Vulcan Announces Third Quarter 2015 Results

Gross Profit Increases 39 Percent to $291 Million

Aggregates Pricing Up 8 Percent

Nov 03, 2015, 08:00 ET from Vulcan Materials Company

BIRMINGHAM, Ala., Nov. 3, 2015 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the third quarter ending September 30, 2015.

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The Company's third quarter results reflect continued strong revenue growth and margin expansion amidst the gradual recovery in construction activity across most of the Company's markets.  Third quarter revenues increased 19 percent and gross profit increased 39 percent from the prior year to $291 million, with gross profit and gross profit margins improving in each of the Aggregates, Asphalt and Concrete segments. In its core Aggregates segment, the Company delivered its ninth consecutive quarter of year-over-year improvements in both shipments and per-ton margins.  Same-store aggregates shipments rose 7 percent and same-store freight-adjusted aggregates pricing increased 8 percent from the prior year.  Same-store incremental aggregates gross profits equaled 72 percent of incremental freight-adjusted revenues for the quarter – and 73 percent for the trailing twelve months.  Although full-year shipments may fall below plan primarily due to weather impacts in the first half of the year, continued pricing and margin improvements lead the Company to reconfirm its full-year EBITDA guidance.  The remainder of this release provides additional detail regarding the Company's third quarter results and outlook for the remainder of the year.

Third Quarter Summary (compared with prior year's third quarter)

  • Total revenues increased $165 million, or 19 percent, to $1.038 billion
  • Gross profit increased $82 million in total, or 39 percent, to $291 million 
  • Aggregates freight-adjusted revenues increased $97 million, or 18 percent, to $629 million
    • Total shipments increased 10 percent, or 4.8 million tons, to 52.6 million tons; same-store shipments increased 7 percent, or 3.5 million tons
    • Segment gross profit increased $63 million, or 33 percent, to $251 million
    • Incremental gross profit as a percent of freight-adjusted revenues was 65 percent; on a same-store basis, this metric was 72 percent
    • Average freight-adjusted sales price increased 8 percent
  • Asphalt, Concrete and Calcium segment gross profit improved $19 million, collectively
  • SAG remained in line with expectations, declining as a percentage of total revenues
  • Adjusted EBIT was $214 million, an increase of $68 million, or 47 percent
  • Adjusted EBITDA was $282 million, an increase of $66 million, or 31 percent
  • Earnings from continuing operations were $0.93 per diluted share versus $0.51 per share in the third quarter of 2014.  Included in these results are:
    • $0.02 per diluted share in the current year's quarter for charges associated with acquisitions, divestitures and restructuring
    • $0.03 per diluted share in the prior year's quarter for charges associated with acquisitions, divestitures and restructuring
  • Adjusted for these items, earnings from continuing operations were $0.95 per diluted share in the third quarter versus $0.54 per diluted share in the prior year

Tom Hill, President and Chief Executive Officer, said, "The ongoing, gradual recovery in construction activity and demand for our products continued in the third quarter.  In fact, many of our customers now face bottlenecks in completing jobs as scheduled, particularly where significant work was delayed by weather in the first half of the year.  The pricing environment also remains strong, as customers see improved backlogs and as construction materials suppliers increasingly focus on earning adequate returns on capital deployed.  Against this backdrop, our teams continue to execute well and to meet rising customer demands efficiently and effectively.  Despite cost pressures in certain areas, unit margins continued to rise across most geographic regions."

Segment Results

Aggregates

Aggregates shipments increased by 10 percent in total and 7 percent on a same-store basis versus the prior year.  The third quarter marked the ninth consecutive quarter of growth in trailing twelve month shipments; however, consumption levels remain well below long-term, mid-cycle levels.  The Company continues to see a gradual strengthening in both private and public construction in most of the markets it serves, although supply bottlenecks (e.g., availability of skilled trade labor) appear to impact the rate of growth in several areas.  Arizona, California, Florida, Georgia, South Carolina and Texas each saw shipment growth in the quarter of 10 percent or higher.  In contrast, Illinois saw shipments decline nearly 10 percent as large project work declined relative to the prior year's quarter.

Freight-adjusted average sales price for aggregates increased 8 percent on a same-store basis, or $0.86 per ton, versus the prior year's third quarter, with most markets realizing solid price improvement.  On a trailing twelve months basis, average selling prices increased 5 percent.  The increase in the rate of pricing growth over recent trend was expected given market conditions and pricing actions taken earlier in the year.  The Company expects positive pricing momentum to continue into the fourth quarter and 2016. 

Overall aggregates unit costs remained roughly in line with the prior year quarter as lower diesel expenditures largely offset higher costs in other areas.  Relative to the prior year, unit costs were impacted by unfavorable geographic mix due to relatively higher volumes in both remote-served markets and other markets with higher inherent operating costs.  Unit costs also were affected by increased expenditures for repair and maintenance activities, employee benefits and overtime labor.  Compared to last year's third quarter, cost of revenues for aggregates benefitted by approximately $12 million from lower diesel fuel expenditures.  The Company remains focused, with a multi-quarter view, on balancing the factors impacting production quality, service quality and cost.  Over the trailing twelve months and excluding the impact of diesel price movements and newly acquired operations, aggregates unit cost of sales have remained essentially flat.

During the third quarter, aggregates same-store unit margins continued to expand.  Gross profit per ton increased $0.90, or 23 percent, from the prior year.  On a trailing-twelve-month basis, same-store unit gross profit has increased 25 percent, while unit cash gross profit has increased 14 percent to $5.27 per ton.

For the quarter, aggregates same-store freight-adjusted revenues increased $83 million, while same-store gross profit for the segment increased $60 million, a flow-through rate of 72 percent.  Because quarterly results can be volatile due to seasonality and other factors, the Company encourages investors to also consider longer-term trends.   On a trailing-twelve-month basis, this flow-through rate has consistently exceeded the Company's stated goal of 60 percent since volumes began to recover in the second half of 2013.

Asphalt, Concrete and Calcium

In the third quarter, Asphalt segment gross profit was $30 million versus $15 million in the prior year.  This year-over-year improvement resulted from higher volumes, effective management of materials margins, and earnings from acquisitions completed since the first half of last year.  Same-store asphalt volumes increased 20 percent. 

Concrete segment gross profit was $10 million versus $5 million in the prior year's third quarter.  Last year's third quarter results included the Company's California concrete business that was divested via an asset swap in January 2015.  On a same-store basis, sales volumes were flat versus the prior year, while pricing and unit profitability improved and gross profit increased sharply versus the prior year. 

The Company's Calcium segment reported gross profit of $0.8 million, a decrease versus the $1.0 million reported in the prior year.

In total, the year-to-date gross profit contribution of these three segments has exceeded plan due to margin improvements resulting from both core operating disciplines and strategic repositioning of our asset portfolio.

Selling, Administrative and General (SAG), Other Operating Expense, and Effective Tax Rate

Overall SAG expenses remain in line with plan, declining by 70 basis points as a percentage of total revenues from the prior year.  In the third quarter, the Company experienced elevated SAG costs of $5 million primarily due to higher pension and other employee benefit costs as well as continued investment in sales force effectiveness and other strategic initiatives.  The Company expects that full-year pension and post-retirement related costs, a portion of which flow through SAG, will be approximately $11 million higher than the prior year.  Other employee benefits costs, such as those associated with enhancements to the employee profit sharing plan, also have risen. In contrast, direct SAG expenses for salaries and wages remained flat with the prior year. The Company intends to further leverage SAG expenses to revenues as volumes recover.

Other operating expense, generally consisting of various cost items not included in cost of revenues, was $8 million versus $3 million in the third quarter of 2014.  The year-over-year increase resulted mostly from environmental charges associated with former sites.  Over the past three years, other operating expenses, exclusive of significant items disclosed individually, have averaged approximately $3 million each quarter.

As a result of steps taken in the second quarter to streamline the Company's corporate legal entity structure, it now expects to use in the future a portion of a $60 million deferred tax asset related to a state-level NOL which has until now been considered unusable.  The resulting tax benefit in the third quarter was $4.7 million.  The Company currently estimates its effective tax rate for the full year to be 28 percent.

Credit Position and Capital Allocation

At the end of the third quarter, total debt outstanding was approximately $2 billion.  This amount includes $85 million of long-term, floating-rate bank borrowings under the Company's $750 million revolving credit facility.  As previously communicated, the Company intends to use additional long-term, floating-rate bank borrowings to refinance the $150 million note maturing in December.  In the absence of other actions, end of year total long-term debt will remain at approximately $2 billion, with $235 million of that amount in the form of floating-rate borrowings.  The Company's ratio of total debt to trailing twelve month Adjusted EBITDA was 2.6 at the end of the third quarter.  The quarter end cash balance was approximately $170 million.

The Company's capital deployment priorities remain unchanged from prior communications.  Capital expenditures for the 2015 calendar year remain on track with plan, although the Company may opt to pull-forward some 2016 spending in order to take advantage of certain procurement savings opportunities.  No material acquisitions or divestitures were closed in the third quarter.  However, the Company will continue to evaluate such opportunities as they arise.  Over time, and subject to the continued recovery of construction activity to more normalized levels, the Company expects to take a balanced approach to capital deployment, one incorporating strategic reinvestment, sustained financial strength and flexibility, and the return of capital to shareholders. 

The performance of the operations the Company has acquired since the beginning of 2014's third quarter continues to improve.  In total, these operations contributed approximately $13 million of EBITDA in the third quarter and $28 million year-to-date.  The full-year EBITDA contribution from these operations may fall short of the Company's original forecast due in part to the timing of capacity expansion investments at certain of the acquired aggregates operations.  The Company remains pleased with the financial return profile and strategic fit of these investments.

Outlook

Regarding the Company's outlook for the remainder of 2015, Mr. Hill stated, "Demand for our products continues to strengthen, and we are encouraged by the strong growth in aggregates pricing throughout our markets.  We are reaffirming our expectation for full year Adjusted EBITDA of $775 to $825 million, assuming normal weather patterns in the fourth quarter.  Consistent with our expectations throughout the year, these results are driven by strong growth in aggregates gross profit per ton, earnings improvement in our non-aggregates businesses and continuing leverage of our SAG expenses.       

"We expect the trends evident thus far in 2015 to extend into 2016.  The gradual recovery in demand continues across most of our markets. The pricing environment remains positive.  Our teams continue to convert incremental revenue into incremental gross profit at an impressive rate.  Our focus will remain on continuous, compounding improvement – both operational and financial."

Conference Call

Vulcan will host a conference call at 11:00 a.m. CST on November 3, 2015.  A 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 877-840-5321 approximately 10 minutes before the scheduled start.  International participants can dial 678-509-8772.  The conference ID is 65809933.  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 other construction materials.

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 successfully implement our new divisional structure and changes in our management team; Vulcan's ability to manage and successfully integrate acquisitions; 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

 

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

Consolidated Statements of Earnings

September 30

September 30

(Condensed and unaudited)

2015

2014

2015

2014

Total revenues

$1,038,460

$873,579

$2,564,896

$2,239,142

Cost of revenues

747,170

664,537

1,961,292

1,821,220

Gross profit

291,290

209,042

603,604

417,922

Selling, administrative and general expenses

71,390

66,074

207,350

199,808

Gain on sale of property, plant & equipment

and businesses

799

1,002

7,423

238,527

Restructuring charges

(448)

(750)

(4,546)

(750)

Other operating expense, net

(8,045)

(2,889)

(22,391)

(17,645)

Operating earnings

212,206

140,331

376,740

438,246

Other nonoperating income (expense), net

(2,818)

(593)

(2,277)

4,030

Interest expense, net

37,800

40,891

183,931

201,531

Earnings from continuing operations

before income taxes

171,588

98,847

190,532

240,745

Provision for income taxes

45,386

31,066

51,177

71,947

Earnings from continuing operations

126,202

67,781

139,355

168,798

Loss on discontinued operations, net of tax

(2,397)

(842)

(7,066)

(1,896)

Net earnings

$123,805

$66,939

$132,289

$166,902

Basic earnings (loss) per share

Continuing operations

$0.95

$0.51

$1.05

$1.29

Discontinued operations

($0.02)

$0.00

($0.06)

($0.02)

Net earnings

$0.93

$0.51

$0.99

$1.27

Diluted earnings (loss) per share

Continuing operations

$0.93

$0.51

$1.03

$1.27

Discontinued operations

($0.02)

($0.01)

($0.05)

($0.01)

Net earnings

$0.91

$0.50

$0.98

$1.26

Weighted-average common shares outstanding

Basic

133,474

131,797

133,082

131,256

Assuming dilution

135,558

133,369

134,942

132,759

Cash dividends per share of common stock

$0.10

$0.06

$0.30

$0.16

Depreciation, depletion, accretion and amortization

$69,662

$71,157

$204,770

$208,858

Effective tax rate from continuing operations

26.5%

31.4%

26.9%

29.9%

 

 

Table B

Vulcan Materials Company

and Subsidiary Companies

 

(in thousands, except per share data)

Consolidated Balance Sheets

September 30

December 31

September 30

(Condensed and unaudited)

2015

2014

2014

Assets

Cash and cash equivalents

$168,681

$141,273

$91,868

Accounts and notes receivable

Accounts and notes receivable, gross

558,755

378,947

485,176

Less: Allowance for doubtful accounts

(5,770)

(5,105)

(5,428)

Accounts and notes receivable, net

552,985

373,842

479,748

Inventories

Finished products

275,717

275,172

254,931

Raw materials

21,680

19,741

22,987

Products in process

1,161

1,250

1,331

Operating supplies and other

28,148

25,641

27,335

Inventories

326,706

321,804

306,584

Current deferred income taxes

39,301

39,726

41,745

Prepaid expenses

56,017

28,640

34,673

Assets held for sale

0

15,184

0

Total current assets

1,143,690

920,469

954,618

Investments and long-term receivables

40,516

41,650

42,117

Property, plant & equipment

Property, plant & equipment, cost

6,803,588

6,608,842

6,608,342

Reserve for depreciation, depletion & amortization

(3,683,961)

(3,537,212)

(3,539,772)

Property, plant & equipment, net

3,119,627

3,071,630

3,068,570

Goodwill

3,094,824

3,094,824

3,095,317

Other intangible assets, net

766,695

758,243

758,863

Other noncurrent assets

151,514

154,281

150,160

Total assets

$8,316,866

$8,041,097

$8,069,645

Liabilities

Current maturities of long-term debt

130

150,137

145

Trade payables and accruals

195,536

145,148

167,837

Other current liabilities

216,411

156,073

196,830

Liabilities of assets held for sale

0

520

0

Total current liabilities

412,077

451,878

364,812

Long-term debt

1,979,493

1,834,642

1,984,075

Noncurrent deferred income taxes

692,643

691,137

733,613

Deferred revenue

209,651

213,968

216,205

Other noncurrent liabilities

659,725

672,773

569,841

Total liabilities

$3,953,589

$3,864,398

$3,868,546

Equity

Common stock, $1 par value

133,315

131,907

131,703

Capital in excess of par value

2,812,593

2,734,661

2,719,169

Retained earnings

1,564,215

1,471,845

1,441,742

Accumulated other comprehensive loss

(146,846)

(161,714)

(91,515)

Total equity

$4,363,277

$4,176,699

$4,201,099

Total liabilities and equity

$8,316,866

$8,041,097

$8,069,645

 

 

Table C

Vulcan Materials Company

and Subsidiary Companies

(in thousands)

Nine Months Ended

Consolidated Statements of Cash Flows

September 30

(Condensed and unaudited)

2015

2014

Operating Activities

Net earnings

$132,289

$166,902

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

Depreciation, depletion, accretion and amortization

204,770

208,858

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

(7,423)

(238,527)

Contributions to pension plans

(11,337)

(4,115)

Share-based compensation

14,020

18,425

Excess tax benefits from share-based compensation

(16,950)

(3,375)

Deferred tax provision (benefit)

(7,640)

13,158

Cost of debt purchase

67,075

72,949

Changes in assets and liabilities before initial

effects of business acquisitions and dispositions

(79,000)

(89,888)

Other, net

(14,467)

5,339

Net cash provided by operating activities

$281,337

$149,726

Investing Activities

Purchases of property, plant & equipment

(214,815)

(169,220)

Proceeds from sale of property, plant & equipment

4,464

21,320

Proceeds from sale of businesses, net of transaction costs

0

719,089

Payment for businesses acquired, net of acquired cash

(20,801)

(268,604)

Other, net

(301)

0

Net cash provided by (used for) investing activities

($231,453)

$302,585

Financing Activities

Proceeds from line of credit

291,000

70,000

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

(751,056)

(649,711)

Proceeds from issuance of long-term debt

400,000

0

Debt and line of credit issuance costs

(7,382)

0

Proceeds from issuance of common stock

0

30,620

Dividends paid

(39,878)

(20,973)

Proceeds from exercise of stock options

67,888

12,513

Excess tax benefits from share-based compensation

16,950

3,375

Other, net

2

(5)

Net cash used for financing activities

($22,476)

($554,181)

Net increase (decrease) in cash and cash equivalents

27,408

(101,870)

Cash and cash equivalents at beginning of year

141,273

193,738

Cash and cash equivalents at end of period

$168,681

$91,868

 

 

Table D

Segment Financial Data and Unit Shipments

(in thousands, except per unit data)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Total Revenues

Aggregates 1

$830,783

$688,922

$2,067,671

$1,752,583

Asphalt Mix 2

178,865

136,441

410,934

330,004

Concrete 2,3

88,013

98,949

226,400

288,792

Calcium 4

2,202

2,273

6,453

22,580

Segment sales

$1,099,863

$926,585

$2,711,458

$2,393,959

Aggregates intersegment sales

(61,403)

(53,006)

(146,562)

(145,592)

Calcium intersegment sales

0

0

0

(9,225)

Total revenues

$1,038,460

$873,579

$2,564,896

$2,239,142

Gross Profit

Aggregates

$250,866

$188,000

$525,816

$388,081

Asphalt Mix 2

30,020

14,567

59,973

28,292

Concrete 2,3

9,578

5,486

15,280

(519)

Calcium 4

826

989

2,535

2,068

Total

$291,290

$209,042

$603,604

$417,922

Depreciation, Depletion, Accretion and Amortization

Aggregates

$57,732

$58,488

$170,251

$169,180

Asphalt Mix 2

4,124

2,638

12,131

7,458

Concrete 2,3

2,955

4,955

8,457

15,678

Calcium 4

170

157

496

1,406

Other

4,681

4,919

13,435

15,136

Total

$69,662

$71,157

$204,770

$208,858

Average Unit Sales Price and Unit Shipments

Aggregates

Freight-adjusted revenues 5

$629,083

$531,613

$1,567,345

$1,339,181

Aggregates - tons 6

52,609

47,825

133,564

121,101

Freight-adjusted sales price 7

$11.96

$11.12

$11.73

$11.06

Other Products

Asphalt Mix - tons

3,251

2,240

7,499

5,508

Asphalt Mix - sales price

$54.73

$55.08

$54.18

$54.01

Ready-mixed concrete - cubic yards

813

978

2,129

2,885

Ready-mixed concrete - sales price

$108.13

$101.20

$106.27

$98.49

Calcium - tons

81

87

239

243

Calcium - sales price

$27.16

$25.58

$26.97

$26.00

1

Includes crushed stone, sand and gravel, sand, other aggregates, as well as freight, delivery and transportation revenues, and other revenues related to services.

2

In January 2015, we exchanged our California ready-mixed concrete operations for 13 asphalt mix plants, primarily in Arizona.

3

Includes ready-mixed concrete. In March 2014, we sold our concrete business in the Florida area which in addition to ready-mixed concrete, included concrete block, precast concrete, as well as building materials purchased for resale. See Appendix 5 for adjusted segment data.

4

Includes cement and calcium products. In March 2014, we sold our cement business.  See Appendix 5 for adjusted segment data. 

5

Freight-adjusted revenues are Aggregates segment sales excluding freight, delivery and transportation revenues, and other revenues related to services, such as landfill tipping fees that are derived from our aggregates business.

6

Includes tons marketed and sold on behalf of a third-party pursuant to volumetric production payment (VPP) agreements and tons shipped to our  down-stream operations (i.e., asphalt mix and ready-mixed concrete). 

7

Freight-adjusted sales price is calculated as freight-adjusted revenues divided by aggregates unit shipments.

 

 

Appendix 1

1.   Supplemental Cash Flow Information

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

(in thousands)

Nine Months Ended

September 30

2015

2014

Cash Payments

Interest (exclusive of amount capitalized)

$136,123

$163,593

Income taxes

46,271

64,539

Noncash Investing and Financing Activities 

Accrued liabilities for purchases of property, plant & equipment

11,941

5,777

Amounts referable to business acquisitions

Liabilities assumed

2,645

24,881

Fair value of noncash assets and liabilities exchanged

20,000

4,914

Fair value of equity consideration

0

45,185

2.   Reconciliation of Non-GAAP Measures

Gross profit margin excluding freight and delivery revenues is not a Generally Accepted Accounting Principle (GAAP) measure. We present this metric as it is consistent with the basis by which we review our operating results. Likewise, we believe that this presentation is consistent with the basis by which investors analyze our operating results considering that freight and delivery services represent pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:

Gross Profit Margin in Accordance with GAAP

(dollars in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Gross profit

$291,290

$209,042

$603,604

$417,922

Total revenues

$1,038,460

$873,579

$2,564,896

$2,239,142

Gross profit margin

28.1%

23.9%

23.5%

18.7%

Gross Profit Margin Excluding Freight and Delivery Revenues

(dollars in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Gross profit

$291,290

$209,042

$603,604

$417,922

Total revenues

$1,038,460

$873,579

$2,564,896

$2,239,142

Freight and delivery revenues 1

160,594

135,336

403,494

351,083

Total revenues excluding freight and delivery revenues

$877,866

$738,243

$2,161,402

$1,888,059

Gross profit margin excluding freight and delivery revenues

33.2%

28.3%

27.9%

22.1%

1Includes freight to remote distributions sites.

 

 

Appendix 2

Reconciliation of Non-GAAP Measures (Continued)

Aggregates segment gross profit margin as a percentage of freight-adjusted revenues is not a GAAP measure. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is meaningful to our investors as it excludes freight, delivery and transportation revenues which are pass-through activities. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Incremental gross profit as a percentage of freight-adjusted revenues represents the year-over-year change in gross profit divided by the year-over-year change in freight-adjusted revenues. Reconciliation of these metrics to their nearest GAAP measures are presented below:

Aggregates Segment Gross Profit Margin in Accordance with GAAP

(dollars in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Aggregates segment

Gross profit

$250,866

$188,000

$525,816

$388,081

Segment sales

$830,783

$688,922

$2,067,671

$1,752,583

Gross profit margin

30.2%

27.3%

25.4%

22.1%

Incremental gross profit margin

44.3%

43.7%

Aggregates Segment Gross Profit as a Percentage of Freight-Adjusted Revenues

(dollars in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Aggregates segment

Gross profit

$250,866

$188,000

$525,816

$388,081

Segment sales

$830,783

$688,922

$2,067,671

$1,752,583

Less

Freight, delivery and transportation revenues 1

$196,442

$152,442

$484,356

$398,195

Other revenues

5,258

4,867

15,970

15,207

Freight-adjusted revenues

$629,083

$531,613

$1,567,345

$1,339,181

Gross profit as a percentage of freight-adjusted revenues

39.9%

35.4%

33.5%

29.0%

Incremental gross profit as a percentage of freight-adjusted revenues

64.5%

60.4%

1At the segment level, freight, delivery and transportation revenues include intersegment freight & delivery revenues, which are eliminated at the consolidated level.

 

 

Appendix 3

Reconciliation of Non-GAAP Measures (Continued)

GAAP does not define "free cash flow," "Aggregates segment cash gross profit" and "Earnings Before Interest, Taxes, Depreciation and Amortization" (EBITDA). 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 and EBITDA 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 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 is calculated by deducting purchases of property, plant & equipment from net cash provided by operating activities.

(in thousands)

Nine Months Ended

September 30

2015

2014

Net cash provided by operating activities

$281,337

$149,726

Purchases of property, plant & equipment

(214,815)

(169,220)

Free cash flow

$66,522

($19,494)

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.

(in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Aggregates segment

Gross profit

$250,866

$188,000

$525,816

$388,081

DDA&A

57,732

58,488

170,251

169,180

Aggregates segment cash gross profit

$308,598

$246,488

$696,067

$557,261

 

 

Appendix 4

Reconciliation of Non-GAAP Measures (Continued)

EBITDA and Adjusted EBITDA

EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization and excludes discontinued operations.  We adjust EBITDA for certain items to provide a more consistent comparison of performance from period to period.

(in thousands)

Three Months Ended

Nine Months Ended

September 30

September 30

2015

2014

2015

2014

Reconciliation of Net Earnings to EBITDA

Net earnings

$123,805

$66,939

$132,289

$166,902

Provision for income taxes

45,386

31,066

51,177

71,947

Interest expense, net

37,800

40,891

183,931

201,531

Loss on discontinued operations, net of tax

2,397

842

7,066

1,896

EBIT

$209,388

$139,738

$374,463

$442,276

Depreciation, depletion, accretion and amortization

69,662

71,157

204,770

208,858

EBITDA

$279,050

$210,895

$579,233

$651,134

Adjusted EBITDA and Adjusted EBIT

EBITDA

$279,050

$210,895

$579,233

$651,134

(Gain) loss on sale of real estate and businesses

0

1,185

(5,886)

(235,922)

Charges associated with acquisitions and divestitures

4,158

3,959

9,195

15,573

Asset impairment

0

0

5,190

0

Amortization of deferred revenue

(1,779)

(1,384)

(4,317)

(3,725)

Restructuring charges

448

750

4,546

750

Adjusted EBITDA

$281,877

$215,405

$587,961

$427,810

Depreciation, depletion, accretion and amortization

(69,662)

(71,157)

(204,770)

(208,858)

Amortization of deferred revenue

1,779

1,384

4,317

3,725

Adjusted EBIT

$213,994

$145,632

$387,508

$222,677

 

 

Appendix 5

Adjusted Concrete and Calcium Segment Financial Data

Comparative financial data after adjusting for both the January 2015 exchange of our California concrete business and the March 2014 sale of our concrete and cement businesses in the Florida area is presented below:

(in thousands)

2015

2014

YTD 1

Q1

Q1

Q2

Q3

Q4

Concrete Segment

Segment sales

   As reported

$226,400

$59,789

$96,009

$93,834

$98,949

$87,014

   Adjusted

221,286

54,675

48,186

74,360

79,697

70,316

Total revenues

   As reported

$226,400

$59,789

$96,009

$93,834

$98,949

$87,014

   Adjusted

221,286

54,675

48,186

74,360

79,697

70,316

Gross profit

   As reported

$15,280

$810

($9,226)

$3,221

$5,486

$2,753

   Adjusted

16,072

1,602

(4,370)

4,921

7,161

4,245

Depreciation, depletion, accretion and amortization

   As reported

$8,457

$2,728

$6,037

$4,686

$4,955

$4,214

   Adjusted

8,357

2,628

3,930

3,905

4,239

3,577

Shipments - cubic yards

   As reported

2,129

573

958

949

978

847

   Adjusted

2,073

517

483

733

765

668

Calcium Segment

Segment sales

   As reported

$6,453

$1,855

$18,133

$2,174

$2,273

$2,451

   Adjusted

6,453

1,855

2,137

2,174

2,273

2,451

Total revenues

   As reported

$6,453

$1,855

$8,908

$2,174

$2,273

$2,451

   Adjusted

6,453

1,855

2,165

2,174

2,273

2,451

Gross profit

   As reported

$2,535

$572

$130

$949

$989

$1,131

   Adjusted

2,535

572

424

949

989

1,131

Depreciation, depletion, accretion and amortization

   As reported

$496

$162

$1,058

$191

$157

$148

   Adjusted

496

162

97

191

157

148

1 Year-to-date 2015 amounts include adjustments for Q1 2015 transactions. There were no adjustments for Q2 or Q3 2015.

 

 

 

SOURCE Vulcan Materials Company



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