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Summit Materials (SUM)

Filed: 11 May 21, 12:14pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
(Mark One)


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                       
Commission file numbers:
001-36873 (Summit Materials, Inc.)
333-187556 (Summit Materials, LLC)
SUMMIT MATERIALS, INC.
SUMMIT MATERIALS, LLC
(Exact name of registrants as specified in their charters)

Delaware (Summit Materials, Inc.)47-1984212
Delaware (Summit Materials, LLC)26-4138486
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1550 Wynkoop Street, 3rd Floor80202
Denver, Colorado(Zip Code)
(Address of principal executive offices)

Registrants’ telephone number, including area code: (303) 893-0012
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock (par value $.01 per share)SUMNew York Stock Exchange
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.
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Summit Materials, Inc.     
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Summit Materials, LLC     
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
As of May 7, 2021, the number of shares of Summit Materials, Inc.’s outstanding Class A and Class B common stock, par value $0.01 per share for each class, was 117,362,411 and 99, respectively.
As of May 7, 2021, 100% of Summit Materials, LLC’s outstanding limited liability company interests were held by Summit Materials Intermediate Holdings, LLC, its sole member and an indirect subsidiary of Summit Materials, Inc.



EXPLANATORY NOTE
 
This quarterly report on Form 10-Q (this “report”) is a combined quarterly report being filed separately by two registrants: Summit Materials, Inc. and Summit Materials, LLC. Each registrant hereto is filing on its own behalf all of the information contained in this report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information. We believe that combining the quarterly reports on Form 10-Q of Summit Materials, Inc. and Summit Materials, LLC into this single report eliminates duplicative and potentially confusing disclosure and provides a more streamlined presentation since a substantial amount of the disclosure applies to both registrants.
 
Unless stated otherwise or the context requires otherwise, references to “Summit Inc.” mean Summit Materials, Inc., a Delaware corporation, and references to “Summit LLC” mean Summit Materials, LLC, a Delaware limited liability company. The references to Summit Inc. and Summit LLC are used in cases where it is important to distinguish between them. We use the terms “we,” “our,” “us” or “the Company” to refer to Summit Inc. and Summit LLC together with their respective subsidiaries, unless otherwise noted or the context otherwise requires.
 
Summit Inc. was formed on September 23, 2014 to be a holding company. As of April 3, 2021, its sole material asset was a 98.2% economic interest in Summit Materials Holdings L.P., a Delaware limited partnership (“Summit Holdings”). Summit Inc. has 100% of the voting rights of Summit Holdings, which is the indirect parent of Summit LLC. Summit LLC is a co-issuer of our outstanding 5 1/8% senior notes due 2025 (“2025 Notes”), our 6 1/2 % senior notes due 2027 (“2027 Notes”) and our 5 1/4% senior notes due 2029 (“2029 Notes” and collectively with the 2025 Notes and the 2027 Notes, the “Senior Notes”). Summit Inc.’s only revenue for the three months ended April 3, 2021 was that generated by Summit LLC and its consolidated subsidiaries. Summit Inc. controls all of the business and affairs of Summit Holdings and, in turn, Summit LLC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report includes “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “trends,” “plans,” “estimates,” “projects” or “anticipates” or similar expressions that concern our strategy, plans, expectations or intentions. All statements made relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, it is very difficult to predict the effect of known factors, and, of course, it is impossible to anticipate all factors that could affect our actual results. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be realized. Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements, including but not limited to the factors discussed in the section entitled “Risk Factors” in Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”), any factors discussed in the section entitled “Risk Factors” of this report and the following:

our dependence on the construction industry and the strength of the local economies in which we operate;
the cyclical nature of our business;
risks related to weather and seasonality;
risks associated with our capital-intensive business;
competition within our local markets;
our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;
our ability to implement and successfully execute on our Elevate Summit strategy;
our dependence on securing and permitting aggregate reserves in strategically located areas;
the impact of the coronavirus (“COVID-19”) pandemic, or any similar crisis, on our business;



declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies;
our reliance on private investment in infrastructure, which may be adversely affected by periods of economic stagnation and recession;
environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;
costs associated with pending and future litigation;
rising prices for commodities, labor and other production and delivery inputs as a result of inflation or otherwise;
conditions in the credit markets;
our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;
material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;
cancellation of a significant number of contracts or our disqualification from bidding for new contracts;
special hazards related to our operations that may cause personal injury or property damage not covered by insurance;
unexpected factors affecting self-insurance claims and reserve estimates;
our substantial current level of indebtedness, including our exposure to variable interest rate risk;
our dependence on senior management team, and our ability to retain and attract other qualified personnel;
supply constraints or significant price fluctuations in the electricity and petroleum-based resources that we use, including diesel and liquid asphalt;
climate change and climate change legislation or regulations;
unexpected operational difficulties;
interruptions in our information technology systems and infrastructure, including cybersecurity and data leakage risks; and
potential labor disputes, strikes, other forms of work stoppage or other union activities.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.
 
Any forward-looking statement that we make herein speaks only as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

 CERTAIN DEFINITIONS
 
As used in this report, unless otherwise noted or the context otherwise requires:
 
“EBITDA” refers to net income (loss) before interest expense (income), income tax expense (benefit) and depreciation, depletion and amortization;
“Finance Corp.” refers to Summit Materials Finance Corp., an indirect wholly-owned subsidiary of Summit LLC and the co-issuer of the Senior Notes;
“Issuers” refers to Summit LLC and Finance Corp. as co‑issuers of the Senior Notes;  
“LP Units” refers to the Class A limited partnership units of Summit Holdings; and
“TRA” refers to a tax receivable agreement between Summit Inc. and certain current and former holders of LP Units and their permitted assignees.



Corporate Structure
The following chart summarizes our organizational structure, equity ownership and our principal indebtedness as of April 3, 2021. This chart is provided for illustrative purposes only and does not show all of our legal entities or all obligations of such entities.
sum-20210403_g1.jpg
(1)SEC registrant.
(2)The shares of Class B Common Stock are currently held by pre-IPO investors, including certain members of management or their family trusts that directly hold LP Units.  A holder of Class B Common Stock is entitled, without regard to the number of shares of Class B Common Stock held by such holder, to a number of votes that is equal to the aggregate number of LP Units held by such holder.
(3)Guarantor under the senior secured credit facilities, but not the Senior Notes.
(4)Summit LLC and Finance Corp are the issuers of the Senior Notes and Summit LLC is the borrower under our senior secured credit facilities. Finance Corp. was formed solely for the purpose of serving as co-issuer or guarantor of certain indebtedness, including the Senior Notes. Finance Corp. does not and will not have operations of any kind and does not and will not have revenue or assets other than as may be incidental to its activities as a co-issuer or guarantor of certain indebtedness.


SUMMIT MATERIALS, INC.
SUMMIT MATERIALS, LLC 
FORM 10-Q 
TABLE OF CONTENTS  



PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets 
(In thousands, except share and per share amounts)
 April 3, 2021January 2, 2021
 (unaudited)(audited)
Assets  
Current assets:  
Cash and cash equivalents$359,741 $418,181 
Accounts receivable, net250,058 254,696 
Costs and estimated earnings in excess of billings17,124 8,666 
Inventories210,934 200,308 
Other current assets20,578 11,428 
Total current assets858,435 893,279 
Property, plant and equipment, less accumulated depreciation, depletion and amortization (April 3, 2021 - $1,170,071 and January 2, 2021 - $1,132,925)1,897,117 1,850,169 
Goodwill1,201,426 1,201,291 
Intangible assets, less accumulated amortization (April 3, 2021 - $12,502 and January 2, 2021 - $11,864)71,486 47,852 
Deferred tax assets, less valuation allowance (April 3, 2021 - $1,675 and January 2, 2021 - $1,675)240,565 231,877 
Operating lease right-of-use assets28,796 28,543 
Other assets53,432 55,000 
Total assets$4,351,257 $4,308,011 
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of debt$6,354 $6,354 
Current portion of acquisition-related liabilities13,372 10,265 
Accounts payable150,243 120,813 
Accrued expenses130,338 160,570 
Current operating lease liabilities7,480 8,188 
Billings in excess of costs and estimated earnings13,930 16,499 
Total current liabilities321,717 322,689 
Long-term debt1,891,522 1,892,347 
Acquisition-related liabilities31,015 12,246 
Tax receivable agreement liability325,832 321,680 
Noncurrent operating lease liabilities22,246 21,500 
Other noncurrent liabilities144,365 121,281 
Total liabilities2,736,697 2,691,743 
Commitments and contingencies (see note 12)00
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 116,644,332 and 114,390,595 shares issued and outstanding as of April 3, 2021 and January 2, 2021, respectively1,167 1,145 
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of April 3, 2021 and January 2, 2021
Additional paid-in capital1,289,267 1,264,681 
Accumulated earnings304,255 326,772 
Accumulated other comprehensive income6,838 5,203 
Stockholders’ equity1,601,527 1,597,801 
Noncontrolling interest in Summit Holdings13,033 18,467 
Total stockholders’ equity1,614,560 1,616,268 
Total liabilities and stockholders’ equity$4,351,257 $4,308,011 

See notes to unaudited consolidated financial statements.
1

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except share and per share amounts) 
 Three months ended
 April 3, 2021March 28, 2020
Revenue:  
Product$354,234 $305,307 
Service44,247 37,099 
Net revenue398,481 342,406 
Delivery and subcontract revenue29,363 24,784 
Total revenue427,844 367,190 
Cost of revenue (excluding items shown separately below):
Product277,134 254,055 
Service40,197 38,524 
Net cost of revenue317,331 292,579 
Delivery and subcontract cost29,363 24,784 
Total cost of revenue346,694 317,363 
General and administrative expenses51,642 41,686 
Depreciation, depletion, amortization and accretion56,336 51,778 
Gain on sale of property, plant and equipment(1,769)(1,917)
Operating loss(25,059)(41,720)
Interest expense24,186 27,818 
Gain on sale of business(15,668)
Other (income) loss, net(4,889)89 
Loss from operations before taxes(28,688)(69,627)
Income tax benefit(5,443)(22,901)
Net loss(23,245)(46,726)
Net loss attributable to Summit Holdings(728)(1,747)
Net loss attributable to Summit Inc.$(22,517)$(44,979)
Loss per share of Class A common stock:
Basic$(0.19)$(0.40)
Diluted$(0.20)$(0.40)
Weighted average shares of Class A common stock:
Basic115,664,725 113,602,110 
Diluted115,411,204 113,602,110 

See notes to unaudited consolidated financial statements.
2

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
(In thousands) 
 Three months ended
 April 3, 2021March 28, 2020
Net loss$(23,245)$(46,726)
Other comprehensive income (loss):
Foreign currency translation adjustment2,126 (8,359)
Less tax effect of other comprehensive (loss) income items(446)2,046 
Other comprehensive income (loss)1,680 (6,313)
Comprehensive loss(21,565)(53,039)
Less comprehensive loss attributable to Summit Holdings(683)(1,967)
Comprehensive loss attributable to Summit Inc.$(20,882)$(51,072)

See notes to unaudited consolidated financial statements.
3

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands) 
 Three months ended
 April 3, 2021March 28, 2020
Cash flow from operating activities:  
Net loss$(23,245)$(46,726)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion, amortization and accretion59,107 55,278 
Share-based compensation expense5,363 4,905 
Net gain on asset and business disposals(15,964)(1,933)
Change in deferred tax asset, net(10,145)(24,194)
Other483 1,611 
Decrease (increase) in operating assets, net of acquisitions and dispositions:
Accounts receivable, net4,946 19,939 
Inventories(15,412)(26,979)
Costs and estimated earnings in excess of billings(8,442)1,710 
Other current assets(9,209)(2,519)
Other assets2,504 5,543 
(Decrease) increase in operating liabilities, net of acquisitions and dispositions:
Accounts payable14,518 (2,712)
Accrued expenses(24,130)(20,776)
Billings in excess of costs and estimated earnings(2,578)245 
Tax receivable agreement liability4,152 993 
Other liabilities(3,266)(3,316)
Net cash used in operating activities(21,318)(38,931)
Cash flow from investing activities:
Purchases of property, plant and equipment(69,757)(61,829)
Proceeds from the sale of property, plant and equipment2,663 3,160 
Proceeds from sale of business33,077 
Other(483)1,801 
Net cash used in investing activities(34,500)(56,868)
Cash flow from financing activities:
Payments on debt(10,170)(5,493)
Payments on acquisition-related liabilities(8,096)(9,515)
Proceeds from stock option exercises15,920 310 
Other(416)(908)
Net cash used in financing activities(2,762)(15,606)
Impact of foreign currency on cash140 (800)
Net decrease in cash(58,440)(112,205)
Cash and cash equivalents—beginning of period418,181 311,319 
Cash and cash equivalents—end of period$359,741 $199,114 

See notes to unaudited consolidated financial statements.
4

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share amounts) 
 Summit Materials, Inc. 
 Accumulated
OtherClass AClass BAdditionalNoncontrollingTotal
AccumulatedComprehensiveCommon StockCommon StockPaid-inInterest inStockholders’
 Earningsincome (loss)SharesDollarsSharesDollarsCapitalSummit HoldingsEquity
Balance - January 2, 2021$326,772 $5,203 114,390,595 $1,145 99 $$1,264,681 $18,467 $1,616,268 
Net loss(22,517)— — — — — — (728)(23,245)
LP Unit exchanges— — 711,794 — — 4,744 (4,751)
Other comprehensive income, net of tax— 1,635 — — — — — 45 1,680 
Stock option exercises— — 863,338 — — 15,911 — 15,920 
Share-based compensation— — — — — — 5,363 — 5,363 
Shares redeemed to settle taxes and other— — 678,605 — — (1,432)— (1,426)
Balance - April 3, 2021$304,255 $6,838 116,644,332 $1,167 99 $$1,289,267 $13,033 $1,614,560 
Balance — December 28, 2019$188,805 $3,448 113,309,385 $1,134 99 $$1,234,020 $17,366 $1,444,773 
Net loss(44,979)— — — — — — (1,747)(46,726)
LP Unit exchanges— — 196,542 — — 1,132 (1,134)
Other comprehensive loss, net of tax— (6,093)— — — — — (220)(6,313)
Stock option exercises— — 13,335 — — 310 — 310 
Share-based compensation— — — — — — 4,905 — 4,905 
Shares redeemed to settle taxes and other— — 591,335 — — (1,096)— (1,090)
Balance — March 28, 2020$143,826 $(2,645)114,110,597 $1,142 99 $$1,239,271 $14,265 $1,395,859 

See notes to unaudited consolidated financial statements.
5

SUMMIT MATERIALS, INC.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
(Dollars in tables in thousands, except per share amounts or otherwise noted)
 
1.SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Summit Materials, Inc. (“Summit Inc.” and, together with its subsidiaries, “Summit,” “we,” “us,” “our” or the “Company”) is a vertically-integrated construction materials company. The Company is engaged in the production and sale of aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, 2 cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. It is also engaged in paving and related services. The Company’s 3 operating and reporting segments are the West, East and Cement segments.
 
Substantially all of the Company’s construction materials, products and services are produced, consumed and performed outdoors, primarily in the spring, summer and fall. Seasonal changes and other weather-related conditions can affect the production and sales volumes of its products and delivery of services. Therefore, the financial results for any interim period are typically not indicative of the results expected for the full year. Furthermore, the Company’s sales and earnings are sensitive to national, regional and local economic conditions, weather conditions and to cyclical changes in construction spending, among other factors.
 
Summit Inc. is a holding corporation operating and controlling all of the business and affairs of Summit Materials Holdings L.P. (“Summit Holdings”) and its subsidiaries and, through Summit Holdings, conducts its business. Summit Inc. owns the majority of the partnership interests of Summit Holdings (see Note 9, Stockholders’ Equity). Summit Materials, LLC (“Summit LLC”) an indirect wholly owned subsidiary of Summit Holdings, conducts the majority of our operations. Summit Materials Finance Corp. (“Summit Finance”), an indirect wholly owned subsidiary of Summit LLC, has jointly issued our Senior Notes as described below.
 
Basis of Presentation—These unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto as of and for the year ended January 2, 2021. The Company continues to follow the accounting policies set forth in those audited consolidated financial statements.
 
Management believes that these consolidated interim financial statements include all adjustments, normal and recurring in nature, that are necessary to present fairly the financial position of the Company as of April 3, 2021, the results of operations for the three months ended April 3, 2021 and March 28, 2020 and cash flows for the three months ended April 3, 2021 and March 28, 2020.
 
Principles of Consolidation—The consolidated financial statements include the accounts of Summit Inc. and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated.
 
For a summary of the changes in Summit Inc.’s ownership of Summit Holdings, see Note 9, Stockholders’ Equity.

Use of Estimates—Preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, tax receivable agreement ("TRA") liability, pension and other postretirement obligations and asset retirement obligations. Estimates also include revenue earned on contracts and costs to complete contracts. Most of the Company’s paving and related services are performed under fixed unit-price contracts with state and local governmental entities. Management regularly evaluates its estimates and assumptions based on historical experience and other factors, including the current economic environment. As future events and their effects cannot be determined with precision, actual results can differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, are reflected in the Company’s consolidated financial statements when the change in estimate occurs.
6

 
Business and Credit Concentrations—The Company’s operations are conducted primarily across 21 U.S. states and in British Columbia, Canada, with the most significant revenue generated in Texas, Utah, Kansas and Missouri. The Company’s accounts receivable consist primarily of amounts due from customers within these areas. Therefore, collection of these accounts is dependent on the economic conditions in the aforementioned states, as well as specific situations affecting individual customers. Credit granted within the Company’s trade areas has been granted to many customers, and management does not believe that a significant concentration of credit exists with respect to any individual customer or group of customers. No single customer accounted for more than 10% of the Company’s total revenue in the three months ended April 3, 2021 or March 28, 2020.

Revenue Recognition—We earn revenue from the sale of products, which primarily include aggregates, cement, ready-mix concrete and asphalt, but also include concrete products, and from the provision of services, which are primarily paving and related services.
Products: Revenue for product sales is recognized when evidence of an arrangement exists and when control passes, which generally is when the product is shipped. 
Services: We earn revenue from the provision of services, which are primarily paving and related services, which are typically calculated using monthly progress based on the percentage of completion or a customer’s engineer review of progress.
The majority of our construction service contracts are completed within one year, but may occasionally extend beyond this time frame. The majority of our construction service contracts are for work that occurs mostly during the spring, summer and fall. We generally measure progress toward completion on long-term paving and related services contracts based on the proportion of costs incurred to date relative to total estimated costs at completion.
The percentage of completion method of accounting involves the use of various estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes in specifications or other disputes.
 
Earnings per Share—The Company computes basic earnings per share attributable to stockholders by dividing income attributable to Summit Inc. by the weighted-average shares of Class A common stock outstanding. Diluted earnings per share reflects the potential dilution beyond shares for basic earnings per share that could occur if securities or other contracts to issue common stock were exercised, converted into common stock, or resulted in the issuance of common stock that would have shared in the Company’s earnings. Since the Class B common stock has no economic value, those shares are not included in the weighted-average common share amount for basic or diluted earnings per share. In addition, as the shares of Class A common stock are issued by Summit Inc., the earnings and equity interests of noncontrolling interests are not included in basic earnings per share.

Prior Period Reclassifications — Beginning in the first quarter of 2021, we have reclassified $31.2 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three months ended March 28, 2020 to conform to the current year presentation. In addition, we reclassified $1.9 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating loss, also to conform to the current year presentation. Lastly, we reclassified $0.8 million of transaction costs from its own line item within operating loss into general and administrative expenses for the three months ended March 28, 2020 to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no impact on previously reported operating income or Adjusted EBITDA, a non-GAAP measure described in note 14 below.
 
New Accounting Standards — In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces the accounting complexity of implementing a cloud computing service arrangement. The ASU aligns the capitalization of implementation costs among hosting arrangements and costs incurred to develop internal-use software. We adopted this ASU in the first quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework Changes to The Disclosure Requirements for Defined Benefits Plans, which modifies the disclosure requirements of employer-sponsored defined benefit and other postretirement benefits plans. The
7

ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We adopted this ASU in the fourth quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.

2.ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLES
 
The Company has completed numerous acquisitions since its formation, which have been financed through a combination of debt and equity funding and available cash. The operations of each acquisition have been included in the Company’s consolidated results of operations since the respective closing dates of the acquisitions. The Company measures all assets acquired and liabilities assumed at their acquisition-date fair value. Goodwill acquired during a business combination has an indefinite life and is not amortized.

Changes in the carrying amount of goodwill, by reportable segment, from January 2, 2021 to April 3, 2021 are summarized as follows:
 WestEastCement
Total  
Balance—January 2, 2021$586,209 $410,426 $204,656 $1,201,291 
Acquisitions (dispositions) (1)(670)(670)
Foreign currency translation adjustments805 805 
Balance—April 3, 2021$587,014 $409,756 $204,656 $1,201,426 
_______________________________________________________________________
(1) Reflects goodwill from acquisitions and dispositions completed during the three months ended April 3, 2021 and working capital adjustments from prior year acquisitions.

The Company’s intangible assets subject to amortization are primarily composed of operating permits, mineral lease agreements and reserve rights. Operating permits relate to permitting and zoning rights acquired outside of a business combination. The assets related to mineral lease agreements reflect the submarket royalty rates paid under agreements, primarily for extracting aggregates. The values were determined as of the respective acquisition dates by a comparison of market-royalty rates. The reserve rights relate to aggregate reserves to which the Company has the rights of ownership, but does not own the reserves. The intangible assets are amortized on a straight-line basis over the lives of the leases or permits. The following table shows intangible assets by type and in total:

 April 3, 2021January 2, 2021
 Gross
 Carrying
 Amount
Accumulated
 Amortization
Net
 Carrying
 Amount
Gross
 Carrying
 Amount
Accumulated
 Amortization
Net
 Carrying
 Amount
Operating permits$33,671 $(1,553)$32,118 $33,671 $(1,207)$32,464 
Mineral leases19,225 (7,857)11,368 19,225 (7,571)11,654 
Reserve rights25,586 (2,710)22,876 6,234 (2,504)3,730 
Other5,506 (382)5,124 586 (582)
Total intangible assets$83,988 $(12,502)$71,486 $59,716 $(11,864)$47,852 
 
Amortization expense totaled $1.0 million and $0.7 million for the three months ended April 3, 2021 and March 28, 2020, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to April 3, 2021 is as follows:

2021 (nine months)$3,023 
20224,091 
20233,904 
20243,809 
20253,765 
20263,620 
Thereafter49,274 
Total$71,486 

In the first quarter of 2021, as part of the Company's strategy to rationalize assets, the Company sold a business in the East segment, resulting in cash proceeds of $33.1 million and a total gain on disposition of $15.7 million.
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3.REVENUE RECOGNITION
 
We derive our revenue predominantly by selling construction materials, products and providing paving and related services. Construction materials consist of aggregates and cement. Products consist of related downstream products, including ready-mix concrete, asphalt paving mix and concrete products. Paving and related service revenue is generated primarily from the asphalt paving services that we provide.
 
Revenue by product for the three months ended April 3, 2021 and March 28, 2020 is as follows:
 Three months ended
 April 3, 2021March 28, 2020
Revenue by product*:  
Aggregates$117,388 $96,161 
Cement38,139 32,863 
Ready-mix concrete158,233 141,704 
Asphalt28,375 23,206 
Paving and related services43,215 33,426 
Other42,494 39,830 
Total revenue$427,844 $367,190 
*Revenue from liquid asphalt terminals is included in asphalt revenue.
 
Accounts receivable, net consisted of the following as of April 3, 2021 and January 2, 2021: 
 April 3, 2021January 2, 2021
Trade accounts receivable$212,825 $191,871 
Construction contract receivables24,795 47,179 
Retention receivables15,080 18,824 
Receivables from related parties1,569 1,339 
Accounts receivable254,269 259,213 
Less: Allowance for doubtful accounts(4,211)(4,517)
Accounts receivable, net$250,058 $254,696 
 
Retention receivables are amounts earned by the Company but held by customers until paving and related service contracts and projects are near completion or fully completed. Amounts are generally billed and collected within one year.

4.INVENTORIES
 
Inventories consisted of the following as of April 3, 2021 and January 2, 2021: 
 April 3, 2021January 2, 2021
Aggregate stockpiles$137,595 $137,938 
Finished goods39,331 32,993 
Work in process7,186 9,281 
Raw materials26,822 20,096 
Total$210,934 $200,308 

9


5.ACCRUED EXPENSES
 
Accrued expenses consisted of the following as of April 3, 2021 and January 2, 2021:
 April 3, 2021January 2, 2021
Interest$14,292 $21,860 
Payroll and benefits25,459 46,026 
Finance lease obligations21,271 24,601 
Insurance20,083 18,355 
Non-income taxes18,566 15,669 
Deferred asset purchase payments3,788 9,749 
Professional fees1,006 828 
Other (1)25,873 23,482 
Total$130,338 $160,570 
(1)Consists primarily of current portion of asset retirement obligations and miscellaneous accruals.

6.DEBT
 
Debt consisted of the following as of April 3, 2021 and January 2, 2021: 
 April 3, 2021January 2, 2021
Term Loan, due 2024:  
$614.7 million and $616.3 million, net of $0.8 million and $0.9 million discount at April 3, 2021 and January 2, 2021, respectively$613,894 $615,425 
518% Senior Notes, due 2025
300,000 300,000 
612% Senior Notes, due 2027
300,000 300,000 
514% Senior Notes, due 2029
700,000 700,000 
Total1,913,894 1,915,425 
Current portion of long-term debt6,354 6,354 
Long-term debt$1,907,540 $1,909,071 
 
The contractual payments of long-term debt, including current maturities, for the five years subsequent to April 3, 2021, are as follows:

2021 (nine months)$4,765 
20226,353 
20236,354 
2024597,253 
2025300,000 
2026
Thereafter1,000,000 
Total1,914,725 
Less: Original issue net discount(831)
Less: Capitalized loan costs(16,018)
Total debt$1,897,876 
 
Senior Notes—On August 11, 2020, Summit LLC and Summit Finance (together, the “Issuers”) issued $700.0 million in aggregate principal amount of 5.250% senior notes due January 15, 2029 (the “2029 Notes”). The 2029 Notes were issued at 100.0% of their par value with proceeds of $690.4 million, net of related fees and expenses. The 2029 Notes were issued under an indenture dated August 11, 2020 (the "2020 Indenture"). The 2020 Indenture contains covenants limiting, among other things, Summit LLC and its restricted subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain
10

transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The 2020 Indenture also contains customary events of default. Interest on the 2029 Notes is payable semi-annually on January 15 and July 15 of each year commencing on January 15, 2021.

On March 15, 2019, the Issuers issued $300.0 million in aggregate principal amount of 6.500% senior notes due March 15, 2027 (the “2027 Notes”). The 2027 Notes were issued at 100.0% of their par value with proceeds of $296.3 million, net of related fees and expenses. The 2027 Notes were issued under an indenture dated March 25, 2019, the terms of which are generally consistent with the 2020 Indenture. Interest on the 2027 Notes is payable semi-annually on March 15 and September 15 of each year commencing on September 15, 2019.

In 2017, the Issuers issued $300.0 million of 5.125% senior notes due June 1, 2025 (the “2025 Notes”). The 2025 Notes were issued at 100.0% of their par value with proceeds of $295.4 million, net of related fees and expenses. The 2025 Notes were issued under an indenture dated June 1, 2017, the terms of which are generally consistent with the 2020 Indenture. Interest on the 2025 Notes is payable semi-annually on June 1 and December 1 of each year commencing on December 1, 2017.

As of April 3, 2021 and January 2, 2021, the Company was in compliance with all financial covenants under the applicable indentures.
 
Senior Secured Credit Facilities— Summit LLC has credit facilities that provide for term loans in an aggregate amount of $650.0 million and revolving credit commitments in an aggregate amount of $345.0 million (the “Senior Secured Credit Facilities”). Under the Senior Secured Credit Facilities, required principal repayments of 0.25% of the refinanced aggregate amount of term debt are due on the last business day of each March, June, September and December commencing with the March 2018 payment. The unpaid principal balance is due in full on the maturity date, which is November 21, 2024.
 
The revolving credit facility bears interest per annum equal to, at Summit LLC’s option, either (i) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) LIBOR plus 1.00%, plus an applicable margin of 2.00% for base rate loans or (ii) a LIBOR rate determined by reference to Reuters prior to the interest period relevant to such borrowing adjusted for certain additional costs plus an applicable margin of 3.00% for LIBOR rate loans. The maturity date with respect to revolving credit commitments under the revolving credit facility is February 25, 2024.
 
There were 0 outstanding borrowings under the revolving credit facility as of April 3, 2021 and January 2, 2021, with borrowing capacity of $329.1 million remaining as of April 3, 2021, which is net of $15.9 million of outstanding letters of credit. The outstanding letters of credit are renewed annually and support required bonding on construction projects, large leases, workers compensation claims and the Company’s insurance liabilities.
 
Summit LLC’s Consolidated First Lien Net Leverage Ratio, as such term is defined in the Credit Agreement, should be no greater than 4.75:1.0 as of each quarter-end. As of April 3, 2021 and January 2, 2021, Summit LLC was in compliance with all financial covenants.
 
Summit LLC’s wholly-owned domestic subsidiary companies, subject to certain exclusions and exceptions, are named as subsidiary guarantors of the Senior Notes and the Senior Secured Credit Facilities. In addition, Summit LLC has pledged substantially all of its assets as collateral, subject to certain exclusions and exceptions, for the Senior Secured Credit Facilities.
11

The following table presents the activity for the deferred financing fees for the three months ended April 3, 2021 and March 28, 2020:
 Deferred financing fees
Balance—January 2, 2021$18,367 
Amortization(836)
Balance—April 3, 2021$17,531 
 
 
Balance—December 28, 2019$15,436 
Amortization(833)
Balance—March 28, 2020$14,603 

Other—On January 15, 2015, the Company’s wholly-owned subsidiary in British Columbia, Canada entered into an agreement with HSBC Bank Canada for a (i) $6.0 million Canadian dollar (“CAD”) revolving credit commitment to be used for operating activities that bears interest per annum equal to the bank’s prime rate plus 0.20%, (ii) $0.5 million CAD revolving credit commitment to be used for capital equipment that bears interest per annum at the bank’s prime rate plus 0.90% and (iii) $0.3 million CAD revolving credit commitment to provide guarantees on behalf of that subsidiary. There were 0 amounts outstanding under this agreement as of April 3, 2021 or January 2, 2021.

7.INCOME TAXES
 
Summit Inc.’s tax provision includes its proportional share of Summit Holdings’ tax attributes. Summit Holdings’ subsidiaries are primarily limited liability companies but do include certain entities organized as C corporations and a Canadian subsidiary. The tax attributes related to the limited liability companies are passed on to Summit Holdings and then to its partners, including Summit Inc. The tax attributes associated with the C corporation and Canadian subsidiaries are fully reflected in the Company’s accounts.
 
Our income tax benefit was $5.4 million and $22.9 million in the three months ended April 3, 2021 and March 28, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. In the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million.
  
As of April 3, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.

NaN material interest or penalties were recognized in income tax expense during the three months ended April 3, 2021 and March 28, 2020.

Tax Receivable Agreement—The Company is party to a TRA with certain current and former holders of LP Units that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA, is deemed to realize) as a result of increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. 
 
In the three months ended April 3, 2021, 711,794 LP Units were acquired by Summit Inc. in exchange for an equal number of newly-issued shares of Summit Inc.’s Class A common stock. These exchanges resulted in net new deferred tax assets of approximately $4.9 million. As we determined that the deferred tax assets created from these exchanges are realizable and payment under the TRA is considered probable, we have recorded 85% of the increase in deferred tax assets as TRA liability and the remainder as an adjustment to additional paid in capital. As of April 3, 2021 and January 2, 2021, we had recorded $325.8 million and $321.7 million of TRA liability, respectively.
 
Tax Distributions – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally
12

calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate in New York, New York. Summit Holdings did 0t make any tax distributions in the three months ended April 3, 2021 and March 28, 2020.

8.EARNINGS PER SHARE
 
Basic earnings per share is computed by dividing net earnings by the weighted average common shares outstanding and diluted net earnings is computed by dividing net earnings, adjusted for changes in the earnings allocated to Summit Inc. as a result of the assumed conversion of LP Units, by the weighted-average common shares outstanding assuming dilution.

The following table shows the calculation of basic and diluted earnings per share:
 Three months ended
 April 3, 2021March 28, 2020
Net loss attributable to Summit Inc.$(22,517)$(44,979)
Weighted average shares of Class A stock outstanding
Add: Nonvested restricted stock awards of retirement eligible shares253,521 
Add: Weighted average shares of Class A stock outstanding115,411,204 113,602,110 
Weighted average basic shares outstanding115,664,725 113,602,110 
Basic loss per share$(0.19)$(0.40)
Diluted net loss attributable to Summit Inc.$(22,517)$(44,979)
Weighted average shares of Class A stock outstanding115,411,204 113,602,110 
Add: weighted average of LP Units
Add: stock options
Add: warrants
Add: restricted stock units
Add: performance stock units
Weighted average dilutive shares outstanding115,411,204 113,602,110 
Diluted loss per share$(0.20)$(0.40)
 
Excluded from the above calculations were the shares noted below as they were antidilutive:
 Three months ended
 April 3, 2021March 28, 2020
Antidilutive shares:  
LP Units2,613,209 3,154,228 
Time-vesting stock options1,175,135 2,109,465 
Warrants43,166 100,037 
Time-vesting restricted stock units1,894,877 1,666,365 
Market-based restricted stock units410,357 446,670 

9.STOCKHOLDERS’ EQUITY
During 2021 and 2020, certain limited partners of Summit Holdings exchanged their LP Units for shares of Class A common stock of Summit Inc. The following table summarizes the changes in our ownership of Summit Holdings:
13

 Summit Inc.
Shares (Class A)
LP UnitsTotalSummit Inc.
Ownership
Percentage
Balance — January 2, 2021114,390,595 2,873,170 117,263,765 97.5 %
Exchanges during period711,794 (711,794)
Stock option exercises863,338 — 863,338 
Other equity transactions678,605 — 678,605 
Balance — April 3, 2021116,644,332 2,161,376 118,805,708 98.2 %
Balance — December 28, 2019113,309,385 3,249,657 116,559,042 97.2 %
Exchanges during period196,542 (196,542)
Stock option exercises13,335 — 13,335 
Other equity transactions591,335 — 591,335 
Balance — March 28, 2020114,110,597 3,053,115 117,163,712 97.4 %
 
Summit Inc. is Summit Holdings’ primary beneficiary and thus consolidates Summit Holdings in its consolidated financial statements with a corresponding noncontrolling interest reclassification, which was 1.8% and 2.5% as of April 3, 2021 and January 2, 2021, respectively.
 
Accumulated other comprehensive income (loss) —The changes in each component of accumulated other comprehensive income (loss) consisted of the following:
 Change in
 retirement plans
Foreign currency
 translation
 adjustments
Accumulated
 other
 comprehensive
 income (loss)
Balance — January 2, 2021$533 $4,670 $5,203 
Foreign currency translation adjustment, net of tax— 1,635 1,635 
Balance — April 3, 2021$533 $6,305 $6,838 
Balance — December 28, 2019$2,171 $1,277 $3,448 
Foreign currency translation adjustment, net of tax— (6,093)(6,093)
Balance — March 28, 2020$2,171 $(4,816)$(2,645)

10.SUPPLEMENTAL CASH FLOW INFORMATION
 
Supplemental cash flow information is as follows:
 Three months ended
 April 3, 2021March 28, 2020
Cash payments:  
Interest$29,476 $36,310 
Payments (refunds) for income taxes, net2,312 (298)
Operating cash payments on operating leases2,928 2,948 
Operating cash payments on finance leases655 794 
Finance cash payments on finance leases5,834 3,883 
Non cash financing activities:
Right of use assets obtained in exchange for operating lease obligations$3,081 $577 
Right of use assets obtained in exchange for finance leases obligations588 6,267 
Exchange of LP Units to shares of Class A common stock19,784 4,648 


14


11.LEASES

We lease construction and office equipment, distribution facilities and office space. Leases with an initial term of 12 months or less, including month to month leases, are not recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight line basis over the lease term. For lease agreements we have entered into or reassessed we combine lease and nonlease components. While we also own mineral leases for mining operations, those leases are outside the scope of Topic 842. Assets acquired under finance leases are included in property, plant and equipment.

Many of our leases include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense were as follows:
15

Three months ended
April 3, 2021March 28, 2020
Operating lease cost$1,727 $2,607 
Variable lease cost72 57 
Short-term lease cost7,301 8,620 
Financing lease cost:
Amortization of right-of-use assets3,050 2,739 
Interest on lease liabilities657 771 
Total lease cost$12,807 $14,794 
April 3, 2021January 2, 2021
Supplemental balance sheet information related to leases:
Operating leases:
Operating lease right-of-use assets$28,796 $28,543 
Current operating lease liabilities$7,480 $8,188 
Noncurrent operating lease liabilities22,246 21,500 
Total operating lease liabilities$29,726 $29,688 
Finance leases:
Property and equipment, gross$83,072 $92,679 
Less accumulated depreciation(31,263)(32,828)
Property and equipment, net$51,809 $59,851 
Current finance lease liabilities$21,271 $24,601 
Long-term finance lease liabilities25,718 31,727 
Total finance lease liabilities$46,989 $56,328 
Weighted average remaining lease term (years):
Operating leases9.38.7
Finance lease2.52.4
Weighted average discount rate:
Operating leases5.2 %5.3 %
Finance lease5.2 %5.2 %
Maturities of lease liabilities were as follows:
Operating LeasesFinance Leases
2021 (nine months)$6,427 $16,259 
20226,785 18,777 
20235,101 7,352 
20243,167 3,207 
20252,224 2,580 
20261,508 988 
Thereafter12,880 1,843 
Total lease payments38,092 51,006 
Less imputed interest(8,366)(4,017)
Present value of lease payments$29,726 $46,989 

12.COMMITMENTS AND CONTINGENCIES
 
The Company is party to certain legal actions arising from the ordinary course of business activities. Accruals are recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, management expects that the ultimate resolution of all current pending or threatened claims and
16

litigation will not have a material effect on the Company’s consolidated financial position, results of operations or liquidity. The Company records legal fees as incurred.

In March 2018, we were notified of an investigation by the Canadian Competition Bureau (the “CCB”) into pricing practices by certain asphalt paving contractors in British Columbia, including Winvan Paving, Ltd. (“Winvan”). We believe the investigation is focused on time periods prior to our April 2017 acquisition of Winvan and we are cooperating with the CCB. Although we currently do not believe this matter will have a material adverse effect on our business, financial condition or results of operations, we are currently not able to predict the ultimate outcome or cost of the investigation.

Environmental Remediation and Site Restoration —The Company’s operations are subject to and affected by federal, state, provincial and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. The Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of the Company’s business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities or noncompliance will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.
 
The Company has asset retirement obligations arising from regulatory and contractual requirements to perform reclamation activities at the time certain quarries and landfills are closed. As of April 3, 2021 and January 2, 2021, $32.0 million and $33.6 million, respectively, were included in other noncurrent liabilities on the consolidated balance sheets and $11.5 million and $10.0 million, respectively, were included in accrued expenses for future reclamation costs. The total undiscounted anticipated costs for site reclamation as of April 3, 2021 and January 2, 2021 were $110.5 million and $112.8 million, respectively.
 
Other—The Company is obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial condition, results of operations and cash flows of the Company. The terms of the purchase commitments generally approximate one year.

13.FAIR VALUE
 
Fair Value Measurements—Certain acquisitions made by the Company require the payment of contingent amounts of purchase consideration. These payments are contingent on specified operating results being achieved in periods subsequent to the acquisition and will only be made if earn-out thresholds are achieved. Contingent consideration obligations are measured at fair value each reporting period. Any adjustments to fair value are recognized in earnings in the period identified.

The fair value of contingent consideration as of April 3, 2021 and January 2, 2021 was:
 April 3, 2021January 2, 2021
Current portion of acquisition-related liabilities and Accrued expenses:  
Contingent consideration$654 $654 
Acquisition-related liabilities and Other noncurrent liabilities:
Contingent consideration$1,120 $1,209 
 
The fair value of contingent consideration was based on unobservable, or Level 3, inputs, including projected probability-weighted cash payments and a 9.5% discount rate, which reflects a market discount rate. Changes in fair value may occur as a result of a change in actual or projected cash payments, the probability weightings applied by the Company to projected payments or a change in the discount rate. Significant increases or decreases in any of these inputs in isolation could result in a lower, or higher, fair value measurement. There were 0 material valuation adjustments to contingent consideration as of April 3, 2021 and March 28, 2020.
 
Financial Instruments—The Company’s financial instruments include debt and certain acquisition-related liabilities (deferred consideration and noncompete obligations). The carrying value and fair value of these financial instruments as of April 3, 2021 and January 2, 2021 was:
17

 
 April 3, 2021January 2, 2021
 Fair ValueCarrying ValueFair ValueCarrying Value
Level 1    
Long-term debt(1)$1,960,901 $1,913,894 $1,971,087 $1,915,425 
Level 3
Current portion of deferred consideration and noncompete obligations(2)12,718 12,718 9,611 9,611 
Long term portion of deferred consideration and noncompete obligations(3)29,895 29,895 11,037 11,037 
(1)$6.4 million was included in current portion of debt as of April 3, 2021 and January 2, 2021.
(2)Included in current portion of acquisition-related liabilities on the consolidated balance sheets.
(3)Included in acquisition-related liabilities on the consolidated balance sheets.

The fair value of debt was determined based on observable, or Level 2, inputs, such as interest rates, bond yields and quoted prices in inactive markets. The fair values of the deferred consideration and noncompete obligations were determined based on unobservable, or Level 3, inputs, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk. The discount rate used is generally consistent with that used when the obligations were initially recorded.
 
Securities with a maturity of three months or less are considered cash equivalents and the fair value of these assets approximates their carrying value.

14.SEGMENT INFORMATION
 
The Company has 3 operating segments: West, East and Cement, which are its reporting segments. These segments are consistent with the Company’s management reporting structure.
 
The operating results of each segment are regularly reviewed and evaluated by the Chief Executive Officer, our Company’s Chief Operating Decision Maker (“CODM”). The CODM primarily evaluates the performance of the Company’s segments and allocates resources to them based on a segment profit metric that we call Adjusted EBITDA, which is computed as earnings from operations before interest, taxes, depreciation, depletion, amortization, accretion, and share-based compensation, as well as various other non-recurring, non-cash amounts. Beginning with the first quarter of 2021, the Company no longer adjusts for transaction costs, as those costs are recurring cash payments, and are included in general and administrative expenses.
 
The West and East segments have several subsidiaries that are engaged in various activities including quarry mining, aggregate production and contracting. The Cement segment is engaged in the production of Portland cement. Assets employed by each segment include assets directly identified with those operations. Corporate assets consist primarily of cash, property, plant and equipment for corporate operations and other assets not directly identifiable with a reportable business segment. The accounting policies applicable to each segment are consistent with those used in the consolidated financial statements.
The following tables display selected financial data for the Company’s reportable business segments as of April 3, 2021 and January 2, 2021 and for the three months ended April 3, 2021 and March 28, 2020:
 
 Three months ended
 April 3, 2021March 28, 2020
Revenue*:  
West$251,133 $196,225 
East136,042 133,040 
Cement40,669 37,925 
Total revenue$427,844 $367,190 
*Intercompany sales are immaterial and the presentation above only reflects sales to external customers.
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 Three months ended
 April 3, 2021March 28, 2020
Loss from operations before taxes$(28,688)$(69,627)
Interest expense24,186 27,818 
Depreciation, depletion and amortization55,570 51,201 
Accretion766 577 
Gain on sale of business(15,668)
Non-cash compensation5,363 4,905 
Other205 787 
Total Adjusted EBITDA$41,734 $15,661 
Total Adjusted EBITDA by Segment:
West$40,648 $22,468 
East11,745 9,573 
Cement2,499 (7,561)
Corporate and other(13,158)(8,819)
Total Adjusted EBITDA$41,734 $15,661 
 
 Three months ended
 April 3, 2021March 28, 2020
Purchases of property, plant and equipment  
West$34,068 $18,896 
East33,202 37,081 
Cement2,273 5,399 
Total reportable segments69,543 61,376 
Corporate and other214 453 
Total purchases of property, plant and equipment$69,757 $61,829 
 
 Three months ended
 April 3, 2021March 28, 2020
Depreciation, depletion, amortization and accretion:  
West$25,140 $21,800 
East21,943 21,096 
Cement8,149 7,893 
Total reportable segments55,232 50,789 
Corporate and other1,104 989 
Total depreciation, depletion, amortization and accretion$56,336 $51,778 

 April 3, 2021January 2, 2021
Total assets:  
West$1,593,869 $1,503,382 
East1,300,877 1,303,742 
Cement852,697 850,835 
Total reportable segments3,747,443 3,657,959 
Corporate and other603,814 650,052 
Total$4,351,257 $4,308,011 
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SUMMIT MATERIALS, LLC AND SUBSIDIARIES
 
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
The unaudited consolidated financial statements and notes thereto for Summit Materials, LLC and subsidiaries are included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are incorporated by reference herein.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. Forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the section entitled “Risk Factors” in the Annual Report, and factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated interim financial statements and the related notes and other information included in this report.
 
Overview

Summit’s vision is to be the most socially responsible, integrated construction materials solution provider, collaborating with stakeholders to deliver differentiated innovations and solve our customers’ challenges. Within our markets, we strive to be a market leader by offering customers a single-source provider for construction materials and related downstream products through our vertical integration. Our materials include aggregates, which we supply across the United States, and in British Columbia, Canada, and cement, which we supply to surrounding states along the Mississippi River from Minnesota to Louisiana. In addition to supplying aggregates to customers, we use a portion of our materials internally to produce ready-mix concrete and asphalt paving mix, which may be sold externally or used in our paving and related services businesses. Our vertical integration creates opportunities to increase aggregates volumes, optimize margin at each stage of production and provide customers with efficiency gains, convenience and reliability, which we believe gives us a competitive advantage.
 
Since our inception in 2009, we have completed dozens of acquisitions, which are organized into 11 operating companies that make up our three distinct operating segments: West, East and Cement, which are also our reporting segments. We operate in 21 U.S. states and in British Columbia, Canada and currently have assets in 21 U.S. states and in British Columbia, Canada. The map below illustrates our geographic footprint.
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sum-20210403_g2.jpg
Business Trends and Conditions
 
The U.S. construction materials industry is composed of four primary sectors: aggregates; cement; ready-mix concrete; and asphalt paving mix. Each of these materials is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies focused on a single material, product or market to publicly traded multinational corporations that offer a wide array of construction materials and services. Competition is constrained in part by the distance materials can be transported efficiently, resulting in predominantly local or regional operations. Due to the lack of product differentiation, competition for all of our products is predominantly based on price and, to a lesser extent, quality of products and service. As a result, the prices we charge our customers are not likely to be materially different from the prices charged by other producers in the same markets. Accordingly, our profitability is generally dependent on the level of demand for our materials and products and our ability to control operating costs.

Our revenue is derived from multiple end-use markets including public infrastructure construction and private residential and nonresidential construction. Public infrastructure includes spending by federal, state, provincial and local governments for roads, highways, bridges, airports and other infrastructure projects. Public infrastructure projects have historically been a relatively stable portion of state and federal budgets. Residential and nonresidential construction consists of new construction and repair and remodel markets. Any economic stagnation or decline, which could vary by local region and market, could affect our results of operations. Our sales and earnings are sensitive to national, regional and local economic conditions and particularly to cyclical changes in construction spending, especially in the private sector. We continue to see positive indicators for the construction sector, including positive trends in housing starts, and highway construction letting
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activity in many of the states in which we operate. However, given the ongoing nature of the COVID-19 pandemic discussed below, we continue to closely monitor these indicators for the impact on our business in subsequent quarters.
 
Transportation infrastructure projects, driven by both federal and state funding programs, represent a significant share of the U.S. construction materials market. Federal funds are allocated to the states, which are required to match a portion of the federal funds they receive. Federal highway spending uses funds predominantly from the Federal Highway Trust Fund, which derives its revenue from taxes on diesel fuel, gasoline and other user fees. The dependability of federal funding allows state departments of transportation to plan for their long-term highway construction and maintenance needs. Through a continuing resolution signed by the President in October 2020, funding for the existing federal transportation funding program extends through September 2021. Historically, Congress has maintained infrastructure spending via various means upon the expiration of federal transportation funding programs, but there is no assurance that this will continue to be the case. With the nation’s infrastructure aging, there is increased demand by states and municipalities for long-term federal funding to support the construction of new roads, highways and bridges in addition to the maintenance of the existing infrastructure.

In addition to federal funding, state, county and local agencies provide highway construction and maintenance funding. Our four largest states by revenue, Texas, Utah, Kansas and Missouri, represented approximately 25%, 14%, 13% and 9%, respectively, of our total revenue in 2020. The following is a summary of key funding initiatives in those states:
 
In January 2021, TXDOT updated its fiscal year 2021 lettings estimate to $9.2 billion up from $7.5 billion in fiscal year 2020 and $8.9 billion in fiscal year 2019. Longer term, TXDOT has indicated a target of $8 billion per year in total state and local lettings. In addition, Texas has received $1.9 billion from legislation passed by Congress in December 2020 and March 2021.

The state of Utah anticipates transportation funding of approximately $1.3 billion in 2021 and $1.8 billion in 2022. In addition, Utah received approximately $263 million from legislation passed by Congress in December 2020 and March 2021.

The state of Kansas anticipates approximately $1.9 billion for 2021 and $2.2 billion for 2022 for transportation funding. In addition, Kansas received approximately $138 million from legislation passed by Congress in December 2020 and March 2021.

The state of Missouri anticipates transportation funding of approximately $2.9 billion in 2021 and $3.1 billion in 2022. In addition, Missouri received approximately $437 million from legislation passed by Congress in December 2020 and March 2021.

Use and consumption of our products fluctuate due to seasonality. Nearly all of the products used by us, and by our customers, in the private construction and public infrastructure industries are used outdoors. Our highway operations and production and distribution facilities are also located outdoors. Therefore, seasonal changes and other weather-related conditions, in particular extended rainy and cold weather in the spring and fall, as well as major weather events such as hurricanes, tornadoes, tropical storms, heavy snows and flooding, can adversely affect our business and operations through a decline in both the use of our products and demand for our services. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second and third quarters of our fiscal year typically result in higher activity and revenue levels during those quarters. The first quarter of our fiscal year typically has lower levels of activity due to weather conditions, and the third quarter of our fiscal year typically has the highest levels of activity.
 
We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, ready-mix concrete and asphalt paving mix production, natural gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalator provisions in most of our private and commercial contracts limit our exposure to price fluctuations in this commodity. We often obtain similar escalators on public infrastructure contracts. In addition, we enter into various firm purchase commitments, with terms generally less than one year, for certain raw materials.
 
Backlog
 
Our products are generally delivered upon receipt of orders or requests from customers, or shortly thereafter. Accordingly, the backlog associated with product sales is converted into revenue within a relatively short period of time. Inventory for products is generally maintained in sufficient quantities to meet rapid delivery requirements of customers. Therefore, a period-over-period increase or decrease of backlog does not necessarily result in an improvement or a deterioration
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of our business. Our backlog includes only those products and projects for which we have obtained a purchase order or a signed contract with the customer and does not include products purchased and sold or services awarded and provided within the period.
 
Financial Highlights
    
The principal factors in evaluating our financial condition and operating results as of and for the three months ended April 3, 2021 as compared to the three months ended March 28, 2020, and certain other highlights include:
 
Net revenue increased $56.1 million in the three months ended April 3, 2021, primarily resulting from organic growth.
Our operating loss decreased $16.7 million in the three months ended April 3, 2021, as revenue exceeded the increases in cost of revenue.
In the first quarter of 2021, the Company sold a business in the East segment, resulting in cash proceeds of $33.1 million and a total gain on disposition of $15.7 million.
In the three months ended April 3, 2021, sales volume increased 20.7% in aggregates, 13.7% in cement, 7.6% in ready-mix concrete and 15.9% in asphalt, respectively.

Results of Operations
 
In late 2019, the COVID-19 virus was first reported to have surfaced, and began impacting countries around the world. However, in all of our markets, construction activities were deemed essential businesses and we continued to operate while many businesses were forced to close or reduce operations. During the first quarter of each of 2020 and 2021, our operating markets remained substantially unaffected by COVID-19. We continue to monitor our operations, the operations of our customers, and the recommendations of the various national, state and local governments in the areas in which we operate. We implemented work-from-home protocols at all of our administrative locations late in the first quarter of 2020, and while some locations have returned, other locations, including our headquarters location, continue to work remotely. In addition, we implemented additional safety measures specific to COVID-19 at all of our operating locations, which did not significantly increase our costs. The extent to which the COVID-19 pandemic impacts the national and local economies in which we operate, and ultimately our business, will depend on numerous developments, which are highly uncertain and difficult to predict. These events, as they continue to develop, could result in business disruption, including reduced revenues, profitability and cash flow.

In 2020, approximately 61% of our revenue was derived from the private construction market, and the remaining revenue from the public markets. We believe residential activity in our key markets will continue to be a driver for volumes in future periods. Funding for public infrastructure projects as been announced as a high priority for the federal government in 2021.

As of April 3, 2021, we had $359.7 million in cash and cash equivalents, and we have remaining borrowing capacity on our senior secured revolving credit facility of $329.1 million, providing us with liquidity that we believe to be adequate to meet our obligations for the next twelve months.
    
The following discussion of our results of operations is focused on the key financial measures we use to evaluate the performance of our business from both a consolidated and operating segment perspective. Operating income and margins are discussed in terms of changes in volume, pricing and mix of revenue source (i.e., type of product, sales or service revenue). We focus on operating margin, which we define as operating income as a percentage of net revenue, as a key metric when assessing the performance of the business, as we believe that analyzing changes in costs in relation to changes in revenue provides more meaningful insight into the results of operations than examining costs in isolation.
 
Operating income (loss) reflects our profit from operations after taking into consideration cost of revenue, general and administrative expenses, depreciation, depletion, amortization and accretion and gain on sale of property, plant and equipment. Cost of revenue generally increases ratably with revenue, as labor, transportation costs and subcontractor costs are recorded in cost of revenue. In periods where our revenue growth occurs primarily through acquisitions, general and administrative expenses and depreciation, depletion, amortization and accretion have historically grown ratably with revenue. However, as organic volumes increase, we expect these costs as a percentage of revenue, to decrease. General and administrative expenses as a percentage of revenue vary throughout the year due to the seasonality of our business.

Consolidated Results of Operations
 
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The table below sets forth our consolidated results of operations for the three months ended April 3, 2021 and March 28, 2020. 
 Three months ended
 April 3, 2021March 28, 2020
($ in thousands)
Net revenue$398,481 $342,406 
Delivery and subcontract revenue29,363 24,784 
Total revenue427,844 367,190 
Cost of revenue (excluding items shown separately below)346,694 317,363 
General and administrative expenses51,642 41,686 
Depreciation, depletion, amortization and accretion56,336 51,778 
Gain on sale of property, plant and equipment(1,769)(1,917)
Operating loss(25,059)(41,720)
Interest expense24,186 27,818 
Gain on sale of business(15,668)— 
Other (income) loss, net(4,889)89 
Loss from operations before taxes(28,688)(69,627)
Income tax benefit(5,443)(22,901)
Net loss$(23,245)$(46,726)

Beginning in the first quarter of 2021, we have reclassified $31.2 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three month period ended March 28, 2020 to conform to the current year presentation. In addition, we reclassified $1.9 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating loss, also to conform to the current year presentation. Lastly, we reclassified $0.8 million of transaction costs from its own line item within operating loss into general and administrative expenses for the three months ended March 28, 2020 to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no impact on previously reported operating income, as well as certain non-GAAP measures defined below, such as Adjusted EBITDA, or Adjusted EBITDA Margin, however Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin were reduced.

Three months ended April 3, 2021 compared to the three months ended March 28, 2020
 
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Net revenue$398,481 $342,406 $56,075 16.4 %
Operating loss(25,059)(41,720)16,661 39.9 %
Operating margin percentage(6.3)%(12.2)%
Adjusted EBITDA (1)$41,734 $15,661 $26,073 166.5 %
Adjusted EBITDA Margin (1)10.5 %4.6 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue increased $56.1 million in the three months ended April 3, 2021, primarily resulting from organic growth in our aggregates and ready-mix concrete operations. Of the increase in net revenue, $26.5 million was from increased sales of materials, $22.4 million was from increased sales of products and $7.1 million from increased service revenue. We generated organic volume growth of 7.1%, 13.7%, 7.6% and 15.9% in aggregates, cement, ready-mix concrete and asphalt, respectively. We had organic price growth in our cement, ready-mix and asphalt lines of business of 0.4%, 3.7% and 5.5%, respectively, while aggregate organic price growth remained flat, during the first three months of 2021.
 
Operating loss decreased by $16.7 million in the first three months of 2021 as compared to the first three months of 2020, primarily as net revenue gains exceeded increases in costs of revenue and general and administrative expenses. Our
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general and administrative expenses increased $10.0 million in the first quarter of 2021 as compared to the same period a year ago due to $3.4 million in severance related costs, an increase in consulting fees as we seek to optimize organizational efficiencies and increases in other professional fees. In addition, depreciation, depletion, amortization and accretion expense increased by $4.6 million over the prior year amount.

Our operating margin percentage for the three months ended April 3, 2021 increased from (12.2)% to (6.3)%, from the comparable period a year ago, due to the factors noted above. Adjusted EBITDA and Adjusted EBITDA Margin, as defined in "Non-GAAP Performance Measures" below, increased by $26.1 million and increased to 10.5% from 4.6% in the three months ended April 3, 2021, respectively, due to the factors noted above.

As a vertically-integrated company, we include intercompany sales from materials to products and from products to services when assessing the operating results of our business. We refer to revenue inclusive of intercompany sales as gross revenue. These intercompany transactions are eliminated in the consolidated financial statements. Gross revenue by product was as follows: 
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Revenue by product*:
Aggregates$143,794 $121,473 $22,321 18.4 %
Cement39,703 34,758 4,945 14.2 %
Ready-mix concrete158,336 141,809 16,527 11.7 %
Asphalt31,225 25,946 5,279 20.3 %
Paving and related services61,808 46,074 15,734 34.1 %
Other(7,022)(2,870)(4,152)(144.7)%
Total revenue$427,844 $367,190 $60,654 16.5 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.
 
Detail of our volumes and average selling prices by product in the three months ended April 3, 2021 and March 28, 2020 were as follows:   
 Three months ended  
 April 3, 2021March 28, 2020  
Volume(1)Volume(1)Percentage Change in
(in thousands)Pricing(2)(in thousands)Pricing(2)VolumePricing
Aggregates13,509 $10.64 11,193 $10.85 20.7 %(1.9)%
Cement340 116.69 299 116.21 13.7 %0.4 %
Ready-mix concrete1,338 118.31 1,244 114.04 7.6 %3.7 %
Asphalt474 60.01 409 56.86 15.9 %5.5 %
(1)Volumes are shown in tons for aggregates, cement and asphalt and in cubic yards for ready-mix concrete.
(2)Pricing is shown on a per ton basis for aggregates, cement and asphalt and on a per cubic yard basis for ready-mix concrete.
    
Revenue from aggregates increased $22.3 million in the three months ended April 3, 2021. In the first quarter of 2021, we had solid increases in aggregate volumes in most of our markets, except for slight decreases in Kansas and Missouri as wind farm and flood repair volumes in the first quarter of 2020 did not repeat in 2021. In the three month period ended April 3, 2021, our aggregate volumes increased due to both acquisition and organic volumes. Aggregate volumes growth was attributable to organic growth in both the West and East segments. Organic aggregate volumes increased 7.1% in the first three months of 2021 as compared to the same period a year ago, primarily due to increases in the Intermountain West, Virginia and British Columbia markets. Aggregate average sales prices of $10.64 per ton decreased 1.9% in the first three months of 2021 as compared to the first three months of 2020, primarily due to lower priced products in Kansas and North Texas markets.  
    
Revenue from cement increased $4.9 million in the three months ended April 3, 2021. In the three months ended April 3, 2021, organic cement volumes increased 13.7%, and organic cement average sales prices increased 0.4%, as compared to the same period in the prior year.

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Revenue from ready-mix concrete increased $16.5 million in the three months ended April 3, 2021. In the three months ended April 3, 2021, our ready-mix volumes increased 7.6%, and our average sales prices 3.7%. The volume increase occurred primarily in our Intermountain West and North Texas markets while our price increase was primarily in the Intermountain West market.
 
Revenue from asphalt increased $5.3 million in the three months ended April 3, 2021. In the first three months of 2021, organic pricing increased 5.5%, with strong pricing gains in our Texas geographies. Further, in the first three months of 2020, we had strong volume increases in North Texas.

Other Financial Information
 
Gain on Sale of business

In the first quarter of 2021, as part of the Company's strategy to rationalize assets, the Company sold a business in the East segment, resulting in cash proceeds of $33.1 million and a net gain on disposition of $15.7 million.

Income Tax Expense
 
Our income tax benefit was $5.4 million and $22.9 million in the three months ended April 3, 2021 and March 28, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. Additionally, in the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million.
 
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible, as well as consideration of tax-planning strategies we may seek to utilize net operating loss carryforwards that begin to expire in 2030.
    
As of April 3, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.

Segment results of operations
 
West Segment
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Net revenue$234,744 $184,492 $50,252 27.2 %
Operating income15,057 354 14,703 4,153.4 %
Operating margin percentage6.4 %0.2 %
Adjusted EBITDA (1)$40,648 $22,468 $18,180 80.9 %
Adjusted EBITDA Margin (1)17.3 %12.2 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue in the West segment increased $50.3 million in the three months ended April 3, 2021, as we had increases in net revenue in all lines of business. Organic aggregate volumes increased 13.1% in the first three months of 2021 as compared to the first three months of 2020 and organic aggregates average sales prices increased 1.1%, primarily due to product mix. Organic ready-mix concrete volumes increased 14.1% and our organic ready-mix concrete average sales prices increased 4.7%. Residential construction activity remains strong, particularly in the Houston and Salt Lake City areas, two of our largest metro areas where we operate. In general, weather conditions in the first quarter of 2021 were better than those in first quarter of 2020, except for extremely cold weather in the middle of February in Texas.
 
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The West segment’s operating income increased $14.7 million in the three months ended April 3, 2021. Adjusted EBITDA and Adjusted EBITDA Margin increased $18.2 million and increased to 17.3% from 12.2% in the three months ended April 3, 2021, respectively. The increases in operating income, Adjusted EBITDA and Adjusted EBITDA Margin occurred as the weather conditions in 2021 have in general been more favorable as compared to 2020, which has resulted in operational efficiencies and increased sales volumes. The operating margin percentage in the West segment increased in the three months ended April 3, 2021 as compared to the three months ended March 28, 2020, due to the impact of the same factors noted above.

Gross revenue by product/ service was as follows:  
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Revenue by product*:
Aggregates$72,138 $51,601 $20,537 39.8 %
Ready-mix concrete126,986 106,227 20,759 19.5 %
Asphalt27,688 23,430 4,258 18.2 %
Paving and related services46,889 33,267 13,622 40.9 %
Other(22,568)(18,300)(4,268)(23.3)%
Total revenue$251,133 $196,225 $54,908 28.0 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in “Other.” Revenue from the liquid asphalt terminals is included in asphalt revenue.
 
The West segment’s percent changes in sales volumes and pricing in the three months ended April 3, 2021 from the three months ended March 28, 2020 were as follows:  
 Three months ended
Percentage Change in
VolumePricing
Aggregates41.1 %(0.9)%
Ready-mix concrete14.1 %4.7 %
Asphalt11.7 %8.0 %
 
Revenue from aggregates in the West segment increased $20.5 million in the three months ended April 3, 2021, due to an increase in sales volumes which more than offset a slight decrease in average sales price. In the three months ended April 3, 2021, the 41.1% increase in aggregates volumes occurred in all of our markets which had organic growth coupled with increased acquisition volumes. Aggregates pricing for the three months ended April 3, 2021 decreased 0.9%, when compared to the same period in 2020 due to product mix primarily in our North Texas markets, as well as the impact of lower prices on acquisition related volumes.
 
Revenue from ready-mix concrete in the West segment increased $20.8 million in the three months ended April 3, 2021. For the three months ended April 3, 2021, our ready-mix concrete organic volumes increased 14.1%, as volume increases in the Intermountain geographies in the three months ended April 3, 2021 were offset by a slight volume decrease in the Houston area due to extremely cold weather in February. For the three months ended April 3, 2021, organic ready-mix concrete prices increased 4.7%. We continue to see strong residential volumes in the Houston and Intermountain West areas.
 
Revenue from asphalt in the West segment increased $4.3 million in the three months ended April 3, 2021. For the three months ended April 3, 2021, asphalt volumes increased 11.7%. Average sales prices for asphalt increased 8.0% in the three months ended April 3, 2021. Revenue for paving and related services in the West segment increased by $13.6 million, in the three months ended April 3, 2021, due to higher organic volumes in our North Texas markets.

Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the three months ended April 3, 2021 was approximately $39.2 million and $6.3 million, respectively.

East Segment
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 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Net revenue$123,068 $119,989 $3,079 2.6 %
Operating loss(10,374)(11,764)1,390 11.8 %
Operating margin percentage(8.4)%(9.8)%
Adjusted EBITDA (1)$11,745 $9,573 $2,172 22.7 %
Adjusted EBITDA Margin (1)9.5 %8.0 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue in the East segment increased $3.1 million in the three months ended April 3, 2021, as compared to the same period a year ago, as the increases in aggregates, asphalt and paving and related services exceeded a decrease in ready-mix concrete revenues. Operating loss decreased $1.4 million in the three months ended April 3, 2021, over the same period a year ago, primarily due to net revenue gains in excess of increases in our cost of revenue. Adjusted EBITDA and Adjusted EBITDA Margin increased $2.2 million and increased to 9.5% from 8.0% in the three months ended April 3, 2021, respectively, due to the items relating to operating income noted above.
 
Operating margin percentage for the three months ended April 3, 2021 increased to (8.4)% from (9.8)%, from the comparable period a year ago, due to the items noted above.
 
Gross revenue by product/ service was as follows:  
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Revenue by product*:
Aggregates$71,656 $69,872 $1,784 2.6 %
Ready-mix concrete31,350 35,582 (4,232)(11.9)%
Asphalt3,537 2,516 1,021 40.6 %
Paving and related services14,919 12,807 2,112 16.5 %
Other14,580 12,263 2,317 18.9 %
Total revenue$136,042 $133,040 $3,002 2.3 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.

The East segment’s percent changes in sales volumes and pricing in the three months ended April 3, 2021 from the three months ended March 28, 2020 were as follows:   
 Three months ended
Percentage Change in
VolumePricing
Aggregates2.7 %(0.2)%
Ready-mix concrete(12.4)%0.5 %
Asphalt55.0 %(11.5)%
 
Revenue from aggregates in the East segment increased $1.8 million in the three months ended April 3, 2021. In the three month period ended April 3, 2021, aggregate volumes exceeded prior year volumes while our average sales price decreased slightly due to product mix. Aggregate volumes in the first three months of 2021 increased 2.7%, primarily due to organic growth in Virginia and Kentucky, which offset organic declines in our Kansas markets as wind farm projects decreased. Aggregates organic pricing was essentially flat in the three months ended April 3, 2021 as compared to the same period a year ago.
 
Revenue from ready-mix concrete in the East segment decreased $4.2 million in the three months ended April 3, 2021, as compared to the same period in 2020, as our realized price increases of 0.5% were not enough to overcome volume
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decreases. In the three months ended April 3, 2021, ready-mix concrete volumes decreased 12.4%, compared to prior year levels primarily due to lower volumes in Kansas as wind farm projects in 2020 were not fully replaced in 2021.
 
Revenue from asphalt increased $1.0 million in the three months ended April 3, 2021, when compared to the same period in 2020. The increase was mainly attributable to higher volumes in Kansas and Virginia. Asphalt pricing decreased 11.5% in the three months ended April 3, 2021, as lower liquid asphalt index prices were incurred in most of our markets. Paving and related service revenue increased $2.1 million in the three months ended April 3, 2021, primarily due to increased activity in our Virginia markets.
 
Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the three months ended April 3, 2021 was approximately $(1.2) million and $(0.2) million, respectively.

Cement Segment
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Net revenue$40,669 $37,925 $2,744 7.2 %
Operating loss(10,046)(15,490)5,444 35.1 %
Operating margin percentage(24.7)%(40.8)%
Adjusted EBITDA (1)$2,499 $(7,561)$10,060 133.1 %
Adjusted EBITDA Margin (1)6.1 %(19.9)%
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue in the Cement segment increased $2.7 million primarily due to increased organic cement volumes of 13.7% in the three months ended April 3, 2021, as well as a 0.4% increase in average sales prices. Our Green America Recycling facility, which provides fuel for one of our plants, is not yet fully operational and as such, revenue from that facility is below 2020 levels for the three month period ended April 3, 2021. Our efforts continue to ramp up to resumption of full operations.

Operating loss decreased $5.4 million during the three months ended April 3, 2021. Adjusted EBITDA and Adjusted EBITDA Margin increased $10.1 million and increased to 6.1% from (19.9)% in the three months ended April 3, 2021, respectively. In the first quarter of 2021, we received $1.2 million in insurance proceeds relative to property, plant and equipment that was destroyed in the recycling plant explosion that occurred in April 2020, which was recorded as gain on sale of assets. In addition, we received $4.3 million in business interruption insurance proceeds in the first quarter of 2021, which was recorded as other income.

Operating margin percentage for the three months ended April 3, 2021 increased to (24.7)% from (40.8)%, from the comparable period a year ago. The increased operating margin for the three months ended April 3, 2021 was primarily due to the same factors noted above. Production levels in the first three months of 2021 were 6.5% higher than in 2020.

Gross revenue by product was as follows:  
 Three months ended  
($ in thousands)April 3, 2021March 28, 2020Variance
Revenue by product*:
Cement$39,703 $34,758 $4,945 14.2 %
Other966 3,167 (2,201)(69.5)%
Total revenue$40,669 $37,925 $2,744 7.2 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. Revenue from waste processing and the elimination of intracompany transactions is included in Other.
 
The Cement segment’s percent changes in sales volumes and pricing in the three months ended April 3, 2021 from the three months ended March 28, 2020 were as follows:
29

 Three months ended
Percentage Change in
Volume    Pricing
Cement13.7 %0.4 %
    
Revenue from cement increased $4.9 million in the three months ended April 3, 2021, as volumes increased 13.7% supplemented by a small organic cement pricing gains in the three months ended April 3, 2021.

Liquidity and Capital Resources
 
Our primary sources of liquidity include cash on-hand, cash provided by operations, amounts available for borrowing under our senior secured credit facilities and capital-raising activities in the debt and capital markets. In addition to our current sources of liquidity, we have access to liquidity through public offerings of shares of our Class A common stock. To facilitate such offerings, in January 2020, we filed a shelf registration statement with the SEC that is effective for a term of three years and will expire in January 2023. The amount of Class A common stock to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific limit on the amount we may issue. The specifics of any future offerings, along with the use of the proceeds thereof, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

As of April 3, 2021, we had $359.7 million in cash and cash equivalents and $536.7 million of working capital compared to $418.2 million and $570.6 million, respectively, at January 2, 2021. Working capital is calculated as current assets less current liabilities. There were no restricted cash balances as of April 3, 2021 or January 2, 2021. We had no outstanding borrowings on our senior secured revolving credit facility, which had borrowing capacity of $329.1 million as of April 3, 2021, which is net of $15.9 million of outstanding letters of credit and is fully available to us within the terms and covenant requirements of our credit agreement governing the senior secured credit facilities (the “Credit Agreement”).  
 
Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Our working capital requirements generally increase during the first half of the year as we build up inventory and focus on repair and maintenance and other set-up costs for the upcoming season. Working capital levels then decrease as the construction season winds down and we enter the winter months, which is when we see significant inflows of cash from the collection of receivables.
 
As of April 3, 2021 and January 2, 2021, our long-term borrowings totaled $1.9 billion for which we incurred $21.2 million of interest expense for the three months ended April 3, 2021, and $24.5 million for the three months ended March 28, 2020. We expect that normal operating cash flow will be sufficient to fund our seasonal working capital needs. We had no outstanding borrowings on the revolving credit facility as of April 3, 2021.
 
We believe we have access to sufficient financial resources from our liquidity sources to fund our business and operations, including contractual obligations, capital expenditures and debt service obligations, for at least the next twelve months. Our growth strategy contemplates future acquisitions for which we believe we have sufficient access to capital. We also plan to divest of certain dilutive businesses as we rationalize our portfolio, which will also generate additional capital.

We and our affiliates may from time to time purchase our outstanding debt through open market purchases, privately negotiated transactions or otherwise. Purchases or retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
 
Indebtedness
 
Please refer to the notes to the consolidated interim financial statements for detailed information about our long-term debt, scheduled maturities of long-term debt and affirmative and negative covenants, including the maximum allowable consolidated first lien net leverage ratio. As of April 3, 2021, we were in compliance with all debt covenants. At April 3, 2021 and January 2, 2021, $1.9 billion of total debt was outstanding under our respective debt agreements.

Cash Flows
 
The following table summarizes our net cash used in or provided by operating, investing and financing activities and our capital expenditures in the three months ended April 3, 2021 and March 28, 2020: 
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 Summit Inc.
($ in thousands)April 3, 2021March 28, 2020
Net cash provided by (used in):
Operating activities$(21,318)$(38,931)
Investing activities(34,500)(56,868)
Financing activities(2,762)(15,606)
 
Operating activities
 
During the three months ended April 3, 2021, cash used in operating activities was $21.3 million primarily as a result of:
 
Net loss of $23.2 million, increased by non-cash expenses, including $59.1 million of depreciation, depletion, amortization and accretion expense and $5.4 million of share-based compensation, reduced by the gain on sale of a business and other assets of $16.0 million.
Billed and unbilled accounts receivable increased by $3.5 million in the first three months of 2021 as a result of the seasonality of our business. The majority of our sales occur in the spring, summer and fall and we typically incur an increase in accounts receivable (net billed and unbilled) during the second and third quarters of each year. This amount is typically converted to cash in the fourth and first quarters.  Our inventory levels also increased during the first quarter as we prepared for the increase in activity over the warmer months.
The timing of payments associated with accounts payable and accrued expenses of cash, which is consistent with the seasonality of our business whereby we build-up inventory levels and incur repairs and maintenance costs to ready the business for increased sales volumes in the summer and fall. These costs are typically incurred in the first half of the year and paid by year-end. In addition, we made $29.5 million of interest payments in the three months ended April 3, 2021.

During the three months ended March 28, 2020, cash used in operating activities was $38.9 million primarily as a result of:

Net loss of $46.7 million, increased by non-cash expenses, including $55.3 million of depreciation, depletion, amortization and accretion expense and $4.9 million of share-based compensation, less the non-cash change in our deferred tax asset.
Billed and unbilled accounts receivable decreased by $21.6 million in the first three months of 2020 as a result of the seasonality of our business. The majority of our sales occur in the spring, summer and fall and we typically incur an increase in accounts receivable (net billed and unbilled) during the second and third quarters of each year. This amount is typically converted to cash in the fourth and first quarters. Our inventory levels also increased during the first quarter as we prepared for the increase in activity over the warmer months.
The timing of payments associated with accounts payable and accrued expenses of cash, which is consistent with the seasonality of our business whereby we build-up inventory levels and incur repairs and maintenance costs to ready the business for increased sales volumes in the summer and fall. These costs are typically incurred in the first half of the year and paid by year-end. In addition, we made $36.3 million of interest payments in the three months ended March 28, 2020.
 
Investing activities
 
During the three months ended April 3, 2021, cash used for investing activities was $34.5 million, of which $69.8 million was invested in capital expenditures, which was partially offset by $2.7 million of proceeds from asset sales. Additionally, in February 2021 we received $33.1 million of proceeds from the sale of a business in the East segment.
 
During the three months ended March 28, 2020, cash used for investing activities was $56.9 million, of which $61.8 million was invested in capital expenditures, which was partially offset by $3.2 million of proceeds from asset sales.

Financing activities
 
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During the three months ended April 3, 2021, cash used in financing activities was $2.8 million. We received $15.9 million of proceeds from stock option exercises, which was offset by $8.1 million payments on acquisition-related liabilities and $10.2 million of payments on debt.
 
During the three months ended March 28, 2020, cash used in financing activities was $15.6 million. We made payments on acquisition-related liabilities of $9.5 million and payments on debt of $5.5 million.

Cash paid for capital expenditures
 
We paid cash of approximately $69.8 million in capital expenditures in the three months ended April 3, 2021 compared to $61.8 million in the three months ended March 28, 2020.
 
We currently estimate that we will invest between $200 million to $220 million including approximately $25 million to $35 million for greenfield projects. We increased our capital expenditure estimate from previously disclosed amounts as we invested in reserves subsequent to quarter end, as well as incremental capital purchases to service demand in high growth markets. The timing of our greenfield expenditures is dependent upon the timing of when permits may be issued. We expect to fund our capital expenditure program through cash on hand, cash from operations, outside financing arrangements and available borrowings under our revolving credit facility.
 
Tax Receivable Agreement
 
When the Company purchases LP Units for cash or LP Units are exchanged for shares of Class A common stock, this results in increases in the Company’s share of the tax basis of the tangible and intangible assets of Summit Holdings. These increases in tax basis may increase, for tax purposes, depreciation and amortization deductions and therefore reduce the amount of tax that Summit Inc. would otherwise be required to pay in the future. In connection with our initial public offering, we entered into a TRA with the holders of the LP Units that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA is deemed to realize) as a result of these increases in tax basis and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. The increases in tax basis as a result of an exchange of LP Units for shares of Class A common stock, as well as the amount and timing of any payments under the TRA, are difficult to accurately estimate, as they will vary depending upon a number of factors, including the timing of the exchanges, the price of our Class A common stock at the time of the exchange, the extent to which the exchanges are taxable, the amount and timing of our income and the effective tax rate.
 
We anticipate funding payments under the TRA from cash flows from operations, available cash and available borrowings under our Senior Secured Revolving Credit Facilities. As of April 3, 2021, we had accrued $325.8 million as TRA liability in our consolidated financial statements. We do not expect significant payments on our TRA liability to occur within the next twelve months.
 
Based upon a $27.81 per share price of our Class A common stock, the closing price of our stock on the last trading day of the three months ended April 3, 2021, and a contractually defined discount rate of 1.28%, we estimate that if Summit Inc. were to exercise its right to terminate the TRA, the aggregate amount required to settle the TRA would be approximately $316.9 million. Estimating the amount and the timing of payments that may be made under the TRA is by its nature difficult and imprecise, insofar as the amounts payable depends on a variety of factors, including, but not limited to, the timing of future exchanges, our stock price at the date of the exchange and the timing of the generation of future taxable income. The increases in tax basis as a result of an exchange, as well as the amount and timing of any payments under the TRA, will vary depending on a variety of factors.

Commitments and contingencies
 
We are party to certain legal actions arising from the ordinary course of business activities. Accruals are recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, management expects that the ultimate resolution of all pending or threatened claims and litigation will not have a material effect on our consolidated financial position, results of operations or liquidity. We record legal fees as incurred.
 
Environmental Remediation—Our operations are subject to and affected by federal, state, provincial and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. We regularly monitor and review
32

its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of our business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities and noncompliance will not have a material adverse effect on our consolidated financial condition, results of operations or liquidity.
Other—We are obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial condition, results of operations, and cash flows of the Company. The terms of the purchase commitments generally approximate one year.
 
Off-Balance sheet arrangements
As of April 3, 2021, we had no material off-balance sheet arrangements.

Non-GAAP Performance Measures
 
We evaluate our operating performance using metrics that we refer to as “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Cash Gross Profit” and “Adjusted Cash Gross Profit Margin” which are not defined by U.S. GAAP and should not be considered as an alternative to earnings measures defined by U.S. GAAP. We define Adjusted EBITDA as EBITDA, adjusted to exclude accretion, loss on debt financings, gain on sale of business, non-cash compensation and certain other non-cash and non-operating items. Beginning with the first quarter of 2021, the Company no longer adjusts for transaction costs, as those costs are recurring cash payments and included in general and administrative expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We define Adjusted Cash Gross Profit as operating income before general and administrative expenses, depreciation, depletion, amortization and accretion and Adjusted Cash Gross Profit Margin as Adjusted Cash Gross Profit as a percentage of net revenue.
 
We present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin for the convenience of investment professionals who use such metrics in their analyses. The investment community often uses these metrics to assess the operating performance of a company’s business and to provide a consistent comparison of performance from period to period. We use these metrics, among others, to assess the operating performance of our individual segments and the consolidated company.
 
Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare such financial measures with other companies’ non-GAAP financial measures having the same or similar names. We strongly encourage investors to review our consolidated financial statements in their entirety and not rely on any single financial measure.

The tables below reconcile our net income (loss) to EBITDA and Adjusted EBITDA, present Adjusted EBITDA by segment and reconcile operating income to Adjusted Cash Gross Profit for the periods indicated:

Reconciliation of Net Income (Loss) to Adjusted EBITDAThree months ended April 3, 2021
by SegmentWestEastCementCorporateConsolidated
($ in thousands)
Net income (loss)$17,436 $6,969 $(1,605)$(46,045)$(23,245)
Interest (income) expense(2,032)(1,720)(4,045)31,983 24,186 
Income tax expense (benefit)186 (66)— (5,563)(5,443)
Depreciation, depletion and amortization24,924 21,474 8,068 1,104 55,570 
EBITDA$40,514 $26,657 $2,418 $(18,521)$51,068 
Accretion216 469 81 — 766 
Gain on sale of business— (15,668)— — (15,668)
Non-cash compensation— — — 5,363 5,363 
Other(82)287 — — 205 
Adjusted EBITDA$40,648 $11,745 $2,499 $(13,158)$41,734 

33

Reconciliation of Net Income (Loss) to Adjusted EBITDAThree months ended March 28, 2020
by SegmentWestEastCementCorporateConsolidated
($ in thousands)
Net income (loss)$498 $(11,067)$(12,278)$(23,879)$(46,726)
Interest (income) expense(578)(569)(3,176)32,141 27,818 
Income tax benefit(467)(129)— (22,305)(22,901)
Depreciation, depletion and amortization21,684 20,720 7,808 989 51,201 
EBITDA$21,137 $8,955 $(7,646)$(13,054)$9,392 
Accretion116 376 85 — 577 
Non-cash compensation— — — 4,905 4,905 
Other1,215 242 — (670)787 
Adjusted EBITDA$22,468 $9,573 $(7,561)$(8,819)$15,661 

Reconciliation of Working CapitalApril 3, 2021January 2, 2021
($ in thousands)
Total current assets$858,435 $893,279 
Less total current liabilities(321,717)(322,689)
Working capital$536,718 $570,590 
 
 Three months ended
Reconciliation of Operating Loss to Adjusted Cash Gross ProfitApril 3, 2021March 28, 2020
($ in thousands)
Operating loss$(25,059)$(41,720)
General and administrative expenses51,642 41,686 
Depreciation, depletion, amortization and accretion56,336 51,778 
Gain on sale of property, plant and equipment(1,769)(1,917)
Adjusted Cash Gross Profit (exclusive of items shown separately)$81,150 $49,827 
Adjusted Cash Gross Profit Margin (exclusive of items shown separately) (1)20.4 %14.6 %
(1)Adjusted Cash Gross Profit Margin, which we define as Adjusted Cash Gross Profit as a percentage of net revenue.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. Our operations are highly dependent upon the interest rate-sensitive construction industry as well as the general economic environment. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs. For a discussion of quantitative and qualitative disclosures about market risk, please refer to the Annual Report from which our exposure to market risk has not materially changed.
 
ITEM  4. CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
Summit Inc.
 
Summit Inc. maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in Summit Inc.’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Summit Inc.’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Summit Inc.’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Summit Inc.’s disclosure controls and procedures as of April 3, 2021. Based upon that evaluation, Summit Inc.’s Chief Executive Officer and
34

Chief Financial Officer concluded that, as of April 3, 2021, Summit Inc.’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
 
Summit LLC
 
Summit LLC maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Summit LLC’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Summit LLC’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Summit LLC’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Summit LLC’s disclosure controls and procedures as of April 3, 2021. Based upon that evaluation, Summit LLC’s Chief Executive Officer and Chief Financial Officer concluded that, as of April 3, 2021, Summit LLC’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
 
Changes in Internal Control over Financial Reporting
 
Summit Inc.
 
There was no change in Summit Inc.’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during its last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Summit Inc.’s internal control over financial reporting.
 
Summit LLC
 
There was no change in Summit LLC’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during its last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Summit LLC’s internal control over financial reporting.

35

PART II—OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
The information set forth under Note 12, "Commitments and Contingencies," to Summit Inc.’s unaudited consolidated financial statements is incorporated herein by reference.

ITEM  1A. RISK FACTORS
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in the Annual Report, which could materially affect the Company’s business, financial condition, operating results or liquidity or future results. The risks described in the Annual Report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its results of operations, financial condition or liquidity. There have been no material changes to the risk factors disclosed in the Annual Report.

ITEM  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM  4. MINE SAFETY DISCLOSURES
 
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this report.
 
ITEM  5. OTHER INFORMATION
None.

36

ITEM  6. EXHIBITS
3.1
3.2
3.3
3.4
10.1*†
10.2*†
10.3*†
31.1*
31.2*
31.3*
31.4*
32.1**
32.2**
32.3**
32.4**
95.1*
99.1*
101.INS*Inline XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.1*
Cover Page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2021,
formatted in Inline XBRL (and contained in Exhibit 101).

*     Filed herewith
**   Furnished herewith
Indicates management contract or compensatory plan or arrangement
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them other than for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
37

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.
 
   
 SUMMIT MATERIALS, INC.
 SUMMIT MATERIALS, LLC
   
Date: May 11, 2021By:/s/ Anne P. Noonan
  Anne P. Noonan
  Chief Executive Officer
  (Principal Executive Officer)
   
Date: May 11, 2021By:/s/ Brian J. Harris
  Brian J. Harris
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

38