BIRMINGHAM, Ala., Aug. 2, 2017 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the second quarter ended June 30, 2017.

Net earnings were $120 million and Adjusted EBITDA was $288 million. The Company's second quarter results reflect record unit profitability in its Aggregates segment despite wet weather and difficult operating conditions across many of its Southeastern and mid-Atlantic markets. Extreme wet weather across the Southeast and weaker demand in Illinois and coastal Texas contributed to a 3 percent decline in same-store aggregates shipments compared to the prior year. Same-store pricing in aggregates improved 5 percent.

Tom Hill, Chairman and Chief Executive Officer, said, "Aggregates shipments in the quarter were hit hard by prolonged and extremely wet weather in the Southeast, particularly in May and June, and the absence or delayed timing of large project work in Illinois and coastal Texas compared to last year. This shortfall in second quarter aggregates shipments drove most of the difference in our reported results versus our plan.

"Despite the volume shortfall in the quarter, I am very encouraged by what I see happening behind the reported numbers. Private demand in our markets continued to strengthen. Highway project starts accelerated in the second quarter, signaling an end to the softness in starts that we have been working through for the last year. Our shipment backlog for public highway work hasn't been this high in at least three years. California and Virginia, important states for us, have returned to shipment growth. Our recent acquisitions are performing well. And, our core profitability in aggregates continues to improve. Aggregates unit gross profit was a second quarter record despite the wet weather we experienced in some of our strongest markets. Aggregates pricing, adjusted for mix, was consistent with full year expectations. These results are a good indication of the market's visibility to further demand recovery.

"Our business remains on track with our longer-term goals and expectations. We remain confident in the sustained, multi-year recovery in materials demand across our markets and in the further, compounding improvements to our unit profitability. We anticipate 5 to 10 percent growth in shipments from August through the end of the year. However, given the shortfall in shipments to date, we now expect full year aggregates shipments of 182 to 187 million tons and full year Adjusted EBITDA of $1.05 to $1.13 billion."

Second Quarter Summary (compared with prior year's second quarter)

• Total revenues increased $74 million, or 8 percent, to $1.03 billion
• Gross profit was $292 million, in line with the prior year
• Aggregates segment sales increased $26 million, or 3 percent, to $818 million, and aggregates freight-adjusted revenues increased $17 million, or 3 percent, to $631 million
• Shipments decreased 0.8 million tons, or 2 percent, to 48.0 million tons
• Freight-adjusted sales price increased $0.55 per ton, or 4 percent
• Segment gross profit was $253 million, approximating the prior year
• Asphalt, Concrete and Calcium segment gross profit improved 2 percent, collectively, to $39 million
• SAG was $83 million, flat with the prior year and down 60 basis points as a percentage of total revenues
• Net earnings were $120 million, a decrease of $5 million, or 4 percent
• Adjusted EBIT was $211 million, an increase of $3 million, or 2 percent
• Adjusted EBITDA was $288 million, an increase of $8 million, or 3 percent
• Earnings from continuing operations were $0.83 per diluted share versus $0.93 per diluted share
• Adjusted earnings from continuing operations were $0.90 per diluted share in both the current year's second quarter and prior year

Trailing-Twelve-Month Summary (compared with prior twelve month period)

• Total revenues were $3.70 billion, an increase of $92 million, or 3 percent
• Gross profit was $996 million, a decrease of $6 million, or 1 percent
• Aggregates segment sales increased $36 million, or 1 percent, to $3.00 billion, and aggregates freight-adjusted revenues increased $45 million, or 2 percent, to $2.32 billion
• Shipments decreased 5.7 million tons, or 3 percent, to 179.6 million tons
• Freight-adjusted sales price increased $0.64 per ton, or 5 percent
• Segment gross profit decreased $19 million, or 2 percent, to $864 million
• Asphalt, Concrete and Calcium segment gross profit improved $13 million, collectively
• SAG was $321 million, in line with full year expectations
• Net earnings were $420 million, an increase of $42 million, or 11 percent
• Adjusted EBIT was $676 million, a decrease of $5 million, or 1 percent
• Adjusted EBITDA was $968 million, an increase of $6 million, or 1 percent
• Earnings from continuing operations were $3.02 per diluted share versus $2.86 per diluted share
• Adjusted earnings from continuing operations were $2.95 per diluted share versus $2.98 per diluted share

Segment Results

Aggregates

Shipment trends in aggregates varied widely across the Company's footprint, largely due to weather and the timing of large projects. Aggregates shipments decreased 2 percent versus the prior year's quarter and same-store shipments declined 3 percent. Alabama, Florida, Georgia, Louisiana and Mississippi combined saw shipments decline 12 percent versus the prior year's second quarter. Severe wet weather and flooding slowed construction activity and impaired shipments in May and June, two key months of the construction season. Aggregates shipments in Florida and Georgia, for example, declined double-digits in June despite very strong underlying market conditions. Coastal Texas and Illinois also experienced significant shipment declines. In Illinois, shipments declined 19 percent versus the prior year due in part to the absence of a state budget to support public construction. Coastal Texas shipments in the quarter were impacted by a softer local economy and the relative timing of DOT spending and other large project activity; however, backlogs for that market remain strong. Markets outside of these areas combined to grow 6 percent versus the prior year's second quarter – more in line with trend and despite weather challenges in Virginia, the Carolinas and Tennessee. Shipments in California grew 10 percent, driven by private construction activity and the catch-up on work deferred from the very wet first quarter. California's passage of a long-term transportation bill resolved Caltrans' funding uncertainty and should, along with other factors, support sustained shipping rate improvements over the coming years.

Fundamental demand drivers and leading indicators for shipment growth continued to strengthen in the quarter for Vulcan-served markets. Trailing-twelve-month construction starts in our markets have steadily improved from a year ago, outpacing non-Vulcan markets by a wide margin. Private construction starts remain strong, led by continued growth in both residential and nonresidential buildings. Importantly, public construction starts have turned positive due to growth in highway and road spending. Additionally, the pre-construction pipeline of projects continues to grow across our footprint. State and local governments have continued to pass funding measures to increase public infrastructure investment significantly, and more projects supported by federal FAST Act funding have moved further toward the active construction stage.

Broad pricing momentum continued across the Company's footprint with substantially all markets realizing price growth in the second quarter. For the quarter, same-store freight-adjusted average sales price for aggregates increased 5 percent versus the prior year, or $0.59 per ton, despite a negative mix impact. The overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital. California and Georgia each realized high-single digit price growth, again supported by clear and improving visibility to sustained growth in demand.

Second quarter Aggregates segment gross profit was $253 million, or $5.27 per ton. Segment results in the quarter were negatively impacted by product shipment mix, acquisition-related integration costs, a 15 percent increase in the unit cost of diesel fuel and costs related to the transition to two new, more efficient ships to transport aggregates from our quarry in Mexico. In total, these items negatively impacted segment gross profit by $16 million in comparison to the prior year.

Asphalt, Concrete and Calcium

Our non-aggregates segments' second quarter gross profit was $39 million, a 2 percent increase over the prior year's period. Asphalt segment gross profit decreased $2 million to $29 million. Shipments increased 16 percent in total and 6 percent on a same-store basis. Arizona and California (the Company's largest asphalt market) drove most of the same-store growth in shipments. Solid volume growth was offset by lower price, higher liquid asphalt unit cost, and costs related to integration of recent acquisitions.

Concrete segment gross profit was $9 million in the quarter compared to $6 million in the prior year period. Shipments increased 21 percent versus the prior year as volumes increased in most of the Company's concrete markets, including Texas and Virginia (the Company's largest concrete market). On a same-store basis, volumes increased 11 percent. Materials margins and unit gross profit in concrete also improved versus the prior year.

Calcium segment gross profit was $0.6 million versus $1.1 million in the prior year.

On a trailing-twelve-month basis, total gross profit in our non-aggregates segments was $132 million, an 11 percent increase from the prior year's comparable period.

Growth, Capital Allocation, and Financial Position

As of June 30, year-to-date capital expenditures were $291 million. This amount included $107 million invested in internal growth projects to enhance the Company's aggregates distribution network to markets without local aggregates reserves, as well as development of new sites and other growth investment projects. Core capital investments to replace existing property, plant and equipment made up the remaining $184 million, and are expected to be approximately $300 million for the full year.

The Company remains active in the pursuit of bolt-on acquisitions and other value-creating growth investments. Since January, the Company has closed acquisitions totaling $212 million. These acquisitions complement our leading positions in certain California, Illinois, New Mexico and Tennessee markets.

At the end of the second quarter, total debt was $3.4 billion and cash was $1.1 billion. Total debt included $1 billion of new notes issued in June to help fund acquisitions and other growth investments, including the previously announced agreement to acquire the assets of Aggregates USA, and to retire $523 million of notes due in June and December of 2018. Retirement of the 2018 maturities was completed on July 12 for $566 million using proceeds from the new notes and cash. Full year interest expense will be approximately $193 million, including $46 million of one-time charges incurred in the third quarter for the early debt retirement.

During the quarter, the Company returned $44 million to shareholders through dividends and share repurchases, bringing the year-to-date total to $126 million.

Selling, Administrative and General (SAG), Other Operating Expense and Taxes

Selling, Administrative and General (SAG) expenses were $83 million, flat with the prior year. Trailing-twelve-month SAG expenses were $321 million, in line with full-year expectations, which remain unchanged.

Other operating expenses were $18 million in the second quarter versus $6 million in the prior year. The year-over-year change is primarily due to certain charges associated with previously divested operations.

Expectations for the full-year 2017 effective tax rate continue to be 28 percent.

Demand and Earnings Outlook

Regarding the Company's earnings outlook for 2017, Mr. Hill stated, "We are excited about the growth opportunities ahead of us. Leading indicators, such as growth in the pre-construction pipeline and in construction starts in our markets, as well as growth in our own order backlogs, point toward a return to growth in the second half of this year and beyond. However, the rate of growth through the remainder of this year will depend on the pace at which our customers catch up on deferred work and on the timing of our shipments to large projects in our backlog. Given these factors and the significant shortfall to plan experienced in the second quarter, we have revised our outlook for shipments to between 182 and 187 million tons. Primarily due to this lower expectation for 2017 aggregates shipments, we now project full year Adjusted EBITDA of between $1.05 and $1.13 billion. Other management expectations (e.g. aggregates price improvement, asphalt and concrete gross profit growth, SAG expense, capital spending, and effective tax rate) remain as outlined in our fourth quarter 2016 earnings communication.

"Our confidence in the longer term outlook for our business remains strong. Our industry-leading core profitability in aggregates keeps improving. Operational excellence, solid sales execution and cost control continue to have a strong positive impact on the bottom line, in spite of the last twelve months of uneven growth. We have the financial strength to continue making smart growth investments that fit us best and we are committed to continuous improvement in safety, customer service and operational efficiencies."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CDT on August 2, 2017. A webcast will be available via the Company's website at www.vulcanmaterials.com. Investors and other interested parties in the U.S. may also access the teleconference live by calling 866-564-2842 approximately 10 minutes before the scheduled start. International participants can dial 323-794-2130. The conference ID is 4834215. The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, and a major producer of other construction materials.

FORWARD-LOOKING STATEMENT DISCLAIMERThis document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales. These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document. These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements. The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan's effective tax rate; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event that the infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions, including those relating to climate change, greenhouse gas emissions, the definition of minerals or international trade; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to existing and/or divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; modification to the terms of the acquisition of Aggregates USA, LLC may be required in order to satisfy approvals or conditions; business disruption during the pendency of, or following the acquisition of, Aggregates USA, LLC, including diversion of management time; the potential of goodwill or long-lived asset impairment; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement. Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.

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