Good day, and thank you for standing by. Welcome to Summit Materials Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Karli Anderson. Thank you. Please go ahead..

Hello, and welcome to Summit Materials' Fourth Quarter and Full Year 2021 Results Conference Call. Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and a supplemental workbook highlighting key financial and operating data.

All of these materials can be found on our Investor Relations website. Management's commentary and responses to questions on today's call may include forward-looking statements, which, by their nature, are uncertain and outside of Summit Materials control.

Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of Summit Materials' latest annual report on Form 10-K, which is filed with the SEC.

You can find reconciliations of the historical non-GAAP financial measures discussed in today's call in our press release. Anne Noonan, our CEO, will begin today's discussion with a business update. Brian Harris, our CFO, will briefly review financial performance. Anne will close our prepared remarks with our outlook for 2022.

We will then open the line for questions. [Operator Instructions] With that, I'll turn the call over to Anne..

Thanks, Karli, and good morning, everyone. I'll start today's call with safety. In 2021, Summit achieved a nearly 10% reduction in our recordable incident rate versus 2020. However, 1 incident is too many.

In 2022, we will continue on our journey towards a zero-harm culture, which demands that we expect more from ourselves and our teammates to drive higher performance. Now let's turn to Slide 4 for a look at the progress we made during the year.

In 2021, Summit achieved several high watermarks with record levels of net revenue net income, adjusted EBITDA and adjusted gross profit. These results are evidence that our Elevate Summit strategy is driving improved performance and execution.

They indicate that we are on the path to becoming a more efficient and better positioned company today than we were 1 year ago. Thanks in large part to the hard work of our dedicated employees, our strategy is gaining traction, and our shareholders are benefiting.

In 2021, our total shareholder return was nearly 100%, outpacing our peers and more than 3x the S&P 500. Brian will go into more detail on our Q4 performance, but let me highlight 3 key reasons for our strong full year results. First and foremost is the pricing discipline that is now firmly established throughout the organization.

At the center of our commercial excellence capability is value pricing. By taking a data-driven approach to segmentation, we are making better pricing decisions at the local level to reflect market conditions and best serve our customer needs. The second contributor to our 2021 success is related to operational excellence.

Like others, we faced cost inflation throughout the year, but through a combination of pass-through pricing, standardization, cost reduction initiatives and effective diesel hedging, our teams did a great job controlling what we could control in 2021. And finally, I'll highlight our ongoing efforts to drive growth and optimize the portfolio.

When viewed through a market leadership and asset-light lens, we have made several no regret portfolio moves in 2021. Those moves better position us to expand our presence in priority markets and facilitate our efforts to attain our Horizon 1 targets.

I wanted to highlight these 3 key reasons for our strong performance because they are all self-help initiatives, and have been instrumental in helping to grow our 2021 top line while expanding margins. That leads us right into our Elevate Summit scorecard on Slide 5.

There, you'll see our leverage continue to improve in Q4 moving to an all-time low of 2.5x net debt-to-EBITDA, 1.5 turn below our 3x target. ROIC and EBITDA margin improved by 80 and 70 basis points, respectively, in 2021.

And relative to Q3, we held steady on return on invested capital and trailing 12-month EBITDA margin despite ongoing inflationary headwinds. Now on Slide 6, you see the 4 strategic priorities at the center of our Elevate Summit strategy.

I'll spend more time on market leadership and asset-light pillars in a moment, but first, an update on our sustainability and innovation agendas.

In April, we plan to share our sustainability road map, which will present our 2030 and 2050 targets to enhance our social impact, improve our land use practices and reduce and ultimately eliminate our carbon emissions. That report will include a credible path to achieving each of those goals.

We'll also present some of our more recent accomplishments, including the commercialization of Portland limestone cement, our implementation of a dashboard to track and address fuel efficiency and consumption in every Summit-owned vehicle and the launch of the Summit-wide water metering and conservation project.

The report will show that we are pursuing both near-term and long-term strategies to become the most socially responsible integrated construction material solution provider. And on innovation, we're in the process of building internal innovation muscle with the imminent addition of a Chief Growth Officer.

We believe pairing this internal capability with university and industry partnerships has the potential to really accelerate our strategic growth.

Returning to market leadership, where our progress on achieving #1 or #2 positions in strategically targeted rural and ex urban markets is most evident through the portfolio optimization work shown on Slide 7.

Here, we identify underperforming or noncore businesses or assets that do not meet or have no clear path to reach margin and return targets, and we find better owners for these businesses.

In Q4, we completed 3 divestitures and generated roughly $25 million in proceeds to bring our 2021 total to 8 noncore divestitures, yielding approximately $128 million in proceeds.

We are currently progressing additional divestitures and have strong visibility towards reaching our horizon 1 ambitions of 10 to 12 divestitures and at least $200 million in total proceeds.

And furthermore, we've bolstered our M&A pipeline and will aggressively pursue attractive opportunities that strengthen the portfolio and advance our market leadership strategy. We feel a lot of investor questions about asset-light means in practice. So to crystallize our approach, we provided a real-world example on Slide 8.

The starting point for these projects is a diligent and objective evaluation against our 5-point asset-light criteria. First, we assess whether there's an existing foundation of trust between Summit and the counterparty.

In our view, having mutual trust is a critical component and highly predictive of whether a partnership will ultimately be successful. Next, we look at the business case. We determine whether the proposed relationship advances our strategic and financial goals.

Specifically, we look at its aggregates intensity, whether it provides market entry or expansion, increases our strategic flexibility and whether it reduces complexity. In reality, not all 5 of these criteria will be met 100% of the time. But by staying rooted in a disciplined approach, we are increasing the probability of a successful relationship.

In this specific example, our assessment identified an attractive opportunity to move forward with an asset swap agreement whereby we exchanged 1 of our downstream businesses for aggregate quarries. We then negotiated a long-term supply agreement with the counterparty, thereby ensuring strong and reliable aggregates pull-through.

Stepping back, you can see that our asset-light approach places a tremendous emphasis on strategic and financial fit. The criteria we apply is thoughtful, rigorous and when executed, our asset-light partnerships strengthen our market position in aggregates, fortify existing customer relationships, reduce capital deployed and are margin accretive.

This framework is now part of our organizational DNA and our continued focus on market leadership and an asset-light operating model will play an important role in driving towards our ROIC target of 10-plus percent, an EBITDA margin target of 30-plus percent. Turning to Slide 9, where we map out our Elevate Summit horizons.

We are currently in Horizon 1, building capabilities, making no regret portfolio decisions and freeing up capital to support sustainable growth.

And thanks to the relentless effort of our people and teams over the last year, I'm extremely pleased with our progress to date, having already achieved our Horizon 1 leverage target and well on our way to reaching Horizon 1 targets for ROIC and EBITDA.

Now before handing off to Brian, I'd like to acknowledge the transition underway on our cement leadership team.

Following 25 years of distinguished service at Continental Cement including the last 9 as President of Summit's Continental Cement Company, Tom Beck will become an Executive Vice President of Summit Materials, focusing on key strategic growth initiatives as part of a planned succession for Continental Cement.

During his tenure at Continental Cement, Tom's unwavering commitment to safety, leadership and commercial excellence serves as a model to Summit employees everywhere.

I want to congratulate Tom for an excellent final year leading our cement business and welcome him into his new role, where he can continue to maximize growth and deliver value for Summit and our shareholders.

As part of this planned succession, David Loomes, Senior Vice President, Sales and Supply Chain at Continental Cement will become President, effective March 1, 2022. David joined Continental Cement in 2020.

In addition to his more than 23 years of experience in operations and sales leadership roles in cement companies, David has been instrumental in developing the PCA's road map to carbon neutrality and currently serves on the Board of the Inland Waterways Commission.

David's experience, in-depth industry knowledge as well as his proven leadership credentials will ensure a smooth transition and strong ongoing leadership of our cement business moving forward. With that, let me pass it to Brian for a financial review..

first, unfavorable geographic and product mix compared to the year ago period. Specifically in Q4 2020, our higher-margin Salt Lake City operations recorded significantly higher than normal pull-through of aggregates volume to the downstream, which boosted margins in Q4 2020 and did not recur in Q4 2021.

Second, our aggregate margins in particular, were negatively impacted by seasonality. Compared to Q4 2020, we had 1 fewer working week in October, which resulted in equipment utilization spread across fewer working hours than the year ago period.

And finally, 1 of our cement plants encountered unplanned downtime negatively impacting production volumes, throughput and fixed cost absorption relative to the prior year period.

Taken together, these 3 factors drove Q4 adjusted cash gross profit margins down across our aggregates, Cement and products business and came despite a positive pricing net of variable cost relationship in the fourth quarter.

For the full year, despite escalating costs, we grew adjusted cash gross margins in 3 of the 4 lines of business as pricing growth, combined with effective cost controls to fuel year-on-year margin gains. Moving to Slide 14 for a look at additional non-GAAP metrics where we are very pleased with our full year performance.

Both adjusted cash gross profit margin and adjusted EBITDA margin increased nicely in 2021, expanding 110 and 70 basis points, respectively, versus 2020 levels. Our dual focus on commercial and operating excellence, together with our portfolio optimization activities, more than offset stiff cost headwinds in 2021.

And with fourth quarter adjusted diluted EPS at $0.27 or $0.02 higher than the prior year, we believe our strategic initiatives are delivering higher earnings quality to our shareholders. Let me wrap up on Slide 15 with a review of Summit's capital structure.

As Anne mentioned, our Q4 2021 leverage ratio declined to 2.5x net debt-to-EBITDA and down 0.7x from 2020 and a half turn better than our Elevate Summit target of 3x. At 2.5x, this marked the lowest leverage ratio in Summit's history, and further enhances the company's financial flexibility.

Additionally, in recognition of our steady improvement in operating performance, predictability of free cash flow and robust operating fundamentals, we were glad to see a recent credit rating upgrade by Moody's. We remain in a very strong liquidity position, closing 2021 with $381 million of cash on hand and the availability of an undrawn revolver.

Our liquidity position, together with our improved leverage means we have a much stronger balance sheet, and we will not hesitate to pursue the highest return opportunities for our business and our shareholders.

And lastly, for the purposes of calculating adjusted diluted earnings per share, please use a share count of 120 million, which includes 118.6 million Class A shares and 1.4 million LP units. And with that, I'll turn the call back to Anne for our view on the year ahead..

first, a heightened emphasis on profit improvement projects that when fully implemented, should have a quick margin-enhancing payback; second, elevated repair and replacement spend to compensate for long lead times on equipment and supply chain disruptions; and third is a project in Davenport, Iowa, where we are constructing a storage dome that will help generate substantial demurrage savings as early as the end of 2022.

To close on Slide 21, I wanted to reiterate my sentiments from earlier. Guided by our 4 strategic pillars, our Elevate Summit strategy is driving improved execution and financial performance. We are certainly a stronger, better equipped company today than we were 1 year ago, and we are closing in on those Horizon 1 targets.

Finally, I want to thank our shareholders for their continued support and feedback and make it clear that our teams are focused, excited and confident that we will build on our momentum in the year ahead. With that, I'll ask the operator to open the line for questions..

[Operator Instructions]. Your first question comes from the line of Trey Grooms with Stephens Inc..

So the volume strength in the cement business, very impressive, especially for a seasonally slower quarter.

Can you talk about some of the drivers you're seeing there? And then has that continued into 1Q? And kind of -- I guess, the thought there is also how does that play into the inventory picture there as we kind of enter the busier spring building season?.

Sure. Yes. Cement was very strong for us in Q4, Trey, as you noted. And in fact, those levels were higher than -- you go back -- have to go back as far as Q1 2017. So very impressive volume and supported by price also, by the way. So the drivers there continue to be nonresidential resumption of demand and also continuing residential growth.

The inventory picture, we did have some downtime, as I referenced in our comments in the fourth quarter. So our inventories are really rather low. We have augmented some of that in 2021 with judicious imports, and we will continue to do the same thing as we go into 2022.

But as you know, imports can have lower margin potential, but we are very keen on making sure that as we import material, we are protected by any long-term contract pricing and stay laser-focused on value pricing. But obviously, we're very focused on meeting our customers requirements for demand and service..

Your next question comes from the line of Courtney Yakavonis with Morgan Stanley..

I think you mentioned the guidance includes the foregone EBITDA from some of the previously announced divestitures.

I think you gave us the number for the 5 last quarter or the quarter before, but can you just give us an update on how much of a total headwind that those divestitures are annually? And then also what's incorporated in 2022 since some of the headwind, I think, fell into '21..

Yes. Courtney, I'm going to turn it over to Brian for that because there are a few moving parts on this one so that we have clarity as you look at your modeling..

Yes, the divestiture EBITDA impact on a pro forma basis in 2021 would have been about $6 million. So on a reported basis, in our bridge, we've built in about 3 for those divestitures..

Okay.

And how about from a revenue standpoint? And I think any guidance you can give on which segments it will most impact because I think last time, there was a big impact on the asphalt division? Any other color there?.

Yes, it's primarily going to be on our downstream businesses. So asphalt, obviously, with the divestiture of Austin asphalt business, and we've also divested 1 or 2 of the smaller noncore ready-mix businesses..

So the main impact to be in the West..

Yes..

Okay. Great. And then just 1 more on the divestitures, if I may. I think you only had about $25 million proceeds from the remaining 3 million.

As we think about your target of $10 million to $12 million and $200 million total, anything we should be thinking about, given that it seemed like the proceeds were a little bit lower than the first set? Are you targeting the number or the absolute proceeds when we're thinking about those goals?.

Yes. As you think about them, Courtney, they are very different assets. Some are purely assets that we are selling on the basis of EBITDA multiple, others are on book value. and because they basically are assets that are more valuable to someone else than ourselves.

So if you were to look at our first 5, you would have drawn a 20x multiple, which we've against not doing that for future divestitures. The ones this quarter were primarily smaller assets, I would say, and the multiples raised across the Board. So we sold some on multiple and some unbooked value.

As we go into 2022, complete our Horizon 1 divestitures, we've -- those additional -- we will target our 10% to 12%, and we'll continue to report our proceeds as we go..

Your next question comes from the line of Garik Shmois with Loop Capital..

This is Jeff Stevenson on for Garik.

Can you talk about the assumptions at the low and high end of the guidance? And how we should think about the cadence of EBITDA growth during the year? Will it be more back half weighted?.

Yes. Let me kind of step back a little bit and give you kind of 2 elements that we're thinking about when we think about our full year guidance for 2022. So there's really 2 elements. The first bucket is when we think about the 3 things that I've talked about is kind of ingrained in our culture right now.

The value pricing, our constant focus on operational excellence and our portfolio optimization enriching in the mix. We believe those 3 factors will more than offset any cost inflation that we have. So that part is an element.

The second part I would encourage you to think about is around the fact that we have Green America Recycling that will be fully operational in 2022. So that will add an additional $7 million to $8 million to the bottom line in 2022. And we also have the impact of our greenfields.

We feel those 2 things combined will more than offset any increased spend we have in G&A, which is really high returning as a result. Now that's kind of what's baked in from a puts and takes into our overall outlook. The thing we have not got in there, as we think about pricing, we're very encouraged by our pricing leaving 2022.

We've got really strong momentum. But we have not put into our guidance any multiple price increases. And I definitely would not rule that out because we are assuming continued cost inflation, and we're assuming continued very extreme focus on value pricing, our operational excellence as we move through it.

The other thing that could be an upside, which we've not baked in and we're not counting on is anything we might get from the infrastructure bill ahead of time. So as you think about that overall, that's kind of how we're looking at our guidance.

Now to your question on cadence, as I said, we're not going to sit here with a crystal ball and say, hey, things are going to improve in the second half. That's not where our heads are. Jeff, we are assuming cost inflation. Our team is focused on price, price, price, keep price ahead of cost on an ongoing basis.

I will tell you, we don't like to give guidance on Q1, but in my prepared comments, we did talk about Q1, both in our last report out and today because we have this unusual thing where generally 3% to 4% of our full year EBITDA sits in Q1. In 2021, when we actually had 8% of our total dollars of EBITDA in Q1.

And so we've guided you to go to more like Q1 2020 as you think about the cadence of that. The other cadence I would give you, as we think about it is -- all of our end markets are growing. And we've pulled back a little bit, as we said, on residential because we do believe supply chain constraints is going to elongate that cycle.

And then the other point I would say is we're very confident in this guidance from self-help initiatives that we've called out in our operational excellence, our procurement practices and our continued portfolio optimization as you think about the cadence of 2022..

Your next question comes from the line of Phil Ng with Jefferies..

This is actually Collin on for Phil. So in the aggregates and cement business in the fourth quarter, you guys did see some gross margin declines, and you were helpful and outlined some of those larger drivers in your prepared remarks. But it sounds like you're expecting some margin enhancement in 2022 with the support of higher prices and volumes.

So just given the inflation headwinds, can you just help us think about the magnitude of the cash gross profit margin improvement you're expecting in the aggregates and Cement businesses?.

Well, let me talk a little bit about just the momentum we have with respect to going into '22 in aggregates and cement that might help a little bit, and then we can add any additional color beyond that. So if we think about aggregates, in Q4 on a full year basis, we've increased price by 8.6%.

And quarter-to-quarter, we've actually increased from Q3 to Q4, another 4.2 percentage points. So very strong momentum in aggregates driven largely by our East region where we've had very strong double-digit price increases. So as we go into 2022, we're confident now moving that guide to more mid- to high single-digit price increases.

So that would give -- if you remember last year, we said low to mid, and we came in at about 3.6%, 3.9%. So we're upping the game pretty much on pricing because we feel we have very strong momentum as we go into that. As we think about volumes going into Q2, we've gone more low single digit into 2022, excuse me.

And there, we're talking about aggregates -- continuing strength in our aggregates, no real pullback on volume. But where I would say it's more end market driven where we've pulled back in residential. We see strength in acceleration in nonres and continued strength in public overall.

Costs, I'll have Brian talk a little bit about what we're assuming in cost inflation.

But we believe that we can continue to expand the margins, as I said in my opening comments, because of the strong pricing, our operational excellence, and you will see more of these portfolio divestitures, which are underperforming assets that will expand the margins.

And that's going to be the main contributor, keeping ahead and expanding that margin to your question, Collin.

Brian, do you want to add a little bit of color on the cost?.

Yes, Collin. So we're not going to give you specific numbers for what the margin could get to. But you can see where we closed the year in aggregates 51.7% and cement just slightly under 40%. And our goal, as we've said, is to make sure that we stay ahead of the price cost curve here.

We've got a few cost numbers that I can quote to you that we're kind of baking into our assumptions that are in the guide. We do have some quite nice mitigation efforts in our energy costs because we've got our diesel hedged. About 50% of our estimated consumption is already hedged there. We also prepurchased some of our natural gas and our coal.

We do expect that there'll be some inflationary pressure on labor probably between 3% and 6%, depending on the individual markets. We expect it to be maybe 5% on underlying materials. And so those are some of the bigger cost buckets that we have in our business, and that's the kind of assumptions that we're making around those costs in 2022..

Your next question comes from the line of Anthony Pettinari with Citi Group..

This is Asher Sohnen on for Anthony.

And just looking out to 2023, do you think you have the capacity to satisfy the anticipated increased infrastructure demand? If not, how should we think about the competitive dynamic evolving? Do you maybe see shared other players or maybe prices accelerate further? Or is there -- could it be an opportunity to maybe drive further customer rationalizations in cement?.

Well, let me kind of address your questions overall. We are confident we will have the capacity to support the ongoing growth from the infrastructure bill. And let me break that out a little bit. Clearly, we're backwardly integrated to aggregates. We have years and years of reserves. So we're ready and able.

We're investing in greenfields to our sustained organic growth. So on the aggregates side, extremely confident. We continue to be able to build our fleet out on the downstream side, so we'll be able to meet that need. On the cement side, we're running tight.

There's no doubt about that, but we have several self-help initiatives that add capacity to us over time to be able to support it. So one thing is keeping our plants up and running, being extremely focused on operational excellence, which we are and continue to be.

But another big factor that needs to be factored into when we think about additional capacity and cement is the introduction of Portland Limestone Cement, which will add another 5% of capacity into the market.

And if you think about where the PCA is talking about their estimates on the impact of the infrastructure bill on Cement, they are predicting basically a 9% annual growth per year. And talking about that come from 2019 and 2020 levels. And so that will add about another 47.56 million metric tons to the market.

We believe Portland Limestone Cement additional capacity and augmenting that with some judicious imports, we'll be able to meet our customers' needs. So will it be tight? Yes. But is there capacity to meet that demand, it's Cement in both aggregates and our downstream absolutely..

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

I'm wondering if you folks can just expand [indiscernible]..

Jerry, I think we lost you. You've broken up..

And I'm sorry, it does look like Jerry's line has disconnected. We'll move on to our next questioner, which is Kathryn Thompson with Thompson Research..

Kind of focus a little bit more on the policy side for my questions. First on some talk in D.C. about temporarily foregoing the federal gas tax to help lower prices, eventually go into the general fund transfer to offset this loss of revenues.

Any thoughts on the potential impact from this? And then given the news with Russia and Ukraine, there's always the potential domino effect even though you're primarily U.S. focused.

But have you thought about the potential implications for Summit and how you might manage your business around that, particularly as energy prices move up?.

Yes. Thanks for your question, Kathryn. I think you're probably talking about the holiday gas tax. It's a very nascent concept right now. So it's hard for me to really respond with any strength to that question.

I will say we're not supportive of any dollars being diverted away from any public infrastructure spending because our roads and bridges need a lot more. And we think it would only provide temporary relief at the pump and cause a bigger problem from an economic perspective.

So that's kind of our high-level thoughts around it right now, maybe more will come out and we'll have a more informed answer for you. On Russian, Ukraine, clearly, that's happening in the here and now. I would let Brian talk a little bit.

The first thing I asked Brian this morning was does that do with our natural gas, with where our portfolio sits today, where do we think that's going to impact us? And Brian, why don't you give the answer you gave me, how about that?.

Yes. So Kathryn, Obviously, it's going to be very volatile. You can see from oil prices this morning. I guess the good thing from our standpoint is that we do have a number of hedging alternatives in place for us. First of all, obviously, we have 50% of our estimated consumption of diesel, already prepurchased at locked-in prices.

Natural gas prices going up, obviously affect our cement business and our asphalt plants, but we do have alternative sources of energy, alternative fuels in the cement business. We can utilize up to about 45% to 50% of our energy requirements from alternative fuels, and we can switch between coal and natural gas there. So that will help us.

And then I guess, the other thing would be that we do have an offset from our landfill facility in Kansas, where we've got methane production, which we capture, and as natural gas prices go up, so too does the methane price. So that gives us a little bit of an offset there as well.

But in the rising hydrocarbon market, we're just going to stay really focused on that cost pricing equation..

And I would say, Kathryn, if you look at the portfolio optimization work we've done, we just referred to that in the prior question. We have exited several asphalt and downstream parts of our business that were underperforming.

So we're in a much stronger position than we were a year ago for this in addition to all of the commentary that Brian gave you. So it's a good thing about being in a business where you're backwardly integrated into your own product. But these things don't impact you as much as you might be in other sectors..

[Operator Instructions]. Your next question comes from the line of Mike Dahl with RBC Capital Markets..

This is actually Chris calling on for Mike. I was hoping to touch on your margin expectations embedded in your guide. You guys are on track to achieve Horizon 1 this year. The targeted range you had there was about 23% to 25% of EBITDA. You're at 23% basically this year, and you mentioned year-over-year expansion.

So I was wondering if you could maybe put a finer point on what you're thinking today is in terms of the magnitude of year-over-year expansion in margins this year?.

Well, we haven't. I will talk more to our assumptions because we don't actually put that out there, if you look at the key elements of that, right? So price, we're very bullish on price, particularly in our aggregates and cement.

We think this situation around our internal focus on value pricing working with our customers, supply-demand dynamics rolled across all 3 of our markets continue to be very constructive to pricing. And we have upped our price guidance from last year to low to mid-single digit to high to mid- to high single digits.

So that part continues to be robust, which obviously will expand margins. Volumes, residential. While we're moderating, we still see continued strength in residential. You just won't see the growth you saw in 2021, and that's where we pulled back a little bit from the point of view of volume.

However, we do see nonres increasing and in particular, that lag that comes after residential,, that 12- to 24-month time frame. That's we're right in that sweet spot right now. And we're also seeing continued investment in data centers, warehousing, green energy, which actually suits Summit's footprint really quite well.

So we see accelerated growth in non-res. And then I've talked a lot about our public funding across all of our key states. With the excess money left from COVID release and tax revenues, they're in really solid, strong funding.

So you take that combination of price volume, you look at our product mix improving and ags increasing over time and our cements, that materials part being stronger, we really feel that the margin profile will improve over time.

And we are expecting, as I said very clearly in my open commentary that we -- between value pricing, operational excellence and our product mix improving, we are going to continue to expand margins in 2022..

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

I thought we were past connectivity issues. I want to ask, regarding the asset swap comments, really interesting.

I'm wondering if you could just expand on the asset that you folks were able to receive, what the market position looks like? And how optimistic are you on additional asset swap opportunities within the remaining portfolio? Is there anything out of the remaining divestitures that you've earmarked that could also fit this description?.

Yes, Jerry. Thanks for the question. Yes, we were particularly pleased with this 1 we referenced in our commentary because it was a great example of where we had downstream assets that were strong assets, but we weren't in our #1 or #2 position in the market.

There was an industry partner who we were competing against, frankly, who had a stronger position. However, we had a stronger position in aggregates. So we basically swapped the assets for a number of aggregate quarries, which was a win-win for both parties. So it's exactly the way we want our asset swaps to work.

And if you think about several of the divestitures that we've done to date, at least half of them, and I'm probably low in my estimation there, have resulted in long-term aggregate supply agreement. So the divestitures went with the long-term ag supply.

So that's what's richening our product mix over time and allowing us to really drive towards that more materials focused portfolio.

And with respect to additional opportunities, every time I think that we've exploited our pipeline here, our team comes up with more and more opportunities at the local level, and it's really become a part of our organizational DNA, to look at assets, say, are we the rightful owner? We could improve ROIC since it's become an incentive for our regional presidents and their teams.

They're very focused on this metric, and it's really bringing dividends and more value to our shareholders over time. So I'll never say never on it. I thought we had locked down in the first horizon, but we will continue to look for that as we move through. It's just part of what we do right now, Jerry..

We have reached our allotted time for Q&A. I'll turn the call over to Anne for closing remarks..

Let me leave you with the following comments. So first, powered by our employees and guided by our strategy, we are very pleased with our 2021 execution and financial performance. And we plan to build on that momentum in 2022 and make further progress against our Elevate Summit strategies.

Secondly, we know what works and the plan is to double down on our proven Elevate Summit playbook in 2022. That means a sharp focus on value pricing, investing in capabilities, optimizing the portfolio and executing on our operational excellence initiatives.

And finally, we think it's a great time to be in our industry and a better time to be with Summit. We're in a position to benefit from the rare concurrence of growth across all 3 end markets, plus we have unique self-help margin levers that will continue to leverage in 2022. Thank you for your time today..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..