Concrete Products

MAR 2018

Concrete Products covers the issues that attract producers of ready mixed and manufactured concrete focusing on equipment and material technology, market development and management topics.

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Producer accruals from Tax Cuts accounting near $1 billion mark The Tax Cuts & Jobs Act (TCJA) with which President Donald Trump and his party closed out 2017 is already spurring returns in concrete, aggregates and cement. A lowering of the corporate tax rate from 39 percent to 21 percent, coupled with reduced liabilities for deferred tax payments, is reflected in major operators' final 2017 finan- cials and stepped up 2018 capital expenditure projections. Vulcan Materials Co. cited a $314 million income tax benefit in the fourth quarter of 2017, including $268 million associated with TCJA-prompted revaluation of de- ferred tax liabilities. "While the full impact of the TCJA continues to be assessed, the Company expects earnings and cash flows will benefit meaningfully going forward," Vulcan tells investors. "We continue to evaluate other aspects of TCJA including full expensing of certain qualified cap- ital spending, [and] expect core capital spending to support an increased level of shipments and further improve production costs and operating efficiencies of approximately $250 million." The producer has budgeted $350 million for internal growth capital expenditures this year, and anticipates TCJA provisions equating to a $100 million reduction of 2018 tax liabilities. Vulcan and its closest rival in aggregates reserves and production, Martin Marietta Materials, finished 2017 with near-equal overall financials—and TCJA spoils. Martin Marietta booked a non-cash income tax benefit of $258 million by remeasuring deferred tax assets and liabilities. "We are encouraged by enact- ment of the Tax Cuts and Jobs Act of 2017 and its long-term benefits for Martin Marietta, our customers and our industry," Martin Marietta CEO Ward Nye tells investors. "Importantly, passage of this legislation provides positive momentum in Washington, D.C. to address the shortfall in sustainable funding commensu- rate with the nation's need for infrastructure investment." TCJA enabled MDU Resources Group to add nearly $42 million to fourth quar- ter figures for its Knife River Corp. business unit. A deferred tax liabilities gain positioned Knife River to contribute $123.4 million of MDU Resources' $284.2 million in 2017 earnings. The business unit has entered 2018 "evaluating acqui- sition opportunities," MDU Resources affirms. Compared to peers, Summit Materials' TCJA accounting looks more compli- cated, but nevertheless positive for investors holding shares from the company's 2015 initial public offering (IPO) or subsequent offers. "Passage of compre- hensive federal tax reform legislation is a positive development," says Summit Materials CFO Brian Harris. "As a result of this legislation, we estimate that our Tax Receivable Agreement liability has been reduced by approximately 40 per- cent to $332 million … We believe the passage of this legislation will provide a measurable long-term benefit to our free cash flow, as $217 million in future cash payments that would have been paid to pre-IPO investors can instead be invested back into the business." Although not bound by publicly traded operators' financial reporting re- quirements, CalPortland Co. mirrors Vulcan, Martin Marietta, MDU and Summit sentiments on TCJA. Economic momentum supported by tax reform and antici- pated federal infrastructure legislation will increase jobs and position CalPort- land to continue to invest in its business, the company noted last month. "The combination of the new tax legislation and reduced bureaucratic red tape will allow American manufacturing to once again compete in world markets," added Senior Vice President Steve Regis, crediting President Trump and Congress with "delivering on promises to streamline runaway bureaucratic regulation." Construction materials producers should find any impolitic stunts from the White House a small price for industry tailwinds attributable to tax reform, plausible infrastructure investment strategies and a taming of federal agencies. EDITORIAL BY DON MARSH SEMCO PUBLISHING CORPORATE OFFICE 8751 East Hampden Avenue, Suite B-1 Denver, Colorado 80231 U.S.A. P: +1.303.283.0640 F: +1.303.283.0641 PRESIDENT/PUBLISHER Peter Johnson, EDITOR Don Marsh, ASSOCIATE EDITOR Josephine Patterson, PRODUCTION MANAGER Dan Fitts, GRAPHIC DESIGNER Michael Florman, PROJECT MANAGER Tanna Holzer, CIRCULATION Juanita Walters, SALES U.S., CANADA SALES Bill Green, Tel +1 414 212 8266 GERMANY SALES Gerd Strasmann, Tel +49 2191 93 1497 SCANDiNAVIA, UNITED KINGDOM AND WESTERN EUROPE SALES Jeff Draycott, Tel +44 (0) 786 6922148 Colm Barry, Tel +46 (0) 736 334670 JAPAN SALES Masao Ishiguro, Tel +81 (3) 3719 0775 AUSTRALIA/ASIA SALES Lanita Idrus, Tel +61 3 9006 1742 Concrete Products, Volume 71, Issue 1, (ISSN 0010-5368, USPS 128-180) is published monthly by Mining Media Inc., dba Semco Publishing, 10 Sedgwick Drive, Englewood, Colorado 80113. Periodicals postage paid at Englewood Colorado, and additional mailing offices. Canada Post Publications Mail Agreement No. 40845540. Canada return address: Station A, PO Box 54, Windsor ON N9A 6J5, Current and back issues and additional resources, including subscription request forms and an editorial calander, are available online at SUBSCRIPTION RATES: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: USA and Canada, 1 year $72.00, 2 year $119.00, 3 year $161.00. For subscriber services or to order single copies, write to Concrete Products, 8751 East Hampden Avenue, Suite B1, Denver, Colorado 80231 USA; call +1.303.283.0640 ext. 207 (USA) or visit ARCHIVES AND MICROFORM: This magazine is available for research and retrieval of selected archived articles from leading electronic databases and online search services, including Factiva, LexisNexis, and ProQuest. For microform availability, contact ProQuest at 800-521-0600 or +1.734-761-4700, or search the Serials in Microform listings at POSTMASTER: Send address changes to Concrete Products, PO Box 828, Northbrook, IL 60065-0828. REPRINTS: Concrete Products, 8751 East Hampden Avenue, Suite B1, Denver, CO 80231 USA; P: +1.303.283.0640 ext. 207, F: 1+303.283.0641, PHOTOCOPIES: Authorization to photocopy articles for internal corporate, personal, or instructional use may be obtained from the Copyright Clearance Center (CCC) at +1.978.750.8400. To obtain further information, visit COPYRIGHT 2018: Concrete Products ALL RIGHTS RESERVED Circuation audited by Official Media Partner 4 • March 2018

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