Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and walk through the U.S concrete Inc. first quarter 2020 earnings conference call.
At this time all participants are in listen only mode. After the speakers presentation. There will be a question answer session. You asked a question during the session muted press star one on your telephone if you require operator systems or the program. Please press star than zero I would now like to be thrilled to be scarf response to John Cooper Senior Vice President and Chief Financial Officer, you May begin Sir.
Good morning, and welcome to U.S. Concretes first quarter earnings call. Joining me on the call today is Ronnie Pruitt, our president and Chief Executive Officer.
During the call we will review, our first quarter performance and spend the balance of the time addressing the current environment and now as well as our vision for some of the reengineering, we are undertaking to optimize our organization and process.
Then well open the call to questions a presentation to facilitate today's discussion is available on the Investor Relations section of our website.
As detailed on page two of our presentation. Today's call will include forward looking statements as defined by the U.S. Private Securities Litigation Reform Act of 1995, such forward looking statements are subject to risks uncertainties and other factors, which could cause actual results could differ materially.
Except as legally required we undertake no obligation to update conform such statements to actual results were to changes in our expectations for a list of these factors. Please refer to the legal disclaimers and risk factors contained in our filings with the FCC. Please note that you can find reconciliations and other information regarding the non-GAAP.
He took measures that we will discuss on this call in the form 8-K, which was filed earlier today.
With that I'll now turn the call over to Ronnie.
Thank you John I.
I would first like to take the opportunity to recognize the incredible work of our concrete deliberate professionals.
Aggregate production teams as well as the other hardworking women and men of U.S concrete.
These are unprecedented days for the world, our nation and all of our families.
Half of the employees of U.S. concrete please accept our best wishes for you.
And your family during these times.
The global pandemic has created a challenging environment for our economies almost every company and the construction market in which we operate.
U.S. concrete as following the guidance in direction of the CDC and other healthcare leaders as well as applicable government authorities and all of our markets.
No as always our number one priority is the safety and health of our employees and their families our customers and our communities.
Every effort is being made to ensure that we are providing a working environment across all of our markets that enables our employees to carry out their daily activities in accordance with the Cdcs protocols to promote health and safety. These include enhanced safety and sanitation protocols.
Actual distancing observing new word practices in our plants and interruptions.
Contact with tickets across the east region in DFW contact was tickets and invoices are available through our proprietary dispatching system Where's my concrete or as it is commonly known WMC no need for signatures or handling of items between our drivers and our customers with this fully did.
Digital platform.
Digital ticketing across the entire U.S. concrete platform all of our ready mix customers can access digital ticketing through our WMC up.
I'm also proud of our local employees, who have donated P. P to local hospitals and resources to food pantries during this crisis.
As you know the construction and building materials industries are considered essential services.
We are operating in each market as demand and business conditions dictate during a dynamic environment.
With this burden mine I will now walk you through how U.S. concrete has been operating and how we were bobbing. During this remarkable time.
My remarks today will be focused on three periods, our performance and trajectory in the first quarter prior to the impact of the pandemic slowdown.
Our actions and business assessments during the onset of Tobin 19.
And our vision for U.S. concrete as we transition through and out of Japan demand.
And while the economic implications with pandemic started in the first quarter.
We're off to a good start and in line with our previously communicated annual guidance.
Please refer to slides five and six in our earnings presentation.
For the quarter, our consolidated revenue was 334.4 million an increase the 0.4% versus the prior year quarter.
Adjusted EBITDA for the quarter was 34.2 million compared to 34.5 million for the prior year quarter.
Aggregate products revenue increased 1.6% from last year's first quarter.
43.6 million, while volumes increased 5.4% from last year's first quarter to 2.6 million tons.
Aggregates adjusted EBITDA was 11.3 million versus 10.4 million in the prior year quarter.
Core contributed 1.7 me into our EBITDA performance during the quarter.
Ready mix concrete revenue increased 0.6% from last year's first quarter 292.2 million.
Ready mix ASP increased 3.4% influenced by regional mix.
Our material spread was $70 in 36 cents per yard compared to $67.94 per yard in the prior year quarter.
Our ready mix adjusted EBITDA was 31.7 million versus 34.5 man in the prior year quarter.
The record rainfall during the quarter in Texas, and the operating restrictions had an impact on our results for the quarter.
I will now I'll turn it over to John for additional comments on our first quarter financial performance.
Our EBITDA adjustments for the quarter relate primarily to stock compensation acquisition related costs in office or transition expenses. You may recall that stock awards were not granted until the second quarter of 2019, which resulted in a lower first quarter 2019 expense and whatnot.
The wise, we expect it.
Yes, DNA was 10.1% of revenue for the first quarter up 2020 compared to 9.6% in the prior year period, adjusted EPS DNA, excluding stock compensation acquisition related costs and officer transition expenses was 8.5% of revenue in the first quarter compared to 9.1% in the year.
Period.
As of March 31st we had total liquidity of $153 million, including $26 million, a cash and cash equivalents and $126 million availability under while our total debt, including current maturities with $790 million and we reported $75 million in operating lease liabilities.
Our net debt to LTM adjusted EBITDA was 4.2 times.
You will recall the corn acquisition was financed with borrowings from our revolver in on April 17th we announced the completion of a delayed draw term loan, which further increased our liquidity position.
The term loan has a five year tenor attractive interest rate options. He can tease no financial maintenance covenants on a pro forma basis after giving effect to the additional 180 million public quoted the from the term loan our liquidity would be $333 million at again at the quarter well in excess of where we were at year end.
Furthermore, we continue to have no near term maturities associated with our senior notes term loan for ABL facility.
Moving onto cash flow during the first quarter, we generated $44 million a cash provided by operating activities as compared to $22 million in the prior year quarter.
Every year, we generated $37 million adjusted free cash flow compared to $15 million last year.
Our cash flow in the quarter benefited from our working capital management activities and cost containment measures.
Lee variable ready mix cost structure, and our ability to manage our capital expenditures puts us in a position to clearly navigate the economic uncertainty with liquidity on hand during the first quarter, we spent $7 million on capital expenditures, primarily related to our plants and equipment to support the continued demand in our markets compared to sell.
$7 million for the same period last year.
While we made commitments for certain capital equipment late last year in earlier in the first quarter, which we will take delivery of in the second and third quarters, we're cutting back our capital expenditures in light of the concerns surrounding the economic environment.
While there is uncertainty regarding the demand environment as we look to the coming quarters, we feel confident that with our variable ready mix cost structure cost containment actions and ample liquidity, we are well position to whether these uncertain economic times.
I'll now turn the call back over to Ron.
Thanks, John.
It has been a remarkable couple of months through the middle of March we were experiencing a strong start to the year.
Despite our mixed weather patterns in our regions mild weather in the northeast drier weather in California, offset by record setting precipitation across our Texas footprint and yet we were trending above prior year volumes.
Our ability to deliver these types of results. Despite adverse weather is a real testament to our team's ability to manage and perform.
Turning to our regional performance.
The East region.
Which is New York, New Jersey, Philadelphia, and Washington, DC represented 36% of our total revenue during the quarter.
Productivity was enhanced by mild weather conditions with increases in concrete and aggregate volumes across all markets until the middle of March.
The central region, which consist of aggregates and ready mix operations.
Of Dallas Fort Worth West, Texas, custom Crete, and the U.S. Virgin Islands represented 34% of our total revenue during the quarter with very good demand.
The West region, which consist of Polaris materials, which supplies aggregates to the west coast and Hawaii, coupled with our concrete operations in the Bay area, specifically San Francisco.
Oakland and San Jose.
The West region represented 30% of our total revenue during the quarter with volume and pricing improvements over last year until the middle of March.
During the last two weeks of March we experience a slowdown in construction activity, notably in the Houston West regions with the local government interpretations of essential services within the construction markets.
San Francisco was the first place to announce shelter in place orders on March 18th.
Followed by the entire state of California, as well as New York on March 20 years.
Daily we adjusted our operations to server customers and their projects that were deemed essential in a very dynamic environment.
Meanwhile, Texas continued solid performance it was mainly impacted by rain.
Now I'd like to turn my comments to several significant and positive events that have recently occurred.
On February 24th we closed on the acquisition of core materials sand and gravel operational long island, which enhanced our vertically integrated position in the greater New York market.
While our production volumes have understandably decreased due to the slowdown in New York City.
We're pleased with the business.
And it shows the promise that we expected.
Our teams are extremely efficient and integrating acquisitions and the slowdown allows us the opportunity to expedite those activities.
Enhancing the company's growth potential corn possesses significant premium sand reserves that we will provide us with self sufficiency in meeting our sand supply needs.
Sure our concrete operations in New York City, as well as providing external cells to third party customers.
Since the acquisition closed during the first quarter, we recognized 1.7 million EBITDA from corn.
During my first few weeks as CEO I can report to you that all of us concrete.
From the board of directors to senior management to the dedicated employees in the regions are all working diligently and efficiently under Holly stressful conditions to manage the business implement painful but necessary cost cutting.
All while actively reengineering the business so that it can respond to changes in each of our operating environment.
As you can see from the Coarm acquisition and the new credit facility, we're doing positive things for the long term growth the company.
With the onset of the pandemic, we experienced virtually daily shifts in the guidelines for laws governing commercial activity and our personal and professional lives.
Socially sort of general contractors reported that Dallas Fort worth added more than 10000 building jobs the biggest gain in the country during them at the March.
As a reminder, us concrete has evolved significantly since the great recession.
Please refer to subtle 11 and our presentation.
Are <unk> production has increased from 2.6 million tons in 2000 intend to new to 11.4 million tons of production today.
Holidays growth in our aggregates business are external sales have increased from 49 per cent of total production in 2016% to 66% of total legere production in 2019.
Our internal consumption of finding of course aggregates has increased almost 40% during the same time period, allowing us to be more efficient with our cost in operating performance.
Example, where the acquisition of course, our internal sand usage in New York market has increased from 26% to 74% pre and post acquisition.
We are actively aligning our operations on our costs structure in all markets with her activity levels.
We are also using this time to carefully evaluate all of the process doesn't work loads of our business.
The company that has grown as much as I was over a decade, including through multiple acquisitions, we'll be able to identify reengineering opportunities.
We are evolving our business model by.
Standardizing all back office processes across the company.
Automating with our proprietary Where's my concrete software, we anticipate significant savings of our transactional cost would the adoption of best practices.
Acknowledged you investments, we're continuing our technology investments to to make better decisions in the field for example in dispatching and fuel efficiency.
Earlier this year, we successfully implemented Where's my concrete and the D.F.W. market and planned to roll it out in West, Texas during the second quarter in California later this year.
We will continue to innovate and create new functionality with WMC to drive efficiencies in our operations.
We have been very focused on right sizing our costs structure to align with our operating volumes.
As a reminder to cost of materials and the direct variable cost of delivery and labor, representing nearly 86% of each cubic yard of concrete in 2019.
Our cost cutting in cash preservation measures include the following.
Reduction of capital expenditures for the balance of the year.
Reduction and guaranteed hours for our nonunion drivers.
Labor productivity, we have cut hourly payroll across the entire business.
Discretionary spending.
We have a disciplined approach to spending half suspended substantially all discretionary spending.
Operational utilization.
Idling certain plans to maximize utilization rates.
<unk> expenses.
We estimate that the adjusted S.U. naked range between six and nine per cent of revenues, depending on the strength of the recovery and correlated revenue performance.
Lower fuel costs.
We are evaluating locking in lower diesel fuel and refining Oh, we're creating capital management processes.
And I want to provide you with commentary about what we're covering could look like and how we are modeling our financial performance.
We're planning our business based on a variety of scenarios.
Overall, we were seeing downward pressures on concrete and I heard volumes on April when compared to last year's piece of business.
These pressures again are highly correlated to the markets that have had the greatest impact of covert cases.
Bored looking orders and a favorable bidding environment continue to support our business with anticipation of restrictions being lifted across our markets.
Current demand outlook remains resilient as all of our regions are recording a very active level of new projects on which we are bidding.
Since the initial onset of local regulations, we continue to see weekly improvements in volumes and productivity in every market.
When local governments loosing their restrictions and our markets respond we are positioned to reengage with our jobs and projects.
It is natural to expect that each of our markets will further open at different rates with different rules.
For example, in Texas, where phase one plans to reopen were announced last week are west, Texas markets will see fewer restrictions than the D.F.W. market based on the number of confirmed cases.
While there is growing speculation about a federally sponsored infrastructure bill.
We are well positioned in each of our markets to capitalize on highway related projects. For example, we're currently participating in the Bay area's US highway one on one project.
Recent volume in our aggregates business has been better and is benefiting from a diverse customer base.
Historically PJ data supports that markets in which we operate rebound out of a recession more quickly than the balance of the country.
For modeling purposes regarding cells price for concrete and aggregates.
Producer price index for concrete increased 3.5% from 2012 to 2000 in 19, while the P.P.I. for aggregates increased 3.6%.
We're observing material price increases in the market and we are passing along the increases to maintain our margin when bidding on new projects.
While we were focused on proactive measures to cut expenses and manage cash flow. We're also position to accelerate growth in dry profit when conditions stabilize.
We will continue to pursue value, creating opportunities, particularly with our aggregates position.
We did with korman colors before that.
Strengthen our defensible vertically integrated positions in major metropolitan markets.
We will maximize the technology advantage of Where's my concrete to improve our efficiency as well as capture additional revenue opportunities with the goal of becoming the technology leader in our field.
We will focus on our customers, where we can continue to differentiate us concrete through value added solutions and service.
We will train develop and engage are dedicated team of talented employees to compete and win in this dynamic environment.
We are committed to our strategy, where well position for the market recovery with high quality aggregates and ready mix assets and locations and attractive markets across the United States.
We have a financial profile and available liquidity to whether this storm and we will emerge stronger on the other side.
In closing we wish you your colleagues and everyone's families. The very best during these trying times.
We are deeply committed to maximizing shareholder value and supporting our communities in the coming days and weeks ahead.
We will now open the call to Q. in a.
Ladies and gentlemen, if you have a question or comment at this time police cross he starred than the one key on your touch tone telephone. If your question. It's been answered you wish to move yourself from the queue. Please press the pound key first question comes from Catherine constant constant research group.
Hi, I'm, taking my question today.
I'd like to focus on cost structure and gave much appreciate details that you gave him Dave Pate commentary I'm, just saying that you had a highly <unk> structure.
When did a really categorize them terms of the biggest <unk> pool to just for the near term impact to cope it 19, and the management near term relieve the next 12 to 18, <unk>, but what did the opportunity to more find two more structural cost on a go for that base.
In this environment.
<unk>.
Thanks gather.
Great question and you know as we look at and we've talked about the verbal side of our business.
Mostly labor and fuel in enroll materials are a big piece of when when the market.
Volumes decrease those things are really verbal or focus right. Now is we talked about on standardizing processes central centralization of a lot of roles in the back office, we were very transactional driven business and so as transactions of increased.
Over the past several years.
That's equated to to headcount and and so for US, it's really focused on right sizing that and making that where it's very sustainable as the market's recover and so that's our goal is to be able to sustain those reductions in.
Which should directly correlated to to better margins as we come out.
<unk> helpful and then on the color by and Mark M.M. marketing mean was not rise empty structure could you give a little bit more color on current demand trends and if he could focus on the if we brought regions and how we should frame.
Holidays, three and markets are performing currently.
Thank you.
Yeah, I would one at a high level you know what we've talked about in the past us forward looking our our commercial.
Use represents about 64% of our forward looking.
Dental for US is about 13.
Infrastructures around 17, no within commercial we we kind of group everything in the commercials kind of a catch all.
And as you look our commercial business you know we have education, we have health we are public.
Public space as far as libraries schools, those things warehouses data centres. So there's a lot of things within that group that we're focused on is saying you know what's going to be the most impacted what's going to be the least impacted.
As you get into the individual markets.
You know I think that's where our crystal ball is probably is fuzzy as anyone and I don't think we want to.
Yeah, they're trying to predict what New York in San Francisco, we're going to do we're seeing a lot of bidding activity.
And we're encouraged by the amount of bidding activity.
But we're being very patient around.
What it looks like as they open these markets backup.
So so I think we're in a good position as far as the.
The end use in the markets that we can and then we can you know as we've talked before in the Boston, We continue to be focused on if there's an infrastructure bill or when there's an infrastructure bill.
We're very.
Agile them when we can pivot to that.
Extremely easy.
And just a clarification on the residential and market. You know are are rare occasion that that construction has really come to hop, but we're starting to see a few clean sheets.
Particularly in the state of Texas, what are you seeing right now in terms that that more specifically to read the ad market.
Yeah, so the Rosie side really in.
West, Texas in Dallas Fort worth we've seen similar.
Communications from our customers, saying.
That things that were under construction, we are going to be completed in and then new starch, we're going to be pause.
But there was such.
Backload or demand of of things that were already under construction in our thing you know the to to be able to get a sense of things that were already under construction.
It's really carried us through this time frame of the market's now starting to reopen so we may see a gap in there.
But there's a lotta demand I mean, it's not like we're at the housing levels in the in the prior to to the to the last recession. So we still have a lot of runway.
And I would anticipate that.
You know, Texas is going to be one a little more resilient and some other markets.
Okay. The final point just a another clarification, then I'd Reds and market what type of projects that you've seen bidding on and it has that pipe changed.
I I wouldn't say the type is changed because we've been really.
Highly busy on business no I'm getting a lot of data warehouse of fly work, we've we've been doing that and it's continued.
I I would I would tell you in the we've talked about it in the transition in New York to the boroughs and the the mid rise to low rise that had already started in those are things that we continue to see.
And then in the on the West Coast side still a lot of technology, driven investments and those projects are the ones that we're continuing to see so we haven't seen any big change in what are bidding activity looks like today and again I think that's where we're taking this approach to say we're going to.
We're going to be there to supply what our customers needs are.
And will be available to to swing with the market of what demands.
Great. Thank you very much thanks.
Our next question comes from Larry Solar with C.J.F. Securities.
Hi, Good morning, it's Pete Lucas for Larry you guys covered a lot of it and thank you for that just what question on a quorum materials, which you mentioned into prepared remarks, you still feel EBIT Doc enterprise and the first 12 months decided just to satisfy internal aggregate demand as you see a slow down an external demand there.
Thanks, Peter Yeah. Good question, Yes, I think we're confident in what we see requirement in like we said in a prepared comments that quorum is says performed as we had expected. It you know, it's all going to depend on on on what the level of what is the baseline of New York what is it fall off to we have a lot of none really good.
Internal business for we have a lot of good extra accounts there too so.
So we do have the up the opportunity to to not only consume more internally, but we will continue to focus on our external sold as well.
But we'll just have to wait and see kind of what the market demand does.
Oh, great. Thanks, just last one for me on a macro level you talked about you know obviously delays here with everything that's going on and but beating remaining okay.
But have you seen any cancel project projects or worries about funding for future projects is that become a concern is a blight.
We haven't seen as far as just directly canceled I mean, I think there's a lot of pause and I think there's a lot of conversations about.
Deferred delayed those kind of words are being used as far as cancelled goes we have not heard of many things that have been cancelled, but I still think that people are trying to.
Just get their arms around what the impact has been to their local side with the embarrassment to their their their own you know vision and we're kind of on the tell him to that.
Very helpful. Thank you.
Thank you.
The next question comes from Vancouver Me with David Davidson.
A good morning.
The mornings I.
So first off kind of on my cat bags, but his management going to provide any outlooks for cap x. into how she'd be thinking about maintenance first growth or will there be any cross been there.
Yeah. So we're not specifically going to provide any cats actually you know as I said, they're prepared remarks. We did you know have order that we place late last year early in the first quarter that we're going to be taken delivery on in the second and third color. It's always hard to distinguish maintenance versus growth cap Max what we're also cognizant of as well is there are.
Projects in our cat backs portfolio that had relatively short payback periods.
Something like a black bear where we have some <unk>. It is odyssey incrementally beneficial to move forward with that you know at moderate amounts and see how the recovery take shape. So I'll have more guidance will be able to get more guidance as the month play out what we can tell you who are very cognizant of where.
We are we has certainly sufficiently liquidity from that perspective, and we want to capitalize on those opportunities I continue to capitalize on those opportunities that will provide a very short payback you know so that's sort of the way that we're thinking about it all going to depend on you know how quickly or slowly the the economy turns and we should know that.
You know within another 36 months I would assume.
Of course, and then maybe keep provide any color on like the ready next backlogs today first last the last year and are you seeing any pricing degradation that competitive responses in areas with greater disruption I guess the project work potentially when you're saying pause or delayed in some cases, how is that looking in new York or California.
How is that beating environment kind of died.
Beating environment dynamic change post and a quarter.
Yeah, <unk> I would I would tell you again, when we look at our forward looking and and and how we look at those opportunities.
Those numbers are pretty similar to last year as we currently said as far as pricing goes we're we're not seeing.
It's just the dynamic of.
Of the how this is so much different than than what happened in the great recess soon where it was more of a slower.
Trend down and people were chasing the market down and you know this just happened so quick that did pricing has really not been.
Something that people been focused on they've been more focused on you know the safety of our employees. The safety of the work sides. You know things that were deemed to central <unk> go things that we're not we're put on hold it really hasn't been something that the you know this was a market driven thing that the you know did some of the.
The old factors that you would have thought about in a normal recession, just have not been and what's happened currently so I just think it's so much different that that's why it's probably a lot more difficult to model as well. So that's kind of what we're seeing today.
Thank you.
Okay.
My next question comes from standing Eliot, what's the whole.
Hey, more guys think you've for taking the question quick question cares talk about the synergies and the costs savings you get you know as your progressively rolling out Where's My concrete you know at some of the other markets in Dallas Fort Worth and then kind of your.
Try to help us frame out what the savings could end up being out in California, and West Texas.
[noise], Yeah stay only I mean, it's.
Obviously, it's a lot tied to to the demand of the business as well so as we as we look at the opportunities that W.M.C. gives us it's it's.
Throughout the whole process of from.
From cradle to grave booking new orders more efficient labor scheduling more better usage of our trucks and it's really an opportunity for us to work a lot closer with our customers because in our business.
Our customers ability to order to place to stay within the guidelines of of their production schedules is critically important on the way we look at our scheduling of that Labour. So as you look at the whole picture. It's just truly an analytical tool that makes a smarter into the.
Visions, we make and so when we think about the efficiency is that we measured we we measured in what we call yards per man hour and so when we're looking at the total amount of labor It takes us to place yards of concrete in the markets. That's what we're trying to drive is is better efficiencies in our labor cost.
Obviously with some of the market than what we've seen through this pandemic is there's been a lot less traffic there's been a lot more predictability in times that it takes us to get from from plant the jobs and so that's been also a tail wind.
Fuel efficiency has been a big or fuel cost has been a big tell when we get fuel efficiency as well because of the because of the markets mullet. The last amount of traffic. So so ultimately I would tell you. That's that's a long answer to say, it's it's really going to depend on how these markets look coming out of this but it just gives us way more.
More insight and way more educated planning around.
Labor costs labor efficiencies customer profitability.
Being able to make better decisions with each down to the customer level.
And that's really what in the end drives our businesses is our ability to predict and to meet the needs of our customers in a very efficient way.
Great. Thank you and I appreciate commentary on kind of the ready mix pricing P.P. eyes.
We think of.
<unk> <unk>, a regional mix impact as for planning out the year when you're talking about you are the the west and east coast markets being maybe a little bit.
Flow where to start relative to the Texas markets.
I would say on the regional mix. Yeah, you could you could you should you should think about that I would I would tell you again, it's it's the regional mixed through us would would more drive.
Top layer on E.S.P.
You know from a margin perspective, our margins in Texas or or as good are very similar to those other market. So it's not it should not affect the margin side the margin side will be more to us. The the variability saw the things we're taking out the cost we're trying to take out in so that's where the focus for US is is really right size.
The things we talked about around centralization. So you will see on the regional mix at the top line. Some influence on the S.P. I would tell you you know from from our side, we're going to be very.
Very supportive of the of material price increases, but at the same time I will not be given up margins.
Not something that we can do.
So again, the the correlation between ready mix pricing Agri uprising in some in pricing has been proven that all of it moves but I I would just tell you for for your purposes, we will not be given up any margin as far as.
Material price increases go.
Perfectly channel and then last irony you guys mentioned the release got to capitalize opportunities.
Yeah, I'm, assuming there's a lot going on at terminally ill I'm, assuming there's some some you plan to to to take market share outperforming your peers really could help kind of frame out a little more context around I kind of what you all meant by that.
Yeah, I don't I don't know that we said anything about taking market share I I think for what we what we talked about on our comments are more around the things we can do to to take out really converting some of our things that have been historically classified as fixed and making those more variable. So no. One was we talked about the.
Growth from this company, we've grown tremendously over over the last five years.
Those opportunities to centralize streamline reprocess, just things that we can do internally to to drive cost out of the company and those are the things. We're focused on you know from up from a marker perspective, we're going to be very very.
[noise] disciplined around what we're doing in the market.
This is not a time to go out and try to do anything that would be disruptive in markets. So we're going to take care of our customers. We're going to continue to analyze we're going to take the work that is best suited for what what we're good at so we're going to be very disciplined and we're going to be very smart about the.
Yeah.
Color <unk>.
Our strategy, what we've been talking about for the past you know five years or more has been building defensible market positions in the markets, where we aren't that's really what distinguishes us from our competitors out there's where do we really the only ones that are concentrated in specific Marcus <unk> can defend the markets that were in with our position is our number one number two position.
In those markets. So as we're in those markets you know it very concentrated positions in those market, we feel that we're able to defend our market share and alike versus other competitive that maybe out there who may be more subset susceptible to the fringe players.
Great. Thank you very much.
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Our next question comes from Julio <unk>.
Hey, you don't want to help you fulfill doing well.
<unk>.
Did you discuss those utilization rates at all I know you mentioned idling Sir plants.
But maybe can't touch on the geography, it maybe doing that and and maybe how much more flexibility you have their slight or you know idle additional plastic drop off maybe get horse.
Yeah. So you know when you think about our.
Worked in a in central groups and when we have multiple plants and never read in multiple plan serving.
Those regions, so our ability to again I mean, when you think about.
Especially new York in in the Northern California markets I mean, it's one of the one of the biggest headwinds we've always had in those markets has just been the growth of of congestion traffic.
Everything there and so you know when we think about what the shutting down of those markets did for a lot of the other businesses in construction continued it. It just gave us the natural ability to serve more of the market from less operating plants and so was.
It's a very easy thing for us to do as far as these plants are you know they'll have a a ton amendment Tory sitting they don't have a ton of things going so our ability to open and close and move plants around to drive that.
Productivity is very easy easy from a standpoint of actually.
Acting it really quick.
You know from a modeling standpoint, it's it's it's more for us to be able to manage that <unk> and get the efficiencies out of it.
It's not a ton of we don't we went out of a ton ahead counted those those plants and so it's it's a very easy thing for us to do to flex up and down like that and we will continue to do that literally on a daily weekly monthly basis. It's it's just something we've we've always naturally done that it has been more.
Focused on during this during this time frame.
Understood and.
Right again, now you're talking about not necessary changes at the industry, It's amazing customers X. competitors.
This is disruption actually accelerate those changes and how does the ready mix industry.
Gotta change structurally as a result on the other side.
Yeah. It's a great question amount I think this this this disruption does this pandemic this the the <unk> the.
It gives them the industry. It gives us a great opportunity to make a lot of changes that we're probably going to be slower to make work on it were needed but.
But we were a lot of of people stuck in old ways and I think what this did was give us a chance to move extremely fast and making changes longer term you know I think we're going to take this opportunity to to look at some of our lung pricing models and convert concrete to more of a variability.
Side, I mean, a lot of the variability on on things, we can predict with Where's my concrete today gives us a lot more opportunity to do that then we could in the past and again I've talked to you before about you know, it's one thing to be able to tell people. This is what I want to do it's a whole another thing to be able to actually do it and.
Now we can actually do it and so I think this is an opportunity for us as you as concrete.
Heard a lot of the things we've talked about in the past a lot of things we want to accomplish it's just you know 110 miles an hour now, let's just go let's do it less implemented let's get it done and then yeah and I think this just gives us opportunity to do that.
Got it maybe just one more for me here is on the working capital side are you.
Actually you know getting better cars to customers are they asking for that day and you just touch on anything you're actually doing on your side of it a minute.
Yeah, So [noise].
If you really look at the breakdown of our D.S.L. as well, what you're referring to quarter over a quarter idea. So actually improve we improve about two and a half days that's reflected in the cash most data too because you could see the changing working capital provided a excess cash flow doing the corner as well. So we really haven't seen a slow down in in in terms or payments or anything.
So that nature are turns out consistent with where where that historically been we've not seen in need increase you know payment terms to anyone and will continue to focus on collecting R.A.R.. We feel we have very good position neglected we're not expecting any.
Increase in bad debts, we have lean rights you know associated with it. So we are in a very good position to get paid with everything that we deliver so if that's really not a concern from our our perspective.
Got it exterior questions that stay healthy.
Exactly.
My next question comes from Adam Dahlheimer with Thompson Davis.
Hey morning, guys nice quarter.
Yeah.
<unk> can you quantify just remodeling purposes, the volume declines in April.
The volume declines in April.
Oh I would tell you you know we're we're we're not giving guide ends and I think that kind of gets you into if I tell you April than your model that for me and then you must live for June and I would I would just tell you from our real time experience Red now that we've continued to see our daily weekly.
And we measure everything down to the day, we've continued to see improvement every week in April and so I think we saw with the onset of this a lot of very quick reactions a lot of things that happened.
We reacted the market's reacted local authorities reacted.
And that continued through the early part of March in mid March and then late March and I would tell you that I believe we've seen at least.
Some stabilization with as these Morgan start to reopen will continue to see that I don't I don't think April would be a fair indication do you to say if you just take April and ran it out that we're not competent to what that we've just continue to see improvement I get that Ronnie I was just thinking if you.
It just if we had the baseline of kind of where to start from name prevent.
I appreciate the question I know [laughter] unknown would be helpful. Okay. If I could do that how about it looks like set for both San Francisco and New York constructions in the phase one of the reopening, but I don't know for either one when phase one starts do you guys have a good sets for that.
Yeah. That's it that's a great question and we we try to get that clarification ourselves and I would tell you. It's it's it's it's kind of like the reopening was was similar to the the onset of the closing and.
<unk>. Each project was was look that in in each project kind of I've got into more of the developers the contractors the.
Whatever form that was of seeking out.
Exemptions and essential terminology there we're seeing the same thing is a reopens there's projects on one side that we say wow, that's that should be deemed essential and it's not and there's another one that wow that shouldn't be deemed essential.
And it is and so we're not really involved as far as how that works other than you know being in constant communication with our customers in our customers you know literally calling us at the first a week and deciding hey, we just got deemed essential we're going and we're ready to do that and there's all kinds of factor than there is some some or per cent.
Change of affordable housing summer percentage of government versus private money, they're just so many mixes out there why things are essential and whether or not.
Then it's it's it's even hard for us to understand that but but we're ready and a and like we said on our call. We've we're prepared for whatever those markets.
Offer us, we're we're going to take advantage of.
Okay, and then you know just kinda bigger picture I mean, it sounds like you guys are in the camp that.
Yeah. This was a health crisis, not an economic crisis and.
Caused a lot of short term pain, and dislocation, but getting still strong and.
You'll be fully back to work hopefully at some point later q. too.
And you know I really concerned about the kind of economy or the project funnel is that fair.
Yeah, I wouldn't I wouldn't say, we're not concerned I mean, I think that's a little.
Huh.
A little generous there I I would I would say, we're we're taking the approach again, we're modeling all kinds of different scenarios up down sideways anywhere you want to look at it.
I think this is an opportune time that again <unk> no one and I guess unless they're over 100 years old today's ever been through anything like this and so you know a lot of those play books that we had were more focused around normal type recessions that we're.
Predictable they were multi year going down on multi you're coming out.
So this was just so unpredictable.
That's why the companies are taken the same approach we are saying, we're not going to try to get ahead of it we're not going to try to predict something that we don't know, but we are prepared we're prepared for multiple scenarios up down and all kinds of different ways and we're going to control we can control.
And if it happens that it's a quick recovery will be a big beneficiary of that.
But we're not going to try to get out there and predict that.
Okay. Good thank you.
Thank you.
The next question comes from Paul Roger with fix thing.
I I could multi guys. Thanks to taking the question that I hope he while apology my line out she got cut off at the start so <unk> the pets, it's it but I've got a question audible materials input costs, if you listen to all the advocate such used as a saying, they're all going to Saddam beat single digit twice lies it actually.
Think about the semantic side I think most $8 per 10, all day at some other than that delight until she I.
I think he's the type of magnitude would have loved the channels cost inflation from those two sides that you expect audio called sending <unk>.
Yeah, Paul Thanks for the question in a an unwelcome I I would tell you again I mean, we're we're in support and and we do support raw material price increases because it does give us the ability to move uprising as well and again all all I would tell you in this time and the.
Way that we're going to being taking care of U.S. concrete would be we're not going to give up our material margins and so we'll be supportive.
It'll be pretty choppy it'll be different delays different I, just think from from our side. What we're seeing is different messages from different suppliers that are all trying to get their arms around you know what they anticipate and each markets different.
So I don't think it's like consistent model that you can say some men's can just go to go $8 across the board because markets are going to be so different.
It is a demand driven product and we we do realize that but we are going to be supportive.
Because we do feel like that adds value to to our products as well.
I'm, just not going to give up my margins. So that's.
That's if you're modeling it that's what you should model.
Okay, then I stopped <unk> I guess they step if I'd related question. If you have talked to think about the greets you know <unk> said.
Could that they in in pots as well from the end market mix I'm thinking in particular, because public I understand that like I could say ball set up so it didn't work.
<unk> I get a half a bit more flexibility on the price that safety. It do please it pivots a bit more to solve the infrastructure style I got I appreciate to that made it that's not must've for you, but could not have a negative <unk> told the price and mix as well.
You know historically on on the ready mix side public works has not been.
You know and it really gets down to the the type of public works and so when you talk about just.
Straight you know mainlane paving that are coming out of a centrum expand plan into a dump truck and you're you're.
You're basically filling up will be concrete.
Even though the margins may be really good the the pricing may look different.
When you're talking about you know a tunnel and you're shooting gun I, you're you're doing shot <unk>, there's a very very big price point on that really good marginal now when you're talking about bridged exits a whole different mix and so really you know for us when we get into infrastructure type work. It is project my project mixed by mix.
And our ability through through our through our Q. seaside in in the.
Product developments that we do working closely with those big <unk> you know, we we'd get a lot of opportunities there too.
To do things on a performance side that that should actually be a benefit to your pricing.
Okay. Just just finally <unk> take a for a cool are you able to say anything Malta intensive <unk> find the backlogs just said it we can think more about and saw a median sound tend to potential and I've gotten a <unk>.
Yeah no.
As we talked about earlier, our our forward looking orders are very similar owner you're over your basis as of today, we've not seen really any impact.
And what the for looking demand is now again I mean those are as good as the information is we have today and that's why we're not getting out there ahead of that but but statistically our our numbers are very similar to where they were last year.
That's great. Thanks, guys.
Thanks.
Mm.
Our next question comes from broke itself the Sun Trust.
Alright, Thanks to take my question.
Questions on April just kind of building.
When you said demand got better week, all week in April and there was some stabilization was that yeah. You know recovery you say, maybe the first quarter rate or is kind of.
Level.
[laughter], you're good fats are going to ask it a different way I like that.
I I get I mean, I think we would just continue to tell you that that that April trends continue doing proven obviously, that's very are highly correlated to the market that we saw the greatest impact in as those markets continued to loosen backup.
The markets that we didn't see the greatest in back in those those market stayed pretty pretty constant so as we see those markets open back up and I consider my comment is really the east and West Coast and had the greatest number of cases, the greatest number of shelter in place restrictions all those things as they loosened backup.
Is we're we're seeing the daily and weekly averages continued to to improve.
Yeah, Okay, and then there's a lot of puts and takes on the on the cost.
Your actions idol plans and and reduce labor costs in overhead.
Diesels down pretty significantly.
I mean is there when you stress. That's your you know your P. now scenario analysis is there like a no either.
Level that you highly coffee naval to descending.
<unk> come off from where they were talked a lot about you know maintaining your your your Marge how're, maybe market share and so I mean is there a level that you can maybe see with high confidence that you can you can sustain and and say you know recession scenario typical robbinsville recessional. So.
Yeah, you know I think but a typical mill.
Recession scenario is it's probably easier for us I don't think this is the problem is this is not a typical recession scenario and so I would tell you when we talked about.
The different scenarios, we've model of our business in and and and I'm not exaggerating we've modeled it from zero to 100, we model from everything going to nothing the first week to sit in and and I can remember back having the conversations with my teams in February that we didn't know we didn't know what was going to happen we didn't know how.
These local restrictions were being applied and so we began at that time running many many scenarios in many different models.
And and really just trying to be prepared and and I can remember you know back then we were preparing for the worst and hoping for the best which is what a lotta people were saying at that time I would tell you. We have been pleased with the things that we've done the things we can control and the things we're going to continue to to try to push through.
I mean, you know our business really well and flew as as as volume declines.
We're just going to have to pull a lot of lovers and we still have lovers that if if markets go back and retread, we've got more lovers will tool, but today I think we've we've done a lot of things and again with just the the nature of this it really gave us an opportunity to just do it really fast and and not wait.
And so I'm really proud of what we've been able to accomplish there.
Okay and then on on diesel you mentioned that you might take advantage of the Lord diesel what was the strategy or would you mean, but.
No.
So so we you know we consume roughly on on a normal year, you know tend to tend to 12 million gallons of diesel a year.
And so as we continue to watch and we're watching in in in in it and it's a very very nice tell when force.
You know where that bottom is and where we think if we wanted delay or in.
Some forward looking locking in of diesel we're we're analyzing that.
It's an opportunity for us it's budget certain I mean, you never.
You know you never want to look back on that but it's it's a big tell one for us today and we're we're going to take advantage of once we feel like.
We should we should institute that.
Yeah is there any way to quantify me the impact that some of the cost saving it should go in place on you know, reducing the Cassidy and.
Labor hours anything weekend gambled, though.
Well I think as you I mean as you as you look at what we've talked about with 86% Burbled me, what what but but then you would you know you would didn't model is is what percentage points above that 86 could you get to to make that variable and so.
You started looking at that and saying, Okay could you get to 90 per cent variable.
Those are the things that we're looking at internally is what things have week. Historically said were fixed that we could take out and then and then when you model you know the cuts were making in S.G.N.A. and again I mean, some of those immediate cuts that you're going to hear multiple companies talk about just just and travel and those things that just absolute.
We got.
You know restricted day, one I mean, those are immediate savings and so there's a lot of buckets there that that historically, we've said, we're untouchable that all the sudden became touchable. So I would just look at it as you know you know modeling that 86% moving up more in a in a variability side and us being able to control that you know on on the.
On the diesel side the fuel side.
For for for modeling purposes. It it's on average about.
No one to 1.1 gallons per yard of concrete. So you can really look at it and saying for for we're diesel moves and whatever pricing.
You know momentum we get there. It's it's it's it's almost a one for one on regarded hungry.
Alright fantastic <unk>. Thank you.
Alright.
Our next question comes from try grow up to Stevens.
Hey, good morning, gentlemen.
<unk>.
I'm, sorry, I I had some trouble getting on the call as well, but so in an effort to not be redundant because I'm not sure exactly what else been addressed running I want to ask you questions, specifically, maybe kind of generic but I think is important you know you you've been on the job here a C.E.O. for about a month or so now.
And very unique times to be handed the range for sure. So just curious what's the most important lesson you've learned through the first month on the job and then and then tied to the secondly had this situation changed the way you look at the bigger picture and how you expect to run the business longer.
<unk>.
Yeah tree.
It's a great question I guess, one be careful when you raise your hand.
I I would tell you from from my personal experience in in in one month and and in the in probably looking back on a lot of things that the bill prepared me for that.
Probably neither one of US saw this is.
It's probably the word that comes to my mind is thankful being thankful for.
You know personally my family in the support I get there.
My leadership team and you know you really see the true colors of leadership come out.
In this kind of crisis, and and I would tell you I've been.
Extremely pleased with the decisions My leadership team has brought me and not even being forced on them or they reacted we all reacted. It's a it's a very very good team here that did I I've said it in the past there's no one else I'd rather be.
In the good times, when there's really no one else I'd rather be in a bad times with so so I think from from a leadership perspective.
You know <unk>, probably tripling quadrupling the importance of communication communication within our team communication with our customers communication with.
All of our employees on on a daily basis has been critical and I think it just brings out the the touch points.
No one of the things that is really pleased me with through this whole process is the investment we made and technology and and I can tell you from.
Literally the very first.
Days of this going into effect, we had immediate plans that if our.
Drug dispatching facilities in all of our markets word shut down that we could remotely badge all of our company from People's houses.
In our ability to do that literally in about three days, we put those plans in place.
We never really had to enact him in most places we didn't do some remote glancing in some places, but just proving to us that all these investment all the things that we've done to to show ourselves of of how good we could be in what we needed to be and what we could take out of this company has again it just it just highlighted.
<unk>.
And then I would just say you know in in the end would be.
Thankful for the people of yours concrete.
The men and women out there in the field.
You know we've been deemed essential.
But that doesn't mean that you know people aren't scared that doesn't mean that people don't show up in fear. So we've we've put a lot of safety protocols in place, but they still show up and you know we're not.
We're not the medical workers, we don't want people to hearing for us, but at the end of the day, we have employees out there on the front line everyday that are executing their jobs and I'm, just really proud and thankful for them.
Great well. Thank you for all the inside that's all good stuff the best of luck as we make our way through all of this thank you.
Thanks trip.
Again, ladies and gentleman if you have a question or comment at this time police parse star than the one key on your touched on telephone.
Oh.
Yeah.
And I'm not showing any further questions at this time I turn the cop stuck over to run it through it.
Thank you. Thank you for your interest in U.S. concrete. Thank you for your support during this time and we look forward to talking to you again, then our second quarter call in August.
Ladies and gentlemen soft include today's presentation, you may now disconnect and have a wonderful day.