Page 58 - 2019 Annual Report
P. 58

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
           End-Use Trends
                 • According  to  the U.S. Geological Survey, for  the nine  months ended September 30,  2019,  the latest available
                  governmental data, estimated construction aggregates consumption and cement consumption increased 6% and 4%,
                  respectively, compared with the nine months ended September 30, 2018.
                 • National spending statistics for the  twelve  months ended  December  31, 2019  versus the  twelve  months ended
                  December 31, 2018, the latest available data, according to U.S. Census Bureau:
                      ♦  Total value of construction put in place decreased less than 1%
                      ♦  Public construction spending increased 7%

                      ♦  Private nonresidential construction market spending was flat
                      ♦  Private residential construction market spending decreased 5%
           The  principal end-use markets of the Building Materials business are  public infrastructure  (i.e.,  highways; streets; roads;
           bridges; and schools); nonresidential construction (i.e., manufacturing and distribution facilities; industrial complexes; office
           buildings; large retailers and wholesalers; and energy-related activity); and residential construction (i.e., subdivision
           development; and  single-  and multi-family housing).  Aggregates are  also used in agricultural,  utility and  environmental
           applications and as railroad ballast, collectively comprising the ChemRock/Rail market.
           Public infrastructure jobs can require several years to complete, while residential and nonresidential construction jobs are
           usually completed within one year. Generally, the purchase orders the Company receives from its customers do not contain
           firm quantity commitments, regardless of end-use market. Therefore, management does not utilize a Company backlog in
           managing its business.

                                                              The public infrastructure market accounted for 35% of the
                                                              Company’s  aggregates  shipments  in 2019. Modestly improved
                                                              weather compared with 2018 allowed transportation projects to
                                                              advance. However, Company’s shipments to this end-use market
                                                              remain below the most recent five-year average of 39% and ten-
                                                              year average of 45%.
                                                              While construction  spending in  the public and private market
                                                              sectors  is affected  by  economic cycles, the  historic  level of
           spending on public infrastructure projects has been comparatively more stable due to predictability of funding from federal,
           state and local governments, with approximately half of the funding from federal government and half from state and local
           governments in certain states. The Fixing America’s Surface Transportation Act (FAST Act), signed into law on December 4,
           2015, is the first long-term transportation funding bill in nearly a decade and authorizes $305 billion over fiscal years 2016
           through 2020. Included with FAST Act funding is $300 million available for loans issued under Transportation Infrastructure
           Finance and Innovation Act (TIFIA). If a successor bill is not passed prior to the September 2020 expiration of the FAST Act,
           management expects  Congressional  continuing resolutions to be  passed to continue federal  highway funding  at  current
           levels.  Public construction  projects, once  awarded, are  seen through  to completion. Thus, delays  from weather or other
           factors typically serve to extend the duration of the construction cycle. State and local initiatives that support infrastructure
           funding, including gas tax increases and  other  ballot initiatives, are increasing in size and  number as these governments
           recognize the need to play an expanded role in public infrastructure funding. In November 2019, 270 state and local ballot
           initiatives, 89% of all infrastructure funding measures up for vote, were approved and are estimated to generate over $9.6
           billion in one-time and recurring revenues. Namely, Texas, Colorado, Georgia and North Carolina approved measures that will
           contribute a total of $8.1  billion to infrastructure funding, the majority of which are in Texas. Since  2010, 81% of
           transportation ballot initiatives have been approved by  voters.  Funding from the FAST Act,  coupled with state and local
           transportation initiatives, has resulted in an acceleration of lettings (making contracts available for bidding) and contract
           awards in key states, including Texas, Colorado, North  Carolina, Georgia and Florida.  The pace of construction should
           accelerate and shipments to the public infrastructure market should return to  historical levels as  monies from  both the
           federal government and state and local governments become awarded.









           Annual Report  ♦  Page 56                                            Celebrating 25 Years as a Public Company
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