Vulcan Materials Company

Ladies and gentlemen, please stand by. Good morning, ladies and gentlemen, and welcome to Vulcan Materials Company's third quarter earnings conference call. My name is Jake, and I will be your conference call coordinator today. As a reminder, today's call is being recorded. During the Q&A portion of this call, we ask that you limit your participation to one question plus a follow-up question. This will allow everyone who wishes the opportunity to participate. Now I would like to turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Good morning, everyone, and thank you for joining our third quarter earnings call. With me today are Tom Hill, Chairman and CEO, and Suzanne Wood, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to call your attention to our quarterly supplemental materials posted at our website, VulcanMaterials.com. Additionally, A recording of this call will be available for replay at our website later today. 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 other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Finally, you can find a reconciliation of non-GAAP financial measures and other related information in both our earnings release and at the end of our supplemental presentation. Now I'd like to turn the call over to Tom.

Thank you, Mark, and thanks to everyone for joining the call today. We appreciate your interest in Vulcan materials. Our third quarter results reflected another strong performance with adjusted EBITDA improving 15% as compared to last year. This was driven primarily by the aggregate segment, which experienced higher shipments, better pricing, and improved unit margins. For the quarter, aggregate shipments increased by 8%, both on a reported and same-store basis. But remember, the quarter did include an extra day. If we normalize the number of shipping days, same-store volume increased by 6% in line with expectations. This growth in volume reflects the solid underlying demand fundamentals in our markets. The fundamentals, which include growth in population, in households, and in jobs, are two to three times the growth of other markets over the next 10 years. Shipments in certain markets in the Southeast, Mid-Atlantic, and Texas were particularly strong. Shipments in California were also better than last year due to the strength in Southern and Central California. Freight-adjusted sales prices rose by 5.6%, and importantly, the increases were widespread. On a mix-adjusted basis, prices improved by 5%. Both product mix and geographic mix were slightly favorable. Gross profit per ton grew by 9% in the quarter to $5.87. we are pleased with the progression of our unit profitability. In fact, this quarter represented the fifth straight quarter of high single-digit or low double-digit year-over-year improvement. The four strategic initiatives reviewed at our recent Investor Day contributed to this outcome and offered further opportunities for margin enhancement. On a trailing 12-month basis, The aggregate same-store incremental flow-through rate was 60%, which is in line with our long-term guidance. Through the first nine months of the year, aggregate shipments have exceeded the upper end of our expectations. Pricing has increased in line with our expectations, and we have delivered good incremental earnings. This improved aggregate performance will partially be offset by lower non-aggregates gross profit. Our non-aggress gross profit is now expected to be below original expectations, but in line with the prior year. That said, we are well positioned to deliver another year of double-digit earnings growth and should carry good momentum into 2020 in all product lines. We expect full year 2019 adjusted EBITDA of between $1.25 billion and and $1.33 billion on track with our expectations at the beginning of the year. Looking ahead to next year, we expect another year of strong earnings growth. Based on early successes of our four strategic initiatives, we are confident that our margin expansion will continue. With respect to 2020 aggregate shipments, we anticipate low to mid-single-digit growth at this time. Vulcan served markets should continue to benefit from public construction demand led by highways. State and local level transportation funding has increased significantly in our key states and it will be a multi-year contributor to our future results. Most of the approved funding is firewalled and can be only used for transportation. Therefore, it's not a matter of if, but when. The demand visibility is there, but the timing of shipments is not precise given the number of state and local transportation agencies involved and the relative complexity of large projects. On the private side, which accounts for the other half of our aggregate shipments, we continue to have solid shipment momentum in most of our markets. It's important to remember that over the medium to long term, the underlying demand fundamentals, including population, and employment growth remain firmly in place and underpin long-term growth in residential and non-residential construction. And we are in the best position with our geographic footprint to capitalize on this trend. Now, turning to price, we expect a positive environment again next year. The visibility of public demand should help drive sales price increases similar to 2019 mid-single-digit range. Together with disciplined capital allocation priorities, the compounding effect of price and unit margin improvement will position us to grow our discretionary cash flows and improve our return profiles in 2020. We will report out our final 2020 guidance in February. Now I'll turn the call over to Suzanne for some additional comments on the results.