Vulcan Announces Earnings for the Second Quarter of 2012 Continued Earnings Improvement Driven by Increased Gross Margins and Reduced Overhead Expenses

Aggregates Gross Margin Up 220 Basis Points and Total Overhead Expenses Down 16 Percent from Second Quarter 2011

BIRMINGHAM, Ala., July 26, 2012 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced earnings for the second quarter ended June 30, 2012.  The Company also provided an update on its Profit Enhancement Plan.

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Second Quarter 2012 Results Summary

  • Aggregates segment gross profit improved $9 million, or 9 percent, reflecting lower unit cost of sales due to improved productivity and cost reduction initiatives.  All key labor and energy efficiency metrics for aggregates improved for the quarter.
    • On a same-store basis, aggregates shipments increased slightly from the prior year period, notwithstanding the pull-forward effect of seasonally favorable weather conditions during the first quarter and the effects of Tropical Storm Debby in Florida in June.  Overall, shipments decreased 1 percent due to the sale of operations in Indiana in 2011. 
    • Aggregates pricing increased slightly, offsetting some of the earnings effect of a less favorable geographic mix.
  • Gross profit from non-aggregates segments decreased by $4 million, due principally to higher costs for liquid asphalt. 
  • Selling, administrative and general (SAG) expenses in the second quarter decreased $12 million, or 16 percent, from the prior year due mainly to cost reduction and restructuring initiatives.  
  • Adjusted EBITDA, as reflected in the attached financial tables, was $127 million in the second quarter of 2012, an increase of $10 million, or 8 percent, over the second quarter of last year. 

Don James, Chairman and Chief Executive Officer, stated, "The improvement in our second quarter operating results demonstrates the continuing benefits of our ongoing focus on reducing overhead costs and maximizing operating efficiency across the organization.  Despite weaker volumes in several of our most profitable markets, Aggregates segment gross profit margin improved by 220 basis points.  Cash earnings per ton of aggregates increased to $4.57 per ton.  Both of these improvements demonstrate our cost reduction efforts and the earnings potential of our aggregates business, particularly as volume across our geographic markets recovers."  

Mr. James continued, "Trends in both the private and public sector construction markets remain positive.  In particular, we are encouraged by the passage of the new multi-year highway bill by Congress in late June, which should provide state departments of transportation with funding certainty they need to move forward on infrastructure programs.  We remain focused on executing our initiatives and aggressively managing other items under our control.  This will enable us to continue to generate higher levels of earnings and cash flow, further improve our operating leverage, reduce overhead costs and strengthen our credit profile."

Commentary on 2Q 2012 Segment Results
Second quarter Aggregates segment gross profit increased $9 million from the prior year reflecting lower cost of sales.  Improved production efficiency and lower unit cost across most major cost categories more than offset the earnings effect of a 1 percent decline in aggregates shipments.  All key labor productivity and energy efficiency metrics improved from the prior year.  Unit cost for diesel fuel decreased 4 percent, accounting for $1 million of the increase in gross profit.  The Company achieved double-digit growth in shipments in a number of key states, including Alabama, Florida, Illinois and Texas.  Shipments in Virginia and California continued to show improvement as compared to the prior year.  These year-over-year increases in aggregates shipments were due mainly to large infrastructure project work – primarily highways – and increased private construction activity.  While volume growth was strong in Florida, severe wet weather in June as a result of Tropical Storm Debby limited the quarterly gain.  Aggregates volumes declined by double-digit percentages in Georgia, North Carolina and South Carolina, which are some of our most profitable markets.  These declines reflected demand weakness as well as the effect of favorable weather conditions that accelerated shipments into the first quarter from the second quarter.  Collectively, on a same-store basis, aggregates shipments in these three states declined 15 percent while volume elsewhere increased 4 percent versus the prior year.  The average sales price for aggregates increased slightly from the prior year's second quarter. 

Asphalt Mix segment gross profit was $5 million compared with $8 million in the prior year's second quarter.  The unit cost for liquid asphalt increased 7 percent, reducing segment earnings by approximately $3 million.  The average sales price for asphalt mix increased slightly from the prior year, offsetting most of the earnings effect of an 8 percent decline in volumes. 

For the second quarter of 2012, Concrete segment gross profit was a loss of $9 million, in line with the prior year.  Ready-mixed concrete volumes increased 6 percent from the prior year.  The earnings effect of higher volumes was offset by an unfavorable geographic mix.  Cement segment gross profit was a loss of $2 million versus a loss of $1 million in the prior year's second quarter.  A planned maintenance outage at the Company's cement plant in Florida, as well as costs related to a production disruption due to heavy rain and power outages from Tropical Storm Debby, negatively affected segment earnings in the second quarter.

The following table summarizes the year-over-year earnings improvement relative to revenue growth.

Year-over-Year Change (Millions)

 



Quarterly  


     Year-to-Date

Change     


     Change


   Aggregates    


(0.5)

         Shipments (tons)          

2.3

(7.3)

Segment Revenue $

16.7

9.0

  Gross Profit  $

32.3


Non-aggregates


1.2

Segment Revenue $

22.1

(3.9)

   Gross Profit  $

1.9


Total Company


(8.6)

Net Sales $

35.0

5.1

   Gross Profit  $

34.2

9.9

    Adjusted EBITDA $ 

51.8

EBITDA and earnings for the second quarter of 2012 included $32 million of costs related to the unsolicited exchange offer by Martin Marietta, a $12 million gain on the sale of mitigation credits in California and $5 million in costs referable to implementation of the Profit Enhancement Plan and Restructuring initiatives.  Excluding these items, Adjusted EBITDA improved $10 million and adjusted earnings from continuing operations improved $0.02 per diluted share.




       
Continuing Operations

EBITDA (Millions)     


EPS, Diluted


2Q2012

2Q2011


2Q2012

2Q2011

$    103.1

$    115.6

   As Reported 

$    (0.13)

$     (0.05)

32.0

-

    Exchange Offer Costs

0.15

-

4.5

1.8

   Restructuring Costs

0.02

0.01

(12.3)

-

   Gain on Sale of Assets

(0.06)

-

-

-

   Debt Tender Offer 

-

0.12

-

-

    Annual Effective Tax Rate Q2 True-up

-

(0.12)

$    127.3

$    117.4


$    (0.02)

$    (0.04)

 

Profit Enhancement Plan and Planned Asset Sales
As previously announced, the Profit Enhancement Plan includes cost reductions and other profit enhancement initiatives intended to improve Vulcan's run-rate profitability, as measured by EBITDA, by more than $100 million annually at current volumes.  The Profit Enhancement Plan is focused on three areas – sourcing, general & administrative costs and transportation/logistics.

Mr. James stated, "Employees throughout the Company are implementing actions that are contributing to our results.  Thanks to their continued efforts, we expect to achieve our goal for 2012.  Through the first half of 2012, we've been keenly focused on managing costs and have reduced total Company controllable costs by $55 million.  This includes the benefit of our previously announced restructuring as well as the initial results of our Profit Enhancement Plan. The largest portion of restructuring and implementation costs associated with the Profit Enhancement Plan, approximately $4.5 million, was incurred in the second quarter.  The Company expects to incur an additional $3 million in restructuring and implementation costs as work is completed in the second half of 2012.

"Execution of the Profit Enhancement Plan initiatives remains a top management priority.  As communicated previously, the majority of these actions build on previously announced restructuring and ERP investments.  Although the business remains inherently local and decentralized, the Company will continue to leverage the benefits of its national scale and operating expertise while consolidating certain support functions.

"In addition, the Company continues to make progress with its Planned Asset Sales which are designed to strengthen Vulcan's balance sheet, unlock capital for more productive uses and create value for shareholders.  The Company has maintained active discussions and negotiations with multiple potential purchasers.  The discussions involve potential sales and other transactions involving a broad range of assets.  While the ultimate composition and timing of transactions remains difficult to project, the Company's objective is $500 million in net after-tax proceeds from asset sales."

2012 Outlook
Through the first half of 2012, adjusted EBITDA was $175 million, up from $123 million in the prior year.  In the second half of 2012, Vulcan expects adjusted EBITDA of approximately $325 million, a $102 million increase from the second half of 2011. 

Included in this second half improvement are approximately $23 million from gains on the routine sale of real estate that is not part of the Planned Asset Sales and savings from the restructuring initiative announced late last year and completed during the first quarter of 2012.  The Company expects the balance of the year-over-year EBITDA improvement to be realized from cost reduction initiatives underway across the organization, including additional savings from the Profit Enhancement Plan, as well as a year-over-year improvement in second half segment earnings in aggregates, concrete and asphalt.  The Company expects controllable costs in the second half of 2012 to decrease approximately $50 million from the prior year.  Full year SAG costs are now expected to be approximately $260 million

Aggregates freight-adjusted pricing is expected to increase 1 to 3 percent in 2012.  Aggregates demand should benefit from a recovery in private construction activity and stability in highway funding in our markets.  As a result, same-store shipments are expected to increase 1 to 3 percent versus the prior year.  Total aggregates shipments for the full year are expected to be flat to 2 percent higher as a result of the sale of Indiana operations in 2011.  The uneven pace of growth in shipments through the first half of 2012 across our key markets make forecasting overall volume growth more difficult.  The full year outlook assumes a more normal geographic mix of shipments in the second half of 2012. 

Non-aggregates segment earnings are expected to increase approximately $25 million versus the prior year due mostly to improved earnings results in asphalt and concrete.  Asphalt Mix segment earnings are expected to increase due to second half growth in shipments as a result of the timing of certain projects in California.  In the Concrete segment, volumes should continue to benefit from growth in private construction activity in the second half of the year. Cement earnings are expected to approach break-even for the year. 

Unit costs for diesel fuel are expected to increase modestly from second half 2011 levels resulting in a full year increase of 1 to 5 percent from the prior year. 

Based on these assumptions, Vulcan expects 2012 adjusted EBITDA of approximately $500 million.  This full year EBITDA expectation excludes results from Planned Asset Sales, as well as costs associated with the unsolicited exchange offer.  The Company expects capital spending to be $100 million in 2012.

Conference Call
Vulcan will host a conference call at 10:00 a.m. CDT on July 26, 2012.  Investors and other interested parties in the U.S. may access the teleconference live by calling 800-573-4752 approximately 10 minutes before the scheduled start.  International participants can dial 617-224-4324.  The access code is 19919538.  A live webcast and accompanying slides 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 August 2, 2012.

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.

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: risks that Vulcan's intentions, plans and results with respect to cost reductions, profit enhancements and asset sales, as well as streamlining and other strategic actions adopted by Vulcan, will not be able to be realized to the desired degree or within the desired time period and that the results thereof will differ from those anticipated or desired; uncertainties as to the timing and valuations that may be realized or attainable with respect to intended asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the impact of a prolonged economic recession on Vulcan's industry, business and financial condition and access to capital markets; 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 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; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; 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; 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 impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; 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










 

(Amounts and shares in thousands,








except per share data)


















Three Months Ended


Six Months Ended

Consolidated Statements of Earnings


June 30


June 30

(Condensed and unaudited)


2012


2011


2012


2011























Net sales


$      648,890


$    657,457


$ 1,148,741


$ 1,113,773

Delivery revenues


45,246


44,514


81,277


75,398

Total revenues


694,136


701,971


1,230,018


1,189,171












Cost of goods sold


542,951


556,617


1,020,844


1,020,039

Delivery costs


45,246


44,514


81,277


75,398

Cost of revenues


588,197


601,131


1,102,121


1,095,437












Gross profit


105,939


100,840


127,897


93,734

Selling, administrative and general expenses


61,914


74,062


126,826


151,271

Gain on sale of property, plant & equipment










and businesses, net


13,152


2,919


19,678


3,373

Recovery from legal settlement


-


-


-


25,546

Restructuring charges


(4,551)


(1,831)


(5,962)


(2,137)

Exchange offer costs


(32,060)


-


(42,125)


-

Other operating income (expense), net


(904)


(4,378)


720


(6,940)

Operating earnings (loss)


19,662


23,488


(26,618)


(37,695)























Other nonoperating income (expense), net


(709)


(20)


2,391


1,361

Interest expense, net


53,687


70,911


105,954


113,161

Loss from continuing operations










before income taxes


(34,734)


(47,443)


(130,181)


(149,495)

Benefit from income taxes


(17,749)


(40,341)


(56,145)


(77,771)

Loss from continuing operations


(16,985)


(7,102)


(74,036)


(71,724)

Earnings (loss) on discontinued operations, net of tax


(1,298)


(1,037)


3,700


8,852

Net loss


$      (18,283)


$      (8,139)


$     (70,336)


$     (62,872)

Basic earnings (loss) per share:










Continuing operations


$          (0.13)


$        (0.05)


$        (0.57)


$        (0.55)


Discontinued operations


(0.01)


(0.01)


0.03


0.06


Net loss per share


$          (0.14)


$        (0.06)


$        (0.54)


$        (0.49)












Diluted earnings (loss) per share:










Continuing operations


$          (0.13)


$        (0.05)


$        (0.57)


$        (0.55)


Discontinued operations


(0.01)


(0.01)


0.03


0.06


Net loss per share


$          (0.14)


$        (0.06)


$        (0.54)


$        (0.49)












Weighted-average common shares









     outstanding:











Basic


129,676


129,446


129,634


129,263



Assuming dilution


129,676


129,446


129,634


129,263

Cash dividends declared per share










of common stock


$           0.01


$         0.25


$         0.02


$         0.50

Depreciation, depletion, accretion and










amortization


$       84,116


$      92,137


$    169,283


$    182,723

Effective tax rate from continuing operations


51.1%


85.0%


43.1%


52.0%




















Table B

Vulcan Materials Company






and Subsidiary Companies



















(Amounts in thousands, except per share data)

Consolidated Balance Sheets


June 30


December 31

June 30

(Condensed and unaudited)


2012


2011


2011









As Restated
(a)

Assets







Cash and cash equivalents


$    158,301


$    155,839


$    106,744

Restricted cash


-


81


109

Accounts and notes receivable:








Accounts and notes receivable, gross


397,506


321,391


397,423


Less: Allowance for doubtful accounts


(7,375)


(6,498)


(7,641)



Accounts and notes receivable, net


390,131


314,893


389,782

Inventories:








Finished products


266,265


260,732


259,109


Raw materials


24,457


23,819


26,300


Products in process


3,974


4,198


4,930


Operating supplies and other


39,910


38,908


38,926



Inventories


334,606


327,657


329,265

Current deferred income taxes


43,357


43,032


45,704

Prepaid expenses


24,840


21,598


22,394



Total current assets


951,235


863,100


893,998

Investments and long-term receivables


28,506


29,004


37,251

Property, plant & equipment:








Property, plant & equipment, cost


6,697,685


6,705,546


6,739,908


Less: Reserve for depr., depl. & amort


(3,419,174)


(3,287,367)


(3,197,163)



Property, plant & equipment, net


3,278,511


3,418,179


3,542,745

Goodwill


3,086,716


3,086,716


3,097,016

Other intangible assets, net


694,972


697,502


694,509

Other noncurrent assets


140,135


134,813


121,736



Total assets


$  8,180,075


$  8,229,314


$  8,387,255




























Liabilities and Equity







Current maturities of long-term debt


$    285,152


$    134,762


$        5,230

Short-term borrowings


-


-


100,000

Trade payables and accruals


171,834


103,931


153,729

Other current liabilities


159,481


167,560


178,677



Total current liabilities


616,467


406,253


437,636

Long-term debt


2,528,387


2,680,677


2,785,843

Noncurrent deferred income taxes


687,337


732,528


756,557

Other noncurrent liabilities


604,948


618,239


535,136



Total liabilities 


4,437,139


4,437,697


4,515,172

Equity:








Common stock, $1 par value


129,393


129,245


129,224


Capital in excess of par value


2,560,824


2,544,740


2,534,562


Retained earnings


1,261,501


1,334,476


1,376,026


Accumulated other comprehensive loss


(208,782)


(216,844)


(167,729)



Total equity


3,742,936


3,791,617


3,872,083



Total liabilities and equity


$  8,180,075


$  8,229,314


$  8,387,255

(a)

The June 30, 2011 balance sheet reflects corrections of errors related to current and deferred income taxes, which have a corresponding impact on retained earnings








Table C

Vulcan Materials Company





and Subsidiary Companies


















(Amounts in thousands)






Six Months Ended

Consolidated Statements of Cash Flows


June 30

(Condensed and unaudited)


2012


2011









Operating Activities





Net loss


$     (70,336)


$     (62,872)

Adjustments to reconcile net loss to






net cash provided by operating activities:







Depreciation, depletion, accretion and amortization


169,283


182,723



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


(31,014)


(15,657)



Contributions to pension plans


(2,248)


(1,995)



Share-based compensation


3,601


8,849



Deferred tax provision


(51,613)


(92,031)



Cost of debt purchase


-


19,153



Changes in assets and liabilities before initial








effects of business acquisitions and dispositions


(20,033)


(37,591)

Other, net


(701)


6,437




Net cash provided by (used for) operating activities


(3,061)


7,016

















Investing Activities





Purchases of property, plant & equipment


(33,584)


(51,512)

Proceeds from sale of property, plant & equipment


26,069


6,717

Proceeds from sale of businesses, net of transaction costs


11,827


12,284

Other, net


49


1,364




Net cash provided by (used for) investing activities


4,361


(31,147)









Financing Activities





Net short-term payments


-


(185,500)

Payment of current maturities and long-term debt


(105)


(737,739)

Cost of debt purchase


-


(19,153)

Proceeds from issuance of long-term debt


-


1,100,000

Debt issuance costs


-


(17,904)

Proceeds from issuance of common stock


-


4,936

Dividends paid


(2,590)


(64,570)

Proceeds from exercise of stock options


3,524


3,232

Other, net


333


32




Net cash provided by financing activities


1,162


83,334









Net increase in cash and cash equivalents


2,462


59,203

Cash and cash equivalents at beginning of year


155,839


47,541

Cash and cash equivalents at end of period


$    158,301


$    106,744














Table D

Segment Financial Data and Unit Shipments










    (Amounts in thousands, except per unit data)


















Three Months Ended


Six Months Ended






June 30


June 30






2012


2011


2012


2011

Total Revenues






















Aggregates segment (a)


$      471,147


$      478,440


$      826,765


$    810,031


Intersegment sales


(39,277)


(39,525)


(70,397)


(69,297)



Net sales


431,870


438,915


756,368


740,734


Concrete segment (b)


103,055


98,185


195,526


180,419


Intersegment sales


(441)


-


(892)


-



Net sales


102,614


98,185


194,634


180,419


Asphalt Mix segment


103,691


110,888


175,047


175,535


Intersegment sales


-


-


-


-



Net sales


103,691


110,888


175,047


175,535


Cement segment (c)


20,326


16,824


40,842


33,354


Intersegment sales


(9,611)


(7,355)


(18,150)


(16,269)



Net sales


10,715


9,469


22,692


17,085


Total












Net sales


648,890


657,457


1,148,741


1,113,773



Delivery revenues


45,246


44,514


81,277


75,398



Total revenues


$      694,136


$      701,971


$   1,230,018


$ 1,189,171













Gross Profit






















Aggregates


$      111,837


$      102,872


$      145,886


$    113,616


Concrete


(9,039)


(9,030)


(21,344)


(23,440)


Asphalt Mix


5,182


8,319


4,522


8,126


Cement


(2,041)


(1,321)


(1,167)


(4,568)


Total gross profit


$      105,939


$      100,840


$      127,897


$      93,734













Depreciation, depletion, accretion and amortization


















Aggregates


$        64,628


$        71,144


$      129,512


$    141,215


Concrete


11,381


13,195


23,474


26,233


Asphalt Mix


2,395


1,948


4,817


3,924


Cement


4,124


4,728


8,560


9,049


Corporate and other unallocated


1,588


1,122


2,920


2,302


Total DDA&A


$        84,116


$        92,137


$      169,283


$    182,723













Unit Shipments






















Aggregates customer tons


35,980


36,405


63,166


60,928


Internal tons (d)


2,744


2,825


5,010


4,966


Aggregates - tons


38,724


39,230


68,176


65,894














Ready-mixed concrete - cubic yards


1,068


1,009


2,033


1,868


Asphalt Mix - tons


1,838


1,998


3,123


3,239












2038














Cement customer tons


96


74


205


127


Internal tons (d)


123


96


231


219


Cement - tons


219


170


436


346













Average Unit Sales Price (including internal sales)



















Aggregates (freight-adjusted) (e)


$          10.38


$          10.36


$         10.32


$       10.35


Ready-mixed concrete


$          92.36


$          92.81


$         92.09


$       92.00


Asphalt Mix


$          55.29


$          55.00


$         54.85


$       53.61


Cement


$          77.79


$          78.38


$         78.02


$       77.23

(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 six months ended June 30 is summarized below:



















(Amounts in thousands)











2012


2011















Supplemental Disclosure of Cash Flow Information 








Cash paid (refunded) during the period for:








Interest


$      103,626


$    102,984



Income taxes


9,074


(33,070)















Supplemental Schedule of Noncash Investing and Financing Activities 






Liabilities assumed in business acquisition


-


13,774


Accrued liabilities for purchases of property, plant & equipment


3,890


6,414


Fair value of equity consideration for business acquisition


-


18,529




























2.   Reconciliation of Non-GAAP Measures




















Generally Accepted Accounting Principles (GAAP) does not define "free cash flow", "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)" and "cash earnings."  Thus, free cash flow should not be considered as an alternative to net cash provided by operating activities or any other liquidity measure.  Likewise, EBITDA and cash earnings 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 and to monitor our cash and liquidity positions.  The investment community often uses these metrics as indicators of a company's ability to incur and service debt.  We use free cash flow, 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.  Reconciliations of these metrics to their nearest GAAP measures are presented below:

























Free Cash Flow























Free cash flow deducts purchases of property, plant & equipment from net cash provided by operating activities
























(Amounts in thousands)











Six Months Ended











June 30











2012


2011















Net cash provided by (used for) operating activities


$        (3,061)


$         7,016


Purchases of property, plant & equipment


(33,584)


(51,512)


Free cash flow


$      (36,645)


$     (44,496)














Table F


Reconciliation of Non-GAAP Measures (Continued)


















EBITDA and Cash Earnings

















EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization.  Cash earnings adjusts EBITDA for net interest expense and current taxes.  
























            (Amounts in thousands)










Three Months Ended


Six Months Ended








June 30


June 30








2012


2011


2012


2011
















Reconciliation of Net Loss to EBITDA and Cash Earnings






















Net loss


$      (18,283)


$        (8,139)


$      (70,336)


$      (62,872)


Benefit from income taxes


(17,749)


(40,341)


(56,145)


(77,771)


Interest expense, net


53,687


70,911


105,954


113,161


(Earnings) loss on discontinued operations, net of tax


1,298


1,037


(3,700)


(8,852)


EBIT


18,953


23,468


(24,227)


(36,334)


Plus: Depreciation, depletion, accretion and amortization


84,116


92,137


169,283


182,723
















EBITDA


$      103,069


$      115,605


$      145,056


$      146,389


Less:  Interest expense, net


(53,687)


(70,911)


(105,954)


(113,161)


           Current taxes


(2,314)


(2,167)


6,312


(13,766)


Cash earnings


$        47,068


$        42,527


$       45,414


$        19,462
















Adjusted EBITDA


























EBITDA


$      103,069


$      115,605


$      145,056


$      146,389


Recovery from legal settlement


-


-


-


(25,546)


Gain on sale of real estate and mitigation credits


(12,342)


-


(18,321)


-


Restructuring charges


4,551


1,831


5,962


2,137


Exchange offer costs


32,060


-


42,125


-


Adjusted EBITDA


$      127,338


$      117,436


$      174,822


$      122,980

 














EBITDA Bridge 




Three Months Ended




Six Months Ended



(Amounts in millions)




June 30




June 30









EBITDA




EBITDA



Continuing Operations - 2011 Actual


$            116




$            146



Plus:

Recovery from legal settlement


-




(26)




Restructuring charges


1




3



2011 EBITDA from operations


117




123
















Increase / (Decrease) due to:










Aggregates:

Volumes


(3)




13





Selling prices


1




(2)





Lower costs and other items


4




9



Concrete


(2)




(1)



Asphalt Mix


(3)




(3)



Cement


(2)




3



Lower selling, administrative and general expenses


12




24



Other


3




9



2012 EBITDA from operations


127




175
















Plus:

Gain on sale of real estate


12




18




Restructuring charges


(4)




(6)




Exchange offer costs


(32)




(42)



Continuing Operations - 2012 Actual


$            103




$            145
















 

 

 

SOURCE Vulcan Materials Company



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http://www.vulcanmaterials.com

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