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U.S. Concrete (NASDAQ:USCR)

Q4 2013 Earnings Call

March 06, 2014 10:00 am ET

Executives

William Matthew Brown - Chief Financial Officer and Senior Vice President

William J. Sandbrook - Chief Executive Officer, President, Chief Operating Officer and Director

Analysts

Seth B. Yeager - Jefferies LLC, Fixed Income Research

Sean Wondrack

Yilma Abebe - JP Morgan Chase & Co, Research Division

Matthew Dodson

John Messenger - Redburn Partners LLP, Research Division

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the U.S. Concrete Fourth Quarter and Full Year 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the conference over to Mr. Matt Brown, Senior Vice President and Chief Financial Officer. Sir, please go ahead.

William Matthew Brown

Thank you, Karen. Good morning, and welcome to U.S. Concrete's fourth quarter and full year 2013 earnings conference call. We appreciate your interest in U.S. Concrete, and we are pleased to share our results with you. Joining me on the call today is Bill Sandbrook, our President and Chief Executive Officer. Before I turn the call over to Bill, I would like to cover a few administrative items.

Information reported on this call speaks only as of today, and therefore, you are advised that time-sensitive information may no longer be accurate as of the date of any replay.

We will discuss certain topics that contain forward-looking information. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements related to projected revenues, volumes and pricing and other financial and operating results, capital expenditures, strategies, expectations, intentions, plans, future events, performance, underlying assumptions and other statements that do not relate to historical or current facts.

Although, the company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions that are discussed in the company's filings with the Securities and Exchange Commission.

If you'd like to be on e-mail distribution list to receive future news releases, please sign up in the Investor Relations section of our website under E-mail 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 and Presentations.

Please also note that you can find a reconciliation to non-GAAP financial measures that we will discuss on this call in the Form 8-K filed earlier today and in the Investor Relations section of our website.

Now, I would like to turn the call over to Bill Sandbrook, our President and CEO, to discuss the highlights for the fourth quarter and full year 2013.

William J. Sandbrook

Thank you, Matt. 2013 marked our first full year with our new management team and new headquarters in Euless, Texas. We started the year with some very aggressive goals for our team and I'm pleased to announce that we delivered both operationally and financially, capitalizing on many of the opportunities in our core markets. Although much of the fourth quarter was challenging from a weather perspective, we were able to grow volume, pricing, revenue and EBITDA in both of our reportable segments, Ready-mixed Concrete and Aggregates.

In addition to our improvements in operating performance during the fourth quarter, we successfully accessed the capital markets and issued $200 million of senior secured notes, combined with the refinancing of our ABL facility, which increased the commitments under the facility to $125 million. These transactions provided us with additional liquidity that will allow us to further grow our business by capitalizing on the burgeoning demand in our core markets and take advantage of strategic opportunities that we identify.

We continue to be encouraged by the improvement in our construction markets. Our core markets are in key areas of states, including Texas, California and New York, that collectively represented over 1/3 of the national ready-mixed volume produced, total population and overall U.S. GDP in 2013. In addition, these states represented over 40% of the total growth in U.S. GDP over the past 2 years. And according to the Portland Cement Association, represented over 55% of the total growth in ready-mixed concrete volume in 2013.

The fourth quarter outlook from SMI, a provider of research to the engineering and construction industry, projects a 7% growth in construction in 2014, with similar growth rates through 2017. We anticipate our core markets will continue to capture a higher than average portion of that growth. The strength of the improved construction markets in our key states of Texas and California has been well documented, and we are fortunate to be participating in this growth through a significant portion of our overall production capacity. It is no surprise why we are so excited about our business, our people, our prospects and our opportunities.

With that, I would like to turn the call back over to Matt to discuss our fourth quarter and full year results.

William Matthew Brown

Thanks, Bill. First, I would like to summarize a few highlights of what was an extremely successful year for U.S. Concrete. Then I will discuss our fourth quarter results in a little more detail.

For the full year, total revenues from continuing operations were up $84 million or 15.8% over prior year. We saw improvement in both of our operating segments. Ready-mixed Concrete revenue increased by 15.1% over prior year and Aggregates Products revenue increased by 19.4% over prior year. Revenue growth was driven by both volume and pricing improvements. Ready-mixed Concrete volume and pricing increased by 8% and 6.6%, respectively, year-over-year. Aggregates volume and pricing increased by 5.6% and 12.0%, respectively, year-over-year. The combination of pricing and volume improvement drove operating leverage in all aspects of our business.

Our Ready-mixed Concrete gross profit increased $18.7 million or 28.2%, on a 15.1% improvement in revenue. This represents a 160-basis-point expansion in our Ready-mixed Concrete gross profit margin for the year. Our Aggregates gross profit increased $3.4 million or 61.8%, on a 19.4% improvement in revenue. This represent a 610-basis-point expansion in our Aggregates gross profit margin for the year. This is particularly encouraging in light of the stress that the weather put on productivity and efficiency during the fourth quarter. This also shows that we were committed and able to effectively pass through increased costs in Cement and Aggregates in the form of increased pricing.

Adjusted EBITDA for the year was $48.3 million, a 92.1% improvement over prior year. Adjusted EBITDA margin was 7.9% for the year, compared to 4.7% in the prior year.

Now, I'd like to discuss our fourth quarter results in a little more detail. Total revenues from continuing operations were up 12.1% year-over-year for the quarter. Ready-mixed revenue increased by $13.9 million, or 11.4% year-over-year, due to a combination of higher volume and higher average sales prices per cubic yard. Aggregates Products revenue increased by $1.3 million or 15.1% for the same period. This marks the 13th consecutive quarter where we have reported an increase in consolidated revenue on a year-over-year comparative basis.

Ready-mixed volume for the quarter increased by 2.6%, compared to the fourth quarter of 2012. We are pleased to see that Ready-mixed volumes have now increased year-over-year in the last 10 consecutive quarters. This is particularly encouraging given the challenging weather hurdle we overcame in Texas in the fourth quarter of 2013. We had abnormally wet and freezing conditions in Texas for several weeks during the fourth quarter of 2013, compared to the fourth quarter of 2012, during which we experienced some of the driest and warmest conditions on record in Texas.

On the price side, we realized an increase in our Ready -- in our average Ready-mixed sales price of 8.7%, from $98.81 per yard on the fourth quarter of 2012 to $107.36 per yard in the fourth quarter of 2013.

Our Ready-mixed Concrete raw material spread increased $2.95 per yard to $50.06 per yard in the fourth quarter of 2013, compared to 2012.

Our SG&A expenses decreased by $2 million during the fourth quarter of 2013, compared to the fourth quarter of 2012. As we have mentioned on previous calls, our SG&A expenses during 2012, particularly in the fourth quarter, were abnormally high due to transactional and one-time expenses that did not recur during the fourth quarter of 2013. As a percentage of total revenue, SG&A expenses decreased to 9.7% in the fourth quarter of 2013, compared to 12.4% in the fourth quarter of 2012.

For the full year, our SG&A expenses as a percentage of total revenue decreased from 9.8% in 2013, compared to 11.1% in 2012. We continue to focus on and aggressively manage our SG&A costs, but understand that we may incur transactional expenses in this area as we deploy capital in support of our acquisition strategy.

Consolidated adjusted EBITDA increased by 51.9% to $9.1 million in the fourth quarter of 2013, compared to $6 million in the fourth quarter of 2012. Adjusted EBITDA as a percentage of revenue was 6% for the fourth quarter of 2013, compared to 4.5% for the prior-year quarter.

During the fourth quarter of 2013, we used cash from operations of $2.7 million, compared to $18.7 million generated from operations in the fourth quarter of 2012. The decrease in operating cash flow year-over-year for the quarter was related to changes in working capital. We implemented an aggressive trade working capital management program in the fourth quarter of 2012. This program continued through 2013 and has become a standard ongoing best practice. These efforts generated an initial increase in cash flow related to working capital changes in the fourth quarter of 2012.

For the full year, we generated $24.2 million of cash from operations in 2013, an improvement of $13.5 million, or 125%, over 2012. For the fourth quarter of 2013, we spent $6.6 million on capital expenditures, up approximately $2.7 million compared to the fourth quarter of 2012. The increase in capital expenditures was due principally to higher spending on plant equipment and improvements to allow the company to meet the growing demand in our markets.

During the fourth quarter of 2013, we closed on 2 separate but related transactions that significantly improved our liquidity and overall capital structure. On our last call, we announced that in October, we amended and restated our asset-based credit agreement, which among other things, gave us improved pricing. And upon a qualified refinancing of our 9.5% senior secured notes due 2015, increased the total commitments under our credit facility to $125 million. On November 22, we announced that we closed on the offering of $200 million of aggregate principal amount of 8.5% senior secured notes due 2018.

The proceeds from the offering were used to repay all of the outstanding borrowings under the ABL facility and to redeem all of the 9.5% senior secured notes due 2015. This qualifies as a refinancing under the amended credit agreement, and resulted in an increase to the commitments under the credit agreement from $102.5 million to $125 million. These financing transactions were a tremendous success for the company and provide us the flexibility and liquidity that will enable us to execute our strategic financial growth.

The book value of our long-term debt, including current maturities, was $214.1 million on December 31, 2013. This included $200 million of senior secured notes due 2018, $11.9 million of equipment financing for new mixer trucks and $2.2 million of other notes payable. As of December 31, 2013, we had 0 drawn on our credit facility, with $11.3 million of undrawn letters of credit outstanding. This left us with $88.3 million of availability as of December 31, 2013, compared to $52.4 million available as of December 31, 2012.

Our availability is net of a $14.6 million availability reserve for outstanding letters of credit and sales tax and other reserves. It is also limited by the eligible amount of our accounts receivable, inventory and rolling stock, which was $102.9 million as of December 31, 2013. We had $112.7 million of cash and cash equivalents on our balance sheet, for a total liquidity of $201 million at the end of 2013.

Now, let me turn the call back over to Bill.

William J. Sandbrook

Thanks, Matt. We are very encouraged by the improving construction activity in all of our markets, which as I mentioned earlier, are a major part of the U.S. economy and a large driver of the economic growth we're all seeing. We worked hard for the last 2 years to improve our balance sheet, build a strong team and put ourselves in the best position to capitalize on the opportunities we believe are only beginning in our markets. Our Ready-mixed backlog at the end of the year was over 4 million cubic yards, which is 31% higher than at the end of last year. To wrap things up, we're very excited about the level of construction activity we are seeing across all building segments in all of our markets. We look forward to the disciplined deployment of the capital we raised last year in developing further accretive expansion opportunities. We're very proud of the teams we have built across the country. And their hard work, dedicated efforts and commitment to operating excellence are delivering on our collective vision of making U.S. Concrete the preeminent supplier of Ready-mixed Concrete in the United States, while simultaneously delivering superior returns to our shareholders.

Thank you for your interest in U.S. Concrete. We look forward to reporting on our future successes. We would now like to turn the call back over to Karen for question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Seth Yeager from Jefferies.

Seth B. Yeager - Jefferies LLC, Fixed Income Research

A couple of backlog questions. When we look at the backlog being up over 30%, how much of that roughly is contractual, and then, based on your LTM pace, it's roughly 3 quarters, how should we think about any changes to the cadence of shipments and just a sense of the end market mix there?

William J. Sandbrook

I'll take that, Matt. Seth, on our backlog, this is a forward backlog that does span multiple quarters and multiple periods. We have great visibility to that in the six-month period. I would estimate it's about 75% contractual and 25% would be the estimated backlog from current customers on their current projects, which wouldn't be signed up with contracts, but we would be supplying a housing development, for instance, and we understand the remaining amount on that project. As far as the mix, our mix remained fairly stable for 2013 versus '12. And I would estimate that our future backlog would be representative of where we ended up in 2013. We shifted a little bit more into commercial. And as I've said in previous calls, our strategy is to be -- to focus on commercial developments, that would be housing complex -- that would be office buildings, big-box developments, retail, that type of thing. And we've also focused a lot on residential. Residential remained fairly stable for the year, at about 21% of our production. We did decline somewhat in streets and highways and other infrastructure, and filled that in with additional work in our commercial space, which is our higher margin work.

Seth B. Yeager - Jefferies LLC, Fixed Income Research

Okay. Perfect. That's very helpful. And then you guys had some nice improvements throughout the year in gross margins. I would imagine you had some impacts from days lost due to weather. Can you just help bridge the year-over-year decline in gross margins during the fourth quarter?

William J. Sandbrook

It would be totally related to weather, Seth. Our pricing is very good, as you can see from our earnings results and our earnings announcement. We lost approximately 30 days or a portion of 30 days in Texas during the quarter. California had very good weather. New York was about comparable to other years and had actually a little pickup because 2012 was impacted by Hurricane Sandy. Our biggest impact would have been weather in Texas in October, November and a big ice storm at the beginning of December. The margin impact of that was about 100 basis points, we feel, and totally weather-related, not operationally related.

Seth B. Yeager - Jefferies LLC, Fixed Income Research

Okay. Perfect. That's very helpful. And then just moving on to pricing, you guys had a nice finish to the year. Can you talk about the announcements out there from the cement suppliers in your regions and the type of price letters you are putting out. What sort of material spreads, trends, should we anticipate, or do you guys have a specific target over the next couple of quarters?

William J. Sandbrook

Yes, we're not going to actually put a number out there for our target on material spread. Obviously, it's our intention to pass on our increased costs. It's been well documented by the cement players in the public space, as they have letters out effective April 1. We're still in the process of negotiating all of those. There's no doubt it is going to be an increase in cement pricing because of demand characteristics. I don't know if the entire -- if their entire announcements are going to hold. We do negotiate that fairly strongly. But we have been very successful in the past 2 years, as you can see in our results, and anticipate similar success in passing those on to our end users as well.

Seth B. Yeager - Jefferies LLC, Fixed Income Research

Okay. And then, just last one from me, on the acquisition front, can you disclose the price and multiple you paid for Young Ready-Mix, possibly, and just any thoughts around what you have in the pipeline currently?

William J. Sandbrook

Seth, yes, we're not going to talk about the multiple. It's a fairly small operation, one plant, one ready-mixed plant operation in a rural market in Texas. That follows our strategy of continuing to focus on those rural Texas markets, which are very vibrant right now because of all the different oil plays in various regions of the state. The pipeline is, I would say, extremely healthy. We have active prospects and negotiations in all 4 of our regions.

Operator

And our next question comes from the line of Philip Volpicelli from Deutsche Bank.

Sean Wondrack

This is Sean Wondrack sitting in for Phil today. The first question builds on one of Seth's questions about how increases in cement and aggregates in relation to ready-mix. You went over the cement side, can you talk about the ready-mix side, what you're seeing in the market and what you think you'll be able to pass along?

William J. Sandbrook

Well, you can see that we were up 6% year-on-year. As I've said in the past, the way we price cement, to a large degree, project by project. And as older projects roll off the backlog and are completed, they are being replaced with forward price and forward booked orders. And there is a steady increase of higher-priced projects entering production phase and lower-priced projects falling off the production phase throughout the year. So it's not a one point in time, i.e., April 1, our prices are going up 5% or 10%. It just doesn't work like that. And we have been successful in the past at least 24 quarters of dropping off the old projects and replacing them with the new projects that are covering increased material costs.

Sean Wondrack

Okay, great. And how confident are you that your margins will be able to stay the same or expand over time? It sounds like, with some of these older projects coming off, you might not get the margin benefit until a little bit later in the year. Is that the right way to think about it?

William J. Sandbrook

For project to project, correct. But remember, this is a continuous process. There are projects coming in every day and there are projects falling off every day across our portfolio, because we have such a large footprint. So it's more of a linear, slow linear growth, the 4%, the 5%, the 6% increases that we have reported over the last couple of quarters. So you won't necessarily see spikes in that trend. At this point in the cycle, aggregates are going up, cement's going up, admixtures are going up, labor's are going up, but it's happening through the entire supply chain and the final price of construction is going up as a result of all that.

Sean Wondrack

Okay, great. And with that weather impact from Texas, the 100 bps on that impact to gross margin, do you have any idea what that flow-through to EBITDA would have been?

William J. Sandbrook

Matt, do you want to handle that?

William Matthew Brown

Sure. So I would say that without the weather impact, we would have seen almost a percentage point increase in EBITDA margin.

Sean Wondrack

Okay, great. And then just as a follow-up, obviously, there has been a lot of news around fly ash or coal ash and the way it's going to be regulated. I'm curious, are you guys able to sub fly ash into ready-mixed concrete, and if so, do you think this will help margins over time?

William J. Sandbrook

We do use fly ash wherever it's economically available. It's not available in all areas of the country, due to transportation costs and limitations. We look at, we continually try to expand the use of fly ash in our ready-mixed concrete. Remember, it's a cement substitution, so the differential between the price of fly ash and cement is what you drop into your material line. I wouldn't say that we're going to double the use of fly ash in the next 2 years, but we have, again, focused on increasing our use over time.

Sean Wondrack

And what is that, like a 20% to 30% contribution to the overall mix or...?

William J. Sandbrook

It depends on the market or region, it could be up to that at times. And it depends on the jobs that you're using it on. It's not a really good answer, it's kind of a blend of all the above.

Sean Wondrack

Okay. That's fair. And then just one last question and then I'll get back in queue. Given the cash on the balance sheet, could you just prioritize the use of cash between acquisitions, greenfields investments in your fleet and other?

William J. Sandbrook

I would say all 3 are equally important. We're going to deploy that cash where it generates the greatest long-term return. We are replenishing our fleet after a couple of years. We bought approximately 80 new and used mixer trucks last year and plan to do the same this year. Greenfields, we just greenfielded a sand and gravel operation that we announced on, the beginning of the week, on the Red River in -- on the Oklahoma-Texas border to supply the DFW market, which is currently experiencing a shortage in sand. And the Young Ready-Mix one was a small bolt-on acquisition. So the answer is they are all equally important to us. We're going to deploy that capital where we can make the best return.

Sean Wondrack

Great. And then do you expect -- how much do you expect the spend to replenish your truck fleet over the next 2 to 3 years?

William J. Sandbrook

Well, we are, we're not adverse to buying used, as long as it's in good condition, in order to conserve our capital. I would say a good run rate on truck replenishment would be about 60 to 80 trucks a year, but on spend, it depends on the mix of new versus used.

Operator

And our next question comes from the line of Yilma Abebe from JPMorgan.

Yilma Abebe - JP Morgan Chase & Co, Research Division

Couple of quick questions. And one, perhaps if you can, obviously, as you look out the next 12 months, what parts of your business, residential, commercial versus public works, highway businesses, do you think presents the outside opportunity for you as you look out to the next 12 months?

William J. Sandbrook

I think residential is going to be more plentiful. Residential in Texas, for instance, increased significantly. It went actually from 20% of our mix to 32% of our mix in the Dallas/Fort Worth market,, and 27% to 30% in West Texas, because of just the vibrancy of that economy. So I would believe that residential is going to have a little bit more play in Texas. In New York, New Jersey, D.C. and California, we're solidly in those downtown construction markets, that are office buildings, retails, some multi-family residential as condominiums are being built. But as you see the gross macro trends, obviously, residential is coming back and it's coming back strong. And while we don't necessarily focus on that, we will use our excess capacity on that, wherever available.

Yilma Abebe - JP Morgan Chase & Co, Research Division

Okay. And then, I guess, and related to that, as you look at your primary markets, which markets are you seeing the most upside, one, and then two, any markets are becoming more competitive this quarter versus the prior year?

William J. Sandbrook

Yes, I'm not going to answer that for competitive reasons. I don't think I want to be public with our forecast for various markets on a competitive basis, or on a growth basis. Let me just answer it though, that all 4 of our markets are very, very vibrant. And they are following the national trends that are well-established. And they are following similar -- we are seeing similar activity that the previous announcements from other public companies are seeing.

Operator

And our next question comes from the line of Matthew Dodson from JWest LLC.

Matthew Dodson

Can you kind of help me understand the pricing in the backlog, compared to the $107 you just kind of reported in the fourth quarter. You've done a great job in pushing it, and I assume it's continued into the fourth quarter, is that fair?

William J. Sandbrook

It's fair to say that the trends remain intact.

Matthew Dodson

And is it fair to assume that if that remains intact, that the spread in the backlog remains intact as well?

William J. Sandbrook

Correct. But, yes, with the caveat that we have not completely locked in our material costs yet. This is the time of the year, February and March, that there is significant negotiation going on between ready-mixed producers and their suppliers to see what the final outcome of the price increases would be.

Matthew Dodson

But you guys have always done a fantastic job of getting in front of cost escalation, why would this year be different?

William J. Sandbrook

No, it's not different. That's as I answered at the beginning, the trends remain intact. So we have assumptions in that backlog. But nonetheless, I just needed to caveat that we don't have contracts on that pricing, but I have no reason to believe that we're not going to be successful, again, in passing on whatever we have to accept.

Matthew Dodson

And then can you run over your spreads again, the dollar and the percent in the fourth quarter?

William J. Sandbrook

Okay, Matt?

William Matthew Brown

Sure, so for material spread, these are percentages: Ready-mixed material spread was 46.5% for Q4 2013 and that compares to 47.5% for Q4 2012.

Matthew Dodson

And how about dollar?

William Matthew Brown

Yes, I'm pulling that up. So Ready-mixed material spread on a dollar basis, in Q4 of '13 was $50, basically $50 even. In Q4 of 2012 it was $47.11.

Matthew Dodson

And can you kind of talk about -- you've always mentioned CapEx running around 4% of revenue, is that going to be the same in 2014 or do you see that kind of bumping up?

William J. Sandbrook

It's going to bump up a little bit. Remember, our greenfields we count in our CapEx, so we did have some Red River Aggregate spend. And we are buying additional mixer trucks, more than we had anticipated, in order to meet demand. In an ideal world, well in the original plans, we would buy new mixer trucks and retire the old ones. Right now, we are buying mixer trucks for incremental volume. And we do have some capacity improvements in our plants, specifically in California, where we have a very, very, very vibrant market that we're trying to keep up with. So I would say in the short term, it could exceed 4% marginally, but our long-term trend, goal, is 4%.

Operator

And our next question comes from the line of John Messenger from Redburn Partners.

John Messenger - Redburn Partners LLP, Research Division

Just a, I think I've got 3, apologies, guys. First one was just, and you've answered, I think, part of this already, Bill. But just to remind us, the material spread number that you gave, is that a 100 bps kind of deterioration in 4Q, and I see, again, you put that back to the weather to some extent. Is that -- am I thinking about that the right way around? And just on that particular input pressure point, I appreciate you're going through negotiations right now, but on the key input of cement, do you expect more input cost pressure this year in terms of the increase compared with last year, given where the industry utilization has moved to, or do you think you're going to get a broadly similar outcome?

William J. Sandbrook

I think that there -- because of in various markets, simply in Texas, and the demand on cement, there is pressure to have a larger increase this year than last year. I don't think that same dynamic is in play in the New York markets. We are basically done with California. And I would say our increases there are similar. So our portfolio is so broad and we negotiate with so many different vendors, it's hard to give one clear answer. Because as you know, we are a regional-based business and each region has its own market characteristics and supply chain dynamics. So I don't like to jump around or avoid this question, but it is much more complex than just a simple, yes, demand is up, so prices are going up. I think we're going to be -- we are happy with where we are coming out. We anticipate a good outcome for us and a fair one for the cement producers, where demand is up. But I'm fully confident in our ability to pass it on.

John Messenger - Redburn Partners LLP, Research Division

And just on the -- I was thinking the right way around there with that material yield point, Bill, is that correct? And was that just because of actually weather, sales occurred given the weather impact, that you had a bit of a dip there, or is there something else we should be thinking around?

William J. Sandbrook

No. You're absolutely correct. There's nothing else going on behind the scenes.

John Messenger - Redburn Partners LLP, Research Division

Brilliant. And then the other one was just on the Aggregates line. Obviously, that, was that again down to particular contracts, because you had a much better 4Q, when we look year-on-year, and obviously, you had pickup in the sales as well. Was that just actually, you had particular contracts, or was that again, just avoidance of some of the weather pressures elsewhere?

William J. Sandbrook

No, I think we've significantly focused on our Aggregate operating segment over the last couple of years since I've been here. And this is a culmination of that focus, both in better and lower-cost operations, in prospecting for new customers with the products that we don't self-consume and a very vibrant market for sand in the Dallas/Fort Worth and Northern Texas market. The combination of all the above allowed that outperformance. There is no one specific contract that bumped that up. No one big road project or anything of that nature. We're very happy with the performance of our Aggregate business and are very optimistic to continue this improving trend in our Ag segment.

John Messenger - Redburn Partners LLP, Research Division

Got you. Just finally, on working capital. Just to understand a little bit more in terms of, obviously you made the point, it's very much a 4Q, something that was started last year, and therefore, we're seeing the impact in the fourth quarter of this year, in terms of year-on-year. But among the majors, we have seen the guys who've got relatively fixed capital employed, the only thing they can play with is their working capital build, as you are well aware. So at the end of the year, we've had companies coming back talking about inventory build or losses because of, basically, stopping production to try and drive down their inventories. For you guys, is this more around the debt or in the receivable line, or just trying to understand a little bit more what actually has been going on here. Because clearly, you don't have a lot of stock, so it's a -- is it all in the receivables line that we are thinking around here, or what is the working capital shift that's been going on?

William J. Sandbrook

Matt, do you want to take that? It's not in the inventory, John, it's in the receivables and payables. But Matt, you can elaborate on that.

William Matthew Brown

Sure. Yes, it's not inventory at all and it's primarily payables. So cash provided by operations in Q4 went down by $21 million year-over-year. And actually, there was a driver that accounted for about $23 million decrease year-over-year, all due to payables. And there were 2 components to that. The first was that during the fourth quarter of 2012, we instituted a new working capital management program such that payables went up significantly over the quarter. Remember, we're comparing a change over the fourth quarter to a change over the -- fourth quarter 2012, to a change over the fourth quarter of 2013 here. So the change in payables, the increase during 2012 fourth quarter was large, as compared to kind of a normalized increase, or decrease actually, in payables over the fourth quarter of 2013. So that phenomenon, just because of improvements in working capital, which will continue going forward, account for $17 million of the decrease in cash provided by operations. The reminder of that $23 million I mentioned, which is $6 million worth of it, basically, was an accounting nuance such that at the end of 2012, we were borrowing because we had very little cash on our balance sheet and we were drawing on revolver to make all our payments to suppliers. So because of that, any outstanding checks at the end of the year were classified as accounts payable. So that accounted for about $6 million of the delta. Whereas in 2013 at the end of the year, since we had a large cash balance, we were paying our suppliers from cash on hand. So that's really what drove that difference.

Operator

[Operator Instructions] And I see no additional questions in the queue at this time. I'd like to turn the conference back to William Sandbrook for any closing comments.

William J. Sandbrook

Okay. Thank you, Karen. Thank you, everyone, for participating in the call this morning and for your support of U.S. Concrete. We look forward to discussing our first quarter 2014 results with you in May. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.

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