Vulcan Materials Company (VMC) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 Annual Meeting of Shareholders of Vulcan Materials Company. I'm Tom Hill, President and Chief Executive Officer of the company and Chairman of the Board of Directors. We decided to host our annual meeting virtually today, which allows us to protect the health and safety of our shareholders and employees during the ongoing COVID-19 pandemic. On behalf of all of my colleagues at Vulcan and our Board of Directors, thank you for attending our annual meeting today. We appreciate your interest in and support of Vulcan Materials Company. At this time, I call the meeting to order. We'll begin the meeting by introducing the members of the Board of Directors who are participating in today's meeting via telephone. First, let me introduce the directors who, in addition to myself, are standing for election to the Board: Tom Fanning is Chairman of the Board, President and Chief Executive Officer of Southern Company; Cynthia Hostetler serves as a trustee of Invesco Funds and is a Director of Resideo Technologies, Inc. and TriLinc Global Impact Fund; and Rich O'Brien is the former President and Chief Executive Officer of Boart Longyear Limited. Next, I want to introduce the other directors who are not standing for election this year: Melissa Anderson is Senior Vice President, Chief Human Resources Officer of Albemarle Corporation; Grayson Hall is the former Chairman and Chief Executive Officer of Regions Financial Corporation; Jim Prokopanko is the former President and Chief Executive Officer of The Mosaic Company; Kathleen Quirk is President and Chief Financial Officer of Freeport-McMoRan Inc; David Steiner is the former President and Chief Executive Officer of Waste Management, Inc.; Lee Styslinger is Chairman and Chief Executive Officer of Altec Inc.; and George Willis is the former President, U.S. Operations, UPS. We are honored and very pleased that each of you could attend today and sincerely appreciate your continued support and interest in Vulcan Materials. Now we will proceed with the formal business of our meeting. Later in the meeting, we will provide time for questions relevant to the business of the meeting. Our Vice President of Investor Relations, Mark Warren, will review your questions. If you have general questions about our business, I encourage you to listen to the recording of our May 4 first quarter earnings call, which is posted on our website. [Operator Instructions] D Franklin will serve as Secretary of the meeting and will now discuss some of the formalities of calling today's meeting. D?

Thank you, Tom. Deborah Baker of Broadridge has been duly appointed and sworn in as Inspector of Elections for this meeting. I confirm that notice of this meeting and the related proxy materials were mailed on March 29, 2021 to our shareholders as of the record date of this meeting in accordance with our bylaws. Therefore, this annual meeting is duly called and noticed. Our Inspector of Election has advised us that based on a review of the number of proxies delivered to date, the shares represented at this meeting are sufficient to constitute a quorum.

Thank you, D. In view of your report, I declare a quorum is presumed to be present and the meeting properly convened. The polls are now open, and the time is 9:04 a.m. on May 14, 2021. If you have already voted your proxy, there is no need to cast your vote in the web portal unless you wish to change your vote. Any shareholder who hasn't yet voted or wishes to change his or her vote, may do so by clicking on the voting button on the web portal and following the instructions. Ladies and gentlemen, it is now in order to proceed with the business of the meeting. We have 3 proposals to be voted upon at this meeting. We have not received any other items of business in accordance with our bylaws or the SEC's proxy rules. As a result, we will not consider any additional items of business at this meeting, and all nominations and proposals are hereby closed. Our first item of business is the election of 4 directors, each to serve 3-year terms or until his or her successor is duly elected and qualified. Is there a motion setting forth the resolution?

I move that the following persons, as nominated by the Board, be elected as Directors of Vulcan Materials Company for 3-year terms ending in 2024: Thomas A. Fanning; J. Thomas Hill; Cynthia L. Hostetler; and Richard T. O'Brien.

Thank you, D. The second item of business is the advisory vote on executive compensation known as Say-on-Pay. Is there a motion setting forth the resolution?

I move that the shareholders approve, on an advisory basis, the compensation of the company's named executive officers as set forth in the company's proxy statement.

The third and final item of business is the ratification of the appointment of the company's independent public accounting firm by the Audit Committee. Jason Rigsby, a partner at Deloitte & Touche, is present -- excuse me, participating in today's meeting, and we thank him for his attendance. Is there a motion setting forth the resolution?

I move that the shareholders ratify the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm to audit the books of the company for the year 2021.

Thank you, D. This concludes the presentation of the proposals to be voted on at today's meeting. Any shareholder who hasn't yet voted or who wishes to change their vote, please do so by now clicking on the voting button on the web portal and following the instructions. [Voting]

If everyone has voted, I declare that the polls are now closed. The time is 9:07 a.m. on May 14, 2021. Now while the votes are being tallied, I'd like to take a little time and give you an update on the company. First, we'll cover our safety, health and environmental performance; then we'll move to our 2020 financial performance, our '21 first quarter and our 2021 full year outlook. Our 2020 safety performance saw both highs and lows. Our operators earned an all-time MSHA/OSHA incident rate. They also achieved a record citation rate, both of which are world-class. However, We experienced a higher number of serious or fatal accidents, which are tragic for our Vulcan family but are life-changing for our employees' families. This has led us to rethink how we address the potential for serious injuries and how we engineer the risk out of our daily task. Work has been underway, which will lead to better protecting our Vulcan family. We saw an excellent environmental performance in 2021, only 14 citations out of 554 inspections, 98.6% citation-free. To me, this is evidence that our people truly care about the environment and want to do the best job they can. COVID-19, this was a challenging year from a health perspective to say the least. We've experienced 1,217 COVID cases. But like the rest of the country, our new cases have dropped dramatically. I want to thank our operators for being at work throughout the pandemic. They are hard-working, brave men and women. Thanks a lot. Moving to 2020. Even though we were challenged from the pandemic, the Vulcan team succeeded. 2020 saw a solid financial performance. While aggregates volumes fell by 3%, our teams earned a 3% price increase from our customers and our operators held our cash cost of sales flat. All of this led to a cash gross profit per ton improvement of 5% to $7.11. An excellent performance. This performance led to an adjusted EBITDA improvement of 4%. So we saw volumes challenged, we were pandemic-challenged; even with that being said, we turned in an excellent performance. I'm proud of our teams, and we thank our teams for their hard work and their loyalty to Vulcan Materials Company. Now to 2021. Our first quarter was a promising start to 2021. We saw solid volume growth, good price increases and an excellent cost control, all of which drove our adjusted EBITDA to be improved by 22%, again, a solid start to the year. Also in the first quarter, you saw us sell a reclaimed quarry in California, with net proceeds of $182 million and a pretax gain of $115 million. This is evidence that we are effectively managing the life cycle of our quarries. You're seeing us mine and reclaim our quarries with an end-use in mind, in order to maximize shareholder value. Now moving to full year 2021 guidance. As you heard last week in our first quarter earnings call, our markets are improving. Therefore, we raised our guidance. Volumes moved and improved from a range of negative 2% to positive 2% to a range of 1 -- an improvement of 1% to an improvement of 4%. This allowed us to move our adjusted EBITDA to a range of $1.38 billion to $1.46 billion. This improvement in earnings that you're seeing is proof to me that our 4 strategic disciplines are at work: operational excellence; strategic sourcing; commercial excellence; and logistics innovations. These disciplines allow us to grow the company and live up to our potential in improving shareholder value. All the time, we'll do it the Vulcan way: do the right thing, the right way at the right time.

Now at this point, I'd like to provide our shareholders with the opportunity to ask questions regarding today's meeting. If you have a general question about our business, I again encourage you to listen to a recording of our May 4 first quarter earnings call, which is posted on our website. [Operator Instructions] Mark, do you have any questions?

Tom, we have not received any questions.

Seeing that there are no questions, I now see that the Inspector of Election had delivered her preliminary report on the votes taken at the meeting. D, will you please give a report on the votes?

Inspector's preliminary report shows that all 4 director nominees were reelected with at least 90% approval; that the Say-on-Pay proposal passed with an approval rate of 96%; and that the ratification of the appointment of Deloitte & Touche as the company's independent public auditor was approved.

Thank you, D. In view of the vote totals that have been reported and subject to receipt of final certified results, I now declare that all 3 proposals have been ratified. This concludes our 2021 Annual Meeting of Shareholders. Thank you for attending. Please continue to keep yourselves and your family safe. And we look forward to seeing you next year. The meeting is now adjourned.