PR Newswire | Aug 4, 2020 07:31AM EDT

08/04 06:30 CDT

Vulcan Reports Second Quarter ResultsImproved Segment Earnings Across All Major Product LinesCost Control and Price Growth Lead to Unit Margin Expansion in Aggregates BIRMINGHAM, Ala., Aug. 4, 2020

BIRMINGHAM, Ala., Aug. 4, 2020 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the quarter ended June 30, 2020.

Tom Hill, Chairman and Chief Executive Officer, said, "Our second quarter results demonstrate the resiliency of our best in class aggregates-led business and reflect the proactive response by our employees to the COVID-19 pandemic. Our operational execution was integral to widespread gains in unit profitability, despite some disruptions to construction activity during the quarter. I am proud of our employees' ability to quickly adapt to the necessary additional safety protocols we have put in place in this environment, while maintaining their focus on operating safely and positioning Vulcan for continued success."

Earnings from continuing operations were $211 million, or $1.58 per diluted share, an increase of 7 percent from the prior year's second quarter. Adjusted EBITDA was $408 million, an increase of 10 percent. The year-over-year earnings improvement was driven primarily by effective cost control and price growth in aggregates. Second quarter segment earnings improved in each major product line. Despite a 2 percent decline in aggregates shipments, mix-adjusted pricing improved 3.3 percent, and freight-adjusted unit cost of sales decreased 1 percent. As a result, aggregates unit gross profit increased 9 percent to $6.25 per ton.

Mr. Hill went on to say, "Certain leading indicators of demand have shown signs of improvement, and our quote activity remains robust. However, our visibility beyond the near-term remains restricted due to the evolving effects of the pandemic. The recent surge in new COVID-19 cases could impact the progress made so far if new restrictions on economic activity are put in place. We believe this uncertainty could continue to weigh on construction activity in the second half of the year, making it difficult to predict the level and timing of shipments. We are continuously reviewing our operating plans to ensure an effective response to demand shifts. Whatever the demand, we remain confident in our ability to successfully navigate the changing environment."

Highlights as of June 30, 2020 include:

Second Quarter Year-to-Date Trailing-Twelve Months

Amounts inmillions, except 2020 2019 2020 2019 2020 2019per unit data

Total revenues $ 1,322.6 $ 1,327.7 $ 2,371.8 $ 2,324.2 $ 4,976.7 $ 4,652.4

Gross profit $ 396.5 $ 370.5 $ 598.2 $ 562.2 $ 1,292.0 $ 1,180.6

Aggregatessegment

Segment sales $ 1,070.6 $ 1,062.1 $ 1,938.8 $ 1,897.0 $ 4,032.1 $ 3,754.8

Freight-adjusted $ 814.7 $ 806.4 $ 1,462.7 $ 1,435.1 $ 3,041.9 $ 2,842.4revenues

Gross profit $ 351.2 $ 329.2 $ 545.3 $ 514.9 $ 1,177.0 $ 1,075.1

Shipments (tons) 56.2 57.3 101.2 102.9 213.8 208.8

Freight-adjustedsales price per $ 14.50 $ 14.07 $ 14.45 $ 13.94 $ 14.23 $ 13.61ton

Gross profit per $ 6.25 $ 5.74 $ 5.39 $ 5.00 $ 5.51 $ 5.15ton

Asphalt,Concrete & $ 45.4 $ 41.3 $ 52.9 $ 47.2 $ 115.0 $ 105.5Calcium segmentgross profit

Selling,Administrative $ 91.2 $ 95.7 $ 177.6 $ 186.0 $ 362.2 $ 351.9and General(SAG)

SAG as % of 6.9% 7.2% 7.5% 8.0% 7.3% 7.6%Total revenues

Earnings fromcontinuingoperations $ 272.3 $ 245.5 $ 344.5 $ 320.1 $ 782.1 $ 694.6before incometaxes

Net earnings $ 209.9 $ 197.6 $ 270.2 $ 260.9 $ 627.0 $ 564.0

Adjusted EBIT $ 308.3 $ 278.5 $ 413.9 $ 382.0 $ 927.3 $ 841.9

Adjusted EBITDA $ 407.8 $ 372.0 $ 608.8 $ 564.7 $ 1,314.2 $ 1,203.8

Earnings fromcontinuing $ 1.58 $ 1.48 $ 2.03 $ 1.97 $ 4.73 $ 4.25operations perdiluted share

Adjustedearnings fromcontinuing $ 1.60 $ 1.48 $ 2.06 $ 1.94 $ 4.82 $ 4.33operations perdiluted share

Segment ResultsAggregatesSecond quarter segment sales increased 1 percent, and gross profit increased 7 percent to $351 million, or $6.25 per ton. The improvement resulted from widespread growth in pricing and effective cost control.

Second quarter aggregates shipments were 2 percent lower than the prior year's second quarter. Shipping patterns varied widely across the Company's footprint as a result of economic uncertainty and wet weather but were generally supported by healthy backlogs and our essential business status in our markets. Key markets in the Southeast and coastal Texas were negatively affected by wet weather while shipments in California were reduced by tighter restrictions on shelter-in-place. Shipments were higher in Georgia, Illinois, Tennessee and Texas. On a mix-adjusted basis, all of the Company's key markets reported year-over-year price growth. For the quarter, freight-adjusted average sales price increased 3 percent versus the prior year's quarter, inclusive of 30 basis points of unfavorable mix.

Freight-adjusted unit cost of sales decreased 1 percent versus the prior year's second quarter. Effective operating efficiencies helped mitigate the cost impact of lower sales volumes and a reduction in inventory. Actions taken across the Company's more than 360 locations reduced cash spending and controlled inventories in areas most impacted by shelter-in-place orders. The associated cost of reducing inventory offset the majority of a $14 million earnings benefit from lower diesel fuel costs.

Unit profitability improvements were widespread across the Company's footprint. Cash gross profit per ton increased 9 percent from the prior year's second quarter to $7.69 per ton. For the trailing-twelve months, cash gross profit was $6.98 per ton.

Asphalt, Concrete and CalciumAsphalt segment gross profit was $30 million, an improvement of $3 million from the prior year. The year-over-year improvement was driven by higher material margins (sales price less cost of raw materials). Although asphalt volumes in the second quarter declined 5 percent versus the prior year, we captured the benefit of lower liquid asphalt costs.

Concrete segment gross profit was $14 million compared with $13 million in the prior year's second quarter. Shipments decreased 4 percent versus the prior year, and average selling prices increased 1 percent compared to the prior year.

Calcium segment gross profit was $0.7 million, down slightly from the prior year quarter.

Selling, Administrative and General (SAG)SAG expense declined 5 percent to $91 million in the quarter due mostly to continued execution of cost reduction initiatives, lower incentive compensation costs and general cost control in response to COVID-19. This year-over-year decline resulted in a 31 basis point improvement as a percentage of total revenues. On a trailing-twelve month basis, SAG expense as a percentage of total revenues stands at 7.3 percent. The Company remains focused on further leveraging its overhead cost structure.

Financial Position, Liquidity and Capital AllocationCapital expenditures in the second quarter were $68 million ($177 million year-to-date). The Company continues to expect to spend between $275 and $325 million on capital this year, most of which is for core operating and maintenance projects. Given that the economic outlook is evolving quickly, we will continue to review our plans and adjust as needed, being thoughtful about preserving liquidity.

For the quarter, the Company returned $45 million to shareholders through dividends, a 10 percent increase versus the prior year. The Company did not repurchase any shares in the quarter.

At quarter-end, total debt to trailing-twelve month Adjusted EBITDA was 2.5 times (1.9 times on a net debt basis reflecting $817 million of cash on hand). The Company's weighted-average debt maturity was 14 years, and the effective weighted-average interest rate was 4.1 percent.

On a trailing twelve month basis, return on invested capital increased 100 basis points as solid earnings growth was leveraged with disciplined capital management.

OutlookRegarding the Company's outlook, Mr. Hill stated, "Although the economic environment is showing signs of improvement, the pandemic's effect on demand and the broader economy remains unclear. As a result, we are not reinstating earnings guidance at this time.

"While demand is subject to market fluctuations outside of our control, we remain focused on those things we can control such as our cost and our pricing discipline, both of which help to compound our unit margins. Our year-to-date results demonstrate those capabilities. On a trailing-twelve month basis our cash gross profit in aggregates is nearly $7 per ton. Our operating plans are underpinned by our four strategic initiatives (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing), a healthy balance sheet, strong liquidity, and the engagement of our people."

Conference CallVulcan will host a conference call at 10:00 a.m. CDT on August 4, 2020. A webcast will be available via the Company's website at www.vulcanmaterials.com. Investors and other interested parties may access the teleconference live by calling 833-962-1439, or 832-900-4623 if outside the U.S., approximately 10 minutes before the scheduled start. The conference ID is 8095639. The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

Vulcan Materials Company, a member of the S&P 500 Index with headquarters in Birmingham, Alabama, is the nation's largest producer of construction aggregates - primarily crushed stone, sand and gravel - and a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete. For additional information about Vulcan, go to www.vulcanmaterials.com.

FORWARD-LOOKING STATEMENT DISCLAIMERThis document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales. These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document. These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements. The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: general economic and business conditions; a pandemic, epidemic or other public health emergency, such as the recent outbreak of COVID-19; Vulcan's dependence on the construction industry, which is subject to economic cycles; the timing and amount of federal, state and local funding for infrastructure; changes in the level of spending for private residential and private nonresidential construction; changes in Vulcan's effective tax rate; the increasing reliance on information technology infrastructure, including the risks that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; the highly competitive nature of the construction industry; the impact of future regulatory or legislative actions, including those relating to climate change, wetlands, greenhouse gas emissions, the definition of minerals, tax policy or international trade; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena, including the impact of climate change and availability of water; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; the impact of a discontinuation of the London Interbank Offered Rate (LIBOR); volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans; the impact of environmental cleanup costs and other liabilities relating to existing and/or divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; the effect of changes in tax laws, guidance and interpretations; significant downturn in the construction industry may result in the impairment of goodwill or long-lived assets; changes in technologies, which could disrupt the way Vulcan does business and how Vulcan's products are distributed; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement. Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.

Table A

Vulcan Materials Company

and Subsidiary Companies

(in thousands, except per share data)

Three Months Ended Six Months Ended

Consolidated Statements of Earnings June 30 June 30

(Condensed and unaudited) 2020 2019 2020 2019

Total revenues $1,322,575 $1,327,682 $2,371,817 $2,324,193

Cost of revenues 926,056 957,180 1,773,575 1,762,016

Gross profit 396,519 370,502 598,242 562,177

Selling, administrative and general expenses 91,205 95,689 177,635 185,957

Gain (loss) on sale of property, plant & equipment

and businesses (258) 3,451 741 10,748

Other operating expense, net (6,160) (2,190) (10,151) (6,461)

Operating earnings 298,896 276,074 411,197 380,507

Other nonoperating income (expense), net 7,367 2,466 (1,969) 5,595

Interest expense, net 33,954 33,035 64,727 65,969

Earnings from continuing operations

before income taxes 272,309 245,505 344,501 320,133

Income tax expense 61,352 47,598 73,546 58,291

Earnings from continuing operations 210,957 197,907 270,955 261,842

Loss on discontinued operations, net of tax (1,041) (349) (781) (985)

Net earnings $209,916 $197,558 $270,174 $260,857

Basic earnings (loss) per share

Continuing operations $1.59 $1.50 $2.04 $1.98

Discontinued operations ($0.01) ($0.01) $0.00 ($0.01)

Net earnings $1.58 $1.49 $2.04 $1.97

Diluted earnings (loss) per share

Continuing operations $1.58 $1.48 $2.03 $1.97

Discontinued operations $0.00 $0.00 $0.00 ($0.01)

Net earnings $1.58 $1.48 $2.03 $1.96

Weighted-average common shares outstanding

Basic 132,552 132,269 132,560 132,157

Assuming dilution 133,115 133,354 133,154 133,199

Depreciation, depletion, accretion and amortization $99,470 $93,497 $194,951 $182,677

Effective tax rate from continuing operations 22.5% 19.4% 21.3% 18.2%

Table B

Vulcan Materials Company

and Subsidiary Companies

(in thousands)

Consolidated Balance Sheets June 30 December 31 June 30

(Condensed and unaudited) 2020 2019 2019

Assets

Cash and cash equivalents $816,765 $271,589 $26,031

Restricted cash 434 2,917 491

Accounts and notes receivable

Accounts and notes receivable, gross 699,320 573,241 700,175

Allowance for doubtful accounts (3,460) (3,125) (2,844)

Accounts and notes receivable, net 695,860 570,116 697,331

Inventories

Finished products 383,483 391,666 377,578

Raw materials 33,178 31,318 31,137

Products in process 5,116 5,604 6,332

Operating supplies and other 29,703 29,720 26,376

Inventories 451,480 458,308 441,423

Other current assets 65,571 76,396 89,739

Total current assets 2,030,110 1,379,326 1,255,015

Investments and long-term receivables 43,849 60,709 51,667

Property, plant & equipment

Property, plant & equipment, cost 8,921,990 8,749,217 8,613,500

Allowances for depreciation, depletion & amortization (4,538,980) (4,433,179) (4,322,818)

Property, plant & equipment, net 4,383,010 4,316,038 4,290,682

Operating lease right-of-use assets, net 426,618 408,189 418,896

Goodwill 3,172,112 3,167,061 3,167,061

Other intangible assets, net 1,114,592 1,091,475 1,076,986

Other noncurrent assets 228,433 225,995 220,457

Total assets $11,398,724 $10,648,793 $10,480,764

Liabilities

Current maturities of long-term debt 500,026 25 24

Short-term debt 0 0 137,000

Trade payables and accruals 278,102 265,159 284,875

Other current liabilities 260,621 270,379 241,689

Total current liabilities 1,038,749 535,563 663,588

Long-term debt 2,785,646 2,784,315 2,781,826

Deferred income taxes, net 671,097 633,039 601,189

Deferred revenue 177,534 179,880 182,666

Operating lease liabilities 405,578 388,042 396,952

Other noncurrent liabilities 555,969 506,097 483,096

Total liabilities $5,634,573 $5,026,936 $5,109,317

Equity

Common stock, $1 par value 132,446 132,371 132,231

Capital in excess of par value 2,789,801 2,791,353 2,787,002

Retained earnings 3,049,943 2,895,871 2,623,747

Accumulated other comprehensive loss (208,039) (197,738) (171,533)

Total equity $5,764,151 $5,621,857 $5,371,447

Total liabilities and equity $11,398,724 $10,648,793 $10,480,764

Table C

Vulcan Materials Company

and Subsidiary Companies

(in thousands)

Six Months Ended

Consolidated Statements of Cash Flows June 30

(Condensed and unaudited) 2020 2019

Operating Activities

Net earnings $270,174 $260,857

Adjustments to reconcile net earnings to net cash provided by operatingactivities

Depreciation, depletion, accretion and amortization 194,951 182,677

Noncash operating lease expense 17,977 17,549

Net gain on sale of property, plant & equipment and businesses (741) (10,748)

Contributions to pension plans (4,409) (4,638)

Share-based compensation expense 15,220 14,370

Deferred tax expense (benefit) 36,644 34,816

Changes in assets and liabilities before initial

effects of business acquisitions and dispositions (101,271) (201,256)

Other, net (2,954) 8,289

Net cash provided by operating activities $425,591 $301,916

Investing Activities

Purchases of property, plant & equipment (223,147) (225,837)

Proceeds from sale of property, plant & equipment 3,063 11,200

Proceeds from sale of businesses 651 1,744

Payment for businesses acquired, net of acquired cash (5,668) 1,122

Other, net 5,575 (4,577)

Net cash used for investing activities ($219,526) ($216,348)

Financing Activities

Proceeds from short-term debt 0 360,100

Payment of short-term debt 0 (356,100)

Payment of current maturities and long-term debt (250,012) (11)

Proceeds from issuance of long-term debt 750,000 0

Debt issuance and exchange costs (10,762) 0

Settlements of interest rate derivatives (19,863) 0

Purchases of common stock (26,132) 0

Dividends paid (90,128) (81,927)

Share-based compensation, shares withheld for taxes (15,830) (25,508)

Other, net (645) (4)

Net cash provided by (used for) financing activities $336,628 ($103,450)

Net increase (decrease) in cash and cash equivalents and restricted cash 542,693 (17,882)

Cash and cash equivalents and restricted cash at beginning of year 274,506 44,404

Cash and cash equivalents and restricted cash at end of period $817,199 $26,522

Table D

Segment Financial Data and Unit Shipments

(in thousands, except per unit data)

Three Months Ended Six Months Ended

June 30 June 30

2020 2019 2020 2019

Total Revenues

Aggregates ^1 $1,070,596 $1,062,061 $1,938,822 $1,897,026

Asphalt ^2 222,950 247,163 362,739 379,253

Concrete 100,683 103,768 195,448 187,405

Calcium 1,889 2,003 3,915 3,954

Segment sales $1,396,118 $1,414,995 $2,500,924 $2,467,638

Aggregates intersegment sales (73,543) (87,313) (129,107) (143,445)

Total revenues $1,322,575 $1,327,682 $2,371,817 $2,324,193

Gross Profit

Aggregates $351,162 $329,215 $545,293 $514,931

Asphalt 30,464 27,583 28,029 24,311

Concrete 14,227 12,887 23,440 21,450

Calcium 666 817 1,480 1,485

Total $396,519 $370,502 $598,242 $562,177

Depreciation, Depletion, Accretion and Amortization

Aggregates $80,747 $75,760 $157,883 $148,281

Asphalt 8,668 8,884 17,402 17,434

Concrete 4,001 3,327 8,083 6,291

Calcium 48 58 97 118

Other 6,006 5,468 11,486 10,553

Total $99,470 $93,497 $194,951 $182,677

Average Unit Sales Price and Unit Shipments

Aggregates

Freight-adjusted revenues ^3 $814,713 $806,444 $1,462,746 $1,435,051

Aggregates - tons 56,195 57,310 101,243 102,947

Freight-adjusted sales price ^4 $14.50 $14.07 $14.45 $13.94

Other Products

Asphalt Mix - tons 3,403 3,595 5,460 5,617

Asphalt Mix - sales price $57.46 $58.31 $57.86 $57.45

Ready-mixed concrete - cubic yards 786 815 1,520 1,484

Ready-mixed concrete - sales price $127.35 $126.12 $127.62 $125.14

Calcium - tons 71 73 144 141

Calcium - sales price $26.55 $27.50 $27.06 $27.89



Includes product sales (crushed stone, sand and gravel, sand, and other 1aggregates), as well as freight & delivery costs that we pass along to our customers, and service revenues related to aggregates.

2Includes product sales, as well as service revenues from our asphalt construction paving business.

Freight-adjusted revenues are Aggregates segment sales excluding freight & 3delivery revenues and immaterial other revenues related to services, such as landfill tipping fees that are derived from our aggregates business.

4Freight-adjusted sales price is calculated as freight-adjusted revenues divided by aggregates unit shipments.

Appendix 1

1. Reconciliation of Non-GAAP Measures

Aggregates segment freight-adjusted revenues is not a Generally AcceptedAccounting Principle (GAAP) measure. We presentthis metric as it is consistent with the basis by which we review our operatingresults. We believe that this presentation is consistentwith our competitors and meaningful to our investors as it excludes revenuesassociated with freight & delivery, which are pass-throughactivities. It also excludes immaterial other revenues related to services,such as landfill tipping fees, that are derived from ouraggregates business. Additionally, we use this metric as the basis forcalculating the average sales price of our aggregates products.Reconciliation of this metric to its nearest GAAP measure is presented below:

Aggregates Segment Freight-Adjusted Revenues

(in thousands, except per ton data)

Three Months Ended Six Months Ended

June 30 June 30

2020 2019 2020 2019

Aggregates segment

Segment sales $1,070,596 $1,062,061 $1,938,822 $1,897,026

Less: Freight & delivery revenues ^1 240,880 241,354 446,588 436,508

Other revenues 15,003 14,263 29,488 25,467

Freight-adjusted revenues $814,713 $806,444 $1,462,746 $1,435,051

Unit shipment - tons 56,195 57,310 101,243 102,947

Freight-adjusted sales price $14.50 $14.07 $14.45 $13.94



At the segment level, freight & delivery revenues include intersegment freight 1& delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

Aggregates segment incremental gross profit flow-through rate is not a GAAPmeasure and represents the year-over-yearchange in gross profit divided by the year-over-year change in segment salesexcluding freight & delivery (revenues and costs).We present this metric as it is consistent with the basis by which we reviewour operating results. We believe that thispresentation is consistent with our competitors and meaningful to our investorsas it excludes revenues associated with freight& delivery, which are pass-through activities. Reconciliation of this metric toits nearest GAAP measure is presented below:

Aggregates Segment Incremental Gross Profit Margin in Accordance with GAAP

(dollars in thousands)

Three Months Ended Six Months Ended

June 30 June 30

2020 2019 2020 2019

Aggregates segment

Gross profit $351,162 $329,215 $545,293 $514,931

Segment sales $1,070,596 $1,062,061 $1,938,822 $1,897,026

Gross profit margin 32.8% 31.0% 28.1% 27.1%

Incremental gross profit margin 257.1% 72.6%

Aggregates Segment Incremental Gross Profit Flow-through Rate (Non-GAAP)

(dollars in thousands)

Three Months Ended Six Months Ended

June 30 June 30

2020 2019 2020 2019

Aggregates segment

Gross profit $351,162 $329,215 $545,293 $514,931

Segment sales $1,070,596 $1,062,061 $1,938,822 $1,897,026

Less: Freight & delivery revenues ^1 240,880 241,354 446,588 436,508

Segment sales excluding freight & delivery $829,716 $820,707 $1,492,234 $1,460,518

Gross profit margin excluding freight & delivery 42.3% 40.1% 36.5% 35.3%

Incremental gross profit flow-through rate 243.6% 95.7%



At the segment level, freight & delivery revenues include intersegment freight 1& delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

GAAP does not define "Aggregates segment cash gross profit" and it should notbe considered as an alternative to earningsmeasures defined by GAAP. We and the investment community use this metric toassess the operating performance of ourbusiness. Additionally, we present this metric as we believe that it closelycorrelates to long-term shareholder value. We donot use this metric as a measure to allocate resources. Aggregates segmentcash gross profit per ton is computed by dividingAggregates segment cash gross profit by tons shipped. Reconciliation of thismetric to its nearest GAAP measure is presented below:

Aggregates Segment Cash Gross Profit

(in thousands, except per ton data)

Three Months Ended Six Months Ended

June 30 June 30

2020 2019 2020 2019

Aggregates segment

Gross profit $351,162 $329,215 $545,293 $514,931

Depreciation, depletion, accretion and amortization 80,747 75,760 157,883 148,281

Aggregates segment cash gross profit $431,909 $404,975 $703,176 $663,212

Unit shipments - tons 56,195 57,310 101,243 102,947

Aggregates segment cash gross profit per ton $7.69 $7.07 $6.95 $6.44

Appendix 2

Reconciliation of Non-GAAP Measures (Continued)

GAAP does not define "Earnings Before Interest, Taxes, Depreciation andAmortization" (EBITDA) and it should not be considered as an alternative toearnings measures defined by GAAP. We use this metric to assess the operatingperformance of our business and as a basis for strategic planningand forecasting as we believe that it closely correlates to long-termshareholder value. We do not use this metric as a measure to allocateresources.We adjust EBITDA for certain items to provide a more consistent comparison ofearnings performance from period to period. Reconciliation of thismetric to its nearest GAAP measure is presented below:

EBITDA and Adjusted EBITDA

(in thousands)

Three Months Ended Six Months Ended TTM

June 30 June 30 June 30

2020 2019 2020 2019 2020 2019

Net earnings $209,916 $197,558 $270,174 $260,857 $626,979 $564,031

Income tax expense 61,352 47,598 73,546 58,291 150,453 128,597

Interest expense, net 33,954 33,035 64,727 65,969 127,758 132,374

Loss on discontinued operations, net of tax 1,041 349 781 985 4,637 1,955

EBIT $306,263 $278,540 $409,228 $386,102 $909,827 $826,957

Depreciation, depletion, accretion and amortization 99,470 93,497 194,951 182,677 386,870 361,851

EBITDA $405,733 $372,037 $604,179 $568,779 $1,296,697 $1,188,808

Gain on sale of businesses 0 0 0 (4,064) (9,289) (4,064)

Property donation 0 0 0 0 10,847 0

Business interruption claims recovery 0 0 0 0 0 (559)

Charges associated with divested operations 774 0 774 0 3,807 18,545

Business development ^1 (3,519) 0 (2,459) 0 (711) 220

COVID-19 direct incremental costs 4,361 0 5,009 0 5,009 0

Restructuring charges ^2 465 0 1,333 0 7,790 829

Adjusted EBITDA $407,814 $372,037 $608,836 $564,715 $1,314,150 $1,203,779

Depreciation, depletion, accretion and amortization (99,470) (93,497) (194,951) (182,677) (386,870) (361,851)

Adjusted EBIT $308,344 $278,540 $413,885 $382,038 $927,280 $841,928



1Represents non-routine charges or gains associated with acquisitions including the cost impact of purchase accounting inventory valuations.

2Restructuring charges are included within other operating expenses. The charges relate to managerial restructuring.

Similar to our presentation of Adjusted EBITDA, we present Adjusted Diluted EPSfrom continuing operations to provide a more consistent comparisonof earnings performance from period to period.

Adjusted Diluted EPS from Continuing Operations (Adjusted Diluted EPS)

Three Months Ended Six Months Ended TTM

June 30 June 30 June 30

2020 2019 2020 2019 2020 2019

Diluted EPS from continuing operations $1.58 $1.48 $2.03 $1.97 $4.73 $4.25

Items included in Adjusted EBITDA above 0.02 0.00 0.03 (0.03) 0.09 0.08

Adjusted Diluted EPS $1.60 $1.48 $2.06 $1.94 $4.82 $4.33

Appendix 3

Reconciliation of Non-GAAP Measures (Continued)



We define Return on Invested Capital (ROIC) as Adjusted EBITDA for thetrailing-twelve months divided by averageinvested capital (as illustrated below) during the trailing 5-quarters. Ourcalculation of ROIC is considered a non-GAAPfinancial measure because we calculate ROIC using the non-GAAP metric EBITDA.We believe that our ROIC metric ismeaningful because it helps investors assess how effectively we are deployingour assets. Although ROIC is a standardfinancial metric, numerous methods exist for calculating a company's ROIC. As aresult, the method we use to calculateour ROIC may differ from the methods used by other companies.

Return on Invested Capital

(in thousands)

TTM

June 30

2020 2019

Adjusted EBITDA $1,314,150 $1,203,779

Average invested capital ^1

Property, plant & equipment 4,335,633 4,219,693

Goodwill 3,168,072 3,165,574

Other intangible assets 1,087,580 1,102,803

Fixed and intangible assets $8,591,285 $8,488,070

Current assets 1,453,094 1,155,425

Less: Cash and cash equivalents 265,920 41,243

Less: Deferred tax 19,289 5,973

Adjusted current assets 1,167,885 1,108,209

Current liabilities 649,772 685,591

Less: Current maturities of long-term debt 100,025 23

Less: Short-term debt 27,400 201,700

Adjusted current liabilities 522,347 483,868

Adjusted net working capital $645,538 $624,341

Average invested capital $9,236,823 $9,112,411

Return on Invested Capital 14.2% 13.2%



1Average Invested Capital is based on a trailing 5-quarters.

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SOURCE Vulcan Materials Company