U.S. Concrete Announces Third Quarter 2017 Results

EULESS, Texas, Nov. 3, 2017 /PRNewswire/ -- U.S. Concrete, Inc. (NASDAQ: USCR), a leading producer of construction materials in select major markets across the United States, today reported results for the quarter ended September 30, 2017. 

Third Quarter 2017 Highlights Compared to Third Quarter 2016

• Consolidated revenue increased 7.9% to $354.6 million
• Ready-mixed concrete revenue increased 8.6% to $323.6 million
• Ready-mixed concrete average sales price improved 3.0% to $136.62 per cubic yard
• Aggregate products revenue decreased 5.3% to $21.0 million
• Aggregate products average sales price improved 2.7% to $12.25 per ton
• Income from continuing operations of $24.3 million compared to $38.1 million
• Total Adjusted EBITDA¹ increased 1.3% to $54.7 million
• Net income per diluted share of $1.45 compared to $2.34
• Adjusted Net Income from Continuing Operations per Diluted Share¹ of $0.99 compared to $1.19

William J. Sandbrook, President, Chief Executive Officer and Vice Chairman of U.S. Concrete stated, "Despite significant weather-related challenges, we are pleased to report that U.S. Concrete reached new quarterly highs for both revenue and Adjusted EBITDA in the third quarter of 2017.  Our results continue to validate the strength of our market positions, the robustness of our regional construction economies and the operational excellence of our dedicated team members that helped us to produce solid growth in a quarter that was overshadowed by three devastating hurricanes and one of the wettest summers on record in Texas."

Mr. Sandbrook continued, "Our market strategy continues to prove successful and has enabled us to achieve our 27th straight quarter of year-over-year revenue growth and 26th straight quarter of ready-mixed concrete pricing growth.  We remain very optimistic for the future as the economic fundamentals across all of our markets continue to indicate a very positive outlook.  Our ready-mixed concrete backlog has grown 7.7% since the beginning of the year and we are optimistic about the growth prospects in our markets with construction spending expected to outpace the national average for the next 12-18 months in the San Francisco Bay area, the Dallas-Ft. Worth metroplex and the five boroughs of New York City."

Mr. Sandbrook concluded, "We continue to remain active in the acquisition market with our recently announced acquisitions in Northern California and Philadelphia and plans to acquire Polaris Materials.  We are excited about our opportunities for growth both organically and through acquisitions.  Our disciplined execution of our strategic growth plan will allow us to capitalize on the solid fundamental growth metrics in our markets and further enhance shareholder value."

THIRD QUARTER 2017 RESULTS COMPARED TO THIRD QUARTER 2016 RESULTS

Consolidated revenue increased 7.9% to $354.6 million, compared to $328.6 million in the prior year third quarter.   Revenue from the ready-mixed concrete segment increased $25.7 million, or 8.6%, compared to the prior year third quarter, driven by volume and pricing.  The Company's ready-mixed concrete sales volume was 2.4 million cubic yards, up 5.6% compared to the prior year third quarter.  We estimate that the inclement weather in Texas resulted in the deferral of approximately 200,000 cubic yards of concrete sales for the quarter.  Ready-mixed concrete average sales price per cubic yard increased $3.92, or 3.0%, to $136.62 compared to $132.70 in the prior year third quarter.  Ready-mixed concrete material spread increased 2.5% to $67.75 per cubic yard, compared to $66.10 per cubic yard in the prior year third quarter.  Ready-mixed concrete backlog at the end of the 2017 third quarter was approximately 7.9 million cubic yards, up 3.2% compared to the end of the prior year third quarter and up 7.7% from the end of 2016.  We estimate that the inclement weather in Texas resulted in the deferral of approximately 90,000 tons of aggregate sales for the quarter in addition to downward pressure in our New Jersey market from weather delays and project timing.  Aggregate products sales volume was 1.5 million tons, down 5.8% compared to the prior year third quarter.  Aggregate products average sales price improved 2.7% to $12.25 per ton in the 2017 third quarter compared to the prior year third quarter.

During the 2017 third quarter, operating income decreased $8.4 million to $27.7 million, with an operating income margin of 7.8% compared to 11.0% in the third quarter of 2016.  The third quarter of 2017 includes $1.9 million of hurricane-related losses from our U.S. Virgin Islands operations following Hurricanes Irma and Maria, $2.2 million of incremental dredge costs following a specific event at one of our quarries, and the negative impact of weather-related challenges in some of our major markets, including the Dallas/Fort Worth metroplex.  On a non-GAAP basis, our consolidated Adjusted Gross Profit increased $2.9 million to $78.0 million in the 2017 third quarter, with an Adjusted Gross Margin of 22.0% compared to 22.9% in the prior year third quarter.  Adjusted Gross Margin declined as a result of a change in overall product mix, including the negative impact of weather-related delays in some of our major markets that generally produce higher gross margin projects.  Adjusted Gross Profit and Adjusted Gross Margin are non-GAAP financial measures.  Please refer to the definitions, reconciliations and other information at the end of this press release. 

Selling, general and administrative ("SG&A") expenses were $30.1 million in the 2017 third quarter compared to $25.1 million in the prior year third quarter.  SG&A as a percentage of revenue was 8.5% in the 2017 third quarter compared to 7.6% in the prior year third quarter.  We incurred $2.0 million in acquisition-related costs during the third quarter of 2017 compared to $1.0 million in the third quarter of 2016 as the Company elevated the scale of its acquisition target profile resulting in increased diligence costs.  We also incurred $2.3 million in non-cash stock compensation expense during the third quarter of 2017 compared to $1.6 million in the third quarter of 2016.  On a non-GAAP basis, our Adjusted SG&A, which excludes acquisition-related professional fees and non-cash stock compensation expense, was $25.7 million for the 2017 third quarter compared to $22.5 million in the prior year third quarter, reflecting increased personnel-related costs to support our growth.  Adjusted SG&A as a percentage of revenue was 7.3% in the 2017 third quarter, compared to 6.9% in the prior year third quarter.  Adjusted SG&A and Adjusted SG&A as a percentage of revenue are non-GAAP financial measures.  Please refer to the definitions, reconciliations and other information at the end of this press release. 

During the 2017 third quarter, income from continuing operations was $24.3 million, as compared to $38.1 million in the 2016 third quarter.  Total Adjusted EBITDA of $54.7 million in the 2017 third quarter increased $0.7 million compared to the prior year third quarter.  Ready-mixed concrete segment Adjusted EBITDA increased $2.2 million to $53.6 million in the 2017 third quarter primarily due to higher volumes and selling prices, despite significant weather-related delays during the quarter.  Aggregate products Adjusted EBITDA of $6.2 million in the 2017 third quarter decreased $0.8 million compared to the prior year third quarter primarily related to lower production volumes, including the impact of weather-related delays during the quarter.  Total Adjusted EBITDA is a non-GAAP financial measure.  Please refer to the definitions, reconciliations and other information at the end of this press release.

For the third quarter of 2017, net income was $24.1 million, or $1.45 per diluted share, compared to net income of $38.0 million, or $2.34 per diluted share, in the third quarter of 2016.  Adjusted Net Income from Continuing Operations was $16.5 million, or $0.99 per diluted share in the third quarter of 2017, compared to $19.3 million, or $1.19 per diluted share, in the prior year third quarter, including the impact of a normalized tax rate of 40% in both periods.  Adjusted Net Income from Continuing Operations in the third quarter of 2017 excludes $13.1 million in non-cash derivative related income resulting from fair value changes in the Company's outstanding warrants, which also reflects their expiration on August 31, 2017, compared to non-cash derivative related income of $21.8 million during the third quarter of 2016.  In addition, Adjusted Net Income from Continuing Operations in the third quarter of 2017 excludes $1.9 million of hurricane related losses and $2.2 million of incremental dredge costs following a specific event at one of our quarries.  Adjusted Net Income from Continuing Operations is a non-GAAP financial measure.  Please refer to the definitions, reconciliations and other information at the end of this press release.

FIRST NINE MONTHS OF 2017 RESULTS COMPARED TO FIRST NINE MONTHS OF 2016

Consolidated revenue for the first nine months of 2017 increased 17.1% to $994.7 million, versus $849.4 million in the comparable prior year period driven by higher volume and pricing in both ready-mixed concrete and aggregate products.  Revenue from the ready-mixed concrete segment increased $138.7 million, or 18.0%, compared to the prior year period.  Aggregate products revenue increased $5.2 million, or 9.1%, compared to the prior year period.

During the first nine months of 2017, operating income increased $15.9 million to $79.3 million, with an operating income margin of 8.0% compared to 7.5% in the prior year period.  On a non-GAAP basis, our consolidated Adjusted Gross Profit increased $43.8 million to $218.8 million for the first nine months of 2017, with an Adjusted Gross Margin of 22.0% compared to 20.6% in the prior year period.  Adjusted Gross Profit and Adjusted Gross Margin are non-GAAP financial measures.  Please refer to the definitions, reconciliations and other information at the end of this press release.

For the first nine months of 2017, net income was $28.6 million compared to net income of $24.5 million for the first nine months of 2016.  During the first nine months of 2017, income from continuing operations was $29.1 million compared to $25.0 million in the first nine months of 2016.  Income from continuing operations as a percentage of revenue was 2.9% in the first nine months of 2017, which was flat to the prior year period.  For the first nine months of 2017, Total Adjusted EBITDA of $148.8 million increased by $35.1 million versus $113.7 million in the comparable prior year period.  Total Adjusted EBITDA as a percentage of revenue was 15.0% in the first nine months of 2017, compared to 13.4% in the prior year period.  Ready-mixed concrete segment Adjusted EBITDA increased by $33.0 million to $144.8 million in the first nine months of 2017, compared to the prior year period.  Aggregate products segment Adjusted EBITDA increased by $3.8 million to $18.9 million in the first nine months of 2017, compared to the prior year period.  Total Adjusted EBITDA is a non-GAAP financial measure.  Please refer to the definitions, reconciliations and other information at the end of this press release.

BALANCE SHEET AND LIQUIDITY

Net cash provided by operating activities in the third quarter of 2017 was $31.1 million compared to net cash provided by operating activities in the prior year third quarter of $56.8 million.  The reduction in net cash provided by operating activities in the third quarter of 2017 primarily related to changes in working capital.  The Company's Adjusted Free Cash Flow in the third quarter of 2017 was $16.4 million, which reflects the impact of working capital changes and increased purchases of property, plant and equipment, compared to $50.3 million in the prior year third quarter.  During the third quarter of 2017, the Company invested approximately $9.5 million for the purchase of a property with additional aggregate reserves adjacent to an existing quarry in New Jersey.  Adjusted Free Cash Flow is a non-GAAP financial measure.  Please refer to the definitions, reconciliations and other information at the end of this press release.

At September 30, 2017, the Company had cash and cash equivalents of $248.3 million and total debt of $688.4 million, resulting in Net Debt of $440.1 million.  Net Debt increased by $66.6 million from December 31, 2016, largely as a result of $45.5 million of equipment financing incurred during the first nine months of 2017.  The Company had a maximum of $245.8 million of unused availability under its revolving credit facility at September 30, 2017.  Net Debt is a non-GAAP financial measure.  Please refer to the definitions, reconciliations and other information at the end of this press release.

CONFERENCE CALL AND WEBCAST DETAILS

U.S. Concrete will host a conference call on Friday, November 3, 2017 at 10:00 a.m. Eastern time (9:00 a.m. Central), to review its third quarter 2017 results.  To participate in the call, please dial (877) 312-8806 – Conference ID: 8996328 at least ten minutes before the conference call begins and ask for the U.S. Concrete conference call. 

A live webcast will be available on the Investor Relations section of the Company's website at www.us-concrete.com.  Please visit the website at least 15 minutes before the call begins to register, download and install any necessary audio software.  A replay of the conference call and archive of the webcast will be available shortly after the call on the Investor Relations section of the Company's website at www.us-concrete.com.

ABOUT U.S. CONCRETE

U.S. Concrete serves the construction industry in several major markets in the United States through its two business segments: ready-mixed concrete and aggregate products.  The Company has 162 standard ready-mixed concrete plants, 17 volumetric ready-mixed concrete facilities, and 17 producing aggregates facilities.  During 2016, U.S. Concrete sold approximately 8.1 million cubic yards of ready-mixed concrete and approximately 5.6 million tons of aggregates.

For more information on U.S. Concrete, visit www.us-concrete.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains various forward-looking statements and information that are based on management's beliefs, as well as assumptions made by and information currently available to management.  These forward-looking statements speak only as of the date of this press release.  The Company disclaims any obligation to update these statements and cautions you not to rely unduly on them.  Forward-looking information includes, but is not limited to, statements regarding: the expansion of the business; the opportunities and results of our acquisitions; the prospects for growth in new and existing markets; encouraging nature of volume and pricing increases; the business levels of our existing markets; ready-mixed concrete backlog; ability to maintain our cost structure and monitor fixed costs; ability to maximize liquidity, manage variable costs, control capital spending and monitor working capital usage; and the adequacy of current liquidity.  Although U.S. Concrete believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that those expectations will prove to have been correct.  Such statements are subject to certain risks, uncertainties and assumptions, including, among other matters: general and regional economic conditions; the level of activity in the construction industry; the ability of U.S. Concrete to complete acquisitions and to effectively integrate the operations of acquired companies; development of adequate management infrastructure; departure of key personnel; access to labor; union disruption; competitive factors; government regulations; exposure to environmental and other liabilities; the cyclical and seasonal nature of U.S. Concrete's business; adverse weather conditions; the availability and pricing of raw materials; the availability of refinancing alternatives; results of litigation; and general risks related to the industry and markets in which U.S. Concrete operates. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected.  These risks, as well as others, are discussed in greater detail in U.S. Concrete's filings with the Securities and Exchange Commission, including U.S. Concrete's Annual Report on Form 10-K for the year ended December 31, 2016.

(Tables Follow)

SEGMENT FINANCIAL INFORMATION

Our two reportable segments consist of ready-mixed concrete and aggregate products. Our chief operating decision maker evaluates segment performance and allocates resources based on Adjusted EBITDA.  The following tables set forth certain unaudited financial information relating to our continuing operations by reportable segment (in thousands, except average sales price amounts):

NON-GAAP FINANCIAL MEASURES
(Unaudited)

Total Adjusted EBITDA and Total Adjusted EBITDA Margin

Total Adjusted EBITDA and Total Adjusted EBITDA Margin are non-GAAP financial measures.  We define Total Adjusted EBITDA as our income (loss) from continuing operations, excluding the impact of income tax expense (benefit), depreciation, depletion and amortization, net interest expense, loss on extinguishment of debt, derivative loss (income), non-cash change in value of contingent consideration, hurricane-related losses, quarry dredge costs for specific event, non-cash stock compensation expense, acquisition-related professional fees, and officer severance.  Acquisition-related professional fees consists of fees and expenses for accountants, lawyers and other professionals incurred during the negotiation and closing of strategic acquisitions and does not include fees or expenses associated with post-closing integration of strategic acquisitions.  We define Total Adjusted EBITDA Margin as the amount determined by dividing Total Adjusted EBITDA by total revenue.  We have included Total Adjusted EBITDA and Total Adjusted EBITDA Margin herein because they are widely used by investors for valuation and comparing our financial performance with the performance of other building material companies.  We also use Total Adjusted EBITDA and Total Adjusted EBITDA Margin to monitor and compare the financial performance of our operations.  Total Adjusted EBITDA does not give effect to the cash we must use to service our debt or pay our income taxes and thus does not reflect the funds actually available for capital expenditures.  In addition, our presentation of Total Adjusted EBITDA may not be comparable to similarly titled measures other companies report.  Total Adjusted EBITDA and Total Adjusted EBITDA Margin are not intended to be used as an alternative to any measure of our performance in accordance with GAAP.  The following table reconciles Total Adjusted EBITDA to the most directly comparable GAAP financial measure, which is income (loss) from continuing operations (in thousands).

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted Gross Profit and Adjusted Gross Margin are non-GAAP financial measures.  We define Adjusted Gross Profit as our income from operations, excluding the impact of depreciation, depletion and amortization ("DD&A"), selling, general and administrative expenses, change in value of contingent consideration, hurricane-related losses in cost of goods sold ("COGS") before DD&A, quarry dredge costs for specific event, and loss (gain) on disposal of assets, net.  We define Adjusted Gross Margin as the amount determined by dividing Adjusted Gross Profit by total revenue.  We have included Adjusted Gross Profit and Adjusted Gross Margin herein because they are widely used by investors for valuing and comparing our financial performance from period to period.  We also use Adjusted Gross Profit and Adjusted Gross Margin to monitor and compare the financial performance of our operations.  Adjusted Gross Profit and Adjusted Gross Margin are not intended to be used as an alternative to any measure of our performance in accordance with GAAP.  The following table reconciles Adjusted Gross Profit to the most directly comparable GAAP financial measure, which is operating income (in thousands).

Adjusted SG&A and Adjusted SG&A as a Percentage of Revenue

Adjusted selling, general and administrative ("SG&A") and Adjusted SG&A as a percentage of revenue are non-GAAP financial measures.  We define Adjusted SG&A as selling, general and administrative expenses, excluding the impact of non-cash stock compensation expense, acquisition-related professional fees, and officer severance.  We define Adjusted SG&A as a percentage of revenue as Adjusted SG&A divided by total revenue.  We have included Adjusted SG&A and Adjusted SG&A as a percentage of revenue herein because they are used by investors to compare our SG&A leverage with the performance of other building materials companies.  We use Adjusted SG&A and Adjusted SG&A as a percentage of revenue to monitor and compare the financial performance of our operations.  Adjusted SG&A and Adjusted SG&A as a percentage of revenue are not intended to be used as an alternative to any measure of our performance under GAAP.  The following table reconciles Adjusted SG&A to the most directly comparable GAAP financial measure, which is SG&A (in thousands).

Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations per Diluted Share

Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations per Diluted Share are non-GAAP financial measures.  We define Adjusted Net Income from Continuing Operations as net income (loss), excluding the impact of loss (income) from discontinued operations, net of taxes, income tax expense (benefit), derivative loss (income), loss on extinguishment of debt, hurricane-related losses, quarry dredge costs for specific event, non-cash stock compensation expense, acquisition-related professional fees, officer severance and non-cash change in value of contingent consideration.  We also adjust Adjusted Net Income from Continuing Operations for a normalized effective income tax rate of 40%.  We define Adjusted Net Income from Continuing Operations per Diluted Share as Adjusted Net Income from Continuing Operations on a diluted per share basis.  Acquisition-related professional fees consists of fees and expenses for accountants, lawyers and other professionals incurred during the negotiation and closing of strategic acquisitions and does not include fees or expenses associated with post-closing integration of strategic acquisitions.

We have included Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations per Diluted Share herein because they are used by investors for valuation and comparing our financial performance with the performance of other building material companies.  We use Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations per Diluted Share to monitor and compare the financial performance of our operations.  Adjusted Net Income from Continuing Operations and Adjusted Net Income from Continuing Operations per Diluted Share are not intended to be used as an alternative to any measure of our performance in accordance with GAAP.

The following tables reconcile (i) Adjusted Net Income from Continuing Operations to the most directly comparable GAAP financial measure, which is net income (loss) and (ii) Adjusted Net Income from Continuing Operations per Diluted Share to the most directly comparable GAAP financial measure, which is net income (loss) per diluted share (in thousands, except per share amounts).

Adjusted Free Cash Flow

Adjusted Free Cash Flow is a non-GAAP financial measure.  We define Adjusted Free Cash Flow as net cash provided by operating activities less capital expenditures, plus proceeds from the sale of property, plant and equipment, proceeds from disposals of acquired businesses and insurance proceeds from property loss claim.  We consider Adjusted Free Cash Flow to be an important indicator of our ability to service our debt and generate cash for acquisitions and other strategic investments.  However, Adjusted Free Cash Flow is not intended to be used as an alternative to any measure of our liquidity in accordance with GAAP.  The following table reconciles Adjusted Free Cash Flow to the most directly comparable GAAP financial measure, which is net cash provided by operating activities (in thousands).

Net Debt

Net Debt is a non-GAAP financial measure.  We define Net Debt as total debt, including current maturities and capital lease obligations, less cash and cash equivalents.  We believe that Net Debt is useful to investors as a measure of our financial position.  We use Net Debt to monitor and compare our financial position from period to period.  However, Net Debt is not intended to be used as an alternative to any measure of our financial position in accordance with GAAP.  The following table reconciles Net Debt to the most directly comparable GAAP financial measure, which is total debt, including current maturities and capital lease obligations (in thousands).

Net Debt to Total Adjusted EBITDA

Net Debt to Total Adjusted EBITDA is a non-GAAP financial measure.  We define Net Debt to Total Adjusted EBITDA as Net Debt divided by Total Adjusted EBITDA for the applicable last twelve-month period.  We believe that Net Debt to Total Adjusted EBITDA is useful to investors as a measure of our financial position.  We use this measure to monitor and compare our financial position from period to period.  However, Net Debt to Total Adjusted EBITDA is not intended to be used as an alternative to any measure of our financial position in accordance with GAAP.  The following table presents our calculation of Net Debt to Total Adjusted EBITDA and the most directly comparable GAAP ratio, which is total debt to last twelve months ("LTM") income from continuing operations (in thousands).

Source: USCR-E

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SOURCE U.S. Concrete, Inc.