Page 18 - 2019 Annual Report

NOTES TO FINANCIAL STATEMENTS (continued)

Revenue Recognition. Total revenues include sales of products and services provided to customers, net of discounts or
allowances, if any, and include freight and delivery costs billed to customers. Revenues for product sales are recognized when
control of the promised good is transferred to unaffiliated customers, typically when finished products are shipped. Revenues
derived from the paving business are recognized using the percentage‐of‐completion method under the cost‐to‐cost approach.
Under the cost‐to‐cost approach, recognized contract revenue is determined by multiplying the total estimated contract
revenue by the estimated percentage of completion. Contract costs are recognized as incurred. The percentage of completion
is determined on a contract‐by‐contract basis using project costs incurred to date as a percentage of total estimated project
costs. The Company believes the cost‐to‐cost approach is appropriate, as the use of asphalt in a paving contract is relatively
consistent with the performance of the related paving services. Paving contracts, notably with governmental entities, may
contain performance bonuses based on quality specifications. Given the uncertainty of meeting the criteria until the
performance obligation is completed, performance bonuses are recognized as revenues when and if determined to be achieved.
Performance bonuses were not material to the Company’s consolidated results of operations for the years ended December
31, 2019, 2018 and 2017. Freight revenues reflect delivery arranged by the Company using a third party on behalf of the
customer and are recognized consistently with the timing of the product revenues.
Freight and Delivery Costs. Freight and delivery costs represent pass‐through transportation costs incurred and paid by the
Company to third‐party carriers to deliver products to customers. These costs are then billed to the customers.

Cash and Cash Equivalents. Cash equivalents are comprised of highly‐liquid instruments with original maturities of three
months or less from the date of purchase. The Company manages its cash and cash equivalents to ensure short‐term operating
cash needs are met and excess funds are managed efficiently. When operating cash is not sufficient to meet current needs, the
Company borrows money under its credit facilities. The Company utilizes excess cash to either pay down credit facility
borrowings or invest in money market funds, money market demand deposit accounts or offshore time deposit accounts.
Money market demand deposits and offshore time deposit accounts are exposed to bank solvency risk.

Accounts Receivable. Accounts receivable are stated at cost. The Company does not typically charge interest on customer
accounts receivable. The Company records an allowance for doubtful accounts, which includes a provision for probable losses
based on historical write‐offs and a specific reserve for accounts deemed at risk. The Company writes‐off accounts receivable
when it becomes probable, based upon customer facts and circumstances, that such amounts will not be collected.

Inventories Valuation. Inventories are stated at the lower of cost or net realizable value. Costs for finished products and in
process inventories are determined by the first‐in, first‐out method. Carrying value for parts and supplies are determined by
the weighted‐average cost method. The Company records an allowance for finished product inventories based on an analysis
of inventory on hand in excess of historical sales for a twelve‐month or five‐year average period and future demand. The
Company also establishes an allowance for parts over five years old and supplies over one year old.

Post‐production stripping costs, which represent costs of removing overburden and waste materials to access mineral deposits,
are a component of inventory production costs and recognized as incurred.

Property, Plant and Equipment. Property, plant and equipment are stated at cost.
The estimated service lives for property, plant and equipment are as follows:

Class of Assets Range of Service Lives
Buildings 5 to 20 years
Machinery & Equipment 2 to 20 years
Land Improvements 5 to 60 years

The Company begins capitalizing quarry development costs at a point when reserves are determined to be proven or probable,
economically mineable and when demand supports investment in the market. Capitalization of these costs ceases when
production commences. Capitalized quarry development costs are classified as land improvements and depreciated over the
life of the reserves.
The Company reviews relevant facts and circumstances to determine whether to capitalize or expense pre‐production stripping
costs when additional pits are developed at an existing quarry. If the additional pit operates in a separate and distinct area of
the quarry, these costs are capitalized as quarry development costs and depreciated over the life of the uncovered reserves.
Additionally, a separate asset retirement obligation is created for additional pits when the liability is incurred. Once a pit enters
the production phase, all post‐production stripping costs are charged to inventory production costs as incurred.

Page 16 ♦ Annual Report Celebrating 25 Years as a Public Company