Annual Statements Open main menu

Summit Materials, Inc. - Quarter Report: 2021 October (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                       
Commission file numbers:
001-36873 (Summit Materials, Inc.)
333-187556 (Summit Materials, LLC)
SUMMIT MATERIALS, INC.
SUMMIT MATERIALS, LLC
(Exact name of registrants as specified in their charters)

Delaware (Summit Materials, Inc.)
47-1984212
Delaware (Summit Materials, LLC)
26-4138486
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1550 Wynkoop Street, 3rd Floor
80202
Denver, Colorado
(Zip Code)
(Address of principal executive offices)

Registrants’ telephone number, including area code: (303) 893-0012
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock (par value $.01 per share)SUMNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Summit Materials, Inc.     
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Summit Materials, LLC     
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Summit Materials, Inc.   YesNo
Summit Materials, LLC   YesNo
As of November 1, 2021, the number of shares of Summit Materials, Inc.’s outstanding Class A and Class B common stock, par value $0.01 per share for each class, was 118,566,950 and 99, respectively.
As of November 1, 2021, 100% of Summit Materials, LLC’s outstanding limited liability company interests were held by Summit Materials Intermediate Holdings, LLC, its sole member and an indirect subsidiary of Summit Materials, Inc.



EXPLANATORY NOTE
 
This quarterly report on Form 10-Q (this “report”) is a combined quarterly report being filed separately by two registrants: Summit Materials, Inc. and Summit Materials, LLC. Each registrant hereto is filing on its own behalf all of the information contained in this report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information. We believe that combining the quarterly reports on Form 10-Q of Summit Materials, Inc. and Summit Materials, LLC into this single report eliminates duplicative and potentially confusing disclosure and provides a more streamlined presentation since a substantial amount of the disclosure applies to both registrants.
 
Unless stated otherwise or the context requires otherwise, references to “Summit Inc.” mean Summit Materials, Inc., a Delaware corporation, and references to “Summit LLC” mean Summit Materials, LLC, a Delaware limited liability company. The references to Summit Inc. and Summit LLC are used in cases where it is important to distinguish between them. We use the terms “we,” “our,” “us” or “the Company” to refer to Summit Inc. and Summit LLC together with their respective subsidiaries, unless otherwise noted or the context otherwise requires.
 
Summit Inc. was formed on September 23, 2014 to be a holding company. As of October 2, 2021, its sole material asset was a 98.8% economic interest in Summit Materials Holdings L.P., a Delaware limited partnership (“Summit Holdings”). Summit Inc. has 100% of the voting rights of Summit Holdings, which is the indirect parent of Summit LLC. Summit LLC is a co-issuer of our outstanding 6 1/2 % senior notes due 2027 (“2027 Notes”) and our 5 1/4% senior notes due 2029 (“2029 Notes” and collectively with the 2027 Notes, the “Senior Notes”). Summit Inc.’s only revenue for the three and nine months ended October 2, 2021 was that generated by Summit LLC and its consolidated subsidiaries. Summit Inc. controls all of the business and affairs of Summit Holdings and, in turn, Summit LLC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report 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,” “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. 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 Summit Inc.’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”), any factors discussed in the section entitled “Risk Factors” of this report and the following:

our dependence on the construction industry and the strength of the local economies in which we operate;
the cyclical nature of our business;
risks related to weather and seasonality;
risks associated with our capital-intensive business;
competition within our local markets;
our ability to execute on our acquisition strategy, successfully integrate acquisitions with our existing operations and retain key employees of acquired businesses;
our ability to implement and successfully execute on our Elevate Summit strategy;
our dependence on securing and permitting aggregate reserves in strategically located areas;



the impact of the coronavirus (“COVID-19”) pandemic, and responses to it, including vaccine mandates, or any similar crisis, on our business;
declines in public infrastructure construction and delays or reductions in governmental funding, including the funding by transportation authorities and other state agencies particularly if such are not augmented by federal funding or if the federal government fails to act on a highway infrastructure bill;
our reliance on private investment in infrastructure, which may be adversely affected by periods of economic stagnation and recession;
environmental, health, safety and climate change laws or governmental requirements or policies concerning zoning and land use;
costs associated with pending and future litigation;
rising prices for, or more limited availability of, commodities, labor and other production and delivery inputs as a result of inflation, supply chain challenges or otherwise;
conditions in the credit markets;
our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;
material costs and losses as a result of claims that our products do not meet regulatory requirements or contractual specifications;
cancellation of a significant number of contracts or our disqualification from bidding for new contracts;
special hazards related to our operations that may cause personal injury or property damage not covered by insurance;
unexpected factors affecting self-insurance claims and reserve estimates;
our substantial current level of indebtedness, including our exposure to variable interest rate risk;
our dependence on senior management team, and our ability to retain and attract other qualified personnel;
supply constraints or significant price fluctuations in the electricity and petroleum-based resources that we use, including diesel and liquid asphalt;
climate change and climate change legislation or other regulations;
unexpected operational difficulties;
interruptions in our information technology systems and infrastructure, including cybersecurity and data leakage risks; and
potential labor disputes, strikes, other forms of work stoppage or other union activities.

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 report. 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 required by law.

 CERTAIN DEFINITIONS
 
As used in this report, unless otherwise noted or the context otherwise requires:
 
“EBITDA” refers to net income (loss) before interest expense (income), income tax expense (benefit) and depreciation, depletion and amortization;
“Finance Corp.” refers to Summit Materials Finance Corp., an indirect wholly-owned subsidiary of Summit LLC and the co-issuer of the Senior Notes;
“Issuers” refers to Summit LLC and Finance Corp. as co‑issuers of the Senior Notes;  
“LP Units” refers to the Class A limited partnership units of Summit Holdings; and



“TRA” refers to a tax receivable agreement between Summit Inc. and certain current and former holders of LP Units and their permitted assignees.



Corporate Structure
The following chart summarizes our organizational structure, equity ownership and our principal indebtedness as of October 2, 2021. This chart is provided for illustrative purposes only and does not show all of our legal entities or all obligations of such entities.
sum-20211002_g1.jpg
(1)SEC registrant.
(2)The shares of Class B Common Stock are currently held by pre-IPO investors, including certain members of management or their family trusts that directly hold LP Units. A holder of Class B Common Stock is entitled, without regard to the number of shares of Class B Common Stock held by such holder, to a number of votes that is equal to the aggregate number of LP Units held by such holder.
(3)Guarantor under the senior secured credit facilities, but not the Senior Notes.
(4)Summit LLC and Finance Corp are the issuers of the Senior Notes and Summit LLC is the borrower under our senior secured credit facilities. Finance Corp. was formed solely for the purpose of serving as co-issuer or guarantor of certain indebtedness, including the Senior Notes. Finance Corp. does not and will not have operations of any kind and does not and will not have revenue or assets other than as may be incidental to its activities as a co-issuer or guarantor of certain indebtedness.


Table of Contents
SUMMIT MATERIALS, INC.
SUMMIT MATERIALS, LLC 
FORM 10-Q 
TABLE OF CONTENTS  
  Page No.
PART I—Financial Information 
   
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
PART II — Other Information 
   
   
   
   
   
   
   
  



Table of Contents
PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 October 2, 2021January 2, 2021
 (unaudited)(audited)
Assets  
Current assets:  
Cash and cash equivalents$258,083 $418,181 
Accounts receivable, net333,351 254,696 
Costs and estimated earnings in excess of billings34,181 8,666 
Inventories195,312 200,308 
Other current assets13,855 11,428 
Total current assets834,782 893,279 
Property, plant and equipment, less accumulated depreciation, depletion and amortization (October 2, 2021 - $1,234,171 and January 2, 2021 - $1,132,925)
1,841,139 1,850,169 
Goodwill1,174,855 1,201,291 
Intangible assets, less accumulated amortization (October 2, 2021 - $14,309 and January 2, 2021 - $11,864)
70,338 47,852 
Deferred tax assets, less valuation allowance (October 2, 2021 - $1,675 and January 2, 2021 - $1,675)
210,389 231,877 
Operating lease right-of-use assets27,339 28,543 
Other assets57,807 55,000 
Total assets$4,216,649 $4,308,011 
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of debt$6,354 $6,354 
Current portion of acquisition-related liabilities12,809 10,265 
Accounts payable155,919 120,813 
Accrued expenses137,378 160,570 
Current operating lease liabilities6,818 8,188 
Billings in excess of costs and estimated earnings11,631 16,499 
Total current liabilities330,909 322,689 
Long-term debt1,591,989 1,892,347 
Acquisition-related liabilities33,223 12,246 
Tax receivable agreement liability330,871 321,680 
Noncurrent operating lease liabilities21,596 21,500 
Other noncurrent liabilities136,297 121,281 
Total liabilities2,444,885 2,691,743 
Commitments and contingencies (see note 12)
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 118,564,950 and 114,390,595 shares issued and outstanding as of October 2, 2021 and January 2, 2021, respectively
1,186 1,145 
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 shares issued and outstanding as of October 2, 2021 and January 2, 2021
— — 
Additional paid-in capital1,319,897 1,264,681 
Accumulated earnings435,118 326,772 
Accumulated other comprehensive income5,670 5,203 
Stockholders’ equity1,761,871 1,597,801 
Noncontrolling interest in Summit Holdings9,893 18,467 
Total stockholders’ equity1,771,764 1,616,268 
Total liabilities and stockholders’ equity$4,216,649 $4,308,011 

See notes to unaudited consolidated financial statements.
1

Table of Contents
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except share and per share amounts) 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Revenue:    
Product$561,938 $540,904 $1,443,972 $1,334,471 
Service100,321 104,342 235,298 228,421 
Net revenue662,259 645,246 1,679,270 1,562,892 
Delivery and subcontract revenue54,981 64,373 133,731 144,926 
Total revenue717,240 709,619 1,813,001 1,707,818 
Cost of revenue (excluding items shown separately below):
Product356,214 354,250 980,045 923,384 
Service75,741 82,969 187,570 190,153 
Net cost of revenue431,955 437,219 1,167,615 1,113,537 
Delivery and subcontract cost54,981 64,373 133,731 144,926 
Total cost of revenue486,936 501,592 1,301,346 1,258,463 
General and administrative expenses47,364 50,972 146,454 132,385 
Depreciation, depletion, amortization and accretion59,082 58,054 173,651 163,760 
Gain on sale of property, plant and equipment (1,159)(1,616)(4,331)(5,747)
Operating income125,017 100,617 195,881 158,957 
Interest expense24,134 24,623 72,536 78,049 
Loss on debt financings6,016 4,064 6,016 4,064 
Loss (gain) on sale of businesses113 — (15,319)— 
Other income, net(1,137)(1,226)(10,721)(2,753)
Income from operations before taxes95,891 73,156 143,369 79,597 
Income tax expense (benefit)20,513 (19,613)33,478 (25,333)
Net income75,378 92,769 109,891 104,930 
Net income attributable to Summit Holdings1,174 2,039 1,545 2,115 
Net income attributable to Summit Inc.$74,204 $90,730 $108,346 $102,815 
Earnings per share of Class A common stock:
Basic$0.63 $0.79 $0.92 $0.90 
Diluted$0.62 $0.79 $0.92 $0.90 
Weighted average shares of Class A common stock:
Basic118,473,530 114,436,907 117,258,431 114,088,447 
Diluted119,291,646 114,472,171 118,360,615 114,457,276 

See notes to unaudited consolidated financial statements.
2

Table of Contents
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
(In thousands) 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Net income$75,378 $92,769 $109,891 $104,930 
Other comprehensive income (loss):
Foreign currency translation adjustment(4,076)2,018 682 (3,395)
Less tax effect of other comprehensive income (loss) items823 (494)(176)831 
Other comprehensive (loss) income(3,253)1,524 506 (2,564)
Comprehensive income72,125 94,293 110,397 102,366 
Less comprehensive income attributable to Summit Holdings1,117 2,091 1,584 2,024 
Comprehensive income attributable to Summit Inc.$71,008 $92,202 $108,813 $100,342 

See notes to unaudited consolidated financial statements.
3

Table of Contents
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands) 
 Nine months ended
 October 2, 2021September 26, 2020
Cash flow from operating activities:  
Net income$109,891 $104,930 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion177,841 164,397 
Share-based compensation expense14,875 23,119 
Net gain on asset and business disposals(19,295)(5,746)
Non-cash loss on debt financings2,116 4,064 
Change in deferred tax asset, net19,814 (28,968)
Other(586)760 
Decrease (increase) in operating assets, net of acquisitions and dispositions:
Accounts receivable, net(78,108)(48,361)
Inventories(12,002)(2,829)
Costs and estimated earnings in excess of billings(26,969)(30,912)
Other current assets(2,556)(75)
Other assets6,459 8,367 
(Decrease) increase in operating liabilities, net of acquisitions and dispositions:
Accounts payable33,756 21,729 
Accrued expenses(15,598)3,164 
Billings in excess of costs and estimated earnings(2,907)395 
Tax receivable agreement liability9,191 993 
Other liabilities(8,549)3,012 
Net cash provided by operating activities207,373 218,039 
Cash flow from investing activities:
Acquisitions, net of cash acquired(7,263)(123,195)
Purchases of property, plant and equipment(170,070)(140,006)
Proceeds from the sale of property, plant and equipment8,827 8,848 
Proceeds from sale of businesses103,649 — 
Other(459)1,395 
Net cash used in investing activities(65,316)(252,958)
Cash flow from financing activities:
Proceeds from debt issuances— 700,000 
Debt issuance costs— (9,565)
Payments on debt(323,802)(666,892)
Payments on acquisition-related liabilities(9,755)(10,391)
Proceeds from stock option exercises32,416 329 
Other(951)(908)
Net cash (used in) provided by financing activities(302,092)12,573 
Impact of foreign currency on cash(63)(216)
Net decrease in cash(160,098)(22,562)
Cash and cash equivalents—beginning of period418,181 311,319 
Cash and cash equivalents—end of period$258,083 $288,757 

See notes to unaudited consolidated financial statements.
4

Table of Contents
SUMMIT MATERIALS, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share amounts) 
 Summit Materials, Inc. 
 Accumulated
OtherClass AClass BAdditionalNoncontrollingTotal
AccumulatedComprehensiveCommon StockCommon StockPaid-inInterest inStockholders’
 Earningsincome (loss)SharesDollarsSharesDollarsCapitalSummit HoldingsEquity
Balance - January 2, 2021$326,772 $5,203 114,390,595 $1,145 99 $— $1,264,681 $18,467 $1,616,268 
Net loss(22,517)— — — — — — (728)(23,245)
LP Unit exchanges— — 711,794 — — 4,744 (4,751)— 
Other comprehensive income, net of tax— 1,635 — — — — — 45 1,680 
Stock option exercises— — 863,338 — — 15,911 — 15,920 
Share-based compensation— — — — — — 5,363 — 5,363 
Shares redeemed to settle taxes and other— — 678,605 — — (1,432)— (1,426)
Balance — April 3, 2021$304,255 $6,838 116,644,332 $1,167 99 $— $1,289,267 $13,033 $1,614,560 
Net loss56,659 — — — — — — 1,099 57,758 
LP Unit exchanges— — 445,540 — — 3,631 (3,635)— 
Other comprehensive income, net of tax— 2,028 — — — — — 51 2,079 
Stock option exercises— — 847,480 — — 15,837 — 15,845 
Share-based compensation— — — — — — 4,827 — 4,827 
Shares redeemed to settle taxes and other— — 18,536 — — (148)— (147)
Balance — July 3, 2021$360,914 $8,866 117,955,888 $1,180 99 $— $1,313,414 $10,548 $1,694,922 
Net income74,204 — — — — — — 1,174 75,378 
LP Unit exchanges— — 283,649 — — 1,769 (1,772)— 
Other comprehensive loss, net of tax— (3,196)— — — — — (57)(3,253)
Stock option exercises— — 33,438 — — — 651 — 651 
Share-based compensation— — — — — — 4,685 — 4,685 
Shares redeemed to settle taxes and other— — 291,975 — — (622)— (619)
Balance - October 2, 2021$435,118 $5,670 118,564,950 $1,186 99 $— $1,319,897 $9,893 $1,771,764 

5

Table of Contents
Summit Materials, Inc.
Accumulated
OtherClass AClass BAdditionalNoncontrollingTotal
AccumulatedComprehensiveCommon StockCommon StockPaid-inInterest inStockholders’
Earningsincome (loss)SharesDollarsSharesDollarsCapitalSummit HoldingsEquity
Balance — December 28, 2019$188,805 $3,448 113,309,385 $1,134 99 $— $1,234,020 $17,366 $1,444,773 
Net loss(44,979)— — — — — — (1,747)(46,726)
LP Unit exchanges— — 196,542 — — 1,132 (1,134)— 
Other comprehensive loss, net of tax— (6,093)— — — — — (220)(6,313)
Stock option exercises— — 13,335 — — — 310 — 310 
Share-based compensation— — — — — — 4,905 — 4,905 
Shares redeemed to settle taxes and other— — 591,335 — — (1,096)— (1,090)
Balance — March 28, 2020$143,826 $(2,645)114,110,597 $1,142 99 $— $1,239,271 $14,265 $1,395,859 
Net income57,064 — — — — — — 1,823 58,887 
Other comprehensive income, net of tax— 2,148 — — — — — 77 2,225 
Share-based compensation— — — — — — 4,892 — 4,892 
Shares redeemed to settle taxes and other— — 1,351 — — — — — — 
Balance — June 27, 2020$200,890 $(497)114,111,948 $1,142 99 $— $1,244,163 $16,165 $1,461,863 
Net income90,730 — — — — — — 2,039 92,769 
Other comprehensive income, net of tax— 1,472 — — — — — 52 1,524 
Stock option exercises— — 1,069 — — — 18 — 18 
Share-based compensation— — — — — — 13,322 — 13,322 
Shares redeemed to settle taxes and other— — 10,894 — — — (3)— 
Balance — September 26, 2020$291,620 $975 114,123,911 $1,142 99 $— $1,257,506 $18,253 $1,569,496 

See notes to unaudited consolidated financial statements.
6

Table of Contents
SUMMIT MATERIALS, INC.
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
(Dollars in tables in thousands, except per share amounts or otherwise noted)
 
1.SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Summit Materials, Inc. (“Summit Inc.” and, together with its subsidiaries, “Summit,” “we,” “us,” “our” or the “Company”) is a vertically-integrated construction materials company. The Company is engaged in the production and sale of aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, two cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. It is also engaged in paving and related services. The Company’s three operating and reporting segments are the West, East and Cement segments.
 
Substantially all of the Company’s construction materials, products and services are produced, consumed and performed outdoors, primarily in the spring, summer and fall. Seasonal changes and other weather-related conditions can affect the production and sales volumes of its products and delivery of services. Therefore, the financial results for any interim period are typically not indicative of the results expected for the full year. Furthermore, the Company’s sales and earnings are sensitive to national, regional and local economic conditions, weather conditions and to cyclical changes in construction spending, among other factors.
 
Summit Inc. is a holding corporation operating and controlling all of the business and affairs of Summit Materials Holdings L.P. (“Summit Holdings”) and its subsidiaries and, through Summit Holdings, conducts its business. Summit Inc. owns the majority of the partnership interests of Summit Holdings (see Note 9, Stockholders’ Equity). Summit Materials, LLC (“Summit LLC”) an indirect wholly owned subsidiary of Summit Holdings, conducts the majority of our operations. Summit Materials Finance Corp. (“Summit Finance”), an indirect wholly owned subsidiary of Summit LLC, has jointly issued our Senior Notes as described below.
 
Basis of Presentation—These unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto as of and for the year ended January 2, 2021. The Company continues to follow the accounting policies set forth in those audited consolidated financial statements.
 
Management believes that these consolidated interim financial statements include all adjustments, normal and recurring in nature, that are necessary to present fairly the financial position of the Company as of October 2, 2021, the results of operations for the three and nine months ended October 2, 2021 and September 26, 2020 and cash flows for the nine months ended October 2, 2021 and September 26, 2020.
 
Principles of Consolidation—The consolidated financial statements include the accounts of Summit Inc. and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated.
 
For a summary of the changes in Summit Inc.’s ownership of Summit Holdings, see Note 9, Stockholders’ Equity.

Use of Estimates—Preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, tax receivable agreement ("TRA") liability, pension and other postretirement obligations and asset retirement obligations. Estimates also include revenue earned on contracts and costs to complete contracts. Most of the Company’s paving and related services are performed under fixed unit-price contracts with state and local governmental entities. Management regularly evaluates its estimates and assumptions based on historical experience and other factors, including the current economic environment. As future events and their effects cannot be determined with precision, actual results can differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, are reflected in the Company’s consolidated financial statements when the change in estimate occurs.
7

Table of Contents
 
Business and Credit Concentrations—The Company’s operations are conducted primarily across 21 U.S. states and in British Columbia, Canada, with the most significant revenue generated in Texas, Utah, Kansas and Missouri. The Company’s accounts receivable consist primarily of amounts due from customers within these areas. Therefore, collection of these accounts is dependent on the economic conditions in the aforementioned states, as well as specific situations affecting individual customers. Credit granted within the Company’s trade areas has been granted to many customers, and management does not believe that a significant concentration of credit exists with respect to any individual customer or group of customers. No single customer accounted for more than 10% of the Company’s total revenue in the three and nine months ended October 2, 2021 or September 26, 2020.

Revenue Recognition—We earn revenue from the sale of products, which primarily include aggregates, cement, ready-mix concrete and asphalt, but also include concrete products, and from the provision of services, which are primarily paving and related services.
Products: Revenue for product sales is recognized when evidence of an arrangement exists and when control passes, which generally is when the product is shipped. 
Services: We earn revenue from the provision of services, which are primarily paving and related services, which are typically calculated using monthly progress based on the percentage of completion or a customer’s engineer review of progress.
The majority of our construction service contracts are completed within one year, but may occasionally extend beyond this time frame. The majority of our construction service contracts are for work that occurs mostly during the spring, summer and fall. We generally measure progress toward completion on long-term paving and related services contracts based on the proportion of costs incurred to date relative to total estimated costs at completion.
The percentage of completion method of accounting involves the use of various estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes in specifications or other disputes.
 
Earnings per Share—The Company computes basic earnings per share attributable to stockholders by dividing income attributable to Summit Inc. by the weighted-average shares of Class A common stock outstanding. Diluted earnings per share reflects the potential dilution beyond shares for basic earnings per share that could occur if securities or other contracts to issue common stock were exercised, converted into common stock, or resulted in the issuance of common stock that would have shared in the Company’s earnings. Since the Class B common stock has no economic value, those shares are not included in the weighted-average common share amount for basic or diluted earnings per share. In addition, as the shares of Class A common stock are issued by Summit Inc., the earnings and equity interests of noncontrolling interests are not included in basic earnings per share.

Prior Period Reclassifications — We reclassified $32.6 million and $93.1 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. In addition, we reclassified $1.6 million and $5.7 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating income, also to conform to the current year presentation. Lastly, we reclassified $0.4 million and $1.5 million of transaction costs from its own line item within operating income into general and administrative expenses for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no material impact on previously reported operating income or Adjusted EBITDA, a non-GAAP measure described in Note 14, Segment Information, below.
 
New Accounting Standards — In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces the accounting complexity of implementing a cloud computing service arrangement. The ASU aligns the capitalization of implementation costs among hosting arrangements and costs incurred to develop internal-use software. We adopted this ASU in the first quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework Changes to The Disclosure Requirements for Defined Benefits Plans, which
8

Table of Contents
modifies the disclosure requirements of employer-sponsored defined benefit and other postretirement benefits plans. The ASU is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We adopted this ASU in the fourth quarter of 2020 and the adoption of this ASU did not have a material impact on the consolidated financial statements.

2.ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLES
 
The Company has completed numerous acquisitions since its formation, which have been financed through a combination of debt and equity funding and available cash. 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. Goodwill acquired during a business combination has an indefinite life and is not amortized. The following table summarizes the Company’s acquisitions by region and period:

Nine months endedYear ended
October 2, 2021January 2, 2021
West— 
East

The purchase price allocation, primarily the valuation of property, plant and equipment for the acquisitions completed during the nine months ended October 2, 2021, as well as the acquisitions completed during 2020 that occurred after September 26, 2020, have not yet been finalized due to the recent timing of the acquisitions, status of the valuation of property, plant and equipment and finalization of related tax returns. 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 endedYear ended
October 2, 2021    January 2, 2021
Financial assets$— $8,696 
Inventories173 2,856 
Property, plant and equipment7,958 130,042 
Intangible assets702 — 
Other assets— 2,790 
Financial liabilities(121)(4,469)
Other long-term liabilities(300)(16,069)
Net assets acquired8,412 123,846 
Goodwill— — 
Purchase price8,412 123,846 
Acquisition-related liabilities(1,149)— 
Other— (369)
Net cash paid for acquisitions$7,263 $123,477 

Changes in the carrying amount of goodwill, by reportable segment, from January 2, 2021 to October 2, 2021 are summarized as follows:
 WestEastCement
Total  
Balance—January 2, 2021$586,209 $410,426 $204,656 $1,201,291 
Dispositions (1)(16,222)(10,520)— (26,742)
Foreign currency translation adjustments306 — — 306 
Balance—October 2, 2021$570,293 $399,906 $204,656 $1,174,855 
_______________________________________________________________________
(1) Reflects goodwill derecognition from dispositions completed during the nine months ended October 2, 2021.

The Company’s intangible assets subject to amortization are primarily composed of operating permits, mineral lease agreements and reserve rights. Operating permits relate to permitting and zoning rights acquired outside of a business combination. The assets related to mineral 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 certain rights of ownership,
9

Table of Contents
but does not own the reserves. The intangible assets are amortized on a straight-line basis over the lives of the leases or permits. The following table shows intangible assets by type and in total:

 October 2, 2021January 2, 2021
 Gross
 Carrying
 Amount
Accumulated
 Amortization
Net
 Carrying
 Amount
Gross
 Carrying
 Amount
Accumulated
 Amortization
Net
 Carrying
 Amount
Operating permits$33,671 $(2,206)$31,465 $33,671 $(1,207)$32,464 
Mineral leases19,927 (8,497)11,430 19,225 (7,571)11,654 
Reserve rights25,586 (3,123)22,463 6,234 (2,504)3,730 
Other5,463 (483)4,980 586 (582)
Total intangible assets$84,647 $(14,309)$70,338 $59,716 $(11,864)$47,852 
 
Amortization expense totaled $0.9 million and $2.8 million for the three and nine months ended October 2, 2021, respectively, and $0.7 million and $2.3 million for the three and nine months ended September 26, 2020, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to October 2, 2021 is as follows:

2021 (three months)$1,034 
20224,141 
20234,008 
20243,913 
20253,868 
20263,724 
Thereafter49,650 
Total$70,338 

In the first nine months of 2021, as part of the Company's strategy to rationalize assets, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a total gain on disposition of $15.3 million.

3.REVENUE RECOGNITION
 
We derive our revenue predominantly by selling construction materials, products and providing paving and related services. Construction materials consist of aggregates and cement. Products consist of related downstream products, including ready-mix concrete, asphalt paving mix and concrete products. Paving and related service revenue is generated primarily from the asphalt paving services that we provide.
 
Revenue by product for the three and nine months ended October 2, 2021 and September 26, 2020 is as follows:
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Revenue by product*:    
Aggregates$160,317 $136,396 $431,201 $362,546 
Cement87,645 82,698 207,953 188,854 
Ready-mix concrete183,114 179,124 525,208 488,710 
Asphalt116,364 128,125 238,674 255,992 
Paving and related services112,671 136,191 257,966 280,446 
Other57,129 47,085 151,999 131,270 
Total revenue$717,240 $709,619 $1,813,001 $1,707,818 
*Revenue from liquid asphalt terminals is included in asphalt revenue.
 
Accounts receivable, net consisted of the following as of October 2, 2021 and January 2, 2021: 
10

Table of Contents
 October 2, 2021January 2, 2021
Trade accounts receivable$268,188 $191,871 
Construction contract receivables53,647 47,179 
Retention receivables14,894 18,824 
Receivables from related parties877 1,339 
Accounts receivable337,606 259,213 
Less: Allowance for doubtful accounts(4,255)(4,517)
Accounts receivable, net$333,351 $254,696 
 
Retention receivables are amounts earned by the Company but held by customers until paving and related service contracts and projects are near completion or fully completed. Amounts are generally billed and collected within one year.

4.INVENTORIES
 
Inventories consisted of the following as of October 2, 2021 and January 2, 2021: 
 October 2, 2021January 2, 2021
Aggregate stockpiles$132,325 $137,938 
Finished goods31,334 32,993 
Work in process9,189 9,281 
Raw materials22,464 20,096 
Total$195,312 $200,308 


5.ACCRUED EXPENSES
 
Accrued expenses consisted of the following as of October 2, 2021 and January 2, 2021:
 October 2, 2021January 2, 2021
Interest$8,891 $21,860 
Payroll and benefits37,906 46,026 
Finance lease obligations17,424 24,601 
Insurance19,676 18,355 
Non-income taxes23,834 15,669 
Deferred asset purchase payments4,538 9,749 
Professional fees1,152 828 
Other (1)23,957 23,482 
Total$137,378 $160,570 
(1)Consists primarily of current portion of asset retirement obligations and miscellaneous accruals.

6.DEBT
 
Debt consisted of the following as of October 2, 2021 and January 2, 2021: 
11

Table of Contents
 October 2, 2021January 2, 2021
Term Loan, due 2024:  
$611.5 million and $616.3 million, net of $0.7 million and $0.9 million discount at October 2, 2021 and January 2, 2021, respectively
$610,830 $615,425 
518% Senior Notes, due 2025
— 300,000 
612% Senior Notes, due 2027
300,000 300,000 
514% Senior Notes, due 2029
700,000 700,000 
Total1,610,830 1,915,425 
Current portion of long-term debt6,354 6,354 
Long-term debt$1,604,476 $1,909,071 
 
The contractual payments of long-term debt, including current maturities, for the five years subsequent to October 2, 2021, are as follows:

2021 (three months)$1,588 
20226,354 
20236,354 
2024597,252 
2025— 
2026— 
Thereafter1,000,000 
Total1,611,548 
Less: Original issue net discount(718)
Less: Capitalized loan costs(12,487)
Total debt$1,598,343 
 
Senior Notes— On September 27, 2021, Summit LLC and Summit Finance (together, the “Issuers”) redeemed all $300.0 million in aggregate principal amount of their 5.125% senior notes due June 1, 2025 (the "2025 Notes") using existing cash on hand at a price equal to par plus an applicable premium and the indenture under which the 2025 Notes were issued was satisfied and discharged. As a result of the redemption, charges of $6.0 million were recognized in the quarter ended October 2, 2021, which included charges of $3.9 million for the applicable redemption premium and $2.1 million for the write-off of the deferred financing fees.

On August 11, 2020, the Issuers issued $700.0 million in aggregate principal amount of 5.250% senior notes due January 15, 2029 (the “2029 Notes”). The 2029 Notes were issued at 100.0% of their par value with proceeds of $690.4 million, net of related fees and expenses. The 2029 Notes were issued under an indenture dated August 11, 2020 (the "2020 Indenture"). The 2020 Indenture contains covenants limiting, among other things, Summit LLC and its restricted subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The 2020 Indenture also contains customary events of default. Interest on the 2029 Notes is payable semi-annually on January 15 and July 15 of each year commencing on January 15, 2021.

On March 15, 2019, the Issuers issued $300.0 million in aggregate principal amount of 6.500% senior notes due March 15, 2027 (the “2027 Notes”). The 2027 Notes were issued at 100.0% of their par value with proceeds of $296.3 million, net of related fees and expenses. The 2027 Notes were issued under an indenture dated March 25, 2019, the terms of which are generally consistent with the 2020 Indenture. Interest on the 2027 Notes is payable semi-annually on March 15 and September 15 of each year commencing on September 15, 2019.

As of October 2, 2021 and January 2, 2021, the Company was in compliance with all covenants under the applicable indentures.
 
Senior Secured Credit Facilities— Summit LLC has credit facilities that provide for term loans in an aggregate amount of $650.0 million and revolving credit commitments in an aggregate amount of $345.0 million (the “Senior Secured Credit Facilities”). Under the Senior Secured Credit Facilities, required principal repayments of 0.25% of the refinanced aggregate
12

Table of Contents
amount of term debt are due on the last business day of each March, June, September and December commencing with the March 2018 payment. The unpaid principal balance is due in full on the maturity date, which is November 21, 2024.
 
The revolving credit facility bears interest per annum equal to, at Summit LLC’s option, either (i) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) LIBOR plus 1.00%, plus an applicable margin of 2.00% for base rate loans or (ii) a LIBOR rate determined by reference to Reuters prior to the interest period relevant to such borrowing adjusted for certain additional costs plus an applicable margin of 3.00% for LIBOR rate loans. The maturity date with respect to revolving credit commitments under the revolving credit facility is February 25, 2024.
 
There were no outstanding borrowings under the revolving credit facility as of October 2, 2021 and January 2, 2021, with borrowing capacity of $329.1 million remaining as of October 2, 2021, which is net of $15.9 million of outstanding letters of credit. The outstanding letters of credit are renewed annually and support required bonding on construction projects, large leases, workers compensation claims and the Company’s insurance liabilities.
 
Summit LLC’s Consolidated First Lien Net Leverage Ratio, as such term is defined in the Credit Agreement, should be no greater than 4.75:1.0 as of each quarter-end. As of October 2, 2021 and January 2, 2021, Summit LLC was in compliance with all financial covenants.
 
Summit LLC’s wholly-owned domestic subsidiary companies, subject to certain exclusions and exceptions, are named as subsidiary guarantors of the Senior Notes and the Senior Secured Credit Facilities. In addition, Summit LLC has pledged substantially all of its assets as collateral, subject to certain exclusions and exceptions, for the Senior Secured Credit Facilities.
The following table presents the activity for the deferred financing fees for the nine months ended October 2, 2021 and September 26, 2020:
 Deferred financing fees
Balance—January 2, 2021$18,367 
Amortization(2,510)
Write off of deferred financing fees(2,116)
Balance—October 2, 2021$13,741 
 
 
Balance—December 28, 2019$15,436 
Loan origination fees9,565 
Amortization(2,499)
Write off of deferred financing fees(3,338)
Balance—September 26, 2020$19,164 

Other—On January 15, 2015, the Company’s wholly-owned subsidiary in British Columbia, Canada entered into an agreement with HSBC Bank Canada for a (i) $6.0 million Canadian dollar (“CAD”) revolving credit commitment to be used for operating activities that bears interest per annum equal to the bank’s prime rate plus 0.20%, (ii) $0.5 million CAD revolving credit commitment to be used for capital equipment that bears interest per annum at the bank’s prime rate plus 0.90% and (iii) $0.3 million CAD revolving credit commitment to provide guarantees on behalf of that subsidiary. There were no amounts outstanding under this agreement as of October 2, 2021 or January 2, 2021.

7.INCOME TAXES
 
Summit Inc.’s tax provision includes its proportional share of Summit Holdings’ tax attributes. Summit Holdings’ subsidiaries are primarily limited liability companies but do include certain entities organized as C corporations and a Canadian subsidiary. The tax attributes related to the limited liability companies are passed on to Summit Holdings and then to its partners, including Summit Inc. The tax attributes associated with the C corporation and Canadian subsidiaries are fully reflected in the Company’s accounts.
 
Our income tax expense was $20.5 million and $33.5 million in the three and nine months ended October 2, 2021, respectively, and our income tax benefit was $(19.6) million and $(25.3) million in the three and nine months ended September 26, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate
13

Table of Contents
primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. In the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million. In the third quarter of 2020, final regulations were issued clarifying portions of the Tax Cuts and Jobs Act of 2017 ("TCJA"). Under the provisions of the final regulations, we reversed unrecognized tax benefits of $32.9 million in the third quarter of 2020.
  
As of October 2, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.

No material interest or penalties were recognized in income tax expense during the three and nine months ended October 2, 2021 and September 26, 2020.

Tax Receivable Agreement—The Company is party to a TRA with certain current and former holders of LP Units that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA, is deemed to realize) as a result of increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. 
 
In the nine months ended October 2, 2021, 1,440,983 LP Units were acquired by Summit Inc. in exchange for an equal number of newly-issued shares of Summit Inc.’s Class A common stock. These exchanges resulted in net new deferred tax assets of approximately $10.8 million. As we determined that the deferred tax assets created from these exchanges are realizable and payment under the TRA is considered probable, we have recorded 85% of the increase in deferred tax assets as TRA liability and the remainder as an adjustment to additional paid in capital. As of October 2, 2021 and January 2, 2021, we had recorded $330.9 million and $321.7 million of TRA liability, respectively.
 
Tax Distributions – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate in New York, New York. Summit Holdings did not make any tax distributions in the nine months ended October 2, 2021 and September 26, 2020.

8.EARNINGS PER SHARE
 
Basic earnings per share is computed by dividing net earnings by the weighted average common shares outstanding and diluted net earnings is computed by dividing net earnings, adjusted for changes in the earnings allocated to Summit Inc. as a result of the assumed conversion of LP Units, by the weighted-average common shares outstanding assuming dilution.

The following table shows the calculation of basic and diluted earnings per share:
14

Table of Contents
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Net income attributable to Summit Inc.$74,204 $90,730 $108,346 $102,815 
Weighted average shares of Class A stock outstanding118,272,955 114,116,564 117,040,207 113,943,292 
Add: Nonvested restricted stock awards of retirement eligible shares200,575 320,343 218,224 145,155 
Weighted average basic shares outstanding118,473,530 114,436,907 117,258,431 114,088,447 
Basic earnings per share$0.63 $0.79 $0.92 $0.90 
Diluted net income attributable to Summit Inc.$74,204 $90,730 $108,346 $102,815 
Weighted average shares of Class A stock outstanding118,272,955 114,116,564 117,040,207 113,943,292 
Add: stock options125,164 — 310,990 — 
Add: warrants14,405 — 17,573 — 
Add: restricted stock units680,980 263,886 812,702 450,353 
Add: performance stock units198,142 91,721 179,143 63,631 
Weighted average dilutive shares outstanding119,291,646 114,472,171 118,360,615 114,457,276 
Diluted earnings per share$0.62 $0.79 $0.92 $0.90 
 
Excluded from the above calculations were the shares noted below as they were antidilutive:
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Antidilutive shares:    
LP Units1,594,272 3,053,115 2,031,090 3,086,819 
Time-vesting stock options— 2,095,929 — 2,095,929 
Warrants— 100,037 — 100,037 
Time-vesting restricted stock units— — — — 
Market-based restricted stock units— — — — 

9.STOCKHOLDERS’ EQUITY
During the nine months ended October 2, 2021 and September 26, 2020, certain limited partners of Summit Holdings exchanged their LP Units for shares of Class A common stock of Summit Inc. The following table summarizes the changes in our ownership of Summit Holdings:
 Summit Inc.
Shares (Class A)
LP UnitsTotalSummit Inc.
Ownership
Percentage
Balance — January 2, 2021114,390,595 2,873,170 117,263,765 97.5 %
Exchanges during period1,440,983 (1,440,983)— 
Stock option exercises1,744,256 — 1,744,256 
Other equity transactions989,116 — 989,116 
Balance — October 2, 2021118,564,950 1,432,187 119,997,137 98.8 %
Balance — December 28, 2019113,309,385 3,249,657 116,559,042 97.2 %
Exchanges during period196,542 (196,542)— 
Stock option exercises14,404 — 14,404 
Other equity transactions603,580 — 603,580 
Balance — September 26, 2020114,123,911 3,053,115 117,177,026 97.4 %
 
Summit Inc. is Summit Holdings’ primary beneficiary and thus consolidates Summit Holdings in its consolidated financial statements with a corresponding noncontrolling interest reclassification, which was 1.2% and 2.5% as of October 2, 2021 and January 2, 2021, respectively.
15

Table of Contents
 
Accumulated other comprehensive income (loss) —The changes in each component of accumulated other comprehensive income (loss) consisted of the following:
 Change in
 retirement plans
Foreign currency
 translation
 adjustments
Accumulated
 other
 comprehensive
 income (loss)
Balance — January 2, 2021$533 $4,670 $5,203 
Foreign currency translation adjustment, net of tax— 467 467 
Balance — October 2, 2021$533 $5,137 $5,670 
Balance — December 28, 2019$2,171 $1,277 $3,448 
Foreign currency translation adjustment, net of tax— (2,473)(2,473)
Balance — September 26, 2020$2,171 $(1,196)$975 

10.SUPPLEMENTAL CASH FLOW INFORMATION
 
Supplemental cash flow information is as follows:
 Nine months ended
 October 2, 2021September 26, 2020
Cash payments:  
Interest$77,890 $86,427 
Payments for income taxes, net6,694 1,131 
Operating cash payments on operating leases7,894 8,372 
Operating cash payments on finance leases1,722 2,402 
Finance cash payments on finance leases13,739 11,528 
Non cash financing activities:
Right of use assets obtained in exchange for operating lease obligations$6,476 $2,931 
Right of use assets obtained in exchange for finance leases obligations600 17,605 
Exchange of LP Units to shares of Class A common stock43,796 4,648 

16

Table of Contents

11.LEASES

We lease construction and office equipment, distribution facilities and office space. Leases with an initial term of 12 months or less, including month to month leases, are not recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight line basis over the lease term. For lease agreements we have entered into or reassessed we combine lease and nonlease components. While we also own mineral leases for mining operations, those leases are outside the scope of ASU No. 2016-2, Leases (Topic 842). Assets acquired under finance leases are included in property, plant and equipment.

Many of our leases include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense were as follows:
17

Table of Contents
Three months endedNine months ended
October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Operating lease cost$1,755 $2,478 $5,175 $7,576 
Variable lease cost90 90 263 253 
Short-term lease cost12,373 14,335 30,517 33,369 
Financing lease cost:
Amortization of right-of-use assets2,168 3,439 7,835 9,307 
Interest on lease liabilities475 780 1,689 2,329 
Total lease cost$16,861 $21,122 $45,479 $52,834 
October 2, 2021January 2, 2021
Supplemental balance sheet information related to leases:
Operating leases:
Operating lease right-of-use assets$27,339 $28,543 
Current operating lease liabilities$6,818 $8,188 
Noncurrent operating lease liabilities21,596 21,500 
Total operating lease liabilities$28,414 $29,688 
Finance leases:
Property and equipment, gross$69,115 $92,679 
Less accumulated depreciation(29,387)(32,828)
Property and equipment, net$39,728 $59,851 
Current finance lease liabilities$17,424 $24,601 
Long-term finance lease liabilities18,249 31,727 
Total finance lease liabilities$35,673 $56,328 
Weighted average remaining lease term (years):
Operating leases9.18.7
Finance lease2.52.4
Weighted average discount rate:
Operating leases5.0 %5.3 %
Finance leases5.3 %5.2 %
Maturities of lease liabilities, as of October 2, 2021, were as follows:
Operating LeasesFinance Leases
2021 (three months)$2,103 $3,950 
20227,489 18,668 
20235,830 7,386 
20243,662 3,209 
20252,444 2,583 
20261,794 990 
Thereafter12,976 1,843 
Total lease payments36,298 38,629 
Less imputed interest(7,884)(2,956)
Present value of lease payments$28,414 $35,673 

12.COMMITMENTS AND CONTINGENCIES
 
The Company is party to certain legal actions arising from the ordinary course of business activities. Accruals are recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be predicted with certainty, management expects that the ultimate resolution of all current pending or threatened claims and
18

Table of Contents
litigation will not have a material effect on the Company’s consolidated financial position, results of operations or liquidity. The Company records legal fees as incurred.

In March 2018, we were notified of an investigation by the Canadian Competition Bureau (the “CCB”) into pricing practices by certain asphalt paving contractors in British Columbia, including Winvan Paving, Ltd. (“Winvan”). We believe the investigation is focused on time periods prior to our April 2017 acquisition of Winvan and we are cooperating with the CCB. Although we currently do not believe this matter will have a material adverse effect on our business, financial condition or results of operations, we are currently not able to predict the ultimate outcome or cost of the investigation.

Environmental Remediation and Site Restoration —The Company’s operations are subject to and affected by federal, state, provincial and local laws and regulations relating to the environment, health and safety and other regulatory matters. These operations require environmental operating permits, which are subject to modification, renewal and revocation. The Company regularly monitors and reviews its operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of the Company’s business, as it is with other companies engaged in similar businesses and there can be no assurance that environmental liabilities or noncompliance will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.
 
The Company has asset retirement obligations arising from regulatory and contractual requirements to perform reclamation activities at the time certain quarries and landfills are closed. As of October 2, 2021 and January 2, 2021, $32.7 million and $33.6 million, respectively, were included in other noncurrent liabilities on the consolidated balance sheets and $9.6 million and $10.0 million, respectively, were included in accrued expenses for future reclamation costs. The total undiscounted anticipated costs for site reclamation as of October 2, 2021 and January 2, 2021 were $108.0 million and $112.8 million, respectively.
 
Other—The Company is obligated under various firm purchase commitments for certain raw materials and services that are in the ordinary course of business. Management does not expect any significant changes in the market value of these goods and services during the commitment period that would have a material adverse effect on the financial condition, results of operations and cash flows of the Company. The terms of the purchase commitments generally approximate one year.

13.FAIR VALUE
 
Fair Value Measurements—Certain acquisitions made by the Company require the payment of contingent amounts of purchase consideration. These payments are contingent on specified operating results being achieved in periods subsequent to the acquisition and will only be made if earn-out thresholds are achieved. Contingent consideration obligations are measured at fair value each reporting period. Any adjustments to fair value are recognized in earnings in the period identified.

The fair value of contingent consideration as of October 2, 2021 and January 2, 2021 was:
 October 2, 2021January 2, 2021
Current portion of acquisition-related liabilities and Accrued expenses:  
Contingent consideration$554 $654 
Acquisition-related liabilities and Other noncurrent liabilities:
Contingent consideration$1,199 $1,209 
 
The fair value of contingent consideration was based on unobservable, or Level 3, inputs, including projected probability-weighted cash payments and a 9.5% discount rate, which reflects a market discount rate. Changes in fair value may occur as a result of a change in actual or projected cash payments, the probability weightings applied by the Company to projected payments or a change in the discount rate. Significant increases or decreases in any of these inputs in isolation could result in a lower, or higher, fair value measurement. There were no material valuation adjustments to contingent consideration as of October 2, 2021 and September 26, 2020.
 
Financial Instruments—The Company’s financial instruments include debt and certain acquisition-related liabilities (deferred consideration and noncompete obligations). The carrying value and fair value of these financial instruments as of October 2, 2021 and January 2, 2021 was:
19

Table of Contents
 
 October 2, 2021January 2, 2021
 Fair ValueCarrying ValueFair ValueCarrying Value
Level 1    
Long-term debt(1)$1,661,673 $1,610,830 $1,971,087 $1,915,425 
Level 3
Current portion of deferred consideration and noncompete obligations(2)12,255 12,255 9,611 9,611 
Long term portion of deferred consideration and noncompete obligations(3)32,024 32,024 11,037 11,037 
(1)$6.4 million was included in current portion of debt as of October 2, 2021 and January 2, 2021.
(2)Included in current portion of acquisition-related liabilities on the consolidated balance sheets.
(3)Included in acquisition-related liabilities on the consolidated balance sheets.

The fair value of debt was determined based on observable, or Level 2, inputs, such as interest rates, bond yields and quoted prices in inactive markets. The fair values of the deferred consideration and noncompete obligations were determined based on unobservable, or Level 3, inputs, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk. The discount rate used is generally consistent with that used when the obligations were initially recorded.
 
Securities with a maturity of three months or less are considered cash equivalents and the fair value of these assets approximates their carrying value.

14.SEGMENT INFORMATION
 
The Company has three operating segments: West, East and Cement, which are its reporting segments. These segments are consistent with the Company’s management reporting structure.
 
The operating results of each segment are regularly reviewed and evaluated by the Chief Executive Officer, our Company’s Chief Operating Decision Maker (“CODM”). The CODM primarily evaluates the performance of the Company’s segments and allocates resources to them based on a segment profit metric that we call Adjusted EBITDA, which is computed as earnings from operations before interest, taxes, depreciation, depletion, amortization, accretion, and share-based compensation, as well as various other non-recurring, non-cash amounts. Beginning with the first quarter of 2021, the Company no longer adjusts for transaction costs, as those costs are recurring cash payments, and are included in general and administrative expenses.
 
The West and East segments have several subsidiaries that are engaged in various activities including quarry mining, aggregate production and contracting. The Cement segment is engaged in the production of Portland cement. Assets employed by each segment include assets directly identified with those operations. Corporate assets consist primarily of cash, property, plant and equipment for corporate operations and other assets not directly identifiable with a reportable business segment. The accounting policies applicable to each segment are consistent with those used in the consolidated financial statements.
The following tables display selected financial data for the Company’s reportable business segments as of October 2, 2021 and January 2, 2021 and for the three and nine months ended October 2, 2021 and September 26, 2020:
 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Revenue*:    
West$369,250 $390,310 $958,351 $919,016 
East255,490 234,435 635,659 590,341 
Cement92,500 84,874 218,991 198,461 
Total revenue$717,240 $709,619 $1,813,001 $1,707,818 
*Intercompany sales are immaterial and the presentation above only reflects sales to external customers.
20

Table of Contents
 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Income from operations before taxes$95,891 $73,156 $143,369 $79,597 
Interest expense24,134 24,623 72,536 78,049 
Depreciation, depletion and amortization58,381 57,364 171,474 161,912 
Accretion701 690 2,177 1,848 
Loss on debt financings6,016 4,064 6,016 4,064 
Loss (gain) on sale of businesses113 — (15,319)— 
Non-cash compensation4,685 13,322 14,875 23,119 
Other363 4,083 682 4,287 
Total Adjusted EBITDA$190,284 $177,302 $395,810 $352,876 
Total Adjusted EBITDA by Segment:
West$92,303 $95,470 $211,722 $196,881 
East69,084 56,943 138,113 119,900 
Cement40,360 35,086 82,281 63,172 
Corporate and other(11,463)(10,197)(36,306)(27,077)
Total Adjusted EBITDA$190,284 $177,302 $395,810 $352,876 
 
 Nine months ended
 October 2, 2021September 26, 2020
Purchases of property, plant and equipment  
West$85,137 $51,148 
East69,469 75,006 
Cement14,852 12,097 
Total reportable segments169,458 138,251 
Corporate and other612 1,755 
Total purchases of property, plant and equipment$170,070 $140,006 
 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
Depreciation, depletion, amortization and accretion:    
West$24,796 $23,117 $75,287 $67,082 
East22,809 22,803 66,306 65,293 
Cement10,409 11,155 28,785 28,425 
Total reportable segments58,014 57,075 170,378 160,800 
Corporate and other1,068 979 3,273 2,960 
Total depreciation, depletion, amortization and accretion$59,082 $58,054 $173,651 $163,760 

 October 2, 2021January 2, 2021
Total assets:  
West$1,569,240 $1,503,382 
East1,316,659 1,303,742 
Cement863,858 850,835 
Total reportable segments3,749,757 3,657,959 
Corporate and other466,892 650,052 
Total$4,216,649 $4,308,011 
21

Table of Contents
SUMMIT MATERIALS, LLC AND SUBSIDIARIES
 
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
The unaudited consolidated financial statements and notes thereto for Summit Materials, LLC and subsidiaries are included as Exhibit 99.1 to this Quarterly Report on Form 10-Q and are incorporated by reference herein.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. Forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the section entitled “Risk Factors” in the Annual Report, and factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated interim financial statements and the related notes and other information included in this report.
 
Overview

Summit’s vision is to be the most socially responsible, integrated construction materials solution provider, collaborating with stakeholders to deliver differentiated innovations and solve our customers’ challenges. Within our markets, we strive to be a market leader by offering customers a single-source provider for construction materials and related downstream products through our vertical integration. Our materials include aggregates, which we supply across the United States, and in British Columbia, Canada, and cement, which we supply to surrounding states along the Mississippi River from Minnesota to Louisiana. In addition to supplying aggregates to customers, we use a portion of our materials internally to produce ready-mix concrete and asphalt paving mix, which may be sold externally or used in our paving and related services businesses. Our vertical integration creates opportunities to increase aggregates volumes, optimize margin at each stage of production and provide customers with efficiency gains, convenience and reliability, which we believe gives us a competitive advantage.
 
Since our inception in 2009, we have completed dozens of acquisitions, which are organized into 11 operating companies that make up our three distinct operating segments: West, East and Cement, which are also our reporting segments. We operate in 21 U.S. states and in British Columbia, Canada and currently have assets in 21 U.S. states and in British Columbia, Canada. The map below illustrates our geographic footprint.
22

Table of Contents
sum-20211002_g2.jpg
Business Trends and Conditions
 
The U.S. construction materials industry is composed of four primary sectors: aggregates; cement; ready-mix concrete; and asphalt paving mix. Each of these materials is widely used in most forms of construction activity. Participants in these sectors typically range from small, privately-held companies focused on a single material, product or market to publicly traded multinational corporations that offer a wide array of construction materials and services. Competition is constrained in part by the distance materials can be transported efficiently, resulting in predominantly local or regional operations. Due to the lack of product differentiation, competition for all of our products is predominantly based on price and, to a lesser extent, quality of products and service. As a result, the prices we charge our customers are not likely to be materially different from the prices charged by other producers in the same markets. Accordingly, our profitability is generally dependent on the level of demand for our materials and products and our ability to control operating costs. We continue to monitor supply chain issues, as well as inflationary pressures on our raw material inputs as well as labor costs.

Our revenue is derived from multiple end-use markets including public infrastructure construction and private residential and nonresidential construction. Public infrastructure includes spending by federal, state, provincial and local governments for roads, highways, bridges, airports and other infrastructure projects. Public infrastructure projects have historically been a relatively stable portion of state and federal budgets. Residential and nonresidential construction consists of new construction and repair and remodel markets. Any economic stagnation or decline, which could vary by local region and market, could affect our results of operations. Our sales and earnings are sensitive to national, regional and local economic conditions and particularly to cyclical changes in construction spending, especially in the private sector. We continue to see positive indicators for the construction sector, including positive trends in housing starts, and highway construction letting
23

Table of Contents
activity in many of the states in which we operate. However, given the ongoing nature of the COVID-19 pandemic discussed below, we continue to closely monitor these indicators for the impact on our business in subsequent quarters.
 
Transportation infrastructure projects, driven by both federal and state funding programs, represent a significant share of the U.S. construction materials market. Federal funds are allocated to the states, which are required to match a portion of the federal funds they receive. Federal highway spending uses funds predominantly from the Federal Highway Trust Fund, which derives its revenue from taxes on diesel fuel, gasoline and other user fees. The dependability of federal funding allows state departments of transportation to plan for their long-term highway construction and maintenance needs. Through a continuing resolution signed by the President in October 2021, funding for the existing federal transportation funding program extends through December 3, 2021. Historically, Congress has maintained infrastructure spending via various means upon the expiration of federal transportation funding programs, but there is no assurance that this will continue to be the case. With the nation’s infrastructure aging, there is increased demand by states and municipalities for long-term federal funding to support the construction of new roads, highways and bridges in addition to the maintenance of the existing infrastructure.

In addition to federal funding, state, county and local agencies provide highway construction and maintenance funding. Our four largest states by revenue, Texas, Utah, Kansas and Missouri, represented approximately 25%, 14%, 13% and 9%, respectively, of our total revenue in 2020. The following is a summary of key funding initiatives in those states:
 
The Texas Department of Transportation (“TXDOT”) updated its fiscal year 2022 lettings estimate to $10.1 billion up from $8.4 billion in fiscal year 2021 and $7.5 billion in fiscal year 2020. Longer term, TXDOT has indicated a target of $8 billion per year in total state and local lettings. In addition, Texas has received $1.9 billion from legislation passed by Congress in December 2020 and March 2021.

The state of Utah anticipates transportation funding of approximately $1.3 billion in 2021 and $1.8 billion in 2022. In addition, Utah received approximately $263 million from legislation passed by Congress in December 2020 and March 2021.

The state of Kansas anticipates approximately $1.9 billion for 2021 and $2.2 billion for 2022 for transportation funding. In addition, Kansas received approximately $138 million from legislation passed by Congress in December 2020 and March 2021.

The state of Missouri anticipates transportation funding of approximately $2.9 billion in 2021 and $3.1 billion in 2022. In addition, Missouri received approximately $437 million from legislation passed by Congress in December 2020 and March 2021.

Use and consumption of our products fluctuate due to seasonality. Nearly all of the products used by us, and by our customers, in the private construction and public infrastructure industries are used outdoors. Our highway operations and production and distribution facilities are also located outdoors. Therefore, seasonal changes and other weather-related conditions, in particular extended rainy and cold weather in the spring and fall, as well as major weather events such as hurricanes, tornadoes, tropical storms, heavy snows and flooding, can adversely affect our business and operations through a decline in both the use of our products and demand for our services. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second and third quarters of our fiscal year typically result in higher activity and revenue levels during those quarters. The first quarter of our fiscal year typically has lower levels of activity due to weather conditions, and the third quarter of our fiscal year typically has the highest levels of activity.
 
We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates, cement, ready-mix concrete and asphalt paving mix production, natural gas for hot mix asphalt production and diesel fuel for distribution vehicles and production related mobile equipment. Liquid asphalt escalator provisions in most of our private and commercial contracts limit our exposure to price fluctuations in this commodity. We often obtain similar escalators on public infrastructure contracts. In addition, we enter into various firm purchase commitments, with terms generally less than one year, for certain raw materials, including diesel fuel.
 
Backlog
 
Our products are generally delivered upon receipt of orders or requests from customers, or shortly thereafter. Accordingly, the backlog associated with product sales is converted into revenue within a relatively short period of time. Inventory for products is generally maintained in sufficient quantities to meet rapid delivery requirements of customers. Therefore, a period-over-period increase or decrease of backlog does not necessarily result in an improvement or a deterioration
24

Table of Contents
of our business. Our backlog includes only those products and projects for which we have obtained a purchase order or a signed contract with the customer and does not include products purchased and sold or services awarded and provided within the period.
 
Financial Highlights
    
The principal factors in evaluating our financial condition and operating results as of and for the three and nine months ended October 2, 2021 as compared to the three and nine months ended September 26, 2020, and certain other highlights include:
 
Net revenue increased $17.0 million and $116.4 million in the three and nine months ended October 2, 2021, respectively, primarily resulting from organic growth.
Our operating income increased $24.4 million and $36.9 million in the three and nine months ended October 2, 2021, respectively, as revenue exceeded the increases in cost of revenue.
In the nine months ended October 2, 2021, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a total gain on disposition of $15.3 million.
In the three and nine months ended October 2, 2021, sales volume increased 9.2% and 14.1% in aggregates, 2.0% and 6.5% in cement, declined (1.4)% and increased 3.9% in ready-mix concrete and declined (11.2)% and (8.6)% in asphalt, respectively.
In September 2021, we redeemed all $300.0 million of 5.125% Senior Notes due 2025 (the “2025 Notes”) using existing cash on hand. We recognized a loss on debt financing of $6.0 million on this redemption.
In August 2020, we issued $700 million of 5.25% Senior Notes due 2029 (the “2029 Notes”), resulting in net proceeds of $690.4 million, after related fees and expenses. The proceeds from the 2029 Notes were used to redeem the $650 million of 6.125% Senior Notes due 2023 (the “2023 Notes”) at par.

Results of Operations
 
In late 2019, the COVID-19 virus was first reported to have surfaced, and began impacting countries around the world. However, in all of our markets, construction activities were deemed essential businesses and we continued to operate while many businesses were forced to close or reduce operations. During the first nine months of each of 2021 and 2020, our operating markets remained substantially unaffected by COVID-19. We continue to monitor our operations, the operations of our customers, and the recommendations of the various national, state and local governments in the areas in which we operate. We implemented work-from-home protocols at all of our administrative locations late in the first quarter of 2020, and while some locations have returned, other locations, including our headquarters location, continue to work remotely. In addition, we implemented additional safety measures specific to COVID-19 at all of our operating locations, which did not significantly increase our costs. The extent to which the COVID-19 pandemic impacts the national and local economies in which we operate, and ultimately our business, will depend on numerous developments, which are highly uncertain and difficult to predict. These events, as they continue to develop, could result in business disruption, including reduced revenues, profitability and cash flow.

In 2020, approximately 61% of our revenue was derived from the private construction market, and the remaining revenue from the public markets. We believe residential activity in our key markets will continue to be a driver for volumes in future periods. Funding for public infrastructure projects as been announced as a high priority for the federal government in 2021, but no action has been taken to date.

As of October 2, 2021, we had $258.1 million in cash and cash equivalents, and we have remaining borrowing capacity on our senior secured revolving credit facility of $329.1 million, providing us with liquidity that we believe to be adequate to meet our obligations for the next twelve months.
    
The following discussion of our results of operations is focused on the key financial measures we use to evaluate the performance of our business from both a consolidated and operating segment perspective. Operating income and margins are discussed in terms of changes in volume, pricing and mix of revenue source (i.e., type of product, sales or service revenue). We focus on operating margin, which we define as operating income as a percentage of net revenue, as a key metric when assessing the performance of the business, as we believe that analyzing changes in costs in relation to changes in revenue provides more meaningful insight into the results of operations than examining costs in isolation.
 
Operating income reflects our profit from operations after taking into consideration cost of revenue, general and administrative expenses, depreciation, depletion, amortization and accretion and gain on sale of property, plant and equipment.
25

Table of Contents
Cost of revenue generally increases ratably with revenue, as labor, transportation costs and subcontractor costs are recorded in cost of revenue. As organic volumes increase, we expect our general and administrative costs as a percentage of revenue to decrease. General and administrative expenses as a percentage of revenue vary throughout the year due to the seasonality of our business.

Consolidated Results of Operations
 
The table below sets forth our consolidated results of operations for the three and nine months ended October 2, 2021 and September 26, 2020. 
 Three months endedNine months ended
 October 2, 2021September 26, 2020October 2, 2021September 26, 2020
($ in thousands)
Net revenue$662,259 $645,246 $1,679,270 $1,562,892 
Delivery and subcontract revenue54,981 64,373 133,731 144,926 
Total revenue717,240 709,619 1,813,001 1,707,818 
Cost of revenue (excluding items shown separately below)486,936 501,592 1,301,346 1,258,463 
General and administrative expenses47,364 50,972 146,454 132,385 
Depreciation, depletion, amortization and accretion59,082 58,054 173,651 163,760 
Gain on sale of property, plant and equipment (1,159)(1,616)(4,331)(5,747)
Operating income125,017 100,617 195,881 158,957 
Interest expense24,134 24,623 72,536 78,049 
Loss on debt financings6,016 4,064 6,016 4,064 
Loss (gain) on sale of businesses113 — (15,319)— 
Other income, net(1,137)(1,226)(10,721)(2,753)
Income from operations before taxes95,891 73,156 143,369 79,597 
Income tax expense (benefit)20,513 (19,613)33,478 (25,333)
Net income$75,378 $92,769 $109,891 $104,930 

In the first nine months of 2021, we reclassified $32.6 million and $93.1 million of fixed overhead expenses related to production activities from general and administrative expenses to cost of revenue for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. In addition, we reclassified $1.6 million and $5.7 million of gain on sale of property, plant and equipment from general and administrative expenses to a separate line item included within operating income, also to conform to the current year presentation. Lastly, we reclassified $0.4 million and $1.5 million of transaction costs from its own line item within operating income into general and administrative expenses for the three and nine months ended September 26, 2020, respectively, to conform to the current year presentation. We believe these reclassifications enhance the comparability of our financial statements to others in the industry and had no impact on previously reported operating income, as well as certain non-GAAP measures defined below, such as Adjusted EBITDA, or Adjusted EBITDA Margin; however, Adjusted Cash Gross Profit and Adjusted Cash Gross Profit Margin were reduced.

Three and nine months ended October 2, 2021 compared to the three and nine months ended September 26, 2020
 
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Net revenue$662,259 $645,246 $17,013 2.6 %$1,679,270 $1,562,892 $116,378 7.4 %
Operating income125,017 100,617 24,400 24.3 %195,881 158,957 36,924 23.2 %
Operating margin percentage18.9 %15.6 %11.7 %10.2 %
Adjusted EBITDA (1)$190,284 $177,302 $12,982 7.3 %$395,810 $352,876 $42,934 12.2 %
Adjusted EBITDA Margin (1)28.7 %27.5 %23.6 %22.6 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.
26

Table of Contents

Net revenue increased $17.0 million in the three months ended October 2, 2021, due to acquisition related volumes in the West segment as well as organic revenue increases in the East and Cement segments. Net revenue increased by $28.9 million from increased sales of materials, and decreased by $7.8 million and $4.0 million from sales of products and services, respectively. We experienced organic volume growth of 5.6% and 2.0% in our aggregates and cement lines of business, respectively, partially offset by a decline of 1.4% and 11.2% in ready-mix concrete and asphalt, respectively. The decline in organic asphalt volumes was primarily due to a divestiture of a paving business in our West segment which occurred in the second quarter of 2021. We achieved organic price growth across all lines of business during the third quarter of 2021. Additional detail about the impact of acquisitions and divestitures on each segment is presented below where material.

Net revenue increased $116.4 million in the nine months ended October 2, 2021, primarily resulting from a mix of organic and acquisition growth in our aggregates operations and organic growth in our cement and ready-mix concrete operations. Of the increase in net revenue, $87.8 million was from increased sales of materials, $21.7 million was from increased sales of products and $6.9 million from increased service revenue. We generated organic volume growth of 5.0%, 6.5% and 3.9% in aggregates, cement and ready-mix concrete, respectively, offset by a 8.6% decline in asphalt primarily due to a divestiture of a paving business in our West segment which occurred in the second quarter of 2021. We had organic price growth in our aggregate, cement, ready-mix and asphalt lines of business of 3.5%, 3.0%, 3.4% and 1.6%, respectively, during the first nine months of 2021.
 
Operating income increased by $24.4 million in the third quarter of 2021 as compared to the third quarter of 2020, primarily as our net revenue gains and decreases in general and administrative expenses outpaced increases in our cost of revenue and depletion, amortization and accretion expenses. Our general and administrative expenses decreased $3.6 million in the third quarter of 2021 despite increased levels of professional fees as we continue to optimize the business, which were offset by a decrease of $10.6 million in CEO transition costs and related stock compensation expenses made in the third quarter of 2020. Our operating income in the West segment was reduced as costs of revenue, notably in Texas, exceeded our increases in net revenue primarily due to inefficiencies caused by weather conditions being less favorable in 2021 than in 2020. In addition, depreciation, depletion, amortization and accretion expense increased by $1.0 million over the prior year amount.

Operating income increased by $36.9 million in the first nine months of 2021 as compared to the first nine months of 2020, primarily as net revenue gains exceeded increases in costs of revenue, general and administrative expenses and depreciation, depletion, amortization and accretion expenses. Our general and administrative expenses increased $14.1 million in the first nine months of 2021 as compared to the same period a year ago due to $3.4 million in severance related costs, an increase in consulting fees as we seek to optimize organizational efficiencies and increases in labor and benefits, offset by a decrease of $10.6 million in CEO transition costs in 2020. In addition, depreciation, depletion, amortization and accretion expense increased by $9.9 million over the prior year amount as our capital expenditures in 2021 exceeded those of 2020.

Our operating margin percentage for the three and nine months ended October 2, 2021 increased from 15.6% to 18.9% and from 10.2% to 11.7%, respectively, from the comparable period a year ago, due to the factors noted above. Adjusted EBITDA, as defined in "Non-GAAP Performance Measures" below, increased by $13.0 million and $42.9 million in the three and nine months ended October 2, 2021, respectively, due to the factors noted above.

As a vertically-integrated company, we include intercompany sales from materials to products and from products to services when assessing the operating results of our business. We refer to revenue inclusive of intercompany sales as gross revenue. These intercompany transactions are eliminated in the consolidated financial statements. Gross revenue by product was as follows: 
27

Table of Contents
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Revenue by product*:
Aggregates$202,523 $178,377 $24,146 13.5 %$540,912 $465,498 $75,414 16.2 %
Cement90,648 85,108 5,540 6.5 %215,024 195,972 19,052 9.7 %
Ready-mix concrete183,213 179,261 3,952 2.2 %525,485 489,034 36,451 7.5 %
Asphalt123,364 137,685 (14,321)(10.4)%255,215 275,150 (19,935)(7.2)%
Paving and related services194,678 232,514 (37,836)(16.3)%432,384 470,648 (38,264)(8.1)%
Other(77,186)(103,326)26,140 25.3 %(156,019)(188,484)32,465 17.2 %
Total revenue$717,240 $709,619 $7,621 1.1 %$1,813,001 $1,707,818 $105,183 6.2 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.
 
Detail of our volumes and average selling prices by product in the three and nine months ended October 2, 2021 and September 26, 2020 were as follows:   
 Three months ended  
 October 2, 2021September 26, 2020  
Volume(1)Volume(1)Percentage Change in
(in thousands)Pricing(2)(in thousands)Pricing(2)VolumePricing
Aggregates17,884 $11.32 16,383 $10.89 9.2 %3.9 %
Cement748 121.26 733 116.17 2.0 %4.4 %
Ready-mix concrete1,509 121.40 1,531 117.12 (1.4)%3.7 %
Asphalt1,880 61.42 2,118 60.40 (11.2)%1.7 %
 Nine months ended  
 October 2, 2021September 26, 2020  
Volume(1)Volume(1)Percentage Change in
(in thousands)Pricing(2)(in thousands)Pricing(2)VolumePricing
Aggregates48,484 $11.16 42,476 $10.96 14.1 %1.8 %
Cement1,796 119.76 1,686 116.22 6.5 %3.0 %
Ready-mix concrete4,381 119.95 4,217 115.97 3.9 %3.4 %
Asphalt3,911 60.63 4,281 59.69 (8.6)%1.6 %
(1)Volumes are shown in tons for aggregates, cement and asphalt and in cubic yards for ready-mix concrete.
(2)Pricing is shown on a per ton basis for aggregates, cement and asphalt and on a per cubic yard basis for ready-mix concrete.
    
Revenue from aggregates increased $24.1 million and $75.4 million in the three and nine months ended October 2, 2021, respectively. In the first nine months of 2021, we had solid increases in aggregate volumes in most of our markets, except for decreases in South Kansas as wind farm volumes in the first nine months of 2020 did not repeat in 2021. In the three months ended October 2, 2021, our aggregate volumes increased due to both acquisition and organic volumes, with organic growth in both the West and East segments. Organic aggregate volumes increased 5.0% in the first nine months of 2021 as compared to the same period a year ago, primarily due to increases in the Intermountain West, North Kansas, Virginia and British Columbia markets. Aggregate average sales prices of $11.16 per ton increased 1.8% in the first nine months of 2021 as compared to the first nine months of 2020, due to our mix of higher priced products in the Intermountain West, British Columbia and South Texas markets.

Revenue from cement increased $5.5 million and $19.1 million in the three and nine months ended October 2, 2021, respectively. In the three and nine months ended October 2, 2021, organic cement volumes increased 2.0% and 6.5%, respectively, and organic cement average sales prices increased 4.4% and 3.0%, respectively, as compared to the same period in the prior year.

28

Table of Contents
Revenue from ready-mix concrete increased $4.0 million and $36.5 million in the three and nine months ended October 2, 2021, respectively. In the three and nine months ended October 2, 2021, our ready-mix volumes decreased 1.4% and increased 3.9%, respectively, and our average sales prices increased 3.7% and 3.4%, respectively. The volume decrease in the three months ended October 2, 2021 occurred primarily in our Texas markets due to weather. The volume increases for the nine months ended October 2, 2021 occurred primarily in our Intermountain West and North Texas markets while our price increase was primarily in the Intermountain West market for both the three and nine months ended October 2, 2021.
 
Revenue from asphalt decreased $14.3 million and $19.9 million in the three and nine months ended October 2, 2021, respectively, primarily due to the divestiture of our paving business in Texas in May 2021. In the first nine months of 2021, organic pricing increased 1.6%, with strong pricing gains in the Kentucky and South Texas geographies. Further, in the first nine months of 2021, we had strong asphalt volume increases in Kentucky, as 2020 volumes had been negatively impacted by COVID-19.

Other Financial Information
 
Loss on Debt Financings

In September 2021, we redeemed all $300.0 million 5.125% Senior Notes due 2025 using existing cash on hand. In connection with this transaction, charges of $6.0 million were recognized in the quarter ended October 2, 2021. The fees included $3.9 million for the applicable prepayment premium and $2.1 million for the write-off of unamortized deferred financing fees.

In August 2020, we issued $700 million of 5.25% Senior Notes due 2029 (the "2029 Notes"), resulting in net proceeds of $690.4 million, after related fees and expenses. The proceeds from the 2029 Notes were used to redeem the $650 million of 6.125% Senior Notes due 2023 (the "2023 Notes") at par. In connection with that transaction, charges of $4.1 million were recognized in the three and nine months ended September 26, 2020. The fees included $0.8 million for the write-off of unamortized original issue discount and $3.3 million for the write-off of unamortized deferred financing fees.

Gain (Loss) on Sale of business

In the first nine months of 2021, as part of the Company's strategy to rationalize assets, the Company sold four businesses in the East segment and one in the West segment, resulting in cash proceeds of $103.6 million and a net gain on disposition of $15.3 million.

Income Tax Expense
 
Our income tax expense was $20.5 million and $33.5 million in the three and nine months ended October 2, 2021, respectively, and our income tax benefit was $(19.6) million and $(25.3) million in the three and nine months ended September 26, 2020, respectively. The effective tax rate for Summit Inc. differs from the federal statutory tax rate primarily due to (1) unrecognized tax benefits in 2020, (2) state taxes, (3) tax depletion expense in excess of the expense recorded under U.S. GAAP, (4) the minority interest in the Summit Holdings partnership that is allocated outside of the Company and (5) various other items such as limitations on meals and entertainment, certain stock compensation and other costs. Additionally, in the first quarter of 2020, we recorded the impact of the Coronavirus Aid, Relief and Economic Stability Act ("CARES Act") enacted into law in late March 2020, which reduced our unrecognized tax benefits by approximately $9.5 million. In the third quarter of 2020, final regulations were issued clarifying portions of the Tax Cuts and Jobs Act of 2017 ("TCJA"). Under the provisions of the final regulations, we reversed unrecognized tax benefits of $32.9 million in the third quarter of 2020.
 
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible, as well as consideration of tax-planning strategies we may seek to utilize net operating loss carryforwards that begin to expire in 2030.
    
As of October 2, 2021 and January 2, 2021, Summit Inc. had a valuation allowance of $1.7 million, which relates to certain deferred tax assets in taxable entities where realization is not more likely than not.






29

Table of Contents
Segment results of operations
 
West Segment
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Net revenue$338,575 $351,510 $(12,935)(3.7)%$886,936 $835,026 $51,910 6.2 %
Operating income67,427 72,280 (4,853)(6.7)%135,693 129,288 6,405 5.0 %
Operating margin percentage19.9 %20.6 %15.3 %15.5 %
Adjusted EBITDA (1)$92,303 $95,470 $(3,167)(3.3)%$211,722 $196,881 $14,841 7.5 %
Adjusted EBITDA Margin (1)27.3 %27.2 %23.9 %23.6 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue in the West segment decreased $12.9 million for the three months ended October 2, 2021, as increases in net revenues in aggregates were more than offset by a decrease in asphalt and paving revenues due to a divestiture in the second quarter of 2021. Net revenue in the West segment increased $51.9 million in the nine months ended October 2, 2021, as increases in net revenues in aggregates and ready-mix concrete outpaced a decrease in asphalt and paving revenues due to a divestiture in the second quarter of 2021. Organic aggregate volumes increased 6.6% in the first nine months of 2021 as compared to the first nine months of 2020, and organic aggregates average sales prices increased 3.0%, primarily due to strong demand in our Intermountain West geography and increased projects in British Columbia. Organic ready-mix concrete volumes increased 8.9% and our organic ready-mix concrete average sales prices increased 3.3%. Residential construction activity remains strong, particularly in the Houston and Salt Lake City areas, two of our largest metro areas where we operate.

The West segment’s operating income decreased $4.9 million and increased $6.4 million in the three and nine months ended October 2, 2021, respectively. Adjusted EBITDA decreased $3.2 million and increased $14.8 million and Adjusted EBITDA Margin increased to 27.3% from 27.2% and to 23.9% from 23.6% in the three and nine months ended October 2, 2021, respectively. The decreases in operating income and Adjusted EBITDA for the third quarter of 2021 occurred as the weather conditions in 2021 in Texas were less favorable as compared to 2020, which has resulted in operational inefficiencies. The operating margin percentage in the West segment decreased in the three and nine months ended October 2, 2021 due to the factors noted above.

Gross revenue by product/ service was as follows:  
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Revenue by product*:
Aggregates$91,701 $81,981 $9,720 11.9 %$251,324 $199,506 $51,818 26.0 %
Ready-mix concrete138,371 132,847 5,524 4.2 %406,858 361,541 45,317 12.5 %
Asphalt74,695 100,409 (25,714)(25.6)%161,847 205,041 (43,194)(21.1)%
Paving and related services119,385 159,307 (39,922)(25.1)%270,042 324,880 (54,838)(16.9)%
Other(54,902)(84,234)29,332 34.8 %(131,720)(171,952)40,232 23.4 %
Total revenue$369,250 $390,310 $(21,060)(5.4)%$958,351 $919,016 $39,335 4.3 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in “Other.” Revenue from the liquid asphalt terminals is included in asphalt revenue.
 
The West segment’s percent changes in sales volumes and pricing in the three and nine months ended October 2, 2021 from the three and nine months ended September 26, 2020 were as follows:  
30

Table of Contents
 Three months endedNine months ended
Percentage Change inPercentage Change in
VolumePricingVolumePricing
Aggregates9.4 %2.3 %24.4 %1.3 %
Ready-mix concrete0.7 %3.4 %8.9 %3.3 %
Asphalt(23.1)%1.8 %(20.1)%2.3 %
 
Revenue from aggregates in the West segment increased $9.7 million and $51.8 million in the three and nine months ended October 2, 2021, respectively, due to an increase in aggregates sales volumes. In the three months ended October 2, 2021, aggregate volumes increased 9.4%, primarily due to acquisition related volumes in South Texas and Vancouver, as well as organic volume increases in our Intermountain West markets. In the nine months ended October 2, 2021, the increases in aggregates volumes occurred in all of our markets which had organic growth coupled with increased acquisition volumes. Aggregates pricing for the three and nine months ended October 2, 2021 increased 2.3% and 1.3%, respectively, when compared to the same period in 2020 due to prices increases and market demand, offset by the impact of lower prices on acquisition related volumes.

Revenue from ready-mix concrete in the West segment increased $5.5 million and $45.3 million in the three and nine months ended October 2, 2021, respectively. For the three and nine months ended October 2, 2021, organic ready-mix concrete prices increased 3.4% and 3.3%, respectively. For the three and nine months ended October 2, 2021, our ready-mix concrete organic volumes increased 0.7% and 8.9%, respectively, as there were strong volume increases in the Intermountain geographies, where we continue to see strong residential volumes.

In May 2021, we divested our paving business in South Texas, which reduced our volumes and revenues subsequent to the closing date. Revenue from asphalt in the West segment decreased $25.7 million and $43.2 million in the three and nine months ended October 2, 2021, respectively. For the three and nine months ended October 2, 2021, asphalt volumes decreased 23.1% and 20.1%, respectively. Average sales prices for asphalt increased 1.8% and 2.3% in the three and nine months ended October 2, 2021, respectively. Revenue for paving and related services in the West segment decreased by $39.9 million and $54.8 million in the three and nine months ended October 2, 2021, respectively.

Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the nine months ended October 2, 2021 was approximately $37.1 million and $16.8 million, respectively.

East Segment
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Net revenue$231,184 $208,862 $22,322 10.7 %$573,343 $529,405 $43,938 8.3 %
Operating income45,018 29,296 15,722 53.7 %69,249 49,014 20,235 41.3 %
Operating margin percentage19.5 %14.0 %12.1 %9.3 %
Adjusted EBITDA (1)$69,084 $56,943 $12,141 21.3 %$138,113 $119,900 $18,213 15.2 %
Adjusted EBITDA Margin (1)29.9 %27.3 %24.1 %22.6 %
(1)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures that we find helpful in monitoring the performance of our business. See "Non-GAAP Performance Measures" below for a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure.

Net revenue in the East segment increased $22.3 million and $43.9 million in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago, as the increases in aggregates, asphalt and paving and related services exceeded a decrease in ready-mix concrete revenues. Operating income increased $15.7 million and $20.2 million in the three and nine months ended October 2, 2021, respectively, primarily due to net revenue gains in excess of increases in our cost of revenue. Adjusted EBITDA increased $12.1 million and $18.2 million in the three and nine months ended October 2, 2021, respectively, and Adjusted EBITDA Margin increased to 29.9% from 27.3% and to 24.1% from 22.6% in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago. 
 
Operating margin percentage for the three and nine months ended October 2, 2021 increased to 19.5% from 14.0% and to 12.1% from 9.3%, respectively, from the comparable period a year ago, due to the items noted above.
31

Table of Contents
 
Gross revenue by product/ service was as follows:  
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Revenue by product*:
Aggregates$110,822 $96,396 $14,426 15.0 %$289,588 $265,992 $23,596 8.9 %
Ready-mix concrete44,842 46,414 (1,572)(3.4)%118,627 127,493 (8,866)(7.0)%
Asphalt48,669 37,276 11,393 30.6 %93,368 70,109 23,259 33.2 %
Paving and related services75,293 73,207 2,086 2.8 %162,342 145,768 16,574 11.4 %
Other(24,136)(18,858)(5,278)(28.0)%(28,266)(19,021)(9,245)(48.6)%
Total revenue$255,490 $234,435 $21,055 9.0 %$635,659 $590,341 $45,318 7.7 %
*Revenue by product includes intercompany and intracompany sales transferred at market value. The elimination of intracompany transactions is included in Other. Revenue from the liquid asphalt terminals is included in asphalt revenue.

The East segment’s percent changes in sales volumes and pricing in the three and nine months ended October 2, 2021 from the three and nine months ended September 26, 2020 were as follows:   
 Three months endedNine months ended
Percentage Change inPercentage Change in
VolumePricingVolumePricing
Aggregates8.9 %5.5 %5.3 %3.4 %
Ready-mix concrete(7.5)%4.3 %(10.2)%3.6 %
Asphalt18.6 %5.4 %23.6 %2.6 %
 
Revenue from aggregates in the East segment increased $14.4 million and $23.6 million in the three and nine months ended October 2, 2021, respectively. Aggregate volumes in the first nine months of 2021 increased 5.3%, as we had organic growth in our North Kansas, Virginia and Carolinas markets. Aggregates organic pricing increased 6.1% and 4.0% in the three and nine months ended October 2, 2021, respectively, as compared to the same period a year ago.
 
Revenue from ready-mix concrete in the East segment decreased $1.6 million and $8.9 million in the three and nine months ended October 2, 2021, respectively, as compared to the same period in 2020, as our realized price increases of 4.3% and 3.6%, respectively, were not enough to overcome volume decreases primarily due to lower volumes in Kansas as wind farm projects in 2020 were not fully replaced in 2021. In the three and nine months ended October 2, 2021, ready-mix concrete volumes decreased 7.5% and 10.2%, respectively, compared to prior year levels primarily due to the items noted above.

Revenue from asphalt increased $11.4 million and $23.3 million in the three and nine months ended October 2, 2021, respectively, when compared to the same period in 2020. The increase was mainly attributable to higher volumes in Kentucky, where our volumes in 2020 were impacted by decreased volumes due to COVID-19, as well as increases in Kansas and Virginia. Asphalt pricing increased 2.6% in the nine months ended October 2, 2021, due to product mix. Paving and related service revenue increased $2.1 million and $16.6 million in the three and nine months ended October 2, 2021, respectively, primarily due to the items noted above.
 
Prior to eliminations of intercompany transactions, the net effect of volume and pricing changes on gross revenue in the nine months ended October 2, 2021 was approximately $19.2 million and $18.8 million, respectively.











32

Table of Contents
Cement Segment
<
 Three months ended  Nine months ended  
($ in thousands)October 2, 2021September 26, 2020VarianceOctober 2, 2021September 26, 2020Variance
Net revenue$92,500 $84,874 $7,626 9.0 %