01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Vulcan Materials Company reported a net loss of $96.5 milliona, or ($0.75) per diluted share, for fiscal 2010, compared with net earnings of $30.3 million in 2009.
Net sales were $2.41 billionb versus $2.54 billion in 2009, and EBITDA fell to $370.6 million from $548.4 million. Results were hit by $43.0 million of pretax charges related to the settlement of an Illinois Department of Transportation (IDOT) lawsuit, higher diesel fuel and liquid asphalt costs that reduced pretax earnings by $51.3 million, and lower freight-adjusted aggregates selling prices. A $39.5 million pretax gain on the sale of non-strategic assets in rural Virginia partly offset these items.
The company, the nation's largest producer of construction aggregates with 319 aggregates facilities, said aggregates shipments declined only 2% in 2010 versus steeper declines in prior years, and that stimulus-funded highway activity and modest housing improvement helped. Management highlighted cash generation: free cash flow was $116.4 millionc, operating cash flow was $202.7 million, and capital spending was cut to $86.3 million. Total debt was $2.72 billion, equal to 40.7% of total capital, and the company paid a $0.25 quarterly dividend throughout 2010.
Credit ratings are a key watch item. Standard & Poor's placed Vulcan's long-term rating BBB- on credit watch negative, and Moody's placed its Baa3 rating under review for downgrade, both in December 2010.
The company also noted the expiration of the multi-year federal highway bill (SAFETEA-LU) on September 30, 2009 and the absence of a replacement as ongoing uncertainty for public infrastructure funding. The filing states that a $25.5 milliond insurance arbitration award will be recorded as income in the first quarter of 2011.
02—Key points
Key Highlights
- Net loss of $96.5 million, or ($0.75) per diluted share, in 2010, versus net earnings of $30.3 million in 2009
- Net sales of $2,405.9 million, down from $2,543.7 million in 2009; EBITDA of $370.6 million versus $548.4 million
- $43.0 million of pretax charges for the IDOT lawsuit settlement and $51.3 million of higher diesel fuel and liquid asphalt costs reduced pretax earnings
- Aggregates shipments declined 2% in 2010 and freight-adjusted aggregates selling prices declined 2%, with the trend slowing from 26% shipment declines in 2009
- Free cash flow of $116.4 million; operating cash flow of $202.7 million; capital spending of $86.3 million
- Total debt of $2,718.2 million, 40.7% of total capital; Standard & Poor's BBB- on credit watch negative and Moody's Baa3 under review for downgrade
- Quarterly dividend held at $0.25 per share throughout 2010 ($127.8 million paid); 14.7 billion tons of permitted proven and probable aggregates reserves
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2010, Vulcan Materials lost $0.04.
- Revenue$2.56B100.0%
- Cost of revenue−$2.26B88.2%
- Gross profit$300.7M11.8%
- Operating costs−$315.3M12.3%
- Operating income−$14.5M0.6%
- Interest, other & tax−$82.0M3.2%
- Net income−$96.5M3.8%
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.56B$2.69B | −4.9% |
| Cost of Revenue | $2.26B$2.24B | +0.6% |
| Gross Profit | $300.73M$445.96M | −32.6% |
| R&D Expenses | $1.58M$1.54M | +2.7% |
| SG&A Expenses | $327.54M$321.61M | +1.8% |
| Operating Income | -$14.54M$148.45M | −109.8% |
| Interest Expense | $181.60M$175.26M | +3.6% |
| Net Income | -$96.49M$30.31M | −418.3% |
| EPS (Basic) | $-0.75$0.25 | −400.0% |
| EPS (Diluted) | $-0.75$0.25 | −400.0% |
| Shares Outstanding (Basic) | 128.05M118.89M | +7.7% |
| Shares Outstanding (Diluted) | 128.05M119.43M | +7.2% |
05—Questions
Frequently Asked Questions
Why did Vulcan report a net loss in 2010?
The filing attributes the loss mainly to lower earnings from continuing operations, which were a loss of $102.5 million. Contributing factors included the $43.0 million pretax IDOT lawsuit settlement charge, $51.4 million of higher unit costs for diesel fuel and liquid asphalt, and lower aggregates selling prices, partly offset by a $39.5 million pretax gain on the sale of rural Virginia assets.
What is the status of Vulcan's credit ratings?
As of December 31, 2010, Standard & Poor's rated long-term debt BBB- and placed it on credit watch negative, effective December 2010. Moody's rated it Baa3 and placed it under review for downgrade, also in December 2010. The filing notes that a downgrade could increase borrowing costs and affect access to financing, and that the 2010 short-term rating was cut to A-3 by S&P in April 2010.
How is federal highway funding affecting Vulcan's business?
The most recent multi-year federal transportation bill, SAFETEA-LU, expired on September 30, 2009, and Congress had not passed a replacement. Highway funding has been provided through a series of extensions. The filing says this uncertainty may cause some states to defer large multi-year projects. Publicly funded construction represented 55% of 2010 aggregates shipments. Approximately $7.1 billion, or 43%, of the stimulus highway and bridge funds apportioned in Vulcan-served states remained to be spent.
What did Vulcan do to conserve cash in 2010?
Vulcan reduced aggregates inventory levels, cut capital spending to $86.3 million from $109.7 million in 2009, and reduced total inventory by $27.7 million from peak 2008 levels. It also cut its quarterly dividend to $0.25 in the third quarter of 2009, and it did not repurchase stock in 2010. Management said debt reduction remains a priority use of cash.
Did Vulcan have any significant legal or insurance developments?
Yes. Vulcan settled the IDOT/Joliet Road lawsuit for $40.0 million in May 2010, paying $20.0 million in each of two installments. In February 2011, an arbitration panel awarded the company $25.5 million from two of its three insurers, which the filing says will be recorded as income in the first quarter of 2011. Vulcan also remains a defendant in perchloroethylene cases tied to its former Chemicals business, and the company cannot estimate losses for these matters.
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