Exhibit 99.1
Vulcan Announces Record Third Quarter
Earnings from Continuing Operations
BIRMINGHAM, Ala.--(BUSINESS WIRE)--Oct. 29, 2007--Vulcan Materials
Company (NYSE: VMC) today announced record third quarter earnings from
continuing operations of $144 million, or $1.47 per diluted share.
Earnings from continuing operations in the third quarter of 2007
include expenses of $3 million, or $0.02 per diluted share, related to
the pending acquisition of Florida Rock Industries. Earnings from
continuing operations in the third quarter of 2006 were $1.44 per
diluted share and included a gain of $0.03 per share resulting from an
increase in the carrying value of the ECU earn-out. Net earnings,
including a $0.09 per diluted share loss referable to discontinued
operations, were $1.38 per diluted share compared to $1.39 per diluted
share in the prior year's third quarter.
Don James, Vulcan's Chairman and Chief Executive Officer, stated,
"Our aggregates-focused business demonstrated remarkable resiliency in
the face of a sharp downturn in residential construction. We achieved
record earnings from continuing operations for the third quarter and
for the year-to-date, and we are on track to report record earnings
for the full year 2007. Our cash generation continues to be strong
with record cash flows from operations up 16 percent year-to-date.
"The attractive long-term attributes of the aggregates business
have added value for our shareholders through different economic
cycles. Our strategic geographic footprint and diverse end-use
markets, in conjunction with the recognition of the increasing value
of permitted reserves in fast-growing metropolitan markets, have
enabled us to grow earnings even as aggregates volumes have declined
due to reduced levels of residential construction activity."
Operating Results - Third Quarter
Gross profit and operating earnings increased from the prior year
due to higher earnings from aggregates and asphalt. Gross profit as a
percentage of net sales increased to 33 percent from 32 percent in the
prior year despite lower shipments and production levels in all major
product lines. Third quarter net sales approximated the prior year's
third quarter net sales as higher aggregates and asphalt sales were
offset by lower concrete sales.
Aggregates revenues and earnings increased from the prior year's
levels due to higher pricing. Aggregates prices increased 12 percent
from the prior year's third quarter, more than offsetting the earnings
effects of an 8 percent decline in aggregates shipments. In response
to lower demand, inventory levels in the third quarter were reduced
from the previous quarter by lowering production levels. Costs of
sales during the quarter were higher due mostly to the effects of
lower production levels and increased costs for energy, parts and
supplies.
Asphalt earnings increased significantly from the prior year.
Third quarter asphalt earnings benefited from higher selling prices,
which increased 8 percent from the prior year's third quarter levels,
as well as lower unit costs for liquid asphalt. Asphalt shipments in
the third quarter of 2007 declined 5 percent from last year's third
quarter level. Third quarter 2007 concrete earnings declined from the
prior year as a 4 percent increase in concrete prices was more than
offset by the earnings effect of a 37 percent decrease in concrete
shipments.
The quarter's results include approximately $0.03 per diluted
share in charges associated with the closure of two former production
sites and provisions for outstanding legal matters at two facilities.
As previously mentioned, the quarter's results also include
approximately $0.02 per diluted share referable to the pending Florida
Rock acquisition.
Discontinued operations posted a loss of $9 million, or $0.09 per
diluted share in the third quarter, related to the settlement of
claims against the Company's former chloralkali chemicals business
unit which was divested in June 2005. Discontinued operations in the
prior year's third quarter recorded a loss of $5 million, or $0.05 per
diluted share. During the third quarter of 2007, the Company received
the final payment under the ECU earn-out of $22 million, bringing the
cumulative cash receipts to the $150 million cap.
Net cash provided by operating activities increased $58 million to
$421 million during the nine months ended September 30, 2007.
All results are unaudited.
Outlook
Commenting on the outlook for the remainder of 2007, Mr. James
stated, "We now expect to close the pending merger with Florida Rock
Industries during the fourth quarter of 2007. With respect to Vulcan's
legacy business, pricing for our products remains strong. We expect
aggregates prices will increase 12 to 13 percent for the full year.
Spending for private nonresidential and public infrastructure
construction continues to grow, somewhat mitigating the steep decline
in residential construction. Predicting the timing of a stable level
for residential construction activity continues to be a challenge. We
believe aggregates volumes in the fourth quarter of 2007 will continue
to be hampered by weak residential construction activity resulting in
a full year decline of approximately 9 to 10 percent as compared with
shipments in 2006.
"Our projected record earnings from continuing operations in 2007
will cap a remarkable year for Vulcan and our shareholders, and the
pending acquisition of Florida Rock Industries makes us even more
optimistic about the future of our business. Although the weakness in
residential construction will continue to affect shipments into that
end use market, we believe that price trends in aggregates will
continue to be favorable. Moreover, the broad use of aggregates
throughout the nation's economy should continue to contribute to
relatively stable growth in demand over the long term.
"We expect our fourth quarter financial results to include Florida
Rock for the post-closing portion of the quarter. However, to date,
access to Florida Rock's financial and operational information has
been limited and we are unable to project the financial results from
Florida Rock for this stub period. Accordingly, we are not issuing
specific earnings guidance for the remainder of the year. We expect to
provide annual earnings guidance for 2008 for Vulcan, including
Florida Rock, when we issue fourth quarter 2007 earnings in February
2008."
Conference Call
Vulcan will host a conference call at 10:00 a.m. CDT on October
30, 2007. Investors and other interested parties in the U.S. may
access the teleconference live by calling (800) 435-1398 approximately
10 minutes before the scheduled start. International participants can
dial (617) 614-4078. The access code is 64084983. A live webcast will
be available via the Internet through Vulcan's home page at
vulcanmaterials.com. The conference call will be recorded and
available for replay approximately two hours after the call through
November 6, 2007.
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 asphalt and concrete.
Certain matters discussed in this release, including expectations
regarding future performance, contain forward-looking statements that
are subject to assumptions, risks and uncertainties that could cause
actual results to differ materially from those projected. These
assumptions, risks and uncertainties include, but are not limited to,
those associated with general economic and business conditions;
changes in interest rates; the timing and amount of federal, state and
local funding for infrastructure; changes in the level of spending for
residential and private nonresidential construction; the highly
competitive nature of the construction materials industry; pricing;
weather and other natural phenomena; energy costs; costs of
hydrocarbon-based raw materials; increasing healthcare costs; the
timing and amount of any future payments to be received under the 5CP
earn-out contained in the agreement for the divestiture of the
Company's Chemicals business; the Company's ability to manage and
successfully integrate acquisitions; risks and uncertainties related
to the proposed transaction with Florida Rock Industries, Inc.
including the ability to close the transaction, successfully integrate
the operations of Florida Rock and to achieve the anticipated cost
savings and operational synergies following the closing of the
proposed transaction with Florida Rock; and other assumptions, risks
and uncertainties detailed from time to time in the Company's SEC
reports, including the report on Form 10-K for the year.
Forward-looking statements speak only as of the date hereof, and
Vulcan assumes no obligation to publicly update such statements.
Table A
Vulcan Materials Company
and Subsidiary Companies
(Amounts and shares in thousands, except
per share data)
Three Months Ended Nine Months Ended
Consolidated Statements of
Earnings September 30 September 30
------------------- -----------------------
(Condensed and unaudited) 2007 2006 2007 2006
- ----------------------------------------------------------------------
Net sales $844,938 $848,296 $2,282,943 $2,298,349
Delivery revenues 59,928 81,025 187,954 227,822
--------- --------- ----------- -----------
Total revenues 904,866 929,321 2,470,897 2,526,171
Cost of goods sold 567,546 575,404 1,553,123 1,603,681
Delivery costs 59,928 81,025 187,954 227,822
--------- --------- ----------- -----------
Cost of revenues 627,474 656,429 1,741,077 1,831,503
--------- --------- ----------- -----------
Gross profit 277,392 272,892 729,820 694,668
Selling, administrative
and general expenses 66,398 67,824 212,108 197,986
Gain on sale of property,
plant and equipment, net 5,543 1,610 56,782 3,671
Other operating expense
(income), net 2,236 326 5,814 (23,137)
--------- --------- ----------- -----------
Operating earnings 214,301 206,352 568,680 523,490
Other (expense) income,
net (1,590) 4,810 (502) 27,659
Interest income 645 914 3,084 5,034
Interest expense 6,499 7,713 21,224 19,689
--------- --------- ----------- -----------
Earnings from continuing
operations before income
taxes 206,857 204,363 550,038 536,494
Provision for income taxes 62,929 63,433 173,091 171,311
--------- --------- ----------- -----------
Earnings from continuing
operations 143,928 140,930 376,947 365,183
Loss on discontinued
operations, net of tax (8,515) (5,243) (10,650) (8,777)
--------- --------- ----------- -----------
Net earnings $135,413 $135,687 $ 366,297 $ 356,406
======================================================================
Basic earnings (loss) per
share:
Earnings from
continuing operations $ 1.50 $ 1.47 $ 3.95 $ 3.71
Discontinued operations (0.09) (0.05) (0.11) (0.09)
--------- --------- ----------- -----------
Net earnings per share $ 1.41 $ 1.42 $ 3.84 $ 3.62
Diluted earnings (loss)
per share:
Earnings from
continuing operations $ 1.47 $ 1.44 $ 3.85 $ 3.63
Discontinued operations (0.09) (0.05) (0.11) (0.09)
--------- --------- ----------- -----------
Net earnings per share $ 1.38 $ 1.39 $ 3.74 $ 3.54
======================================================================
Weighted-average common
shares outstanding:
Basic 95,763 95,708 95,507 98,546
Assuming dilution 97,888 97,679 97,988 100,671
Cash dividends declared
per share of common stock $ 0.46 $ 0.37 $ 1.38 $ 1.11
Depreciation, depletion,
accretion and
amortization from
continuing operations $ 66,366 $ 58,026 $ 191,071 $ 166,869
Effective tax rate from
continuing operations 30.4% 31.0% 31.5% 31.9%
======================================================================
Table B
Vulcan Materials Company
and Subsidiary Companies
(Amounts in thousands)
Consolidated Balance Sheets September 30 December 31 September 30
(Condensed and unaudited) 2007 2006 2006
- ----------------------------------------------------------------------
Assets
- -------------------------------
Cash and cash equivalents $ 31,079 $ 55,230 $ 68,651
Accounts and notes receivable:
Accounts and notes
receivable, gross 457,325 394,815 483,356
Less: Allowance for doubtful
accounts (3,302) (3,355) (4,572)
------------ ------------ ------------
Accounts and notes
receivable, net 454,023 391,460 478,784
Inventories:
Finished products 232,250 214,508 209,216
Raw materials 10,835 9,967 10,300
Products in process 1,747 1,619 1,876
Operating supplies and other 21,690 17,443 16,705
------------ ------------ ------------
Inventories 266,522 243,537 238,097
Deferred income taxes 30,402 25,579 18,562
Prepaid expenses 39,364 15,388 27,070
------------ ------------ ------------
Total current assets 821,390 731,194 831,164
Investments and long-term
receivables 5,069 6,664 6,985
Property, plant and equipment:
Property, plant and
equipment, cost 4,203,952 3,897,618 3,758,480
Less: Reserve for depr.,
depl., & amort (2,151,182) (2,028,504) (1,992,564)
------------ ------------ ------------
Property, plant and
equipment, net 2,052,770 1,869,114 1,765,916
Goodwill 650,205 620,189 625,076
Other assets 205,074 200,673 185,122
------------ ------------ ------------
Total assets $ 3,734,508 $ 3,427,834 $ 3,414,263
============ ============ ============
Liabilities and Shareholders'
Equity
- -------------------------------
Current maturities of long-term
debt $ 562 $ 630 $ 32,547
Short-term borrowings 147,775 198,900 236,750
Trade payables and accruals 161,385 154,215 174,510
Other current liabilities 145,850 133,763 125,259
------------ ------------ ------------
Total current liabilities 455,572 487,508 569,066
Long-term debt 321,227 322,064 322,267
Deferred income taxes 299,611 287,905 297,191
Other noncurrent liabilities 358,430 319,458 302,801
------------ ------------ ------------
Total liabilities 1,434,840 1,416,935 1,491,325
------------ ------------ ------------
Shareholders' equity:
Common stock, $1 par value 139,705 139,705 139,705
Capital in excess of par
value 254,271 191,695 181,002
Retained earnings 3,215,846 2,982,526 2,903,698
Accumulated other
comprehensive loss (17,995) (4,953) (2,233)
Treasury stock at cost (1,292,159) (1,298,074) (1,299,234)
------------ ------------ ------------
Shareholders' equity 2,299,668 2,010,899 1,922,938
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 3,734,508 $ 3,427,834 $ 3,414,263
======================================================================
Table C
Vulcan Materials Company
and Subsidiary Companies
(Amounts in
thousands)
Nine Months Ended
Consolidated Statements of Cash Flows September 30
---------------------
(Condensed and unaudited) 2007 2006
- ----------------------------------------------------------------------
Operating Activities
- ------------------------------------------------
Net earnings $ 366,297 $ 356,406
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, depletion, accretion and
amortization 191,071 166,888
Net gain on sale of property, plant and
equipment (56,782) (3,672)
Net gain on sale of contractual rights - (24,850)
Contributions to pension plans (1,262) (1,112)
Share-based compensation 12,595 11,249
Increase in assets before initial effects of
business acquisitions and dispositions (154,195) (159,236)
Increase in liabilities before initial
effects of business acquisitions and
dispositions 48,663 15,060
Change in asset retirement obligations due to
settlements 7,259 1,526
Other, net 7,667 1,359
---------- ----------
Net cash provided by operating activities 421,313 363,618
---------- ----------
Investing Activities
- ------------------------------------------------
Purchases of property, plant and equipment (351,486) (299,147)
Proceeds from sale of property, plant and
equipment 61,114 5,909
Proceeds from sale of contractual rights, net of
cash transaction fees - 24,850
Proceeds from sale of Chemicals business 30,560 141,916
Payment for businesses acquired, net of acquired
cash (58,861) (20,498)
Proceeds from sales and maturities of medium-
term investments - 175,140
Decrease in investments and long-term
receivables 1,595 172
Other, net 1,706 (13)
---------- ----------
Net cash (used for) provided by investing
activities (315,372) 28,329
---------- ----------
Financing Activities
- ------------------------------------------------
Net short-term borrowings (payments) (51,125) 236,750
Payment of short-term debt and current
maturities (552) (240,470)
Purchases of common stock (4,800) (521,632)
Dividends paid (131,559) (109,109)
Proceeds from exercise of stock options 33,804 23,036
Excess tax benefits from exercise of stock
options 24,140 12,991
---------- ----------
Net cash used for financing activities (130,092) (598,434)
---------- ----------
Net decrease in cash and cash equivalents (24,151) (206,487)
Cash and cash equivalents at beginning of period 55,230 275,138
---------- ----------
Cash and cash equivalents at end of period $ 31,079 $ 68,651
======================================================================
Table D
1. Supplemental Cash Flow Information
Supplemental information referable to the Condensed Consolidated
Statements of Cash Flows for the nine months ended September 30 is
summarized below (amounts in thousands):
2007 2006
- ----------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
- ----------------------------------------------------
Cash paid during the period for:
Interest, net of amount capitalized $ 15,664 $ 19,678
Income taxes 145,013 172,126
Supplemental Schedule of Noncash Investing and
Financing Activities
- ----------------------------------------------------
Accrued liabilities for purchases of property, plant
and equipment 26,340 16,540
Debt issued for purchases of property, plant and
equipment 15 -
Proceeds receivable from exercise of stock options 16 676
Accrued liabilities for purchases of treasury stock - 310
2. Net Sales and Unit Shipments
(Amounts in thousands)
Three Months Ended Six Months Ended
September 30 September 30
------------------ ---------------------
Net Sales by Product -
Customer 2007 2006 2007 2006
------------------ ---------------------
Aggregates $608,890 $580,861 $1,653,768 $1,610,439
Asphalt mix 161,369 155,448 384,230 366,760
Concrete 45,879 69,700 149,475 206,784
Other products 28,800 42,287 95,470 114,366
--------- -------- ---------- ----------
Total net sales $844,938 $848,296 $2,282,943 $2,298,349
========= ======== ========== ==========
Unit Shipments
Aggregates
Customer tons 60,330 65,272 166,358 185,187
Internal tons (a) 3,173 3,601 8,291 9,960
--------- -------- ---------- ----------
Aggregates - tons 63,503 68,873 174,649 195,147
========= ======== ========== ==========
Asphalt mix - tons 3,247 3,427 7,892 8,732
Concrete - cubic
yards 475 752 1,565 2,319
(a) Represents tons shipped primarily to our other operations (e.g.,
asphalt mix and concrete). Revenue from internal shipments is not
included in net sales as presented in the accompanying Condensed
Consolidated Statements of Earnings.
Average Unit Sales Price (including internal sales)
Aggregates (freight adjusted)
(b) $ 9.43 $ 8.42 $ 9.34 $ 8.19
(b) Freight adjusted sales price is calculated as total sales dollars
less freight to remote distribution sites divided by sales units.
Table E
Reconciliation of Non-GAAP
Performance Measures
(Amounts in thousands, except per
share data)
Three Months Ended Six Months Ended
September 30 September 30
------------------ -------------------
2007 2006 2007 2006
------------------ -------------------
GAAP Earnings from continuing
operations before income taxes $206,857 $204,363 $550,038 $536,494
Gain on sale of contractual
rights (1) - (1) - (24,850)
Gain on sale of California
real estate, net (2) 943 - (40,966) -
Gain from adjustment in the
carrying value of the ECU
earn-out (3) - (4,734) (1,929) (27,720)
Retrospective adjustment
related to a change in
accounting principle (4) - 366 - (71)
-------- --------- --------- ---------
Earnings from continuing
operations before income
taxes, as adjusted (5) $207,800 $199,994 $507,143 $483,853
======== ========= ========= =========
GAAP Diluted earnings per share
from continuing operations $ 1.47 $ 1.44 $ 3.85 $ 3.63
After-tax gain per diluted
share resulting from the
sale of contractual rights
(1) - - - (0.15)
After-tax gain per diluted
share resulting from sale
of California real estate,
net (2) 0.01 - (0.25) -
After-tax gain per diluted
share resulting from the
adjustment in the carrying
value of the ECU earn-out
(3) - (0.03) (0.01) (0.17)
After-tax gain per diluted
share resulting from the
retrospective adjustment
related to a change in
accounting principle (4) - 0.01 - (0.03)
-------- --------- --------- ---------
Earnings per share from
continuing operations, net of
tax, as adjusted (5) $ 1.48 $ 1.42 $ 3.59 $ 3.28
======== ========= ========= =========
(1) During the second quarter of 2006, the Company recognized a $25
million pretax gain from the sale of its contractual rights to mine
the Bellwood quarry in Atlanta, Georgia. The City of Atlanta plans to
convert the property into a city park and greenspace as part of a
larger economic growth and development project around the city's
perimeter. The Company worked with city and county officials to
achieve this mutually beneficial transaction. The Company will
continue operating the site for approximately two years subsequent to
the sale as it transitions customers to its existing 12 quarries in
the greater Atlanta area and to a new, zoned site purchased in 2004
in anticipation of the Bellwood sale.
(2) In January 2007, the Company sold approximately 125 acres of
vacant land located in San Bernardino County, California resulting in
a pretax gain of $43.8 million. The amounts shown above are net of
the related incentives ratably applied in accordance with U.S.
Generally Accepted Accounting Principles (GAAP).
(3) In June 2005, the Company sold substantially all the assets of its
Chemicals business, known as Vulcan Chemicals, to a subsidiary of
Occidental Chemical Corporation, Basic Chemicals. Subject to certain
conditions as defined in a separate earn-out agreement, Basic
Chemicals was required to make payments based on ECU and natural gas
prices during the five-year period beginning July 1, 2005. In
September 2007, the company received the final payment under the ECU
earn-out of $22.1 million, bringing cumulative cash receipts to the
$150 million cap. The ECU earn-out was accounted for as a derivative
instrument; accordingly, it was reported at fair value. Changes to
the fair value of the ECU derivative were recorded within continuing
operations pursuant to SAB Topic 5:Z:5.
(4) On January 1, 2007 the Company adopted FSP AUG AIR-1 "Accounting
for Planned Major Maintenance Activities" and retrospectively
adjusted prior year financial statements as required under the FSP.
One result of the retrospective application of this change in
accounting principle was an increase in the cumulative undistributed
earnings at a certain wholly owned foreign subsidiary, and an
increase in the associated deferred tax liability. During the second
quarter of 2006, we determined that the cumulative undistributed
earnings at this foreign subsidiary would be indefinitely reinvested
offshore, and accordingly reversed the associated deferred tax
liability pursuant to Accounting Principles Board Opinion No. 23,
"Accounting for Income Taxes - Special Areas." Consistent with our
prior determination that the cumulative undistributed earnings would
be indefinitely reinvested offshore, the deferred tax liability
arising from the retrospective adjustments was reversed, resulting in
a favorable adjustment to the provision for income taxes during the
second quarter of 2006.
(5) The Company prepares and reports its financial statements in
accordance with GAAP. Internally, management monitors the operating
performance of its Construction Materials business using non-GAAP
metrics similar to those above. These non-GAAP measures exclude the
effects of the items described more fully above.
In Management's opinion, these non-GAAP measures are important
indicators of the ongoing operations of our Construction Materials
business and provide better comparability between reporting periods
because they exclude items that may not be indicative of or are
unrelated to our core business and provide a better baseline for
analyzing trends in our core operations. The Company does not, nor
does it suggest that investors should, consider such non-GAAP
financial measures in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP. The Company
believes the disclosure of the effects of these items increases the
reader's understanding of the underlying performance of the business
and that such non-GAAP financial measures provide investors with an
additional tool to evaluate our financial results and assess our
prospects for future performance.
CONTACT: Vulcan Materials Company
Investor Contact:
Mark Warren, 205-298-3220
or
Media Contact:
David Donaldson, 205-298-3220