Noel Ryan - Head, IR Thomas Hill - CEO Brian Harris - CFO.

Robert Wetenhall - RBC Capital Markets Trey Grooms - Stephens Inc. Stanley Elliott - Stifel, Nicolaus & Company Garik Shmois - Longbow Research Scott Schrier - Citigroup Adam Thalhimer - Thompson, Davis & Company Kathryn Thompson - Thompson Research Group Brent Thielman - D.A. Davidson & Co. Nishu Sood - Deutsche Bank AG.

Welcome to Summit Materials Second Quarter 2017 Earnings Conference Call. [Operator Instructions]. And as a reminder, this conference is being recorded. I would now like to hand the conference over to Noel Ryan, Vice President of Investor Relations. Thank you, please go ahead..

Good morning and welcome to Summit Materials Second Quarter 2017 Results Conference Call. Leading today's call are Summit's CEO, Tom Hill; and CFO, Brian Harris. We issued a press release before the market opened this morning, detailing our second quarter results.

We also publish an updated supplemental workbook highlighting key financial and operating data which can be found on the investors section of our website at summit-materials.com. This call will be accompanied by our second quarter investor presentation which is available in the Investor section of our website in PDF format.

I would like to remind you that management's commentaries and responses to questions on today's call may include forward-looking statements which by their nature are uncertain and outside of Summit Materials' control.

Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. For a discussion of some of the factors that could cause actual results to differ, please see the risk factor section of Summit Materials' latest annual report on form 10-K filed with the SEC.

Additionally, you can find reconciliations of the historical non-GAAP financial measures discussed in today's call in this morning's press release. Today's call will begin with remarks from Tom Hill, who will provide an update on our business and market conditions in the second quarter, followed by a financial review and outlook from Brian Harris.

At the conclusion of these remarks, we will open the line for questions. With that, I'll turn the call over to Tom..

Thank you, Noel and welcome to today's call. As outlined in the release issued earlier today, our results in the first half of the year were exceptionally strong.

Our continued focus on operational excellence, coupled with strong underlying fundamentals within our key regional markets resulted in another quarterly performance that underscores the competitive advantages of our vertically integrated, materials-based model. Turning to Slide 4, 5 and 6 of the deck.

Overall organic volume growth has exceeded our expectations coming into the year. Demand in our markets has continued to improve as organic volumes of aggregates, cement, ready-mix concrete and asphalt all increased on a year to year basis.

Adjusted EBITDA increased 17.9% year-on-year in the second quarter, with approximately 1/3 of that growth coming from organic improvements. Adjusted cash gross profit and adjusted EBITDA margins both increased on a year-to-year basis, consistent with the long term trend.

Between May and the end of July, we completed 4 bolt-on acquisitions for a combined investment of $130 million. On a year-to-date basis, we have invested $309 million across 10 acquisitions.

Given the accommodation of strong organic growth, evidenced during the first half of 2017, together with partial year EBITDA contributions from recent acquisitions, we've raised our fiscal year 2017 EBITDA guidance for the second time this year, signaling continued confidence in the trajectory of our business.

Further, we've raised our projected full-year acquired EBITDA target from a range of $40 million to $60 million to a range of $50 million to $70 million, given what remains an active pipeline of potential targets, including more than 20 transactions currently under review.

By year end, depending on the pace of additional acquisitions, we anticipate net leverage will be between 3x and 3.5x. As shown on Slide 7 organic volumes rebounded from prior year levels across all lines of business in the second quarter.

In our Cement segment organic volumes increased 7.1% year-on-year due to strengthening demand in our Northern Mississippi River markets. Organic aggregates volumes increased 6.1% year-on-year as strength in the West region more than offset weather-related softness in the East region.

In our Ready-mix Concrete business organic volumes increased 9.2% year-on-year given improved ready-mix demand in Houston, Utah and Nevada, all 3 of which are strong and improving residential markets.

Finally, within our Asphalt line of business organic volume growth increased 3.6% year-on-year, given the pickup in activity in several East Region markets, together with an ongoing recovery in Austin paving volumes.

Turning to a discussion of materials ASPs organic average selling prices on cement increased by 3% year-on-year in the second quarter, consistent with our expectations. However organic average selling prices on aggregates declined 1.7% in the second quarter, due mainly to sales mix.

Excluding the impact of product and geographic mix come organic aggregates places increased more than 3% on a year-on-year basis in the second quarter. Turning to slides 8 and 9, Cement remains a prominent growth engine in the Summit Materials' portfolio.

Cement segment adjusted EBITDA grew 16.5% year-on-year in the second quarter, while EBITDA margins grew 480 basis points.

Our 2 world-class cement production facilities, serving the Mississippi River corridor, together with our 11 distribution terminals that span from New Orleans to Minneapolis, continue to benefit from strong underlying demand, particularly in the northern markets.

Based on projections from the Portland Cement Association, we estimate that the Mississippi River Corridor could be short domestically sourced cement beginning next year with incremental supplies of cement likely to be important from offshore markets. Currently, both of our cement plants are running at capacity.

We currently sell 80% of the cement we produce in Minnesota, Missouri and Iowa. The PCA anticipates each of these states will experience a rate of cement demand growth in the low to mid-single digits over the next several years, creating a situation where new sources of supply will need to be identified to satisfy customer requirements.

We believe U.S. cement imports which currently supply 15% of U.S. demand will need to increase over the next 24 months to satisfy demand which is projected to grow at 3.5% in 2018, 5% in 2019 and 7.7% in 2020 according to the PCA. Turning to Slide 10.

Despite a year-on-year in organic ASPs in the second quarter in our aggregates business, you can see that aggregates adjusted cash gross profit margin increased 500 basis points in the period, given strength in volumes. Cement margin cash -- capture was equally strong come, up 520 basis points to 57.4%.

The next several slides present our latest market outlooks for some of its top 3 states by net revenue. Beginning with Texas, we're seeing strong demand across both public and private markets.

On the public side, we see several large projects on deck, including the $1.3 billion construction of a dam in Northeast Texas near our RK Hall platform, the first dam construction in Texas in 30 years.

In Houston, we have the $1 billion widening of the Sam Houston Tollway which will consist of the construction of a new bridge span across the Houston Ship Channel. Construction is expected to begin here in late 2017. On the private side, we're seeing an acute housing shortage in the Permian Basin.

In Houston, housing is continued to improve in the west, south and southwest side of the city, as reflected by strong year-on-year organic growth in ready-mix volumes during the second quarter. Our homebuilding customers remain optimistic on the second half outlook for residential demand in Houston.

On the commercial side, we're seeing a lot of activities throughout the state with a new FedEx distribution center near completion, new Amazon distribution centers, broad-based construction of educational facilities and continued build out of retail strip malls.

Given this backdrop, we continue to view Texas as an exciting early-cycle market for us, as evidenced by our recent acquisition of Hannah's been and Great Southern Ready Mix. In Kansas, the state legislature recently agreed to roll back of the tax breaks that had weakened the state's finances over the past 5 years.

The budget for fiscal year 2018 which commenced July 1, 2017, should then be more balanced than in the recent past. The effect on state-level funding through K-DOT should improve over time, most likely toward mid-calendar 2018. On the private side, residential is growing at a steady pace due to reduced inventory and improved demand.

Commercial activity remains strong, especially in Wichita, similar to what we've seen in over the last 2 years. Moving in to Utah which remains our fastest-growing market. The pace of activity in Utah continues to accelerate, driving strong organic volume and price growth for aggregates in ready-mix.

Positive demographic trends have contributed to an acute housing shortage and the need for a scalable public infrastructure. Although unemployment and increased business formation has contributed to meaningful net migration into this state, resulting in a significant increase in new housing starts.

Aside from a strong private market, the state has shown a willingness to invest in roads and infrastructure to support their booming population as evidenced by the recent passage of a $1 billion general obligation bond entirely dedicated to accelerating highway projects around Utah.

Salt Lake City is currently investing $2.2 billion in a major airport expansion in addition to $650 million in a new correctional facility, both of which will be completed by 2020. As one of the largest heavy-side material players in Utah, some would look forward to participating in this state's growth. Turning to Slide 16.

Since our last quarterly call in May, we've completed 4 additional acquisitions for a combined total of $130 million. Glasscock is a vertically integrated aggregates and ready-mix business, serving the Piedmont region of the Carolinas. Texas-based Great Southern is an independent ready-mix business serving Houston.

And Ready-Mix Concrete in Somerset is a pure-play ready-mix producer serving of the south-central Kentucky region. Northwest Ready-mix is in aggregates and ready mix concrete business, that allows for the further expansion in the Intermountain region outside of Steamboat Springs Colorado, building on our January 2017 acquisition of Everest Materials.

Together, all four of these transactions allow for increased offtake from our existing aggregates facilities into newly acquired downstream businesses. With Glasscock in northwest, we're acquiring additional quality aggregate reserves in these key regions.

We anticipate that our overall mix of EBITDA source for materials which includes aggregates and cement, will increase several 100 basis points this year, up from 61% at yearend 2016. Looking ahead, our acquisition pipeline remains very active with more than 20 additional transactions currently in various stages of diligence.

While most of the immediate opportunities ahead of us are bolt-on investments, we're also evaluating several larger materials-based transactions that provide an attractive foothold in new markets. We look forward to providing you with additional updates on our progress in the months ahead. With that, I'll turn the call over to Brian..

Thank you, Tom and good morning, everyone. As Tom indicated, we've recorded strong second quarter results, driven by a broad-based organic volume growth across all lines of business.

As we look to the second half of the year, our focus remains on striking the optimal balance between organic price and volume growth in the markets we serve, while continuing to maintain a disciplined approach towards expense management throughout the organization.

Given a combination of price, volume and cost optimization, Summit is well-positioned to drive continued organic growth over time. Let's begin on Slide 18.

Consolidated net revenue increased by 15.9% year-on-year to $478.4 million in the second quarter 2017 with the following segment split, in our West region, net revenue increased 19.6% on a year-on-year basis to $249.8 million due to growth in both organic and acquisition-related net revenue; in our East Region, net revenue increased 16.3% for on a year-on-year basis to $144.3 million, bolstered mainly by growth in acquired net revenue; and finally, in our Cement segment, net revenue increased by 5.8% for the year-on-year basis to $84.2 million, supported by positive organic growth in average selling prices and volume.

Turning to Slide 19. Adjusted EBITDA margins continued to increase on a year-on-year basis in the second quarter, up more than 450 basis points since the second quarter of 2015.

Our Cement segment has been a significant contributor to our track record of continued margin expansion, given a combination of organic volume and price growth when compared to the prior-year period.

We anticipate organic growth and average selling prices for materials, coupled with continued efficiency gains, to be the primary longer term drivers of margin expansion. Turning to Slide 20.

Incremental adjusted cash gross profit margins increased across our materials lines of business during the second quarter but on an LTM basis, through the second quarter 2017 which accounts for seasonality, incremental margins within our cement business increased to 63%, while incremental margins within the aggregates business remains strong in the mid-70% range.

As indicated on Slide 21, Summit continues to generate strong cash flows from operating activities which excluding net capital expenditures, has translated into significant year-on-year growth in free cash generation.

On an LTM basis, through the second quarter 2017, free cash flow has increased by more than $100 million when compared to the prior period. As a business becomes increasingly cash generative, we expect to be able to self-fund a larger proportion of the acquisitions and organic investments.

As illustrated on Slide 22, net leverage declined to 3.7x in the second quarter, down from 4.5x in the prior year periods. Cash and available liquidity increased due to the proceeds from our recently completed $300 million, 5.125% senior notes offering in May of 2017. We anticipate a decline in net leverage to between 3x to 3.5x by year-end 2017.

Including both availability on our undrawn revolver and cash on hand, our total liquidity stood at $572 million at the end of the second quarter. Looking ahead, we're well-positioned to fund transactions currently in the acquisition pipeline, together with the capital requirements of our business.

As indicated on Slide 23, we have increased our full-year 2017 adjusted EBITDA guidance for the second time this year, up from a range of $430 million to $445 million, to a range of $440 million to $455 million which implies year-on-year growth of 15% to 19% versus our full-year 2016 further adjusted EBITDA of $382 million.

By the way, a reminder, our full-year adjusted EBITDA guidance only includes transactions that have been announced. As we complete additional acquisitions throughout the year, we will update our full-year guidance. However, for modeling purposes, we advise analysts to refrain from including potential acquisition related EBITDA in their estimates.

For the full-year 2017, we're reiterating our gross capital expenditure guidance of $140 million to $160 million. Total gross capital expenditure in the first half of 2017 was $110 million, consistent with our typical pace of capital expenditure.

For modeling purposes, including the impact of all 10 completed acquisitions on a year-to-date basis, SG&A is running at the quarterly range of $60 million to $62 million, while DDNA is running at a quarterly range of $45 million to $47 million.

Interest expense, including a full quarter impact from the completed $300 million bond offering is running and a range of approximately $28 million to $29 million per quarter.

All analysts should also model for approximately $2 million per quarter of transaction-related expenses, an amount which can vary depending on the volume of potential acquisitions under review.

With regard to cash taxes, we expect paying $2 million to $4 million in state and local cash taxes and no federal income tax for the full-year 2017 given existing net operating loss carryforwards. During the second quarter, 2017, we took a $1.5 million noncash tax receivable charge.

This estimate was based on our current estimate of 2017 taxable income that we expect to generate. We believe that $1.5 million of the TRA expense has become probable and are able to estimate the amount that will be payable to LP unit holders in future years.

Please note that TRA expense is nonoperating and is excluded from our calculation of adjusted EBITDA. At this juncture, we estimate the earliest cash distribution distributions under the TRA will commence in 2020. Finally, with regard to total equity interest that spending.

As of August 1, 2017, we had $106.9 million Class A shares outstanding and $4.6 million LP units held by investors, resulting in total equity interest that standing at $111.5 million. In calculating the adjusted diluted earnings per share, this is the share count that should be used.

And with that, I'll turn the call over to Tom for his closing remarks..

Thanks, Brian. We've had a great first half of the year, highlighted by strong safety metrics, sustained margin expansion and a record quarterly profitability.

None of this would be possible without the tireless dedication of our employees, all of whom are working together to position Summit as of the leading integrated heavy-side materials company in North America.

Currently, we're the only company in our industry completed multiple small- to medium-sized acquisitions each year, helping to consolidate on an otherwise fragmented industry. Overtime, this approach has allowed us to build leading regional platforms in early cycle markets at attractive valuations.

While labor-intensive, our proven approach continues to create value for our shareholders. Entering the third quarter organic Summit volumes and prices have remained a strong, while our key aggregates and product businesses continue to benefit from solid underlying market conditions.

We have an active pipeline of potential acquisitions under review, some of which serve to build our presence in regional markets where we have in insisting footprint. Others of which have the potential to meaningfully increase our materials exposure.

We've upwardly revised our full-year adjusted EBITDA guidance for the second time this year as we continue to source, close and integrate acquisitions at attractive multiples. We remain optimistic on prospects for the business as we transition into the second half of the year and look forward to meeting our investors in the coming weeks.

With that, I'd like to open the call for questions.

Operator?.

[Operator Instructions]. Our first question comes from the line of Bob Wetenhall with RBC..

Loved the increase to guidance. Tom, I was hoping you could take a minute to talk about what's going on with aggregates pricing.

It looks like pricing declined year-over-year in relation to mix because of the sand business in Vancouver and I wanted to know first, if you think that's the right way to think about pricing? And then maybe you could step out of that and just talk about how like-for-like pricing trended in your other markets for aggregates?.

Okay, Bob. You know, from quarter to quarter, you're going to have pretty significant variations depending on mix. We sold 10 million or 11 million tons of -- 10 million or 11 million tons in the quarter, so a significant base job at a lower price can have a significant impact on that.

I don't really see any change in the underlying fundamentals of the aggregate pricing dynamics. We still have good pricing power. It's the sand business in Vancouver that picked up pretty significantly in Q2.

Austin had a number of significant base jobs, so really, Bob, it's the -- it's a continuation of what have seen in the past 3 years, to be honest, in Kansas, Missouri, the Central part of the country have been consistent. So I really don't see any change in the underlying pricing dynamics in aggregates..

So it's down positive and then maybe you could just touch on, on your deck, you called out the fact that 1/3 of the EBITDA growth in the second quarter was organic as opposed to acquired. So I was hoping you could step through some of the things you're doing operationally to drive organic EBITDA growth.

Is that really the tailwind from a favorable pricing environment in some your product categories? Or is it really volume-driven operating leverage? Or are you just running the business better? Any color would help..

I think you have to remember that we owned our businesses for only an average of 2.5 years, 3 years. So there's still operational improvements to be had. We have a very decentralized model at Summit that allows our local managers to make decisions on a timely basis.

We have made significant progress on driving down our aggregate costs and we have our own version of lean manufacturing that we have implemented around the group and we've said, great success on that.

Since of the Devonport acquisition on our Cement side, we have a -- we really put together a first-class management team at Cement and we have had a very, very large improvement in the underlying production cost there or the reliability in our plants is up fairly significantly and we're very pleased with that.

And you know, I think we're seeing the benefits of this decentralized model which keeps the decision-making local, makes it timely and I think the model is proving itself in every quarter..

Got it. It's very solid.

One quick last one for Brian, given Tom's remarks about the M&A pipeline being really robust in terms of the opportunity set, how high would you be willing to raise leverage for the right purchase? And are you committed to 3x, 3.5x? Or will you exceed that if the right asset comes to market?.

As we've always said in the past, for the right transaction, we would be comfortable at this stage of the cycle of and aligning our leverage to spike up a little bit in the short term, providing that we can see a pathway to bring that leverage back down quickly.

That's what we did with Devonport and that's what we did with Boxley, we're driving down the leverage. You can see consistently. So short term spike, comfortable at this stage of the cycle, long term goal is to continually drive the volume..

And your next question comes from the line of Trey Grooms with Stephens..

Just real quick, I guess, following up on your mix commentary around the aggregates pricing, that kind of thing, I know that it's a part of business and it moves around from any given quarter to the next, but as you sit here and look at your backlog for the rest of the year, what does that pricing mix look like there that's kind of embedded there? Should we be expecting any more comp fluctuations or impacts as we look to the back of the year on that -- back-half of the year?.

Trey, we're very optimistic given our backlog am however, it can be and predictability and you can have quarter-to quarter variations. We still see and aggregates pricing overall for the year in that low- to mid-single-digits improvement.

And I think of the real thing to focus on here I think of metals and the margins that we're seeing which sort of take out the product mix and just show the underlying profitability and they are very strong. So we're very bullish and very optimistic about our aggregates line of business, both from pricing costs and margins..

Yes, that was the next thing I was going to highlight is the fact that your incrementals were bucking the trend that you've been seeing from some of the folks out there and it seems like -- there's been some headwinds obviously, from weather and diesel and some of these other things but, what is it -- is it just really some of the things you noted earlier about the overall business that's helping you guys out, specifically on your ags operations that are kind of leaning to the nice incremental that you're putting up here? Or is it anything unique going on there that -- would you guys, like I said, bucking the trend?.

Yes, I was hoping to get through 1 call without mentioning weather, but -- you know, it's really -- I think a lot of it comes down to how we're performing on the cost side. We really have a, I think, a very good system now of taking cost out of our aggregate facilities and improving our overall productivity.

And we're also seeing good pricing in a lot of our markets. So it's sort of a combination of all those things, Trey which I think results in those both cash gross margins and incrementals..

And then on the acquisition EBITDA contribution for the year that you moved that up to a range of $50 million to $70 million.

I asked you this last quarter too, Tom but just kind of -- know that you have moved it up, where are we into that for this year, kind of what's in the bag? I think last quarter, you said we were about halfway there to the original guidance, then you bumped it up.

What would you say now?.

I certainly think that the midpoint of that is what we expect. So I'm not sure how we define in the back? But we're very confident of getting through the midpoint of that range and we also have a shot at doing more.

I mean, we're just very busy and I think we're very busy because of where we're in the cycle and I still think that we're, without a doubt, the buyer of choice because of the way we run our business and the way we look after people's companies. So we're optimistic at least to get to the midpoint..

Yes. And if you probably in the bag was a poor choice of words. Nothing is ever certain.

I meant more like from the acquisition, you've already got enclosed, where you think we're in that range? So just to kind of got an idea, what's still left ahead that you may need to close on in order to kind of close the -- or to finish the gap there?.

Hey, Trey, it's Noel. Real quick, so we've acquired or invested, on a year-to-date basis, $310 million or thereabouts and our typical multiple that we pay is about 7.5x. So on balance, that would imply maybe around $40 million of acquired EBITDA year-to-date.

So theoretically, we could do another $20 million to $30 million between now and the second half of the year. Now obviously, not all of that $20 million to $30 million would be coming in this year's EBITDA, we can get a partial year contribution from that. But hopefully, that helps..

That's helpful. Thanks for that color, Noel. And then last one for me, Houston for you guys sounds like it's back up in the races again. I mean, it's is like one of your stronger markets and there's been some kind of mixed commentary out there on what folks are seeing in Houston.

What's behind that for you guys? I mean, is it -- I know you've touched a lot of reds there that market and your specific to a certain part of Houston but just any color around that and maybe also touch on West Texas on what's going on out there?.

Sure. In Houston, we're definitely seeing an optic on the residential side. We have been heavily weighted towards residential in our Houston ready-mix business and we're seeing a recovery there. Our customers, who consist of all the major homebuilders in Houston, are very optimistic for the second half of the year also.

The acquisition that we just completed, Great Southern, not only brings some very well-located plants, a first-class management team but they also bring a much bigger focus on of the nonresidential side which we think we can carry over to our existing plants so we're quite excited about that. So we do see nonresidential also staying quite strong.

And then finally, the highway market is picking up. It's the letting has stayed consistent, but a few of the bigger projects are actually starting to take shipments, so we see that. We see it across the board. We see that, that market getting better.

Our aggregates shipments are lagging a bit, we're hoping to see an increase of there in the second half of the year. But it feels good. Our customers are all very bullish in Houston and we look forward to a strong second half there..

Any comment in West Texas?.

I'm sorry, Trey, I have a short term memory issue. It's very strong. We actually are seeing a significant uptick across all both aggregates and ready-mix. Pricing is good. That business -- there's a real housing shortage in the Permian Basin, there's a bunch of large projects.

That's going to be a very small in the scheme of things for us, but it's a very good market and we see that improving over the next few quarters..

Our next question comes from the line of Stanley Elliott with Stifel..

When I think about kind of the available capacity that you guys have, you called out 5 72 in liquidity.

Is there -- with the deal pipeline as robust as it is right now, is there anyway to think about how quickly you would like to put this to work in kind of a best case scenario? Or is this something that kind of extend beyond into 2019?.

We have a very disciplined acquisition strategy and program. But I would see more of the same again. I mean, we came out of the box in, we would to $30 million acquired EBITDA at 7.5x. We're going to beat that. We beat at the last couple of years, we're going to beat it this year and we see that continuing into the near future.

There is a number of larger transactions out in the marketplace that we certainly look at and we see if there's a way that we can create enough value to pay a higher price because those auctions tend to be at a higher price. We'll see. We haven't found 1 yet this year, but you never know..

And for these higher-priced deals, would you be able to kind of find enough cash flows and debt? Or would you be looking to go to the equity markets?.

Obviously, it depends on the deal. There's a few -- there's a couple of very large deals out there that we would have to go to the capital markets for. But I think that's doubtful for us to be successful, but we'll see.

Davenport acquisition we did a couple of years ago was an example of when we sort of hung around the hoop and we're successful in an auction atmosphere. So you never know and we keep trying..

I think that's fair.

Anything in the cost rise that would, you know, incrementals have been nice, anything on the cost arising that would cost that imbalance to kind of creep up and maybe the incrementals would be as good? Or is it you're still looking at it fairly stable cost environment on a go-forward basis?.

It's been pretty stable. Obviously, hydrocarbons are always a concern. They've been pretty stable. Our labor costs have really not spiked at all. We're finding labor to be very tight in the Intermountain West, especially in Utah, but we still haven't seen a labor costs spike there.

Wouldn't surprise me if we did see that going forward, but we haven't seen it as yet.

Brian, anything you see on the cost side?.

We managed the cost pretty tightly. We got the forward program for buying diesel that's been able to continue the year-on-year change on diesel prices -- coal prices, actually, have been down a little bit this year. And so, that, plus continued emphasis on lean productivity improvements is what's allowing us to contain our cost pretty effectively..

Our next question comes from the line of Garik Shmois with Longbow Securities..

First, if I recall, coming out of the first quarter, you have a low- to mid-single-digit aggregates to volume growth given the strength year-to-date.

Just wondering if you're still expecting that kind of performance for the full year's or is the potential upside?.

Garrick, you blanked out there in the first sentence, if you could repeat it?.

Yes, sorry. I said, coming out of the first quarter, you had anticipated a low- to mid-single-digit aggregate volume growth.

Just wondering given the strength year-to-date, if that's still good favor to assume or was there a potential upside?.

I think we would still stick to the assumption of low- to mid-single digits. We were very happy with our Q2 volumes, but I would still stick to low to mid, Garik..

Okay, thanks.

And we've been hearing a lot over the last couple of days just around highway project delays, lumpiness on project timing, transitioning for smaller projects to larger projects, just for the high-level, could you just beat to what you're seeing on the highway side of your markets and if any of these challenges are kind of translating over to the markets that you serve?.

We don't really see that, Garik. There was a bit of delays in Houston on some projects, but I guess, our business mix is much more geared towards the small- to medium-sized paving jobs. We're very -- we don't really do much high-rise ready-mix work. We're basically residential, small nonres.

So we really don't have what I would call big project exposure. And I think that's a real strength in our business not to have that big project exposure. So I guess, the simple answer is we're not seeing that..

My last question is just on modeling and fine-tuning.

Just to be clear, could you break out the guidance rates today for the stronger EBITDA? Just to be clear, was that entirely due to acquisitions or is it stronger organic? Just wanted to see kind of what the proportion is between the 2?.

Garik, it's all acquisition-related..

Our next question's come from the line of Scott Schrier with Citigroup..

I want to talk about cement.

So cement volumes were particularly strong and is that due -- and I'm also mean strong exit acquisition component, is that you to underlying demand or are you taking any share there? And looking at your deck, our you focusing no more on the northern part of the river due to maybe some competition downstream?.

The answer on that last question is no. We look at all the markets and we're just as focused on New Orleans as we're on Minneapolis. I don't think we're taking much share, I think it's just basically good strong markets and there may be some regional variation in there. But overall, we're just in some markets that are performing quite well..

Got it.

And then your comments about your cement that's both running at capacity, so should we think about in chemical volumes really coming from purchased cement? And if that's the case, would we start to see some margin pressure going forward?.

Yes, I think that we've imported 1 load of cement from Turkey, about 44,000 tons this year. We've purchased 125,000 tons from other domestic sources and I think those numbers will grow next year and we see the margins and the purchase demand probably half of what the margins are in the manufactured cement.

So yes, I mean, as we grow from here, we'll see increased EBITDA, but the incremental should decline..

Got it.

And then one more, on the comment on the upward revision to acquire EBITDA from $50 million to $70 million, is that on a go-forward basis or is that just for 2017?.

It's just for 2017..

Got it, okay.

So then as we -- longer term, you're still focused on the $40 million to $60 million number?.

Yes, Scott. We'll reset each year and give you guys guidance probably on our February year-end call..

The next question comes from Adam Thalhimer from Thompson, Davis..

There's been some chatter about a thorough cement price increase on these Q2 earnings calls.

Is there a chance of that along the river and then do you have and your early thoughts on cement pricing in 2018?.

I would say on the river, we will not get our full price increase. It's actually so much of our businesses is geared towards the northern part of the Mississippi and there, the season ends in November, so a full price increase just doesn't make any sense. So with that -- no, we really haven't seen any rumblings or initial thoughts on next year.

We don't sell cement in Houston, but there is a -- what is that -- I can't remember, $5 price increase on cement that has been announced for October 1, whether that holds or not, we'll see. But again, we're just a purchaser there, not a supplier..

Okay, just a quick question on what's embedded on your margin expectations for the back half. Cement margin have been running higher year-over-year margin, products margins were lower year-over-year.

Will that trend continue in the back half?.

I think we'll probably, Adam, we'll probably see much more of the same. The product margins actually a very stable if you look at what we delivered in the quarter. The asphalt margins and we look for the margin liquid with the price because of the fluctuation of the liquid purchases.

They're very stable, they're tracking almost exactly in line with the last 12 months tread and we would expect the products margin to sort of remain stable for the balance of the year. And typically, we're coming into our biggest quarter of the year. So you might see a slight uptick in Q3 but down the long term trends are very much intact..

Our next question comes from the line of Kathryn Thompson, Thompson Research..

This year, as we head into the back half of the year, we certainly thought of Q2, there are couple of markets that give you a little bit less worry including Vancouver and the Austin markets.

When we look at volume flow in the quarter, could you help us better understand how much is -- more specifically, on volumes on those 2 markets, but also, stepping back and broadly looking at volume performance, particularly in the Southeast that was impacted more heavily by rains versus other markets that were less affected?.

Sure. Volumes were up fairly significantly in both Vancouver and Austin. We don't give the details by market. Certainly, the Southeast was impacted by weather and the middle part of the country was good solid volume, so I don't -- you know, I mean in broad terms, the East was a little down and the West was much better..

Good. I was looking for a little more detail, but that's okay, I follow up with that one.

When you look at the acquired assets for [indiscernible] since May, can you give a little bit more color in terms of relative portability versus legacy Summit assets? And also what are the synergy opportunities for these 4 assets, but also when you look at broadly at the 10 that you acquired year-to-date?.

Okay. You know, all four deals are bolt-ons, obviously, to existing operations. I think imagine 1 on Great Southern which not only brings some well-located plants, it gets us into the Northeast part of Houston.

It also has a brand-new plant in the Northwest part of Houston, but it brings a really first-class management team that has a completely different emphasis. We're very homebuilder-focused, they are very nonres focused.

So we believe there will be very significant synergies as we take our residential focus into their market and we take their nonresidential focus into our markets. And it's, I think, that's -- I think we see some very significant synergy there. We also see sourcing on that deal as we become an even larger cement purchaser in that area.

Northwest -- and also, with Great Southern, as with all 4 of these, we will be supplying our aggregates into these downstream bolt-on acquisitions. And there's good solid synergy there. Ready-mix in Somerset is the diversification of our Kentucky business, away from the asphalt and paving Kentucky VOD or KYTC, as it's known in Kentucky.

They will be buying aggregate from our existing -- they will be supplying aggregate to those plants. That's the main synergy there. Northwest is the same extension of the Everest business that we bought earlier. We think there's a very good synergies there. There's some immediate fixed overhead purchasing aggregate supply.

And then in South Carolina, it's a great add-on to our existing sand-and-gravel businesses in the Piedmont and I think that we should have some production synergies there also. So overall, typical of what we do with these businesses, there's immediate synergies on costs.

But longer term synergies is which -- you know, we've mentioned a few times on this call, that take a little bit longer to implement are lean manufacturing on the aggregate side, the overall synergies of just being part of a larger group.

So we're very pleased with our deal so far and even with these deals which over product-oriented, we're still seeing that our materials percentage is up a few 100 basis points versus of the 61% that we had in 2016.

So this is what we do, this is what we do really well, being able to do 10, 15 deals in a year, to source them, to cut a deal, to get them closed and to integrate them and to realize these synergies and I think is what we do better than anyone..

And you did allude how you've, not only acquire, but you've improve the profitability of the assets acquired. Is there a rough ballpark way of how we can pick about cost-savings, even from a percentage, from a dollar-basis that you're able to yield from an average acquisition? Or maybe for using this as a good example..

Kathryn, it's Brian here. We've constantly been able to acquire an average multiple of about 7.5x. That's still a range that we're comfortable, as Tom mentioned earlier, it's about the run rate that we've seen in the deals that we completed this year.

And then, again, pretty consistently, since we've been doing this, we've been able to get to a turn to 1.5 of multiple improvement as of those deals in the first 12 to 18 months post-acquisition.

And again, that's the kind of run rate that we target, that's the source of improvement that we expect to get and we've been pretty consistent in delivering that so far..

One final thing, Kathryn is that we do look at multiple cash-on-cash return metrics to measure EVA. And one we look at, for example, would be EBIT divided it by total investment. Overtime, our project returns have to exceed our cost of capital for them to be considered.

And so, going back historically, we typically worked to achieving 10% to 15% cash-on-cash returns on completed acquisitions..

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

Tom, when you look at -- take a step back and look at the first half performance, where have you been most surprised in terms of this kind of rebound in organic volume growth, the volume of the markets, maybe versus where you were thinking when you started the year?.

I think, first off would be cement, has certainly exceeded our expectations. I think the -- although we haven't seen it in aggregates yet, but in ready-mix in Houston, the fundamentals in Houston are certainly better than what we saw.

The 2 areas we had difficulties in last year, Vancouver and Austin, have really bounced back very strongly, way ahead of where we thought we would be. So those would be the areas that -- probably most happy -- pleasantly surprised, I guess, would be the right way to look at it..

And in terms of the outlook, aside from more deals you probably will do, but is the momentum you're seeing in those areas, what could potentially drive some additional upside? In other words, our you building in much into the outlook for a rebound in those specific areas?.

As we said, we're looking at low- to mid-single-digit volume increases in ag. If we get mid to high, there'll be some upside. But certainly, at this point, we're sticking to the low to mid forecast and hopefully, we're surprised..

Okay.

And then just on cement, is there any concern or risk that some of the problems that the M&A market could spill into your kind of traditional territories, sort of by I'm talking more specifically some of that capacity into that market spilling into where you typically address?.

We haven't seen it, but certainly if the Illinois State issues continue to get worse and worse and they discontinue their highway program, that does have some potential to spill into our markets. But we haven't seen it yet..

Our next question comes from the line of Nishu Sood with Deutsche Bank..

So I wanted to ask first about the acquisition pipeline. The deal size has been pretty consistent so far this year and I think stretching back in the last year as well.

As you look at the 20 deals that you have in the -- or 20-plus deals you have in the pipeline, how does the average deal size of what's in the pipeline compared to the kind of run rate you've been at?.

It's probably a little higher, there's a couple of larger deals in there. They're probably the lower-likelihood deals. But basically, it's not going to change dramatically unless one of these larger auction deals falls into our lap. But again, as I've said before, it's probably unlikely.

So it's pretty much a continuation of what we've seen in the past with maybe a few more of the larger public auction deals..

Got it, okay. And then switching to cement, where we're in terms of capacity utilization obviously, in the markets that you served. In volumes coming in better than expected, it certainly look very good.

What's kind of your updated thoughts on the pricing cycle, typically at this stage, you begin to think about an acceleration in pricing, do you think that's on the horizon for the pricing cycle for '18 or do you think it's still another 2-plus years out?.

Well, first off, I think this is pricing is a bit of a disappointment. And so we would expect to see some improved pricing going into '18. We believe the river is basically on domestic supplies, demand is? To be sold out next year. So that should be the backdrop for some improvement in the rate of pricing increase..

That ends our question-and-answer session. I'd like to turn the call back to Tom Hill for closing comments..

Thank you, Operator and thanks, everybody for joining us. That concludes our call. We look forward to talking to you next quarter. Cheers..

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation..