US Concrete's (USCR) CEO Bill Sandbrook on Q2 2017 Results - Earnings Call Transcript

US Concrete Inc (NASDAQ:USCR)

Q2 2017 Earnings Conference Call

August 08, 2017 10:00 AM ET

Executives

Kevin Kohutek - Vice President and Chief Accounting Officer

Bill Sandbrook - President and Chief Executive Officer

Analysts

Trey Grooms - Stephens Inc

Adam Thalhimer - Thompson, Davis

Scott Schrier - Citi

Craig Bibb - CJS Securities

Stanley Elliott - Stifel Nicolaus

Roresa Mojo - D.A. Davidson

Operator

Good day, ladies and gentlemen, and welcome to the U.S. Concrete, Inc. Second Quarter 2017 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Kevin Kohutek, Vice President and Chief Accounting Officer. You may begin.

Kevin Kohutek

Thank you, Israh. Good morning, and welcome to U.S. Concrete's Second Quarter 2017 Earnings Conference Call. Joining me on the call today is Bill Sandbrook, our President and Chief Executive Officer. 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. U.S. Concrete would like to take advantage of the safe harbor provisions of the U.S. 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 risks, 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 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 and under the Investor Relations section of our website. If you'd like to be on an e-mail 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 website under Events & Presentations.

Now I would like to turn the call over to Bill to discuss the highlights for the quarter.

Bill Sandbrook

Thank you, Kevin, and welcome, everyone, to our call this morning. I'm very pleased to announce that U.S. Concrete once again, reported strong growth in revenue, profitability and margins from increased volumes and pricing in both our ready-mixed concrete and aggregate products segments for the second quarter of 2017.

Total revenue, as compared to the same period last year, increased 24% to $341 million. Income from continuing operations improved from a loss of $3 million to a loss of $2 million, and total adjusted EBITDA increased 55% to $53 million. We had loss from continuing operations margin of 0.6% and total adjusted EBITDA margin of 15.5% for the quarter. We continue to drive these trends with focused execution of our fundamental strategy.

We shape selective markets to meet our growth objectives, irrespective of any underlying need for external government stimulus. Rather, our markets have been selected and developed in Metropolitan areas of the country with higher than average mid- and long-term underlying economic growth drivers and government-funded activities simply supplement our growth rates. Our market development activities in the high-end spectrum of the ready-mixed concrete product set, allow us to have a significant competitive advantage in competing for high-volume, high-margin opportunities.

The density of our plant networks allow us full low-cost market coverage to be positioned to service jobs better than competing alternative suppliers. The sheer volume of raw materials that our regional plant networks consume, makes us a very valuable customer for our cement and aggregates suppliers for which we are rewarded. Additionally, our regional plant networks are large consumers of our own internal aggregate supply, which elevates our total company margin profile.

These fundamentals continue to drive success and our strategic operating leverage generated incremental adjusted EBITDA margins of 73% and 27% through the first half of 2017 for our aggregate products and ready-mixed concrete segments respectively. In addition, while only 18% of our current revenues are directly generated through infrastructure project spending, we remain well positioned to take advantage of the robust multiyear construction infrastructure spending plans that have been put into place in all of our major markets to stay level. While these initiatives as well as FAST Act flow-through funds, or some future-enhanced federal infrastructure spending would be a tailwind, we are not waiting for government-funded projects to improve our results.

Despite the fifth wettest June on record, in the Dallas/Fort Worth area, we increased our year-over-year ready-mixed volumes by 20%. We estimate that the inclement weather in the Dallas/Fort Worth Metropolitan market in June alone resulted in a deferral sales volume of over 75,000 cubic yards in the second quarter of 2017. However, I must emphasize that the effect of the weather simply means there are project backlog increases, as these jobs are not lost, but simply delayed to future quarters. Generally, as weather normalizes in each of our impacted markets, the existing large backlog will combine with the pent-up demand of work, push forward from the buildup of the first half of the year delays, and enable a very robust project pipeline over the second half of the year.

We began to see the positive rebound of this deferred volume in Northern California, in the second quarter of 2017, as weather normalized in the back half of the quarter and volume growth was strong. Our year-over-year organic growth rate and ready-mixed concrete volume for the second quarter of 2017 was approximately 8%. If you include the estimated additional 75,000 cubic yards of ready-mixed concrete that was delayed by the inclement weather in DFW, we would have achieved a year-over-year organic growth rate for ready-mixed concrete volumes of approximately 11%. We believe that our platform will continue to deliver consistent results for the balance of the year, with high single-digit growth in ready-mixed concrete organic volumes for the full year of 2017, along with mid-single-digit growth in pricing. We are optimistic that these organic growth trends could continue for the next several years.

While there are no acquisitions to report this quarter, other than the previously disclosed April acquisition of a high-quality sand and gravel operation in New Jersey, with access to an additional export dock; we continue to have a large attractive pipeline of potential accretive acquisitions, which we expect to further enhance and supplement our organic growth. In fact, we are currently in various stages of discussions and negotiations with 21 potential acquisition targets. Additionally, we remain very focused and committed on the potential to enter a new regional market.

I'll now take you through each of our markets. In the greater New York metro area, which represented 25% of our revenue in this quarter, we continue to see strong demand for offices, hotels and multifamily residential in the entire region. Residential construction was relatively high in the Bronx and Manhattan, with unit starts more than 60% higher than past year averages in both borrows. Lawmakers recently passed an Affordable Housing Bill, aimed to stimulate multifamily residential construction in New York City, which should provide 2,500 new affordable apartments annually through 2020.

The New York metro area was ranked the top Metro area for new multifamily permits through May of 2017, with a 68% increase over the prior year period. With last year's acquisitions in this region, we remain well positioned to capture the increased demand from recently passed funding legislation by the Port Authority. The 10 year $32 billion plan will refocus on redevelopment and revitalization of the entire Metro area's infrastructure. In addition, in a report recently issued by the New York Economic Development Corp., $1.6 billion in public and private funding is being directed towards the revitalization of the North Shore waterfront in Staten Island.

The development, which is projected to generate over 2,000 new jobs and include over 4,000 housing units and 200,000 square feet of space, will include new housing, major retail developments, iconic attractions, transportation upgrades and waterfront parks. Our market-leading plant network in the New York City market and in Staten Island, in particular, will allow us to compete for a significant portion of the increased demand from this robust project pipeline.

Our Washington D.C. and Northern Virginia market remains an area of significant growth. Over 100 projects have currently broken ground, representing over 20 million square feet of space and $9 billion of construction to be delivered through 2019. With the opening of our new greenfield plant in Lorton, Virginia, we now have six concrete plants servicing this growing market area. Our ready-mixed concrete plant network is well positioned to take advantage of the population influx in the area driving office, retail and residential construction. In Dallas/Fort Worth, which represented 25% of our revenue this quarter, significant rainfall, particularly in June, resulted in deferral of sales volumes.

However, we remain extremely active in this vibrant market. Dallas/Fort Worth has one of the strongest population inflows and employment growth rates in the country. Housing permits have increased over 30% from this time last year and continued growth is expected. Dallas/Fort Worth is also one of the top apartment building markets in the U.S., with over 50,000 units under construction and less than 5% of current units unoccupied. The nonresidential sector is also expanding at a rapid pace. For example, developers are getting closer to starting work on the Hidden Ridge mixed-use development in Las Colinas, which includes more than 2 million square feet of offices, hundreds of apartments, restaurants and shops. Pioneer Natural Resources will be the anchor business tenant, with plans to move over 1,000 people into a 750,000 square foot office complex. Opportunities continue to expand in this market, and we continue to add to our backlog, which increased once again this quarter and is 10% higher in the DFW Metroplex than the same time last year.

In Northern California, which represented 24% 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, Warriors Arena and the San Francisco redevelopment project. The weather normalized during the quarter, and we began to see a notable increase in volume, as we slowly begin to catch up from the weather-related delays from the prior two quarters. 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, organic growth in the technology sector and the recent approval of the SB-1 Transportation bill.

Our West Texas region, which comprised 9% of our second quarter revenue, continues to contribute favorably to our results. As we have discussed on past calls, this market mainly comprises operations west to Fort Worth, in the Wichita Falls, Abilene, Lubbock, Odessa and San Angelo areas. Dodge projects compound annual growth in ready-mixed concrete volumes of almost 8% through 2020 in this region. The active rig count in the Permian Basin has increased over 140% from the end of the second quarter last year. We operate in a diverse range of economies throughout West Texas region, where we enjoy favorable industry dynamics and a higher mix of vertically integrated aggregate positions that should allow us to capitalize on future accelerated growth. Overall, the economic fundamentals across our markets continue to indicate a very positive outlook.

All of our major Metropolitan markets are experiencing positive employment growth. The latest Architecture Billing Index indicates solid growth in the U.S. nonresidential market, with forward-looking inquiries index increasing to its highest rating since the third quarter of 2014.

The Inaugural Commercial Construction Index, a new economic indicator, designed to gauge what drives commercial construction, shows commercial construction is in high demand across the country and contractors are confident in the industry trajectory. The recently reported growth in GDP, in the United States during the second quarter was driven by increased consumer spending and nonresidential investment, which continues to be a strong indicator of the strength in our overall economy.

Our ready-mixed concrete backlog continues to increase, and as of June 30, 2017, was approximately 7.6 million cubic yards, up 10.6% from the same time last year, and up 3.4% from the end of the prior year.

Now I would like to turn the call to Kevin to discuss our second quarter results in more detail.

Kevin Kohutek

Thanks, Bill. We are very pleased with our second quarter results with the continuation of our track record of profitable growth, and which were highlighted by a 26th consecutive quarter of year-over-year revenue growth. We have also delivered stronger balance sheet metrics and continue to enhance cash flow generation.

We reported revenue of $341 million, loss from continuing operations of $2.2 million and total adjusted EBITDA of $53 million. Our ready-mixed concrete average selling price increased to $134.43 per cubic yard as compared to $129.01 per cubic yard for the same period last year, to achieve a 25th straight quarter of year-over-year price increases. We also improved our year-over-year ready-mixed concrete raw material margins from $62.76 on a dollar per cubic yard basis to $66.59. In aggregate products, we increased our sales volumes by 8.3% and our average selling prices by 7.5% versus the same period last year.

During the second quarter, consolidated revenue increased 23.6% on a year-over-year basis, on higher volume and average selling prices in both ready-mixed concrete and aggregate products, along with the impact of acquisitions we made during 2016. In ready-mixed concrete, we improved our average selling price by 4.2% as compared to the same period last year. These price increases drove increases in our raw material dollar per cubic yard margins during the second quarter of 2017, due to the strength of our position in each of our markets.

Looking forward to the balance of 2017, we expect to continue to improve both our ready-mixed concrete average selling prices and dollar per cubic yard raw material margin spreads, in part due to high levels of demand in our markets and our proven ability to pass along raw material price increases.

Second quarter 2017 ready-mixed concrete revenue increased by $61.6 million or 24.8% year-over-year, and our ready-mixed volume increased 19.7% to 2.3 million cubic yards with higher average selling prices, driving the remaining component of this revenue increase. We believe these trends in selling prices and margin expansion reflect the continued strong construction activity in the well-structured markets where we operate.

During the second quarter of 2017, aggregate products revenue increased by $3.6 million or 19% year-over-year, to $22.8 million. Approximately 58% of our aggregates product shipments were supplied internally to our ready mixed concrete operations across our vertically integrated positions.

Looking at our profit and margins. Second quarter 2017 loss from continuing operations decreased from $3.3 million in the prior year quarter to a loss of $2.2 million. Results for the second quarter of 2017 include the recognition of a $15.8 million noncash derivative-related loss compared to a $2.6 million noncash derivative loss in the second quarter of 2016. On a non-GAAP basis, total adjusted EBITDA increased by approximately 55.4% to $53 million, compared to $34.1 million in the prior year quarter. Loss from continuing operations, as a percentage of revenue, decreased to 0.6% for the second quarter of 2017, compared to 1.2% in the prior year second quarter. Total adjusted EBITDA, as a percentage of revenue, was 15.5% for the second quarter of 2017, compared to 12.4% for the prior year second quarter. Notably, our ready-mixed concrete raw material margins, as a percentage of revenue, continue to remain near the 50% level.

Our SG&A expense in the 2017 second quarter was 8.9% of revenue. Excluding acquisition-related professional fees and stock compensation expense, our SG&A expense in the 2017 second quarter was 7.4% of revenue compared to 7.3% of revenue in the prior year quarter. We continue to aggressively manage our SG&A expense levels and expect this metric to continue to improve as we drive organic growth and complete the integration of acquired companies. On a GAAP basis, our net loss was $2.3 million in the 2017 second quarter, or a loss of $0.15 per diluted share. On a non-GAAP basis, adjusted net income from continuing operations was $15.8 million, or $0.95 per diluted share for the second quarter, representing a 76% increase compared to the prior year period.

The adjusted net income from continuing operations for the second quarter of 2017 is normalized -- is net of a normalized tax rate of 40%. This normalized tax amount is consistent with our position as a full cash taxpayer in 2017. During the second quarter of 2017, we generated $23.6 million of net cash provided by operating activities, as compared to $15.5 million in the prior year quarter. On a non-GAAP basis, we generated $16.6 million of adjusted free cash flow as compared to $4.2 million in the prior year quarter, primarily as a result of improved operating profit.

We continue to maintain a critical focus on working capital management, particularly in our cash collections and timing of vendor payments. We spent approximately $8 million on capital expenditures during the second quarter of 2017, primarily to purchase plant machinery and equipment in support of growing demand in our markets compared to approximately $11.7 million for the same period last year. As of June 30, 2017, the book value of our long-term debt, including current maturities, was $673.8 million. This included $610.7 million of unsecured senior notes due 2024, no amount outstanding on our revolving credit facility and approximately $63.1 million of other debt, consisting mainly of equipment financing for new mixer trucks and mobile equipment, less $10.6 million of debt issuance costs.

As of June 30, 2017, we had total liquidity of $504.2 million, including $271.7 million of cash and cash equivalents, and $232.5 million of availability under our revolver. Our availability is net of a $17.5 million availability reserve for outstanding letters of credit and sales tax and other reserves. At June 30, 2017, our total debt-to-LTM income from continuing operations was 24.4 times, and our net debt-to-LTM total adjusted EBITDA ratio remains conservative at 2.07 times. We ended the quarter with a strong capital position to continue investing in our business and deploying capital opportunistically, on select, accretive growth opportunities. I'll now turn the call back over to Bill.

Bill Sandbrook

Thank you, Kevin. We are pleased to continue to deliver on our growth objectives and create a sustainable platform for continued success. We continue to believe that the construction cycle has a healthy runway for continued expansion. We've established our company in attractive geographic markets, with leading share positions to deliver consistent profit improvement and generate attractive returns for many years to come. As we look to the balance of 2017, we are optimistic on the prospects for growth in our existing markets and our acquisition pipeline remains a viable avenue for additional growth, including a potential new region 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-pronged strategy. The first, grow organically through operating excellence, superior product delivery and service. And second, expand through 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 U.S. Concrete. We look forward to updating you on our future successes.

We'd now like to turn the call back over to the operator for the question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Trey Grooms from Stephens Inc. Your line is now open.

Trey Grooms

Bill, you mentioned good visibility for 12 to 18 months. When you look at your backlog there, do you see any type of change in the project type or anything noteworthy on that front?

Bill Sandbrook

Sure. As I've discussed Trey, on previous calls, we anticipated a shift, to some degree, into additional infrastructure projects as the FAST Act comes to fruition and all these state initiatives, with the defining funding mechanisms through gas taxes, or whatever means. We have additional revenues flowing into that sector in all of our major regions, and we are seeing that shift to some extent. In our backlog, for instance, we are shifting. I believe it's the 21% in infrastructure now, in our forward backlog on a volume basis, that's up from 17% to second quarter 2017. So we are seeing that shift and some shift into the residential sector too as the single-family homes continue to expand and multifamily homes stay at a high level. So there is some shifting there. So on the mix, we have somewhat of a decline on the commercial industrial side and more towards residential infrastructure.

But as I've said repeatedly on these calls, concrete is fungible. I don't need highways for concrete. I can build buildings. I can build airports. We can build roads. We can build schools. And wherever we get the highest margin opportunities, at any part of the cycle, we will direct our capacity utilization towards that. Now there's more opportunities in infrastructure and residential, so it's kind of moving in the exact direction that we've anticipated over the last two years.

Trey Grooms

Again, it sounds like from your comments that you're expecting continued price improvement, of course, volume, and then also, margins over time. So it would suggest, I guess, that little shift that you've seen, or that shift that you've seen in backlog into different end markets is not going to really impact you from a margin standpoint, as you continue to think that's going to improve?

Bill Sandbrook

Yes. Infrastructure projects are very high-margin business, as we've been able to consolidate our major markets and we're rationalizing our existing plant network, we're getting efficiencies on delivery. So it's not just a material margin, it's on overall marginal contribution that we can continue to expand total EBITDA margin, based on our purchasing power and aggregates of cement, and our regional plant networks and when we look at New York, for instance, we haven't even lapped a couple of those acquisitions yet. And when you think that the normal time to fully integrate these and synergize them are 18 to 24 months. We haven't even lapped two of those acquisitions yet. So I continue to focus on increased margin expansion as we go forward. And this somewhat minor shift that I just described, is only going to help that. It's not going to diminish our rate of improvement on margins.

Trey Grooms

And then, still on that same line of questioning. The geographic mix, obviously, can impact pricing and margins, in any given quarter. Was there any kind of an impact that you could note, in the 2Q, from a geographic standpoint, and any impact to the mix there? And then also, the follow-up to that is, given the visibility you have into your markets, how should we be thinking about geographic mix? And how that can impact, as we look over the next few quarters?

Bill Sandbrook

In the second quarter, I don't see much impact on regional mix. It was better weather in California than Q2 '16. It was slightly worse weather in New York. Those are priced somewhat comparatively and the bad weather we had in Texas in June was absorbed into those other dynamics. So I don't see any regional mix issues in second quarter. And as we go forward, I mean, the backlogs in all of our regions are healthy and I don't see any significant mix shifts that we're going to slow down in any one region versus another. So I think it's pretty stable from our breakdown of businesses, as I described in my commentary.

Operator

Thank you. And our next question comes from the line of Adam Thalhimer from Thompson, Davis. Your line is now open.

Adam Thalhimer

On -- just quick question on the price -- the pricing in the quarter was kind of flattish, up a little bit sequentially. Can you give us a little bit more insight into how you're thinking about pricing in the back half?

Bill Sandbrook

Well, remember, we operate on a continuous pricing model and depending on the fall-off of existing projects and the uptake of new projects, it's not a discrete process. Pricing was marginally up, sequentially, significantly up on the year-over-year. We're getting price increases in every market. So I think it's a very healthy pricing environment now, and as most of our raw material price increases have been already fully absorbed in this second quarter, traditionally, around the April time frame. Margins should continue to expand as our pricing increases.

Adam Thalhimer

And then on the aggregates margin, really on the EBITDA -- adjusted EBITDA margin for aggregates really broke out almost to a new level at 38%. Is that something that's sustainable? Or was there an impact in the quarter?

Bill Sandbrook

We did have -- last year second quarter, we were still in the process of shaking out some -- a new plant and equipment in our New Jersey operations. Now that we have a full year of operations there, we've been able to expand our margins as well as we have a minor operation in the Virgin Islands that we've showed significant improvement in our ability to increase margins, primarily on the cost side. The combination of the 2 really made for a healthy incremental aggregate margins in the quarter. And even on a year-to-date basis, at that 70-plus percent, it's very healthy. But it was significantly expanded in the second quarter, as you could see.

Adam Thalhimer

So maybe in the back half it normalizes a little bit, though?

Bill Sandbrook

It will normalize at a higher level than historic.

Operator

And our next question comes from the line of Scott Schrier from Citi.

Scott Schrier

I wanted to ask that pricing question that was asked in a little bit of a different way. If I look back, in the last 4 years, you typically have sequential improvement in pricing from 1Q to 2Q and like you said, we're roughly flat and I understand the dynamics of the continuous pricing model. I'm curious, if maybe there's something fundamentally different in the cadence of the projects this year versus some prior years that might have an effect there?

Bill Sandbrook

There might be some minor cadence issues there, Scott, but primarily, first quarter this year was cold in lot of our areas, and we were able to use a lot of value-added admixtures and be able to price up to that. And in the second quarter, it was somewhat abnormally cool in some of our higher temperature regions that we weren't able to add ice to the mixes to cool down the heat of hydration, which means that we didn't get to markup those products as much as we would in June, especially with the cold, rainy weather in Texas. So I would look in small variations in our additives, not as having not as robust of a sequential price increase, as opposed to any variations in our project cadence.

Scott Schrier

And a follow-up on the aggregates question. How much of an impact, or qualitatively, can you give to -- about the Corbett Aggregates have in a quarter?

Bill Sandbrook

I would say minimal. We closed that in April. We needed to increase our stockpiles and then get our distribution channels in line with our barging up into the New York metro market. So I would say, somewhat de-minims, but accelerating now into the second half.

Scott Schrier

And one more and backlog is up nicely year-on-year, as you alluded to. But if we look at on quarter-to-quarter the actual year-on-year growth rate has decelerated a little bit. And I'm curious if that's just a function of acquisition activity slowing down a little bit in this year, or are there any noticeable changes in the bidding environment? Whether it's -- as you alluded to before that you're having a kind of a little bit of a shift into infrastructure and resi away from some of the commercial? Just want to see if there's anything to read into on that metric?

Bill Sandbrook

No, there's nothing to read into that. Remember we have to be able to execute all of our backlog, which means we pick and choose, depending on our plant capacities that we expect to have in the upcoming months. So as I said, we're picking and choosing. We're choosing high-margin projects right now. It's a very healthy backlog. I wouldn't read anything into it that it's decelerating. I wouldn't want to sit here with a 10 million yard backlog and not be able to form it in the short term because 60% of it is going to be -- has to be formed in the next 6 months. So this is a very, very comfortable level of backlog and it gives us -- our margin profile that we find attractive to increasing our profitability.

Operator

[Operator Instructions] And our next question comes from the line of Craig Bibb from CJS Securities.

Craig Bibb

Bill, congratulations on the coming expiration of the warrants.

Bill Sandbrook

Finally.

Craig Bibb

Exactly. Jesus. No more derivative calculations. You spent $2.4 million on acquisition costs and did not announce a deal in the quarter. I think you said you had 21 possible deals in the pipeline. I mean, how soon are we likely to see something, maybe you can bracket it?

Bill Sandbrook

Yes. It's difficult to predict any of these, Craig, as you can understand. I mean, if we had a deal, we'd have an announcement. So we don't have any of those 21 deals, or we'd be talking about them today. So I would say, when we have something to announce, we will put it on the wire as soon as we can, but obviously, we're working very hard at various size acquisitions around the country at this point. It's as healthy as I've ever seen it, and we'll leave it at that at this point.

Craig Bibb

Okay. And actually, it did seem like in the press release, you were alluding to maybe the potential for something of a larger scale, actually, are you thinking along those lines?

Bill Sandbrook

I would think of around both lines. Our fundamental strategy of bolt-on acquisitions remains very, very viable and active, and as we've been local now for a number of quarters that we are looking at opportunities to increase our geographic scope through the addition of a new region.

Craig Bibb

And then, you highlighted D.C. and Northern Virginia in today's call. You don't typically do that. Is that market becoming more attractive to you? Or is it just that the greenfield is opening now?

Bill Sandbrook

I think, it's been attractive for a number of quarters. We have been working on a greenfield, and these greenfields take an awful long time. The permit, as you're well aware, and we have finally succeeded in opening a new plant in Lorton, Virginia, and we have invested there because we're very bullish on the overall trajectory of that Northern Virginia, downtown D.C. economic environment. So it's still a small part of the portfolio, but growing and vibrant.

Craig Bibb

And then, there has been a lot of rain in New York City this quarter. Is that slowing things down? And are there any other weather, or other one-timey kind of issues that we need to keep an eye on?

Bill Sandbrook

Well, weather always. I mean, we reported here, it was much drier in California, in second quarter than it was last year and weather in Dallas, and weather in New York and Virginia and that had its own effects on projects. I would say, it's less an effect in our urban markets because it's mostly vertical construction, and they're not as constrained on the following days from rain events. They are impacted on the day of the event and some of our work in the more rural areas and Dallas areas, where we have large slab work for data centers and warehouses that a day of rain could cost you a week because of the job site conditions. So in following the space, I urge everybody to watch weather and understand that it impacts us. So no more, nor less. It doesn't destroy ultimate end user demand, but just pushes it out to later periods.

Craig Bibb

And then the last question. Looks like you did a -- margin of materials is really attractive at almost 50%, but you also did a good job of leveraging your other cost of goods sold. Was that delivery efficiency in New York? Or just overall volume leverage?

Bill Sandbrook

I would say a combination of both. Fixed plant leverage on volume at our busy plants, combined with rationalization of our delivery footprints, where we've had our most recent acquisitions primarily, New York. But other efficiencies in other parts of the country, where we're just executing at a higher level.

Operator

And your next question comes from the line of Stanley Elliott from Stifel. Your line is now open.

Stanley Elliott

When we're thinking about the M&A piece, you mentioned 530 million of liquidity. Is that enough to gain the size and skill, assuming you're looking at new markets to go in there, to get the sizing and the opportunity that you were looking for?

Bill Sandbrook

Well, that's a pretty healthy war chest and obviously, goes a long way in our infill and bolt-on type acquisitions. For somewhat larger transactions, Capital Markets we believe, are very open to the U.S. Concrete right now. We have a very strong record of performance and delivery on every fundraising that we've done and improved underlying fundamentals for a number of years. So if in fact, an opportunity comes along that is a little bit of stretch for our current cap structure we think that we're in a very good position to raise additional funds through the markets.

Stanley Elliott

And if you had kind of like everything to sell the way that you're hoping for it to fall, would this 530 million be allocated, put to use within the next 12 months, later or sooner?

Bill Sandbrook

I again, I didn't dimension it previously, but I'd be very disappointed if we're talking 12 months from now that we have that same structure and balance sheet leverage that we have now. I would be extremely disappointed. So that's about as much dimensioning on timing as I'll give you, but I'll put the outset of that at 12 months.

Stanley Elliott

No. That I think is very fair. And then, last question. There was a question on normalized margin on the aggregates, but then it sounds like you're starting to ship more product out of New Jersey, which would imply that it would seem like your efficiencies in that piece of business would get better. Is there any way to help square that? Or am I trying to read in too much to what's a very nice margin quarter?

Bill Sandbrook

Yes, you might be reading a little bit too much into it. We expect extremely good margin profile out of our Corbett acquisition, but it's a discrete acquisition in Southern New Jersey that will be shipping fine aggregates, i.e. sand into our New York ready-mixed plants, and the cost of sand in New York is extremely high right now. So for us to be able to supply our own needs, or a large portion of our own needs, will be very accretive and very margin enhancing, as we transfer at arm's length market pricing to ourselves.

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Roresa Mojo from D.A. Davidson. Your line is now open.

Roresa Mojo

How much of the increase in backlog was associated with delays in Dallas volume because of weather?

Bill Sandbrook

Well, we reported out. We thought it was a 75,000 yard delay due to weather, so if it wasn't accomplished, it's still in backlog. So by definition, it'd be that 75,000 yards.

Roresa Mojo

And you guys have any early read on when some of the California infrastructure opportunities could come, and how that would possibly change shift in project mix?

Bill Sandbrook

Well, as far as the read, traditionally, and you can see this with the FAST Act as well. There's always overoptimism of how fast those once funds grow, and we would dimension that as 18 to 24 months after the passage or enactment of the actual bill that we would start seeing some of those. Now how the projects are spread, amongst the state as large as California, when we have a fairly limited geographic spread from San Jose to San Francisco, Pleasanton and Oakland. So it's going to depend on how those individual projects flow. But by and large, I'm not counting on anything into our 2018 budget, for instance, but would expect to see some impact -- positive impact, in 2019.

Roresa Mojo

And then, also in regards to the FAST Act and infrastructure. Is -- and you guys have called out in the press release regards for -- you guys saw there was a lack of, I guess, external stimulus in local government funding. Do you see that there -- is there uncertainty in terms of local governments, in terms of this -- causing this lag?

Bill Sandbrook

No. I don't think there's uncertainties at all. I think it's just the timing necessary from when money is available to the permitting process, the design process, the engineering, the letting and then, the actual consummation and beginning of a project. I don't think there's any uncertainty or unwillingness, let's say, for California to spend in their $50 billion project. It just takes time. The Port Authorities, $32 billion 10-year project capital budget. It just takes time to let the projects, but it's not because of uncertainty, a lack of will or any such thing is that. It's just the complexity of project delivery in a highly regulated environment.

Operator

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Bill Sandbrook, President and Chief Executive Officer, for any closing remarks.

Bill Sandbrook

All right. Thank you, Israh. 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 results with you in November. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a nice day.

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