May 08, 2018 • 10:00 am ET



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Howard Nye

of the Southeast and Mid-Atlantic, principally in Georgia and Maryland.

In these two states, aggregate shipments remain 20% to 30% below mid-cycle demand, not peak demand, but 20% to 30% below mid-cycle levels. As economic growth in the Eastern United States accelerates, we believe our enhanced geographic footprint positions us to meaningfully benefit from the anticipated increased aggregates demand from construction activity.

I'm grateful to our collective employees for their dedication and perseverance in reaching this point and their efforts to complete this acquisition, the second-largest in our company's history. We look forward to working together to seamlessly integrate the Bluegrass operations and realize synergies to deliver significant value to our shareholders, customers and employees. Thus far, integration activities have progressed superbly, both from an operational and customer-facing perspective. We expect this trend to continue.

Additionally, we appreciate the efforts of the U.S. Department of Justice as they reviewed the Bluegrass transaction. We view the agreement reached with the DOJ as a fair, responsible and appropriate conclusion to the Hart-Scott-Rodino process. More specifically, the agreement requires that we divest the leasehold interest and related assets of our Forsyth County quarry north of Atlanta, Georgia. We've already (technical difficulty) completed our transaction.

Additionally, we're required to divest Bluegrass's Beaver Creek quarry in Western Maryland. Our aim is to complete the sale in the second quarter. Such divestitures were anticipated and do not impact the strategic rationale or the value of the Bluegrass transaction, which is expected to be accretive to earnings per diluted share and cash flow within 12 months.

Now let's turn to the company's first quarter performance. In line with our first quarter business plan and normal seasonality, aggregate shipments decreased 8% overall, with all segments reporting declines from widespread precipitation and cold temperatures across our geographic footprint.

That said, according to the National Oceanic and Atmospheric Administration, or NOAA, the Dallas Forth Worth area, our single largest metropolitan market, eclipsed these more typical weather conditions and, in fact, experienced the wettest February on record with 10.5 inches of rainfall, or 8 inches above the normal level. This was punctuated by measurable snow accumulation that occurred in Houston and San Antonio as well as in North Carolina.

For example, our Mid-Atlantic Division, which historically has generated the company's highest margins, experienced 3 additional snow events compared with first quarter 2017, resulting in 7 district-wide shutdowns. In addition, multiple Noreasters deferred shipments from our Nova Scotia operations into New York.

Extreme temperature also impacts construction activity. In that regard, our Midwest division experienced 15% fewer days with temperatures above freezing, which contributed to a double-digit volume decline. This is relevant because typically, the ambient temperature needs to be 50 degrees Fahrenheit or higher for asphalt contractors to perform construction work on paving or patching projects.

With respect to ready-mix concrete, if temperatures are too low, water and concrete mix can freeze, meaning it's not available to properly hydrate the cement bonding agent and potentially affect the strength of the concrete.