John Neuner is the managing director at Harris Williams & Co. He can be reached at 804-648-0072 or jneuner@harriswilliams.com.

The overall equity markets continue to trade sideways as investors look to synthesize the mixed economic, financial, and industry data. For the month, the S&P 500 ended up 3.4 to 100.6 but only after hitting an intra-month low of 92.3. Similarly, the AggMan Index moved slightly from 100.7 to 100.1 and to remain essentially unchanged despite spending the majority of the month in the low to mid-90s. With second quarter earnings being released by most of the industry players, the reports coming out show some signs of life in volumes driven by public construction projects in many areas of the country — some driven by stimulus funding and some by the extension of the Federal Highway bill. Furthermore, there are signs of life in the future as the U.S. House of Representatives passed a transportation bill providing $45 billion in federal funding for highways in 2011, a 10-percent increase from 2010. Despite these positive funding dynamics, several industry players have fallen short of expectations for second quarter revenue and earnings, which has weighed on stock prices. Additionally, the broader economic data has been showing signs of slower recovery, and this has placed a cloud over market valuations. Unfortunately, this cloud is likely to linger until more of the broader economic indicators reflect a clearer picture of the rate of recovery.

Divestitures and Private Equity Drive M&A

Acquisitions continue at a modest pace with divestitures and private equity activity continuing to lead the way. Second quarter results indicate that the sector is continuing to bump along the bottom. The major strategic players remain focused on balance sheet management and capital raising activities, while the private equity players are actively looking for opportunities to deploy their committed capital.

Recent transactions

Martin Marietta Materials, Inc. acquired three quarries and the remaining 49-percent interest in Granite Canyon Quarry from Cemex for $65 million in June. Granite Canyon is located in Wyoming and the three quarries are located in Fort Calhoun, Neb., Guernsey, Wyo., and Milford, Utah.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

Cemex announced in July that it has reached an agreement to sell seven aggregates quarries, three resale aggregate distribution centers, and one concrete block manufacturing facility in Kentucky to Bluegrass Materials Co., LLC for $90 million. Bluegrass Materials Co., LLC is a wholly owned subsidiary of Panadero Aggregates Holdings, LLC, which was formed in 2010 by John D. Baker II and Edward L. Baker II, formerly of Florida Rock Industries, to invest in aggregates and other construction materials businesses.

Boral Industries Inc. is acquiring the remaining 50-percent stake in MonierLifetile LLC from Monier Group GmbH for $75 million. MonierLifetile LLC manufactures concrete roof tiles in the United States. It offers lightweight tiles, roof system components, standard weight tiles, energy efficient roof systems, and cool roof tiles. MonierLifetile LLC was founded in 1997 as a joint venture between Lafarge and Boral and is headquartered in Irvine, Calif.

Other financial news

U.S. Concrete, Inc. announced that the U.S. Bankruptcy Court granted the company’s request to confirm its plan of reorganization, paving the way for the company’s emergence from Chapter 11 proceedings. The plan provides for the conversion of approximately $285 million of senior subordinated notes into equity of the reorganized company. At Aggregates Manager press time, the company expected to emerge from Chapter 11 by the end of August 2010.

Moody’s Investors Service and Standard and Poor’s are considering a cut to Lafarge’s credit rating, which is one notch above speculative grade, as the company is facing challenges to meet leverage ratios. HeidelbergCement, rated three notches below investment grade, recently issued EUR 650 million of eurobonds.

John Neuner is the managing director at Harris Williams & Co. He can be reached at 804-648-0072 or jneuner@harriswilliams.com.

The past two months have not been kind to the overall markets or the AggMan Index as the equity markets react to concerns over European debt issues and the overall global economic recovery. Since the end of April, these concerns have rippled through the S&P 500 resulting in a decline from 121.4 to 100.7, a reduction of 17.1 percent. While the AggMan Index “outperformed” the broader market, the index also posted a 9.3-percent reduction and now stands at 97.1 as of the end of June. In the coming weeks, we will start to see second quarter earnings results for most of the public industry players. The first glance at what these reports will hold was the CRH trading statement that was recently released and showed a 10-percent decline in first-half 2010 revenues and a 20-percent decline in profitability. While the first half of the year is typically less active, it seems that industry sentiment is that the season will not be as active as previously anticipated with states continuing to struggle through their own fiscal issues and the remaining stimulus projects not enough to fill the gap. Additionally, the residential market has not posted any meaningful uptick to help fill the gap. As a result of the slower recovery, several companies have been forced to look at options to sell non-core assets or forced to sell as a result of pressure from debt providers. While the near-term is still a bit unclear as to when “normal” activity will return, the long-term prospects remain strong — it’s just a matter of time.

Summer Heats Up, But M&A Remains Lukewarm

The sluggish economy continues to have a depressing effect on merger and acquisition activity, with small transactions and distressed situations leading the way. While many buyers continue to see attractive investment opportunities that make for good long-term growth, current debt levels and lack of immediate returns are taking the wind out of the sails.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

One company dealing with the challenges of its debt levels is Cemex. Cemex has expressed concerns that its efforts to cut debt will mean sitting out the next round of industry consolidation. Struggles to reduce debt and work within loan covenants means that any expansion will most likely have to come through an investment fund, Blue Rock Cement Holdings, in which Cemex will be a minority partner, rather than the direct purchaser. Cemex will own 10 percent to 20 percent of the fund and the opportunity to operate any cement plants acquired or built. At the end of five years, Cemex will have the option to buy out its partners.

Recent transactions

VantaCore Partners acquired Lafarge North America’s Clemons Aggregates site in Denham Springs, La. The operation has an estimated 7.5 million tons of sand and gravel reserves and sells approximately 550,000 tons annually. This is VantaCore’s fourth purchase, the first since receiving $100 million in equity funding from Trilantic Capital Partners.

Oldcastle Materials has acquired select assets of Schwab Industries in Ohio and Florida. Schwab Industries Inc. filed for Chapter 11 bankruptcy protection on Feb. 28, 2010. The Ohio assets include 12 ready-mixed concrete locations, two block plants, and one aggregate distribution terminal. The business operates under the trade names Twin Cities Concrete, Quality Block and Supply Inc., and Medina Supply Co. Schwab operates in Florida as Schwab Ready-Mix and Eastern Cement Corp., with seven ready-mixed concrete locations and a cement import terminal.

Is the worst behind us?

By George H. Reddin

George H. Reddin is a principal at FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

The construction materials peer group fared poorly in the first quarter of 2010 when compared to the first quarter of 2009. Revenues were down for all the companies except Holcim, which benefited from a more significant exposure to the growth in emerging markets. International-focused companies like Holcim and Heidelberg benefited from business activities in emerging markets, while companies concentrated in North America saw the most significant decreases in revenue. A rainy and cold first quarter also contributed to these poor results. Overall, the peer group had a median revenue decrease of just over 10 percent when compared to the same period in 2009 (see Figure 1).

Figure 1 * CRH report is for the first two months of 2010. ** Texas Industries is for the quarter ended Feb. 28, 2010.

On the bright side, product shipments for Cemex and Vulcan increased in March and April when compared to the same period in 2009, the first increase since 2006. This, together with a greater outlook for leading indicators of future demand such as contract awards for residential and highway construction, suggests an improved outlook for the balance of 2010, with most of this improvement expected in the second half of 2010.

Figure 2 * CRH has not reported for the first quarter of 2010. ** Texas Industries is for the quarter ended Feb. 28, 2010.

Earnings for the peer group followed revenue for the most part with a median decline in EBITDA of 15.5 percent when compared to the prior year in 2009 (see Figure 2). Holcim, benefiting from its presence in emerging markets, showed a 28.6-percent increase in EBITDA, while the balance of the peer group showed decreases.

Figure 3 * CRH has not reported for the first quarter of 2010. ** Texas Industries is for the quarter ended Feb. 28, 2010.

Balance sheet management was emphasized over the last year as companies sought to refinance debt and raise capital. Significant increases in debt associated with major acquisitions during 2003-2007, coupled with a near collapse of the credit markets in the latter half of 2008, had these companies focused on their leverage. Figures 3 and 4 present total debt/EBITDA (Figure 3) and EBITDA/interest expense (Figure 4) coverage ratios at the end of the first quarter in 2010 versus the same period in 2009.

Figure 4 * CRH has not reported for the first quarter of 2010. ** Texas Industries is for the quarter ended Feb. 28, 2010. Note: Granite and Texas Industries had negative EBITDA.

As shown, the results are mixed. While improvements have been made on overall levels of debt and liquidity, decreases in EBITDA have resulted in a mixed bag in the coverage ratios. We expect continued diligence to balance sheet issues.

The construction materials peer group saw an average increase of more than 40 percent in its total enterprise value/revenue valuations (see Figure 5) at the end of the first quarter versus the same period in 2009. During the same time, the S&P 500 and Dow Jones Industries increased by 46.6 percent and 42.7 percent, respectively.

The industry hopes that the worst is behind it and, with increased forecasted demand and improved credit markets, there is an improved outlook for the balance of 2010. Economic indicators and demand dynamics present an opportunity for modest optimism. That said, this optimism remains fragile.

Recent deals

Since the last report, Summit Materials, LLC acquired a majority stake in Continental Cement Co., LLC on May 27, 2010. The financial terms of the deal were not disclosed. Continental’s new state-of-the-art cement manufacturing and waste processing facilities are located in Hannibal, Mo., 100 miles north of St. Louis. With distribution terminals in St. Louis, Mo., and Bettendorf, Iowa, Continental supplies cement to customers in Missouri, Iowa, and Illinois.

Asphalt paving company Hardrives Inc., in St. Cloud, Minn., acquired Lakeland-based Tower Asphalt Inc. for an undisclosed amount. Tower Asphalt and Hardrives Inc. are competitors on highway projects for counties and cities in the Twin Cities and for the Minnesota DOT.

Titan America sold its Cumberland quarry in Salem, Ky. The quarry has more than a billion tons of reserves on the Cumberland River and barges aggregates to various locations along the Mississippi River, including New Orleans and neighboring markets.

In an agreement that has yet to be finalized, Meadow Vista, Calif.-based Chevreaux Aggregates Inc. would be sold to a partnership consisting of Sacramento-based Teichert Materials and Rocklin-based Western Care Construction Co. The partnership, Green Vista Holdings, has the option to purchase Chevreaux Aggregates and is currently conducting due diligence. Teichert has been responsible for managing the plant. AM

John Neuner is the managing director at Harris Williams & Co. He can be reached at 804-648-0072 or jneuner@harriswilliams.com.

The AggMan Index posted another solid month of gains as the overall economy continues to show positive signs of recovery, which will hopefully trickle into positive future activity for the construction material industry. For the month, the index increased 8.9 percent to 118.4 and saw a second straight monthly gain in the 8-percent range. While slightly below its year-end value, the index is at its highest point since Jan. 19, 2010, but the valuations appear to be riding the wave of the overall market versus reacting to specific news in the industry. Over the past few weeks, many of the companies in the index have reported earnings that continue to show the pressures on industry profitability. Despite the lower earnings reports, the index managed to outpace the broader market over the past 30 days by about 5 percent. However, the overall S&P 500 is up 8.4 percent year to date (as compared to a decline of 3.1 percent for the AggMan Index), and the S&P 500 is at its highest point since Sept. 26, 2008 (as compared to the AggMan Index that was at 150.6 on this date and has declined more than 21 percent during this period). While the construction material sector is looking to the future for improved performance, many in the S&P 500 have already started to post solid performance with 75.9 percent of the 269 companies reporting beating revenue estimates by an average of 13.1 percent over the same period the prior year. Similarly, 74.1 percent of these S&P 500 companies posted an average increase in operating profit of 97.2 percent. Hopefully, the performance of the S&P 500 companies is representative of the broader markets and economic recovery, and the solid increase in performance will find its way to the materials sector in the near future.

Not Out of the Woods Yet, but Progress Continues

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

Holcim, Vulcan, Martin Marietta, Granite Construction, Cemex, and Eagle Materials all reported increased losses for the first quarter of 2010 compared to the same period in 2009. A more complete analysis of the first quarter results will be available in the next issue. Additionally, there was continued progress on capital raising and balance sheet restructuring, and another acquisition by a financial buyer.

Summit Materials, LLC continued its acquisition campaign by acquiring Cornejo & Sons, Inc. in Wichita, Kan. Cornejo & Sons, Inc. specializes in concrete and asphalt paving, ready-mix concrete, sand and gravel extraction, demolition, and warehousing. This marks Summit’s third acquisition in the last six months.

VantaCore Partners LP raised $100 million of equity funding from Trilantic Capital Partners and a $15 million acquisition facility from PNC Financial Services Group, Inc. VantaCore’s current investments include Southern Aggregates LLC in Louisiana, McIntosh Construction, Inc. and Winn Materials, Inc., both located in Clarksville, Tenn.

U.S. Concrete, Inc. sought bankruptcy protection from creditors with a plan to reduce its debt by about $272 million. The restructuring proposal would have its bondholders swap notes for the reorganized company’s equity. Current shareholders would get warrants to buy up to 15 percent of the new company’s stock.

North American Limestone Corp., through its wholly owned subsidiary Ohio River Trading Co., has entered into an agreement with Iron Mountain Trap Rock Co., a wholly owned subsidiary of Fred Weber, Inc., to provide operational resources and services at the company’s Cherry Grove Crushed Stone quarry in Todd County, Ky.

Anglo American and private equity-backed Marwyn Materials Limited have held discussions regarding Anglo Mining selling an interest in its Tarmac building materials arm. Tarmac operates quarries and cement manufacturing facilities in the U.K. Marwyn Materials, an acquisitions vehicle incorporated in 2007, is headed by Peter Tom, the former chairperson of Aggregate Industries, and Simon Vivian, a one-time executive of the British industrials group Hanson.

Although overall reported earnings are down in the first quarter and the number of announced acquisitions is modest, there is still a sense that deal activity is picking up as buyers gear up for expected improved results for 2011 and beyond.

Arizona

Maricopa County’s Air Quality Department staff presented a draft policy that proposes that applicants for new and modified permits conduct an impact analysis of PM10 dust emissions on air quality. The Arizona Republic reports that if the emission is equal to or exceeds a significant impact level, then a cumulative analysis kicks in. County Permit Division Manager Doug Erwin told the newspaper that the policy “will give us the authority to deny permits.” The county exceeds the federal standard for dust emissions, and the policy is part of a county “5-percent plan” submitted to the Environmental Protection Agency for approval. Members of the sand and gravel industry oppose the policy. “This policy must be based on science and not assumptions,” said Steve Trussell, executive director of the Arizona Rock Products Association. “We are absolutely opposed to it because of what it will unintentionally create.”

California

Graniterock is hosting its Third Annual Construction Career Day on May 14 at its A.R. Wilson Quarry in Aromas. The day is designed for Santa Cruz County high school students and will highlight career paths in the construction industry. The day will include a tour of the quarry. Bruce W. Woolpert, president and CEO of Graniterock, will address the students. Afterward, more than 25 different professionals will offer presentations on various construction and green building occupations.

California

Residents in Davenport will pay substantially more for utilities following the closure of Cemex’s plant, which had long managed and largely paid for the community’s water and sewer service. According to the Santa Cruz Sentinel, residents and businesses could now pay hundreds, if not thousands, of dollars more each year. The county’s Public Works records indicate that sewer rates could increase nearly 75 percent, with a flat residential fee of approximately $2,500 per year. Water rates could rise 10 percent, with a flat annual fee of $1,500 for households. The charges are levied on twice-a-year property tax bills. Businesses could face even more significant hikes.

Illinois

The Illinois Association of Aggregate Producers (IAAP) is asking aggregate producers and other construction materials operators to lobby state Senators against H.B. 6112. The bill, sponsored in the House by Rep. Bob Flider (D-101, Decatur) was picked up in the Senate by Sen. James Meeks (D-15, Calumet City). According to the association’s newsletter, the bill provides that workers who transport aggregates, ready-mixed concrete, hot-mix asphalt, and/or excavated materials to or from a public works project should receive the same wages and benefits paid to a trucker directly employed on a public works project. Further, it provides that workers who transport non-aggregates materials or equipment are not deemed to be employed upon public works and, therefore, are not required to be paid prevailing wages. IAAP said the bill will “substantially increase direct costs associated with building and maintaining schools, roads, and other public works.” It also contends that the bill is unconstitutional.

Maryland

Vulcan Materials Co.’s Havre de Grace Quarry in Havre de Grace received an Excellence in Community Relations Gold Award from the National Stone, Sand and Gravel Association for its efforts with work with its Adopt-a-School program, partnering programs with the Boys and Girls Clubs of Harford County, working with the city of Havre de Grace on several ventures, hosting a Community Outreach Day, and offering plant tours. “Since the arrival of Vulcan to our community, they have become a great partner to Havre de Grace,” said Mayor Wayne H. Dougherty. “Vulcan is a partner who has made a very positive impact for the citizens and very supportive of our youth, schools, volunteer groups, and local government.

Massachusetts

Westminster Business Park owners are seeking a sand and gravel mining permit to extend local streets and allow potential clients easier access to industrial lots inside the park, Selectman Laila Michaud told the Sentinel & Enterprise. Bob Hakala, co-owner of the business park, said the new roadway will allow easier access to 12 lots inside the heavily wooded business park. The permit will allow the developers to remove aggregates from certain sections of the business park to allow for construction of the street. A local environmental advocate said that the owners are just looking for a way to excavate more sand and gravel, not for potential businesses.

Montana

Schellinger Construction Co. is seeking to extend the hours of operation of its crushing and mining operation off Interstate 15 near Hardy Creek. The Great Falls Tribune reports the hours in the original permit were 7 a.m. to 7 p.m. The company is asking the state to approve an amendment to the permit that would expand the hours from 6 a.m. to midnight, Monday through Saturday. A representative for the state Department of Environmental Quality’s Industrial & Energy Minerals Division said the amendments have not been approved, but that the state would require the company to shield its lighting fixtures to minimize the impact of artificial lighting. An expansion of hours would not apply to materials haulage, which would be restricted to 7 a.m. to 7 p.m.

Ohio

The Shelly Co., an Oldcastle Materials Inc. company, received numerous awards for excellence in its commitment to community relations and outreach programs from the National Stone, Sand and Gravel Association. According to the Zanesville Time-Recorder, the company’s Belle Center, Columbus Limestone, and East Fultonham quarries received gold awards; its Maumee and Celina quarries won silver awards; and its Auglaize and Scott quarries received bronze awards.

Pennsylvania

Lawrence County Commissioners planned meetings with state and federal legislative representatives in an effort to preserve about 100 jobs at the Wampum Cemex plant. The Beaver County Times reports that the company laid off 82 people in late March and ceased production at the facility. Cemex spokesperson Jennifer Borgen told the newspaper that additional layoffs are likely, but 13 to 15 people will be kept on to maintain the production machines and run the Wampum facility as a distribution and shipping center. She said the closure was originally intended to be temporary, but the company’s forecast called for the economy to remain sluggish for months to come. “We looked at the market and thought this would be longer than we thought it would be,” Borgen said. “So we made the hard decision to end production.”

Texas

Vulcan Materials Co. hopes to create a stockyard in Dallas County on a site zoned for industrial use, according to DallasNews.com. In a prepared statement, the company said it has met with neighbors several times and worked to address their objections. “As a result of these meetings, we have made changes to our site plan in order to improve appearance, reduce noise, and mitigate the impact of truck traffic,” the statement said. “We are committed to continuing to work with the community to ensure that our facility meets the needs of a growing economy and the community.” The Vulcan statement also noted that the stockyard would make building roads and other infrastructure in eastern Dallas County cheaper and more efficient.

Virginia

Vulcan Materials Co.’s Springfield Quarry in Glen Allen received an Excellence in Community Relations Silver Award from the National Stone, Sand and Gravel Association for its efforts with Henrico School District, the local Boy Scouts, and operation tours. “Vulcan Materials has been an exceptional and generous business partner with our schools, Rivers Edge Elementary School…,” said Johnna Riley, school principal. “Through their financial support and hands-on labor, we have two paths (a boardwalk and a gravel path) leading to the watershed in our back school yard, which provides teachers the ability to access the grounds for environmental instruction and provides a positive watershed experience for our students, and we are able to provide recognition to the classrooms for positive student behavior.”

Washington

A gravel mine, two quarries, and a concrete batch plant proposed west of Kitsap Lake in Bremerton have been approved by the Kitsap County hearing examiner. The Kitsap Sun reports that Hearing Examiner Kim Allen ruled that mining operations would be consistent with Kitsap County zoning and would not unduly harm the environment, provided that the project complies with nearly 200 conditions during construction and operation. Conditions include hours of operation from 7:30 a.m. to 5 p.m. weekdays, with no truck travel before 8 a.m.; a daily total number of trips by all vehicles not to exceed 186; mining in 10-acre increments; crushers must be located in an excavated area below the surrounding terrain; a 20-foot berm must be built as a sound barrier for the nearest neighbors; and storm water must be directed into a series of ponds designed to infiltrate water into the ground. In addition, several requirements address dust suppression and air quality monitoring.

Washington

A gravel mine, two quarries, and a concrete batch plant proposed west of Kitsap Lake in Bremerton have been approved by the Kitsap County hearing examiner. The Kitsap Sun reports that Hearing Examiner Kim Allen ruled that mining operations would be consistent with Kitsap County zoning and would not unduly harm the environment, provided that the project complies with nearly 200 conditions during construction and operation. Conditions include hours of operation from 7:30 a.m. to 5 p.m. weekdays, with no truck travel before 8 a.m.; a daily total number of trips by all vehicles not to exceed 186; mining in 10-acre increments; crushers must be located in an excavated area below the surrounding terrain; a 20-foot berm must be built as a sound barrier for the nearest neighbors; and storm water must be directed into a series of ponds designed to infiltrate water into the ground. In addition, several requirements address dust suppression and air quality monitoring.

Oregon

Department of Environmental Quality (DEQ) officials lauded Egge Sand & Gravel for a turnaround in its behavior with regulators, noting that after a recent minor spill, an Egge official immediately notified regulators, accepted culpability, and took — in the regulator’s view — “extraordinary efforts to ensure the violation would not be repeated. According to The Register Guard, the operation (purchased in 2006 by Oldcastle Materials) had a couple employees who decided to wash 10-inch cobble stones for a customer and washed it on the ground with a water truck, turning it over with a loader. When Dale Fortner, the company’s local environmental and land use manager, saw what happened, he stopped the activity, shut down the pump, and notified DEQ. Since then, the operation has retrained yard staff, erected signs marking clean water areas, and made maps explaining the system.

Pennsylvania

Richmond Township supervisors holding a series of closed-door meetings regarding contentious plans for a quarry expansion may be doing so in violation of the Sunshine Act. The Reading Eagle reports that the supervisors announced meetings with neighboring municipalities, Lehigh Cement officials, and members of the East Penn Valley citizens group, which is opposed to the proposed expansion. The town solicitor said he could not divulge what was being discussed other than to say that discussions dealt with litigation about the quarry, noting that a zoning hearing constitutes active litigation. Melissa Melewsky, media law counsel for the Pennsylvania Newspaper Association, told the newspaper that the body can deliberate during an executive session or meet with its attorney, but neither appears to be the case with these meetings.

Texas

In response to neighbor complaints about a proposed 2,000-acre quarry, Austin City Council members asked the city staff to look for ways to more effectively regulate projects near the city limits. According to the American-Statesman, Texas Industries Inc. contends that it has met all applicable laws for the site. State law gives cities some authority outside their boundaries through “extraterritorial jurisdictions” created by the Legislature to protect neighborhoods near city limits from incompatible use, but is mainly limited to ensuring the project does not pollute local waterways.

Washington

Menzel Lake Gravel’s plan to nearly triple the size of its pit faces opposition in Granite Falls. The Daily Herald reports that the operator has applied to Snohomish County to increase its operation by 91 acres, with an additional 141 acres around the perimeter set aside for wetlands protection. The operation is not inside the city limits, so the county rather than the city will decide on its request, but city officials are fighting the expansion. The proposal would increase truck trips allowed in and out of the pit over the course of a year to an average of 200 per day, from the current 68 per day. Rob Hild, owner-manager of Menzel Lake Gravel, said while the size of the pit would grow, the operation would not. It is a family operation with six employees, including Hild.

Washington

The Port of Tacoma approved the sale of its Maytown property to Maytown Sand and Gravel for $17 million, The News Tribune reports. The move was delayed at the end of 2009 because of concerns raised by an environmental group opposed to mining in the habitat. Thurston County officials have said that the port is not in compliance with the gravel mining special-use permit, and they haven’t granted go-ahead on mining.

West Virginia

The Department of Environmental Protection (DEP) has scheduled an informal conference for April 14 at 7 p.m. at the Mountain Ridge Intermediate School in Gerrardstown. According to the Charleston Daily Mail, the state regulators are seeking information on private water intakes in streams near a shale quarry proposed by North Mountain Shale LLC. The operator is seeking a pollution discharge permit from the DEP for a quarry on its 100-acre site that would discharge treated water and storm water into tributaries of Mill Creek.

Wisconsin

Two Kraemer Co. employees, Richard Marino and Roger Osegard, answered questions about its proposed operation during a recent Kinnickinnic Town board meeting. River Falls Journal reports that the company would like to develop two parcels of land currently owned by Cudd Trust Co. and develop a 40,000-ton-per-year operation. Mining would take place in 3-acre increments. Residents voiced concerns about horses being spooked and environmental issues. A town supervisor requested the names of homeowners near Kraemer’s other quarry sites as references.

Wisconsin

The Hudson Plan Commission recommended approval of a 9.6-acre expansion of the Mimbach limestone quarry over objections of neighboring property owners. According to the Hudson Star-Observer, a member of the Plan Commission recognized Milestone Materials management, a subsidiary of Mathy Construction Co., as “good and responsible people” and the motion carried with no objections. The Hudson City Council will have final say on whether to amend Milestone Materials’ conditional use permit for the quarry to clear its path for expansion.

John Neuner is the managing director at Harris Williams & Co. He can be reached at 804-648-0072 or jneuner@harriswilliams.com.

The AggMan Index showed signs of life during the month posting an increase of 8 percent to 109.4 as compared to a 5-percent increase for the S&P 500. While the index is down from 122.1 at the end of 2009, the industry has been in a seasonally slower period and weathering the lack of a long-term transportation funding plan. However, the latter was addressed during the month with the Senate passing a $28 billion jobs bill that will inject $19.5 billion in new and $8.7 billion in restored funding for state highway projects. The day the bill passed, the index had an immediate pop of 5 percent as the market priced the benefits of the bill into industry valuations. With nine months to deploy the capital, the attention quickly turned to the “shovel ready” projects and trying to determine how much of the funding could be employed during the year. The funding bill is welcome relief for the industry, but may be too little, too late for some industry players. During the month, several companies have been working through restructuring plans and bankruptcies as they try to manage over-leveraged balance sheets. The difficulties for the industry are not quite in the rear view mirror, but the jobs bill and the beginning of the season should help on the road to recovery.

Things appear to be returning to normal (?)

The first quarter of 2010 showed modest signs of a return to normalcy for the deal business. A mix of corporate divestitures and sponsor-backed deals dominated the headlines in the United States. Overseas transactions were more popular than deals in the United States as buyers looked to consolidate positions in developing markets and took advantage of strong outlooks for growth in those markets.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

Improving balance sheets, refinancing debt, and raising cash have been common themes for the last year and a half. The industry has done a good job dealing with capital structure issues brought on in 2008-2009 with the decline in earnings, equity values, and availability of credit. Since the last issue of Aggregates Manager, all the announced merger and acquisition transactions took place outside the United States.

Titan Cement Co. recently sold a 16-percent interest in Alexandria Portland Cement Co. to International Finance Corp., raising $108.26 million. International Finance Corp. is a private equity arm of World Bank specializing in providing various financial products to private sector projects in emerging markets in developing countries. The firm also makes fund investments in a wide range of funds, such as private equity funds and venture capital funds, and debt funds that invest in emerging-market securities.

Cemex announced a private placement of convertible subordinated notes due 2015 for gross proceeds of $500 million on March 23. Cemex will use the proceeds to fund the purchase of a capped call transaction, for general corporate purposes, and to repay indebtedness.

Our sense is that activity is picking up, and we expect this activity to result in significant deal closings in the second half of the year.

VantaCore nets significant investment capital

VantaCore Partners LP completed an acquisition financing package consisting of $100 million of equity funding from Trilantic Capital Partners and a $15 million acquisition facility from PNC. PNC also provided VantaCore with a $27 million senior secured credit facility.

“We are excited about this significant new source of acquisition financing and adding these two great new partners to our team,” said Colin Oerton, VantaCore’s CEO. “These financings provide us with the capital to continue our strategy of purchasing high-quality aggregate businesses in the United States, following the three successful acquisitions that we have made in Tennessee and Louisiana since mid-2007. We look forward to working with Trilantic and are also pleased that PNC Bank has decided to not only support our existing business, but to also fund our growth plans. PNC’s facility will be used to refinance our existing senior debt and provide $15 million to fund future investments.”

“VantaCore represents an exciting opportunity for us combining three attractive characteristics of an excellent management team, solid industry fundamentals, and a well-run operating business with substantial growth prospects,” noted Trilantic’s Chris Manning. “We believe that this is an excellent time to be making this investment and are pleased to provide VantaCore with the funding, which will enable them to take advantage of the significant expansion opportunities in its industry including acquisitions of, and investments in, other aggregate companies, as well as internal growth projects.”

VantaCore is a private company focused on acquiring competitively advantaged aggregates and related businesses in the domestic U.S. market. With approximately 150 employees, its operations consist of an integrated limestone quarry (with permitted surface reserves of about 49 million tons), dock facility, two asphalt plants, a commercial asphalt lay down business located in Clarksville, Tenn., and a sand and gravel business (with approximately 67 million tons of sand and gravel reserves) located near Baton Rouge, La.

By Therese Dunphy, Editor in Chief

Arizona

In early February, a bipartisan vote of the state Senate endorsed a three-year hike in the state sales tax. The YumaSun.com reports that — if approved — the tax increase would help forestall more than $900 million in annual cuts throughout the next three years as the state faces an anticipated deficit of $3.4 billion next year. During the debate, Sen. Rebecca Rios (D-Apache Junction) led an effort to extend the 1-percent point hike to taxes paid by the mining and sand and gravel industries. She pointed out that mining has a 2.5-percent tax levy on extracted minerals while sand and gravel is taxed at a 3.2-percent rate. She said the industries should be “good corporate neighbors” and contribute their share. Lawmakers rejected her proposal.

California

Cemex announced that it will permanently shut down its cement plant and quarry on Santa Cruz County’s North Coast. The Santa Cruz Sentinel reports that the 133-year-old operation was temporarily closed last March and company officials said it would reopen when cement demand improved. “Unfortunately, market conditions have not improved and the company has made the very difficult decision to permanently shut down operations,” Cemex Vice President of Human Resources John Andrews wrote in a letter to employees. The facility employed approximately 120 people.

California

Vandals damaged four large pieces of equipment at quarries owned by Graniterock near Davenport and Felton, according to The Monterey County Herald. Authorities say the damage could cost as much as $400,000 to repair. Employees reported the damage after finding that someone apparently poured a powdery substance in the motors and transmissions of the heavy equipment, including three bulldozers and one excavator. Graniterock President Bruce Woolpert told the newspaper that he is aware of at least one other Felton area company that sustained similar damage.

Colorado

By a 3-0 vote, El Paso County Commissioners approved a special use permit that will allow Lafarge to expand its operations there, despite neighbor opposition. According to KRDO.com, the company has agreed to make more than $1 million in improvements to boost safety at the I-25 exit ramp near its operation. Steve Brown, Lafarge’s director of land management for the Western U.S. Region, told the television station that the company has agreed to conditions that would require extensive groundwater monitoring. It also has a reclamation plan for lakes or reservoirs on the property. The 15-year project will take place in two phases, with the first phase being reclaimed upon completion of its mining.

Illinois

The Illinois Association of Aggregate Producers will present its Illinois Teachers Workshop July 19-21 at the Chestnut Mountain Resort in Galena. Titled “Rocks, Minerals & Mining in Today’s Society,” the seminar will offer creative ways to teach earth science for elementary and high school students. Lectures, as well as hands-on activities, will be offered. For more information and a registration form, visit the association’s Web site at iaap-aggregates.org/workshop.htm. Registration is limited to the first 35 teachers.

Massachusetts

A news release from the Conservation Law Foundation says that environmental advocates hailed the release of the Massachusetts Ocean Management Plan as a giant step toward achieving enduring stewardship of the state’s ocean waters and described it as a “critical first building block for the Obama Administration’s effort to develop a National Ocean Policy built around regional ocean management plans.” The foundation and Mass Audubon praised the plan’s scope and substance, particularly its strong protections for special, sensitive, and unique marine resources, noting that 11 categories of ocean wildlife and habitat areas are “particularly vulnerable to certain ocean uses such as sand and gravel mining and construction on the seafloor.”

Massachusetts

A news release from the Conservation Law Foundation says that environmental advocates hailed the release of the Massachusetts Ocean Management Plan as a giant step toward achieving enduring stewardship of the state’s ocean waters and described it as a “critical first building block for the Obama Administration’s effort to develop a National Ocean Policy built around regional ocean management plans.” The foundation and Mass Audubon praised the plan’s scope and substance, particularly its strong protections for special, sensitive, and unique marine resources, noting that 11 categories of ocean wildlife and habitat areas are “particularly vulnerable to certain ocean uses such as sand and gravel mining and construction on the seafloor.”

Montana

In early February, Ash Grove Cement Co. announced plans to reopen its Jefferson County plant and call back approximately 50 workers. The Helena Independent Record notes that the workers were expected to report for work in mid-February as the demand for cement picks up after a sluggish two years. The newspaper reported that, although the worker recall “might not be the ultimate signal that the recession is turning the corner…it sure is a good indicator that the litmus test of the upcoming construction season — the demand for cement products — is promising.”

Nevada

Las Vegas Paving gave formal notice that it will challenge a federal judge who ordered Clark County to award Fisher Sand and Gravel a contract to improve the northern Las Vegas Beltway. According to Las Vegas Review-Journal, the appeal is expected to be filed in late March with the 9th U.S. Circuit Court of Appeals, with the main issue revolving around whether the judge overreached by imposing a bid award rather than letting county commissioners handle it. An attorney for Las Vegas Paving estimates that it will be a year before the appeal is heard. Until then, the county can’t hire a contractor to improve the Beltway section in the middle of the dispute.

New Hampshire

Nearly 40 Weare residents attended a planning board meeting asking the board not to endorse an amendment on the town warrant allowing a proposed asphalt plant. According to the Concord Monitor, the residents were successful in their mission as the board voted 4-1 not to recommend the amendment. Chris Bolton, owner and operator of Mt. Williams Inc., a sand and gravel company, backed the amendment which would allow him to site an asphalt plant at the same location as his gravel pit. Under his petition, the plant would be permitted as an accessory use to the existing gravel operation, and its size would be limited to 25 percent of the combined annual sales of both plants. The amendment will still appear before voters on the warrant, but without the planning board’s endorsement.

New Jersey

Borough officials and quarry owners — at odds over a three-year operating license renewal — agreed on what information should be included in an engineering report necessary for permit approval. NorthJersey.com reports that Saddle Mountain LP anticipates mining below 370 feet above sea level, and city officials are looking for a protocol that shows there will be no negative effects from mining at that depth. Jeremy Vogel, attorney for Saddle Mountain, said the company wants to cooperate with concerns about its effect on the area. “We have the right to go below 370 feet and don’t need to do anything more,” Vogel said, “but in an effort to show that we want to accommodate everyone, we will submit the protocol.”

North Dakota

Dickinson-based Fisher Sand & Gravel Co. was recognized by the Mine Safety and Health Administration’s Rocky Mountain District with three awards for safety achievements in 2008. The Bismarck Tribune reports that the awards are for man-hours worked without a lost-time accident and for being citation-free during two mandatory inspections. Three Fisher locations were recognized: the Billings, Mont., site managed by Jim Rahr; the Glendive, Mont., site managed by Loren Boese, and a portable North Dakota operation managed by Joel Meyer. The company also received 13 Safe Mine Achievement Awards for 2008.

Pennsylvania

According to the Pittsburgh Tribune Review, Cemex Inc. plans a temporary layoff of 124 workers at its cement plant in Wampum beginning March 19. The company will continue to produce cement until the layoffs begin and will stockpile cement for future shipping. Jennifer Borgen, a spokesman at the company’s Houston headquarters, told the newspaper the company is shutting down cement production because of the drop in cement demand.

Texas

In a 3-2 vote, Travis County Commissioners Court approved the site development permits for Texas Industries’ proposed Hornsby Bend sand and gravel operation near Webberville. The Austin Chronicle notes that the vote had been postponed at an earlier meeting after the Fort Worth office of the U.S. Army Corps of Engineers said it had been alerted by an area resident about the development and wanted to meet with TXI to review the project for potential Corps jurisdiction under the U.S. Clean Water Act. The Corps’ Stephen Brooks later wrote TXI that “We have determined this project will not involve activities subject to the requirement of Section 404 [of the Clean Water Act] or Section 10 [of the Rivers and Harbors Act]. Therefore, it will not require Department of the Army authorization.” The area resident, Ryan Metz — an environmental consultant — called the Corps’ decision “disappointing to say the least.”

Province news

A seam in the deposit led to an unusually loud blast from Walker Industries’ Niagara Falls quarry. According to a report in The Niagara Falls Review, John Fisher, president of the company, said it completed an investigation of its Jan. 25 blast and determined it was due to blasting rock with a crack in it. “What we concluded was there was an anomaly in the rock that allowed energy to escape through a crack in the rock,” Fisher told the newspaper. “It’s unusual for us to have a situation like that.”

In June, Texas General Land Office (GLO) Commissioner Jerry Patterson accused Cemex of trespassing on its own land by not paying the state of Texas for the removal and sale of sand and gravel by Cemex, and all of its predecessors, at its McKelligon Canyon operation in El Paso County. The GLO sought $558 million from Cemex in alleged unpaid royalties and also asked for payment of the value of the sand and gravel that had been removed.

When the case went to court in December 2009, Judge Carlos Villa ruled in favor of Cemex and against the state of Texas and the GLO. From the bench, he ruled that sand, gravel, limestone, granite, caliche, and soil are not minerals reserved to the state of Texas, and that the State cannot require Cemex to pay royalties for their removal.

“This ruling confirms our view that the suit by the State of Texas and the General Land Office is completely lacking in merit,” said Cemex USA President Gilberto Perez in a company press release.

Cemex’s evidence showed that the GLO’s allegations were contrary to Texas Supreme Court rulings and Texas Attorney General opinion. The case could potentially have an effect on other Texas landowners of mineral-classified lands. The judge’s ruling protects the rights of these surface landowners to the sand, gravel, limestone, granite, caliche, and soil on their property.

“We’re going to appeal,” GLO spokesman Jim Suydam told The Associated Press. “This is round one.”

Mining fatalities fall to an all-time low

According to recently released, preliminary data from the U.S. Department of Labor’s Mine Safety and Health Administration (MSHA), mine fatalities in 2009 fell to an all-time low for the second year in a row. A combined total of 34 mining deaths nationwide in 2009, only 16 of which were metal/nonmetal mines, is a significant drop from 2008’s combined total of 52 deaths.

“This decline in numbers is a testament to the commitment of miners, mine operators, MSHA, the Department of Labor, and other members of the mining community in making safety and health our top concern,” said Joseph A. Main, assistant secretary of labor for mine safety and health, in a Department of Labor news release. “At the same time, we are ever mindful that these numbers represent a tragic loss to the families and friends of the 34 victims. We will not rest until we reach zero fatalities in mining.”

According to Main, key contributing factors include enforcement of the Federal Mine Safety and Health Act of 1977 and continued implementation of the Mine Improvement and New Emergency Response (MINER) Act enacted by Congress in 2006. In 2009, MSHA assessed 173,000 civil penalties for violations of mine safety and health legal requirements, totaling $140.7 million.

Highlights of the 2009 Quarry Academy

The 2009 Quarry Academy — hosted by Sandvik and Dyno Nobel — put special emphasis on balancing unit operations with total process outcomes while maintaining standards of safety and best practices. The curriculum addressed critical processes within the quarry operation, as well as the relationship between each process, how these processes interact with one another, and how they can be linked to improve overall operational improvement.

“We know for certain that the old approach of ‘silo’ costing isn’t effective — that is, thinking of drilling, blasting, crushing, sizing, loading, and hauling as separate activities,” said John Watson, general manager/marketing, Dyno Nobel, at the opening session. “Instead, each is part of a total value chain and the key is to attain the optimal cost zone.”

“It’s not about lowest cost at every step, but the overall profitability,” added Aaron Berg, director of consulting, River Logic Inc. “There is an optimal intersection of a quarry’s capabilities and what the market demands. The key is setting up the ‘stone production value chain’ to make less waste product and more value added materials.”

Instructors pointed out that one of the largest areas of cost reduction for quarry operations is understanding the key controls and levers of crushing equipment to reduce waste, lower energy consumption, and optimize productivity of crushers. A real-world case study demonstrated how drilling and blasting can be used to accomplish chemical crushing to yield significant gains in productivity and process economy. Various tools were highlighted that electronically collect, store, and manage drilling and blasting data.

Volvo Construction Equipment personnel pointed out the effect that roadway conditions, grades, haul-road turn-radius geometry, and other factors had on productivity and cost of operation. They discussed loading, contrasting the principal alternatives of rubber-tired loaders, back-hoe excavators, and hydraulic front shovels. GPS terrain logging technology was used on a software simulation program to demonstrate production dynamics and economics based on one particular quarry’s haul road distance and grades.

The academy offered interactive classes, workshops, and field trips, as well as hands-on training on a drill training simulator. Vulcan Materials hosted the on-site visit that included four different workshops and demonstrations, including signature waveform data collection, drill deviation control and measurement review, crushing, and electronic detonator technology.

More than 250 students in North America have graduated from Quarry Academy since it began. To learn more about the 2010 Quarry Academy, go to www.quarryacademy.com

Vulcan Materials elects new directors

Kathleen Wilson-Thompson and James T. Prokopanko were recently elected as directors of Vulcan Materials Co., according to press release from the company.

Wilson-Thompson, formerly senior vice president, global human resources for the Kellogg Co., joined Kellogg in 1992 as a senior attorney and has served in her current position since 2005. In January, she joined Walgreens as senior vice president and chief human resources officer.

Prokopanko is president and chief executive officer of The Mosaic Co., a producer of concentrated phosphate and potash crop nutrients. He began his career with the company in 2004 and served as executive vice president and chief operating officer.

“We are very pleased that Kathleen Wilson-Thompson and Jim Prokopanko have agreed to join Vulcan’s board,” said Don James, chairman and chief executive officer of Vulcan Materials. “Kathleen and Jim are outstanding and experienced leaders making significant contributions to the success of large, dynamic, publicly traded companies. We look forward to working with them in the years ahead and to their contributions as members of our board.”

With the addition of Wilson-Thompson and Prokopanko, Vulcan’s 12-member board consists of 11 outside directors.