Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL COMMENTS

Overview

We provide the basic materials for the infrastructure needed to maintain and expand the U.S. economy. We operate primarily in the U.S. and are one of the nation's largest suppliers of construction aggregates (primarily crushed stone, sand and gravel) and a major producer of asphalt mix and ready-mixed concrete. Our strategy and competitive advantage are based on our strength in aggregates which are used in most types of construction and in the production of asphalt mix and ready-mixed concrete.

Demand for our products is dependent on construction activity and correlates positively with changes in population growth, household formation and employment. End uses include public construction (e.g., highways, bridges, buildings, airports, schools, prisons, sewer and waste disposal systems, water supply systems, dams, reservoirs and other public construction projects), private nonresidential construction (e.g., manufacturing, retail, offices, industrial and institutional) and private residential construction (e.g., single-family houses, duplexes, apartment buildings and condominiums).

Aggregates have a very high weight-to-value ratio and, in most cases, must be produced near where they are used; if not, transportation can cost more than the materials, rendering them uncompetitive compared to locally produced materials. Exceptions to this typical market structure include areas along the U.S. Gulf Coast and the Eastern Seaboard where there are limited supplies of locally available, high-quality aggregates. We serve these markets from quarries that have access to cost-effective long-haul transportation — shipping by barge and rail — and from our quarry on Mexico's Yucatan Peninsula with our fleet of Panamax-class, self-unloading ships. Additionally, as a result of our 2021 acquisition of U.S. Concrete, we serve markets in California and Hawaii from our quarry in British Columbia, Canada by means of a long-term marine shipping agreement with CSL Americas.

There are limited substitutes for quality aggregates. Due to zoning and permitting regulation and high transportation costs relative to the value of the product, the location of reserves is a critical factor to our long-term success.

No material part of our business depends upon any single customer whose loss would have a significant adverse effect on our business. In 2020, our five largest customers accounted for 7.5% of our total revenues, and no single customer accounted for more than 1.8% of our total revenues. Although approximately 45% to 55% of our aggregates shipments have historically been used in publicly-funded construction, such as highways, airports and government buildings, a relatively small portion of our sales are made directly to federal, state, county or municipal governments/agencies. Therefore, although reductions in state and federal funding can curtail publicly-funded construction, the vast majority of our business is not directly subject to renegotiation of profits or termination of contracts with local, state or federal governments. In addition, our sales to government entities span several hundred entities coast-to-coast, ensuring that negative changes to various government budgets would have a muted impact across such a diversified set of government customers.

While aggregates is our focus and primary business, we believe vertical integration between aggregates and downstream products, such as asphalt mix and ready-mixed concrete, can be managed effectively in certain markets to generate attractive financial returns and enhance financial returns in our core Aggregates segment. We produce and sell asphalt mix and/or ready-mixed concrete primarily in our Alabama, Arizona, California, Maryland, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, Tennessee, Texas, the U.S. Virgin Islands, Virginia and Washington D.C. markets. Aggregates comprise approximately 95% of asphalt mix by weight and 80% of ready-mixed concrete by weight. In both of these downstream businesses, aggregates are primarily supplied from our operations.

Seasonality and cyclical nature of our business

Almost all of our products are produced and consumed outdoors. Seasonal changes and other weather-related conditions can affect the production and sales volume of our products. Therefore, the financial results for any quarter do not necessarily indicate the results expected for the year. Normally, the highest sales and earnings are in the third quarter and the lowest are in the first quarter. Furthermore, our sales and earnings are sensitive to national, regional and local economic conditions, demographic and population fluctuations, and particularly to cyclical swings in construction spending, primarily in the private sector.

‎

EXECUTIVE SUMMARY

Financial highlights for THIRD Quarter 2021

Compared to third quarter of 2020: ‎

Total revenues increased $206.6 million, or 16%, to $1,516.5 million

Gross profit increased $13.6 million, or 4%, to $394.1 million

Aggregates segment sales increased $123.4 million, or 12%, to $1,172.4 million

Aggregates segment freight-adjusted revenues increased $90.4 million, or 11%, to $898.0 million

Shipments increased 8%, or 4.2 million tons, to 60.2 million tons

Same-store shipments increased 5%, or 3.0 million tons, to 58.9 million tons

Freight-adjusted sales price increased 3.4%, or $0.49 per ton to $14.93

Same-store freight-adjusted sales price increased 3.1%, or $0.45 per ton to $14.89

Aggregates segment gross profit increased $34.5 million, or 10%, to $372.3 million

Unit profitability (as measured by gross profit per ton) increased 2.5% to $6.19 per ton

Same-store unit profitability (as measured by gross profit per ton) increased 5.1% to $6.35 per ton.

Asphalt, Concrete and Calcium segment gross profit decreased $20.9 million, or 49%, to $21.7 million, collectively

Selling, administrative and general (SAG) expenses increased $20.3 million and increased 0.4 percentage points (40 basis points) as a percentage of total revenues

Operating earnings decreased $25.7 million, or 9%, to $262.4 million

Earnings attributable to Vulcan from continuing operations were $1.33 per diluted share compared to $1.51 per diluted share

Adjusted earnings attributable to Vulcan from continuing operations were $1.54 per diluted share, compared to $1.56 per diluted share

Net earnings attributable to Vulcan were $176.9 million, a decrease of $22.9 million, or 11%

Adjusted EBITDA was $417.7 million, an increase of $14.2 million, or 4%

Returned capital to shareholders via dividends ($49.1 million @ $0.37 per share versus $45.0 million @ $0.34 per share)

Our aggregates-focused business is built for times like these. We expanded our industry-leading trailing-twelve month unit profitability for the thirteenth consecutive quarter despite a challenging operating environment caused by inflationary pressures and labor constraints. This consistent growth in the underlying business is driven by our execution on Vulcan’s four strategic disciplines and is further enhanced by strategic growth through acquisitions and greenfield investments. Since completing the U.S. Concrete acquisition in late August, our teams are making progress integrating the businesses across the expanded footprint and are identifying additional opportunities to accelerate our growth and create value for shareholders.

Throughout a difficult eighteen months of pandemic disruptions and economic challenges, our people strengthened their operating disciplines and moved pricing higher. Now that trailing-twelve month aggregates volumes are back to pre-pandemic levels, these solid fundamentals, coupled with our leading positions in attractive geographies, position us well to capitalize on positive demand trends going forward and will allow us to deliver both revenue and earnings growth.

Capital expenditures in the third quarter were $126.9 million ($292.1 million year-to-date September), including $69.2 million for growth projects. For the full year 2021, we expect to spend between $450 million and $475 million on capital expenditures, including growth projects. We will continue to review our plans and will adjust as needed, while being thoughtful about preserving liquidity.

As of September 30, 2021, total debt to trailing-twelve month Adjusted EBITDA was 2.8 times (2.7 times on a net debt basis) reflecting financing actions taken to complete the U.S. Concrete acquisition during the quarter. We remain committed to our stated target leverage range of 2.0 to 2.5 times.

Interest expense, net of interest income, was $36.8 million in the third quarter compared with $35.8 million in the prior year. Year-to-date, net interest expense was $111.6 million compared to $100.5 million in the prior year. This increase includes $9.4 million of cost in the second quarter associated with financing the pending acquisition of U.S. Concrete. We expect full year interest expense to be approximately $145 million.

On a trailing-twelve month basis, return on invested capital was 14.2%, reflecting the investment in the U.S. Concrete acquisition and its earnings contribution since August 26, 2021. We remain committed to driving further improvement through solid operating earnings growth coupled with disciplined capital management and a balanced approach to growth.

OUTLOOK

We are increasing our full-year Adjusted EBITDA range to reflect the earnings contribution of U.S. Concrete as well as the recent trends in demand, price and cost inflation. As a result, we expect full-year Adjusted EBITDA to be between $1.430 to $1.460 billion in 2021 (excluding the $114.7 million gain from a land sale completed in the first quarter and including the U.S. Concrete acquisition).

As we look ahead, we believe our aggregates-focused business is uniquely positioned for broad participation in improving demand and is capable of navigating any changes in the macro environment. The U.S. Concrete acquisition extends our growth platform, and we are excited about the opportunities in front of us. The prospects continue to be positive for the most significant federal investment in infrastructure since the creation of the Interstate Highway System in 1956, and we are well situated with leading positions in attractive growth areas where the need is greatest. Finally, we expect favorable pricing dynamics to continue, leading to attractive price growth.

RESULTS OF OPERATIONS

Total revenues are primarily derived from our product sales of aggregates, asphalt mix and ready-mixed concrete, and include freight & delivery costs that we pass along to our customers to deliver these products. We also generate service revenues from our asphalt construction paving business and services related to our aggregates business. We present separately our discontinued operations, which consist of our former Chemicals business.

The following table highlights significant components of our consolidated operating results including EBITDA and Adjusted EBITDA.

consolidated operating ResultS highlights

	Three Months Ended						Nine Months Ended
	September 30						September 30
in millions, except unit and per unit data	2021			2020			2021			2020
Total revenues	$ 1,516.5			$ 1,309.9			$ 3,945.9			$ 3,681.7
Cost of revenues	1,122.4			929.4			2,924.2			2,703.0
Gross profit	$ 394.1			$ 380.5			$ 1,021.7			$ 978.7
Gross profit margin	26.0%			29.0%			25.9%			26.6%
Selling, administrative and general (SAG)	$ 103.8			$ 83.5			$ 293.1			$ 261.1
SAG as a percentage of total revenues	6.8%			6.4%			7.4%			7.1%
Gain on sale of property, plant &
equipment and businesses	$ 2.9			$ 1.6			$ 120.3			$ 2.3
Operating earnings	$ 262.4			$ 288.1			$ 799.4			$ 699.3
Interest expense, net	$ 36.8			$ 35.8			$ 111.6			$ 100.5
Earnings from continuing operations
before income taxes	$ 228.7			$ 258.1			$ 705.1			$ 602.6
Income tax expense	$ 51.8			$ 57.0			$ 169.7			$ 130.5
Effective tax rate from continuing operations	22.6%			22.1%			24.1%			21.7%
Earnings from continuing operations	$ 177.0			$ 201.1			$ 535.4			$ 472.1
Loss on discontinued operations,
net of income taxes	(0.2)			(1.3)			(2.6)			(2.1)
Loss attributable to noncontrolling interest	0.1			0.0			0.1			0.0
Net earnings attributable to Vulcan	$ 176.9			$ 199.8			$ 532.9			$ 470.0
Diluted earnings (loss) per share attributable
to Vulcan
Continuing operations	$ 1.33			$ 1.51			$ 4.01			$ 3.54
Discontinued operations	(0.01)			(0.01)			(0.02)			(0.01)
Diluted net earnings per share attributable to Vulcan	$ 1.32			$ 1.50			$ 3.99			$ 3.53
EBITDA 1	$ 383.2			$ 394.9			$ 1,137.8			$ 999.0
Adjusted EBITDA 1	$ 417.7			$ 403.5			$ 1,068.0			$ 1,012.3
Average Sales Price and Unit Shipments
Aggregates
Tons (thousands)	60,163			55,920			165,128			157,163
Freight-adjusted sales price	$ 14.93			$ 14.44			$ 14.86			$ 14.45
Asphalt Mix
Tons (thousands)	3,202			3,493			8,553			8,953
Average sales price	$ 59.43			$ 58.36			$ 58.27			$ 58.05
Ready-mixed concrete
Cubic yards (thousands)	1,596			775			2,940			2,295
Average sales price	$ 136.29			$ 131.51			$ 133.88			$ 128.93
Calcium
Tons (thousands)	52			49			197			193
Average sales price	$ 28.29			$ 27.51			$ 27.81			$ 27.18

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

third quarter 2021 Compared to THIRD Quarter 2020

Third quarter 2021 total revenues were $1,516.5 million, up 16% from the third quarter of 2020. Shipments increased in aggregates (+8%) and ready-mixed concrete (+106%) while decreasing in asphalt mix (-8%). Likewise, gross profit increased in the Aggregates (+$34.5 million or 10%) and Concrete (+$2.1 million or 18%) segments while decreasing in the Asphalt (-$23.1 million or 77%) segment. A 59% increase in the unit cost of diesel fuel increased same-store costs by $13.8 million from the prior year’s third quarter with most ($12.8 million) of this cost increase reflected in the Aggregates segment.

Net earnings attributable to Vulcan for the third quarter of 2021 were $176.9 million, or $1.32 per diluted share, compared to $199.8 million, or $1.50 per diluted share, in the third quarter of 2020. Each period’s results were impacted by discrete items, as follows:

Net earnings attributable to Vulcan for the third quarter of 2021 include:

pretax charges of $0.4 million associated with divested operations

pretax charges of $24.7 million associated with non-routine business development

pretax charges of $5.9 million for COVID-19 pandemic direct incremental costs

pretax charges of $3.5 million for managerial restructuring (related to U.S. Concrete)

Net earnings attributable to Vulcan for the third quarter of 2020 include:

pretax charges of $5.9 million associated with divested operations

pretax charges of $0.3 million associated with non-routine business development

pretax charges of $2.4 million for COVID-19 pandemic direct incremental costs

Adjusted for these discrete items, earnings attributable to Vulcan from continuing operations (Adjusted Diluted EPS) was $1.54 per diluted share for the third quarter of 2021 compared to $1.56 per diluted share in the third quarter of 2020.

Continuing Operations — Changes in earnings from continuing operations before income taxes for the third quarter of 2021 versus the third quarter of 2020 are summarized below:

earnings from continuing operations before income taxes

in millions
Third quarter 2020	$ 258.1
Higher aggregates gross profit	34.5
Lower asphalt gross profit	(23.1)
Higher concrete gross profit	2.1
Higher calcium gross profit	0.1
Higher selling, administrative and general expenses	(20.3)
Higher gain on sale of property, plant & equipment and businesses	1.4
Higher interest expense, net	(1.0)
U.S. Concrete acquisition related expenses	(21.1)
All other	(2.0)
Third quarter 2021	$ 228.7

Third quarter Aggregates segment sales increased 12%, while gross profit increased 10% to $372.3 million. The year-over-year earnings improvement was widespread across our footprint and resulted from both volume and price growth, as well as effective cost control. Gross profit margin decreased 0.4 percentage points (40 basis points) due to the unfavorable impacts of selling acquired inventory after its markup to fair value as part of acquisition accounting and a significantly higher unit cost of diesel fuel, $3.0 million and $12.8 million respectively.

Total aggregates shipments were 60.2 million tons versus 55.9 million in last year’s third quarter, an increase of 8%. Same-store aggregates shipments increased 5%, reflecting improving demand across all end-market segments and despite severe wet weather in certain key markets. The pricing environment continues to be positive across our footprint as demand visibility improves. The rate of pricing growth has improved sequentially each quarter this year. In the third quarter, same-store freight-adjusted pricing increased 3.1% year-over-year (mix-adjusted pricing increased 3.5%) with the growth widespread across geographies.

In the third quarter, solid execution helped to offset a 59% increase in the average unit cost of diesel fuel, inflation for certain parts and supplies, and operational disruptions caused by wet weather in the Southeast and along the Gulf Coast due in part to Hurricane Ida. Same-store freight-adjusted unit cost of sales increased 1.7% over the prior year’s third quarter but

decreased almost 1% excluding the impact of higher diesel prices. Total aggregates gross profit per ton improved 2% to $6.19 while cash gross profit per ton improved 3% to $7.74. Positive pricing opportunities and improved operating efficiencies are expected to continue to help offset some of the cost inflation going forward.

Overall, non-aggregates segments gross profit of $21.7 million was $20.9 million lower than the prior year’s third quarter.

Asphalt segment gross profit was $7.1 million for the third quarter compared to $30.2 million in the prior year period. The decrease in earnings was driven primarily by the impact of sharply higher energy costs and weather-related impacts on volumes. The average cost of liquid asphalt during the third quarter was over $100 per ton higher than in the same period last year ($16.2 million impact). A rise in the cost of natural gas, used in plant production, also negatively affected quarterly gross profit. Average selling prices for asphalt mix increased 2%, or $1.07 per ton, versus the prior year’s third quarter as pricing actions began to gain traction. Efforts to mitigate the earnings impact of energy inflation will continue with positive results expected in the first half of next year. Asphalt volumes declined 8% as volume growth in California was more than offset by lower volumes in Arizona. A record-setting number of rainy days disrupted asphalt shipments in Arizona, our second largest asphalt market. Additionally, construction activity in Tennessee was also negatively impacted by hurricane-related wet weather.

Concrete segment gross profit was $14.3 million for the third quarter compared to $12.2 million in the prior year. The current year’s third quarter includes results from U.S. Concrete operations. Same-store shipments decreased 7% versus the prior year due to fewer large projects in the current year’s quarter, while same-store average selling prices increased 2% compared to the prior year. Segment results were negatively impacted by higher diesel prices and by the availability of drivers in certain markets.

Calcium segment gross profit of $0.3 million was $0.1 million higher than the prior year’s third quarter.

SAG expenses were $103.8 million in the quarter, or 6.8% of total revenues. The current year’s third quarter includes overhead expenses associated with the U.S. Concrete business that were not in the prior year’s quarter. Additionally, increased routine business development activities and more normalized travel expenses, due in part to integration activities, contributed to the year-over-year increase.

Other operating expense, which has an approximate run-rate of $12.0 million a year (exclusive of discrete items), is composed primarily of idle facilities expense, environmental remediation costs, property abandonments and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:

$30.8 million in third quarter 2021 — includes discrete items as follows:

$21.7 million of non-routine business development charges

$5.9 million for COVID-19 pandemic direct incremental costs

$3.5 million for managerial restructuring (related to U. S. Concrete)

$10.5 million in third quarter 2020 — includes discrete items as follows:

$5.9 million of charges associated with divested operations

$2.4 million for COVID-19 pandemic direct incremental costs

Other nonoperating income, net was a net income of $3.2 million for the third quarter of 2021 and was unfavorable by $2.6 million from the third quarter of 2020. This unfavorable variance resulted primarily from a $1.2 million foreign currency translation loss in the current period versus a $0.7 million gain in the prior year’s third quarter.

Net interest expense was $36.8 million in the third quarter of 2021 compared to $35.8 million in the third quarter of 2020.

Income tax expense from continuing operations was $51.8 million in the third quarter of 2021 compared to $57.0 million in the third quarter of 2020. The decrease in tax expense was primarily related to a decrease in pretax earnings.

Earnings attributable to Vulcan from continuing operations were $1.33 per diluted share in the third quarter of 2021 compared to $1.51 per diluted share in the third quarter of 2020.

Discontinued Operations — Third quarter pretax loss from discontinued operations was $0.3 million in 2021 compared with a pretax loss of $1.8 million in 2020. Both periods include charges/credits related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.

year-to-date September 30, 2021 Compared to year-to-date September 30, 2020

Total revenues for the first nine months of 2021 were $3,945.9 million, up 7% from the first nine months of 2020. Shipments increased in aggregates (+5%) and ready-mixed concrete (+28%) while decreasing in asphalt mix (-4%). Gross profit increased in the Aggregates (+$86.6 million or 10%) segment while decreasing in the Asphalt (-$40.6 million or 70%) and Concrete (-$3.2 million or 9%) segments. A 43% increase in the unit cost of diesel fuel increased same-store costs by $28.7 million from the first nine months of 2020 with most ($26.4 million) of this cost increase reflected in the Aggregates segment.

Net earnings attributable to Vulcan for the first nine months of 2021 were $532.9 million, or $3.99 per diluted share, compared to $470.0 million, or $3.53 per diluted share, in the first nine months of 2020. Each period’s results were impacted by discrete items, as follows:

Net earnings attributable to Vulcan for the first nine months of 2021 include:

$13.7 million of tax charges related to an increase in the Alabama NOL carryforward valuation allowance

pretax net gain of $114.7 million related to the sale of a reclaimed quarry in Southern California

pretax charges of $1.1 million associated with divested operations

pretax charges of $30.6 million associated with non-routine business development

pretax charges of $9.7 million for COVID-19 pandemic direct incremental costs

pretax changes of $3.5 million for managerial restructuring (related to U.S. Concrete)

pretax interest charges of $9.4 million related to financing the U.S. Concrete acquisition

Net earnings attributable to Vulcan for the first nine months of 2020 include:

pretax charges of $6.7 million associated with divested operations

pretax gains of $2.1 million associated with non-routine business development

pretax charges of $7.4 million for COVID-19 pandemic direct incremental costs

pretax charges of $1.3 million for restructuring

Adjusted for these discrete items, earnings attributable to Vulcan from continuing operations (Adjusted Diluted EPS) was $3.80 per diluted share for the first nine months of 2021 compared to $3.62 per diluted share in the first nine months of 2020.

Continuing Operations — Changes in earnings from continuing operations before income taxes for year-to-date September 30, 2021 versus year-to-date September 30, 2020 are summarized below:

earnings from continuing operations before income taxes

in millions
Year-to-date September 30, 2020	$ 602.6
Higher aggregates gross profit	86.6
Lower asphalt gross profit	(40.6)
Lower concrete gross profit	(3.2)
Higher calcium gross profit	0.2
Higher selling, administrative and general expenses	(31.9)
Higher gain on sale of property, plant & equipment and businesses	118.0
Higher interest expense, net	(11.1)
U.S. Concrete acquisition related expenses	(21.1)
All other	5.6
Year-to-date September 30, 2021	$ 705.1

Aggregates segment sales for the first nine months of 2021 were $3,192.7 million (up 7%) while aggregates shipments increased 5%, or 8.0 million tons (same-store up 4%, or 6.7 million tons), compared to the prior year. Freight-adjusted average sales price for aggregates increased 2.8%, or $0.41 per ton, versus the first nine months of 2020. Same-store freight-adjusted pricing increased 2.7%, or $0.39 per ton (mix-adjusted pricing increased 2.8%).

Aggregates segment gross profit was $969.8 million ($5.87 per ton) versus $883.2 million ($5.62 per ton) in the first nine months of 2020. Cash gross profit per ton increased 4% from the prior year’s first nine months to $7.44 per ton. First nine months 2021 freight-adjusted unit cost increased 2%, or $0.16 per ton, versus the prior year reflecting the aforementioned higher cost of diesel fuel.

Overall, non-aggregates segments gross profit of $51.9 million was $43.7 million lower than the first nine months of 2020.

Asphalt segment gross profit of $17.6 million was down $40.6 million from the first nine months of 2020. The decrease in earnings was primarily driven by the impact of sharply higher liquid asphalt costs and the aforementioned impacts of weather and energy costs in the third quarter. The average price paid for liquid asphalt was over $60 per ton higher than the prior year ($24.2 million impact). Pricing increased 0.4%, or $0.22 per ton, versus the first nine months of 2020.

Concrete segment gross profit was $32.4 million for the first nine months of 2021, a decrease of $3.2 million from the prior year period. Same-store shipments decreased 10% versus the prior year due to the timing of large projects in the current year and unfavorable weather during the third quarter, while same-store average selling prices increased 2.4% compared to the prior year. Segment results were negatively impacted by higher diesel prices and by the availability of truck drivers in certain markets.

Our Calcium segment’s gross profit of $1.9 million was up $0.2 million compared to the first nine months of 2020.

SAG expenses were $293.1 million versus $261.1 million in the prior year’s first nine months reflecting a 0.3 percentage point (30 basis point) increase as a percentage of total revenues.

Gain on sale of property, plant & equipment and businesses was $120.3 million in the first nine months of 2021 versus $2.3 million in the first nine months of 2020. The 2021 amount includes the aforementioned net pretax gain of $114.7 million from the sale of a reclaimed quarry in Southern California.

Other operating expense, which has an approximate run-rate of $12 million a year (exclusive of discrete items), is composed primarily of idle facilities expense, environmental remediation costs, property abandonments and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:

$49.5 million in first nine months of 2021 — includes discrete items as follows:

$27.6 million of non-routine business development charges

$9.7 million for COVID-19 pandemic direct incremental costs

$3.5 million for managerial restructuring (related to U. S. Concrete)

$20.6 million in first nine months of 2020 — includes discrete items as follows:

$6.7 million of charges associated with divested operations

$2.1 million of net gain associated with non-routine business development

$7.4 million for COVID-19 pandemic direct incremental costs

Other nonoperating income, net was a net income of $17.3 million for the first nine months of 2021, favorable by $13.5 million from the first nine months of 2020. This favorable variance resulted primarily from two items: 1) a $4.2 million reduction in foreign currency translation losses and 2) a $7.5 million reduction in pension related costs (see Note 10 to the condensed consolidated financial statements).

Net interest expense was $111.6 million in the first nine months of 2021 compared to $100.5 million in the first nine months of 2020. This increase resulted primarily from an additional $9.4 million of interest expense related to financing the acquisition of U.S. Concrete (see Note 7 to the condensed consolidated financial statements).

Income tax expense from continuing operations was $169.7 million in the first nine months of 2021 compared to $130.5 million in the first nine months of 2020. The increase in tax expense was primarily related to an increase in pretax earnings and a $13.7 million increase in our Alabama NOL valuation allowance as discussed in Note 3 to the condensed consolidated financial statements.

Earnings from continuing operations attributable to Vulcan were $4.01 per diluted share in the first nine months of 2021 compared to $3.54 per diluted share in the first nine months of 2020.

Discontinued Operations — First nine months pretax loss from discontinued operations was $3.7 million in 2021 compared with a pretax loss of $2.9 million in 2020. Both periods include charges/credits related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

SAME-STORE

We have provided certain information on a same-store basis. When discussing our financial results in comparison to prior periods, we may exclude the operating results of recently acquired/divested businesses that do not have comparable results in the periods being discussed. These recently acquired/divested businesses are disclosed in Note 16 “Acquisitions and Divestitures.” This approach allows us to evaluate the performance of our operations on a comparable basis. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our operations are performing period over period without the effects of acquisition and divestiture activity. Our same-store information may not be comparable to similar measures used by other companies.

AGGREGATES SEGMENT FREIGHT-ADJUSTED REVENUES

Aggregates segment freight-adjusted revenues is not a Generally Accepted Accounting Principle (GAAP) measure and should not be considered as an alternative to metrics defined by GAAP. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities. It also excludes immaterial other revenues related to services, such as landfill tipping fees, that are derived from our aggregates business. Additionally, we use this metric as the basis for calculating the average sales price of our aggregates products. Reconciliation of this metric to its nearest GAAP measure is presented below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
in millions, except per ton data	2021			2020			2021			2020
Aggregates segment
Segment sales	$ 1,172.4			$ 1,049.0			$ 3,192.7			$ 2,987.8
Less
Freight & delivery revenues 1	253.1			225.4			685.2			672.0
Other revenues	21.3			16.0			54.4			45.5
Freight-adjusted revenues	$ 898.0			$ 807.6			$ 2,453.1			$ 2,270.3
Unit shipments - tons	60.2			55.9			165.1			157.2
Freight-adjusted sales price	$ 14.93			$ 14.44			$ 14.86			$ 14.45

1	At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

Aggregates segment incremental gross profit

Aggregates segment incremental gross profit flow-through rate is not a GAAP measure and represents the year-over-year change in gross profit divided by the year-over-year change in segment sales excluding freight & delivery (revenues and costs). This metric should not be considered as an alternative to metrics defined by GAAP. We evaluate this metric on a trailing-twelve month basis as quarterly gross profit flow-through rates can vary widely from quarter to quarter. We present this metric as it is consistent with the basis by which we review our operating results. We believe that this presentation is consistent with our competitors and meaningful to our investors as it excludes revenues associated with freight & delivery, which are pass-through activities. Reconciliation of this metric to its nearest GAAP measure is presented below:

margin in accordance with gaap

	Three Months Ended						Trailing-Twelve Months
	September 30						September 30
dollars in millions	2021			2020			2021			2020
Aggregates segment
Gross profit	$ 372.3			$ 337.9			$ 1,245.8			$ 1,157.7
Segment sales	$ 1,172.4			$ 1,049.0			$ 4,149.2			$ 3,947.9
Gross profit margin	31.8%			32.2%			30.0%			29.3%
Incremental gross profit margin	27.9%						43.8%

FLOW-THROUGH RATE (non-gaap)

	Three Months Ended						Trailing-Twelve Months
	September 30						September 30
dollars in millions	2021			2020			2021			2020
Aggregates segment
Gross profit	$ 372.3			$ 337.9			$ 1,245.8			$ 1,157.7
Less: Contribution from acquisitions (same-store)	(1.9)			0.0			(1.8)			0.0
Same-store gross profit	$ 374.2			$ 337.9			$ 1,247.6			$ 1,157.7
Segment sales	$ 1,172.4			$ 1,049.0			$ 4,149.2			$ 3,947.9
Less: Freight & delivery revenues 1	253.1			225.4			890.2			897.1
Segment sales excluding freight & delivery	$ 919.3			$ 823.6			$ 3,259.0			$ 3,050.8
Less: Contribution from acquisitions (same-store)	25.0			0.0			25.2			0.0
Same-store segment sales excluding freight & delivery	$ 894.3			$ 823.6			$ 3,233.8			$ 3,050.8
Gross profit margin excluding freight & delivery	40.5%			41.0%			38.2%			37.9%
Same-store gross profit margin excluding
freight & delivery	41.8%			41.0%			38.6%			37.9%
Incremental gross profit flow-through rate	36.0%						42.3%
Same-store incremental gross profit flow-through rate	51.4%						49.1%

1	At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites.

cash gross profit

GAAP does not define “cash gross profit,” and it should not be considered as an alternative to earnings measures defined by GAAP. We and the investment community use this metric to assess the operating performance of our business. Additionally, we present this metric as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. Cash gross profit adds back noncash charges for depreciation, depletion, accretion and amortization to gross profit. Aggregates segment cash gross profit per ton is computed by dividing Aggregates segment cash gross profit by tons shipped. Reconciliation of this metric to its nearest GAAP measure is presented below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
in millions, except per ton data	2021			2020			2021			2020
Aggregates segment
Gross profit	$ 372.3			$ 337.9			$ 969.8			$ 883.2
Depreciation, depletion, accretion and amortization	93.3			82.5			258.5			240.4
Aggregates segment cash gross profit	$ 465.6			$ 420.4			$ 1,228.3			$ 1,123.6
Unit shipments - tons	60.2			55.9			165.1			157.2
Aggregates segment gross profit per ton	$ 6.19			$ 6.04			$ 5.87			$ 5.62
Aggregates segment cash gross profit per ton	$ 7.74			$ 7.52			$ 7.44			$ 7.15
Asphalt segment
Gross profit	$ 7.1			$ 30.2			$ 17.6			$ 58.2
Depreciation, depletion, accretion and amortization	9.0			8.6			27.1			26.0
Asphalt segment cash gross profit	$ 16.1			$ 38.8			$ 44.7			$ 84.2
Concrete segment
Gross profit	$ 14.3			$ 12.2			$ 32.4			$ 35.6
Depreciation, depletion, accretion and amortization	8.7			4.0			16.6			12.1
Concrete segment cash gross profit	$ 23.0			$ 16.2			$ 49.0			$ 47.7
Calcium segment
Gross profit	$ 0.3			$ 0.2			$ 1.9			$ 1.7
Depreciation, depletion, accretion and amortization	0.0			0.0			0.1			0.1
Calcium segment cash gross profit	$ 0.3			$ 0.2			$ 2.0			$ 1.8

NET DEBT TO ADJUSTED EBITDA

Net debt to Adjusted EBITDA is not a GAAP measure and should not be considered as an alternative to metrics defined by GAAP. We, the investment community and credit rating agencies use this metric to assess our leverage. Net debt subtracts cash and cash equivalents and restricted cash from total debt. Reconciliation of this metric to its nearest GAAP measure is presented below:

							September 30
in millions							2021			2020
Debt
Current maturities of long-term debt							$ 12.2			$ 509.4
Short-term debt							0.0			0.0
Long-term debt							3,874.1			2,777.1
Total debt							$ 3,886.3			$ 3,286.5
Less: Cash and cash equivalents and restricted cash							136.4			1,084.7
Net debt							$ 3,749.9			$ 2,201.8
Trailing-Twelve Months (TTM) Adjusted EBITDA							$ 1,379.2			$ 1,310.8
Total debt to TTM Adjusted EBITDA							2.8x			2.5x
Net debt to TTM Adjusted EBITDA							2.7x			1.7x

‎

EBITDA and adjusted ebitda

GAAP does not define “Earnings Before Interest, Taxes, Depreciation and Amortization” (EBITDA), and it should not be considered as an alternative to earnings measures defined by GAAP. We use this metric to assess the operating performance of our business and as a basis for strategic planning and forecasting as we believe that it closely correlates to long-term shareholder value. We do not use this metric as a measure to allocate resources. We adjust EBITDA for certain items to provide a more consistent comparison of earnings performance from period to period. Reconciliation of this metric to its nearest GAAP measure is presented below (numbers may not foot due to rounding):

	Three Months Ended						Nine Months Ended						Trailing-Twelve Months
	September 30						September 30						September 30
in millions	2021			2020			2021			2020			2021			2020
Net earnings attributable to Vulcan	$ 176.9			$ 199.8			$ 532.9			$ 470.0			$ 647.4			$ 611.1
Income tax expense	51.8			57.0			169.7			130.5			195.0			154.0
Interest expense, net of interest income	36.8			35.8			111.6			100.5			145.5			131.3
Loss on discontinued operations, net of tax	0.2			1.3			2.7			2.1			4.1			3.6
EBIT	265.7			293.9			816.8			703.1			991.9			900.0
Depreciation, depletion, accretion and amortization	117.5			101.0			321.0			295.9			421.9			391.6
EBITDA	$ 383.2			$ 394.9			$ 1,137.8			$ 999.0			$ 1,413.8			$ 1,291.6
Gain on sale of real estate and businesses, net	$ 0.0			$ 0.0			$ (114.7)			$ 0.0			$ (114.7)			$ (9.3)
Property donation	0.0			0.0			0.0			0.0			0.0			10.8
Charges associated with divested operations	0.4			5.9			1.1			6.7			1.4			9.7
Business development 1	24.7			0.3			30.6			(2.1)			40.0			(0.8)
COVID-19 direct incremental costs 2	5.9			2.4			9.7			7.4			12.5			7.4
Pension settlement charge	0.0			0.0			0.0			0.0			22.7			0.0
Restructuring charges	3.5			0.0			3.5			1.3			3.5			1.3
Adjusted EBITDA	$ 417.7			$ 403.5			$ 1,068.0			$ 1,012.3			$ 1,379.2			$ 1,310.8
Depreciation, depletion, accretion and amortization	(117.5)			(101.0)			(321.0)			(295.9)			(421.9)			(391.6)
Adjusted EBIT	$ 300.2			$ 302.5			$ 747.0			$ 716.4			$ 957.3			$ 919.2

1	Represents non-routine charges or gains associated with acquisitions and dispositions. Costs in the third quarter of 2021 include U.S. Concrete acquisition related expenses of $21,092,000 and the cost impact of purchase accounting inventory valuations of $3,000,000.
2	These costs include $3,049,000 related to our COVID-19 vaccination incentive program initiated in the third quarter of 2021.

Adjusted Diluted EPS attributable to vulcan from continuing Operations

Similar to our presentation of Adjusted EBITDA, we present Adjusted diluted earnings per share (EPS) attributable to Vulcan from continuing operations to provide a more consistent comparison of earnings performance from period to period. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2021			2020			2021			2020
Diluted Earnings Per Share
Net earnings attributable to Vulcan	$ 1.32			$ 1.50			$ 3.99			$ 3.53
Less: Discontinued operations	(0.01)			(0.01)			(0.02)			(0.01)
Diluted EPS attributable to Vulcan from continuing
operations	$ 1.33			$ 1.51			$ 4.01			$ 3.54
Items included in Adjusted EBITDA above	$ 0.21			$ 0.05			$ (0.36)			$ 0.08
AL NOL carryforward valuation allowance	0.00			0.00			0.10			0.00
Acquisition financing interest costs	0.00			0.00			0.05			0.00
Adjusted diluted EPS attributable to Vulcan from
continuing operations	$ 1.54			$ 1.56			$ 3.80			$ 3.62

2021 projected ebitda

The following reconciliation to the mid-point of the range of 2021 Projected EBITDA excludes adjustments (as noted in Adjusted EBITDA above) as they are difficult to forecast (timing or amount). Due to the difficulty in forecasting such adjustments, we are unable to estimate their significance. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below:

			2021 Projected
in millions			Mid-point
Net earnings attributable to Vulcan				$ 640
Income tax expense				195
Interest expense, net of interest income				145
Depreciation, depletion, accretion and amortization				465
Projected EBITDA				$ 1,445

RETURN ON INVESTED CAPITAL

We define “Return on Invested Capital” (ROIC) as Adjusted EBITDA for the trailing-twelve months divided by average invested capital (as illustrated below) during the trailing 5-quarters. Our calculation of ROIC is considered a non-GAAP financial measure because we calculate ROIC using the non-GAAP metric EBITDA. We believe that our ROIC metric is meaningful because it helps investors assess how effectively we are deploying our assets. Although ROIC is a standard financial metric, numerous methods exist for calculating a company’s ROIC. As a result, the method we use to calculate our ROIC may differ from the methods used by other companies. This metric is not defined by GAAP and should not be considered as an alternative to earnings measures defined by GAAP. Reconciliation of this metric to its nearest GAAP measure is presented below (numbers may not foot due to rounding):

							Trailing-Twelve Months
							September 30
dollars in millions							2021			2020
Adjusted EDITDA							$ 1,379.2			$ 1,310.8
Average invested capital 1
Property, plant & equipment, net							$ 4,609.1			$ 4,346.2
Goodwill							3,272.6			3,169.1
Other intangible assets							1,253.6			1,093.6
Fixed and intangible assets							$ 9,135.3			$ 8,608.9
Current assets							$ 2,090.9			$ 1,655.2
Less: Cash and cash equivalents							855.7			477.6
Less: Current tax							29.6			16.0
Adjusted current assets							1,205.6			1,161.6
Current liabilities							831.9			731.0
Less: Current maturities of long-term debt							213.6			201.9
Less: Short-term debt							0.0			0.0
Adjusted current liabilities							618.3			529.1
Adjusted net working capital							$ 587.3			$ 632.5
Average invested capital							$ 9,722.6			$ 9,241.4
Return on invested capital							14.2%			14.2%

1	Average invested capital is based on trailing 5-quarters.

LIQUIDITY AND FINANCIAL RESOURCES

Our primary sources of liquidity are cash provided by our operating activities and a substantial, committed bank line of credit. Additional sources of capital include access to the capital markets, the sale of surplus real estate, and dispositions of nonstrategic operating assets. We believe these financial resources are sufficient to fund our business requirements for 2021, including:

contractual obligations

capital expenditures

debt service obligations

dividend payments

potential acquisitions

potential share repurchases

Our balanced approach to capital deployment remains unchanged. We intend to balance reinvestment in our business, growth through acquisitions and return of capital to shareholders, while sustaining financial strength and flexibility.

We actively manage our capital structure and resources in order to balance the cost of capital and the risk of financial stress. We seek to meet these objectives by adhering to the following principles:

maintain substantial bank line of credit borrowing capacity

proactively manage our debt maturity schedule such that repayment/refinancing risk in any single year is low

maintain an appropriate balance of fixed-rate and floating-rate debt

minimize financial and other covenants that limit our operating and financial flexibility

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

Cash

Included in our September 30, 2021 cash and cash equivalents and restricted cash balances of $136.4 million is $0.7 million of restricted cash as described in Note 1 under the caption Restricted Cash.

cash from operating activities

	Nine Months Ended
	September 30
in millions	2021			2020
Net earnings	$ 532.7			$ 470.0
Depreciation, depletion, accretion and amortization (DDA&A)	321.0			295.9
Noncash operating lease expense	32.7			27.8
Net gain on sale of property, plant & equipment and businesses	(120.3)			(2.3)
Contributions to pension plans	(6.0)			(6.5)
Deferred tax expense	71.4			50.3
Other operating cash flows, net 1	(106.7)			(57.3)
Net cash provided by operating activities	$ 724.8			$ 777.9

1	Primarily reflects changes to working capital balances.

Net cash provided by operating activities was $724.8 million during the nine months ended September 30, 2021, a $53.1 million decrease compared to the same period of 2020. This decrease primarily resulted from unfavorable changes in working capital balances.

Days sales outstanding, a measurement of the time it takes to collect receivables, were 45.9 days at September 30, 2021 compared to 43.5 days at September 30, 2020. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; attention is being paid to the potential negative impact of the COVID-19 pandemic on our customers’ ability to pay their amounts owed to us.

cash from investing activities

Net cash used for investing activities was $1,760.6 million during the first nine months of 2021, a $1,506.8 million increase compared to cash used of $253.7 million in the same period of 2020. During the first nine months of 2021, we invested $318.6 million in our existing operations compared to $269.0 million in the prior year period. Of this $318.6 million, $134.1 million was invested in internal growth projects to enhance our distribution capabilities, develop new production sites and enhance existing production facilities and other growth opportunities. Reducing cash used, proceeds from the sale of property, plant & equipment were up $182.9 million from the first nine months of 2020 primarily reflecting the sale of a reclaimed quarry in Southern California (see Note 16 to the condensed consolidated financial statements). In August 2021, we completed the acquisition of U.S. Concrete for $1,634.5 million of cash consideration (see Note 16 to the condensed consolidated financial statements) compared with only $5.7 million of acquisitions in the first nine months of 2020.

cash from financing activities

Net cash used for financing activities in the first nine months of 2021 was $25.8 million, compared to cash provided of $286.0 million in the same period of 2020. The current year includes: a) cash paid to retire the $500.0 million floating rate notes due March 2021, b) $13.3 million of financing costs for a bridge facility commitment and delayed draw term loan facility (see Note 7 to the condensed consolidated financial statements), c) initial proceeds of $1,600.0 million from the August draw on the delayed draw term loan facility, d) the subsequent pay down of $500.0 million on the delayed draw term loan facility, and e) $434.5 million of cash paid in September to retire U.S. Concrete’s outstanding notes assumed in the acquisition. The prior year includes: a) net cash proceeds of $734.6 million from the issuance of debt, b) cash paid to retire the $250.0 million floating rate notes due June 2020, and c) $19.9 million of cash paid to settle interest rate derivatives.

Additionally, capital returned to our shareholders decreased by $14.0 million as higher dividends of $12.1 million ($1.11 per share compared to $1.02 per share) were offset by lower share repurchases of $26.1 million (no shares repurchased compared to 214,338 shares repurchased @ $121.92 average price per share).

debt

Certain debt measures are presented below:

			September 30			December 31			September 30
dollars in millions			2021			2020			2020
Debt
Current maturities of long-term debt			$ 12.2			$ 515.4			$ 509.4
Short-term debt			0.0			0.0			0.0
Long-term debt			3,874.1			2,772.3			2,777.1
Total debt			$ 3,886.3			$ 3,287.7			$ 3,286.5
Capital
Total debt			$ 3,886.3			$ 3,287.7			$ 3,286.5
Total equity			6,449.1			6,027.3			5,928.4
Total capital			$ 10,335.4			$ 9,315.0			$ 9,214.9
Total Debt as a Percentage of Total Capital			37.6%			35.3%			35.7%
Weighted-average Effective Interest Rates
Delayed draw term loan 1			1.00%			n/a			n/a
Line of credit 1			1.13%			1.25%			1.38%
Term debt			4.64%			4.10%			4.10%
Fixed versus Floating Interest Rate Debt
Fixed-rate debt			72.2%			85.1%			85.1%
Floating-rate debt			27.8%			14.9%			14.9%

1		Reflects the margin above LIBOR for LIBOR-based borrowings; we also paid upfront fees that are amortized to interest expense and pay fees for unused borrowing capacity and standby letters of credit.

bridge facility, delayed draw term loan and line of credit

In June 2021, concurrent with the announcement of the pending acquisition of U.S. Concrete (see Note 16 for additional information), we obtained a $2,200.0 million bridge facility commitment from Truist Bank. Later, in June 2021, we entered into a $1,600.0 million delayed draw term loan facility with a subset of the banks that provide our line of credit. The bridge facility commitment was terminated as a condition to the execution of the delayed draw term loan facility. The delayed draw term loan was drawn in August 2021 for $1,600.0 million in connection with the acquisition of U.S. Concrete and was subsequently paid down to $1,100.0 million prior to September 30, 2021. Any amounts repaid are no longer available for borrowing and any outstanding borrowings are due August 2024. The delayed draw term loan contains covenants customary for an unsecured investment-grade facility and mirror those in our line of credit. As of September 30, 2021, we were in compliance with the delayed draw term loan covenants. Borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. Financing costs for the bridge facility commitment and the delayed draw term loan facility totaled $13.3 million, $9.4 million of which was recognized as interest expense in the second quarter of 2021.

In September 2020, we executed a new five-year unsecured line of credit of $1,000.0 million, incurring $4.6 million of deferred transaction costs. Covenants, borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of September 30, 2021, we were in compliance with the line of credit covenants, the credit margin for LIBOR borrowings was 1.125%, the credit margin for base rate borrowings was 0.125%, and the commitment fee for the unused amount was 0.100%.

As of September 30, 2021, our available borrowing capacity under the line of credit was $941.7 million. Utilization of the borrowing capacity was as follows:

none was borrowed

$58.3 million was used to provide support for outstanding standby letters of credit

TERM DEBT

Essentially all of our $3,957.2 million (face value) of term debt is unsecured. $2,846.2 million of such debt is governed by three essentially identical indentures that contain customary investment-grade type covenants. As of September 30, 2021, we were in compliance with all term debt covenants.

In August 2021, we assumed $434.5 million (fair value) of senior notes due 2029 in connection with the acquisition of U.S. Concrete and subsequently retired these notes in September 2021.

In May 2020, we issued $750.0 million of 3.50% senior notes due 2030. Total proceeds were $741.4 million (net of discounts and transaction costs). $250.0 million of the proceeds were used to retire the $250.0 million floating rate notes due June 2020, and the remainder of the proceeds, together with cash on hand, was used to retire the $500.0 million floating rate notes due March 2021.

CURRENT MATURITIES of long-term debt

The $12.2 million of current maturities of long-term debt as of September 30, 2021 is due as follows:

	Current
in millions	Maturities
Fourth quarter 2021	$7.6
First quarter 2022	2.3
Second quarter 2022	1.1
Third quarter 2022	1.2

debt ratings

Our debt ratings and outlooks as of September 30, 2021 are as follows:

			Rating/Outlook		Date			Description
Senior Unsecured Term Debt
Fitch			BBB/stable		2/22/2021			rating revised
Moody's			Baa2/stable		11/9/2020			rating revised
Standard & Poor's			BBB+/stable		2/28/2020			rating revised

LIBOR TRANSITION

The London Interbank Offered Rate (LIBOR) is an indicative measure of the average rate at which major global banks could borrow from one another and is used extensively globally as a reference rate for financial contracts (e.g., corporate bonds and loans) and commercial contracts (e.g., real estate leases). The United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, announced in July 2017 that it intends to cease requiring banks to submit LIBOR rates after 2021. ICE Benchmark Administration (IBA), the administrator of LIBOR, has announced that it would have to cease the publication of LIBOR quotes in June 2023 for the most actively used maturities on legacy transactions and December 2021 for all other maturities unless the FCA exercises its new powers under the Financial Services Act 2021 to require IBA to continue publishing LIBOR quotes using a “synthetic” basis.

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

As of September 30, 2021, we had two material debt instruments with LIBOR as a reference rate: 1) our $1,000.0 million line of credit (none outstanding at September 30, 2021) and 2) our $1,600.0 million delayed draw term loan facility ($1,100.0 million outstanding at September 30, 2021). At this time, we cannot predict the future impact of a departure from LIBOR as a reference rate; however, if future rates based upon the successor reference rate (or a new method of calculating LIBOR) are higher than LIBOR rates as currently determined, our interest expense would increase.

Equity

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

	September 30			December 31			September 30
in thousands	2021			2020			2020
Common stock shares at January 1,
issued and outstanding	132,516			132,371			132,371
Common Stock Issuances
Share-based compensation plans	188			359			297
Common Stock Purchases
Purchased and retired	0			(214)			(214)
Common stock shares at end of period,
issued and outstanding	132,704			132,516			132,454

As of September 30, 2021, there were 8,064,851 shares remaining under the February 2017 Board of Directors’ share purchase authorization. Depending upon market, business, legal and other conditions, we may purchase shares from time to time through open market (including plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934) and/or privately negotiated transactions. The authorization has no time limit, does not obligate us to purchase any specific number of shares, and may be suspended or discontinued at any time.

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

	September 30			December 31			September 30
in thousands, except average cost	2021			2020			2020
Shares Purchased and Retired
Number	0			214			214
Total purchase price	$ 0			$ 26,132			$ 26,132
Average cost per share	$ 0.00			$ 121.92			$ 121.92

There were no shares held in treasury as of September 30, 2021, December 31, 2020 and September 30, 2020.

off-balance sheet arrangements

We have no off-balance sheet arrangements, such as financing or unconsolidated variable interest entities.

Standby Letters of Credit

For a discussion of our standby letters of credit, see Note 7 to the condensed consolidated financial statements.

Contractual Obligations

Our obligation to make future payments under contracts is presented in our most recent Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES

We follow certain significant accounting policies when preparing our consolidated financial statements. A summary of these policies is included in our Annual Report on Form 10-K for the year ended December 31, 2020 (Form 10-K).

We prepare these financial statements to conform with accounting principles generally accepted in the United States of America. These principles require us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and contingent liabilities at the date of the financial statements. We base our estimates on historical experience, current conditions and various other assumptions we believe reasonable under existing circumstances and evaluate these estimates and judgments on an ongoing basis. The results of these estimates form the basis for our judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our actual results may materially differ from these estimates.

We believe that the accounting policies described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our Form 10-K require the most significant judgments and estimates used in the preparation of our consolidated financial statements, so we consider these to be our critical accounting policies. There have been no changes to our critical accounting policies during the three months ended September 30, 2021.

new Accounting standards

For a discussion of the accounting standards recently adopted or pending adoption and the effect such accounting changes will have on our results of operations, financial position or liquidity, see Note 17 to the condensed consolidated financial statements.

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including expectations regarding future performance, contain forward-looking statements that are subject to assumptions, risks and uncertainties that could cause actual results to differ materially from those projected. These assumptions, risks and uncertainties include, but are not limited to:

general economic and business conditions

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

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

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

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

changes in our effective tax rate

the increasing reliance on information technology infrastructure, including the risks that the infrastructure does not work as intended, experiences technical difficulties or is subjected to cyber-attacks

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

the highly competitive nature of the construction industry

the impact of future regulatory or legislative actions, including those relating to climate change, wetlands, greenhouse gas emissions, the definition of minerals, tax policy or international trade

the outcome of pending legal proceedings

pricing of our products

weather and other natural phenomena, including the impact of climate change and availability of water

availability and cost of trucks, railcars, barges and ships as well as their licensed operators for transport of our materials

energy costs

costs of hydrocarbon-based raw materials

healthcare costs

the amount of long-term debt and interest expense we incur

changes in interest rates

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

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

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

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

our ability to manage and successfully integrate acquisitions

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

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

changes in technologies, which could disrupt the way we do business and how our products are distributed

other assumptions, risks and uncertainties detailed from time to time in our periodic reports filed with the SEC

All forward-looking statements are made as of the date of filing or publication. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law. Investors are cautioned not to rely unduly on such forward-looking statements when evaluating the information presented in our filings, and are advised to consult any of our future disclosures in filings made with the Securities and Exchange Commission (SEC) and our press releases with regard to our business and consolidated financial position, results of operations and cash flows.

INVESTOR information

We make available on our website, www.vulcanmaterials.com, free of charge, copies of our:

Annual Report on Form 10-K

Quarterly Reports on Form 10-Q

Current Reports on Form 8-K

Our website also includes amendments to those reports filed with or furnished to the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as all Forms 3, 4 and 5 filed with the SEC by our executive officers and directors, as soon as the filings are made publicly available by the SEC on its EDGAR database (www.sec.gov).

In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K, including financial statements, by writing to Denson N. Franklin III, Senior Vice President, General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.

We have a:

Business Conduct Policy applicable to all employees and directors

Code of Ethics for the CEO and Senior Financial Officers

Copies of the Business Conduct Policy and the Code of Ethics are available on our website under the heading “Corporate Governance.” If we make any amendment to, or waiver of, any provision of the Code of Ethics, we will disclose such information on our website as well as through filings with the SEC.

Our Board of Directors has also adopted:

Corporate Governance Guidelines

Charters for its Audit, Compensation, Executive, Finance, Governance and Safety, Health & Environmental Affairs Committees

These documents meet all applicable SEC and New York Stock Exchange regulatory requirements.

The Charters of the Audit, Compensation and Governance Committees are available on our website under the heading “Corporate Governance” under the “Investor Relations” tab or you may request a copy of any of these documents by writing to Denson N. Franklin III, Senior Vice President, General Counsel and Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.

Information included on our website is not incorporated into, or otherwise made a part of, this report.

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