Q1 2021 US Concrete Inc Earnings Call
Good day, and thank you for standing by and welcome to the U S concrete incorporated first quarter 2021 earnings conference call.
This time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question and during the session you will need to press star one on your telephone keypad. Please be advised that today's conference.
And if you require further assistance you May press Star Zero, and I would now like to hand, the conference over to your speaker for today, Ms. Sharon Ellis Vice President of Investor Relations Ma'am the floor is yours.
Thank you Kyle and welcome to U S concrete first quarter earnings call. We appreciate your interest and our company.
Joining me on the call today are Ronnie Pruitt, our president and Chief Executive Officer, and John Kim Our senior Vice President and Chief Financial Officer Ronny.
Ronnie and John will make some prepared remarks, after which we will open the call to questions.
As detailed on page two of our accompanying presentation. Today's call will include forward looking statements as defined by the US Private Securities Litigation Reform Act of 1995.
Such forward looking statements are subject to risks uncertainties and other factors, which could cause actual results to differ materially.
Except as legally required we undertake no obligation to update or conform such statements to actual results or to changes and our expectation.
For a list of these factors please refer to the legal disclaimers and risk factors contained in our filings with the SEC. Please.
Please note that you can find a reconciliation and other information regarding the non-GAAP financial measures that we will discuss on this call in the form 8-K, which was filed earlier today and.
Patient to facilitate today's discussion is available on the Investor Relations section of our website.
With that I will turn the call over to Ronnie.
Thank you Sharon and welcome everyone to our first quarter earnings Conference call.
We hope that you and your families continue to be healthy and safe.
And we'll open the call with brief comments regarding our first quarter performance, followed by John Coates, who will address our financial results in greater detail.
I will conclude the call with an update on our strategic growth initiatives and progress on our horizon 2025 goals as well as and outlook for 2021.
Even with the weather events as a headwind during the first quarter I am pleased with our progress towards the goal we discussed during our Investor day, and the tremendous efforts our teams have put forth to manage our business. We feel very good about our positioning for market recovery with improving demand and increasing construction activity across our operating regions.
Coupled with embedded value, we are creating and our platform to drive sustainable strong performance.
During the quarter when weather wasn't a factor we continue to see operational performance and margin improvements aligned with our expectations.
And as we move into the second quarter, we are observing and improved business environment across our regions and we continue to be focused on our operating margins.
As we reflect on the first quarter weather events across our operations our operating locations resulted in major disruptions.
And our West region, we had two major rain events, one last thing over a week.
And our central region Winter storm, Yuri Rob freezing and record breaking subzero temperatures in February that resulted in a disruption to power and rolling blackouts across Texas.
As a result of this 100 year weather event, we were forced to suspend all operations across the state for 11 consecutive days. Additionally, the east region experienced four waves and Nor'easters. These.
And these weather events impacted the construction industry and each company that operates in these regions during the quarter.
Despite the weather impacts and February March proved to be a strong month, and we saw an increase in activity across our operational footprint.
I am very proud of our employees and their efforts to manage delivery cost material margins and labor efficiencies.
We continue to focus on shareholder value creation with a disciplined focus on investing and our business enhancing our operational efficiencies and expanding our digital platform, whereas my concrete.
John I will turn the call over to you for additional comments on our financial performance.
Thanks, Ronny as Ronnie mentioned, even though we faced several challenges during the quarter, we remain optimistic about the outlook for the remainder of the year and thereafter, turning to slide five and our presentation. Our first quarter revenue of $286 million was off 14, 6% compared to the prior year quarter the revenue.
The decline was generally consistent with what we have experienced since the onset of the pandemic.
And was further impacted by the weather during the first quarter, our first quarter, adjusted EBITDA was $28 million compared to $34 million and the prior year quarter.
Our aggregates business continue to show improvements in margins and EBITDA. Despite the challenges presented during the quarter average revenue and EBITDA were up compared to the prior year with pricing being the primary contributor to these improvements.
Even though the declines and our ready mix volumes limited our ability to pull through aggregate volumes, which resulted in flat intersegment sales are external average revenue increased seven 1%.
However, ready mix revenue declined 17, 4% compared to the prior year quarter, driven by lower volumes on the coast as a result of weather related delays and lower overall activity, which was consistent with the declines we have seen since the start of the pandemic.
After adjusting for changes and geographic mix, our ready mixed ASP was up 1% when compared to the prior year quarter and our material margin was flat.
Our stock compensation expense did not include any costs associated with the current year awards similar to 2019 the costs for the current year awards will be determined after shareholder approval and the second quarter stock compensation expense will include expense that would otherwise have been included in the first quarter.
Our SG&A expense of $29 $3 million was $4 $4 million lower than the prior year quarter.
Our adjusted SG&A expense was $2 $8 million lower than the prior year quarter.
As a percentage of revenue our adjusted SG&A was higher and the prior year quarter, primarily due or due to lower net revenue.
For 2021, we expect our adjusted effective tax rate to be approximately 27% and our interest expense to be and the $39 million to $43 million range. However, with a June 1st step down in a call price for a six and three eights nose, and a continuing strength and the debt capital markets and opportune.
And that he may exist to further reduce interest expense by refinancing those notes, while extending the maturity of our ABL.
Moving onto our cash flow and balance sheet during the quarter, we generated $12 $5 million of cash provided by our operating activities as working capital requirements proved to be a headwind during the quarter ex.
Moving to capital costs related to our acquisition of the Orca royalty rights agreement, we generated $11 $6 million of adjusted free cash flow during the quarter.
We ended the quarter with leverage at three nine times.
Excluding the capital costs related to our acquisition of the Orca royalty rights agreement, we invested approximately $3 7 million and capital expenditures during the quarter compared to approximately $7 3 million for the same period last year.
For the full year, we continue to expect capital expenditures to be and the range of $40 million to $50 million.
Excluding acquisition related capital for growth investments similar to the ortho royalty rights agreement and the recently acquired Stockton terminal.
With a quarter.
And while the quarter turned out to be generally more challenging than we initially anticipated. We continue to remain upbeat with respect to the outlook for our business with that I'll turn the call over to Ronnie.
Thank you John.
With respect to our outlook, we've seen underlying fundamentals continued to improve since the beginning of the year, which is reflected in our pipeline of projects across all of our markets.
Despite the challenges of the first quarter, we are encouraged by the strength of our end markets. The momentum that we see and our business and the progress of our employees have made on cost containment and operational efficiencies.
With signs of recovery, we are focused on the execution of our strategic initiatives.
Debt within our control to position the company for and accelerated improvement and our financial performance.
Many of these initiatives were outlined during our Investor day present presentation last November as part of our Horizon 2025 strategic goals.
With an eye on horizon, 2025 objective of generating $300 million of adjusted EBITDA, we want to share and update on several projects.
Terminal facilities.
During our fourth quarter call, we mentioned that we're actively expanding our terminal and network and several of our markets. During April we announced that we closed the acquisition of a rail terminal and bulk storage facility for cement tissue us materials and Stockton, California.
This terminal complements our northern California, ready mix operations and further diversifies our regional assets.
Ortho royalty agreement during the first quarter, we acquired lease lands associated with our Orca quarry and British Columbia, which.
Which eliminated a royalty agreement.
Purchased at an accretive multiple this will further improve our EBITDA margins for our aggregate operations.
Black bear we.
We continue to make good progress with the environmental permitting process working closely with our first nations partners. This phase of the development is being shaped on a responsible and efficient basis through continuous engagement with the first nations as well as the governmental authorities.
Our main priority for this phase is to receive a permitting decision response that is aligned with our previously described strategic objectives for this project with an operational target by the end of 2023 and production contributing to sales in 2024.
Simultaneously, we are developing our mine plan and working on the engineering study for the production facilities and conveyor system to access these coarse aggregate reserves.
We will keep you updated on our progress for this important project.
Each of these investments as well as others that we are reviewing.
Have a lower EBITDA multiple than ours.
As we continue to be very disciplined and our approach to each of our strategic initiatives under consideration.
Horizon, 2025 will likely be compromised of a combination of improvements in both volumes and pricing with our organic platform continued operational improvements and expansions to our aggregate operations and will be further complemented by strategic opportunities.
Our current assessment of our operational and financial performance, coupled with our development opportunities gives us confidence that our horizon 2025 targets are achievable.
As we reflect on 2021, we remain confident and the business outlook as we see improved demand for our products with strong residential activity diversified commercial needs and resilient infrastructure projects, which would be enhanced by a national infrastructure Bill.
While we closely follow developments on the infrastructure front, we are well positioned to do our part on these public works projects given the diversity of our end markets.
Our team will continue to focus on our margins with our previously cited operational initiatives further complemented by a favorable pricing environment for both ready mix and aggregates.
And therefore, we are reaffirming our guidance of around 200 million and adjusted EBITDA for 2021 with a stronger back half of the year.
In closing we are very grateful to Bill Sam broke who will retire from the board with the 2021 annual meeting for his years of service to the company as our chairman and CEO Bill has been a committed and visionary leader and we appreciate all of US contributions, we wish them well and his future endeavors opera.
Later, I would now like to open the call for questions.
Thank you Sir as a reminder to ask a question you will need to press star one on your telephone keypad and.
And that is star one to ask a question.
Our first question comes from the line of Julio Romero from Sidoti and company. Your line is open.
Okay.
Hey, good morning, everyone.
Hey, Julio.
I guess my first question would just be on the ready mixed volume and the quarter.
And I know you cited COVID-19 weather, especially in the coastal region no debt.
The driver availability or any other factors, maybe affect ready mixed volumes and the quarter.
No we didn't see any impact from driver availability.
I think we've talked about through through the impacts of the pandemic that we actually had picked up.
The head count and our drivers and driver availability.
But I think it was what you said at the first I mean, we talked about the impact of weather and we've talked about the impact of COVID-19 and as we've seen those things start to a to.
To be more normalized as far as the weather goes and as well as the restrictions being lifted.
We're pleased with what we see volume starting to recover.
Got it.
And.
Your your volumes aren't ready mix were down 17%, but I think your margins were down only 50 basis points. So I.
And I don't know if you can rank order some of the variable cost actions you took on the ready mix side.
Yeah, Julio I think it's the things that we've talked about previously with the initiatives that we had around managing our labor and.
And the variability and our cost structure.
And so with the help of our technology, especially with WMC.
I think our decision, making us a lot better our planning is a lot better where we.
Working more closely with our customers to be more efficient and how we plan that labor.
And so I think it complements all the things that we put in place.
And this was a quarter that we obviously were stressed by inclement weather and other factors and and so those those initiatives got tested and I think we proved that we can continue to deliver good margins, even with stress on the on the demand side.
Okay, and if I could just sneak one more and here and I'll pass it on us.
And you quantified the benefit either on an EBIT dollar basis or on a margin basis.
Now that you don't have to pay that royalty on the lease land related to the Orca quarry.
It's a few million dollars is what we said the acquisitions that we're doing have been multiple accretive meaning that for the most part the multiples that we're acquiring on these projects are lower we said that the Oracle and rate was worth about $28 million and I'll. Let you guys do the math backwards or reverse engineer it but it's a few million dollars.
<unk> for that.
A few million dollars annually and.
Yes annually, Okay, all right got it thanks very much I appreciate it.
Our next question comes from the line of Kathryn Thompson from Thompson Research. Your line is open.
Hey, good morning, its actually Brian Biros on for Catherine. Thank you for taking my questions.
First of all and I guess just on the cadence of volumes from Q1, I understand you mentioned and I think 11 down days in February and from the Texas event.
And then a strong rebound and activity in March can you, maybe just frame and like the volume trends in February and then in March till kind of share.
And kind of run rate of how things are looking exiting March.
As far as volume trends within our regions.
We saw similar split between our regions with with our Central region accounting for about 40% of the volume and the quarter and the other two regions, our Houston West regions were.
Pretty similar to 30% and 30.
As we came out of <unk>.
March.
We would see what typically would happen with a weather driven event we.
We saw pent up demand.
And that demand pushed into March and so on.
Our March run rate was a pretty normal run rate for the state of Texas and our central region.
And what we're seeing and the coastal regions and on the eastern West Us.
Two fold, we had weather that was was created.
Pent up demand and then we also had continued restrictions from from COVID-19 as the markets have started to rebound and so I'd say, what we're seeing now and those markets is more in line with pre COVID-19 volumes with some pent up demand. So we're pleased with the way the recoveries looks and and all of our regions right now and so I think the.
What we experienced was was a very typical.
Typical reaction to two and extreme weather event and.
And we see those volumes continue to come back.
Got it and then follow up I guess on the cement shortages and Texas can you comment on.
How are you dealing and managing through that and maybe.
And how severe is it allocation and and.
And back to eliminate your volumes or impact on price.
And I'll frame up that conversation would be helpful.
Yes, we are experiencing cement.
Shortages in Texas and.
And really started previous to the to the weather and and the weather didn't help with the rolling blackouts and the power outages on the cement production side and did not help to some implants catch up any and so.
So those shortages continued through through the spring and I anticipate and continuing through the summer.
And the benefit that we have us we do buy from multiple suppliers. So so we have backup plans for us for many suppliers that debt, we utilize and the state of Texas, our suppliers all of them have worked closely with us on.
Making sure that we're able to to.
To get our allocations that they have they've been they've been fair to us, but it does it does limit everyone's ability to to try to grow their business when when allocations are happening.
And so the positive side of allocation as pricing improvement and so I would expect.
Significant pricing improvement and our Texas markets.
And we will make sure that the debt, we're disciplined and that approach.
But it's also from us from.
A shortage standpoint, it's definitely not a shortage of demand and so the demand side for Texas is really strong its very diversified its all the markets. It's not just residential and commercial is strong residential and infrastructures and.
So I think the critical thing is this is not a this is not a slowdown from from an economic side. This is a this is us.
Cement shortage and there can be positive benefits out of that but but I am very realistic around what the what volumes can and can grow back to and so we're going to manage through it and make sure. We're getting the most out of US every ton of submit we can get.
Thanks, I'll pass it along thank.
Thank you.
Our next question comes from the line of Trey Grooms from Stephens. Your line is open.
Yeah, Hey, Ryan and Jim.
Thanks, a lot.
Alright.
Okay can you hear me now.
And here you know and that's been alright.
It was breaking up a little bit there sorry about that.
Okay, so kind of a follow on to that last question.
And of course with the.
Takes us being down several days lost several days, there, but with the cement shortages and.
And driver constraint and these types of things and.
And how.
How quick can you regain those lost days I guess.
This year.
And I guess also kind of going into that as we look through the balance of the year.
I know the weather event was it is what it is and you guys just kind of.
Pretty well known.
And when you when you gave your guidance so it's reasonable that you're reiterating it today, but thinking and that guidance that you had given before there was an expectation for a little bit of volume improvement overall in ready mix and if I remember right something low single digits, maybe I think it was kicked around.
Number one is that is is that still a reasonable bogey given the constraints, we're seeing on the cement side on the supply side, there and maybe other constraints you might have with drivers and that sort of thing.
Yes, I think it is.
I guess the positive thing about.
On a weather event and the month of February as February was never really great month for us either way, it's a short months from shipping days and <unk>.
Typically has some weather impacts and Texas in February. So this was way more dramatic than a normal.
But I think thats why it gives us confidence and we continue to have some ability to make it up.
And the cement shortage can can can definitely limit some of the some of the growth opportunities there, but I still say Trey with based on where we're at with the allocations that we have.
And the submit sources from from multiple vendors that are that are working with us the.
And my expectations would be we could weaken in the year and Texas.
And that's still a positive versus last year and and.
And a much greater positive on the pricing side, and so anything that we might not get on the volume side I would say, we would more than make it up on the margin side.
Okay.
That's helpful and.
You mentioned improving demand.
Can you and I understand Texas, but can you give us a little more detail around <unk>.
And that what Youre seeing and some of these other markets like.
New York for example, I know they are opening up there.
I know it seemed like you guys want a project there.
Recently.
A decent sized project can you just give us a little more detail about.
The improving demand youre talking about outside of Texas.
Both west and east and what types of projects you're seeing.
Coming back.
Yes, that's a great question.
I would say when we talk about business environment.
And it really covers.
Everything from from our activity and conversations with our customers to actually putting jobs.
And our pipeline to two also our daily volume and so all those things we're seeing.
Positive trends too from from actual yards being placed.
Two jobs being awarded to activity that jobs are being talked about that we see coming and the and the very near future.
And so we're very.
Positive on both coast I would say from a type of job we have everything from a typical high rise is going in and we're working on Matt Poors met for us that we've been holding off on that we're implementing now too to a lot of mid rise and residential.
Operations, and as well as us infrastructure projects that were still seeing and.
And a lot of our end markets.
But what's encouraging the mitre us if I look at some of our daily volumes and the run rate in March and April and I've got to go back to like 2019 to compare that that's where we were running and those levels and so I do think as we see restrictions lifted and more activity happening.
And then we will see more normalized volumes and both of those markets that we said last year at the end of the year. We said those were the most impacted market by the COVID-19 restrictions.
Right Okay.
And.
I guess lastly.
Everybody is having trouble with labor and it seems like.
And you drive around there is.
There is a helpful and it's on and every window it seems like and so.
I know.
And for you guys labor is important.
Drivers are in high demand.
As we look through the year.
And even into next year, but do you see that really being a limiting factor or maybe could become even more of a headwind as we go through the year.
Alright.
Or are you making.
And making some changes and doing some things that you need to do in order to create a little bit more flexibility on that front.
And we definitely recognize challenges and I think every industry out there we will have challenges with labor us, especially in markets and open back up that maybe that labor is not even there anymore.
And we've made a lot of investments so our WMC technology.
We've invested and a module, which is the driver app that are that are drivers can have more visibility and the scheduling and and really trying to give more of a work life balance to do a lot of our.
Drivers out there that are working really hard every day.
Some of this stuff and Texas, Trey is the cement shortage could actually.
Be a benefit there from a standpoint of.
Getting pricing and more value for our product, but it also is not going to put as much.
Necessity on hiring more drivers if those volumes can't be.
Realized.
But I do think we were looking at several different things.
And it's not just compensated related and if it is compensation related.
I think the market is really prepared the cost of our products are going to have to go up.
But we're also looking at things that are non compensation related like the app.
More communication like more.
Training with our drivers are more referrals more retentions.
Lots of different things happening.
And I'm extremely pleased with our HR and our operations teams on and where.
Where we sit today and we're in a pretty good position.
Alright, Thanks, a lot and I'll leave it at that and pass it all and thanks and good luck.
Thank you Terry.
Our next question comes from the line of Paul Roger from Exane BNP Paribas. Your line is open.
Yeah, Hi, Bonnie Hi, John.
And the question.
So you've obviously talked quite a bit about the volume side wonderful and say a few words from pricing.
Clearly a place and normally for us to wait and sort of the April Todd can you quantify the magnitude of day sequential increase.
And maybe in both ready mix and aggregates and also being quite interested in this year that there's quite a few of your competitors are talking about the potential for a second sequential price increase.
And what in the year is that something you've seen what could be possible as well.
Yes, Paul good afternoon for you.
Yes, I do I think it's each individual market obviously has.
Their own demand and supply issues.
Issues, and so were the especially the Texas market I do see the potential for.
A second increase on the cement side I think aggregates will be and then more of a normal.
And motive.
That April time frame and and flowing through.
I don't anticipate us.
And second increase on aggregates, but cement being as short as it is and and I think justifiably. So because the cement guys are having to do more on the transportation side to try to meet the demand so theres more.
Ships being us theres more rail being us theres more truck transportation from a truck standpoint, and so those are all costly things to do to try to meet demands and so I think from from that side I do see the potential and the second increase during the year.
And I would tell you we're already preparing.
On the ready mix side for that same.
Second increase and as we've said before.
Cement going up is not a bad thing for us and so we take that and we're going to pass it along.
And we're even going to try to grow and mature margin, even further and so we're anticipating that.
I think when you look at a range I would say, it's going to be and somewhere in that five to $8 range.
On the cement and.
And in turn around and use that same range for yard of concrete.
And that would more than cover our needs and continuing to grow our margins as well and.
So I think I think what youre seeing us probably a pretty accurate picture of what what's happening and the market.
And would that apply to California, and the northeast as long or is it really specific to Texas I think it's just more specific to Texas and the northeast.
As far as the northwest.
And we did talk about the cement and the shortages that we experienced last year.
And even at that time, we said that it would take some time for imports to make up and.
And it has and it took that time, but today those imports have.
And now begun to supplement the way they should and we're not experiencing those shortages and the northern California market like we did last year.
Yeah, that's great and just maybe one other one another.
Another notable feature of this result sees and has been a bit more positive about non residential and in particular, the lights and nonresidential commercial construction.
You also see and some green shoots.
And he said and maybe at a strong and got a little bit stronger than you expected.
And I don't know about how stronger than what we expected I think of US what we see as the markets have opened back up and things have started to get back to a.
More of a normal predictability I think theres going to be commercial.
More as us.
And as well as some light infrastructure more cities counties, those kind of opportunities that are.
And that people are going to take advantage of the fact that these markets are opening back up and people are desiring to do things.
So I think it's we expected this.
I think the speed at which it happens is going to be really market by market and so.
So we are anticipating.
Those markets to continue to show a lot of different signs of recovery and <unk>.
Some of these markets.
The recovery is going to be and and big huge double digits because of how restricted they were.
And so I think what we're seeing today is what we were thinking is how recovery could look us is pretty much how it's shaping up.
And that's great. Thanks, a lot.
Thank you Paul.
Our next question comes from the line of the phone Us Chris from CJS Securities.
Your line is open.
Hey, Ronny and John Thanks for taking my questions.
Sure sure first I believe on the last call you said, whereas my concrete would be in place and all three regions.
That still on track and can you maybe give us some more detail on.
And the aided margin and 2021.
Absolutely yes. It is still on track we're in the.
And the middle of the implementation and our Northern California region and it is well within the timeframe that we set which we said it would be completed and our second quarter and it will be completed and our second quarter.
We've also started to focus on external business with WMC and we said once we completed our internal rollout we would start focusing on our sales.
<unk> and marketing strategy around.
External customers and significant.
I guess.
And we've signed up five.
External customers and the last six months and we're going to continue to do that we think theres a lot of benefits and the investment we've made and the technology and the reporting function and the.
And the pro quo are quoting function or sales.
Quoting function.
And the and the driver at the customer up and all the different modules and so we're going to continue to push forward with.
Our strategic position of growing our technology business.
That's great and just a follow up and I know, it's early stages and yourself communicating with those external clients.
But do you have any sense of what revenue contribution would be from external customers.
And I'm, saying.
I'm going to probably be providing more color on that and the next call.
I think it's a little early for us to give that number but I can tell you depending on the size of the customer.
And that we could we could see some significant growth there and and so we're gonna be trying to attract.
Some customers that we feel like it could be a huge benefit to their operating performance and.
As well as changing the way commercially that.
That people price concrete, so I will be giving more color, but it's a little early right now.
Perfect. Thank you so much thank you.
Our next question comes from the line of Adam Tal Hymer from Thompson Davis Your line is open.
Hey, guys I wanted to start on <unk>.
Margins if I could.
And then Rodney you guys actually had some pretty good margins during the pandemic I think they were kind of specific tailwind with less traffic on the road and that type of thing as you and you think about your margin expectations. This year as last year actually a tough comp or is it or.
Or is it an easy comp.
I wouldn't say, it's an easy comp because I do think we took a lot of cost out and we will.
Talked about it on our on our fourth quarter call.
Anticipating some of those costs would come back.
But I think we also anticipated the volume to come back with them that would allow us to continue to focus on those margins and sustain and grow even even better margins. So so I think we what we experienced and our first quarter was weak.
Had some cost come back and we didn't have the volume to sustain it but.
But that volume is coming back and we will be able to layer in the opportunities that we have.
We're going to see fuel cost, obviously is going to be.
A headwind, but we've got fuel surcharges in place we've talked about that many times in the past that fuels more of a pass through for us and it has a direct impact we have seen traffic come back we have seen other as the markets open back up.
But I was still extremely pleased with our delivery costs and the metrics that we were able to accomplish and so.
So I think it's a.
And as more of an impact on the lack of volume and what the impact of that was and.
And I think as we recover those volumes and the markets continue to go debt.
But I wouldn't say, it's the easy comp, but I'm anticipating that we can continue to deliver a better margins as we move forward.
Okay.
Perfect segue to my next question, which was volumes.
Yes.
And I'm just curious if.
And then we're coming up against now the first full on COVID-19 comp and are you confident and volume growth kind of from Q2 to Q4.
Year over year.
Year over year, Yes, yes, yes, I am confident and.
Okay and then.
I guess on.
And new York's probably the market is at least insight into just because theres not a lot of.
Comps for U like what are you seeing and the bidding environment. What are you seeing and the boroughs what are you seeing in Manhattan.
Your expectation for New York.
I think our expectation is probably what we started seeing EBIT before COVID-19 that we talked about.
The shift from the Manhattan.
And the boroughs, we talked about affordable housing and the boroughs, we talked about developments with <unk>.
Theres still lots of land and lots of.
And the developments being discussed and talked about and the boroughs.
We've even talked about data centers, we've talked about growth into debt Westchester area and so what we saw before the pandemic is what we're seeing coming out of the pandemic is that's where there is a lot of activity.
And the New Jersey side, we've talked about Jersey City, we talked about kind of the affordability on the Jersey side of the river. We continue to see that there is a very.
Solid pipeline of projects and New Jersey, a lot of them multi.
Multi <unk>.
Residential commercial and the same type of projects, we saw before COVID-19, we're seeing those kick off again.
<unk> remained very robust and D. C is a really good market with very good margins and so I.
I think as it shapes up Adam we're going to we're going to see the things that we thought we were going to see even prior to COVID-19.
And is still the same pattern that we're seeing us.
And the restrictions get lifted.
And then.
Just one for John and John You mentioned something about the.
Potential.
And to restructure some not restructure but.
Refinance refinance yeah can you give us some more details on that and I'm. Just curious you know when do you hit the point.
When you do slow down and some of the acquisitions and just try and get debt paid down a little bit.
That's been our focus last year, our leverage got up to over four and we brought it down to three six and I remember we did an acquisition we've talked about the orca land and royalty rights agreement here and their first quarter that was $30 million and we did stocked in.
Now these are all accretive to our multiple right.
And ties us and when I talk about a multiple it's our corporate multiple too so I'm not trying to bifurcate between ready mix aggregates anything to that nature and I'm looking at the corporate multiple.
And these things are very accretive from that perspective.
So our intention is still to pay it down but have a prudent a reasonable approach and those acquisitions and what what the significance is down and when I approach that June 1st call date.
And the math is pretty compelling that says if you take out the six and three ace and you replace it.
With that note or a term loan b you can.
I have a pretty meaningful pickup or I should say meaningful reduction and your interest expense.
And so I would anticipate that as long as the markets and debt capital markets continue to remain the way that they are.
I think theres, a real opportunity for us to do something there and you could see a benefit.
Real cash savings from lower interest expense and the second half of the year and.
And that's what we were just trying to point out.
Yeah.
Okay, great. Thank you guys.
Thanks Luke.
Our next question comes from the line and Stanley Elliott from Stifel. Your line is open.
Hey, everybody. Thank you guys for taking the question.
And we think about the business and <unk>.
Certainly residential seems to be the strongest.
And from what we read and the data is there any mix impact to your operations, whether it's a residential product versus a commercial product or even a public infrastructure product.
And you know.
Mixed from the type of mixes that go into those projects, yes, and mix from the cost of those mixes.
I think from a margin perspective, we tried to do a really good job and that's why we've invested so much.
And our CRM and our pro quo debt.
Do we have a lot of discipline around margin targets mature margin targets delivering margin targets customer margin targets.
And so certainly as you look at it there could be some swings in and our cost profile there could be some swings and.
And the things it takes to make those mixes and the difference between 15000, and <unk> mix and a 3500 <unk> mix.
Definitely different mixes and there but from a.
From a margin perspective, we're going to continue to really focus on delivering really strong margins on no matter what the.
The mixes and the concrete.
And in terms of kind of the impact of taxes.
I apologize if you all said it did you see and to protect the volume and they were and improved in March and it sounds like you have a preferred there in April were they positive during the first quarter or did you give that level of granularity.
And we were we were a little bit up and volume in Texas.
And that's what you'll see.
And then in terms of the Stockton.
Move I think it was very interesting.
Certainly shores up the ability for materials within the Bay area.
It also provides you a platform to maybe further expand a little bit inland I'm, just curious how youre thinking about that that new assets and the portfolio.
And it could I would say that's definitely not the.
The reason for it I mean.
And with stock and terminal does for US is it's extremely strategic logistical opportunity for us with that.
Hey, Tim and tissue because it can be flash can be slag it can be cement.
Giving us that kind of a storage with rail.
That can both go inbound and outbound.
And I think it's just very strategic for our existing because if you think about that market Stanley where when permanent they went down.
Now the majority of cement coming to the Bay area is now coming from.
Debt, Sacramento, Stockton, and all where the water is and so.
It's going to have to kind of have to take care of the existing stuff. We have before before we would look at expanding and going more inland towards.
For downstream operations.
Perfect guys. Thank you.
Thank you.
Our next question comes from the line of Keith.
And from tourists your line is open.
Thank you my question is on M&A, a couple of questions around that I guess, one with the pending.
Potential higher capital gains taxes does that play a role.
With some of the sellers to potentially speed them speed them up.
And I guess number two with really a nice light at the end of the channel on.
Non residential coming and all the stuff you discussed on infrastructure.
Does that increase your appetite if need be to pay a little bit more to get a deal for us.
Might be a nice couple of your cycle.
Yes, it's a good question and I think it's a little early for us to see what.
And with the talk of debt capital gains tax could do for especially a lot of these individual smaller.
Mom and pop companies.
I think we fall back on our horizon 'twenty four 'twenty five goals and talk about the discipline and we're gonna have and and the position that we're in and we just can't try to go out and pay really high multiples and layer them in and we need to realize.
Significant improvement and our multiples before we could put and by other multiples.
But with that being said I still say, we're going to be very strategic and we're going to look at things that are the potential for bolt on the potential for more pull through of our aggregates.
Or.
Downstream products from terminals like Stockton and we've talked about other potential terminals that we're working on and we've got those that strategically we're working on and other aggregate opportunities and our existing footprints and we're working on and so.
I'd say right now are the best strategic value for US is to continue to focus on the things that we can control and the things that are the most accretive at the at the multiple that we can invest and our own opportunities and and.
If those other opportunities external opportunities come that would be very very strategic to us and we're going to we're going to definitely take a look at those.
Okay. Thank you.
Thank you.
As a reminder, if you have questions.
Please press star one.
There seems to be no further questions. At this time I will now turn and I will now turn the call over back to Mr. Ronnie Pruitt.
<unk> and Chief Executive Officer for closing remarks. Thank.
Thank you Carl.
You very much for your time and interested in U S concrete and we look forward to updating you and August regarding our operational and financial performance and the progress we're making across our platform until then we hope you stay.
Safe and healthy.
This concludes today's conference. Thank you again for participating you may now disconnect.
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