Vulcan Announces Third Quarter 2013 Results

BIRMINGHAM, Ala., Nov. 4, 2013 /PRNewswire/ -- Vulcan Materials Company (NYSE:VMC), the nation's largest producer of construction aggregates, today announced results for the third quarter ending September 30, 2013.

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Third Quarter Summary

• Net sales increased $88 million, or 13 percent, versus the prior year's third quarter.
• Gross profit improved $32 million, or 25 percent, from the prior year.
• Each major product line realized growth in unit shipments from the prior year, due mostly to continued improvement in private construction.
  • Aggregates shipments increased 9 percent.
  • Volumes in ready-mixed concrete and cement increased 17 percent and 10 percent, respectively.
  • Asphalt mix volumes increased 4 percent.
• Aggregates gross profit increased $25 million and gross profit margin increased 130 basis points.
• Earnings from continuing operations were $42 million, or $0.32 per diluted share, versus $16 million, or $0.12 per diluted share, in the prior year.
• EBITDA was $180 million, an increase of $39 million, or 27 percent, compared to the third quarter of last year. Cash earnings were $126 million, an increase of $41 million. Results from the current year's third quarter include a $9 million pretax gain on sale of reclaimed real estate.

Don James, Chairman and Chief Executive Officer, said, "Our third quarter results reflect the continued recovery of our markets and the benefits of the Company's powerful earnings leverage.  A 9 percent increase in aggregates volume helped drive a 20 percent increase in aggregates gross profit.  In the third quarter, cash gross profit per ton of aggregates increased to $4.83 per ton, our highest quarterly unit profitability in more than four years.  As a result, cash gross profit per ton on a trailing twelve month basis now is 26 percent higher than at the prior peak level of shipments, setting the stage for better earnings leverage in this cycle.  Pricing continues to benefit from an improving demand outlook and we are realizing price improvements across most of our markets.  Demand for our products continues to benefit from recovery in private construction activity, particularly residential construction, in many of our key markets.  Growth in residential construction activity, and its traditional follow-on impact on private nonresidential construction, continues to underpin our expectations for future volume growth and earnings improvement."

Commentary on Third Quarter 2013 Segment Results
Aggregates segment gross profit was $150 million, a $25 million increase from the prior year.  This earnings improvement was due to volume growth in virtually all our markets and broad-based pricing gains.  Aggregates shipments increased 9 percent compared to the prior year.  On a same store basis, aggregates shipments increased 10 percent.  Many markets realized double-digit volume growth including a number of the Company's key markets.  Strong private construction demand in Florida led to an increase in shipments of more than 35 percent versus last year's third quarter.  Shipments in Texas also benefited from stronger demand, particularly large industrial projects, increasing nearly 30 percent versus the prior year.  Increased private construction activity also benefited aggregates shipments in other key markets.  Arizona, California, Georgia and North Carolina each increased more than 14 percent.  Overall, freight-adjusted aggregates prices increased more than 2 percent compared to the prior year.  In most markets we realized positive price growth versus the prior year with year-over-year price improvements ranging from low to mid-single digits.   

In the third quarter, aggregates sales volumes exceeded production levels, lowering segment gross profit approximately $6 million.  Additionally, cost of sales increased $2 million due to increased freight and distribution costs resulting from higher growth in shipments from sales yards along the Gulf Coast.  Our current inventory levels provide opportunity for higher production levels and greater efficiencies as demand continues to improve.

Each of the non-aggregates segments also benefited from volume growth and price improvement, leading to a $7 million overall improvement in gross profit compared to the prior year.  Concrete shipments and pricing increased in each of the Company's markets versus the prior year.  Overall, concrete shipments increased 17 percent from the prior year and segment gross profit improved $5 million.  Asphalt segment gross profit increased 24 percent from the prior year, benefitting from better materials margins and a 4 percent increase in asphalt mix shipments.  Cement segment gross profit approximated the prior year.                           

2013 Outlook
Regarding the Company's outlook, Mr. James stated, "Through the first nine months of 2013, segment gross profit and margins improved in all major product lines, leading to 180 basis points of margin expansion overall.  This improvement was driven by higher volumes and pricing in most major products.  Despite a challenging first half of the year due to wet weather, aggregates shipments were up 3 percent through the first nine months of 2013, excluding the effects of the divestiture of our Wisconsin aggregates operations as well as acquisitions in Texas and Georgia completed earlier this year.  This year-to-date growth in aggregates demand is in-line with our expectations at the beginning of the year and is driven by improved private construction activity, particularly in several of our key states, including Arizona, California, Florida, Georgia and Texas.  Through the first nine months of the year, aggregates shipments in these five states combined were up more than 16 percent.  Looking ahead, these states have accounted for more than one-third of all U.S. housing starts in the trailing twelve months ending September and 80 percent of contract awards for all U.S. private nonresidential buildings, measured in square feet, during the same period.  As a result, we believe the outlook for volume growth in these key states should continue and help offset the impact of several large highway and industrial projects that have now been deferred into the first half of 2014.      

Mr. James continued, "As we look at the projects that could impact our aggregates volumes for the remainder of the year and into 2014, we continue to see a disproportionately greater number of large highway and industrial projects.  The timing of shipments to these projects remains difficult to predict.  New highway projects, as measured by trailing twelve month contract awards, increased 7 percent versus the prior year's level – the third consecutive quarter with an increase.  The large increase in TIFIA funding contained in last year's highway bill should also positively impact future demand.

"Year-to-date, aggregates volumes are up more than 2 percent and pricing has increased more than 3 percent with virtually all markets realizing price growth versus the prior year.  Assuming normal weather patterns, we expect these year-over-year growth trends to continue in the fourth quarter.

"In our non-aggregates businesses, overall segment gross profit has improved $24 million through the first nine months of 2013.  All three segments have reported improved gross profit and we expect each to report full year growth in 2013.  Asphalt materials margin increased throughout 2012 and continued to improve in 2013, due mostly to lower liquid asphalt costs.  Full year concrete volumes and materials margin are expected to improve in 2013 as housing and private construction continue to recover in key states.  Concrete volumes in the first nine months of 2013 increased 13 percent versus the prior year due in part to increased private construction activity in Florida, where volumes have increased more than 20 percent.  We expect increased private construction activity to continue leading to improved unit profitability in the Concrete segment.  Cement earnings should improve in 2013 due primarily to lower production costs.

"We continue to expect full year Selling, Administrative and General expenses to be flat to slightly down as compared to the prior year.  Year-to-date, controllable costs are down versus the prior year as we continue to tightly manage expenditures.

"We remain focused on our strategic initiatives to enhance our leading aggregates reserves positions in attractive markets.  Year-to-date, we have divested certain assets in lower margin, lower growth markets in the Midwest and have added aggregates reserves and operations in attractive markets in Texas and Georgia.  Going forward, we will continue to look for opportunities to further enhance our strategic coast-to-coast footprint. 

"We have reduced debt $289 million in the last twelve months and we remain committed to strengthening our balance sheet, unlocking capital for more productive uses, improving our operating results and creating value for shareholders." 

Conference Call
Vulcan will host a conference call at 10:00 a.m. CT on November 4, 2013.  Investors and other interested parties can access the live webcast via the Company's website at www.vulcanmaterials.com.  To participate by phone within the U.S., call 855-877-0343 approximately 10 minutes before the scheduled start.  International participants can dial 678-509-8772.  The access code is 88948590.  The webcast 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, a major producer of asphalt mix and concrete and a leading producer of cement in Florida.

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: 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 planned asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the effects of the sequestration on demand for our products in markets that may be subject to decreases in federal spending; changes in Vulcan's effective tax rate; the increasing reliance on 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; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values and liabilities which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; 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.

SOURCE Vulcan Materials Company

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