Noel Ryan - Vice President, Investor Relations Thomas Hill - President and Chief Executive Officer Brian Harris - Executive Vice President and Chief Financial Officer.

Philip Ng - Jefferies Blake Anderson - Stephens Kathryn Thompson - Thomson Research Group Stanley Elliott - Stifel Nicolaus Brent Thielman - D.A. Davidson Jerry Revich - Goldman Sachs Jeffrey Stevenson - Longbow Research Scott Schrier - Citigroup Nishu Sood - Deutsche Bank.

Greetings. And welcome to the Summit Materials first quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Noel Ryan. Please go ahead..

Good morning and welcome to Summit Materials' first quarter 2018 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 first quarter results, and we also published an updated supplemental workbook highlighting key financial and operating data, which can be found in the Investors section of our website at summit-materials.com.

This call will be accompanied by our first quarter 2018 investor presentation, which is available on the Investors section of our website.

I'd like to remind you that management's commentary 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 Factors 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 entering construction season, followed by a financial overview and outlook from Brian Harris. At the conclusion of these remarks, we'll open the line for questions. With that, I'd like to turn the call over to Tom..

Thank you, Noel. And welcome to today's call. Turning to slides four and five of the deck, given the seasonality of our business, the first quarter has little impact on our full-year outlook, representing less than 2% of full-year adjusted EBITDA.

Our business had strong momentum heading into the start of our busy construction season, supported by accelerating activity in our largest private and public markets.

Today, we increased our full-year 2018 adjusted EBITDA guidance from a range of $490 million to $510 million to a range of $495 million to $515 million, which includes contributions from four acquisitions closed since our last update in February.

We continue to anticipate mid to high-single-digit organic EBITDA growth this year as detailed in the bridge on slide five. Since January, we've completed seven acquisitions for a total invested capital of $154 million.

Recent acquisitions have further established our leadership in well-structured material-based markets in Utah, Texas, Oklahoma, Kansas, Kentucky and Missouri. The acquisition pipeline remains very active as we look ahead to the remainder of the year, with multiple transactions currently in various stages of diligence.

Turning to slides six through eight, the LTM trend on key performance indicators remain strong with net revenues, operating income, adjusted EBITDA and net income above the prior-year LTM period. Sales volume across all other lines of business were down year-on-year in the first quarter, excluding ready-mix concrete, which increased 2.8%.

Organic average selling prices on aggregates and cement both increased in the first quarter with aggregate prices excluding mix increasing 3.9% versus 2.5% in the prior-year period. Several of our larger markets, including Houston and Salt Lake City, reported high single-digit organic growth in aggregate selling prices during the first quarter.

Turning to slide nine. LTM adjusted cash gross profit margin on materials increased significantly on a year-on-year basis exiting the first quarter. LTM adjusted cash gross profit on aggregates and cement increased 310 basis points and 400 basis points respectively.

Aggregate's margins have continued to benefit from reductions in our cost per ton produced, which has declined three of the last four years.

Cement gross profit margin increased 520 basis points in the first quarter as higher average selling prices and improved cost efficiencies more than offset a weather-related decline in cement volumes along the Mississippi River corridor.

LTM incremental margins on both aggregates and cement were up significantly in the first quarter versus the prior-year period. Turning to slide ten. Our cement segment remains well positioned entering the construction season.

Our customers are very optimistic with regard to demand conditions along the river, with US cement prices expected to rise for the sixth consecutive year. In 2018, we anticipate year-over-year cement price growth in the low to mid-single digits on a percentage basis.

Every $1 increase in cement ASP on existing production results in a $2.5 million increase in cement segment adjusted EBITDA, given that we are currently operating at peak capacity. We will continue to supplement our cement volumes with purchased cement from both domestic and overseas suppliers.

As available capacity along the river is exhausted, we expect that an increasing proportion of our third party supply will come from imports. We estimate that approximately 75% of the cement we sell serves private end markets.

Private demand in the Northern River markets remains strong as we look to the remainder of the year, particularly in regions north of St. Louis where we sell more than 80% of our annual cement volume.

Turning to slide 11, beginning with a discussion of the federal public spending outlook, in March, Congress signed into the law the fiscal year 2018 Omnibus appropriations bill. Among other items, the bill provided for significant incremental funding to key federal surface transportation improvement programs.

These programs have been operating at fiscal year 2017 funding levels through a series of continuing resolutions since last fall.

As a result of the bill, the FAST Act Highway fund, the airport improvement program and the TIGER program have received more than $4.5 billion of combined incremental funding, which can be matched at the state level anytime between fiscal 2018 and 2021.

Separately, in April, the US Department of Transportation announced $1 billion in emergency relief to repair roads and bridges damaged by storms, floods and other disasters last year.

This funding, which is incremental to the massive $89 billion aid package passed in February, will include significant funding to rebuild portions of Houston's transportation system. Turning to slide 12, in March, TXDOT indicated that it intends to increase lettings for the current fiscal year ended August by 25% from $4.8 billion to $6 billion.

We believe this upwardly revised lettings guidance has the potential to drive more project work in our markets over the coming months. Importantly, 90% of the $6 billion in fiscal 2018 TXDOT lettings are small, sub-$15 million repair and maintenance projects that comprised the bulk of the public work that we service.

The key takeaway here is that after years of new transportation fundings through Propositions 1 and 7, we are finally beginning to see a real pickup in activity. Turning to slide 13, within the private markets we serve, our outlook remains positive.

Our largest markets continued to experience net population growth, low unemployment and a lower cost of living than comparable metro regions in other parts of the country.

In key housing markets such as Houston, Dallas and Salt Lake City, inventories of single-family homes remain very low by historical standards, while housing starts continue to trend higher, addressing pent-up demand for entry-level homes. In Houston, we believe the non-residential cycle has bottomed, making way for a new commercial cycle.

The $1.5 billion expansion of the Texas Medical Center is one such example of this, slated to begin in 2019. This new medical campus is expected to bring 30,000 new jobs to Houston. Turning to slide 14. Over the last 90 days, our outlook for Texas, Vancouver, the Carolinas and Utah has improved.

Collectively, these regions represented more than 40% of 2017 revenue. Texas is easily the largest public market in Summit's portfolio. A combination of increased statewide lettings, together with federal aid related to disaster recovery in the wake of Hurricane Harvey, set the stage for an acceleration in public activity throughout our Texas markets.

On the private side, we're seeing increased demand for moderately priced single-family homes, particularly in Houston. Oil production activity in the Permian has spiked higher in recent months with the rig count up 30% year-over-year. Increased oil patch activity has resulted in a housing shortage in the Midland Odessa market.

In Vancouver, net migration into the market continues, resulting in the need for significant investment in public infrastructure.

In the Carolinas, single-family residential activities is very strong, while public in South Carolina is accelerating following the recent passage of a $0.12 per gallon gasoline tax increase that phases in at $0.02 per year through 2022.

South Carolina estimates that this tax will generate approximately $640 million annually in recurring revenue for road repair and maintenance in the state. Finally, in Utah, the housing market remains one of the strongest in the country, while [indiscernible] is expected to increase by more than 60% over the next three years.

Turning to slide 15, our ability to build attractive materials-based positions in early cycle markets remains an integral part of the Summit growth story, positioning us as the most active acquirer of small and medium-sized material assets in the US.

Today, we estimate that Summit is the number one or number two player in 80% to 85% of our materials markets, positioning us as a top ten aggregates player nationally. Turning to slide 16, since our last update in February, we completed the acquisition of two aggregates companies and two ready-mix companies.

Kansas-based Midwest Minerals is an aggregates-intensive bolt-on acquisition and the largest of the four announced transactions. Midwest brings significant high-quality reserves in a market that we expect will accelerate over the medium term.

Missouri-based Stoner Sand is a pure-play aggregates bolt-on acquisition that expands the company's reserve base in the Northwest Missouri market. Day Concrete and Superior Ready-Mix are bolt-on acquisitions in the downstream with high synergy potential, serving Southern Oklahoma and Central Kentucky respectively.

We expect to invest approximately $300 million to $400 million in bolt-on acquisitions in 2018. Currently, we're also in discussions with several platform targets that, if completed, would push our anticipated current-year acquisition spend above this range.

Overall, the cadence of acquisition activity remains healthy with more transactions expected to close over the coming months. With that, I'll turn the call over to Brian for a discussion of our financial results..

Thank you, Tom. And good morning to everyone. We are pleased to report that the underlying LTM trends in our business remain positive entering construction season. From an organic growth perspective, our full-year outlook remains unchanged, supported by year-on-year growth in materials ASPs and volumes.

Overall, we believe the year will be biased towards the second half, particularly in Texas, which remains our largest growth market. Looking ahead, our focus will be on further positioning the company for long-term growth in margin expansion, free cash flow and profitable growth throughout the cycle.

Turning to slide 18, consolidated net revenue increased by 11.9% in the first quarter. In the West segment, net revenue increased 28%, while in our East segment, net revenue was up nearly 1%.

Growth in the West segment net revenue was supported by a combination of organic and acquisition-related growth, while in the East, a decline in organic growth was offset by increased acquisition-related contributions.

Net revenue in the cement segment declined 14.3% in the first quarter as a delayed start to the construction season in our northern markets contributed to lower sales volumes in the period. The chart on slide 19 shows the correlation between average selling prices on aggregates and the consumer price index.

As you can see, the slope of the aggregates ASP curve has steepened in periods of rising inflation. In periods of lower inflation, aggregates prices have continued to rise, albeit at a slower pace. As a result, price increases have historically more than kept pace with inflation and, in fact, have tended to outpace the CPI.

Turning to slide 20, our adjusted EBITDA guidance for the full-year 2018 assumes cost inflation of $12 million to $15 million, given higher wages, benefits and hydrocarbon cost.

On this slide, we illustrate how increases in volume and price across our aggregates, cement and ready-mix concrete lines of business in 2018 would offset the impact of inflation to the business. On slide 21, we provide an overview of our diesel fuel forward purchase program.

In 2018, we expect to consume approximately 30 million gallons of diesel fuel, approximately 62% of which has been purchased at an average price below $1.90 per gallon.

Our program, which utilizes physical contracts to pre-purchase a portion of our required diesel fuel volumes up to 12 months in advance, provides visibility into our overall diesel fuel expense each year. By mid-year 2018, we expect to have contracted for approximately 50% of our estimated 2019 diesel fuel consumption.

Turning to slide 22, as of March 31, 2018, we had $397.9 million in cash and availability under our revolving credit facility to support our ongoing acquisition strategy and the general growth of the business.

We anticipate net leverage to remain between approximately 3 times and 4 times for the duration of the year, assuming the midpoint of our upwardly-revised adjusted EBITDA guidance and subject to the pace of acquisitions.

For modeling purposes, including the impact of all seven completed acquisitions on a year-to-date basis, SG&A is running in a quarterly range of $68 million to $70 million, DD&A is running in a quarterly range of $48 million to $50 million and interest expense is running in a quarterly range of $28 million to $29 million.

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. We estimate our effective GAAP tax rate will be 22% to 25% for the full-year 2018.

However, with regard to cash taxes, we anticipate paying $4 million to $6 million in state and local cash taxes and no US federal income taxes in the current year.

Finally, with regard to total equity interest outstanding, as of March 31, 2018, we had a weighted average of 110.7 million Class A shares outstanding and 3.6 million LP units held by investors, resulting in total equity interests outstanding of 114.3 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. Turning to slide 24, in summary, our outlook for the full year remains positive entering the busy construction season. We expect to achieve mid to high-single-digit organic adjusted EBITDA growth this year, while our acquisition pipeline remains very active with multiple bolt-on transactions expected to close in the coming months.

Underlying demand conditions remain strong in our core markets. We anticipate a combination of price and volume growth across our major lines of business, which should more than offset potential inflationary headwinds, particularly in some of our higher growth markets where a tightening in supply may translate into even higher average selling prices.

On balance, the year is setting up well with increased weighting toward the second half of the year. With that, I'd like to open the call for questions.

Operator?.

Thank you. [Operator Instructions]. Our first question comes from Phil Ng of Jefferies. Please proceed with your question..

Hey, guys.

Your improved outlook, now that you are seeing the budget plan improve and increased funding from some of the storm activity last year, do you expect to start seeing that flow through this year or is that more of a 2019 event?.

I think we will hopefully see some of it late in the year, probably in Q4, but probably the bulk of it will start in 2019..

Okay, got it. And then, when we think about growth this year going into 2019, just given that progression, I think you guided to like low to mid-single-digit growth for aggregates. How should we think about that trajectory going into 2019? And is that going to be like close to mid to high? Any color would be helpful..

I think we're looking at low to mid-single digits growth. I think the year is going to be more back-end loaded just with some of the poor weather in Q1. So, I think we are still in that mid to low-single-digit growth rates..

Okay. My question was really more on 2019, but I appreciate that. Things should step up going into next year. And then, just switching gears a little bit on the cement side of things, I wanted some color on how the April price increase is progressing. Certainly sounds like market is getting pretty tight.

Sets you guys up nicely for an acceleration, but any color on how it's progressing right now would be helpful..

It's going sort of as we said in our last call. It's low to mid-single-digit expected increase for the year and we're optimistic going into 2019 that that will start to accelerate..

Okay. And then, on that note – and that will be my last question – just, historically, when we've seen the market sell out, we do see an acceleration.

And just given the fact that imports would need to come in and they are more breakeven, can you just kind of help us gauge like, from a historical perspective, when things were tight, what type of acceleration of pricing you would see? Good luck on the quarter..

Okay. Phil, thanks. In the last market in the mid-2000s when things were sold out, there was a couple of years where the industry got double-digit price increases. And we would hope, as the market nears balance, that we'll start to see the same. We are very optimistic about cement prices starting to gain momentum in 2019..

Okay, thanks a lot..

Okay, Phil. Thanks..

Our next question comes from Trey Grooms with Stephens. Please proceed with your question..

Yeah, good morning, guys. It's actually Blake on here for Trey. First question, I appreciate the color on the year and volume outlook there. I was looking to see if we can get an update on some more recent trends, maybe April, if you're willing to share, or if April was kind of within that outlook for the year..

Having known what April is, it's within the outlook. April was okay. But you have to remember that in a lot of the markets that we operate in, the season really doesn't really start until May. That's Utah and Idaho, Wyoming, the upper Mississippi area where 85% – 80% of our cement goes.

So, we were happy with April, but the real volumes start in May and June..

Got it. That's helpful. And then, just the last one for me on aggregates pricing. You kind of called out some of the stronger markets in the quarter. I was curious which markets weighed on pricing and to what extent mix, whether it be product or geography, might have impacted that..

Blake, it varies by small market by small market. We've seen good demand in parts of Texas. We are really virtually sold out in the Odessa Midland area. The year hasn't really started in the Intermountain West and hasn't really – in the Midwest hasn't really started.

So, it's really hard to say, but it does vary from low to high single digits, and we're optimistic. On a product mix adjusted, we were at 3.9% in Q1. So, we are optimistic for certainly low to mid-single-digit price increases in ags for the year..

And certainly from a pricing perspective, Blake, we in the West region were up mid-single-digits organically in price in the first quarter. The East was a little bit impacted by weather on the volume and on the price side. But our biggest markets, places like Utah, Texas, are seeing very strong price growth.

Houston, in the press release, Salt Lake in the press release, we're seeing high-single-digit [indiscernible] on aggregates..

Got it. Very helpful. Thank you..

Our next question comes from Kathryn Thompson of Thompson Research Group. Please proceed with your question..

Hi. Thank you for taking my questions today. First, on the cement segment, obviously, a tough volume quarter with more normalized winter, but also shows some nice improvement in margins.

Could you give more color on the puts and takes on the margin expansion in the quarter, particularly if there are any unusual items that lowered your cost to a greater degree this quarter or were higher cost in the year-ago quarter?.

Our shutdowns, Kathryn, on the cement side, were pretty typical this year and really comparable to the prior. We have gotten decent cement price increases. So, there's really nothing that jumps out to me as far as anything unusual on the cement side as far as margins go. It's a very small quarter.

And so, small things can have a big impact, but it's sort of been businesses as usual.

Brian, any other thoughts on that?.

No. That's right, Tom. Because it's such a small volume quarter anyway, the percentages do tend to be somewhat a little bit distorted in a low volume quarter. We track the LTMs there, so the last 12 months. And that still looks to be in line with our expectations. So, a little bit of distortion because of volume, but nothing unusual..

Sorry, Kathryn.

Noel, did you have something?.

Kathryn, we track variable costs per ton very closely within our business. And within both Hannibal and in Davenport, we saw year-over-year declines in variable cost per ton. We were down 2.5% at Hannibal in 2017 and we were down 4.5% at Davenport.

On the aggregate side, our variable cost per ton is down nearly 10% since 2014, which Tom will tell you is an incredible feat based on his experience..

Yeah, Kathryn. One of the things, I would say, aggregates at Summit is, we – in my prior life, we really – I don't think we saw more than one or two out of 30 years where the actual price, the actual cost of production of aggregates, went down.

And we've seen three out of the last four years and a 10% overall reduction in the cash cost to produce aggregates. So, we've done our – the team has done a great job on the variable cost side..

So, just to summarize for cement, it's really a combination of lowering that cost per ton and price improvement really drove the margins, obviously, on low volumes..

Yeah. So, that's correct. Because it's such small volumes, I'd stress that it's not particularly meaningful..

Understood. Understood. Pulling the string a little bit more, that actually leads into my follow-up question, your commentary on variable cost per ton changes and how we really wanted to have some discussions in terms of what we think about incremental margins, perhaps not just for this year but beyond.

But how do you think about incremental margins in light of inflation and other cost considerations married up with some of your initiatives with pricing and lowering that overall variable cost per ton?.

Yes, Kathryn. So, as always, it's a combination of things that will drive that incremental margin. Again, we look to the LTM trends because Q1 is a little unusual with the low volumes. But the LTM trends on the incremental margins all look really continuing to be favorable. We've got some nice incremental margins on the aggregates.

You've got a little bit of a skewed number there. That 228% you'll see in our data sheet for cement is obviously one of those slightly anomalous Q1 numbers. But, otherwise, the long-term trends on margin expansion continue to be favorable. We've talked a little bit about the impact of inflation there.

Obviously, we've protected some of our input costs with the diesel forward purchasing program that we have. We've got selling price increases in place, which will help offset some of it.

And then, the chart that we showed there in the deck, relatively small volume and price increases will offset a good portion, if not all, of our inflationary input costs, which are hydrocarbons, wages and salaries, other energy costs are the ones where we see the price increases year-on-year.

So, we still feel good that we've got the latitude to expand our margins in addition to the normal price and volume aspects of it. We do have an opportunity with the synergies from the acquired businesses as we integrate those. We typically look to get a turn to a turn and a half of multiple improvement.

And a lot of that comes from price optimization and improved reduction of fixed overheads and variable cost control. So, we still think there's further room for margin expansion going forward..

Yeah. And on the product side, Kathryn, we're relatively optimistic in Houston for the first time in a couple of years. The cement price increase seems to be holding. And we've announced a $6 ready-mix price increase for May.

And so, when we look at our realized, we would hope to get somewhere around $3 on our ready-mix in Houston, which is a large chunk of our ready-mix business. So, we are seeing some optimism in that Houston market..

Thank you very much..

Thanks, Kathryn..

Our next question comes from Stanley Elliott of Stifel. Please proceed with your question..

Hey, guys. Good morning. Thank you for taking the question. With you all being sold out or close thereto in terms of cement, how do we think about the volumes and the amount that you guys could import, especially in a tight market? And then, maybe give us an update on where we stand with the Memphis terminal..

Well, first, the Memphis terminal is under construction. And I believe the first load should be going through there this summer. And we have a really first-class cement import terminal in Baton Rouge. At the moment, we are still buying a mix of domestic and foreign wholesale volumes.

But, certainly, we have the capacity to import a significant amount of product over the next few years through that Baton Rouge terminal..

And then, when we're thinking about – you had mentioned some platform acquisitions.

Should we think of this more in terms of new products or quarried cement or is it more on the regional side moving into markets where you aren't currently?.

It's moving into new markets in our traditional vertically integrated aggregates-based businesses. We've got three or four platforms that we are beginning discussions with. And who knows? We might go over 4 or we might even get 1 or 2 by the end of the year. But we are very pleased with the fact that these proprietary deals have come forward..

Absolutely. Thanks, guys. Best of luck..

Okay. Thanks, Stanley..

Our next question comes from Brent Thielman of D.A. Davidson. Please proceed with your question..

Thanks. Good morning..

Good morning, Brent..

Tom, the guidance for $30 million organic EBITDA growth at the midpoint, as we think about this sort of recently improved outlook for Texas public sector activities, how much of that do you factor into the outlook versus other things, Houston private sector recovery, Midland Odessa, private activity, Austin? I'm just trying to get a sense of where more of the optimism is in Texas right now..

I think we're the most optimistic about the highway side. Lettings have certainly improved and we have very good strong backlogs in Texas on the highway side. In Houston, there's a lot of optimism from our customers. We are very pleased that it looks like the cement price increase is going to go through. So, we have a fair amount of optimism there.

We are seeing things improving in Austin, but it's still very competitive in that market. So, although we see improvements, they won't be major in Austin. Then we go out west to Odessa, Midland and the Permian is absolutely exploding. Although we're relatively small there, we are doing extremely well.

And optimistic about really both the volume and price in our Odessa Midland operations..

Okay, that's helpful. And then, just – yeah. Sorry, go ahead..

Basically, if you look at the latest TXDOT data, the latest lettings data, about a month ago, shortly after we reported our fourth quarter results, TXDOT put out updated lettings guidance that effectively took lettings for the full-year fiscal 2018, which goes from September of 2017 to August 2018.

They increased lettings guidance by 25% or $1.2 billion. That's an incredible jump in a very short period of time. And if you look at the phasing of that incremental lettings activity, it occurs principally between May and August of fiscal 2018.

So, effectively, over the next five months, particularly in places like Northeast Texas and in parts of Houston, we would expect to see an acceleration..

Great, okay. It looks like May was really strong. Maybe just a follow-up. It doesn't really look like you're baking any kind of improvement in Kansas, but it does look like the lettings are stepping up pretty nicely there.

Is that still a 2019 story for you, Tom?.

Yes. For any significant improvement in Kansas, it's going to probably be the second half of 2019. We are very optimistic. The legislature passed a task force that is now going to be named and is going to come up with a proposal for improving the highway program there. So, we do think that we hit bottom in 2017.

We are seeing a little bit of – they have some maintenance funds this year, which we've actually done well in lettings and our backlog is up in Kansas. So, we'll see some slight improvement this year.

But to get back to where we need to be and where we were a few years ago in Kansas, the legislature is going to have to pass a new program, which we are optimistic will happen in the first half of 2019..

Okay, great. Thank you..

Our next question comes from Jerry Revich of Goldman Sachs. Please proceed with your question..

Hi. Good morning, everyone..

Good morning, Jerry. .

I wonder if you folks can comment on the valuations that you're seeing on acquisitions that you're evaluating now. Maybe the newer part of the pipeline. And talk about if you've seen any multiple inflation since now we are a quarter plus into the new tax structure.

Are you seeing multiples creeping higher at all for the types of deals that you folks are targeting?.

The simple answer on the deals that we target, the small and medium sized, no. We haven't. The typical proprietary deal, we are still in the range we've been in for a number of years.

The larger deals, which are – if they go to auction, certainly the big deals that have been announced over the last year, are at very elevated multiples, and that's an area that we just don't feel at Summit that we can create shareholder value at those elevated multiples. So, we're sticking to our knitting.

And we have a really strong pipeline right at the moment and we think we can continue to do what we've been doing. It makes it less likely we'll do a larger deal, but we still – we have some, what I would say, mid-sized deals in the pipeline that we're hopeful that we can get to the finish line..

Okay. And, separately, you folks spoke about back-half-weighted guidance this year. Should we take that to mean you are expecting a weaker second quarter? Because it sounds like – from a couple of other folks that have reported so far – April looks pretty good.

And I'm wondering if you folks are seeing any disconnect within your footprint that we should keep in mind or do you folks just want to give yourself room to execute? I'm just trying to put the comments about back-half-weighted guidance into context based on what we're hearing for 2Q..

Luckily, I think our footprint is probably much more north, northern focused than some of our comparable companies and that makes April less relevant. When the sun shines in May, we are extremely busy. So, I wouldn't read too much into that, Jerry. I think it's – the Q2 for us is very heavily weighted towards May and June..

Okay. And, sorry, just a clarification, Tom.

Back-half-weighted, is that in line with normal seasonality or are you seeing more back-half-weighted than we've seen over the past couple of years when you say that?.

Normal seasonality. It's just, like I say, more business as usual..

Perfect, thank you..

Our next question comes from Garik Shmois of Longbow Research. Please proceed with your question..

This is Jeff Stevenson in for Garik. I just had a question on the Mid-Atlantic region. Obviously, this area was impacted by weather in the first quarter, but it sounds like things are picking up, especially with infrastructure in the North Carolina market.

I'm just wondering what your expectations are for the rest of the year as we move into peak construction season..

As we said earlier that really the Carolinas and Southern Virginia are very busy. We are very optimistic for strong growth there for the balance of the year. We operate from Charlotte over to the coast of North and South Carolina and Southern Virginia. And really hitting on all cylinders on res, non-res and highway in all of those areas.

Our backlogs are quite strong. So, we see that continuing to be quite strong through the rest of the year..

Okay, great. And I know you touched on margins earlier, but just on the downstream. What are the expectations as we move through the rest of the year with liquid asphalt increases and also price increases in both cement and aggregates? I'm just wondering kind of what your expectations are moving forward..

Yes. So, Jeff, the liquid asphalt in most states is a pass-through. So, we really focus on the margin in our asphalt business more so than the price. However, the one exception to that rule is in Texas where it's not a pass-through. As you know, we had to take down our liquid asphalt terminal in Houston, which supplies our Austin market.

That won't be up and running up until July. And so, in the meantime, we are buying our liquid spot in the Texas market. So, that gives us a little bit more of a challenge than we would otherwise have. But other than that, we would say it's – liquid's a pass-through and we would expect to be able to maintain our margins in most of the network.

On the ready-mix, we are seeing cement prices look like they're going to hold and we'll be able to, as is normal in the industry, pass that cement price increase on to our customers on the ready-mix side..

Okay, thank you..

Our next question comes from Scott Schrier of Citigroup. Please proceed with your question..

Salt Lake City has been a booming market for you guys. And you disclosed in the press of aggregate price growth there.

I'm curious, given the supply dynamics in the region, if you look at that as something that could be sustainable or would you anticipate some moderation?.

Certainly, I think for the short to medium term that it is sustainable. In a cyclical business, it's probably not sustainable forever, but that market is definitely – Scott, it's definitely on fire. They have a multibillion airport project going on. There's virtually no stock of finished single-family homes for sale.

So, our residential business is quite strong. Non-res is following. It's a pretty well-structured market. Our recent acquisition of Metro there has been very successful. It's just a great market and we certainly see that continuing for the next few years..

That's helpful. And for my follow-up, I wanted to ask, on the ready-mix concrete side, pricing had some nice acceleration. I know you called out that the Houston activity was ags and cement.

I'm curious if you could talk about the overall environment and what you're seeing as we move forward, given your positions, if those environments are conducive to kind of keeping that price ahead of cost as you called out in that slide and the ability.

And do you have the ability to expand margins in products?.

We've had some margin compression over the last several years in Houston as they were not able to sustain a cement price increase. And our margins definitely suffered. That seems to – the market is now improving. The residential market is quite strong.

I think we're finally going to see, after a two or three-year hiatus, some good solid commercial growth. And after a little bit of lull on the highway lettings, I think there's going to be very strong highway construction in Houston. So, I think we've turned the corner in Houston and we should see some margin growth there over the next few years.

In Utah, we should continue to see margin growth as the market is as close to sold out as it can be. Where we're in ready-mix in Kansas and Missouri, Missouri is okay. Kansas, with the lack of highways, we are still probably seeing a touch of margin compression there.

But, overall, I'm optimistic on the product side that we can get back some of the margin that has compressed over the last few quarters. I think we definitely have turned the corner in Houston. And Utah should be a real plus..

Great. Thanks for that, Tom. Appreciate it. Good luck..

Okay, Scott. Cheers..

[Operator Instructions]. Our next question comes from Nishu Sood of Deutsche Bank. Please proceed with your question..

Thank you. Just continuing along the lines of thinking about product. Tom, is the turnaround in the Houston business in terms of getting price through, is that the major piece of getting products back to positive margin trend? You talked about some of the other factors as well. Also, obviously, the mix of that business has changed through acquisition.

So, I just want to understand the bigger pieces of getting it back to a positive margin trend like your other businesses..

Yes. I think Houston is the biggest impact there and we have seen some margin pickup on the asphalt side in our Austin market that has been very competitive over the last couple of years. Those margins have improved and we hope that they continue to improve. So, those would probably be the largest pieces on the product side..

Got it. Got it. And, obviously, related to the – with your change in management recently at the COO level, Karl joining the team, obviously, one of the benefits of that is the downstream experience. Are there accretive initiatives that have begun now to help margins in the downstream business? Just any kind of update along those lines, please..

Certainly, Karl brings a wealth of experience on both the upstream and the downstream. He has been a real champion on pricing for his career. And we are utilizing that expertise as much as we can. We have had a pricing team that has been fairly successful over the last few years. And we do believe that Karl can make a strong contribution there.

We're certainly glad to have him part of the team. And he brings, like I say, a wealth of experience..

Great, thank you..

Thanks, Nishu..

There are no further questions. I'd like to turn the call back to Mr. Tom Hill for closing comments..

Thank you, operator. And thanks, everybody, for joining us today. That concludes our call. Everybody, have a good day. Cheers..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. And have a wonderful day..