Edgar Filing: Summit Materials, Inc.

Financial Statements and Supplementary Data

Exhibits, Financial Statement Schedules

Signatures

Document

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 29, 2018

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file numbers:

001-36873 (Summit Materials, Inc.)

333-187556 (Summit Materials, LLC)

SUMMIT MATERIALS, INC.

SUMMIT MATERIALS, LLC

(Exact name of registrants as specified in their charters)



Delaware (Summit Materials, Inc.) Delaware (Summit Materials, LLC)	47-1984212 26-4138486
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1550 Wynkoop Street, 3rd Floor Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

Registrants’ telephone number, including area code: (303) 893-0012

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Class A Common Stock (par value $.01 per share)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Summit Materials, Inc.	Yes x	No ¨
Summit Materials, LLC	Yes ¨	No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Summit Materials, LLC	Yes ¨	No x
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.
Summit Materials, Inc.	Yes x	No ¨
Summit Materials, LLC	Yes x	No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Summit Materials, Inc.	Yes x	No ¨
Summit Materials, LLC	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 ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Summit Materials, Inc.
Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨
Summit Materials, LLC
Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨
		Emerging growth company	¨



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Summit Materials, Inc.	Yes ¨	No x
Summit Materials, LLC	Yes ¨	No x

The aggregate market value of the Summit Materials, Inc. voting stock held by non-affiliates of the Registrants as of July 1, 2017 was approximately $3.1 billion.

As of January 30, 2019, the number of shares of Summit Materials, Inc.’s outstanding Class A and Class B common stock, par value $0.01 per share for each class, was 111,671,837 and 99, respectively.

As of January 30, 2019, 100% of Summit Materials, LLC’s outstanding limited liability company interests were held by Summit Materials Intermediate Holdings, LLC, its sole member and an indirect subsidiary of Summit Materials, Inc.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from Summit Materials, Inc.’s definitive proxy statement relating to its 2019 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of Summit Materials, Inc.’s fiscal year.

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EXPLANATORY NOTE

Summit Materials, Inc. (the “Company) files this Amendment No. 1 (“Amendment No. 1”) to its Annual Report on Form 10-K for the year ended December 29, 2018 filed with the Securities and Exchange Commission (“SEC”) on February 6, 2019 (the “Original 10-K”) at the request of KPMG LLP to provide an amended report of its independent registered public accounting firm (the “KPMG report”) that includes a statement inadvertently omitted from the previously filed version that confirms that the Company’s independent registered accounting firm did not audit the internal controls over financial reporting for the consolidated financial statements of Summit Materials, LLC whose consolidated financial statements were filed as Exhibit 99.1 to the Company’s Original 10-K. The KPMG report, as replaced in Amendment No. 1, does not modify KPMG LLP's unqualified opinion on the Summit Materials, LLC consolidated financial statements included in the Original 10-K.

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), currently-dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer have been included as exhibits to this Amendment No. 1. Furthermore, pursuant to Rule 12b-15 promulgated under the Exchange Act, the Company has repeated the entire text of Item 8 and Item 15 of the Original 10-K in this Amendment No. 1, however, there have been no changes to the text of such items other than to replace the KPMG report as described above and to file an updated consent of KPMG LLP as Exhibit 23.1.

Amendment No. 1 speaks as of the date of the Original 10-K, does not reflect events that may have occurred after the date of the Original 10-K and does not modify or update in any way the disclosures made in the Original 10-K, except as described above. Accordingly, Amendment No. 1 should be read in conjunction with the Original 10-K and with the Company’s other filings with the SEC subsequent to the filing of the Original 10-K, including any amendments thereto.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

FORM 10-K/A

For the Fiscal Year ended December 29, 2018

TABLE OF CONTENTS

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PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Summit Materials, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Summit Materials, Inc. and subsidiaries (the Company) as of December 29, 2018 and December 30, 2017, the related consolidated statements of operations, comprehensive loss, changes in redeemable noncontrolling interest and stockholders’ equity, and cash flows for each of the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2018 and December 30, 2017, and the results of its operations and its cash flows for each of the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 6, 2019 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2012.

Denver, Colorado

February 6, 2019

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 29, 2018 and December 30, 2017

(In thousands, except share and per share amounts)



	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	128,508	$	383,556
Accounts receivable, net	214,518		198,330
Costs and estimated earnings in excess of billings	18,602		9,512
Inventories	213,851		184,439
Other current assets	16,061		7,764
Total current assets	591,540		783,601
Property, plant and equipment	1,780,132		1,615,424
Goodwill	1,192,028		1,036,320
Intangible assets	18,460		16,833
Deferred tax assets	225,397		284,092
Other assets	50,084		51,063
Total assets	$	3,857,641	$	3,787,333
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of debt	$	6,354	$	4,765
Current portion of acquisition-related liabilities	34,270		14,087
Accounts payable	107,702		98,744
Accrued expenses	100,491		116,629
Billings in excess of costs and estimated earnings	11,840		15,750
Total current liabilities	260,657		249,975
Long-term debt	1,807,502		1,810,833
Acquisition-related liabilities	49,468		58,135
Tax receivable agreement liability	309,674		331,340
Other noncurrent liabilities	88,195		65,329
Total liabilities	2,515,496		2,515,612
Commitments and contingencies (see note 16)
Stockholders’ equity:
Class A common stock, par value $0.01 per share; 1,000,000,000 shares authorized, 111,658,927 and 110,350,594 shares issued and outstanding as of December 29, 2018 and December 30, 2017, respectively	$	1,117	$	1,104
Class B common stock, par value $0.01 per share; 250,000,000 shares authorized, 99 and 100 shares issued and outstanding as of December 29, 2018 and December 30, 2017, respectively	—		—
Additional paid-in capital	1,194,204		1,154,220
Accumulated earnings	129,739		95,833
Accumulated other comprehensive income	2,681		7,386
Stockholders’ equity	1,327,741		1,258,543
Noncontrolling interest in Summit Holdings	14,404		13,178
Total stockholders’ equity	1,342,145		1,271,721
Total liabilities and stockholders’ equity	$	3,857,641	$	3,787,333

See accompanying notes to consolidated financial statements.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 29, 2018, December 30, 2017 and December 31, 2016

(In thousands, except share and per share amounts)



	2018			2017			2016
Revenue:
Product	$	1,600,159		$	1,449,936		$	1,223,008
Service	309,099			302,473			265,266
Net revenue	1,909,258			1,752,409			1,488,274
Delivery and subcontract revenue	191,744			180,166			137,789
Total revenue	2,101,002			1,932,575			1,626,063
Cost of revenue (excluding items shown separately below):
Product	1,058,544			898,281			751,419
Service	225,491			203,330			182,584
Net cost of revenue	1,284,035			1,101,611			934,003
Delivery and subcontract cost	191,744			180,166			137,789
Total cost of revenue	1,475,779			1,281,777			1,071,792
General and administrative expenses	253,609			242,670			243,512
Depreciation, depletion, amortization and accretion	204,910			179,518			149,300
Transaction costs	4,238			7,733			6,797
Operating income	162,466			220,877			154,662
Interest expense	116,548			108,549			97,536
Loss on debt financings	149			4,815			—
Tax receivable agreement (benefit) expense	(22,684		)	271,016			14,938
Gain on sale of business	(12,108		)	—			—
Other (income) loss, net	(15,516		)	(5,303		)	1,361
Income (loss) from operations before taxes	96,077			(158,200		)	40,827
Income tax expense (benefit)	59,747			(283,977		)	(5,299		)
Net income	36,330			125,777			46,126
Net (loss) income attributable to noncontrolling interest in subsidiaries	—			(27		)	16
Net income attributable to Summit Holdings	2,424			3,974			9,327
Net income attributable to Summit Inc.	$	33,906		$	121,830		$	36,783
Income per share of Class A common stock:
Basic	$	0.30		$	1.12		$	0.52
Diluted	$	0.30		$	1.11		$	0.52
Weighted average shares of Class A common stock:
Basic	111,380,175			108,696,438			70,355,042
Diluted	112,316,646			109,490,898			70,838,508

See accompanying notes to consolidated financial statements.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

Years ended December 29, 2018, December 30, 2017 and December 31, 2016

(In thousands)



	2018			2017			2016
Net income	$	36,330		$	125,777		$	46,126
Other comprehensive income (loss):
Postretirement curtailment adjustment	—			429			—
Postretirement liability adjustment	1,661			699			426
Foreign currency translation adjustment	(9,348		)	7,768			2,125
Income (loss) on cash flow hedges	1,206			1,413			(1,529		)
Less tax effect of other comprehensive income (loss) items	1,578			(288		)	—
Other comprehensive (loss) income:	(4,903		)	10,021			1,022
Comprehensive income	31,427			135,798			47,148
Less comprehensive (loss) income attributable to the noncontrolling interest in consolidated subsidiaries	—			(27		)	16
Less comprehensive income attributable to Summit Holdings	2,226			4,360			9,803
Comprehensive income attributable to Summit Inc.	$	29,201		$	131,465		$	37,329

See accompanying notes to consolidated financial statements.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 29, 2018, December 30, 2017 and December 31, 2016

(In thousands)



	2018			2017			2016
Cash flow from operating activities:
Net income	$	36,330		$	125,777		$	46,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion	208,772			193,107			160,633
Share-based compensation expense	25,378			21,140			49,940
Net gain on asset disposals	(30,093		)	(7,638		)	(3,102		)
Non-cash loss on debt financings	—			3,856			—
Change in deferred tax asset, net	57,490			(289,219		)	(4,263		)
Other	2,018			(2,359		)	(1,282		)
(Increase) decrease in operating assets, net of acquisitions and dispositions:
Accounts receivable, net	(5,796		)	(3,720		)	2,511
Inventories	(11,598		)	(18,609		)	(10,297		)
Costs and estimated earnings in excess of billings	(8,702		)	(1,825		)	(2,684		)
Other current assets	(7,159		)	8,703			(5,518		)
Other assets	(106		)	(3,103		)	(2,350		)
(Decrease) increase in operating liabilities, net of acquisitions and dispositions:
Accounts payable	(13,403		)	6,192			(5,751		)
Accrued expenses	(16,544		)	(7,006		)	13,196
Billings in excess of costs and estimated earnings	(5,052		)	109			700
Tax receivable agreement liability	(21,666		)	273,194			58,145
Other liabilities	(501		)	(6,416		)	(51,141		)
Net cash provided by operating activities	209,368			292,183			244,863
Cash flow from investing activities:
Acquisitions, net of cash acquired	(246,017		)	(374,930		)	(336,958		)
Purchases of property, plant and equipment	(220,685		)	(194,146		)	(153,483		)
Proceeds from the sale of property, plant and equipment	21,635			17,072			16,868
Proceeds from sale of business	21,564			—			—
Other	3,804			(471		)	2,921
Net cash used for investing activities	(419,699		)	(552,475		)	(470,652		)
Cash flow from financing activities:
Proceeds from equity offerings	—			237,600			—
Capital issuance costs	—			(627		)	(136		)
Proceeds from debt issuances	64,500			302,000			354,000
Debt issuance costs	(550		)	(6,416		)	(5,801		)
Payments on debt	(85,042		)	(16,438		)	(120,702		)
Purchase of noncontrolling interests	—			(532		)	—
Payments on acquisition-related liabilities	(36,504		)	(34,650		)	(32,040		)
Distributions from partnership	(69		)	(1,974		)	(13,034		)
Proceeds from stock option exercises	15,615			21,661			440
Other	(1,943		)	(869		)	(20		)
Net cash (used in) provided by financing activities	(43,993		)	499,755			182,707
Impact of foreign currency on cash	(724		)	701			69
Net (decrease) increase in cash	(255,048		)	240,164			(43,013		)
Cash and cash equivalents—beginning of period	383,556			143,392			186,405
Cash and cash equivalents—end of period	$	128,508		$	383,556		$	143,392

See accompanying notes to consolidated financial statements.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders’ Equity

Years ended December 29, 2018, December 30, 2017 and December 31, 2016

(In thousands, except share amounts)



				Summit Materials, Inc.
							Accumulated
	Noncontrolling						Other			Class A			Class B					Additional			Noncontrolling			Total
	Interest in			Accumulated			Comprehensive			Common Stock			Common Stock					Paid-in			Interest in			Stockholders’
	Subsidiaries			Earnings			Income (Loss)			Shares	Dollars		Shares		Dollars			Capital			Summit Holdings			Equity
Balance — January 2, 2016	$	1,362		$	10,870		$	(2,795	)	49,745,944	$	497	69,007,297		$	690		$	619,003		$	138,233		$	767,860

Net income	16			36,783			—			—	—		—		—			—			9,327			46,126
LP Unit exchanges	—			—			—			45,124,528	451		—		—			117,813			(118,264		)	—
Other comprehensive income	—			—			546			—	—		—		—			—			476			1,022
Stock option exercises	—			—			—			24,354	2		—		—			438			—			440
Class B share cancellation	—			—			—			—	—		(69,007,197	)	(690		)	690			—			—
Share-based compensation	—			(1,684		)	—			—	—		—		—			51,624			—			49,940
Dividend (0.012/share)	—			(26,941		)	—			1,135,692	11		—		—			27,047			(121		)	(4		)
Distributions from partnership	—			—			—			—	—		—		—			—			(13,034		)	(13,034		)
Other	—			—			—			2,704	—		—		—			7,689			—			7,689
Balance — December 31, 2016	$	1,378		$	19,028		$	(2,249	)	96,033,222	$	961	100		$	—		$	824,304		$	16,617		$	860,039

Net (loss) income	(27		)	121,830			—			—	—		—		—			—			3,974			125,777
Issuance of Class A Shares	—			—			—			10,000,000	100		—		—			238,367			(1,496		)	236,971
LP Unit exchanges	—			—			—			1,461,677	15		—		—			4,159			(4,174		)	—
Other comprehensive income, net of tax	—			—			9,635			—	—		—		—			—			386			10,021
Stock option exercises	—			—			—			1,203,121	12		—		—			21,649			—			21,661
Share-based compensation	—			—			—			—	—		—		—			21,140			—			21,140
Dividend (0.014/share)	—			(45,025		)	—			1,521,056	15		—		—			45,163			(155		)	(2		)
Distributions from partnership	—			—			—			—	—		—		—			—			(1974		)	(1,974		)
Purchase of noncontrolling interest	(1,148		)	—			—			—	—		—		—			—			—			(1,148		)
Shares redeemed to settle taxes and other	(203		)	—			—			131,518	1		—		—			(562		)	—			(764		)
Balance — December 30, 2017	$	—		$	95,833		$	7,386		110,350,594	$	1,104	100		$	—		$	1,154,220		$	13,178		$	1,271,721

Net income	—			33,906			—			—	—		—		—			—			2,424			36,330
LP Unit exchanges	—			—			—			254,102	2		—		—			929			(931		)	—
Other comprehensive loss, net of tax	—			—			(4,705		)	—	—		—		—			—			(198		)	(4,903		)
Stock option exercises	—			—			—			863,898	9		—		—			15,607			—			15,616
Share-based compensation	—			—			—			—	—		—		—			25,378			—			25,378
Distributions from partnership	—			—			—			—	—		—		—			—			(69		)	(69		)
Shares redeemed to settle taxes and other	—			—			—			190,333	2		(1	)	—			(1,930		)	—			(1,928		)
Balance — December 29, 2018	$	—		$	129,739		$	2,681		111,658,927	$	1,117	99		$	—		$	1,194,204		$	14,404		$	1,342,145

See accompanying notes to consolidated financial statements.

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SUMMIT MATERIALS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in tables in thousands, unless otherwise noted)

(1) Summary of Organization and Significant Accounting Policies

Summit Materials, Inc. (“Summit Inc.” and, together with its subsidiaries, the “Company”) is a vertically-integrated construction materials company. The Company is engaged in the production and sale of aggregates, cement, ready-mix concrete, asphalt paving mix and concrete products and owns and operates quarries, sand and gravel pits, two cement plants, cement distribution terminals, ready-mix concrete plants, asphalt plants and landfill sites. It is also engaged in paving and related services. The Company’s three operating and reporting segments are the West, East and Cement segments.

Substantially all of the Company’s products and services are produced, consumed and performed outdoors, primarily in the spring, summer and fall. Seasonal changes and other weather-related conditions can affect the production and sales volumes of its products and delivery of services. Therefore, the financial results for any interim period are typically not indicative of the results expected for the full year. Furthermore, the Company’s sales and earnings are sensitive to national, regional and local economic conditions and to cyclical changes in construction spending, among other factors.

On September 23, 2014, Summit Inc. was formed as a Delaware corporation to be a holding company. Its sole material asset is a controlling equity interest in Summit Materials Holdings L.P. (“Summit Holdings”). Pursuant to a reorganization into a holding company structure (the “Reorganization”) consummated in connection with Summit Inc.’s March 2015 initial public offering, Summit Inc. became a holding corporation operating and controlling all of the business and affairs of Summit Holdings and its subsidiaries. Summit Inc. owns the majority of the partnership interests of Summit Holdings (see note 11, Stockholders’ Equity). Summit Materials, LLC (“Summit LLC”) an indirect wholly owned subsidiary of Summit Holdings, conducts the majority of our operations. Continental Cement Company, L.L.C. (“Continental Cement”) is also a wholly owned subsidiary of Summit LLC. Summit Materials Finance Corp. (“Summit Finance”), an indirect wholly owned subsidiary of Summit LLC, has jointly issued our Senior Notes as described below.

Principles of Consolidation—The consolidated financial statements include the accounts of Summit Inc. and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated. As a result of the Reorganization, Summit Holdings became a variable interest entity over which Summit Inc. has 100% voting power and control and for which Summit Inc. has the obligation to absorb losses and the right to receive benefits.

The Company’s fiscal year is based on a 52-53 week year with each quarter composed of 13 weeks ending on a Saturday. The 53-week year occurs approximately once every seven years and last occurred in 2015.

For a summary of the changes in Summit Inc.’s ownership of Summit Holdings, see Note 11, Stockholders’ Equity.

The Company attributes consolidated stockholders’ equity and net income separately to the controlling and noncontrolling interests. The Company accounts for investments in entities for which it has an ownership of 20% to 50% using the equity method of accounting.

Use of Estimates—Preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenue and expenses. Such estimates include the valuation of accounts receivable, inventories, valuation of deferred tax assets, goodwill, intangibles and other long-lived assets, the tax receivable agreement (“TRA”) liability, pension and other postretirement obligations, and asset retirement obligations. Estimates also include revenue earned on contracts and costs to complete contracts. Most of the Company’s paving and related services are performed under fixed unit-price contracts with state and local governmental entities. Management regularly evaluates its estimates and assumptions based on historical experience and other factors, including the current economic environment. As future events and their effects cannot be determined with precision, actual results can differ significantly from estimates made. Changes in estimates, including those resulting from continuing changes in the economic environment, are reflected in the Company’s consolidated financial statements when the change in estimate occurs.

Business and Credit Concentrations—The Company’s operations are conducted primarily across 23 U.S. states and in British Columbia, Canada, with the most significant revenue generated in Texas, Utah, Kansas and Missouri. The Company’s

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accounts receivable consist primarily of amounts due from customers within these areas. Therefore, collection of these accounts is dependent on the economic conditions in the aforementioned states, as well as specific situations affecting individual customers. Credit granted within the Company’s trade areas has been granted to many customers and management does not believe that a significant concentration of credit exists with respect to any individual customer or group of customers. No single customer accounted for more than 10% of the Company’s total revenue in 2018, 2017 or 2016.

Accounts Receivable—Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the collectability of individual accounts. In establishing the allowance, management considers historical losses adjusted to take into account current market conditions and its customers’ financial condition, the amount of receivables in dispute, the current receivables aging and current payment terms. Balances that remain outstanding after reasonable collection efforts are exercised are written off through a charge to the valuation allowance.

The balances billed but not paid by customers, pursuant to retainage provisions included in contracts, are generally due upon completion of the contracts.

Revenue Recognition—We earn revenue from the sale of products, which primarily include aggregates, cement, ready-mix concrete and asphalt, but also include concrete products and plastics components, and from the provision of services, which are primarily paving and related services, but also include landfill operations, the receipt and disposal of waste that is converted to fuel for use in our cement plants and underground storage space rental.

Products

We earn revenue from the sale of products, which primarily include aggregates, cement, ready-mix concrete and asphalt, but also include concrete products, net of discounts or allowances, if any, and freight and delivery charges billed to customers. Freight and delivery charges associated with cement sales are recorded on a net basis together with freight costs within cost of sales. Revenue for product sales is recognized when evidence of an arrangement exists and when control passes, which generally is when the product is shipped.

Aggregates and cement products are sold point-of-sale through purchase orders. When the product is sold on account, collectability typically occurs 30 to 60 days after the sale. Revenue is recognized when cash is received from the customer at the point of sale or when the products are delivered or collected on site. There are no other timing implications that will create a contract asset or liability, and contract modifications are unlikely given the timing and nature of the transaction. Material sales are likely to have multiple performance obligations if the product is sold with delivery. In these instances, delivery most often occurs on the same day as the control of the product transfers to the customer. As a result, even in the case of multiple performance obligations, the performance obligations are satisfied concurrently and revenue is recognized simultaneously.

Services

We earn revenue from the provision of services, which are primarily paving and related services, but also include landfill operations, the receipt and disposal of waste that is converted to fuel for use in our cement plants, and underground storage space rental. Revenue from the receipt of waste fuels is recognized when the waste is accepted and a corresponding liability is recognized for the costs to process the waste into fuel for the manufacturing of cement or to ship the waste offsite for disposal in accordance with applicable regulations.

Collectability of service contracts is due reasonably after certain milestones in the contract are performed. Milestones vary by project, but are typically calculated using monthly progress based on the percentage of completion or a customer’s engineer review of progress. The majority of the time, collection occurs within 90 days of billing and cash is received within the same fiscal year as services performed. On most projects, the customer will withhold a portion of the invoice for retainage, which may last longer than a year depending on the job.

Revenue derived from paving and related services is recognized using the percentage of completion method, which approximates progress towards completion. Under the percentage of completion method, we recognize paving and related services revenue as services are rendered. The majority of our construction service contracts are completed within one year, but may occasionally extend beyond this time frame. We estimate profit as the difference between total estimated revenue and total estimated cost of a contract and recognize that profit over the life of the contract based on input measures. We generally measure progress toward completion on long-term paving and related services contracts based on the proportion of costs incurred to date relative to total estimated costs at completion. We include revisions of estimated profits on contracts in earnings under the cumulative catch-up method, under which the effect of revisions in estimates is recognized immediately. If a

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revised estimate of contract profitability reveals an anticipated loss on the contract, we recognize the loss in the period it is identified.

The percentage of completion method of accounting involves the use of various estimating techniques to project costs at completion, and in some cases includes estimates of recoveries asserted against the customer for changes in specifications or other disputes. Contract estimates involve various assumptions and projections relative to the outcome of future events over multiple periods, including future labor productivity and availability, the nature and complexity of the work to be performed, the cost and availability of materials, the effect of delayed performance, and the availability and timing of funding from the customer. These estimates are based on our best judgment. A significant change in one or more of these estimates could affect the profitability of one or more of our contracts. We review our contract estimates regularly to assess revisions in contract values and estimated costs at completion. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts. No material adjustments to a contract were recognized in the year ended December 29, 2018.

We recognize claims when the amount of the claim can be estimated reliably and its realization is probable. In evaluating these criteria, we consider the contractual basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim.

When the contract includes variable consideration, we estimate the amount of consideration to which we will be entitled in exchange for transferring the promised goods or services to a customer. The amount of estimated variable consideration included in the transaction price is the amount for which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Types of variable consideration include, but are not limited to, liquidated damages and other performance penalties and production and placement bonuses.

The majority of contract modifications relate to the original contract and are often an extension of the original performance obligation. Predominately, modifications are not distinct from the terms in the original contract; therefore, they are considered part of a single performance obligation. We account for the modification using a cumulative catch-up adjustment. However, there are instances where goods or services in a modification are distinct from those transferred prior to the modification. In these situations, we account for the modifications as either a separate contract or prospectively depending on the facts and circumstances of the modification.

Generally, construction contracts contain mobilization costs which are categorized as costs to fulfill a contract. These costs are excluded from any measure of progress toward contract fulfillment. These costs do not result in the transfer of control of a good or service to the customer and are amortized over the life of the contract.

Costs and estimated earnings in excess of billings are composed principally of revenue recognized on contracts on the percentage of completion method for which billings had not been presented to customers because the amounts were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, the unbilled receivables at the balance sheet date are expected to be billed in following periods. Billings in excess of costs and estimated earnings represent billings in excess of revenue recognized. Contract assets and liabilities are netted on a contract-by-contract basis.

Inventories—Inventories consist of stone that has been removed from quarries and processed for future sale, cement, raw materials and finished concrete blocks. Inventories are valued at the lower of cost or market and are accounted for on a first-in first-out basis or an average cost basis. If items become obsolete or otherwise unusable or if quantities exceed what is projected to be sold within a reasonable period of time, they will be charged to costs of production in the period that the items are designated as obsolete or excess inventory. Stripping costs are costs of removing overburden and waste material to access aggregate materials and are expensed as incurred.

Property, Plant and Equipment, net—Property, plant and equipment are recorded at cost, less accumulated depreciation, depletion and amortization. Expenditures for additions and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Repair and maintenance costs that do not substantially expand productive capacity or extend the life of property, plant and equipment are expensed as incurred.

Landfill airspace is included in property, plant and equipment at cost and is amortized based on the portion of the airspace used during the period compared to the gross estimated value of available airspace, which is updated periodically as circumstances dictate. Management reassesses the landfill airspace capacity with any changes in value recorded in cost of revenue. Capitalized landfill costs include expenditures for the acquisition of land and related airspace, engineering and permitting costs, cell construction costs and direct site improvement costs.

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Upon disposal of an asset, the cost and related accumulated depreciation are removed from the Company’s accounts and any gain or loss is included in general and administrative expenses.

The Company reviews the carrying value of property, plant and equipment for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Such indicators may include, among others, deterioration in general economic conditions, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows or a trend of negative or declining cash flows over multiple periods.

Property, plant and equipment is tested for impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. As a result, the property, plant and equipment impairment test is at a significantly lower level than the level at which goodwill is tested for impairment. In markets where the Company does not produce downstream products, such as ready-mix concrete, asphalt paving mix and paving and related services, the lowest level of largely independent identifiable cash flows is at the individual aggregates operation or a group of aggregates operations collectively serving a local market or the cement operations. Conversely, in vertically-integrated markets, the cash flows of the downstream and upstream businesses are not largely independently identifiable and the vertically-integrated operations are considered the lowest level of largely independent identifiable cash flows.

Accrued Mining and Landfill Reclamation—The mining reclamation reserve and financial commitments for landfill closure and post-closure activities are based on management’s estimate of future cost requirements to reclaim property at both currently operating and closed sites. Estimates of these obligations have been developed based on management’s interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Costs are estimated in current dollars, inflated until the expected time of payment, and then discounted back to present value using a credit-adjusted, risk-free rate on obligations of similar maturity, adjusted to reflect the Company’s credit rating. Changes in the credit-adjusted, risk-free rate do not change recorded liabilities. However, subsequent increases in the recognized obligations are measured using a current credit-adjusted, risk-free rate. Decreases in the recognized obligations are measured at the initial credit-adjusted, risk-free rate.

Significant changes in inflation rates or the amount or timing of future cost estimates typically result in both (1) a current adjustment to the recorded liability (and corresponding adjustment to the asset) and (2) a change in accretion of the liability and depreciation of the asset to be recorded prospectively over the remaining capacity of the unmined quarry or landfill.

Goodwill—Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill recorded in connection with the Company’s acquisitions is primarily attributable to the expected profitability, assembled workforces of the acquired businesses and the synergies expected to arise after the Company’s acquisition of those businesses. Goodwill is not amortized, but is tested annually for impairment as of the first day of the fourth quarter and at any time that events or circumstances indicate that goodwill may be impaired. A qualitative approach may first be applied to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If, as a result of the qualitative assessment, it is determined that an impairment is more likely than not, the two-step quantitative impairment test is then performed, otherwise further analysis is not required. The two-step impairment test first identifies potential goodwill impairment for each reporting unit and then, if necessary, measures the amount of the impairment loss.

Income Taxes—Summit Inc. is a corporation subject to income taxes in the United States. Certain subsidiaries, including Summit Holdings, or subsidiary groups of the Company are taxable separate from Summit Inc. The provisions, or Summit Inc.’s proportional share of the provision, are included in the Company’s consolidated financial statements.

The Company’s deferred income tax assets and liabilities are computed for differences between the tax basis and financial statement amounts that will result in taxable or deductible amounts in the future. The computed deferred balances are based on enacted tax laws and applicable rates for the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized for deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines it would be able to realize its deferred tax assets for which a valuation allowance had been recorded then an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

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The Company evaluates the tax positions taken on income tax returns that remain open and positions expected to be taken on the current year tax returns to identify uncertain tax positions. Unrecognized tax benefits on uncertain tax positions are recorded on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized is recognized. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit.

Tax Receivable Agreement— When Summit Inc. purchases LP Units for cash or LP Units are exchanged for shares of Class A common stock, this results in increases in Summit Inc.’s share of the tax basis of the tangible and intangible assets, which increases the tax depreciation and amortization deductions that otherwise would not have been available to Summit Inc. These increases in tax basis and tax depreciation and amortization deductions are expected to reduce the amount of cash taxes that we would otherwise be required to pay in the future. Prior to our IPO, we entered into a TRA with the pre-IPO owners that require us to pay the pre-IPO owners 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize as a result of these exchanges. These benefits include (1) increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, (2) tax benefits attributable to payments under the TRA, or (3) under certain circumstances such as an early termination of the TRA, we are deemed to realize, as a result of the increases in tax basis in connection with exchanges by the pre-IPO owners described above and certain other tax benefits attributable to payments under the TRA.

As noted above, we periodically evaluate the realizability of the deferred tax assets resulting from the exchange of LP Units for Class A common stock. If the deferred tax assets are determined to be realizable, we then assess whether payment of amounts under the TRA have become probable. If so, we record a TRA liability equal to 85% of such deferred tax assets. In subsequent periods, we assess the realizability of all of our deferred tax assets subject to the TRA. Should we determine a deferred tax asset with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and consideration of a corresponding TRA liability will be assessed. The realizability of deferred tax assets, including those subject to the TRA, is dependent upon the generation of future taxable income during the periods in which those deferred tax assets become deductible and consideration of prudent and feasible tax-planning strategies.

The measurement of the TRA liability is accounted for as a contingent liability. Therefore, once we determine that a payment to a pre-IPO owner has become probable and can be estimated, the estimate of payment will be accrued.

Earnings per Share—The Company computes basic earnings per share attributable to stockholders by dividing income attributable to Summit Inc. by the weighted-average shares of Class A common stock outstanding. Diluted earnings per share reflects the potential dilution beyond shares for basic earnings per share that could occur if securities or other contracts to issue common stock were exercised, converted into common stock, or resulted in the issuance of common stock that would have shared in the Company’s earnings. Since the Class B common stock has no economic value, those shares are not included in the weighted-average common share amount for basic or diluted earnings per share. In addition, as the shares of Class A common stock are issued by Summit Inc., the earnings and equity interests of noncontrolling interests are not included in basic earnings per share.

New Accounting Standards — In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which prescribes a five-step model for revenue recognition that will replace most existing revenue recognition guidance in U.S. GAAP. The ASU will supersede nearly all existing revenue recognition guidance under U.S. GAAP and provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB postponed the effective date of the new revenue standard by one year to the first quarter of 2018. We adopted this new standard in January 2018 using the modified retrospective approach. The adoption of this new ASU did not have a material impact on our consolidated financial results.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will result in lessees recognizing most leases on the balance sheet. Lessees are required to disclose more quantitative and qualitative information about the leases than current U.S. GAAP requires. The ASU and subsequent amendments issued in 2018, are effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have compiled our leases, and currently estimate that we will record additional right of use assets and liabilities of approximately $30 to $40 million beginning in 2019. We plan to adopt this ASU, as amended, using the modified retrospective approach.

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In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the definition of a business. This ASU provides a screen to determine whether a group of assets constitutes a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated as acquisitions. If the screen is not met, this ASU (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output and (2) removes the evaluation of whether a market participant could replace missing elements. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. We adopted this ASU beginning in 2018. The adoption of this ASU did not have a material impact on the consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, allowing more financial and nonfinancial hedging strategies to be eligible for hedge accounting. The ASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, increasing the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

(2) Acquisitions

The Company has completed numerous acquisitions since its formation, which have been financed through a combination of debt and equity funding. The operations of each acquisition have been included in the Company’s consolidated results of operations since the respective closing dates of the acquisitions. The Company measures all assets acquired and liabilities assumed at their acquisition-date fair value. The following table summarizes the Company’s acquisitions by region and year:



	2018	2017	2016
West	5	6	3
East (1)	7	8	5
Cement	—	—	1

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(1)	In addition, the Company acquired certain assets of a small ready-mix concrete operation in the second quarter of 2018.

The purchase price allocation for certain 2018 acquisitions has not yet been finalized due to the recent timing of the acquisitions and status of the valuation of property, plant and equipment, among other items. The table below summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates. Information related to the 2018 acquisitions is shown on an aggregated basis as the acquisitions were not material individually, or collectively.

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	2018			2017
Financial assets	$	14,769		$	31,615
Inventories	18,313			8,300
Property, plant and equipment	124,957			160,975
Intangible assets	3,175			161
Other assets	1,539			4,200
Financial liabilities	(13,529		)	(15,501		)
Other long-term liabilities	(8,125		)	(17,610		)
Net assets acquired	141,099			172,140
Goodwill	154,120			247,536
Purchase price	295,219			419,676
Acquisition-related liabilities	(49,202		)	(43,452		)
Other	—			(1,294		)
Net cash paid for acquisitions	$	246,017		$	374,930

Acquisition-Related Liabilities—A number of acquisition-related liabilities have been recorded subject to terms in the relevant purchase agreements, including deferred consideration and noncompete payments. Noncompete payments have been accrued where certain former owners of newly acquired companies have entered into standard noncompete arrangements. Subject to terms and conditions stated in these noncompete agreements, payments are generally made over a five-year period. Deferred consideration is purchase price consideration paid in the future as agreed to in the purchase agreement and is not contingent on future events. Deferred consideration is generally scheduled to be paid in years ranging from five to 20 years in annual installments. The remaining payments due under these noncompete and deferred consideration agreements are as follows:




2019	$	32,960
2020	31,745
2021	9,705
2022	3,411
2023	2,657
Thereafter	9,640
Total scheduled payments	90,118
Present value adjustments	(12,949		)
Total noncompete obligations and deferred consideration	$	77,169

Accretion on the deferred consideration and noncompete obligations is recorded in interest expense.

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(3) Goodwill

As of December 29, 2018, the Company had 12 reporting units with goodwill for which the annual goodwill impairment test was completed. We perform the annual impairment test on the first day of the fourth quarter each year. We initially perform a qualitative analysis. As a result of this analysis, it was determined that it is more likely than not that the fair value of four reporting units were greater than its carrying value. For the remaining reporting units we perform a two-step quantitative analysis. Step 1 of that analysis compares the estimated the fair value of the reporting units using an income approach (i.e., a discounted cash flow technique) and a market approach to the carrying value of the reporting unit. If the estimated fair value exceeds its carrying value, the goodwill of the reporting unit is not considered impaired. If the carrying value of the reporting unit exceeds its fair value, we proceed to the second step to measure the amount of potential impairment loss. Based on this analysis, it was determined that the reporting units’ fair values were greater than their carrying values and no impairment charges were recognized in 2018. The accumulated impairment charges recognized in periods prior to 2016 totaled $68.2 million.

These estimates of a reporting unit’s fair value involve significant management estimates and assumptions, including but not limited to sales prices of similar assets, assumptions related to future profitability, cash flows, and discount rates. These estimates are based upon historical trends, management’s knowledge and experience and overall economic factors, including projections of future earnings potential. Developing discounted future cash flow estimates in applying the income approach required management to evaluate its intermediate to longer-term strategies, including, but not limited to, estimates about revenue growth, operating margins, capital requirements, inflation and working capital management. The development of appropriate rates to discount the estimated future cash flows required the selection of risk premiums, which can materially affect the present value of estimated future cash flows.

In addition to the financial impact of Hurricane Harvey, our operations in Austin continue to be pressured by aggressive competition, which has further impacted volumes and pricing. We expect the Austin market to continue to grow, and the Texas Department of Transportation to invest in infrastructure projects in that area. The Austin reporting unit has approximately $18 million of goodwill as of December 29, 2018, which we continue to believe is realizable. The key assumptions around the realizability analysis are revenue growth, as well as the discount rate of 10%. Our discount rate came under pressure in the fourth quarter of 2018 due to decreases in the market price of our Class A common stock. We will continue to monitor whether an event indicates the carrying value of the Austin based reporting unit may be impaired.

The following table presents goodwill by reportable segments and in total:



	West			East		Cement		Total
Balance, December 31, 2016	$	334,257		$	243,417	$	204,538	$	782,212
Acquisitions	187,883			61,957		118		249,958
Foreign currency translation adjustments	4,150			—		—		4,150
Balance, December 30, 2017	$	526,290		$	305,374	$	204,656	$	1,036,320
Acquisitions (1)	59,148			101,431		—		160,579
Foreign currency translation adjustments	(4,871		)	—		—		(4,871		)
Balance, December 29, 2018	$	580,567		$	406,805	$	204,656	$	1,192,028

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(1)	Reflects goodwill from 2018 acquisitions and working capital adjustments from prior year acquisitions.

(4) Revenue Recognition

We derive our revenue predominantly by selling construction materials, products and providing paving and related services. Construction materials consist of aggregates and cement. Products consist of related downstream products, including ready-mix concrete, asphalt paving mix and concrete products. Paving and related service revenue is generated primarily from the asphalt paving services that we provide.

Revenue by product for the years ended December 29, 2018, December 30, 2017 and December 31, 2016 consisted of the following:

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	2018		2017		2016
Revenue by product*:
Aggregates	$	373,824	$	313,383	$	264,609
Cement	258,876		282,041		250,349
Ready-mix concrete	584,114		492,302		395,917
Asphalt	301,247		285,653		239,419
Paving and related services	379,540		371,763		304,041
Other	203,401		187,433		171,728
Total revenue	$	2,101,002	$	1,932,575	$	1,626,063

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* Revenue from the liquid asphalt terminals is included in asphalt revenue.

The following table outlines the significant changes in contract assets and contract liability balances from December 30, 2017 to December 29, 2018. Also included in the table is the net change in the estimate as a percentage of aggregate revenue for such contracts:



	Costs and estimated			Billings in excess
	earnings in			of costs and
	excess of billings			estimated earnings
Balance—December 30, 2017	$	9,512		$	15,750
Changes in revenue billed, contract price or cost estimates	8,702			(5,052		)
Acquisitions	483			1,179
Other	(95		)	(37		)
Balance—December 29, 2018	$	18,602		$	11,840

Accounts receivable, net consisted of the following as of December 29, 2018 and December 30, 2017:



	2018			2017
Trade accounts receivable	$	157,601		$	137,696
Construction contract receivables	47,994			49,832
Retention receivables	15,010			14,973
Receivables from related parties	629			468
Accounts receivable	221,234			202,969
Less: Allowance for doubtful accounts	(6,716		)	(4,639		)
Accounts receivable, net	$	214,518		$	198,330

Retention receivables are amounts earned by the Company but held by customers until paving and related service contracts and projects are near completion or fully completed. Amounts are generally billed and collected within one year.

(5) Inventories

Inventories consisted of the following as of December 29, 2018 and December 30, 2017:



	2018		2017
Aggregate stockpiles	$	151,300	$	126,791
Finished goods	34,993		34,667
Work in process	7,478		7,729
Raw materials	20,080		15,252
Total	$	213,851	$	184,439

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(6) Property, Plant and Equipment, net and Intangibles, net

Property, plant and equipment, net consisted of the following as of December 29, 2018 and December 30, 2017:



	2018			2017
Land (mineral bearing) and asset retirement costs	$	323,553		$	274,083
Land (non-mineral bearing)	184,029			168,501
Buildings and improvements	173,559			170,615
Plants, machinery and equipment	1,239,793			1,068,007
Mobile equipment and barges	468,313			391,256
Truck and auto fleet	51,938			47,270
Landfill airspace and improvements	49,754			49,480
Office equipment	39,794			33,314
Construction in progress	43,650			44,739
Property, plant and equipment	2,574,383			2,247,265
Less accumulated depreciation, depletion and amortization	(794,251		)	(631,841		)
Property, plant and equipment, net	$	1,780,132		$	1,615,424

Depreciation on property, plant and equipment, including assets subject to capital leases, is generally computed on a straight-line basis. Depletion of mineral reserves is computed based on the portion of the reserves used during the period compared to the gross estimated value of proven and probable reserves, which is updated periodically as circumstances dictate. Leasehold improvements are amortized on a straight-line basis over the lesser of the asset’s useful life or the remaining lease term. The estimated useful lives are generally as follows:




Buildings and improvements	10 - 30	years
Plant, machinery and equipment	15 - 20	years
Office equipment	3 - 7	years
Truck and auto fleet	5 - 8	years
Mobile equipment and barges	6 - 8	years
Landfill airspace and improvements	10 - 30	years
Other	4 - 20	years

Depreciation, depletion and amortization expense of property, plant and equipment was $199.6 million, $174.4 million and $144.2 million in the years ended December 29, 2018, December 30, 2017 and December 31, 2016, respectively.

Property, plant and equipment at December 29, 2018 and December 30, 2017 included $67.7 million and $51.2 million, respectively, of capital leases for certain equipment and a building with accumulated amortization of $19.3 million and $18.5 million, respectively. The equipment leases generally have terms of less than five years and the building lease had an original term of 30 years. Approximately $15.6 million and $19.3 million of the future obligations associated with the capital leases are included in accrued expenses as of December 29, 2018 and December 30, 2017, respectively, and the present value of the remaining capital lease payments, $33.6 million and $16.4 million, respectively, is included in other noncurrent liabilities on the consolidated balance sheets. Future minimum rental commitments under long-term capital leases are $17.9 million, $13.9 million, $15.3 million, $3.0 million, and $1.0 million for the years ended 2019, 2020, 2021, 2022 and 2023, respectively.

Assets are assessed for impairment charges when identified for disposition. The net gain from asset dispositions recognized in general and administrative expenses in fiscal years 2018, 2017 and 2016 was $12.6 million, $7.5 million and $6.8 million, respectively. No material impairment charges have been recognized on assets held for use in fiscal 2018, 2017 or 2016. The losses are commonly a result of the cash flows expected from selling the asset being less than the expected cash flows that could be generated from holding the asset for use.

Intangible Assets—The Company’s intangible assets are primarily composed of lease agreements and reserve rights. The assets related to lease agreements reflect the submarket royalty rates paid under agreements, primarily, for extracting aggregates. The values were determined as of the respective acquisition dates by a comparison of market-royalty rates to contract-royalty rates. The reserve rights relate to aggregate reserves to which the Company has the rights of ownership, but do

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not own the reserves. The intangible assets are amortized on a straight-line basis over the lives of the leases. The following table shows intangible assets by type and in total:



	December 29, 2018							December 30, 2017
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Leases	$	19,064	$	(5,259	)	$	13,805	$	15,888	$	(4,178	)	$	11,710
Reserve rights	6,234		(1,940		)	4,294		6,234		(1,625		)	4,609
Trade names	1,000		(858		)	142		1,000		(758		)	242
Other	409		(190		)	219		409		(137		)	272
Total intangible assets	$	26,707	$	(8,247	)	$	18,460	$	23,531	$	(6,698	)	$	16,833

Amortization expense in fiscal 2018, 2017 and 2016 was $1.5 million, $1.3 million and $2.6 million, respectively. The estimated amortization expense for intangible assets for each of the next five years and thereafter is as follows:




2019	$	1,588
2020	1,510
2021	1,475
2022	1,482
2023	1,349
Thereafter	11,056
Total	$	18,460

(7) Accrued Expenses

Accrued expenses consisted of the following as of December 29, 2018 and December 30, 2017:



	2018		2017
Interest	$	26,223	$	24,095
Payroll and benefits	15,952		33,915
Capital lease obligations	15,557		19,276
Insurance	13,625		11,455
Non-income taxes	7,442		7,236
Professional fees	1,408		1,717
Other (1)	20,284		18,935
Total	$	100,491	$	116,629

______________________


(1)	Consists primarily of subcontractor and working capital settlement accruals and deferred revenue.

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(8) Debt

Debt consisted of the following as of December 29, 2018 and December 30, 2017:



	2018		2017
Term Loan, due 2024:
$630.6 million and $635.4 million, net of $1.3 million and $1.6 million discount at December 29, 2018 and December 30, 2017, respectively	$	629,268	$	633,805
8 1/2% Senior Notes, due 2022	250,000		250,000
6 1/8% Senior Notes, due 2023:
$650.0 million, net of $1.1 million and $1.4 million discount at December 29, 2018 and December 30, 2017, respectively	648,891		648,650
5 1/8% Senior Notes, due 2025	300,000		300,000
Total	1,828,159		1,832,455
Current portion of long-term debt	6,354		4,765
Long-term debt	$	1,821,805	$	1,827,690

The contractual payments of long-term debt, including current maturities, for the five years subsequent to December 29, 2018, are as follows:




2019	$	6,354
2020	7,942
2021	6,354
2022	256,354
2023	656,354
Thereafter	897,253
Total	1,830,611
Less: Original issue net discount	(2,452		)
Less: Capitalized loan costs	(14,303		)
Total debt	$	1,813,856

Senior Notes— On June 1, 2017, Summit LLC and Summit Finance (together, the “Issuers”) issued $300 million of 5 1⁄8% senior notes due June 1, 2025 (the “2025 Notes”). The 2025 Notes were issued at 100% of their par value with proceeds of $295.4 million, net of related fees and expenses. The 2025 Notes were issued under an indenture dated June 1, 2017 (as amended and supplemented, the “2017 Indenture”). The 2017 Indenture contains covenants limiting, among other things, Summit LLC and its restricted subsidiaries’ ability to incur additional indebtedness or issue certain preferred shares, pay dividends, redeem stock or make other distributions, make certain investments, sell or transfer certain assets, create liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets, enter inter certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The 2017 Indenture also contains customary events of default. Interest on the 2025 Notes is payable semi-annually on June 1 and December 1 of each year commencing on December 1, 2017.

In 2016, the Issuers issued $250.0 million of 8.5% senior notes due April 15, 2022 (the “2022 Notes”). The 2022 Notes were issued at 100% of their par value with proceeds of $246.3 million, net of related fees and expenses. The proceeds from the sale of the 2022 Notes were used to fund the acquisition of Boxley Materials Company, replenish cash used for the acquisition of American Materials Company and pay expenses incurred in connection with these acquisitions. The 2022 Notes were issued under an indenture dated March 8, 2016, the terms of which are generally consistent with the 2017 Indenture. Interest on the 2022 Notes is payable semi-annually in arrears on April 15 and October 15 of each year.

In 2015, the Issuers issued $650 million of 6.125% senior notes due July 2023 (the “2023 Notes” and collectively with the 2022 Notes and the 2025 Notes, the “Senior Notes”). Of the aggregate $650.0 million of 2023 Notes, $350.0 million were issued at par and $300.0 million were issued at 99.375% of par. The 2023 Notes were issued under an indenture dated July 8, 2015, the terms of which are generally consistent with the 2017 Indenture. Interest on the 2023 Notes is payable semi-annually in arrears on January 15 and July 15 of each year.

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In April, August and November 2015, $288.2 million, $183.0 million and $153.8 million, respectively, in aggregate principal amount of the then outstanding 10 1/2% senior notes due January 31, 2020 (the “2020 Notes”) were redeemed at a price equal to par plus an applicable premium and the indenture under which the 2020 Notes were issued was satisfied and discharged. As a result of the redemptions, net charges of $56.5 million were recognized for the year ended December 31, 2016. The fees included $66.6 million for the applicable prepayment premium and $11.9 million for the write-off of deferred financing fees, partially offset by $22.0 million of net benefit from the write-off of the original issuance net premium.

As of December 29, 2018 and December 30, 2017, the Company was in compliance with all financial covenants under the applicable indentures.

Senior Secured Credit Facilities— Summit LLC has credit facilities that provide for term loans in an aggregate amount of $650.0 million and revolving credit commitments in an aggregate amount of $235.0 million (the “Senior Secured Credit Facilities”). Under the Senior Secured Credit Facilities, required principal repayments of 0.25% of the refinanced aggregate amount of term debt are due on the last business day of each March, June, September and December, commencing with the March 2018 payment. The unpaid principal balance is due in full on the maturity date, which is November 21, 2024.

On January 19, 2017, Summit LLC entered into Amendment No. 1 (“Amendment No. 1”) to the credit agreement governing the Senior Secured Credit Facilities (the “Credit Agreement”), which, among other things, reduced the applicable margin in respect of then outstanding $640.3 million principal amount of term loans thereunder. All other material terms and provisions remain substantially identical to the terms and provisions in place immediately prior to the effectiveness of Amendment No. 1. On November 21, 2017, Summit LLC entered into Amendment No. 2 to the Credit Agreement, which, among other things, extended the maturity date from 2022 to 2024 and reduced the applicable margin in respect of the $635.4 million outstanding principal amount of term loans thereunder. On May 22, 2018, Summit LLC entered into Amendment No. 3 to the Credit Agreement, which, among other things, reduced the applicable margin in respect of the $633.8 million outstanding principal amount of term loans thereunder.

The revolving credit facility bears interest per annum equal to, at Summit LLC’s option, either (i) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) LIBOR plus 1.00%, plus an applicable margin of 2.25% for base rate loans or (ii) a LIBOR rate determined by reference to Reuters prior to the interest period relevant to such borrowing adjusted for certain additional costs plus an applicable margin of 3.25% for LIBOR rate loans.

There were no outstanding borrowings under the revolving credit facility as of December 29, 2018 or December 30, 2017. As of December 29, 2018, we had remaining borrowing capacity of $219.6 million under the revolving credit facility, which is net of $15.4 million of outstanding letters of credit. The outstanding letters of credit are renewed annually and support required bonding on construction projects and the Company’s insurance liabilities.

Summit LLC’s Consolidated First Lien Net Leverage Ratio, as such term is defined in the Credit Agreement, should be no greater than 4.75:1.0 as of each quarter-end. As of December 29, 2018 and December 30, 2017, Summit LLC was in compliance with all financial covenants under the Credit Agreement.

Summit LLC’s wholly-owned domestic subsidiary companies, subject to certain exclusions and exceptions, are named as subsidiary guarantors of the Senior Notes and the Senior Secured Credit Facilities. In addition, Summit LLC has pledged substantially all of its assets as collateral, subject to certain exclusions and exceptions, for the Senior Secured Credit Facilities.

The following table presents the activity for the deferred financing fees for the years ended December 29, 2018 and December 30, 2017:

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	Deferred financing fees
Balance—December 31, 2016	$	18,290
Loan origination fees	6,416
Amortization	(3,990		)
Write off of deferred financing fees	(1,683		)
Balance—December 30, 2017	$	19,033
Loan origination fees	550
Amortization	(4,108		)
Balance—December 29, 2018	$	15,475

Other—On January 15, 2015, the Company’s wholly-owned subsidiary in British Columbia, Canada entered into an agreement with HSBC for a (i) $6.0 million Canadian dollar (“CAD”) revolving credit commitment to be used for operating activities that bears interest per annum equal to the bank’s prime rate plus 0.20%, (ii) $0.5 million CAD revolving credit commitment to be used for capital equipment that bears interest per annum at the bank’s prime rate plus 0.90% and (iii) $0.4 million CAD revolving credit commitment to provide guarantees on behalf of that subsidiary. There were no amounts outstanding under this agreement as of December 29, 2018 or December 30, 2017.

(9) Income Taxes

Summit Inc.’s tax provision includes its proportional share of Summit Holdings’ tax attributes. Summit Holdings’ subsidiaries are primarily limited liability companies, but do include certain entities organized as C corporations and a Canadian subsidiary. The tax attributes related to the limited liability companies are passed on to Summit Holdings and then to its partners, including Summit Inc. The tax attributes associated with the C corporation and Canadian subsidiaries are fully reflected in the Company’s consolidated financial statements. For the years ended December 29, 2018, December 30, 2017 and December 31, 2016, income taxes consisted of the following:



	2018		2017			2016
Provision for income taxes:
Current	$	463	$	2,530		$	2,835
Deferred	59,284		(286,507		)	(8,134		)
Income tax expense (benefit)	$	59,747	$	(283,977	)	$	(5,299	)

The effective tax rate on pre-tax income differs from the U.S. statutory rate of 21%, 35%, and 35% for 2018, 2017 and 2016, respectively, due to the following:



	2018			2017			2016
Income tax expense (benefit) at federal statutory tax rate	$	20,177		$	(55,365	)	$	14,290
Less: Income tax benefit at federal statutory tax rate for LLC entities	(561		)	(2,123		)	(10,608		)
State and local income taxes	4,894			(5,209		)	2,490
Permanent differences	(5,537		)	(4,410		)	(5,902		)
Effective tax rate change	4,034			216,904			(1,432		)
Unrecognized tax benefits	22,663			—			—
Tax receivable agreement (benefit) expense	(8,282		)	104,804			5,228
Change in valuation allowance	17,592			(500,162		)	239,008
Impact of LP Unit ownership change	—			(31,790		)	(252,456		)
Other	4,767			(6,626		)	4,083
Income tax expense (benefit)	$	59,747		$	(283,977	)	$	(5,299	)

The following table summarizes the components of the net deferred income tax asset (liability) as December 29, 2018 and December 30, 2017:

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	2018			2017
Deferred tax assets (liabilities):
Net intangible assets	$	275,412		$	316,950
Accelerated depreciation	(185,020		)	(147,943		)
Net operating loss	143,234			94,751
Investment in limited partnership	(29,981		)	(14,467		)
Mining reclamation reserve	1,600			1,239
Inventory purchase accounting adjustments	—			—
Working capital (e.g., accrued compensation, prepaid assets)	36,932			35,237
Interest expense limitation carryforward	2,586			—
Less valuation allowance	(19,366		)	(1,675		)
Deferred tax assets	225,397			284,092
Less foreign deferred tax liability (included in other noncurrent liabilities)	(5,133		)	(3,992		)
Net deferred tax asset	$	220,264		$	280,100

As of December 29, 2018, $379.4 million of our deferred tax assets subject to our TRA are included in the net intangible assets and the net operating loss line items above.

Our income tax expense (benefit) was $59.7 million, $(284.0) million and $(5.3) million in the fiscal years ended 2018, 2017 and 2016, respectively. Our effective income tax rate in 2018 was impacted by the IRS interpretative guidance of TCJA, a change in state tax rates and a reduction in the amount of our TRA liability. We recorded an income tax benefit in fiscal 2017, primarily related to the release of the valuation allowance as discussed below, partially offset by charge related to the decrease in the federal statutory corporate tax rate. Our effective income tax rate in 2017 was higher as compared to 2016, primarily due to the benefit associated with the release of the valuation allowance discussed below, the accrual of the TRA expense, the statutory rate change referred to below and depletion in excess of U.S. GAAP depletion recognized in 2017. During the year ended 2016, our income tax benefit was $5.3 million.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible, as well as consideration of tax-planning strategies we may seek to utilize net operating loss carryforwards that begin to expire in 2030. Due to our limited operating history as of December 31, 2016, during which we incurred only a small amount of pre-tax income over the previous three years, as well as our acquisitive business strategy, after considering both positive and negative evidence, we concluded that it was not more likely than not that we would fully realize those deferred tax assets, and therefore recorded a partial valuation allowance against those deferred tax assets as of December 31, 2016. However, the amount of cumulative income increased significantly during the year ended December 30, 2017. As a result of this significant positive evidence, we determined that the deferred tax assets had become more likely than not of becoming realizable and therefore released the majority of the valuation allowance in the third quarter of 2017. The Company updated the analysis as of December 30, 2018, and adjusted the valuation allowance for interest expense carryforwards limited under TCJA.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was enacted. Among other things, the TCJA, beginning January 1, 2018, reduced the federal statutory rate from 35% to 21% and extended bonus depreciation provisions. In addition, the TCJA prescribes the application of net operating loss carryforwards generated in 2018 and beyond will be limited, 100% asset expensing will be allowed through 2022 and begin to phase out in 2023, and the amount of interest expense we are able deduct may also be limited in future years. As a result of the enactment of TCJA and other state effective rate changes, we reduced the carrying value of our net deferred tax assets in the fourth quarter of 2017 by $216.9 million to reflect the revised federal statutory rate and other state statutory rates which will be in effect at the time those deferred tax assets are expected to be realized. The TCJA contains many provisions which continue to be clarified through new regulations. As permitted by Staff Accounting Bulletin 118 issued by the SEC on December 22, 2017, we completed our accounting of the impacts of the TCJA. We completed our analysis within 2018 consistent with the guidance of SAB 118 and any adjustments during the measurement period have been included in net earnings from continuing operations as an adjustment to income tax expense. We recorded additional tax expense of $17.6 million resulting from the IRS interpretative guidance of TCJA during the fourth quarter of 2018.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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	Unrealized Tax Benefits
Balance—December 30, 2017	$	—
Additions based on tax position in 2018	22,663
Balance—December 29, 2018	$	22,663

At December 29, 2018, there was $22.7 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. We did not recognize interest or penalties related to this amount as it is offset by other attributes. There were no uncertain tax positions for the years ended December 30, 2017 and December 31, 2016.

Our net operating loss carryforward deferred tax assets begin to expire in 2030 and are expected to reverse before expiration. Therefore, we have not given consideration to any potential tax planning strategies as a source of future taxable income to monetize those net operating loss carryforwards. The Company will continue to monitor facts and circumstances, including our analysis of other sources of taxable income, in the reassessment of the likelihood that the tax benefit of our deferred tax assets will be realized.

As of December 29, 2018, Summit Inc. had federal net operating loss carryforwards of $664 million, which expire between 2030 and 2037. As of December 29, 2018, $322.5 million of our federal net operating losses were under the terms of our TRA. In addition, Summit Inc. has alternative minimum tax credits of $0.2 million as of December 29, 2018, which do not expire. As of December 29, 2018 and December 30, 2017, Summit Inc. had a valuation allowance on net deferred tax assets of $19.4 million and $1.7 million, respectively, where realization of our interest tax attributes and net operating losses are not more likely than not.



	2018			2017
Valuation Allowance:
Beginning balance	$	(1,675	)	$	(502,839	)
Additional basis from exchanged LP Units	(99		)	(31,790		)
Current year increases from operations	(17,592		)	—
Release of valuation allowance and other	—			532,954
Ending balance	$	(19,366	)	$	(1,675	)

Tax Receivable Agreement— During 2015, the Company entered into a TRA with the holders of LP Units and certain other pre-initial public offering owners (“Investor Entities”) that provides for the payment by Summit Inc. to exchanging holders of LP Units of 85% of the benefits, if any, that Summit Inc. actually realizes (or, under certain circumstances such as an early termination of the TRA, is deemed to realize) as a result of increases in the tax basis of tangible and intangible assets of Summit Holdings and certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA.

When LP Units are exchanged for an equal number of newly-issued shares of Summit Inc.’s Class A common stock, these exchanges result in new deferred tax assets. Using tax rates in effect as of each year end, $2.0 million, $12.4 million, and $422.5 million of deferred tax assets were created during the years ended December 29, 2018, December 30, 2017 and December 31, 2016, respectively, when LP Units were exchanged for shares of Class A common stock.

As noted above, when payments are made under the TRA, we expect the amount that is characterized as imputed interest will be limited under the proposed IRS regulations, and therefore the Company will not benefit from that deduction. Further, in 2018, we updated our estimate of the state income tax rate that will be in effect at the date the TRA payments are made. As a result of the updated state income tax rate, and the imputed interest limitation noted above, we have reduced our TRA liability by $22.7 million as of December 29, 2018.

In the third quarter of 2017, as a result of the analysis of the realizability of our deferred tax assets as indicated above, we reduced the valuation allowance against our deferred tax assets, including those deferred tax assets subject to the TRA. Further, we determined the TRA liability to be probable of being payable and, as such, we recorded 85% of the deferred tax assets subject to the TRA, or $501.8 million, as TRA liability. Our TRA liability as of December 29, 2018 and December 30, 2017 was $310.4 million and $331.9 million, respectively, of which $0.7 million and $0.6 million was classified as accrued expenses, respectively.

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Tax Distributions – The holders of Summit Holdings’ LP Units, including Summit Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Summit Holdings. The limited partnership agreement of

Summit Holdings provides for pro rata cash distributions (“tax distributions”) to the holders of the LP Units in an amount generally calculated to provide each holder of LP Units with sufficient cash to cover its tax liability in respect of the LP Units. In general, these tax distributions are computed based on Summit Holdings’ estimated taxable income allocated to Summit Inc. multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to a corporate resident in New York, New York.

For the years ended December 29, 2018 and December 30, 2017, Summit Holdings paid tax distributions totaling $0.1 million and $1.8 million, respectively, to holders of its LP Units, other than Summit Inc.

C Corporation Subsidiaries — The effective income tax rate for the C corporations differ from the statutory federal rate primarily due to (1) tax depletion expense (benefit) in excess of the expense recorded under U.S. GAAP, (2) state income taxes and the effect of graduated tax rates, (3) various other items such as limitations on meals and entertainment and other costs and (4) unrecognized tax benefits. The effective income tax rate for the Canadian subsidiary is not significantly different from its historical effective tax rate.

No material interest or penalties were recognized in income tax expense during the years ended December 29, 2018, December 30, 2017 or December 31, 2016. Tax years from 2014 to 2018 remain open and subject to audit by federal, Canadian, and state tax authorities.

(10) Earnings Per Share

Basic earnings per share is computed by dividing net earnings by the weighted average common shares outstanding and diluted net earnings is computed by dividing net earnings, adjusted for changes in the earnings allocated to Summit Inc. as a result of the assumed conversion of LP Units, by the weighted-average common shares outstanding assuming dilution.

The following table shows the calculation of basic income per share:



	2018		2017		2016
Net income attributable to Summit Inc.	$	33,906	$	121,830	$	36,783
Weighted average shares of Class A stock outstanding	111,380,175		108,696,438		70,355,042
Basic income per share	$