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Vulcan Materials
2020 Annual Report

Vulcan Announces Third Quarter Results

11/01/10

BIRMINGHAM, Ala., Nov. 1, 2010 /PRNewswire via COMTEX/ --

Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, announced results today for the third quarter ended September 30, 2010.

(Photo: http://photos.prnewswire.com/prnh/20090710/CL44887LOGO )

(Photo: http://www.newscom.com/cgi-bin/prnh/20090710/CL44887LOGO )

Third Quarter Summary and Comparisons with the Prior Year

  • Net earnings were $0.10 per diluted share and earnings from continuing operations were $11 million, or $0.08 per diluted share.
  • EBITDA was $150 million and cash earnings were $116 million.
  • Aggregates shipments declined 2.6 percent, decreasing pretax earnings $7 million.
  • The average price for aggregates was in line with the prior year, with wide variations across markets.
  • Excluding energy costs, unit cost of sales for aggregates decreased 2 percent.
  • Unit cost for diesel fuel increased 17 percent, reducing pretax earnings $4 million.
  • Unit cost for liquid asphalt increased 14 percent, reducing pretax earnings $6 million.
  • Selling, administrative and general expenses were reduced by $2 million.

Commenting for the Company, Don James, Vulcan's Chairman and Chief Executive Officer, stated, "Despite the modest decline in third quarter aggregates shipments, we are encouraged by underlying shipping trends. Trailing twelve month aggregates shipments have been increasing since February in spite of significantly lower volumes in the third quarter in Illinois due to a labor strike affecting our customers. In asphalt, trailing twelve month shipments have been relatively stable for the last 4 months.

"We continue to focus on controlling costs and managing production levels to meet current demand. During the last two years, we have reduced inventory levels of aggregates across our footprint. This action, while negatively affecting reported earnings, has improved cash flows and better positions us operationally for a recovery in demand. In the third quarter, aggregates production equaled sales volumes and, as a result, our unit cost of sales was in line with the prior year, notwithstanding the increase in energy costs. Going forward, we believe the cumulative effect of aggressively managing our inventory levels during the past two years has better positioned us to benefit from higher production levels.

"Contract awards for highway construction in Vulcan-served states continue to out-pace other states. During the twelve months ending September 2010, total contract awards for highway construction in Vulcan-served states, including awards for federal, state and local projects, increased 7 percent from the prior year compared to 3 percent for other states. Through September 2010, the Federal Highway Administration reported that only 42 percent of the total stimulus funds obligated for highways in Vulcan's 10 largest revenue states had been spent - which bodes well for increased construction activity from federal stimulus spending for the remainder of 2010 and 2011."

Third Quarter Operating Results Commentary

Third quarter aggregates earnings were $125 million versus $133 million in the prior year. Aggregates shipments declined 2.6 percent from the prior year's third quarter, accounting for most of the year-over-year decline in segment earnings. An industry-wide strike during most of July by construction workers in Illinois affected our customers and accounted for the year-over-year decline in shipments. Otherwise, many Vulcan-served markets realized solid increases in shipments versus the prior year's third quarter due primarily to stronger demand from public infrastructure projects and some improvement in single-family housing starts while some other markets realized declines in shipments.

The average unit price for aggregates in the third quarter was in line with the prior year but pricing continues to reflect wide variations across Vulcan-served markets. Aggregates unit costs of sales were in line with the prior year's third quarter despite higher energy costs.

Segment earnings in asphalt were $8 million lower than the prior year due primarily to a 14 percent increase in the unit cost for liquid asphalt and lower selling prices. Selling prices for asphalt mix generally lag increasing liquid asphalt costs and were further held in check due to competitive pressures. Asphalt volumes decreased 3 percent from the prior year's third quarter. Sequentially, unit material margins in the third quarter increased 10 percent from the second quarter due to lower unit costs.

Concrete segment earnings declined $9 million from the prior year's third quarter due principally to lower selling prices. Cement segment earnings in the third quarter were a loss of $2 million due primarily to lower selling prices.

Selling, administrative and general expense in the third quarter was $78 million versus $80 million in the prior year's third quarter. The year-over-year decline resulted mostly from lower employee-related expenses.

All results are unaudited.

Outlook Highlights and Commentary

Commenting on the Company's outlook for the remainder of the year, Mr. James stated, "While the current construction environment remains challenging, our optimism that the worst is behind us continues to grow. First, from the perspective of the overall economy, most GDP forecasts for the U.S. indicate further growth. In past economic cycles, demand for aggregates has improved as GDP has grown during the initial years of economic recovery. Additionally, state and local tax revenues have historically rebounded after GDP recovers. Since the second quarter of 2009, all Vulcan-served states have shown positive growth in gross state product - an indication economic recovery is underway.

"Public construction activity, particularly highways, continues to provide solid support for aggregates demand. Trailing twelve month contract awards for highways continue to show improvement versus the prior year, and approximately half of the $26 billion of total stimulus funds obligated for highways in the U.S. remains to be spent, according to the Federal Highway Administration. In August, the Congressional Budget Office forecasted total outlays for federal highway construction for the fiscal year ending September 2011 to increase 7 percent from the fiscal year just ended. This projected increase includes outlays from the regular highway funding program as well as stimulus funds.

"Private construction activity has remained challenging, particularly private nonresidential construction. Single-family housing starts appear to have turned the corner, bottoming late in 2009. Through September, single-family housing starts for the trailing twelve months have increased 10 percent versus the same period last year, due in part to the home-buyers tax credit that expired in April. While private nonresidential construction remains weak, the rate of decline in contract awards has slowed. A number of external forecasts now are calling for private nonresidential construction activity to bottom in 2011. The start of a recovery in this end market will be influenced by employment growth, business investment and lending activity.

"Overall, pricing for aggregates remains solid. A number of our markets are realizing year-over-year price growth, although pricing in certain other markets has declined due to competitive pressures. As a result, we expect pricing in the fourth quarter to approximate the prior year's level. Assuming typical weather patterns, we expect fourth quarter aggregates shipments to be up slightly from last year's level.

"In our asphalt business, material margins on each ton of asphalt mix sold have trended higher since the first quarter of this year due to a relatively more stable cost environment for liquid asphalt. We expect this trend to continue in the fourth quarter. In concrete and cement, we expect higher volumes to offset lower prices.

"Debt reduction and achieving target debt ratios remain a priority. We expect to reduce total debt by $120 million by the end of 2010. For the full year, we now expect capital spending to be less than $100 million, down from the previous guidance of $125 million.

"Our available production capacity positions Vulcan to participate efficiently and effectively in the increase in federal highway spending projected by the Congressional Budget Office. By the second half of 2011, we expect that continued growth in the overall economy and an improving job market will begin driving an increase in private construction activity, accelerating the earnings leverage of the Company."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CDT on November 2, 2010. Investors and other interested parties in the U.S. may access the teleconference live by calling 800.884.5695 approximately 10 minutes before the scheduled start. International participants can dial 617.786.2960. The access code is 36126335. A live webcast will be available via the Internet through Vulcan's home page at www.vulcanmaterials.com. The conference call will be recorded and available for replay approximately two hours after the call through November 9, 2010.

Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, a major producer of asphalt mix and concrete and a leading producer of cement in Florida.

Certain matters discussed in this release, including expectations regarding future performance, contain forward-looking statements that are subject to assumptions, risks and uncertainties that could cause actual results to differ materially from those projected. These assumptions, risks and uncertainties include, but are not limited to, those associated with general economic and business conditions; changes in interest rates; the timing and amount of federal, state and local funding for infrastructure; changes in the level of spending for private residential and nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing for our products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by the Company; volatility in pension plan asset values which may require cash contributions to the pension plans; the timing and amount of any future payments to be received under the 5CP earn-out contained in the agreement for the divestiture of the Company's Chemicals business; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; the Company's ability to secure and permit aggregates reserves in strategically located areas; the Company's ability to manage and successfully integrate acquisitions; the impact of the global economic recession on our business and financial condition and access to the capital markets; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions; and other assumptions, risks and uncertainties detailed from time to time in the Company's SEC reports, including the report on Form 10-K for the year. Forward-looking statements speak only as of the date hereof, and Vulcan assumes no obligation to publicly update such statements.

Table A

Vulcan Materials Company








and Subsidiary Companies











(Amounts and shares in thousands, except per share data)














Three Months Ended


Nine Months Ended

Consolidated Statements of Earnings

September 30


September 30

(Condensed and unaudited)

2010


2009


2010


2009











Net sales

$ 699,792


$ 738,664


$ 1,857,085


$ 1,987,939

Delivery revenues

43,412


39,528


115,534


112,407

Total revenues

743,204


778,192


1,972,619


2,100,346











Cost of goods sold

573,045


584,184


1,607,109


1,610,018

Delivery costs

43,412


39,528


115,534


112,407

Cost of revenues

616,457


623,712


1,722,643


1,722,425











Gross profit

126,747


154,480


249,976


377,921

Selling, administrative and general expenses

77,560


79,558


247,431


238,629

Gain on sale of property, plant & equipment









and businesses, net

476


7,496


50,210


10,653

Charge for legal settlement

-


-


40,000


-

Other operating income (expense), net

769


286


2,117


(2,885)

Operating earnings

50,432


82,704


14,872


147,060











Other income, net

1,637


2,756


1,780


4,578

Interest expense, net

47,526


43,519


134,541


130,029

Earnings (loss) from continuing operations









before income taxes

4,543


41,941


(117,889)


21,609

Benefit from income taxes

(6,048)


(5,983)


(61,491)


(9,621)

Earnings (loss) from continuing operations

10,591


47,924


(56,398)


31,230

Earnings on discontinued operations, net of tax

2,655


6,308


6,905


12,433

Net earnings (loss)

$ 13,246


$ 54,232


$ (49,493)


$ 43,663

Basic earnings (loss) per share:









Continuing operations

$ 0.08


$ 0.38


$ (0.44)


$ 0.27


Discontinued operations

0.02


0.05


0.05


0.10


Net earnings (loss) per share

$ 0.10


$ 0.43


$ (0.39)


$ 0.37











Diluted earnings (loss) per share:









Continuing operations

$ 0.08


$ 0.38


$ (0.44)


$ 0.27


Discontinued operations

0.02


0.05


0.05


0.10


Net earnings (loss) per share

$ 0.10


$ 0.43


$ (0.39)


$ 0.37











Weighted-average common shares








outstanding:










Basic

128,602


125,361


127,840


116,533



Assuming dilution

128,910


125,859


127,840


117,047

Cash dividends declared per share









of common stock

$ 0.25


$ 0.25


$ 0.75


$ 1.23

Depreciation, depletion, accretion and









amortization

$ 97,697


$ 99,243


$ 289,174


$ 298,158

Effective tax rate from continuing operations

-133.1%


-14.3%


52.2%


-44.5%

Table B

Vulcan Materials Company

and Subsidiary Companies








(Amounts in thousands, except per share data)







Consolidated Balance Sheets

September 30


December 31


September 30

(Condensed and unaudited)

2010


2009


2009









Assets






Cash and cash equivalents

$ 82,496


$ 22,265


$ 46,547

Restricted cash

531


-


-

Medium-term investments

3,910


4,111


6,803

Accounts and notes receivable:







Accounts and notes receivable, gross

414,316


276,746


408,407


Less: Allowance for doubtful accounts

(9,382)


(8,722)


(9,394)



Accounts and notes receivable, net

404,934


268,024


399,013

Inventories:







Finished products

251,457


261,752


265,422


Raw materials

22,924


21,807


24,565


Products in process

5,905


3,907


5,085


Operating supplies and other

35,958


37,567


36,623



Inventories

316,244


325,033


331,695

Deferred income taxes

66,718


57,967


67,967

Prepaid expenses

42,729


50,817


33,466

Assets held for sale

14,582


15,072


-



Total current assets

932,144


743,289


885,491

Investments and long-term receivables

33,808


33,283


31,424

Property, plant & equipment:







Property, plant & equipment, cost

6,656,252


6,653,261


6,678,317


Less: Reserve for depr., depl. & amort.

(2,987,287)


(2,778,590)


(2,713,057)



Property, plant & equipment, net

3,668,965


3,874,671


3,965,260

Goodwill

3,093,979


3,093,979


3,093,979

Other intangible assets, net

693,779


682,643


681,087

Other assets

106,922


105,085


105,927



Total assets

$ 8,529,597


$ 8,532,950


$ 8,763,168

















Liabilities and Shareholders' Equity






Current maturities of long-term debt

$ 325,249


$ 385,381


$ 60,421

Short-term borrowings

-


236,512


286,357

Trade payables and accruals

138,462


121,324


141,884

Other current liabilities

207,085


113,109


187,171

Liabilities of assets held for sale

460


369


-



Total current liabilities

671,256


856,695


675,833

Long-term debt

2,432,521


2,116,120


2,506,170

Deferred income taxes

849,925


887,268


896,598

Other noncurrent liabilities

537,041


620,845


599,039



Total liabilities

4,490,743


4,480,928


4,677,640

Shareholders' equity:







Common stock, $1 par value

128,391


125,912


125,401


Capital in excess of par value

2,487,538


2,368,228


2,342,765


Retained earnings

1,606,754


1,752,240


1,797,036


Accumulated other comprehensive loss

(183,829)


(194,358)


(179,674)



Shareholders' equity

4,038,854


4,052,022


4,085,528



Total liabilities and shareholders' equity

$ 8,529,597


$ 8,532,950


$ 8,763,168

Table C

Vulcan Materials Company

and Subsidiary Companies










(Amounts in thousands)





Nine Months Ended

Consolidated Statements of Cash Flows

September 30

(Condensed and unaudited)

2010


2009















Operating Activities




Net earnings (loss)

$ (49,493)


$ 43,663

Adjustments to reconcile net earnings (loss) to





net cash provided by operating activities:






Depreciation, depletion, accretion and amortization

289,174


298,158



Net gain on sale of property, plant & equipment and businesses

(59,004)


(11,465)



Contributions to pension plans

(23,400)


(26,793)



Share-based compensation

15,198


21,870



Deferred tax provision

(51,060)


(26,477)



Changes in assets and liabilities before initial







effects of business acquisitions and dispositions

(6,647)


51,845

Other, net

13,059


4,021




Net cash provided by operating activities

127,827


354,822








Investing Activities




Purchases of property, plant & equipment

(62,104)


(94,165)

Proceeds from sale of property, plant & equipment

4,008


6,399

Proceeds from sale of businesses, net of transaction costs

50,954


16,075

Payment for businesses acquired, net of acquired cash

(35,404)


(36,980)

Redemption of medium-term investments

22


30,590

Other, net


341


676




Net cash used for investing activities

(42,183)


(77,405)








Financing Activities




Net short-term payments

(236,512)


(798,118)

Payment of current maturities and long-term debt

(193,994)


(296,555)

Proceeds from issuance of long-term debt, net of discounts

450,000


397,660

Debt issuance costs

(3,058)


(3,033)

Proceeds from issuance of common stock

41,734


587,129

Dividends paid

(95,696)


(140,048)

Proceeds from exercise of stock options

12,597


10,958

Other, net


(484)


943




Net cash used for financing activities

(25,413)


(241,064)








Net increase in cash and cash equivalents

60,231


36,353

Cash and cash equivalents at beginning of year

22,265


10,194

Cash and cash equivalents at end of period

$ 82,496


$ 46,547

Table D

Segment Financial Data and Unit Shipments











(Amounts in thousands, except per unit data)




Three Months Ended


Nine Months Ended




September 30


September 30




2010


2009


2010


2009

Total Revenues



Aggregates segment (a)

$ 514,332


$ 532,936


$ 1,369,492


$ 1,432,353


Intersegment sales

(44,792)


(48,070)


(119,239)


(128,048)



Net sales

469,540


484,866


1,250,253


1,304,305


Concrete segment (b)

105,049


119,284


293,028


348,730


Intersegment sales

-


(32)


(7)


(118)



Net sales

105,049


119,252


293,021


348,612


Asphalt mix segment

115,788


123,922


282,309


305,983


Intersegment sales

-


-


-


-



Net sales

115,788


123,922


282,309


305,983


Cement segment (c)

20,360


19,829


61,208


56,423


Intersegment sales

(10,945)


(9,205)


(29,706)


(27,384)



Net sales

9,415


10,624


31,502


29,039


Total




Net sales

699,792


738,664


1,857,085


1,987,939



Delivery revenues

43,412


39,528


115,534


112,407



Total revenues

$ 743,204


$ 778,192


$ 1,972,619


$ 2,100,346











Gross Profit





Aggregates

$ 125,129


$ 133,229


$ 262,514


$ 323,675


Concrete

(10,070)


(604)


(31,736)


(3,671)


Asphalt mix

13,440


21,334


21,756


59,229


Cement

(1,752)


521


(2,558)


(1,312)


Total gross profit

$ 126,747


$ 154,480


$ 249,976


$ 377,921











Depreciation, depletion, accretion and amortization





Aggregates

$ 74,512


$ 78,060


$ 222,561


$ 235,146


Concrete

13,622


12,786


40,064


38,994


Asphalt mix

2,212


2,194


6,689


6,374


Cement

5,787


4,924


15,360


14,332


Corporate and other unallocated

1,564


1,279


4,500


3,312


Total DD&A

$ 97,697


$ 99,243


$ 289,174


$ 298,158











Unit Shipments









Aggregates customer tons

40,079


41,090


105,144


108,424


Internal tons (d)

3,314


3,454


8,748


8,895


Aggregates - tons

43,393


44,544


113,892


117,319












Ready-mixed concrete - cubic yards

1,137


1,191


3,165


3,407


Asphalt mix - tons

2,258


2,336


5,462


5,636












Cement customer tons

70


81


245


204


Internal tons (d)

148


97


390


287


Cement - tons

218


178


635


491











Average Unit Sales Price (including internal sales)



















Aggregates (freight-adjusted) (e)

$ 10.18


$ 10.20


$ 10.18


$ 10.27


Ready-mixed concrete

$ 87.62


$ 96.15


$ 86.95


$ 97.40


Asphalt mix

$ 50.62


$ 52.38


$ 50.54


$ 53.50


Cement

$ 79.56


$ 93.31


$ 80.01


$ 96.17











(a) Includes crushed stone, sand and gravel, sand, other aggregates, as well as transportation and service revenues associated with the aggregates business.

(b) Includes ready-mixed concrete, concrete block, precast concrete, as well as building materials purchased for resale.

(c) Includes cement and calcium products.

(d) Represents tons shipped primarily to our downstream operations (e.g., asphalt mix and ready-mixed concrete). Sales from internal shipments are eliminated in net sales presented above and in the accompanying Condensed Consolidated Statements of Earnings.

(e) Freight-adjusted sales price is calculated as total sales dollars (internal and external) less freight to remote distribution sites divided by total sales units (internal and external).

Table E

1. Supplemental Cash Flow Information




Supplemental information referable to the Condensed Consolidated Statements of
Cash Flows for the nine months ended September 30 is summarized below:



(Amounts in thousands)



2010


2009











Supplemental Disclosure of Cash Flow Information




Cash paid (refunded) during the period for:





Interest

$ 101,917


$ 109,586


Income taxes

3,897


(9,706)






Supplemental Schedule of Noncash Investing and Financing Activities




Liabilities assumed in business acquisitions

150


-

Accrued liabilities for purchases of property, plant & equipment

4,674


13,436

Note received from sale of businesses

-


1,450

Debt issued for purchases of property, plant & equipment

-


1,984

Stock issued for pension contribution

53,864


-

Proceeds receivable from issuance of common stock

-


1,712











2. Reconciliation of Non-GAAP Measures









Net cash provided by operating activities

$ 127,827


$ 354,822

Purchases of property, plant & equipment

(62,104)


(94,165)

Free cash flow

$ 65,723


$ 260,657






Free cash flow deducts purchases of property, plant & equipment from net cash
provided by operating activities. This financial metric is used by the investment
community as an indicator of the company's ability to incur and service debt. It is
not defined by Generally Accepted Accounting Principles (GAAP); thus, it should
not be considered as an alternative to net cash provided by operating activities or
any other liquidity measure defined by GAAP.


This metric is presented for the convenience of investment professionals that use
such metrics in their analysis and to provide our shareholders with an understanding
of the metrics we use to assess performance and to monitor our cash and liquidity
positions. We internally use free cash flow and other such measures to assess the
operating performance of our various business units and the consolidated company.
We do not use this metric as a measure to allocate resources internally.

Table F












Reconciliation of Non-GAAP Measures









EBITDA and Cash Earnings Reconciliations














(Amounts in thousands)






Three Months Ended


Nine Months Ended






September 30


September 30






2010


2009


2010


2009













Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Cash Earnings




















Net cash provided by operating activities



$ 109,171


$ 185,420


$ 127,827


$ 354,822

Changes in operating assets and liabilities before initial










effects of business acquisitions and dispositions



9,231


(87,695)


6,647


(51,845)

Other net operating items (providing) using cash



(7,459)


55,750


105,207


38,844

Earnings on discontinued operations, net of tax



(2,655)


(6,308)


(6,905)


(12,433)

Benefit from income taxes



(6,048)


(5,983)


(61,491)


(9,621)

Interest expense, net



47,526


43,519


134,541


130,029

Less: Depreciation, depletion, accretion and amortization



(97,697)


(99,243)


(289,174)


(298,158)

EBIT





52,069


85,460


16,652


151,638

Plus: Depreciation, depletion, accretion and amortization



97,697


99,243


289,174


298,158

EBITDA





$ 149,766


$ 184,703


$ 305,826


$ 449,796

Less: Interest expense, net



(47,526)


(43,519)


(134,541)


(130,029)

Current taxes



13,303


(26,526)


10,393


(16,999)

Cash earnings





$ 115,543


$ 114,658


$ 181,678


$ 302,768













Reconciliation of Net Earnings (Loss) to EBITDA and Cash Earnings





















Net earnings (loss)




$ 13,246


$ 54,232


$ (49,493)


$ 43,663

Benefit from income taxes



(6,048)


(5,983)


(61,491)


(9,621)

Interest expense, net



47,526


43,519


134,541


130,029

Earnings on discontinued operations, net of tax



(2,655)


(6,308)


(6,905)


(12,433)

EBIT





52,069


85,460


16,652


151,638

Plus: Depreciation, depletion, accretion and amortization



97,697


99,243


289,174


298,158

EBITDA





$ 149,766


$ 184,703


$ 305,826


$ 449,796

Less: Interest expense, net



(47,526)


(43,519)


(134,541)


(130,029)

Current taxes



13,303


(26,526)


10,393


(16,999)

Cash earnings





$ 115,543


$ 114,658


$ 181,678


$ 302,768


































EBITDA Bridge




Three Months Ended



Nine Months Ended


(Amounts in millions)



September 30



September 30







EBITDA




EBITDA



Continuing Operations - 2009 Actual



$ 185




$ 450



Increase / (Decrease) due to:










Illinois DOT settlement and related expenses



-




(41)



Aggregates:

Volumes




(7)




(21)




Selling prices




(1)




(10)




Costs and other items




(4)




(43)



Concrete





(9)




(27)



Asphalt mix





(8)




(37)



Gain on sale of property, plant & equipment and businesses (a)


(7)




30



Depreciation, depletion, accretion and amortization



n/a




n/a



All other (additional shares, tax rate, misc. items)



1




5



Continuing Operations - 2010 Actual



$ 150




$ 306



























(a) Excludes the donation of land


EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization. Cash earnings adjusts EBITDA for net interest and current taxes. These financial metrics are often used by the investment community as indicators of a company's ability to incur and service debt. They are not defined by Generally Accepted Accounting Principles (GAAP); thus, they should not be considered as an alternative to net cash provided by operating activities, operating earnings, or any other liquidity or performance measure defined by GAAP.


These metrics are presented for the convenience of investment professionals that use such metrics in their analysis and to provide our shareholders with an understanding of the metrics we use to assess performance and to monitor our cash and liquidity positions. We internally use EBITDA, cash earnings and other such measures to assess the operating performance of our various business units and the consolidated company. We do not use these metrics as a measure to allocate resources internally.

SOURCE Vulcan Materials Company