EX-99.1 2 a5323283ex99_1.htm EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Press release
Exhibit 99.1
January 31, 2007
FOR IMMEDIATE RELEASE
Investor Contact: Mark Warren (205) 298-3220
Media Contact: David Donaldson (205) 298-3220
 
 
VULCAN ANNOUNCES RECORD QUARTERLY SALES AND EARNINGS
Earnings per Share from Continuing Operations Increase 34%

Birmingham, Alabama - January 31, 2007 - Vulcan Materials Company (NYSE:VMC) today announced record fourth quarter and full year sales and earnings. Earnings from continuing operations were $115 million or $1.19 per diluted share in the fourth quarter as compared with $92 million or $0.89 per diluted share in the prior year. Net sales increased 9 percent from the prior year’s fourth quarter. Full year net sales increased 16 percent to $3 billion. Earnings from continuing operations were $477 million or $4.79 per diluted share, a 45 percent increase per diluted share from the prior year.

Don James, Vulcan’s Chairman and Chief Executive Officer, stated, “We achieved excellent earnings growth in the fourth quarter, demonstrating the strength and diversity of our businesses. Our coast-to-coast footprint serving many of the fastest growing U.S. markets provided regional economic diversification in 2006. The increasing demand for aggregates in a broad range of public infrastructure and nonresidential construction helped offset the correction that has occurred in residential construction. Our consistent earnings growth is a reflection of both our broad geographic and end-use markets and a pricing environment for aggregates that recognizes the high cost of reserves replacement and product distribution in high growth metropolitan markets.”

Earnings per share from continuing operations increased 34 percent and gross profit increased 33 percent from the prior year’s fourth quarter, as improved pricing more than offset the earnings effect from lower shipments.

Fourth quarter aggregates pricing increased 16.5 percent from the prior year’s level. Aggregates shipments were 6 percent lower than the prior year’s record fourth quarter. The average unit cost for diesel fuel in the quarter was favorable to the prior year and somewhat offset higher costs for parts, supplies, electricity and the effects of lower production volumes.

Sales and earnings for asphalt increased from the prior year’s fourth quarter as improved prices more than offset higher costs for liquid asphalt and aggregates and the effects of lower volumes. Concrete earnings were slightly lower than in the prior year as improved selling prices were offset by the effects of lower volumes and higher costs for cement and aggregates.

Other income decreased approximately $11 million from the prior year’s fourth quarter due principally to a $1 million increase in the carrying value of the ECU earn-out as compared with an $11 million increase in the fourth quarter of 2005 (Table E).

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Page 2
January 31, 2007
FOR IMMEDIATE RELEASE
 
For the full year, improved pricing for all key products led to a 16 percent increase in net sales and drove earnings per share from continuing operations up 45 percent to a record $4.79 per diluted share. Aggregates pricing improved 14.7 percent and more than offset the effects of a slight decline in aggregates shipments and higher production costs related to diesel fuel, parts, supplies and electricity. Asphalt and concrete earnings also increased significantly as pricing improvements exceeded increases in raw material costs.

The effective tax rate for 2006 was 32.1 percent as compared to 28.4 percent for 2005. Last year’s tax rate included a reduction in estimated income tax liabilities for prior years and a favorable settlement of federal income tax refund claims, representing approximately $0.12 per diluted share. In 2006, favorable tax adjustments totaled $0.01 per diluted share.

For the full year, net cash provided by operating activities increased 22 percent from the prior year to $579 million.

During 2006, the Company purchased 6,757,361 shares at a total cost of approximately $523 million, representing an average cost of $77.37 per share.

All results are unaudited.

Outlook - Full Year 2007

Commenting on Vulcan’s outlook for 2007, Mr. James stated, “We remain confident in our ability to continue strong earnings growth in 2007. Broader economic factors such as low interest rates, job growth, falling office vacancy rates and the solid fiscal condition of most states should continue to aid the more aggregate-intensive infrastructure and private non-residential end use markets in 2007. Overall demand for aggregates in our markets should remain relatively stable.

“The residential construction slowdown in the U.S. continued in the fourth quarter of 2006 and contributed to lower aggregates shipments for the year. However, with mortgage interest rates still at relatively low historical levels and household formations increasing in high growth markets, residential construction has the potential to stabilize by the second half of 2007.

“Aggregates demand from highway construction in Vulcan-served markets should increase in 2007, primarily as a result of higher state spending levels and moderating liquid asphalt costs. In 2006, construction cost inputs for highway projects increased significantly, particularly liquid asphalt and diesel fuel, resulting in some delays for new contract awards.

“We believe private non-residential construction will continue to improve in 2007. This construction end market includes a wide array of project types and generally is more aggregates intensive than private residential construction. Economic factors, such as job growth, vacancy rates, private infrastructure needs and demographic trends, help drive demand for this type of construction.
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Page 3
January 31, 2007
FOR IMMEDIATE RELEASE
“We believe that for 2007 our business is very well positioned to achieve earnings from continuing operations of $5.51 to $5.91 per diluted share. In January 2007, we closed a real estate sale transaction in California that resulted in a net after-tax gain of $0.26 per diluted share, and its earnings effect is included in our guidance. Excluding the gain from this real estate sale transaction, our earnings guidance for 2007 is consistent with full year guidance provided at the end of the third quarter. Our current earnings outlook is based on an overall aggregates price improvement of 10 to 11 percent and aggregates shipments in line with the prior year.”

Outlook - First Quarter 2007

Mr. James further stated, “Weather in the first quarter of 2006 was very favorable for construction. As a result, earnings in the first quarter of 2006 far exceeded usual seasonal trends. Typically, the first quarter contributes approximately 10 percent of operating earnings for the full year and we expect the first quarter of 2007 to be more in line with historical performance. Consequently, including the sale of the real estate in California, we expect to earn $0.75 to $0.95 per diluted share in the first quarter of 2007.”

In keeping with past practice, Vulcan will give quarterly and annual earnings guidance. Revised guidance will be issued only if Vulcan determines that comparable earnings per share, on either a quarterly or an annual basis, will be outside its most recent published estimates.

Conference Call

Vulcan will host a conference call at 10:00 a.m. CST on February 1, 2007. Investors and other interested parties may access the teleconference live by calling (800) 510-0219 approximately 10 minutes before the scheduled start. International participants can dial (617) 614-3451. The access code is 97381548. A live webcast will be available via the Internet through Vulcan's website at vulcanmaterials.com. The conference call will be recorded and available for replay approximately two hours after the call through February 8, 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 other construction materials.

Certain matters discussed in this release, including expectations regarding future performance, contain forward-looking statements that are subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those projected. These risks, assumptions 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 by the Company under two earn-outs contained in the agreement for the divestiture of the Company's Chemicals business; and other risks, assumptions 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 update such statements.
 
(Tables Follow)
 
                   
Table A
  
Vulcan Materials Company
and Subsidiary Companies
       
(Amounts and shares in thousands, except per share data)
  
                       
       
Three Months Ended
  
Twelve Months Ended
  
Consolidated Statements of Earnings
  
 
  
December 31
  
December 31
  
(Condensed and unaudited) 
  
 
  
2006
  
2005
  
2006
  
2005
  
                       
Net sales
       
$
742,743
  
$
680,849
  
$
3,041,093
  
$
2,614,965
  
Delivery revenues
         
73,561
   
73,772
   
301,382
   
280,362
 
Total revenues
         
816,304
   
754,621
   
3,342,475
   
2,895,327
 
                                 
Cost of goods sold
         
505,436
   
502,237
   
2,109,099
   
1,906,489
 
Delivery costs
         
73,561
   
73,772
   
301,382
   
280,362
 
Cost of revenues
         
578,997
   
576,009
   
2,410,481
   
2,186,851
 
                                 
Gross profit
         
237,307
   
178,612
   
931,994
   
708,476
 
Selling, administrative and general expenses
         
66,320
   
63,020
   
264,396
   
232,531
 
Gain on sale of property, plant and equipment, net
         
1,886
   
5,195
   
5,557
   
8,295
 
Other operating expense (income), net
          
1,233
   
588
   
(21,904
)
  
7,862
 
Operating earnings
         
171,640
   
120,199
   
695,059
   
476,378
 
                                 
Other income, net
         
881
   
11,470
   
28,541
   
24,378
 
Interest income
          
1,138
   
4,509
   
6,171
   
16,627
 
Interest expense
          
6,621
   
9,123
   
26,310
   
37,146
 
Earnings from continuing operations
                                
before income taxes
         
167,038
   
127,055
   
703,461
   
480,237
 
Provision for income taxes
         
51,991
   
34,927
   
225,963
   
136,402
 
Earnings from continuing operations
          
115,047
   
92,128
   
477,498
   
343,835
 
Earnings (loss) on discontinued operations, net of tax
         
(1,187
)
  
(1,485
)
  
(9,964
)
  
44,922
 
Net earnings
        
$
113,860
  
$
90,643
  
$
467,534
  
$
388,757
  
Basic earnings (loss) per share:
                                
Earnings from continuing operations
       
$
1.21
  
$
0.91
  
$
4.89
  
$
3.37
  
Discontinued operations
          
(0.01
)
  
(0.01
)
  
(0.10
)
  
0.43
 
Net earnings per share
       
$
1.20
  
$
0.90
  
$
4.79
  
$
3.80
  
                                 
Diluted earnings (loss) per share:
                                
Earnings from continuing operations
        
$
1.19
  
$
0.89
  
$
4.79
  
$
3.30
  
Discontinued operations
          
(0.02
)
  
(0.01
)
  
(0.10
)
  
0.43
 
Net earnings per share
       
$
1.17
  
$
0.88
  
$
4.69
  
$
3.73
  
                                 
Weighted-average common shares
                                
outstanding:
                                
 Basic
         
94,704
   
101,217
   
97,577
   
102,179
 
 Assuming dilution
         
96,961
   
103,188
   
99,777
   
104,085
 
Cash dividends declared per share
                                
of common stock
       
$
0.37
  
$
0.29
  
$
1.48
  
$
1.16
  
Depreciation, depletion, accretion and
                                
amortization from continuing operations
       
$
59,078
  
$
57,544
  
$
224,677
  
$
220,488
  
Effective tax rate from continuing operations
         
31.1
%
  
27.5
%
  
32.1
%
  
28.4
%
 
 
           
Table B
  
Vulcan Materials Company
and Subsidiary Companies
               
       
(Amounts in thousands)
  
Consolidated Balance Sheets 
  
 
  
December 31
  
December 31
  
(Condensed and unaudited) 
  
 
  
2006
  
2005
  
               
Assets
            
Cash and cash equivalents
       
$
55,230
  
$
275,138
  
Medium-term investments
         
-
   
175,140
 
Accounts and notes receivable:
                    
Accounts and notes receivable, gross
          
394,815
   
480,647
 
Less: Allowance for doubtful accounts
          
(3,355
)
  
(4,277
)
 Accounts and notes receivable, net
          
391,460
   
476,370
 
Inventories:
                    
Finished products
          
214,508
   
170,539
 
Raw materials 
          
9,967
   
9,602
 
Products in process 
          
1,619
   
1,589
 
Operating supplies and other
          
17,443
   
16,022
 
 Inventories
          
243,537
   
197,752
 
Deferred income taxes
          
20,108
   
23,184
 
Prepaid expenses
         
15,388
   
17,138
 
 Total current assets
         
725,723
   
1,164,722
 
Investments and long-term receivables
          
6,664
   
6,942
 
Property, plant and equipment:
                    
Property, plant and equipment, cost
         
3,897,618
   
3,481,708
 
Less: Reserve for depr., depl., & amort.
         
(2,028,504
)
  
(1,877,741
)
 Property, plant and equipment, net
         
1,869,114
   
1,603,967
 
Goodwill
          
620,189
   
617,083
 
Other assets
          
196,879
   
196,170
 
 Total assets
       
$
3,418,569
  
$
3,588,884
  
                     
                     
Liabilities and Shareholders' Equity
                    
Current maturities of long-term debt
        
$
630
  
$
272,067
  
Short-term borrowings
          
198,900
   
-
 
Trade payables and accruals
          
154,215
   
142,221
 
Other current liabilities
         
139,942
   
164,726
 
 Total current liabilities
          
493,687
   
579,014
 
Long-term debt
          
322,064
   
323,392
 
Deferred income taxes
          
282,249
   
275,065
 
Other noncurrent liabilities
          
319,458
   
284,872
 
Shareholders' equity
         
2,001,111
   
2,126,541
 
 Total liabilities and shareholders' equity
        
$
3,418,569
  
$
3,588,884
  
 

           
Table C
  
Vulcan Materials Company
and Subsidiary Companies
               
       
(Amounts in thousands)
  
       
Twelve Months Ended
  
Consolidated Statements of Cash Flows 
  
 
  
December 31
  
 (Condensed and unaudited)
  
 
  
2006
  
2005
  
               
Operating Activities
  
 
          
Net earnings
       
$
467,534
  
$
388,757
  
Adjustments to reconcile net earnings to
                    
net cash provided by operating activities:
                    
Depreciation, depletion, accretion and amortization  
          
224,696
   
220,956
 
Net gain on sale of property, plant and equipment 
          
(5,557
)
  
(9,414
)
Net gain on sale of contractual rights  
          
(24,841
)
  
-
 
Contributions to pension plans 
          
(1,433
)
  
(29,100
)
Increase in assets before initial 
                    
 effects of business acquisitions and dispositions
         
(66,589
)
  
(115,005
)
Increase (decrease) in liabilities before initial 
                    
 effects of business acquisitions and dispositions
         
(27,639
)
  
5,983
 
Other, net  
          
13,178
   
11,007
 
 Net cash provided by operating activities
         
579,349
   
473,184
 
                     
Investing Activities
                    
Purchases of property, plant and equipment
         
(435,207
)
  
(215,646
)
Proceeds from sale of property, plant and equipment
         
7,918
   
10,629
 
Proceeds from sale of contractual rights, net of cash transaction fees
         
24,849
   
-
 
Proceeds from sale of Chemicals business, net of cash transaction fees
         
141,916
   
209,254
 
Payment for partner's interest in consolidated Chemicals joint venture
         
-
   
(65,172
)
Payment for businesses acquired, net of acquired cash
         
(20,531
)
  
(93,965
)
Purchases of medium-term investments
         
-
   
(313,490
)
Proceeds from sales and maturities of medium-term investments
         
175,140
   
317,560
 
Change in investments and long-term receivables
         
304
   
596
 
Other, net
         
604
   
1,062
 
 Net cash used for investing activities
         
(105,007
)
  
(149,172
)
                     
Financing Activities
                    
Net short-term borrowings
          
198,900
   
-
 
Payment of short-term debt and current maturities
         
(272,532
)
  
(3,350
)
Payment of long-term debt
         
-
   
(8,253
)
Purchases of common stock
         
(522,801
)
  
(228,479
)
Dividends paid
         
(144,082
)
  
(118,229
)
Proceeds from exercise of stock options
         
28,889
   
37,940
 
Excess tax benefits from exercise of stock options
         
17,376
   
-
 
Other, net
         
-
   
47
 
 Net cash used for financing activities
          
(694,250
)
  
(320,324
)
                     
Net (decrease) increase in cash and cash equivalents
          
(219,908
)
  
3,688
 
Cash and cash equivalents at beginning of year
          
275,138
   
271,450
 
Cash and cash equivalents at end of year
       
$
55,230
  
$
275,138
  
 

                   
Table D
  
                       
1. Supplemental Cash Flow Information
                       
Supplemental information referable to the Condensed Consolidated Statements of Cash Flows for the twelve months ended December 31 is summarized below (amounts in thousands):
                     
               
2006
  
2005
  
                       
Supplemental Disclosure of Cash Flow Information  
 
                  
Cash paid during the period for:
  
 
                  
Interest, net of amount capitalized
                    
$
32,616
  
$
37,331
  
Income taxes
                     
219,218
   
211,985
 
                                 
Supplemental Schedule of Noncash Investing and Financing Activities
                          
Liabilities assumed in business acquisitions
                      
-
   
4,684
 
Accrued liabilities for purchases of property, plant and equipment
                     
32,941
   
14,244
 
Debt issued for purchases of property, plant and equipment
                     
177
   
-
 
Proceeds receivable from exercise of stock options
                      
31
   
-
 
Noncash proceeds from the sale of the Chemicals business:
                                
Earn-outs
                     
-
   
127,979
 
Working capital adjustments
                      
-
   
14,255
 
                                 
                                 
                                 
                                 
2. Net Sales and Unit Shipments
 
                                
           
(Amounts in thousands)
  
 
          
Three Months Ended
    
Twelve Months Ended
  
 
          
December 31
    
December 31
  
Net Sales by Product - Customer
          
2006
    
2005
    
2006
    
2005
  
                                 
Aggregates, excluding freight
                                
to remote distribution sites
        
$
488,899
  
$
445,715
  
$
1,991,348
  
$
1,758,111
  
Freight to remote distribution sites
         
32,567
   
33,821
   
140,557
   
125,864
 
Aggregates
          
521,466
   
479,536
   
2,131,905
   
1,883,975
 
Asphalt mix
         
133,429
   
109,558
   
500,188
   
371,405
 
Concrete
          
53,944
   
66,556
   
260,727
   
252,091
 
Other products
         
33,904
   
25,199
   
148,273
   
107,494
 
                                 
Total net sales
       
$
742,743
  
$
680,849
  
$
3,041,093
  
$
2,614,965
  
                                 
Unit Shipments
                                
                                 
Aggregates
                                
Customer tons
          
57,287
   
60,882
   
242,473
   
245,709
 
Internal tons *
         
2,975
   
3,468
   
12,936
   
13,831
 
Aggregates - tons
          
60,262
   
64,350
   
255,409
   
259,540
 
                                 
Asphalt mix - tons
          
2,867
   
3,052
   
11,599
   
11,698
 
                                 
Concrete - cubic yards
         
574
   
810
   
2,893
   
3,238
 
                                 
* 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 Consolidated Statements of Earnings.
 

                   
Table E
  
                       
Reconciliation of Non-GAAP Performance Measures
                       
       
(Amounts in thousands, except per share data)
  
                       
       
Three Months Ended
  
Twelve Months Ended
  
       
December 31
  
December 31
  
       
2006
  
2005
  
2006
  
2005
  
                       
GAAP Earnings from continuing operations before income taxes
       
$
167,038
  
$
127,055
  
$
703,461
  
$
480,237
  
Gain on sale of contractual rights (1)
         
9
   
-
   
(24,841
)
  
-
 
Gain from adjustment in the carrying value
                                
of the ECU earn-out (2)
          
(1,002
)
  
(11,070
)
  
(28,722
)
  
(20,420
)
Earnings from continuing operations before income taxes,
                                
excluding gains on sale of contractual rights and adjustment
                                
in the carrying value of the ECU earn-out (3)
       
$
166,045
  
$
115,985
  
$
649,898
  
$
459,817
  
                                 
                                 
                                 
GAAP Earnings from continuing operations, net of tax
       
$
115,047
  
$
92,128
  
$
477,498
  
$
343,835
  
Gain on sale of contractual rights, net of tax (1)
         
5
   
-
   
(14,845
)
  
-
 
Gain from adjustment in the carrying value
                                
of the ECU earn-out, net of tax (2)
         
(600
)
  
(6,634
)
  
(17,213
)
  
(12,238
)
Earnings from continuing operations, excluding gains on sale of
                                
contractual rights and adjustment in the carrying value
                                
of the ECU earn-out, net of tax (3)
       
$
114,452
  
$
85,494
  
$
445,440
  
$
331,597
  
                                 
                                 
                                 
GAAP Diluted earnings per share from continuing operations
       
$
1.19
  
$
0.89
  
$
4.79
  
$
3.30
  
After-tax gain per diluted share resulting from the sale of
                               
contractual rights (1)
         
-
   
-
   
(0.15
)
  
-
 
After-tax gain per diluted share resulting from the adjustment
                                
in the carrying value of the ECU earn-out (2)
          
(0.01
)
  
(0.06
)
  
(0.17
)
  
(0.12
)
Earnings per share from continuing operations, excluding gains
                                
on sale of contractual rights and adjustment in the
                                
carrying value of the ECU earn-out, net of tax (3)
       
$
1.18
  
$
0.83
  
$
4.47
  
$
3.18
  
 
(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 quarry for approximately 2 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 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 is required to make future payments based on ECU and natural gas prices during the five-year period beginning July 1, 2005, capped at $150 million (ECU earn-out or ECU derivative). The ECU earn-out is accounted for as a derivative instrument; accordingly, it is reported at fair value. Changes to the fair value of the ECU derivative are recorded within continuing operations pursuant to SAB Topic 5:Z:5.
     
(3)
 
The Company prepares and reports its financial statements in accordance with U.S. Generally Accepted Accounting Principles (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 two items, described more fully above: 1) the gain on the sale of contractual rights at the Bellwood quarry in Atlanta, Georgia, during the second quarter of 2006 (included in other operating income, net in the accompanying condensed consolidated statements of earnings), and 2) the ECU earn-out obtained in connection with the June 2005 sale of our Chemicals business, including the associated changes in carrying value (included in other income, net in the accompanying condensed consolidated statements of earnings).
 
    
 
  
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.