PR Newswire | Aug 4, 2021 07:31AM EDT

08/04 06:30 CDT

Vulcan Reports Second Quarter 2021 ResultsAggregates Margin Continues to ExpandStrong Execution and Positive Demand Environment Support Full Year Outlook BIRMINGHAM, Ala., Aug. 4, 2021

BIRMINGHAM, Ala., Aug. 4, 2021 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the quarter ended June 30, 2021.

Second Quarter Financial and Operating Highlights:

* Net earnings were $195 million, or $1.46 per diluted share * Net earnings include $0.10 per diluted share related to financing costs associated with the proposed acquisition of U.S. Concrete and other non-routine charges excluded from Adjusted EBITDA

* Second quarter Adjusted EBITDA was $406 million * Aggregates gross profit increased $23 million, or 6 percent, to $374 million * Non-aggregates gross profit declined $21 million to $25 million * Announced U.S. Concrete acquisition, which is expected to close in the second half of 2021 * Reiterate full-year 2021 Adjusted EBITDA guidance between $1.380 to $1.460 billion (excluding the gain from a land sale completed in the first quarter and the U.S. Concrete acquisition announced June 7, 2021)

Tom Hill, Chairman and Chief Executive Officer, said, "Our performance in the first half of 2021 has been supported by consistent execution on Vulcan's four strategic disciplines. Our team's efforts have allowed us to expand our aggregates gross profit margin by 150 basis points and increase our cash gross profit per ton by 5 percent. Despite energy inflation and disruptive weather in the second quarter, aggregates gross profit margin improved 40 basis points, and cash gross profit grew by 2 percent to $7.83 per ton. Across our business, energy inflation reduced earnings by $25 million in the quarter, $15 million due to diesel and $10 million due to liquid asphalt. Lower non-aggregates earnings dampened an otherwise strong performance."

Mr. Hill continued, "We expect to carry forward the progress we have made through the first half of 2021 and will continue to diligently navigate the changing macro environment. Recent pricing actions across much of our footprint and a keen focus on improving operating efficiencies will continue to help offset spikes in certain input costs. The flexibility of our operating plans will enable us to maintain a high level of performance during the second half of the year and achieve our full-year 2021 targets. We remain excited and focused on closing the proposed acquisition of U.S. Concrete, which will expand Vulcan's footprint in attractive geographies and accelerate our growth strategy."

Highlights as of June 30, 2021 include:

Second Quarter Year-to-Date Trailing-Twelve-Months Amounts in millions, except per unit data 2021 2020 2021 2020 2021 2020 Total revenues $ 1,361.0 $ 1,322.6 $ 2,429.4 $ 2,371.8 $ 4,914.4 $ 4,976.7 Gross profit $ 398.4 $ 396.5 $ 627.6 $ 598.2 $ 1,310.9 $ 1,292.0 Aggregates segment Segment sales $ 1,125.4 $ 1,070.6 $ 2,020.3 $ 1,938.8 $ 4,025.7 $ 4,032.1 Freight-adjusted revenues $ 874.0 $ 814.7 $ 1,555.1 $ 1,462.7 $ 3,100.0 $ 3,041.9 Gross profit $ 373.8 $ 351.2 $ 597.5 $ 545.3 $ 1,211.4 $ 1,177.0 Shipments (tons) 58.5 56.2 105.0 101.2 212.0 213.8 Freight-adjusted sales price per ton $ 14.93 $ 14.50 $ 14.82 $ 14.45 $ 14.62 $ 14.23 Gross profit per ton $ 6.39 $ 6.25 $ 5.69 $ 5.39 $ 5.71 $ 5.51 Asphalt, Concrete & Calcium segment gross profit $ 24.5 $ 45.4 $ 30.2 $ 52.9 $ 99.5 $ 115.0 Selling, Administrative and General (SAG) $ 100.7 $ 91.2 $ 189.3 $ 177.6 $ 371.4 $ 362.2 SAG as % of Total revenues 7.4% 6.9% 7.8% 7.5% 7.6% 7.3% Earnings from continuing operations before income taxes $ 254.1 $ 272.3 $ 476.4 $ 344.5 $ 875.7 $ 782.1 Net earnings $ 195.3 $ 209.9 $ 356.0 $ 270.2 $ 670.3 $ 627.0 Adjusted EBIT $ 302.9 $ 308.3 $ 446.8 $ 413.9 $ 959.7 $ 927.3 Adjusted EBITDA $ 406.0 $ 407.8 $ 650.3 $ 608.8 $ 1,365.0 $ 1,314.2 Earnings from continuing operations per diluted share $ 1.47 $ 1.58 $ 2.69 $ 2.03 $ 5.07 $ 4.73 Adjusted earnings from continuing operations per diluted share $ 1.57 $ 1.60 $ 2.26 $ 2.06 $ 4.90 $ 4.82

Segment ResultsAggregatesSecond quarter segment sales increased 5 percent, and gross profit increased 6 percent to $374 million. Gross profit margin increased 40 basis points due to growth in both volume and price as well as effective cost control that helped to offset an estimated $14 million impact of rising diesel prices. Earnings improvement was widespread across the Company's footprint.

Aggregates shipments increased 4 percent from the prior year's second quarter, reflecting improving demand across all end-market segments. The pricing environment continues to be positive across the Company's footprint as demand visibility improves. For the quarter, freight-adjusted pricing increased 3 percent (mix-adjusted pricing increased 2.6 percent). The rate of growth improved sequentially throughout the quarter, reflecting pricing actions taken in many areas. These efforts are expected to help offset cost inflation forecasted for the rest of the year.

Improved operating efficiencies helped offset both the sharp increase in the average unit cost of diesel fuel and the impact of any operational disruptions caused by the wet weather. Freight adjusted unit cost of sales were 3.5 percent higher than the prior year's second quarter but increased less than 1 percent excluding the impact of higher diesel prices.

Asphalt, Concrete and CalciumOverall, non-aggregates segments gross profit was $21 million lower than the prior year's second quarter. Asphalt segment gross profit was $14 million in the quarter compared to $30 million in the prior year period. The decrease in earnings was primarily driven by the impact of higher liquid asphalt costs (approximately $10 million) and wet weather conditions that delayed project shipments. Asphalt volumes declined 8 percent as volume growth in California and Tennessee was more than offset by lower volumes in Alabama, Arizona and Texas. The average price for liquid asphalt increased 19 percent versus the prior year's second quarter, outpacing the 1 percent increase in the average selling price.

Second quarter Concrete segment gross profit was $10 million compared to $14 million in the prior year. Shipments decreased 7 percent versus the prior year due to the timing of projects in Virginia, while average selling prices increased 3 percent compared to the prior year.

Calcium segment gross profit of $0.7 million was in line with the prior year quarter.

Selling, Administrative and General (SAG)SAG expense was $101 million in the quarter compared with $91 million in the prior year. The increase was primarily due to higher incentive compensation tied to business performance and increased business development activities. On a trailing twelve-month basis, SAG expense was $371 million, or 7.6 percent as a percentage of total revenues.

Financial Position, Liquidity and Capital AllocationCapital expenditures in the second quarter were $94 million, including $34 million for growth projects. During the fourth quarter of 2020, the Company restarted planned growth projects that were put on hold in the first quarter of 2020 as a result of the pandemic. For the full year 2021, the Company expects to spend between $450 and $475 million on capital expenditures, including growth projects. The Company will continue to review its plans and will adjust as needed.

As of June 30, 2021, total debt to trailing-twelve month Adjusted EBITDA was 2.0 times, or 1.3 times on a net debt basis reflecting $968 million of cash on hand. The Company's weighted-average debt maturity was 15 years, and its effective weighted-average interest rate was 4.6 percent.

Interest expense, net of interest income, was $42 million in the second quarter, up from $34 million in the prior year. The increase includes $9 million of cost associated with financing the proposed acquisition of U.S. Concrete announced June 7, 2021.

On a trailing-twelve month basis, return on invested capital was 14.8 percent, 60 basis points higher than the comparable prior year period. The Company remains committed to driving further improvement through solid operating earnings growth coupled with disciplined capital management and a balanced approach to growth.

OutlookRegarding the Company's expectations for 2021, Mr. Hill said, "We reiterate our full-year Adjusted EBITDA range of $1.380 to $1.460 billion. Our operating performance in the first half of the year was strong, and we remain on track to achieve another year of earnings growth. Our aggregates business is executing well, and we are focused on factors within our control, including pricing and operating disciplines."

Conference CallVulcan will host a conference call at 10:00 a.m. CT on August 4, 2021. 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 9979328. The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

About Vulcan Materials CompanyVulcan Materials Company, a member of the S&P 500 Index with headquarters in Birmingham, Alabama, is the nation's largest supplier 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 COVID-19 outbreak; 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; availability and cost of trucks, railcars, barges and ships as well as their licensed operators for transport of Vulcan's materials; 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; Vulcan's proposed acquisition of U.S. Concrete, including (1) the risk that U.S. Concrete's business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (2) the acquisition may not be completed in a timely manner, on the terms proposed, or at all, (3) the effect of the announcement or pendency of the proposed acquisition on Vulcan's business relationships, operating results and business generally, (4) risks related to diverting management's attention from ongoing business operations, and (5) the outcome of any legal proceedings related to the merger agreement or the proposed acquisition; 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.

Investor Contact: Mark Warren (205) 298-3220 Media Contact: Janet Kavinoky (205) 298-3220

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) 2021 2020 2021 2020

Total revenues $1,361,047 $1,322,575 $2,429,391 $2,371,817

Cost of revenues 962,683 926,056 1,801,760 1,773,575

Gross profit 398,364 396,519 627,631 598,242

Selling, administrative and general expenses 100,667 91,205 189,260 177,635

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

and businesses 211 (258) 117,376 741

Other operating expense, net (10,372) (6,160) (18,698) (10,151)

Operating earnings 287,536 298,896 537,049 411,197

Other nonoperating income (expense), net 8,223 7,367 14,136 (1,969)

Interest expense, net 41,696 33,954 74,814 64,727

Earnings from continuing operations

before income taxes 254,063 272,309 476,371 344,501

Income tax expense 57,283 61,352 117,922 73,546

Earnings from continuing operations 196,780 210,957 358,449 270,955

Loss on discontinued operations, net of tax (1,436) (1,041) (2,491) (781)

Net earnings $195,344 $209,916 $355,958 $270,174

Basic earnings (loss) per share

Continuing operations $1.48 $1.59 $2.70 $2.04

Discontinued operations ($0.01) ($0.01) ($0.02) $0.00

Net earnings $1.47 $1.58 $2.68 $2.04

Diluted earnings (loss) per share

Continuing operations $1.47 $1.58 $2.69 $2.03

Discontinued operations ($0.01) $0.00 ($0.02) $0.00

Net earnings $1.46 $1.58 $2.67 $2.03

Weighted-average common shares outstanding

Basic 132,781 132,552 132,765 132,560

Assuming dilution 133,507 133,115 133,455 133,154

Effective tax rate from continuing operations 22.5% 22.5% 24.8% 21.3%

Table B

Vulcan Materials Company

and Subsidiary Companies

(in thousands)

Consolidated Balance Sheets June 30 December 31 June 30

(Condensed and unaudited) 2021 2020 2020

Assets

Cash and cash equivalents $857,555 $1,197,068 $816,765

Restricted cash 110,851 945 434

Accounts and notes receivable

Accounts and notes receivable, gross 689,591 558,848 699,320

Allowance for doubtful accounts (2,739) (2,551) (3,460)

Accounts and notes receivable, net 686,852 556,297 695,860

Inventories

Finished products 373,677 378,389 383,483

Raw materials 37,967 33,780 33,178

Products in process 5,099 4,555 5,116

Operating supplies and other 33,900 31,861 29,703

Inventories 450,643 448,585 451,480

Other current assets 94,524 74,270 65,571

Total current assets 2,200,425 2,277,165 2,030,110

Investments and long-term receivables 34,264 34,301 43,849

Property, plant & equipment

Property, plant & equipment, cost 9,094,689 9,102,086 8,921,990

Allowances for depreciation, depletion & amortization (4,729,456) (4,676,087) (4,538,980)

Property, plant & equipment, net 4,365,233 4,425,999 4,383,010

Operating lease right-of-use assets, net 464,765 423,128 426,618

Goodwill 3,172,112 3,172,112 3,172,112

Other intangible assets, net 1,103,079 1,123,544 1,114,592

Other noncurrent assets 231,149 230,656 228,433

Total assets $11,571,027 $11,686,905 $11,398,724

Liabilities

Current maturities of long-term debt 15,436 515,435 500,026

Trade payables and accruals 300,109 273,080 278,102

Other current liabilities 283,700 259,368 260,621

Total current liabilities 599,245 1,047,883 1,038,749

Long-term debt 2,769,892 2,772,240 2,785,646

Deferred income taxes, net 748,279 706,050 671,097

Deferred revenue 170,160 174,045 177,534

Noncurrent operating lease liabilities 443,128 399,582 405,578

Other noncurrent liabilities 547,210 559,775 555,969

Total liabilities $5,277,914 $5,659,575 $5,634,573

Equity

Common stock, $1 par value 132,678 132,516 132,446

Capital in excess of par value 2,806,693 2,802,012 2,789,801

Retained earnings 3,531,861 3,274,107 3,049,943

Accumulated other comprehensive loss (178,119) (181,305) (208,039)

Total equity $6,293,113 $6,027,330 $5,764,151

Total liabilities and equity $11,571,027 $11,686,905 $11,398,724

Table C

Vulcan Materials Company

and Subsidiary Companies

(in thousands)

Six Months Ended

Consolidated Statements of Cash Flows June 30

(Condensed and unaudited) 2021 2020

Operating Activities

Net earnings $355,958 $270,174

Adjustments to reconcile net earnings to net cash provided by operatingactivities

Depreciation, depletion, accretion and amortization 203,475 194,951

Noncash operating lease expense 20,867 17,977

Net gain on sale of property, plant & equipment and businesses (117,376) (741)

Contributions to pension plans (4,097) (4,409)

Share-based compensation expense 17,688 15,220

Deferred tax expense 41,103 36,644

Changes in assets and liabilities before initial

effects of business acquisitions and dispositions (135,007) (101,271)

Other, net 15,262 (2,954)

Net cash provided by operating activities $397,873 $425,591

Investing Activities

Purchases of property, plant & equipment (192,234) (223,147)

Proceeds from sale of property, plant & equipment 190,747 3,063

Proceeds from sale of businesses 0 651

Payment for businesses acquired, net of acquired cash 0 (5,668)

Other, net 15 5,575

Net cash used for investing activities ($1,472) ($219,526)

Financing Activities

Payment of current maturities and long-term debt (500,013) (250,012)

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

Debt issuance and exchange costs (13,286) (10,762)

Settlements of interest rate derivatives 0 (19,863)

Purchases of common stock 0 (26,132)

Dividends paid (98,173) (90,128)

Share-based compensation, shares withheld for taxes (12,782) (15,830)

Other, net (1,754) (645)

Net cash provided by (used for) financing activities ($626,008) $336,628

Net increase (decrease) in cash and cash equivalents and restricted cash (229,607) 542,693

Cash and cash equivalents and restricted cash at beginning of year 1,198,013 274,506

Cash and cash equivalents and restricted cash at end of period $968,406 $817,199

Table D

Segment Financial Data and Unit Shipments

(in thousands, except per unit data)

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Total Revenues

Aggregates ^1 $1,125,367 $1,070,596 $2,020,276 $1,938,822

Asphalt ^2 212,577 222,950 359,744 362,739

Concrete 96,201 100,683 177,560 195,448

Calcium 1,960 1,889 4,020 3,915

Segment sales $1,436,105 $1,396,118 $2,561,600 $2,500,924

Aggregates intersegment sales (75,058) (73,543) (132,209) (129,107)

Total revenues $1,361,047 $1,322,575 $2,429,391 $2,371,817

Gross Profit

Aggregates $373,833 $351,162 $597,471 $545,293

Asphalt 13,532 30,464 10,541 28,029

Concrete 10,293 14,227 18,061 23,440

Calcium 706 666 1,558 1,480

Total $398,364 $396,519 $627,631 $598,242

Depreciation, Depletion, Accretion and Amortization

Aggregates $84,328 $80,747 $165,136 $157,883

Asphalt 9,060 8,668 18,155 17,402

Concrete 4,026 4,001 7,978 8,083

Calcium 39 48 78 97

Other 5,654 6,006 12,128 11,486

Total $103,107 $99,470 $203,475 $194,951

Average Unit Sales Price and Unit Shipments

Aggregates

Freight-adjusted revenues ^3 $873,971 $814,713 $1,555,126 $1,462,746

Aggregates - tons 58,528 56,195 104,965 101,243

Freight-adjusted sales price ^4 $14.93 $14.50 $14.82 $14.45

Other Products

Asphalt Mix - tons 3,134 3,403 5,351 5,460

Asphalt Mix - sales price $58.14 $57.46 $57.58 $57.86

Ready-mixed concrete - cubic yards 731 786 1,344 1,520

Ready-mixed concrete - sales price $130.61 $127.35 $131.03 $127.62

Calcium - tons 71 71 145 144

Calcium - sales price $27.64 $26.55 $27.64 $27.06

1 Includes product sales (crushed stone, sand and gravel, sand, and otheraggregates), as well as freight & deliverycosts that we pass along to our customers, and service revenues related toaggregates.

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

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

4 Freight-adjusted sales price is calculated as freight-adjusted revenuesdivided 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 and should not be considered as analternative to metrics defined by GAAP. We present this metric as it isconsistent with the basis by which we review our operating results. Webelieve that this presentation is consistent with our competitors andmeaningful to our investors as it excludes revenues associated withfreight & delivery, which are pass-through activities. It also excludesimmaterial other revenues related to services, such as landfill tippingfees, that are derived from our aggregates business. Additionally, we usethis metric as the basis for calculating the average sales price of ouraggregates products. Reconciliation of this metric to its nearest GAAPmeasure is presented below:

Aggregates Segment Freight-Adjusted Revenues

(in thousands, except per ton data)

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Aggregates segment

Segment sales $1,125,367 $1,070,596 $2,020,276 $1,938,822

Less: Freight & delivery revenues ^1 234,845 240,880 432,071 446,588

Other revenues 16,551 15,003 33,079 29,488

Freight-adjusted revenues $873,971 $814,713 $1,555,126 $1,462,746

Unit shipment - tons 58,528 56,195 104,965 101,243

Freight-adjusted sales price $14.93 $14.50 $14.82 $14.45

^1At the segment level, freight & delivery revenues include intersegmentfreight & delivery (which are eliminated at the consolidated level) and freightto remote

distribution sites.

Aggregates segment incremental gross profit flow-through rate is not a GAAPmeasure and represents the year-over-year change in gross profit divided by theyear-over-year change in segment sales excluding freight & delivery (revenuesand costs). This metric should not be considered as an alternative to metricsdefined by GAAP. We present this metric as it is consistent with the basis bywhich we review our operating results. We believe that this presentation isconsistent with our competitors and meaningful to our investors as it excludesrevenues associated with freight & delivery, which are pass-through activities.Reconciliation of this metric to its 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

2021 2020 2021 2020

Aggregates segment

Gross profit $373,833 $351,162 $597,471 $545,293

Segment sales $1,125,367 $1,070,596 $2,020,276 $1,938,822

Gross profit margin 33.2% 32.8% 29.6% 28.1%

Incremental gross profit margin 41.4% 64.1%

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

(dollars in thousands)

Three Months Ended Six Months Ended

June 30 June 30

2021 2020 2021 2020

Aggregates segment

Gross profit $373,833 $351,162 $597,471 $545,293

Segment sales $1,125,367 $1,070,596 $2,020,276 $1,938,822

Less: Freight & delivery revenues ^1 234,845 240,880 432,071 446,588

Segment sales excluding freight & delivery $890,522 $829,716 $1,588,205 $1,492,234

Gross profit margin excluding freight & delivery 42.0% 42.3% 37.6% 36.5%

Incremental gross profit flow-through rate 37.3% 54.4%

^1At the segment level, freight & delivery revenues include intersegmentfreight & delivery (which are eliminated at the consolidated level) and freightto remote

distribution sites.

GAAP does not define "Aggregates segment cash gross profit" and it should notbe considered as an alternative to earnings measures defined by GAAP. We andthe investment community use this metric to assess the operating performance ofour business. Additionally, we present this metric as we believe that itclosely correlates to long-term shareholder value. We do not use this metric asa measure to allocate resources. Aggregates segment cash gross profit per tonis computed by dividing Aggregates segment cash gross profit by tons shipped.Reconciliation of this metric 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

2021 2020 2021 2020

Aggregates segment

Gross profit $373,833 $351,162 $597,471 $545,293

Depreciation, depletion, accretion and amortization 84,328 80,747 165,136 157,883

Aggregates segment cash gross profit $458,161 $431,909 $762,607 $703,176

Unit shipments - tons 58,528 56,195 104,965 101,243

Aggregates segment cash gross profit per ton $7.83 $7.69 $7.27 $6.95

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 planning andforecasting as we believe that it closely correlates to long-term shareholdervalue. We do not use this metric as a measure to allocate resources. We adjustEBITDA for certain items to provide a more consistent comparison of earningsperformance from period to period. Reconciliation of this metric to its nearestGAAP measure is presented below:

EBITDA and Adjusted EBITDA

(in thousands)

Three Months Ended Six Months Ended TTM

June 30 June 30 June 30

2021 2020 2021 2020 2021 2020

Net earnings $195,344 $209,916 $355,958 $270,174 $670,264 $626,979

Income tax expense 57,283 61,352 117,922 73,546 200,179 150,453

Interest expense, net 41,696 33,954 74,814 64,727 144,480 127,758

Loss on discontinued operations, net of tax 1,436 1,041 2,491 781 5,225 4,637

EBIT $295,759 $306,263 $551,185 $409,228 $1,020,148 $909,827

Depreciation, depletion, accretion and amortization 103,107 99,470 203,475 194,951 405,330 386,870

EBITDA $398,866 $405,733 $754,660 $604,179 $1,425,478 $1,296,697

Gain on sale of real estate and businesses, net 0 0 (114,695) 0 (114,695) (9,289)

Property donation 0 0 0 0 0 10,847

Charges associated with divested operations 350 774 686 774 6,847 3,807

Business development ^1 5,489 (3,519) 5,875 (2,459) 15,668 (711)

COVID-19 direct incremental costs 1,318 4,361 3,786 5,009 8,947 5,009

Pension settlement charge 0 0 0 0 22,740 0

Restructuring charges 0 465 0 1,333 0 7,790

Adjusted EBITDA $406,023 $407,814 $650,312 $608,836 $1,364,985 $1,314,150

Depreciation, depletion, accretion and amortization (103,107) (99,470) (203,475) (194,951) (405,330) (386,870)

Adjusted EBIT $302,916 $308,344 $446,837 $413,885 $959,655 $927,280

Adjusted EBITDA margin 29.8% 30.8% 26.8% 25.7% 27.8% 26.4%

^1Represents non-routine charges or gains associated with acquisitions anddispositions including the cost impact of purchase accounting inventoryvaluations.

Similar to our presentation of Adjusted EBITDA, we present Adjusted dilutedearnings per share (EPS) from continuing operations to provide a moreconsistent comparison of earnings performance from period to period. Thismetric is not defined by GAAP and should not be considered as an alternative toearnings measures defined by GAAP. Reconciliation of this metric to its nearestGAAP measure is presented below:

Adjusted Diluted EPS from Continuing Operations (Adjusted Diluted EPS)

Three Months Ended Six Months Ended TTM

June 30 June 30 June 30

2021 2020 2021 2020 2021 2020

Diluted EPS from continuing operations $1.47 $1.58 $2.69 $2.03 $5.07 $4.73

Items included in Adjusted EBITDA above 0.05 0.02 (0.58) 0.03 (0.32) 0.09

Alabama NOL carryforward valuation allowance 0.00 0.00 0.10 0.00 0.10 0.00

Acquisition financing interest costs 0.05 0.00 0.05 0.00 0.05 0.00

Adjusted diluted EPS $1.57 $1.60 $2.26 $2.06 $4.90 $4.82

Net debt to Adjusted EBITDA is not a GAAP measure and should not be consideredas an alternative to metrics defined by GAAP. We, the investment community andcredit rating agencies use this metric to assess our leverage. Net debtsubtracts cash and cash equivalents and restricted cash from total debt.Reconciliation of this metric to its nearest GAAP measure is presented below:

Net Debt to Adjusted EBITDA

(in thousands)

June 30

2021 2020

Debt

Current maturities of long-term debt $15,436 $500,026

Long-term debt 2,769,892 2,785,646

Total debt $2,785,328 $3,285,672

Less: Cash and cash equivalents and restricted cash 968,406 817,199

Net debt $1,816,922 $2,468,473

Trailing-Twelve Months (TTM) Adjusted EBITDA $1,364,985 $1,314,150

Total debt to TTM Adjusted EBITDA 2.0x 2.5x

Net debt to TTM Adjusted EBITDA 1.3x 1.9x

Appendix 3

Reconciliation of Non-GAAP Measures (Continued)

The following reconciliation to the mid-point of the range of 2021 ProjectedEBITDA excludes adjustments (as noted in Adjusted EBITDA above) as they aredifficult to forecast (timing or amount). Due to the difficulty in forecastingsuch adjustments, we are unable to estimate their significance. This metric isnot defined by GAAP and should not be considered as an alternative to earningsmeasures defined by GAAP. Reconciliation of this metric to its nearest GAAPmeasure is presented below:

2021 Projected EBITDA

(in millions)

Mid-point

Net earnings $670

Income tax expense 205

Interest expense, net of interest income 145

Discontinued operations, net of tax 0

Depreciation, depletion, accretion and amortization 400

Projected EBITDA $1,420

We define "Return on Invested Capital" (ROIC) as Adjusted EBITDA for thetrailing-twelve months divided by average invested capital (as illustratedbelow) during the trailing 5-quarters. Our calculation of ROIC is considered anon-GAAP financial measure because we calculate ROIC using the non-GAAP metricEBITDA. We believe that our ROIC metric is meaningful because it helpsinvestors assess how effectively we are deploying our assets. Although ROIC isa standard financial metric, numerous methods exist for calculating a company'sROIC. As a result, the method we use to calculate our ROIC may differ from themethods used by other companies. This metric is not defined by GAAP and shouldnot be considered as an alternative to earnings measures defined by GAAP.Reconciliation of this metric to its nearest GAAP measure is presented below:

Return on Invested Capital

(dollars in thousands)

TTM

June 30

2021 2020

Adjusted EBITDA $1,364,985 $1,314,150

Average invested capital ^1

Property, plant & equipment, net $4,376,276 $4,335,633

Goodwill 3,172,113 3,168,072

Other intangible assets 1,112,585 1,087,580

Fixed and intangible assets $8,660,974 $8,591,285

Current assets $2,153,208 $1,453,094

Less: Cash and cash equivalents 991,857 265,920

Less: Current tax 19,167 19,289

Adjusted current assets 1,142,184 1,167,885

Current liabilities 864,325 649,772

Less: Current maturities of long-term debt 311,154 100,025

Less: Short-term debt 0 27,400

Adjusted current liabilities 553,171 522,347

Adjusted net working capital $589,013 $645,538

Average invested capital $9,249,987 $9,236,823

Return on invested capital 14.8% 14.2%

^1Average invested capital is based on a trailing 5-quarters.

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SOURCE Vulcan Materials Company