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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

‎VULCAN MATERIALS COMPANY
‎(Exact name of registrant as specified in its charter)

‎ New Jersey  ‎(State or other jurisdiction of incorporation)			‎20-8579133 ‎(I.R.S. Employer Identification No.)
‎1200 Urban Center Drive, Birmingham, Alabama ‎(Address of principal executive offices)				‎35242 ‎(zip code)
‎(205) 298-3000 ‎(Registrant's telephone number including area code)
‎Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
‎Title of each class	‎Trading Symbol				Name of each exchange on ‎which registered
Common Stock, $1 par value	VMC				New York Stock Exchange
‎Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o ‎ ‎Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o ‎ ‎Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
‎Large accelerated filer þ		‎Accelerated filer o				‎Smaller reporting company o
‎Non-accelerated filer o						‎Emerging growth company o
‎If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
‎Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
‎Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
‎                    Class						Shares outstanding ‎      at October 25, 2019
Common Stock, $1 Par Value						132,354,605

 

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part I financial information

  ITEM 1

FINANCIAL STATEMENTS

VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited	September 30			December 31			September 30
in thousands	2019			2018			2018
Assets
Cash and cash equivalents	$         90,411			$         40,037			$         38,026
Restricted cash	691			4,367			5,043
Accounts and notes receivable
Accounts and notes receivable, gross	727,900			542,868			648,009
Allowance for doubtful accounts	(2,960)			(2,090)			(2,294)
Accounts and notes receivable, net	724,940			540,778			645,715
Inventories
Finished products	364,164			372,604			346,940
Raw materials	31,250			27,942			29,078
Products in process	6,062			3,064			2,668
Operating supplies and other	28,184			25,720			29,966
Inventories	429,660			429,330			408,652
Other current assets	78,540			64,633			78,476
Total current assets	1,324,242			1,079,145			1,175,912
Investments and long-term receivables	57,059			44,615			42,944
Property, plant & equipment
Property, plant & equipment, cost	8,657,731			8,457,619			8,386,315
Allowances for depreciation, depletion & amortization	(4,370,386)			(4,220,312)			(4,197,592)
Property, plant & equipment, net	4,287,345			4,237,307			4,188,723
Operating lease right-of-use assets, net	410,833			0			0
Goodwill	3,167,061			3,165,396			3,169,615
Other intangible assets, net	1,071,330			1,095,378			1,099,354
Other noncurrent assets	221,803			210,289			199,087
Total assets	$  10,539,673			$    9,832,130			$    9,875,635
Liabilities
Current maturities of long-term debt	24			23			23
Short-term debt	0			133,000			200,000
Trade payables and accruals	265,012			216,473			233,885
Other current liabilities	270,248			253,054			256,507
Total current liabilities	535,284			602,550			690,415
Long-term debt	2,783,068			2,779,357			2,778,129
Deferred income taxes, net	628,726			567,283			581,026
Deferred revenue	180,541			186,397			186,829
Operating lease liabilities	391,079			0			0
Other noncurrent liabilities	478,736			493,640			493,447
Total liabilities	$    4,997,434			$    4,629,227			$    4,729,846
Other commitments and contingencies (Note 8)
Equity
Common stock, $1 par value, Authorized 480,000 shares,
Outstanding 132,350, 131,762 and 132,045 shares, respectively	132,350			131,762			132,045
Capital in excess of par value	2,785,245			2,798,486			2,795,366
Retained earnings	2,795,834			2,444,870			2,361,903
Accumulated other comprehensive loss	(171,190)			(172,215)			(143,525)
Total equity	$    5,542,239			$    5,202,903			$    5,145,789
Total liabilities and equity	$  10,539,673			$    9,832,130			$    9,875,635
The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

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VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF
‎COMPREHENSIVE INCOME

	Three Months Ended						Nine Months Ended
Unaudited	September 30						September 30
in thousands, except per share data	2019			2018			2019			2018
Total revenues	$    1,418,758			$    1,240,197			$    3,742,951			$    3,294,822
Cost of revenues	1,018,115			897,055			2,780,131			2,469,161
Gross profit	400,643			343,142			962,820			825,661
Selling, administrative and general expenses	88,789			81,606			274,747			248,989
Gain on sale of property, plant & equipment
and businesses	234			2,104			10,982			8,374
Other operating expense, net	(8,712)			(14,456)			(15,173)			(23,822)
Operating earnings	303,376			249,184			683,882			561,224
Other nonoperating income, net	359			4,890			5,954			12,708
Interest expense, net	32,197			33,547			98,165			104,566
Earnings from continuing operations
before income taxes	271,538			220,527			591,671			469,366
Income tax expense	53,472			40,663			111,764			75,805
Earnings from continuing operations	218,066			179,864			479,907			393,561
Loss on discontinued operations, net of tax	(2,353)			(713)			(3,338)			(1,778)
Net earnings	$       215,713			$       179,151			$       476,569			$       391,783
Other comprehensive income, net of tax
Deferred gain on interest rate derivative	0			0			0			2,496
Amortization of prior interest rate derivative loss	57			53			169			171
Amortization of actuarial loss and prior service
cost for benefit plans	286			1,091			856			3,274
Other comprehensive income	343			1,144			1,025			5,941
Comprehensive income	$       216,056			$       180,295			$       477,594			$       397,724
Basic earnings (loss) per share
Continuing operations	$             1.65			$             1.36			$             3.63			$             2.97
Discontinued operations	(0.02)			(0.01)			(0.03)			(0.01)
Net earnings	$             1.63			$             1.35			$             3.60			$             2.96
Diluted earnings (loss) per share
Continuing operations	$             1.63			$             1.34			$             3.60			$             2.94
Discontinued operations	(0.01)			0.00			(0.02)			(0.02)
Net earnings	$             1.62			$             1.34			$             3.58			$             2.92
Weighted-average common shares outstanding
Basic	132,414			132,392			132,244			132,505
Assuming dilution	133,375			133,894			133,273			134,079
Depreciation, depletion, accretion and amortization	$         96,247			$         89,390			$       278,925			$       256,463
Effective tax rate from continuing operations	19.7%			18.4%			18.9%			16.2%
The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

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VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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notes to condensed consolidated financial statements

Note 1: summary of significant accounting policies

NATURE OF OPERATIONS

Vulcan Materials Company (the “Company,” “Vulcan,” “we,” “our”), 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.

We operate primarily in the United States and our principal product — aggregates — is used in virtually all types of public and private construction projects and in the production of asphalt mix and ready-mixed concrete. We serve markets in twenty states, Washington D.C., and the local markets surrounding our operations in Mexico and the Bahamas. Our primary focus is serving metropolitan markets in the United States that are expected to experience the most significant growth in population, households and employment. These three demographic factors are significant drivers of demand for aggregates. While aggregates is our focus and primary business, we produce and sell asphalt mix and/or ready-mixed concrete in our Alabama, mid-Atlantic, Southwestern, Tennessee and Western markets.

BASIS OF PRESENTATION

Our accompanying unaudited condensed consolidated financial statements were prepared in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. We prepared the accompanying condensed consolidated financial statements on the same basis as our annual financial statements, except for the adoption of new accounting standards as described in Note 17. Our Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from the audited financial statement, but it does not include all disclosures required by GAAP. In the opinion of our management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. Operating results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and footnotes included in our most recent Annual Report on Form 10-K.

Due to the 2005 sale of our Chemicals business as described within this Note under the caption Discontinued Operations, the results of the Chemicals business are presented as discontinued operations in the accompanying Condensed Consolidated Statements of Comprehensive Income.

RESTRICTED CASH

Restricted cash consists of cash proceeds from the sale of property held in escrow for the acquisition of replacement property under like-kind exchange agreements and cash reserved by other contractual agreements (such as asset purchase agreements) for a specified purpose and therefore is not available for use for other purposes. The escrow accounts are administered by an intermediary. Cash restricted pursuant to like-kind exchange agreements remains restricted for a maximum of 180 days from the date of the property sale pending the acquisition of replacement property. Restricted cash is included with cash and cash equivalents in the accompanying Condensed Consolidated Statements of Cash Flows.

LEASES

Beginning in 2019 (see ASU 2016-02, “Leases,” as presented in Note 17), our nonmineral leases are recognized on the balance sheet as right-of-use (ROU) assets and lease liabilities. Mineral leases continue to be exempt from balance sheet recognition.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. ROU assets are adjusted for any prepaid lease payments and lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

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We elected the following practical expedients: (1) the practical expedient package which permits us to not reassess our prior conclusions about lease identification, lease classification, and initial direct costs; (2) to not separate the lease components from the non-lease components for all leases; (3) to apply a portfolio approach to our railcar and barge leases; (4) to not recognize ROU assets and lease liabilities for all pre-existing land easements not previously accounted for as leases; and (5) to not recognize ROU assets or lease liabilities for our short-term leases, including existing short-term leases of those assets in transition.

For additional information about leases see Note 2.

DISCONTINUED OPERATIONS

In 2005, we sold substantially all the assets of our Chemicals business to Basic Chemicals, a subsidiary of Occidental Chemical Corporation. The financial results of the Chemicals business are classified as discontinued operations in the accompanying Condensed Consolidated Statements of Comprehensive Income for all periods presented. Results from discontinued operations are as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
in thousands	2019			2018			2019			2018
Discontinued Operations
Pretax loss	$       (3,167)			$          (969)			$       (4,506)			$       (2,417)
Income tax benefit	814			256			1,168			639
Loss on discontinued operations,
net of tax	$       (2,353)			$          (713)			$       (3,338)			$       (1,778)

Our discontinued operations include charges related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business (including certain matters as discussed in Note 8). There were no revenues from discontinued operations for the periods presented.

EARNINGS PER SHARE (EPS)

Earnings per share are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS), as set forth below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
in thousands	2019			2018			2019			2018
Weighted-average common shares
outstanding	132,414			132,392			132,244			132,505
Dilutive effect of
Stock-Only Stock Appreciation Rights	525			905			662			1,021
Other stock compensation plans	436			597			367			553
Weighted-average common shares
outstanding, assuming dilution	133,375			133,894			133,273			134,079

All dilutive common stock equivalents are reflected in our earnings per share calculations. In periods of loss, shares that otherwise would have been included in our diluted weighted-average common shares outstanding computation would be excluded.

Antidilutive common stock equivalents are not included in our earnings per share calculations. The number of antidilutive common stock equivalents for which the exercise price exceeds the weighted-average market price is as follows:

 

 

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