U.S. Concrete, Inc.
Q1 2016 Earnings Call Transcript

Published: 8 May 2016

[Operator:]

Good day, ladies and gentlemen, welcome to the U.S. Concrete, Inc., First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Joe Tusa, Chief Financial Officer. Sir, please go ahead.

[Joseph Tusa:]

Thank you, Ayela. Good morning and welcome to U.S. Concrete's first quarter 2016 earnings conference call. Joining me on the call today is Bill Sandberg, our President and Chief Executive Officer. Bill and I will make some prepared remarks, after which we'll open the call to your questions. Before I turn the call over to Bill, I would like to cover a few administrative items. U.S. Concrete would like to take advantage of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Certain statements in this conference call may be considered forward-looking statements within the meaning of that act. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially. For a list of these factors, please refer to the legal disclaimers contained in our filings with the Securities and Exchange Commission. Please note that you can find the reconciliation of non-GAAP financial measures that we will discuss on this call, in the Form 8-K filed earlier today and in the Investor Relations section of our website. If you would like to be on an email distribution list to receive future news releases, please sign up in the Investor Relations section of our website under email alerts. If you would like to listen to a replay of today's call, it will be available in the Investor Relations section of our website under Events and Presentations. Now I would like to turn the call over to Bill to discuss the highlights for the quarter.

[William Sandbrook:]

Thank you, Jody, and welcome everyone to our call. Our strong record of profitable growth continued into the first quarter of 2016. We increased year-over-year adjusted EBITDA 57% to $25.6 million. This growth represents 100 basis points of adjusted EBITDA margin improvement to 10.5%. We improved our ready-mix concrete raw material margins on $1 per cubic yard basis and in aggregates, we achieved an increase in adjusted EBITDA margin to 19%. We also improved our free cash flow to $6.8 million in the first quarter of 2016 compared to a deficit of $2.1 million for the same period last year. This performance reflects the collective merits of our strategy and execution, especially considering the seasonality of this quarter. This is truly a rewarding milestone and exciting start to the year. During the first quarter, consolidated revenue increased 43% to $245 million on higher volume and price in both ready-mix concrete and aggregates. In aggregates, we improved our average selling price 14%. In ready-mix concrete, we increased our price 4.5% to achieve a 20th straight quarter of year-over-year price increases, supported by our leadership positions in high growth markets. Importantly, we experienced continued year-over-year and sequential quarterly selling price increases in all of our major metropolitan markets during the first quarter of 2016. Our underlying demand trends were robust in the first quarter. Our organic ready-mix volume increased 18% reflecting our balanced exposure to high growth markets along with some additional benefits from favorable comparisons in weather-impacted Texas markets in the prior year quarter. This organic volume improvement was partly offset by an abnormally high number of wet weather days in our Northern California market, which kept volumes in that market flat on a year-over-year basis. Our overall ready-mix volume was up 38% and aggregates products volume was up 55%, reflecting the addition of highly successful acquisitions, which we have completed since the beginning of 2015. In the first quarter, we acquired two strategic ready-mix concrete businesses, which strengthened our existing operations in New York and Northern Texas. In particular, our acquisition of Greco Brothers provided us with a very well established ready-mix concrete producer in New York City with extensive customer relationships. Greco significantly enhanced our exposure to new commercial and residential high-rise projects throughout New York and fit seamlessly into our existing operations, enhancing our plant network to even more efficiently service customers in all five boroughs. Beyond these two transactions to start the year, we have a robust pipeline of potential acquisitions, which meet our expansion objectives and we expect to continue to supplement our organic growth with accretive acquisitions from our strategic deal flow. Our acquisition approach is focused on strengthening our aggregate positions around our ready-mix concrete operations to enhance our vertical integration. Our approach also focuses on continuing to strengthen our ready-mix positions in our high growth markets to more efficiently meet the needs demanded by complex high intensity projects. This disciplined expansion strategy is paying off with our deals completed since the beginning of 2015 representing 28% of our adjusted EBITDA growth during the first quarter. Now looking at our markets, demand continues to improve, with each of our regional economies exhibiting robust construction environments. According to Dodge Data & Analytics, the seasonally adjusted annual rate of non-residential starts in March 2016 is up 24% year-over-year and is at the highest level since April 2015. Residential land development and home construction remains on an upswing as well, despite housing starts still lagging their historical average. Dodge also noted in the same report that on a year-to-date basis, the two leading metropolitan areas for multi-family starts are New York City and San Francisco. In Northern California, which represented 27% of our revenue this quarter, we have a solid position in this market, with an extensive plant network to capture rising demand. Our private construction end markets are benefiting from robust growth in the technology sector coupled with solid tourism activity driving continued economic growth and construction activity. In the Greater New York Metro area, which represented 24% of our revenue in this quarter, rising employment and declining vacancy rates are driving growth for offices, hotels and warehouses. The New York Building Congress forecasts 4 million square feet of new office construction in 2016. Also the same group has reported that non-residential starts in New York City increased 65% in 2015 to $18 billion with commercial buildings accounting for approximately two-thirds of this activity. On the residential side, high-rise apartment demand continues to increase driving steady upward progression in multi-family housing starts. We believe the Greater New York metro area will continue to generate strong demand in 2016 and over the next several years. In Washington DC, job growth is high and unemployment rates are low. An increasing influx of population flow into the DC suburbs is benefitting this market, including the Northern Virginia area, and principally along the Dulles Greenway, which directly overlaps with our ready-mix positions in the greater DC market. In Dallas Fort Worth, which represented 26% of our revenue this quarter, private construction markets are robust and most sectors are expanding driving one of the strongest employment growth rates in the country. DFW continues to rank in the top three nationally in terms of investment dollars in new commercial construction. Residential end markets continued to improve with housing starts still remaining 40% below prior peak levels, while single family home inventories remain at a very low level. On the public side, innovative state transportation funding programs are supporting a healthy construction material demand environment. The State of Texas, Department of Transportation under Propositions 1 and 7 is expected to allocate $9 billion to road projects in Texas in 2016, which is up from approximately $7 billion in 2015. There's been no sign of any discernible negative impacts of oil pricing in our end-markets in the DFW Metroplex. Our West Texas region, which comprised 13% of our quarter revenue, continues to contribute very favorably to our results. This area mainly comprises operations West of Fort Worth, as well as the Wichita Falls, Abilene, Lubbock, Odessa and San Angelo areas. We operate in a diverse range of economies throughout the West Texas region where we enjoy favorable industry dynamics, including relatively consolidated markets and a higher mix of vertically integrated aggregate positions. As we have discussed in the past, we have no direct exposure to oil. Additionally, our indirect exposure to oil is now less than 2%, as revenues have increased organically throughout our operations as well as the increased revenues resulting from our acquisition-related activities. So overall, the economic fundamentals across our markets continue to indicate a positive outlook and we have a healthy project pipeline for 2016. Ready-mix backlog at the end of the first quarter 2016 was approximately 6.5 million cubic yards, up 29% from the end of the first quarter 2015. Now I would like to turn the call to Jody to discuss our first quarter results in more detail.

[Joseph Tusa:]

Thanks, Bill. In the first quarter, we meaningfully grew revenue, improved profitability and further enhanced our footprint through strategic acquisitions. The end result was a 13th consecutive quarter of year-over-year adjusted EBITDA growth, a solid upward move in our free cash flow and stronger balance sheet metrics. Consolidated revenue of $245 million for the first quarter was up $73.7 million or 43% on a year-over-year basis. Acquisitions completed since January 1, 2015 accounted for approximately $41 million or 56% of the incremental revenue generated during the first quarter of 2016. First quarter ready-mix revenue increased by $69 million or 44.5% year-over-year. We realized an increase in our average selling price of 4.5% to $126.44 per cubic yard compared to the prior year quarter. Our ready-mix volume increased 38% to 1.8 million cubic yards in the first quarter driven by acquisitions and organic improvements. Acquisitions made since January 1, 2015 accounted for approximately $38 million or 55% of our incremental ready-mix revenue during the first quarter of 2016. Our estimated annual run rate ready-mix volumes acquired during 2015 totaled approximately 1.1 million cubic yards. During the first quarter of 2016, aggregate products revenue increased by $6.2 million or 70% year-over-year to $15.1 million. Approximately 48% of our aggregate product shipments were supplied internally to our ready-mix concrete operations across our vertically integrated positions during the first quarter. Looking at our profit and margins, first quarter consolidated adjusted EBITDA increased by $9.3 million or 57% to $25.6 million compared to $16.3 million in the prior year quarter. Adjusted EBITDA as a percentage of revenue was 10.5% for the first quarter of 2016, compared to 9.5% for the prior year quarter. In aggregate products, our segment-adjusted EBITDA margin increased to 19% for the first quarter. Our SG&A expense in the first quarter was 9.5% of revenue compared to 10.5% of revenue in the prior year quarter. Excluding non-cash stock compensation, severance and acquisition related professional fees, SG&A expense as a percentage of revenue was 8.6% compared to 9.2% in the prior year quarter. The improvement year-over-year is primarily related to higher revenues, which more than offset additions to our workforce to sustain our growth going forward. We continue to aggressively manage our SG&A margin but anticipate that we will continue to incur transactional-related expenses as we pursue additional acquisitions. Our ready-mix concrete raw materials spread increased 2.1% to $62.78 per cubic yard compared to the prior year quarter, mainly attributable to a higher average selling price. Our raw material spread increased year-over-year in all of our major metropolitan markets. However, on a year-over-year consolidated basis, our raw material spread margin percentage was lowered by 120 basis points, which was almost entirely due to sales mix by region. This was because we had a lower mix of our volume from Northern California and that market has some of our highest average price and raw material spreads. As Bill mentioned in the first quarter of 2016, San Francisco experienced abnormally wet weather, which delayed some project activity. This mix factor is also evident in our ready-mix concrete EBITDAR segment margin, which was 12.4% in the first quarter compared to 13.3% in the prior year quarter. However, despite the adverse mix impact, our sequential margin spread percentage increased by 80 basis points. As a result of both our strategy to increase the percentage of EBITDA generated from our aggregates segment as well as disciplined SG&A control, we successfully increased our overall gross profit margin by 50 basis points to 18.9% and our EBITDAR margin by 100 basis points to 10.5% each on a year-over-year basis. Adjusted net income was $5 million or $0.31 per diluted share for the first quarter representing more than 158% growth compared to the prior year period. In addition to several non-core add backs, the adjusted net income for the first quarter 2016 is net of a normalized tax rate of 40%, which we discussed on our prior call. Our income tax expense for the first quarter is primarily based on adding back the derivative loss to our loss from continuing operations before income taxes and then applying an approximately 40% income tax rate. This normalized tax is consistent with our expectation to be a cash taxpayer in 2016. Now moving on to our cash flow and balance sheet, during the first quarter of 2016 our free cash flow improved to $6.8 million as compared to a $2.1 million deficit in the prior year quarter. We are extremely pleased with this cash flow improvement, which primarily reflects the progress we are making to grow adjusted EBITDA and our continued focus on working capital management. We spent $11.2 million on capital expenditures for the first quarter of 2016, primarily to purchase plant machinery and equipment in support of our growing demand in our markets. As of March, 31, 2016, the book value of our long-term debt, including current maturities, was $296.5 million. This included $200 million of senior secured notes due in 2018, $65 million on our revolving credit facility and $31.5 million of other debt, consisting mainly of equipment financing for new mixer trucks and mobile equipment. As of March 31, 2016, we had total liquidity of $103.4 million, including $8.8 million of cash and cash equivalents and $94.6 million of availability as of March 31, 2016 under our revolver. Our availability is net of a $16.4 million availability reserve for outstanding letters of credit and sales tax and another reserves. Our availability is also limited by the eligible amount of our accounts receivable, inventory and rolling stock, which was $176 million as of March 31, 2016. At March 31, 2016, our net debt-to-LTM EBITDA ratio was a conservative 2.0 times, level with the prior quarter and a year ago. We ended the quarter with a strong capital position to continue investing in our business and deploying capital opportunistically on select growth opportunities. I'll now turn the call back over to Bill.

[William Sandbrook:]

Thank you, Jody. We are pleased to continue to deliver on our growth objectives and create a sustainable platform for continued success. The first quarter was another demonstration of the resiliency of our Construction Material positions. We have established our company in attractive geographic markets with leading share positions to deliver consistent profit improvement and generate attractive returns for many years to come. As we look to the full year 2016 we are optimistic on the prospects for growth in our existing markets and our acquisition pipeline remains a viable avenue for additional growth. We expect our markets to continue to outpace the national average for construction spending, allowing us to maintain our relentless focus on our two-pronged strategy. To first grow organically through operating excellence, superior product delivery and service. And second, expand through acquisitions that bolster our existing market positions and capitalize on potential opportunities in new high growth markets. We continue to expect to produce additional adjusted EBITDA in 2016, due to disciplined execution of our strategic growth plan, which should lead to increased value for our shareholders. Thank you for your interest in U.S. Concrete. We look forward to updating you on our future successes. We would now like to turn the call back over to the operator for the question-and-answer session.

[Operator:]

[Operator Instructions] And our first question comes from Adam Thalhimer from BB&T Capital Markets. Your line is now open.

[Adam Thalhimer:]

Hey, good morning guys. Congrats on a strong quarter.

[William Sandbrook:]

Hey, Adam. Thank you.

[Adam Thalhimer:]

Can you give us a little color - you had nice backlog growth in the quarter, can you give us a little color which regions drove that?

[William Sandbrook:]

All of our major regions; Texas, California and New York, including New Jersey and Washington DC have increased their backlog. And furthermore, sequentially from the fourth quarter, we're up 8% as well. So we're seeing it across the board, Adam.

[Adam Thalhimer:]

Great, and then your incremental margins, I want to ask about those because very strong in aggregates, but the incremental margin in ready-mix continues to tick down a little bit. I'm just curious what we should expect there going forward?

[William Sandbrook:]

Adam, that tick down is solely a result of mix. As Jody had mentioned in the call, the wet weather in California, which is one of our highest margin regions both on material margin, ready-mix margin as well as contribution margin declined actually 10% from the first quarter of the previous year. On a volume basis, Northern California represented 34% of our mix in first quarter of 2015 on a ready-mix volume basis. And that tick down to 24%, both because of the abnormally wet weather and also some acquisitions that impacted the volumes and positively impacted volumes in other regions. But the tick down is not a structural derivative of any market conditions. It's solely because of the mix shift.

[Joseph Tusa:]

Adam, just to add to Bill's commentary, if you look at the individual markets, as I mentioned a bit earlier, both in selling prices and margin spreads, we've actually improved not only year-over-year but sequentially as well.

[Adam Thalhimer:]

Okay, great. That’s it from me. Thanks.

[William Sandbrook:]

Right, thanks Adam.

[Operator:]

Our next question comes from Craig Bibb from CJS Securities. Your line is now open.

[Craig Bibb:]

Okay, just a quick follow-up on margin over materials. So sequentially that had been trending down for three quarters. You actually just turned it back up. Where do you see that go on later in the year?

[William Sandbrook:]

Well, obviously we're having price increases right now both in our products and also in our raw material costs from the cement and aggregate suppliers. So as you can see through the last 20 quarters, in the last five years, we've successfully passed it on, outside any mix shifts. So we fully intend to continue to pass on any price increases that are affecting us.

[Craig Bibb:]

Okay, do you think you can get to like up 51% or close before the year is over?

[William Sandbrook:]

I'm not going to say where we can get it to. Just remember our pricing is project-by-project and it's region-by-region and our raw material increases are not monolithic across the portfolio. So however that ends up in the end is where it's going to be. Directionally, it should be in the right direction.

[Joseph Tusa:]

And Craig, an increase in the Northern California volumes, of course, would improve that margin percentage.

[Craig Bibb:]

And speaking of the right direction, 18% organic growth was off the charts. You had an easy weather comparison on Texas. You are about to have another one, you might have some catch-up in California, this quarter. Can you do something similar in the second quarter?

[William Sandbrook:]

Similar to first quarter?

[Craig Bibb:]

18% organic, yes similar.

[William Sandbrook:]

I'd have to look at actually the Texas impact in the second quarter of last year. Obviously, we do have some favorable comps there. I don't believe it's as favorable in California although we're coming off a very wet first quarter. So it's to be seen yet how the weather plays out for May and June. We did have some wet weather in April in Texas as everybody has seen on the news as well.

[Craig Bibb:]

Okay, and you are having wet weather in New York now also is that trending the same or…?

[William Sandbrook:]

Well, it's spring, so it's going to rain in spring in some regions and it's just how it all shakes out at the end of the quarter, which we obviously have no control over. We try to control what we can control and weather is not one of them.

[Craig Bibb:]

Okay, and then it looked like, I mean you guys are generating a lot more free cash right now, and using that to expand your ag and purchased Greco and Strickland. Can you talk about uses of capital for the remainder of the year and then maybe touch on where you want that to be when the cycle peaks.

[William Sandbrook:]

Yeah, Craig, the use of debt for the remainder of the year, we will continue to invest in our mixer truck fleet and other equipment, similar to the levels that we had last year and probably somewhat higher with the growth that we've seen in the business. The funding will come not only from free cash flow that we generate, but the capacity under the ABL and we are continuing to look at other sources of capital in the debt markets as those have become fairly, fairly attractive recently. So we would expect to see similar patterns for both sources as well as deployment of capital.

[Craig Bibb:]

Okay, anything on the M&A front?

[William Sandbrook:]

Pipeline continues to be healthy. We expect further deal flow this year. We're going to make good deals. So we're not in any time constraint to just continue to be a serial acquirer. We want to be a serial good acquirer. And I do anticipate that we'll have some opportunities through the year.

[Craig Bibb:]

Great, got it. Thanks a lot guys.

[William Sandbrook:]

Thanks, Craig.

[Operator:]

Our next question comes from Trey Grooms from Stephens Inc. Your line is now open.

[Trey Grooms:]

Hey, good morning and congrats on a good quarter guys.

[William Sandbrook:]

Thanks Trey. Thank you. Good morning.

[Trey Grooms:]

Real quick on - well, first just a point of clarity. You guys mentioned 29% backlog growth. How much of that was organic? I know that you made a mention earlier about 8%, but I missed what that was exactly?

[William Sandbrook:]

8% was sequential from quarter four of 2015.

[Trey Grooms:]

Okay.

[William Sandbrook:]

And part of this growth is from acquired companies, but it becomes very difficult to separate that now as we combine our companies together and try to attribute current generated backlog to legacy or acquired companies. And it's really kind of a pointless exercise because in California we merged together the Right Away in central concrete operations in New York; we merged the Greco, Ferrara, and legacy Eastern operations in DC; we merged the two operate DuBrook and Superior; and in New Jersey, we merged Colonial Concrete with Eastern. So it's very difficult to try to separate that at this point. But there is some that we've gotten from those companies. But additionally, we have additional plants and additional capacity now to fill. So you can expect that to continue to stay at a healthy level.

[Trey Grooms:]

Okay, I understand that, and as far as kind of against the backlog, you mentioned project pipeline is robust. Can you talk about the type of projects you see there, is it more multi-family or office and is there any big profile, high-profile projects we should be watching out for in any of your key markets?

[William Sandbrook:]

Well, let's talk a little bit about specific jobs. We have a large portion of the LaGuardia Airport yardage [indiscernible]. We had Manhattan West Tower at 70,000 yards, Hudson Yards 55, 70,000 yards, Hudson Yards Tower D, Hudson Yards Tower E, still working on the Goethals Bridge, still doing the Tappan Zee land-based approaches to the bridge in New Jersey, 90 Columbus Circle, The Ellipsis [ph] high rise. In Washington DC we have the Wharf, in Dallas we have Toyota and The Reunion Tower and the Facebook DataCenter. In California, we have the San Antonio village, the Apple Campus [ph], Nvidia. And these are all high, high profile jobs in each of our markets. And there are mixed use, some residential, some commercial, some office, some infrastructure. It's a nice spread of projects across all of the sectors that we service.

[Trey Grooms:]

That's great color. I appreciate that, Bill, and then I guess kind as a follow on to that, specifically in the New York market. I mean it sounds like you guys got a lot of things going for you and a lot of opportunity there. There is some concern around the high-end residential kind of vertical build there slowing in New York City. But it sounds like your outlook stays positive, and is it safe to say that you guys feel like there's plenty out there to kind of pick up any slack that would come from any of that, high-rise, high-end residential build out.

[William Sandbrook:]

Yeah, I mean that is slowing down. But as I just went through that whole list of projects and I can tick off another 10 that we're on in New York City that are - only so many people can afford $5 million apartments, but there is a need - for people that can afford less expensive apartments and they both need concrete. And as we've talked about many times before, the dynamics of high-end residential and a limited number of people that can afford it is pushing multi-family construction across the river, to the bay-owned Jersey City, Fort Lee, Hoboken and the same dynamics happening in California, where it's pushing development over in to the East Bay and in Oakland. So we're seeing increased activity in that sector in multi-family residential in both Northern New Jersey and the East Bay and there is plenty of other type projects within the core New York City and San Francisco market, that it's immaterial to me that, that one small segment of the residential segment or sector might be slowing a little bit. There is a lot taking its place,

[Trey Grooms:]

Thanks for all the color and good luck guys.

[William Sandbrook:]

Hey, Thanks.

[Joseph Tusa:]

Thanks Trey.

[Operator:]

Our next question comes from Scott Schrier from Citi. Your line is now open.

[Scott Schrier:]

Good morning. Let me also say congrats on a great quarter and thanks for that color on the large projects, which kind of leads in to my first question. As you grow and you take on these big projects and you have more capital at your disposal, does it change the way you look at acquisitions, whether it's deploying capital for larger acquisitions, whether it's on the ready-mix side or multiple ready-mix plants versus maybe a larger aggregates quarry?

[William Sandbrook:]

Yeah, that's a fair point, Scott. Obviously our capacity now to fund, source and execute larger acquisitions is exponentially more than it was in 2011 and 2012 and incrementally more on a sequential year basis as we grow. So I would say that's a fair statement that we have the ability now to do larger deals, more strategic deals than we did in the past. That's fair.

[Scott Schrier:]

Got it, and then I wanted to ask again on Metro spread in a different way, some of the other competitors have been realizing like a strong aggregates pricing and also cement increases are expected to go through. So can you just talk about how you gain comfort in using your scale and purchasing power to both get these accounts on your purchasing versus also pushing all of that through to your customers to maintain these levels of material spread margin?

[William Sandbrook:]

It absolutely a two-pronged strategy, as we build out our plant network within each of these very difficult to service urban environments, it gives us the ability to do projects that only a handful of competitors can also compete on, which gives us a significant ability to get value for our service delivery and our product. So that's on the price side. On the cost side, which is a corollary as we get these stronger positions by definition we'll be a larger consumer of aggregates and cement than we were prior. Aggregates and cement is bought locally or regionally at most because of its cost of transportation. And make no mistake about it, that we use our regional power combined with the national overlay of multiple touch points with some of the large vendors to make sure that we get very, very fair deals for both parties because we're providing a large outlet, but also we're going to get a little bit of price because of that ability to buy large volumes.

[Scott Schrier:]

Great, thanks. Appreciate the color. Good luck this quarter.

[William Sandbrook:]

Hey, Scott. Thank you.

[Joseph Tusa:]

Thanks Scott.

[Operator:]

Our next question comes from Michael Conti from Sidoti & Company. Your line is now open.

[Michael Conti:]

Hi, good morning.

[William Sandbrook:]

Hey, Michael.

[Joseph Tusa:]

Hey, Michael. Good morning.

[Michael Conti:]

Yes, so just looking at quarter two, Bill, you touched upon weather in Texas. Are you seeing any impact to volumes in the second quarter?

[William Sandbrook:]

Well, we have had some weather impacts, as we said earlier, in April in Texas. In fact the Trinity River overflowed at banks once again for about the eighth time in the last 365 days. So we were weather impacted and the first week of May had some rain here. And I know that the weather is not great in the New York area right now. But this is normal and last year, I would say was abnormally wet in April and May in Texas. I hope not to repeat that. We will see how it shakes out in May and June yet.

[Michael Conti:]

So I mean - so how should we think of, I guess this is sequential increase in the spread. I mean if you're having a greater allocation to some of your higher margin regions, should we think of that, in that way?

[William Sandbrook:]

I mean, that's fair. I mean, if Texas is weather impacted again, and California is not as it was in the first quarter with us not lifting a finger, our numbers will change just because of that mix shift. We may in fact see that again. So you have to really dig into the numbers of what the effect of mix is and what the effect of our underlying actions on price and costs are.

[Michael Conti:]

Right okay.

[Joseph Tusa:]

Yeah, Mike, absent those mix considerations, we put some pretty strong improvements in those margins quarter-after-quarter. But as Bill said the mix consideration depending on the weather impact is an important factor.

[Michael Conti:]

Okay, and lastly, just a housekeeping question on the backlog. How much do you estimate to work through over the next six months or so?

[William Sandbrook:]

About roughly 50% to 60% of that backlog, Michael, is a zero to six month forward period of time. And so that will give you a little bit of a gauge. I would caution though that there's not a perfect corollary between backlog and revenue recognition as you know. But that's roughly the composition of the backlog.

[Michael Conti:]

Right, okay. Just a rough estimate. Great, I appreciate it.

[William Sandbrook:]

Okay, Mike. Thank you.

[Operator:]

And we have a follow up question from Craig Bibb from CJS Securities. Your line is now open.

[Craig Bibb:]

And next, if you can tell us - with the mix moving away from California and towards Texas, your price is actually up sequentially. Could you give us a little color on what's going on with the price in Texas?

[William Sandbrook:]

All of our region sequential pricing is up. And as you know, the bulk of our business in Texas is the Metroplex and the Metroplex has a very healthy pricing dynamic now, just because the level of activity for us and all the ready-mix players is at such a high level.

[Joseph Tusa:]

Yeah and Craig, you probably know we had some pretty significant acquisition activity up in the New York area, that also has a higher level of volume in Q1, 2016.

[Craig Bibb:]

Okay, I think you mentioned this but the percentage of your ready-mix that's being supplied internally now, is what?

[William Sandbrook:]

EBITDA percentage is roughly 20% to aggregate and aggregate related, which is up materially year-over-year.

[Craig Bibb:]

But of your ag needs for concrete, how much are you supplying with your own internally?

[William Sandbrook:]

We - some of our aggregate production about - we use about 50% of our ag production internally, which is where we have ag, it's outside of California, it's about 30% of our needs.

[Craig Bibb:]

30% of your needs.

[William Sandbrook:]

And Ags are defined sand and coarse aggregate or hard rock.

[Craig Bibb:]

All right. Okay, great. Thanks a lot.

[William Sandbrook:]

Okay, thanks Craig.

[Operator:]

[Operator Instructions] I am showing no further questions. I would now like to turn the call back over to Bill Sandbrook, Chief Executive Officer for any further remarks.

[William Sandbrook:]

Thank you, Ayela. Thank you everyone for participating in the call this morning and for your continued support of U.S. Concrete. This concludes our call and we look forward to discussing our second quarter results with you in a few months. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone have a great day.