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)








         Shipments (tons)          



Segment Revenue $



  Gross Profit  $




Segment Revenue $



   Gross Profit  $


Total Company


Net Sales $



   Gross Profit  $



    Adjusted EBITDA $ 


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





$    103.1

$    115.6

   As Reported 

$    (0.13)

$     (0.05)



    Exchange Offer Costs





   Restructuring Costs





   Gain on Sale of Assets





   Debt Tender Offer 





    Annual Effective Tax Rate Q2 True-up



$    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  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.

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.