ACQUISITIONS, DISPOSTIONS, GOODWILL AND INTANGIBLES |
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Acquisitions, Dispositions, Goodwill and Intangible Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS, DISPOSTIONS, GOODWILL AND INTANGIBLES | ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLES Acquisition of Argos USA On January 12, 2024, Summit completed its acquisition of all of the outstanding equity interests of Argos USA from Argos SEM LLC and Valle Cement Investments, Inc. for total consideration of approximately $3.1 billion. Summit acquired all of the outstanding equity interests of Argos USA in exchange for (i) $1.1 billion of cash (subject to customary adjustments), (ii) 54,720,000 shares of Class A Common Stock and (iii) one share of preferred stock, par value $0.01 per share, of Summit Inc. (together with the Class A Consideration, the “Stock Consideration”). The Argos USA assets include four integrated cement plants, two grinding facilities, 140 ready-mix concrete plants, eight ports and 10 inland terminals across the East and Gulf Coast regions, with a total installed cement grinding capacity of 9.6 million tons per annum and a total import capacity of 5.4 million tons of cement per annum. The results of Argos USA’s operations are included in these consolidated financial statements from the closing date of the Transaction. Argos USA revenues and net income included in the consolidated income statement for the period from January 12, 2024 to September 28, 2024 was $1,221.1 million and $139.6 million, respectively. The following table includes unaudited pro forma financial information that presents the consolidated results of operations for the three and nine months ended September 28, 2024 and September 30, 2023 as if the Transaction had occurred on January 1, 2023.
The unaudited pro forma information has been calculated after adjusting the results of Argos USA for the following impacts of the Transaction, among other items: •Additional depreciation, depletion, and amortization for property, plant, and equipment and intangible assets acquired. •Interest expense adjustments to reflect the payoff of Argos USA debt obligations and new debt issued by the Company to complete the Transaction. •Elimination of royalties expenses paid to the parent of Argos USA which will not be incurred post-combination. •Elimination of historical transaction expenses of Argos USA incurred to pursue an initial public offering. The Company incurred combination-related costs of $83.9 million in the nine months ended September 28, 2024 and $17.9 million in the nine months ended September 30, 2023. These expenses are included in transaction and integration costs on consolidated income statement and are reflected in pro forma net income attributable to Summit Inc. for the nine months ended September 30, 2023 in the table above. The pro forma results do not include any cost savings or associated costs to achieve such savings from operating efficiencies or synergies that may result from the combination. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of the consolidated results of operations of the Company had the combination actually occurred on January 1, 2023, nor of the results of our future operations of the combined business. The pro forma results are based on the preliminary purchase price allocation and will be updated to reflect the final amounts as the allocation is finalized during the measurement period. Fair value of consideration transferred
Summit Inc. issued 54,720,000 shares of common stock and calculated the fair value of stock consideration using a per share price of $36.07 on January 12, 2024, the closing date of the Transaction. The fair value of preferred stock is immaterial. The preferred stock is non-transferable and has no economic rights or ordinary voting rights. The preferred stock was issued to ensure the Argos Parties’ voting interests are not involuntarily diluted and provides a short window to purchase shares of Class A Common Stock in the market, in certain limited circumstances, to prevent the Argos Parties voting interests from dropping below 25.01% of the total Summit common stock. Argos USA Preliminary Purchase Price Allocation The acquisition of all of the outstanding equity interests of Argos USA was accounted for in accordance with Accounting Standards Codification 805, Business Combinations. The identifiable assets acquired and liabilities assumed were recorded at their estimated preliminary acquisition date fair values. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed.
The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value estimates of assets acquired and liabilities assumed are pending the completion of various items, including obtaining further information regarding the identification and valuation of all assets acquired and liabilities assumed. Certain of the more significant balances that are not yet finalized include the valuation of property, plant and equipment, intangible assets (including goodwill), inventories, and other working capital accounts, and related income tax considerations. Accordingly, management considers the balances above to be preliminary, and there could be further adjustments to the consolidated financial statements in subsequent periods, including changes to depreciation and amortization expense related to the property, plant, and equipment and intangible assets acquired and their respective useful lives, among other adjustments. Certain measurement period adjustments were recorded in these consolidated financial statement due to the receipt of additional information and updated preliminary valuation reports. Further adjustments during the three months ended September 28, 2024 included: i.$42.7 million decrease in property, plant, and equipment and a $10.6 million increase in other noncurrent liabilities related to updated valuations due to revised information included in preliminary valuation reports. ii.$14.1 million decrease in goodwill related to the adjustments noted in (i.) above, among others. The final determination of the fair values of the assets acquired and liabilities assumed will be completed within the measurement period of up to one year from the acquisition date. The identified intangible assets acquired include Customer Relationships and Contractual Intangible Assets, with preliminary fair values of $85.0 million and $15.0 million, respectively, and expected to be amortized over a weighted average amortization period of 3 and 8 years, respectively. Goodwill Goodwill recognized includes synergies expected to be achieved from the operations of the combined company, the assembled workforce of Argos USA, and intangible assets that do not qualify for separate recognition. Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems. The transaction is considered a non-taxable business combination and the goodwill is not deductible for tax purposes. The allocation of goodwill to the Company’s reporting units is not complete and is subject to change during the measurement period. On a preliminary basis, goodwill was assigned to the Cement and East reportable segments. Intellectual Property License Agreement In connection with the Transaction, the Company and Argos USA entered into an Intellectual Property License Agreement with the Argos Parties pursuant to which the parties will grant each other various intellectual property licenses. Certain intellectual property licenses from the Argos Parties, including the "Argos" trade name in Canada and the United States, are provided on a royalty-fee basis. The $21.4 million paid to Argos Parties, which is also the fair value of these intangible assets acquired by the Company was excluded and recorded separately from the business combination. Other Acquisitions The financial results of each acquisition have been included in the Company’s consolidated results of operations beginning on the respective closing dates of the acquisitions. The Company measures all assets acquired and liabilities assumed at their acquisition-date fair value. Goodwill acquired during a business combination has an indefinite life and is not amortized. The following table summarizes the Company’s other acquisitions by region and period:
_______________________________________________________________________ * The combination with Argos USA affected all three reporting segments. In addition to the acquisition of all of the outstanding equity interests of Argos USA, we also acquired two aggregates-based operations, one in each of our West and East segments. The purchase price allocation, primarily the valuation of property, plant and equipment, as well as considerations for contracts assumed in the acquisition, for the acquisitions completed during the nine months ended September 28, 2024, as well as the acquisitions completed during 2023 that occurred after September 30, 2023, have not yet been finalized due to the recent timing of the acquisitions, status of the valuation of property, plant and equipment and finalization of related tax returns. The following table summarizes aggregated information regarding the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates:
Changes in the carrying amount of goodwill, by reportable segment, from December 30, 2023 to September 28, 2024 are summarized as follows:
_______________________________________________________________________ (1) Reflects goodwill from 2024 acquisitions and working capital adjustments from prior year acquisitions. (2) Reflects goodwill derecognition from dispositions completed during 2024. The Company’s intangible assets subject to amortization are primarily composed of operating permits, mineral lease agreements and reserve rights. Operating permits relate to permitting and zoning rights acquired outside of a business combination. The assets related to mineral 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. The reserve rights relate to aggregate reserves to which the Company has certain rights of ownership, but does not own the reserves. The intangible assets are amortized on a straight-line basis over the lives of the leases or permits. The following table shows intangible assets by type and in total:
Amortization expense totaled $10.6 million and $30.8 million for the three and nine months ended September 28, 2024, respectively, and $0.8 million and $2.6 million for the three and nine months ended September 30, 2023, respectively. The estimated amortization expense for the intangible assets for each of the five years subsequent to September 28, 2024 is as follows:
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