Investor Contact:  Mark Warren (205) 298-3220

 

Media Contact:  David Donaldson (205) 298-3220

 

 

 

Birmingham, Alabama– July 30, 2007 – Vulcan Materials Company (NYSE:VMC) today announced second quarter earnings from continuing operations were $144 million, or $1.46 per diluted share.  Earnings from continuing operations in the second quarter of 2006 were $1.50 per diluted share and included gains of $0.15 per share resulting from the sale of contractual rights at its Bellwood quarry in Atlanta, $0.06 per share resulting from an increase in the carrying value of the ECU earn-out and $0.03 per share referable to a change in accounting principle retrospectively applied.  Excluding these gains, comparable earnings per diluted share from continuing operations were $1.46 versus $1.26, an increase of 16 percent from the prior year’s second quarter (refer to Table E attached).

 

Don James, Vulcan’s Chairman and Chief Executive Officer, stated, “The significant slowdown in residential construction, driven by excess inventory of single-family houses in many markets, resulted in lower than expected volumes in all major product lines, despite growth in private nonresidential and public infrastructure construction.  Pricing for each major product line increased versus the prior year’s second quarter, more than offsetting the earnings effect from lower volumes.

 

“Our business has demonstrated remarkable resilience to the weakness in residential construction activity.  We have managed to grow margins even as aggregates volumes have declined.  This performance reflects the strength inherent in our broad geographic and end-use markets and a pricing environment for aggregates that recognizes the high cost of replacing reserves.”

 

 

Quarterly net sales approximated the prior year’s second quarter level.  Gross profit as a percentage of net sales increased to 35 percent from 32 percent in the prior year due to higher earnings from aggregates and asphalt. 

 

Aggregates revenues and earnings increased from prior year’s levels due to higher pricing.  Aggregates prices increased 14.6 percent from the prior year’s second quarter.  The Company realized double-digit improvements in all major markets.  Aggregates second quarter volumes were 10 percent lower than in the prior year.

 

Asphalt earnings increased significantly from the prior year.  A 16 percent increase in prices more than offset the earnings effects of a 14 percent decline in shipments.  Second quarter asphalt earnings also benefited from slightly lower unit costs for liquid asphalt.  Second quarter concrete earnings were lower than the prior year.  A 7 percent increase in concrete prices was more than offset by the earnings effect of a 28 percent decrease in concrete shipments.

 

Selling, administrative and general expenses in the second quarter increased approximately $6 million from the prior year’s second quarter due mostly to higher employee-related costs and expenses associated with certain corporate initiatives, including the pending acquisition of Florida Rock Industries, improving business processes and the replacement of legacy information systems.

 

Other operating income in the prior year’s second quarter included a $24.8 million gain from the sale of contractual rights at the Company’s Bellwood quarry in Atlanta.  There is no comparable gain in this year’s second quarter.

 

Other income in the prior year’s second quarter included a $10.8 million gain in the carrying value of the ECU earn-out as compared with a $1.2 million gain in this year’s second quarter.  As of June 30, 2007, the Company has earned the $150 million maximum payment provided for underthe terms of the ECU earn-out agreement related to the sale of its Chemicals business.

 

All results are unaudited.

 

 

Commenting on Vulcan’s outlook for the remainder of 2007, Mr. James stated, “Private nonresidential and public infrastructure construction continue to grow.  We believe that growth in these end markets during the second half of the year will mitigate some of the slowdown in residential construction.  We believe aggregates volumes in the second half of 2007 will be approximately 2 percent lower than the prior year’s second half, resulting in a full year decline of approximately 7 percent as compared with 2006.

 

“Aggregates pricing momentum remains strong and we expect aggregates prices to increase 12 to 13 percent for the full year.

 

“As a result, for the second half of 2007, we expect earnings from continuing operations of $2.80 to $3.15 per diluted share.  For the full year, we expect record earnings of $5.18 to $5.53 per diluted share.

 

“We are confident about the future opportunities for our business.  We are well positioned in markets where population, household formation and employment continue to drive growth in demand for our products.  Price trends in aggregates continue to be favorable and the broad use of aggregates throughout the U.S. economy contributes to relatively stable demand over the long term.  Our reinvestment of capital to reduce production and transportation costs, add reserves and increase our operational footprint through strategic acquisitions and greenfield site development will make our business even stronger when residential construction recovers.”

 

Earnings guidance provided in this press release does not reflect the pending merger with Florida Rock Industries, Inc.

 

 

Vulcan will release its earnings for the second quarter after the close of business on July 30, 2007, and host a conference call at 11:00 a.m. CDT on July 31, 2007.  Investors and other interested parties in the U.S. may access the teleconference live by calling (800) 798-2864 approximately 10 minutes before the scheduled start.  International participants can dial (617) 614-6206.  The access code is 71364009.  A live webcast will be available via the Internet through Vulcan's home page at vulcanmaterials.com.  The conference call will be recorded and available for replay approximately two hours after the call through August 7, 2007.

 

Vulcan Materials Company, a member of the S&P 500 index, is the nation's largest producer of construction aggregates and a major producer of asphalt and concrete.

 

Certain matters discussed in this release, 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, those associated with general economic and business conditions; changes in interest rates; the timing and amount of federal, state and local funding for infrastructure; changes in the level of spending for residential and private nonresidential construction; the highly competitive nature of the construction materials industry; pricing; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; increasing healthcare costs; the timing and amount of any future payments to be received under two earn-outs contained in the agreement for the divestiture of the Company's Chemicals business; the Company’s ability to manage and successfully integrate acquisitions; risks and uncertainties related to the proposed transaction with Florida Rock Industries, Inc. (Florida Rock) including the ability to successfully integrate the operations of Florida Rock and to achieve the anticipated cost savings and operational synergies following the closing of the proposed transaction with Florida Rock; and other assumptions, risks and uncertainties detailed from time to time in the Company’s SEC reports, including the report on Form 10-K for the year.  Forward-looking statements speak only as of the date hereof, and Vulcan assumes no obligation to publicly update such statements.