Page 57 - 2019 Annual Report

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