Wednesday, March 10, 2010

Thoughts on U.S. Concrete (RMIX) Conference Call

U.S. Concrete's (RMIX) 2009 adjusted EBITDA was $25.3 million in 2009 compared to $40.5 million in 2008. Note that even this sadly diminished figure benefited from gains on the repurchase of a portion of their senior subordinated Notes earlier in 2009, and from cost cutting.

Unfortunately, neither of those benefits to EBITDA are sustainable, as the company no longer has the cash to buy back Notes at a discount, and as management pointed out on the conference call this morning,

you should note that several of the recent cost reduction initiatives are more temporary in nature, as we do fully expect to reinstate normal salary adjustments and incentive compensation as well as 401(k) matching contribution when economic conditions return and improve to more normalized levels.

Until construction starts booming again (could be years), RMIX might continue to have these dismal EBITDA and even worse cash flow numbers (thanks to cap ex requirements). Meanwhile, the annual interest payment on the Notes is something like $23 million - hence the need for a balance sheet restructuring.

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