Vulcan Materials Company

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

Thank you, Operator. Good morning to everyone and thank you for your interest in our company. With me today are Tom Hill, Chairman and CEO, and Suzanne Wood, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, bulkandmaterials.com. A recording of this call will be available for replay later today at our website. 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. Reconciliations of any non-GAAP financial measures and other information are available in both our earnings release and at the end of our supplemental presentations. As the operator indicated, please limit your Q&A participation to one question plus a follow-up. This will help maximize participation during our time together. With that, I will now turn the call over to Tom.

Thanks, Mark, and thanks to everyone for joining the call today. We appreciate your interest in Volcker Materials Company. As always, but particularly in today's world, we hope you and your families are safe and healthy. In spite of the difficulties caused by the pandemic, our company is thriving, which demonstrates the strength of our people and of our core business. I'll take some time to comment on three accomplishments. First, our employees have continued to shine. I'm proud of how quickly they've adapted to rapidly changing environments. Since the start of the pandemic, they've shown again and again their flexibility, their tenacity, and their commitment to everything from ensuring a safe workplace to taking care of our customers. Our workforce is second to none, and I appreciate everything they're doing to grow Volcan materials regardless of challenges. Second, our teams executed well on the operational and the financial contingency plans that we developed in the early days of the pandemic. Our approach was to identify, prioritize, and focus on what we can control, and then to take the appropriate and decisive actions. At times like these, the ability to have vision, to make decisions quickly and accurately, and to execute effectively is critical. We continually review our location-specific contingency plans and make the necessary adjustments all the while sharing best practices across our network. The combination of these proactive plans, solid execution, good communication, and the strength of our agris-focused model gives us confidence that we will continue to be successful. And third, our strong second quarter and year-to-date results clearly demonstrate our ability to grow our unit profitability and to improve our return on investment. We remain focused on what we can control, including maintaining our pricing disciplines and controlling our costs. Our success here is supported by our four strategic disciplines, particularly commercial excellence and operational excellence. You saw this in the second quarter. Despite a 2% decline in aggregate volume, we improved our adjusted EBITDA by 10%, our cash gross profit per ton by 9%, and on a trading 12-month basis, a return on investment by 100 basis points. Suzanne will review the quarter results in more detail shortly, but first, I want to describe some of the demand trends we're seeing. Certain leading indicators of construction activity appear to be showing signs of improvement, both sequentially and year-over-year. Housing has been the most resilient of our market segments, with June data showing improvement and single-family housing leading the way. Permits and starts have improved at a faster rate in our footprint than in other states. Private non-residential construction is the most variable in use, reflecting a wide range of building categories, each driven by different factors. At the end of 2019, the pipeline of new projects, measured by square feet of contract awards, had increased 10% from prior year in our markets compared to down 3% in other markets. This momentum reflected winners and losers both categorically and geographically. In April, this momentum was interrupted by the pandemic. However, Jews showed improvement over April and May. As a leading supplier in 90% of our markets, we are well positioned to supply all types of non-residential construction regardless of the category. As we think about current trends, it's important to keep in mind that unlike the Great Recession of 2008, private construction going into the pandemic was not overbuilt. Both residential and non-residential demand were below long-term averages. This suggests that a slowdown from the pandemic could be short in duration, assuming that the trajectory is not significantly interrupted by additional waves of new COVID cases. Highway construction was deemed an essential business at the onset of the pandemic, and so has pretty much been business as usual. Now, with shelter in place, gas consumption fell, and this affected state DOT revenues. But with reopenings, the revenues are recovering. The recovery, coupled with proposed COVID-19 relief, has the state DOT's outlooks improving. We are encouraged, as work continues in Congress, to backstop DOT revenues lost to COVID-19 and to reauthorize the FAST Act. The House has already passed backstop funding for DOTs, as well as a reauthorization bill. The Senate is working toward a COVID-19 recovery package now, and we expect they will address reauthorization in September. To summarize, the economic environment and certain leading indicators of construction activity showed improvement during the quarter. However, the evolving pandemic's effect on demand in our markets and the broader economy remains unclear. The volatility of new COVID cases restricts our visibility into the second half, and as a result, the pace and scope of recovery, and therefore, our shipments volume is uncertain. As a consequence, we are not reinstating earnings guidance at this time. We will continue to monitor all aspects of our markets, and as our visibility improves with respect to the economic effect of the pandemic, we will resume our usual practice of providing guidance. As we move forward, we will remain focused on the things that we can control, keeping our teams safe and healthy, servicing our customers, and executing on our operating disciplines. The maturing of our four strategic initiatives will continue to expand our margins. Our second quarter results clearly demonstrate that our strategic disciplines are working. The pandemic has not changed the underlying fundamentals of our agri-focused model. Our business is sound, resilient, and more easily adapted to the changing market conditions. We also have the solid foundation of a healthy balance sheet, strong liquidity, and the full support and engagement of our people. Despite near-term uncertainty, we remain confident about our long-term prospects for growth. Now I'll hand the call over to Suzanne for some additional comments.