FILED PURSUANT TO RULE 425
FILED BY VULCAN MATERIALS COMPANY
PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933
AND DEEMED FILED PURSUANT TO RULE 14a-12
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SUBJECT COMPANY: FLORIDA ROCK INDUSTRIES, INC.
COMMISSION FILE NO. 001-07159
Important Information
This document may be deemed to be solicitation material in respect of the proposed transaction. In
connection with the proposed transaction, a registration statement on Form S-4 was filed with the
SEC on April 12, 2007 containing a
preliminary proxy statement and other documents filed by Vulcan Materials Company and Florida Rock
Industries, Inc. An amendment to the registration statement on
Form S-4 was filed with the SEC on June 12, 2007. SHAREHOLDERS OF FLORIDA ROCK ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT
AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT
IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. The final proxy statement/prospectus will be mailed to shareholders of
Florida Rock. Investors and security holders will be able to obtain the documents free of charge at
the SECs website, www.sec.gov, from www.vulcanfloridarock.com, www.vulcanmaterials.com or
www.flarock.com.
Vulcan Materials, Florida Rock and their respective directors and executive officers and other
members of management and employees may be deemed to participate in the solicitation of proxies in
respect of the proposed transaction. Information regarding Vulcan Materials directors and
executive officers is available in Vulcan Materials proxy statement for its 2007 annual meeting of
shareholders, which was filed with the SEC on April 11, 2007, and information regarding Florida
Rocks directors and executive officers is available in Florida Rocks proxy statement for its 2007
annual meeting of shareholders, which was filed with the SEC on December 7, 2006. Additional
information regarding the interests of such potential participants will be included in the proxy
statement/prospectus and the other relevant documents filed with the SEC when they become
available.
Cautionary Statement Regarding Forward-Looking Statements
Certain matters discussed in this document, including expectations regarding future performance of
Florida Rock and Vulcan Materials, contain forward-looking statements that are subject to risks,
assumptions and uncertainties that could cause actual results to differ materially from those
projected. These risks, assumptions, 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; cost
of hydrocarbon-based raw materials; increasing healthcare costs; the timing and amount of any
future payments to be received by Vulcan Materials under two earn-outs contained in the agreement
for the divestiture of Vulcan Materials Chemicals business; the ability to successfully integrate
acquisitions quickly and in a cost-effective manner and achieve anticipated profitability and
synergies; and other risks, assumptions and uncertainties detailed from time to time in either
companys SEC reports, including each companys report on Form 10-K for the year. There can be no
assurance that the transaction described above will be consummated. Forward-looking statements
speak only as of the date hereof, and each company assumes no obligation to update such statements.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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CORPORATE PARTICIPANTS
Don James
Vulcan Materials Chairman & CEO
Dan Sansone
Vulcan Materials SVP, CFO
CONFERENCE CALL PARTICIPANTS
David MacGregor
Longbow Research Analyst
Louis Sarkes
Chesapeake Partners Analyst
Jack Kelly
Goldman Sachs Analyst
Clyde Lewis
Citigroup Analyst
John Fox
Fenimore Asset Mgmt, Inc. Analyst
Michael Lucas
Appaloosa Management Analyst
Barry Vogel
Barry Vogel & Associates Analyst
Tom Brinkmann
Davenport & Company Analyst
Jack Kasprzak
BB&T Capital Markets Analyst
Michael Lewis
JL Advisors Analyst
Mike Peasley
Priority Capital Analyst
Alan Mitrani
Sylvan Lake Asset Management Analyst
PRESENTATION
Operator
Good day, ladies and gentlemen, and welcome to the Vulcan Materials first quarter 2007
earnings conference call. My name is Annie, and Ill be your coordinator for today. At this time,
all participants are in listen-only mode. We will be conducting a question and answer session
toward the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being
recorded for replay purposes. I would now like to turn the presentation over to your host for
todays call, Mr. Don James, Chairman and CEO. Please proceed, sir.
Don James - Vulcan Materials Chairman & CEO
Good morning. Thank you for joining this conference call to discuss our first quarter results
and outlook for the remainder of the year. Im Don James, Chairman and Chief Executive Officer of
Vulcan Materials. We appreciate your interest in Vulcan and we hope our remarks and our dialogue
will be helpful to you. Replay of this conference call will be available later today at our
website. Joining me today are Dan Sansone, our Senior Vice President and Chief Financial Officer;
and Mac Badgett, Senior Vice President, Construction Materials. Before I begin, let me
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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remind you
that certain matters discussed in this conference call contain forward-looking statements, which
are subject to risk and uncertainties that could cause actual results to differ materially from
those projected. Descriptions of these risks and uncertainties are detailed in the companys SEC
reports, including our most recent report on Form 10-K. Forward-looking statements speak only as of
the date hereof and the company assumes no obligation to update such statements.
In late January, when we reported our 2006 results, we believe that our business was very well
positioned to achieve strong earnings growth in 2007, and our view has not changed. The use of
aggregates in a broad range of construction end uses and the growing recognition of the underlying
economic value of aggregates reserves are positive factors for our strong and consistent earnings
growth. The pricing environment for aggregates remains favorable, with demands for aggregates
supported by growth and infrastructure and private nonresidential construction, even in the face of
lower demand from single family housing. We are pleased with our first quarter operating results
and the year-over-year growth in our earnings. First quarter 2007 earnings per share increased 34%
from the prior year to a record $0.91 per diluted share, and operating earnings were $137 million,
a 39% increase from the prior years level. In the first quarter, net sales decreased 2% from the
prior years level. By contrast, gross profit increased 4%. Gross profit as a percent of sales
increased from 25.5% in the prior years first quarter to 26.5% this year.
Double-digit price increases in all three key products more than offset the earnings effect of
lower sales volumes. Softening in single-family residential construction and significantly less
favorable first quarter weather were the primary drivers for lower volumes in the quarter. The
average price for aggregates, excluding freight to remote distribution sites, increased 16% from
last years first quarter. Aggregate shipments in the first quarter decreased 14% from last years
record first quarter levels, when shipments surged 13%. This years first quarter aggregate
shipments were more in line with normal patterns than were last years abnormally high first
quarter shipments.
After practically three years of rising diesel fuel cost, we experienced some relief beginning in
the fourth quarter of 2006. This moderation in unit costs for diesel fuel continued in the first
quarter, as unit costs approximated last years first quarter. First quarter asphalt sales
increased 14% from the prior year, and earnings increased sharply as a result of higher sales
prices. Asphalt pricing increased 26% from the prior years first quarter, more than offsetting a
10% decrease in sales volumes, a 7% increase in unit costs for liquid asphalt and higher transfer
pricing, or internally supplied aggregates. Concrete sales decreased $17 million from the prior
years first quarter and earnings decreased as higher pricing was more than offset by sharply lower
volumes, as well as higher costs for cement and for aggregate supplied internally from our
quarries. Concrete pricing increased 10%, demonstrating resiliency despite weaker single-family
housing construction in Southern California and Arizona. Higher earnings in asphalt, aggregates and
aggregates-related transportation more than offset the lower concrete earnings.
In recent years, we have generated a significant value for our shareholders through the planned
development and sale of reclaimed and surplus real estate, and we are continuing this process. As
we have previously announced, in January of this year, we sold California real estate in the
quarter for a pretax gain of $44 million. Selling, administrative and general expenses for the
first quarter increased approximately $9 million from the prior year. This increase is due mostly
to higher employee-related costs, including incentive costs related to the sale of California real
estate, and expenses associated with certain corporate initiatives, including improving business
processes, as well as the pending acquisition of Florida Rock.
Other income decreased $11 million from the prior years first quarter due primarily to the
carrying value of the ECU earn-out. Other income in the current years first quarter includes a
gain of $700,000 compared to a gain of $12.2 million in the prior year in the carrying value of the
ECU
earn-out. As you may recall, the terms of the ECU earn-out agreement from the sale of our chemicals
business provided for a maximum payment of $150 million. Through March 31, 2007, we have recognized
approximately $149 million of this earn-out in our financial statements. We anticipate the
additional $1 million gain will be booked in the future. Thus far, we have received cash payments
of $128 million. We believe it is likely the remaining $22 million under the contract will be
received in the third quarter of 2007. In March, the company received $8.4 million in cash from the
5CP earn-out agreement with a purchaser of our former chemicals business. The cash receipt had no
effect on earnings in the current quarter. This earn-out is to be paid annually in the first
quarter, subject to certain conditions, through 2013. To date, we have received $12.3 million cash
referable to the 5CP earn-out. As of March 31, 2007, we have a $21 million receivable referable to
the 5CP earn-out. Over the next six years, we expect to receive approximately $9 million annually.
Based on our current projections, we expect to recognize after-tax earnings and discontinued
operations from this earn-out beginning in 2010.
Putting our significant cash flows to work to enhance our business and increase shareholder value
remains a constant priority for us. Our coast to coast footprint provides us a platform for
sustainable earnings growth, and we continue to move aggressively to capitalize on the
opportunities presented by continued economic growth and depletion of aggregate reserves in a
number of key fast-growing markets. In February, we announced the acquisition of Florida Rock
Industries, which for us is a logical fit, both from a business perspective and from a cultural
perspective and aligns perfectly with our long-term strategic objectives. We look forward to the
prospects of combining our companies later this year, achieving synergies and being well positioned
to benefit from recovery in the Florida market. Also during the first quarter, the company acquired
quarries in Illinois and North Carolina.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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We reinvested approximately $123 million in our businesses in the first quarter of 2007. Much of
the increase in spending over the prior years levels was for high return projects to lower
operating costs for the acquisition of new reserves and for additional production and distribution
assets in key markets. In February, we increased our dividend to shareholders 24%. This marks the
15th consecutive year that we have increased the dividend.
As we look ahead to the remainder of 2007, we remain confident in our ability to continue strong
earnings growth. Pricing momentum we achieved in 2005 and 2006 is continuing in 2007. We now expect
aggregates pricing to improve 10 to 12% versus 2006. Overall, we expect 2000 (sic) earnings from
continuing operations of $5.51 to $5.91 per diluted share, consistent with the full year guidance
provided at the end of the fourth quarter. This guidance assumes approximately 98 million diluted
shares outstanding. The earnings contribution from higher aggregates pricing should more than
offset the earnings effect of a potential decrease in aggregate shipments resulting from weakness
in residential construction. For the full year, we expect aggregate shipments to be flat to down 2%
from the prior years level, and overall demand for aggregates in our markets to be supported by
public infrastructure and private nonresidential construction, even in the face of lower demand
from single-family housing. Even though the residential construction slow-down in the U.S.
continued in the first quarter of 2007 and contributed to lower aggregate shipments for the
quarter, residential construction has the potential, we believe, to stabilize in the second half of
2007 in many of our markets. Mortgage interest rates are still at relatively low historical levels,
and household formations are increasing in many of our higher growth markets.
We believe most categories of private nonresidential construction will continue to improve in 2007.
This construction end market includes a wide variety of project types and generally is more
aggregates-intensive than single-family residential construction. Economic factors such as job
growth, vacancy rates, private infrastructure needs, including growth in energy-related projects
primarily in the Gulf Coast, and demographic trends help drive overall demand for nonresidential
construction. Our geographic footprint positions us well in the regions expected to show the most
growth in 2007. Aggregates demand from highway construction and Vulcan-served markets should
increase in 2007, primarily as a result of higher federal and state spending levels, and moderating
liquid asphalt cost. The recent trend in falling liquid asphalt and diesel cost should bring
highway bids back in line with project budgets in the future, and increase highway construction
activity in markets where projects have been deferred. It is worth noting that over 70% of our
aggregate shipments go to the more aggregate-intensive public construction and private
nonresidential construction end markets, and we are well positioned to benefit from growth in
demand in each of these end markets.
Those of you who have been following Vulcan, you know that Californias our largest state in terms
of revenue, and we are very optimistic about the future for infrastructure spending in that state.
But before I touch on California, let me provide you with some brief comments on two other
important states to Vulcan, Virginia and Georgia. In Georgia, highway construction activity in our
markets continues to strengthen, and offset some of the softness in single-family residential
construction. Highway awards for the trailing 12 months ending March 2007 are up 60% over the prior
12 months, ending in March 2006. In April, the Virginia House and Senate overwhelmingly approved
Governor Kaines amended Transportation Funding Bill, paving the way for the first funding reform
in that state in many years. This legislation would increase transportation funding approximately
$1 billion annually over each of the next 5 to 6 years. Revenue would include new state, regional
and local sources, redirected general funds, and $3 billion in transportation bonds. We strongly
support Governor Kaines program and the legislatures leadership in addressing transportation and
infrastructure needs in Virginia.
In California, residents view traffic congestion as a major problem and many feel that the states
transportation system suffers from underinvestment and has not kept pace with growth in population
and travel demand, according to a January 2000 legislative analyst office report produced in
California. Additionally in a report released last October, TRIP, a national transportation
research group, found that 5 of the 10 large urban areas in the United States with the poorest
highway conditions were located in California. That said, the outlook is very encouraging because
Governor Schwarzenegger, the state legislature and the voters of California all appear to be
committed to addressing the states transportation and infrastructure problems. In November 2006,
California voters approved 5 state-wide bond measures, totaling approximately $42.7 billion, that
will help improve the states infrastructure, including transportation, education, buildings and
housing. Implementation plans for each bond program are currently being submitted for approval
through a collaborative effort of state, regional and local authorities. At this time, $4.5 billion
of the $19.9 billion approved by voters under Proposition 1B has been approved by the implementing
agencies, with an additional $2 billion pending approval. Additionally, approximately $2.8 billion
designated to augment existing state highway and transportation programs will be submitted for
approval in June. An additional $22.8 billion in funding that was passed in November to address the
infrastructure needs in transportation, education, trade infrastructure and housing is in the
process of implementation. The transportation bonds authorized by the November election should
become available to the implementing agencies upon appropriation in Californias annual budget act.
The governors proposed 2008 budget submitted in January includes $5.8 billion of capital outlay
for transportation projects, of which $1.5 billion is part of the $19.9 billion approved as
Proposition 1B in November. The 2008 proposed funding level is an increase of $1.2 billion from the
record $4.6 billion allocated in fiscal year 2007, and is a substantial increase from the $900
million allocated in fiscal year 2005.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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The additional funding approved by voters in November is very promising for addressing Californias
infrastructure deficiencies. However, the governor believes additional funding is necessary to go
beyond meeting existing needs for transportation capacity, and begin meeting future transportation
infrastructure needs. To that end, he has proposed that an additional $43 billion of infrastructure
bonds be put to the voters for approval between 2008 and 2010 that include additional construction
of educational buildings, flood control, dams, judicial buildings and public safety projects. Late
last week, the California assembly acted on one of the strategic growth programs, passing
legislation unanimously to fund $7.4 billion of prison and jail construction.
At the federal level, the highway program SAFETEA-LU is fully funded at $39.1 billion for fiscal
2007, the level guaranteed in the current six-year bill, and $3.5 billion above the last fiscal
years level. The 2008 level authorized in the current six-year highway bill and approved in both
the House and Senate fiscal 2008 budget resolutions increases to $40.2 billion for the year.
We are proceeding on a number of capital projects that will add capacity, increase efficiency and
boost aggregate reserves at existing operations over the next few years and we are pursuing several
new quarry sites and distribution facilities to serve our markets for the long-term. Several of
these projects are focused on enhancing our ability to serve the expected increase in aggregates
demand from highway and other infrastructure projects in California. We are also investing in
projects to increase the supply of aggregates to attractive U.S. Gulf Coast markets. In both
California and the Gulf Coast, the industry reserve base for aggregates is shrinking due to
depletion, regulation and litigation. We have significant reserves available to serve these high
growth markets and are further developing our production transportation and distribution capacity
to grow our presence in these markets. As a result, our estimate for capital spending on property
plant and equipment for 2007 is in the range of $475 million to $550 million, exclusive of
acquisitions. The capital investment opportunities contemplated in this estimate provide attractive
returns and will help us serve our customers and markets more effectively going forward. They will
also help us reduce production costs as well as add additional reserves.
Moving now to our second quarter outlook, we expect to earn $1.55 to $1.70 per diluted share. Last
years second quarter earnings from continuing operations were $1.47 per diluted share and included
a gain of $0.15 per share resulting from the sale of contractual rights, as well as $0.06 per share
gain resulting from an increase in the carrying value of the ECU earn-out. This years second
quarter guidance does not include any comparable items. Additionally, our second quarter and full
year earnings guidance for continuing operations in 2007 does not reflect the pending acquisition
of Florida Rock.
In closing, I would like to reiterate some of the points that support our optimism about the future
sales and earnings growth for Vulcan. Construction spending remains at high levels in our markets.
Relative end market demand is returning to historical norms that match very well with our
geographic footprint and our strategic focus. Pent-up demand for improved transportation
infrastructure is finally moving towards funding for construction in key Vulcan states. Because of
its broad use in construction, aggregates demand is well balanced between end markets. With public
construction growing and strength in private construction beginning to transition from residential
to nonresidential construction, we are very encouraged by potential sales and earnings growth,
particularly in light of the fact that over 70% of our aggregate shipments serve public
infrastructure and private nonresidential construction. As a result of the solid demand in our
markets and the high cost and challenges of securing new reserves in many markets, we believe the
momentum underlying a price improvement achieved in 2005 and 2006 will continue into 2007. We
certainly thank you for your interest in Vulcan. Now if our operator will give you the required
instructions, well be happy to respond to your questions.
QUESTION AND ANSWER
Operator
(OPERATOR
INSTRUCTIONS) Your first question comes from the line of David MacGregor with Longbow Research.
David MacGregor - Longbow Research Analyst
Yes, good morning, everyone.
Don James - Vulcan Materials Chairman & CEO
Good morning, David.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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David MacGregor - Longbow Research Analyst
You talked about price momentum heading into 2007. I just wanted to get your thoughts on the
potential for a mid-year price increase across the southern U.S.
Don James - Vulcan Materials Chairman & CEO
David, as weve said many times before, we do our pricing on a market-by-market, product
by-product, customer by customer basis, but yes, we will expect to get some mid-year price
increases. Thats not to say they will be in every market for every product for every customer, but
we do expect continued price improvement.
David MacGregor - Longbow Research Analyst
I mean, is it possible at this point, and I realize youve got sort of a collection of
regional markets here and everyones distinctly different but in total, is it possible to talk a
little bit about expectations? I mean should we be thinking about mid-single digits, all things
considered?
Don James - Vulcan Materials Chairman & CEO
Well, the best way we find to look at pricing is look at average price from one period to the
other and as we have indicated, we believe for full year 07, we will get price increases in
aggregates in the range of 10 to 12% above those in 2006. You saw from our press release the price
improvement we enjoyed in the first quarter. So I think pricing momentum is well in place.
David MacGregor - Longbow Research Analyst
And I guess a mid-year price increase certainly serves to firm up the January 1st price
initiatives.
Don James - Vulcan Materials Chairman & CEO
Weve had no trouble with aggregate pricing.
David MacGregor - Longbow Research Analyst
The numbers certainly dont look like it. The other question I had for you, Don, really dealt
with the Florida Rock expectations. At the time of the acquisition that you had conveyed the
thought that you could deliver on average annual EBITDA of $2 billion over the first three years.
With the weakness that youre seeing in Florida right now, do you still believe you can deliver on
that vision?
Don James - Vulcan Materials Chairman & CEO
David, our projection was an average of $2 billion of EBITDA in 2008, 2009, and 2010.
David MacGregor - Longbow Research Analyst
Correct.
Don James - Vulcan Materials Chairman & CEO
Hopefully it comes at no surprise to you that we did not buy Florida Rock for its 2007
projected earnings. Certainly not its first calendar quarter of 2007 earnings.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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David MacGregor - Longbow Research Analyst
Right, right.
Don James - Vulcan Materials Chairman & CEO
So we are very happy with where we are with that transaction. We look forward to getting it
closed sometime this summer. We believe there will be upside in the Florida market certainly
beginning in 2008, and they are currently undergoing the correction that you and everybody else in
the financial markets predicted when you took their price way down in 2006, along with Rinker. So I
think all were seeing today is a manifestation of the predictions that the public markets were
using for Florida Rock and Rinker last year.
David MacGregor - Longbow Research Analyst
Right. So from a modeling standpoint, we can continue to use that average annual EBITDA of $2
billion over 08, 09, 10?
Don James - Vulcan Materials Chairman & CEO
No, we have no reason to change that.
David MacGregor - Longbow Research Analyst
Okay. Thanks very much, Don.
Operator
Your next question comes from the line of Louis Sarkes with Chesapeake Partners.
Louis Sarkes - Chesapeake Partners Analyst
Thank you. I have two questions. One is and I thought it was very interesting hearing
Florida Rock talk about it, but what would, if you had to guess, would the shipments to
residential markets be down in the Florida market? I think they thought or implied it could be as
much as 70% for residential and just I would love to hear your perspective on that.
Don James - Vulcan Materials Chairman & CEO
I dont believe that number is anywhere if youre talking about Florida Rock, certainly 70%
of their shipments do not go to residential.
Louis Sarkes - Chesapeake Partners Analyst
No, no, no. The residential shipments in the state of Florida were down, in a very large
amount, even as much as 70%.
Don James - Vulcan Materials Chairman & CEO
I have not seen any data that would suggest that at all. We are we believe that in our
markets for 07, we see highways up about 4%, we see public works up 2%, we see housing down about
6% this is in aggregate shipments and non-res up about 3%, and that yields our flat to down
2%. In the markets that Florida Rock serves, our research would indicate that highways ought to be
up about 2%, public works about 5%, non-res up about 2% and residential down about 15%. They are
heavily in Northern Virginia and the DC suburbs and in Florida, which are two markets that have had
excess housing inventories.
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Louis Sarkes - Chesapeake Partners Analyst
Right, as well as great highway projects and infrastructure going on. Is it fair to say that
you are as happy today with the Florida Rock transaction as you were at the end of February when
you announced it?
Don James - Vulcan Materials Chairman & CEO
We bought Florida Rock for the long-term aggregate reserve positions, the high growth markets,
their market position and their customer relationships and none of that has changed at all.
Louis Sarkes - Chesapeake Partners Analyst
Right. Thank you very much.
Operator
Your next question comes from the line of Jack Kelly with Goldman Sachs.
Jack Kelly - Goldman Sachs Analyst
Good morning.
Don James - Vulcan Materials Chairman & CEO
Hey, Jack. How are you?
Jack Kelly - Goldman Sachs Analyst
Good. Don, just on the asphalt earnings, you mentioned they were up significantly despite a
10% decline in tonnage. You gave us metrics, I think you said unit asphalt oil-based costs to that
business were up 7%, prices up 26. The question, is thats typically a lag business where it
takes a while for prices to go up, likewise to go down. Assuming volume in asphalt was flat to down
this year, can you give us a sense of how you think
the pricing dynamics would work? And so would it work out to be similar to stone, where we could
have flat to down volume and because of better pricing, actually have earnings up for the full
year?
Don James - Vulcan Materials Chairman & CEO
Yes.
Jack Kelly - Goldman Sachs Analyst
Okay.
Don James - Vulcan Materials Chairman & CEO
And the reason for that is that much of our asphalt goes into public infrastructure. Higher
amount goes into private non-res, particularly retail and to some extent industrial, where there
are large parking lot. The asphalt going into housing is just for streets. So one of the things
that we like about our product mix historically and moving back to a more normalized product mix is
that asphalt and aggregates really benefit from the improvement in public infrastructure and
private non-res.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Jack Kelly - Goldman Sachs Analyst
Okay. Now, secondly, maybe I have a question for Dan. Inventories, finished inventories are up
about 15%. Was that a planned action just to get ahead of things in certain areas, where maybe like
California? Or is that a result that shipments were a bit less than you thought? Just to comment on
finished inventories.
Dan Sansone - Vulcan Materials SVP, CFO
Yes, I think its a little bit of both. Certainly the amount of weather-effected shipping days
we had today certainly left a little more inventory on the ground than you customarily would have.
At the same token, this time of the year is the time when we really generally push production
pretty hard to build inventories, get them back on the ground going into the second, third quarter
of busy shipping seasons. If you look at inventory metrics, the number of days sales that we have
in inventory have crept up a little bit, but not dramatically. The number of day sales in inventory
is up a couple of days from what it had been a year ago. So while its a lot of dollars, its not
an exorbitant increase when measured in the pace of shipments.
Jack Kelly - Goldman Sachs Analyst
Okay.
Don James - Vulcan Materials Chairman & CEO
Last years first quarter is distortive in many ways, including quarter end inventory levels,
because we were shipping rock last year in the first quarter that we had planned to build inventory
and ship later in the year. So last years weather pattern just distorts everything about the first
quarter.
Jack Kelly - Goldman Sachs Analyst
Got it. Don, on the pricing, the 10 to 12, could you share with us, if we looked at the top 5
states for Vulcan, not getting specific, but just do kind of an under and over so for instance,
California, I would guess is better than the 10 to 12 and maybe just go down the other four, if
those would be better than 10 to 12 or less?
Don James - Vulcan Materials Chairman & CEO
Jack, virtually every one of our markets will have either very high single-digit price
increases or double-digit. Theres not a great deal of differentiation between our markets in the
levels of price increases were enjoying today.
Jack Kelly - Goldman Sachs Analyst
Okay. And just finally on Florida Rock, and I know this is near term, but you had indicated
that Florida Rock would have a neutral impact on 07. Does that statement still stand, much like
the $2 billion number still stands?
Don James - Vulcan Materials Chairman & CEO
Jack, I dont have an updated projections from Florida Rock. We are certainly limited in the
Hart-Scott process by how much data we can share. Were not concerned about 07. I dont have the
data to tell you that we have changed our view, but I just dont have the data.
Jack Kelly - Goldman Sachs Analyst
Got it, okay. Thanks a lot.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Operator
And your next question comes from the line of Clyde Lewis with Citigroup.
Clyde Lewis - Citigroup Analyst
Good morning, Don. Couple of questions from me, if I may. Can you maybe share a little bit
more about the monthly performance within the first quarter and how volume-wise that varied? Maybe
talking a little bit more about the weather patterns and maybe seeing how its fared compared to
2004 and 2005, given obviously 2006 was something of an exception
Don James - Vulcan Materials Chairman & CEO
Well, I think if you look at our volume in first quarter 2007, they look more like volumes in
04 and 05. So from that standpoint, this is a much more normalized first quarter than 06. If you
look at first quarter shipments, March was a better month than January and February, and it had a
lot to do with weather. Last year, we had good weather January and February. This year, we had
normal weather in January and February, and so our shipments for March compared to a year ago were
more favorable relative to January and February a year ago.
Clyde Lewis - Citigroup Analyst
The other question I had was on the SG&A. Now, I didnt quite catch everything you said about
sort of the one-off costs, but maybe you could sort of expand a little bit on what was running
through that line in the first quarter and on what would be one-off and what would be there to
stay.
Don James - Vulcan Materials Chairman & CEO
Our SG&A was up because of several factors. One is we part of our incentive plan for a
significant number of employees are what we call performance share units and those were paid out in
the first quarter and we had to pay the company share of taxes on that, payroll taxes. That was a
significant amount of money. And as you can imagine, based on our 06 performance, those
performance shares paid off very nicely for a large group of our employees. We had some round
numbers, about $1 million of additional incentive that we booked in the first quarter associated
with the land sale in California. Those land gains flow through our incentive plans because it
takes years of planning to develop and reclaim those properties in a fashion that makes them
attractive for redevelopment, and so we believe its appropriate that thats part of our normal
business
process. So that goes through our incentives. We booked some additional expense for our charitable
foundation in the quarter. We believe thats a key toward building good community relations across
our footprint. We had some expenses associated with the Florida Rock transaction and professional
fees. Were also underway in various process improvements and IT improvements, and we had some
professional fees and costs associated with that. So it was a mix of things, but much of that in
terms of the employee cost for the employee taxes would not be replicated in subsequent quarters.
Clyde Lewis - Citigroup Analyst
Okay, okay. The last question I had was on property sales. Have you got any more that are
imminent and any more that feature in your full year guidance?
Don James - Vulcan Materials Chairman & CEO
We have none in our full year guidance. Certainly we continue to look for opportunities to
market those properties, but were not going to sell them this year for less than we think we can
sell them next year. So well continue to look at those and try to respond to market conditions.
But for guidance purposes, theres none in our second quarter guidance nor our full year guidance.
Clyde Lewis - Citigroup Analyst
Thanks so much.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Operator
Your next question comes from the line of John Fox with Fenimore Asset Management.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Hi, good morning.
Don James - Vulcan Materials Chairman & CEO
Hi, John.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
I did want to ask, can you break out the Florida Rock transaction costs from SG&A?
Dan Sansone - Vulcan Materials SVP, CFO
John, theres very little Florida Rock transaction cost included in the SG&A. It doesnt mean
we havent spent any money, but under the accounting rules, virtually everything weve spent, be it
investment banking fees or legal fees or any other advisory fees, will be capitalized as part of
the basis in the property, and so thats all held in suspense. In contrast, the accounting rules
will provide Florida Rock being the acquiree would have to expense those costs, which explains the
disparity between their announced SG&A impact from the transaction and ours.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Okay, and, Dan, do you have an estimate for D&A for this year or DD&A?
Dan Sansone - Vulcan Materials SVP, CFO
Yes, Ill come back. Let me look it up.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
I have another number of questions, so youll have some time. For Don, I wonder if you could
expand a little bit more on if you feel residential will stabilize in the second half of the year.
Is that just easy comparisons, or are you seeing certain signals right now?
Don James - Vulcan Materials Chairman & CEO
John, as you know, its very market-specific, but we are watching inventory levels. Were
watching permits. In many markets where there have been sharp drops in unit sales and some
declining prices, we think thats probably whats necessary price decreases.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Sure.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
In order to move the excess inventories. The housing decline has now been predicted probably
for as long as three years. We are I think in many markets well into that decline. And hopefully
many have hit the bottom or are close to it. Its very hard to predict when thats going to come
back, but certainly were optimistic that many markets will stabilize by the end of this year and
certainly most others in 08 as these excess inventories move. The only two factors that we see
causing the difficulty in housing is, number one, which is the obvious one, is that is there was
excess construction during late 05 and the first half of 06.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Right.
Don James - Vulcan Materials Chairman & CEO
And then the other factor is the tightening of mortgage lending standards in the subprime
area, which will reduce take demand levels for housing back to a more normalized pattern. But
then on the positive side, we see no demographic trends that would indicate a reduction in
long-term housing demand in our markets. Population continues to grow in our markets at
substantially greater rates than the U.S. Household formations are continuing to grow. Jobs are
continuing to grow. All of those things we see as being very positive trends. None of those have we
seen any deterioration in.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Right, sure. Yes, my last question is, Don, for the first time I heard you mention about some
significant energy projects in the Gulf Coast. Are there any new specific projects, or is that just
a general buildout of the energy infrastructure, or can you just comment on that? I havent heard
you use that phrase before.
Don James - Vulcan Materials Chairman & CEO
Well, there are some L&G projects in the Gulf Coast.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Sure.
Don James - Vulcan Materials Chairman & CEO
There are some refineries, including one announced yesterday by Marathon. Any time you build a
big energy project in the Gulf Coast, the first thing you have to do is to build a pad out of
crushed rock to support the facilities which generally are large and sprawling and are built on
typically low-lying land. So those are wonderful projects for us, particularly coming out wonderful
projects for us, particularly coming out of Mexico, but also we can supply those, depending on
where they are by rail or by barge or by some combination of the three. So there are fortunately
for all of us, the U.S. is finally beginning to add refining capacity, which we have not done for
probably the last 25 years.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Right.
Don James - Vulcan Materials Chairman & CEO
And thats all going to be built on the Gulf Coast and right in our sweet spot.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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John Fox - Fenimore Asset Mgmt, Inc. Analyst
Okay. Thank you.
Dan Sansone - Vulcan Materials SVP, CFO
Hey, John, the DD&A for 2007 will be in between $260 million and $270 million. And just one
point of clarification we did have some Florida Rock-related transaction costs flow through
SG&A. There are certain categories that are not required to be capitalized, but they were
relatively small in the grand scheme of the SG&A increase, more in the neighborhood of 3 to
$400,000.
Don James - Vulcan Materials Chairman & CEO
Im glad Dan corrected that. I just told Clyde in response to another question that we had
some Florida Rock expenses in our SG&A.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Yes, it was in the press release.
Dan Sansone - Vulcan Materials SVP, CFO
It was not anywhere near the order of magnitude of what you saw in the Florida Rock press
release.
John Fox - Fenimore Asset Mgmt, Inc. Analyst
Okay. Well, thank you for clearing that up.
Operator
Your next question comes from the line of Michael Lucas with Appaloosa Management.
Michael Lucas - Appaloosa Management Analyst
Yes, hows it going? I would really like to clarify some things. I listened to the Florida
Rock call and they had volumes down 34, 50%, et cetera. I went through the math with them and they
came up saying that 50 more percent of their total volume goes towards residential. They said
Virginia was 33% basically for aggregates and cement residential, non-res and private. For you
guys, Im just trying to figure out the same. If I take the numbers you basically gave, if I look
at the first quarter even, nonresidentials down 20% basically and non-res is down somewhere, maybe
up 7 to 10% depending, the public is 7 to 10, how do you get volumes down 15%? I still would like
more, if you could, just walk through maybe more. It seems more of your product goes towards
residential than the 25, 25, 50 that everybody likes to layout. Do you understand the question?
Don James - Vulcan Materials Chairman & CEO
Im not sure I understand your question. I will attempt to answer it. In the first quarter,
volumes were down. Part of it is weather. Particularly on the highways, public works, and private
non-res, I think you could conclude virtually all of that compared to last years first quarter is
weather. Housing is market conditions as well as weather.
Michael Lucas - Appaloosa Management Analyst
Let me ask it this way. What would be the non-res portion that you would think would be down
for this first quarter. And the same thing for public. Were they up for this first quarter? I know
weather-related, but were they up?
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
Down. All the market sectors in aggregate shipments for the first quarter were down.
Michael Lucas - Appaloosa Management Analyst
And the order of magnitude? Im not trying to push on this. Im just trying to see. It seems
that more is focused on residential than the split, right? Because to get the numbers to be down
15%, if Im down 20% residential and its 25%, the non-res has to be down somewhere on the order of
10% and publics got to be down 10 and Im still not there. Its only negative 12.5% on a weighted
average basis. So that tells me that either residential is a higher percentage, or non-res and
public were down more than 10%. And I havent seen that statistics anywhere. Do you understand what
Im trying to get at on a weighted average basis? If you say 25, 25, 50.
Don James - Vulcan Materials Chairman & CEO
The 50, 25, 25 is a reasonable number for us. Okay. Start with that proposition. On an annual
basis, not on a quarterly basis. You cant put asphalt down when the temperatures are below 40
degrees. So you cant take the first quarter and extrapolate to the full year.
Michael Lucas - Appaloosa Management Analyst
No, I recognize that. Im trying
Don James - Vulcan Materials Chairman & CEO
I think thats where youre probably getting some misinterpretation of the quarterly results.
Michael Lucas - Appaloosa Management Analyst
I dont know, because I mean Im looking at the weather. The Northeast was pretty good weather
for the most part. Florida
Don James - Vulcan Materials Chairman & CEO
We dont sell anything in the Northeast.
Michael Lucas - Appaloosa Management Analyst
I know. Im saying California had very, very bad weather? Whats your
Don James - Vulcan Materials Chairman & CEO
No, you need to focus on the fact that last years first quarter is not a representative first
quarter. If you go back and compare to the 2005 first quarter, our volumes were down about 2%. Last
years first quarter they were up 13%. This year they were down 14. When you compare it to a normal
first quarter, we were very close to being flat to down slightly. So I hope that helps you
understand that last years first quarter is not a valid comparison for us, particularly in
highways and also in private non-res.
Michael Lucas - Appaloosa Management Analyst
Okay. And then just one other thing
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
And our view is the highway market is up. The private non-res market is up. Multifamily
housing is up. Single-family housing is way down.
Michael Lucas - Appaloosa Management Analyst
Okay, and that gets to you your positive, negative 2 to positive 3 aggregate shipments for the
year, youre saying.
Don James - Vulcan Materials Chairman & CEO
Well, its flat to negative 2. Theres no positive 3 in our projection.
Michael Lucas - Appaloosa Management Analyst
Okay. Just out of curiosity, Im looking at this as a commodity. I recognize theres
region-specific issues and some stuff, but a lot of these areas theres a lot of years of reserves.
Will customers keep paying 10% price increases on a commodity that has a declining demand picture
in shipments? Im curious how you keep getting price increases, though.
Don James - Vulcan Materials Chairman & CEO
If you look at high growth markets, high growth urban markets, the available reserves
continued to shrink as demand over any significant period of time will continue to grow
Michael Lucas - Appaloosa Management Analyst
The way I look at
Don James - Vulcan Materials Chairman & CEO
You can read reports from the state of California. You can read reports from the state of
Florida. If you look at Virginia or Georgia or North Carolina or Texas or Arizona, you will find
the same thing over and over and over again. The available permitted reserves are shrinking and
demand over any extended period of time will continue to grow and that is the basis of pricing
opportunities. Aggregates are clearly a commodity if you think about them physically. They are not
sold into commodity markets.
Michael Lucas - Appaloosa Management Analyst
Okay. Thank you.
Operator
Your next question comes from the line of Barry Vogel with Barry Vogel and associates.
Barry Vogel - Barry Vogel & Associates Analyst
Good morning, gentlemen.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
Good morning, Barry.
Barry Vogel - Barry Vogel & Associates Analyst
I first have a couple of questions for Dan. On the weather situation, which usually we know
we have weather all the time to contend with, but obviously this was an unusual situation. Dan, to
make it simple, can you give us the weather impact in shipping days in the first quarter of 06
versus the first quarter of 07.
Dan Sansone - Vulcan Materials SVP, CFO
Not really.
Barry Vogel - Barry Vogel & Associates Analyst
That would tell us that would give us
Dan Sansone - Vulcan Materials SVP, CFO
We can estimate them. Ill look something up, Barry, and give you what we have later. But I
think the its hard to do this on a precise basis, but the real point is last years first
quarter was extraordinary in terms of the favorable wet weather conditions, by any measure, and
well come up with some statistics here in a minute, the best we have. It was almost an
unprecedentedly good first quarter in terms of weather in 2006. In 2007, it was more normal weather
patterns. Generally with certain areas that were more wet and more adverse than normal, but Ill
give you some examples. Charlotte and again, its hard to characterize respond to your
question across the whole company, because its all local market specific. But in the city of
Charlotte, we estimated there were three wet weather days in the first quarter of last year and
there were 11 in the first quarter of this year. Chicago, the number of wet weather days was up
60%. Washington, DC area, the number of wet weather days was double what it was in the first
quarter of last year. San Antonio, in the first quarter of 06, we measured by the way we track it,
two wet weather days. We measured 13 in the first quarter of this year.
Barry Vogel - Barry Vogel & Associates Analyst
Okay. Thats fine. Thats good color.
Don James - Vulcan Materials Chairman & CEO
And, Barry, theres another factor running through here as well, and that is temperature days.
And you cannot nobody is running their asphalt plant. If its 45, they are going to run the
asphalt plant. If its 35, they are not, Fahrenheit degrees. So its wet weather and its
temperature. And beginning at the end of last years fourth quarter, we started telling you that
dont expect another first quarter like this. And sure enough, we didnt have another one like
first quarter of 06. Were not saying the weather was bad this years first quarter. Were just
saying compared to last year, thats not a good comparison. If you really want to look at market
conditions and isolate it from weather, go back and look at 04, 05 first quarter versus 07. And
thats a much better comparison of market conditions, isolating the weather from those first
quarter periods.
Barry Vogel - Barry Vogel & Associates Analyst
Okay. Now, I have a question for you, Don. Obviously youve had a few acquisitions in the
first quarter and of course the largest one in the history of the company with Florida Rock.
Considering your debt to capital projections after you buy Florida Rock, if acquisitions are out
there, and I know of course they are always out there do you feel constrained at this time to
make additional acquisitions where the fact that maybe you would want to digest the Florida Rock?
Or do you feel so positive about your pricing leverage for the future and the dwindling reserves
situation, which you have mentioned several times, that you would seriously consider additional
acquisitions if they became available at the right price in 2007?
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
Yes, we would, and there are a number of aspects to that. One constraint for many large
acquisitions is a management team, and we are fortunate that Florida Rock has an able management
team. And combined with ours, we dont have any plans to restaff the Florida Rock management team.
So thats very helpful to our ability to continue to look at additional acquisitions. The other
constraint is a financial constraint. And that is given the projected amount of cash utilization to
buy Florida Rock obviously will take our leverage up to a few, probably I guess we went to about
45% debt to total cap in the Calmat acquisition. This one will take us to 51%. But our cash flows
and ability to service these debt are far greater today than they were when we bought Calmat.
Certainly an acquisition thats part or all stock may in fact help our debt to total cap, but we
dont while we are not likely to do another large transaction until we get Florida Rock under
our belt, we certainly are continuing to look at bolt-on acquisitions.
Barry Vogel - Barry Vogel & Associates Analyst
Okay, and few more questions for Dan, is the capital expenditure number that you threw out
first of all, is it just Vulcan alone? And secondly, is it higher than you talked about on your
last conference call?
Dan Sansone - Vulcan Materials SVP, CFO
Point one, Barry, its Vulcan alone. Point two, its the exact same guidance that we had at
the end of the fourth quarter or back in January. And if you look at our spend rate in the first
quarter, were pretty much tracking towards the middle of that guidance range we just provided.
Barry Vogel - Barry Vogel & Associates Analyst
Okay, and as far as land sales, this big sale, part of the Calmat land?
Dan Sansone - Vulcan Materials SVP, CFO
Yes.
Barry Vogel - Barry Vogel & Associates Analyst
And, Dan, how much Calmat dollars of land do you have on the books left?
Dan Sansone - Vulcan Materials SVP, CFO
I dont have that number off the top of my head, Barry. If youre talking about book value,
its one number if youre talking about market value, its a very different number. We have
identified about $100 million of properties that we expect to sell over a relatively few years.
Barry Vogel - Barry Vogel & Associates Analyst
Is that book value?
Dan Sansone - Vulcan Materials SVP, CFO
No, thats market value.
Barry Vogel - Barry Vogel & Associates Analyst
What about the book value?
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Dan Sansone - Vulcan Materials SVP, CFO
Dont know the answer to that, but its a whole lot lower.
Barry Vogel - Barry Vogel & Associates Analyst
Now, I was surprised that you booked a gain because, and correct me if Im wrong, ever since
youve been selling Calmat properties, I dont remember any gains.
Don James - Vulcan Materials Chairman & CEO
Yes, weve had gains.
Barry Vogel - Barry Vogel & Associates Analyst
You have?
Don James - Vulcan Materials Chairman & CEO
To say there would be no gains would say that the value of California real estate has not
appreciated since January 1, 1999. And there has been huge escalation in the value of California
real estate. So we have been booking as time passes the proportion of the proceeds from sale
will carry a higher gain. Thats just thats the nature of real estate.
Barry Vogel - Barry Vogel & Associates Analyst
Okay. Thank you very much, and, again, you guys have made this great acquisition. Im looking
forward to several years of great growth in profitability.
Don James - Vulcan Materials Chairman & CEO
Thanks, Barry. Its more than mildly remarkable to us that the market is reacting to what we
thought was a very good quarter for Vulcan, with very good prospects apparently the market is
reacting to Florida Rocks first quarter, which we find to be amazing, I guess, in the grand scheme
of things.
Barry Vogel - Barry Vogel & Associates Analyst
Well, offline Ill tell you why they reacted today.
Don James - Vulcan Materials Chairman & CEO
Okay. Thank you.
Operator
Your next question comes from the line of Tom Brinkmann with Davenport.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Tom Brinkmann - Davenport & Company Analyst
Good morning, everybody.
Don James - Vulcan Materials Chairman & CEO
Good morning.
Tom Brinkmann - Davenport & Company Analyst
I was wondering you went through very quickly these shipment volume estimates for the year
by end market, and how you came up to the flat to down 2% estimate, and you went through those very
quickly. I was wondering if you would just indulge me and go through them again very quickly.
Don James - Vulcan Materials Chairman & CEO
Sure. For Vulcan-served markets, we see highways up and this is 07 compared to 06 full
year highways up about 4%, public works up about 2, non-res up about 3, housing down 6. And that
yields essentially flat to down slightly.
Tom Brinkmann - Davenport & Company Analyst
Okay, and that was for the full year?
Don James - Vulcan Materials Chairman & CEO
Full year.
Tom Brinkmann - Davenport & Company Analyst
And did you also mention what they were for the quarter, I think? Actually the first quarter
actual results?
Don James - Vulcan Materials Chairman & CEO
And I mean I can I have that data, but its meaningless because of the impact of weather in
the first quarter.
Tom Brinkmann - Davenport & Company Analyst
I understand.
Don James - Vulcan Materials Chairman & CEO
Here, we do not worry about first quarter for a lot of reasons. You know, Q2, Q3 are the
telling quarters for us in terms of relative end market demand.
Tom Brinkmann - Davenport & Company Analyst
Okay. The 6% drop in housing shipments for 2007 is that consistent with the current run
rate, or are you assuming some kind of modest recovery in the second half of 2007?
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reproduced or transmitted in any form or by any means without the prior written consent of Thomson
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
Some modest recovery in the second half compared to first half.
Tom Brinkmann - Davenport & Company Analyst
Okay, and obviously you expect highways to be strong. Can you explain what happened in
February of this year? It was the first time in at least a year and a half, I mean since the
Federal Highway Bill was passed, that I observed the highway contract lettings were down about 13%
year-over-year according to the American Road & Transportation Builders association.
Don James - Vulcan Materials Chairman & CEO
My advice is do not look at highway contract awards on a monthly basis. Theres really no
consistency in the months during which the states bid work. I think you have to look at that over
a longer period of time. We track that on a 12-month basis as opposed to individual months in order
to get a feel for whats happening with highway awards.
Tom Brinkmann - Davenport & Company Analyst
Okay, and then just as far as the transaction with Florida Rocks concerned, I was wondering
if are there going to be differences between DDA for the combined company versus what they would
be individually with Florida Rock and Vulcan? And similarly, with a tax rate, do you think it would
be paying more dollars of taxes as a combined company than you would have separately? Im not a
CFO, so Im not an expert on these things.
Don James - Vulcan Materials Chairman & CEO
Well, a key to understanding the pro forma DD&A is to look at the Florida Rock S-4, where
there is a pro forma financials of the combined company for 06.
Dan Sansone - Vulcan Materials SVP, CFO
The S-4 includes our best estimate today based on limited information of what the purchase
accounting entries would be, and the related depreciation and amortization calculation of the
combined company. The ball park numbers from that document are that in 2006, if the companies were
combined on a pro forma basis during 2006, depreciation, depletion, amortization would have been
approximately $60 million higher. Thats based on preliminary estimates of the purchase accounting
entries and obviously post closing well go through that calculation with a much higher degree of
precision than weve been able to in the time that weve had to publish the S-4 and also in the
limited access that we have to information and data sharing because of legal restrictions. But
roughly a $60 million increase in DD&A is our best guess at this point in time.
Tom Brinkmann - Davenport & Company Analyst
Okay, thank you.
Dan Sansone - Vulcan Materials SVP, CFO
In terms of the tax rate
Tom Brinkmann - Davenport & Company Analyst
I take it that S-4s available on Florida Rocks website or
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Dan Sansone - Vulcan Materials SVP, CFO
Yes, it should be out on the deal website as well. In terms of tax rate, conceptually, you
will probably see an effective tax rate for the combined company thats a little bit higher than
what Vulcans historic tax rate has been and conceptually a little bit lower than what Florida
Rocks historical tax rate has been. And that has to do with the fact that Florida Rocks business
mix includes a much higher proportion of revenues and earnings associated with concrete operations
that are not entitled to statutory depletion, which has the effect of lowering your tax rate.
However, in their depletion calculation, they do get the benefit of depletion in their cement
operations for the cement feed stock that they produce. That actually is at a depletion rate a
little bit higher than what we get for aggregate. But net net, itll be a little bit of an uptick
in the effective tax rate on balance versus what Vulcan has historically tracked at.
Tom Brinkmann - Davenport & Company Analyst
Okay. Thats very helpful. Thank you. And also, the synergies, I know you talked about at the
time the acquisition was announced, about $18 million in the second half of 2007, $43 million in
2008, then about $50 million annually thereafter. Do you still see that same level of synergies,
and they are going come from cost of goods sold, do you think, or SG&A expenses?
Don James - Vulcan Materials Chairman & CEO
Well, first of all, we have no reason to change our estimate of synergies. That $50 million
was developed mainly on SG&A-based synergies. There were some procurement synergies less than
$10 million of the $50 million was tied to procurement savings. I think most of the remainder was
in SG&A, with the exception of a revision to some of the profit sharing plans, which will flow
through not only SG&A, but also through cost of goods. I dont have a good breakdown at my
fingertips of how much would flow through SG&A and how much would flow through other line items.
Tom Brinkmann - Davenport & Company Analyst
Okay, and then I guess the bigger picture question here is Im assuming since you guys
signed a definitive transaction with Florida Rock that it was always your most attractive
competitor in terms of construction materials companies. What was it about Florida Rock that made
it more attractive than others? In particular, Rinker in several different earnings conference
calls in recent quarters, Florida Rock has complimented Rinker on the initiatives they have taken
to cut costs and just be proactive in terms of boosting margins. So I mean I think both companies
are very well run, but what attracted you to Florida Rock?
Don James - Vulcan Materials Chairman & CEO
Principal attraction to Florida Rock to us is their reserve base in the state of Florida. They
also have a very good reserve base in Maryland, as well. Both of those are markets where we dont
have significant reserves in the local markets. That was our principal attraction. Culturally, and
in terms of a part of cultures management philosophy, theres a great deal of compatibility in the
way the Florida Rock management views our businesses. We like the Florida Rock management team.
They have performed very well and we certainly part of the attraction to us was to get that
management team to work, to integrate with ours. The growth in their markets, if you back up and
look at the key demographic factors, population growth, job growth and household formations, there
is no better market in the U.S. than Florida. Theres an excess supply of single family housing in
Florida today, and thats had an impact. But we are much more focused on the next five years than
the last quarter, and we see a continuation from every bit of demographic data we have received,
both internally and externally. It points up that Florida is going to continue to grow very
significantly greater than the national average. And yet Florida reserves locally produce
Florida reserves and production are shrinking. And as a result of that, we see very significant
opportunities for continued earnings growth and margin improvement in the state of Florida. Thats
hugely important to us. Thats part of our strategy.
If you look at what we have done over the last decade, you will see we have expanded to California,
Arizona, New Mexico. We continue to look for higher growth markets, which typically means coastal
markets. And as a result of that, the place that stuck out like a sore thumb basically in our
strategy was not having a major presence in Florida. And the two places that could occur would be
Rinker and Florida Rock. Rinker, as you know, is a much bigger company. They also had operations in
Australia, which was not part of our long-term strategic plan. I think my understanding is and I
heard this, I listened to the Florida Rock conference call and heard John Baker say that Rinker
had been more aggressive in cutting costs in the quarter than Florida Rock. And Johns view, which
makes sense to me, is that Rinker was struggling to survive as an
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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independent company and Florida
Rock was thinking much more about the long-term in preserving its operations and employee base. And
I can certainly understand why there may have been a difference in the intensity with which costs
were cut in the quarter. And I expect that has a fair amount to do with the differential between
the operating results of Rinker and Florida Rock in the quarter. The other I think has to do with
the geographic distribution in Florida. If you have been to Miami lately, you see 30-odd high-rise
condos that are being completed. And those still, if you look at the residential statistics in
Florida, Miami is still doing well, whereas much of the rest of Florida has turned down and our
view is that it is the completion of high-rise condos thats holding up demand for concrete
aggregates and cement in the Miami area, whereas the single family housing in the Fort Myers,
Naples, Orlando, Tampa, Jacksonville markets have already seen their big downturns.
Tom Brinkmann - Davenport & Company Analyst
I see. Okay. My last question, as I try to project the number of shares of the holding
company, still thinking about maybe 13 million VMC shares to be issued in terms of financing the
transaction?
Don James - Vulcan Materials Chairman & CEO
Thats correct.
Tom Brinkmann - Davenport & Company Analyst
And about 30% of the existing Florida Rock shares outstanding would be converted into holding
company shares? And also, would the VMC shares convert on a one to one basis into holding company
shares?
Don James - Vulcan Materials Chairman & CEO
Correct.
Tom Brinkmann - Davenport & Company Analyst
Okay. Thats great. Thank you, guys.
Don James - Vulcan Materials Chairman & CEO
Thank you.
Operator
Your next question comes from the line of Jack Kasprzak with BB&T Capital Markets.
Jack Kasprzak - BB&T Capital Markets Analyst
Thanks. Good morning, everyone.
Don James - Vulcan Materials Chairman & CEO
Good morning, Jack.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Jack Kasprzak - BB&T Capital Markets Analyst
Don, I wanted to ask, with regard to your pricing guidance of 10 to 12% this year and you made
a comment earlier about what could happen I guess in terms of a second round of price increases
is there a second round of price increases implied in that 10 to 12% guidance, or does that just
assume we get what weve already have in place?
Don James - Vulcan Materials Chairman & CEO
There are some additional price increases in the guidance.
Jack Kasprzak - BB&T Capital Markets Analyst
Okay. Very good.
Don James - Vulcan Materials Chairman & CEO
I know everybody wants me to say were going raise aggregate prices X percent on June 1st.
Thats not the way we do it. So I cant give you that kind of data.
Jack Kasprzak - BB&T Capital Markets Analyst
Well, isnt it true last year, too, that it was a similar situation? You got a second round of
price increases, but it went into effect at different times in different markets?
Don James - Vulcan Materials Chairman & CEO
Thats absolutely true, and that will happen again this year.
Jack Kasprzak - BB&T Capital Markets Analyst
So it wasnt until after the fact that you could give maybe a reasonable number about what
went into effect on average for the company?
Don James - Vulcan Materials Chairman & CEO
Well, we hope our 10 to 12% is a reasonable number. Our guidance for the full year thats
our best judgment.
Dan Sansone - Vulcan Materials SVP, CFO
Thats based on a bottoms-up forecast that each of our operating business units prepares each
quarter.
Jack Kasprzak - BB&T Capital Markets Analyst
Right. I was just
Dan Sansone - Vulcan Materials SVP, CFO
That bottoms-up is bottoms-up across dozens of dozens of individual markets and plants and
quarries. So its real hard to parse it at a consolidated level and say, well, that reflects X
percent increase on a certain date. Its a whole myriad of actual increases and the results of
its the best judgment on how were going to be able to bid stone on individual projects that
havent yet been bid, so theres an awful lot that goes into that number and the 10 to 12% is based
on the best judgment of the operating business units as it rolls up.
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Jack Kasprzak - BB&T Capital Markets Analyst
Okay. Thats good color. Thanks. And youve addressed the Florida Rock issue in terms of the
markets reaction today and your rationale for buying the company, which is unchanged. And I guess
longer-term projections that at this point you dont have any reason to change. So at the risk of
beating a dead horse, I guess I just wanted to touch on one issue, which is in the filing related
to the deal and the projections for Florida Rock, it says that they were prepared in January of
this year. And it does appear that the March quarter was worse than expected at least versus
consensus estimates and perhaps the quarter got worse over the course of the quarter. Having said
that, are we just comfortable in being consistent with your view that of the longer-term issue here
that maybe its worse in the short-term, but it does very little, if any impact on the rationale in
the longer-term opportunity. And youre willing to well, you havent even bought the company
yet, so youre not even really riding it out. It hasnt really the severity now is not really
impacting that view.
Don James - Vulcan Materials Chairman & CEO
Two, two responses to that, Jack. The S-4 contains Florida Rocks projections. It does not
contain Vulcans projections.
Jack Kasprzak - BB&T Capital Markets Analyst
Okay.
Don James - Vulcan Materials Chairman & CEO
We have our own set of projections built on our own numbers, and they are different than the
Florida Rock projections. Secondly, we think that the downturn in single-family housing generally
and in Florida particular has been well predicted for a long time. If there is any John Baker
said he was surprised in his conference call today by, I guess, the lack of demand in March and he
had not cut costs nearly as much as Rinker had. But what matters to us, to reiterate your point, is
08, 09, 10, 11, 12, long-term market position and aggregate reserves to be able to supply what
we see as a very robust market over the long-term.
Jack Kasprzak - BB&T Capital Markets Analyst
So perhaps the reaction in the market today implies that many people were assuming you were
using the numbers to base your assumptions
Don James - Vulcan Materials Chairman & CEO
I dont know. I dont know that, but we develop as we do in every transaction, we develop
our own set of projections and numbers and we price deals off of our numbers, not the sellers
numbers.
Jack Kasprzak - BB&T Capital Markets Analyst
Fair enough. Thats great color. Thank you very much.
Operator
Your next question comes from the line of Michael Lewis with JL Advisors.
Clyde Lewis - Citigroup Analyst
Hi. Could you give a little color on the Lake Belt litigation and status of it and what you
think the timing will be and how that maybe progresses over time?
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial. |
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
Theres been, to our knowledge, no change in the Lake Belt litigation. I believe at this point
the parties are awaiting the remedy order of the federal judge in Miami. Thats expected, I
suppose, any day now. Were not a part of that litigation. We have no influence on that litigation.
What we have done is both Vulcan individually and pro forma Vulcan-Florida Rock to develop
mitigation plans about serving the market under a broad range of possible outcomes of that
litigation, both in terms of the initial order from the judge plus what may happen on appeal. So we
are awaiting the results to see which way we go.
Clyde Lewis - Citigroup Analyst
What are the various possibilities? I mean I guess they can say business as usual, go ahead.
They could do something more drastic. Is there a middle case as well?
Don James - Vulcan Materials Chairman & CEO
Absolutely. There are a whole range of middle cases, which would focus on perhaps reducing the
available reserves in the Lake Belt district going forward, perhaps reducing the annual production
of the Lake Belt quarries. So there are as you probably know, the permits have been sent back to
the core of engineers. The core of engineers, my understanding is, is going through a new process
to look at those permits and they could come back with various and sundry changes, which easily
could reduce total reserves in the Lake Belt district or could perhaps affect the level of annual
production, but we just dont have any idea.
Clyde Lewis - Citigroup Analyst
When you were putting together the numbers, the $2 billion average annual number, what
assumption were you making that it was going to be business as usual, or some change in
business?
Don James - Vulcan Materials Chairman & CEO
We arrived at our projections looking at what we perceived to be as all of the possible
outcomes and what our mitigation plans would be under each of those outcomes. Whatever the outcome
is, we will be a major supplier of rock to the state of Florida going forward. Where it comes from,
and what it sells for will change, depending upon various outcomes. But in terms of our commitment
and our ability to get rock into the state of Florida, we are well positioned.
Clyde Lewis - Citigroup Analyst
Last question, have you already made plans to get rock into the state of Florida from outside
of Florida, and how long would that take to you get up and running to be able to do that?
Don James - Vulcan Materials Chairman & CEO
The answer to thats clearly yes. How long will it take us? We are, as you know, we have
completed the construction of a third ship. We have been adding capacity to our plant in Mexico. We
have opportunities to increase rail deliveries into Florida from quarries in Georgia and Alabama.
We have added distribution yards on the East Coast of Florida. We are continuing to look at ways.
If theres a complete shutdown of mining in the Lake Belt district in the near term, we certainly
cant replace all that.
Clyde Lewis - Citigroup Analyst
What percentage would you be able to replace?
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Don James - Vulcan Materials Chairman & CEO
I cant tell you that because that will vary over time.
Clyde Lewis - Citigroup Analyst
Right. Okay. Thank you.
Operator
Your next question comes from the line of Mike Peasley with Priority Capital.
Mike Peasley - Priority Capital Analyst
All right. Mute button off. Thanks for taking the call. Not much left to ask, but I did want
to get some comments on concrete pricing. Youve been very confident in your thoughts on aggregates
and the momentum there. Can you say the same on the concrete side? Are you looking for generally 10
to 12% or something in the double-digit figures for concrete in 07 on average?
Don James - Vulcan Materials Chairman & CEO
When Im talking about concrete, Im talking about Vulcan concrete, which is Texas, New
Mexico, Arizona and California. Im not talking about concrete in Florida Rocks markets where we
dont participate.
Mike Peasley - Priority Capital Analyst
Right.
Don James - Vulcan Materials Chairman & CEO
We got very nice price increases in the first quarter. The ability to deal with concrete
depends on a number of factors, including input costs like cement diesel fuel, as well as market
demand. As I said in my prepared remarks, concrete pricing in our markets has been resilient. We
dont think we will get concrete price increases necessarily that match aggregate price increases.
But we are certainly less certain about that than with respect to aggregate pricing.
Mike Peasley - Priority Capital Analyst
Okay, thank you.
Don James - Vulcan Materials Chairman & CEO
Your next question comes from the line of Alan Mitrani with Sylvan Lake Asset Management.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Hi, thank you. On the Florida Rock comp 0- well, in your presentation slides when you first
did the deal, announced the deal with Florida Rock you talked about $80 million of land sales
from Florida Rock, most of which you thought would be done this year and that was net of
transaction fees. On the Florida Rock call, they werent aware of some of these land sales. Can you
just talk about the status of those? I realize the deal is not closed, but whether you think in
your projections those are still on track? Just give us an update, if you can.
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Dan Sansone - Vulcan Materials SVP, CFO
Not all of that $80 million was land sales. That was only a small portion of that total.
Theres a variety of items included in that $80 million. For example, theres company-owned life
insurance policies that Florida Rock owns that have cash surrender value associated with them that
we intend to liquidate those policies. Theres tax benefits that will be associated with the
exercise of stock options by Florida Rock employees at closing. There are some pieces of property
that are expected to be sold. Theres some net cash flow benefit to capital spending of the company
being combined, where we wont spend redundant capital capital that Vulcan was already planning
on spending and Florida Rock was planning on spending that will not have to be spent. When you net
all that together is how we got to the $80 million. The reason John Baker couldnt respond to that
question is it was framed earlier as $80 million of land sales and land is only a small portion of
that piece. So I think thats where the confusion came from.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Okay. Thats very helpful. So basically then because its a small portion and obviously land
prices have not gone up in the last few months in Florida, its not like youre going to be selling
depressed, selling at what could be fire sale prices in order
Dan Sansone - Vulcan Materials SVP, CFO
No, sir.
Alan Mitrani - Sylvan Lake Asset Management Analyst
you already have plans to make that $80 million for this year?
Dan Sansone - Vulcan Materials SVP, CFO
Correct. I mean we have no reason at this point in time to believe that that 80 million is not
a good a number as it was back in February when we made the announcement. I had the same comment
that I made about the $50 million in synergies. We have no basis today to offer a different number.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Okay, and then subsequent to your deal, the Walt Disney Company announced major expansion to
Disney World down in Florida. Seems like they are going to build a Four Seasons Hotel, expand the
western entrance and so on and so forth with golf courses. Was this something that you even had a
sense of before you purchased or have you done any analysis to see what this could mean for
business in the next couple years for Florida Rock? Because last time Walt Disney World expanded
meaningfully, it was pretty significant for Florida Rock.
Don James - Vulcan Materials Chairman & CEO
Well, we looked at that only in the context of overall private non-res construction trends in
the state of Florida. Thats one example of many. So we did not specifically address a Disney
expansion in building our model for Florida Rock.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Okay, and then can you just remind us what your authorization is for buyback and what you did
in the first quarter and whether you plan on purchasing any more shares through
Don James - Vulcan Materials Chairman & CEO
We made no open market purchases in the first quarter of 2007, and I believe we have 3.4
million shares still outstanding in current authorizations.
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial. |
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Alan Mitrani - Sylvan Lake Asset Management Analyst
Right. It doesnt seem like youre going to be that I realize youll be leveraged more than
you were, but you werent really leveraged at all. But if you take your pro forma numbers and you
look out to 08, would you expect in order to get to that multi-year $2 billion average, youre
less than 2 times levered, and it seems like there will be CapEx cuts relative to what you spent
the last couple years over the next couple years. Could you give us a sense of what a proper
capital structure is, not this year, but maybe a year from now? On a debt to EBITDA basis, because
I dont care much about debt to cap in terms of looking at your leverage ratios.
Dan Sansone - Vulcan Materials SVP, CFO
Well, the companys current debt to EBITDA is about 0.5 or 0.55. Its less than 1. We estimate
that at closing, that will rise to approximately 2.7, and Im thumbing through some pages as we
speak here just to make sure my memory is correct. The drawdown in that debt over time we think
will occur fairly rapidly and I know you asked for it expressed in debt to EBITDA, but Im going
to, because have I the number in my head our target is to maintain a debt to total cap in the 35
to 40% territory prospectively. We believe the cash flows to be generated from the combined company
will be sufficient to draw that level down well below that target in the next 3 to 4 years, 2 to 3
years. Obviously that then creates a question of what do we do with that excess cash if were going
maintain that target. And as Don has often stated, the first priority is to reinvest that money in
the business and in projects that earn adequate returns. And in the absence of the ability to do
that, we have demonstrated that we will be aggressive in buying back our shares. So I think we have
more than adequate cash flow projected to allow the debt level to draw down well below that target
level. We will hopefully have other investment opportunities to consume that excess cash, and
absent that, well do something else with it.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Okay. I think thats very helpful. One last thing regarding the interest rates, on the
debt, you said youre going to issue about 3.2, maybe a little more debt. Are you going to keep it
in a term loan and then term it out in 5, 10 or 30-year money given another attractiveness of the
interest rate?
Dan Sansone - Vulcan Materials SVP, CFO
Yes, the current thinking right now is that we will term out a considerable portion of the
cash required to close the transaction at or immediately following closing.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Great. Thank you.
Dan Sansone - Vulcan Materials SVP, CFO
Probably and this is still fluid, and so it could move plus or minus 10 or 15% from what
Im about to say but were probably looking at about $2 billion of proceeds to be raised in the
bond market immediately following closing. The exact term of those tranches were still studying
and will probably not be determined precisely until we get right to market. And that $2 billion of
money to be raised in the bond market could move a little bit as well. The remainder of the cash
required to close the transaction will be supported by commercial paper or other short-term
floating rate debt.
Alan Mitrani - Sylvan Lake Asset Management Analyst
Thank you.
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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Operator
And your last question is a follow-up from Michael Lucas.
Michael Lucas - Appaloosa Management Analyst
Yes, hi, again. I was wondering if you could help me clarify one of the things. We talked
about the scarcity value in a lot of these markets. Im not asking about aggregates. Maybe you
could help me out on a higher level. Im looking at your 10-K and your mid (inaudible). You have 44
estimated years of life. Now when you lay out some of your best segments here, most of them a
bunch of them over 100, most of them over 65. In terms of reserve life, you look at gas, coal, et
cetera, these are enormous reserve lives. Im wondering why, when you say scarcity value. Like for
instance, North Carolina, which has 55 years relative to your percent carry of reserves. Whats the
scarcity value?
Don James - Vulcan Materials Chairman & CEO
Because thats it. Theres very little opportunity to in urban areas to secure additional
reserves and that has a big impact. Theres nothing worth less than a quarry that has run out of
reserves. And the two fastest growing markets in the country are Florida and California, and youll
notice from our 10-K that our reserve life in California is listed at 18 years and we probably have
the best reserve position in California of anybody and I dont have a comparable number for
Florida. But I know the Florida reserve situation is very, very limited, in large measure due to
the lack of quality limestone deposits in the state. There just isnt any there.
Michael Lucas - Appaloosa Management Analyst
And then one other thing once these, you start to get more built up, at some point will you
start to use the rubble from these facilities that are taken down as recycled aggregates? Or is
this a phenomenon that goes on forever, keeps growing and never have enough?
Don James - Vulcan Materials Chairman & CEO
Well, the recycled material is a fact of life and has been there for at least the last 10 or
15 years, both recycled asphalt and recycled concrete. Theres a finite supply of that material.
Theres a real limitation into the end uses in which it can be put and its essentially not a
factor in our market in any way thats likely to change in the future.
Michael Lucas - Appaloosa Management Analyst
Okay. Thank you very much.
Don James - Vulcan Materials Chairman & CEO
Okay. Well, thank you very much for joining us today. We appreciate your interest and your
questions, and were looking forward to talking with you again after the end of the second quarter.
Thank you.
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© 2007 Thomson Financial. Republished with permission. No part of this publication may be
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Final Transcript |
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May. 01. 2007 / 10:00AM CT, VMC Q1 2007 Vulcan Materials Earnings Conference Call |
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