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US Concrete (NASDAQ:USCR)
Q3 2018 Earnings Conference Call
Nov. 1, 2018 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the U.S. Concrete, Inc. third-quarter 2018 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, John Kunz, senior vice president and CFO.

John Kunz -- Senior Vice President and Chief Financial Officer

Thank you, Lindsay. Good morning and welcome to U.S. Concrete's third-quarter 2018 earnings call. Joining me on the call today is Bill Sandbrook, our chairman, president and chief executive officer.

Bill and I will make some prepared remarks, after which we will open the call to questions. Before I turn the call over to Bill, I would like to cover a few administrative items. The presentation to facilitate today's call is available on the Investor Relations section of our website. And as detailed on Page 2 of our presentation, today's call will include forward-looking statements as defined by the U.S.

Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially. Except as legally required, we undertake no obligation to update or conform such statements to actual results or changes in our expectations. For a list of these factors, please refer to the legal disclaimers and risk factors contained in our filings with the SEC.

Please note that you can find the reconciliations and other information regarding the non-GAAP financial measures that we will discuss on this call in the Form 8-K filed earlier today. If you would like to be on an email distribution list to receive future news releases, please sign up in the Investor Relations section of our website under Email Alerts. If you would like to listen to a replay of today's call, it will be available in the Investor Relations section of our website under Events & Presentations. Now I would like to turn the call over to Bill to discuss the highlights for the quarter, current market trends and our outlook for 2018.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Thank you, John. Good morning, ladies and gentlemen, and welcome to our call. Our third-quarter results once again reflect the continued weather-related headwinds that have frustrated our industry for the past several quarters. I assure you that we are more tired of mentioning the weather as a factor impacting our results than you are of hearing it.

Unfortunately, the elements have not been favorable in our markets for three of the last four quarters. However, we remain optimistic and confident in the fundamentals of our business and the anticipated growth closing out 2018 and heading into 2019 with anticipated normal weather patterns. We will discuss more about our outlook a little later on the call. On the positive side for the quarter, we once again hit a quarterly record for revenue driven by the continued strength of underlying construction demand in our markets.

Our overall aggregates position continued to expand and become a more meaningful part of our company led by the significant contributions from Polaris. We are also proud to report our 31st consecutive quarter of year-over-year revenue growth, which is a testament to our strategy and the strength of our regional economies and operating teams. It is this strategy that has also driven consistent, positive operating cash flow for the last five years as illustrated on Slide 5 of our presentation. We continue to feel confident in our outlook supported by a solid backlog, which remains at over eight million cubic yards.

I want to emphasize the fact that we have not seen fundamental construction demand decline in any of our markets over the last year. In months of normalized weather, we have consistently reported year-over-year volume and revenue growth in the high single digit to double digits. It is important not to confuse short-term pressures like weather or inflationary input costs with the underlying macroeconomic demand trends. Our regional teams report weekly on work coming to market, new bidding opportunities, wins and losses in the regions, and ultimately, backlog of work to be delivered.

To reemphasize what we're seeing from these reports, the opportunities and activity in our markets remain strong. Third-quarter 2018 aggregate volumes more than doubled to set another quarterly record of 3.2 million tons on the continued strength and further synergistic integration of Polaris Materials. This increased volume drove a $5.9 million increase in our aggregates adjusted EBITDA for the quarter to $12.1 million. During the quarter, we announced that the formal approvals were finalized to expand the throughput capacity at our Long Beach terminal, which sets us up for further volume expansion heading into next year.

We remain on track to exceed expectations at Polaris with full-year volumes in excess of five million tons for 2018 and adjusted EBITDA in the mid- to upper teens. We have received a lot of questions surrounding our aggregate margins over the past couple of quarters as we have more fully integrated recent acquisitions into our results. We have explained the business model of our aggregate operations in Polaris and the significant freight costs that are passed through and reported as revenue from our customers. It is important to understand that in any aggregate business, the customer is typically responsible for transportation costs from the quarry to the customer's site.

On Slide 6 of our presentation, we more accurately reflect the margins of our aggregate business on a freight-adjusted basis, which excludes the zero-margin pass-through revenue and costs associated with the customer paid freight. As you can see, our aggregate margins remained solid for the quarter, and overall gross profit has doubled in both amount and as a percentage of our total company profit. With our recent acquisitions, our aggregates gross profit, including our internally managed hauling and distribution operations, is approaching 20% of total company gross profit. Turning to our ready mix results starting on Slide 12 of the presentation.

Total volume was up 6% year over year for the quarter, even though the weather headwinds in both Texas and the northeast resulted in a slight decline in organic volume for the quarter. We received solid contributions from our recent acquisitions during the quarter. On the next slide, Page 13 of the presentation, we've put into context the relationship between the weather pressures in Dallas-Fort Worth this year and their ready mix volume each month. You can see that in months of lower volume growth or declines, the rainfall totals in Dallas-Fort Worth were significant; and in both February and September set new all-time records for the months.

Unfortunately, we once again set a record for rainfall in Dallas-Fort Worth in the month of October, making 2018 now the wettest year ever for the Metroplex with still two months remaining. Although they have not exceeded monthly records, you can also see that in New York City, we have significantly exceeded the average monthly rainfall totals in six of the first nine months of 2018. To more specifically explain the impact of the September weather, ready mix volume was the lowest it has been in seven months and more than 25% lower than August. Remember that after cost of materials, driver labor and delivery costs are the largest costs in our business model.

During a short-term event like adverse weather that creates a deferral of volume, we must continue to pay drivers in our non-union markets in Texas, which creates significant short-term pressures on margins. A key metric that we track internally to measure productivity is yards per man hour. It shows how efficiently a driver is delivering concrete and generating revenue per hour of pay. In the month of September, our yards per man hour for the company was 8% lower than the prior year, and the DFW market alone was 15% lower than last year in September.

I'd like to still put a little more clarity on the multi-region record rainfall on our results. Focusing on September, the DFW region recorded a record high for rainfall, and the New Jersey and New York area saw its second wettest September in 10 years. The Texas and Atlantic regions represent 75.5% of our volume. In DFW, a lot of our work is flat work, not vertical construction.

Extremely saturated ground conditions can defer construction for weeks, unlike vertical construction where you may only lose the rain day. As a result, September's ready mix volumes declined 21.5% from the pace we were on in July and August on a companywide basis in September. By region, revenues in September compared to the July August average in the Atlantic region, declined 22%; Dallas-Fort Worth by 32%; and in West Texas by 27% due to anomalous weather events. With these negative revenue impacts, the impact on margins in our business is significant as fixed costs can't be absorbed.

And as we have repeatedly said, drivers in many of our markets have become a semi-fixed cost in order to maintain drivers in the seats. Contribution margin in our New York operations in September declined 36% from their July and August average due to the weather. Similarly, in Texas, contribution margin declined approximately 17%. Even more significantly, as total overheads including SG&A are unabsorbed, EBITDA margins are impacted dramatically.

On a companywide basis, our average adjusted EBITDA margin in July and August was 15.1%, significantly improved over our year to date run rate. In September, once again due to the weather, the companywide adjusted EBITDA margin dropped to 8.5%, thus reducing the quarter-adjusted EBITDA margin to 13.3%. We estimate that the weather impact of the overall company profitability was approximately $12 million to $13 million in the month of September alone. Now the good news.

On sunny days, our volumes are setting records. For example, on Tuesday of this week, our DFW ready mix had a record production day with over 16,000 yards sold compared to our third-quarter daily average of around 10,000 yards. I must emphatically reemphasize, the impact of this short-term pressure on volume, efficiency and pricing is temporary and weather-dependent only. Again, the underlying demand in all of our markets remained strong as can be seen on Slide 13 of our presentation, where we show solid growth in each month of the year, where weather has not been an issue.

We're pleased with the response of our team to cost pressures in the prior quarter with pricing in the third quarter up 1% over prior year, more than overcoming the mix pressures on prices. Organic pricing was up over 2% for the quarter as we continue to see price increases in most of our major markets. As we mentioned on our call last quarter, we've put pricing responses in place to cover unexpected cost pressures and we have seen positive initial results from these responses as material spread margins of 48.4% for the quarter improved 80 basis points sequentially from the second quarter. We anticipate material spread margins to improve and approach the 50% range over the next couple of quarters as newly priced work starts to replace order backlog.

I'll now take you through each of our markets. Our Northern California region, which represented 24% of our revenue this quarter, confirmed our previous outlook of continued success by topping its second quarter with another record high in revenue. Our integration of the Polaris Materials acquisition is moving along successfully and we are seeing a significant contribution from our ready mix concrete operations. Construction activity across all sectors remained strong.

And a decreasing unemployment rate at 2.6%, lowest among all of our major markets, continues to present long-term strength. Speaking of long-term growth, our outlook on the successful completion of SB1 surviving the election remains strong. This will provide much needed long-term sustainability and construction for California. Normally, when I present our markets to you, we are talking about our successful ready mix concrete markets.

I'm happy to add the Southern California region to our earnings presentation. This is an aggregate-only market for us and it's now increasing -- an increasing contributor to our top-line growth. During the third quarter, we announced a major expansion of the throughput at our Long Beach terminal. Polaris is now able to deliver up to two million tons of highly specified aggregates annually, effectively doubling its throughput capacity and supply constraint in Southern California.

This market illustrates the impact that our growing aggregates operations is having on the company as a whole and I look forward to increasing contributions from Polaris in our Southern California market. Another up and coming region is more of a comeback story, our Southeast division in the U.S. Virgin Islands. Looking back on our recovery efforts, they are following Hurricanes Maria and Irma in 2017.

Our employees' resilience in the face of utter destruction is inspiring. From the country -- from across the country, our other employees generously gave to provide help to all of our affected USVI employees. Now they are on a comeback trail and in a growth mode. In a recent report, the total long-term aid to help reconstruction efforts is expected to total more than $8 billion.

Beyond federal fund aid funding, the private sector stepped up to invest in building for the future. The formally closed Hovensa refinery is expected to receive $1.4 billion to refurbish and restart the plant under BP's ownership. Dallas-Fort Worth, which represented 22% of our revenue this quarter, once again showed volume growth for the quarter, which was quite a feat considering the significant impact from September weather. The Dallas-Fort Worth Metroplex experienced the wettest September ever with over 12 inches of rain.

While this level of precipitation is disruptive to concrete operations, I wanted to highlight how well our operations performed during the other two months. The results and work we are seeing during normalized months show the strength of this market, and we expect it to continue to drive growth in the foreseeable future. A report recently released from PricewaterhouseCoopers and the Urban Land Institute ranked the Metroplex as the top market for 2019 in overall real estate prospects. Unemployment remains low ending the quarter at 3.4%, and we expect to see continued population growth.

The strongest leading indicator is the growth of our business cycle index in Dallas and Fort Worth. Dallas rose 4.4% and Fort Worth rose 3.9%. The DFW's market's low cost of living and business-friendly environment continued to see corporate headquarter relocations, giving us a favorable outlook on construction activity across all sectors in the Metroplex. Our West Texas region, which comprised 11% of our third-quarter revenue continued its significant year-over-year quarterly revenue growth.

Our accretive acquisition of Golden Spread Redi-Mix earlier this year continues to make a significant impact in this market in both ready mix concrete and aggregates. Recent rig counts released show that the Permian Basin has added 105 new rigs, a 27% increase over 2017 and still only 86% of the previous peak. The New York City market represented 20% of our revenue in this quarter and we continue to have an optimistic outlook for this region. The New York State Index of Coincident Economic Indicators rose at an annual rate of 5.8% in August, following a 5.6% increase in July and has risen 3.7% over the past 12 months.

These strong economic indicators coupled with investment in building will continue to drive our construction cycle in this market. Recently, the New York Building Congress released forecasts that stated there will be over $177 billion in construction spending over the next three years, with $59 billion in construction spending projected in 2019 alone. These forecasts, combined with the continued integration and efficiencies in our evolving outer borough markets support our expectation for growth in New York in 2019. Overall, the fundamentals for a strong economy continue to remain intact across all of our markets and we continue to see plenty of runway in this construction cycle.

Our ready mix concrete backlog, our continued aggregates growth and significant pent-up demand from a continuous poor weather cycle during 2018 give us significant optimism for the remainder of the year and heading into 2019. Now I would like to turn the call back over to John.

John Kunz -- Senior Vice President and Chief Financial Officer

Thanks, Bill. As Bill mentioned, we once again set a new quarterly record with total revenue of $404 million for the third quarter of 2018. Adjusted EBITDA was down slightly to $53.6 million due to significant weather-related headwinds in the final month of the quarter. Our adjustments for the quarter related to the implementation of our strategic initiatives, stock compensation, relocation cost for a plant in Washington D.C., a litigation settlement that related to 2015 event, a gain on the sale of our lime slurry business and changes in contingent consideration for past acquisitions.

During the quarter, we continued to strategically realign our portfolio and sold the assets of our lime slurry business in the Dallas-Fort Worth Metroplex. The lime slurry divestiture provided further liquidity to allocate to our expanding aggregate business and improve the balance sheet to reduce borrowings. Additionally, through an eminent domain action, we were required to relocate one of our Washington D.C. facilities within the city.

We expect to be reimbursed for the majority of the cost and expenses associated with the relocation of the facility. SG&A was 8% of revenue for the third quarter of 2018 compared to 8.5% in the prior-year quarter. Adjusted SG&A, excluding stock compensation, acquisition-related costs, eminent domain plant relocation costs and litigation settlement costs, was 6.6% of revenue in the third quarter of 2018 compared to 7.3% in the prior-year quarter. Although gross profit margins had been negatively impacted by inefficiencies created with weather-related deferrals, our increased volumes and synergies from recent acquisitions continue to drive operating leverage in this area.

As of September 30, our total debt, including current maturities, was $731 million. This included $609 million of senior unsecured notes due 2024, $36 million outstanding on our revolving credit facility and approximately $95 million of other debt consisting mainly of equipment financing for new mixer trucks and mobile equipment, net of $9 million in debt issuance costs. As of September 30, we had total liquidity of $251 million, including $25 million of cash and cash equivalents and $226 million of availability under our revolver. At September 30, 2018, our net debt to adjusted EBITDA was 3.7 times.

We remain focused on reducing our leverage in the coming quarters as we fully synergize recent acquisitions, drive increased earnings and generate additional cash flow. We continue to have a solid liquidity position and no near-term maturities associated with our senior notes or ABL facility. Moving to cash flow and the balance sheet. During the third quarter of 2018, we generated $42 million of cash provided by our operating activities as compared to $31 million in the prior-year quarter.

We've generated $46 million on adjusted free cash flow, including the proceeds from the sale of our lime slurry assets, compared to $16 million in the prior-year quarter. We were very proactive in response to the weather-related headwinds during the quarter to effectively manage our working capital and capital expenditures to generate increased cash flow. We spent approximately $11 million on capital expenditures during the third-quarter 2018, primarily related to our plants, machinery and equipment to support the continued demand in our markets compared to approximately $15 million for the same period last year. For the nine months ended September 30th, we spent $32 million compared to $34 million for the same period last year.

For the full year, excluding approximately $6 million of costs associated with the relocation of our plant in Washington D.C., we anticipate our capital expenditures to be in the upper end of the $55 million to $65 million range, including equipment acquired through capital leases and our cash flow from operations to be in a range of 50% to 60% of adjusted EBITDA. We continue to have $50 million in authorization for share repurchases. We are confident with our outlook for the remainder of the year and anticipate continued solid cash flow generation along with adequate liquidity to support our ongoing operations and near-term acquisition strategy. I'll now turn the call back over to Bill.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Thanks, John. I have mentioned it briefly, but let's talk about our outlook and expectations moving forward. Given the unexpected weather impact of the third quarter, we are adjusting our full-year guidance for 2018. We expect solid top-line growth in the fourth quarter driven by continued volume gains from combined organic and acquisition growth in addition to continued pricing momentum.

Overall, we are adjusting our anticipated full-year total company revenues to be between $1.5 billion and $1.55 billion, which represents approximately 14% growth over 2017, using the midpoint of our 2018 revenue estimate. Based on recent pricing responses we have put in place and expectations of normal operating conditions in the fourth quarter, we fully anticipate adjusted EBITDA margin expansion in the last quarter of the year compared to the last quarter of 2017. We now anticipate adjusted EBITDA based on these expectations to be between $200 million and $208 million for the full year, which represents 6% growth over 2017 using the midpoint of our 2018 adjusted EBITDA estimate. Although we will ultimately fall short of the high expectations we've set for ourselves at the beginning of the year, we remain very confident in the construction demand within our markets.

In months of normalized weather this year, we have shown continued strong growth driven by solid fundamentals in each of our regions. The Dodge Momentum Index remains 36% higher than this time last year, which supports the continued strengthening of construction activity. In addition, according to the Chamber of Commerce Commercial Construction Index, backlog levels have exceeded 10 months for the first time since the start of the index in Q2 2017. As we finish the year and look forward to 2019, we remain bullish in our outlook for both revenue and EBITDA growth.

Our customers continue to see a robust growth environment and solid demand throughout 2019, which will translate into improved operating metrics for U.S. Concrete. Absence of severe weather conditions we experienced in 2018, we would expect meaningful revenue and EBITDA growth in 2019. We are in the process of finalizing our 2019 budget and will provide additional details on our fourth-quarter earnings call.

In conclusion, we remain optimistic for our growth trajectory and expect to capitalize on the continued underlying pent-up demand in each of our markets. We are well-positioned to benefit from our increased vertical integration and aggregates exposure and the steady multiyear cyclical recovery that we believe has substantial remaining runway in our vibrant markets. We continue to be focused on generating shareholder value by capitalizing on the strength of our regional markets, maintaining our strong cash flow generation and achieving continued profitability growth. Thank you for your interest in U.S.

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

Questions and Answers:

Operator

[Operator instructions] Our first question comes from Rohit Seth with SunTrust. Your line is now open.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Hi. Thanks for taking my question. I've got two questions actually, one on the 2018 guidance, one on your backlogs. The 2018 guidance implies a really good growth in the fourth quarter, but we've had more weather in October in Texas.

Just kind of what gives you the confidence we can get to, there's a 30% growth expectation and what are you assuming on revenue and margins? And then my second question, in the backlogs, we saw a sequential dip in the backlog. We haven't seen that in several quarters. Is that some cancellations? Is there market slowing? Any color there would be helpful.

John Kunz -- Senior Vice President and Chief Financial Officer

Seth, I'll take your margin and revenue growth question and I'll turn it to Bill for the backlog question. If you look at our guidance from the second quarter to now, really, the only thing that's changed and is different for us has been the impact of weather. We're still very confident in the markets and our margins and what we anticipate going into Q4 with the exception of the weather that we've had in October. So if you break down our guidance that we gave last quarter, I think the third quarter was estimated around $67 million of EBITDA and the fourth quarter is right around $60 million.

The lower guidance is reflected, all of which is -- $14 million, $15 million relates to the third-quarter mix. And then we brought down our fourth quarter by $4 million to account for the impact of weather in October. So when you look at the guidance that we have provided, I guess it's on that last page, Page 17 of the presentation, we're very comfortable with that $56 million and it's not materially different than what we had expected 90 days ago when we gave our outlook as a whole. The only implication we have is October.

We haven't closed the books for October, but we think the $4 million reduction is a reasonable proxy for what the implications will be for the severe weather. Because as the chart shows on Slide 13, we had pretty severe weather in October, as well as September. The differentiating factor there being that September weather in the Atlantic was also very poor. So those were the reasons for the adjustment in our guidance and our outlook.

It really hasn't changed. We're still very bullish and optimistic. And as Bill said, even in going into 2019, we continue to be very bullish and optimistic with respect to the prospects for '19. And we think that that $56 million -- $56 million, $57 million is certainly achievable, and we're not overly concerned about that number.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Seth, to your backlog question, I'll answer that. You have to remember that September -- excuse me, July and August were significantly elevated compared to previous periods on our production of concrete. On Slide 13, you see that July is up 21% on a year-over-year basis and August was 10% up. At the eight million cubic yard level, that's over three-quarters of your backlog.

We are being selective. We are pushing prices through. So we've been very selective in what jobs we do take. And in that level, a couple of hundred thousand yards either way between mix shifts regionally or the falloff of big projects or the falloff of significant production months such as July or August to the tune of 100,000 or 200,000 yards doesn't concern me at all.

And we are pushing price through our backlog, which also tends to moderate to some extent. I could grow that backlog to whatever number I want if I want to take all jobs at all costs, but we're very selective in order to drive these margins forward and drive our material margin and EBITDA margin forward to levels that I have indicated in the past that I think we can achieve.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you. Thanks for taking my question.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

OK, Seth. Thank you.

Operator

Our next question comes from the line of Trey Grooms with Stephens Inc. Your line is now open.

Trey Grooms -- Stephens Inc. -- Analyst

Hey, good morning.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Hey, Trey.

John Kunz -- Senior Vice President and Chief Financial Officer

Hey, Trey.

Trey Grooms -- Stephens Inc. -- Analyst

First question for me is, you mentioned you're expecting continued growth in the New York City market in '19. It sounds like you're expecting continued growth in all markets in '19. But specifically around New York, you've talked in the past about this transition to maybe some more non-union type work or union B drivers needed for certain types of projects just given where the mix of projects has gone within that market. Where are we in that process of that transition? And also as you kind of look at the backlog and look at -- into '19, what does that mix of work look like in that market?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Yes. I'll answer that Trey. As far as our transition from A to B work, I would still say it's a work in process and we're making great strides in getting complete coverage in all five boroughs of the lower market recovery rate. It's not complete at any -- by any way, shape or form.

I had anticipated by the end of the fourth quarter as I said on previous calls, meaningful progress in that area. I still feel confident in that and significantly enhanced even from where we'll be at the end of the first-quarter efficiencies and complete market coverage probably by the end of the second quarter next year. And I'm very confident in that transition being undertaken and taken efficiently. As far as the New York market, a couple of things.

The New York market, those five boroughs and now we've opened a new -- well, we've reopened a plant in Westchester County. It has been mothballed for a number of years. That is just starting to take concrete production in the beginning of the third -- in the middle of the third quarter and now ramping up in the fourth quarter, which will give us additional capacity into the Westchester-Bronx line. So there is going to be some incremental capacity coming online for us.

The Fed Beige Book that came out on October 24th, in relation to New York City says specifically and I quote, "In the apartment rental market, Manhattan's vacancy rate declined to its lowest level in a decade". That's the lowest level in a decade of vacancies in Manhattan, which leads me to the underlying belief that there is pent-up demand for additional construction of multifamily in New York. When you look at the Dodge Construction starts, the top five metropolitan areas ranked by dollar amount of multifamily starts in August, so these are projects just beginning, the top five was New York, New York, No. 2 was Dallas-Fort Worth, No.

5 was San Francisco. And the top five states ranked by the dollar amount of highway and bridge construction starts for August were Texas, No. 1; Florida, Illinois, 2 and 3; New York, No. 4; North -- and the North Carolina, No.

5. But so you have New York as the top metro area on dollar amount of multifamilies in August and No. 3 in the country on highway and bridge construction. I am not pessimistic on New York at all with our opportunities to reach a market segment in the non-union area with our marker recovery contract, the opening -- the reopening of our Westchester County plant and the underlying demand in New York that I just indicated from Dodge.

I'm very confident in our prospects in New York.

Trey Grooms -- Stephens Inc. -- Analyst

Great. Thanks for that. And also kind of keeping on the theme of geography here, in DFW, there is some concern that maybe -- that housing market there might be cooling a little bit off of extremely hot levels first off and then also on the non-res side. It looked like that's still pretty good, but there had been some concerns maybe that that could be a little peak-ish.

Given your outlook for DFW and what you see given your backlog, what -- I mean, it doesn't sound like you're seeing any of that or you do -- it sounds like you continue to expect growth in that market as well. If you could just give us any more color on those two buckets, specifically in that market and what you're seeing?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Sure. So I'll refer back to the Dodge construction starts which has Dallas-Fort Worth in August as No. 2, and Texas No. 1 in highway and bridge construction and I'll revert back to the Beige Book published 10/24/2018 for Dallas.

Apartment -- I quote, "Apartment demand exceeded expectations in most major metros in Texas during the third quarter, pushing up occupancy and rents. Dallas economic activity expanded at a solid pace. Healthy growth continued in manufacturing, retail and non-financial service. Hiring continued and outlooks remain quite optimistic".

I am even more bullish on Dallas than I am in New York and I'm quite bullish on New York. In our contacts and our customer base, they still see a long runway, both in residential and commercial and in infrastructure. And I would say Dallas is continuing at a high level and should continue that pace of activity for the foreseeable future.

Trey Grooms -- Stephens Inc. -- Analyst

OK. And sorry if I missed these as I got on the call just a little bit late. So I mean, obviously, you've had a pretty massive pullback in the stock here recently. With that, how are you guys balancing share repurchase versus near-term acquisition opportunities? And then also any -- you sold the lime slurry business in Dallas-Fort Worth.

Are you -- as you look at your asset base, I mean, do you see any other non-core assets in the portfolio or undervalued assets that just don't make sense? Thank you.

John Kunz -- Senior Vice President and Chief Financial Officer

Yes. So I'll get that for you, Trey. With respect to our ability to generate cash flow, that's still in play. We certainly generated meaningful cash flow here in Q3 above what we did in Q3 of last year.

Share repurchase, when you look at where we're trading -- where we've been trading, I think as -- when we're at $30 or more, that's a sub-six EBITDA multiple, you do a forward look on it, that's mid-fives, somewhere around there. So there's not really any better company out there. When you look at our attributes, the attributes the company has with respect to its footprint in New York and Dallas and in Northern California and the aggregates that we have, if there were a company out there that had those same attributes and we could buy it at five, we would. That's why I mentioned the $50 million in share repurchase authorization we have.

It is something that's certainly on the table and that we look at in light of where we're trading because we just think that the value that you get for this company at those levels is probably unmatched by any other company out there. When you look forward, we do want to balance our -- any repurchase activity we want to undertake with respect to acquisitions out there and with respect to any other capital planning that we would have, and we're certainly cognizant of our leverage, but more importantly is our liquidity. When you look at our debt profile, we don't have any current maturity, so we've taken that off the table. We have no maintenance covenants.

So that's not an issue. The third and final leg of that stool is just making sure that we have sufficient liquidity. At $250 million of liquidity at the end of the third quarter, we certainly feel that we have sufficient liquidity out there. But we're trying to balance them all and we're evaluating each one individually as we progress through the remainder of the year and into the first quarter.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

And Trey, to further expand on your acquisition question, we will continue to source smaller bolt-on and tuck-on -- tuck-in acquisitions that bolster our regional footprints and that are creative -- accretive. I think there is a disconnect right now between public company valuations and private companies' expectations that has to be managed to do a deal in the first place. But we're going to take some time now to really synergize and optimize the acquisitions that we've done over the past two to three years and take a deep dive into self-help activities in order to improve our operating characteristics and our margin performance. So I wouldn't be looking for any big acquisitions in the short term.

And likewise, I don't see any non-core assets in our portfolio that we're going to be disposing off in the short term as well. Nothing -- there's nothing like lime out there that I can just peel off and sell opportunistically that's non-core. We're down to our core regions now, but we're going to be looking at self-help activities to improve our margins and fully synergize the acquisitions that we have.

Trey Grooms -- Stephens Inc. -- Analyst

OK. Thank you.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

You're welcome.

Operator

Your next question comes from Craig Bibb with CJS Securities. Your line is now open.

Craig Bibb -- CJS Securities -- Analyst

Hi, guys.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Hey, Craig.

Craig Bibb -- CJS Securities -- Analyst

I wish it would stop raining also.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Then I'd stay here.

Craig Bibb -- CJS Securities -- Analyst

Yes. So it looks like maybe the price issue and the backlog issue are kind of interrelated. So I realize you had 1% price in Q3. Your mix tilted a little bit to Texas.

And then within Texas, you were tilting toward West Texas because of the lower price. But 1% price is still kind of modest. So could you maybe just give us an overview by region? Is anything changing price-wise competitively?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

I think where you have more rational markets that with more publicly traded company competition, we have more opportunity to increase price and they're directly correlated to the more private companies that we compete against, who don't have to answer on earnings calls such as this. They are making lot of money. I mean, at these levels, they haven't made these levels since the last peak and at times are satisfied with these levels. Thus comes our strategy of differentiation on our service level and thus our desire to compete for the hardest and highest profile projects within any region in order to drive margin expansion and thus there is regional aspects that come into play in reporting out our total average selling price.

And it's very complex, it's very interrelated on a regional basis and then at the end added up to show you those 1% and 2% increases that you have. But I wouldn't say there's anything anomalous in any of our regions. I would say the more independent players, the more difficult to raise price on commoditized concrete. Thus our desire not to compete in that segment and the focus on the higher-end projects available.

Craig Bibb -- CJS Securities -- Analyst

OK. And so then, when you talk about less rational players, it's more you're raising price and they're not following along and so it's muting that increase?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, then – and when that happens and that happens all the time in different scenarios, depending on a competitor's lack of projects in his backlog, which is situational, that we will come to a decision point when it's us versus a competitor just like in any competitive situation, and we have to make a decision. I can win every one of those bids if I want. It's just a matter of how low do I want to go to take that project. So there's an art and science into saying, OK, I'm going to have to let that one go, because I don't want it to affect -- it's too low for my margin profile and I don't want it to affect other pricing within the market.

So those decisions, it's interesting. Those decisions are made maybe a hundred times a day around our regions and the collective impact of those hundred decisions is what you'd see us report out on a quarterly basis.

Craig Bibb -- CJS Securities -- Analyst

OK. And so then, backlog, you had a wet September. Obviously, you have weather, volume-deferred but your backlog is only up 2% and that's because you guys are trying to push price and other players aren't following along? And if that continues at that pace, when do you pivot?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

No. I don't characterize that completely. We're being selective in the opportunities that we want to win projects on. July was 21% over year over – that previous July on a year-over-year growth volume basis and August was 10% over.

So we aid into the backlog in the first part of the third quarter. Obviously, September wasn't robust as I've reported out. But the first two months were extremely busy. So -- and as I said earlier, 100,000 or 200,000 yards either way in my backlog, I don't lose any sleep over it.

I look for trends and I'm not seeing any trends down.

Craig Bibb -- CJS Securities -- Analyst

OK. A couple of quick ones and I'll hand it over. If SB1 survives on Tuesday, when do you guys see that in revenue?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, some of SB1 revenue is here already. There had been projects left. And as the months tick by, that is flowing through. On the bigger projects that aren't – that haven't been let yet, I would say 18 to 24 months.

Now the good part about that is that if SB1 survives, and I am anticipating it does, our footprint in California now is much expanded from just a year ago. Just the Long Beach portion of our footprint and the ability to put two million tons of aggregates there into hopefully a very robust transportation infrastructure increase in spending, that's all very, very additive and very accretive to us on an ongoing basis in addition to our businesses in the Bay area that we have had as our legacy businesses.

Craig Bibb -- CJS Securities -- Analyst

So with -- I mean, with the huge year – rock on roads, I thought that was high rent for...

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, roads -- certain roads have -- if it's a federal spec, a very high specified roads as well.

Craig Bibb -- CJS Securities -- Analyst

OK. And then the last one, I'm not sure that people want to see you guys buying back stock until debt is below three to one. But when can you buy stock, Bill?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

I can...

John Kunz -- Senior Vice President and Chief Financial Officer

I don't think he can buy it -- well, I'll speak for Bill. I don't think that he can buy it for a while because he's sold. There's the wash sale rule out there, Craig, that limits Bill's ability to buy until six months after he's sold. He just ended -- well, he just put it -- he just changed his 10b5-1 plan back in August.

So I'd say the earliest he could buy would probably be March.

Craig Bibb -- CJS Securities -- Analyst

OK. Great. Someone else is tired. Thanks a lot, guys.

John Kunz -- Senior Vice President and Chief Financial Officer

OK, Craig. Thank you.

Operator

Our next question comes from Brent Thielman with D.A. Davidson. Your line is now open.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Thanks, good morning.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Good morning, Brent.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Maybe back on the quarter on aggregates. The sales and volume stepped up quarter over quarter 2Q to 3Q, but the margins did shrink. Can you parse out the profitability headwinds there?

John Kunz -- Senior Vice President and Chief Financial Officer

I think it really relates to -- are you looking at it on an aggregates-only basis or are you looking at it with respect to the logistics and transportation costs that's in there as well? Because we're going to have -- you're going to have a little bit of mix impact in there with respect to the quarries that are in Dallas and New York region. And then you're going to have a little bit of mix impact in there associated with the increase in Polaris because as Polaris continues to move along, that will influence the margins. Obviously, we're ramping up volume and margins there. But Q3 impact versus Q2, we had a relatively solid quarter with respect to weather in Q2.

So it didn't really impact the quarries whereas in Q3, it did.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

And one other point of reference. We recognized revenue from Polaris when either at Long Beach, the ships are unloaded and there's an ultimate sale to a third party and similar on our docks in San Francisco and we did have two large ships. I would say they're both about 70,000-ton ships that were loaded and had not been offloaded at times, so they were in transit. And so we incurred the costs of that production of two large ships worth of material without any offsetting revenue or profit.

So at those numbers and those volumes and those capacities of ships, those do have an impact on the number that you're seeing there.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

OK. And then on the ASP, I mean, given the higher-value Polaris product, shouldn't that be growing?

John Kunz -- Senior Vice President and Chief Financial Officer

Well, what we're looking at there, Brent, is we're only counting the ASP from the core and not the landed cost. So if you look at a landed cost like in Long Beach, you're going to get $20. If you're looking at the ASP from the core, you're going to get a single-digit number or maybe right around $10. So there's a big difference associated.

What we're reporting is just the quarry cost, not the landed cost.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

OK. But wouldn't the price of aggregates in California theoretically be a lot higher than in some of your other locations?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Brent, it is higher. You have to -- you have to subtract the transportation cost that has to be incurred. And our price -- remember, we only -- we haven't even lapped our Polaris ownership at this point yet, and we've just finalized our negotiations with Cemex that we're being negotiated through the year. So our price increases that we would have been able to incur throughout other than Long Beach have been basically on hold, pending the outcome of the Cemex negotiation, which has been successfully completed.

Going forward, I would anticipate and we fully plan that we're going to see high single digit to low double digit growth in aggregate pricing in our markets in California.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Got it. That helps, Bill. Thank you. And then how should we think about free cash flow into the fourth quarter? I mean, you have $50 million, almost $60 million year to date.

Typically, I think it tends to be pretty robust in the fourth quarter. Is there any reason to think it would be different this year?

John Kunz -- Senior Vice President and Chief Financial Officer

No. I would expect the same thing. I would look at it in the light of the guidance we provided. When you look at your operating cash flow, we say 50% to 60%.

And then you couple that with our CAPEX guidance, then we say we're going to be in the upper end of our range. So you can sort of back into it based on the EBITDA number that we gave about $56 million sort of back into what you think the cash flow is. We think those two points of guidance associated with the cash flow and then the EBITDA number we give you were really where we would expect it to be.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

OK. And then maybe last one. You made a lot of good color on the end markets, Bill. In ready mix, I guess, from the regional pie perspective from the presentation and kind of based on where you see activity today by market and maybe what you have on backlog, do you think that regional mix is going to look a lot different a year from now? I mean, obviously, you don't make any big changes within the business.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, I don't think structurally you're going to see a change. You will see it because of -- if we get to a normalized weather pattern here, Texas was the most impacted, so I would think there'd be an increase in Texas, a slight increase in New York. And because of that shift, probably a little bit of decline on the percentage basis of California, but only because of weather impacts and our ability to produce concrete, not because of underlying market dynamics.

Brent Thielman -- D.A. Davidson & Co. -- Analyst

OK. Great. Thank you.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

All right. Thanks, Brent.

Operator

Our next question comes from Adam Thalhimer with Thompson Davis. Your line is now open.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Thanks, guys.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Hey, Adam.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

First question, Bill. Can you talk high level about pricing in 2019? I'm just curious if it could accelerate as you and your competitors look to offset some of the inflation?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, our -- we'd anticipate passing through any cost increases that we get in our inputs due to inflationary measures. The 1% and 2% price increases that we're showing now, I think our -- are substandard and I would anticipate that as our backlog continues to wind off older work that we are replacing it with higher priced work. So, I'm not -- we are not fully through our budgeting process yet, but I would expect at least similar if not improved pricing dynamics into next year from where we are ending this year.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

And then my last one. I'm just curious on the guidance for Q4. What you're assuming, I mean, to hit the high end of the range, I think you need volumes up sequentially probably in both segments. Do you think that's possible?

John Kunz -- Senior Vice President and Chief Financial Officer

When you look at -- so our revenue guidance is -- the midpoint is the $388 million. I think the revenues you'll certainly see that. I think that's -- we may exceed that number a little bit to hit the $57 million. But we feel comfortable with both with the $57 million and call it something approaching $400 million in revenue.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Approaching $400 million. OK. So you've got volumes probably kind of...

John Kunz -- Senior Vice President and Chief Financial Officer

Yes.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

OK. So you really see the margins? It's really more the margins that come back sequentially in Q4 versus...

John Kunz -- Senior Vice President and Chief Financial Officer

Yes. So remember what we try to emphasize is the fact that the margins are really compressed in Q3. And so we expect them to improve sequentially and year over year. Because last year in Q4, we had some poor weather as well in the Atlantic region and then we had some worker comp costs that impacted our results.

So if you're going to compare it year over year, we certainly see meaningful improvement there and then even sequentially in light of the poor performance that we've had in DFW and in the Atlantic, we would expect improvement there. So I would expect the margins to improve versus Q3 and I would expect that EBITDA number to improve as well.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

OK. That makes perfect sense.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Remember, Adam, what I had said in my prepared remarks that the September and October companywide EBITDA margin was 15.1%, which is significantly higher than our run rate in -- if you put all three quarters together with the impact of weather. So with normalized weather, we are expecting improved margins in the fourth quarter to allow us to hit our midpoint of our guidance.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

OK. Perfect. Thanks, Bill.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

All right, Adam.

Operator

Our next question comes from Stanley Elliott with Stifel.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Hey, guys, thank you for fitting me in. Quick question, you haven't talked about Virgin Islands for a long time. How quickly can that ramp up and be kind of more of a contributor going forward?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

It is ramping up as we speak. It has ramped up significantly in the third quarter, both from a demand aspect and the actions that we had undertaking previously that were masked by the hurricanes to improve the underlying operational capabilities and lowering their cost of production, both on ready mix and on aggregates. It was an underspent, undercapitalized operation that we bought and we knew that when we bought that. So, we put significant actions in place to improve the underlying profitability in a slow growth market, which we're completely masked and set backwards by the 2 hurricanes.

Now that has run off and there is money flowing into those islands, so we're getting more growth than we had anticipated and we are getting the lower cost of production that we have -- that we had modeled and it is significantly ramping up and will be a contributor to our overall profitability and overall EBITDA as opposed to either at worst to drag and at best just a breakeven operation that we've had since we've owned it.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Perfect. And then can you talk a little bit about the pivot to more of a self-help kind of focus? Is that M&A is expensive? I mean, you're running, you just talked about running 15%-plus sort of EBITDA margins, which is I believe industry-leading for the ready mix business. Did you feel like you're leaving a lot on the table? Maybe I think more color there to kind of help parse that out?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Sure. I don't think we're leaving anything on the table. And our last sizable ready mix acquisition of Golden Spread have been -- in Amarillo is a very, very good acquisition and will be very, very accretive. As far as -- that was in February I believe -- February, early March.

Subsequent to that, there haven't been a lot of opportunities for accretive acquisitions in the ready-mix space. There are a couple one-off plants here and there, but in the absence of significant opportunities and our desire to be somewhat conservative on our balance sheet and reduce leverage over time and watch our cash, I think we do have some self-help initiatives internally, some maximization of technology in our dispatch and customer billing and customer interfacing systems that we want to fully integrate, make sure that we've completely integrated our operations in New York to harvest all the transportation and logistics synergy that are available there that we need to continue working on. That even in the light -- and my whole point here was in the light of somewhat of a slowdown or no blockbuster M&A, in the near term that we're going to continue to be able to drive improvement in our underlying margins. And that doesn't preclude me from finding a good tuck-in here and there on the smaller end and doing those acquisitions, which is our bread and butter anyway.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Perfect. And then you had mentioned kind of before the Q&A part about meaningful revenue, EBITDA growth in 2019. Your labor markets are pretty tight right now, does that, based upon kind of existing employee base it's out there, a contractor base? We're not talking about them needing -- the contractors need into ramp up to accommodate that work, right? You're talking about more of a steady state and that's really more a function of the visibility which you have in the business.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

I would characterize that as yes. And we've put a significant amount of effort and renewed effort and resources both human capital and financial resources into making sure that we have a full contingent of drivers to harvest the opportunities that are out there. There have been times and not so much in the third quarter, but there have been times earlier in the year and last year that we've had a lot of trucks sitting for drivers and we've fully resourced that now to make sure that's not taking place and will not hinder us from growing in 2019.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Perfect. Thank you, guys. Best of luck.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

All right. Thanks, Stanley.

Operator

[Operator instructions] Our next question comes from Scott Schrier with Citi. Your line is now open.

Scott Schrier -- Citi -- Analyst

Hi, good morning. I want to build on some of your comments from an answer to an earlier question about private and public competition on pricing. I'm assuming New York City, the outer boroughs in Jersey that's a market where you're going to have a lot of the private competition and I know with your strategy where it seems like you're expanding into a lot more lower priced on projects where you would have some more competition, it seems like that would be a market where maybe because just competitive, you would need to trade some price and really push the volumes to get the leverage there. And I know your earlier comments, you're really talking about how you're being selective in the projects that you take and maybe growing your backlog at a lower rate with higher-priced projects.

So, I'm just curious, how that overall strategy fits into the New York City market in particular?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Sure. Scott, you have it. You've kind of outlined it in its essence that expanding into a more competitive market in the boroughs, i.e., the non-union market, it's a lower end concrete specified market. So the concrete prices are lower structurally.

Competitive dynamics, lower the price structurally and the trade-off is in a much lower burdened labor rate for your ready-mix truck drivers where the largest cost in New York because the difficulty in delivering ready mix, i.e., you can get to two to three rounds in a day out of a driver, whereas in Texas you can get five rounds out a driver. Not only that, the wage rates in New York being that much higher, you need to make sure that you have efficient utilization of lower cost drivers and it's more impactful than lower cost concrete on those commoditized competitive projects and that's the offset, price versus the cost of labor. In addition, we have significant material cost advantages specifically over those non-union customers -- non-union competitors because of our ability to purchase cement significantly cheaper, our ability to self-consume our own sand and make a margin on our sand through our own end use of concrete as well as our docks in New York City that we bring in stone from Martin Marietta in Canada and our own quarries in New Jersey. Thus, when we do get volume expansion, we are getting additional accretive internal aggregate margin as well as being able to compete for that volume at acceptable margins because our cost to labor is on par with our competitors, thus allowing us to have a lower price.

When you see our average selling prices impacted by that, it kind of masks that we also have lower cost structure and a lot of pull-through on the raw materials as well as the cement purchasing advantage to allow our margins seem to be higher than our competitors in that low end market at the same time saving our A-rate drivers in the somewhat less competitive, because there's a lower number of competitors that can compete on projects like LaGuardia Airport or the World Trade Center. There's only a handful of players that can, one, service them; and two, produce the quality of concrete that is necessary. So we have two separate strategies, both coming out of the same plants with our same cost of materials in New York City. So it's a bifurcated strategy that dovetail and support one another.

Scott Schrier -- Citi -- Analyst

I want to talk a little bit about California and you made some pretty encouraging comments on aggregates pricing there. First, after the negotiations with Cemex, when do you expect to see that start to flow through and then more broadly, as we look at the -- it looks like you've added some labor there for the volumes that you have and how do we think about the incremental margins in that business as we have a little bit more costs and whether there is going to be more start-up costs, whether it's associated with Long Beach or expanding your quarry in British Columbia? And then, I guess, as we think about -- you mentioned you've really strong pricing there, volume is also pretty significant, so just thinking about -- just your thoughts on the price versus volumes conversation as it relates to Polaris.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Yes. You'll start seeing more and more flow through obviously in the fourth quarter, because of our completion of our negotiations with Cemex and depending when pricing actually goes into place for next year, whether it'd be Jan 1 or April 1, whatever the market support there, you will see significant flow through at that point. So I would say at the latest, at the latest significant flow through second quarter of next year and some flowing in the first -- in the fourth quarter of this year and first quarter of next year. As far as ramp-up costs -- the start-up costs, they've already been incurred at Polaris to get us into the excess of the $5 billion.

So some of those costs have already been absorbed into the first -- all of those costs have already been absorbed into this year's results, and we have fully implemented a third shift at Polaris now that is embedded in their operations and that's just come online in the last six weeks or so, but all those costs have been already incurred.

Scott Schrier -- Citi -- Analyst

Thanks a lot, and best of luck.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

You're welcome, Scott.

Operator

[Operator instructions] Our next question comes from Craig Bibb with CJS Securities. Your line is now open.

Craig Bibb -- CJS Securities -- Analyst

Bill, when you started talking about self-help opportunities, I understood you're talking about margins. But isn't greenfield another self-help opportunity for you and are there sand and gravel greenfield opportunities through Dallas?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

We do have a number of greenfield projects under way right now in our Texas markets. Some does support our West Texas operations. A significant enhancement of our Amarillo aggregate operation, a new greenfield just west of Dallas that will support our Eastern West Texas markets and our -- and a little bit of our West Fort Worth markets. That's a brand new greenfield that will be operational next year, so...

Craig Bibb -- CJS Securities -- Analyst

Is that ready mix or sand and gravel?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

That's sand and gravel, both of those I speak of, neither of which are in the -- have been in our results at this point, but we'll be entering our results in the first and second quarter of next year. And that's again expanding our percentage of EBITDA being generated from our aggregates segment, which is one of our core strategies. And thank you for pointing that out on those greenfields, because there's really two of them that are going to be coming online next year. Nothing on the side obviously in Polaris, but meaningful nonetheless.

Craig Bibb -- CJS Securities -- Analyst

OK. And then how about port or terminal opportunities for Polaris?

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Well, right now -- and we are doing our budgeting, and we said we're going to end up this year in excess of $5 million. That will go up next year from that as well. Then we start hitting our limits there at around six million tons until we develop the Black Bear quarry, which we're going to start, which we -- in the game of permitting now and we'll be starting to develop toward the middle of next year, but won't be operational next year in any meaningful way. But as far as additional port opportunities, we were picking and choosing where to send that Polaris material now.

The demand is so strong with our increased permit at Long Beach. Our opportunities in Hawaii and the strength of our business and our customers' business in the Bay Area, both on the east, west, north shores that we're going to be bumping against that high end of capacity without having to look for opportunities in Portland or Seattle, which we will do on a long-term basis as we expand Black Bear and get that entire operation up into the eight million ton category, but that won't be happening next year, that's in the out years.

Craig Bibb -- CJS Securities -- Analyst

OK. Great. Thanks a lot.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

All right. Thanks, Craig.

Operator

I am showing no further questions at this time. I would now like to turn the call over to Bill Sandbrook for closing comments.

Bill Sandbrook -- Chairman, President and Chief Executive Officer

All right. Thank you, Lindsay, and 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 fourth-quarter and full-year results with you in February.

Thanks, again.

Operator

[Operator signoff]

Duration: 72 minutes

Call Participants:

John Kunz -- Senior Vice President and Chief Financial Officer

Bill Sandbrook -- Chairman, President and Chief Executive Officer

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Trey Grooms -- Stephens Inc. -- Analyst

Craig Bibb -- CJS Securities -- Analyst

Brent Thielman -- D.A. Davidson & Co. -- Analyst

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Scott Schrier -- Citi -- Analyst

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