Our strategy is based on our strength....
Transcript of Our strategy is based on our strength....
Investor PresentationSeptember 10, 2013
Our strategy is based on our strength.
AggregatesEssential Material | Valuable Asset
Investor Presentation, November 2013
Investor Presentation, November 2013
I M P O R T A N T D I S C L O S U R E N O T E S
This presentation 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: risks that Vulcan's intentions, plans and results with respect to cost reductions, profit enhancements and asset sales, as well as streamlining and other strategic actions adopted by Vulcan, will not be able to be realized to the desired degree or within the desired time period and that the results thereof will differ from those anticipated or desired; uncertainties as to the timing and valuations that may be realized or attainable with respect to planned asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the effects of the sequestration on demand for our products in markets that may be subject to decreases in federal spending; changes in Vulcan’s effective tax rate; the increasing reliance on technology infrastructure for Vulcan’s ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties; 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; 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; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; the potential of goodwill or long-lived asset impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; 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.
Safe Harbor
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I M P O R T A N T D I S C L O S U R E N O T E S
This presentation 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: risks that Vulcan's intentions, plans and results with respect to cost reductions, profit enhancements and asset sales, as well as streamlining and other strategic actions adopted by Vulcan, will not be able to be realized to the desired degree or within the desired time period and that the results thereof will differ from those anticipated or desired; uncertainties as to the timing and valuations that may be realized or attainable with respect to planned asset sales; those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; the effects of the sequestration on demand for our products in markets that may be subject to decreases in federal spending; changes in Vulcan’s effective tax rate; the increasing reliance on technology infrastructure for Vulcan’s ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties; 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; 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; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; the potential of goodwill or long-lived asset impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; 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.
Safe Harbor
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NotesC O M P A N Y S N A P S H O T
95%2012 Net Sales: $2.4 Billion Aggregates Facilities: 341
Headquarters: Birmingham, AL Ticker: VMC
Company 2012 10-K Report
Vulcan-Served States Our value proposition and leading position is based upon…
1. Favorable geographic footprint that provides attractive long-term growth prospects
2. Largest proven and probable reserve base
3. Operational expertise and pricing discipline which provides attractive unit profitability
Industry-Leading Position in Aggregates
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Notes
Build and Hold Substantial Reserves
Used in virtually all types of public and private construction projects
Strategically located in high-growth markets that will require large amounts of aggregates
Aggregates operations require virtually no other raw material other than aggregates reserves
Coast-to-coast Footprint
Diversified regional exposure
Complementary asphalt, concrete and cement businesses in select markets
More opportunities to further enhance long-term earnings growth
Profitable Growth
95% of Sales are tied to aggregates
Tightly managed operational and overhead costs
Benefits of scale as the largest producer
Effective Land Management
Can lead to attractive real estate transactions
B U S I N E S S S T R A T E G Y
Aggregates-led Value Creation
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NotesB U S I N E S S S T R A T E G Y
Strategically Positioned
Leading ReservePosition
Unit Profitability Continues to
Grow
75% Share of U.S. Population Growth
27% Higher than peak-year in volumes
15.0 Billion Tons of Aggregates Reserves
Source: Company 2012 10-K Report. As of December 31, 2012 . Unit Profitability = Cash Gross Profit / Ton. See Non-GAAP reconciliation at end of presentation.
Positioning the Business to Maximize Future Earnings Growth
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Notes
CA, FL and TX accounted for more than 40% of total sales in 2012. Source: Moody’s Analytics as of June 2013
VMC-Served States
74%Population Growth
69%
62%
Household Formation
Employment Growth
CA,FL,TX
38%
43%
33%
Strategically Positioned in Attractive MarketsS H A R E O F T O T A L U . S . G R O W T H ( 2 0 1 0 – 2 0 2 0 )
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Notes
$4.01
$4.21
2011 2012
17.7%
20.4%
2011 2012
11.8%
13.9%
2011 2012
14.6%
17.1%
2011 2012
Note: Please see Non-GAAP reconciliations at the end of this presentation. Aggregates Gross Profit Margin calculated using Segment Total Revenues.
Adjusted EBITDA Margin
Aggregates Cash Gross Profit per Ton
Gross Profit Margin
Aggregates Gross Profit Margin
M O S T R E C E N T F U L L Y E A R F I N A N C I A L R E S U L T S
Operating Leverage Driven by Higher Pricing and Effective Cost Control
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Notes
Net Sales up 8% and Gross Profit up 21% Broad-based improvement in aggregates pricing, up 3%
Aggregates volumes up 2%, despite extremely wet weather in 1H’13
Concrete and Cement volumes up 13% and 14% respectively
Gross Profit Margin up 180 basis points Aggregates earnings up 11%
Non-aggregates earnings improvement of $24 million
EPS Improvement of $0.53 per diluted share
Improved Credit Metrics Net Debt / EBITDA 4.5x, down from 6.9x
C U R R E N T Y E A R F I N A N C I A L R E S U L T S – Y T D S E P T . 3 0 , 2 0 1 3
Margin Expansion and Earnings Improvement in Each Operating Segment
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Note: Please see Non-GAAP reconciliations at the end of this presentation. Margin calculated using Net Sales.
Investor Presentation, November 2013
Notes
Tons in Millions. Note: Please see Non-GAAP reconciliations at the end of this presentation.
C A S H G R O S S P R O F I T P E R T O N O F A G G R E G A T E S
Unit Profitability That Was Maintained Throughout the Downturn, Now Beginning to Grow
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2012 Profitability is higher than prior year and 32% higher than peak-year in volumes (2005)
Investor Presentation, November 2013
Notes
Note: Historical performance is not a guarantee or assurance of future performance nor that previous results will be attained or surpassed.*Industry = Producer Price Index for Aggregates reported by the U.S. Bureau of Labor Statistics. For comparison purposes, Vulcan price not freight adjusted.
6.4%
5.3%
CAGR ’92-’02 ’02-’12
Industry*
Vulcan 3.6%
2.8%
Vulcan Consistently Outperforms, Contributing to Higher Unit Profitability
A G G R E G A T E S P R I C E G R O W T H ( I N D E X , 1 9 9 2 = 1 0 0 )
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Notes
Total SAG down $115 million from 2007
(31% decrease)
Millions of $ Source: Company filings Note: 2007 SAG includes Florida Rock on a pro forma basis ($84.5M).
S A G E X P E N S E S
Reduced During the Downturn. Well Positioned to Leverage ERP Investment and Shared Services
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Notes2 0 1 2 C A S H F L O W B R I D G E
Sources of Cash
Uses of Cash
Operating activities, less debt service costs, generated $121
million of cash in 2012
Progress on Planned Asset Sales coincidently offset cash used for
debt maturities and exchange offer defense costs
VPP = Volumetric Production Payment. Exchange Offer = Costs incurred as a result of an unsolicited exchange offer initiated by Martin Marietta Materials on December 12, 2011 and subsequently withdrawn in 2012.
De-Risking the Balance Sheet Through Higher Cash Generation from Operations and Asset Sales
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Notes
(1) Line of credit is an Asset Based Lending facility: $500 million 5 year facility expiring March 2018.
Favorable debt maturity profile with substantial liquidity
Minimal maturities of $150 million over the next three years
$500 million line of credit (1)
Limited financial covenants
B A L A N C E S H E E T
Significant Financial and Operational Flexibility With Limited Near-Term Maturities
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Amounts in Millions, except ratios 2013 2012 2011
Total Debt 2,524$ 2,813$ 2,821$ Cash and Cash Equivalents 246 243 152 Net Debt 2,278$ 2,569$ 2,669$
Net Debt / TTM EBITDA 4.5 6.9 6.6
As of Sept 30
Notes
Source: Company estimates of aggregates demand using data from Woods & Poole CEDDS.
Aggregate demand significantly below
population trend line.
A G G R E G A T E S D E M A N D I N V U L C A N M A R K E T S ( 1 9 7 2 = 1 0 0 )
Vulcan’s Key Markets Are Leveraged to Favorable Long-Term Growth Prospects
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Notes
Source: Company estimates of aggregates demand.
U . S . A G G R E G A T E S D E M A N D ( M I L L I O N S O F T O N S )
Privately Funded Construction Accounts for Most of the Cyclicality
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Notes
Notes: States sorted high to low by largest absolute change in TTM housing starts.. For example, of the Vulcan-served states shown, FL had the largest absolute change and TX the next largest.Source: McGraw-Hill and Company Estimates. TTM = Trailing Twelve Months. Includes both Single-family and Multi-family
U . S . H O U S I N G S T A R T S
Growth Bodes Well for Continued Recovery in Our Markets
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Year-over-Year % Change in TTM – September 2013
Investor Presentation, November 2013
Notes
Source: McGraw-Hill and Company Estimates. TTM = Trailing Twelve Months.
YoY Chg. TTMHousing +23%
Private NR +10%
U . S . P R I V A T E N O N R E S I D E N T I A L
Growth in Residential is Helping Drive Growth in Private Nonresidential Buildings
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Notes
Note: The Architectural Billings Index (ABI) is a diffusion index derived from the monthly Work-on-the-Boards Survey conducted by the AIA Economics & Market Research Group
P R I V A T E N O N R E S I D E N T I A L
Another Leading Indicator, the ABI, Has Remained Above 50 for 11 of the Last 12 Months
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Architectural Billing Index – Monthly Value
A value greater than 50 indicates an increase in billing activity from the prior month.
Investor Presentation, November 2013
Notes
As of June 2013. Sources: The American Road & Transportation Builders Association, McGraw-Hill and Company Estimates. 1 U.S. Department of Transportation Secretary July 27, 2012
Growth in TTM Contract Awards for New Highway Projects U.S. +7% and Vulcan-served states +11%
Growth in Obligation of Regular Highway Program Funds Obligated $ greater than any year since 2009 (last year of SAFETEA-LU)
Increased State-led Highway Funding Initiatives
TIFIA Funding Authorization Expanded in MAP-21 $1.75 billion of funding authorization could support up to $50 billion of new
construction 1
P U B L I C C O N S T R U C T I O N - H I G H W A Y S
More Stabile and Predictable Funding Environment Leads to Improving Construction Activity
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Notes
Enacted in 1998 to provide Federal credit assistance for eligible transportation projects and stimulate private capital investment.
Each dollar put into TIFIA can provide approximately $10 in loans and support up to $30 in infrastructure investment.
MAP-21 Funding Authorization: $1.75 billion over two years (FY’13 & FY’14). Signed into law July 2012.
12 projects$14 billion
14 projects$13 billion
5 projects$9 billion 3 projects
$3 billion
4 projects$3 billion
59 projects submitted for approval as of August 2013 totaling $74 billion. Includes FY 2011-FY 2013
$74Bn of Potential Projects Submitted
>60%Share of Total Project $
in Vulcan Markets
LA, FL and GA4 projects$4 billion
P U B L I C C O N S T R U C T I O N
Vulcan States Should Get a Disproportionate Number of TIFIA-funded Projects
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Notes
Attractive unit profitability
Cost reduction initiatives resetting mid-cycle EBITDA to new, higher level
Favorable trends in private construction activity
New multi-year Federal Highway Bill
Superior Aggregates Operations
Strong Operating Leverage
De-Risked Balance Sheet
Largest reported reserve base
Favorable long term growth prospects
Benefits of scale
Operational expertise and pricing growth
Attractive real estate opportunities
Substantial liquidity
Moderate debt maturity profile
Commitment to strengthening balance sheet
Commitment to restore a meaningful dividend
Well Positioned to Capitalize on Market RecoveryS U M M A R Y – V U L C A N ’ S V A L U E P R O P O S I T I O N
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Notes
Source: Company filings
Reconciliation of Non-GAAP Financial MeasuresA P P E N D I X
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Amounts in millions of dollars, except per ton data
EBITDAEBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization.
Aggregates Segment Cash Gross ProfitAggregates segment cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization to gross profit.
YTD YTD 12/31/12 12/31/11
EBITDA and Adjusted EBITDANet earnings (loss) (52.6) (70.8)Provision (benefit) for income taxes (66.5) (78.4)Interest expense, net 211.9 217.2Discontinued operations, net of tax (1.3) (4.5)
EBIT 91.5 63.5
Plus: Depr., depl., accretion and amort. 332.0 361.7
EBITDA 423.5 425.2Legal settlement - (46.4)Restructuring charges 9.5 12.9Exchange offer costs 43.4 2.2Gain on sale of real estate and businesses (65.1) (42.1)
Adjusted EBITDA 411.3 351.8
Q3 Q3 Q32013 2012 2011
Net earnings (loss) 18.9 (83.9) (89.7)Provision (benefit) for income taxes (21.2) (97.7) (76.2)Interest expense, net 205.7 212.4 210.1Discontinued operations, net of tax (3.6) (0.4) (5.5)Depr., depl., accretion and amort. 309.2 341.4 366.4
EBITDA 509.0 371.8 405.1
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q12012 2012 2012 2012 2011 2011 2011 2011 2010 2010 2010 2010 2009 2009 2009 2009
Aggregates Segment Cash Gross ProfitAggregates segment gross profit 352.1 350.0 338.5 329.5 306.2 284.6 296.4 315.5 320.1 332.2 340.2 345.0 393.3 451.2 503.2 594.3Agg. Depr., depl., accretion and amort. 240.7 247.7 255.1 261.8 267.0 272.5 279.3 284.8 288.6 293.1 295.9 298.6 303.9 304.9 304.4 302.7
Aggregates segment cash gross profit 592.8 597.6 593.6 591.3 573.2 557.1 575.7 600.3 608.8 625.3 636.1 643.6 697.1 756.1 807.6 897.0Aggregate tons 141.0 142.1 145.3 145.8 143.0 142.2 143.0 146.8 147.6 147.4 148.6 146.2 150.9 160.7 172.6 190.8
Aggregates segment cash gross profit per ton 4.21 4.20 4.08 4.06 4.01 3.92 4.03 4.09 4.12 4.24 4.28 4.40 4.62 4.70 4.68 4.70
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q12008 2008 2008 2008 2007 2007 2007 2007 2006 2006 2006 2006 2005 2005 2005 2005
Aggregates segment gross profit 657.6 722.3 775.2 808.2 828.7 846.3 849.7 826.9 819.0 772.8 732.4 690.4 650.0 591.9 565.5 524.1Agg. Depr., depl., accretion and amort. 299.8 298.8 283.2 266.4 248.0 228.3 220.8 213.1 206.6 205.1 203.0 202.7 201.6 197.7 194.4 191.8
Aggregates segment cash gross profit 957.4 1,021.1 1,058.4 1,074.6 1,076.7 1,074.6 1,070.4 1,040.0 1,031.1 977.8 935.3 893.1 828.7 789.7 759.9 715.9Aggregates tons 204.3 217.4 224.4 228.5 231.0 234.5 239.8 246.7 255.4 258.8 263.6 265.3 259.5 255.0 252.6 245.8
Aggregates segment cash gross profit per ton 4.68 4.70 4.72 4.70 4.67 4.58 4.46 4.22 4.05 3.78 3.55 3.37 3.20 3.10 3.01 2.91
Generally Accepted Accounting Principles (GAAP) does not define "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)" and "aggregates segment cash gross profit." Thus, they should not be considered as an alternative to any earnings measure defined by GAAP. We present these metrics for the convenience of investment professionals who use such metrics in their analysis, and for shareholders who need to understand the metrics we use to assess performance. The investment community often uses these metrics as indicators of a company's ability to incur and service debt. We use cash gross profit, EBITDA and other such measures to assess the operating performance of our various business units and the consolidated company. Additionally, we adjust EBITDA for certain items to provide a more consistent comparison of performance from period to period. We do not use these metrics as a measure to allocate resources. Reconciliations of these metrics to their nearest GAAP measures are presented below:
Trailing 12 Months
Trailing 12 Months EBITDA
NotesA P P E N D I X – S I M P L I F I E D G E O L O G Y M A P
Below the Geological Fall Line, Little or No Hard Rock Aggregates Reserves Suitable for Mining
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Notes
Geological Fall Line
4-5 truckloads per rail car$0.04-0.12 per ton mile
65 truckloads per barge$0.02-0.03 per ton mile
2,500 truckloads per shipLess than $0.01 per ton mile
20-25 tons per truck$0.15-0.35 per ton mile
Note: Per ton mile costs exclude loading and unloading.
A P P E N D I X
Comprehensive Distribution Network to Serve Attractive Markets With Reserves
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Notes
1200 Urban Center DriveBirmingham, AL 35242-2545Telephone: (205) 298-3000Fax: (205) 298-2963
Shareholder Services:(866) 886-9902 (toll free inside the U.S. and Canada)(201) 680-6578 (outside the U.S. and Canada, may call collect)(800) 231-5469 (TDD, hearing impaired)Internet: computershare.com/investor
Investor Relations:Mark WarrenTelephone: (205) 298-3191Email: [email protected]
Independent Auditors:Deloitte & Touche LLPBirmingham, Alabama
Registrar and Transfer Listing:Computershare Shareowner Services LLC
Other InformationA P P E N D I X
Media Relations:David DonaldsonTelephone: (205) 298-3220Email: [email protected]
29Investor Presentation, November 2013