01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
Vulcan Materials Company (NYSE: VMC) reported 2019 total revenues of $4.93 billiona, up 12% from $4.38 billion in 2018, and net earnings of $617.7 million ($4.63 per diluted share), an increase of 20%.
Adjusted EBITDA was $1,270.0 millionb, up 12%. Aggregates segment gross profit rose 16% to $1,146.6 million, and aggregates freight-adjusted sales price increased 6%, or $0.74 per ton, on shipments that rose 7% to 215.5 million tons. Asphalt, Concrete and Calcium combined gross profit was roughly flat at $109.3 million, with Concrete gross profit declining 14%.
Total debt was $2.8 billionc, or 2.2 times 2019 Adjusted EBITDA, with a weighted-average maturity of 14 years and a weighted-average interest rate of 4.4%. Operating cash flow was $984.1 million, and the company returned $166.6 million to shareholders through dividends and share repurchases.
Management expects 2020 earnings from continuing operations of $5.20 to $5.80d per diluted share and Adjusted EBITDA of $1.385 billion to $1.485 billion, citing public infrastructure funding and a recovering private construction market. Key risks highlighted include dependence on construction spending cycles, the timing of federal, state and local infrastructure funding (the FAST Act expires September 30, 2020), environmental and Hewitt Landfill matters, litigation tied to a former Chemicals business, LIBOR transition, and the NAFTA arbitration over the Playa del Carmen quarry in Mexico.
02—Key points
Key Highlights
- Revenue of $4,929.1 million in 2019, up 12%; gross profit of $1,255.9 million, up 14%.
- Net earnings of $617.7 million, or $4.63 per diluted share, versus $3.85 in 2018; adjusted diluted EPS from continuing operations of $4.70 versus $4.05.
- Aggregates shipments rose 7% to 215.5 million tons, and freight-adjusted aggregates price rose 5.6%, or $0.74 per ton; aggregates gross profit per ton grew 8% to $5.32.
- Total debt of $2,784.3 million at 2.2 times Adjusted EBITDA; leverage improved from 6.5x at year-end 2012, within a stated 2.0x to 2.5x target.
- 2020 guidance: aggregates shipments growth of 2% to 4%, freight-adjusted price increase of 4% to 6%, and net earnings of $695 million to $775 million.
- Capital expenditures of $404.3 million in 2019, including $239.3 million of core operating and maintenance capital; $44.2 million of cash paid for acquisitions.
- Dividends of $1.24 per share in 2019, up from $1.12; Fitch upgraded the outlook from stable to positive in February 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Vulcan Materials kept $0.13.
- Revenue$4.93B100.0%
- Cost of revenue−$3.67B74.5%
- Gross profit$1.26B25.5%
- Operating costs−$378.4M7.7%
- Operating income$877.5M17.8%
- Interest, other & tax−$259.8M5.3%
- Net income$617.7M12.5%
Where FY2019 revenue went
$4.93B- Cost of revenue: $3.67B, 75% of revenue
- Net income: $617.7M, 13% of revenue
- SG&A: $370.5M, 7.5% of revenue
- Interest, other & tax: $259.8M, 5.3% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.93B$4.38B | +12.5% |
| Cost of Revenue | $3.67B$3.28B | +11.9% |
| Gross Profit | $1.26B$1.10B | +14.1% |
| SG&A Expenses | $370.50M$333.37M | +11.1% |
| Operating Income | $877.50M$747.71M | +17.4% |
| Interest Expense | $130.20M$137.98M | −5.6% |
| Net Income | $617.70M$515.80M | +19.8% |
| EPS (Basic) | $4.67$3.90 | +19.7% |
| EPS (Diluted) | $4.63$3.85 | +20.3% |
| Shares Outstanding (Basic) | 132.30M132.39M | −0.1% |
| Shares Outstanding (Diluted) | 133.40M133.93M | −0.4% |
05—Questions
Frequently Asked Questions
How did Vulcan's core aggregates business perform in 2019?
Aggregates segment sales rose 14% to $3,990.3 million and segment gross profit rose 16% to $1,146.6 million. Shipments increased 7%, led by double-digit growth in Alabama, Texas and Virginia, and freight-adjusted pricing increased 5.6%.
What drives the company's outlook for 2020?
Management cites higher levels of highway funding, a multi-year federal transportation law, and state and local ballot-approved transportation measures. It also expects residential and private nonresidential construction to improve, supporting solid price improvement in 2020.
How strong is Vulcan's balance sheet?
Total debt was $2.8 billion at year-end 2019, or 33.1% of total capital, with a weighted-average maturity of 14 years and a 4.36% weighted-average term debt rate. The $750.0 million line of credit was undrawn at year-end, with $697.4 million of available capacity.
What are the main risks to the investment case?
The filing highlights construction cyclicality, uncertain timing of public infrastructure funding, and the FAST Act's September 30, 2020 expiration. It also flags environmental liabilities such as the Hewitt Landfill matter, litigation tied to the former Chemicals business, LIBOR discontinuation affecting three debt instruments, and the NAFTA arbitration against Mexico.
How much did the company return to shareholders in 2019?
Vulcan returned $166.6 million through dividends of $164.0 million and share repurchases of $2.6 million. In 2018 it repurchased $134.0 million of stock, and 8,279,189 shares remained under the Board's repurchase authorization at year-end.
06—Continue