Portions of the Proxy Statement related to the registrant's 2020 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, are incorporated by reference into Part III of this report.

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•	general economic and business conditions, which will, among other things, affect demand for commercial and residential construction;

•	our ability to successfully implement our operating strategy;

•	our ability to successfully identify, manage, and integrate acquisitions;

•	governmental requirements and initiatives, including those related to mortgage lending, financing or deductions, funding for public or infrastructure construction, land usage, and environmental, health and safety matters;

•	seasonal and inclement weather conditions, which impede the placement of ready-mixed concrete;

•	the cyclical nature of, and changes in, the real estate and construction markets, including pricing changes by our competitors;

•	our ability to maintain favorable relationships with third parties who supply us with equipment and essential materials;

•	our ability to retain key personnel and maintain satisfactory labor relations;

•	disruptions, uncertainties or volatility in the credit markets that may limit our, our suppliers' and our customers' access to capital;

•	product liability, property damage, results of litigation and other claims and insurance coverage issues;

•	our substantial indebtedness and the restrictions imposed on us by the terms of our indebtedness; and

•	the effects of currency fluctuations on our results of operations and financial condition.

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•	water usage;

•	land usage;

•	street and highway usage;

•	noise levels;

•	operating hours; and

•	health, safety and environmental matters.

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•	the level of commercial and residential construction in our regional markets, including reductions in the demand for new residential housing construction below current or historical levels;

•	the availability of funds for public or infrastructure construction from local, state and federal sources;

•	unexpected events that delay or adversely affect our ability to deliver concrete according to our customers’ requirements;

•	changes in interest rates and lending standards;

•	changes in the mix of our customers and business, which result in periodic variations in the margins on jobs performed during any particular quarter;

•	the timing and cost of acquisitions and difficulties or costs encountered when integrating acquisitions;

•	the budgetary spending patterns of customers;

•	increases in construction and design costs;

•	power outages and other unexpected delays;

•	our ability to control costs and maintain quality;

•	pricing pressure due to changes in asset utilization or economic weakness;

•	employment levels; and

•	regional or general economic conditions.

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•	it requires us to use a significant percentage of our cash flow from operations for debt service and the repayment of our indebtedness, including indebtedness we may incur in the future, and such cash flow may not be available for other purposes;

•	it limits our ability to borrow money or sell assets to fund our working capital, capital expenditures, acquisitions and debt service requirements;

•	our interest expense could increase if interest rates in general increase, because borrowings under our Revolving Facility bear interest at floating rates;

•	it may limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities;

•	we are more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

•	it may make us more vulnerable to a downturn in our business or the economy;

•	it may increase our cost of borrowing;

•	it may restrict us from exploiting business opportunities;

•	debt service requirements could make it more difficult for us to make payments on the 2024 Notes and our other indebtedness;

•	the interest limitation enacted as part of the Tax Act could increase our effective tax rate and income taxes payable; and

•	there would be a material adverse effect on our business and financial condition, if we were unable to refinance, service our indebtedness or obtain additional financing, as needed.

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•	incur additional indebtedness or issue disqualified stock or preferred stock;

•	pay dividends or make other distributions, repurchase or redeem our stock or subordinated indebtedness, or make certain investments;

•	prepay, redeem, or repurchase certain debt;

•	sell assets and issue capital stock of our restricted subsidiaries;

•	incur liens;

•	enter into agreements restricting our restricted subsidiaries’ ability to pay dividends, make loans to other U.S. Concrete entities or restrict the ability to provide liens;

•	enter into transactions with affiliates;

•	consolidate, merge, or sell all or substantially all of our assets; and

•	with respect to the Indenture, designate our subsidiaries as unrestricted subsidiaries.

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•	exposure to civil or criminal liability under the U.S. Foreign Corrupt Practices Act (“FCPA”), the Canadian Corruption of Foreign Public Officials Act, anti-boycott rules, trade and export control regulations, as well as other international regulations.

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(1)	Represents shares of our common stock acquired from employees who elected for us to make their required tax payments upon vesting of certain restricted shares by withholding a number of those vested shares having a value on the date of vesting equal to their tax obligations.

(2)	On March 1, 2017, our Board approved a share repurchase program that allows us to repurchase up to $50.0 million of our common stock until the earlier of March 31, 2020, or a determination by the Board to discontinue the program. The program does not obligate us to acquire any specific number of shares.

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(1)	We sell aggregate products to our ready-mixed concrete segment businesses at market price.

(2)	Our calculation of the aggregate products segment ASP excludes certain other ancillary revenue and Polaris’s freight revenue.  We define revenue for our aggregate products ASP calculation as amounts billed to customers for coarse and fine aggregate products, excluding delivery charges.  Our definition and calculation of ASP may differ from other companies in the construction materials industry.

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•	deterioration of revenue, due to lower volume and/or pricing, because of weakness in the markets in which we operate;

•	declines in margins due to shifts in our product mix or increases in the cost of our raw materials, fuel and fixed costs;

•	any deterioration in our ability to collect our accounts receivable from customers as a result of weakening in construction demand or payment difficulties experienced by our customers; and

•	inclement weather beyond normal patterns that could adversely affect our sales volumes and/or gross margins.

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(1)	Estimated future payments of contingent consideration obligations associated with certain acquisitions. As more fully described in Note 13, "Fair Value Disclosures," to our consolidated financial statements where the fair value of this amount is presented, changes may occur until to the final payment in 2023.

(2)	Consists of deferred consideration obligations associated with acquisitions.

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Nature of Operations

U.S. Concrete, Inc., a Delaware corporation, is a heavy building materials supplier of aggregates, ready-mixed concrete and concrete-related products and services to the construction industry in several major markets in the United States, as well as select markets in the U.S. Virgin Islands and Canada. U.S. Concrete, Inc. is a holding company and conducts its businesses through its consolidated subsidiaries.  In these notes to the consolidated financial statements (these “Notes”), we refer to U.S. Concrete, Inc. and its subsidiaries as “we,” “us,” “our,” the “Company,” or “U.S. Concrete,” unless we specifically state otherwise or the context indicates otherwise.

Basis of Presentation

The consolidated financial statements consist of the accounts of U.S. Concrete, Inc. and its majority or wholly owned subsidiaries. All significant intercompany account balances and transactions have been eliminated. Certain computations may be impacted by the effect of rounding.

For acquisitions accounted for as business combinations, all of the assets acquired and liabilities assumed are recorded at their respective fair value as of the date of the acquisition. The results of operations of acquisitions (discussed in more detail in Note 2) are included in the consolidated financial statements from the respective date of acquisition.

Discontinued Operations

Discontinued operations in 2017 primarily related to real estate leases and subleases of businesses that were disposed of in prior years, generating a net loss before taxes of $1.0 million, for which we recorded a $0.4 million income tax benefit.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  Estimates and assumptions that we consider significant in the preparation of our financial statements include those related to our business combinations, goodwill, intangibles, accruals for self-insurance, income taxes, valuation of contingent consideration, allowance for doubtful accounts, the valuation of inventory, and the valuation and useful lives of property, plant and equipment.

Business Combinations

Effective January 1, 2018, we follow the accounting guidance for business combinations that clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or as business combinations. The guidance provides a screen to determine when a set of assets is not of a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similarly identifiable assets, the set is not a business. This screen was intended to reduce the number of transactions that need to be further evaluated.

We account for business acquisitions under the acquisition method of accounting. Accordingly, we recognize assets acquired and liabilities assumed in a business combination, including contingent liabilities and deferred payment obligations, based on the fair value estimates as of the date of acquisition. Goodwill is measured as the excess of the fair value of the consideration paid over the fair value of the identified net tangible and intangible assets acquired.

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The fair value measurement of the identified net assets requires the significant use of estimates and is based on information that was available to management at the time these consolidated financial statements were prepared. The estimates used for determining the fair value of certain assets and liabilities related to acquisitions are considered Level 3 inputs (as defined in Note 13). We utilize recognized valuation techniques, including the income approach, sales approach and cost approach to value the net assets acquired. We generally use a third party valuation firm to assist us with developing our estimates of fair value. The fair value of property, plant and equipment is based primarily on a market valuation approach. Additionally, we may use a cost valuation approach to value long-lived assets when a market valuation approach is unavailable. In determining the fair value of intangible assets, we use the cost approach (primarily through the cost-to-recreate method), the market approach and the income approach. The income approach may incorporate the use of a discounted cash flow method. In applying the discounted cash flow method, the estimated future cash flows and residual values for each intangible asset are discounted to a present value using a discount rate based on an estimated weighted average cost of capital for the building materials industry. Cash flow projections are based on management’s estimates of economic and market conditions including revenue growth rates, operating margins, capital expenditures and working capital requirements. The impact of changes to the estimated fair value of assets acquired and liabilities assumed is recorded in the reporting period in which the adjustment is identified. Final valuations of assets and liabilities are obtained and recorded as soon as practical, but no later than one year from the date of the acquisition. See Note 13 for additional information regarding valuation of contingent consideration obligations, including maximum payout amounts and how the fair value was estimated.

Foreign Currency

The Company accounts for its Canadian operations using the United States dollar (“US dollar”) as the functional currency, as the primary economic environment in which the entity operates is the United States. Transactions in Canadian dollars are recognized at the rates of exchange prevailing at the dates of the transaction. At the end of each reporting period, monetary assets and liabilities denominated in Canadian dollars are remeasured at the rates prevailing at that date. Foreign currency differences arising on remeasurement of monetary items are recognized in earnings. During 2017, we recorded net foreign exchange rate losses of $1.9 million primarily related to the funding of our purchase of the stock of Polaris Materials Corp. (“Polaris”).

Cash and Cash Equivalents

We record as cash equivalents all highly liquid investments having maturities of three months or less at the original date of purchase. Our cash equivalents may include money market accounts, certificates of deposit and commercial paper of highly rated corporate or government issuers. We classify our cash equivalents as held-to-maturity. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. The maximum amount placed in any one financial institution is limited in order to reduce risk. At times, our cash and investments may be in excess of amounts insured by the Federal Deposit Insurance Corporation. We have not experienced any losses on these accounts. Cash held as collateral or escrowed for contingent liabilities, if any, is included in other current and noncurrent assets based on the expected release date of the underlying obligation.

Business and Credit Concentrations

We grant credit, generally without collateral, to our customers, which include general contractors, municipalities and commercial companies located primarily in Texas, New Jersey, New York, Philadelphia, Washington, D.C., California, Oklahoma, the U.S. Virgin Islands and Hawaii. Consequently, we are subject to potential credit risk related to changes in business and economic factors in those states and territories.  We generally have lien rights in the work we perform, and concentrations of credit risk are limited because of the diversity of our customer base. Further, our management believes that our contract acceptance, billing and collection policies are adequate to limit potential credit risk. We did not have any customers that accounted for more than 10% of our revenue or any suppliers that accounted for more than 10% of our cost of goods sold in 2019, 2018 or 2017. We did not have any customers that accounted for more than 10% of our accounts receivable as of December 31, 2019 or December 31, 2018.

Accounts Receivable     

Accounts receivable consist primarily of receivables from contracts with customers for the sale of ready-mixed concrete, aggregates and other products. Accounts receivable initially are recorded at the transaction amount. We utilize liens or other legal remedies in our collection efforts of certain accounts receivable. Each reporting period, we evaluate the collectability of the receivables and record an allowance for doubtful accounts and customer disputes for our estimated probable losses on balances that may not be collected in full, which reduces the accounts receivable balance. Additions to the allowance result from a provision

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for bad debt expense that is recorded to selling, general and administrative expenses. A provision for customer disputes recorded as a reduction to revenue also increases the allowance. Accounts receivable are written off if and when we determine the receivable will not be collected and are reflected as a reduction to the allowance.  We determine the amount of bad debt expense and customer dispute losses each reporting period and the resulting adequacy of the allowance at the end of each reporting period by using a combination of historical loss experience, customer-by-customer analysis, and subjective assessments of our loss exposure.

Inventories

Inventories consist primarily of cement and other raw materials, aggregates at our pits and quarries, and building materials that we hold for sale or use in the ordinary course of business. Inventories are measured at the lower of cost or net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Cost in all periods presented was determined using the average cost and first-in, first-out (“FIFO”) methods. We reduce the carrying value of our inventories for estimated excess and obsolete inventories equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future product demand and market conditions. The value is not increased with any changes in circumstances that would indicate an increase after the remeasurement. If actual product demand or market conditions are less favorable than those projected by management, inventory write-downs may be required.

Property, Plant and Equipment, Net

We state property, plant and equipment at cost less accumulated depreciation. We capitalize leasehold improvements on properties held under operating leases and amortize those costs over the lesser of their estimated useful lives or the applicable lease term.  We record amortization of assets recorded under finance leases as depreciation expense. We compute depletion of mineral deposits as such deposits are extracted utilizing the unit-of-production method. 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.

We use the straight-line method to compute depreciation and amortization of these assets, other than mineral deposits, over the following estimated useful lives: 

Class of Assets		Range of Service Lives
Buildings and land improvements		10 to 40 years
Machinery and equipment		10 to 30 years
Mixers, trucks and other vehicles		1 to 12 years
Other		3 to 10 years

Reclamation Costs

Reclamation costs resulting from normal use of long-lived assets are recognized over the period the asset is in use when there is a legal obligation to incur these costs upon retirement of the assets. Additionally, reclamation costs resulting from normal use under a mineral lease are recognized over the expected lease term when there is a legal obligation to incur these costs upon expiration of the lease. The obligation, which is not reduced by estimated offsetting cash flows, is recorded at fair value as a liability at the obligating event date and is accreted through charges to operating expenses. This fair value is also capitalized as part of the carrying amount of the underlying asset and depleted over the estimated useful life of the asset. If the obligation is settled for other than the carrying amount of the liability, a gain or loss is recognized on settlement.

To determine the fair value of the obligation, we estimate the cost (including a reasonable profit margin) for a third party to perform the legally required reclamation tasks. This cost is then increased for both future estimated inflation and an estimated market risk premium related to the estimated years to settlement. Once calculated, this cost is discounted to fair value using present value techniques with a credit-adjusted, risk-free rate commensurate with the estimated years to settlement.

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In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date. If this evaluation identifies alternative estimated settlement dates, we use a weighted-average settlement date considering the probabilities of each alternative.

We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date. Examples of events that would trigger a change in the cost include a new reclamation law or amendment of an existing mineral lease. Examples of events that would trigger a change in the estimated settlement date include the acquisition of additional reserves or the closure of a facility.

For additional information about reclamation obligations (referred to in our financial statements as asset retirement obligations) see Note 10.

Impairment of Long-lived Assets

We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Such evaluations for impairment are significantly impacted by estimates of future prices for our products, capital needs, economic trends in the applicable construction sector and other factors.  If we consider such assets to be impaired, the impairment we recognize is measured by the amount by which the carrying amount of the assets exceeds their fair value.  Assets to be disposed of by sale are reflected at the lower of their carrying amounts or fair value, less cost to sell. We test for impairment using a multi-tiered approach that incorporates an equal weighting to a multiple of earnings and to undiscounted estimated future cash flows. In 2017, we recorded a $0.5 million non-cash impairment of assets related to property, plant and equipment destroyed by hurricanes at our U.S. Virgin Islands (“USVI”) operations. In 2018, we recorded a $1.3 million non-cash impairment of assets related to property, plant and equipment for properties in New Jersey and Michigan that were sold in 2018.

Leases

As of January 1, 2019, we adopted the new lease accounting guidance by using the transition approach that permitted application of the new standard at the adoption date instead of the earliest comparative period presented in the financial statements. The core principle of the guidance is that lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases, excluding mineral interest leases, with terms greater than twelve months. Additionally, this guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. As a result of adopting the new standard, we recorded additional lease assets and lease liabilities of approximately $76.9 million and $79.2 million, respectively, on the consolidated balance sheet as of January 1, 2019. The additional lease assets equal the lease liabilities, excluding the impact of deferred rent, which was previously recorded in accrued liabilities. The standard did not materially impact our consolidated net earnings and had no impact on cash flows.

In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We elected to exclude leases with an initial term of 12 months or less from the consolidated balance sheet. We made an accounting policy election to combine lease and non-lease components when calculating the lease liability under the new standard. Non-lease components, which may include taxes, maintenance, insurance and certain other expenses applicable to the leased property, are primarily considered variable costs. We did not elect the hindsight practical expedient to determine the lease term for existing leases.

We are the lessee in a lease contract when we obtain the right to control the asset.  We lease certain land, office space, equipment and vehicles. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of lease renewal options is primarily at our discretion. 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.

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Certain of our lease agreements include rental payments based on a percentage of volume sold over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Where observable, we use the implicit interest rate in determining the present value of future payments. Where the implicit interest rate is not observable, we use our incremental borrowing rate based on the information available at lease commencement date in determining the present value of future payments.  We give consideration to our outstanding debt as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

See Note 9 for additional information regarding our leases.

Goodwill Impairment

Goodwill represents the cost of net assets acquired in a business combination over the fair value of the acquired net identifiable tangible and intangible assets. Goodwill is assigned to the reporting unit that it will benefit. We do not amortize goodwill but instead evaluate it for impairment within the reporting unit. Goodwill impairment exists when the fair value of a reporting unit is less than its carrying amount. Goodwill is tested for impairment annually, as of October 1, or more frequently if events or circumstances indicate that assets might be impaired. The annual test for impairment is performed in the fourth quarter of each year, because this period gives us the best visibility of the reporting units’ operating performance for the current year (seasonally, April through October are our highest revenue and production months) and our outlook for the upcoming year, because much of our customer base is finalizing operating and capital budgets during the fourth quarter.  We have the option of either assessing qualitative factors to determine whether it is more likely than not that the carrying value of our reporting units exceeds their respective fair value or proceeding directly to a quantitative test. We elected to perform the quantitative impairment test for all years presented. The quantitative impairment test involves estimating the fair value of our reporting units and comparing the result to the reporting unit's carrying value, including goodwill. If the fair value is less than the carrying value, goodwill impairment is determined to be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We changed our reporting units in 2019 and performed the impairment assessment both before and after the change, with no difference in the assessment results. There was no impairment of goodwill in either 2019 or 2018. In 2017, Hurricanes Irma and Maria resulted in extensive damage, flooding and power outages throughout the USVI, impacting our facilities and operations. Based on the uncertainty of the timing of the business recovery and its impact on our projected cash flows, we recorded a non-cash goodwill impairment charge of $5.8 million in 2017, representing a full impairment of the goodwill related to our USVI operations.

We generally estimate fair value using an equally weighted combination of discounted cash flows and multiples of invested capital to EBITDA. The discounted cash flow model includes forecasts for revenue and cash flows discounted at our weighted average cost of capital. Multiples of invested capital to EBITDA are calculated using a weighted average of two selected 12 month periods results by reporting unit compared to the enterprise value of the Company, which is determined based on the combination of the market value of our capital stock and total outstanding debt. Determining the fair value of our reporting units involves the use of significant estimates and assumptions and considerable management judgment. We base our fair value estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject to inherent uncertainty and actual results may differ. Changes in key assumptions or management judgment with respect to a reporting unit or its prospects, which may result from a change in market conditions, market trends, interest rates or other factors outside of our control, or underperformance relative to historical or projected operating results, could result in a significantly different estimate of the fair value of our reporting units, which could result in an impairment charge in the future.

Intangible Assets

Our definite-lived intangible assets consist of identifiable trade names, customer relationships, non-compete agreements, leasehold interests, favorable contracts and emissions credits that were acquired through business or asset purchases. We amortize these intangible assets over their estimated useful lives, which range from 3 to 25 years, using a straight-line approach. Our indefinite-lived intangible assets consist of a land right acquired in a 2014 acquisition that will be reclassified to property, plant and equipment upon the completion of certain settlement activities. For the land right, we performed a qualitative assessment under the accounting rules for intangible assets, to determine that this indefinite-lived intangible asset was not impaired as of December 31, 2019. See Note 6 for further discussion of our intangible assets.

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Debt Issuance Costs

Debt issuance costs are amortized as interest expense over the scheduled maturity period of the debt. The costs related to our line-of-credit arrangement are amortized over the term of the arrangement, regardless of whether there are any outstanding borrowings.

Revenue

As of the beginning of 2018, we adopted the new revenue recognition accounting guidance by applying the modified retrospective transition approach to all contracts. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The adoption of the guidance did not have a material impact on the amount or timing of revenue recognized.

We derive substantially all of our revenue from the production and delivery of ready-mixed concrete, aggregates and related building materials.  Revenue from the sale of these products is recognized when control passes to the customer, which generally occurs at the point in time when products are delivered. We do not deliver product unless we have an order or other documentation authorizing delivery to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Sales and other taxes we collect concurrently with revenue-producing activities are excluded from revenue. Incidental items, such as mix formulation and testing services that are immaterial in the context of the revenue contract and completed in close proximity to the revenue-producing activities, are recorded within cost of goods sold as incurred. We generally do not provide post-delivery services, such as paving or finishing. Customer dispute costs are recorded as a reduction of revenue at the end of each period and are estimated by using a combination of historical customer experience and a customer-by-customer analysis.  

Amounts billed to customers for delivery costs are classified as a component of total revenue. Our payment terms vary by the type and location of our customer and the products offered. The term between invoicing and when payment is due is not significant. As permitted under U.S. GAAP, we have elected not to assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods to the customer will be one year or less.

See Note 20 for disaggregation of revenue by segment and product, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

We do not have any customer contracts that meet the definition of unsatisfied performance obligations in accordance with U.S. GAAP.

Cost of Goods Sold

Cost of goods sold consists primarily of product costs and operating expenses, excluding depreciation, depletion and amortization, which is reported separately.  Operating expenses consist primarily of wages, benefits, insurance and other expenses attributable to plant operations, repairs and maintenance and delivery costs.  

Selling, General and Administrative Expenses

Selling expenses consist primarily of sales commissions, salaries 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, provision for doubtful accounts and legal and professional fees.

Income Taxes

We use the asset and liability method of accounting for income taxes under which 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 the temporary differences are expected to reverse.  We record a valuation allowance to reduce

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the deferred tax assets to the amount that is more likely than not to be realized.  We recognize interest and penalties related to uncertain tax positions in income tax expense.

The Tax Act (as defined in Note 15) requires a U.S. shareholder of a foreign corporation to include in taxable income its global intangible low-tax income (“GILTI”).  In general, GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets.  As the accounting rules are unclear as to the treatment of GILTI, an entity may either include the additional taxes on GILTI in income tax expense in the year incurred or recognize deferred taxes for temporary basis differences expected to affect the amount of GILTI in future years.  Beginning in 2018, we included the additional taxes on GILTI in income tax expense.

Contingent Consideration

We record an estimate of the fair value of contingent consideration, incurred with certain acquisitions, within accrued liabilities and other long-term obligations and deferred credits on our consolidated balance sheets. On a quarterly basis, we revalue the liability and record increases or decreases in the fair value as change in value of contingent consideration on our consolidated statement of operations. Changes to the contingent consideration liability can result from adjustments to the discount rate, accretion of interest expense due to the passage of time or changes in the assumptions regarding probabilities of successful achievement of related milestones and the estimated timing in which the milestones are expected to be achieved. For further information, see Note 13 regarding our fair value disclosures.

Fair Value of Financial Instruments

Our other financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. We consider the carrying values of cash and cash equivalents, accounts receivable and accounts payable to be representative of their respective fair value because of their short-term maturities or expected settlement dates.  For further information, see Note 10 regarding our other long-term obligations and deferred credits and Note 13 regarding our fair value disclosures.

Stripping Costs

Stripping costs are the costs of removing overburden and waste materials to access mineral deposits. We include post-production stripping costs in the cost of inventory produced during the period these costs are incurred. Post-production stripping costs represent stripping costs incurred after the first salable minerals are extracted from the mine.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period after giving effect to all potentially dilutive securities outstanding during the period. See Note 16 for additional information regarding our earnings per share.

Comprehensive Income

Comprehensive income represents all changes in equity of an entity during the reporting period, except those resulting from investments by, and distributions to, shareholders. For all years presented, no differences existed between our consolidated net income and our consolidated comprehensive income.

Stock-based Compensation

Stock-based employee compensation cost is measured at the grant date based on the calculated fair value of the award. We recognize expense on a straight-line basis over the employee’s requisite service period, generally the vesting period of the award, or in the case of performance-based awards, over the derived service period. We recognize forfeitures of stock-based awards as they occur. We recognize excess tax benefits and tax deficiencies in the income statement when awards vest or are settled. See Note 14 for additional information regarding our stock-based compensation plans.

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Recent Accounting Pronouncements Not Yet Adopted

Credit Losses. In June 2016, the FASB issued an update on the measurement of credit losses on financial instruments, which requires entities to use a forward-looking approach based on expected losses rather than the current model of incurred losses to estimate credit losses on certain types of financial instruments, including trade accounts receivable. Application of the new model may result in the earlier recognition of allowances for losses. We will adopt the new rules effective January 1, 2020 with any cumulative effect as of adoption recorded as an adjustment to retained earnings. While we are still assessing the impact, we do not expect there to be a material effect on our consolidated financial statements and the related disclosures.

2018 Acquisitions

We completed five acquisitions during 2018 that expanded our ready-mixed concrete operations in our East Region (which we define to include New York City, New Jersey, Washington, D.C. and Philadelphia), and expanded our ready-mixed concrete, aggregate products and other non-reportable operations in West Texas. The aggregate fair value consideration for these acquisitions, which were all accounted for as business combinations, was $70.8 million. The acquisitions included the assets and certain liabilities of the following:

•	On Time Ready Mix, Inc. (“On Time”) located in Flushing, New York on January 10, 2018;

•	Cutrell Trucking, LLC, Dumas Concrete, LLC, Pampa Concrete Co., Inc., Panhandle Concrete, LLC, and Texas Sand & Gravel Co., Inc. (collectively “Golden Spread”) located in Amarillo, Texas on March 2, 2018;

•	Leon River Aggregate Materials, LLC (“Leon River”) located in Proctor, Texas on August 29, 2018; and

•	Two individually immaterial ready-mixed concrete operations in our East Region and West Texas on March 5, 2018 and September 14, 2018, respectively.

The aggregate fair value consideration for these five acquisitions included $69.9 million in cash and fair value contingent consideration of $1.1 million and was net of a working capital receivable of $0.2 million. We funded the cash portion of the 2018 acquisitions through a combination of cash on hand and borrowings under our asset-based revolving credit facility (the “Revolving Facility”). The combined assets acquired through these 2018 acquisitions included 149 mixer trucks, 20 concrete plant facilities and two aggregate facilities. To effect these transactions, during 2018, we incurred approximately $0.7 million of transaction costs which were included in selling and general administrative expenses in our consolidated statements of operations. See Note 6 for a description of our measurement period adjustments.

The following table presents the total consideration for the 2018 acquisitions and the preliminary amounts related to the assets acquired and liabilities assumed based on the estimated fair value as of the respective acquisition dates:

($ in millions)	2018 Acquisitions
Inventory	$	1.1
Other current assets	0.1
Property, plant and equipment	37.4
Definite-lived intangible assets	19.8
Total assets acquired	58.4
Current liabilities	0.1
Other long-term liabilities	1.1
Total liabilities assumed	1.2
Goodwill	13.6
Total consideration (fair value)(1)	$	70.8

(1) Included $1.1 million of contingent consideration.

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Acquired Intangible Assets and Goodwill

A summary on the intangible assets acquired in 2018 and their estimated useful lives is as follows:

($ in millions)	Weighted Average Amortization Period (In Years)		Fair Value At Acquisition Date
Customer relationships	5.5		$	18.5
Non-competes	5.0		1.3
Total			$	19.8

As of December 31, 2019, the estimated future aggregate amortization expense of definite-lived intangible assets from the 2018 acquisitions was as follows (in millions):

2020	$	3.6
2021	2.8
2022	2.6
2023	1.6
2024	1.4
Thereafter	0.4
Total	$	12.4

During 2019, we recorded $4.5 million of amortization expense related to these intangible assets, of which $0.5 million related to measurement period adjustments. During 2018, we recorded $2.9 million of amortization expense related to these intangible assets, of which $0.2 million related to measurement period adjustments.

The goodwill from the 2018 acquisitions is related to the synergies in our ready-mixed concrete segment that we expect to achieve with expansion in the markets in which we already operate as well as entry into new metropolitan areas of our existing geographic markets. While the goodwill as determined in the purchase price allocation relates to our ready-mixed concrete and other non-reportable segments in the amounts of $12.8 million and $0.8 million, respectively, we generally expect all $13.6 million of the goodwill from the 2018 acquisitions to benefit the ready-mixed concrete segment and be deductible for tax purposes. See Note 15 for additional information regarding income taxes.

Impact of Acquisitions

During 2018, we recorded approximately $50.4 million of revenue and $4.0 million of operating income in our consolidated statements of operations related to the 2018 acquisitions following their respective dates of acquisition.

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The information presented below reflects the unaudited pro forma combined financial results for the 2018 acquisitions, excluding the individually immaterial acquisitions as described above, as historical financial results for these operations were not material and were impractical to obtain from the former owners. All other acquisitions have been included and represent our estimate of the 2018 results of operations as if the 2018 acquisitions had been completed on January 1, 2017. The impact to the 2019 results of operations if the 2018 acquisitions had been completed on January 1, 2017 was not materially different from our reported results.

($ in millions except per share)	2018
Revenue	$	1,523.2
Net income attributable to U.S. Concrete	$	29.4
Net income per share attributable to U.S. Concrete - basic	$	1.79
Net income per share attributable to U.S. Concrete - diluted	$	1.78

The above pro forma results are unaudited and were prepared based on the historical U.S. GAAP results of the Company and the historical results of the acquired companies for which financial information was available, based on data provided by the former owners. These results are not necessarily indicative of what the Company's actual results would have been had the 2018 acquisitions occurred on January 1, 2017.

The unaudited pro forma net income attributable to U.S. Concrete and per share amounts above reflect the following adjustments:

($ in millions)	2018
Increase in intangible amortization expense	$	(0.7	)
Exclusion of buyer transaction costs	0.7
Decrease in income tax expense	0.2

The unaudited pro forma results do not reflect any operational efficiencies or potential cost savings that may occur as a result of consolidation of the operations.

($ in millions)		2019				2018
Balance, beginning of period		$	6.1			$	5.8
Provision for doubtful accounts and customer disputes		3.2				4.6
Uncollectible receivables written off, net of recoveries		(4.7		)		(4.3		)
Other adjustments		(0.6		)		—
Balance, end of period		$	4.0			$	6.1

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		December 31,
($ in millions)		2019				2018
Land and mineral deposits		$	313.0			$	310.4
Buildings and improvements		66.2				65.7
Machinery and equipment		295.7				266.2
Mixers, trucks and other vehicles		258.8				244.0
Other		1.9				1.7
Construction in progress		27.8				28.3
		963.4				916.3
Less: accumulated depreciation, depletion and amortization		(289.9		)		(236.1		)
Total		$	673.5			$	680.2

As of December 31, 2019 and 2018, the net carrying amounts of mineral deposits were $231.7 million and $238.9 million, respectively. We recorded depreciation, depletion and amortization expense on our property, plant and equipment of $69.3 million for 2019, $67.9 million for 2018 and $47.1 million for 2017, which is included in our consolidated statements of operations.

Acquired intangible assets are classified into three categories: (1) goodwill, (2) intangible assets with finite lives subject to amortization, and (3) intangible assets with indefinite lives. Goodwill and intangible assets with indefinite lives are not amortized; rather, they are reviewed for impairment at least annually.

Goodwill

Goodwill is recognized when the consideration paid for a business exceeds the fair value of the tangible and identifiable intangible assets acquired. Goodwill is allocated to reporting units for purposes of testing goodwill for impairment. There were no charges for goodwill impairment in 2019 or 2018. In 2017, we recorded $5.8 million of goodwill impairment charges associated with our USVI operations. Accumulated goodwill impairment losses amount to $4.4 million in the ready-mixed concrete segment and $1.4 million in the aggregate products segment for the three years presented.

The accumulated impairment was as follows:

		December 31,
( in millions)		2019				2018				2017
Goodwill, gross		$	245.3			$	245.1			$	210.5
Accumulated impairment		(5.8		)		(5.8		)		(5.8		)
Goodwill, net		$	239.5			$	239.3			$	204.7

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The changes in the goodwill by reportable segment were as follows:

($ in millions)		Ready-Mixed Concrete Segment				Aggregate Products Segment				Other Non-Reportable Segments				Total
Goodwill, net at December 31, 2017(1)		$	136.7			$	56.1			$	11.9			$	204.7
2018 acquisitions(1)		13.4				—				—				13.4
Measurement period adjustments for prior year business combinations(2)		(0.3		)		30.1				(8.6		)		21.2
Goodwill, net at December 31, 2018		149.8				86.2				3.3				239.3
Measurement period adjustments for prior year business combinations		0.2			(3)	—				—				0.2
Goodwill, net at December 31, 2019		$	150.0			$	86.2			$	3.3			$	239.5

 

(1)	$1.3 million and $0.8 million of goodwill was assigned to the ready-mixed concrete reporting unit as of the date certain operations that are accounted for in other non-reportable segments were acquired in 2017 and 2018, respectively, because it was determined that the goodwill would benefit the ready-mixed concrete operating segment.

(2)

Adjustments for certain 2017 acquisitions recorded during 2018 included $21.0 million of additional long-term obligations, of which $18.6 million related to deferred taxes attributable to fair value adjustments of Polaris's fixed assets as of the acquisition date; $2.8 million of assumed liabilities; $0.4 million of lower working capital; $2.7 million of additional property, plant, and equipment; $0.3 million of additional definite-lived intangible assets; and other various changes. The measurement period adjustments for certain 2017 acquisitions also included an $8.6 million reclassification of goodwill between the aggregate products segment and other non-reportable segments.

(3)	The fair value of property, plant and equipment acquired in 2018 was determined to be $0.2 million lower than the original estimate.

Intangible Assets

Our purchased intangible assets were as follows:

		December 31, 2019
($ in millions)		Gross				Accumulated Amortization				Net				Weighted Average Remaining Life (in Years)
Definite-lived intangible assets
Customer relationships		$	108.5			$	(59.7	)		$	48.8			3.9
Trade names		44.5				(13.6		)		30.9				19.1
Non-competes		18.3				(15.3		)		3.0				2.4
Leasehold interests		12.5				(6.7		)		5.8				5.4
Favorable contract		4.0				(3.9		)		0.1				0.9
Environmental credits		2.8				(0.2		)		2.6				16.0
Total definite-lived intangible assets		190.6				(99.4		)		91.2				9.4
Indefinite-lived intangible assets
Land rights(1)		1.2				—				1.2
Total purchased intangible assets		$	191.8			$	(99.4	)		$	92.4

(1) Land rights will be reclassified to property, plant and equipment upon the division of certain shared properties and settlement of the associated deferred payment.

 

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		December 31, 2018
($ in millions)		Gross				Accumulated Amortization				Net				Weighted Average Remaining Life (in Years)
Definite-lived intangible assets
Customer relationships		$	108.5			$	(43.1	)		$	65.4			4.7
Trade names		44.5				(11.1		)		33.4				19.6
Non-competes		18.3				(12.1		)		6.2				2.6
Leasehold interests		12.5				(5.1		)		7.4				5.9
Favorable contract		4.0				(3.8		)		0.2				1.9
Environmental credits		2.8				—				2.8				17.0
Total definite-lived intangible assets		190.6				(75.2		)		115.4				9.8
Indefinite-lived intangible assets
Land rights(1)		1.2				—				1.2
Total purchased intangible assets		$	191.8			$	(75.2	)		$	116.6

(1) Land rights will be reclassified to property, plant and equipment upon the division of certain shared properties and settlement of the associated deferred payment.

As of December 31, 2019, the estimated remaining amortization of our definite-lived intangible assets was as follows (in millions):

2020		$	20.9
2021		18.6
2022		12.7
2023		6.3
2024		6.0
Thereafter		26.7
Total		$	91.2

Also included in other long-term obligations and deferred credits in our consolidated balance sheets were unfavorable lease intangibles with a gross carrying amount of $1.5 million as of December 31, 2019 and a net carrying amount of $0.5 million and $0.8 million as of December 31, 2019 and 2018, respectively. These unfavorable lease intangibles had a weighted average remaining life of 4.1 years as of December 31, 2019 and 4.6 years as of December 31, 2018.

We recorded amortization expense for our definite-lived intangible assets and unfavorable lease intangibles of $23.9 million in both 2019 and 2018, and $20.7 million in 2017 in our consolidated statements of operations.

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		December 31,
($ in millions)		2019				2018
Compensation and benefits		$	11.9			$	12.8
Contingent consideration		10.8				36.2
Materials		9.8				10.9
Self-insurance reserves		9.2				8.7
Property, sales and other taxes		9.0				7.3
Interest		3.3				3.5
Deferred consideration		2.2				4.0
Other		7.3				12.9
Total		$	63.5			$	96.3

		December 31,
($ in millions)		2019				2018
Senior unsecured notes due 2024 and unamortized premium(1)		$	606.8			$	608.4
Asset based revolving credit facility		—				15.0
Finance leases		67.3				71.2
Promissory notes		20.4				28.5
Debt issuance costs		(7.2		)		(9.0		)
Total debt		687.3				714.1
Less:  current maturities		(32.5		)		(30.8		)
Long-term debt, net of current maturities		$	654.8			$	683.3

(1)	The effective interest rate for these notes was 6.56% as of both December 31, 2019 and December 31, 2018.

As of December 31, 2019, the principal amounts due under our debt agreements for the next five years and thereafter were as follows (in millions): 

2020		$	32.5
2021		26.9
2022		16.6
2023		9.4
2024		602.3
Thereafter		—
Total		$	687.7

Senior Unsecured Notes due 2024

During 2016 and 2017, we issued $600.0 million aggregate principal amount of 6.375% senior unsecured notes due 2024 (the “2024 Notes”). The 2024 Notes are governed by an indenture (the “Indenture”) dated as of June 7, 2016, by and among U.S. Concrete, Inc., as issuer, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee. The 2024 Notes

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accrue interest at a rate of 6.375% per annum, which is payable on June 1 and December 1 of each year. The 2024 Notes mature on June 1, 2024, and are redeemable at our option prior to maturity at prices specified in the Indenture. The Indenture contains negative covenants that restrict our ability and our restricted subsidiaries' ability to engage in certain transactions, as described below, and also contains customary events of default.

The Indenture contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

•	incur additional debt or issue disqualified stock or preferred stock;

•	pay dividends or make other distributions, repurchase or redeem our stock or subordinated indebtedness or make certain investments;

•	sell assets and issue capital stock of our restricted subsidiaries;

•	incur liens;

•	allow to exist certain restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;

•	enter into transactions with affiliates;

•	consolidate, merge or sell all or substantially all of our assets; and

•	designate our subsidiaries as unrestricted subsidiaries.

The 2024 Notes are issued by U.S. Concrete, Inc. (the “Parent”). Our obligations under the 2024 Notes are jointly and severally and fully and unconditionally guaranteed on a senior unsecured basis by each of our restricted subsidiaries that guarantees any obligations under the Revolving Facility or that guarantees certain of our other indebtedness or certain indebtedness of our restricted subsidiaries (other than foreign restricted subsidiaries that guarantee only indebtedness incurred by another foreign subsidiary).

U.S. Concrete, Inc. does not have any independent assets or operations, and none of its foreign subsidiaries guarantee the 2024 Notes. There are no significant restrictions on the ability of the Company or any guarantor to obtain funds from its subsidiaries by dividend or loan. For additional information regarding our guarantor and non-guarantor subsidiaries, see the information set forth in Note 21.

The 2024 Notes and the guarantees thereof are effectively subordinated to all of our and our guarantors' existing and future secured obligations, including obligations under the Revolving Facility, to the extent of the value of the collateral securing such obligations; senior in right of payment to any of our and our guarantors' future subordinated indebtedness; pari passu in right of payment with any of our and our guarantors' existing and future senior indebtedness, including our and our guarantors' obligations under the Revolving Facility; and structurally subordinated to all existing and future indebtedness and other liabilities, including preferred stock, of any non-guarantor subsidiaries.

Asset Based Revolving Credit Facility

The Company has a senior secured asset-based credit facility that provides for up to $350.0 million of revolving borrowings and up to $50.0 million for the issuance of letters of credit, with $19.7 million of undrawn standby letters of credit as of December 31, 2019 through its August 31, 2022 maturity. However, any such issuance of letters of credit will reduce the amount available for borrowings under the Revolving Facility. The Third Amended and Restated Loan and Security Agreement (“Third Loan Agreement”) is secured by a first priority lien on substantially all of the personal property of the Company and our guarantors, subject to permitted liens and certain exceptions. Our actual maximum credit availability varies from time to time and is determined by calculating the value of our eligible accounts receivable, inventory, mixer trucks and machinery, minus reserves and other adjustments, as specified in the Third Loan Agreement. Loans may not exceed the borrowing base as defined in the Third Loan Agreement. At December 31, 2019, we had no amounts outstanding under the Revolving Facility, our borrowing base was $263.4 million, and we had $243.7 million of available borrowings under the Revolving Facility. The Third Loan Agreement also contains a provision for over-advances and protective advances in each case, of up to $25.0 million in excess of the borrowing base levels and provides for swingline loans, up to a $15.0 million sublimit. Loans under the Revolving Facility are in the form of either base rate loans or “LIBOR loans” denominated in U.S. dollars.

The Third Loan Agreement requires that we, upon the occurrence of certain events, maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for each period of 12 calendar months.  As of December 31, 2019, we were in compliance with all covenants under the Third Loan Agreement.

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Finance Leases and Promissory Notes

We have a series of promissory notes with various lenders primarily for the purchase of mixer trucks and other machinery and equipment in an aggregate outstanding principal amount of $20.4 million as of December 31, 2019, with fixed annual interest rates ranging from 2.50% to 4.49%, payable monthly for terms ranging from three to five years.

We have leasing agreements with various other lenders for the purchase of mixer trucks and other machinery and equipment with a total remaining principal amount of $67.3 million as of December 31, 2019, with fixed annual interest rates ranging from 0.15% to 6.61%, payable monthly for terms ranging from less than one to seven years. Because the lease terms include one dollar buyout options at the end of the lease, these financings have been classified as finance leases.

The weighted average interest rate of our finance leases and promissory notes was 3.77% as of December 31, 2019 and 3.72% as of December 31, 2018.

				December 31,
Leases ($ in millions)		Balance Sheet Classification		2019				2018
Assets:
Operating lease assets		Operating lease assets		$	69.8			$	—
Finance lease assets		Property, plant and equipment, net		91.5			(1)	85.4			(2)
Total lease assets				$	161.3			$	85.4
Liabilities:
Current liabilities:
Operating		Current operating lease liabilities		$	12.9			$	—
Finance		Current maturities of long-term debt		24.2				20.2
Long-term liabilities:
Operating		Long-term operating lease liabilities		59.7				—
Finance		Long-term debt, net of current maturities		43.1				51.0
Total lease liabilities				$	139.9			$	71.2

(1) Net of accumulated amortization of $29.4 million.

(2) Gross assets of $103.2 million and accumulated amortization of $17.8 million.

Lease Cost ($ in millions)		Statement of Operations Classification		2019				2018				2017
Operating lease cost		Selling, general and administrative expenses		$	24.2		(1)	$	23.4			$	20.7
Finance lease cost:
Amortization of leased assets		Depreciation, depletion and amortization		11.6				18.4				12.4
Interest on lease liabilities		Interest expense, net		2.6				2.1				1.6
Total finance lease cost				14.2				20.5				14.0
Total				$	38.4			$	43.9			$	34.7

(1) Includes short-term lease and variable lease costs of approximately $5.9 million.

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Maturity of Lease Liabilities ($ in millions)		Operating Leases				Finance Leases				Total
2020		$	16.9			$	26.8			$	43.7
2021		15.8				21.1				36.9
2022		12.5				13.6				26.1
2023		10.9				8.1				19.0
2024		10.2				1.9				12.1
Thereafter		24.9				—				24.9
Total lease payments		91.2				71.5				162.7
Less interest		18.6				4.2				22.8
Present value of lease liabilities		$	72.6			$	67.3			$	139.9

Lease Term and Discount Rate		December 31, 2019
Weighted-average remaining lease term (years):
Operating leases		6.6
Finance leases		3.4
Weighted-average discount rate:
Operating leases		6.2%
Finance leases		3.8%

Other Information ($ in millions)		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	17.7
Operating cash flows for finance leases		2.6
Financing cash flows for finance leases		22.0
Net assets obtained in exchange for finance lease liabilities		18.1
Net right-of-use assets obtained in exchange for operating lease liabilities		8.2

		December 31,
($ in millions)		2019				2018
Self-insurance reserves		$	16.9			$	13.9
Contingent consideration		16.4				24.5
Asset retirement obligations		5.2				4.2
Income taxes		4.9				5.7
Deferred consideration		0.6				2.9
Other		5.1				3.6
Total		$	49.1			$	54.8

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Share Repurchase Program

In March 2017, our Board authorized a share repurchase program to repurchase up to $50.0 million of our outstanding common stock (the “Share Repurchase Program”), effective April 1, 2017 until the earlier of March 31, 2020, or a determination by the Board to discontinue the Share Repurchase Program. During 2018 under the Share Repurchase Program, we repurchased 0.2 million shares of our common stock at a cost of $6.7 million.

Through its ownership of Polaris, the Company holds a 70% interest in Eagle Rock Materials Ltd. (“Eagle Rock”) and an 88% interest in the Orca Sand and Gravel Limited Partnership (“Orca”). Eagle Rock was originally formed to develop the Eagle Rock quarry project in British Columbia, Canada. Orca was formed to develop the Orca quarry, also in British Columbia, Canada, with the remaining 12% minority interest held by the Namgis First Nation (“Namgis”). Non-controlling interest consists of the Namgis’s share of the fair value equity in the partnership offset by the capital contributions loaned to the Namgis by Polaris.

To enable the Namgis to make their required equity contributions to Orca once a construction decision was made, Polaris loaned the Namgis $8.0 million (Canadian dollars) in prior years. Polaris’s sole recourse for repayment is against distributions payable to the Namgis by the partnership, after repayment of any approved third party who has loaned the Namgis funds for equity contributions. Reflective of the equity nature of the funding, the balance of the loans offset the non-controlling interest’s share of equity. No interest accrues on the loans until a specified time after a set volume is met, at which time the loans will accrue interest at an annual rate of 6%. Following Orca's achievement of certain financial metrics, the Namgis may elect that up to one-half of the amount to which they are entitled under the partnership agreement be paid in cash.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Accounting guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain assets and liabilities within the fair value hierarchy. There were no transfers of assets or liabilities between the fair value measurement levels for the years ended December 31, 2019 or 2018.

We estimate the fair value of acquisition-related contingent consideration arrangements using a Monte Carlo simulation model, an income approach or a discounted cash flow technique, as appropriate. The fair value of the contingent consideration arrangements is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics and changes in discount rates. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest projections and input provided by practice leaders and management. Any change in the fair value estimate is recorded in our consolidated statement of operations for that period. The current portion of contingent consideration is included in accrued liabilities while the long-term portion is included in other long-term obligations and deferred credits, both of which are in our consolidated balance sheets. The use of

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different estimates and assumptions could increase or decrease the estimated fair value of our contingent consideration liability, which would result in different impacts to our consolidated balance sheets and consolidated statement of operations. These fair value measurements are based on significant inputs not observable in the market, and thus represent Level 3 inputs. Our recurring Level 3 fair value liability, contingent consideration, including the current portion, was $27.2 million as of December 31, 2019 and $60.7 million as of December 31, 2018.

The following tables present the inputs for the models used to value our acquisition-related contingent consideration:

($ in millions)		December 31, 2019
Valuation Inputs		Discounted Cash Flow Technique(1)
Fair value		$	27.2
Discount rate		3.70% - 7.46%
Payment cap		$	28.8
Expected payment period remaining (in years)		0-3
Management projections of the payout criteria		EBITDA/Volumes

(1)	Includes acquisition-related contingent consideration that was estimated using the Monte Carlo simulation model and income approach in 2018. The change from the Monte Carlo simulation model and income approach to discounted cash flow technique was due to the proximity to the measurement period end, which resulted in increased certainty in achieving the maximum payout.

($ in millions)		December 31, 2018
Valuation Inputs		Monte Carlo Simulation				Income Approach				Discounted Cash Flow Technique
Fair value		$	33.2			$	26.5			$	1.0
Discount rate		10.75% - 12.25%				3.70% - 5.00%				6.03% - 15.75%
Payment cap		$	37.3			$	27.3			$	1.1
Expected payment period remaining (in years)		1-3				1				1-4
Management projections of the payout criteria		EBITDA/Volumes				Permitted reserves/Volumes				Volumes

A reconciliation of the changes in Level 3 fair value measurements is as follows:

($ in millions)	Contingent Consideration
Balance at December 31, 2017	$	61.8
2018 acquisitions	1.1
Payments	(2.2		)
Balance at December 31, 2018	60.7
Increase in contingent consideration valuation	2.8
Payments	(36.3		)
Balance at December 31, 2019	$	27.2

Other Financial Instruments

The fair value of our 2024 Notes, estimated based on broker/dealer quoted market prices, was $627.0 million as of December 31, 2019 and $552.0 million as of December 31, 2018. The carrying value of the outstanding amount under our Revolving Facility in 2019 approximated fair value. The carrying value of our operating and finance lease assets and liabilities in 2019 and 2018 approximated fair value.

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We grant stock-based compensation awards to management, employees and non-employee directors under the U.S. Concrete, Inc. Long Term Incentive Plan (the “LTI Plan”), which we amended effective February 13, 2019 (the “Amendment”) to reserve an additional 0.9 million shares of common stock for future issuance as equity-based awards to management and employees. As of December 31, 2019, there were 0.5 million shares remaining for future issuance under the LTI Plan.  Stock-based compensation may include stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled equity awards and performance awards.

Stock-Based Compensation Cost

We recognized stock-based compensation expense related to restricted stock and restricted stock units of $19.1 million in 2019, $10.4 million in 2018 and $8.3 million in 2017. We realized tax benefits of $2.4 million in 2019, $2.4 million in 2018 and $3.2 million in 2017. Realized tax benefits for stock-based compensation expense are inclusive of excess tax benefits recognized in income tax expense of less than $0.1 million in 2019, $0.2 million in 2018 and $1.4 million in 2017. Stock-based compensation expense is reflected in selling, general and administrative expenses in our consolidated statements of operations.

As of December 31, 2019, we had approximately $10.7 million of unrecognized stock-based compensation expense, which we expect to recognize over a weighted average period of approximately 1.5 years.

Restricted Stock Units

Restricted stock units (“RSU”) that are granted to our Board of Directors as compensation for their services generally vest over a one-to-three year period on a quarterly basis.  Restricted stock units are subject to restrictions on transfer and certain conditions to vesting.  These restricted stock units are not considered outstanding shares of our common stock.

On March 1, 2019, the Compensation Committee of the Board of Directors approved grants of 0.3 million RSUs (the “2019 RSU Grant”), conditioned upon obtaining stockholder approval of the Amendment. The Amendment was approved by the Company's stockholders at the Company's annual meeting in May 2019, and the stockholder approval condition related to the 2019 RSU Grant was satisfied. The 2019 RSU Grant consisted of a 60% time-vested component that vests annually over a three-year period and a 40% stock performance hurdle component. The stock performance hurdle component triggers vesting upon our stock price reaching certain thresholds and may vest up to 200% of the target number of performance stock units granted.

The fair value of the 2019 RSU Grant subject to time-based vesting restrictions was determined based upon the closing price of our common stock on the effective date of the grant. The fair value of the 2019 RSU Grant subject to market performance hurdles was determined utilizing a Monte Carlo financial valuation model. Compensation expense determined utilizing the Monte Carlo simulation is recognized regardless of whether the common stock reaches the defined thresholds, provided that each grantee remains an employee at the end of the expected term. The effective date of the grant was in May 2019, whereas the communication of the equity award was made March 1, 2019, contingent upon approval of the LTI Plan by the Company's shareholders. As the stock price increased from March 1, 2019 to the date of shareholder approval, the fair value of the award was higher than it would have been if the dates had been the same. The assumptions used to estimate the fair value of performance-based restricted stock units granted in 2019 were as follows:

		2019
Expected term (years)		0.0 - 0.5
Expected volatility		41.1%
Risk-free interest rate		2.1%
Vesting price(1)		$45.90 - $58.60
Weighted average grant date fair value per share		$39.60 - $48.75

(1)	The vesting price is the average of the daily volume-weighted average share price of our common stock over any period of 20 consecutive trading days within the three-year period beginning on the date of grant. These hurdles were established on March 1, 2019.

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RSU activity for 2019 was as follows (units in thousands): 

		Number of Units				Weighted Average  Grant Date  Fair Value Per Share
Unvested RSUs outstanding at beginning of period		22				$	49.94
Granted		474		(1)		46.26
Vested		(144	)			47.16
Forfeited		(21	)			45.65
Unvested RSUs outstanding at end of period		331				$	46.15

(1)	Reflects the 2019 RSU Grant at the maximum 200% of the target.

Additional RSU information was as follows: 

		2019				2018				2017
Weighted average fair value per share on grant date(1)		$	46.26			$	49.94			$	76.30
Fair value of vested units (in millions)		$	6.8			$	0.8			$	0.8

(1)	The fair value was determined based upon the closing price of our common stock on the effective date of the grant.

Restricted Stock Awards

Restricted stock awards granted are subject to restrictions on transfer and certain conditions to vesting.  The restricted stock awards issued to date consist of a 60% time-vested component and a 40% stock performance hurdle component. The time-vested component vests annually over a three year period. The stock performance hurdle component triggers vesting upon our stock price reaching certain thresholds. During the restriction period, the holders of restricted stock are entitled to vote and receive dividends; however, such dividends would be forfeited in the event the stock does not vest. As a result, these awards are included in our outstanding shares of common stock.

Restricted stock award activity for 2019 was as follows (shares in thousands): 

		Number of Shares			Weighted Average  Grant Date  Fair Value Per Share
Unvested restricted stock awards outstanding at beginning of period		326			$	59.93
Granted		—			—
Vested		(97	)		64.04
Forfeited		(21	)		57.40
Unvested restricted stock awards outstanding at end of period		208			$	58.20

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During 2019, there were no restricted stock awards granted. During 2018 and 2017, the weighted average grant date fair value of restricted stock awards granted was $61.97 and $60.24 per share, respectively. The fair value of restricted stock awards subject only to time-based vesting restrictions was determined based upon the closing price of our common stock on the date of grant. The fair value of restricted stock awards subject to market performance hurdles was determined utilizing a Monte Carlo financial valuation model. Compensation expense determined utilizing the Monte Carlo simulation is recognized regardless of whether the common stock reaches the defined thresholds, provided that each grantee remains an employee at the end of the expected term. The range of assumptions used to estimate the fair value of performance-based restricted stock awards granted were as follows:

		2018		2017
Expected term (years)		0.7 - 0.9		0.6 - 0.9
Expected volatility		40.4%		36.9%
Risk-free interest rate		2.4%		1.7%
Vesting price(1)		$91.10 - $99.10		$82.50 - $91.75
Weighted average grant date fair value per share		$48.14 - $52.81		$44.96 - $51.31

(1)	The vesting price is the average of the daily volume-weighted average share price of our common stock over any period of 20 consecutive trading days within the three-year period beginning on the date of grant.

During 2019, the total fair value of restricted stock awards vested was $6.2 million. The total fair value of restricted stock awards vested was $4.9 million for both 2018 and 2017.

Stock Options

There were no stock option grants or compensation expense for stock options in 2019, 2018 or 2017. We had 13,000 stock options with a weighted average exercise price of $17.23 outstanding at the beginning of 2019 that were all exercised in 2019. The intrinsic value of stock options exercised during each of 2019, 2018 and 2017 was $0.3 million. The aggregate intrinsic value of outstanding and exercisable stock options was $0.2 million at December 31, 2018 and $1.3 million at December 31, 2017.

The components of income from continuing operations before income taxes were as follows:

($ in millions)	2019				2018				2017
Income (loss) before income taxes:
U.S.	$	16.3			$	43.4			$	51.0
Non-U.S.	12.3				4.7				(12.4		)
Total income from continuing operations before income taxes	$	28.6			$	48.1			$	38.6

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A reconciliation of the federal statutory corporate income tax rate to our effective income tax rate follows: 

($ in millions)	2019							2018							2017
Tax expense at statutory rate	$	6.0			21.0	%		$	10.1			21.0	%		$	13.5			35.0	%
Add (deduct):
Rates different from statutory(1)	(1.3		)		(4.5	)		(0.9		)		(1.9	)		2.3				5.9
Statutory income tax change	—				—			2.1				4.4			(7.6		)		(19.6	)
State income taxes	1.5				5.2			0.8				1.7			3.5				9.1
Nondeductible items	1.3				4.5			1.3				2.7			3.1				7.9
GILTI inclusion(2)	0.2				0.7			1.1				2.3			—				—
Unrecognized tax benefit relating to warrants(3)	—				—			—				—			0.3				0.7
Valuation allowance	5.8				20.3			4.7				9.8			(2.5		)		(6.6	)
Unrecognized tax benefit	(0.1		)		(0.4	)		(2.2		)		(4.7	)		—				—
Other	(1.1		)		(3.8	)		(0.2		)		(0.4	)		(0.2		)		(0.5	)
Income tax expense on continuing operations	$	12.3			43.0	%		$	16.8			34.9	%		$	12.4			31.9	%

(1)	Includes differences between the U.S. federal tax rates and the rates in Canada and the U.S. Virgin Islands.

(2)	In accordance with FASB Staff Q&A, Topic 740, No. 5, we have elected to treat the income tax impact of GILTI as a period cost.

(3)	Non-cash impacts of changes in the derivative liabilities that we had from our warrants that expired in August 2017 were not recognized for purposes of calculating our tax provision; instead, they were treated as an unrecognized tax benefit.  Further, exercises of the warrants were also treated as an unrecognized tax benefit for purposes of calculating our tax provision.

We operate under a tax holiday in the U.S. Virgin Islands, which is effective through December 31, 2030, and may be extended if certain additional requirements are satisfied. The tax holiday is conditional upon our meeting certain employment and investment thresholds. The impact of these tax holidays decreased foreign taxes $1.6 million and $1.0 million for 2019 and 2018, respectively, and reduced the tax benefit of foreign losses by $2.4 million for 2017. The tax holiday benefited diluted earnings per share by $0.10 and $0.06 in 2019 and 2018, respectively, and lowered diluted earnings per share by $0.14 in 2017.

The amounts of our consolidated federal and state income tax expense (benefit) from continuing operations were as follows: 

($ in millions)		2019				2018				2017
Current:
U.S. Federal		$	(1.9	)		$	2.2			$	8.9
U.S. State		1.9				(0.2		)		7.0
Non-U.S.		0.1				0.2				(0.1		)
		0.1				2.2				15.8
Deferred:
U.S. Federal		$	9.6			$	14.2			$	(0.6	)
U.S. State		0.6				(0.2		)		(3.5		)
Non-U.S.		2.0				0.6				0.7
		12.2				14.6				(3.4		)
Income tax expense on continuing operations		$	12.3			$	16.8			$	12.4

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Deferred income tax provisions result from temporary differences in the recognition of expenses for financial reporting purposes and for tax reporting purposes.  Our deferred income tax liabilities and assets were as follows: 

		December 31,
($ in millions)		2019				2018
Deferred tax assets:
Goodwill and other intangibles		$	8.3			$	8.4
Inventory		1.3				2.8
Accrued insurance		5.2				4.6
Stock compensation		3.5				2.5
Interest limitation carryover		10.4				6.6
Start-up acquisition costs		2.8				2.7
Other accrued expenses		3.4				3.4
Operating lease liabilities		18.1				—
Net operating loss ("NOL") carryforwards		11.3				8.4
Property, plant and equipment, net - Polaris		3.3				2.9
Other		1.9				3.7
Total gross deferred tax assets		69.5				46.0
Valuation allowance		(15.1		)		(9.2		)
Net deferred tax assets		54.4				36.8
Deferred income tax liabilities:
Property, plant and equipment, net - non-Polaris		(56.4		)		(46.1		)
Partnership outside basis		(28.2		)		(26.7		)
Depletion		—				(1.6		)
Operating lease assets		(17.9		)		—
Other		(2.2		)		(0.4		)
Total gross deferred tax liabilities		(104.7		)		(74.8		)
Net deferred tax liability(1)		$	(50.3	)		$	(38.0	)

(1)

At December 31, 2019, our state deferred tax asset of $4.5 million was classified as a non-current asset, and our U.S. and foreign deferred tax liability of $54.8 million was classified as a non-current liability. At December 31, 2018, our state deferred tax asset of $5.1 million was classified as a non-current asset, and our U.S. and foreign deferred tax liability of $43.1 million was classified as a non-current liability.

 

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact us: (1) reduction of the U.S. federal corporate income tax rate from 35% to 21%; (2) extension and expansion of the bonus depreciation provisions; (3) creation of a new limitation on deductible interest expense; (4) enactment of a new provision designed to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries; (5) repeal of the domestic production activities deduction; (6) further limitation of the deductibility of certain executive compensation; and (7) limitation of certain other deductions.

The Company recorded provisional income tax benefits of $7.6 million in 2017 related to the impact of the Tax Act on our deferred tax balances for the change in tax rate and executive compensation payable in future years. As allowed by SEC Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” we completed our accounting for the income tax effects of the Tax Act in 2018 and recognized a $2.1 million reduction of the provisional income tax benefit.

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In accordance with U.S. GAAP, the recognized value of deferred tax assets must be reduced to the amount that is more likely than not to be realized in future periods.  The ultimate realization of the benefit of deferred tax assets from deductible temporary differences or tax carryovers depends on the generation of sufficient taxable income during the periods in which those temporary differences become deductible.  We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on these considerations, we had valuation allowances as of December 31, 2019 and 2018 in the amounts of $15.1 million and $9.2 million, respectively, for certain deferred tax assets due to the uncertainty regarding their ultimate realization.  In 2018, we established a valuation allowance of $6.6 million related to the interest expense limitation carryfoward attribute, resulting from the Tax Act, which we do not believe is more likely than not to be realized under the current interpretation of the applicable statute. As of December 31, 2019, the valuation allowance related to the interest expense limitation carryforward was $10.4 million.

As of December 31, 2019, the Company had NOL carryforwards related to tax losses in Canada and the U.S. that may be used to reduce future taxable income. The Canadian NOL carryforwards were approximately $9.9 million as of December 31, 2019, and expire at various dates from 2032 to 2039. The U.S federal NOL carryforwards were approximately $10.7 million as of December 31, 2019, and expire at various dates from 2028 to 2037. The deferred tax assets associated with state NOL carryforwards were approximately $6.4 million as of December 31, 2019, and the underlying state NOL carryforwards expire at various dates from 2020 to 2039. We maintain a valuation allowance of $4.7 million for certain NOL carryforwards because of the uncertainty of their recovery.

Under U.S. tax law, we treat our Canadian and U.S. Virgin Island subsidiaries (collectively, “foreign subsidiaries”) as controlled foreign corporations. We consider the undistributed earnings, if any, and other outside basis differences in our investments in our foreign subsidiaries to be indefinitely reinvested and, accordingly, no foreign withholding or other income taxes have been provided thereon. Due to the complexities in the tax laws, it is not practicable to estimate the amount of deferred income taxes not recorded that are associated with those earnings or other outside basis differences. We have not, nor do we currently anticipate in the foreseeable future, the need to repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

At December 31, 2019, we had unrecognized tax benefits of $12.3 million, including accrued penalties and interest, of which, $11.5 million would impact the effective tax rate if recognized. The unrecognized tax benefits were primarily included as components of other long-term obligations and deferred credits and deferred income taxes. We recorded interest and penalties related to unrecognized tax benefits, which were included in income tax expense in our consolidated statements of operations of $0.2 million in 2019, $0.2 million in 2018 and $0.4 million in 2017.  Total accrued penalties and interest at December 31, 2019 and 2018 were approximately $1.0 million and $1.1 million, respectively, which were included in the related tax liability in our consolidated balance sheets. It is reasonably possible that our unrecognized tax benefits could significantly decrease within the next twelve months should the U.S. Department of Treasury issue final regulations, with respect to the interest expense limitation, that remove certain unfavorable interpretations of the applicable statute.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

($ in millions)		2019				2018				2017
Unrecognized tax benefits at January 1		$	4.6			$	6.2			$	43.0
Additions for tax positions related to current year		0.5				0.5				6.8
Additions for tax positions related to prior year		7.4				—				—
Reductions - current year decrease		—				—				(5.4		)
Reductions - prior year decrease		(1.2		)		—				(38.2		)
Lapse of statute of limitations		—				(2.1		)		—
Unrecognized tax benefits at December 31		$	11.3			$	4.6			$	6.2

 

We recorded $0.4 million of unrecognized tax benefits in 2017 related to our warrants that expired in August 2017, due to uncertainty about their deductibility for federal and state income tax purposes. Approximately $39.8 million of unrecognized tax benefits related to warrants were released in 2017 upon the expiration of the warrants, the tax effect of which was generally offset by the write-off of the related deferred tax asset.

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We conduct business in the U.S., Canada and the U.S. Virgin Islands, and U.S. Concrete, Inc. or one or more of our subsidiaries file income tax returns in the U.S., Canada, U.S. Virgin Islands and various provincial, state and local jurisdictions. In the normal course of business, we are subject to examination in the U.S., Canada, U.S. Virgin Islands and the provincial, state and local jurisdictions in which we conduct business. With few exceptions, we are no longer subject to U.S. federal, state or local tax examinations or such examinations by the U.S. Virgin Islands for years before 2016. With few exceptions, we are no longer subject to Canadian federal or provincial tax examinations for years before 2015. Currently, the Canadian Revenue Agency is conducting an active examination in connection with our acquisition of Polaris in 2017. The resolution of this audit is still pending. Texas has concluded their audit of our tax years 2013 to 2015, with regards to the margin tax. Although the audit liability has been paid, we continue to contest the state's position.

Basic earnings per share is computed by dividing net earnings attributable to U.S. Concrete by the weighted average number of common shares outstanding during the period. Diluted earnings attributable to U.S. Concrete per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period after giving effect to all potentially dilutive securities outstanding during the period.

The following is a reconciliation of the components of the basic and diluted earnings per share calculations:

(in millions)	2019				2018				2017
Numerator for basic and diluted earnings per share:
Income from continuing operations attributable to U.S. Concrete	$	14.9			$	30.0			$	26.1
Loss from discontinued operations, net of taxes	—				—				(0.6		)
Net income attributable to U.S. Concrete	$	14.9			$	30.0			$	25.5
Denominator for diluted earnings per share:
Basic weighted average common shares outstanding	16.4				16.5				15.9
Restricted stock awards and RSUs	—				—				0.1
Warrants	—				—				0.6
Diluted weighted average common shares outstanding	16.4				16.5				16.6

Legal Proceedings

From time to time, and currently, we are subject to various 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 our operations.  As a result of these types of claims and litigation, we must periodically evaluate the probability of damages being assessed against us and the range of possible outcomes.  In each reporting period, if we determine that the likelihood of damages being assessed against us is probable, and if we believe we can estimate a range of possible outcomes, then we will record a liability. The amount of the liability will be based upon a specific estimate, if we believe a specific estimate to be likely, or it will reflect the low end of our range. Currently, there are no material legal proceedings pending against us.

In the future, we may receive funding deficiency demands related to multi-employer pension plans to which we contribute.  We are unable to estimate the amount of any potential future funding deficiency demands because the actions of each of the other contributing employers in the plans has an effect on each of the other contributing employers, and the development of a rehabilitation plan by the trustees and subsequent submittal to and approval by the Internal Revenue Service is not predictable. Further, the allocation of fund assets and return assumptions by trustees are variable, as are actual investment returns relative to the plan assumptions.

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As of February 25, 2020, there were no material product defect claims pending against us.  Accordingly, our existing accruals for claims against us do not reflect any material amounts relating to product defect claims.  While our management is not aware of any facts that would reasonably be expected to lead to material product defect claims against us that would have a material adverse effect on our business, financial condition or results of operations, it is possible that claims could be asserted against us in the future.  We do not maintain insurance that would cover all damages resulting from product defect claims.  In particular, we generally do not maintain insurance coverage for the cost of removing and rebuilding structures.  In addition, our indemnification arrangements with contractors or others, when obtained, generally provide only limited protection against product defect claims.  Due to inherent uncertainties associated with estimating unasserted claims in our business, we cannot estimate the amount of any future loss that may be attributable to unasserted product defect claims related to ready-mixed concrete we have delivered prior to December 31, 2019.

 

We believe that the resolution of any litigation currently pending or threatened against us or any of our subsidiaries will not materially exceed our existing accruals for those matters.  However, because of the inherent uncertainty of litigation, there is a risk that we may have to increase our accruals for one or more claims or proceedings to which we or any of our subsidiaries is a party as more information becomes available or proceedings progress, and any such increase in accruals could have a material adverse effect on our consolidated financial condition or results of operations.  We expect in the future that we and our operating subsidiaries will, from time to time, be a party to litigation or administrative proceedings that arise in the normal course of our business.

 

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 experience and the information currently available, our management does not believe that these claims will materially exceed our related accruals.  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 to us or cannot be estimated by us.  In addition, changes in federal or state laws, regulations or requirements, or discovery of currently unknown conditions, could require additional expenditures.

 

As permitted under Delaware law, we have agreements that provide indemnification of officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The maximum potential amount of future payments that we could be required to make under these indemnification agreements is not limited; however, we have a director and officer insurance policy that potentially limits our exposure and enables us to recover a portion of future amounts that may be paid.  As a result of the insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as of December 31, 2019.

We and our subsidiaries are parties to agreements that require us to provide indemnification in certain instances when we acquire businesses and real estate and in the ordinary course of business with our customers, suppliers, lessors and service providers. As of February 25, 2020, there were no material pending claims related to such indemnification.

Royalty Assessment

In 2014, Eagle Rock was notified by the British Columbia Ministry of Forests, Lands and Natural Resource Operations that royalties were due for 2012 and 2013, based on the tenure date, in respect of Polaris’s quarrying lease for the Eagle Rock Quarry project. In 2016, Eagle Rock was notified that further royalties were due for 2014, 2015 and 2016 (up to October) based on the tenure date, and in 2017, Eagle Rock was notified of interest charges. While the Company had previously disputed the claim, Eagle Rock settled the claim in May 2019 for CAD $4.0 million and entered into a repayment agreement that extended the payment terms, as defined.

Eminent Domain Matter

In 2018, we incurred $0.7 million of expenses to dismantle and move a ready-mixed concrete plant and office to another location, because the District of Columbia exercised its power of eminent domain over the former site. We incurred certain additional expenditures that were capitalized for the new facilities. In 2019, we received $5.3 million, net of attorney's fees, from the District of Columbia as reimbursement for our costs, which is reported in other income, net, in our consolidated statement of operations.

 

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Insurance Programs

 

We maintain third-party insurance coverage against certain workers’ compensation, automobile and general liability risks.  Under certain 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.  Generally, our deductible retentions per occurrence for auto, workers’ compensation and general liability insurance programs are $1.0 million to $2.0 million for workers' compensation and general liability and $2.0 million to $10.0 million for automobile, although certain of our operations are self-insured for workers’ compensation.  We record an expense for expected losses under the programs.  The expected losses are determined using a combination of our historical loss experience and subjective assessments of our future loss exposure. The estimated losses are subject to uncertainty, including changes in claims reporting patterns, claims settlement patterns, judicial decisions, legislation and economic conditions.  Although we believe that the estimated losses we have recorded are reasonable, significant differences related to the items noted above could materially affect our insurance obligations and future expense. The amount accrued for self-insurance claims, which was recorded in accrued liabilities and other long-term obligations and deferred credits, aggregated $23.3 million as of December 31, 2019 and $20.4 million as of December 31, 2018.

Performance Bonds

 

In the normal course of business, we and our subsidiaries were contingently liable under $14.4 million in performance bonds that various contractors, states and municipalities have required as of December 31, 2019. The bonds principally relate to construction contracts, reclamation obligations, licensing and permitting.  We and our subsidiaries have indemnified the underwriting insurance company against any exposure under the performance bonds. No material claims have been made against these bonds.

Employee Savings Plans

We maintain a defined contribution 401(k) profit sharing plan for employees meeting various employment requirements. Eligible employees may contribute amounts up to the lesser of 60% of their annual compensation or the maximum amount Internal Revenue Service (“IRS”) regulations permit.  We match 100% of the first 5% of pay contributed by the employee. Matching contributions vest immediately. The match was $6.0 million in 2019, $5.9 million in 2018 and $4.8 million in 2017, and was predominantly included in selling, general and administrative expenses in the consolidated statements of operations.

We also maintain a non-qualified contribution retirement plan (“Non-Qualified Savings Plan”) covering highly compensated employees, as defined in the plan. This plan allows eligible employees to defer receipt of up to 75% of their base compensation and 75% of their annual bonus. We do not match contributions to this plan.

Contributions under both plans may be invested in various investment funds at the employee's discretion. Such contributions, including the Company's matching contributions described above, may not be invested in the Company's common stock.

At inception of the Non-Qualified Savings Plan, the Company established a rabbi trust to fund the plan's obligations. The market value of the trust assets for the Non-Qualified Savings Plan was $2.1 million as of December 31, 2019 and $2.6 million as of December 31, 2018 and was included in other assets in our consolidated balance sheets. The related liability to the participants is included in other long-term obligations and deferred credits in our consolidated balance sheets.

Multi-Employer Pension Plans

 

Several of our subsidiaries are parties to various collective bargaining agreements with labor unions having multi-year terms that expire on a staggered basis. As of December 31, 2019, 1,079 of our employees, or 34.0% of our workforce, were represented by labor unions having collective bargaining agreements with us.  As of December 31, 2019, 432 of our employees, or 13.6% of our workforce, were represented by labor unions having collective bargaining agreements that will expire within one year.

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Under these agreements, our applicable subsidiaries pay specified wages to covered employees, observe designated workplace rules and make payments to multi-employer pension plans and employee benefit trusts rather than administering the funds on behalf of these employees. The risks of participating in these multi-employer pension plans are different from single-employer plans. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If we choose to stop participating in some of these multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. We were not required to record a liability in 2019 or 2018 for full or partial withdrawals from any multi-employer pension plans. For additional information regarding our potential future obligations, see Note 17.

 

The required disclosures and our participation in significant multi-employer pension plans are presented in the table below. The EIN/Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number, if applicable. The Pension Protection Act zone status is based on information available from the plan or the plan’s public filings. Among other factors, plans in the red zone are generally less than 65% funded, plans in the orange or yellow zones are less than 80% funded, and plans in the green zone are at least 80% funded. The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The final column lists the expiration date(s) of the collective-bargaining agreements to which the plans are subject.

Pension Fund		EIN/PPN		Pension Protection Act Zone Status				FIP/RP Status Pending/ Implemented		Contributions  (in millions)												Surcharge Imposed		Expiration Date of Collective Bargaining  Agreement
				2019		2018				2019				2018				2017
Western Conference of Teamsters Pension Plan		91-6145047/001		Green		Green		No		$	6.2			$	5.9			$	5.3			No		6/30/2020 to 8/27/2023
Local 282 Pension Trust Fund		11-6245313/001		Green		Green		No		4.3				4.4				4.8				No		6/30/2020 to 6/30/2024
Pension Trust Fund For Operating Engineers		94-6090764/001		Orange		Red		No		1.2				1.2				1.1				No		6/30/2021
Trucking Employees of North Jersey Pension Fund		22-6063702/001		Red		Red		Yes		0.7				0.6				0.7				No		4/30/2023
Other (1)		Various		Various		Various		Various		2.1				2.0				1.9				No		4/30/2018 to 7/31/2024
Total										$	14.5			$	14.1			$	13.8

(1)	We were actively negotiating the Collective Bargaining Agreement for two of these plans as of December 31, 2019.

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		2019
($ in millions except per share data)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenue		$	333.1			$	367.5			$	408.9			$	369.2
Operating income		$	7.9			$	6.0			$	33.3			$	18.0
Net income (loss)		$	(2.6	)		$	0.9			$	13.6			$	4.4
Net income (loss) attributable to U.S. Concrete		$	(2.7	)		$	0.7			$	13.0			$	3.9
Net income (loss) per share attributable to U.S. Concrete - basic		$	(0.16	)		$	0.04			$	0.79			$	0.24
Net income (loss) per share attributable to U.S. Concrete - diluted		$	(0.16	)		$	0.04			$	0.79			$	0.23

 

		2018
($ in millions except per share)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenue		$	327.8			$	404.2			$	404.3			$	370.1
Operating income		$	7.6			$	30.6			$	35.0			$	16.7
Net income (loss)		$	(3.9	)		$	16.3			$	15.8			$	3.1
Net income (loss) attributable to U.S. Concrete		$	(3.9	)		$	16.3			$	15.6			$	2.0
Net income (loss) per share attributable to U.S. Concrete - basic		$	(0.23	)		$	0.99			$	0.95			$	0.12
Net income (loss) per share attributable to U.S. Concrete - diluted		$	(0.23	)		$	0.99			$	0.94			$	0.12

Our customers are generally involved in the construction industry, which is a cyclical business and is subject to general and more localized economic conditions.  In addition, our business is impacted by seasonal variations in weather conditions, which vary by regional market.  Accordingly, demand for our products and services during the winter months is typically lower than in other months of the year because of inclement weather.  Also, sustained periods of inclement weather and other adverse weather conditions could cause the delay of construction projects during other times of the year.

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Our two reportable segments consist of ready-mixed concrete and aggregate products, as described below.

Our ready-mixed concrete segment produces and sells ready-mixed concrete. This segment serves the following markets: Texas, Northern California, New York City, New Jersey, Philadelphia, Washington, D.C., Oklahoma and the U.S. Virgin Islands. Our aggregate products segment includes crushed stone, sand and gravel products and serves the markets in which our ready-mixed concrete segment operates as well as the West Coast and Hawaii. Other products not associated with a reportable segment include our aggregates distribution operations, building materials stores, hauling operations, lime slurry (until we divested it on September 5, 2018), ARIDUS^® Rapid Drying Concrete technology, brokered product sales and a recycled aggregates operation.

Our customers are generally involved in the construction industry, which is a cyclical business and is subject to general and more localized economic conditions.  In addition, our business is impacted by seasonal variations in weather conditions, which vary by regional market.  Accordingly, demand for our products and services during the winter months is typically lower than in other months of the year because of inclement weather.  Also, sustained periods of inclement weather and other adverse weather conditions could cause the delay of construction projects during other times of the year.

Our chief operating decision maker evaluates segment performance and allocates resources based on Adjusted EBITDA. We define Adjusted EBITDA as our income from continuing operations, excluding the impact of income tax expense (benefit), depreciation, depletion and amortization, net interest expense and certain other non-cash, non-recurring and/or unusual, non-operating items including, but not limited to: non-cash stock compensation expense, non-cash change in value of contingent consideration, impairment of assets, acquisition-related costs, officer transition expenses, an eminent domain matter, and hurricane-related gains/losses, net. Acquisition-related costs include fees and expenses for accountants, lawyers and other professionals incurred during the negotiation and closing of strategic acquisitions and certain acquired entities' management severance costs. Acquisition-related costs do not include fees or expenses associated with post-closing integration of strategic acquisitions. Many of the impacts excluded to derive Adjusted EBITDA are similar to those excluded in calculating our compliance with our debt covenants.

We consider Adjusted EBITDA to be an indicator of the operational strength and performance of our business. We have included Adjusted EBITDA because it is a key financial measure used by our management to (1) internally measure our operating performance and (2) assess our ability to service our debt, incur additional debt, and meet our capital expenditure requirements.

Adjusted EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on U.S. GAAP, and is not a measure of our cash flows or ability to fund our cash needs. Our measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies, and may not be comparable to similarly titled measures used in the agreements governing our debt.

We generally account for inter-segment sales at market prices. Corporate includes executive, administrative, financial, legal, human resources, business development and risk management activities that are not allocated to reportable segments and are excluded from segment Adjusted EBITDA. Eliminations include transactions to account for intercompany activity.

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The following tables set forth certain financial information relating to our continuing operations by reportable segment ($ in millions): 

		2019				2018				2017
Revenue:
Ready-mixed concrete
Sales to external customers		$	1,278.6			$	1,306.5			$	1,213.0
Aggregate products
Sales to external customers		141.7				136.5				49.8
Intersegment sales		53.5				46.1				40.9
Total aggregate products		195.2				182.6				90.7
Total reportable segment revenue		1,473.8				1,489.1				1,303.7
Other products and eliminations		4.9				17.3				32.3
Total revenue		$	1,478.7			$	1,506.4			$	1,336.0
Reportable Segment Adjusted EBITDA:
Ready-mixed concrete		$	157.7			$	179.2			$	185.8
Aggregate products		53.8				41.6				27.2
Total reportable segment Adjusted EBITDA		$	211.5			$	220.8			$	213.0
Reconciliation of Total Reportable Segment Adjusted EBITDA to Income From Continuing Operations:
Total reportable segment Adjusted EBITDA		$	211.5			$	220.8			$	213.0
Other products and eliminations income from operations		3.3				21.7				10.8
Corporate overhead		(59.5		)		(54.9		)		(56.3		)
Depreciation, depletion and amortization for reportable segments		(86.1		)		(85.8		)		(63.1		)
Interest expense, net		(46.1		)		(46.4		)		(42.1		)
Eminent domain matter		5.3				(0.7		)		—
Hurricane-related gains (losses) for reportable segments, net		2.1				0.8				(3.0		)
Change in value of contingent consideration for reportable segments		(2.8		)		—				(7.9		)
Loss on mixer truck fire		(0.7		)		—				—
Litigation settlement costs		(0.3		)		(2.1		)		—
Acquisition-related costs, net		1.0				(1.4		)		—
Impairment of goodwill and other assets		—				(1.3		)		(6.2		)
Quarry dredge costs for specific event for reportable segments		—				(1.1		)		(3.4		)
Purchase accounting adjustments for inventory		—				(0.8		)		(1.3		)
Corporate derivative loss		—				—				(0.8		)
Corporate, other products and eliminations other loss (income), net		0.9				(0.7		)		(1.1		)
Income from continuing operations before income taxes		28.6				48.1				38.6
Income tax expense		12.3				16.8				12.4
Income from continuing operations		$	16.3			$	31.3			$	26.2

 

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		2019				2018				2017
Capital Expenditures:
Ready-mixed concrete		$	18.0			$	24.0			$	21.7
Aggregate products		23.6				13.8				18.9
Other products and corporate		1.1				2.1				2.1
Total capital expenditures		$	42.7			$	39.9			$	42.7

		2019				2018				2017
Revenue by Product:
Ready-mixed concrete		$	1,278.6			$	1,306.5			$	1,213.0
Aggregate products		141.7				136.5				49.8
Aggregates distribution		22.5				22.7				30.6
Building materials		28.9				26.2				24.4
Lime		—				7.4				9.9
Hauling		4.3				4.8				5.6
Other		2.7				2.3				2.7
Total revenue		$	1,478.7			$	1,506.4			$	1,336.0

		December 31,
		2019				2018				2017
Identifiable Property, Plant and Equipment Assets:
Ready-mixed concrete		$	286.4			$	295.5			$	266.6
Aggregate products		359.6				355.0				342.1
Other products and corporate		27.5				29.7				27.6
Total identifiable assets		$	673.5			$	680.2			$	636.3

Our 2024 Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by each direct and indirect wholly owned domestic subsidiary of the Company, except as described below, each a guarantor subsidiary. Neither the net book value nor the purchase price of any of our recently acquired guarantor subsidiaries were 20% or more of the aggregate principal amount of our 2024 Notes. The 2024 Notes are not guaranteed by any direct or indirect foreign subsidiaries of the Company (or any of their subsidiaries), our U.S. Virgin Islands subsidiaries or domestic subsidiaries that are not wholly owned, each a non-guarantor subsidiary. Consequently, we are required to provide condensed consolidating financial information in accordance with Rule 3-10 of Regulation S-X.

The following condensed consolidating financial information present, in separate columns, financial information for (1) the Company, as Parent on a parent only basis, (2) the guarantor subsidiaries on a combined basis, (3) the non-guarantor subsidiaries on a combined basis, (4) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis and (5) the Company on a consolidated basis.

The following condensed consolidating financial information of U.S. Concrete, Inc. and its subsidiaries present investments in consolidated subsidiaries using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

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CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2019

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations and Reclassifications				U.S. Concrete Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	29.0			$	11.6			$	—			$	40.6
Trade accounts receivable, net		—				216.6				16.5				—				233.1
Inventories		—				45.9				13.1				—				59.0
Other receivables		15.1				6.3				0.3				(13.3		)		8.4
Prepaid expenses and other		—				7.3				0.6				—				7.9
Intercompany receivables		8.9				—				0.3				(9.2		)		—
Total current assets		24.0				305.1				42.4				(22.5		)		349.0
Property, plant and equipment, net		—				470.3				203.2				—				673.5
Operating lease assets		—				55.8				14.0				—				69.8
Goodwill		—				155.7				83.8				—				239.5
Intangible assets, net		—				88.2				4.2				—				92.4
Investment in subsidiaries		642.6				—				—				(642.6		)		—
Long-term intercompany receivables		281.8				—				5.3				(287.1		)		—
Other assets		—				8.0				1.1				—				9.1
Total assets		$	948.4			$	1,083.1			$	354.0			$	(952.2	)		$	1,433.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	134.4			$	2.0			$	—			$	136.4
Accrued liabilities		4.3				64.0				8.5				(13.3		)		63.5
Current maturities of long-term debt		0.3				31.7				0.5				—				32.5
Current operating lease liabilities		—				11.2				1.7				—				12.9
Intercompany payables		—				—				9.2				(9.2		)		—
Total current liabilities		4.6				241.3				21.9				(22.5		)		245.3
Long-term debt, net of current maturities		600.4				52.9				1.5				—				654.8
Long-term operating lease liabilities		—				47.1				12.6				—				59.7
Other long-term obligations and deferred credits		—				44.2				4.9				—				49.1
Deferred income taxes		—				28.9				25.9				—				54.8
Long-term intercompany payables		—				170.4				116.7				(287.1		)		—
Total liabilities		605.0				584.8				183.5				(309.6		)		1,063.7
Total shareholders' equity		343.4				498.3				144.3				(642.6		)		343.4
Non-controlling interest		—				—				26.2				—				26.2
Total equity		343.4				498.3				170.5				(642.6		)		369.6
Total liabilities and equity		$	948.4			$	1,083.1			$	354.0			$	(952.2	)		$	1,433.3

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CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2018

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations and Reclassifications				U.S. Concrete Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	10.8			$	9.2			$	—			$	20.0
Trade accounts receivable, net		—				219.7				6.9				—				226.6
Inventories		—				42.4				8.8				—				51.2
Other receivables		11.1				7.0				0.3				—				18.4
Prepaid expenses and other		—				7.1				0.8				—				7.9
Intercompany receivables		9.7				—				0.3				(10.0		)		—
Total current assets		20.8				287.0				26.3				(10.0		)		324.1
Property, plant and equipment, net		—				468.3				211.9				—				680.2
Goodwill		—				155.5				83.8				—				239.3
Intangible assets, net		—				111.8				4.8				—				116.6
Investment in subsidiaries		604.1				—				—				(604.1		)		—
Long-term intercompany receivables		308.9				—				1.1				(310.0		)		—
Other assets		—				10.8				0.3				—				11.1
Total assets		$	933.8			$	1,033.4			$	328.2			$	(924.1	)		$	1,371.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	122.4			$	3.4			$	—			$	125.8
Accrued liabilities		4.7				83.2				8.4				—				96.3
Current maturities of long-term debt		0.3				29.9				0.6				—				30.8
Intercompany payables		—				—				10.0				(10.0		)		—
Total current liabilities		5.0				235.5				22.4				(10.0		)		252.9
Long-term debt, net of current maturities		615.5				67.6				0.2				—				683.3
Other long-term obligations and deferred credits		0.9				51.0				2.9				—				54.8
Deferred income taxes		—				22.4				20.7				—				43.1
Long-term intercompany payables		—				188.7				121.3				(310.0		)		—
Total liabilities		621.4				565.2				167.5				(320.0		)		1,034.1
Total shareholder's equity		312.4				468.2				135.9				(604.1		)		312.4
Non-controlling interest		—				—				24.8				—				24.8
Total equity		312.4				468.2				160.7				(604.1		)		337.2
Total liabilities and equity		$	933.8			$	1,033.4			$	328.2			$	(924.1	)		$	1,371.3

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

2019

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations and Reclassifications				U.S. Concrete Consolidated
Revenue		$	—			$	1,361.2			$	117.5			$	—			$	1,478.7
Cost of goods sold before depreciation, depletion and amortization		—				1,107.6				80.0				—				1,187.6
Selling, general and administrative expenses		—				122.6				7.4				—				130.0
Depreciation, depletion and amortization		—				78.2				15.0				—				93.2
Change in value of contingent consideration		—				2.8				—				—				2.8
Gain on sale/disposal of assets and business, net		—				(0.1		)		—				—				(0.1		)
Operating income		—				50.1				15.1				—				65.2
Interest expense, net		39.7				3.6				2.8				—				46.1
Other income, net		—				(7.9		)		(1.6		)		—				(9.5		)
Income (loss) before income taxes, equity in earnings of subsidiaries and non-controlling interest		(39.7		)		54.4				13.9				—				28.6
Income tax expense (benefit)		(15.1		)		24.3				3.1				—				12.3
Net income (loss) before equity in earnings of subsidiaries and non-controlling interest		(24.6		)		30.1				10.8				—				16.3
Equity in earnings of subsidiaries		39.5				—				—				(39.5		)		—
Net income (loss)		14.9				30.1				10.8				(39.5		)		16.3
Less: Net income attributable to non-controlling interest		—				—				(1.4		)		—				(1.4		)
Net income (loss) attributable to U.S. Concrete		$	14.9			$	30.1			$	9.4			$	(39.5	)		$	14.9

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

2018

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations and Reclassifications				U.S. Concrete Consolidated
Revenue		$	—			$	1,394.4			$	112.0			$	—			$	1,506.4
Cost of goods sold before depreciation, depletion and amortization		—				1,130.8				81.4				—				1,212.2
Selling, general and administrative expenses		—				118.5				8.0				—				126.5
Depreciation, depletion and amortization		—				76.2				15.6				—				91.8
Change in value of contingent consideration		0.1				(0.1		)		—				—				—
Impairment of assets		—				1.3				—				—				1.3
Loss (gain) on sale/disposal of assets and business, net		—				(15.5		)		0.2				—				(15.3		)
Operating income (loss)		(0.1		)		83.2				6.8				—				89.9
Interest expense, net		39.5				3.7				3.2				—				46.4
Other expense (income), net		1.2				(3.7		)		(2.1		)		—				(4.6		)
Income (loss) before income taxes and equity in earnings of subsidiaries		(40.8		)		83.2				5.7				—				48.1
Income tax expense (benefit)		(4.5		)		18.4				2.9				—				16.8
Net income (loss) before equity in earnings of subsidiaries and non-controlling interest		(36.3		)		64.8				2.8				—				31.3
Equity in earnings of subsidiaries		66.3				—				—				(66.3		)		—
Net income (loss)		30.0				64.8				2.8				(66.3		)		31.3
Less: Net income attributable to non-controlling interest		—				—				(1.3		)		—				(1.3		)
Net income (loss) attributable to U.S. Concrete		$	30.0			$	64.8			$	1.5			$	(66.3	)		$	30.0

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

2017

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations and Reclassifications				U.S. Concrete Consolidated
Revenue		$	—			$	1,311.6			$	24.4			$	—			$	1,336.0
Cost of goods sold before depreciation, depletion and amortization		—				1,034.3				22.3				—				1,056.6
Selling, general and administrative expenses		—				115.4				3.8				—				119.2
Depreciation, depletion and amortization		—				64.1				3.7				—				67.8
Change in value of contingent consideration		0.9				7.0				—				—				7.9
Impairment of goodwill and other assets		—				—				6.2				—				6.2
Gain on sale/disposal of assets and business, net		—				(0.7		)		—				—				(0.7		)
Operating income (loss)		(0.9		)		91.5				(11.6		)		—				79.0
Interest expense, net		39.9				1.6				0.6				—				42.1
Derivative loss		0.8				—				—				—				0.8
Other income, net		—				(2.5		)		—				—				(2.5		)
Income (loss) from continuing operations before income taxes and equity in earnings of subsidiaries		(41.6		)		92.4				(12.2		)		—				38.6
Income tax expense (benefit)		(16.3		)		29.0				(0.3		)		—				12.4
Net income (loss) from continuing operations before equity in earnings of subsidiaries		(25.3		)		63.4				(11.9		)		—				26.2
Loss from discontinued operations, net of taxes and before equity in earnings of subsidiaries		—				(0.6		)		—				—				(0.6		)
Net income (loss) before equity in earnings of subsidiaries		(25.3		)		62.8				(11.9		)		—				25.6
Equity in earnings of subsidiaries		50.8				—				—				(50.8		)		—
Net income (loss)		25.5				62.8				(11.9		)		(50.8		)		25.6
Less: Net income attributable to non-controlling interest		—				—				(0.1		)		—				(0.1		)
Net income (loss) attributable to U.S. Concrete		$	25.5			$	62.8			$	(12.0	)		$	(50.8	)		$	25.5

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

2019

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				U.S. Concrete Consolidated
Net cash provided by (used in) operating activities		$	(42.3	)		$	147.2			$	15.9			$	18.0			$	138.8
Cash flows from investing activities:
Purchases of property, plant and equipment		—				(39.1		)		(3.6		)		—				(42.7		)
Proceeds from sale of businesses and property, plant and equipment		—				2.9				—				—				2.9
Proceeds from eminent domain matter and property insurance claims		—				5.3				0.7				—				6.0
Investment in subsidiaries		1.0				—				—				(1.0		)		—
Net cash provided by (used in) investing activities		1.0				(30.9		)		(2.9		)		(1.0		)		(33.8		)
Cash flows from financing activities:
Proceeds from revolver borrowings		353.5				—				—				—				353.5
Repayments of revolver borrowings		(368.5		)		—				—				—				(368.5		)
Proceeds from stock option exercises		0.2				—				—				—				0.2
Payments of other long-term obligations		(0.7		)		(32.7		)		—				—				(33.4		)
Payments for finance leases, promissory notes and other		(0.3		)		(31.8		)		(0.7		)		—				(32.8		)
Shares redeemed for employee income tax obligations		(3.2		)		—				—				—				(3.2		)
Intercompany funding		60.3				(33.6		)		(9.7		)		(17.0		)		—
Net cash provided by (used in) financing activities		41.3				(98.1		)		(10.4		)		(17.0		)		(84.2		)
Effect of exchange rates on cash and cash equivalents		—				—				(0.2		)		—				(0.2		)
Net increase in cash and cash equivalents		—				18.2				2.4				—				20.6
Cash and cash equivalents at beginning of period		—				10.8				9.2				—				20.0
Cash and cash equivalents at end of period		$	—			$	29.0			$	11.6			$	—			$	40.6

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

2018

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				U.S. Concrete Consolidated
Net cash provided by (used in) operating activities		$	(32.5	)		$	156.5			$	1.9			$	(3.1	)		$	122.8
Cash flows from investing activities:
Purchases of property, plant and equipment		—				(35.9		)		(4.0		)		—				(39.9		)
Payments for acquisitions, net of cash acquired		—				(72.3		)		—				—				(72.3		)
Proceeds from sale of businesses and property, plant and equipment		—				20.7				—				—				20.7
Purchase of environmental credits		—				—				(2.8		)		—				(2.8		)
Proceeds from property insurance claims		—				1.6				1.0				—				2.6
Investment in subsidiaries		6.5				—				—				(6.5		)		—
Net cash provided by (used in) investing activities		6.5				(85.9		)		(5.8		)		(6.5		)		(91.7		)
Cash flows from financing activities:
Proceeds from revolver borrowings		431.2				—				—				—				431.2
Repayments of revolver borrowings		(425.2		)		—				—				—				(425.2		)
Proceeds from stock option exercises		0.1				—				—				—				0.1
Payments of other long-term obligations		(2.2		)		(3.7		)		—				—				(5.9		)
Payments for finance leases, promissory notes and other		—				(28.5		)		(1.1		)		—				(29.6		)
Payments for Share Repurchase Program		(6.7		)		—				—				—				(6.7		)
Shares redeemed for employee income tax obligations		(1.9		)		—				—				—				(1.9		)
Other proceeds		—				4.6				—				—				4.6
Intercompany funding		30.7				(39.2		)		(1.1		)		9.6				—
Net cash provided by (used in) financing activities		26.0				(66.8		)		(2.2		)		9.6				(33.4		)
Effect of exchange rates on cash and cash equivalents		—				—				(0.3		)		—				(0.3		)
Net increase (decrease) in cash and cash equivalents		—				3.8				(6.4		)		—				(2.6		)
Cash and cash equivalents at beginning of period		—				7.0				15.6				—				22.6
Cash and cash equivalents at end of period		$	—			$	10.8			$	9.2			$	—			$	20.0

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

2017

($ in millions)

		Parent				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				U.S. Concrete Consolidated
Net cash provided by (used in) operating activities		$	(30.1	)		$	114.5			$	(4.9	)		$	15.3			$	94.8
Cash flows from investing activities:
Purchases of property, plant and equipment		—				(40.0		)		(2.7		)		—				(42.7		)
Payments for acquisitions, net of cash acquired		(236.1		)		(59.0		)		—				—				(295.1		)
Proceeds from sale of businesses and property, plant and equipment		—				3.5				—				—				3.5
Investment in subsidiaries		(1.8		)		—				—				1.8				—
Net cash provided by (used in) investing activities		(237.9		)		(95.5		)		(2.7		)		1.8				(334.3		)
Cash flows from financing activities:
Proceeds from revolver borrowings		54.4				—				—				—				54.4
Repayments of revolver borrowings		(45.4		)		—				—				—				(45.4		)
Proceeds from issuance of debt		211.5																211.5
Proceeds from warrant and stock option exercises		2.7				—				—				—				2.7
Payments of other long-term obligations		(4.2		)		(4.8		)		—				—				(9.0		)
Payments for finance leases, promissory notes and other		—				(20.2		)		(0.1		)		—				(20.3		)
Debt issuance costs		(4.5		)		—				—				—				(4.5		)
Shares redeemed for employee income tax obligations		(3.1		)		—				—				—				(3.1		)
Intercompany funding		56.6				(62.6		)		23.1				(17.1		)		—
Net cash provided by (used in) financing activities		268.0				(87.6		)		23.0				(17.1		)		186.3
Net increase (decrease) in cash and cash equivalents		—				(68.6		)		15.4				—				(53.2		)
Cash and cash equivalents at beginning of period		—				75.6				0.2								75.8
Cash and cash equivalents at end of period		$	—			$	7.0			$	15.6			$	—			$	22.6

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Acquisition of Aggregates Company in New York

On February 24, 2020, we acquired all of the equity of Coram Materials Corp. and certain of its affiliates (collectively, “Coram”) for $142.0 million, subject to certain post-closing adjustments (the “Acquisition”). Coram is a sand and gravel products provider located on Long Island, New York. Coram’s operations supply natural sand to the New York City area, which is used in concrete and other applications across industry sectors and within all construction categories. Coram owns approximately 41.9 million tons of proven and permitted reserves and approximately 7.5 million tons of proven, but unpermitted reserves. The Acquisition increases the vertical integration of our New York City operations. We funded the purchase price for the Acquisition by borrowing $140.0 million on our Revolving Facility, and we have additional committed financing to further support our liquidity needs. We will seek to refinance or replace this borrowing as conditions permit. The remaining $2.0 million of the purchase price will be paid over the next two years.

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