Item 2. PROPERTIES

A World-Class Organization Built for Success		Form 10-K ♦ Page 21

Part I ♦ Item 2 – Properties

Building Materials Business

As of December 31, 2020, the Company processed or shipped aggregates from approximately 300 quarries, underground mines, and distribution yards in 27 states, Canada and The Bahamas, of which 130 are located on land owned by the Company free of major encumbrances, 61 are on land owned in part and leased in part, 91 are on leased land, and 14 are on facilities neither owned nor leased, where raw materials are removed under an agreement. The Company’s aggregates reserves, on average, represent approximately 90 years at current production levels. However, certain locations may be subject to more limited reserves and may not be able to expand. In addition, as of December 31, 2020, the Company processed and shipped ready mixed concrete and asphalt products from 128 properties in three states, of which 100 are located on land owned by the Company free of major encumbrances, two are on land owned in part and leased in part, two are at facilities neither owned nor leased and 24 are on leased land.

The Company uses various drilling methods, depending on the type of aggregates, to estimate aggregates reserves that are economically mineable. The extent of drilling varies and depends on whether the location is a potential new site (greensite), an existing location, or a potential acquisition. More extensive drilling is performed for potential greensites and acquisitions, and, in rare cases, the Company may rely on existing geological data or results of prior drilling by third parties. Subsequent to drilling, selected core samples are tested for soundness, abrasion resistance, and other physical properties relevant to the aggregates industry. If the reserves meet the Company’s standards and are economically mineable, then they are either leased or purchased.

The Company estimates proven and probable reserves based on the results of drilling. Proven reserves are reserves of deposits designated using closely spaced drill data and are believed to be relatively homogenous. Proven reserves have a certainty of 85% to 90%. Probable reserves are reserves that are inferred utilizing fewer drill holes and/or assumptions about the economically mineable reserves based on local geology or drill results from adjacent properties. The degree of certainty for probable reserves is 70% to 75%. In determining the amount of reserves, the Company’s policy is to exclude calculations that exceed certain depths, so for deposits such as granite, that typically continue to depths well below the ground, there may be additional deposits that are not included in the reserve calculations. The Company also deducts reserves not available due to property boundaries, set-backs, and plant configurations, as deemed appropriate when estimating reserves. The Company uses the same methods of analysis to evaluate and estimate the amount of its aggregates reserves used in the cement manufacturing process for its cement operations as it does for its aggregates operations. For additional information on the Company’s assessment of reserves, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Financial Information - Critical Accounting Policies and Estimates - Property, Plant and Equipment” included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K.

Set forth in the tables below are the Company’s estimates of reserves of recoverable aggregates (hard rock and sand and gravel) of suitable quality for economic extraction, shown on a state-by-state basis, and the Company’s total annual production for the last three years, along with the Company’s estimate of years of production available, shown on a reportable segment-by-reportable segment basis. The number of producing quarries shown on the table includes underground mines. The Company’s reserve estimates for the last two years are shown for comparison purposes on a state-by-state basis. The changes in reserve estimates at a particular state level from year to year reflect the tonnages of reserves on locations that have been opened or closed during the year, whether by acquisition, disposition, or otherwise; production and sales in the normal course of business; additional reserve estimates or refinements of the Company’s existing reserve estimates; opening of additional reserves at existing locations; the depletion of reserves at existing locations; and other factors. The Company evaluates its reserve estimates primarily on a Company-wide, or reportable segment-by- reportable segment basis, and does not believe comparisons of changes in reserve estimates on a state-by-state basis from year to year are particularly meaningful. The Company’s estimate of reserves shown in the tables below include reserves used in the Company’s cement product line and Magnesia Specialties business.

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Part I ♦ Item 2 – Properties

The Company calculates its aggregate reserves for purposes of this table based on land that has been zoned for quarrying and land for which the Company has determined zoning is not required.

Cement

As of December 31, 2020, the Company, through its subsidiaries, processed or shipped cement from eight properties in two states, of which six are located on land owned by the Company free of major encumbrances, one is on land that is owned in part and leased in part and one is on leased land. The Company’s cement operations have production facilities located at two

A World-Class Organization Built for Success		Form 10-K ♦ Page 23

Part I ♦ Item 2 – Properties

sites in Texas: Midlothian, Texas, south of Dallas/Fort Worth; and Hunter, Texas, north of San Antonio. The following table summarizes certain information about the Company’s cement manufacturing facilities at December 31, 2020:

Reserves identified with the facilities shown above are contained on approximately 2,844 acres of land owned by the Company. As of December 31, 2020, the Company estimated its total proven and probable limestone reserves on such land to be approximately 682 million tons.

The Company’s cement manufacturing facilities include kilns, crushers, pre-heaters/calciners, coolers, finish mills and other equipment used to process limestone and other raw materials into cement, as well as equipment used to extract and transport the limestone from the adjacent quarries. These cement manufacturing facilities are served by rail and truck.

As of December 31, 2020, the Company, through its subsidiaries, also operated, directly or through third parties, six cement distribution terminals.

Magnesia Specialties Business

The Magnesia Specialties business currently operates major manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. Both of these facilities are owned.

Other Properties

The Company’s principal corporate office, which it owns, is located in Raleigh, North Carolina. The Company owns and leases various administrative offices for its five operating business segments. The Company plans to move its principal corporate office to leased space in early 2021 and sell the owned headquarters buildings.

Condition and Utilization

The Company’s principal properties, which are of varying ages and are of different construction types, are believed to be generally in good condition, are generally well maintained, and are generally suitable and adequate for the purposes for which they are used.

During 2020, the principal properties of the aggregates operations were believed to be utilized at average productive capacities of approximately 75% and were capable of supporting a higher level of market demand. The Company adjusts its production schedules to meet volume demand for its products.

During 2020, the Texas cement plants operated on average at 80% utilization. The Portland Cement Association (PCA) has projected that Texas cement consumption will increase modestly in 2021 from 2020. The cement business’ leadership, in collaboration with the aggregates and ready mixed concrete teams, have developed strategic plans regarding interplant efficiencies, as well as tactical plans addressing plant utilization and efficiency.

The Company’s Magnesia Specialties business expects future organic earnings growth to result from increased pricing, recovery from the impact from COVID-19, rationalization of the current assets and portfolio and/or further cost reductions. In the current operating environment, where steel utilization is between 75% and 80%, any unplanned change in costs or customers introduces volatility to the earnings of the Magnesia Specialties segment. The dolomitic lime business of the Magnesia Specialties segment operated at 73% utilization in 2020.

Form 10-K ♦ Page 24		A World-Class Organization Built for Success

Part I ♦ Item 3 – Legal Proceedings