UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
‎For the quarterly period ended June 30, ~~2019~~2020
‎OR ‎
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
‎For the transition period from to
‎Commission File Number 001-33841

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




‎ New Jersey ‎(State or other jurisdiction of incorporation)			‎20-8579133 ‎(I.R.S. Employer Identification No.)
‎1200 Urban Center Drive, Birmingham, Alabama ‎(Address of principal executive offices)				‎35242 ‎(zip code)
‎(205) 298-3000 ‎(Registrant's telephone number including area code)
‎Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
‎Title of each class	‎Trading Symbol				Name of each exchange on ‎which registered
Common Stock, $1 par value	VMC				New York Stock Exchange
‎Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o ‎ ‎Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o ‎ ‎Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
‎Large accelerated filer þ		‎Accelerated filer o				‎Smaller reporting company o
‎Non-accelerated filer o						‎Emerging growth company o
‎If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
‎Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
‎Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
‎ Class						Shares outstanding ‎ at July ~~25, 2019~~23, 2020
Common Stock, $1 Par Value						~~132,286,856~~ 132,448,129



VULCAN MATERIALS COMPANY FORM 10-Q QUARTER ENDED JUNE 30, ~~2019~~2020 Contents


			Page
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Cash Flows Notes to Condensed Consolidated Financial Statements	2 3 4 5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4647
	Item 4.	Controls and Procedures	4647

PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	4748
	Item 1A.	Risk Factors	4748
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4749
	Item 4.	Mine Safety Disclosures	4749
	Item 6.	Exhibits	4850
		Signatures	4951
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.

‎

part I financial information

ITEM 1

FINANCIAL STATEMENTS

VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED BALANCE SHEETS



Unaudited	June 30	December 31	June 30	June 30	December 31	June 30
in thousands	2019	2018	2018	2020	2019	2019
Assets
Cash and cash equivalents	$ 26,031	$ 40,037	$ 55,059	$ 816,765	$ 271,589	$ 26,031
Restricted cash	491	4,367	6,056	434	2,917	491
Accounts and notes receivable
Accounts and notes receivable, gross	700,175	542,868	640,742	699,320	573,241	700,175
Allowance for doubtful accounts	(2,844)	(2,090)	(2,628)	(3,460)	(3,125)	(2,844)
Accounts and notes receivable, net	697,331	540,778	638,114	695,860	570,116	697,331
Inventories
Finished products	377,578	372,604	343,948	383,483	391,666	377,578
Raw materials	31,137	27,942	29,684	33,178	31,318	31,137
Products in process	6,332	3,064	1,882	5,116	5,604	6,332
Operating supplies and other	26,376	25,720	28,250	29,703	29,720	26,376
Inventories	441,423	429,330	403,764	451,480	458,308	441,423
Other current assets	89,739	64,633	80,209	65,571	76,396	89,739
Total current assets	1,255,015	1,079,145	1,183,202	2,030,110	1,379,326	1,255,015
Investments and long-term receivables	51,667	44,615	41,989	43,849	60,709	51,667
Property, plant & equipment
Property, plant & equipment, cost	8,613,500	8,457,619	8,241,164	8,921,990	8,749,217	8,613,500
Allowances for depreciation, depletion & amortization	(4,322,818)	(4,220,312)	(4,134,750)	(4,538,980)	(4,433,179)	(4,322,818)
Property, plant & equipment, net	4,290,682	4,237,307	4,106,414	4,383,010	4,316,038	4,290,682
Operating lease right-of-use assets, net	418,896	0	0	426,618	408,189	418,896
Goodwill	3,167,061	3,165,396	3,163,954	3,172,112	3,167,061	3,167,061
Other intangible assets, net	1,076,986	1,095,378	1,156,898	1,114,592	1,091,475	1,076,986
Other noncurrent assets	220,457	210,289	192,327	228,433	225,995	220,457
Total assets	$ 10,480,764	$ 9,832,130	$ 9,844,784	$ 11,398,724	$ 10,648,793	$ 10,480,764
Liabilities
Current maturities of long-term debt	24	23	23	500,026	25	24
Short-term debt	137,000	133,000	360,000	0	0	137,000
Trade payables and accruals	284,875	216,473	231,913	278,102	265,159	284,875
Other current liabilities	241,689	253,054	219,860	260,621	270,379	241,689
Total current liabilities	663,588	602,550	811,796	1,038,749	535,563	663,588
Long-term debt	2,781,826	2,779,357	2,776,906	2,785,646	2,784,315	2,781,826
Deferred income taxes, net	601,189	567,283	545,756	671,097	633,039	601,189
Deferred revenue	182,666	186,397	188,826	177,534	179,880	182,666
Operating lease liabilities	396,952	0	0	405,578	388,042	396,952
Other noncurrent liabilities	483,096	493,640	500,870	555,969	506,097	483,096
Total liabilities	$ 5,109,317	$ 4,629,227	$ 4,824,154	$ 5,634,573	$ 5,026,936	$ 5,109,317
Other commitments and contingencies (Note 8)
Equity
Common stock, $1 par value, Authorized 480,000 shares,
Outstanding 132,231, 131,762 and 132,268 shares, respectively	132,231	131,762	132,268
Outstanding 132,446, 132,371 and 132,231 shares, respectively				132,446	132,371	132,231
Capital in excess of par value	2,787,002	2,798,486	2,788,486	2,789,801	2,791,353	2,787,002
Retained earnings	2,623,747	2,444,870	2,244,545	3,049,943	2,895,871	2,623,747
Accumulated other comprehensive loss	(171,533)	(172,215)	(144,669)	(208,039)	(197,738)	(171,533)
Total equity	$ 5,371,447	$ 5,202,903	$ 5,020,630	$ 5,764,151	$ 5,621,857	$ 5,371,447
Total liabilities and equity	$ 10,480,764	$ 9,832,130	$ 9,844,784	$ 11,398,724	$ 10,648,793	$ 10,480,764
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.

‎

VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF
‎COMPREHENSIVE INCOME



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
Unaudited	June 30		June 30		June 30		June 30
in thousands, except per share data	2019	2018	2019	2018	2020	2019	2020	2019
Total revenues	$ 1,327,682	$ 1,200,151	$ 2,324,193	$ 2,054,625	$ 1,322,575	$ 1,327,682	$ 2,371,817	$ 2,324,193
Cost of revenues	957,180	876,967	1,762,016	1,572,106	926,056	957,180	1,773,575	1,762,016
Gross profit	370,502	323,184	562,177	482,519	396,519	370,502	598,242	562,177
Selling, administrative and general expenses	95,689	89,043	185,957	167,383	91,205	95,689	177,635	185,957
Gain on sale of property, plant & equipment
Gain (loss) on sale of property, plant & equipment
and businesses	3,451	2,106	10,748	6,270	(258)	3,451	741	10,748
Other operating expense, net	(2,190)	(5,994)	(6,461)	(9,969)	(6,160)	(2,190)	(10,151)	(6,461)
Operating earnings	276,074	230,253	380,507	311,437	298,896	276,074	411,197	380,507
Other nonoperating income, net	2,466	3,339	5,595	8,421
Other nonoperating income (expense), net					7,367	2,466	(1,969)	5,595
Interest expense, net	33,035	33,244	65,969	71,018	33,954	33,035	64,727	65,969
Earnings from continuing operations
before income taxes	245,505	200,348	320,133	248,840	272,309	245,505	344,501	320,133
Income tax expense	47,598	40,046	58,291	35,143	61,352	47,598	73,546	58,291
Earnings from continuing operations	197,907	160,302	261,842	213,697	210,957	197,907	270,955	261,842
Loss on discontinued operations, net of tax	(349)	(650)	(985)	(1,066)	(1,041)	(349)	(781)	(985)
Net earnings	$ 197,558	$ 159,652	$ 260,857	$ 212,631	$ 209,916	$ 197,558	$ 270,174	$ 260,857
Other comprehensive income, net of tax
Deferred gain on interest rate derivative	0	0	0	2,496
Deferred loss on interest rate derivative					0	0	(14,679)	0
Amortization of prior interest rate derivative loss	56	52	111	118	194	56	988	111
Amortization of actuarial loss and prior service
cost for benefit plans	336	1,092	571	2,183	1,695	336	3,390	571
Other comprehensive income	392	1,144	682	4,797
Other comprehensive income (loss)					1,889	392	(10,301)	682
Comprehensive income	$ 197,950	$ 160,796	$ 261,539	$ 217,428	$ 211,805	$ 197,950	$ 259,873	$ 261,539
Basic earnings (loss) per share
Continuing operations	$ 1.50	$ 1.21	$ 1.98	$ 1.61	$ 1.59	$ 1.50	$ 2.04	$ 1.98
Discontinued operations	(0.01)	0.00	(0.01)	(0.01)	(0.01)	(0.01)	0.00	(0.01)
Net earnings	$ 1.49	$ 1.21	$ 1.97	$ 1.60	$ 1.58	$ 1.49	$ 2.04	$ 1.97
Diluted earnings (loss) per share
Continuing operations	$ 1.48	$ 1.20	$ 1.97	$ 1.59	$ 1.58	$ 1.48	$ 2.03	$ 1.97
Discontinued operations	0.00	(0.01)	(0.01)	(0.01)	0.00	0.00	0.00	(0.01)
Net earnings	$ 1.48	$ 1.19	$ 1.96	$ 1.58	$ 1.58	$ 1.48	$ 2.03	$ 1.96
Weighted-average common shares outstanding
Basic	132,269	132,437	132,157	132,563	132,552	132,269	132,560	132,157
Assuming dilution	133,354	134,051	133,199	134,280	133,115	133,354	133,154	133,199
Depreciation, depletion, accretion and amortization	$ 93,497	$ 85,633	$ 182,677	$ 167,072	$ 99,470	$ 93,497	$ 194,951	$ 182,677
Effective tax rate from continuing operations	19.4%	20.0%	18.2%	14.1%	22.5%	19.4%	21.3%	18.2%
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.

‎

VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Six Months Ended		Six Months Ended
Unaudited	June 30		June 30
in thousands	2019	2018	2020	2019
Operating Activities
Net earnings	$ 260,857	$ 212,631	$ 270,174	$ 260,857
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation, depletion, accretion and amortization	182,677	167,072	194,951	182,677
Noncash operating lease expense			17,977	17,549
Net gain on sale of property, plant & equipment and businesses	(10,748)	(6,270)	(741)	(10,748)
Contributions to pension plans	(4,638)	(104,794)	(4,409)	(4,638)
Share-based compensation expense	14,370	14,763	15,220	14,370
Deferred tax expense (benefit)	34,816	40,549	36,644	34,816
Cost of debt purchase	0	6,922
Changes in assets and liabilities before initial
effects of business acquisitions and dispositions	(201,256)	(55,415)	(101,271)	(201,256)
Other, net	25,838	302	(2,954)	8,289
Net cash provided by operating activities	$ 301,916	$ 275,760	$ 425,591	$ 301,916
Investing Activities
Purchases of property, plant & equipment	(225,837)	(247,166)	(223,147)	(225,837)
Proceeds from sale of property, plant & equipment	11,200	8,523	3,063	11,200
Proceeds from sale of businesses	1,744	11,256	651	1,744
Payment for businesses acquired, net of acquired cash	1,122	(218,996)	(5,668)	1,122
Other, net	(4,577)	(10,226)	5,575	(4,577)
Net cash used for investing activities	$ (216,348)	$ (456,609)	$ (219,526)	$ (216,348)
Financing Activities
Proceeds from short-term debt	360,100	506,200	0	360,100
Payment of short-term debt	(356,100)	(146,200)	0	(356,100)
Payment of current maturities and long-term debt	(11)	(892,044)	(250,012)	(11)
Proceeds from issuance of long-term debt	0	850,000	750,000	0
Debt issuance and exchange costs	0	(45,513)	(10,762)	0
Settlements of interest rate derivatives	0	3,378	(19,863)	0
Purchases of common stock	0	(74,921)	(26,132)	0
Dividends paid	(81,927)	(74,196)	(90,128)	(81,927)
Share-based compensation, shares withheld for taxes	(25,512)	(31,386)	(15,830)	(25,508)
Net cash (used for) provided by financing activities	$ (103,450)	$ 95,318
Net decrease in cash and cash equivalents and restricted cash	(17,882)	(85,531)
Other, net			(645)	(4)
Net cash provided by (used for) financing activities			$ 336,628	$ (103,450)
Net increase (decrease) in cash and cash equivalents and restricted cash			542,693	(17,882)
Cash and cash equivalents and restricted cash at beginning of year	44,404	146,646	274,506	44,404
Cash and cash equivalents and restricted cash at end of period	$ 26,522	$ 61,115	$ 817,199	$ 26,522
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.

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~~20 states, Washington D.C., and the local markets surrounding our operations in ~~Mexico and the Bahamas.~~Mexico. 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~~3 demographic factors are significant drivers of demand for aggregates. While aggregates is our focus and primary business, we produce and sell asphalt mix and/or ready-mixed concrete in our Alabama, ~~mid-Atlantic, Southwestern,~~Arizona, California, Maryland, New Mexico, Tennessee, Texas, Virginia and ~~Western~~Washington D.C. markets.

BASIS OF PRESENTATION

Our accompanying unaudited condensed consolidated financial statements were prepared in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. We prepared the accompanying condensed consolidated financial statements on the same basis as our annual financial statements, except for the adoption of new accounting standards as described in Note 17. Our Condensed Consolidated Balance Sheet as of December 31, ~~2018~~2019 was derived from the audited financial statement, but it does not include all disclosures required by GAAP. In the opinion of our management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. ~~Operating results for the three and six month periods ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.~~ For further information, refer to the consolidated financial statements and footnotes included in our most recent Annual Report on Form 10-K. Operating results for the three and six month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, particularly in light of the uncertainty over the economic and operational impacts of the current novel coronavirus (COVID-19) pandemic.

We are operating as an essential business and while the COVID-19pandemic has not yet materially impacted our business, operations, or financial results, it may have far-reaching impacts on many aspects of our operations, directly and indirectly, including with respect to its impacts on customer behaviors, business and manufacturing operations, our employees, and the market generally. Our condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues and expenses. Such estimates and assumptions affect, among other things, our goodwill and long-lived asset valuations; inventory valuation; assessment of the annual effective tax rate; valuation of deferred income taxes; allowance for doubtful accounts; measurement of cash bonus plans; and pension plan assumptions. Events and changes in circumstances arising after June 30, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

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

RESTRICTED CASH

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

LEASES

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

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

~~We elected the following practical expedients: (1) the practical expedient package which permits us to~~ The non-lease components of our lease agreements are not ~~reassess our prior conclusions about lease identification, lease classification, and initial direct costs; (2) to not separate~~separated from 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.components.

For additional information about leases see Note 2.

DISCONTINUED OPERATIONS

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



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Discontinued Operations
Pretax loss	$ (701)	$ (883)	$ (1,339)	$ (1,449)	$ (1,412)	$ (701)	$ (1,058)	$ (1,339)
Income tax benefit	352	233	354	383	371	352	277	354
Loss on discontinued operations,
net of tax	$ (349)	$ (650)	$ (985)	$ (1,066)	$ (1,041)	$ (349)	$ (781)	$ (985)

Our discontinued operations include ~~charges~~charges/credits 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 no0 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		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Weighted-average common shares
outstanding	132,269	132,437	132,157	132,563	132,552	132,269	132,560	132,157
Dilutive effect of
Stock-Only Stock Appreciation Rights	723	583	723	636	271	723	307	723
Other stock compensation plans	362	1,031	319	1,081	292	362	287	319
Weighted-average common shares
outstanding, assuming dilution	133,354	134,051	133,199	134,280	133,115	133,354	133,154	133,199

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		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Antidilutive common stock equivalents	192	157	220	155	296	192	275	220

6RECLASSIFICATIONS

Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2020 presentation.

Note 2: Leases

~~Operating lease-related assets and liabilities (we do~~ ~~not~~ ~~have any material finance leases) reflected on our June 30, 2019 balance sheet and the weighted-average lease term and discount rate are as follows:~~



		~~June 30~~
~~in thousands~~	~~Classification on the Balance Sheet~~	~~2019~~
~~Assets~~
~~Operating lease right-of-use assets~~		~~$ 435,672~~
~~Accumulated amortization~~		~~(16,776)~~
~~Total lease assets~~	~~Operating lease right-of-use assets, net~~	~~$ 418,896~~
~~Liabilities~~
~~Current~~
~~Operating~~	~~Other current liabilities~~	~~$ 31,357~~
~~Noncurrent~~
~~Operating~~	~~Operating lease liabilities~~	~~396,952~~
~~Total lease liabilities~~		~~$ 428,309~~
~~Lease Term and Discount Rate~~
~~Weighted-average remaining lease term (years)~~
~~Operating leases~~		~~10.0~~
~~Weighted-average discount rate~~
~~Operating leases~~		~~4.4%~~

Our portfolio of nonmineral leases is composed almost entirely of operating leases (we do 0t have any material finance leases) for real estate (including office buildings, aggregates sales yards, and concrete and asphalt sites) and equipment (including railcars and rail track, barges, office equipment and plant equipment).

~~Our building leases have remaining noncancelable periods of 1 - 30 years,~~Operating lease ROU assets 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~~liabilities and the ~~cost to relocate. Rental payments for certain of our building leases~~weighted-average lease term and discount rate are ~~periodically adjusted for inflation and this variable component is recognized~~ as expense when incurred. Many of 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).follows:

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 impact of extending the lease, including the reserve life of the sourcing 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 table below.

Our concrete and asphalt site leases have remaining noncancelable periods of 0 - 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 of 2 - 3 years, and lease terms 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.



		June 30	December 31	June 30
in thousands	Classification on the Balance Sheet	2020	2019	2019
Assets
Operating lease ROU assets		$ 472,003	$ 441,656	$ 435,672
Accumulated amortization		(45,385)	(33,467)	(16,776)
Total lease assets	Operating lease right-of-use assets, net	$ 426,618	$ 408,189	$ 418,896
Liabilities
Current
Operating	Other current liabilities	$ 32,645	$ 29,971	$ 31,357
Noncurrent
Operating	Operating lease liabilities	405,578	388,042	396,952
Total lease liabilities		$ 438,223	$ 418,013	$ 428,309
Lease Term and Discount Rate
Weighted-average remaining lease term (years)
Operating leases		10.4	9.9	10.0
Weighted-average discount rate
Operating leases		4.1%	4.3%	4.4%

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 office and plant equipment leases with terms of 1 year or less.

Our lease agreements do not contain ~~material~~ residual value guarantees, restrictive covenants or early termination options that we deem material. We have not sought or been granted any material ~~termination options.~~lease concessions as a result of the COVID-19 pandemic.

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		Six Months Ended			Three Months Ended		Six Months Ended
		June 30		June 30			June 30		June 30
in thousands	in thousands		2019		2019	in thousands	2020	2019	2020	2019
Lease cost
Lease Cost						Lease Cost
Operating lease cost	Operating lease cost		$ 14,167		$ 28,294	Operating lease cost	$ 14,234	$ 14,167	$ 28,340	$ 28,294
Short-term lease cost ¹	Short-term lease cost ¹		7,922		16,623	Short-term lease cost ¹	8,070	7,922	17,441	16,623
Variable lease cost	Variable lease cost		3,489		6,557	Variable lease cost	3,773	3,489	6,905	6,557
Sublease income	Sublease income		(807)		(1,418)	Sublease income	(721)	(807)	(1,456)	(1,418)
Total lease cost	Total lease cost		$ 24,771		$ 50,056	Total lease cost	$ 25,356	$ 24,771	$ 51,230	$ 50,056


¹	~~We have elected to recognize~~Our short-term lease cost includes the cost of leases with an initial term of one month or ~~less within our short-term lease cost.~~less.

~~Total nonmineral operating lease expense for the prior year’s three and six months ended June 30, 2018 was $21,968,000 and $46,320,000, respectively.~~7

Cash paid for operating leases was $26,559,000 and $25,513,000 for the six months ended June 30, 2020 and 2019, respectively, and was reflected as ~~a reduction~~reductions to operating cash flows.

~~Maturity analysis on an undiscounted basis of our nonmineral lease liabilities as of June 30, 2019 is as follows:~~

Operating
in thousands
Leases
Maturity of Lease Liabilities
2019 (remainder)
$       26,537
2020
49,740
2021
45,807
2022
40,760
2023
36,203
Thereafter
606,079
Total minimum lease payments
$     805,126
Less: Lease payments representing interest
376,817
Present value of future minimum lease payments
$     428,309
Less: Current obligations under leases
31,357
Long-term lease obligations
$     396,952

Future minimum operating lease payments under leases with initial or remaining noncancelable lease terms in excess of one year, exclusive of mineral leases, as 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

Note 3: Income Taxes

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The CARES Act provides numerous tax relief provisions and stimulus measures. A temporary favorable change to the prior year and current year limitations on interest deductions and a temporary suspension of certain payment requirements for the employer portion of Social Security taxes are the relief provisions that are expected to provide us the greatest benefit. In the first quarter of 2020 (i.e., the period of enactment), an expected cash tax benefit of $13,301,000 was recorded to account for the favorable change to the prior year limitation on interest deductions.

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 second quarter of ~~2019,~~2020, we recorded income tax expense from continuing operations of ~~$47,598,000~~$61,352,000 compared to ~~income tax expense from continuing operations of $40,046,000~~$47,598,000 in the second quarter of ~~2018.~~2019. The increase in tax expense was primarily related to an increase in earnings ~~partially offset by an increase~~along with a decrease in share-based compensation excess tax benefits ~~quarter-over-quarter.~~quarter over quarter.

For the first six months of ~~2019,~~2020, we recorded income tax expense from continuing operations of ~~$58,291,000~~$73,546,000 compared to ~~income tax expense from continuing operations of $35,143,000~~$58,291,000 for the first six months of ~~2018.~~2019. The increase in tax expense was primarily related to an increase in earnings along with a decrease in share-based compensation excess tax benefits as compared to the same period in ~~2018.~~2019.

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. A summary of our deferred tax assets and liabilities is included in Note 9 “Income Taxes” in our Annual Report on Form 10-K for the year ended December 31, 2019.

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. ~~At December 31, 2019, we~~We project Alabama state net operating loss (NOL) carryforward deferred tax assets at December 31, 2020 of ~~$67,598,000 ($64,718,000 relates to Alabama),~~$63,380,000 against which we project to have a valuation allowance of ~~$29,678,000 ($29,183,000 relates~~$29,236,000. At this time, we do not expect any future adjustment to ~~Alabama).~~this valuation allowance. The Alabama ~~net operating loss~~NOL carryforward, if not utilized, would expire ~~in years~~ between 2023 – ~~2032~~. and 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, 2018.~~

Note 4: revenueS

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.

Our segment total revenues by geographic market for the three and six month periods ended June 30, 2020 and 2019 are disaggregated as follows:



	Three Months Ended June 30, 2020
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 350,238	$ 37,956	$ 71,653	$ 0	$ 459,847
Gulf Coast	567,811	50,503	17,946	1,889	638,149
West	152,547	134,491	11,084	0	298,122
Segment sales	$ 1,070,596	$ 222,950	$ 100,683	$ 1,889	$ 1,396,118
Intersegment sales	(73,543)	0	0	0	(73,543)
Total revenues	$ 997,053	$ 222,950	$ 100,683	$ 1,889	$ 1,322,575



	Three Months Ended June 30, 2019
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 339,351	$ 46,392	$ 70,871	$ 0	$ 456,614
Gulf Coast	553,746	56,727	14,865	2,003	627,341
West	168,964	144,044	18,032	0	331,040
Segment sales	$ 1,062,061	$ 247,163	$ 103,768	$ 2,003	$ 1,414,995
Intersegment sales	(87,313)	0	0	0	(87,313)
Total revenues	$ 974,748	$ 247,163	$ 103,768	$ 2,003	$ 1,327,682



	Six Months Ended June 30, 2020
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 590,106	$ 55,839	$ 133,772	$ 0	$ 779,717
Gulf Coast	1,061,107	84,358	34,911	3,915	1,184,291
West	287,609	222,542	26,765	0	536,916
Segment sales	$ 1,938,822	$ 362,739	$ 195,448	$ 3,915	$ 2,500,924
Intersegment sales	(129,107)	0	0	0	(129,107)
Total revenues	$ 1,809,715	$ 362,739	$ 195,448	$ 3,915	$ 2,371,817



	Six Months Ended June 30, 2019
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 564,253	$ 64,608	$ 125,587	$ 0	$ 754,448
Gulf Coast	1,050,381	93,779	31,370	3,954	1,179,484
West	282,392	220,866	30,448	0	533,706
Segment sales	$ 1,897,026	$ 379,253	$ 187,405	$ 3,954	$ 2,467,638
Intersegment sales	(143,445)	0	0	0	(143,445)
Total revenues	$ 1,753,581	$ 379,253	$ 187,405	$ 3,954	$ 2,324,193

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 and Texas

West market — Arizona, California and New Mexico

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 ~~$65,257,000~~$57,374,000 and ~~$56,103,000~~$65,257,000 for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$99,772,000~~$96,938,000 and ~~$74,742,000~~$99,772,000 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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~~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,

the vast majority of our aggregates business is not directly subject to renegotiation of profits or termination of contracts with state or federal governments.

~~Our segment total revenues by geographic market for the three and six month periods ended June 30, 2019 and 2018 are disaggregated as follows:~~

Three Months Ended June 30, 2019
in thousands
Aggregates
Asphalt
Concrete
Calcium
Total
Total Revenues by Geographic Market ¹
East
$     339,351
$     46,392
$     70,871
$              0
$      456,614
Gulf Coast
553,746
56,727
14,865
2,003
627,341
West
168,964
144,044
18,032
0
331,040
Segment sales
$  1,062,061
$   247,163
$   103,768
$       2,003
$   1,414,995
Intersegment sales
(87,313)
0
0
0
(87,313)
Total revenues
$     974,748
$   247,163
$   103,768
$       2,003
$   1,327,682

Three Months Ended June 30, 2018
in thousands
Aggregates
Asphalt
Concrete
Calcium
Total
Total Revenues by Geographic Market ¹
East
$     313,245
$     49,339
$     69,605
$              0
$      432,189
Gulf Coast
493,696
38,845
18,354
2,282
553,177
West
149,324
123,644
18,764
0
291,732
Segment sales
$     956,265
$   211,828
$   106,723
$       2,282
$   1,277,098
Intersegment sales
(76,947)
0
0
0
(76,947)
Total revenues
$     879,318
$   211,828
$   106,723
$       2,282
$   1,200,151

Six Months Ended June 30, 2019
in thousands
Aggregates
Asphalt
Concrete
Calcium
Total
Total Revenues by Geographic Market ¹
East
$     564,253
$     64,608
$   125,587
$              0
$      754,448
Gulf Coast
1,050,381
93,779
31,370
3,954
1,179,484
West
282,392
220,866
30,448
0
533,706
Segment sales
$  1,897,026
$   379,253
$   187,405
$       3,954
$   2,467,638
Intersegment sales
(143,445)
0
0
0
(143,445)
Total revenues
$  1,753,581
$   379,253
$   187,405
$       3,954
$   2,324,193

Six Months Ended June 30, 2018
in thousands
Aggregates
Asphalt
Concrete
Calcium
Total
Total Revenues by Geographic Market ¹
East
$     496,459
$     61,068
$   131,175
$              0
$      688,702
Gulf Coast
888,271
53,488
43,554
4,224
989,537
West
271,192
201,107
32,956
0
505,255
Segment sales
$  1,655,922
$   315,663
$   207,685
$       4,224
$   2,183,494
Intersegment sales
(128,869)
0
0
0
(128,869)
Total revenues
$  1,527,053
$   315,663
$   207,685
$       4,224
$   2,054,625

~~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 payment is due by the 15^th 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:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Freight & Delivery Revenues
Total revenues	$ 1,327,682	$ 1,200,151	$ 2,324,193	$ 2,054,625	$ 1,322,575	$ 1,327,682	$ 2,371,817	$ 2,324,193
Freight & delivery revenues ¹	(196,796)	(171,607)	(359,401)	(301,297)	(202,855)	(196,796)	(379,223)	(359,401)
Total revenues excluding freight & delivery	$ 1,130,886	$ 1,028,544	$ 1,964,792	$ 1,753,328	$ 1,119,720	$ 1,130,886	$ 1,992,594	$ 1,964,792


¹	Includes freight & delivery to remote distribution sites.

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):

relate to ~~eight~~8 quarries in Georgia and South Carolina

provide the purchaser solely with a nonoperating percentage interest in the subject quarries’ aggregates production

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 aggregates production. Our consolidated total revenues exclude the revenue from the sale of the purchaser’s share of aggregates.

The proceeds we received from the sale of the percentage interest were recorded as deferred revenue on the balance sheet. We recognize revenue on a unit-of-sales basis (as we sell the purchaser’s share of production) relative to the volume limitations of the transactions. Given the nature of the risks and potential rewards assumed by the buyer, the transactions do not reflect financing activities.

Reconciliation of the VPP deferred revenue balances (current and noncurrent) is as follows:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Deferred Revenue
Balance at beginning of period	$ 191,131	$ 198,201	$ 192,783	$ 199,556	$ 183,997	$ 191,131	$ 185,339	$ 192,783
Revenue recognized from deferred revenue	(2,079)	(1,905)	(3,731)	(3,260)	(2,034)	(2,079)	(3,376)	(3,731)
Balance at end of period	$ 189,052	$ 196,296	$ 189,052	$ 196,296	$ 181,963	$ 189,052	$ 181,963	$ 189,052

Based on expected sales from the specified quarries, we expect to recognize $7,500,000 of VPP deferred revenue as income during the 12-month period ending June 30, ~~2020~~2021 (reflected in other current liabilities in our June 30, ~~2019~~2020 Condensed Consolidated Balance Sheet).

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:



	Level 1 Fair Value			Level 1 Fair Value
	June 30	December 31	June 30	June 30	December 31	June 30
in thousands	2019	2018	2018	2020	2019	2019
Fair Value Recurring
Rabbi Trust
Mutual funds	$ 23,382	$ 19,164	$ 20,698	$ 21,994	$ 22,883	$ 23,382
Total	$ 23,382	$ 19,164	$ 20,698	$ 21,994	$ 22,883	$ 23,382



	Level 2 Fair Value			Level 2 Fair Value
	June 30	December 31	June 30	June 30	December 31	June 30
in thousands	2019	2018	2018	2020	2019	2019
Fair Value Recurring
Rabbi Trust
Money market mutual fund	$ 398	$ 1,015	$ 1,754	$ 1,738	$ 1,340	$ 398
Total	$ 398	$ 1,015	$ 1,754	$ 1,738	$ 1,340	$ 398

We have ~~two~~2 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 ~~$2,844,000~~$(998,000) and ~~$(428,000)~~$2,844,000 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The portions of the net gains (losses) related to investments still held by the Rabbi Trusts at June 30, 2020 and 2019 were $(990,000) and ~~2018 were~~ $2,885,000, ~~and $(430,000),~~ 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.

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 gains 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. Changes in the fair value of interest rate swap 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. We may also enter into contracts that qualify for the normal purchases and normal sale (NPNS) exception. When a contract meets the criteria to qualify as NPNS, we apply such exception. Income recognition and realization related to NPNS contracts generally coincide with the physical delivery of the commodity. For contracts qualifying for the NPNS exception, no recognition of the contract’s fair value in the consolidated financial statements is required until settlement of the contract as long as the transaction remains probable of occurring.

In February 2020, we entered into interest rate locks of a future debt issuance to hedge the risk of higher interest rates. These interest rate locks were designated as cash flow hedges. Consistent with their terms, we settled the interest rate locks in March 2020 for a cash payment of $19,863,000. Given that the related debt issuance at the end of the first quarter: a) was not executed, b) remained probable in the near term and c) had uncertain timing, 1/20^th of the hedge was deemed ineffective and $993,000 of the settlement was recorded to interest expense in the first quarter. The remainder of the settlement was deferred and recorded in AOCI. In May 2020, we issued the related debt in the form of $750,000,000 of 3.50% 10-year notes. The deferred hedge settlement amount in AOCI is amortized to interest expense over the term of the related debt.

In 2007 and 2018, we entered into interest rate locks of future debt issuances to hedge the risk of higher interest rates. These interest rate locks were designated as cash flow hedges. The gain/loss upon settlement of these interest rate hedges is deferred (recorded in AOCI) and amortized to interest expense over the term of the related debt.

This amortization was reflected in the accompanying Condensed Consolidated Statements of Comprehensive Income as follows:



		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
	Location on	June 30		June 30		Location on	June 30		June 30
in thousands	Statement	2019	2018	2019	2018	Statement	2020	2019	2020	2019
Interest Rate Hedges
Loss reclassified from AOCI	Interest					Interest
(effective portion)	expense	$ (76)	$ (71)	$ (151)	$ (160)	expense	$ (263)	$ (76)	$ (1,337)	$ (151)

For the 12-month period ending June 30, ~~2020,~~2021, we estimate that ~~$319,000~~$1,894,000 of the ~~$11,069,000~~$24,644,000 net of tax loss in AOCI will be reclassified to interest expense.

Note 7: Debt

Debt is detailed as follows:



		Effective	June 30	December 31	June 30		Effective	June 30	December 31	June 30
in thousands	in thousands	Interest Rates	2019	2018	2018	in thousands	Interest Rates	2020	2019	2019
Short-term Debt	Short-term Debt					Short-term Debt
Bank line of credit expires 2021 ^{1, 2}		1.25%	$ 137,000	$ 133,000	$ 360,000
Delayed draw term loan expires 2021						Delayed draw term loan expires 2021		$ 0	$ 0	$ 0
Bank line of credit expires 2021 ¹						Bank line of credit expires 2021 ¹		0	0	137,000
Total short-term debt	Total short-term debt		$ 137,000	$ 133,000	$ 360,000	Total short-term debt		$ 0	$ 0	$ 137,000
Long-term Debt	Long-term Debt					Long-term Debt
Bank line of credit expires 2021 ¹	Bank line of credit expires 2021 ¹		$ 0	$ 0	$ 0	Bank line of credit expires 2021 ¹		$ 0	$ 0	$ 0
Floating-rate notes due 2020 ³		3.31%	250,000	250,000	250,000
Floating-rate notes due 2020						Floating-rate notes due 2020		0	250,000	250,000
Floating-rate notes due 2021	Floating-rate notes due 2021	3.38%	500,000	500,000	500,000	Floating-rate notes due 2021	1.21%	500,000	500,000	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
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	400,000	400,000	3.90% notes due 2027	4.00%	400,000	400,000	400,000
3.50% notes due 2030						3.50% notes due 2030	3.91%	750,000	0	0
7.15% notes due 2037	7.15% notes due 2037	8.05%	129,239	129,239	129,239	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	700,000	700,000	4.50% notes due 2047	4.59%	700,000	700,000	700,000
4.70% notes due 2048	4.70% notes due 2048	5.42%	460,949	460,949	460,949	4.70% notes due 2048	5.42%	460,949	460,949	460,949
Other notes	Other notes	6.46%	197	208	219	Other notes	1.10%	9,153	185	197
Total long-term debt - face value	Total long-term debt - face value		$ 2,846,385	$ 2,846,396	$ 2,846,407	Total long-term debt - face value		$ 3,355,341	$ 2,846,373	$ 2,846,385
Unamortized discounts and debt issuance costs	Unamortized discounts and debt issuance costs		(64,535)	(67,016)	(69,478)	Unamortized discounts and debt issuance costs		(69,669)	(62,033)	(64,535)
Total long-term debt - book value	Total long-term debt - book value		$ 2,781,850	$ 2,779,380	$ 2,776,929	Total long-term debt - book value		$ 3,285,672	$ 2,784,340	$ 2,781,850
Less current maturities	Less current maturities		24	23	23	Less current maturities		500,026	25	24
Total long-term debt - reported value	Total long-term debt - reported value		$ 2,781,826	$ 2,779,357	$ 2,776,906	Total long-term debt - reported value		$ 2,785,646	$ 2,784,315	$ 2,781,826
Estimated fair value of long-term debt	Estimated fair value of long-term debt		$ 2,898,283	$ 2,695,802	$ 2,782,543	Estimated fair value of long-term debt		$ 3,225,468	$ 3,073,693	$ 2,898,283


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~~ if we have the intent and ability to extend payment beyond twelve months.
²	The effective interest rate 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.
³	~~This debt is classified as long-term since we intend to refinance it and have the ability to do so by borrowing on our line of credit.~~

Discounts and debt issuance costs are amortized using the effective interest method over the terms of the respective notes resulting in ~~$2,482,000~~$3,126,000 and ~~$2,698,000~~$2,482,000 of net interest expense for these items for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

LINE OF CREDIT AND DELAYED DRAW TERM LOAN

Our unsecured $750,000,000 line of credit matures December 2021 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 June 30, ~~2019,~~2020, we were in compliance with the line of credit covenants.

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~~Truist 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 June 30, ~~2019,~~2020, 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%.

In April 2020, we executed a $750,000,000 364-day delayed draw term loan with a subset of the banks that provide our line of credit. This facility provides for up to 2 draws through October 2020 and all borrowings are due April 2021. Borrowings may be repaid prior to maturity, but once repaid may not be borrowed again. During the second quarter, we borrowed and repaid $250,000,000 on this delayed draw term loan leaving $500,000,000 available for future borrowings.

All terms and conditions of the delayed draw term loan are consistent with those of the line of credit except for the interest rate on borrowings and the commitment fee. Borrowings bear interest, at our option, at either LIBOR plus a credit margin ranging from 1.375% to 2.125%, or Truist Bank’s base rate (generally, its prime rate) plus a credit margin ranging from 0.375% to 1.125%. The credit margin for both LIBOR and base rate borrowings is determined by our credit ratings. The commitment fee, paid on the daily average unused amount of the facility, ranges from 0.125% to 0.25% and is determined by our credit ratings. As of June 30, ~~2019,~~2020, we were in compliance with the delayed draw term loan covenants, the credit margin for LIBOR borrowings was 1.625%, the credit margin for base rate borrowings was 0.625%, and the commitment fee for the unused amount was 0.175%.

As of June 30, 2020, our available borrowing capacity was ~~$558,470,000.~~$1,195,871,000. Utilization of the borrowing capacity was as follows:

~~$137,000,000~~0ne was borrowed

$~~54,530,000~~54,129,000 was used to provide support for outstanding standby letters of credit

TERM DEBT

All of our ~~$2,846,385,000~~$3,355,341,000 (face value) of term debt is unsecured. ~~$2,846,188,000~~$3,346,188,000 of such debt is governed by ~~three~~3 essentially identical indentures that contain customary investment-grade type covenants. The primary covenant in all three indentures limits the amount of secured debt we may incur without ratably securing such debt. As of June 30, ~~2019,~~2020, we were in compliance with all term debt covenants.

In ~~December 2018,~~May 2020, we ~~completed an exchange offer in which all~~issued $750,000,000 of the $460,949,000 of 4.70% senior unregistered notes due 2048 (issued in February 2018 and March 2018 as described below) were exchanged for new registered notes of 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%~~3.50% senior notes due ~~2037 for: (1) a like amount of notes due 2048 (these notes are a further issuance of, and form a single series with, the $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 as described above) and $500,000,000 of floating-rate senior notes due 2021.2030. Total proceeds ~~of $846,029,000~~were $741,417,000 (net of discounts and transaction ~~costs and an interest~~costs). $250,000,000 of the proceeds were used to retire the $250,000,000 floating rate ~~derivative settlement gain),~~notes due June 2020. The remainder of the proceeds, together with cash on hand, ~~were~~will be used to ~~retire/repay without penalty or premium: (1)~~retire the $350,000,000 term loan due 2018, (2) the $250,000,000 term loan due 2021, and (3) the $250,000,000 bank line of credit borrowings. We recognized noncash expense of $203,000 with the acceleration of unamortized deferred transaction costs.

~~In January 2018, we early retired via redemption the remaining $35,111,000 of the 7.50% senior~~$500,000,000 floating rate 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 retirements described above, we recognized premiums of $5,608,000, transaction costs of $1,314,000 and noncash expense (acceleration of unamortized deferred transaction costs) of $466,000. The combined charge of $7,388,000 was a component of interest expense for the three and six months ended June 30, 2018.March 2021.

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 canceled 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 June 30, ~~2019~~2020 are summarized by purpose in the table below:



in thousands
Standby Letters of Credit
Risk management insurance	$ ~~46,611~~47,031
Reclamation/restoration requirements	~~7,919~~7,098
Total	$ ~~54,530~~54,129

Note 8: Commitments and Contingencies

~~As summarized~~Certain of our aggregates reserves are burdened by ~~purpose directly above~~volumetric production payments (nonoperating interest) as described in Note ~~7, our standby letters~~4. As the holder of ~~credit totaled $54,530,000 as~~the working interest, we have responsibility to bear the cost of ~~June 30, 2019.~~mining and producing the reserves attributable to this nonoperating interest.

As described in Note 2, our ~~nonmineral operating~~present value of future minimum (nonmineral) lease ~~liabilities~~payments totaled ~~$428,309,000~~$438,223,000 as of June 30, ~~2019.~~2020.

As summarized by purpose in Note 7, our standby letters of credit totaled $54,129,000 as of June 30, 2020.

As described in Note 9, our asset retirement obligations totaled ~~$223,497,000~~$263,748,000 as of June 30, ~~2019.~~2020.

Amounts accrued for environmental remediation costs (measured on an undiscounted basis) were as follows:



	June 30	December 31	June 30
in thousands	2020	2019	2019
Accrued Environmental Remediation Costs
Continuing operations	$ 22,743	$ 30,429	$ 35,218
Retained from former Chemicals business	10,846	10,972	10,726
Total	$ 33,589	$ 41,401	$ 45,944

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.

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 and superfund site) — 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~~are a participant in ~~this~~the voluntary allocation process, which is likely to ~~take several years.~~extend beyond 2020.

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.

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 state of Louisiana. Damage categories encompassed within the litigation include individual plaintiffs’ claims for property damage, a claim by the state of Louisiana 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.

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 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.

A bench trial (judge only) began in September 2017 and ended in October 2017 in the 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. In December 2017, the judge 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.

We have settled all ~~but two~~except 2 outstanding cases, and our insurers to date 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 these open cases at this 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 2527 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,~~seven New York counties (Nassau, Orange, Putnam, ~~Suffolk,~~ Sullivan, Ulster, Washington and ~~Westchester Counties, New York.~~Westchester). 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 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) — In September 2015, the Los Angeles Regional Water Quality Control Board (RWQCB) issued a Cleanup and Abatement Order ~~(CAO)~~ directing Vulcan to assess, monitor, cleanup and abate wastes that have been discharged to soil, soil vapor, and/or groundwater at the former Hewitt Landfill in Los Angeles. The CAO follows a 2014 Investigative Order from the RWQCB that sought data and a technical evaluation regarding the Hewitt Landfill, and a subsequent amendment to the Investigative Order requiring us to provide groundwater monitoring results to the RWQCB and to create and implement a work plan for further investigation of the Hewitt Landfill. In April 2016, we submitted an interim remedial action plan (IRAP) to the RWQCB, proposing an on-site pilot test of a pump and treat system.

~~Operation of~~Following a thorough investigation and pilot scale testing, the ~~on-site pilot-scale treatment system began in January 2017,~~RWQCB approved a corrective action that includes leachate recovery, storm water capture and ~~was completed in April 2017. With completion of the pilot testing~~conveyance improvements, and ~~other investigative work, we submitted an amendment to the IRAP (AIRAP) to RWQCB in August 2017 proposing the use of~~ a groundwater pump, treat and reinjection system. ~~In February 2018,~~Certain on-site source control measures have been implemented and the ~~AIRAP was approved by RWQCB. As a result~~groundwater treatment system is expected to be operating in mid-2020. The currently-anticipated costs of ~~this approval, we have begun to implement the~~these on-site source control activities ~~described in the AIRAP. During 2018, we accrued a total of $19,032,000 (Q3 - $8,640,000 and Q4 - $10,392,000) for the on-site remedy, bringing the life-to-date total to $34,271,000.~~have been fully accrued.

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.

The EPA and Vulcan entered into an AOC and Statement of Work having an effective date of September 2017 for the design of ~~two~~2 extraction wells south of the Hewitt Site to protect the North Hollywood West (NHW) well ~~field.~~field located within the NHOU. In November 2017, we submitted a Pre-Design Investigation (PDI) Work Plan to the EPA, which sets forth the activities and schedule for our evaluation of the need for a two-well remedy. These activities were completed between the first and third quarters of 2018, and in December 2018 we submitted a PDI Evaluation Report to the EPA. The PDI Evaluation Report summarizes data collection activities conducted pursuant to the PDI Work Plan and provides model updates and evaluation of remediation ~~alternatives to protect the NHW and Rinaldi-Toluca well fields from 1,4-dioxane from the Hewitt Site.~~alternatives. In May 2019, the EPA provided an initial set of comments on the PDI Evaluation Report but has not yet provided additional, final comments. ~~Vulcan has not yet received comments or feedback from the RWQCB 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. 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,~~Playa del Carmen (Cancun), Mexico, 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. NoNaN 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.

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. These AROs relate to our underlying land parcels, including both owned properties and mineral leases. ~~For the three and six month periods ended June 30, we recognized~~ ARO operating costs related to accretion of the liabilities and depreciation of the assets are as follows:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
ARO Operating Costs
Accretion	$ 2,717	$ 2,668	$ 5,450	$ 5,352	$ 3,247	$ 2,717	$ 6,155	$ 5,450
Depreciation	1,800	1,343	3,641	2,680	2,063	1,800	3,899	3,641
Total	$ 4,517	$ 4,011	$ 9,091	$ 8,032	$ 5,310	$ 4,517	$ 10,054	$ 9,091

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:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Asset Retirement Obligations
Balance at beginning of period	$ 225,186	$ 214,709	$ 225,726	$ 218,117	$ 263,445	$ 225,186	$ 210,323	$ 225,726
Liabilities incurred	263	0	263	0	0	263	0	263
Liabilities settled	(3,388)	(1,805)	(6,966)	(7,826)	(3,354)	(3,388)	(8,588)	(6,966)
Accretion expense	2,717	2,668	5,450	5,352	3,247	2,717	6,155	5,450
Revisions, net	(1,281)	(151)	(976)	(222)	410	(1,281)	55,858	(976)
Balance at end of period	$ 223,497	$ 215,421	$ 223,497	$ 215,421	$ 263,748	$ 223,497	$ 263,748	$ 223,497

ARO liabilities settled during the first six months of 2020 and 2019 include $2,152,000 and ~~2018 include~~ $2,015,000, ~~and $5,158,000,~~ respectively, of reclamation activities required under a development agreement and conditional use permits at ~~two~~2 adjacent aggregates sites on owned property in Southern California. The reclamation required under the ~~reclamation~~development agreement will result in the restoration of 90 acres of previously mined property to conditions suitable for retail and commercial development.

ARO revisions during the first six months of 2020 primarily include increases in estimated costs at 3 aggregates locations, including reclamation activities required under a development agreement at an aggregates site on owned property in Southern California. The reclamation required under the development agreement will result in the restoration of previously mined property to conditions suitable for retail and commercial development.

Note 10: Benefit Plans

PENSION PLANS

We sponsor ~~three~~3 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~~3 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 with the exception of two unions that continue to add new participants. Future benefit accruals for participants in our salaried defined benefit pension plans ceased 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:



PENSION BENEFITS	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Components of Net Periodic Benefit Cost
Service cost	$ 1,249	$ 1,429	$ 2,498	$ 2,858	$ 1,331	$ 1,249	$ 2,662	$ 2,498
Interest cost	9,410	8,875	18,820	17,751	7,531	9,410	15,062	18,820
Expected return on plan assets	(11,937)	(14,797)	(23,875)	(29,594)	(12,485)	(11,937)	(24,969)	(23,875)
Amortization of prior service cost	335	335	670	670	335	335	670	670
Amortization of actuarial loss	1,358	2,456	2,716	4,913	3,140	1,358	6,279	2,716
Net periodic pension benefit cost (credit)	$ 415	$ (1,702)	$ 829	$ (3,402)	$ (148)	$ 415	$ (296)	$ 829
Pretax reclassifications from AOCI included in
net periodic pension benefit cost	$ 1,693	$ 2,791	$ 3,386	$ 5,583	$ 3,475	$ 1,693	$ 6,949	$ 3,386

The contributions to pension plans for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, as reflected on the Condensed Consolidated Statements of Cash Flows, pertain to benefit payments under nonqualified plans for both ~~periods and a discretionary qualified plan contribution of $100,000,000 in the first quarter of 2018.~~periods.

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:



OTHER POSTRETIREMENT BENEFITS	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in thousands	2019	2018	2019	2018	2020	2019	2020	2019
Components of Net Periodic Benefit Cost
Service cost	$ 330	$ 340	$ 659	$ 679	$ 380	$ 330	$ 760	$ 659
Interest cost	347	310	694	620	242	347	485	694
Amortization of prior service credit	(979)	(990)	(1,959)	(1,981)	(980)	(979)	(1,959)	(1,959)
Amortization of actuarial gain	(327)	(325)	(654)	(649)	(201)	(327)	(403)	(654)
Net periodic postretirement benefit credit	$ (629)	$ (665)	$ (1,260)	$ (1,331)	$ (559)	$ (629)	$ (1,117)	$ (1,260)
Pretax reclassifications from AOCI included in
net periodic postretirement benefit credit	$ (1,306)	$ (1,315)	$ (2,613)	$ (2,630)	$ (1,181)	$ (1,306)	$ (2,362)	$ (2,613)

DEFINED CONTRIBUTION PLANS

WeIn addition to our pension and postretirement plans, we sponsor ~~two~~2 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 ~~$13,681,000~~$12,810,000 and ~~$13,596,000~~$13,681,000 for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and totaled ~~$27,600,000~~$23,867,000 and ~~$20,144,000~~$27,600,000 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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:



		June 30	December 31	June 30		June 30	December 31	June 30
in thousands	in thousands	2019	2018	2018	in thousands	2020	2019	2019
AOCI	AOCI				AOCI
Interest rate hedges	Interest rate hedges	$ (11,069)	$ (11,180)	$ (8,824)	Interest rate hedges	$ (24,644)	$ (10,953)	$ (11,069)
Pension and postretirement plans	Pension and postretirement plans	(160,464)	(161,035)	(135,845)	Pension and postretirement plans	(183,395)	(186,785)	(160,464)
Total	Total	$ (171,533)	$ (172,215)	$ (144,669)	Total	$ (208,039)	$ (197,738)	$ (171,533)

Changes in AOCI, net of tax, for the six months ended June 30, ~~2019~~2020 are as follows:



			Pension and				Pension and
		Interest Rate	Postretirement			Interest Rate	Postretirement
in thousands	in thousands	Hedges	Benefit Plans	Total	in thousands	Hedges	Benefit Plans	Total
AOCI	AOCI				AOCI
Balances as of December 31, 2018		$ (11,180)	$ (161,035)	$ (172,215)
Balances as of December 31, 2019					Balances as of December 31, 2019	$ (10,953)	$ (186,785)	$ (197,738)
Other comprehensive income (loss)					Other comprehensive income (loss)
before reclassifications					before reclassifications	(14,679)	0	(14,679)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	111	571	682	Amounts reclassified from AOCI	988	3,390	4,378
Balances as of June 30, 2019		$ (11,069)	$ (160,464)	$ (171,533)
Net current period OCI changes					Net current period OCI changes	(13,691)	3,390	(10,301)
Balances as of June 30, 2020					Balances as of June 30, 2020	$ (24,644)	$ (183,395)	$ (208,039)

Amounts reclassified from AOCI to earnings, are as follows:



		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		June 30		June 30			June 30		June 30
in thousands	in thousands	2019	2018	2019	2018	in thousands	2020	2019	2020	2019
Amortization of Interest Rate Hedge Losses	Amortization of Interest Rate Hedge Losses					Amortization of Interest Rate Hedge Losses
Interest expense	Interest expense	$ 76	$ 71	$ 151	$ 160	Interest expense	$ 263	$ 76	$ 1,337	$ 151
Benefit from income taxes	Benefit from income taxes	(20)	(19)	(40)	(42)	Benefit from income taxes	(69)	(20)	(349)	(40)
Total	Total	$ 56	$ 52	$ 111	$ 118	Total	$ 194	$ 56	$ 988	$ 111
Amortization of Pension and Postretirement	Amortization of Pension and Postretirement					Amortization of Pension and Postretirement
Plan Actuarial Loss and Prior Service Cost	Plan Actuarial Loss and Prior Service Cost					Plan Actuarial Loss and Prior Service Cost
Other nonoperating expense	Other nonoperating expense	$ 386	$ 1,477	$ 772	$ 2,953	Other nonoperating expense	$ 2,294	$ 386	$ 4,587	$ 772
Benefit from income taxes	Benefit from income taxes	(50)	(385)	(201)	(770)	Benefit from income taxes	(599)	(50)	(1,197)	(201)
Total	Total	$ 336	$ 1,092	$ 571	$ 2,183	Total	$ 1,695	$ 336	$ 3,390	$ 571
Total reclassifications from AOCI to earnings	Total reclassifications from AOCI to earnings	$ 392	$ 1,144	$ 682	$ 2,301	Total reclassifications from AOCI to earnings	$ 1,889	$ 392	$ 4,378	$ 682

Note 12: Equity

Our capital stock consists solely of common stock, par value $1.00 per share, of which 480,000,000 shares may be issued. Holders of our common stock are entitled to ~~one~~1 vote per share. We may also issue 5,000,000 shares of preferred stock, but no0 shares have been issued. The terms and provisions of such shares will be determined by our Board of Directors upon any issuance in accordance with our Certificate of Incorporation.

There were no0 shares held in treasury as of June 30, ~~2019,~~2020, December 31, ~~2018~~2019 and June 30, ~~2018.~~2019.

Our common stock purchases (all of which were open market purchases) and subsequent retirements for the year-to-date periods ended are as follows:



	June 30	December 31	June 30	June 30	December 31	June 30
in thousands, except average price	2019	2018	2018
in thousands, except average cost				2020	2019	2019
Shares Purchased and Retired
Number	0	1,192	643	214	19	0
Total purchase price	$ 0	$ 133,983	$ 74,921	$ 26,132	$ 2,602	$ 0
Average price per share	$ 0.00	$ 112.41	$ 116.49
Average cost per share				$ 121.92	$ 139.90	$ 0.00

As of June 30, ~~2019, 8,297,789~~2020, 8,064,851 shares may be purchased under the current authorization of our Board of Directors.

Changes in total equity are summarized below:


"

		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		June 30		June 30			June 30		June 30
in thousands, except per share data		2019	2018	2019	2018		2020	2019	2020	2019
Total Equity	Total Equity					Total Equity
Balance at beginning of period	Balance at beginning of period	$ 5,217,209	$ 4,913,210	$ 5,202,903	$ 4,968,893	Balance at beginning of period	$ 5,590,326	$ 5,217,209	$ 5,621,857	$ 5,202,903
Net earnings	Net earnings	197,558	159,652	260,857	212,631	Net earnings	209,916	197,558	270,174	260,857
Common stock issued	Common stock issued					Common stock issued
Share-based compensation plans, net of shares	Share-based compensation plans, net of shares					Share-based compensation plans, net of shares
withheld for taxes	withheld for taxes	(11,370)	(7,228)	(25,438)	(31,337)	withheld for taxes	(1,456)	(11,370)	(16,539)	(25,438)
Purchase and retirement of common stock	Purchase and retirement of common stock	0	(17,097)	0	(74,921)	Purchase and retirement of common stock	0	0	(26,132)	0
Share-based compensation expense	Share-based compensation expense	8,646	7,969	14,370	14,763	Share-based compensation expense	8,504	8,646	15,220	14,370
Cash dividends on common stock	Cash dividends on common stock					Cash dividends on common stock
($0.31/$0.28/$0.62/$0.56 per share, respectively)		(40,988)	(37,020)	(81,927)	(74,196)
Other comprehensive income		392	1,144	682	4,797
($0.34/$0.31/$0.68/$0.62 per share, respectively)						($0.34/$0.31/$0.68/$0.62 per share, respectively)	(45,028)	(40,988)	(90,128)	(81,927)
Other comprehensive income (expense)						Other comprehensive income (expense)	1,889	392	(10,301)	682
Balance at end of period	Balance at end of period	$ 5,371,447	$ 5,020,630	$ 5,371,447	$ 5,020,630	Balance at end of period	$ 5,764,151	$ 5,371,447	$ 5,764,151	$ 5,371,447

Note 13: Segment Reporting

We have ~~four~~4 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. Our 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		Six Months Ended			Three Months Ended		Six Months Ended
		June 30		June 30			June 30		June 30
in thousands	in thousands	2019	2018	2019	2018	in thousands	2020	2019	2020	2019
Total Revenues	Total Revenues					Total Revenues
Aggregates ¹	Aggregates ¹	$ 1,062,061	$ 956,265	$ 1,897,026	$ 1,655,922	Aggregates ¹	$ 1,070,596	$ 1,062,061	$ 1,938,822	$ 1,897,026
Asphalt ²	Asphalt ²	247,163	211,828	379,253	315,663	Asphalt ²	222,950	247,163	362,739	379,253
Concrete	Concrete	103,768	106,723	187,405	207,685	Concrete	100,683	103,768	195,448	187,405
Calcium	Calcium	2,003	2,282	3,954	4,224	Calcium	1,889	2,003	3,915	3,954
Segment sales	Segment sales	$ 1,414,995	$ 1,277,098	$ 2,467,638	$ 2,183,494	Segment sales	$ 1,396,118	$ 1,414,995	$ 2,500,924	$ 2,467,638
Aggregates intersegment sales	Aggregates intersegment sales	(87,313)	(76,947)	(143,445)	(128,869)	Aggregates intersegment sales	(73,543)	(87,313)	(129,107)	(143,445)
Total revenues	Total revenues	$ 1,327,682	$ 1,200,151	$ 2,324,193	$ 2,054,625	Total revenues	$ 1,322,575	$ 1,327,682	$ 2,371,817	$ 2,324,193
Gross Profit	Gross Profit					Gross Profit
Aggregates	Aggregates	$ 329,215	$ 283,476	$ 514,931	$ 431,697	Aggregates	$ 351,162	$ 329,215	$ 545,293	$ 514,931
Asphalt	Asphalt	27,583	25,750	24,311	25,996	Asphalt	30,464	27,583	28,029	24,311
Concrete	Concrete	12,887	13,191	21,450	23,511	Concrete	14,227	12,887	23,440	21,450
Calcium	Calcium	817	767	1,485	1,315	Calcium	666	817	1,480	1,485
Total	Total	$ 370,502	$ 323,184	$ 562,177	$ 482,519	Total	$ 396,519	$ 370,502	$ 598,242	$ 562,177
Depreciation, Depletion, Accretion	Depreciation, Depletion, Accretion					Depreciation, Depletion, Accretion
and Amortization (DDA&A)	and Amortization (DDA&A)					and Amortization (DDA&A)
Aggregates	Aggregates	$ 75,760	$ 69,738	$ 148,281	$ 135,691	Aggregates	$ 80,747	$ 75,760	$ 157,883	$ 148,281
Asphalt	Asphalt	8,884	7,298	17,434	14,300	Asphalt	8,668	8,884	17,402	17,434
Concrete	Concrete	3,327	3,049	6,291	6,463	Concrete	4,001	3,327	8,083	6,291
Calcium	Calcium	58	70	118	139	Calcium	48	58	97	118
Other	Other	5,468	5,478	10,553	10,479	Other	6,006	5,468	11,486	10,553
Total	Total	$ 93,497	$ 85,633	$ 182,677	$ 167,072	Total	$ 99,470	$ 93,497	$ 194,951	$ 182,677
Identifiable Assets ³	Identifiable Assets ³					Identifiable Assets ³
Aggregates	Aggregates			$ 9,385,444	$ 8,751,186	Aggregates			$ 9,545,787	$ 9,385,444
Asphalt	Asphalt			597,328	625,985	Asphalt			583,902	597,328
Concrete	Concrete			299,729	276,743	Concrete			321,304	299,729
Calcium	Calcium			4,042	4,258	Calcium			3,718	4,042
Total identifiable assets	Total identifiable assets			$ 10,286,543	$ 9,658,172	Total identifiable assets			$ 10,454,711	$ 10,286,543
General corporate assets	General corporate assets			167,699	125,497	General corporate assets			126,814	167,699
Cash and cash equivalents and restricted cash	Cash and cash equivalents and restricted cash			26,522	61,115	Cash and cash equivalents and restricted cash			817,199	26,522
Total assets	Total assets			$ 10,480,764	$ 9,844,784	Total assets			$ 11,398,724	$ 10,480,764


¹	Includes product sales (crushed stone, sand and gravel, sand, and other aggregates), as well as freight & delivery costs that we pass along to our customers, and service revenues (see Note 4) related to aggregates.
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.

Note 14: Supplemental Cash Flow Information

Supplemental information referable to our Condensed Consolidated Statements of Cash Flows is summarized below:



	Six Months Ended		Six Months Ended
	June 30		June 30
in thousands	2019	2018	2020	2019
Cash Payments (Refunds)
Cash Payments
Interest (exclusive of amount capitalized)	$ 66,414	$ 62,021	$ 60,741	$ 66,414
Income taxes	34,297	(102,711)	9,055	34,297
Noncash Investing and Financing Activities
Accrued liabilities for purchases of property, plant & equipment	$ 30,259	$ 21,257	$ 10,994	$ 30,259
Recognition of new asset retirement obligations	263	0	0	263
Right-of-use assets obtained in exchange for new operating lease liabilities	435,678	0
Right-of-use assets obtained in exchange for new operating lease liabilities ¹			25,083	435,678
Amounts referable to business acquisitions
Liabilities assumed ¹	3,525	4,040
Liabilities assumed			5,637	3,525
Consideration payable to seller	0	4,500	8,980	0
Fair value of noncash assets and liabilities exchanged			21,214	0


¹	~~Includes adjustments to prior year acquisitions.~~The 2019 amount includes the initial right-of-use assets resulting from our adoption of ASU 2016-02, “Leases.”

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 no0 charges for goodwill impairment in the six month periods ended June 30, ~~2019~~2020 and ~~2018.~~2019. Accumulated goodwill impairment losses amount to $252,664,000 in the Calcium segment.

We have ~~four~~4 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, ~~2018~~2019 to June 30, ~~2019~~2020 are ~~as follows:~~shown 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, 2018		$ 3,073,763	$ 91,633	$ 0	$ 0	$ 3,165,396
Totals at December 31, 2019							Totals at December 31, 2019	$ 3,075,428	$ 91,633	$ 0	$ 0	$ 3,167,061
Goodwill of acquired businesses ¹	Goodwill of acquired businesses ¹	1,665	0	0	0	1,665	Goodwill of acquired businesses ¹	5,051	0	0	0	5,051
Total as of June 30, 2019		$ 3,075,428	$ 91,633	$ 0	$ 0	$ 3,167,061
Totals at June 30, 2020							Totals at June 30, 2020	$ 3,080,479	$ 91,633	$ 0	$ 0	$ 3,172,112


¹	See Note 16 for a summary of ~~prior year~~recent acquisitions.

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.

Note 16: Acquisitions and Divestitures

BUSINESS ACQUISITIONS

~~2019~~2020 BUSINESS ACQUISITIONS — ~~We had no acquisitions through~~Through the six months ended June 30, ~~2019.~~2020, we purchased businesses that support our aggregates operations for total consideration of $35,862,000.

The 2020 acquisitions are reported in our consolidated financial statements as of the acquisition dates and are not material to our results of operations or financial position. The purchase price allocations have been finalized.

As a result of these 2020 acquisitions, we recognized $39,833,000 of amortizable intangible assets and $5,051,000 of goodwill. The amortizable intangible assets will be amortized against earnings on a straight-line basis over a weighted-average 20 years and will not be deductible for income tax purposes. The goodwill represents the balance of deferred tax liabilities generated from carrying over the tax basis in the assets acquired and is not deductible for income tax purposes.

~~2018~~2019 BUSINESS ACQUISITIONS — For the full year ~~2018,~~2019, we purchased the following operations, none of which were material to our results of operations or financial position either individually or collectively, for total cash consideration of ~~$219,863,000 ($215,363,000 cash and $4,500,000 payable):~~$45,273,000:

~~Alabama~~Tennessee — aggregates ~~asphalt mix and construction paving~~ operations

~~California~~Virginia — ~~aggregates and asphalt-mix~~ready-mixed concrete operations



~~Texas — aggregates rail yards, asphalt mix~~The 2019 acquisitions listed above are reported in our consolidated financial statements as of their respective acquisition dates. Purchase price allocations have not been finalized due to pending appraisals for intangible assets and ~~construction paving operations~~property, plant & equipment.

As a result of the ~~2018~~2019 acquisitions, we recognized ~~$44,163,000~~$25,443,000 of amortizable intangible assets (contractual rights in place). The contractual rights in place will be amortized against earnings ~~($43,072,000 -~~on a straight-line basis over a weighted-average ~~19.9~~19.5 years and ~~$1,080,000 - units of sales in excess of 30.0 years) and $7,385,000~~ will be deductible for income tax purposes over 15 years. Of the $43,990,000 of goodwill recognized, $4,863,000 will be deductible for income tax purposes over 15 years, and $31,721,000 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 an increase to goodwill of $1,665,000).

DIVESTITURES AND PENDING DIVESTITURES

In 2020, we sold:

Second quarter — exited our New Mexico ready-mixed concrete business, resulting in an immaterial gain. We retained the concrete plants and mobile fleet and are leasing these assets to the buyer. Additionally, we obtained a 20-year aggregates supply agreement

In 2019, we sold:

First quarter — ~~two~~2 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)

NoNaN assets met the criteria for held for sale at June 30, ~~2019,~~2020, December 31, ~~2018~~2019 or June 30, ~~2018.~~2019.

Note 17: New Accounting Standards

ACCOUNTING STANDARDS RECENTLY ADOPTED

~~LEASE ACCOUNTING~~ CREDIT LOSSES During the first quarter of ~~2019,~~2020, we adopted Accounting Standards Update (ASU) ~~2016-02, “Leases,~~2016-13, “Measurement of Credit Losses on Financial Instruments.” ~~utilizing the comparatives transition option (we elected not to restate comparative periods) under ASC 840.~~ This ASU ~~amends~~amended prior ~~accounting standards for lease accounting and adds additional disclosures about leasing arrangements. Under~~guidance on the impairment of financial instruments. The new guidance lessees are required to recognize lease right-of-use assets and lease liabilities on the balance 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 expense recognition in the income statement and presentation of cash flow in the statement of cash flows. Upon adoption, we recognized operating lease liabilities of $442,697,000, with corresponding right-of-use assetsestimates credit losses based on expected losses, modifies the ~~present value~~impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration. The adoption of the 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.this standard did not materially impact our consolidated financial statements.

ACCOUNTING STANDARDS PENDING ADOPTION

~~defined benefit plans~~LIBOR TRANSITION In ~~August 2018,~~March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The ASU is effective immediately for all entities and will apply through December 31, 2022. For additional information, see our LIBOR transition disclosure in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity and Financial Resources - Debt." We continue to evaluate the effect that discontinuance of LIBOR will have on our contracts.

InCOME tAXES In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes and changes the accounting for certain income tax transactions. The new standard is effective as of January 1, 2021. We do not expect this standard to have a material impact on our consolidated financial statements.

defined benefit plans In August 2018, the 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 effective for fiscal years ending after December 15, 2020 and is to be applied retrospectively. Early adoption is permitted. While we are still evaluating the impact of ASU 2018-14 and whether we will early adopt, it will not impact our consolidated financial statements as it only affects disclosure. Thus, theThe adoption of this standard will have a minor impact on the notes to our consolidated financial statements, 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. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

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~~aggregates which 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 ~~growth~~changes 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, reservoirs and ~~reservoirs)~~other public construction projects), 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 very 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 limited substitutes for quality aggregates. ~~Because of barriers~~Due 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 ~~2018,~~2019, our five largest customers accounted for 8%7.7% of our total revenues (excluding internal sales), and no single customer accounted for more than 2%1.9% of our total revenues. Although approximately 45% to 55% of our aggregates shipments have historically been used in ~~publicly funded~~publicly-funded construction, such as highways, airports and government buildings, a relatively ~~insignificant~~small portion of our sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail ~~publicly funded~~publicly-funded construction, the vast majority of our business is not directly subject to renegotiation of profits or termination of contracts with local, state or federal governments. In addition, our sales to government entities span several hundred entities coast-to-coast, ensuring that negative changes to various government budgets would have a muted impact across such a diversified set of government customers.

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 ~~generating acceptable~~to generate attractive financial returns and ~~enhancing~~enhance financial returns in our core Aggregates segment. We produce and sell asphalt mix and/or ready-mixed concrete primarily in our Alabama, ~~mid-Atlantic, Southwestern,~~Arizona, California, Maryland, New Mexico, Tennessee, Texas, Virginia and ~~Western~~Washington D.C. 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 operations.

Seasonality and cyclical nature of our business

Almost all of 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.

‎

EXECUTIVE SUMMARY

Financial highlights for ~~Second~~second Quarter ~~2019~~2020

Compared to second quarter ~~2018:~~of 2019:
‎

Total revenues ~~increased $127.5~~decreased $5.1 million, or ~~11%~~less than 1%, to ~~$1,327.7~~$1,322.6 million

Gross profit increased ~~$47.3~~$26.0 million, or ~~15%~~7%, to ~~$370.5~~$396.5 million

Aggregates segment sales increased ~~$105.8~~$8.5 million, or ~~11%~~1%, to ~~$1,062.1~~$1,070.6 million

Aggregates segment freight-adjusted revenues increased ~~$75.9~~$8.3 million, or ~~10%~~1%, to ~~$806.4~~$814.7 million

Shipments ~~increased 4%~~decreased 2%, or ~~2.4~~1.1 million tons, to ~~57.3 million tons~~

~~Same-store shipments increased 3%, or 1.7 million tons, to 56.7~~56.2 million tons

Freight-adjusted sales price increased ~~5.9%~~3.1%, or ~~$0.78 per ton~~

~~Same-store freight-adjusted sales price increased 5.7%, or $0.76~~$0.43 per ton

Segment gross profit increased ~~$45.7~~$21.9 million, or ~~16%~~7%, to ~~$329.2~~$351.2 million

Asphalt, Concrete and Calcium segment gross profit increased ~~$1.6~~$4.1 million, or 4%10%, to ~~$41.3~~$45.4 million, collectively

Selling, administrative and general (SAG) expenses ~~increased $6.6~~decreased $4.5 million and decreased ~~0.2~~0.3 percentage points ~~(200~~(30 basis points) as a percentage of total revenues

Operating earnings increased ~~$45.8~~$22.8 million, or ~~20%~~8%, to ~~$276.1~~$298.9 million

Earnings from continuing operations were ~~$197.9~~$211.0 million, or ~~$1.48~~$1.58 per diluted share, compared to ~~$160.3~~$197.9 million, or ~~$1.20~~$1.48 per diluted share

Adjusted earnings from continuing operations were ~~$1.48~~$1.60 per diluted share, compared to ~~$1.23~~$1.48 per diluted share

Net earnings were ~~$197.6~~$209.9 million, an increase of ~~$37.9~~$12.4 million, or ~~24%~~6%

Adjusted EBITDA was ~~$372.0~~$407.8 million, an increase of ~~$47.2~~$35.8 million, or ~~15%~~10%

Returned capital to shareholders via dividends ($~~41.0~~45.0 million @ ~~$0.31~~$0.34 per share versus ~~$37.0~~$41.0 million @ ~~$0.28 per share) and share repurchases (none in 2019 versus $19.4 million @ an average of $113.29~~$0.31 per share)

~~Net earnings in the~~Our second quarter results demonstrate the resiliency of ~~2019 were $197.6 million, up 24%,~~our best in class aggregates-led business and ~~Adjusted EBITDA~~reflect the proactive response by our employees to the current novel coronavirus (COVID-19) pandemic. Our operational execution was ~~$372.0 million, up 15%, compared~~integral to ~~last year’s second~~widespread gains in unit profitability, despite some disruptions to construction activity during the quarter. ~~The double-digit growth was driven primarily by a 16% increase~~We are proud of our employees’ ability to quickly adapt to the necessary additional safety protocols we have put in ~~Aggregates segment gross profit. For the quarter, aggregates shipments increased 4% year-over-year,~~place in this environment, while maintaining their focus on operating safely and ~~freight-adjusted aggregates pricing increased 5.9% (5.4% mix-adjusted). Same-store aggregates gross profit incremental flow-through rate~~positioning Vulcan for ~~the trailing-twelve months was 65%.~~continued success.

~~We continued to execute well. Our industry-leading unit profitability in aggregates increased~~Second quarter revenues were $1,322.6 million and net earnings were $209.9 million. Earnings from ~~$5.16 to $5.74~~continuing operations were $211.0 million, or $1.58 per ~~ton,~~diluted share, an ~~11%~~ increase ~~compared to~~of 7% from the prior year’s second quarter. ~~We remain keenly focused on creating long-term value~~Adjusted EBITDA was $407.8 million, an increase of 10%. The year-over-year earnings improvement was driven primarily by ~~compounding our~~effective cost control and price growth in aggregates. Second quarter segment earnings improved in each major product line. Despite a 2% decline in aggregates shipments, mix-adjusted pricing improved 3.3%, and freight-adjusted unit cost of sales decreased 1%. As a result, aggregates unit ~~margins, while continuing~~gross profit increased 9% to operate safely. Shipment growth in the second quarter was solid and consistent with full-year expectations. Importantly, price improvements were widespread. These results further highlight the strength of our aggregates-focused business, which serves our attractive, long-term growth markets.$6.25 per ton.

~~Our key markets~~Certain leading indicators of demand have shown signs of improvement, and our quote activity remains robust. However, our visibility beyond the near-term remains restricted due to the evolving effects of the pandemic. The recent surge in new COVID-19 cases could impact the progress made so far if new restrictions on economic activity are ~~benefitting from robust growth~~put in ~~public~~place. We believe this uncertainty could continue to weigh on construction demand, driven by highways. State-level transportation funding increases signed into law in recent years have led to new highway construction starts that are 21% higher than two years ago. This significant increase will support continued shipment growth into transportation-related end marketsactivity in the ~~coming years. Shipments into private construction continue~~second half of the year, making it difficult to ~~grow as well. Aggregates pricing momentum continues~~predict the level and timing of shipments. We are continuously reviewing our operating plans to ~~improve, consistent with~~ensure an effective response to demand shifts. Whatever the demand, we remain confident in our ~~expectations. The continuing improvement in unit profitability is a direct result of our focus on operating disciplines and compounding pricing improvements.~~ability to successfully navigate the changing environment.

Capital expenditures in the second quarter were ~~$103.8 million. This amount included $63.8~~$67.9 million ($176.9 million year-to-date). We continue to expect to spend between $275 and $325 million on capital this year, most of which is for core operating and maintenance ~~capital~~projects. Given that the economic outlook is evolving quickly, we will continue to ~~improve or replace existing property, plant & equipment. In addition,~~review our plans and adjust as needed, being thoughtful about preserving liquidity.

During the quarter, we ~~invested $40.0~~returned $45.0 million to shareholders through dividends, a 10% increase versus the prior year’s quarter. We did not repurchase any shares in ~~internal growth projects~~the quarter (temporarily suspended due to ~~secure new aggregates reserves, develop new production sites, enhance our distribution capabilities and support~~ the ~~targeted growth~~COVID-19 pandemic).

At quarter-end, total debt to trailing-twelve month Adjusted EBITDA was 2.5 times (1.9 times on a net debt basis reflecting $817.2 million of ~~our asphalt operations. Through the first six months of the year, capital expenditures totaled $225.8 million ($131.2 million maintenance capital and $94.6 million internal growth capital)~~cash on hand). Our ~~full-year expectations for 2019 remain unchanged at $250 million on maintenance capital~~weighted-average debt maturity was 14 years, and ~~$200 million on internal growth projects.~~the effective weighted-average interest rate was 4.1%.

During the quarter, we returned $41.0 million to shareholders through dividends, an 11% increase versus the prior year quarter. No shares were repurchased during the quarter. At quarter-end, total debt was $2.9 billion, or 2.4 times trailing-twelve month Adjusted EBITDA.OuTLOOK

~~Overall~~Although the economic environment is showing signs of improvement, the pandemic’s effect on the demand ~~growth in~~for our ~~markets~~products and the broader economy remains unclear. As a result, we are not reinstating earnings guidance at this time.

While demand is subject to market fluctuations outside of our control, we remain ~~healthy. Public demand growth, led by highways, continues~~focused on those things we can control such as our cost and pricing disciplines, both of which help to ~~be robust across~~compound our footprint. Shipments into private construction end markets continue to benefit from the ongoing economic recovery. Demand fundamentals, including population and employment growth, underpin long-term growth in residential and private nonresidential construction. We delivered good incremental earnings in the first half of this year. Unit profitabilityunit margins. Our year-to-date results demonstrate those capabilities. On a trailing-twelve month basis our cash gross profit in aggregates ~~increased 11% through~~is nearly $7 per ton. Our operating plans are underpinned by our four strategic initiatives (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing), a healthy balance sheet, strong liquidity, and the ~~first half~~engagement of ~~2019,~~our people.

Additionally, we currently do not anticipate any material impairment charges, increases in allowances for credit losses, increases in deferred tax asset valuation allowances, restructuring charges or other expenses, violations of debt covenants, or changes in accounting judgments that are reasonably likely to have a material impact on our financial statements.

For support functions, we previously implemented remote work arrangements and ~~we are well positioned~~restricted business travel effective mid-March. To date, these arrangements have not materially affected our ability to ~~carry that momentum forward through~~maintain our business operations, including the ~~remainder~~operation of ~~the year. For the full year, we expect earnings from continuing operations of between $4.55~~financial reporting systems, internal control over financial reporting, and ~~$5.05 per diluted share~~disclosure controls and ~~Adjusted EBITDA of between $1.250 billion and $1.330 billion.~~procedures.

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~~present 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~~ResultS highlights



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in millions, except unit and per unit data	2019	2018	2019	2018	2020	2019	2020	2019
Total revenues	$ 1,327.7	$ 1,200.2	$ 2,324.2	$ 2,054.6	$ 1,322.6	$ 1,327.7	$ 2,371.8	$ 2,324.2
Cost of revenues	957.2	877.0	1,762.0	1,572.1	926.1	957.2	1,773.6	1,762.0
Gross profit	$ 370.5	$ 323.2	$ 562.2	$ 482.5	$ 396.5	$ 370.5	$ 598.2	$ 562.2
Gross profit margin	27.9%	26.9%	24.2%	23.5%	30.0%	27.9%	25.2%	24.2%
Selling, administrative and general (SAG)	$ 95.7	$ 89.0	$ 186.0	$ 167.4	$ 91.2	$ 95.7	$ 177.6	$ 186.0
SAG as a percentage of total revenues	7.2%	7.4%	8.0%	8.1%	6.9%	7.2%	7.4%	8.0%
Operating earnings	$ 276.1	$ 230.3	$ 380.5	$ 311.4	$ 298.9	$ 276.1	$ 411.2	$ 380.5
Interest expense, net	$ 33.0	$ 33.2	$ 66.0	$ 71.0	$ 34.0	$ 33.0	$ 64.7	$ 66.0
Earnings from continuing operations
before income taxes	$ 245.5	$ 200.3	$ 320.1	$ 248.8	$ 272.3	$ 245.5	$ 344.5	$ 320.1
Income tax expense					$ 61.4	$ 47.6	$ 73.5	$ 58.3
Effective tax rate from continuing operations					22.5%	19.4%	21.3%	18.2%
Earnings from continuing operations	$ 197.9	$ 160.3	$ 261.8	$ 213.7	$ 211.0	$ 197.9	$ 271.0	$ 261.8
Loss on discontinued operations,
net of income taxes	(0.3)	(0.6)	(0.9)	(1.1)	(1.1)	(0.3)	(0.8)	(0.9)
Net earnings	$ 197.6	$ 159.7	$ 260.9	$ 212.6	$ 209.9	$ 197.6	$ 270.2	$ 260.9
Diluted earnings (loss) per share
Continuing operations	$ 1.48	$ 1.20	$ 1.97	$ 1.59	$ 1.58	$ 1.48	$ 2.03	$ 1.97
Discontinued operations	0.00	(0.01)	(0.01)	(0.01)	0.00	0.00	0.00	(0.01)
Diluted net earnings per share	$ 1.48	$ 1.19	$ 1.96	$ 1.58	$ 1.58	$ 1.48	$ 2.03	$ 1.96
EBITDA	$ 372.0	$ 319.2	$ 568.8	$ 486.9
Adjusted EBITDA	$ 372.0	$ 324.8	$ 564.7	$ 492.7
EBITDA ¹					$ 405.7	$ 372.0	$ 604.2	$ 568.8
Adjusted EBITDA ¹					$ 407.8	$ 372.0	$ 608.8	$ 564.7
Average Sales Price and Unit Shipments
Aggregates
Tons (thousands)	57,310	54,957	102,947	95,489	56,195	57,310	101,243	102,947
Freight-adjusted sales price	$ 14.07	$ 13.29	$ 13.94	$ 13.19	$ 14.50	$ 14.07	$ 14.45	$ 13.94
Asphalt Mix
Tons (thousands)	3,595	3,330	5,617	5,149	3,403	3,595	5,460	5,617
Average sales price	$ 58.31	$ 53.97	$ 57.45	$ 53.69	$ 57.46	$ 58.31	$ 57.86	$ 57.45
Ready-mixed concrete
Cubic yards (thousands)	815	876	1,484	1,692	786	815	1,520	1,484
Average sales price	$ 126.12	$ 120.56	$ 125.14	$ 121.48	$ 127.35	$ 126.12	$ 127.62	$ 125.14
Calcium
Tons (thousands)	73	80	141	148	71	73	144	141
Average sales price	$ 27.50	$ 28.11	$ 27.89	$ 28.49	$ 26.55	$ 27.50	$ 27.06	$ 27.89


¹	Non-GAAP measures are defined and reconciled within this Item 2 under the caption Reconciliation of Non-GAAP Measures.

Second quarter ~~2019~~2020 Compared to second Quarter ~~2018~~2019

Second quarter ~~2019~~2020 total revenues were ~~$1,327.7~~$1,322.6 million, ~~up 11%~~down slightly from the second quarter of ~~2018.~~2019. Shipments ~~increased~~decreased in aggregates ~~(+4%~~(-2%), asphalt mix (-5%) and ~~asphalt mix (+8%) while they declined in~~ ready-mixed concrete ~~(-7%~~(-4%). ~~Gross~~Conversely, gross profit increased in the Aggregates (+$~~45.7 million or +16%) and Asphalt (+$1.8~~21.9 million or +7%) ~~segments, while it declined in the Concrete segment (-~~, Asphalt (+$~~0.3~~2.9 million or ~~-2%~~+10%). and Concrete (+$1.3 million or +10%) segments. A ~~1% decrease~~47% decline in the unit cost of diesel fuel ~~lowered~~decreased costs by ~~$0.4~~$16.3 million from the prior year’s second quarter with most ($14.4 million) of this cost decline reflected in the Aggregates segment.

Net earnings for the second quarter of ~~2019~~2020 were ~~$197.6~~$209.9 million, or ~~$1.48~~$1.58 per diluted share, compared to ~~$159.7~~$197.6 million, or ~~$1.19~~$1.48 per diluted share, in the second quarter of ~~2018.~~2019. Each period’s results were impacted by discrete items, as follows:

Net earnings for the second quarter of 2020 include:

pretax charges of $0.8 million associated with divested operations

pretax gains of $3.5 million associated with non-routine business development

pretax charges of $4.4 million for COVID-19 pandemic direct incremental costs

pretax charges of $0.5 million for restructuring

Net earnings for the second quarter of 2019 include:

no discrete items

~~Net earnings for the second quarter of 2018 include:~~

~~pretax charges of $4.5 million associated with non-routine business development~~

~~pretax charges of $1.1 million for managerial restructuring~~

Adjusted for these discrete items, earnings from continuing operations (Adjusted Diluted EPS) was ~~$1.48~~$1.60 per diluted share for the second quarter of ~~2019~~2020 compared to ~~$1.23~~$1.48 per diluted share in the second quarter of ~~2018.~~2019.

Continuing Operations — Changes in earnings from continuing operations before income taxes for the second quarter of ~~2019~~2020 versus the second quarter of ~~2018~~2019 are summarized below:

earnings from continuing operations before income taxes



in millions
Second quarter ~~2018~~2019	$ ~~200.3~~245.5
Higher aggregates gross profit	~~45.7~~21.9
Higher asphalt gross profit	~~1.8~~2.9
Higher concrete gross profit	1.3
Lower ~~concrete~~calcium gross profit	~~(0.3)~~(0.2)
~~Higher calcium gross profit~~	~~0.1~~
~~Higher~~Lower selling, administrative and general expenses	~~(6.6)~~4.5
~~Higher~~Lower gain on sale of property, plant & equipment and businesses	~~1.3~~ (3.7)
Higher interest expense, net	(0.9)
Lower ~~interest expense, net~~foreign currency translation losses	~~0.2~~0.4
All other	~~3.0~~0.6
Second quarter ~~2019~~2020	$ ~~245.5~~272.3

Second quarter Aggregates segment sales increased ~~11%~~1% to $1,070.6 million and gross profit increased ~~16%~~7% to ~~$329.2~~$351.2 million. Unit margins increased ~~$0.58~~$0.51 per ton, or ~~11%~~9%, to ~~$5.74~~$6.25 per ton. ~~This improvement~~These improvements resulted from ~~solid~~wide-spread growth in ~~shipments, price improvements~~pricing and ~~execution of operating disciplines and efficiencies.~~effective cost control.

Second quarter aggregates shipments ~~increased 4% (3% on a same-store basis)~~decreased 2% versus the prior ~~year~~year’s second quarter. ~~The solid underlying demand fundamentals of increased public funding for highways, along with employment and population growth, helped drive shipment strength~~Shipping patterns varied widely across ~~most of~~ our footprint ~~particularly~~as a result of economic uncertainty and wet weather but were generally supported by healthy backlogs and our essential business status in our markets. Key markets in the ~~Mid-Atlantic~~Southeast and ~~Southeast. Wet~~coastal Texas were negatively affected by wet weather ~~delayed~~while shipments ~~across~~in California were reduced by tighter restrictions on shelter-in-place. Shipments were higher in Georgia, Illinois, Tennessee and Texas. California overcame another quarter of wet weather to realize shipment growth compared to the prior year. A healthy demand environment, led by transportation-related construction, is driving volume growth and price improvement.

~~All~~On a mix-adjusted basis, all of our key markets reported year-over-year price growth. For the quarter, freight-adjusted average sales price ~~for aggregates~~ increased ~~5.9%~~3% versus the prior year’s quarter, inclusive of 30 basis points of unfavorable mix.

Second quarter freight-adjusted unit cost of sales decreased 1% versus the prior year’s second quarter. ~~Favorable mix added 0.5 percentage points (50 basis points) to overall growth. Positive trends~~Effective operating efficiencies helped mitigate the cost impact of lower sales volumes and a reduction in ~~backlogged project work along with demand visibility~~inventory. Actions taken across our more than 360 locations reduced cash spending and ~~customer confidence, support similar price improvement throughout~~controlled inventories in areas most impacted by shelter-in-place orders. The associated cost of reducing inventory offset the ~~remainder~~majority of ~~2019.~~a $14.4 million earnings benefit from lower diesel fuel costs.

~~Second quarter same-store unit cost of sales (freight-adjusted)~~Unit profitability improvements were wide-spread across our footprint. Aggregates segment cash gross profit per ton increased ~~less than 2% compared to~~9% from the prior ~~year quarter.~~year’s second quarter to $7.69 per ton. Trailing-twelve month same-store incremental gross profit flow-through rate was ~~65%~~52%, ~~which is slightly ahead of longer-term~~below our long-term expectations of 60%. Quarterly gross profit flow-through rates can vary widely from quarter to quarter; therefore, we evaluate this metric on a trailing-twelve month basis. ~~We remain focused on compounding improvements in unit margins throughout the cycle through fixed cost leverage, price growth and operating efficiencies.~~

Asphalt segment gross profit was ~~$27.6~~$30.5 million for the second quarter, an ~~increase~~improvement of ~~$1.8~~$2.9 million from the prior year. ~~Asphalt shipments increased 8% (5% same-store), and asphalt mix selling prices increased 8%, or $4.34 per ton, in~~The year-over-year improvement was driven by higher material margins (sales price less cost of raw materials). Compared to the prior year’s second ~~quarter. The~~quarter, the average unit cost for liquid asphalt was ~~16% higher than~~17% lower and asphalt mix material margins increased 14%. Although total asphalt mix shipments declined 5% versus the prior year, ~~quarter. Liquid~~California, our largest asphalt ~~costs have remained relatively stable through the first half of the year and have allowed pricing gains to begin offsetting the higher unit costs for liquid asphalt.~~market, reported year-over-year earnings growth.

Concrete segment gross profit was ~~$12.9~~$14.2 million, ~~a 2% decrease from~~10% higher than the prior ~~year~~year’s second quarter. ~~Shipments were~~Ready-mixed concrete shipments of 0.8 million cubic yards ~~down from 0.9 million cubic yards in the prior year. Average~~decreased 4%. The average sales price increased ~~5% and led to modest gains in~~1.0% while ready-mixed concrete material ~~margins.~~margins increased 4%.

Calcium segment gross profit was ~~$0.8~~$0.7 million, ~~a slight increase versus~~down $0.1 million compared to the prior ~~year~~year’s quarter.

SAG expenses ~~were $95.7 million versus $89.0~~declined 5% to $91.2 million in the ~~prior year’s second quarter. The~~quarter due mostly to continued execution of cost reduction initiatives, lower incentive compensation costs and general cost control in response to COVID-19. This year-over-year ~~increase was due mainly~~decline resulted in a 0.3 percentage point (30 basis points) improvement as a percentage of total revenues to compensation related expense, including incentives that are tied to earnings expectations and the share price. Additionally, we have made investments in people and processes to accelerate the benefits derived from our sales and operational initiatives.6.9%. On a trailing-twelve month basis, SAG ~~expense~~expenses as a percentage of total revenues ~~was 7.6%, 0.3 percentage points (30 basis points) lower than the prior year period.~~stands at 7.3%. We remain focused on further leveraging our overhead cost structure.

Gain on sale of property, plant & equipment and businesses was a loss of $0.3 million in the second quarter of 2020 versus a gain of $3.5 million in the second quarter of 2019.

Other operating expense, which has an approximate run-rate of $12 million a year (exclusive of discrete items), is composed primarily of ~~various operating items not separately presented in the accompanying Condensed Consolidated Statements~~idle facilities expense, environmental remediation costs, property abandonments, gain (loss) on settlement of ~~Comprehensive Income.~~AROs and rental income. Total other operating expense and significant items included in the total were:

$~~2.2~~6.2 million in second quarter ~~2019~~ — ~~includes discrete items as follows:~~

~~no discrete items~~

~~$6.0 million in second quarter 2018~~2020 — includes discrete items as follows:

$~~4.5~~0.8 million of ~~non-routine business development~~ charges associated with divested operations

$~~1.1~~3.5 million of net gain associated with non-routine business development

$4.4 million for COVID-19 pandemic direct incremental costs

$0.5 million of managerial restructuring charges

$2.2 million in second quarter 2019

Other nonoperating income of $7.4 million for the second quarter of 2020 was favorable by $4.9 million from the second quarter of 2019. This favorable variance resulted primarily from two items: 1) a $0.5 million foreign currency translation gain versus a $0.1 million gain in the prior year’s quarter resulting from a partial recovery of the first quarter 2020 rapid devaluation of the Mexican peso, and 2) the mark-to-market gain on our Rabbi Trust investments of $4.1 million versus a gain of $1.0 million in the prior year’s quarter due to a partial recovery in equity market values from the first quarter declines.

Net interest expense was $34.0 million in the second quarter of 2020 compared to $33.0 million in the second quarter of ~~2019 compared to $33.2 million in the second quarter of 2018.~~2019.

Income tax expense from continuing operations was $61.4 million in the second quarter of 2020 compared to $47.6 million in the second quarter of ~~2019 compared to an income tax expense of $40.0 million in the second quarter of 2018.~~2019. The increase in tax expense was primarily related to an increase in earnings ~~partially offset by an increase~~along with a decrease in share-based compensation excess tax benefits ~~quarter-over-quarter.~~quarter over quarter.

Earnings from continuing operations were $1.58 per diluted share in the second quarter of 2020 compared to $1.48 per diluted share in the second quarter of ~~2019 compared to $1.20 per diluted share in the second quarter of 2018.~~2019.

Discontinued Operations — Second quarter pretax loss from discontinued operations was $1.4 million in 2020 compared with a loss of $0.7 million in ~~2019 compared with $0.9 million in 2018.~~2019. Both periods include ~~charges~~charges/credits 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 1 to the condensed consolidated financial statements under the caption Discontinued Operations.

~~YEAR-TO-DATE JUNE~~year-to-date june 30, ~~2019~~2020 Compared to ~~YEAR-TO-DATE JUNE~~year-to-date june 30, ~~2018~~2019

Total revenues for the first six months of ~~2019~~2020 were ~~$2,324.2~~$2,371.8 million, up ~~13%~~2% from the first six months of ~~2018.~~2019. Shipments ~~were up~~decreased in aggregates ~~(+8%~~(-2%) and asphalt mix ~~(+9%~~(-3%) while ~~down~~they increased in ready-mixed concrete ~~(-12%~~(+2%). Gross profit increased in the Aggregates ~~segment~~ (+$~~83.2~~30.4 million or ~~+19%~~+6%) ~~while it declined in the~~, Asphalt (-(+$~~1.7~~3.7 million or ~~-6%~~+15%) and Concrete (-(+$~~2.1~~2.0 million or ~~-9%~~+9%) segments. A ~~20% increase in unit costs for liquid asphalt lowered Asphalt segment earnings by $19.7 million. Conversely, a 3% decrease~~29% decline in the unit cost of diesel fuel ~~lowered~~decreased costs ~~$1.6~~by $19.2 million from the first half of ~~2018~~2019 with most ($~~1.5~~17.0 million) of this cost decline reflected in the Aggregates segment.

Net earnings for ~~first~~the six months of ~~2019~~2020 were ~~$260.9~~$270.2 million, or ~~$1.96~~$2.03 per diluted share, compared to ~~$212.6~~$260.9 million, or ~~$1.58~~$1.96 per diluted share, in the first six months of ~~2018.~~2019. Each period’s results were impacted by discrete items, as follows:

Net earnings for the first six months of 2020 include:

pretax charges of $0.8 million associated with divested operations

pretax gains of $2.5 million associated with non-routine business development

pretax charges of $5.0 million for COVID-19 pandemic direct incremental costs

pretax charges of $1.3 million for restructuring

Net earnings for the first six months 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 six months of 2018 include:~~

~~pretax interest charges of $7.4 million related to early debt retirement~~

~~pretax gains of $2.9 million related to the sale of businesses~~

~~pretax charges of $5.0 million associated with non-routine business development~~

~~pretax gains of $1.7 million for business interruption claims~~

~~pretax charges of $5.4 million for managerial restructuring.~~

Adjusted for these discrete items, earnings from continuing operations (Adjusted Diluted EPS) was ~~$1.94~~$2.06 per diluted share for the first half of ~~2019~~2020 compared to ~~$1.66~~$1.94 per diluted share in ~~2018.~~the first half of 2019.

Continuing Operations — Changes in earnings from continuing operations before income taxes for year-to-date June 30, ~~2019~~2020 versus year-to-date June 30, ~~2018~~2019 are summarized below:

earnings from continuing operations before income taxes



in millions
Year-to-date June 30, ~~2018~~2019	$ ~~248.8~~320.1
Higher aggregates gross profit	~~83.2~~30.4
Higher asphalt gross profit	3.7
Higher concrete gross profit	2.0
Lower ~~asphalt~~calcium gross profit	~~(1.7)~~0.0
Lower ~~concrete gross profit~~	~~(2.1)~~
~~Higher calcium gross profit~~	~~0.2~~
~~Higher~~ selling, administrative and general expenses	~~(18.6)~~8.3
~~Higher~~Lower gain on sale of property, plant & equipment and businesses	~~4.5~~ (10.0)
Lower interest expense, net	~~5.0~~ 1.2
Higher foreign currency translation losses	(6.3)
All other	~~0.8~~ (4.9)
Year-to-date June 30, ~~2019~~2020	$ ~~320.1~~344.5

First half 2019 Aggregates segment gross profit was $514.9 million ($5.00 per ton) versus $431.7 million ($4.52 per ton) in the first half of 2018. As a percentage of segment sales, gross profit margin expanded 1.0 percentage points (100 basis points) due primarily to strong growth in shipments and price improvements.2020 Aggregates segment sales of ~~$1,897.0~~$1,938.8 million were up ~~15% from the prior year’s first half, and aggregates freight-adjusted revenues of $1,435.1 million were up 14%. First-half~~2% while aggregates shipments ~~increased 8% (same-store +7%)~~decreased 2%, or ~~7.5~~1.7 million tons, ~~(same-store +6.5 million tons),~~ compared to the prior year. Freight-adjusted average sales price for aggregates increased ~~5.7%~~3.7%, or ~~$0.75~~$0.51 per ton, versus the first half of ~~2018.~~2019. Excluding mix impact, aggregates price increased ~~5.4%~~3.8%.

Aggregates segment gross profit was $545.3 million ($5.39 per ton) versus $514.9 million ($5.00 per ton) in the first half of 2019. As a percentage of segment sales excluding freight & delivery, gross profit margin increased 1.2 percentage points (120 basis points) due primarily to the wide-spread growth in pricing and effective cost control. First half ~~2019~~2020 freight-adjusted unit cost of sales ~~(freight-adjusted) in the Aggregates segment was up 3%~~increased 1%, or ~~$0.27~~$0.12 per ton, versus the prior year. Cash gross profit per ton increased 8% from the prior year’s first half to $6.95 per ton. The average unit cost of diesel fuel decreased 29% versus the first half of 2019, increasing Aggregates segment gross profit by $17.0 million or $0.17 per ton.

Asphalt segment gross profit of ~~$24.3~~$28.0 million was ~~down $1.7~~up $3.7 million from the first six months of ~~2018.~~2019. Asphalt mix shipments ~~increased 9% (+7% same-store)~~declined 3% while selling prices increased 7%0.7%, or ~~$3.76~~$0.41 per ton. ~~However,~~Compared to the prior year’s first half, the average unit cost for liquid asphalt was ~~20% higher than~~down 13% — a significant factor in the ~~first half of 2018, negatively affecting earnings by $19.7 million.~~12% increase in our asphalt mix material margins.

Concrete segment gross profit was ~~$21.5~~$23.4 million for the first six months of ~~2019, a decrease~~2020, an increase of ~~$2.1~~$2.0 million from the prior year period. Ready-mixed concrete shipments ~~decreased 12% (same-store decreased 8%) versus the first half of 2018.~~and average sales price both increased 2% driving a 4% increase in material margins.

Our Calcium segment’s gross profit of $1.5 million was ~~up $0.2 million versus~~essentially flat compared to the first half of ~~2018.~~

~~For the first six months of 2019, total gross profit in our non-aggregates segments was $47.2 million, a 7% decrease from the prior year’s comparable period.~~2019.

SAG expenses were ~~$186.0~~$177.6 million versus ~~$167.4~~$186.0 million in the prior year’s first half reflecting a ~~0.1~~0.5 percentage point ~~(10~~(50 basis point) decrease as a percentage of total revenues.

Gain on sale of property, plant & equipment and businesses was $0.7 million in the first half of 2020 versus $10.7 million in the first half of 2019. The 2019 amount includes the aforementioned pretax gains of $4.1 million related to the sale of businesses.

$~~6.5~~10.2 million in ~~the~~ first ~~six months~~half of ~~2019~~

2020~~$10.0 million in the first six months of 2018~~ — includes discrete items as follows:

$~~1.7~~0.8 million of charges associated with divested operations

$2.5 million of net gain ~~referable to the settlement of~~associated with non-routine business ~~interruption claims related to the 2010 Gulf Coast oil spill~~development

$5.0 million ~~of non-routine business development charges~~for COVID-19 pandemic direct incremental costs

$~~5.4~~1.3 million of managerial restructuring charges

$6.5 million in first half of 2019

Other nonoperating income (expense) was a net expense of $2.0 million for the first half of 2020, unfavorable by $7.6 million from the first half of 2019. This unfavorable variance resulted primarily from two items: 1) $5.8 million of foreign currency translation losses resulting from the rapid devaluation of the Mexican peso in the current year versus a $0.4 million gain in the prior year’s first half, and 2) the mark-to-market loss on our Rabbi Trust investments of $1.0 million due to declines in equity market values versus a gain of $2.8 million in the prior year’s first half (see Note 5 to the condensed consolidated financial statements).

Net interest expense was $64.7 million in the first half of 2020 compared to $66.0 million in the first ~~six months~~half of ~~2019 compared to $71.0 million in the first six months of 2018.~~2019. The ~~prior year~~current year’s interest expense includes ~~$7.4~~$1.0 million ~~of charges~~ related to the ~~first quarter 2018 debt refinancing.~~ineffective portion of a cash flow hedge loss.

Income tax expense from continuing operations was $73.5 million in the first half of 2020 compared to $58.3 million in the first ~~six months~~half of ~~2019 compared to $35.1 million in the first six months of 2018.~~2019. The increase in ~~income~~ tax expense was ~~largely due~~primarily related to an increase in earnings along with a decrease in share-based compensation excess tax benefits as compared to the same period in ~~2018.~~2019.

Earnings from continuing operations were $2.03 per diluted share in the first half of 2020 compared to $1.97 per diluted share in the first ~~six months~~half of ~~2019 compared to $1.59 per diluted share in the first six months of 2018.~~2019.

Discontinued Operations — ~~Year-to-date June~~First half pretax loss from discontinued operations was $1.1 million in 2020 compared with a loss of $1.3 million in ~~2019 compared with pretax loss of $1.4 million in year-to-date June 2018.~~2019. Both periods include ~~charges~~charges/credits 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 1 to the condensed consolidated financial ~~statements.~~statements under the caption Discontinued Operations.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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 companies.

AGGREGATES SEGMENT FREIGHT-ADJUSTED REVENUES

Aggregates segment freight-adjusted 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. 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. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Additionally, we use this metric as the basis for calculating the average sales price of our aggregates products. Reconciliation of this metric to its nearest GAAP measure is presented below:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
dollars in millions	2019	2018	2019	2018
in millions, except per ton data					2020	2019	2020	2019
Aggregates segment
Segment sales	$ 1,062.1	$ 956.3	$ 1,897.0	$ 1,655.9	$ 1,070.6	$ 1,062.1	$ 1,938.8	$ 1,897.0
Less
Freight & delivery revenues ¹	241.4	213.5	436.5	372.4	240.9	241.4	446.6	436.5
Other revenues	14.3	12.3	25.4	23.6	15.0	14.3	29.5	25.4
Freight-adjusted revenues	$ 806.4	$ 730.5	$ 1,435.1	$ 1,259.9	$ 814.7	$ 806.4	$ 1,462.7	$ 1,435.1
Unit shipments - tons	57.3	55.0	102.9	95.5	56.2	57.3	101.2	102.9
Freight-adjusted sales price	$ 14.07	$ 13.29	$ 13.94	$ 13.19	$ 14.50	$ 14.07	$ 14.45	$ 13.94


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.

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 evaluate this metric on a trailing-twelve month basis as quarterly gross profit flow-through rates can vary widely from quarter to quarter. 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~~activities. Reconciliation of ~~the selling price of the product). Reconciliations of these metrics~~this metric to ~~their~~its nearest GAAP ~~measures are~~measure is presented below:

margin in accordance with gaap



	Three Months Ended		Trailing-Twelve Months		Three Months Ended		Trailing-Twelve Months
	June 30		June 30		June 30		June 30
dollars in millions	2019	2018	2019	2018	2020	2019	2020	2019
Aggregates segment
Gross profit	$ 329.2	$ 283.5	$ 1,075.1	$ 896.0	$ 351.2	$ 329.2	$ 1,177.0	$ 1,075.1
Segment sales	$ 1,062.1	$ 956.3	$ 3,754.8	$ 3,284.1	$ 1,070.6	$ 1,062.1	$ 4,032.1	$ 3,754.8
Gross profit margin	31.0%	29.6%	28.6%	27.3%	32.8%	31.0%	29.2%	28.6%
Incremental gross profit margin	43.2%		38.1%		257.1%		36.8%

FLOW-THROUGH RATE (non-gaap)



	Three Months Ended		Trailing-Twelve Months		Three Months Ended		Trailing-Twelve Months
	June 30		June 30		June 30		June 30
dollars in millions	2019	2018	2019	2018	2020	2019	2020	2019
Aggregates segment
Gross profit	$ 329.2	$ 283.5	$ 1,075.1	$ 896.0	$ 351.2	$ 329.2	$ 1,177.0	$ 1,075.1
Less: Contribution from acquisitions (same-store)	1.1	0.0	13.2	(0.8)	0.1	0.0	1.0	0.3
Same-store gross profit	$ 328.1	$ 283.5	$ 1,061.9	$ 896.8	$ 351.1	$ 329.2	$ 1,176.0	$ 1,074.8
Segment sales	$ 1,062.1	$ 956.3	$ 3,754.8	$ 3,284.1	$ 1,070.6	$ 1,062.1	$ 4,032.1	$ 3,754.8
Less: Freight & delivery revenues ¹	241.4	213.5	861.1	718.8	240.9	241.4	931.2	861.1
Segment sales excluding freight & delivery	$ 820.7	$ 742.8	$ 2,893.7	$ 2,565.3	$ 829.7	$ 820.7	$ 3,100.9	$ 2,893.7
Less: Contribution from acquisitions (same-store)	11.9	0.0	76.2	0.4	0.5	0.0	12.1	(2.9)
Same-store segment sales excluding freight & delivery	$ 808.8	$ 742.8	$ 2,817.5	$ 2,564.9	$ 829.2	$ 820.7	$ 3,088.8	$ 2,896.6
Gross profit flow-through rate	40.1%	38.2%	37.2%	34.9%
Same-store gross profit flow-through rate	40.6%	38.2%	37.7%	35.0%
Gross profit margin excluding freight & delivery					42.3%	40.1%	38.0%	37.2%
Same-store gross profit margin excluding
freight & delivery					42.3%	40.1%	38.1%	37.2%
Incremental gross profit flow-through rate	58.7%		54.5%		243.6%		49.2%
Same-store incremental gross profit flow-through rate	67.6%		65.4%		257.5%		51.6%


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.

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 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:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in millions, except per ton data	2019	2018	2019	2018	2020	2019	2020	2019
Aggregates segment
Gross profit	$ 329.2	$ 283.5	$ 514.9	$ 431.7	$ 351.2	$ 329.2	$ 545.3	$ 514.9
Depreciation, depletion, accretion and amortization	75.8	69.7	148.3	135.7	80.7	75.8	157.9	148.3
Aggregates segment cash gross profit	$ 405.0	$ 353.2	$ 663.2	$ 567.4	$ 431.9	$ 405.0	$ 703.2	$ 663.2
Unit shipments - tons	57.3	55.0	102.9	95.5	56.2	57.3	101.2	102.9
Aggregates segment gross profit per ton	$ 5.74	$ 5.16	$ 5.00	$ 4.52	$ 6.25	$ 5.74	$ 5.39	$ 5.00
Aggregates segment cash gross profit per ton	$ 7.07	$ 6.43	$ 6.44	$ 5.94	$ 7.69	$ 7.07	$ 6.95	$ 6.44
Asphalt segment
Gross profit	$ 27.6	$ 25.8	$ 24.3	$ 26.0	$ 30.5	$ 27.6	$ 28.0	$ 24.3
Depreciation, depletion, accretion and amortization	8.9	7.3	17.4	14.3	8.7	8.9	17.4	17.4
Asphalt segment cash gross profit	$ 36.5	$ 33.1	$ 41.7	$ 40.3	$ 39.2	$ 36.5	$ 45.4	$ 41.7
Concrete segment
Gross profit	$ 12.9	$ 13.2	$ 21.5	$ 23.5	$ 14.2	$ 12.9	$ 23.4	$ 21.5
Depreciation, depletion, accretion and amortization	3.3	3.0	6.3	6.5	4.0	3.3	8.1	6.3
Concrete segment cash gross profit	$ 16.2	$ 16.2	$ 27.8	$ 30.0	$ 18.2	$ 16.2	$ 31.5	$ 27.8
Calcium segment
Gross profit	$ 0.8	$ 0.8	$ 1.5	$ 1.3	$ 0.7	$ 0.8	$ 1.5	$ 1.5
Depreciation, depletion, accretion and amortization	0.1	0.0	0.1	0.2	0.0	0.1	0.1	0.1
Calcium segment cash gross profit	$ 0.9	$ 0.8	$ 1.6	$ 1.5	$ 0.7	$ 0.9	$ 1.6	$ 1.6

‎

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 use this metric to assess the operating performance of our business and as a basis for 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 (numbers may not foot due to rounding):



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
in millions	2019	2018	2019	2018	2020	2019	2020	2019
Net earnings	$ 197.6	$ 159.7	$ 260.9	$ 212.6	$ 209.9	$ 197.6	$ 270.2	$ 260.9
Income tax expense (benefit)	47.6	40.0	58.3	35.1
Income tax expense					61.4	47.6	73.5	58.3
Interest expense, net of interest income	33.0	33.2	66.0	71.0	34.0	33.0	64.7	66.0
Loss on discontinued operations, net of tax	0.3	0.7	1.0	1.1	1.0	0.3	0.8	1.0
EBIT	278.5	233.6	386.1	319.8	306.3	278.5	409.2	386.1
Depreciation, depletion, accretion and amortization	93.5	85.6	182.7	167.1	99.5	93.5	195.0	182.7
EBITDA	$ 372.0	$ 319.2	$ 568.8	$ 486.9	$ 405.7	$ 372.0	$ 604.2	$ 568.8
Gain on sale of businesses	$ 0.0	$ 0.0	$ (4.1)	$ (2.9)	$ 0.0	$ 0.0	$ 0.0	$ (4.1)
Business interruption claims recovery	0.0	0.0	0.0	(1.7)
Charges associated with divested operations					0.8	0.0	0.8	0.0
Business development ¹	0.0	4.5	0.0	5.0	(3.5)	0.0	(2.5)	0.0
COVID-19 direct incremental costs					4.4	0.0	5.0	0.0
Restructuring charges	0.0	1.1	0.0	5.4	0.5	0.0	1.3	0.0
Adjusted EBITDA	$ 372.0	$ 324.8	$ 564.7	$ 492.7	$ 407.8	$ 372.0	$ 608.8	$ 564.7
Depreciation, depletion, accretion and amortization	(93.5)	(85.6)	(182.7)	(167.1)	(99.5)	(93.5)	(195.0)	(182.7)
Adjusted EBIT	$ 278.5	$ 239.2	$ 382.0	$ 325.6	$ 308.3	$ 278.5	$ 413.9	$ 382.0


¹	Represents non-routine charges or gains 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, we present Adjusted diluted earnings per share (EPS) from continuing operations to provide a more consistent comparison of earnings performance from period to period. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:



	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30		June 30		June 30		June 30
	2019	2018	2019	2018	2020	2019	2020	2019
Diluted Earnings Per Share
Net earnings	$ 1.48	$ 1.19	$ 1.96	$ 1.58	$ 1.58	$ 1.48	$ 2.03	$ 1.96
Less: Discontinued operations (loss)	0.00	(0.01)	(0.01)	(0.01)
Less: Discontinued operations loss					0.00	0.00	0.00	(0.01)
Diluted EPS from continuing operations	$ 1.48	$ 1.20	$ 1.97	$ 1.59	$ 1.58	$ 1.48	$ 2.03	$ 1.97
Items included in Adjusted EBITDA above	$ 0.00	$ 0.03	$ (0.03)	$ 0.03	$ 0.02	$ 0.00	$ 0.03	$ (0.03)
Debt refinancing costs	0.00	0.00	0.00	0.04
Adjusted diluted EPS from continuing operations	$ 1.48	$ 1.23	$ 1.94	$ 1.66	$ 1.60	$ 1.48	$ 2.06	$ 1.94

~~2019 projected ebitda~~

The following reconciliation to the mid-point of the range of 2019 Projected EBITDA excludes adjustments (as noted in Adjusted EBITDA above) as they are difficult to forecast (timing or amount). Due to the difficulty in forecasting such adjustments, we are unable to estimate their 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 metric to its nearest GAAP measure is presented below:




	~~2019 Projected~~
~~in millions~~	~~Mid-point~~
~~Net earnings~~		~~$ 640~~
~~Income tax expense~~		~~160~~
~~Interest expense, net~~		~~130~~
~~Discontinued operations, net of tax~~		0
~~Depreciation, depletion, accretion and amortization~~		~~360~~
~~Projected EBITDA~~		~~$ 1,290~~

LIQUIDITY AND FINANCIAL RESOURCES

Our primary sources of liquidity are cash provided by our operating activities and a substantial, committed bank line of credit. In an effort to strengthen our liquidity position while navigating the COVID-19 pandemic, we have taken a number of proactive steps since the first quarter of 2020. In April 2020, we entered into a $750.0 million delayed draw term loan (of which $500.0 million remains available for future borrowings) and in May 2020, we issued $750.0 of 3.50% senior notes due 2030 — each to enhance our already strong liquidity and financial flexibility. 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 ~~2019,~~2020, including:

~~cash~~ contractual obligations

capital expenditures

debt service obligations

dividend payments

potential share repurchases (temporarily suspended due to the COVID-19 pandemic)

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~~balance the cost of capital ~~while properly managing~~and the risk of financial ~~risk.~~stress. 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

As the impact of the COVID-19pandemic on the economy and our operations evolves, we will continue to assess our liquidity sources and needs and take appropriate actions.

Cash

Included in our June 30, ~~2019~~2020 cash and cash equivalents and restricted cash ~~balance~~balances of ~~$26.5~~$817.2 million is ~~$0.5~~$0.4 million of restricted cash as described in Note 1 under the caption Restricted Cash.

cash from operating activities



	Six Months Ended		Six Months Ended
	June 30		June 30
in millions	2019	2018	2020	2019
Net earnings	$ 260.9	$ 212.6	$ 270.2	$ 260.9
Depreciation, depletion, accretion and amortization (DDA&A)	182.7	167.1	195.0	182.7
Noncash operating lease expense			18.0	17.5
Contributions to pension plans	(4.6)	(104.8)	(4.4)	(4.6)
Deferred tax expense (benefit)	34.8	40.5
Cost of debt purchase	0.0	6.9
Other operating cash flows, net ¹	(171.9)	(46.5)	(53.2)	(154.6)
Net cash provided by operating activities	$ 301.9	$ 275.8	$ 425.6	$ 301.9


¹	Primarily reflects changes to working capital balances.

Net cash provided by operating activities was ~~$301.9~~$425.6 million during the six months ended June 30, ~~2019,~~2020, a ~~$26.1~~$123.7 million increase compared to the same period of ~~2018. There was~~2019. This increase primarily resulted from favorable changes in working capital balances.

Days sales outstanding, a measurement of the time it takes to collect receivables, were 42.9 days at June 30, 2020 compared to 45.1 days at June 30, 2019. All customer accounts are actively managed and no ~~unusual operating cash flow activity during~~losses in excess of amounts reserved are currently expected; attention is being paid to the ~~first half~~potential negative impact of ~~2019. During~~ the ~~first half of 2018, we made a $100.0 million discretionary contribution~~COVID-19 pandemic on our customers’ ability to ~~our qualified pension plans that was deductible for tax purposes in 2017 and early retired debt incurring premium and transaction costs of $6.9 million (which is added back~~pay their amounts owed to ~~operating cash flows and reflected as a financing cash outflow).~~us.

cash from investing activities

Net cash used for investing activities was ~~$216.3~~$219.5 million during the first six months of ~~2019,~~2020, a ~~$240.3~~$3.2 million ~~decrease~~increase compared to the same period of ~~2018.~~2019. During the first half of ~~2019,~~2020, we invested ~~$225.8~~$223.1 million in our existing operations compared to ~~$247.2~~$225.8 million in the prior year period. Of this ~~$225.8~~$223.1 million, ~~$94.6~~$61.9 million was invested in internal growth projects to enhance our distribution capabilities, develop new production sites and enhance existing production ~~facilities. During the first six months of 2018, we acquired the following businesses for $219.0 million of cash consideration: Alabama — aggregates, asphalt mix~~facilities and construction paving operations; California — asphalt mix operations; and Texas — aggregates rail yards, asphalt mix and construction paving operations. Furthermore, during the first six months of 2018, we divested our ready-mixed concrete operations in Georgia resulting in proceeds of $11.3 million and a long-term aggregates supply agreement.other growth opportunities.

cash from financing activities

Net cash ~~used for~~provided by financing activities in the first six months of ~~2019~~2020 was ~~$103.5~~$336.6 million, compared to ~~$95.3~~the use of cash of $103.5 million ~~provided by financing activities~~ in the same period of ~~2018.~~2019. The current year includes a) cash proceeds of $739.2 million from the issuance of new debt, b) cash paid to retire the $250.0 million floating rate notes due 2020 and c) $19.9 million of cash paid to settle interest rate locks. The prior year includes a net $4.0 million draw on our bank line of credit. ~~The prior year period includes a $360.0 million net draw on our line of credit partially offset by several refinancing actions that used $84.2 million of cash (as described in the debt section below).~~

Additionally, we increased the capital returned to our shareholders ~~decreased~~ by ~~$67.2~~$34.3 million asvia higher dividends of ~~$7.7~~$8.2 million ($~~0.62~~0.68 per share compared to ~~$0.56~~$0.62 per share) ~~were offset by lower~~and higher share repurchases of ~~$74.9~~$26.1 million ~~(no shares in 2019 compared to 643,147~~(214,338 shares repurchased @ ~~$116.49~~$121.92 average price per share compared to none in ~~2018)~~first half of 2019).

debt

Certain debt measures are presented below:



		June 30	December 31	June 30		June 30	December 31	June 30
dollars in millions	dollars in millions	2019	2018	2018	dollars in millions	2020	2019	2019
Debt	Debt				Debt
Current maturities of long-term debt	Current maturities of long-term debt	$ 0.0	$ 0.0	$ 0.0	Current maturities of long-term debt	$ 500.0	$ 0.0	$ 0.0
Short-term debt	Short-term debt	137.0	133.0	360.0	Short-term debt	0.0	0.0	137.0
Long-term debt ¹		2,781.8	2,779.4	2,776.9
Long-term debt					Long-term debt	2,785.6	2,784.3	2,781.8
Total debt	Total debt	$ 2,918.8	$ 2,912.4	$ 3,136.9	Total debt	$ 3,285.6	$ 2,784.3	$ 2,918.8
Capital	Capital				Capital
Total debt	Total debt	$ 2,918.8	$ 2,912.4	$ 3,136.9	Total debt	$ 3,285.6	$ 2,784.3	$ 2,918.8
Equity	Equity	5,371.4	5,202.9	5,020.6	Equity	5,764.2	5,621.9	5,371.4
Total capital	Total capital	$ 8,290.2	$ 8,115.3	$ 8,157.5	Total capital	$ 9,049.8	$ 8,406.2	$ 8,290.2
Total Debt as a Percentage of Total Capital	Total Debt as a Percentage of Total Capital	35.2%	35.9%	38.5%	Total Debt as a Percentage of Total Capital	36.3%	33.1%	35.2%
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%
Delayed draw term loan ¹					Delayed draw term loan ¹	1.63%	n/a	n/a
Line of credit ¹					Line of credit ¹	1.25%	1.25%	1.25%
Term debt	Term debt	4.49%	4.56%	4.38%	Term debt	4.12%	4.36%	4.49%
Fixed versus Floating Interest Rate Debt	Fixed versus Floating Interest Rate Debt				Fixed versus Floating Interest Rate Debt
Fixed-rate debt	Fixed-rate debt	70.3%	70.4%	65.4%	Fixed-rate debt	85.1%	73.7%	70.3%
Floating-rate debt	Floating-rate debt	29.7%	29.6%	34.6%	Floating-rate debt	14.9%	26.3%	29.7%


¹		~~Long-term debt includes the $250.0 million floating-rate notes due June 2020~~ ~~(see Note 7 to the condensed consolidated financial statements)~~ ~~as we intend to refinance these notes and have the ability to do so by borrowing on our line of credit.~~
²		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.

~~Line~~line of credit and delayed draw term loan

Our unsecured $750.0 million line of credit matures December 2021. Covenants, borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of June 30, ~~2019,~~2020, we were in compliance with the line of credit covenants, 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%.

In April 2020, we executed a $750,000,000 364-day delayed draw term loan that provides for up to two draws through October 2020 and repayment April 2021. Borrowings may be repaid prior to maturity, but once repaid may not be borrowed again. During the second quarter, we borrowed and repaid $250,000,000 leaving $500,000,000 available for future borrowings. Covenants, borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of June 30, ~~2019,~~2020, we were in compliance with the delayed draw term loan covenants, the credit margin for LIBOR borrowings was 1.625%, the credit margin for base rate borrowings was 0.625%, and the commitment fee for the unused amount was 0.175%.

As of June 30, 2020, our available borrowing capacity ~~under the line of credit~~ was ~~$558.5~~$1,195.9 million. Utilization of the borrowing capacity was as follows:

~~$137.0 million~~none was borrowed

$~~54.5~~54.1 million was used to provide support for outstanding standby letters of credit

TERM DEBT

All of our ~~$2,846.4~~$3,355.3 million (face value) of term debt is unsecured. ~~$2,846.2~~$3,346.2 million of such debt is governed by three essentially identical indentures that contain customary investment-grade type covenants. The primary covenant in all three indentures limits the amount of secured debt we may incur without ratably securing such debt. As of June 30, ~~2019,~~2020, we were in compliance with all term debt covenants.

~~As a result~~In May 2020, we issued $750.0 million of 3.50% senior notes due 2030 for total proceeds of $741.4 million (net of discounts and transaction costs). $250.0 million of the ~~first quarter 2018 early debt retirements (see Note 7~~proceeds were used to retire the ~~condensed consolidated financial statements)~~, ~~we recognized premiums~~$250.0 million floating rate notes due June 2020, and the remainder of ~~$5.6~~the proceeds, together with cash on hand, will be used to retire the $500.0 million transaction costs of $1.3 million and noncash expense (acceleration of unamortized deferred transaction costs) of $0.5 million. The combined charge of $7.4 million was a component of interest expense for the first quarter of 2018.floating rate notes due March 2021.

CURRENT MATURITIES of long-term debt

~~Current~~The $500.0 million of current maturities of long-term debt as of June 30, ~~2019 were insignificant. As previously noted,~~2020 includes all long-term debt ~~includes the $250.0 million floating-rate notes due June 2020 as~~that we intend to ~~refinance these notes~~pay within twelve months, and ~~have the ability to do so by borrowing on our line of credit.~~is due as follows:



	Current
in millions	Maturities
Third quarter 2020	$0.0
Fourth quarter 2020	0.0
First quarter 2021	500.0
Second quarter 2021	0.0

debt ratings

Our debt ratings and outlooks as of June 30, ~~2019~~2020 are as follows:



	Rating/Outlook	Date	Description
Senior Unsecured Term Debt
Fitch	BBB-/stable	~~9/24/2018~~5/7/2020	~~rating/~~outlook ~~affirmed~~revised
Moody's	Baa3/stable	~~3/29/2019~~4/23/2020	~~rating/~~outlook ~~affirmed~~revised
Standard & Poor's	~~BBB/~~BBB+/stable	~~4/4/2019~~2/28/2020	~~rating/outlook affirmed~~rating revised

LIBOR TRANSITION

The London Interbank Offered Rate (LIBOR) is an indicative measure of the average rate at which major global banks could borrow from one another and is used extensively globally as a reference rate for financial contracts (e.g., corporate bonds and loans) and commercial contracts (e.g., real estate leases). The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it intends to cease requiring banks to submit LIBOR rates after 2021.

The expected discontinuation of LIBOR has led to the formation of working groups in the U.S. and elsewhere to recommend alternative reference rates. The U.S. working group is the Alternative Reference Rates Committee (ARRC) convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The ARRC has selected the Secured Overnight Financing Rate (SOFR) as the preferred alternative to LIBOR.

As of June 30, 2020, we had three material debt instruments with LIBOR as a reference rate, each of which matures before the end of 2021: 1) $500.0 million floating-rate notes due March 2021, 2) $750.0 million line of credit (none outstanding at June 30, 2020) due December 2021, and 3) $750.0 million delayed draw term loan due April 2021. At this time, we cannot predict the future impact of a departure from LIBOR as a reference rate; however, if future rates based upon the successor reference rate (or a new method of calculating LIBOR) are higher than LIBOR rates as currently determined, our interest expense would increase.

Equity

The number of our common stock issuances and purchases for the year-to-date periods ended are as follows:



	June 30	December 31	June 30	June 30	December 31	June 30
in thousands	2019	2018	2018	2020	2019	2019
Common stock shares at January 1,
issued and outstanding	131,762	132,324	132,324	132,371	131,762	131,762
Common Stock Issuances
Share-based compensation plans	469	630	587	289	628	469
Common Stock Purchases
Purchased and retired	0	(1,192)	(643)	(214)	(19)	0
Common stock shares at end of period,
issued and outstanding	132,231	131,762	132,268	132,446	132,371	132,231

On February 10, 2017, our Board of Directors authorized us to purchase 8,243,243 shares of our common stock to refresh the number of shares we were authorized to purchase to 10,000,000. As of June 30, ~~2019,~~2020, there were ~~8,297,789~~8,064,851 shares remaining under the authorization. Depending upon market, business, legal and other conditions, we may purchase 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.

The detail of our common stock purchases (all of which were open market purchases) for the year-to-date periods ended are as follows:



	June 30	December 31	June 30	June 30	December 31	June 30
in thousands, except average price	2019	2018	2018
in thousands, except average cost				2020	2019	2019
Shares Purchased and Retired
Number	0	1,192	643	214	19	0
Total purchase price	$ 0	$ 133,983	$ 74,921	$ 26,132	$ 2,602	$ 0
Average price per share	$ 0.00	$ 112.41	$ 116.49
Average cost per share				$ 121.92	$ 139.90	$ 0.00

There were no shares held in treasury as of June 30, ~~2019,~~2020, December 31, ~~2018~~2019 and June 30, ~~2018.~~2019.

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.

As a result of our second quarter 2020 execution of a delayed draw term loan and issuance of additional debt as described in Note 7 to the condensed consolidated financial statements, our obligations to make future payments under contracts increased as follows:



	Payments Due by Year
in millions	2020	2021-2022	2023-2024	Thereafter	Total
Cash Contractual Obligations
Delayed draw term loan
Principal payments	$ 0.0	$ 0.0	$ 0.0	$ 0.0	$ 0.0
Interest payments and fees	1.5	0.0	0.0	0.0	1.5
Bank line of credit
Principal payments	0.0	0.0	0.0	0.0	0.0
Interest payments and fees	0.0	0.0	0.0	0.0	0.0
Term debt
Principal payments	0.0	8.9	0.0	750.0	758.9
Interest payments	9.1	50.6	52.5	144.4	256.6
Total	$ 10.6	$ 59.5	$ 52.5	$ 894.4	$ 1,017.0

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, ~~2018~~2019 (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 ~~six~~three months ended June 30, ~~2019.~~2020.

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.

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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

a pandemic, epidemic or other public health emergency, such as the recent outbreak of COVID-19

our dependence on the construction industry, which is subject to economic cycles

the timing and amount of federal, state and local funding for infrastructure

changes in the level of spending for private residential and private nonresidential construction

changes in 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~~including the ~~event~~risks that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks

the impact of the state of the global economy on our businesses and financial condition and access to capital markets

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 and availability of water

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

the impact of a discontinuation of the London Interbank Offered Rate (LIBOR)

volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans

the impact of environmental cleanup costs and other liabilities relating to existing and/or divested businesses

our ability to secure and permit aggregates reserves in strategically located areas

our ability to manage and successfully integrate acquisitions

the effect of changes in tax laws, guidance and interpretations

significant downturn in the construction industry may result in the impairment of goodwill or long-lived assets

changes in technologies, which could disrupt the way 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 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.

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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).

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 ~~Michael R. Mills, Chief Administrative Officer~~Denson N. Franklin III, Senior Vice President, 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 ~~Michael R. Mills, Chief Administrative Officer~~Denson N. Franklin III, Senior Vice President, 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.

‎

4546

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~~trading or ~~trading~~speculative 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. Over time, our EBITDA and operating 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 toagainst weaker operating results due to general economic weakness.

At June 30, ~~2019,~~2020, the estimated fair value of our long-term debt including current maturities was ~~$2,898.3~~$3,725.5 million compared to a book value of ~~$2,781.9~~$3,285.7 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 ~~$271.2~~$384.2 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

controls and procedures

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 June 30, ~~2019.~~2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2019.~~2020.

NoDue to the COVID-19 pandemic, we have implemented remote work arrangements for support functions and restricted business travel effective mid-March. To date, these arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. We are continually accessing the potential effects of the COVID-19 pandemic on the design and operating effectiveness of our internal control over financial reporting and if necessary, will take appropriate actions.

Therefore, no material changes were made during the second quarter of ~~2019~~2020 to our internal controls over financial reporting, nor have there been other factors that materially affect these controls.

‎

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part Ii other information

ITEM 1

legal proceedings

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, ~~2018~~2019 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 quarter ended March 31, ~~2019.~~2020. 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

risk factors

~~There were~~Other than the risk factor set forth below, there have been 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, ~~2018.~~2019.

A pandemic, epidemic or other public health emergency, such as the recent outbreak of the current coronavirus (COVID-19) pandemic, could have a material adverse effect on our business, results of operations, financial condition and cash flows — Our operations expose us to risks associated with pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic. In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The outbreak has resulted in governments around the world implementing or reimplementing strict measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic, and may take further action as circumstances warrant.

Consistent with federal guidelines and with state and local orders to date, we currently continue to operate across our footprint as an essential business. Notwithstanding our continued operations and an economic environment that has shown signs of improvement, the COVID-19 pandemic has had and may have further negative impacts on our operations, supply chain, transportation networks and customers, which may lower our revenues and EBITDA, including as a result of preventative and precautionary measures that we, other businesses and governments are taking. The COVID-19 pandemic is a widespread public health crisis that is adversely affecting the economies and financial markets of many countries. Any resulting economic downturn could adversely affect demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products and services. The progression of this matter has and may continue to negatively impact our business or results of operations by affecting the health of our employees and through the temporary closure of our operating locations or those of our customers or suppliers. The extent to which the COVID-19 outbreak impacts our business, results of operations, financial condition or cash flows will depend on future developments, which remain highly uncertain and cannot be predicted, including, but not limited to, the duration and geographic spread of the outbreak, its severity, the actions to contain the virus or treat its impact including the reimplementation of restrictions on economic activity following new outbreaks, the long-term impacts of the virus on government budgets and other funding priorities and to what extent normal economic and operating conditions can resume. There can be no assurance that we will not be impacted by adverse consequences that may be brought about by pandemics on global financial markets, which may reduce resources, share prices and financial liquidity and may severely limit the availability of financing capital.

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of our equity securities during the quarter ended June 30, ~~2019~~2020 are summarized below.



			Total Number	Maximum			Total Number	Maximum
			of Shares	Number of			of Shares	Number of
			Purchased as	Shares that			Purchased as	Shares that
	Total		Part of Publicly	May Yet Be	Total		Part of Publicly	May Yet Be
	Number of	Average	Announced	Purchased	Number of	Average	Announced	Purchased
	Shares	Price Paid	Plans or	Under the Plans	Shares	Price Paid	Plans or	Under the Plans
Period	Purchased	Per Share	Programs	or Programs ¹	Purchased	Per Share	Programs	or Programs ¹
2019
2020
Apr 1 - Apr 30	0	$ 0.00	0	8,297,789	0	$ 0.00	0	8,064,851
May 1 - May 31	0	$ 0.00	0	8,297,789	0	$ 0.00	0	8,064,851
June 1 - June 30	0	$ 0.00	0	8,297,789	0	$ 0.00	0	8,064,851
Total	0	$ 0.00	0		0	$ 0.00	0

On February 10, 2017, our Board of Directors authorized us to purchase 8,243,243 shares of our common stock to refresh the number of shares we were authorized to purchase to 10,000,000. As of June 30, ~~2019,~~2020, there were ~~8,297,789~~8,064,851 shares remaining under the authorization. Depending upon market, business, legal and other conditions, we may make share purchases 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. Due to the COVID-19 pandemic, we have temporarily suspended our share repurchase program.

We did not have any unregistered sales of equity securities during the second quarter of ~~2019.~~2020.

ITEM 4

MINE SAfETY DISCLOSURES

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.

‎

4749

ITEM 6

exhibits


Exhibit 4.1		Ninth Supplemental Indenture, dated as of May 18, 2020, between Vulcan Materials Company and Regions Bank as Trustee, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 18, 2020¹
Exhibit 10.1		364-Day Credit Agreement, dated April 10, 2020, among Vulcan Materials Company, Truist Bank, as Administrative Agent, and the Lenders and other parties named therein, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 13, 2020¹
Exhibit 10.2		Second Amendment to Credit Agreement, dated April 10, 2020, among Vulcan Materials Company, each of the Guarantors, the Lenders party thereto, and Truist Bank successor by merger to SunTrust Bank, as Administrative Agent
Exhibit 10.3		Form of Non-Employee Director Restricted Stock Unit Award Agreement under the Vulcan Materials Company 2016 Omnibus Long-Term Incentive Plan²
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		MSHA Citations and Litigation
Exhibit ~~101.INS~~101		~~XBRL Instance Document –~~The following unaudited financial information from this Quarterly Report on Form 10-Q for the ~~instance document does not appear~~quarter ended June 30, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the ~~Interactive Data file because its XBRL tags are embedded within~~Condensed Consolidated Balance Sheets, (ii) the ~~Inline XBRL document.~~Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements.
Exhibit ~~101.SCH~~104		~~XBRL Taxonomy Extension Schema Document~~
Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 is formatted in iXBRL (contained in 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~~101).

¹	Incorporated by reference.
²	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.

‎

4850

SIGNATURES

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.

VULCAN MATERIALS COMPANY

Date ~~July 29, 2019~~August 5, 2020

/s/ Randy L. Pigg

Randy L. Pigg

Vice President, Controller

(Principal Accounting Officer)

Date ~~July 29, 2019~~August 5, 2020

/s/ Suzanne H. Wood

Suzanne H. Wood

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

4951

‎ Class

Shares outstanding
‎ at July 25, 201923, 2020

Common Stock, $1 Par Value

132,286,856 132,448,129



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



	Three Months Ended June 30, 2018
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 313,245	$ 49,339	$ 69,605	$ 0	$ 432,189
Gulf Coast	493,696	38,845	18,354	2,282	553,177
West	149,324	123,644	18,764	0	291,732
Segment sales	$ 956,265	$ 211,828	$ 106,723	$ 2,282	$ 1,277,098
Intersegment sales	(76,947)	0	0	0	(76,947)
Total revenues	$ 879,318	$ 211,828	$ 106,723	$ 2,282	$ 1,200,151



	Six Months Ended June 30, 2018
in thousands	Aggregates	Asphalt	Concrete	Calcium	Total
Total Revenues by Geographic Market ¹
East	$ 496,459	$ 61,068	$ 131,175	$ 0	$ 688,702
Gulf Coast	888,271	53,488	43,554	4,224	989,537
West	271,192	201,107	32,956	0	505,255
Segment sales	$ 1,655,922	$ 315,663	$ 207,685	$ 4,224	$ 2,183,494
Intersegment sales	(128,869)	0	0	0	(128,869)
Total revenues	$ 1,527,053	$ 315,663	$ 207,685	$ 4,224	$ 2,054,625

‎ Class

Shares outstanding‎ at July 25, 201923, 2020

Common Stock, $1 Par Value

132,286,856 132,448,129

Shares outstanding
‎ at July 25, 201923, 2020