01—Abstract
Summary
Summary of the 10-K filed February 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Vulcan Materials Company (VMC), the nation's largest supplier of construction aggregates (crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete, reported total revenues of $3,890.3 milliona for 2017, up $297.6 million, or 8%, from 2016.
Gross profit was essentially flat at $1,000.6 millionb, and the Aggregates segment gross profit margin declined to 27.8% from 29.5%. Net earnings rose to $601.2 million, or $4.46 per diluted share, from $419.5 million, but this increase was driven largely by $297.0 million of net tax benefits, including $268.2 million related to the Tax Cuts and Jobs Act. Operating earnings fell 5% to $647.1 million, and interest expense rose to $295.5 million, which included a $148.0 million one-time charge on early debt retirements.
Adjusted EBITDA was $981.9 millionc, an increase of $15.9 million, or 2%. The company closed the Aggregates USA acquisition on December 29, 2017 for $616 million net of $287 million immediately divested, and it expects this deal to add $50 million of EBITDA in 2018. Total debt rose to $2,854.9 million at year end, from $1,982.9 million, and total debt as a percentage of total capital was 36.5%, up from 30.2%.
Capital expenditures were $464.2 million, and dividends increased to $1.00d per share for 2017, with the first-quarter 2018 dividend raised to $0.28. For 2018, management guides to same-store aggregates shipment growth of 4% to 6%, freight-adjusted aggregates price growth of 3% to 5%, net earnings of $585 to $635 million, adjusted EBITDA of $1.150 to $1.250 billion, and earnings from continuing operations of $4.00 to $4.65 per diluted share. The filing also states that the effective tax rate should decline from approximately 28% to 20% on a net basis, reflecting tax reform.
02—Key points
Key Highlights
- Revenue grew 8% to $3,890.3 million, while gross profit was flat at $1,000.6 million and the Aggregates segment gross profit margin fell to 27.8% from 29.5%.
- Net earnings of $601.2 million ($4.46 per diluted share) were boosted by $297.0 million of net tax benefits, including $268.2 million from the Tax Cuts and Jobs Act; earnings from continuing operations before income taxes were $361.3 million.
- Interest expense rose to $295.5 million, including a $148.0 million charge from early debt retirements, and total debt reached $2,854.9 million, or 36.5% of total capital.
- Acquired Aggregates USA on December 29, 2017 for $616 million net, adding 16 rail distribution yards and an expected $50 million of 2018 EBITDA.
- 2018 guidance calls for same-store aggregates shipments up 4% to 6%, aggregates freight-adjusted pricing up 3% to 5%, and adjusted EBITDA of $1.150 to $1.250 billion.
- Returned $132.3 million to shareholders through dividends and $60.3 million through share repurchases; the Q1 2018 dividend was raised to $0.28 per share from $0.25.
- Aggregates reserves totaled 16.0 billion tons of proven and probable reserves, with 79% of projected U.S. population growth from 2018 to 2028 expected in Vulcan-served states.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Vulcan Materials kept $0.15.
- Revenue$3.89B100.0%
- Cost of revenue−$2.90B74.5%
- Gross profit$993.5M25.5%
- Operating costs−$354.5M9.1%
- Operating income$639.0M16.4%
- Interest, other & tax−$37.9M1.0%
- Net income$601.2M15.5%
Where FY2017 revenue went
$3.89B- Cost of revenue: $2.90B, 74% of revenue
- Net income: $601.2M, 15% of revenue
- SG&A: $325.0M, 8.4% of revenue
- Other operating costs: $29.5M, 0.8% of revenue
- Interest, other & tax: $37.9M, 1.0% of revenue
Kept 15% as net incomeOther operating costs $29.5M · 0.8%Interest, other & tax $37.9M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 27, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $3.89B$3.59B | +8.3% |
| Cost of Revenue | $2.90B$2.60B | +11.3% |
| Gross Profit | $993.51M$988.88M | +0.5% |
| SG&A Expenses | $324.97M$316.77M | +2.6% |
| Operating Income | $639.04M$665.90M | −4.0% |
| Interest Expense | $295.52M$125.75M | +135.0% |
| Net Income | $601.18M$419.49M | +43.3% |
| EPS (Basic) | $4.54$3.15 | +44.1% |
| EPS (Diluted) | $4.46$3.09 | +44.3% |
| Shares Outstanding (Basic) | 132.51M133.21M | −0.5% |
| Shares Outstanding (Diluted) | 134.88M135.79M | −0.7% |
05—Questions
Frequently Asked Questions
How much of 2017 earnings growth came from operations versus tax benefits?
Net earnings rose $181.7 million to $601.2 million, but the filing attributes $297.0 million of net tax benefits to 2017, including $268.2 million related to the Tax Cuts and Jobs Act. Operating earnings actually decreased $32.5 million, or 5%, to $647.1 million, and earnings from continuing operations before income taxes were $361.3 million.
What drove the increase in interest expense in 2017?
Interest expense was $295.5 million, compared with $134.1 million in 2016. The increase reflects a $148.0 million pretax charge related to the 2017 early debt retirements, plus $5.1 million of carried interest on the March debt issuance.
What does the Aggregates USA acquisition add to Vulcan?
The company closed the acquisition on December 29, 2017 for $616 million, net of $287 million immediately disposed and including $6 million of liabilities assumed. The filing says it added approximately 460 million tons of proven and probable reserves, 16 new rail distribution yards in Florida, Georgia and South Carolina, and is expected to contribute $50 million of EBITDA in 2018.
What is management's 2018 outlook?
Management expects same-store aggregates shipment growth of 4% to 6% and aggregates pricing growth of 3% to 5%. Guidance includes net earnings of $585 to $635 million, adjusted EBITDA of $1.150 to $1.250 billion, and earnings from continuing operations of $4.00 to $4.65 per diluted share, with an effective tax rate of approximately 20%.
How did the 2017 weather events affect results?
The filing states that 2017 results were negatively impacted by unusually harsh weather, including flooding in California, extreme rainfall in the Southeast, and hurricanes Harvey and Irma and tropical storm Nate. Aggregates shipments were down 1% through the first nine months, but shipment trends rebounded in the fourth quarter.
06—Continue