Good morning. My name is Bridget, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vulcan Materials 2014 Third Quarter Earnings Call. [Operator Instructions] And now I would like to turn the call over to Mr. Tom Hill. Mr. Hill, you may begin your conference.

Good morning. Thank you for joining us to discuss our third quarter 2014 results. I'm Tom Hill, President and Chief Executive Officer of Vulcan Materials Company. Joining me today is John McPherson, Executive Vice President, Chief Financial and Strategy Officer. We are very pleased with our third quarter results detailed in the press release. We're happy to provide additional color today and spend some time answering your questions. A slide presentation will accompany this webcast and be posted on the company's website at the conclusion of this earnings call. Before we begin with the actual results and projections, I refer you to Slide 2 of our presentation regarding forward-looking statements, which are subject to risks and uncertainties. Descriptions of these risks and uncertainties are detailed in the company's SEC reports, including our most recent report on Form 10-K. In addition, during this call, management will refer to certain non-GAAP financial measurements. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures and other related information in our earnings release and at the end of this presentation. Now turning to Slide 3. We are pleased with our third quarter results and how we continue the strong conversion of incremental revenues in the growth in earnings. Revenues increased 7%, driven mostly by a 12% increase in aggregates shipments. Excluding revenues in the prior year associated with our divested concrete and cement businesses in Florida, revenues increased 15%. Our earnings leverage on higher revenues continues to be excellent. Gross profits and EBIT increased sharply, up 31% and 57%, respectively, due largely to strong earnings leverage in our aggregates business and flat SAG costs. On a comparable basis, earnings from continuing operations increased 93% to $0.54 per diluted share. Turning to Slide 4. Our third quarter results…

Thanks, Tom, and good morning, everyone. I'll touch briefly on our nonaggregates businesses before turning to our full year outlook, and then a summary of our approach to capital allocation through the first 9 months of the year. Starting with Slide 10, we'll present the results from our asphalt and concrete segments. Earning results in each of these segments improved versus the prior year on higher sales. Asphalt gross profit improved $1 million due to higher margins and earnings from recently completed acquisitions. Asphalt volumes approximated the prior year but were short of expectations due to the delayed start of several large projects in California until 2015. Concrete gross profit was $5 million higher versus a loss of $4 million in the prior year's third quarter. Adjusting for the company's Florida concrete business sold in the first quarter of 2014, unit profitability improved and gross profit increased $3 million. Collectively, reported gross profit for our nonaggregates segments improved $12 million over the prior year quarter. Now turning to Slide 11 and our full year outlook. Our full year expectations for earnings growth and margin expansion remain basically in line with our plans, although we'll get there in a slightly different way. Aggregates volumes should come in a bit higher than our beginning-of-year expectations. And although our growth in average selling prices for aggregates has been modest, both our per ton margins and our incremental gross profit margins are in line with our internal goals. Our execution in this regard has been very strong, as Tom mentioned. As just highlighted, our gross profits from our nonaggregates segments had been at the low end of our beginning-of-year expectations, due in large part to delays of certain jobs into 2015. As a result, our overall external guidance for full year 2014 remains largely…

Thanks, John. We are pleased with our third quarter performance, and we're looking forward to the months ahead. We are very excited about the opportunities we see. Our recent acquisitions are already performing well. We're excited about the volume growth, pricing momentum and strong margin expansion we see across our markets. Our operations continue to run with great efficiency and are best-in-class in the industry. I thank our employees for their outstanding performance in these exciting times. I am very proud of our people, and our future looks great. And now, if the operator will give the required instructions, we'll be happy to respond to your questions.

[Operator Instructions] And your first question comes from the line of Ted Grace with Susquehanna.

Tom or John, I was hoping you might be able to touch on 2015 in a little more detail. I know there wasn't kind of explicit guidance. The commentary was encouraging or is encouraging. One of your big competitors kind of laid out a framework. I was wondering if you might at least speak to kind of an agreement on that and that was one that kind of pointed towards infrastructure being up mid-singles in '15, private nonres being up in the high singles and residential being up in the double-digit range. And to the degree you're comfortable just giving us a broad framework, could you maybe start there?

Yes, Ted. Right now, we're in the middle of the planning process for 2015. But let me give you a little bit of how we view it. We are continuing to see, as we stated earlier, lots of pricing momentum, demand continues to grow, our employees continue to give us great margin expansion. We continue to focus on those 3 profit drivers, sales and production mix, price for service and operating leverage and efficiency, and all 3 of those continue to improve each month.

Okay, fair enough.

Ted, this is John. The only thing I think we'd add is we do -- we're not ready to give any explicit guidance, obviously, for next year, but we do continue to see all LNG segments up for '15 directionally. And I think, importantly, as Tom said in his comments, we believe our market will continue to grow faster than the industry as a whole. We like our geographic mix. They were more depressed than the market as a whole, and they're recovering faster than the industry as a whole.

Okay, fair enough. If I can ask a second, just I know at the end of your prepared remarks, you touched on the balance sheet, John, and I guess, exiting '13, we had you at about 5x leverage. On our numbers, you'll exit this year at about 2.5x, and exiting next year, we'd have you at about 2x debt-to-EBITDA. So a huge improvement and a lot of strength. Can you just talk about how you might redeploy that capital? And how you think about whether it's acquisitions or CapEx or buybacks or all the options, and kind of where you are at this point?

Sure. First, I'll just say the obvious, which is how we think about capital allocation, how we think about return of cash to shareholders, how we think about our capital structure, all really important topics in a business such as ours. We're always evaluating a variety of different options. I think given the strength of our asset base, we actually have many options. I think what you can count on us for is to have a plan, not just to swing from one latest idea to another. More to the point on your question, I think we're very comfortable with the strength of our credit position and the financial position right now. I think we have several good options for the redeployment of capital through time. Certainly, reinvestment of CapEx into our business to support growth, but also to support the margin expansion to which Tom referred. I think we continue to see a pipeline of potentially attractive bolt-on acquisitions of a nature similar to those that you saw us complete in the third quarter. Always more difficult to kind of predict how those will turn out, though. And I think you'll see us, over time, have a balanced approach to reinvesting in growth and returning cash to shareholders. Now the exact form and timing of that return of cash is to be decided later, but I think you'll hear us talk about a plan for that approach.

And your next question comes from the line of Jerry Revich with Goldman Sachs.

It's Matt Rybak on behalf of Jerry. To follow up on the capital deployment discussion, just wondering, are there any opportunities here going forward to set up on an MLP-type structure for a portion of your assets?

I think anybody could see that our aggregates business and some of our product lines will likely qualify for MLP treatment. But that said, I kind of come back to my answer to Ted's question, which is we're always evaluating a wide variety of options for improving our capital structure and our capital costs. We think that's of critical important -- critically important part of our jobs. Those options could range from the mundane such as the ratio of fixed to floating debt in our portfolio to options such as MLPs that may be a bit different. I think the good thing for us is that we have a lot of options. We're very disciplined in how we look at them. And I think it's the kind of topic you should expect us to talk more about at our Investor Day. Not MLP specifically necessarily, but our approach to the capital structure and capital allocation overall.

Great. And then turning to volume briefly. Just wondering if you can maybe say more on the cadence of volumes over the course of the quarter. We've heard that some highway job start dates have been impacted by the highway bill timing. September and October growth sounds like it was much stronger than July and August. Just curious what you've seen on that front?

We -- I think the only highway jobs that we had delayed were in Northern California for any significant volume. It hurt our asphalt volumes. Other than that, we've seen very -- we saw very good highway shipments in the third quarter. We continue to see very large highway jobs start to ship in 2014. Most of those will actually go in 2015. And with those, I'm referring to some of the TIFIA jobs like the Grand Parkway in Houston. We shipped a little bit of that this year, the majority of it will go next year. I-75, 575 in Atlanta, we have 1.2 million tons of backlog on that job. We will only ship -- we've not begun shipping. I think we'll start in December and probably ship 40,000 tons in '14, the balance in '15, '16. So -- then we've got the I-4 work in Florida, which is 1.7 million tons of concrete rock and probably 2 million tons of base and fill. That job has actually been awarded to the contractors, but the construction materials has not been awarded. So we'll, for sure, get part of that, but that will ship second half of '15 and '16. So we didn't see any slowdown in the third quarter, but we think it will pick up in '14 if weather holds, but for sure, in '15.

And your next question comes from the line of Kathryn Thompson with Thompson Research.

First, on the acquired assets during the quarter, could you clarify the revenue opportunities for these? And what portion are plug-and-play versus others that may require a little bit more work?

Kathryn, would you -- I'm sorry, it's Tom. Would you repeat your question?

Yes, on the acquired assets during the quarter, could you clarify the revenue opportunity for these? And what portions are plug-and-play, so really don't require as much handholding, versus others that require little bit more work? So just the understanding that it's not an even margin with all of the acquired assets. It doesn't have to be a specific dollar amount but just even a rough percentage in terms of understanding how much will require some -- a little bit more work to get up to speed versus others that are really good as a standalone right now?

Well, I think, if you look at those assets, we had a partial quarter in the third quarter with the assets. They were already profitable in spite -- accounting for marking up inventories to market levels. We expect they are -- all of those are tucked into existing markets, except for New Mexico, and the New Mexico market is a very attractive market when it comes to profitability. So we think we'll hit the ground running with them in 2015, and they will be accretive in 2015.

Okay. This is more of a Texas policy question. Could you provide any color on the impact of Proposition 1 referendum? And what that impact could be for TxDOT, if passed? And when would the dollars become available, if you have knowledge of that, if that referendum does, in fact, pass?

Yes. It will be -- and actually, let's cross our fingers because it's being voted on today. It is $1.7 billion of new funds. It's from the oil and gas taxes paid by the drilling companies from the state's rainy day funds. Knowing how TxDOT works, I would say that they would be, if it passes, they will be available immediately, but probably, you won't see that flow through to -- at the earliest second half, probably second half of '15. Those will be a lot of overlays because this is really driven by the damage to the roads with all the truck traffic, with all the big energy plays and drilling in Texas. So I would -- and I don't know this for a fact, but my guess is that those funds would -- you would start seeing volumes from that sometime second half of '15.

Right. And speaking of energy, are you seeing any slowdown in energy markets given the drop in oil prices?

We have not, and it's -- I think it's too early for that. But we continue to see that go very strongly, particularly the Gulf Coast projects. I think we'll ship about 500,000 or 600,000 tons on those jobs on the Gulf Coast in 2014. We'll see another -- I know we have another 2 million that we've backlogged to ship in '15, and there's probably, well on the books, on paper, there's another 10 million tons to be let. Now all of those -- probably all of those projects probably won't go, but even if half of them goes, it's a great shot in the arm for us.

And just to clarify, those are more energy-related versus port expansion related to Panama Canal?

That's exactly correct.

Kathryn, it's John. Just back on your acquisition question quickly, I think if you look at them collectively, the profitability of those businesses on a unit basis should match or exceed our company average once we get past the very early integration phase. And again, these are bolt-ons. There's not a tremendous amount of hard work to do to pull them into our business. Our folks are doing a very good job of that already.

Okay, great. And then final question on volumes. Just any more color on the type of projects you're seeing in Illinois and Texas? And what's the tail for these projects from a volume standpoint?

I think that, on Texas, we've mentioned the Grand Parkway, which is, I think, a total of 1.2 million tons. Of that, we'll ship 400,000 or so. We will ship 400,000 at the end of 2014. The balance will go in '15. Again, we mentioned the energy projects in Texas. I think that this proposition, you'll see a lot of big asphalt work coming up. I believe that will pass. And then we're -- in Texas, you're just seeing all markets hit, residential, nonresidential, all of them are hitting. In Illinois, we have a number of projects. At O'Hare Airport and the widening of I-90 have been 2 very large projects for us. But again, we're starting to see the residential and the western suburbs of Illinois start to pick up also.

And your next question comes from the line of Todd Vencil with Sterne Agee. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Tom, you mentioned that new lot development is continuing to increase, and I wanted to drill in a little bit on that. I mean, how much of a pickup have you guys seen in sort of the lot development as opposed to just aggregates to build houses as the recoveries kind of crank on?

It really depends on where you are. In the more mature markets, California, Texas, Florida, parts of North Carolina and even Georgia, we're starting to see new subdivisions. And those are the places where we're starting to see the pickup. Kind of give you an idea where overall housing, we're seeing up low double digit, but if you look at specific markets and what demands happened in 2014 with aggregates, we've seen Los Angeles up 23%; San Antonio, up 23%; Dallas, up 18%; Nashville, which has been a little bit slower, up 12%; Atlanta is already up 15%; and then in Florida, Fort Myers is up 37%; Orlando is up 30%; Charlotte is already up 22%; and Baltimore is up 21%. So in those markets, where it's a little farther along, you're starting to see the subdivisions come in. Kind of the center of the country, we're still building out lots. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Got it, got it. And is it safe for me to assume that once you start getting those land development activities in place, they're a bit sort of longer tails and more steady than what might be sort of a bit more volatile kind of housing starts-driven stuff?

Yes, absolutely. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Okay, good. All right. Jumping around, looking at Texas, your volumes were up significantly in Texas. You didn't mention that as an influence on the average price. What does your price in Texas look like relative to the average?

Now Texas is -- the pricing has jumped already. It will -- we don't give specific pricing, but let me just give you an example on that. We -- and depending on the market in Texas, in October, we secured between $1 and $2 of price increase, and we'll see another price increase of April of between $1 and $2 depending on the market. So you can tell that where the markets, as we talked about, where the market recovery is more mature, we're seeing big price increases, and in some of those markets, we're seeing price increases every 6 months instead of every 12 months. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Is that across the whole state?

Yes. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Okay, that's great. And just to sort of circle...

I mean, when I said across the whole state, each one of those markets is different, but all of them have sharp price increases, and they all have a lot of momentum. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Got it. Makes sense. Is it -- without trying to pin you down, was your average Texas price in the third quarter, was it above or below average?

Oh, it's well above. I'm sorry, Todd you mean, company average? L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Yes.

Oh, I'm sorry, I thought you meant price increase percentages. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: No, I'm sorry, yes. Just absolute price versus the company average price.

I think, Todd, back to not pinning it down, I think it would have been offset elsewhere by other volume changes. So the geographic exception for pricing for us for the quarter was really Illinois-related. I think that's the best way to look at it. L. Todd Vencil - Sterne Agee & Leach Inc., Research Division: Got it. And then final one for me right now. Just looking at that Slide 5, where you sort of give state-by-state on the volume increases. Rural South Carolina is the one that jumps out as being the only one that's not green. What -- anything in particular happen there?

Yes, the guys in South Carolina are probably listening to this call hanging their heads, but it was only down 2%, and the impact was not so much demand. It was the fact that we had some very large project work last year that we don't have this year.

And your next question comes from the line of Robert Wetenhall with RBC Capital Markets.

Wanted to ask, Tom, maybe if you could provide some color. You're doing $3.93 gross profit per ton, up 12% year-over-year. How should we think about that going forward? And I just wanted to get a deeper understanding. You were talking about price for service, and it sounds like you have some good pricing power, and expect to see that in 2015. Does that imply that your 60% incremental margin can actually move higher if you realize that price?

I think, on average, we stick to the 60%. Obviously, price increases will help that. And, obviously, we're operating at 50% to 60% of our production -- our peak production. The operating leverage in the plants continues to get bigger. But I think over time, it'll shoot up and come back down, but over time, I think that 60% is probably in line with what our expectations are.

I think one takeaway, Bob, is we have a long ways to go in the margin expansion and the positive flow-through. That story is still, just like the volume story, it's still in its early innings.

Okay. But you're doing kind of margins consistent with where you were at 150 million more tons. So it seems like you've taken out a cost -- a lot of costs out of the system, and I'm just trying to figure out how to think about profitability, assuming your volume strength continues into '15.

Well I think you're asking the right question. I'd encourage you to keep thinking about profitability on a per ton basis, and that's that way we present our financial statements. And that per ton profitability will, of course, be affected by pricing through time, which we're focused on every day, and we have some tailwind to there. It'll be affected by operating leverage and operating efficiency at our plant level. And it's, of course, also affected by a healthier product mix through time. I think all of those 3 things, we still have a long ways to go on. And our takeaway is that despite being, if you will, near previous high levels of unit profitability, we're nowhere near a cap or ceiling.

Got it. And then when you're talking about sales and production mix, is there -- what's the opportunity look like there from a mix standpoint if you get better demand across the product line?

Well, with new construction, you'll see an increase in sales for fines and base, which just allows us to sell the complete product split. And it just -- while those are low priced, they're very high margin, and they fill out our hand in selling the complete product line.

You saw a little bit of that in the current quarter. Our product mix hurt us on average selling price, but we still drove significant improving margin per ton, and that was one of the factors in this quarter.

Yes, it's just tough to grasp externally a little bit just because of the moving pieces. John, just also wanted to understand on your guidance for 7% to 9%, what's -- on that 7% to 9%, what's the contribution from the recent acquisitions? So is that like 1 point or 0.5 point?

You're talking about the volume guidance, is that right, Bob?

That's correct.

I would think of a high end of that range on a same-store basis, so excluding impact of acquisitions for the year.

So what percentage in the 7% to 9% should we attribute to acquisitions?

0.

0, so it's negligible.

And your next question comes from the line of Keith Hughes with SunTrust.

A question on transport costs. And the news here, back in the quarter, any impact we should?

Keith, I can't quite hear you.

I'm sorry. The question's on transport costs. Just was there any transport cost impact in the quarter? And should we expect any in near-term quarters?

We didn't see any impact from transportation costs, rail, barge or ship. In fact, they were -- rail was flat for the quarter, I think barge was relatively flat.

Keith, and the way we present our financials, for freight-adjusted pricing and the way we flow that through, you wouldn't expect to have a significant impact for us the way we report our financials.

Okay. But from a cash perspective, no impact in the period outside of your expectations?

No impact. Year-over-year, no impact.

Okay. Secondly, looking at, of course, we have another temporary highway bill taking it through the spring. Any new views there you're hearing, your trade routes [indiscernible] along the things of that nature?

Well, we continue to see growing bipartisan commitment for infrastructure. Last month, Senator Boehner urged President Obama to work with Congress in 2015 for both tax reform and a multi-year transportation bill. Leadership in both parties want to find funding solutions, and I think all of them are tired of going back to the general fund and getting embarrassed about it. Last week, we did have House Majority Leader Kevin McCarthy tour our Chula Vista operation in San Diego. And he -- while he was there, he stressed congressional leadership's intention to get a highway bill passed in 2015. So we continue to see momentum behind it. I wouldn't expect it in the lame-duck session, but we've got our fingers crossed it will happen in '15.

Does a Republican Senate help you or hurt you towards that goal?

I think, like I said, we're seeing bipartisan commitment, and I'm not sure if it helps or hurts us because they all want to fix the problem.

And your next question comes from the line of Trey Grooms with Stephens.

Just a couple questions left for me. One, you talk about the M&A environment, and you said some potentially attractive acquisitions. Can you talk about just kind of the valuations and how those are looking out in the market now versus what you've seen over the last few years? Are people starting to get a little bit more rational? Just any color you can give us on that, please.

Sure. There's a lot of activity out there, and we see a lot of opportunities. Now with that activity, there's a lot of them that are very unattractive. There are some that -- there are a lot of them that we're looking at for our footprint that make a lot of sense for us. I think they're fair deals, and I think they're also acquisitions that we can improve dramatically by fitting them into our family. But it is busy, and there's some great stuff out there, there's also some junk.

Okay. That's fair. And I guess, just kind of on the valuation front. I mean, you got some junk and some others that are attractive, I guess, those are being priced accordingly then.

I think, Trey, I think just a lot of this comes down to the reason -- a lot of the reason we're focused on bolt-ons is the synergies you bring to a transaction, which typically, we don't pay for in a deal. And I think if -- and we're not going to get into the valuations of the individual deals we've done. But if you looked at them all collectively, again, in the most recent year, producing 8 million tons roughly. That has a lot of growth behind it, at or above our per ton profitability as a company. You can kind of draw your own estimates for valuation collectively. Again, individual deals vary. But I think what really drives it from our point of view and we're very, very focused on is the -- is obviously, the synergies with the rest of our market positions. That's what makes it go from I've kind of got a good deal to a very good deal, and a lot of what will drive the accretion in the next year for us.

Got you. And Tom, you mentioned -- you touched briefly on some of these bigger energy programs down there, jobs that are being done over the next few years in the Gulf. What is the -- if you kind of look at that market, I know Texas overall is priced lower, but that market specifically, is that a higher priced market than Texas overall? And kind of how do we think of that from a profitability standpoint since that is one of your long-haul markets?

It is a very profitable business for us. The pricing has very much improved over the last 18 months. But it's also, you got to remember, we are in the unique position to service those out of Mexico. So we have a dramatic freight advantage, which improves our profitability to service those markets.

That makes sense. And then last one's kind of housekeeping here. With the pullback in oil and just trying to get a sense for any kind of benefits you guys may see going forward, how much diesel are you guys using in your quarries now kind of post some of the recent acquisitions and divestitures and how that's moved?

I think one way to look at diesel may be to look at it on what happens to the per gallon cost of diesel because it's -- we've got diesel cost in quarries, we have it in asphalt, we have it in ready mix. But right now, a dime movement per gallon of diesel would mean about $4.5 million for us annually.

And your next question comes from the line of Stanley Elliott with Stifel. Stanley S. Elliott - Stifel, Nicolaus & Company, Incorporated, Research Division: Quick question on the M&A environment. Do you expect to see more -- I guess, as more sort of the private smaller type transactions are out there, do you expect to see more downstream assets kind of like what you picked up in New Mexico as part of the deal on a go-forward basis?

Every one of those is different, and our focus is aggregates. We don't have any interest in picking up downstream unless it has aggregates attached to it. And when you look at those, some of those markets that have the downstream business attached to them, those downstream business are very profitable. And if they are, and we can -- we run them with a good return, we'll keep them. If not, we'll keep the aggregates and sell the downstream product lines. Stanley S. Elliott - Stifel, Nicolaus & Company, Incorporated, Research Division: Perfect. And then I apologize if I missed it, but on Slide 6, you kind of highlighted the 3 profit drivers. Is there a way to kind of rank order them from most contribution out of those 3?

I'd try -- I'd say no. I think the point is that you have to balance these and manage them in combination. And I think just the very heart of the business is you can't rank order them, you've got to make trade-offs at a local level between these factors.

I would agree with that. I would also tell you that as the volumes come back and demand comes back, and new construction, the balance between those 3 gets a whole lot better, and as so our unit margins improve.

And we have reached our allotted time for questions. So I would now like to turn the call back over to Tom Hill for closing remarks.

Thank you for your interest in Vulcan Materials Company, and we look forward to speaking with you during our next earnings call. Have a good day.

And thank you. This does conclude today's conference call. You may now disconnect your lines.