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Press release from PR Newswire

Vulcan Announces Full Year And Fourth Quarter 2012 Earnings

Thursday, February 14, 2013

Vulcan Announces Full Year And Fourth Quarter 2012 Earnings08:00 EST Thursday, February 14, 2013Continued Improvement in Aggregates Profitability Driven by Higher Pricing and Effective Cost ControlBIRMINGHAM, Ala., Feb. 14, 2013 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced earnings for 2012.(Logo: http://photos.prnewswire.com/prnh/20090710/CL44887LOGO )Full Year HighlightsAdjusted EBITDA increased $59 million on flat revenues. Gross profit increased $50 million and gross profit margins improved 210 basis points. Aggregates segment gross profit margins improved 270 basis points from the prior year due to lower unit cost of sales and higher pricing. Aggregates shipments declined 1 percent and pricing increased 2 percent. Cash gross profit per ton increased 5 percent.SAG expenses were $259 million versus $290 million in the prior year. Cash earnings were $210 million, an increase of 8 percent from the prior year. Gross cash proceeds of $174 million were realized from asset sales. The Company retired $135 million of debt as scheduled.Don James, Chairman and Chief Executive Officer, said, "Our full year results demonstrate our employees' efforts in managing those aspects of the business that are under their control.  Despite slightly weaker aggregates shipments, we achieved a 17 percent increase in Adjusted EBITDA, reflecting aggressive actions to reduce costs and to take advantage of pricing opportunities across the markets we serve."   Fourth Quarter 2012 Results SummaryFourth quarter EBITDA, including gains on sale of real estate and businesses, restructuring charges and exchange offer costs, was $137 million as compared to $85 million in the prior year.  Excluding these items, Adjusted EBITDA was $90 million versus $95 million in the prior year. Gross profit increased $5 million, or 7 percent, and gross profit margins improved 90 basis points on slightly lower net sales. Aggregates segment gross profit increased $2 million and margins improved 40 basis points despite a 3 percent decline in shipments versus the prior year. Aggregates pricing increased 4 percent versus the prior year. Volumes in ready-mixed concrete and cement increased 11 percent and 8 percent, respectively, due to improving levels of private construction.Earnings from continuing operations were $0.03 per diluted share versus a loss of $0.20 per diluted share in the prior year.Commentary on Fourth Quarter 2012 Segment ResultsAggregates segment gross profit increased $2 million from the prior year's fourth quarter and gross profit margin expanded due in part to a 4 percent increase in pricing and despite a 3 percent decline in aggregates shipments.  Aggregates shipments in Florida, North Carolina, Texas and Arizona showed strength, each increasing more than 10 percent versus the prior year.   Some markets reported declines versus the prior year's fourth quarter, due in part to very favorable weather in December 2011, as compared to more normalized weather in 2012.  Shipments in Virginia, California, Georgia and the Midwest were lower versus the prior year due in part to less large-project work than in the prior year.  Virtually all of the Company's markets realized increased pricing.  Improved productivity in key energy efficiency metrics helped offset a 7 percent increase in the unit cost for diesel fuel. Gross profit from non-aggregates businesses improved approximately $3 million to a loss of $2 million.  Asphalt Mix segment gross profit was $7 million versus $5 million in the prior year.  Unit profitability, as measured by materials margin, increased 13 percent despite a 4 percent increase in the unit cost of liquid asphalt.  Asphalt volumes decreased 11 percent from the prior year's fourth quarter.  Concrete segment gross profit improved $3 million due in part to an 11 percent increase in shipments.  Cement segment earnings in the fourth quarter were a loss of $1 million versus earnings of $1 million in the prior year due primarily to the effects of an unscheduled production outage.2013 Outlook "Our outlook for another year of earnings growth is supported by improved pricing, aggressive cost control and some volume growth," said Mr. James.  "Our expectations are for aggregates margins and profitability to continue to expand."We believe economic and construction-related fundamentals that drive demand for our products are continuing to improve from the historically low levels created by the economic downturn.  The passage of the new federal highway bill in July 2012 is providing stability and predictability to future highway funding.  Through the first three months of fiscal year 2013, obligation of federal funds for future highway projects is up sharply versus the prior year, a positive indicator of growth in future contract awards.  The large increase in TIFIA (Transportation Infrastructure Finance and Innovation Act) funding contained in the new highway bill should also positively impact demand going forward."Leading indicators of private construction activity, specifically residential housing starts and contract awards for nonresidential buildings, continue to improve.  Consequently, aggregates demand in private construction is growing. We are seeing tangible evidence of this growth in several key states, including Florida, Texas, California, Georgia and Arizona.  Growth in residential construction has historically been a leading indicator of other construction end uses."        Mr. James continued, "Demand for aggregates in our markets is expected to grow by mid-single digits in 2013.  Aggregates demand from residential construction is expected to increase double-digits while demand from private non-residential buildings is expected to increase high single-digits versus 2012.  Our current expectation for growth in aggregates demand into public construction, including highways and other infrastructure, is limited given the lead time required from award of contract to the start of construction.  As we look at the projects that could impact our 2013 aggregates volumes, we see a disproportionately greater number of large, discrete highway and industrial projects.  The timing of these projects is difficult to predict at this point in the year.  As a result, our full year shipments in 2013 are expected to increase 1 to 5 percent with most of the expected year-over-year growth to occur in the second half of the year, due in part to favorable weather in the first quarter of 2012.  "In keeping with our successful efforts to offset the earnings effect of lower volumes in recent quarters, we will continue our focus on reducing controllable costs and achieving improved pricing.  In 2012, we achieved a 2 percent decrease in aggregates unit cost of sales despite the effects of lower volumes.  The geographic breadth of pricing gains achieved in 2012 reinforces our expectations for continued growth in pricing in 2013.  We expect full year freight-adjusted price growth of approximately 4 percent in 2013."Additionally, earnings in each of our non-aggregates segments should improve versus the prior year.  Asphalt materials margin increased throughout 2012 and should contribute to earnings growth in 2013.  Concrete volumes and materials margin are improving as housing starts continue recovering in key states.  Cement earnings should improve in 2013 due mostly to lower production costs.  As a result, collectively, full year earnings from these segments are expected to contribute significantly to earnings growth in 2013.  "We are on track to achieve our Profit Enhancement goals for 2013.  These pricing and cost initiatives should allow us to more than offset the effects of higher costs of key materials and supplies and maintaining competitive wages.  In 2012, we announced a number of asset sales that generated total gross proceeds of $174 million.  The Company continues to work on additional asset sales.  However, the ultimate timing of such transactions is difficult to predict.  The Company remains committed to completing transactions designed to strengthen Vulcan's balance sheet, unlock capital for more productive uses, improve our operating results and create value for shareholders."  Conference Call Vulcan will host a conference call at 10:00 a.m. CST on February 14, 2013.  Investors and other interested parties in the U.S. may access the teleconference live by calling 866.711.8198 approximately 10 minutes before the scheduled start.  International participants can dial 617.597.5327.  The access code is 23352917.  A live webcast and accompanying slides will be available via the Internet through Vulcan's home page at www.vulcanmaterials.com.  The conference call will be recorded and available for replay approximately two hours after the call through February 21, 2013.Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, a major producer of asphalt mix and concrete and a leading producer of cement in Florida.FORWARD-LOOKING STATEMENT DISCLAIMERThis document contains forward-looking statements.  Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales.  These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document.  These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements.  The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: risks that Vulcan's intentions, plans and results with respect to cost reductions, profit enhancements and asset sales, as well as streamlining and other strategic actions adopted by Vulcan, will not be able to be realized to the desired degree or within the desired time period and that the results thereof will differ from those anticipated or desired; uncertainties as to the timing and valuations that may be realized or attainable with respect to intended asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the impact of a prolonged economic recession on Vulcan's industry, business and financial condition and access to capital markets; changes in the level of spending for private residential and nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in Vulcan's effective tax rate; changes in interest rates; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; Vulcan's increasing reliance on information technology; the potential of goodwill impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.  Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law. Table AVulcan Materials Companyand Subsidiary Companies(Amounts and shares in thousands,except per share data)Three Months EndedTwelve Months EndedConsolidated Statements of EarningsDecember 31December 31(Condensed and unaudited)2012201120122011Net sales$      574,885$    578,189$ 2,411,243$ 2,406,909Delivery revenues33,54636,437156,067157,641Total revenues608,431614,6262,567,3102,564,550Cost of goods sold495,679503,8342,077,2172,123,040Delivery costs33,54636,437156,067157,641Cost of revenues529,225540,2712,233,2842,280,681Gross profit79,20674,355334,026283,869Selling, administrative and general expenses66,87371,702259,140289,993Gain on sale of property, plant & equipment               and businesses, net46,7682,92268,45547,752Recovery from legal settlement---46,404Restructuring charges(540)(9,994)(9,557)(12,971)Exchange offer costs(49)(2,227)(43,380)(2,227)Other operating income (expense), net(2,980)1,118(5,623)(9,390)Operating earnings (loss)55,532(5,528)84,78163,444Other nonoperating income, net2,5312,3866,7272Interest expense, net52,92853,346211,926217,184Earnings (loss) from continuing operations               before income taxes5,135(56,488)(120,418)(153,738)Provision for (benefit from) income taxes647(30,545)(66,492)(78,483)Earnings (loss) from continuing operations4,488(25,943)(53,926)(75,255)Earnings (loss) on discontinued operations, net of tax(1,005)(1,921)1,3334,477Net earnings (loss)$         3,483$     (27,864)$     (52,593)$     (70,778)Basic earnings (loss) per share:               Continuing operations$           0.03$        (0.20)$        (0.42)$        (0.58)               Discontinued operations-(0.02)0.010.03               Net earnings (loss) per share$           0.03$        (0.22)$        (0.41)$        (0.55)Diluted earnings (loss) per share:               Continuing operations$           0.03$        (0.20)$        (0.42)$        (0.58)               Discontinued operations-(0.02)0.010.03               Net earnings (loss) per share$           0.03$        (0.22)$        (0.41)$        (0.55)Weighted-average common shares     outstanding:               Basic129,954129,502129,745129,381               Assuming dilution131,008129,502129,745129,381Cash dividends declared per share               of common stock$           0.01$         0.01$         0.04$         0.76Depreciation, depletion, accretion and               amortization$       78,568$      88,048$    331,959$    361,719Effective tax rate from continuing operations12.6%54.1%55.2%51.0%Table BVulcan Materials Companyand Subsidiary Companies(Amounts in thousands, except per share data) Consolidated Balance SheetsDecember 31December 31(Condensed and unaudited)20122011AssetsCash and cash equivalents$    275,478$    155,839Restricted cash-81Accounts and notes receivable:Accounts and notes receivable, gross303,178321,391Less: Allowance for doubtful accounts(6,198)(6,498)Accounts and notes receivable, net296,980314,893Inventories:Finished products262,886260,732Raw materials27,75823,819Products in process5,9634,198Operating supplies and other38,41538,908Inventories335,022327,657Current deferred income taxes40,69643,032Prepaid expenses21,71321,598Assets held for sale15,083-Total current assets984,972863,100Investments and long-term receivables42,08129,004Property, plant & equipment:Property, plant & equipment, cost6,666,6176,705,546Less: Reserve for depr., depl. & amort(3,507,432)(3,287,367)Property, plant & equipment, net3,159,1853,418,179Goodwill3,086,7163,086,716Other intangible assets, net692,532697,502Other noncurrent assets161,113134,813Total assets$  8,126,599$  8,229,314Liabilities and EquityCurrent maturities of long-term debt$    150,602$    134,762Trade payables and accruals113,337103,931Other current liabilities171,671167,560Liabilities of assets held for sale801-Total current liabilities436,411406,253Long-term debt2,526,4012,680,677Noncurrent deferred income taxes657,367732,528Deferred revenue73,583-Other noncurrent liabilities671,775618,239Total liabilities 4,365,5374,437,697Equity:Common stock, $1 par value129,721129,245Capital in excess of par value2,580,2092,544,740Retained earnings1,276,6491,334,476Accumulated other comprehensive loss(225,517)(216,844)Total equity3,761,0623,791,617Total liabilities and equity$  8,126,599$  8,229,314Table CVulcan Materials Companyand Subsidiary Companies(Amounts in thousands) Twelve Months EndedConsolidated Statements of Cash FlowsDecember 31(Condensed and unaudited)20122011Operating ActivitiesNet loss$     (52,593)$     (70,778)Adjustments to reconcile net loss tonet cash provided by operating activities:Depreciation, depletion, accretion and amortization331,959361,719Net gain on sale of property, plant & equipment and businesses(78,654)(58,808)Proceeds from sale of future production, net of transaction costs73,583-Contributions to pension plans(4,509)(4,892)Share-based compensation17,47418,454Deferred tax provision(69,830)(93,739)Cost of debt purchase-19,153Changes in assets and liabilities before initialeffects of business acquisitions and dispositions20,378(11,906)Other, net6679,840Net cash provided by operating activities238,475169,043Investing ActivitiesPurchases of property, plant & equipment(93,357)(98,912)Proceeds from sale of property, plant & equipment80,82913,675Proceeds from sale of businesses, net of transaction costs21,16674,739Payment for businesses acquired, net of acquired cash-(10,531)Other, net1,7611,550Net cash provided by (used for) investing activities10,399(19,479)Financing ActivitiesNet short-term payments-(285,500)Payment of current maturities and long-term debt(134,780)(743,075)Cost of debt purchase-(19,153)Proceeds from issuance of long-term debt-1,100,000Debt issuance costs-(27,426)Proceeds from settlement of interest rate swap agreements-23,387Proceeds from issuance of common stock-4,936Dividends paid(5,183)(98,172)Proceeds from exercise of stock options10,4623,615Other, net266122Net cash used for financing activities(129,235)(41,266)Net increase in cash and cash equivalents119,639108,298Cash and cash equivalents at beginning of year155,83947,541Cash and cash equivalents at end of year$    275,478$    155,839 Table DSegment Financial Data and Unit Shipments(Amounts in thousands, except per unit data)Three Months EndedTwelve Months EndedDecember 31December 312012201120122011Total RevenuesAggregates segment (a)$411,496$409,251$1,729,419$1,734,005Intersegment sales(35,311)(30,802)(148,230)(142,572)Net sales376,185378,4491,581,1891,591,433Concrete segment (b)103,08592,862406,370374,671Intersegment sales----Net sales103,08592,862406,370374,671Asphalt Mix segment84,86094,530378,126398,962Intersegment sales----Net sales84,86094,530378,126398,962Cement segment (c)20,99819,42984,56771,920Intersegment sales(10,243)(7,081)(39,009)(30,077)Net sales10,75512,34845,55841,843TotalNet sales574,885578,1892,411,2432,406,909Delivery revenues33,54636,437156,067157,641Total revenues$608,431$614,626$2,567,310$2,564,550Gross ProfitAggregates$  81,332$  79,196$   352,100$   306,203Concrete(8,384)(11,041)(38,234)(43,368)Asphalt Mix7,4725,15722,97025,575Cement(1,214)1,043(2,810)(4,541)Total gross profit$  79,206$  74,355$   334,026$   283,869Depreciation, depletion, accretion and amortizationAggregates$  57,044$  63,993$   240,704$   266,968Concrete9,21111,55641,31647,659Asphalt Mix2,0972,1328,6877,740Cement4,5084,89718,05517,801Other5,7085,47023,19721,551Total DDA&A$  78,568$  88,048$   331,959$   361,719Unit ShipmentsAggregates customer tons30,96332,005130,520132,394Internal tons (d)2,4412,56410,44010,637Aggregates - tons33,40434,569140,960143,031Ready-mixed concrete - cubic yards1,0759724,2233,883Asphalt Mix - tons1,4931,6866,7017,208Cement customer tons114129442380Internal tons (d)13097497413Cement - tons244226939793Average Unit Sales Price (including internal sales)Aggregates (freight-adjusted) (e)$    10.45$    10.07$      10.44$      10.25Ready-mixed concrete$    91.38$    91.50$      92.19$      92.16Asphalt Mix$    56.07$    55.29$      55.33$      54.71Cement$    77.20$    69.21$      77.77$      73.66 (a) Includes crushed stone, sand and gravel, sand, other aggregates, as well as transportation and service revenues associated with the aggregates      business(b) Includes ready-mixed concrete, concrete block, precast concrete, as well as building materials purchased for resale(c) Includes cement and calcium products(d) Represents tons shipped primarily to our downstream operations (i.e., asphalt mix and ready-mixed concrete). Sales from internal shipments      are eliminated in net sales presented above and in the accompanying Condensed Consolidated Statements of Earnings(e) Freight-adjusted sales price is calculated as total sales dollars (internal and external) less freight to remote distribution sites divided by total      sales units (internal and external) Table E1.   Supplemental Cash Flow InformationSupplemental information referable to the Condensed Consolidated Statements of Cash Flowsfor the twelve months ended December 31 is summarized below:(Amounts in thousands)20122011Supplemental Disclosure of Cash Flow Information Cash paid (refunded) during the period for:Interest$      207,745$    205,088Income taxes20,374(29,874)Supplemental Schedule of Noncash Investing and Financing Activities Liabilities assumed in business acquisition-13,912Accrued liabilities for purchases of property, plant & equipment9,6277,226Fair value of noncash assets and liabilities exchanged-25,994Fair value of equity consideration for business acquisition-18,5292.   Reconciliation of Non-GAAP MeasuresGenerally 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.  We use free cash flow, cash gross profit, EBITDA, cash earnings and other such measures to assess the operating performance of our various business units and the consolidated company.  We do not use these metrics as a measure to allocate resources.  Reconciliations of these metrics to their nearest GAAP measures are presented below:Free Cash FlowFree cash flow deducts purchases of property, plant & equipment from net cash provided by operating activities(Amounts in thousands)Twelve Months EndedDecember 3120122011Net cash provided by operating activities$      238,475$    169,043Purchases of property, plant & equipment(93,357)(98,912)Free cash flow$      145,118$      70,131Aggregates Segment Cash Gross ProfitAggregates 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 EndedTwelve Months EndedDecember 31December 312012201120122011Aggregates segment gross profit$        81,332$        79,196$      352,100$    306,203Aggregates segment DDA&A57,04463,993240,704266,968Aggregates segment cash gross profit$      138,376$      143,189$      592,804$    573,171Table FReconciliation of Non-GAAP Measures (Continued)EBITDA and Cash EarningsEBITDA 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 EndedTwelve Months EndedDecember 31December 312012201120122011Reconciliation of Net Loss to EBITDA and Cash EarningsNet earnings (loss)$         3,483$      (27,864)$      (52,593)$      (70,778)Provision for (benefit from) income taxes647(30,545)(66,492)(78,483)Interest expense, net52,92853,346211,926217,184(Earnings) loss on discontinued operations, net of tax1,0051,921(1,333)(4,477)EBIT58,063(3,142)91,50863,446Plus: Depreciation, depletion, accretion and amortization78,56888,048331,959361,719EBITDA$      136,631$       84,906$      423,467$      425,165Less:  Interest expense, net(52,928)(53,346)(211,926)(217,184)           Current taxes(3,983)(4,041)(1,913)(14,318)Cash earnings$       79,720$       27,519$      209,628$      193,663Adjusted EBITDA and Adjusted EBITEBITDA$      136,631$       84,906$      423,467$      425,165Recovery from legal settlement---(46,404)Gain on sale of real estate and businesses(46,801)(2,482)(65,122)(42,141)Restructuring charges5409,9949,55712,971Exchange offer costs492,22743,3802,227Adjusted EBITDA$       90,419$       94,645$      411,282$      351,818Less: Depreciation, depletion, accretion and amortization78,56888,048331,959361,719Adjusted EBIT$       11,851$         6,597$       79,323$        (9,901)EBITDA Bridge Three Months EndedTwelve Months Ended(Amounts in millions)December 31December 31EBITDAEBITDAContinuing Operations - 2011 Actual$              85$            425Plus:Recovery from legal settlement-(46)Gain on sale of real estate and businesses(2)(42)Restructuring charges1013Exchange offer costs222011 Adjusted EBITDA from continuing operations95352Increase / (Decrease) due to:Aggregates:Volumes(6)(12)Selling prices1327Lower costs and other items(12)5Concrete-(2)Asphalt Mix2(2)Cement(2)3Lower selling, administrative and general expenses531Other(4)92012 Adjusted EBITDA from continuing operations91411Plus:Gain on sale of real estate and businesses4765Restructuring charges(1)(10)Exchange offer costs-(43)Continuing Operations - 2012 Actual$            137$            423  SOURCE Vulcan Materials CompanyFor further information: Investor Contact: Mark Warren, +1-205-298-3220; Media Contact: David Donaldson, +1-205-298-3220