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U.S. Concrete, Inc. (USCR) Q3 2017 Earnings Conference Call Transcript

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U.S. Concrete Inc. (NASDAQ: USCR)
Q3 2017 Earnings Conference Call
Nov. 03, 2017, 10:00 AM. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the U.S. Concrete, Inc.'s third quarter 2017 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. I would now like to introduce your host for today's conference, Mr. John Kunz, Senior Vice President, and Chief Financial Officer. Sir, you may begin.

John Kunz -- Senior Vice President, Chief Financial Officer

Thank you, Jimmy. Good morning, and welcome to U.S. Concrete's third quarter 2017 earnings conference call. Joining me on the call today is Bill Sandbrook, our President, Chief Executive Officer, and Vice Chairman. Bill and I will make some prepared remarks, after which we will open the call to your questions. Before I turn the call over to Bill, I would like to cover a few administrative items. US Concrete would like to take advantage of the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Certain statements in this conference call may be considered forward-looking statements, within the meaning of that act. Such forward-looking statements are subject to risk, uncertainties, and other factors, which could cause actual results to differ materially. For a list of these factors, please refer to the legal disclaimers and risk factors, contained in our filings with the SEC.

Please know that you can find the reconciliations and other information, regarding the non-gap financial measures that we will discuss on this call, in the form 8K, filed earlier today, and under the Investor Relations section of our website. 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 under the Investor Relations section of our website, under Events and Presentations. Now, I would like to turn the call over to Bill, to discuss the highlights for the quarter and year-to-date results.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Good morning, ladies and gentlemen, and welcome to our call. Before I begin my formal remarks, I'd like to formally introduce and welcome John Kunz, as U.S. Concrete's new CFO. We are very excited to have John join our team, and you'll hear more from him later in this call. Moving on to our results. I am pleased to announce that U.S. Concrete, once again, reached new highs in revenue and profitability for the third quarter of 2017. Through our model of continuous improvement, we delivered solid returns in growth, in spite of significant weather headwinds in the quarter. I am proud that, even through a very challenging quarter, we were able to grow our revenues, further expand our backlog, and continue to build a strong foundation, to continue to capitalize on the continued strength of our markets.

Total revenue, as compared to the same period last year, increased 7.9%, to $355 million, and total adjusted EBITDA increased 1.3%, to $54.7 million. Our adjusted EBITDA growth for the quarter was almost entirely organic, as we have lapped a significant majority of our acquisitions, from 2016, and we are particularly pleased with our growth, despite significant rainfall in Texas during the quarter, and one of the wettest summers on record in the Dallas-Fort Worth area. As is expected from weather events, this deferral of sales feeds our backlog of projects, that we will supply, as weather normalizes. In addition to the significant rainfall in Texas, we all witnessed an unprecedented, consecutive string of three major hurricanes during the quarter. Our operations are not significant in the areas impacted, but I was extremely proud of our team, and their immediate response to help employees in need, both financially, and from a safety standpoint.

Our volumetric operations in Houston, Corpus Christi, Austin and South Texas were negatively impacted by Hurricane Harvey, and our team in the US Virgin Islands remains on generator power, as the islands were heavily damaged by Hurricanes Irma and Maria. We are fortunate to report that, while many of our employees suffered significant property losses, they all weathered the storm safely. We continue to assess the damages, as access to the islands opens up, but we have limited revenue-generating activities coming from those operations currently. Our adjusted EBITDA for the quarter excludes approximately $1.9 million in losses, that were incurred due to the lost revenue, and property damages on the islands. But, it's not been adjusted due to the impact of Hurricane Harvey, or the weather in Texas during the quarter.

To give you a little more color, we estimate that the inclement weather in Texas during the quarter resulted in deferred sales volumes of approximately 200,000 cubic yards of ready-mixed concrete, and 90,000 tons of aggregates, in the third quarter of 2017. Despite the weather-impacted quarter, our year-to-date results remain very strong, with total revenue and adjusted EBITDA up 17% and 31%, respectively, compared to the prior year period. We also successfully improved our year-over-year sales price, in the third quarter, for both ready-mixed concrete, and aggregates products, by 3%, and 2.7 percent, respectively. And, our material margins remain healthy, near the 50% level, as a result of our continued focus on premium product pricing, and aggressive material purchasing leverage.

In the third quarter, we continued to successfully execute our disciplined, and well-proven growth strategy. With the announcement of entering into an agreement to buy Polaris Materials in British Columbia, we introduced significant value enhancement to one of our premier markets in our west region, encompassing Northern California, which will provide vertical integration into aggregates for our ready-mixed concrete operations. West coast states present significant challenges to permitting and producing aggregates, and this acquisition will give us the ability to deliver high-quality construction materials, and provide sustainable supply for depleting aggregate resources. Polaris also provides immediate entrance into new markets in Southern California, with the delivery of aggregates, and the potential future expansion into ready-mixed concrete

Shortly after our announcement regarding Polaris, we acquired two ready-mixed concrete operations in Northern California, expanding our customer base in San Francisco's Peninsula, and South Bay. These acquisitions further expand our presence in the region, provide access to new markets, and enhance our vertical integration opportunities. An additional acquisition, announced the same day, further advanced our growth strategy, into another vibrant and dynamic market. Action Supply, in Philadelphia, is a significant addition to our Atlantic region, encompassing New York, New Jersey, and Washington DC. This robust market contains all of the same criteria for above-average growth and consolidation, that has proven successful in our east and west coast markets, and offers another potential opportunity, to self-supply with fine aggregates, from our April acquisition of Corbett Sand and Gravel. The overall national construction market remains strong, with employment in the industry at its highest level in over 10 years.

And, 97% of contractors reporting moderate to high confidence in the demand for commercial construction, according to the Commercial Construction Index. Additionally, the Architectural Building Index remains strong, with all sectors remaining over 50, and the Commercial-Industrial Sector at 54. Total building permits in our markets remain 16% higher than last year, and significantly above the national average, of 4.6%. Single-family housing permits through September, in our markets, are at their highest point since 2006. And, excluding 2015, a year where we saw a handful of extremely large projects in the New York City market come online, multi-family permits remain at their highest point in over 15 years.

New York and Dallas-Fort Worth remain the top two markets in the country, for projected construction of apartments during 2017. We are very optimistic for the balance of the year, and into 2018, with solid, underlying economic fundamentals, in all of our regions. I'll now take you through each of our markets, briefly. In New York City, which represented 24 percent of our revenue in this quarter, we continued to see strong demand for offices, hotels, and multi-family residential in the entire region. While Manhattan has generated a significant number of large high-rise projects, over the last couple of years, we are starting to see equally strong growth in the outer boroughs, with a need for more affordable housing and offices, outside of Manhattan.

What's more, we are seeing growth in civil, industrial construction, with the recently started Jacob Javits Center, and continued infrastructure work, with the soon-to-begin second phase of the Kosciuszko Bridge. We continue to supply concrete on the multi-year LaGuardia Airport renovation, and Hudson Yards. And, ongoing Manhattan development continues to provide opportunities for large, multi-year projects. Our market leading plant network, in all of the boroughs in New York City, will allow us to compete for a significant portion of the increased demand, from this robust project pipeline. Our backlog continues to expand and is 9% higher in New York than it was this time last year. In Dallas-Fort Worth, which represented 25% of our revenue this quarter, significant rainfall, particularly in July and August, resulted in deferral of approximately 200,000 cubic yards of ready-mixed concrete, and 90,000 tons of aggregate sales volume.

Despite the deferral of sales, a plethora of many major projects are underway, and population growth is driving more housing demand. One of the most potentially impactful projects coming to Dallas will transform the downtown area, and possibly the business landscape in this area. In an effort to attract Silicon Valley-type businesses, a downtown area of more than 20 acres is being hailed as the country's next smart district. The project would include up to 8 million square feet of office space and be anchored by a 78-story commercial tower. Texas' ability to attract corporate relocations makes these types of projects a strong possibility to become a reality.

In Northern California, which represented 27% of our revenue this quarter, demand remains strong in the Bay Area, with many projects now underway, and several large projects recently awarded, including the new Google campus, and major development projects for Facebook, and LinkedIn in the South Bay, Nividia, in Sunnyvale, the Stanford-Escondido Village, and the San Francisco Airport expansion, and the Air Train extension. Demand remains very strong, and we have an extensive plant network in the Bay Area, to capture the pent-up demand, driven by weather-related delays earlier in the year, organic growth in the technology sector, and the recent approval of the SB-1 transportation bill. Our backlog continues to expand in this region, as well.

Our West Texas region, which comprised 9% of our third quarter revenue, continues to contribute extremely favorably to our results. We operate on a diverse range of economies throughout the West Texas region, where we enjoy favorable industry dynamics, and a higher mixed of vertically integrated aggregates positions, which allow us to capitalize on future accelerated growth. The oil rig count continues to grow in the Permian Basin, and economic activity has noticeably accelerated in the last nine months. Overall, the economic fundamentals across our markets, continue to indicate a very robust outlook. All of our major metropolitan markets are experiencing positive employment growth and economic activity. Our ready-mixed concrete backlog continues to increase.

And, as of September 30, 2017, was approximately 7.9 million cubic yards, up 3.2% from the same time last year, and up 7.7% from the end of the prior year. Now, I would like to turn the call to John, to discuss our third quarter results in more detail.

John Kunz -- Senior Vice President, Chief Financial Officer

Thanks, Bill. We are pleased with our third quarter results, with continuation of our track record of profitable growth, in the face of significant headwinds, which is highlighted by 27 consecutive quarters of year-over-year revenue growth. We have also delivered strong balance sheet metrics and continued cash flow generation. We reported revenue of $355 million, and total adjusted EBITDA of $54.7 million. Our ready-mixed concrete average selling price increased to $136.62 per cubic yard, as compared to $132.70 per cubic yard, for the same period last year, to achieve a 26th straight quarter of year-over-year price increases. We also improved our year-over-year ready-mixed concrete raw material margins, which increased to $67.75, on a dollar-per-cubic-yard basis, from $66.10.

These solid results in our ready-mixed concrete segment are substantially from organic growth and despite significant weather-related disruptions in Texas during the quarter. In aggregate products, sales volume and revenue declined, year-over-year, for the quarter by 5.8% and 5.3%, respectively. Rainfall in the Dallas-Fort Worth market, where we internally supply a significant portion of the fine aggregate demand for ready-mixed operations, resulted in the deferral of approximately 90.000 tons of aggregate sales, during the quarter. Aggregate sales in our New Jersey market were also impacted by weather and the timing of projects. But, the demand and backlog of work remains strong, across all markets. Pricing across our aggregate segment remains solid, but average sales price is up 2.7%, compared to the prior-year quarter. During the third quarter, consolidated revenue increased 7.9% on a year-over-year basis, on higher ready-mixed concrete volumes, and higher average selling prices, in both ready-mixed concrete, and aggregate products.

Due to the strength of our position in each of our ready-mixed concrete markets, we improved our average selling price by 3%, as compared to the same period last year. These price increases resulted in an increase in our raw material margin, on a dollar-per-cubic-yard basis, during the third quarter of 2017. We also note that our raw material margins remain healthy, at approximately 50%. Looking forward to the balance of 2017, we expect to continue to improve both our ready-mixed concrete average selling price, and dollar-per-cubic-yard raw material margin spread, in part due to high levels of demand in our markets, and our ability to pass along raw material price increases. Third quarter 2017 ready-mixed concrete revenue increased by $25.7 million, or 8.6%, year-over-year. And, our ready-mixed volume increased 5.6%. 2.4 million cubic yards, with higher average selling prices driving the remaining component of this revenue increase.

These trends in selling prices and margin expansion reflect the continued strong construction activity, in the well-structured markets where we operate. During the third quarter of 2017, aggregate products revenue decreased by $1.2 million, or 5.3%, year-over-year, to $21 million. Significant weather delays in the Dallas-Fort Worth metroplex drove approximately 90,000 tons of the shortfall. Looking ahead, we anticipate strong growth in our aggregate segment in the upcoming quarters, as we return to normalized weather patterns. Approximately 55% of our aggregate product shipments were supplied internally to our ready-mixed concrete operations, across our vertically integrated position.

Looking at our profit margins, the third quarter of 2017, total adjusted EBITDA increased by 1.3%, to $54.7 million, compared to $54 million, in the prior-year quarter. Total adjusted EBITDA, as a percent of revenue, was 15.4% for the third quarter of 2017, compared to 16.4%, for the prior year third quarter. This margin decline was primarily related to lost volumes from weather delays, as previously discussed. Out SG&A expense, in the 2017 third quarter, which excludes acquisitions and professional fees, and stock compensation expense, was 7.3% of revenue, compared to 6.9% of revenue, in a prior-year quarter. The increase is primarily related to approximately $2 million in costs, incurred for reserves on specific receivables during the quarter, and higher self-insurance costs.

We continue to aggressively manage our SG&A expense levels and expect this metric to continue to improve, as we drive organic growth, and capitalize on the pent-up demand from weather delays. Moving to cash flow, and the balance sheets. During the third quarter, we generated $16.4 million of adjusted free cash flow, as compared to $50.3 million, in the prior year quarter, primarily as a result of changes in working capital, and higher capital expenditures. We continue to maintain a critical focus on working capital management, particularly in our cash collection, and timing of vendor payments. Our accounts receivable DSO has steadily decreased over the past few years, which has helped to offset the cash needs associated with the growth of our business.

In a prior year, we implemented a more rigorous process around payments to our vendors, which increased our accounts payable balances, and GPO, generating an additional [inaudible] cashflow during the third quarter of 2016. Our DPO remains steady, but the quarter-over-quarter changes in our accounts payable balances did not generate the same level of additional operating cash flow as those produced during the prior year third quarter. We spent approximately $15.3 million on capital expenditures during the third quarter of 2017, compared to approximately $8.1 million, for the same period last year. The increase resulted from the purchase of a property with additional reserves, adjacent to our quarry in Hamburg, New Jersey. Our year-to-date capital expenditures remain relatively flat, as compared to the prior year, and represent 3.4% of revenue, compared to 3.7%, in the prior year.

As of September 30, 2017, full value of a long-term debt, including current maturities, was $688.4 million. This included $610.3 million of senior unsecured notes, due in 2014. There were no amounts outstanding at our revolving credit facility, and approximately $89.3 million of other debt, consisting mainly of equipment financing for new metric trucks and mobile equipment, plus $11.2 million of debt issuance costs. As of September 30, we had total liquidity of $494.1 million, including $248.3 million of cash, and cash equivalents. And $245.8 million of availability, under our revolver.

Our availability is net of an $18.4 million reserve for outstanding letters of credit, and sales tax, and other reserves. At September 30, our net debt, to last 12 months total adjusted EBITDA ratio remains conservative, at 2.3 times. We ended the quarter with a strong capital position, and will continue investing in our business, and deploying capital opportunistically, on select accretive growth opportunities, including our recently announced plain acquisition of Flores Materials. I'll now turn the call back over to Bill.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Thanks, John. We are pleased to have continued to deliver on our growth objectives, and create a sustainable platform for continued value creation, in the face of significant obstacles in the third quarter. We believe that the construction cycle has a healthy runway for continued expansion. We have established our company in attractive geographic markets, with leading share positions, to deliver consistent gross profit improvement, and generate attractive returns for many years to come. As we look to the balance of 2017, we're optimistic on the prospects for growth in our existing markets, and our acquisition pipeline remains a viable avenue for additional growth, including potential new metropolitan market areas, and increased vertical integration, with additional aggregates.

We expect our markets to continue to outpace the national average for construction spending, allowing us to maintain our relentless focus on our two-prong strategy, to first, grow organically, through operating excellence, superior product delivery, and service. And, second, expand through ready-mixed and aggregate acquisitions, that bolster our existing market positions, and capitalize on potential opportunities in new, high-growth markets. We expect that the disciplined execution of our strategic growth plan should lead to increased value for our shareholders. Thank you for your interest in US Concrete. We look forward to updating you on our progress after the fourth quarter. We would now like to turn the call back over to the operator, for the question and answer session

Questions and Answers:

Operator

Thank you. This is the operator once more. If you'd like to ask a question during the Q&A session, please hit star, then 1, on your touchtone telephone. If your question has been answered, or you wish to remove yourself from the queue, please hit the pound key. We do ask that once you ask your question, you mute your line to remove any background noise from coming through. Our first question comes from Craig Bibb, from CJS Securities. Your line is now open.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Hello, Craig.

Craig Bibb -- CJS Securities -- Analyst

Hey, Bill, thanks for taking my call. Texas cement pricing got competitive in the third quarter, how much of a benefit was that to you, and how's it play out from here?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Texas cement pricing, Craig?

Craig Bibb -- CJS Securities -- Analyst

Yeah.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, you know, we usually are working off of some pre-established, fixed price, established earlier in spring, traditionally. And, once those are established, they're pretty well set for the bulk of that construction season. Now, there might be differences among the various suppliers, that we can shift to a lower cost supplier, so our overall mix drops our cost of cement. But, I don't really -- I wouldn't characterize it that existing deals with our cement suppliers were driven down.

Craig Bibb -- CJS Securities -- Analyst

Okay, great. I'm gonna jump back in the queue, because I'm jumping calls, but I'll talk to you guys again in a second.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Thanks, Craig.

Operator

Thank you, and our next question comes from Trey Gruance from Stephens Inc. Your line is now open.

Trey Gruance -- Stephens Inc. -- Analyst

Hey, good morning, Bill.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Hey, Craig, good morning.

Trey Gruance -- Stephens Inc. -- Analyst

And, welcome, John, as well. I look forward to working with you.

John Kunz -- Senior Vice President, Chief Financial Officer

Yeah, you as well.

Trey Gruance -- Stephens Inc. -- Analyst

Bill, can you talk about, just on Polaris, at least to the extent you can, talk a little bit more about the rationale there, and where you see opportunity, and any color -- any more color you can give us around that?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, I can briefly address that. We're not gonna go into any specifics, obviously, because it hasn't closed yet. But, the strategic imperative is, as I've described over the past couple years, and over probably 20 or 30 conference calls, is we need to get vertically integrated into aggregates in all of our operating regions. California's the only region where we don't have the ability to self-supply a portion of our aggregates. The margins available on aggregates will definitely pull up our overall company margins, and protect us from supply disruptions -- external supply disruptions, or overly aggressive price increases. And, it allows us, with the Long Beach Terminal, to immediately have the potential point of entry into a new metropolitan area, with the same characteristics as the ones we currently operate in. And, as we put a flag in Philadelphia, you can see that we are aggressively looking for those major metropolitan areas.

So, all of the above, as the strategic imperative for that acquisition. And, we are extremely optimistic about our ability to execute that successfully.

Trey Gruance -- Stephens Inc. -- Analyst

Great, thank you for that. And then, this is a pretty sizable deal for you. Should we expect -- and, I've gotten this question a few times, I think I know the answer. But, should we expect any slowdown at all, in your M&A, or in the trajectory of your executing on your M&A strategy?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

No, we need to de-lever this, we're very comfortable with where we are in our leverage metrics, in the low 2s, this will obviously elevate that. We tend to have a direct line to very quickly de-lever that and continue to grow this company, both organically, and through acquisitions. So, we're approaching almost 30 acquisitions now, under my tenure here, and we expect that pace and cadence to remain, as has been our history, of various sized deals. But, we aren't -- we're going to be very respectful of where we are in the cycle, very disciplined with our deployment of those funds, and very disciplined in our overall debt metrics, in all phases, going forward. But, I would not expect any change in our trajectory.

Trey Gruance -- Stephens Inc. -- Analyst

Great. And, I think, John, you mentioned that you expect, or you guys expect ASP, and material spread to continue to improve in the fourth quarter. If you guys look at the backlog that you have, and the types of projects that are in the backlog, how should we be thinking about that, as we kinda go into the new year?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I'll take that one as well, Trey, and if you look back through the 27 last quarters, we've successfully increased our pricing, year-over-year, in each of those quarters, without a misstep. We anticipate that that backlog will also deliver those same results. It is interesting -- I'll digress a little bit, but it is on pricing. That, without the hurricane in the US Virgin Islands, let's talk about aggregate pricing. If we had a normalized month or just the same volume as we did in the previous year's quarter, our aggregate average ASP would have increased to 4% from 2.7 percent. So, when you look at that 2.7, you say it's a little bit light, but when you take the USVI impact out, it's 4%.

And, there's another nuance that you should know, and the others on the call. That this summer was a mild summer, in New York City, and in Dallas. The average temperature in New York City in August '17 was 5 degrees cooler than it was in August of '16. And, in Dallas, in August, it was almost 2 degrees cooler than the previous year. Why that's important, and why I'm bringing it up, is, in concrete manufacturing, in hot weather, you have to cool that newly produced concrete, which we sell, and mark up. The effect of that cooler weather meant that we did not sell as much ice, nor could we mark it up. And, the net effect on our overall average ready-mix ASP, for the entire company, because of those two regions being cooler than normal, was approximately 100 basis points. So, our underlying pricing is even a little bit stronger, accounting for those two nuances.

Trey Gruance -- Stephens Inc. -- Analyst

Alright, well that's helpful color, I appreciate that. And then, the last one, from me, is, obviously, weather impacted the quarter for you guys, and pretty much everybody in the industry. Can you talk about kind of the trend that you've seen through October, kinda going into the fourth quarter, as weather's maybe kinda cooperated a little bit more, had there been lingering effects from storms and things like that, or just any color on how we can kinda think about that, and trends in October?

John Kunz -- Senior Vice President, Chief Financial Officer

Sure, why don't I answer that? If you take the third quarter out of it for the weather effects, continue the trajectory and the cadence of business that we were on in the second quarter, I would say that's a linear relationship, outside the Virgin Islands. Obviously, I spoke on the call, that the Virgin Islands are going to be very slow coming back, similar to Puerto Rico, we have no operations in Puerto Rico, but we still don't have companies supplied, or electric utilities supplied power there. So, we're going to continue to have significant, lingering effects, in the Virgin Islands. As far as our exposure to the hurricane-related areas in south Texas, in our volumetric business, we're not seeing any lingering effects. We don't have meaningful operations there.

And, our ability to pick up the smaller work that we do in our volumetric business is in Eagleford, Corpus, Houston, etc., that's back on line for us, and Dallas is not affected, so I have no lingering effects in Dallas. There is some effect -- and, others have noted it, on our customers' crews. Some of that labor has been pulled into the hurricane-related areas, for the higher paying jobs, in the reconstruction. So, there are some bottlenecks, as has been well-documented, in our downstream customer labor pool.

Trey Gruance -- Stephens Inc. -- Analyst

Alright, thanks a lot, guys, and I appreciate you taking my questions, that's it for me.

John Kunz -- Senior Vice President, Chief Financial Officer

Okay, Trey, thank you.

Operator

Thank you, and our next question comes from Rohid Seth, from Sun Trust. Your line is now open.

Rohid Seth -- Sun Trust -- Analyst

Hey, thanks for taking my question. I know, you mentioned Polaris hasn't closed yet, but I wanted to ask you, they did put up a slide on their website, talking about profitability, at certain levels of production. And, I was curious if you had a look at that, and if you think those numbers are feasible? I mean, they had 4 million to 5 million tons, the business could do about 25 million EBITDA. Is that feasible on your management?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Well, Seth, obviously, that's their numbers. We justified our acquisition based on our own due diligence, and our ability to drive significant downstream synergies, for our pull through of aggregates. I would say, in our diligence, that's it's a very well-run operation. It's a very low-cost operation, and what we can do, under our management, we have our plans, obviously. But, I would say that they are directionally correct, if not wildly over or understated.

Rohid Seth -- Sun Trust -- Analyst

Fantastic, OK. And then, on your backlogs, you said backlogs were up about 300,000 tons. 200,000 of that was due to the weather. And, you also mentioned that New York was up about 9%. So, is that -- that other 100,000, is that largely coming from New York?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

It's spread across the entire footprint. I had said that -- I think I was quoted on my comments that New York itself was up 9%. So, and I called it out specifically, to show the vibrancy of that metropolitan area. But, we're up in all regions, and significantly up.

Rohid Seth -- Sun Trust -- Analyst

Okay, and then, on the aggregates business, is there -- pricing was down, you mentioned the USVI. Is there anything else in Texas, that gives you any concern on pricing in aggregates, or it continues robust, and this is maybe just an aberration?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I'm very optimistic about aggregate pricing in Texas, as we get back to a normalized demand level across the entire state, and all the supply chains. I'm optimistic about pricing in Texas.

Rohid Seth -- Sun Trust -- Analyst

Alright, thanks. I'll pass it on.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Okay, thanks, Seth.

Operator

Thank you, and our next question comes from Adam Thalheimer, from Thompson-Davis. Your line is now open.

Adam Thalheimer -- Thompson-Davis -- Analyst

Hey, good morning, guys.

John Kunz -- Senior Vice President, Chief Financial Officer

Hey, Adam.

Adam Thalheimer -- Thompson-Davis -- Analyst

I can't remember what the policy is on guidance, but could EBITDA be flat in Q4, with Q3?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Well, remember, Q4, it's now -- we have seasonality in the four quarters, just because we have some northern exposure, up in New York and New Jersey. And, we do not guide. I do not give quarterly or annual guidance. But, you have to remember that you have -- you gotta look quarter -- year on year, quarter on quarter, not sequential.

Adam Thalheimer -- Thompson-Davis -- Analyst

Okay, so we'll have normal seasonality, even though there were some weather disruptions in Q3.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, but I mean, you need to compare Q4, or project Q4 '17, against Q4 '16, Q4 '15. Not against Q3. This is not a straight line, monolithic business, because of seasonality, within our footprint.

Adam Thalheimer -- Thompson-Davis -- Analyst

Sure, understood. And then, you referenced, I think it was in the release, some project delays in the northeast. Can you give some additional color on that, and then, the timing of when those are gonna ship?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

There were some larger projects delayed, up in northern New Jersey, and it's just -- and there's various degrees of reasons. Either permitting holdups with construction crews, bottlenecks in crew moving from one job to another. I wouldn't overplay that, but now, it's gonna -- November should be fine, weather-wise, but coming into December, January. February, it's not like making up business, if you're sitting here and it's June, and we have August, September, October of northeast good weather. But, nonetheless, those projects will, if they're pushed, they'll push into 2018, and just be -- remain in backlog until completed, and be completed in next year's fiscal year.

Adam Thalheimer -- Thompson-Davis -- Analyst

Okay, and then, lastly, just, you sound positive on aggregates pricing. Maybe just some comments on the cadence of improvement potential?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I'm positive because I think the overall demand characteristics are very healthy, in all of our markets. Texas, specifically, and in New Jersey and New York, because the underlying demand from concrete producers and asphalt producers is fairly significant. Cadence, I would say it's at a measured cadence, and consistent to where we are now, in the low-to-mid single digits.

Adam Thalheimer -- Thompson-Davis -- Analyst

Great, thanks so much.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Okay, Adam, thank you.

Operator

Thank you. And, our next question comes from Brent Daleman, from DA Davidson. Your line is now open.

Brent Daleman -- DA Davidson -- Analyst

Hey, thanks, good morning.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Hey, Brent, good morning.

Brent Daleman -- DA Davidson -- Analyst

Bill or John, sorry if you said it, but the Virgin Island operation, what sort of costs will you undertake, to rebuild that business, there?

John Kunz -- Senior Vice President, Chief Financial Officer

Well, the overall direct costs, we lost a garage on St. Thomas, and we lost a garage on St. Croix, where we maintain our ready-mixed trucks. But, those were fairly insubstantial structures. Obviously, they don't need to be heated, so they're usually corrugated steel, and blew away in the hurricane. So, it's just to get our guys undercover for repair and maintenance activities. There were no physical damages to our concrete plants, we have two in St. Thomas, and one on St. Croix, and aggregate facilities on both islands, that were not damaged. We have some problems with motors now, hooking motors up into generator power. We brought generators in, to run all of our businesses there. We're running our concrete plant on St. Croix on a generator right now. We have our concrete plant on St. Thomas running on a generator.

And, various parts of the aggregate plants running, as well. There's no significant demand because there's no significant reconstruction in our product sets right now. So, the cadence of bringing those online, I wouldn't say, is critical. But, however, I do see a ramp up in the second half of next year, on needs in those islands. But, as far as physical damage, and reinvestment, or capital needs, it's minimal.

Brent Daleman -- DA Davidson -- Analyst

Okay, great, and Bill, I've had this question from a few folks, and you talked a little bit about the impact on labor for contractors. But, any signs or concern, as it directly affects your business, in, I guess, the labor pulled from Dallas, in the rebuilding of Houston market. I'm thinking about truck drivers, things like that?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, Brent, truck drivers haven't been -- in our business, in ready-mixed trucks, I haven't seen that dynamic, that our drivers are going down there. Because and the rebuild might be in debris removal and whatnot, and ready-mixed truck drivers are somewhat of a specialized skill set. We have various retention plans in place, and bonus plans in place for these fellows, to be incentivized to stay on a quarterly basis. So, they're rewarded pretty well, here in our own markets. So, I see the normal shortage of qualified drivers, but I see nothing abnormal in pull of existing drivers, into the hurricane-affected areas.

Brent Daleman -- DA Davidson -- Analyst

Okay, and then, Bill, you talked about the industry structure, I think, before, in Philly. What sort of underlying market trends and drivers of construction do you see going on there, that gets you comfortable entering this point in the cycle?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, I still think this is a very good entry point in the cycle. I'm not looking at this as late cycle at all. And, for a comparison there, single-family housing right now in the United States. 48% of the past peak. In our markets, even in Dallas-Fort Worth, where it's extremely busy right now, we're only at 73% of peak, on single-family development. San Francisco's only at 52%. I don't have the exact number for Philadelphia, but I'm sure it's directionally accurate in here, too. We're seeing, in all of our markets -- San Francisco, Dallas, and New York -- that there's a significant vibrancy, and inflow, and gentrification of inner city living, as inner cities are becoming safer, and more livable, with more amenities, that there's a whole resurgence, and not just in my footprint, but in all of the metropolitan areas. And, we think that increased concrete demand depends on large populations of existing people.

With an older housing stock, older, multi-family dwelling stock, and it being reinvigorated. The path to consolidation is -- we have a line of sight to it, with a number of follow-on acquisitions. It's a hard to operate environment, because of traffic congestion, etc. etc. And, it's right in between our DC, and New Jersey, and metro New York operations. So, we have a very efficient management structures in place to absorb this, so this is right in our wheelhouse.

Brent Daleman -- DA Davidson -- Analyst

Great. Maybe one more, and that's on sort of southern California, theoretically, if you were gonna build out a ready-mixed base there. It looks like Polaris would kinda be the entry point for it. Any unique challenges, to doing M&A in that platform, versus where you've done it in other markets? And, I guess, are you in dialogue with ready-mixed players there now?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

We've been prospecting in that region for a number of years. So, yes, there's dialogue with multiple parties in that region. The challenge there is, it's pretty far from San Francisco to Los Angeles, just geographically. So, it won't be -- if we get to build out a platform in there, or San Diego, or anywhere else on the west coast, it'll probably be a stand-alone region, and we don't have an existing management team to bolt it onto. So, that adds a little more challenges and a little more risk. But, very doable, because there's first-class companies, in that Los Angeles market, that we'd be very pleased to have join us.

Brent Daleman -- DA Davidson -- Analyst

Okay, great. Good luck closing up Polaris; looks like a pretty intriguing deal.

John Kunz -- Senior Vice President, Chief Financial Officer

Okay, thanks, Brent.

Operator

Thank you, and our next question comes from Stanley Elliott, from Sta-Fold. Your line is now open.

Stanley Elliott -- Sta-Fold -- Analyst

Hey, guys, good morning. Thank you for taking the question, and welcome John. Quick question. There was some comment in the release, about increased personnel to support growth. What market, specifically, are you kind of actively hiring individuals right now?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I would say, Dallas-Fort Worth, for sure. As we saw how busy Dallas is, we continue to try to ramp up the number of drivers we have here. And then, when you have a weather-impacted quarter like we did in northern Texas, and that semi-variable labor becomes fixed, since we are guaranteeing 40-hour workweeks for those fellas, in order to maintain our drivers, it comes in and really compresses your margins, in a quarter like this. But, I would say, Dallas-Fort Worth, we've been aggressively hiring

Stanley Elliott -- Sta-Fold -- Analyst

Perfect. And then, kinda going back to some of the earlier M&A questions. So, if you're looking at the 500 million of capacity out there, would you expect to have the vast majority of that kinda spoken for by this time next year?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I would say that would probably be accurate. Maybe a little later in the year, so that we would be finding other ways to finance our growth.

John Kunz -- Senior Vice President, Chief Financial Officer

And, let's just be clear, too, that we'll always maintain a certain amount of liquidity. So, when you refer to the 500 million, or the 494, a portion of that will always be preserved, to make sure that we have sufficient liquidity to make it through any potential downturn. So, we would look at an additional capital raise, if we were to go beyond what we believe is a necessary buffer for liquidity.

Stanley Elliott -- Sta-Fold -- Analyst

So, would this be additional debt, or are we talking equity at this point, or is it still kind of, still lots of moving parts?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

It would be a lot of moving parts, and it would be situational, depending on deal size, and cadence of deal flow, etc., etc. Right now, we're fine. We're looking at a number of other bolt-on acquisitions, and we will plan forward for that, but execute at the appropriate time.

Stanley Elliott -- Sta-Fold -- Analyst

That's fair. And then, last for me, with Polaris on the horizon, does the cap-x needs for your business fundamentally change? We've seen some of the dredging costs, right? And, some of the additional costs associated with more the aggregates piece. Does that start to ramp for you guys, next year and beyond, or is there much of a material change?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I would say it's not much of a material change. On a per-site location and the application of that capital, obviously, it would be a much more intense capital consumer than a ready-mixed plant. But, remember, we have 17 aggregate facilities now. This would be by far, the largest. But, we have quarries that are doing over 1 million tons now, that have their unique needs as well. So, I mean, yellow iron's expensive, the plant's in very good shape. But, I wouldn't say there'd be any material changes to capital needs.

Stanley Elliott -- Sta-Fold -- Analyst

Perfect guys, thank you very much, and best of luck.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Great, thank you, Stanley

Operator

Thank you, and our next question comes from Scott Shrier, from Citigroup. Your line is now open.

Scott Shrier -- Citigroup -- Analyst

Hi, good morning, Bill, and welcome, John. First question is, I understand that you don't give guidance or anything. But, earlier in the year, you were speaking to around a high single-digit organic volume growth, and taking into account the challenges in the third quarter, is there any way that you would continue to frame that discussion, or that conversation, as we look at 2017, now?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

I'm gonna go back to a previous answer that I gave, and that's if you ignore the weather impacted Q3, and look at Q2, the trajectory is exactly the same, and we stay firm in that commitment, on upper-single-digit organic growth.

Scott Shrier -- Citigroup -- Analyst

Got it. And, on the follow-up, on the M&A pipeline, with the different markets, that build up in southern or central California, and New York, and what have you. Is there any way, or how can we think about where the priorities are for allocating that much capital?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

You broke up at the very end. Priority for which capital?

Scott Shrier -- Citigroup -- Analyst

Where you're gonna allocate your capital, dedicated to M&A, to the various geographic markets.

John Kunz -- Senior Vice President, Chief Financial Officer

Well, sure. We still have continued opportunities in each of our existing markets, to further solidify our position within those markets, and externally, around the center. As we look at those opportunities -- and, now, obviously, Philadelphia becomes one. And, weigh that with a new market entry, potentially with the Long Beach beachhead for aggregates, I would say, directionally, the opportunities in our existing markets are smaller bolt-ons, and to come into a new market, it would have to be more meaningful. So, there could be a number of small bolt-ons, or a single larger one, in a new market. And, we'll weigh the risk/reward/return ratios, as we allocate that going forward.

Scott Shrier -- Citigroup -- Analyst

Got it, and the last one, on the ready-mixed pricing, and I appreciate the color on the 100 bits of impact, which brings us to about 4%. Just curious if there are any other mix issues, be it geographic, or the types of projects, from a complexity perspective, that we should consider, in the pricing.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

We have a normal mix of big projects. In fact, in our backlog right now, we have 84 projects that are over 25,000 yards. So, those are large projects. They're in our wheelhouse, but they're very large projects, and we have 84 of them. And, that's probably a normal level of large projects in our background. So, anecdotally, I'd say that the complexity, or pricing dynamics within that backlog, I would say it's fairly consistent. When you look at our volumes from quarter -- third quarter of '16 to third quarter of '17, in our reported categories, it stayed exactly the same, commercial/industrial, 58%, residential, 25%, and public works, street/highway/infrastructure, around 17%.

And, it's almost exactly the same mix as it was last year, at this time. As I said on our previous earnings call, I do expect, with SB-1 funds, additional Prop 1 and Prop 7 funds in Texas, and the Port Authority of New York and New Jersey, $32 billion, 10-year capital spend projections, as well as, hopefully, some type of meaningful infrastructure bill in '18, that hits the street in '19, that we will probably tick our infrastructure side up a couple hundred basis points. But, right now, what we're seeing, we're seeing stability in our backlog. So, to directly answer your question, I don't see any anomalies on either higher value or lower value work, in that backlog.

Scott Shrier -- Citigroup -- Analyst

Thanks, Bill. I appreciate all the color there, and good luck this quarter.

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Thanks, Scott.

Operator

Thank you, and if you'd like to ask a question one more time, please hit star, then 1, on your touchtone telephone. If your question has been answered, or you wish to remove yourself from the queue, please hit the pound key. We have a follow up from Craig Bibb, from CJS Securities. Sir, your line is open

Craig Bibb -- CJS Securities -- Analyst

I apologize if you've already answered this, but I'm not sure if you talked about Q4 activity, and is it consistent with your upper single-digit organic growth outline?

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Yeah, we had covered that just a minute ago, Craig. We are confident that that little bit of guidance remains intact. And, the data point that I threw out there is, the trends that we saw in the second quarter? Take the third quarter out for weather impacted quarter items, that it's consistent with what we saw in the second quarter, which is consistent with that little bit of guidance we gave. Yes.

Craig Bibb -- CJS Securities -- Analyst

You know, I think, as you guys realize, a lot of investors are looking at pretty extraordinary levels of construction activity in New York City and Dallas, and thinking, we've gotta be somewhere near the peak for those markets. How much visibility do you have, and how far out does it extend?

John Kunz -- Senior Vice President, Chief Financial Officer

Our visibility goes into 2018, and in some instances, well into 2019. But, let's talk about that just briefly. The trailing 12-month single-family housing permits in Dallas were $32,000. It's the most in 10 years. But, the single-family number of permits is only 73% of what it was at the last peak. When you look at DFW third quarter single-family housing starts, it was $8,500. But, in 2005, 2006, quarterly starts were over $12,000. So, it's at a nice level now, but nowhere near what this market had absorbed over 10 years ago. And, we have similar situations in our other regions.

And, I'm glad you asked this. One little bit more color. On building permits, single-family, and multi-family building permits, if you look at the percent change right now -- and this is permits, so these haven't necessarily been constructed, yet. If you look at the national average, those building permits are up 4.6%. But, to highlight to point that we operate in areas of the country that significantly exceed the national average, that same statistic for San Francisco, '16 to '17, is up 9.3%, DFW is up 22%, and New York City is up 25.1% And, that's compared to a national average of 4.6, and these are permits. These are to-be-constructed units, yet. So, I'm not sitting here, at all worried that we're getting too frothy, or too much at a peak. Because we're not even near the level that these cities were in, 11 and 12 years ago.

Craig Bibb -- CJS Securities -- Analyst

I guess the flipside of that -- and, you kinda just adjust it, and said, we think our mix is gonna stay about where it is. But, it's -- single-family has lagged in the construction cycle, and now, it's accelerating. And, public construction has lagged, and we're all hoping something happens next year, and '19. So, that would suggest, maybe, your mix goes into the lower margin type activity, over '18, and '19.

John Kunz -- Senior Vice President, Chief Financial Officer

Infrastructure is high margin, and large residential contractors, that are banging out house after house after house, you need to have a service level that allows you to charge a premium. I would say that your statement is correct, on a single-family home, with a single-plant operator, that that might be a little bit commoditized. Because of the concrete, and your truck and sit there most of the day. But, when you're doing large developments of single-family homes, you need a high service level, and you can command somewhat of a premium for that.

Craig Bibb -- CJS Securities -- Analyst

Okay, and then, infrastructure is high margin, when it's a bridge, or a tunnel, or something technical. But, low margin if it's a road? Or, high margin for everything?

 John Kunz -- Senior Vice President, Chief Financial Officer

Well, technical, obviously, a tunnel or a bridge has some structural characteristics, and load-bearing characteristics, and strength characteristics, that will be a high-priced concrete that you'll be able to get a higher margin on. A lot of roadwork, big, big infrastructure roadwork, is oftentimes self-performed, by the contractor himself, because they need a dedicated facility. And, there's oftentimes that, even though those infrastructure numbers look great, and the road miles look great, that a contractor will self-perform. So, I would say that the infrastructure work that would be in our bread and butter would be runways, would be bridges, would be tunnels, would be onramps and offramps. The asphalt roads, where you need them to be out of concrete. Waterworks distribution, viaducts, things like that. Mainline, blow-and-go, concrete road paving is probably a very small part of our opportunities.

Craig Bibb -- CJS Securities -- Analyst

Great, thanks a lot, guys.

John Kunz -- Senior Vice President, Chief Financial Officer

Okay, thanks, Craig.

Operator

Thank you, and I'm showing no further questions in the Q&A queue at this time. I'd like to turn the call over to Bill Sandbrook, CEO and Vice Chairman, for any closing remarks,

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Thank you, Jimmy, and thanks, everyone, for participating in the call this morning, and for your continued support of US Concrete. This concludes our call and we look forward to discussing our fourth quarter results with you. Thank you

Operator

Ladies and gentlemen, this is the operator once more. This does conclude your program for today, and you may all disconnect. Everyone, have a great day

Duration: 56 minutes

Call participants:

John Kunz -- Senior Vice President, Chief Financial Officer

Bill Sandbrook -- Chief Executive Officer and Vice Chair

Craig Bibb -- CJS Securities -- Analyst

Trey Gruance -- Stephens Inc. -- Analyst

Rohid Seth -- Sun Trust –Analyst

Adam Thalheimer -- Thompson-Davis -- Analyst

Brent Daleman -- DA Davidson -- Analyst

Stanley Elliott -- Sta-Fold -- Analyst

Scott Shrier -- Citigroup -- Analyst

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