U.S. Concrete, Inc. (NASDAQ:USCR) Q2 2017 Earnings Conference Call - Final Transcript

Aug 08, 2017 • 10:00 am ET


U.S. Concrete, Inc. (NASDAQ:USCR) Q2 2017 Earnings Conference Call - Final Transcript


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Bill Sandbrook

us to have a significant competitive advantage in competing for high-volume, high-margin opportunities. The density of our plant networks allow us full low-cost market coverage to be positioned to service jobs better than competing alternative suppliers.

The sheer volume of raw materials that our regional plant networks consume, makes us a very valuable customer for our cement and aggregates suppliers for which we are rewarded. Additionally, our regional plant networks are large consumers of our own internal aggregate supply, which elevates our total company margin profile.

These fundamentals continue to drive success and our strategic operating leverage generated incremental adjusted EBITDA margins of 73% and 27% through the first half of 2017 for our aggregate products and ready-mixed concrete segments respectively.

In addition, while only 18% of our current revenues are directly generated through infrastructure project spending, we remain well positioned to take advantage of the robust multiyear construction infrastructure spending plans that have been put into place in all of our major markets to stay level.

While these initiatives as well as FAST Act flow-through funds, or some future-enhanced federal infrastructure spending would be a tailwind, we are not waiting for government-funded projects to improve our results. Despite the fifth wettest June on record, in the Dallas/Fort Worth area, we increased our year-over-year ready-mixed volumes by 20%. We estimate that the inclement weather in the Dallas/Fort Worth Metropolitan market in June alone resulted in a deferral sales volume of over 75,000 cubic yards in the second quarter of 2017.

However, I must emphasize that the effect of the weather simply means there are project backlog increases, as these jobs are not lost, but simply delayed to future quarters. Generally, as weather normalizes in each of our impacted markets, the existing large backlog will combine with the pent-up demand of work, push forward from the buildup of the first half of the year delays, and enable a very robust project pipeline over the second half of the year.

We began to see the positive rebound of this deferred volume in Northern California, in the second quarter of 2017, as weather normalized in the back half of the quarter and volume growth was strong. Our year-over-year organic growth rate and ready-mixed concrete volume for the second quarter of 2017 was approximately 8%.

If you include the estimated additional 75,000 cubic yards of ready-mixed concrete that was delayed by the inclement weather in DFW, we would have achieved a year-over-year organic growth rate for ready-mixed concrete volumes of approximately 11%. We believe that our platform will continue to deliver consistent results for the balance of the year, with high single-digit growth in ready-mixed concrete organic volumes for the full year of 2017, along with mid-single-digit growth in pricing.

We are optimistic that these organic growth trends could continue for the next several years. While there are no acquisitions to report this quarter, other than the previously disclosed April acquisition of a high-quality sand and gravel operation in New Jersey, with access to