fourth quarter 2014 earnings resultss1.q4cdn.com/.../vmc-4q-2014-earnings-call-slides_final.pdf ·...

Aggregates Essential Material | Valuable Asset

Fourth Quarter 2014 Earnings Results

Earnings Conference Call, February 5, 2015

2 Earnings Conference Call – February 5, 2015

Slide 2

Important Disclosure Notes Forward Looking Statements

This document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales. These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document. These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC. Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements. The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan’s effective tax rate that can adversely impact results; the increasing reliance on information technology infrastructure for Vulcan’s ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan’s businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values and liabilities which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; 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.


Slide 3

Building an Even Stronger Business Momentum, Execution and Discipline


Slide 4

Fourth Quarter – Key Figures Earnings improvement and margin expansion on solid execution

*Same-store aggregates shipments and total revenues increased 12 percent and 16 percent, respectively. See Presentation Appendix for reconciliation of Non-GAAP measures.

2014 F/(U)Amounts in millions, except per share 2014 2013 vs 2013 Chg.

Aggregates Shipments (tons)* 41.3 35.7 5.5 15%

Total Revenues* 755.0$ 680.2$ 74.8$ 11%

Gross Profit 169.7$ 117.3$ 52.3$ 45%% of Total Revenues 22.5% 17.3% 520 bps

Selling, Administrative and General 72.5$ 64.0$ (8.5)$ 13%

Adjusted EBIT 102.5$ 55.5$ 47.0$ 85%

Adjusted EBITDA 171.9$ 130.6$ 41.3$ 32%

Diluted EPS, Continuing Operations 0.29$ 0.08$ 0.21$ 263%

Fourth Quarter


Slide 5

Trailing Twelve Months – Key Figures Earnings leverage continues the trend of recent quarters

*Same-store aggregates shipments and total revenues increased 10 percent and 14 percent, respectively. See Presentation Appendix for reconciliation of Non-GAAP measures.

2014 F/(U)Amounts in millions, except per share 2014 2013 vs 2013 Chg.

Aggregates Shipments (tons)* 162.4 145.9 16.5 11%

Total Revenues* 2,994.2$ 2,770.7$ 223.5$ 8%

Gross Profit 587.6$ 426.9$ 160.7$ 38%% of Total Revenues 19.6% 15.4% 420 bps

Selling, Administrative and General 272.3$ 259.4$ (12.9)$ 5%

Adjusted EBIT 325.2$ 163.2$ 162.0$ 99%

Adjusted EBITDA 599.7$ 468.3$ 131.4$ 28%

Diluted EPS, Continuing Operations 1.56$ 0.16$ 1.40$ 875%

Adjusted EPS, Continuing Operations 0.91$ -$ 0.91$ n/a


Slide 6

Aggregates Volumes – Full Year Recovering construction activity and solid sales execution

Year-over-Year Change in Aggregates Shipments

Note: Total volumes reported. Includes acquisitions completed during the year.

Greater than 10%

Up to 10%

Down less than 2%

Down 10-15%


Slide 7

Aggregates Results – Industry-Leading Unit Profitability Managing volume, product splits and price to grow profitability

4Q 2014 Year-over-Year Improvement

Sales and Production

Mix

Operating Efficiency

and Leverage

Price for Service

Effective Management

Drives Growth in

Unit Profitability

Gross Profit $3.90 / Ton

+25%

Note: Gross Profit figures exclude acquisitions completed during 2014.


Slide 8

Aggregates Unit Profitability Growing unit profitability faster than selling price since recovery began

Trailing Twelve Month Gross Profit per Ton

YoY% Change in TTM: Volume – tons* Price - $/ton Gross Profit – $/ton

+6% +3% +18%

+4% +4% +13%

+8% +3% +19%

+9% +3% +19%

+10% +2% +18%

$0.52 +18%

Note: Excluding acquisitions completed during 2014, gross profit was $3.39/ton, an increase of 20 percent. *Same-store basis.


Slide 9

Vulcan’s Incremental Margin Leverage in Aggregates Best-in-class incremental flow through has recovered with volumes

Note: Quarter and trailing twelve months figures for 3Q’14 and 4Q’14 exclude impact of acquisitions completed during 2014. Incremental Margins = Change in Segment Gross Profit / Change in Freight-adjusted Revenues. See Appendix for reconciliation of Non-GAAP measures and other notes.

Aggregates Incremental Gross Profit Margins


Slide 10 Fourth Quarter Asphalt and Concrete Performance Year-over-Year earnings improvement

Excluding Florida Concrete Business sold in March 2014, segment gross profit improved $3 million and $6 million in the fourth quarter and full year, respectively.

2014 F/(U) 2014 F/(U)Amounts in million 2014 2013 vs 2013 2014 2013 vs 2013

Asphalt SegmentShipments (tons) 1.90 1.67 0.24 7.41 6.87 0.54

Segment Revenues 115.5$ 99.4$ 16.2$ 445.5$ 407.7$ 37.9$

Gross Profit 9.8$ 7.9$ 1.8$ 38.1$ 32.7$ 5.4$ Gross Profit / ton 5.14$ 4.77$ 0.37$ 5.14$ 4.76$ 0.38$

Concrete SegmentShipments (cyds) 0.85 1.24 (0.39) 3.73 4.80 (1.07)

Segment Revenues 87.0$ 121.8$ (34.8)$ 375.8$ 471.7$ (95.9)$

Gross Profit 2.8$ (5.0)$ 7.7$ 2.2$ (24.8)$ 27.0$ Gross Profit / cyd 3.25$ (4.03)$ 7.28$ 0.60$ (5.16)$ 5.76$

Fourth Quarter Full Year


Slide 11 Capital Allocation – 2014 in Review

Divested Florida Concrete and Cement

Strengthened balance sheet and core profitability

Returned to more normal levels of operating CAPEX

Strengthened asset base through targeted acquisitions

Marginally increased the dividend

Positioned going forward to:

To sustain capital reinvestment in our current asset base

To recover and maintain an investment-grade credit position

To accelerate the return of capital to shareholders

To prudently pursue attractive bolt-on acquisitions


Slide 12 End Market Outlook - 2015

Private Residential

• Double-digit growth

Private Non Residential

• Double-digit growth

Highways

• Low-to-mid-single-digit growth

Other Infrastructure

• Low-to-mid- single-digit growth

Core momentum remains strong in Vulcan-served markets

Private Public

14% to 18% Growth 3% to 5% Growth


Slide 13

FY 2015 Outlook

Mid-point of Underlying Assumptions

Commentary

Aggregates Volume

180 Mn tons, Up 11 percent

Same-store basis up approximately 8 percent

Aggregates Price Up 6 percent Strengthening momentum

Aggregates Gross Profit

$735 Mn Unit margins expanding faster than price; continued strong incremental margins.

Non-Aggregates Gross Profit

$70 Mn Improved unit profitability in concrete and asphalt; positive impact from asset swap

SAG $265 Mn Declining as percent of sales

DDA&A $270 Mn Down slightly from $279 million in 2014

Capital Spending $250 Mn Supports growing future demand and further improves production costs and efficiencies

Continued execution of sales and operating plans will lead to solid earnings growth and expanding margins

Figures in millions unless noted otherwise. Guidance figures above represent mid-point of current expectations unless noted otherwise. The Company will provide quarterly updates, as necessary.

Overall Adjusted EBITDA: $775 to $825 Million

Aggregates Essential Material | Valuable Asset

Question and Answer Session

Earnings Conference Call, February 5, 2015


Slide 15

Appendix

* Excludes acquisitions completed during 2014. Some figures may differ due to rounding.

Aggregates Incremental Gross Profit Margin Calculation Illustrated

Amounts in millions 2014* 2013 Amount % 2014* 2013 Amount %

Aggregates Tons 40.1 35.7 4.3 12% 160.6 145.9 14.7 10%Freight-Adjusted Sales Price 11.07$ 10.82$ 0.25$ 2% 11.06$ 10.80$ 0.26$ 2%

Freight-Adjusted Revenues 443.4$ 386.7$ 56.7$ 15% 1,776.2$ 1,575.7$ 200.5$ 13%

Aggregates Segment Gross Profit 156.2$ 111.6$ 44.6$ 40% 545.0$ 413.3$ 131.8$ 32%

Gross Margin % of Freight-Adjusted Revenues 35.2% 28.9% 79% 30.7% 26.2% 66%

Fourth Quarter YoY Chg Full Year YoY Chg


Slide 16

Reconciliation of Non-GAAP Measures

Source: Company documents filed or furnished to the SEC.

Adjusted Earnings Per Share (EPS) EBITDA

Q4 Q4Continuing Operations: 2014 2013 EPS and Adjusted EPS, DilutedAs reported $1.56 $0.16Gain on sale of real estate and businesses (1.11) (0.17)Charges associated with acquisitions and divestitures 0.10 0.00Tender offer costs 0.35 0.00Restructuring charges 0.01 0.01 EBITDA and Adjusted EBITDA Q4 Q4 Q4 Q4

Adjusted EPS, diluted $0.91 $0.00 (in millions) 2014 2013 2014 2013 Net earnings $38.0 $9.1 $204.9 $24.4Provision for (benefit from) income taxes 19.7 (2.6) 91.7 (24.5)Interest expense, net 40.9 48.9 242.4 201.6Discontinued operations, net of tax 0.3 1.0 2.2 (3.6)

Concrete Segment Q4 Q4 Q4 Q4 EBIT 99.0 56.4 541.2 197.9(in millions) 2014 2013 2014 2013 Depreciation, depletion, accretion and amortization 70.6 76.2 279.5 307.1Total Revenues EBITDA $169.6 $132.6 $820.7 $505.0

As reported $87.0 $121.8 $375.8 $471.7 Gain on sale of real estate and businesses (2.6) (1.4) (238.5) (36.8)Adjusted $87.0 $75.8 $343.1 $303.1 Charges associated with acquisitions and divestitures 5.6 0.5 21.1 0.5

Gross Profit Amortization of deferred revenue (1.2) (1.1) (5.0) (2.0)As reported $2.8 ($5.0) $2.2 ($24.8) Restructuring charges 0.6 0.0 1.3 1.5Adjusted $2.8 $0.1 $5.9 ($0.3) Adjusted EBITDA $171.9 $130.6 $599.7 $468.3

Shipments - cubic yards Depreciation, depletion, accretion and amortization (70.6) (76.2) (279.5) (307.1)As reported 0.85 1.24 3.73 4.80 Amortization of deferred revenue 1.2 1.1 5.0 2.0Adjusted 0.85 0.78 3.42 3.10 Adjusted EBIT $102.5 $55.5 $325.2 $163.2

Trailing 12 Months

Comparative financial data after adjusting for the March 7, 2014 sale of our concrete business in the Florida area is presented below.

Trailing 12 Months

EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization and excludes discontinued operations. GAAP does not define EBITDA. Thus, it should not be considered as an alternative to any earnings measure defined by GAAP. We present this metric for the convenience of investment professionals who use this metric in their analysis, and for shareholders who need to understand the metrics we use to assess performance. The investment community often uses this metric to assess the operating performance of a company's business. We use EBITDA to assess 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. Reconciliations of this metric to its nearest GAAP measure is presented below:

Adjusted EPS adjusts GAAP earnings per share for discrete items that occurred during the period. We present this metric for the convenience of investors to evaluate and forecast our financial results. Reconciliation of this metric to its nearest GAAP measure is presented below:

Trailing 12 Months


Slide 17

Reconciliation of Non-GAAP Measures (continued)

Source: Company documents filed or furnished to the SEC.

Aggregates segment gross profit margin as a percentage of freight-adjusted revenues

Aggregates Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2(in millions) 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014Gross profit $ 34.0 $111.8 $124.9 $ 81.3 $ 24.8 $127.1 $149.8 $111.6 $ 38.5 $161.7 Volume 29.5 38.7 39.4 33.4 27.9 39.6 42.8 35.7 29.6 43.6Freight-adjusted sales price $10.25 $10.38 $10.63 $10.45 $10.72 $10.75 $10.89 $10.82 $10.94 $11.08 Freight-adjusted revenues $301.9 $402.0 $418.6 $349.1 $298.6 $425.3 $465.7 386.7 $324.1 $483.6

Aggregates Q3 Q4(in millions) 2014 2014Gross profit $188.0 $156.0

(0.8) (0.2) $188.8 $156.2

Volume 47.8 41.3Freight-adjusted sales price $11.12 $11.03 Freight-adjusted revenues $531.6 $455.1

6.2 11.7Freight-adjusted revenues excluding 2014 acquisitions $525.4 $443.4

Trailing 12 Months Q4 Q1 Q2 Q3 Q4Aggregates Incremental Margins (Excl. Acq.) 2013 2014 2014 2014 2014(in millions)Change in gross profit $ 61.2 $ 84.2 $103.5 $117.5 $131.8 Change in freight-adjusted revenues 104.8 133.5 168.5 181.1 200.5

58% 63% 61% 65% 66%

Quarter over Quarter Q4 Q1 Q2 Q3 Q4Aggregates Incremental Margins (Excl. Acq.) 2013 2014 2014 2014 2014(in millions)Change in gross profit $ 30.3 $ 13.7 $ 34.6 $ 39.0 $ 44.6 Change in freight-adjusted revenues 37.6 25.5 58.3 59.7 56.7

81% 54% 59% 65% 79%

Aggregates segment gross profit margin as a percentage of freight-adjusted revenues is not a GAAP measure. We present Aggregates segment gross profit margin as a percentage of freight-adjusted revenues as it is consistent with the basis by which we review our operating results. We believe that this presentation is more meaningful to our investors as it excludes related transportation revenues (a pass-through activity) and other service-related revenues, such as landfill tipping fees. Reconciliation of this metric to its nearest GAAP measure is presented below:

Change in gross profit margin as a percentage of freight-adjusted revenues

Change in gross profit margin as a percentage of freight-adjusted revenues

Gross profit for 2014 acquisitionsGross profit excluding 2014 acquisitions

Freight-adjusted revenues for 2014 acquisitions

fourth quarter 2014 earnings resultss1.q4cdn.com/.../vmc-4q-2014-earnings-call-slides_final.pdf ·...

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