Vulcan Announces First Quarter 2014 Results

Continued Margin Expansion Driven by Aggregates Demand Recovery

May 06, 2014, 08:00 ET from Vulcan Materials Company

BIRMINGHAM, Ala., May 6, 2014 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the first quarter ending March 31, 2014.

First Quarter Summary (compared with prior year's first quarter)

  • Net sales increased $44 million, or 9 percent
  • Gross profit increased $16 million, or 93 percent.  Gross profit margin increased 270 basis points
  • Aggregates segment gross profit improved $14 million, or 55 percent
    • Shipments increased 6 percent, or 1.8 million tons
    • Pricing increased 2 percent
    • Cash gross profit per ton improved 8 percent
  • Non-aggregates gross profit improved approximately $3 million
  • Earnings from continuing operations were $0.41 per diluted share.  Included in the current year results are:
    • $1.04 per diluted share of income related to the sale of the Company's Florida-area cement and concrete assets in March
    • $0.35 per diluted share in charges to interest expense referable to the $506 million of debt purchased in March
    • Adjusted for these one-time items, earnings from continuing operations were a loss of $0.28 per diluted share versus a loss of $0.47 per diluted share in the prior year
  • Adjusted EBITDA was $39 million as compared to $26 million

Don James, Chairman and Chief Executive Officer, said, "Our aggregates business reported solid growth in the first quarter despite extremely cold weather in most of our markets, and we remain confident in the full year expectations we announced in early February.  We continue to experience strengthening demand in each of our end markets and across most of our footprint.  Our operations and sales teams continue to deliver strong incremental margins.  On a 6 percent increase in aggregates volume, our teams delivered a 55 percent increase in aggregates gross profit – despite the production and shipping challenges that come with a cold, wet winter.  Aggregates pricing continues to benefit from improving demand, and we are realizing price improvements across virtually all of our markets.

"Although construction activity and aggregates consumption remain far below historical levels, our aggregates shipments have now increased year-over-year for four consecutive quarters.  With the strength of our aggregates reserves positions, our continuing profit enhancements, the divestitures of non-strategic operations, and significant debt reduction, Vulcan remains very well positioned to grow earnings faster than sales during this period of aggregates demand recovery."

Commentary on First Quarter 2014 Segment Results

Aggregates Aggregates segment total revenue increased 13 percent and gross profit increased 55 percent versus the prior year.  Gross profit as a percent of total segment revenues increased 260 basis points versus the prior year.

Aggregates shipments increased 6 percent versus the prior year despite abnormally cold weather in most of our markets.  Shipments in California, Florida, Georgia, Illinois and Texas showed strength, each increasing by more than 15 percent versus the first quarter of last year.  In contrast, first quarter shipments in certain other markets were lower versus the prior year due to unfavorable weather, including key markets in Virginia, North Carolina and South Carolina.    

Overall, pricing increased 2 percent versus the prior year's first quarter.  Prices improved broadly with virtually all of the Company's markets realizing price increases in the quarter versus the prior year.  Despite the unfavorable weather impact, cash gross profit per ton of aggregates continued to expand, increasing 8 percent above the prior year. 

Asphalt, Concrete and Cement Gross profit from non-aggregates businesses improved $3 million versus the prior year due mostly to higher volume and materials margin in the Asphalt Mix segment.  Concrete segment gross profit improved $1 million versus the first quarter of last year.  Unit profitability for asphalt and concrete, as measured by materials margin, increased 7 percent and 11 percent, respectively, versus the prior year level.

Other Items On March 7, 2014, the Company completed the sale of its cement and concrete operations in the Florida area for gross proceeds of $720 million.  This transaction resulted in a pretax gain of $230 million and related charges of $9 million.  In the two months prior to the sale, these operations reported a gross profit loss of $4 million.

Additionally, during the first quarter, the Company completed its tender offer to purchase $506 million principal amount of its outstanding debt.  Charges associated with this transaction increased first quarter net interest expense by $73 million.

Consistent with Vulcan's ongoing strategy to generate value through effective land management, the Company completed the sale of two reclaimed former operating sites in the first quarter.  Total gross proceeds of $18 million were realized with associated gains of $6 million.

2014 Outlook

Regarding the Company's 2014 outlook, Mr. James stated, "Vulcan-served markets are expected to outperform other markets, led by continued improvement in private construction activity.  Leading indicators such as housing starts, nonresidential contract awards and employment continue to show favorable growth trends in Vulcan-served markets.  Additionally, we continue to pursue a number of large-scale transportation and industrial projects, which we are well positioned to supply.  While timing can be difficult to forecast, we expect these projects to play a meaningful role in our full year volumes in 2014.  Additionally, we expect any shipment delays due to severe winter weather in the first quarter to be recovered during the remainder of the year. 

"Trailing twelve month aggregates shipments have increased for four consecutive quarters and we expect this volume growth to provide positive momentum for broad-based price growth.  This top-line growth in aggregates coupled with tight management of our production costs should result in further margin expansion in aggregates.      

"We remain optimistic about the volume and margin opportunities for 2014 and beyond as underlying fundamentals that help drive aggregates demand continue to improve.  Sales momentum over the last twelve months supports our confidence in the full year aggregates volume and price growth projections we provided in February.  In our non-aggregates businesses, we expect full year volume and price improvements in both asphalt and our continuing concrete businesses, driven mostly by increased private construction activity." 

Conference Call Vulcan will host a conference call at 10:00 a.m. CDT on May 6, 2014.  A live webcast will be available via the Company's website at www.vulcanmaterials.com.  Investors and other interested parties in the U.S. may also access the teleconference live by calling 855-877-0343 approximately 10 minutes before the scheduled start.  International participants can dial 678-509-8772.  The access code is 33654085.  The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

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

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

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements.  The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan's effective tax rate that can adversely impact results; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; 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 and liabilities 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; Vulcan's ability to implement successfully a management succession plan; the potential of goodwill or long-lived asset 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

Consolidated Statements of Earnings

March 31

(Condensed and unaudited)

2014

2013

Net sales

$548,496

$504,554

Delivery revenues

25,924

33,608

Total revenues

574,420

538,162

Cost of goods sold

514,404

486,899

Delivery costs

25,924

33,608

Cost of revenues

540,328

520,507

Gross profit

34,092

17,655

Selling, administrative and general expenses

66,119

64,655

Gain on sale of property, plant & equipment

and businesses, net

236,364

4,110

Restructuring charges

-

(1,509)

Other operating expense, net

(9,668)

(5,659)

Operating earnings (loss)

194,669

(50,058)

Other nonoperating income, net

2,825

2,373

Interest expense, net

120,089

52,752

Earnings (loss) from continuing operations

before income taxes

77,405

(100,437)

Provision for (benefit from) income taxes

22,900

(38,818)

Earnings (loss) from continuing operations

54,505

(61,619)

Earnings (loss) on discontinued operations, net of taxes

(510)

6,783

Net earnings (loss)

$53,995

($54,836)

Basic earnings (loss) per share

Continuing operations

$0.42

($0.47)

Discontinued operations

($0.01)

$0.05

Net earnings (loss)

$0.41

($0.42)

Diluted earnings (loss) per share

Continuing operations

$0.41

($0.47)

Discontinued operations

$0.00

$0.05

Net earnings (loss)

$0.41

($0.42)

Weighted-average common shares outstanding

Basic

130,810

130,186

Assuming dilution

132,314

130,186

Dividends declared per share

$0.05

$0.01

Depreciation, depletion, accretion and amortization

$69,378

$75,597

Effective tax rate from continuing operations

29.6%

38.6%

 

Table B

Vulcan Materials Company

and Subsidiary Companies

(Amounts in thousands, except per share data)

Consolidated Balance Sheets

March 31

December 31

March 31

(Condensed and unaudited)

2014

2013

2013

Assets

Cash and cash equivalents

$268,773

$193,738

$188,081

Restricted cash

63,024

-

-

Accounts and notes receivable

Accounts and notes receivable, gross

353,601

344,475

328,202

Less: Allowance for doubtful accounts

(5,264)

(4,854)

(6,030)

Accounts and notes receivable, net

348,337

339,621

322,172

Inventories

Finished products

258,007

270,603

267,783

Raw materials

19,431

29,996

27,148

Products in process

875

6,613

6,168

Operating supplies and other

27,520

37,394

39,475

Inventories

305,833

344,606

340,574

Current deferred income taxes

39,591

40,423

38,844

Prepaid expenses

28,184

22,549

24,762

Assets held for sale

-

10,559

12,929

Total current assets

1,053,742

951,496

927,362

Investments and long-term receivables

42,137

42,387

41,707

Property, plant & equipment

Property, plant & equipment, cost

6,340,034

6,933,602

6,675,569

Reserve for depreciation, depletion & amortization

(3,446,744)

(3,621,585)

(3,507,394)

Property, plant & equipment, net

2,893,290

3,312,017

3,168,175

Goodwill

3,081,521

3,081,521

3,086,043

Other intangible assets, net

633,870

697,578

694,659

Other noncurrent assets

167,675

174,144

160,529

Total assets

$7,872,235

$8,259,143

$8,078,475

Liabilities

Current maturities of long-term debt

$171

$170

$140,604

Trade payables and accruals

150,628

139,345

116,677

Other current liabilities

190,069

159,620

212,572

Total current liabilities

340,868

299,135

469,853

Long-term debt

2,006,782

2,522,243

2,525,420

Noncurrent deferred income taxes

693,234

701,075

614,405

Deferred revenue

218,946

219,743

73,392

Other noncurrent liabilities

581,286

578,841

680,476

Total liabilities

3,841,116

4,321,037

4,363,546

Equity

Common stock, $1 par value

130,802

130,200

129,952

Capital in excess of par value

2,651,949

2,611,703

2,585,696

Retained earnings

1,343,294

1,295,834

1,220,512

Accumulated other comprehensive loss

(94,926)

(99,631)

(221,231)

Total equity

4,031,119

3,938,106

3,714,929

Total liabilities and equity

$7,872,235

$8,259,143

$8,078,475

 

Table C

Vulcan Materials Company

and Subsidiary Companies

(Amounts in thousands)

Three Months Ended

Consolidated Statements of Cash Flows

March 31

(Condensed and unaudited)

2014

2013

Operating Activities

Net earnings (loss)

$53,995

($54,836)

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

Depreciation, depletion, accretion and amortization

69,378

75,597

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

(236,364)

(17,141)

Contributions to pension plans

(1,355)

(1,132)

Share-based compensation

4,319

4,933

Excess tax benefits from share-based compensation

(2,997)

(856)

Deferred tax provision

(7,648)

(39,918)

Cost of debt purchase

72,949

-

Changes in assets and liabilities before initial

effects of business acquisitions and dispositions

40,127

22,349

Other, net

2,624

(1,863)

Net cash used for operating activities

(4,972)

(12,867)

Investing Activities

Purchases of property, plant & equipment

(46,006)

(26,851)

Proceeds from sale of property, plant & equipment

17,785

1,623

Proceeds from sale of businesses, net of transaction costs

720,056

18,164

Payment for businesses acquired, net of acquired cash

-

(60,212)

Increase in restricted cash

(63,024)

-

Other, net

-

2

Net cash provided by (used for) investing activities

628,811

(67,274)

Financing Activities

Payment of current maturities, long-term debt & line of credit

(579,676)

(10,016)

Proceeds from issuance of common stock

22,808

-

Dividends paid

(6,531)

(1,299)

Proceeds from exercise of stock options

11,599

3,203

Excess tax benefits from share-based compensation

2,997

856

Other, net

(1)

-

Net cash used for financing activities

(548,804)

(7,256)

Net increase (decrease) in cash and cash equivalents

75,035

(87,397)

Cash and cash equivalents at beginning of year

193,738

275,478

Cash and cash equivalents at end of period

$268,773

$188,081

 

Table D

Segment Financial Data and Unit Shipments

(Amounts in thousands, except per unit data)

Three Months Ended

March 31

2014

2013

Total Revenues

Aggregates (a)

Segment revenues

$404,266

$358,999

Intersegment sales

(43,432)

(33,604)

Net sales

360,834

325,395

Concrete (b)

Segment revenues

96,009

99,889

Net sales

96,009

99,889

Asphalt Mix

Segment revenues

83,019

67,287

Net sales

83,019

67,287

Cement (c).

Segment revenues

17,859

22,693

Intersegment sales

(9,225)

(10,710)

Net sales

8,634

11,983

Totals

Net sales

548,496

504,554

Delivery revenues

25,924

33,608

Total revenues

$574,420

$538,162

Gross Profit

Aggregates

$38,477

$24,786

Concrete

(9,226)

(10,079)

Asphalt Mix

4,711

1,937

Cement

130

1,011

Total

$34,092

$17,655

Depreciation, Depletion, Accretion and Amortization

Aggregates

$54,622

$55,889

Concrete

6,037

7,976

Asphalt Mix

2,400

2,037

Cement

1,058

3,906

Other

5,261

5,789

Total

$69,378

$75,597

Unit Shipments

Aggregates customer tons (d)

27,268

25,601

Internal tons (e)

2,360

2,258

Aggregates - tons

29,628

27,859

Ready-mixed concrete - cubic yards

958

1,023

Asphalt Mix - tons

1,441

1,229

Cement customer tons

76

122

Internal tons (e)

96

126

Cement - tons

172

248

Average Unit Sales Price (including internal sales)

Aggregates (freight-adjusted) (f)

$10.94

$10.72

Ready-mixed concrete

$95.41

$92.02

Asphalt Mix

$53.07

$53.76

Cement

$92.51

$82.92

(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.  On March 7, 2014, we sold       our concrete business in the Florida area.

(c) Includes cement and calcium products.  On March 7, 2014, we sold our cement business in the Florida area.

(d) Includes tons marketed and sold on behalf of a third-party pursuant to a volumetric production payment (VPP) agreement.

(e) Represents tons shipped primarily to our other operations (i.e., asphalt mix and ready-mixed concrete). Revenue from internal shipments       is not included in net sales, or total revenue as presented above and in the accompanying Condensed Consolidated Statements of Earnings.

(f) Freight-adjusted sales price is calculated as total sales dollars less freight to remote distribution sites divided by total sales units.

 

Table E

1.   Supplemental Cash Flow Information

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

(Amounts in thousands)

Three Months Ended

March 31

2014

2013

Cash Payments

Interest (exclusive of amount capitalized)

$83,801

$1,426

Income taxes

3,209

584

Noncash Investing and Financing Activities

Accrued liabilities for purchases of property, plant & equipment

16,035

5,404

2.   Reconciliation of Non-GAAP Measures

Generally Accepted Accounting Principles (GAAP) does not define "free cash flow," "Aggregates segment cash gross profit," "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 defined by GAAP.  Likewise, Aggregates segment cash gross profit, 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 and to assess the operating performance of a company's businesses.  We use free cash flow, Aggregates segment cash gross profit, EBITDA, cash earnings and other such measures to assess liquidity and the operating performance of our various business units and the consolidated company.  Additionally, we adjust EBITDA for certain items to provide a more consistent comparison of performance from period to period.  We do not use these metrics as a measure to allocate resources.  Reconciliations of these metrics to their nearest GAAP measures are presented below:

Free Cash Flow

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

(Amounts in thousands)

Three Months Ended

March 31

2014

2013

Net cash used for operating activities

($4,972)

($12,867)

Purchases of property, plant & equipment

(46,006)

(26,851)

Free cash flow

($50,978)

($39,718)

Aggregates Segment Cash Gross Profit

Aggregates segment cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization (DDA&A) to Aggregates segment gross profit.

(Amounts in thousands)

Three Months Ended

March 31

2014

2013

Aggregates segment

Gross profit

$38,477

$24,786

DDA&A

54,622

55,889

Aggregates segment cash gross profit

$93,099

$80,675

 

Table F

Reconciliation of Non-GAAP Measures (Continued)

EBITDA, Cash Earnings and Adjusted EBITDA

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

March 31

2014

2013

Reconciliation of Net Earnings to EBITDA and Cash Earnings

Net earnings (loss)

$53,995

($54,836)

Provision for (benefit from) income taxes

22,900

(38,818)

Interest expense, net

120,089

52,752

(Earnings) loss on discontinued operations, net of taxes

510

(6,783)

EBIT

197,494

(47,685)

Depreciation, depletion, accretion and amortization

69,378

75,597

EBITDA

$266,872

$27,912

Interest expense, net

(120,089)

(52,752)

Current taxes

(30,658)

4,407

Cash earnings

$116,125

($20,433)

Adjusted EBITDA and Adjusted EBIT

EBITDA

$266,872

$27,912

Gain on sale of real estate and businesses

(236,020)

(3,259)

Charges associated with divestitures

9,107

-

Amortization of deferred revenue

(984)

(253)

Restructuring charges

-

1,509

Adjusted EBITDA

$38,975

$25,909

Depreciation, depletion, accretion and amortization

(69,378)

(75,597)

Amortization of deferred revenue

984

253

Adjusted EBIT

($29,419)

($49,435)

EBITDA Bridge 

Three Months Ended

(Amounts in millions)

March 31

 Actual EBITDA

$28

Plus:  Gain on sale of real estate and businesses

(3)

Restructuring charges

1

Amortization of deferred revenue

-

 Adjusted EBITDA

26

Increase / (Decrease) due to

Aggregates:       Volumes

9

                           Selling prices

7

                           Costs and other items

(4)

Concrete

(1)

Asphalt Mix

3

Cement

(4)

Selling, administrative and general expenses

(1)

Other

4

 Adjusted EBITDA

39

Plus:  Gain on sale of real estate and businesses

236

Charges associated with divestitures

(9)

Amortization of deferred revenue

1

Actual EBITDA

$267

 

Table G

Reconciliation of Non-GAAP Measures (Continued)

2014 Results Adjusted for Disposition Transaction and Debt Purchase

The impacts of the disposition (gain and related charges referable to the sale of Florida area cement and concrete businesses) as well as the debt purchase to our first quarter 2014 results is presented below:

(Amounts and shares in thousands, except per share data)

Consolidated Statements of Earnings

March 31, 2014

Disposition

Debt

(Condensed and unaudited)

As Reported 1

Transaction 2

Purchase 3

Adjusted 4

Net sales

$548,496

$548,496

Delivery revenues

25,924

25,924

Total revenues

574,420

-

-

574,420

Cost of goods sold

514,404

514,404

Delivery costs

25,924

25,924

Cost of revenues

540,328

-

-

540,328

Gross profit

34,092

-

-

34,092

Selling, administrative and general expenses

66,119

(1,000)

65,119

Gain on sale of property, plant & equipment

and businesses, net

236,364

(230,061)

6,303

Other operating expense, net

(9,668)

8,112

(1,556)

Operating earnings (loss)

194,669

(220,949)

-

(26,280)

Other nonoperating income, net

2,825

2,825

Interest expense, net

120,089

(72,949)

47,140

Earnings (loss) from continuing operations

before income taxes

77,405

(220,949)

72,949

(70,595)

Provision for (benefit from) income taxes

22,900

(83,342)

26,853

(33,589)

Earnings (loss) from continuing operations

$54,505

($137,607)

$46,096

($37,006)

Basic earnings per share - Continuing operations

$0.42

($0.28)

Diluted earnings per share - Continuing operations

$0.41

($0.28)

Weighted-average common shares outstanding

Basic

130,810

130,810

Assuming dilution

132,314

132,314

1

Represents results of operations as of March 31, 2014 as reported in Table A.

2

Represents the one-time gain on disposition of our Florida area cement and concrete businesses, adjusted for disposition related charges.

3

Represents the one-time cost to purchase $506.4 million principal amount of outstanding debt.

4

Represents the results of operations after adjustments for the disposition transaction and debt purchase. 

 

SOURCE Vulcan Materials Company



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