Vulcan(VMC) - 2024 Q4 - Annual Report

Part I Business Overview Vulcan Materials is the largest U.S. supplier of construction aggregates, asphalt, and concrete, primarily operating in high-growth U.S. metropolitan areas - Vulcan is the largest U.S. supplier of construction aggregates, also producing asphalt mix and ready-mixed concrete[20] - As of December 31, 2024, the company operated 423 active aggregates, 70 asphalt, and 74 concrete facilities[20][21] - The company's top ten revenue-producing states, including California, Texas, and Georgia, accounted for 89% of 2024 revenues[22][24] Business Strategy The company's strategy focuses on aggregates, durable growth, land management, and environmental commitment - The company's strategy centers on four pillars: aggregates focus, durable growth, holistic land management, and commitment to safety, health, and environment[25] - Vulcan emphasizes its aggregates business due to high barriers to entry and favorable pricing, holding 16.5 billion tons of proven and probable reserves in high-growth areas[26][28] - Growth is pursued organically and through acquisitions, with aggregates gross profit per ton increasing 39% to $8.26 and cash gross profit per ton increasing 36% to $10.61 from 2022 to 2024[31][33] - The company manages its 310,000-acre land portfolio through its life cycle, generating a $36.7 million pretax gain from a real estate sale in 2024[39][40] - Vulcan is committed to environmental stewardship, reusing 2.1 million tons of recycled asphalt pavement and 1.7 million tons of recycled concrete in 2024[46] Product Lines and Segments The company operates three reportable segments: Aggregates, Asphalt, and Concrete, with Aggregates being the primary contributor to revenues and gross profit - The company operates three reportable segments: Aggregates, Asphalt, and Concrete, with Aggregates being the primary contributor to 2024 total revenues and gross profit[48][49][50] - The Aggregates segment benefits from high transportation costs, limited substitutes, and a fragmented industry structure offering consolidation opportunities[52][53] - The Asphalt segment produces asphalt mix, with aggregates comprising approximately 95% of its weight, primarily sourced internally[69][70] - The Concrete segment produces ready-mixed concrete, with aggregates comprising approximately 80% of its weight, also primarily sourced internally[69][72] Markets and Customers Demand is driven by public and private construction, with public sector supported by federal funding and private sector by economic factors - Demand is driven by public and private construction, with public accounting for approximately 40% and private for approximately 60% of 2024 aggregates shipments[58][64] - Public sector demand is supported by the Infrastructure Investment and Jobs Act (IIJA) and state/local ballot measures, providing federal highway funding reauthorization[59][62] - Private sector demand is driven by nonresidential and residential construction, influenced by job growth, household formations, and financing costs[67] - The company has a diversified customer base, with no single customer accounting for more than 3% and the five largest accounting for approximately 8% of 2024 total revenues[78] Human Capital Vulcan employs over 11,000 people in the U.S. and internationally, emphasizing employee development programs - As of January 1, 2025, Vulcan employed 11,436 people in the United States, with approximately 9.5% represented by labor unions[88] - The company also employed 535 people internationally, with 248 represented by labor unions[88] - Vulcan emphasizes employee development through programs such as tuition reimbursement, mentoring, leadership, and technical skills training[92][94] Risk Factors The company identifies key risks including economic cycles, reliance on government funding, international operations, intense competition, securing new reserves, and cybersecurity threats - Economic/Political Risks: Business is highly dependent on the cyclical U.S. construction industry and relies on federal, state, and local infrastructure funding[106][107] - International Risks: The company faces risks from international operations, including adverse actions by the Mexican government such as arbitrary shutdown orders of its Calica operations[108] - Operational Risks: The industry is highly competitive and fragmented, with long-term success dependent on securing and permitting new aggregates reserves, which is increasingly difficult[109][111] - Financial/Accounting Risks: The capital-intensive business has earnings sensitive to shipment volumes and relies on significant estimates for goodwill impairment, business combinations, and pensions[115][118] - Cybersecurity Risks: The company's dependence on IT systems poses risks of unauthorized access or sabotage, potentially disrupting operations and damaging reputation[128] Cybersecurity Vulcan manages cybersecurity risk through a NIST-based program with Board oversight, regular assessments, and third-party testing - The company's cybersecurity risk management program is based on the National Institute of Standards and Technology (NIST) framework, covering identification, protection, detection, response, and recovery[136] - The Audit Committee and Board of Directors actively oversee the cybersecurity program, receiving regular updates from the Chief Information Officer[139] - The company uses layered defenses, conducts annual risk assessments, performs quarterly employee phishing tests, and engages third-party experts for penetration and maturity testing[137][138] Properties, Reserves, and Resources As of December 31, 2024, Vulcan holds 16.5 billion tons of proven and probable aggregates reserves and 11.3 billion tons of measured and indicated resources across its strategic properties Aggregates Resources by Division (as of Dec 31, 2024, millions of tons) | Division | Measured (M) | Indicated (I) | Total (M+I) | Inferred | | :--- | :--- | :--- | :--- | :--- | | Central | 629.1 | 1,163.3 | 1,805.1 | 580.5 | | East | 2,644.2 | 748.5 | 3,392.7 | 295.3 | | International | 0.0 | 61.1 | 61.1 | 0.0 | | Northeast | 855.0 | 15.9 | 902.7 | 19.2 | | South | 558.7 | 497.2 | 1,140.8 | 384.4 | | Southern Gulf Coast | 671.6 | 175.1 | 888.7 | 218.4 | | Southwest | 478.5 | 38.9 | 669.2 | 500.0 | | Western | 476.4 | 875.8 | 2,449.9 | 962.3 | | Total | 6,313.5 | 3,575.8 | 11,310.2 | 2,960.1 | Aggregates Reserves and Production by Division (as of Dec 31, 2024, millions of tons) | Division | Proven | Probable | Total Reserves | 2024 Production | | :--- | :--- | :--- | :--- | :--- | | Central | 1,984.0 | 1,020.3 | 3,013.1 | 33.0 | | East | 3,233.8 | 1,106.8 | 4,340.6 | 48.7 | | International | 471.1 | 0.0 | 471.1 | 1.7 | | Northeast | 1,364.2 | 503.5 | 1,975.6 | 25.3 | | South | 853.6 | 359.1 | 1,413.6 | 30.3 | | Southern Gulf Coast | 1,864.3 | 117.5 | 1,981.8 | 24.6 | | Southwest | 1,159.6 | 105.0 | 1,421.1 | 27.7 | | Western | 815.9 | 108.4 | 1,837.3 | 32.9 | | Total | 11,746.5 | 3,320.6 | 16,454.2 | 224.2 | - Total proven and probable reserves increased by 0.8 billion tons from the prior year, primarily due to acquisitions, with 63% on owned land and 37% on leased land[155][157] - The company's land portfolio consists of approximately 310,000 acres[157] Legal Proceedings Vulcan is involved in various legal proceedings, including environmental matters and a NAFTA arbitration claim against Mexico regarding its Calica quarry operations - The company is subject to various lawsuits and governmental proceedings, with material legal proceedings detailed in Note 12 of the financial statements[164][166] Part II Stock Performance and Shareholder Matters Vulcan's common stock trades on the NYSE under VMC, with 132.1 million shares outstanding and a performance graph showing relative returns - As of February 13, 2025, there were 132,109,660 shares of common stock outstanding and 1,977 shareholders of record[10][180] Shareholder Return Performance (2019-2024) | Year | Vulcan Materials | S&P 500 | S&P 500 Materials | | :--- | :--- | :--- | :--- | | 2019 | $100.00 | $100.00 | $100.00 | | 2020 | $104.20 | $118.40 | $120.70 | | 2021 | $147.03 | $152.38 | $153.65 | | 2022 | $125.12 | $124.80 | $134.75 | | 2023 | $163.53 | $157.62 | $151.60 | | 2024 | $186.59 | $197.03 | $151.60 | Management's Discussion and Analysis (MD&A) Vulcan's 2024 revenues decreased 5% to $7.4 billion, while gross profit increased 3% to $2.0 billion and Adjusted EBITDA rose 2% to $2.06 billion, with 2025 Adjusted EBITDA projected between $2.35 billion and $2.55 billion 2024 Financial Summary vs. 2023 | Metric | 2024 | Change vs. 2023 | | :--- | :--- | :--- | | Total Revenues ($M) | $7,417.7 | -5% | | Gross Profit ($M) | $1,999.6 | +3% | | Net Earnings Attributable to Vulcan ($M) | $911.9 | -2% | | Adjusted EBITDA ($M) | $2,057.2 | +2% | | Diluted EPS (Continuing Ops) ($) | $6.91 | -2.1% | | Adjusted Diluted EPS (Continuing Ops) ($) | $7.53 | +7.6% | | Aggregates Shipments (M tons) | 219.9 | -6% | | Aggregates Freight-Adjusted Price ($/ton) | $21.08 | +10.8% | - The company invested $2.3 billion in six business acquisitions in 2024, including Wake Stone Corporation and Superior Ready Mix, L.P., to expand its presence in key growth states[189] - Capital returned to shareholders in 2024 included $244.4 million in dividends and $68.8 million in share repurchases[187][190] Market Developments and Outlook for 2025 Vulcan projects 2025 Adjusted EBITDA between $2.35 billion and $2.55 billion, with continued aggregates pricing strength and volume growth 2025 Full-Year Outlook | Metric | 2025 Guidance | | :--- | :--- | | Net Earnings Attributable to Vulcan ($M) | $1,010 M - $1,170 M | | Adjusted EBITDA ($M) | $2,350 M - $2,550 M | | Aggregates Shipments Growth (%) | +3% to +5% | | Aggregates Freight-Adjusted Price Growth (%) | +5% to +7% | | Capital Spending ($M) | $750 M - $800 M | - The company expects a third consecutive year of double-digit growth in Aggregates cash gross profit per ton and a low to mid-single digit increase in freight-adjusted unit cash cost[193] Results of Operations by Segment Aggregates gross profit increased 5% despite shipment decline, while Asphalt gross profit rose and Concrete gross profit decreased due to divestiture - Aggregates: Shipments decreased 6% in 2024, but a 10.8% increase in freight-adjusted price drove segment gross profit up 5% to $1.82 billion, with cash gross profit per ton increasing 12% to $10.61[224][226][228] - Asphalt: Gross profit increased by $20.5 million to $170.1 million in 2024, with slight shipment increases and a 5.7% rise in average sales price[230] - Concrete: Gross profit decreased by $49.3 million to $12.8 million, largely due to Texas operations divestiture, while average sales price increased 9.6%[238] Liquidity and Financial Resources Vulcan's liquidity is supported by cash from operations, a $1.6 billion credit facility, and a commercial paper program, with total debt increasing to $5.31 billion in 2024 due to acquisitions - Primary liquidity sources include cash from operations, a $1.6 billion credit facility, and a commercial paper program, with available liquidity of $2.06 billion as of December 31, 2024[269][207] Cash Flow Summary (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash from Operating | $1,409.6 | $1,536.8 | | Net Cash for Investing | $(2,814.9) | $(163.5) | | Net Cash from/(for) Financing | $1,056.9 | $(585.6) | - Total debt increased to $5.31 billion at year-end 2024 from $3.88 billion in 2023, primarily for acquisitions, resulting in a total debt to Adjusted EBITDA ratio of 2.6x[283] - In November 2024, the company issued $2.0 billion in senior notes maturing in 2029, 2034, and 2054 to repay a term loan for acquisitions and provide liquidity[288][289] Critical Accounting Policies The company identifies critical accounting policies requiring significant judgment, including goodwill impairment, business combinations, and pension benefits - The company identifies several critical accounting policies requiring significant judgment and estimates, including Goodwill impairment, Impairment of long-lived assets, Business combinations, Pension benefits, Environmental costs, Claims and litigation, and Income taxes[297][301] - In 2024, the company recorded an $86.6 million noncash goodwill impairment charge related to a concrete reporting unit acquired in 2021[304] Financial Statements and Supplementary Data This section presents audited consolidated financial statements for 2022-2024, including detailed notes, showing total assets of $17.1 billion and total equity of $8.1 billion at year-end 2024 Consolidated Financial Highlights (in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Income Statement | | | | Total Revenues ($) | $7,417.7 | $7,781.9 | | Gross Profit ($) | $1,999.6 | $1,948.5 | | Operating Earnings ($) | $1,364.5 | $1,427.4 | | Net Earnings Attributable to Vulcan ($) | $911.9 | $933.2 | | Balance Sheet (Year-End) | | | | Total Assets ($) | $17,104.8 | $14,545.7 | | Total Liabilities ($) | $8,962.3 | $7,037.8 | | Total Equity ($) | $8,142.5 | $7,507.9 | Note 12: Commitments and Contingencies The company has commitments for purchases and mineral leases, and is involved in NAFTA arbitration against Mexico and environmental cleanup matters - As of December 31, 2024, the company has commitments for property, plant & equipment purchases of $78.2 million and noncapital purchases of $146.8 million[532] - Minimum royalty commitments under mineral leases total $237.6 million[533] - NAFTA Arbitration: The company filed a claim against Mexico in 2018 over its Calica quarry, which was shut down by Mexican officials in May 2022, with an arbitration decision expected in the first half of 2025[554][556] - Hewitt Landfill Matter: A subsidiary is involved in cleanup and abatement orders for a former Los Angeles landfill, accruing for anticipated on-site costs but unable to estimate potential off-site contribution claims[548][554] Note 19: Acquisitions and Divestitures In 2024, Vulcan acquired operations for $2.30 billion, including material acquisitions of Wake Stone and Superior, and divested Texas concrete operations in 2023 - In 2024, Vulcan acquired operations in Alabama, California, North Carolina, South Carolina, and Texas for total consideration of $2.30 billion[583][584] - The acquisitions of Wake Stone and Superior were collectively material, adding $334.4 million in goodwill and $275.5 million in identifiable intangible assets based on preliminary purchase price allocation[586] - In 2023, the company divested its concrete operations in Texas, resulting in a $28.3 million impairment charge and a $13.8 million loss on sale[589]