Investor Relations

Vulcan Reports Third Quarter Results

11/05/20
Price Growth and Cost Control Drive Continued Expansion in Aggregates Profitability

BIRMINGHAM, Ala., Nov. 5, 2020 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the quarter ended September 30, 2020.

Net earnings were $200 million compared to $216 million in the prior year's comparable quarter.  Third quarter Adjusted EBITDA was $403 million versus $407 million in the prior year.  Adjusted EBITDA margins expanded by 210 basis points despite an 8 percent decline in total revenues.  This margin expansion was driven by effective cost control throughout the organization and price growth in each major product line. 

Tom Hill, Chairman and Chief Executive Officer, said, "Building on strong performance from the first half of the year, our operational execution produced another quarter of unit margin expansion in the third quarter.  Unit profitability gains were widespread across our footprint, and our team remained focused on driving those improvements.  The continued impact of the COVID-19 pandemic on construction activity, along with severe wet weather, led to lower shipment levels in the quarter.  However, our resilient and best-in-class aggregates business overcame these disruptive conditions, which enabled us to expand cash gross profit per ton, drive higher cash flows, and improve returns on invested capital." 

Mr. Hill continued, "Year-to-date, cash gross profit per ton has increased 7 percent, despite a 4 percent decline in shipments.  The flexibility of our operating plans and our aggregates-focused business model have enabled us to continue to perform at a high level while also positioning us for earnings growth in the future as demand recovers.  The pricing environment remains supportive, and we are encouraged by the sequential improvement in demand visibility.  Residential construction has rebounded quickly which should bode well for private nonresidential construction as it has been the weakest end market since the pandemic began.  State transportation revenues continue to recover to pre-pandemic levels, and the one-year extension of federal highway funding will support future highway construction.  Continued recovery in these fundamentals would point to construction activity stabilizing over the course of 2021.  As we consider the remainder of 2020, we now believe we have sufficient near-term visibility to provide guidance for the full year.  We expect that our 2020 Adjusted EBITDA will range between $1.285 billion to $1.315 billion." 

Highlights as of September 30, 2020 include:


Third Quarter


Year-to-Date


Trailing-Twelve Months

Amounts in millions, except per unit data

2020

2019


2020

2019


2020

2019

Total revenues

$  1,309.9

$  1,418.8


$  3,681.7

$  3,743.0


$  4,867.9

$   4,831.0

Gross profit

$     380.5

$     400.6


$     978.7

$     962.8


$  1,271.8

$   1,238.1

Aggregates segment









Segment sales

$  1,049.0

$  1,133.1


$  2,987.8

$  3,030.1


$  3,947.9

$   3,904.1

Freight-adjusted revenue

$     807.6

$     858.5


$  2,270.3

$  2,293.6


$  2,990.9

$   2,951.2

Gross profit

$     337.9

$     357.2


$     883.2

$     872.1


$  1,157.7

$   1,128.5

Shipments (tons)

55.9

60.9


157.2

163.8


208.8

213.6

Freight-adjusted sales price per ton

$     14.44

$     14.10


$     14.45

$     14.00


$     14.33

$      13.82

Gross profit per ton

$       6.04

$       5.87


$       5.62

$       5.32


$       5.54

$        5.28

Asphalt, Concrete & Calcium segment gross profit

$       42.6

$       43.4


$       95.6

$       90.7


$     114.1

$      109.6

Selling, Administrative and General (SAG)

$       83.5

$       88.8


$     261.1

$     274.7


$     356.9

$      359.1

SAG as % of Total revenues

6.4%

6.3%


7.1%

7.3%


7.3%

7.4%

Earnings from continuing operations before income taxes

$     258.1

$     271.5


$     602.6

$     591.7


$     768.6

$      745.6

Net earnings

$     199.8

$     215.7


$     470.0

$     476.6


$     611.1

$      600.6

Adjusted EBIT

$     302.5

$     310.6


$     716.4

$     692.6


$     919.2

$      888.4

Adjusted EBITDA

$     403.5

$     406.8


$  1,012.3

$     971.6


$  1,310.8

$   1,257.1

Earnings from continuing operations per diluted share

$       1.51

$       1.63


$       3.54

$       3.60


$       4.61

$        4.53

Adjusted earnings from continuing operations per diluted share

$       1.56

$       1.68


$       3.62

$       3.62


$       4.70

$        4.61

Segment Results

Aggregates

Third quarter gross profit margin expanded 70 basis points despite a decrease in segment sales.  Gross profit was $338 million compared to $357 million in the prior year.  Unit profitability increased 3 percent to $6.04 per ton due to widespread growth in pricing and effective cost control. 

Third quarter aggregates shipments were 8 percent lower than the prior year's third quarter due to economic uncertainty caused by the pandemic, severe wet weather and wildfires in key markets.  Last year's third quarter included very few severe weather events, helping drive strong volume growth.  Despite lower shipments in most markets, virtually all of the Company's markets improved their respective unit profitability compared to the prior year's third quarter.  Shipments declined in most of our markets reflecting weaker demand resulting from the pandemic.  Shipments along the Atlantic Coast, in the Southeast and Texas were impacted by severe weather.  Shipments in California were impacted by wildfires and resulting power outages which interrupted the supply of cement for ready-mix concrete production and limited construction activity.       

On a mix-adjusted basis, most of the Company's markets reported year-over-year price growth.  For the quarter, mix-adjusted sales price increased 2.9 percent (reported freight-adjusted sales price increased 2.4 percent).  Year-to-date, mix-adjusted pricing has increased 3.5 percent (reported freight-adjusted sales price increased 3.2 percent) despite a 4 percent decline in shipments.

Freight-adjusted unit cost of sales increased 2 percent, and cash costs were flat versus the prior year's third quarter.  Effective operating efficiencies and lower diesel fuel costs helped mitigate the cost impact of lower sales volumes.  The Aggregates segment earnings impact from lower diesel fuel was $9 million in the quarter.

Asphalt, Concrete and Calcium

Asphalt segment gross profit was $30 million, an improvement of $3 million from the prior year's third quarter.  The year-over-year improvement was driven by higher material margins (sales price less unit cost of raw materials).  Although asphalt volumes in the third quarter declined 13 percent compared to the prior year, results benefited from slightly higher prices and effective cost containment, including lower liquid asphalt costs.  Shipments in the current year's quarter were impacted by wildfires in California, the Company's largest asphalt market, and the completion of certain large projects last year in the Tennessee market.

Concrete segment gross profit was $12 million compared with $15 million in the prior year's third quarter.  Shipments decreased 11 percent versus the prior year, and average selling prices increased 3 percent compared to the prior year.  Third quarter shipments were impacted by wet weather in Virginia, the Company's largest concrete market, and wildfires in Northern California.

Calcium segment gross profit was $0.2 million versus $0.8 million in the prior year quarter.

Selling, Administrative and General (SAG) and Other Operating Expense

SAG expense declined 6 percent to $84 million in the quarter due mostly to continued execution of cost reduction initiatives and general cost control.  On a trailing twelve-month basis, SAG expense as a percentage of total revenues is 7.3 percent.  The Company remains focused on further leveraging its overhead cost structure.

Other operating expense of $10 million included $6 million in charges associated with divested operations.  The prior year did not include a similar charge.

Financial Position, Liquidity and Capital Allocation

Capital expenditures in the third quarter were $52 million and $229 million year-to-date.  The Company expects to spend between $300 million and $350 million on capital this year, most of which is for core operating and maintenance projects.  The Company continues to review its plans and will adjust as needed, while being thoughtful about preserving liquidity. 

Year-to-date September 30, the Company returned $135 million to shareholders through dividends, a 10 percent increase versus the prior year.  Year-to-date, the Company repurchased $26 million in common stock.   

At quarter-end, total debt to trailing-twelve month Adjusted EBITDA was 2.5 times or 1.7 times on a net debt basis reflecting $1.1 billion of cash on hand - of which approximately $500 million will be used to pay off certain maturities due March 2021.  The Company's weighted-average debt maturity was 14 years, and the effective weighted-average interest rate was 4.1 percent.

On a trailing twelve-month basis, return on invested capital increased to 14.2 percent and operating cash flows were $1.1 billion, up 23 percent versus the comparable previous trailing twelve months.  Solid earnings growth coupled with disciplined capital management led to these results.

Outlook

Mr. Hill stated, "Going into 2020, we expected shipment growth; however, in March, that trajectory was disrupted by COVID-19 and the resulting shelter-in-place ordinances.  Since then, the economic uncertainty and the evolving nature of the pandemic have continued to weigh on construction activity.  We are encouraged by the recent sequential improvement in leading indicators that foreshadow future construction activity, and now believe that we have sufficient near-term visibility to provide full-year guidance.  We expect full-year 2020 Adjusted EBITDA of $1.285 billion to $1.315 billion.  This full year outlook reflects year-over-year earnings growth despite lower shipments.  It assumes no major changes in COVID shelter-in-place restrictions and also assumes a normal weather pattern for the balance of the year.  As we look ahead to 2021, the pricing environment remains positive and we continue to work hard to add value for our customers.  We expect to provide full-year guidance when we report fourth quarter earnings in February."

Reflecting on the Company's execution, Mr. Hill went on to say, "While demand is subject to market fluctuations outside of our control, we remain focused on the factors we can control, such as our pricing and cost actions, both of which help to compound our unit margins.  Our year-to-date results demonstrate our capabilities to drive continued improvement in challenging circumstances.  Actions taken across our more than 360 locations have ensured an effective response to the economic disruption resulting from COVID-19.  Our operating plans are underpinned by our four strategic disciplines (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing), a healthy balance sheet, strong liquidity, and the engagement of our people."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CST on November 5, 2020.  A webcast will be available via the Company's website at www.vulcanmaterials.com.  Investors and other interested parties may access the teleconference live by calling 833-962-1439, or 832-900-4623 if outside the U.S., approximately 10 minutes before the scheduled start.  The conference ID is 7796747.  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 with headquarters in Birmingham, Alabama, is the nation's largest producer of construction aggregates – primarily crushed stone, sand and gravel – and a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete.  For additional information about Vulcan, go to www.vulcanmaterials.com.

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: general economic and business conditions; a pandemic, epidemic or other public health emergency, such as the recent outbreak of COVID-19; Vulcan's dependence on the construction industry, which is subject to economic cycles; the timing and amount of federal, state and local funding for infrastructure; changes in the level of spending for private residential and private nonresidential construction; changes in Vulcan's effective tax rate; the increasing reliance on information technology infrastructure, including the risks that the infrastructure does not work as intended, 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; the highly competitive nature of the construction industry; the impact of future regulatory or legislative actions, including those relating to climate change, wetlands, greenhouse gas emissions, the definition of minerals, tax policy or international trade; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena, including the impact of climate change and availability of water; 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; the impact of a discontinuation of the London Interbank Offered Rate (LIBOR); volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans; the impact of environmental cleanup 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 effect of changes in tax laws, guidance and interpretations; significant downturn in the construction industry may result in the impairment of goodwill or long-lived assets; changes in technologies, which could disrupt the way Vulcan does business and how Vulcan's products are distributed; 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


Nine Months Ended

Consolidated Statements of Earnings


September 30


September 30

(Condensed and unaudited)


2020


2019


2020


2019












Total revenues


$1,309,890


$1,418,758


$3,681,707


$3,742,951

Cost of revenues


929,392


1,018,115


2,702,967


2,780,131

Gross profit


380,498


400,643


978,740


962,820

Selling, administrative and general expenses


83,511


88,789


261,146


274,747

Gain on sale of property, plant & equipment









and businesses


1,576


234


2,317


10,982

Other operating expense, net


(10,459)


(8,712)


(20,610)


(15,173)

Operating earnings


288,104


303,376


699,301


683,882

Other nonoperating income, net


5,787


359


3,818


5,954

Interest expense, net


35,782


32,197


100,509


98,165

Earnings from continuing operations









before income taxes


258,109


271,538


602,610


591,671

Income tax expense


56,984


53,472


130,530


111,764

Earnings from continuing operations


201,125


218,066


472,080


479,907

Loss on discontinued operations, net of tax


(1,337)


(2,353)


(2,118)


(3,338)

Net earnings


$199,788


$215,713


$469,962


$476,569












Basic earnings (loss) per share









Continuing operations


$1.52


$1.65


$3.56


$3.63

Discontinued operations


($0.01)


($0.02)


($0.01)


($0.03)

Net earnings


$1.51


$1.63


$3.55


$3.60












Diluted earnings (loss) per share









Continuing operations


$1.51


$1.63


$3.54


$3.60

Discontinued operations


($0.01)


($0.01)


($0.01)


($0.02)

Net earnings


$1.50


$1.62


$3.53


$3.58























Weighted-average common shares outstanding









Basic


132,573


132,414


132,564


132,244

Assuming dilution


133,268


133,375


133,192


133,273

Depreciation, depletion, accretion and amortization


$100,962


$96,247


$295,912


$278,925

Effective tax rate from continuing operations


22.1%


19.7%


21.7%


18.9%

 









Table B

Vulcan Materials Company







and Subsidiary Companies















(in thousands)

Consolidated Balance Sheets


September 30


December 31


September 30

(Condensed and unaudited)


2020


2019


2019

Assets







Cash and cash equivalents


$1,084,100


$271,589


$90,411

Restricted cash


630


2,917


691

Accounts and notes receivable







Accounts and notes receivable, gross


647,362


573,241


727,900

Allowance for doubtful accounts


(3,155)


(3,125)


(2,960)

Accounts and notes receivable, net


644,207


570,116


724,940

Inventories







Finished products


384,575


391,666


364,164

Raw materials


34,562


31,318


31,250

Products in process


5,098


5,604


6,062

Operating supplies and other


31,226


29,720


28,184

Inventories


455,461


458,308


429,660

Other current assets


80,935


76,396


78,540

Total current assets


2,265,333


1,379,326


1,324,242

Investments and long-term receivables


41,778


60,709


57,059

Property, plant & equipment







Property, plant & equipment, cost


8,958,342


8,749,217


8,657,731

Allowances for depreciation, depletion & amortization


(4,614,543)


(4,433,179)


(4,370,386)

Property, plant & equipment, net


4,343,799


4,316,038


4,287,345

Operating lease right-of-use assets, net


431,227


408,189


410,833

Goodwill


3,172,112


3,167,061


3,167,061

Other intangible assets, net


1,107,091


1,091,475


1,071,330

Other noncurrent assets


229,193


225,995


221,803

Total assets


$11,590,533


$10,648,793


$10,539,673

Liabilities







Current maturities of long-term debt


509,435


25


24

Trade payables and accruals


263,296


265,159


265,012

Other current liabilities


297,162


270,379


270,248

Total current liabilities


1,069,893


535,563


535,284

Long-term debt


2,777,072


2,784,315


2,783,068

Deferred income taxes, net


685,520


633,039


628,726

Deferred revenue


174,488


179,880


180,541

Operating lease liabilities


407,336


388,042


391,079

Other noncurrent liabilities


547,872


506,097


478,736

Total liabilities


$5,662,181


$5,026,936


$4,997,434

Equity







Common stock, $1 par value


132,454


132,371


132,350

Capital in excess of par value


2,797,222


2,791,353


2,785,245

Retained earnings


3,204,671


2,895,871


2,795,834

Accumulated other comprehensive loss


(205,995)


(197,738)


(171,190)

Total equity


$5,928,352


$5,621,857


$5,542,239

Total liabilities and equity


$11,590,533


$10,648,793


$10,539,673

 








Table C

Vulcan Materials Company





and Subsidiary Companies










(in thousands)






Nine Months Ended

Consolidated Statements of Cash Flows


September 30

(Condensed and unaudited)


2020


2019

Operating Activities





Net earnings





$469,962


$476,569

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





Depreciation, depletion, accretion and amortization


295,912


278,925

Noncash operating lease expense


27,820


26,349

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


(2,317)


(10,982)

Contributions to pension plans


(6,540)


(6,767)

Share-based compensation expense


23,239


24,815

Deferred tax expense (benefit)


50,346


62,232

Changes in assets and liabilities before initial





effects of business acquisitions and dispositions


(76,545)


(221,001)

Other, net





(3,951)


15,989

Net cash provided by operating activities


$777,926


$646,129

Investing Activities





Purchases of property, plant & equipment


(268,989)


(306,893)

Proceeds from sale of property, plant & equipment


9,440


12,112

Proceeds from sale of businesses


651


1,744

Payment for businesses acquired, net of acquired cash


(5,668)


1,122

Other, net





10,819


(11,342)

Net cash used for investing activities


($253,747)


($303,257)

Financing Activities





Proceeds from short-term debt


0


366,900

Payment of short-term debt


0


(499,900)

Payment of current maturities and long-term debt


(250,018)


(17)

Proceeds from issuance of long-term debt


750,000


0

Debt issuance and exchange costs


(15,394)


0

Settlements of interest rate derivatives


(19,863)


0

Purchases of common stock


(26,132)


(2,602)

Dividends paid




(135,161)


(122,943)

Share-based compensation, shares withheld for taxes


(16,303)


(37,598)

Other, net





(1,084)


(14)

Net cash provided by (used for) financing activities


$286,045


($296,174)

Net increase in cash and cash equivalents and restricted cash


810,224


46,698

Cash and cash equivalents and restricted cash at beginning of year


274,506


44,404

Cash and cash equivalents and restricted cash at end of period


$1,084,730


$91,102

 












Table D

Segment Financial Data and Unit Shipments










(in thousands, except per unit data)






Three Months Ended


Nine Months Ended






September 30


September 30






2020


2019


2020


2019

Total Revenues









Aggregates 1


$1,048,962


$1,133,085


$2,987,784


$3,030,111

Asphalt 2


235,201


270,237


597,940


649,490

Concrete 


102,807


112,964


298,255


300,369

Calcium 



1,354


2,119


5,269


6,073

Segment sales


$1,388,324


$1,518,405


$3,889,248


$3,986,043

Aggregates intersegment sales


(78,434)


(99,647)


(207,541)


(243,092)

Total revenues


$1,309,890


$1,418,758


$3,681,707


$3,742,951

Gross Profit









Aggregates


$337,891


$357,202


$883,184


$872,133

Asphalt



30,217


27,639


58,246


51,950

Concrete 


12,157


15,037


35,597


36,487

Calcium 





233


765


1,713


2,250

Total




$380,498


$400,643


$978,740


$962,820

Depreciation, Depletion, Accretion and Amortization





Aggregates


$82,487


$78,978


$240,370


$227,259

Asphalt



8,644


8,909


26,046


26,343

Concrete 


3,987


3,371


12,070


9,662

Calcium 



49


59


146


177

Other




5,795


4,930


17,280


15,484

Total




$100,962


$96,247


$295,912


$278,925

Average Unit Sales Price and Unit Shipments





Aggregates









Freight-adjusted revenues 3


$807,575


$858,522


$2,270,321


$2,293,573

Aggregates - tons


55,920


60,898


157,163


163,845

Freight-adjusted sales price 4


$14.44


$14.10


$14.45


$14.00













Other Products









Asphalt Mix - tons


3,493


4,007


8,953


9,624

Asphalt Mix - sales price


$58.36


$58.20


$58.05


$57.76













Ready-mixed concrete - cubic yards


775


875


2,295


2,359

Ready-mixed concrete - sales price


$131.51


$127.99


$128.93


$126.19













Calcium - tons


49


75


193


216

Calcium - sales price


$27.51


$28.33


$27.18


$28.04


1 Includes product sales (crushed stone, sand and gravel, sand, and other aggregates), as well as freight & delivery


costs that we pass along to our customers, and service revenues related to aggregates.

2 Includes product sales, as well as service revenues from our asphalt construction paving business.

3 Freight-adjusted revenues are Aggregates segment sales excluding freight & delivery revenues and immaterial


other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business.

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

 












Appendix 1


1.   Reconciliation of Non-GAAP Measures






















Aggregates segment freight-adjusted 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. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, 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. Additionally, we use this metric as the basis for calculating the average sales price of our aggregates products. Reconciliation of this metric to its nearest GAAP measure is presented below:




Aggregates Segment Freight-Adjusted Revenues















(in thousands, except per ton data)







Three Months Ended


Nine Months Ended







September 30


September 30







2020


2019


2020


2019


Aggregates segment










Segment sales


$1,048,962


$1,133,085


$2,987,784


$3,030,111


Less:


Freight & delivery revenues 1


225,382


259,417


671,969


695,924





Other revenues


16,005


15,146


45,494


40,614


Freight-adjusted revenues


$807,575


$858,522


$2,270,321


$2,293,573


Unit shipment - tons


55,920


60,898


157,163


163,845


Freight-adjusted sales price


$14.44


$14.10


$14.45


$14.00















1 At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

























Aggregates segment incremental gross profit flow-through rate is not a GAAP measure and represents the year-over-year change in gross profit divided by the year-over-year change in segment sales excluding freight & delivery (revenues and costs). We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:




Aggregates Segment Incremental Gross Profit Margin in Accordance with GAAP











(dollars in thousands)







Three Months Ended


Nine Months Ended







September 30


September 30







2020


2019


2020


2019


Aggregates segment










Gross profit


$337,891


$357,202


$883,184


$872,133


Segment sales


$1,048,962


$1,133,085


$2,987,784


$3,030,111


Gross profit margin


32.2%


31.5%


29.6%


28.8%


Incremental gross profit margin


N/A 




N/A 

















Aggregates Segment Incremental Gross Profit Flow-through Rate (Non-GAAP)











(dollars in thousands)







Three Months Ended


Nine Months Ended







September 30


September 30







2020


2019


2020


2019


Aggregates segment










Gross profit


$337,891


$357,202


$883,184


$872,133


Segment sales


$1,048,962


$1,133,085


$2,987,784


$3,030,111


Less:


Freight & delivery revenues 1


225,382


259,417


671,969


695,924



Segment sales excluding freight & delivery


$823,580


$873,668


$2,315,815


$2,334,187


Gross profit margin excluding freight & delivery


41.0%


40.9%


38.1%


37.4%


Incremental gross profit flow-through rate


N/A




N/A

















1 At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

























GAAP does not define "Aggregates segment cash gross profit" and it should not be considered as an alternative to earnings measures defined by GAAP. We and the investment community use this metric to assess the operating performance of our business. Additionally, we present this metric as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources.  Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped. Reconciliation of this metric to its nearest GAAP measure is presented below:




Aggregates Segment Cash Gross Profit















(in thousands, except per ton data)







Three Months Ended


Nine Months Ended







September 30


September 30







2020


2019


2020


2019


Aggregates segment










Gross profit


$337,891


$357,202


$883,184


$872,133


Depreciation, depletion, accretion and amortization


82,487


78,978


240,370


227,259



Aggregates segment cash gross profit


$420,378


$436,180


$1,123,554


$1,099,392


Unit shipments - tons


55,920


60,898


157,163


163,845


Aggregates segment cash gross profit per ton


$7.52


$7.16


$7.15


$6.71


 
















Appendix 2


Reconciliation of Non-GAAP Measures (Continued)



























GAAP does not define "Earnings Before Interest, Taxes, Depreciation and Amortization" (EBITDA) and it should not be considered as an alternative to earnings measures defined by GAAP. We use this metric to assess the operating performance of our business and as a basis for strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. We adjust EBITDA for certain items to provide a more consistent comparison of earnings performance from period to period. Reconciliation of this metric to its nearest GAAP measure is presented below:



















EBITDA and Adjusted EBITDA



















(in thousands)







Three Months Ended


Nine Months Ended



TTM







September 30


September 30


September 30







2020


2019


2020


2019


2020


2019


Net earnings


$199,788


$215,713


$469,962


$476,569


$611,055


$600,591


Income tax expense


56,984


53,472


130,530


111,764


153,964


141,408


Interest expense, net


35,782


32,197


100,509


98,165


131,344


131,022


Loss on discontinued operations, net of tax


1,337


2,353


2,118


3,338


3,621


3,596


EBIT




$293,891


$303,735


$703,119


$689,836


$899,984


$876,617


Depreciation, depletion, accretion and amortization


100,962


96,247


295,912


278,925


391,583


368,708


EBITDA



$394,853


$399,982


$999,031


$968,761


$1,291,567


$1,245,325



Gain on sale of businesses


0


0


0


(4,064)


(9,289)


(4,064)



Property donation


0


0


0


0


10,847


0



Charges associated with divested operations


5,892


0


6,666


0


9,699


8,497



Business development 1


346


403


(2,113)


403


(768)


403



COVID-19 direct incremental costs


2,380


0


7,389


0


7,389


0



Restructuring charges 2


0


6,457


1,333


6,457


1,333


6,970


Adjusted EBITDA


$403,471


$406,842


$1,012,306


$971,557


$1,310,778


$1,257,131



Depreciation, depletion, accretion and amortization


(100,962)


(96,247)


(295,912)


(278,925)


(391,583)


(368,708)


Adjusted EBIT


$302,509


$310,595


$716,394


$692,632


$919,195


$888,423


1 Represents non-routine charges or gains associated with acquisitions including the cost impact of purchase accounting inventory valuations.


2 Restructuring charges are included within other operating expenses. The charges relate to managerial restructuring.



















Similar to our presentation of Adjusted EBITDA, we present Adjusted Diluted earnings per share (EPS) from continuing operations to provide a more consistent comparison of earnings performance from period to period. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:





















Adjusted Diluted EPS from Continuing Operations (Adjusted Diluted EPS)
































Three Months Ended


Nine Months Ended


TTM







September 30


September 30


September 30







2020


2019


2020


2019


2020


2019


Diluted EPS from continuing operations


$1.51


$1.63


$3.54


$3.60


$4.61


$4.53



Items included in Adjusted EBITDA above


0.05


0.05


0.08


0.02


0.09


0.08


Adjusted Diluted EPS


$1.56


$1.68


$3.62


$3.62


$4.70


$4.61



















The following reconciliation to the mid-point of the range of 2020 Projected EBITDA excludes adjustments (as noted in Adjusted EBITDA above) as they are difficult to forecast (timing or amount). Due to the difficulty in forecasting such adjustments, we are unable to estimate their significance. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP.  Reconciliation of this metric to its nearest GAAP measure is presented below:



















2020 Projected EBITDA



























(in millions)

















Mid-point




Net earnings










$607




Income tax expense










168




Interest expense, net










135




Discontinued operations, net of tax










0




Depreciation, depletion, accretion and amortization










390




Projected EBITDA










$1,300




 






Appendix 3

Reconciliation of Non-GAAP Measures (Continued)








We define Return on Invested Capital (ROIC) as Adjusted EBITDA for the trailing-twelve months divided by average invested capital (as illustrated below) during the trailing 5-quarters. Our calculation of ROIC is considered a non-GAAP financial measure because we calculate ROIC using the non-GAAP metric EBITDA. We believe that our ROIC metric is meaningful because it helps investors assess how effectively we are deploying our assets. Although ROIC is a standard financial metric, numerous methods exist for calculating a company's ROIC. As a result, the method we use to calculate our ROIC may differ from the methods used by other companies.








Return on Invested Capital








(in thousands)




TTM




September 30




2020


2019


Adjusted EBITDA


$1,310,778


$1,257,131


Average invested capital 1







Property, plant & equipment


4,346,256


4,255,879



Goodwill


3,169,082


3,166,195



Other intangible assets


1,093,601


1,085,689



Fixed and intangible assets


$8,608,939


$8,507,763










Current assets


1,655,158


1,183,633



Less: Cash and cash equivalents


477,562


47,241



Less: Deferred tax


16,002


9,078



Adjusted current assets


1,161,594


1,127,314










Current liabilities


731,033


630,289



Less: Current maturities of long-term debt


201,907


24



Less: Short-term debt


0


129,700



Adjusted current liabilities


529,126


500,565



Adjusted net working capital


$632,468


$626,749









Average invested capital


$9,241,407


$9,134,512









Return on Invested Capital


14.2%


13.8%









1 Average Invested Capital is based on a trailing 5-quarters.

 

 

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SOURCE Vulcan Materials Company