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1.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of U.S. Concrete, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company," or "U.S. Concrete") and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for reporting interim financial information. Some information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") have been condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 10-K").  In the opinion of our management, all material adjustments necessary to state fairly the information in our unaudited condensed consolidated financial statements have been included. All adjustments are of a normal or recurring nature. All amounts are presented in United States dollars, unless otherwise noted. Certain computations may be impacted by the effect of rounding in this report. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

The preparation of financial statements and accompanying notes in conformity with 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 of doubtful accounts, the valuation of inventory and the valuation and useful lives of property, plant and equipment.

2.	RECENT ACCOUNTING PRONOUNCEMENTS, SEC FINANCIAL DISCLOSURE REQUIREMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Credit Losses. As of January 1, 2020, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification 326, "Current Expected Credit Losses" ("ASC 326"). While the prior accounting rules used a model of incurred losses to estimate credit losses on certain types of financial instruments, including trade accounts receivable, ASC 326 requires entities to use a forward-looking approach based on expected losses, which when applied may result in the earlier recognition of allowances for losses. As required by the standard, upon adoption we applied the model on a prospective basis and recorded a cumulative-effect adjustment, net of taxes, of $3.3 million to opening retained earnings for the impact of the addition to the allowance for doubtful accounts.

Fair Value Measurements. As of January 1, 2020, we adopted a FASB update to disclosure requirements for fair value measurement, which removed, modified and added certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The adoption of this update did not have a material impact on the consolidated financial statements. See Note 10 for additional information.

Subsidiary Guarantees. In March 2020, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements. The Company adopted these amendments as of March 31, 2020. Accordingly, combined summarized financial information has been presented only for the issuers and guarantors of our registered securities for the most recent fiscal year and the year-to-date interim period, and the location of the required disclosures has been removed from the Notes to Condensed Consolidated Financial Statements to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Significant Accounting Policies Update--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 losses on balances that may not be collected in full, which reduces the accounts receivable balance.  Additions to the allowance result from a provision for bad debt expense that is recorded to selling, general and administrative

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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, subjective assessments of our loss exposure. For accounts receivable balances as of and prior to December 31, 2019, our estimate of allowance for doubtful accounts was based on our estimated probable losses. Beginning January 1, 2020, upon our adoption of ASC 326, our allowance for doubtful accounts is based on our estimated expected losses, and the underlying evaluations include analysis of forward-looking information, including economic conditions.

Other Significant Accounting Policies. For our other significant accounting policies, including a description of our business combination valuation methodologies, see Note 1 to the consolidated financial statements in our 2019 10-K.

3.	BUSINESS COMBINATION

On February 24, 2020, we acquired all of the equity of Coram Materials Corp. and certain of its affiliates (collectively, "Coram Materials"). Coram Materials is a sand and gravel products provider located on Long Island, New York. This acquisition increased the vertical integration of our New York City operations.

The acquisition of all of the equity of Coram Materials (the "Coram Acquisition") was accounted for as a business combination. We funded the initial cash purchase consideration through borrowings under our Revolving Facility (as defined in Note 7). The combined assets acquired through the Coram Acquisition included an aggregates facility and 330 acres of land, including 180 mining acres with approximately 41.9 million tons of in-place, proven and permitted aggregate reserves and approximately 7.5 million tons of in-place, proven, but unpermitted reserves. To effect this transaction, we incurred $0.5 million of transaction costs, which were included in selling and general administrative expenses in our condensed consolidated statements of operations for the three months ended March 31, 2020.

Our accounting for the Coram Acquisition is preliminary. We expect to record adjustments as we accumulate information needed to estimate the fair value of assets acquired and liabilities assumed, including working capital balances and estimated fair value of property, plant and equipment.

The following table presents the total consideration for the Coram Acquisition and the amounts related to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date:

($ in millions)	Coram Materials
Accounts receivable	$	2.0
Inventory	10.0
Other current assets	0.3
Property, plant and equipment	130.9
Total assets acquired	143.2
Current liabilities	0.1
Other long-term liabilities	0.2
Total liabilities assumed	0.3
Total consideration (fair value)(1)	$	142.9

(1) Includes $140.2 million in cash for the initial purchase consideration, fair value deferred consideration of $1.7 million, a trade working capital payable of $1.6 million, less a $0.6 million settlement of accounts payable owed by the Company to Coram Materials at the acquisition date. The maximum amount of deferred consideration is $2.0 million, payable over 2 years.

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Impact of Coram Acquisition

Following the acquisition date and during the three months ended March 31, 2020, we recorded revenue of $1.6 million and an operating loss of $0.2 million in our condensed consolidated statement of operations for the operations associated with the Coram Acquisition. Included in the operating loss was $1.6 million of costs related to the fair value increase in inventory on hand acquired at the acquisition date.

The information presented below reflects the unaudited pro forma combined financial results for the Company, which include and represent our estimate of the first quarter 2020 results of operations as if the Coram Acquisition had been completed on January 1, 2019.

	Three Months Ended March 31,
($ in millions except per share)	2020				2019
Revenue	$	336.5			$	337.0
Net loss attributable to U.S. Concrete	$	(1.6	)		$	(2.6	)
Net loss per share attributable to U.S. Concrete - basic	$	(0.10	)		$	(0.16	)
Net loss per share attributable to U.S. Concrete - diluted	$	(0.10	)		$	(0.16	)

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 Coram Materials, 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 acquisition occurred on January 1, 2019 and do not reflect any operational efficiencies or potential cost savings that may occur as a result of consolidation of the operations.

The unaudited pro forma amounts above reflect the following adjustments:

	Three Months Ended March 31,
($ in millions)	2020				2019
Decrease (increase) in cost of goods sold related to fair value increase in inventory	$	1.6			$	(0.8	)
Increase in depreciation, depletion and amortization expense	(0.9		)		(0.9		)
Exclusion of buyer transaction costs	0.5				—
Exclusion of seller transaction costs	0.3				—
Increase in interest expense	(0.8		)		(1.0		)
Increase in income tax expense	(1.1		)		(0.2		)

4.	ALLOWANCE FOR DOUBTFUL ACCOUNTS AND CUSTOMER DISPUTES

 

($ in millions)
Balance, December 31, 2019		$	4.0
Cumulative effect of the adoption of ASC 326		4.5
Balance, January 1, 2020		8.5
Provision for doubtful accounts and customer disputes		0.3
Uncollectible receivables written off, net of recoveries		(0.7		)
Balance, March 31, 2020		$	8.1

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5.	INVENTORIES

 

($ in millions)	March 31, 2020				December 31, 2019
Raw materials	$	63.4			$	53.4
Building materials for resale	4.0				3.6
Other	1.8				2.0
Total	$	69.2			$	59.0

Goodwill

    

We perform our annual goodwill impairment testing in the fourth quarter of each year. In addition to the annual impairment test, we are required to regularly assess whether a triggering event has occurred that would require interim impairment testing. We determined that the significant decline in the overall financial markets, including U.S. Concrete's market capitalization, as a result of the COVID-19 pandemic, qualified as a triggering event that warranted further analysis to determine if there was an impairment loss as of March 31, 2020. As allowed, we elected to perform a qualitative assessment for our reporting units to assess whether it was more likely than not that the goodwill was impaired as of March 31, 2020.  Considering the existing excess fair value identified in our 2019 impairment assessment, our qualitative assessment included a review of our previous forecasts, assumptions and analyses in light of more current information such as: (1) projected revenues, expenses and cash flows, including the expected duration and extent of impact to our business and our customers from the COVID-19 pandemic; (2) current discount rates; (3) the reduction in our market capitalization; and (4) changes to the regulatory environment. Based on the qualitative assessment, we determined that it was more likely than not that the goodwill was not impaired; therefore, no quantitative assessment was necessary.

The accumulated impairment was as follows:

($ in millions)		March 31, 2020				December 31, 2019
Goodwill, gross		$	245.3			$	245.3
Accumulated impairment		(5.8		)		(5.8		)
Goodwill, net		$	239.5			$	239.5

Goodwill by reportable segment was as follows:

($ in millions)		March 31, 2020				December 31, 2019
Ready-mixed concrete		$	150.0			$	150.0
Aggregate products		86.2				86.2
Other non-reportable segments		3.3				3.3
Goodwill, net		$	239.5			$	239.5

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Other Intangible Assets

Our purchased intangible assets were as follows:

		March 31, 2020
($ in millions)		Gross				Accumulated Amortization				Net				Weighted Average Remaining Life (In Years)
Definite-lived intangible assets
Customer relationships		$	108.5			$	(63.5	)		$	45.0			3.7
Trade names		44.5				(14.1		)		30.4				18.9
Non-competes		18.3				(15.8		)		2.5				2.3
Leasehold interests		12.5				(7.2		)		5.3				5.3
Favorable contracts		4.0				(3.9		)		0.1				0.7
Environmental credits		2.8				(0.2		)		2.6				15.8
Total definite-lived intangible assets		190.6				(104.7		)		85.9				9.5
Indefinite-lived intangible assets
Land rights(1)		1.2				—				1.2
Total purchased intangible assets		$	191.8			$	(104.7	)		$	87.1

		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 contracts		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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As of March 31, 2020, the estimated remaining amortization of our definite-lived intangible assets was as follows (in millions):

2020 (remainder of the year)	$	15.6
2021	18.6
2022	12.7
2023	6.3
2024	6.0
Thereafter	26.7
Total	$	85.9

Also included in other long-term obligations and deferred credits in the accompanying condensed consolidated balance sheets were unfavorable lease intangibles with a gross carrying amount of $1.5 million as of both March 31, 2020 and December 31, 2019, and a net carrying amount of $0.4 million and $0.5 million as of March 31, 2020 and December 31, 2019, respectively. These unfavorable lease intangibles had a weighted average remaining life of 4.1 years as of March 31, 2020.

7.	DEBT

 

($ in millions)	March 31, 2020				December 31, 2019
Senior unsecured notes due 2024 and unamortized premium(1)	$	606.5			$	606.8
Asset based revolving credit facility	90.3				—
Finance leases	82.8				67.3
Promissory notes	18.1				20.4
Debt issuance costs	(7.8		)		(7.2		)
Total debt	789.9				687.3
Less: current maturities	(27.3		)		(32.5		)
Long-term debt, net of current maturities	$	762.6			$	654.8

(1)	The effective interest rate for these notes was 6.56% as of both March 31, 2020 and December 31, 2019.

See Note 16 for a discussion of a Delayed Draw Term Loan Facility entered into on April 17, 2020.

Asset Based Revolving Credit Facility

As of March 31, 2020, we had $19.7 million of undrawn standby letters of credit under our senior secured credit facility ("Revolving Facility"). Loans under the Revolving Facility are in the form of either base rate loans or London Interbank Offered Rate ("LIBOR") loans denominated in U.S. dollars. The interest rate for the facility was 3.50% as of March 31, 2020.

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Supplemental balance sheet information related to leases was as follows:

($ in millions)	Balance Sheet Classification		March 31, 2020				December 31, 2019
Assets:
Operating	Operating lease assets		$	71.7			$	69.8
Finance	Property, plant and equipment, net		109.4			(1)	91.5			(1)
Total lease assets			$	181.1			$	161.3
Liabilities:
Current liabilities:
Operating	Current operating lease liabilities		$	13.7			$	12.9
Finance	Current maturities of long-term debt		21.1				24.2
Long-term liabilities
Operating	Long-term operating lease liabilities		61.0				59.7
Finance	Long-term debt, net of current maturities		61.7				43.1
Total lease liabilities			$	157.5			$	139.9

(1) Net of accumulated amortization of $33.3 million and $29.4 million as of March 31, 2020 and December 31, 2019, respectively.

Supplemental statement of operations information related to leases was as follows:

		Three Months Ended March 31,
($ in millions)		2020				2019
Operating lease cost
Cost of goods sold before depreciation, depletion and amortization		$	5.5			$	5.9
Selling, general and administrative expenses		0.7				0.5
Total operating lease cost		6.2			(1)	6.4			(1)
Finance lease cost
Depreciation, depletion and amortization		3.7				2.7
Interest expense, net		0.8				0.6
Total finance lease cost		4.5				3.3
Total lease cost		$	10.7			$	9.7

(1) Includes short-term lease and variable lease costs of $1.7 million for the three months ended March 31, 2020 and $1.5 million for the three months ended March 31, 2019.

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Maturities of lease liabilities were as follows:

($ in millions)		Operating Leases				Finance Leases
2020 (remainder of year)		$	13.0			$	16.5
2021		16.7				25.3
2022		13.2				20.1
2023		11.6				14.5
2024		10.8				8.1
2025		8.0				4.1
Thereafter		18.6				0.5
Total lease payments		91.9				89.1
Less interest		17.2				6.3
Present value of lease liabilities		$	74.7			$	82.8

Lease term and discount rate were as follows:

		March 31, 2020			December 31, 2019
Weighted-average remaining lease term:
Operating leases		6.6 years			6.6 years
Finance leases		3.8 years			3.4 years
Weighted-average discount rate:
Operating leases		5.8	%		6.2	%
Finance leases		3.7	%		3.8	%

Supplemental cash flow information related to leases was as follows:

		Three Months Ended March 31,
($ in millions)		2020				2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	0.8			$	4.8
Operating cash flows for finance leases		4.3				0.6
Financing cash flows for finance leases		6.0				5.1
Net assets obtained in exchange for finance lease liabilities		9.7				1.3
Net right-of-use assets obtained in exchange for operating lease liabilities		5.3				0.8

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10.	FAIR VALUE MEASUREMENTS

The methodologies and the fair value measurement levels used to determine the fair value of our financial assets and liabilities at March 31, 2020 were the same as those used at December 31, 2019.

The following table provides a reconciliation of the changes in Level 3 fair value measurements:

($ in millions)	Contingent Consideration
Balance at December 31, 2019	$	27.2
Change in valuation	0.3
Payments	(2.0		)
Balance at March 31, 2020	$	25.5

Inputs for the discounted cash flow technique used to value our acquisition-related contingent consideration were as follows:

		March 31, 2020				December 31, 2019
Range of discount rates		4.98% - 6.38%				3.70% - 7.46%
Weighted-average discount rate		4.94		%		4.99		%
Payment cap (in millions)		$	26.8			$	28.8
Expected payment period remaining (in years)		0-3				0-3
Management projections of the payout criteria		EBITDA/Volumes				EBITDA/Volumes

Other Financial Instruments

11.	STOCK-BASED COMPENSATION

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").  As of March 31, 2020, there were approximately 23,000 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 of $3.7 million during the three months ended March 31, 2020 and $1.7 million during the three months ended March 31, 2019. Stock-based compensation expense is reflected in selling, general and administrative expenses in our consolidated statements of operations.

2020 Restricted Stock Unit Grant

On March 1, 2020, the Compensation Committee of the Board of Directors approved grants of 0.4 million restricted stock units (the "2020 RSU Grant"). The 2020 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 2020 RSU Grant subject only 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 2020 RSU Grant subject to market performance hurdles was determined utilizing a Monte Carlo financial valuation model. Compensation expense determined utilizing the Monte

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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 assumptions used to estimate the fair value of performance-based restricted stock units granted in 2020 were as follows:

		2020
Expected term (years)		1.1 to 1.6
Expected volatility		43.8%
Risk-free interest rate		0.9%
Vesting price(1)		$43.23 - $55.21
Grant date fair value per share		$11.49 - $16.24

(1)	The vesting price is the average of the daily volume-weighted average share price of U.S. Concrete's 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, 2020.

12.	INCOME TAXES

We recorded an income tax benefit of $4.9 million for the three months ended March 31, 2020. Our effective tax rate differed substantially from the statutory tax rate primarily due to additional tax benefits recognized related to the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") enacted on March 27, 2020. The CARES Act, among other things, modified the business interest deduction limitation for tax years beginning in 2019 and 2020 from 30% of adjusted taxable income ("ATI") to 50% of ATI. As a result, we recorded an additional tax benefit of $3.2 million in the three months ended March 31, 2020 to reflect the CARES Act change to our estimated interest limitation for the year ended December 31, 2019. This tax benefit was partially offset by a net tax shortfall for share-based compensation.

In addition to the interest limitation change, the CARES Act includes modifications for net operating loss carryovers and carrybacks, immediate refund of alternative minimum tax credit carryovers and a technical correction to the Tax Cuts and Jobs Act of 2017 (the "2017 Act") for qualified improvement property. Absent a change in the interpretation of the calculation of ATI for purposes of the business interest limitation as provided in the proposed regulations issued in November 2018, we do not anticipate these provisions will have a material impact on the Company. The CARES Act also includes non-income tax relief for which the Company currently expects to benefit, including the deferral of certain payroll tax payments and payroll tax credits for retaining certain employees.

13.	EARNINGS (LOSS) PER SHARE

14.	COMMITMENTS AND CONTINGENCIES

 

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.

 

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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.

As of May 5, 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 such unasserted product defect claims related to ready-mixed concrete we have delivered prior to March 31, 2020.

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 potential liability of these indemnification agreements is minimal. Accordingly, we have not recorded any liabilities for these agreements as of March 31, 2020.

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 May 5, 2020, there were no material pending claims related to such indemnification.

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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 insurance program deductible retentions per occurrence 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, was $24.3 million as of March 31, 2020 and $23.3 million as of December 31, 2019.

Performance Bonds

 

In the normal course of business, we and our subsidiaries were contingently liable under $16.4 million in performance bonds that various contractors, states and municipalities have required as of March 31, 2020. 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.

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15.	SEGMENT INFORMATION

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, California, New York City, New Jersey, Washington, D.C., Philadelphia, Oklahoma and the U.S. Virgin Islands. Our aggregate products segment produces crushed stone, sand and gravel and serves the markets in which our ready-mixed concrete segment operates as well as the West Coast and Hawaii. Other operations and products not associated with a reportable segment include our aggregates distribution operations, building materials stores, hauling operations, ARIDUS^® Rapid Drying Concrete technology, brokered product sales and recycled aggregates.

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 net income (loss), 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 and purchase accounting adjustments for inventory. Acquisition-related costs consist of 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 operations by reportable segment ($ in millions):

		Three Months Ended March 31,
		2020				2019
Revenue by Segment:
Ready-mixed concrete
Sales to external customers		$	292.2			$	290.4
Aggregate products
Sales to external customers		31.1				31.8
Intersegment sales		12.5				11.1
Total aggregate products		43.6				42.9
Total reportable segment revenue		335.8				333.3
Other products and eliminations		(1.4		)		(0.2		)
Total revenue		$	334.4			$	333.1
Reportable Segment Adjusted EBITDA:
Ready-mixed concrete		$	31.7			$	34.5
Aggregate products		11.3				10.4
Total reportable segment Adjusted EBITDA		$	43.0			$	44.9
Reconciliation of Total Reportable Segment Adjusted EBITDA to Net Income:
Total reportable segment Adjusted EBITDA		$	43.0			$	44.9
Other products and eliminations from operations		0.1				(0.1		)
Corporate overhead		(15.6		)		(14.5		)
Depreciation, depletion and amortization for reportable segments		(21.8		)		(20.8		)
Interest expense, net		(11.4		)		(11.6		)
Change in value of contingent consideration for reportable segments		(0.3		)		(1.0		)
Purchase accounting adjustments for inventory		(1.6		)		—
Loss on mixer truck fire		—				(0.6		)
Corporate, other products and eliminations other income (loss), net		(0.1		)		0.4
Income (loss) from operations before income taxes		(7.7		)		(3.3		)
Income tax benefit (expense)		4.9				0.7
Net income (loss)		$	(2.8	)		$	(2.6	)

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		Three Months Ended March 31,
		2020				2019
Capital Expenditures:
Ready-mixed concrete		$	4.4			$	5.8
Aggregate products		2.8				1.2
Other products and corporate		0.1				0.2
Total capital expenditures		$	7.3			$	7.2

		Three Months Ended March 31,
		2020				2019
Revenue by Product:
Ready-mixed concrete		$	292.2			$	290.4
Aggregate products		31.1				31.8
Aggregates distribution		3.7				5.3
Building materials		6.3				4.6
Other		1.1				1.0
Total revenue		$	334.4			$	333.1

 

		March 31, 2020				December 31, 2019
Identifiable Property, Plant and Equipment Assets:
Ready-mixed concrete		$	290.8			$	286.4
Aggregate products		487.1				359.6
Other products and corporate		26.1				27.5
Total identifiable assets		$	804.0			$	673.5

16.	SUBSEQUENT EVENT - DELAYED DRAW TERM AGREEMENT

On April 17, 2020, the Company entered into a secured delayed draw term loan agreement (the "Agreement") with certain subsidiaries guarantors thereto, Bank of America, N.A. as administrative agent and collateral agent, and the lenders and other parties named therein. The Agreement provides for a $180.0 million delayed draw term loan facility (the "Credit Facility"). The Agreement permits borrowings until December 15, 2021, and any such borrowings will mature May 1, 2025 (subject to a springing maturity on March 1, 2024 to the extent any of our 2024 Notes remain outstanding on such date). In connection with entering into the Agreement, we incurred $1.0 million of debt issuance costs. We entered into the Agreement to enhance our liquidity and financial flexibility.

Borrowings under the Agreement bear interest at our option of either: (1) LIBOR (subject to a floor of 0.75%) plus a margin ranging from 2.75% to 3.75% or (2) a base rate (which is equal to the greatest of the prime rate, the Federal Funds effective rate plus 0.50% and LIBOR plus 1.00%, and is subject to a floor of 1.75%) plus a margin ranging from 1.75% to 2.75%. The applicable margin depends on the aggregate amount borrowed. Additionally, each draw on the Credit Facility will be issued at a price of 99.0% of the amount drawn. The Agreement is secured by a first priority lien and security interest on certain real property of the subsidiary guarantors and substantially all of the personal property of the Company and its subsidiary guarantors that is not secured by a first priority security interest under our Revolving Facility (the "Revolving Facility Collateral") and a second priority security interest on the Revolving Facility Collateral. The Agreement contains customary representations, warranties, covenants and events of default but does not contain any financial maintenance covenants.

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

(1)	Total debt includes long-term debt, net of unamortized debt issuance costs, including current maturities, finance leases, notes payable and borrowings under the Revolving Facility.

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•	deterioration of revenue, due to lower volume and/or pricing, because of weakness in the markets in which we operate or COVID-19 operating restrictions;

•	declines in gross margins due to shifts in our product mix, increases in fixed or variable costs or the impact of COVID-19;

•	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, including from COVID-19;

•	any further COVID-19 impacts to our business; and

•	inclement weather beyond normal patterns that could reduce our sales volumes.

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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 installation 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 supplies;

•	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;

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

•	the length and severity of the COVID-19 pandemic;

•	the pace of recovery following the COVID-19 pandemic;

•	our ability to implement cost containment strategies; and

•	the adverse effects of COVID-19 on our business, the economy and the markets we serve.

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Item 4.	Controls and Procedures

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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 allowed us to repurchase up to $50.0 million of our common stock. The share repurchase program expired March 31, 2020.

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