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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2003
Commission file number 000-26025
U.S. CONCRETE, INC.
(exact name of registrant as specified in its charter)
Delaware 76-0586680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2925 Briarpark, Suite 500, Houston, Texas 77042
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (713) 499-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ________
--------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No ________
--------
As of the close of business on May 9, 2003, U.S. Concrete, Inc. had
28,135,831 shares of its common stock issued and outstanding.
U.S. CONCRETE, INC. AND SUBSIDIARIES
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets .................................................... 1
Condensed Consolidated Statements of Operations .......................................... 2
Condensed Consolidated Statements of Cash Flows .......................................... 3
Notes to Condensed Consolidated Financial Statements ..................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 14
Item 4. Controls and Procedures .................................................................... 15
Part II - Other Information
Item 1. Legal Proceedings .......................................................................... 15
Item 2. Changes in Securities and Use of Proceeds .................................................. 15
Item 4. Submission of Matters to a Vote of Security Holders ........................................ 15
Item 6. Exhibits and Reports on Form 8-K ........................................................... 16
SIGNATURES ............................................................................................... 17
CERTIFICATIONS ........................................................................................... 18
INDEX TO EXHIBITS ........................................................................................ 20
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2003 2002
----------- ------------
(unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents .............................................. $ 3,609 $ 4,685
Trade accounts receivable, net ......................................... 56,693 59,224
Inventories (Note 8) ................................................... 20,949 21,044
Deferred income taxes .................................................. 2,499 4,188
Prepaid expenses and other current assets .............................. 8,346 9,715
----------- -----------
Total current assets ................................................. 92,096 98,856
----------- -----------
Property, plant and equipment, net ........................................ 120,292 117,199
Goodwill, net ............................................................. 164,323 157,364
Other assets .............................................................. 4,710 4,943
----------- -----------
Total assets ......................................................... $ 381,421 $ 378,362
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt ................................... $ 53 $ 56
Accounts payable and accrued liabilities ............................... 47,688 51,742
----------- -----------
Total current liabilities ............................................ 47,741 51,798
----------- -----------
Long-term debt, net of current maturities (Note 9) ........................ 166,632 161,752
Other long-term liabilities ............................................... 466 466
Deferred income taxes ..................................................... 4,315 2,501
----------- -----------
Total liabilities .................................................... 219,154 216,517
----------- -----------
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock ........................................................... 28 27
Additional paid-in capital ............................................. 162,177 157,276
Retained earnings ...................................................... 502 4,542
Unearned deferred compensation ......................................... (440) --
----------- -----------
Total stockholders' equity ........................................... 162,267 161,845
----------- -----------
Total liabilities and stockholders' equity ........................... $ 381,421 $ 378,362
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
U.S. CONCRETE, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months
Ended March 31
--------------------------------
2003 2002
----------- -----------
(unaudited)
Sales ...................................................................... $ 85,068 $ 104,900
Cost of goods sold ......................................................... 75,128 87,447
----------- -----------
Gross profit ............................................................ 9,940 17,453
Selling, general and administrative expenses ............................... 10,060 11,862
Depreciation, depletion and amortization ................................... 2,660 2,558
----------- -----------
Income (loss) from operations ........................................... (2,780) 3,033
Interest expense, net ...................................................... 4,189 4,362
Other income, net .......................................................... 122 161
----------- -----------
Loss before income tax benefit and cumulative effect of accounting
change ................................................................ (6,847) (1,168)
Income tax benefit ......................................................... (2,807) (479)
----------- -----------
Net loss before cumulative effect of accounting change .................. (4,040) (689)
Cumulative effect of accounting change, net of tax of $12,297 (Note 4) ..... -- (24,328)
----------- -----------
Net loss ................................................................ $ (4,040) $ (25,017)
=========== ===========
Basic and diluted net loss per share before cumulative effect of accounting
change .................................................................. $ (0.15) $ (0.03)
Cumulative effect of accounting change ..................................... -- (0.91)
----------- -----------
Basic and diluted net loss per share ....................................... $ (0.15) $ (0.94)
=========== ===========
Basic and diluted common shares outstanding (Note 6) ....................... 27,641 26,732
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
U.S. CONCRETE, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months
Ended March 31
------------------------------
2003 2002
----------- -----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................. $ (4,040) $ (25,017)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Cumulative effect of accounting change ................................ -- 24,328
Depreciation, depletion and amortization .............................. 2,660 2,558
Debt issuance cost amortization ....................................... 345 331
Net gain on sale of property, plant and equipment ..................... (95) (28)
Deferred income taxes ................................................. 2,732 1,500
Provision for doubtful accounts ....................................... 178 615
Changes in operating assets and liabilities, net of acquisitions ........ (163) (3,010)
----------- -----------
Net cash provided by operating activities ........................... 1,617 1,277
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment, net of disposals of $1,344 and $119 ........ (1,672) (2,523)
Payments for acquisitions, net of cash received of $1,081 and $0 .......... (5,814) (17,064)
Other investing activities ................................................ (84) (1,269)
----------- -----------
Net cash used in investing activities ............................... (7,570) (20,856)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings .................................................. 4,880 16,208
Repayments of borrowings .................................................. (3) (18)
Proceeds from issuances of common stock ................................... -- 519
----------- -----------
Net cash provided by financing activities ........................... 4,877 16,709
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS .................................... (1,076) (2,870)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................. 4,685 7,127
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................... $ 3,609 $ 4,257
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
U.S. CONCRETE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
U.S. Concrete, Inc., a Delaware corporation, provides ready-mixed concrete
and related products and services to the construction industry in several major
markets in the United States. U.S. Concrete is a holding company and conducts
its businesses through its consolidated subsidiaries.
U.S. Concrete commenced operations in May 1999 when it acquired six
operating businesses in three major markets in the United States. Since then,
U.S. Concrete has acquired an additional 23 operating businesses, in these and
seven additional markets in the United States, and intends to acquire additional
companies to expand its operations.
The consolidated financial statements include the accounts of U.S. Concrete
and subsidiaries and have been prepared by U.S. Concrete, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC's rules and regulations,
although U.S. Concrete believes that the disclosures are adequate to make the
information presented not misleading. You should read these unaudited condensed
consolidated financial statements together with the consolidated financial
statements and related notes in U.S. Concrete's annual report on Form 10-K for
the year ended December 31, 2002. In the opinion of U.S. Concrete, all
adjustments necessary to present fairly the information in the unaudited
condensed consolidated financial statements of U.S. Concrete have been included.
Operating results for the three-month period ended March 31, 2003, are not
necessarily indicative of the results for the year ended December 31, 2003.
The preparation of financial statements and accompanying notes in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported. Actual results
could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
U.S. Concrete adopted Financial Accounting Standards Board ("FASB")
Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." FASB
Interpretation 45 generally requires a guarantor to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. This interpretation applies to guarantees issued or
modified after December 31, 2002 and has had no impact on U.S. Concrete's
consolidated results of operations or consolidated balance sheet.
On January 1, 2003, U.S. Concrete adopted Statement of Financial Accounting
Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations." SFAS
No. 143 applies to legal obligations associated with the retirement of
long-lived assets resulting from the acquisition, construction, development
and/or normal use of the underlying assets. SFAS No. 143 requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred. The associated asset retirement costs are
capitalized as part of the carrying amount of the underlying asset and
depreciated over the estimated useful life of the asset. If the asset retirement
obligation is settled for other than the carrying amount of the liability, U.S.
Concrete will recognize a gain or loss on settlement. U.S. Concrete's asset
retirement obligations are reported in its accompanying consolidated balance
sheets in other noncurrent liabilities. The adoption of SFAS No. 143 did not
have a material impact on U.S. Concrete's consolidated financial position,
results of operations or cash flows.
Other than as described above, U.S. Concrete has not changed its accounting
policies since December 31, 2002. For a description of these policies, refer to
note 2 of the consolidated financial statements in U.S. Concrete's annual report
on Form 10-K for the year ended December 31, 2002.
4
3. STOCK-BASED COMPENSATION
U.S. Concrete accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." No stock-based employee compensation cost for U.S. Concrete's stock
option plans is reflected in its consolidated statement of operations, as all
options granted under U.S. Concrete's plans have an exercise price equal to the
market value of the underlying common stock on the date of grant.
The following table illustrates the pro forma effect on net loss and loss
per share if U.S. Concrete had applied the fair value recognition provisions of
SFAS No.123, "Accounting for Stock-based Compensation," as amended by SFAS No.
148, "Accounting for Stock-Based Compensation-Transition and Disclosure, an
amendment of FASB Statement No. 123," for the three months ended March 31, 2003
and 2002 (in thousands, except per share amounts).
Three Months
Ended March 31
--------------------------
2003 2002
----------- -----------
Net loss ....................................................... $ (4,040) $ (25,017)
Deduct: Total stock option employee compensation expense
calculated using the fair value method (net of tax) .......... (387) (416)
----------- -----------
Pro forma net loss ............................................. $ (4,427) $ (25,433)
=========== ===========
Loss per share:
Reported basic and diluted ..................................... $ (0.15) $ (0.94)
Pro forma basic and diluted .................................... $ (0.16) $ (0.95)
During the quarter ended March 31, 2003, U.S. Concrete awarded to certain
key employees 97,561 restricted shares of common stock (valued at $0.4 million).
The awards are subject to certain vesting requirements. The value of such stock
was established by the market price on the date of grant and was recorded as
unearned compensation. The unearned compensation is reflected as a reduction in
stockholders' equity on the consolidated balance sheet and will be amortized
ratably over the applicable restricted stock vesting period of five years.
4. GOODWILL
On January 1, 2002, U.S. Concrete adopted SFAS No. 142, "Goodwill and Other
Intangibles." This statement changed the accounting for goodwill and
indefinite-lived intangible assets from an amortization approach to an
impairment-only approach. Under SFAS No. 142, U.S. Concrete recorded a goodwill
impairment charge of $36.6 million ($24.3 million, net of tax), presented as a
cumulative effect of accounting change in the quarter ended March 31, 2002.
The changes in the carrying amount of goodwill for the three months ended
March 31, 2003 were as follows (in thousands):
Amount
----------
Balance at December 31, 2002 ........................ $ 157,364
Additions: Acquisitions and related adjustments ..... 6,089
Contingent consideration ......................... 870
----------
Balance at March 31, 2003 ........................... $ 164,323
==========
5. ACQUISITION
In February 2003, U.S. Concrete completed the acquisition of Builders
Redi-Mix, Inc., which produces and distributes ready-mixed concrete in the
greater Lansing, Michigan market. The aggregate purchase price of this
transaction was approximately $10.5 million, comprised of $5.8 million in cash,
net of cash acquired, and transaction costs of $0.4 million, with the remaining
portion of the purchase price paid through the issuance of 920,726 shares of
common stock (valued at $4.3 million). The aggregate purchase price of $10.5
million has been allocated to the fair value of property and equipment of $3.8
million, other net current assets of $0.6 million (net of $2.0 million of
assumed liabilities) and goodwill of $6.1 million. The accompanying consolidated
balance sheet includes allocations of the purchase price to the assets acquired
and liabilities assumed based on estimates of fair value and are subject to
final adjustments primarily related to real property and income taxes. The sales
and total assets of Builders Redi-Mix, Inc. were not material.
5
5. ACQUISITION (continued)
The following summarized unaudited pro forma consolidated financial
information adjusts the historical consolidated financial information to reflect
the assumption that this acquisition occurred on January 1, 2002 (in thousands,
except per share data):
Three Months
Ended March 31
-----------------------------
2003 2002
------------ -------------
Sales .............................................................. $ 85,364 $ 106,385
Net loss before cumulative effect of accounting change ............. $ (4,024) $ (951)
Net loss ........................................................... $ (4,024) $ (25,279)
Basic and diluted loss per share before cumulative effect of
accounting change ............................................... $ (0.14) $ (0.03)
Pro forma adjustments in these amounts primarily relate to:
.. contractual reductions in salaries, bonuses and benefits to employees and
former owners of the acquired business;
.. elimination of sellers' legal, accounting and other professional fees
incurred in connection with the acquisition;
.. adjustments to depreciation expense to reflect the impact of the fair value
adjustments of property and equipment;
.. adjustments to interest expense, net increase to reflect borrowings
incurred to fund the acquisition; and
.. adjustments to the federal and state income tax provision based on pro
forma operating results.
The pro forma financial information does not purport to represent what the
combined financial results of operations of U.S. Concrete actually would have
been if this acquisition had in fact occurred when assumed and are not
necessarily representative of its financial results of operations for any future
period.
6. SHARES USED IN COMPUTING LOSS PER SHARE
The following table summarizes the number of shares (in thousands) of
common stock U.S. Concrete has used on a weighted average basis in calculating
basic and diluted loss per share:
Three Months
Ended March 31
-------------------------------
2003 2002
------------ -------------
Basic weighted average common shares outstanding ............ 27,641 26,732
Effect of dilutive stock options and warrants ............... -- --
------------ -------------
Diluted weighted average common shares outstanding .......... 27,641 26,732
============ =============
Stock options and warrants covering 4.2 million shares for the three months
ended March 31, 2003 and 2.9 million shares for the three months ended March 31,
2002 were excluded from the computation of the loss per share as their effect
would have been anti-dilutive and decreased the loss per share.
7. RESTRUCTURING CHARGES
During the fourth quarter of 2002, U.S. Concrete implemented operational
initiatives focusing on the realignment of the businesses in its North Texas and
Memphis, Tennessee/Northern Mississippi markets. The initiatives included
termination of certain services in U.S. Concrete's North Texas market. In
connection with those initiatives, U.S. Concrete completed a restructuring plan
that included severance for one employee, lease terminations, the disposal of
assets, the write-down of certain equipment and other actions.
The reconciliation of the restructuring liability as of March 31, 2003, is
as follows (in thousands):
Liability at Liability at
December 31, Cash paid March 31,
2002 In 2003 2003
-------------- -------------- --------------
(unaudited)
Severance costs ................................ $ 90 $ (39) $ 51
Lease termination and other exit costs ......... 191 (36) 155
-------------- -------------- --------------
Total .......................................... $ 281 $ (75) $ 206
============== ============== ==============
The restructuring liability, totaling $0.2 million as of March 31, 2003, is
included in accrued liabilities in the consolidated balance sheet. During the
quarter ended March 31, 2003, U.S. Concrete recognized a gain, totaling $0.3
million, related to the sale of assets that were impaired in the fourth quarter
of 2002.
6
8. INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
2003 2002
------------- -------------
(unaudited)
Raw materials .................................... $ 7,934 $ 8,151
Finished products and supplies ................... 13,015 12,893
------------- -------------
Total ............................................ $ 20,949 $ 21,044
============= =============
9. LONG-TERM DEBT
A summary of long-term debt is as follows (in thousands):
March 31, December 31,
2003 2002
------------- -------------
(unaudited)
Secured revolving credit facility ................ $ 71,610 $ 66,730
12.00% senior subordinated notes ................. 95,000 95,000
Other ............................................ 75 78
------------- -------------
166,685 161,808
Less: current maturities ...................... (53) (56)
------------- -------------
Long-term debt, net of current maturities ........ $ 166,632 $ 161,752
============= =============
Annual maturities of long-term debt for each of the five succeeding years
are (in millions) $0.1, $85.1, $13.6, $13.6, $13.6 and $40.7 thereafter.
U.S. Concrete has available a bank-financed $200 million secured revolving
credit facility, with a scheduled maturity of May 2004. At the time of each
borrowing, U.S. Concrete selects an interest rate for that borrowing at a
specified margin above either prime or LIBOR. Commitment fees at a current
annual rate of 0.50% are paid on the unused portion of this facility. At March
31, 2003, $71.6 million was outstanding under this facility at a weighted
average rate of 3.9% per annum.
The credit agreement contain covenants that place limitations on incurring
certain indebtedness, prepaying indebtedness, paying dividends, purchasing
treasury stock and making capital expenditures, acquisitions and investments.
The provisions of the secured revolving credit facility also require U.S.
Concrete to maintain certain ratios as of the end of each quarter including
leverage, fixed coverage, and asset coverage. Effective as of April 4, 2003,
U.S. Concrete entered into a second amendment to its secured revolving credit
facility to adjust the total leverage and fixed charge coverage ratios. For the
quarter ended March 31, 2003, U.S. Concrete was in compliance with these
covenants, as amended. At March 31, 2003, U.S. Concrete had $128.4 million of
remaining capacity under this facility, of which it could borrow $10.5 million
based on its leverage ratio at that date; however, its ability to borrow
additional amounts would increase to the extent that it uses the facility to
fund the acquisition of additional businesses with positive cash flow.
U.S. Concrete's 12.00% senior subordinated notes are outstanding in the
aggregate principal amount of $95 million, have a maturity date of November 10,
2010 and are mandatorily repayable in equal annual installments of approximately
$13.6 million on November 10 in each of the years 2004 through 2010. These notes
are subordinated in right of payment to the indebtedness outstanding under the
credit facility, are guaranteed by the subsidiaries of U.S. Concrete and require
U.S. Concrete to comply with covenants generally consistent with those required
under the credit facility. Effective as of April 9, 2003, U.S. Concrete entered
into a second amendment to the note purchase agreement to adjust the total
leverage ratio.
For the three months ended March 31, U.S. Concrete's interest payments were
approximately $3.9 million in 2003 and $3.6 million in 2002.
7
10. INCOME TAXES
In accordance with accounting principles generally accepted in the United
States of America, for each interim reporting period, U.S. Concrete estimates
the effective tax rate expected for the full fiscal year. The rate so determined
is used in providing U.S. Concrete's income taxes on a current year-to-date
basis.
The effective income tax rate of 41.0% for the first three months of 2003
and 2002 differed from the federal statutory rate of 35% due primarily to state
income taxes.
For the three months ended March 31, 2003, U.S. Concrete made no income tax
payments. For the three months ended March 31, 2002, U.S. Concrete's income tax
payments were approximately $2.2 million.
11. COMMITMENTS AND CONTINGENCIES
Bay-Crete Transportation & Materials, LLC alleges in a lawsuit it filed on
July 11, 2000 in a California state court against U.S. Concrete's subsidiary,
Central, and U.S. Concrete that it possesses beneficiary rights under a 1983
contract to purchase annually up to 200,000 cubic yards of ready-mixed concrete
from Central until March 30, 2082. Under that contract, the purchase price would
consist of Central's direct materials costs and an overhead fee. Bay-Crete
alleges that U.S. Concrete breached that contract by refusing to acknowledge
Bay-Crete's rights as a beneficiary of that contract. It is seeking damages of
$500 million of lost profits spread over the next 80 years. Central and U.S.
Concrete each filed an answer and cross-complaint in August 2000 seeking (1)
declaratory relief for a determination that Bay-Crete is not entitled to use the
contract and (2) damages for improper conduct by Bay-Crete, the general manager
of Bay-Crete and a member of Bay-Crete for making demands under the contract in
violation of an order of a United States bankruptcy court. U.S. Concrete
withdrew its cross-complaint in September 2002 for procedural reasons. Central's
cross-complaint is still pending. U.S. Concrete and Central believe they have
meritorious defenses to Bay-Crete's claim and intend to vigorously defend this
suit. By order dated April 8, 2003, the trial court postponed the trial date and
has not yet set a new trial date. A status conference has been scheduled for
June 3, 2003, at which it is possible a new trial date will be set.
From time to time, and currently, U.S. Concrete is subject to various other
claims and litigation brought by employees, customers and other third parties
for, among other matters, personal injuries, property damages, product defects
and delay damages that have, or allegedly have, resulted from the conduct of its
operations.
U.S. Concrete believes that the resolution of all litigation currently
pending or threatened against it or any of its subsidiaries (including the
dispute with Bay-Crete described above) will not have a material adverse effect
on its business or financial condition; however, because of the inherent
uncertainty of litigation, U.S. Concrete cannot assure you that the resolution
of any particular claim or proceeding to which it is a party will not have a
material adverse effect on its results of operations for the fiscal period in
which that resolution occurs. U.S. Concrete expects in the future it and its
operating subsidiaries will from time to time be a party to litigation or
administrative proceedings that arise in the normal course of its business.
U.S. Concrete retains various self-insurance risks with respect to losses
for third-party liability and property damage.
U.S. Concrete is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions and wastewater
discharge. Its management believes it is in substantial compliance with
applicable environmental laws and regulations. From time to time, it receives
claims from federal and state environmental regulatory agencies and entities
asserting that it may be in violation of environmental laws and regulations.
Based on experience and the information currently available, management of U.S.
Concrete believes that these claims will not have a material impact on U.S.
Concrete's consolidated financial condition or results of operations. Despite
compliance and experience, it is possible that U.S. Concrete could be held
liable for future charges, which might be material but are not currently known
or estimable. In addition, changes in federal or state laws, regulations or
requirements or discovery of currently unknown conditions could require
additional expenditures.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on required disclosures
by a guarantor in its financial statements about obligations under certain
guarantees that it has issued and clarifies the need for a guarantor to
recognize, at the inception of certain guarantees, a liability for the fair
value of the obligation undertaken in issuing the guarantee. The provisions of
this Interpretation relating to initial recognition and measurement of guarantor
liabilities were effective for qualifying guarantees entered into or modified
after December 31, 2002. The adoption of these provisions did not have a
material impact on U.S. Concrete's consolidated financial statements. The
disclosure requirements of the Interpretation, which were effective for the
quarter ended March 31, 2003, are included in the following paragraphs.
8
11. COMMITMENTS AND CONTINGENCIES (continued)
As permitted under Delaware law, U.S. Concrete has agreements that provide
indemnification of officers and directors for certain events or occurrences
while the officer or director is, or was serving, at U.S. Concrete's request in
such capacity. The maximum potential amount of future payments that U.S.
Concrete could be required to make under these indemnification agreements is not
limited; however, U.S. Concrete has a Director and Officer insurance policy that
limits its exposure and enables U.S. Concrete to recover a portion of any future
amounts paid. All the indemnification agreements were grandfathered under the
provisions of FASB Interpretation No. 45, as they were in effect prior to
December 31, 2002. As a result of the insurance policy coverage, U.S. Concrete
believes the estimated fair value of these indemnification agreements is
minimal. Accordingly, U.S. Concrete has not recorded any liabilities for these
agreements as of March 31, 2003.
U.S. Concrete is party to agreements that require it to provide
indemnification in certain instances when it acquires businesses and real
estate, and in the ordinary course of business with its customers, suppliers and
service providers.
In the normal course of business, U.S. Concrete is currently contingently
liable for performance under $22.7 million in performance bonds that various
states and municipalities have required. The bonds are principally related to
construction contracts, reclamation obligations and mining permits. U.S.
Concrete has indemnified the underwriting insurance company against any exposure
under the performance bonds. In U.S. Concrete's past experience, no material
claims have been made against these bonds.
The following are U.S. Concrete's contractual commitments associated with
its indebtedness and lease obligations and purchase agreements as of March 31,
2003 (in millions):
Less Than After
Contractual obligations Total 1 year 1-3 years 4-5 years 5 years
- --------------------------------------- ------------ ------------- ------------- ------------ ------------
Principal on long-term debt .......... $ 166.7 $ 0.1 $ 112.3 $ 27.2 $ 27.1
Interest on long-term debt (1) ....... 54.1 8.5 29.3 11.4 4.9
Operating leases ..................... 34.2 7.6 19.8 5.5 1.3
Contingent purchase obligations ...... 0.9 0.9 0.0 0.0 0.0
------------ ------------- ------------- ------------ ------------
Total ................................ $ 255.9 $ 17.1 $ 161.4 $ 44.1 $ 33.3
============ ============= ============= ============ ============
(1) Interest payments due under U.S. Concrete's 12% Senior Subordinated Notes.
U.S. Concrete does not have any other material financial guarantees or
off-balance sheet arrangements other than those disclosed herein.
13. NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities," which clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
relating to consolidation of certain entities. FIN 46 will require
identification of U.S. Concrete's participation in variable interest entities
("VIEs"), which are defined as entities with a level of invested equity that is
not sufficient to fund future activities to permit them to operate on a
stand-alone basis, or whose equity holders lack certain characteristics of a
controlling financial interest. For entities identified as VIEs, FIN 46 sets
forth a model to evaluate potential consolidation based on an assessment of
which party to the VIE, if any, bears a majority of the exposure to its expected
losses or stands to gain from a majority of its expected returns. FIN 46 also
sets forth certain disclosure requirements regarding interests in VIEs are
deemed significant, even if consolidation is not required. As U.S. Concrete does
not maintain any VIEs, the adoption of FIN 46, effective July 1, 2003 for
entities acquired before February 1, 2003, will not have a material impact on
its consolidated financial position, results of operations or cash flows.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements we make in the following discussion which express a belief,
expectation or intention, as well as those that are not historical fact, are
forward-looking statements that are subject to risks, uncertainties and
assumptions. Our actual results, performance or achievements, or industry
results, could differ materially from those we express in the following
discussion as a result of a variety of factors, including the risks and
uncertainties we have referred to under the heading "Cautionary Statement
Concerning Forward-looking Statements" following Items 1 and 2 of Part I of our
annual report on Form 10-K for the year ended December 31, 2002 (the "2002
10-K"), and under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Factors That May Affect Our Future
Operating Results" in Item 7 of Part II of the 2002 10-K. For a discussion of
our other commitments, related-party transactions, our critical accounting
policies, new accounting pronouncements and inflation, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of Part II of the 2002 10-K.
Overview
We derive substantially all our revenues from the sale of ready-mixed
concrete, other concrete products and related construction materials to the
construction industry in the United States. We serve substantially all segments
of the construction industry, and our customers include contractors for
commercial, industrial, residential and public works and infrastructure
construction. We typically sell ready-mixed concrete under daily purchase orders
that require us to formulate, prepare and deliver ready-mixed concrete to the
job sites of our customers. We recognize our sales from these orders when we
deliver the ordered products.
Our cost of goods sold consists principally of the costs we incur in
obtaining the cement, aggregates and admixtures we combine to produce
ready-mixed concrete and other concrete products in various formulations. We
obtain most of these materials from third parties and generally have only one
day's supply at each of our concrete plants. Our cost of goods sold also
includes labor costs and the operating, maintenance and rental expenses we incur
in operating our concrete plants and mixer trucks and other vehicles.
Our selling expenses include the salary and incentive compensation we pay
our sales force, the salaries and incentive compensation of our sales managers
and travel, entertainment and other promotional expenses. Our general and
administrative expenses include the salaries and benefits we pay to our
executive officers, the senior managers of our local and regional operations and
administrative staff. These expenses also include office rent and utilities,
communications expenses and professional fees.
We purchased one business in the first quarter of 2003, which we have
accounted for in accordance with the purchase method of accounting.
Seasonality of Operations
Results of any individual quarter are not necessarily indicative of results
to be expected for the year, principally because of the effect that seasonal
changes and other weather-related conditions can have on construction activity
and , as a result, on our sales and earnings. Normally, we attain the highest
sales and earnings in the second and third quarters and the lowest sales and
earnings in the first quarter. You should not rely on (1) quarterly comparisons
of our revenues and operating results as indicators of our future performance or
(2) the results of any quarterly period during a year as an indicator of results
you may expect for that entire year.
Critical accounting policies
We outlined our critical accounting policies in Item 7 of Part II of the
2002 10-K. We have concluded that our critical accounting policies are the use
of estimates in the recording of allowance for doubtful accounts, realization of
goodwill, accruals for self-insurance, accruals for income tax provision and the
valuation and useful lives of property, plant and equipment. See note 2
(Significant Accounting Policies) to our consolidated financial statements
included in Item 8 of the 2002 10-K for a discussion of these accounting
policies.
During the three months ended March 31, 2003, there were no changes in the
application of our critical accounting policies presented in the 2002 10-K,
except for the provisions in Financial Accounting Standards Board ("FASB")
Interpretation 45 related to guarantees and Statement of Financial Accounting
Standards ("SFAS") No. 143 related to asset retirement obligations. The adoption
of the new standards did not have a material effect on our consolidated
financial statements. For further discussion of our accounting policies, see
note 2 (Significant Accounting Policies) to our condensed consolidated financial
statements in Part I of this report.
10
New Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities," which clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
relating to consolidation of certain entities. FIN 46 will require
identification of our participation in variable interest entities ("VIEs"),
which are defined as entities with a level of invested equity that is not
sufficient to fund future activities to permit them to operate on a stand-alone
basis, or whose equity holders lack certain characteristics of a controlling
financial interest. For entities identified as VIEs, FIN 46 sets forth a model
to evaluate potential consolidation based on an assessment of which party to the
VIEs, if any, bears a majority of the exposure to its expected losses, or stands
to gain from a majority of its expected returns. FIN 46 also sets forth certain
disclosure requirements regarding interests in VIEs that are deemed
significant, even if consolidation is not required. As we do not maintain any
VIEs, the adoption of FIN 46, effective July 1, 2003 for entities acquired
before February 1, 2003, will not have a material impact on our consolidated
financial position, results of operations or cash flows.
Results of Operations
The following table sets forth selected historical statements of operations
information (dollars in thousands) and that information as a percentage of sales
for the periods indicated.
Three Months Ended March 31,
-----------------------------------------------------------
2003 2002
------------------------ -------------------------
(unaudited)
Sales ............................................... $ 85,068 100.0% $ 104,900 100.0%
Cost of goods sold .................................. 75,128 88.3 87,447 83.4
----------- ------ ----------- ------
Gross profit ................................... 9,940 11.7 17,453 16.6
Selling, general and administrative expenses ........ 10,060 11.8 11,862 11.3
Depreciation, depletion and amortization ............ 2,660 3.1 2,558 2.4
----------- ------ ----------- ------
Income (loss) from operations .................. (2,780) (3.2) 3,033 2.9
Interest expense, net ............................... 4,189 4.9 4,362 4.2
Other income, net ................................... 122 0.1 161 0.2
----------- ------ ----------- ------
Loss before income tax provision ............... (6,847) (8.0) (1,168) (1.1)
Income tax benefit .................................. (2,807) (3.3) (479) (0.5)
----------- ------ ----------- ------
Loss before cumulative effect of
accounting change ............................ (4,040) (4.7) (689) (0.6)
Cumulative effect of accounting change .............. -- -- (24,328) (23.2)
----------- ------ ----------- ------
Net loss ....................................... $ (4,040) (4.7)% $ (25,017) (23.8)%
=========== ====== =========== ======
Sales. Sales decreased $19.8 million, or 18.9%, for the three-month period
ended March 31, 2003, as compared with the corresponding period in 2002. The
decrease in sales for the first quarter was primarily attributable to a 0.7%
decrease in the average sales price of ready-mixed concrete and a 17.0% decrease
in ready-mixed concrete volumes as a result of the decline in total construction
in most of our markets. Severe weather in the quarter, particularly in February,
reduced construction activity in our markets.
Gross profit. Gross profit decreased $7.5 million, or 43.0% for the three
months ended March 31, 2003, as compared with the corresponding period in 2002.
Gross margins decreased from 16.6% in the three months ended March 31, 2002 to
11.7% in the three months ended March 31, 2003. The decrease resulted from lower
plant and delivery productivity, which was primarily attributable to a decrease
in ready-mixed concrete volumes.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $1.8 million, or 15.2% for the three months
ended March 31, 2003, as compared with the corresponding period in 2002. The
selling, general and administrative expenses decrease in the three-month period
ended March 31, 2003 was attributable to decreased communication costs,
decreased bad debt expense and professional fees and lower incentive
compensation expense (which is linked to operating profitability).
11
Depreciation, depletion and amortization. Depreciation, depletion and
amortization expense increased $0.1 million, or 4.0% for the three months ended
March 31, 2003, as compared with the corresponding period in 2002.
Interest expense, net. Interest expense, net, decreased $0.2 million, or
4.0% for the three months ended March 31, 2003, as compared with the
corresponding period in 2002. This decrease was attributable to a lower average
interest rate under our credit facility during 2003. At March 31, 2003, we had
borrowings totaling $166.7 million outstanding at a weighted average annual
interest rate of 8.5%. At March 31, 2002, we had borrowings totaling $180.0
million outstanding at a weighted average annual interest rate of 8.6%.
Other income, net. Other income, net, decreased less than $0.1 million for
the three months ended March 31, 2003, as compared with the corresponding period
in 2002.
Income tax benefit. We recorded an income tax benefit of $2.8 million for
the three-month period ended March 31, 2003, as compared with a benefit of $0.5
million during the corresponding period in 2002. The increase in the benefit
for income taxes is principally the result of larger taxable loss generated from
our operations. Our estimated annualized effective tax rate was 41.0% for the
three-month periods ended March 31, 2003 and 2002.
Cumulative effect of accounting change. Under SFAS No. 142, we recorded a
transitional goodwill impairment charge of $36.6 million ($24.3 million, net of
tax) presented as a cumulative effect of accounting change, effective January 1,
2002. This impairment charge is attributable to two reporting units, our
divisions in North Texas/Southwest Oklahoma and Memphis/Northern Mississippi.
Local market and economic conditions have affected the value of acquisitions
made in North Texas (in 2000 and 2001) and Memphis, Tennessee/Northern
Mississippi (in 1999).
Liquidity and Capital Resources
Net loss was $4.0 million in the three-month period ended March 31, 2003
compared to a net loss, excluding the noncash cumulative effect of the
accounting change, of $0.7 million in the three-month period ended March 31,
2002. Net cash provided by operating activities for the three months ended March
31, 2003 was $1.6 million. Net cash provided by operating activities primarily
funded substantially all capital expenditures of $1.7 million (net of
disposals). Net cash used in investing activities for the three months ended
March 31, 2003 was $7.6 million. Net cash provided by financing activities for
the three months ended March 31, 2003 was $4.9 million.
Cash Flow
Net cash provided by operating activities is generally the cash effects of
transactions and other events used in the determination of net income or loss.
Net cash provided by operating activities of $1.6 million in the first three
months of 2003 increased $0.3 million, or 26.6%, from the first three months of
2002. This increase reflected lower trade vendor and income tax payments,
partially offset by lower operating profit. During the first three months of
2003, we experienced a decrease in working capital of $2.7 million, primarily
from decreases in receivables and assets held for sale, which were partially
offset by a reduction in accounts payable.
We define free cash flow as net cash provided by operating activities less
purchases of property, plant and equipment (net of disposals). Free cash flow is
a performance measure not prepared in accordance with generally accepted
accounting principles ("GAAP"). Our management uses free cash flow in managing
our business because we consider it to be an important indicator of our ability
to service our debt and generate cash for acquisitions and other strategic
investments. We believe free cash flow may provide users of our financial
information additional meaningful comparisons between current results and
results in prior operating periods. As a non-GAAP financial measure, free cash
flow should be viewed in addition to, and not as an alternative for, our
reported operating results or cash flow from operations or any other measure of
performance prepared in accordance with GAAP.
Our historical net cash provided by operating activities and free cash flow
is as follows (in thousands):
Three Months
Ended March 31
--------------------------------
2003 2002
------------ ------------
(unaudited)
Net cash provided by operating activities .......................... $ 1,617 $ 1,277
Less: Purchases of property and equipment (net of disposals) ....... (1,672) (2,523)
------------ ------------
Free cash flow .................................................. $ (55) $ (1,246)
============ ============
12
Net cash used in investing activities of $7.6 million in the first three
months of 2003 decreased $13.3 million, or 63.7%, from the first three months of
2002 total of $20.9 million, primarily due to decreases in funds used for
acquisitions. Net cash provided by financing activities of $4.9 million
decreased $11.8 million, or 70.8%, from the first three months of 2002 total of
$16.7 million. Cash provided by financing activities consisted primarily of net
borrowings used to fund acquisitions.
The result is that cash and cash equivalents, which totaled $3.6 million
at March 31, 2003, decreased $1.1 million, or 23.4%, from December 31, 2002.
Acquisitions
In February 2003, we completed the acquisition of Builders Redi-Mix Inc.,
which produces and distributes ready-mixed concrete in the greater Lansing,
Michigan market. The aggregate purchase price of this transaction was
approximately $10.5 million, comprised of $5.8 million in cash, net of cash
acquired, and transaction costs of $0.4 million, with the remaining portion of
the purchase price paid through the issuance of 920,726 shares of common stock
(valued at $4.3 million). The aggregate purchase price of $10.5 million has been
allocated to the fair value of property and equipment of $3.8 million, other net
assets of $0.6 million (net of $2.0 million of assumed liabilities) and goodwill
of $6.1 million.
Capital Resources
We have a $200 million secured revolving credit facility scheduled to
expire in May 2004. We may use the facility for financing acquisitions and
internal expansion of operations, working capital and general corporate
purposes. At our option, we can borrow at alternative variable interest rates
under the facility. We pay commitment fees on the unused portion of this
facility at a current annual rate of 0.50%. At March 31, 2003, we had $71.6
million of outstanding borrowings under this facility. As of March 31, 2003,
rates on the outstanding borrowings were as follows:
Outstanding Amount Formula Effective Rate
---------------------------- --------------------- --------------------
$70.0 million LIBOR + 2.50% 3.88%
1.6 million Prime + 1.50% 5.75%
Our subsidiaries have fully and unconditionally guaranteed the repayment of
all amounts owing under the facility, and we collateralized the facility with
the capital stock and assets of our subsidiaries on a joint and several basis.
The facility: (1) requires the consent of the lenders for acquisitions; (2)
prohibits the payment of cash dividends on our common stock; (3) limits our
ability to incur additional indebtedness; and (4) requires us to comply with
financial covenants, including leverage ratios, an asset coverage ratio, a
minimum net worth calculation, a limitation on additional indebtedness and a
prohibition of cash dividends on our common stock. Our failure to comply with
these covenants and restrictions would constitute an event of default under the
facility. Effective as of April 4, 2003, we entered into a second amendment to
our secured revolving credit facility to adjust the total leverage and fixed
charge coverage ratios. We have filed the amendment as an exhibit to this
report. For the quarter ended March 31, 2003, we were in compliance with these
covenants, as amended. We are currently seeking to extend the maturity of our
secured revolving credit facility. We expect to finalize the extension of the
facility during the second half of 2003.
At March 31, 2003, we had $128.4 million of remaining capacity under this
facility, of which we could borrow $10.5 million based on our leverage ratio at
that date. Our ability to borrow additional amounts would increase to the extent
that we use the facility to fund the acquisition of additional businesses with
positive cash flow.
Our 12.00% senior subordinated notes are outstanding in the aggregate
principal amount of $95 million and have a maturity date of November 10, 2010.
These notes: (1) are mandatorily repayable in equal annual installments of
approximately $13.6 million on November 10 in each of the years 2004 through
2010; (2) are subordinated in right of payment to the indebtedness outstanding
under the credit facility; (3) are guaranteed by our subsidiaries; and (4)
require us to comply with covenants generally consistent with those required
under the credit facility. Effective as of April 9, 2003, we entered into a
second amendment to the note purchase agreement to adjust the total leverage
ratio. We have filed the amendment as an exhibit to this report.
Based on current expectations, our management believes that our internally
generated cash flow and access to existing credit facilities are sufficient to
meet the liquidity requirements necessary to fund operations, capital
requirements and debt service payments for at least the next 12 months. However,
our ability to maintain existing credit facilities can be impacted by economic
conditions outside of our control. The continuation of our growth strategy will
require substantial capital. We currently intend to finance future acquisitions
through issuances of our equity or debt securities, including convertible
securities, and borrowings under our credit facility. The use of debt to
complete acquisitions could substantially limit our operating and financial
flexibility and the use of equity securities or convertible securities for this
purpose may result in
13
dilution to our then existing stockholders. The extent to which we will be able
or willing to use our common stock to make acquisitions will depend on its
market value from time to time and the willingness of potential sellers to
accept it as full or partial payment. If we are unable to obtain additional
capital on acceptable terms, we may be unable to grow through significant
acquisitions.
Commitments
In the normal course of business, we are currently contingently liable for
performance under $22.7 million in performance bonds that various states and
municipalities have required. The bonds are principally related to construction
contracts, reclamation obligations and mining permits. We have indemnified the
underwriting insurance company against any exposure under the performance bonds.
In our past experience, no material claims have been made against these bonds.
The following are our contractual commitments associated with our
indebtedness and our lease obligations and purchase agreements as of March 31,
2003 (in millions):
Less Than After
Contractual obligations Total 1 year 1-3 years 4-5 years 5 years
- --------------------------------------- ------------ ------------- ------------- ------------ ------------
Principal on long-term debt .......... $ 166.7 $ 0.1 $ 112.3 $ 27.2 $ 27.1
Interest on long-term debt (1) ....... 54.1 8.5 29.3 11.4 4.9
Operating leases ..................... 34.2 7.6 19.8 5.5 1.3
Contingent purchase obligations ...... 0.9 0.9 0.0 0.0 0.0
------------ ------------- ------------- ------------ ------------
Total ................................ $ 255.9 $ 17.1 $ 161.4 $ 44.1 $ 33.3
============ ============= ============= ============ ============
(1) Interest payments due under our 12% Senior Subordinated Notes.
We do not have any other material financial guarantees or off-balance sheet
arrangements other than those disclosed herein.
Environmental Matters
We are subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions and wastewater
discharge. Our management believes we are in substantial compliance with
applicable environmental laws and regulations. From time to time, we receive
claims from federal and state environmental regulatory agencies and entities
asserting that we may be in violation of environmental laws and regulations.
Based on our experience and the information currently available, our management
believes these claims will not have a material impact on our consolidated
financial position, results of operations or cash flows. Despite compliance and
experience, it is possible that we could be held liable for future charges that
might be material but are not currently known or estimable. In addition, changes
in federal or state laws, regulations or requirements or discovery of currently
unknown conditions could require additional expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not enter into derivatives or other financial instruments for trading
or speculative purposes. Because of the short duration of our investments,
changes in market interest rates would not have a significant impact on their
fair value.
We have exposure to market risk from changes in interest rates for our debt
instruments. Outstanding borrowings under our credit facility were $71.6 million
at March 31, 2003. The weighted average interest rate under our credit facility
was 3.94% as of March 31, 2003. A change of one percent in the interest rate
would cause a change in interest expense on these outstanding borrowings of
approximately $716,000 ($422,000, net of tax), or $0.02 per share, on an
annualized basis. Borrowings made under the revolving credit facility bear
interest at variable rates based on the lenders' prime lending rate or the
applicable Eurodollar interest rate.
Our operations are subject to factors affecting the level of general
construction activity, including the level of interest rates and availability of
funds for construction. A significant decrease in the level of general
construction activity in any of our market areas may have a material adverse
effect on our sales and earnings.
14
Item 4. Controls and Procedures
Within the 90-day period immediately preceding the filing of this report,
an evaluation was carried out under the supervision and with the participation
of our management, including our chief executive officer and chief financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934). Based on that evaluation, our chief executive
officer and chief financial officer concluded that the design and operation of
our disclosure controls and procedures were effective as of the date of that
evaluation. There have been no significant changes in our internal controls or
in other factors that could significantly affect those controls subsequent to
the date of that evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information about litigation involving us, see note 11 to the condensed
consolidated financial statements in Part I of this report, which we incorporate
by reference into this Item 1.
Item 2. Changes in Securities and Use of Proceeds
(c) Unregistered Sales of Securities.
Between January 1, 2003 and March 31, 2003, we issued 920,726 shares of
common stock (valued at $4.3 million) as part of the consideration we paid to
the former owners of a business we acquired in that period. We issued those
shares without registration under the Securities Act in reliance on the
exemption Section 4(2) of the Securities Act provides for transactions not
involving any public offering.
Item 4. Submission of Matters to a Vote of Security Holders
1. At the annual meeting of shareholders held April 29, 2003, shareholders
elected Eugene P. Martineau and T. William Porter as Directors of U.S. Concrete,
Inc. with terms expiring in 2006. Votes cast to elect Eugene P. Martineau were
20,827,597 for and 673,462 withheld, with no abstentions and broker non-votes.
Votes cast to elect T. William Porter were 20,369,074 for and 1,131,985
withheld, with no abstentions and broker non-votes. Terms of office for
continuing directors expire (1) in 2004 for Vincent D. Foster, John R. Colson
and Mary P. Ricciardello and (2) in 2005 for Robert S. Walker and Murray S.
Simpson. On April 29, 2003, Michael W. Harlan, William T. Albanese and Michael
D. Mitschele resigned as a member of our board of directors.
2. At the annual meeting of shareholders held April 29, 2003, shareholders
ratified the appointment of PricewaterhouseCoopers LLP as the independent
auditors of U.S. Concrete, Inc. for the year ending December 31, 2003. Votes
cast to ratify PricewaterhouseCoopers were 21,342,839 for and 65,815 withheld,
with 92,405 abstentions and no broker non-votes.
15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number Description
- ----------- ------------------------------------------------------------------
3.1* --Restated Certificate of Incorporation of U.S. Concrete, Inc.
(Form S-1 (Reg. No. 333-74855), Exhibit 3.1).
3.2* --Amended and Restated Bylaws of U.S. Concrete, Inc., as amended
(Post Effective Amendment No. 1 to Form S-3 (Reg. No. 333-
42860), Exhibit 4.2).
3.3* --Certificate of Designations of Series A Junior Participating
Preferred Stock (Form 10-Q for the quarter ended June 30, 2000
(File No. 000-26025) Exhibit 3.3).
4.1* --Amended and Restated Credit Agreement, dated as of August 31,
2001, the parties to which include U.S. Concrete, Inc., the
Guarantors named therein, the Lenders named therein, JPMorgan
Chase Bank, as administrative agent (Form 10-Q for the quarter
ended September 30, 2001 (File No. 000-26025), Exhibit 4.1).
4.2* --First Amendment to Exhibit 4.1(Form 10-Q for the quarter ended
June 30, 2002 (File No. 000-26025), Exhibit 4.2).
4.3* --New Lender Acceptance, dated June 12, 2002, under Exhibit 4.1
(Form 10-Q for the quarter ended June 30, 2002 (File No.
000-26025), Exhibit 4.3).
4.4 --Second Amendment to Exhibit 4.1.
4.5* --Note Purchase Agreement, dated November 10, 2000, the parties to
which include U.S. Concrete, Inc., The Prudential Insurance
Company of America, Metropolitan Life Insurance Company,
Teachers Insurance & Annuity Association, Connecticut General
Life Insurance Company, Allstate Life Insurance Company,
Allstate Life Insurance Company of New York and Southern Farm
Bureau Life Insurance Company (Form 10-K for the year ended
December 31, 2000 (File No. 000-26025), Exhibit 4.4).
4.6* --First Amendment to Exhibit 4.5 (Form 10-K for the year ended
December 31, 2001 (File No. 000-26025), Exhibit 4.4).
4.7 --Second Amendment to Exhibit 4.5.
99.1 --Certification by U.S. Concrete's Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.
99.2 --Certification by U.S. Concrete's Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.
* Incorporated by reference to the filing indicated.
(b) Reports on Form 8-K.
We did not file any current reports on Form 8-K during the quarter
ended March 31, 2003.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. CONCRETE, INC.
Date: May 12, 2003 By: /s/ Michael W. Harlan
--------------------------------
Michael W. Harlan
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
17
CERTIFICATIONS
I, Eugene P. Martineau, chief executive officer of U.S. Concrete, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of U.S. Concrete,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
May 12, 2003
/s/ Eugene P. Martineau
---------------------------
Eugene P. Martineau
Chief Executive Officer
18
I, Michael W. Harlan, chief financial officer of U.S. Concrete, Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of U.S. Concrete, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
May 12, 2003
/s/ Michael W. Harlan
---------------------------
Michael W. Harlan
Chief Financial Officer
19
INDEX TO EXHIBITS
Exhibit
Number Description
- ---------- -------------------------------------------------------------------
3.1* --Restated Certificate of Incorporation of U.S. Concrete, Inc.
(Form S-1 (Reg. No. 333-74855), Exhibit 3.1).
3.2* --Amended and Restated Bylaws of U.S. Concrete, Inc., as amended
(Post Effective Amendment No. 1 to Form S-3 (Reg. No. 333-
42860), Exhibit 4.2).
3.3* --Certificate of Designations of Series A Junior Participating
Preferred Stock (Form 10-Q for the quarter ended June 30, 2000
(File No. 000-26025) Exhibit 3.3).
4.1* --Amended and Restated Credit Agreement, dated as of August 31,
2001, the parties to which include U.S. Concrete, Inc., the
Guarantors named therein, the Lenders named therein, JPMorgan
Chase Bank, as administrative agent (Form 10-Q for the quarter
ended September 30, 2001 (File No. 000-26025), Exhibit 4.1).
4.2* --First Amendment to Exhibit 4.1 (Form 10-Q for the quarter ended
June 30, 2002 (File No. 000-26025), Exhibit 4.2).
4.3* --New Lender Acceptance, dated June 12, 2002, under Exhibit 4.1
(Form 10-Q for the quarter ended June 30, 2002 (File No. 000-
26025), Exhibit 4.3).
4.4 --Second Amendment to Exhibit 4.1.
4.5* --Note Purchase Agreement, dated November 10, 2000, the parties
to which include U.S. Concrete, Inc., The Prudential Insurance
Company of America, Metropolitan Life Insurance Company,
Teachers Insurance & Annuity Association, Connecticut General
Life Insurance Company, Allstate Life Insurance Company,
Allstate Life Insurance Company of New York and Southern Farm
Bureau Life Insurance Company (Form 10-K for the year ended
December 31, 2000 (File No. 000-26025), Exhibit 4.4).
4.6* --First Amendment to Exhibit 4.5 (Form 10-K for the year ended
December 31, 2001 (File No. 000-26025), Exhibit 4.4).
4.7 --Second Amendment to Exhibit 4.5.
99.1 --Certification by U.S. Concrete's Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.
99.2 --Certification by U.S. Concrete's Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.
* Incorporated by reference to the filing indicated.
20