Ready Mix Incorporated Q3 2008 Earnings Call Transcript

| About: Ready Mix, (RMX)

Ready Mix Inc. (RMX) Q3 2008 Earnings Call November 12, 2008 10:00 AM ET


Brad Larson - Chief Executive Officer and Executive Director

Bob De Ruiter - President

Clint Tryon - Chief Financial Officer


Walter Schenker - Titan Capital


Ladies and gentlemen, thank you for standing by. Welcome to the Ready Mix Inc. third quarter conference call. During the presentation all participants will be in listen-only mode. (Operator Instructions) As a reminder this conference call is being recorded Wednesday, November 12, 2008.

I would now like to turn the conference over to Mr. Brad Larson, Chief Executive Officer; please go ahead sir.

Brad Larson

Thank you operator and thank you all for joining us this morning for Ready Mix Inc.’s 2008, third quarter results conference call. On the phone with us today we have Bob De Ruiter the President and Chief Financial Officer, Clint Tryon We all will be available to answer your questions following our prepared remarks.

Please note that this conference call will include forward-looking statements. These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. These statements are not guarantees of future performance and actual results may differ materially.

A more detailed discussion of these risks and uncertainties is contained in this morning’s press release and Ready Mix Inc’s various filing with the SEC, including our Annual Report filed on form 10-K for the year ended December 31, 2007. The statements made during this call are made only as of the date of the call November 12, 2008 and we undertake no obligations to update these statements.

Our third quarter financial results reflect the continuing slump in residential construction in the metropolitan areas of Las Vegas and Phoenix. The outlook for residential construction in our market remains cloudy. Accordingly, we have redoubled our efforts to reduce costs, including reductions in personnel and overtime and implementation of the fuel surcharge, while at the same time enhancing our ability to serve our customers and respond to new business opportunities.

We also remain alert to the possibility that scarce credit may affect demand for our Ready Mix products in the non-residential construction sector, which has held up extraordinarily well so far in this cycle. Bob De Ruiter will have more details on our market and operations in just a moment, but first let’s review the numbers.

For the three months ended September 30, 2008 revenue decreased 14.4% to $16.4 million compared to revenue of $19.1 million for the third quarter of 2007. Cubic yards of concrete sold decreased 8.9% for this year’s third quarter compared to the same period of 2007, while our average unit sales price decreased 6.5%.

Gross profit decreased to approximately $20,000 or 0.1% of revenue compared to gross profit of $1.1 million or 5.8% of revenue a year earlier. General and administrative expenses decreased 10.2% to $1 million, compared to G&A expenses of $1.2 million for the third quarter of 2007. The net loss for the third quarter of 2008 was $0.6 million or $0.16 per basic and diluted share. This compares to net income for the third quarter of 2007 of approximately $60,000 or $0.02 per basic and diluted share.

For the nine months ended September 30, 2008, revenue decreased 20.6% to $49.2 million compared to revenue of $62 million for the first nine months of 2007. Cubic yards of concrete sold decreased 15.4% for this year’s first nine months compared to the same period of 2007, while average unit sales price decreased 5.9%.

Gross profit decreased to $0.3 million or 0.6% of revenue compared to gross profit of $5.6 million or 9.0% of revenue, a year earlier. The net loss for the first nine months of 2008 was $1.7 million or $0.45 per basic and diluted share. This compares to net income for the first nine months of 2007 of $1.6 million or $0.41 per diluted share.

Our balance sheet remained strong and liquid despite the continuing slump in housing. At September 30, 2008, Ready Mix, Inc. reported working capital of approximately $10.6 million, including cash and cash equivalents of $5.6 million, a current ratio of approximately 2.3 and total stockholders equity of $27.6 million or approximately $7.25 per outstanding share.

In comparison at December 31, 2007, Ready Mix, Inc. reported working capital of approximately $11.8 million, including cash and cash equivalents of $9.2 million. The current ratio was approximately 2.5 and total stockholders equity was $29.2 million or approximately $7.67 per outstanding share.

Now, that we’ve gone over the numbers I’d like to turn the call over the Bob De Ruiter.

Bob De Ruiter

Thank you, Brad. As I mentioned in our last conference call, we completed the installation of our fourth batch plant in Phoenix located on a third sand and gravel site during the third quarter. We expected this new plant to help us make more efficient use of our existing fleet of Ready Mix trucks and to allow us to compete on a geographic location we could not compete in before because of the travel distance to our other batch plants.

With the ongoing housing downturn, the plant is not living up to our expectation so far, but we still expect this geographic area to be among the first to rebound when the turnaround finally arrives. So we are very pleased to have this site in our portfolio for the long-term.

As Brad stated, the outlook for residential construction in our market remains cloudy. In particular as I mentioned on our last conference call the inventory of unsold homes remains high. While the number of the new home permits has declined during the quarter, has reported in the October editions of the Phoenix Housing Market Letter and the Las Vegas Housing Market Letter.

Additionally our market leads in Asian and foreclosures and conditions in the mortgage market continue to remain unsettled. We must also remain alert to the possibility that scarce credit may affect demand for Ready Mix products in the non-residential constructions sector, which to the good fortune of the whole industry has held up remarkably well so far in this cycle.

Earlier in the call we touched upon our cost reduction efforts. Given the declining demand for our products, it was essential that we reduced cost and continue to look for any other opportunity to do so.

Besides the reductions in personnel and overtime and the implementation of a fuel surcharge, all salaried personnel took a 5% wage reduction effective November 1 and we are seeking all possible cost saving opportunities from vendors and suppliers as well as making further administrative cost changes; while at the same time striving to improve upon our ability to sever our customers and respond to new business opportunity as they may arise. Accordingly, we continue to manage our cost closely while we take advantage of our operational flexibility to better position Ready Mix, Inc. for the future.

Operator, we are ready for the first question.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Walter Schenker - Titan Capital.

Walter Schenker - Titan Capital

A couple of balance sheet questions; I noticed accounts receivable and inventories were up fairly sharply for this period. When you look at the balance sheet, I realize it’s first of December, so there might be some seasonal pattern, but is there an issue on receivables? I slowly took a slide increase in reserves, but it seem that receivables given the $16 million of revenue was somewhat high?

Clint Tryon

This is Clint Tryon, Walter. I would say that we don’t have any specific issues in our receivables. I believe that our receivables are following the cycle of the economy as far as the slowdown in the credit facilities and the slowdown the others are paying; the generals, which is flowing down through the subcontractor’s and eventually slowing down to pay from our subcontractors to us the suppliers.

Walter Schenker - Titan Capital

However, we have not had at least so far any substantial problem with collections; it just seems somewhat on the slow side? I mean people aren’t going bankrupted that we know off things like that?

Clint Tryon

Nothing have been a significant point. We have seen a few smaller contractors that we’ve done business with going into the bankruptcy mode, but nothing of any significance and our positions are relatively secure.

Walter Schenker - Titan Capital

And inventories are part of function of the fourth batch plant or it’s also somewhat seasonal.

Clint Tryon

The inventory is somewhat of a seasonal type item. As far as add mixtures and other material products that we inventory, do seasonally change an increase or decrease with the season.

Walter Schenker - Titan Capital

In respect to revenue related parties I realize for [inaudible] and Brad to some extend it would seem as if and I realize in part it’s a function of location, but it would seem as if given the strength of Meadow Valley’s business that there should be some opportunities given our excess capacity to do more with Meadow Valley even. I realize you have to be competitive and at an enormous length, but it would seem as if there ought to be some opportunity in times when business is really tough to sell more to Meadow Valley. Are we not capable of producing the products they need?

Bob De Ruiter

Ready Mix is capable of producing the product that Meadow Valley needs on its projects an in fact as you know has supplied a numerous projects in the past. Unfortunately when we go through the bidding process on the Meadow Valley side and we’ve discussed on previous calls how we try to keep that competitive field even between already mix suppliers.

The commitments are made to other Ready Mix producers and Meadow Valley abides by those commitments made at bid time. So, it would be very unusual for us, unless there were some kind of a product or service problem with a competing Ready Mix supplier as long as they perform on Meadow Valley jobs, we would abide by our contractual obligations with them and would not just simply change suppliers to shift business in Ready Mix Inc.’s direction.

We are looking at every opportunity for Ready Mix Inc. to provide concrete on future Meadow Valley projects, because we do see that as an opportunity since there is that synergy between the two businesses, but it’s very difficult to go back on jobs that have already been bid.

Walter Schenker - Titan Capital

Okay, but there is no reason why Ready Mix cannot be competitive. I realize the margin may be less than we would like for future Meadow Valley business assuming it’s location relevant.

Bob De Ruiter

You are exactly correct.

Walter Schenker - Titan Capital

Okay. So hopefully we’ll see in future quarters; at least we’ll see Ready Mix in future quarters, an opportunity of some of the excess capacity we have showing it over to Ready Mix; I mean from Ready Mix Meadow Valley.

Last question, I know we’ve cut G&A effective November 1 on salaries. Is there additional opportunities since G&A is not down much year-over-year, you may have to do with an additional batch plant to cut G&A since CapEx is down and we have a bunch of G&A, we’d think that from a cash flow standpoint there might even be more that can be done.

Bob De Ruiter

There are a few more things to be done as we mentioned in the call; there is some administrative changes that we are still anticipating making before the end of the year. So, I guess we think that we will able to show further reductions in G&A.


(Operator Instructions) and it seems there are no questions at this time.

Brad Larson

Alright, well thank you everyone and Walter thank you for your questions. You were as lonely as you thought you where on this call, but it’s probably because your questions were so thorough. Thank you all for joining us and have a good day. Thank you.


Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.

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