Vulcan Materials Company (VMC) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the U.S. Concrete’s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would like to turn the call to John Kunz, Senior Vice President and Chief Financial Officer.

Thank you. Good morning, and welcome to U.S. Concrete’s second quarter 2020 earnings call. Joining me on the call today is Ronnie Pruitt, our President and Chief Executive Officer. We will make some prepared remarks, after which we will open the call to questions. As detailed on Page 2 of our accompanying presentation to facilitate today’s discussion, 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 to differ materially. Except as legally required, we undertake no obligation to update or conform such statements to actual results or 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 SEC. Please note that you can find the reconciliations 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. A presentation to facilitate today’s discussion is available on the investor relations section of our website. Before I turn the call over to Ronnie to offer his comments, I will review our financial performance and businesses results. Today, we are pleased to present our results for the second quarter. [The] volume disruptions that began in March continued into April, especially in the coastal markets we serve. These disruptions resulted in a significant reduction in revenue during the quarter. As the quarter progressed, we experienced a steady rebounded demand. We achieved substantially higher margins and adjusted EBITDA in the quarter versus the second quarter of 2019, primarily as a result of aggressive cost containment, more efficient utilization of our plant and equipment, and the increased use of our proprietary technology. The improvement in our plant and equipment utilization and overall efficiency was achieved through the use of data analytics, greater use of ‘where's my concrete technology’, and reductions in cycle times. Our performance since the inception of the pandemic, including the strength of our second quarter results is a direct result of our team's rapidly response to this challenging environment and a testament to the strength of our business model. Our focus on building defensible vertically integrated market positions with an increasing concentration in aggregates helped us produce the robust second quarter results and demonstrates the strength of our business model during difficult times and market conditions. Our significant investments in aggregates, most notably Polaris and Coram led to record setting performance of our aggregates business in the second quarter. During the quarter, the impact of the pandemic, the related shelter in place requirements, and other restrictions were most acutely felt in our coastal regions. Even though we were deemed an essential business, many of our customer’s projects were subject to disruptions and delays as the various shutdown orders were being rolled out and implemented. These restrictions impacted demand during the quarter resulting in revenue of $323 million, a 12% decrease, compared to the prior year second quarter. Despite the lower volume in revenue, our total adjusted EBITDA was $47.6 million, a 13.3% increase, compared to the $42.0 million in last year’s second quarter. Our adjusted EBITDA margin was 14.8% during the quarter versus 11.4% in the second quarter of 2019. This improvement was driven by both our aggregate and ready mixed operations. Our aggregates adjusted EBITDA margin was 39.6%, which was up 1,500 basis points versus the prior year, and our ready mixed adjusted EBITDA margin was 14%, which was an increase of 190 basis points, compared to the prior year. Our material margin was flat at 47.6% compared to the prior year quarter as we were able to recover modest material price increases. Our EBITDA adjustments for the quarter relate primarily to stock compensation, contingent consideration, realignment initiatives, and purchase accounting adjustments for Coram inventory. For 2020, we expect our adjusted effective tax rate to be approximately 27% and our interest expense to be in the $44 million to $47 million range. Moving on to cash flow and the balance sheet, during the second quarter we generated $40.1 million of cash provided by operating activities more than double the $18.7 million in the prior year quarter. We generated $33.3 million of adjusted free cash flow during the second quarter, compared to $14.1 million in the prior year quarter. Our operating performance and cost containment efforts during the quarter contributed to this improvement. Our focus and effort with respect to working capital added $7.7 million to these results during the quarter. Our solid cash flow allowed us to pay down debt and reduced our net debt by $22 million as of June 30, compared to the March 31 quarter-end, resulting in $741.4 million of net debt at the end of the quarter. The increase in our trailing 12 months EBITDA, along with lower net debt position reduced our leverage at 3.9 times for about a quarter of return, compared to the March 31 leverage ratio. As of June 30, we had total liquidity of $335 million, including $17.5 million of cash and cash equivalents, $137.3 million of availability under our revolver, plus $180 million of availability under our delayed draw term loan. During the second quarter of 2020, we invested approximately $6.9 million in capital expenditures, compared to approximately $10.9 million for the same period last year. For the full-year 2020, given the improving business environment and the opportunity to allocate capital to both high return and high growth projects, we’re planning for capital expenditures within a range of $30 million to $40 million, but we could reduce this amount if circumstances change. Similar to 2019, we are targeting free cash flow for the full-year to once again be above $100 million. While we had our share of challenges during the quarter, we are very pleased that our management team and employees rose to the challenge by controlling costs, and leveraging our technology, data analytics, and asset base, which led to our improved operating performance during the quarter. With that, I will turn the call over to Ronnie.

Thank you, John. Good morning, everyone. And thank you for joining the call. I know this continues to be a challenging time for many people. So first and foremost, I hope you're all staying healthy and safe. With the onset of COVID-19, we immediately committed ourselves to the following guidance of global healthcare leaders with a priority of taking care of our people and continuing to serve our customers. We continue to monitor government related mandates and commit to maintaining our focus on these important priorities. The second quarter of 2020 was a very dynamic environment due to the number of COVID cases across the country, and government imposed restrictions put in place that affected our business. We adjusted our operations on a daily basis to serve our customers and their projects that were deemed essential. We witnessed a direct correlation between the number of COVID cases in our markets, and the impact and timing of construction projects in those markets, most notably in New York and California. We witnessed a geographical shift in our revenue due to the operating restrictions in our markets with the West and East regions representing 30% of revenue during the quarter, and the central region comprising the balance of 40%. Turning to our performance, we generated $322.7 million of revenue during the second quarter of 2020, with revenue increasing from 29%, earned in April, 32% earned in May to 39% earned in June. Each month during the quarter, we saw sequential growth in construction activity across our markets as the definition of essential services evolved in each market and restrictions were modified. We are pleased to announce that U.S. concrete’s aggregate operations had record setting quarterly revenue of $55 million with almost 3.2 million tons sold. Our adjusted EBITDA for aggregates operations was $22 million during the second quarter, with an adjusted EBITDA margin net of freight of 51%. Revenue production and EBITDA for our Texas aggregate operations were up year-over-year and quarter-over-quarter and we saw a significant increase in volume led by our Greenfield at MW Ranch, and the modernization of our plant and Mobile Equipment at our Amarillo sand and gravel operation. Both of these strategic investments supported robust construction activity in their regions during the quarter. Our aggregates segment performance was further enhanced by the first full quarter of Coram Materials, our sand and gravel operation on Long Island that we acquired in February. We are very pleased with the integration of Coram, the pull-through of volume to support our operations and the external sales to third party customers in the New York area. In addition to our internal consumption in our New York ready mixed operation, Coram shipped 217,000 tons to external customers during the quarter. As previously discussed, Coram is on target to achieve a post synergized multiple of 7x. Our ready mixed concrete segment delivered nearly 2 million cubic yards of concrete during the quarter, generating over $272 million of revenue and $38 million of adjusted EBITDA. Our ready mixed concrete ASP was up in each of our markets during the quarter, but on a consolidated basis was down slightly due to geographical and product mix. The employees at U.S. Concrete were diligently and efficiently to manage the business and implemented cost cutting measures all while actively re-engineering the business so that we could respond to the changes in each of our operating environments, our proprietary technology platform WheresMyConcrete and its CRM provided valuable real time data and analytics to respond to the changes in our business. During the second quarter, we generated an adjusted EBITDA margin of 14.8% as compared to 11.4% in the second quarter of 2019. The key to delivering the improvement to our operating margins is two-fold. The variable nature of our cost structure for example, in the form of materials delivery labor and fuel, and the agility of our managers showed in each market by resizing and scaling their assets to mirror the market conditions. Our team continues to be focused on the following initiatives: labor management, improved processes, use of internally sourced aggregates, mixed optimization for our concrete, back office consolidation, higher asset utilization, management of plant cost, converting what were traditionally fixed expenses to the sum of variable, and delivery efficiencies with a focus on enhanced customer service and yards for driver hour, with our technology platform WheresMyConcrete. We also benefited from lower fuel cost and lower traffic volumes during the quarter. All of these measures are driving improvements to our cost structure and profitability. Our focus continues to be on operating margins and operating efficiencies. As restrictions were lifted during the quarter, our operating performance also improved as evidenced by our results, as June's performance was substantially better than April's. In the future, where people live, how they commute to work and what a traditional work environment will be, either remotely or in an office setting, are all still unknown. These trends will impact the residential, commercial, and infrastructure markets that we serve. We're fully prepared to pivot within our markets to address changing demand patterns as exhibited by our second quarter performance. While further volatility and restrictions are clearly possible, and the pandemic's economic impact is still difficult to quantify. I am certain that all companies are evaluating their business and the changing landscape to assess future demand. Based on what we know today, our view is that business and construction restrictions will be limited, which should result in healthy activity levels in our markets resulting in an adjusted EBITDA anchored in the 50s for the third quarter. Looking forward into 2021, a detailed MSA analysis of construct connects U.S. Construction spend for the markets we serve projects a 17.5% increase in put in place commercial construction spending over 2020. Please refer to Slide 8 in our supplemental presentation provided. As a market leader, we participate in all sectors of the industry and have expertise with materials and mix designs and have the relationships, the plant locations, and the assets to support any type of construction project. We continue to support the very large complex projects that we have consistently discussed. It is also important to recognize that we have thousands of customers with thousands of diverse projects across our operating platform. This portfolio diversity highlights the capabilities and our versatility to handle dynamic market conditions and a wide variety of commercial and infrastructure projects in large markets with underlying favorable conditions. We have the knowledge, ability, and agility to support the projects and in-markets for whatever drives aggregates and concrete demand, whether in residential, commercial, or infrastructure. With attractive and desirable locations, our markets represent over 20% of the U.S. population and are seeing increased population growth, with rates higher than the national average. Due to the proximity of infrastructure projects to our markets, U.S. Concrete has been and will be well-positioned to support these projects. We are even better positioned now to support infrastructure with our aggregates and distribution terminals located near many major markets. This confirms our strategic alignment of aggregates and concrete and attractive markets that are coordinated with our proprietary technology platforms, all of which will be a formidable foundation for any contemplated infrastructure bill. We continue to be laser focused on our strategy. We have diverse operating assets across major metropolitan regions in the United States and further diversified with our robust aggregates portfolio to provide vertical integration for our ready mixed assets, our focus is on maximizing our margins through cost management and operational efficiencies, and as exhibited by our second quarter financial results, we have a variable cost structure. Every employee U.S. Concrete is operating with a sense of purpose to deliver durable, long-term results for all of our stakeholders. We crossed an important operating milestone in U.S. Concrete’s evolution as a company with our second quarter results. We have successfully proven that we can maintain and even improve our operating margins during times of pressure. We have significantly grown the impact of our aggregates business, which represented 36% of total reported segment adjusted EBITDA generated during the quarter. We have improved our liquidity with the generation of free cash flow. We reduced our leverage to 3.9 times and we recognize stable and even improving pricing of our products during difficult market conditions over the quarter. We are a company focused on delivering aggregates, we are a company focused on delivering concrete, and we are a company focused on delivering results. If you noticed, I emphasize the word ‘we’. This is a team effort, and I want to thank all of our employees for their leadership and dedication. U.S. Concrete’s financial results are tangible evidence of their hard work and efforts. Operator, I would now like to open the call for questions.

Thank you. [Operator Instructions] Our first question is from Paul Roger - Exane BNP Paribas. Please go ahead.

Hi, good afternoon from London, guys. Congratulations on the results. And as always, thanks for taking my questions. And I'll just start off with two of them, please. Obviously, the big story today, I guess is about the excellent margin performance. Now, clearly, demands will be whatever it is in the second half, but when we think about those margins, do you think they're sustainable and that's a realistic level that you'll get again in the second half? And then my second question is on the ready mixed pricing, looks like they fell, I think let's say about 5% sequentially in the quarter. Now, you've mentioned mix. So, is it possible to tell us what that was on a mix adjusted basis? And how concerned should we be about that? Obviously, the industry typically pricing historically has been quite volatile.

Yeah. Thanks, Paul. Good afternoon on your side of the pond. So, I'll take the first question on margin. So, I'll give you a couple of data points to think about. And I really want to talk about sequential quarter-over-quarter, so if you look at our Q1 volumes, we were right at around 2 million yards. Our volumes in Q2 were very similar right at about 2 million yards. So, if I look at those comparable on the quarter-over-quarter, and then I’d take, what I'm going to talk about is our total plant cost, which is really our labor and our repair and maintenance at our ready mixed operating facilities, as well as our total delivery cost, and when I look at those in a total dollar amount, quarter-over-quarter, our total plant cost was down a little over $4 million. On a percentage basis, if I look at our labor cost at our plants, they were down about 16%. Our repair and maintenance was down an additional 16%. You know, on the on the delivery side, we were down about $11 million in total on a Q-over-Q sequentially. If I take that and I really look at fuel, we had a tailwind on fuel. Obviously, everyone has talked about the tailwind on fuel, but fuel only made up about $2 million of that. And so when I think about the other things that go into our delivery cost, our delivery labor was down about 14%, our delivery R&M cost was down 23%. So those are things that we control. Those are decisions we made. And, you know, I just, I want to emphasize that fuel has been a tailwind. Traffic congestion continues to be a tailwind, but we're also really driving with the help of our technology and planning. And, you know, every dip manager out there watching the labor side to me is where we have the most control over that, and we will continue to focus on that. And I'll let John give you a little insight on the pricing side.

So Paul, with respect to our ASP, the short answer to your question is on a mix adjusted basis, our ASP is actually up 1.3%. Now, if you think about that, just conceptually, you know, obviously, the Atlantic region was the hardest hit, they have one of the higher ASPs. So as that volume drops, that's going to have obviously pull down the ASP, but when you look across the regions, our regions and just do them individually, we're really up in every region. We really didn't see a decrease in the quarter for the region, but you know, 1.3% is what we saw on a mix adjusted basis.

Okay, that's good. And just going back to Ronnie's answer to the first question, and linking it to UseMyConcrete [sic] [WheresMyConcrete], what lines does UseMyConcrete [sic] [WheresMyConcrete] really help you address? Is it the delivery down logistics or is it labor? And what proportion of your network is actually using this tool now?

I think you referred to WheresMyConcrete? WheresMyConcrete is our…

Apology.

That’s okay. We spend a lot of money getting that name right there, Paul. So, WheresMyConcrete, our entire Atlantic region is on it. In the first half of the year, we rolled out all of our DFW ready mix on it, and currently we're installing it in West Texas that our Ingram ready mix. The next phase of it will be rolled out into our California footprint. And so if you think about it on, we're a little over probably three quarters of the way done as far as the number of yards we're running through the system. The thing that the system allows us to do, it’s our scheduling, it’s scheduling of our customers orders, it’s scheduling of our labor, it’s scheduling of all of our delivery, and so when we think about the efficiencies we try to drive and using analytics to do that, it's getting out ahead of us and estimating the impacts of what would have historically taken eight trucks to serve a job now takes four trucks to serve a job, what would have historically taken, you know, 10 hours to serve a job is now taking 6 hours to serve a job. So, the system's ability to predict that and be real time learning is critical to us. Because if we were going back in old way of doing business, we would have, you know, been estimating that on our own, and maybe it would have taken several weeks to estimate that and we didn't know traffic patterns, and we didn't know, you know, the things that really drive our efficiencies. And so that's what the technology allows us to do. On a real time basis, it's making adjustments to predict demand and predict traffic and printing labor needs, and so that's what we use it for to – it also schedules all of our in-bound materials. It adds a lot of functions to it, but from the most part, it's really a predictability model that we're trying to be more predictable with our needs and in managing those labor and assets.

That’s really interesting. Thanks a lot.

Thank you. Our next question comes from Kathryn Thompson with Thompson Research. Please go ahead.

Hi, thank you for taking my questions today. Wanted to look more on the concrete side of your business, for margins on a go forward basis, how much of the efficiency – how much of the margin improvement in the quarter was really driven by efficiency or shortened drive times from lower traffic, but also the tools that you have internally versus cutting other variable costs, and you know along that with the other costs with labor, could you give more clarity in terms of changes you may have done on the labor front and including cutting back on guaranteed times, and what does that mean for the future?

Yeah, good morning, Kathryn. Thank you. You know, going through some of the numbers I just talked about, and breaking those down even further, and, you know, at a high level, yes, we did reduce guaranteed hours in our in our non union footprint here in the Texas market. We implemented that early on in April. And I would tell you, you know, we've talked in the past about, you know, how that guaranteed hours was more in-line with our ability to attract consistent labor and you know, we talked about those pressures in the first quarter call, also in the fourth quarter of last year. You know, one of the things we have seen is those pressures on the labor lifted dramatically during this time. Our driver turnover is really a lot better during this time, but from a cost perspective, when we talked about our delivery labor costs being down 14% sequentially, again, I think there's a lot of that that has to do with our predictability, our managing of those driver labor hours. Now, does this traffic help that? It does. And I would say the most impacted markets on the congestion is definitely New York and San Francisco, but at the same time, you know, I've had comments as well, you know, those markets are never going to do this or never going to do that, but you're not going to be able to sustain those kind of efficiencies. I guess my only argument would be, you know, you can't argue that both ways. If they're never going to build another office building in New York then there's not going to be traffic back, if they are going to build those office buildings and there will be traffic back. One way or the other, I can either sustain in for a long time, and the market may shift, and like I've said, we've have the ability to pivot whether that's infrastructure, whether that's commercial, whether that's residential, whatever concrete demand is, we don't make the demand, but we will meet the demand, and you know, the – I think the most positive thing I've taken from these results is our ability of our managers to adapt to predicting what that labor needs are going to be, and really managing down to the daily needs of our labor. And so in a variable cost model, you know, we took cost off. Are some of those costs going to come back? You know, it just depends. There's a lot of factors out there that influence that, but I'm extremely pleased in where we're at. And I'm extremely pleased in our ability to continue to drive the margins that we delivered.

So, it’s fair to say that the – perhaps not all, but there is a decent portion of the margin upside that could be classified as a more structural change outside the kind of the labor element.

Yes.

Okay.

Yeah, I think you look at, I mean, you've pointed it out in the past, as you look at the growth of U.S. Concrete, and the acquisitions that we've done over the last, you know, eight plus years, I mean, what that did give us the ability to do is manage assets. And so if you think about our ability to serve these major metropolitan areas, we have multiple assets in these big markets, that ultimately, we just, we can take a plant down. I mean, when we take a plant down, our labor cost at that plant goes to zero and we can serve the market. I mean, if there's less needs, I don't have to operate all my plants, and when I take that plant down, and I don't have any labor costs there, and really that's what we saw, especially coming out of April into May, and then as we opened those plants back up in June, obviously that labor cost is going to come back, but we're doing that in a way we're predicting the demand on that plant. And so we're are looking at this from an asset management standpoint as well, not just as a delivery company, but also as a production company that we operate these plants in many locations.

Okay, it's helpful. Shifting to California, could you give us an update just between Northern and Southern California? Because the understanding that Southern California got back a little bit faster than Northern, where are you now just in terms of shelter-in-place routes and where are you in terms of not just volumes now, but kind of, what are you seeing in that activity trends in both of those markets?

Yeah, so, you know, Southern California, obviously, we're just there with our Long Beach terminal and we supply that from Polaris. I would tell you that our business during the quarter was pretty steady in Southern California with less or – less interruptions because of the type of work that we are on there. We were more project specific deemed essential. So, we saw very little interruption in Southern California, but obviously a much smaller presence for us. And a lot less opportunity to disrupt because we don't have a wide variety of different projects like we are in Northern California. And Northern California, I think it was very similar to New York as far as the immediate impacts of early on with the restrictions that were put in place, and then as the market opened back up, and those restrictions were lifted, we saw the volumes recover pretty quick and pretty steady. I would tell you we're, you know, from a bidding perspective and pipeline in all the different analysis that we do, as far as how we look forward, in our demand side, we haven't seen a tremendous amount of shift, residential has been steady, we obviously have a lot of technology spend out there, that, you know, I think that's the thing in that market that is, it's tough to predict on a financial model, because there's a lot of liquidity out there. So there's, I mean, we did a MEDPOR downtown San Francisco on an office mix use tower two weeks ago. And so it's not like, wow, you're just not seeing nothing, everything's come to an end. We're still seeing very good activity. We're still having a lot of interaction with our customers. And I think there's still a lot of, you know, a lot of blurriness and a crystal ball to say, you know, how far ahead of it are you willing to get? I think that's why we said we're confident in what we say for our third quarter and we'll re-evaluate as far as guidance looks after that.

Okay, very helpful. And just final point, and once again, looking at a key geographic market for you for Texas. Your thoughts, you know that – in that market, you're a little bit more exposed to kind of private side. So, resi and non-res to some extent, what are you seeing in terms of trends in that market and what are your thoughts specifically on the resi end market in terms of debt activity? Thank you very much.

Yeah, thank you. Yeah, as far as Texas goes, we've seen the resi side pretty much just stay really consistent. I would say the most impact was early on and some of that impact was mixed with both COVID and weather, and so we had some early on weather and so it was really hard to distinguish on the resi side because a lot of the customers we have told us that all the houses that were under construction, were going to continue and they initially were not going to start any new and then that got flipped pretty quick. So, we've seen very consistent results on the resi side. On the non-resi side, I think we continue to see the same trends. We have not really seen anything, as far as the word major cancellations. We've seen words like delay, words like pushed out, but we're also seeing jobs that are bidding on a daily and weekly basis. And so, you know, I think that's going to be the piece to me that we're in the right markets, and so where the people are matters. When you look at per capita consumption and that equation is based on where population is. And so, I would much rather be where I'm at today than in the middle of nowhere, hoping that they're going to build something and my ability to pivot again, whether that's infrastructure, whether that's commercial or whether that is residential is extremely easy for me, extremely easy. I mean, the assets are in the right place, we've got the expertise. So, whatever the demand is, we're in a position to meet.

Thank you very much.

Thank you. Our next question comes from Trey Grooms with Stephens. Please go ahead.

Hey, good morning.

Hi Trey.

And congrats on the quarter. Nice work, especially on the margins. And I know that's been touched on quite a bit, but the on the aggregate side, it seems like a lot of the things we’re talking about was on the ready mix side, but on aggregates, massive increase there in the gross margin. Can you talk a little bit more about that specifically on the aggregate side and how much of that is due to Coram coming on, you know, and how much of that is more just kind of structural changes that you've made, there would be my first question?

Yeah, Trey. I think definitely a benefit from Coram. Definitely continued benefit from Polaris and also, you know as I called out MW Ranch, our Greenfield investment that was really fully online in the first of the year, but really maximizing that through the quarter was also you know, a very big toe in-force on the margin side. You know, I guess the way I would look at it Trey and when we talk about net of freight 51% margins on our aggregate side. You know, I think the lack of credit we get is people look at sand and gravel as kind of a stepchild to hard rock. Hard rock is good, hard rock is necessary. We have hard rock quarries in New Jersey, but if you look at a yard of concrete, there's also fine aggregates needed. In every single yard, there's fine aggregates needed and when you look at the operations I have today with Coram within MW Ranch, with Rainbow, with Red River, with Chatfield, with Polaris, and I’d go on down the list of sand and gravel plants that I have. My cost structure, there is just so much different. I don't have drill and blasting. I have very, very little quarry cost. It's extremely efficient, and how we mine the sand. And if you look at the ASPs for our aggregates, I mean, they're just really steady. And so as we continue to put those improvements in our operations we continue to invest in a mobile equipment that also has a really good payback for our efficiencies. I just think we're in a really good position with our aggregate strategy, and what we've done, and we talked about from a location matters and so everything we've done has been coordinated around our pull-through strategy. And so what we did at Polaris is the exact same thing we talked about at Coram and Coram is another example that we buy it, we integrate it, and we can pull through and control it. We did the hard work on the downstream assets. Once you have the downstream assets, the rest of the work is a lot, lot easier. And that's the story we continue to try to tell. And I think that's the story that we continue to not get credit for. So hopefully, you know these results we can continue to deliver. And, you know, people will give us credit for what we've done in aggregate. It's a tough business, but I believe we're in the right place with the right locations, and definitely have the right operating teams and I'm very proud of what our teams did.

And seeing, you know aggregates now 36% of EBITDA in the quarter is definitely worth noting. And I guess to follow-up still just kind of sticking with aggregates just for a second, you know, Coram you closed on that and then, you know, right out of the gate you had, you know, COVID hit. So, I don't, clearly I don't think we've seen, you know, its full potential. So, how are you thinking about that aggregate mix, you know, as a portion of your total EBITDA as we go forward?

I think that 36% as, you know, as we see the interruptions in COVID, it interrupted both sides. So it did interrupt the concrete side, too. So, as we've continued to see the markets, month-over-month sequentially improve, we've continued to see both sides of it improve. I would tell you on a, you know on a margin side and an EBITDA side, obviously the aggregates is going to have a much greater influence. You know, on a revenue side, the Coram is a lot of FOB sales and so it's really, really clean operation that has just a lot of FOB customers. You know, the other side of that is that, you know, one of the benefits of being vertically integrated in that market is just the visibility it gives us into the entire market. It's just a really good fit for us with a pure pull-through into that New York market. So, it not only supports our own internal operations, but we have a lot of really good third party customers there that are also diversified in other markets there, and so it really diversifies us in all those other markets in residential and smaller commercial stuff and in infrastructure as well. So, I think it gives us a better cushion around any volatility in the New York market as well.

Got it. And then switching gears to the, you had a little bit of commentary around 3Q, just to make sure I heard you right, it sounded like adjusted EBITDA in the 50s range. I was having some technical difficulties and it was breaking up around that time, I want to make sure I heard that right first off? And secondly, if you can maybe give a little bit more color about, you know, kind of what you're what you're seeing that drives you to that number and, you know, kind of what's your saying that grabs you to that number and you know, kind of what’s backed into that, I guess?

Yeah, Trey, you did hear, we should have anchored in the 50s. And so we're trying to get a little range there. And I will tell you what we see and what gives us confidence in that is; one, on the margin side durability side, the things I've talked about the things we've put in place to manage this business through the pressures that we see; and two, the continued sequential month-over-month-over-month improvements. And so I think we're far enough into the Q3 that we can have that visibility, and I think we're going to be really patient around getting too far out ahead of that. I can tell you that we're confident in our ability to manage the business, and we're not trying to get out and predict the demand side, but we will absolutely maximize our assets and absolutely be in a position that whatever drives concrete demand and aggregate demand that we can meet that demand.

Understood. Thanks for the color.

Thank you. Our next question is from Stanley Elliott with Stifel.

Hi, good morning everybody. Congratulations on a nice quarter. I apologize if you mentioned this, I have been juggling a bunch of calls this morning, did you guys provide any commentary on Trent in July? I heard the 50 million plus for EBITDA, but I was just curious kind of, if you had said anything about July?

No, we did not. I think Stanley what we have said is, we just continue to see sequential improvements in our business. So, as markets have stabilized and opened back up, we continue to see the same trends that we did, as I gave you the example of the difference in April, the difference in May, the difference in June, we've continued to see just a small steady increase in how the markets look more stable as we've gotten into July.

Perfect. Did you guys provide any contribution from acquisitions in the quarter in terms of that nice ramp on the aggregates piece?

Now, I mean, we called out kind of, what the external influence on Coram was, and we called out where we believe Coram is exactly in-line with where we had originally said. Even through COVID, even through the timing of announcing that at the end of February and all the difficulties that everybody said we were going to have, we were absolutely on pace on a post-synergy of 7x multiple in that acquisition, so you can model that however you would like, but I think that absolutely we’re confident in that.

And lastly, you did just a nice job on the cost side, in delivery cost. Is it pretty well split between kind of your union and non-union markets? Just curious kind of how those costs trended, and if there were any different between those two?

Yeah, I would tell you using from a modeling perspective, what we said was there was a shift regionally from 30% of our revenues came in the east, 30% west, and 40% in our central. So, I would say from a volume perspective, cost perspective, those kind of things. That's a pretty good model to use. Obviously, there's some higher labor costs on our union contracts and things like that, but I think, if you use that kind of model in the quarter, most of that will wash out.

Perfect guys. Thanks for the time appreciate it. Best of luck.

Thank you, Stanley.

Thank you. Our next question is from Adam Thalhimer with Thompson Davis. Please go ahead.

Very good morning guys. Congrats.

Hey, Adam.

Hey, I'm just curious, like on the visibility front, I know a couple months ago, you know, it’s hard to have faith and kind of your concrete schedules, just with client’s kind of moving things around during the pandemic, has that improved at all just your disability in general?

I think our visibility from a standpoint of, you know, we have a CRM system that we use that we've – is part of our WheresMyConcrete technology that we developed. In the CRM, we've actually rolled that out everywhere. We put the CRM in place ahead of dispatching technology and what the CRM does is it allows us to be way more specific down to the customer level. So, we track a lot of things on customer trends, because at the end of the day, our customers are the ones that we see the biggest impact as far as inflows and outflows of jobs. And so when we really start predicting year-over-year customer trends, I mean, I think we have a real pretty good visibility into where they're at and if there's shifts in the market because we have customers segmented in residential, customers segmented in commercial, and customer segment in infrastructure. So I, you know, we're just trying to get so far away from the typical backlog that people talk about, because backlog to us was Stone Age, and people that still want to talk about backlog, there's a lot more data out there that we can use and we think we can be smarter around planning our asset, planning our labor, planning our investment, planning our CapEx, playing those things around, more visibility into what forward looking things are going to look like. And so, I would tell you again, I mean, we what we are going to be disciplined in is our pricing side. We do not – we did not create demand on our product with pricing. It never has and it never will. So whatever demand is going to look like, we're prepared to supply that, but I would say you know in the construct connect information we gave you, even if you think about the way a lot of whether it's construct connect, whether it’s – a lot of these guys are reporting, you know, we're always going to be a lag because a lot of those projects get reported right up front. And then we may be pouring on the job three, four, five more months, but we're also a lag on the front-end. So, you know, it kind of balances out, but I would tell you, you know, I think from our perspective, we feel good on continuing to see the sequential improvements that we've seen, you know, really starting from mid-May when a lot of the restrictions were lifted.

Yeah. Okay. That's my key point. Like, as the restrictions were lifted, how would you characterize kind of customer behavior? I mean, as we sit here in July, are you seeing customers saying, and you alluded to this in San Francisco, but saying, hey, rates are low. I got to move on this stuff?

Yeah, I think it's been a combination of both. I think some of them were more impacted by restrictions depending on what type of work they were. So some of them immediately started back to work on jobs that they already had. And they hit the ground running. I mean, it was full speed ahead, you know, the hole was already dug, whatever dirt work was done. And then we've seen a certain amount of customers that said, you know, we don't know what's going to happen. And then two weeks later, you know, jobs came back, if they thought we're going to be delayed for a long time. And so there's market-by-market, segment-by-segment residential has been very consistent. And I wouldn't say, you know, I don't want to use the words of, you know, records or blah, blah, blah, but it's been very consistent. And I think that's the ability for us to continue to push, the efficiencies that we've built-in and controlling our cost is, it's a consistent model that we can get ahead of and really manage that labor, as well as, you know the [R&M] and the things like that, that we said we control during the quarter.

Okay. And then just from a sense of like, your guys on the ground, the activity they're seeing, the bids they're seeing, maybe the easiest thing to do would just be kind of, you know, rank your big geographies New York, San Fran, Dallas, kind of, you know, where you feel the most confident the next kind of 6 to 12 months and maybe where you feel the least?

Yeah, I would say from a confidence standpoint, we've talked about it in the past, Texas is very diverse. Texas has a lot of growth. Texas has a lot of land and affordability is obviously a big piece of that. And so I think, you know, Texas is one that probably can pivot the most to whatever demand there is and whatever economic factors influences it. I would say from a standpoint of both New York and San Francisco and New Jersey and D.C., and Philadelphia, that, I mean, the positive thing is there's so much infrastructure demand, and it's not infrastructure from a standpoint of, you know, how we're going to pay for, what's it going to be bah, bah, bah, there's a lot of that political stuff that's going to still happen. From a demand perspective, those markets have been starved for infrastructure dollars, and you know, when you think about our footprint, I mean, it's where the infrastructure dollars are needed. And I don't care if we talk about well, there's going to be a transition out to the suburbs from the city. We can reach the suburbs. We're in Westchester. We're in New Jersey. We can reach those markets. And it's not like oh, well, everything leaves that city. And you're done there. Now, we can pivot and go to the suburbs too and we've got really good assets to fit that, and so I'm confident in all of our markets, all of them will look different. All of them are going to have different demand drivers. And again, I think location matters and where people are matters, and I just feel very confident and we pick and pick the right locations, because population and per capita is a very big driver of what concrete and aggregate demand is.

Okay, great. Okay, great. Thank you, Ronnie.

Bye-bye.

Thank you. Our next question is from Larry Solow with CJS Securities.

Good morning. This is Brendan on for Larry. Just wanted to ask about looking at the aggregates margins year-over-year, how much, could you speak to how much Coram attributed to that benefit?

We don't break out Coram. I would tell you Coram’s aggregate results are similar to our other sand and gravel results. I mean, I think they were all very good from a production side. They were all very good from a sales price being consistent and movement on that. And so, you know, looking at Coram, it's just another really good aggregate play for us that has really, really good pull-through and obviously as we put more volume through it, those margins are going to just improve.

Okay. And then just looking at your pipeline, you talked about some that you've seen steady fairly quickly, looking beyond, I guess [the price] you're working on now, I mean, how are customers approaching, you know, feature large projects, you know, are you having similar amounts of conversations with customers about that stuff that's I guess, not necessarily backlog, but potential looking more out like potential backlog? Are people just kind of sitting and waiting, are you still having those projects conversations?

No. We're having lots of project conversations and the same amount of planning that goes into these complex projects are still haven't changed even though those maybe virtual planning meetings now, instead of in-person, the planning still goes into that. And I would tell you that, I think our customers are taking the same approach we are – they're pleasantly surprised by the amount of work that's come back and they're being cautiously optimistic about what's to come. They have their relationships just like we have our relationships with developers, with owners, with key projects, and I think so depending on which segment you're in, and which markets you're in. Those customers levels of confidence are going to vary, but I would say overall, the tone is pretty positive.

Okay, great. Thank you.

All right.

Thank you. Our next question comes from Zane Karimi with D.A. Davidson. Your line is open.

Hey, good morning guys. Congrats on the quarter and hope everyone is staying healthy and well.

Thanks, Zane.

So, first off, I think was off of Katherine's question earlier, but to what degree have you guys been able to – employees back to job sites in New York City in the Bay Area, and how much of a recovery should we assume [into 3Q]?

So, as far as job sites and restrictions, we have no restrictions as far as government imposed or local restrictions on job sites in New York or in San Francisco. So, the restrictions have been lifted. I mean, we have a lot of safety things we're doing with our own internal employees, and then we have safety things that are also being done by our customers on job sites. So, there's a lot of, you know, things that we're doing from a safety perspective, but as far as restrictions as far as being on jobs, we don't have any of those right now on either market. So, I would say that from a natural progression of the jobs we're covering, it's just all about now the customers and the job and what our ability is to actually start those jobs back. So, it's nothing that is from a governance perspective being restricted.

Thank you. Then, how much longer can you guys sustain CapEx at these levels? I think it was below DD&A and can you remind of the true maintenance CapEx run rate?

Yeah, so, for our CapEx, you know that 30 million to 40 million range isn't too far below our depreciation, as you refer to that, there is depletion and amortization in there as well. So, the depreciation there was by – in the mid-60s, so our forecast is a little bit lower than that. We think that we can sustain it, and obviously for the remainder of the year and then as we go on to next year, it will evaluate how we think about it, but we do want to allocate capital to the high growth, high return projects going forward. So, it's something that certainly can be managed.

Okay, well, thank you guys very much.

Thank you.

Thank you. [Operator Instructions] Our next question is from Julio Romero with Sidoti & Company.

Hey, good morning. Hope you all are well.

Thanks, Julio.

Guess my first question is on ready mixed pricing, John I appreciate you calling out the mix adjusted price being up 1.3% on the quarter, can you just talk about pricing trends you're maybe seeing today, and you know are your geographic markets still holding price on a standalone year-over-year basis?

Yeah, I would. I would tell you, what we're seeing today is, very little pressure on pricing, very little pressure on what a normal economic downturn would look like. You know, and I think as you think about that, Julio, the markets have changed. I mean, we did a lot of consolidation. There's been other consolidation to help and there's been a focus over the past, you know, 8 to 10 years ever since Bill started the strategy of ruling up a lot of these assets that the investment community to – all sides of it hammered on us about how the importance of pricing was. And so when you look at the PPI, and you can go back over the last five years, and you can look at it currently, ready mix pricing is holding really well, really strong. And you know, there is a very, very strong correlation between ready mixed pricing and aggregate pricing and cement pricing. And I've told you in the past, and I'll reiterate it, I'm in a position that I'm not trying to beat up suppliers every day. I've told you, I'm not going to give up material margins and I'm not willing to give up material margins, but I'm going to support those increases. I'm in the aggregate business, I don't do any good trying to find one source of beating someone up and then it all gets given away, and so, you know, our role as a leader in our markets has continued to do the things we do. And pricing being stable is one of the things we’ve said in the past, that was our focus, and it's going to continue to be a focus. And I'm not saying there won’t be ups and downs, but strategically with the systems we have, the analytics we're using, with our CRM tool, with our WMC tool we're going to make the right decisions from a profitability standpoint with pricing. And if we have to walk away, we walk away, but we're just not, again, we're not going to create concrete demand with the price of concrete.

Thank you. I appreciate the caller. And I guess that dovetails into just my follow up question is, you know, you do have some healthy share in the Northeast of California and you've got some defensible positions in those markets, have you, I mean, do you think you maybe have gained any share or seen any broader changes in the competitive landscape, just given the volatility in the quarter in those markets? Thank you?

Yeah, I don't think in the quarter, and I think because of the restrictions because of the type of work because of the choppiness and how those jobs opened back up, and we're down, that there was really, really hard to get visibility into what market share was because it just really depended on what job you had going into it and how that job was affected. So, I think it's too early to say, you know, you're going to go out and really think that someone gave up or took market share. As the market stabilizes, and as we continue to see consistency in the markets, we evaluate that normally. It's not something we overreact to because it can ebb and flow with large projects and if you lose a large project for whatever reason or you get a large project for whatever reason, you know, your market share could really take a big jump. It's not something that I measure from a standpoint of being aggressive or being more on the pricing side because it's just too many moving parts.

Understood. Thanks for taking the questions. Appreciate it.

Thank you.

Thank you. And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call to Ronnie Pruitt for his final remarks.

Thank you. [Cameron]. From all of us at U.S. Concrete, thank you for joining our second quarter call. We will continue to navigate these challenging times and deliver excellent operating margins to drive shareholder value. We look forward to sharing our third quarter financial results in a few months, until then, stay safe and be well.

Thank you, ladies and gentlemen for participating in today's conference. You may now disconnect.