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

Jul 26, 2012, 08:00 ET from Vulcan Materials Company

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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