RECLAMATION ACCRUAL

9 Months Ended

Sep. 28, 2019

RECLAMATION ACCRUAL

RECLAMATION ACCRUAL

19.  During the quarter ended September 28, 2019 the Company made a strategic decision to cease mining operations at its Pikeview quarry in Colorado Springs, Colorado as it was no longer in the best economic interest of the consolidated portfolio to continue operations. The Company has a legal obligation to complete reclamation of the property as required by its mining permits with the State of Colorado. Generally accepted accounting principles require the recognition of a liability in the period in which it is incurred if a reasonable estimate of fair value can be made. Prior to cessation of mining, reclamation was performed concurrently by backfilling mined areas with overfill from current mining. The reclamation costs were reported as operating expense as the Company could not reasonably estimate the ultimate liability. Since the Company will no longer perform concurrent reclamation and can now reasonably estimate the cost of final reclamation, an asset retirement obligation (ARO) has been recorded as of September 28, 2019. The ARO liability of $20,950,000 represents the estimated fair value of the total reclamation costs.  The fair value of the liability was calculated by applying an expected present value technique using estimated cash flows over a period of time and then discounting the expected cash flows using a credit-adjusted risk-free interest rate. The related ARO asset was considered 100% impaired as total carrying value including future costs to maintain and dispose of the asset will exceed the fair value. Therefore, the Company also recorded an impairment charge of $20,217,000 related to the asset.