Q1 2020 Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time. Your line is what can be placed on the mute a cold. Thank you for your patience.
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At this time, all participants are no listen only mode.
After the speakers presentation, there will be a question answer session.
To ask a question during the session you want me to press Star one on your telephone if you acquire any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today Karli Anderson. Thank you. Please go ahead.
Welcome to summit materials first quarter 2020 results conference call.
We issued a press release this morning detailing our financial and operating results.
The company by our first quarter 2020, investor presentation and enough due to supplement the workbook highlighting key financial and operating data all of which are posted to the investor section on our website.
Management commentary and responses to questions on today's call may include forward looking statements, which by their nature or uncertain and outside of kind of material control. Although these forward looking statements are based on management's current expectations and beliefs actual results may differ in a material way for discussion of some of the factors that could cause actual results to differ.
Please see the risk factor section of something material latest annual report on form 10-K, which is filed with the FCC and in our quarterly report on form 10-Q for the first quarter of 2020, which we expect to file with the FCC. After this call that would put a discussion of certain risks to our business related to Cobot night gene you can find reconciled.
You should the historical non-GAAP financial measures discussed in today's call in our press release.
Today's call will begin with an update from Tom Hill said, Brian Harris will provide a financial review and Tom will provide concluding remarks.
We will then open the lines for questions. Please limit your questions to one question and one follow up and then returned to the Q. So we can accommodate as money and once as possible in the time, we have available.
In compliance with sound that safety and distancing protocols. Our management team members are dialing into today's call Center home offices.
Ladies and audio or background noise may occur during their prepared remarks, and acuity session with that I'll turn the call over to Tom.
Thanks Carly.
Good morning, everyone and thank you for joining our call.
I will begin on slide four of the presentation to discuss almost response to cold at 19.
Under any business conditions safety is always our first priority or cold in 19 as presented new challenges summit is fortunate to have a world class safety scene that helped US act quickly and decisively.
In early March we adopted safety distancing protocols for all employees.
Construction has fortunately been deans essential and business continues on all the markets. That's almost survey, which includes 23 stage and the problems a British Columbia.
Our work is mostly done outdoors and our employees such as those pictured on slide four or setting a good example.
Weve implemented extensive safety hygiene and dispensing protocols for ourselves, our vendors and our customers and encourage their use both at the job site and at home.
Our employees that demonstrated their dedication to safety quality at a time when our company our customers and communities needed most and we think huh.
On slide five we provided an executive summary of today's remarks.
We set first quarter record for net revenue and adjusted EBITDA on higher demand for ready mix and aggregates as well have more favorable weather conditions relative to a year ago.
You want to traditionally our smallest quarter of the year due to seasonality.
So demand for our products and services has not been materially impacted by cold that 19, the near term impact of construction activity is less clear.
We believe that it is proving to withdraw our previously announced 2020 adjusted EBITDA guidance until we have better visibility into the extent of coldest 19 related disruption and the inevitable resumption of normal business conditions.
While we cannot predict much less control the potential impact of cold at 19 to our business, we can control our capital expenditures as a result.
We are reducing our capex guidance to 145 to 160 million.
This reduction is mostly related to greenfield activities that we have elected to defer until later periods.
We expect these deferrals to be limited then duration. So our long term estimates for EBITDA contribution from our Greenfield remains unchanged.
While the near term impact of the global health and economic crisis is uncertain. We believe summit, then the strongest strategic and financial position in the company's history.
Several elements make up our unique value proposition.
First of all summit is made up of entrepreneurial locally operating companies run by managers with decades of experience navigating tough business conditions are operating company leaders are empowered to make local decisions and leverage economies of scale through summit.
Support and back office functions.
They have a flexibility to make real time decisions to respond to fluctuations in demand.
Second entering this crisis, our end markets were structurally sound not oversupplied and well funded.
Private residential and nonresidential construction was study through the first quarter and most of our markets and those trends have been continuing into Q2 as demand for home wind farms and warehouses continues notwithstanding the impact of cold at 19.
Through the end of March housing inventories in each of so much markets were well below long term averages.
Well, we have not yet experience a slowdown in private construction activity, we recognize that those markets may be more vulnerable should there be a prolonged economic contraction.
By contrast, most of our 2020 public construction book of business is already funded in some cases well into 2021.
Overall, our backlog for aggregates ready mix and asphalt or about 20% ahead of where they were at the same point and 29 team.
Thanks for taking the lead on transportation and infrastructure funding earlier this month, the Kansas State Legislature approved a 10 year 10 billion dollar transportation plan, while the Virginia General Assembly approved a new gas tax an authorized over 800 million highway.
Construction bonds.
Texas 2020 transportation funding is supported in part by a sales and use tax based on receipts collected two years ago.
And Utah.
The new gas tax is expected to generate millions for transportation investment.
On a national scale, we hear that there's potential for a federal infrastructure bill that could add billions to state and local transportation funds for projects such as road construction and repair.
Finally.
We believe summit is in the strongest financial position in its history. Our last 12 months adjusted EBITDA has grown steadily over the last five quarters.
Our nearest maturity is over three years away, which limits our financial risk.
And some it currently has over 500 million of liquidity, our net senior secured leverage ratio is one time versus our covenant of 4.75 times in other words, we have over 300 million you bizarre headroom under our only financial maintenance covenants.
Turning to parts it highlights of our Q1 and early indications of our Q2.
We began 2020 as building permits were increasing housing inventories were well below historical averages and state Department transportation budgets were in their best shape in years.
Those market conditions are reflected in our record Q1 net revenue of 342.4 million up 12% from Q1 2019.
Aggregates volumes increased 9.7% on higher demand markets, such as Missouri, Kansas and Texas.
Ready mix volumes increased 14% and our average sales prices increased 6% on stronger demand across the company and better weather in the interim mountain region relative to Q1 2019.
Adjusted EBITDA was especially strong at 16.4 million up 149% from the first quarter 2019.
We experienced pricing growth in all lines of business in Q1, that's 2020 began with growth in demand for residential non residential and public construction activity.
And finally, we exited our first quarter 2020 with over 300 million of EBITDA headroom between our current net senior secured leverage ratio and our covenant.
Well U.S. economic conditions begins to deteriorate in late March and early April has generally been business as usual in our markets, albeit with extraordinary yet necessary safety precautions.
Ill make a few comments about but we're seeing in the first four weeks of Q2.
The construction season has begun.
Demand for aggregates asphalt and ready mix has been typical for April.
There were a small number of projects delayed or deferred around the edges of our business, but we have been able to replace these with other projects.
We have been flexing cement production to meet demand cement price increases have been postponed from April one to June one.
Public highway activity seems to be resilient and our largest public markets, such as Texas, Kansas, Missouri, Virginia and Georgia.
Two of our smaller markets, North Carolina, and Kentucky, which comprise a much smaller proportion of our public works revenue are facing some fiscal issues that preceded the cobot 19 pandemic.
I'll discuss our cement business on slide seven.
In 2019 cement contributed 22% of summits adjusted EBITDA.
As we plan for 2020, we plan to flex production with demand.
Price increases will take effect on June one.
The majority of our volume shifts north of St. Louis and shipping conditions on the river have the normal since the river open northbound and mid March.
Southbound traffic opened in early April.
We continue to monitor demand conditions on a daily basis.
The chart on slide seven is from the Portland Cement Association and features a projection of cement demand for March through June 2020.
As you'll see demand projections vary considerably amongst the markets served within the Mississippi River distribution area. The PPA projects anywhere from eight zero to a 30% decline in cement demand over the 120 day period in the state support or the river.
On slide eight we provided a snapshot of our current market conditions summits end use markets are 38% public.
31% residential.
31% non residential.
Geographically.
Our markets tend to be an extra them and rural areas today, our markets have had lower density and fewer outbreaks than some of the more populated areas in North America.
The information in the chart on slide eight is based on feedback from our top five states in terms of 2019 revenue.
These comments reflect their business conditions today.
In Texas are public highway work is booked through 2020 and halfway in between 21, most of which is in our North Texas operation.
From a private construction standpoint, usten residential was steady through April.
We haven't seen a clear trend emerge on spec building.
Builders have pulled back.
Others have continued with new projects.
Residential demand continues to be resilient in Austin.
Inventories are low and the Metro area continues to attract new residents.
Our Odessa Midland operation in the Permian Basin, which represented only 2% of summits net revenue and 29 team continues to operate as usual and they are still very busy despite the collapse in oil price.
We have no direct oil and gas customers in the Permian.
In Kansas, we've seen additional lettings related to the states New transportation Bill.
That legislation was structured to prevent the transportation problems from being used for other purposes.
Non residential activity is steady with wind farm and warehouse projects continuing to add to demand.
In Utah, we've seen fairly consistent demand for aggregates asphalt and ready mix that is typical of the early construction season for public work, while private residential construction has seen a small decline.
Housing inventory was only 1.3 months in March so there appears to be no overbuilding in this market.
Missouri continues to reflect demand for state Department of transportation work and flood repair activity, though the flood work is on a smaller scale than in 2019.
Private construction remains resilient in this area with additional wind farm and warehouse work.
Finally in Kentucky, which is the smallest of our top five states in terms of revenue a change in administration and overall state budget shortfalls are resulting in flat to slowing public spending.
The Kentucky Transportation Authority recently canceled its may and June lettings, resulting from fiscal issues that preceded the cold at 19 outbreak.
Private spending which is a small part of our Kentucky business is also flat to lower reflecting tightening fiscal conditions.
Wrapping up the business update on slide nine.
You will see this summer to value proposition includes a flexible cost structure and diverse end use markets in rural and X urban areas.
Coupled with our strong financial position these elements give summit the ability to thrive despite market uncertainty.
For example, most of our cost of goods sold is variable.
1.3 billion in cost of goods sold and 29 team we estimate over 75% of it was comprised of items that adjust with demand such as labor fuel material hauling and energy.
Those costs are controlled at the operating company level, where local management has the freedom to adjust these costs to reflect demand conditions.
In addition over half of our DNA is overheads specific to our lines of business like our cost of goods sold this overhead can flex with demand.
Interest expense comprised only about 6% of our net revenue last year. So we are well equipped to cover debt service and we have no maturities forthcoming for over three years.
Finally, there is value to having end markets anchored by public spending.
Infrastructure work is in the public interest and enjoys bipartisan political support.
The 23 U.S. states in the province of British Columbia, where we do business the majority of them.
Entered this crisis with well funded transportation budgets.
While there was a likely reduction in tax revenue related to the economic slowdown. We believe that there is a good chance that federal government stimulus funding will fill a lot of those gaps.
With that I'll turn the call over to Brian for discussion of financial results.
Thank you Tom.
Turning to slide 11.
I'll start with a summary of summits capital structure.
Our nearest maturity is nothing until July 2023.
On the left side, you'll see a cap table.
We only have a financial maintenance covenants with respect to a senior.
Secured leverage and at the end of Q1, we were at one times.
This means we have over 300 million of EBITDA headroom under our covenant, which is shown in more detail in the sensitivity table on the right side.
Essentially summit would have to exhaust its 500 million of current liquidity and see annual adjusted EBITDA full by more than 60% from current levels to risk violating this financial covenant.
We currently have no plans to draw down our revolver.
As Tom discussed a business has not yet been materially impacted by the economic slowdown.
Most of our costs are variable and our cash flows a well defined.
Further to that point on slide 12.
We've highlighted updates to our Twentytwenty capex guidance.
Well, we have not yet seen a significant impact our business from Covidien 19, we have opted to defer some of our greenfields and maintenance capex spending to maximize our flexibility.
Those revisions yielded a reduction of approximately 40 to 50 million.
And our revised Twentytwenty Capex guidance is 145 to 160 million, which includes 50 to 60 million for Greenfields.
Our estimated cash outflows for Twentytwenty total approximately 300 million.
These cash outflows include the aforementioned 145 to 160 million of Capex.
About 102 million of interest.
5 million of cash taxes.
17 to 20 million of lease obligations.
Roughly 30 million for acquisition liabilities related to prior transactions.
At the bottom of the slide we've provided a chart showing the seasonal variability in our cash and liquidity for the last 12 quarters.
We began twentytwenty with the highest Q1 liquidity ever.
On slide 13, we have a full year net revenue bridge comparing Q1 Twentytwenty to Q1 2019 net revenue increased 12% to 342.4 million and was led by our East region, which contributed an incremental 19.6 million on high exit.
It's volumes and average sales prices in Missouri and parts of Kansas.
Ready mix concrete revenue and average selling prices also increased in east region due in part to wind farm working Kansas and commercial work in Arkansas.
West region contributed an incremental 16 point threemillion of net revenue driven by higher aggregates and ready mix volumes in Utah and parts of Texas.
Turning to slide 14, you'll see the year over year adjusted EBITDA Bridge.
The first quarter is typically our smallest due to seasonality, we still had its strongest ever Q1, twentytwenty adjusted EBITDA with 16.4 million, an increase of 149% from a year ago.
The larger EBITDA contributions from the east and west regions more than offset higher maintenance and logistical costs in our cement business.
Turning to slide 15, you'll see a key GAAP financial metrics.
Net revenue increased 12% in the first quarter due to higher volume and pricing aggregates cement and ready mix of the 36.5 million increase in net revenue 8.7 million was from materials 25 million from products and 2.8 million from services.
Our Q1, Twentytwenty operating loss improved by 16 million as compared to the first three months of 29 team on higher net revenue and lower DDNA.
On a trailing 12 months basis operating income has increased 40, 70% relative to the 12 months ended March 30th 2019.
Our first quarter Twentytwenty net loss attributable to sum it think decreased 23.8 million from the first quarter 2019.
In the year ago quarter, we incurred charges of 14.6 million related to the offering of Twentytwenty seven notes to redeem all of the outstanding Twentytwenty two nodes.
First quarter Twentytwenty did not have any such charges and also had lower interest expense.
Our Q1 Twentytwenty reported basic loss per share was 40 cents an improvement of 22 cents per share from the first quarter 2019.
Turning to slide 16.
We presented several non-GAAP financial metrics.
Adjusted cash gross profit margin expanded by 220 basis points in Q1, Twentytwenty and 200 basis points over the last 12 months or LTM on strengthening margins in aggregates and ready mix.
Adjusted EBITDA margins expanded by 260 basis points in Q1, Twentytwenty and by 160 basis points LTM on higher net revenue and net income.
Adjusted diluted net income improved by a penny per share from a year ago, why we started with a lower net loss than the year go quarter. We recognized a 9.5 million change in unrecognized tax benefits related to the cares Act passed in March Twentytwenty, which was unfavorable.
Adjusted earnings.
Turning to slide 17, we've provided a comparison of our price and volume in Q1, Twentytwenty relative to Q1 2019.
During the first quarter Twentytwenty, we experienced solid demand in our markets that are active in the first three months of the year, particularly in Missouri, Kansas and Utah.
Average selling prices increased 2.2%.
It gets 2.6% for cement, 6% in ready mix and 4.1% in asphalt.
Volumes increased 9.7% aggregates, 0.7% for cement and 14% for ready mix.
Asphalt volume contributed by 2.9% during what is typically a very light volume parts of the year.
Turning to slide 18, how progress towards higher margins continues in a aggregates and products lines of business, both of which demonstrated adjusted cash gross margin expansion in Q1 and LTM.
Aggregates margins expanded by an impressive 450 basis points in Q1, and 210 basis points LTM on demand and price strengths in Missouri, Kansas in Utah.
Products business expanded by 490 basis points for Q1, and 200 basis points LTM on good performance in our West region, where pricing is finally catching up to volume.
Margins in our services business were flat relative to the year ago, Porsche and up 120 basis points LCM, well cement margins declined in Q1, and LTM as that segments experienced higher maintenance and winter storage costs.
Materials on products still comprised 89% of our adjusted cash gross profit unchanged from last quarter and we continue to expect that's a contribution from materials will be an increasing proportion of our EBITDA.
Fortunately modeling purposes for Twentytwenty, we estimate that interest expense should be in a range of 27 to 29 million.
We anticipate paying minimal state and local cash taxes and know us federal income taxes.
In addition to minimal cash taxes, we do not expect have any significant GRA payments until 2025 finally with regards to total equity interest outstanding We had 114.1 million class a shares outstanding and 3.1 million LP units held by investors Rick.
Also in total equity interest that standing of 117.2 million at March 28, 2020. This if the share count that should be used in calculating the adjusted diluted earnings per share with that I'll turn the call back to Tom for his closing remarks.
Thanks, Brian.
Conclude my prepared remarks on slide 20.
As we developed our original 2020 outlook, we expected a continuation of the economic conditions, we experienced at the end of 2019.
Well this year has arrived with unprecedented challenges and uncertainties summit is well positioned to face them.
So most of our company is engaged in business as usual with extraordinary safety precautions. We also continue to refine contingency plans as the economic slowdown begins to affect construction activity.
Three things give us great confidence in 2020.
We are strengthening financial results the chart on the upper left side demonstrates consistent growth in our trailing 12 months adjusted EBITDA over the last five quarters. These steady returns provides some it with a strong foundation that includes over 500 million of liquidity.
Our revolving credit facility is there we need it but right now we don't think we will.
Most of our costs are variable and we will adjust to meet demand.
Second we have a great deal of wrong on our only financial covenants.
On the upper Rightside, you'll see the sensitivity analysis that Brian discussed.
We'd have to exhaust our current cash of nearly 200 million.
Our 329 million of available revolver.
And see adjusted EBITDA fall by more than 60% to risk, reaching our only financial maintenance covenants.
And finally, we believe that our end markets, where structurally sound not oversupplied and well funded entering this crisis.
Early year aggregates and ready mix price increases were adopted in several markets, reflecting the health of the private construction business.
Mark U.S. housing inventories were still well below historical averages in all of summits markets with some markets like Salt Lake City reporting less than two months supply.
Low interest rates have continued to attract homebuyers, despite social distancing will thanks to virtual home tours and open houses.
States such as Kansas just passed a major new highway plan with funds, specifically ring fenced for state Department of transportation years.
Our backlog of Texas Public Highway work takes us into the middle of 2021, and most states are continuing with or accelerating lettings activity during the cold at 19 crisis.
To conclude.
We believe summit is positioned to thrive in the uncertainty of today and the inevitable return to normal.
We have a strong financial position.
Taxable cost structure, and a very entrepreneurial culture.
Low interest rates and low inventory will drive long term residential growth in our markets.
We believe non residential construction is also poised for long term growth as Americans continue to order goods online.
I think alternative forms of energy and consider locating their homes and businesses beyond city centers.
We believe there is high bipartisan support for public Highway work, which we expect will result in more federal aid flowing to state in the form of infrastructure or transportation Bill in the near future.
Summit is built on a strong foundation that reflects the dedication of its employees.
We thank them for their commitment.
Enthusiasm and creativity and upholding high safety standards at work and at home.
Their dedication helps summit continue to be an essential business that is building critical infrastructure and generating value for our shareholders.
With that I'd like to turn it over to the operator for questions.
Operator.
Thank you as a matter too.
When you to press are I guess.
Let's try or questions, Chris the path or hash key.
And.
Please yes.
And once.
Thank you first question here come from the line.
And Tom.
Your last okay. Thanks, operator, I couldn't you were coming in that operator, so I'm thinking for taking my questions today begin again for the flexibility during these.
Highly unusual times first question is gonna be on the policy side really two part question.
First do you see or do you expect to see any business from the carriers that which is had 25 billion asset for transit and 10 billion for aviation.
The first part of the question and then the second do you have any color on teacher Lettings and is there any way to measure how much.
Volume is pool for key states accelerating projects. Thank you.
Yeah. Thanks Catherine.
Our as the cares act, it's really hard to tell if there will be directed money all that goes to transportation construction, but certainly that that 25 billion will release some strain on the state budgets, which should will result in less pressure on their transportation construction budgets, but it's pretty hard to make a dime.
Correct connection.
Got it but it's very helpful.
Going on Lettings, we are.
Very busy.
In Texas, Kansas, Utah, Colorado.
We haven't seen a lot pulled forward and allstate's, but we're optimistic for instance in Virginia with their recent gas tax increase that they will get some more.
Well get some more work, they're all South Carolina continues to look at work on a regular basis I'm. So you know outside of North Carolina, and Kentucky, No our states continue.
Letting you know work on a regular basis, but we haven't seen the pull forward for instance that you know that you're seeing in Florida, We hope that that will happen in due course, but right at the moment.
Okay.
Okay, you still there.
Yeah.
Okay, unless you're a little bit.
Then just following up on a cement production.
And just really for clarification. This is a higher fixed cost business for you.
And there could be concerns about it anytime to slow down even though it certainly does not appear to be the case today.
Do you do you could give more color on what you're seeing in terms of backlog or demand for years can that business.
And have you seen any type of downtime in response to 'cause. It 19 really kind of what are your broader expectations based on what you're seeing with the flow business now. Thank you.
Yeah, so as far as cement goes on in you know it's early in the year, we had a pretty tough start with some cost overruns on our on on our winter shutdown.
You know on also entering the year, we actually were very optimistic about demand arm. So we actually did in Portugal man into our Louisiana terminal well that has turned out to be problematic.
We we had a good recovery in April in cement you know it is probably a business that we don't have much backlog. We just have customers, it's not really a backlog business like asphalt or even like aggregates actually it's a fairly customer oriented.
Business, our customers are all over the map a.
We have many of them that are very optimistic some of them not so much. So it's really I would say our cement business is the one that we probably you know is the most on certain for us.
Are.
We are with two plants and.
Nine terminals.
We do have flexibility to two to flex our production.
With minimal impact.
And I'll, if we do see a slowdown will be able to will reduce production appropriately. So.
It's we'll just wait and see pretty encouraged and all in April, but we'll see workloads from here.
Great encouraging to see that like everyone else is slowing down in April to keep recovery in April for that business.
Our family Unprecedent it thank you.
Your next question comes from the line of growth Pizza with Suntrust. Please go ahead. Your line is now open.
Hey, Thanks for taking my question just one.
Aggregates.
Your your margins really strong little bit of pricing sequentially lower just curious was there any mix.
Impact and.
Do you anticipate pricing to improve sequentially in the next quarter.
Our armed our mix adjusted price increase was about 3% in Q1 2020 versus about four and a half in 2019.
No. It is our lowest volume quarter. So sometimes it's it's not the best indicator, we would hope that this death differential.
Narrows as the year progressive, but we've had very successful price increases you know it's again there may be some impacts in 30 60 90 days from coal that 19, but as of now you know we're optimistic on our AG prices.
And that that the difference between the 3% this year and 4.5% last year.
Narrows overtime.
Okay and then.
Building on what you just said I mean, so if demand were to deteriorate and I've always known Agri repricings to kind of hold up once a price is set for the year are you, suggesting though if demand does pull back that might have to give waste on tonight braces.
No I don't think you'd give a lot back but I think if there is a significant decline and volume it's hard to have absolutely no impact on pricing. It is the most resilient commodity product probably in.
In the world as far as pricing goes, but you know.
Yeah, there is some impact.
I think.
And then on your slides.
The PC forecasts I am I reading this right there.
Checking double digit growth across the country, except for going in Mississippi River.
Brian do you want to take the on.
Bronner I can't hear you I don't know if you're on mute.
Sorry, it's a very wide range of.
Projections from the PPA, we focused on the ones that are in.
The Mississippi River markets.
Again, it's a it's a pretty broad range from a huge as here at 10% decline. So I mean that just give you a sense of just how much as Tom said you know customers.
Reporting a wide range of of differences.
You know that these are the PCIA numbers and.
Yeah, it's a pretty well, it's a pretty wide range across.
Most end markets.
Yeah. Thanks.
That we're expecting the PCIA to update their forecast a fairly shortly maybe even this week.
Okay, I mean again like that older 40% in the quarter for some places the.
Yeah keep keep in mind drove it and it's just not find today. It's a march through June a projection from the PPA at this point there will be updating those numbers regularly I'm sure.
Okay and then your your view on prices for cement.
Pushing as the June just any color on that as the customers kind of suffering so.
Kind of move into June and what gives you.
Any confidence that.
You know you're going to have the ability to execute on that.
Well, we were we were very optimistic about the April one increase and certainly the uncertainty around cobot 19.
You know really the industry just put it on pause.
For a couple of months, we continue to be I'm optimistic everyone is at $8 in June won.
You know lets will.
And you know our although the relative strength, we had in April gives us some optimism, but we'll just have to wait and see its certainly part of the unprecedented.
Uncertainty, we have a firm called the bank team but.
Again April made a somewhat optimistic.
Gotcha and Brian on hard hydrocarbons is there a strategy there to take advantage of the decline in.
Diesel and actual.
Yeah, well on the diesel.
As you know, we always buy forward a portion.
Have a have a diesel requirements on and off road diesel last year in 2019, we consumed about 32 million gallons of diesel.
And at this point, we have about in the remainder of the year between May in December we have about 10.5 million gallons already pre purchase at prices that are lower than the 2019 actual so we'll be able to take advantage of.
The lower spot prices as we go through the year.
And yes that will be that will be a tailwind tourists compared to the prior year.
As far as the liquid goes it's pretty much a pass through in most.
Most states, we don't have any normal amount of liquid asphalt storage, but we do have some in Kentucky and in Texas for a San Antonio Austin business.
So, yes, we should be able to see some benefit from a from liquid asphalt pricing, but in say for the most part it is that it is a pass through and indexed with the state deities.
All right great. Thank you and hero he did say that Charlie Anderson and I just wanted to clarify on slide seven those are all the other decline.
For all of those percentages.
From the zero to 10, okay into the 4% or above based on the.
Dates that are picture there that's what the.
Okay I read differently to me that thank you for clarifying that.
Yeah of course.
Your next question comes from the line a trade agreements with Stephens. Please go ahead. Your line is now open.
Hey, good morning.
So.
No significant impact.
You're seeing in your markets pretty remarkable.
About 30% your business is nonres.
So how are the discussions going there was some of your nonres customers.
Turning to see any of these folks kind of push out or even discussed pushing out.
New projects and your and your markets I mean the.
Some of the leading indicators would suggest that.
We might start to see that at some point, but just wondering.
How those discussions are going specifically was nonres customers.
Yeah Trey.
In Las Vegas, we certainly have seen a number of projects deferred delayed or canceled and that's a pretty small part of our business is less than 2% of our revenue, but certainly that's our our hardest hit and that would be really led by by far the nonres customers.
You know so far in our big.
You know there the salt Lake area. The Houston area, you know some conversation some worry.
But but we really haven't seen a lot of cancellations.
It's still early it's still uncertain, but as of right now, which we just we just really haven't seen it.
That's that's pretty interesting.
And encouraging.
So I.
I guess kind of switching gears a little bit here.
You touched on it a little bit, but you don't have much direct oil and gas exposure, but.
Houston is an important market for you in.
Right now as you mentioned it sounds like the rest side is still strong.
But this move that we've seen in energy prices.
Clearly pretty intense.
Can you talk about what kind of impact.
You've seen in prior shocks to oil prices.
Maybe the last I guess, most recent one in in the 15 16 timeframe and and how this go around.
The difference.
Well you know 2015 on the oil collapse at the end of 14, an early 15, we were very concerned about our Houston operation, which is almost two thirds roughly two thirds residential.
We did remarkably well in 2015 post that crash, a oil and gas crash.
We were down but it was it was low single digits.
And I think Houston is a different place, it's pretty diversified and I actually think that the impact this time may be less because.
Oil and gas after 15, they really did send the ranks of you know.
Of employment, there and the oil and gas field.
The combination of.
You know.
Of 10 dollar oil and Cobot 19, yeah, I'm worried about Houston, but as of today.
It has remained remarkably strong I'm just anecdotally I can tell you that we have had a great business there number one probably.
One of the really best ready mix businesses I've ever going to associated with it in my in my career and you know the salesforce, they're very impressed with our customers.
When about Oh, three weeks ago when co bid was just starting to really get.
Hi, all top 15 of their builders.
That they were going to stop spec building.
Well last week five of them started again.
And it's you know again, we just get conflicting reports from our customers, but the fact that five of our top 15 customers have started spec building again again, it's it's somewhat encouraging but you know certainly Houston is an area that I would I would worry about but so far it.
Hanging in there.
Fair enough.
So one big picture question in there.
Just real quick.
Stuart Glee.
Aggregates producers when when volume decline in prior recession.
The pricing typically does not follow.
Directionally, maybe you can move around.
But.
Usually see pricing slip.
In any significant way in aggregates business. So.
Just from where we sit today in your markets I guess and how they're structured it do you see any reason that wouldn't be the case. If we if we were to enter a fairly severe recession for your aggregates business.
No and look at a lot of our markets I think it's better position those as markets are well continue to be well structured and.
I I.
I agree with what you said it you know prices might go up a little less.
But there they're going to go up.
Fair enough.
Thanks for the color, Tom and I'm glad to hear everybody's well.
Great Cheers.
Ladies and gentlemen, when taken as a reminder, please limit yourself to one question and one follow up. Thank you. Your next question comes from Jerry Revich with Goldman Sachs. Please go ahead. Your line is now open.
Yes, hi, good morning, everyone Im glad to hear your all being well.
Thanks for Ken.
I'm wondering if you could talk about how you see this cycle compared to be or nine downturn and especially in your markets. Obviously, the industry's could consolidating so.
You can you just give us a snapshot with different today versus a decade again.
Basing your expenditure.
Yeah, I mean I had the biggest different Jerry is the fact that going into all nine markets were pretty significantly.
Overbuilt.
And I think it may be cycle significantly deeper.
And we knew at the end of six that you know the cycle was turning down and you know the especially on the residential side got way over built.
Even on the non res side. It was overbuilt. So I think that's the primary difference where as you know really in general.
Our markets right now are underserved.
And I think that we'll we'll certainly have an impact I mean, we in some of our markets again, our customers are all over the close.
But a lot of our residential customers in places like you to our saying Hey, this is going to give us a chance to catch up because we've been behind we see this is transitory. So we're going to use this as an opportunity to get some product on the ground.
That's not everybody, but that's certainly some of the things we here.
The other part of the that I would say on the cycle is that when we.
On the cement side of things I don't know if you remember nisha, but you know the true we went into a contraction as the cement industry. We're shutting plants moving volume around from old what style plants that were being shot to their new plants and it really put a bunch of uncertainty into the market.
Based on the cement side, we don't have that now and that should certainly help to support pricing.
On on the cement side versus the cycles warm in you know not.
But and it's on the follow up there can you talk about your competitive position in your biggest concrete and asphalt markets today compared to what the predecessor companies would achieve.
Five years again, the concern is when construction spending slows that you see greater margin compression from mid vertically integrated participants amaze markets and you folks it certainly improved the competitive position there. So I'm wondering if you just flush that out as well if you don't mind.
Well I mean look were lower in two major ready mixed markets and you know the salt Lake and Houston markets. They.
Yes, the Salt Lake market as you know is very structured again worry a little bit about Houston, It's Scott a number of competitors, we'll see what happens there.
Asphalts.
Hasn't really changed very much it's pretty much the same.
You know, we liked and always have like vertically integrated positions. We have that gives us some flexibility who want a downturn to go get work and maintain some volume so we.
Well like it but I.
You know I don't think the competitive situation in the in the product side has really changed very much overall, it's pretty it's pretty much the same as it has been.
Okay I appreciate the discussion thanks.
Okay. Thanks Gerry.
Your next question comes from the line of Phil Ng with Jefferies. Please go ahead. Your line is now open.
Hey, good afternoon, everyone.
Based on your slide deck, it looks like the Pcs forecasting a 20% decline in cement for QQ.
Is that you is that your view in terms of how your business is going to hold up and just curious why that SNET businesses delaying delineating from the trends you're seeing a there across the rest of your portfolio.
Well first off its a forecast.
So it's it's it's unclear we do our volumes were okay and in Q1.
You know April has been pretty good. So it's it's it's all to play for we'll see as PK updates or forecast.
You know what we'll see if it's if it's true.
Yes, good volumes do go down 20% it will be very different than what we've seen in the rest of our business, but again, it's just a forecast fill and we'll see how it plays out in these pretty uncertain times.
Any color on how April is trending for Smith for you guys is it up Dell.
No April's was was decent we recovered pretty well from a pretty tough.
First quarter.
Got it.
Then I guess understate deal T. front, if you kind of alluded to that as well just due to drop off in gas tax receipts curious if you haven't view how much are they declined your bigger states are going to see and what that means for demand for your public business down the road, which 2021 2022 absent of the federal Backstop and Tom It seems like your commentary.
Three on a potential infrastructure built seems a lot more upbeat than the past any color on those two dynamics would be really helpful. Thanks.
Yeah, I'd say, it's the first time and.
You know in 20 years that I think we will get some type of infrastructure or highway bill.
You know out it out of the federal government I think it's you know it's a it's in a central business. We work outside we can work save your they're good jobs, there's just lots of.
Good public policy reasons to supportive.
On.
It's just it's pretty early to tell what the impact is on <unk> I would worry about 2021 is theres no federal Bill.
And it depends obviously on the nature of the recovery.
You know from called at 19 that V or you shaped or whatever shape going up name.
You know.
I think a lot of times, they look they look forward and not back.
But right now I'm sure.
Tax receipts are being hit pretty hard.
We.
Our Big States, Texas, Kansas, and Utah, I had would be pretty optimistic that that they're going to be able to weather the storm.
Other states, Missouri.
Obviously, Kentucky's you know in pretty bad financial shape.
Well I think we will seventies, we saw it in North Carolina on the other hand, South Carolina, Virginia at recent talk gas tax increases, which may or may not make up the shortfall.
They are issuing bonds in Virginia, Sage, it's really a a patch work that you really have to.
Which can have to wait and see but I am I feel okay about 2020.
But you know without a federal.
Highway Bill I would worry about 21.
Thanks, a lot I appreciate it.
Thanks So.
Your next question comes from the line of Stanley Elliott with Stifel. Please go ahead. Your line is now open.
Hey, good morning, everybody. Thank you all for taking the question and good to hear your voice.
Quick question and this may be tough, but it certainly sounds like business trends are hanging in there pretty well, you'll really across the portfolio.
What are you gonna be looking at you were 40, you would consider reinstating a guidance kind of given where we are right now.
How do you plan on communicating that just curious conceptually, how you're thinking about that versus what you're seeing on the ground and then expectations for recovery.
Yes, Stanley you're right that is a tough one.
I think we have to get a clearer picture about what the reopening looks like what it looks like for the economy.
When.
The growth in unemployment stops and I don't I think we may be.
You know 30, 60 days away from having a clear picture of that.
You know, we we literally have daily calls with our senior team to talk about what trends there are seeing on what their customers are saying and what I'm. Most importantly, we start out with you know how.
Well, how the viruses directly affecting all employees.
And.
So we're we're on on top of the we have all sorts of contingency plans that will take into impact any.
Any.
Pretty much anything that happens over the over the next 90 days. So we're.
I think we're on on top of it but you know, it's really going to be.
How this virus impacts us over the next 60 90 days and weather.
And when we get a clear picture what it looks like.
Fourth it could get it behind us.
Fair enough and then.
You guys had been on a journey can moving from more of an M&A rule of story to certainly one more of an operating company I think that's showing up in your margin you maybe talk about kind of that journey, how thats positioning you.
Both from from managing the downturn. It then also being able to derive a profits you don't want to go forward basis.
Yeah, I don't think we were averaged less than M&A.
The company so if we do focus on.
You know on our operations I think obviously as the age.
Although the amount of time, we own a business, we're able to make more and more changes and to focus on improving those businesses in getting the economies of scale again first principle of summit is we believe in the local we believe this is the ultimate local business, we keep a lot of decision making local.
But we do everything we can.
To derive benefit from scale and I think you know as as time goes on we have gotten more and more benefit of that scale and that's really where we're we're focused on obviously right now is not the time.
You know for M&A until we see the end of this.
And.
We are we are razor focused on on getting those benefits of scale.
Perfect. Thanks, guys appreciate it.
Thanks, Don.
And ladies and gentlemen, we have reached our allotted time I'll turn the call back over to Mr., Tom Hill for closing comments.
Thanks, operator, and thanks, everybody for joining us.
That concludes our call everybody Ah stay safe and be well and we'll talk to him at the end of Q2.
Sure.
And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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