“Specialty Products continued its strong performance in both the chemicals and dolomitic lime product lines. For the quarter, net sales were $49.4 million and record third-quarter earnings from operations were $17.0 million, or 34.4% of net sales, an improvement of 350 basis points. The new dolomitic lime kiln we recently completed at our Woodville, Ohio, facility will begin generating sales in the fourth quarter. The new kiln is expected to provide incremental annual net sales ranging from $22 million to $25 million with margins comparable to existing operations.
“Direct production costs for the heritage aggregates product line fell 2.7%, as production levels were reduced to better match shipment activity. Our operations personnel prudently managed costs and limited the increase in cost per ton to 1.0%, despite this decline.
“Consolidated gross margin (excluding freight and delivery revenues) for the quarter was 22.9%, a 220-basis-point decline compared with the prior-year quarter. The decline was primarily attributable to the increased impact of our newly acquired Colorado businesses, which is more vertically integrated ( i.e., with ready mixed concrete, hot mixed asphalt and related paving operations) than our traditional heritage business. In fact, excluding the effect of these recently acquired businesses, consolidated gross margin (excluding freight and delivery revenues) would have been 25.6%, an improvement of 50 basis points over the prior-year quarter. Notably, our Mideast Group benefitted during the quarter from pricing growth to increase net sales, and coupled this sales growth with reduced personnel costs to increase its gross margin (excluding freight and delivery revenues) by 180 basis points to 33.7%.
“Consolidated SG&A as a percentage of net sales was 6.0%, an improvement of 140 basis points compared with the prior-year quarter. On an absolute basis, SG&A decreased $0.7 million despite absorbing overhead incurred at our Denver operations, as well as costs related to an information systems upgrade expected to be completed by the fall of 2013.