"Overall, our outlook for aggregates demand in 2010 reflects an increase in highway and other infrastructure-related construction activity due primarily to stimulus-related funding. While we have assumed that regular federal funding for highways will remain at an annualized level consistent with fiscal year 2009 under SAFETEA-LU, Congress will need to act quickly to restore fiscal year 2010 funding levels and contract authority prior to the start of the construction season. Additionally, residential construction activity should increase year-over-year in 2010, albeit from low levels. Further weakness is expected in private nonresidential construction. As a result, aggregates volumes are expected to be flat to up 5 percent from 2009 levels. For the full year 2010, we expect aggregates pricing to improve 2 to 3 percent.
"In our asphalt business, we expect sales volumes to increase approximately 5 percent from 2009 levels. Pricing for asphalt mix is expected to increase from 2009 levels but not enough to offset projected higher prices for liquid asphalt and aggregates. As a result, we expect lower material margins in asphalt when compared with the prior year. In concrete, we expect sales volumes to remain flat with the prior year and pricing to decline modestly, reflecting continued weakness in private nonresidential construction.
"Debt reduction and achieving target debt ratios remain a priority use of cash flows. For the full year, we expect capital spending of approximately $125 million, up from $110 million spent in 2009 and down sharply from the $353 million spent in 2008.
"Our available production capacity and ongoing efforts to improve cash margins position Vulcan to participate efficiently and effectively in the $50 to $60 billion of stimulus-related construction, including significant remaining portions of the $27 billion for highways and bridges. We expect 2010 to be the largest year of stimulus-related highway demand for our products followed by another solid year in 2011. By that time, we expect demand from private construction activity to be improving, accelerating the earnings leverage from our improved cost structure and disciplined approach to pricing."