Vulcan Materials Company (VMC)

Investor Day 2019

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Sep 17, 2019

Good morning, and welcome to the Vulcan Materials Company Aggregates Day. We're glad you're here. Thank you for joining us in person and via the webcast. For those of you who are new to our company, my name is Mark Warren, Vice President, Investor Relations at Volca Materials. We're excited that you're here and the opportunity to talk to you about our company. We hope it will be both educational and informative, and we want to give you a little glimpse into our passion for reaching higher to make the best aggregates company in the world better. In our time together this morning, you will hear various members of our management team talk about our company's strategy, financial outlook and performance. We'll take a quick coffee and e mail break about 2 thirds of the way through, leaving time at the end to respond to questions. But before we get started, the lawyers tell me that I have to show you this slide. So let's walk through a couple of things from a legal standpoint. So the legal disclaimer that accompanies our remarks. Please be aware that today's program will include forward looking statements, which are based on management's current expectations. Actual results may differ materially from what we are presenting today. This slide on the screen gives you information about some of the risks regarding those forward looking statements materials. Materials. Today's event is being recorded. The audio and slides are being made available via webcast to a live audience, and a replay of today's webcast will be available at our website vulcanmaterials.com. And with that said, I'd like to turn the presentation over to Vulcan Materials' Chairman and Chief Executive Officer and to Suzanne Wood, Senior Vice President and CFO. Thank you, Mark. Welcome to Vulcan Materials 2019 Aggregates Day. Now these events don't happen without a lot of hard work. So let's take a moment and thank Mark Warren and his team for what they're doing for us. Thank you, Mark. We appreciate it. Thank you for your attendance. Thank you for your interest in Vulcan Materials. And for those of you who are in Tampa, we've got a great treat for you to go see our Panamax class vessel this afternoon. Today, as Mark said, we're going to talk about how do you take the most valuable aggregate franchise in the world and make it better? How do you take the industry's leading unit margins and drive them higher faster? How do you make the best better? Now I'm going to spend some time right up front talking to you about why Vulcan has the best product, while Vulcan is in the best markets, the fastest growing markets, and we have the people who run that. Then Suzanne's going to talk about our financial performance over the last 6 years. Then we've got a treat for you. We've got 4 of our key line managers, line leadership, and they're going to come up here and talk about our 4 strategic initiatives, the things we're focused on to make the best better, to drive those unit margins up faster. When they're done, we're going to take a break. Then Suzanne is going to come back and talk to you about what does that mean financially. Then we're going to have a discussion. We'll have some Q and A. So with that, let's get started. Most of you are very familiar with Vulcan Materials Company. And as you know, Vulcan is the largest agri producer in the United States. But more importantly, Vulcan is the most valuable agri franchise in the world. Now this took 60 years to build, 60 years to build these assets and importantly to build our culture. And I would tell you, it's built to last. And we have a very, very rich history. But there's a lot more to come, and that's what we'll talk about this morning. I talked about culture. And for us, culture is critical. It's our lifeblood. And these ten items, if you talk to any Vulcan employee, they can spend hours talking to you about it because it's who we are that defines us. And you see right at the top, it's people. It's people first. Now I would describe our culture as one that cares and ownership. If you go to any Vulcan quarry, the plant manager is going to call it my quarry. The loader operator is going to call it my loader. The crusher operator is going to call it my plant. The salesperson is going to call it my market, my customers. It is a local business, and our employees have ownership, and that's the way we want it. Now they also care. I'm going to make an assertion to you this morning an assertion, excuse me. I'm going to make an assertion to you this morning that Vulcan Materials is the most valuable and the best value proposition of any company in the Heavy Materials sector. That assertion is that we have the best product, the best markets, the highest margins, and we're poised for growth. But you as shareholders should expect more from us, and that's what we'll cover this morning. We'll talk about right product, right markets, right people and right focus. Let's dive into it. Vulcan is the aggregates company. 90% of our gross profit is aggregates, more than any other company in the sector. Now a lot of folks talk about being aggregate centric, leading with aggregates. We they talk about it. We live it. Check out this slide. Look at the blue bars. You can easily tell who the aggregates company is. Fulpin has the most aggregates and the least downstream, and the downstream products we have are incredibly valuable. We have no cement. And we'll talk about how important this is. This has served us well and it's served you well. In the next few slides, I'll talk about why aggregates is so special. Price. Blue line is price over 40 years. The demand falls by 30%, 40%. Price continues to go up. The aggregates business, the aggregates product line has pricing inelasticity and there's the proof. Now the next few slides are very, very because we're going to talk about the difference in the products in the Heavy Materials sector. So let's talk about Aggregates first. The reason Aggregates has pricing elasticity is this. It has various entry. It has incredibly wide geographic boats. It's a very small percentage of the end product, whether it's a house or a road. Price of aggregates, not going to decide when you build something. It also has flexible productive capacity. What does that mean? All right. When you produce aggregates, it's a mechanical process. You're crushing it. Therefore, you can take capacity up or down very quickly and very cheaply. Within 15 minutes, I can turn a plan off. And with no penalty, I can turn it back on an hour or a year. Therefore, you don't have to force product into a market that doesn't need it. That's what creates that inelasticity. It is the best product line. Now if we move to asphalt, if you think about asphalt, the biggest cost component of asphalt is the bitumen in it. But no refinery is going to be in the asphalt business. They don't need to. The next biggest cost component is the aggregates. Therefore, if you have a well structured aggregates market, you have the potential to have a well structured asphalt market. And now asphalt acts like aggregates. So asphalt has the potential to have the inelasticity that aggregates does. Aggregates does. These two products are good through the cycle, reliable, stable, good returns through the cycle. Now let's move to the other side. So, mint ready mix, It's going to be more volatile and more fragile. So why? Cement does not behave like aggregates. Cement is a thermal process. When you produce cement, you got to keep that plant running. To turn a kiln off is very expensive and very painful. Therefore, regardless of what happens in the market, as demand tightens, everybody's going to want to keep running that kiln, now pricing has volatility. It does not have the same characteristics as aggregates does. Remember the moat on aggregates? Cement doesn't have that moat. We can move cement across oceans, and everybody does and people do every day. It's just more volatile. Now let's move down to ready mix. Ready mix the largest cost component in ready mix is going to be the cement, okay? Cement producers are in the ready mix business. As the market gets tight, they're going to move cement out of the back of a ready mix truck. So it has the same volatility. Now every once in a while, you'll see cement I mean, you'll see ready mixed markets that are very special. There's a few of them out there. And what makes them special is that if they have abnormal barriers to entry. And there's a few, but most of them, light cement, are volatile and fragile when it comes to the profitability through the cycle. So I think we've established aggregates, asphalt, stable. They're going to make good returns to the cycle. Cement ready mix are going to be more volatile and more fragile. If you look at the end uses for aggregates, it's pretty balanced. About half of it's going to be public. About half of it is going to be private. But remember, Aggregates is in all new construction, all of it. Have to have that foundation to build anything. If you think about the Public side of the business, it's going to be much more aggregate intensive for every dollar spent. I mean, that's just logical. Just think about our road. The road is basically just built out of aggregates from the base through the concrete or the cement, whereas a building or a house should have been the foundation, and all the vertical is probably going to be something else. So as we move right now through the markets and we look at the setup of what's going on, this is good news. This is good news for the Aggregates business. The oncoming public spending is going to drive that public side. Just look at this graph. 85% of Vulcan's revenues are in states that have dramatically increased their funding and in local markets that have dramatically increased their funding. So what does that mean from a dollars and cents perspective? This represents a $20,000,000,000 per year increase in highway spending, dollars 20,000,000,000 a year. So let's put that $20,000,000,000 in perspective. The Federal Highway Bill is $45,000,000,000 So this is an increase of $20,000,000,000 in 11 states versus the federal bill, which is $45,000,000,000 in 50 states. This is a big deal, and it's already starting to flow through. This started coming through about midyear last year, and we're seeing it day in and day out today as lettings continue to improve. So let's look at some examples on a local basis. This is the city of Atlanta. And you can see our quarries. And then you can see in the yellow boxes the mega projects in Atlanta. This will be $11,000,000,000 spent over 10 years to build out these projects, and you can see who's sitting there to supply the aggregates for them. And we already got one of them going right now that Jason Teter can talk about a little bit. Now let's go to the state of California. $52,000,000,000 over 10 years. Look at the projects on that map. And $52,000,000,000 is just the state funding. There is a few $1,000,000,000 a year in local funding from cities like L. A. And San Francisco, over and beyond the $52,000,000,000 so it's $5,000,000,000 no, an average of $5,200,000,000 a year. And don't forget, Vulcan is the largest agri producer in California and the largest asphalt producer in California. And asphalt really gets driven by public spending when you stop and think about it. Asphalt is a very good business for us. Remember I said that in the right markets, where you have the right structure of aggregates asphalt performs like aggregates, the extension of aggregates. You basically heat those aggregates up to 300 degrees and add bitumen to them. In the 6 states where we operate, that's how this performs. Now we've seen some headwinds in asphalt over the last 1.5 years with spiking of bitumen. And I would tell you that even with that, we're making very good margins in asphalt. And as that settles out and I think that's settled down now to where we've overcome that. If you remember the last quarter, our unit margins were about flat with prior years, and we told you that price in asphalt was going to catch up with the cost of bitumen, and we believe that's happened. But regardless, this is a very good business, and this is very much driven by the public side because it's roads and you're paving roads. If you remember on Concrete, I talked about those few markets that have unusual high barriers to entry. We have that business. We have that business in Napa Valley, and we have that business in Washington, D. C. And think about trying to permit a ready mix plant in D. C. Or Napa, pretty tough. So therefore, in those markets, the Concrete business starts to act like aggregates, but they're rare. Now I believe we've established that Vulcan has the best product, which is aggregates. Now let's move to markets. Check this slide out. We have over 16,000,000,000 tonnes of reserves in the fastest growing cities in the United States. And this is amazing that 50% of the population of United States lives within 50 miles of a Volcan quarry. 80% of our revenues come from states excuse me, come from markets where we have a number 1 or number 2 position. And that's important, but it allows us to lead the market, to lead on price. In those markets, in those cities, those fast growing cities, it's only going to get better because Vulcan has the most strategic positions in those cities. And you think about it as those cities build out, that moat just gets wider. Now on top of those markets, Vulcan has the most sophisticated and the most unique logistics network. What you see on this map, and you see the lightly checkered along the coast, both the Gulf Coast and the East Coast, there is no naturally occurring stone. You have to import stone from all construction either by rail or by barge or by ocean going vessel. And you import them into the red is rail, light blue is barge, and dark blue on the map is oceanfront vessel. In a market that has no natural occurring stone, in a market like Tampa or Houston, those shipyards which you'll visit today or those rail yards start to act like virtual quarries with the same barriers to entry and the same logistical moats. And that's what we've established over the last 60 years. Now something special about this is the blue water. If you take out the boxes, the cost for blue water versus any other modes, it's substantially more economical. So if you don't spend it on freight, it naturally goes to your unit margins. And that's what we've established with this distribution network. I want to take a minute and show you what it looks like when a company successfully pursues strategic growth over the years. So this is 70s, 80s, 90s, 2000, 2010, 2019. Irreplaceable. You cannot replicate this. Think about that. How are you going to put a 500 acre, 300 foot hole in the ground in the middle of Atlanta or Charlotte or Dallas or L. A. Or San Francisco. And again, as those cities build out, it only gets better. The moat just gets wider. The fundamental drivers for demand in the AgriS business: population growth, household formation and employment growth. Now this is what the next decade will look like in Vulcan markets versus the rest of the country, driven by those three drivers. And our markets, as you can see, are going to grow anywhere from 2 to 3 times faster than anybody else's markets. So we've talked about the best product aggregates. We've talked about the best markets because of the fastest growing markets, and we have the best position in those markets. Now let's talk about people for a minute. We talked about the culture and it being people first. And if you talk to employees at Vulcan, you'll quickly find out it's a great place to work. If you go to one of our quarries, it feels like family business. If you go to one of our quarries, what's probably going to happen though is you meet people, you'll meet a parent or a grandparent whose grandchildren or children are working at that same quarry. That's the nicest compliment we can get that a parent or grandparent would tell their daughter or grandson, you need to come to work where I do. I'm proud of it. It's a great place. I've worked here for 30 years, and you need to join us. Culture and measuring what it's like to work in a company is hard, but we do that. We asked Mackenzie to do an organizational health study for us every 2 to 3 years. And the last two we've done rank in the top decile of the 2,000 companies that they survey. Our people tell us that they like our culture and they like to work for Vulcan. And the reason they like it is because they care about each other and they get to own this company. Now I've worked for Vulcan since 1985. And when I came to Vulcan as an operations trainee, the first thing they said was, Be safe. You spent a week on safety. This is our incident rate. At 0.9, we're half of the industry average, and we're proud of that. But I'd also tell you we want that number to be 0. It can be 0. We have multiple operations that go years without an accident. Therefore, it can be achieved. Our view of this is every employee at Vulcan should go home just as healthy as they came to work, just as safe as they came to work. All of our employees, all of our Vulcan family, they have families at home that love them and care about them. And they expect them to come home just as healthy as they went to work. It is our core responsibility, and it is first on everybody's mind that works in these operations. Along those lines, we expect our employees to be healthy. Again, when I came to work for Volcan in 1985, we were already performing occupational health surveys for our employees. We were one of the first in business to do it, much less this industry. It served us well. Our employees and our retired employees remain healthy because we took care of them, because we care about them. This is important to us. It should be important to you. At Vulcan, we talk a lot about commitments and it serves us well. We're committed to our employees and our customers. We're committed to the communities in which we operate. We're committed to our environment. And we're committed to you, our shareholders. We take those commitments very seriously, and it serves us well. If you think about the environmental piece of this and the community side of this, our employees live in those towns and cities. They live in those communities. They live right down the road from the quarry. Their children grow up, go to school next to the quarry. It's important that we take care of it And don't just follow the law, but do what's right by the community, by our employees and by you, our shareholders. So we established that Vulcan has the right product aggregates. We're in the right markets, the fastest growing markets, and we have the people to drive improvement in this business. Now I'm going to turn it over to Suzanne, who will talk to you about our financial performance. Suzanne? Thanks, Tom, and good morning, everyone. Our financial results since the start of the economic recovery have been driven by the competitive strengths that Tom outlined as well as solid execution on our part. We are in a good place right now, and we're poised to get better. And we got here by focusing on the right things on the basics: solid aggregate shipment growth, price improvement, compounding unit margins, strengthening our balance sheet and improving our return on investment. Now for the next few minutes, I want to talk to you about some of these financial accomplishments over the last few years because I want you to understand and remember how far we've come. I think looking at this historical view will also set the stage for a discussion we'll have later on this morning about our future expectations and long term financial goals. The first key element of our success is solid shipment growth in Aggregates. The figures shown in this graph and the graphs that follow compare 2 periods. The first period is the trailing 12 months ended with Q2 of 2013. We chose that period because we consider that to be the start of our economic recovery. We compare that period to the most recent trailing 12 months ended Q2 2019. And as you look at that comparison for shipment growth, you can see that our shipments grew by a 7% compound annual growth rate. Now almost as important as the number 7 is the fact that this growth was widespread across our footprint. And that growth pattern really mirrored the private recovery that has taken place, growth in both residential and nonresidential. It's really only been over the last year that public construction has actually joined the recovery, and we have seen some of those shipments over the last year. It will be a big driver of our growth going forward, and we'll talk about that a bit more later. Another key contributor to our success during the period was improvement in our pricing. Pricing grew by a 4% compound annual growth rate over the 6 years. Our ability to raise prices, especially over the last year, resulted principally from an increased visibility of demand. It makes sense that our customers would be more receptive to price increases if they know they have a big backlog of work in front of them. And the onset of highway lettings and actual shipments against those lettings gave that comfort to our customers and it also underpinned our favorable pricing outlook as we go forward. Like the strength in shipments, these pricing improvements were broad based across our footprint. In fact, in the Q2 of 2019, every single one of our key markets experienced year over year price growth. Now the next slide is a favorite of all the Vulcan people in the room. Gross profit per tonne or unit margin, as we sometimes refer to it, is one of the, if not the most important metrics in our business. It measures the efficiency and effectiveness of our operations, and it serves as a focal point for everyone in the company from Tom to each individual plant and sales manager. To say that it captures and holds our attention on a daily basis is not an understatement. Now why is that? Of all the metrics in our business, and believe me, we have lots of them, that we could choose from, why gross profit per ton? Well, it's because this is the place where the drivers or the levers Aggregates profitability converge, shipment growth, price improvement and operating costs. And it's the management of these three elements and how we strike the proper balance between them that's a bit of an art and a science. It's within our span of control, and that's why it's important to us. Therefore, it's been gratifying to see a 12% compound annual growth rate over this 6 year period. And it's also gratifying to know that our unit margins are some 40% ahead of those of our nearest competitors. And that is not an accident. It's a result of local leadership, strong local leadership, discipline and superior execution of our strategy. So let's move now from our principal aggregates products into non aggregates. I think Tom gave a very good analysis and setup for that. Over the past 6 years, we've experienced a compound annual growth rate of 16% in this sector, and that's come from both same store growth as well as a couple of strategic acquisitions. Now, as Tom mentioned, the businesses in this sector can be very attractive because they can act as the natural extension of the well structured aggregates market and also because they can be located in very select areas where there are barriers to entry. And we did experience some headwinds over the last 12 to 18 months in this segment in the form of rising liquid asphalt costs. Those costs have begun to stabilize. And over time, we've been able to pass along many of those additional costs to our customers in the form of price increases. I'll also take the opportunity portfolio of assets. As we review it, we carefully consider what they have brought to the table thus far and what they may do for us going forward. It's a very thoughtful strategic review of how these assets fit into our long term plans. And I'll give you a couple of examples of those. Over I guess, about 2 years ago, we divested the Georgia Concrete Business. We also swapped a California Concrete operation for an Asphalt operation. And when we take those decisions, again, it's based on strategic fit of the asset. But more importantly, it's based on our current and longer term view of profitability and ROI. So having covered the Aggregates and the Non Aggregates segment of our business, let's move on to EBITDA, which has grown by a 20% annual growth rate over the period. 20%. I'm sure you'll agree that, that is an impressive result. It speaks to our ability to convert incremental revenue to gross profit, which leads to EBITDA, which leads to strong operating cash flows. And that's why we are always, always focused on improving unit margins and managing our long term flow through. Now we've talked about profitability drivers a lot this morning, but we've also made significant strides in other things in our business, in particular, improving our balance sheet and improving our return on investment. So let's talk about that for a moment. Look at the improvement in our leverage over time. 6.5 times levered back in 2013 to 2.4x today, which is within our target range of 2x to 2.5x. Over that period, we also improved the structure of our debt, and we reduced the cost of the debt, all of which are important. These actions strengthened our balance sheet, and that provides us with confidence and flexibility going forward. Those actions have put us in a good place, and we'll be in that place for a long time to come. In addition to all the other things a strong balance sheet can do for you, it also gives us the amount of capital we've invested in the business and what we have leveraged that into. I want to talk about ROI in a slightly different way than what you usually see. Usually, you see the simple bar graphs or the line graphs that show return on investment by year. But I quite like this presentation because it gives you it not only tells you what the number is, but it gives you an idea of how you actually got there. So over the past 6 years, our return on investment has improved by 7 70 basis points, nearly doubling. We achieved that by investing at a compound rate of 4%. So, our invested capital rose by 4% compounded over that period. And for a business like ours, I think that's a pretty modest rate of growth. On the profitability side, we've talked about the 20% compound annual growth rate improvement in our EBITDA. And it's the combination of those 2 and how we leverage the capital in our business that has allowed us to move our return on investment forward. As we move forward, we are going to continue to focus strongly on return on investment, and we're going to approach it from both sides of the equation. So to summarize, the historical results that I have shared with you are quantifiable proof points that our strategy works. We've accomplished a lot, but we have a lot more to accomplish. And I'll turn back over to Tom now to talk about that path forward. I like this. A little capital, a lot of EBITDA. I also like those compounding that compounding growth in unit margins. That's pretty good performance. We're proud of that. So what next? Let's get in the fun part of it. So talked about taking the most valuable aggregate franchise in the world and making it better. Well, this is our 4 strategic initiatives: operational excellence, strategic sourcing, commercial excellence and logistics innovations. These are things that we can control. These are things that we can control to drive those unit margins higher every day: to make the best better, to live up to our potential. Now I'm going to call up 4 of our key line managers, our key leadership that lives this every day. And one of the themes you're going to hear in there is this. What they're going to talk about is how do you take a business that is very granular, that you have to run on a local basis in every quarry, in every market every day And how do you take the collective knowledge, experience and passion of all those operators and all those sales folks in Vulcan and leverage it, harness that information that lets us know how we're doing and how we're going to adjust to get that multiplying effect to make the best better, to control our own destiny with the things we can control regardless of what happens in the markets or the outside world so that we're always living up to our potential in every quarry and every market. Now to start off, I'm going to talk about operational excellence. David Clement, who is our Senior Vice President, David runs the central part of the country, and David is a very expensive very experienced operator, who expensive too. Sorry, David. He's a very experienced operator and is uniquely qualified to talk about operations. David? Thank you, John. Good morning, everyone. So back in 1983, I joined the company. Just as Tom did as an operations trainee. And yes, the first thing we were taught was, you need to be safe. Safety is the primary most important thing that happens every day at our operations. The second thing we were taught was Vulcan expects to be the best operator in the business bar none. It was drilled into us. It was part of our culture then and it's part of our culture today. And I want to talk to you about how we're going to improve in that culture going forward. We believe that the best way to improve in that culture is to enable our great people. We have the best in the business. We have to make them better. So how do you enable your best people? How do you enable the best people in the industry? We firmly believe the best way to do that is for them to win. And our people like to win. So where is it? Where do we like to win? First off, we like to win in safety performance. Tom had a slide up earlier about our outstanding safety performance. It speaks for itself. But that safety performance is about much more than just the numbers. It's about the fact that our people care that our people know that we care about them, that they care about each other, and as a result, they take that ownership in the business that Tom talked about. It's true. You go to one of our quarries, you're going to hear that loader operator say, this is my loader. And he takes care of it like it's his own personal vehicle. And they talk about my plant, it's my plant. They take that ownership. And when you want to improve operational performance, there is a lot of power in employee ownership. 2nd, we like to win with our customers. And winning with our customers means having the right material in the right place at the right time and doing it better today than we did it yesterday. We like to win for our owners, our investors. And we win for our owners by utilizing the assets that are entrusted to us better and better each day more efficiently. Anybody can go out and buy yellow iron. That's that large mining equipment that we use every day in our operations. If you want to win for your investors, you have to utilize that iron better and better every day to improve your returns. So if you want to make the best better, where do you start? We started with asking ourselves some tough questions. Questions about where we are today and questions about where we think we need to be in the future. A few of those questions are here, there are many more, but let me highlight a couple of them. Data, information. We collect a lot of data on our operations. We generate reports. But how do we take that data and turn it into more real time actionable information for our people to make adjustments more quickly. Operations managers, best in the business, very experienced at operating and maintaining our plants. But how do we train those senior operating managers to be better coaches and mentors of our people to very effectively hand off that knowledge to that next generation. And then there's my favorite training. 30 plus years ago, when Tom and I joined the industry, you learned 1 of 2 ways. You had a textbook or you spent about 3 days going through something like this, a big old binder full of information about how to run an operation. That's not how people learn anymore. Today, everyone in our operations run around with one of these, a smartphone. That's how they navigate, that's how they communicate and that's how they learn. So one of the opportunities for us is to take this really, really good operating principles that have been developed over time and make them teachable and learnable the way our people are going to learn today and tomorrow. Those were a few of the questions we asked ourselves. There were many more. As we went through that, we decided we're going to focus on the things that we can control in our operations. And there are 5 core operating elements that we are focused on every day. People, Tom said it, I said it. It all goes back to enabling our people. That's where you have to start. They have that ownership. We have to enable them to be better every day. And the discussion about training and mentoring and coaching is all about enabling our people to be better every day. 2nd, production planning and serving our customers. Every year, we mine mountains of rock, and we have to crush it down into some very small fractions. You saw those last night. So you take a mountain of rock and you have to make it into those into the sizes of those little bowels we saw last night. And you have to meet some very tight specifications in the process of doing that. That's not an exact science. And you only have so much control over how those sizes break as you're crushing them. For us to serve our customers as well as we can to have the right material in the right place at the right time, 2 things really have to happen. One, we need some very strong rhythms of communication between our sales teams and our operating teams so they can know the products that our customers are going to need. And secondly, we have to have our operating teams have to have the best predictive tools available to them to make adjustments and make those adjustments rapidly to meet the changing demands in the marketplace. Number 3, availability. Okay, when a plant is supposed to run, it needs to run. So think about this. You get up in the morning, you get in your car going to work or you get on a train to go to work and it doesn't start or you're going down the interstate in your car and it breaks down on you. You are about to waste a bunch of time and money. Same thing applies to us. Every day, when we go to start when we go to produce materials in our quarries, we have a lot of people and assets that are deployed to do just one thing, and that's crush rock. And if for any reason those assets aren't able to be used to do that at that point in time, we're not optimizing our cost position. Plant throughput. Now the math here is real simple. If you can produce more stone through the same plant in the same amount of time using the same number of assets and the same number of people, you'll reduce your cost position and you'll grow your unit margins. So throughput is extremely important to us. Number 5, inspection and maintenance. All day long in our plants, we have rock beating on metal. And if you watched the video last night, and I know some of you were talking to me about that last night, we talking about screens and how you adjust screens and how you watch all that. You have rock beating on metal. Things wear out and sometimes they break. If we want to hit those high levels of availability and high levels of plant throughput, we have to be focused on making sure that our maintenance teams have the best tools available to not only inspect our plants, but prioritize the repairs necessary to keep those plants operational. And that's what we're focused on. So where are we in this journey? There are several of the initiatives that we're currently pursuing are here on the slide, and you can see those. But our intent here is not to reach a specific destination. We're here to build that foundation for continuous improvement, to put the right tools, to enable our people with the right tools to make sure that they're better today, tomorrow and the next day. And to ensure that we're constantly in the cycle of implement, review and adjust the continuous improvement loop. That's what we're driving for on our operating side of the business. Now so what's all that mean? It might be best if I give you just a quick example of the power of some of the things that we're doing on the operating side right now. In one of our states where a significant highway legislation was passed, we had a sand and gravel operation. That sand and gravel operation produced a very high value product that's used in asphalt paving. And if you were looking at those products last night, you saw that number 78 product, really small fraction. It takes a lot of crushing to get down to that fraction when you're sorting with rock, right? Okay. So with the passage of the Highway Bill, our sales team thought, you know what, there's an opportunity here for us to sell more of this very high priced, high value product. And when we go back to our operating team at the location and talk to them about that, The operating team at the location was we're really right now, we're pretty much producing as much of that as we think we can. And to produce more of it, we're either going to have to add people, time, equipment, something like that. That's where that first check mark comes in, our enterprise wide operations support team. We brought people in from 5 different states to work with those with the people in that plant to figure out how they could do this better. The team put forth several recommendations. Within 2 months, the local operating team had implemented all those recommendations. As a result of that those changes, they were able to double the output of that very high value fraction without increasing any of our input costs. You want to talk about improving unit margins? That's improvement in unit margins. And that's just one example of the things that our operating teams are doing out there every day to try to improve our operations. So where do we think this is going to take us? Again, it's a journey. It's not a specific destination. There are several principles, several things that we're pursuing on this slide that we'd like that we're targeting for improvement. But let me kind of summarize this with 3 points. 1st, we want to take that industry leading operating model and make it trainable and sustainable going into the future. That's what we're doing. Number 2, we're going to make sure that our operating practices are always focused on increasing utilization of the assets that are entrusted to us every day. And number 3, we want to make sure that we have the right product at the right time, in the right place, in the right quantity, at the lowest possible cost. And when we do that, we do 2 things for our owners, for our investors. 1, we improve returns on invested capital and second, we build on those industry leading unit margins. Thank you. Thanks, David. And remember, more experience, less expense. Next up, we're going to talk about strategic sourcing, and Jason Teeter is going to help us. Jason is our Southeast Division President, and Jason spearheaded this effort. So he's qualified to talk about this. Thank you, Tom. I spearheaded this effort with a lot of really great people, so I have to thank them as well. As Tom said, I'm going to talk to you a little bit about strategic sourcing. And first, let me say thanks for being here. We appreciate your support of our great company. But strategic sourcing is something that we believe can make the best better. And before we jump into the specifics of it, let me tell you why it's important. First of all, we spend over $2,000,000,000 a year, and that ranges from things like asphalt oil for our asphalt business to office supplies, to tires for our quarries and our quarry trucks and our loaders, etcetera. We have over 10,000 suppliers. We have over 2,000 transactions every day across our 427 sites in our 20 states. So for us, the reason it's important is because that complete process and that spend is not optimized, and we believe there's opportunity there. And that's why this is important for us. And that opportunity lies in 2 places. It first lies in serving and also saving. In the serve piece, just briefly to talk about that, is how we ensure that our plant managers and our frontline operating teams have what they need it, when they need it, to do what they do best, which is efficiently driving our operations' excellence and keeping our people safe. And from a saving perspective, it's all about taking a total cost of ownership approach. And what I mean by that is, it's not just about the price or the payment terms that we're working with our suppliers on. It's about how that part or that tool or that service affects the efficiency of the rest of our operation. To think about a little bit where we're coming from, our plant managers, moving back to serving, have to spend too much time and had to spend too much time shopping and buying. Our procurement team had to spend too much time on the administrative aspects of procurement just to make the process work. In terms of saving, we had a few categories of spend that we did a nice job with. I would call it fuel, mobile equipment, where we really understood the suppliers' perspective, we understood the operational customers' need and we thought about the whole chain. But there were several categories and continue to be several categories where we can have opportunity. I'll talk about a few of those later, but talk about tires, which is a top 20 spend for us utilities, electrical power, which is a top 10 spend for us. We'll talk about those in a few minutes. So where did we start? Again, a few questions. Are our teams properly saved properly trained to drive serving and saving? Can we shift the focus to total cost of ownership? How do we better serve and save across our vast footprint? How do we free up our operational teams to focus on what they do best, again, which is efficiently crushing rock and keeping our people safe? And how can we better partner with our suppliers across all of our spend categories? Those are the key questions that we sought out to answer. So what have we done? Over the last couple of years, we've made significant investments in both serving and saving in people, process and systems. In terms of serving, we've invested in a new system that includes mobile enablement, thinking about Amazon for our team, where they can look at a screen and they have a catalog and they can pick the part or service that they need. They don't have to do a lot of shopping, right? It's right there, the things that we use and they need every day. We redefine processes, sometimes the most simplest of processes. For example, and it sounds small but it's quite important, is when does part or service or part or tool is delivered to 1 of our quarries, where does it get delivered? How does everybody know where to get there, the signage that tells everybody where to go and what to do? And we trained our people and gave them clarity in their roles. In each of those things, we have been through the implementation and now we're in the check and adjust stage. From a saving perspective, we redefined how we approach our spend categories. We trained our people through live practice on real spend categories with the first wave of categories. We'll do a wave a couple of waves a year that might be 6 to 7 categories where we'll just work our way 1 by 1 through each spend category. The important part of that, however, is the partnership with our operational teams and ensuring it's a priority for them and those operational customers and also working with our suppliers and really understanding their business and how we can collectively take costs out. So the results so far. We're proud to say we've had some really great successes. In terms of serving, we've reduced our order time by 50%. Again, back to that mobile enablement. We don't have to sit in front of a computer anymore to put a requisition in to approve something, etcetera. We've freed up real time for our people, both for our plant managers to focus on, again, what they do well, And we have real savings across some of those initial categories. A couple of examples: tires. And for context, the tire in our organization in our quarries will cost $10,000 per tire, might last 3, 4 years. We through this process, we consolidated the majority of our spend with 1 supplier. And of course, we got some commercial term benefit of that, right? But more importantly, what we got was we really understood how we could take cost out of the value chain for us. And we thought a lot about Treadwear with a dedicated resource from that supplier that works with Vulcan, and we have a system that we can monitor treadwear, and we've identified 10% to 15% treadwear that we have been leaving on our tires, which you can do the math and translate that into a 10% to 15% cost reduction in tires over a period of time. Next, let me talk about utilities. This one's fun because I think this one is a good example important from the utility to how we run our plan. You can choose many different rate plans, and it's important that we match them to the plan, how we run it. We're pretty good at that. We had an individual that helped their plant manager just do that. But now we're focusing on what we call behind the meter. And these are sometimes very simple things. As an example, do we have the our electrical switch houses at the right temperature in our quarries? Have we changed the lighting in our quarries to be much more efficient, to draw a lot less power? Our offices are at the right temperature. Is the lighting in our office is correct? Obviously, very simple things, some of which we probably incorporate and you incorporate at home. But also to much more complicated things, such as how do we make sure our pumps and our motors match the need in our quarries? Do we have the right sized pump for the right application that matches the power drill that we need to have? Funny story about that, we have a firm that monitors power at some of our big maintenance shops. And as we implemented this and some of those very simple practices about lighting and temperature and how we're going about, they called and they thought we had a problem because we dropped the power draw so much. It's a pretty neat story. Lastly, let me talk about the depth at which we're going. It's not just about what's going on in our quarries and these big items we talked about, but it's also about a category we call indirects. And indirects might be software, computers, legal services, consulting services, office supplies. We have 1 person in our organization that focuses on nothing but that and looks at that category constantly. Travel would be part of that. But we're looking at every single category, and we believe, again, there's opportunity there. So at the end of the day, this is again about having the right part at the right time. It's about freeing up our operational teams to do what they do well. It's about freeing up our procurement teams to spend more time with our suppliers and help take costs out of the system and overall to optimize on a category by category basis, 1 by 1 across our organization to lower our total cost of ownership. It's something that will and our people believe more importantly that will help make the best better. Thanks very much. Thank you, Jason. Now we're going to move to commercial excellence. And Brock Lodge, who is our division president of Western Division, which is California, is going to come up and talk to us about commercial excellence. And before years ago, before Brock was a division president, he grew up in the commercial side of the business. Thanks, Tom. As Tom said, I'm Brock Lodge. I lead our Western division in California. And like Tom said, I began my career in this industry 25 years ago as a sales leader in this industry, the last 19 years with the company. And I can emphatically say that the training and tools that our salespeople have today at their operating disciplines. How And Jason Teter talked about how we're serving and saving through our through the strategic sourcing initiatives. So a lot of that focus is inside the gates of our plants. I'm going to shift the focus here and shift the discussion to outside the gates into the sales arena. I'll say this into a less controlled environment out in the marketplace, but it's a place where we control what we can control and that we're focused on controlling our behaviors and what we're doing and putting a process into place. So I want to talk about our disciplined sales process and how that's helping drive our top line revenue growth and expand our superior unit cash margins. So in 2017, we did some reflecting and we looked at things and we said, hey, how do we widen the gap? How do we create a bigger lead for our company and for our shareholders? To build on that lead, we knew we had to have a more sophisticated process, and we developed the Vulcan way of selling. In early by early 2018, we had that implemented across the entire company. Today, and I'm going to talk about it, the bulk of way of selling, it continues to mature, it's enabled us to be much more intentional in controlling what we can control, how we behave and how we respond in our markets. At the crux of the Balkan Way of selling is the defined process. It enables our sales personnel to spend time where it counts in front of our customers. In the next few minutes, we're going to talk about the Vulcan Way of selling and how that's helping us spend time where it counts and control what we can control. So before I frame up the process of the Vulcan way of selling, I'd like to talk I'd like to do look back at some and 3 through 2018, that top line represents our pricing growth. And we experienced annual pricing growth on average of 5.1%, while the rest of the industry experienced 4.3%. The reason of looking at this, we want to talk about where we've been and then cast a vision later as to where we want to go. Tom talked earlier about pricing and elasticity. As you all know, included in this time period of 2,003 to 2018 was one of the worst economic not the worst economic downturn since the Great Depression, and we still outpaced the market during that time with strong pricing, we call pricing inelasticity. The question we kept that we began to ask ourselves long about 2017 was how do we build on that lead? How do we create a bigger gap in this and expand our unit cash margins? That was built on local strategies, and we looked at it, we said we still have to have our strong local strategies, but how are we going to augment this with disciplined systems and processes, a process where our salespeople would be spending more time where it counts? So we asked ourselves some questions. These are the questions that we asked ourselves when we talked about how we build on that lead. The first question was, how can we spend less time on non selling activities? First thing we had to do, we had to free up our sales people, get them out in front of our customers where we could drive higher levels of sales force productivity. We asked ourselves, how can we be more responsive? That was a question we asked. One thing to note, we talk about being more responsive. You hear us talk a lot about the aggregates that we sell in large blocks to asphalt producers and that we sell to ready mix producers. One thing you should know is that represents 40% of our business. I don't want to diminish the importance of that 40% of our business. Those are large blocks of tons that we generally negotiate on an annual or biannual basis. But once we have that and we're creating value there, there's still another 60% that's out on the open market day in, day out. This is where we've developed our process of attacking and going after that 60% in a more targeted way, in our daily quotes, in a much more dynamic pricing environment with that 60% creating value. We said, how do we leverage our relationships? That was a question that we asked ourselves. First thing we had to do, we had to be on the front row of our customers, And when we got on the front row, we had to know what to do when we got there. So went back to training. How are we training our salespeople to understand what our full value proposition is so when they get in with the customer and they're on the front row, we can talk about not only our aggregates, but the other products, the other services that we brought to the table in solution selling. We had to develop our sales people. We asked the question about our sales managers. We intentionally shifted the role of our sales managers to a new role, and that was from growing sales to growing sales people. That was a very important paradigm shift for us. A lot of our sales managers had been major account managers and handled major accounts very well for us over the years, but we went back to them and we said, hey, this can have a multiplying effect if we can better train our sales reps. And so the role of the sales manager shifted to being a coach in training those sales reps. How do we shift to solution selling? This was a focus, a shifted paradigm shift as well. You hear us talk a lot about aggregates, and aggregates being the core to our business, and aggregates get us in the door. But once we get in the door, we had to shift the focus away from the rocks to the other products and services that we bring to the table. And we're training our salespeople to take that focus away from that and then we can create overall more value for our customer and expand those unit margins. In a nutshell, when we talk about what our objective is, it's really to take our prospects over a threshold to where they become our customers, and then to take those customers over a threshold to where they become our clients. We've got a very defined process of what that looks like. I could say it's hard work, and it takes a lot of discipline. And our salespeople are more equipped today to do that than they were yesterday. So where are we now? We're going to talk about this in the context of the implement, review and adjust continuum. We absolutely have a plan to win. We've got a framework now for our sales reps. They know what their plan is and we've got productivity measures where we measure the productivity of our sales reps each and every day. So the plan to win is firmly in place. We've got forward looking information in a much more, I talked about that 60% and the dynamic nature of that 60% that target in our daily quotes each and every day. We've got dynamic pricing information that helps us understand where the value is on each job and really understanding how to price appropriately. We're spending time where it counts. David talked about mining, I want to talk about a different type of mining. We call this mining the value gap. And we talk about the value gap, and all of our salespeople know exactly what the value gap is. And that's really the difference between what the customer can do for themselves and what only Ball can do for the customers. And the wider that gap, and that's something that we have to understand through our consultation and question with our customers is, where is that value gap and how do we mine that value gap? Coaching, it all goes back to the coaching. And like I said, the role of the sales manager shifted from growing sales to growing salespeople, and that was a big focus. And how we grow our salespeople, we do that in weekly sales huddles, we do that in weekly 1 on 1 meetings and conversations between a manager and a sales rep to discuss those performance metrics, and then we do in the field coaching. That's before sales calls and ride alongs. That's after the sales calls and the ride alongs. We're very disciplined and rigorous about that. Your favorite and ours, how do we measure the success? Through the scoreboard. We've got more timely data. We're not making decisions based off one off anecdotal projects or data points in the marketplace. We've got a collective look at the data, and we're looking at that and understanding it. And quite frankly, we're managing our scoreboard better. So how does it all come together? We kind of this is really when the whole all of the value comes together. We're spending more time with our customers. We've got the real time forward looking metrics. We've become incredibly disciplined and rigorous about our coaching, and everyone knows their job, and they do their job, and we're focused on that. And that's a continuum that we keep going, and we're creating value. I want to go back to the story that David Clement talked about. I want to talk a little bit about the value gap. So David talked about that project with the anti skid asphalt material that we were making, but we had limited capacity. We did that, we looked at it, we determined ways to make more of that product, reduce our waste and increase our productivity. So if you imagine, David and the operating team are right here, we got over here. So now we're here. We've widened that value gap. That wasn't the end of the story. So we're over here, so now it's handed over to our sales team, and our sales team took it at that point in time. So we had increased earnings over here from an operational perspective, and we said, all right, how are we going to leverage our earnings from in the marketplace? We looked at what our advantages were, where we had logistics advantages, where we had service advantages, where we had product advantages. Our sales group assessed where we were going to price the project, and we came over here. So we had a project that had a gap initially right here, and we widened the gap. Now that story is not unique. We do that each and every day, and that happens all over our company each and every day, and that's what we call mining the value gap. So when we do that, we're creating value for our customers, which in turn creates value for us, and at the end of the day, it creates value for you, our shareholders. This is what we do. We do it different and we do it better. Thank you. Thanks, Brock. Bert O'Neill, who is our Vice President of Logistics and Commercial Excellence, is going to talk to us about logistics innovation. Bert heads this up. Thank you, Tom. Good morning. We are excited to talk to you today about logistics innovation and the new things that Vulcan is bringing to the market. As Tom will tell you, historically, in this industry, there's been very little attention paid to the last mile. Sometimes people even ignore the last mile. As you'll soon discover, and we'll show you why, the last mile can be a major impediment for the rate of shipments. At Vulcan, we see things differently. At Vulcan, we're paying attention to this. And at Vulcan, the last mile matters. Let's do an overview of our logistics network. Our logistics teams manage over half the product that go to market. And that's done through 4 modes of transportation: truck, rail, ship and barge. The most frequently used is the last mile, that's the trucking. So for 36% of our product, a logistics team member is managing the delivery into the customer site. In other words, 64% of the time, the customer is doing it on their own. If you add that all up, our customers spend over $1,000,000,000 to get our product to their site, over $1,000,000,000 So for a $4,000,000,000 top line company, this is a big opportunity for innovation. Now Tom and the management team presented this slide at Investor Day 3 years ago. On the left, our core demand drivers on the right, the rate of shipments demand on the left actuals on the right. There's a lot of stuff in between. And these are the things that are the impediments between demand and actuals. Most of what's on the screen totally out of our control. Project design, project complexities, funding delays, equipment failures, labor shortages. Tom's favorite, the weather. Suzanne calls it the W word. But there's one thing on the screen that is in our control and that's logistics. It's a major bottleneck in the construction supply chain. But there's things that we can do and there's things that we are doing that we can release that bottleneck. So how do we do it? In every major metro market, we've stood up and we've built logistics service centers. And there's 3 ingredients that go into a logistics service center. One is the people. It's the team that's managing the orders. We recognize to really do this well, we needed real logistics professionals operating those centers. Today, we have people from FedEx, UPS, Schneider, Ryder that are now on the Vulcan team operating logistics service centers. The process, we run a best in class order fulfillment process. And what that means is when Brock and the sales team go win the order and the customer says, let's go, it's time to ship, a logistics team member schedules the freight, arranges for loading at the plant and confirms their product got to their site on time. And third is systems, systems that help us automate processes and digital tools that give us real time information so our people can make better, faster decisions. Still in the early days of testing some new technology there, but the results look very promising. Now why is order execution so important? Why are we talking about that at Investor Day? We do this over 10,000,000 times a year. That's why it's important. And the way that we look at it is, there's 2 customers to every single transaction. There's the obvious customer, which is the contractor, and then there's the driver. For the contractor and the end use customer, we recognize the megatrend that everybody's delivery experience and their expectations around that are continuing to increase. Whether you order an asphalt on a job site or Domino's Pizza at home or Amazon at home, all of our expectations are continuing to rise around a delivery experience. We recognize that. So we have to step up our game to exceed customer expectations. These jobs are getting more and more difficult to perform on time and in budget. As you can see on the screen, 90% of infrastructure projects are late or over budget. 9 out of 10 late or over budget. Let's go to the right side with the drivers. If you guys went to a Vulcan quarry 10, 15 years ago and you're there early in the morning, you would have seen a line of trucks outside of the gates, up the roads, all of them ready to load and go to the customer site. That's disappeared. The surplus of drivers that we have in this country and at Vulcan sites has disappeared and it's not returning. In the next 3 to 4 years, the United States will be short 200,000 drivers. So the way our people talk about it is the war for drivers, it's on. And this is a cross industry battle. Anybody that needs to get product to market and use a truck driver is facing this issue. So how do you win the war? The way we approach it is we help the driver. We've got to earn their loyalty. And that's why they're the 2nd customer. We have to earn their loyalty. And the best way to earn a driver's loyalty is to help them put more money in their pocket. We track pay per day for our drivers, how much money are they making on a daily basis. And if we can help them with that, we'll earn their loyalty we can serve Vulcan and serve our customers. This combination of heightened expectation and constrained supply creates a premium opportunity to provide a solution into our markets, and that's what we're doing today. Now this isn't a Saddle Line initiative, separate part of the business. In fact, it's very core to some of the things that you heard Brock talk about when we're dealing with our commercial capabilities. And I'll start at the bottom, which is the foundation, sales management practices, sales service, time with customers, logistics professionals managing safety and service and sales and logistics teams being totally in sync and on the same page in terms of their processes and what we're trying to accomplish. That's foundational. Those building blocks are in place. This is not the plan. That's in place today. We came back. And on top of the foundation, we put advanced tools, sales training, sales coaching, the heart of what we do, market intel, data, analytics, real time information. It's really at the center of what we do in our markets. And logistics technology tools that are helping digitize the experience, still early but excited about where that could go. Everything you see in blue underneath the green below the water line, most of the time, our customers, they don't see that. That's our internal capability. What's at the top, the tip of the iceberg are commercial solutions. And we call them commercial solutions, not just solutions, but commercial because they create value for Brock and the sales team to go capture. We challenge our sales teams to bring the best of Vulcan and these solutions to each and every one of our customers. Now I want to tell you a story, a different story than the one David and Brock told. We are shipping on a job today. We've got 20 or 30 trucks dedicated today. Very complex, big infrastructure job, millions of tons, multiple years. It's over a 4 mile stretch of highway, and there's 100 different drop points along the way. Now mind you, this is an interstate. There's no physical address. You don't see mailboxes on an interstate. So it's still very difficult to know where to go. You're not telling the UPS driver to take a package to a mailbox, 100 different drop points along the way, and timing's critical. So we've met with a customer in the job trailer with our sales and logistics team, and we said, what's painful about the job? How can we help you be on budget and on time? And they said, guys, there's 3 things we're really struggling with. Number 1, we're an out of state contractor. First time we've done a job in this state. We don't know the local transportation market. We said, well, we do. We know it very well. They said, we can't find drivers. The second thing they said was there's too much paper. It's a lot of headaches in administering this job. There's a paper bill of lading for every single shipment across millions of tons. And we're having to manage all that paper to track our progress. The third thing they said is, we don't know where the truck is. We don't know when they're loading. We don't know when they're in traffic. We don't know when they're out of traffic. We don't know if they're on our job sites sometime where the truck is. So the team left, went back. They packaged the solution and they scheduled a second meeting in the trailer with the customer. We provided 3 things. Number 1 is we provided a bundled solution of material and freight and services. We bundled it all together for that customer. So it's one solution, not just rock, but material, freight and services. The second thing we did is we digitized a lot of the record keeping for them. And this was a big deal for the customer because the customer had a penalty in place that if their actuals and their design deviated too far, they had a penalty to pay. So every week, we give them digital reporting on what that looks like. Every time that we drop off, we snap the longitude and the latitude, we can report back on every one of those drop points and what their yields look like. The third thing we did is we provided the superintendents on the job with a smart device that showed the tracking and the ETAs on the truck. This way, when the truck's loading at the quarry or if the truck got hung up in traffic or if the truck was on the job site, the customer knew exactly what the estimated time of arrival would be and they could better plan their crews. And this is an example of bringing the best of Vulcan to our customers. Here's what the customer said about it and ask you guys to read along with me because that this does a really good job of just showing how does it all come together. Scheduling, speed and accuracy of delivery, invoice reconciliation, process controls have all been greatly streamlined by partnership with Vulcan Materials. That's how you want your customer talking about it, partnership. I believe much of this improvement is due to technology and transparency that Vulcan provides to their clients. For this customer, like most customers, the last mile matters. So the last mile matters to Vulcan Materials. When we solve this problem and we are solving this problem, we're going to ship a lot more rock. Thank you. Thank you, Bert. A round of applause for my colleagues. Thank you all very much. Appreciate it. Those guys are good. So I think we've established right product aggregates, right markets, right people. And now we have the right focus, the right focus on the processes that drive unit margins. Now what this does is provides us with a different, real and certain path to rising unit margins, controlling what we can control. These are in our cans. Doesn't matter what happens to the weather or the markets, we're going to drive it better. What you've heard my colleagues talk about is hard to do. You're taking a local business that has to be managed locally and you're leveraging the collective experience, knowledge and passion of all materials across the entire sector. You harness that information and you're making the best better. You're improving the processes. You're improving the systems and technology. And you're helping the people get better so that we live up to our potential. You're making the best better. And we've been working on this, we got a long way to go. Now for you as investors, what does that mean for dollars and cents? Where's the money? And I promise you, if you'll take 15 minutes and get a cup of coffee and come back, Suzanne will tell you. So let's take a break for 15 minutes. We could, everyone could kind of start to work their way back to their seats. We'll get started again. Okay. That was a great first part of the presentation. We're ready to get started with the second part. So I'm going to turn things back over to Suzanne to get us rolling. Welcome back, everyone. I'm happy to see that you actually stayed for the last part of the presentation. So thank you for that. I hope that as you were getting a coffee, you had the opportunity to catch maybe a couple of minutes of the video that we were showing. I think it really showcases well what our company is all about, especially the people. So I hope you were able to enjoy that. This part of the presentation is where we take everything that we've heard all morning, pull it together and put it in financial terms. Simply put, as Tom and I like to joke, it's time for the money slides. So over the next few minutes, I'll share with you our future outlook and expectations and what our long term financial goals are. I first need to give you a little bit of context around what we're going to be talking about because there is forward looking information here. And because neither Tom nor I have a crystal ball, Mark Warren made me promise to put in these highlights of the Safe Harbor provisions that he reviewed earlier. Now, before we talk about the future, let's look back to our last Investor Days in 2015 2016. At that time, we shared with you 5 core disciplines or strategic priorities, as I like to call them. As you look at them, I'm sure you'll agree that they're still pertinent and appropriate for today. What we've done is add longer term goals that match up to each one of those priorities. And you've heard us talk about these before as you've met with us. For example, over the long term, we want to achieve a 60% flow through rate of incremental revenue to gross profit, again, which flows to EBITDA, incredibly important. A second goal we don't talk about quite as much, but one which is still important to us is that we want to continue to leverage our SAG expenses. And so as a long term goal, we are targeting a ratio of SAG expenses to revenues of about 6%. And as you think about the 4 initiatives that you just heard our operational leadership talk about, and as you look at them here, you can see that they just fit almost perfectly up into the support of these strategic priorities. We have begun to leverage those. We've begun to see some of the results of those, and we think there's a lot more where that came from. Now in 2015, we also shared with you our future outlook on Aggregates profitability. And we split that into the 2 main drivers: volume and unit profitability. This slide updates you on the progress. But before I get into the detail of it, the key takeaway from this slide is that we have executed well, but the pathway that we've taken and the pace with which we've traveled down the pathway has been a little bit different from our initial expectation. So let me explain that. 1st, with respect to volume. In 2015, we anticipated that over time, we would return to a more normalized level of demand. And we estimated that, that was about 250,000,000 tons of aggregate shipments. That assumed and this is important, that assumed that both the private and the public sector would participate in the recovery. But up until a year ago, the recovery was purely private based. And it was only over the last year that the public sector came to the Economic Recovery Party, as I like to say. The good news is that although our return to normal demand has been a little bit slower than we expected, the public construction recovery is finally, finally here. And when we look at those highway funding levels that we see now and we compare those back to what we expected in 2015, those highway funding initiatives are at a much higher level than what we initially expected back in 2015. And I'll refer you back to Tom's transportation chart that sets forth all the details, but I'll just remind you of one key point. In the 11 key states for us that constitute 85% of our revenue, there have been dramatic increases in funding, and that is going to benefit us for a long time to come. So our view now is that this normal demand level of 250,000,000 tonnes that we spoke of back in 2015, we believe that, that is still achievable. And that belief is supported by the significant increases that I just talked about in highway demand. While the direction is clear, however, the timing is not precise. Therefore, when we think about volume as a driver of Aggregates profitability, we consider it to be largely outside of our control just because there is some imprecision around the timing of when that happens. On the other hand, when you think about our unit profitability, it's a different story entirely. Our 2015 expectation was that we would achieve a cash gross profit of $8.25 per tonne when we achieved the normal demand level of 250,000,000 tons. As we think about the progression of our cash gross profit over the last 6 years, it's grown in an 8% compound annual growth rate. So from a unit profitability perspective, that's actually put us ahead of where we thought we would be at our current volume levels that we're experiencing today. So we are in a good place right now, a great position from which to move forward. And there are several reasons for that. I'll give you 3 of them. First of all, improved demand visibility just creates a better pricing environment. Secondly, we're Vulcan. For those of you who know us, we are keenly focused on cost control. Just ask any of the last 4 presenters. And we are always focused on and we talk internally about how we beat inflation. That's our goal. And third, the execution around these 4 initiatives has and will continue to provide incremental improvement opportunities. And as a result, unlike volume, we consider unit profitability to be largely within our control. So I want to take a little bit deeper dive into volume and normalized demand, and I'll show you why. For those of you in the back of the room who may find it a little bit difficult to read the legend, let me explain what you're looking at here. The chart covers a period of time from 1974 to today, 2019. The two lines are this. The broken or dashed line represents normal aggregates demand. That is the trend line over that period of time. The actual demand, what we actually experienced, is represented by the solid line. I think as you look at the chart, there are a couple of things that are apparent. First, actual demand is not linear. I wish it was linear because that would sure make my life a lot easier, but unfortunately, it's not. The second and more important thing is that since 1974, every time actual demand has dipped below the trend line, it's bounced back and often has exceeded that trend line. Today, we're still below normal demand for the reasons I mentioned earlier. But we are encouraged by these higher levels of highway funding that we're seeing. And just to pick up on a number that Tom mentioned, we have an additional $20,000,000,000 of funding at the state and local level in our key states. And that knowledge and the certainty of that, because again, the funds are all firewalled for use in public constructions, increases our confidence that, over time, the market will return to normal demand. Now in addition to that information, the underlying demand drivers in our business are still in place, and we've listed those out here for you. Tom highlighted 3 very important ones earlier: population growth, employment growth and household formations. And the anticipated pace of those underlying demand factors just correlates really nicely with our footprint. I'd like to add a couple to these underlying demand drivers, and I'll speak to the 2 on the Private side. When you look at the markets we serve, there is a low inventory of houses relative to what the demand is because, again, the demand is driven by those three factors I mentioned earlier. In addition to that, we're operating in a very low interest rate environment now. Both of those are conducive to and positive on the private side. If you look at the public side, look, we've already touched on the big one. We've just had a sea change in funding that's just beginning to kick off and just being really simple and practical when we think about it, just drive around the country. I mean, we are just in need of so much infrastructure. Now this is our view over the long term. And in our opinion, we've got some tailwinds with respect to volume. We've got some tailwinds with respect to unit profitability. So the key question now is what does that mean going forward? What is our long term EBITDA goal? And what is a reasonable path to get there? So we've been teasing about the money slide. Here it is. We still have our sights set on $2,000,000,000 of EBITDA. You've seen our historical results. We've been making steady progress toward that goal. Now some of you may be thinking, well, so what? You compare the two periods, it's the same number. And you're right, it is the same number. But it was a big goal back in 2015 2016 when we set it out, and it's a big goal now. The key is and the main point of our current outlook is that we have a little bit different pathway and pace to get to the $2,000,000,000 A bit of a change, but we believe it's a change for the better. Our outlook now calls for us to hit our EBITDA target by way of higher margins and fewer aggregates tons. Let me just repeat that. More margins, more margin, less tons. And the reason that's important is because reflect back on the comments I made earlier, of the 2 drivers, volume and unit profitability, Unit profitability is more within our control. That's what we've been focusing on. That's what we've been talking about. That's the basis of the 4 initiatives you've heard about. So, we think it's good news that the focus has shifted more to margin than volume. The so what, therefore, is that we are accelerating our pace. We're pulling forward the achievement of some of these goals. And that's what happens when the best gets better. So to be clear about this, because I know we will be talking about this for a long time to come, Our long term financial goal is to achieve $2,000,000,000 of EBITDA. And the pathway that we believe is most likely is a $9 cash gross profit per ton when we achieve a volume level of somewhere between 230,000,000 to 240,000,000 tons. That's our goal, and we are on a path to achieve it. And we will continue to measure our progress against it, and we'll continue to report that back to you. Now as we implement the strategy and the initiatives we've talked about, it's important to have financial flexibility to do what you intend to do, and we certainly have that. We've talked about the improvement in our leverage ratio. The balance sheet for us is an underpin to our operating strategy. It gives us the confidence and the flexibility to execute. It's a source of strength. And although many people don't think about it in this way, we think about it, I personally think about it as a competitive advantage, and we intend to keep it that way. The flexibility that our balance sheet gives us also gives us the flexibility to appropriately invest our cash. We have a well established set of priorities with respect to capital allocation that you can see here. We allocate and invest our cash on the basis of the priorities that make the most sense at the time and in a way that is most likely to enhance shareholder value. And that's what we're here for, to enhance the value of those who invest in the company. So let me just talk about these priorities. I know some of you have seen this slide before. You've heard us talk about it. But for those who may be new to the story, I think it's important enough just to spend a couple of minutes covering it. Our first and highest use of cash is to make sure that we maintain and protect this valuable franchise that we have. That takes the form of operating and maintenance capital. So our cash always is allocated on that basis first to keep what we have in good working order and make sure it delivers to our customers what our customers need. And I would just remind you that, that operating and maintenance capital can float or move up and down as volume changes. Our next priority is to grow, expand our franchise. And we do that via a couple of different ways. We have internal growth projects, which we quite like because they're generally some of our highest returning projects, and we have the opportunity for M and A. I'll give you a couple of examples of internal growth projects that have been and will continue to be very good ones for our company. Along the Gulf Coast, we have a number of sales and distribution yards that we have opened. Those sales and distribution yards strategic way, So very important to us. And if you think back to Tom's Logistics slide, you can really see how that Logistics network has grown and expanded. A second example of an internal growth project is a real time one. Our we have opened a greenfield quarry, brand new quarry and a rail line in Texas. So we're very excited about that. On the M and A front, if you look at the M and A that we've done over time, particularly recently, and I'm a big fan of this, we tend to look at small bolt on acquisitions. We have a really strategic and returns based set of criteria that we expect those to meet. And we are very, very disciplined about that. We look at lots of deals. You see how many we do. That means we are disciplined enough to turn down the ones that aren't really perfect for our business. So from the capital allocation perspective, as we think about the growth category, please understand that we know it's all about discipline. The next priority is dividend growth. We return cash to shareholders via dividends. It's a progressive dividend. And our view of that progressive dividend is that we will continue to raise it, generally in line with profit growth to a level that we are absolutely 100% certain that we can maintain through the cycle, very, very critical for you as shareholders and for us as a management team. And if after fulfilling all of the priorities that we have prior to this, if there's excess cash left over and it's within the bounds and we are within the bounds of our leverage range, then we would consider returning cash to shareholders via share buybacks. Now as we follow this capital allocation policy and we have good strong execution from the operating side, our returns should improve over time. We're going to be really focused on that, and I'll just share an additional fact with you. Over the last 12 months, our return on investment has increased by nearly 100 basis points. That's quite good progress, and that's a progress that we want to continue. So I hope that I've made clear the linkage between our strategic priorities, these 4 operating initiatives that we have and how that translates into future growth and financial expectations. We will measure our progress against that and keep reporting back to you. And I just want you all to understand, we, as a management team, are very, very excited about this and our pathway forward, and I hope you are as well. So I'll turn back over to Tom for some closing comments. Thank you, Suzanne. I want to take a minute and highlight 2 really important points that Suzanne just made. With regard to normalized demand first, if you think about on the private side, the fundamentals of population growth, employment growth and household formation and put that together with, in our markets, extremely low levels of housing supply and extremely low interest rates. The public side should continue to grow excuse me, the private side should continue to grow. Moving to the public side. Remember the chart, this is Anne reference, where in our markets, we see an increase of $20,000,000,000 a year of funding. You put those 2 together, now I think it provides a lot of clarity and certainty to the path back to normalized demand. 2nd point. Our strategic initiatives, the things that we can control, our focus on the process that move the needle in this business, pull forward our ability to get to gets into $2,000,000,000 It accelerates the growth unit margins and pull forward it pulls forward to $2,000,000,000 Good news. Now I think we've established some facts. Number 1, bulk of materials has the right product aggregates. We're in the right markets. We have the right people. And as my colleagues explained, we have the right focus on the things that we control to drive our industry leading unit margins higher every day. In the beginning of this, I made an assertion, remember? Assertion that Volk Materials was the best value proposition in the Heavy Materials sector. Confirmed. Best product aggregates, best markets, fastest growing markets, the right people to run the assets and the right focus on the processes, the 4 strategic objectives that we control, regardless of what happens in the outside world, the things that we can control to make the best better. If you stop and think about this and those 4 strategic objectives initiatives that we control, It's a journey. You don't have to get to the end to see the profitability. Every time a quarry improves the process, improves the throughput, every time we create value, whether it's with our logistics or with our service to our customers. Every time we're able to get to earn price with our customers, we drive those unit margins higher, faster. It is a journey to make the best Aggregates company in the world better. Now we're going to take a minute. I'm going to ask my colleagues to join us on stage, and we'll take your questions. Okay. So to ask questions, so yes, raise your hand and we'll come around. And if you could, before you ask a question, just give your name, the firm you're with, and just, I guess, initially, why don't we just limit it to one question and a follow-up so we can kind of get everybody's question if we can, okay? All right. Thanks, Mark. Good morning, Jerry, Rebish, Goldman Sachs. So, so far since 2003, pricing has been up 4%. The longer time series for you folks, pricing has been closer to 5%. Can you talk about is there a path for this cycle to get to that historical bulk in 5% pricing bogey and it's been nice to see the aggregates PPI really continue to accelerate through August. Can you talk about whether that's consistent in Vulcan markets as well? I'll start. We're over 5% today. I think that the clarity and surety of getting to pricing is better today than it was over the last 5 years, and the driver of that is the surety and clarity to rising public demand. If you go in our markets and our customers look out ahead to the projects that are coming, they see it, they know what's coming and that just reinforces pricing. You guys want to talk a little bit? You guys still running the business. So, you want to talk about that a little bit? Yes. In California, it's our day to day bid activity and we're looking at a large a lot of the large SP1 projects that we're targeting. A lot of confidence in the contracting world, a lot of confidence with materials suppliers in California. So that visibility is giving us good visibility where we're very confident in our pricing plan forward. I would add to the second for George. I've got Ford. I mean, we feel good. As Tom said, I mean, there's confidence in the markets, and that helps us a tremendous amount. And can you folks comment on the second part of the question? So the aggregates PPI nationwide accelerated from 5.5% in the second quarter to north of 7% so far in the 3rd quarter. Is that consistent with the pricing trends that you're seeing in your markets? We're not going to comment on the Q3. But I but to add to that, I would just remind you the pricing outlook for the full year is 5% to 7%. Good morning, everyone. Phil Ng from Jefferies. I think you guys have done a good job illustrating how quality of your business that bears entry and the pricing powered unit margins. But I think the question we get a lot often is the return profile surprisingly isn't higher. A lot of initiatives you guys have talked about today seem like it could be enhancing, but it's not very capital intensive. So when you think about the next 3 to 5 years from a return profile standpoint, is the expectation for it to accelerate? And from a capital deployment standpoint, is it decelerate, I guess, based on that leverage profile? No. I mean, you're exactly right. We talk a lot about unit margin internally, but we also talk about return on invested capital. It's one of my personal favorite metrics. I mean, that's what we are in business to do, to improve those returns. And if you think back to the slide I showed, there are 2 ways to attack that. You work on minimizing, if you will, to use that word, your invested more profitability. And I think that's what we've really been focused on doing over the last few years. And yes, I would personally be disappointed, and I know I speak for my colleagues as well if that return on investment did not improve. These gentlemen and the colleagues will drive that. Catherine Thompson, Thompson Research Group. I'm going to follow-up again on kind of your returns question. Really, we spent a lot of time there's been a lot of focus on M and A, big chunky acquisitions. But I'd like to spend a little bit more time on internal projects and really quantifying how much of a better return they are for perhaps bigger acquisitions? And then when you look at that 7 70 basis point improvement in returns, how much of that is from internal projects versus some of the other initiatives that you've outlined? And how should we think about that going forward? I'm going to take well, if you think about internal projects, and they're so important because what you're doing is going outside your existing market boundary lines and putting in an operation. And it does 2 things. It enhances the value of operation because it grows it, but also protects your franchise. So they're very important. They're hard to do. They're very hard to do. They take a lot of time and it's actually a pretty good investment. Once you do them, they just it's like an acquisition without paying for the Blue Sky. The returns, why don't you take that one? No, that's right. I mean, when you think about internal projects versus M and A, I mean, it's certainly a less risky proposition. It is completely within your control. You get exactly what you want, and it's exactly where you want it. So you can get the most strategic benefit of it. There really isn't a high level of integration risk, and you really don't have to worry very much about overpaying because, as Tom said, there isn't this big goodwill element associated with it. So when you start off on that basis, it helps the returns immensely because your capital base is just naturally lower. And we don't get that granular and share the returns for specific projects. I mean, we tend to look at it from the capital allocation standpoint. We have a long list of internal growth projects. We have a list of potential M and A candidates, and it is a constant weekly, monthly review of, at this point in time, which provides the most benefit from us to us. And the criteria we look at again are what's the strategic fit and what's the returns profile. The field or it's a piece of M and A coming to market. I would point out while it's not flashy, the biggest most meaningful internal growth project is these 4 initiatives. That will move the needle much further than anything as far as growing the value of the company. Great. And follow-up questions on IMO 2020. What's the potential impact to your asphalt business? And just to confirm that it's not necessarily an impact to your shipping business? Thank you. It is not impactful to our shipping business, and that was part of the investment in the 2 new ships that we did about a year ago, one of which we'll tour today. They're equipped with scrubbers. As far as the asphalt business, as we said, our asphalt business performs like an extension of our Aggregates business. The biggest variable is going to be the price of bitumen, yet the market responds very quickly to when bitumen goes up. When it goes down, it expands your unit margins. So we'd love some help on lowering bitumen prices and it will expand quickly expand unit margins. But as I said earlier, I think we've caught up with the big increase in bitumen and with the price of hot mix. So we're in a very good place and hope the price goes down. But if it doesn't, we're fine too. Thanks. Derek Schmois with Longbow Research. You talked a lot about infrastructure, and now you're finally starting to see growth and you're expecting to see a lot of growth over the next several years. Does the unit profitability matter to you whether you're servicing infrastructure projects relative to private construction? And then secondly, at one of your prior analyst days, you anticipated really taking meaningful market share on infrastructure as being one of the largest producers closest to market able to service these large projects. Would your expectation over the next several years be to continue to take market share because of the infrastructure acceleration? The first part of your question was the difference between unit profitability private versus public, not a lot of difference. I think what you get, what we talked about with the public side is us and our customers get a lot of visibility of what's coming, which gives everybody confidence and confidence to improve unit margins. On so I think that is very helpful for us. As far as large projects, I'll draw your attention back to the slide that we had on Atlanta that had our quarries and the mega projects. Our firepower and our ability to service a project that has millions of tons and has liquidated damages related to time on it, all of a sudden the price of aggregates is not nearly as important as your serviceability of the job, which gives us a strategic advantage. Yes. I think we're uniquely positioned to benefit from those projects because of where we are, because of our logistics capabilities that Bert talked about and a number of other things. We I think we that is a benefit that naturally comes to us because of our leadership position. We don't really talk about it internally in terms of taking market share because I think sometimes that gives the connotation that you're going to buy it with price, and we have 0 interest in buying something with price and not improving our unit margins. We're a leader in these markets, and want to make sure that we're leading on price as well. Yes. I think Bert's example of the service to that highway job is a very good example of that, that you earn that and with your capabilities. But while we're on highway demand and shipments, I mean, these gentlemen are operating in the states California, Georgia, Tennessee, South Carolina to have some of the big increases. So why don't you guys talk a little bit about what's happening in your states of that money maturing into shipments? Sure. I can address Tennessee. Some of this how fast that money starts to flow has a lot to do with how well prepared the DOTs are to start spending that money and releasing projects once the money starts coming in from the increase. So for instance, Tennessee. Tennessee, when they approached their most recent motor fuel tax increase, they had a list, a 10 year list of projects on the books that they were going to apply to those funds to. Many of them were already designed. So Tennessee passed their motor fuel tax increase. It went into effect July of 2017. Within less than a year, we were shipping projects that were being funded from that funding increase and are still shipping on today. I mean, we've got some large projects in Tennessee we're shipping on, for instance, the Interstate 440 reconstruction around Nashville, $150,000,000 project that we're shipping on today that's part of that IMPROVE Act funding? I'll start with South Carolina. I mean, if you look at South Carolina just recently, they've passed an improved gas tax rate that raised I think it's about $0.12 a gallon. That will phase in between 2017 when that was passed in 2023. We're seeing some of the benefit of that today. But South Carolina also has had several bond raises that were serving several of the 85, 385 projects. And there's a lot of plans if you all have been to Charleston lately, how much has grown and sort of the infrastructure around just coming out of Charleston up 26. And there's several projects that are also being funded by bonds that are it's over $2,000,000,000 between Charleston and Columbia. Talking about Georgia, House Bill 170, 75% increase back in 2015 in their funding. That was a little bit slower than what we would have liked to get that done. And it gets back to David's point about the DOTs being prepared, but we're seeing real benefit of that today and quite excited about it. And if you think about Florida, just very continued strong funding there. Yes. In regards to California, I'll talk about the state level and I'll also talk about the local level. At the state level, I know all of you are aware of SB-one and what SB-one injected into California around $5,200,000,000 annually with that gas tax. You're also aware that, that was somewhat in peril for about 9 to 12 months as there was some talks of repealing that and pulling that back. We were successful. The state of California was successful in repealing not repealing that and helping keep that intact. So now there was a little bit of a delay, a little bit of a lag that we saw with the uncertainty around that. We're seeing the work bidding. We're seeing the our visibility now on the bid activity is certainly much better than it was. We've booked and shipped a nice share of work in regards to that. So we're in a position to participate on that. We only see that getting better. I also want to talk about the local measures in California. Since 2016, locally, City of Los Angeles, San Francisco, other places have passed. On an annualized basis, about $1,400,000,000 of injected monies into our into the infrastructure systems as well. So we're really excited about that, and that's something we have been participating on on City of Los Angeles where we've got a great market position. We've been participating on that. And then just kind of going back, I mean, to what we're doing and how this better positions us, it positions us to win. Our capacity, the services, the things we're doing here on the logistics side of things, we think of we don't think of it as taking it. We think of it as winning it, and our customers have a lot of confidence in us, and we're helping our customers win. Kind of to Brock's point, if you look at Georgia between, call it, now and 2028, the major mobility improvement projects, that's something where you look at that network of quarries that Tom referred to, that's something where to Brock's point is we can win that. And it's because of our network of cores and because we have backups on backups to be able to supply those jobs and ensure those customers are not waiting for any material. Great. Thanks, guys. Adam Seidl from Barclays. So first, when we look at the normalized ton, the 250, of course, didn't have Acre USA, the 230 to 240, just a point of clarification there, whether that includes the incremental volumes from Aggregates USA? And then also, if the private markets were to hold as they are today and then what you guys see on public volumes and lettings, do you believe that you'd have the potential to get above that normalized ton forecast in the intermediate term like that long term chart has showed that this industry has been able to do? I think if I understand your question right, the 230, 240 dollars is merely us pulling forward the $2,000,000,000 because of our ability to continue to improve unit margin and by those four initiatives, accelerating that ability to pull it forward. So it's just that's just pulling it forward. As far as our view of normalized demand in the cycle, underscored by what's happening now with public funding, I think that's what I as we what both Suzanne and I talked about, about the clarity moving forward on that. That's right. The introduction of a volume range of 230 to 240 just merely indicates that through an accelerating of unit margins, which we have seen over time because we're in a better place than we expected to be right now at the current volume levels. And as we look forward, it's the pace of those that accelerate that allow us to get to the big goal of $2,000,000,000 with fewer tons. That doesn't mean that over the long term, we see a particular structural reason as to why we wouldn't get back to normalized demand. And you're right, I just refer you back to the chart. Actual fluctuates around the trend line, but it does go back over time. Great. And then one last one on SG and A. You've had this 6% target as a long term goal. During the presentation, you spoke a bit about things you can control and things you can't control. So within that SG and A, there's obviously two sides of the equation there on sales and costs. So how much of it do you feel like is in your control versus what you need to see on the sales side? Yes. I think if you look at our and thank you for saying SG and A, I've been at Vulcan now for a year, and it's still hard for me to say SAG costs. So bear with me. It's worth between the 2. When you think about those costs, I mean, you have 2 ways to approach it. You build the revenue base. That helps with the leverage. But I think that's kind of an easier way out. We need to look really closely at the cost we expend in that category of SAG expenses, and we need to make sure that we're spending them on the right things to move the business forward. And I would say, people in supporting these processes that we've talked about are key because the money you spend there, the return you get in unit margin is going to far outstrip the cost. But our view is, again, because volume is not always the most predictable thing in the world, your costs and how you control them is more predictable. So I would tend to approach how we continue this downward trend we've had in that ratio over time by making sure that we're spending the right amount on the right things. It's okay to invest, but you still have to be disciplined. That's right. Good morning. Curt Woodworth with Credit Suisse. When you sort of stratify this $20,000,000,000 of public side funding you see coming, different pieces of funding had different lead times anywhere from 1 to 2 years. You mentioned South Carolina, some of the funding is staggered into 2023. Can you give us a sense of how you see the cadence of the monies that are allocated that will translate into actual shipments for you over the next couple of years? I mean, it seems like given the acceleration in the market that you could be looking at a period of above trend growth as a lot of this funding is sort of hitting at the same time in the next couple of years. But how do you see that playing out over say a 3 to 5 year time frame? Thank you. I think ultimately we'll see it grow for 7, 9 years based on 2 things. As these states mature into their funding, it'll layer on within a state and then layer on between states because all of them are at different stages. But in most also in most of these bills, the funding goes up over time. So you have 2 or 3 effects there. It's a little difficult for us to predict because we've got states like Tennessee who came on really fast, California that's come on really fast, South Carolina that's been a little slower. So putting that all together, we'll give you some guidance later in the year for we put together our guidance for 2020. We'll actually have visibility into the highway lettings. And it's almost on a year to year basis to look at that because we just don't know the timing of the maturing of those DOTs and the timing of these big mega projects, both of which are meaningful. So we're just going to have to call that as it comes up. Do you guys give any color on that? No. I think that's well said. I mean, we're very focused on the monies and the flow of the monies in California and understanding what that looks like, but it's been a little lumpy coming out of the gates. But like I said, when it comes, we will participate. Go ahead. Yes. I spoke with several of you last night about Illinois. I mean, Illinois has had a significant increase in funding, but we're still waiting to see the project list. When they haven't published a new project list that's going to go with that funding. So we're still we don't have really good visibility in the timing of projects at this point with Illinois. Thank you. This is some good news though. Behind the scenes, there's a lot of political pressure to put that money to work, so the taxpayers see it. So there's a fair amount of political pressure to get it going and get it out there. Okay. Adam Thalhimer, Thompson Davis. It strikes me that the $230,000,000 to $240,000,000 target, we're actually not that far away from that at $212,000,000 roughly this year. So with 5% growth, you'd be there in 2021. With 3% volume growth, you'd be there in 20 22. But it's a huge jump in EBITDA from kind of 1.3% today to 2%. So I just want to make sure I'm thinking about that the correct way. And are we at the point where the incrementals are just that high? Well, I think if you can make your own assumptions about the timing. You know it's probably as much about the predictability of volume as we do. We said these are long range goals. We haven't put a time frame around them. But if you work through the math and you take the view that we will deliver what we say we're going to deliver with respect to a 60% fall through, it'll get you there. I'm Paul Eckley from State Farm. Tom and Suzanne, can I ask a couple of questions? One would be, you have this target of 2 to 2.5 times debt to EBITDA. So if you earn $2,000,000,000 of EBITDA, I guess if my arithmetic is correct, that means we're going to have perhaps $4,000,000,000 to $5,000,000,000 of debt. And then can I also ask where the institutional memory of Vulcan resides? Is that with the Board? A lot of the Board has turned over since some of the events that occurred in 2000 and seven through 2,009 time period. Why don't you take the debt out there? Sure. Institutional knowledge. Yes. The institutional knowledge of what can happen and the unpleasant times you live in when your leverage ratio is at 6.5 times, and there's a long step between there. It's still alive and well in Vulcan. We are a cyclical business, 2x to 2.5x. That's a range that the board's comfortable with right now. But look, we have the flexibility at any time we choose if we think it's the right thing to do to reduce that leverage. We're at 2.4 now personally. And again, this is a personal statement from Suzanne Wood. As we get to the point in time where we think we might begin to be seeing the turn of the cycle, I'd like to be closer to 2%. So my view is the it's a competitive advantage, but it's a position of strength that allows you to do lots of things that you choose to do, like work on these 4 initiatives. But first and foremost, leverage is a defensive position. So I've always worked in cyclical industries, and I understand what it can be like when that leverage is a bit high. It just really limits the opportunities that company has. So we are very your point is very well taken, Paul. I mean, that's something that we talk about in the Board meeting, and it's one of the reasons why over the last year, I've been very keen to get back within that range because as you remember, we were riding a bit above that at kind of 2.6%, 2.7%, 2.8%. So, I think if there's a range, we need to be within it. And for me, I'd prefer to be at the bottom of it rather than at the top end of it. I would comment on the knowledge first. While the Board has turned it over and we do have some members that were there at that time, we've also gone back and run the Board through what happened and how it happened so that even new Board members are quite aware of it. You have one Board member that lived it, who actually got to run Florida, who has a lot of scars. So I'll never forget it. But as Suzanne said, I think that the worst thing you can have is sickled businesses over levered, and we will not do that, and we'll be very careful with that. And the other thing is to know where you are in the cycle and don't get surprised. So I think that both the knowledge is there. We talk about it a lot. And I think from Suzanne's and my perspective, it looked like conservative. I would just add to that. If you go back to the capital allocation slide when I talked about growth, the growth category, requires us to be very, very disciplined. That's really what I was getting at. Whether it is the right thing or the wrong thing to do in terms of building something, in terms of buying something, whether it's right or wrong, if you do it at the wrong time, you still come up with the wrong answer. So we just have to be really, really disciplined about what it is we're doing, how we're investing the cash and when it is that we're investing it, to Tom's point. Tom, I'll turn it back over to you just for some closing comments, but I think that'll bring us to the end of the Q and A. Well, first of all, again, thank you for your interest in Vulcan, and thank you for being here. I'll go back to that original assertion that Vulcan Materials is the best value proposition in the Heavy Materials sector. Best product aggregates, by far the best product. The best markets because of the fastest growing markets, underscored by that public funding the best people, the people to run this business. And now we have the right focus, the focus on those disciplines that we can control. So no matter what happens in the outside world, we're always getting better day in and day out. That journey to take the highest unit margins in the sector and drive them higher faster, to pull that $2,000,000,000 forward, That journey to take the best aggregates company in the world and make it better. We look forward to talking to you about this in the future. Let's go see a ship.

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