GENERAL COMMENTS

Overview

We provide the basic materials for the infrastructure needed to maintain and expand the U.S. economy. We operate primarily in the U.S. and are the nation's largest supplier of construction aggregates (primarily crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete. Our strategy and competitive advantage are based on our strength in aggregates which are used in most types of construction and in the production of asphalt mix and ready-mixed concrete.

Demand for our products is dependent on construction activity and correlates positively with changes in population growth, household formation and employment. End uses include public construction (e.g., highways, bridges, buildings, airports, schools, prisons, sewer and waste disposal systems, water supply systems, dams, reservoirs and other public construction projects), private nonresidential construction (e.g., manufacturing, retail, offices, industrial and institutional) and private residential construction (e.g., single-family houses, duplexes, apartment buildings and condominiums).

Aggregates have a very high weight-to-value ratio and, in most cases, must be produced near where they are used; if not, transportation can cost more than the materials, rendering them uncompetitive compared to locally produced materials. Exceptions to this typical market structure include areas along the U.S. Gulf Coast and the Eastern Seaboard where there are limited supplies of locally available, high-quality aggregates. We serve these markets from quarries that have access to cost-effective long-haul transportation - shipping by barge and rail - and from our quarry on Mexico's Yucatan Peninsula with our fleet of Panamax-class, self-unloading ships.

There are limited substitutes for quality aggregates. Due to zoning and permitting regulation and high transportation costs relative to the value of the product, the location of reserves is a critical factor to our long-term success.

No material part of our business depends upon any single customer whose loss would have a significant adverse effect on our business. In 2020, our five largest customers accounted for 7.5% of our total revenues, and no single customer accounted for more than 1.8% of our total revenues. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly-funded construction, such as highways, airports and government buildings, a relatively small portion of our sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly-funded construction, the vast majority of our business is not directly subject to renegotiation of profits or termination of contracts with local, state or federal governments. In addition, our sales to government entities span several hundred entities coast-to-coast, ensuring that negative changes to various government budgets would have a muted impact across such a diversified set of government customers.

While aggregates is our focus and primary business, we believe vertical integration between aggregates and downstream products, such as asphalt mix and ready-mixed concrete, can be managed effectively in certain markets to generate attractive financial returns and enhance financial returns in our core Aggregates segment. We produce and sell asphalt mix and/or ready-mixed concrete primarily in our Alabama, Arizona, California, Maryland, New Mexico, Tennessee, Texas, Virginia and Washington D.C. markets. Aggregates comprise approximately 95% of asphalt mix by weight and 80% of ready-mixed concrete by weight. In both of these downstream businesses, aggregates are primarily supplied from our operations.

Seasonality and cyclical nature of our business

Almost all of our products are produced and consumed outdoors. Seasonal changes and other weather-related conditions can affect the production and sales volume of our products. Therefore, the financial results for any quarter do not necessarily indicate the results expected for the year. Normally, the highest sales and earnings are in the third quarter and the lowest are in the first quarter. Furthermore, our sales and earnings are sensitive to national, regional and local economic conditions, demographic and population fluctuations, and particularly to cyclical swings in construction spending, primarily in the private sector.








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EXECUTIVE SUMMARY

Financial highlights for FIRST Quarter 2021



Compared to first quarter of 2020:
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?Total revenues increased $19.1 million, or 2%, to $1,068.3 million

?Gross profit increased $27.5 million, or 14%, to $229.3 million

?Aggregates segment sales increased $26.7 million, or 3%, to $894.9 million

?Aggregates segment freight-adjusted revenues increased $33.1 million, or 5%, to $681.2 million

?Shipments increased 3%, or 1.4 million tons, to 46.4 million tons

?Freight-adjusted sales price increased 1.9%, or $0.28 per ton to $14.67

?Aggregates segment gross profit increased $29.5 million, or 15%, to $223.6 million

?Unit profitability (as measured by gross profit per ton) increased 12% to $4.82 per ton

?Asphalt, Concrete and Calcium segment gross profit declined $2.0 million, or 26%, to $5.6 million, collectively

?Selling, administrative and general (SAG) expenses increased $2.2 million and increased 0.1 percentage points (10 basis points) as a percentage of total revenues

?Gain on sale of property, plant & equipment and business was $117.2 million, compared to $1.0 million

?Operating earnings increased $137.2 million, or 122%, to $249.5 million

?Earnings from continuing operations were $161.7 million, or $1.21 per diluted share, compared to $60.0 million, or $0.45 per diluted share

?Adjusted earnings from continuing operations were $0.69 per diluted share, compared to $0.47 per diluted share

?Net earnings were $160.6 million, an increase of $100.4 million, or 167%

?Adjusted EBITDA was $244.3 million, an increase of $43.3 million, or 22%

?Returned capital to shareholders via dividends ($49.1 million @ $0.37 per share versus $45.1 million @ $0.34 per share) and share repurchases (none versus $26.1 million @ an average price of $121.92 per share)

Our first quarter results are a testament to the resiliency of our best-in-class aggregates business. While severe winter weather conditions in February resulted in an uneven start to the year, strong execution from our teams allowed us to drive earnings growth and margin expansion. As the construction season got underway during March, many of our key markets began to see shipments rebound. Our four strategic disciplines (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing) helped us grow our aggregates cash gross profit by 9% to $6.56 per ton.

During the quarter, we sold a reclaimed quarry in Southern California for net proceeds of $182.3 million. The transaction resulted in a pretax gain of $114.7 million ($85.4 million after tax), or $0.64 per diluted share. We remain focused on efforts to maximize the value of our portfolio of quarry operations as they move through their life-cycle of land management.

Capital expenditures in the first quarter were $71.4 million, including both core operating and maintenance projects as well as growth projects. During the fourth quarter of 2020, we restarted planned growth projects that were put on hold in the first quarter of 2020 as a result of the pandemic. For the full year 2021, we expect to spend between $450 and $475 million on capital expenditures, including growth projects. We will continue to review our plans and will adjust as needed.

At quarter-end, total debt to trailing-twelve month Adjusted EBITDA was 2.0 times or 1.4 times on a net debt basis reflecting $890.9 million of cash on hand. As planned, we paid off approximately $500.0 million of debt maturities in March. Our weighted-average debt maturity was 15 years, and our effective weighted-average interest rate was 4.6%.

At 14.8%, our return on invested capital increased 0.9 percentage points (90 basis points) year-over-year driven by solid operating earnings growth coupled with disciplined capital management and a balanced approach to growth.


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OUTLOOK

We continue to see strength in residential construction activity, driven by single-family housing. Recent growth in highway awards and construction employment trends in our markets also bode well for further recovery in construction activity later in 2021. Shipments into private nonresidential continue to benefit from heavy industrial projects, such as data centers and warehouses, while leading nonresidential indicators suggest growth opportunities in other categories are on the horizon. The pricing environment remains positive, and we continue to execute at a high level, positioning us well for 2021. These trends in the key drivers of our aggregates business lead us to an improved earnings outlook for the remainder of the year.

Management expectations for 2021 include the following updates:

?Aggregates shipments up 1% to 4% versus 2020

?An effective tax rate of approximately 23% to 24%

?Adjusted Earnings from continuing operations of $4.85 to $5.30 per diluted share (excludes land sale gain)

?Adjusted Net earnings of $650 million to $710 million (excludes land sale gain)

?Adjusted EBITDA of $1.380 to $1.460 billion (excludes land sale gain)

?All other aspects of our expectations for 2021 remain unchanged from those reported as part of our fourth quarter earnings and our Annual Report on Form 10-K

We remain focused on factors within our control, including pricing and cost actions, both of which will drive further improvement in our industry-leading unit margins. Our operating plans are underpinned by our aforementioned four strategic disciplines, a healthy balance sheet and the engagement of our people. Our performance clearly demonstrates that a balanced approach to growth, focusing on organic investments, acquisitions, and greenfield developments is the best way to create value for our shareholders.

For support functions, we previously implemented remote work arrangements and restricted business travel effective mid-March 2020. To date, these arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures.







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RESULTS OF OPERATIONS

Total revenues are primarily derived from our product sales of aggregates, asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and services related to our aggregates business. We present separately our discontinued operations, which consist of our former Chemicals business.

The following table highlights significant components of our consolidated operating results including EBITDA and Adjusted EBITDA.

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