UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-15217
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U.S. AGGREGATES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 57-0990958
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 500,
San Mateo, California 94402
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(Address of principal executive offices) (Zip Code)
(650) 685-4880
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of February 29, 2000, the aggregate market value of voting stock held by
non-affiliates of the registrant, based upon closing sales price for the
registrant's common stock, as reported on the New York Stock Exchange, was
approximately $64,473,256 (calculated by excluding shares owned beneficially by
directors and officers).
Number of shares of registrant's common stock outstanding as of February
29, 2000 were 14,900,593.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual proxy statement for the annual meeting
of its shareholders to be held on May 16, 2000, are incorporated by reference
into Part III of this Form 10-K.
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CONTENTS
PART ITEM PAGE
<S> <C> <C> <C>
I 1 Business 3
2 Properties 5
3 Legal Proceedings 7
4 Submission of Matters to a Vote of Security Holders 7
II 5 Market for Registrant's Common Equity and Related
Stockholder Matters 8
6 Selected Financial Data 8
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
7A Quantitative and Qualitative Disclosures About Market Risk 13
8 Financial Statements and Supplementary Data 13
9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 13
III 10 Directors and Executive Officers of the Registrant 14
11 Executive Compensation 14
12 Security Ownership of Certain Beneficial Owners and Management 14
13 Certain Relationships and Related Transactions 14
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 14
-- Signatures 21
</TABLE>
2
<PAGE>
PART I
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ITEM 1. BUSINESS
U.S. Aggregates, Inc. ("U.S. Aggregates", "USAI" or "the Company") was
founded in January 1994 and is a leading producer of aggregates and aggregate
related products. Aggregates consist of crushed stone, sand and gravel. In
1999, the Company shipped approximately 19.1 million tons of aggregates,
primarily to customers in nine Southeast and Mountain states, generating net
sales and income from operations of $298.2 million and $39.6 million,
respectively. In 1999, approximately 88% of the aggregates shipped by the
Company were crushed stone or sand and gravel, and approximately 12% were
unprocessed material.
On August 18, 1999, U.S. Aggregates completed its initial public offering
(IPO), in which it issued and sold 5.0 million shares of its common stock at
$15.00 per share. The net proceeds from the IPO (after underwriting discounts,
commission and offering expenses of $9.3 million) were approximately $65.7
million.
Our products are used primarily for the construction and maintenance of
highways and other infrastructure projects and for commercial and residential
construction. In 1999, approximately 72% of our aggregates volume was sold
directly to customers. The balance was used to produce asphalt, which generally
contains approximately 90% aggregates by volume; and ready-mix concrete, which
generally contains 80% aggregates by volume. As a result of dependence upon the
construction industry, the profitability of aggregates producers is sensitive to
national, regional and local economic conditions, and particularly to downturns
in construction spending and to changes in the level of infrastructure spending
funded by the public sector.
Our production capacity has increased to approximately 30 million tons per
year since 1994 while unit costs have been reduced substantially from the level
of costs incurred in individual operations at the time they were acquired or
started. This cost reduction is the result of comprehensive mining plans
combined with the installation of state of the art equipment permitting the
implementation of "best practices" throughout our operations. In addition,
asphalt plants and transportation infrastructure for delivery of asphalt and
concrete have been upgraded.
The following table shows, for the periods indicated, our total shipments
of aggregates, asphalt and ready-mix concrete.
U.S. AGGREGATES, INC.
SHIPMENTS OF AGGREGATES, ASPHALT AND READY-MIX CONCRETE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
(in millions)
<S> <C> <C> <C> <C> <C>
Tons of aggregates sold:
Sold directly to customers. . . . . . . . . . . . 13.7 11.9 6.6 5.1 3.1
Used internally . . . . . . . . . . . . . . . . . 5.4 3.9 2.9 2.1 1.7
----- ----- ----- ----- -----
Total tons of aggregates sold . . . . . . . . . 19.1 15.8 9.5 7.2 4.8
Percentage of aggregates sold used internally 28.3% 24.7% 30.5% 29.2% 35.4%
Tons of asphalt sold. . . . . . . . . . . . . . . . 2.2 1.6 1.3 0.9 0.6
Yards of ready-mix concrete sold. . . . . . . . . . 1.8 1.4 0.9 0.9 0.8
</TABLE>
3
<PAGE>
We believe that long-term, high-quality aggregate reserves located near
customers are central to our success. Accordingly, we have focused on the
acquisition and development of aggregate production sites and companies that are
well positioned to serve growing markets. Since our inception, we have
completed and integrated 28 business and asset acquisitions, including both
operating companies and aggregate production facilities.
In 1999, U.S. Aggregates, Inc. made additional investments in its aggregate
quarries located in our operations in the Mountain states, including expansion
and development of four of our crushed stone quarries and in our largest sand
and gravel operation in the Wasatch Front in Utah. In addition, the Company
invested in a new crushing plant and shipping facilities at its O'Neal, Alabama
site and opened a new greenfield site in Pride, Alabama on the Tennessee River.
Aggregates from the Pride location will be shipped by rail and barge to serve
areas in Alabama, Tennessee, Mississippi, and the Gulf Coast. Four new
distribution yards were added to provide for competitive modes of entry into
markets in Alabama, Tennessee, and Mississippi. These areas possess no local
rock resources capable of meeting the Superpave standards of new highway
construction.
The Company's business is seasonal with peak revenue and profits occurring
primarily in the months of April through November. Bad weather conditions
during this period could adversely affect operating income and cash flow and
could therefore have a disproportionate impact on the Company's results for the
full year. Quarterly results have varied significantly in the past and are
likely to vary significantly from quarter to quarter in the future.
We market our aggregates products to customers in a variety of industries,
including public infrastructure, commercial and residential construction
contractors; producers of asphaltic concrete, ready-mix concrete, concrete
blocks, and concrete pipes; and railroads. A substantial amount of our
aggregates is used in publicly funded projects. A decrease or delay in
government funding of highway construction and maintenance and other
infrastructure projects could reduce our sales and profits. Currently, we do
not have any customers that account for more than 10% of our sales.
A material rise in the price or a material decrease in the availability of
oil could adversely affect operating results. The cost of asphalt is correlated
to the price of oil. Any increase in the price of oil might result in the
company's customers using less asphalt. A material increase in the price of oil
could also lead to higher gasoline costs which could increase the company's
operating costs. These increases may not be accepted by customers in the form
of higher prices.
Because of the impact of high transportation costs on the aggregates
business, competition in each of our markets tends to be limited to producers in
proximity to our production facilities. Although we experience competition in
all of our markets, we believe that we are generally a leading producer in the
market areas we serve. Competition is based primarily on aggregate production
site location and price, but quality of aggregates and level of customer service
are also important factors. We compete directly with a number of large and
small producers in the markets we serve.
Environmental and zoning regulations have made it increasingly difficult
for the construction aggregates industry to expand existing quarries and to
develop new quarry operations. Although it cannot be predicted what policies
will be adopted in the future by federal, state and local governmental bodies
regarding these matters, the Company anticipates that future restrictions will
not have a material adverse effect upon its business.
We employ approximately 2,000 employees, of whom approximately 1,600 are
hourly, approximately 400 are salaried and 43 are part-time. Approximately 600
of our employees are represented by labor unions. The expiration dates of the
various labor union contracts are from April 2000 through February 2003. We
consider our relations with our employees to be good.
4
<PAGE>
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's operations are subject to and affected by federal, state and
local laws and regulations relating to the environment, health and safety and
other regulatory matters. Certain of the Company's operations may from time to
time involve the use of substances that are classified as toxic or hazardous
substances within the meaning of these laws and regulations. Environmental
operating permits are, or may be, required for certain of the Company's
operations and such permits are subject to modification, renewal and revocation.
We continually evaluate whether we must take additional steps at our locations
to ensure compliance with these laws and regulations. We believe that our
operations are in substantial compliance with applicable laws and regulations
and that any noncompliance is not likely to have a material adverse effect on
our business, financial condition or results of operations. However, future
events, such as changes in or modified interpretations of existing laws and
regulations or enforcement policies, or further investigation or evaluation of
the potential health hazards of our products or business activities, may give
rise to additional compliance and other costs that could have a material adverse
effect on us. In accordance with the Company's accounting policy for
environmental costs, amounts are accrued and included in the Company's financial
statements when it is probable that a liability has been incurred and such
amount can be reasonably estimated. Costs incurred by the Company in connection
with environmental matters in the preceding two fiscal years were not material
to the Company's operations or financial condition.
U.S. Aggregates, as well as other companies in the aggregates industry,
produce some products containing varying amounts of crystalline silica.
Excessive and prolonged inhalation of very small particles of crystalline silica
has been associated with non-malignant lung disease. The carcinogenic potential
of excessive exposure to crystalline silica has been evaluated for over a decade
by a number of research groups including the International Agency for Research
on Cancer, the National Institute for Occupational Safety and Health and the
National Toxicology Program, a part of the Department of Health and Human
Services. Results of various studies have ranged from classifying crystalline
silica as a probable to a known carcinogen. Other studies concluded higher
incidences of lung cancer in some operations was due to cigarette smoking, not
silica. Governmental agencies, including the Occupational Safety and Health
Administration and Mine Safety Health Administration, coordinate to establish
standards for controlling permissible limits on crystalline silica. In the
early 1990s, they considered lowering silica exposure limits but decided to
retain existing limits. Recently, the Occupational Safety and Health
Administration has announced a postponement of its stakeholder meetings from
Spring to Fall of 2000 relating to the release of new rules to implement more
stringent regulations. We believe we currently meet government guidelines for
crystalline silica exposure and will continue to employ advanced technologies as
they become available to ensure worker safety and comply with regulations.
Monroc, Inc., one of our subsidiaries, previously owned approximately 9.9
acres of land located in Murray, Utah. This land, together with the surrounding
land, was proposed by the Environmental Protection Agency for listing on the
National Priorities List for clean-up. Mining slag containing certain heavy
metals had been deposited on all of these properties by a prior owner. Pursuant
to an agreement between U.S. Aggregates, surrounding landowners and the City of
Murray, and pursuant to a Remedial Design/Remedial Action Consent Decree entered
by the United States District Court for the District of Utah, Case Number 2:98CV
04158 on August 19, 1998, between the Environmental Protection Agency and the
landowners, we agreed to dedicate some of the Murray property, approximately 1.8
acres, for a roadway, to participate in a local improvement district and to
institute institutional controls, all of which have been accomplished. In
return, we received protection against claims for contribution for matters
addressed by the Consent Decree and a covenant not to sue from the United
States.
ITEM 2. PROPERTIES
In 1999, we conducted mining operations at 26 aggregate production sites,
of which 12 are located on property we own, two are on land owned in part and
leased in part, 11 are on leased property, and one is on facilities leased on a
job basis. In addition to our quarry sites, we own other real property. In
total, we own 61 pieces of real property and lease property at 64 locations. We
have six pieces of property, which are owned in part and leased in part. Five
of our properties have mortgages attached to the property. Our significant
quarry leases expire between the year 2012 to 2039 and in some cases are
renewable for additional periods. We believe that no single aggregate
production site is of major significance to our operations.
5
<PAGE>
Our current estimated aggregate reserve position exceeds 1.3 billion tons.
The yield from the extraction of reserves is based on an estimate of the volume
of materials which can be economically extracted to meet current market and
product applications. Our mining plans are developed by experienced mining and
operating personnel based on internal and outside drilling and geological
studies and surveys. In some cases, zoned properties must be extracted in
phases as reserves in a particular area of the reserve are exhausted.
We own approximately 600 million tons and lease approximately 700 million
tons of our aggregate reserves. Leases usually provide for royalty payments
based on revenues from aggregates sold at a specific location. Leases usually
expire after a specific time period and may be renewable for additional terms.
Most leases have extension options providing for at least 20 years of operation
based on 1999 extraction rates. With minor exceptions, where lease options
total less than 20 years, we have developed and zoned additional reserves that
will allow us to serve our markets on a competitive basis and ensure long term
availability. Generally, reserves at our aggregate production sites are
adequate for in excess of 20 years production at 1999 rates of extraction. At
one of our quarries we are required to extract a minimum amount of 100,000 tons
of aggregate per year and at another quarry, 500,000 tons of aggregate per year
in order to maintain our rights to mine reserves on these leased properties. We
anticipate fulfilling these minimum extraction requirements during the lease
terms.
The following table presents our aggregate reserves by market area. The 50
million tons listed as zoned and unpermitted refers to one site where zoning is
approved for the entire property, but the permit for the second phase of the
mine plan is contingent on completion of the first phase.
U.S. AGGREGATES, INC.
AGGREGATES RESERVES BY MARKET AREA
<TABLE>
<CAPTION>
ZONED/ ZONED/
PERMITTED UNPERMITTED UNZONED TOTAL
--------- ----------- ------- -----
(in million tons)
<S> <C> <C> <C> <C>
Alabama . . . . . . . . . . . 450 50 - 500
Eastern Tennessee . . . . . . 72 - - 72
Northern Utah . . . . . . . . 368 - - 368
Central Utah. . . . . . . . . 111 - 54 165
So. Utah/SE Nevada/NW Arizona 126 - 83 209
Idaho . . . . . . . . . . . . 36 - - 36
--------- ----- ------- -----
TOTAL . . . . . . . . . . . 1,163 50 137 1,350
========= ===== ======= =====
</TABLE>
Management believes the raw material reserves are sufficient to permit
production at present operational levels for the foreseeable future. The
Company does not anticipate any material difficulty in obtaining the raw
materials that it uses for production.
We are required by the laws of various states to reclaim aggregate sites
after reserves have been depleted. Each site's mining plan includes a
reclamation plan which has been developed for that site to maximize the value of
the end use of the site. In some cases, depleted sites have been sold for
commercial or residential properties generating additional profits.
Historically, we have not incurred and do not anticipate incurring substantial
costs in excess of residual land values in connection with the closing of
aggregate operations due to depletion of reserves.
In 1999, the Company leased and developed four aggregate distribution yards
in Tennessee, Mississippi and Alabama to facilitate the shipment of aggregates
by rail and barge to growth areas in eastern Tennessee, eastern Mississippi, and
the Gulf Coast of Alabama.
The Company has two aggregate production sites in Georgia. One site is
leased to a major building materials producer under a long-term lease and the
other aggregate production site is not anticipated to open in 2000.
6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, U.S. Aggregates and our subsidiaries have been involved
in various legal proceedings relating to our and our subsidiaries' operations
and properties, all of which we believe are routine in nature and incidental to
the conduct of our and our subsidiaries' business. Our and our subsidiaries'
ultimate legal and financial liability with respect to such proceedings cannot
be estimated with certainty, but we believe, based on our examination of such
matters, that none of these proceedings, if determined adversely, would have a
material adverse effect on our business, financial condition or results of
operations.
See also "Note 13: Commitments and Contingencies" of the "Consolidated
Notes to Financial Statements".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1999.
7
<PAGE>
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "AGA", where it commenced trading on August 13, 1999 following the
Company's initial public offering. As of February 29, 2000, the number of
shareholders of record approximated 44. The closing price of the Common Stock
on the New York Stock Exchange on February 29, 2000, was $14.94. The prices in
the following table represent the high and low sales prices for the Company's
Common Stock as reported on the New York Stock Exchange:
Quarter Ended 1999
-------------- ----
High Low
---- ---
September 30 (from August 13) $15.46 $11.78
December 31 $14.96 $ 9.48
On December 15, 1999, the Board of Directors authorized a dividend of $0.03
per share of common stock payable January 10, 2000 to holders of record on
December 27, 1999.
The Company's policy is to pay out a reasonable share of net cash provided
by operating activities as dividends, consistent with the goal of maintaining
debt ratios with prudent and generally acceptable limits. The future payment of
dividends, however, will be within the discretion of the Board of Directors of
the Company and will depend on the Company's profitability, capital
requirements, financial condition, growth, business opportunities and other
factors which the Board of Directors may deem relevant.
The Company's credit facility and other debt documents will permit the
payment of dividends subject to the following restrictions and limitations: The
Company (1) is not in default under the credit agreement or senior subordinated
notes; (2) is in pro forma compliance with all financial covenants in the credit
agreement and senior subordinated notes; and (3) dividend payments do not exceed
15% of consolidated net income, excluding extraordinary items, for the prior
year.
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations, per share data and balance sheet data
for each of the 5 years ended December 31 set forth below have been derived from
the audited consolidated financial statements of the Company. The following
data should be read in conjunction with the consolidated financial statements of
the Company and notes to consolidated financial statements on pages F-1 through
F-22.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $298,181 $228,739 $163,243 $131,710 $97,527
Income from continuing operations. . . . . . . . . 14,197 4,832 5,505 6,444 4,579
Income from continuing operations available
for common shareholders per share
-basic . . . . . . . . . . . . . . . . . . . . $ 1.20 $ 0.12 $ 0.29 $ 0.57 $ 0.44
-diluted . . . . . . . . . . . . . . . . . . . $ 1.16 $ 0.11 $ 0.28 $ 0.57 $ 0.44
Total assets . . . . . . . . . . . . . . . . . . . $414,928 $337,611 $172,266 $150,139 $83,560
Long-term obligations & redeemable preferred stock 160,312 229,353 126,115 110,123 66,139
Cash dividends declared per share. . . . . . . . . $ 0.03 $ - $ - $ - $ -
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
We conduct our operations through the quarrying and distribution of
aggregate products in nine states in two fast growing regions of the Mountain
states and the Southeast. Our operations have the same general economic
characteristics including the nature of the products, production processes, type
and class of customers, methods of distribution and governmental regulations.
Over the last three years, our net sales and profitability have increased
as a result of internal growth, the maturation of our recently developed
aggregate production sites and the completion of several business and asset
acquisitions. In February 1998, we completed the acquisition of Falcon Ridge
Quarry, Inc. and the acquisition of Geodyne Transport, Inc. In June 1998, we
completed our largest acquisition to date, Monroc, Inc. Collectively, these
acquisitions are referred to as the 1998 acquired businesses. The 1998 acquired
businesses and the start-up of three greenfield aggregate sites significantly
expanded our business in the Mountain states and increased our presence in a
number of local markets. In 1999, we opened the quarry in Pride, Alabama on the
Tennessee River.
Since 1996, we have started nine major greenfield aggregate production
sites serving large metropolitan markets. The development of greenfield
aggregate production sites includes securing all necessary permits and zoning to
ensure that commercially economic quantities of aggregates can be produced.
These new sites include both sites which have never been permitted or mined, as
well as sites which may have been properly zoned, but either were not operating
or were not operating at sufficient volumes to be economically viable. Based on
our experience, a new aggregate production site's net sales, cash flow and
profitability tend to increase over the first five years of operation as
production increases and the site matures.
Our business is seasonal, with peak sales and profits occurring primarily
in the months of April through November. Accordingly, our results of operations
for any individual quarter are not indicative of our results for the full year.
RESULTS OF OPERATIONS
The following table presents net sales, gross profit, selling, general and
administrative expenses, depreciation, depletion and amortization, income from
operations, and net interest expense for U.S. Aggregates:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $298,181 100.0% $228,739 100.0% $163,243 100.0%
Gross profit . . . . . . . . . . . . . . . . 84,504 28.3 60,519 26.5 44,111 27.0
Selling, general and administrative expenses 32,035 10.7 25,001 10.9 18,275 11.2
Depreciation, depletion and amortization . . 12,851 4.3 11,098 4.9 7,830 4.8
Income from operations . . . . . . . . . . . 39,618 13.3 24,420 10.7 18,006 11.0
Interest expense, net. . . . . . . . . . . . 16,042 5.4 14,351 6.3 8,344 5.1
</TABLE>
1999 COMPARED TO 1998
NET SALES. Net sales for 1999 increased by 30.4% to $298.2 million from
$228.7 million for 1998. This increase consisted of $39.5 million additional
net sales from the 1998 acquired businesses and an increase in net sales by our
existing business of $30.0 million, a 15.7% increase. The increase in sales
from our existing business was due to strong demand for our aggregates and
related products. Total shipments of aggregates increased to 19.1 million tons
for 1999 from 15.8 million tons for 1998, a 20.9% increase. Revenues were
further enhanced by 32.8% and 24.7% increases in asphalt and ready mix volumes,
respectively. We also experienced an increase in selling prices of
approximately 4% for our aggregates and related products.
9
<PAGE>
GROSS PROFIT. Gross profit for 1999 increased 39.6% to $84.5 million from
$60.5 million for 1998. The increase consisted of $6.6 million additional gross
profit from our 1998 acquired businesses and an increase in gross profit from
our existing business of $17.4 million, a 34.6% increase. The increase in gross
profit at our existing business was attributable to higher volumes and improved
production efficiencies. Overall gross margins increased to 28.3% in 1999 from
26.5% in 1998. Gross margins from our existing business were 30.6% in 1999,
compared to 26.5% in 1998. Margins from existing businesses increased due to
higher selling prices and the leverage gained on fixed costs due to higher
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $32.0 million for 1999 from $25.0 million
for 1998, due to the inclusion of the 1998 acquired businesses and increased
selling and administrative costs at existing businesses. As a percentage of net
sales, selling, general and administrative expenses decreased to 10.7% for 1999
from 10.9% for 1998, due to the leveraging of these costs over a larger sales
base.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased to $12.9 million for 1999 from $11.1 million for 1998,
primarily as a result of the inclusion of the 1998 acquired businesses and
additional capital expenditures made in 1999. As a percentage of net sales, our
depreciation, depletion and amortization expenses decreased to 4.3% from 4.9%
for the same periods primarily due to the leveraging of these costs over a
larger sales base.
INCOME FROM OPERATIONS. Income from operations in 1999 increased 62.2% to
$39.6 million compared to $24.4 million for 1998 because of the factors
discussed above.
INTEREST EXPENSE, NET. Net interest expense increased to $16.0 million for
1999 from $14.4 million for 1998 as a result of the inclusion of a full year of
interest expense on the purchase of the 1998 acquired businesses in mid year of
1998 and other expansion and capital needs, offset by the debt reduction as a
result of the 1999 initial public offering.
1998 COMPARED TO 1997
NET SALES. Net sales for 1998 increased by 40.1% to $228.7 million from
$163.2 million in 1997. This increase reflects the inclusion of $37.8 million
of net sales from 1998 acquired businesses since their date of acquisition. The
increase in 1998 net sales from our existing business of $27.7 million, a 16.9%
increase, resulted from increased sales demand in our established business plus
the start up of new aggregate production sites and related activity in both 1998
and 1997. Shipments of aggregates increased by 66% to 15.8 million tons in 1998
from 9.5 million tons in 1997. Although volumes increased, our mix of products
sold in 1998 included more lower priced aggregates than in 1997. Approximately
one-half of this increase in volume came from the 1998 acquired businesses. Our
selling prices per ton also increased approximately 5% during the period.
GROSS PROFIT. Gross profit for 1998 increased 37.2% to $60.5 million in
1998 from $44.1 million in 1997. The 1998 acquired businesses contributed $10.4
million to gross profit in 1998, with a gross margin of 27.4%. Gross profit at
our existing business increased 13.6% to $50.1 million from $44.1 million in
1997. Gross margins from our existing business were 26.5% in 1998 compared to
27.0% in 1997, continuing a slight down trend in gross margin since 1996 due to
our rapid expansion into the Mountain states markets which, because of product
mix, traditionally have lower gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $25.0 million in 1998 from $18.3 million in
1997 primarily due to the 1998 acquired businesses. As a percentage of net
sales, selling, general and administrative expenses decreased to 10.9% in 1998
from 11.2% in 1997, due to the leveraging of fixed costs over a larger sales
base.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization increased 41.7% to $11.1 million in 1998 from $7.8 million in 1997.
The 1998 acquired businesses contributed $1.8 million of this increase. As a
percentage of net sales, our depreciation, depletion and amortization expenses
increased to 4.9% in 1998 from 4.8% in 1997.
INCOME FROM OPERATIONS. Income from operations increased 35.6% to $24.4
million in 1998 from $18.0 million in 1997 because of the above factors.
10
<PAGE>
INTEREST EXPENSE, NET. Net interest expense increased to $14.4 million in
1998 from $8.3 million in 1997 as a result of significantly increased borrowings
used to fund the purchase of the 1998 acquired businesses and other expansion
and capital needs.
LIQUIDITY AND CAPITAL RESOURCES
From our inception in 1994, we have financed our operations and growth from
the issuance of preferred and common stock, debt and operating cash flow. We
have also used operating leases to finance the acquisition of equipment used in
the business.
At December 31, 1999, we had $169.6 million of debt outstanding. This
level of debt decreased from $200.6 million as of December 31, 1998. On August
18, 1999, we completed our IPO resulting in net proceeds to the Company of $65.7
million which was used to reduce our short and long term debt. The debt is
primarily used to finance acquisitions and capital expansion. The terms of this
debt are discussed further below and in Notes 6 and 7 to the audited financial
statements included herein.
We lease aggregate production sites, facilities, and equipment under
operating leases with terms generally ranging from 5 to 40 years. Our future
minimum commitment under these leases was $104.7 million in 1999, $67.9 million
in 1998 and $23.0 in 1997.
Our primary capital requirements are for working capital, acquisitions of
existing businesses and the acquisition and development of quarry operations,
and equipment purchases.
During 1999, we generated $27.0 million of cash from operations, 747%
higher than the $3.2 million generated in 1998. This increase in cash flow
results primarily from an increase in earnings before depreciation, depletion,
and amortization of $11.1 million, an increase in deferred taxes and less growth
in working capital compared to 1998. In 1997, we generated $5.3 million of cash
flow from operations primarily due to higher net income and lower working
capital than 1998. As of December 31, 1999, 1998, and 1997, working capital was
$36.0 million, $29.3 million, and $14.2 million, respectively. Working capital
needs will continue to increase with growth in our business.
Net cash used in investing activities for 1999 was $60.0 million. We
expended $63.1 million for the purchase of property, plant and equipment, and
$0.3 million for the acquisition of subsidiaries, offset by proceeds of $3.4
million from the sale of assets. A substantial portion of the capital
expenditures were focused on developing the new greenfield site in Pride,
Alabama including the rail and barge facilities at that location and installing
new crushing and rail facilities at our O'Neal, Alabama crushed stone plant. In
addition, we made extensive improvements in the Mountain states quarries,
primarily at sites which were part of the businesses acquired in 1998. Net cash
used in investing activities was $100.9 million in 1998. Of this amount, $83.9
million was used for acquisitions, $67.8 million of which was for the purchase
of Monroc. Also of this amount, $27.3 million was for the purchase of property,
plant and equipment offset by proceeds of $10.4 million from the sale of certain
properties, including a depleted sand and gravel deposit and an unused ready-mix
plant site at Monroc. Net cash used in investing activities was $20.5 million
in 1997. Of this amount, $4.0 million was used for acquisitions and $16.5
million was used for the net purchase of property, plant and equipment.
Cash provided by financing activities was $34.6 million in 1999, $100.0
million in 1998 and $14.3 million in 1997. In 1999, of the cash provided by
financing activities, $65.7 million was from sale of stock through the initial
public offering, which sum was used to reduce our debt. The remainder of the
cash provided by financing activities represents additional net borrowings. All
of the cash provided by financing activities in 1998 and 1997 was from increased
borrowings under existing or restructured debt agreements.
In August 1999, concurrent with the completion of the Company's initial
public offering, all preferred stock with accumulated dividends were converted
into common shares.
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The revolving portion of our credit facility was increased to $60.0 million
from $40.0 million in April 1999. Subsequent to the end of 1999, the revolving
facility was again increased to $90 million. The revolving facility terminates
in June 2004 and accrues interest quarterly based on the Eurodollar rate plus a
spread of 0.875% to 2.125%. As of December 31, 1999, we had borrowings of $30.0
million outstanding under the revolving facility, $39.2 million of term loan A
outstanding, and $46.4 million of term loan B outstanding. The credit facility
is secured by all of our assets. Among other financial covenants, the debt
agreements specify a minimum interest coverage ratio, a minimum fixed charge
coverage ratio and a maximum leverage ratio. The Company was in compliance with
these covenants at December 31, 1999 and 1998.
In June 1998, we amended our existing credit facility with a syndicate of
lenders. The term portion of the facility was increased to an aggregate
principal amount of $115.0 million. The term loan consists of an "A" tranche
and a "B" tranche. The term loan A accrues interest at a rate per annum based
on the Eurodollar rate plus a spread of 0.875% to 2.125% and the term loan B
accrues interest at a rate per annum based on the Eurodollar rate plus a spread
of 1.875% to 2.500%. The term loan A matures in March 2004 and the term loan B
matures in March 2006.
In March 1998, we entered into a $9.0 million revolving line of credit
facility with Harris Trust and Savings Bank (HTSB). Harris Trust and Savings
Bank increased the amount available under the HTSB Note to $17.5 million in
April 1999. This note was retired with the proceeds of the initial public
offering.
In November 1996 and June 1998, we issued $30.0 million and $15.0 million
of senior subordinated notes to an institutional investor. Interest accrues
quarterly at an annual rate of 10.34% on the 1996 notes and 10.09% on the 1998
notes. The notes mature in November 2006 and November 2008 and are subject to
annual required principal payments beginning in 2003. In connection with this
debt, we issued warrants to purchase 286,380 shares of common stock.
We believe the proceeds of the offering, cash flow from operations, our
existing credit facility as amended and existing cash balances will be
sufficient to meet working capital requirements and fund future acquisitions
during the next twelve months. To the extent we pursue additional acquisitions,
or require additional working capital, we may need to obtain additional sources
of financing. There can be no assurance that such financing will be
commercially available through an increased commitment under our credit facility
or otherwise be obtained pursuant to favorable terms, if at all. If we are
unable to obtain additional financing to finance our future operations, we may
not be able to implement our business strategy, which could have a material
adverse effect on our business, financial condition and results of operation.
There are no known trends, commitments, events or uncertainties which are
reasonably likely to result in our liquidity increasing or decreasing
materially.
YEAR 2000 ISSUE
The Year 2000 issue concerns the ability of computer hardware and software
to distinguish between the year 1900 and the year 2000. An inability to make
this distinction could result in computer application failure.
During 1999, the Company completed a detailed assessment of all its
information technology and non-information technology hardware and software with
regard to the Year 2000 issue, with special emphasis on mission critical
systems. Information and non-information technology hardware and software were
inventoried and those not Year 2000 ready were identified, remediated (i.e.,
corrected or replaced) and tested to ensure that they would, in fact, operate as
desired according to Year 2000 requirements. The Company expensed approximately
$979,728 during 1999, in addition to the $499,400 spent in 1998, in connection
with remediating its systems.
As a result of its Year 2000 readiness efforts, the Company's mission
critical information technology and non-information technology systems
successfully distinguished between the year 1900 and the year 2000 on January 1,
2000, without any mission critical application failure. The Company will
continue to monitor its mission critical computer applications throughout the
year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
EFFECT OF INFLATION
Management believes that inflation has not had a material effect on U.S.
Aggregates.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES
("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all costs
related to start-up activities, including organizational costs, be expensed as
incurred. The cumulative effect of the adoption of SOP 98-5 impacted our net
earnings by $84, which has been recorded as a nonoperating expense in the first
quarter of 1999.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"). We adopted SOP 98-1 on
January 1, 1999. SOP 98-1 requires the capitalization of certain costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. The Company expensed such costs as incurred through December
31, 1998 and have capitalized certain costs incurred in 1999. These costs are
being depreciated using the straight-line method over 5 years. The impact of
the adoption of SOP 98-1 was not material.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), which establishes accounting
and reporting standards of derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.
Subsequently, in June 1999, the FASB issued SFAS No, 137, ACCOUNTING FOR
DERIVATIVES AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE OF SFAS NO.
133, which amended SFAS No. 133. Because of our minimal use of derivatives,
management does not anticipate that the adoption of this standard will have a
significant impact on our net earnings, financial position or cash flows.
FORWARD LOOKING STATEMENTS
Certain matters discussed in this report contain forward-looking statements
and information based on management's belief as well as assumptions made by and
information currently available to management. Such statements are subject to
risks, uncertainties and assumptions including, among other matters, future
growth in the construction industry; the ability of U.S. Aggregates, Inc. to
complete acquisitions and effective integration of acquired companies
operations; and general risks related to the markets in which U.S. Aggregates,
Inc. operates. Should one or more of these risks materialize, or should
underlying assumptions prove incorrect, actual results may differ materially
from those projected. Additional information regarding these risk factors and
other uncertainties may be found in the Company's filings with the Securities
and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks arising from transactions
that are entered into in the normal course of business.
All of the Company's borrowings under our floating rate credit facilities
are subject to interest rate risk. Borrowings under our syndicated revolving
credit facility bear interest, at our option, at either the Eurodollar rate or
the ABR rate, plus margin. Each 1.0% increase in the interest rates on the
total of our floating rate debt would impact pretax earnings by approximately
$1.2 million. The Company does not use interest rate swap contracts to hedge
the impact of interest rate fluctuations on certain variable rate debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements listed under the heading
"(a)(1) Consolidated Financial Statements" of Item 14 hereof, which financial
statements are incorporated herein by reference in response to this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of the Company is
incorporated herein by reference to the information included in the Company's
definitive proxy statement which will be filed with the Commission within 120
days after the end of the Company's 1999 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference to the information included in the Company's definitive proxy
statement which will be filed with the Commission within 120 days after the end
of the Company's 1999 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference to the information included in
the Company's definitive proxy statement which will be filed with the Commission
within 120 days after the end of the Company's 1999 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the information included in the Company's
definitive proxy statement which will be filed with the Commission within 120
days after the end of the Company's 1999 fiscal year.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Consolidated Financial Statements
The following consolidated financial statements of U.S. Aggregates, Inc.
and the Report of Independent Auditors thereon are included in Item 8 above:
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 F-6
Consolidated Notes to Financial Statements F-7
(a)(2) Financial Statement Schedules
All financial statement schedules required by Item 14(a)(2) have been
omitted because they are inapplicable or because the required information has
been included in the Consolidated Financial Statements or Notes thereto.
14
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(a)(3) Exhibits
Exhibit No. Description
- ------------ -----------
3.1* Form of Restated Certificate of Incorporation of the Company
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
3.1(vi), filed July 14, 1999)
3.2* Form of Restated By-laws of the Company (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii), filed July
14, 1999)
4.1(i)* Third Amended and Restated Credit Agreement dated as of June
5, 1998 by and among the Company, various financial
institutions and Bank of America National Trust and Savings
Association, individually and as agent (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.1(i), filed July
14, 1999)
4.1(ii)* First Amendment to Third Amended and Restated Credit
Agreement dated as of April 14, 1999 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.1(ii), filed July 14, 1999)
4.1(iii) Second Amendment to Third Amended and Restated Credit
Agreement dated as of August 12, 1999 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent
4.1(iv) Third Amendment to Third Amended and Restated Credit
Agreement dated as of January 13, 2000 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent
4.2* Amended and Restated Security Agreement dated as of June 5,
1998 by and among the Company, its subsidiaries and Bank of
America National Trust and Savings Association (Amendment
No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 4.2, filed
July 14, 1999)
4.3* Amended and Restated Company Pledge Agreement dated as of
June 5, 1998 by and between the Company and Bank of America
National Trust and Savings Association (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.3, filed July 14,
1999)
4.4* Amended and Restated Subsidiary Pledge Agreement dated as of
June 5, 1998 by and among Western Aggregates Holding Corp.,
Western Rock Products Corp., SRM Holdings Corp., Southern
Ready Mix, Inc., Monroc, Inc. and Bank of America National
Trust and Savings Association (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.4, filed July 14, 1999)
4.5* Amended and Restated Shareholder Pledge Agreement dated as
of June 5, 1998 by and among Western Aggregates Holding
Corp.'s stockholders, SRM Holdings Corp.'s stockholders and
Bank of America National Trust and Savings Association
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.5, filed July 14, 1999)
4.6* Amended and Restated Guaranty dated as of June 5, 1998 by
and among the Company's subsidiaries, various financial
institutions and Bank of America National Trust and Savings
Association (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.6, filed July 14, 1999)
4.7(i)* Amended and Restated Note and Warrant Purchase Agreement
dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.7(i), filed July
14, 1999)
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4.7(ii)* Amendment No. 1 to Amended and Restated Note and Warrant
Purchase Agreement dated as of April 14, 1999 by and between
the Company and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.7(ii), filed July 14, 1999)
4.7(iii)* Waiver under Note Agreement dated as of April 15, 1999 by
and between the Company and The Prudential Insurance Company
of America (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.7(iii), filed July 14, 1999)
4.7(iv) Amendment No. 2 to Amended and Restated Note and Warrant
Purchase Agreement dated as of August 12, 1999 by and
between the Company and The Prudential Insurance Company of
America
4.8* Amended and Restated Guaranty dated as of June 5, 1998 by
and among the Company's subsidiaries and The Prudential
Insurance Company of America (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.8, filed July 14, 1999)
4.9(i)* Registration Rights and Stockholders' Agreement dated as of
November 21, 1996 by and among the Company, the Company's
stockholders and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.9(i), filed July 14, 1999)
4.9(ii)* First Amendment to Registration Rights and Stockholders'
Agreement dated as of June 5, 1998 by and among, the
Company, the Company's stockholders and The Prudential
Insurance Company of America (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.9(ii), filed July 14, 1999)
4.10* Warrant Agreement dated as of November 21, 1996 by and
between the Company and The Prudential Insurance Company of
America (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.10, filed July 14, 1999)
4.11* Warrant Agreement dated as of June 5, 1998 by and between
the Company and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.11, filed July 14, 1999)
4.12* Letter Agreement dated as of April 15, 1999 by and among
Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust
and Savings Bank, Bank of America National Trust and Savings
Association, as Agent, The Prudential Insurance Company of
America and the Company (Amendment No. 1 to Form S-1 (Reg.
No. 333-79209), Exhibit 4.12, filed July 14, 1999)
4.13* Floating Rate Loan - Procedures Letter dated as of April 15,
1999 by and between Harris Trust and Savings Bank and the
Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.13, filed July 14, 1999)
4.14* Guaranty, dated April 15, 1999, in favor of Harris Trust and
Savings Bank executed by Golder, Thoma, Cressey, Rauner
Fund, IV, L.P. (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.14, filed July 14, 1999)
10.1* Form of Underwriting Agreement among the Company, the
Selling Stockholders, BT Alex Brown Incorporated, The
Robinson-Humphrey Company, LLC and J. Henry Schroder & Co.
Limited (Form S-1 (Reg. No. 333-79209), Exhibit 1.1, filed
May 24, 1999)
10.2* Equity Purchase Agreement dated as of January 24, 1994
between the Company and Golder, Thoma, Cressey, Rauner Fund
IV, L.P. (Form S-1 (Reg. No. 333-79209), Exhibit 10.2, filed
May 24, 1999)
10.3* Stockholders Agreement dated as of January 24, 1994 by and
among the Company and Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and certain Executives named therein (Form S-1
(Reg. No. 333-79209), Exhibit 10.3, filed May 24, 1999)
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<PAGE>
10.4* Stockholders Joinder Agreement dated as of August 1, 1994 by
and among the Company, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and Edward A. Dougherty (Form S-1 (Reg. No. 333-
79209), Exhibit 10.4, filed May 24, 1999)
10.5* Stockholders Joinder Agreement dated as of August 5, 1994 by
and among the Company, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and Morris L. Bishop (Form S-1 (Reg. No. 333-
79209), Exhibit 10.5, filed May 24, 1999)
10.6* Stockholders Joinder Agreement dated as of October 31, 1994
by and among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Charles R. Pullin (Form S-1 (Reg. No. 333-
79209), Exhibit 10.6, filed May 24, 1999)
10.7* Stockholders Joinder Agreement dated as of July 31, 1998 by
and among the Company, James A. Harris and James A. Harris
Grantor Retained Annuity Trust (Form S-1 (Reg. No. 333-
79209), Exhibit 10.7, filed May 24, 1999)
10.8* Stockholders Joinder Agreement dated as of October 1, 1998
by and among the Company, James A. Harris and The James A.
Harris Charitable Remainder Unitrust (Form S-1 (Reg. No. 333-
79209), Exhibit 10.8, filed May 24, 1999)
10.9* Registration Rights Agreement dated as of January 24, 1994
by and among the Company and Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and certain Executives named therein (Form S-1
(Reg. No. 333-79209), Exhibit 10.9, filed May 24, 1999)
10.10* Registration Rights Joinder Agreement dated as of August 1,
1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Edward A. Dougherty (Form S-1 (Reg.
No. 333-79209), Exhibit 10.10, filed May 24, 1999)
10.11* Registration Rights Joinder Agreement dated as of August 5,
1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Morris L. Bishop (Form S-1 (Reg.
No. 333-79209), Exhibit 10.11, filed May 24, 1999)
10.12* Registration Rights Joinder Agreement dated as of October
31, 1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Charles R. Pullin (Form S-1 (Reg.
No. 333-79209), Exhibit 10.12, filed May 24, 1999)
10.13* Senior Management Agreement dated as of January 24, 1994 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.13, filed May 24, 1999)
10.15* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.15, filed May 24, 1999)
10.16* Senior Management Agreement dated as of January 24, 1994 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.16, filed May 24, 1999)
10.18* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.18, filed May 24, 1999)
10.19* Senior Management Agreement dated as of August 5, 1994 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.19, filed May 24, 1999)
10.20* Senior Management Agreement dated as of October 1, 1997 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.20, filed May 24, 1999)
10.21* Executive Stock Pledge Agreement dated as of January 24,
1994 by and between the Company and James A. Harris (Form S-
1 (Reg. No. 333-79209), Exhibit 10.21, filed May 24, 1999)
10.22* Executive Stock Pledge Agreement dated as of May 10, 1994 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.22, filed May 24, 1999)
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<PAGE>
10.23* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and James A. Harris. (Form S-
1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10.15, filed May 24, 1999)
10.24* Executive Stock Pledge Agreement dated as of January 24,
1994 by and between the Company and Michael J. Stone (Form S-
1 (Reg. No. 333-79209), Exhibit 10.24, filed May 24, 1999)
10.25* Executive Stock Pledge Agreement dated as of May 10, 1994 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.25, filed May 24, 1999)
10.26* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and Michael J. Stone. (Form
S-1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10., filed May 24, 1999)
10.27* Executive Stock Pledge Agreement dated as of August 5, 1994
by and between the Company and Morris L. Bishop, Jr. (Form S-
1 (Reg. No. 333-79209), Exhibit 10.27, filed May 24, 1999)
10.28* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and Morris L. Bishop, Jr.
(Form S-1 (Reg. No. 333-79209), included as Exhibit B to
exhibit 10.43, filed May 24, 1999)
10.29* Executive Stock Pledge Agreement dated as of October 1, 1997
by and between the Company and Morris L. Bishop, Jr. (Form S-
1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10.20, filed May 24, 1999)
10.30* Promissory Note dated as of January 24, 1994 by James A.
Harris in favor of the Company in the principal amount of
$16,223.76. (Form S-1 (Reg. No. 333-79209), Exhibit 10.30,
filed May 24, 1999)
10.31* Promissory Note dated as of May 10, 1994 by James A. Harris
in favor of the Company in the principal amount of
$121,638.24. (Form S-1 (Reg. No. 333-79209), Exhibit 10.31,
filed May 24, 1999)
10.32* Promissory Note dated as of November 20, 1996 by James A.
Harris in favor of the Company in the principal amount of
$8,096.89. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to exhibit 10.15, filed May 24, 1999)
10.33* Promissory Note dated as of January 24, 1994 by Michael J.
Stone in favor of the Company in the principal amount of
$10,809.18. (Form S-1 (Reg. No. 333-79209), Exhibit 10.33,
filed May 24, 1999)
10.34* Promissory Note dated as of May 10, 1994 by Michael J. Stone
in favor of the Company in the principal amount of
$81,098.82. (Form S-1 (Reg. No. 333-79209), Exhibit 10.34,
filed May 24, 1999)
10.35* Promissory Note dated as of November 20, 1996 by Michael J.
Stone in favor of the Company in the principal amount of
$8,096.89. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to Exhibit 10.18, filed May 24, 1999)
10.36* Promissory Note dated August 5, 1994 by Morris L. Bishop in
favor of the Company in the principal amount of $16,903.08.
(Form S-1 (Reg. No. 333-79209), Exhibit 10.36, filed May 24,
1999)
10.37* Promissory Note dated November 20, 1996 by Morris L. Bishop
in favor of the Company in the principal amount of
$9,940.05. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to exhibit 10.43, filed May 24, 1999)
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10.38* Demand Note dated October 1, 1997 by Morris L. Bishop in
favor of the Company in the principal amount of $219,985.62.
(Form S-1 (Reg. No. 333-79209), included as an exhibit A to
exhibit 20, filed May 24, 1999)
10.39* Amended and Restated Employment Agreement dated August 18,
1999 with James A. Harris (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.2, filed
November 12, 1999)
10.40* Amended and Restated Employment Agreement dated August 18,
1999 with Michael J. Stone (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.3, November 12,
1999)
10.41* Amended and Restated Employment Agreement dated August 18,
1999 with Morris L. Bishop, Jr. (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.4, November 12,
1999)
10.42(i)* Agreement and Plan of Merger dated as of January 29, 1998 by
and among the Company, Western Acquisition, Inc. and Monroc,
Inc. (Form S-1 (Reg. No. 333-79209), Exhibit 10.42(i), filed
May 24, 1999)
10.42(ii)* Amended and Restated Agreement and Plan of Merger dated as
of March 4, 1998 by and among the Company, Western
Acquisition, Inc. and Monroc, Inc. (Form S-1 (Reg. No. 333-
79209), Exhibit 10.42(ii), filed May 24, 1999)
10.43* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.43, filed May 24, 1999)
10.44* Stockholders Joinder Agreement dated as of December 31, 1997
by and among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Jeanne T. Richey (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.44, filed July 14,
1999)
10.45* Letter Agreement dated as of April 18, 1998 by and between
the Company and Edward A. Dougherty (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.45, filed July 14,
1999)
10.46* Letter Agreement dated as of April 18, 1998 by and between
the Company and Edward A. Dougherty (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.46, filed July 14,
1999)
10.47* Letter Agreement dated as of December 30, 1998 by and
between the Company and Edward A. Dougherty (Amendment No. 1
to Form S-1 (Reg. No. 333-79209), Exhibit 10.47, filed July
14, 1999)
10.49* U.S. Aggregates, Inc. 1999 Long Term Incentive Plan
(Amendment No. 4 to Form S-1 (Reg. No. 333-79209), Exhibit
10.49, filed August 12, 1999)
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule (EDGAR Filing Only)
* Incorporated by reference to the filing indicated.
19
<PAGE>
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the fourth quarter ended December 31, 1999.
All other items specified by Part II of this report are
inapplicable and accordingly have been omitted.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 16, 2000.
U.S. AGGREGATES, INC.
/s/ James A. Harris
----------------------------------------
James A. Harris
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ James A. Harris Chairman and Chief Executive March 16, 2000
--------------------------- Officer
James A. Harris (Principal Executive Officer)
/s/ Michael J. Stone Executive Vice President, Chief March 16, 2000
--------------------------- Financial Officer, Treasurer,
Michael J. Stone Secretary and Director
(Principal Financial Officer)
/s/ Morris L. Bishop, Jr. President, Chief Operation March 16, 2000
--------------------------- Officer and Director
Morris L. Bishop, Jr.
/s/ Bruce V. Rauner Director March 16, 2000
- ----------------------------
Bruce V. Rauner
/s/ David A. Donnini Director March 16, 2000
- ----------------------------
David A. Donnini
/s/Edward A. Dougherty Director March 16, 2000
- ----------------------------
Edward A. Dougherty
/s/ Franz Cristiani Director March 16, 2000
- ----------------------------
Franz Cristiani
/s/ Raymond Wingard Director March 16, 2000
- ----------------------------
Raymond Wingard
21
<PAGE>
U.S. AGGREGATES, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 F-6
Consolidated Notes to Financial Statements F-7
F - 1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
U.S. AGGREGATES, INC.:
We have audited the accompanying consolidated balance sheets of U.S.
Aggregates, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of U.S.
Aggregates, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
San Francisco, California
February 3, 2000
F - 2
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
DECEMBER 31, DECEMBER 31,
1999 1998
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,478 $ 2,849
Trade accounts receivable, net of allowance for doubtful accounts
of $1,273 and $1,163. . . . . . . . . . . . . . . . . . . . . . . . . . . 52,294 37,703
Notes and other receivables . . . . . . . . . . . . . . . . . . . . . . . . 2,022 8,104
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,041 25,480
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . 5,780 3,966
-------------- --------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . 92,615 78,102
PROPERTY, PLANT AND EQUIPMENT, net. . . . . . . . . . . . . . . . . . . . . . 292,910 232,319
INTANGIBLE ASSETS, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,308 25,543
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,095 1,647
-------------- --------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 414,928 $ 337,611
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,631 $ 24,111
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,743 1,270
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 8,033 7,676
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 886 890
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 9,298 6,781
Demand note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8,020
-------------- --------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 56,591 48,748
LONG-TERM DEBT, net of current portion. . . . . . . . . . . . . . . . . . . . 160,312 185,790
DEFERRED INCOME TAXES, net. . . . . . . . . . . . . . . . . . . . . . . . . . 55,404 44,611
OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 192
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 272,403 279,341
-------------- --------------
MINORITY INTEREST, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3,160
-------------- --------------
COMMITMENTS AND CONTINGENCIES (Note 13)
MANDATORY REDEEMABLE PREFERRED STOCK, $.01 par value,
10,000,000 and 500,000 shares authorized, 0 and 300,842 shares outstanding. - 43,563
-------------- --------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 and 7,508,664
shares authorized, 14,908,222 and 6,144,250 shares outstanding,
including 7,629 shares of treasury stock. . . . . . . . . . . . . . . . . 149 61
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . 123,648 2,887
Notes receivable from sale of stock . . . . . . . . . . . . . . . . . . . . (1,195) (640)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (2)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,913 9,241
-------------- --------------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . 142,513 11,547
-------------- --------------
Total liabilities, minority interest, mandatory redeemable
preferred stock and shareholders' equity. . . . . . . . . . . . . . . $ 414,928 $ 337,611
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . $ 298,181 $ 228,739 $ 163,243
COST OF PRODUCTS SOLD . . . . . . . . . . . . . . . . 213,677 168,220 119,132
----------- ----------- -----------
Gross profit. . . . . . . . . . . . . . . . . . 84,504 60,519 44,111
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. . . . . 32,035 25,001 18,275
DEPRECIATION, DEPLETION AND AMORTIZATION. . . . . . . 12,851 11,098 7,830
----------- ----------- -----------
Income from operations. . . . . . . . . . . . . 39,618 24,420 18,006
OTHER EXPENSES:
Interest, net . . . . . . . . . . . . . . . . . . . (16,042) (14,351) (8,344)
Loss on sale of real estate . . . . . . . . . . . . - (386) -
Other, net. . . . . . . . . . . . . . . . . . . . . (307) (718) (150)
----------- ----------- -----------
Income before provision for income taxes,
minority interest and extraordinary item. . . 23,269 8,965 9,512
PROVISION FOR INCOME TAXES. . . . . . . . . . . . . . (8,499) (3,748) (3,384)
----------- ----------- -----------
Income before minority interest and
extraordinary item. . . . . . . . . . . . . . 14,770 5,217 6,128
MINORITY INTEREST . . . . . . . . . . . . . . . . . . (573) (385) (623)
----------- ----------- -----------
Income before extraordinary item. . . . . . . . 14,197 4,832 5,505
EXTRAORDINARY ITEM: Loss on extinguishment of debt,
less applicable income tax benefit of $161 and $212 (264) (338) -
----------- ----------- -----------
Net income. . . . . . . . . . . . . . . . . . . $ 13,933 $ 4,494 $ 5,505
=========== =========== ===========
Income per common share-basic
Income before extraordinary item available for
common shareholders . . . . . . . . . . . . . . . $ 1.20 $ 0.12 $ 0.29
Extraordinary item, net of tax. . . . . . . . . . . (0.03) (0.06) -
----------- ----------- -----------
Net income available for common shareholders. . . . $ 1.17 $ 0.06 $ 0.29
=========== =========== ===========
Weighted average common shares outstanding. . . . . 9,522,156 6,136,630 6,116,718
Income per common share-diluted
Income before extraordinary item available for
common shareholders . . . . . . . . . . . . . . . $ 1.16 $ 0.11 $ 0.28
Extraordinary item, net of tax. . . . . . . . . . . (0.03) (0.06) -
----------- ----------- -----------
Net income available for common shareholders. . . . $ 1.13 $ 0.05 $ 0.28
=========== =========== ===========
Weighted average common shares outstanding. . . . . 9,799,817 6,382,094 6,306,747
</TABLE>
The accompanying notes are an integral part of these statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share amounts)
TREASURY STOCK
NOTES -------------------
COMMON STOCK ADDITIONAL RECEIVABLE SHARES TOTAL
------------------- PAID-IN FROM SALE HELD IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL OF STOCK TREASURY AMOUNT EARNINGS EQUITY
---------- ------- ------------ ------------ --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1996. . . . . . . 6,144,250 $ 61 $ 2,585 $ (361) - $ - $ 7,051 $ 9,336
Purchase of treasury stock,
net. . . . . . . . . . . . . - - - - 43,190 (220) - (220)
Notes receivable, net of
payments . . . . . . . . . . - - 2 (232) (35,561) 218 - (12)
Accretion of mandatory
redeemable preferred
stock dividend . . . . . . . - - - - - - (3,712) (3,712)
Net income . . . . . . . . . . - - - - - - 5,505 5,505
---------- ------- ------------ ------------ --------- -------- ---------- -------------
BALANCE AT
DECEMBER 31, 1997. . . . . . . 6,144,250 61 2,587 (593) 7,629 (2) 8,844 10,897
Notes receivable, net of
payments . . . . . . . . . . - - - (47) - - - (47)
Issuance of stock warrants . . - - 300 - - - - 300
Accretion of mandatory
redeemable preferred
stock dividend . . . . . . . - - - - - - (4,097) (4,097)
Net income . . . . . . . . . . - - - - - - 4,494 4,494
---------- ------- ------------ ------------ --------- -------- ---------- -------------
BALANCE AT
DECEMBER 31, 1998. . . . . . . 6,144,250 61 2,887 (640) 7,629 (2) 9,241 11,547
Notes receivable, net of
payments . . . . . . . . . . - - - (62) - - - (62)
Conversion of minority
interest to equity . . . . . 649,363 6 8,760 (493) - - - 8,273
Issuance of common stock . . . 5,000,000 50 65,656 - - - - 65,706
Exercise of warrants . . . . . 22,800 1 (1) - - - - -
Accretion of mandatory
redeemable preferred
stock dividend . . . . . . . - - - - - - (2,814) (2,814)
Conversion of preferred shares
and accreted dividends to
common shares. . . . . . . . 3,091,809 31 46,346 - - - - 46,377
Net income . . . . . . . . . . - - - - - - 13,933 13,933
Cash dividends declared. . . . - - - - - - (447) (447)
---------- ------- ------------ ------------ --------- -------- ---------- -------------
BALANCE AT
DECEMBER 31, 1999. . . . . . . 14,908,222 $ 149 $ 123,648 $ (1,195) 7,629 $ (2) $ 19,913 $ 142,513
========== ======= ============ ============ ========= ======== ========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F - 5
<PAGE>
<TABLE>
<CAPTION>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share amounts)
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before extraordinary item . . . . . . . . . . . . . . . . . . . $ 14,197 $ 4,832 $ 5,505
Adjustments to reconcile income before extraordinary item
to net cash provided by operating activities:
Depreciation, depletion and amortization . . . . . . . . . . . . . 12,851 11,098 7,830
Provision for doubtful accounts, net . . . . . . . . . . . . . . . 109 (49) (88)
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . 7,117 3,226 3,129
Loss (gain) on disposal of fixed assets and real estate. . . . . . (171) 330 (63)
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . 573 775 981
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . (264) (338) -
Change in operating assets and liabilities:
Trade accounts, notes and other receivables. . . . . . . . . . . (9,096) (13,018) (2,589)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,665) (8,280) (3,160)
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . (5,919) 2,890 (4,218)
Trade accounts payable and accrued liabilities . . . . . . . . . 11,341 347 (2,309)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . (4) 916 615
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (96) 454 (347)
---------- ---------- ----------
Net cash provided by operating activities. . . . . . . . . . . 26,973 3,183 5,286
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . . . . . . . . . . (63,097) (27,330) (17,750)
Acquisition of subsidiaries, net of cash acquired. . . . . . . . . . . (325) (83,884) (4,038)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . 3,455 10,360 1,310
---------- ---------- ----------
Net cash used in investing activities. . . . . . . . . . . . . (59,967) (100,854) (20,478)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt . . . . . . . . . . . . . . . . . (101,281) (85,990) (693)
New borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,198 185,731 14,946
Proceeds from sale of stock, net . . . . . . . . . . . . . . . . . . . 65,706 - -
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 300 -
---------- ---------- ----------
Net cash provided by financing activities. . . . . . . . . . . 34,623 100,041 14,253
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . . 1,629 2,370 (939)
CASH, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 2,849 479 1,418
---------- ---------- ----------
CASH, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,478 $ 2,849 $ 479
========== ========== ==========
DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,684 $ 13,364 $ 8,311
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 131 (639)
NONCASH TRANSACTIONS:
Value assigned to warrants . . . . . . . . . . . . . . . . . . . . . . - 300 -
Accretion of preferred stock dividend. . . . . . . . . . . . . . . . . 2,814 4,097 3,712
Conversion of minority interest to equity. . . . . . . . . . . . . . . 8,273 - -
Conversion of preferred shares and accreted dividends to common shares 46,377 - -
Dividends declared but not paid. . . . . . . . . . . . . . . . . . . . 447 - -
</TABLE>
The accompanying notes are an integral part of these statements.
F - 6
<PAGE>
U.S. AGGREGATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BUSINESS
U.S. Aggregates, Inc. (a Delaware corporation, hereinafter referred to as
"USAI" or "the Company") was incorporated in 1994. USAI is a leading producer
of aggregates, primarily crushed stone, sand and gravel and associated
aggregate-based materials and services. Its products are used primarily for the
construction and maintenance of highways and other infrastructure projects and
for commercial and residential construction, in nine states. The Company
operates through two wholly owned subsidiaries: SRM Holdings Corp. (SRMHC) and
Western Aggregates Holding Corp. (WAHC). The current capital structure of USAI
includes common stock with voting rights.
The Company conducts its operations through one reportable segment: the
quarrying and distribution of aggregate products. The Company operates in nine
states which have been aggregated for segment reporting purposes.
RISK FACTORS RELATING TO THE COMPANY'S BUSINESS AND INDUSTRY
The Company's business is seasonal, with peak revenue and profits occurring
primarily in the months of April through November. Bad weather conditions
during this period could adversely affect operating income and cash flow and
could therefore have a disproportionate impact on the Company's results for the
full year. Quarterly results have varied significantly in the past and are
likely to vary significantly from quarter to quarter in the future.
A majority of the Company's revenues are from customers who are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions. In addition, since operations occur in a variety
of geographic markets, the Company's business is subject to the economic
conditions in each such geographic market. General economic downturns or
localized downturns in the regions where the Company has operations, including
any downturns in the construction industry, could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company's operations are subject to and affected by federal, state and
local laws and regulations including such matters as land usage, street and
highway usage, noise levels and health, safety and environmental matters. In
many instances, various permits are required. Although management believes that
the Company is in compliance with regulatory requirements, there can be no
assurance that the Company will not incur material costs or liabilities in
connection with regulatory requirements.
Certain of the Company's operations may from time to time involve the use
of substances that are classified as toxic or hazardous substances within the
meaning of certain federal, state or local laws and regulations. Risk of
environmental liability is inherent in the operation of the Company's business.
As a result, it is possible that environmental liabilities will have a material
adverse effect on the Company in the future.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of USAI and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent funds on deposit in non-interest and
interest-bearing operating and/or highly liquid investment accounts, with
original maturities of three months or less.
F - 7
<PAGE>
INVENTORIES
Inventories are stated at the lower of average manufactured cost (which
approximates the first-in, first-out method of accounting) or market. Average
manufactured cost includes all direct labor and material costs and those
indirect costs specifically related to aggregate production, including indirect
labor, repairs, depreciation and depletion.
INCOME PER SHARE
In accordance with the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 128, Earning Per Share, the Company reports
two separate income per share numbers, basic and diluted. Both were calculated
by dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share includes the impact
of outstanding Warrants and stock options, using the treasury stock method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
for using the straight-line method over the estimated useful lives of the
assets, which are as follows:
Buildings 40 years
Plant and equipment 10-30 years
Transportation and delivery equipment 4-15 years
Furniture and fixtures 5-10 years
In 1997, USAI changed the estimated lives of certain depreciable assets,
resulting in an approximate $1,550 reduction of 1997 depreciation expense
compared to what it would have been had the estimated lives not been changed.
Expenditures for development, renewals and betterments of developing
quarries and gravel pits are capitalized. Depletion of acquired or leased
mineral deposits is calculated on the units-of-production method over the
estimated remaining recoverable reserves. Repairs and maintenance that do not
improve or extend the lives of the assets are charged against operations or
included in the inventory overhead pool in the year benefited. When properties
are retired or otherwise disposed of, related costs and accumulated depreciation
are removed from the accounts and any resulting gain or loss is included in
operations.
INTANGIBLES
Goodwill is amortized on a straight-line basis over 40 years. Covenants
not to compete are amortized on a straight-line basis over the life of the
agreement. Deferred finance charges are amortized on a straight-line basis over
the life of the related loan. As of December 31, 1999 and 1998, the accumulated
amortization applicable to the intangible assets was $8,659 and $6,208,
respectively.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform with the
current-year presentation.
F - 8
<PAGE>
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its plant and other long-term assets for impairment
and assesses their recoverability based upon anticipated future cash flows. If
facts and circumstances lead the Company's management to believe that the cost
of one of its assets may be impaired, the Company will (a) evaluate the extent
to which that cost is recoverable by comparing the future undiscounted cash
flows estimated to be associated with that asset to the asset's carrying amount
and (b) write-down that carrying amount to market value or discounted cash flow
value to the extent necessary. Using this approach, the Company's management
determined that the cash flows would be sufficient to recover the carrying value
of the Company's long-lived assets as of December 31, 1999 and 1998.
VALUATION ACCOUNTS
Below is a summary of the changes in the Company's valuation accounts for
1999, 1998 and 1997:
<TABLE>
<CAPTION>
ADDITIONS
BEGINNING -------------------- ENDING
BALANCE ACQUIRED PROVIDED DEDUCTIONS BALANCE
---------- --------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
1999
Allowance for doubtful accounts $ 1,163 $ - $ 580 $ (470) $ 1,273
Inventory valuation reserve . . 500 - 16 (500) 16
1998
Allowance for doubtful accounts $ 629 $ 583 $ 409 $ (458) $ 1,163
Inventory valuation reserve . . 291 - 500 (291) 500
1997
Allowance for doubtful accounts $ 867 $ - $ 50 $ (288) $ 629
Inventory valuation reserve . . 350 - 500 (559) 291
</TABLE>
Deductions include all charges against reserves. These deductions were
made in the normal course of business and only for the specific use for which
the reserve was identified and intended.
RECLAMATION COSTS
Quarry and pit reclamation costs are treated as normal ongoing costs and
are expensed as incurred.
ENVIRONMENTAL MATTERS
Remediation costs are accrued based on estimates of known environmental
remediation exposure. Ongoing environmental compliance costs, including
maintenance and monitoring costs, are expensed as incurred. Any other
environmental costs are recorded in the period which the amount can be
reasonably estimated. Among the variables that management must assess in
evaluating costs associated with environmental issues are the evolving
regulatory standards. It is impossible to quantify the impact of all actions
regarding environmental matters, particularly the extent and cost of future
remediation and other compliance efforts. However, the Company currently has no
known material liabilities in connection with expected remediation or other
environmental-related costs.
INCOME TAXES
USAI accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109). Under SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement and tax bases, as well as the effect
of operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the period of change.
F - 9
<PAGE>
REVENUE RECOGNITION
Revenues are recognized at the time the related products are shipped.
Contract revenues and costs are recognized under the
percentage-of-completion method, measured by the percentage of costs incurred to
date as a percentage of estimated total costs for each contract. Revisions in
cost estimates during the course of a contract are reflected in the accounting
period in which the change of costs becomes known. Provision for estimated
losses on incomplete contracts is made in the period in which such losses become
evident.
DEFERRED OFFERING COSTS
As of December 31, 1999 and 1998 costs of $8,946 and $348, respectively,
have been incurred in connection with the Company's initial public offering.
Such costs were treated as a reduction of the proceeds from the offering.
FINANCIAL INSTRUMENTS
USAI's financial instruments, other than debt, consist of cash, short-term
accounts receivable and accounts payable for which current carrying amounts are
equal to or approximate fair market value. The estimated fair values of the
Company's debt instruments at December 31, 1999, aggregated approximately
$163,404 compared with a carrying amount of $169,610. The fair values were
estimated based on the quoted market prices for similar issues, or on current
rates anticipated by the Company for debt of the same remaining maturities.
INTERNAL USE SOFTWARE
In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use ("SOP
98-1"). The Company adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. The Company
expensed such costs as incurred through December 31, 1998, and has capitalized
certain costs incurred in 1999. These costs are being depreciated using the
straight-line method over 5 years.
COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all
costs related to certain start-up activities, including organizational costs, be
expensed as incurred. The cumulative effect of the adoption of SOP 98-5 reduced
net earnings by $84, which has been recorded as an expense in the period ended
December 31, 1999.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("FAS 133"), which establishes accounting and
reporting standards of derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.
Subsequently, in June 1999, the FASB issued SFAS No, 137, Accounting for
Derivatives and Hedging Activities - Deferral of the Effective Date of SFAS No.
133, which amended SFAS No. 133. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of FAS 133 will
have a significant impact on net earnings or the financial position of the
Company.
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to various collective bargaining agreements with
labor unions. The agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements will expire
at various times between April 2000 through February 2003.
F - 10
<PAGE>
3. ACQUISITIONS
On June 5, 1998, USAI, through WAHC, purchased all of the outstanding
common stock of Monroc, Inc. (Monroc). Monroc's purchase price was
approximately $67,800 in cash plus costs and certain assumed liabilities. The
acquisition has been accounted for under the purchase method of accounting. The
amount by which the total cost exceeded the fair value of the tangible net
assets acquired of $1,135 was recognized as goodwill and is being amortized over
40 years.
In addition, at various dates during 1997 and 1998, USAI, through its
subsidiaries, acquired assets and businesses of several small companies. The
operating results of the acquired businesses are included in the accompanying
financial statements from their respective dates of acquisition.
The following table reflects supplemental disclosure of noncash
transactions related to these acquisitions for 1998:
Fair value of assets acquired, including goodwill of $4,132 $ 139,417
Liabilities assumed (55,533)
---------
Cash paid for assets $ 83,884
=========
The following unaudited selected pro forma financial data are presented as
if the acquisitions (excluding Monroc's discontinued operations) had occurred on
January 1, 1997. The pro forma financial information includes adjustments for
amortization of goodwill and accrual of interest expense for the entire periods
presented. The unaudited pro forma information presented below is not
necessarily indicative of what results of operations actually would have been if
the acquisition had occurred on the date indicated. Moreover, they are not
necessarily indicative of future results.
1998 1997
-------- --------
(unaudited)
Net sales $ 249,224 $ 212,910
Income before extraordinary items 4,916 3,663
Income before extraordinary items per share $ 0.13 $ (.01)
ASSETS HELD FOR SALE
Concurrent with the acquisition of Monroc, the Company decided to dispose
of the Precast Division operations of Monroc. The Precast Division operations
concentrated on the production of pre-fabricated concrete products using our
site casts and molds, made to meet existing industry construction standards.
The Company accounted for the acquisition and disposition of this division as
required by purchase accounting and EITF 87-11, "Allocation of Purchase Price to
Assets to be Sold". This included recording expected operational income as well
as interest on the cost of carrying this division as an allocation to purchase
price of Monroc. On December 31, 1998, the Company sold the Precast Division for
$8,637. No gain or loss was recognized on this disposition. The results of
operations from the Precast Division between the date of acquisition and sale of
$1,409 net of tax, and the interest expense associated with the purchase of the
Precast Division of $247 net of tax was considered in the purchase price
allocation. There were no earnings received or losses funded by Monroc during
the operational period.
Also, concurrent with the acquisition of Monroc, the Company decided to
dispose of a depleted sand and gravel deposit site and an unused ready-mix
plant site. The sites were sold during 1998 for $6,945 and no gain or loss was
recognized on these dispositions.
F - 11
<PAGE>
4. INVENTORIES
Inventories consist of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Finished products. $24,624 $19,014
Raw materials. . . 2,341 5,730
Supplies and parts 551 888
Fuel . . . . . . . 541 348
Less: Allowances . (16) (500)
-------- --------
$28,041 $25,480
======== ========
</TABLE>
Inventories are pledged as security under various debt agreements (see Note
6).
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Land and improvements. . . . . . . . . . . . $ 61,400 $ 40,293
Mineral deposits . . . . . . . . . . . . . . 89,228 88,756
Plant and equipment. . . . . . . . . . . . . 160,253 119,675
Furniture and fixtures . . . . . . . . . . . 5,391 4,148
Construction in progress . . . . . . . . . . 9,056 1,038
--------- ---------
325,328 253,910
Less: Accumulated depreciation and depletion (32,418) (21,591)
--------- ---------
$292,910 $232,319
========= =========
</TABLE>
The Company capitalized interest costs of $1,531 in 1999, and $0 in 1998
with respect to qualifying construction projects.
Property, plant and equipment are pledged as security for various debt
agreements (see Note 6).
6. LONG-TERM DEBT
Long-term debt consists of the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Prudential Insurance subordinated notes, net of discount
of $664 and $753, respectively . . . . . . . . . . . . $ 44,336 $ 44,247
Bank of America term loan A. . . . . . . . . . . . . . . 39,238 53,500
Bank of America term loan B. . . . . . . . . . . . . . . 46,404 58,500
Bank of America revolving loan . . . . . . . . . . . . . 30,000 24,200
Notes payable to former stockholders . . . . . . . . . . 4,001 4,997
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 5,631 7,127
--------- ---------
Total long-term debt . . . . . . . . . . . . . . . . 169,610 192,571
Less: Current portion. . . . . . . . . . . . . . . . . . (9,298) (6,781)
--------- ---------
Long-term debt, net of current portion . . . . . . . $160,312 $185,790
========= =========
</TABLE>
F - 12
<PAGE>
The Bank of America credit facilities are secured by all of the assets of
USAI. The Prudential Insurance notes are subordinated to the Bank of America
credit facilities. Among other financial covenants, the debt agreements
specify a minimum interest coverage ratio, a minimum fixed charge coverage ratio
and a maximum leverage ratio. The Company was in compliance with these
covenants at December 31, 1999 and 1998.
The Company's credit facility and other debt documents will permit the
payment of dividends subject to the following restrictions and limitations: (1)
The Company is not in default under the credit agreement or senior subordinated
notes; (2) is in pro forma compliance with all financial covenants in the credit
agreement and senior subordinated notes; and (3) dividend payments do not exceed
15% of consolidated net income, excluding extraordinary items, for the prior
year.
PRUDENTIAL INSURANCE COMPANY SUBORDINATED NOTES
In November 1996 and June 1998, USAI issued $30,000 and $15,000,
respectively, in subordinated notes to the Prudential Insurance Company of
America (Prudential Insurance). Interest is due quarterly at a rate of 10.34
percent and 10.09 percent, respectively, per annum. Principal payments are
scheduled as follows:
2003 $ 6,000
2004 6,000
2005 6,000
2006 16,500
2007 4,500
2008 6,000
In connection with the issuance of the subordinated notes, USAI issued to
Prudential Insurance warrants to purchase 286,380 shares of the common stock of
USAI at a nominal cost. USAI has estimated the fair value of the warrants at
$900 ($600 recorded in 1996 and $300 in 1998) and reflected this amount as a
discount on the subordinated notes, with the offsetting credit to additional
paid-in capital. The discount is being amortized on a straight-line basis
(which approximates the interest method) over the life of the notes.
BANK OF AMERICA TERM LOANS
USAI has a syndicated term loan facility with Bank of America NT & SA, as
agent, and certain other financial institutions (Bank of America). In June
1998, the term loan agreement was amended to increase the total principal amount
of the Term Loan from $30,000 to $115,000 of Term Loan A and Term Loan B. On
August 19, 1999, the Company repaid $12,000 to each Term Loan A and Term Loan B
with the proceeds from its initial public offering. In connection with the
various restructuring of the Company's debt, previously capitalized fees and
costs of $264 and $338, net of a tax benefit of $161 and $212, were recorded as
an Extraordinary Item--Loss on Extinguishment of Debt in 1999 and 1998,
respectively.
Term loan A has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 1.375 percent, or approximately 7.5625 percent as of
December 31, 1999. Principal payments are scheduled as follows:
March 2000 $ 543
June 2000 through March 2001 $ 1,793 per quarter
June 2001 through March 2002 $ 2,293 per quarter
June 2002 through March 2003 $ 2,543 per quarter
June 2003 through March 2004 $ 3,043 per quarter
Term loan B has interest payments due quarterly and is currently payable at
the Eurodollar rate plus 2.25 percent, or approximately 8.4375 percent as of
December 31, 1999. The principal is due March 2006.
F - 13
<PAGE>
BANK OF AMERICA REVOLVING LOAN
On April 15, 1999, the Company's revolving loan facility was increased to
$60,000. Subsequent to year-end, this loan facility was increased to $90,000.
The revolving loan is to be paid in full by the revolving facility termination
date in June 2004; however, USAI may terminate revolving commitments at any time
provided that USAI pays, in full, all obligations. Interest on the unpaid
principal amount of each revolving loan is due quarterly. The interest rate on
this debt as of December 31, 1999 was 7.875%. The interest rate and commitment
fee on unused amounts of the revolving loan vary based on certain performance
criteria established by USAI's banks. However, the rates cannot exceed the
Eurodollar rate plus 1.375%, the alternate reference rate plus 0.375%, or, in
relation to commitment fees, 0.375% of the unused portion of the revolver.
NOTES PAYABLE TO FORMER SHAREHOLDERS
In connection with the acquisition of certain companies, USAI subsidiaries
have issued from time to time notes payable to the selling shareholders, several
of whom remain employees and shareholders. These notes payable bear interest at
rates from 6% to 10.65% per annum and have varying maturity dates continuing to
2001.
OTHER DEBT
Other debt consists primarily of various borrowings from banks, generally
secured by equipment. Interest rates range from 7.9% to 10.0% and have varying
maturity dates through 2018.
SCHEDULED PAYMENTS OF LONG-TERM DEBT
Scheduled long-term debt maturities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- -------------------------
<S> <C>
2000 . . . . . . . . . . . $ 9,298
2001 . . . . . . . . . . . 10,804
2002 . . . . . . . . . . . 10,584
2003 . . . . . . . . . . . 18,241
2004 . . . . . . . . . . . 39,375
Thereafter . . . . . . . . 81,972
---------
170,274
Less: Unamortized discount (664)
---------
$169,610
=========
</TABLE>
7. DEMAND NOTE
In March 1998, Harris Trust & Savings Bank granted USAI a $9,000 revolving
line of credit guaranteed by a shareholder. On April 15, 1999, the Company
retired the above note and was granted a $17,500 revolving line of credit also
guaranteed by a shareholder. The note including interest was paid in full on
August 19, 1999 with the proceeds from the Company's initial public offering.
F - 14
<PAGE>
8. EMPLOYEE BENEFIT PLANS
U.S. AGGREGATES INC. 401(K) PLAN
Prior to 1998, some of USAI's subsidiaries had 401(k) plans with various
vesting and discretionary contribution formulas. In 1998, USAI established a
401(k) plan that is funded by both employees and at the discretion of USAI.
This plan is administered by a third party. Subsequently, the subsidiaries'
401(k) plans were merged into the USAI plan.
All full-time employees other than certain union employees are eligible to
participate in the U.S. Aggregates, Inc. 401(k) Plan. USAI may make
discretionary contributions each year. Participants increase their vested
interest in these discretionary contributions based upon years of employment in
which at least 1,000 hours are worked, and they become fully vested after five
years. Participants are fully vested in their contributions. For the years
ended December 31, 1999, 1998 and 1997, USAI provided contributions of $0, $334
and $255, respectively.
SRM
SRM maintains a benefit plan partially funded by key-man life insurance for
current and former key employees of SRM. Benefits under the plan are
discretionary and are payable over a ten-year period upon retirement at age 65
or upon death. As of December 31, 1999, 1998 and 1997, the present value of
long-term benefits payable are $42, $76 and $79, respectively.
MULTIEMPLOYER PLANS
The Company participates in various multiemployer union pension plans
through two of its subsidiaries. Contributions to these plans in 1999, 1998 and
1997 were approximately $842, $586 and $292, respectively.
9. INCOME TAXES
USAI files a consolidated federal tax return. Its subsidiaries file tax
returns in the states in which they conduct business.
The provision for income taxes for 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $1,197 $ 884 $ 255
State 24 127 -
------ ------ ------
1,221 1,011 255
------ ------ ------
Deferred:
Federal 6,187 2,197 2,718
State 930 328 411
------ ------ ------
7,117 2,525 3,129
------ ------ ------
$8,338 $3,536 $3,384
====== ====== ======
</TABLE>
F - 15
<PAGE>
The provision for income taxes as reflected in the accompanying statements
of operations includes the following components:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Provision for income taxes. . . . . . . . $8,499 $3,748 $3,384
Benefit for income taxes on extraordinary
item. . . . . . . . . . . . . . . . . . (161) (212) -
------- ------- ------
$8,338 $3,536 $3,384
======= ======= ======
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accruals and reserves . . . . . . . . . . $ 980 $ 308
Alternative minimum tax credit. . . . . . 3,040 2,425
Net operating loss. . . . . . . . . . . . 4,778 3,922
Other . . . . . . . . . . . . . . . . . . 1,156 1,211
--------- ---------
Total deferred tax assets . . . . . . . 9,954 7,866
--------- ---------
Deferred tax liabilities:
Depreciation and depletion. . . . . . . . (30,584) (24,147)
Book basis in fixed assets over tax basis (30,846) (27,082)
Other . . . . . . . . . . . . . . . . . . (3,928) (1,248)
--------- ---------
Total deferred tax liabilities. . . . . (65,358) (52,477)
--------- ---------
Net deferred tax liability. . . . . . . $(55,404) $(44,611)
========= =========
</TABLE>
The reconciliation of the statutory rate to the effective rate is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Tax at federal statutory rate . . . . . . $7,995 $3,037 $3,234
State taxes, net of federal benefit . . . 742 304 358
Effect of tax rate increase to 35 percent - 546 -
Depletion . . . . . . . . . . . . . . . . (408) (491) (365)
Other . . . . . . . . . . . . . . . . . . 9 140 157
------- ------- -------
$8,338 $3,536 $3,384
======= ======= =======
</TABLE>
At December 31, 1999 and 1998 the Company had net operating loss
carryforwards of $12,492 and $10,437 available to offset future taxable income.
These carryforwards expire through 2013. Alternative minimum tax credit
carryforwards of $3,040 and $2,425 at December 31, 1999 and 1998 have no
expiration date. Prior to 1998, the Company provided federal income taxes using
a rate of 34%. In the year ended December 31, 1998 this rate was increased to
35% and deferred taxes were adjusted accordingly.
F - 16
<PAGE>
10. CAPITAL ACCOUNTS
COMMON STOCK
In August 1999, the company completed its initial public offering of common
stock. The Company sold 5 million shares of common stock.
At December 31, 1999 and 1998, the Company's $.01 par value common stock
authorized was 100 million and 7,508,664 shares, with 14,908,222 and 6,144,250
shares outstanding, including 7,629 shares of treasury stock, respectively.
The Company had a stock purchase plan periodically made available to select
members of management. Under this formula plan, individuals are allowed to
purchase stock in the Company or its subsidiaries. The Company sold 43,190
shares of its common stock under this program in 1997. Also 50 shares (12,120
equivalent USAI shares) of SRMHC and 2,500 shares (46,757 equivalent USAI
shares) of WAHC common stock were sold under this program in 1998. Shares
issued under this program were generally sold for a combination of cash and
notes and were subject to vesting over a 6-year period. The vested and unvested
shares were subject to various call or put options upon termination. The
repurchase price was at fair market value for vested shares or original cost for
unvested shares. The total number of shares outstanding under this program were
43,190 and 17,276 unvested and vested for the Company, 3,857 (72,136 equivalent
USAI shares) and 952 (17,805 equivalent USAI shares) unvested and vested for
WAHC and 170 (41,208 equivalent USAI shares) and 67 (16,241 equivalent USAI
shares) unvested and vested for SRM. Immediately prior to the consummation of
the initial public offering, the employees' shares in subsidiary stock were
exchanged for stock of the Company, and the Company's and employees' rights with
regard to vested shares ceased. The plan was terminated.
PREFERRED STOCK
At December 31, 1999 and 1998, the Company's $.01 par value non-voting
preferred stock authorized was 10 million and 500,000 shares with 0 and 300,842
shares issued and outstanding, respectively. Aggregate and per share cumulative
preferred dividends in arrears as of December 31 are as follows:
1999 1998 1997
------ ------ ------
Aggregate cumulative preferred dividends $ - $ 13,479 $ 9,382
Per preferred share cumulative preferred dividends - 44.80 31.18
Effective November, 1996 the terms of the preferred stock agreement were
modified, allowing the holders to redeem their shares at liquidation value plus
all accrued and unpaid dividends at any date after January 2000, subject to the
approval of the Company's lenders. As of December 31, 1998 the Company's debt
agreements do not allow such a redemption.
The preferred stock prior to redemption was reflected as Mandatorily
Redeemable Preferred Stock on the balance sheet and was not considered a
component of Shareholders' Equity. Dividends were accreted at a compound rate
of 10% per annum.
Accumulated accreted dividends of $16,293 have been charged against
retained earnings through August 18, 1999, the completion of the Company's
initial public offering, at which time all preferred stock with accumulated
dividends were converted into common shares.
F - 17
<PAGE>
WARRANTS
In connection with the issuance of the subordinated notes, USAI issued to
Prudential Insurance warrants to purchase 286,380 shares of the Company's common
stock at a nominal cost. These warrants were issued in 1998 and 1996. In
September 1999, 22,800 shares were exercised.
At December 31, 1999 and 1998, there were 263,580 and 286,380 warrants
outstanding, respectively.
11. INCOME PER SHARE
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
requires dual presentation of basic and diluted earnings per share on the face
of the income statement. The reconciliation between the computations is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1999 1998 1997
--------------------------- --------------------------- ---------------------------
PER SHARE PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- --------- ------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before extraordinary item. . . . . . . $14,197 $ 4,832 $ 5,505
Less: Accretion of preferred stock dividend 2,814 4,097 3,712
------- ------- -------
Basic income before extraordinary item
available to common shareholders. . . . . . 11,383 9,522,156 $ 1.20 735 6,136,630 $ 0.12 1,793 6,116,718 $ 0.29
Effect of warrants and options 277,661 245,464 190,029
--------- --------- ---------
Dilutive income before extraordinary item
available to common shareholders. . . . . . $11,383 9,799,817 $ 1.16 $ 735 6,382,094 $ 0.11 $ 1,793 6,306,747 $ 0.28
======= ========= ======= ======= ========= ======= ======= ========= =======
</TABLE>
All common stock equivalents are reflected in the Company's income per
share calculations; the Company had no anti-dilutive common stock equivalent
shares in 1999, 1998 and 1997.
Net income per share for all periods presented and all share data reflect
the Company's 30.0347 for 1 stock split effective at the time of the Company's
initial public offering of common stock.
12. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject USAI to concentrations of
credit risk consist primarily of cash and trade receivables.
USAI places its cash on deposit with credit-worthy financial institutions,
in accounts or instruments with maturities of three months or less.
Concentration of credit risk with respect to trade receivables is limited due to
the large number of customers who service a large base of clients dispersed
across many different industries throughout the southeastern and southwestern
sections of the United States.
F - 18
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
USAI and its subsidiaries lease office facilities, trucks, equipment and
certain quarry sites under operating lease arrangements. Lease expense (other
than royalties) was $11,154, $8,951 and $3,933 for the years ended December 31,
1999, 1998 and 1997, respectively. Total future minimum rentals under
noncancelable operating leases as of December 31, 1999 are:
<TABLE>
<CAPTION>
<S> <C>
2000 . . . . . . . . . $ 15,882
2001 . . . . . . . . . 15,702
2002 . . . . . . . . . 13,628
2003 . . . . . . . . . 12,182
2004 . . . . . . . . . 10,181
Thereafter . . . . . . 37,168
--------
$104,743
========
</TABLE>
The Company operates several quarries on land owned entirely or in part by
unrelated third parties. Pursuant to related agreements, the Company pays
monthly royalties to the owner based on the quantity of aggregates sold. The
initial terms of these agreements range from 5 to 40 years and generally include
renewal options. The minimum royalty payments are included in the above table.
Royalty expenses recorded pursuant to these arrangements in 1999, 1998 and 1997
totaled $5,740, $4,748 and $2,725, respectively.
USAI and its subsidiaries are subject to various laws and regulations
relating to the protection of the environment. It is not possible to quantify
with certainty the potential impact of actions regarding environmental matters,
particularly any future remediation and other compliance efforts. In the
opinion of management, future compliance with existing environmental protection
laws will not have a material adverse effect on the financial condition or
results of operations of USAI.
USAI acquired SRM from Lohja, Inc. (Lohja) in 1994. In connection with the
purchase, USAI agreed to make semiannual payments to Lohja (the Lohja
obligation) through December 31, 1999, under an initial $3,760 obligation,
contingent upon the continuing operations and earnings of one of the Company's
quarries. In September 1998, the Company signed a lease authorizing continuing
operations at the quarry and in accordance with the original purchase agreement
paid the balance owed of $1,149 in full satisfaction of the purchase contract.
The Company has a quarry under development in DeKalb County, Georgia which
is inactive but currently permitted as a dimensional stone quarry site. The
Company intends to file a lawsuit against the county regarding a dispute over
the issuance of a blasting permit to start a crushed stone operation. The
DeKalb site development-stage activities to date have consisted primarily of
site preparation work such as road construction, the placement of scales and
legal fees. DeKalb has also made advance minimum royalty payments under a
sublease agreement to be applied against payments due upon the commencement of
operations at this site. Capitalized costs as of December 31, 1999 and 1998 in
connection with this site were $1,636 and $1,524, respectively. Management
feels that they will eventually open the quarry; however, in the event that
DeKalb is not permitted to conduct operations at this quarry, the quarry will
likely be leased to a dimensional stone producer.
USAI is subject to various legal proceedings and claims that have arisen in
the ordinary course of its business and have not been finally adjudicated. In
the opinion of management, the ultimate resolution of these issues would not
have a material adverse effect on USAI's financial condition or results of
operations.
F - 19
<PAGE>
14. RELATED-PARTY TRANSACTIONS
During 1998, SRMHC issued 50 shares (12,120 equivalent USAI shares) of
SRMHC common stock to one management member of SRMHC and received a note
receivable of $57 for the issuance of such shares. This note bears interest at
8 percent per annum and is due on December 31, 2003.
In 1998, WAHC issued 2,500 shares (46,757 equivalent USAI shares) of WAHC
common stock to several members of WAHC management and received notes receivable
of $250 for the issuance of these shares. Additionally, a member of Valley
Asphalt, Inc.'s (Valley) management elected to purchase 625 shares (11,689
equivalent USAI shares) of WAHC's outstanding common stock, in lieu of amounts
owed to them.
In August 1999, immediately prior to the Company's initial public offering,
all notes receivable pertaining to the purchase of SRMHC's and WAHC's common
stock were transferred to USAI.
Included in long-term debt is $2,033 and $1,682 as of December 31, 1999 and
1998 that is due to employees or shareholders who were former owners of acquired
companies.
An executive officer and director of the Company has a minority interest in
Dekalb Stone, Inc., a company in which U.S. Aggregates is the majority
shareholder.
All related-party transactions are considered to be conducted at arm's
length.
USAI pays an advisory fee to one of its major shareholders. Such fee
amounted to $150 for each of the years ended December 31, 1999, 1998 and 1997.
Also, USAI paid advisory fees of approximately $416, $404 and $308 to a common
and preferred shareholder of USAI for each of the years ended December 31, 1999,
1998 and 1997, respectively. These fees were paid in connection with various
financing transactions undertaken by USAI during these years. The wife of one
executive acts as a financial advisor to the Company. This advisor was paid a
total of $144 and $151 in 1999 and 1998, respectively, for financial advisory
services provided.
15. U.S. AGGREGATES, INC. LONG-TERM INCENTIVE PLAN
The Board of Directors and the Company adopted the U.S. Aggregates, Inc.
1999 Long Term Incentive Plan, whereby the Company is authorized to issue up to
700,840 shares of the Company at a price equal to the fair market value of the
stock on the date of grant. This plan terminates at the close of business on
August 10, 2009. The vesting period for options granted under this plan is
three years for employees of the Company and immediately upon the grant date for
outside directors. Options granted under this plan are accounted for in
accordance with APB. No. 25 wherein no compensation expense would be recognized
for options issued to employees.
In 1999, the compensation committee of the Board of Directors granted
287,836 options under the plan to certain employees of the company and 15,000
options to certain directors. Pro forma information regarding net earnings and
earnings per share is required by SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that statement.
The fair value for options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.27%; dividend yields of 0.8%;
volatility factors of the expected market price of the Company's common stock of
63.0%; and a weighted-average expected life of the options of three years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effects
of applying SFAS 123 on a pro forma basis would have decreased net earnings by
approximately $229 in 1999. The impact on basic and diluted earnings per share
in 1999 would have been a $.02 and $.01 decrease, respectively.
F - 20
<PAGE>
A summary of the Company's stock option activity, related information as of
December 31, 1999 and changes during the year is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
-------- ---------
<S> <C> <C>
Outstanding at beginning of year. . . . . - $ -
Granted at fair value . . . . . . . . . 302,836 $ 14.74
Exercised . . . . . . . . . . . . . . . - $ -
Forfeited . . . . . . . . . . . . . . . 10,500 $ 15.00
--------
Outstanding at year end . . . . . . . . . 292,336 $ 14.73
========
Options exercisable at year end . . . . . - $ -
Weighted-average grant date fair value of
each option granted during the year . . $ 6.66
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OF CONTRACTUAL EXERCISE OF EXERCISE
EXERCISE PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
- --------------- ------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C>
$ 11.47 22,500 9.61 $ 11.47 - $ -
$ 15.00 269,836 9.61 $ 15.00 - $ -
------- --------
Total 292,336 9.61 - $ -
======= ========
</TABLE>
F - 21
<PAGE>
16. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
----------- --------- -------------- --------------
<S> <C> <C> <C> <C>
1999
Net sales. . . . . . . . . . . . . . . . $ 49,171 $ 77,768 $ 93,986 $ 77,256
Gross profit . . . . . . . . . . . . . . 11,461 23,512 28,986 20,545
Income (loss) before extraordinary item. (1,675) 4,799 8,071 3,002
Net income (loss). . . . . . . . . . . . (1,675) 4,799 7,807 3,002
Income (loss) before extraordinary item
available for common shareholders
per share
-basic . . . . . . . . . . . . . . . $ (0.45) $ 0.60 $ 0.69 $ 0.20
-diluted . . . . . . . . . . . . . . $ (0.45) $ 0.57 $ 0.67 $ 0.20
1998
Net sales. . . . . . . . . . . . . . . . $ 28,513 $ 54,529 $ 82,512 $ 63,185
Gross profit . . . . . . . . . . . . . . 7,179 15,055 23,982 14,303
Income (loss) before extraordinary item. (1,823) 2,210 3,858 587
Net income (loss). . . . . . . . . . . . (1,823) 1,872 3,858 587
Income (loss) before extraordinary item
available for common shareholders
per share
-basic . . . . . . . . . . . . . . . $ (0.46) $ 0.20 $ 0.46 $ (0.08)
-diluted . . . . . . . . . . . . . . $ (0.46) $ 0.19 $ 0.44 $ (0.08)
</TABLE>
F - 22
<PAGE>
EXHIIBIT INDEX
Exhibit No. Description
- ------------ -----------
3.1* Form of Restated Certificate of Incorporation of the Company
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
3.1(vi), filed July 14, 1999)
3.2* Form of Restated By-laws of the Company (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 3.2(ii), filed July
14, 1999)
4.1(i)* Third Amended and Restated Credit Agreement dated as of June
5, 1998 by and among the Company, various financial
institutions and Bank of America National Trust and Savings
Association, individually and as agent (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.1(i), filed July
14, 1999)
4.1(ii)* First Amendment to Third Amended and Restated Credit
Agreement dated as of April 14, 1999 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.1(ii), filed July 14, 1999)
4.1(iii) Second Amendment to Third Amended and Restated Credit
Agreement dated as of August 12, 1999 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent
4.1(iv) Third Amendment to Third Amended and Restated Credit
Agreement dated as of January 13, 2000 by and among the
Company, various financial institutions and Bank of America
National Trust and Savings Association, individually and as
agent
4.2* Amended and Restated Security Agreement dated as of June 5,
1998 by and among the Company, its subsidiaries and Bank of
America National Trust and Savings Association (Amendment
No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit 4.2, filed
July 14, 1999)
4.3* Amended and Restated Company Pledge Agreement dated as of
June 5, 1998 by and between the Company and Bank of America
National Trust and Savings Association (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.3, filed July 14,
1999)
4.4* Amended and Restated Subsidiary Pledge Agreement dated as of
June 5, 1998 by and among Western Aggregates Holding Corp.,
Western Rock Products Corp., SRM Holdings Corp., Southern
Ready Mix, Inc., Monroc, Inc. and Bank of America National
Trust and Savings Association (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.4, filed July 14, 1999)
4.5* Amended and Restated Shareholder Pledge Agreement dated as
of June 5, 1998 by and among Western Aggregates Holding
Corp.'s stockholders, SRM Holdings Corp.'s stockholders and
Bank of America National Trust and Savings Association
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.5, filed July 14, 1999)
4.6* Amended and Restated Guaranty dated as of June 5, 1998 by
and among the Company's subsidiaries, various financial
institutions and Bank of America National Trust and Savings
Association (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.6, filed July 14, 1999)
4.7(i)* Amended and Restated Note and Warrant Purchase Agreement
dated as of June 5, 1998 by and between the Company and The
Prudential Insurance Company of America (Amendment No. 1 to
Form S-1 (Reg. No. 333-79209), Exhibit 4.7(i), filed July
14, 1999)
<PAGE>
4.7(ii)* Amendment No. 1 to Amended and Restated Note and Warrant
Purchase Agreement dated as of April 14, 1999 by and between
the Company and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.7(ii), filed July 14, 1999)
4.7(iii)* Waiver under Note Agreement dated as of April 15, 1999 by
and between the Company and The Prudential Insurance Company
of America (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.7(iii), filed July 14, 1999)
4.7(iv) Amendment No. 2 to Amended and Restated Note and Warrant
Purchase Agreement dated as of August 12, 1999 by and
between the Company and The Prudential Insurance Company of
America
4.8* Amended and Restated Guaranty dated as of June 5, 1998 by
and among the Company's subsidiaries and The Prudential
Insurance Company of America (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.8, filed July 14, 1999)
4.9(i)* Registration Rights and Stockholders' Agreement dated as of
November 21, 1996 by and among the Company, the Company's
stockholders and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.9(i), filed July 14, 1999)
4.9(ii)* First Amendment to Registration Rights and Stockholders'
Agreement dated as of June 5, 1998 by and among, the
Company, the Company's stockholders and The Prudential
Insurance Company of America (Amendment No. 1 to Form S-1
(Reg. No. 333-79209), Exhibit 4.9(ii), filed July 14, 1999)
4.10* Warrant Agreement dated as of November 21, 1996 by and
between the Company and The Prudential Insurance Company of
America (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.10, filed July 14, 1999)
4.11* Warrant Agreement dated as of June 5, 1998 by and between
the Company and The Prudential Insurance Company of America
(Amendment No. 1 to Form S-1 (Reg. No. 333-79209), Exhibit
4.11, filed July 14, 1999)
4.12* Letter Agreement dated as of April 15, 1999 by and among
Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust
and Savings Bank, Bank of America National Trust and Savings
Association, as Agent, The Prudential Insurance Company of
America and the Company (Amendment No. 1 to Form S-1 (Reg.
No. 333-79209), Exhibit 4.12, filed July 14, 1999)
4.13* Floating Rate Loan - Procedures Letter dated as of April 15,
1999 by and between Harris Trust and Savings Bank and the
Company (Amendment No. 1 to Form S-1 (Reg. No. 333-79209),
Exhibit 4.13, filed July 14, 1999)
4.14* Guaranty, dated April 15, 1999, in favor of Harris Trust and
Savings Bank executed by Golder, Thoma, Cressey, Rauner
Fund, IV, L.P. (Amendment No. 1 to Form S-1 (Reg. No. 333-
79209), Exhibit 4.14, filed July 14, 1999)
10.1* Form of Underwriting Agreement among the Company, the
Selling Stockholders, BT Alex Brown Incorporated, The
Robinson-Humphrey Company, LLC and J. Henry Schroder & Co.
Limited (Form S-1 (Reg. No. 333-79209), Exhibit 1.1, filed
May 24, 1999)
10.2* Equity Purchase Agreement dated as of January 24, 1994
between the Company and Golder, Thoma, Cressey, Rauner Fund
IV, L.P. (Form S-1 (Reg. No. 333-79209), Exhibit 10.2, filed
May 24, 1999)
<PAGE>
10.3* Stockholders Agreement dated as of January 24, 1994 by and
among the Company and Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and certain Executives named therein (Form S-1
(Reg. No. 333-79209), Exhibit 10.3, filed May 24, 1999)
10.4* Stockholders Joinder Agreement dated as of August 1, 1994 by
and among the Company, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and Edward A. Dougherty (Form S-1 (Reg. No. 333-
79209), Exhibit 10.4, filed May 24, 1999)
10.5* Stockholders Joinder Agreement dated as of August 5, 1994 by
and among the Company, Golder, Thoma, Cressey, Rauner Fund
IV, L.P. and Morris L. Bishop (Form S-1 (Reg. No. 333-
79209), Exhibit 10.5, filed May 24, 1999)
10.6* Stockholders Joinder Agreement dated as of October 31, 1994
by and among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Charles R. Pullin (Form S-1 (Reg. No. 333-
79209), Exhibit 10.6, filed May 24, 1999)
10.7* Stockholders Joinder Agreement dated as of July 31, 1998 by
and among the Company, James A. Harris and James A. Harris
Grantor Retained Annuity Trust (Form S-1 (Reg. No. 333-
79209), Exhibit 10.7, filed May 24, 1999)
10.8* Stockholders Joinder Agreement dated as of October 1, 1998
by and among the Company, James A. Harris and The James A.
Harris Charitable Remainder Unitrust (Form S-1 (Reg. No. 333-
79209), Exhibit 10.8, filed May 24, 1999)
10.9* Registration Rights Agreement dated as of January 24, 1994
by and among the Company and Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and certain Executives named therein (Form S-1
(Reg. No. 333-79209), Exhibit 10.9, filed May 24, 1999)
10.10* Registration Rights Joinder Agreement dated as of August 1,
1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Edward A. Dougherty (Form S-1 (Reg.
No. 333-79209), Exhibit 10.10, filed May 24, 1999)
10.11* Registration Rights Joinder Agreement dated as of August 5,
1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Morris L. Bishop (Form S-1 (Reg.
No. 333-79209), Exhibit 10.11, filed May 24, 1999)
10.12* Registration Rights Joinder Agreement dated as of October
31, 1994 by and among the Company, Golder, Thoma, Cressey,
Rauner Fund IV, L.P. and Charles R. Pullin (Form S-1 (Reg.
No. 333-79209), Exhibit 10.12, filed May 24, 1999)
10.13* Senior Management Agreement dated as of January 24, 1994 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.13, filed May 24, 1999)
10.15* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.15, filed May 24, 1999)
10.16* Senior Management Agreement dated as of January 24, 1994 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.16, filed May 24, 1999)
10.18* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.18, filed May 24, 1999)
10.19* Senior Management Agreement dated as of August 5, 1994 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.19, filed May 24, 1999)
<PAGE>
10.20* Senior Management Agreement dated as of October 1, 1997 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.20, filed May 24, 1999)
10.21* Executive Stock Pledge Agreement dated as of January 24,
1994 by and between the Company and James A. Harris (Form S-
1 (Reg. No. 333-79209), Exhibit 10.21, filed May 24, 1999)
10.22* Executive Stock Pledge Agreement dated as of May 10, 1994 by
and between the Company and James A. Harris (Form S-1 (Reg.
No. 333-79209), Exhibit 10.22, filed May 24, 1999)
10.23* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and James A. Harris. (Form S-
1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10.15, filed May 24, 1999)
10.24* Executive Stock Pledge Agreement dated as of January 24,
1994 by and between the Company and Michael J. Stone (Form S-
1 (Reg. No. 333-79209), Exhibit 10.24, filed May 24, 1999)
10.25* Executive Stock Pledge Agreement dated as of May 10, 1994 by
and between the Company and Michael J. Stone (Form S-1 (Reg.
No. 333-79209), Exhibit 10.25, filed May 24, 1999)
10.26* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and Michael J. Stone. (Form
S-1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10., filed May 24, 1999)
10.27* Executive Stock Pledge Agreement dated as of August 5, 1994
by and between the Company and Morris L. Bishop, Jr. (Form S-
1 (Reg. No. 333-79209), Exhibit 10.27, filed May 24, 1999)
10.28* Executive Stock Pledge Agreement dated as of November 20,
1996 by and between the Company and Morris L. Bishop, Jr.
(Form S-1 (Reg. No. 333-79209), included as Exhibit B to
exhibit 10.43, filed May 24, 1999)
10.29* Executive Stock Pledge Agreement dated as of October 1, 1997
by and between the Company and Morris L. Bishop, Jr. (Form S-
1 (Reg. No. 333-79209), included as Exhibit B to exhibit
10.20, filed May 24, 1999)
10.30* Promissory Note dated as of January 24, 1994 by James A.
Harris in favor of the Company in the principal amount of
$16,223.76. (Form S-1 (Reg. No. 333-79209), Exhibit 10.30,
filed May 24, 1999)
10.31* Promissory Note dated as of May 10, 1994 by James A. Harris
in favor of the Company in the principal amount of
$121,638.24. (Form S-1 (Reg. No. 333-79209), Exhibit 10.31,
filed May 24, 1999)
10.32* Promissory Note dated as of November 20, 1996 by James A.
Harris in favor of the Company in the principal amount of
$8,096.89. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to exhibit 10.15, filed May 24, 1999)
10.33* Promissory Note dated as of January 24, 1994 by Michael J.
Stone in favor of the Company in the principal amount of
$10,809.18. (Form S-1 (Reg. No. 333-79209), Exhibit 10.33,
filed May 24, 1999)
10.34* Promissory Note dated as of May 10, 1994 by Michael J. Stone
in favor of the Company in the principal amount of
$81,098.82. (Form S-1 (Reg. No. 333-79209), Exhibit 10.34,
filed May 24, 1999)
<PAGE>
10.35* Promissory Note dated as of November 20, 1996 by Michael J.
Stone in favor of the Company in the principal amount of
$8,096.89. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to Exhibit 10.18, filed May 24, 1999)
10.36* Promissory Note dated August 5, 1994 by Morris L. Bishop in
favor of the Company in the principal amount of $16,903.08.
(Form S-1 (Reg. No. 333-79209), Exhibit 10.36, filed May 24,
1999)
10.37* Promissory Note dated November 20, 1996 by Morris L. Bishop
in favor of the Company in the principal amount of
$9,940.05. (Form S-1 (Reg. No. 333-79209), included as
Exhibit A to exhibit 10.43, filed May 24, 1999)
10.38* Demand Note dated October 1, 1997 by Morris L. Bishop in
favor of the Company in the principal amount of $219,985.62.
(Form S-1 (Reg. No. 333-79209), included as an exhibit A to
exhibit 20, filed May 24, 1999)
10.39* Amended and Restated Employment Agreement dated August 18,
1999 with James A. Harris (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.2, filed
November 12, 1999)
10.40* Amended and Restated Employment Agreement dated August 18,
1999 with Michael J. Stone (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.3, November 12,
1999)
10.41* Amended and Restated Employment Agreement dated August 18,
1999 with Morris L. Bishop, Jr. (Form 10-Q for the Quarterly
Period Ended September 30, 1999, Exhibit 10.4, November 12,
1999)
10.42(i)* Agreement and Plan of Merger dated as of January 29, 1998 by
and among the Company, Western Acquisition, Inc. and Monroc,
Inc. (Form S-1 (Reg. No. 333-79209), Exhibit 10.42(i), filed
May 24, 1999)
10.42(ii)* Amended and Restated Agreement and Plan of Merger dated as
of March 4, 1998 by and among the Company, Western
Acquisition, Inc. and Monroc, Inc. (Form S-1 (Reg. No. 333-
79209), Exhibit 10.42(ii), filed May 24, 1999)
10.43* Senior Management Agreement dated as of November 20, 1996 by
and between the Company and Morris L. Bishop, Jr. (Form S-1
(Reg. No. 333-79209), Exhibit 10.43, filed May 24, 1999)
10.44* Stockholders Joinder Agreement dated as of December 31, 1997
by and among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P. and Jeanne T. Richey (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.44, filed July 14,
1999)
10.45* Letter Agreement dated as of April 18, 1998 by and between
the Company and Edward A. Dougherty (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.45, filed July 14,
1999)
10.46* Letter Agreement dated as of April 18, 1998 by and between
the Company and Edward A. Dougherty (Amendment No. 1 to Form
S-1 (Reg. No. 333-79209), Exhibit 10.46, filed July 14,
1999)
10.47* Letter Agreement dated as of December 30, 1998 by and
between the Company and Edward A. Dougherty (Amendment No. 1
to Form S-1 (Reg. No. 333-79209), Exhibit 10.47, filed July
14, 1999)
<PAGE>
10.49* U.S. Aggregates, Inc. 1999 Long Term Incentive Plan
(Amendment No. 4 to Form S-1 (Reg. No. 333-79209), Exhibit
10.49, filed August 12, 1999)
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule (EDGAR Filing Only)
* Incorporated by reference to the filing indicated.
SECOND AMENDMENT
THIS SECOND AMENDMENT dated as of August 12, 1999 (this "Amendment") is to
the Third Amended and Restated Credit Agreement (as heretofore amended, the
"Credit Agreement") dated as of June 5, 1998 among U.S. AGGREGATES, INC., a
"Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent
for the Lenders (the "Agent"). Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as defined in the Credit Agreement.
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence
of) the Amendment Effective Date (as defined below):
1.1 (a) The following definition shall be added to Section 1.1
of the Credit Agreement in its appropriate alphabetical position:
Change of Control means (i)(A) any Person or group of related persons for
purposes of Section 13(d) of the Securities Exchange Act of 1934 (a "Group")
(other than GTCR) shall become the owner, directly or indirectly, beneficially
or of record, of shares representing 30% or more of the aggregate ordinary
voting power represented by the issued and outstanding capital stock (the
indirectly, in the aggregate a lesser percentage of the Voting Stock of the
Company than such Person or Group, (ii) the replacement of a majority of the
Board of Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved or (iii) any event or condition relating to a change of control of the
Company shall occur which requires, or permits the holder or holders (or any
agent or trustee therefor) of any Debt of the Company or any Subsidiary to
require, the purchase or repurchase prior to its expressed maturity of any Debt
of the Company or any Subsidiary in an aggregate principal amount (for all such
Debt) of $1,000,000 or more.
(b) The definition of "Fixed Charge Coverage Ratio" in Section 1.1 of
the Credit Agreement shall be amended and restated in its entirety to read as
follows:
Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of
(a) EBITDA for such Computation Period to (b) the sum for such Computation
Period of (i) Interest Expense (other than, so long as the Harris Note Documents
are in effect, with respect to the Harris Note), (ii) Capital Expenditures,
(iii) cash taxes paid by the Company and its Subsidiaries, (iv) all scheduled
principal payments due on any Total Debt, other than principal payments made as
a result of any mandatory reduction of the Revolving Commitments and (v) the
amount of all cash dividends declared or paid by the Company.
1.2 Section 6.2.1(a)(iv) of the Credit Agreement shall be amended and
restated to read in its entirety as follows:
(iv) Concurrently with the receipt of any Net Cash Proceeds from any
issuance of equity securities of the Company or any Subsidiary (including a
Public Offering, but excluding (x) any issuance of shares of capital stock
pursuant to any employee or director stock option program, benefit plan or
compensation program, (y) equity contributions from GTCR or its Affiliates to
fund Permitted Acquisitions or to fund payments required by the Harris Note
Documents and (z) any issuance of capital stock by a Subsidiary to the Company
or another Subsidiary), in an amount equal to (x) (i) such Net Cash Proceeds
minus (ii) if and to the extent that the Company funds such payment with the
proceeds of its initial Public Offering of common stock, the amount (not to
exceed $16,400,000) paid by the Company to pay in full and retire the Harris
Note times (y) 0.50.
1.3 Section 10.1 of the Credit Agreement shall be amended (a) by
deleting the number "30" where it appears in clause (ii) of Section 10.1.2 and
inserting in lieu thereof the number "45" and (b) adding the following as
Section 10.1.12:
10.1.12 Forms 10K and 10Q. For so long as the Company is a "registrant"
within the meaning of Rule 1-01 of Regulation S-X of the SEC and is obligated to
file annual and quarterly reports with the SEC on Forms 10K and 10Q (or any
successor forms) then, notwithstanding the foregoing, it is understood and
agreed that the Company may satisfy its obligations under Sections 10.1.1 and
10.1.2 by delivering copies of such forms to each Lender within the time periods
specified in such Sections in lieu of the deliveries specified in such Sections.
1.4 Section 10.11 of the Credit Agreement shall be amended by deleting
the word "and" immediately prior to clause (viii) of the proviso thereof and
inserting the following at the end of such proviso "; (ix) the Company may
convert 300,842.2 shares of its Preferred Stock into common stock at a
conversion price equal to the offering price per share of common stock in its
initial Public Offering of such common stock; and (x) if no Event of Default or
Unmatured Event of Default exists or would result therefrom, the Company may
declare and pay dividends on its common stock (A) in the third and fourth Fiscal
Quarters of 1999 in an amount not to exceed $600,000 in any such fiscal quarter
and (B) in any Fiscal Year (commencing with the Fiscal Year beginning January 1,
2000) in an amount not to exceed 15% of Consolidated Net Income for the
immediately preceding Fiscal Year (provided, that the Company may only pay any
dividend pursuant to this clause (x) if, after giving effect thereto, the
Company shall be in compliance with all financial covenants in Section 10.6 on a
pro forma basis for the twelve consecutive month period ending on the date of
the Lenders on or prior to the date of declaration of such dividend), it being
understood that, unless an Event of Default under Section 12.1.1 exists,
dividends may be paid within 60 days after the date of declaration thereof if at
such date of declaration such dividend complied with this clause (x) even if at
the time of payment thereof the Company is not in compliance with this clause
(x)."
1.5 Section 10.12 of the Credit Agreement shall be amended and restated
to read in its entirety as follows:
10.12 Capital Expenditure, etc. Not, and not permit any Subsidiary to,
make or commit to make any Capital Expenditure in any Fiscal Year, except
Capital Expenditures which do not in the aggregate exceed (i) $19,000,000 in the
1999 Fiscal Year and (ii) $35,000,000 in any Fiscal Year thereafter; provided
that any unused amount in any Fiscal Year, up to a maximum of $2,000,000, may be
carried over and used in the following Fiscal Year.
1.6 Section 12.1.11(a) of the Credit Agreement shall be amended and
restated to read in its entirety as follows "(a) a Change of Control shall
occur."
SECTION 2 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that (a) the representations and
warranties made in Section 9 (excluding Sections 9.6 and 9.8) of the Credit
Agreement are true and correct on and as of the Amendment Effective Date with
the same effect as if made on and as of the Amendment Effective Date (except to
the extent relating solely to an earlier date, in which case they were true and
correct as of such earlier date); (b) no Event of Default or Unmatured Event of
Default exists or will result from the execution of this Amendment; (c) no event
or circumstance has occurred since the Effective Date that has resulted, or
would reasonably be expected to result, in a Material Adverse Effect; (d) the
execution and delivery by the Company of this Amendment and the performance by
the Company of its obligations under the Credit Agreement as amended hereby (as
so amended, the "Amended Credit Agreement") (i) are within the corporate powers
of the Company, (ii) have been duly authorized by all necessary corporate
action, (iii) have received all necessary approval from any Governmental
Authority and (iv) do not and will not contravene or conflict with any provision
of any law, rule or regulation or any order, decree, judgment or award which is
binding on the Company or any Guarantor or any of their respective Subsidiaries
or of any provision of the certificate of incorporation or bylaws or other
organizational documents of the Company or of any agreement, indenture,
instrument or other document which is binding on the Company or any Guarantor or
any of their respective Subsidiaries; and (e) the Amended Credit Agreement is
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
SECTION 3 EFFECTIVENESS. The amendments set forth in Section 1 above
Agent shall have received (a) evidence that the Company has consummated the
initial public offering of its equity securities (the "IPO") and received gross
cash proceeds therefrom in an amount not less than $65,000,000, which evidence
must be received on or prior to October 31, 1999, (b) a counterpart of this
Amendment executed by the Company and the Required Lenders, the Required
Revolving Lenders, the Required Term A Lenders and the Required Term B Lenders
(or, in the case of any party other than the Company from which the Agent has
not received a counterpart hereof, facsimile confirmation of the execution of a
counterpart hereof by such party), (c) for each of the Lenders, an amendment fee
in an amount equal to 0.125% of the sum of such Lender's Revolving Commitment
plus the outstanding Term Loans of such Lender and (d) each of the following
documents, each in form and substance satisfactory to the Agent:
3.1 Reaffirmation. Counterparts of the Reaffirmation of Loan
Documents, substantially in the forms of Exhibit A executed by the Company and
each Guarantor.
3.2 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Amendment, the Amended Credit Agreement and
each other Loan Document contemplated by this Amendment to which the Company is
a party.
3.3 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of the Company, certifying the names of the
officer or officers of the Company authorized to sign this Amendment and the
other Loan Documents contemplated hereby to which the Company is a party,
together with a sample of the true signature of each such officer.
3.4 Subordinated Debt. Evidence satisfactory to the Agent that the
Note and Warrant Purchase Agreement shall have been amended to permit the
payment of the Harris Note from the proceeds of the IPO in the manner
contemplated hereby.
3.5 Other Documents. Such other documents as the Agent or any Lender
may reasonably request.
SECTION 4 MISCELLANEOUS.
4.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references
in the Credit Agreement, the Notes, each other Loan Document and any similar
document to the "Credit Agreement" or similar terms shall refer to the Amended
Credit Agreement.
4.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
4.3 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including reasonable fees and disbursements of counsel,
including, without duplication, the allocable costs of internal legal services
and all disbursements of internal legal counsel) in connection with the
preparation, execution and delivery of this Amendment.
4.4 Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Illinois applicable to contracts made and
to be wholly performed within the State of Illinois.
4.5 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
successors and assigns of the Lenders and the Agent.
<PAGE>
Delivered as of the day and year first above written.
U.S. AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Chief Financial Officer
---------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
/s/ Jim Cockey
By: Jim Cockey
-----------
Title: Principal
-----------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender and as
Issuing Lender
/s/ Jim Cockey
By: Jim Cockey
-----------
Title: Principal
-----------
BANKBOSTON, N.A., as a Lender
/s/ Marie C. Duprey
By: Marie C. Duprey
-----------------
Title: Vice President
---------------
NATIONAL CITY BANK, as a Lender
/s/ Brian Cullina
By: Brian Cullina
--------------
Title: Senior Vice President
-----------------------
BANK OF SCOTLAND, as a Lender
/s/ Annie Glynn
By: Annie Glynn
------------
Title: Senior Vice President
-----------------------
IBJ WHITEHALL BANK AND TRUST COMPANY (formerly IBJ Schroder Bank & Trust
Company), as a Lender
/s/ Mark H. Minter
By: Mark H. Minter
----------------
Title: Managing Director
------------------
COMERICA BANK - CALIFORNIA, as a Lender
/s/ Scott J. Smith
By: Scott J. Smith
----------------
Title: Vice President
---------------
ZIONS FIRST NATIONAL BANK, as a Lender
/s/ Kelly Robertson
By: Kelly Robertson
----------------
Title: Vice President
---------------
UNION BANK OF CALIFORNIA, N.A., as a Lender
/s/ Nancy A. Perkins
By: Nancy A. Perkins
------------------
Title: Vice President
---------------
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.
as Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance
Company as Portfolio Manager, as a Lender
Illegible
By:
Title: Principal
---------
CYPRESSTREE INVESTMENT PARTNERS II, LTD.
By: CypressTree Investment Management Company, Inc., as Portfolio Manager
Illegible
By:
Title: Principal
---------
ING HIGH INCOME PRINCIPAL PRESERVATION FUND HOLDINGS, LDC, as a Lender
By: ING Capital Advisors, Inc., as Investment Advisor
/s/ Helen Y. Rhee
By: Helen Y. Rhee
---------------
Title: Vice President & Portfolio Manager
--------------------------------------
PILGRIM PRIME RATE TRUST, as a Lender
By: Pilgrim Investments, Inc., as its Investment Manager
/s/ Robert L. Wilson
By: Robert L. Wilson
------------------
Title: Vice President
---------------
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
/s/ Scott H. Page
By: Scott H. Page
---------------
Title: Vice President
---------------
EATON VANCE INSTITUTIONAL SENIOR LOAN FUND
By: Eaton Vance Management, as Investment Advisor
/s/ Scott H. Page
By: Scott H. Page
---------------
Title: Vice President
---------------
KZH-CYPRESSTREE - 1 LLC
/s/ Peter Chin
By: Peter Chin
-----------
Title: Authorized Agent
-----------------
KZH-HIGHLAND - 2 LLC
/s/ Peter Chin
By: Peter Chin
-----------
Title: Authorized Agent
-----------------
ARCHIMEDES FUNDING II, LLC
By: ING Capital Advisors, LLC, as Collateral Manager
/s/ Helen Y. Rhee
By: Helen Y. Rhee
---------------
Title: Vice President & Portfolio Manager
--------------------------------------
<PAGE>
EXHIBIT A
FORM OF REAFFIRMATION OF
LOAN DOCUMENTS
July 8, 1999
Bank of America National Trust
and Savings Association, as Agent
and the other parties
to the Third Amended and
Restated Credit Agreement
referred to below
1455 Market Street
San Francisco, California 94103
Attn: Agency Management Services #5596
RE: REAFFIRMATION OF LOAN DOCUMENTS --
COMPANY AND SUBSIDIARIES
Ladies and Gentlemen:
Please refer to:
1. The Amended and Restated Security Agreement dated as of June 5, 1998
(the "Security Agreement") among U.S. Aggregates, Inc. (the "Company"), Western
Aggregates Holding Corporation, a Delaware corporation, Jensen Construction and
Development, INC., a Nevada corporation, Sandia Construction, Inc., a Nevada
corporation, Cox Rock Products Inc., a Utah corporation, Cox Transport
Corporation, a Utah corporation, SRM Holdings Corp., a Delaware corporation,
Southern Ready Mix, Inc., an Alabama corporation, A-Block Company, Inc., an
Arizona corporation, A-Block Company, Inc., a California corporation, Mohave
Concrete and Materials, Inc., an Arizona corporation, Mohave Concrete and
Materials, Inc., a Nevada corporation, Mulberry Rock Corporation, a Georgia
corporation, Valley Asphalt, Inc., a Utah Corporation, BHY Ready Mix, Inc., a
Tennessee corporation, Geodyne Transport, Inc., a Utah corporation, Western Rock
Products Corp., a Utah corporation, Tri-State Testing Laboratories, Inc., a Utah
Corporation, Dekalb Stone, Inc., a Georgia corporation, Beck Paving, Inc., a
Utah corporation, Bradley Stone & Sand, Inc., a Tennessee corporation, Treasure
Valley Concrete, Inc., an Idaho corporation, Monroc, Inc., a Delaware
corporation, Western Aggregates, Inc., a Utah corporation, and Bank of America
National Trust and Savings Association in its capacity as Agent (in such
capacity, the "Agent");
2. The Amended and Restated Guaranty dated as of June 5, 1998 (the
"Guaranty") executed in favor of the Agent and various other parties by Western
Aggregates Holding Corporation, Jensen Construction and Development, Inc.,
Sandia Construction, Inc., Cox Rock Products Inc., Cox Transport Corporation,
SRM Holdings Corp., Southern Ready Mix, Inc., A-Block Company, Inc., A-Block
Company, Inc., Mohave Concrete and Materials, Inc., Mohave Concrete and
Materials, Inc., Mulberry Rock Corporation, Valley Asphalt, Inc., BHY Ready Mix,
Inc., Geodyne Transport, Inc., Western Rock Products Corp., Tri-State Testing
Laboratories, Inc., Dekalb Stone, Inc., Beck Paving, Inc., Bradley Stone & Sand,
Inc., Treasure Valley Concrete, Inc., and Monroc, Inc.;
3. The following Pledge Agreements:
(a) the Amended and Restated Company Pledge Agreement dated as of
June 5, 1998 between the Company and the Agent, and
(b) the Amended and Restated Subsidiary Pledge Agreement dated as of
June 5, 1998 between Western Aggregates Holding Corp., Western Rock Products
Corp., SRM Holdings Corp., Southern Ready Mix, Inc., Monroc, Inc., and the
Agent,
(all of the foregoing Pledge Agreements, in each case as heretofore amended,
being collectively referred to herein as the "Pledge Agreements").
4. The Patent Security Agreement made as of March 30, 1995 by Cox Rock
Products Inc. in favor of the Agent (the "Patent Security Agreement").
The Security Agreement, the Guaranty, the Pledge Agreements, the Aircraft
Security Agreement and the Patent Security Agreement, in each case as heretofore
amended, are collectively referred to herein as the "Loan Documents".
Capitalized terms not otherwise defined herein will have the meanings given in
the Credit Agreement referred to below.
Each of the undersigned acknowledges that the Company, the Banks and the
Agent have executed the Second Amendment (the "Amendment") to the Third Amended
and Restated Credit Agreement dated as of June 5, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement").
Each of the undersigned hereby confirms that each Loan Document to which
such undersigned is a party remains in full force and effect after giving effect
to the effectiveness of the Amendment and that, upon such effectiveness, all
references in such Loan Document to the "Credit Agreement" shall be references
to the Credit Agreement as amended by the Amendment.
The letter agreement may be signed in counterparts and by the various
parties as herein on separate counterparts. This letter agreement shall be
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such State.
U.S. AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Chief Financial Officer
---------------------------
SRM HOLDINGS CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN AGGREGATES HOLDING CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN ROCK PRODUCTS CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
JENSEN CONSTRUCTION & DEVELOPMENT, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
SANDIA CONSTRUCTION, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
TRI-STATE TESTING LABORATORIES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MOHAVE CONCRETE AND MATERIALS, INC.,
a Nevada corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MOHAVE CONCRETE AND MATERIALS, INC.,
an Arizona corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
A-BLOCK COMPANY, INC.,
an Arizona corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
A-BLOCK COMPANY, INC.,
a California corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
COX ROCK PRODUCTS, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
COX TRANSPORT CORPORATION
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
VALLEY ASPHALT, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
GEODYNE TRANSPORT, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BECK PAVING, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
SOUTHERN READY MIX, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
DEKALB STONE, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MULBERRY ROCK CORPORATION
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BHY READY MIX, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BRADLEY STONE & SAND, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
TREASURE VALLEY CONCRETE, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MONROC, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
ACKNOWLEDGED AND AGREED
as of the date first written above
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
/s/ Jim Cockey
By: Jim Cockey_
-----------
Title: Principal
----------
<PAGE>
THIRD AMENDMENT
THIS THIRD AMENDMENT dated as of January 13, 2000 (this "Amendment") is to
the Third Amended and Restated Credit Agreement (as heretofore amended, the
"Credit Agreement") dated as of June 5, 1998 among U.S. AGGREGATES, INC., a
Delaware corporation (the "Company"), various financial institutions (the
"Lenders") and BANK OF AMERICA, N.A. (formerly Bank of America National Trust
and Savings Association), as agent for the Lenders (the "Agent"). Unless
otherwise defined herein, terms defined in the Credit Agreement are used herein
as defined in the Credit Agreement.
WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence of) the
Amendment Effective Date (as defined below):
1.1 The definition of "Capital Expenditures" in Section 1.1 of the
Credit Agreement shall be amended and restated to read in its entirety as
follows:
Capital Expenditures means all expenditures which, in accordance with GAAP,
would be required to be capitalized and shown on the consolidated balance sheet
of the Company (including, without limitation, quarry development expenditures),
but excluding (a) Investments in preferred stock issued by Dekalb Stone (to the
extent such payments or investments constitute capital expenditures), (b)
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced, (c)
Acquisition Capital Expenditures to the extent that Acquisition Capital
Expenditures during the Fiscal Year or Computation Period in question do not
exceed $7,500,000 and (d) Capital Expenditures incurred in the second, third and
fourth Fiscal Quarters of 1999 in connection with certain 1999 capital expansion
projects to the extent that such Capital Expenditures do not exceed $21,000,000.
1.2 Section 2.3 of the Credit Agreement shall be amended by deleting
the reference to "10:00 A.M." in clause (a) of the first sentence of such
Section and inserting the reference "11:00 A.M." in lieu thereof.
1.3 Section 10.1.2 of the Credit Agreement shall be amended and
restated to read in its entirety as follows:
10.1.2 Interim Reports. Promptly when available and in any event within
45 days after the end of each Fiscal Quarter, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end of such Fiscal
Quarter and consolidated and consolidating statements of earnings and cash flows
of the Company and its Subsidiaries for the period from the end of the last
Fiscal Year to the end of such Fiscal Quarter, certified by the President or the
chief financial officer of the Company to the effect that such financial
statements fairly present the financial condition and results of operations of
the Company and its Subsidiaries.
1.4 Section 10.25 of the Credit Agreement shall be amended and restated
to read in its entirety as follows:
10.25 Interest Rate Protection. Not later than 60 days after the end
of any Computation Period ending on or prior to June 30, 2001 for which the
Leverage Ratio is greater than (x) the required maximum Leverage Ratio under
Section 10.6.3 for such Computation Period less (y) .25, enter into one or more
Hedging Agreements, each with a term of at least two years, on an ISDA standard
form with one or more Lenders or Affiliates thereof or with counterparties
reasonably acceptable to the Agent to fix the interest rate with respect to not
less than 50% of the principal amount of the Term Loans outstanding at the end
of such Computation Period in form and substance reasonably satisfactory to the
Agent.
1.5 The Revolving Commitments of the Lenders on the Amendment Effective
Date shall be as set forth on Schedule I hereto (subject to adjustment as set
forth in the definition of "Revolving Commitment").
1.6 Schedule 1.1A to the Credit Agreement shall be replaced by Schedule
1.1A hereto.
SECTION 2 WAIVER OF DEFAULT. Effective on (and subject to the occurrence
of) the Amendment Effective Date, the Required Lenders hereby waive (i) any
Event of Default under Section 10.12 for the 1999 Fiscal Year (or prior periods)
which is solely attributable to the recharacterization (in accordance with the
opinion of the Company's independent public accountants) as capital expenditures
during such Fiscal Year of quarry development expenses not previously accounted
for by the Company as capital expenditures and (ii) the Event of Default created
by the Company's noncompliance with Section 10.25 of the Credit Agreement prior
to the date hereof.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that: (a) the representations and
warranties made in Section 9 (excluding Sections 9.6 and 9.8) of the Credit
Agreement are true and correct on and as of the Amendment Effective Date with
the same effect as if made on and as of the Amendment Effective Date (except to
the extent relating solely to an earlier date, in which case they were true and
correct as of such earlier date); (b) no Event of Default or Unmatured Event of
Default exists or will result from the execution of this Amendment; (c) no event
or circumstance has occurred since the Effective Date that has resulted, or
would reasonably be expected to result, in a Material Adverse Effect; (d) the
execution and delivery by the Company of this Amendment and the performance by
the Company of its obligations under the Credit Agreement as amended hereby (as
so amended, the "Amended Credit Agreement") (i) are within the corporate powers
of the Company, (ii) have been duly authorized by all necessary corporate
action, (iii) have received all necessary approval from any Governmental
Authority and (iv) do not and will not contravene or conflict with any provision
of any law, rule or regulation or any order, decree, judgment or award which is
binding on the Company or any Guarantor or any of their respective Subsidiaries
or of any provision of the certificate of incorporation or bylaws or other
organizational documents of the Company or of any agreement, indenture,
instrument or other document which is binding on the Company or any Guarantor or
any of their respective Subsidiaries; and (e) the Amended Credit Agreement is
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
SECTION 4 EFFECTIVENESS. The amendments set forth in Section 1 above and
the waiver set forth in Section 2 above shall become effective on such date (the
"Amendment Effective Date") when the Agent shall have received (a) a counterpart
of this Amendment executed by the Company, the Required Lenders, each Revolving
Lender that has agreed to increase its Revolving Commitment on the Amendment
Effective Date (each such Revolving Lender, an "Increasing Lender") and each
financial institution listed on the signature pages hereof that was not a party
to the Credit Agreement immediately prior to the Amendment Effective Date (each
such financial institution, a "New Lender") (or, in the case of any party other
than the Company from which the Agent has not received a counterpart hereof,
facsimile confirmation of the execution of a counterpart hereof by such party),
(b) all fees and expenses then due and owing to the Lenders in connection with
this Amendment shall have been paid, as previously agreed upon and (c) each of
the following documents, each in form and substance satisfactory to the Agent:
4.1 Reaffirmation. Counterparts of the Reaffirmation of Loan
Documents, substantially in the form of Exhibit A, executed by the Company and
each Guarantor.
4.2 New Notes. For each New Lender, a Note.
4.3 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Amendment, the Amended Credit Agreement and
each other Loan Document contemplated by this Amendment to which the Company is
a party.
4.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of the Company, certifying the names of the
officer or officers of the Company authorized to sign this Amendment and the
other Loan Documents contemplated hereby to which the Company is a party,
together with a sample of the true signature of each such officer.
4.5 Opinion. An opinion, addressed to the Agent and the Lenders, of
Kirkland & Ellis, counsel to the Company and its Subsidiaries, substantially in
the form of Exhibit B.
4.6 Other Documents. Such other documents as the Agent or any Lender
may reasonably request.
SECTION 5 MISCELLANEOUS.
5.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Amendment Effective Date, all references
in the Credit Agreement, the Notes, each other Loan Document and any similar
document to the "Credit Agreement" or a similar term shall refer to the Amended
Credit Agreement. The waiver contained in Section 2 hereof is limited strictly
to its terms and shall not apply to non-compliance with any other term of the
Credit Agreement or the Amended Credit Agreement.
5.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
5.3 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including reasonable fees and disbursements of counsel,
including, without duplication, the allocable costs of internal legal services
and all disbursements of internal legal counsel) in connection with the
preparation, execution and delivery of this Amendment.
5.4 Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Illinois applicable to contracts made and
to be wholly performed within the State of Illinois.
5.5 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and the
successors and assigns of the Lenders and the Agent.
5.6 Fees. The fees referred to in Section 4(b) hereof are not subject
to Section 7.5 of the Credit Agreement.
5.7 Addition of Lenders; Adjustments to Revolving Loan Percentages. On
the Amendment Effective Date, the Agent shall notify the Revolving Lenders and
the Company, on or before 1:00 p.m. (Chicago time), by facsimile of the
occurrence of the Amendment Effective Date. On the Amendment Effective Date,
each New Lender shall automatically become a party to the Amended Credit
Agreement and be entitled to the benefits, and have the obligations, of a
"Lender" thereunder. Each Increasing Lender and each New Lender shall, before
2:00 p.m. (Chicago time) on the Amendment Effective Date, make available to the
Agent in immediately available funds an amount equal to (A) in the case of an
Increasing Lender, the excess of (1) such Increasing Lender's Revolving Loan
Percentage (as in effect immediately following the effectiveness of this
Amendment) of the Revolving Loans then outstanding over (2) such Increasing
Lender's Revolving Loan Percentage (as in effect immediately prior to the
effectiveness of this Amendment) of the Revolving Loans then outstanding and (B)
in the case of a New Lender, such New Lender's Revolving Loan Percentage (as in
effect immediately following the effectiveness of this Amendment) of the
Revolving Loans then outstanding. After the Agent's receipt of such funds from
each Increasing Lender and each New Lender, the Agent will promptly thereafter
cause to be distributed like funds to each Revolving Lender that is not an
Increasing Lender or a New Lender in an amount to such Revolving Lender such
that the aggregate amount owing to each Revolving Lender after giving effect to
such distribution equals such Lender's Revolving Loan Percentage (as in effect
immediately following the effectiveness of this Amendment) of the Revolving
Loans then outstanding. If the Amendment Effective Date shall occur on a date
that is not the last day of the Interest Period for all Revolving Loans then
outstanding that are Eurodollar Loans, (x) the Company shall pay any amounts
owing pursuant to Section 8.4 of the Credit Agreement to any Revolving Lender
whose proportionate share of any outstanding Revolving Loan that is a Eurodollar
Loan is decreased as a result of the distributions to Revolving Lenders under
this Section and (y) for each outstanding Revolving Loan that is a Eurodollar
Loan, the respective Revolving Loans made by the Increasing Lenders and New
Lenders pursuant to this Section shall be deemed to be funded at the applicable
Eurodollar Rate (Reserve Adjusted) for such Loan.
Delivered as of the day and year first above written.
U.S. AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
--------------------
Title: Chief Financial Officer
---------------------------
BANK OF AMERICA, N.A., as Agent
/s/ Patrick W. Zetzman
By: Patrick W. Zetzman
----------------------
Title: Vice President
-----------------
BANK OF AMERICA, N.A., as a Lender and as Issuing Lender
/s/ Jim Cockey
By: Jim Cockey
-------------
Title: Principal
-----------
BANKBOSTON, N.A., as a Lender
/s/ Richard D. Hill, Jr.
By: Richard D. Hill, Jr.
-------------------------
Title: Managing Director
--------------------
NATIONAL CITY BANK, as a Lender
/s/ Brian Cullina
By: Brian Cullina
----------------
Title: Senior Vice President
-------------------------
BANK OF SCOTLAND, as a Lender
/s/ Annie Glynn
By: Annie Glynn
--------------
Title: Senior Vice President
-------------------------
IBJ SCHRODER BANK AND TRUST
COMPANY, as a Lender
By:
Title:
COMERICA BANK - CALIFORNIA, as a Lender
/s/ Scott J. Smith
By: Scott J. Smith
------------------
Title: Vice President
-----------------
ZIONS FIRST NATIONAL BANK, as a Lender
/s/ Kelly Robertson
By: Kelly Robertson
------------------
Title: Vice President
-----------------
UNION BANK OF CALIFORNIA, N.A., as a
Lender
/s/ Nancy A. Perkins
By: Nancy A. Perkins
--------------------
Title: Vice President
-----------------
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
as Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance Company as
Portfolio Manager, as a Lender
Illegible
By:
Title: Principal
-----------
CYPRESSTREE INVESTMENT PARTNERS II, LTD.
By: CypressTree Investment Management
Company, Inc., as Portfolio Manager
Illegible
By:
Title: Principal
-----------
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC.
By: ING Capital Advisors, LLC. As Investment
Advisor
/s/ Michael J. Campbell
By: Michael J. Campbell
-----------------------
Title: Senior Vice President & Portfolio Manager
------------------------------------------------
PILGRIM PRIME RATE TRUST, as a Lender
By: Pilgrim Investments, Inc., as its Investment Manager
/s/ Robert L. Wilson
By: Robert L. Wilson
--------------------
Title: Vice President
-----------------
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
/s/ Payson F. Swaffield
By: Payson F. Swaffield
-----------------------
Title: Vice President
-----------------
EATON VANCE INSTITUTIONAL SENIOR LOAN FUND
By: Eaton Vance Management, as Investment Advisor
/s/ Payson F. Swaffield
By: Payson F. Swaffield
-----------------------
Title: Vice President
-----------------
KZH-CYPRESSTREE - 1 LLC
/s/ Susan Lee
By: Susan Lee
------------
Title: Authorized Agent
-------------------
KZH-HIGHLAND - 2 LLC
By:
Title:
ARCHIMEDES FUNDING II, LLC
By: ING Capital Advisors, LLC, as Collateral Manager
/s/ Michael J. Campbell
By: Michael J. Campbell
-----------------------
Title: Senior Vice President & Portfolio Manager
-----------------------------------------------
BANK ONE, N.A.
/s/ Stephanie A. Mack
By: Stephanie A. Mack
---------------------
Title: Commercial Banking Officer
------------------------------
BRANCH BANKING AND TRUST COMPANY
Illegible
By:
Title: Corporate Accounts Officer
------------------------------
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
<S> <C> <C>
REVOLVING REVOLVING
LENDER COMMITMENT PERCENTAGE
- ------ ---------- ----------
BANK OF AMERICA, N.A. $12,655,262.86 14.06%
UNION BANK OF CALIFORNIA $11,000,000.00 12.22%
IBJ WHITEHALL $ 7,894,736.84 8.77%
BANK AND TRUST COMPANY
BANK OF SCOTLAND $ 7,894,736.84 8.77%
NATIONAL CITY BANK $ 8,660,526.62 9.62%
COMERICA BANK - CALIFORNIA $ 8,000,000.00 8.89%
ZIONS FIRST NATIONAL BANK $ 8,000,000.00 8.89%
BANKBOSTON, N.A. $ 5,894,736.84 6.55%
BANK ONE, N.A. $10,000,000.00 11.11%
BRANCH BANKING AND TRUST COMPANY $10,000,000.00 11.11%
TOTAL $90,000,000.00 100.00%
</TABLE>
<PAGE>
SCHEDULE 1.1A
--------------
PRICING SCHEDULE
----------------
The Applicable ABR Margin, Applicable Eurodollar Margin and Non-Use Fee
Rate shall be determined based on the Leverage Ratio as set forth below.
(a) initially, the Applicable ABR Margin for Revolving Loans and Term A
Loans shall be 0.75% per annum, the Applicable Eurodollar Margin for Revolving
Loans and Term A Loans shall be 1.75% per annum, the Applicable ABR Margin for
Term B Loans shall be 1.375% per annum, the Applicable Eurodollar Margin for
Term B Loans shall be 2.375% per annum and the Non-Use Fee Rate shall be 0.425%
per annum;
(b) on and after any date specified below on which the Applicable ABR
Margin and Applicable Eurodollar Margin for Revolving Loans, Term A Loans and
Term B Loans and the Non-Use Fee Rate are to be adjusted, the rate per annum set
forth in the table below opposite the applicable Leverage Ratio:
<TABLE>
<CAPTION>
APPLICABLE
EURODOLLAR APPLICABLE
MARGIN ABR MARGIN APPLICABLE
(REVOLVING (REVOLVING EURODOLLAR APPLICABLE
LOANS AND LOANS AND NON-USE MARGIN ABR MARGIN
LEVERAGE RATIO TERM A LOANS) TERM A LOANS) FEE RATE (TERM B LOANS) (TERM B LOANS)
- ---------------------------------------------------- ------------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
GREATER THAN OR EQUAL TO 4.50:1 2.75% 1.75% 0.50% 2.75% 1.75%
GREATER THAN OR EQUAL TO 4.00:1 BUT LESS THAN 4.50:1 2.38% 1.38% 0.50% 2.75% 1.75%
GREATER THAN OR EQUAL TO 3.50:1 BUT LESS THAN 4.00:1 2.00% 1.00% 0.50% 2.38% 1.38%
GREATER THAN OR EQUAL TO 3.00:1 BUT LESS THAN 3.50:1 1.75% 0.75% 0.43% 2.38% 1.38%
GREATER THAN OR EQUAL TO 2.50:1 BUT LESS THAN 3.00:1 1.50% 0.50% 0.38% 2.38% 1.38%
LESS THAN 2.50:1 1.25% 0.25% 0.35% 2.00% 1.00%
</TABLE>
The Applicable ABR Margin, Applicable Eurodollar Margin and Non-Use Fee Rate
shall be adjusted, to the extent applicable, following each Fiscal Quarter on
the earlier to occur of (x) 45 days (or, in the case of the last Fiscal Quarter
of any year, 120 days) after the end of each Fiscal Quarter, based on the
Leverage Ratio as of the last day of such Fiscal Quarter and (y) the date the
financial statements required by Section 10.1.1 or 10.1.2, as applicable, and
the related Compliance Certificate, if any, required by Section 10.1.3, are
delivered in accordance with such Sections; it being understood that if the
Company fails to deliver the financial statements required by Section 10.1.1 or
10.1.2, as applicable, and the related Compliance Certificate, if any, required
by Section 10.1.3 by the 45th day (or, if applicable, the 120th day) after any
Fiscal Quarter, the Applicable ABR Margin for Revolving Loans and Term A Loans
shall be 1.75% per annum, the Applicable Eurodollar Margin for Revolving Loans
and Term A Loans shall be 2.75% per annum, the Applicable ABR Margin for Term B
Loans shall be 1.75% per annum, the Applicable Eurodollar Margin for Term B
Loans shall be 2.75% per annum and the Non-Use Fee Rate shall be 0.50% per annum
until such financial statements and Compliance Certificate are delivered. In
addition, at all times when an Event of Default or Unmatured Event of Default
shall have occurred and be continuing, there shall be no reduction in the
Applicable ABR Margin, the Applicable Eurodollar Margin or the Non-Use Fee Rate.
<PAGE>
EXHIBIT A
FORM OF REAFFIRMATION OF
LOAN DOCUMENTS
January 13, 2000
Bank of America, N.A., as Agent
and the other parties to the Third
Amended and Restated Credit
Agreement referred to below
1455 Market Street
San Francisco, California 94103
Attn: Agency Management Services #5596
RE: REAFFIRMATION OF LOAN DOCUMENTS
Ladies and Gentlemen:
Please refer to:
1. The Amended and Restated Security Agreement dated as of June 5, 1998 (the
"Security Agreement") among U.S. Aggregates, Inc. (the "Company"), Western
Aggregates Holding Corporation, a Delaware corporation, Jensen Construction and
Development, Inc., a Nevada corporation, Sandia Construction, Inc., a Nevada
corporation, Cox Rock Products Inc., a Utah corporation, Cox Transport
Corporation, a Utah corporation, SRM Holdings Corp., a Delaware corporation,
Southern Ready Mix, Inc., an Alabama corporation, A-Block Company, Inc., an
Arizona corporation, A-Block Company, Inc., a California corporation, Mohave
Concrete and Materials, Inc., an Arizona corporation, Mohave Concrete and
Materials, Inc., a Nevada corporation, Mulberry Rock Corporation, a Georgia
corporation, Valley Asphalt, Inc., a Utah corporation, BHY Ready Mix, Inc., a
Tennessee corporation, Geodyne Beck Rock Products, Inc., a Utah corporation,
Western Rock Products Corp., a Utah corporation, Tri-State Testing Laboratories,
Inc., a Utah Corporation, Dekalb Stone, Inc., a Georgia corporation, Bradley
Stone & Sand, Inc., a Tennessee corporation, Monroc, Inc., a Delaware
corporation, Western Aggregates, Inc., a Utah corporation, and Bank of America,
N.A. in its capacity as Agent (in such capacity, the "Agent");
2. The Amended and Restated Guaranty dated as of June 5, 1998 (the
"Guaranty") executed in favor of the Agent and various other parties by Western
Aggregates Holding Corporation, Jensen Construction and Development, Inc.,
Sandia Construction, Inc., Cox Rock Products Inc., Cox Transport Corporation,
SRM Holdings Corp., Southern Ready Mix, Inc., A-Block Company, Inc., A-Block
Company, Inc., Mohave Concrete and Materials, Inc., Mohave Concrete and
Materials, Inc., Mulberry Rock Corporation, Valley Asphalt, Inc., BHY Ready Mix,
Inc., Geodyne Beck Rock Products, Inc., Western Rock Products Corp., Tri-State
Testing Laboratories, Inc., Dekalb Stone, Inc., Bradley Stone & Sand, Inc. and
Monroc, Inc.;
3. The following Pledge Agreements:
(a) the Amended and Restated Company Pledge Agreement dated as
of June 5, 1998 between the Company and the Agent, and
(b) the Amended and Restated Subsidiary Pledge Agreement dated
as of June 5, 1998 between Western Aggregates Holding Corp., Western Rock
Products Corp., SRM Holdings Corp., Southern Ready Mix, Inc., Monroc, Inc., and
the Agent,
(all of the foregoing Pledge Agreements, in each case as heretofore
amended, being collectively referred to herein as the "Pledge Agreements").
4. The Patent Security Agreement made as of March 30, 1995 by Cox Rock
Products Inc. in favor of the Agent (the "Patent Security Agreement").
The Security Agreement, the Guaranty, the Pledge Agreements and the Patent
Security Agreement, in each case as heretofore amended, are collectively
referred to herein as the "Loan Documents". Capitalized terms not otherwise
defined herein will have the meanings given in the Credit Agreement referred to
below.
Each of the undersigned acknowledges that the Company, the Banks and the
Agent have executed the Third Amendment (the "Amendment") to the Third Amended
and Restated Credit Agreement dated as of June 5, 1998 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement").
Each of the undersigned hereby confirms that each Loan Document to which
such undersigned is a party remains in full force and effect after giving effect
to the effectiveness of the Amendment and that, upon such effectiveness, all
references in such Loan Document to the "Credit Agreement" shall be references
to the Credit Agreement as amended by the Amendment.
The letter agreement may be signed in counterparts and by the various
parties as herein on separate counterparts. This letter agreement shall be
governed by the laws of the State of Illinois applicable to contracts made and
to be performed entirely within such State.
U.S. AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Chief Financial Officer
---------------------------
SRM HOLDINGS CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN AGGREGATES HOLDING CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN ROCK PRODUCTS CORP.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
JENSEN CONSTRUCTION & DEVELOPMENT, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
SANDIA CONSTRUCTION, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
TRI-STATE TESTING LABORATORIES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MOHAVE CONCRETE AND MATERIALS, INC.,
a Nevada corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MOHAVE CONCRETE AND MATERIALS, INC.,
an Arizona corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
A-BLOCK COMPANY, INC.,
an Arizona corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
A-BLOCK COMPANY, INC.,
a California corporation
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
COX ROCK PRODUCTS, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
COX TRANSPORT CORPORATION
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
VALLEY ASPHALT, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
GEODYNE BECK ROCK PRODUCTS, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BECK PAVING, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
SOUTHERN READY MIX, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
DEKALB STONE, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MULBERRY ROCK CORPORATION
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BHY READY MIX, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
BRADLEY STONE & SAND, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
MONROC, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
WESTERN AGGREGATES, INC.
/s/ Michael J. Stone
By: Michael J. Stone
------------------
Title: Vice President
-----------------
ACKNOWLEDGED AND AGREED
as of the date first written above
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
/s/ Patrick W. Zetzman
By: Patrick W. Zetzman
--------------------
Title: Vice President
----------------
<PAGE>
U.S. AGGREGATES, INC.
-----------------------------------
AMENDMENT NO. 2 TO AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
-----------------------------------
DATED AS OF AUGUST 12, 1999
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
AND
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
<PAGE>
U.S. AGGREGATES, INC.
$30,000,000 10.34% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2006
AND
$15,000,000 10.09% SENIOR SUBORDINATED NOTES DUE NOVEMBER 22, 2008
AMENDMENT NO. 2 TO AMENDED AND RESTATED
NOTE AND WARRANT PURCHASE AGREEMENT
As of August 12, 1999
The Prudential Insurance Company of America
c/o Prudential Capital Group
One Gateway Center, 11 Floor
Newark, New Jersey 07102
Ladies and Gentlemen:
U.S. AGGREGATES, INC., a Delaware corporation (together with its successors
and assigns, the "COMPANY"), agrees with you as follows:
1. PRIOR AMENDMENT AND ISSUANCE OF NOTES.
The Company has entered into an Amendment No. 1 to Amended and Restated
Note and Warrant Purchase Agreement, dated as of April 14, 1999 (as in effect
immediately prior to giving effect to the amendments provided for by this
Agreement, the "EXISTING NOTE PURCHASE AGREEMENT" and, as amended pursuant to
this Agreement and as may be further amended, restated or otherwise modified
from time to time, the "AMENDED NOTE PURCHASE AGREEMENT"), pursuant to which
certain amendments were made to the Amended and Restated Note and Warrant
Purchase Agreement dated as of June 5, 1998 whereby $30,000,000 aggregate
principal amount of 10.34% Senior Subordinated Notes due November 22, 2006 and
$15,000,000 aggregate principal amount of 10.09% Senior Subordinated Notes due
November 22, 2008 (such Notes, as may be amended, restated or otherwise modified
from time to time, the "NOTES") of the Company have been issued to you and are
currently outstanding.
2. DEFINED TERMS.
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Existing Note Purchase Agreement.
3. REQUEST FOR CONSENT TO AMENDMENTS.
The Company requests that you consent to the amendments to the Existing
Note Purchase Agreement provided for by this Agreement (the "AMENDMENTS").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce you to enter into this Agreement and to consent to the
Amendments, the Company represents and warrants as follows:
4.1 ORGANIZATION AND EXISTENCE.
The Company is a corporation duly organized and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations under the Amended Note Purchase Agreement.
4.2 ACTIONS PENDING.
There are no actions, suits, investigations or proceedings pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, by or before any court, arbitrator or administrative or
governmental body that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
4.3 AMENDMENT AUTHORIZED; OBLIGATIONS ENFORCEABLE.
(a) AGREEMENT IS LEGAL AND AUTHORIZED. The execution and delivery by
the Company of this Agreement, and compliance by the Company with all of the
provisions of the Amended Note Purchase Agreement, are within the corporate
powers of the Company.
(b) COMPANY OBLIGATIONS ARE ENFORCEABLE. The Company has duly
authorized this Agreement by all necessary action on its part. This Agreement
has been executed and delivered by one or more duly authorized officers of the
Company, and each of this Agreement and the Amended Note Purchase Agreement
constitutes a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforceability thereof may be:
(i) limited by applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium, or other similar laws affecting the enforceability of
creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
4.4 NO CONFLICTS.
Neither the execution nor delivery of this Agreement, nor fulfillment of
nor compliance with the terms and provisions of the Amended Note Purchase
Agreement and the other Financing Documents will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
or result in any violation of, or result in the creation of any Lien upon any of
the Properties of the Company or any of its Subsidiaries pursuant to, the
charter or bylaws of the Company or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject.
4.5 GOVERNMENTAL CONSENT.
Neither the execution and delivery of this Amendment, nor the performance
by the Company of its obligations under the Amended Note Purchase Agreement and
the other Financing Documents, is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings with the
Securities and Exchange Commission and/or state Blue Sky authorities) on the
part of the Company in connection with the execution and delivery of this
Agreement or fulfillment of or compliance with the terms and provisions of the
Amended Note Purchase Agreement or of the other Financing Documents.
4.6 FULL DISCLOSURE.
This Agreement and the documents, certificates or other writings delivered
to you by or on behalf of the Company in connection with the proposal and
negotiation of the Amendments, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the other documents, certificates and other writings
delivered to you by or on behalf of the Company specifically for use in
connection with the transactions contemplated by the Note Purchase Agreement and
this Agreement.
4.7 AMENDMENT OF BANK CREDIT AGREEMENT.
Attached hereto as Exhibit C is a copy of the Second Amendment to the Bank
Credit Agreement (the "SECOND AMENDMENT"), which has been duly executed and
delivered by each of the parties thereto, is true, correct and complete, and
(subject only to the execution and delivery of this Agreement) is in full force
and effect.
4.8 NO DEFAULTS.
No event has occurred and no condition exists that, upon the execution and
delivery of this Agreement and the effectiveness of the Amendments and the
Second Amendment, would constitute a Default or an Event of Default.
5. AMENDMENTS.
5.1 AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT.
Subject to paragraph 5.2, the Existing Note Purchase Agreement is hereby
amended in the manner specified in Exhibit A to this Agreement.
5.2 EFFECTIVENESS OF AMENDMENTS.
The amendments of the Existing Note Purchase Agreement contemplated by
paragraph 5.1 and Exhibit A shall become effective at such time as
(a) the Company and you shall have executed and delivered a counterpart
of this Agreement;
(b) the representations and warranties set forth in paragraph 4 shall
be true and correct;
(c) the Company shall have authorized, by all necessary corporate
action, the execution and delivery of this Agreement and the performance of all
obligations of, and the satisfaction of all closing conditions set forth in,
this paragraph 5 by, and the consummation of all transactions contemplated by
this Agreement by, the Company;
(d) each Restricted Subsidiary shall have executed and delivered the
Guarantor Consent in respect of its obligations under the Subsidiary Guaranty,
substantially in the form attached hereto as Exhibit B;
(e) evidence that the Company has consummated the initial public
offering of its equity securities (the "IPO") and received gross proceeds
therefrom in an amount not less than $[65],000,000, which evidence must be
received on or prior to October 31, 1999;
(f) evidence of the full, final, and indefeasible payment of the Harris
Trust Note;
(g) the Company shall have paid you an amendment fee in the amount of
$56,250; and
(h) all proceedings taken in connection with this Agreement and all
documents and papers relating thereto shall be satisfactory to you and your
special counsel, and you and your special counsel shall have received copies of
such documents and papers as you or your special counsel may reasonably request
in connection herewith.
6. EXPENSES.
Whether or not the Amendments become effective, the Company will promptly
(and in any event within 30 days of receiving any statement or invoice therefor)
pay all fees, expenses and costs relating to this Agreement, including, but not
limited to, (a) the cost of reproducing this Agreement and the other documents
delivered in connection herewith and (b) the reasonable fees and disbursements
of your special counsel (namely, Bingham Dana LLP, or its successor or assigns)
incurred in connection with the preparation, negotiation and delivery of this
Agreement and the review of documents produced in connection with the Company's
IPO. Nothing in this paragraph 6 shall limit the Company's obligations under
paragraph 14B of the Amended Note Purchase Agreement.
7. MISCELLANEOUS.
7.1 PART OF NOTE PURCHASE AGREEMENT, FUTURE REFERENCES, etc.
This Agreement shall be construed in connection with and as a part of the
Existing Note Purchase Agreement and, except as expressly amended by this
Agreement, all terms, conditions and covenants contained in the Existing Note
Purchase Agreement and the Notes are hereby ratified and shall be and remain in
full force and effect. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Agreement may refer to the Existing Note Purchase Agreement and the Notes
without making specific reference to this Agreement, but nevertheless all such
references shall include this Agreement unless the context otherwise requires.
7.2 COUNTERPARTS; EFFECTIVENESS.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one instrument.
Delivery of an executed signature page by facsimile transmission shall be
effective as delivery of a manually signed counterpart of this Agreement.
7.3 SUCCESSORS AND ASSIGNS.
All covenants and other agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.
7.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS SIGNATURE PAGE.]
If you are in agreement with the foregoing, please so indicate by signing
the agreement below on the accompanying counterpart of this Agreement and return
it to the Company, whereupon the foregoing shall become a binding agreement
among you and the Company.
Very truly yours,
U.S. AGGREGATES, INC.
By: /s/ Micahael J. Stone
Name: Micahael J. Stone
Title: Chief Financial Officer
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Robert R. Derrick
Name: Robert R. Derrick
Title: Vice President
<PAGE>
EXHIBIT A
AMENDMENTS
1. PARAGRAPH 6C(iv)(a) OF THE EXISTING NOTE PURCHASE AGREEMENT (CHANGE IN
CONTROL) IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
(a) "CHANGE IN CONTROL" means, at any time,
(i) (A) any Person or group of related persons for purposes of Section 13(d) of
the Securities Exchange Act of 1934 (a "GROUP") (other than GTCR LP) shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing thirty percent (30%) or more of all the issued and outstanding
Voting Stock of each class of the Company and (B) GTCR LP shall beneficially
own, directly or directly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such Person or Group; or
(ii) the replacement of a majority of the Board of Directors of the Company over
a two-year period from the directors who constituted the Board of Directors of
the Company at the beginning of such period, and such replacement shall not have
been approved by a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board of Directors
at the beginning of such period or whose election as a member of such Board of
Directors was previously so approved; or
(iii) any event of condition relating to a Change in Control of the Company
which requires, or permits the holder or holders (or any agent or trustee
therefor) of any Debt of the Company or any Restricted Subsidiary to require the
purchase or repurchase prior to its expressed maturity of any Debt (excluding
the Notes) of the Company or any Restricted Subsidiary in an aggregate principal
amount (for all such Debt) of $1,000,000 or more.
2. ANY AND ALL REFERENCES TO THE HARRIS TRUST NOTE (INCLUDING, BUT NOT
LIMITED TO THE REFERENCE IN PARAGRAPH 8C(I) IN THE CALCULATION OF CONSOLIDATED
DEBT, THE REFERENCE IN THE CALCULATION OF CONSOLIDATED INTEREST EXPENSE AND THE
DEFINED TERM IN PARAGRAPH 13B) IN THE EXISTING NOTE PURCHASE AGREEMENT ARE
HEREBY DELETED.
3. PARAGRAPH 8E OF THE EXISTING NOTE PURCHASE AGREEMENT (RESTRICTED
PAYMENTS) IS HEREBY AMENDED AND RESTATED AS FOLLOWS:
8E. RESTRICTED PAYMENTS. The Company will not and will not permit any
Restricted Subsidiary to,
(i) declare or pay any dividend (other than stock dividends) or
distribution on any of its capital stock,
(ii) purchase or redeem any capital stock of the Company or any
Restricted Subsidiary (or any warrants, options or other rights in respect
thereof),
(iii) make any other distribution to shareholders of the Company or any
Restricted Subsidiary,
(iv) prepay, purchase, defease or redeem any Debt subordinate to the
Notes, or
(v) set aside funds for any of the foregoing;
provided that
(a) the Company may convert 300,842.2 shares of its preferred stock, par value
$0.01 per share, into common stock at a conversion price equal to the offering
price per share of common stock in its Initial Public Offering of such common
stock;
(b) any Restricted Subsidiary may declare dividends, or make other
distributions, to the Company or to another Restricted Subsidiary of the Company
(but not to any other Person); and
(c) so long as no Default or Event of Default exists or would result therefrom,
(1) the Company or any Restricted Subsidiary may repurchase or redeem its stock
from any former employee, director or consultant to, a Restricted Subsidiary (or
any heirs or legal representatives of any such employee, director or consultant)
in an aggregate amount, for all such purposes, not exceeding $1,000,000 in any
fiscal year; and
(2) the Company may declare and pay dividends on its common stock (A) in its
third and fourth fiscal quarters of 1999 in an amount not to exceed $600,000 in
either such fiscal quarter and (B) in any of its fiscal years (commencing with
the fiscal year beginning January 1, 2000) in an amount not to exceed 15% of
Consolidated Net Income for the immediately preceding fiscal year (provided
that the Company may only pay any dividend pursuant to this clause (c)(2) if,
after giving effect thereto, the Company shall be in compliance with all
financial covenants in Paragraph 8 and such dividends may be paid within 60 days
after the date of declaration thereof if at such date of declaration such
dividend complied with this clause (c)(2)).
4. THE DEFINITION OF "CONSOLIDATED FIXED CHARGES" IN PARAGRAPH 13B OF THE
EXISTING NOTE PURCHASE AGREEMENT (OTHER TERMS) IS HEREBY AMENDED AND RESTATED AS
FOLLOWS:
"CONSOLIDATED FIXED CHARGES" means, in respect of any period of four (4)
consecutive fiscal quarters of the Company, the sum of
(i) Consolidated Interest Expense in respect of such period, plus
(ii) Consolidated Capital Expenditures made during such period, plus
(iii) taxes paid in cash by the Company and its Restricted Subsidiaries
during such period, plus
(iv) all scheduled principal payments due on any Consolidated Debt
during such period, other than any principal payments to be made as a result of
any mandatory reduction of commitments under the Revolving Credit Facility, plus
(v) the amount of all cash dividends declared by the Company.
<PAGE>
EXHIBIT B
[FORM OF GUARANTOR CONSENT]
Reference is made to that certain Amended and Restated Note and Warrant
Purchase Agreement, dated as of June 5, 1998 (the "Note Purchase Agreement"),
between U.S. Aggregates, Inc. (the "Company") and The Prudential Insurance
Company of America (the "Noteholder"), pursuant to which $30,000,000 principal
amount of 10.34% Senior Subordinated Notes due November 22, 2006 and $15,000,000
principal amount of 10.09% Senior Subordinated Notes due November 22, 2008 (the
"Notes") of the Company have been issued to the Noteholder and are currently
outstanding. Capitalized terms used herein and defined in the Note Purchase
Agreement are used herein with the meanings ascribed to them in the Note
Purchase Agreement. The Note Purchase Agreement was amended pursuant to the
terms of Amendment No. 1 to the Amended and Restated Note and Warrant Purchase
Agreement dated as of April 14, 1999 (as in effect immediately prior to giving
effect to the amendments provided for in Amendment No. 2 to the Amended and
Restated Note and Warrant Purchase Agreement, the "EXISTING NOTE PURCHASE
AGREEMENT" and, as amended pursuant to Amendment No. 2 to the Amended and
Restated Note and Warrant Purchase Agreement and as may be further amended,
restated or otherwise modified from time to time, the "AMENDED NOTE PURCHASE
AGREEMENT"). The Existing Note Purchase Agreement is being amended pursuant to
the terms of Amendment No. 2 to the Note Purchase Agreement dated as of August
12, 1999 (the "SECOND AMENDMENT AGREEMENT").
Each of the undersigned Restricted Subsidiaries (each, a "GUARANTOR") is a
party to the Subsidiary Guaranty entered into in connection with the execution
and delivery of the Note Purchase Agreement and the issuance and sale of the
Notes. Each Guarantor hereby consents to the Second Amendment Agreement and
acknowledges and affirms all of its obligations under the terms of the
Subsidiary Guaranty.
Dated: As of August 12, 1999
[Remainder of page intentionally left blank. Next page is signature page.]
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guarantor Consent to be
executed on its behalf, as of the date first above written, by one of its duly
authorized officers.
SRM HOLDINGS CORP.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
SOUTHERN READY MIX, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
WESTERN AGGREGATES
HOLDING CORP.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
WESTERN ROCK PRODUCTS
CORPORATION
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
COX ROCK PRODUCTS, INCORPORATED
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
COX TRANSPORT CORPORATION
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
JENSEN CONSTRUCTION &
DEVELOPMENT, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
SANDIA CONSTRUCTION, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
SOUTHERN NEVADA AGGREGATES, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
MOHAVE CONCRETE AND MATERIALS, INC. (NEVADA)
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
<PAGE>
MOHAVE CONCRETE AND MATERIALS, INC. (ARIZONA)
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
A-BLOCK COMPANY, INC. (ARIZONA)
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
A-BLOCK COMPANY, INC. (CALIFORNIA)
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
VALLEY ASPHALT, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
DEKALB STONE, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
<PAGE>
GEODYNE TRANSPORT, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
FALCON RIDGE CONSTRUCTION, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
BECK PAVING, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
MULBERRY ROCK CORPORATION
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
BHY READY MIX, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
BRADLEY STONE & SAND, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
TRI-STATE TESTING LABORATORIES, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
BIG HORN REDI MIX, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
TREASURE VALLEY CONCRETE, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
MONROC, INC.
By: /s/ Michael J. Stone
Name: Michael J. Stone
Title: Vice President
<PAGE>
EXHIBIT C
[COPY OF EXECUTED SECOND BANK AMENDMENT]
<TABLE>
<CAPTION>
SUBSIDIARIES OF U.S. AGGREGATES, INC.
-----------------------------------------
COMPANY JURISDICTION OF INCORPORATION INTEREST
- ------- ----------------------------- --------
<S> <C> <C>
SRM HOLDINGS CORP. DELAWARE 100% OWNED SUBSIDIARY
WESTERN AGGREGATES HOLDING CORP. DELAWARE 100% OWNED SUBSIDIARY
SOUTHERN READY MIX, INC. ALABAMA 100% OWNED SUBSIDIARY
WESTERN ROCK PRODUCTS CORPORATION UTAH 100% OWNED SUBSIDIARY
COX ROCK PRODUCTS, INC. UTAH 100% OWNED SUBSIDIARY
COX TRANSPORT CORPORATION UTAH 100% OWNED SUBSIDIARY
JENSEN CONSTRUCTION & DEVELOPMENT, INC. NEVADA 100% OWNED SUBSIDIARY
SANDIA CONSTRUCTION, INC. NEVADA 100% OWNED SUBSIDIARY
MOHAVE CONCRETE AND MATERIALS, INC. (NEVADA) NEVADA 100% OWNED SUBSIDIARY
MOHAVE CONCRETE AND MATERIALS, INC. (ARIZONA) ARIZONA 100% OWNED SUBSIDIARY
A-BLOCK COMPANY, INC. (ARIZONA) ARIZONA 100% OWNED SUBSIDIARY
A-BLOCK COMPANY, INC. (CALIFORNIA) CALIFORNIA 100% OWNED SUBSIDIARY
VALLEY ASPHALT, INC. UTAH 100% OWNED SUBSIDIARY
DEKALB STONE, INC. GEORGIA 70.6667% OF THE COMMON STOCK
AND 100% OF THE REFERRED STOCK
MULBERRY ROCK CORPORATION GEORGIA 100% OWNED SUBSIDIARY
BHY READY MIX, INC. TENNESSEE 100% OWNED SUBSIDIARY
BRADLEY STONE & SAND, INC. TENNESSEE 100% OWNED SUBSIDIARY
TRI-STATE TESTING LABORATORIES, INC. UTAH 100% OWNED SUBSIDIARY
GEODYNE BECK ROCK PRODUCTS, INC. UTAH 100% OWNED SUBSIDIARY
MONROC, INC. DELAWARE 100% OWNED SUBSIDIARY
WESTERN AGGREGATES, INC. UTAH 100% OWNED SUBSIDIARY
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE RELATED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4478
<SECURITIES> 0
<RECEIVABLES> 53567
<ALLOWANCES> 1273
<INVENTORY> 28041
<CURRENT-ASSETS> 92615
<PP&E> 325328
<DEPRECIATION> 32418
<TOTAL-ASSETS> 414928
<CURRENT-LIABILITIES> 56591
<BONDS> 160312
0
0
<COMMON> 149
<OTHER-SE> 142364
<TOTAL-LIABILITY-AND-EQUITY> 414928
<SALES> 298181
<TOTAL-REVENUES> 298181
<CGS> 213677
<TOTAL-COSTS> 258563
<OTHER-EXPENSES> 307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16042
<INCOME-PRETAX> 23269
<INCOME-TAX> 8499
<INCOME-CONTINUING> 14197
<DISCONTINUED> 0
<EXTRAORDINARY> (264)
<CHANGES> 0
<NET-INCOME> 13933
<EPS-BASIC> 1.20
<EPS-DILUTED> 1.16
</TABLE>
