
|
|
2026
|
1,794
|
|
|
990
|
|
|
Thereafter
|
12,976
|
|
|
1,843
|
|
|
Total lease payments
|
36,298
|
|
|
38,629
|
|
|
Less imputed interest
|
(7,884)
|
|
|
(2,956)
|
|
|
Present value of lease payments
|
$
|
28,414
|
|
|
$
|
35,673
|
|
12.COMMITMENTS AND CONTINGENCIES
The Company is party to certain legal actions arising from the ordinary course of business activities. Accruals are recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, management expects that the ultimate resolution of all current pending or threatened claims and
litigation will not have a material effect on the Company’s consolidated financial position, results of operations or liquidity. The Company records legal fees as incurred.
In March 2018, we were notified of an investigation by the Canadian Competition Bureau (the “CCB”) into pricing practices by certain asphalt paving contractors in British Columbia, including Winvan Paving, Ltd. (“Winvan”). We believe the investigation is focused on time periods prior to our April 2017 acquisition of Winvan and we are cooperating with the CCB. Although we currently do not believe this matter will have a material adverse effect on our business, financial condition or results of operations, we are currently not able to predict the ultimate outcome or cost of the investigation.
Environmental Remediation and Site Restoration —The Company’s operations are subject to and affected by federal, state, provincial and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. The Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of the Company’s business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities or noncompliance will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.
The Company has asset retirement obligations arising from regulatory and contractual requirements to perform reclamation activities at the time certain quarries and landfills are closed. As of October 2, 2021 and January 2, 2021, $32.7 million and $33.6 million, respectively, were included in other noncurrent liabilities on the consolidated balance sheets and $9.6 million and $10.0 million, respectively, were included in accrued expenses for future reclamation costs. The total undiscounted anticipated costs for site reclamation as of October 2, 2021 and January 2, 2021 were $108.0 million and $112.8 million, respectively.
Other—The Company is obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial condition, results of operations and cash flows of the Company. The terms of the purchase commitments generally approximate one year.
13.FAIR VALUE
Fair Value Measurements—Certain acquisitions made by the Company require the payment of contingent amounts of purchase consideration. These payments are contingent on specified operating results being achieved in periods subsequent to the acquisition and will only be made if earn-out thresholds are achieved. Contingent consideration obligations are measured at fair value each reporting period. Any adjustments to fair value are recognized in earnings in the period identified.
The fair value of contingent consideration as of October 2, 2021 and January 2, 2021 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Current portion of acquisition-related liabilities and Accrued expenses:
|
|
|
|
|
Contingent consideration
|
$
|
554
|
|
|
$
|
654
|
|
|
Acquisition-related liabilities and Other noncurrent liabilities:
|
|
|
|
|
Contingent consideration
|
$
|
1,199
|
|
|
$
|
1,209
|
|
The fair value of contingent consideration was based on unobservable, or Level 3, inputs, including projected probability-weighted cash payments and a 9.5% discount rate, which reflects a market discount rate. Changes in fair value may occur as a result of a change in actual or projected cash payments, the probability weightings applied by the Company to projected payments or a change in the discount rate. Significant increases or decreases in any of these inputs in isolation could result in a lower, or higher, fair value measurement. There were no material valuation adjustments to contingent consideration as of October 2, 2021 and September 26, 2020.
Financial Instruments—The Company’s financial instruments include debt and certain acquisition-related liabilities (deferred consideration and noncompete obligations). The carrying value and fair value of these financial instruments as of October 2, 2021 and January 2, 2021 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Level 1
|
|
|
|
|
|
|
|
|
Long-term debt(1)
|
$
|
1,661,673
|
|
|
$
|
1,610,830
|
|
|
$
|
1,971,087
|
|
|
$
|
1,915,425
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
Current portion of deferred consideration and noncompete obligations(2)
|
12,255
|
|
|
12,255
|
|
|
9,611
|
|
|
9,611
|
|
|
Long term portion of deferred consideration and noncompete obligations(3)
|
32,024
|
|
|
32,024
|
|
|
11,037
|
|
|
11,037
|
|
(1)$6.4 million was included in current portion of debt as of October 2, 2021 and January 2, 2021.
(2)Included in current portion of acquisition-related liabilities on the consolidated balance sheets.
(3)Included in acquisition-related liabilities on the consolidated balance sheets.
The fair value of debt was determined based on observable, or Level 2, inputs, such as interest rates, bond yields and quoted prices in inactive markets. The fair values of the deferred consideration and noncompete obligations were determined based on unobservable, or Level 3, inputs, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk. The discount rate used is generally consistent with that used when the obligations were initially recorded.
Securities with a maturity of three months or less are considered cash equivalents and the fair value of these assets approximates their carrying value.
14.SEGMENT INFORMATION
The Company has three operating segments: West, East and Cement, which are its reporting segments. These segments are consistent with the Company’s management reporting structure.
The operating results of each segment are regularly reviewed and evaluated by the Chief Executive Officer, our Company’s Chief Operating Decision Maker (“CODM”). The CODM primarily evaluates the performance of the Company’s segments and allocates resources to them based on a segment profit metric that we call Adjusted EBITDA, which is computed as earnings from operations before interest, taxes, depreciation, depletion, amortization, accretion, and share-based compensation, as well as various other non-recurring, non-cash amounts. Beginning with the first quarter of 2021, the Company no longer adjusts for transaction costs, as those costs are recurring cash payments, and are included in general and administrative expenses.
The West and East segments have several subsidiaries that are engaged in various activities including quarry mining, aggregate production and contracting. The Cement segment is engaged in the production of Portland cement. Assets employed by each segment include assets directly identified with those operations. Corporate assets consist primarily of cash, property, plant and equipment for corporate operations and other assets not directly identifiable with a reportable business segment. The accounting policies applicable to each segment are consistent with those used in the consolidated financial statements.
The following tables display selected financial data for the Company’s reportable business segments as of October 2, 2021 and January 2, 2021 and for the three and nine months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Revenue*:
|
|
|
|
|
|
|
|
|
West
|
$
|
369,250
|
|
|
$
|
390,310
|
|
|
$
|
958,351
|
|
|
$
|
919,016
|
|
|
East
|
255,490
|
|
|
234,435
|
|
|
635,659
|
|
|
590,341
|
|
|
Cement
|
92,500
|
|
|
84,874
|
|
|
218,991
|
|
|
198,461
|
|
|
Total revenue
|
$
|
717,240
|
|
|
$
|
709,619
|
|
|
$
|
1,813,001
|
|
|
$
|
1,707,818
|
|
*Intercompany sales are immaterial and the presentation above only reflects sales to external customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Income from operations before taxes
|
$
|
95,891
|
|
|
$
|
73,156
|
|
|
$
|
143,369
|
|
|
$
|
79,597
|
|
|
Interest expense
|
24,134
|
|
|
24,623
|
|
|
72,536
|
|
|
78,049
|
|
|
Depreciation, depletion and amortization
|
58,381
|
|
|
57,364
|
|
|
171,474
|
|
|
161,912
|
|
|
Accretion
|
701
|
|
|
690
|
|
|
2,177
|
|
|
1,848
|
|
|
Loss on debt financings
|
6,016
|
|
|
4,064
|
|
|
6,016
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of businesses
|
113
|
|
|
—
|
|
|
(15,319)
|
|
|
—
|
|
|
Non-cash compensation
|
4,685
|
|
|
13,322
|
|
|
14,875
|
|
|
23,119
|
|
|
Other
|
363
|
|
|
4,083
|
|
|
682
|
|
|
4,287
|
|
|
Total Adjusted EBITDA
|
$
|
190,284
|
|
|
$
|
177,302
|
|
|
$
|
395,810
|
|
|
$
|
352,876
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA by Segment:
|
|
|
|
|
|
|
|
|
West
|
$
|
92,303
|
|
|
$
|
95,470
|
|
|
$
|
211,722
|
|
|
$
|
196,881
|
|
|
East
|
69,084
|
|
|
56,943
|
|
|
138,113
|
|
|
119,900
|
|
|
Cement
|
40,360
|
|
|
35,086
|
|
|
82,281
|
|
|
63,172
|
|
|
Corporate and other
|
(11,463)
|
|
|
(10,197)
|
|
|
(36,306)
|
|
|
(27,077)
|
|
|
Total Adjusted EBITDA
|
$
|
190,284
|
|
|
$
|
177,302
|
|
|
$
|
395,810
|
|
|
$
|
352,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Purchases of property, plant and equipment
|
|
|
|
|
West
|
$
|
85,137
|
|
|
$
|
51,148
|
|
|
East
|
69,469
|
|
|
75,006
|
|
|
Cement
|
14,852
|
|
|
12,097
|
|
|
Total reportable segments
|
169,458
|
|
|
138,251
|
|
|
Corporate and other
|
612
|
|
|
1,755
|
|
|
Total purchases of property, plant and equipment
|
$
|
170,070
|
|
|
$
|
140,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Depreciation, depletion, amortization and accretion:
|
|
|
|
|
|
|
|
|
West
|
$
|
24,796
|
|
|
$
|
23,117
|
|
|
$
|
75,287
|
|
|
$
|
67,082
|
|
|
East
|
22,809
|
|
|
22,803
|
|
|
66,306
|
|
|
65,293
|
|
|
Cement
|
10,409
|
|
|
11,155
|
|
|
28,785
|
|
|
28,425
|
|
|
Total reportable segments
|
58,014
|
|
|
57,075
|
|
|
170,378
|
|
|
160,800
|
|
|
Corporate and other
|
1,068
|
|
|
979
|
|
|
3,273
|
|
|
2,960
|
|
|
Total depreciation, depletion, amortization and accretion
|
$
|
59,082
|
|
|
$
|
58,054
|
|
|
$
|
173,651
|
|
|
$
|
163,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
January 2, 2021
|
|
Total assets:
|
|
|
|
|
West
|
$
|
1,569,240
|
|
|
$
|
1,503,382
|
|
|
East
|
1,316,659
|
|
|
1,303,742
|
|
|
Cement
|
863,858
|
|
|
850,835
|
|
|
Total reportable segments
|
3,749,757
|
|
|
3,657,959
|
|
|
Corporate and other
|
466,892
|
|
|
650,052
|
|
|
Total
|
$
|
4,216,649
|
|
|
$
|
4,308,011
|
|
SUMMIT MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited consolidated financial statements and notes thereto for Summit Materials, LLC and subsidiaries are included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are incorporated by reference herein.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. Forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the section entitled “Risk Factors” in the Annual Report, and factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated interim financial statements and the related notes and other information included in this report.
Overview
Summit’s vision is to be the most socially responsible, integrated construction materials solution provider, collaborating with stakeholders to deliver differentiated innovations and solve our customers’ challenges. Within our markets, we strive to be a market leader by offering customers a single-source provider for construction materials and related downstream products through our vertical integration. Our materials include aggregates, which we supply across the United States, and in British Columbia, Canada, and cement, which we supply to surrounding states along the Mississippi River from Minnesota to Louisiana. In addition to supplying aggregates to customers, we use a portion of our materials internally to produce ready-mix concrete and asphalt paving mix, which may be sold externally or used in our paving and related services businesses. Our vertical integration creates opportunities to increase aggregates volumes, optimize margin at each stage of production and provide customers with efficiency gains, convenience and reliability, which we believe gives us a competitive advantage.
Since our inception in 2009, we have completed dozens of acquisitions, which are organized into 11 operating companies that make up our three distinct operating segments: West, East and Cement, which are also our reporting segments. We operate in 21 U.S. states and in British Columbia, Canada and currently have assets in 21 U.S. states and in British Columbia, Canada. The map below illustrates our geographic footprint.
Business Trends and Conditions
The U.S. construction materials industry is composed of four primary sectors: aggregates; cement; ready-mix concrete; and asphalt paving mix. Each of these materials is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies focused on a single material, product or market to publicly traded multinational corporations that offer a wide array of construction materials and services. Competition is constrained in part by the distance materials can be transported efficiently, resulting in predominantly local or regional operations. Due to the lack of product differentiation, competition for all of our products is predominantly based on price and, to a lesser extent, quality of products and service. As a result, the prices we charge our customers are not likely to be materially different from the prices charged by other producers in the same markets. Accordingly, our profitability is generally dependent on the level of demand for our materials and products and our ability to control operating costs. We continue to monitor supply chain issues, as well as inflationary pressures on our raw material inputs as well as labor costs.
Our revenue is derived from multiple end-use markets including public infrastructure construction and private residential and nonresidential construction. Public infrastructure includes spending by federal, state, provincial and local governments for roads, highways, bridges, airports and other infrastructure projects. Public infrastructure projects have historically been a relatively stable portion of state and federal budgets. Residential and nonresidential construction consists of new construction and repair and remodel markets. Any economic stagnation or decline, which could vary by local region and market, could affect our results of operations. Our sales and earnings are sensitive to national, regional and local economic conditions and particularly to cyclical changes in construction spending, especially in the private sector. We continue to see positive indicators for the construction sector, including positive trends in housing starts, and highway construction letting
activity in many of the states in which we operate. However, given the ongoing nature of the COVID-19 pandemic discussed below, we continue to closely monitor these indicators for the impact on our business in subsequent quarters.
Transportation infrastructure projects, driven by both federal and state funding programs, represent a significant share of the U.S. construction materials market. Federal funds are allocated to the states, which are required to match a portion of the federal funds they receive. Federal highway spending uses funds predominantly from the Federal Highway Trust Fund, which derives its revenue from taxes on diesel fuel, gasoline and other user fees. The dependability of federal funding allows state departments of transportation to plan for their long-term highway construction and maintenance needs. Through a continuing resolution signed by the President in October 2021, funding for the existing federal transportation funding program extends through December 3, 2021. Historically, Congress has maintained infrastructure spending via various means upon the expiration of federal transportation funding programs, but there is no assurance that this will continue to be the case. With the nation’s infrastructure aging, there is increased demand by states and municipalities for long-term federal funding to support the construction of new roads, highways and bridges in addition to the maintenance of the existing infrastructure.
In addition to federal funding, state, county and local agencies provide highway construction and maintenance funding. Our four largest states by revenue, Texas, Utah, Kansas and Missouri, represented approximately 25%, 14%, 13% and 9%, respectively, of our total revenue in 2020. The following is a summary of key funding initiatives in those states:
•The Texas Department of Transportation (“TXDOT”) updated its fiscal year 2022 lettings estimate to $10.1 billion up from $8.4 billion in fiscal year 2021 and $7.5 billion in fiscal year 2020. Longer term, TXDOT has indicated a target of $8 billion per year in total state and local lettings. In addition, Texas has received $1.9 billion from legislation passed by Congress in December 2020 and March 2021.
•The state of Utah anticipates transportation funding of approximately $1.3 billion in 2021 and $1.8 billion in 2022. In addition, Utah received approximately $263 million from legislation passed by Congress in December 2020 and March 2021.
•The state of Kansas anticipates approximately $1.9 billion for 2021 and $2.2 billion for 2022 for transportation funding. In addition, Kansas received approximately $138 million from legislation passed by Congress in December 2020 and March 2021.
•The state of Missouri anticipates transportation funding of approximately $2.9 billion in 2021 and $3.1 billion in 2022. In addition, Missouri received approximately $437 million from legislation passed by Congress in December 2020 and March 2021.
Use and consumption of our products fluctuate due to seasonality. Nearly all of the products used by us, and by our customers, in the private construction and public infrastructure industries are used outdoors. Our highway operations and production and distribution facilities are also located outdoors. Therefore, seasonal changes and other weather-related conditions, in particular extended rainy and cold weather in the spring and fall, as well as major weather events such as hurricanes, tornadoes, tropical storms, heavy snows and flooding, can adversely affect our business and operations through a decline in both the use of our products and demand for our services. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second and third quarters of our fiscal year typically result in higher activity and revenue levels during those quarters. The first quarter of our fiscal year typically has lower levels of activity due to weather conditions, and the third quarter of our fiscal year typically has the highest levels of activity.
We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, ready-mix concrete and asphalt paving mix production, natural gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalator provisions in most of our private and commercial contracts limit our exposure to price fluctuations in this commodity. We often obtain similar escalators on public infrastructure contracts. In addition, we enter into various firm purchase commitments, with terms generally less than one year, for certain raw materials, including diesel fuel.
Backlog
Our products are generally delivered upon receipt of orders or requests from customers, or shortly thereafter. Accordingly, the backlog associated with product sales is converted into revenue within a relatively short period of time. Inventory for products is generally maintained in sufficient quantities to meet rapid delivery requirements of customers. Therefore, a period-over-period increase or decrease of backlog does not necessarily result in an improvement or a deterioration
of our business. Our backlog includes only those products and projects for which we have obtained a purchase order or a signed contract with the customer and does not include products purchased and sold or services awarded and provided within the period.
Financial Highlights
The principal factors in evaluating our financial condition and operating results as of and for the three and nine months ended October 2, 2021 as compared to the three and nine months ended September 26, 2020, and certain other highlights include:
•Net revenue increased $17.0 million and $116.4 million in the three and nine months ended October 2, 2021, respectively, primarily resulting from organic growth.
•Our operating income increased $24.4 million and $36.9 million in the three and nine months ended October 2, 2021, respectively, as revenue exceeded the increases in cost of revenue.
•In the nine months ended October 2, 2021, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a total gain on disposition of $15.3 million.
•In the three and nine months ended October 2, 2021, sales volume increased 9.2% and 14.1% in aggregates, 2.0% and 6.5% in cement, declined (1.4)% and increased 3.9% in ready-mix concrete and declined (11.2)% and (8.6)% in asphalt, respectively.
•In September 2021, we redeemed all $300.0 million of 5.125% Senior Notes due 2025 (the “2025 Notes”) using existing cash on hand. We recognized a loss on debt financing of $6.0 million on this redemption.
•In August 2020, we issued $700 million of 5.25% Senior Notes due 2029 (the “2029 Notes”), resulting in net proceeds of $690.4 million, after related fees and expenses. The proceeds from the 2029 Notes were used to redeem the $650 million of 6.125% Senior Notes due 2023 (the “2023 Notes”) at par.
Results of Operations
In late 2019, the COVID-19 virus was first reported to have surfaced, and began impacting countries around the world. However, in all of our markets, construction activities were deemed essential businesses and we continued to operate while many businesses were forced to close or reduce operations. During the first nine months of each of 2021 and 2020, our operating markets remained substantially unaffected by COVID-19. We continue to monitor our operations, the operations of our customers, and the recommendations of the various national, state and local governments in the areas in which we operate. We implemented work-from-home protocols at all of our administrative locations late in the first quarter of 2020, and while some locations have returned, other locations, including our headquarters location, continue to work remotely. In addition, we implemented additional safety measures specific to COVID-19 at all of our operating locations, which did not significantly increase our costs. The extent to which the COVID-19 pandemic impacts the national and local economies in which we operate, and ultimately our business, will depend on numerous developments, which are highly uncertain and difficult to predict. These events, as they continue to develop, could result in business disruption, including reduced revenues, profitability and cash flow.
In 2020, approximately 61% of our revenue was derived from the private construction market, and the remaining revenue from the public markets. We believe residential activity in our key markets will continue to be a driver for volumes in future periods. Funding for public infrastructure projects as been announced as a high priority for the federal government in 2021, but no action has been taken to date.
As of October 2, 2021, we had $258.1 million in cash and cash equivalents, and we have remaining borrowing capacity on our senior secured revolving credit facility of $329.1 million, providing us with liquidity that we believe to be adequate to meet our obligations for the next twelve months.
The following discussion of our results of operations is focused on the key financial measures we use to evaluate the performance of our business from both a consolidated and operating segment perspective. Operating income and margins are discussed in terms of changes in volume, pricing and mix of revenue source (i.e., type of product, sales or service revenue). We focus on operating margin, which we define as operating income as a percentage of net revenue, as a key metric when assessing the performance of the business, as we believe that analyzing changes in costs in relation to changes in revenue provides more meaningful insight into the results of operations than examining costs in isolation.
Operating income reflects our profit from operations after taking into consideration cost of revenue, general and administrative expenses, depreciation, depletion, amortization and accretion and gain on sale of property, plant and equipment.
Cost of revenue generally increases ratably with revenue, as labor, transportation costs and subcontractor costs are recorded in cost of revenue. As organic volumes increase, we expect our general and administrative costs as a percentage of revenue to decrease. General and administrative expenses as a percentage of revenue vary throughout the year due to the seasonality of our business.
Consolidated Results of Operations
The table below sets forth our consolidated results of operations for the three and nine months ended October 2, 2021 and September 26, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
662,259
|
|
|
$
|
645,246
|
|
|
$
|
1,679,270
|
|
|
$
|
1,562,892
|
|
|
Delivery and subcontract revenue
|
54,981
|
|
|
64,373
|
|
|
133,731
|
|
|
144,926
|
|
|
Total revenue
|
717,240
|
|
|
709,619
|
|
|
1,813,001
|
|
|
1,707,818
|
|
|
Cost of revenue (excluding items shown separately below)
|
486,936
|
|
|
501,592
|
|
|
1,301,346
|
|
|
1,258,463
|
|
|
General and administrative expenses
|
47,364
|
|
|
50,972
|
|
|
146,454
|
|
|
132,385
|
|
|
Depreciation, depletion, amortization and accretion
|
59,082
|
|
|
58,054
|
|
|
173,651
|
|
|
163,760
|
|
|
Gain on sale of property, plant and equipment
|
(1,159)
|
|
|
(1,616)
|
|
|
(4,331)
|
|
|
(5,747)
|
|
|
Operating income
|
125,017
|
|
|
100,617
|
|
|
195,881
|
|
|
158,957
|
|
|
Interest expense
|
24,134
|
|
|
24,623
|
|
|
72,536
|
|
|
78,049
|
|
|
Loss on debt financings
|
6,016
|
|
|
4,064
|
|
|
6,016
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of businesses
|
113
|
|
|
—
|
|
|
(15,319)
|
|
|
—
|
|
|
Other income, net
|
(1,137)
|
|
|
(1,226)
|
|
|
(10,721)
|
|
|
(2,753)
|
|
|
Income from operations before taxes
|
95,891
|
|
|
73,156
|
|
|
143,369
|
|
|
79,597
|
|
|
Income tax expense (benefit)
|
20,513
|
|
|
(19,613)
|
|
|
33,478
|
|
|
(25,333)
|
|
|
Net income
|
$
|
75,378
|
|
|
$
|
92,769
|
|
|
$
|
109,891
|
|
|
$
|
104,930
|
|
In the first nine months of 2021, we reclassified $32.6 million and $93.1 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. In addition, we reclassified $1.6 million and $5.7 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating income, also to conform to the current year presentation. Lastly, we reclassified $0.4 million and $1.5 million of transaction costs from its own line item within operating income into general and administrative expenses for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no impact on previously reported operating income, as well as certain non-GAAP measures defined below, such as Adjusted EBITDA, or Adjusted EBITDA Margin; however, Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin were reduced.
Three and nine months ended October 2, 2021 compared to the three and nine months ended September 26, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Net revenue
|
$
|
662,259
|
|
|
$
|
645,246
|
|
|
$
|
17,013
|
|
|
2.6
|
%
|
|
$
|
1,679,270
|
|
|
$
|
1,562,892
|
|
|
$
|
116,378
|
|
|
7.4
|
%
|
|
Operating income
|
125,017
|
|
|
100,617
|
|
|
24,400
|
|
|
24.3
|
%
|
|
195,881
|
|
|
158,957
|
|
|
36,924
|
|
|
23.2
|
%
|
|
Operating margin percentage
|
18.9
|
%
|
|
15.6
|
%
|
|
|
|
|
|
11.7
|
%
|
|
10.2
|
%
|
|
|
|
|
|
Adjusted EBITDA (1)
|
$
|
190,284
|
|
|
$
|
177,302
|
|
|
$
|
12,982
|
|
|
7.3
|
%
|
|
$
|
395,810
|
|
|
$
|
352,876
|
|
|
$
|
42,934
|
|
|
12.2
|
%
|
|
Adjusted EBITDA Margin (1)
|
28.7
|
%
|
|
27.5
|
%
|
|
|
|
|
|
23.6
|
%
|
|
22.6
|
%
|
|
|
|
|
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.
Net revenue increased $17.0 million in the three months ended October 2, 2021, due to acquisition related volumes in the West segment as well as organic revenue increases in the East and Cement segments. Net revenue increased by $28.9 million from increased sales of materials, and decreased by $7.8 million and $4.0 million from sales of products and services, respectively. We experienced organic volume growth of 5.6% and 2.0% in our aggregates and cement lines of business, respectively, partially offset by a decline of 1.4% and 11.2% in ready-mix concrete and asphalt, respectively. The decline in organic asphalt volumes was primarily due to a divestiture of a paving business in our West segment which occurred in the second quarter of 2021. We achieved organic price growth across all lines of business during the third quarter of 2021. Additional detail about the impact of acquisitions and divestitures on each segment is presented below where material.
Net revenue increased $116.4 million in the nine months ended October 2, 2021, primarily resulting from a mix of organic and acquisition growth in our aggregates operations and organic growth in our cement and ready-mix concrete operations. Of the increase in net revenue, $87.8 million was from increased sales of materials, $21.7 million was from increased sales of products and $6.9 million from increased service revenue. We generated organic volume growth of 5.0%, 6.5% and 3.9% in aggregates, cement and ready-mix concrete, respectively, offset by a 8.6% decline in asphalt primarily due to a divestiture of a paving business in our West segment which occurred in the second quarter of 2021. We had organic price growth in our aggregate, cement, ready-mix and asphalt lines of business of 3.5%, 3.0%, 3.4% and 1.6%, respectively, during the first nine months of 2021.
Operating income increased by $24.4 million in the third quarter of 2021 as compared to the third quarter of 2020, primarily as our net revenue gains and decreases in general and administrative expenses outpaced increases in our cost of revenue and depletion, amortization and accretion expenses. Our general and administrative expenses decreased $3.6 million in the third quarter of 2021 despite increased levels of professional fees as we continue to optimize the business, which were offset by a decrease of $10.6 million in CEO transition costs and related stock compensation expenses made in the third quarter of 2020. Our operating income in the West segment was reduced as costs of revenue, notably in Texas, exceeded our increases in net revenue primarily due to inefficiencies caused by weather conditions being less favorable in 2021 than in 2020. In addition, depreciation, depletion, amortization and accretion expense increased by $1.0 million over the prior year amount.
Operating income increased by $36.9 million in the first nine months of 2021 as compared to the first nine months of 2020, primarily as net revenue gains exceeded increases in costs of revenue, general and administrative expenses and depreciation, depletion, amortization and accretion expenses. Our general and administrative expenses increased $14.1 million in the first nine months of 2021 as compared to the same period a year ago due to $3.4 million in severance related costs, an increase in consulting fees as we seek to optimize organizational efficiencies and increases in labor and benefits, offset by a decrease of $10.6 million in CEO transition costs in 2020. In addition, depreciation, depletion, amortization and accretion expense increased by $9.9 million over the prior year amount as our capital expenditures in 2021 exceeded those of 2020.
Our operating margin percentage for the three and nine months ended October 2, 2021 increased from 15.6% to 18.9% and from 10.2% to 11.7%, respectively, from the comparable period a year ago, due to the factors noted above. Adjusted EBITDA, as defined in "Non-GAAP Performance Measures" below, increased by $13.0 million and $42.9 million in the three and nine months ended October 2, 2021, respectively, due to the factors noted above.
As a vertically-integrated company, we include intercompany sales from materials to products and from products to services when assessing the operating results of our business. We refer to revenue inclusive of intercompany sales as gross revenue. These intercompany transactions are eliminated in the consolidated financial statements. Gross revenue by product was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Revenue by product*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates
|
$
|
202,523
|
|
|
$
|
178,377
|
|
|
$
|
24,146
|
|
|
13.5
|
%
|
|
$
|
540,912
|
|
|
$
|
465,498
|
|
|
$
|
75,414
|
|
|
16.2
|
%
|
|
Cement
|
90,648
|
|
|
85,108
|
|
|
5,540
|
|
|
6.5
|
%
|
|
215,024
|
|
|
195,972
|
|
|
19,052
|
|
|
9.7
|
%
|
|
Ready-mix concrete
|
183,213
|
|
|
179,261
|
|
|
3,952
|
|
|
2.2
|
%
|
|
525,485
|
|
|
489,034
|
|
|
36,451
|
|
|
7.5
|
%
|
|
Asphalt
|
123,364
|
|
|
137,685
|
|
|
(14,321)
|
|
|
(10.4)
|
%
|
|
255,215
|
|
|
275,150
|
|
|
(19,935)
|
|
|
(7.2)
|
%
|
|
Paving and related services
|
194,678
|
|
|
232,514
|
|
|
(37,836)
|
|
|
(16.3)
|
%
|
|
432,384
|
|
|
470,648
|
|
|
(38,264)
|
|
|
(8.1)
|
%
|
|
Other
|
(77,186)
|
|
|
(103,326)
|
|
|
26,140
|
|
|
25.3
|
%
|
|
(156,019)
|
|
|
(188,484)
|
|
|
32,465
|
|
|
17.2
|
%
|
|
Total revenue
|
$
|
717,240
|
|
|
$
|
709,619
|
|
|
$
|
7,621
|
|
|
1.1
|
%
|
|
$
|
1,813,001
|
|
|
$
|
1,707,818
|
|
|
$
|
105,183
|
|
|
6.2
|
%
|
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.
Detail of our volumes and average selling prices by product in the three and nine months ended October 2, 2021 and September 26, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
|
|
|
|
|
Volume(1)
|
|
|
|
Volume(1)
|
|
|
|
Percentage Change in
|
|
|
(in thousands)
|
|
Pricing(2)
|
|
(in thousands)
|
|
Pricing(2)
|
|
Volume
|
|
Pricing
|
|
Aggregates
|
17,884
|
|
|
$
|
11.32
|
|
|
16,383
|
|
|
$
|
10.89
|
|
|
9.2
|
%
|
|
3.9
|
%
|
|
Cement
|
748
|
|
|
121.26
|
|
|
733
|
|
|
116.17
|
|
|
2.0
|
%
|
|
4.4
|
%
|
|
Ready-mix concrete
|
1,509
|
|
|
121.40
|
|
|
1,531
|
|
|
117.12
|
|
|
(1.4)
|
%
|
|
3.7
|
%
|
|
Asphalt
|
1,880
|
|
|
61.42
|
|
|
2,118
|
|
|
60.40
|
|
|
(11.2)
|
%
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
|
October 2, 2021
|
|
September 26, 2020
|
|
|
|
|
|
|
Volume(1)
|
|
|
|
Volume(1)
|
|
|
|
Percentage Change in
|
|
|
(in thousands)
|
|
Pricing(2)
|
|
(in thousands)
|
|
Pricing(2)
|
|
Volume
|
|
Pricing
|
|
Aggregates
|
48,484
|
|
|
$
|
11.16
|
|
|
42,476
|
|
|
$
|
10.96
|
|
|
14.1
|
%
|
|
1.8
|
%
|
|
Cement
|
1,796
|
|
|
119.76
|
|
|
1,686
|
|
|
116.22
|
|
|
6.5
|
%
|
|
3.0
|
%
|
|
Ready-mix concrete
|
4,381
|
|
|
119.95
|
|
|
4,217
|
|
|
115.97
|
|
|
3.9
|
%
|
|
3.4
|
%
|
|
Asphalt
|
3,911
|
|
|
60.63
|
|
|
4,281
|
|
|
59.69
|
|
|
(8.6)
|
%
|
|
1.6
|
%
|
(1)Volumes are shown in tons for aggregates, cement and asphalt and in cubic yards for ready-mix concrete.
(2)Pricing is shown on a per ton basis for aggregates, cement and asphalt and on a per cubic yard basis for ready-mix concrete.
Revenue from aggregates increased $24.1 million and $75.4 million in the three and nine months ended October 2, 2021, respectively. In the first nine months of 2021, we had solid increases in aggregate volumes in most of our markets, except for decreases in South Kansas as wind farm volumes in the first nine months of 2020 did not repeat in 2021. In the three months ended October 2, 2021, our aggregate volumes increased due to both acquisition and organic volumes, with organic growth in both the West and East segments. Organic aggregate volumes increased 5.0% in the first nine months of 2021 as compared to the same period a year ago, primarily due to increases in the Intermountain West, North Kansas, Virginia and British Columbia markets. Aggregate average sales prices of $11.16 per ton increased 1.8% in the first nine months of 2021 as compared to the first nine months of 2020, due to our mix of higher priced products in the Intermountain West, British Columbia and South Texas markets.
Revenue from cement increased $5.5 million and $19.1 million in the three and nine months ended October 2, 2021, respectively. In the three and nine months ended October 2, 2021, organic cement volumes increased 2.0% and 6.5%, respectively, and organic cement average sales prices increased 4.4% and 3.0%, respectively, as compared to the same period in the prior year.
Revenue from ready-mix concrete increased $4.0 million and $36.5 million in the three and nine months ended October 2, 2021, respectively. In the three and nine months ended October 2, 2021, our ready-mix volumes decreased 1.4% and increased 3.9%, respectively, and our average sales prices increased 3.7% and 3.4%, respectively. The volume decrease in the three months ended October 2, 2021 occurred primarily in our Texas markets due to weather. The volume increases for the nine months ended October 2, 2021 occurred primarily in our Intermountain West and North Texas markets while our price increase was primarily in the Intermountain West market for both the three and nine months ended October 2, 2021.
Revenue from asphalt decreased $14.3 million and $19.9 million in the three and nine months ended October 2, 2021, respectively, primarily due to the divestiture of our paving business in Texas in May 2021. In the first nine months of 2021, organic pricing increased 1.6%, with strong pricing gains in the Kentucky and South Texas geographies. Further, in the first nine months of 2021, we had strong asphalt volume increases in Kentucky, as 2020 volumes had been negatively impacted by COVID-19.
Other Financial Information
Loss on Debt Financings
In September 2021, we redeemed all $300.0 million 5.125% Senior Notes due 2025 using existing cash on hand. In connection with this transaction, charges of $6.0 million were recognized in the quarter ended October 2, 2021. The fees included $3.9 million for the applicable prepayment premium and $2.1 million for the write-off of unamortized deferred financing fees.
In August 2020, we issued $700 million of 5.25% Senior Notes due 2029 (the "2029 Notes"), resulting in net proceeds of $690.4 million, after related fees and expenses. The proceeds from the 2029 Notes were used to redeem the $650 million of 6.125% Senior Notes due 2023 (the "2023 Notes") at par. In connection with that transaction, charges of $4.1 million were recognized in the three and nine months ended September 26, 2020. The fees included $0.8 million for the write-off of unamortized original issue discount and $3.3 million for the write-off of unamortized deferred financing fees.
Gain (Loss) on Sale of business
In the first nine months of 2021, as part of the Company's strategy to rationalize assets, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a net gain on disposition of $15.3 million.
Income Tax Expense
Our income tax expense was $20.5 million and $33.5 million in the three and nine months ended October 2, 2021, respectively, and our income tax benefit was $(19.6) million and $(25.3) million in the three and nine months ended September 26, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. Additionally, in the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million. In the third quarter of 2020, final regulations were issued clarifying portions of the Tax Cuts and Jobs Act of 2017 ("TCJA"). Under the provisions of the final regulations, we reversed unrecognized tax benefits of $32.9 million in the third quarter of 2020.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible, as well as consideration of tax-planning strategies we may seek to utilize net operating loss carryforwards that begin to expire in 2030.
As of October 2, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.
Segment results of operations
West Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Net revenue
|
$
|
338,575
|
|
|
$
|
351,510
|
|
|
$
|
(12,935)
|
|
|
(3.7)
|
%
|
|
$
|
886,936
|
|
|
$
|
835,026
|
|
|
$
|
51,910
|
|
|
6.2
|
%
|
|
Operating income
|
67,427
|
|
|
72,280
|
|
|
(4,853)
|
|
|
(6.7)
|
%
|
|
135,693
|
|
|
129,288
|
|
|
6,405
|
|
|
5.0
|
%
|
|
Operating margin percentage
|
19.9
|
%
|
|
20.6
|
%
|
|
|
|
|
|
15.3
|
%
|
|
15.5
|
%
|
|
|
|
|
|
Adjusted EBITDA (1)
|
$
|
92,303
|
|
|
$
|
95,470
|
|
|
$
|
(3,167)
|
|
|
(3.3)
|
%
|
|
$
|
211,722
|
|
|
$
|
196,881
|
|
|
$
|
14,841
|
|
|
7.5
|
%
|
|
Adjusted EBITDA Margin (1)
|
27.3
|
%
|
|
27.2
|
%
|
|
|
|
|
|
23.9
|
%
|
|
23.6
|
%
|
|
|
|
|
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.
Net revenue in the West segment decreased $12.9 million for the three months ended October 2, 2021, as increases in net revenues in aggregates were more than offset by a decrease in asphalt and paving revenues due to a divestiture in the second quarter of 2021. Net revenue in the West segment increased $51.9 million in the nine months ended October 2, 2021, as increases in net revenues in aggregates and ready-mix concrete outpaced a decrease in asphalt and paving revenues due to a divestiture in the second quarter of 2021. Organic aggregate volumes increased 6.6% in the first nine months of 2021 as compared to the first nine months of 2020, and organic aggregates average sales prices increased 3.0%, primarily due to strong demand in our Intermountain West geography and increased projects in British Columbia. Organic ready-mix concrete volumes increased 8.9% and our organic ready-mix concrete average sales prices increased 3.3%. Residential construction activity remains strong, particularly in the Houston and Salt Lake City areas, two of our largest metro areas where we operate.
The West segment’s operating income decreased $4.9 million and increased $6.4 million in the three and nine months ended October 2, 2021, respectively. Adjusted EBITDA decreased $3.2 million and increased $14.8 million and Adjusted EBITDA Margin increased to 27.3% from 27.2% and to 23.9% from 23.6% in the three and nine months ended October 2, 2021, respectively. The decreases in operating income and Adjusted EBITDA for the third quarter of 2021 occurred as the weather conditions in 2021 in Texas were less favorable as compared to 2020, which has resulted in operational inefficiencies. The operating margin percentage in the West segment decreased in the three and nine months ended October 2, 2021 due to the factors noted above.
Gross revenue by product/ service was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Revenue by product*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates
|
$
|
91,701
|
|
|
$
|
81,981
|
|
|
$
|
9,720
|
|
|
11.9
|
%
|
|
$
|
251,324
|
|
|
$
|
199,506
|
|
|
$
|
51,818
|
|
|
26.0
|
%
|
|
Ready-mix concrete
|
138,371
|
|
|
132,847
|
|
|
5,524
|
|
|
4.2
|
%
|
|
406,858
|
|
|
361,541
|
|
|
45,317
|
|
|
12.5
|
%
|
|
Asphalt
|
74,695
|
|
|
100,409
|
|
|
(25,714)
|
|
|
(25.6)
|
%
|
|
161,847
|
|
|
205,041
|
|
|
(43,194)
|
|
|
(21.1)
|
%
|
|
Paving and related services
|
119,385
|
|
|
159,307
|
|
|
(39,922)
|
|
|
(25.1)
|
%
|
|
270,042
|
|
|
324,880
|
|
|
(54,838)
|
|
|
(16.9)
|
%
|
|
Other
|
(54,902)
|
|
|
(84,234)
|
|
|
29,332
|
|
|
34.8
|
%
|
|
(131,720)
|
|
|
(171,952)
|
|
|
40,232
|
|
|
23.4
|
%
|
|
Total revenue
|
$
|
369,250
|
|
|
$
|
390,310
|
|
|
$
|
(21,060)
|
|
|
(5.4)
|
%
|
|
$
|
958,351
|
|
|
$
|
919,016
|
|
|
$
|
39,335
|
|
|
4.3
|
%
|
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in “Other.” Revenue from the liquid asphalt terminals is included in asphalt revenue.
The West segment’s percent changes in sales volumes and pricing in the three and nine months ended October 2, 2021 from the three and nine months ended September 26, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
Percentage Change in
|
|
Percentage Change in
|
|
|
Volume
|
|
Pricing
|
|
Volume
|
|
Pricing
|
|
Aggregates
|
9.4
|
%
|
|
2.3
|
%
|
|
24.4
|
%
|
|
1.3
|
%
|
|
Ready-mix concrete
|
0.7
|
%
|
|
3.4
|
%
|
|
8.9
|
%
|
|
3.3
|
%
|
|
Asphalt
|
(23.1)
|
%
|
|
1.8
|
%
|
|
(20.1)
|
%
|
|
2.3
|
%
|
Revenue from aggregates in the West segment increased $9.7 million and $51.8 million in the three and nine months ended October 2, 2021, respectively, due to an increase in aggregates sales volumes. In the three months ended October 2, 2021, aggregate volumes increased 9.4%, primarily due to acquisition related volumes in South Texas and Vancouver, as well as organic volume increases in our Intermountain West markets. In the nine months ended October 2, 2021, the increases in aggregates volumes occurred in all of our markets which had organic growth coupled with increased acquisition volumes. Aggregates pricing for the three and nine months ended October 2, 2021 increased 2.3% and 1.3%, respectively, when compared to the same period in 2020 due to prices increases and market demand, offset by the impact of lower prices on acquisition related volumes.
Revenue from ready-mix concrete in the West segment increased $5.5 million and $45.3 million in the three and nine months ended October 2, 2021, respectively. For the three and nine months ended October 2, 2021, organic ready-mix concrete prices increased 3.4% and 3.3%, respectively. For the three and nine months ended October 2, 2021, our ready-mix concrete organic volumes increased 0.7% and 8.9%, respectively, as there were strong volume increases in the Intermountain geographies, where we continue to see strong residential volumes.
In May 2021, we divested our paving business in South Texas, which reduced our volumes and revenues subsequent to the closing date. Revenue from asphalt in the West segment decreased $25.7 million and $43.2 million in the three and nine months ended October 2, 2021, respectively. For the three and nine months ended October 2, 2021, asphalt volumes decreased 23.1% and 20.1%, respectively. Average sales prices for asphalt increased 1.8% and 2.3% in the three and nine months ended October 2, 2021, respectively. Revenue for paving and related services in the West segment decreased by $39.9 million and $54.8 million in the three and nine months ended October 2, 2021, respectively.
Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the nine months ended October 2, 2021 was approximately $37.1 million and $16.8 million, respectively.
East Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Net revenue
|
$
|
231,184
|
|
|
$
|
208,862
|
|
|
$
|
22,322
|
|
|
10.7
|
%
|
|
$
|
573,343
|
|
|
$
|
529,405
|
|
|
$
|
43,938
|
|
|
8.3
|
%
|
|
Operating income
|
45,018
|
|
|
29,296
|
|
|
15,722
|
|
|
53.7
|
%
|
|
69,249
|
|
|
49,014
|
|
|
20,235
|
|
|
41.3
|
%
|
|
Operating margin percentage
|
19.5
|
%
|
|
14.0
|
%
|
|
|
|
|
|
12.1
|
%
|
|
9.3
|
%
|
|
|
|
|
|
Adjusted EBITDA (1)
|
$
|
69,084
|
|
|
$
|
56,943
|
|
|
$
|
12,141
|
|
|
21.3
|
%
|
|
$
|
138,113
|
|
|
$
|
119,900
|
|
|
$
|
18,213
|
|
|
15.2
|
%
|
|
Adjusted EBITDA Margin (1)
|
29.9
|
%
|
|
27.3
|
%
|
|
|
|
|
|
24.1
|
%
|
|
22.6
|
%
|
|
|
|
|
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.
Net revenue in the East segment increased $22.3 million and $43.9 million in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago, as the increases in aggregates, asphalt and paving and related services exceeded a decrease in ready-mix concrete revenues. Operating income increased $15.7 million and $20.2 million in the three and nine months ended October 2, 2021, respectively, primarily due to net revenue gains in excess of increases in our cost of revenue. Adjusted EBITDA increased $12.1 million and $18.2 million in the three and nine months ended October 2, 2021, respectively, and Adjusted EBITDA Margin increased to 29.9% from 27.3% and to 24.1% from 22.6% in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago.
Operating margin percentage for the three and nine months ended October 2, 2021 increased to 19.5% from 14.0% and to 12.1% from 9.3%, respectively, from the comparable period a year ago, due to the items noted above.
Gross revenue by product/ service was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Revenue by product*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates
|
$
|
110,822
|
|
|
$
|
96,396
|
|
|
$
|
14,426
|
|
|
15.0
|
%
|
|
$
|
289,588
|
|
|
$
|
265,992
|
|
|
$
|
23,596
|
|
|
8.9
|
%
|
|
Ready-mix concrete
|
44,842
|
|
|
46,414
|
|
|
(1,572)
|
|
|
(3.4)
|
%
|
|
118,627
|
|
|
127,493
|
|
|
(8,866)
|
|
|
(7.0)
|
%
|
|
Asphalt
|
48,669
|
|
|
37,276
|
|
|
11,393
|
|
|
30.6
|
%
|
|
93,368
|
|
|
70,109
|
|
|
23,259
|
|
|
33.2
|
%
|
|
Paving and related services
|
75,293
|
|
|
73,207
|
|
|
2,086
|
|
|
2.8
|
%
|
|
162,342
|
|
|
145,768
|
|
|
16,574
|
|
|
11.4
|
%
|
|
Other
|
(24,136)
|
|
|
(18,858)
|
|
|
(5,278)
|
|
|
(28.0)
|
%
|
|
(28,266)
|
|
|
(19,021)
|
|
|
(9,245)
|
|
|
(48.6)
|
%
|
|
Total revenue
|
$
|
255,490
|
|
|
$
|
234,435
|
|
|
$
|
21,055
|
|
|
9.0
|
%
|
|
$
|
635,659
|
|
|
$
|
590,341
|
|
|
$
|
45,318
|
|
|
7.7
|
%
|
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.
The East segment’s percent changes in sales volumes and pricing in the three and nine months ended October 2, 2021 from the three and nine months ended September 26, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
Percentage Change in
|
|
Percentage Change in
|
|
|
Volume
|
|
Pricing
|
|
Volume
|
|
Pricing
|
|
Aggregates
|
8.9
|
%
|
|
5.5
|
%
|
|
5.3
|
%
|
|
3.4
|
%
|
|
Ready-mix concrete
|
(7.5)
|
%
|
|
4.3
|
%
|
|
(10.2)
|
%
|
|
3.6
|
%
|
|
Asphalt
|
18.6
|
%
|
|
5.4
|
%
|
|
23.6
|
%
|
|
2.6
|
%
|
Revenue from aggregates in the East segment increased $14.4 million and $23.6 million in the three and nine months ended October 2, 2021, respectively. Aggregate volumes in the first nine months of 2021 increased 5.3%, as we had organic growth in our North Kansas, Virginia and Carolinas markets. Aggregates organic pricing increased 6.1% and 4.0% in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago.
Revenue from ready-mix concrete in the East segment decreased $1.6 million and $8.9 million in the three and nine months ended October 2, 2021, respectively, as compared to the same period in 2020, as our realized price increases of 4.3% and 3.6%, respectively, were not enough to overcome volume decreases primarily due to lower volumes in Kansas as wind farm projects in 2020 were not fully replaced in 2021. In the three and nine months ended October 2, 2021, ready-mix concrete volumes decreased 7.5% and 10.2%, respectively, compared to prior year levels primarily due to the items noted above.
Revenue from asphalt increased $11.4 million and $23.3 million in the three and nine months ended October 2, 2021, respectively, when compared to the same period in 2020. The increase was mainly attributable to higher volumes in Kentucky, where our volumes in 2020 were impacted by decreased volumes due to COVID-19, as well as increases in Kansas and Virginia. Asphalt pricing increased 2.6% in the nine months ended October 2, 2021, due to product mix. Paving and related service revenue increased $2.1 million and $16.6 million in the three and nine months ended October 2, 2021, respectively, primarily due to the items noted above.
Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the nine months ended October 2, 2021 was approximately $19.2 million and $18.8 million, respectively.
Cement Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Net revenue
|
$
|
92,500
|
|
|
$
|
84,874
|
|
|
$
|
7,626
|
|
|
9.0
|
%
|
|
$
|
218,991
|
|
|
$
|
198,461
|
|
|
$
|
20,530
|
|
|
10.3
|
%
|
|
Operating income
|
30,012
|
|
|
23,975
|
|
|
6,037
|
|
|
25.2
|
%
|
|
45,767
|
|
|
34,579
|
|
|
11,188
|
|
|
32.4
|
%
|
|
Operating margin percentage
|
32.4
|
%
|
|
28.2
|
%
|
|
|
|
|
|
20.9
|
%
|
|
17.4
|
%
|
|
|
|
|
|
Adjusted EBITDA (1)
|
$
|
40,360
|
|
|
$
|
35,086
|
|
|
$
|
5,274
|
|
|
15.0
|
%
|
|
$
|
82,281
|
|
|
$
|
63,172
|
|
|
$
|
19,109
|
|
|
30.2
|
%
|
|
Adjusted EBITDA Margin (1)
|
43.6
|
%
|
|
41.3
|
%
|
|
|
|
|
|
37.6
|
%
|
|
31.8
|
%
|
|
|
|
|
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.
Net revenue in the Cement segment increased $7.6 million and $20.5 million primarily due to increased organic cement volumes of 2.0% and 6.5% in the three and nine months ended October 2, 2021, respectively. Our Green America Recycling facility, which provides fuel for one of our plants, is now operational; however, revenue from that facility is below 2020 levels for the nine months ended October 2, 2021 as we completed repairs and commissioning activities after its prolonged shutdown due to an explosion in April 2020.
Operating income increased $6.0 million and $11.2 million during the three and nine months ended October 2, 2021, respectively. Adjusted EBITDA increased $5.3 million and $19.1 million and Adjusted EBITDA Margin decreased to 43.6% from 41.3% and increased to 37.6% from 31.8% in the three and nine months ended October 2, 2021, respectively. In the first nine months of 2021, we received $1.2 million in insurance proceeds relative to property, plant and equipment that was destroyed in the recycling plant explosion that occurred in April 2020, which was recorded as gain on sale of assets. In addition, we received $7.9 million in business interruption insurance proceeds in the first nine months of 2021, which was recorded as other income.
Operating margin percentage for the three and nine months ended October 2, 2021 increased to 32.4% from 28.2% and to 20.9% from 17.4%, respectively, from the comparable period a year ago. The increased operating margin for the nine months ended October 2, 2021 was primarily due to increased levels of repair and maintenance costs due to increased capitalization of costs into inventory as well as lower levels of incentive compensation in the third quarter of 2020. Production levels in the three and nine months of 2021 were slightly higher than in 2020.
Gross revenue by product was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Variance
|
|
Revenue by product*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cement
|
$
|
90,648
|
|
|
$
|
85,108
|
|
|
$
|
5,540
|
|
|
6.5
|
%
|
|
$
|
215,024
|
|
|
$
|
195,972
|
|
|
$
|
19,052
|
|
|
9.7
|
%
|
|
Other
|
1,852
|
|
|
(234)
|
|
|
2,086
|
|
|
(891.5)
|
%
|
|
3,967
|
|
|
2,489
|
|
|
1,478
|
|
|
59.4
|
%
|
|
Total revenue
|
$
|
92,500
|
|
|
$
|
84,874
|
|
|
$
|
7,626
|
|
|
9.0
|
%
|
|
$
|
218,991
|
|
|
$
|
198,461
|
|
|
$
|
20,530
|
|
|
10.3
|
%
|
*Revenue by product includes intercompany and intracompany sales transferred at market value. Revenue from waste processing and the elimination of intracompany transactions is included in Other.
The Cement segment’s percent changes in sales volumes and pricing in the three and nine months ended October 2, 2021 from the three and nine months ended September 26, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
Percentage Change in
|
|
Percentage Change in
|
|
|
Volume
|
|
Pricing
|
|
Volume
|
|
Pricing
|
|
Cement
|
2.0
|
%
|
|
4.4
|
%
|
|
6.5
|
%
|
|
3.0
|
%
|
Revenue from cement increased $5.5 million and $19.1 million in the three and nine months ended October 2, 2021, respectively, due to volume increases of 2.0% and 6.5%, respectively, supplemented by organic cement pricing gains in the three and nine months ended October 2, 2021.
Liquidity and Capital Resources
Our primary sources of liquidity include cash on-hand, cash provided by operations, amounts available for borrowing under our senior secured credit facilities and capital-raising activities in the debt and capital markets. In addition to our current sources of liquidity, we have access to liquidity through public offerings of shares of our Class A common stock. To facilitate such offerings, in January 2020, we filed a shelf registration statement with the SEC that will expire in January 2023. The amount of Class A common stock to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific limit on the amount we may issue. The specifics of any future offerings, along with the use of the proceeds thereof, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
As of October 2, 2021, we had $258.1 million in cash and cash equivalents and $503.9 million of working capital compared to $418.2 million and $570.6 million, respectively, at January 2, 2021. Working capital is calculated as current assets less current liabilities. There were no restricted cash balances as of October 2, 2021 or January 2, 2021. We had no outstanding borrowings on our senior secured revolving credit facility, which had borrowing capacity of $329.1 million as of October 2, 2021, which is net of $15.9 million of outstanding letters of credit and is fully available to us within the terms and covenant requirements of our credit agreement governing the senior secured credit facilities (the “Credit Agreement”).
Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Our working capital requirements generally increase during the first half of the year as we build up inventory and focus on repair and maintenance and other set-up costs for the upcoming season. Working capital levels then decrease as the construction season winds down and we enter the winter months, which is when we see significant inflows of cash from the collection of receivables.
As of October 2, 2021 and January 2, 2021, our long-term borrowings totaled $1.6 billion and $1.9 billion, respectively, for which we incurred $20.8 million and $63.2 million of interest expense for the three and nine months ended October 2, 2021, respectively, and $21.5 million and $68.4 million for the three and nine months ended September 26, 2020, respectively. We expect that normal operating cash flow will be sufficient to fund our seasonal working capital needs. We had no outstanding borrowings on the revolving credit facility as of October 2, 2021.
We believe we have access to sufficient financial resources from our liquidity sources to fund our business and operations, including contractual obligations, capital expenditures and debt service obligations, for at least the next twelve months. Our growth strategy contemplates future acquisitions for which we believe we have sufficient access to capital. We also plan to divest of certain dilutive businesses as we rationalize our portfolio, which will also generate additional capital.
We and our affiliates may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Indebtedness
Please refer to the notes to the consolidated interim financial statements for detailed information about our long-term debt, scheduled maturities of long-term debt and affirmative and negative covenants, including the maximum allowable consolidated first lien net leverage ratio. As of October 2, 2021, we were in compliance with all debt covenants. At October 2, 2021 and January 2, 2021, $1.6 billion and $1.9 billion, respectively, of total debt was outstanding under our respective debt agreements.
Cash Flows
The following table summarizes our net cash used in or provided by operating, investing and financing activities and our capital expenditures in the nine months ended October 2, 2021 and September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit Inc.
|
|
($ in thousands)
|
October 2, 2021
|
|
September 26, 2020
|
|
Net cash provided by (used in):
|
|
|
|
|
Operating activities
|
$
|
207,373
|
|
|
$
|
218,039
|
|
|
Investing activities
|
(65,316)
|
|
|
(252,958)
|
|
|
Financing activities
|
(302,092)
|
|
|
12,573
|
|
Operating activities
During the nine months ended October 2, 2021, cash provided by operating activities was $207.4 million primarily as a result of:
•Net income of $109.9 million, increased by non-cash expenses, including $177.8 million of depreciation, depletion, amortization and accretion expense and $14.9 million of share-based compensation, reduced by the net gain on sale of businesses and other assets of $19.3 million.
•Billed and unbilled accounts receivable increased by $105.1 million in the first nine months of 2021 as a result of the seasonality of our business. The majority of our sales occur in the spring, summer and fall and we typically incur an increase in accounts receivable (net billed and unbilled) during the second and third quarters of each year. This amount is typically converted to cash in the fourth and first quarters. Our inventory levels decreased during the second quarter as business activity increased during the quarter.
•The timing of payments associated with accounts payable and accrued expenses of cash, which is consistent with the seasonality of our business whereby we build-up inventory levels and incur repairs and maintenance costs to ready the business for increased sales volumes in the summer and fall. These costs are typically incurred in the first half of the year and paid by year-end. In addition, we made $77.9 million of interest payments in the nine months ended October 2, 2021.
During the nine months ended September 26, 2020, cash provided by operating activities was $218.0 million primarily as a result of:
•Net income of $104.9 million, increased by non-cash expenses, including $164.4 million of depreciation, depletion, amortization and accretion expense and $23.1 million of share-based compensation.
•Billed and unbilled accounts receivable increased by $79.3 million in the first nine months of 2020 as a result of the seasonality of our business. The majority of our sales occur in the spring, summer and fall and we typically incur an increase in accounts receivable (net billed and unbilled) during the second and third quarters of each year. This amount is typically converted to cash in the fourth and first quarters.
•The timing of payments associated with accounts payable and accrued expenses of cash, which is consistent with the seasonality of our business whereby we build-up inventory levels and incur repairs and maintenance costs to ready the business for increased sales volumes in the summer and fall. These costs are typically incurred in the first half of the year and paid by year-end. In addition, we made $86.4 million of interest payments in the nine months ended September 26, 2020.
Investing activities
During the nine months ended October 2, 2021, cash used for investing activities was $65.3 million, of which $170.1 million was invested in capital expenditures, which was offset by $103.6 million of proceeds from the sale of businesses, as well as $8.8 million of proceeds from asset sales.
During the nine months ended September 26, 2020, cash used for investing activities was $253.0 million, of which $123.2 million related to three acquisitions completed in the period and $140.0 million was invested in capital expenditures, which was partially offset by $8.8 million of proceeds from asset sales.
Financing activities
During the nine months ended October 2, 2021, cash used in financing activities was $302.1 million. We made $323.8 million of payments on debt, including the redemption of $300.0 million of the 2025 Senior Notes in September 2021, received
$32.4 million of proceeds from stock option exercises, which was offset by $9.8 million payments on acquisition-related liabilities.
During the nine months ended September 26, 2020, cash provided by financing activities was $12.6 million. We received $700.0 million from the issuance of the 2029 Notes, which was offset by $10.4 million payments on acquisition-related liabilities and $666.9 million of payments on debt, including the retirement of the 2023 Notes.
Cash paid for capital expenditures
We paid cash of approximately $170.1 million in capital expenditures in the nine months ended October 2, 2021 compared to $140.0 million in the nine months ended September 26, 2020.
We currently estimate that we will invest between $200 million to $220 million including approximately $25 million to $35 million for greenfield projects. We increased our capital expenditure estimate from previously disclosed amounts as we invested in reserves subsequent to quarter end, as well as incremental capital purchases to service demand in high growth markets. The timing of our greenfield expenditures is dependent upon the timing of when permits may be issued. We expect to fund our capital expenditure program through cash on hand, cash from operations, outside financing arrangements and available borrowings under our revolving credit facility.
Tax Receivable Agreement
When the Company purchases LP Units for cash or LP Units are exchanged for shares of Class A common stock, this results in increases in the Company’s share of the tax basis of the tangible and intangible assets of Summit Holdings. These increases in tax basis may increase, for tax purposes, depreciation and amortization deductions and therefore reduce the amount of tax that Summit Inc. would otherwise be required to pay in the future. In connection with our initial public offering, we entered into a TRA with the holders of the LP Units that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA is deemed to realize) as a result of these increases in tax basis and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. The increases in tax basis as a result of an exchange of LP Units for shares of Class A common stock, as well as the amount and timing of any payments under the TRA, are difficult to accurately estimate, as they will vary depending upon a number of factors, including the timing of the exchanges, the price of our Class A common stock at the time of the exchange, the extent to which the exchanges are taxable, the amount and timing of our income and the effective tax rate.
We anticipate funding payments under the TRA from cash flows from operations, available cash and available borrowings under our Senior Secured Revolving Credit Facilities. As of October 2, 2021, we had accrued $330.9 million as TRA liability in our consolidated financial statements. We do not expect significant payments on our TRA liability to occur within the next twelve months.
Based upon a $33.34 per share price of our Class A common stock, the closing price of our stock on the last trading day of the three months ended October 2, 2021, and a contractually defined discount rate of 1.24%, we estimate that if Summit Inc. were to exercise its right to terminate the TRA, the aggregate amount required to settle the TRA would be approximately $321.7 million. Estimating the amount and the timing of payments that may be made under the TRA is by its nature difficult and imprecise, insofar as the amounts payable depends on a variety of factors, including, but not limited to, the timing of future exchanges, our stock price at the date of the exchange and the timing of the generation of future taxable income. The increases in tax basis as a result of an exchange, as well as the amount and timing of any payments under the TRA, will vary depending on a variety of factors.
Commitments and contingencies
We are party to certain legal actions arising from the ordinary course of business activities. Accruals are recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, management expects that the ultimate resolution of all pending or threatened claims and litigation will not have a material effect on our consolidated financial position, results of operations or liquidity. We record legal fees as incurred.
Environmental Remediation—Our operations are subject to and affected by federal, state, provincial and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. We regularly monitor and review
its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of our business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities and noncompliance will not have a material adverse effect on our consolidated financial condition, results of operations or liquidity.
Other—We are obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial condition, results of operations, and cash flows of the Company. The terms of the purchase commitments generally approximate one year.
Off-Balance sheet arrangements
As of October 2, 2021, we had no material off-balance sheet arrangements.
Non-GAAP Performance Measures
We evaluate our operating performance using metrics that we refer to as “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Cash Gross Profit” and “Adjusted Cash Gross Profit Margin” which are not defined by U.S. GAAP and should not be considered as an alternative to earnings measures defined by U.S. GAAP. We define Adjusted EBITDA as EBITDA, adjusted to exclude accretion, loss on debt financings, gain on sale of business, non-cash compensation and certain other non-cash and non-operating items. Beginning with the first quarter of 2021, the Company no longer adjusts for transaction costs, as those costs are recurring cash payments and included in general and administrative expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We define Adjusted Cash Gross Profit as operating income before general and administrative expenses, depreciation, depletion, amortization and accretion and Adjusted Cash Gross Profit Margin as Adjusted Cash Gross Profit as a percentage of net revenue.
We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin for the convenience of investment professionals who use such metrics in their analyses. The investment community often uses these metrics to assess the operating performance of a company’s business and to provide a consistent comparison of performance from period to period. We use these metrics, among others, to assess the operating performance of our individual segments and the consolidated company.
Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.
The tables below reconcile our net income (loss) to EBITDA and Adjusted EBITDA, present Adjusted EBITDA by segment and reconcile operating income to Adjusted Cash Gross Profit for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
Three months ended October 2, 2021
|
|
by Segment
|
West
|
|
East
|
|
Cement
|
|
Corporate
|
|
Consolidated
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
69,457
|
|
|
$
|
47,924
|
|
|
$
|
34,310
|
|
|
$
|
(76,313)
|
|
|
$
|
75,378
|
|
|
Interest (income) expense
|
(2,933)
|
|
|
(2,237)
|
|
|
(4,359)
|
|
|
33,663
|
|
|
24,134
|
|
|
Income tax expense
|
976
|
|
|
119
|
|
|
—
|
|
|
19,418
|
|
|
20,513
|
|
|
Depreciation, depletion and amortization
|
24,577
|
|
|
22,412
|
|
|
10,324
|
|
|
1,068
|
|
|
58,381
|
|
|
EBITDA
|
$
|
92,077
|
|
|
$
|
68,218
|
|
|
$
|
40,275
|
|
|
$
|
(22,164)
|
|
|
$
|
178,406
|
|
|
Accretion
|
219
|
|
|
397
|
|
|
85
|
|
|
—
|
|
|
701
|
|
|
Loss on debt financings
|
—
|
|
|
—
|
|
|
—
|
|
|
6,016
|
|
|
6,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of businesses
|
(135)
|
|
|
248
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|
Non-cash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
4,685
|
|
|
4,685
|
|
|
Other
|
142
|
|
|
221
|
|
|
—
|
|
|
—
|
|
|
363
|
|
|
Adjusted EBITDA
|
$
|
92,303
|
|
|
$
|
69,084
|
|
|
$
|
40,360
|
|
|
$
|
(11,463)
|
|
|
$
|
190,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
Nine months ended October 2, 2021
|
|
by Segment
|
West
|
|
East
|
|
Cement
|
|
Corporate
|
|
Consolidated
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
142,340
|
|
|
$
|
91,928
|
|
|
$
|
65,935
|
|
|
$
|
(190,312)
|
|
|
$
|
109,891
|
|
|
Interest (income) expense
|
(7,825)
|
|
|
(6,133)
|
|
|
(12,439)
|
|
|
98,933
|
|
|
72,536
|
|
|
Income tax expense
|
2,360
|
|
|
209
|
|
|
—
|
|
|
30,909
|
|
|
33,478
|
|
|
Depreciation, depletion and amortization
|
74,634
|
|
|
65,032
|
|
|
28,535
|
|
|
3,273
|
|
|
171,474
|
|
|
EBITDA
|
$
|
211,509
|
|
|
$
|
151,036
|
|
|
$
|
82,031
|
|
|
$
|
(57,197)
|
|
|
$
|
387,379
|
|
|
Accretion
|
653
|
|
|
1,274
|
|
|
250
|
|
|
—
|
|
|
2,177
|
|
|
Loss on debt financings
|
—
|
|
|
—
|
|
|
—
|
|
|
6,016
|
|
|
6,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of businesses
|
(408)
|
|
|
(14,911)
|
|
|
—
|
|
|
—
|
|
|
(15,319)
|
|
|
Non-cash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
14,875
|
|
|
14,875
|
|
|
Other
|
(32)
|
|
|
714
|
|
|
—
|
|
|
—
|
|
|
682
|
|
|
Adjusted EBITDA
|
$
|
211,722
|
|
|
$
|
138,113
|
|
|
$
|
82,281
|
|
|
$
|
(36,306)
|
|
|
$
|
395,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
Three months ended September 26, 2020
|
|
by Segment
|
West
|
|
East
|
|
Cement
|
|
Corporate
|
|
Consolidated
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
72,871
|
|
|
$
|
31,013
|
|
|
$
|
27,324
|
|
|
$
|
(38,439)
|
|
|
$
|
92,769
|
|
|
Interest (income) expense
|
(1,192)
|
|
|
(649)
|
|
|
(3,393)
|
|
|
29,857
|
|
|
24,623
|
|
|
Income tax expense (benefit)
|
937
|
|
|
(193)
|
|
|
—
|
|
|
(20,357)
|
|
|
(19,613)
|
|
|
Depreciation, depletion and amortization
|
22,973
|
|
|
22,346
|
|
|
11,066
|
|
|
979
|
|
|
57,364
|
|
|
EBITDA
|
$
|
95,589
|
|
|
$
|
52,517
|
|
|
$
|
34,997
|
|
|
$
|
(27,960)
|
|
|
$
|
155,143
|
|
|
Accretion
|
144
|
|
|
457
|
|
|
89
|
|
|
—
|
|
|
690
|
|
|
Loss on debt financings
|
—
|
|
|
—
|
|
|
—
|
|
|
4,064
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
13,322
|
|
|
13,322
|
|
|
Other
|
(263)
|
|
|
3,969
|
|
|
—
|
|
|
377
|
|
|
4,083
|
|
|
Adjusted EBITDA
|
$
|
95,470
|
|
|
$
|
56,943
|
|
|
$
|
35,086
|
|
|
$
|
(10,197)
|
|
|
$
|
177,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
Nine months ended September 26, 2020
|
|
by Segment
|
West
|
|
East
|
|
Cement
|
|
Corporate
|
|
Consolidated
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
130,409
|
|
|
$
|
52,152
|
|
|
$
|
44,432
|
|
|
$
|
(122,063)
|
|
|
$
|
104,930
|
|
|
Interest (income) expense
|
(2,479)
|
|
|
(1,651)
|
|
|
(9,685)
|
|
|
91,864
|
|
|
78,049
|
|
|
Income tax expense (benefit)
|
1,524
|
|
|
(358)
|
|
|
—
|
|
|
(26,499)
|
|
|
(25,333)
|
|
|
Depreciation, depletion and amortization
|
66,707
|
|
|
64,080
|
|
|
28,165
|
|
|
2,960
|
|
|
161,912
|
|
|
EBITDA
|
$
|
196,161
|
|
|
$
|
114,223
|
|
|
$
|
62,912
|
|
|
$
|
(53,738)
|
|
|
$
|
319,558
|
|
|
Accretion
|
375
|
|
|
1,213
|
|
|
260
|
|
|
—
|
|
|
1,848
|
|
|
Loss on debt financings
|
—
|
|
|
—
|
|
|
—
|
|
|
4,064
|
|
|
4,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
23,119
|
|
|
23,119
|
|
|
Other
|
345
|
|
|
4,464
|
|
|
—
|
|
|
(522)
|
|
|
4,287
|
|
|
Adjusted EBITDA
|
$
|
196,881
|
|
|
$
|
119,900
|
|
|
$
|
63,172
|
|
|
$
|
(27,077)
|
|
|
$
|
352,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Working Capital
|
October 2, 2021
|
|
January 2, 2021
|
|
($ in thousands)
|
|
|
|
|
Total current assets
|
$
|
834,782
|
|
|
$
|
893,279
|
|
|
Less total current liabilities
|
(330,909)
|
|
|
(322,689)
|
|
|
Working capital
|
$
|
503,873
|
|
|
$
|
570,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
Reconciliation of Operating Income to Adjusted Cash Gross Profit
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2, 2021
|
|
September 26, 2020
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
125,017
|
|
|
$
|
100,617
|
|
|
$
|
195,881
|
|
|
$
|
158,957
|
|
|
General and administrative expenses
|
47,364
|
|
|
50,972
|
|
|
146,454
|
|
|
132,385
|
|
|
Depreciation, depletion, amortization and accretion
|
59,082
|
|
|
58,054
|
|
|
173,651
|
|
|
163,760
|
|
|
Gain on sale of property, plant and equipment
|
(1,159)
|
|
|
(1,616)
|
|
|
(4,331)
|
|
|
(5,747)
|
|
|
Adjusted Cash Gross Profit (exclusive of items shown separately)
|
$
|
230,304
|
|
|
$
|
208,027
|
|
|
$
|
511,655
|
|
|
$
|
449,355
|
|
|
Adjusted Cash Gross Profit Margin (exclusive of items shown separately) (1)
|
34.8
|
%
|
|
32.2
|
%
|
|
30.5
|
%
|
|
28.8
|
%
|
(1)Adjusted Cash Gross Profit Margin, which we define as Adjusted Cash Gross Profit as a percentage of net revenue.