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Vulcan Materials
2020 Annual Report

Vulcan Announces 2010 Results

02/02/11

BIRMINGHAM, Ala., Feb. 2, 2011 /PRNewswire via COMTEX/ --

Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates; announced results today for 2010 and the fourth quarter ended December 31, 2010.

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

Commenting for the Company, Don James, Vulcan's Chairman and Chief Executive Officer, stated, "The length and depth of the decline in construction activity and aggregates demand during this economic downturn have been unprecedented. For Vulcan, aggregates shipments in 2010 were one-half the level shipped in 2006 when demand peaked. That said, we start 2011 with optimism that the decline in demand for our products bottomed in 2010 and that growth in shipments is ahead of us.

"The United States economy is improving with many economic measures indicating that recovery is underway. To date, the economic recovery has not had a significant effect on some of our key end markets or key regional markets. However, we are encouraged by overall shipping trends for our products. Trailing twelve month aggregates shipments have increased modestly since February of last year while overall pricing for aggregates has remained reasonably stable during the worst year of demand."

Full Year Summary and Comparisons with the Prior Year

  • Net earnings were a loss of $96 million or $0.75 per diluted share.
  • Cash earnings were $228 million and EBITDA was $371 million.
  • Net earnings, cash earnings and EBITDA all include a net pretax expense of $22 million. This net pretax charge includes amounts related to the settlement of a lawsuit in Illinois, the gain associated with the sale of non-strategic assets in rural Virginia, as well as certain other fourth quarter adjustments and charges.
  • Unit cost for diesel fuel and liquid asphalt increased 30 percent and 20 percent respectively, reducing pretax earnings $51 million.
  • Freight-adjusted aggregates pricing declined approximately 2 percent due principally to weakness in Florida and California.
  • Aggregates shipments declined approximately 2 percent, reflecting varied market demand conditions across our footprint.
  • Full year capital spending was $86 million, compared with $110 million in the prior year.

Commenting on the full year, Mr. James stated, "Throughout the year, we have managed our business to maximize cash generation. For example, we further reduced inventory levels of aggregates. While this action negatively affected GAAP earnings, it increased cash generation and better positions us to increase production and earnings as demand recovers. During 2010, we also continued to reduce our overhead expenses. Costs associated with implementing some of these reductions increased selling, administrative and general (SAG) expenses in the fourth quarter and full year; however these overhead reductions better position us for earnings growth in 2011 and beyond. On a comparable basis, full year SAG costs in 2010 were approximately $4 million lower than the prior year. Finally, benefits related to our project to replace legacy IT systems began to be realized in 2010, lowering SAG costs for the year. We expect additional benefits from this project in 2011."

Fourth Quarter Summary and Comparisons with the Prior Year

  • Net earnings were a loss of $47 million or $0.37 per diluted share.
  • Cash earnings were $46 million and EBITDA was $65 million.
  • Net earnings, cash earnings and EBITDA all include certain adjustments and charges that lowered pretax earnings approximately $21 million.
  • Unit cost for diesel fuel increased 19 percent, reducing pretax earnings $4 million.
  • Unit cost for liquid asphalt increased 14 percent, reducing pretax earnings $5 million.
  • Aggregates shipments were in line with the prior year.
  • Unfavorable mix factors accounted for the majority of the 4 percent decline in the average freight-adjusted selling price.
  • Excluding energy costs, unit cost of sales for aggregates decreased 1 percent.

Fourth quarter aggregates earnings were $58 million versus $70 million in the prior year and include $7 million of the $21 million in adjustments and charges noted above. A number of Vulcan-served markets, most notably Texas, Virginia and South Carolina, realized solid increases in shipments versus the prior year's fourth quarter, due primarily to stronger demand from public infrastructure projects and more normal weather patterns. California showed a modest increase in shipments. However, other markets experienced declines in shipments, including North Carolina, Georgia and Florida. As a result, overall aggregates shipments were in line with the prior year's fourth quarter.

The majority of the 4 percent decline in the average freight-adjusted selling price was accounted for by the change in the mix of aggregates shipments. Unfavorable geographic mix accounted for a large portion of the adverse effect, particularly in North Carolina and Texas where aggregates shipments decreased and increased, respectively, more than 30 percent versus the prior year. The remaining decrease was due principally to lower pricing in Florida and California, which have experienced the steepest overall declines in demand. Excluding energy-related costs, aggregates unit costs of sales in the fourth quarter were favorable versus the prior year, reflecting effective cost control efforts.

Segment earnings in asphalt were $8 million versus $10 million in the prior year's fourth quarter. Selling prices for asphalt mix increased approximately 2 percent, offsetting a portion of the earnings effect of the 14 percent increase in liquid asphalt cost. Selling prices for asphalt mix generally lag increasing liquid asphalt costs and were further held in check due to competitive pressures. Asphalt volumes decreased 4 percent from the prior year's fourth quarter. Sequentially, unit materials margins in the fourth quarter increased slightly from the third quarter, the second consecutive quarter of improving materials margins.

The Concrete segment reported a loss of $13 million, a $2 million decline from the prior year's fourth quarter. The year-over-year decline in earnings was due to lower selling prices. Concrete shipments and unit cash costs of sales were favorable versus the prior year's fourth quarter. Cement segment earnings in the fourth quarter were a loss of $1 million due primarily to lower selling prices.

Selling, administrative and general expenses in the fourth quarter were approximately $80 million versus $83 million in the prior year's fourth quarter. Both periods included certain charges and expenses, including legal fees, severance payments and charges for the donation of real estate, that resulted in a net increase to each period's reported number of $4 million and $5 million respectively.

Additionally, other operating expense for the fourth quarter of 2010 includes approximately $10 million of charges due principally to the impairment of non-core assets and settlement of prior period obligations.

All results are unaudited.

Outlook Highlights and Commentary

Commenting on the Company's outlook for 2011, Mr. James stated, "While economic improvement and growth in construction activity across our footprint have not materialized equally, we expect aggregates shipments and pricing to increase from the prior year, leading to earnings growth in 2011. There are several factors that make us more optimistic about the prospects for earnings growth in 2011. First, from the perspective of the overall economy, most GDP forecasts for the U.S. indicate additional growth in 2011. 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 been increasing for the last four quarters ending December 2010, according to an independent research organization. This pattern appears to be consistent with past cycles in which state and local tax revenues have rebounded after GDP recovers. On a sequential basis, virtually all Vulcan-served states have shown positive growth in gross state product since the spring of 2009 - an indication economic recovery is underway.

"Looking more specifically at our construction end markets, public construction activity, particularly highways, should continue to provide solid support for aggregates demand provided that Congress acts in a timely manner to extend authorized highway funding at current levels through the remainder of the fiscal year ending September 2011. Authorized federal-aid highway funding is currently set to end on March 4, 2011 with the expiration of the Continuing Resolution now funding government programs. However, the committees of jurisdiction in the U.S. House and Senate are working on new authorizing legislation to complete the current fiscal year. The transportation construction sector of the economy and state Departments of Transportation are at this time being adversely affected by the short-term spending approach contained in Continuing Resolutions to fund government programs, and are working with members of Congress to enact responsible, authorized highway funding as a bridge to ultimate passage of a new multi-year federal surface transportation bill.

"During the twelve months ending December 2010, total contract awards for highway construction in Vulcan-served states, including awards for federal, state and local projects, increased 5 percent from the prior year compared to 2 percent for other states. According to the Federal Highway Administration, approximately $7.1 billion, or 43 percent, of the total stimulus funds apportioned for highways in Vulcan-served states remains to be spent. This absolute level of funding is more than twice the $3.2 billion remaining for other states.

"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 December, single-family housing starts for the trailing twelve months have increased 2 percent versus the same period last year, while multi-family residential construction has increased in each of the last three quarters versus the prior year. As a result, our current outlook for residential construction activity assumes continued growth in 2011, albeit from a small base. While private nonresidential construction remains weak, the rate of decline in contract awards has slowed considerably. 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, capacity utilization, business investment and lending activity.

"Overall, expected growth in demand for our products in 2011 largely depends on the pace of recovery in single-family residential construction, the stabilization of private nonresidential construction and the continuity of federal funding for highways at current levels without interruption. With that said, we expect aggregates earnings in 2011 to increase from the prior year due to higher shipments and average selling prices as well as the benefits of cost reduction efforts. The mid-point of our estimated growth range in aggregates shipments is 2 percent above the prior year level, driven by low to mid-single digit volume growth in most markets outside of California and Florida, where shipments are expected to be in line with the prior year. Most of our markets are expected to realize year-over-year price growth in 2011. We believe a more stable demand outlook will benefit pricing overall. Assuming comparable geographic and product mix, we expect aggregates pricing in 2011 to increase 1 to 3 percent from the prior year's level.

"In our asphalt business, materials margins on each ton of asphalt mix sold trended higher in the second half of 2010 due to a relatively more stable cost environment for liquid asphalt, allowing average selling prices to better reflect the cost of this key cost input. In 2011, we expect this trend to continue, resulting in continued recovery in materials margins. Overall, we expect asphalt earnings to increase from the prior year. This growth in segment earnings assumes a modest increase in sales volumes as well as improved materials margins as higher selling prices more than offset higher costs for liquid asphalt.

"In concrete, we expect higher sales volumes and slightly higher selling prices. As a result, we expect the loss reported in 2010 to narrow somewhat. In cement, we expect segment earnings in 2011 to improve slightly from the loss reported in the prior year.

"Selling, administrative and general expenses in 2011 are expected to be lower than the prior year. Total SAG expenses of $327 million in 2010 included approximately $24 million of certain adjustments and charges referable to the fair market value of donated real estate, severance costs and expenses related to legal settlements. In 2011, we do not anticipate similar adjustments and charges. As a result, we expect SAG expenses in 2011 of $305 million to approximate the comparable level in 2010.

"For the full year, we expect capital spending to be approximately $125 million, up from $86 million in 2010.

"Improved stability in the economic factors that drive demand for our products will bring the strength of Vulcan's fundamentals back into focus. We have worked diligently throughout this downturn to position the company for earnings growth when demand recovers. As a result of these efforts, cash earnings per ton of aggregates sold in 2010 remained higher than at the peak of demand. This result has been achieved primarily through focus on pricing and effective cost management in spite of a 50 percent decline in demand for aggregates. Going forward, we will continue to focus on controlling costs and managing production to meet current demand levels. By the second half of 2011, we expect that continued growth in the overall economy 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. CST on February 3, 2011. Investors and other interested parties in the U.S. may access the teleconference live by calling 866.713.8565 approximately 10 minutes before the scheduled start. International participants can dial 617.597.5324. The access code is 30225249. 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 February 10, 2011.

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; the lack of a multi-year federal highway funding bill with an automatic funding mechanism; the reluctance of state departments of transportation to undertake highway projects without a reliable method of federal funding for projects; 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; the negative outlook on our debt rating and our increased cost of capital in the event that our debt rating is lowered under investment grade; volatility in pension plan asset values which may require cash contributions to the pension plans; 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


Twelve Months Ended


Consolidated Statements of Earnings


December 31


December 31


(Condensed and unaudited)


2010


2009


2010


2009














Net sales


$ 548,831


$ 555,767


$ 2,405,916


$ 2,543,707


Delivery revenues


37,412


34,377


152,946


146,783


Total revenues


586,243


590,144


2,558,862


2,690,490














Cost of goods sold


498,082


487,726


2,105,190


2,097,745


Delivery costs


37,412


34,377


152,946


146,783


Cost of revenues


535,494


522,103


2,258,136


2,244,528














Gross profit


50,749


68,041


300,726


445,962


Selling, administrative and general expenses


80,106


82,979


327,537


321,608


Gain on sale of property, plant & equipment











and businesses, net


9,092


16,451


59,302


27,104


Charge for legal settlement


-


-


40,000


-


Other operating income (expense), net


(9,148)


(122)


(7,031)


(3,006)


Operating earnings (loss)


(29,413)


1,391


(14,540)


148,452


Other income, net


1,295


730


3,074


5,307


Interest expense, net


46,199


42,951


180,740


172,980


Loss from continuing operations











before income taxes


(74,317)


(40,830)


(192,206)


(19,221)


Benefit from income taxes


(28,172)


(28,248)


(89,663)


(37,869)


Earnings (loss) from continuing operations


(46,145)


(12,582)


(102,543)


18,648


Earnings (loss) on discontinued operations, net of tax


(852)


(767)


6,053


11,666


Net earnings (loss)


$ (46,997)


$ (13,349)


$ (96,490)


$ 30,314


Basic earnings (loss) per share:











Continuing operations


$ (0.36)


$ (0.10)


$ (0.80)


$ 0.16



Discontinued operations


(0.01)


(0.01)


0.05


0.09



Net earnings (loss) per share


$ (0.37)


$ (0.11)


$ (0.75)


$ 0.25














Diluted earnings (loss) per share:











Continuing operations


$ (0.36)


$ (0.10)


$ (0.80)


$ 0.16



Discontinued operations


(0.01)


(0.01)


0.05


0.09



Net earnings (loss) per share


$ (0.37)


$ (0.11)


$ (0.75)


$ 0.25














Weighted-average common shares










outstanding:












Basic


128,673


125,889


128,050


118,891




Assuming dilution


128,673


125,889


128,050


119,430


Cash dividends declared per share











of common stock


$ 0.25


$ 0.25


$ 1.00


$ 1.48


Depreciation, depletion, accretion and











amortization


$ 92,919


$ 96,454


$ 382,093


$ 394,612


Effective tax rate from continuing operations


37.9%


69.2%


46.6%


197.0%


Table B


Vulcan Materials Company


and Subsidiary Companies








(Amounts in thousands,

except per share data)









Consolidated Balance Sheets


December 31


December 31


(Condensed and unaudited)


2010


2009








As Restated

(a)


Assets






Cash and cash equivalents


$ 47,541


$ 22,265


Restricted cash


547


-


Medium-term investments


-


4,111


Accounts and notes receivable:







Accounts and notes receivable, gross


325,303


276,746



Less: Allowance for doubtful accounts


(7,505)


(8,722)




Accounts and notes receivable, net


317,798


268,024


Inventories:







Finished products


254,840


261,752



Raw materials


22,222


21,807



Products in process


6,036


3,907



Operating supplies and other


36,747


37,567




Inventories


319,845


325,033


Deferred income taxes


53,794


56,017


Prepaid expenses


19,374


42,367


Assets held for sale


13,207


15,072




Total current assets


772,106


732,889


Investments and long-term receivables


37,386


33,283


Property, plant & equipment:







Property, plant & equipment, cost


6,692,814


6,653,261



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


(3,059,900)


(2,778,590)




Property, plant & equipment, net


3,632,914


3,874,671


Goodwill


3,097,016


3,096,300


Other intangible assets, net


691,693


682,643


Other assets


106,776


105,085




Total assets


$ 8,337,891


$ 8,524,871


















Liabilities and Shareholders' Equity






Current maturities of long-term debt


$ 5,246


$ 385,381


Short-term borrowings


285,500


236,512


Trade payables and accruals


102,315


121,324


Other current liabilities


172,495


113,109


Liabilities of assets held for sale


116


369




Total current liabilities


565,672


856,695


Long-term debt


2,427,516


2,116,120


Deferred income taxes


849,448


893,974


Other noncurrent liabilities


530,275


620,845




Total liabilities


4,372,911


4,487,634


Shareholders' equity:







Common stock, $1 par value


128,570


125,912



Capital in excess of par value


2,500,886


2,368,228



Retained earnings


1,512,863


1,737,455



Accumulated other comprehensive loss


(177,339)


(194,358)




Shareholders' equity


3,964,980


4,037,237




Total liabilities and shareholders' equity


$ 8,337,891


$ 8,524,871


(a) The December 31, 2009 balance sheet reflects corrections of errors related to an understatement of deferred income tax liabilities.

















Table C


Vulcan Materials Company


and Subsidiary Companies














(Amounts in thousands)







Twelve Months Ended


Consolidated Statements of Cash Flows


December 31


(Condensed and unaudited)


2010


2009











Operating Activities






Net earnings (loss)


$ (96,490)


$ 30,314


Adjustments to reconcile net earnings (loss) to







net cash provided by operating activities:








Depreciation, depletion, accretion and amortization


382,093


394,612




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


(68,095)


(27,916)




Contributions to pension plans


(24,496)


(27,616)




Share-based compensation


20,637


23,120




Deferred tax provision


(51,684)


(43,773)




Changes in assets and liabilities before initial









effects of business acquisitions and dispositions


19,938


90,276


Other, net


20,803


14,018





Net cash provided by operating activities


202,706


453,035











Investing Activities






Purchases of property, plant & equipment


(86,324)


(109,729)


Proceeds from sale of property, plant & equipment


13,602


17,750


Proceeds from sale of businesses, net of transaction costs


50,954


16,075


Payment for businesses acquired, net of acquired cash


(70,534)


(36,980)


Reclassification from medium-term investments to cash equivalents


3,630


-


Redemption of medium-term investments


22


33,282


Other, net


274


(400)





Net cash used for investing activities


(88,376)


(80,002)











Financing Activities






Net short-term borrowings (payments)


48,988


(847,963)


Payment of current maturities and long-term debt


(519,204)


(361,724)


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


606,546


Dividends paid


(127,792)


(171,468)


Proceeds from exercise of stock options


20,502


17,327


Other, net


(224)


1,693





Net cash used for financing activities


(89,054)


(360,962)











Net increase in cash and cash equivalents


25,276


12,071


Cash and cash equivalents at beginning of year


22,265


10,194


Cash and cash equivalents at end of year


$ 47,541


$ 22,265


Table D


Segment Financial Data and Unit Shipments





(Amounts in thousands, except

per unit data)







Three Months Ended


Twelve Months Ended





December 31


December 31






2010


2009


2010


2009


Total Revenues


















Aggregates segment (a)


$ 397,418


$ 406,246


$ 1,766,910


$ 1,838,599



Intersegment sales


(34,855)


(37,162)


(154,094)


(165,210)




Net sales


362,563


369,084


1,612,816


1,673,389



Concrete segment (b)


90,148


90,705


383,175


439,435



Intersegment sales


-


(6)


(6)


(123)




Net sales


90,148


90,699


383,169


439,312



Asphalt mix segment


87,567


87,711


369,876


393,694



Intersegment sales


-


-


-


-




Net sales


87,567


87,711


369,876


393,694



Cement segment (c)


19,024


16,108


80,232


72,531



Intersegment sales


(10,471)


(7,835)


(40,177)


(35,219)




Net sales


8,553


8,273


40,055


37,312



Total





Net sales


548,831


555,767


2,405,916


2,543,707




Delivery revenues


37,412


34,377


152,946


146,783




Total revenues


$ 586,243


$ 590,144


$ 2,558,862


$ 2,690,490














Gross Profit






Aggregates


$ 57,699


$ 69,613


$ 320,214


$ 393,288



Concrete


(13,232)


(10,785)


(44,968)


(14,456)



Asphalt mix


7,580


9,743


29,336


68,972



Cement


(1,298)


(530)


(3,856)


(1,842)



Total gross profit


$ 50,749


$ 68,041


$ 300,726


$ 445,962














Depreciation, depletion, accretion and amortization






Aggregates


$ 70,479


$ 77,073


$ 293,040


$ 312,219



Concrete


13,532


13,653


53,596


52,647



Asphalt mix


2,019


2,237


8,708


8,611



Cement


5,523


1,925


20,883


16,257



Corporate and other unallocated


1,366


1,566


5,866


4,878



Total DDA&A


$ 92,919


$ 96,454


$ 382,093


$ 394,612














Unit Shipments











Aggregates customer tons


31,051


30,873


136,195


139,297



Internal tons (d)


2,650


2,671


11,398


11,566



Aggregates - tons


33,701


33,544


147,593


150,863
















Ready-mixed concrete - cubic yards


973


930


4,138


4,337



Asphalt mix - tons


1,704


1,779


7,166


7,415
















Cement customer tons


56


58


301


262



Internal tons (d)


143


81


534


369



Cement - tons


199


139


835


631















Average Unit Sales Price (including internal sales)












Aggregates (freight-adjusted) (e)


$ 9.95


$ 10.39


$ 10.13


$ 10.30



Ready-mixed concrete


$ 86.95


$ 93.34


$ 86.95


$ 96.53



Asphalt mix


$ 50.70


$ 49.93


$ 50.58


$ 52.66



Cement


$ 76.90


$ 94.03


$ 79.27


$ 95.70


(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 twelve months ended December 31 is summarized below:






(Amounts in thousands)




2010


2009














Supplemental Disclosure of Cash Flow Information





Cash paid (refunded) during the period for:






Interest

$ 183,061


$ 181,352



Income taxes

(15,745)


(25,184)








Supplemental Schedule of Noncash Investing and Financing Activities





Liabilities assumed in business acquisitions

150


-


Accrued liabilities for purchases of property, plant & equipment

8,200


13,459


Note received from sale of businesses

-


1,450


Debt issued for purchases of property, plant & equipment

-


1,987


Stock issued for pension contribution

53,864


-














2. Reconciliation of Non-GAAP Measures











Net cash provided by operating activities

$ 202,706


$ 453,035


Purchases of property, plant & equipment

(86,324)


(109,729)


Free cash flow

$ 116,382


$ 343,306








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


Twelve Months Ended






December 31


December 31






2010


2009


2010


2009













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





















Net cash provided by operating activities


$ 74,880


$ 98,214


$ 202,706


$ 453,035

Changes in operating assets and liabilities before initial









effects of business acquisitions and dispositions


(26,585)


(38,429)


(19,938)


(90,276)

Other net operating items (providing) using cash


(2,373)


23,320


102,835


62,167

(Earnings) loss on discontinued operations, net of tax


852


767


(6,053)


(11,666)

Benefit from income taxes


(28,172)


(28,248)


(89,663)


(37,869)

Interest expense, net


46,199


42,951


180,740


172,980

Less: Depreciation, depletion, accretion and amortization


(92,919)


(96,454)


(382,093)


(394,612)

EBIT


(28,118)


2,121


(11,466)


153,759

Plus: Depreciation, depletion, accretion and amortization


92,919


96,454


382,093


394,612

EBITDA


$ 64,801


$ 98,575


$ 370,627


$ 548,371

Less: Interest expense, net


(46,199)


(42,951)


(180,740)


(172,980)

Current taxes


27,412


10,893


37,806


(6,106)

Cash earnings


$ 46,014


$ 66,517


$ 227,693


$ 369,285













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





















Net earnings (loss)


$ (46,997)


$ (13,349)


$ (96,490)


$ 30,314

Benefit from income taxes


(28,172)


(28,248)


(89,663)


(37,869)

Interest expense, net


46,199


42,951


180,740


172,980

(Earnings) loss on discontinued operations, net of tax


852


767


(6,053)


(11,666)

EBIT


(28,118)


2,121


(11,466)


153,759

Plus: Depreciation, depletion, accretion and amortization


92,919


96,454


382,093


394,612

EBITDA


$ 64,801


$ 98,575


$ 370,627


$ 548,371

Less: Interest expense, net


(46,199)


(42,951)


(180,740)


(172,980)

Current taxes


27,412


10,893


37,806


(6,106)

Cash earnings


$ 46,014


$ 66,517


$ 227,693


$ 369,285







EBITDA Bridge

Three Months Ended



Twelve Months Ended

(Amounts in millions)

December 31



December 31


EBITDA



EBITDA

Continuing Operations - 2009 Actual

$ 99



$ 548

Increase / (Decrease) due to:





Illinois DOT settlement and related expenses

1



(43)

Aggregates:

Volumes

1



(21)


Selling prices

(15)



(25)


Costs and other items

(4)



(46)

Concrete

(1)



(30)

Asphalt mix

(2)



(40)

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

(7)



24

Depreciation, depletion, accretion and amortization

n/a



n/a

Impairment and settlement of prior obligations

(10)



(10)

All other (SAG, Other Expenses)

3



14

Continuing Operations - 2010 Actual

$ 65



$ 371












(a) Net of donations


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