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Vulcan Announces Fourth Quarter 2016 Results

02/07/17

Fourth Quarter Diluted Earnings per Share Increase 16 Percent
Full Year Diluted Earnings per Share Increase 81 Percent
Company Expects Continued Earnings Growth in 2017

BIRMINGHAM, Ala., Feb. 7, 2017 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the fourth quarter ended December 31, 2016.

The Company's fourth quarter results reflect solid price growth in aggregates and higher gross profits in the Company's Asphalt and Concrete segments, partially offsetting the earnings effect from a 3.5 percent decline in aggregates shipments. Net earnings were $113 million, or 27 percent higher than the prior year's fourth quarter, and Adjusted EBITDA was $230 million, or 6 percent lower than the prior year's fourth quarter.

For the year, net earnings were $419 million and Adjusted EBITDA was $966 million, which represent gains of 90 percent and 16 percent, respectively, over the prior year.  Aggregates shipments grew 2 percent, and pricing increased 7 percent.  Incremental aggregates gross profit equaled 65 percent of incremental freight-adjusted revenues.  Aggregates gross profit as a percentage of freight-adjusted revenues expanded to 38 percent from 36 percent.  Total Company gross profit margin expanded to 28 percent from 25 percent, and total Company gross profit margin excluding freight and delivery revenues expanded to 33 percent from 30 percent.

Tom Hill, Chairman and Chief Executive Officer, said, "Vulcan's operating momentum remains strong.  While our fourth quarter results reflect a mid-December ramp-down of the construction season in many of our markets, which was earlier than in 2015, our solid full year results and outlook for 2017 demonstrate a continuation of longer-term trends in volume recovery, price increases, and margin expansion.  Our daily aggregates shipment rates in October and November exceeded the prior year's strong comparison before falling off in the second half of December.  In addition, and important to our forward outlook, key measures of both public and private construction starts have improved steadily since July.  Adjusted for product and geographic mix, aggregates pricing growth over last year's fourth quarter was approximately 7 percent, in line with the full-year trend.  Several temporary and timing-related factors combined to impact fourth quarter unit margin and flow-through comparisons.  Full year results better represent the underlying trend and our forward expectations.  For 2017, we expect to deliver Adjusted EBITDA of between $1.125 and $1.225 billion.  We expect aggregates shipments to grow between 5 percent and 8 percent and average selling prices to increase between 5 percent and 7 percent.  The flow-through of freight-adjusted revenues to gross profit in our Aggregates segment should remain in line with the longer-term trend of greater than 60 percent.  We remain focused on continuous, compounding improvement in profitability and cash flows, and expect them to continue - not only for 2017 but for years to come."

Fourth Quarter Summary (compared with prior year's fourth quarter)

  • Total revenues increased $16 million, or 2 percent, to $873 million
  • Gross profit decreased $14 million, or 6 percent, to $240 million 
  • Aggregates segment sales increased $4 million, or 1 percent, to $714 million, and aggregates freight-adjusted revenues increased $6 million, or 1 percent, to $551 million
    • Shipments decreased 3.5 percent, or 1.6 million tons, to 43.1 million tons
    • Freight-adjusted sales price increased 5 percent, and 7 percent exclusive of mix
    • Segment gross profit decreased $21 million, or 9 percent, to $209 million
  • Asphalt, Concrete and Calcium segment gross profit improved $7 million, collectively
  • SAG declined 20 basis points as a percentage of total revenues
  • Net earnings were $113 million, an increase of $24 million, or 27 percent
  • Adjusted EBIT was $159 million, a decrease of $15 million, or 9 percent
  • Adjusted EBITDA was $230 million, a decrease of $14 million, or 6 percent
  • Earnings from continuing operations were $0.80 per diluted share versus $0.69 per diluted share
  • Adjusted earnings from continuing operations were $0.69 per diluted share versus $0.74 per diluted share

Full Year Summary (compared with prior year)

  • Total revenues increased $170 million, or 5 percent, to $3.59 billion
  • Gross profit increased $143 million, or 17 percent, to $1.00 billion 
  • Aggregates segment sales increased $184 million, or 7 percent, to $2.96 billion, and aggregates freight-adjusted revenues increased $182 million, or 9 percent, to $2.29 billion
    • Shipments increased 2 percent, or 3 million tons, to 181 million tons
    • Freight-adjusted sales price increased 7 percent
    • Segment gross profit increased $117 million, or 16 percent, to $873 million
  • Asphalt, Concrete and Calcium segment gross profit improved $26 million, collectively
  • SAG increased 40 basis points as a percentage of total revenues
  • Net earnings were $419 million, an increase of $198 million, or 90 percent
  • Adjusted EBIT was $681 million, an increase of $121 million, or 22 percent
  • Adjusted EBITDA was $966 million, an increase of $131 million, or 16 percent
  • Earnings from continuing operations were $3.11 per diluted share versus $1.72 per diluted share
  • Adjusted earnings from continuing operations were $2.86 per diluted share versus $2.16 per diluted share

Segment Results

Aggregates

The quarter-over-quarter decline in shipments primarily resulted from (i) an earlier ramp-down to the construction season relative to the prior year's strong shipment rates through late December and (ii) continued volume weakness in California, Illinois and coastal Texas.  Excluding these markets, daily shipment rates were 9 percent ahead of the prior year pace in October and November, but fell 7 percent below the prior year in December.  In contrast, daily shipment rates for the quarter in California, Illinois and coastal Texas remained more than 15 percent below the prior year's pace.  With an earlier end to the construction season, Illinois shipments in December were more than 45 percent below the prior year.  Price increases in California and Illinois partially offset the revenue impact of lower shipments.  Average selling prices for these two states were more than 10 percent above the prior year.

For the year, shipments rose 2 percent over the prior year, with this gain coming despite double-digit shipment declines in California, Illinois and Texas.  For the year, shipments in the Company's other markets grew 10 percent on average.  Trailing twelve month construction start activity, both public and private, has steadily improved since July.  This improvement has helped reverse year-over-year declines from May to October, which negatively impacted our shipments in the second half of the year.  The backlog of construction projects in development continues to grow as well.  In addition, state and local governments continue to pass measures to increase public infrastructure investment.  While the Company believes conditions remain in place for a sustained, multi-year recovery in demand for aggregates, quarter-to-quarter trends may vary significantly.

For the quarter, freight-adjusted average sales price for aggregates increased 5 percent, or $0.60 per ton, versus the prior year.  Pricing was negatively impacted by product and geographic mix in the fourth quarter.  Excluding this effect, overall pricing increased 7 percent.  Full year pricing increased 7 percent, with virtually all of the Company's markets realizing higher pricing versus the prior year.  The overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital.

Fourth quarter unit cost of sales in the Aggregates segment increased 13 percent versus the prior year's fourth quarter, and per ton profitability – although near record levels – declined for the first time in nearly 4 years.  These quarter-over-quarter declines were driven primarily by reduced fixed cost absorption, the timing of repair and maintenance and stripping expenses, and other items and variances in end-of-year accounting adjustments for inventory. 

For the year, unit cost of sales increased 3 percent.  Unit gross profit increased 14 percent, to $4.81 per ton, while unit cash gross profit increased 11 percent to $6.12 per ton.  The flow-through rate from freight-adjusted aggregates revenues to segment gross profit was 65 percent.  These improvements in the Company's core profitability were delivered despite modest shipment growth and a year-over-year decline in inventory levels.   

Asphalt, Concrete and Calcium

In the fourth quarter, Asphalt segment gross profit increased 19 percent to $22 million.  Shipments increased 4 percent and the average sales price decreased 2 percent.  Solid sales and operating disciplines, as well as effective materials margin management, more than offset the modest decline in price. 

For the full year, Asphalt segment gross profit increased 25 percent to $98 million.  Volumes and price decreased 3 percent and 2 percent, respectively, versus the prior year while gross profit margin expanded 430 basis points due mostly to lower unit costs for liquid asphalt.

Concrete segment gross profit was $8 million in the quarter compared to $5 million in the prior year period.  Sales volumes increased 16 percent versus the prior year as volumes increased in each of the Company's concrete markets. 

Full year Concrete segment gross profit increased 32 percent and margin expanded 130 basis points versus the prior year.  Shipments increased 7 percent and the average sales price increased 3 percent.  Material margins expanded, offsetting higher costs for internally supplied aggregates and other raw materials.

In the fourth quarter, the Company's Calcium segment reported gross profit of $0.9 million versus approximately $1.0 million in the prior year.

For our non-aggregates segments in total, full year 2016 gross profit was $128 million, a 25 percent increase over 2015.

Credit Position, Capital Allocation, and Growth

At the end of the fourth quarter, total debt outstanding was approximately $2 billion, including $235 million of floating-rate borrowings.  The quarter end cash balance was $259 million.

For the full year, cash capital expenditures were $350 million, including both core capital expenditures and internal growth capital investments.  Internal growth capital investments were approximately $100 million, including $28 million invested in the purchase of two replacement ships to transport aggregates from the Company's quarry in Mexico, as well as development of new sites and investment in other growth opportunities.  During 2016, for example, the Company opened 5 new distribution sites to serve attractive markets in Georgia, South Carolina and Texas.  Core capital expenditures to replace existing property, plant and equipment were approximately $250 million.

The Company remains active in the pursuit of bolt-on acquisitions.  Since the end of September 2016, the Company has either closed or signed purchase agreements for 4 acquisitions that include both aggregates and asphalt assets.  Since 2013, the Company has completed more than 15 transactions that position it to further strengthen its customer service capabilities and cash flows.

The Company also remains focused on realizing the full value of its land assets.  During the fourth quarter, the Company completed the sales of excess land for a total cash value of approximately $26 million and a gain of $16 million.  The Company excludes this gain from its calculation of Adjusted EBITDA.  However, the on-going cost associated with land management and reclamation is treated as ordinary expenses.

During 2016, the Company returned $268 million to shareholders through dividends and share repurchases.  The Company repurchased approximately 1.4 million shares at an average cost of $113.18 per share during the year.

Demand and Earnings Outlook

Regarding the Company's earnings outlook for 2017, Mr. Hill stated, "The strong fundamentals of our aggregates-focused business and the outstanding improvement in our core profitability have led to strong earnings growth during the last three years of recovery.  In 2017, we expect continued growth across the vast majority of our markets and across each of the end use segments we serve.  Our expectation for full year Adjusted EBITDA of $1.125 to $1.225 billion is driven by a continuing recovery in shipments, with higher levels of publicly funded construction activity just beginning to join the ongoing recovery in private demand, as well as a favorable pricing environment."

The following assumptions support the Company's outlook for strong year-over-year growth in Adjusted EBITDA in 2017.

  • Aggregates shipments growth of 5 to 8 percent from 2016, with growth weighted more toward the second half of the year
  • Freight-adjusted aggregates price increase of 5 to 7 percent, with unit margins continuing to grow faster than pricing
  • Asphalt, Concrete and Calcium gross profit growth of approximately 15 percent
  • SAG expenses of approximately $320 million, 2 percent higher than the prior year and excluding business development-related expenses

Other expectations include:

  • Core capital spending of approximately $300 million to support the increased level of shipments and further improve production costs and operating efficiencies
  • Interest expense of approximately $140 million
  • Depreciation, depletion, accretion and amortization expense of approximately $300 million
  • Effective tax rate of 28 percent

Mr. Hill concluded, "Our 2017 outlook reflects earnings growth and unit margin performance consistent with recent trends as well as our longer range goals.  Since the beginning of this recovery, our teams' efforts have resulted in Aggregates segment gross profit increasing $515 million on a 41 million ton increase in shipments.  During this period, unit cash gross profit in our core Aggregates segment has improved 46 percent on a trailing twelve month basis.  We remain focused on continuous improvement and on turning in another strong year."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CT on February 7, 2017.  A webcast will be available via the Company's website at www.vulcanmaterials.com.  Investors and other interested parties in the U.S. may also access the teleconference live by calling 888-713-3596 approximately 10 minutes before the scheduled start.  International participants can dial 913-312-0417.  The conference ID is 8892027.  The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, and a major producer of other construction materials.

FORWARD-LOOKING STATEMENT DISCLAIMER

This document contains forward-looking statements.  Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales.  These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document.  These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements.  The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan's effective tax rate that can adversely impact results; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions, including those relating to climate change, greenhouse gas emissions or the definition of minerals; the outcome of pending legal proceedings; pricing of Vulcan's 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 Vulcan; changes in interest rates; volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to existing and/or divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; the potential of goodwill or long-lived asset impairment; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.  Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.

 

 











Table A

Vulcan Materials Company








and Subsidiary Companies














(in thousands, except per share data)
















Three Months Ended


Twelve Months Ended

Consolidated Statements of Earnings




December 31




December 31

(Condensed and unaudited)


2016


2015


2016


2015












Total revenues


$872,975


$857,285


$3,592,667


$3,422,181

Cost of revenues


633,270


603,355


2,591,850


2,564,648

Gross profit


239,705


253,930


1,000,817


857,533

Selling, administrative and general expenses


79,526


79,494


314,986


286,844

Gain on sale of property, plant & equipment









and businesses


12,498


2,504


15,431


9,927

Business interruption claims recovery


0


0


11,652


0

Impairment of long-lived assets


0


0


(10,506)


(5,190)

Other operating income (expense), net


1,122


(3,903)


(22,826)


(25,648)

Operating earnings


173,799


173,037


679,582


549,778

Other nonoperating income (expense), net


619


599


944


(1,678)

Interest expense, net


33,077


36,311


133,269


220,243

Earnings from continuing operations









before income taxes


141,341


137,325


547,257


327,857

Income tax expense


33,276


43,766


124,851


94,943

Earnings from continuing operations


108,065


93,559


422,406


232,914

Earnings (loss) on discontinued operations, net of tax


4,536


(4,672)


(2,915)


(11,737)

Net earnings


$112,601


$88,887


$419,491


$221,177












Basic earnings (loss) per share









Continuing operations


$0.82


$0.70


$3.17


$1.75

Discontinued operations


$0.03


($0.03)


($0.02)


($0.09)

Net earnings


$0.85


$0.67


$3.15


$1.66












Diluted earnings (loss) per share









Continuing operations


$0.80


$0.69


$3.11


$1.72

Discontinued operations


$0.03


($0.04)


($0.02)


($0.08)

Net earnings


$0.83


$0.65


$3.09


$1.64























Weighted-average common shares outstanding









Basic


132,571


133,592


133,205


133,210

Assuming dilution


135,362


135,711


135,790


135,093

Cash dividends per share of common stock


$0.20


$0.10


$0.80


$0.40

Depreciation, depletion, accretion and amortization


$71,578


$70,054


$284,940


$274,823

Effective tax rate from continuing operations


23.5%


31.9%


22.8%


29.0%












 

 







Table B

Vulcan Materials Company





and Subsidiary Companies











(in thousands)

Consolidated Balance Sheets


December 31


December 31

(Condensed and unaudited)


2016


2015

Assets





Cash and cash equivalents


$258,986


$284,060

Restricted cash


9,033


1,150

Accounts and notes receivable





Accounts and notes receivable, gross


477,309


423,600

Less: Allowance for doubtful accounts


(2,813)


(5,576)

Accounts and notes receivable, net


474,496


418,024

Inventories





Finished products


293,619


297,925

Raw materials


22,648


21,765

Products in process


1,480


1,008

Operating supplies and other


27,869


26,375

Inventories


345,616


347,073

Prepaid expenses


31,726


34,284

Total current assets


1,119,857


1,084,591

Investments and long-term receivables


39,226


40,558

Property, plant & equipment





Property, plant & equipment, cost


7,185,818


6,891,287

Reserve for depreciation, depletion & amortization


(3,924,380)


(3,734,997)

Property, plant & equipment, net


3,261,438


3,156,290

Goodwill


3,094,824


3,094,824

Other intangible assets, net


769,052


766,579

Other noncurrent assets


169,753


158,790

Total assets


$8,454,150


$8,301,632

Liabilities





Current maturities of long-term debt


138


130

Trade payables and accruals


145,042


175,729

Other current liabilities


209,739


177,620

Total current liabilities


354,919


353,479

Long-term debt


1,982,751


1,980,334

Noncurrent deferred income taxes


702,853


681,096

Deferred revenue


198,388


207,660

Other noncurrent liabilities


642,763


624,875

Total liabilities


$3,881,674


$3,847,444

Equity





Common stock, $1 par value


132,339


133,172

Capital in excess of par value


2,807,995


2,822,578

Retained earnings


1,771,518


1,618,507

Accumulated other comprehensive loss


(139,376)


(120,069)

Total equity


$4,572,476


$4,454,188

Total liabilities and equity


$8,454,150


$8,301,632








 

 








Table C

Vulcan Materials Company





and Subsidiary Companies












(in thousands)






Twelve Months Ended

Consolidated Statements of Cash Flows




December 31

(Condensed and unaudited)


2016


2015

Operating Activities





Net earnings




$419,491


$221,177

Adjustments to reconcile net earnings to net cash provided by operating activities




Depreciation, depletion, accretion and amortization


284,940


274,823

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


(15,431)


(9,927)

Contributions to pension plans


(9,576)


(14,047)

Share-based compensation expense


20,670


18,248

Excess tax benefits from share-based compensation


0


(18,376)

Deferred tax expense (benefit)


33,591


3,069

Cost of debt purchase


0


67,075

Changes in assets and liabilities before initial





effects of business acquisitions and dispositions


(92,788)


(23,120)

Other, net





3,691


616

Net cash provided by operating activities


$644,588


$519,538

Investing Activities





Purchases of property, plant & equipment


(350,148)


(289,262)

Proceeds from sale of property, plant & equipment


23,318


8,218

Payment for businesses acquired, net of acquired cash


(32,537)


(27,198)

Increase in restricted cash


(7,883)


(1,150)

Other, net





2,173


(350)

Net cash used for investing activities


($365,077)


($309,742)

Financing Activities





Proceeds from line of credit


3,000


441,000

Payment of line of credit


(3,000)


(206,000)

Payment of current maturities and long-term debt


(130)


(695,060)

Proceeds from issuance of long-term debt


0


400,000

Debt and line of credit issuance costs


(1,860)


(7,382)

Purchases of common stock


(161,463)


(21,475)

Dividends paid




(106,333)


(53,214)

Proceeds from exercise of stock options


0


72,971

Share based compensation, shares withheld for taxes


(34,797)


(16,160)

Excess tax benefits from share-based compensation


0


18,376

Other, net





(2)


(65)

Net cash used for financing activities


($304,585)


($67,009)

Net increase (decrease) in cash and cash equivalents


(25,074)


142,787

Cash and cash equivalents at beginning of year


284,060


141,273

Cash and cash equivalents at end of year


$258,986


$284,060

 

 












Table D


Segment Financial Data and Unit Shipments













(in thousands, except per unit data)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015















Total Revenues










Aggregates 1


$713,661


$710,087


$2,961,835


$2,777,758


Asphalt Mix 


123,750


119,758


512,310


530,692


Concrete 


87,335


72,852


330,125


299,252


Calcium 


2,129


2,143


8,860


8,596


Segment sales


$926,875


$904,840


$3,813,130


$3,616,298


Aggregates intersegment sales


(53,900)


(47,555)


(220,463)


(194,117)


Total revenues


$872,975


$857,285


$3,592,667


$3,422,181















Gross Profit










Aggregates


$208,964


$229,851


$873,118


$755,666


Asphalt Mix 


21,654


18,252


97,682


78,225


Concrete 


8,209


4,872


26,543


20,152


Calcium 





878


955


3,474


3,490


Total




$239,705


$253,930


$1,000,817


$857,533















Depreciation, Depletion, Accretion and Amortization





Aggregates


$59,343


$58,215


$236,472


$228,466


Asphalt Mix 


4,328


4,247


16,797


16,378


Concrete 


2,988


2,917


12,129


11,374


Calcium 


197


183


774


679


Other




4,722


4,492


18,768


17,926


Total




$71,578


$70,054


$284,940


$274,823















Average Unit Sales Price and Unit Shipments






Aggregates










Freight-adjusted revenues 2


$551,446


$545,115


$2,294,227


$2,112,460


Aggregates - tons


43,124


44,708


181,374


178,272


Freight-adjusted sales price 3


$12.79


$12.19


$12.65


$11.85















Other Products










Asphalt Mix - tons


2,249


2,159


9,353


9,658


Asphalt Mix - sales price


$53.65


$54.59


$53.45


$54.27















Ready-mixed concrete - cubic yards

791


681


3,000


2,810


Ready-mixed concrete - sales price


$110.39


$106.96


$110.02


$106.44















Calcium - tons


77


83


326


321


Calcium - sales price


$27.29


$25.90


$27.08


$26.70















1Includes crushed stone, sand and gravel, sand, other aggregates, as well as freight, delivery and transportation
     
revenues, and other revenues related to services.



2Freight-adjusted revenues are Aggregates segment sales excluding freight, delivery and transportation revenues,
     and other revenues related to services, such as, landfill tipping fees that are derived from our aggregates business.

3Freight-adjusted sales price is calculated as freight-adjusted revenues divided by aggregates unit shipments.


 

 












Appendix 1


1.   Supplemental Cash Flow Information








Supplemental information referable to the Condensed Consolidated Statements of Cash Flows is summarized below:


























(in thousands)











Twelve Months Ended













December 31











2016


2015















Cash Payments










Interest (exclusive of amount capitalized)






$135,039


$208,288


Income taxes






102,849


53,623















Noncash Investing and Financing Activities










Accrued liabilities for purchases of property, plant & equipment




26,676


31,883


Amounts referable to business acquisitions










     Liabilities assumed






798


2,645


     Fair value of noncash assets and liabilities exchanged





0


20,000















2.   Reconciliation of Non-GAAP Measures





















Gross profit margin excluding freight and delivery revenues is not a Generally Accepted Accounting Principle (GAAP) measure. We present this metric as it is consistent with the basis by which we review our operating results. Likewise, we believe that this presentation is consistent with the basis by which investors analyze our operating results considering that freight and delivery services represent pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:



















Gross Profit Margin in Accordance with GAAP




















(dollars in thousands)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015















Gross profit


$239,705


$253,930


$1,000,817


$857,533


Total revenues


$872,975


$857,285


$3,592,667


$3,422,181


     Gross profit margin


27.5%


29.6%


27.9%


25.1%















Gross Profit Margin Excluding Freight and Delivery Revenues

















(dollars in thousands)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015















Gross profit


$239,705


$253,930


$1,000,817


$857,533


Total revenues


$872,975


$857,285


$3,592,667


$3,422,181


Freight and delivery revenues 1


128,608


134,633


535,930


538,127


Total revenues excluding freight and delivery revenues

$744,367


$722,652


$3,056,737


$2,884,054


Gross profit margin excluding freight and delivery revenues

32.2%


35.1%


32.7%


29.7%















1 Includes freight to remote distribution sites.










 

 












Appendix 2


Reconciliation of Non-GAAP Measures (Continued)



















Aggregates segment gross profit margin as a percentage of freight-adjusted revenues is not a GAAP measure. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is meaningful to our investors as it excludes freight, delivery and transportation revenues which are pass-through activities. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Incremental gross profit as a percentage of freight-adjusted revenues represents the year-over-year change in gross profit divided by the year-over-year change in freight-adjusted revenues. Reconciliations of these metrics to their nearest GAAP measures are presented below:





















Aggregates Segment Gross Profit Margin in Accordance with GAAP















(dollars in thousands)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015


Aggregates segment










Gross profit


$208,964


$229,851


$873,118


$755,666


Segment sales


$713,661


$710,087


$2,961,835


$2,777,758


Gross profit margin


29.3%


32.4%


29.5%


27.2%


Incremental gross profit margin


N/A 




63.8%






























Aggregates Segment Gross Profit as a Percentage of Freight-Adjusted Revenues













(dollars in thousands)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015


Aggregates segment










Gross profit


$208,964


$229,851


$873,118


$755,666


Segment sales


$713,661


$710,087


$2,961,835


$2,777,758


Less












    Freight, delivery and transportation revenues 1


$157,868


$160,314


$651,885


$644,671


    Other revenues


4,347


4,658


15,723


20,627


    Freight-adjusted revenues


$551,446


$545,115


$2,294,227


$2,112,460















Gross profit as a percentage of freight-adjusted revenues

37.9%


42.2%


38.1%


35.8%


Incremental gross profit as a percentage 
of freight-adjusted revenues











N/A




64.6%

















1 At the segment level, freight, delivery and transportation revenues include intersegment freight & delivery revenues, which are eliminated at the 
     consolidated level.











 

 












Appendix 3


Reconciliation of Non-GAAP Measures (Continued)



















GAAP does not define "Aggregates segment cash gross profit" and "Earnings Before Interest, Taxes, Depreciation and Amortization" (EBITDA). Thus, Aggregates segment cash gross profit and EBITDA should not be considered as alternatives to earnings measures defined by GAAP. We present these metrics for the convenience of investment professionals who use such metrics in their analyses and for shareholders who need to understand the metrics we use to assess performance.  The investment community often uses these metrics to assess the operating performance of a company's businesses. We use Aggregates segment cash gross profit and EBITDA to assess the operating performance of our various business units and the consolidated company. Additionally, we adjust EBITDA for certain items to provide a more consistent comparison of performance from period to period. We do not use these metrics as a measure to allocate resources. Reconciliations of these metrics to their nearest GAAP measures are presented below:





















Aggregates Segment Cash Gross Profit










Aggregates segment cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization (DDA&A) to Aggregates segment gross profit.  Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped.













(in thousands, except per ton data)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015


Aggregates segment










Gross profit


$208,964


$229,851


$873,118


$755,666


DDA&A



59,343


58,215


236,472


228,466


    Aggregates segment cash gross profit


$268,307


$288,066


$1,109,590


$984,132


Unit shipments - tons


43,124


44,708


181,374


178,272


Aggregates segment cash gross profit per ton


$6.22


$6.44


$6.12


$5.52















 

 










Appendix 4


Reconciliation of Non-GAAP Measures (Continued)






EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization and excludes discontinued operations. We adjust EBITDA and Earnings Per Share (EPS) for certain items to provide a more consistent comparison of performance from period to period. Adjusted EBITDA for 2015 has been revised to conform with the 2016 presentation which no longer includes an adjustment for amortization of deferred revenue and charges associated with business development. Adjusting for amortization of deferred revenue is no longer meaningful as all periods presented include amortization of deferred revenue at amounts that are substantially equivalent.  Additionally, we no longer exclude charges associated with business development as they represent normal recurring operating expenses.

 













(in thousands, except per share data)




















Three Months Ended


Twelve Months Ended









December 31




December 31







2016


2015


2016


2015















Reconciliation of Net Earnings to EBITDA























Net earnings


$112,601


$88,887


$419,491


$221,177


Income tax expense


33,276


43,766


124,851


94,943


Interest expense, net


33,077


36,311


133,269


220,243


(Earnings) loss on discontinued operations, net of tax


(4,536)


4,672


2,915


11,737


EBIT




$174,418


$173,636


$680,526


$548,100


Depreciation, depletion, accretion and amortization


71,578


70,054


284,940


274,823


EBITDA



$245,996


$243,690


$965,466


$822,923















Adjusted EBITDA and Adjusted EBIT























EBITDA



$245,996


$243,690


$965,466


$822,923


    Gain on sale of real estate and businesses


(16,216)


(443)


(16,216)


(6,329)


    Business interruption claims recovery, net of incentives

162


0


(11,014)


0


    Charges associated with divested operations


215


352


16,983


7,202


    Fair market value adjustments for acquired inventory

0


0


0


965


    Asset impairment


0


0


10,506


5,190


    Restructuring charges


0


442


320


4,988


Adjusted EBITDA


$230,157


$244,041


$966,045


$834,939


    Depreciation, depletion, accretion and amortization


(71,578)


(70,054)


(284,940)


(274,823)


Adjusted EBIT


$158,579


$173,987


$681,105


$560,116















Adjusted Diluted Earnings Per Share From Continuing Operations (Adjusted Diluted EPS)
















Diluted EPS


$0.80


$0.69


$3.11


$1.72


    Items included in Adjusted EBITDA above


(0.08)


0.00


0.00


0.08


    Interest charges associated with debt refinancing


0.00


0.00


0.00


0.35


    Certain discrete tax items (including ASU 2016-09)


(0.03)


0.05


(0.25)


0.01


Adjusted Diluted EPS


$0.69


$0.74


$2.86


$2.16


The following reconciliation to the mid-point of the range of 2017 Projected EBITDA excludes adjustments for the future outcome of legal proceedings, charges associated with divested operations, asset impairment and other unusual gains and losses due to the uncertainty in predicting these items.





























(in millions)















2017 Projected EBITDA








Mid-point















Net earnings








$530


Income tax expense








205


Interest expense, net








140


Loss on discontinued operations, net of tax








0


Depreciation, depletion, accretion and amortization








300


Projected EBITDA








$1,175


 

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/vulcan-announces-fourth-quarter-2016-results-300402943.html

SOURCE Vulcan Materials Company

Investor Contact: Mark Warren (205) 298-3220; Media Contact: David Donaldson (205) 298-3220

Contact

Vulcan Materials Company
Corporate Office
1200 Urban Center Drive
P.O. Box 385014
Birmingham, AL 35242

Tel: (205) 298-3000