Vulcan Materials Company

Good morning, ladies and gentlemen, and welcome to the Vulcan Materials Company fourth quarter and full 2018 earnings conference call. My name is Amanda, and I will be your conference call coordinator today. As a reminder, today's call is being recorded. Now I would like to turn the call over to your host, Mark Warren, Director of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Good morning, and thank you for joining our fourth quarter and full year 2018 earnings call. With me today are Tom Hill, Chairman and CEO, and Suzanne Wood, Senior Vice President and Chief Financial Officer. A question and answer session will follow their prepared remarks. Before we begin, I would like to call your attention to our quarterly supplemental materials posted at our website, VulcanMaterials.com. You can access this presentation from the Investor Relations homepage of the website. A recording of this call will be available for replay at our website later today. Additionally, you can sign up to receive future news releases through the quick links on the Investor Relations homepage. Finally, please be reminded that comments regarding the company's results and projections may include forward-looking statements which are subject to risks and uncertainties. These risks, along with our other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Management will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures and other related information in both our earnings release and at the end of our supplemental presentation. Now we'll turn the call over to Tom.

Thank you, Mark, and thanks to everyone for joining the call today. We appreciate your interest in our company. in addition to discussing the fourth quarter and full year results, we'll also touch on several other matters of interest, including our improving pricing dynamic, our view on 2019 demand and shipments, and our financial expectations for 2019. Suzanne will review the financial shortly, but first, let me get right to the notable things about the fourth quarter that set us up for a strong 2019. The quarter was a great finish to the year. We delivered a 24% increase in gross profit in our core aggregate segment. We enjoyed solid shipment growth, compounding price improvements, and disciplined cost control. A principal driver of the strength in the quarter was an 8% increase in total aggregate shipments, 4% on the same store basis. These higher shipments were largely due to the growing demand in the public sector. The many increases in state and local highway funding that we've seen across our footprint are now turning into shipments. We are in the very early stages of big growth in highway demand. Shipments in the quarter rebounded in Texas and Virginia, states that are among our more profitable markets. And solid growth continued in Florida, Arizona, Alabama, and Illinois. Our pricing dynamic also improved in the fourth quarter, excluding the impact of MIX. Our freight adjusted, pricing increased approximately 5% compared to last year's quarter, including MIX. Pricing increased 2% due to stronger shipments and relatively lower price markets such as Alabama, Arizona, and Illinois. We've seen improving pricing momentum quarter after quarter. This ongoing momentum sets the stage as we move into 2019. It's supported by improved backlogs of private and public work, customer confidence, demand visibility, and logistics constraints. Throughout the quarter and the year, we were highly focused on operating efficiencies and cost control. For the quarter, we converted all of our higher revenue into gross profit, finishing the full year with a 12-month same-store flow-through rate of 64% in our aggregate segment. For the full year, we increased total revenues, earnings from continuing operations before taxes, and adjusted EBITDA, while decreasing our overhead expenses as a percent of total revenues. For the full year, we achieved record aggregate cash gross profit per ton of $6.32. Our safety performance, which is a leading indicator of operational excellence and proper stewardship of our most important resource, which is our people. I am immensely proud that we further advance our safety performance, improving on our record-setting results from the previous year. For 2018, our injury rate was 0.92 per 200,000 employee hours worked, which is world-class. This is a great tribute to the performance of our people throughout our company. Our performance and our core aggregate business improved throughout 2018. The momentum we generated and these positive trends in our aggregate business will play forward in 2019. We continue to see growth and private demand in vol conserved markets. In the public sector, Demand growth is coming on strong, and it's most notable in the markets that we serve. Nine Vulcan states that generate almost 80% of our revenue have passed infrastructure legislation over the last three years. These laws have raised funding by almost 60% over 2015 levels. Altogether, state laws and local initiatives to increase transportation infrastructure revenue have added more than $20 billion annually of funding in just these nine Vulcan states. That's nearly half as much as the federal government provides each year for all 50 states. So the pace of the conversion of public funding and lettings into shipments continues to accelerate. While the timing of those shipments is never precise, the direction is clearly up. This creates a healthy and positive pricing environment. Our backlogs and booking pace are in great shape and are improving. This, along with our 2019 fixed plant price increases, gives us confidence in the growing strength of 2019. Now I'll turn the call over to Suzanne. for a more detailed view of the numbers.