Summit Materials Inc. announced results for the third quarter of 2020. For the three months ended Sept. 26, the company reported net income attributable to Summit Inc. of $90.7 million, or $0.79 per basic share, compared to net income attributable to Summit Inc. of $55.8 million, or $0.50 per basic share in the comparable prior-year period. Summit reported adjusted diluted net income of $63.9 million, or $0.55 per adjusted diluted share as compared to adjusted diluted net income of $58.2 million, or $0.50 per adjusted diluted share in the prior-year period.
Summit’s net revenue decreased 3.1% in the third quarter of 2020 to $645.2 million, compared to $665.8 million in the third quarter of 2019, on lower East segment and cement revenue relative to a year ago.
Net revenue increased $38.5 million to $1,562.9 million in the nine months ended Sept. 26, primarily resulting from organic growth in aggregates and ready-mix concrete. The company reported operating income of $100.6 million in the third quarter 2020, compared to $130.9 million in the prior-year period, as the third quarter 2020 included $10.6 million of CEO transition and related stock compensation adjustments.
Operating income increased by $5.3 million in the first nine months of 2020 as compared to the first nine months of 2019, primarily as net revenue gains exceeded increases in costs of revenue and general and administrative expenses. Summit’s operating margin percentage for the three and nine months ended Sept. 26, decreased to 15.6% from 19.7%, and increased to 10.2% from 10.1%, respectively, from the comparable period a year ago, due to the factors noted above.
Net income attributable to Summit Inc., which included the reversal of an unrecognized tax benefit, increased 62.7% in the third quarter to $90.7 million as compared to $55.8 million. Net income attributable to Summit Inc. was $102.8 million for the nine months ended Sept. 26. Adjusted EBITDA decreased 8.1% in the third quarter to $177.7 million as compared to $193.3 million in 2019, and for the first nine months of 2020 Adjusted EBITDA increased 4.1% to $354.4 million.
For the three months ended Sept. 26, sales volumes increased 3.1% in aggregates, and decreased 1.0% in ready-mix concrete, 6.4% in asphalt and 11.3% in cement relative to the same period last year. Average selling prices in the third quarter of 2020 decreased 2.2% in aggregates, and increased 0.5% in cement, 4.6% in ready-mix concrete and were flat in asphalt relative to the prior-year period. The company had organic price growth across all lines of business during the third quarter of 2020.
Anne Noonan, CEO of Summit Materials, commented, “Our West segment performance was the highlight of the quarter, delivering 16.5% growth in Adjusted EBITDA in Q3, as migration trends favor certain U.S. central and western suburban and exurban markets that we serve. Company-wide, our adjusted cash gross profit margin has held steady. We are focused on consistent organic growth with investment in greenfields and Summit end markets that are underpinned by strong growth fundamentals. Sustainable organic growth serves as a foundation to support strategic acquisitions, such as Multisources of Texas, and Valley Gravel of British Columbia, which we completed in the third quarter while keeping our leverage ratio steady at 3.5x. Most importantly, we continue to vigilantly practice safety and distancing protocols in response to the COVID-19 outbreak.”
As of Sept. 26, the company had $288.8 million in cash and $1.9 billion in debt outstanding. The company’s $345 million revolving credit facility has $329 million available after letters of credit. For the nine months ended Sept. 26, cash flow provided by operations was $218.0 million while cash paid for capital equipment was $140.0 million.
Brian Harris, CFO of Summit Materials added, “During Q3, we strengthened our balance sheet by redeeming all of the outstanding $650 million 6.125% notes due 2023, which was our nearest term maturity, with proceeds from our issuance of $700 million of 5.250% notes due 2029. Summit reported over $617 million in available liquidity at quarter end.”
Given the uncertainties relating to COVID-19, Summit is not providing Adjusted EBITDA guidance at this time. Noonan said, “We continue to believe that it is prudent to forego providing guidance pending better visibility into the ultimate resumption of normal business conditions.”
The company is expanding its previously announced 2020 capital expenditure guidance to $175 million to $185 million, including $50 million to $60 million for greenfield projects. This is an increase from the company’s previous guidance of $145 million to $160 million.
Aggregates net revenues decreased by $1.1 million to $136.4 million in the third quarter 2020 when compared to the prior-year period. Aggregates adjusted cash gross profit margin decreased to 64.2% in the third quarter 2020 as compared to 68.6% in the third quarter 2019 on differences in product mix.
Aggregates sales volumes increased 3.1% in the third quarter 2020 when compared to the prior-year period on higher volumes in Texas, partially offset by lower volumes in Missouri, Kentucky and British Columbia. Average selling prices for aggregates decreased 2.2% in the third quarter 2020. On a mix-adjusted basis, Summit estimates that aggregates prices have increased by approximately 2.1% year-to-date in 2020.
Cement segment net revenues decreased 14.3% to $84.9 million in the third quarter 2020, when compared to the prior-year period, on lower sales volume of cement. Cement adjusted cash gross profit margin decreased to 45.1% in the third quarter, compared to 46.0% in the prior-year period, as lower volumes resulted in higher unit plant costs.
In addition, its solid waste processing facility continued to undergo repairs related to an explosion that occurred in April 2020. The Adjusted EBITDA impact from the down time at the facility was approximately $4.3 million in the third quarter. Organic sales volume of cement decreased 11.3% in the third quarter and organic average selling prices increased 0.5% when compared to the prior-year period.
Products net revenues were $321.8 million in the third quarter 2020, compared to $324.7 million in the prior year period. Products adjusted cash gross profit margin increased to 25.4% in the third quarter, versus 24.4% in the prior-year period.
Its organic average sales price for ready-mix concrete increased 4.6% and organic sales volumes of ready-mix concrete decreased 1.0%, as higher volumes in residential construction markets were offset by flat to slightly lower volumes in other parts of Texas (Permian) and Kentucky. Organic average sales price for asphalt was flat, while asphalt organic sales volumes decreased 6.4%, as lower volume in Kentucky was offset by higher volumes in North Texas and Kansas.
Net revenue decreased by 3.1% to $645.2 million in the third quarter 2020, versus $665.8 million in the prior-year period. The reduction in net revenue was primarily attributable to lower volume of cement, asphalt, ready-mix concrete and aggregates, partially offset by higher cement and ready-mix concrete prices.
Aggregates reported average selling prices declined 2.2% in the third quarter 2020 relative to the prior year, but on a product mix adjusted basis, year-to-date aggregates pricing has increased approximately 2.1%. The company reported operating income of $100.6 million in the third quarter of 2020, compared to $130.9 million in the prior-year period.
Net income increased to $92.8 million in the third quarter of 2020, which included a $32.9 million reversal of an unrecognized tax benefit, compared to income of $58.2 million in the prior year period. Adjusted EBITDA decreased 8.1% to $177.7 million in the third quarter of 2020, compared to $193.3 million in the prior-year period on lower revenue.
The West segment reported operating income of $72.3 million in the third quarter 2020, compared to $58.5 million in the prior year period. Aggregates revenue in the third quarter increased 12.2% over the prior year period, while organic average sales prices increased 4.4%. The company completed the acquisition of Multisources of Houston, Texas and Valley Gravel of Abbotsford, British Columbia, in the third quarter, both of which are primarily aggregates businesses.
The East segment reported operating income of $29.3 million in the third quarter 2020, compared to $55.5 million in the prior year period as lower asphalt revenues due to the ongoing fiscal constraints in Kentucky more than offset strength in ready-mix concrete. Aggregates revenue decreased 7.2%, resulting in part from a 5.6% decrease in organic volumes, notably in Kentucky and also in Missouri, where the company was involved in significant floor repair work a year ago and operations have since returned to normal run rates. Aggregates average selling prices decreased 2.2% on a difference in product mix from the year-ago quarter.
The Cement segment reported operating income of $24.0 million in the third quarter 2020, compared to $31.5 million in the prior-year period. The segment reported organic sales volumes and organic average selling prices decreased 11.3% and increased 0.5%, respectively, during the third quarter 2020 as compared to the prior-year period. Its solid-waste processing facility continued to undergo repairs related to an explosion that occurred in April 2020.