VMC - Earnings call transcript Q4 2019 | Vulcan Materials Company

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Operator

Good morning, ladies and gentlemen and welcome to Vulcan Materials Company's Fourth Quarter and Full Year Earnings Conference Call. My name is Kevin, and I will be your conference call coordinator today.

As a reminder, today's call is being recorded. [Operator Instructions].

Now, I will turn the call over to your host, Mr. of for President Materials. Vice Warren, Investor Vulcan Relations Mark Mr. Warren, begin. you may

Mark Warren

CEO; quarter Vulcan are year and Senior to Officer. everyone Chief and President Tom Suzanne and Vice Materials’ Chairman today Welcome me fourth full Financial Wood, With earnings Hill, and call.

Today’s press issued and by this our website. a posted supplemental presentation to accompanied call morning is release a

Additionally, today. later a for available replay recording of be this call will

forward-looking and legal statements, along regarding begin, are the that company's and projections filings the please may in projections the with described in we risks include Before to with release detail comments Securities -- which risks, subject company's and disclaimers, be results, These Exchange earnings and the other in reminded uncertainties. are other Commission.

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

over the I'll call now to Tom. turn

Tom Hill

represented your earnings of We business Mark, Vulcan Materials you, call the our Thank today. XXXX year thanks joining and interest the strength in for model. and demonstrated everyone another of appreciate aggregate-centric to Company. growth strong

growth. accomplishments gross we million, X% the the in made quarter. fourth about improvement by with in Southeast we increased the good X%, our quarter. you spend for minutes markets $XXX the before But to progress year, I Southwest about fourth the prior year again profit a few strong was talk Aggregates want telling versus reporting a Aggregates shipments and

our above is network. average in sales was point price logistics Coast mix freight average growth increased benefit For year-over-year basis to growth. This noteworthy. severed They key are Gulf in adjusted the XX reported part growth due by markets. X.X%, the unparalleled quarter, prices by all And markets from

most volume, XX% negatively ton $X.XX related. made Gross X% and timing tough things, XXXX per and of profit XXXX. by mix X% of increase mix in in growth for impacted a improved and the a quarter Aggregates was price which adjusted over gross are fourth growth profit, in three with comparison The quarter

higher First, maintenance were and repair costs quarter. in the

maintenance Therefore, are of types As we scheduled. and before, associated certain costs repairs routine are and said more predicable. the

the Other are to repair maintenance timing predict annually, is difficult precision. with exact planned more activities but

time work to as You monitor determine a optimal result situation and the do can be the throughout the year the to cost the lumpier.

This includes of these several of quarter types repairs.

maintenance our In in of operational addition, year. inspection early our we second the the of grow of part the rigorous some that out and excellence rolled initiative as higher XXXX in half costs protocol

guidance. have is thing health continue for additional and in them We our high to incorporated XXXX expect see Setting the repair standards our business. and the to costs right of long-term maintenance in do to

or are preempt and and cost. inspection Our are can they maintenance In and mobile doing failures, avoid equipment much initiative. expensive could which focused so, equipment highly employees result in we fixed aspects on the engaged, this of more plant intently repair

that versus factor our second geographic Aggregates profit gross in actual impacted our The expectations. was mix

also are from carry rail along quarter are and fourth versus shipments margins. by serve fourth in higher markets but particularly affected selling tons higher water. Our the water. were markets carry the Remote by In the shipped higher the along quarter rail which Gulf volumes Coast, distribution, -- prices, blue served cost, if negatively robust rail

projects mainly the on the Instead, quarter. to timing revenue which lower fees third benefit and This XXXX. of tipping certain fill. generate of The were expected delayed, clean a factor was but contribute matter to from aggregates was locations, also will earnings projects result fourth

a prices. improvement in where average shipments increased results, by gross asphalt quarter improvement fourth profit the driven This $X in was compared our highlight million X% by quarter selling last also to and fourth I'll Finally, year. XX%

addition asphalt. to These profitability in drove expect spite addition, a of in unit the quarter. weather reduction improvements wet improvement asphalt the XX% in volume fourth California, In in unit a in in in XX% we liquid volume growth experienced costs and -- average we for price

the Suzanne we're year about you talk numbers a accomplishments will I'd about like share summarize XXXX to excited with in and XXXX. first, detailed why moment. our full But

with safety. important most aspect Let's of the start business our

In led ever. us year class of XXXX, our people being safety despite busier to performance world than another

We also our sourcing. will logistics, of completed the initiatives growth towards us these all and of operational long-term initiatives strategic our excellence, innovation help strategic believe accelerate rollout excellence, commercial goals. We

price X%. and average by On increased financial X.X% gross grew shipments profitability XXXX. grew aggregate and the sales by was than better freight side, X% profit XX%, by adjusted Aggregates unit

longer forward half another showed on profit step our per of trends segment year-over-year, Non-Aggregates signs was the gross gross profit $X And while flat second to the improving goal business. of our Asphalt path ton in term the Cash $X.XX, was ton. per

EBITDA capital And for adjusted the grew by to invested our Our importantly, on XX.X%. year XX%. increase return

were with whole, just we our annual aren't pleased As we a setting records. satisfied results. But with

and day our on reaching is focus Our potential. better every getting

of XXXX, advantage enter markets year of we earnings supportive another take well-positioned to deliver are we double-digit As growth. and

from markets the will in highways benefit private a on to Our continue resurgence particularly and public side, by led construction demand demand both residential.

there, to support The the all public the highway investment. revenues demand as is

disappointed letting projects -- with we which it's shipments begin. fair, the couple of are of be we finally we've been rather months if, me with said as -- but seemed work. a bit are when little As last the excuse before, over -- To started a the states not we matter seem the and speed

term. are remain medium in a go we to these confident that near However, the projects

the Underlying growth employment With growth in been indicators, markets cautious, bit very fundamentals, and respect our underpin the demand of remain expectations and and a residential construction. to we're outpacing in now Vulcan country. non-residential leading a including we've which turn of seeing place firmly in population private, residential but rest demand, with positive

on catalyst These and footprint, capitalize demand public the to demand contributor. visibility important pricing characteristics geographic positive growth And are also on environment With we the our in a best XXXX. position markets, in is demand. private focus an higher for

to this shipments. aggregate rate in a adjusted does X%. Aggregate We mean growth sales and X% what increase between freight to are all expected So for prices X% anticipate XXXX? X%

through same-store Aggregate to looking on basis. view double-digit flow Additionally, trailing our earnings. approximately at growth are of profit segment month in rate we maintain we Overall, XX longer gross XX% term a

Moving profit to relatively segment, collectively. we This growth XX% Product in in expect Construction liquid to contemplates XX% gross cost stable, our Asphalt.

I'll it full comments now turn over XXXX for and Suzanne on XXXX guidance. our further to performance year

Suzanne Wood

solid good and households two the in in Tom including the to everyone. and demand Aggregates next that our three population, other fundamentals over years. XX jobs. market, volume That reflected Thanks, of growth times morning In XXXX, markets to growth our underlying is

Atlantic strong. prices particularly Aggregates all in Shipments increased sales reporting Average in were improvement. certain higher and markets and in the prices widespread, Mid with were Texas markets Southeast, major

aggregates our the flow year rate. For full a XX% through to up contributing X%, same-store costs were

As factors affected rate, Tom that the mentioned, were several in quarter. fourth this particularly there

ability Our underpins decreased expenses earnings dollar segment gross This in growth. a deliver as terms higher continued while profit our SAG percentage to revenues. increased attractive total progression by XX%. absolute of

to balance return the made areas. Moving We of flows cash investment. progress these each on on and in sheet, now

from XX Our structure average balance of sheet rate well average within target range. and a was of our Leverage weighted times, interest X.X%. remains debt to X.X X.X reduced years, strong, weighted a with maturity

on the shareholder attractive and investments flow cash determine that discretionary we In use of to repurchases. on as And return capital well XXXX, as this XXX enhancing followed a cash as allocation return returns improved share and dividends of basis adjusted EBITDA through and opportunities, million $XXX cash. generated invested most our our basis. of an result, priorities capital growth by We points included

expenses of operational million taken on XXXX. expense a has aspects from revenue. efficiently steps our segment forecast a the reduction in are to approximate already leveraging covered Tom in XXXX points. already XXXX. have overhead. be I'll absolute I'll This SAG comment as dollars, reduction $XXX on other to to as ensure we represents the ratio the now our guidance, so We move in of to well are few

$XXX anticipate effective that XX%. depreciation interest and We rate will amortization be And tax will expense XXXX. approximate and -- our million rate tax depletion, accretion our approximate will $XXX effective in approximately that million

$X.XXX these midpoint $X.XXX The assumptions XX% as billion combination of us range of compared a range The XXXX. this EBITDA for increase XXXX. adjusted of an to represents billion to to lead

cash We generative our approximately discretionary anticipate cash exception. Moving that flow business million. inherently no XXXX of $XXX and an Remember onto is one, expectations. flow cash be will our

you I'll model thoughts to our you share blanks. flows, some cash the As help fill in

adhere unchanged allocation our will directing to of priorities cash, capital guideposts, range. within As uses continue will we our target to stay our in we and leverage

million We of cash the and finally, and CapEx million, expense million. of $XXX of taxes cash $XXX operating expect maintenance $XXX interest

The of our discretionary in capital shareholders, acquisitions. internal growth returns involved cash to uses

cover Let one me those. of each

sustainable it First, level we in progressive cycle. that to with generally dividend, maintain line a to earnings fully growing expect the through is a

for projects projects the CapEx as million we yards. we of the we underway, sales our growth network to other spend $XXX are expect amount in as at logistics and approximately expansion include and not of on did distribution well largely quarry growth in spend projected improvements Second, quarries, already XXXX. California, new These capacity a full that to capital opening as

continuously And to evaluation And and we opportunities arise, shareholders. third, and share we will strategy to as use as excess investing fit those a synergies. acquisition returns repurchases will in superior evaluate means they continue offer disciplined last, our of only opportunistic cash of return the which our

remarks. over for I'll call closing now the turn back And to Tom

Tom Hill

Suzanne. Thanks,

of Vulcan opportunity want we disciplines. business before of the for customers their Materials and I processes dedication. hard and to Now this to go our their taken improved to They thank women take have work and and good care men have our Q&A,

responsible safety and they safety Importantly, strong are promoted metrics. delivering industry our culture our for leading

continue our move our geographic local capitalize capabilities. our to and will forward, we focused strengths, on outstanding footprint business, As execution we our aggregates

return compounding and will capital. on also remain focus improving our We through the margins unit cycle invested our on

happy questions. be we'll Now, take to your

Operator

Instructions] [Operator

you. Thank

from Our of comes Stanley Stifel. ahead. first Please go question Elliott

Stanley Elliott

bit taking about that into morning, cost little to everybody. takes roll -- the curious a of and the for question. as heading Just guide. you this any cost we're Tom, You were trying see mentioned kind being Good current of puts played off? some guys Does you Thanks about of talk XXXX? the could the piece. how Hey, in structure thinking

Tom Hill

Sure.

three look the mix somewhat said, as quarter, items. of impacted you equally, accommodation are was the items unique of all average fourth If or pretty unit those of timing. by And I was, cost and at much profitability three

dirt take a it but fee. will we The we back in first fill job which temporarily in the large one is will stopped, up was tipping The start for quarry project, XXXX. clean

we'll that see again, get that we'll back. So,

It volumes The on simple comes geographic really that reason timing the increased thing. cost, was remote but item mix. yards bit rail we was had Coast, Mid good which the work. distribution the in at just -- couple with with the second states Gulf also It a is only to higher really due a little not experienced to yard the quarry a that volumes you of costs, you And costs. lower Atlantic the

And the and really while failure. and in as item then It our is off inspection actually kicked equipment the customer these costs third improves is part right was really which focus And efforts, catastrophic because our driven by for And excellence is equipment were of efforts cost service. of we maintenance this the prevent efforts, February higher operational improves just year. long-term last company. to in equipment on increased operating efficiencies QX, decision maintenance the QX our

will efforts us year. those benefit later Now, this

But guidance, of that's work here. built a operators lot tell cost full the I of got costs all and I effort eliminate for expensive year time, of to expense helping failure continue a I'm over As XXXX you and to a performance This I really will into XXXX. and lot these some would takes pleased. expect our and of it costs very improves bit And please downtime. into by to

Stanley Elliott

the tracking little of best double-digits. company's how you're a that Talk then your And SG&A, about line? on going to revenues the can below feel just doubt. like you’re seeing are I speak X% the of history. to wanted sales, the cost maybe sticking but to No down the bit on you I leverage side, when driving SAG that call one up be

Suzanne Wood

which area, Yeah. to we morning Sure. SAG are area administrative where you. good our happy and that. And focusing predominantly an to type corporate is is costs, attention. I'm do The continually

dollar fourth and of If as been full something amount part we our absolute budgeting you did as reduce the revenue look had it look really a you XXXX, quarter as -- at is cost year of and a the that's that on higher, at percentage we focused of process. while

XXXX important into those be finding want the to things. to do in in are appropriate ways have make for move that I to efficient as that operational delivering those corporate and And just folks. efficient effective to look, people, particularly functions is to services we we and sometimes more admin more services the we footprint, delivering ways And mean, our looked sure we across and

technology. using it's Sometimes,

some You just of use disposal try at your a effect to things change. to number

some which see completed speak. you'll efforts are those So, we have as -- already begun some

that You'll and those of we absolutely of to that. reduction absolute we in in a place reflected a a the see guidance and percentage do just have are revenue, but driving also XXXX cost not toward in amount, reduction dollar plans as the

Stanley Elliott

you Thank for best Perfect. of much and time very luck. the

Tom Hill

Thank you.

Operator

Our next of comes go from question Trey Inc. Please Stephens Grooms ahead.

Tom Hill

Good morning, Trey.

Suzanne Wood

Good morning.

Trey Grooms

morning. Good

is more I'm I more So, guess, -- question around going the talk my volume. to or first

this talk more or end can market end it's about we you for your from of to have the what -- residential, X% that up So, see year did to XQ other assumptions there non-resi there the X%, XQ of X% first you I how put aggregates in And public, you and guess seeing guidance deceleration you baked or the that private, and that. expectations we to some a quarters. then into one, your in bit going specifically a the of get relative volume, little so, volume question, my your XX% are, what markets, saw

Suzanne Wood

start XX% Hi, and reminder address If we off specific tough That's good which We quarter had in X% aggregates we to quarter, perspective, good volume, some gross a then more can the just from a fourth just Tom an look morning. revenue a strong really a it that profit. I'll question. the comp at with was in comments. year-over-year the led about gentle in fourth XXXX of growth quarter. had

I decent we at off. increase the of growth. that's coming beginning year, think our that the So, of forward well -- volume think guidance quarter I set in It's the with I and X% about range frankly, year pretty within this mean, the that's

by last I'm completely had very not we So, good fourth year, quarter surprised that.

Tom Hill

growth our it to Yeah. add in be into XXXX, of I thoughtful think The to I would taking everything that. comparing to about is to trying timing demand, whether X% X% account, -- XXXX. shipments

to October, up that little the July starts side this the indicators remember quarter picked what through So, dramatically. could private of know up on seeing quite And -- short to or right we a that kind we're third a slower leading saw as has low we and yet. it part just picked it, bit of and a that in and now through XXXX don't flow could now -- it look just know

up. up, the the highway there, to On up. The side, is is has think. non-highway funding is timing, time, about works get a first about be demands about And for picking can public let DOTs to funding fast unknowns work. bit I jobs there's again how it quite and public Still, but of works --

prior a tropical first And any pulled year. as us also not have -- we that are the any going year or were said, going Last We not from storms we had didn't we material hurricanes have way. impacted to Suzanne have a to we're in XXXX, had windfall, forward as XXXX. quarter XX% we then

that X% the I together. markets those on, X% thoughtful our to is guidance that one will I coming of end in to is and is all and non-highway that's growth think pleased point pull approach a all see out now as pieces in growth the all this, would we're we we infrastructure factors see in the rolling. four volume

Trey Grooms

it. Got

Suzanne, as things the in things the good is you should and we we with like of there, but the should windfalls. Tom into be XXXX tough look this thinking mentioned that be thinking And having and comps Okay. about maybe a we light cadence volume of XXXX -- how How XQ nature? there, some showing pretty of for

Tom Hill

-- going I think -- to related. It'll ebbs projects. timing flows the with be it that, as -- always, be of will and weather and timing of will have timing be it's the large we but

Trey Grooms

Okay. you. I'll Thank Fair it on. enough. pass

Tom Hill

Thank you.

Operator

pardon Thompson -- of of Thomas go beg comes Research -- Thompson ahead. Group. next Kathryn from question your Please Our Kathryn

Tom Hill

morning, Kathryn. Good

Suzanne Wood

morning. Good

Kathryn Thompson

today. for Thanks my taking questions Morning.

in First, what years. past an and commentary has know a prepared seeing do on that are could about I forward several a work, type you’re have lettings seeing the lettings that. you up focusing focusing the Illinois. talked impact big on of we we underperformed -- state build projects you pick Illinois, relatively over in only expect How how the

Tom Hill

hard from it's What worked? how me question think, work? how's we should you. for I to expect What’s of hear your type would it And -- all, in what of Illinois? first what it -- then

Kathryn Thompson

state What the expectations are volumes Act? your and Really. we've this from -- seen Yeah. future FAST you come see only are in from to for lettings, starting what rebuild work

Tom Hill

-- So, XXXX. of wouldn't that I to a we're I funding think lot flow in that through not expecting Illinois,

still think in Illinois the in weighted it’s I have work benefit toll some more XXXX. will work XXXX. and of which us We airport

Illinois, On probably the of few on weakness the is one probably private that. places in not seeing it's side, our strengths, we're one some probably of

the while margins, volumes, in much of work we going big it Illinois, until highway the they're I not team the benefit are job, don't unit Illinois and of see improving getting XXXX. good did So, in think to

I Am your answering question?

Kathryn Thompson

Yeah. rail And helpful. No, on up the that's That's just also then following network. helpful.

driving Could more you're terms of most color are of the of -- projects Gulf? Georgia type your Thank you. just any us in that Assume South demand ops. you out confirm in seeing, give that volumes the are that

Tom Hill

Yeah.

-- fourth just weather Texas. and I really across it. Mississippi, -- had was Florida. work the a even It Alabama, it. out a -- pleased So, quarter, it was the Panhandle, helped widespread, at in comes It had it South It's was quarter really board. We're But just really solid the timing. good good was it Louisiana/assuming with it mean, was work. rail just cost. and fourth was more higher the We into

Kathryn Thompson

Thanks right. very All much.

Operator

of Sachs Please from Revich Goldman comes question Jerry go Group. next Our ahead.

Jerry Revich

morning, Good Hi. Yes. everyone.

Suzanne Wood

morning. Good

Tom Hill

Jerry. Hi,

Jerry Revich

I'm the we XXXX, on of wondering terms should in breadth you XXXX? of think price XXXX talk about keep as versus through we mind? -- comment pricing broad price of that increases could any cadence in differences about as how put is markets about we increases versus what you timing in can think And the XXXX you

Tom Hill

continuing XXXX. I Yeah. solid XXXX. similar it be price is point XXXX very very this improvements -- see in We're will similar describe at would to

We are improvement X% price very the and X% that year. to confident guided for

doing our support out, support this we're pointed that Our would the again, highway solid it's fixed bid solid with will customers Again seen in kind work, underpinned -- by backlogs discussions in private really but we’ve And side. our -- momentum. of a this, always and performance plant growing of would a the visibility rapidly our we and work. be pricing think this growth

widespread. now in would And see Whilst you then smallest piece it, see growth that again, It’s across tell infrastructure. non-highway going And we're increases every It's price of the really starting markets. our of it's healthy. across. I to one the it's we're to

Suzanne Wood

As XXXX. was in it

Tom Hill

Yeah.

Jerry Revich

in guidance -- will -- And hit gains, have obviously, of Pricing looking we have gains. X% it's two in for think you XXXX you're so. And not you in growth or straight to pricing how term. counsel think level medium the if the years sustainable would will pricing a than outlook, medium of lower long-term as about about volume XXXX. sustainable term the I'm wondering we us

Tom Hill

to not we're XXXX, saw give XXXX. see -- in XXXX, going guidance it you're but going in Obviously, I to past it you

funding again, will got highway we've the that -- substantial grow. and continue think to long-term coming I visibility

pricing singing. kind we're the supports of just that So

Jerry Revich

just a margin from could And Can back in we've lastly, achieve rate on past? this in faster in of when gross you're asphalt the cycle. your able levels cycle what's the to to past in margins seen achieving the far aggregates compared in you momentum asphalt get markets, had historical -- in I you so you than expansion. holding Okay. gross comment pricing

Tom Hill

asphalt Yeah, we're to as well, up think to -- product I being and is XX%. lines not guiding as far concerned, our XX%

in expect improvement would be to going that liquid costs. slight prices profit margins That slight to improvement improvement the asphalt. Asphalt up in drive double-digit. a We -- gross probably would unit big asphalt and be to a are flat

work I timing and funds that the where we line good experienced our think up big is good business. news that asphalt the the highway with the of

margins. story last and the said we this So -- in improve bypass cost we all I catch year asphalt we is unit to liquid liquid prices, would think is

happen saw come. You the this in quarter, more to fourth

Jerry Revich

you. Thank Okay.

Tom Hill

you. Thank

Operator

go Our of ahead. next from question comes Anthony Pettinari Please Citi.

Tom Hill

Morning.

Anthony Pettinari

get couple to I relative Good last mentioned states over being color morning. work. more with speed you're the what was to which regards think expecting. you with which on the this initially disappointed seeing of magnitude are some I just maybe little and if a wondering Tom, the states the were you delays, letting months you

Tom Hill

Yeah. way. I would describe it this

now, at this single in think are we the year where I predict expect highway demand right would at be we low this up, digit. point, point

single on digit started. Now timing depending get and that let could and projects ability move to state's get really the of mid work work to large

like I Tennessee. is earlier at As demand end to that flip South last strongest Florida, started. Texas, struggled for year fundings to -- side places said Carolina, and work where news have XXXX, we states into get is California, the of Virginia, get the asphalt, they let going and have good work But the if asphalt probably Georgia of the

If you shipping projects we mega in at look are three Georgia. still Georgia,

been then All and mid you digit. that said, again to single quickly helping, lettings come flow, starts that -- but low would but single highway and single a have us So awards data go. digit slower, could to think push they I do -- I little turn ebb that that's that tell they digit

billion. and fast. funding experience that embedded in funding at XX%, in some very a already up You to now half go work. where got billion XXXX lettings XXXX, and going worth XXXX Texas looking first It's of in in California, of we'll highways their could is into slow, is that's half of second spending come. to that All-in-all, the let increase expect in growth is Georgia double to healthy. maintenance years XX% fund lettings were $X we'd $X.XXX going maintenance in for the to XXXX Georgia

you while XX% starts been they've reminder or as bit now slower that were two And years a give little maybe I versus they a right ago. will highway where --

in It's it get So, just fast the it's states growing. how to work.

Anthony Pettinari

then Got you think saw you expect very in project magnitude this made release, kind of And XXXX? these and you Got And it. talk it. helpful. the where concrete continue Can project to the delays? some to That's do I into reference about you what delays.

Tom Hill

Yeah. this. They I -- those would got in was I expect volumes up then up got we in projects places. expect digit we -- California and on hit both in delayed concrete single I margins digit two piece big And would mid markets. was Virginia. it up weather fires in It unit with single the mid in would volume timing XXXX Northern both prices and probably where concrete of recovering double-digits. and in expect of

Anthony Pettinari

Okay. helpful. I'll turn That's it over.

Tom Hill

you. Thank

Operator

of Mike ahead. Please comes RBC next Capital from Our Markets. question go Dahl

Tom Hill

morning. Good

Mike Dahl

Thanks for …

Suzanne Wood

Morning.

Mike Dahl

Morning. Thanks my for questions. taking

cause pace to follow-up of around Is just worker just the a What's -- things underlying prior is lettings? little it slower cause the one color it terms fundamental -- more for the it just regulatory is of your of I'm the a root -- on underlying through in a the just So, questions getting the of shortage, the there? lettings. sense something state on bodies,

Tom Hill

let let planned this, and the DOTs. for mature this got that got got that -- engineering of of you those think -- -- ability not going at and outside huge what's work factors work. while has estimated, you they external of to permitted, projects put to they up them is funding, to that It's into I able just is a to to really are out the holding got they everybody the into put being pressures have workers to get out, goes get it’s it's and Yeah. the -- -- it’s then states, it up and it don't their just holding DOTs, lettings, work lot and employment slug

Suzanne Wood

some larger larger been are of a process. the the they that complexity the had than past. in as project of degree The Particularly projects just to adds the

Mike Dahl

Thanks. Okay.

time I you the if and is and initiatives. on where terms the issues about. and would working in of just talking internal in number about on been incremental some $XX math if for million understand margin had and look big volume pretty is question, incremental whole, you it's of XXXX transitory of about one would But XX% margins, in price at or difference target the of you a the thinking so the and right that year be as this issues Second terms everything what kind EBITDA your my you've in

So, as it actually too we go I'm go Is it just And high to trying to just into really guess giving understand get as XX%? or the into at volume of XX, what's costs is XXXX, in can -- level what gives you the the you that getting that you confidence back I was hot -- XXXX? aren't stripping little. so bridge

Suzanne Wood

say I'm on you're below with quite some some XX% some have million, a is I'm respect years the often when -- say quarters I we -- math a you're your it that long-term it. is and going the to average, this have sure hit but I Yeah. to will that Tom you about quarters, follow-up comment first and sure can't will comment. I'm then $XX

of a above We had we years just that. were have where couple

XX-month if trailing In at right for at XXXX fact, we period you in ended just were the XX%. look September

So this have those been it three had I revolve think not when we would much you for at the does to out, really number. year look called that it for been that Tom through closer items those flow around

extent timing and related, won't to XXXX. those and and into of mix have that you pressure mix the related were some timing And it’s

Tom Hill

is come for volume It's fill good us. a that's remote an more distribution, Yeah, I this think, the XXXX. The -- really fundamentally, that's in about more good, issue. inflationary because not about talked timing. We work it's will

we QX and in far preventive maintenance. stripping did what As was and QX as

got operating I are that think those disciplines. just

all, stripping investment of the an in First pits. is and

a pits which one are develop get and while thing for -- we ready grow. for cost you future time volumes as it's While it's a think going to

maintenance do sure really control timely equipment and have equipment, -- side, the it's to manner. control we our the you in you want On make about don't a

real a like example life you give just that. me Let of

due If seven-foot you you cone it $XX,XXX. oil samples, down, take cost to crusher a were to

are you failed, very now If metrics tip cost hour which improvement. iceberg are till is really per a like the we man hour, to that down you and it that's because And cost from tons plant $XXX,XXX the taking the wait or where you're just expensive. per it downtime important look you tons you plant at underneath of if seeing

efficiency an We you February our we in will profitability I'm of It's and their that as our they to operational their these maximize with account long-term our And taken confidence tell XXXX. program, through people this started efforts operations excellence plan folks think the And created us allows investment. guidance investment for -- operations. of the have into I that improve those I’d company.

Mike Dahl

for color. Thanks the Okay.

Operator

comes Our Please Seth Rohit SunTrust. next of from ahead. go question

Rohit Seth

Hi. taking question. my Thanks for

on -- benefits there or residential construction curious if if on the Just any would XXXX, or mixed you than maybe expected grew in faster resident be cost side? ASP

Tom Hill

residential I a No, good mix you it -- base think has both clean would of stone. and

through else. I would think it everything like flow

is love see. Although -- that to and something we'd

I big got margins crossed, fingers our but wouldn't price unit mix expect change. mix any we or So, change

Rohit Seth

that how under already years, on Okay. of the been but said, kind things on has of some XX%. three last curious then much of it's And equipment just your building I'm failure of part you've come incremental margins, the issue?

Tom Hill

about XXXX years I have finished we as years are have talked do XX%. that in we up, -- so think Well, we XXXX below. was -- same-store that we and same-store

it at guide have have the -- look XX%. could and the times you higher, you're when you and you out to to times would to as -- think lower, it's will when it’s point same-store back going I I you

Rohit Seth

Right.

Suzanne Wood

was I The other thing -- going sorry, just to add. I'm

the between look that something the is a on of company, be that other through there be of back performance is carry question trailing the is no to of a there cost materially us our forward fourth there into I structure sort though reason, significant the isn't -- a there question And items, XXXX. those real change we guide significant the of view about internally in of that is talked quarter the is, real that years, the on we, go in some going structure the company. as a cost long-term volatility cost it we XX%. through is basis, that as And of or can is cost some them me company. XX would of back something shift is, for there again, quarters indicative has to for in lot something the that important these changed the think thing we've And even

Rohit Seth

Understood. maybe pipeline, out thoughts there seeing And any you're appetite. the provide you and and on can then your what M&A

Tom Hill

Yeah.

you we've and really does discipline Everything its have both working. as to that it got is the be small it's large tell for fast As always very projects integrate able not us. and discipline. synergies if to always Again, we some fit have It's you that we're once us, away you get expensive be won't And to it. importantly very make from accurately. walk too it, sure unique

buy. picky a them -- number We'll of again we'll working. we've us, about we got don't just what fit So, be of so all them

Rohit Seth

size of deals out Any there?

Tom Hill

small this some I There both ones some full think there, -- -- out are it's large -- but ones there's both. and I would It's gambit. any mega don't ones.

Rohit Seth

you. right. Understood. Thank All

Tom Hill

Thank you.

Operator

Our comes ahead. question Please from Instinet. next Wood Nomura Michael of go

Michael Wood

morning. good Hi,

Suzanne Wood

Hi, Michael.

Michael Wood

I we purely in if year next is could bit elevated was hoping terms you Curious year? of is you variable a volume, about could much repair decline more. after a the this it and it little a as COGS? percentage And alongside being maybe increasing of tell maintenance think or could how us quantify this should

Tom Hill

call is -- meet to to that -- that what year. more and you. full I through months would some to And both I think you then, is the the off of level but guidance that flows I it that a out for cost how flows repair we're hand think guidance stripping in as you first some and our maintenance, think of few we the the we've I year the look at -- this our given bit would expect And I little guide see for would year. confident through that of may we this

Michael Wood

in us kind you Is Okay. seeing on the mixed -- highway if that? In mix mature? can you lower projects you I'm the up know curious that year year, were some an continued, ongoing give on as XXXX, throughout of update talking I earlier or the to those projects. about larger

Tom Hill

of mix quarter little the that bit the -- in little geographic saw we of we what and in think mix. bit a I product saw a was

Geographic right was bit out, Coast asphalt on little that our driven called of size guidance. performance we and higher really the year The it the As was volumes full was and with think by Southeast. for the a it is adjusted X.X, the I mix, line year highway in Gulf X.X, mix impact work. was in

Michael Wood

Okay. you. Thank

Operator

Ng comes question from Phil from next Jefferies. Our

Phil Ng

Hi, guys.

Tom Hill

morning. Good

Suzanne Wood

morning. Good

Phil Ng

downdraft couple Appreciating private, morning. potentially Would comps. Tom, some about helpful, that year give shape some be growth you the color from if standpoint? think some a the how lettings Good to are delayed us tougher of of and from there

Tom Hill

it and also one I XX% question. forward really volumes we -- of the tough very would -- you of you than into and of had XXXX expect was of Good exception was in have quarter it -- timing other had with California comp year was the first of projects last were got weather quite that QX, weather first up that a all, call really from a because timing I pull would XXXX. last Yeah. of And in large year good. and the

guys -- and this the So see in what's right year. and with weather outside quarter happening you look now first can

all-in-all, in of think timing So, I weather it's projects. large

Phil Ng

juncture, at which any at predict your And delay kind juncture, I'm this larger interpreting you of project Tom, can't calling you're not for would of ...? this if

Tom Hill

Yeah.

it's places. can now. let we're going the We highways right yeah, of shipping got So fast number out a called I three and lot believe of get in -- to how be Georgia. projects to big the a jobs work. different We've

Phil Ng

Okay.

Tom Hill

were little fast a which where out that Carolina, bit and about talked what with there we South call slow and was And it Georgia we we slot.

The second and of they've half first of this half flow last into but huge got letting. year XXXX lettings year's the which slow,

get -- So, started. how the we'll work fast see

Phil Ng

the last on into little environment. frankly thought you're coming give you Got touch actually, more a it. a puts below more not guidance and liquid you what price for manageable the Can of takes? strength. your delays saw surprised some some and your I'm expecting of us you business year based it's asphalt for XXXX, downstream And project then XXXX initially, given just

Tom Hill

Yeah.

strength double-digit. being I will think are gets We're slightly what we to that calling unit volumes how down. our be margin and started. of -- see flat the up DOT again determined timing just in in And the work this fast for real and by up liquid is it improvement asphalt slightly. And

asphalt had projects we the in had and into got of we -- going XXXX. two Tennessee one XXX big project those You repeating we big remember which had in Arizona, to in neither were

we're accelerate they'll get about. So, they were to even that to with windfalls -- the much so improvements are lettings repeat, going that is in of seeing that volume some in and in have they I slight XXXX, not work talked bigger

Phil Ng

Got it.

Tom Hill

said XXXX. through I'm I quarter, saw XXXX, carry thing -- asphalt -- margins of we encouraged those about momentum in chasing is turn the the into you predicting The we see kind been fourth we have in that -- now year that that

Phil Ng

down When you or cleanup question, you said costs, year-over-year calling sequentially flat a is to …? Tom. liquid And one on more just on that are

Tom Hill

in what to -- I the a with But last we're of manage happens that asphalt going manage think number importantly appropriately. margin to we're fall, going what -- unit that

keep we'll as liquid perform and see I like I see in the we -- margins. unit is So, to good the we call it prices that XXXX. And said news fall, that accretive think growing we'll to continue it and

Phil Ng

a lot. Thanks Okay.

Tom Hill

Thank you.

Operator

question ahead. Bank. next of Deutsche go Please comes from Our Seldon Clarke

Seldon Clarke

question. the for Thanks Hi.

Tom Hill

Sure.

Seldon Clarke

the Could initiatives they've solely provided with putting change you been in your by ongoing that's rails the that areas, or of has how rail? give us coming differs margin a particular the these place? the dynamic of shipments cost Is just on demand this higher sense from into a by service some of

Tom Hill

point this margins general, the margins, is I where -- Okay. be In good margins. little lower higher just and costs, that's way. a price, would bit to and tons little higher -- rail lower going but out a very

be the would price, blue is higher good point out good it's much mean, work. in that would cost up contrast, water volume margins, So, and tonnage than being the a higher higher it is higher whole. margins I the I thing.

was good just at saw the what quarter work a we So a along of happened timing higher in to and ship rail the --- that rate.

Seldon Clarke

Okay.

do them in nothing putting So, to process with place. rail

Okay.

Tom Hill

No.

Suzanne Wood

No.

Tom Hill

quarry simple rail costs and the rail comes with higher higher versus plus cost. A thing distribution, at a distribution quarry a price have which just you cost

Seldon Clarke

Got it.

to what your end a need and XXXX differential give what's the maybe Could points hit and see you in in range? as end it guidance, on really Okay. of low the is you of question low higher us XXX growth. sense relates the And just end embedded then about there guidance, of to just basis high a the the of in would that year to

Tom Hill

the mostly -- -- go think volume. would I I hit tell back is timing I do to we go I to of you get big going get with do delta. the I between probably back the be and up lines would to shipments, be low end storm think high Those you or end three. the would two be it how the variables, tropical and or so

Suzanne Wood

you're comes with down how year. said, what the happens or throughout to XXXX the year. it of ahead we being weather lower a starts, And luckily volume beginning up and we to that -- to guidance at took how it's X% of continue Tom the of what with for timing, happily right, continue higher then, really that's approach X%. and as wound very as And the right. watch to end. similar end the at we'll whether when a range shipments is That's Tom residential the those we gave to improve interest But to And the

Seldon Clarke

All right. for Thanks time. the

Tom Hill

Thank you.

Operator

Please of Shmois Capital. question Our Loop Garik ahead. go next comes from

Garik Shmois

Thanks. Hi.

... more one Just

Tom Hill

morning. Good

Suzanne Wood

morning. Good

Garik Shmois

good Hey, morning.

lead on these some So, how wanted might Act and year with can highway expiring the delays into the in could outlook to being factors XXXX? the the follow-up letting additional an you election of FAST Do that just just that play outlook, curious sluggishness think the Just to just you see? highway fall. in

Tom Hill

-- the they have will going talked impact We would year lettings, it and it, and to highway don't on least from about any it's I and FAST state DOT of impact that the Feds. -- on timing coming slow have Yeah. think won't been or any have strong I an for have and funding the the election lettings Act sure cadence and the some the wouldn't now on think

do highway working and side towards extension. funding. that any progress the Act an are down, in hard highway of of the the don't get on don't the I people to in expect to bill, XXXX. FAST go that on the funding bill just we'll a expect I lot think time, same a when Washington I build made both expires, At

I don't So, due DOT year. state election see impact on to a impact any it. this big lettings on being see don't I

Garik Shmois

you as out EBITDA million volume. potentially this repair that given Thanks. then, be and maintenance of your about be and the here reach you Investor you Day out, think just some laid some you achievable clear target the items all called is other of costs -- Okay. of could and how about $X your million billion to that And XXX your tons once to within plan thinking just XXX

Tom Hill

strategic operations get Yeah. initiative If $X anything giving the that we our initiatives, to the ability more four including and -- excellence the I to think me more planned. in confidence are

right through if starting business you for we things tons look repair beneath things investing you is to individual operating Really in hour to our the starting the operations, per we're -- throughput per see man like hour plants, and -- doing operator headline the were our higher surface while maintenance and measure the the think look the individual if importantly plants, the I stripping which that though Behind you're costs. parameters key think improvement. is see I individual long-term. in downtime in tons to plants, that, you're

do. think I things people our right the teaching to we young are

and leveraging collective XXX Vulcan across of are experience plants. the We knowledge

this some very our we're progress gel. to into from the is The headline those working, goes commercial is starting and there. mature. pleased is we with that work things, So, see initiatives excellence initiatives while ultimate It

Garik Shmois

you. Thank Great.

Operator

next Our Longbow ahead. David comes Please of question go from MacGregor Research.

Tom Hill

Good morning.

David MacGregor

morning. Good

element X% get constraint how a to getting lettings. guess use within concern for that or downstream if in potentially accounted awards volume guide, Just your we the conservative as your the X% increase question are What to I and And construction you just capacity bottlenecks guidance? a on large back that to and and growth? most volume

Tom Hill

we internally, think and love of first concrete Well, it. prospective both see be grow it asphalt much could, aggregate Vulcan I for can any there see to will we bottlenecks We prospective it all, from handle or and perspective. we as don't an as

you On about ability bottleneck yes. the hold far is, ask I question that up think is catch delayed. don't answer think as work, to increase lettings -- but is dramatically, shortages, as people if would labor it's work up all the see it to happen. will and labor up were once always what I to is The big the is think to I going hold work as

longer have a So, little big to that if the a going you in through, do catch had come or I how the don't firepower because would if take to they storm it. fast. was cold it month catch had it's up to you which That's you it a up trying wintertime, rain just all describe tropical to and really

David MacGregor

seems element Have bullish? the Okay. between fairly which guidance? which factored your in is that Is pretty an seems you conservative potentially story, discrepancy the versus X%, X% there to -- that

Tom Hill

rail indicators pocket the think the the all we to little when of through, try pull of about X%. highway got it said and work together the bit comparing air state's and tried we -- as potential, factors we the pull side I've pull the comes I to I think timings that's to that -- that when piece be and get weather to of we and ability as aspect X% risk a in last thoughtful and to what those that year volume, upside it, of a lettings all leading it, and the of

David MacGregor

faster pace of And is building That products And your if mix. Yeah. then your makes geographies? in your backlog. growth and about could as talk margin second on And higher you question sense. the in backlog

Tom Hill

describe I I -- would this. think

is best at I think when X% to looked X% can. we we the

of of mix and mix geographic product when take both mix I together. products you the say -- If

our as support improvement improvement seen price both our good we stone now backlogs. volume booking seen look in have guidance. in it and at backlogs think good I we in and clean We've right will in in base our our in pace

David MacGregor

very much. you Thank

Tom Hill

you. Thank

Operator

Thalhimer Our Davis. of next Please comes question Adam from Thompson ahead. go

Adam Thalhimer

Hey, in down morning, good was What to flat EBITDA shock you guys. if QX? did

Tom Hill

QX Well, -- we guidance. give we can't

before. said quarter pull volume year are with year had pull from think comping -- windfall XX% as I of over and we we the of a XXXX of in forward you'll the through. that see good weather I very first don't think we was which the

weather first look in fourth is can -- guys quarter. the You what doing the the know in outside,

halfway again, wait have see. it, So, just and through to we're we'll

Adam Thalhimer

us and through right now And can then seeing demand Tom, walk in you're the you Texas? California

Tom Hill

strong. describe California the of think public way, let Sure. The wow And is TxDOT horizon. billion. work There $XX said from The right is there's I Texas. me -- the job start shipping excellent to well, billion to has done big and there I lettings big side work -- that as factor very an out. now, getting would is going work this next on of we go with year $X they're a

flat North exceptions, is development describe private Worth. big fairly non-res. the say some would res I'd being Texas On I driven with some side, North by Fort is

in now. Texas soft. second a on going Coastal Coastal of housing XXXX, you bit Texas some the bit strong, little work everything Texas a non-res, little could half strong. And South LNG see start

but a is Southern months indicators On of very us were were of over and for in is leading last strong, Publics for asphalt. a Bay. the in three -- side California, very a watch up were a flat probably strong, on bit improving. a bit good, leading with California, both non-highway indicators, bit, private Northern in aggregates highway California, Private bit single maybe Cal a strong. public little XX%. is again indicators strong public Southern bit looks the Non-res soft, softer

healthy you both in think improvements good locations, would So, states. unit -- all-in-all, in I that would pretty I expect asphalt. growth I in And both and both margin in improvements tell margin aggregates

Adam Thalhimer

color. Good

Thanks, Okay. Tom.

Tom Hill

Thank you.

Operator

Our Huerta next of go from ahead. Please comes question Adrian JPMorgan.

Adrian Huerta

taking my and Suzanne. morning Hi, everyone Tom good thank for and call, you

Suzanne Wood

morning. Good

Adrian Huerta

can tell any -- you I ended guidance? way last year. is what expecting you now ended that they lower last year. If your million. they early were there how And back be question below believe there taxes you're expecting cash Quick morning. chances right could us Good into than probably $XXX on

Suzanne Wood

reason year the cash started reduction main the year. was the taxes for we the that And through as in Sure.

We not as is of the because a have well to we depreciation we year that's determination there some bonus that file as made going some each depletion a advantage through not to go tax take to we calculation were or it returns between allowance things. our other when get, whether we have interplay that as and

So, methodology seem would selecting benefit. -- go a obvious, take there might bonus want depreciation you actual it ensure there of tax that you is to the actually that you to calculation while to you advantage calculation is are most an the gives the need

X% going indeed to bonus determined take the were initially second us than started we the at the that between and and this XXXX was out out had paying less a we the in cash assumption. So, resulted tax one -- called and depreciation, time tax rate year the in bit under the We X%. we that quarter for intended estimated quite

an to use. go off start we're tax going make to same we a determination effective what XXXX, As depreciation methodology of and the are we again guiding we to will rate XX%, in process through as

there we use taxes we this we million that may the the work lower. XXXX of to flow. throw cash through that point fashion some compared under discretionary in Even will cash even be assumption -- as off cash the chance year. But would $XXX -- we'll tax similar out, having in a is of just higher So, under XXXX, still I about process

healthy, basis share on and discretionary a if the growth M&A, meets that $XXX and comes all criteria your potentially toward repurchases. could be very something dividends very that projects, outlined, substantial put that Tom million So along

Adrian Huerta

the That clear, I quarry may that is open with when in potential was could to take? quarry size in that And Can annual details volumes basis Suzanne. if you question. any the expected ask California and terms an that on another and of us very share on

Tom Hill

Yeah.

it beginning next it's, probably in or next second of at we're not open going first quarter disclose -- of So this until year. to point. that year -- actually we're not Frisco, won't Size,

plus quite worked hard some to years that closer market. been healthy it things. into about we good -- The We very a now It's profitable. out have talk they're working this market It and get -- it a done. a and XX very to was will build us has team those very hard, is taken is to

Adrian Huerta

Excellent, Tom.

So, market it's totally for new you?

Tom Hill

a before. in it's we've been No, market

Adrian Huerta

Excellent. you it. much Suzanne. so Okay. Tom Thank and I appreciate

Tom Hill

you. Thank

Suzanne Wood

you. Thank

Operator

Paul Chabran from ahead. Field comes question go next of Please Investment On Research. Our

Paul Chabran

Good everyone. and my Hello, morning you thank taking questions. for

all, of First the But already there any Is evolution about margins so concerning about rail extensively it already think that we XXXX? how you my talked rail as the and it could think in you I that QX your did answered. it apologies of chance XXXX should for deliveries, impact deliveries.

Tom Hill

sorry, -- your beginning hear. I'm question beginning sorry. your I'm of I The question of couldn't

Paul Chabran

impact XXXX? evolution I'm -- we should related could the XXXX. that, about margin to it in of your think question QX does did in was sorry. change The How deliveries they rail as

Suzanne Wood

-- was maintenance, The hear. sorry. asking that poor is couldn't just the you're little repairs about I I'm what connection -- a and

Paul Chabran

the that your concerning Apologies. rail on Yeah. had QX? margin deliveries It's in don't an impact defense rail deliveries. They

Tom Hill

-- I think we've we volumes network got impact. of the those wouldn't XXXX fourth would and see a happen expect would do our -- And issue very in little that not the distribution quarter. big expect -- that out those guidance, in I rail I embedded to rail be of I shipments timing the

Paul Chabran

Thank Okay. very you All much. right.

Tom Hill

Thank you.

Suzanne Wood

you. Thank

Operator

Davidson. comes of Please question DA Brent Thielman next from go ahead. Our

Tom Hill

morning. Good

Suzanne Wood

Good morning.

Brent Thielman

Hey, good morning.

well, the just the sensitivity for us through start Just you going understand In you the are I SAG can below can we Suzanne, this you, growth expense, think X%, volume other XXXX if X%, wanted to on help X% year, sustain to to year. growth, level? words, -- for lineup SAG seeing things

Suzanne Wood

Yeah.

I we think can.

a this said, that or about. is the changes cost what's year-over-year talked we matter driving As of reduction I

Some in way we of do the that things. is being efficient more

some kind the of a that more sustainable, it's it's think call would that yes. on be making So, -- I It's side like would not expense. and changes variable we that so, fixed what I are

Brent Thielman

had. That's you. I Thank all

Operator

Our next Research. question Dudas from Vertical go of ahead. Please Michael comes

Tom Hill

morning. Good

Michael Dudas

Good -- I think afternoon.

you think XX gone o'clock. have into I may

good very in descriptive. very being job you've So, and in light of that been answering

answered. you. my of all it. Good luck. Appreciate questions So, have been Thank

Tom Hill

Thank you.

Operator

would hand additional at call to There further no the Hill questions like this to back I remarks. are for time. closing Tom or any

Tom Hill

to Vulcan today. enjoyed you for interest support and Well, your thank talking Materials. We've you to

I forward ton. $X gross we continue very the months look you excited Thanks. ton, term and we of sharing tell, are progress goals of to can the And Suzanne team's you about to a We'll profit our As cash to news per XXXX. longer throughout to make talk how toward come.

Suzanne Wood

Thanks. Goodbye.

Operator

your This for today. Thank concludes today’s participation. you

may You disconnect. now

Vulcan Materials (VMC) 18 Feb 202019 Q4 Earnings call transcript