Page 86 - 2019 Annual Report

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The useful lives of amortizable intangible assets and the remaining useful lives for acquired machinery and equipment have a
significant impact on earnings. The selected lives are based on the expected periods that the assets will provide value to the
Company subsequent to the business combination.
The Company may adjust the amounts recognized for a business combination during a measurement period after the
acquisition date. Any such adjustments are based on the Company obtaining additional information that existed at the
acquisition date regarding the assets acquired or the liabilities assumed. Measurement-period adjustments are generally
recorded as increases or decreases to the goodwill recognized in the transaction. The measurement period ends once the
Company has obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year
from the date of acquisition. Any adjustments to assets acquired or liabilities assumed beyond the measurement period are
recorded through earnings.

Property, Plant and Equipment

Net property, plant and equipment represent 51% of total assets at December 31, 2019. Accordingly, accounting for these
assets represents a critical accounting policy. Useful lives of the assets can vary depending on factors, including production
levels, geographic location, portability and maintenance practices. Additionally, climate and inclement weather can reduce
the useful life of an asset. Historically, the Company has not recognized significant losses on the disposal or retirement of
fixed assets.
Aggregates mineral reserves and mineral interests are components within the plant, property and equipment balance on the
consolidated balance sheets. The Company evaluates aggregates reserves, including those used in the cement manufacturing
process, in several ways, depending on the geology at a particular location and whether the location is a greensite, an
acquisition or an existing operation. Greensites require an extensive drilling program before any significant investment is
made in terms of time, site development or efforts to obtain appropriate zoning and permitting (see Environmental
Regulation and Litigation section). The depth of overburden and the quality and quantity of the aggregates reserves are
significant factors in determining whether to pursue opening the site. Further, the estimated average selling price for
products in a market is also a significant factor in concluding that reserves are economically mineable. If the Company’s
analysis based on these factors is satisfactory, the total aggregates reserves available are calculated and a determination is
made whether to open the location. Reserve evaluation at existing locations is typically performed to evaluate purchasing
adjoining properties, for quality control, calculating overburden volumes and for mine planning. Reserve evaluation of
acquisitions may require a higher degree of sampling to locate any problem areas that may exist and to verify the
total reserves.
Well-ordered subsurface sampling of the underlying deposit is basic to determining reserves at any location. This subsurface
sampling usually involves one or more types of drilling, determined by the nature of the material to be sampled and the
particular objective of the sampling. The Company’s objectives are to ensure that the underlying deposit meets aggregates
specifications and the total reserves on site are sufficient for mining and economically recoverable. Locations underlain with
hard rock deposits, such as granite and limestone, are drilled using the diamond core method, which provides the most useful
and accurate samples of the deposit. Selected core samples are tested for soundness, abrasion resistance and other physical
properties relevant to the aggregates industry and depend on the aggregates use. The number and depth of the holes are
determined by the size of the site and the complexity of the site-specific geology. Some geological factors that may affect the
number and depth of holes include faults, folds, chemical irregularities, clay pockets, thickness of formations and weathering.
A typical spacing of core holes on the area to be tested is one hole for every four acres, but wider spacing may be justified if
the deposit is homogeneous.
Despite previous drilling and sampling, once accessed, the quality of reserves within a deposit can vary. Construction
contracts, for the infrastructure market in particular, include specifications related to the aggregates material. If a flaw in the
deposit is discovered, the aggregates material may not meet the required specifications. Although it is possible that the
aggregates material can still be used for non-specification uses, this can have an adverse effect on the Company’s ability to
serve certain customers or on the Company’s profitability. In addition, other issues can arise that limit the Company’s ability
to access reserves in a particular quarry, including geological occurrences, blasting practices and zoning issues.
Locations underlain with sand and gravel are typically drilled using the auger method, whereby a six-inch corkscrew brings up
material from below the ground which is then sampled. Deposits in these locations are typically limited in thickness.
Additionally, the quality and sand-to-gravel ratio of the deposit can vary both horizontally and vertically. Hole spacing at
these locations is approximately one hole for every acre to ensure a representative sampling.

Annual Report ♦ Page 84 Celebrating 25 Years as a Public Company