Investor Presentation, March 2013
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Investor Presentation, March 2013 Presentation Transcript

  • 1. Our strategy is based on our strength Aggregates Essential Material | Valuable AssetInvestor PresentationMarch 2013
  • 2. Important Disclosure Notes Certain matters discussed in this presentation, including expectations regarding future performance, containforward-looking statements that are subject to assumptions, risks and uncertainties that could cause actual results to differmaterially from those projected. These assumptions, risks and uncertainties include, but are not limited to, those associatedwith: cost reductions, profit enhancements and asset sales, as well as streamlining and other strategic actions we adoptedwill not be able to be realized to the desired degree or within the desired time period and that the results there of will differfrom those anticipated or desired; uncertainties as to the timing and valuations that may be realized or attainable withrespect to intended asset sales; general economic and business conditions; the impact of a prolonged economic recessionon our business and financial condition and access to capital markets; changes in the level of spending for privateresidential and nonresidential construction; the highly competitive nature of the construction materials industry; the impact offuture regulatory or legislative actions; the outcome of pending legal proceedings; pricing of our products; weather and othernatural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-termdebt and interest expense incurred by the Company; changes in Vulcan’s effective tax rate; changes in interest rates; theimpact of our below investment grade debt rating on our cost of capital; volatility in pension plan asset values which mayrequire cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating topreviously divested businesses; the Company’s ability to secure and permit aggregates reserves in strategically locatedareas; the Company’s ability to manage and successfully integrate acquisitions; Vulcan’s increasing reliance on informationtechnology; the potential of goodwill impairment; the potential impact of future legislation or regulations relating to climatechange or greenhouse gas emissions or the definition of minerals; and other assumptions, risks and uncertainties detailedfrom time to time in the Company’s SEC reports, including the report on Form 10-K for the year. Forward-lookingstatements are made as of the date hereof, and Vulcan assumes no obligation to publicly update such statements. Investor Presentation, March 2013 2
  • 3. Company Snapshot Vulcan is the Leading Aggregates Producer in the U.S. Vulcan-Served States Our leading position in aggregates is based on… 1. Favorable geographic footprint that provides attractive long-term growth prospects 2. Largest proven and probably reserve base 3. Operational expertise and pricing discipline which provides attractive unit profitability2012 Net Sales: $2.4 Billion Aggregates Facilities: 341 95%Headquarters: Birmingham, AL Ticker: VMC Company 2012 10-K Report Investor Presentation, March 2013 3
  • 4. Positioning the Business to Maximize Future Earnings Growth Strategically Leading Unit Positioned Reserve Profitability Position Continues to Grow 75% 15.0 27% Share of U.S. Billion Tons of Higher than Population Aggregates peak-year in Growth Reserves volumes Unit Profitability = Cash Gross Profit / Ton. See Non-GAAP reconciliation at end of presentation. Investor Presentation, March 2013 4
  • 5. Aggregates-Led Value Creation  Build and Hold Substantial Reserves  Used in virtually all types of public and private construction projects  Strategically located in high-growth markets that will require large amounts of aggregates to meet construction demand  Aggregates operations require virtually no other raw material other than aggregates reserves 95 Percent  Coast-to-coast Footprint  Diversified regional exposure  Complementary asphalt, concrete and cement businesses in select Sales Tied to markets Aggregates  More opportunities to manage portfolio of locations to further enhance long-term earnings growth  Profitable Growth  Tightly managed operational and overhead costs  Benefits of scale as the largest producer 95%  Effective Land Management  Can lead to attractive real estate transactions Investor Presentation, March 2013 5
  • 6. Share of Total U.S. Growth – 2010 to 2020Vulcan’s Aggregates Assets are Strategically Positioned in Attractive Markets 75% in VMC-served states 70% in VMC-served states 63% in VMC-served states Source: Moody’s Analytics as of November 2012 Investor Presentation, March 2013 6
  • 7. Recent Financial Results Demonstrate Operating LeverageMargin Expansion and Earnings Improvement on Flat Revenues Full Year 2012 F(U) Amounts in Millions, except EPS 2012 2011 vs. 2011 Net Sales $ 2,411 $ 2,407 $ 4 Gross Profit $ 334 $ 284 $ 50 % Margin 13.9% 11.8% 2.1 pts SAG $ 259 $ 290 $ 31 EBITDA $ 423 $ 425 $ (2) 1 Adjusted EBITDA $ 411 $ 352 $ 59 % Margin 17.1% 14.6% 2.5 pts EPS from Cont. Ops, diluted $ (0.42) $ (0.58) $ 0.16 Adjusted EPS1 from Cont. Ops, diluted $ (0.47) $ (0.93) $ 0.46 Note: Please see Non-GAAP reconciliations at the end of this presentation. Margin calculated using Net Sales. 1 Adjusted to exclude gain on sale of real estate and businesses, recovery from a legal settlement, exchange offer and restructuring costs. Investor Presentation, March 2013 7
  • 8. Recent Financial Results Demonstrate Operating LeverageIncrease in Profitability Driven by Higher Pricing and Effective Cost Control Gross Profit Margin Adjusted EBITDA Margin 17.1% 13.9% 14.6% 11.8% 2011 2012 2011 2012 Aggregates Gross Profit Margin Aggregates Cash Gross Profit per Ton 20.4% $4.21 17.7% $4.01 2011 2012 2011 2012 Note: Please see Non-GAAP reconciliations at the end of this presentation. Aggregates Gross Profit Margin calculated using Segment Total Revenues. Investor Presentation, March 2013 8
  • 9. Attractive ProfitabilityUnit Profitability That Was Maintained Throughout the Downturn, Now Beginning to Grow Trailing Twelve Months Cash Gross Profit Per Ton of Aggregates 2012 profitability is higher than prior year and 27% higher than peak-year in volumes (2005) Note: Please see Non-GAAP reconciliations at the end of this presentation. Investor Presentation, March 2013 9
  • 10. Track Record for Price GrowthVulcan Consistently Outperforms, Contributing to Higher Unit ProfitabilityAggregates Price GrowthIndex, 1992 = 100 CAGR ’92-’02 ’02-’12 Vulcan 3.6% 6.4% Industry* 2.8% 5.3% Note: Historical performance is not a guarantee or assurance of future performance nor that previous results will be attained or surpassed. *Industry = Producer Price Index for Aggregates reported by the U.S. Bureau of Labor Statistics Investor Presentation, March 2013 10
  • 11. SAG Expenses Have Been Reduced During the DownturnWell Positioned to Leverage ERP Investment and Shared Services Platforms Total SAG down $115 million from 2007 (31% decrease) Millions of $ Source: Company filings Note: 2007 SAG includes Florida Rock on a pro forma basis ($84.5M). Investor Presentation, March 2013 11
  • 12. De-Risked Balance SheetHigher Cash Generated from Operations and Asset Sales 2012 Cash Flow Bridge Sources of Cash Uses of Cash Operating activities, less debt Progress on Planned Asset service costs, generated Sales coincidently offset cash $121 million of cash in 2012 used for debt maturities and exchange offer defense costs VPP = Volumetric Production Payment. Exchange Offer = Costs incurred as a result of an unsolicited exchange offer initiated by Martin Marietta Materials on December 12, 2011 and subsequently withdrawn in 2012. Investor Presentation, March 2013 12
  • 13. De-Risked Balance Sheet Significant Financial and Operational Flexibility With Limited Near-Term Maturities  Favorable debt maturity profile with substantial liquidity: — Minimal maturities of $290 million over the next three years ― $275 million cash on hand with no borrowing on $600 million line of credit (1)  Debt maturities to be funded from available cash and free cash flows  Limited financial covenants Debt Summary Debt Maturity Profile (Millions $) As of December 31Amounts in Millions, except ratios 2012 2011 2010Total Debt $ 2,677.0 $ 2,815.4 $ 2,718.3Cash and Cash Equivalents 275.5 155.8 47.5Net Debt $ 2,401.5 $ 2,659.6 $ 2,670.8Net Debt / Adjusted EBITDA 5.8 7.6 7.2 (1) Line of credit is an Asset Based Lending facility: $600 million 5 year facility expiring December 2016. Investor Presentation, March 2013 13
  • 14. Aggregates DemandVulcan’s Key Markets Leveraged to Favorable Long Term Growth Prospects 2012 aggregate demand 47% below population trend line. Source: Company estimates of aggregates demand using MSA population data from Woods & Poole CEDDS. Investor Presentation, March 2013 14
  • 15. Aggregates DemandPrivately funded construction accounts for most of the cyclicality Source: Company estimates of aggregates demand. Investor Presentation, March 2013 15
  • 16. Private Construction – ResidentialGrowth Bodes Well for Continued Recovery in Our Markets… Investor Presentation, March 2013 16
  • 17. Private Construction – Residential…Evident by the Significant Growth in Housing Starts in These Key Vulcan-Served States Source: McGraw-Hill and Company Estimates Investor Presentation, March 2013 17
  • 18. Private Construction – NonresidentialGrowth in Residential is Helping Drive Growth in Private Nonresidential Buildings Investor Presentation, March 2013 18
  • 19. Private Construction – Nonresidential BuildingsImportant End Use Categories Like Stores and Office Buildings Growing Again Source: McGraw-Hill and Company Estimates Investor Presentation, March 2013 19
  • 20. Public Construction – Other Public InfrastructureSupported by Large Projects Through the Downturn, Contract Awards Have Turned Positive Investor Presentation, March 2013 20
  • 21. Public Construction – HighwaysPassage of Federal Highway Bill Should Provide Stability and Predictability to Funding Investor Presentation, March 2013 21
  • 22. Public Construction - HighwaysObligation of Federal Highway Funds is Beginning to Grow Obligation of Federal Highway Funds for New Projects Through January of Fiscal Year (Billions $) Obligation of Federal Highway Funds in the Regular Highway Program are again growing - up 58% versus the prior year Obligation - FHWA obligates the federal government to pay its share of the cost for an eligible project under the federal-aid highway program. The project can then proceed to bidding and construction Fiscal Year ends September 30. Source: ARTBA and FHWA Investor Presentation, March 2013 22
  • 23. Public Construction – Highways Vulcan states should get a disproportionate number of TIFIA-funded projects Potential TIFIA Projects in Vulcan-Served Counties From the Fall of 2011 to January 2013, Letters of Interest (LOIs) totaling $77 billion have been filed. Of these LOIs, 43 projects totaling $49 billion, or 64%, are located in Vulcan-served counties.Enacted in 1998 to provide Federal credit assistance for eligible transportation projects and stimulate private capital investment. Since enactment, 13 states and the District of Columbia have used $9.2 billion of TIFIA credit assistance to help fund more than $36 billion in projects (mostly large-scale highway projects). Investor Presentation, March 2013 23
  • 24. Vulcan’s Value PropositionWell Positioned to Capitalize on Market Recovery Superior Aggregates Strong Operating De-Risked Balance Operations Leverage Sheet Largest reported reserve  Attractive unit profitability  Substantial liquidity base  Cost reduction initiatives  Moderate debt maturity Favorable long term resetting mid-cycle profile growth prospects EBITDA to new, higher level  Commitment to Benefits of scale strengthening balance  Favorable trends in sheet Operational expertise and private construction pricing growth activity  Commitment to restore a meaningful dividend Attractive real estate  New multi-year Federal opportunities Highway Bill Investor Presentation, March 2013 24
  • 25. Appendix - Reconciliation of Non-GAAP Financial Measures Amounts in millions of dollars, except per share data Generally Accepted Accounting Principles (GAAP) does not define "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)" and "cash gross profit." Thus, they should not be considered as an alternative to any earnings measure defined by GAAP. We present these metrics for the convenience of investment professionals who use such metrics in their analysis, and for shareholders who need to understand the metrics we use to assess performance and to monitor our cash and liquidity positions. The investment community often uses these metrics as indicators of a companys ability to incur and service debt. We use cash gross profit, EBITDA and other such measures 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 and provide the earnings per share (EPS) impact of these for the convenience of the investment community. We do not use these metrics as a measure to allocate resources. Reconciliations of these metrics to their nearest GAAP measures are presented below: EBITDA EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization. Cash gross profit Cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization to gross profit. Q4 Q4 YTD YTD YTD 2012 2011 12/31/12 12/31/11 12/31/10 EBITDA and Adjusted EBITDA Net earnings (loss) 3.5 (27.8) (52.6) (70.8) (96.5) Provision (benefit) for income taxes 0.6 (30.6) (66.5) (78.4) (89.7) Interest expense, net 52.9 53.4 211.9 217.2 180.7 Discontinued operations, net of tax 1.0 1.9 (1.3) (4.5) (6.0) EBIT 58.0 (3.1) 91.5 63.5 (11.5) Plus: Depr., depl., accretion and amort. 78.6 88.0 332.0 361.7 382.1 EBITDA 136.6 84.9 423.5 425.2 370.6 Legal settlement - - - (46.4) 40.0 Restructuring charges 0.5 10.0 9.5 12.9 0.0 Exchange offer costs 0.0 2.2 43.4 2.2 0.0 Gain on sale of real estate and businesses (46.8) (2.5) (65.1) (42.1) (39.5) Adjusted EBITDA 90.4 94.6 411.3 351.8 371.1 Q4 Q4 YTD YTD 2012 2011 12/31/12 12/31/11 EPS and Adjusted EPS As reported 0.03 (0.20) (0.42) (0.58) Legal settlement - - - (0.22) Restructuring charges 0.00 0.05 0.05 0.06 Exchange offer costs 0.00 0.01 0.20 0.01 Gain on sale of real estate and businesses (0.22) (0.01) (0.30) (0.20) Adjusted EPS (0.19) (0.15) (0.47) (0.92) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Trailing 12 Months 2012 2012 2012 2012 2011 2011 2011 2011 2010 2010 2010 2010 2009 2009 2009 2009 2008 2008 Aggregates Segment Cash Gross Profit Aggregates segment gross profit 352.1 350.0 338.5 329.5 306.2 284.6 296.4 315.5 320.1 332.2 340.2 345.0 393.3 451.2 503.2 594.3 657.6 722.3 Agg. Depr., depl., accretion and amort. 240.7 247.7 255.1 261.8 267.0 272.5 279.3 284.8 288.6 293.1 295.9 298.6 312.2 304.9 304.4 302.7 310.8 298.8 Aggregates segment cash gross profit 592.8 597.6 593.6 591.3 573.2 557.1 575.7 600.3 608.8 625.3 636.1 643.6 705.5 756.1 807.6 897.0 968.4 1,021.1 Aggregate tons 141.0 142.1 145.3 145.8 143.0 142.2 143.0 146.8 147.6 147.4 148.6 146.2 150.9 160.7 172.6 190.8 204.3 217.4 Aggregates segment cash gross profit per ton 4.21 4.20 4.08 4.06 4.01 3.92 4.03 4.09 4.12 4.24 4.28 4.40 4.68 4.70 4.68 4.70 4.74 4.70 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2008 2008 2007 2007 2007 2007 2006 2006 2006 2006 2005 2005 2005 2005 2004 2004 2004 2004 Aggregates segment gross profit 775.2 808.2 828.7 846.3 849.7 826.9 819.0 772.8 732.4 690.4 650.0 591.9 565.5 524.1 517.0 519.1 513.7 510.8 Agg. Depr., depl., accretion and amort. 283.2 266.4 246.9 228.3 220.8 213.1 210.3 205.1 203.0 202.7 206.4 197.7 194.4 191.8 191.1 191.1 191.8 192.6 Aggregates segment cash gross profit 1,058.4 1,074.6 1,075.6 1,074.6 1,070.4 1,040.0 1,029.3 977.8 935.3 893.1 856.4 789.7 759.9 715.9 708.1 710.2 705.5 703.4 Aggregates tons 224.4 228.5 231.0 234.5 239.8 246.7 255.4 258.8 263.6 265.3 259.5 255.0 252.6 245.8 242.3 240.8 239.5 236.2 Aggregates segment cash gross profit per ton 4.72 4.70 4.66 4.58 4.46 4.22 4.03 3.78 3.55 3.37 3.30 3.10 3.01 2.91 2.92 2.95 2.95 2.98 Source: Company filings Investor Presentation, March 2013 25
  • 26. Appendix – Simplified Geology MapBelow Geological Fall Line, Little or No Hard Rock Aggregates Reserves Suitable for Mining Simplified Geology Map Investor Presentation, March 2013 26
  • 27. Appendix - Comprehensive Distribution Network to Serve AttractiveMarkets With Limited Aggregates Reserves 65 truckloads per barge $0.02-0.03 per ton mile Geological Fall Line 4-5 truckloads per rail car $0.04-0.12 per ton mile 20-25 tons per truck $0.15-0.35 per ton mile 2,500 truckloads per ship Note: Per ton mile costs exclude loading and unloading. Less than $0.01 per ton mile Investor Presentation, March 2013 27
  • 28. Appendix - South Region Map Investor Presentation, March 2013 28
  • 29. Appendix - Central Region Map Investor Presentation, March 2013 29
  • 30. Appendix - East Region Map Investor Presentation, March 2013 30
  • 31. Appendix - West Region Map Investor Presentation, March 2013 31
  • 32. Investor Relations: Mark Warren Telephone: (205) 298-3191 Email: ir@vmcmail.com Registrar and Transfer Listing: Computershare Shareowner Services LLC Shareholder Services: (866) 886-9902 (toll free inside the U.S. and Canada)(201) 680-6578 (outside the U.S. and Canada, may call collect) (800) 231-5469 (TDD, hearing impaired) Internet: bnymellon.com/shareowner/equityaccess Independent Auditors: Deloitte & Touche, LLP Birmingham, Alabama 1200 Urban Center Drive Birmingham, AL 35242-2545 Telephone: (205) 298-3000