Vulcan Materials Co (NYSE: VMC) Q1 2020 Earnings Call Transcript

Vulcan Materials Co (VMC) Q1 2020 earnings call dated May 6, 2020

Corporate Participants:

Mark Warren — Director, Investor Relations

Tom Hill — Chairman, President & Chief Executive Officer

Suzanne Wood — Chief Financial Officer & Senior Vice President

Analysts:

Stanley Elliott — Stifel — Analyst

Kathryn Thompson — Thompson Research — Analyst

Anthony Pettinari — Citi — Analyst

Mike Dahl — RBC Capital — Analyst

Trey Grooms — Stephens — Analyst

Mike Wood — Nomura Instinet. — Analyst

Seldon Clarke — Deutsche Bank — Analyst

Garik Shmois — Loop Capital. — Analyst

Adam Thalhime — Thompson Davis. — Analyst

Paul Roger — Exane BNP Paribas — Analyst

Michael Dudas — Vertical Research — Analyst

Phil Ng — Jefferies — Analyst

Adrian Huerta — JPMorgan — Analyst

Rohit Seth — SunTrust — Analyst

Jerry Revich — Goldman Sachs — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen and welcome to the Vulcan Materials Company First Quarter Earnings Conference Call. My name is Nicole and I will be your conference call coordinator today. All participants are currently in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] During the Q&A portion of this call, we ask that you limit your participation to one question, plus a follow-up. It will allow everyone who wishes the opportunity to participate.

Now, I would like to turn the call over to your host Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Mark Warren — Director, Investor Relations

Good morning, everyone. With me today are Tom Hill, Chairman and CEO; and Suzanne Wood Senior Vice President and Chief Financial Officer. Today’s call is accompanied by a press release issued this morning and a supplemental presentation posted to our website vulcanmaterials.com. Additionally, a recording of this call will be available for replay at our website later today. Please be reminded that comments regarding the company’s results and projections may include forward-looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company’s earnings release and in other filings with the Securities and Exchange Commission. You can find a reconciliation of non-GAAP financial measures and other information in both our earnings release and at the end of our supplemental presentation.

I will now turn the call over to Tom to begin our prepared remarks. Tom?

Tom Hill — Chairman, President & Chief Executive Officer

Thank you, Mark, and thanks to everyone for joining the call today. We appreciate your interest in Vulcan Materials Company. As you all know, we’re living and operating in times that challenge us all, both at work and at home. We hope you and your families are healthy and safe. It’s been over two months since our company proactively began taking protective measures to keep our people healthy, while continuing to crush rocks, service our customers and run our business. I’d like to begin the call by saying thank you to all of our employees, for their patience, their flexibility and commitment to Vulcan, each other and to our customers, as well as to our communities. You are doing a great job, under difficult circumstances. I am very proud to be part of your team. We had a very good first quarter. It was in line with our expectations and we didn’t experience much disruption other than some wet weather. Before Suzanne goes over the quarter results, I’d like to talk about the underlying strength of Vulcan’s business model and then I’ll speak to how we’re proactively responding to the COVID-19 pandemic and to the economic uncertainties that this crisis has created across our economy.

First, I want to emphasize that the underlying fundamentals driving our business remain unchanged. Our aggregates-focused business is sound, is resilient and more adaptable to demand shifts than any other products in our space. We have a strong and stable aggregates franchise that was built over 60 years. As a result, we remain confident about our company with its inherent strengths that will provide long-term stability and growth. In the near term, however, these are extraordinarily complex and uncertain times that are and will continue to test our resolve and our resilience. Our approach is to identify, prioritize and to focus on what we can control and to take appropriate thoughtful and decisive actions. At times like these the ability to make decisions quickly and accurately and to execute effectively is critical. I’d like to highlight a few of the priorities that are top of mind for our management team today. First and foremost, the health and safety of our people are of paramount importance to us. Early on, Vulcan implemented a robust set of COVID-19 protections, precautions and procedures. We are following the guidance of the CDC and other health organizations to keep us working in the safest environment possible. I’m pleased to tell you, its working.

Second we are focused on our financial position. We entered this crisis with a strong balance sheet and liquidity. In addition, we have taken prudent steps to further enhance our financial position, including supplementing our existing revolving credit facility with a term loan and reducing our planned capital expenditures for the remainder of 2020. Next, continuous improvement remains vitally important to us. We are utilizing our four strategic initiatives, particularly commercial and operational excellence, to improve our execution capabilities and manage our business more efficiently. Fourth, we are concentrating on real-time communication. This ensures that the management team has immediate insight into what’s happening on the ground, at our quarries, in our markets and with our customers. Our top operating and functional team leaders are constantly participating in calls where discussions — where we are discussing and monitoring the health of our employees, the business and the impacts from the pandemic. This allows us to look around corners and quickly adjust our plans, particularly with respect to possible changes in demand or the timing of construction activity. It also helps us to cascade communication to align employees to accelerate the decision-making process and to promote the sharing of best practices particularly around health and safety.

And finally, we’re looking ahead and focused on contingency planning, from both the financial and the operational perspective. Now, I already mentioned a couple of proactive steps we took to enhance our already strong financial position. Operationally, each division has developed detailed contingency plans and trigger points to allow us to execute well ahead of the curve depending on the pandemic’s effect on construction activities. These plans include among many other items, changing our production schedules, project timing and reducing costs. Certain elements of these plans are already underway particularly around cost reduction and project timing. As you can see, we are taking many steps to adapt to the changing environment. We are vigilantly monitoring this evolving situation. Now, I’ll describe what we’re seeing from a demand and shipment perspective and how that translates to an outlook for the remainder of 2020. During the first quarter, we were designated an essential business. As a result, the shipment activity was good across our markets, as customers executed on their backlogs and we continued to book both private and public projects. These conditions generally continued in April. However, on the private side, we have begun to see some project schedules shift including some postponements and cancellations. This adds to our uncertainty about near-term demand.

We have sufficient backlogs to stay busy, but we cannot control future demand. So, given the lack of visibility, as to the duration and impact of the pandemic and to the quickly evolving economic situation, there is just a level of unpredictability with respect to project timing and new construction starts. When we provided our previous guidance, we try to strike a reasonable and a thoughtful balance between being realistic and being cautious. We now find ourselves in a more dynamic world in which we believe the balance should shift toward a more cautious approach. Therefore, we have decided to withdraw our previous earnings guidance for 2020. We will continue to monitor all aspects of our markets. As more data becomes available and our visibility improves, we’ll resume our usual practice of providing guidance.

Now, I’ll hand the call over to Suzanne for additional comments. Suzanne?

Suzanne Wood — Chief Financial Officer & Senior Vice President

Thank, Tom and good morning. I’ll cover some highlights from the quarter and also comment on our balance sheet and liquidity position. Adjusted EBITDA for the first quarter grew by 4% to $201 million. This included a foreign currency balance sheet translation loss of $6 million, resulting from the rapid devaluation of the Mexican peso in March. In the Aggregates segment, our gross profit improved by 5%. On a per ton basis that translated to $4.31 or a 6% increase year-over-year. Cash gross profit per ton also increased by 6% in the quarter to $6.02. Given the seasonality of the first quarter, we typically look at cash gross profit on a trailing 12-month basis. That number was $6.82 per ton, an increase of 7%, representing another good step forward on our path to $9. This quarter’s aggregates shipments were 1% lower than Q1 last year, which was a tough comp. You’ll recall that the first quarter of 2019 experienced strong year-over-year growth of 13% as a result of delayed shipments from the fourth quarter of 2018. There was also some negative impact from wet weather this year in the Southeast and the Southwest, but California, Florida, Illinois and Virginia realized solid growth.

All of our key markets reported year-over-year price growth, up 4.5% on a reported basis and 4.8% on a mix-adjusted basis. Unit cost of sales increased by 4%. As expected, we continue to have some impact from higher repairs, maintenance and stripping. Wet weather inefficiencies also had an impact on the cost profile in certain markets. On the positive side, lower diesel fuel costs benefited the quarter by approximately $3 million. Moving on to our non-aggregates segments. I’ll start with asphalt. Our gross profit this year was a $2 million loss compared to a loss of $3 million last year. Asphalt shipments increased by 2% and prices increased by 5%. In addition, the average unit cost for liquid asphalt was 6% lower than last year’s quarter and this also contributed to the expanding margins. This represented the fourth consecutive quarter of year-over-year profit improvement. The concrete segment also saw better results this year. Gross profit improved by 8% to $9 million led by a 10% increase in shipments and a 3% increase in average selling prices. SAG expenses declined 4% year-over-year and as a percentage of revenue improved by 90 basis points. This resulted from adjustments to stock-based compensation and earlier-implemented cost reductions. Our return on investment continued to improve increasing by 110 basis points to 13.9% for the trailing 12 months ended March 31. Consistent with past practice, this has been calculated on an adjusted EBITDA basis.

Tom has already commented on our strong balance sheet and liquidity position, which we further enhanced in April with the $750 million term loan. Our available liquidity is now $1.6 billion. This is comprised of the term loan, the undrawn revolving credit facility and cash on hand. Our debt structure is very good with a weighted average debt maturity of 14 years and a weighted average interest rate of 4.2%. And in terms of leverage our debt-to-EBITDA ratio on a gross basis was 2.2 times and on a net basis it was 2.1 times. Tom mentioned our contingency planning efforts. A part of these plans relate to our capital expenditures. We have reduced our expected 2020 spend from a total of $475 million to between $275 million and $325 million. The majority of this amount will be spent on operating and maintenance capex and most of our growth projects will be placed on hold. Our capital allocation priorities remain the same. But in light of the uncertainty created by the pandemic, we are most committed to operating and maintenance capex to protect the value of our franchise, dividends and the overall preservation of our liquidity. From an M&A perspective, our evaluation of opportunities will be even more stringent and we will remain disciplined in this area.

And now, I’ll turn the call back over to Tom for closing remarks.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you, Suzanne. Before we go to Q&A, I want to take this opportunity to again thank the employees of Vulcan for their hard work and their dedication. They’ve taken good care of our customers, and continue to improve our operating disciplines and efficiencies. Our MSHA/OSHA injury rate this quarter was 0.75 accidents per 200,000 employee hours worked, a 15% decrease from the same quarter last year. Simultaneously, our hard-working teams have followed strict COVID-19 protocols and stayed healthy. Our world-class safety record over the last three years underscores how committed our people are to superior performance in safety and health.

Our culture of putting people and safety at the center of our decisions serves our shareholders and our employees well. We are committed to making decisions about our business that will protect the financial health of the business and will ensure strong growth for the long term. We entered uncertain times in a position of strength. We will exit uncertain times in a position of strength.

Now, we’ll be happy to take your questions.

Questions and Answers:

Operator

[Operator Instructions] The first question will come from the line of Stanley Elliott with Stifel.

Stanley Elliott — Stifel — Analyst

Hi, everyone. Good morning. Thank you guys for taking the call and good to hear to voices.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Good morning.

Stanley Elliott — Stifel — Analyst

Could you all talk, I guess kind of Tom high level? I mean, obviously plenty of uncertainty in the marketplace. I’d love to get your take on kind of, what you’re seeing more broadly across the portfolio maybe even a little more detail on what to what you’re seeing in trends in April if you could please?

Tom Hill — Chairman, President & Chief Executive Officer

Sure. I would describe April as a continuation of the first quarter. I think volumes, we’ve seen them shipping kind of as usual. The one exception, I’d call out would be in the Bay Area where residential and non-residential construction were not deemed essential. We’re seeing that lighten up though. I mean, they’ve lifted that in Napa and our customers in that area are telling us that they’ve got when it lifts they’re ready to go both in res and non-res. So, as far as April is concerned, so far so good from a demand perspective, again, lots of unknowns out there. We’ve seen some postponements and some delays. So we’ll see how the rest of the quarter plays out. From a pricing perspective, I would tell you the cadence again is much like the first quarter. I don’t see a big delta between April and the first three months.

Stanley Elliott — Stifel — Analyst

In pricing, the pricing was obviously very good in the quarter. I mean, should we think about the demand piece obviously there’s plenty of uncertainty out there. Is it fair to assume that kind of the structures you all have in place kind of what’s being done at the ground level that maybe there’s a little more visibility on the pricing side?

Tom Hill — Chairman, President & Chief Executive Officer

Yeah. I think that the visibility on the pricing side is particularly with the disciplines that we’ve put in on our commercial excellence piece is very clear. For the short term, I don’t see anything that would throw me off of how we again our cadence in the first four months. So, again, so far so good in the quarter you saw it — we were at 4.8 mix-adjusted. The mix was in the Southeast where we had a lot of rain. Most all of our January price increases stuck. We have some price increases to fixed plants and ready-mixed that go in April. Most of those went through April 1. There’s a few that pushed into May, but they’re going to stick. So I think prices should hold throughout 2020. And I would tell you, they’ll hold even if you see volumes slide a little bit in the second half. That’s one of the unique characteristics about aggregates. And we’ve seen that prove out over past cycles.

Stanley Elliott — Stifel — Analyst

Perfect. I will pass along. Thanks guys. Appreciate it.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

The next question will come from the line of Kathryn Thompson with Thompson Research.

Kathryn Thompson — Thompson Research — Analyst

Hi. Thank you for taking my questions today. First for the team just a bigger picture view taking a step back could you help clarify the differences between Vulcan today versus the Great Recession a little over 10 years ago? In particular, how has end-market exposure changed, geographic mix changed, structural costs adjustments and other important fundamental differences today versus the last downturn? Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Yeah. Good morning, Kath. Thank you. First of all, from a market perspective the markets are just fundamentally and structurally different. And actually, they’re structurally better. You don’t have the overbuilding that we had some 12 years ago.

If you look at it from either a res or a non-res perspective, we’re still below long-term averages. You’ve got much better highway funding. Our core states, Vulcan’s core states have made big investments in infrastructure and we didn’t have that 12 years ago. And then the fundamentals are just good. I mean you’ve got — you don’t have the overbuilding. You’ve got extremely low inventories of houses. You’ve got low interest rates. So, just fundamentally construction demand is in a better position today than it was 12 years ago.

From Vulcan’s perspective, we’re just a very different company. Structurally, our product lines are different. We are uniquely advantaged in the Aggregates business. We don’t have any cement. The little bit of ready-mixed we have is in great markets. Our balance sheet and liquidity is much better.

And then we started earlier in this to ensure that our unit margins either continues to improve or protect it. And those are those four initiatives that we talked about: the commercial piece, the operating disciplines, logistics and procurement. And as we said last year, those initiatives which are very much maturing will in good times will help us grow unit margins. If we get headwinds, it will protect our unit margins. So, we’re just in a lot better place and as are the markets.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yeah. And I would just add to that too Kathryn. I mean from my perspective, when you go through uncertain times like these having a management team that has a deep knowledge of operations. It’s just so important, because you have leaders who know how to exercise good judgment and how to make decisions that are right for the business, because it’s really about striking an appropriate balance between short-term and long-term decisions.And as I think about my colleagues around the table on the senior management team, certainly Tom, Stan Bass and Tom Baker, I mean these guys were Division Presidents, out in the field in the last Great Recession running a business. So, they are absolutely battle-tested. And I just think that’s very important.

They’ve got the first-hand knowledge from having put together actionable plans to stay ahead of the curve back then and that experience has been brought forth now. So I think that that is something that gives me confidence that we will be in a position to make the right decisions and execute them well.And as Tom said, I mean I think, we — and while this is a difficult time in many ways, from a structural perspective, we’re much better off than we were in the last recession anyway.

Kathryn Thompson — Thompson Research — Analyst

Okay. That’s helpful. The next question is really a comparison and contrast between two end markets one that has more visibility versus one that maybe is a little cloudier. On the public side, you’re seeing acceleration of construction work. But also you cited states that were outperforming, overall were Illinois and California. To what extent, the public really helped to drive demand at those states, because they do have more recent structural changes in funding? And then I guess the contrast against that. Help us understand how you’re thinking about the non-res end market. Our contacts aren’t seeing a wholesale cancellation of projects, but projects being pushed out in terms of start date. How are you thinking about that non-res exposure? Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

I’ll take the non-res first. In the vast majority of our markets, shipments to non-res projects, it just continues to be strong. Our bookings and our backlogs continue to be healthy. Again the exception we’d call out would be the Bay Area, which we think will hopefully is starting to start back up, and we’ll get that back on track. I think Houston is a watch for us. We have seen along the coast the LNG projects that — the ones that are started are going. The ones that haven’t — had not started are being pushed back. We also see a few other non-res jobs push back; very few cancellations. I can only think of one or two to come to mind.

Our — if you talk to our ready-mixed customers, they feel good for now. I think they probably have some pause or concerns passed getting through the backlog. So there’s just a lot of unknowns from a non-res perspective with the impact of COVID-19 on non-res construction. Will work bid will it continue? But, so far so good, but we’re watching it closely. The highway piece is a strength for us. Currently the state DOT work is shipping normal. We’ve got solid backlogs. We continue to have solid bookings. However, most states are projecting, as you guys know, a decline in revenues and AASHTO would tell you that’s probably on average 30%.

The vast majority of our states have continued construction and maintenance as expected. They expect the lettings for fiscal year 2020 to continue as planned. Exceptions to that would be Pennsylvania, which has halted construction; Kentucky, Mississippi, which has suspended lettings; and then North Carolina, we know, came into this year with financial issues although the legislation — their legislators are trying to fix that. The flip side of that is some of our key states Florida, California, Alabama, Texas, are all accelerating work, and that’s both efficient and safer. And now what we know on this is that shipments for now are strong and good. Lettings for the near term, three or four months are solid. We don’t know what the future holds for these DOTs past three or four months out. There — none of ours have released their budgets for fiscal year 2021. So again, so far so good, we’ll watch what happens, and hopefully funding will get backstop from the Feds from AASHTO, and hopefully the world will start driving again, and we’ll see gas taxes pick back up.

Kathryn Thompson — Thompson Research — Analyst

And just one quick just a clarification. Illinois, California, you cited them as seeing increase in demand overall. How much of that was private versus public?

Tom Hill — Chairman, President & Chief Executive Officer

So in California it’s across California has been in the first four months has been good shipments across all four end markets. Illinois is more on the public side both infrastructure with O’Hare work, toll roads. And then as you know, we’ve got new funding coming on in Illinois for highways.

Kathryn Thompson — Thompson Research — Analyst

Okay. Thank you so much.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

The next question will come from the line of Anthony Pettinari with Citi.

Anthony Pettinari — Citi — Analyst

Good morning.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning.

Anthony Pettinari — Citi — Analyst

Tom just a follow-up to that last question on state budgets. You indicated lettings were solid for the next three to four months. From a flow-through perspective I mean is there a time frame or a time line that we need to see federal aid to states to keep the outlook relatively positive in the second half of the year?

Tom Hill — Chairman, President & Chief Executive Officer

Except for maintenance work which goes very fast, most of those jobs we’d tell you that the backlog six to nine months on average before you start shipping them when you book them and you ship them. But again, they’re all over the place. But just as a rule of thumb, we would tell you that that backlog ships six to nine months out. Big work may be a little longer but that’s kind of a rule of thumb.

Anthony Pettinari — Citi — Analyst

Okay. That’s helpful. And then you referenced Houston as a watch market. I’m just wondering, if you could talk broadly about the impact of maybe lower oil prices to your business both as maybe a potential, modest tailwind from derivatives, raw material perspective and then also maybe as a headwind from a demand perspective?

Tom Hill — Chairman, President & Chief Executive Officer

Yes. So from directly we ship very little to the oilfield. It’s just not a big play for us. It’s not in our really in our geography. So we won’t see the direct impact from that. Indirectly, obviously lower fuel prices will help our aggregates cost. It could help cost from a long-haul freight perspective whether that’s rail ship or barge. And then we’ll continue, as I said, we’ll continue to watch the impact on Texas volumes, particularly Coastal Texas. We’re not seeing a lot of that yet but it’s a watch for us.

Anthony Pettinari — Citi — Analyst

Okay. That’s helpful. I’ll turn it over.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

Our next question is from the line of Mike Dahl with RBC Capital.

Mike Dahl — RBC Capital — Analyst

Thanks for taking my questions. I wanted to follow-up on the kind of Q&A or exchange around some of the past cycle comparisons. And I guess, specifically thinking about on the private side you’re talking about seeing some non-res projects kind of delayed versus canceled. I’m curious if you go back to last cycle, did the early stages kind of start out like this and you kind of push out the projects as long as you can before push comes to shove and gets canceled? Or did you see kind of quicker outright cancellations trying to draw some comparisons around what to take from initially just seeing a postponement versus cancellation?

Tom Hill — Chairman, President & Chief Executive Officer

I think that it was quicker and you saw more cancellations than postponements. It was more dire. And again it goes back to the overbuilding, you’re not overbuilt right now. If you look at homebuilders there is these markets have don’t have any inventories. And so people want to buy a house, they’ve got to build them. And people are trying to take advantage of the interest rates on the non-res side with the strengths we’re seeing there or data centers, distribution centers, warehouses, online commerce, education and health care. And again, those projects I’ll give you some examples of what’s pushed out. We’ve seen a dorm and a major university pushed out. A Google project get delayed, some office buildings get delayed, a couple of Carvana facilities we saw get delayed. The only cancellation that I can think of was that Dave & Busters in Lexington. Everything else is a postponement and we’ll see.

Now on the res side, we saw people push out new phases of subdivision three or four weeks ago. And now we’re seeing them in a number of our markets saying we’re going forward with them. So while people it’s kind of a mixed bag where people are pausing and then moving forward and then pausing and moving forward.

Mike Dahl — RBC Capital — Analyst

Okay. That’s interesting and helpful. Second question just on diesel. You noted the $3 million year-on-year improvement in the first quarter and presumably, it would get larger, especially as we work into higher volume or typically higher volume months. But curious, I understand that, there’s no guidance anymore for this year but can you help us frame up, your diesel consumption for last year in aggs? And all else equal, if you were to assume current diesel pricing on last year’s shipments, what type of full year tailwind would that represent?

Tom Hill — Chairman, President & Chief Executive Officer

Well our last year our trailing 12 month I think we used about 55 million, 56 million gallons of diesel fuel. Yes, there is a drop in that but I think that we can’t control the price of diesel. So what we’ll always focus on is and every operator at Vulcan would know it is your tons per gallon of fuel and every plant that we operate and that’s their training and that’s how they look at it. You guys can do the math. We dropped from $2.26 to $2.04. And since then it’s gone down dramatically. So if it was $1 it’s assuming usage is the same, it’s $50 million. But again that’s one of those that that’s not our controllables. And we’ll our operators every day look at how they use it.

Mike Dahl — RBC Capital — Analyst

Okay. Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

Next question is from the line of Trey Grooms with Stephens.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning, Trey.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Hi, Trey.

Trey Grooms — Stephens — Analyst

Good morning, Suzanne. How are you?

Suzanne Wood — Chief Financial Officer & Senior Vice President

Great. I hope you are?

Trey Grooms — Stephens — Analyst

Doing well. So my first question is around the FAST Act — it’s expiring in September. I think the prior thought was that we would likely get some, sort of, a continuing resolution to kind of see us through the election and into next year and maybe revisit. Do you guys think that the current situation changes that at all and the potential that we may could get something maybe more meaningful than just the CR? Or how are you thinking about that given the — in light of the current health crisis that we’re in?

Tom Hill — Chairman, President & Chief Executive Officer

So Trey, I’d divide that into three buckets. The first one and probably the most pressing is AASHTO’s request for $50 billion to backstop the fall in state funding. This really needs to be included at COVID-19 Phase 4 bill. And I think hopefully that’s going to happen because it’s a real need that was the impact of the pandemic. The second bucket of this is to your point the FAST Act reauthorization. Prior to COVID-19 there was serious work underway in D.C. on reauthorization. Earlier this year, the Senate EPW Committee passed the highway portion of the FAST Act. It was an increase of I think it was about 25%, 26%. Unfortunately, the pandemic interrupted that work. The good news is the prework has been done there. So they got had a good start to it. Again, it’s been interrupted.

But remember that if the reauthorization isn’t done by September we will get extensions. So we’re not going to lose that funding. It won’t go down. It will just be pushed out. And then so it’s either flat or if we were to get it — it would go up dramatically. And then the third bucket would be the discussion — kind of the continuous discussion of a big infrastructure bill. There’s a lot of talk. There’s been a lot of talk for several quarters about a significant act to address infrastructure. Again COVID-19 complicates this politically, but there’s also — this is also — this is an opportunity for that and everybody recognizes the need both from an infrastructure perspective, but also to as a stimulus package. So we’ll just have to see what happens.

Trey Grooms — Stephens — Analyst

Understood. Okay. So — and then I guess, the next question maybe for Suzanne. It sounds like things are holding in now, but clearly with all the uncertainty seeing some level of volume declines in aggregates over the next few quarters is not entirely out of the question. So in that kind of scenario, I know the long-term goal for incremental margins is 60%. Is there — how should we be thinking about the — in the case of lower volume just kind of the mechanics around the decremental margins in that type of scenario? And assuming that this is somewhat short-lived in duration if there is — if we do come into some type of a downturn?

Tom Hill — Chairman, President & Chief Executive Officer

I’ll start off, if you don’t mind. I think that’s part of the beauty of the aggregates business. A big key to that is from a margin perspective is staying ahead of the curve and making sure you know what’s going to happen and hit it off. We’ve been — we set trigger points in these markets that aren’t just volume falling. It’s quoting praise, how we’re quoting, our job bookings, backlog levels, the shipping pace and that’s the all-in markets.

A big benefit to us is that commercial excellence strategic agenda, which allows in individual markets for clear metrics that are automated, they’re consistent, they’re accurate and they really give us a view to the future before volumes actually fall. At the same time, you look at timing and delays and critical inventory sizes, I think, that the team has done a really good job of putting those contingency plans in place for potential volume swings and they’re detailed by plant and by market and setting those trigger points. And again, that — this is you can take production in aggregates as you know up and down very quickly as a mechanical process. So cost is a piece of this. Price is a piece of this. But at the end of the day it’s that management of unit margins and our goal is to maximize those unit margins and live up to our potential. Again those four strategic initiatives are really going to serve us well in this and as we said they’ll help us grow margins in good times and protect in bad times. So we’ll leverage that. And I think we’re in a really strong position to protect those unit margins.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yes. I agree, with Tom. And I would just add to that look, I mean, that’s why we got started on these contingency plans very early so we would know exactly what we plan to do well in advance of any volumes beginning to fall because certainly as Tom said, we understand how to reduce costs. We want to make sure that we do that sensibly. But a large part of our costs are variable and so we do have the ability to do that.

We want to make sure we do the right things for the business. We do want to protect our unit margin. And certainly, as you’ve heard us talk about many times we are well ahead of the industry on those. And so our folks in the field understand that well. You can always say that history will repeat itself, but just as a — just as an indicator of the company’s resolve and ability to reduce cost if you look back to the last recession when certainly there was a significant decline in volume our unit margins only went down by about 10% where — while volumes declined much more than that. So that indicates that there is certainly room for us to manage those margins.

Trey Grooms — Stephens — Analyst

Okay. Understood. Thank you very much. And good luck with the rest of the quarter and stay safe.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you. Stay safe.

Operator

The next question is from the line of Mike Wood with Nomura Instinet.

Mike Wood — Nomura Instinet. — Analyst

Hi, good morning.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning Mike.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Good morning.

Mike Wood — Nomura Instinet. — Analyst

Could you give us some color in terms of maybe your top three markets in terms of how that revenue shortfall in transportation revenues looks compared to that 30% national shortfall per AASHTO?

Tom Hill — Chairman, President & Chief Executive Officer

I don’t know that I have those specific numbers, but our top markets are going to be — the top — if you look at our top 10 markets our top 10 states the top three would be Texas, California, Virginia. All of them have kept their lettings the same through fiscal year 2020. The only one that has not the nine out of the — the one out of the 10 that did not is North Carolina and we all know what’s happening there and hopefully they’ll get that problem solved. I would tell you that Texas is very healthy based on their current revenues. California continues to be pretty healthy as does Virginia. But specifics of those top three, I’ll have to get back with you.

Mike Wood — Nomura Instinet. — Analyst

Okay. And I’m curious to get your thoughts in terms of — your shipments lags the funding that the states are putting in on the public infrastructure side. Have you looked at in terms of if funding levels drop 10%, 20% from 2019 levels, what that would actually lead to in terms of the drop-off in your shipments?

Tom Hill — Chairman, President & Chief Executive Officer

Too early. The short answer is really too early to tell and a lot of moving parts. I think that if you look at those states and where we are and our backlogs again those things lag six to nine months. But I think this is one of the real unknowns and uncertainties that we’ll have to put together of what’s it going to mean. I would tell you that our states and the top 10 that we talked about nine of those 10 have much better funding than increased their funding over the last three or four years. Only one that hasn’t has been Arizona. So, we sit in a better place than most, but too early to tell.

Mike Wood — Nomura Instinet. — Analyst

Okay. Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

The next question is from the line of Seldon Clarke with Deutsche Bank.

Seldon Clarke — Deutsche Bank — Analyst

Hey thanks for the question. If you just take a step back and think about the business mix from a higher level you mentioned backlogs or some of the maintenance-type work and state lettings and obviously, you’ve got some ongoing projects in both the commercial and residential space. But when you try to contextualize this internally or when you do your stress test, what percentage of your revenue mix do you really think is at risk from a macro perspective over the next let’s say three, six, and 12 months?

Tom Hill — Chairman, President & Chief Executive Officer

Again, I’m sorry not to give you a clear answer to that because I just don’t think there is a clear answer right now on it. We just — we don’t know the short-term or long-term impact of the shelter-in-places and it’s a very dynamic situation. Even today as people start to lift it we don’t know what that means. We don’t know on the private side. Again, we continue to see res. Homebuilders come back and build subdivisions. We see a few projects here and there postponed in the non-res sector. So on the private side it’s really going to depend on is — do these postponements get to be meaningful? So, far they have not. Or does — what we have booked does it postpone? Again, which we have not seen much of that at this point. So, again, so far so good, but I just don’t think we have clear information either on the public side or the private side to predict that either short-term or long-term.

Seldon Clarke — Deutsche Bank — Analyst

Okay. Any color on the states that have looser restrictions in place that — just to give us a sense of what the continuing business looks like over the next couple of weeks or months?

Tom Hill — Chairman, President & Chief Executive Officer

Yes. So, in general, as we said both on the public side and the private side through April, we’re shipping as usual with the one exception has been northern California actually just the Bay Area and the seven counties up there. And we think that’s going to lift which will give us a boost hopefully over the next 30 45 days. It’s already started again as we said with Napa. But at this point, with the shelters in — the shelter in place over the last seven or eight weeks we’ve not seen a falloff. So, we would think that as those lift it would only support the shipments we’re seeing today.

Seldon Clarke — Deutsche Bank — Analyst

Okay. Is there any way to just contextualize what you mean by as normal in April whether as it relates to comps last year if there was — what type of delayed demand from late 2018 impacted April or you’re talking normal seasonality? Or is there anything to help contextualize what April look like?

Tom Hill — Chairman, President & Chief Executive Officer

What I would tell you is it was — it’s fairly normal compared to prior April.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yes. And that the spillover from fourth quarter of 2018 that was really a first quarter impact last year. So, that really has no bearing on what we’re talking about for April.

Seldon Clarke — Deutsche Bank — Analyst

Okay, that’s helpful. Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

Next question is from the line of Garik Shmois with Loop Capital.

Garik Shmois — Loop Capital. — Analyst

Hey thanks. Just wondering just on SAG, how much of the decline in the quarter was a lower base — share-based comp versus the cost actions you took? And how to think about SAG moving forward both in a maybe a shorter or a longer downturn?

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yes. No, thank you for the question. Probably three quarters or so maybe 60% to 75% of the amount was share-based comp. I mean that’s basically tied to the share price. So, we’ll continue to report on fluctuations there.

The other reductions that you saw in the SAG cost, I mean, we really teased those a bit in the fourth quarter when we talked about having looked across our corporate and field operational overhead base and we made some adjustments there, really around technology and looking for ways to be more efficient as well as ways from the corporate standpoint to better manage professional services. And therefore we said, back in February, that we expected SAG to be lower for the full year both, in absolute dollars and as a percentage of revenue. Certainly that guidance was lifted, as we lifted all the other guidance, in the release this morning. And I would say that, as we think about SAG, as we go forward in these times I mean we’re always looking for ways to better leverage the overhead. Just like our operations group have detailed contingency plans by plant, we also have our contingency plans with respect to SAG. So we will — as we go forward, we will see which of those contingency plans are executed on the basis of what we see happening in the business.

Garik Shmois — Loop Capital. — Analyst

Okay. Thank you. Follow-up question is I was curious if you’re seeing any impact to your Calica Quarry in Cancun just given some of the shutdowns in various industries in Mexico. How you’re thinking about the long-haul network, just given some of the watch points across the oil markets in the Gulf coast.

Tom Hill — Chairman, President & Chief Executive Officer

So, first of all our people have done a great job, keeping each other safe and healthy, both on the quarries — in the Quarry and in the shipping lines. We continue to operate in Mexico. We’ve been deemed, essential business. Just like the U.S. we’ve implemented solid procedures and protocols to petro employees. Again, we’re still operating. And we’re still shipping. And at this point, we don’t see any interruptions.

Garik Shmois — Loop Capital. — Analyst

Great, thank you.

Operator

Next question is from the line of Adam Thalhimer with Thompson Davis.

Adam Thalhime — Thompson Davis. — Analyst

Thanks. Good morning guys.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Hi. Good morning.

Adam Thalhime — Thompson Davis. — Analyst

Tom, what percentage of your shipments comes from backlog? So if backlog is stable, kind of says to me that shipments could be flattish, as we move through the year. But I don’t know if there’s a lot of book and burn work that would come in over the summer. Or if that doesn’t come in this year, then all of a sudden, you’re minus 10% on volume, something like that.

Tom Hill — Chairman, President & Chief Executive Officer

So about 60% of our business is, what we call, bid work which is in the backlog. And about 40% of that is large to medium projects. The other 20% is small projects, because small projects go faster. The large to medium projects again is kind of in that 60 — or excuse me six to nine month timeframe. The other 40% of our work is shipments to fixed asphalt and ready mix plants. The asphalt will be more driven by the public side. The ready mix is using more driven towards the private side. So I mean, we’ve got pretty good insight into, how we’re going to look there. I would tell you that as I said earlier, the systems and the procedures and the disciplines that were put in with the commercial excellence. And this was still some three years ago. And that they’ve been perfected, actually that’s really gotten pretty accurate both from a volume perspective and a price perspective. The things we can’t control in both of these are projects being delayed or projects being cancelled and the unknowns around those.

Adam Thalhime — Thompson Davis. — Analyst

Okay. And then, what are your thoughts on, cash flow this year, because, with the pull down in capex you should generate a lot of cash this year, just curious how you’re thinking about deploying that?

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yeah. I — yeah to the capital allocation question, look, our priorities are basically the same, as when we’ve talked to you before. The order of the capital allocation priorities is unchanged. But in light of the pandemic uncertainty, I would tell you that we are most committed to operating and maintenance capex to protect the value of our franchise and keep all of that in good running order. We’re very committed to our dividends and certainly to the overall preservation of liquidity. And you saw us take steps in the quarter to ensure that we not only preserved our liquidity, but enhanced it.

As we think about growth in M&A, you’re right. We did reduce some of the capex that we plan to spend on internal growth projects. Those projects are pretty easily turned on and off without a lot of impact on the business. M&A, we would — didn’t do any in the first quarter. We would continue to evaluate opportunities as they arise, but applying an even more stringent lens to that, just given the current economic environment. And so, we’ve always been very disciplined there. And certainly we will remain even more disciplined. And at the bottom of the capital allocations priority waterfall our share repurchases — and look, we think share repurchase is an important part of the capital allocation structure. We — its part of that for the long-term, and we did do a little buying very early in the quarter about $26 million pre-COVID. So we’re committed in the long-term. But I can tell you in the short-term yes, probably not. We will focus more on preserving liquidity and the other items I mentioned.

Adam Thalhime — Thompson Davis. — Analyst

Okay, great. Thank you, Suzanne.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Sure.

Operator

Our next question is from the line of Paul Roger with Exane BNP Paribas.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning, Paul.

Paul Roger — Exane BNP Paribas — Analyst

Yeah. Good morning Tom.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Good morning.

Paul Roger — Exane BNP Paribas — Analyst

Hi, Suzanne, well good morning. I expect you all are doing well.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yeah.

Tom Hill — Chairman, President & Chief Executive Officer

Yes.

Paul Roger — Exane BNP Paribas — Analyst

Okay. Just a follow-up maybe, I mean you’ve talked a bit there about the cash flow. Maybe I’ll just have a follow-up on that. I mean, obviously, you’re cutting back on capex. I’m assuming, therefore, your business delaying your greenfields, is the plan essentially post-COVID-19 to start them again? And should we, therefore, when we think about the sort of medium term, should we be expecting capex to sort of ramp back up again? And just joined to that also, can you say a bit about working capital and whether there’s much more to do on that front as well?

Tom Hill — Chairman, President & Chief Executive Officer

I’ll take the capex first. It’s market specific as always. Those are greenfields in California and Virginia and South Carolina and so we’ll ramp up or down depending on those individual markets and the needs and the opportunities. So it’s — we’ll have to play that just by ear. But if the need is there and the demand is there, obviously, we’re going to invest because of good investments. And if not we will hold off until it’s time to invest.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yeah. And with respect to the working capital question, yeah, we’re obviously looking at that and have taken some steps to improve that. As I said the — our cash flows and the preservation of liquidity have always been important to the company. It’s one of the core tenets of how we run our business. And so in times like these obviously we’re going to ramp up those efforts. So we are making sure that our accounts receivable is collected timely, making sure that we don’t let any agings or anything like that slip there. And we’re also looking at carefully managing our inventory levels. That’s all part of the contingency planning. And certainly we will — if there’s some steps to be taken on the payable side, we’ll look at that as well. Hopefully that’s responsive to your question.

Paul Roger — Exane BNP Paribas — Analyst

Yeah, that’s great. And just as a quick follow-up. Can you maybe talk a little bit about the outlook for asphalt margins? I mean, obviously, Q1 you had prices up, bitumen down. I guess, bitumen comes down by even more given what oil is doing. Do you think you can hold that price cost spread? And actually could it even get wider as we go through the year?

Tom Hill — Chairman, President & Chief Executive Officer

Well, I think I would describe it this way. Our prices will continue to climb. We saw — and you’ve seen a number of quarters actually in all of last year prices climb as we chased liquid — rising liquid costs. We caught it in the fourth quarter and we said we would catch it and go past it, which is what you’ve seen. So I do have confidence that our pricing will continue to go up in the hot mix portion of it.

I think that the liquid piece for us is an unknown. On the surface so it went down some 6% as Suzanne said in the quarter. But the future for us is unknown in liquid and there’s opposing forces there. The dramatic fall in crude prices would have a lowering effect. Flip side of that is right now you’ve got less refinery activity because of this demand for diesel and gasoline is down. And so does that — the question is does that put pressure on supply of liquid? So what I’m confident is our prices will go up. What I — the unknown here is what’s going to happen to liquid prices as we go forward.

Paul Roger — Exane BNP Paribas — Analyst

Understood. Thanks a lot. Stay fit guys. Thank you.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Thank you.

Operator

The next question is from the line of Michael Dudas with Vertical Research.

Tom Hill — Chairman, President & Chief Executive Officer

Good morning.

Michael Dudas — Vertical Research — Analyst

Good morning, or maybe afternoon for some. I appreciate you taking my question. Tom, the implementation of COVID mitigation throughout your organization, through the plants, the facilities, how quickly did everybody adapt? Do you see that continue — was there any productivity issues? Or could there be some enhancements to operations as you think about going forward if we’re going to keep these types of mitigations for a very long period of time? Are you seeing that with the customer — with your customers that you’re talking to as well?

Tom Hill — Chairman, President & Chief Executive Officer

So I don’t — the short answer is I don’t really see a big impact on our operations on our customers. I’d tell you I’m very proud of our people and the job they have done with this and they’re doing a great job both — they’ve done a great job of protecting themselves. But also you got to remember there’s a dynamic of this that what happens out of work and so they’ve been very vigilant protecting themselves and their families. We started this really early and we continue to adjust as we get new information and new procedures. Out of our 9,000 employees, we’ve had minimal cases. And that’s — the script protocols and staying to that it has paid off.

From an operating perspective, you saw in our — in my opening remarks about our safety record for the first quarter was excellent and continue to be excellent through April. And I got to tell you that’s a real feat from our operators in that they’re under a lot of pressure and with the COVID-19 protocols, which were new, they still protected themselves. Our operating efficiencies in the first four months have been very good. So they’ve done a great job and we’ve not seen any hiccups and I don’t expect to see any from our perspective. And I think the same can be said for our customers. We are deemed an essential business. All of us are and we have to earn that and protect ourselves and follow the rules. And I think the industry as a whole has done a really good job with that.

Michael Dudas — Vertical Research — Analyst

Those are excellent thoughts. And just my follow-up would be the mitigation and the aftermath of COVID, do you think that there’ll be some trends and opportunities that will impact where your plants and your business is located to see migration? Being here in the New York City area, you do talk to people thinking about their — look they continue to look south especially after what’s going on here. Do you think that could give some medium/longer term support to your business flows?

Tom Hill — Chairman, President & Chief Executive Officer

I think that from where we’re located both in the markets we’re in and where we’re located in those markets Vulcan is advantaged and that’s been built over six decades as we said. So I really like Vulcan’s position moving forward. There’s always the question of — the recent question of do people want to move out of the metropolitan areas and go buy a house? Gosh, we hope so. We’ll be glad to supply the stone to build those houses and those subdivisions.

Paul Roger — Exane BNP Paribas — Analyst

I’m sure you will. Thanks for your thoughts. I appreciate it.

Thank you.

Operator

Our next question is from the line of Phil Ng with Jefferies.

Phil Ng — Jefferies — Analyst

Hey, good afternoon everyone.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Phil, good afternoon.

Tom Hill — Chairman, President & Chief Executive Officer

Hi.

Phil Ng — Jefferies — Analyst

The LNG projects around the Gulf region that you’ve — you guys have talked about, can you help us size how big of an opportunity that is? And then if you had to kind of like break down what percent of those projects have started versus not yet. And then with oil prices where it’s at, do you have a view if that kind of moves forward?

Tom Hill — Chairman, President & Chief Executive Officer

So this was always a 2021 play. The LNG projects that we said that had started are continuing and we’re shipping a number of those projects today both in Louisiana and in Texas. The big work was the work that was coming. It is tens of millions of tons. That has been postponed. Again, that was more to be 2021. It was kind of icing on the cake of everything else that was going on. I’m sure at some point in time those projects will go. I think there is demand throughout the world that will want that. I think the world has to settle down some. So the timing is unknown, but I think ultimately they’ll go.

Phil Ng — Jefferies — Analyst

Okay. That’s helpful. And on the commercial side of things, can you help us break out your major end markets by percentage? Some of the end markets like warehouse and data centers seem to be more solid footing going forward post-COVID, but maybe hospitality and office might be more at risk. Can you kind of help us break down the major buckets from a percentage standpoint?

Tom Hill — Chairman, President & Chief Executive Officer

Yes. So I think that if you looked at the heavy non-res and which is some of what has slowed the lighter non-restructuring, which we talked about data centers, distribution centers, warehouses, health care education, online commerce has very much picked up. I would describe that is probably in normal times maybe half and half, but it’s just over a long period of time. But any moment in time one of those is going to be heavier than the other one. And right now, it just tends to be the lighter one that’s heavier.

Phil Ng — Jefferies — Analyst

Okay. Thanks a lot. Appreciate the color.

Operator

The next question is from the line of Adrian Huerta with JPMorgan.

Adrian Huerta — JPMorgan — Analyst

Hi, Tom and Suzanne. Thank you for taking my question.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Hi, Adrian.

Adrian Huerta — JPMorgan — Analyst

Hi, Suzanne. My question has to do with the maintenance cost. If you can just give us some more details on the incremental amount that you had this quarter that flow through the income statement. And what was the total amount of maintenance costs that you had last year? And what is your expectation for the full year for this year?

Tom Hill — Chairman, President & Chief Executive Officer

So we had called out in the last couple of quarters that we would see higher maintenance and higher stripping costs. We talked about that in the third quarter. We talked about that in the fourth quarter. We said it would — we would see it again in the first quarter and then it would start to level off.

If you just look at the cash cost, for aggregates, it was up some 3% or $0.26. Most of that increase was in parts and supplies. And stripping — again, you got to remember this is the worst time of the year the first quarter to operate just because it’s cold, it’s wet. You have big inefficiencies. So we go in and try to finish a lot of those repairs and maintenance. So when the season comes we’re ready to go. That is what you saw in Q1. That’s what we talked about that was going to happen. I think x volume swings, we feel good about the balance of the year. We feel like our operating disciplines and our strategic initiative on those operating disciplines are in place, and they’re maturing and doing well. So I feel really good about our operations and our operating efficiencies. Again, that is — the fundamentals of that is maximizing through — you’re looking at the R&M piece, but the fundamentals of that are how do you maximize input, minimize downtime, how do you efficiently use manpower and then you proactively inspect that equipment and maintain it and then the last is employee ownership and engagement and effective leadership is key to all of that.

Adrian Huerta — JPMorgan — Analyst

Thank you, Tom. That was clear. And if I may ask a follow-up question. Can you just tell us a bit more on what happened? I mean, I heard what you said that you’re taking steps to improve our working capital, but can you tell us a bit on what happened in the first quarter with working capital?

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yes. With respect to working capital in the first quarter, we had a bit higher use of working capital, because we had a little bit of inventory build. I mean, not a whole lot but a little bit in the couple of areas we called out that were fairly wet in the Southeast and the Southwest. We also had a fair bit of mobile equipment, which falls into our operating and maintenance capex that we had ordered in the fourth quarter. That came in and was paid for in cash in the first quarter. And so that was another fair bit of working capital. That just was timing between the fourth quarter and the first quarter.

And in addition to that, we also expended $26 million of cash with respect to share repurchases. And those were really the biggest components in the first quarter.

Adrian Huerta — JPMorgan — Analyst

Thank you, Suzanne.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Sure.

Operator

The next question is from the line of Rohit Seth with SunTrust.

Rohit Seth — SunTrust — Analyst

Hi. Thanks for taking my question.

Tom Hill — Chairman, President & Chief Executive Officer

Sure.

Rohit Seth — SunTrust — Analyst

I just on state DOTs, the AASHTO number down 30% and requiring about $50 billion. Let’s say that number doesn’t come in quite at the $50 billion. I was just thinking about — it doesn’t come at $50 billion and then states could look at the highway funds as funds that they can use to pay for other areas of the budget that are in shortfall. So I think the lockboxes might be a little bit important right now. Do you know offhand, which states in your markets have put in lockboxes? I believe California. I think Illinois has one. Do you know about some of the other top 10 states of yours?

Tom Hill — Chairman, President & Chief Executive Officer

Well, all of them have lockboxes. So all of that funding is protected and can’t be diverted for other uses. So the funding is safe. And hopefully that funding will come back strong as we reopen up. But for now, any funding that’s there is to be used only for highways.

Rohit Seth — SunTrust — Analyst

Okay. And then, today there’s — an unemployment report came out. It showed construction employment was down about 2.5 million jobs in April. Meanwhile, most of the companies reporting on construction this earnings season said April was not too bad. But the 2.5 million is an alarming number. Just curious, did you see — are you seeing that? Are you hearing that? I mean, it took me by surprise —

Tom Hill — Chairman, President & Chief Executive Officer

Yes. I think that is a national number and we did not see that kind of drop in our markets. I don’t think we’ve seen that kind of drop in our markets in April. So I think it’s more where that is. All these shelter in places have been different. For example, as we talked about the seven counties and around the Bay Area were restrictive on private. Well, Pennsylvania did not keep going with highway construction. As we know New York got hit harder. So some of the northeast probably got hit harder than most of our markets, got hit with this. So I just — we didn’t see those kind of drops in our markets.

Rohit Seth — SunTrust — Analyst

Okay. And then, just on liquid asphalt again. So as liquid asphalt does fall though, do you expect to realize the benefit? I know there’s been about mixed responses on that in the past.

Tom Hill — Chairman, President & Chief Executive Officer

Yes. If history repeats itself, which we believe it will, as we saw the last couple of years, as mix went up we chased it. We’ve caught that now. So if you see a drop, we should — you should see that benefit unit margins in asphalt.

Rohit Seth — SunTrust — Analyst

All right. So your asphalt business, given the highway is probably going to be the most resilient part of your business. I mean that should probably a pretty good business for you guys this year. Is that fair to say?

Tom Hill — Chairman, President & Chief Executive Officer

I would like most of this from a demand perspective, I would tell you. So far, so good. We think we’re protected with highway demand for the next three or four months. After that hopefully the AASHTO will get what they need and it’ll continue to grow as we move forward.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Yes. But, clearly, it’s something we need to monitor.

Tom Hill — Chairman, President & Chief Executive Officer

Sure.

Rohit Seth — SunTrust — Analyst

All right. Great. Thank you. It’s all I had.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

The final question will come from the line of Jerry Revich with Goldman Sachs.

Jerry Revich — Goldman Sachs — Analyst

Yes. Hi. Good morning. Good afternoon.

Suzanne Wood — Chief Financial Officer & Senior Vice President

Hi, Jerry.

Tom Hill — Chairman, President & Chief Executive Officer

Hi, Jerry.

Jerry Revich — Goldman Sachs — Analyst

Battling connectivity issues this morning, so I apologize in advance if this has been asked. But can you talk about the pricing tools that you now have available heading into this downturn? And is there a way to quantify or better understand what they’re going to allow you to do in this cycle compared to last one? So, obviously, not having cement helps in this downturn. But from pure aggregates standpoint, can you just talk about what the tools could potentially allow you to do here?

Tom Hill — Chairman, President & Chief Executive Officer

Yes. So the tools that we use, all give us visibility into that — really into that 60% of the business that we’re bidding that we talked about. And its real time that keeps up with our backlogs, our booking pace, what the prices in both of those look like, what sector the work is coming from, what size of the work is coming from.

So you really have a real-time visibility and down deep into markets of the effective — not only the effectiveness of our sales force and how they’re doing on their disciplines, but also how the world should look going forward. And it just gives those management teams a lot better tools to predict, so that we can adjust our operations and our efforts accordingly.

Jerry Revich — Goldman Sachs — Analyst

Yes. And Tom, in terms of what that’ll drive from a market share standpoint, does that mean we should look for lower market share at the trough as you folks focus on — you got more profitable jobs? Can you just flesh that out for me a bit, relative to the competitive landscape as well?

Tom Hill — Chairman, President & Chief Executive Officer

No. I wouldn’t look at it that way. I think what it allows us to do is maximize our price and maximize our customer service to earn that price. So I wouldn’t see a big market share swing in this. And you got to remember that is the beauty of the aggregates business, is the pricing characteristics that they are resilient. And we’ve seen this through multiple cycles. In fact, we’ve seen it for 40 years. I wouldn’t think that this one would be any different. I think probably the industry, as a whole, is better off today than it was some 12 years ago. So I think the pricing disciplines, both within Vulcan and within the industry, are better today than they probably were 12 years ago, much less 20 years ago.

Jerry Revich — Goldman Sachs — Analyst

And in terms of the metrics that you’re managing, the individual 350 plant operators, can you talk about any changes in terms of the framework for evaluating their performance in a downturn compared to what it would have looked like a year ago? And how do we keep folks from — who haven’t seen this movie before, as the senior management team has, from getting up over those skis you have, from a cost structure standpoint?

Tom Hill — Chairman, President & Chief Executive Officer

Yes. Well, I think that we have a lot of experienced managers. We have a lot of new managers. I think that the — again the operating piece of those four strategic initiatives of how do we run those operations the most efficiently and keep our people engaged to make sure we have appropriate training, so that you get that experience faster and further into the organization are very important and it will serve us very well through this.

At the same time, we will look at all those leading indicators from our sales group to affect our operations as we look at critical sizes on those operations and adjust those accordingly. There’s a lot of levers to pull in the operating side of the business, whether that’s inventory or discretionary spending maximizing as we talked about those fundamentals of efficiencies. And I think that — I know that our people are in a very good place here and they’ll be able to handle swings in volume, as they would if it just marched up steadily.

Jerry Revich — Goldman Sachs — Analyst

Appreciate the time. Thanks.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you.

Operator

And with that, I’ll hand the call back to Tom Hill for closing remarks.

Tom Hill — Chairman, President & Chief Executive Officer

Thank you. Thanks all of you for taking the time to listen to our call today. Clearly, these are very challenging times and they’re challenging for all people throughout the world and for every business. So we greatly appreciate your interest and your support in Vulcan. Please stay healthy and we look forward to talking to you in the coming weeks and months and have a great day.

Operator

[Operator Closing Remarks].