Q2 2019 Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by and welcome to the U.S. concrete incorporated second quarter 2019 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call may be recorded I would now like to turn the conference over to Mr., John Cooper, Senior Vice President and Chief Financial Officer.
Thank you <unk> good morning, and welcome to U.S. concrete second quarter 2019 earnings call. Joining me on the call today are Bill Sandbrook, our chairman and Chief Executive Officer, and Roni Pruitt, our President and Chief operating Officer, we will make some prepared remarks, after which we'll open the call to questions before I turn the call over to Bill I would like to cover a few administrative items presentations to facilitate today's discussion is available in the Investor Relations section of our website.
As detailed on page two of our presentation. Today's call will include forward looking statements as defined by the U.S. 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 will undertake no obligation to update or conform such statements to actual results or 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 filed earlier today.
If you would like to be on an email distribution list to receive future news releases. Please sign up in the Investor Relations section of our website under email alerts if you would like to listen to a replay of today's call. It will be available in the Investor Relations section of our web site under events and presentation with that I'll now turn the call over to Bill.
Thanks, John Good morning, ladies and gentlemen, and welcome to our call.
As reported in our press release this morning.
Second quarter results are reflective of the short term realities. The rainfall plays in the downstream use of ready mixed concrete.
Particularly in horizontal construction projects, which dominate our Texas markets.
And that a complication of Texas precipitation wise and the unfortunate fact that horizontal work such as Roche Runrate runways, and big box warehouses rely on the ultimate ability of the access roads and job sites to drain off the standing water and dry out in order to accept concrete.
The us multiple daily days of sales can be lost to a single weather event.
Specifically in Dallas Fort worth we experienced over 19 inches of rain during the second quarter compared to only four inches in the prior year second quarter more importantly, we experienced 33 consecutive weeks of measurable rainfall in the DFW market with over 60 inches of rain in the past 12 months. It is that's not surprising that in Dallas Fort worth and West, Texas, Our ready mix volume was down 222000 cubic yards. Additionally, our aggregates volume was down 126000 thought largely as a result of our inability to run one of our major sand plants on the Red River due to the flooding during the quarter and an interruption in another.
Sand and gravel operation that supplies DFW.
As Texas accounted for 44% of our total company ready mix volume is no surprise that the financial impact of the weather events was meaningful with our adjusted EBITDA in Texas for the second quarter down approximately $13 million from the prior year.
On page seven of our presentation. We've included a 12 month history that compares rainfall in the DFW market to our concrete volumes in each corresponding month, you can see that when the rain subsides as it did in July and August of last year in February this year, our volume growth remained solid and it's in fact impressive which is reflective of the overall strength of the construction market in Texas.
Although Texas was by far the most impacted by weather during the second quarter.
We're also plagued with significant rainfall in our other regions as well.
In New York, we experienced the most rainfall in the last 10 years first second quarter and in Northern California May was the wettest and over 20 years. Following what you already know is a significantly weather impacted first quarter.
Well, we reported very strong results for Polaris and the first quarter. Despite these weather delays the steady shipping pace during a quarter, where construction activity was deferred resulted in aggregate inventory build up at the distribution terminals and the northern California market during the first quarter the excess inventory in the market carried over into the second quarter, resulting in deferred shipments from Polaris.
Now, let's move to some more contextual realities of the heavy materials and construction related industrial markets deposit deposits at sand and gravel pits and hard rock quarries do not degrade with time. They are not perishable in fact do the difficulties inherent in green building new operations due to ever increasing restrictions on permitting chorus tend to grow in value over time.
Likewise construction projects are delayed by weather not cancelled.
The us project completion, and the actual usage of our concrete in aggregate are pushed into future periods, our investments in reserves and assets to mine rock and produce and deliver concrete has a very long time horizons, there will be periods of weather disruptions in the life of Macquarie or ready mixed concrete plant.
However, short term temporary weather disrupted periods of demand should in no way be interpreted as the underlying driver of our long term results.
Quite the contrary the fundamental economic trends and all of our markets remains robust.
Interest rate cuts have once again become a tailwind.
Unemployment remains at historic low levels.
Consumer confidence is high.
There remains untapped pent up demand in residential markets as long term demographic trends remain favorable.
State level infrastructure spending is increasing and the outlook for a meaningful increase in federal spending on a bipartisan surface transportation Bill.
It's in the realm of possibility.
The strength of our local markets is evident in our ability to pass along raw material cost increases in our value chain.
Year over year ready mix and aggregate.
Average selling prices increased four and 6.5% respectively for the second quarter.
These increases simply did not occur in a week long term demand environment on the contrary a return to a more normalized weather pattern. In July has resulted in a return to our historical volumes.
Finally, I must emphasize that we are not simply waiting for better weather and robust pricing to improve our results.
We are undertaking multiple aggressive actions at both the strategic portfolio and operating unit levels.
On the strategic front, our aggregate business now represents 20% of our adjusted gross profit.
This is a significant increase over the past five years and the value of our aggregates business remains undervalued compared to our peer group.
We are undertaking vigorous actions to leverage technology, and and streamline our processes within our company in order to increase delivery in production efficiencies streamline back office functions and cut significant non die cost at all levels of the organization at the operating level now I will turn the call over to Ronnie discuss these initiatives in greater detail.
Thanks Bill.
As mentioned during our first quarter call a reorganized our management team to more effectively evaluate manage and drive our strategic initiatives within each region.
I've been pleased with the direction, our new leadership team has taken but it will take some time before actions and initiatives are fully reflected in our results.
I am seeing progress on each of our regional initiatives, which should support margin growth in the coming quarters. Our regional teams are becoming leaner as we standardize processes and eliminate redundant functions are mixed design processes are becoming more streamlined and organize providing opportunity for substantial savings in our raw material cost. This can be seen in our material spread which on a dollar per cubic yard basis was $65 or 96 cents in the second quarter, a 4% improvement over the prior year quarter.
We have various regional teams designated to focus on initiatives related to the management of our professional delivery workforce efficiency of our concrete delivery process, all customer touch points and the cost of waste concrete disposal just to name a few our professional sales teams are focused on new business opportunities and regional market penetration to drive additional volume and pricing with more vision and transparency into market customer and project level profitability. These initiatives will improve our operating leverage customer service business processes and more importantly, improve our ability to operate more efficiently.
Additionally, we are making great progress on the development <unk> mutation of our proprietary software Where's my concrete.
We recently had representatives from each of our regions and our Dallas office to discuss that.
Customization of our CRM and general customer facing portions of the software. It was an extremely productive meeting and we came away with a good plan for enhanced development rollout and implementation of the functionality within the software. We are still in the early stages of development of all the capabilities. We believe this platform will deliver and anticipate a steady rollout over the next 12 to 18 months.
The successful rollout of Where's my kind of substantial benefits to our regional teams and our customers through enhanced transparency and improve data analytics, leading to better decision making.
I would now like to take you through each of our regions and highlight the key areas that are driving our results.
Our West region, which includes northern California, ready mix operations and Polaris aggregates represented approximately 32% of our revenue this quarter.
Demand remains strong in northern California markets supported by solid backlog.
Due to the wet weather, we have seen a deferral of sales many of projects have been pushed back further extending this region's construction cycle.
Over the coming weekends, we have scheduled many large concrete foundations that will kick off.
Heavy cycle of concrete deliveries to fulfill the needs of such projects as the Adobe North tower in San Jose, the Google Amphitheater, and Oyster point in San Francisco.
Additionally, the recent earthquakes in southern California remind us the being in the seismic zone brings concrete specifications to the forefront.
And there is no better provider than us concrete, which can fully utilize polaris aggregates for those complex specifications.
Northern California is also a leader in the use of environmental concrete mixers and value added products aimed at reducing the amount of Seo to released into the atmosphere.
These type of products command, a premium that are standard concrete, while reducing our carbon footprint.
That coupled with the help of our National Research Laboratory located in San Francisco, San Jose will continue to support the success of our business.
Although weather improved in northern California market in June overall, construction and project delays from the significant rainfall in the first quarter and through May continue to impact results. The first half of the second quarter with regards to Polaris our efforts to increase production capacity and export limits from our worker Corey are well underway and improved operational efficiencies will continue to make players a major contributor our company, while transforming the aggregate side of our business. The business development efforts of our Polaris team are on the customer seeing expanded agreements and new opportunities in North America and Asia.
[noise] East region, which includes New York, New Jersey, Philadelphia, DC, Virginia represented 33% of our revenue in this quarter.
Demand is holding steady across all sectors. This market is also rely on exacting specifications for high profile developments that require high performance concrete in New York, We are delighted with the news of another superstructure being built JP Morgan Chase recently announced the plans were approved to demolish the building on the side of their future skyscraper. In addition, we continue providing concrete to Laguardia airport expansion as well as existing jobs in Manhattan like 425 Park Avenue and the Hudson yards. We are confident that we will see many of these new developments announced we forecast growth across all sectors and the five boroughs and greater New Jersey, New York, New Jersey Metropolitan areas.
In Washington, DC, and Northern Virginia demand remained strong with commercial residential and infrastructure projects. All back if we represented Amazon Amazon into Q2 continues to dominate the development news in the market through their own plans through its indirect.
Through their own plans and through indirect economic impact the building of their 22 storey tower will have a far reaching economic impact.
Nearby housing units selling quickly and one apartment complexes proposing to add 1000, new units in anticipation of the favorable impact that will have on the area.
Our central region, which includes Texas, Oklahoma and USPI operations represented 35% of our revenue this quarter Dallas Fort worth continues to see significant economic and population growth. The rain has not kept companies from moving jobs to this area, which again supports our expectations of production will pickup in construction cycle will continue even longer than expected.
We are seeing strong building activity across the entire area of this market. One example of this can be seen in recently announced construction project in downtown Dallas, which will bring a new mixed use development with more than 5 million square feet of space to the heart of the city. We're currently very active on the troll swap campus in Westtx and Westlake, Texas as well as the Fine Art Center for Public School District, the Swift nature by which Texas Department of transportation puts infrastructure projects into action and all of the sectors.
The continually plan new projects makes us very confident that this market will remain a significant attributed contributor to our bottom line in 2020 and beyond.
Our west, Texas ready mixed operations continue seeing volume improvements as weather's improved.
Backlog in bidding activity remains healthy.
Commercial residential and public works projects.
Our key West, Texas markets are driven by educational spend such as West, Texas, and Ams expansion in Amarillo medical spend with significant projects and I believe in Lubbock as well as continued demand from energy sector.
Texas is also a leading.
The leader in wind power producing more than any other state.
We are currently pursuing this lucrative work and we have seen new major wind farm projects announced throughout the year.
As mentioned on our first quarter call, we have begun modernization and expansion of our aggregate plant in Amarillo supports our downstream concrete operations. In addition, we have begun commissioning of our greenfield sand and gravel operation MW Ranch located south of the DFW metroplex, which should be fully online in the third quarter.
Both of these investments support our continued strategic focus on aggregate revenue growth.
Each of our markets present their own positive outlook for continued building and growth reaffirming our bullish outlook for our construction markets now I would like to turn the call over to John to discuss our financial results.
Thanks, Tony.
We generated total revenue of $368 million for the second quarter of 2019 with adjusted EBITDA of $42 million, both revenue and adjusted EBITDA declined for the quarter due primarily to weather related headwinds our EBITDA adjustments for the quarter relate primarily to stock compensation acquisition related cost officer transition expense is proceeds received from insurance recoveries recoveries on our US Virgin Islands, 2017, Hurricane losses, and eminent domain proceeds received from the relocation of our plant in Washington DC.
As DNA was 10.7% of revenue for the second quarter of 2019 compared to 7.9% in the prior year quarter adjusted as DNA, excluding stock compensation acquisition related costs officer transition expenses was 7.8% of revenue in the second quarter of 2019 compared to 6.9% in the prior year quarter, primarily reflecting the impact of lower volumes and revenue stock compensation expense was higher as our annual awards were made at the beginning of March but the valuation for accounting purposes did not take place until shareholder approval at our annual meeting in May.
It was a meaningful increase in the share price between those two days leading to an increase in expense had those dates been in sync as they were in prior years and I think as we expect going forward our stock compensation expense would be more in line with prior years.
In 2019, we expect our adjusted effective tax rate to be approximately 27% for the full year and our interest expense is expected to be in the $45 million to $47 million range. Our adjusted effective tax rate of 27% is based on the expectation that language unfavorable to manufacturers related to the interest deduction limitation. Currently included in the proposed regulations is removed by the treasury in the final version.
As of June Thirtyth, our total debt, including current maturities was $716 million.
This included $607.6 million of senior unsecured notes due 2020 $420.5 million outstanding on our revolving credit facility and approximately $96.7 million of other debt consisting mainly of equipment financing for new mixer trucks, and mobile equipment net of $8.1 million in debt issuance costs.
In addition, we reported $75 million, an operating lease liabilities as of June Thirtyth.
As of June Thirtyth, we had total liquidity of $224.4 million, including $24.8 million of cash and cash equivalents and $199.6 million of availability under our revolver at June Thirtyth.
Our net debt to adjusted EBITDA was 3.9 times as weather improves and volume ramps up in the second half of the year, we would expect to see a reduction in this ratio. We continue to have a solid liquidity position and no near term maturities associated with our senior notes or ABL facility.
Moving to our cash flow and balance sheet. During the second quarter of 2019, we generated $18.7 million of cash provided by operating activities as compared to $22.2 million.
In the prior year quarter, including the benefit of proceeds from insurance recoveries, an eminent domain activity. Following the relocation of our Washington, DC plant, we generated $14.1 million of adjusted free cash flow compared to $10.9 million in the prior year quarter. We continue to focus on managing working capital and capital expenditures in the coming quarters to generate increased cash flow.
Through the first six months, we made contingent consideration and deferred payments associated with our past acquisitions of approximately $16 million in July we made a $22 million or payment for additional aggregate reserves at one of ours sand and gravel quarries upon completion of the permit approval process and the remaining five months of the year, we expect to make approximately 2 million more of payments.
During the second quarter of 2019, we spent approximately $10.9 million on capital expenditures, primarily related to plant and machinery equipment to support the continued demand in our markets compared to approximately $12.4 million for the same period last year.
For the full year 2019, given the weather impacted first half results, we anticipate manager our capital expenditures lower than originally planned.
We expect our capital expenditures to equal $30 million to $35 million in our equipment acquired through capital leases to equal 20% to $25 million, excluding capital for the development of the Texas aggregates Corey.
Our cash flow from operating activities is expected to be in the range of 50% to 60% of adjusted EBIT da.
We continue to see a robust demand environment as we look to rebound from a weather impacted first half of the year. We anticipate continued solid cash flow generation, along with sufficient liquidity to support our ongoing operational neat.
I will now turn the call back over to Bill.
Thank you John .
We remain confident in the strong fundamentals solid backlog and overall demand environment and our regions. However, based on the significant impact from the delays in the first half of the year. We are updating our guidance to reflect the uncertainty that there is enough time left in the year given contractor capacity constraints and driver shortages in some of our markets to makeup the shortfalls in our original annual guidance as such for the full year 2019, we now expect total revenue in the range of $1.5 billion to $1.575 billion with a midpoint of $1.54 billion and adjusted EBITDA in the range of $195 million to $210 million with a midpoint of $202.5 billion.
While the first half of the year with disappointing we remain very optimistic for the remainder of the year with strong fundamental economic indicators in each of our regional markets as the weather improves we anticipate our solid backlog of work and ongoing pace of bidding activity to drive meaningful increases volume that combined with our ongoing initiatives should generate positive momentum to finish out the year.
We remain relentlessly focused on leveraging the strength of our team our assets and our market positions to drive increased profitability and cash flow, resulting in improved shareholder value.
Thank you for your interest in U.S concrete, we would now like to turn the call back over to the operator for the question and answer session.
Thank you we will now open the line to questions. If you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Your first question comes from Trey Grooms of U.S. concrete. Your line is now open.
Hi, good morning, gentlemen.
Hey, Jay.
First is on Polaris.
Can you give us a little bit more detail on.
What was going on with the with the Polaris assets over the in the last quarter. I mean, you mentioned, what I guess is kind of the inventory build in the channel right or a distribution points.
In the first quarter and if I understood it right it impacted.
The second quarter shipments just any more color you can give us on that and is that typical in is that behind you at this point.
As we kind of go into Threeq.
Hey, Trey this are running.
Yes, I mean, if you think about Polaris on a on a on a year over year basis.
Volumes were down about 3%.
And in DFW as Bill talked about volumes and aggregates were down over 45 for 44%.
So we talked about the first quarter weather impact so Polaris continued to ship.
In the California, even though the demand wasn't there because of our downstream aggregate inventories and so that weather impact and the continued whether in the may that we talked about obviously affects the ability for us to continue to take bowlers materials in the northern California. So it's just a lag and as those volumes pick back up in in July and August .
Will the distribution channel will even out so.
As you say, it's normal and when we see these pickups in demand and we'll continue to see the ebbs and flows of the of the inventory.
And are you still thinking.
You know something in the kind of 6 million ton kind of run rate range as we go into the back half year.
Still.
A good range.
I don't think we see anything that's going to affect that range.
Okay, great perfect and then.
Next would be just on the on the guidance.
The guidance for the second half implies a pretty good margin lift versus what we've been seeing the last few quarters here and understanding where there's been an issue for you guys as well as everybody else.
You know as we look at the back half what are you seeing.
That's really driving the expectation for the margin lift.
Fair enough that's embedded in the guidance there and then your thoughts around material spread in the back half as well.
Sure.
When you when you look at the back half of the year trade were obviously anticipating improved volumes and volumes.
Really in the sport in the DFW market, specifically, that's really what penalizes during the current quarter is that.
We have 40 guarantee a 40 hour guarantees in place and it was basically washed out.
For the second quarter as a whole if you go back and look historically at your.
All you or your margin expectations and margin expectations are no different than what they were really call. It back in the sick 15, 16 17 timeframe. So it's not unreasonable that.
Net.
The margins are going to improve.
I don't even think they hit the levels that we were back in the 15 16 timeframe.
As a whole with respect to material margin as Ronnie stated.
Our material margin is basically flat, but what we have said to everyone as well is pricing in DFW has has compressed a little bit. So if you take that out if you take out DFW just that that region out were actually up.
Yes, Trey I would add to that if you think about timing and we talk about this in the first quarter.
No timing of our raw material increases that between the cement and aggregates usually take place on April one we always talk about the lag.
Ready mixed pricing.
I'm very encouraged from the standpoint of our second quarter results. Our material margin did I mean, we were able to take on those increases.
Even in weather affected markets and continue to to maintain and grow that material margin and so I think from there.
All upside because I think all those prices that we put in place are now catching up and so this additional volume will will only play into a better material margin going forward.
Well that sounds great. Thank you for the color and thanks for taking my questions I'll pass it on.
Thank you.
Thank you. Your next question comes from Larry Solow CJS Securities. Your line is now open.
Good morning, and thank you.
Just looking at the guidance for a moment from a from a high level.
It sounds like obviously weather impacted both aggregates and ready mix. So fair to say that the adjustment is sort of I realize this is a small PC business, but both of those sort of were adjusted downward.
But we're going to make up some of that aggregates maybe easier then.
Due to the inventory build easier than the underwriting much good.
Yeah, the pull through and it really what impacted our aggregates.
And we would expect the somewhat of a rebound not a complete rebound.
In the aggregate.
On the aggregate side of the business.
So.
That's that's.
Really what these adjustments were there the adjustments on the ready mix side are all weather related right. It's mostly DFW some atlanta, just because of the weather related headwinds there.
And this does your guidance going forward. Obviously, you know you mentioned you had so far in July weather was good July to August while there has been.
A lot better.
Does this guidance sort of assume obviously, some normalized down days in and in a real is not you can't make a lot of things up or things just get shifted to the right. But if you have a you know like a super stretch of weather or you're able to actually maybe not double down but get additional opportunities.
Start going through the queue as well as.
The late opportunities.
Hello. This is Ryan so what we assume.
As normal so we went back to normal which is a 20 your normal weather pattern and we take that all the way down to shipping days.
So as you look at our ability to make up and I've talked about even northern California. The the amount of slabs big mass spores were doing on weekends. So Saturdays gives us some ability to makeup.
But the markets still have their labor challenges not not just our labor challenges for for drivers, it's our customers labor challenges for actually placing and finishing as well. So so we did bake in a normal weather pattern is what we assume is normal and we also baked in catching up some but as we've told you in the past some of that deferred volume just prolongs and were busier all through some of the weekends, but we can't make it all up at once.
Understood how about just in terms of the you mentioned that they still have some difficulty I guess.
Hiring retaining.
Truck drivers has that improved at all or has that been but basically you know sort of status quo year over year.
Yes, I would say in in the northeast and Northern California markets are our driver pool is more stable.
And in the south in the Dallas and even in some of the West Texas markets. Those markets are going to continue to be a challenge I think thats something that you'll hear us repeat from now on and.
And it's we've got all kinds of programs, we got recruiting programs. We've got retention programs. We've we've got all kinds of things. We're doing we're not just sitting back and waiting on the drivers to come in our door, but it's always going to be a challenge and then something we're taking head on.
Okay, and then on the on the price increases on the on the ready mix piece, you mentioned I think it was up 4% on average.
We did a mix shift at all helped us perhaps should obviously, Texas area was down significantly did that may be skewed that a little bit and have you seen price improvement specifically in Texas or is that sort of a Q3 expectation.
Yes, I'll address it first and then I'll turn it back over Roni for.
Outlook.
No there really wasn't a mix impact there are marginal mix impact I realised DFW is lower price than we were down in volume there, but remember pricing prices actually decreased in the DFW market on a year over year basis.
So if you take DSW out of the equation our prices would have actually increased more so it really isn't a mix thing its absolute prices and all the other regions are up except for DFW or is it back half the year, yes, I'll, let Ronnie address that yes I would.
I would think in the back half of the year, we'll see continued momentum on pricing in the DFW market.
I'm expecting from our team and the sales effort. So we have that.
We're going to actually start seeing some improvement in and the momentum of pricing in Texas.
Okay, great. Thank you very much appreciate it.
Thank you. Your next question comes from Brent Tillman of D.A. Davidson. Your line is now open.
Hey, Thanks, good morning.
Morning.
Hey, Bill or Ronnie can you talk maybe more specifically about some of the.
Turning initiatives, you're taking that they might be able to.
The weather is going to be shorter term disruptions you've seen in the business. Obviously, you can't control volumes, but how how that might help you at least provide a little protection to margins when when you see the shorter term gyrations.
Yes, no I mean, we have to do and we so from an initiative standpoint, we have.
Both corporate and regional initiatives and those initiatives are really focused on raw materials labor and commercial and so as you start breaking that down into what we're talking about with mix optimization and really.
Good morning, whenever skilled mix and not having any ways.
Raw material costs or anything else that goes into the mix of concrete.
On the on the labor side, its labor from driving efficiencies from the way our customers.
Poor kind create from the way they treat our our our trucks and they're ordering methods from their cancellations.
The full gamut literally from.
Cradle to grave on every single thing in our processes of our customer touch points, our driver touch point, our back office consolidation.
And then on the commercial side, we talked about the CRM and the meetings, we had in Dallas with our regional VP gyms, and our sales folks.
It's the way we sell concrete it's the way we price carbon credits the way we look at every job that's our leads.
So I can tell you Brent.
I mean, it every single aspect of our business, we're trying to streamline and figure out not only the best way to do it today, it's how we're going to change the way concrete business, we've looked at in the future and Thats our real goal.
This is this is a very mature business and you've been around and longtime too.
We've got to change the way the business is done.
Okay I appreciate that color.
And on aggregates are you starting to have discussions kind of on the next round of price increases.
Given the strength of some of the markets are and I mean.
Do you think could see something in excess of what you've experienced today.
I do.
I think again from a aggregate standpoint, I think there is a potential especially in.
Out of our Polaris.
Markets that we serve there as well as some of the DFW markets the potential for a second round of increases at the tail end of the year.
Okay. That's that's great and I'm sorry, if you said this what was the EBITDA contribution from Polaris still up year on year and such as the flat segment EBITDA versus last year was dragged down from the challenges in the other markets.
Yes, we were flattish compared to last year with respect to EBITDA phone.
Okay and last one just on.
The ready mix price are you are you sort of beyond this year on year headwind.
At this mix shift out to the boroughs in the New York market is that kind of.
As we compared to last year, you see beyond that.
Yes, I think so I think that's a fair assessment.
Okay, great. Thank you.
Thank you so much our next question comes from.
Stanley Elliott of Stifel. Your line is now open.
Hey, good morning, guys. Thank you for taking the question.
I apologize if you missed it did you talk about kind of what the volume came to Ben and the recovery in July .
Or would you care to.
Yes, I mean, if you just look at July were up in our volumes.
On a year over year basis.
Q remember Q3 last year really what impacted US was late August September September was complete wash out in.
Most of our regions. So thats really where we are impacted July wasn't impacted much at all in were up in volumes year over year.
And when we think about kind of the con contractor.
Part of the constraints that we're seeing with driver shortages et cetera.
It is it Pos and difficult comparisons or.
Relative on July and August .
Is double digit ready mix volumes achievable, especially when we think about kind of the opportunities you will have in the month of September .
Well digit percentage increase.
Yes.
Quarter over quarter third quarter, and I would think it's yes, yes, absolutely yes.
Well I would say yes.
We can keep that.
Great and then last for me.
Roger you talked about.
The cost saves you guys have.
Is there any way to ballpark, what sort of margin opportunities you'll have because I mean, clearly you guys are industry leaders in terms of margins and.
Just trying to get a framework of what sort of upside there might be from from already very strong margins.
Our anticipation.
And our goals would be north of 16% on a run rate.
No into next year.
That that would obviously be world class.
And I think from the.
All the background that we've done I mean, we've gone through every single number and setting goals on all kinds of aspects that we believe thats achievable and Sally. This is bill if you remember.
We've had a three year the entire industry has had a three year run of abnormal weather.
If you would look at 16 17 18 compared to.
Two.
Let's say 13, 14, and 15, it's not even comparable on a weather basis and and when we were hitting those margins up in the fifteens. We had this discussion with the whole market of how high we could go and Aspirationally. We are always targeted 17 that seems like a long time in the rearview mirror and and it's only big only because of the weather impacts that we've had over the three years. If you look at our portfolio now compared to three years ago. The last time, we really had a good.
Yearly run rate of whether our portfolio is now more heavily Eric aggregate weighted which is going to help that margin profile. So if we can get into it.
A stretch of weather like we had in 13 14 and 15.
It is not unrealistic to to maintain and exceed those prior expectations that we had.
Great guys really appreciate it thank you.
Thank you and your next question comes from Adam Thalhimer Assumption Davis. Your line is now open.
Hey, good morning, guys.
I wanted to point out.
The.
Ready mix volumes.
I'd mix backlog 8.5 million cubic yards I believe that's a record for you guys can you give us a little bit of help on how much of that was.
Projects that were delayed because of weather and how much of that is strong.
Pipeline and funnel in awards.
Yes, we talked about the deferred.
Volumes in the DFW market.
And so some of that has rolled into our backlog, but as well we are still very very active in all of our markets on.
On bidding and placing.
New yards on our backlog so.
I would say there is a mix there definitely we see some deferred but we also are continuing even in even into this month.
Selling as much or more than were none were born.
And.
And Bill like you kind of just answered this question.
You have had flat EBITDA for a couple of years.
And.
A lot of that is weather, but just what else can you say about the potential for a snap back in 2000.
Well I would defer to the corporate initiatives that Ron is heading up.
Both of the tactical.
And back office level.
And as well as.
Increased volumes from Polaris and our Greenfield operations in in Texas.
That whole combination of tactical and strategic portfolio realignment leads to significantly improve margins.
All right and then just last one from me for John can you get can you give us some help.
Trying to parse through your from your free cash flow comments and then also the.
A couple of payments you still have left in the back half of the year. How much cash you think you might actually generate that could be used to pay down debt.
We may just made a $22 million payment were expecting.
Pretty solid cash flow in Q3 really in Q4 from our results.
It's not going to be that significant in light of that payment.
But they are certainly be some excess cash flow that we use to generate and pay down debt from going forward. Once we got the $22 million payment out there is not much as far as the contingent in deferred payments left so there is only about 2 million left so that was the biggest one.
But it should be at least 20 million right.
Yeah, I would think thats well thats your number but yes, that's that's certainly within the reason that's right.
Great. Okay. Thanks, guys.
Thank you and our next question comes from Rohit Seth of Suntrust. Your line is now open.
Hi, Thanks for taking my question just curious if you can update us on the permitting with Polaris you talked about potentially expanding that permit there.
We've talked about.
Two phases of that one's the permitting of the of the ship loader itself, which is.
Within.
What we described will own pay is meeting our expectations. It's just the.
Governmental things that we have to go through and then the second one was the Blackberry expansion project as well as the.
Within the guidelines that we've talked about before from a permitting and engineering standpoint. So.
We're full steam ahead on both of those.
Do you have any.
Sure timeframe on the first phase.
So the first based on the ship floaters, it's not critical that's really more tied to the bringing on a Blackberry I mean, we have plenty of capacity there to meet the expectations that we've set for Polaris as shipments into this year and next so that's not a critical path for us that's more critical tied to the permitting a blackberry.
Okay, I thought that permit would have allowed you to ramp up without having to.
Extend the quarry.
No we're already more yes, we already have the capacity there with the ship loader to do what Orca can do so that's that's not as critical as it is tying it all together because the same ship loader will be used with both quarters. So if you think about blackberry being a different quarter, but it will all come through the same funnel of the ship loader. So that's those two projects are tied.
Significantly together so that's why it's all working in luck stuff together.
Okay. So there so where are we with Polaris in terms of how much can you shift on on those existing permits that you have the floor and expansion.
So we've we've we've made it clear that our expectations was six and we could get up to eight and we can do that now.
So the okay.
All right.
All right Thats all I had thank you.
Okay. Thanks Seth.
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I am showing no further questions at this time I would now like to turn the call back to Mr. Bill Sandbrook for closing remarks correctly. Thank you everyone for participating in the call. This morning and for your continued support of U.S concrete. This concludes our call and we look forward to discussing our third quarter with you in November .
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