2014

Vulcan Announces First Quarter 2014 Results Continued Margin Expansion Driven by Aggregates Demand Recovery

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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