U.S. Concrete Announces Third Quarter 2017 Results

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)

U.S. CONCRETE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2017				2016				2017				2016
Revenue	$	354,628			$	328,588			$	994,687			$	849,383
Cost of goods sold before depreciation, depletion and amortization	278,995				253,477				778,328				674,451
Selling, general and administrative expenses	30,056				25,104				86,073				71,447
Depreciation, depletion and amortization	16,593				14,139				48,802				38,795
Change in value of contingent consideration	719				714				2,047				2,325
Impairment of assets	648				—				648				—
Loss (gain) on disposal of assets, net	(106)				(1,003)				(496)				(1,016)
Operating income	27,723				36,157				79,285				63,381
Interest expense, net	10,552				7,635				31,062				19,933
Derivative loss (income)	(13,119)				(21,772)				791				(6,430)
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