01—Abstract
Summary
Summary of the 10-K filed February 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Vulcan Materials Company, a New Jersey corporation, is the nation's largest supplier of construction aggregates (primarily crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete, operating 337 active aggregates facilities as of December 31, 2016.
Aggregates accounted for 76% of 2016 total revenues. In 2016 total revenues rose $170.5 milliona, or 5%, to $3,592.7 million, and gross profit rose $143.3 million, or 17%, to $1,000.8 million. Net earnings were $419.5 million, an increase of $198.3 million, or 90%, and earnings from continuing operations were $422.4 million, or $3.11 per diluted share.
Adjusted EBITDA was $966.0 millionb, up $131.1 million, or 16%. The company reported a 14% increase in Aggregates segment unit gross profit to $4.81 per ton, with freight-adjusted aggregates pricing up 7% and shipments up 2%. Management's 2017 outlook calls for Adjusted EBITDA of $1.125 to $1.225 billion, driven by aggregates shipment growth of 5% to 8% and a freight-adjusted aggregates price increase of 5% to 7%.
Core capital spending is expected to be about $300 millionc. The company returned $106.3 million to shareholders through dividends and $161.5 million through share repurchases in 2016, and the Board raised the quarterly dividend to $0.25 per share for the first quarter of 2017.
Total debt was $1,982.9 milliond at year-end, representing 30.2% of total capital, and cash was $259.0 million. Key risks disclosed include dependence on public infrastructure funding timing, climate and environmental regulation, competition, legal matters such as the Lower Passaic River Superfund site and the Texas Brine litigation, and the sensitivity of earnings to shipment volumes given high fixed costs.
02—Key points
Key Highlights
- Aggregates segment gross profit rose $117.5 million, or 16%, to $873.1 million, with segment gross profit margin of 29.5%.
- Net earnings were $419.5 million ($3.09 per diluted share), up $198.3 million, or 90%, from 2015, and include $36.1 million of discrete tax benefits.
- Adjusted EBITDA was $966.0 million, up $131.1 million, or 16%.
- 2017 outlook projects Adjusted EBITDA of $1.125 to $1.225 billion, with aggregates shipments growth of 5% to 8% and freight-adjusted aggregates price increase of 5% to 7%.
- Capital returns increased to $106.3 million in dividends and $161.5 million in share repurchases in 2016, and the quarterly dividend was raised to $0.25 per share for the first quarter of 2017.
- Total debt was $1,982.9 million, or 30.2% of total capital, and the company ended 2016 with $259.0 million of cash; a $750 million line of credit was extended to December 2021 and a $250 million delayed draw term loan was added.
- The company has 15.5 billion tons of proven and probable aggregates reserves, with 56% on owned land, and reports a 22.8% effective tax rate for 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Vulcan Materials kept $0.12.
- Revenue$3.59B100.0%
- Cost of revenue−$2.60B72.5%
- Gross profit$988.9M27.5%
- Operating costs−$323.0M9.0%
- Operating income$665.9M18.5%
- Interest, other & tax−$246.4M6.9%
- Net income$419.5M11.7%
Where FY2016 revenue went
$3.59B- Cost of revenue: $2.60B, 72% of revenue
- Net income: $419.5M, 12% of revenue
- SG&A: $316.8M, 8.8% of revenue
- Interest, other & tax: $246.4M, 6.9% of revenue
Kept 12% as net incomeNet income $419.5M · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 24, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.59B$3.42B | +5.0% |
| Cost of Revenue | $2.60B$2.56B | +1.5% |
| Gross Profit | $988.88M$857.53M | +15.3% |
| SG&A Expenses | $316.77M$286.84M | +10.4% |
| Operating Income | $665.90M$549.78M | +21.1% |
| Interest Expense | $125.75M$220.59M | −43.0% |
| Net Income | $419.49M$221.18M | +89.7% |
| EPS (Basic) | $3.15$1.66 | +89.8% |
| EPS (Diluted) | $3.09$1.64 | +88.4% |
| Shares Outstanding (Basic) | 133.21M133.21M | 0.0% |
| Shares Outstanding (Diluted) | 135.79M135.09M | +0.5% |
05—Questions
Frequently Asked Questions
What drove the large increase in 2016 net earnings?
Net earnings rose $198.3 million, or 90%, to $419.5 million. Higher aggregates gross profit was the main contributor, along with lower interest expense (which included $67.1 million of 2015 debt purchase charges) and $36.1 million of discrete tax benefits in 2016, including $24.8 million of excess tax benefits from share-based compensation.
What is management's outlook for 2017?
Management expects full-year Adjusted EBITDA of $1.125 to $1.225 billion, supported by aggregates shipments growth of 5% to 8% weighted toward the second half, freight-adjusted aggregates price increases of 5% to 7%, Asphalt Mix, Concrete and Calcium gross profit growth of approximately 15%, and SAG expenses of approximately $320 million.
How concentrated is the company's customer and geographic exposure?
The five largest customers accounted for 8.1% of 2016 total revenues, and no single customer exceeded 3.0%. The top ten revenue-producing states accounted for 84% of 2016 revenues, and the top five accounted for 59%. Texas and California are among the leading states.
What are the main legal and environmental exposures?
The filing describes the Lower Passaic River Study Area Superfund site, where the EPA issued a record of decision in March 2016 estimating a $1.38 billion bank-to-bank dredging remedy that Vulcan disputes, and the Texas Brine matter, where damages claimed exceed $500 million. Vulcan also discloses the Hewitt Landfill matter in Los Angeles, where it cannot yet estimate remedial costs. Vulcan states that none of these are expected to have a material effect on consolidated results, except that amounts recorded in a given period could be material.
How much debt matures and how is it being managed?
Term debt principal of $522.5 million matures in 2018 and $606.0 million in 2021, with the line of credit maturing in December 2021. Management said it expects to retire current maturities using existing cash and to refinance nearer-term maturities rather than repay them when due. Debt ratings as of year-end were BBB-/stable from Fitch, Ba1/positive from Moody's, and BBB/stable from S&P.
06—Continue