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

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The Company's second quarter results reflect the continuation of strong margin expansion and improvement in its industry-leading unit profitability in aggregates.  Despite extremely wet weather in many of our markets, second quarter revenues increased 13 percent and gross profit increased 34 percent from the prior year, with gross profit and gross profit margins improving in all segments.  Same-store aggregates shipments rose 5 percent and same-store freight-adjusted aggregates pricing increased 6 percent from the prior year.  Underlying demand recovery and pricing momentum remain strong.  Same-store incremental aggregates gross profits equaled 74 percent of incremental freight-adjusted revenues for the quarter – and 72 percent for the trailing twelve months.  Although weather impacts in the second quarter and first half may result in full-year volumes below plan, pricing and margin improvements lead the Company to reconfirm its full-year EBITDA guidance.  The remainder of this release provides additional detail regarding the Company's second quarter results and full year outlook.

Second Quarter Summary (compared with prior year's second quarter)

• Total revenues increased $104 million, or 13 percent, to $895 million
• Gross profit increased $60 million in total, or 34 percent, to $234 million
• Aggregates freight-adjusted revenues increased $75 million, or 15 percent, to $558 million
  • Shipments increased 9 percent, or 3.8 million tons, to 47.5 million tons
    • Same-store shipments increased 5 percent, or 2.4 million tons
  • Segment gross profit increased $46 million, or 28 percent, to $207 million
  • Incremental gross profit as a percent of freight-adjusted revenues was 61 percent
    • On a same-store basis, this metric was 74 percent
  • Average freight-adjusted sales price increased 6 percent
• Asphalt Mix, Concrete and Calcium segment gross profit improved $14 million, collectively
• SAG remained in line with expectations and declined as a percentage of total revenues
• Adjusted EBITDA was $229 million, an increase of $56 million, or 33 percent
• Earnings from continuing operations were $0.37 per diluted share versus $0.35 per share in the second quarter of 2014. Included in these results are:
  • $0.24 per diluted share in the current year's quarter for net charges related to debt refinancing in 2015
  • $0.05 and $0.01 for net charges related to restructuring and business development costs in 2015 and 2014 respectively
• Adjusted for these items, earnings from continuing operations were $0.66 per diluted share in the second quarter of 2015 versus $0.36 per diluted share in the prior year

Tom Hill, President and Chief Executive Officer, said, "The continuing recovery in construction activity across most of our markets was masked by extremely wet weather, particularly in April and May.  Despite deferred shipments and operating cost challenges due to these weather conditions, our local teams delivered another quarter of significant margin improvements – a pattern of performance sustained since the gradual recovery in shipments began eight quarters ago.  Customer confidence and the overall demand outlook continue to improve, and, as expected, pricing momentum continues to strengthen.  Looking forward, we remain well positioned to serve our customers and to achieve strong earnings growth in 2015 and beyond." 

Commentary on Quarterly Segment Results

Aggregates Segment

Severe wet weather disrupted shipments across many of the Company's key markets.  Same-store shipment growth of 5.4 percent in the quarter fell below both plan and recent trends.  A monthly break-down of shipping trends illustrates the weather impacts in the quarter.  On a same-store basis, aggregates shipments in April and May (when record rainfall was reported in several of our markets) increased 5 percent and 2 percent, respectively, versus the prior year.  In contrast, June same-store aggregates shipments increased 9 percent versus the prior year.  Despite weather limiting available construction days in several markets, the second quarter marked the eighth consecutive quarter of growth in trailing twelve month shipments.  For the quarter just ended, trailing twelve month shipments grew 9 percent over the prior year period on a same-store basis.  Both public and private demand for aggregates continue to recover across most of our markets; however, current consumption levels remain well below historic trends. 

Freight-adjusted average sales price for aggregates increased 6.4 percent on a same-store basis, or $0.71 per ton, versus the prior year's second quarter, with most markets realizing accelerating price improvement.  Product mix muted the impact of reported price increases in some key markets, including Virginia, where large shipments of lower-priced fines product contributed to an approximately 1 percent decline in quarterly average selling price over the prior year.  In most markets, announced price increases have been well accepted.  Customer service levels remain high, and as noted below, the Company continues to invest to meeting rising customer requirements for product quantities and quality.  Given these and other indicators, we expect overall aggregates pricing to continue to rise throughout the year, with a higher rate of increase in the second half.

Overall, aggregates operating costs approximated the prior year's second quarter.  During the second quarter, several markets experienced higher than expected costs pertaining to repair and maintenance activities and overtime labor, with weather conditions also negatively impacting production efficiencies.  Despite lower than planned shipments in the current quarter, the company moved ahead with stripping and other expenditures geared toward meeting rising customer demand. Diesel related cost-savings mostly offset these higher costs in the quarter.  Compared to last year's second quarter, cost of revenues for the Aggregates segment benefitted by approximately $9 million from lower fuel expenditures.  The Company remains focused, with a multi-quarter view, on balancing the several factors impacting production quality, service quality and cost.  Over the trailing twelve months, and excluding the impact of diesel price movements and newly acquired operations, aggregates unit cost of sales have declined by approximately 1 percent.

During the second quarter, the Company's same-store unit margins continued to expand faster than unit pricing.  Gross profit per ton increased $0.76, or 21 percent, from the prior year.  On a trailing twelve month basis, same-store unit gross profit has increased 23 percent, while unit cash gross profit has increased 12 percent to $5.04 per ton – a new twelve-month high despite cyclically low volumes.  These results reflect the Company's continued commitment to high customer service levels as well as plant-level cost controls and operating disciplines.

For the quarter, aggregates same-store freight-adjusted revenues increased $59 million, while same-store gross profit for the segment increased $44 million, a flow-through rate of 74 percent.  Because quarterly results can be volatile due to seasonality and other factors, the Company encourages investors to also consider longer-term trends.  On a trailing-twelve-month basis, this flow-through rate has consistently exceeded the Company's stated goal of 60 percent since volumes began to recover in the second half of 2013.

Asphalt, Concrete and Calcium Segments

In the second quarter, Asphalt segment gross profit was $21 million versus $9 million in the prior year.  This year-over-year improvement resulted from higher volumes, effective management of materials margins, and earnings from acquisitions completed since the first half of last year.  Same-store asphalt volumes increased 8 percent. 

Concrete segment gross profit was $5 million versus $3 million in the prior year's second quarter.  Last year's second quarter results included the Company's California concrete business that was divested via an asset swap in January 2015.  On a same-store basis, sales volumes decreased 5 percent versus the prior year due to unusually wet weather in Virginia and Texas.  Pricing and unit profitability improved while same-store gross profit was flat with the prior year due to the negative volume impact of wet weather. 

The Company's Calcium segment reported gross profit of $1.1 million, an improvement over the prior year.

In total, the year-to-date gross profit contribution of these three segments has exceeded plan.  Margin improvements resulting from both core operating disciplines and changes to our asset portfolio have offset lower than anticipated volumes in certain markets.

Selling, Administrative and General (SAG) and Other Cost Items

Overall SAG expenses remain in line with expectations and largely flat with the prior year.  In the second quarter, legal and outside services expenses, primarily associated with business development activities, were higher than the prior year.  Although the company continues to invest in sales-related staff and support, overall headcount-related costs were lower year-over-year.  As a percentage of total revenues, SAG was approximately 80 basis points lower than the prior year.  The Company intends to further leverage SAG expenses to revenues as volumes recover.

The Company expects that full-year pension and post retirement-related costs, a portion of which flow through SAG, will be approximately $10 million higher than the prior year due primarily to changes in the assumptions used to value future obligations.

Other operating expense, generally consisting of various cost items not included in cost of revenues, was $10 million versus $5 million in the second quarter of 2014.  The year-over-year increase resulted from a land parcel in California where the lease was not renewed.  As a result, the associated reclamation obligation was expensed in the second quarter.  Over the past three years, other operating expenses, exclusive of significant items disclosed individually, have averaged approximately $3 million each quarter.   

Capital Allocation

During March and April, the Company completed major components of the refinancing plan announced during its February 25, 2015 Investor Day.  Refinancing expenses, including the acceleration of previously deferred financing costs, were $67 million in total, of which $45 million, or $0.24 per diluted share, was incurred in the second quarter and was reported as part of interest expense.  The remainder ($22 million, or $0.12 per diluted share) was reported as part of interest expense in the first quarter. 

In June, the Company closed on a new $750 million unsecured credit facility.  As previously noted, the Company intends to use this credit facility to refinance the $150 million note due December 2015.

In total, the operations acquired by the Company since the first half of 2014 contributed $11 million of EBITDA in the second quarter.  These results were slightly below management expectations, reflecting the impact of weather and marginally higher costs associated with increasing production capacity and efficiency at certain operations. 

The Company continues to pursue attractive bolt-on acquisitions.  In the second quarter, the Company completed the acquisition of three aggregates facilities and seven ready-mixed concrete operations in Arizona and New Mexico for approximately $21 million.

Outlook

Regarding the Company's outlook for 2015, Mr. Hill stated, "Severe weather in the first half of the year, particularly in the second quarter, masked improving fundamentals in construction activity.  Underlying demand remains strong and we are encouraged by the accelerating momentum in aggregates pricing throughout our markets.  As a result, we are reaffirming our expectation for Adjusted EBITDA of $775 to $825 million, driven by strong growth in aggregates gross profit per ton, earnings improvement in our non-aggregates businesses and continuing leverage of our SAG expenses.  Through the first half of 2015, same-store aggregates volumes are up 7 percent and total aggregates pricing is up 5 percent.  We expect a higher rate of pricing growth in the second half.  With respect to second half shipments, a key factor will be the ability of our customers to recover weather-delayed volume from the first half, which can be a challenge in a growing market where scheduled work is compressed into a shorter time period.     

"Our performance in the first half of this year directly reflects the great efforts of our people at all levels of the organization and the geographic diversification of our operational footprint.  Revenue growth is translating into expanding margins and higher unit profitability – and we intend to keep pushing for additional improvement.  We believe executing our sales and operating plans will achieve significant future earnings growth while delivering quality products and services to our customers safely and efficiently. We remain focused on the execution of those plans."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CDT on August 4, 2015.  A webcast will be available via the Company's website at www.vulcanmaterials.com.  Investors and other interested parties in the U.S. may also access the teleconference live by calling 877-840-5321 approximately 10 minutes before the scheduled start.  International participants can dial 678-509-8772.  The conference ID is 87603419.  The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, and a major producer of other construction materials.

FORWARD-LOOKING STATEMENT DISCLAIMER
This document contains forward-looking statements.  Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales.  These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document.  These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements.  The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan's effective tax rate that can adversely impact results; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values and liabilities which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to successfully implement our new divisional structure and changes in our management team; Vulcan's ability to manage and successfully integrate acquisitions; the potential of goodwill or long-lived asset impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.  Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.