ACQUISITIONS AND BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2021

Rail Terminal and Bulk Storage Facility

On April 20, 2021, we purchased a rail terminal and bulk storage facility for cementitious materials in Stockton, California for $8.2 million that is currently leased to and operated by a third party. We made this investment to increase the control and stability over our raw material supply chain to support our West Region's ready-mixed concrete business. We accounted for this purchase as an asset acquisition and recorded the assets in property, plant and equipment on our condensed consolidated balance sheets.

Property Royalty Agreement

On March 12, 2021, we acquired property and the underlying royalty agreement associated with the Orca Quarry on Vancouver Island, British Columbia, Canada for $28.7 million (the “Orca Acquisition”). The Orca Acquisition had the effect of eliminating future royalty payments, which had previously been recognized in cost of goods sold excluding depreciation, depletion and amortization in our condensed consolidated statements of operations. We accounted for the Orca Acquisition as an asset acquisition and recorded the assets in property, plant and equipment on our condensed consolidated balance sheets.

Sugar City Building Materials Co.

On November 7, 2020, we acquired certain assets of Sugar City Building Materials Co. (the “Sugar City Acquisition”), which expanded our ready-mixed concrete operations in our West Region, for total cash consideration of $7.8 million. We accounted for the Sugar City Acquisition as a business combination. The assets acquired primarily included inventory and property, plant and equipment. The Sugar City Acquisition resulted in $2.1 million of goodwill, which is amortizable for tax purposes and has been allocated to our ready-mixed concrete segment because we expect to receive synergies in that segment. No pro forma information has been disclosed in these financial statements, as the operations of Sugar City Building Materials Co. for the period were not material to our revenue, net income or earnings per share.

Coram Materials Corp.

On February 24, 2020, we acquired 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 the equity of Coram Materials (the “Coram Acquisition”) was accounted for as a business combination. We funded the initial cash purchase consideration with cash and borrowings under our Revolving Facility (as defined in Note 5). 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 aggregate 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.

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(1)	$	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)(2)	$	142.9

(1) The aggregate fair value of the acquired accounts receivable approximated the aggregate gross contractual amount.

(2) Consisted of a $140.2 million initial cash payment, a $1.7 million initial present value of deferred consideration, and a $1.6 million working capital adjustment paid in August 2020, 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 was $2.0 million, of which $1.0 million was paid in the six months ended June 30, 2021 and the remainder is due in February 2022.

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 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, 2020.


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

Earnings per share attributable to U.S. Concrete - basic	$	0.56	$	0.46
Earnings per share attributable to U.S. Concrete - diluted	$	0.56	$	0.46

The above pro forma results 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, 2020 and do not reflect any operational efficiencies or potential cost savings that may occur as a result of the consolidation of these operations.

The pro forma amounts above reflect the following adjustments:


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

Acquisition by Vulcan Materials Company

On June 6, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vulcan Materials Company, a New Jersey corporation (“Vulcan”), and Grizzly Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of Vulcan (“Grizzly”). The Merger Agreement provides that, subject to its terms and conditions, Grizzly will merge with and into U.S. Concrete (the “Merger”), with U.S. Concrete surviving the Merger and becoming a wholly owned subsidiary of Vulcan.

Subject to the terms and conditions set forth in the Merger Agreement, at the time of the Merger (the “Effective Time”), each issued and outstanding share of common stock, par value $0.001 per share, of U.S. Concrete (“USCR Stock”) (other than such shares (i) owned by U.S. Concrete or any of its subsidiaries, Vulcan or Grizzly or any other wholly owned subsidiary of Vulcan or (ii) exercising dissenters rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will be converted into the right to receive $74.00 in cash, without interest. In addition, each restricted stock unit that is solely subject to time-based vesting requirements granted under the Company's Long Term Incentive Plan that is outstanding immediately prior to the Effective Time will fully vest and be converted into the right to receive $74.00 in cash (without interest and subject to applicable tax withholding). The Merger Agreement provides each of the Company and Vulcan with certain termination rights and, under certain circumstances, may require the Company or Vulcan to pay a $50.0 million termination fee.

To effect this transaction, we incurred $6.3 million of transaction costs, which were included in selling, general and administrative expenses in our condensed consolidated statements of operations for the three and six months ended June 30, 2021.

The transaction is expected to close in the second half of 2021 subject to the receipt of approvals by the Company's shareholders, regulatory approval and other customary closing conditions. If the Merger is consummated, USCR Stock will be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).