Page 57 - 2019 Annual Report
P. 57

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

           BUSINESS ENVIRONMENT

           Building Materials Business
           The Building  Materials business serves customers in the
           construction marketplace. The  business’  profitability is
           sensitive to national, regional and local economic
           conditions and  cyclical swings in  construction spending,
           which are in turn affected by fluctuations in levels of public-
           sector infrastructure funding; interest rates; access to
           capital  markets;   and  demographic,  geographic,
           employment and population dynamics.

           The heavy-side construction business, inclusive of much of
           the Company’s operations, is conducted outdoors.
           Therefore, erratic weather patterns, precipitation and other
           weather-related conditions, including flooding, hurricanes,
           snowstorms, cold temperatures  and  droughts, can
           significantly affect production schedules, shipments, costs,
           efficiencies and profitability. Generally, the financial results
           for the first and fourth quarters are subject to the impacts
           of winter weather, while the second and third quarters are
           subject to the impacts of heavy precipitation. The impacts
           of erratic weather patterns are more fully discussed in the
           Building Materials Business’ Key Considerations section.
           Product Lines

           Aggregates are an engineered, granular material consisting
           of crushed stone  and  sand  and gravel, manufactured  to
           specific sizes, grades and  chemistry for use  primarily in
           construction applications. The  Company’s operations
           consist  primarily  of open pit  quarries;  however, the
           Company is also the largest operator  of underground
           aggregates mines in the United States, with 14 active underground mines located in the Mid-America Group. The Company’s
           aggregates reserves represent 89 years on average at the current production level.

           Cement is the basic binding agent used to bind water, aggregates and sand in the production of ready mixed concrete. The
           Company has a strategic and leading cement position in the Texas market, with production facilities in Midlothian, Texas,
           south of Dallas/Fort Worth, and Hunter, Texas, north of San Antonio. These two facilities produce Portland and specialty
           cements, have  a  combined annual capacity  of 4.5  million tons, and  operated at  80%  to 85% utilization in 2019. The
           Midlothian plant has a permit that allows for annual capacity expansion of 0.8 million tons. In addition to the two production
           facilities, the Company operates several cement distribution terminals. Calcium carbonate in the form of limestone is the
           principal  raw material  used in the  production of cement. The  Company  owns more than 600 million tons of limestone
           reserves adjacent to its cement production plants.

           Ready mixed concrete, a mixture primarily of cement, water, aggregates and sand, is measured in cubic yards and specifically
           batched  or produced for customers’  construction projects and then transported  and  poured at the  project  site. The
           aggregates used for ready  mixed concrete is a washed material with limited amounts of fines  (i.e., dirt and  clay). The
           Company operates 141 ready mix plants in Texas, Colorado, Louisiana, Arkansas and Wyoming. Asphalt is most commonly
           used in surfacing roads and parking lots and consists of liquid asphalt, or bitumen, the binding medium, and aggregates.
           Similar to ready mixed concrete, each asphalt batch is produced to customer specifications.  The Company’s asphalt
           operations and paving services are located in Colorado. Market dynamics for these downstream product lines include a highly
           competitive environment and lower barriers to entry compared with aggregates and cement.








           Celebrating 25 Years as a Public Company                                         Annual Report  ♦  Page 55
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