US Concrete Inc (USCR) Q1 2021 Earnings Call Transcript

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US Concrete Inc (USCR)
Q1 2021 Earnings Call
May 7, 2021, 8:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the US Concrete Incorporated First Quarter 2021 Earnings Conference Call. At this time all participants are in listen only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]

Now, I would like to hand the conference over to your speaker for today. Ms. Sharon Ellis, Vice President of Investor Relations. Ma'am, the floor is yours.

Sharon Ellis -- Vice President of Investor Relations

Thank you, Carl, and welcome to us concrete first quarter earnings call. We appreciate your interest in our company. Joining me on the call today are Ronnie Pruitt, our President and Chief executive officer; and John Kunz, our Senior Vice President and Chief Financial Officer. Ronnie and John will make some prepared remarks, after which we will open the call to questions.

As detailed on page two of our company's presentation, today's call will include forward-looking statements as defined by the US Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially. Except as legally required, we undertake no obligation to update or conform such statements to actual results or to changes in our expectations. For a list of these factors, please refer to the legal disclaimers and risk factors contained in our filings with the SEC. Please note that you can find the reconciliations and other information regarding the non-GAAP financial measures that we will discuss on this call in the Form 8-K which was filed earlier today. A presentation to facilitate today's discussion is available on the Investor Relations section of our website.

With that, I will turn the call over to Ronnie.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you, Sharon, and welcome everyone to our first quarter earnings conference call. We hope that you and your families continue to be healthy and safe. I will open the call with brief comments regarding our first quarter performance, followed by john coats who will address our financial results in greater detail. I will conclude the call with an update on our strategic growth initiatives and progress on our horizon 2025 goals as well as an outlook for 2021. Even when the weather events of the headwind during the first quarter, I am pleased with our progress toward the goal we discussed during our investor day, and the tremendous efforts our teams have put forth to manage our business. We feel very good about our positioning for market recovery. With improving demand and increasing construction activity across our operating regions, coupled with embedded value, we are creating an AR platform to drive sustainable, strong performance.

During the quarter, when weather wasn't a factor, we continue to see operational performance and margin improvements aligned with our expectations. And as we move into the second quarter, we're observing an improved business environment across our regions and we continue to be focused on our operating margins. As we reflect on the first quarter weather events across our operations, our operating locations resulted in major disruptions. In our West region, we had two major rain events, one lasting over a week. In our central region, Winter Storm Yuri brought freezing and record breaking sub zero temperatures in February that resulted in a disruption to power and rolling blackouts across Texas. As a result of this 100 year weather event, we were forced to suspend all operations across the state for 11 consecutive days.

Additionally, the East region experienced four ways the nor'easters. These weather events impacted the construction industry and each company that operates in these regions during the quarter. Despite the weather impacts in February, March proved to be a strong month, and we saw an increase in activity across our operational footprint. I'm very proud of our employees and their efforts to manage delivery cost, material margins and labor efficiencies. We continue to focus on shareholder value creation with a disciplined focus on investing in our business, enhancing our operational efficiencies, and expanding our digital platform. Where's my concrete?

John, I will turn the call over to you for additional comments on our financial performance.

John E. Kunz -- Senior Vice President and Chief Financial Officer

Thanks, Ronnie. As Ronnie mentioned, even though we face several challenges during the quarter, we remain optimistic about the outlook for the remainder of the year. And they're turning to slide five in our presentation, our first quarter revenue $286 million was off 14.6% compared to the prior year quarter. The revenue decline was generally consistent with what we have experienced since the onset of the pandemic, but was further impacted by the weather during the first quarter. Our first quarter adjusted EBITDA was $28 million compared to $34 million in the prior quarter. Our aggregates business continues to show improvements in margins and EBITDA. Despite the challenges presented during the quarter, average revenue and EBITDA were up compared to the prior year, with pricing being the primary contributor to these improvements. Even though the declines in already MCs volumes limited our ability to pull through aggregate volumes, which resulted in flat intersegment sales, our external average revenue increased 7.1%. However, ready-mix revenue declined 17.4% compared to the prior year quarter, driven by lower volumes on the coast, others as a result of weather related delays, and lower overall activity, which was consistent with the declines we have seen since the start of the pandemic.

After adjusting for changes in geographic mix, our ready-mix ASP was up 1% when compared to the prior quarter, and our material margin was flat. Our stock compensation expense did not include any costs associated with the current year awards, similar to 2019. The cost for the current year awards will be determined after shareholder approval, and the second quarter stock compensation expense will include expense that would otherwise have been included in the first quarter. Our SG&A expense of $29.3 million was $4.4 million lower than the prior year quarter. Our adjusted SG&A expense was $2.8 million lower than the prior year quarter. As a percentage of revenue, our adjusted SG&A was higher than the prior year quarter, primarily due are due to lower revenue. For 2021, we expect our adjusted effective tax rate to be approximately 27% in our interest expense to be in the $39 to $43 million range. However, with a June 1 step down in the call price for our six and three nose and it continuing strength in the debt capital markets and opportunity may exist to further reduce interest expense by refinancing those notes while extending the maturity of our abl.

Moving on to our cash flow and balance sheet. During the quarter, we generated $12.5 million of cash provided by operating activities, as working capital requirements proved to be a headwind during the quarter, excluding the capital costs related to our acquisition of Orca royalty rights agreement, we generated $11.6 million of adjusted free cash flow during the quarter. We ended the quarter with leverage 3.9 times. Excluding the capital costs related to our acquisition of the Orca royalty rights agreement, we invested approximately $3.7 million in capital expenditures during the quarter compared to approximately $7.3 million for the same period last year. For the full year, we continue to expect capital expenditures to be in the range of 40 to $50 million, excluding acquisition related capital for growth investments, similar to the Orca royalty rights agreement and the recently acquired Stockton terminal with a quarter while the quarter turned out to be generally more challenging than we initially anticipated, we continue to remain upbeat with respect to the outlook for our business.

With that, I'll turn the call over to Ronnie.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you, John. With respect to our outlook, we've seen underlying fundamentals continue to improve since the beginning of the year, which is reflected in our pipeline of projects across all of our markets. Despite the challenges of the first quarter, we are encouraged by the strength of our in markets. The momentum that we see in our business and the progress of our employees have made on cost containment and operational efficiencies. With signs of recovery, we are focused on the execution of our strategic initiatives that are within our control to position the company for an accelerated improvement in our financial performance. Many of these initiatives were outlined during our investor day present presentation last November as part of our horizon 2025 strategic goals. With an eye on horizon 2025 objective of generating 300 million of adjusted EBIT da we want to share an update on several projects, terminal facilities. During our fourth quarter call we mentioned that we were actively expanding our terminal and network in several of our markets. During April, we announced that we closed the acquisition of a real terminal and bolt bulk storage facility for cementations materials in Stockton, California. This terminal complements our northern California ready-mix operations and further diversifies our regional assets Orca royalty agreement.

During the first quarter we acquired leased lands associated with our Orca quarry in British Columbia, which eliminated a royalty agreement purchase that in a creative multiple this will further improve our EBITDA margins for our integrated operations. Black Bear, we continue to make good progress with the environmental permitting process working closely with our first nation's partners. This phase of the development is being shaped on a responsible and efficient basis through continuous engagement with the First Nations as well as the governmental authorities. Our main priority for this phase is to receive a permitting decision response that is aligned with our previously described strategic objectives for this project with an operational target by the end of 2023, and production contributing to sales in 2024. Simultaneously, we are developing our mind plan and working on the engineering study for the production facilities and conveyor system to access these coarse aggregate reserves. We will keep you updated on our progress for this important project. Each of these investments, as well as others that we are reviewing have a lower EBITDA multiple than ours. As we continue to be very disciplined in our approach to each of our strategic initiatives under consideration, horizon 2025 will likely be compromised of a combination of improvements in both volumes and pricing with our organic platform, continued operational improvements, expansions to our aggregate operations, and will be further complemented by strategic opportunities.

Our current assessment of our operational and financial performance, coupled with our development opportunities, gives us confidence that our horizon 2025 targets are achievable. As we reflect on 2021 we remain confident in the business outlook, as we see improved demand for our products with strong residential activity, diversified commercial needs, and resilient infrastructure projects, which would be enhanced by a national infrastructure bill. While we closely follow developments on the infrastructure front, we are well positioned to do our part on these public works projects, given the diversity of our markets. Our team will continue to focus on our margins with our previously cited operational initiatives, further complemented by a favorable pricing environment for both ready-mix and aggregates. Therefore, we are reaffirming our guidance of around 200 million in adjusted EBIT for 2021 with a stronger back half of the year. In closing, we're very grateful to Bill Sandbrook who will retire from the board with the 2021 Annual Meeting for his years of service to the company, as our Chairman and CEO. Bill has been a committed and visionary leader, and we appreciate all of his contributions. We wish him well in his future endeavors.

Operator, I would now like to open the call for questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Our first question comes from the line of Julio Romero from Sidoti & Company. Your line is open.

Julio Romero -- Sidoti & Company -- Analyst

Hey, good morning, everyone.

Ronnie Pruitt -- President and Chief Executive Officer

Hey, Julio.

Julio Romero -- Sidoti & Company -- Analyst

Hey. My first question would just be on the ready-mix volume in the quarter. I know you cited COVID weather, especially in the coastal regions, no driver availability or any other factors, maybe effect ready Mexico, volumes in the quarter?

Ronnie Pruitt -- President and Chief Executive Officer

No, we didn't see any impact of driver availability. I think we've talked about through the impacts of the pandemic that we actually had picked up the headcount on our drivers and driver availability. So thank you, I think it was what you said at the first I mean, we talked about the impact of weather. And we've talked about the impact of COVID. And as we've seen, those things start to be more normalized as far as the weather goes, and as well as the restrictions being lifted. We're pleased with what we see volume starting to recover.

Julio Romero -- Sidoti & Company -- Analyst

Got it. And, you know, your volumes on ready-mix, were down 17%. But I think their margins were down only 50 basis points. So I don't know if you can rank order some of the variable cost actions you took on the right hand side?

Ronnie Pruitt -- President and Chief Executive Officer

Yeah, I think it's the things that we've talked about previously with the initiatives that we had around managing our labor, and the variability in our cost structure. And so with the help of our technology, especially with WMC, I think our decision making is a lot better, our planning is a lot better. We're working more closely with our customers to be more efficient in how we plan that labor. And so I think it complements all the things that we put in place. This was a quarter that we obviously were stressed by inclement weather and other factors. And so those -- those initiatives got tested. And I think we, we proved that we can continue to deliver good margins, even with stress on the on the demand side.

Julio Romero -- Sidoti & Company -- Analyst

Okay. If I could just sneak one more in here, I'll pass it on is, you know, can you quantify the benefit either on an even dollar basis or on a margin basis? Now, you don't have to pay that royalty on the lease land related to the Orca quarry?

John E. Kunz -- Senior Vice President and Chief Financial Officer

It's a few million dollars. So is what we said, you know, the acquisitions that we're doing have been multiple creative, meaning that for the most part, the multiples that we're acquiring on these projects are lower. We said that the you know, Oracle and right was, what about $28 million? So that you guys do the math backwards or reverse engineer, but you know, it's a few million dollars for that. A few million annually, annually, yes, annually.

Julio Romero -- Sidoti & Company -- Analyst

Okay. All right. Got it. Thanks very much. Appreciate it.

Operator

Our next question comes from the line of Kathryn Thompson from Thomson Research. Your line is open.

Brian Biros -- Thomson Research -- Analyst

Hey, good morning. It's actually Brian Biros on for Kathryn. Thank you for taking my questions. First one, I guess is on the cadence of volumes for through Q1 understanding, imagine, I think 11 down days in February from the Texas event, and then a strong rebound in activity in March. Can you maybe just frame like the volume trends in February, and then in March to kind of set up a kind of run rate of how things are looking exiting March?

John E. Kunz -- Senior Vice President and Chief Financial Officer

As far as volume trends within our regions, you know, we saw similar split between our regions with our central region accounting for about 40% of the volume in the quarter and the in the other two regions, our east and west regions were pretty similar the 30 and 30. As, as we came out of March, we would see what typically would happen with a weather driven event. We saw pent up demand, and that demand pushed into March, and so are our March run rate was a pretty normal run rate for the state of Texas, in our central region. You know, what we're seeing in the coastal regions and on the eastern West is twofold we had we had weather that was created pent up demand.

And then we also had continued restrictions from COVID, as the markets have started to rebound. And so I'd say what we're seeing now in those markets is more in line with pre COVID volumes with some pent up demand. So we're pleased with the way the recovery looks in, in all of our reasons right now. And so I think the, what we experienced was a very typical reaction to an extreme weather event. And we see those volumes, continue to come back.

Brian Biros -- Thomson Research -- Analyst

And then follow-up, I guess, on the cement shortages and Texas geese coming on the highway dealing and managing to that maybe, you know, how severe is it allocation and its impact to limiting your volumes or impact on price help frame up that conversation? That be helpful.

Ronnie Pruitt -- President and Chief Executive Officer

Yeah. We are experiencing some shortages in Texas, and really started previous to the weather. And in the weather didn't help with the rolling blackouts. And in the power outages on the cement production side, it did not help the cement plant to catch up any. And so those shortages have continued through the spring. And I anticipate them continuing through the summer. In the benefit that we have is we do buy from multiple suppliers. So we have backup plans for many suppliers that that we utilize in the state of Texas, our suppliers, all of them have worked closely with us on making sure that we're able to get our allocation to that they have they've been they've been fair to us.

But it does, it does limit everyone's ability to, to try to grow their business when allocations are happening. And so the positive side of allocation is pricing improvement. And so I would expect significant pricing improvement and in our Texas markets. And we will make sure that we're disciplined in that approach, but it's also you know, from a shortage standpoint, it's definitely not a shortage of demand. And so the demand side for Texas is really strong. It's very diversified. It's all the markets. It's not just residential, it's commercial is strong residential and infrastructures. And so I think the critical thing is this is not a this is not a slowdown from an economic side. This is a -- this is a cement shortage, and there could be positive benefits out of that. But, but I am very realistic around what the what volumes can grow back to and so we're going to manage through it and make sure we're getting the most out of every tunnel. Submit we can get.

Brian Biros -- Thomson Research -- Analyst

Thanks.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Trey Grooms from Stephens. Your line is open.

Trey Grooms -- Stephens -- Analyst

Hey, Ronnie, and thanks. Okay, can you hear me now?

Ronnie Pruitt -- President and Chief Executive Officer

Yes, we did hear you.

Trey Grooms -- Stephens -- Analyst

Sorry. It was breaking up a little bit there. Sorry about that. Okay. So a couple of follow on to that last question. You know, of course, with the Texas we have down several days, he lost several days there. But with the summit shortages, and driver constraints and these types of things, and, you know, I guess how, how quick, can you regain those last days, I guess, you know, this year. And I guess, also kind of going into that as we look through the balance of the year. I know the weather event was it is what it is. And you guys, it was kind of me pretty well known when you when you gave your guidance. So it's reasonable that you're reiterating it today. But I think in that guidance that you had given before there was an expectation for a little bit of volume improvement overall and ready-mix? Right, some low single digits, maybe I think was kicked around. Number one is that is, is that still a reasonable, given the constraints we're seeing on the cement side on the supply side? There might be other constraints you might have with drivers and that sort of thing?

Ronnie Pruitt -- President and Chief Executive Officer

Yeah. I think it is -- I guess the positive thing about a weather event in the month of February is, February is never a really great month for us. Either way, it's a short month from shipping days, it typically is some weather impacts, and Texas in February, so this was way more dramatic than normal. But I think that's why it gives us confidence that we continue to, to have some ability to make it up, you know, the cement shortage can definitely limit some of the some of the growth opportunities there. But I still say tray with based on where we're at, with the allocations that we have, in the cement sources from multiple vendors that are that are working with us that my expectations with would be we could if we can end the year in Texas as I as still a positive versus last year and in a much greater positive on the pricing side. And so anything that we might not get on the volume side, I would say we would more than make it up on the margin side.

Trey Grooms -- Stephens -- Analyst

Okay. That's helpful. And, you know, you mentioned improving demand. Can you, and I understand Texas, but can you give us a little more detail around that what you're seeing in some of these other markets? Like, you know, New York, for example, I know, they're opening up there. I know, it seemed like you guys want to project their, you know, recently, you know, a decent sized project, can you just give us a little more detail about, you know, the improving demand you're talking about outside of Texas, you know, both, you know, West and East? And, you know, what types of projects you're seeing, you know, coming back?

Ronnie Pruitt -- President and Chief Executive Officer

Yeah, that's a great question. I would say when we talk about business environment, it really covers everything from our activity and conversations with our customers to actually putting jobs in our pipeline to also our daily volume. And so all those things we're seeing positive trends to from actual yards being placed. Two jobs being awarded to activity that jobs are being talked about, that we see coming in the in the very near future. So we're very positive.

On both coasts, I would say from a type of job, we have everything from typical high rises going in and we're working on map pours map for that we've been holding off on that we're implementing now to a lot of mid rise and residential type operations. And as well as infrastructure projects that we're still seeing and, and a lot of our in markets, you know, but what's encouraging to me, Trey is if I look at some of our daily volumes in the run rate, March and April, I got to go back to like 2019 to compare that that's where we were running in those levels. And so I do think, as we see restrictions lifted and more activity happening, that we will see more normalized volumes in both of those markets that we said last year, at the end of the year, we said those were the most impacted market by the COVID restrictions, right.

Trey Grooms -- Stephens -- Analyst

Yep. Okay. And I guess Lastly, you know, everybody's having trouble with labor, it seems like you drive around, there's a help wanted sign in every window, it seems like and so, you know, I know, for you guys labor is important, you know, drivers are in high demand, you know, as we look through the year, and even into next year, but do you see that really being a limiting factor, or maybe can become even more of a headwind as we go through the year or you making some changes and doing some things that you need to do in order to create a little bit more flexibility on that front?

Ronnie Pruitt -- President and Chief Executive Officer

I mean, we definitely recognize challenges. And I think every industry out there will have challenges with labor as, especially in markets, they'll come back up to maybe that labor is not even there anymore. You know, we've made a lot of investment. So our WMC technology, we've invested in a module which has a driver app that our that our drivers can have more visibility in those scheduling and, and really trying to give more of a work life balance to do a lot of our drivers out there that are working really hard every day.

Some of this stuff in Texas, Trey is, the cement shortage could actually be a benefit there from a standpoint of getting pricing and more value for our product. But it also is not going to put as much necessity on hiring more drivers if those volumes can't be realized. But I do think we're looking at several different things. And it's not just compensated related, if it is compensation related. I think the market is really prepared that the cost of our products are going to have to go up. But we're also looking at things that are non-compensation related, like the app, like more communication, like more training with our drivers, more referrals, more retentions, a lots of different things happening. But I'm extremely pleased with our HR and our operations teams on where we sit today, we're in a pretty good position.

Trey Grooms -- Stephens -- Analyst

All right. Thanks a lot. I'll leave it at that and pass it on. Thanks. And good luck.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Paul Roger from Exane BNP Paribas. Your line is open.

Paul Roger -- Exane BNP Paribas -- Analyst

Yeah. Hi, Ronnie. Hi, John. Thanks for taking the question. So you've obviously talked quite a bit about the volume side or influence there a few words on pricing? Clearly, pricing normally goes through in the sort of April time, can you quantify the magnitude of the sequential increase? You're put through maybe in both ready-mix and aggregates? And also, it's been quite interesting this year, because quite a few of your competitors are talking about the potential for a second sequential price increase later on in the year, is that something you think could be possible as well?

Ronnie Pruitt -- President and Chief Executive Officer

Yeah. Paul. Good afternoon to you. Yes, I do. I think it's, each individual market obviously has their own demand and supply issues. And so we're the, you know, especially the Texas market, I do see the potential for a second increase on the cement side, I think aggregates will be in more of a normal mode of that April timeframe and flowing through, I don't anticipate a second increase on aggregates, but cement being as short as it is. And, and I think justifiably so because the cement guys are having to do more on the transportation side to try to meet the demand. So there's more ships being used. There's more rail being used, there's more transport transportation from a truck standpoint. And so those are all costly things to do to try to meet demands. And so I think from that side, I do see the potential of a second increase during the year. And I would tell you, we're already preparing on the ready-mix side for that same second increase.

And as we've said before, cement going up is not a bad thing for us. And so we take that, and we're going to pass it along. And we're even going to try to grow our material margin even further. And so we're anticipating that. So I think, you know, when you look at a range, I would say it's going to be in somewhere in that five day dollar range on the summit, and we're going to turn around and use that same rains for a yard of concrete. And that would more than cover our needs and continue to grow our margins as well. So I think, you know, I think what you're seeing is probably a pretty accurate picture of what--what 's happening in the market?

Paul Roger -- Exane BNP Paribas -- Analyst

And would that apply to California in the northeast as well? Or is it? Is it really specific to Texas?

Ronnie Pruitt -- President and Chief Executive Officer

I think it's just more specific to Texas, the Northeast, as far as the Northwest, you know, we did talk about the cement and the shortages that we experienced last year. And even at that time, you know, we said that it would take some time for imports to make up. And it has, and it took that time, but today, those imports have now begun to supplement the way they should. And then we're not experiencing those, those shortages in the northern California market, like we did last year.

Paul Roger -- Exane BNP Paribas -- Analyst

Yeah, that's good. And just maybe one of the one another notable feature of this result season, there's been a bit more positivity, about non residential and in particular, light non residential. So commercial construction, are you also seeing some green shoots there. And these movies are stronger, a little bit stronger than you expected?

Ronnie Pruitt -- President and Chief Executive Officer

I don't know about how stronger than what we expected I think is what we see is the markets have opened back up and things have started to give back to a more of a normal predictability, I think there's going to be commercial, more res, as well as some light infrastructure, more cities, counties, those kind of opportunities that that people are going to take advantage of the fact that, you know, these markets are opening back up and people are desiring to do things.

So I think it's, we expected this, I think the speed of which it happens is going to be really market by market. And so we're anticipating, you know, those those markets to continue to show a lot of different signs of recovery. And you know, some of these markets, the recovery is going to be in, in big, huge double digits because of how restricted they were. And so I think what we're seeing today is is what we were thinking is how recovery could look as is pretty much how it's shaping up.

Paul Roger -- Exane BNP Paribas -- Analyst

That's great. Thanks a lot.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Stefanos Crist from CJS Securities. Your line is open.

Stefanos Crist -- CJS Securities -- Analyst

Hey, Ronnie, and John, thanks for taking my questions. First, I believe on the last call, you said, Where's my concrete would be in place and all three regions? Is that still on track? And can you maybe give us some more detail on, you know, the aided margin in 2021?

John E. Kunz -- Senior Vice President and Chief Financial Officer

Absolutely, yes, it is still on track. We're in the, in the middle of the implementation in our northern California region. And it is, well within the timeframe that we set which we said it would be completed in our second quarter, and it will be completed in our second quarter. We've also started to focus on external business with WMC. And we said, once we completed our internal rollout, we would start focusing on a sales and marketing strategy around external customers and significant I guess, we've signed up five extra customers in the last six months. And we're going to continue to do that we think there's a lot of benefits. And the investment we've made in the technology and the reporting function in the, in the pro quo, our quoting function or sales, quoting function, and in the in the driver app, the customer app, and all the different modules. And so we're going to continue to push forward with, you know, a strategic position of growing our technology business.

Stefanos Crist -- CJS Securities -- Analyst

That's great. And just to follow-up, and I know it's early stages, and you're still communicating with those external clients. But do you have any sense of what a revenue contribution would be from external customers with WMC?

John E. Kunz -- Senior Vice President and Chief Financial Officer

I'm going to probably be providing more color on that in the next call. I think it's a little early for us to give that number. But I can tell you, depending on the size of the customer, that we could, we could see some significant growth there. And, and so we're going to be trying to attract some customers that we feel like it could be a huge benefit to their operating performance and as well as changing the way commercially that the people price concrete. So I will be given more color, but it's a little early right now.

Stefanos Crist -- CJS Securities -- Analyst

Perfect. Thank you so much.

John E. Kunz -- Senior Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from the line of Adam Thalhimer from Thompson Davis. Your line is open.

Adam Thalhimer -- Thompson Davis -- Analyst

Hey, guys, I wanted to start on margins if I could. I mean, Ronnie, you guys actually had some pretty good margins during the pandemic, I think they're kind of specific tailwinds with less traffic on the road and that type of thing. As you, as you think about your margin expectations this year is last year actually a tough coppers and or is it an easy con?

Ronnie Pruitt -- President and Chief Executive Officer

I wouldn't say it's an easy cop does, I do think we took a lot of cost out, and we talked about it on our on our fourth quarter call, anticipating some of those costs would come back. But I think we also anticipated the volume to come back with them that would allow us to continue to focus on those margins and sustain and grow even even better margins. So, so I think we, you know, what we experienced in the first quarter was we, we had some costs come back, and we didn't have the volume to sustain it. But that volume is coming back. And we'll be able to layer in the opportunities that we have, you know, we're going to see fuel cost, obviously, is going to be a headwind, but we've got fuel surcharges in place.

We've talked about that many times in the past that fuels more of a pass through for us than it is a direct impact. We have seen traffic come back, we have seen other markets open back up. But I was still extremely pleased with our delivery cost and the metrics that we were able to accomplish. And so I think it's it's a was more of an impact on the lack of volume and what the impact of that was. And and I think as we recover those volumes, and the markets continue to go, that I wouldn't say it's an easy comp, but I'm anticipating that we continue continue to deliver a better margins as we move forward.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. Perfect. So on to my next question, which was volumes. Yep. And I'm just curious if I mean, we're coming up against now the first full on COVID comp, very confident in volume growth, from Q2 to Q4 year over year, year over year.

Ronnie Pruitt -- President and Chief Executive Officer

Yes, yes. Yes, I am confident.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. And then. I guess, New York's probably the market I have the least insight into just because there's not a lot of comps for you. Like, what are you seeing in the bidding environment? What do you think in the boroughs? What do you seen in Manhattan, which expectation for New York?

Ronnie Pruitt -- President and Chief Executive Officer

I think our expectation is probably what we started seeing even before COVID that we talked about the shift from the Manhattan to the boroughs. We talked about affordable housing in the boroughs. We talked about developments with, there's still lots of land and lots of developments being discussed and talked about in the borough's. We've even talked about data centers. We've talked about growth into that Westchester area. And so what we saw before the pandemic is what we're seeing coming out of the pandemic is, that's where there's a lot of activity.

In the New Jersey side, we've talked about Jersey City, we talked about kind of the affordability on the Jersey side of the river, we continue to see that there's a very solid pipeline of projects in New Jersey, a lot of them multi, multi residential, commercial, the same type of projects we saw before COVID, we're seeing those kick off again, the C's remain remained very robust. And DC is a really good market with very good margins. And so I think as it as it shapes up, Adam, we're going to we're going to see the things that we thought we were going to see even prior to COVID is still the same pattern that we're seeing as the restrictions get lifted.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. And then just one for John. John, you mentioned something about the potential to restructure, so not restructure, but refinance. refinance. Yeah. Can you give us some more details on that? And I'm just curious, you know, when do you hit the point where you do slow down on some of the acquisition and just try to get that paid down a little bit?

John E. Kunz -- Senior Vice President and Chief Financial Officer

You know, that's been our focus. Last year, our leverage got up to over four, and we brought it down to three, six. Now remember, we did an acquisition we talked about the Orca land and royalty rights agreement here in their first quarter that was $30 million. And we did stocked in now, these are all accretive to our multiple, right. That's what that's what entices us. When I talk about our multiple, it's our corporate multiple too. So I'm not trying to bifurcate between ready-mix or aggregates, anything of that nature. I'm looking at the corporate multiple, these things are very creative from that perspective.

So our intention is still to pay it down, but have a prudent or reasonable approach in those acquisitions. What, what the significance is now when I approached that June 1 call day, the math is pretty compelling that says, if you take out the six and three A's and you replace it, you know with a note or a term loan B, you can, you know, have a pretty meaningful pickup or I should say meaningful reduction in your interest expense. You know, and so I would anticipate that as long as the market the debt capital markets continue to remain the way that they are, I think there's a real opportunity for us to do something there. And you could see a benefit a real cash savings from lower interest expense in the in the second half of the year. And, you know, that's what we were just trying to point out.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. Great. Thank you.

Operator

Our next question comes from the line of Stanley Elliott from Stifel. Your line is open.

Stanley Elliott -- Stifel -- Analyst

Hey, everybody, thank you guys for taking the question. We think about the business, you know, and certainly residential seems to be the strongest, you know, from what we read in the data, is there any makes impact to your operations, whether it's a residential product versus a commercial product, or, or even a public infrastructure product?

Ronnie Pruitt -- President and Chief Executive Officer

You know, mixed from the type of mixes that go into those projects, yes, and mixed from the cost of those mixes. I think from a margin perspective, we tried to do a really good job. And that's why we've invested so much in our CRM on our pro quo, that we have a lot of discipline around margin targets, material margin targets, delivery margin targets, customer margin targets. So you know, certainly as you look at it, there could be some swings in our in our cost profile, there could be some swings and, and in the things it takes to make those mixes and the difference between a 15,000 psi mix and a 3500 psi mix.

Definitely different mixes in there. But from a from a margin perspective, we're going to continue to really focus on delivering really strong margins on no matter what the what the mix is in the concrete.

Stanley Elliott -- Stifel -- Analyst

And in terms of kind of impact to Texas. I apologize if y'all said, did you see Texas volumes? I knew they were improved in March. That sounds like they've improved further in April. Were they positive during the first quarter? Or did you give that level of granularity?

Ronnie Pruitt -- President and Chief Executive Officer

We were a little bit up in volume in Texas, is what you'll see.

Stanley Elliott -- Stifel -- Analyst

Then, in terms of the Stockton move, I think it's very interesting. You'll certainly shores up the ability for materials within the Bay Area. It also provides you a platform to maybe further expand a little bit inland. Just curious how you're thinking about that, that new asset in the portfolio? You know, it could?

Ronnie Pruitt -- President and Chief Executive Officer

I would say that's definitely not the reason for it. I mean, what stock in Terminal does for us is it's an extremely strategic logistical opportunity for us with the least we say cementations because it can be flash, it can be slag, it can be cement, giving us that kind of a storage with rail that can both go inbound and outbound. And I think it's just very strategic for our existing because if you think about you know that market Stanley we're when permanent they went down. Now the majority of cement coming to the Bay Area is now coming from that Sacramento, Stockton and all where the water is. And so it's going to have to go up to take care of the existing stuff we have before we would look at expanding and going more inland toward for downstream operations.

Stanley Elliott -- Stifel -- Analyst

Thanks, Guys. Thank you.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Keith Hughes from Truist. Your line is open.

Keith Hughes -- Truist -- Analyst

Thank you. My question is on M&A a couple questions around that I guess one with the pending potential higher capital gains taxes does that play a role with some of the sellers to potentially speed them speed them up? And I guess number two with really a nice light at the end of the tunnel on non-residential coming and all the stuff you discussed on infrastructure is that you know increase your appetite if need be to pay a little bit more to get a deal or might be a nice couple year cycle decades?

Ronnie Pruitt -- President and Chief Executive Officer

It's a good question. And you know, I think it's a little early for us to see what the talk of that capital gains tax could do for especially a lot of these individual smaller mom and pop companies. You know, I think we fall back on our horizon 24 to 25 goals and talking about the discipline we're going to have and the position that we're in and we just can't, you know, try to go out and pay really high multiples and layer minute. We need to realize, significant improvement are multiples before we go out and buy other multiples.

But with that being said, I still say we're going to be very strategic. And you know, we're going to look at things that are the potential for bolt on the potential for more pull through of our aggregates, or, you know, downstream products from terminals, livestock, and then we've talked about other potential terminals that we're working on. And we've got those that strategically we're working on and other aggregate opportunities in our existing footprint that we're working on. And so, you know, I'd say right now are the best strategic value for us as a continue to focus on the things that we can control and the things that are the most creative at the at the multiple that we can invest in our own opportunities. And if you know if those other opportunities, external opportunities come that that would be very, very strategic to us, then we're going -- we're going to definitely take a look at those.

Keith Hughes -- Truist -- Analyst

Okay. Thank you.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] There seems to be no further questions at this time. I will now turn the call over back to Mr. Ronnie Pruitt, President and Chief Executive Officer for closing remarks.

Ronnie Pruitt -- President and Chief Executive Officer

Thank you, Carl. Thank you very much for your time in interested in US Concrete. We look forward to updating you in August regarding our operational financial performance and the progress we're making across our platform. Until then, we hope you stay safe and healthy.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Sharon Ellis -- Vice President of Investor Relations

Ronnie Pruitt -- President and Chief Executive Officer

John E. Kunz -- Senior Vice President and Chief Financial Officer

Julio Romero -- Sidoti & Company -- Analyst

Brian Biros -- Thomson Research -- Analyst

Trey Grooms -- Stephens -- Analyst

Paul Roger -- Exane BNP Paribas -- Analyst

Stefanos Crist -- CJS Securities -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Stanley Elliott -- Stifel -- Analyst

Keith Hughes -- Truist -- Analyst

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