Vulcan Announces Second Quarter 2017 Results
BIRMINGHAM, Ala., Aug. 2, 2017 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the second quarter ended June 30, 2017.
Net earnings were $120 million and Adjusted EBITDA was $288 million. The Company's second quarter results reflect record unit profitability in its Aggregates segment despite wet weather and difficult operating conditions across many of its Southeastern and mid-Atlantic markets. Extreme wet weather across the Southeast and weaker demand in Illinois and coastal Texas contributed to a 3 percent decline in same-store aggregates shipments compared to the prior year. Same-store pricing in aggregates improved 5 percent.
Tom Hill, Chairman and Chief Executive Officer, said, "Aggregates shipments in the quarter were hit hard by prolonged and extremely wet weather in the Southeast, particularly in May and June, and the absence or delayed timing of large project work in Illinois and coastal Texas compared to last year. This shortfall in second quarter aggregates shipments drove most of the difference in our reported results versus our plan.
"Despite the volume shortfall in the quarter, I am very encouraged by what I see happening behind the reported numbers. Private demand in our markets continued to strengthen. Highway project starts accelerated in the second quarter, signaling an end to the softness in starts that we have been working through for the last year. Our shipment backlog for public highway work hasn't been this high in at least three years. California and Virginia, important states for us, have returned to shipment growth. Our recent acquisitions are performing well. And, our core profitability in aggregates continues to improve. Aggregates unit gross profit was a second quarter record despite the wet weather we experienced in some of our strongest markets. Aggregates pricing, adjusted for mix, was consistent with full year expectations. These results are a good indication of the market's visibility to further demand recovery.
"Our business remains on track with our longer-term goals and expectations. We remain confident in the sustained, multi-year recovery in materials demand across our markets and in the further, compounding improvements to our unit profitability. We anticipate 5 to 10 percent growth in shipments from August through the end of the year. However, given the shortfall in shipments to date, we now expect full year aggregates shipments of 182 to 187 million tons and full year Adjusted EBITDA of $1.05 to $1.13 billion."
Second Quarter Summary (compared with prior year's second quarter)
-- Total revenues increased $74 million, or 8 percent, to $1.03 billion
-- Gross profit was $292 million, in line with the prior year
-- Aggregates segment sales increased $26 million, or 3 percent, to $818
million, and aggregates freight-adjusted revenues increased $17 million,
or 3 percent, to $631 million
-- Shipments decreased 0.8 million tons, or 2 percent, to 48.0 million
tons
-- Freight-adjusted sales price increased $0.55 per ton, or 4 percent
-- Segment gross profit was $253 million, approximating the prior year
-- Asphalt, Concrete and Calcium segment gross profit improved 2 percent,
collectively, to $39 million
-- SAG was $83 million, flat with the prior year and down 60 basis points
as a percentage of total revenues
-- Net earnings were $120 million, a decrease of $5 million, or 4 percent
-- Adjusted EBIT was $211 million, an increase of $3 million, or 2 percent
-- Adjusted EBITDA was $288 million, an increase of $8 million, or 3
percent
-- Earnings from continuing operations were $0.83 per diluted share versus
$0.93 per diluted share
-- Adjusted earnings from continuing operations were $0.90 per diluted
share in both the current year's second quarter and prior year
Trailing-Twelve-Month Summary (compared with prior twelve month period)
-- Total revenues were $3.70 billion, an increase of $92 million, or 3
percent
-- Gross profit was $996 million, a decrease of $6 million, or 1 percent
-- Aggregates segment sales increased $36 million, or 1 percent, to $3.00
billion, and aggregates freight-adjusted revenues increased $45 million,
or 2 percent, to $2.32 billion
-- Shipments decreased 5.7 million tons, or 3 percent, to 179.6 million
tons
-- Freight-adjusted sales price increased $0.64 per ton, or 5 percent
-- Segment gross profit decreased $19 million, or 2 percent, to $864
million
-- Asphalt, Concrete and Calcium segment gross profit improved $13 million,
collectively
-- SAG was $321 million, in line with full year expectations
-- Net earnings were $420 million, an increase of $42 million, or 11
percent
-- Adjusted EBIT was $676 million, a decrease of $5 million, or 1 percent
-- Adjusted EBITDA was $968 million, an increase of $6 million, or 1
percent
-- Earnings from continuing operations were $3.02 per diluted share versus
$2.86 per diluted share
-- Adjusted earnings from continuing operations were $2.95 per diluted
share versus $2.98 per diluted share
Segment Results
Aggregates
Shipment trends in aggregates varied widely across the Company's footprint, largely due to weather and the timing of large projects. Aggregates shipments decreased 2 percent versus the prior year's quarter and same-store shipments declined 3 percent. Alabama, Florida, Georgia, Louisiana and Mississippi combined saw shipments decline 12 percent versus the prior year's second quarter. Severe wet weather and flooding slowed construction activity and impaired shipments in May and June, two key months of the construction season. Aggregates shipments in Florida and Georgia, for example, declined double-digits in June despite very strong underlying market conditions. Coastal Texas and Illinois also experienced significant shipment declines. In Illinois, shipments declined 19 percent versus the prior year due in part to the absence of a state budget to support public construction. Coastal Texas shipments in the quarter were impacted by a softer local economy and the relative timing of DOT spending and other large project activity; however, backlogs for that market remain strong. Markets outside of these areas combined to grow 6 percent versus the prior year's second quarter - more in line with trend and despite weather challenges in Virginia, the Carolinas and Tennessee. Shipments in California grew 10 percent, driven by private construction activity and the catch-up on work deferred from the very wet first quarter. California's passage of a long-term transportation bill resolved Caltrans' funding uncertainty and should, along with other factors, support sustained shipping rate improvements over the coming years.
Fundamental demand drivers and leading indicators for shipment growth continued to strengthen in the quarter for Vulcan-served markets. Trailing-twelve-month construction starts in our markets have steadily improved from a year ago, outpacing non-Vulcan markets by a wide margin. Private construction starts remain strong, led by continued growth in both residential and nonresidential buildings. Importantly, public construction starts have turned positive due to growth in highway and road spending. Additionally, the pre-construction pipeline of projects continues to grow across our footprint. State and local governments have continued to pass funding measures to increase public infrastructure investment significantly, and more projects supported by federal FAST Act funding have moved further toward the active construction stage.
Broad pricing momentum continued across the Company's footprint with substantially all markets realizing price growth in the second quarter. For the quarter, same-store freight-adjusted average sales price for aggregates increased 5 percent versus the prior year, or $0.59 per ton, despite a negative mix impact. The overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital. California and Georgia each realized high-single digit price growth, again supported by clear and improving visibility to sustained growth in demand.
Second quarter Aggregates segment gross profit was $253 million, or $5.27 per ton. Segment results in the quarter were negatively impacted by product shipment mix, acquisition-related integration costs, a 15 percent increase in the unit cost of diesel fuel and costs related to the transition to two new, more efficient ships to transport aggregates from our quarry in Mexico. In total, these items negatively impacted segment gross profit by $16 million in comparison to the prior year.
Asphalt, Concrete and Calcium
Our non-aggregates segments' second quarter gross profit was $39 million, a 2 percent increase over the prior year's period. Asphalt segment gross profit decreased $2 million to $29 million. Shipments increased 16 percent in total and 6 percent on a same-store basis. Arizona and California (the Company's largest asphalt market) drove most of the same-store growth in shipments. Solid volume growth was offset by lower price, higher liquid asphalt unit cost, and costs related to integration of recent acquisitions.
Concrete segment gross profit was $9 million in the quarter compared to $6 million in the prior year period. Shipments increased 21 percent versus the prior year as volumes increased in most of the Company's concrete markets, including Texas and Virginia (the Company's largest concrete market). On a same-store basis, volumes increased 11 percent. Materials margins and unit gross profit in concrete also improved versus the prior year.
Calcium segment gross profit was $0.6 million versus $1.1 million in the prior year.
On a trailing-twelve-month basis, total gross profit in our non-aggregates segments was $132 million, an 11 percent increase from the prior year's comparable period.
Growth, Capital Allocation, and Financial Position
As of June 30, year-to-date capital expenditures were $291 million. This amount included $107 million invested in internal growth projects to enhance the Company's aggregates distribution network to markets without local aggregates reserves, as well as development of new sites and other growth investment projects. Core capital investments to replace existing property, plant and equipment made up the remaining $184 million, and are expected to be approximately $300 million for the full year.
The Company remains active in the pursuit of bolt-on acquisitions and other value-creating growth investments. Since January, the Company has closed acquisitions totaling $212 million. These acquisitions complement our leading positions in certain California, Illinois, New Mexico and Tennessee markets.
At the end of the second quarter, total debt was $3.4 billion and cash was $1.1 billion. Total debt included $1 billion of new notes issued in June to help fund acquisitions and other growth investments, including the previously announced agreement to acquire the assets of Aggregates USA, and to retire $523 million of notes due in June and December of 2018. Retirement of the 2018 maturities was completed on July 12 for $566 million using proceeds from the new notes and cash. Full year interest expense will be approximately $193 million, including $46 million of one-time charges incurred in the third quarter for the early debt retirement.
During the quarter, the Company returned $44 million to shareholders through dividends and share repurchases, bringing the year-to-date total to $126 million.
Selling, Administrative and General (SAG), Other Operating Expense and Taxes
Selling, Administrative and General (SAG) expenses were $83 million, flat with the prior year. Trailing-twelve-month SAG expenses were $321 million, in line with full-year expectations, which remain unchanged.
Other operating expenses were $18 million in the second quarter versus $6 million in the prior year. The year-over-year change is primarily due to certain charges associated with previously divested operations.
Expectations for the full-year 2017 effective tax rate continue to be 28 percent.
Demand and Earnings Outlook
Regarding the Company's earnings outlook for 2017, Mr. Hill stated, "We are excited about the growth opportunities ahead of us. Leading indicators, such as growth in the pre-construction pipeline and in construction starts in our markets, as well as growth in our own order backlogs, point toward a return to growth in the second half of this year and beyond. However, the rate of growth through the remainder of this year will depend on the pace at which our customers catch up on deferred work and on the timing of our shipments to large projects in our backlog. Given these factors and the significant shortfall to plan experienced in the second quarter, we have revised our outlook for shipments to between 182 and 187 million tons. Primarily due to this lower expectation for 2017 aggregates shipments, we now project full year Adjusted EBITDA of between $1.05 and $1.13 billion. Other management expectations (e.g. aggregates price improvement, asphalt and concrete gross profit growth, SAG expense, capital spending, and effective tax rate) remain as outlined in our fourth quarter 2016 earnings communication.
"Our confidence in the longer term outlook for our business remains strong. Our industry-leading core profitability in aggregates keeps improving. Operational excellence, solid sales execution and cost control continue to have a strong positive impact on the bottom line, in spite of the last twelve months of uneven growth. We have the financial strength to continue making smart growth investments that fit us best and we are committed to continuous improvement in safety, customer service and operational efficiencies."
Conference Call
Vulcan will host a conference call at 10:00 a.m. CDT on August 2, 2017. 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 866-564-2842 approximately 10 minutes before the scheduled start. International participants can dial 323-794-2130. The conference ID is 4834215. 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; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event that the 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, including those relating to climate change, greenhouse gas emissions, the definition of minerals or international trade; 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; 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 existing and/or divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; modification to the terms of the acquisition of Aggregates USA, LLC may be required in order to satisfy approvals or conditions; business disruption during the pendency of, or following the acquisition of, Aggregates USA, LLC, including diversion of management time; the potential of goodwill or long-lived asset impairment; 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 Six Months Ended
Consolidated Statements of Earnings June 30 June 30
------- -------
(Condensed and unaudited) 2017 2016 2017 2016
------------------------ ---- ---- ---- ----
Total revenues $1,030,763 $956,825 $1,818,091 $1,711,552
Cost of revenues 738,988 664,641 1,366,337 1,254,649
---------------- ------- ------- --------- ---------
Gross profit 291,775 292,184 451,754 456,903
Selling, administrative and general expenses 82,793 82,681 164,914 159,149
Gain on sale of property, plant & equipment
and businesses 2,773 356 3,142 911
Business interruption claims recovery 0 10,962 0 10,962
Impairment of long-lived assets 0 (860) 0 (10,506)
Other operating expense, net (17,768) (6,175) (23,595) (20,414)
---------------------------- ------- ------ ------- -------
Operating earnings 193,987 213,786 266,387 278,707
Other nonoperating income (expense), net 1,869 29 3,893 (666)
Interest expense, net 38,455 33,333 72,531 67,065
--------------------- ------ ------ ------ ------
Earnings from continuing operations
before income taxes 157,401 180,482 197,749 210,976
Income tax expense 45,652 53,241 42,477 41,772
------------------ ------ ------ ------ ------
Earnings from continuing operations 111,749 127,241 155,272 169,204
Earnings (loss) on discontinued operations, net of tax 8,390 (2,532) 9,788 (4,338)
------------------------------------------------------ ----- ------ ----- ------
Net earnings $120,139 $124,709 $165,060 $164,866
------------ -------- -------- -------- --------
Basic earnings (loss) per share
Continuing operations $0.84 $0.95 $1.17 $1.27
Discontinued operations $0.07 ($0.02) $0.08 ($0.04)
Net earnings $0.91 $0.93 $1.25 $1.23
Diluted earnings (loss) per share
Continuing operations $0.83 $0.93 $1.15 $1.24
Discontinued operations $0.06 ($0.01) $0.07 ($0.03)
Net earnings $0.89 $0.92 $1.22 $1.21
Weighted-average common shares outstanding
Basic 132,413 133,419 132,524 133,619
Assuming dilution 134,735 136,208 134,925 136,136
Cash dividends per share of common stock $0.25 $0.20 $0.50 $0.40
Depreciation, depletion, accretion and amortization $76,775 $71,908 $148,339 $141,314
Effective tax rate from continuing operations 29.0% 29.5% 21.5% 19.8%
--------------------------------------------- ---- ---- ---- ----
Table B
Vulcan Materials
Company
and Subsidiary
Companies
(in thousands)
-------------
Consolidated Balance
Sheets June 30 December 31 June 30
(Condensed and
unaudited) 2017 2016 2016
-------------- ---- ---- ----
Assets
Cash and cash
equivalents $1,129,799 $258,986 $91,902
Restricted cash 0 9,033 0
Accounts and notes
receivable
Accounts and notes
receivable, gross 573,029 494,634 537,127
Less: Allowance for
doubtful accounts (2,943) (2,813) (4,332)
------------------- ------ ------ ------
Accounts and notes
receivable, net 570,086 491,821 532,795
Inventories
Finished products 318,465 293,619 295,405
Raw materials 27,106 22,648 25,366
Products in process 1,210 1,480 2,223
Operating supplies and
other 28,148 27,869 24,872
---------------------- ------ ------ ------
Inventories 374,929 345,616 347,866
Prepaid expenses 109,998 31,726 50,844
Total current assets 2,184,812 1,137,182 1,023,407
Investments and long-
term receivables 38,888 39,226 38,924
Property, plant &
equipment
Property, plant &
equipment, cost 7,531,536 7,185,818 7,052,051
Allowances for
depreciation,
depletion &
amortization (3,992,728) (3,924,380) (3,834,680)
-------------- ---------- ---------- ----------
Property, plant &
equipment, net 3,538,808 3,261,438 3,217,371
Goodwill 3,101,439 3,094,824 3,094,824
Other intangible
assets, net 834,971 769,052 754,341
Other noncurrent assets 171,025 169,753 161,246
Total assets $9,869,943 $8,471,475 $8,290,113
------------ ---------- ---------- ----------
Liabilities
Current maturities of
long-term debt 525,776 138 131
Trade payables and
accruals 202,753 145,042 176,476
Other current
liabilities 197,264 227,064 156,071
Total current
liabilities 925,793 372,244 332,678
Long-term debt 2,809,293 1,982,751 1,982,527
Deferred income taxes,
net 706,726 702,854 683,999
Deferred revenue 195,020 198,388 203,800
Other noncurrent
liabilities 631,007 642,762 607,778
Total liabilities $5,267,839 $3,898,999 $3,810,782
----------------- ---------- ---------- ----------
Equity
Common stock, $1 par
value 132,181 132,339 133,027
Capital in excess of
par value 2,797,269 2,807,995 2,804,279
Retained earnings 1,810,528 1,771,518 1,661,459
Accumulated other
comprehensive loss (137,874) (139,376) (119,434)
Total equity $4,602,104 $4,572,476 $4,479,331
Total liabilities and
equity $9,869,943 $8,471,475 $8,290,113
--------------------- ---------- ---------- ----------
Table C
Vulcan Materials Company
and Subsidiary Companies
(in thousands)
-------------
Six Months Ended
Consolidated Statements of Cash Flows June 30
-------
(Condensed and unaudited) 2017 2016
------------------------ ---- ----
Operating Activities
Net earnings $165,060 $164,866
Adjustments to reconcile net earnings
to net cash provided by operating
activities
Depreciation, depletion, accretion and
amortization 148,339 141,314
Net gain on sale of property, plant &
equipment and businesses (3,142) (911)
Contributions to pension plans (4,744) (4,737)
Share-based compensation expense 13,671 10,832
Deferred tax expense (benefit) 2,901 2,592
Changes in assets and liabilities
before initial
effects of business acquisitions and
dispositions (170,701) (157,216)
Other, net 3,838 (1,738)
Net cash provided by operating
activities $155,222 $155,002
------------------------------ -------- --------
Investing Activities
Purchases of property, plant &
equipment (291,034) (199,764)
Proceeds from sale of property, plant
& equipment 8,530 2,427
Payment for businesses acquired, net
of acquired cash (210,562) (1,611)
Decrease in restricted cash 9,033 1,150
Other, net 405 1,862
Net cash used for investing activities ($483,628) ($195,936)
-------------------------------------- --------- ---------
Financing Activities
Proceeds from line of credit 5,000 3,000
Payment of line of credit (5,000) (3,000)
Payment of current maturities and
long-term debt (235,007) (9)
Proceeds from issuance of long-term
debt 1,600,000 0
Debt discounts and issuance costs (15,046) 0
Purchases of common stock (60,303) (69,156)
Dividends paid (66,194) (53,338)
Share-based compensation, shares
withheld for taxes (24,231) (28,721)
Net cash provided by (used for)
financing activities $1,199,219 ($151,224)
------------------------------- ---------- ---------
Net increase (decrease) in cash and
cash equivalents 870,813 (192,158)
Cash and cash equivalents at beginning
of year 258,986 284,060
Cash and cash equivalents at end of
period $1,129,799 $91,902
----------------------------------- ---------- -------
Table D
Segment Financial Data and Unit Shipments
(in thousands, except per unit data)
-----------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Total Revenues
Aggregates (1) $817,586 $791,497 $1,467,886 $1,426,365
Asphalt 175,758 142,055 271,534 231,154
Concrete 105,213 81,246 193,963 151,643
Calcium 1,971 2,448 3,857 4,358
------- ----- ----- ----- -----
Segment sales $1,100,528 $1,017,246 $1,937,240 $1,813,520
Aggregates intersegment sales (69,765) (60,421) (119,149) (101,968)
Total revenues $1,030,763 $956,825 $1,818,091 $1,711,552
-------------- ---------- -------- ---------- ----------
Gross Profit
Aggregates $252,791 $254,008 $392,953 $402,392
Asphalt 28,918 30,925 37,558 43,139
Concrete 9,481 6,146 19,935 9,623
Calcium 585 1,105 1,308 1,749
------- ---
Total $291,775 $292,184 $451,754 $456,903
----- -------- -------- -------- --------
Depreciation, Depletion, Accretion and Amortization
Aggregates $60,832 $59,414 $118,488 $116,925
Asphalt 6,615 4,136 12,347 8,368
Concrete 3,672 3,088 6,695 6,069
Calcium 192 196 387 379
Other 5,464 5,074 10,422 9,573
Total $76,775 $71,908 $148,339 $141,314
----- ------- ------- -------- --------
Average Unit Sales Price and Unit Shipments
Aggregates
Freight-adjusted revenues (2) $631,425 $614,778 $1,128,230 $1,101,695
Aggregates - tons 47,967 48,766 86,213 87,973
Freight-adjusted sales price (3) $13.16 $12.61 $13.09 $12.52
Other Products
Asphalt Mix - tons 2,917 2,515 4,695 4,214
Asphalt Mix - sales price $52.90 $54.10 $52.26 $53.27
Ready-mixed concrete - cubic yards 910 752 1,702 1,400
Ready-mixed concrete - sales price $115.08 $108.06 $113.65 $108.30
Calcium - tons 70 91 136 163
Calcium - sales price $28.39 $26.91 $28.29 $26.72
--------------------- ------ ------ ------ ------
(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)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.
(3)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)
-------------
Six Months Ended
June 30
-------
2017 2016
---- ----
Cash Payments
Interest (exclusive of amount capitalized) $67,849 $67,679
Income taxes 117,204 64,556
------------ ------- ------
Noncash Investing and Financing Activities
Accrued liabilities for purchases of property, plant & equipment $17,924 $20,850
Amounts referable to business acquisitions
1,935 0
Liabilities assumed
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 our competitors and 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 Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Gross profit $291,775 $292,184 $451,754 $456,903
Total revenues $1,030,763 $956,825 $1,818,091 $1,711,552
Gross profit margin 28.3% 30.5% 24.8% 26.7%
------------------- ---- ---- ---- ----
Gross Profit Margin Excluding Freight and Delivery Revenues
(dollars in thousands)
---------------------
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Gross profit $291,775 $292,184 $451,754 $456,903
------------ -------- -------- -------- --------
Total revenues $1,030,763 $956,825 $1,818,091 $1,711,552
Freight and delivery revenues (1) 136,167 142,300 254,269 263,511
--------------------------------
Total revenues excluding freight and delivery revenues $894,596 $814,525 $1,563,822 $1,448,041
------------------------------------------------------ -------- -------- ---------- ----------
Gross profit margin excluding freight and delivery revenues 32.6% 35.9% 28.9% 31.6%
----------------------------------------------------------- ---- ---- ---- ----
(1)Includes freight to remote distribution 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 consistent with our
competitors and 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. Reconciliations 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 Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Aggregates segment
Gross profit $252,791 $254,008 $392,953 $402,392
Segment sales $817,586 $791,497 $1,467,886 $1,426,365
Gross profit margin 30.9% 32.1% 26.8% 28.2%
------------------- ---- ---- ---- ----
Incremental gross profit margin N/A N/A
------------------------------- --- ---
Aggregates Segment Gross Profit as a Percentage of Freight-Adjusted Revenues
(dollars in thousands)
---------------------
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Aggregates segment
Gross profit $252,791 $254,008 $392,953 $402,392
------------ -------- -------- -------- --------
Segment sales $817,586 $791,497 $1,467,886 $1,426,365
Less
Freight, delivery and transportation revenues (1) 176,395 173,397 324,293 317,147
Other revenues 9,766 3,322 15,363 7,523
--------------
Freight-adjusted revenues $631,425 $614,778 $1,128,230 $1,101,695
------------------------- -------- -------- ---------- ----------
Gross profit as a percentage of freight-adjusted revenues 40.0% 41.3% 34.8% 36.5%
--------------------------------------------------------- ---- ---- ---- ----
Incremental gross profit as a percentage N/A N/A
of freight-adjusted revenues
----------------------------
(1)At the segment level, freight, delivery and transportation revenues include intersegment freight & delivery revenues, which are eliminated at the consolidated level.
GAAP does not define "Aggregates segment cash gross profit" and it should not be considered as an alternative to earnings measures defined by GAAP. We present this metric 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. We and the investment community use this metric to assess the operating performance of our business. Additionally, we present this metric as we believe that it closely correlates to
long-term shareholder value. We do not use this metric as a measure to allocate resources. Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped. Reconciliation of this metric to its nearest
GAAP measure is presented below:
Aggregates Segment Cash Gross Profit
(in thousands, except per ton data)
----------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Aggregates segment
Gross profit $252,791 $254,008 $392,953 $402,392
Depreciation, depletion, accretion and amortization 60,832 59,414 118,488 116,925
Aggregates segment cash gross profit $313,623 $313,422 $511,441 $519,317
------------------------------------ -------- -------- -------- --------
Unit shipments - tons 47,967 48,766 86,213 87,973
--------------------- ------ ------ ------ ------
Aggregates segment cash gross profit per ton $6.54 $6.43 $5.93 $5.90
-------------------------------------------- ----- ----- ----- -----
Appendix 3
Reconciliation of Non-GAAP Measures (Continued)
GAAP does not define "Earnings Before Interest, Taxes, Depreciation and Amortization" (EBITDA) and it should not be considered as an alternative to earnings measures defined by GAAP. We present this metric 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. We use this metric to assess the operating performance of our business and for a basis of strategic planning
and forecasting as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. We adjust EBITDA for certain items to provide a more consistent comparison of earnings
performance from period to period. Reconciliation of this metric to its nearest GAAP measure is presented below:
EBITDA and Adjusted EBITDA
(in thousands)
-------------
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Net earnings $120,139 $124,709 $165,060 $164,866
Income tax expense 45,652 53,241 42,477 41,772
Interest expense, net 38,455 33,333 72,531 67,065
(Earnings) loss on discontinued operations, net of tax (8,390) 2,532 (9,788) 4,338
EBIT $195,856 $213,815 $270,280 $278,041
Depreciation, depletion, accretion and amortization 76,775 71,908 148,339 141,314
EBITDA $272,631 $285,723 $418,619 $419,355
------ -------- -------- -------- --------
$0 $0 $0 $0
Gain on sale of real estate and businesses
0 (10,962) 0 (10,962)
Business interruption claims recovery, net of incentives
15,023 3,847 16,401 15,697
Charges associated with divested operations
0 0 0 0
Fair market value adjustments for acquired inventory
0 860 0 10,506
Asset impairment
0 0 1,942 320
Restructuring charges
Adjusted EBITDA $287,654 $279,468 $436,962 $434,916
--------------- -------- -------- -------- --------
(76,775) (71,908) (148,339) (141,314)
Depreciation, depletion, accretion and amortization
Adjusted EBIT $210,879 $207,560 $288,623 $293,602
------------- -------- -------- -------- --------
Adjusted EBITDA for 2016 has been revised to conform with the 2017 presentation which no longer includes an adjustment for charges associated with business development. We no longer exclude charges associated with business development as they are
deemed to represent normal recurring operating expenses.
Similar to our presentation of Adjusted EBITDA, we present Adjusted Diluted EPS to provide a more consistent comparison of earnings performance from period to period.
Adjusted Diluted EPS from Continuing Operations (Adjusted Diluted EPS)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2017 2016 2017 2016
---- ---- ---- ----
Diluted EPS $0.83 $0.93 $1.15 $1.24
0.07 (0.03) 0.09 0.08
Items included in Adjusted EBITDA above
0.00 0.00 0.00 0.00
Alabama NOL carryforward valuation allowance
0.00 0.00 0.00 0.00
Foreign tax credit carryforward impairment
Adjusted Diluted EPS $0.90 $0.90 $1.24 $1.32
-------------------- ----- ----- ----- -----
The following reconciliation to the mid-point of the range of 2017 Projected EBITDA excludes adjustments for the future outcome of legal proceedings, charges associated with divested operations, asset impairment and other unusual gains and losses.
Due to the difficulty of forecasting the timing or amount of items that have not yet occurred, are out of our control, or cannot be reasonably predicted, we are unable to estimate the significance of this unavailable information.
2017 Projected EBITDA
(in millions)
------------
Mid-point
---------
Net earnings $430
Income tax expense 170
Interest expense, net 190
Discontinued operations, net of tax 0
Depreciation, depletion, accretion and amortization 300
Projected EBITDA $1,090
---------------- ------
View original content with multimedia:http://www.prnewswire.com/news-releases/vulcan-announces-second-quarter-2017-results-300497982.html
SOURCE Vulcan Materials Company
