BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2020

On February 24, 2020, we acquired all of the equity of Coram Materials Corp. and certain of its affiliates (collectively, "Coram Materials"). Coram Materials is a sand and gravel products provider located on Long Island in New York. This acquisition increased the vertical integration of our New York City operations.

The acquisition of all of the equity of Coram Materials (the "Coram Acquisition") was accounted for as a business combination. We funded the initial cash purchase consideration through borrowings under our Revolving Facility (as defined in Note 7). The combined assets acquired through the Coram Acquisition included an aggregates facility with 330 acres of land, including 180 mining acres containing approximately 41.9 million tons of in-place, proven and permitted aggregate reserves and approximately 7.5 million tons of in-place, proven, but unpermitted reserves. To effect this transaction, we incurred $0.6 million of transaction costs, which were included in selling and general administrative expenses in our condensed consolidated statements of operations for the six months ended June 30, 2020.

Our accounting for the Coram Acquisition is preliminary. We expect to record adjustments as we accumulate information needed to estimate the fair value of assets acquired and liabilities assumed, including working capital and property, plant, and equipment. The fair value of acquired receivables, inventory, machinery and equipment, land and buildings are based on inputs derived principally from, or corroborated by, observable market data (i.e., Level 2 inputs). The fair value of machinery and

equipment, land and buildings was based on a market valuation approach or a cost valuation approach when a market valuation approach was unavailable. The estimates used for determining the fair value of the mineral reserves were unobservable and significant to the overall measurement (i.e., Level 3 inputs). The fair value of the mineral reserves was determined using an excess earnings approach, which required management to estimate future cash flows, net of capital investments in the specific operation. Management’s cash flow projections involved the use of significant estimates and assumptions with respect to the expected production of the aggregate facility over the estimated time period, sales prices, shipment volumes, and expected profit margins. The present value of the projected net cash flows represents the preliminary fair value assigned to mineral reserves. The discount rate is a significant assumption used in the valuation model.

The total consideration for the Coram Acquisition and the amounts related to the assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date were as follows:


($ in millions)	Coram Materials
Accounts receivable	$	2.0
Inventory	10.0
Other current assets	0.3
Property, plant and equipment	130.9
Total assets acquired	143.2
Current liabilities	0.1
Other long-term liabilities	0.2
Total liabilities assumed	0.3
Total consideration (fair value)⁽¹⁾	$	142.9

(1) Included $140.2 million in cash, present value deferred consideration of $1.7 million, and a trade working capital payable of $1.6 million, less a $0.6 million settlement of accounts payable owed by the Company to Coram Materials at the acquisition date. The total amount of deferred consideration is $2.0 million, which is payable over two years.

Impact of Coram Acquisition

During the three months ended June 30, 2020, the Coram Materials business generated revenue of $7.0 million, including intersegment sales of $2.7 million, and generated operating income of $1.3 million. During the period from the acquisition date to June 30, 2020, the Coram Materials business generated revenue of $9.6 million, including intersegment sales of $3.7 million, and generated operating income of $1.1 million. The results of this acquired business are included in our aggregate products segment.

The unaudited pro forma consolidated financial results shown below represent our estimate of the Company's results of operations as if the Coram Acquisition had been completed on January 1, 2019.


	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions except per share)	2020		2019		2020		2019
Revenue	$	322.7	$	372.5	$	659.2	$	709.5
Net income (loss) attributable to U.S. Concrete	$	9.3	$	0.8	$	7.7	$	(1.8)

Net income (loss) per share attributable to U.S. Concrete - basic	$	0.56	$	0.05	$	0.46	$	(0.11)
Net income (loss) per share attributable to U.S. Concrete - diluted	$	0.56	$	0.05	$	0.46	$	(0.11)

The above pro forma results are unaudited and were prepared based on the historical U.S. GAAP results of the Company and the historical results of Coram Materials, based on data provided by the former owners. These results are not necessarily indicative of what the Company's actual results would have been had the Coram Acquisition occurred on January 1, 2019 and do not reflect any operational efficiencies or potential cost savings that may occur as a result of the consolidation of these operations.

The unaudited pro forma amounts above reflect the following adjustments:


	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2020		2019		2020		2019
Decrease (increase) in cost of goods sold related to fair value increase in inventory	$	2.6	$	(1.3)	$	4.2	$	(2.1)
Decrease (increase) in depreciation, depletion and amortization expense	—		(1.5)		(0.9)		(2.5)
Exclusion of buyer transaction costs	0.1		—		0.6		—
Exclusion of seller transaction costs	—		—		0.3		—
Increase in interest expense	—		(1.7)		(0.8)		(2.7)
Increase in income tax expense	—		(0.4)		(1.1)		(0.6)