UNITED STATES
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FORM
CURRENT REPORT
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Item 7.01. | Regulation FD Disclosure. |
On November 27, 2023, Summit Materials, Inc. (“Summit Inc.”) issued a press release announcing that its indirect subsidiaries Summit Materials, LLC and Summit Materials Finance Corp. (collectively, the “Issuers”, and, together with Summit Inc., the “Company”) intend to offer $800.0 million aggregate principal amount of their senior notes due 2031 in a private offering (the “Offering”). The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
In connection with the Offering, the Issuers are disclosing certain information to prospective investors in a preliminary offering memorandum dated November 27, 2023 (the “Preliminary Offering Memorandum”). Pursuant to Regulation FD, the Company is furnishing as Exhibit 99.2 to this Current Report on Form 8-K the sections captioned “Offering Memorandum Summary—Summary Historical Consolidated Financial and Other Data of Summit LLC and Subsidiaries,” “—Summary Historical Consolidated and Combined Financial and Other Data of Argos USA and Subsidiaries” and “—Summary Unaudited Pro Forma Condensed Combined Financial Information” from the Preliminary Offering Memorandum.
The information included in this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report on Form 8-K, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, unless specifically incorporated by reference into any such filing. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely by Regulation FD.
The information included in this Current Report on Form 8-K is neither an offer to sell nor a solicitation of an offer to buy any securities.
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this Current Report on Form 8-K, including the exhibits hereto, contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties. A discussion of factors that may affect future results is contained in the registrants’ Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, as such factors may be updated from time to time in the registrants’ periodic filings with the Securities and Exchange Commission. The registrants disclaim any obligation to update forward-looking statements, except as may be required by law.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
99.1 | Press Release of Summit Materials, Inc. dated November 27, 2023. | |
99.2 | Information excerpted from Preliminary Offering Memorandum dated November 27, 2023 | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUMMIT MATERIALS, INC. | ||
SUMMIT MATERIALS, LLC | ||
Date: November 27, 2023 | ||
By: | /s/ Christopher B. Gaskill | |
Name: | Christopher B. Gaskill | |
Title: | EVP, Chief Legal Officer & Secretary |
Exhibit 99.1
Summit Materials Announces intention to offer $800 million of senior notes
DENVER--(PR NEWSWIRE)--Summit Materials, Inc. (NYSE: SUM, “Summit”) announced today that its indirect subsidiaries Summit Materials, LLC and Summit Materials Finance Corp. (the “Issuers”, and, together with Summit, the “Company”) intend to offer $800.0 million aggregate principal amount of Senior Notes due 2031 (the “notes”). The Company intends to use the proceeds from the offering, together with borrowings under a new term loan B facility, to finance the previously announced transaction with Cementos Argos S.A. to acquire all of the outstanding equity interests of Argos North America Corp. (the “Argos Transaction”) and to pay related fees and expenses incurred in connection with the offering, the Argos Transaction and other financing transactions in connection therewith. Any remaining net proceeds will be used for general corporate purposes.
The notes to be offered have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The notes will be offered, by the initial purchasers, only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.
This press release is being issued pursuant to Rule 135(c) under the Securities Act, and it is neither an offer to sell nor a solicitation of an offer to buy any securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of any securities in any jurisdiction in which such offer, solicitation or sale is unlawful.
About Summit Materials
Summit Materials is a leading vertically integrated materials-based company that supplies aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a geographically diverse, materials-based business of scale that offers customers a single-source provider of construction materials and related downstream products in the public infrastructure, residential and nonresidential end markets. Summit has a strong track record of successful acquisitions since its founding and continues to pursue growth opportunities in new and existing markets.
Cautionary Statement Regarding Forward-Looking Statements
This press release 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,” “outlook,” “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. Such forward-looking statements include but are not limited to statements about the Argos Transaction and related financing transactions, and other statements that are not historical facts. 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov.
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 press release. 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 otherwise required by law.
Contacts
Andy Larkin
Vice President, Investor Relations
andy.larkin@summit-materials.com
702-618-6013
Exhibit 99.2
Summary Historical Consolidated Financial and Other Data of Summit LLC and Subsidiaries
The following tables set forth, for the periods and as of the dates indicated, our summary historical consolidated financial and other data. The summary historical consolidated financial information as of and for the nine months ended September 30, 2023 and October 1, 2022 was derived from Summit LLC’s unaudited consolidated financial statements included and incorporated by reference in this offering memorandum. The summary historical consolidated financial information as of December 31, 2022 and January 1, 2022 and for each of the three years ended December 31, 2022 has been derived from Summit LLC’s audited consolidated financial statements included and incorporated by reference in this offering memorandum. We have prepared our unaudited consolidated financial statements on the same basis as our audited consolidated financial statements and, in our opinion, have included all adjustments, which include normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations. The results for any historical or interim period are not necessarily indicative of the results that may be expected for the full year or any future period.
You should read the following information together with the more detailed information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit LLC” and the consolidated financial statements and the accompanying notes included and incorporated by reference in this offering memorandum.
The unaudited consolidated financial information for the twelve months ended September 30, 2023 has been derived by adding the financial information from our audited consolidated financial statements for the fiscal year ended December 31, 2022 to the financial data from our unaudited consolidated financial statements for the nine months ended September 30, 2023 and subtracting the financial information from our unaudited consolidated financial statements for the nine months ended October 1, 2022.
Twelve Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||
September 30, | September 30, | October 1, | December 31, | January 1, | January 2, | |||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Total revenue | $ | 2,511,609 | $ | 1,959,335 | $ | 1,860,248 | $ | 2,412,522 | $ | 2,409,669 | $ | 2,332,451 | ||||||||||||
Total cost of revenue (excluding items shown separately below) | 1,780,255 | 1,389,599 | 1,372,521 | 1,763,177 | 1,736,410 | 1,710,654 | ||||||||||||||||||
General and administrative expenses | 204,052 | 150,731 | 136,897 | 190,218 | 196,728 | 182,873 | ||||||||||||||||||
Depreciation, depletion, amortization and accretion | 213,100 | 163,133 | 150,483 | 200,450 | 229,366 | 221,320 | ||||||||||||||||||
Transaction costs | 16,881 | 19,518 | 2,637 | — | — | — | ||||||||||||||||||
Gain on sale of property, plant and equipment | (9,864 | ) | (5,787 | ) | (6,293 | ) | (10,370 | ) | (5,900 | ) | (7,569 | ) | ||||||||||||
Operating income | 307,185 | 242,141 | 204,003 | 269,047 | 253,065 | 225,173 | ||||||||||||||||||
Interest expense | 107,576 | 83,335 | 62,728 | 86,969 | 92,178 | 103,291 | ||||||||||||||||||
Loss on debt financings | 2,230 | 493 | — | 1,737 | 6,016 | 4,064 | ||||||||||||||||||
Loss (gain) on sale of business | 1,984 | — | (174,373 | ) | (172,389 | ) | (20,011 | ) | — | |||||||||||||||
Other income, net | (19,805 | ) | (14,769 | ) | (4,956 | ) | (9,992 | ) | (17,038 | ) | (3,982 | ) | ||||||||||||
Income from operations before tax | 215,200 | 173,082 | 320,604 | 362,722 | 191,920 | 121,800 | ||||||||||||||||||
Income tax expense | 12,131 | 15,103 | 19,557 | 16,585 | 20,949 | 1,063 | ||||||||||||||||||
Net income | $ | 203,069 | $ | 157,979 | $ | 301,047 | $ | 346,137 | $ | 170,971 | $ | 120,737 |
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Twelve Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||
September 30, | September 30, | October 1, | December 31, | January 1, | January 2, | |||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||
Net cash provided by (used for): | ||||||||||||||||||||||||
Operating activities | $ | 395,596 | $ | 243,623 | $ | 131,580 | $ | 283,553 | $ | 361,929 | $ | 408,869 | ||||||||||||
Investing activities | (508,643 | ) | (415,532 | ) | 188,933 | 95,822 | (91,248 | ) | (285,587 | ) | ||||||||||||||
Financing activities | (131,666 | ) | (155,661 | ) | (262,443 | ) | (238,448 | ) | (307,927 | ) | (16,771 | ) | ||||||||||||
Balance Sheet Data (as of period end): | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 192,996 | $ | 192,996 | $ | 520,451 | $ | 380,961 | ||||||||||||||||
Total assets | 4,371,058 | 4,371,058 | 4,119,706 | 4,035,559 | ||||||||||||||||||||
Total debt (including current portion of long-term debt) | 1,505,738 | 1,505,738 | 1,509,560 | 1,609,960 | ||||||||||||||||||||
Finance leases | 8,579 | 8,579 | 14,126 | 32,606 | ||||||||||||||||||||
Total members’ interest | 2,306,102 | 2,306,102 | 2,143,150 | 1,884,944 | ||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Total hard assets (as of period end)(1) | $ | 2,217,668 | $ | 2,217,668 | $ | 2,026,193 | $ | 2,023,668 | ||||||||||||||||
Adjusted EBITDA(2) | $ | 560,756 | $ | 441,465 | $ | 372,185 | $ | 491,476 | $ | 520,082 | $ | 482,289 | ||||||||||||
Further Adjusted EBITDA(2) | $ | 579,820 | $ | 453,212 | $ | 366,399 | $ | 493,007 | $ | 520,342 | $ | 496,484 | ||||||||||||
Run-Rate Further Adjusted EBITDA(2) | $ | 993,834 |
(1) | Represents net property, plant and equipment and inventories. |
(2) | Reflects Adjusted EBITDA and Further Adjusted EBITDA of Summit, without giving effect to the Transactions, as well as Run-Rate Further Adjusted EBITDA. We evaluate our operating performance using a metric we refer to as “Adjusted EBITDA.” Adjusted EBITDA is defined as EBITDA, adjusted to exclude accretion, loss on debt financings, gain on sale of business, non-cash compensation and certain other non-cash or non-operating items. We use a metric we refer to as “Further Adjusted EBITDA,” which we define as Adjusted EBITDA plus transaction costs and pre-acquisition EBITDA contribution of acquisitions completed in the twelve months prior to the measurement date. In addition, we present a metric we refer to as “Run-Rate Further Adjusted EBITDA,” which we define as Further Adjusted EBITDA plus synergies that we expect to realize from the Argos Transaction. We may be unable to achieve these expected synergies on the timeline we anticipate or at all. See “Basis of Presentation” and “Risk Factors—Risks Related to the Company Following the Argos Transaction—The integration of Argos USA may not be as successful as anticipated, and we may not achieve the intended benefits or do so within the intended timeframe.” In addition, we use a metric we refer to as “Adjusted EBITDA Margin,” which we define as Adjusted EBITDA divided by Adjusted Revenues. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Summit LLC—Non-GAAP Performance Measures.” |
We include Adjusted EBITDA, Further Adjusted EBITDA and Run-Rate Further Adjusted EBITDA in addition to our U.S. GAAP results because management believes they provide a more complete understanding of factors and trends affecting our business than U.S. GAAP measures alone. Management believes these non-GAAP measures assist our board of directors, management, lenders and investors in comparing our operating performance on a consistent basis because they remove, where applicable, the impact of our capital structure, asset base, acquisition accounting, non-cash charges and non-operating items from our operations. In addition, management uses Adjusted EBITDA, Further Adjusted EBITDA and Run-Rate Further Adjusted EBITDA to evaluate our operational performance as a basis for strategic planning and as a performance evaluation metric. |
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Despite the importance of these measures in analyzing our business, evaluating our operating performance and determining covenant compliance, as well as the use of adjusted EBITDA measures by securities analysts, lenders and others in their evaluation of our company, Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP; nor are Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin intended to be measures of liquidity or free cash flow for our discretionary use. Some of the limitations of Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin are:
• | they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
• | they do not reflect changes in, or cash requirements for, our working capital needs; |
• | they do not reflect the interest expense, or the cash requirements to service interest or principal payments on our debt; and |
• | they do not reflect income tax payments we are required to make. |
To properly and prudently evaluate our business, we encourage you to review the financial statements included and incorporated by reference in this offering memorandum, and not rely on any single financial measure to evaluate our business. We also strongly urge you to review the reconciliation of net income to Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin set forth below. Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin, as presented in this offering memorandum, may differ from and may not be comparable to similarly titled measures used by other companies, because Adjusted EBITDA, Further Adjusted EBITDA, Run-Rate Further Adjusted EBITDA and Adjusted EBITDA Margin are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations.
All of the items included in the reconciliation from net income to Adjusted EBITDA, Further Adjusted EBITDA and Run-Rate Further Adjusted EBITDA, other than transaction costs, the pro forma effect of EBITDA for the specified acquisitions and expected synergies, are either (i) non-cash items (such as depreciation, depletion, amortization and accretion and non-cash compensation expense) or (ii) items that management does not consider in assessing our on-going operating performance (such as income taxes, acquisition costs and interest expense). In the case of the non-cash items, management believes that investors can better assess our comparative operating performance if the measures are presented without such items because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items, management believes that investors can better assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance. See “Non-GAAP Financial Measures.”
The following table sets forth a reconciliation of Summit’s net income to Adjusted EBITDA, Further Adjusted EBITDA and Run-Rate Further Adjusted EBITDA.
Twelve
Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||
September 30, | September 30, | October 1, | December 31, | January 1, | January 2, | |||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||
Net income | $ | 203,069 | $ | 157,979 | $ | 301,047 | $ | 346,137 | $ | 170,971 | $ | 120,737 | ||||||||||||
Interest expense | 107,576 | 83,335 | 62,728 | 86,969 | 92,178 | 103,291 | ||||||||||||||||||
Income tax expense | 12,131 | 15,103 | 19,557 | 16,585 | 20,949 | 1,063 | ||||||||||||||||||
Depreciation, depletion and amortization | 210,385 | 160,921 | 148,373 | 197,837 | 226,442 | 218,682 | ||||||||||||||||||
EBITDA | $ | 533,161 | $ | 417,338 | $ | 531,705 | $ | 647,528 | $ | 510,540 | $ | 443,773 | ||||||||||||
Accretion | 2,715 | 2,212 | 2,110 | 2,613 | 2,924 | 2,638 |
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Twelve
Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||
September 30, | September 30, | October 1, | December 31, | January 1, | January 2, | |||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||
Loss on debt financings | 2,230 | 493 | — | 1,737 | 6,016 | 4,064 | ||||||||||||||||||
Gain on sale of business | 1,984 | — | (174,373 | ) | (172,389 | ) | (20,011 | ) | — | |||||||||||||||
Non-cash compensation(a) | 18,405 | 15,116 | 15,058 | 18,347 | 19,705 | 28,857 | ||||||||||||||||||
Argos USA Acquisition and integration costs(b) | 17,859 | 17,859 | — | — | — | — | ||||||||||||||||||
Other(c) | (15,598 | ) | (11,553 | ) | (2,315 | ) | (6,360 | ) | 908 | 2,957 | ||||||||||||||
Adjusted EBITDA | $ | 560,756 | $ | 441,465 | $ | 372,185 | $ | 491,476 | $ | 520,082 | $ | 482,289 | ||||||||||||
Transaction costs(d) | 2,380 | 1,659 | 2,637 | 3,358 | 3,252 | 2,747 | ||||||||||||||||||
EBITDA for certain acquisitions, net of divestitures(e) | 16,684 | 10,088 | (8,423 | ) | (1,827 | ) | (2,992 | ) | 11,448 | |||||||||||||||
Further Adjusted EBITDA | $ | 579,820 | $ | 453,212 | $ | 366,399 | $ | 493,007 | $ | 520,342 | $ | 496,484 | ||||||||||||
Argos USA Further Adjusted EBITDA(f) | 314,014 | |||||||||||||||||||||||
Argos Transaction synergies(g) | 100,000 | |||||||||||||||||||||||
Run-Rate Further Adjusted EBITDA | $ | 993,834 |
(a) | Represents non-cash equity-based compensation granted to employees. |
(b) | The adjustment for acquisition and integration costs related to the agreement to combine with Argos USA is comprised of finder’s fees, advisory, legal and professional fees incurred relating to our agreement to combine with Argos USA. We currently expect to incur at least $30 million of acquisition and integration costs related to the Argos Transaction, excluding expenses that were incurred prior September 30, 2023. Estimates of costs, fees and expenses are subject to change and the actual costs, fees and expenses incurred in connection with the Argos Transaction may be greater or less than our current estimates. |
(c) | Consists primarily of interest income earned on cash balances. Includes the net (gain) loss recognized on assets identified for disposal, non-recurring or one time income and expense items that were incurred outside normal operating activities such as integration costs, unrealized currency gains and losses and interest, tax, depreciation on unconsolidated joint ventures and fair value adjustments to contingent consideration obligations that originated with various acquisitions. |
(d) | Represents the non-Argos USA transaction expenses associated with closed and probable acquisitions and divestitures, consisting primarily of accounting, legal, valuation and financial advisory fees. |
(e) | Represents certain EBITDA from completed acquisitions and does not include the Argos Transaction. Under the terms of our senior secured credit facilities, the existing notes and the notes offered hereby, we include EBITDA from our acquisitions, net of dispositions, in each fiscal year for periods prior to acquisition. We believe this provides our lenders with a more meaningful view of our EBITDA across all periods by making the information more comparable. This amount is based on good faith estimates of management derived entirely from financial information provided by the management of the respective companies acquired in the relevant acquisition prior to our ownership and control of such companies. Accordingly, although we believe such information to be accurate, such information cannot be independently verified by our management, nor has such information been independently reviewed or audited. We cannot assure you that the financial statements of companies we have acquired or will acquire would not be materially different if such statements were audited. |
4
(f) | Reflects Further Adjusted EBITDA of Argos USA, without giving effect to the Transactions. For a reconciliation of net income of Argos USA to Further Adjusted EBITDA of Argos USA, see footnote (1) under “—Summary Historical Consolidated and Combined Financial and Other Data of Argos USA and Subsidiaries.” |
(g) | Represents synergies expected to be realized related to the Argos Transaction, including $63 million expected to be realized within the first two years of closing of the Argos Acquisition and $37 million expected to be realized thereafter. Under the terms of our senior secured credit facilities, we are permitted to include in our calculation of EBITDA synergies expected to be obtained within a two year period on a pro forma basis giving effect to the Transactions. These amounts are based on good faith estimates of management. We may be unable to achieve these anticipated synergies on the timeline we anticipate or at all. See “Risk Factors—Risks Related to the Company Following the Argos Transaction—The integration of Argos USA may not be as successful as anticipated, and we may not achieve the intended benefits or do so within the intended timeframe.” |
5
Summary Historical Consolidated and Combined Financial and Other Data of Argos USA and Subsidiaries
The following tables set forth, for the periods and as of the dates indicated, Argos USA’s summary historical consolidated and combined financial and other data. The summary historical consolidated and combined financial information as of and for the nine months ended September 30, 2023 and 2022 was derived from Argos USA’s unaudited consolidated and combined financial statements included in this offering memorandum. The summary historical consolidated and combined financial information as of December 31, 2022 and 2021 and for the three ended December 31, 2022, 2021 and 2020 has been derived from Argos USA’s audited consolidated and combined financial statements included in this offering memorandum. Argos USA has prepared its unaudited consolidated and combined financial statements on the same basis as its audited consolidated and combined financial statements and, in its opinion, have included all adjustments, which include normal recurring adjustments, necessary to present fairly in all material respects its financial position and results of operations. The results for any historical or interim period are not necessarily indicative of the results that may be expected for the full year or any future period.
You should read the following information together with the more detailed information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Argos USA” and the consolidated and combined financial statements and the accompanying notes included elsewhere in this offering memorandum.
The unaudited consolidated and combined financial information for the twelve months ended September 30, 2023 has been derived by adding the financial information from Argos USA’s audited consolidated and combined financial statements for the fiscal year ended December 31, 2022 to the financial data from Argos USA’s unaudited consolidated and combined financial statements for the nine months ended September 30, 2023 and subtracting the financial information from Argos USA’s unaudited consolidated and combined financial statements for the nine months ended September 30, 2022.
Twelve Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2021 | 2020 | ||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Total revenues | $ | 1,672,316 | $ | 1,296,222 | $ | 1,189,339 | $ | 1,565,433 | $ | 1,446,650 | $ | 1,452,813 | ||||||||||||
Total cost of revenues | 1,355,897 | 1,030,537 | 1,017,796 | 1,343,156 | 1,225,559 | 1,229,847 | ||||||||||||||||||
Gross profit | 316,419 | 265,685 | 171,543 | 222,277 | 221,091 | 222,966 | ||||||||||||||||||
Selling, general and administrative expenses | 151,617 | 118,889 | 112,547 | 145,275 | 119,135 | 139,335 | ||||||||||||||||||
Operating income | 164,802 | 146,796 | 58,996 | 77,002 | 101,956 | 83,631 | ||||||||||||||||||
Other income, net | (7,719 | ) | (994 | ) | (5,261 | ) | (11,986 | ) | (7,430 | ) | (8,426 | ) | ||||||||||||
Net (gain) loss on disposals | (4,580 | ) | (4,452 | ) | (23,124 | ) | (23,252 | ) | (48,798 | ) | 7,724 | |||||||||||||
Interest expense, net | 38,547 | 28,533 | 23,570 | 33,584 | 36,262 | 48,671 | ||||||||||||||||||
Income before income taxes | 138,554 | 123,709 | 63,811 | 78,656 | 121,922 | 35,662 | ||||||||||||||||||
Income tax expense | 33,556 | 30,664 | 24,499 | 27,391 | 43,034 | 13,789 | ||||||||||||||||||
Net income | $ | 104,998 | $ | 93,045 | $ | 39,312 | $ | 51,265 | $ | 78,888 | $ | 21,873 | ||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities | $ | 168,924 | $ | 87,301 | $ | 128,326 | $ | 123,055 | $ | 153,748 | ||||||||||||||
Investing activities | (82,382 | ) | 46,424 | 6,990 | 128,809 | (23,699 | ) | |||||||||||||||||
Financing activities | (442 | ) | (105,833 | ) | (106,216 | ) | (251,188 | ) | (142,709 | ) |
6
Twelve Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | ||||||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2021 | 2020 | ||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Balance Sheet Data (as of period end): | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 133,948 | $ | 47,847 | $ | 18,747 | ||||||||||||||||||
Property, plant and equipment, net | 1,704,581 | 1,687,667 | 1,714,472 | |||||||||||||||||||||
Total assets | 2,509,554 | 2,385,909 | 2,385,187 | |||||||||||||||||||||
Long term debt, net | 484,918 | 485,052 | 298,742 | |||||||||||||||||||||
Long term debt to affiliate, net | 250,882 | 250,882 | 271,882 | |||||||||||||||||||||
Total stockholder’s equity | 1,324,132 | 1,231,367 | 1,204,038 | |||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Adjusted EBITDA(1) | $ | 314,014 | $ | 257,482 | $ | 181,380 | $ | 237,912 | $ | 245,595 | $ | 240,537 | ||||||||||||
Further Adjusted EBITDA(1) | 314,014 | 257,482 | 178,980 | 235,512 | 236,124 | 215,560 |
(1) | Reflects Adjusted EBITDA and Further Adjusted EBITDA of Argos USA, without giving effect to the Transactions. For definitions of and other important information regarding, Adjusted EBITDA and Further Adjusted EBITDA, see footnote (2) under “—Summary Historical Consolidated Financial and Other Data of Summit LLC and Subsidiaries.” |
The following table sets forth a reconciliation of Argos USA’s net income to Adjusted EBITDA and Further Adjusted EBITDA.
Twelve Months Ended | Nine Months Ended | Year Ended | ||||||||||||||||||||||
September 30, | September 30, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||||||
(in thousands) | 2023 | 2023 | 2022 | 2022 | 2021 | 2020 | ||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
Net income | $ | 104,998 | $ | 93,045 | $ | 39,312 | $ | 51,265 | $ | 78,888 | $ | 21,873 | ||||||||||||
Interest expense | 38,547 | 28,533 | 23,570 | 33,584 | 36,262 | 48,671 | ||||||||||||||||||
Income tax expense | 33,556 | 30,664 | 24,499 | 27,391 | 43,034 | 13,789 | ||||||||||||||||||
Depreciation, depletion and amortization | 102,399 | 78,305 | 81,123 | 105,217 | 119,504 | 117,987 | ||||||||||||||||||
EBITDA | $ | 279,500 | $ | 230,547 | $ | 168,504 | $ | 217,457 | $ | 277,688 | $ | 202,320 | ||||||||||||
License and Technical Services Agreements(a) | 21,921 | 16,846 | 27,490 | 32,565 | 15,146 | 15,164 | ||||||||||||||||||
Gain on sale of business(b) | — | — | (22,000 | ) | (22,000 | ) | (49,122 | ) | — | |||||||||||||||
Argos USA Acquisition and integration costs | 14,046 | 9,605 | 6,854 | 11,295 | — | — | ||||||||||||||||||
Other(c) | (1,453 | ) | 484 | 532 | (1,405 | ) | 1,883 | 23,053 | ||||||||||||||||
Adjusted EBITDA | $ | 314,014 | $ | 257,482 | $ | 181,380 | $ | 237,912 | $ | 245,595 | $ | 240,537 | ||||||||||||
EBITDA for certain acquisitions, net of divestitures(d) | — | — | (2,400 | ) | (2,400 | ) | (9,471 | ) | (24,977 | ) | ||||||||||||||
Further Adjusted EBITDA | $ | 314,014 | $ | 257,482 | $ | 178,980 | $ | 235,512 | $ | 236,124 | $ | 215,560 |
(a) | Represents expenses related to the technical services agreement with Cementos Argos to provide certain support services to Argos USA and expenses related to the license agreements with Cementos Argos to grant Argos USA certain intellectual property licenses. |
(b) | Represents the sale of certain ready-mix concrete operations during the years ended December 31, 2022 and 2021. |
(c) | Includes legal settlement and related legal fees and insurance recoveries. |
(d) | Represents certain EBITDA from the sale of certain ready-mix concrete operations during the years ended December 31, 2022, 2021 and 2020. |
7
Summary Unaudited Pro Forma Condensed Combined Financial Information
The summary unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2023 and the year ended December 31, 2022 give pro forma effect to the Transactions, as if they had all been consummated on January 1, 2022. The summary unaudited pro forma condensed combined balance sheet data give pro forma effect to the Transactions, as if each had been consummated on September 30, 2023.
The following summary unaudited pro forma condensed combined financial information is being provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations of Summit would have been had the Transactions occurred on the dates assumed or any other date, nor is it necessarily indicative of Summit’s future results of operations for any future period or financial condition as of any future date. The following summary unaudited pro forma condensed combined financial information is based upon currently available information and estimates and assumptions that our management believes are reasonable as of the date hereof. Any of the factors underlying these estimates and assumptions may change or prove to be materially different.
The following summary unaudited pro forma condensed combined financial information does not contain all of the information you should consider before deciding whether or not to invest in the notes, and should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference into this offering memorandum, and the unaudited pro forma consolidated combined financial information, and notes thereto, included in this offering memorandum under the heading “Unaudited Pro Forma Condensed Combined Financial Data.”
Argos USA’s predecessor results included in the pro forma statements are presented based on their fiscal year, which is based on the calendar period ends. Summit LLC’s fiscal year is based on a 52 – 53 week year. The resulting difference is not considered material to the pro forma condensed consolidated financial statements.
Nine Months Ended | Year Ended | |||||||
(in thousands) | September 30, 2023 | December 31, 2022 | ||||||
Statement of Operations Data: | ||||||||
Total revenue | $ | 3,255,557 | $ | 3,977,955 | ||||
Cost of revenue excluding items shown separately below | 2,328,973 | 2,977,285 | ||||||
General and administrative expenses | 242,505 | 288,264 | ||||||
Depreciation, depletion, amortization and accretion | 241,437 | 305,667 | ||||||
Transaction costs | 19,518 | — | ||||||
Gain on sale of property, plant and equipment | (10,239 | ) | (13,596 | ) | ||||
Operating income | 433,363 | 420,335 | ||||||
Interest expense | 161,266 | 193,398 | ||||||
Loss on debt financings | 493 | 1,737 | ||||||
Net gain on disposals | — | (192,415 | ) | |||||
Other income, net | (15,763 | ) | (21,978 | ) | ||||
Income before income taxes | 287,367 | 439,593 | ||||||
Income tax expense | 44,944 | 43,897 | ||||||
Net income | $ | 242,423 | $ | 395,696 | ||||
Balance Sheet Data (as of period end): | ||||||||
Cash and cash equivalents | $ | 266,996 | ||||||
Total assets | 8,007,782 | |||||||
Total liabilities | 3,859,805 | |||||||
Total members’ interest | 4,147,977 |
8
(in thousands) | Nine Months Ended September 30, 2023 | |||
Other Pro Forma Financial Data: | ||||
Total hard assets (as of period end)(1) | 4,548,615 | |||
Net debt (as of period end)(2) | 2,614,582 |
(1) | Represents net property, plant and equipment and inventories. |
(2) | Net debt consists of (i) the notes offered hereby and the existing notes, (ii) amounts outstanding under our senior secured credit facilities (including the New Term Loans) and (iii) obligations related to finance leases and acquisition related liabilities in the amount of $75.8 million (which constitute secured indebtedness as defined in the indentures that govern the existing notes and in the indenture that will govern the notes), net of our as adjusted unrestricted cash balance as of September 30, 2023. Pro forma unrestricted cash includes amounts that will be used to pay fees and expenses related to the Argos Transaction and integration of Argos USA, including legal, accounting and advisory and other costs, which amounts, excluding expenses that were incurred prior September 30, 2023, are currently estimated to be at least $30 million. |
9
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