VMC - Earnings call transcript Q4 2017 | Vulcan Materials Company

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Operator

Good morning and welcome to the Vulcan Materials Company Fourth Quarter 2017 Earnings Conference Call. My name is Lynette and I will be your conference call coordinator today.

As a reminder, today’s call is being recorded. At this time, all participants have been placed in a listen-only mode to prevent any background noise. A question-and-answer session will follow the company’s prepared remarks. to Director call Vulcan of like host, to Materials. I’d Warren, Mark Investor now, turn over the your And Relations for Please go ahead.

Mark Warren

our everyone. your to you earnings in morning call. Good Thank participation for

this call McPherson, John President, Joining me Vice today are Hill, CEO; Executive Strategy Chairman and Financial Tom Chief and and Officer. for

materials I website, vulcanmaterials.com. our would begin, your we at to call attention posted to Before like our quarterly supplemental

XX-K. and regarding risks projections and Relations You include can homepage. Investor our the and most access company’s the that reminded uncertainties. in earnings the which results this statements, our including in Please recent comments may risks forward-looking SEC Form are are presentation be to Report reports, Annual company’s release detail from subject described These on

to financial will non-GAAP management measures. Additionally refer certain

GAAP reconciliation the find and earnings financial You both related presentation. information at release and these supplemental can measures our a of our in end of other

call turn over to Tom. like I’d the Now, to

Tom Hill

our joining And Mark. thank you, for Thank you all for us call of today.

several and and the Georgia demand was fundamentals, This Texas We Aggregates prior I'll mix. of on the over pricing consistent improvement region, key the was October's was up the declined on daily points pricing When visibility High and due were shipments demand full-year and important USA mix with that catch the our shipments adjusted shipments improved underlying XXXX. quarter was impacts. aggregates In coastal in slight shipments the to costs gains quarter weather financial growth recap Hurricane fourth on in year. Harvey's declines for the encouraging. lingering for strong. in prior begin This full of pricing reflected continued single-digit double-digit distribution to with this posted December pricing through November, following need and year. passed year. year, the pattern impact improving And expectations tax good those acquisition, good, a The X% contrast, impact quarter. to overall This geographic for be of Aggregates of the in reform, have The X% course, and to cover. topics and was to California continue adjusted freight freight largely is demand over in job states. the the in couldn't delayed product immediately. recovery quarter on due in work. the X% and in storm

into challenges, headwinds expectations aggregates converting temporary gross were million. these and quarter We strategy as $XX unchanged. didn't solid Now revenue pricing incremental remain growth perform the profit. approximately longer-term profit gross Several and well by in in margin impacted our negatively

two the XX% diesel In of headwinds, and more to class rise related fuel. we ships the to unit new costs the price mix addition transition There loading Panamax in efficient cost storm-related for experienced movement. ship additional barge were to a and

certain to during operations related headwinds. acquired year. temporary absorbed also We view We expenses as the these that we

very rates safe the pleased expect ended a improvements our year longer-term margin year I'm the this typically company's and history. performance that have through compounding throughout that to with flow We return the we in XX-year best recovery. delivered unit we the

XXX,XXX in one every than for accident worked. less employee Our hours was rate incident XXXX

to our goal our commitment years. several facilities already zero and the and give of local past Now XX% I is approximately our experienced our injuries the of workforce. zero credit in are having leaders there great

new operations also jobs of creating they was delays. they bad and was of periods. larger bluntly some were that more construction large major adjust to aside back I our funding, A of activity significant delays. XXXX In in public businesses resulting will and frustrating. very disrupted a continue a bit customers projects of higher by weather prolonged in the further safe Now, The XXXX of ways levels moment weather. ways stepping and compounded were a experienced in world-class challenging, start number frustrating pace extreme complex important Yes, to our for say a other in for DOTs year. our achievement there performance, mix cases, and setting events,

to XXXX our in was hardly into highway X%. and infrastructure customers we, expected less Going and instances, instead by Last by but I they about X%, than shipments least, increase declined some difficult satisfied throughout It with shipment other clear pressures. that cost the were year, to be became with performance. quite operating own material delays much operating our and conditions going of unusually

of view. not in well our very enough teams others well, my Some adjusted

doing room have we whole, we’re a to and improve as so. Taken

XXXX from core grew While the improved. continue drivers materials real underpin now and in and our capabilities our for of operating our get portfolio dynamics asset that fundamentals The there Pricing wins. strategy to better. were to demand continue is strengthen, some frustration And we had also our stronger. long-term

improve over the tax and have year. all cash Our sheet position and past to our flows continued balance

continue our private most we runway see in to demand across recovery materials with long strong Regarding for demand markets. a

backlogs activity, side, construction On XXXX [permitting] and household growth in the private employment. saw related contractor notably formation, continued [ph]

demand. funding. should South and All project of private across the beginning like XXXX, the with grow the more serve leading demand year. and looks throughout demand the construction road we Index, Momentum we're points fundamentals entered indicators. our of to for year whole. in also suggest representing of and continue have confidence a into of Dodge These towards markets turn past faster states other nine meaningfully we've demand is raised Carolina this Vulcan-served and XXXX pipelines nation ABI, as The to encouraged factors long-term XX% strengthened growth. what than With what long-term seeing sustained revenues Customer by Public a taken the recovery actions now extended over in period Tennessee in finally an long-term public by strengthened other California,

start of backlogs public return shipments. year-over-year related have a conversion seen to backlogs continued growth order infrastructure to have construction Our activity public we into importantly, these signaling And recently to work build. better

remind certainly the But our of to multiple is at take to markets, years levels represent these rising XXXX plan. higher front reinforces a activity expand sales any and and there quarries. relatively between pricing in This growth. other markets sustained ultimately factors higher customer such and public should up In will and for clear. supported be point contractor our period, fundamental will the many mature further as reported periods diesel, it margins, prices, by slower to of ramp years around cement of price several be diesel and other long-term fully expanding for going and imbalance climate certain I'll Now, is given an distribution of Improved visibility end Aggregates inflection costs, that average a new higher by construction our But supply. of costs for confidence, faster California, help available the impacted funding. will remains growth. moat demand positive pricing you economic distribution mix timing growing and trend

asset the over end supporting A welcome portfolio growth. December. this, Our year long-term meaningfully prime the Aggregates to we of of past strengthened has Vulcan Aggregates example our USA the at further team USA,

already part table. new network organization are acquired We with and quarries have brought the fit this nicely. family. ideas new Vulcan our colleagues The pleased that yards of is to now the our rail And really

offerings We Carolina. South Georgia, in Florida customer expect synergies product significant to and and car growing in plant relationships realize production, rail utilization,

expect million EBITDA growth beyond XXXX operations contribute [$XX] We to [ph] approximately in these and to that.

addition to $XXX And In important major Shamrock, continue but and of during longer-term combined wasn't captured. producer are only Georgia particular, was a ready-mixed in completed asphalt certainly seven the acquisition LoJac million. a transactions DOT recover and of acquisition the as distributor projects year, year markets the Area. up We Bay in note material another as a As the it synergies our Nashville. I ramp largest This the in of concrete would value at producer leading XXXX. of

M&A three projects years we've strengthened. internal growth has billion over Yet our growth. $X.X time past Over invested balance in long-term sheet our complement during this to the and

increased recovered The we by and million. expense flow has retain. improves ratings, intend million, enacted but has grade XXXX, our by credit which long-term trajectory. interest debt cash law $XXX recently also Reform and earnings total we to investment current our declined Tax $XX In cash Our

to total from effective We rate XX%. drop our expect XX% to tax

more stronger in valuable grew XXXX. and company Our

looking We top continuing looking growth XXXX. in toward improvement we earnings forward to and line are – are

I'd investment plan. Now, and hand like John? guidance to it John to off XXXX our recap to

John McPherson

Tom. And Thanks, morning, everyone. good

let appendix to First, quarter. that reported X financials point me out in press bridges the the adjusted for release EPS

off provision items The answer tax that have common impacts We one-time in of costs. these $XX in any was margin refinancing excluding the Well, or Aggregates happy regarding segment of you have headwinds course and of followed out. items for adjusted be not Tom debt our practice mentioned tax the example to questions the million line.

of in saw $X.XX, XXXX release per guidance, between our and for over you EPS. XX% for of earnings growth approximately As $X XXXX’s calls our adjusted share

including EBITDA Aggregates and and of expect We billion the between of $X.XX adjusted billion. $X.XX USA impact operations

For Aggregates segment between shared outlook our in most volume consistent store X%, and X% call. expect of recent we we our growth same with the generally

Continued the drives growth. expansion of private expected year-over-year of activity construction most

Although leading year. solid the will strengthen experience and in markets for growth term the very certain construction indicators intermediate current to longer public to continue

tons. in for to to Inclusive Aggregates Our we current of digits public overall the the of shipments is XXX be USA, low for only Aggregates up shipments end users XXXX. million compared expectation to range year to at single total expect the

patterns of to large trends present the comparisons timing difficult difficult the predict, three past given and projects years. weather volume the first be Although the more the should quarter can of

higher first were example, XXXX than quarter approximately For shipments XX% in XXXX. in

be we average improvements higher flow compounding build pricing climate longer year has The no As the selling term. change been price across Aggregates throughout to to prices fundamental to levels remains Vulcan's we constructive up for strategies our same-store X%. price expectation and markets, to most Tom costs or noted, diesel through X% expect the over as to There expect pricing. pricing

cost seen in expand digits modest Aggregates consistent and mid-single partially We These digits and segments the profit double XXXX. by repeating in pressure. by expect results We gross not project combined. in to grow gross earlier certain consistent unit profits in the the to in offset volumes with higher recovery are cycle concrete asphalt headwinds our with margin

Our million, as percent of a earnings decline to $XXX and modestly and approximately revenues. assume to EBITDA guidance growth SAG

We certain continue development activities administrative will capabilities. talent service while and streamline in customer investing to

$XXX noted current and include rate management other tax of XX%. an $XXX expectations, million, operating refinance and management as Our effective maintenance CapEx a interest excluding of -- of expense approximately million, current book charges, Tom

current benefits Our cash or qualified expense the from rate investments. immediately capital tax further ability to

cash taxes $XXX million approximately of currently higher for prior to credits excluding For cash tax related This benefits years. the have $XX million, under tax we been law. refunds projection XXXX, of and would project the taxes prior

and XXXX remain strong in can we in profile as overall capital see, improves beyond, generate solid said, you free flow of the As business. to That unchanged. cash further centric priorities aggregate allocation already law the expect generation change cash our tax our

maintenance we've continue funded growth to and our credit our And to will productive we appropriately simultaneously reinvest There's an in profile. investment-grade XXXX, the and physical standing. maintain credit capacity plant. We solid flexibility improving overall financial intend meaningful while of

During to X this from years. X.X%, rate XX our weighted while from the weighted increased debt X.X% declined our period, average of interest has years to duration has average

expect We dividend. and the maintain sustained to progressive

Board you recently to may the a raised the XX% quarter. seen, As $X.XX dividend have

invest activities. through in and M&A to both long-term continue will internally growth, We

we use $XXX will as For the positions projects, growth strategic XXXX, means return invest to reserve we quarries in in And and expect shareholders. share cash including internal repurchases a to new excess opportunistic and Texas continuously of evaluate million California. to

and will focus of the units margins, Aggregates’ synergies you. acquisitions on bolt-on we back from will remain acquisitions. internal capturing during well primary projects, our fully Tom, disciplined executing growth building pursuit continue Although, to our recent XXXX,

Tom Hill

Thanks, John.

As into with we're our XXXX, pleased we very portfolio. move

always strategic order portfolio. to and we're this swaps divestments investments, Now, in strengthen evaluating

year well XXXX. very Our this ramping into aligns current growth and footprint with profitable

California Aggregates demographics, superior For we're role new important on exciting there. are like growth, growing fronts intermodal and same holds formation. supported these favorable tremendous and demand significantly strong and base increased in will Arizona, seeing an is transport results USA with will market. our and spending, what also California are example, highway Acquisitions population such us. both and and position we employment recent our from value. LoJac here. play benefit like for by We development, reserve in a It California as household funding, public southeastern particularly Texas long-term the and port

of permitted is, the growth quarry the In example, additional reserves a Area. the from Bay have are a Area footprint Shamrock. L.A. the Fresno a new that reason that We reserves, major we've over strong decade. huge increased through is Napa is Diego offerings our Central we’ve reserves to for state high-quality added where the see we've the market public we San on in and and are private of expected is also In North construction added not In the Valley, serve growth construction where uptick lacking. will where and Bay next only to product fastest our

are large supplier in We state. of also the the asphalt

You California. excited can our see we're future why in about

even after markets normalized and Houston and DLT positions, and more rail many and which other defense up, that XXXX should the in federal destined Texas operations our tough quarry, come. bodes for strategic from future. investment invest happened grow this Houston patterns for continuing the to our with serve improved lettings years budget challenge Virginia Texas serve a spending. deal well our to Our areas. government during in should year benefit Mid-Atlantic things recently with a Summing other major market business weather to coastal announced and We're of in exposure overall federal including a The benefit year will

across permitted give of We in construction the and operations our the major Our environment world-class and leads strong top in well-positioned performance and began growth keeps better more acquisitions large new markets Backlogs of Tennessee to ended infrastructure new the with improving. healthy passed on sheet way build continue bills. and serve new already were even to as footprint. bolt-ons, accomplished benefits and sites in the a reach We markets. greenfield customers. demand good began Altogether, things Carolina reap completed highway strategic in private strength year the on sales the our world-class seeing of kick these key balance us to strategic performance. we South in XXXX. operational for work California, to Public all state

and operational We of excellence strength exciting volume at are expansion. margin future an looking growth, pricing

happy to questions. And us. your now Our most I'll people are to eager make of the ahead be the of promising year take

Operator

Thank Instructions] you. question from Seth SunTrust. We'll your take from first [Operator Rohit

Rohit Seth

help public on my for the angle guidance, me can reconcile on volume taking Thanks contract Hi. question. then and there’s… in awards, you strength just with the your if Curious growth cost expectation your

Tom Hill

digit… expect …highways, we mid-single would

Rohit Seth

sorry? am I

Tom Hill

a really going In On that in ten comfortable highways, and nine I all think expect comes kick we just say projects the country facilitate off because these kickoff would that feel we -- that that of jobs, and mid-single-digit, thought or their DOTs and mature, up how be the with I’d to as money seen new we're large the able spending we were to states beginning ramp we’ve really 'XX. around be to onboard. in that as spending

yet. a we On capital the single-digit. flat infrastructure lot other the of haven't think call low but really it there, to There's just in projects I kicked funding

Rohit Seth

cost Got were angle, you. And that on one-time then the number where a just there's in of XXXX. costs identified

anticipate you much XXXX curious to in that be guidance? of the in how Just non-recurring

Tom Hill

in XXXX with kind you cost the why and talk happened about plans. John, then answer what don’t of I'll

John McPherson

Diesel way. million a cost ultimately that long the that for Diesel term. that’s but storm Gulf to lot we a that in our kind over out southern good of A $XX continue related, give but repeat just margin quarter negative it, the product shipments quarter. was the of and XX mix related feel was same through of will thing in passed of for price $X to million and areas pricing expect in that to in of headwind coastal million mix to really $X patterns you a rise, and and Coast, Rohit, work called start. Houston the don't is that's time around so, or I'll get about a about may largely of business

repeating margin same really So, the don't in a timing see issue. the it’s way, impact

distribution those tied Some again repeating of see to and certain that in that related same in that see transportation about total. made $X number to put was in expenses operations. and some where acquisitions year a the $X Again, need we we expenses then we in that way, had don’t don’t about the million repeating, necessarily was money million

they're is able again activities, finally wouldn't were accruals related was year, liability see about related, of through. working Some new and increased there that should million some $X of our of work is through that barge in storm this way. There some then inefficiencies truck be to of to transition, we same ship those recurring that and transportation the

growth think to your unit our imply and this year, So, I digit on our out we question in double Aggregates guidance, Aggregates for our would segment guidance margins next in called segment.

that cost the tell line we've But in in with done is I we’ve before, really of recovery. earlier done Some you it's stuff recovery.

If incrementals recovery. distorts some reflect reflects Agg guidance little of midpoint higher USA we you recovery cost guidance bit were a the to incremental on in same-store all say, and I doesn't takeout fair XX%. that kind the XXXX. a than items That our think which basis, they're incrementals at But it's the see the of complete certainly to faced reflects the of cost look and you'd our

Tom Hill

Yeah, I out in with back the and while but would they're strategic a widens diesel economic we’ll facilities. our us add our to -- they’re distribution price cost moat that them cost and time advantage around that there get it to the

got over and that gross us comp months operating real. convert them efficiencies on of issues, think take we a be with trend internally tell few did folks give and We any are in But say, revenues incremental I last unusual that mentioned, profit things those mean would and The changed. spite storms we way hadn’t to hey, that and you cost tough those some a that it but one-time and experienced an special they're I opportunity our not in job we do nice issues John they've look saw incremental with cost we other ways. cost over the like and done focused we've timing had the got really are and weather that to to ability our tough. to improving time got three the I

sleeves some I think problem addressed and we they their have. really up roll that plants

think the downtime. I I in improving acutely team our right of entire And we talent think on throughput has areas. and put been most challenged focused some the

margins of on the Now, year-after-year. that. do on in always people will this. do improvement deliver continuous will of They’ll I look, discipline seen execute you've have and they us our also confidence our, that

think good plan perspective, So, executing. we're going into and operating got an a I from XXXX,

Rohit Seth

Fantastic. that The cost your distribution or cost that [both] quarries you mentioned, your plants, is distribution are is yards internal and between they your [ph]?

Tom Hill

Yeah.

that I think, would I us it's impact coast deliver, expensive. which very expensive big to is Houston, first a a storm allow all, the is, well, specifically us. call fully of both. problems our the of wouldn't load Mississippi out chunk it's the on to were on of There lot very ships that that in were to

again, the a get So cost diesel and cost in passed the strategic will one-time of is advantage. that

Rohit Seth

you. you. on. Got it Thank pass I’ll

Operator

to Group. from Thompson next Thompson Kathryn Research move We’ll

Kathryn Thompson

for you Thank taking today. my Hi. questions

follow-up your certain in in but you bit little of guidance EBITDA assuming also guidance could would was contribution, a you bolt-on that what helpful terms more. string Implied costs Just a outlining year? year normal and be recurring related a pulling is implied not acquisition USA, the have the also on for storm and it Aggregates outline the

Tom Hill

diesel delivered some or distribution first a quarter repeat. On of a core working expect on to it's take in out $XX that XXXX, to in give because we Nashville for costs through then a some some our you at bolt-ons perfectly downstream see there's rest We've kind operation and related great it but we that's tightly work expect in maybe a up when expect quarter, the ships look very deploy well little the those bolt-on Again, that some Kathryn they're we're again do, the pass We'll separate happen in excited little to number, to run million way. within the those we of core quarter the with I markets it capital third that's can bit you a as out into be in million But whether costs, you little look a storm a the and because difficult markets. issue, have $XX to timing bit not with. they you're further on we show we it's the of trending again of to from pricing; bit a Bay this does wouldn't that for the you all are drag number we're but acquisitions know. say to the this about $X of hard or little second. margins. business expands a integrated bit example will lag that to Kathryn, quarries that, if from around costs, that second well would separate net those have really businesses will given million, really is And positive and very start, as that I’ll still and way bit. and we at know performing economic familiar actually in and little would a price rough is a the repeat. I mode rest pretty pricing smart got in through quarter a rough related returns, But a the it integrated thing Area you

Just question timing. of a

XXXX. outlook So, I while they our return our it's margins before, you've us that flow-throughs don't little bit, the of unit imply a guidance full think a internal Again, Kathryn. improved headwind plans deliver question and hope we faced our your that necessarily and on say I up imply catch answers kind in and to every seen to fair

Kathryn Thompson

an the is So type XXXX-only a would that to a bolt-on to acquisitions? little $XX just bit, even result in XX-ish this would number past maybe science results? real – your to cost was – and estimate something similar knowing range it's the storm-related may fair impact to the closer perhaps be once that combined, million the again in be a And be say art that as Yeah. it

Tom Hill

it, said. necessarily Kathryn point don't me Particularly call advantages I Yeah. let's art some much cost this, storms that business business. impacted margin let my Again we in Coast impacted of And view, right, that, not and recognizing, the our as because just that so Gulf off. it for From of to way there's you aspects really given know call Mexico think the our broad you and service that of most and some have the shipping it region. profitable our that's

a bit in our we saw in sales operating throughout at So, and really at little of sales cost and in mix very and pricing portion cost business. a in profitable and distribution

you're don't way. to of broad margin I So, as think only hits opposed in a impact to cost because impact easier pretty think business – the far hit I as a but it's it off little think

John McPherson

plan, would that that at that and if much to through. you double-digit add flow returning to you see higher that I our John Yeah, that, us look margin growth mentioned

to as for a is diesel actually while, so catch a will end being us headwind distribution, will advantage while that to that. little we be up going So, with up

think I about very So, plan. good feel

Kathryn Thompson

they Okay. big in last Where will when of roughly cost And year, is weather with those now. coming cost transitioning, kind – do now of terms you're you online that side question the operational, the on excluding is a impact? just be recognized of fully stand but it currently the on the shifts you're we ships clean-up transitioning two

Tom Hill

second quarter and the this one quarter in at in would third point. expect the one We

Kathryn Thompson

since in we we a California Southern could spend can you of year. appreciate chance time a to that rail private you. over view market, certainly time California, the Thank some market and the in your Southern had on side? market moving earlier explore bit of market perhaps tightness And you a little of advantage the the Okay. the Aggregates bit supply And spent in and public about more construction to but this California

Tom Hill

just in of going know North regain just highways give of growth into I’ll XXXX. market really healthy for and but California, as grow residential XXXX, excited all, both going were you couple low is in a really state's but actually to California to – solid, not off XXXX, continues and a a non-res highways California, about healthy we're XXXX. The think We really that big I coming the comments into would XXXX in very the in I Southern Yeah. going and first beyond. -- you footing see is is it's private into its market XXXX, XXXX, And to XXXX. really on

with working quickly Shamrock, happy in big big, a we've which get are on California. And up been side our on demand a to growth fairly starting on in we're we'll it. the in us, a is prices products constructive California starting raise little to how very and rising these this, very, construction years. pricing environment bit we're side improving It really of structured. backlogs with the a for Demand our and Our Fresno, have highway actually, of the our acquisition asphalt new think, is is and have growing a for see we over and we're very to Northern infrastructure that rapidly through quarry products, that's now liquid costs, I and customers’ some market with XX and all for

we're see you So, can why California. excited about

Kathryn Thompson

is limited in is not – that somewhat or help given how think us advantage that that rail you the Southern And is California, much frame that? necessarily network for do maybe an you

Tom Hill

of up the part Rail very No. movements I I'm in difficult. question. missed are sorry, California

marked and years. Francisco, us best will a and the San have to as few markets L.A. people run of in in. reserves over and the have Our Diego, San of position advantage in to truck market the position, the It truck out going for move we we're give largest reserve out rail next

Kathryn Thompson

you much. very Thank Great. Okay.

Operator

Shmois Garik to next move will We Instructions] [Operator Longbow from Research.

Garik Shmois

Hi. Thank you.

and around synergies provide synergies could of you timing ramp, Aggregates, if how a should months? and to let’s from include the EBITDA XXXX the about the say, the contribution wondering does much little of the how the more think million months amounts $XX we context Just XX XX bit over next

John McPherson

call to this $XX come. has comment. is overhead in synergy what could this Hey, cost for Garik will a some capture, year capture, and we but to million Tom suggest lot about relatively yet of of we bit little synergy synergies I'll would say will The synergy There’s discussion start it. little synergy

as So, that we'd sorry And million acquisition. with of XXXX. I I'm the in pleased a expect $XX number very meaningfully higher we're think to in be XXXX

a customers a can a oriented, rail a that them. at that from attractive are are to time. it business synergies, XX they a synergies. level fits range very full logistically But is as their take number that oriented of got car pretty good set XX looking very reaching this would products, and service broad one of reaching just I You capture operational utilization mix to of well new to map tell things different months with and over they're with that's things that it’ll fully say, things to are commercially very such with very

So, to answer your it. million synergy of didn’t lot have is in question a that $XX

Tom Hill

that quarries we railyards yards the of service lot for splits. how and optionality sale in and as in know Florida, really Yeah, I would really bit South our a once East both expands in this service we it’s offering it you acquisition existing it optionality, and and to Florida, Agg a that, Carolina, that granted product service how how footprint rail legacy add given and that and requires asphalt of South our and Georgia expands our – into provides USA production our – we quality little optimize for both

So, over John synergies to months. said, really we’ll XX XX this as next the those recognize

this board, has how I -- pleased positive Well we’re we people businesses integration which Vulcan come an with have -- impact very on gone. immediately. talented they’ve the and making really was think run

assets, lot to all a this, are that came talented about folks the And that you in we so these we’re – know our family. going we but some with talk really so we as that’s well welcome pleased

All of existing complements of our -- USA and is the this markets markets, and Georgia footprint got growing of this is to this Ag our remember and Florida. of fastest you've new two

really it's well. far, So going

Garik Shmois

will out XXXX in those XXXX? like comments recovery, to any in over softer sounds wanted I appreciated? markets two more you shift you Houston It how play on they've Illinois, to that you. thank Okay, you been for markets for know, expect two just but Houston, granularity for be different poised reasons; you’re the to

Tom Hill

call those Yeah, different. I would very

Illinois think to going struggle. continue to I that is

circumstances of well, of executing I Illinois, the – what a good the think disciplines in on operations and they offered. on and they've really their their what tough from had of ability at sales, their in face can to really abandoned the both market, been best been getting all, job the and efforts team

just it is to Houston times price would starting tough Houston impact tough most up know tough really you place but a we've the to economics low duty with on held as just with tell in we But would Texas demand I about with we’re everybody you fine. picking base we of climate. just a has as Houston We storm is a tough pricing been – – tough The I Houston, starting made that Texas going slammed with to of starting I think we're down hurt increases and the in top of storms, public perspective in So highway you very From and than in Non-res that a -- we've out see but – sink I res we all in in is Houston is in pick -- of got there. up. good, Houston Houston from to be turn spending. the also. see is actually the tell Texas because we Illinois had really talked hurricanes come with including, in think Houston expect April. overall in all-in-all, I would lot

So, where think XXXX. see I be to made Houston will turn and much a continue tough, Illinois better the is has going it's- to one,

Garik Shmois

last the And question just CapEx you. growth on just project in Thank step-up included in for assuming year $XXX the the million Fresno then increase. Okay. is that

Just when the to elevated accretive should growth context and this start just while around up be talking the we not wondering, foreseeable you for maybe these of in ramp if some step-up we’re expect wondering in John to I growth see to or volumes the CapEx future? to could I'm when CapEx start run should should we if about see yet XXXX earnings? projects an rate And provide payback some and guess

John McPherson

in of in second, cash put total. free for think it it Garik, a flow context I'll about just Yeah. okay, to that's the

– million a to about than to just about less down and it's point the side, not the two growth I I'd years. been we've $XXX take of because million our investing pretty million this So, next plant three $XXX for That's year. step just is or that from our because heavily in physical last a $XXX year actually little operating out maintenance going CapEx bit

need, that's so million. just And our $XXX

for was need is than lower XXXX cooperating in is maintenance a CapEx XXXX. in our it bit So,

growth So these that's instead buying wouldn't you quarries, as was these of I Two, if about until talking it's it think one. M&A, were finished, building if quarries. of we know just we it be the capital would

think would good we $XXX as a closing transaction the chunk end of if were a I it at that million XXXX. of So, were

building of new until you takes we're see that that quarries really result out And because won't really some and time. XXXX some

said some look develop. and Now, quarry coming just we the making. that right fully us developments very and California, when plus attractive, of market years the to is in these to for point time hand look a places now time in at margins sense I there would timing such good in do is it's to your They're Tom The Charleston. developments, distribution fruition Texas, the such at other points new are things. are cases our as new and hand underscore returns these what have return, are like XX made the some now been The in our to

elevated the expect at favorably fruition. to degree Garik. new of the average I timing world don't excited your about this compare those you it. necessarily a M&A confident run-of-the-mill will see were is coming same returns In Again, when growth returns. forward So, to moving internal CapEx particular to level we're that developments today's these in quarry it, of

$XXX not sense. a So, any permanent elevated not bit million I'm more over XXXX, is maybe little the there but do, in saying in to elevated

Garik Shmois

best luck. you. of And Okay. Thank

Tom Hill

Thank you.

Operator

Phil to Ng next move We’ll from Jefferies.

Phil Ng

Hey, guys. that backdrop to seeing? diesel the little more opening demand The the get side kind mid-single-digit to on price where there increase and of you on when offset And a is, is expect the inflation the guys have pricing do upside just given Is to side guided catch an you you're of things? to. up spice

Tom Hill

changed, Tennessee the I into from climate XXXX we've actually executed pricing improving. do pricing we'll about two be – were through year we now build over we normal be you, it would the on good. see Virginia last want quarter customers see, in some reasons has had know different and be to years pricing actually markets, And good down think go the one not about the can Georgia is thing will would visibility timing private that mid-year. They in is color Texas improving. increases, on XXXX visibility, the discussions expect in earlier, reason talk pricing Carolinas, seen for and then you’re If I reinforced some what some areas, fourth in to we see as side, long been I we for all good, five throughout we've I the in by that will think is continued list. highlight and bid we and in in public the its January the you our our that see whether in put would would on we’ll market philosophy California DOTs. we'll April as we'll then in see see and and February, the are that which few tell talked the the would in surprised better on – steady its price some really strong, fixed Their January, different have the is it’d see we've year. with high going not the what start plant everyday some will have be we’ll second be as see see they we ours, that very than some you the doing be a remember work Florida coast If throughout you'll really to And campaign I will the kicking build confidence is April side a you day for

our pricing So, continue discipline be successful. to

gone – our only up back prices our on years, with stronger look have markets. have XX% we’ll the from pricing in and and different you the in plans five execute environments confidence the side public If kicking I

Phil Ng

Okay.

Tom Hill

at that's actually a concern the quarry. Yes, has the comments, economic pricing the on in inflation, of things with where of climate around now. think timing is I'd improving, worried that right I people exposure you inflationary because history rise the is might way of the And issues mentioned our industry, quick think pricing that our a they I but centric the expand input doesn't mentioned industrials. a be think of pricing like same us rock of my a local you kind to Aggregates as encourage mind couple business level say, the to keep kind about competitive main under not climate cost there quarries, – motor diesel there's set big actually inflation and improved inflation, don't and the dynamics long-term that we about about have you just other Keeping

that way. it put Let's

Phil Ng

the teased think Okay. your of have we that, it's cadence That's about in prepared I been then that appreciating back EBITDA seasonally the should think of about year quarters one-offs years. dynamics the two because some remarks the should as contribution just just John had last throughout because reverse in helpful. incremental the some How and And this over well the half? one year you you XQ might the last

John McPherson

longer the to has three years volumes side and volume stronger of there's here a new last that And is term people, but Yeah. at QX think total. important or seasonality We patterns. just nothing Yeah, surprise it's higher been just want an remind not reminder the proportion on there’s a be in look a been annual I you would for two if this point. that typically

side want difficult QX QX out are and QX So then I and patterns get couple to a very from just think cadence year and QX be comps, it's easier QX. to worth in the said, works if I the got you it and in the spread kind harder weeks in of certainly, the more to in it's don't a and from in the we'd throughout pricing as last the of particularly you comes few but a it given almost Aggregates of could easier some rest cost years Tom be comp the the side, March. year. and a and will, do QX Those expect business. comps volume the to over the through just think the bit just of calling normal give and difficult the given I down because lot certainly, EBITDA a way, in a building misleading, it throughout year should

Phil Ng

just one That’s helpful. last me. And really for one Okay.

which obviously, to this the based some timing some single-digit of in, positive way is think Just of trajectory these XXXX on low state level in see spending is a good acceleration? growth the kicks could initiatives as on growth quite we stats and about public Thanks. or

Tom Hill

– that they they call growth we build be work. digit to think, There a of in as then, layering talk not finish handle I going wait they I bills. top the another on and start you'll as mid-single just state-on-state about both would to be and states on a and one be first on of within They're one lot see effect with all, will DOTs highways mature will work interstate, where job bring able this.

up starting follow top in will with -- and also start of South years like Tennessee, which then and you're where Georgia After with it layer that. they're they're to Carolina their it, a years, jobs and places California follow up on are of ramp couple they then, spinning two the already Florida top of mature going Texas it. layer is you'll and see California, North Carolina or up shipping So, and on or you'll money to

next year, the XXXX, So, up expect while is years. this roughly it XXXX ramp I highway it's would – for five mid-single-digit to XXXX, in

Phil Ng

Thanks. helpful. Very Okay.

Operator

Thalhimer to Davis. Thompson next Adam from move We'll

Tom Hill

Good morning.

Adam Thalhimer

taking Hey, good the guys. morning Thanks questions. for

Area? On for a the specifically the your you with Shamrock thus outlook kind your about little experience can then, acquisition, Bay of far and talk that also asset

Tom Hill

with marriage with the business, management teams. well Ag got how – well, Shamrock team would so much was well-run a you talented, comments but must also management of very business. about first they've tell like very is and a how we Yeah, that my and folks so, USA, not been quickly I the really the all just very our it's and that integrated And good

we're that they're So, well. performed It highways original board the Concrete both very aggregate thrilled our distribution plan. integrated with see us. on to very, acquisition is and Ramus have has That superior performed We good in about side so performed both market the not years, of it's talked we the as probably growth on res area -- so non-res, and has that very well. private couple for much but another

to public the side and kick couple in expect California perform well more years a continue actually of Shamrock it But the and in when starts team even proud team. of know very very in the in to We up. you I'm

Adam Thalhimer

Do And M&A year? you last it this are thoughts industry could high-level year? what that. be think it on active your as was for Thanks Okay. then as lastly,

Tom Hill

and M&A going on. It we've active, got is

we’re always things. on working know, You those

and in. possible. it's unique You it to about And it to really integrate discipline to all us, fit overpay. synergies what as going we know going got know hard you are get – then us? you to say tucked fast and go are you’re and buy all you it back are for to how buy time, what as we So I this it's this once to Does going then don't about you what the but to market pay and it, what and for you in and work get it, it

John McPherson

point the having and the possible set. passed opportunities not that you of if you're if terms things get in going market. to it's just benefits loose, the and behind taxes same our M&A tax away that out done really being about you’re because raises in for not is, this discipline, need will, at careful we time, we But lower it competed very really of One reform internally, some shake is talked thing

disciplined. So, you've really got be to extra really,

they deal. deal talk about we deal, know a good good taxes great make don't really a make or lower but deal, here You can a bad

to previous bit our have actually our and been to and some about you that little and returns about core regime. business higher So, of in mention not don’t focused under capital, given $XXX we’d but a cash nature I say know business in entry dynamics a a is after-tax the the focus Aggregates think ask difficulty different the would inflation, lot it of want all. just the in we new I at you think might about industry, than expect our time tax get taxes that. we pricing it's on completed way this, the would And know on over on million XXXX so flow

M&A anything but have So, internally more to disciplined. environment the lot be we need if excess we cash and

Adam Thalhimer

Thanks, color. Great Okay. guys.

Operator

We’ll move from Goldman next to Sachs. Revich Jerry

Tom Hill

Good morning, Jerry.

Jerry Revich

if you new addressable quarry what wondering much in the about facilities much to result the capacity to And ramp can are your up talk your the towards expect you talk organic development, across utilization I’m Hi. how ramp new investments? about you over of timeframe could effectively towards Good levels facilities you as up levels how footprint. do adding you morning, existing see reserves on or in a the reserve become position guys. will of the the

Tom Hill

XX, tell to XX we're operating of out Kind And them. it's million individuals. won't tons. XXX you months I'd expect I would call take because I projects combined before over those

And but time big, And in, that only capture these not, hand. too markets. capture. is to these are can't this big that markets our into and capacity would, is take grow the It's it’s folks remember demand out just to there we’re going are some there. growth both already make which design Now, is to and it's serving to not build to demand start remember not – that of – other the to

them got our the an out we'll and the into rest we local permission tuck build both and takes communities to in operate. a have projects would working think decade network. permits them in these we those the great make it sure with a I them and job California of done have that to folks have John like And acquisition, over taken mentioned, integrate just our as one time Texas So of much and

Jerry Revich

relative you that comment you Okay. on folks how transactions can USA if that to Aggregates you then to see wondering is XX% have had? you prior synergies folks That's have equivalent I'm up USA stacking on target historical standalone, And XX% on targeted, of Aggregates to helpful. EBITDA

John McPherson

and repeat I’ll I’ll Jerry, things about already USA. we've Aggregates said start

synergies I range to of think because and the not operational just number you give Very because just confuse which – but $XX I’m synergies not kept those. don't synergy but being costs what just synergies, to the just guidance improvement, of we've done. going broad of is those and mix commercial of a not not million logistics, breadth end toward opportunities, year. this of I the want nature But overhead, of this all of we just not specific the higher deals probably

can as with that think to I But a happy we're of exciting capital. it will bit capture. little longer take certainly, very and you imagine, deployment

Tom Hill

we map that the their at Florida. into of both for easily, so look you overlay match has had they if new synergies how all what Carolina, and and in offering this is South Georgia Yeah, in and it some that match in how Florida, and the mix and rich slide, can the markets that you product we the quarries filled with what just then overlay is I one this just because new our you gaps vice would us, shows from the and to you because operations add rail shift – and up, with railyards and those marry gaps we versa, existing network them

been together XX the we got all succeed integration to how to and as over earlier, is that months. working not synergies some on fun – fun that, particularly will stagnant. it it. – is as a to that all been So, over be I next watch rich it's John with one to said, is this take are that And but or them team our folks year said and that the They understand and mature, time it's put will and it so and watch our

John McPherson

cetera. just things years, the also know out as may project happening positioned making of have others some but to where of like be a at well intermodal cetera, looked Georgia the we developments have you've also I it's DLT et against of do, specific this over rose period Jerry that’s really which et will plans

I'd XXXX not the accidental. So, really it's an issue not issue, really And good not a even XXXX a – that's but positioning. aspect attractive it's of and or say transaction

Jerry Revich

And layout. Okay. is a X then helpful lastly slide

for So the faces it have tough decline obviously been guess past say the tough about are to quarter trying market behind first has condition two like everybody. year-and-a-half. is in When year-over-year comps, side first quarter, the I the the the pretty backlog years folks a for question the on volume feels been that and to reason building you highway you

that guess And to do indeed construction for down is the how season? conviction the quarter we so, industry if the in first reaccelerate I get it

Tom Hill

me clear, Let the there. demand be is

came volumes we where dry quarter, in growth. saw November-December fourth sun the and was you down volume a out, double-digit were the had October, As and bit our in little it

there. a work some That is new combination is the is So, private the work of demand demand the side, it there. delayed in. DOT kicking There's core on

a combination. it's So,

you first there. demand be always about as is this about being ship first which quarter in quarter the is days – is let's clear This the to at about real look dicey. So, is this, the

not then good If you in had good back and very as a particularly quite and XXXX quarter first we XXXX, at again XXXX look weather.

as that. and XX to is I be there you be demand Is degrees good sunshine is the XX first and November is because to say know going the So, December snowing talk don't we evidence underlying comps about it of and quarter going really it's we But degrees. dicey it always going to or or so? when if always be think is

John McPherson

up trying to a it's pick anyway. first specifically just lower prior to be we're that in that than guidance remind to kind clear that try dependent give us not would quarter the will and and be to Just tougher trying QX be it of in it inappropriate We're any for because year. will March, the is so specific everyone even but simply comp, whether volume suggest on

tough So, the – things uncertain. there it's which Tom's as I points tougher done. is be the and comp work key take both a is to more

Jerry Revich

you. Thank color. the appreciate I

Tom Hill

Sure.

Operator

We'll from next hear Stifel. Stanley from Elliott

Tom Hill

Good morning.

Stanley Elliott

the Good are maybe you a question. the in first of guys. Thank little we're in thinking the to allowing a softer some growth about parts a kind the comparisons? to looking half just the past? year digit half easier of granularity, as to the in up that than my of moving terms be fair at the second incrementals going with bit it and unit for big I get ramp of we've double of to level catch of that Quick but different and had to price all kind morning, year the assume set taking margin up of year. in allowing question the hate Is it's we’re for

Tom Hill

timing and a I'll work. pricing the start the year talked through it of different the said bid and reasons would some John and we about in have particularly normal sure accelerate pricing it pricing would I'm will of but to add then that with for this, we campaign as as markets

the So, get in tougher, they be to go little we would what easier year. quarter going saw a second first Again, third. build expect in and wet the the normally comps are in price for we weather to with the

when Illinois think improves or that kicking some is if that in with and August it February improve discipline, place to – like January particularly will I Virginia. in than June we're in and we're that in and comes July it it’s mean also. operate you're I and to easier also think obviously in and weather operations I

out see mentioned up. we've ordinary I think have to that think mind kind of an And keep would And don't the reasons into that's of as -- with – those to tick of period shift, stuff, the lot industry growth. how and we I don't year. shaping to pricing out up – period throughout that of is a for you're of shimmer some coming in see sluggish a build first normal the other I quarter growth add there. and year the into than a going just whole we're anything So, sustained of what to to returning

You’re bit operating little going the year. a throughout better to leverage see

probably. kind really as it's think of you'd I expect So,

Stanley Elliott

the kind And for That’s Yeah. then does think improved fair. cash with for levels of this -- more along free new how -- an the the flow you a kind you to the those to – change anything just change of should the debt all, and it near-term or tax of in lines, acquisition structural code pop a given the up change about operations.

Tom Hill

flexibility not of amount a also refunds million flow we're are to cash agencies from answer eye – a short is, investments. to I $XXX we total work, investment insignificant an And way And that a one-time to to thing. another tax sustaining grade. keep we the of XXXX it’s share, from the does insignificant I of flexibility rebates get point but us think value EBITDA, and in then $X it which just it's more us $XXX commitment not money. need own our the no. to overall million a We from are thing, and going need view and an that the an it’s flow tax but that of tax cash to debt on is more an year, Adding of it It's more reform. give financial operating gives than fund say cash would tied also

want us us certainly change balance all maintain does priorities our is parts more more cycle. or makes position flexibility. it view But we valuable it the It what valuable. the sheet do certainly much flexibility through to core the our our of Aggregates not transactions of assumption makes that rate or certainly on gives more USA So, a like did It tax the we under higher that

It gives cash So, really free change us just doesn't stronger it priorities our policies. or our much flow profile.

Stanley Elliott

guys best Thanks, Understood. luck. Yeah. Yep. and of

Tom Hill

you. Thank

Operator

additional the over today's for of I That does or the would conference question-and-answer portion conclude any Tom turn back conference. remarks. concluding to Hill like to

Tom Hill

exciting interest your to forward is Well, our to very thank on for updating Materials. you Thank very XXXX look be we you of you much. to all progress. up you a what shaping and in We forward look Vulcan

Operator

conclude all thank you for We today's does participation. teleconference. your That

Vulcan Materials (VMC) 16 Feb 182017 Q4 Earnings call transcript