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US Concrete Inc (USCR)
Q4 2019 Earnings Call
Feb 25, 2020, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by. And welcome to the US Concrete, Inc. Fourth Quarter and Full Year 2019 Conference call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to your speaker today, John Kunz, Senior Vice President and Chief Financial Officer. Thank you. Please go ahead, sir.
John E. Kunz -- Senior Vice President and Chief Financial Officer
Thank you, Justin. Good morning, and welcome to the US Concrete's fourth quarter and full year 2019 earnings call. Joining me on the call today are Bill Sandbrook, our Chairman and Chief Executive Officer; and Ronnie Pruitt, our President and Chief Operating Officer.
After our prepared remarks, we'll open the call to questions. A presentation to facilitate today's discussion is available on the Investor Relations section of our website. As detailed on Page 2 of our presentation, today's call will include forward-looking statements as defined by the US Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially. Except as legally required, we undertake no obligation to update or conform such statements to actual results or to changes in our expectations.
For a list of these factors, please refer to the legal disclaimers and risk factors contained in our filings with the SEC. Please note that you can find the reconciliations and other information regarding the non-GAAP financial measures that we will discuss on this call in the Form 8-K filed earlier today.
With that, I'll now turn the call over to Bill.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thank you, John and good morning. There's a lot of exciting news to share with you today about the future of our great company. First, let me address the succession announcement we made earlier this month. After implementing a robust and rigorous succession process, the Board and I unanimously agreed that it was the opportune time to promote Ronnie Pruitt to CEO after serving four years as our COO.
Ronnie has brought deep industry expertise and a highly strategic and process oriented approach to our operations and business. He has been instrumental in driving the necessary organizational change to position us for success, the engine behind our technology strategy and advancements, and a key ingredient in the successful sourcing and integration of recent acquisitions. His deep industry, supplier and customer relationships will prove invaluable to a seamless transition.
I've had the opportunity to mention what's Ronnie developed into the leader he is today and are excited to be turning over the reins and I'm very confident in his ability to drive US Concrete to the next level. I still have, until April 3 in my current role. So with that, let me get down to the other exciting news.
Today, I'm pleased to announce the completion of our most recent aggregates acquisition, Coram Materials for a purchase price of $142 million. The acquisition is expected to be accretive to earnings per share and produced a margin profile in excess of the company's average within the first full year of ownership. Post-synergies, which we expect to achieve within two years, the deal represents a multiple of approximately 7 times EBITDA. Our M&A approach has been focused on building scale in key metropolitan markets where we have a strong position, identifying assets that allow us to vertically integrate our aggregate operations and that also offer a higher margin profile than core USR businesses.
This acquisition fulfills those strategic filters and represents another major milestone for us. Coram is a large state-of-the-art sand and gravel operation located on Long Island, and serves the New York metro ready-mix and asphalt markets. It produces more than 1 million tons of sand a year and has reserves of approximately 50 million tons. This acquisition following an extremely successful Polaris integration provides us with a strategically located asset. And with their strong operations, we expect to drive additional pull through from our existing nearby ready-mix operations.
Historically, we have purchased a portion of our sand needs from Coram for our New York operations, and believe we can meaningfully increase production to become entirely self-sufficient in sand supply for our New York ready-mix operations. Coram also has many other third-party supply arrangements, which we would expect to cultivate and build upon. In addition, we expect to be able to further minimize the logistics costs associated with transporting sand from Long Island to the City as we have the potential to backhaul stone from our New York City docks to third party asphalt and ready-mix operations on Long Island.
Coram supports our focus on, one, vertically integrating our existing ready-mix operations with self-supplied aggregates, and two, building defensible ready-mix positions in major metropolitan markets, which create unique, market-leading and value enhancing franchises that are impossible to replicate. In the future, we will be accelerating our vertical integration strategy through accretive and unique aggregate opportunities to continue to increase the overall percentage of EBITDA generated from the aggregate segment of our business. We are excited about the addition of Coram Materials and welcome their employees to the US Concrete team.
Moving on to our results. For the quarter, we reported revenue of $369 million compared to $370 million in the year ago quarter. Aggregate volumes and price increased during the quarter, leading to a 7% increase in aggregates revenue. Ready-mixed prices increased approximately 1.1% offsetting volume declines of 1.5% resulting in a relatively flat quarter-over-quarter revenue. Our adjusted EBITDA for the quarter was $45.5 million. Aggregates adjusted EBITDA came in at $14.9 million, a 19% increase driven by higher prices and volumes as well as operational efficiencies.
Our ready-mix adjusted EBITDA fell short of our expectations given higher cost relating to insurance reserves. Specifically, our actuarial results required us to increase our reserves by approximately $4 million in the quarter. We are taking aggressive steps to reduce our loss experience and concurrent costs as well as addressing the significant premium increases that are being seen in the insurance markets. This includes recovering these costs through additional price increases in those markets. For the full year, our revenue was down 2% compared to the prior year. As you may recall, the unseasonably wet weather in the second quarter caused our ready-mixed revenue to drop by 10.3% on a year-over-year basis in that quarter.
However, when looking at the second half of the year, our total company revenue was up almost 1% compared to the prior year and our adjusted EBITDA was up 8%. These are both record highs for the last six months of any year and demonstrate the strength and potential of our underlying markets and strong operations.
I'll now turn the call over to Ronnie to take us through our markets and to highlight our margin improvement progress.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, Bill and good morning everyone. Before I provide an overview of the markets and our operations, I'd like to speak on behalf of the entire US Concrete team, and thank Bill for his nine years of service with our company. During his tenure, he implemented a strategic vision and executed multiple acquisitions, which allowed the company to separate itself from others in the industry. His vision and planning led US Concrete to tripling revenue and increasing value to both our shareholders and employees.
On a personal level, my relationship with Bill goes back well over a decade. I first had the opportunity to interact with him when he was CEO of Oldcastle Architectural Products. Four years ago, he presented me with the opportunity to join US Concrete and the incredible team of employees he had assembled. Bill's leadership of the company and his personal time spent with developing me as a future leader have been immeasurable. I look forward to carrying on his legacy of profitable growth and I am honored to be overseeing US Concrete's future. Bill, the entire organization appreciates everything you've done for us and we wish you nothing but the best in the years to come.
Now let me turn to the business and market and update you on the fourth quarter and full year, including some exciting new solutions as well as our accomplishments and opportunities. Let's start with our aggregate business. Our total aggregates sales volume was up 7% in the quarter and 2.5% for the year. The increase in the fourth quarter volumes was driven by an increase in our Dallas-Fort Worth market, which was complemented from the commissioning of our Greenfield aggregate operation, MW Ranch that we discussed on our last call, as well as improved efficiencies at our Red River sand operations.
Polaris also continues to meet our expectations and we continue to see robust demand for our products this year. Our aggregate pricing increased 5.1% in the fourth quarter and 5.8% for the year driven by healthy demand across all markets. The combination of increased demand and pricing for our aggregate products led to a 300 basis point improvement in the quarter with margins expanding to 29.9%. For the full year, we increased margins by 480 basis points and ending the year with an EBITDA margin of 27.6%. The efforts of our aggregate team gives me confidence in our ability to continue to drive both improved volume and pricing as we integrate Coram into our company.
On the concrete side of our business volumes ended the year, down 3.8%. But as you may recall, through the first six months of the year, volumes were off 8%. So the back half of the year has certainly showed improvement. In our East region, which consist of New York, New Jersey, Philadelphia and DC, and represents approximately 32% of our total volume, concrete volumes were down 6.5% in the quarter, driven mainly by inclement weather that affected all areas of the region.
For the full year, volume was down 2.5% versus 2018. Pricing increased in the region by 1.6% for the quarter and 1% for the year. Our team is executing against our operational improvement initiatives, which are focused on labor efficiency, mixed optimization and commercial excellence. Specific to this market, a major focus of ours has been on driver retention and growth. And through our efforts, we've increased the driver pool by 26% year-over-year. These initiatives continue to be a major focus for the organization, and I'm confident in our team's ability to continue to deliver margin improvement during the year.
In our Central region, which is made up of DFW, West Texas, Custom-Crete, and the USVI and represents approximately 47% of the total volume, concrete volume was up 3.9% for the fourth quarter. On a year-over-year basis, our total volume ended up similar to last year's volumes. As a reminder, this region was affected the most by heavy rains occurring in the second quarter of 2019. In the first six months of that year, volume was off 8% year-over-year. So we were successful in recovering some of the shortfall in the second half of the year and are seeing good momentum.
For the quarter, pricing in the Central region was down 1% and essentially flat year-over-year. Demand remained strong with a solid pipeline across infrastructure, commercial and residential projects. On top of our operational initiatives in this region, our greatest focus is on price improvement across all sectors. We are seeing strong momentum from recently announced price increases across the region and anticipate seeing the realization of these actions as we progress through the year. In our West region, which is made up of concrete operations in San Francisco, Oakland, San Jose areas and represents approximately 21% of our total volume, concrete volume was down 4% in the fourth quarter and down 13% year-over-year.
This region experienced a very wet first quarter of 2019, and as we communicated before, and similar to the Central regions, we were down 20% in the first half of 2019 and have been able to significantly close the gap in the back half of the year. Even with the weather impacts we were able to achieve pricing improvement of 6.4% in the fourth quarter, and ended the year, up 6.8%. Our outlook is for continued strong demand and the solid forward looking sales -- forward looking sales in this region. Let me now provide an update on our technology initiatives.
I'm pleased to announce we have successfully implemented our proprietary dispatching system WheresMyConcrete into our DFW concrete operations. I would like to recognize the hard work of the WMC and DFW teams that made this vision a reality. If you recall, when we purchased this proprietary software system in 2017, it was only operating in one plant in New York. Since then, we have successfully developed it into a dynamic information management system that manages optimal mixes, predicts demand curves and optimizes operating, scheduling, routing and other logistics to name just a few of its key functions. This breakthrough software tool is currently adding value to close to 60% of our operational footprint.
To provide some perspective on the operational efficiencies and growth opportunities already being realized through digitizing the experience for our customers, we have cut transactional cost, improved billing accuracy, increased scheduling accuracy and improved overall customer experience. Analytics provided through the system have produced better visibility and insights into the operations and are being utilized to increase driver productivity, drive higher pricing, and increase efficiencies throughout the supply chain. Our plan is to complete implementation in our West region during the second half of 2020 and then begin to market this powerful tool, along with the customer app, the driver app and the electronic ticketing analytics and customer relationship software commercially. We have assembled a team of leading technology experts and it's time for us to market the value and operational efficiencies this system provides to the entire industry.
Now I'd like to turn the call over to John to discuss our financial results.
John E. Kunz -- Senior Vice President and Chief Financial Officer
Thanks, Ronnie, and good morning, everyone. I'd also just like to take a moment to thank Bill for his leadership and partnership during my time here in US Concrete, and I also wish you all the best in the years to come, Bill.
Now on to our results. For the fourth quarter, total revenue was $369 million and adjusted EBITDA was $46 million, both basically flat with the prior year quarter. Higher aggregates volume and pricing was offset by lower ready-mix volumes. Our material spread was $65.97 on a dollar per cubic yard basis. Our EBITDA adjustments for the quarter, relate primarily to stock compensation, acquisition-related costs and officer transition expenses. SG&A fell to 7.2% of revenue for the fourth quarter of 2019, compared to 8.1% in the prior year period.
Adjusted SG&A, excluding stock compensation, acquisition-related costs and officer transition expenses was 6.5% of revenue in the fourth quarter compared to 6.9% in the year ago period. As of December 31, our total debt, including current maturities, was $687 million and we reported $73 million in operating lease liabilities. As of December 31, we had total liquidity of $284 million, including $41 million of cash and cash equivalents and $243 million of availability under our revolver. Our net debt to adjusted EBITDA fell to 3.5 times. The Coram acquisition was financed with borrowings from our revolver and we have additional committed financing to further support our liquidity needs.
We continue to have no near-term maturities associated with our senior notes or ABL facility. Moving on to cash flow. During the fourth quarter, we generated $47 million of cash provided by our operating activities as compared to $33 million in the prior year quarter. We generated $34 million of adjusted free cash flow compared to $28 million year-over-year. For the full year, we generated $138 million in cash from operating activities, which is a full-year record. Our cash flow in the coming quarters should benefit from our increasing aggregates position as well as our focus on managing working capital and capital expenditures.
We made contingent consideration and deferred payments associated with past acquisitions of approximately $40 million during the year, and expect to make further contingent consideration, payments and deferred payments of $13 million in the coming year. In 2020, our cash flow from operating activities is expected to be in the range of 55% to 65% of adjusted EBITDA. During the fourth quarter, we spent $14.1 million on capital expenditures, primarily related to our plants and equipment to support the continued demand in our markets compared to approximately $7.7 million for the same period last year. Looking forward to 2020, we continue to expect our adjusted effective tax rate to be approximately 27% for the full year and our adjusted interest expense to be around $50 million.
The adjusted effective tax rate estimate is based on our expectations that the language related to the interest deduction limitation currently included in the proposed regulations which is unfavorable to manufacturers is removed by the Treasury in the final version. The increased interest expense results from additional capital needed to finance Coram acquisition. We anticipate managing capital expenditures in the range of $40 million to $45 million and anticipate our -- that our equipment acquired through financial leases will be in the $25 million to $30 million range excluding capital for the modernization of one of our Texas aggregates core.
We continue to see a robust demand environment as we look to build on our fourth quarter results. We anticipate continued solid cash flow generation along with sufficient liquidity to support our ongoing operational needs. I'll now turn the call back over to Ronnie to provide our 2020 outlook.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, John. There continues to be a solid pipeline of construction and infrastructure projects coming to market with meaningful volumes and solid margin potential. We are excited about the addition of Coram and expect a meaningful contribution from them for the remainder of the year. Accordingly, our full-year 2020 guidance includes the anticipated benefits we expect to see from this transaction.
For 2020, we expect organic aggregate pricing to increase in the mid single digits and volumes to increase in the low to mid single digits. In ready-mix, we expect pricing and volumes to increase in the low single digits. For the full year, we anticipate -- we estimate our revenues to be between $1.5 billion and $1.6 billion, and EBITDA to be between $195 million and $215 million. With the transition in leadership, I see a continuation of the strategic direction we have communicated beginning last year. Our strategy is focused on building a hard to replicate, vertically integrated ready-mixed and aggregates franchise that consistently delivers profitable growth to our stakeholders. To do this, we will continue to grow and leverage our aggregate position to further strengthen our defensible vertically integrated positions in major metropolitan markets, leverage the technology advantage of WheresMyConcrete to not only improve our efficiency, but also capture additional revenue opportunities, focus on our customers where we can continue to differentiate US Concrete through value-added solutions and service, train, develop and engage our dedicated teams of talented employees to compete and win in this fast changing environment.
I'll now turn the call back over to Bill for a few closing remarks.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thank you, Ronnie. As this will be my last earnings call with US Concrete, I want to take the opportunity to formally thank the Board of Directors for their tremendous support throughout the past nine years. I also want to highlight what a privilege it has been to serve beside the most talented, creative, and committed management team in the industry. Even more importantly, I tip my hat with my deepest gratitude to the hard working men and women of US Concrete who sweat hard work and sacrifices, I have the utmost respect for and to whom I offer my heartfelt appreciation. I'm very humbled to have been able to lead such a marvelous group of dedicated professionals.
Going forward, I will be moving into a senior strategic advisory role assisting the company and supporting Ronnie in the acceleration of our vertical integration strategy. To Ronnie, I'm entrusting the safety and growth of our employees and a future increase in shareholder value required by our stakeholders. I am 100% confident that he will deliver. With that, I'll turn the call over to Justin for the question-and-answer session.
Questions and Answers:
Operator
Thank you. [Operator Instructions] And our first question comes from Paul Roger from Exane BNP. Your line is now open.
Paul Roger -- Exane BNP Paribas Research -- Analyst
Yeah, good afternoon everybody. Well, good afternoon from London, anyway. Thank you for taking the questions. So just one general one to start off with. Bill, obviously, this is your last call. I wonder if you could reflect a little bit on what you're most proud of in your tenure at US Concrete. And also say if there's anything you maybe would have done differently if you had your time again. And then also just passing to Ronnie, you talked about introduction about continuity, but I wonder if there is any areas where you feel US Concrete could maybe take a slightly different path or accelerate innovation?
William J. Sandbrook -- Chairman and Chief Executive Officer
All right. Hey, Paul, thanks for that. I wasn't really expecting that question, but...
Paul Roger -- Exane BNP Paribas Research -- Analyst
I thought, I'll try to catch you by surprise.
William J. Sandbrook -- Chairman and Chief Executive Officer
But, yeah, there is an awful lot to reflect on. I'm probably most proud of being able to develop this team of fine professionals in a space that isn't -- isn't that well looked down from time to time, and it's really not the easiest thing bringing people into this space anymore, especially young people, but I have a very good young group of talented men and women who we've developed together to lead this forward. So I think I'm most proud of the young group of talented people that will be able to bring the company to new heights and many other things you're talking about here and kind of a little change to strategic direction, technology etc, etc. And with that I'll pass it over to Ronnie to expound upon.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, Bill. Great question, Paul, because I think there is a lot of opportunities here that we've talked about in this call and we've referenced over the past couple of calls. But one would be our strategic direction around aggregates and the Coram acquisition obviously complements that. And we talked about the post 24 month synergies of several multiple. And those are the kind of aggregate deals that we're going to be looking for in the future. Ones that we are not paying crazy multiples for but they fit within our targeted markets, our targeted regions that we've done the hard work on the vertical integration pull through downstream to structure those markets in a way we would like to be structured. We feel like there's great opportunities out there to continue to find these aggregate opportunities that we will be able to bolt on in those markets. And so I would continue to look for us to maximize that focus on those aggregate opportunities as well as the technology piece that I referred to and that Bill talked about.
I think there's great opportunity around WheresMyConcrete, the driver app, the customer app for the dispatching tools, the customer relationship software, all those things that we've developed and I don't want to under-emphasize enough the fact that the hard work that the people that we've put together here have put into making that system where, and one, we're confident enough to roll it out through our entire footprint and two, the confidence we have and be able to go market that to the outside.
Paul Roger -- Exane BNP Paribas Research -- Analyst
That's clear. Maybe just a quick follow-up, maybe one that you would have anticipated. You've given a volume and price outlook for aggregates, concrete, for the group overall, can you just say a little bit more about whether that guidance is relevant for all of your three key regions? Or are there any significant differences between the regions you think are worth highlighting today?
Ronnie Pruitt -- President and Chief Operating Officer
Sure. Yeah, let me walk you through that and I'll talk about a couple of quotes from the Beige Book, from the Fed Beige Book in January, where in New York residential rental market remain positive trends, multifamily construction started to pick up across the district and Dallas home sales rose broadly, demand exceeding expectations, and San Francisco residential real estate expanded strongly reports from across the district noted for demand remained robust. Those kind of quotes and those kind of comments from the Beige Book complement what we're seeing in the markets.
I would say in the -- in our East region, the New York, the New Jersey, DC and Philly region, we continue to see strong demand. And that demand as we've said in the past is really around res, non-res commercial with really some infrastructure, but we anticipate more infrastructure to come. So we believe that as the infrastructure comes and that spending will continue that that's just the third leg of the stool that will help that market continue to even grow better. DFW continues to be a very strong diversified market with really strong demand in all sectors, residential, commercial, infrastructure.
I would say the opportunities in DFW would be one, normal weather, which we hope that normalizes soon, and the impact that that can have with our ability to serve all of those markets. We have a very good footprint to serve all the demands. We feel confident in the footprint that we have and in the labor force that we have, in the equipment that we have and so I don't anticipate anything in DFW other than what I talked about with the pricing momentum and we want to see a very good pricing picture for next year.
So that's our focus here in the DFW market. Demand is there, we want to see the price improve. And in California, our Northern California region, San Francisco, San Jose, Oakland. We talked about the weather impact last year. We also saw some impact of softening in that market. With regards to environmental and permitting issues, the demand is still really strong. We've seen a lot of uptick in commercial that’s continued. We have a very strong backlog there of work and we picked up some projects along with Google in Mountain View. We continue to pull on the Adobe North Tower. We have the I-680 and SB4 interchange there. So a lot of really strong projects. And I think our team out there is in a great position to capitalize on still a real strong demand.
Paul Roger -- Exane BNP Paribas Research -- Analyst
That's clear. Well, just finally from me, congratulations again Bill and wish you all the best for the future.
William J. Sandbrook -- Chairman and Chief Executive Officer
All right, thank you very much, Paul.
Ronnie Pruitt -- President and Chief Operating Officer
Thank you.
Operator
Thank you. And our next question comes from Brent Thielman from DA Davidson. Your line is now open.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Great, thank you. And congrats, Bill.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thanks, Brent.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Maybe just starting on Coram, I'm just curious kind of the margin profile, we can think about against your existing aggregate segment.
Ronnie Pruitt -- President and Chief Operating Officer
Yeah. We talked about it in the call being above our current margin. So if you, if you look at our current margin of around 29%, it's going to be north of that. We anticipate again on a two-year run rate of the 7 multiple. And I would say, I mean when we integrate these operations, we're integrating systems, we are out there today on-boarding people. We've got a large significant of external customers. So our plan is to keep everything as was and improve in places we can improve but we'll have some time here to integrate that and we'll give you more color on that as we do.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. And then, any way to think about or quantify kind of what impact this has to your kind of existing New York ready-mix operations, just from a margin perspective. Just curious kind of what this helps you deal?
William J. Sandbrook -- Chairman and Chief Executive Officer
So one, on the control we talked about. This acquisition gives us an opportunity to be 100% self-sufficient on our fine aggregate needs in New York. And then we also talked about the transportation opportunities with backhauls and looking at lowering transportation cost. I would tell you, from a margin standpoint, our goal when we acquire aggregates in these regions and become vertically integrated, we don't want to dilute the margin from the aggregate opportunities.
So it's not really an opportunity that we want to lower our concrete cost as much it is we want to maintain and grow our aggregate margins. And so sand pricing will give us more control as far as what we want to do with sand pricing in the region and sand pricing to ourselves. And so we'll be very aggressive in pushing that and we think there is a lot of upside in that opportunity.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay. And then a quick one for John, I apologize if you said it, but did you give an capex number for the year that you expect?
John E. Kunz -- Senior Vice President and Chief Financial Officer
Yeah, so I broke it down in two pieces. Our cash capex is going to be $40 million to $45 million, and then capital leases to be about $20 million to $25 million.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay, and then my last one was just on running on just the thoughts of marketing WheresMyConcrete commercially, it seems like that's a competitive advantage for you and your business internally. And I guess I just wanted to get some more thoughts on why take that outside the company and what -- is there a way to kind of quantify the opportunity there?
Ronnie Pruitt -- President and Chief Operating Officer
Sure, so yeah our WMC, WheresMyConcrete group. We have a separate group that is focused on one developing and implementing the system throughout our footprint. And two, externally marketing the product to the external market. We've attended WheresMyConcrete Show in Las Vegas a couple of weeks ago and had a lot of interesting leads around not just in the United States, but other countries and the need for systems and technology and analytics that we think we can provide. So we have a team of external people that are focused on marketing this.
We already have a couple of customers signed up on the customer app side. It's a pretty easy implementation to allow third parties to use the customer app. So, our anticipation is and to put some context around it I mean, when you talk about selling systems it's not the same as us selling concrete. It's a lot longer lead time, there is a lot of due diligence that takes place of us evaluating the systems that we're going into. So we have a whole team of people that are more than capable of doing that. And like I said, I think we've really assembled a team of experts, when it comes to the technology in our industry. And these men and women are anxious to start calling on external account and start selling the benefits of this to those markets. And so I would say timing wise our expectations would be, like I said, continue to implement this in our West region in the second half of 2020. At the same time, we would start really pursuing some of these third-party opportunities that we already have the interest in. And I think there is great opportunity there.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay, thank you.
John E. Kunz -- Senior Vice President and Chief Financial Officer
Hey Brent, I just wanted to clarify for you too. The capital leases are $25 million to $30 million. I think I misspoke, I said $20 million to $25 million. They are $25 million to $30 million.
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Okay, great. Thanks, John.
Operator
Thank you. [Operator Instructions] And our next question comes from Adam Thalhimer from Thompson Davis. Your line is now open.
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
Hey, good morning guys. And congrats, Bill and Ronnie to you both on your new roles.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thanks Adam.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks Adam.
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
Hey, I guess I wanted to start on Coram. What are the anticipated synergies that you baked in to the 7 times? And then also what are your aggregates volumes expectations in 2020 including Coram?
Ronnie Pruitt -- President and Chief Operating Officer
So let me start on the anticipated synergies. So from a synergistic side and I think Bill touched on them is really around the logistics piece. I mean, it does give us a lot of opportunities to move materials around both to and from Long Island in a way that we can maximize backhauls and those things. And so when you're moving that much material with that kind of control around the logistics piece, there's obviously opportunities there to lower our inbound cost and our outbound cost of other materials.
So I think there is a great opportunity there. Volume pull through is one that obviously has a great impact on the cost side. So when we can pull more volume through, we will anticipate a lower production cost mix there. And then looking at other opportunities with external customers, we believe that with the market make up there and our ability to continue to push production and sell this more on the outside that we will get some influence there on the pricing side as well.
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
So I think what was the -- what was the volume guidance for aggregates organic, it was like, up mid single digits?
Ronnie Pruitt -- President and Chief Operating Officer
Yeah, up mid-single digits what’s organic, it did not include Coram and Coram, we said was just north of a million tons.
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
Oh a million tons. Okay. Got it. All right. And then on the, your EBITDA margins in ready-mix, would you assume about flat this year?
Ronnie Pruitt -- President and Chief Operating Officer
You're talking about for 2020?
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
For 2020.
Ronnie Pruitt -- President and Chief Operating Officer
Yeah. Well, we said low-to-single digits in pricing and low single digits in volume. I would anticipate, if we're able to achieve that with the operational efficiencies, we're going to continue to focus in on those margins. So I would like to see margin expansion and that's what we're pushing for. A lot of that's going to be in the markets and the acceptance on pricing in DFW and we believe there's a lot of momentum behind that.
John E. Kunz -- Senior Vice President and Chief Financial Officer
Yeah, I'll expand on that too. So if you look at our guidance with our revenue and our EBITDA guidance, it implies margins of 13% to 13.5%. We're a little bit below 12% as we exit the year, as we exit '19. So we're being a little conservative on margins there. But we think that range is probably appropriate. And by there, I think we'll -- as Ronnie said too, remember Coram's margins are higher than our existing margins. So we'll see a little bit of a benefit as well from the Coram acquisition on our margins.
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
Okay, got it. That's helpful. Thank you.
Operator
Thank you. And our next question comes from Larry Solow from CJS Securities. Your line is now open.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Great, thanks a lot. And I might I'd congratulate Bill as well. Thanks so much and you did a lot for the firm here and me as well, late in the game. But do appreciate that and best of luck.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thank you, Larry.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Just, have you guys -- I joined the call little bit late. Did you discuss sort of Polaris at all? What sort of, I know you sort of gave the whole outlook for aggregates as a whole and you discussed a lot about some new greenfield operations around Texas. But did you discuss Polaris at all sort of what the outlook is there?
William J. Sandbrook -- Chairman and Chief Executive Officer
Yeah, yeah. I mentioned Polaris and said that we still feel very confident and what our long-term vision was of Polaris and the opportunities there in the market. Polaris is obviously a plant that's tied heavily to the Southern or in the Northern California market. So as you saw what our volumes did there that reflected on Polaris, but we feel very confident in the long-term outlook for Polaris and what our volume will look like in 2020.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Okay and then Ronnie, I know you did -- last question is sort of centered little bit on margins and clearly there were a little bit, I think a little bit depressed, a little bit more so in '19 than we thought, but I know you guys have a bunch of initiatives that you've clearly discussed again on this call. And you have sort of quantified in prior calls that you can, you saw this being a potential 100 bps maybe even 200 bps improvement over time from sort of like a 13% level. Do you still see that happening, and again I realize we're maybe not this year and we're coming off a low, so I don't want to buy a lot more that we can chew one year. But what's sort of your outlook over the next two years, three years for margin improvement.
Ronnie Pruitt -- President and Chief Operating Officer
Yeah, I mean I think we're still confident in that plan. I would tell you that the things we can control, the things that we are focused on, which I talked about with labor, with the mixed optimization and the things that WheresMyConcrete provides to us, we're getting more data today than we've ever gotten. And so our ability to become a company that's more predictable about the situations we face every day, will lead us to making better decisions and will lead us to improve margins. And that's really where our focus on is getting ahead of it instead of being a reactionary company to become more predictable and to say that we know these things are predictable and we can react to that.
When we are able to predict we can drive better margins because it obviously flows down the food chain with us being able to schedule better, to book better orders, to understand profitability with our customers. I mean, all those things play into that. So I anticipate us still being on schedule and that's our goal to continue to keep focusing on those margins.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Okay. How about just an update on the, on the labor issues I think you mentioned in Dallas. You hired some more drivers and any more updates there or some color there? And anything going on just in terms of the union, non-union transition in the New York City area?
William J. Sandbrook -- Chairman and Chief Executive Officer
Yeah. As I mentioned in my comments in New York, we were up 26% year-over-year with our driver pool there. So we've had an initiative to put drivers in the seats where we needed them, and we've been very successful in doing that. And on the last call, we talked about labor in Texas. I would tell you right now with the multitude of different programs we have in place, some are focused on hiring, some focused on retention, some focused on other things, we are -- we have a full complement of drivers today and our team over here in the DFW market is doing a great job of identifying and retaining drivers. So we don't see that as an issue facing us right now.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Okay, and then just lastly, did you mention the -- I know you said there would be about 1 million tons for Coram, did you just mentioned the approximate EBITDA contribution in ‘20 sort of incorporated in your guidance for that?
William J. Sandbrook -- Chairman and Chief Executive Officer
We said post two years, 7 times multiple, so you can do the math on that --
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Well, I've already, that's ‘20. right. I get that. But can you -- is that about $5 million this year, is that a million tons. Is that a good number to start with, or a little higher than that or?
William J. Sandbrook -- Chairman and Chief Executive Officer
I would just tell you, as we are bringing the operation into our fold and having to deal with integration and customer leakage and things like that that we feel like we will be able to hit the multiples that we've discussed in 24 months. So I would say your model is not far off.
John E. Kunz -- Senior Vice President and Chief Financial Officer
Yeah. Larry, let me give you -- we said the Coram numbers are baked into our EBITDA guidance already. So that $195 million to $215 million range, if you take that midpoint of $205 million, it's in that number. If you're looking to sequence that by quarter, realize that we're not going to really receive any benefit of Coram in the first quarter at all. So when you look at the historical period, especially because of the weather we've had here in the Texas region in the month of February, you're not going to see a meaningful contribution or meaningful improvement year-over-year, would be my expectation.
But as we go into Q2, since Q2 was a relatively challenged quarter last year. I would expect meaningful improvement and then you will see more improvement in the back half of the year. So if you're looking to sequence your numbers to our midpoint or how you're doing it, I would, I would offer you that guidance as well.
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Got it. Great. I appreciate that color. Thanks.
Operator
Thank you. And our next question comes from Trey Grooms from Stephens. Your line is now open.
Trey Grooms -- Stephens Inc. -- Analyst
Hey, good morning. And Bill, congrats on your retirement, wish you the best.
William J. Sandbrook -- Chairman and Chief Executive Officer
Trey, thank you.
Trey Grooms -- Stephens Inc. -- Analyst
And Ronnie, congrats on your promotion as well. Well deserved.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, Trey.
Trey Grooms -- Stephens Inc. -- Analyst
And I'm sorry, I missed some of the prepared remarks as well. Ronnie, I came in as you were kind of talking about some of the assumptions that you had embedded in the full year guide. And I think you said ready-mix pricing, low single-digits, did I catch that correctly or was it mid singles, just for clarity?
Ronnie Pruitt -- President and Chief Operating Officer
You got that correct.
Trey Grooms -- Stephens Inc. -- Analyst
Okay. So low single digits pricing in ready-mix and then the volume was also low singles?
Ronnie Pruitt -- President and Chief Operating Officer
Yes.
Trey Grooms -- Stephens Inc. -- Analyst
Okay. And so with that kind of looking across your footprint, I know Dallas-Fort Worth pricing is a real focus for you guys. I mean the market is strong, it should support it. I guess what, how much are you going for in the different markets. I don't know how much color you can give me on that, but how did the different markets kind of differ from a pricing standpoint? And what is the timing on the price increases that you have out there? And just any color you can give us on kind of that plus the kind of competitive dynamics that are out there as it relates to pricing and what's kind of baked into that low single digit on price?
Ronnie Pruitt -- President and Chief Operating Officer
Yeah. So when you think about our footprint and you know our footprint well. I would tell you that all of our announced increases are for April across all markets. But you also know that with that April announcement, especially when it comes to ready-mix, it takes time for those to flow through because of the way we've bid projects and all the things that happened behind the scenes on that. So you're very familiar with that.
With regards to, it's probably easier to keep it on a percentage basis, I would say pretty consistent through all our markets where we're announcing and trying to push for 5% to 8% increases. Some of those are way more realistic in some markets and some of them aren't. So I think we're in a position that we want to be very realistic on what we've seen over the last two years to three years. We want to give ourselves an opportunity that we can tell you guys what we wanted to deliver on and deliver on that. And so you can read into that and see that we're being conservative on that pricing.
Trey Grooms -- Stephens Inc. -- Analyst
Okay, perfect. That's helpful. And then you're looking at, I guess from acquisitions that you did last year and then also combined with Coram. I'm trying to get a ballpark because I know you didn't give us the exact revenue or anything like that. But I'm trying to get a ballpark of how much revenue is coming into 2020 from acquisitions that maybe haven't anniversaried and how that timing kind of walks through? I know John, you mentioned kind of something, some timing color around 2Q for Coram and that kind of thing. But as far as the other acquisitions done last year, anyway that we can kind of think about when those anniversary and how to bake those things in?
William J. Sandbrook -- Chairman and Chief Executive Officer
Yeah, Trey. I mean we didn't do any acquisitions last year. So really that's an organic number. So when you look at like-for-like that's going to be pretty pure and then with Coram, we only are really going to get 10 months this year. So, and depending on seasonality in New York, I mean March can be a pretty dicey year. So I would anticipate any significant change this year other than what we will be modeling Coram at and we will probably be giving you more details on that on the next call. That will give us a couple of months to get it under our belt and really get a feel for it. So -- but nothing other than that, because we didn't really do any acquisitions last year.
Trey Grooms -- Stephens Inc. -- Analyst
Okay, thanks for that. For some reason, I was thinking you guys did a couple of smaller ones, but I guess I was thinking too far back. I feel [indecipherable] Ronnie.
Ronnie Pruitt -- President and Chief Operating Officer
I got to get you up early.
Trey Grooms -- Stephens Inc. -- Analyst
Thanks for that. And then I guess lastly, John you gave a little bit of color around kind of cadence and that type of thing. But when you're kind of looking at the first quarter, specifically I know you've mentioned kind of there have been some weather in the quarter and that sort of thing. And, seasonally you kind of expect that, but is there anything to note outside of where the comps are clearly, but anything else to note that we need to be kind of aware of on the cadence side of things, when we look at kind of the revenue, I guess mainly rollout.
And then secondly, maybe how the margin improvement could work through the year given where the price announcements are?
John E. Kunz -- Senior Vice President and Chief Financial Officer
Yeah. No. I'll go back to what I said earlier, I think you know, the first quarter will probably look similar to what we had in 2019, remembering that we will have acquisition and integration cost for Coram. So there's really not going to be much of any benefit in the first quarter at all. I will have it for a month and then you'll have those costs. So I'm not anticipating any margin improvement or benefit really from that, maybe a little bit of incremental revenue for the quarter. So when I look at the first quarter of '19 compared to the first quarter '20, they're going to look strikingly similar to what we had.
As you look on to Q2 and Q3, Q2 will certainly show margin improvement, certainly show EBITDA growth and revenue growth, just because of the issues we had with weather in Q2. Last year, we reported about $42 million in EBITDA. I'd see a meaningful improvement in that number, as we head into Q2 of 2020 absent some significant weather impact. But if it’s just normal and you have the regular weather what we had anticipated, say back in '18 then you'll see meaningful improvement there. And then as you go into Q3 and Q4, that's when I would expect to see more contribution from Coram as well. So you'll see more back half improvement as well. That's how we would think about it as you sequence the quarters.
Trey Grooms -- Stephens Inc. -- Analyst
Okay. And I hate to ask this question because it's, I hate to focus on it, but it is one where you guys it's an outdoor sport so weather plays a role. As you're looking at this volume that you've baked in to your guidance to get to the top line, is there any way to kind of give a gauge on maybe what type of operating environment you're kind of baking into that?
William J. Sandbrook -- Chairman and Chief Executive Officer
Yeah, Trey, when we do our budgets, we try to take normal weather. We obviously take into account what's happened over the several last two years to three years in all of our markets, but we don't try to get into the reading the farmer's almanac and get into weather forecasting. So we try to take everything back to what's normal and we base that on the markets. And so that's where we would baseline everything. Hopefully, we will be correct.
Trey Grooms -- Stephens Inc. -- Analyst
Good enough. Well, thank you for taking my questions. Good luck, and again congrats on your new position and on your retirement, Bill. Best of luck.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thanks, Trey.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, Trey.
Operator
Thank you. [Operator Instructions] And our next question comes from Tom Buckley from SunTrust. Your line is now open.
Tom Buckley -- SunTrust Robinson Humphrey -- Analyst
Hi, good morning. I'm on for Rohit Seth today. Thank you for taking my questions. First off, on the material cost increases. I was wondering what you guys are expecting this year in cement and aggregates?
William J. Sandbrook -- Chairman and Chief Executive Officer
It really depends on the markets. I would tell you that I think most of the cement guys are out with 3% to 5% in the markets. As we've said on past calls and we continue to say, we support increases of raw materials and we believe we will have our buying advantages. And so that's where we are -- that's where we will comment on cement. On the aggregate side, our focus will be on increasing aggregate pricing as well, since we're vertically integrated and we are in the aggregate business in a lot of those markets. And so we've given you guidance of that low to mid single digit range and I think that's what we would anticipate.
Tom Buckley -- SunTrust Robinson Humphrey -- Analyst
Okay, thank you. Second question is just kind of on the leverage, you mentioned in your prepared remarks that you're planning to accelerate your aggregate strategy and that you might have plans for some more deals here. What kind of leverage do you think you're comfortable with moving forward?
John E. Kunz -- Senior Vice President and Chief Financial Officer
So if you look at our leverage, as it stands at year-end, we were at 3 times, 3.5 times levered with Coram. Including our guidance, using the midpoint of our guidance, we will be up about 4. But if you look at our free cash flow generation, especially for the past two years, our free cash flow generation has been in excess of $100 million. So that's about a half a turn there that brings it back down. You know what Ronnie said with respect to the acquisition opportunities or our strategy going forward is there are some unique opportunities out there, where we don't think it's necessary to pay double-digit multiples and actually multiples in line or lower with what we would expect on the Coram acquisition.
Nothing of that size or magnitude and a lot of that can be incorporated or some of it can be incorporated into our existing capex budget, so we can move things around in our capex budget overall. So I don't anticipate significant or I don't really anticipate any growth in our leverage ratio, I'd actually expect it to contract because some of these we can fund organically with our free cash flow going forward, and that's what our focus will be. I mean, our focus will be taking the leverage from right around 4 times where we expect it to be today using some of our free cash flow to fund those acquisitions and to pay down debt. So I would see it coming back from here.
As I mentioned on the call too, we don't have any refinancing risk. Our maturities are out for a few years now, we don't have any covenants to write, so that we don't have any risk of our maintenance covenants or capital calls from that perspective and we continue to have liquidity, significant liquidity because we have committed financing for it as well. So I think we're in good shape. Not really overly concerned with our leverage profile as it exists. Anyhow, and our ultimate goal is to bring it back down into that mid-two range. I mean, that's where we would expect it to be and that's where we would be more comfortable with it, but when the opportunities, when the strategic opportunities like this come along, they only come along once and you have to capitalize them or else they will be gone forever in perpetuity. And we think that they are strategically important to the company and change the profile and dynamics of the company as such, and so we have to capitalize on them.
Tom Buckley -- SunTrust Robinson Humphrey -- Analyst
Awesome. Good to hear. Thank you, guys.
William J. Sandbrook -- Chairman and Chief Executive Officer
Thanks, Tom.
Operator
Thank you. And now I would like to turn the call back over to Ronnie Pruitt, President and Chief Operating Officer for closing remarks.
Ronnie Pruitt -- President and Chief Operating Officer
Thanks, Justin. Thank you for 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 first quarter earnings with you in May.
Operator
[Operator Closing Remarks]
Duration: 56 minutes
Call participants:
John E. Kunz -- Senior Vice President and Chief Financial Officer
William J. Sandbrook -- Chairman and Chief Executive Officer
Ronnie Pruitt -- President and Chief Operating Officer
Paul Roger -- Exane BNP Paribas Research -- Analyst
Brent Thielman -- D.A. Davidson & Co. -- Analyst
Adam Thalhimer -- Thompson Davis & Co. -- Analyst
Lawrence Solow -- CJS Securities, Inc. -- Analyst
Trey Grooms -- Stephens Inc. -- Analyst
Tom Buckley -- SunTrust Robinson Humphrey -- Analyst
