SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
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Yes | ||||||
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| Name of each exchange on | ||||
Common Stock, $1 par value | VMC | New York Stock Exchange | ||||
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| Shares outstanding | |||||
Common Stock, $1 Par Value |
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VULCAN MATERIALS COMPANY
FORM 10-Q QUARTER ENDED
Contents | ||||
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PART I | FINANCIAL INFORMATION |
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| Item 1. | Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Cash Flows Notes to Condensed Consolidated Financial Statements
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2 3 4 5 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations
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| Item 3. | Quantitative and Qualitative Disclosures About
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| Item 4. |
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PART II | OTHER INFORMATION |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 4. |
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| Item 6. |
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Unless otherwise stated or the context otherwise requires, references in this report to “Vulcan,” the “Company,” “we,” “our,” or “us” refer to Vulcan Materials Company and its consolidated subsidiaries. |
1
part I financial information
ITEM 1
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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Unaudited, except for December 31 | September 30 |
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| December 31 |
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| September 30 |
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Unaudited | March 31 |
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| December 31 |
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| March 31 |
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in thousands | 2017 |
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| 2016 |
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| 2016 |
| 2019 |
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| 2018 |
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| 2018 |
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Assets |
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Cash and cash equivalents | $ 701,163 |
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| $ 258,986 |
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| $ 135,365 |
| $ 30,838 |
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| $ 40,037 |
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| $ 38,141 |
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Restricted cash | 0 |
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| 9,033 |
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| 0 |
| 270 |
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| 4,367 |
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| 8,373 |
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Accounts and notes receivable |
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Accounts and notes receivable, gross | 582,105 |
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| 494,634 |
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| 536,242 |
| 563,084 |
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| 542,868 |
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| 492,103 |
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Less: Allowance for doubtful accounts | (2,903) |
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| (2,813) |
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| (4,260) |
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Allowance for doubtful accounts | (2,554) |
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| (2,090) |
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| (2,667) |
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Accounts and notes receivable, net | 579,202 |
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| 491,821 |
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| 531,982 |
| 560,530 |
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| 540,778 |
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| 489,436 |
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Inventories |
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Finished products | 307,046 |
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| 293,619 |
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| 283,266 |
| 369,743 |
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| 372,604 |
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| 340,666 |
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Raw materials | 27,852 |
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| 22,648 |
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| 25,411 |
| 27,951 |
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| 27,942 |
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| 29,393 |
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Products in process | 1,652 |
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| 1,480 |
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| 2,753 |
| 4,976 |
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| 3,064 |
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| 1,303 |
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Operating supplies and other | 29,276 |
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| 27,869 |
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| 26,612 |
| 26,727 |
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| 25,720 |
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| 28,392 |
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Inventories | 365,826 |
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| 345,616 |
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| 338,042 |
| 429,397 |
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| 429,330 |
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| 399,754 |
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Prepaid expenses | 100,781 |
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| 31,726 |
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| 71,370 |
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Other current assets | 62,816 |
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| 64,633 |
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| 75,495 |
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Total current assets | 1,746,972 |
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| 1,137,182 |
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| 1,076,759 |
| 1,083,851 |
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| 1,079,145 |
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| 1,011,199 |
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Investments and long-term receivables | 35,999 |
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| 39,226 |
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| 38,914 |
| 50,952 |
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| 44,615 |
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| 35,056 |
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Property, plant & equipment |
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Property, plant & equipment, cost | 7,539,928 |
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| 7,185,818 |
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| 7,105,036 |
| 8,559,549 |
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| 8,457,619 |
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| 8,116,439 |
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Allowances for depreciation, depletion & amortization | (4,002,227) |
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| (3,924,380) |
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| (3,876,743) |
| (4,284,211) |
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| (4,220,312) |
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| (4,090,574) |
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Property, plant & equipment, net | 3,537,701 |
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| 3,261,438 |
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| 3,228,293 |
| 4,275,338 |
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| 4,237,307 |
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| 4,025,865 |
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Operating lease right-of-use assets, net | 426,381 |
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| 0 |
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| 0 |
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Goodwill | 3,101,337 |
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| 3,094,824 |
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| 3,094,824 |
| 3,161,842 |
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| 3,165,396 |
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| 3,130,161 |
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Other intangible assets, net | 835,269 |
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| 769,052 |
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| 753,314 |
| 1,085,398 |
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| 1,095,378 |
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| 1,060,831 |
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Other noncurrent assets | 182,056 |
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| 169,753 |
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| 165,981 |
| 213,090 |
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| 210,289 |
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| 190,099 |
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Total assets | $ 9,439,334 |
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| $ 8,471,475 |
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| $ 8,358,085 |
| $ 10,296,852 |
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| $ 9,832,130 |
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| $ 9,453,211 |
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Liabilities |
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Current maturities of long-term debt | 4,827 |
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| 138 |
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| 131 |
| 24 |
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| 23 |
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| 22 |
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Short-term debt | 178,500 |
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| 133,000 |
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| 200,000 |
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Trade payables and accruals | 181,207 |
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| 145,042 |
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| 163,139 |
| 248,119 |
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| 216,473 |
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| 188,163 |
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Other current liabilities | 227,665 |
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| 227,064 |
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| 197,642 |
| 232,964 |
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| 253,054 |
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| 195,122 |
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Total current liabilities | 413,699 |
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| 372,244 |
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| 360,912 |
| 659,607 |
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| 602,550 |
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| 583,307 |
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Long-term debt | 2,809,966 |
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| 1,982,751 |
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| 1,983,639 |
| 2,780,589 |
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| 2,779,357 |
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| 2,775,687 |
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Deferred income taxes, net | 716,165 |
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| 702,854 |
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| 706,715 |
| 568,229 |
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| 567,283 |
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| 479,430 |
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Deferred revenue | 193,117 |
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| 198,388 |
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| 201,732 |
| 184,744 |
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| 186,397 |
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| 190,731 |
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Operating lease liabilities | 403,426 |
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| 0 |
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| 0 |
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Other noncurrent liabilities | 621,253 |
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| 642,762 |
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| 601,117 |
| 483,048 |
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| 493,640 |
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| 510,846 |
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Total liabilities | $ 4,754,200 |
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| $ 3,898,999 |
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| $ 3,854,115 |
| $ 5,079,643 |
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| $ 4,629,227 |
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| $ 4,540,001 |
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Other commitments and contingencies (Note 8) |
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Equity |
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Common stock, $1 par value, Authorized 480,000 shares, |
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Outstanding 132,281, 132,339 and 132,309 shares, respectively | 132,281 |
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| 132,339 |
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| 132,309 |
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Outstanding 132,069, 131,762 and 132,290 shares, respectively | 132,069 |
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| 131,762 |
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| 132,290 |
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Capital in excess of par value | 2,803,106 |
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| 2,807,995 |
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| 2,805,355 |
| 2,789,864 |
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| 2,798,486 |
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| 2,787,848 |
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Retained earnings | 1,886,006 |
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| 1,771,518 |
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| 1,685,412 |
| 2,467,201 |
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| 2,444,870 |
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| 2,138,885 |
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Accumulated other comprehensive loss | (136,259) |
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| (139,376) |
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| (119,106) |
| (171,925) |
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| (172,215) |
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| (145,813) |
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Total equity | $ 4,685,134 |
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| $ 4,572,476 |
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| $ 4,503,970 |
| $ 5,217,209 |
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| $ 5,202,903 |
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| $ 4,913,210 |
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Total liabilities and equity | $ 9,439,334 |
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| $ 8,471,475 |
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| $ 8,358,085 |
| $ 10,296,852 |
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| $ 9,832,130 |
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| $ 9,453,211 |
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The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. | The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
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2
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
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| Three Months Ended |
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| Nine Months Ended |
| Three Months Ended |
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Unaudited |
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| September 30 |
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| September 30 |
| March 31 |
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in thousands, except per share data | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Total revenues | $ 1,094,715 |
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| $ 1,008,140 |
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| $ 2,912,806 |
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| $ 2,719,693 |
| $ 996,511 |
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| $ 854,474 |
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Cost of revenues | 789,199 |
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| 703,931 |
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| 2,155,536 |
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| 1,958,581 |
| 804,836 |
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| 695,140 |
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Gross profit | 305,516 |
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| 304,209 |
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| 757,270 |
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| 761,112 |
| 191,675 |
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| 159,334 |
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Selling, administrative and general expenses | 73,350 |
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| 76,311 |
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| 238,263 |
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| 235,460 |
| 90,268 |
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| 78,340 |
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Gain on sale of property, plant & equipment |
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and businesses | 1,488 |
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| 2,023 |
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| 4,630 |
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| 2,934 |
| 7,297 |
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| 4,164 |
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Business interruption claims recovery | 0 |
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| 690 |
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| 0 |
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| 11,652 |
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Impairment of long-lived assets | 0 |
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| 0 |
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| 0 |
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| (10,506) |
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Other operating expense, net | (4,167) |
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| (3,535) |
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| (27,763) |
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| (23,949) |
| (4,271) |
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| (3,963) |
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Operating earnings | 229,487 |
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| 227,076 |
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| 495,874 |
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| 505,783 |
| 104,433 |
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| 81,195 |
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Other nonoperating income, net | 1,784 |
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| 990 |
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| 5,677 |
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| 325 |
| 3,129 |
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| 5,071 |
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Interest expense, net | 82,041 |
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| 33,126 |
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| 154,572 |
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| 100,192 |
| 32,934 |
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| 37,774 |
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Earnings from continuing operations |
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before income taxes | 149,230 |
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| 194,940 |
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| 346,979 |
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| 405,916 |
| 74,628 |
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| 48,492 |
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Income tax expense | 39,080 |
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| 49,803 |
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| 81,557 |
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| 91,575 |
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Income tax expense (benefit) | 10,693 |
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| (4,903) |
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Earnings from continuing operations | 110,150 |
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| 145,137 |
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| 265,422 |
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| 314,341 |
| 63,935 |
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| 53,395 |
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Earnings (loss) on discontinued operations, net of tax | (1,571) |
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| (3,113) |
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| 8,217 |
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| (7,451) |
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Loss on discontinued operations, net of tax | (636) |
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| (416) |
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Net earnings | $ 108,579 |
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| $ 142,024 |
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| $ 273,639 |
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| $ 306,890 |
| $ 63,299 |
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| $ 52,979 |
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Other comprehensive income, net of tax |
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Reclassification adjustment for cash flow hedges | 1,188 |
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| 307 |
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| 1,836 |
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| 902 |
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Deferred gain on interest rate derivative | 0 |
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| 2,496 |
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Amortization of prior interest rate derivative loss | 55 |
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| 66 |
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Amortization of actuarial loss and prior service |
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cost for benefit plans | 427 |
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| 20 |
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| 1,281 |
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| 61 |
| 235 |
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| 1,091 |
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Other comprehensive income | 1,615 |
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| 327 |
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| 3,117 |
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| 963 |
| 290 |
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| 3,653 |
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Comprehensive income | $ 110,194 |
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| $ 142,351 |
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| $ 276,756 |
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| $ 307,853 |
| $ 63,589 |
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| $ 56,632 |
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Basic earnings (loss) per share |
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Continuing operations | $ 0.83 |
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| $ 1.09 |
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| $ 2.00 |
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| $ 2.36 |
| $ 0.48 |
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| $ 0.40 |
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Discontinued operations | (0.01) |
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| (0.02) |
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| 0.07 |
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| (0.06) |
| 0.00 |
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| 0.00 |
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Net earnings | $ 0.82 |
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| $ 1.07 |
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| $ 2.07 |
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| $ 2.30 |
| $ 0.48 |
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| $ 0.40 |
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Diluted earnings (loss) per share |
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Continuing operations | $ 0.82 |
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| $ 1.07 |
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| $ 1.97 |
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| $ 2.31 |
| $ 0.48 |
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| $ 0.40 |
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Discontinued operations | (0.01) |
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| (0.02) |
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| 0.06 |
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| (0.05) |
| 0.00 |
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| (0.01) |
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Net earnings | $ 0.81 |
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| $ 1.05 |
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| $ 2.03 |
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| $ 2.26 |
| $ 0.48 |
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| $ 0.39 |
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Weighted-average common shares outstanding |
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Basic | 132,484 |
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| 133,019 |
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| 132,510 |
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| 133,418 |
| 132,043 |
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| 132,690 |
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Assuming dilution | 134,765 |
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| 135,823 |
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| 134,853 |
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| 135,932 |
| 133,054 |
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| 134,359 |
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Cash dividends per share of common stock | $ 0.25 |
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| $ 0.20 |
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| $ 0.75 |
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| $ 0.60 |
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Depreciation, depletion, accretion and amortization | $ 79,636 |
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| $ 72,049 |
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| $ 227,974 |
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| $ 213,362 |
| $ 89,181 |
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| $ 81,439 |
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Effective tax rate from continuing operations | 26.2% |
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| 25.5% |
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| 23.5% |
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| 22.6% |
| 14.3% |
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| -10.1% |
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The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. | The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |
3
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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| Nine Months Ended |
| Three Months Ended |
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Unaudited |
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| September 30 |
| March 31 | ||||
in thousands | 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Operating Activities |
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Net earnings | $ 273,639 |
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| $ 306,890 |
| $ 63,299 |
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| $ 52,979 |
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Adjustments to reconcile net earnings to net cash provided by operating activities |
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Depreciation, depletion, accretion and amortization | 227,974 |
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| 213,362 |
| 89,181 |
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| 81,439 |
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Net gain on sale of property, plant & equipment and businesses | (4,630) |
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| (2,934) |
| (7,297) |
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| (4,164) |
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Contributions to pension plans | (17,638) |
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| (7,126) |
| (2,320) |
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| (102,443) |
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Share-based compensation expense | 19,953 |
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| 15,645 |
| 5,724 |
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| 6,794 |
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Deferred tax expense (benefit) | 11,298 |
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| 25,094 |
| 774 |
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| 7,968 |
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Cost of debt purchase | 43,048 |
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| 0 |
| 0 |
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| 6,922 |
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Changes in assets and liabilities before initial effects of business acquisitions |
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and dispositions | (162,849) |
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| (145,548) |
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Changes in assets and liabilities before initial |
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effects of business acquisitions and dispositions | (45,765) |
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| 39,832 |
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Other, net | 8,740 |
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| (774) |
| 12,568 |
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| 3,641 |
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Net cash provided by operating activities | $ 399,535 |
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| $ 404,609 |
| $ 116,164 |
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| $ 92,968 |
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Investing Activities |
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Purchases of property, plant & equipment | (366,845) |
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| (287,440) |
| (122,019) |
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| (128,688) |
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Proceeds from sale of property, plant & equipment | 10,403 |
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| 5,865 |
| 6,512 |
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| 1,701 |
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Proceeds from sale of businesses | 1,744 |
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| 11,256 |
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Payment for businesses acquired, net of acquired cash | (210,562) |
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| (1,611) |
| 1,122 |
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| (76,259) |
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Decrease in restricted cash | 9,033 |
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| 1,150 |
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Other, net | 405 |
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| 2,488 |
| (7,237) |
|
| (34) |
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Net cash used for investing activities | $ (557,566) |
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| $ (279,548) |
| $ (119,878) |
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| $ (192,024) |
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Financing Activities |
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Proceeds from line of credit | 5,000 |
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| 3,000 |
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Payment of line of credit | (5,000) |
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| (3,000) |
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Proceeds from short-term debt | 196,200 |
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| 252,000 |
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Payment of short-term debt | (150,700) |
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| (52,000) |
| |||||
Payment of current maturities and long-term debt | (800,572) |
|
| (14) |
| (6) |
|
| (892,038) |
|
Proceeds from issuance of long-term debt | 1,600,000 |
|
| 0 |
| 0 |
|
| 850,000 |
|
Debt discounts and issuance costs | (15,046) |
|
| 0 |
| |||||
Debt issuance and exchange costs | 0 |
|
| (45,513) |
| |||||
Settlements of interest rate derivatives | 0 |
|
| 3,378 |
| |||||
Purchases of common stock | (60,303) |
|
| (161,463) |
| 0 |
|
| (55,568) |
|
Dividends paid | (99,263) |
|
| (79,865) |
| (40,939) |
|
| (37,176) |
|
Share-based compensation, shares withheld for taxes | (24,608) |
|
| (32,414) |
| (14,137) |
|
| (24,159) |
|
Net cash provided by (used for) financing activities | $ 600,208 |
|
| $ (273,756) |
| |||||
Net increase (decrease) in cash and cash equivalents | 442,177 |
|
| (148,695) |
| |||||
Cash and cash equivalents at beginning of year | 258,986 |
|
| 284,060 |
| |||||
Cash and cash equivalents at end of period | $ 701,163 |
|
| $ 135,365 |
| |||||
Net cash used for financing activities | $ (9,582) |
|
| $ (1,076) |
| |||||
Net decrease in cash and cash equivalents and restricted cash | (13,296) |
|
| (100,132) |
| |||||
Cash and cash equivalents and restricted cash at beginning of year | 44,404 |
|
| 146,646 |
| |||||
Cash and cash equivalents and restricted cash at end of period | $ 31,108 |
|
| $ 46,514 |
| |||||
The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of the statements. | The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of the statements. |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of the statements. |
|
4
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, Georgia, 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, 20162018 was derived from the audited financial statement, but it does not include all disclosures required by accounting principles generally accepted in the United States of America.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 periodsperiod ended September 30, 2017March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2019. 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 inwithin this Note 2,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.
SHARE-BASED COMPENSATION – ACCOUNTING STANDARDS UPDATE
We adopted Accounting Standards Update (ASU) 2016-09, “Improvement to Employee Share-Based Payment Accounting,” in the fourth quarter of 2016. The provisions of this standard were applied as of the beginning of the year of adoption resulting in revisions to our 2016 interim financial statements.
Under ASU 2016-09, tax benefits resulting from tax deductions in excess of the compensation cost recognized (excess tax benefits) are reflected as discrete income tax benefits in the period of exercise or issuance. Before the adoption of this standard, excess tax benefits were recorded directly to equity (APIC). Net excess tax benefits are reflected as a reduction to our income tax expense for the three and nine months ended September 30, 2017 ($4,001,000 and $20,759,000, respectively) and revised three and nine months ended September 30, 2016 ($2,259,000 and $24,451,000, respectively). As a result, we also revised our September 30, 2016 diluted share calculation to exclude the assumption that proceeds from excess tax benefits would be used to purchase shares, resulting in an increase in dilutive shares of 790,000 for the quarter and 740,000 year-to-date.
Under ASU 2016-09, gross excess tax benefits are classified as operating cash flows rather than financing cash flows. As a result, for the nine months ended September 30, 2016 we increased our operating cash flows and decreased our financing cash flows by $26,747,000. Additionally, this ASU requires cash paid for shares withheld to satisfy statutory income tax withholding obligations be classified as financing activities rather than operating activities. As a result, for the nine months ended September 30, 2016 we increased our operating cash flows and decreased our financing cash flows by $32,414,000.
5
RECLASSIFICATIONS
Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2019 presentation.
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 2017 presentation.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
5
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.
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:
|
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|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
| March 31 | ||||
in thousands | 2019 |
|
| 2018 |
|
Discontinued Operations |
|
|
|
|
|
Pretax loss | $ (638) |
|
| $ (566) |
|
Income tax benefit | 2 |
|
| 150 |
|
Loss on discontinued operations, |
|
|
|
|
|
net of tax | $ (636) |
|
| $ (416) |
|
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 |
| Three Months Ended | ||||||||||
| September 30 |
|
| September 30 |
| March 31 | ||||||||||
in thousands | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
|
Weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding | 132,484 |
|
| 133,019 |
|
| 132,510 |
|
| 133,418 |
| 132,043 |
|
| 132,690 |
|
Dilutive effect of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-Only Stock Appreciation Rights | 1,249 |
|
| 1,356 |
|
| 1,305 |
|
| 1,322 |
| 742 |
|
| 1,132 |
|
Other stock compensation plans | 1,032 |
|
| 1,448 |
|
| 1,038 |
|
| 1,192 |
| 269 |
|
| 537 |
|
Weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding, assuming dilution | 134,765 |
|
| 135,823 |
|
| 134,853 |
|
| 135,932 |
| 133,054 |
|
| 134,359 |
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
|
| September 30 |
| March 31 | ||||||||||
in thousands | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2019 |
|
| 2018 |
|
Antidilutive common stock equivalents | 79 |
|
| 2 |
|
| 79 |
|
| 234 |
| 220 |
|
| 157 |
|
6
Note 2: Discontinued OperationsLeases
In 2005, Operating lease-related assets and liabilities (we sold substantially all do not have any material finance leases) reflected on our March 31, 2019 balance sheet and the weighted-average lease term and discount rate are as follows:
March 31 | |||
in thousands | Classification on the Balance Sheet | 2019 | |
Assets | |||
Operating lease right-of-use assets | $ 434,970 | ||
Accumulated amortization | (8,589) | ||
Total lease assets | Operating lease right-of-use assets, net | $ 426,381 | |
Liabilities | |||
Current | |||
Operating | Other current liabilities | $ 31,255 | |
Noncurrent | |||
Operating | Operating lease liabilities | 403,426 | |
Total lease liabilities | $ 434,681 | ||
Lease Term and Discount Rate | |||
Weighted-average remaining lease term (years) | |||
Operating leases | 10.3 | ||
Weighted-average discount rate | |||
Operating leases | 4.4% |
Our portfolio of nonmineral leases is composed almost entirely of operating leases for real estate (including office buildings, aggregates sales yards, and concrete and asphalt sites) and equipment (including railcars andrail track, barges, office equipment and plant equipment).
Our building leases have remaining noncancelable periods of 1 - 30 years, and lease terms (including options to extend) of 1 - 30 years. Key factors in determining the certainty of lease renewals include the location of the building, the value of leasehold improvements and the cost to relocate.Rental payments for certain of our Chemicals business to Basic Chemicals, a subsidiarybuilding leases are periodically adjusted for inflation and this variable component is recognized as expense when incurred. Many of Occidental Chemical Corporation. our building leases contain common area maintenance charges which we include in the calculation of our lease liability (the lease consideration is not allocated between the lease and non-lease components).
Our aggregates sales yard leases have remaining noncancelable periods of 0 - 13 years, and lease terms of 2 - 80 years. The key factor in determining the certainty of lease renewals is the financial resultsimpact of extending the lease, including the reserve life of the Chemicals business are classified as discontinued operationssourcing aggregates quarry. Certain aggregates sales yard lease agreements include rental payments based on a percentage of sales over contractual levels or the number of shipments received into the sales yard. Variable payments for these sales yards comprise a majority of the overall variable lease cost presented in the accompanying Condensed Consolidated Statementstable below.
Our concrete and asphalt site leases have remaining noncancelable periods of Comprehensive Income0 - 97 years, and lease terms of 1 - 97 years. The key factor in determining the certainty of lease renewals is the financial impact of extending the lease, including the reserve life of the sourcing aggregates quarry. Rental payments are generally fixed for our concrete and asphalt sites.
Our rail (car and track) leases have remaining noncancelable periods of 0 - 7 years, and lease terms of 2 - 76 years. Key factors in determining the certainty of lease renewals include the market rental rate for comparable assets and, in some cases, the cost incurred to restore the asset. Rental payments are fixed for our rail leases. The majority of our rail leases contain substitution rights that allow the supplier to replace damaged equipment. Because these rights are generally limited to either replacing railcars or moving our placement on rail track for purposes of repair or maintenance, we do not consider these substitution rights to be substantive and have recorded a lease liability and ROU asset for all leased rail.
Our barge leases have remaining noncancelable periods presented. There were no revenuesof 2 - 3 years, and lease terms (including options to extend) of 10 - 16 years. Key factors in determining the certainty of lease renewals include the market rental rate for comparable assets and, in some cases, the cost incurred to restore the asset. Rental payments are fixed. Like our rail leases, our barge leases contain non-substantive substitution rights that are limited to replacing barges in need of repair or maintenance.
7
Office and plant equipment leases have remaining noncancelable periods of 0 - 4 years, and lease terms of 0 - 4 years. The key factor in determining the certainty of lease renewals is the market rental rate for comparable assets. Rental payments are generally fixed for our equipment leases with terms greater than 1 year. The significant majority of our short-term lease cost presented in the table below is derived from discontinued operationsoffice and plant equipment leases with terms of 1 year or less.
Our lease agreements do not contain material residual value guarantees, material restrictive covenants or material termination options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. The components of nonmineral operating lease expense are as follows:
Three Months Ended | ||||||
March 31 | ||||||
in thousands | 2019 | |||||
Lease cost | ||||||
Operating lease cost | $ 14,127 | |||||
Short-term lease cost 1 | 8,700 | |||||
Variable lease cost | 3,068 | |||||
Sublease income | (610) | |||||
Total lease cost | $ 25,285 |
1 | We have elected to recognize the cost of leases with an initial term of one month or less within our short-term lease cost. |
Total nonmineral operating lease expense for the periods presented. Results from discontinued operations areprior year’s three months ended March 31, 2018 was $24,352,000.
Cash paid for operating leases was $13,333,000 for the three months ended March 31, 2019 and was reflected as a reduction to operating cash flows.
Maturity analysis on an undiscounted basis of our nonmineral lease liabilities as of March 31, 2019 is as follows:
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||
| September 30 |
|
| September 30 |
| ||||||
in thousands | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
Pretax earnings (loss) | $ (1,282) |
|
| $ (5,135) |
|
| $ 13,614 |
|
| $ (12,312) |
|
Income tax (expense) benefit | (289) |
|
| 2,022 |
|
| (5,397) |
|
| 4,861 |
|
Earnings (loss) on discontinued operations, |
|
|
|
|
|
|
|
|
|
|
|
net of tax | $ (1,571) |
|
| $ (3,113) |
|
| $ 8,217 |
|
| $ (7,451) |
|
|
|
|
|
|
|
|
|
| Operating |
| |
in thousands | Leases |
| |
Maturity of Lease Liabilities |
|
| |
2019 (remainder) | $ 39,281 |
| |
2020 | 49,300 |
| |
2021 | 45,607 |
| |
2022 | 40,680 |
| |
2023 | 36,143 |
| |
Thereafter | 605,516 |
| |
Total minimum lease payments | $ 816,527 |
| |
Less: Lease payments representing interest | 381,846 |
| |
Present value of future minimum lease payments | $ 434,681 |
| |
Less: Current obligations under leases | 31,255 |
| |
Long-term lease obligations | $ 403,426 |
|
Our discontinued operations include charges related to general and product liability costs, including legal defense costs, and environmental remediation costs associatedFuture minimum operating lease payments under leases with our former Chemicals business. The 2017 results noted above primarily reflect charges and related insurance recoveries, including those associated with the Texas Brine matter,initial or remaining noncancelable lease terms in excess of one year, exclusive of mineral leases, as further discussed in Note 8.of December 31, 2018 were payable as follows:
|
|
|
|
|
|
in thousands |
|
|
Future Minimum Operating Lease Payments |
|
|
2019 | $ 47,979 |
|
2020 | 43,540 |
|
2021 | 35,732 |
|
2022 | 27,463 |
|
2023 | 19,707 |
|
Thereafter | 195,104 |
|
Total | $ 369,525 |
|
8
Note 3: Income Taxes
Our estimated annual effective tax rate (EAETR) is based on full-year expectations of pretax earnings, statutory tax rates, permanent differences between book and tax accounting such as percentage depletion, and tax planning alternatives available in the various jurisdictions in which we operate. For interim financial reporting, we calculate our quarterly income tax provision in accordance with the EAETR. Each quarter, we update our EAETR based on our revised full-year expectation of pretax earnings and calculate the income tax provision so that the year-to-date income tax provision reflects the EAETR. Significant judgment is required in determining our EAETR.
In the thirdfirst quarter of 2017,2019, we recorded income tax expense from continuing operations of $39,080,000$10,693,000 compared to an income tax expensebenefit from continuing operations of $49,803,000$4,903,000 in the thirdfirst quarter of 2016.2018. The increase in tax expense is related to an increase in earnings along with a decrease in our incomeshare-based compensation excess tax expense resulted largely from applying the statutory rate to the decrease in our pretax earnings.
For the first nine months of 2017, we recorded income tax expense from continuing operations of $81,557,000 compared to $91,575,000 for the first nine months of 2016. The decrease in our income tax expense resulted largely from applying the statutory rate to the decrease in our pretax earnings.benefits.
We recognize deferred tax assets and liabilities (which reflect our best assessment of the future taxes we will pay) based on the differences between the book basis and tax basis of assets and liabilities. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns while deferred tax liabilities represent items that will result in additional tax in future tax returns.
Each quarter we analyze the likelihood that our deferred tax assets will be realized. A valuation allowance is recorded if, based on the weight of all available positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that some portion, or all, of a deferred tax asset will not be realized.
7
Based on our third quarter 2017 analysis, At December 31, 2019, we believe it is more likely than not that we will realize the benefit of all our deferred tax assets with the exception of certainproject state net operating loss carryforwards. For December 31, 2017, we projectcarryforward deferred tax assets related to state net operating loss carryforwards of $53,751,000, of which $52,552,000$65,787,000 ($63,603,000 relates to Alabama.Alabama), against which we project to have a valuation allowance of $29,678,000 ($29,183,000 relates to Alabama). The Alabama net operating loss carryforward, if not utilized, would expire in years 2023 – 2029. Before 2015, this Alabama deferred tax asset carried a full valuation allowance. During 2015, we restructured our legal entities which resulted in a partial release of the valuation allowance in the amount of $4,655,000. During the fourth quarter of 2016, we achieved three consecutive years of positive Alabama adjusted earnings which resulted in an additional partial release of the valuation allowance in the amount of $4,791,000. We expect one additional significant partial release of this valuation allowance once we have returned to sustained profitability, which we project will occur in the fourth quarter of 2017 (“Alabama adjusted earnings” and “sustained profitability” are defined in our most recent Annual Report on Form 10-K).2032.
We recognize a tax benefit associated with a tax position when, in our judgment, it is more likely than not that the position will be sustained based upon the technical merits of the position. For a tax position that meets the more likely than not recognition threshold, we measure the income tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized. A liability is established for the unrecognized portion of any tax benefit. Our liability for unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation.
A summary of our deferred tax assets is included in Note 9 “Income Taxes” in our Annual Report on Form 10-K for the year ended December 31, 2016.2018.
Note 4: deferredrevenueS
Revenues are measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales and other taxes we collect are excluded from revenues. Costs to obtain and fulfill contracts (primarily asphalt construction paving contracts) are immaterial and are expensed as incurred when the expected amortization period is one year or less.
Total revenues are primarily derived from our product sales of aggregates (crushed stone, sand and gravel, sand and other aggregates), asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and service revenues related to our aggregates business, such as landfill tipping fees. Our total service revenues were $34,515,000 and $18,639,000 for the three months ended March 31, 2019 and 2018, respectively.
Our products typically are sold to private industry and not directly to governmental entities. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly funded construction, such as highways, airports and government buildings, relatively insignificant sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly-funded construction, our aggregates business is not directly subject to renegotiation of profits or termination of contracts with state or federal governments.
9
Our segment total revenues by geographic market for the three month periods ended March 31, 2019 and 2018 are disaggregated as follows:
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| ||
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|
| Three Months Ended March 31, 2019 | |||||||||||||
in thousands | Aggregates |
|
| Asphalt |
|
| Concrete |
|
| Calcium |
|
| Total |
| ||
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
East | $ 224,902 |
|
| $ 18,216 |
|
| $ 54,716 |
|
| $ 0 |
|
| $ 297,834 |
| ||
Gulf Coast | 496,633 |
|
| 37,053 |
|
| 16,505 |
|
| 1,951 |
|
| 552,142 |
| ||
West | 113,430 |
|
| 76,821 |
|
| 12,416 |
|
| 0 |
|
| 202,667 |
| ||
Segment sales | $ 834,965 |
|
| $ 132,090 |
|
| $ 83,637 |
|
| $ 1,951 |
|
| $ 1,052,643 |
| ||
Intersegment sales | (56,132) |
|
| 0 |
|
| 0 |
|
| 0 |
|
| (56,132) |
| ||
Total revenues | $ 778,833 |
|
| $ 132,090 |
|
| $ 83,637 |
|
| $ 1,951 |
|
| $ 996,511 |
|
|
|
|
|
|
|
|
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| ||
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| ||
|
|
| Three Months Ended March 31, 2018 | |||||||||||||
in thousands | Aggregates |
|
| Asphalt |
|
| Concrete |
|
| Calcium |
|
| Total |
| ||
Total Revenues by Geographic Market 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
East | $ 193,848 |
|
| $ 11,729 |
|
| $ 61,571 |
|
| $ 0 |
|
| $ 267,148 |
| ||
Gulf Coast | 383,941 |
|
| 14,644 |
|
| 25,199 |
|
| 1,942 |
|
| 425,726 |
| ||
West | 121,868 |
|
| 77,462 |
|
| 14,192 |
|
| 0 |
|
| 213,522 |
| ||
Segment sales | $ 699,657 |
|
| $ 103,835 |
|
| $ 100,962 |
|
| $ 1,942 |
|
| $ 906,396 |
| ||
Intersegment sales | (51,922) |
|
| 0 |
|
| 0 |
|
| 0 |
|
| (51,922) |
| ||
Total revenues | $ 647,735 |
|
| $ 103,835 |
|
| $ 100,962 |
|
| $ 1,942 |
|
| $ 854,474 |
|
1 | The geographic markets are defined by states/countries as follows: | |
East market — Arkansas, Delaware, Illinois, Kentucky, Maryland, North Carolina, Pennsylvania, Tennessee, Virginia, and Washington D.C. Gulf Coast market — Alabama, Florida, Georgia, Louisiana, Mexico, Mississippi, Oklahoma, South Carolina, Texas and the Bahamas West market — Arizona, California and New Mexico |
PRODUCT REVENUES
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs at a point in time when our aggregates, asphalt mix and ready-mixed concrete are shipped/delivered and control passes to the customer. Revenue for our products is recorded at the fixed invoice amount and is due by the 15th day of the following month — we do not offer discounts for early payment.Freight & delivery generally represents pass-through transportation we incur (including our administrative costs) and pay to third-party carriers to deliver our products to customers and are accounted for as a fulfillment activity. Likewise, the costs related to freight & delivery are included in cost of revenues.
Freight & delivery revenues are as follows:
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| Three Months Ended | ||||
| March 31 | ||||
in thousands | 2019 |
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| 2018 |
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Freight & Delivery Revenues |
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Total revenues | $ 996,511 |
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| $ 854,474 |
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Freight & delivery revenues 1 | (162,605) |
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| (129,690) |
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Total revenues excluding freight & delivery | $ 833,906 |
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| $ 724,784 |
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1 | Includes freight & delivery to remote distribution sites. |
10
CONSTRUCTION PAVING SERVICE REVENUES
Revenue from our asphalt construction paving business is recognized over time using the percentage-of-completion method under the cost approach. The percentage of completion is determined by costs incurred to date as a percentage of total costs estimated for the project. Under this approach, recognized contract revenue equals the total estimated contract revenue multiplied by the percentage of completion. Our construction contracts are unit priced and an account receivable is recorded for amounts invoiced based on actual units produced. Contract assets for estimated earnings in excess of billings, contract assets related to retainage provisions and contract liabilities for billings in excess of costs are immaterial. Variable consideration in our construction paving contracts is immaterial and consists of incentives and penalties based on the quality of work performed. Our construction paving contracts may contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from nine months to one year after project completion. Due to the nature of our construction paving projects, including contract owner inspections of the work during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties.
VOLUMETRIC PRODUCTION PAYMENT DEFERRED REVENUES
In 2013 and 2012, we sold a percentage interest in certain future aggregates production for net cash proceeds of $226,926,000. These transactions, structured as volumetric production payments (VPPs).
The VPPs::
§ | relate to eight quarries in Georgia and South Carolina |
§ | provide the purchaser solely with a nonoperating percentage interest in the subject quarries’ future |
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§ | contain no minimum annual or cumulative guarantees by us for production or sales volume, nor minimum sales price |
§ | are both volume and time limited (we expect the transactions will last approximately 25 years, limited by volume rather than time) |
We are the exclusive sales agent for, and transmit quarterly to the purchaser the proceeds from the sale of, the purchaser’s share of future aggregates production. Our consolidated total revenues exclude the sales of aggregates owned by the VPP purchaser.
We received net cash proceedsrevenue from the sale of the VPPspurchaser’s share of $153,282,000 and $73,644,000 foraggregates.
The proceeds we received from the 2013 and 2012 transactions, respectively. These proceedssale of the percentage interest were recorded as deferred revenue on the balance sheet and are amortized tosheet. We recognize revenue on a unit-of-sales basis over(as we sell the termspurchaser’s share of future production) relative to the volume limitations of the VPPs (expected to be approximately 25 years, limitedtransactions. Given the nature of the risks and potential rewards assumed by volume rather than time).the buyer, the transactions do not reflect financing activities.
Reconciliation of the VPP deferred revenue balances (current and noncurrent) is as follows:
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| Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| September 30 |
| March 31 | ||||||||||
in thousands | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Deferred Revenue |
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Balance at beginning of period | $ 203,100 |
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| $ 210,200 |
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| $ 206,468 |
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| $ 214,060 |
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Amortization of deferred revenue | (1,903) |
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| (2,068) |
|
| (5,271) |
|
| (5,928) |
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Balance at beginning of year | $ 192,783 |
|
| $ 199,556 |
| |||||||||||
Revenue recognized from deferred revenue | (1,652) |
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| (1,355) |
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Balance at end of period | $ 201,197 |
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| $ 208,132 |
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| $ 201,197 |
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| $ 208,132 |
| $ 191,131 |
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| $ 198,201 |
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Based on expected sales from the specified quarries, we expect to recognize approximately $8,080,000$7,500,000 of deferred revenue as income during the 12-month period ending September 30, 2018March 31, 2020 (reflected in other current liabilities in our 2017March 31, 2019 Condensed Consolidated Balance Sheet).
811
Note 5: Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as described below:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs that are derived principally from or corroborated by observable market data
Level 3: Inputs that are unobservable and significant to the overall fair value measurement
Our assets subject to fair value measurement on a recurring basis are summarized below:
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| Level 1 Fair Value | Level 1 Fair Value | ||||||||||||||
| September 30 |
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| December 31 |
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| September 30 |
| March 31 |
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| December 31 |
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| March 31 |
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in thousands | 2017 |
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| 2016 |
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| 2016 |
| 2019 |
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| 2018 |
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| 2018 |
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Fair Value Recurring |
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Rabbi Trust |
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Mutual funds | $ 7,431 |
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| $ 6,883 |
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| $ 6,601 |
| $ 20,953 |
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| $ 19,164 |
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| $ 19,412 |
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Equities | 12,825 |
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| 10,033 |
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| 8,574 |
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Total | $ 20,256 |
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| $ 16,916 |
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| $ 15,175 |
| $ 20,953 |
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| $ 19,164 |
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| $ 19,412 |
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| Level 2 Fair Value | Level 2 Fair Value | ||||||||||||||
| September 30 |
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| December 31 |
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| September 30 |
| March 31 |
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| December 31 |
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| March 31 |
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in thousands | 2017 |
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| 2016 |
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| 2016 |
| 2019 |
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| 2018 |
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| 2018 |
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Fair Value Recurring |
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Rabbi Trust |
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Money market mutual fund | $ 386 |
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| $ 1,705 |
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| $ 2,144 |
| $ 490 |
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| $ 1,015 |
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| $ 2,738 |
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Total | $ 386 |
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| $ 1,705 |
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| $ 2,144 |
| $ 490 |
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| $ 1,015 |
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| $ 2,738 |
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We have two Rabbi Trusts for the purpose of providing a level of security for the employee nonqualified retirement and deferred compensation plans and for the directors' nonqualified deferred compensation plans. The fair values of these investments are estimated using a market approach. The Level 1 investments include mutual funds and equity securities for which quoted prices in active markets are available. Level 2 investments are stated at estimated fair value based on the underlying investments in the fund (short-term, highly liquid assets in commercial paper, short-term bonds and certificates of deposit).
Net gains (losses) of the Rabbi Trust investments were $1,950,000$1,863,000 and $1,379,000$(776,000) for the ninethree months ended September 30, 2017March 31, 2019 and 2016,2018, respectively. The portions of the net gains (losses) related to investments still held by the Rabbi Trusts at September 30, 2017March 31, 2019 and 20162018 were $1,424,000$1,905,000 and $273,000,$(787,000), respectively.
The carrying values of our cash equivalents, restricted cash, accounts and notes receivable, short-term debt, trade payables and accruals, and all other current liabilities approximate their fair values because of the short-term nature of these instruments. Additional disclosures for derivative instruments and interest-bearing debt are presented in Notes 6 and 7, respectively.
9
Assets subject to fair value measurement on a nonrecurring basis are summarized below:
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| Period ended September 30, 2017 |
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| Period ended September 30, 2016 |
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| Impairment |
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| Impairment |
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in thousands | Level 2 |
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| Charges |
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| Level 2 |
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| Charges |
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Fair Value Nonrecurring |
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Property, plant & equipment, net | $ 0 |
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| $ 0 |
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| $ 0 |
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| $ 1,359 |
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Other intangible assets, net | 0 |
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| 0 |
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| 0 |
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| 8,180 |
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Other assets | 0 |
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| 0 |
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| 0 |
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| 967 |
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Total | $ 0 |
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| $ 0 |
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| $ 0 |
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| $ 10,506 |
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We recorded $10,506,000 of losses on impairment of long-lived assets for the nine months ended September 30, 2016, reducing the carrying value of these Aggregates segment assets to their estimated fair value of $0. Fair value was estimated using a market approach (observed transactions involving comparable assets in similar locations).
Note 6: Derivative Instruments
During the normal course of operations, we are exposed to market risks including interest rates, foreign currency exchange rates and commodity prices. From time to time, and consistent with our risk management policies, we use derivative instruments to balance the cost and risk of such exposure. We do not use derivative instruments for trading or other speculative purposes.
The accounting for gainsIn 2007 and losses that result from changes in the fair value of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationship. The interest rate lock agreements described below were designated as cash flow hedges. The changes in fair value of our cash flow hedges are recorded in accumulated other comprehensive income (AOCI) and are reclassified into interest expense in the same period the hedged items affect earnings.
CASH FLOW HEDGES
During 2007,2018, we entered into fifteen forward starting interest rate locks on $1,500,000,000 of future debt issuances to hedge the risk of higher interest rates. Upon the 2007 and 2008 issuances of the related fixed-rate debt, underlyingThese interest rates were lower than the rate locks and we terminated and settledwere designated as cash flow hedges. The gain/loss upon settlement of these forward starting locks for cash payments of $89,777,000. This amount was booked to AOCIinterest rate hedges is deferred (recorded in AOCI) and is being amortized to interest expense over the term of the related debt.
12
This amortization was reflected in the accompanying Condensed Consolidated Statements of Comprehensive Income as follows:
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| Three Months Ended |
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| Nine Months Ended |
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| Three Months Ended | ||||||||||
| Location on |
| September 30 |
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| September 30 |
| Location on |
| March 31 | ||||||||||
in thousands | Statement |
| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| Statement |
| 2019 |
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| 2018 |
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Cash Flow Hedges |
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Interest Rate Hedges |
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Loss reclassified from AOCI | Interest |
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| Interest |
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(effective portion) | expense |
| $ (1,955) |
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| $ (507) |
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| $ (3,022) |
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| $ (1,490) |
| expense |
| $ (75) |
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| $ (89) |
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The 2017 losses reclassified from AOCI include the acceleration of deferred losses in the amount of $1,405,000 referable to the July debt purchases as described in Note 7.
For the 12-month period ending September 30, 2018,March 31, 2020, we estimate that $344,000$314,000 of the pretax loss in AOCI will be reclassified to earnings.interest expense.
10
Note 7: Debt
Debt is detailed as follows:
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| Effective |
| September 30 |
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| December 31 |
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| September 30 |
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| Effective |
| March 31 |
| December 31 |
|
| March 31 |
| |
in thousands | in thousands | Interest Rates |
| 2017 |
|
| 2016 |
|
| 2016 |
| in thousands | Interest Rates |
| 2019 |
| 2018 |
|
| 2018 |
| |||
Short-term Debt | Short-term Debt |
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| Short-term Debt |
|
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|
|
|
|
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| ||
Bank line of credit expires 2021 1, 2, 3 | n/a |
| $ 0 |
|
| $ 0 |
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| $ 0 |
| ||||||||||||||
Bank line of credit expires 2021 1, 2 | Bank line of credit expires 2021 1, 2 | 1.25% |
| $ 178,500 |
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| $ 133,000 |
|
| $ 200,000 |
| |||||||||||||
Total short-term debt | Total short-term debt |
|
| $ 0 |
|
| $ 0 |
|
| $ 0 |
| Total short-term debt |
|
| $ 178,500 |
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| $ 133,000 |
|
| $ 200,000 |
| ||
Long-term Debt | Long-term Debt |
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| Long-term Debt |
|
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|
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| ||
Bank line of credit expires 2021 1, 2, 3 | n/a |
| $ 0 |
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| $ 235,000 |
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| $ 235,000 |
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7.00% notes due 2018 | n/a |
| 0 |
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| 272,512 |
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| 272,512 |
| ||||||||||||||
10.375% notes due 2018 | n/a |
| 0 |
|
| 250,000 |
|
| 250,000 |
| ||||||||||||||
Floating-rate notes due 2020 | Floating-rate notes due 2020 | 2.13% |
| 250,000 |
|
| 0 |
|
| 0 |
| Floating-rate notes due 2020 | 3.61% |
| $ 250,000 |
|
| $ 250,000 |
|
| $ 250,000 |
| ||
7.50% notes due 2021 | 7.75% |
| 600,000 |
|
| 600,000 |
|
| 600,000 |
| ||||||||||||||
Floating-rate notes due 2021 | Floating-rate notes due 2021 | 3.59% |
| 500,000 |
|
| 500,000 |
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| 500,000 |
| |||||||||||||
8.85% notes due 2021 | 8.85% notes due 2021 | 8.88% |
| 6,000 |
|
| 6,000 |
|
| 6,000 |
| 8.85% notes due 2021 | 8.88% |
| 6,000 |
|
| 6,000 |
|
| 6,000 |
| ||
Term loan due 2021 2, 3 | 2.49% |
| 250,000 |
|
| 0 |
|
| 0 |
| ||||||||||||||
4.50% notes due 2025 | 4.50% notes due 2025 | 4.65% |
| 400,000 |
|
| 400,000 |
|
| 400,000 |
| 4.50% notes due 2025 | 4.65% |
| 400,000 |
|
| 400,000 |
|
| 400,000 |
| ||
3.90% notes due 2027 | 3.90% notes due 2027 | 4.00% |
| 400,000 |
|
| 0 |
|
| 0 |
| 3.90% notes due 2027 | 4.00% |
| 400,000 |
|
| 400,000 |
|
| 400,000 |
| ||
7.15% notes due 2037 | 7.15% notes due 2037 | 8.05% |
| 240,188 |
|
| 240,188 |
|
| 240,188 |
| 7.15% notes due 2037 | 8.05% |
| 129,239 |
|
| 129,239 |
|
| 129,239 |
| ||
4.50% notes due 2047 | 4.50% notes due 2047 | 4.59% |
| 700,000 |
|
| 0 |
|
| 0 |
| 4.50% notes due 2047 | 4.59% |
| 700,000 |
|
| 700,000 |
|
| 700,000 |
| ||
Other notes 3 | 6.31% |
| 353 |
|
| 365 |
|
| 484 |
| ||||||||||||||
4.70% notes due 2048 | 4.70% notes due 2048 | 5.42% |
| 460,949 |
|
| 460,949 |
|
| 460,949 |
| |||||||||||||
Other notes | Other notes | 6.46% |
| 202 |
|
| 208 |
|
| 224 |
| |||||||||||||
Total long-term debt - face value | Total long-term debt - face value |
|
| $ 2,846,541 |
|
| $ 2,004,065 |
|
| $ 2,004,184 |
| Total long-term debt - face value |
|
| $ 2,846,390 |
|
| $ 2,846,396 |
|
| $ 2,846,412 |
| ||
Unamortized discounts and debt issuance costs | Unamortized discounts and debt issuance costs |
|
| (31,748) |
|
| (21,176) |
|
| (20,414) |
| Unamortized discounts and debt issuance costs |
|
| (65,777) |
|
| (67,016) |
|
| (70,703) |
| ||
Total long-term debt - book value | Total long-term debt - book value |
|
| $ 2,814,793 |
|
| $ 1,982,889 |
|
| $ 1,983,770 |
| Total long-term debt - book value |
|
| $ 2,780,613 |
|
| $ 2,779,380 |
|
| $ 2,775,709 |
| ||
Less current maturities | Less current maturities |
|
| 4,827 |
|
| 138 |
|
| 131 |
| Less current maturities |
|
| 24 |
|
| 23 |
|
| 22 |
| ||
Total long-term debt - reported value | Total long-term debt - reported value |
|
| $ 2,809,966 |
|
| $ 1,982,751 |
|
| $ 1,983,639 |
| Total long-term debt - reported value |
|
| $ 2,780,589 |
|
| $ 2,779,357 |
|
| $ 2,775,687 |
| ||
Estimated fair value of long-term debt | Estimated fair value of long-term debt |
|
| $ 3,068,236 |
|
| $ 2,243,213 |
|
| $ 2,305,065 |
| Estimated fair value of long-term debt |
|
| $ 2,775,511 |
|
| $ 2,695,802 |
|
| $ 2,843,943 |
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1 | Borrowings on the bank line of credit are classified as short-term debt if we intend to repay within twelve months and as long-term debt |
2 | The effective interest rate |
|
Our total long-term debt - book value is presented in the table above net of unamortized discounts/premiums and unamortized deferred debt issuance costs. Discounts/premiumsDiscounts and debt issuance costs are amortized using the effective interest method over the terms of the respective notes resulting in $4,473,000$1,239,000 and $1,473,000 of net interest expense for these items for the ninethree months ended September 30, 2017.
The estimated fair value of our debt presented in the table above was determined by: (1) averaging several asking price quotes for the publicly traded notesMarch 31, 2019 and (2) assuming par value for the remainder of the debt. The fair value estimates for the publicly traded notes were based on Level 2 information (as defined in Note 5) as of their respective balance sheet dates.2018, respectively.
LINE OF CREDIT
In December 2016, among other favorable changes, we extended the maturity date of ourOur unsecured $750,000,000 line of credit from June 2020 tomatures December 2021. The credit agreement2021 and contains affirmative, negative and financial covenants customary for an unsecured investment-grade facility. The primary negative covenant limits our ability to incur secured debt. The financial covenants are: (1) a maximum ratio of debt to EBITDA of 3.5:1 (upon certain acquisitions, the maximum ratio can be 3.75:1 for three quarters), and (2) a minimum ratio of EBITDA to net cash interest expense of 3.0:1. As of September 30, 2017,March 31, 2019, we were in compliance with the line of credit covenants.
1113
Borrowings on our line of credit are classified as short-term debt if we intend to repay within twelve months and as long-term debt if we have the intent and ability to extend repayment beyond twelve months. Borrowings bear interest, at our option, at either LIBOR plus a credit margin ranging from 1.00% to 1.75%, or SunTrust Bank’s base rate (generally, its prime rate) plus a credit margin ranging from 0.00% to 0.75%. The credit margin for both LIBOR and base rate borrowings is determined by our credit ratings. Standby letters of credit, which are issued under the line of credit and reduce availability, are charged a fee equal to the credit margin for LIBOR borrowings plus 0.175%. We also pay a commitment fee on the daily average unused amount of the line of credit that ranges from 0.10% to 0.25% determined by our credit ratings. As of September 30, 2017,March 31, 2019, the credit margin for LIBOR borrowings was 1.25%, the credit margin for base rate borrowings was 0.25%, and the commitment fee for the unused amount was 0.15%.
As of September 30, 2017,March 31, 2019, our available borrowing capacity was $706,712,000.$516,970,000. Utilization of the borrowing capacity was as follows:
§ |
|
§ | $ |
TERM DEBT
All of our $2,846,390,000 (face value) of term debt is unsecured. $2,596,188,000$2,846,188,000 of such debt is governed by twothree essentially identical indentures that contain customary investment-grade type covenants. The primary covenant in bothall three indentures limits the amount of secured debt we may incur without ratably securing such debt. $250,000,000 of such debt is governed, as described below, by the same credit agreement that governs our line of credit. As of September 30, 2017,March 31, 2019, we were in compliance with all term debt covenants.
In June 2017,December 2018, we issued $1,000,000,000completed an exchange offer in which all of debt composedthe $460,949,000 of three issuances4.70% senior unregistered notes due 2048 (issued in February 2018 and March 2018 as follows: (1) $700,000,000described below) were exchanged for new registered notes of 4.50%like principal amount and like denomination as the unregistered notes, with substantially identical terms. We did not receive any proceeds from the issuance of the new notes.
In March 2018, we early retired via exchange offer $110,949,000 of the $240,188,000 7.15% senior notes due June 2047, (2) $50,000,0002037 for: (1) a like amount of 3.90% senior notes due April 20272048 (these notes are a further issuance of, and form a single series with, the 3.90%$350,000,000 of 4.70% senior notes due 2048 issued in February 2018 as described below) and (2) $38,164,000 of cash. The cash payment primarily reflects the trading price of the retired notes relative to par and will be amortized to interest expense over the term of the notes due 2048. We recognized transaction costs of $1,314,000 with this early retirement.
In February 2018, we issued $350,000,000 of 4.70% senior notes due 2048(these notes now total $460,949,000 including the notes issued in March 2017),as described above) and (3) $250,000,000$500,000,000 of floating-rate seniornotes due June 2020. These issuances resulted in2021. Total proceeds of $989,512,000$846,029,000 (net of original issue discounts/premiums, underwriter feesdiscounts, transaction costs and other transaction costs). The proceeds will be used to partially finance the pending acquisition of Aggregates USA, LLC as described in Note 16 andan interest rate derivative settlement gain), together with cash on hand, were used to early retireretire/repay without penalty or premium: (1) the notes$350,000,000 term loan due in 2018, ($272,512,000 @ 7.00%(2) the $250,000,000 term loan due 2021, and (3) the $250,000,000 @ 10.375%). This early retirement was completed in July at a costbank line of $565,560,000 including a $43,020,000 premium above the principal amount of the notes and transaction costs of $28,000. As a result, in the third quarter, wecredit borrowings. We recognized $3,029,000 of net noncash expense associatedof $203,000 with the acceleration of unamortized discounts, deferred transaction costs.
In January 2018, we early retired via redemption the remaining $35,111,000 of the 7.50% senior notes due 2021 at a cost of $40,719,000 including a premium of $5,608,000. Additionally, we recognized noncash expense of $263,000 with the acceleration of unamortized deferred transaction costs.
As a result of the first quarter 2018 early debt issuanceretirements described above, we recognized premiums of $5,608,000, transaction costs of $1,314,000 and noncash expense (acceleration of unamortized deferred interest rate derivative settlement losses.transaction costs) of $466,000. The combined charge of $46,077,000$7,388,000 was a component of interest expense for the three and nine months ended September 30, 2017.
In June 2017, we drew the full $250,000,000 on the unsecured delayed draw term loan entered into in December 2016. These funds were used to repay the $235,000,000 borrowed on our linefirst quarter of credit and for general corporate purposes. Borrowings bear interest in the same manner as the line of credit. The term loan principal will be repaid quarterly beginning March 2018 as follows: quarters 5 - 8 @ $1,562,500/quarter; 9 - 12 @ $3,125,000/quarter; 13 - 19 @ $4,687,500/quarter and $198,437,500 for quarter 20 (December 2021). The term loan may be prepaid at any time without penalty. It is provided by the same group of banks that provides our line of credit, and is governed by the same credit agreement as the line of credit. As such, it is subject to the same affirmative, negative, and financial covenants.
In March 2017, we issued $350,000,000 of 3.90% senior notes due April 2027 for proceeds of $345,450,000 (net of original issue discounts, underwriter fees and other transaction costs). The proceeds were used for general corporate purposes. This series of notes now totals $400,000,000 due to the additional $50,000,000 of notes issued in June (as described above).2018.
1214
STANDBY LETTERS OF CREDIT
We provide, in the normal course of business, certain third-party beneficiaries with standby letters of credit to support our obligations to pay or perform according to the requirements of an underlying agreement. Such letters of credit typically have an initial term of one year, typically renew automatically, and can only be modified or cancelledcanceled with the approval of the beneficiary. All of our standby letters of credit are issued by banks that participate in our $750,000,000 line of credit, and reduce the borrowing capacity thereunder. Our standby letters of credit as of September 30, 2017March 31, 2019 are summarized by purpose in the table below:
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in thousands |
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Standby Letters of Credit |
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Risk management insurance | $ |
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Reclamation/restoration requirements |
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Total | $ |
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Note 8: Commitments and Contingencies
As summarized by purpose directly above in Note 7, our standby letters of credit totaled $43,288,000$54,530,000 as of September 30, 2017.March 31, 2019.
As described in Note 2, our nonmineral operating lease liabilities totaled $434,681,000 as of March 31, 2019.
As described in Note 9, our asset retirement obligations totaled $222,888,000$225,186,000 as of September 30, 2017.March 31, 2019.
LITIGATION AND ENVIRONMENTAL MATTERS
We are subject to occasional governmental proceedings and orders pertaining to occupational safety and health or to protection of the environment, such as proceedings or orders relating to noise abatement, air emissions or water discharges. As part of our continuing program of stewardship in safety, health and environmental matters, we have been able to resolve such proceedings and to comply with such orders without any material adverse effects on our business.
We have received notices from the United States Environmental Protection Agency (EPA) or similar state or local agencies that we are considered a potentially responsible party (PRP) at a limited number of sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) or similar state and local environmental laws. Generally, we share the cost of remediation at these sites with other PRPs or alleged PRPs in accordance with negotiated or prescribed allocations. There is inherent uncertainty in determining the potential cost of remediating a given site and in determining any individual party's share in that cost. As a result, estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, remediation methods, other PRPs and their probable level of involvement, and actions by or against governmental agencies or private parties.
We have reviewed the nature and extent of our involvement at each Superfund site, as well as potential obligations arising under other federal, state and local environmental laws. While ultimate resolution and financial liability is uncertain at a number of the sites, in our opinion based on information currently available, the ultimate resolution of claims and assessments related to these sites will not have a material effect on our consolidated results of operations, financial position or cash flows, although amounts recorded in a given period could be material to our results of operations or cash flows for that period.
We are a defendant in various lawsuits in the ordinary course of business. It is not possible to determine with precision the outcome, or the amount of liability, if any, under these lawsuits, especially where the cases involve possible jury trials with as yet undetermined jury panels.
1315
In addition to these lawsuits in which we are involved in the ordinary course of business, certain other material legal proceedings are more specifically described below:
■Lower Passaic River Study Area (DISCONTINUED OPERATIONS) — The Lower Passaic River Study Area is part of the Diamond Shamrock Superfund Site in New Jersey. Vulcan and approximately 70 other companies are parties (collectively the Cooperating Parties Group, CPG) to a May 2007 Administrative Order on Consent (AOC) with the EPA to perform a Remedial Investigation/Feasibility Study (draft RI/FS) of the lower 17 miles of the Passaic River (River). The draft RI/FS was submitted recommending a targeted hot spot remedy; however, the EPA issued a record of decision (ROD) in March 2016 that calls for a bank-to-bank dredging remedy for the lower 8 miles of the River. The EPA estimates that the cost of implementing this proposal is $1.38 billion. In September 2016, the EPA entered into an Administrative Settlement Agreement and Order on Consent with Occidental Chemical Corporation (Occidental) in which Occidental agreed to undertake the remedial design for this bank-to-bank dredging remedy, and to reimburse the United States for certain response costs. In August 2017, the EPA informed certain members of the CPG, including Vulcan, that it planned to use the services of a third-party allocator with the expectation of offering cash-out settlements to some parties in connection with the bank-to-bank remedy. This voluntary allocation process is intended to establish an impartial third-party expert recommendation that may be considered by the government and the participants as the basis of possible settlements. We have begun participating in this voluntary allocation process, which is likely to take several years. In July 2018, Vulcan, along with more than one hundred other defendants, was sued by Occidental in United States District Court for the District of New Jersey, Newark Vicinage. Occidental is seeking cost recovery and contribution under CERCLA. It is unknown at this time whether the filing of the Occidental lawsuit will impact the EPA allocation process. In October 2018, the EPA ordered the CPG to prepare a streamlined feasibility study specifically for the upper 9 miles of the River. This directive is focused on dioxin and covers the remaining portion of the River not included in the EPA’s March 2016 ROD. |
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Efforts to remediate the River have been underway for many years and have involved hundreds of entities that have had operations on or near the River at some point during the past several decades. We formerly owned a chemicals operation near the mouth of the River, which was sold in 1974. The major risk drivers in the River have been identified as dioxins, PCBs, DDx and mercury. We did not manufacture any of these risk drivers and have no evidence that any of these were discharged into the River by Vulcan.
The AOC does not obligate us to fund or perform the remedial action contemplated by either the draft RI/FS or the ROD. Furthermore, the parties who will participate in funding the remediation and their respective allocations have not been determined. We do not agree that a bank-to-bank remedy is warranted, and we are not obligated to fund any of the remedial action at this time; nevertheless, we previously estimated the cost to be incurred by us as a potential participant in a bank-to-bank dredging remedy and recorded an immaterial loss for this matter in 2015.
| ■TEXAS BRINE MATTER (DISCONTINUED OPERATIONS) — During the operation of its former Chemicals Division, Vulcan secured the right to mine salt out of an underground salt dome formation in Assumption Parish, Louisiana from 1976 - 2005. Throughout that period and for all times thereafter, the Texas Brine Company (Texas Brine) was the operator contracted by Vulcan (and later Occidental) to mine and deliver the salt. We sold our Chemicals Division in 2005 and transferred our rights and interests related to the salt and mining operations to the purchaser, a subsidiary of Occidental, and we have had no association with the leased premises or Texas Brine since that time. In August 2012, a sinkhole developed in the vicinity of the Texas Brine mining operations, and numerous lawsuits were filed in state court in Assumption Parish, Louisiana. Other lawsuits, including class action litigation, were also filed in federal court before the Eastern District of Louisiana in New Orleans. |
There are numerous defendants, including Texas Brine and Occidental, to the litigation in state and federal court. Vulcan was first brought into the litigation as a third-party defendant in August 2013 by Texas Brine. We have since been added as a direct and third-party defendant by other parties, including a direct claim by the statestate of Louisiana. Damage categories encompassed within the litigation include individual plaintiffs’ claims for property damage, a claim by the state of Louisianaand Texas Brine for response costs and civil penalties, claims by Texas Brine for response costs and lost profits,, claims for physical damages to nearby oil and gas pipelines and storage facilities (pipelines), and business interruption claims.
16
In addition to the plaintiffs’ claims, we were also sued for contractual indemnity and comparative fault by both Texas Brine and Occidental. It is alleged that the sinkhole was caused, in whole or in part, by our negligent actions or failure to act. It is also alleged that we breached the salt lease with Occidental, as well as an operating agreement and related contracts with Texas Brine; that we are strictly liable for certain property damages in our capacity as a former lessee of the salt lease; and that we violated certain covenants and conditions in the agreement under which we sold our Chemicals Division to Occidental. We have likewise made claims for contractual indemnity and on a basis of comparative fault against Texas Brine and Occidental. Vulcan and Occidental have since dismissed all of their claims against one another. Texas Brine has claims that remain pending against Vulcan and against Occidental. Discovery remains ongoing in various cases.
In December 2016, we settled with plaintiffs in one of the cases involving individual property damages. During the first nine months of 2017, we settled with the plaintiffs in the cases involving physical damages to pipelines. Our insurers have funded the settlements in excess of our self-insured retention amount. Each of the pipeline plaintiffs signed a release in favor of Vulcan and agreed that we would not be responsible to the pipelines for any amount beyond the settlement amount. A bench trial (judge only) began in September 2017 and ended in October 2017 in two of the three pipeline cases. The trial was limited in scope to the allocation of comparative fault or liability for causing the sinkhole, with a damages phase of the trial to be held at a later date. Vulcan participated in the trial, as it encompassed cross-party and third-party claims against us. The court ordered post-trial briefs to be filed early NovemberIn December 2017, and scheduled closing arguments for later that month. We do not know at this time when the judge will issue his ruling.issued a ruling on the allocation of fault among the three defendants as follows: Occidental 50%, Texas Brine 35% and Vulcan 15%. This ruling has been appealed by the parties.
WWe have settled all but two outstanding cases and our insurers have funded these settlements in excess of our self-insured retention amount. The remaining cases involve Texas Brine and the state of Louisiana. Discovery remains ongoing and we cannot reasonably estimate a range of liability pertaining to thethese open cases at this time.time.
■NEW YORK WATER DISTRICT CASES (DISCONTINUED OPERATIONS) — During the operation of our former Chemicals Division, which was divested to Occidental in 2005, Vulcan manufactured a chlorinated solvent known as 1,1,1-trichloroethane. We are a defendant in 14 cases allegedly involving 1,1,1-trichloroethane. All of the cases are filed in the United States District Court for the Eastern District of New York. According to the various complaints, the plaintiffs are public drinking water providers who serve customers in Nassau County and Suffolk County, New York. It is alleged that our 1,1,1-trichloroethane was stabilized with 1,4-dioxane and that various water wells of the plaintiffs are contaminated with 1,4-dioxane. The cases, against us and other defendants, have been filed by the following plaintiffs: Albertson Water District, Bethpage Water District, Carle Place Water District, Garden City Park Water District, Jericho Water District, Manhasset-Lakeview Water District, Oyster Bay Water District, Plainview Water District, Port Washington Water District, Roslyn Water District, South Farmingdale Water District, Suffolk County Water Authority, Water Authority of Great Neck North, and the West Hempstead Water District (collectively, the Cases). The plaintiffs are seeking unspecified compensatory and punitive damages. We will vigorously defend the Cases. At this time we cannot determine the likelihood or reasonably estimate a range of loss, if any, pertaining to the Cases.
| ■HEWITT LANDFILL MATTER (SUPERFUND SITE) — |
Operation of the on-site pilot-scale treatment system began in January 2017, and was completed in April 2017. With completion of the pilot testing and other investigative work worto date,k, we submitted an amendment to the IRAP (AIRAP) to RWQCB in August 2017 proposing the use of a 300 gallon per minute pump, treat and reinjection system. Based onIn December 2017, we submitted an addendum to the preliminary designAIRAP, incorporating new data acquired since the prior submission. In February 2018, the AIRAP was approved by RWQCB. As a result of this system,approval, we accrued $14,216,000 have begun to implement the on-site source control activities described in the second quarterAIRAP. In 2018, we accrued a total of 2017 (reflected in other operating expense).We are currently responding$19,032,000 (Q3 - $8,640,000 and Q4 - $10,392,000) for the on-site remedy, bringing the life-to-date total to comments and planning for implementation of the AIRAP.$34,271,000.
We are also engaged in an ongoing dialogue with the EPA, the Los Angeles Department of Water and Power, and other stakeholders regarding the potential contribution of the Hewitt Landfill to groundwater contamination in the North Hollywood Operable Unit (NHOU) of the San Fernando Valley Superfund Site. We are gathering and analyzing data and developing technical information to determine the extent of possible contribution by the Hewitt Landfill to the groundwater contamination in the area. This work is also intended to assist in identification of other PRPs that may have contributed to groundwater contamination in the area.
In July 2016, the17
The EPA sent us a letter requesting that we enter into an AOC for remedial design work at the NHOU. Weand Vulcan entered into an AOC and Statement of Work with the EPA inhaving an effective date of September 2017 for the design of two extraction wells south of the Hewitt Site to protect the North Hollywood West (NHW) well field. The AOC providesIn November 2017, we submitted a Pre-Design Investigation (PDI) Work Plan to the EPA, which sets forth the activities and schedule for Vulcan to undertake a preliminaryour evaluation of the appropriateness of theneed for a two-well remedy. Estimated costsThese activities were completed between the first and third quarters of 2018, and in December 2018 we submitted a PDI Evaluation Report to comply with this AOC are immaterialthe EPA. The PDI Evaluation Report summarizes data collection activities conducted pursuant to the PDI Work Plan, and have been accrued. Until the remedial design workprovides model updates and evaluation of remediation alternatives to protect the two-well remedyNHW and Rinaldi-Toluca well fields from 1,4-dioxane from the Hewitt Site. Vulcan has not yet received comments or feedback from the EPA or the Regional Board on the report. Until the EPA’s review of the PDI Evaluation Report is complete and an effective remedy can be agreed upon, we cannot identify an appropriate remedial action oraction. Given the various stakeholders involved and the uncertainties relating to issues such as testing, monitoring, and remediation alternatives, we cannot reasonably estimate a loss pertaining to this matter.
■NAFTA ARBITRATION — In September 2018, our subsidiary Legacy Vulcan, LLC (Legacy Vulcan), on its own behalf, and on behalf of our Mexican subsidiary Calizas Industriales del Carmen, S.A. de C.V. (Calica), served the United Mexican States (Mexico) a Notice of Intent to Submit a Claim to Arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA). Our NAFTA claim relates to the treatment of a portion of our quarrying operations in the State of Quintana Roo, in Mexico’s Yucatan Peninsula, arising from, among other measures, Mexico’s failure to comply with a legally binding zoning agreement and relates to other unfair, arbitrary and capricious actions by Mexico’s environmental enforcement agency. We assert that these actions are in breach of Mexico’s international obligations under NAFTA and international law.
As required by Article 1118 of NAFTA, we sought to settle this dispute with Mexico through consultations. Notwithstanding our good faith efforts to resolve the dispute amicably, we were unable to do so and filed a Request for Arbitration, which we filed with the International Centre for Settlement of Investment Disputes (ICSID) in December 2018. In January 2019, ICSID registered our Request for Arbitration.
We expect that the NAFTA arbitration will take at least two years to be concluded. At this time, there can be no assurance whether we will be successful in our NAFTA claim, and we cannot quantify the amount we may recover, if any, under this arbitration proceeding if we were successful.
It is not possible to predict with certainty the ultimate outcome of these and other legal proceedings in which we are involved and a number of factors, including developments in ongoing discovery or adverse rulings, or the verdict of a particular jury, could cause actual losses to differ materially from accrued costs. No liability was recorded for claims and litigation for which a loss was determined to be only reasonably possible or for which a loss could not be reasonably estimated. Legal costs incurred in defense of lawsuits are expensed as incurred. In addition, losses on certain claims and litigation described above may be subject to limitations on a per occurrence basis by excess insurance, as described in our most recent Annual Report on Form 10-K.
1518
Note 9: Asset Retirement Obligations
Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.
Recognition of a liability for an ARO is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the ARO is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.
We record all AROs for which we have legal obligations for land reclamation at estimated fair value. Essentially all theseThese AROs relate to our underlying land parcels, including both owned properties and mineral leases. For the three and nine month periods ended September 30,March 31, we recognized ARO operating costs related to accretion of the liabilities and depreciation of the assets as follows:
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| Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| March 31 | ||||||||||
in thousands | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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ARO Operating Costs |
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Accretion | $ 2,857 |
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| $ 2,692 |
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| $ 8,620 |
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| $ 8,163 |
| $ 2,733 |
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| $ 2,684 |
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Depreciation | 1,494 |
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| 1,469 |
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| 4,741 |
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| 4,783 |
| 1,841 |
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| 1,337 |
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Total | $ 4,351 |
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| $ 4,161 |
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| $ 13,361 |
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| $ 12,946 |
| $ 4,574 |
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| $ 4,021 |
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ARO operating costs are reported in cost of revenues. AROs are reported within other noncurrent liabilities in our accompanying Condensed Consolidated Balance Sheets.
Reconciliations of the carrying amounts of our AROs are as follows:
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| Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| March 31 | ||||||||||
in thousands | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Asset Retirement Obligations |
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Balance at beginning of period | $ 223,953 |
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| $ 217,043 |
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| $ 223,872 |
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| $ 226,594 |
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Balance at beginning of year | $ 225,726 |
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| $ 218,117 |
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Liabilities incurred | 731 |
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| 0 |
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| 1,066 |
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| 505 |
| 0 |
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| 0 |
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Liabilities settled | (5,263) |
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| (3,937) |
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| (15,739) |
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| (14,256) |
| (3,578) |
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| (6,021) |
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Accretion expense | 2,857 |
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| 2,692 |
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| 8,620 |
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| 8,163 |
| 2,733 |
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| 2,684 |
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Revisions, net | 610 |
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| (1,112) |
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| 5,069 |
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| (6,320) |
| 305 |
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| (71) |
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Balance at end of period | $ 222,888 |
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| $ 214,686 |
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| $ 222,888 |
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| $ 214,686 |
| $ 225,186 |
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| $ 214,709 |
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ARO liabilities settled during the first ninethree months of 20172019 and 20162018 include $8,117,000$1,266,000 and $10,373,000,$4,402,000, respectively, of reclamation activities required under a development agreement and conditional use permits at two adjacent aggregates sites on owned property in Southern California. The reclamation required under the reclamation agreement will result in the restoration and development of 90 acres of previously mined property to conditions suitable for retail and commercial development.
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Note 10: Benefit Plans
PENSION PLANS
We sponsor three qualified, noncontributory defined benefit pension plans. These plans cover substantially all employees hired before July 2007, other than those covered by union-administered plans. Normal retirement age is 65, but the plans contain provisions for earlier retirement. Benefits for the Salaried Plan and the Chemicals Hourly Plan are generally based on salaries or wages and years of service; the Construction Materials Hourly Plan provides benefits equal to a flat dollar amount for each year of service. In addition to these qualified plans, we sponsor three unfunded, nonqualified pension plans.
In 2005, benefit accruals for our Chemicals Hourly Plan participants ceased upon the sale of our Chemicals business. Effective July 2007, we amended our defined benefit pension plans to no longer accept new participants. Effective December 2013, we amendedFuture benefit accruals for participants in our salaried defined benefit pension plans to freeze future benefit accruals for salaried pension participants effectiveceased on December 31, 2013, while salaried participants’ earnings considered for benefit calculations were frozen on December 31, 2015.
The following table sets forth the components of net periodic pension benefit cost:
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PENSION BENEFITS | Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| September 30 |
| March 31 | ||||||||||
in thousands | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Components of Net Periodic Benefit Cost |
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Service cost | $ 1,653 |
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| $ 1,335 |
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| $ 4,961 |
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| $ 4,007 |
| $ 1,249 |
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| $ 1,429 |
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Interest cost | 9,057 |
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| 9,127 |
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| 27,172 |
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| 27,379 |
| 9,410 |
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| 8,876 |
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Expected return on plan assets | (12,097) |
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| (12,891) |
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| (36,289) |
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| (38,672) |
| (11,938) |
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| (14,797) |
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Amortization of prior service cost (credit) | 335 |
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| (11) |
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| 1,005 |
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| (32) |
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Amortization of prior service cost | 335 |
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| 335 |
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Amortization of actuarial loss | 1,824 |
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| 1,540 |
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| 5,471 |
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| 4,622 |
| 1,358 |
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| 2,457 |
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Net periodic pension benefit cost (credit) | $ 772 |
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| $ (900) |
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| $ 2,320 |
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| $ (2,696) |
| $ 414 |
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| $ (1,700) |
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Pretax reclassifications from AOCI included in |
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net periodic pension benefit cost | $ 2,159 |
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| $ 1,529 |
| �� | $ 6,476 |
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| $ 4,590 |
| $ 1,693 |
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| $ 2,792 |
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The contributions to pension plans for the ninethree months ended September 30, 2017March 31, 2019 and 2016,2018, as reflected on the Condensed Consolidated Statements of Cash Flows, pertain to benefit payments under nonqualified plans for both periods and a third quarter 2017 discretionary qualified plan contribution of $10,600,000.$100,000,000 for the first quarter of 2018.
POSTRETIREMENT PLANS
In addition to pension benefits, we provide certain healthcare and life insurance benefits for some retired employees. In 2012, we amended our postretirement healthcare plan to cap our portion of the medical coverage cost at the 2015 level. Substantially all our salaried employees and, where applicable, certain of our hourly employees may become eligible for these benefits if they reach a qualifying age and meet certain service requirements. Generally, Company-provided healthcare benefits end when covered individuals become eligible for Medicare benefits, become eligible for other group insurance coverage or reach age 65, whichever occurs first.
The following table sets forth the components of net periodic other postretirement benefit cost:
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OTHER POSTRETIREMENT BENEFITS | Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| September 30 |
| March 31 | ||||||||||
in thousands | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
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| 2018 |
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Components of Net Periodic Benefit Cost |
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Service cost | $ 292 |
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| $ 281 |
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| $ 875 |
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| $ 842 |
| $ 329 |
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| $ 339 |
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Interest cost | 315 |
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| 302 |
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| 945 |
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| 907 |
| 347 |
|
| 310 |
|
Amortization of prior service credit | (1,059) |
|
| (1,059) |
|
| (3,177) |
|
| (3,177) |
| (980) |
|
| (991) |
|
Amortization of actuarial gain | (397) |
|
| (438) |
|
| (1,190) |
|
| (1,313) |
| (327) |
|
| (324) |
|
Net periodic postretirement benefit credit | $ (849) |
|
| $ (914) |
|
| $ (2,547) |
|
| $ (2,741) |
| $ (631) |
|
| $ (666) |
|
Pretax reclassifications from AOCI included in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net periodic postretirement benefit credit | $ (1,456) |
|
| $ (1,497) |
|
| $ (4,367) |
|
| $ (4,490) |
| $ (1,307) |
|
| $ (1,315) |
|
1720
DEFINED CONTRIBUTION PLANS
We sponsor two defined contribution plans. Substantially all salaried and nonunion hourly employees are eligible to be covered by one of these plans. Under these plans, we match employees’ eligible contributions at established rates. Expense recognized in connection with these matching obligations totaled $13,919,000 and $6,548,000 for the three months ended March 31, 2019 and 2018, respectively.
Note 11: other Comprehensive Income
Comprehensive income comprises two subsets: net earnings and other comprehensive income (OCI). The components of other comprehensive income are presented in the accompanying Condensed Consolidated Statements of Comprehensive Income, net of applicable taxes.
Amounts in accumulated other comprehensive income (AOCI), net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30 |
|
| December 31 |
|
| September 30 |
|
|
| March 31 |
| December 31 |
|
| March 31 | ||
in thousands | in thousands | 2017 |
|
| 2016 |
|
| 2016 |
| in thousands | 2019 |
| 2018 |
|
| 2018 | ||||
AOCI | AOCI |
|
|
|
|
|
|
|
| AOCI |
|
|
|
|
|
|
|
| ||
Cash flow hedges | $ (11,464) |
|
| $ (13,300) |
|
| $ (13,592) |
| ||||||||||||
Interest rate hedges | Interest rate hedges | $ (11,125) |
|
| $ (11,180) |
|
| $ (8,876) |
| |||||||||||
Pension and postretirement plans | Pension and postretirement plans | (124,795) |
|
| (126,076) |
|
| (105,514) |
| Pension and postretirement plans | (160,800) |
|
| (161,035) |
|
| (136,937) |
| ||
Total | Total | $ (136,259) |
|
| $ (139,376) |
|
| $ (119,106) |
| Total | $ (171,925) |
|
| $ (172,215) |
|
| $ (145,813) |
|
Changes in AOCI, net of tax, for the ninethree months ended September 30, 2017March 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pension and |
|
|
|
|
|
|
|
|
| Pension and |
|
|
|
|
|
| Cash Flow |
|
| Postretirement |
|
|
|
|
| Interest Rate |
| Postretirement |
|
|
|
| |||
in thousands | in thousands | Hedges |
|
| Benefit Plans |
|
| Total |
| in thousands | Hedges |
| Benefit Plans |
|
| Total | ||||
AOCI | AOCI |
|
|
|
|
|
|
|
| AOCI |
|
|
|
|
|
|
|
| ||
Balance as of December 31, 2016 | $ (13,300) |
|
| $ (126,076) |
|
| $ (139,376) |
| ||||||||||||
Balances as of December 31, 2018 | Balances as of December 31, 2018 | $ (11,180) |
|
| $ (161,035) |
|
| $ (172,215) |
| |||||||||||
Amounts reclassified from AOCI | Amounts reclassified from AOCI | 1,836 |
|
| 1,281 |
|
| 3,117 |
| Amounts reclassified from AOCI | 55 |
|
| 235 |
|
| 290 |
| ||
Balance as of September 30, 2017 | $ (11,464) |
|
| $ (124,795) |
|
| $ (136,259) |
| ||||||||||||
Balances as of March 31, 2019 | Balances as of March 31, 2019 | $ (11,125) |
|
| $ (160,800) |
|
| $ (171,925) |
|
Amounts reclassified from AOCI to earnings, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||
|
|
| September 30 |
|
| September 30 |
| ||||||
in thousands | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||
Reclassification Adjustment for Cash Flow |
|
|
|
|
|
|
|
|
|
|
| ||
Hedge Losses |
|
|
|
|
|
|
|
|
|
|
| ||
Interest expense | $ 1,955 |
|
| $ 507 |
|
| $ 3,022 |
|
| $ 1,490 |
| ||
Benefit from income taxes | (767) |
|
| (200) |
|
| (1,186) |
|
| (588) |
| ||
Total 1 | $ 1,188 |
|
| $ 307 |
|
| $ 1,836 |
|
| $ 902 |
| ||
Amortization of Pension and Postretirement |
|
|
|
|
|
|
|
|
|
|
| ||
Plan Actuarial Loss and Prior Service Cost |
|
|
|
|
|
|
|
|
|
|
| ||
Cost of revenues | $ 576 |
|
| $ 27 |
|
| $ 1,721 |
|
| $ 82 |
| ||
Selling, administrative and general expenses | 127 |
|
| 6 |
|
| 388 |
|
| 18 |
| ||
Benefit from income taxes | (276) |
|
| (13) |
|
| (828) |
|
| (39) |
| ||
Total | $ 427 |
|
| $ 20 |
|
| $ 1,281 |
|
| $ 61 |
| ||
Total reclassifications from AOCI to earnings | $ 1,615 |
|
| $ 327 |
|
| $ 3,117 |
|
| $ 963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
|
| March 31 | ||||
in thousands | 2019 |
| 2018 |
| |||
Amortization of Interest Rate Hedge Losses |
|
|
|
|
| ||
Interest expense | $ 75 |
|
| $ 89 |
| ||
Benefit from income taxes | (20) |
|
| (23) |
| ||
Total | $ 55 |
|
| $ 66 |
| ||
Amortization of Pension and Postretirement |
|
|
|
|
| ||
Plan Actuarial Loss and Prior Service Cost |
|
|
|
|
| ||
Other nonoperating income | $ 386 |
|
| $ 1,476 |
| ||
Benefit from income taxes | (151) |
|
| (385) |
| ||
Total | $ 235 |
|
| $ 1,091 |
| ||
Total reclassifications from AOCI to earnings | $ 290 |
|
| $ 1,157 |
|
1821
Note 12: Equity
Our capital stock consists solely of common stock, par value $1.00 per share.share, of which 480,000,000 shares may be issued. Holders of our common stock are entitled to one vote per share. Our Certificate of IncorporationWe may also authorizesissue 5,000,000 shares of preferred stock, of whichbut no shares have been issued. The terms and provisions of such shares will be determined by our Board of Directors upon any issuance of preferred shares in accordance with our Certificate of Incorporation.
Changes in total equity are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
| |||
|
|
|
| September 30 |
| |||
in thousands |
|
|
| 2017 |
|
| 2016 |
|
Total Equity |
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
| $ 4,572,476 |
|
| $ 4,454,188 |
| |
Net earnings |
|
| 273,639 |
|
| 306,890 |
| |
Share-based compensation plans, net of shares withheld for taxes |
|
| (24,485) |
|
| (32,388) |
| |
Purchase and retirement of common stock |
|
| (60,303) |
|
| (161,463) |
| |
Share-based compensation expense |
|
| 19,953 |
|
| 15,645 |
| |
Cash dividends on common stock ($0.75/$0.60 per share) |
|
| (99,263) |
|
| (79,865) |
| |
Other comprehensive income |
|
| 3,117 |
|
| 963 |
| |
Balance at end of period |
|
| $ 4,685,134 |
|
| $ 4,503,970 |
|
There were no shares held in treasury as of September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016.March 31, 2018.
Our common stock purchases (all of which were open market purchases) wereand subsequent retirements for the year-to-date periods ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31 |
| December 31 |
|
| March 31 | ||
in thousands, except average price | 2019 |
| 2018 |
|
| 2018 1 | ||
Shares Purchased and Retired |
|
|
|
|
|
|
|
|
Number | 0 |
|
| 1,192 |
|
| 492 |
|
Total purchase price | $ 0 |
|
| $ 133,983 |
|
| $ 57,824 |
|
Average price per share | $ 0.00 |
|
| $ 112.41 |
|
| $ 117.47 |
|
| ||
1 |
|
|
|
|
|
As of September 30, 2017,March 31, 2019, 9,489,7178,297,789 shares may be purchased under the current purchase authorization of our Board of Directors.Directors.
Changes in total equity are summarized below:
|
|
|
|
|
|
|
|
|
" |
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| |||
|
|
|
| March 31 |
| |||
in thousands |
|
|
| 2019 |
| 2018 |
| |
Total Equity |
|
|
|
|
|
|
| |
Balance at beginning of year |
|
| $ 5,202,903 |
|
| $ 4,968,893 |
| |
Net earnings |
|
| 63,299 |
|
| 52,979 |
| |
Common stock issued |
|
|
|
|
|
|
| |
Share-based compensation plans, net of shares |
|
|
|
|
|
|
| |
withheld for taxes |
|
| (14,068) |
|
| (24,109) |
| |
Purchase and retirement of common stock |
|
| 0 |
|
| (57,824) |
| |
Share-based compensation expense |
|
| 5,724 |
|
| 6,794 |
| |
Cash dividends on common stock |
|
|
|
|
|
|
| |
($0.31/$0.28 per share, respectively) |
|
| (40,939) |
|
| (37,176) |
| |
Other comprehensive income |
|
| 290 |
|
| 3,653 |
| |
Balance at end of period |
|
| $ 5,217,209 |
|
| $ 4,913,210 |
|
1922
Note 13: Segment Reporting
We have four operating (and reportable) segments organized around our principal product lines: Aggregates, Asphalt, Concrete and Calcium. The vast majority of our activities are domestic. We sell a relatively small amount of construction aggregates outside the United States. IntersegmentOur Asphalt and Concrete segments are primarily supplied with their aggregates requirements from our Aggregates segment. These intersegment sales are made at local market prices for the particular grade and quality of product used in the production of asphalt mix and ready-mixed concrete. Management reviews earnings from the product line reporting segments principally at the gross profit level.
segment financial disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended | ||||||||||||
|
| September 30 |
|
| September 30 |
|
| March 31 | ||||||||||||
in thousands | in thousands | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| in thousands | 2019 |
|
| 2018 |
| ||
Total Revenues | Total Revenues |
|
|
|
|
|
|
|
|
|
|
| Total Revenues |
|
|
|
|
| ||
Aggregates 1 | Aggregates 1 | $ 858,699 |
|
| $ 821,809 |
|
| $ 2,326,585 |
|
| $ 2,248,174 |
| Aggregates 1 | $ 834,965 |
|
| $ 699,657 |
| ||
Asphalt | 189,940 |
|
| 157,406 |
|
| 461,474 |
|
| 388,560 |
| |||||||||
Asphalt 2 | Asphalt 2 | 132,090 |
|
| 103,835 |
| ||||||||||||||
Concrete | Concrete | 115,485 |
|
| 91,147 |
|
| 309,448 |
|
| 242,790 |
| Concrete | 83,637 |
|
| 100,962 |
| ||
Calcium | Calcium | 1,965 |
|
| 2,373 |
|
| 5,822 |
|
| 6,732 |
| Calcium | 1,951 |
|
| 1,942 |
| ||
Segment sales | Segment sales | $ 1,166,089 |
|
| $ 1,072,735 |
|
| $ 3,103,329 |
|
| $ 2,886,256 |
| Segment sales | $ 1,052,643 |
|
| $ 906,396 |
| ||
Aggregates intersegment sales | Aggregates intersegment sales | (71,374) |
|
| (64,595) |
|
| (190,523) |
|
| (166,563) |
| Aggregates intersegment sales | (56,132) |
|
| (51,922) |
| ||
Total revenues | Total revenues | $ 1,094,715 |
|
| $ 1,008,140 |
|
| $ 2,912,806 |
|
| $ 2,719,693 |
| Total revenues | $ 996,511 |
|
| $ 854,474 |
| ||
Gross Profit | Gross Profit |
|
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
|
|
| ||
Aggregates | Aggregates | $ 259,122 |
|
| $ 261,762 |
|
| $ 652,075 |
|
| $ 664,154 |
| Aggregates | $ 185,716 |
|
| $ 148,221 |
| ||
Asphalt | Asphalt | 31,363 |
|
| 32,889 |
|
| 68,921 |
|
| 76,028 |
| Asphalt | (3,272) |
|
| 246 |
| ||
Concrete | Concrete | 14,367 |
|
| 8,711 |
|
| 34,302 |
|
| 18,334 |
| Concrete | 8,563 |
|
| 10,320 |
| ||
Calcium | Calcium | 664 |
|
| 847 |
|
| 1,972 |
|
| 2,596 |
| Calcium | 668 |
|
| 547 |
| ||
Total | Total | $ 305,516 |
|
| $ 304,209 |
|
| $ 757,270 |
|
| $ 761,112 |
| Total | $ 191,675 |
|
| $ 159,334 |
| ||
Depreciation, Depletion, Accretion | Depreciation, Depletion, Accretion |
|
|
|
|
|
|
|
|
|
|
| Depreciation, Depletion, Accretion |
|
|
|
|
| ||
and Amortization (DDA&A) | and Amortization (DDA&A) |
|
|
|
|
|
|
|
|
|
|
| and Amortization (DDA&A) |
|
|
|
|
| ||
Aggregates | Aggregates | $ 64,071 |
|
| $ 60,204 |
|
| $ 182,559 |
|
| $ 177,129 |
| Aggregates | $ 72,521 |
|
| $ 65,953 |
| ||
Asphalt | Asphalt | 6,494 |
|
| 4,100 |
|
| 18,841 |
|
| 12,468 |
| Asphalt | 8,550 |
|
| 7,002 |
| ||
Concrete | Concrete | 3,591 |
|
| 3,072 |
|
| 10,286 |
|
| 9,141 |
| Concrete | 2,964 |
|
| 3,414 |
| ||
Calcium | Calcium | 180 |
|
| 198 |
|
| 567 |
|
| 577 |
| Calcium | 60 |
|
| 69 |
| ||
Other | Other | 5,300 |
|
| 4,475 |
|
| 15,721 |
|
| 14,047 |
| Other | 5,086 |
|
| 5,001 |
| ||
Total | Total | $ 79,636 |
|
| $ 72,049 |
|
| $ 227,974 |
|
| $ 213,362 |
| Total | $ 89,181 |
|
| $ 81,439 |
| ||
Identifiable Assets 2 |
|
|
|
|
|
|
|
|
|
|
| |||||||||
Identifiable Assets 3 | Identifiable Assets 3 |
|
|
|
|
| ||||||||||||||
Aggregates | Aggregates |
|
|
|
|
|
| $ 7,974,915 |
|
| $ 7,671,222 |
| Aggregates | $ 9,275,593 |
|
| $ 8,545,904 |
| ||
Asphalt | Asphalt |
|
|
|
|
|
| 355,171 |
|
| 243,909 |
| Asphalt | 564,103 |
|
| 447,961 |
| ||
Concrete | Concrete |
|
|
|
|
|
| 233,565 |
|
| 188,169 |
| Concrete | 288,797 |
|
| 267,678 |
| ||
Calcium | Calcium |
|
|
|
|
|
| 3,505 |
|
| 5,392 |
| Calcium | 3,905 |
|
| 4,156 |
| ||
Total identifiable assets | Total identifiable assets |
|
|
|
|
|
| $ 8,567,156 |
|
| $ 8,108,692 |
| Total identifiable assets | $ 10,132,398 |
|
| $ 9,265,699 |
| ||
General corporate assets | General corporate assets |
|
|
|
|
|
| 171,015 |
|
| 114,028 |
| General corporate assets | 133,346 |
|
| 140,998 |
| ||
Cash and cash equivalents |
|
|
|
|
|
| 701,163 |
|
| 135,365 |
| |||||||||
Total |
|
|
|
|
|
| $ 9,439,334 |
|
| $ 8,358,085 |
| |||||||||
Cash and cash equivalents and restricted cash | Cash and cash equivalents and restricted cash | 31,108 |
|
| 46,514 |
| ||||||||||||||
Total assets | Total assets | $ 10,296,852 |
|
| $ 9,453,211 |
|
|
|
1 | Includes |
2 | Includes product sales, as well as service revenues (see Note 4) from our asphalt construction paving business. |
3 | Certain temporarily idled assets are included within a segment's Identifiable Assets but the associated DDA&A is shown within Other in the DDA&A section above as the related DDA&A is excluded from segment gross profit. |
2023
Note 14: Supplemental Cash Flow Information
Supplemental information referable to our Condensed Consolidated Statements of Cash Flows is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended |
| Three Months Ended | |||||||
| September 30 |
| March 31 | |||||||
in thousands | 2017 |
|
| 2016 |
| 2019 |
| 2018 |
| |
Cash Payments |
|
|
|
|
| |||||
Cash Payments (Refunds) |
|
|
|
|
| |||||
Interest (exclusive of amount capitalized) | $ 118,157 |
|
| $ 69,865 |
| $ 19,798 |
|
| $ 15,829 |
|
Income taxes | 124,121 |
|
| 92,397 |
| (364) |
|
| (105,699) |
|
Noncash Investing and Financing Activities |
|
|
|
|
|
|
|
|
|
|
Accrued liabilities for purchases of property, plant & equipment | $ 10,602 |
|
| $ 10,493 |
| $ 34,360 |
|
| $ 24,714 |
|
Accrued liabilities for common stock purchases | 0 |
|
| 2,255 |
| |||||
Right-of-use assets obtained in exchange for new operating lease liabilities | 435,192 |
|
| 0 |
| |||||
Amounts referable to business acquisitions |
|
|
|
|
|
|
|
|
|
|
Liabilities assumed | 1,935 |
|
| 0 |
| (2,720) |
|
| 2,796 |
|
Note 15: Goodwill
Goodwill is recognized when the consideration paid for a business exceeds the fair value of the tangible and identifiable intangible assets acquired. Goodwill is allocated to reporting units for purposes of testing goodwill for impairment. There were no charges for goodwill impairment in the ninethree month periods ended September 30, 2017March 31, 2019 and 2016.2018. Accumulated goodwill impairment losses amount to $252,664,000 in the Calcium segment.
We have four reportable segments organized around our principal product lines: Aggregates, Asphalt, Concrete and Calcium. Changes in the carrying amount of goodwill by reportable segment from December 31, 20162018 to September 30, 2017March 31, 2019 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in thousands | in thousands | Aggregates |
|
| Asphalt |
|
| Concrete |
|
| Calcium |
|
| Total |
| in thousands | Aggregates |
|
| Asphalt |
|
| Concrete |
|
| Calcium |
|
| Total | |||
Goodwill | Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total as of December 31, 2016 | $ 3,003,191 |
|
| $ 91,633 |
|
| $ 0 |
|
| $ 0 |
|
| $ 3,094,824 |
| ||||||||||||||||||
Total as of December 31, 2018 | Total as of December 31, 2018 | $ 3,073,763 |
|
| $ 91,633 |
|
| $ 0 |
|
| $ 0 |
|
| $ 3,165,396 |
| |||||||||||||||||
Goodwill of acquired businesses 1 | Goodwill of acquired businesses 1 | 6,513 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 6,513 |
| Goodwill of acquired businesses 1 | (3,554) |
|
| 0 |
|
| 0 |
|
| 0 |
|
| (3,554) |
| ||
Goodwill of divested businesses | 0 |
|
| 0 |
|
| 0 |
|
| 0 |
|
| 0 |
| ||||||||||||||||||
Total as of September 30, 2017 | $ 3,009,704 |
|
| $ 91,633 |
|
| $ 0 |
|
| $ 0 |
|
| $ 3,101,337 |
| ||||||||||||||||||
Total as of March 31, 2019 | Total as of March 31, 2019 | $ 3,070,209 |
|
| $ 91,633 |
|
| $ 0 |
|
| $ 0 |
|
| $ 3,161,842 |
|
|
|
1 | See Note 16 for a summary of |
We test goodwill for impairment on an annual basis or more frequently if events or circumstances change in a manner that would more likely than not reduce the fair value of a reporting unit below its carrying value. A decrease in the estimated fair value of one or more of our reporting units could result in the recognition of a material, noncash write-down of goodwill.
2124
Note 16: Acquisitions and Divestitures
BUSINESS ACQUISITIONS AND PENDING ACQUISITIONS
During2019 BUSINESS ACQUISITIONS — We had no acquisitions through the second quarter of 2017, we announced the pending acquisition of Aggregates USA, LLC, an aggregates business that is composed of 32 facilitiesthree months ended March 31, 2019. (15 aggregates facilities, 16 aggregates rail distribution yards and 1 aggregates truck distribution yard) in Florida, Georgia, South Carolina, Tennessee and Virginia, for $900.0 million in cash. In order to expedite the regulatory approval process, we may divest quarries in Tennessee and Virginia subject to receipt of regulatory approval. We expect to close this acquisition in the fourth quarter of 2017.
During2018 BUSINESS ACQUISITIONS — For the nine months ended September 30, 2017,full year 2018, we purchased the following for total considerationoperations, none of $212,406,000:
|
|
|
|
|
|
|
|
The 2017 completed acquisitions listed above are reported in our condensed consolidated financial statements as of their respective acquisition dates. None of these acquisitions arewhich were material to our results of operations or financial position either individually or collectively.
The fair value of consideration transferred for these acquisitions and the preliminary amounts of assets acquired and liabilities assumed (based on their estimated fair values at their acquisition dates), are summarized below:
| ||
| ||
| ||
|
| |
| ||
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
| |
|
|
Estimated fair values of assets acquired and liabilities assumed are preliminary pending appraisals of contractual rights in place and property, plant & equipment.
As a result of these 2017 completed acquisitions, we recognized $73,092,000 of amortizable intangible assets (contractual rights in place). These contractual rights in place will be amortized against earnings ($66,630,000 – straight-line over a weighted-average 18.8 years and $6,462,000 – units of sales over an estimated 20 years) and deductible for income tax purposes over 15 years. The goodwill noted above will be deductible for income tax purposes over 15 years.
22
For the full year 2016, we purchased the followingcollectively, for total consideration of $33,287,000$219,863,000 ($32,537,000215,363,000 cash and $750,000$4,500,000 payable):
§ |
|
§ |
|
§ | Texas — |
None of the 2016 acquisitions listed above are material to our results of operations or financial position either individually or collectively. As a result of these 2016the 2018 acquisitions, we recognized $16,670,000$44,163,000 of amortizable intangible assets ($15,213,000 contractual(contractual rights in place and $1,457,000 noncompetition agreement)place). The contractual rights in place arewill be amortized against earnings ($6,798,000 –43,072,000 - straight-line over 20a weighted-average 19.9 years and $8,415,000 –$1,080,000 - units of sales over an estimated 20in excess of 30.0 years) and $7,385,000 will be deductible for income tax purposes over 15 years. Of the $42,325,000 of goodwill recognized, $4,468,000 will be deductible for income tax purposes over 15 years, and $32,871,000 represents the balance of deferred tax liabilities generated from carrying over the seller’s tax basis in the assets acquired (immaterial adjustments were recorded in 2019 including a decrease to goodwill of $3,554,000).
DIVESTITURES AND PENDING DIVESTITURES
In 2019, we sold:
§ | First quarter — two aggregates operations in Georgia and reversed a contingent payable related to the fourth quarter 2017 Department of Justice required divestiture of former Aggregates USA operations, resulting in a pretax gain of $4,064,000 |
In 2018, we sold:
§ | First quarter — ready-mixed concrete operations in Georgia resulting in a pretax gain of $2,929,000 (we retained all real property which is leased to the buyer, and obtained a long-term aggregates supply agreement) |
No assets met the criteria for held for sale at September 30, 2017,March 31, 2019, December 31, 20162018 or September 30, 2016. However, as stated above, we may divest several quarries in Tennessee in order to expedite the regulatory approval process for the pending Aggregates USA acquisition.March 31, 2018.
25
Note 17: New Accounting Standards
ACCOUNTING STANDARDS PENDING ADOPTIONRECENTLY ADOPTED
PRESENTATION OF NET PERIODIC BENEFIT PLANS In March 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which changes the presentation of the net periodic benefit cost in the income statement. Employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs. The other components of net benefit cost will be included in nonoperating expense. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual reporting periods. Retrospective application of the change in income statement presentation is required. A practical expedient is provided that permits entities to use the components of cost disclosed in prior years as a basis for the retrospective application of the new income statement presentation. We will adopt ASU 2017-07 inLEASE ACCOUNTING During the first quarter of 2018. We do2019, we adopted Accounting Standards Update (ASU) 2016-02, “Leases,” utilizing the comparatives transition option (we elected not expectto restate comparative periods) under ASC 840. This ASU amends prior accounting standards for lease accounting and adds additional disclosures about leasing arrangements. Under the adoption of this standardnew guidance, lessees are required to have a material impact on our consolidated financial statements; service cost for 2017 is estimated to be $7,782,000 while all other components are estimated to be a benefit of $8,083,000.
GOODWILL IMPAIRMENT TESTING In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill (Step 2) to measure a goodwill impairment charge. Instead, entities will record an impairment charge basedrecognize lease right-of-use assets and lease liabilities on the excessbalance sheet for all leases (excluding mineral leases) with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of a reporting unit’s carrying value over its fair value. This ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. We will early adopt this standard as of our November 1, 2017 annual impairment test. The results of our November 1, 2016 annual impairment test indicated that the fair value of all our reporting units substantially exceeded their carrying values. As a result, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
INTRA-ENTITY ASSET TRANSFERS In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory,” which requires the tax effects of intercompany transactions other than inventory to be recognized currently. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual reporting periods. We will adopt this standardexpense recognition in the first quarterincome statement and presentation of 2018. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
23
CASH FLOW CLASSIFICATION In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which amends guidance on the classification of certain cash receipts and paymentsflow in the statement of cash flows. This ASU adds or clarifies guidance on eight specific cash flow issues. Additionally, guidanceUpon adoption, we recognized operating lease liabilities of $442,697,000, with corresponding right-of-use assets based on the presentationpresent value of restricted cashthe remaining minimum rental payments under current leasing standards for existing operating leases. See Note 1 under the caption Leases for the practical expedients elected and other information. Additionally, See Notes 2 and 14 for the required lease disclosures.
ACCOUNTING STANDARDS PENDING ADOPTION
defined benefit plans In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-14, “Changes to the Disclosure Requirements for Defined Benefit Plans,” which adds, removes and clarifies the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. ASU 2018-14 is addressed in ASU 2016-18 which was issued in November 2016. Our current policyeffective for fiscal years ending after December 15, 2020 and is to present changes in restricted cash within the investing section of our consolidated statements of cash flows. Both of these standards are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual reporting periods.be applied retrospectively. Early adoption is permitted. We doWhile we are still evaluating the impact of ASU 2018-14 and whether we will early adopt, it will not expectimpact our consolidated financial statements as it only affects disclosure. Thus, the adoption of these standards tothis standard will have a materialminor impact on the notes to our consolidated financial statements, of cash flows.specifically, our benefit plans note.
CREDIT LOSSES In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” which amends guidance on the impairment of financial instruments. The new guidance estimates credit losses based on expected losses, modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, and interim reporting periods within those annual reporting periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2018. While we are still evaluating the impact of ASU 2016-13, weWe do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
LEASE ACCOUNTING In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends existing accounting standards for lease accounting and adds additional disclosures about leasing arrangements. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement and presentation of cash flow in the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods. Early adoption is permitted and modified retrospective application is required. We will adopt this standard in the first quarter of 2019. While we expect the adoption of this standard to have a material effect on our consolidated financial statements and related disclosures, we have yet to quantify the effect.
CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTS In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which amends certain aspects of current guidance on the recognition, measurement and disclosure of financial instruments. Among other changes, this ASU requires most equity investments be measured at fair value. Additionally, the ASU eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value for instruments not recognized at fair value in our financial statements. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
REVENUE RECOGNITION In May 2014, the FASB issued ASU 2014-09, “Revenue From Contracts With Customers,” which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This ASU provides a more robust framework for addressing revenue issues and expands required revenue recognition disclosures. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual reporting periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Further, in applying this ASU an entity is permitted to use either the full retrospective or cumulative effect transition approach. We expect to identify similar performance obligations under ASU 2014-09 compared with the deliverables and separate units of account we have identified under existing accounting standards. As a result, we expect the timing of our revenues to remain generally the same. We will adopt this standard using the cumulative effect transition approach.
2426
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL COMMENTS
Overview
We provide the basic materials for the infrastructure needed to maintain and expand the U.S. economy. We operate primarily in the U.S. and are 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. Our strategy and competitive advantage are based on our strength in aggregates. Aggregates are used in most types of construction and in the production of asphalt mix and ready-mixed concrete.
Demand for our products is dependent on construction activity and correlates positively with changesgrowth in population, growth, household formation and employment. End uses include public construction (e.g., highways, bridges, buildings, airports, schools, prisons, sewer and waste disposal systems, water supply systems, dams and reservoirs), private nonresidential construction (e.g., manufacturing, retail, offices, industrial and institutional) and private residential construction (e.g., single-family houses, duplexes, apartment buildings and condominiums). Customers for our products include heavy construction and paving contractors; commercial building contractors; concrete products manufacturers; residential building contractors; railroads and electric utilities; and to a smaller extent state, county and municipal governments.
Aggregates have a high weight-to-value ratio and, in most cases, must be produced near where they are used; if not, transportation can cost more than the materials, rendering them uncompetitive compared to locally produced materials. Exceptions to this typical market structure include areas along the U.S. Gulf Coast and the Eastern Seaboard where there are limited supplies of locally available high-quality aggregates. We serve these markets from quarries that have access to cost-effective long-haul transportation — shipping by barge and rail — and from our quarry on Mexico's Yucatan Peninsula with our fleet of Panamax-class, self-unloading ships.
There are practically nolimited substitutes for quality aggregates. Because of barriers to entry created in many metropolitan markets by zoning and permitting regulation and because of high transportation costs relative to the value of the product, the location of reserves is a critical factor to our long-term success.
No material part of our business depends upon any single customer whose loss would have a significant adverse effect on our business. In 2016,2018, our five largest customers accounted for 8.1%8% of our total revenues (excluding internal sales), and no single customer accounted for more than 3.0%2% of our total revenues. Our products typically are sold to private industry and not directly to governmental entities. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly funded construction, such as highways, airports and government buildings, relatively insignificant sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly funded construction, our business is not directly subject to renegotiation of profits or termination of contracts with state or federal governments.
While aggregates is our focus and primary business, we believe vertical integration between aggregates and downstream products, such as asphalt mix and ready-mixed concrete, can be managed effectively in certain markets to generate attractivegenerating acceptable financial returns.returns and enhancing financial returns in our core Aggregates segment. We produce and sell asphalt mix and/or ready-mixed concrete primarily in our Alabama, mid-Atlantic, Georgia, Southwestern, Tennessee and Western markets. Aggregates comprise approximately 95% of asphalt mix by weight and 80% of ready-mixed concrete by weight. In both of these downstream businesses, aggregates are primarily supplied from our own operations.
Seasonality and cyclical nature of our business
Almost all our products are produced and consumed outdoors. Seasonal changes and other weather-related conditions can affect the production and sales volume of our products. Therefore, the financial results for any quarter do not necessarily indicate the results expected for the year. Normally, the highest sales and earnings are in the third quarter and the lowest are in the first quarter. Furthermore, our sales and earnings are sensitive to national, regional and local economic conditions, demographic and population fluctuations, and particularly to cyclical swings in construction spending, primarily in the private sector.
2527
EXECUTIVE SUMMARY
Financial highlights for THIRDfirst Quarter 20172019
Compared to thirdfirst quarter 2016:2018:
§ | Total revenues increased |
§ | Gross profit increased |
§ | Aggregates segment sales increased |
§ | Aggregates segment freight-adjusted revenues increased |
§ | Shipments increased |
§ | Same-store shipments |
§ | Freight-adjusted sales price increased |
§ | Same-store freight-adjusted sales price also increased |
§ | Segment gross profit |
§ | Asphalt, Concrete and Calcium segment gross profit |
§ | Selling, administrative and general (SAG) expenses increased $11.9 million and decreased |
§ | Operating earnings increased |
§ | Earnings from continuing operations were |
§ |
|
§ | Net earnings were $63.3 million, an increase of $10.3 million, or 19% |
§ | Adjusted EBITDA was $192.7 million, an increase of $24.9 million, or 15% |
§ | Returned capital to shareholders via dividends ($40.9 million @ $0.31 per share versus $37.2 million @ $0.28 per share) and share repurchases (none in 2019 versus $55.6 million @ an average of $117.47 per share) |
Net earnings were $63.3 million and Adjusted EBITDA was $192.7 million in the first quarter. The 19% growth in net earnings and 15% growth in Adjusted EBITDA were driven by strong aggregates shipments, up 13% year-over-year, and a 5.4% increase in aggregates pricing.
Our first quarter results represent a good start to the year and are consistent with our full-year expectations. Broad-based shipment growth, compounding price improvements and solid operating efficiencies in our Aggregates segment contributed to 17% growth in total revenues and 29% growth in operating earnings. These results demonstrate the strength of our unique aggregates-centric business model.
Aggregates segment gross profit increased from $3.66 per ton to $4.07 per ton, an 11% increase from the prior year’s first quarter. This double-digit improvement in first quarter unit profitability builds on last year’s results, and we are well positioned for further gains in our industry-leading unit profitability.
Our key markets are benefitting from both robust growth in public construction demand and continued growth in private demand. Leading indicators, such as construction award activity, signal broad-based shipment growth across our footprint. Above-average demand growth in our markets compared to the rest of the United States further supports our positive outlook for shipment growth. Aggregates pricing momentum continues to improve — consistent with our full-year expectations. Additionally, the underlying direction of aggregates unit profitability remains clear, supported by our strategic and tactical focus on compounding pricing improvements and operating disciplines. As a result, we reiterate our full-year expectations for 2019 earnings from continuing operations of between $4.55 and $5.05 per diluted share and Adjusted EBITDA of between $1.25 and $1.33 billion. All other aspects of our outlook are consistent with those provided in our 10-K.
Capital expenditures in the first quarter were $122.0 million. This amount included $67.5 million of core operating and maintenance capital investments to improve or replace existing property, plant & equipment. In addition, we invested $54.5 million in internal growth projects to secure new aggregates reserves, develop new production sites, enhance our distribution capabilities, and support the targeted growth of our asphalt operations. Our full-year capital expectations for 2019 remain the same, approximately $250 million on maintenance capital and $200 million for internal growth projects that are largely underway.
During the quarter, we returned $40.9 million to shareholders through dividends, a 10 percent increase versus the prior year quarter. No shares were repurchased during the current quarter. At quarter-end, total debt was $3.0 billion, or 2.6 times trailing-twelve month Adjusted EBITDA.
28
RESULTS OF OPERATIONS
Total revenues are primarily derived from our product sales of aggregates, asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and services related to our aggregates business. We discuss separately our discontinued operations, which consist of our former Chemicals business.
The following table highlights significant components of our consolidated operating results including EBITDA and Adjusted EBITDA.
consolidated operating Result highlights
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
| March 31 | ||||
in millions, except per share data | 2019 |
| 2018 |
| |
Total revenues | $ 996.5 |
|
| $ 854.5 |
|
Cost of revenues | 804.8 |
|
| 695.2 |
|
Gross profit | $ 191.7 |
|
| $ 159.3 |
|
Gross profit margin | 19.2% |
|
| 18.6% |
|
Selling, administrative and general (SAG) expenses | $ 90.3 |
|
| $ 78.3 |
|
SAG as a percentage of total revenues | 9.1% |
|
| 9.2% |
|
Operating earnings | $ 104.4 |
|
| $ 81.2 |
|
Interest expense, net | $ 32.9 |
|
| $ 37.8 |
|
Earnings from continuing operations |
|
|
|
|
|
before income taxes | $ 74.6 |
|
| $ 48.5 |
|
Earnings from continuing operations | $ 63.9 |
|
| $ 53.4 |
|
Loss on discontinued operations, |
|
|
|
|
|
net of income taxes | (0.6) |
|
| (0.4) |
|
Net earnings | $ 63.3 |
|
| $ 53.0 |
|
Diluted earnings (loss) per share |
|
|
|
|
|
Continuing operations | $ 0.48 |
|
| $ 0.40 |
|
Discontinued operations | 0.00 |
|
| (0.01) |
|
Diluted net earnings per share | $ 0.48 |
|
| $ 0.39 |
|
EBITDA | $ 196.7 |
|
| $ 167.7 |
|
Adjusted EBITDA | $ 192.7 |
|
| $ 167.8 |
|
first quarter 2019 Compared to first Quarter 2018
First quarter 2019 total revenues were $996.5 million, up 17% from the first quarter of 2018. Shipments increased in aggregates (+13%) and asphalt mix (+11%) while they declined in ready-mixed concrete (-18%). Gross profit increased in the Aggregates segment (+$37.5 million or +25%), while it declined in the Asphalt (-$3.5 million) and Concrete (-$1.8 million or -17%) segments. Asphalt segment earnings were compressed by a 29% increase in unit costs for liquid asphalt compared to first quarter 2018, which accounted for a $9.0 million increase in cost. Conversely, a 4% decrease in the unit cost of diesel fuel decreased costs $1.3 million from the prior year’s first quarter with most ($1.1 million) of this cost decline reflected in the Aggregates segment.
29
Net earnings for the first quarter of 2019 were $63.3 million, or $0.48 per diluted share, compared to $53.0 million, or $0.39 per diluted share, in the first quarter of 2018. Each period’s results were impacted by discrete items, as follows:
Net earnings for the first quarter of 2019 include:
§ | pretax gains of $4.1 million related to the sale of businesses (see Note 16 to the Condensed Consolidated Financial Statements) |
Net earnings for the first quarter of 2018 include:
§ | pretax interest charges of |
§ | pretax |
§ |
|
|
|
|
|
§ | pretax charges of |
§ |
|
Continuing Operations — Changes in earnings from continuing operations before income taxes for the first quarter of 2019 versus the first quarter of 2018 are summarized below:
earnings from continuing operations before income taxes
in millions | ||
First quarter 2018 | $ 48.5 | |
Higher aggregates gross profit | 37.5 | |
Lower asphalt gross profit | (3.5) | |
Lower concrete gross profit | (1.8) | |
Higher calcium gross profit | 0.1 | |
Higher selling, administrative and general expenses | (11.9) | |
Higher gain on sale of | 3.1 | |
Lower interest expense, net | 4.8 | |
All other | (2.2) | |
First quarter 2019 | $ 74.6 |
First quarter 2019 Aggregates segment gross profit was $185.7 million ($4.07 per ton) versus $148.2 million ($3.66 per ton) in first quarter 2018. As a percentage of segment sales, gross profit margin expanded 1.0 percentage points (100 basis points) due to strong growth in shipments and price improvements.
The trailing-twelve month same-store Aggregates segment incremental gross profit flow-through rate was 57%, which is in-line with longer-term expectations of 60%. As a reminder, quarterly gross profit flow-through rates can vary widely from quarter to quarter; therefore, we evaluate this metric on a trailing-twelve month basis.
First quarter aggregates shipments increased 13% (11% same-store) versus the prior year quarter. Shipment growth was realized across most of our footprint. Solid underlying fundamentals and pent-up demand carried over from last year helped drive shipment growth across most of our footprint. However, in California, shipments decreased by double-digits due to record rainfall throughout most of the quarter. A strong demand environment, driven by transportation-related construction as well as growth in our project-related bookings, support our expectations for 2019 shipment growth in California.
Price growth was positive across all our markets. For the quarter, freight-adjusted average sales price for aggregates increased 5.4% (5.8% mix adjusted) versus the prior year’s quarter. Pricing was particularly strong in Arizona, California, Georgia, Tennessee and Texas. Positive trends in backlogged project work along with demand visibility and customer confidence support continued upward pricing movements throughout 2019.
First quarter unit cost of sales (freight-adjusted) increased 3% (same for same-store) compared to the prior year’s quarter due in part to planned higher repair & maintenance costs in advance of the construction season. Unit cost of sales in California was negatively impacted by the aforementioned record rainfall. We remain focused on compounding improvements in unit margin throughout the cycle through fixed cost leverage, price growth and operating efficiencies.
30
In line with expectations, Asphalt segment gross profit was a loss of $3.3 million, down $3.5 million from the $0.2 million gross profit in the prior year quarter. Asphalt mix shipments increased 11% (5% same-store) while selling prices increased 5%, or $2.73 per ton. However, the average unit cost for liquid asphalt was 29% higher than the prior year quarter, remaining relatively stable throughout the quarter on a monthly basis. Pricing gains are beginning to offset higher liquid asphalt costs, but their impact will be gradual during 2019.
Concrete segment gross profit was $8.6 million versus $10.3 million in the prior year quarter. Ready-mixed concrete shipments decreased 18% (same-store -10%) year-over-year driven by inclement weather in Virginia while pricing increased 1% (same for same-store).
Our Calcium segment reported gross profit of $0.7 million, a slight increase versus $0.5 million in the first quarter of 2018.
Collectively, our full-year earnings growth outlook for our non-Aggregates segments remains unchanged.
SAG expenses were $90.3 million versus $78.3 million in the prior year quarter. Full-year expectations for total SAG expenses remain unchanged at $355 million. The year-over-year increase was partially attributable to increased wages and incentives reflecting higher employment levels and improved performance.As a percentage of total revenues, first quarter SAG expense decreased from 9.2% in 2018 to 9.1% in 2019. We remain focused on further leveraging our overhead cost structure.
Other operating expense, which has an approximate run-rate of $12 million a year (exclusive of discrete items), is composed of various operating items not separately presented in the accompanying Condensed Consolidated Statements of Comprehensive Income. Total other operating expense and significant items included in the total were:
§ | $4.3 million |
§ |
|
§ | $1.7 million gain referable to the settlement of |
§ | $0.5 million |
§ | $4.2 million of managerial restructuring charges |
Hurricanes Harvey and Irma negatively affected more than half of our operational footprintNet interest expense was $32.9 million in the third quarter. Important Southeastern markets, particularly Florida and Georgia, as well as coastal markets in Texas and along the central Gulf Coast were disrupted. Prolonged extreme weather conditions limited both revenue growth and profitability. Aggregates shipments increased 1% and pricing improved 3% versus the prior year’s third quarter. Overall, both gross profit and operating earnings improved slightlyfirst quarter of 2019 compared to the prior year.
Storms disrupted the third quarter shipment pattern in a number of our stronger growth markets. Absent the impact of these storms, we believe that our third quarter shipments would have been in line with expectations. We are still experiencing some lingering effects from these storms on plant efficiency and shipment levels, which will take some time to work through. Underlying demand, however, remains solid, the pricing environment remains positive and our unit profitability in aggregates continues to strengthen. On a same-store basis, our third quarter gross profit per ton was essentially flat while our cash gross profit per ton set a third-quarter record despite the severe weather. We are very encouraged by these trends, which should provide good momentum into 2018.
Our business remains on track with our longer-term goals and expectations. Growth in new construction starts in our markets continues to outpace the rest of the U.S. Recent acquisitions are performing well and should make meaningful contributions to our earnings growth in 2018 and beyond. We remain confident$37.8 million in the sustained, multi-year recovery in materials demand across our markets and in the further compounding improvements to our unit profitability. However, given the shortfall in shipments to date and due to certain lingering effectsfirst quarter of third quarter weather events on fourth quarter shipments, pricing and costs, we now expect full year aggregates shipments to approximate the2018. The prior year with full year Adjusted EBITDA of approximately $1 billion.
26
As of September 30, year-to-date cash capital expenditures were $366.8 million. This amount included $136.8includes a $7.4 million invested in internal growth projectscharge related to enhance our aggregates distribution network to markets without local aggregates reserves, as well as development of new sites and other growth investment projects. Core capital investments to replace existing property, plant & equipment made up the remaining $230.0 million, and are expected to be approximately $300 million for the full year.
We remain active in the pursuit of acquisitions and other value-creating growth investments. Since January, we have closed acquisitions totaling $212.4 million (seefirst quarter 2018 debt refinancing. For additional details, see Note 167 to the condensed consolidated financial statements). These acquisitions complement our existing positions in certain California, Illinois, New Mexico and Tennessee markets.statements.
We expectIncome tax expense from continuing operations was $10.7 million in the first quarter of 2019 compared to closean income tax benefit of $4.9 million in the Aggregates USA acquisition (see Note 16) during the fourth quarter.first quarter of 2018. The increase in tax expense is related to an increase in earnings along with a decrease in share-based compensation excess tax benefits quarter-over-quarter.
AtEarnings from continuing operations were $0.48 per diluted share in the endfirst quarter of 2019 compared to $0.40 per diluted share in the thirdfirst quarter total debtof 2018.
Discontinued Operations — First quarter pretax loss from discontinued operations was $2.8 billion and cash was $701.2 million. Retirement of notes due$0.6 million in June and December of 2018 was completed2019 compared with $0.6 million in July for $565.6 million using part of the proceeds from the $1.0 billion of new notes issued in June. The remainder of the proceeds will be used to help fund acquisitions and other growth investments including the Aggregates USA acquisition. One-time2018. Both periods include charges related to this early debt retirement were $46.1 million. Full year interest expense will be approximately $190.2 milliongeneral and product liability costs, including these one-time charges.legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.
We are excited about the growth opportunities ahead of us. Leading indicators, such as growth in the pre-construction pipeline and in construction starts in our markets, as well as growth in our own order backlogs, point toward a return to growth in 2018 and beyond. Private demand continues to grow and public demand is firming up after relative weakness during the last 18 months.
Our confidence in the longer term outlook for our business remains strong. Our industry-leading core profitability in aggregates keeps improving and positions us well for future earnings growth. We have the financial strength to continue making smart growth investments that fit us best and we are committed to continuous improvements in safety, customer service and operational efficiencies.
2731
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Gross profit margin excluding freight and delivery revenues is not a Generally Accepted Accounting Principle (GAAP) measure. We present this metric as it is consistent with the basis by which we review our operating results. Likewise, we believe that this presentation is consistent with our competitors and consistent with the basis by which investors analyze our operating results considering that freight and delivery services represent pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:
gross profit margin in accordance with gaap
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| September 30 |
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| September 30 |
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dollars in millions | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Gross profit | $ 305.5 |
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| $ 304.2 |
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| $ 757.3 |
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| $ 761.1 |
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Total revenues | $ 1,094.7 |
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| $ 1,008.1 |
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| $ 2,912.8 |
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| $ 2,719.7 |
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Gross profit margin | 27.9% |
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| 30.2% |
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| 26.0% |
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| 28.0% |
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gross profit margin excluding freight and delivery revenues
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| September 30 |
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dollars in millions | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Gross profit | $ 305.5 |
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| $ 304.2 |
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| $ 757.3 |
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| $ 761.1 |
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Total revenues | $ 1,094.7 |
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| $ 1,008.1 |
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| $ 2,912.8 |
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| $ 2,719.7 |
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Freight and delivery revenues 1 | 143.7 |
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| 143.8 |
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| 397.9 |
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| 407.3 |
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Total revenues excluding freight and delivery revenues | $ 951.0 |
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| $ 864.3 |
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| $ 2,514.9 |
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| $ 2,312.4 |
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Gross profit margin excluding |
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freight and delivery revenues | 32.1% |
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| 35.2% |
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| 30.1% |
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| 32.9% |
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SAME-STORE
We have provided certain information on a same-store basis. When discussing our financial results in comparison to prior periods, we may exclude the operating results of recently acquired/divested businesses that do not have comparable results in the periods being discussed. These recently acquired/divested businesses are disclosed in Note 16 “Acquisitions and Divestitures.” This approach allows us to evaluate the performance of our operations on a comparable basis. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our operations are performing period over period without the effects of acquisition and divestiture activity. Our same-store information may not be comparable to similar measures used by other entities.companies.
AGGREGATES SEGMENT FREIGHT-ADJUSTED REVENUES
28
Aggregates segment gross profit margin as a percentage of freight-adjusted revenues is not a GAAPGenerally Accepted Accounting Principle (GAAP) measure. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, and transportation revenues, which are pass-through activities. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Incremental gross profitAdditionally, we use this metric as a percentagethe basis for calculating the average sales price of freight-adjusted revenues represents the year-over-year change in gross profit divided by the year-over-year change in freight-adjusted revenues. Reconciliationsour aggregates products. Reconciliation of these metricsthis metric to theirits nearest GAAP measures aremeasure is presented below:
Aggregates segment gross profit margin in accordance with gaap
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dollars in millions | 2017 |
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| 2016 |
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Aggregates segment |
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Gross profit | $ 259.1 |
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| $ 261.8 |
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| $ 652.1 |
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| $ 664.2 |
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Segment sales | $ 858.7 |
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| $ 821.8 |
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| $ 2,326.6 |
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| $ 2,248.2 |
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Gross profit margin | 30.2% |
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| 31.9% |
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| 28.0% |
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| 29.5% |
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Incremental gross profit margin | n/a |
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| n/a |
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Aggregates segment gross profit as a percentage offreight-adjusted revenues
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| March 31 | ||||||||||
dollars in millions | 2017 |
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| 2016 |
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| 2016 |
| 2019 |
| 2018 |
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Aggregates segment |
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Gross profit | $ 259.1 |
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| $ 261.8 |
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| $ 652.1 |
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| $ 664.2 |
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Segment sales | $ 858.7 |
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| $ 821.8 |
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| $ 2,326.6 |
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| $ 2,248.2 |
| $ 835.0 |
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| $ 699.7 |
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Less |
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Freight, delivery and transportation revenues 1 | 181.3 |
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| 176.9 |
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| 505.6 |
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| 494.0 |
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Freight & delivery revenues 1 | 195.2 |
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| 159.0 |
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Other revenues | 8.9 |
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| 3.8 |
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| 24.3 |
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| 11.4 |
| 11.2 |
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| 11.3 |
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Freight-adjusted revenues | $ 668.5 |
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| $ 641.1 |
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| $ 1,796.7 |
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| $ 1,742.8 |
| $ 628.6 |
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| $ 529.4 |
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Gross profit as a percentage of |
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freight-adjusted revenues | 38.8% |
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| 40.8% |
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| 36.3% |
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| 38.1% |
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Incremental gross profit as a percentage of |
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freight-adjusted revenues | n/a |
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| n/a |
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Unit shipments - tons | 45.6 |
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| 40.5 |
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Freight-adjusted sales price | $ 13.77 |
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| $ 13.06 |
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1 | At the segment level, freight & delivery |
32
Aggregates segment incremental gross profit
Aggregates segment incremental gross profit flow-through rate is not a GAAP measure and represents the year-over-year change in gross profit divided by the year-over-year change in segment sales excluding freight & delivery (revenues and costs). We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities (we do not generate a profit associated with the transportation component of the selling price of the product). Reconciliations of these metrics to their nearest GAAP measures are presented below:
margin in accordance with gaap
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| Three Months Ended |
| Trailing-Twelve Months | ||||||||
| March 31 |
| March 31 | ||||||||
dollars in millions | 2019 |
| 2018 |
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| 2019 |
| 2018 |
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Aggregates segment |
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Gross profit | $ 185.7 |
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| $ 148.2 |
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| $ 1,029.4 |
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| $ 864.0 |
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Segment sales | $ 835.0 |
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| $ 699.7 |
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| $ 3,649.0 |
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| $ 3,145.4 |
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Gross profit margin | 22.2% |
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| 21.2% |
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| 28.2% |
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| 27.5% |
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Incremental gross profit margin | 27.7% |
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| 32.8% |
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FLOW-THROUGH RATE (non-gaap)
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dollars in millions | 2019 |
| 2018 |
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| 2019 |
| 2018 |
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Aggregates segment |
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Gross profit | $ 185.7 |
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| $ 148.2 |
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| $ 1,029.4 |
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| $ 864.0 |
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Less: Contribution from acquisitions (same-store) | 0.6 |
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| $ (0.1) |
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| $ 11.7 |
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| $ (1.0) |
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Same-store gross profit | $ 185.1 |
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| $ 148.3 |
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| $ 1,017.7 |
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| $ 865.0 |
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Segment sales | $ 835.0 |
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| $ 699.7 |
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| $ 3,649.0 |
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| $ 3,145.4 |
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Less: Freight & delivery revenues 1 | 195.2 |
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| 159.0 |
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| 833.1 |
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| 681.7 |
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Segment sales excluding freight & delivery | $ 639.8 |
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| $ 540.7 |
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| $ 2,815.9 |
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| $ 2,463.7 |
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Less: Contribution from acquisitions (same-store) | 10.2 |
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| $ 0.4 |
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| $ 85.5 |
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| $ 1.6 |
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Same-store segment sales excluding freight & delivery | $ 629.6 |
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| $ 540.3 |
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| $ 2,730.4 |
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| $ 2,462.1 |
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Gross profit flow-through rate | 29.0% |
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| 27.4% |
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| 36.6% |
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| 35.1% |
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Same-store gross profit flow-through rate | 29.4% |
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| 27.5% |
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| 37.3% |
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| 35.1% |
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Incremental gross profit flow-through rate | 37.8% |
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| 47.0% |
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Same-store incremental gross profit flow-through rate | 41.2% |
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| 56.9% |
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1 | At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites. |
2933
cash gross profit
GAAP does not define “cash gross profit” and it should not be considered as an alternative to earnings measures defined by GAAP. We present this metric for the convenience of investment professionals who use such metrics in their analyses and for shareholders who need to understand the metrics we use to assess performance. We and the investment community use this metric to assess the operating performance of our business. Additionally, we present this metric as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. Cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization to gross profit. Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped. Reconciliation of this metric to its nearest GAAP measure is presented below:
cash gross profit
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| March 31 | ||||
in millions, except per ton data | 2019 |
| 2018 |
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Aggregates segment |
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Gross profit | $ 185.7 |
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| $ 148.2 |
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Depreciation, depletion, accretion and amortization | 72.5 |
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| 66.0 |
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Aggregates segment cash gross profit | $ 258.2 |
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| $ 214.2 |
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Unit shipments - tons | 45.6 |
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| 40.5 |
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Aggregates segment gross profit per ton | $ 4.07 |
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| $ 3.66 |
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Aggregates segment cash gross profit per ton | $ 5.66 |
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| $ 5.28 |
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Asphalt segment |
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Gross profit | $ (3.3) |
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| $ 0.2 |
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Depreciation, depletion, accretion and amortization | 8.6 |
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| 7.0 |
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Asphalt segment cash gross profit | $ 5.3 |
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| $ 7.2 |
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Concrete segment |
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Gross profit | $ 8.6 |
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| $ 10.3 |
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Depreciation, depletion, accretion and amortization | 3.0 |
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| 3.4 |
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Concrete segment cash gross profit | $ 11.6 |
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| $ 13.7 |
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Calcium segment |
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Gross profit | $ 0.7 |
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| $ 0.5 |
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Depreciation, depletion, accretion and amortization | 0.1 |
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| 0.1 |
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Calcium segment cash gross profit | $ 0.8 |
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| $ 0.6 |
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| Three Months Ended |
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| Nine Months Ended |
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| September 30 |
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| September 30 |
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in millions, except per ton data | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
|
Aggregates segment |
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Gross profit | $ 259.1 |
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| $ 261.8 |
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| $ 652.1 |
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| $ 664.2 |
|
DDA&A | 64.1 |
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| 60.2 |
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| 182.5 |
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| 177.1 |
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Aggregates segment cash gross profit | $ 323.2 |
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| $ 322.0 |
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| $ 834.6 |
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| $ 841.3 |
|
Unit shipments - tons | 50.9 |
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| 50.3 |
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| 137.2 |
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| 138.3 |
|
Aggregates segment cash gross profit per ton | $ 6.34 |
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| $ 6.40 |
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| $ 6.09 |
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| $ 6.09 |
|
Asphalt segment |
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Gross profit | $ 31.4 |
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| $ 32.9 |
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| $ 68.9 |
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| $ 76.0 |
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DDA&A | 6.5 |
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| 4.1 |
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| 18.8 |
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| 12.5 |
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Asphalt segment cash gross profit | $ 37.9 |
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| $ 37.0 |
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| $ 87.7 |
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| $ 88.5 |
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Concrete segment |
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Gross profit | $ 14.4 |
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| $ 8.7 |
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| $ 34.3 |
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| $ 18.3 |
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DDA&A | 3.6 |
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| 3.1 |
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| 10.3 |
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| 9.1 |
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Concrete segment cash gross profit | $ 18.0 |
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| $ 11.8 |
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| $ 44.6 |
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| $ 27.4 |
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Calcium segment |
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Gross profit | $ 0.7 |
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| $ 0.8 |
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| $ 2.0 |
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| $ 2.6 |
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DDA&A | 0.2 |
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| 0.2 |
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| 0.6 |
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| 0.6 |
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Calcium segment cash gross profit | $ 0.9 |
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| $ 1.0 |
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| $ 2.6 |
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| $ 3.2 |
|
3034
EBITDA and adjusted ebitda
GAAP does not define “Earnings Before Interest, Taxes, Depreciation and Amortization” (EBITDA) and it should not be considered as an alternative to earnings measures defined by GAAP. We present this metric for the convenience of investment professionals who use such metrics in their analyses and for shareholders who need to understand the metrics we use to assess performance. We use this metric to assess the operating performance of our business and foras a basis offor strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. We adjust EBITDA for certain items to provide a more consistent comparison of earnings performance from period to period. Reconciliation of this metric to its nearest GAAP measure is presented below:
EBITDA and adjusted ebitda
below (numbers may not foot due to rounding):
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| Three Months Ended |
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| Nine Months Ended |
| Three Months Ended | ||||||||||
| September 30 |
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| September 30 |
| March 31 | ||||||||||
in millions | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
| 2019 |
| 2018 |
| |
Net earnings | $ 108.6 |
|
| $ 142.0 |
|
| $ 273.6 |
|
| $ 306.9 |
| $ 63.3 |
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| $ 53.0 |
|
Income tax expense | 39.1 |
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| 49.8 |
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| 81.6 |
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| 91.6 |
| |||||
Interest expense, net | 82.0 |
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| 33.2 |
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| 154.6 |
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| 100.1 |
| |||||
(Earnings) loss on discontinued operations, net of tax | 1.6 |
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| 3.1 |
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| (8.2) |
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| 7.5 |
| |||||
Income tax expense (benefit) | 10.7 |
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| (4.9) |
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Interest expense, net of interest income | 32.9 |
|
| 37.8 |
| |||||||||||
Loss on discontinued operations, net of tax | 0.6 |
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| 0.4 |
| |||||||||||
EBIT | 231.3 |
|
| 228.1 |
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| 501.6 |
|
| 506.1 |
| 107.6 |
|
| 86.3 |
|
Depreciation, depletion, accretion and amortization | 79.6 |
|
| 72.0 |
|
| 228.0 |
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| 213.4 |
| 89.2 |
|
| 81.4 |
|
EBITDA | $ 310.9 |
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| $ 300.1 |
|
| $ 729.6 |
|
| $ 719.5 |
| $ 196.7 |
|
| $ 167.7 |
|
Business interruption claims recovery, net of incentives | $ 0.0 |
|
| $ (0.2) |
|
| $ 0.0 |
|
| $ (11.2) |
| |||||
Charges associated with divested operations | 0.1 |
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| 1.1 |
|
| 16.5 |
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| 16.8 |
| |||||
Business development, net of termination fee | 0.8 |
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| 0.0 |
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| 0.8 |
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| 0.0 |
| |||||
Asset impairment | 0.0 |
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| 0.0 |
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| 0.0 |
|
| 10.5 |
| |||||
Gain on sale of businesses | $ (4.1) |
|
| $ (2.9) |
| |||||||||||
Business interruption claims recovery | 0.0 |
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| (1.7) |
| |||||||||||
Business development 1 | 0.0 |
|
| 0.5 |
| |||||||||||
Restructuring charges | 0.0 |
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| 0.0 |
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| 1.9 |
|
| 0.3 |
| 0.0 |
|
| 4.2 |
|
Adjusted EBITDA | $ 311.8 |
|
| $ 301.0 |
|
| $ 748.8 |
|
| $ 735.9 |
| $ 192.7 |
|
| $ 167.8 |
|
Depreciation, depletion, accretion and amortization | (79.6) |
|
| (72.0) |
|
| (228.0) |
|
| (213.4) |
| (89.2) |
|
| (81.4) |
|
Adjusted EBIT | $ 232.2 |
|
| $ 229.0 |
|
| $ 520.8 |
|
| $ 522.5 |
| $ 103.5 |
|
| $ 86.4 |
|
1 | Represents non-routine charges associated with acquisitions including the cost impact of purchase accounting inventory valuations. |
Adjusted Diluted EPS from continuing Operations
Similar to our presentation of Adjusted EBITDA, for 2016 has been revisedwe present Adjusted diluted earnings per share (EPS) from continuing operations to conform with the 2017 presentation which no longer includes an adjustment for routine business development charges. However, business development charges that are deemedprovide a more consistent comparison of earnings performance from period to period. This metric is not defined by GAAP and should not be non-routine are includedconsidered as an adjustment.alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:
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| Three Months Ended | ||||
| March 31 | ||||
| 2019 |
| 2018 |
| |
Diluted Earnings Per Share |
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|
|
Net earnings | $ 0.48 |
|
| $ 0.39 |
|
Less: Discontinued operations (loss) | 0.00 |
|
| (0.01) |
|
Diluted EPS from continuing operations | $ 0.48 |
|
| $ 0.40 |
|
Items included in Adjusted EBITDA above | $ (0.02) |
|
| $ 0.00 |
|
Debt refinancing costs | 0.00 |
|
| 0.04 |
|
Adjusted diluted EPS from continuing operations | $ 0.46 |
|
| $ 0.44 |
|
2017
35
2019 projected ebitda
The following reconciliation to the mid-point of the range of 20172019 Projected EBITDA excludes adjustments for charges associated with divested operations, asset impairment and other unusual gains and losses.(as noted in Adjusted EBITDA above) as they are difficult to forecast (timing or amount). Due to the difficulty ofin forecasting the timing or amount of items that have not yet occurred, are out of our control, or cannot be reasonably predicted,such adjustments, we are unable to estimate the significancetheir significance. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this unavailable information.metric to its nearest GAAP measure is presented below:
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in millions | Mid-point | ||||||
Net earnings |
| $ |
| ||||
Income tax expense |
|
| |||||
Interest expense, net |
|
| |||||
Discontinued operations, net of tax |
| 0 |
| ||||
Depreciation, depletion, accretion and amortization |
|
| |||||
Projected EBITDA |
| $ |
|
31
RESULTS OF OPERATIONS
Total revenues include sales of products to customers, net of any discounts and taxes, and freight and delivery revenues billed to customers. Related freight and delivery costs are included in cost of revenues. This presentation is consistent with the basis on which we review our consolidated results of operations. We discuss separately our discontinued operations, which consist of our former Chemicals business.
The following table highlights significant components of our consolidated operating results including EBITDA and Adjusted EBITDA.
consolidated operating Result highlights
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| Three Months Ended |
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| Nine Months Ended |
| ||||||
| September 30 |
|
| September 30 |
| ||||||
in millions, except per share data | 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
|
Total revenues | $ 1,094.7 |
|
| $ 1,008.1 |
|
| $ 2,912.8 |
|
| $ 2,719.7 |
|
Cost of revenues | 789.2 |
|
| 703.9 |
|
| 2,155.5 |
|
| 1,958.6 |
|
Gross profit | $ 305.5 |
|
| $ 304.2 |
|
| $ 757.3 |
|
| $ 761.1 |
|
Selling, administrative and general expenses | $ 73.4 |
|
| $ 76.3 |
|
| $ 238.3 |
|
| $ 235.5 |
|
Gain on sale of property, plant & equipment |
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and businesses | $ 1.5 |
|
| $ 2.0 |
|
| $ 4.6 |
|
| $ 2.9 |
|
Operating earnings | $ 229.5 |
|
| $ 227.1 |
|
| $ 495.9 |
|
| $ 505.8 |
|
Interest expense, net | $ 82.0 |
|
| $ 33.1 |
|
| $ 154.6 |
|
| $ 100.2 |
|
Earnings from continuing operations |
|
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|
|
|
|
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|
|
before income taxes | $ 149.2 |
|
| $ 194.9 |
|
| $ 347.0 |
|
| $ 405.9 |
|
Earnings from continuing operations | $ 110.2 |
|
| $ 145.1 |
|
| $ 265.4 |
|
| $ 314.3 |
|
Earnings (loss) on discontinued operations, |
|
|
|
|
|
|
|
|
|
|
|
net of income taxes | (1.6) |
|
| (3.1) |
|
| 8.2 |
|
| (7.4) |
|
Net earnings | $ 108.6 |
|
| $ 142.0 |
|
| $ 273.6 |
|
| $ 306.9 |
|
Basic earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Continuing operations | $ 0.83 |
|
| $ 1.09 |
|
| $ 2.00 |
|
| $ 2.36 |
|
Discontinued operations | (0.01) |
|
| (0.02) |
|
| 0.07 |
|
| (0.06) |
|
Basic net earnings per share | $ 0.82 |
|
| $ 1.07 |
|
| $ 2.07 |
|
| $ 2.30 |
|
Diluted earnings (loss) per share |
|
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|
|
|
|
|
|
|
|
Continuing operations | $ 0.82 |
|
| $ 1.07 |
|
| $ 1.97 |
|
| $ 2.31 |
|
Discontinued operations | (0.01) |
|
| (0.02) |
|
| 0.06 |
|
| (0.05) |
|
Diluted net earnings per share | $ 0.81 |
|
| $ 1.05 |
|
| $ 2.03 |
|
| $ 2.26�� |
|
EBITDA | $ 310.9 |
|
| $ 300.1 |
|
| $ 729.6 |
|
| $ 719.5 |
|
Adjusted EBITDA | $ 311.8 |
|
| $ 301.0 |
|
| $ 748.8 |
|
| $ 735.9 |
|
THIRD quarter 2017 Compared to THIRD Quarter 2016
Third quarter 2017 total revenues were $1,094.7 million, up 9% from the third quarter of 2016. Shipments increased in aggregates (+1%), asphalt mix (+7%) and ready-mixed concrete (+20%). Gross profit declined in the Aggregates (-$2.6 million or -1%) and Asphalt (-$1.5 million or -5%) segments, while it was up in the Concrete segment (+$5.7 million or +65%). Diesel fuel costs were up $3.9 million as a result of an 18% increase in the unit cost of diesel fuel, with most ($2.7 million) of this increased cost reflected in the Aggregates segment.
32
Net earnings for the third quarter of 2017 were $108.6 million, or $0.81 per diluted share, compared to $142.0 million, or $1.05 per diluted share, in the third quarter of 2016. Each period’s results were impacted by discrete items, as follows:
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|
Continuing Operations — Changes in earnings from continuing operations before income taxes for the third quarter of 2017 versus the third quarter of 2016 are summarized below:
earnings from continuing operations before income taxes
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Aggregates shipments increased 1% versus the prior year’s quarter. Shipment trends in aggregates were disrupted by hurricanes across our Florida, Georgia, Gulf Coast, North Carolina, South Carolina and coastal Texas markets. Markets outside of these areas combined to grow mid-single digit versus the prior year’s third quarter – more in line with trends and expectations.
Broad pricing momentum continued across our footprint with most markets realizing price growth in the third quarter. For the quarter, freight-adjusted average sales price for aggregates increased 3% versus the prior year, or $0.37 per ton, despite a negative product mix impact. Product mix, partly due to aggregates needs immediately after the hurricanes, negatively impacted price growth by approximately one percentage point (100 basis points). Excluding mix impact, aggregates price increased 4%. The overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital.
Third quarter Aggregates segment gross profit was $259.1 million, or $5.09 per ton. These results were slightly lower than the prior year as a result of the third quarter weather events. Weather-related disruptions impaired shipments and drove inefficiencies that limited revenue growth and earnings improvement. The aforementioned 18% increase in the unit cost of diesel fuel and costs related to the transition to two new, more efficient ships to transport aggregates from our quarry in Mexico negatively impacted segment gross profit by $6.7 million in comparison to the prior year.
33
Asphalt segment gross profit was $31.4 million in the third quarter of 2017 versus $32.9 million in the prior year period. Shipments of asphalt mix were 3.1 million tons in total and 2.8 million tons on a same-store basis. Shipments in the prior year were 2.9 million tons. An 18% increase in liquid asphalt unit cost negatively affected materials margins.
Concrete segment gross profit was $14.4 million in the quarter compared to $8.7 million in the prior year period. Shipments increased 20% versus the prior year. On a same-store basis, volumes increased 8%, as volumes in Virginia (our largest concrete market) drove most of the year-over-year increase. Materials margins and unit gross profit in the Concrete segment also improved versus the prior year.
Our Calcium segment reported gross profit of $0.7 million versus $0.8 million in the third quarter of 2016.
On a trailing-twelve-month basis, total gross profit in our non-aggregates segments was $135.9 million, a 12% increase from the prior year’s comparable period.
SAG expenses were $73.4 million versus $76.3 million in the prior year’s third quarter. Trailing-twelve-month SAG expenses were $317.8 million, in line with full-year expectations.
Other operating expense was $4.2 million in the third quarter of 2017 versus $3.5 million in the third quarter of 2016. This line item includes the aforementioned discrete charges associated with business development (net of a termination fee) in the amount of $1.2 million for the third quarter of 2017. These net charges were composed of $9.2 million of non-routine business development charges partially offset by an $8.0 million credit related to an asset purchase agreement termination fee. Additionally, this line item includes the aforementioned discrete charges associated with divested operations (environmental liability accruals at divested sites) of $0.1 million and $1.1 million for the third quarters of 2017 and 2016, respectively.
Net interest expense was $82.0 million in the third quarter of 2017 compared to $33.1 million in 2016. The higher interest expense resulted primarily from the $46.1 million charge related to the July 2017 debt purchase. For additional details, see Note 7 to the condensed consolidated financial statements.
Income tax expense from continuing operations was $39.1 million in the third quarter of 2017 compared to income tax expense of $49.8 million in the third quarter of 2016. The decrease in our income tax expense resulted largely from applying the statutory rate to the decrease in our pretax earnings.
Earnings from continuing operations were $0.82 per diluted share in the third quarter of 2017 compared to $1.07 per diluted share in the third quarter of 2016.
Discontinued Operations — Third quarter pretax loss from discontinued operations was $1.3 million in 2017 compared with a pretax loss of $5.1 million in 2016. Both periods include charges related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 2 to the condensed consolidated financial statements.
34
YEAR-TO-DATE SEPTEMBER 30, 2017 Compared to YEAR-TO-DATE SEPTEMBER 30, 2016
Total revenues for the first nine months of 2017 were $2,912.8 million, up 7% from the first nine months of 2016. Shipments declined in aggregates (-1%) while they were up in asphalt mix (+10%) and ready-mixed concrete (+21%). Gross profit declined in the Aggregates (-$12.1 million or -2%) and Asphalt (-$7.1 million or -9%) segments while it was up in the Concrete segment (+$16.0 million or +87%). Diesel fuel costs were up $12.4 million as a result of a 22% increase in the unit cost of diesel fuel compared with the first nine months of 2016, with most ($9.1 million) of this increased cost reflected in the Aggregates segment.
Net earnings for the first nine months of 2017 were $273.6 million, or $2.03 per diluted share, compared to $306.9 million, or $2.26 per diluted share, in the first nine months of 2016. Each period’s results were impacted by discrete items, as follows:
|
|
|
|
Continuing Operations — Changes in earnings from continuing operations before income taxes for year-to-date September 30, 2017 versus year-to-date September 30, 2016 are summarized below:
earnings from continuing operations before income taxes
| ||
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Gross profit for our Aggregates segment was $652.1 million for the first nine months of 2017 versus $664.2 million in the comparable period of 2016. Aggregates segment sales of $2,326.6 million were up 3%, and aggregates freight-adjusted revenues of $1,796.7 million were also up 3%. Year-to-date aggregates shipments declined 1%, or 1.1 million tons, compared to the first nine months of 2016. Wet weather — severe flooding in California during the first quarter of 2017, extreme rainfall in core Southeastern markets (Alabama, Florida, Georgia, Louisiana and Mississippi) during the second quarter of 2017, and hurricanes/tropical storm conditions across our Florida, Georgia, Gulf Coast, North Carolina, South Carolina and coastal Texas markets during the third quarter of 2017 — contributed to the shipment shortfall. Freight-adjusted average sales price for aggregates increased 4%, or $0.49 per ton, versus the first nine months of 2016, with most major markets realizing price improvement. Year-to-date unit cost of sales (freight-adjusted) in the Aggregates segment was up 7%, or $0.55 per ton, versus the nine months of 2016. As noted above, higher diesel fuel costs accounted for $9.1 million of the cost increase in the Aggregates segment. Additionally, inefficiencies and lower volume due to the severe weather conditions noted above also contributed to the increased cost. Gross profit per ton was $4.75 per ton for the first nine months of 2017 compared with $4.80 per ton for the first nine months of 2016.
35
Asphalt segment gross profit of $68.9 million was down $7.1 million from the first nine months of 2016. Shipments increased 10% in total and were essentially flat on a same-store basis. Materials margins were lower as a result of lower unit sales price and higher liquid asphalt unit cost.
Concrete segment gross profit was $34.3 million for the first nine months of 2017, up $16.0 million from the prior year period. Shipments increased 21% versus the first nine months of 2016 as ready-mixed concrete volumes increased in most of our markets. On a same-store basis, ready-mixed concrete shipments increased 13%. Concrete segment materials margins and unit gross profit also improved versus the first nine months of 2016.
Our Calcium segment reported gross profit of $2.0 million versus $2.6 million in the first nine months of 2016.
SAG expenses were $238.3 million versus $235.5 million in the prior year’s first nine months reflecting a 0.5 percentage point (50 basis point) reduction as a percentage of total revenues.
In the first nine months of 2016, we recognized a gain of $11.7 million related to the settlement of business interruption claims from the 2010 Gulf Coast oil spill.
There were no asset impairment charges during the first nine months of 2017. During the first nine months of 2016, we recorded $10.5 million of losses on impairment of long-lived assets, as follows: ($0.9 million) — wrote off nonrecoverable project costs related to two Aggregates segment capital projects that we no longer intend to complete and ($9.6 million) — terminated a nonstrategic aggregates site lease we no longer intended to develop.
Other operating expense, net is composed of various cost items not included in cost of revenues and not specifically presented in the accompanying Condensed Consolidated Statement of Comprehensive Income. The total other operating expense, net and significant items included in the total were:
|
|
|
|
Net interest expense was $154.6 million in the first nine months of 2017 compared to $100.2 million in 2016. This increase resulted from the $46.1 million charge related to the July 2017 debt purchase coupled with the higher debt load. For additional details, see Note 7 to the condensed consolidated financial statements.
Income tax expense from continuing operations was $81.6 million in the first nine months of 2017 compared to $91.6 million in the first nine months of 2016. The decrease in our income tax expense resulted largely from applying the statutory rate to the decrease in our pretax earnings.
Earnings from continuing operations were $2.03 per diluted share in the first nine months of 2017 compared to $2.26 per diluted share in the first nine months of 2016.
Discontinued Operations — Year-to-date September pretax earnings from discontinued operations were $13.6 million in 2017 compared with a pretax loss of $12.3 million in 2016. 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. The current year results also include insurance recoveries from previously incurred general liability costs. For additional details, see Note 2 to the condensed consolidated financial statements.
36
LIQUIDITY AND FINANCIAL RESOURCES
Our primary sources of liquidity are cash provided by our operating activities and a substantial, committed bank line of credit. Additional sources of capital include access to the capital markets, the sale of surplus real estate, and dispositions of nonstrategic operating assets. We believe these financial resources are sufficient to fund our business requirements for 2017,2019, including:
§ | cash contractual obligations |
§ | capital expenditures |
§ | debt service obligations |
§ | dividend payments |
§ | potential share repurchases |
§ | potential acquisitions |
Our balanced approach to capital deployment remains unchanged. We intend to balance reinvestment in our business, growth through acquisitions and return of capital to shareholders, while sustaining financial strength and flexibility.
We actively manage our capital structure and resources in order to minimize the cost of capital while properly managing financial risk. We seek to meet these objectives by adhering to the following principles:
§ | maintain substantial bank line of credit borrowing capacity |
§ | proactively manage our debt maturity schedule such that repayment/refinancing risk in any single year is low |
§ | maintain an appropriate balance of fixed-rate and floating-rate debt |
§ | minimize financial and other covenants that limit our operating and financial flexibility |
36
Cash
Included in our September 30, 2017March 31, 2019 cash and cash equivalents and restricted cash balance of $701.2$31.1 million is $55.1$0.3 million of restricted cash held at our foreign subsidiaries. All of this $55.1 million of cash relates to earnings that are indefinitely reinvested offshore. Use of this cash is currently limited to our foreign operations.as described in Note 1 under the caption Restricted Cash.
cash from operating activities
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| Nine Months Ended |
| Three Months Ended | |||||||
| September 30 |
| March 31 | |||||||
in millions | 2017 |
|
| 2016 |
| 2019 |
| 2018 |
| |
Net earnings | $ 273.6 |
|
| $ 306.9 |
| $ 63.3 |
|
| $ 53.0 |
|
Depreciation, depletion, accretion and amortization (DDA&A) | 228.0 |
|
| 213.4 |
| 89.2 |
|
| 81.4 |
|
Net earnings before noncash deductions for DDA&A | $ 501.6 |
|
| $ 520.3 |
| |||||
Contributions to pension plans | (17.6) |
|
| (7.1) |
| (2.3) |
|
| (102.4) |
|
Deferred tax expense (benefit) | 0.8 |
|
| 8.0 |
| |||||
Cost of debt purchase | 43.0 |
|
| 0.0 |
| 0.0 |
|
| 6.9 |
|
Other operating cash flows, net 1 | (127.5) |
|
| (108.6) |
| (34.8) |
|
| 46.1 |
|
Net cash provided by operating activities | $ 399.5 |
|
| $ 404.6 |
| $ 116.2 |
|
| $ 93.0 |
|
|
|
1 | Primarily reflects changes to working capital balances. |
Net cash provided by operating activities is derived primarily from net earnings before noncash deductions for depreciation, depletion, accretion and amortization. Net cash provided by operating activities was $399.5$116.2 million during the ninethree months ended September 30, 2017,March 31, 2019, a $5.1$23.2 million decreaseincrease compared to the same period of 2016.2018. During the thirdfirst quarter of 2017,2018, we made a $100.0 million discretionary contribution to our qualified pension plan contribution of $10.6 million. Additionally, weplans that was deductible for tax purposes in 2017 and early retired debt costing $43.0incurring premium and transaction costs of $6.9 million above the principal amount of the notes which(which is added back to operating cash flows and reflected as a financing cash outflow.outflow).
37
cash from investing activities
Net cash used for investing activities was $557.6$119.9 million during the first ninethree months of 2017,2019, a $278.0$72.1 million increasedecrease compared to the same period of 2016. We2018. During the first three months of 2018, we acquired the following businesses for $76.3 million of cash consideration: Alabama — aggregates, asphalt mix and construction paving operations; and Texas — aggregates operations. Furthermore, during the first three months of 2018, we divested our ready-mixed concrete operations in Georgia resulting in proceeds of $11.3 million and a ten-year aggregates supply agreement. During the first quarter of 2019, we invested $366.8$122.0 million in our existing operations incompared to the first nine months of 2017, a $79.4$128.7 million increase compared toin the prior year period. Of this $366.8$122.0 million, $136.8$54.5 million was invested in shipping capacity enhancements,internal growth projects to enhance our distribution capabilities, develop new site developmentsproduction sites and enhance existing production facilities and other growth opportunities. Additionally, during the first nine months of 2017, we acquired the following businesses for $210.6 million of cash consideration: California — ready-mixed concrete facilities, an aggregates marine distribution yard and building materials yards; Illinois — two aggregates facilities; New Mexico — an aggregates facility; and Tennessee — two aggregates facilities, asphalt mix operations and a construction paving business. During the first nine months of 2016, we purchased a distribution business in Georgia for $1.6 million of cash consideration.
cash from financing activities
Net cash provided byused for financing activities in the first ninethree months of 20172019 was $600.2 million, an increase of $874.0$9.6 million, compared with the cashto $1.1 million used duringfor financing activities in the same period of 2016. This increase was primarily attributable to the 2017 debt issuances (as2018. The current year includes a net $45.5 million draw on our bank line of credit. The prior year period includes several refinancing actions as described in the debt section below) which providedbelow and a net proceeds of $1,585.0$200.0 million partially offset by the repayment ofdraw on our $235.0 million line of credit and the early retirement of notes due in 2018 for a total cost of $565.6 million ($522.5 million principal and $43.0 million cost of debt purchase).credit. Additionally, we increased dividendscapital returned to our shareholders decreased by $19.4$51.8 million as higher dividends of $3.8 million ($0.750.31 per share compared to $0.60$0.28 per share). Share were offset by lower share repurchases decreased by $101.2of $55.6 million (510,283(no shares in 2019 compared to 492,234 shares @ $118.18$117.47 average price per share compared to 1,426,659 shares @ $113.18 per share). Finally, cash paid for shares withheld to satisfy statutory income tax withholding obligations of $24.6 million decreased $7.8 million from the first nine months of 2016 (see Note 1 to the condensed consolidated financial statements, caption Share-based Compensation – Accounting Standards Update).
37
debt
Certain debt measures are outlinedpresented below:
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| September 30 |
| December 31 |
| September 30 |
|
|
| March 31 |
| December 31 |
| March 31 | ||||||
dollars in millions | dollars in millions | 2017 |
|
| 2016 |
|
| 2016 |
| dollars in millions | 2019 |
| 2018 |
| 2018 | |||||
Debt | Debt |
|
|
|
|
|
|
|
| Debt |
|
|
|
|
|
|
|
| ||
Current maturities of long-term debt | Current maturities of long-term debt | $ 4.8 |
|
| $ 0.1 |
|
| $ 0.1 |
| Current maturities of long-term debt | $ 0.0 |
|
| $ 0.0 |
|
| $ 0.0 |
| ||
Short-term debt (line of credit) | 0.0 |
|
| 0.0 |
|
| 0.0 |
| ||||||||||||
Long-term debt 1 | 2,810.0 |
|
| 1,982.8 |
|
| 1,983.6 |
| ||||||||||||
Short-term debt | Short-term debt | 178.5 |
|
| 133.0 |
|
| 200.0 |
| |||||||||||
Long-term debt | Long-term debt | 2,780.6 |
|
| 2,779.4 |
|
| 2,775.7 |
| |||||||||||
Total debt | Total debt | $ 2,814.8 |
|
| $ 1,982.9 |
|
| $ 1,983.7 |
| Total debt | $ 2,959.1 |
|
| $ 2,912.4 |
|
| $ 2,975.7 |
| ||
Capital | Capital |
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|
|
| Capital |
|
|
|
|
|
|
|
| ||
Total debt | Total debt | $ 2,814.8 |
|
| $ 1,982.9 |
|
| $ 1,983.7 |
| Total debt | $ 2,959.1 |
|
| $ 2,912.4 |
|
| $ 2,975.7 |
| ||
Equity | Equity | 4,685.1 |
|
| 4,572.5 |
|
| 4,504.0 |
| Equity | 5,217.2 |
|
| 5,202.9 |
|
| 4,913.2 |
| ||
Total capital | Total capital | $ 7,499.9 |
|
| $ 6,555.4 |
|
| $ 6,487.7 |
| Total capital | $ 8,176.3 |
|
| $ 8,115.3 |
|
| $ 7,888.9 |
| ||
Total Debt as a Percentage of Total Capital | Total Debt as a Percentage of Total Capital | 37.5% |
|
| 30.2% |
|
| 30.6% |
| Total Debt as a Percentage of Total Capital | 36.2% |
|
| 35.9% |
|
| 37.7% |
| ||
Weighted-average Effective Interest Rates | Weighted-average Effective Interest Rates |
|
|
|
|
|
|
|
| Weighted-average Effective Interest Rates |
|
|
|
|
|
|
|
| ||
Line of credit 2 | 1.25% |
|
| 1.25% |
|
| 1.25% |
| ||||||||||||
Line of credit 1 | Line of credit 1 | 1.25% |
|
| 1.25% |
|
| 1.25% |
| |||||||||||
Term debt | Term debt | 5.08% |
|
| 7.52% |
|
| 7.52% |
| Term debt | 4.55% |
|
| 4.56% |
|
| 4.30% |
| ||
Fixed versus Floating Interest Rate Debt | Fixed versus Floating Interest Rate Debt |
|
|
|
|
|
|
|
| Fixed versus Floating Interest Rate Debt |
|
|
|
|
|
|
|
| ||
Fixed-rate debt | Fixed-rate debt | 82.4% |
|
| 88.3% |
|
| 88.3% |
| Fixed-rate debt | 69.3% |
|
| 70.4% |
|
| 68.8% |
| ||
Floating-rate debt | Floating-rate debt | 17.6% |
|
| 11.7% |
|
| 11.7% |
| Floating-rate debt | 30.7% |
|
| 29.6% |
|
| 31.2% |
|
|
| |
1 |
| |
Reflects the margin above LIBOR for LIBOR-based borrowings; we also paid upfront fees that are amortized to interest expense and pay fees for unused borrowing capacity and standby letters of credit. | ||
|
|
38
Line of credit
Covenants, borrowingborrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of September 30, 2017,March 31, 2019, we were in compliance with the line of credit covenants, and the credit margin for London Interbank Offered Rate (LIBOR)LIBOR borrowings was 1.25%, the credit margin for base rate borrowings was 0.25%, and the commitment fee for the unused amount was 0.15%.
As of September 30, 2017,March 31, 2019, our available borrowing capacity under the line of credit was $706.7$517.0 million. Utilization of the borrowing capacity was as follows:
§ |
|
§ | $ |
TERM DEBT
All of our $2,846.4 million (face value) of term debt is unsecured. $2,596.2$2,846.2 million of such debt is governed by twothree essentially identical indentures that contain customary investment-grade type covenants. The primary covenant in bothall three indentures limits the amount of secured debt we may incur without ratably securing such debt. $250.0 million of such debt is governed, as described below, by the same credit agreement that governs our line of credit. As of September 30, 2017,March 31, 2019, we were in compliance with all term debt covenants.
In JuneThroughout 2017 and during the first quarter of 2018, we issued $1,000.0 millioncompleted a number of debt composedrefinancing activities in order to extend the maturity of three issuances as follows: (1) $700.0 million of 4.50% senior notes due June 2047, (2) $50.0 million of 3.90% senior notes due April 2027 (these notes are a further issuance of, and form a single seriesour debt portfolio consistent with the 3.90% notes issued in March 2017), and (3) $250.0 millionlong-lived nature of floating-rate senior notes due June 2020. These issuances resulted in proceeds of $989.5 million (net of original issue discounts/premiums, underwriter fees and other transaction costs). The proceeds will be used to partially finance the pending acquisition of Aggregates USA as described in Note 16 to the condensed consolidated financial statements and were used to early retire the notes due in 2018 ($272.5 million @ 7.00% and $250.0 million @ 10.375%). This early retirement was completed in July at a cost of $565.6 million including $43.0 million in premium above the principal amount of the notes and transaction costs.our asset base. As a result inof these actions, the thirdweighted-average term of our debt portfolio has more than doubled to approximately 15 years.
As a result of the first quarter 2018 early debt retirements (see Note 7 to the Condensed Consolidated Financial Statements), we recognized $3.0premiums of $5.6 million, transaction costs of net$1.3 million and noncash expense associated with the acceleration(acceleration of unamortized discounts, deferred debt issuance costs and deferred interest rate derivative settlement losses.transaction costs) of $0.5 million. The combined charge of $46.1$7.4 million was a component of interest expense for the three and nine months ended September 30, 2017.first quarter of 2018.
In June 2017, we drew the full $250.0 million on the unsecured delayed draw term loan entered into in December 2016. These funds were used to repay the $235.0 million borrowed on our line of credit and for general corporate purposes. Borrowings bear interest in the same manner as the line of credit. The term loan principal will be repaid quarterly beginning March 2018 as follows: quarters 5 - 8 @ $1.6 million/quarter; 9 - 12 @ $3.1 million/quarter; 13 - 19 @ $4.7 million/quarter and $198.4 million for quarter 20 (December 2021). The term loan may be prepaid at any time without penalty. It is provided by the same group of banks that provides our line of credit, and is governed by the same credit agreement as the line of credit. As such, it is subject to the same affirmative, negative, and financial covenants.
38
In March 2017, we issued $350.0 million of 3.90% senior notes due April 2027 for proceeds of $345.5 million (net of original issue discounts, underwriter fees and other transaction costs). The proceeds were used for general corporate purposes. This series of notes now totals $400.0 million due to the additional $50.0 million of notes issued in June (as described above).
CURRENT MATURITIES of long-term debt
The $4.8 millionAs a result of the debt refinancing activities completed throughout 2017 and the first quarter of 2018, current maturities of long-term debt as of September 30, 2017 includes all long-term debt that we intend to pay within twelve months, and is due as follows:March 31, 2019 were insignificant.
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39
debt ratings
Our debt ratings and outlooks as of September 30, 2017March 31, 2019 are as follows:
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| Rating/Outlook |
| Date |
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| Description |
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Senior Unsecured Term Debt |
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Fitch | BBB-/stable |
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| rating/outlook affirmed |
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Moody's | Baa3/stable |
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| rating/outlook affirmed |
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Standard & Poor's | BBB/stable |
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| rating/outlook affirmed |
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Equity
OurThe number of our common stock issuances and purchases for the year-to-date periods ended are as follows:
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September 30 |
| December 31 |
| September 30 |
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| March 31 |
| December 31 |
| March 31 | |||||||||||
in thousands | 2017 |
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| 2016 |
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| 2016 |
| 2019 |
| 2018 |
| 2018 | |||
Common stock shares at January 1, |
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issued and outstanding | 132,339 |
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| 133,172 |
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| 133,172 |
| 131,762 |
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| 132,324 |
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| 132,324 |
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Common Stock Issuances |
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Share-based compensation plans | 452 |
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| 594 |
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| 564 |
| 307 |
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| 630 |
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| 458 |
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Common Stock Purchases |
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Purchased and retired | (510) |
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| (1,427) |
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| (1,427) |
| 0 |
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| (1,192) |
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| (492) |
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Common stock shares at end of period, |
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issued and outstanding | 132,281 |
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| 132,339 |
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| 132,309 |
| 132,069 |
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| 131,762 |
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| 132,290 |
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On February 10, 2006,2017, our Board of Directors authorized us to purchase up to 10,000,0008,243,243 shares of our common stock. On February 10, 2017, there were 1,756,757 shares remaining under this authorization and our Board of Directors authorized us to purchase an additional 8,243,243 sharesstock to refresh the number of shares we were authorized to purchase to 10,000,000. As of September 30, 2017,March 31, 2019, there were 9,489,7178,297,789 shares remaining under the authorization. Depending upon market, business, legal and other conditions, we may make share purchasespurchase shares from time to time through open market (including plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934) and/or privately negotiated transactions. The authorization has no time limit, does not obligate us to purchase any specific number of shares, and may be suspended or discontinued at any time.
OurThe detail of our common stock purchases (all of which were open market purchases) for the year-to-date periods ended are detailed below:as follows:
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September 30 |
| December 31 |
| September 30 |
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in thousands, except average cost | 2017 |
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| 2016 |
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| 2016 |
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Shares Purchased and Retired |
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Number | 510 |
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| 1,427 |
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| 1,427 |
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Cost 1 | $ 60,303 |
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| $ 161,463 |
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| $ 161,436 |
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Average cost per share 1 | $ 118.18 |
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| $ 113.18 |
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| $ 113.18 |
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| March 31 |
| December 31 |
| March 31 | |||
in thousands, except average price | 2019 |
| 2018 |
| 2018 | |||
Shares Purchased and Retired |
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Number | 0 |
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| 1,192 |
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| 492 |
|
Total purchase price | $ 0 |
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| $ 133,983 |
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| $ 57,824 |
|
Average price per share | $ 0.00 |
|
| $ 112.41 |
|
| $ 117.47 |
|
There were no shares held in treasury as of September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016.March 31, 2018.
4039
off-balance sheet arrangements
We have no off-balance sheet arrangements, such as financing or unconsolidated variable interest entities, that either have or are reasonably likely to have a current or future material effect on our:
§ | results of operations and financial position |
§ | capital expenditures |
§ | liquidity and capital resources |
Standby Letters of Credit
For a discussion of our standby letters of credit, see Note 7 to the condensed consolidated financial statements.
Cash Contractual Obligations
Our obligation to make future payments under contracts is presented in our most recent Annual Report on Form 10-K. Changes resulting from our March 2017 debt issuance as described in Note 7 to the condensed consolidated financial statements are outlined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. Changes resulting from our June 2017 debt transactions as well as the July 2017 debt retirement, as described in Note 7 to the condensed consolidated financial statements, are outlined in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.
CRITICAL ACCOUNTING POLICIES
We follow certain significant accounting policies when preparing our consolidated financial statements. A summary of these policies is included in our Annual Report on Form 10-K for the year ended December 31, 20162018 (Form 10-K).
We prepare these financial statements to conform with accounting principles generally accepted in the United States of America. These principles require us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and contingent liabilities at the date of the financial statements. We base our estimates on historical experience, current conditions and various other assumptions we believe reasonable under existing circumstances and evaluate these estimates and judgments on an ongoing basis. The results of these estimates form the basis for our judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our actual results may materially differ from these estimates.
We believe that the accounting policies described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-K require the most significant judgments and estimates used in the preparation of our consolidated financial statements, so we consider these to be our critical accounting policies. There have been no changes to our critical accounting policies during the ninethree months ended September 30, 2017.March 31, 2019.
new Accounting standards
For a discussion of the accounting standards recently adopted or pending adoption and the effect such accounting changes will have on our results of operations, financial position or liquidity, see Note 17 to the condensed consolidated financial statements.
4140
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including expectations regarding future performance, contain forward-looking statements that are subject to assumptions, risks and uncertainties that could cause actual results to differ materially from those projected. These assumptions, risks and uncertainties include, but are not limited to:
§ | general economic and business conditions |
§ | 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 our effective tax rate |
§ | the increasing reliance on information technology infrastructure for our ticketing, procurement, financial statements and other processes could adversely affect operations in the event that the infrastructure does not work as intended or experiences technical difficulties or is subjected to |
§ | the impact of the state of the global economy on our businesses and financial condition and access to capital markets |
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|
§ | the highly competitive nature of the construction materials 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 our products |
§ | weather and other natural phenomena, including the impact of climate change |
§ | energy costs |
§ | costs of hydrocarbon-based raw materials |
§ | healthcare costs |
§ | the amount of long-term debt and interest expense we incur |
§ | changes in interest rates |
§ | 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 |
§ | our ability to secure and permit aggregates reserves in strategically located areas |
§ |
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| our ability to manage and successfully integrate acquisitions |
§ | the |
§ | significant downturn in the construction industry may result in the impairment of goodwill or long-lived |
§ | changes in technologies, which could disrupt the way we do business and how our products are distributed |
§ | other assumptions, risks and uncertainties detailed from time to time in our periodic reports filed with the SEC |
All forward-looking statements are made as of the date of filing.filing or publication. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. Investors are cautioned not to rely unduly on such forward-looking statements when evaluating the information presented in our filings, and are advised to consult any of our future disclosures in filings made with the Securities and Exchange Commission (SEC) and our press releases with regard to our business and consolidated financial position, results of operations and cash flows.
4241
INVESTOR information
We make available on our website, www.vulcanmaterials.com, free of charge, copies of our:
§ | Annual Report on Form 10-K |
§ | Quarterly Reports on Form 10-Q |
§ | Current Reports on Form 8-K |
Our website also includes amendments to those reports filed with or furnished to the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as all Forms 3, 4 and 5 filed with the SEC by our executive officers and directors, as soon as the filings are made publicly available by the SEC on its EDGAR database (www.sec.gov).
The public may read and copy materials filed with the SEC at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K, including financial statements, by writing to Jerry F. Perkins Jr., General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.
We have a:
§ | Business Conduct Policy applicable to all employees and directors |
§ | Code of Ethics for the CEO and Senior Financial Officers |
Copies of the Business Conduct Policy and the Code of Ethics are available on our website under the heading “Corporate Governance.” If we make any amendment to, or waiver of, any provision of the Code of Ethics, we will disclose such information on our website as well as through filings with the SEC.
Our Board of Directors has also adopted:
§ | Corporate Governance Guidelines |
§ | Charters for its Audit, Compensation, Executive, Finance, Governance and Safety, Health & Environmental Affairs Committees |
These documents meet all applicable SEC and New York Stock Exchange regulatory requirements.
The Charters of the Audit, Compensation and Governance Committees are available on our website under the heading, “Corporate Governance,” or you may request a copy of any of these documents by writing to Jerry F. Perkins Jr., General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.
Information included on our website is not incorporated into, or otherwise made a part of, this report.
4342
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. To manage these market risks, we may use derivative financial instruments. We do not enter into derivative financial instruments for speculative or trading purposes.
As discussed in the Liquidity and Financial Resources section of Part I, Item 2, we actively manage our capital structure and resources to balance the cost of capital and risk of financial stress. Such activity includes balancing the cost and risk of interest expense. In addition to floating-rate borrowings, we at times use interest rate swaps to manage the mix of fixed-rate and floating-rate debt.
While floating-rate debt exposes us to rising interest rates, it is typically cheaper than issuing fixed-rate debt at any point in time but can become more expensive than previously issued fixed-rate debt. However, a rising interest rate environment is not necessarily harmful to our financial results. Since 200Over 2,time, our EBITDA and Operatingoperating income are positively correlated to floating interest rates (as measured by 3-month LIBOR). As such, our business serves as a natural hedge to rising interest rates, and floating-rate debt serves as a natural hedge againstto weaker operating results due to general economic weakness.
At September 30, 2017,March 31, 2019, the estimated fair value of our long-term debt including current maturities was $3,073.1$2,775.5 million compared to a book value of $2,814.8$2,780.6 million. The estimated fair value was determined by averaging several asking price quotes for the publicly traded notes and assuming par value for the remainder of the debt. The fair value estimate is based on information available as of the balance sheet date. The effect of a decline in interest rates of one percentage point would increase the fair value of our debt by approximately $258.3$248.2 million.
We are exposed to certain economic risks related to the costs of our pension and other postretirement benefit plans. These economic risks include changes in the discount rate for high-quality bonds and the expected return on plan assets. The impact of a change in these assumptions on our annual pension and other postretirement benefits costs is discussed in our most recent Annual Report on Form 10-K.
ITEM 4
disclosure controls and procedures
We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. These disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a - 15(e) or 15d - 15(e)), include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other management officials, evaluated the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2017.March 31, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017.March 31, 2019.
No material changes were made during the thirdfirst quarter of 20172019 to our internal controls over financial reporting, nor have there been other factors that materially affect these controls.
4443
part Ii other information
ITEM 1
Certain legal proceedings in which we are involved are discussed in Note 12 to the consolidated financial statements and Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2016, and in Note 8 to the condensed consolidated financial statements and Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.2018. See Note 8 to the condensed consolidated financial statements of this Form 10-Q for a discussion of certain recent developments concerning our legal proceedings.
ITEM 1A
There were no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2018.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of our equity securities during the quarter ended September 30, 2017March 31, 2019 are summarized below.
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| Total Number |
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| Maximum |
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|
|
|
|
|
| of Shares |
|
| Number of |
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|
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| Purchased as |
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| Shares that |
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| Total |
|
|
|
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| Part of Publicly |
|
| May Yet Be |
|
| Number of |
|
| Average |
|
| Announced |
|
| Purchased |
|
| Shares |
|
| Price Paid |
|
| Plans or |
|
| Under the Plans |
|
Period | Purchased |
|
| Per Share |
|
| Programs |
|
| or Programs 1 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
July 1 - July 31 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 9,489,717 |
|
Aug 1 - Aug 31 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 9,489,717 |
|
Sept 1 - Sept 30 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 9,489,717 |
|
Total | 0 |
|
| $ 0.00 |
|
| 0 |
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|
|
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|
|
|
|
| Total Number |
|
| Maximum |
|
|
|
|
|
|
|
| of Shares |
|
| Number of |
|
|
|
|
|
|
|
| Purchased as |
|
| Shares that |
|
| Total |
|
|
|
|
| Part of Publicly |
|
| May Yet Be |
|
| Number of |
|
| Average |
|
| Announced |
|
| Purchased |
|
| Shares |
|
| Price Paid |
|
| Plans or |
|
| Under the Plans |
|
Period | Purchased |
|
| Per Share |
|
| Programs |
|
| or Programs 1 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
Jan 1 - Jan 31 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 8,297,789 |
|
Feb 1 - Feb 28 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 8,297,789 |
|
Mar 1 - Mar 31 | 0 |
|
| $ 0.00 |
|
| 0 |
|
| 8,297,789 |
|
Total | 0 |
|
| $ 0.00 |
|
| 0 |
|
|
|
|
|
|
1 | On February 10, |
We did not have any unregistered sales of equity securities during the thirdfirst quarter of 2017.2019.
ITEM 4
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 of this report.
4544
ITEM 6
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|
Exhibit 10.1 | |
Exhibit 31(a) | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 31(b) | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 32(a) | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Exhibit 32(b) | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Exhibit 95 | |
Exhibit 101.INS | XBRL Instance Document |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema Document |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
Exhibit 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
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1 | Management contract or compensatory plan. |
Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 001-33841.
4645
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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|
| VULCAN MATERIALS COMPANY
|
Date | /s/
Vice President, Controller (Principal Accounting Officer) |
|
|
Date | /s/
(Principal Financial Officer) |
4746