UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2002 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
Commission file number 000-26025
U.S. CONCRETE, INC.
(exact name of registrant as specified in its charter)
Delaware 76-0586680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2925 Briarpark, Suite 500, Houston, Texas 77042
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (713) 499-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of the close of business on August 13, 2002, U.S. Concrete, Inc. had
26,891,824 shares of its common stock issued and outstanding.
U.S. CONCRETE, INC. AND SUBSIDIARIES
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Part II - Other Information
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
PART I - FINANCIAL INFORMATION
The information appearing under the caption "Item 1. Financial Statements"
in Part I-Financial Information of U.S. Concrete's quarterly report on Form 10-Q
for the quarter ended June 30, 2002 is amended to read in its entirety as set
forth below. The amended information corrects a typographical error in the first
table appearing in note 3 to the condensed consolidated financial statements.
Item 1. Financial Statements
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2002 2001
----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,688 $ 7,127
Trade accounts receivable, net 79,852 72,326
Inventories 20,012 16,499
Deferred income taxes 2,877 1,851
Prepaid expenses and other current assets 8,052 7,444
--------- ---------
Total current assets 117,481 105,247
--------- ---------
Property, plant and equipment, net 113,187 100,309
Goodwill, net 185,400 219,868
Other assets 5,308 5,412
--------- ---------
Total assets $ 421,376 $ 430,836
========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 56 $ 77
Accounts payable and accrued liabilities 62,487 58,229
--------- ---------
Total current liabilities 62,543 58,306
--------- ---------
Long-term debt, net of current maturities 175,072 163,698
Other long-term liabilities 305 --
Deferred income taxes 12,184 20,517
--------- ---------
Total liabilities 250,104 242,521
--------- ---------
Commitments and contingencies
Stockholders' equity
Common stock 27 27
Additional paid-in capital 156,649 155,380
Retained earnings 14,596 32,908
--------- ---------
Total stockholders' equity 171,272 188,315
--------- ---------
Total liabilities and stockholders' equity $ 421,376 $ 430,836
========= =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -----------------------
2002 2001 2002 2001
----------- --------- --------- ----------
(unaudited) (unaudited)
Sales $ 140,187 $ 136,299 $ 245,087 $ 226,177
Cost of goods sold 110,043 106,981 197,490 183,208
--------- --------- --------- ---------
Gross profit 30,144 29,318 47,597 42,969
Selling, general and administrative expenses 11,876 10,420 23,738 19,163
Special compensation charge -- 2,124 -- 2,124
Depreciation, depletion and amortization 2,709 3,366 5,267 6,607
--------- --------- --------- ---------
Income from operations 15,559 13,408 18,592 15,075
Interest expense, net 4,341 5,081 8,703 10,051
Other income, net 146 163 307 369
--------- --------- --------- ---------
Income before income taxes and cumulative
effect of accounting change 11,364 8,490 10,196 5,393
Income tax provision 4,659 3,508 4,180 2,238
--------- --------- --------- ---------
Income before cumulative effect of
accounting change 6,705 4,982 6,016 3,155
Cumulative effect of accounting change, net of tax
of $12,297 -- -- (24,328) --
--------- --------- --------- ---------
Net income (loss) $ 6,705 $ 4,982 $ (18,312) $ 3,155
========= ========= ========= =========
Basic income per share before cumulative effect of
accounting change $ 0.25 $ 0.21 $ 0.22 $ 0.14
Cumulative effect of accounting change, net of tax -- -- (0.91) --
--------- --------- --------- ---------
Basic net income (loss) per share $ 0.25 $ 0.21 $ (0.69) $ 0.14
========= ========= ========= =========
Diluted income per share before cumulative effect
of accounting change $ 0.25 $ 0.21 $ 0.22 $ 0.14
Cumulative effect of accounting change, net of tax -- -- (0.91) --
--------- --------- --------- ---------
Diluted net income (loss) per share $ 0.25 $ 0.21 $ (0.69) $ 0.14
========= ========= ========= =========
Basic average common shares outstanding 26,768 23,413 26,750 23,010
========= ========= ========= =========
Diluted average common shares outstanding 26,786 23,585 26,772 23,095
========= ========= ========= =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months
Ended June 30
---------------------
2002 2001
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(18,312) $ 3,155
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Cumulative effect of accounting change 24,328 --
Depreciation, depletion and amortization 5,267 6,607
Debt issuance cost amortization 669 939
Net (gain) loss on sale of assets (75) 25
Deferred income taxes 3,000 846
Provision for doubtful accounts 1,127 1,156
Stock compensation charge -- 737
Changes in operating assets and liabilities, net of acquisitions (5,031) 2,724
-------- --------
Net cash provided by operating activities 10,973 16,189
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment, net of disposals of $331 and $1,880 (4,208) (4,277)
Payments for acquisitions, net of cash received of $0 and $1,817 (17,064) (35,133)
Other investing activities (2,026) (2,010)
-------- --------
Net cash used in investing activities (23,298) (41,420)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in revolving credit facility borrowings 11,380 28,880
Payments on other long-term debts (27) (75)
Proceeds from issuances of common stock 676 643
Debt issuance costs (143) (322)
-------- --------
Net cash provided by financing activities 11,886 29,126
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (439) 3,895
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,127 711
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,688 $ 4,606
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
U.S. Concrete, Inc., a Delaware corporation, provides ready-mixed concrete
and related products and services to the construction industry in several major
markets in the United States. U.S. Concrete is a holding company and the
businesses of the consolidated group are conducted through U.S. Concrete's
subsidiaries.
U.S. Concrete commenced operations in May 1999 when it acquired six
operating businesses in three major markets in the United States. Since then,
U.S. Concrete has acquired an additional 22 operating businesses, in these and
seven additional markets in the United States, and intends to acquire additional
companies to expand its operations.
The consolidated financial statements include the accounts of U.S. Concrete
and subsidiaries, and have been prepared by U.S. Concrete, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC's rules and regulations,
although U.S. Concrete believes that the disclosures are adequate to make the
information presented not misleading. You should read these unaudited condensed
consolidated financial statements together with the consolidated financial
statements and the related notes included in U.S. Concrete's annual report on
Form 10-K for the year ended December 31, 2001. In the opinion of U.S. Concrete,
all adjustments necessary to present fairly the information in the unaudited
condensed consolidated financial statements of U.S. Concrete have been included.
Operating results for the three- and six-month periods ended June 30, 2002, are
not necessarily indicative of the results for the year ended December 31, 2002.
The preparation of financial statements and accompanying notes in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported. Actual results
could differ from those estimates. We have made certain reclassifications to
some amounts in the prior period presentations to conform with the current
period presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
Effective January 1, 2002, U.S. Concrete adopted Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations," SFAS No. 142,
"Goodwill and Other Intangible Assets," and SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," except for certain transitional
provisions in SFAS No. 141 and SFAS No. 142 related to business combinations
after June 30, 2001, which it adopted on July 1, 2001. SFAS No. 141 requires the
purchase method of accounting for all business combinations initiated after June
30, 2001 and prohibits the use of the pooling-of-interests method for such
transactions. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and provisions of Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business. SFAS No. 144
establishes criteria for the recognition and measurement of an impairment loss
for long-lived assets to be held and used and defines classification of
continuing and discontinued operations. SFAS No. 144 also requires that assets
held for sale be measured at the lower of their carrying amount or fair value
less cost to sell. The adoption of SFAS No. 141 and SFAS No. 144 did not impact
our financial position or results of operations.
As a result of adopting SFAS No. 142, U.S. Concrete's goodwill and
intangible assets with an indefinite useful life are no longer amortized.
Pursuant to SFAS No. 142, goodwill and intangible assets are periodically tested
for impairment, and the new standard provided a six-month transitional period to
complete the impairment review. U.S. Concrete completed its impairment review
during the quarter ended June 30, 2002, which indicated impairments attributable
to two reporting units. Accordingly, U.S. Concrete recorded retroactively a
transitional goodwill impairment charge of $24.3 million, net of tax, which it
has presented as a cumulative effect of accounting change, in the quarter ended
March 31, 2002. The SFAS No. 142 impairments are associated solely with
goodwill. Prior year goodwill amortization totaled $1.3 million for the three
months ended June 30, 2001 and $2.6 million for the six months ended June 30,
2001. At June 30, 2002, U.S. Concrete's unamortized goodwill balance was $185.4
million. For additional discussion on the impact of adopting SFAS No. 142, see
note 3 to the condensed consolidated financial statements.
4
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
U.S. Concrete acquired mineral rights related to its acquisition of an
aggregates business in 2002. The financial results of the acquired business have
been included in U.S. Concrete's results since January 1, 2002. Effective
January 1, 2002, U.S. Concrete computes the depletion of the related mineral
deposits on the basis of the estimated quantity of recoverable raw materials.
Other than as described above, U.S. Concrete has not added to or changed
its accounting policies significantly since December 31, 2001. For a description
of these policies, refer to note 2 of the consolidated financial statements in
U.S. Concrete's annual report on Form 10-K for the year ended December 31, 2001.
3. TRANSITIONAL DISCLOSURE UNDER SFAS NO. 142
Under SFAS No. 142, substantially all of U.S. Concrete's intangible assets
are no longer amortized, and U.S. Concrete must perform an annual impairment
test for goodwill and intangible assets. U.S. Concrete allocates these assets to
various reporting units, which comprise 11 divisions. SFAS No. 142 requires U.S.
Concrete to compare the fair value of the reporting unit to its carrying amount
on an annual basis to determine if there is potential impairment. If the fair
value of the reporting unit is less than its carrying value, an impairment loss
would be recorded to the extent of that difference. The impairment test for
intangible assets consists of comparing the fair value of the intangible asset
to its carrying amount. If the carrying amount of the intangible asset exceeds
its fair value, an impairment is recognized. U.S. Concrete bases the fair values
of its reporting units on a combination of valuation approaches including
discounted cash flows; multiples of sales and earnings before interest, taxes,
depreciation and amortization; and comparisons of recent transactions. Under
SFAS No. 142, U.S. Concrete recorded retroactively a transitional goodwill
impairment charge of $36.6 million ($24.3 million, net of tax), presented as a
cumulative effect of accounting change in the first quarter of 2002. This
impairment charge is attributable to two reporting units, its divisions in North
Texas/Southwest Oklahoma and Memphis/Northern Mississippi. Local market and
economic conditions have affected the value of acquisitions made in North Texas
(in 2000 and 2001) and Memphis/Northern Mississippi (in 1999).
The following unaudited pro forma information presents net income (loss),
basic net income (loss) per share and diluted net income (loss) per share
adjusted for SFAS No. 142 (in thousands):
Three Months Six Months
Ended June 30 Ended June 30
-------------------- -----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(unaudited) (unaudited)
Net income (loss):
Reported income before cumulative effect of
accounting change $ 6,705 $ 4,982 $ 6,016 $ 3,155
Add back: goodwill amortization, net of tax -- 1,011 -- $ 1,727
-------- --------- --------- ---------
Adjusted income before cumulative effect of
accounting change $ 6,705 $ 5,993 $ 6,016 $ 4,882
Cumulative effect of accounting change, net of tax -- -- (24,328) --
-------- --------- --------- ---------
Adjusted net income (loss) $ 6,705 $ 5,993 $ (18,312) $ 4,882
======== ========= ========= =========
Basic net income (loss) per share:
Reported income before cumulative effect of
accounting change $ 0.25 $ 0.21 $ 0.22 $ 0.14
Adjusted basic income before cumulative effect of
accounting change per share $ 0.25 $ 0.26 $ 0.22 $ 0.21
Adjusted basic net income (loss) per share $ 0.25 $ 0.26 $ (0.69) $ 0.21
Diluted net income (loss) per share:
Reported income before cumulative effect of
accounting change $ 0.25 $ 0.21 $ 0.22 $ 0.14
Adjusted diluted income before cumulative effect
of accounting change per share $ 0.25 $ 0.25 $ 0.22 $ 0.21
Adjusted diluted net income (loss) per share $ 0.25 $ 0.25 $ (0.69) $ 0.21
The balance of goodwill subsequent to the recognition of the transitional
goodwill impairment charge above was $185.4 million at June 30, 2002.
5
3. TRANSITIONAL DISCLOSURE UNDER SFAS NO. 142 (continued)
For the six months ended June 30, U.S. Concrete acquired goodwill, all
related to acquisitions, of $0 in 2002 and $24.7 million in 2001. The changes in
the carrying amount of goodwill for the six-months ended June 30, 2002, were as
follows (in thousands):
Amount
---------
Balance at December 31, 2001 $ 219,868
Additions: Acquisitions and adjustments 2,157
Less: Impairments (36,625)
---------
Balance at June 30, 2002 $ 185,400
=========
The goodwill adjustments primarily represent post-acquisition adjustments
to reflect the final fair values of assets acquired and liabilities assumed in
the acquisition of two precast businesses and one ready-mixed concrete business
in 2001.
The following unaudited pro forma information presents the net loss for the
quarter ended March 31, 2002 to reflect the recognition of the transitional
goodwill impairment charge, presented as a cumulative effect of accounting
change:
Basic and
diluted
Amount per share
------------- -------------
(in thousands)
Reported loss before cumulative effect of accounting
change $ (689) $ (0.03)
Cumulative effect of accounting change, net of tax (24,328) (0.91)
------------ ------------
Adjusted net loss $ (25,017) $ (0.94)
============ ============
4. BUSINESS COMBINATIONS
U.S. Concrete effected one acquisition in the first quarter of 2002 and
seven during 2001, all of which were accounted for as purchases. U.S. Concrete
did not effect any acquisitions during the second quarter of 2002. The following
tables summarize the number of acquisitions completed and aggregate
consideration U.S. Concrete paid in these transactions:
Six Months Year Ended
Ended June 30, December 31,
2002 2001
Acquisitions completed: -------------- ------------
Aggregates businesses 1 --
Ready-mixed businesses -- 5
Precast businesses -- 2
--------- ----------
Total 1 7
========= ==========
Six Months Year Ended
Ended June 30, December 31,
2002 2001
Consideration (in thousands): -------------- ------------
(unaudited)
Cash $ 17,064 $ 49,303
Fair value of common stock issued 0 12,375
--------- ----------
Total $ 17,064 $ 61,678
========= ==========
6
4. BUSINESS COMBINATIONS (continued)
The following summarized unaudited pro forma consolidated financial
information adjusts the historical consolidated financial information to reflect
the effect of non-amortization of goodwill in accordance with SFAS No. 142 and
to reflect the assumption that all acquisitions occurred on January 1, 2001 (in
thousands, except per share data):
Six Months Ended
Ended June 30,
-----------------------
2002 2001
--------- ----------
(unaudited)
Revenues $245,087 $250,211
Income before cumulative effect of accounting change $ 6,016 $ 5,579
Net income (loss) $(18,312) $ 5,579
Basic earnings (loss) per share:
Income before cumulative effect of accounting change $ 0.22 $ 0.21
Net income (loss) $ (0.69) $ 0.21
Diluted earnings (loss) per share:
Income before cumulative effect of accounting change $ 0.22 $ 0.21
Net income (loss) $ (0.69) $ 0.21
Pro forma adjustments in these amounts primarily relate to:
. contractual reductions in salaries, bonuses and benefits to employees
and former owners of the acquired businesses;
. elimination of sellers' legal, accounting and other professional fees
incurred in connection with the acquisitions;
. elimination of the amortization of goodwill during the 2001 period;
. adjustments to interest expense, net increase to reflect borrowings
incurred to fund acquisitions; and
. adjustments to the federal and state income tax provision based on pro
forma operating results.
The pro forma financial information does not purport to represent what the
combined financial results of operations of U.S. Concrete actually would have
been if these transactions and events had in fact occurred when assumed and are
not necessarily representative of its financial results of operations for any
future period.
In connection with the acquisitions, U.S. Concrete has determined the
resulting goodwill as follows (in thousands):
Six Months Year Ended
Ended June 30, December 31,
2002 2001
-------------- ------------
(unaudited)
Cash consideration $ 17,064 $ 49,303
Less: Cash received from acquired companies -- (2,174)
--------- ----------
Cash paid, net of cash acquired 17,064 47,129
Fair value of common stock issued -- 12,375
Direct acquisition costs incurred 215 2,613
--------- ----------
Total purchase costs incurred, net of cash acquired 17,279 62,117
--------- ----------
Fair value of assets acquired, net of cash acquired 17,579 40,056
Less: Fair value of assumed liabilities (300) (14,257)
---------- ----------
Fair value of net assets acquired, net of cash acquired 17,279 25,799
--------- ----------
Costs incurred in excess of net assets acquired $ 0 $ 36,318
========= ==========
7
5. SHARES USED IN COMPUTING EARNINGS PER SHARE
The following table summarizes the number of shares (in thousands) of
common stock we have used on a weighted average basis in calculating basic and
diluted net income (loss) per share:
Three Months Six Months
Ended June 30 Ended June 30
------------------------------- ----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ----------------
(unaudited) (unaudited)
Basic weighted average common shares outstanding 26,768 23,413 26,750 23,010
Effect of dilutive stock options and warrants 18 172 22 85
--------------- --------------- --------------- ----------------
Diluted weighted average common shares outstanding 26,786 23,585 26,772 23,095
=============== =============== =============== ================
Stock options and warrants covering 3.3 million shares for the three months
ended June 30, 2002 and 0.1 million shares for the three months ended June 30,
2001 were excluded from the computation of diluted earnings per share because
their effect would be antidilutive.
6. INVENTORIES
Inventories consist of the following (in thousands):
June 30, December 31,
2002 2001
--------------- -------------
(unaudited)
Raw materials $ 8,638 $ 5,699
Finished products and supplies 11,374 10,800
--------------- -------------
$ 20,012 $ 16,499
=============== =============
7. LONG-TERM DEBT
A summary of long-term debt is as follows (in thousands):
June 30, December 31,
2002 2001
--------------- -------------
(unaudited)
Secured revolving credit facility $ 80,000 $ 68,620
12.00% senior subordinated notes 95,000 95,000
Other 128 155
--------------- -------------
175,128 163,775
Less: current maturities (56) (77)
--------------- -------------
Long-term debt, net of current maturities $ 175,072 $ 163,698
=============== =============
On August 31, 2001, U.S. Concrete amended and restated its secured
revolving credit facility. The terms of the facility are substantially
unchanged, except that the parties extended the maturity of the facility from
May 2002 to May 2004 and initially reduced the size of the facility from $200
million to $188 million. On June 12, 2002, the size of the facility increased to
$200 million with the addition of a new lender. U.S. Concrete may use this
facility for working capital and capital expenditures, to finance acquisitions
and for other general corporate purposes. Availability under the facility is
tied to various covenants, including leverage ratios, an asset coverage ratio, a
minimum net worth calculation, a limitation on additional indebtedness, lender
consent for acquisitions and a prohibition of cash dividends on U.S. Concrete's
common stock. Subsidiary guarantees and pledges of substantially all U.S.
Concrete's fixed assets and subsidiary capital stock secure the payment of all
obligations owing under the facility. Advances bear interest at the prime rate
or applicable Eurodollar rates, at U.S. Concrete's option, in each case plus a
margin keyed to the leverage ratio. A commitment fee, based on the leverage
ratio, is paid on any unused borrowing capacity. At June 30, 2002, U.S. Concrete
had borrowings totaling $80.0 million outstanding under this facility at a
weighted average interest cost of 4.4%. At June 30, 2002, U.S. Concrete had
$120.0 million of remaining capacity under this facility, of which it could
borrow $14.7 million based on its leverage ratio at that date; however, its
ability to borrow additional amounts would increase to the extent that it uses
the facility to fund the acquisition of additional businesses with positive cash
flow.
8
7. LONG-TERM DEBT (continued)
U.S. Concrete's 12.00% senior subordinated notes are outstanding in the
aggregate principal amount of $95 million, have a maturity date of November 10,
2010 and are mandatorily repayable in equal annual installments of approximately
$13.6 million on November 10 in each of the years 2004 through 2010. These notes
are subordinated in right of payment to the indebtedness outstanding under the
credit facility, are guaranteed by the subsidiaries of U.S. Concrete and require
U.S. Concrete to comply with covenants generally consistent with those required
under the credit facility.
For the six months ended June 30, U.S. Concrete's interest payments were
approximately $7.9 million in 2002 and $9.0 million in 2001.
8. INCOME TAXES
Prior to their respective acquisitions, several businesses U.S. Concrete
acquired were S corporations and thus were not subject to federal income taxes.
Effective with their acquisitions, they became subject to those taxes, and U.S.
Concrete has recorded an estimated deferred tax liability to provide for its
estimated future income tax obligations resulting from the difference between
the book and tax bases of the net assets of these corporations as of the dates
of their acquisitions. These consolidated financial statements reflect the
federal and state income taxes of these corporations since their dates of
acquisition.
For the six months ended June 30, U.S. Concrete's income tax payments were
approximately $2.3 million in 2002 and $0.3 million in 2001.
9. COMMITMENTS AND CONTINGENCIES
Bay-Crete Transportation & Materials, LLC alleges in a lawsuit it filed on
July 11, 2000 in a California state court against U.S. Concrete's subsidiary,
Central, and U.S. Concrete that it possesses beneficiary rights under a 1983
contract to purchase annually up to 200,000 cubic yards of ready-mixed concrete
from Central until March 30, 2082. Under that contract, the purchase price would
consist of Central's direct materials costs and an overhead fee. Bay-Crete
alleges that U.S. Concrete breached that contract by refusing to acknowledge
Bay-Crete's rights as a beneficiary of that contract. It is seeking damages of
$500 million of lost profits spread over the next 80 years. Central and U.S.
Concrete each filed an answer and cross-complaint in August 2000 which seeks
declaratory relief for a determination that Bay-Crete is not entitled to use the
contract. In addition, the cross-complaints seek damages for improper conduct by
Bay-Crete, the general manager of Bay-Crete and a member of Bay-Crete for making
demands under the contract in violation of an order of a United States
bankruptcy court. U.S. Concrete and Central believe they have meritorious
defenses to Bay-Crete's claim and intend to vigorously defend this suit. The
trial date is set for December 2002.
From time to time, and currently, U.S. Concrete is subject to various other
claims and litigation brought by employees, customers and other third parties
for, among other matters, personal injuries, property damages, product defects
and delay damages that have, or allegedly have, resulted from the conduct of its
operations.
U.S. Concrete believes that the resolution of all litigation currently
pending or threatened against it or any of its subsidiaries (including the
dispute with Bay-Crete described above) will not have a material adverse effect
on its business or financial condition; however, because of the inherent
uncertainty of litigation, U.S. Concrete cannot assure you that the resolution
of any particular claim or proceeding to which it is a party will not have a
material adverse effect on its results of operations for the fiscal period in
which that resolution occurs. U.S. Concrete expects in the future it and one or
more of its operating subsidiaries will from time to time be a party to
litigation or administrative proceedings that arise in the normal course of its
business.
U.S. Concrete retains various self-insurance risks with respect to losses
for third-party liability and property damage.
9
9. COMMITMENTS AND CONTINGENCIES (continued)
U.S. Concrete is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions and wastewater
discharge. Its management believes it is in substantial compliance with
applicable environmental laws and regulations. From time to time, it receives
claims from federal and state environmental regulatory agencies and entities
asserting that it may be in violation of environmental laws and regulations.
Based on experience and the information currently available, management of U.S.
Concrete believes that these claims will not have a material impact on U.S.
Concrete's consolidated financial condition or results of operations. Despite
compliance and experience, it is possible that U.S. Concrete could be held
liable for future charges, which might be material but are not currently known
or estimable. In addition, changes in federal or state laws, regulations or
requirements or discovery of currently unknown conditions could require
additional expenditures.
10. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations." The standard
requires that legal obligations associated with the retirement of long-lived
intangible assets be recorded at fair value when incurred. SFAS No. 143 will be
effective for U.S. Concrete on January 1, 2003. U.S. Concrete does not expect
the adoption of this statement initially to have a material impact on U.S.
Concrete's consolidated financial position, results of operations or cash
flows.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement provides guidance on the classification of gains
and losses from the extinguishment of debt and on the accounting for specified
lease transactions. U.S. Concrete does not expect the adoption of this statement
to have a material impact on U.S. Concrete's consolidated financial position,
results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement provides guidance
on the recognition and measurement of liabilities associated with disposal
activities and will be effective for U.S. Concrete on January 1, 2003. U.S.
Concrete is currently reviewing the provisions of SFAS No. 146 to determine the
standard's impact on adoption.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements we make in the following discussion which express a belief,
expectation or intention, as well as those that are not historical fact, are
forward-looking statements that are subject to risks, uncertainties and
assumptions. Our actual results, performance or achievements, or industry
results, could differ materially from those we express in the following
discussion as a result of a variety of factors, including the risks and
uncertainties we have referred to under the heading "Cautionary Statement
Concerning Forward-looking Statements" following Items 1 and 2 of Part I of our
annual report on Form 10-K for the year ended December 31, 2001, and under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Factors That May Affect Our Future Operating Results" in Item 7
of Part II of that annual report. For a discussion of our other commitments,
related-party transactions, our critical accounting policies, new accounting
pronouncements and inflation, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 7 of Part II of that
annual report.
Seasonality of Operations
Results of any individual quarter are not necessarily indicative of results
to be expected for the year due principally to the effect that seasonal changes
and other weather-related conditions can have on construction activity and
thereby on our sales and earnings. Normally, we attain the highest sales and
earnings in the second and third quarters and the lowest sales and earnings in
the first quarter.
Critical accounting policies
We outlined our critical accounting policies in Item 7 of Part II of our
annual report on Form 10-K for the year ended December 31, 2001 (the "2001
10-K"). We have concluded that our critical accounting policies are the use of
estimates in the recording of allowance for doubtful accounts, realization of
goodwill, accruals for self-insurance, accruals for income tax provision and the
valuation and useful lives of property, plant and equipment. See note 2
(Significant Accounting Policies) to our Consolidated Financial Statements
included in Item 8 to the 2001 10-K for a complete discussion of these
accounting policies.
During the six months ended June 30, 2002, there were no material changes
to or in the application of our critical accounting policies presented in the
2001 10-K, except for the provisions in SFAS No. 142 related to goodwill. For
further discussion on our accounting policies, see note 2 to our condensed
consolidated financial statements in Part I of this report.
Sales and Expenses
We derive sales primarily from the production and delivery of ready-mixed
concrete and related products and materials. We recognize a sale of products
when we deliver them. Cost of goods sold consists primarily of product costs and
operating expenses. Operating expenses consist primarily of wages, benefits and
other expenses attributable to plant operations, repairs and maintenance and
delivery costs. Selling expenses consist primarily of salaries and benefits of
sales managers, travel and entertainment expenses and trade show expenses.
General and administrative expenses consist primarily of executive and
administrative compensation and benefits, office rent, utilities, communication
and technology expenses and professional fees.
Allowance for Doubtful Accounts
We provide an allowance for accounts receivable we believe we may not
collect in full. A provision for bad debt expense recorded to selling, general
and administrative expenses increases the allowance. Accounts receivable which
we write off decrease the allowance. We determine the amount of bad debt expense
we record each period and the resulting adequacy of the allowance at the end of
each period by using a combination of historical results reported by the
concrete industry, historical loss experience, customer-by-customer analyses of
accounts receivable balances each period and subjective assessments of future
bad debt exposure.
11
Insurance Programs
We maintain third-party insurance coverage in amounts and against the risks
we believe are reasonable. Under components of our insurance program, we share
the risk of loss with our insurance underwriters by maintaining high deductibles
subject to aggregate annual loss limitations. We fund these deductibles and
record an expense for losses we expect under the programs. We determine losses
by using a combination of historical loss experience and subjective assessments
of future loss exposure.
Income Taxes
We use the liability method of accounting for income taxes. Under this
method, we record deferred income taxes based on temporary differences between
the financial reporting and tax bases of assets and liabilities and use enacted
tax rates and laws that we expect will be in effect when we recover those assets
or settle those liabilities, as the case may be, to measure those taxes.
Valuation of Long-Lived Assets
We review our long-lived assets for impairment whenever events or changes
in circumstances indicate that their carrying amounts may not be recoverable. If
the expected future undiscounted cash flows of an asset we intend to hold for
use is less than the carrying amount of the asset, we will recognize a loss
equal to the difference between the fair value (calculated by discounting the
estimated future operating cash flows) and the carrying amount of the asset. If
we intend to dispose of an asset that is impaired, we will recognize a loss
equal to the difference between the estimated fair value of the asset, less
estimated costs to sell, and its carrying amount.
Property, Plant and Equipment, Net
We state our property, plant and equipment at cost, unless impaired, and use
the straight-line method to compute depreciation of these assets over their
estimated useful lives. We capitalize leasehold improvements on properties we
hold under operating leases and amortize them over the lesser of their estimated
useful lives or the applicable lease term. We state equipment we hold under
capital leases at the net present value of the future minimum lease payments at
the inception of the applicable leases and amortize that equipment over the
lesser of the life of the lease or the estimated useful life of the asset.
We expense maintenance and repair costs when incurred and capitalize and
depreciate expenditures for major renewals and betterments that extend the
useful lives of our existing assets. When we retire or dispose of property,
plant or equipment, we remove the related cost and accumulated depreciation from
our accounts and reflect any resulting gain or loss in our consolidated
statements of operations.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations." The standard
requires that legal obligations associated with the retirement of long-lived
intangible assets be recorded at fair value when incurred. SFAS No. 143 will be
effective for us on January 1, 2003. Our management does not expect the adoption
of this statement initially will have a material impact on our consolidated
financial position, results of operations or cash flows.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement provides guidance on the classification of gains
and losses from the extinguishment of debt and on the accounting for specified
lease transactions. Our management does not expect the adoption of this
statement will have a material impact on our consolidated financial position,
results of operations or cash flows.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement provides guidance
on the recognition and measurement of liabilities associated with disposal
activities and will be effective for us on January 1, 2003. We are currently
reviewing SFAS No. 146 to determine its impact on our adoption.
12
Results of Operations
The following table sets forth selected historical statements of operations
information (dollars in thousands) and that information as a percentage of sales
for the periods indicated. Except as we note below, our acquisitions in 2001 and
the first quarter of 2002 principally account for the changes in 2002 from 2001.
Three Months Ended June 30 Six Months Ended June 30
------------------------------------------- ----------------------------------------------
2002 2001 2002 2001
---------------------- -------------------- ----------------------- ----------------------
(unaudited) (unaudited)
Sales $ 140,187 100.0% $ 136,299 100.0% $ 245,087 100.0% $ 226,177 100.0%
Cost of goods sold 110,043 78.5 106,981 78.5 197,490 80.6 183,208 81.0
------------ --------- ----------- -------- ------------ ---------- ------------ ---------
Gross profit 30,144 21.5 29,318 21.5 47,597 19.4 42,969 19.0
Selling, general and
administrative expenses 11,876 8.5 10,420 7.6 23,738 9.7 19,163 8.5
Special compensation charge -- -- 2,124 1.6 -- -- 2,124 0.9
Depreciation, depletion and
amortization 2,709 1.9 3,366 2.5 5,267 2.1 6,607 2.9
------------ --------- ----------- -------- ------------ ---------- ------------ ---------
Income from operations 15,559 11.1 13,408 9.8 18,592 7.6 15,075 6.7
Interest expense, net 4,341 3.1 5,081 3.7 8,703 3.5 10,051 4.4
Other income, net 146 0.1 163 0.1 307 0.1 369 0.2
------------ --------- ----------- -------- ------------ ---------- ------------ ---------
Income before income taxes
and cumulative effect
of accounting change 11,364 8.1 8,490 6.2 10,196 4.2 5,393 2.4
Income tax provision 4,659 3.3 3,508 2.5 4,180 1.7 2,238 1.0
------------ --------- ----------- -------- ------------ ---------- ------------ ---------
Income before cumulative
effect of accounting change 6,705 4.8 4,982 3.7 6,016 2.5 3,155 1.4
Cumulative effect of accounting
change -- -- -- 0.0 (24,328) (10.0) -- 0.0
------------ --------- ----------- -------- ------------ ---------- ------------ ---------
Net income (loss) $ 6,705 4.8% $ 4,982 3.7% $ (18,312) (7.5)% $ 3,155 1.4%
============ ========= =========== ======== ============ ========== ============ =========
Sales. Sales increased $3.9 million, or 2.9%, and $18.9 million, or 8.4%,
for the three- and six-month periods ended June 30, 2002, respectively, as
compared with the corresponding periods in 2001. The increase in sales for the
second quarter was attributable to sales of precast concrete and aggregates and
a slight increase in the average sales price of ready-mixed concrete, partially
offset by a decrease in ready-mixed concrete volumes as a result of a decline in
total construction in some of our markets.
Gross profit. Gross profit increased $0.8 million, or 2.8%, and $4.6
million, or 10.8%, for the three- and six-month periods ended June 30, 2002,
respectively, as compared with the corresponding periods in 2001. Gross margins
were unchanged at 21.5% in the three months ended June 30, 2001 compared to the
three months ended June 30, 2002. Gross margins increased from 19.0% in the six
months ended June 30, 2001 to 19.4% in the six months ended June 30, 2002. The
increase is attributable to improvement in customer and product mix.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.5 million, or 14.0%, and $4.6 million, or
23.9%, for the three- and six-month periods ended June 30, 2002, respectively,
as compared with the corresponding periods in 2001. The increase in these
expenses in the 2002 periods was attributable to management additions, increased
communication costs in some of our markets, increased professional fees, and
higher incentive compensation expense (which is linked to operating
profitability).
Special compensation charge. In the second quarter of 2001, we granted
additional compensation to members of our management team and some of our key
employees in recognition of the overall contribution made by those employees to
our various 2001 capital-raising initiatives. This special award was in addition
to our recurring annual incentive compensation program.
13
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expense decreased $0.7 million, or 19.5%, and $1.3 million, or
20.3%, for the three- and six-month periods ended June 30, 2002, respectively,
as compared with the corresponding periods in 2001. This decrease is
attributable to the discontinuation of goodwill amortization, effective January
1, 2002, in accordance with SFAS No. 142, partially offset by additional
depreciation of property, plant and equipment purchased and included with
companies we acquired after December 31, 2000, and depletion of mineral deposits
related to the aggregates business we acquired in 2002. Goodwill amortization
expense was $1.3 million and $2.6 million for the three- and six-month periods
ended June 30, 2001, respectively.
Interest expense, net. Interest expense, net, decreased $0.7 million, or
14.6%, and $1.3 million, or 13.4%, for the three- and six-month periods ended
June 30, 2002, respectively, as compared with the corresponding periods in 2001.
This decrease was attributable to a lower average interest rate and lower
average balance under our credit facility during 2002. At June 30, 2002, we had
borrowings totaling $80.0 million outstanding under our credit facility at a
weighted average interest cost of 4.4% per annum. Based on this weighted average
interest rate, the annualized impact of our 12% senior subordinated notes on
interest expense is an increase of $7.2 million ($4.3 million net of tax), or a
decrease in net income per diluted share of $0.16. At June 30, 2002, we had
borrowings totaling $175.1 million outstanding at a weighted average annual
interest rate of 8.5%. At June 30, 2001, we had borrowings totaling $185.9
million outstanding at a weighted average annual interest rate of 9.5%.
Other income, net. Other income, net, decreased less than $0.1 million for
the three- and six-month periods ended June 30, 2002, as compared with the
corresponding periods in 2001.
Income tax provision. We provided for income taxes of $4.7 million and $4.2
million for the three- and six-month periods ended June 30, 2002, respectively,
as compared with a provision of $3.5 million and $2.2 million during the
corresponding periods in 2001. The increase in income taxes is principally the
result of higher taxable income generated from our operations, partially offset
by a lower effective income tax rate during the three- and six-month periods
ended June 30, 2002.
Cumulative effect of accounting change. The six months ended June 30, 2002
net loss included a cumulative effect of accounting change, net of tax, as a
result of adoption of SFAS No. 142. Under SFAS No. 142, we recorded
retroactively a transitional goodwill impairment charge of $24.3 million, net of
tax, in the first quarter of 2002. This impairment charge is attributable to two
reporting units, its divisions in North Texas/Southwest Oklahoma and
Memphis/Northern Mississippi. Local market and economic conditions have affected
the value of acquisitions made in North Texas (in 2000 and 2001) and
Memphis/Northern Mississippi (in 1999).
14
Liquidity and Capital Resources
Net income, excluding the noncash cumulative effect of the accounting
change, increased $2.9 million in the first half of 2002 from the first half of
2001. Net cash from operating activities for the six months ended June 30, 2002
was $11.0 million. Net cash from operating activities primarily funded capital
expenditures of $4.2 million (net of disposals) and debt reductions of $5.9
million. Net cash from borrowings for the current six-month period was $11.4
million (net of the reductions of $5.9 million).
Cash Flow
Net cash from operating activities is generally the cash effects of
transactions and other events used in the determination of net income. We define
free cash flow as cash from operating activities less net property, plant and
equipment additions and represents funds available to invest in acquisitions or
to reduce outstanding debt or equity capital.
Our historical net cash from operating activities and free cash flow is as
follows (in thousands):
Six Months
Ended June 30
--------------------------
2002 2001
--------------------------
(unaudited)
Net cash from operating activities $ 10,973 $ 16,189
Less: Property, plant and equipment, net additions (4,208) (4,277)
----------- -----------
Free cash flow $ 6,765 $ 11,912
=========== ===========
Net cash from operating activities in the first half of 2002 decreased $5.2
million, or 32%, from the first half of 2001. This decrease reflected an
increase in comparative working capital requirements and income tax payments,
partially offset by higher operating profit and lower interest costs. During the
first half of 2002, we experienced an increase in working capital of $5.0
million, primarily from a seasonal buildup of receivables and inventories and
partially offset by an increase in accounts payable.
Net cash used for investing activities of $23.3 million in the first half
of 2002 decreased $18.1 million, or 44%, from the first half 2001 total of $41.4
million, primarily due to decreased acquisitions. Net cash provided by financing
activities of $11.9 decreased $17.2 million, or 59%, from the first half 2001
total of $29.1 million. Cash provided by financing activities consisted
primarily of net borrowings used to fund acquisitions and proceeds received from
employee stock purchases.
The result is that cash and cash equivalents, which totaled $6.7 million
at June 30, 2002, increased $2.1 million, or 45%, from June 30, 2001.
Acquisitions
The following table summarizes the amount we paid for acquisitions during
the indicated periods (in thousands):
Six Months Year Ended
Ended June 30, December 31,
2002 2001
---------------- ------------
(unaudited)
Cash consideration $ 17,064 $ 49,303
Less: Cash received from acquired companies -- (2,174)
--------- ----------
Cash paid, net of cash acquired 17,064 47,129
Fair value of common stock issued 0 12,375
Direct acquisition costs incurred 215 2,613
--------- ----------
Total purchase costs incurred, net of cash acquired 17,279 62,117
--------- ----------
Fair value of assets acquired, net of cash acquired 17,579 40,056
Less: Fair value of assumed liabilities (300) (14,257)
---------- ----------
Fair value of net assets acquired, net of cash acquired 17,279 25,799
--------- ----------
Costs incurred in excess of net assets acquired $ 0 $ 36,318
========= ==========
15
Capital Resources
On August 31, 2001, we amended and restated our secured revolving credit
facility. The terms of the facility are substantially unchanged, except that we
extended the maturity of the facility from May 2002 to May 2004 and initially
reduced the size of the facility from $200 million to $188 million. On June 12,
2002, the size of the facility increased to $200 million with the addition of a
new lender. We had $80.0 million of outstanding borrowings under the facility at
June 30, 2002. We may use the facility for financing acquisitions, working
capital and capital expenditures and general corporate purposes. At our option,
we can borrow at alternative variable interest rates under the facility. As of
June 30, 2002, rates on the outstanding borrowings were as follows:
Outstanding
Amount Formula Effective Rate
------ ------- --------------
$80.0 million LIBOR + 2.50% 4.40%
0.0 million Prime + 1.50% 6.25%
Our subsidiaries have guaranteed the repayment of all amounts owing under
the facility, and we secured the facility with the capital stock and assets of
our subsidiaries. The facility: (1) requires the consent of the lenders for all
acquisitions; (2) prohibits the payment of cash dividends on our common stock;
(3) limits our ability to incur additional indebtedness; and (4) requires us to
comply with financial covenants. Our failure to comply with these covenants and
restrictions would constitute an event of default under the facility. At June
30, 2002, we were in compliance with these covenants.
At June 30, 2002, we had $120.0 million of remaining capacity under this
facility, of which we could borrow $14.7 million based on our leverage ratio at
that date. Our ability to borrow additional amounts would increase to the extent
that we use the facility to fund the acquisition of additional businesses with
positive cash flow.
Our 12.00% senior subordinated notes are outstanding in the aggregate
principal amount of $95 million and have a maturity date of November 10, 2010.
These notes: (1) are mandatorily repayable in equal annual installments of
approximately $13.6 million on November 10 in each of the years 2004 through
2010; (2) are subordinated in right of payment to the indebtedness outstanding
under the credit facility; (3) are guaranteed by our subsidiaries; and (4)
require us to comply with covenants generally consistent with those required
under the credit facility.
Our ratio of total debt to total capital was 50.6% as of June 30, 2002,
53.3% as of June 30, 2001 and 46.5% as of December 31, 2001.
Annual maturities of long-term debt for each of the five succeeding years
are (in millions) $0.1, $80.0, $13.6, $13.6, $13.6 and $54.3 thereafter.
We lease real property, facilities and equipment in our operations. Rent
expense under operating leases was approximately $5.5 million for the six months
ended June 30, 2002. Minimum future annual lease payments under our
noncancellable leases for each of the five succeeding years are substantially
unchanged from December 31, 2001.
Based on current expectations, our management believes that our internally
generated cash flow and access to existing credit facilities are sufficient to
meet the liquidity requirements necessary to fund operations, capital
requirements and debt service payments. The continuation of our growth strategy
will require substantial capital. We currently intend to finance future
acquisitions through issuances of our equity or debt securities, including
convertible securities, and borrowings under our revolving credit facility. The
use of equity securities or convertible securities for this purpose may result
in dilution to then existing U.S. Concrete stockholders. It may be necessary to
obtain additional levels of financing in the event opportunities arise for U.S.
Concrete to make a strategic acquisition.
We cannot accurately predict the timing, size and success of our
acquisition efforts or our associated potential capital commitments.
16
Environmental Matters
We are subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions and wastewater
discharge. Our management believes we are in substantial compliance with
applicable environmental laws and regulations. From time to time, we receive
claims from federal and state environmental regulatory agencies and entities
asserting that we may be in violation of environmental laws and regulations.
Based on our experience and the information currently available, our management
believes these claims will not have a material impact on our consolidated
financial condition or results of operations. Despite compliance and experience,
it is possible that we could be held liable for future charges, which might be
material but are not currently known or estimable. In addition, changes in
federal or state laws, regulations or requirements or discovery of currently
unknown conditions could require additional expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not enter into derivatives or other financial instruments for trading
or speculative purposes. Because of the short duration of our investments,
changes in market interest rates would not have a significant impact on their
fair value.
We have exposure to market risk from changes in interest rates for our debt
instruments. The following table provides information about our debt instruments
that are sensitive to changes in interest rates:
Carrying Weighted Average
Interest rate sensitivity (in millions): Amount Fair Value Interest Rate
------ ---------- -------------
Revolving Credit Facility $80.0 $80.0 4.40%
12% Senior Subordinated Notes 95.0 101.5 12.00%
Outstanding borrowings under our credit facility were $80.0 million at June
30, 2002. A change of one percent in the interest rate would cause a change in
interest expense on these outstanding borrowings of approximately $800,000
($472,000 net of tax), or $0.02 per share, on an annualized basis. Borrowings
made under the revolving credit facility bear interest at variable rates based
on the lenders' prime lending rate or the applicable Eurodollar interest rate.
Our operations are subject to factors affecting the level of general
construction activity including the level of interest rates, availability of
funds for construction and other factors affecting the construction industry. A
significant decrease in the level of general construction activity in any of our
market areas may have a material adverse effect on our sales and earnings.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information about litigation involving us, see note 9 to the condensed
consolidated financial statements in Part I of this report, which we incorporate
by reference into this Item 1.
Item 4. Submission of Matters to a Vote of Security Holders
1. Our stockholders voted on the following matters at their annual meeting
held on May 16, 2002:
(a) The following were elected to serve new terms as directors and received
the number of votes set opposite their respective names:
Votes For Votes Against
------------ ---------------
William T. Albanese 19,042,109 587,596
Robert S. Walker 19,042,109 587,596
Murray S. Simpson 19,042,109 587,596
(b) The following persons are also directors whose terms of office as
director continued after the meeting:
Eugene P. Martineau Vincent D. Foster
Michael W. Harlan Michael D. Mitschele
T. William Porter John R. Colson
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number Description
------------ ------------------------------------------------------------------
3.1* --Restated Certificate of Incorporation of U.S. Concrete (Form
S-1 (Reg. No. 333-74855), Exhibit 3.1).
3.2* --Amended and Restated Bylaws of U.S. Concrete, as amended (Form
S-3 (Reg. No. 333-42860), Exhibit 4.2).
3.3* --Certificate of Designations of Series A Junior Participating
Preferred Stock (Form 10-Q for the quarter ended June 30, 2000
(File No. 000-26025), Exhibit 3.3).
4.1* --Amended and Restated Credit Agreement, dated as of August 31,
2001, among U.S. Concrete, the Guarantors named therein,
the Lenders named therein, The Chase Manhattan Bank, as
administrative agent, Credit Lyonnais New York Branch and
First Union National Bank, as syndication agents, Branch
Banking & Trust Company, as documentation agent, and J.P.
Morgan Securities, Inc., as sole bookrunner and lead arranger.
(Form 10-Q for the quarter ended September 30, 2001 (File No.
000-26025), Exhibit 4.1).
4.2* --First Amendment to Amended and Restated Credit Agreement,
dated as of May 21, 2001, among U.S. Concrete, the
Guarantors named therein, the Lenders named therein,
JPMorgan Chase Bank, formerly known as The Chase Manhattan
Bank, as administrative agent, Credit Lyonnais New York
Branch and First Union National Bank, as syndication agents,
Branch Banking & Trust Company, as documentation agent. (Form
10-Q for the quarter ended June 30, 2002 (File No. 000-26025),
Exhibit 4.2).
4.3* --New Lender Acceptance, dated June 12, 2002, among U.S.
Concrete, JPMorgan Chase Bank, formerly known as The Chase
Manhattan Bank, as administrative agent, and Guaranty Bank.
(Form 10-Q for the quarter ended June 30, 2002 (File No.
000-26025), Exhibit 4.3).
4.4* --Note Purchase Agreement, dated November 10, 2000, among U.S.
Concrete, Inc., The Prudential Insurance Company of America,
Metropolitan Life Insurance Company, Teachers Insurance &
Annuity Association, Connecticut General Life Insurance Company,
Allstate Life Insurance Company, Allstate Life Insurance Company
of New York and Southern Farm Bureau Life Insurance Company.
(Form 10-K for the year ended December 31, 2000 (File No.
000-26025), Exhibit 4.4).
18
4.5* --First Amendment to Note Purchase Agreement, dated November 30,
2001, among U.S. Concrete, Inc., The Prudential Insurance
Company of America, Metropolitan Life Insurance Company,
Teachers Insurance & Annuity Association, Connecticut
General Life Insurance Company, Allstate Life Insurance
Company, Allstate Life Insurance Company of New York and
Southern Farm Bureau Life Insurance Company (Form 10-K for the
year ended December 31, 2001 (File No. 000-26025), Exhibit 4.4).
* Incorporated by reference to the filing indicated.
(b) Reports on Form 8-K.
On May 21, 2002, we filed a Current Report on Form 8-K to report that we
determined not to renew the engagement of Arthur Andersen LLP as our independent
accountants and appointed PricewaterhouseCoopers LLP as our new independent
accountants.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. CONCRETE, INC.
Date: August 16, 2002 By: /s/ Michael W. Harlan
--------------------------------
Michael W. Harlan
Senior Vice President -- Chief
Financial Officer
20
INDEX TO EXHIBITS
Exhibit
Number Description
------------ ------------------------------------------------------------------
3.1* --Restated Certificate of Incorporation of U.S. Concrete (Form
S-1 (Reg. No. 333-74855), Exhibit 3.1).
3.2* --Amended and Restated Bylaws of U.S. Concrete, as amended (Form
S-3 (Reg. No. 333-42860), Exhibit 4.2).
3.3* --Certificate of Designations of Series A Junior Participating
Preferred Stock (Form 10-Q for the quarter ended June 30, 2000
(File No. 000-26025), Exhibit 3.3).
4.1* --Amended and Restated Credit Agreement, dated as of August 31,
2001, among U.S. Concrete, the Guarantors named therein,
the Lenders named therein, The Chase Manhattan Bank, as
administrative agent, Credit Lyonnais New York Branch and
First Union National Bank, as syndication agents, Branch
Banking & Trust Company, as documentation agent, and J.P.
Morgan Securities, Inc., as sole bookrunner and lead arranger.
(Form 10-Q for the quarter ended September 30, 2001 (File No.
000-26025), Exhibit 4.1).
4.2* --First Amendment to Amended and Restated Credit Agreement,
dated as of May 21, 2001, among U.S. Concrete, the
Guarantors named therein, the Lenders named therein,
JPMorgan Chase Bank, formerly known as The Chase Manhattan
Bank, as administrative agent, Credit Lyonnais New York
Branch and First Union National Bank, as syndication agents,
Branch Banking & Trust Company, as documentation agent. (Form
10-Q for the quarter ended June 30, 2002 (File No. 000-26025),
Exhibit 4.2).
4.3* --New Lender Acceptance, dated June 12, 2002, among U.S.
Concrete, JPMorgan Chase Bank, formerly known as The Chase
Manhattan Bank, as administrative agent, and Guaranty Bank.
(Form 10-Q for the quarter ended June 30, 2002 (File
No. 000-26025), Exhibit 4.3).
4.4* --Note Purchase Agreement, dated November 10, 2000, among U.S.
Concrete, Inc., The Prudential Insurance Company of America,
Metropolitan Life Insurance Company, Teachers Insurance &
Annuity Association, Connecticut General Life Insurance Company,
Allstate Life Insurance Company, Allstate Life Insurance Company
of New York and Southern Farm Bureau Life Insurance Company.
(Form 10-K for the year ended December 31, 2000 (File No.
000-26025), Exhibit 4.4).
4.5* --First Amendment to Note Purchase Agreement, dated November 30,
2001, among U.S. Concrete, Inc., The Prudential Insurance
Company of America, Metropolitan Life Insurance Company,
Teachers Insurance & Annuity Association, Connecticut
General Life Insurance Company, Allstate Life Insurance
Company, Allstate Life Insurance Company of New York and
Southern Farm Bureau Life Insurance Company (Form 10-K for the
year ended December 31, 2001 (File No. 000-26025), Exhibit 4.4).
* Incorporated by reference to the filing indicated.
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