Vulcan(US:VMC)2024-05-02 16:31PART I Financial Statements This section presents the unaudited condensed consolidated financial statements for Vulcan Materials Company as of and for the three months ended March 31, 2024, including Balance Sheets, Statements of Comprehensive Income, Statements of Cash Flows, and detailed Notes providing context on accounting policies, segment performance, debt, and contingencies Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $13,910.9 million, a decrease from $14,545.7 million at year-end 2023, primarily due to a reduction in cash and cash equivalents; total liabilities decreased to $6,394.3 million from $7,037.8 million, largely driven by a reduction in long-term debt; total equity remained stable at $7,516.6 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $292.4 | $931.1 | $139.6 | | Total current assets | $1,907.6 | $2,524.9 | $1,792.5 | | Property, plant & equipment, net | $6,209.3 | $6,217.7 | $6,044.9 | | Goodwill | $3,531.7 | $3,531.7 | $3,689.6 | | Total assets | $13,910.9 | $14,545.7 | $14,076.9 | | Liabilities & Equity | | | | | Total current liabilities | $696.2 | $797.6 | $756.9 | | Long-term debt | $3,330.7 | $3,877.3 | $3,876.9 | | Total liabilities | $6,394.3 | $7,037.8 | $7,066.2 | | Total equity | $7,516.6 | $7,507.9 | $7,010.7 | Condensed Consolidated Statements of Comprehensive Income For the three months ended March 31, 2024, total revenues decreased to $1,545.7 million from $1,649.0 million year-over-year; net earnings attributable to Vulcan were $102.7 million, down from $120.7 million in Q1 2023; diluted earnings per share from continuing operations were $0.78, compared to $0.92 in the prior-year period, impacted by lower revenues and a higher effective tax rate Q1 2024 vs Q1 2023 Performance (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $1,545.7 | $1,649.0 | | Gross profit | $304.9 | $302.0 | | Operating earnings | $172.9 | $187.2 | | Net earnings attributable to Vulcan | $102.7 | $120.7 | | Diluted EPS (Continuing Operations) | $0.78 | $0.92 | | Diluted EPS (Net Earnings) | $0.77 | $0.90 | | Effective tax rate (Continuing Operations) | 21.6% | 11.9% | Condensed Consolidated Statements of Cash Flows For Q1 2024, net cash from operating activities was $173.4 million, a decrease from $221.3 million in Q1 2023; net cash used for investing activities was $163.8 million; net cash used for financing activities increased significantly to $658.7 million, primarily due to a $550.4 million payment of long-term debt, resulting in a net decrease in cash of $649.1 million for the quarter Q1 2024 vs Q1 2023 Cash Flow (in millions) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $173.4 | $221.3 | | Net cash used for investing activities | $(163.8) | $(61.7) | | Net cash used for financing activities | $(658.7) | $(181.1) | | Net decrease in cash | $(649.1) | $(21.5) | - Financing activities in Q1 2024 included a $550.4 million payment of long-term debt, $62.0 million in dividends, and $18.8 million in common stock purchases12 Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial results, covering revenue disaggregation by segment and geography, debt structure and recent repayments, significant legal proceedings and contingencies (including the NAFTA arbitration with Mexico), segment reporting changes, and recent acquisition and divestiture activities - The company is the largest U.S. supplier of construction aggregates and a major producer of asphalt mix and ready-mixed concrete, operating primarily in 23 states and select international locations1415 Total Revenues by Segment (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Aggregates | $1,211.2 | $1,194.1 | | Asphalt | $186.2 | $169.8 | | Concrete | $148.3 | $285.1 | | Total Revenues | $1,545.7 | $1,649.0 | - In March 2024, the company redeemed its $550.0 million 5.80% senior notes due 2026 using cash on hand60 - The company is involved in a NAFTA arbitration claim against Mexico due to the government's shutdown of its Calica operations in May 2022, with a decision expected in 202482 - In Q1 2024, the company acquired aggregates operations in North Carolina for $12.3 million, and in April 2024, it acquired aggregates and asphalt operations in Alabama105 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q1 2024 financial results, highlighting a 6% decrease in total revenues to $1,545.7 million but a 1% increase in gross profit to $304.9 million, driven by margin expansion; despite lower aggregates shipment volumes due to weather, unit profitability improved, and the company maintains a positive outlook, expecting to deliver double-digit earnings growth for the full year Q1 2024 Financial Highlights vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,545.7M | $1,649.0M | -6% | | Gross Profit | $304.9M | $302.0M | +1% | | Operating Earnings | $172.9M | $187.2M | -8% | | Net Earnings (attributable to Vulcan) | $102.7M | $120.7M | -15% | | Adjusted EBITDA | $323.5M | $337.7M | -4% | | Aggregates Shipments (tons) | 48.1M | 51.8M | -7% | | Aggregates Gross Profit per ton | $6.30 | $5.86 | +8% | - The company remains on track to deliver $2,150 to $2,300 million of Adjusted EBITDA for the full year 2024, marking the fourth consecutive year of projected double-digit growth123 - In Q1 2024, the company returned $80.8 million to shareholders through $62.0 million in dividends and $18.8 million in share repurchases119124 Results of Operations Q1 2024 total revenues fell 6% to $1,545.7 million, primarily due to a 7% decline in aggregates shipments and a 54% drop in concrete shipments, the latter affected by a divestiture; despite lower volumes, Aggregates segment gross profit was stable at $303.3 million, as freight-adjusted selling prices rose 10.2% to $20.59 per ton, boosting unit profitability; the Asphalt segment saw gross profit rise to $4.7 million from $0.8 million, while the Concrete segment's loss widened slightly, and SAG expenses increased by $12.4 million Aggregates Segment Performance - Q1 2024 vs Q1 2023 | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Unit Shipments (million tons) | 48.1 | 51.8 | -7% | | Freight-adjusted sales price per ton | $20.59 | $18.69 | +10.2% | | Gross Profit per ton | $6.30 | $5.86 | +8% | | Cash Gross Profit per ton | $8.86 | $8.03 | +10% | - Asphalt segment gross profit increased to $4.7 million from $0.8 million year-over-year, driven by a 3% increase in shipments and a 6.0% increase in pricing133 - Concrete segment gross profit was a loss of $3.1 million, compared to a loss of $2.4 million in the prior year, impacted by the divestiture of Texas operations in November 2023128134 Liquidity and Financial Resources The company's primary liquidity sources are cash from operations, a $1,600 million line of credit, and a commercial paper program; in Q1 2024, cash from operations was $173.4 million, and the company used cash for financing activities totaling $658.7 million, including the redemption of $550 million in senior notes; as of March 31, 2024, total debt was $3,331.2 million, and the ratio of total debt to trailing-twelve months Adjusted EBITDA was 1.7x, with $1,510 million available under its line of credit - Net cash from operating activities decreased by $47.9 million to $173.4 million in Q1 2024 compared to Q1 2023, mainly due to lower net earnings and changes in working capital153 - Net cash used for financing activities increased by $477.6 million to $658.7 million in Q1 2024, driven by the redemption of $550.0 million senior notes due 2026156 Debt Metrics as of March 31, 2024 | Metric | Value | | :--- | :--- | | Total Debt | $3,331.2 million | | Total Debt as a % of Total Capital | 30.7% | | Total debt to TTM Adjusted EBITDA | 1.7x | | Net debt to TTM Adjusted EBITDA | 1.5x | | Weighted-Average Debt Maturity | 10.9 years | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily interest rate risk, which it manages by balancing fixed-rate and floating-rate debt and using derivative instruments; as of March 31, 2024, 83.8% of its debt was fixed-rate, and the fair value of its long-term debt was $3,205.6 million against a face value of $3,391.1 million; the company is also exposed to economic risks related to its pension and postretirement benefit plans - The company actively manages its capital structure to balance the cost of capital and risk, including balancing fixed-rate (83.8%) and floating-rate (16.2%) debt as of March 31, 2024184158 - The estimated fair value of long-term debt was $3,205.6 million compared to a face value of $3,391.1 million at the end of Q1 2024185 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024; the company is in the process of replacing its quote-to-invoice system for aggregates and asphalt operations, with full implementation expected by Q4 2024, and no other material changes to internal controls over financial reporting occurred during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024188 - The company is implementing a new quote-to-invoice system for its aggregates and asphalt operations, expected to be completed by Q4 2024189 PART II OTHER INFORMATION Legal Proceedings This section refers to Note 8 of the financial statements for a detailed discussion of legal proceedings, including environmental cases related to the former Chemicals business (Lower Passaic River, Texas Brine), Superfund site liabilities (Hewitt Landfill), and the ongoing NAFTA arbitration against Mexico concerning the shutdown of the company's Calica operations - For a detailed discussion of legal proceedings, refer to Note 8 of the condensed consolidated financial statements192 Risk Factors There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors were reported for the quarter193 Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company repurchased 70,932 shares of its common stock at an average price of $265.44 per share, for a total cost of $18.8 million; as of March 31, 2024, 7,016,328 shares remained available for purchase under the current board authorization, and there were no unregistered sales of equity securities Q1 2024 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31 | 0 | $0.00 | | Feb 1 - Feb 29 | 0 | $0.00 | | Mar 1 - Mar 31 | 70,932 | $265.44 | | Total | 70,932 | $265.44 | - As of March 31, 2024, 7,016,328 shares may yet be purchased under the company's existing share repurchase authorization196 Mine Safety Disclosures Information regarding mine safety violations and other regulatory matters as required by the Dodd-Frank Act is included in Exhibit 95 of this Form 10-Q report - Mine safety disclosures required by Section 1503(a) of the Dodd-Frank Act are provided in Exhibit 95197 Other Information During the first quarter of 2024, Chairman and CEO Tom Hill adopted a Rule 10b5-1 trading arrangement on March 14, 2024, for the potential sale of 62,900 shares, with the plan expiring on the earlier of when all shares are sold or February 11, 2025 - Chairman and CEO Tom Hill adopted a Rule 10b5-1 trading plan on March 14, 2024, to sell up to 62,900 shares of common stock199