Vulcan Materials Company — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results, not standalone fourth-quarter results. Vulcan is the largest U.S. construction-aggregates supplier, with asphalt, ready-mixed concrete and calcium businesses.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $7,315.2 million | $5,552.2 million | +32% |
| Gross profit | $1,557.7 million | $1,373.4 million | +13% |
| Gross margin | 21.3% | 24.7% | Down 3.4 percentage points |
| Operating earnings | $951.4 million | $1,010.8 million | Down 6% |
| Net earnings attributable to Vulcan | $575.6 million | $670.8 million | Down 14% |
| Diluted EPS | $4.31 | $5.02 | Down 14% |
| Adjusted EBITDA (non-GAAP) | $1,625.6 million | $1,451.3 million | +12% |
| Cash from operating activities | $1,148.2 million | $1,011.9 million | +13% |
Revenue growth reflected higher aggregates shipments and pricing, acquisitions—particularly the full-year contribution from U.S. Concrete—and higher downstream sales. Aggregates shipments rose 6% to 236.3 million tons; freight-adjusted price increased 10.3% to $16.40 per ton. Aggregates gross profit rose 9% to $1,408.5 million, while gross profit per ton increased to $5.96. Higher diesel, energy, labor and other input costs pressured margins; freight-adjusted aggregates cash cost per ton increased 15%.
Asphalt and concrete segment gross profit improved to $57.3 million and $89.3 million, respectively. Concrete volumes increased substantially largely because of acquisitions; same-store shipments were essentially flat. Selling, administrative and general expense rose 23% to $515.1 million, but declined to 7.0% of revenue from 7.5%.
Cash, investment and liquidity: Year-end cash and restricted cash totaled $161.5 million. Operating cash flow was $1,148.2 million; investing activities used $1,053.0 million, including $612.6 million of capital investment and $529.2 million of cash consideration for acquisitions. Financing activities used $175.2 million. Available liquidity was $1,582.8 million, including $1,421.4 million of available line-of-credit capacity.
Debt: Total debt was $3,975.7 million, versus $3,880.0 million in 2021. Total debt to Adjusted EBITDA was 2.4x (net debt basis 2.3x), within management’s 2.0x–2.5x long-term target. The company reported investment-grade ratings and an 11-year weighted-average debt maturity. Interest expense increased to $169.2 million from $149.3 million.
Capital returns: Dividends paid were $212.6 million, or $1.60 per share, up from $196.4 million, or $1.48 per share. No shares were repurchased during 2022.
Material changes versus prior year
- Full-year revenue growth was strong, but GAAP earnings declined; the prior year included a $114.7 million pretax gain on reclaimed Southern California real estate, compared with a $10.7 million total gain on property and business sales in 2022.
- 2022 included $67.9 million of impairment charges, principally a $50.9 million goodwill impairment and a $16.9 million long-lived-asset impairment tied to the sale of concrete operations in New Jersey, New York and Pennsylvania. The divestiture also generated a $17.4 million loss on sale.
- Adjusted diluted EPS from continuing operations was $5.11, compared with $5.04 in 2021, despite reported diluted EPS falling to $4.31 from $5.02.
- U.S. Concrete acquisition effects continued to shape year-over-year comparisons; Vulcan also completed four 2022 acquisitions for total consideration of $594.6 million.
- Cash from operations increased, while capital expenditures rose to $612.6 million from $451.3 million. Year-end debt leverage improved from 2.7x to 2.4x on a total-debt-to-Adjusted-EBITDA basis.
Outlook, management commentary and risks
Management expected 2023 earnings growth, citing pricing momentum, infrastructure demand and operating execution, while noting uncertainty around residential activity, highway project timing and interest-sensitive private nonresidential construction. 2023 guidance included:
- Aggregates shipments down 2%–6%, with freight-adjusted price growth of 11%–13%.
- Adjusted EBITDA of $1.725–$1.875 billion and net earnings attributable to Vulcan of $715–$835 million.
- Capital expenditures of $600–$650 million; interest expense of approximately $195 million; and an effective tax rate of approximately 22%.
- Aggregates cash gross profit per ton expected to improve further. Management expected combined asphalt, concrete and calcium cash gross profit broadly in line with 2022.
Material contingency: Mexican authorities ordered Vulcan’s Calica operations to cease underwater quarrying and extraction in May 2022 and suspended a customs permit. Vulcan is pursuing claims through NAFTA arbitration; the tribunal’s decision was not expected before 2024. The shutdown contributed to lost shipments and a $14.5 million valuation allowance against Calica tax-loss assets. The outcome and any recovery remain uncertain.
Other principal risks include construction-cycle exposure, higher interest rates and input costs, labor and truck-driver constraints, weather and climate impacts, permitting and reserve access, competition, acquisition integration, environmental remediation and litigation. The company also disclosed unresolved environmental and legacy-business proceedings; certain potential losses cannot currently be reasonably estimated. Discontinued operations recorded a $25.2 million pretax loss in 2022, including a $15.3 million litigation charge related to the former Chemicals business.
The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified goodwill valuation for certain concrete reporting units and the Hewitt Landfill environmental matter as critical audit matters.
Important facts for investors to verify
- Whether 2023 shipment, pricing, cost and earnings guidance was achieved, and how much growth came from pricing versus acquisition contributions.
- Progress and financial effects of the Calica shutdown, including arbitration timing, operating status, tax-asset valuation and any recoverable amounts.
- Whether input-cost inflation, labor constraints and higher financing costs further affect margins, cash generation and debt leverage.
- Cash conversion and capital allocation, including planned capital expenditures, acquisition spending, dividend sustainability and any future share repurchases.
- Potential impairment exposure in concrete reporting units and the range of environmental or litigation obligations, particularly matters for which the filing says losses cannot be reasonably estimated.