渥肯建材 (VMC) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the first quarter Vulcan Materials conference call. My name is Lisa and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Don James, Chairman and CEO. Please proceed.

Good morning. Thank you for joining this conference to discuss Vulcan's first quarter results. I'm Don James, Chairman and Chief Executive Officer of Vulcan Materials. Joining me today is Dan Sansone, our Executive Vice President and Chief Financial Officer, and Danny Shepherd, Executive Vice President, Construction Materials. Before we begin, let me remind you that certain matters discussed in this conference call contain forward-looking statements which are subject to risks and uncertainties. Descriptions of these risks and uncertainties are detailed in the Company's SEC reports, including our most recent report on Form 10-K. Let me begin by making some brief remarks about last week's tragic and devastating tornadoes that moved across the southeast. As you know, our home state, Alabama, was particularly hard hit by these storms.

First, on the human perspective, I'm pleased to report that all Vulcan employees living in the numerous affected areas in Alabama as well as Mississippi, Georgia, Tennessee, North Carolina and Virginia are safe although some employees have lost their homes and many more have suffered serious property damage. But there is great devastation, loss of life, and many tragedies as a result of the tornadoes in many of the communities where Vulcan has operations. Virtually all of us here in Alabama and our other southeastern states know someone affected by the storms. So on behalf of all current and former Vulcan employees, let me say that our thoughts and prayers go out to those who have suffered loss.

Vulcan is actively involved in the recovery effort here in Alabama and in our other affected states with both human resources and financial support. I would like to thank every employee who has jumped into action to help others. Your can-do effort helps make this organization special. From an operations perspective, we had modest damage and electrical outages in several locations but nothing that should impact our ability to serve our customers going forward.

Turning now to first quarter, our results were generally in line with our expectations and support our broader expectations for full-year volume and earnings growth in 2011. Freight-adjusted aggregates pricing was in line with the first quarter of the prior year. Unit materials margins were higher in both ready-mixed concrete and asphalt mix. On a comparable basis, SAG expenses were flat with the prior year and a significant amount of earnings effect from higher unit cost for diesel fuel and liquid asphalt was recovered through improved production efficiencies in aggregates and higher pricing for asphalt mix.

One aspect of our first quarter results that was outside our expectations was the wet weather impact on March sales volumes. After a very solid start in January and February, extremely wet weather hampered aggregates shipments in March in many of our key markets. As a result, aggregates shipments in the first quarter were almost 3% lower than last year's first quarter. Despite the inclement March weather, our Virginia, Tennessee and Georgia aggregates businesses realized increases in shipments compared to last year's first quarter. Other markets, however, including South Carolina, Florida and along the Gulf Coast, experienced declines in shipments.

Freight-adjusted aggregate pricing was in line with the prior year but more importantly, as underpinned by several factors we consider to be positive. First, there was less variation around the change in average selling prices across our geographic footprint. Second, on a same-store basis adjusted for mix and freight, the overall average selling price was slightly above last year's levels. More specifically, the adjusted selling price in Florida increased from the prior year's level, a very positive sign for one of our important markets. During this economic downturn, our employees have effectively managed the business. These efforts have not only included minimizing costs, but have also included aggressive management of working capital, including a reduction in total aggregates inventory. In the prior year, inventory reduction negatively affected our GAAP earnings and margins because of the reduced production levels.

In the first quarter of this year, our production costs benefited from our ability to increase production and efficiency and helped offset a 34% increase in the unit cost for diesel fuel. Overall, first quarter segment earnings in aggregates were approximately $11 million versus $15 million last year. Most of the decline in segment earnings in aggregates related to the lower volumes. In our asphalt segment, earnings were a loss of $200,000 versus earnings of $1 million in last year's first quarter. Selling prices for asphalt mix increased 4%, offsetting most of the earnings effect of the 12% increase in liquid asphalt costs. Unit material margins in it is first quarter increased slightly from the prior year and were in line with those in the second half of 2010.

In our concrete business, the segment loss of $14 million improved from last year's first quarter. Unit materials margins in ready-mixed concrete improved from last year's first quarter due primarily to higher pricing. The average unit price for ready-mixed concrete increased 4% from the prior year. The cement segment first quarter loss of $3 million was due primarily to a scheduled maintenance event in the quarter. There were no similar events in last year's first quarter and no similar events were scheduled for the remainder of 2011.

SAG expenses in the first quarter were $77.5 million versus $86.5 million in the prior year's first quarter. Excluding the effect of the $9 million non-cash charge for donated real estate from last year's first quarter, SAG expenses were flat with the prior year. The $25.5 million in recovery from legal settlements included in the current year's first quarter results reflects the arbitration award we received from insurers related to the lawsuit settled last year with the Illinois Department of Transportation. A further arbitration proceeding to recover additional amounts that we paid in settlement and for defense costs is pending against another insurer. The timing and amount of recovery from this insurer, if any, is unknown at this time. Earnings from discontinued operations are due principally to receipt of an annual earnout related to the 2005 sale of the Company's chemicals business as well as a $7.5 million pre-tax gain due to an insurance arbitration award referable to previously settled lawsuits against the Company's divested chemicals business.

Turning to our outlook for the remainder of the year, let me start by saying that we expect earnings growth in 2011 driven mostly by growth in aggregates earnings. We continue to expect aggregate pricing in 2011 to increase 1% to 3% from last year's levels and for aggregate shipments to be 2% above last year. We expect the full year growth in volumes to be weighted more towards the second half of the year driven primarily by growth in demand. Weather-related disruptions in March and April across our markets in the southeast and along the Mississippi River system will likely impact shipments in the near term and push some demand to later in the year.

The full extent of the impact on shipments in the second quarter or in the second half of the year cannot be fully assessed until water levels recede in the Mississippi River system and storm damage across the southeast is cleaned up enough to start reconstruction activity. Certain large projects in a number of our key markets are expected to start in the second half of the year and support our expectations for second half volumes growth. Higher selling prices for aggregates and the benefits of production efficiencies and cost management measures are expected to offset higher energy-related cost pressures expected throughout the remainder of the year.

In our asphalt business, we expect earnings to increase from the prior year, reflecting a modest increase in sales volumes as well as improved materials margins despite upward revisions to the estimated unit costs for liquid asphalt. In concrete, we expect the loss reported in 2010 to narrow somewhat while cement earnings are expected to decrease modestly from the $4 million loss reported last year. Public construction activity, particularly highways should continue to provide solid support for aggregates demand and help drive the operating results I just outlined. As you know, in April, Congress passed and the President signed legislation funding government programs through the remainder of the current fiscal year ending September 30, 2011.

In spite of the cuts made to many programs, the legislation maintains core federal aid highway funding at fiscal year 2010 levels. While Congress works to draft a new six-year federal highway bill, several of our key states are proactively working to make major investments in their transportation infrastructure. In April, Virginia's Governor signed into law a plan to infuse Virginia's ailing transportation infrastructure with $4 billion over the next three years.

In Texas, lawmakers are proposing the authorization of another $3 billion of general obligation bonds for transportation needs as part of the next two-year budget. In November 2007, Texas voters approved Proposition 12 authorizing the State Legislature to issue up to $5 billion in general obligation bonds for highway improvement projects. During the three months ended March 2011, total contract awards for highway construction in Vulcan-served states including awards for federal, state and local projects were in line with the prior year compared to a decline for all the remaining non-Vulcan served states.

Within Vulcan's footprint, several key states report sharp increases in highway awards for the trailing three months ended March. For example, contract awards for highways in Virginia were up more than 100% while in California and Texas, awards were up 42% and 34%, respectively. One factor driving the sharp increase in contract awards I just mentioned, particularly in Virginia, is the still significant levels of stimulus funds remaining to be spent in our states.

According to the Federal Highway Administration, approximately $6 billion, or 36%, of the total stimulus funds apportioned for highways in Vulcan-served states remains to be spent. In general, private construction activity remains at low levels. However, some indications of stability are developing. Single-family housing starts bottomed late in 2009 and multi-family starts have shown strength in recent months, both positive indicators for residential construction activity.

Our current outlook for residential construction activity assumes some continued growth in 2011, albeit from a small base. While private non-residential construction remains weak, rate of decline in contract awards has slowed considerably. Trailing 12 month contract awards for construction activity referable to the manufacturing sector have been strong while modest growth in retail and office construction occurred in contract awards for the trailing three months ended March 2011. A number of external forecasts are calling for private non-residential construction activity to bottom in 2011, and these increases in contract award activity I just mentioned provide some support to those views. The start of the sustained recovery in this end market will be influenced by employment growth, capacity utilization, business investment and lending activity.

Selling, administrative and general expenses in 2011 are expected to be lower than last year. Total SAG expenses of $327 million in 2010 included approximately $24 million of certain adjustments and charges referable to the fair market value of donated real estate to severance costs and expenses related to legal settlements. In 2011, we do not anticipate similar adjustments and charges. As a result, we expect SAG expenses in 2011 of $305 million to approximate the comparable level in 2010.

Interest expense for the full year is expected to be in the range of $170 million to $180 million based on expected interest rates and a reduced level of capitalized interest on capital projects. We have carefully reviewed our capital spending needs based on projected demand levels and as a result, we now expect to spend approximately $125 million in 2011, up from the $86 million spent in 2010 but still sharply lower than the $353 million spent in 2008. Now if our operator will give the required instructions, we'll be pleased to try to respond to your questions.

(Operator Instructions) Your first question is from the line of Kathryn Thompson with Thompson Research Group.

Good morning. This is Jamie Baskin on the line for Kathryn. Can you speak to how volume trends have been since quarter end. In other words, did the bad March weather lead to any release in pent-up demand?

Sad to say, the weather in April didn't improve. It got worse, and with the tornadoes and the rains and the destruction, the disruptions of shifting and production, while we don't give monthly volume, certainly the weather impact has continued negatively.

Okay. And then as a percentage of sales, can you talk to how much of your revenues are directly related to stimulus in Q1 and do you have a -- and what's your expectations are for fiscal year '11?

I can answer it this way. This is largely federal government data and it is on a fiscal year basis for other than a calendar year basis, but it gives you some indication that total stimulus spending for highways in 2010 was about $11.8 billion. In 2011, it's 9 -- we anticipate it will be $9.4 billion, but I think the more important factor for us is that a number of our key states still have a lot of stimulus money to spend. For example, Virginia has spent -- still has almost 70% of its stimulus money yet to spend. Georgia, California, and Florida have almost half of their stimulus money yet to spend. So there is still a significant stimulus effect moving forward, but I can't tell you how much of our revenue in the first quarter came from stimulus projects.

Okay. And then my final question, we have been hearing [rumblings] of a mid-year price increase in aggregates. Just wanted to see if you could provide your thoughts on that?

Well, we have put in price increases in a number of markets already this year. We'll continue as market conditions warrant to put in price increases. We -- as we have said many, many times before, we don't have a generalized across-the-board price increase on January 1 to July 1. They are spread throughout the year based on individual market conditions, but we do expect price increases to take effect and are taking effect and have taken effect so far in 2011.

Okay. That's all for me. Thank you.

Your next question comes from the line of Garik Shmois with Longbow Research.

Hi, thanks. This is Garrett Shmois. Let me take a stab at the mid-year price increase question a different way if I could. Don, is it -- given what you have seen out of markets that have secured pricing already this year, would you anticipate some markets would be able to secure a second price increase in 2011?

Yes.

Okay. And we assume that those would be markets in which volumes were the strongest?

Generally that would be the case.

Okay. And could you -- you mentioned January and February were off to a good start, March obviously was hit by the weather. Is it possible to provide how much volumes were up in January and February?

I think they were up about 6% or 7% over the prior year.

Okay. And then on your volume guidance for the full year, you maintained the midpoint at 2%, but has the way you have bracketed your guidance internally changed at all given what you have seen in 1Q and here at the beginning of 2Q, meaning, I think on the last call, you've thought that maybe there was 100 basis points to 200 basis points either direction or that 2% volume range? Could that bracket be expanded given what you're seeing right now?

Well our range -- and this is going to shock you, is zero to 4% so that comes in at about 2%. The volume reductions that we have seen as a result of weather we would expect to recoup by the end of the year, so it would really be a -- as I tried to indicate, we don't see the weather impact of March or April impacting negatively volumes for the full year. That volume will materialize, and I -- as I indicated, too, there are several large projects that will begin across our footprint in the second half of the year and that's really our basis for predicting volume growth in the second half and for the full year.

Okay. Thank you. And I guess two quick questions. On concrete and cement prices, if you could address the increase in concrete prices relative to the year-ago period, what markets you secured pricing there or whether or not it was mainly mix related and if cement price increase in Florida had gained traction here in the beginning of the year? Thank you. Cement prices -- concrete prices, rather, improved in Florida. They are also improving in some of our western markets, and we haven't had any large drops in concrete pricing in any of our markets. On average, as I said, they were 4%. Actually ,they were up 4.4%, so we think there is some stability coming to concrete markets and hopefully, some improvement in pricing. Cement prices are still under some pressure, but we expect stability there. Cement is driven by concrete demand and I think the reality is that as concrete markets improved, the ability for cement price increases to stick will be substantially better. Okay. Thank you very much.

Your next question comes from the line of Jack Kasprzak with BB&T. Sir, your line is open. Mr. Jack Kasprzak with BB&T, your line is open.

Thanks, good morning, gentlemen.

Good morning, Jack.

Sorry about that. I was going to ask about SG&A expense in the first quarter. Is that a level on a quarterly basis? Were you more or less expected to be for the balance of the year or might there be further improvements in terms of the dollar amount?

I think it's -- that's adjusted for all the noise we had in there, the run rate is probably close to what we would expect for the full year.

Okay. With regard to diesel prices --

Go ahead, I am sorry.

That's -- I am sorry. With regard to diesel prices, up 34% in the quarter, can you tell us your average price and gallons used in the quarter?

We used probably about 8.5 million gallons in the quarter. Our diesel price is a blend of a lot of geographies and a fair amount of our diesel is on-road diesel. As you may know, we have trucking businesses in Texas and Illinois on highway trucking, and we have ready-mixed trucks in a number of states, so we are very happy to pay the fuel tax associated with the on-road diesel. But that does flow through our numbers, but I think we -- our first quarter price was about $3.16 including the tax and the geographic and that was up about $0.79 from last year.

Okay.

We actually pay $3.16 anywhere, probably the answer to that is no, but if you add it all up and including the fuel tax, that's what it comes out to be.

Got it. And I think you had said or indicated that you think aggregates' profit will be up for the year. Obviously first quarter is seasonally very slow quarter, and your aggregates profit was down a bit in the first quarter. Given the headwind from diesel, would the profit probably mirror your expectations for volume i.e., most of the gains are likely to happen in the second half versus starting in the second quarter?

Yes. I think it will be second half driven. With our incremental margins, a little bit of volume goes a long way, and if we can get the 1% to 3% price increase we expect and the 2% volume increase we expect, that will move the needle. The really good news -- and I -- for us was that the productivity improvements in our aggregates business in the quarter virtually fully offset this 34% increase in diesel fuel costs, and that productivity improvement is driven by the fact that we are -- we have gotten our inventory levels down to a point where we can actually run our plants now on an efficient schedule which we did in the first quarter at least up through March when the weather hit us. But the ability to run our plants really improves our productivity, particularly our labor productivity but every other form of productivity as well, and we enjoyed that in the first quarter and as I said, it virtually fully offset this 34% increase in the cost of diesel fuel.

Okay, great. Thanks very much, Don.

That's a big deal for us. We have gone through a lot of pain over the last two years or three years getting our inventory level it is down so that we can actually produce to current levels of demand instead of having to pull out of inventory which, as you know, hurts your GAAP earnings.

Got it. Great. Thanks very much, Don.

Your next question comes from the line of Scott Levine with JPMorgan.

Hi. Good morning.

Good morning.

You mentioned, I think, in the aggregates business that you saw generally more uniformity in pricing trends across regions. I was hoping you might be able to comment on which regions generally experienced greater relative improvement in the quarter sequentially and any other observations you might have on regional pricing trends?

Yes. What we were trying to convey is that there was less variation from prior -- the prior year's quarter both up and down, so the range of change narrowed. That's not to say the absolute price level equalized across the country, and I know you didn't mean to suggest that, but the change -- the places where we saw really good price improvement was in Alabama, along the Mississippi River system, in Tennessee and Kentucky, in Los Angeles, in Arizona and New Mexico, in northern Illinois. So those are -- and as we said earlier, we actually saw some price improvement in aggregates in Florida which was the first time we have seen that in a long time, so we were very -- we're happy and optimistic about that. So those are some of the markets. We didn't have markets that had huge price drops like we had seen in some prior quarters and huge, I mean double-digit so that band has narrowed which I think means that stability is coming back into the pricing environment across many, many markets.

That's encouraging to hear. One follow-up, if I may. It sounds like expectations have continued stability and highway funding [underpin] your outlook for '11. We have had some developments and some proposals regarding legislation, some news out of maybe the House before we can expect out of the Senate. Have your thoughts changed in any way maybe even beyond 2011 or what are your bigger term thoughts in terms of what we may ultimately see with renewed highway legislation?

Well, that is a key focus of ours at this point as you can well imagine. The -- if you look at the balances in the existing Highway Trust Fund plus the projected receipts into the trust fund, there is ample money to maintain the current level of spending in the regular Federal Highway Program which is $40 billion, $41 billion plus or minus. We can keep that level through 2012 and really into well into 2013 without any change in revenue going in the Highway Trust Fund. We are -- take some comfort in the fact that the bipartisan support for highway infrastructure spending at the federal level that has existed for many Congresses, really became apparent again in the fact that the highway program was not cut in the budget cuts that have occurred so far this year. The issue that becomes the challenge is that the projected receipts in the Highway Trust Fund of $32 billion or $33 billion a year, if the new Federal Highway Program is limited to those, that existing level, it would be a 30% to 31% drop in the money going to each of the states.

When we have met with congressmen and senators and have pointed out what would seem to us to be the obvious, and they have to go back to their states and say tighten your belts, guys, you're only going to get 69% or 70% of what you have had for the last three years or four years, I think that causes a lot of concern. So the jury is still out on what happens, but the balance is in the trust fund as a result of the supplemental appropriation that went in with the [HIRE Act] about a year ago, created enough money in the trust fund to maintain the current level of spending at least in the calendar '13 but by that point we will have to have a new highway bill, so that's where we are.

Got it. Thank you.

Your next question is from the line of Ted Grace with Susquehanna. Please proceed.

Hello guys, good morning. First question, I was hoping to run by you is a good follow onto the question just asked. Just wondering if you could help us think about, at a little more granular level, how you're thinking about state and local government budgets. I think we all know that they're still struggling from all the articles out there talking about increases in tax receipts, what they often overshoot in the title is the fact that their cost basis is rising at a fast rate so the budget deficits are widening. You have seen in Oregon and Kansas, both Governors talk about taking money out of the Highway Trust Funds at the state level to plug budgetary holes. You had Illinois recently introduce a six-year highway bill at the state level that was about 10% smaller than its predecessor while the state also acknowledged they had no idea how they would really pay for it, given their credit profile.

And then we've got obviously the issue of gas prices negatively impacting fuel consumption with federal numbers just coming out this week, reaffirming that. And so just as we think about those headwinds, I am just wondering, as a starting point, if you could talk about how you think about those issues and I know you mentioned some of the general obligation proposals, I think you said taxes in Virginia but are those funds really offsetting the clients elsewhere? So on a net basis, can you help us understand how to think about the state issue?

The state and local issue is obviously in flux, and there are as many answers to your question as there are state and local governments and budgets. One of the things that we find encouraging and there's a US Treasury Department report with an update on this topic, but some 70% to 80% of the state and local ballot initiatives to support increased spending for highways have passed. There is a -- when voters are asked to spend more money at the state and local level for a specific highway project, there has been very strong support for that across the country which tells us that while nobody wants to pay higher gasoline taxes today, particularly with high gasoline prices, there is a strong grassroots support because everybody is -- when you look at highway congestion numbers and highway condition numbers, the need is clearly there. Nobody debates the need, the whole issue is funding. We don't know where it is going to come out.

I think we have -- our focus is largely on the Federal Highway Program at this point because we think that's where -- that's about one-third of the total highway spending and the US state and local is about two-thirds, but some states and some locations are increasing. Some, as you point out, are diverting highway funds for budget deficits, so there are many different stories around the country, but there has been great stability in highway contract awards as we pointed out in the Vulcan-served states notwithstanding all of the noise. Highway contract awards have been maintained at the levels of the last year or two years which is true at the federal level as well. So the answer to the question is there are a lot of different movements in a lot of different places but when you run them all through the system there has been great stability in the highway spending but the big issue, the single biggest issue is going to be the -- at the renewal of the multi-year federal highway bill and how that comes out.

Sure. As part B to that question, I was just wondering if you could talk about -- if you could just help us calibrate how we should think about the impact of rising diesel prices, liquid asphalt pricing and if you could touch on what your liquid asphalt costs were in the quarter, that would be great. And potentially, aggregate price increases on fixed budgets at the, at least on the road and highway side for state, local and federal because as you have that inflation, right, the dollars are fixed, you can consume less aggregates ultimately. Well, that's what my -- intuitively would assume so could you just help us understand how that balance works?

Well, certainly liquid asphalt prices were up about 12% in the quarter over the same quarter last year and we're projecting higher liquid asphalt prices throughout '11 and that's built into our projections. Fortunately, our asphalt mix prices are up which is generally what happens, asphalt mix prices respond with some lag because of the whole bidding process to increases in liquid asphalt costs. We're expecting, as we said, our materials margins in asphalt to improve which means we're -- we anticipate price improvement more than offsetting the increased cost of liquid asphalt along with some productivity improvements and higher volumes in some of our markets which would improve our productivity.

And I guess that's the --

There is clearly with $1 of highway spending if it is going -- if a larger portion of that $1 is going to liquid asphalt, that means a smaller portion of the $1 will go to everything else including aggregates, so there is some marginal impact there on the higher input costs.

Okay. And then, I -- if I heard you correctly, did you say your infrastructure volumes would be down 20% year-over-year Was the internal expectation?

I didn't say that.

Okay. Then I apologize. I guess I misheard you.

Actually, we're looking that -- we think infrastructure, including public and private, will be up slightly in 2011 over 2010.

Okay. Maybe it was the context was the stimulus because if I look at your expectations, you said $9.4 billion spent this year versus $11.8 billion last year.

That's highway stimulus.

Yes. So I guess two questions. One, how do you offset that and, two, basically if I look at your numbers, you're assuming that all the stimulus dollars will be consumed by the end of this calendar year. If you look at the CBO analysis --

I didn't say that.

But I know you spent $5.7 billion in 2009 and $11.8 billion last year, so if you spend $9.4 billion now, that's $27 billion. So that's basically the whole pot. But the CBO analysis would tell you they think that 10% to 15% is going to get spent in 2012 and beyond. So I am wondering if you can help us reconcile --

(multiple speakers) the CBO say $2.5 billion in fiscal '12.

I am talking calendar year, so maybe that's -- I was going to ask because --

All right. So let me back up. You said infrastructure, we have a separate category of infrastructure which is non-highway infrastructure. We see that being up 2%. Our highway piece, we see up being 5% for the year. That is a combination of higher spending out of the regular Federal Highway Program, again these are fiscal year numbers, up from $32 billion in 2010 to $35.6 billion in 2011 and that more than offsets that $3.6 billion increase there more than offsets the $2.4 billion decline in the stimulus spending for highways at the federal level. So the net, there is a net increase in projected spending for federal highways in 2011 over '10 if that helps you.

Yes. That's actually exactly what I was hoping to ask and the last question I promise, just in terms of the dividend, can you just give us a sense how you think about the stability of the dividend? I think given the cash generation profile and the liquidity expectations you have and I know it is something you guys talk about at the Board level but can you just give us a sense for how comfortable you are with the sustainability of the quarter, the $0.25 per quarter?

Sure. I think the basic issue is you pay dividends out of cash earnings, not out of GAAP earnings, and we look at our cash earnings as the source of cash flow for dividends and we -- our cash earnings are sufficient to pay the dividend and fund our CapEx program and help with some debt reduction.

Okay. That's great. Guys, thanks a lot. Best of luck this quarter.

Thank you.

Your next question comes from the line of Jerry Revich with Goldman Sachs.

Hi, good morning.

Good morning, Jerry.

Don, excellent concrete pricing in the quarter. Can you talk about whether pricing momentum continued through the tough weather period in March and April and also can you touch on what ready-mixed pricing trends you're seeing out of your customers in areas where you're not vertically integrated in that business?

Our view is that concrete pricing not only is going up but has to go up because I don't think many people in the world are making any money in the concrete business. Some are not covering their cash costs. So that is an unsustainable market situation in our view. Our -- as I said, our ready-mixed pricing in the quarter across all of our ready-mixed market was up 4.4%. It was actually up more than that in March, so if the answer is yes, the momentum continues.

Helpful. And other part of the question, Don, can you comment on whether in areas where you're not vertically integrated, are we seeing the same pace of price increases, faster or slower, just any context you could give us would be helpful.

Where we see concrete prices going up across our footprint.

And can we have the same discussion on the asphalt side? I was surprised pricing wasn't up faster this quarter considering what we have seen on the liquid asphalt side. Are you seeing asphalt mix prices accelerating in March and April like you're talking about on the ready-mixed side?

Yes. Our asphalt prices were up more in the month of March than they were for the quarter which means prices are accelerating. The issue with asphalt mix prices compared to liquid asphalt costs, there is a timing issue, and historically, and this goes back several years, suppliers of liquid asphalt would give you price protection on large jobs that might spread over a year or two years. That really is rarely the case today. So there is a fair amount of price risk associated with asphalt mix and it takes -- generally takes a couple of quarters at least to get the asphalt mix pricing moving up or down in relationship to the liquid asphalt inputs. Clearly, today, I think we and everyone else are seeing higher liquid asphalt costs throughout the year which is the basis of improvement in asphalt mix pricing.

Okay. And lastly, can you touch on cement? I apologize. I had poor reception during any prepared portion of the remarks and I am not sure if you touched on the driver of the downtime in the quarter and how you're thinking about volumes in balance of a year and lastly, about pricing trends in cement considering what we saw in the quarter? Thanks.

Well, cement volumes are not robust anywhere, I think, including in markets served by our cement plant. Pricing will probably improve over the course of the year. We certainly hope so. That is not a material factor in Vulcan's results. Much of our cement runs through our own concrete or through swaps, which ultimately run through our own concrete so as concrete prices improve, I think it will help cement. Some people say it works the other way, cement price increases force ready-mixed prices up. I am not sure exactly which way it works. But certainly as volumes stabilize, and as ready-mixed pricing stabilizes, it will certainly help the cement pricing.

And down the -- the downtime part of the question, can you talk about the schedule maintenance? Was that a function of lower demand or were you going to run this --

It is just timing. I mean, you just have to -- when you have a big continuous process manufacturing plant, you have to take it down for annual maintenance, and we took it down in the first quarter. As I said, we didn't have a first quarter maintenance outage last year nor do we expect one for the remainder of this year so that's just a more or less annual event which has now already occurred.

Thank you.

Your next question comes from the line of Brent Thielman with D.A. Davidson.

Hi. Good morning.

Good morning.

Don, I guess between your coastal markets in California and Florida, maybe elsewhere which sounds like you have seen some acceleration in volumes at least on the infrastructure side of things. I think in general those markets contribute higher absolute pricing. How is that factored into your pricing guidance assumptions for the year, particularly given pretty weak construction activity and volume contributions in those markets the last few years?

well, our pricing guidance does have a geographic mix impact to it. Our strongest volumes are really offsetting in some senses, so there is not any tremendous geographic mix impact for the year if that's your question. It is in there, but it is not a huge factor at least based on our current outlook.

Okay. And then how were you thinking about the progression of asphalt mix pricing throughout the year? You are certainly seeing some uptick the last few quarters. But could we see some acceleration in sequential, I guess, quarter-over-quarter growth from what you have been seeing the last three quarters just given what you are seeing in the market right now?

We think asphalt pricing will be up for the full year over last year. We have a lot of work booked and that's built into our forecast. Whether we'll see quarter -- sequential quarter price improvement, I don't know at this time, probably not a lot because a lot of our work is already booked and we already know the pricing and that's built into our forecast.

Okay. Great.

If we can get 4% price for the full year in the asphalt mix business, we'll be satisfied.

Great. Thanks, Don.

Your next question comes from the line of Adam Rudiger with Wells Fargo Securities.

Hi, good morning. Thank you.

Good morning, Adam.

Typically, I think you see [in] 30% to 40% sequential growth in shipments from the first to the second quarter. I was wondering with your comments on April weather being worse than March if that was something you're still expecting to see this year?

I don't -- we have not re-forecast the second quarter based on April's weather so I don't -- I can't give you an answer to that at this point. I think as I tried to say earlier, depending upon when the water levels in the Mississippi River begin to recede and when the clean-up in a lot of markets occur so that normal shipments and production resume, there may actually be some impact on volumes from reconstruction but that's very unlikely that any of that would occur in the second quarter. If we get that this year, it will likely be in the second half. So I don't know, but I would think the second quarter will contribute slightly less to the total annual volume this year than we would have seen historically.

Okay. Thank you. And then you just said, I think that your -- if you could get 4% liquid asphalt prices, that would -- liquid asphalt mix, excuse me, asphalt mix prices up for the year, that would satisfy you?

Well, that's our projection. We will obviously try to get more as the year moves on but that's what's in our forecast.

So let's say you get the 4% and let's say that liquid asphalt stays up 12% through the year, let's just say that doesn't change. Can you remind me of what the portion of a ton of asphalt mix, what the cost breakout is, liquid asphalt versus rocks?

Yes. As a round number and this is way too simplistic, aggregates are 95% by weight, liquid asphalt is 4% or 5% by weight. If you take our average aggregates price which is $10.50, plus or minus, and you take our average liquid asphalt cost, which would be $21 or $22 of liquid asphalt cost per ton of asphalt mix, you can get into the range. But as we indicated, the 4% increase in our asphalt mix cost in the quarter virtually offset the 12% increase in liquid asphalt costs, so there is a little metric there that can help you. Liquid asphalt prices are very different in Texas and California, for example. We have asphalt mix in both markets. Our prices for our asphalt mix are very different in each market, so there is a lot of calculations in there and it is going to vary greatly from market to market but suffice it to say that if asphalt mix is up 12% for the year, and we get prices up 4%, our material margins will actually improve based on our projection.

Okay. That's what I was trying to understand. So that's all I have. Thank you.

Thank you.

I would now like to turn the conference back over to Mr. Don James for closing remarks.

Thank you very much for joining us today. We look forward to talking with you again at the end of the second quarter. Thank you for your interest in Vulcan. Have a good day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.