Vulcan(US:VMC)2023-08-04 17:31PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents Vulcan Materials Company's unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Comprehensive Income, and Cash Flows, with detailed accounting notes Condensed Consolidated Balance Sheets Total assets increased to $14.33 billion from $14.23 billion, while total liabilities decreased and total equity rose, reflecting a stronger financial position Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $2,043.7 | $1,902.0 | | Property, plant & equipment, net | $6,105.8 | $6,051.3 | | Goodwill | $3,689.5 | $3,689.6 | | Total assets | $14,333.6 | $14,234.6 | | Total current liabilities | $793.3 | $956.6 | | Long-term debt | $3,873.2 | $3,875.2 | | Total liabilities | $7,107.2 | $7,282.4 | | Total shareholders' equity | $7,202.6 | $6,928.6 | | Total liabilities and equity | $14,333.6 | $14,234.6 | Condensed Consolidated Statements of Comprehensive Income Q2 2023 total revenues increased to $2.11 billion, with net earnings attributable to Vulcan rising to $308.6 million and diluted EPS reaching $2.33 Q2 and Six Months Performance Comparison (in millions, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,112.9 | $1,954.3 | $3,761.8 | $3,495.0 | | Gross profit | $583.3 | $446.2 | $885.3 | $714.9 | | Operating earnings | $451.1 | $307.6 | $638.3 | $454.5 | | Net earnings attributable to Vulcan | $308.6 | $187.3 | $429.3 | $279.1 | | Diluted EPS (Continuing Operations) | $2.33 | $1.50 | $3.25 | $2.20 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $507.5 million in H1 2023, while investing cash outflows decreased and financing activities shifted to a net use of cash Six Months Cash Flow Comparison (in millions) | Activity | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $507.5 | $325.5 | | Net cash used for investing activities | $(203.2) | $(468.7) | | Net cash provided by (used for) financing activities | $(297.6) | $25.4 | | Net increase (decrease) in cash | $6.7 | $(117.8) | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, revenue disaggregation, debt structure, significant legal proceedings including NAFTA arbitration, and segment performance - The company is the largest U.S. supplier of construction aggregates, with operations in 22 states and select international locations, focusing on aggregates as its principal product1415 - Mexican government officials shut down the company's Calica operations in May 2022, leading to a NAFTA arbitration claim and a $14.5 million valuation allowance against a deferred tax asset in 2022, with a projected increase in 20233594 Total Revenues by Segment (Six Months Ended June 30, in millions) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Aggregates | $2,621.4 | $2,266.9 | | Asphalt | $507.1 | $442.0 | | Concrete | $628.7 | $782.8 | | Calcium | $4.6 | $3.3 | | Total | $3,761.8 | $3,495.0 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2023 financial results, highlighting strong aggregates performance, revenue growth, margin expansion, and raised full-year Adjusted EBITDA guidance - The company raised its full-year Adjusted EBITDA guidance to a range of $1,900 million to $2,000 million, an increase of $150 million from initial expectations, driven by strong performance and positive shipment trends135141 - Q2 2023 Aggregates segment gross profit increased 24% to $498.6 million, with gross profit per ton improving 25% to $7.87, driven by a 15.0% increase in freight-adjusted sales price138148150 - The ratio of total debt to trailing-twelve months Adjusted EBITDA improved to 2.1 times as of June 30, 2023, remaining within the target leverage range of 2.0 to 2.5 times137 Executive Summary and Outlook Q2 2023 saw an 8% revenue increase and 31% gross profit rise, leading to an updated 2023 outlook with Adjusted EBITDA projected between $1.9 billion and $2.0 billion Q2 2023 Financial Highlights vs. Q2 2022 | Metric | Q2 2023 | Change vs. Q2 2022 | | :--- | :--- | :--- | | Total Revenues | $2,112.9M | +8% | | Gross Profit | $583.3M | +31% | | Operating Earnings | $451.1M | +47% | | Adjusted EBITDA | $595.3M | +32% | | Diluted EPS (Continuing Ops) | $2.33 | +$0.83 | - Updated 2023 Outlook includes aggregates shipments down 1% to 4%, net earnings attributable to Vulcan between $855 million and $935 million, and Adjusted EBITDA between $1,900 million and $2,000 million141 Results of Operations Q2 2023 revenue growth was driven by strong Aggregates pricing and improved Asphalt gross profit, while Concrete segment gross profit declined due to divestiture and residential slowdown - Aggregates segment showed strong Q2 2023 performance with a 13% sales increase, 24% gross profit increase to $498.6 million, and cash gross profit per ton rising 22% to $9.76148 - Asphalt segment gross profit surged 318% to $56.6 million in Q2 2023, driven by a 16% increase in shipments, an 8.8% price increase, and lower liquid asphalt costs146153 - Concrete segment gross profit declined 10% to $27.0 million in Q2 2023, primarily due to the November 2022 divestiture and a slowdown in residential construction146154 Liquidity and Financial Resources Primary liquidity sources include operating cash flow, a $1.6 billion credit line, and commercial paper, with H1 2023 operating cash flow increasing to $507.5 million and debt-to-capital ratio improving to 34.9% - Net cash from operating activities increased by $182.0 million to $507.5 million in H1 2023, primarily due to higher net earnings and favorable working capital changes188189 - In March 2023, the company issued $550.0 million of 5.80% senior notes due 2026, using the proceeds to fully repay its delayed draw term loan200 Debt to Capital Ratio | Date | Total Debt ($M) | Total Equity ($M) | Total Debt as % of Total Capital | | :--- | :--- | :--- | :--- | | June 30, 2023 | $3,873.7 | $7,226.4 | 34.9% | | Dec 31, 2022 | $3,975.7 | $6,952.2 | 36.4% | | June 30, 2022 | $4,050.2 | $6,744.2 | 37.5% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk through derivative instruments, including a $550.0 million fixed-to-floating interest rate swap initiated in March 2023 to hedge new fixed-rate debt - In March 2023, the company entered into a $550.0 million fixed-to-floating interest rate swap, designated as a fair value hedge, to manage interest rate risk on its new 5.80% notes due 2026222 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2023, while a legacy software system replacement for concrete operations is underway - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023226 PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 8 of the financial statements for detailed information on recent legal proceedings developments - The report directs readers to Note 8 of the financial statements for details on legal proceedings230 Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported in this period - No material changes to risk factors were reported for the quarter231 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2023, the company repurchased 241,363 shares for $49.9 million, with 7,823,488 shares remaining available under board authorization Q2 2023 Share Repurchases | Period | Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Apr 1 - Apr 30 | 0 | $0.00 | | May 1 - May 31 | 0 | $0.00 | | June 1 - June 30 | 241,363 | $206.82 | | Total | 241,363 | $206.82 | Item 4. Mine Safety Disclosures Mine safety disclosures, as required by the Dodd-Frank Act, are provided in Exhibit 95 of this report - Mine safety disclosures are provided in Exhibit 95 of the Form 10-Q234 Item 5. Other Information Chief Strategy Officer Stanley G. Bass adopted a Rule 10b5-1 trading plan in Q2 to sell 12,300 shares of company common stock - Chief Strategy Officer Stanley G. Bass adopted a Rule 10b5-1 trading plan on June 9, 2023, to sell 12,300 shares237 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, mine safety disclosures, and iXBRL formatted financial statements