Page 58 - 2019 Annual Report

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