Acquisitions

9 Months Ended

Sep. 30, 2017

Acquisitions

2.ACQUISITIONS

The Company has completed numerous acquisitions since its formation. 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. The following acquisitions completed in the nine months ended September 30, 2017 and in fiscal 2016 were not material individually, or when combined:

West segment:

· On August 20, 2017, the Company acquired Alan Ritchey Materials Company, L.C. (“Alan Ritchey”), a large aggregates business servicing the Dallas-Fort Worth market.

· On August 1, 2017, the Company acquired Northwest Ready Mix, Inc. and Northwest Aggregates, Inc. (“Northwest”), a ready-mix and aggregates-based business with three ready-mix plants and one sand and gravel pit, servicing the northwest region of Colorado.

· On July 31, 2017, the Company acquired Great Southern Ready Mix, LLC, Great Southern Stabilized, LLC and Southern Cement Slurry, LLC (“Great Southern”), a primarily ready-mix concrete business with two plants servicing the Houston, Texas market.

· On May 1, 2017, the Company acquired Winvan Paving, Ltd. (“Winvan Paving”), a paving and construction services company based in Vancouver, British Columbia.

· On April 3, 2017, the Company acquired Hanna’s Bend Aggregate, Ltd. (“Hanna’s Bend”), an aggregates-based business with one sand and gravel pit servicing the Houston, Texas market. 

· On January 30, 2017, the Company acquired Everist Materials, LLC (“Everist Materials”), a vertically integrated aggregates, ready-mix concrete, and paving business based in Silverthorne, Colorado, with two aggregates plants, five ready-mix plants and two asphalt plants. 

· On October 3, 2016, the Company acquired Midland Concrete Ltd. (“Midland Concrete”), a ready-mix company with one plant servicing the Midland, Texas market.

· On August 19, 2016, the Company acquired H.C. Rustin Corporation (“Rustin”), a ready-mix company with 12 ready-mix plants servicing the Southern Oklahoma market.

· On April 29, 2016, the Company acquired Sierra Ready Mix, LLC (“Sierra”), a vertically integrated aggregates and ready-mix concrete business with one sand and gravel pit and two ready-mix concrete plants located in Las Vegas, Nevada.

East segment:

· On September 6, 2017, the Company acquired CSS Conversion Holdco, Inc., CA Conversion Holdco, LLC, Columbia Silica Sand, Inc. and Columbia Aggregates, LLC (“Columbia Silica”), an aggregates business with four pits in central South Carolina.  

· On August 3, 2017, the Company acquired Georgia Stone Products, LLC (“Georgia Stone”), an aggregates business with two quarries servicing northern Georgia.

· On July 28, 2017, the Company acquired Ready Mix Concrete of Somerset, Inc. and RMCS Holdings, Inc. (“Somerset”), a ready-mix company with ten plants in southeast Kentucky.

· On May 12, 2017, the Company acquired Glasscock Company, Inc. and Glasscock Logistics Company, LLC (“Glasscock”), a vertically integrated sand, ready-mix, recycle and trucking business based in Sumter, South Carolina.

· On April 3, 2017, the Company acquired Carolina Sand, LLC (“Carolina Sand”), a sand and trucking business with four sand pits in northeastern South Carolina.

· On March 17, 2017, the Company acquired Sandidge Concrete (“Sandidge”), a ready-mix concrete company with three plants servicing the Columbia, Missouri market.

· On February 24, 2017, the Company acquired Razorback Concrete Company (“Razorback”), an aggregates-based business with ready-mix concrete operations in central and northeastern Arkansas. 

· On August 26, 2016, the Company acquired R.D. Johnson Excavating Company, LLC and Asphalt Sales of Lawrence, LLC (“RD Johnson”), an asphalt producer and construction services company based in Lawrence, Kansas.

· On August 8, 2016, the Company acquired the assets of Weldon Real Estate, LLC (“Weldon”) and the membership interests of Honey Creek Disposal Service, LLC. (‘‘Honey Creek’’). Honey Creek is a trash collection business, which was sold immediately after acquisition. The Company retained the building assets of Weldon, where its recycling business in Kansas is operated.

· On May 20, 2016, the Company acquired seven aggregates quarries in central and northwest Missouri from APAC-Kansas, Inc. and APAC-Missouri, Inc., subsidiaries of Oldcastle Materials, Inc. (“Oldcastle Assets”).

· On March 18, 2016, the Company acquired Boxley Materials Company (“Boxley”), a vertically integrated company based in Roanoke, Virginia with six quarries, four ready-mix concrete plants and four asphalt plants.

· On February 5, 2016, the Company acquired American Materials Company (“AMC”), an aggregates company with five sand and gravel pits servicing coastal North and South Carolina.

Cement segment:

· On August 30, 2016, the Company acquired two river-supplied cement and fly-ash distribution terminals in Southern Louisiana.

The purchase price allocation, primarily the valuation of property, plant and equipment for the 2017 acquisitions, as well as the 2016 acquisitions that occurred after September 30, 2016, has not yet been finalized due to the timing of the acquisitions. The following table summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates:

	Nine months ended		Year ended
	September 30,		December 31,
	2017		2016
Financial assets (1)	$	31,895	$	22,204
Inventories		11,315		17,215
Property, plant and equipment		159,154		180,321
Intangible assets		—		5,531
Other assets		5,321		6,757
Financial liabilities (1)		(16,422)		(20,248)
Other long-term liabilities		(17,806)		(36,074)
Net assets acquired		173,457		175,706
Goodwill		222,451		176,319
Purchase price		395,908		352,025
Acquisition related liabilities		(23,238)		(17,034)
Other		(1,191)		1,967
Net cash paid for acquisitions	$	371,479	$	336,958

(1) In the first quarter of 2017, we reclassified $1.2 million of accounts payable overdrafts from financial assets to financial liabilities for the year ended December 31, 2016.

Changes in the carrying amount of goodwill, by reportable segment, from December 31, 2016 to September 30, 2017 are summarized as follows:

	West		East		Cement		Total
Balance, December 31, 2016	$	334,257	$	243,417	$	204,538	$	782,212
Acquisitions (1)		169,317		56,602		118		226,037
Foreign currency translation adjustments		4,522		—		—		4,522
Balance, September 30, 2017	$	508,096	$	300,019	$	204,656	$	1,012,771
Accumulated impairment losses as of September 30, 2017 and December 31, 2016	$	(53,264)	$	(14,938)	$	—	$	(68,202)

(1) Reflects goodwill from 2017 acquisitions and working capital adjustments from prior year acquisitions.

The Company’s intangible assets are primarily composed of goodwill, lease agreements and reserve rights. The assets related to 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. The following table shows intangible assets by type and in total:

	September 30, 2017						December 31, 2016
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Leases	$	15,888	$	(3,963)	$	11,925	$	15,888	$	(3,382)	$	12,506
Reserve rights		6,234		(1,550)		4,684		8,706		(3,710)		4,996
Trade names		1,000		(733)		267		1,000		(658)		342
Other		249		(130)		119		249		(104)		145
Total intangible assets	$	23,371	$	(6,376)	$	16,995	$	25,843	$	(7,854)	$	17,989

Amortization expense totaled $0.3 million and $1.0 million for the three and nine months ended September 30, 2017, respectively, and $0.6 million and $2.1 million for the three and nine months ended October 1, 2016, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to September 30, 2017 is as follows:

2017 (three months)	$	321
2018		1,265
2019		1,259
2020		1,176
2021		1,134
2022		1,104
Thereafter		10,736
Total	$	16,995

Summit Materials, LLC

Acquisitions

2.ACQUISITIONS

The Company has completed numerous acquisitions since its formation. 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. The following acquisitions completed in the nine months ended September 30, 2017 and in fiscal 2016 were not material individually, or when combined:

West segment:

· On August 20, 2017, the Company acquired Alan Ritchey Materials Company, L.C. (“Alan Ritchey”), a large aggregates business servicing the Dallas-Fort Worth market.

· On August 1, 2017, the Company acquired Northwest Ready Mix, Inc. and Northwest Aggregates, Inc. (“Northwest”), a ready-mix and aggregates-based business with three ready-mix plants and one sand and gravel pit, servicing the northwest region of Colorado.

· On July 31, 2017, the Company acquired Great Southern Ready Mix, LLC, Great Southern Stabilized, LLC and Southern Cement Slurry, LLC (“Great Southern”), a primarily ready-mix concrete business with two plants servicing the Houston, Texas market.

· On May 1, 2017, the Company acquired Winvan Paving, Ltd. (“Winvan Paving”), a paving and construction services company based in Vancouver, British Columbia.

· On April 3, 2017, the Company acquired Hanna’s Bend Aggregate, Ltd. (“Hanna’s Bend”), an aggregates-based business with one sand and gravel pit servicing the Houston, Texas market. 

· On January 30, 2017, the Company acquired Everist Materials, LLC (“Everist Materials”), a vertically integrated aggregates, ready-mix concrete, and paving business based in Silverthorne, Colorado, with two aggregates plants, five ready-mix plants and two asphalt plants. 

· On October 3, 2016, the Company acquired Midland Concrete Ltd. (“Midland Concrete”), a ready-mix company with one plant servicing the Midland, Texas market.

· On August 19, 2016, the Company acquired H.C. Rustin Corporation (“Rustin”), a ready-mix company with 12 ready-mix plants servicing the Southern Oklahoma market.

· On April 29, 2016, the Company acquired Sierra Ready Mix, LLC (“Sierra”), a vertically integrated aggregates and ready-mix concrete business with one sand and gravel pit and two ready-mix concrete plants located in Las Vegas, Nevada.

East segment:

· On September 6, 2017, the Company acquired CSS Conversion Holdco, Inc., CA Conversion Holdco, LLC, Columbia Silica Sand, Inc. and Columbia Aggregates, LLC (“Columbia Silica”), an aggregates business with four pits in central South Carolina.  

· On August 3, 2017, the Company acquired Georgia Stone Products, LLC (“Georgia Stone”), an aggregates business with two quarries servicing northern Georgia.

· On July 28, 2017, the Company acquired Ready Mix Concrete of Somerset, Inc. and RMCS Holdings, Inc. (“Somerset”), a ready-mix company with ten plants in southeast Kentucky.

· On May 12, 2017, the Company acquired Glasscock Company, Inc. and Glasscock Logistics Company, LLC (“Glasscock”), a vertically integrated sand, ready-mix, recycle and trucking business based in Sumter, South Carolina.

· On April 3, 2017, the Company acquired Carolina Sand, LLC (“Carolina Sand”), a sand and trucking business with four sand pits in northeastern South Carolina.

· On March 17, 2017, the Company acquired Sandidge Concrete (“Sandidge”), a ready-mix concrete company with three plants servicing the Columbia, Missouri market.

· On February 24, 2017, the Company acquired Razorback Concrete Company (“Razorback”), an aggregates-based business with ready-mix concrete operations in central and northeastern Arkansas. 

· On August 26, 2016, the Company acquired R.D. Johnson Excavating Company, LLC and Asphalt Sales of Lawrence, LLC (“RD Johnson”), an asphalt producer and construction services company based in Lawrence, Kansas.

· On August 8, 2016, the Company acquired the assets of Weldon Real Estate, LLC (“Weldon”) and the membership interests of Honey Creek Disposal Service, LLC. (‘‘Honey Creek’’). Honey Creek is a trash collection business, which was sold immediately after acquisition. The Company retained the building assets of Weldon, where its recycling business in Kansas is operated.

· On May 20, 2016, the Company acquired seven aggregates quarries in central and northwest Missouri from APAC-Kansas, Inc. and APAC-Missouri, Inc., subsidiaries of Oldcastle Materials, Inc. (“Oldcastle Assets”).

· On March 18, 2016, the Company acquired Boxley Materials Company (“Boxley”), a vertically integrated company based in Roanoke, Virginia with six quarries, four ready-mix concrete plants and four asphalt plants.

· On February 5, 2016, the Company acquired American Materials Company (“AMC”), an aggregates company with five sand and gravel pits servicing coastal North and South Carolina.

Cement segment:

· On August 30, 2016, the Company acquired two river-supplied cement and fly-ash distribution terminals in Southern Louisiana.

The purchase price allocation, primarily the valuation of property, plant and equipment for the 2017 acquisitions, as well as the 2016 acquisitions that occurred after September 30, 2016, has not yet been finalized due to the timing of the acquisitions. The following table summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates:

	Nine months ended		Year ended
	September 30,		December 31,
	2017		2016
Financial assets (1)	$	31,895	$	22,204
Inventories		11,315		17,215
Property, plant and equipment		159,154		180,321
Intangible assets		—		5,531
Other assets		5,321		6,757
Financial liabilities (1)		(16,422)		(20,248)
Other long-term liabilities		(17,806)		(36,074)
Net assets acquired		173,457		175,706
Goodwill		222,451		176,319
Purchase price		395,908		352,025
Acquisition related liabilities		(23,238)		(17,034)
Other		(1,191)		1,967
Net cash paid for acquisitions	$	371,479	$	336,958

(1) In the first quarter of 2017, we reclassified $1.2 million of accounts payable overdrafts from financial assets to financial liabilities for the year ended December 31, 2016.

Changes in the carrying amount of goodwill, by reportable segment, from December 31, 2016 to September 30, 2017 are summarized as follows:

	West		East		Cement		Total
Balance, December 31, 2016	$	334,257	$	243,417	$	204,538	$	782,212
Acquisitions (1)		169,317		56,602		118		226,037
Foreign currency translation adjustments		4,522		—		—		4,522
Balance, September 30, 2017	$	508,096	$	300,019	$	204,656	$	1,012,771
Accumulated impairment losses as of September 30, 2017 and December 31, 2016	$	(53,264)	$	(14,938)	$	—	$	(68,202)

(1) Reflects goodwill from 2017 acquisitions and working capital adjustments from prior year acquisitions.

The Company’s intangible assets are primarily composed of goodwill, lease agreements and reserve rights. The assets related to 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. The following table shows intangible assets by type and in total:

	September 30, 2017						December 31, 2016
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Leases	$	15,888	$	(3,963)	$	11,925	$	15,888	$	(3,382)	$	12,506
Reserve rights		6,234		(1,550)		4,684		8,706		(3,710)		4,996
Trade names		1,000		(733)		267		1,000		(658)		342
Other		249		(130)		119		249		(104)		145
Total intangible assets	$	23,371	$	(6,376)	$	16,995	$	25,843	$	(7,854)	$	17,989

Amortization expense totaled $0.3 million and $1.0 million for the three and nine months ended September 30, 2017, respectively, and $0.6 million and $2.1 million for the three and nine months ended October 1, 2016, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to September 30, 2017 is as follows:

2017 (three months)	$	321
2018		1,265
2019		1,259
2020		1,176
2021		1,134
2022		1,104
Thereafter		10,736
Total	$	16,995