Loading...
Docoh

Summit Materials (SUM)

Filed: 11 May 21, 12:14pm


Exhibit 99.1
 
SUMMIT MATERIALS, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
 
 April 3,January 2,
 20212021
 (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 
Goodwill1,202,426 1,202,291 
Intangible assets, less accumulated amortization (April 3, 2021 - $12,502 and January 2, 2021 - $11,864)71,486 47,852 
Operating lease right-of-use assets28,796 28,543 
Other assets53,432 55,000 
Total assets$4,111,692 $4,077,134 
Liabilities and Members' Interest  
Current liabilities:  
Current portion of debt$6,354 $6,354 
Current portion of acquisition-related liabilities13,372 7,827 
Accounts payable150,854 121,422 
Accrued expenses130,568 160,801 
Current operating lease liabilities7,480 8,188 
Billings in excess of costs and estimated earnings13,930 16,499 
Total current liabilities322,558 321,091 
Long-term debt1,891,522 1,892,347 
Acquisition-related liabilities31,015 12,246 
Noncurrent operating lease liabilities22,246 21,500 
Other noncurrent liabilities188,880 167,182 
Total liabilities2,456,221 2,414,366 
Commitments and contingencies (see note 11)
Members' equity1,477,578 1,459,211 
Accumulated earnings194,350 222,140 
Accumulated other comprehensive loss(16,457)(18,583)
Total members' interest1,655,471 1,662,768 
Total liabilities and members' interest$4,111,692 $4,077,134 
 
See notes to unaudited consolidated financial statements.





SUMMIT MATERIALS, LLC AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands)
 
 Three months ended
 April 3, 2021March 28, 2020
Revenue:  
Product$354,234 $305,307 
Service44,247 37,099 
Net revenue398,481 342,406 
Delivery and subcontract revenue29,363 24,784 
Total revenue427,844 367,190 
Cost of revenue (excluding items shown separately below):
Product277,134 254,055 
Service40,197 38,524 
Net cost of revenue317,331 292,579 
Delivery and subcontract cost29,363 24,784 
Total cost of revenue346,694 317,363 
General and administrative expenses51,642 41,686 
Depreciation, depletion, amortization and accretion56,336 51,778 
Gain on sale of property, plant and equipment(1,769)(1,917)
Operating loss(25,059)(41,720)
Interest expense24,124 27,700 
Gain on sale of business(15,668)
Other (income) loss, net(4,889)89 
Loss from operations before taxes(28,626)(69,509)
Income tax benefit(836)(5,884)
Net loss attributable to Summit LLC$(27,790)$(63,625)
 
See notes to unaudited consolidated financial statements.





SUMMIT MATERIALS, LLC AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
(In thousands)
 
 Three months ended
 April 3, 2021March 28, 2020
Net loss$(27,790)$(63,625)
Other comprehensive income (loss):  
Foreign currency translation adjustment2,126 (8,359)
Other comprehensive income (loss)2,126 (8,359)
Comprehensive loss attributable to Summit LLC$(25,664)$(71,984)
 
See notes to unaudited consolidated financial statements.





SUMMIT MATERIALS, LLC 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$(27,790)$(63,625)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion, amortization and accretion59,045 55,160 
Share-based compensation expense5,363 4,905 
Net gain on asset and business disposals(15,964)(1,933)
Change in deferred tax asset, net(1,386)(6,184)
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 
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:
Capital contributions by member15,920 310 
Payments on debt(10,170)(5,493)
Payments on acquisition-related liabilities(5,596)(7,015)
Distributions(2,500)(2,500)
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.





SUMMIT MATERIALS, LLC AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Members' Interest
(In thousands)
 
 Total Members' Interest 
   Accumulated 
   otherTotal
 Members'Accumulatedcomprehensivemembers'
 equityearningslossinterest
Balance — January 2, 2021$1,459,211 $222,140 $(18,583)$1,662,768 
Net contributed capital15,920 — — 15,920 
Net loss— (27,790)— (27,790)
Other comprehensive income— — 2,126 2,126 
Distributions(2,500)— — (2,500)
Share-based compensation5,363 — — 5,363 
Shares redeemed to settle taxes and other(416)— — (416)
Balance — April 3, 2021$1,477,578 $194,350 $(16,457)$1,655,471 
Balance — December 28, 2019$1,432,718 $101,403 $(20,971)$1,513,150 
Net contributed capital310 — — 310 
Net loss— (63,625)— (63,625)
Other comprehensive income— — (8,359)(8,359)
Distributions(2,500)— — (2,500)
Share-based compensation4,905 — — 4,905 
Shares redeemed to settle taxes and other(908)— — (908)
Balance — March 28, 2020$1,434,525 $37,778 $(29,330)$1,442,973 
 
See notes to unaudited consolidated financial statements





SUMMIT MATERIALS, LLC
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
(Dollars in tables in thousands)

1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Summit Materials, LLC (“Summit LLC” 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 LLC is a wholly owned indirect subsidiary of Summit Materials Holdings L.P. (“Summit Holdings”), whose primary owner is Summit Materials, Inc. (“Summit Inc.”). Summit Inc. was formed as a Delaware corporation on September 23, 2014. Its sole material asset is a controlling equity interest in Summit Holdings. Pursuant to a reorganization into a holding company structure (the “Reorganization”) consummated in connection with Summit Inc.’s March 2015 initial public offering, Summit Inc. became a holding corporation operating and controlling all of the business and affairs of Summit Holdings and its subsidiaries, including Summit LLC.

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.
 
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, 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.
 
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.

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.
 
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 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$587,209 $410,426 $204,656 $1,202,291 
Acquisitions (dispositions) (1)(670)(670)
Foreign currency translation adjustments805 805 
Balance—April 3, 2021$588,014 $409,756 $204,656 $1,202,426 
_______________________________________________________________________
(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.
 
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 
 

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 taxes18,796 15,900 
Deferred asset purchase payments3,788 9,749 
Professional fees1,006 828 
Other (1)25,873 23,482 
Total$130,568 $160,801 
_______________________________________________________________________
(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 
5 1/8% Senior Notes, due 2025
300,000 300,000 
6 1/2% Senior Notes, due 2027
300,000 300,000 
5 1/4% 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 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.

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 LLC is a limited liability company and passes its tax attributes for federal and state tax purposes to its parent company and is generally not subject to federal or state income tax. However, certain subsidiary entities file federal, state and Canadian income tax returns due to their status as taxable entities in the respective jurisdiction. The effective income tax rate for the C Corporations differs from the statutory federal rate primarily due to (1) tax depletion expense in excess of the expense recorded under U.S. GAAP, (2) state income taxes and the effect of graduated tax rates and (3) various other items, such as limitations on meals and entertainment and other costs. The effective income tax rate for the Canadian subsidiary is not significantly different from its historical effective tax rate.
 
NaN material interest or penalties were recognized in income tax expense during the three months ended April 3, 2021 and March 28, 2020. We recognized uncertain tax benefits in the three months ended March 28, 2020 related to the passage of the Coronavirus Aid, Relief and Economic Stability Act (“CARES Act”) on March 25, 2020.

8. MEMBERS’ INTEREST
 



Accumulated other comprehensive income (loss) —The changes in each component of accumulated other comprehensive income (loss) consisted of the following:
 
   Accumulated
  Foreign currencyother
 Change intranslationcomprehensive
 retirement plansadjustments(loss) income
Balance — January 2, 2021$(8,546)$(10,037)$(18,583)
Foreign currency translation adjustment— 2,126 2,126 
Balance — April 3, 2021$(8,546)$(7,911)$(16,457)
Balance — December 28, 2019$(6,317)$(14,654)$(20,971)
Foreign currency translation adjustment— (8,359)(8,359)
Balance — March 28, 2020$(6,317)$(23,013)$(29,330)
 
9. 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 
 
10. 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:



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 

11. 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



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.
 
12. 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:



 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 7,173 7,173 
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.
 
13. 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 acquired 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.
 



 Three months ended
 April 3, 2021March 28, 2020
 20212020
Loss from operations before taxes$(28,626)$(69,509)
Interest expense24,124 27,700 
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 other364,249 419,175 
Total$4,111,692 $4,077,134 
 



14. GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
 
Summit LLC’s domestic wholly-owned subsidiary companies other than Finance Corp. are named as guarantors (collectively, the “Guarantors”) of the Senior Notes. Finance Corp. does not and will not have any assets or operations other than as may be incidental to its activities as a co-issuer of the Senior Notes and other indebtedness. Certain other partially-owned subsidiaries and a non-U.S. entity do not guarantee the Senior Notes (collectively, the “Non-Guarantors”). The Guarantors provide a joint and several, full and unconditional guarantee of the Senior Notes.
 
There are no significant restrictions on Summit LLC’s ability to obtain funds from any of the Guarantors in the form of dividends or loans. Additionally, there are no significant restrictions on a Guarantor’s ability to obtain funds from Summit LLC or its direct or indirect subsidiaries.
 
The following condensed consolidating balance sheets, statements of operations and cash flows are provided for the Issuers, the Guarantors and the Non-Guarantors.
 
Earnings from subsidiaries are included in other income in the condensed consolidated statements of operations below. The financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Guarantors or Non-Guarantors operated as independent entities.




Condensed Consolidating Balance Sheets
April 3, 2021
     
  Non-  
 Issuers
Guarantors 
Guarantors 
Eliminations 
Consolidated
Assets     
Current assets:     
Cash and cash equivalents$345,936 $4,396 $12,027 $(2,618)$359,741 
Accounts receivable, net229,444 20,827 (213)250,058 
Intercompany receivables394,071 1,306,790 (1,700,861)
Cost and estimated earnings in excess of billings15,818 1,306 17,124 
Inventories204,039 6,895 210,934 
Other current assets2,885 15,160 2,533 20,578 
Total current assets742,892 1,775,647 43,588 (1,703,692)858,435 
Property, plant and equipment, net8,521 1,796,487 92,109 1,897,117 
Goodwill1,141,412 61,014 1,202,426 
Intangible assets, net66,362 5,124 71,486 
Operating lease right-of-use assets2,434 22,358 4,004 28,796 
Other assets4,050,562 208,521 524 (4,206,175)53,432 
Total assets$4,804,409 $5,010,787 $206,363 $(5,909,867)$4,111,692 
Liabilities and Members' Interest
Current liabilities:
Current portion of debt$6,354 $$$$6,354 
Current portion of acquisition-related liabilities13,372 13,372 
Accounts payable3,412 137,018 10,637 (213)150,854 
Accrued expenses44,914 85,627 2,645 (2,618)130,568 
Current operating lease liabilities931 5,932 617 7,480 
Intercompany payables1,194,001 500,244 6,616 (1,700,861)
Billings in excess of costs and estimated earnings13,350 580 13,930 
Total current liabilities1,249,612 755,543 21,095 (1,703,692)322,558 
Long-term debt1,891,522 1,891,522 
Acquisition-related liabilities31,015 31,015 
Noncurrent operating lease liabilities2,327 16,759 3,160 22,246 
Other noncurrent liabilities5,477 229,622 118,202 (164,421)188,880 
Total liabilities3,148,938 1,032,939 142,457 (1,868,113)2,456,221 
Total members' interest1,655,471 3,977,848 63,906 (4,041,754)1,655,471 
Total liabilities and members' interest$4,804,409 $5,010,787 $206,363 $(5,909,867)$4,111,692 
        



Condensed Consolidating Balance Sheets
January 2, 2021
 
     
  Non-  
 Issuers
Guarantors 
Guarantors 
Eliminations 
Consolidated
Assets     
Current assets:     
Cash and cash equivalents$401,074 $10,287 $10,461 $(3,641)$418,181 
Accounts receivable, net230,199 24,384 109 254,696 
Intercompany receivables404,459 1,303,293 (1,707,752)
Cost and estimated earnings in excess of billings7,504 1,162 8,666 
Inventories193,417 6,891 200,308 
Other current assets2,840 6,797 1,791 11,428 
Total current assets808,377 1,751,497 44,689 (1,711,284)893,279 
Property, plant and equipment, net9,410 1,746,045 94,714 1,850,169 
Goodwill1,142,083 60,208 1,202,291 
Intangible assets, net47,852 47,852 
Operating lease right-of-use assets2,615 21,880 4,048 28,543 
Other assets4,022,729 207,699 493 (4,175,921)55,000 
Total assets$4,843,131 $4,917,056 $204,152 $(5,887,205)$4,077,134 
Liabilities and Members' Interest
Current liabilities:
Current portion of debt$6,354 $$$$6,354 
Current portion of acquisition-related liabilities7,827 7,827 
Accounts payable3,889 108,805 8,619 109 121,422 
Accrued expenses54,108 106,320 4,014 (3,641)160,801 
Current operating lease liabilities913 6,114 1,161 8,188 
Intercompany payables1,215,043 485,401 7,308 (1,707,752)
Billings in excess of costs and estimated earnings15,508 991 16,499 
Total current liabilities1,280,307 729,975 22,093 (1,711,284)321,091 
Long-term debt1,892,347 1,892,347 
Acquisition-related liabilities12,246 12,246 
Noncurrent operating lease liabilities2,567 16,062 2,871 21,500 
Other noncurrent liabilities5,142 208,540 117,921 (164,421)167,182 
Total liabilities3,180,363 966,823 142,885 (1,875,705)2,414,366 
Total members' interest1,662,768 3,950,233 61,267 (4,011,500)1,662,768 
Total liabilities and members' interest$4,843,131 $4,917,056 $204,152 $(5,887,205)$4,077,134 




Condensed Consolidating Statements of Operations
For the three months ended April 3, 2021
 
     
  Non-  
 Issuers
Guarantors 
Guarantors 
Eliminations
Consolidated 
Revenue$$407,301 $22,811 $(2,268)$427,844 
Cost of revenue (excluding items shown separately below)331,844 17,118 (2,268)346,694 
General and administrative expenses18,591 29,849 1,433 49,873 
Depreciation, depletion, amortization and accretion1,104 52,566 2,666 56,336 
Operating (loss) income(19,695)(6,958)1,594 (25,059)
Other income, net(25,560)(4,337)(481)25,489 (4,889)
Interest expense (income)33,291 (10,543)1,376 24,124 
Gain on sale of business(15,668)(15,668)
(Loss) income from operation before taxes(27,426)23,590 699 (25,489)(28,626)
Income tax expense (benefit)364 (1,385)185 (836)
Net (loss) income attributable to Summit LLC$(27,790)$24,975 $514 $(25,489)$(27,790)
Comprehensive (loss) income attributable to member of Summit Materials, LLC$(25,664)$24,975 $(1,612)$(23,363)$(25,664)

Condensed Consolidating Statements of Operations
For the three months ended March 28, 2020
 
     
  Non-  
 Issuers
Guarantors 
GuarantorsEliminationsConsolidated
Revenue$$354,330 $16,193 $(3,333)$367,190 
Cost of revenue (excluding items shown separately below)308,110 12,586 (3,333)317,363 
General and administrative expenses13,830 24,209 1,730 39,769 
Depreciation, depletion, amortization and accretion989 49,473 1,316 51,778 
Operating (loss) income(14,819)(27,462)561 (41,720)
Other loss (income), net15,292 (306)1,171 (16,068)89 
Interest expense (income)33,214 (6,714)1,200 27,700 
Loss from operation before taxes(63,325)(20,442)(1,810)16,068 (69,509)
Income tax expense (benefit)300 (5,717)(467)(5,884)
Net loss attributable to Summit LLC$(63,625)$(14,725)$(1,343)$16,068 $(63,625)
Comprehensive (loss) income attributable to member of Summit Materials, LLC$(71,984)$(14,725)$7,016 $7,709 $(71,984)




Condensed Consolidating Statements of Cash Flows
For the three months ended April 3, 2021
 
     
  Non-  
 Issuers
Guarantors 
GuarantorsEliminationsConsolidated
Net cash (used in) provided by operating activities$(44,988)$18,590 $5,080 $$(21,318)
Cash flow from investing activities:
Purchase of property, plant and equipment(215)(67,795)(1,747)(69,757)
Proceeds from the sale of property, plant, and equipment2,457 206 2,663 
Proceeds from the sale of a business33,077 33,077 
Other(483)(483)
Net cash used for investing activities(215)(32,744)(1,541)(34,500)
Cash flow from financing activities:
Proceeds from investment by member15,920 15,920 
Loans received from and payments made on loans from other Summit Companies(21,350)22,390 (2,063)1,023 
Payments on long-term debt(1,589)(8,531)(50)(10,170)
Payments on acquisition-related liabilities(5,596)(5,596)
Distributions from partnership(2,500)(2,500)
Other(416)(416)
Net cash (used in) provided by financing activities(9,935)8,263 (2,113)1,023 (2,762)
Impact of cash on foreign currency140 140 
Net (decrease) increase in cash(55,138)(5,891)1,566 1,023 (58,440)
Cash — Beginning of period401,074 10,287 10,461 (3,641)418,181 
Cash — End of period$345,936 $4,396 $12,027 $(2,618)$359,741 


























Condensed Consolidating Statements of Cash Flows
For the three months ended March 28, 2020
 
     
  Non-  
 Issuers
Guarantors 
GuarantorsEliminationsConsolidated
Net cash (used in) provided by operating activities$(51,401)$10,349 $2,121 $$(38,931)
Cash flow from investing activities:
Purchase of property, plant and equipment(454)(60,423)(952)(61,829)
Proceeds from the sale of property, plant, and equipment3,140 20 3,160 
Other1,801 1,801 
Net cash used for investing activities(454)(55,482)(932)(56,868)
Cash flow from financing activities:
Proceeds from investment by member310 310 
Loans received from and payments made on loans from other Summit Companies(55,225)52,247 188 2,790 
Payments on long-term debt(1,588)(3,856)(49)(5,493)
Payments on acquisition-related liabilities(7,015)(7,015)
Distributions from partnership(2,500)(2,500)
Other(822)(86)(908)
Net cash (used in) provided by financing activities(59,825)41,290 139 2,790 (15,606)
Impact of cash on foreign currency(800)(800)
Net (decrease) increase in cash(111,680)(3,843)528 2,790 (112,205)
Cash — Beginning of period302,474 5,488 9,834 (6,477)311,319 
Cash — End of period$190,794 $1,645 $10,362 $(3,687)$199,114