UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
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VULCAN MATERIALS COMPANY
FORM 10-Q QUARTER ENDED JUNE 30, 2021
Contents |
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Page |
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PART I |
FINANCIAL INFORMATION
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Item 1. |
Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Cash Flows Notes to Condensed Consolidated Financial Statements
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2 3 4 5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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27 |
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Item 3. |
Quantitative and Qualitative Disclosures About
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48 |
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Item 4. |
48 |
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PART II |
OTHER INFORMATION
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Item 1. |
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49 |
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Item 1A. |
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49 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
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49 |
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Item 4. |
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49 |
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Item 6. |
50 |
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51 |
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Unless otherwise stated or the context otherwise requires, references in this report to “Vulcan,” the “Company,” “we,” “our,” or “us” refer to Vulcan Materials Company and its consolidated subsidiaries. |
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part I financial information
ITEM 1
FINANCIAL STATEMENTS
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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Unaudited |
June 30 |
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December 31 |
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June 30 |
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in thousands |
2021 |
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2020 |
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2020 |
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Assets |
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Cash and cash equivalents |
$ 857,555 |
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$ 1,197,068 |
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$ 816,765 |
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Restricted cash |
110,851 |
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945 |
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434 |
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Accounts and notes receivable |
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Accounts and notes receivable, gross |
689,591 |
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558,848 |
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699,320 |
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Allowance for doubtful accounts |
(2,739) |
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(2,551) |
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(3,460) |
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Accounts and notes receivable, net |
686,852 |
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556,297 |
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695,860 |
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Inventories |
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Finished products |
373,677 |
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378,389 |
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383,483 |
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Raw materials |
37,967 |
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33,780 |
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33,178 |
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Products in process |
5,099 |
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4,555 |
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5,116 |
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Operating supplies and other |
33,900 |
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31,861 |
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29,703 |
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Inventories |
450,643 |
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448,585 |
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451,480 |
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Other current assets |
94,524 |
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74,270 |
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65,571 |
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Total current assets |
2,200,425 |
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2,277,165 |
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2,030,110 |
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Investments and long-term receivables |
34,264 |
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34,301 |
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43,849 |
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Property, plant & equipment |
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Property, plant & equipment, cost |
9,094,689 |
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9,102,086 |
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8,921,990 |
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Allowances for depreciation, depletion & amortization |
(4,729,456) |
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(4,676,087) |
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(4,538,980) |
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Property, plant & equipment, net |
4,365,233 |
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4,425,999 |
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4,383,010 |
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Operating lease right-of-use assets, net |
464,765 |
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423,128 |
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426,618 |
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Goodwill |
3,172,112 |
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3,172,112 |
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3,172,112 |
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Other intangible assets, net |
1,103,079 |
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1,123,544 |
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1,114,592 |
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Other noncurrent assets |
231,149 |
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230,656 |
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228,433 |
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Total assets |
$ 11,571,027 |
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$ 11,686,905 |
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$ 11,398,724 |
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Liabilities |
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Current maturities of long-term debt |
15,436 |
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515,435 |
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500,026 |
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Trade payables and accruals |
300,109 |
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273,080 |
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278,102 |
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Other current liabilities |
283,700 |
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259,368 |
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260,621 |
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Total current liabilities |
599,245 |
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1,047,883 |
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1,038,749 |
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Long-term debt |
2,769,892 |
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2,772,240 |
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2,785,646 |
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Deferred income taxes, net |
748,279 |
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706,050 |
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671,097 |
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Deferred revenue |
170,160 |
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174,045 |
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177,534 |
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Noncurrent operating lease liabilities |
443,128 |
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399,582 |
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405,578 |
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Other noncurrent liabilities |
547,210 |
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559,775 |
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555,969 |
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Total liabilities |
$ 5,277,914 |
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$ 5,659,575 |
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$ 5,634,573 |
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Other commitments and contingencies (Note 8) |
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Equity |
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Common stock, $1 par value, Authorized 480,000 shares, |
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Outstanding 132,678, 132,516 and 132,446 shares, respectively |
132,678 |
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132,516 |
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132,446 |
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Capital in excess of par value |
2,806,693 |
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2,802,012 |
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2,789,801 |
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Retained earnings |
3,531,861 |
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3,274,107 |
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3,049,943 |
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Accumulated other comprehensive loss |
(178,119) |
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(181,305) |
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(208,039) |
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Total equity |
$ 6,293,113 |
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$ 6,027,330 |
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$ 5,764,151 |
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Total liabilities and equity |
$ 11,571,027 |
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$ 11,686,905 |
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$ 11,398,724 |
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The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
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VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
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Three Months Ended |
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Six Months Ended |
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Unaudited |
June 30 |
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June 30 |
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in thousands, except per share data |
2021 |
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2020 |
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2021 |
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2020 |
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Total revenues |
$ 1,361,047 |
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$ 1,322,575 |
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$ 2,429,391 |
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$ 2,371,817 |
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Cost of revenues |
962,683 |
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926,056 |
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1,801,760 |
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1,773,575 |
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Gross profit |
398,364 |
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396,519 |
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627,631 |
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598,242 |
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Selling, administrative and general expenses |
100,667 |
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91,205 |
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189,260 |
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177,635 |
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Gain (loss) on sale of property, plant & equipment |
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and businesses |
211 |
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(258) |
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117,376 |
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741 |
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Other operating expense, net |
(10,372) |
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(6,160) |
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(18,698) |
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(10,151) |
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Operating earnings |
287,536 |
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298,896 |
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537,049 |
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411,197 |
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Other nonoperating income (expense), net |
8,223 |
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7,367 |
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14,136 |
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(1,969) |
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Interest expense, net |
41,696 |
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33,954 |
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74,814 |
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64,727 |
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Earnings from continuing operations |
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before income taxes |
254,063 |
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272,309 |
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476,371 |
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344,501 |
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Income tax expense |
57,283 |
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61,352 |
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117,922 |
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73,546 |
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Earnings from continuing operations |
196,780 |
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210,957 |
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358,449 |
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270,955 |
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Loss on discontinued operations, net of tax |
(1,436) |
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(1,041) |
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(2,491) |
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(781) |
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Net earnings |
$ 195,344 |
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$ 209,916 |
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$ 355,958 |
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$ 270,174 |
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Other comprehensive income (loss), net of tax |
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Deferred loss on interest rate derivative |
0 |
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0 |
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0 |
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(14,679) |
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Amortization of prior interest rate derivative loss |
360 |
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194 |
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716 |
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988 |
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Amortization of actuarial loss and prior service |
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cost for benefit plans |
1,235 |
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1,695 |
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2,470 |
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3,390 |
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Other comprehensive income (loss) |
1,595 |
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1,889 |
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3,186 |
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(10,301) |
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Comprehensive income |
$ 196,939 |
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$ 211,805 |
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$ 359,144 |
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$ 259,873 |
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Basic earnings (loss) per share |
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Continuing operations |
$ 1.48 |
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$ 1.59 |
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$ 2.70 |
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$ 2.04 |
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Discontinued operations |
(0.01) |
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(0.01) |
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(0.02) |
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0.00 |
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Net earnings |
$ 1.47 |
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$ 1.58 |
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$ 2.68 |
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$ 2.04 |
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Diluted earnings (loss) per share |
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Continuing operations |
$ 1.47 |
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$ 1.58 |
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$ 2.69 |
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$ 2.03 |
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Discontinued operations |
(0.01) |
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0.00 |
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(0.02) |
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0.00 |
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Net earnings |
$ 1.46 |
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$ 1.58 |
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$ 2.67 |
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$ 2.03 |
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Weighted-average common shares outstanding |
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Basic |
132,781 |
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132,552 |
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132,765 |
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132,560 |
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Assuming dilution |
133,507 |
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133,115 |
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133,455 |
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133,154 |
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Effective tax rate from continuing operations |
22.5% |
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22.5% |
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24.8% |
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21.3% |
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The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
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VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
notes to condensed consolidated financial statements
Note 1: summary of significant accounting policies
NATURE OF OPERATIONS
Vulcan Materials Company (the “Company,” “Vulcan,” “we,” “our”), a New Jersey corporation, is one of the nation’s largest suppliers of construction aggregates (primarily crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete.
We operate primarily in the United States and our principal product — aggregates — is used in virtually all types of public and private construction projects and in the production of asphalt mix and ready-mixed concrete. We serve markets in twenty states, Washington D.C., and the local markets surrounding our operations in Mexico. Our primary focus is serving metropolitan markets in the United States that are expected to experience the most significant growth in population, households and employment. These three demographic factors are significant drivers of demand for aggregates. While aggregates is our focus and primary business, we produce and sell asphalt mix and/or ready-mixed concrete in our Alabama, Arizona, California, Maryland, New Mexico, Tennessee, Texas, Virginia and Washington D.C. markets.
BASIS OF PRESENTATION
Our accompanying unaudited condensed consolidated financial statements were prepared in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. We prepared the accompanying condensed consolidated financial statements on the same basis as our annual financial statements, except for the adoption of new accounting standards as described in Note 17. Our Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from the audited financial statement, but it does not include all disclosures required by GAAP. In the opinion of our management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. For further information, refer to the consolidated financial statements and footnotes included in our most recent Annual Report on Form 10-K. Operating results for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, particularly in light of the uncertainty over the economic and operational impacts of the current novel coronavirus (COVID-19) pandemic as construction activity continues to be impacted by capacity constraints (supply chain bottlenecks, labor shortages and transportation availability) and cost inflation.
Our condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues and expenses. Such estimates and assumptions affect, among other things, our goodwill and long-lived asset valuations; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes; allowance for doubtful accounts; measurement of cash bonus plans; and pension plan assumptions. Events and changes in circumstances arising after June 30, 2021, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.
Due to the 2005 sale of our Chemicals business as described within this Note under the caption Discontinued Operations, the results of the Chemicals business are presented as discontinued operations in the accompanying Condensed Consolidated Statements of Comprehensive Income.
RESTRICTED CASH
Restricted cash primarily consists of cash proceeds from the sale of property held in escrow for the acquisition of replacement property under like-kind exchange agreements. The escrow accounts are administered by an intermediary. Cash restricted pursuant to like-kind exchange agreements remains restricted for a maximum of 180 days from the date of the property sale pending the acquisition of replacement property. Restricted cash may also include cash reserved by other contractual agreements (such as asset purchase agreements) for a specified purpose and therefore is not available for use for other purposes. Restricted cash is included with cash and cash equivalents in the accompanying Condensed Consolidated Statements of Cash Flows.
DISCONTINUED OPERATIONS
In 2005, we sold substantially all the assets of our Chemicals business to Basic Chemicals, a subsidiary of Occidental Chemical Corporation. The financial results of the Chemicals business are classified as discontinued operations in the accompanying Condensed Consolidated Statements of Comprehensive Income for all periods presented. Results from discontinued operations are as follows:
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Three Months Ended |
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Six Months Ended |
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June 30 |
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June 30 |
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in thousands |
2021 |
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2020 |
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2021 |
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2020 |
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Discontinued Operations |
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Pretax loss |
$ (1,935) |
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$ (1,412) |
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$ (3,358) |
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$ (1,058) |
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Income tax benefit |
499 |
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371 |
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867 |
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277 |
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Loss on discontinued operations, |
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net of tax |
$ (1,436) |
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$ (1,041) |
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$ (2,491) |
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$ (781) |
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Our discontinued operations include charges/credits related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business (including certain matters as discussed in Note 8). There were no revenues from discontinued operations for the periods presented.
EARNINGS PER SHARE (EPS)
Earnings per share are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS), as set forth below:
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Three Months Ended |
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Six Months Ended |
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June 30 |
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June 30 |
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in thousands |
2021 |
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2020 |
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2021 |
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2020 |
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Weighted-average common shares |
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outstanding |
132,781 |
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132,552 |
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132,765 |
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132,560 |
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Dilutive effect of |
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Stock-Only Stock Appreciation Rights |
318 |
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271 |
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309 |
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307 |
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Other stock compensation plans |
408 |
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292 |
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381 |
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287 |
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Weighted-average common shares |
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outstanding, assuming dilution |
133,507 |
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133,115 |
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133,455 |
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133,154 |
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All dilutive common stock equivalents are reflected in our earnings per share calculations. In periods of loss, shares that otherwise would have been included in our diluted weighted-average common shares outstanding computation would be excluded.
Antidilutive common stock equivalents are not included in our earnings per share calculations. The number of antidilutive common stock equivalents for which the exercise price exceeds the weighted-average market price is as follows:
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Three Months Ended |
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Six Months Ended |
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June 30 |
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June 30 |
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in thousands |
2021 |
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2020 |
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2021 |
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2020 |
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Antidilutive common stock equivalents |
67 |
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296 |
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67 |
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275 |
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Note 2: Leases
Our portfolio of nonmineral leases is composed of leases for real estate (including office buildings, aggregates sales yards, and concrete and asphalt sites) and equipment (including railcars and rail track, barges, office equipment and plant equipment).
Lease right-of-use (ROU) assets and liabilities and the weighted-average lease terms and discount rates are as follows:
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June 30 |
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December 31 |
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June 30 |
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in thousands |
Classification on the Balance Sheet |
2021 |
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2020 |
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2020 |
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Assets |
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Operating lease ROU assets |
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$ 530,760 |
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$ 482,513 |
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$ 472,003 |
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Accumulated amortization |
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(65,995) |
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(59,385) |
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(45,385) |
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Operating leases, net |
Operating lease right-of-use assets, net |
464,765 |
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423,128 |
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426,618 |
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Finance lease assets |
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11,061 |
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7,796 |
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6,223 |
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Accumulated amortization |
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(2,970) |
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(1,640) |
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(737) |
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Finance leases, net |
Property, plant & equipment, net |
8,091 |
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6,156 |
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5,486 |
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Total lease assets |
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$ 472,856 |
|
|
$ 429,284 |
|
|
$ 432,104 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
Operating |
Other current liabilities |
$ 36,694 |
|
|
$ 36,969 |
|
|
$ 32,645 |
|
|
Finance |
Other current liabilities |
2,815 |
|
|
2,047 |
|
|
1,695 |
|
|
Noncurrent |
|
|
|
|
|
|
|
|
|
|
Operating |
Noncurrent operating lease liabilities |
443,128 |
|
|
399,582 |
|
|
405,578 |
|
|
Finance |
Other noncurrent liabilities |
5,325 |
|
|
4,139 |
|
|
3,807 |
|
|
Total lease liabilities |
|
$ 487,962 |
|
|
$ 442,737 |
|
|
$ 443,725 |
|
|
Lease Term and Discount Rate |
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
|
|
Operating leases |
9.1 |
|
|
9.5 |
|
|
10.4 |
|
|
|
Finance leases |
3.8 |
|
|
4.2 |
|
|
4.4 |
|
|
|
Weighted-average discount rate |
|
|
|
|
|
|
|
|
|
|
Operating leases |
3.3% |
|
|
3.6% |
|
|
4.1% |
|
|
|
Finance leases |
1.3% |
|
|
1.4% |
|
|
1.5% |
|
|
Our lease agreements do not contain residual value guarantees, restrictive covenants or early termination options that we deem material. We have not sought or been granted any material lease concessions as a result of the COVID-19 pandemic.
The components of lease expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|||||||
|
|
June 30 |
|
|
June 30 |
||||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
Lease Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
$ 699 |
|
|
$ 369 |
|
|
$ 1,330 |
|
|
$ 673 |
|
|
|
Interest on lease liabilities |
30 |
|
|
25 |
|
|
60 |
|
|
47 |
|
|
|
Operating lease cost |
15,517 |
|
|
14,234 |
|
|
30,809 |
|
|
28,340 |
|
|
|
Short-term lease cost 1 |
5,345 |
|
|
7,676 |
|
|
10,447 |
|
|
16,721 |
|
|
|
Variable lease cost |
2,779 |
|
|
3,773 |
|
|
5,470 |
|
|
6,905 |
|
|
|
Sublease income |
(834) |
|
|
(721) |
|
|
(1,657) |
|
|
(1,456) |
|
|
|
Total lease cost |
$ 23,536 |
|
|
$ 25,356 |
|
|
$ 46,459 |
|
|
$ 51,230 |
|
|
|
|
|
|
1 |
Our short-term lease cost includes the cost of leases with an initial term of one month or less. |
|
|
|
Cash paid for operating leases was $28,738,000 and $26,559,000 for the six months ended June 30, 2021 and 2020, respectively. Cash paid for finance leases was $1,310,000 and $658,000 for the six months ended June 30, 2021 and 2020, respectively.
Note 3: Income Taxes
Our estimated annual effective tax rate (EAETR) is based on full-year expectations of pretax earnings, statutory tax rates, permanent differences between book and tax accounting such as percentage depletion, and tax planning alternatives available in the various jurisdictions in which we operate. For interim financial reporting, we calculate our quarterly income tax provision in accordance with the EAETR. Each quarter, we update our EAETR based on our revised full-year expectation of pretax earnings and calculate the income tax provision so that the year-to-date income tax provision reflects the EAETR. Significant judgment is required in determining our EAETR.
In the second quarter of 2021, we recorded income tax expense from continuing operations of $57,283,000 compared to $61,352,000 in the second quarter of 2020. The decrease in tax expense was primarily related to a decrease in pretax earnings.
For the first six months of 2021, we recorded income tax expense from continuing operations of $117,922,000 compared to $73,546,000 for the first six months of 2020. The increase in tax expense was primarily related to an increase in pretax earnings and an increase in the Alabama net operating loss (NOL) valuation allowance.
In February 2021, the Alabama Business Competitiveness Act was signed into law. This Act contained a provision requiring most taxpayers to change from a three-factor, double-weighted sales method to a single-sales factor method to apportion income to Alabama. This provision had the effect of significantly reducing our apportionment of income to Alabama, thereby further inhibiting our ability to utilize our Alabama NOL carryforward. As a result, we recorded a charge in the first quarter to increase the valuation allowance by $13,695,000. No other material tax impacts resulted from the enactment of this Act.
We recognize deferred tax assets and liabilities (which reflect our best assessment of the future taxes we will pay) based on the differences between the book basis and tax basis of assets and liabilities. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns while deferred tax liabilities represent items that will result in additional tax in future tax returns. A summary of our deferred tax assets and liabilities is included in Note 9 “Income Taxes” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Each quarter we analyze the likelihood that our deferred tax assets will be realized. Realization of the deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in either the carryback or carryforward period. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that some portion, or all, of a deferred tax asset will not be realized. We project Alabama NOL carryforward deferred tax assets at December 31, 2021 of $63,155,000 against which we have a valuation allowance of $42,931,000 (after considering the Act). Almost all of the Alabama NOL carryforward would expire between 2023 and 2029 if not utilized.
We recognize a tax benefit associated with a tax position when, in our judgment, it is more likely than not that the position will be sustained based upon the technical merits of the position. For a tax position that meets the more likely than not recognition threshold, we measure the income tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized. A liability is established for the unrecognized portion of any tax benefit. Our liability for unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe our liability for unrecognized tax benefits is appropriate.
Note 4: revenueS
Revenues are measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales and other taxes we collect are recorded as liabilities until remitted and thus are excluded from revenues. Costs to obtain and fulfill contracts (primarily asphalt construction paving contracts) are immaterial and are expensed as incurred when the expected amortization period is one year or less.
Our segment total revenues by geographic market for the three and six month periods ended June 30, 2021 and 2020 are disaggregated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|||||||||||||
|
in thousands |
Aggregates |
|
|
Asphalt |
|
|
Concrete |
|
|
Calcium |
|
|
Total |
|
|
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
$ 354,415 |
|
|
$ 42,797 |
|
|
$ 66,265 |
|
|
$ 0 |
|
|
$ 463,477 |
|
|
Gulf Coast |
607,514 |
|
|
46,075 |
|
|
18,618 |
|
|
1,960 |
|
|
674,167 |
|
|
West |
163,438 |
|
|
123,705 |
|
|
11,318 |
|
|
0 |
|
|
298,461 |
|
|
Segment sales |
$ 1,125,367 |
|
|
$ 212,577 |
|
|
$ 96,201 |
|
|
$ 1,960 |
|
|
$ 1,436,105 |
|
|
Intersegment sales |
(75,058) |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(75,058) |
|
|
Total revenues |
$ 1,050,309 |
|
|
$ 212,577 |
|
|
$ 96,201 |
|
|
$ 1,960 |
|
|
$ 1,361,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|||||||||||||
|
in thousands |
Aggregates |
|
|
Asphalt |
|
|
Concrete |
|
|
Calcium |
|
|
Total |
|
|
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
$ 350,238 |
|
|
$ 37,956 |
|
|
$ 71,653 |
|
|
$ 0 |
|
|
$ 459,847 |
|
|
Gulf Coast |
567,811 |
|
|
50,503 |
|
|
17,946 |
|
|
1,889 |
|
|
638,149 |
|
|
West |
152,547 |
|
|
134,491 |
|
|
11,084 |
|
|
0 |
|
|
298,122 |
|
|
Segment sales |
$ 1,070,596 |
|
|
$ 222,950 |
|
|
$ 100,683 |
|
|
$ 1,889 |
|
|
$ 1,396,118 |
|
|
Intersegment sales |
(73,543) |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(73,543) |
|
|
Total revenues |
$ 997,053 |
|
|
$ 222,950 |
|
|
$ 100,683 |
|
|
$ 1,889 |
|
|
$ 1,322,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
|||||||||||||
|
in thousands |
Aggregates |
|
|
Asphalt |
|
|
Concrete |
|
|
Calcium |
|
|
Total |
|
|
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
$ 597,766 |
|
|
$ 60,197 |
|
|
$ 121,354 |
|
|
$ 0 |
|
|
$ 779,317 |
|
|
Gulf Coast |
1,126,368 |
|
|
87,488 |
|
|
36,026 |
|
|
4,020 |
|
|
1,253,902 |
|
|
West |
296,142 |
|
|
212,059 |
|
|
20,180 |
|
|
0 |
|
|
528,381 |
|
|
Segment sales |
$ 2,020,276 |
|
|
$ 359,744 |
|
|
$ 177,560 |
|
|
$ 4,020 |
|
|
$ 2,561,600 |
|
|
Intersegment sales |
(132,209) |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(132,209) |
|
|
Total revenues |
$ 1,888,067 |
|
|
$ 359,744 |
|
|
$ 177,560 |
|
|
$ 4,020 |
|
|
$ 2,429,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
|||||||||||||
|
in thousands |
Aggregates |
|
|
Asphalt |
|
|
Concrete |
|
|
Calcium |
|
|
Total |
|
|
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East |
$ 590,106 |
|
|
$ 55,839 |
|
|
$ 133,772 |
|
|
$ 0 |
|
|
$ 779,717 |
|
|
Gulf Coast |
1,061,107 |
|
|
84,358 |
|
|
34,911 |
|
|
3,915 |
|
|
1,184,291 |
|
|
West |
287,609 |
|
|
222,542 |
|
|
26,765 |
|
|
0 |
|
|
536,916 |
|
|
Segment sales |
$ 1,938,822 |
|
|
$ 362,739 |
|
|
$ 195,448 |
|
|
$ 3,915 |
|
|
$ 2,500,924 |
|
|
Intersegment sales |
(129,107) |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(129,107) |
|
|
Total revenues |
$ 1,809,715 |
|
|
$ 362,739 |
|
|
$ 195,448 |
|
|
$ 3,915 |
|
|
$ 2,371,817 |
|
|
|
|
|
|
1 |
The geographic markets are defined by states/countries as follows: |
|
|
|
|
East market — Arkansas, Delaware, Illinois, Kentucky, Maryland, North Carolina, Pennsylvania, Tennessee, Virginia, and Washington D.C. Gulf Coast market — Alabama, Florida, Georgia, Louisiana, Mexico, Mississippi, Oklahoma, South Carolina and Texas West market — Arizona, California and New Mexico |
Total revenues are primarily derived from our product sales of aggregates (crushed stone, sand and gravel, sand and other aggregates), asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and service revenues related to our aggregates business, such as landfill tipping fees. Our total service revenues were $60,778,000 (4.5% of total revenues) and $57,374,000 (4.3% of total revenues) for the three months ended June 30, 2021 and 2020, respectively, and $102,018,000 (4.2% of total revenues) and $96,938,000 (4.1% of total revenues) for the six months ended June 30, 2021 and 2020, respectively.
Our products typically are sold to private industry and not directly to governmental entities. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly-funded construction, such as highways, airports and government buildings, relatively insignificant sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly-funded construction, the vast majority of our aggregates business is not directly subject to renegotiation of profits or termination of contracts with state or federal governments.
PRODUCT REVENUES
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs at a point in time when our aggregates, asphalt mix and ready-mixed concrete are shipped/delivered and control passes to the customer. Revenue for our products is recorded at the fixed invoice amount and payment is due by the 15th day of the following month — we do not offer discounts for early payment.
Freight & delivery generally represents pass-through transportation we incur (including our administrative costs) and pay to third-party carriers to deliver our products to customers and are accounted for as a fulfillment activity. Likewise, the costs related to freight & delivery are included in cost of revenues.
Freight & delivery revenues are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Freight & Delivery Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
$ 1,361,047 |
|
|
$ 1,322,575 |
|
|
$ 2,429,391 |
|
|
$ 2,371,817 |
|
|
Freight & delivery revenues 1 |
(195,060) |
|
|
(202,855) |
|
|
(358,468) |
|
|
(379,223) |
|
|
Total revenues excluding freight & delivery |
$ 1,165,987 |
|
|
$ 1,119,720 |
|
|
$ 2,070,923 |
|
|
$ 1,992,594 |
|
|
|
|
|
1 |
Includes freight & delivery to remote distribution sites. |
CONSTRUCTION PAVING SERVICE REVENUES
Revenue from our asphalt construction paving business is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by costs incurred to date as a percentage of total costs estimated for the project. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced, and an account receivable is recorded for amounts invoiced based on actual units produced. Contract assets for estimated earnings in excess of billings, contract assets related to retainage provisions and contract liabilities for billings in excess of costs are immaterial. Variable consideration in our construction paving contracts is immaterial and consists of incentives and penalties based on the quality of work performed. Our construction paving contracts may contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from nine months to one year after project completion. Due to the nature of our construction paving projects, including contract owner inspections of the work during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties.
VOLUMETRIC PRODUCTION PAYMENT DEFERRED REVENUES
In 2013 and 2012, we sold a percentage interest in certain future aggregates production for net cash proceeds of $226,926,000. These transactions, structured as volumetric production payments (VPPs):
relate to eight quarries in Georgia and South Carolina
provide the purchaser solely with a nonoperating percentage interest in the subject quarries’ future aggregates production
contain no minimum annual or cumulative guarantees by us for production or sales volume, nor minimum sales price
are both volume and time limited (we expect the transactions will last approximately 20 years, limited by volume rather than time)
We are the exclusive sales agent for, and transmit quarterly to the purchaser the proceeds from the sale of, the purchaser’s share of aggregates production. Our consolidated total revenues exclude the revenue from the sale of the purchaser’s share of aggregates.
The proceeds we received from the sale of the percentage interest were recorded as deferred revenue on the balance sheet. We recognize revenue on a unit-of-sales basis (as we sell the purchaser’s share of production) relative to the volume limitations of the transactions. Given the nature of the risks and potential rewards assumed by the buyer, the transactions do not reflect financing activities.
Reconciliation of the VPP deferred revenue balances (current and noncurrent) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Deferred Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
$ 176,293 |
|
|
$ 183,997 |
|
|
$ 177,962 |
|
|
$ 185,339 |
|
|
Revenue recognized from deferred revenue |
(2,217) |
|
|
(2,034) |
|
|
(3,886) |
|
|
(3,376) |
|
|
Balance at end of period |
$ 174,076 |
|
|
$ 181,963 |
|
|
$ 174,076 |
|
|
$ 181,963 |
|
Based on expected sales from the specified quarries, we expect to recognize $7,500,000 of VPP deferred revenue as income during the 12-month period ending June 30, 2022 (reflected in other current liabilities in our June 30, 2021 Condensed Consolidated Balance Sheet).
Note 5: Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as described below:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs that are derived principally from or corroborated by observable market data
Level 3: Inputs that are unobservable and significant to the overall fair value measurement
Our assets subject to fair value measurement on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 Fair Value |
|||||||
|
|
June 30 |
|
|
December 31 |
|
|
June 30 |
|
|
in thousands |
2021 |
|
|
2020 |
|
|
2020 |
|
|
Fair Value Recurring |
|
|
|
|
|
|
|
|
|
Rabbi Trust |
|
|
|
|
|
|
|
|
|
Mutual funds |
$ 31,190 |
|
|
$ 28,058 |
|
|
$ 21,994 |
|
|
Total |
$ 31,190 |
|
|
$ 28,058 |
|
|
$ 21,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 Fair Value |
|||||||
|
|
June 30 |
|
|
December 31 |
|
|
June 30 |
|
|
in thousands |
2021 |
|
|
2020 |
|
|
2020 |
|
|
Fair Value Recurring |
|
|
|
|
|
|
|
|
|
Rabbi Trust |
|
|
|
|
|
|
|
|
|
Money market mutual fund |
$ 1,249 |
|
|
$ 837 |
|
|
$ 1,738 |
|
|
Total |
$ 1,249 |
|
|
$ 837 |
|
|
$ 1,738 |
|
We have two Rabbi Trusts for the purpose of providing a level of security for the employee nonqualified retirement and deferred compensation plans and for the directors' nonqualified deferred compensation plans. The fair values of these investments are estimated using a market approach. The Level 1 investments include mutual funds for which quoted prices in active markets are available. Level 2 investments are stated at estimated fair value based on the underlying investments in the fund (high-quality, short-term, U.S. dollar-denominated money market instruments).
Net gains (losses) of the Rabbi Trusts’ investments were $3,382,000 and $(998,000) for the six months ended June 30, 2021 and 2020, respectively. The portions of the net gains (losses) related to investments still held by the Rabbi Trusts at June 30, 2021 and 2020 were $3,028,000 and $(990,000), respectively.
Interest rate swaps are measured at fair value using quoted market prices or pricing models that use prevailing market interest rates as of the measurement date. These interest rate swaps are more fully described in Note 6.
The carrying values of our cash equivalents, restricted cash, accounts and notes receivable, short-term debt, trade payables and accruals, and all other current liabilities approximate their fair values because of the short-term nature of these instruments. Additional disclosures for derivative instruments and interest-bearing debt are presented in Notes 6 and 7, respectively.
Note 6: Derivative Instruments
During the normal course of operations, we are exposed to market risks including interest rates, foreign currency exchange rates and commodity prices. From time to time, we use derivative instruments to balance the cost and risk of such exposures. We do not use derivative instruments for trading or other speculative purposes.
In 2007, 2018 and 2020, we entered into interest rate locks of future debt issuances to hedge the risk of higher interest rates. These interest rate locks were designated as cash flow hedges. The gain/loss upon settlement of these interest rate hedges is deferred (recorded in accumulated other comprehensive income (AOCI)) and amortized to interest expense over the term of the related debt.
This amortization was reflected in the accompanying Condensed Consolidated Statements of Comprehensive Income as follows:
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Three Months Ended |
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|
Six Months Ended |
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||||||
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Location on |
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
Statement |
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2021 |
|
|
2020 |
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|
2021 |
|
|
2020 |
|
|
Interest Rate Hedges |
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|
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|
|
|
|
|
|
|
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|
|
|
Loss reclassified from AOCI |
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
(effective portion) |
expense |
|
$ (487) |
|
|
$ (263) |
|
|
$ (969) |
|
|
$ (1,337) |
|
For the 12-month period ending June 30, 2022, we estimate that $2,005,000 of the $23,227,000 net of tax loss in AOCI will be reclassified to interest expense.
Note 7: Debt
Debt is detailed as follows:
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|
Effective |
|
June 30 |
|
December 31 |
|
|
June 30 |
|
|
|
in thousands |
Interest Rates |
|
2021 |
|
2020 |
|
|
2020 |
|
|||
|
Short-term Debt |
|
|
|
|
|
|
|
|
|
|
||
|
Bank line of credit expires 2025 1 |
|
|
$ 0 |
|
|
$ 0 |
|
|
$ 0 |
|
||
|
Total short-term debt |
|
|
$ 0 |
|
|
$ 0 |
|
|
$ 0 |
|
||
|
Long-term Debt |
|
|
|
|
|
|
|
|
|
|
||
|
Delayed draw term loan expires 2024 |
|
|
$ 0 |
|
|
$ 0 |
|
|
$ 0 |
|
||
|
Bank line of credit expires 2025 1 |
|
|
0 |
|
|
0 |
|
|
0 |
|
||
|
Floating-rate notes due 2021 |
|
|
0 |
|
|
500,000 |
|
|
500,000 |
|
||
|
8.85% notes due 2021 |
8.88% |
|
6,000 |
|
|
6,000 |
|
|
6,000 |
|
||
|
4.50% notes due 2025 |
4.65% |
|
400,000 |
|
|
400,000 |
|
|
400,000 |
|
||
|
3.90% notes due 2027 |
4.00% |
|
400,000 |
|
|
400,000 |
|
|
400,000 |
|
||
|
3.50% notes due 2030 |
3.94% |
|
750,000 |
|
|
750,000 |
|
|
750,000 |
|
||
|
7.15% notes due 2037 |
8.05% |
|
129,239 |
|
|
129,239 |
|
|
129,239 |
|
||
|
4.50% notes due 2047 |
4.59% |
|
700,000 |
|
|
700,000 |
|
|
700,000 |
|
||
|
4.70% notes due 2048 |
5.42% |
|
460,949 |
|
|
460,949 |
|
|
460,949 |
|
||
|
Other notes |
0.88% |
|
11,270 |
|
|
11,711 |
|
|
9,153 |
|
||
|
Total long-term debt - face value |
|
|
$ 2,857,458 |
|
|
$ 3,357,899 |
|
|
$ 3,355,341 |
|
||
|
Unamortized discounts and debt issuance costs |
|
|
(72,130) |
|
|
(70,224) |
|
|
(69,669) |
|
||
|
Total long-term debt - book value |
|
|
$ 2,785,328 |
|
|
$ 3,287,675 |
|
|
$ 3,285,672 |
|
||
|
Less current maturities |
|
|
15,436 |
|
|
515,435 |
|
|
500,026 |
|
||
|
Total long-term debt - reported value |
|
|
$ 2,769,892 |
|
|
$ 2,772,240 |
|
|
$ 2,785,646 |
|
||
|
Estimated fair value of long-term debt |
|
|
$ 3,345,392 |
|
|
$ 3,443,225 |
|
|
$ 3,225,468 |
|
||
|
|
|
|
1 |
Borrowings on the bank line of credit are classified as short-term if we intend to repay within twelve months and as long-term if we have the intent and ability to extend payment beyond twelve months. |
Discounts and debt issuance costs are amortized using the effective interest method over the terms of the respective notes resulting in $11,380,000 and $3,126,000 of net interest expense for these items for the six months ended June 30, 2021 and 2020, respectively.
BRIDGE FACILITY, DELAYED DRAW TERM LOAN AND LINE OF CREDIT
In June 2021, concurrent with the announcement of the proposed acquisition of U.S. Concrete (see Note 16 for additional information), we obtained a $2,200,000,000 bridge facility commitment from Truist Bank. Later, in June 2021, we entered into a $1,600,000,000 delayed draw term loan facility with a subset of the banks that provide our line of credit. The bridge facility commitment was terminated as a condition to the execution of the delayed draw term loan facility. The delayed draw term loan may be drawn once upon the acquisition of U.S. Concrete and all borrowings are due three years from the funding
date. The delayed draw term loan contains covenants customary for an unsecured investment-grade facility and mirror those in our line of credit. As of June 30, 2021, we were in compliance with the delayed draw term loan covenants.
Financing costs for the bridge facility commitment and the delayed draw term loan facility totaled $13,316,000, $9,384,000 of which was recognized as interest expense in the current quarter. Borrowings on the delayed draw term loan bear interest, at our option, at either LIBOR plus a credit margin ranging from 0.875% to 1.375%, or Truist Bank’s base rate (generally, its prime rate) plus a credit margin ranging from 0.000% to 0.375%. We also pay a commitment fee on the delayed draw term loan until it is drawn that ranges from 0.090% to 0.225%. The credit margins and commitment fee are determined by our credit ratings. As of June 30, 2021, the credit margin for LIBOR borrowings was 1.000%, the credit margin for base rate borrowings was 0.000% and the commitment fee was 0.100%.
In September 2020, we executed a new five-year unsecured line of credit of $1,000,000,000, incurring $4,632,000 of deferred transaction costs. The line of credit contains covenants customary for an unsecured investment-grade facility. As of June 30, 2021, we were in compliance with the line of credit covenants.
Borrowings on the line of credit bear interest, at our option, at either LIBOR plus a credit margin ranging from 1.000% to 1.625%, or Truist Bank’s base rate (generally, its prime rate) plus a credit margin ranging from 0.000% to 0.625%. The credit margin for both LIBOR and base rate borrowings is determined by our credit ratings. Standby letters of credit, which are issued under the line of credit and reduce availability, are charged a fee equal to the credit margin for LIBOR borrowings plus 0.175%. We also pay a commitment fee on the daily average unused amount of the line of credit that ranges from 0.090% to 0.225% determined by our credit ratings. As of June 30, 2021, the credit margin for LIBOR borrowings was 1.125%, the credit margin for base rate borrowings was 0.125%, and the commitment fee for the unused amount was 0.100%.
As of June 30, 2021, our available borrowing capacity under the line of credit was $942,715,000. Utilization of the borrowing capacity was as follows:
none was borrowed
$57,285,000 was used to provide support for outstanding standby letters of credit
TERM DEBT
All of our $2,857,458,000 (face value) of term debt is unsecured. $2,846,188,000 of such debt is governed by three essentially identical indentures that contain customary investment-grade type covenants. As of June 30, 2021, we were in compliance with all term debt covenants.
In May 2020, we issued $750,000,000 of 3.50% senior notes due 2030. Total proceeds were $741,417,000 (net of discounts and transaction costs). $250,000,000 of the proceeds were used to retire the $250,000,000 floating rate notes due June 2020. The remainder of the proceeds, together with cash on hand, was used to retire the $500,000,000 floating rate notes due March 2021.
STANDBY LETTERS OF CREDIT
We provide, in the normal course of business, certain third-party beneficiaries with standby letters of credit to support our obligations to pay or perform according to the requirements of an underlying agreement. Such letters of credit typically have an initial term of one year, typically renew automatically, and can only be modified or canceled with the approval of the beneficiary. All of our standby letters of credit are issued by banks that participate in our $1,000,000,000 line of credit, and reduce the borrowing capacity thereunder. Our standby letters of credit as of June 30, 2021 are summarized by purpose in the table below:
|
|
|
|
|
|
|
|
|
in thousands |
|
|
|
Standby Letters of Credit |
|
|
|
Risk management insurance |
$ 48,982 |
|
|
Reclamation/restoration requirements |
8,303 |
|
|
Total |
$ 57,285 |
|
Note 8: Commitments and Contingencies
Certain of our aggregates reserves are burdened by volumetric production payments (nonoperating interest) as described in Note 4. As the holder of the working interest, we have responsibility to bear the cost of mining and producing the reserves attributable to this nonoperating interest.
As stated in Note 2, our lease liabilities totaled $487,962,000 as of June 30, 2021.
As summarized by purpose in Note 7, our standby letters of credit totaled $57,285,000 as of June 30, 2021.
As described in Note 9, our asset retirement obligations totaled $286,435,000 as of June 30, 2021.
LITIGATION AND ENVIRONMENTAL MATTERS
We are subject to occasional governmental proceedings and orders pertaining to occupational safety and health or to protection of the environment, such as proceedings or orders relating to noise abatement, air emissions or water discharges. As part of our continuing program of stewardship in safety, health and environmental matters, we have been able to resolve such proceedings and to comply with such orders without any material adverse effects on our business.
We have received notices from the United States Environmental Protection Agency (EPA) or similar state or local agencies that we are considered a potentially responsible party (PRP) at a limited number of sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) or similar state and local environmental laws. Generally, we share the cost of remediation at these sites with other PRPs or alleged PRPs in accordance with negotiated or prescribed allocations. There is inherent uncertainty in determining the potential cost of remediating a given site and in determining any individual party's share in that cost. As a result, estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, remediation methods, other PRPs and their probable level of involvement, and actions by or against governmental agencies or private parties.
We have reviewed the nature and extent of our involvement at each Superfund site, as well as potential obligations arising under other federal, state and local environmental laws. While ultimate resolution and financial liability is uncertain at a number of the sites, in our opinion based on information currently available, the ultimate resolution of claims and assessments related to these sites will not have a material effect on our consolidated results of operations, financial position or cash flows, although amounts recorded in a given period could be material to our results of operations or cash flows for that period. Amounts accrued for environmental matters (measured on an undiscounted basis) are presented below:
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
|
June 30 |
||
|
in thousands |
2021 |
|
2020 |
|
|
2020 |
||||
|
Accrued Environmental Remediation Costs |
|
|
|
|
|
|
|
|
||
|
Continuing operations |
$ 25,543 |
|
|
$ 25,544 |
|
|
$ 22,743 |
|
||
|
Retained from former Chemicals business |
10,870 |
|
|
10,971 |
|
|
10,846 |
|
||
|
Total |
$ 36,413 |
|
|
$ 36,515 |
|
|
$ 33,589 |
|
||
We are a defendant in various lawsuits in the ordinary course of business. It is not possible to determine with precision the outcome, or the amount of liability, if any, under these lawsuits, especially where the cases involve possible jury trials with as yet undetermined jury panels.
In addition to these lawsuits in which we are involved in the ordinary course of business, certain other material legal proceedings are more specifically described below:
■ Lower Passaic River Study Area (DISCONTINUED OPERATIONS and superfund site) — The Lower Passaic River Study Area is part of the Diamond Shamrock Superfund Site in New Jersey. Vulcan and approximately 70 other companies are parties (collectively the Cooperating Parties Group, CPG) to a May 2007 Administrative Order on Consent (AOC) with the EPA to perform a Remedial Investigation/Feasibility Study (draft RI/FS) of the lower 17 miles of the Passaic River (River). The draft RI/FS was submitted recommending a targeted hot spot remedy; however, the EPA issued a record of decision (ROD) in March 2016 that calls for a bank-to-bank dredging remedy for the lower 8 miles of the River. The EPA estimates that the cost of implementing this proposal is $1.38 billion. In September 2016, the EPA entered into an Administrative Settlement Agreement and Order on Consent with Occidental Chemical Corporation (Occidental) in which Occidental agreed to undertake the remedial design for this bank-to-bank dredging remedy and to reimburse the United States for certain response costs.
Efforts to investigate and remediate the River have been underway for many years and have involved hundreds of entities that have had operations on or near the River at some point during the past several decades. We formerly owned a chemicals operation near the mouth of the River, which was sold in 1974. The major risk drivers in the River have been identified to include dioxins, PCBs, DDx and mercury. We did not manufacture any of these risk drivers and have no evidence that any of these were discharged into the River by Vulcan.
In August 2017, the EPA informed certain members of the CPG, including Vulcan, that it planned to use the services of a third-party allocator with the expectation of offering cash-out settlements to some parties in connection with the bank-to-bank remedy identified in the ROD. This voluntary allocation process is intended to establish an impartial third-party expert recommendation that may be considered by the government and the participants as the basis of possible settlements, including settlements related to future remediation actions. The final allocation recommendations, which are subject to confidentiality provisions, were submitted to the EPA for its review and consideration in late December 2020. Certain PRPs, including Vulcan, have since received a joint confidential settlement demand from the EPA/DOJ. The demand will be subject to further negotiation. If the PRPs who received the joint confidential settlement demand use the allocator’s recommendation as the basis to allocate the demand amongst themselves, Vulcan’s portion would be within the immaterial loss recorded for this matter in 2015.
In July 2018, Vulcan, along with more than one hundred other defendants, was sued by Occidental in United States District Court for the District of New Jersey, Newark Vicinage. Occidental is seeking cost recovery and contribution under CERCLA. It is unknown at this time how the proposed settlement with the EPA/DOJ would affect the Occidental lawsuit.
■ TEXAS BRINE MATTER (DISCONTINUED OPERATIONS) — During the operation of its former Chemicals Division, Vulcan secured the right to mine salt out of an underground salt dome formation in Assumption Parish, Louisiana from 1976 - 2005. Throughout that period, the Texas Brine Company (Texas Brine) was the operator contracted by Vulcan (and later Occidental Chemical Company (Occidental)) to mine and deliver the salt. We sold our Chemicals Division in 2005 and transferred our rights and interests related to the salt and mining operations to the purchaser, a subsidiary of Occidental, and we have had no association with the leased premises or Texas Brine since that time. In August 2012, a sinkhole developed in the vicinity of the Texas Brine mining operations, and numerous lawsuits were filed in state court in Assumption Parish, Louisiana. Other lawsuits, including class action litigation, were also filed in federal court before the Eastern District of Louisiana in New Orleans.
There have been numerous defendants, including Texas Brine and Occidental, to the litigation in state and federal court. Vulcan was first brought into the litigation as a third-party defendant in August 2013 by Texas Brine. We have since been added as a direct and third-party defendant by other parties, including a direct claim by the state of Louisiana. Damage categories encompassed within the litigation include, but are not limited to, individual plaintiffs’ claims for property damage; a claim by the state of Louisiana for response costs and civil penalties; claims by Texas Brine for past and future response costs, lost profits and investment costs, indemnity payments, attorneys’ fees, other litigation costs and judicial interests; claims for physical damages to nearby oil and gas pipelines and storage facilities (pipelines); and business interruption claims.
In addition to the plaintiffs’ claims, we were also sued for contractual indemnity and comparative fault by both Texas Brine and Occidental. It is alleged that the sinkhole was caused, in whole or in part, by our negligent or fraudulent actions or failure to act. It is also alleged that we breached the salt lease with Occidental, as well as an operating agreement and related contracts with Texas Brine; that we are strictly liable for certain property damages in our capacity as a former lessee of the salt lease; and that we violated certain covenants and conditions in the agreement under which we sold our Chemicals Division to Occidental. We likewise made claims for contractual indemnity and on a basis of comparative fault against Texas Brine and Occidental. Vulcan and Occidental have since dismissed all of their claims against one another. Texas Brine has claims that remain pending against Vulcan and against Occidental.
A joint bench trial (judge only) began in September 2017 and ended in October 2017 in the pipeline cases. The trial was limited in scope to the allocation of comparative fault or liability for causing the sinkhole, with a damages phase of the trial to be held at a later date. In December 2017, the judge issued a ruling on the allocation of fault among the three defendants as follows: Occidental 50%, Texas Brine 35% (and its wholly-owned subsidiary) and Vulcan 15%. This ruling was appealed by the parties in each of the pipeline cases. In December 2020, the Louisiana Court of Appeal, First Circuit issued its Notice of Judgment and Disposition in one of the pipeline cases reversing in part and amending the trial court judgment to reallocate 20% of the fault from Occidental to Texas Brine, with the result that 30% of the fault is now allocated to Occidental and 55% of the fault is now allocated to Texas Brine (and its wholly-owned subsidiary). The Court of Appeal affirmed the 15% fault allocation to Vulcan. The Court of Appeal made various other findings, including findings related to the arbitrability of certain claims between Occidental and Texas Brine. In March 2021, Texas Brine and Vulcan
each filed a writ application with the Louisiana Supreme Court seeking review of various portions of the lower court decision, including fault allocations. In May 2021, the Court of Appeal issued a ruling in one of the other two pipeline cases, assigning the same allocation of fault between the parties. On June 8, 2021, the Louisiana Supreme Court denied the parties’ March 2021 writ applications in one of the three pipeline cases. Appeal and writ proceedings remain ongoing in connection with all three pipeline cases.
We have settled claims by all plaintiffs except in two outstanding cases, and our insurers to date have funded these settlements in excess of our self-insured retention amount. The remaining claims involve Texas Brine and the State of Louisiana. Discovery remains ongoing and we cannot reasonably estimate a range of liability pertaining to these open cases at this time.
■ NEW YORK WATER DISTRICT CASES (DISCONTINUED OPERATIONS) — During the operation of our former Chemicals Division, which was divested to Occidental in 2005, Vulcan manufactured a chlorinated solvent known as 1,1,1-trichloroethane. We are a defendant in 27 cases allegedly involving 1,1,1-trichloroethane. All of the cases are filed in the United States District Court for the Eastern District of New York. According to the various complaints, the plaintiffs are public drinking water providers who serve customers in seven New York counties (Nassau, Orange, Putnam, Sullivan, Ulster, Washington and Westchester). It is alleged that our 1,1,1-trichloroethane was stabilized with 1,4-dioxane and that various water wells of the plaintiffs are contaminated with 1,4-dioxane. The plaintiffs are seeking unspecified compensatory and punitive damages. We will vigorously defend the cases. At this time we cannot determine the likelihood or reasonably estimate a range of loss, if any, pertaining to the cases.
■ HEWITT LANDFILL MATTER (SUPERFUND SITE) — In September 2015, the Los Angeles Regional Water Quality Control Board (RWQCB) issued a Cleanup and Abatement Order directing Vulcan to assess, monitor, cleanup and abate wastes that have been discharged to soil, soil vapor, and/or groundwater at the former Hewitt Landfill in Los Angeles.
Following an onsite and offsite investigation and pilot scale testing, the RWQCB approved a corrective action that includes leachate recovery, storm water capture and conveyance improvements, and a groundwater pump, treat and reinjection system. Certain on-site source control measures have been implemented and the new treatment system is fully operational. Currently-anticipated costs of these on-site source control activities have been fully accrued.
We are also engaged in an ongoing dialogue with the EPA, Honeywell, and the Los Angeles Department of Water and Power (LADWP) regarding the potential contribution of the Hewitt Landfill to groundwater contamination in the North Hollywood Operable Unit (NHOU) of the San Fernando Valley Superfund Site.
The EPA and Vulcan entered into an AOC and Statement of Work having an effective date of September 2017 for the design of two extraction wells south of the Hewitt Landfill to protect the North Hollywood West (NHW) well field located within the NHOU. In November 2017, we submitted a Pre-Design Investigation (PDI) Work Plan to the EPA, which sets forth the activities and schedule for collection of data in support of our evaluation of the need for an offsite remedy. In addition, this evaluation was expanded as part of the PDI to include the evaluation of a remedy in light of a new project by LADWP at the Rinaldi-Toluca (RT) wellfield. PDI investigative activities were completed between the first and third quarters of 2018, and in December 2018 we submitted a Draft PDI Evaluation Report to the EPA. The PDI Evaluation Report summarizes data collection activities conducted pursuant to the Draft PDI Work Plan and provides model updates and evaluation of remediation alternatives for offsite areas. The EPA provided an initial set of comments on the Draft PDI Evaluation Report in May 2019 and a final set of comments in October 2020. The final set of comments includes a request for Vulcan to revise and develop a final PDI Evaluation Report. The final comments further provide, if Vulcan agrees, a proposal for an alternative approach for offsite remediation (as opposed to installation of offsite extraction wells) and development of a Supplemental PDI Evaluation Report that would require the EPA to modify the remedy in the 2009 ROD as it relates to the Hewitt Landfill. In December 2020, Vulcan submitted the Final PDI Evaluation Report, which includes edits to the Draft PDI Evaluation Report and responses to the EPA’s comments. Until the EPA’s review and approval of the Final PDI Evaluation Report and any Supplemental PDI Evaluation Report on remedial alternative(s) is complete and an effective remedy has been selected by the EPA or agreed upon, we cannot identify an appropriate remedial action that will be required under the AOC. Given the various stakeholders involved and the uncertainties relating to remediation alternatives, we cannot reasonably estimate a loss pertaining to Vulcan’s responsibility for future remedial action required by the EPA.
In December 2019, Honeywell agreed with LADWP to build a water treatment system (often referred to as the Cooperative Containment Concept or CCC or the second interim remedy) that will provide treated groundwater in the NHOU to LADWP for public water supply purposes. Honeywell contends that some of the contamination to be remediated by the system it will build originated from the Hewitt Landfill, and that Vulcan should fund some portion of the costs that Honeywell has incurred and will incur in developing the second interim remedy. During the third quarter 2020, Vulcan recorded an immaterial accrual related to Honeywell’s contribution claim for certain types of cost incurred. We are also gathering and analyzing data and developing technical information to determine the extent of possible contribution by the Hewitt Landfill to the groundwater contamination in the area. This work is also intended to assist in identification of other PRPs that may have contributed to groundwater contamination in the area. At this time, we cannot reasonably estimate a range of an additional loss to Vulcan pertaining to this contribution claim.
Further, LADWP has announced plans to install new treatment capabilities at two city wellfields located near the Hewitt Landfill — the NHW wellfield and the RT wellfield. LADWP has alleged that the Hewitt Landfill is one of the primary PRPs for the contamination at the NHW wellfield and is one of many PRPs for the contamination at the RT wellfield. We are gathering and analyzing data and developing technical information to determine the extent of possible contribution by the Hewitt Landfill to the groundwater contamination in the area, consistent with the parallel request by the EPA. This work is also intended to assist in identification of other PRPs that may have contributed to groundwater contamination in the area. Vulcan is also seeking access to LADWP’s list of PRPs. At this time, we cannot reasonably estimate a range of a loss to Vulcan pertaining to this contribution claim.
■ NAFTA ARBITRATION — In September 2018, our subsidiary Legacy Vulcan, LLC (Legacy Vulcan), on its own behalf, and on behalf of our Mexican subsidiary Calizas Industriales del Carmen, S.A. de C.V. (Calica), served the United Mexican States (Mexico) a Notice of Intent to Submit a Claim to Arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA). Our NAFTA claim relates to the treatment of a portion of our quarrying operations in Playa del Carmen (Cancun), Mexico, arising from, among other measures, Mexico’s failure to comply with a legally binding zoning agreement and relates to other unfair, arbitrary and capricious actions by Mexico’s environmental enforcement agency. We assert that these actions are in breach of Mexico’s international obligations under NAFTA and international law.
As required by Article 1118 of NAFTA, we sought to settle this dispute with Mexico through consultations. Notwithstanding our good faith efforts to resolve the dispute amicably, we were unable to do so and filed a Request for Arbitration, which we filed with the International Centre for Settlement of Investment Disputes (ICSID) in December 2018. In January 2019, ICSID registered our Request for Arbitration.
We expect that the NAFTA arbitration will be concluded in the second half of 2022. At this time, there can be no assurance whether we will be successful in our NAFTA claim, and we cannot quantify the amount we may recover, if any, under this arbitration proceeding if we were successful.
It is not possible to predict with certainty the ultimate outcome of these and other legal proceedings in which we are involved, and a number of factors, including developments in ongoing discovery or adverse rulings, or the verdict of a particular jury, could cause actual losses to differ materially from accrued costs. No liability was recorded for claims and litigation for which a loss was determined to be only reasonably possible or for which a loss could not be reasonably estimated. Legal costs incurred in defense of lawsuits are expensed as incurred. In addition, losses on certain claims and litigation described above may be subject to limitations on a per occurrence basis by excess insurance, as described in our most recent Annual Report on Form 10-K.
Note 9: Asset Retirement Obligations
Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets, including legal obligations for land reclamation at both owned properties and mineral leases. Recognition of a liability for an ARO is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the ARO is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.
ARO operating costs related to accretion of the liabilities and depreciation of the assets are as follows:
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Three Months Ended |
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Six Months Ended |
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|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
ARO Operating Costs |
|
|
|
|
|
|
|
|
|
|
|
|
Accretion |
$ 3,259 |
|
|
$ 3,247 |
|
|
$ 6,455 |
|
|
$ 6,155 |
|
|
Depreciation |
2,664 |
|
|
2,063 |
|
|
5,325 |
|
|
3,899 |
|
|
Total |
$ 5,923 |
|
|
$ 5,310 |
|
|
$ 11,780 |
|
|
$ 10,054 |
|
ARO operating costs are reported in cost of revenues. AROs are reported within other noncurrent liabilities in our accompanying Condensed Consolidated Balance Sheets.
Reconciliations of the carrying amounts of our AROs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Asset Retirement Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
$ 285,401 |
|
|
$ 263,445 |
|
|
$ 283,163 |
|
|
$ 210,323 |
|
|
Liabilities incurred |
0 |
|
|
0 |
|
|
938 |
|
|
0 |
|
|
Liabilities settled |
(2,260) |
|
|
(3,354) |
|
|
(4,953) |
|
|
(8,588) |
|
|
Accretion expense |
3,259 |
|
|
3,247 |
|
|
6,455 |
|
|
6,155 |
|
|
Revisions, net |
35 |
|
|
410 |
|
|
832 |
|
|
55,858 |
|
|
Balance at end of period |
$ 286,435 |
|
|
$ 263,748 |
|
|
$ 286,435 |
|
|
$ 263,748 |
|
ARO revisions during the first six months of 2020 primarily include increases in estimated costs at two aggregates locations, including reclamation activities required under a development agreement at an aggregates site on owned property in Southern California. The reclamation required under the development agreement will result in the restoration of previously mined property to conditions suitable for retail and commercial development.
Note 10: Benefit Plans
PENSION PLANS
We sponsor two qualified, noncontributory defined benefit pension plans, the Vulcan Materials Company Pension Plan (VMC Pension Plan) and the CMG Hourly Pension Plan (CMG Pension Plan). The VMC Pension Plan has been closed to new entrants since 2007 and benefit accruals, based on salaries or wages and years of service, ceased in 2005 for hourly participants and 2013 for salaried participants. The CMG Pension Plan is closed to new entrants other than through one small union and benefits continue to accrue equal to a flat dollar amount for each year of service. In addition to these qualified plans, we sponsor three unfunded, nonqualified pension plans.
The following table sets forth the components of net periodic pension benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION BENEFITS |
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Components of Net Periodic Benefit Cost |
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ 1,194 |
|
|
$ 1,331 |
|
|
$ 2,387 |
|
|
$ 2,662 |
|
|
Interest cost |
4,880 |
|
|
7,531 |
|
|
9,759 |
|
|
15,062 |
|
|
Expected return on plan assets |
(11,375) |
|
|
(12,485) |
|
|
(22,750) |
|
|
(24,969) |
|
|
Amortization of prior service cost |
336 |
|
|
335 |
|
|
673 |
|
|
670 |
|
|
Amortization of actuarial loss |
2,179 |
|
|
3,140 |
|
|
4,357 |
|
|
6,279 |
|
|
Net periodic pension benefit credit |
$ (2,786) |
|
|
$ (148) |
|
|
$ (5,574) |
|
|
$ (296) |
|
|
Pretax reclassifications from AOCI included in |
|
|
|
|
|
|
|
|
|
|
|
|
net periodic pension benefit cost |
$ 2,515 |
|
|
$ 3,475 |
|
|
$ 5,030 |
|
|
$ 6,949 |
|
The contributions to pension plans for the six months ended June 30, 2021 and 2020, as reflected on the Condensed Consolidated Statements of Cash Flows, pertain to benefit payments under nonqualified plans for both periods.
POSTRETIREMENT PLANS
In addition to pension benefits, we provide certain healthcare and life insurance benefits for some retired employees. In 2012, we amended our postretirement healthcare plan to cap our portion of the medical coverage cost at the 2015 level. Substantially all our salaried employees and, where applicable, certain of our hourly employees may become eligible for these benefits if they reach a qualifying age and meet certain service requirements. Generally, Company-provided healthcare benefits end when covered individuals become eligible for Medicare benefits, become eligible for other group insurance coverage or reach age 65, whichever occurs first.
The following table sets forth the components of net periodic other postretirement benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER POSTRETIREMENT BENEFITS |
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Components of Net Periodic Benefit Cost |
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ 265 |
|
|
$ 380 |
|
|
$ 530 |
|
|
$ 760 |
|
|
Interest cost |
106 |
|
|
242 |
|
|
212 |
|
|
485 |
|
|
Amortization of prior service credit |
(477) |
|
|
(980) |
|
|
(953) |
|
|
(1,959) |
|
|
Amortization of actuarial gain |
(367) |
|
|
(201) |
|
|
(734) |
|
|
(403) |
|
|
Net periodic postretirement benefit credit |
$ (473) |
|
|
$ (559) |
|
|
$ (945) |
|
|
$ (1,117) |
|
|
Pretax reclassifications from AOCI included in |
|
|
|
|
|
|
|
|
|
|
|
|
net periodic postretirement benefit credit |
$ (844) |
|
|
$ (1,181) |
|
|
$ (1,687) |
|
|
$ (2,362) |
|
DEFINED CONTRIBUTION PLANS
In addition to our pension and postretirement plans, we sponsor two defined contribution plans. Substantially all salaried and nonunion hourly employees are eligible to be covered by one of these plans. Under these plans, we match employees’ eligible contributions at established rates. Expense recognized in connection with these matching obligations totaled $12,885,000 and $12,810,000 for the three months ended June 30, 2021 and 2020, respectively, and totaled $35,022,000 and $23,867,000 for the six months ended June 30, 2021 and 2020, respectively.
Note 11: other Comprehensive Income
Comprehensive income comprises two subsets: net earnings and other comprehensive income (OCI). The components of OCI are presented in the accompanying Condensed Consolidated Statements of Comprehensive Income, net of applicable taxes.
Amounts in accumulated other comprehensive income (AOCI), net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
|
June 30 |
||
|
in thousands |
2021 |
|
2020 |
|
|
2020 |
||||
|
AOCI |
|
|
|
|
|
|
|
|
||
|
Interest rate hedges |
$ (23,227) |
|
|
$ (23,943) |
|
|
$ (24,644) |
|
||
|
Pension and postretirement plans |
(154,892) |
|
|
(157,362) |
|
|
(183,395) |
|
||
|
Total |
$ (178,119) |
|
|
$ (181,305) |
|
|
$ (208,039) |
|
||
Changes in AOCI, net of tax, for the six months ended June 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and |
|
|
|
|
|
|
Interest Rate |
|
Postretirement |
|
|
|
|
|||
|
in thousands |
Hedges |
|
Benefit Plans |
|
|
Total |
||||
|
AOCI |
|
|
|
|
|
|
|
|
||
|
Balances as of December 31, 2020 |
$ (23,943) |
|
|
$ (157,362) |
|
|
$ (181,305) |
|
||
|
Amounts reclassified from AOCI |
716 |
|
|
2,470 |
|
|
3,186 |
|
||
|
Net current period OCI changes |
716 |
|
|
2,470 |
|
|
3,186 |
|
||
|
Balances as of June 30, 2021 |
$ (23,227) |
|
|
$ (154,892) |
|
|
$ (178,119) |
|
||
Amounts reclassified from AOCI to earnings, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||
|
Amortization of Interest Rate Hedge Losses |
|
|
|
|
|
|
|
|
|
|
|
||
|
Interest expense |
$ 487 |
|
|
$ 263 |
|
|
$ 969 |
|
|
$ 1,337 |
|
||
|
Benefit from income taxes |
(127) |
|
|
(69) |
|
|
(253) |
|
|
(349) |
|
||
|
Total |
$ 360 |
|
|
$ 194 |
|
|
$ 716 |
|
|
$ 988 |
|
||
|
Amortization of Pension and Postretirement |
|
|
|
|
|
|
|
|
|
|
|
||
|
Plan Actuarial Loss and Prior Service Cost |
|
|
|
|
|
|
|
|
|
|
|
||
|
Other nonoperating expense |
$ 1,671 |
|
|
$ 2,294 |
|
|
$ 3,343 |
|
|
$ 4,587 |
|
||
|
Benefit from income taxes |
(436) |
|
|
(599) |
|
|
(873) |
|
|
(1,197) |
|
||
|
Total |
$ 1,235 |
|
|
$ 1,695 |
|
|
$ 2,470 |
|
|
$ 3,390 |
|
||
|
Total reclassifications from AOCI to earnings |
$ 1,595 |
|
|
$ 1,889 |
|
|
$ 3,186 |
|
|
$ 4,378 |
|
||
Note 12: Equity
Our capital stock consists solely of common stock, par value $1.00 per share, of which 480,000,000 shares may be issued. Holders of our common stock are entitled to one vote per share. We may also issue 5,000,000 shares of preferred stock, but no shares have been issued. The terms and provisions of such shares will be determined by our Board of Directors upon any issuance of preferred shares in accordance with our Certificate of Incorporation.
There were no shares held in treasury as of June 30, 2021, December 31, 2020 and June 30, 2020.
Our common stock purchases (all of which were open market purchases) and subsequent retirements for the year-to-date periods ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
|
June 30 |
||
|
in thousands, except average cost |
2021 |
|
2020 |
|
|
2020 |
||
|
Shares Purchased and Retired |
|
|
|
|
|
|
|
|
|
Number |
0 |
|
|
214 |
|
|
214 |
|
|
Total purchase price |
$ 0 |
|
|
$ 26,132 |
|
|
$ 26,132 |
|
|
Average cost per share |
$ 0.00 |
|
|
$ 121.92 |
|
|
$ 121.92 |
|
As of June 30, 2021, 8,064,851 shares may be purchased under the current authorization of our Board of Directors.
Changes in total equity are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
|
|
|
June 30 |
|
|
June 30 |
|||||||
|
in thousands, except per share data |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Total Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
|
|
$ 6,136,241 |
|
|
$ 5,590,326 |
|
|
$ 6,027,330 |
|
|
$ 5,621,857 |
|
|
|
Net earnings |
|
|
195,344 |
|
|
209,916 |
|
|
355,958 |
|
|
270,174 |
|
|
|
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation plans, net of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
withheld for taxes |
|
|
(798) |
|
|
(1,456) |
|
|
(12,876) |
|
|
(16,539) |
|
|
|
Purchase and retirement of common stock |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(26,132) |
|
|
|
Share-based compensation expense |
|
|
9,819 |
|
|
8,504 |
|
|
17,688 |
|
|
15,220 |
|
|
|
Cash dividends on common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($0.37/$0.34/$0.74/$0.68 per share, respectively) |
|
|
(49,088) |
|
|
(45,028) |
|
|
(98,173) |
|
|
(90,128) |
|
|
|
Other comprehensive income (expense) |
|
|
1,595 |
|
|
1,889 |
|
|
3,186 |
|
|
(10,301) |
|
|
|
Balance at end of period |
|
|
$ 6,293,113 |
|
|
$ 5,764,151 |
|
|
$ 6,293,113 |
|
|
$ 5,764,151 |
|
|
Note 13: Segment Reporting
We have four operating (and reportable) segments organized around our principal product lines: Aggregates, Asphalt, Concrete and Calcium. The vast majority of our activities are domestic. We sell a relatively small amount of construction aggregates outside the United States. Our Asphalt and Concrete segments are primarily supplied with their aggregates requirements from our Aggregates segment. These intersegment sales are made at local market prices for the particular grade and quality of product used in the production of asphalt mix and ready-mixed concrete and are excluded from total revenues. Management reviews earnings from the product line reporting segments principally at the gross profit level.
segment financial disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||
|
|
June 30 |
|
|
June 30 |
|||||||||
|
in thousands |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||
|
Total Revenues |
|
|
|
|
|
|
|
|
|
|
|
||
|
Aggregates 1 |
$ 1,125,367 |
|
|
$ 1,070,596 |
|
|
$ 2,020,276 |
|
|
$ 1,938,822 |
|
||
|
Asphalt 2 |
212,577 |
|
|
222,950 |
|
|
359,744 |
|
|
362,739 |
|
||
|
Concrete |
96,201 |
|
|
100,683 |
|
|
177,560 |
|
|
195,448 |
|
||
|
Calcium |
1,960 |
|
|
1,889 |
|
|
4,020 |
|
|
3,915 |
|
||
|
Segment sales |
$ 1,436,105 |
|
|
$ 1,396,118 |
|
|
$ 2,561,600 |
|
|
$ 2,500,924 |
|
||
|
Aggregates intersegment sales |
(75,058) |
|
|
(73,543) |
|
|
(132,209) |
|
|
(129,107) |
|
||
|
Total revenues |
$ 1,361,047 |
|
|
$ 1,322,575 |
|
|
$ 2,429,391 |
|
|
$ 2,371,817 |
|
||
|
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
||
|
Aggregates |
$ 373,833 |
|
|
$ 351,162 |
|
|
$ 597,471 |
|
|
$ 545,293 |
|
||
|
Asphalt |
13,532 |
|
|
30,464 |
|
|
10,541 |
|
|
28,029 |
|
||
|
Concrete |
10,293 |
|
|
14,227 |
|
|
18,061 |
|
|
23,440 |
|
||
|
Calcium |
706 |
|
|
666 |
|
|
1,558 |
|
|
1,480 |
|
||
|
Total |
$ 398,364 |
|
|
$ 396,519 |
|
|
$ 627,631 |
|
|
$ 598,242 |
|
||
|
Depreciation, Depletion, Accretion |
|
|
|
|
|
|
|
|
|
|
|
||
|
and Amortization (DDA&A) |
|
|
|
|
|
|
|
|
|
|
|
||
|
Aggregates |
$ 84,328 |
|
|
$ 80,747 |
|
|
$ 165,136 |
|
|
$ 157,883 |
|
||
|
Asphalt |
9,060 |
|
|
8,668 |
|
|
18,155 |
|
|
17,402 |
|
||
|
Concrete |
4,026 |
|
|
4,001 |
|
|
7,978 |
|
|
8,083 |
|
||
|
Calcium |
39 |
|
|
48 |
|
|
78 |
|
|
97 |
|
||
|
Other |
5,654 |
|
|
6,006 |
|
|
12,128 |
|
|
11,486 |
|
||
|
Total |
$ 103,107 |
|
|
$ 99,470 |
|
|
$ 203,475 |
|
|
$ 194,951 |
|
||
|
Identifiable Assets 3 |
|
|
|
|
|
|
|
|
|
|
|
||
|
Aggregates |
|
|
|
|
|
|
$ 9,492,913 |
|
|
$ 9,545,787 |
|
||
|
Asphalt |
|
|
|
|
|
|
579,151 |
|
|
583,902 |
|
||
|
Concrete |
|
|
|
|
|
|
314,166 |
|
|
321,304 |
|
||
|
Calcium |
|
|
|
|
|
|
3,527 |
|
|
3,718 |
|
||
|
Total identifiable assets |
|
|
|
|
|
|
$ 10,389,757 |
|
|
$ 10,454,711 |
|
||
|
General corporate assets |
|
|
|
|
|
|
212,864 |
|
|
126,814 |
|
||
|
Cash and cash equivalents and restricted cash |
|
|
|
|
|
|
968,406 |
|
|
817,199 |
|
||
|
Total assets |
|
|
|
|
|
|
$ 11,571,027 |
|
|
$ 11,398,724 |
|
||
|
|
|
|
1 |
Includes product sales (crushed stone, sand and gravel, sand, and other aggregates), as well as freight & delivery costs that we pass along to our customers, and service revenues (see Note 4) related to aggregates. |
|
2 |
Includes product sales, as well as service revenues (see Note 4) from our asphalt construction paving business. |
|
3 |
Certain temporarily idled assets are included within a segment's Identifiable Assets but the associated DDA&A is shown within Other in the DDA&A section above as the related DDA&A is excluded from segment gross profit. |
Note 14: Supplemental Cash Flow Information
Supplemental information referable to our Condensed Consolidated Statements of Cash Flows is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|||
|
|
June 30 |
||||
|
in thousands |
2021 |
|
|
2020 |
|
|
Cash Payments |
|
|
|
|
|
|
Interest (exclusive of amount capitalized) |
$ 65,195 |
|
|
$ 60,741 |
|
|
Income taxes |
87,416 |
|
|
9,055 |
|
|
Noncash Investing and Financing Activities |
|
|
|
|
|
|
Accrued liabilities for purchases of property, plant & equipment |
$ 27,018 |
|
|
$ 10,994 |
|
|
Recognition of new and revised asset retirement obligations |
1,770 |
|
|
55,858 |
|
|
Recognition of new and revised right-of-use assets for |
|
|
|
|
|
|
Operating lease liabilities 1 |
56,974 |
|
|
25,083 |
|
|
Finance lease liabilities |
3,265 |
|
|
4,991 |
|
|
Amounts referable to business acquisitions |
|
|
|
|
|
|
Liabilities assumed |
0 |
|
|
5,637 |
|
|
Consideration payable to seller |
0 |
|
|
8,980 |
|
|
Fair value of noncash assets and liabilities exchanged |
0 |
|
|
21,214 |
|
|
|
|
|
1 |
The 2021 amount includes a modification to our headquarters office space lease to extend the lease term. |
Note 15: Goodwill
Goodwill is recognized when the consideration paid for a business exceeds the fair value of the tangible and identifiable intangible assets acquired. Goodwill is allocated to reporting units for purposes of testing goodwill for impairment. There were no charges for goodwill impairment in the six month periods ended June 30, 2021 and 2020. Accumulated goodwill impairment losses amount to $252,664,000 (year 2008) in the Calcium segment.
We have four reportable segments organized around our principal product lines: Aggregates, Asphalt, Concrete and Calcium. Changes in the carrying amount of goodwill by reportable segment from December 31, 2020 to June 30, 2021 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in thousands |
Aggregates |
|
|
Asphalt |
|
|
Concrete |
|
|
Calcium |
|
|
Total |
|||
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Totals at December 31, 2020 |
$ 3,080,479 |
|
|
$ 91,633 |
|
|
$ 0 |
|
|
$ 0 |
|
|
$ 3,172,112 |
|
||
|
Totals at June 30, 2021 |
$ 3,080,479 |
|
|
$ 91,633 |
|
|
$ 0 |
|
|
$ 0 |
|
|
$ 3,172,112 |
|
||
We test goodwill for impairment on an annual basis or more frequently if events or circumstances change in a manner that would more likely than not reduce the fair value of a reporting unit below its carrying value. A decrease in the estimated fair value of one or more of our reporting units could result in the recognition of a material, noncash write-down of goodwill.
Note 16: Acquisitions and Divestitures
BUSINESS ACQUISITIONS AND PROPOSED ACQUISITION
During the second quarter of 2021, we announced the proposed acquisition of U.S. Concrete, Inc. (NASDAQ: USCR), a leading supplier of aggregates and ready-mixed concrete for a purchase price of $74.00 per common share in cash, representing a total equity value of $1.294 billion. The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2021, subject to U.S. Concrete shareholder approval, regulatory clearance and other customary closing conditions.
2021 BUSINESS ACQUISITIONS — Through the six months ended June 30, 2021, we completed no business acquisitions.
2020 BUSINESS ACQUISITIONS — For the full year 2020, we purchased the following operations, for total consideration of $73,416,000 ($43,223,000 cash and $30,193,000 noncash):
business to support our aggregates operations across most of our footprint
Texas — asphalt mix and recycle operations
The 2020 acquisitions listed above are reported in our consolidated financial statements as of their respective acquisition dates. None of these acquisitions were material to our results of operations or financial position either individually or collectively.
As a result of the 2020 acquisitions, we recognized $65,545,000 of amortizable intangible assets and $5,051,000 of goodwill. The amortizable intangible assets will be amortized against earnings ($65,545,000 - straight-line basis over a weighted-average 20.0 years) and $25,712,000 will be deductible for income tax purposes over 15 years. The goodwill represents the balance of deferred tax liabilities generated from carrying over the seller’s tax basis in the assets acquired and is not deductible for income tax purposes.
DIVESTITURES AND PENDING DIVESTITURES
In 2021, we sold:
First quarter — a reclaimed quarry in Southern California resulting in a pretax gain of $114,695,000 (net of a $12,900,000 contingency and other directly related obligations)
In 2020, we sold:
Fourth quarter — a Virginia ready-mix concrete business, resulting in an immaterial loss. We retained all real property which is being leased to the buyer and obtained a 20-year aggregates supply agreement
Second quarter — our New Mexico ready-mix concrete business, resulting in an immaterial gain. We retained the concrete plants and mobile fleet and are leasing these assets to the buyer. Additionally, we obtained a 20-year aggregates supply agreement
No material assets met the criteria for held for sale at June 30, 2021, December 31, 2020 or June 30, 2020.
Note 17: New Accounting Standards
ACCOUNTING STANDARDS RECENTLY ADOPTED
InCOME tAXES During the first quarter of 2021, we adopted Accounting Standards Update (ASU) 2019-12, “Simplifying the Accounting for Income Taxes,” which added new guidance to simplify the accounting for income taxes and changed the accounting for certain income tax transactions. The adoption of this standard did not materially impact our consolidated financial statements.
CONVERTIBLE INSTRUMENTS During the first quarter of 2021, we adopted ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU reduced the number of models used to account for convertible instruments and modified the diluted earnings per share calculations for convertible instruments. This ASU also amended the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives. The adoption of this standard did not materially impact our consolidated financial statements.
ACCOUNTING STANDARDS PENDING ADOPTION
None
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL COMMENTS
Overview
We provide the basic materials for the infrastructure needed to maintain and expand the U.S. economy. We operate primarily in the U.S. and are one of the nation's largest suppliers of construction aggregates (primarily crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete. Our strategy and competitive advantage are based on our strength in aggregates which are used in most types of construction and in the production of asphalt mix and ready-mixed concrete.
Demand for our products is dependent on construction activity and correlates positively with changes in population growth, household formation and employment. End uses include public construction (e.g., highways, bridges, buildings, airports, schools, prisons, sewer and waste disposal systems, water supply systems, dams, reservoirs and other public construction projects), private nonresidential construction (e.g., manufacturing, retail, offices, industrial and institutional) and private residential construction (e.g., single-family houses, duplexes, apartment buildings and condominiums).
Aggregates have a very high weight-to-value ratio and, in most cases, must be produced near where they are used; if not, transportation can cost more than the materials, rendering them uncompetitive compared to locally produced materials. Exceptions to this typical market structure include areas along the U.S. Gulf Coast and the Eastern Seaboard where there are limited supplies of locally available, high-quality aggregates. We serve these markets from quarries that have access to cost-effective long-haul transportation — shipping by barge and rail — and from our quarry on Mexico's Yucatan Peninsula with our fleet of Panamax-class, self-unloading ships.
There are limited substitutes for quality aggregates. Due to zoning and permitting regulation and high transportation costs relative to the value of the product, the location of reserves is a critical factor to our long-term success.
No material part of our business depends upon any single customer whose loss would have a significant adverse effect on our business. In 2020, our five largest customers accounted for 7.5% of our total revenues, and no single customer accounted for more than 1.8% of our total revenues. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly-funded construction, such as highways, airports and government buildings, a relatively small portion of our sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly-funded construction, the vast majority of our business is not directly subject to renegotiation of profits or termination of contracts with local, state or federal governments. In addition, our sales to government entities span several hundred entities coast-to-coast, ensuring that negative changes to various government budgets would have a muted impact across such a diversified set of government customers.
While aggregates is our focus and primary business, we believe vertical integration between aggregates and downstream products, such as asphalt mix and ready-mixed concrete, can be managed effectively in certain markets to generate attractive financial returns and enhance financial returns in our core Aggregates segment. We produce and sell asphalt mix and/or ready-mixed concrete primarily in our Alabama, Arizona, California, Maryland, New Mexico, Tennessee, Texas, Virginia and Washington D.C. markets. Aggregates comprise approximately 95% of asphalt mix by weight and 80% of ready-mixed concrete by weight. In both of these downstream businesses, aggregates are primarily supplied from our operations.
Seasonality and cyclical nature of our business
Almost all of our products are produced and consumed outdoors. Seasonal changes and other weather-related conditions can affect the production and sales volume of our products. Therefore, the financial results for any quarter do not necessarily indicate the results expected for the year. Normally, the highest sales and earnings are in the third quarter and the lowest are in the first quarter. Furthermore, our sales and earnings are sensitive to national, regional and local economic conditions, demographic and population fluctuations, and particularly to cyclical swings in construction spending, primarily in the private sector.
EXECUTIVE SUMMARY
Financial highlights for SECOND Quarter 2021
Compared to second quarter of 2020:
Total revenues increased $38.5 million, or 3%, to $1,361.0 million
Gross profit increased $1.8 million, or less than 1%, to $398.4 million
Aggregates segment sales increased $54.8 million, or 5%, to $1,125.4 million
Aggregates segment freight-adjusted revenues increased $59.3 million, or 7%, to $874.0 million
Shipments increased 4%, or 2.3 million tons, to 58.5 million tons
Freight-adjusted sales price increased 3.0%, or $0.43 per ton to $14.93
Aggregates segment gross profit increased $22.7 million, or 6%, to $373.8 million
Unit profitability (as measured by gross profit per ton) increased 2.2% to $6.39 per ton
Asphalt, Concrete and Calcium segment gross profit decreased $20.8 million, or 46%, to $24.5 million, collectively
Selling, administrative and general (SAG) expenses increased $9.5 million and increased 0.5 percentage points (50 basis points) as a percentage of total revenues
Operating earnings decreased $11.4 million, or 4%, to $287.5 million
Earnings from continuing operations were $196.8 million, or $1.47 per diluted share, compared to $211.0 million, or $1.58 per diluted share
Adjusted earnings from continuing operations were $1.57 per diluted share, compared to $1.60 per diluted share
Net earnings were $195.3 million, a decrease of $14.6 million, or 7%
Adjusted EBITDA was $406.0 million, a decrease of $1.8 million, or less than 1%
Returned capital to shareholders via dividends ($49.1 million @ $0.37 per share versus $45.0 million @ $0.34 per share)
Our performance in the first half of 2021 has been supported by consistent execution on our four strategic disciplines (Operational Excellence, Commercial Excellence, Logistics Innovation and Strategic Sourcing). Our team’s efforts throughout the first half of 2021 have allowed us to expand our Aggregates segment gross profit by 1.5 percentage points (150 basis points) and increase our cash gross profit per ton by 4.6%. Despite energy inflation and disruptive weather in the second quarter, Aggregates segment gross profit margin improved 0.40 percentage points (40 basis points), and cash gross profit grew by 1.8% to $7.83 per ton. Across our business, energy inflation reduced earnings by $25.3 million in the quarter, $15.2 million due to diesel and $10.1 million due to liquid asphalt. Lower non-aggregates earnings dampened an otherwise strong performance.
We expect to carry forward the progress we have made through the first half of 2021 and will continue to diligently navigate the changing macro environment. Recent pricing actions across much of our footprint and a keen focus on improving operating efficiencies will continue to help offset spikes in certain input costs. The flexibility of our operating plans will enable us to maintain a high level of performance during the second half of the year and achieve our full-year 2021 targets. We remain excited and focused on closing the proposed acquisition of U.S. Concrete, which will expand our footprint in attractive geographies and accelerate our growth strategy.
Capital expenditures in the second quarter were $93.7 million, including $34.3 million for growth projects. During the fourth quarter of 2020, we restarted planned growth projects that were put on hold in the first quarter of 2020 as a result of the pandemic. For the full year 2021, we expect to spend between $450 million and $475 million on capital expenditures, including growth projects. We will continue to review our plans and will adjust as needed.
As of June 30, 2021, total debt to trailing-twelve month Adjusted EBITDA was 2.0 times or 1.3 times on a net debt basis reflecting $968.4 million of cash on hand. Our weighted-average debt maturity was 15.1 years, and our effective weighted-average interest rate was 4.63%.
Interest expense, net of interest income, was $41.7 million in the second quarter, up from $34.0 million in the prior year. This increase includes $9.4 million of costs associated with financing the proposed acquisition of U.S. Concrete announced on June 7, 2021.
On a trailing-twelve month basis, return on invested capital was 14.8%, 0.60 percentage points (60 basis points) higher than the comparable prior year period. We remain committed to driving further improvement through solid operating earnings growth coupled with disciplined capital management and a balanced approach to growth.
OUTLOOK
We reiterate our full-year Adjusted EBITDA range of $1.380 billion to $1.460 billion. Our operating performance in the first half of the year was strong, and we remain on track to achieve another year of earnings growth. Our aggregates business is executing well, and we are focused on factors within our control, including pricing and operating disciplines.
RESULTS OF OPERATIONS
Total revenues are primarily derived from our product sales of aggregates, asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and services related to our aggregates business. We present separately our discontinued operations, which consist of our former Chemicals business.
The following table highlights significant components of our consolidated operating results including EBITDA and Adjusted EBITDA.
consolidated operating ResultS highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in millions, except unit and per unit data |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Total revenues |
$ 1,361.0 |
|
|
$ 1,322.6 |
|
|
$ 2,429.4 |
|
|
$ 2,371.8 |
|
|
Cost of revenues |
962.6 |
|
|
926.1 |
|
|
1,801.8 |
|
|
1,773.6 |
|
|
Gross profit |
$ 398.4 |
|
|
$ 396.5 |
|
|
$ 627.6 |
|
|
$ 598.2 |
|
|
Gross profit margin |
29.3% |
|
|
30.0% |
|
|
25.8% |
|
|
25.2% |
|
|
Selling, administrative and general (SAG) |
$ 100.7 |
|
|
$ 91.2 |
|
|
$ 189.3 |
|
|
$ 177.6 |
|
|
SAG as a percentage of total revenues |
7.4% |
|
|
6.9% |
|
|
7.8% |
|
|
7.5% |
|
|
Gain (loss) on sale of property, plant & |
|
|
|
|
|
|
|
|
|
|
|
|
equipment and businesses |
$ 0.2 |
|
|
$ (0.3) |
|
|
$ 117.4 |
|
|
$ 0.7 |
|
|
Operating earnings |
$ 287.5 |
|
|
$ 298.9 |
|
|
$ 537.0 |
|
|
$ 411.2 |
|
|
Interest expense, net |
$ 41.7 |
|
|
$ 34.0 |
|
|
$ 74.8 |
|
|
$ 64.7 |
|
|
Earnings from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
before income taxes |
$ 254.1 |
|
|
$ 272.3 |
|
|
$ 476.4 |
|
|
$ 344.5 |
|
|
Income tax expense |
$ 57.3 |
|
|
$ 61.4 |
|
|
$ 117.9 |
|
|
$ 73.5 |
|
|
Effective tax rate from continuing operations |
22.5% |
|
|
22.5% |
|
|
24.8% |
|
|
21.3% |
|
|
Earnings from continuing operations |
$ 196.8 |
|
|
$ 211.0 |
|
|
$ 358.4 |
|
|
$ 271.0 |
|
|
Earnings (loss) on discontinued operations, |
|
|
|
|
|
|
|
|
|
|
|
|
net of income taxes |
(1.5) |
|
|
(1.1) |
|
|
(2.4) |
|
|
(0.8) |
|
|
Net earnings |
$ 195.3 |
|
|
$ 209.9 |
|
|
$ 356.0 |
|
|
$ 270.2 |
|
|
Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
$ 1.47 |
|
|
$ 1.58 |
|
|
$ 2.69 |
|
|
$ 2.03 |
|
|
Discontinued operations |
(0.01) |
|
|
0.00 |
|
|
(0.02) |
|
|
0.00 |
|
|
Diluted net earnings per share |
$ 1.46 |
|
|
$ 1.58 |
|
|
$ 2.67 |
|
|
$ 2.03 |
|
|
EBITDA 1 |
$ 398.9 |
|
|
$ 405.7 |
|
|
$ 754.7 |
|
|
$ 604.2 |
|
|
Adjusted EBITDA 1 |
$ 406.0 |
|
|
$ 407.8 |
|
|
$ 650.3 |
|
|
$ 608.8 |
|
|
Average Sales Price and Unit Shipments |
|
|
|
|
|
|
|
|
|
|
|
|
Aggregates |
|
|
|
|
|
|
|
|
|
|
|
|
Tons (thousands) |
58,528 |
|
|
56,195 |
|
|
104,965 |
|
|
101,243 |
|
|
Freight-adjusted sales price |
$ 14.93 |
|
|
$ 14.50 |
|
|
$ 14.82 |
|
|
$ 14.45 |
|
|
Asphalt Mix |
|
|
|
|
|
|
|
|
|
|
|
|
Tons (thousands) |
3,134 |
|
|
3,403 |
|
|
5,351 |
|
|
5,460 |
|
|
Average sales price |
$ 58.14 |
|
|
$ 57.46 |
|
|
$ 57.58 |
|
|
$ 57.86 |
|
|
Ready-mixed concrete |
|
|
|
|
|
|
|
|
|
|
|
|
Cubic yards (thousands) |
731 |
|
|
786 |
|
|
1,344 |
|
|
1,520 |
|
|
Average sales price |
$ 130.61 |
|
|
$ 127.35 |
|
|
$ 131.03 |
|
|
$ 127.62 |
|
|
Calcium |
|
|
|
|
|
|
|
|
|
|
|
|
Tons (thousands) |
71 |
|
|
71 |
|
|
145 |
|
|
144 |
|
|
Average sales price |
$ 27.64 |
|
|
$ 26.55 |
|
|
$ 27.64 |
|
|
$ 27.06 |
|
|
|
|
|
1 |
Non-GAAP measures are defined and reconciled within this Item 2 under the caption Reconciliation of Non-GAAP Financial Measures. |
secoND quarter 2021 Compared to SECOND Quarter 2020
Second quarter 2021 total revenues were $1,361.0 million, up 3% from the second quarter of 2020. Shipments increased in aggregates (+4%) while declining in asphalt mix (-8%) and ready-mixed concrete (-7%). Likewise, gross profit increased in the Aggregates (+$22.7 million or 6%) segment while declining in the Asphalt (-$16.9 million or 56%) and Concrete (-$3.9 million or 28%) segments. A 71% increase in the unit cost of diesel fuel increased costs by $15.2 million from the prior year’s second quarter with most ($14.0 million) of this cost increase reflected in the Aggregates segment.
Net earnings for the second quarter of 2021 were $195.3 million, or $1.46 per diluted share, compared to $209.9 million, or $1.58 per diluted share, in the second quarter of 2020. Each period’s results were impacted by discrete items, as follows:
Net earnings for the second quarter of 2021 include:
pretax charges of $0.4 million associated with divested operations
pretax charges of $5.5 million associated with non-routine business development
pretax charges of $1.3 million for COVID-19 pandemic direct incremental costs
pretax interest charges of $9.4 million related to financing the proposed acquisition of U.S. Concrete
Net earnings for the second quarter of 2020 include:
pretax charges of $0.8 million associated with divested operations
pretax gains of $3.5 million associated with non-routine business development
pretax charges of $4.4 million for COVID-19 pandemic direct incremental costs
pretax charges of $0.5 million for managerial restructuring
Adjusted for these discrete items, earnings from continuing operations (Adjusted Diluted EPS) was $1.57 per diluted share for the second quarter of 2021 compared to $1.60 per diluted share in the second quarter of 2020.
Continuing Operations — Changes in earnings from continuing operations before income taxes for the second quarter of 2021 versus the second quarter of 2020 are summarized below:
earnings from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
in millions |
|
|
|
Second quarter 2020 |
$ 272.3 |
|
|
Higher aggregates gross profit |
22.7 |
|
|
Lower asphalt gross profit |
(16.9) |
|
|
Lower concrete gross profit |
(3.9) |
|
|
Higher calcium gross profit |
0.0 |
|
|
Higher selling, administrative and general expenses |
(9.5) |
|
|
Higher gain on sale of property, plant & equipment and businesses |
0.5 |
|
|
Higher interest expense, net |
(7.7) |
|
|
All other |
(3.4) |
|
|
Second quarter 2021 |
$ 254.1 |
|
Second quarter Aggregates segment sales increased 5%, and gross profit increased 6% to $373.8 million. Gross profit margin increased 0.4 percentage points (40 basis points) due to growth in both volume and price as well as effective cost control that helped to offset an estimated $14.0 million impact of rising diesel prices. Earnings improvement was widespread across our footprint.
Aggregates shipments increased 4% from the prior year’s second quarter, reflecting improving demand across all end-market segments. The pricing environment continues to be positive across our footprint as demand visibility improves. For the quarter, freight-adjusted pricing increased 3.0% (mix-adjusted pricing increased 2.6%). The rate of growth improved sequentially throughout the quarter, reflecting pricing actions taken in many areas. These efforts are expected to help offset cost inflation forecasted for the rest of the year.
Improved operating efficiencies helped offset both the sharp increase in the average unit cost of diesel fuel and the impact of any operational disruptions caused by the wet weather. Freight-adjusted unit cost of sales were 3.5% higher than the prior year’s second quarter but increased less than 1% excluding the impact of higher diesel prices.
Overall, non-aggregates segments gross profit was $20.8 million lower than the prior year’s second quarter.
Asphalt segment gross profit was $13.5 million for the second quarter, unfavorable by $16.9 million from the prior year. This decrease in earnings was primarily driven by the impact of higher liquid asphalt costs (approximately $10.1 million) and wet weather conditions that delayed project shipments. Asphalt mix shipments declined 8% as volume growth in California and Tennessee was more than offset by lower volumes in Alabama, Arizona and Texas. The average unit cost for liquid asphalt increased 19% versus the prior year’s second quarter, outpacing the 1.2% increase in the average unit selling price and resulting in a 13% decline in asphalt mix material margins.
Concrete segment gross profit was $10.3 million for the second quarter compared to $14.2 million in the prior year. Ready-mixed concrete shipments decreased 7% due to the timing of projects in Virginia, while the average sales price increased 2.6% compared to the prior year.
Calcium segment gross profit of $0.7 million was in line with the prior year’s quarter.
SAG expenses increased 10% to $100.7 million in the quarter primarily due to higher incentive compensation tied to business performance and increased business development activities. As a percentage of total revenues, second quarter SAG expenses increased from 6.9% in 2020 to 7.4% in 2021.
Other operating expense, which has an approximate run-rate of $12.0 million a year (exclusive of discrete items), is composed primarily of idle facilities expense, environmental remediation costs, property abandonments and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:
$10.4 million in second quarter 2021 — includes discrete items as follows:
$0.4 million of charges associated with divested operations
$5.5 million of non-routine business development charges
$1.3 million for COVID-19 pandemic direct incremental costs
$6.2 million in second quarter 2020 — includes discrete items as follows:
$0.8 million of charges associated with divested operations
$3.5 million of net gain associated with non-routine business development charges
$4.4 million for COVID-19 pandemic direct incremental costs
$0.5 million of managerial restructuring charges
Other nonoperating income (expense) was a net income of $8.2 million for the second quarter of 2021 and was favorable by $0.9 million from the second quarter of 2020. This favorable variance resulted primarily from a $1.5 million foreign currency translation gain in the current period versus a $0.5 million gain in the prior year’s second quarter.
Net interest expense was $41.7 million in the second quarter of 2021 compared to $34.0 million in the second quarter of 2020. The current quarter included an additional $9.4 million of interest expense related to financing the proposed acquisition of U.S. Concrete (see Note 7 to the condensed consolidated financial statements).
Income tax expense from continuing operations was $57.3 million in the second quarter of 2021 compared to $61.4 million in the second quarter of 2020. The decrease in tax expense was primarily related to a decrease in pretax earnings.
Earnings from continuing operations were $1.47 per diluted share in the second quarter of 2021 compared to $1.58 per diluted share in the second quarter of 2020.
Discontinued Operations — Second quarter pretax loss from discontinued operations was $1.9 million in 2021 compared with a loss of $1.4 million in 2020. Both periods include charges/credits related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.
year-to-date june 30, 2021 Compared to year-to-date june 30, 2020
Total revenues for the first six months of 2021 were $2,429.4 million, up 2% from the first six months of 2020. Shipments increased in aggregates (+4%) while declining in asphalt mix (-2%) and ready-mixed concrete (-12%). Gross profit increased in the Aggregates (+$52.2 million or 10%) segment while declining in the Asphalt (-$17.5 million or 62%) and Concrete
(-$5.4 million or 23%) segments. A 26% increase in the unit cost of diesel fuel increased costs by $14.9 million from the first half of 2020 with most ($13.7 million) of this cost increase reflected in the Aggregates segment.
Net earnings for the first six months of 2021 were $356.0 million, or $2.67 per diluted share, compared to $270.2 million, or $2.03 per diluted share, in the first six months of 2020. Each period’s results were impacted by discrete items, as follows:
Net earnings for the first six months of 2021 include:
$13.7 million of tax charges related to an increase in the Alabama NOL carryforward valuation allowance
pretax net gain of $114.7 million related to the sale of a reclaimed quarry in Southern California
pretax charges of $0.7 million associated with divested operations
pretax charges of $5.9 million associated with non-routine business development
pretax charges of $3.8 million for COVID-19 pandemic direct incremental costs
pretax interest charges of $9.4 million related to financing the proposed acquisition of U.S. Concrete
Net earnings for the first six months of 2020 include:
pretax charges of $0.8 million associated with divested operations
pretax gains of $2.5 million associated with non-routine business development
pretax charges of $5.0 million for COVID-19 pandemic direct incremental costs
pretax charges of $1.3 million for restructuring
Adjusted for these discrete items, earnings from continuing operations (Adjusted Diluted EPS) was $2.26 per diluted share for the first half of 2021 compared to $2.06 per diluted share in the first half of 2020.
Continuing Operations — Changes in earnings from continuing operations before income taxes for year-to-date June 30, 2021 versus year-to-date June 30, 2020 are summarized below:
earnings from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
in millions |
|
|
|
Year-to-date June 30, 2020 |
$ 344.5 |
|
|
Higher aggregates gross profit |
52.2 |
|
|
Lower asphalt gross profit |
(17.5) |
|
|
Lower concrete gross profit |
(5.4) |
|
|
Higher calcium gross profit |
0.1 |
|
|
Higher selling, administrative and general expenses |
(11.6) |
|
|
Higher gain on sale of property, plant & equipment and businesses |
116.6 |
|
|
Higher interest expense, net |
(10.1) |
|
|
Lower foreign currency translation losses |
6.0 |
|
|
All other |
1.6 |
|
|
Year-to-date June 30, 2021 |
$ 476.4 |
|
First half 2021 Aggregates segment sales of $2,020.3 million were up 4% while aggregates shipments increased 4%, or 3.7 million tons, compared to the prior year. Freight-adjusted average sales price for aggregates increased 2.6%, or $0.37 per ton, versus the first half of 2020. Excluding mix impact, aggregates price increased 2.1%.
Aggregates segment gross profit was $597.5 million ($5.69 per ton) versus $545.3 million ($5.39 per ton) in the first half of 2020. Cash gross profit per ton increased 5% from the prior year’s first half to $7.27 per ton. First half 2021 freight-adjusted unit cost of sales increased 1%, or $0.07 per ton, versus the prior year. The average unit cost of diesel fuel increased 26% versus the first half of 2020, decreasing Aggregates segment gross profit by $13.7 million or $0.13 per ton.
On a trailing-twelve month basis, Aggregates segment gross profit margin as a percentage of segment sales excluding freight & delivery increased 0.3 percentage points (30 basis points) to 38.3%.
Asphalt segment gross profit of $10.5 million was down $17.5 million from the first six months of 2020. Asphalt mix shipments declined 2% while average unit selling prices decreased less than 1%, or $0.28 per ton. Compared to the prior year’s first half, the average unit cost for liquid asphalt was up 8% — a significant factor in the 9% decrease in our asphalt mix material margins.
Concrete segment gross profit was $18.1 million for the first six months of 2021, a decrease of $5.4 million from the prior year period. Ready-mixed concrete shipments declined 12% while the average sales price increased 2.7% and the material margins decreased 1%.
Our Calcium segment’s gross profit of $1.6 million was up $0.1 million compared to the first half of 2020.
SAG expenses were $189.3 million versus $177.6 million in the prior year’s first half reflecting a 0.3 percentage point (30 basis point) increase as a percentage of total revenues.
Gain on sale of property, plant & equipment and businesses was $117.4 million in the first half of 2021 versus $0.7 million in the first half of 2020. The 2021 amount includes the aforementioned net pretax gain of $114.7 million from the sale of a reclaimed quarry in Southern California.
Other operating expense, which has an approximate run-rate of $12 million a year (exclusive of discrete items), is composed primarily of idle facilities expense, environmental remediation costs, property abandonments and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:
$18.7 million in first half of 2021 — includes discrete items as follows:
$0.7 million of charges associated with divested operations
$5.9 million of non-routine business development charges
$3.8 million for COVID-19 pandemic direct incremental costs
$10.2 million in first half of 2020 — includes discrete items as follows:
$0.8 million of charges associated with divested operations
$2.5 million of net gain associated with non-routine business development
$5.0 million for COVID-19 pandemic direct incremental costs
$1.3 million of managerial restructuring charges
Other nonoperating income (expense) was a net income of $14.1 million for the first half of 2021, favorable by $16.1 million from the first half of 2020. This favorable variance resulted primarily from two items: 1) a $0.2 million foreign currency translation gain in the current year’s first half versus a $5.8 million loss in the prior year resulting from the rapid devaluation of the Mexican peso at the beginning of the pandemic, and 2) the mark-to-market gain on our Rabbi Trust investments of $3.4 million in the first half of 2021 versus a loss of $1.0 million in the prior year’s first half (see Note 5 to the condensed consolidated financial statements).
Net interest expense was $74.8 million in the first half of 2021 compared to $64.7 million in the first half of 2020. This increase resulted primarily from the additional $9.4 million of interest expense related to financing the proposed acquisition of U.S. Concrete (see Note 7 to the condensed consolidated financial statements).
Income tax expense from continuing operations was $117.9 million in the first half of 2021 compared to $73.5 million in the first half of 2020. The increase in tax expense was primarily related to an increase in pretax earnings and a $13.7 million increase in our Alabama NOL valuation allowance as discussed in Note 3 to the condensed consolidated financial statements.
Earnings from continuing operations were $2.69 per diluted share in the first half of 2021 compared to $2.03 per diluted share in the first half of 2020.
Discontinued Operations — First half pretax loss from discontinued operations was $3.4 million in 2021 compared with a loss of $1.1 million in 2020. Both periods include charges/credits related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
SAME-STORE
We have provided certain information on a same-store basis. When discussing our financial results in comparison to prior periods, we may exclude the operating results of recently acquired/divested businesses that do not have comparable results in the periods being discussed. These recently acquired/divested businesses are disclosed in Note 16 “Acquisitions and Divestitures.” This approach allows us to evaluate the performance of our operations on a comparable basis. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our operations are performing period over period without the effects of acquisition and divestiture activity. Our same-store information may not be comparable to similar measures used by other companies.
AGGREGATES SEGMENT FREIGHT-ADJUSTED REVENUES
Aggregates segment freight-adjusted revenues is not a Generally Accepted Accounting Principle (GAAP) measure and should not be considered as an alternative to metrics defined by GAAP. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Additionally, we use this metric as the basis for calculating the average sales price of our aggregates products. Reconciliation of this metric to its nearest GAAP measure is presented below:
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Three Months Ended |
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|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in millions, except per ton data |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Aggregates segment |
|
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|
|
|
|
|
|
|
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|
|
Segment sales |
$ 1,125.4 |
|
|
$ 1,070.6 |
|
|
$ 2,020.3 |
|
|
$ 1,938.8 |
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Less |
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|
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|
|
|
|
|
|
|
Freight & delivery revenues 1 |
234.8 |
|
|
240.9 |
|
|
432.1 |
|
|
446.6 |
|
|
Other revenues |
16.6 |
|
|
15.0 |
|
|
33.1 |
|
|
29.5 |
|
|
Freight-adjusted revenues |
$ 874.0 |
|
|
$ 814.7 |
|
|
$ 1,555.1 |
|
|
$ 1,462.7 |
|
|
Unit shipments - tons |
58.5 |
|
|
56.2 |
|
|
105.0 |
|
|
101.2 |
|
|
Freight-adjusted sales price |
$ 14.93 |
|
|
$ 14.50 |
|
|
$ 14.82 |
|
|
$ 14.45 |
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|
|
|
1 |
At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites. |
Aggregates segment incremental gross profit
Aggregates segment incremental gross profit flow-through rate is not a GAAP measure and represents the year-over-year change in gross profit divided by the year-over-year change in segment sales excluding freight & delivery (revenues and costs). This metric should not be considered as an alternative to metrics defined by GAAP. We evaluate this metric on a trailing-twelve month basis as quarterly gross profit flow-through rates can vary widely from quarter to quarter. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:
margin in accordance with gaap
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Three Months Ended |
|
|
Trailing-Twelve Months |
|
||||||
|
|
June 30 |
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|
June 30 |
|||||||
|
dollars in millions |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Aggregates segment |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ 373.8 |
|
|
$ 351.2 |
|
|
$ 1,211.4 |
|
|
$ 1,177.0 |
|
|
Segment sales |
$ 1,125.4 |
|
|
$ 1,070.6 |
|
|
$ 4,025.7 |
|
|
$ 4,032.1 |
|
|
Gross profit margin |
33.2% |
|
|
32.8% |
|
|
30.1% |
|
|
29.2% |
|
|
Incremental gross profit margin 1 |
41.4% |
|
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|
|
|
n/a |
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|
FLOW-THROUGH RATE (non-gaap)
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Three Months Ended |
|
|
Trailing-Twelve Months |
|
||||||
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|
June 30 |
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|
June 30 |
|||||||
|
dollars in millions |
2021 |
|
|
2020 |
|
|
2021 |
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|
2020 |
|
|
Aggregates segment |
|
|
|
|
|
|
|
|
|
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|
|
Gross profit |
$ 373.8 |
|
|
$ 351.2 |
|
|
$ 1,211.4 |
|
|
$ 1,177.0 |
|
|
Less: Contribution from acquisitions (same-store) |
0.0 |
|
|
0.0 |
|
|
0.2 |
|
|
0.0 |
|
|
Same-store gross profit |
$ 373.8 |
|
|
$ 351.2 |
|
|
$ 1,211.2 |
|
|
$ 1,177.0 |
|
|
Segment sales |
$ 1,125.4 |
|
|
$ 1,070.6 |
|
|
$ 4,025.7 |
|
|
$ 4,032.1 |
|
|
Less: Freight & delivery revenues 1 |
234.9 |
|
|
240.9 |
|
|
862.4 |
|
|
931.2 |
|
|
Segment sales excluding freight & delivery |
$ 890.5 |
|
|
$ 829.7 |
|
|
$ 3,163.3 |
|
|
$ 3,100.9 |
|
|
Less: Contribution from acquisitions (same-store) |
0.0 |
|
|
0.0 |
|
|
0.6 |
|
|
0.0 |
|
|
Same-store segment sales excluding freight & delivery |
$ 890.5 |
|
|
$ 829.7 |
|
|
$ 3,162.7 |
|
|
$ 3,100.9 |
|
|
Gross profit margin excluding freight & delivery |
42.0% |
|
|
42.3% |
|
|
38.3% |
|
|
38.0% |
|
|
Same-store gross profit margin excluding |
|
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freight & delivery |
42.0% |
|
|
42.3% |
|
|
38.3% |
|
|
38.0% |
|
|
Incremental gross profit flow-through rate |
37.3% |
|
|
|
|
|
55.1% |
|
|
|
|
|
Same-store incremental gross profit flow-through rate |
37.2% |
|
|
|
|
|
55.3% |
|
|
|
|
|
|
|
|
1 |
At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites. |
cash gross profit
GAAP does not define “cash gross profit” and it should not be considered as an alternative to earnings measures defined by GAAP. We and the investment community use this metric to assess the operating performance of our business. Additionally, we present this metric as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. Cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization to gross profit. Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped. Reconciliation of this metric to its nearest GAAP measure is presented below:
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|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
in millions, except per ton data |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Aggregates segment |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ 373.8 |
|
|
$ 351.2 |
|
|
$ 597.5 |
|
|
$ 545.3 |
|
|
Depreciation, depletion, accretion and amortization |
84.4 |
|
|
80.7 |
|
|
165.1 |
|
|
157.9 |
|
|
Aggregates segment cash gross profit |
$ 458.2 |
|
|
$ 431.9 |
|
|
$ 762.6 |
|
|
$ 703.2 |
|
|
Unit shipments - tons |
58.5 |
|
|
56.2 |
|
|
105.0 |
|
|
101.2 |
|
|
Aggregates segment gross profit per ton |
$ 6.39 |
|
|
$ 6.25 |
|
|
$ 5.69 |
|
|
$ 5.39 |
|
|
Aggregates segment cash gross profit per ton |
$ 7.83 |
|
|
$ 7.69 |
|
|
$ 7.27 |
|
|
$ 6.95 |
|
|
Asphalt segment |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ 13.5 |
|
|
$ 30.5 |
|
|
$ 10.5 |
|
|
$ 28.0 |
|
|
Depreciation, depletion, accretion and amortization |
9.1 |
|
|
8.7 |
|
|
18.2 |
|
|
17.4 |
|
|
Asphalt segment cash gross profit |
$ 22.6 |
|
|
$ 39.2 |
|
|
$ 28.7 |
|
|
$ 45.4 |
|
|
Concrete segment |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ 10.3 |
|
|
$ 14.2 |
|
|
$ 18.1 |
|
|
$ 23.4 |
|
|
Depreciation, depletion, accretion and amortization |
4.0 |
|
|
4.0 |
|
|
8.0 |
|
|
8.1 |
|
|
Concrete segment cash gross profit |
$ 14.3 |
|
|
$ 18.2 |
|
|
$ 26.1 |
|
|
$ 31.5 |
|
|
Calcium segment |
|
|
|
|
|
|
|
|
|
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|
|
Gross profit |
$ 0.7 |
|
|
$ 0.7 |
|
|
$ 1.6 |
|
|
$ 1.5 |
|
|
Depreciation, depletion, accretion and amortization |
0.0 |
|
|
0.0 |
|
|
0.1 |
|
|
0.1 |
|
|
Calcium segment cash gross profit |
$ 0.7 |
|
|
$ 0.7 |
|
|
$ 1.7 |
|
|
$ 1.6 |
|
NET DEBT TO ADJUSTED EBITDA
Net debt to Adjusted EBITDA is not a GAAP measure and should not be considered as an alternative to metrics defined by GAAP. We, the investment community and credit rating agencies use this metric to assess our leverage. Net debt subtracts cash and cash equivalents and restricted cash from total debt. Reconciliation of this metric to its nearest GAAP measure is presented below:
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|
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|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
June 30 |
||||||||||
|
in millions |
2021 |
|
|
2020 |
|
||||||
|
Debt |
|
|
|
|
|
||||||
|
Current maturities of long-term debt |
$ 15.4 |
|
|
$ 500.0 |
|
||||||
|
Short-term debt |
0.0 |
|
|
0.0 |
|
||||||
|
Long-term debt |
2,769.9 |
|
|
2,785.6 |
|
||||||
|
Total debt |
$ 2,785.3 |
|
|
$ 3,285.6 |
|
||||||
|
Less: Cash and cash equivalents and restricted cash |
968.4 |
|
|
817.2 |
|
||||||
|
Net debt |
$ 1,816.9 |
|
|
$ 2,468.4 |
|
||||||
|
Trailing-Twelve Months (TTM) Adjusted EBITDA |
$ 1,365.0 |
|
|
$ 1,314.2 |
|
||||||
|
Total debt to TTM Adjusted EBITDA |
2.0x |
|
|
2.5x |
|
||||||
|
Net debt to TTM Adjusted EBITDA |
1.3x |
|
|
1.9x |
|
||||||
EBITDA and adjusted ebitda
GAAP does not define “Earnings Before Interest, Taxes, Depreciation and Amortization” (EBITDA) and it should not be considered as an alternative to earnings measures defined by GAAP. We use this metric to assess the operating performance of our business and as a basis for strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. We adjust EBITDA for certain items to provide a more consistent comparison of earnings performance from period to period. Reconciliation of this metric to its nearest GAAP measure is presented below (numbers may not foot due to rounding):
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Trailing-Twelve Months |
|
|||||||||
|
|
June 30 |
|
|
June 30 |
|
June 30 |
|||||||||||
|
in millions |
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Net earnings |
$ 195.3 |
|
|
$ 209.9 |
|
|
$ 356.0 |
|
|
$ 270.2 |
|
|
$ 670.3 |
|
|
$ 627.0 |
|
|
Income tax expense |
57.3 |
|
|
61.4 |
|
|
117.9 |
|
|
73.5 |
|
|
200.2 |
|
|
150.5 |
|
|
Interest expense, net of interest income |
41.7 |
|
|
34.0 |
|
|
74.8 |
|
|
64.7 |
|
|
144.5 |
|
|
127.8 |
|
|
Loss on discontinued operations, net of tax |
1.4 |
|
|
1.0 |
|
|
2.5 |
|
|
0.8 |
|
|
5.2 |
|
|
4.6 |
|
|
EBIT |
295.8 |
|
|
306.3 |
|
|
551.2 |
|
|
409.2 |
|
|
1,020.1 |
|
|
909.8 |
|
|
Depreciation, depletion, accretion and amortization |
103.1 |
|
|
99.5 |
|
|
203.5 |
|
|
195.0 |
|
|
405.3 |
|
|
386.9 |
|
|
EBITDA |
$ 398.9 |
|
|
$ 405.7 |
|
|
$ 754.7 |
|
|
$ 604.2 |
|
|
$ 1,425.5 |
|
|
$ 1,296.7 |
|
|
Gain on sale of real estate and businesses, net |
$ 0.0 |
|
|
$ 0.0 |
|
|
$ (114.7) |
|
|
$ 0.0 |
|
|
$ (114.7) |
|
|
$ (9.3) |
|
|
Property donation |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
10.8 |
|
|
Charges associated with divested operations |
0.4 |
|
|
0.8 |
|
|
0.7 |
|
|
0.8 |
|
|
6.8 |
|
|
3.8 |
|
|
Business development 1 |
5.5 |
|
|
(3.5) |
|
|
5.9 |
|
|
(2.5) |
|
|
15.7 |
|
|
(0.7) |
|
|
COVID-19 direct incremental costs |
1.3 |
|
|
4.4 |
|
|
3.8 |
|
|
5.0 |
|
|
8.9 |
|
|
5.0 |
|
|
Pension settlement charge |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
22.7 |
|
|
0.0 |
|
|
Restructuring charges |
0.0 |
|
|
0.5 |
|
|
0.0 |
|
|
1.3 |
|
|
0.0 |
|
|
7.8 |
|
|
Adjusted EBITDA |
$ 406.0 |
|
|
$ 407.8 |
|
|
$ 650.3 |
|
|
$ 608.8 |
|
|
$ 1,365.0 |
|
|
$ 1,314.2 |
|
|
Depreciation, depletion, accretion and amortization |
(103.1) |
|
|
(99.5) |
|
|
(203.5) |
|
|
(195.0) |
|
|
(405.3) |
|
|
(386.9) |
|
|
Adjusted EBIT |
$ 302.9 |
|
|
$ 308.3 |
|
|
$ 446.8 |
|
|
$ 413.9 |
|
|
$ 959.7 |
|
|
$ 927.3 |
|
|
|
|
|
1 |
Represents non-routine charges or gains associated with acquisitions and dispositions including the cost impact of purchase accounting inventory valuations. |
Adjusted Diluted EPS from continuing Operations
Similar to our presentation of Adjusted EBITDA, we present Adjusted diluted earnings per share (EPS) from continuing operations to provide a more consistent comparison of earnings performance from period to period. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||
|
|
June 30 |
|
|
June 30 |
|||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Diluted Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ 1.46 |
|
|
$ 1.58 |
|
|
$ 2.67 |
|
|
$ 2.03 |
|
|
Less: Discontinued operations |
(0.01) |
|
|
0.00 |
|
|
(0.02) |
|
|
0.00 |
|
|
Diluted EPS from continuing operations |
$ 1.47 |
|
|
$ 1.58 |
|
|
$ 2.69 |
|
|
$ 2.03 |
|
|
Items included in Adjusted EBITDA above |
$ 0.05 |
|
|
$ 0.02 |
|
|
$ (0.58) |
|
|
$ 0.03 |
|
|
AL NOL carryforward valuation allowance |
0.00 |
|
|
0.00 |
|
|
0.10 |
|
|
0.00 |
|
|
Acquisition financing interest costs |
0.05 |
|
|
0.00 |
|
|
0.05 |
|
|
0.00 |
|
|
Adjusted diluted EPS from continuing operations |
$ 1.57 |
|
|
$ 1.60 |
|
|
$ 2.26 |
|
|
$ 2.06 |
|
2021 projected ebitda
The following reconciliation to the mid-point of the range of 2021 Projected EBITDA excludes adjustments (as noted in Adjusted EBITDA above) as they are difficult to forecast (timing or amount). Due to the difficulty in forecasting such adjustments, we are unable to estimate their significance. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Projected |
||||
|
in millions |
Mid-point |
||||
|
Net earnings |
|
$ 670 |
|
||
|
Income tax expense |
|
205 |
|
||
|
Interest expense, net of interest income |
|
145 |
|
||
|
Depreciation, depletion, accretion and amortization |
|
400 |
|
||
|
Projected EBITDA |
|
$ 1,420 |
|
||
RETURN ON INVESTED CAPITAL
We define “Return on Invested Capital” (ROIC) as Adjusted EBITDA for the trailing-twelve months divided by average invested capital (as illustrated below) during the trailing 5-quarters. Our calculation of ROIC is considered a non-GAAP financial measure because we calculate ROIC using the non-GAAP metric EBITDA. We believe that our ROIC metric is meaningful because it helps investors assess how effectively we are deploying our assets. Although ROIC is a standard financial metric, numerous methods exist for calculating a company’s ROIC. As a result, the method we use to calculate our ROIC may differ from the methods used by other companies. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below (numbers may not foot due to rounding):
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
Trailing-Twelve Months |
||||||||||
|
|
June 30 |
||||||||||
|
in millions |
2021 |
|
|
2020 |
|
||||||
|
Adjusted EDITDA |
$ 1,365.0 |
|
|
$ 1,314.2 |
|
||||||
|
Average invested capital 1 |
|
|
|
|
|
||||||
|
Property, plant & equipment, net |
$ 4,376.3 |
|
|
$ 4,335.6 |
|
||||||
|
Goodwill |
3,172.1 |
|
|
3,168.1 |
|
||||||
|
Other intangible assets |
1,112.6 |
|
|
1,087.6 |
|
||||||
|
Fixed and intangible assets |
$ 8,661.0 |
|
|
$ 8,591.3 |
|
||||||
|
Current assets |
$ 2,153.2 |
|
|
$ 1,453.1 |
|
||||||
|
Less: Cash and cash equivalents |
991.9 |
|
|
265.9 |
|
||||||
|
Less: Current tax |
19.2 |
|
|
19.3 |
|
||||||
|
Adjusted current assets |
1,142.2 |
|
|
1,167.9 |
|
||||||
|
Current liabilities |
864.3 |
|
|
649.8 |
|
||||||
|
Less: Current maturities of long-term debt |
311.2 |
|
|
100.0 |
|
||||||
|
Less: Short-term debt |
0.0 |
|
|
27.4 |
|
||||||
|
Adjusted current liabilities |
553.2 |
|
|
522.3 |
|
||||||
|
Adjusted net working capital |
$ 589.0 |
|
|
$ 645.5 |
|
||||||
|
Average invested capital |
$ 9,250.0 |
|
|
$ 9,236.8 |
|
||||||
|
Return on invested capital |
14.8% |
|
|
14.2% |
|
||||||
|
|
|
|
1 |
Average invested capital is based on trailing 5-quarters. |
LIQUIDITY AND FINANCIAL RESOURCES
Our primary sources of liquidity are cash provided by our operating activities, a delayed draw term loan facility and a substantial, committed bank line of credit. Additional sources of capital include access to the capital markets, the sale of surplus real estate, and dispositions of nonstrategic operating assets. We believe these financial resources are sufficient to fund our business requirements for 2021, including:
contractual obligations
capital expenditures
debt service obligations
dividend payments
potential acquisitions (including the proposed acquisition of U.S. Concrete)
potential share repurchases
Our balanced approach to capital deployment remains unchanged. We intend to balance reinvestment in our business, growth through acquisitions and return of capital to shareholders, while sustaining financial strength and flexibility.
We actively manage our capital structure and resources in order to balance the cost of capital and the risk of financial stress. We seek to meet these objectives by adhering to the following principles:
maintain substantial bank line of credit borrowing capacity
proactively manage our debt maturity schedule such that repayment/refinancing risk in any single year is low
maintain an appropriate balance of fixed-rate and floating-rate debt
minimize financial and other covenants that limit our operating and financial flexibility
As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity sources and needs and take appropriate actions.
Cash
Included in our June 30, 2021 cash and cash equivalents and restricted cash balances of $968.4 million is $110.9 million of restricted cash as described in Note 1 under the caption Restricted Cash.
cash from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
||||
|
|
June 30 |
||||
|
in millions |
2021 |
|
2020 |
|
|
|
Net earnings |
$ 356.0 |
|
|
$ 270.2 |
|
|
Depreciation, depletion, accretion and amortization (DDA&A) |
203.5 |
|
|
195.0 |
|
|
Noncash operating lease expense |
20.9 |
|
|
18.0 |
|
|
Net gain on sale of property, plant & equipment and businesses |
(117.4) |
|
|
(0.7) |
|
|
Contributions to pension plans |
(4.1) |
|
|
(4.4) |
|
|
Deferred tax expense |
41.1 |
|
|
36.6 |
|
|
Other operating cash flows, net 1 |
(102.1) |
|
|
(89.1) |
|
|
Net cash provided by operating activities |
$ 397.9 |
|
|
$ 425.6 |
|
|
|
|
|
1 |
Primarily reflects changes to working capital balances. |
Net cash provided by operating activities was $397.9 million during the six months ended June 30, 2021, a $27.7 million decrease compared to the same period of 2020. This decrease primarily resulted from unfavorable changes in working capital balances.
Days sales outstanding, a measurement of the time it takes to collect receivables, were 41.7 days at June 30, 2021 compared to 42.9 days at June 30, 2020. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; attention is being paid to the potential negative impact of the COVID-19 pandemic on our customers’ ability to pay their amounts owed to us.
cash from investing activities
Net cash used for investing activities was $1.5 million during the first six months of 2021, a $218.0 million decrease compared to cash used of $219.5 million in the same period of 2020. Proceeds from sale of property, plant & equipment were up $187.7 million from the first six months of 2020 primarily reflecting the sale of a reclaimed quarry in Southern California (see Note 16 to the condensed consolidated financial statements). Additionally, during the first half of 2021, we invested $192.2 million in our existing operations compared to $223.1 million in the prior year period. Of this $192.2 million, $64.9 million was invested in internal growth projects to enhance our distribution capabilities, develop new production sites and enhance existing production facilities and other growth opportunities.
cash from financing activities
Net cash used for financing activities in the first half of 2021 was $626.0 million, compared to cash provided of $336.6 million in the same period of 2020. The current year includes a) cash paid to retire the $500.0 million floating rate notes due March 2021 and b) $13.3 million of financing costs for a bridge facility commitment and delayed draw term loan facility (see Note 7 to the condensed consolidated financial statements). The prior year includes: a) net cash proceeds of $739.2 million from the issuance of debt, b) cash paid to retire the $250.0 million floating rate notes due June 2020, and c) $19.9 million of cash paid to settle interest rate derivatives.
Additionally, we decreased the capital returned to our shareholders by $18.1 million as higher dividends of $8.0 million ($0.74 per share compared to $0.68 per share) were offset by lower share repurchases of $26.1 million (no shares repurchased compared to 214,338 shares repurchased @ $121.92 average price per share).
debt
Certain debt measures are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
June 30 |
|||
|
dollars in millions |
2021 |
|
2020 |
|
2020 |
|||||
|
Debt |
|
|
|
|
|
|
|
|
||
|
Current maturities of long-term debt |
$ 15.4 |
|
|
$ 515.4 |
|
|
$ 500.0 |
|
||
|
Short-term debt |
0.0 |
|
|
0.0 |
|
|
0.0 |
|
||
|
Long-term debt |
2,769.9 |
|
|
2,772.3 |
|
|
2,785.6 |
|
||
|
Total debt |
$ 2,785.3 |
|
|
$ 3,287.7 |
|
|
$ 3,285.6 |
|
||
|
Capital |
|
|
|
|
|
|
|
|
||
|
Total debt |
$ 2,785.3 |
|
|
$ 3,287.7 |
|
|
$ 3,285.6 |
|
||
|
Equity |
6,293.1 |
|
|
6,027.3 |
|
|
5,764.2 |
|
||
|
Total capital |
$ 9,078.4 |
|
|
$ 9,315.0 |
|
|
$ 9,049.8 |
|
||
|
Total Debt as a Percentage of Total Capital |
30.7% |
|
|
35.3% |
|
|
36.3% |
|
||
|
Weighted-average Effective Interest Rates |
|
|
|
|
|
|
|
|
||
|
Delayed draw term loan 1 |
1.00% |
|
|
n/a |
|
|
n/a |
|
||
|
Line of credit 1 |
1.13% |
|
|
1.25% |
|
|
1.25% |
|
||
|
Term debt |
4.63% |
|
|
4.10% |
|
|
4.12% |
|
||
|
Fixed versus Floating Interest Rate Debt |
|
|
|
|
|
|
|
|
||
|
Fixed-rate debt |
100.0% |
|
|
85.1% |
|
|
85.1% |
|
||
|
Floating-rate debt |
0.0% |
|
|
14.9% |
|
|
14.9% |
|
||
|
|
|
|
|
1 |
Reflects the margin above LIBOR for LIBOR-based borrowings; we also paid upfront fees that are amortized to interest expense and pay fees for unused borrowing capacity and standby letters of credit. |
|
|
|
|
|
bridge facility, delayed draw term loan and line of credit
In June 2021, concurrent with the announcement of the proposed acquisition of U.S. Concrete (see Note 16 for additional information), we entered into a $2,200.0 million bridge facility commitment from Truist Bank. Later, in June 2021, we entered into a $1,600.0 million delayed draw term loan facility with a subset of the banks that provide our line of credit. The bridge facility commitment was terminated as a condition to the execution of the delayed draw term loan facility. The delayed draw term loan may be drawn once upon the acquisition of U.S. Concrete and all borrowings are due three years from the funding date. The delayed draw term loan contains covenants customary for an unsecured investment-grade facility and mirror those in our line of credit. As of June 30, 2021, we were in compliance with the delayed draw term loan covenants. Borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. Financing costs for the bridge facility commitment and the delayed draw term loan facility totaled $13.3 million, $9.4 million of which was recognized as interest expense in the current quarter.
In September 2020, we executed a new five-year unsecured line of credit of $1,000.0 million, incurring $4.6 million of deferred transaction costs. Covenants, borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of June 30, 2021, we were in compliance with the line of credit covenants, the credit margin for LIBOR borrowings was 1.125%, the credit margin for base rate borrowings was 0.125%, and the commitment fee for the unused amount was 0.100%.
As of June 30, 2021, our available borrowing capacity under the line of credit was $942.7 million. Utilization of the borrowing capacity was as follows:
none was borrowed
$57.3 million was used to provide support for outstanding standby letters of credit
TERM DEBT
All of our $2,857.5 million (face value) of term debt is unsecured. $2,846.2 million of such debt is governed by three essentially identical indentures that contain customary investment-grade type covenants. As of June 30, 2021, we were in compliance with all term debt covenants.
In May 2020, we issued $750.0 million of 3.50% senior notes due 2030 for total proceeds of $741.4 million (net of discounts and transaction costs). $250.0 million of the proceeds were used to retire the $250.0 million floating rate notes due June 2020, and the remainder of the proceeds, together with cash on hand, was used to retire the $500.0 million floating rate notes due March 2021.
CURRENT MATURITIES of long-term debt
The $15.4 million of current maturities of long-term debt as of June 30, 2021 includes all long-term debt that we intend to pay within twelve months, and is due as follows:
|
|
|
|
|
|
|
|
|
|
Current |
|
|
in millions |
Maturities |
|
|
Third quarter 2021 |
$9.0 |
|
|
Fourth quarter 2021 |
6.0 |
|
|
First quarter 2022 |
0.4 |
|
|
Second quarter 2022 |
0.0 |
|
debt ratings
Our debt ratings and outlooks as of June 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating/Outlook |
|
Date |
|
|
Description |
|
|
Senior Unsecured Term Debt |
|
|
|
|
|
|
|||
|
Fitch |
BBB/stable |
|
2/22/2021 |
|
|
rating revised |
|
||
|
Moody's |
Baa2/stable |
|
11/9/2020 |
|
|
rating revised |
|
||
|
Standard & Poor's |
BBB+/stable |
|
2/28/2020 |
|
|
rating revised |
|
||
LIBOR TRANSITION
The London Interbank Offered Rate (LIBOR) is an indicative measure of the average rate at which major global banks could borrow from one another and is used extensively globally as a reference rate for financial contracts (e.g., corporate bonds and loans) and commercial contracts (e.g., real estate leases). The United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, announced in July 2017 that it intends to cease requiring banks to submit LIBOR rates after 2021. ICE Benchmark Administration (IBA), the administrator of LIBOR, has announced that it would have to cease the publication of LIBOR quotes in June 2023 for the most actively used maturities on legacy transactions and December 2021 for all other maturities unless the FCA exercises its new powers under the Financial Services Act 2021 to require IBA to continue publishing LIBOR quotes using a “synthetic” basis.
The expected discontinuation of LIBOR has led to the formation of working groups in the U.S. and elsewhere to recommend alternative reference rates. The U.S. working group is the Alternative Reference Rates Committee (ARRC) convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The ARRC has selected the Secured Overnight Financing Rate (SOFR) as the preferred alternative to LIBOR.
As of June 30, 2021, we had two material debt instruments with LIBOR as a reference rate: 1) our $1,000.0 million line of credit (none outstanding at June 30, 2021) and 2) our $1,600.0 million delayed draw term loan facility (none outstanding at June 30, 2021). At this time, we cannot predict the future impact of a departure from LIBOR as a reference rate; however, if future rates based upon the successor reference rate (or a new method of calculating LIBOR) are higher than LIBOR rates as currently determined, our interest expense would increase.
Equity
The number of our common stock issuances and purchases for the year-to-date periods ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
June 30 |
|||
|
in thousands |
2021 |
|
2020 |
|
2020 |
|||
|
Common stock shares at January 1, |
|
|
|
|
|
|
|
|
|
issued and outstanding |
132,516 |
|
|
132,371 |
|
|
132,371 |
|
|
Common Stock Issuances |
|
|
|
|
|
|
|
|
|
Share-based compensation plans |
162 |
|
|
359 |
|
|
289 |
|
|
Common Stock Purchases |
|
|
|
|
|
|
|
|
|
Purchased and retired |
0 |
|
|
(214) |
|
|
(214) |
|
|
Common stock shares at end of period, |
|
|
|
|
|
|
|
|
|
issued and outstanding |
132,678 |
|
|
132,516 |
|
|
132,446 |
|
As of June 30, 2021, there were 8,064,851 shares remaining under the February 2017 Board of Directors’ share purchase authorization. Depending upon market, business, legal and other conditions, we may purchase shares from time to time through open market (including plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934) and/or privately negotiated transactions. The authorization has no time limit, does not obligate us to purchase any specific number of shares, and may be suspended or discontinued at any time.
The detail of our common stock purchases (all of which were open market purchases) for the year-to-date periods ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
December 31 |
|
June 30 |
|||
|
in thousands, except average cost |
2021 |
|
2020 |
|
2020 |
|||
|
Shares Purchased and Retired |
|
|
|
|
|
|
|
|
|
Number |
0 |
|
|
214 |
|
|
214 |
|
|
Total purchase price |
$ 0 |
|
|
$ 26,132 |
|
|
$ 26,132 |
|
|
Average cost per share |
$ 0.00 |
|
|
$ 121.92 |
|
|
$ 121.92 |
|
There were no shares held in treasury as of June 30, 2021, December 31, 2020 and June 30, 2020.
off-balance sheet arrangements
We have no off-balance sheet arrangements, such as financing or unconsolidated variable interest entities.
Standby Letters of Credit
For a discussion of our standby letters of credit, see Note 7 to the condensed consolidated financial statements.
Cash Contractual Obligations
Our obligation to make future payments under contracts is presented in our most recent Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES
We follow certain significant accounting policies when preparing our consolidated financial statements. A summary of these policies is included in our Annual Report on Form 10-K for the year ended December 31, 2020 (Form 10-K).
We prepare these financial statements to conform with accounting principles generally accepted in the United States of America. These principles require us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and contingent liabilities at the date of the financial statements. We base our estimates on historical experience, current conditions and various other assumptions we believe reasonable under existing circumstances and evaluate these estimates and judgments on an ongoing basis. The results of these estimates form the basis for our judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our actual results may materially differ from these estimates.
We believe that the accounting policies described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-K require the most significant judgments and estimates used in the preparation of our consolidated financial statements, so we consider these to be our critical accounting policies. There have been no changes to our critical accounting policies during the three months ended June 30, 2021.
new Accounting standards
For a discussion of the accounting standards recently adopted or pending adoption and the effect such accounting changes will have on our results of operations, financial position or liquidity, see Note 17 to the condensed consolidated financial statements.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, 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:
general economic and business conditions
a pandemic, epidemic or other public health emergency, such as the COVID-19 outbreak
our dependence on the construction industry, which is subject to economic cycles
the timing and amount of federal, state and local funding for infrastructure
changes in the level of spending for private residential and private nonresidential construction
changes in our effective tax rate
the increasing reliance on information technology infrastructure, including the risks that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks
the impact of the state of the global economy on our businesses and financial condition and access to capital markets
the highly competitive nature of the construction industry
the impact of future regulatory or legislative actions, including those relating to climate change, wetlands, greenhouse gas emissions, the definition of minerals, tax policy or international trade
the outcome of pending legal proceedings
pricing of our products
weather and other natural phenomena, including the impact of climate change and availability of water
availability and cost of trucks, railcars, barges and ships as well as their licensed operators for transport of our materials
energy costs
costs of hydrocarbon-based raw materials
healthcare costs
the amount of long-term debt and interest expense we incur
changes in interest rates
the impact of a discontinuation of the London Interbank Offered Rate (LIBOR)
volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans
the impact of environmental cleanup costs and other liabilities relating to existing and/or divested businesses
our ability to secure and permit aggregates reserves in strategically located areas
our ability to manage and successfully integrate acquisitions
our proposed acquisition of U.S. Concrete, including:
the integration may not be successful or that such integration may be more difficult, time-consuming or costly than expected
the acquisition may not be completed in a timely manner, on the terms proposed, or at all
the effect of the announcement or pendency of the proposed acquisition on our business relationships, operating results and business generally
diversion of management’s attention from ongoing business operations
the outcome of any legal proceedings related to the merger agreement or the proposed acquisition
the effect of changes in tax laws, guidance and interpretations
significant downturn in the construction industry may result in the impairment of goodwill or long-lived assets
changes in technologies, which could disrupt the way we do business and how our products are distributed
other assumptions, risks and uncertainties detailed from time to time in our periodic reports filed with the SEC
All forward-looking statements are made as of the date of filing or publication. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. Investors are cautioned not to rely unduly on such forward-looking statements when evaluating the information presented in our filings, and are advised to consult any of our future disclosures in filings made with the Securities and Exchange Commission (SEC) and our press releases with regard to our business and consolidated financial position, results of operations and cash flows.
INVESTOR information
We make available on our website, www.vulcanmaterials.com, free of charge, copies of our:
Annual Report on Form 10-K
Quarterly Reports on Form 10-Q
Current Reports on Form 8-K
Our website also includes amendments to those reports filed with or furnished to the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as all Forms 3, 4 and 5 filed with the SEC by our executive officers and directors, as soon as the filings are made publicly available by the SEC on its EDGAR database (www.sec.gov).
In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K, including financial statements, by writing to Denson N. Franklin III, Senior Vice President, General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.
We have a:
Business Conduct Policy applicable to all employees and directors
Code of Ethics for the CEO and Senior Financial Officers
Copies of the Business Conduct Policy and the Code of Ethics are available on our website under the heading “Corporate Governance.” If we make any amendment to, or waiver of, any provision of the Code of Ethics, we will disclose such information on our website as well as through filings with the SEC.
Our Board of Directors has also adopted:
Corporate Governance Guidelines
Charters for its Audit, Compensation, Executive, Finance, Governance and Safety, Health & Environmental Affairs Committees
These documents meet all applicable SEC and New York Stock Exchange regulatory requirements.
The Charters of the Audit, Compensation and Governance Committees are available on our website under the heading “Corporate Governance” under the “Investor Relations” tab or you may request a copy of any of these documents by writing to Denson N. Franklin III, Senior Vice President, General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.
Information included on our website is not incorporated into, or otherwise made a part of, this report.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. To manage these market risks, we may use derivative financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.
As discussed in the Liquidity and Financial Resources section of Part I, Item 2, we actively manage our capital structure and resources to balance the cost of capital and risk of financial stress. Such activity includes balancing the cost and risk of interest expense. In addition to floating-rate borrowings, we at times use interest rate swaps to manage the mix of fixed-rate and floating-rate debt.
At June 30, 2021, the estimated fair value of our long-term debt including current maturities was $3,361.0 million compared to a book value of $2,785.3 million. The estimated fair value was determined by averaging several asking price quotes for the publicly traded notes and assuming par value for the remainder of the debt. The fair value estimate is based on information available as of the balance sheet date. The effect of a decline in interest rates of one percentage point would increase the fair value of our debt by approximately $392.3 million.
We are exposed to certain economic risks related to the costs of our pension and other postretirement benefit plans. These economic risks include changes in the discount rate for high-quality bonds and the expected return on plan assets. The impact of a change in these assumptions on our annual pension and other postretirement benefits costs is discussed in our most recent Annual Report on Form 10-K.
ITEM 4
controls and procedures
disclosure controls and procedures
We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. These disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a - 15(e) or 15d - 15(e)), include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other management officials, evaluated the effectiveness of the design and operation of the disclosure controls and procedures as of June 30, 2021. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.
No material changes were made during the second quarter of 2021 to our internal controls over financial reporting, nor have there been other factors that materially affect these controls.
part Ii other information
ITEM 1
legal proceedings
Certain legal proceedings in which we are involved are discussed in Note 12 to the consolidated financial statements and Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2020 and in Note 8 to the condensed consolidated financial statements and Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. See Note 8 to the condensed consolidated financial statements of this Form 10-Q for a discussion of certain recent developments concerning our legal proceedings.
ITEM 1A
risk factors
There were no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of our equity securities during the quarter ended June 30, 2021 are summarized below.
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Total Number |
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Maximum |
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of Shares |
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Number of |
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Purchased as |
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Shares that |
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Total |
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Part of Publicly |
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May Yet Be |
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Number of |
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Average |
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Announced |
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Purchased |
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Shares |
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Price Paid |
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Plans or |
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Under the Plans |
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Period |
Purchased |
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Per Share |
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Programs |
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or Programs 1 |
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2021 |
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Apr 1 - Apr 30 |
0 |
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$ 0.00 |
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0 |
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8,064,851 |
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May 1 - May 31 |
0 |
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$ 0.00 |
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0 |
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8,064,851 |
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June 1 - June 30 |
0 |
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$ 0.00 |
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0 |
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8,064,851 |
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Total |
0 |
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$ 0.00 |
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0 |
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1 |
In February 2017, our Board of Directors authorized us to purchase up to 10,000,000 shares of our common stock. As of June 30, 2021, there were 8,064,851 shares remaining under the authorization. Depending upon market, business, legal and other conditions, we may make share purchases from time to time through open market (including plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934) and/or privately negotiated transactions. The authorization has no time limit, does not obligate us to purchase any specific number of shares, and may be suspended or discontinued at any time. |
We did not have any unregistered sales of equity securities during the second quarter of 2021.
ITEM 4
MINE SAfETY DISCLOSURES
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 of this report.
ITEM 6
exhibits
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Exhibit 2.1 |
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Exhibit 10.1 |
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Exhibit 10.2 |
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Exhibit 31(a) |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Exhibit 31(b) |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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Exhibit 32(a) |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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Exhibit 32(b) |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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Exhibit 95 |
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Exhibit 101 |
The following unaudited financial information from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements. |
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Exhibit 104 |
Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 is formatted in iXBRL (contained in Exhibit 101). |
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1 |
Incorporated by reference |
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Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 001-33841.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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VULCAN MATERIALS COMPANY
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Date August 5, 2021 |
/s/ Randy L. Pigg Randy L. Pigg Vice President, Controller (Principal Accounting Officer) |
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Date August 5, 2021 |
/s/ Suzanne H. Wood Suzanne H. Wood Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
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