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Q3 2012 Earnings Presentation

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Q3 2012 Earnings Presentation

Q3 2012 Earnings Presentation


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  • 1. Third Quarter 2012 Earnings ResultsNovember 8, 2012
  • 2. Important Disclosure Notes – Forward Looking Statements This document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcans 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 Vulcans business, among others, could cause actual results to differ materially from those described in the forward-looking statements: risks that Vulcans 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 intended asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the impact of a prolonged economic recession on Vulcans industry, business and financial condition and access to capital markets; changes in the level of spending for private residential and 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 Vulcans 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 Vulcans below investment grade debt rating on Vulcans cost of capital; volatility in pension plan asset values which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcans ability to secure and permit aggregates reserves in strategically located areas; Vulcans ability to manage and successfully integrate acquisitions; the potential of goodwill 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. 3Q 2012 Earnings Results – November 8, 2012 2
  • 3. Third Quarter HighlightsContinued Improvement in Earnings and Aggregates Profitability • Continued Earnings Improvement • Adjusted EBITDA increased 9 percent • Adjusted Earnings from Continuing Operations were $0.14 per diluted share, an improvement of $0.27 per share from the prior year • Higher Aggregates Profitability Due to Improved Pricing and Cost Reduction Initiatives • Record third quarter cash unit profitability of $4.75 per ton • Aggregates segment gross profit margin increased 340 basis points • Aggregates pricing increased 4 percent • Unit cost of sales decreased 1 percent on lower production volumes • Construction-related Fundamentals Continue to Improve • Leading indicators of Private sector construction are growing • New federal highway bill will provide stability and predictability to funding Note: Please see Non-GAAP reconciliations at the end of this presentation. Aggregates Gross Profit Margin calculated using Segment Total Revenues. 3Q 2012 Earnings Results – November 8, 2012 3
  • 4. Overall Third Quarter and Year-to-Date 2012 Financial ResultsSignificant Margin Expansion Gross Profit Margin Adjusted EBITDA MarginThird Quarter Nine Months Third Quarter Nine Months Ending Sept. 30 Ending Sept. 30 Note: Please see Non-GAAP reconciliations at the end of this presentation. Margin calculated using Net Sales. 3Q 2012 Earnings Results – November 8, 2012 4
  • 5. 3Q and Year-to-Date 2012 Segment ResultsRecord Third Quarter Unit Profitability in Aggregates Cash Gross Profit / Ton Aggregates Gross Profit MarginThird Quarter Nine Months Third Quarter Nine Months Ending Sept. 30 Ending Sept. 30 Note: Please see Non-GAAP reconciliations at the end of this presentation. Aggregates Gross Profit Margin calculated using Segment Total Revenues. 3Q 2012 Earnings Results – November 8, 2012 5
  • 6. Aggregates PerformanceHigher Pricing and Lower Costs Are Driving Earnings Growth Third Quarter 2012 Nine Months Ending September 30, 2012 Change Due To: Change Due To: +$15 $463 +$6 $187 $184 ($18) +$14 +$15 ($5) $439 Note: Please see Non-GAAP reconciliations at the end of this presentation. 3Q 2012 Earnings Results – November 8, 2012 6
  • 7. Aggregates PerformanceUnit Profitability Continues to Increase Trailing Twelve Months Cash Gross Profit Per Ton of Aggregates TTM 3Q’12 profitability is 8% higher than prior year twelve months and 30% higher than peak-year in volumes (2005) Note: Please see Non-GAAP reconciliations at the end of this presentation. 3Q 2012 Earnings Results – November 8, 2012 7
  • 8. Non-Aggregates PerformanceConcrete and Cement Volumes Recovering from Cyclical Lows Year-Over-Year Change in Volumes Third Quarter 2012 Nine Months Ending Sept. 30 • Concrete and Cement segments have benefitted from increased private construction activity. • Asphalt volumes are down due to softness in highways while overall material margins remain stable. 3Q 2012 Earnings Results – November 8, 2012 8
  • 9. End MarketsPassage of Federal Highway Bill Should Provide Stability and Predictability to Funding Map-21 signed into law July 2012 3Q 2012 Earnings Results – November 8, 2012 9
  • 10. End MarketsTIFIA Funding Should Positively Impact Future Aggregates Demand in Our Markets Potential TIFIA Projects in Vulcan-Served Counties 3Q 2012 Earnings Results – November 8, 2012 10
  • 11. End MarketsOther Public Infrastructure Has Remained Lumpy Through the Downturn 3Q 2012 Earnings Results – November 8, 2012 11
  • 12. End MarketsPrivate Construction Growth Bodes Well for Continued Recovery in Our Markets 3Q 2012 Earnings Results – November 8, 2012 12
  • 13. End MarketsPrivate Construction Growth Bodes Well for Continued Recovery in Our Markets 3Q 2012 Earnings Results – November 8, 2012 13
  • 14. Full Year 2012 Outlook 2012 Value Commentary Aggregates Updated due to the uneven pace and rate of growth in ~(1%) Shipments shipments. Same-store shipments flat with prior year. Reflects continued recovery in private construction Aggregates activity and newly enacted federal highway +1 to 3% Price growth legislation. Includes benefit of Organizational Restructuring, SAG $260M Profit Enhancement Plan and other cost reduction initiatives. Up 23 to 29 percent from Adjusted EBITDA of $354 million in the prior year. $435 to Includes $29 million in gains, of which $18 million has EBITDA $455M been realized. Excludes results related to other Planned Asset Sales. Note: Please see Non-GAAP reconciliations at the end of this presentation. 3Q 2012 Earnings Results – November 8, 2012 14
  • 15. SummaryContinued Focus on Executing Our Initiatives to Further Improve Operating Leverage Through the first nine months of 2012… • Continued Earnings Improvement • Adjusted EBITDA up $64 million, or 25 percent • Adjusted Earnings from Continuing Operations has improved $0.48 per diluted share • Higher Aggregates Profitability Due to Improved Pricing and Cost Reduction • Cash gross profit $4.30 per ton, up 6 percent from the prior year • Aggregates segment gross profit margin has increased 340 basis points • Aggregates pricing has increased 1.3 percent • Controllable costs have been reduced approximately $70 million • Construction-related fundamentals continue to improve • Leading indicators of private sector construction remain positive • New federal highway bill will provide stability and predictability to funding Note: Please see Non-GAAP reconciliations at the end of this presentation. 3Q 2012 Earnings Results – November 8, 2012 15
  • 16. Question & Answer Session
  • 17. Reconciliation of Non-GAAP Measures Reconciliation of Non-GAAP Financial Measures Amounts in millions of dollars 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. 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. Q3 Q3 YTD YTD YTD 2012 2011 9/30/12 9/30/11 12/31/11 EBITDA Net earnings (loss) 14.3 20.0 (56.1) (42.8) (70.8) Provision (benefit) for income taxes (11.0) 29.8 (67.1) (47.9) (78.4) Interest expense, net 53.0 50.7 159.0 163.9 217.2 Discontinued operations, net of tax 1.4 2.5 (2.3) (6.4) (4.5) EBIT 57.7 103.0 33.5 66.8 63.5 Plus: Depr., depl., accretion and amort. 84.1 90.9 253.4 273.5 361.7 EBITDA 141.8 193.9 286.9 340.3 425.2 Legal settlement - (20.9) - (46.4) (46.4) Restructuring charges 3.0 0.9 9.0 3.0 13.0 Exchange offer costs 1.2 - 43.3 - 2.2 Sale of non-strat. asset - (39.7) (18.3) (39.7) (39.7) Adjusted EBITDA 146.0 134.2 320.9 257.2 354.3 Q3 Q3 YTD YTD 2012 2011 9/30/12 9/30/11 Earnings Per Share (EPS) As reported 0.12 0.17 (0.45) (0.38) Legal settlement - (0.11) - (0.22) Restructuring charges 0.01 - 0.04 0.01 Exchange offer costs 0.01 - 0.20 - Sale of non-strat. asset - (0.19) (0.09) (0.19) Adjusted EPS 0.14 (0.13) (0.29) (0.77) Q3 Q3 YTD YTD 2012 2011 9/30/12 9/30/11 Aggregate Segment Cash Gross Profit Segment gross profit 124.9 113.4 270.7 227.0 Depr., depl., accretion and amort. 62.3 70.3 191.8 211.5 Segment cash gross profit 187.2 183.7 462.5 438.5 Tons 39.4 42.6 107.6 108.5 Segment cash gross profit per ton 4.75 4.31 4.30 4.04 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Trailing 12 Months 2012 2012 2012 2011 2011 2011 2011 2010 2010 2010 2010 2009 2009 2009 2009 2008 2008 2008 2008 Aggregates Segment Cash Gross Profit Aggregates segment gross profit 350.0 338.5 329.5 306.2 284.6 296.4 315.5 320.1 332.2 340.2 345.0 393.3 451.2 503.2 594.3 657.6 722.3 775.2 808.2 Agg. Depr., depl., accretion and amort. 258.5 266.1 272.6 277.8 281.6 286.2 289.9 293.0 295.8 296.5 297.5 312.2 302.2 302.6 300.7 310.8 296.3 278.4 260.8 Aggregates segment cash gross profit 608.5 604.6 602.1 584.0 566.2 582.6 605.5 613.2 628.0 636.7 642.5 705.5 753.5 805.8 895.0 968.4 1,018.6 1,053.6 1,069.0 Aggregate tons 142.1 145.3 145.8 143.0 142.2 143.0 146.8 147.6 147.4 148.6 146.2 150.9 160.7 172.6 190.8 204.3 217.4 224.4 228.5 Aggregates segment cash gross profit per ton 4.28 4.16 4.13 4.08 3.98 4.07 4.12 4.15 4.26 4.28 4.39 4.68 4.69 4.67 4.69 4.74 4.68 4.70 4.68 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 2007 2007 2007 2007 2006 2006 2006 2006 2005 2005 2005 2005 2004 2004 2004 2004 Aggregates segment gross profit 828.7 846.3 849.7 826.9 824.5 772.8 732.4 690.4 650.0 591.9 565.5 524.1 517.0 519.1 513.7 510.8 Agg. Depr., depl., accretion and amort. 246.9 221.4 215.3 207.8 200.9 199.2 200.7 203.9 206.4 206.2 203.1 200.7 199.9 200.1 200.9 201.6 Aggregates segment cash gross profit 1,075.6 1,067.7 1,065.0 1,034.7 1,025.5 972.0 933.0 894.3 856.4 798.2 768.6 724.7 716.9 719.2 714.6 712.4 Aggregate tons 231.0 234.5 239.8 246.7 254.7 258.8 263.6 265.3 259.5 255.0 252.6 245.8 242.3 240.8 239.5 236.2 Aggregates segment cash gross profit per ton 4.66 4.55 4.44 4.19 4.03 3.76 3.54 3.37 3.30 3.13 3.04 2.95 2.96 2.99 2.98 3.02 Source: Company filings 3Q 2012 Earnings Results – November 8, 2012 17