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 the nation's largest supplier of construction aggregates (primarily crushed stone, sand and gravel), a major producer of asphalt mix and ready-mixed concrete, and a supplier of construction paving services. 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 quarries in Quintana Roo, Mexico (see Note 8, NAFTA Arbitration) and Puerto Cortés, Honduras (acquired in the third quarter of 2022) 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 2021, our five largest customers accounted for 8% of our total revenues, and no single customer accounted for more than 2% 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, Virginia, U.S. Virgin Islands, Washington D.C. and Bahamas 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 2022

Compared to third quarter of 2021: ‎

Total revenues increased $571.8 million, or 38%, to $2,088.3 million

Gross profit increased $98.8 million, or 25%, to $492.9 million

Aggregates segment sales increased $318.1 million, or 27%, to $1,490.5 million

Aggregates segment freight-adjusted revenues increased $199.2 million, or 22%, to $1,097.2 million

Shipments increased 9%, or 5.2 million tons, to 65.4 million tons

Same-store shipments increased 3%, or 2.0 million tons, to 60.8 million tons

Freight-adjusted sales price increased 12.5%, or $1.86 per ton to $16.79

Same-store freight-adjusted sales price increased 13.2%, or $1.97 per ton to $16.86

Aggregates segment gross profit increased $63.7 million, or 17%, to $436.1 million

Unit profitability (as measured by gross profit per ton) increased 8% to $6.67 per ton

Asphalt, Concrete and Calcium segment gross profit increased $35.1 million, or 162%, to $56.8 million, collectively

Selling, administrative and general (SAG) expenses increased $31.5 million but decreased 0.3 percentage points (30 basis points) as a percentage of total revenues

Operating earnings increased $43.0 million, or 16%, to $305.4 million

Earnings attributable to Vulcan from continuing operations were unchanged at $1.33 per diluted share

Adjusted earnings attributable to Vulcan from continuing operations were $1.78 per diluted share, compared to $1.54 per diluted share

Net earnings attributable to Vulcan were essentially unchanged at $177.1 million, an increase of $0.2 million

Adjusted EBITDA was $507.0 million, an increase of $89.3 million, or 21%

Returned capital to shareholders via dividends ($53.2 million @ $0.40 per share versus $49.1 million @ $0.37 per share)

Consistent with our expectations for the second half of the year, strong pricing momentum and solid operational execution led to earnings growth in each of our segments. Aggregates cash gross profit per ton improved by 9%, a considerable acceleration from the first half of the year. This momentum, along with the ongoing favorable pricing environment and current visibility into private nonresidential and infrastructure demand, reinforces our confidence in our ability to deliver strong earnings growth in 2022.

Capital expenditures in the third quarter were $137.6 million, including $66.4 million for growth projects (year-to-date $377.6 million and $157.1 million, respectively). For the full year, we expect to spend $600 million to $650 million on capital expenditures. Full-year capital expenditures include spending for U.S. Concrete operations (acquired in August 2021) as well as spending for projects put on hold in 2020 due to the pandemic. We will continue to review our plans and will adjust as needed, while being thoughtful about preserving liquidity. During the quarter, we acquired strategic aggregates and downstream assets to complement our position in Northern California. Additionally, we acquired a quarry in Honduras from which we have been distributing materials to certain Gulf Coast markets since 2019 (see Note 16 to the condensed consolidated financial statements).

As of September 30, 2022, the ratio of total debt to trailing-twelve months Adjusted EBITDA was 2.6 times (2.5 times on a net debt basis). We remain committed to our stated long-term target leverage range of 2.0 to 2.5 times total debt to trailing-twelve months Adjusted EBITDA.

Interest expense, net of interest income, was $46.1 million in the third quarter compared with $36.8 million in the prior year.

On a trailing-twelve months basis, return on invested capital was 13.6%, 0.6 percentage points (60 basis points) lower than the comparable prior year period. We are focused on driving further improvement through solid operating earnings growth coupled with disciplined capital management.

OUTLOOK

We have continued to execute well and now expect full-year 2022 Adjusted EBITDA of $1.640 to $1.680 billion. Through the first nine months, aggregates shipments have exceeded the upper end of our expectations, driven by acquisitions and healthy underlying demand on our markets.

As we look ahead to 2023, leading indicators suggest that growing public construction activity, particularly highways, and the recovery in private nonresidential contract awards should help to offset contracting single-family residential demand. The pricing environment remains positive, and we expect to carry the strong momentum into 2023.

Our industry-leading aggregates focus positions us well for continued growth and value creation. We have a durable business model with strong fundamentals and less execution risk through economic cycles. This durability is evidenced by the consistent growth in our aggregates unit profitability, despite ongoing volatility in the macro environment. We are positioned in geographic markets that will continue to outperform other parts of the country from a demand perspective, both in the near term and long term, and we expect both the favorable pricing dynamics and our strong execution to lead to continued earnings 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	2022			2021			2022			2021
Total revenues	$ 2,088.3			$ 1,516.5			$ 5,583.3			$ 3,945.9
Cost of revenues	1,595.4			1,122.4			4,375.5			2,924.2
Gross profit	$ 492.9			$ 394.1			$ 1,207.8			$ 1,021.7
Gross profit margin	23.6%			26.0%			21.6%			25.9%
Selling, administrative and general (SAG)	$ 135.3			$ 103.8			$ 388.7			$ 293.1
SAG as a percentage of total revenues	6.5%			6.8%			7.0%			7.4%
Gain on sale of property, plant &
equipment and businesses	$ 23.8			$ 2.9			$ 28.4			$ 120.3
Loss on impairments	$ (67.8)			$ 0.0			$ (67.8)			$ (4.6)
Operating earnings	$ 305.4			$ 262.4			$ 759.9			$ 799.4
Interest expense, net	$ 46.1			$ 36.8			$ 120.8			$ 111.6
Earnings from continuing operations
before income taxes	$ 260.6			$ 228.7			$ 637.4			$ 705.1
Income tax expense	$ 82.3			$ 51.7			$ 164.6			$ 169.7
Effective tax rate from continuing operations	31.6%			22.6%			25.8%			24.1%
Earnings from continuing operations	$ 178.3			$ 177.0			$ 472.8			$ 535.4
Loss on discontinued operations,
net of income taxes	(1.2)			(0.2)			(16.1)			(2.7)
(Earnings) loss attributable to noncontrolling interest	0.0			0.1			(0.5)			0.2
Net earnings attributable to Vulcan	$ 177.1			$ 176.9			$ 456.2			$ 532.9
Diluted earnings (loss) per share attributable to Vulcan
Continuing operations	$ 1.33			$ 1.33			$ 3.54			$ 4.01
Discontinued operations	0.00			(0.01)			(0.12)			(0.02)
Diluted net earnings per share attributable to Vulcan	$ 1.33			$ 1.32			$ 3.42			$ 3.99
EBITDA 1	$ 457.7			$ 383.2			$ 1,192.7			$ 1,137.8
Adjusted EBITDA 1	$ 507.0			$ 417.7			$ 1,251.0			$ 1,068.0
Average Sales Price and Unit Shipments
Aggregates
Tons (thousands)	65,351			60,163			182,180			165,128
Freight-adjusted sales price	$ 16.79			$ 14.93			$ 16.23			$ 14.86
Asphalt Mix
Tons (thousands)	3,631			3,202			9,374			8,553
Average sales price	$ 74.80			$ 59.43			$ 70.17			$ 58.27
Ready-mixed concrete
Cubic yards (thousands)	2,924			1,596			8,255			2,940
Average sales price	$ 153.54			$ 136.29			$ 148.95			$ 133.88
Calcium
Tons (thousands)	58			52			161			197
Average sales price	$ 36.27			$ 28.29			$ 33.45			$ 27.81

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

THIRd quarter 2022 Compared to THIRd Quarter 2021

Third quarter 2022 total revenues were $2,088.3 million, up 38% from the third quarter of 2021. Shipments increased in aggregates (+9%), asphalt mix (+13%) and ready-mixed concrete (+83%). Likewise, gross profit increased in the Aggregates (+$63.7 million or 17%), Asphalt (+$22.4 million or 318%) and Concrete (+$12.2 million or +85%) segments. An 82% increase in the unit cost of diesel fuel increased costs by $30.6 million from the prior year’s third quarter with most ($27.5 million) of this cost increase reflected in the Aggregates segment.

Net earnings attributable to Vulcan for the third quarter of 2022 were $177.1 million, or $1.33 per diluted share, compared to $176.9 million, or $1.32 per diluted share, in the third quarter of 2021. Each period’s results were impacted by discrete items, as follows:

Net earnings attributable to Vulcan for the third quarter of 2022 include:

pretax net gain of $23.5 million related to the sale of excess real estate in Southern California

pretax charges of $67.8 million associated with goodwill and long-lived asset impairments

pretax charges of $0.4 million associated with divested operations

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

pretax charges of $2.1 million for managerial restructuring (related to acquisitions)

$9.6 million of tax charges related to a Calica NOL carryforward valuation allowance

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)

Adjusted for these discrete items, earnings attributable to Vulcan from continuing operations (Adjusted Diluted EPS) was $1.78 per diluted share for the third quarter of 2022 compared to $1.54 per diluted share in the third quarter of 2021.

Continuing Operations — Changes in earnings from continuing operations before income taxes for the third quarter of 2022 versus the third quarter of 2021 are summarized below:

earnings from continuing operations before income taxes

in millions
Third quarter 2021	$ 228.7
Higher aggregates gross profit	63.7
Higher asphalt gross profit	22.4
Higher concrete gross profit	12.2
Higher calcium gross profit	0.5
Higher selling, administrative and general expenses	(31.5)
Higher gain on sale of property, plant & equipment and businesses	20.9
Higher impairment charges	(67.8)
Higher interest expense, net	(9.3)
U.S. Concrete acquisition related expenses in 2021	21.1
All other	(0.3)
Third quarter 2022	$ 260.6

Third quarter Aggregates segment sales increased 27%, while gross profit increased $63.7 million, or 17%, to $436.1 million ($6.67 per ton). Double-digit price growth and solid operational execution helped offset a $27.5 million unfavorable impact from significantly higher diesel fuel costs, $2.2 million unfavorable impact from selling acquired inventory after its markup to fair value, and continued inflationary pressures for many other parts and supplies. Cash gross profit per ton was $8.41 in the quarter compared to $7.74 in the prior year quarter. Higher diesel fuel costs negatively impacted the Aggregates segment by $0.42 per ton.

Total aggregates shipments were 65.4 million tons versus 60.2 million in last year’s third quarter, an increase of 9%. This increase reflects shipment contribution from acquisitions and healthy construction activity levels. Same-store aggregates shipments increased 3%. Shipment growth was geographically widespread and particularly strong in many southeastern markets and California.

Price growth in the third quarter was consistently strong across our markets. Freight-adjusted pricing was $16.79 per ton, an increase of 12.5% ($1.86 per ton) over the prior year. Same-store freight-adjusted average sales price increased 13.2%, or $1.97 per ton – excluding mix impact, aggregates price increased 12.4%.

Freight-adjusted unit cost of sales increased 16%, or $1.38 per ton, and cash cost of sales increased 17%, or $1.19 per ton, as compared to the prior year’s third quarter. Excluding the impact of higher diesel fuel costs, freight-adjusted cash cost of sales increased 11%, or $0.77 per ton.

Overall, non-aggregates segments gross profit of $56.8 million was $35.1 million higher than the prior year’s third quarter.

Asphalt segment gross profit of $29.5 million was up $22.4 million from the prior year’s third quarter. The year-over-year increase was driven by widespread volume improvement and continued pricing momentum. Asphalt volumes increased 13% driven by growth in Arizona and California, our two largest asphalt markets. Asphalt pricing increased 25.9%, or $15.37 per ton, more than offsetting a 42% ($33.1 million) increase in the average price paid for liquid asphalt as well as a $2.9 million year-over-year increase in natural gas cost.

Concrete segment gross profit was $26.5 million for the third quarter compared to $14.3 million in the prior year. Concrete results benefited from the contribution of acquired operations as well as strong volume and price growth in our legacy operations. Unit material margins improved as higher selling prices helped offset higher raw materials costs, including aggregates supplied by our Aggregates segment. Segment results were negatively impacted by higher diesel prices and the availability of truck drivers and cement in certain markets.

Calcium segment gross profit was $0.8 million compared to $0.3 million in the prior year quarter.

SAG expenses were $135.3 million in the quarter, or 6.5% of total revenues. Higher expenses versus the prior year were driven by elevated legal and professional fees, related mostly to Mexico and business development activities, and increased incentives driven by favorable current year performance. Additionally, more normalized travel expenses and travel related to U.S. Concrete integration activities contributed to the year-over-year increase. Trailing-twelve months SAG expense was 7.1% of total revenues, down 0.5 percentage points (50 basis points) from the prior year.

For the three months ended September 30, 2022, we sold excess real estate in Southern California resulting in a pretax gain of $23.5 million ($17.5 million after tax). There were no similar gains in the prior comparable period.

During the third quarter of 2022, we recognized a goodwill impairment charge of $50.9 million and a long-lived asset impairment charge of $16.9 million related to the probable divestiture of concrete operations in New York, New Jersey and Pennsylvania (expected to close in the fourth quarter of 2022, subject to obtaining regulatory approvals and the satisfaction of other customary closing conditions). There were no similar charges in the prior comparable period.

Other operating expense is composed primarily of idle facilities expense, environmental remediation costs and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:

$8.2 million in third quarter 2022 — includes discrete items as follows:

$0.4 million of charges associated with divested operations

$0.3 million of non-routine business development charges (excludes items included in cost of revenues)

$2.1 million for managerial restructuring (related to acquisitions)

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

$21.7 million of non-routine business development charges (excludes items included in cost of revenues)

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

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

Other nonoperating income, net was a net income of $1.3 million for the third quarter of 2022 and was unfavorable by $1.8 million from the third quarter of 2021.

Net interest expense was $46.1 million in the third quarter of 2022 compared to $36.8 million in the third quarter of 2021.

Income tax expense from continuing operations was $82.3 million in the third quarter of 2022 compared to $51.7 million in the third quarter of 2021. The increase in tax expense was primarily related to an increase in pretax earnings, the recording of a valuation allowance against the net operating losses of one of our Mexican subsidiaries and the impairment of non-tax deductible goodwill in the current quarter.

Earnings attributable to Vulcan from continuing operations were $1.33 per diluted share in the third quarter of 2022, unchanged from the third quarter of 2021.

Discontinued Operations — Third quarter pretax loss from discontinued operations was $1.6 million in 2022 compared with a pretax loss of $0.3 million in 2021. Both periods include charges 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, 2022 Compared to year-to-date SEPTEMBER 30, 2021

Total revenues for the first nine months of 2022 were $5,583.3 million, up 41% from the first nine months of 2021. Shipments increased in aggregates (+10%), asphalt mix (+10%) and ready-mixed concrete (+181%). Gross profit increased in the Aggregates (+$111.5 million or 11%), Asphalt (+$22.6 million or 128%) and Concrete (+$52.3 million or 162%) segments. A 98% increase in the unit cost of diesel fuel increased costs by $96.1 million from the first nine months of 2021 with most ($83.2 million) of this cost increase reflected in the Aggregates segment.

Net earnings attributable to Vulcan for the first nine months of 2022 were $456.2 million, or $3.42 per diluted share, compared to $532.9 million, or $3.99 per diluted share, in the first nine months of 2021. Each period’s results were impacted by discrete items, as follows:

Net earnings attributable to Vulcan for the first nine months of 2022 include:

pretax gain of $23.5 million related to the sale of excess real estate in Southern California

pretax charges of $67.8 million associated with goodwill and long-lived asset impairments

pretax charges of $1.0 million associated with divested operations

pretax charges of $8.1 million associated with non-routine business development

pretax charges of $4.9 million for managerial restructuring (related to acquisitions)

pretax charges of $15.3 million for a litigation matter included in discontinued operations

$9.6 million of tax charges related to a Calica NOL carryforward valuation allowance

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

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 charges 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

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

Adjusted for these discrete items, earnings attributable to Vulcan from continuing operations (Adjusted Diluted EPS) was $4.03 per diluted share for the first nine months of 2022 compared to $3.80 per diluted share in the first nine months of 2021.

Continuing Operations — Changes in earnings from continuing operations before income taxes for year-to-date September 30, 2022 versus year-to-date September 30, 2021 are summarized below:

earnings from continuing operations before income taxes

in millions
Year-to-date September 30, 2021	$ 705.1
Higher aggregates gross profit	111.5
Higher asphalt gross profit	22.6
Higher concrete gross profit	52.3
Lower calcium gross profit	(0.3)
Higher selling, administrative and general expenses	(95.6)
Lower gain on sale of property, plant & equipment and businesses	(91.9)
Higher impairment charges	(63.2)
Higher interest expense, net	(9.2)
U.S. Concrete acquisition related expenses in 2021	21.1
All other	(15.0)
Year-to-date September 30, 2022	$ 637.4

Aggregates segment sales for the first nine months of 2022 were $4,013.5 million (up 26%) while aggregates shipments increased 10%, or 17.1 million tons, compared to the prior year. Same-store aggregates shipments increased 4%, or 6.7 million tons. Freight-adjusted average sales price for aggregates increased 9.2%, or $1.37 per ton, versus the first nine months of 2021. Same-store freight-adjusted average sales price increased 9.8%, or $1.45 per ton — excluding mix impact, aggregates price increased 9.8%.

Aggregates segment gross profit was $1,081.3 million ($5.94 per ton) versus $969.8 million ($5.87 per ton) in the first nine months of 2021. Cash gross profit per ton increased 4% from the prior year’s first nine months to $7.72 per ton. First nine months 2022 freight-adjusted unit cost of sales increased 14%, or $1.30 per ton, versus the prior year. The average unit cost of diesel fuel increased 98% versus the first nine months of 2021, decreasing Aggregates segment gross profit by $83.2 million or $0.46 per ton.

On a trailing-twelve months basis, Aggregates segment gross profit margin as a percentage of segment sales excluding freight & delivery decreased 2.4 percentage points (240 basis points) to 35.8%.

Asphalt segment gross profit of $40.2 million was up $22.6 million from the first nine months of 2021. Asphalt mix shipments increased 10% while average unit selling prices increased 20%, or $11.90 per ton. Compared to the prior year’s first nine months, asphalt mix unit material margins increased 10% despite a 40% increase in the average unit cost for liquid asphalt.

Concrete segment gross profit was $84.7 million for the first nine months of 2022, an increase of $52.3 million from the prior year period. Ready-mixed concrete shipments increased 181% (flat same-store) while the average sales price increased 11% and the unit material margins increased 12%.

Calcium segment’s gross profit of $1.6 million was down $0.3 million compared to the first nine months of 2021.

SAG expenses were $388.7 million versus $293.1 million in the prior year’s first nine months reflecting a 0.4 percentage point (40 basis point) decrease as a percentage of total revenues. The current year included overhead expenses associated with U.S. Concrete that were only in September of the prior year’s first nine months.

Gain on sale of property, plant & equipment and businesses was $28.4 million in the first nine months of 2022 versus $120.3 million in the first nine months of 2021. The 2022 amount includes a net pretax gain of $23.5 million from the sale of excess real estate in Southern California while the 2021 amount includes a net pretax gain of $114.7 million from the sale of a reclaimed quarry in Southern California.

For the nine months ended September 30, 2022, we recognized a goodwill impairment charge of $50.9 million and a long-lived asset impairment charge of $16.9 million related to the probable divestiture of concrete operations in New York, New Jersey and Pennsylvania (expected to close in the fourth quarter of 2022). There were no similar charges in the prior comparable period.

Other operating expense is composed primarily of idle facilities expense, environmental remediation costs and gain (loss) on settlement of AROs. Total other operating expense and significant items included in the total were:

$19.8 million in first nine months of 2022 — includes discrete items as follows:

$1.0 million of charges associated with divested operations

$0.5 million of non-routine business development charges (excludes items included in cost of revenues)

$4.9 million for managerial restructuring (related to acquisitions)

$44.9 million in first nine months of 2021 — includes discrete items as follows:

$27.6 million of non-routine business development charges (excludes items included in cost of revenues)

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

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

Other nonoperating income (expense) was a net expense of $1.7 million for the first nine months of 2022, unfavorable by $19.0 million from the first nine months of 2021. This unfavorable variance included unfavorable Rabbi Trust gains/losses and benefit plan costs of $10.5 million and $11.2 million, respectively.

Net interest expense was $120.8 million in the first nine months of 2022 compared to $111.6 million in the first nine months of 2021. The 2022 expense factored in a higher debt level resulting from financing the acquisition of U.S Concrete while 2021 included $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 $164.6 million in the first nine months of 2022 compared to $169.7 million in the first nine months of 2021. The decrease in tax expense was primarily related to lower pretax earnings partially offset by the impairment of non-tax deductible goodwill in the current year.

Earnings attributable to Vulcan from continuing operations were $3.54 per diluted share in the first nine months of 2022 compared to $4.01 per diluted share in the first nine months of 2021.

Discontinued Operations — First nine months pretax loss from discontinued operations was $21.7 million in 2022 compared with a pretax loss of $3.6 million in 2021. Both periods include charges related to general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business while 2022 includes a $15.3 million charge for a litigation matter. For additional details, see Note 1 to the condensed consolidated financial statements under the caption Discontinued Operations.

KNOWN TRENDS OR UNCERTAINTIES

Inflationary pressures and labor constraints are trends continuing to impact our operations in 2022. Although inflationary pressures can create short- to medium-term headwinds, the combination of inflation and improving visibility of demand has created and may continue to create a favorable environment for price increases. Additionally, labor constraints (especially truck drivers) have caused delays and inefficiencies in our operations as well as those of our customers. If labor constraints continue and demand remains strong, our operations may proceed at a slower pace, which may effectively extend the recovery while allowing us the opportunity to compound price, control costs and grow earnings.

Further, recently, the Mexican government has taken actions adverse to our operations in that country. On May 5, 2022, Mexican government officials presented employees at our Calica operations in Quintana Roo, Mexico with arbitrary shutdown orders to immediately cease underwater quarrying and extraction operations. On May 13, 2022, the Mexican government suspended the three-year customs permit granted in March 2022 to Calica and began a proceeding that could result in the revocation of that permit. We strongly believe that the actions taken by Mexico are arbitrary and illegal, and we intend to vigorously pursue all lawful avenues available to us in order to protect our rights, under both Mexican and international law. Our full year 2022 Outlook includes an EBITDA impact of $80 million to $100 million as a result of this shutdown.

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 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	2022			2021			2022			2021
Aggregates segment
Segment sales	$ 1,490.5			$ 1,172.4			$ 4,013.5			$ 3,192.7
Less
Freight & delivery revenues 1	364.6			253.1			972.9			685.2
Other revenues	28.7			21.3			84.1			54.4
Freight-adjusted revenues	$ 1,097.2			$ 898.0			$ 2,956.5			$ 2,453.1
Unit shipments - tons	65.4			60.2			182.2			165.1
Freight-adjusted sales price	$ 16.79			$ 14.93			$ 16.23			$ 14.86

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 months 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	2022			2021			2022			2021
Aggregates segment
Gross profit	$ 436.1			$ 372.4			$ 1,407.2			$ 1,245.8
Segment sales	$ 1,490.5			$ 1,172.4			$ 5,165.8			$ 4,149.2
Gross profit margin	29.3%			31.8%			27.2%			30.0%
Incremental gross profit margin	20.1%						15.9%

FLOW-THROUGH RATE (non-gaap)

	Three Months Ended						Trailing-Twelve Months
	September 30						September 30
dollars in millions	2022			2021			2022			2021
Aggregates segment
Gross profit	$ 436.1			$ 372.4			$ 1,407.2			$ 1,245.8
Segment sales	$ 1,490.5			$ 1,172.4			$ 5,165.8			$ 4,149.2
Less: Freight & delivery revenues 1	364.6			253.1			1,239.7			890.2
Segment sales excluding freight & delivery	$ 1,125.9			$ 919.3			$ 3,926.1			$ 3,259.0
Gross profit margin excluding freight & delivery	38.7%			40.5%			35.8%			38.2%
Incremental gross profit flow-through rate	30.9%						24.2%

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. Aggregates segment cash cost of sales per ton is computed by subtracting Aggregates segment cash gross profit per ton from Aggregates segment freight-adjusted sales price. Reconciliation of these metrics to their nearest GAAP measures are presented below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
in millions, except per ton data	2022			2021			2022			2021
Aggregates segment
Gross profit	$ 436.1			$ 372.4			$ 1,081.3			$ 969.8
Depreciation, depletion, accretion and amortization	113.5			93.3			324.4			258.5
Aggregates segment cash gross profit	$ 549.6			$ 465.7			$ 1,405.7			$ 1,228.3
Unit shipments - tons	65.4			60.2			182.2			165.1
Aggregates segment gross profit per ton	$ 6.67			$ 6.19			$ 5.94			$ 5.87
Aggregates segment cash gross profit per ton	$ 8.41			$ 7.74			$ 7.72			$ 7.44
Aggregates segment freight-adjusted sales price	$ 16.79			$ 14.93			$ 16.23			$ 14.86
Aggregates segment cash cost of sales per ton	$ 8.38			$ 7.19			$ 8.51			$ 7.42
Asphalt segment
Gross profit	$ 29.5			$ 7.1			$ 40.2			$ 17.6
Depreciation, depletion, accretion and amortization	8.9			9.0			26.0			27.1
Asphalt segment cash gross profit	$ 38.4			$ 16.1			$ 66.2			$ 44.7
Concrete segment
Gross profit	$ 26.5			$ 14.3			$ 84.7			$ 32.4
Depreciation, depletion, accretion and amortization	21.7			8.7			63.5			16.6
Concrete segment cash gross profit	$ 48.2			$ 23.0			$ 148.2			$ 49.0
Calcium segment
Gross profit	$ 0.8			$ 0.3			$ 1.6			$ 1.9
Depreciation, depletion, accretion and amortization	0.0			0.0			0.1			0.1
Calcium segment cash gross profit	$ 0.8			$ 0.3			$ 1.7			$ 2.0

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	2022			2021			2022			2021			2022			2021
Net earnings attributable to Vulcan	$ 177.1			$ 176.9			$ 456.2			$ 532.9			$ 594.2			$ 647.4
Income tax expense	82.3			51.7			164.6			169.7			195.0			195.0
Interest expense, net of interest income	46.1			36.8			120.8			111.6			156.9			145.5
Loss on discontinued operations, net of tax	1.2			0.2			16.1			2.7			16.7			4.1
Depreciation, depletion, accretion and amortization	151.0			117.5			435.0			321.0			577.0			421.9
EBITDA	$ 457.7			$ 383.2			$ 1,192.7			$ 1,137.8			$ 1,539.7			$ 1,413.8
Gain on sale of real estate and businesses, net	$ (23.5)			$ 0.0			$ (23.5)			$ (114.7)			$ (23.5)			$ (114.7)
Loss on impairments	67.8			0.0			67.8			0.0			67.8			0.0
Charges associated with divested operations	0.4			0.4			1.0			1.1			1.5			1.4
Business development 1	2.5			24.7			8.1			30.6			16.5			40.0
COVID-19 direct incremental costs	0.0			5.9			0.0			9.7			3.7			12.5
Pension settlement charge	0.0			0.0			0.0			0.0			12.1			22.7
Restructuring charges	2.1			3.5			4.9			3.5			16.3			3.5
Adjusted EBITDA	$ 507.0			$ 417.7			$ 1,251.0			$ 1,068.0			$ 1,634.3			$ 1,379.2

1	Represents non-routine charges or gains associated with acquisitions and dispositions including the cost impact of purchase accounting inventory valuations.

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							2022			2021
Debt
Current maturities of long-term debt							$ 0.5			$ 12.2
Short-term debt							312.0			0.0
Long-term debt							3,874.2			3,874.1
Total debt							$ 4,186.7			$ 3,886.3
Less: Cash and cash equivalents and restricted cash							146.9			136.4
Net debt							$ 4,039.8			$ 3,749.9
Trailing-Twelve Months (TTM) Adjusted EBITDA							$ 1,634.3			$ 1,379.2
Total debt to TTM Adjusted EBITDA							2.6x			2.8x
Net debt to TTM Adjusted EBITDA							2.5x			2.7x

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
	2022			2021			2022			2021
Diluted Earnings Per Share
Net earnings attributable to Vulcan	$ 1.33			$ 1.32			$ 3.42			$ 3.99
Less: Discontinued operations	0.00			(0.01)			(0.12)			(0.02)
Diluted EPS attributable to Vulcan from continuing
operations	$ 1.33			$ 1.33			$ 3.54			$ 4.01
Items included in Adjusted EBITDA above, net of tax	$ 0.38			$ 0.21			$ 0.42			$ (0.36)
NOL carryforward valuation allowance	0.07			0.00			0.07			0.10
Acquisition financing interest costs	0.00			0.00			0.00			0.05
Adjusted diluted EPS attributable to Vulcan from
continuing operations	$ 1.78			$ 1.54			$ 4.03			$ 3.80

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							2022			2021
Adjusted EBITDA							$ 1,634.3			$ 1,379.2
Average invested capital
Property, plant & equipment, net							$ 5,716.4			$ 4,609.1
Goodwill							3,705.5			3,272.6
Other intangible assets							1,761.0			1,253.6
Fixed and intangible assets							$ 11,182.9			$ 9,135.3
Current assets							$ 1,855.3			$ 2,090.9
Less: Cash and cash equivalents							156.3			855.7
Less: Current tax							49.3			29.6
Adjusted current assets							1,649.7			1,205.6
Current liabilities							945.7			831.9
Less: Current maturities of long-term debt							4.5			213.6
Less: Short-term debt							117.6			0.0
Adjusted current liabilities							823.6			618.3
Adjusted net working capital							$ 826.1			$ 587.3
Average invested capital							$ 12,009.0			$ 9,722.6
Return on invested capital							13.6%			14.2%

2022 projected ebitda

The following reconciliation to the mid-point of the range of 2022 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:

	0
			2022 Projected
in millions			Mid-point
Net earnings attributable to Vulcan				$ 690
Income tax expense				230
Interest expense, net of interest income				165
Depreciation, depletion, accretion and amortization				575
Projected EBITDA				$ 1,660

Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures, other than the reconciliation of Projected EBITDA as noted above. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

LIQUIDITY AND FINANCIAL RESOURCES

Our primary sources of liquidity are cash provided by our operating activities, a substantial, committed bank line of credit and our commercial paper program. 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 2022, 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

Cash

Included in our September 30, 2022 cash and cash equivalents and restricted cash balances of $146.9 million is $24.5 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	2022			2021
Net earnings	$ 456.7			$ 532.7
Depreciation, depletion, accretion and amortization (DDA&A)	435.0			321.0
Noncash operating lease expense	46.6			32.7
Net gain on sale of property, plant & equipment and businesses	(28.4)			(120.3)
Loss on impairments	67.8			4.6
Deferred tax expense	35.4			71.4
Other operating cash flows, net 1	(264.8)			(117.3)
Net cash provided by operating activities	$ 748.3			$ 724.8

1	Primarily reflects changes to working capital balances.

Net cash provided by operating activities was $748.3 million during the nine months ended September 30, 2022, a $23.5 million increase compared to the same period of 2021.

Days sales outstanding, a measurement of the time it takes to collect receivables, were 47.6 days at September 30, 2022 compared to 45.9 days at September 30, 2021. Additionally, our over 90 day balance of $46.4 million at September 30, 2022 was $33.1 million above the $13.3 million at September 30, 2021. All customer accounts are actively managed, and no losses in excess of amounts reserved are currently expected.

cash from investing activities

Net cash used for investing activities was $940.7 million during the first nine months of 2022, an $819.9 million decrease compared to cash used of $1,760.6 million in the same period of 2021. This decrease was primarily attributable to less cash used for business acquisitions in the current period compared to the prior period. During the first nine months of 2022, we acquired businesses for $528.0 million of cash consideration as compared to $1,634.5 million of acquisitions in the first nine months of 2021 (see Note 16 to the condensed consolidated financial statements). Additionally, during the first nine months of 2022, we invested $450.4 million in our existing operations (includes changes in accruals for property, plant & equipment) compared to $318.6 million in the prior year period. Of this $450.4 million, $157.1 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. Further, in the first nine months of 2022, proceeds from the sale of property, plant & equipment were $37.8 million, a decrease of $154.6 million from the first nine months of 2021. In 2021, we sold reclaimed real estate in Southern California for net cash proceeds of $182.3 million.

cash from financing activities

Net cash provided by financing activities in the first nine months of 2022 was $97.8 million, compared to cash used of $25.8 million in the same period of 2021. The current year includes a $312.0 million net draw on our line of credit. The prior year includes $156.0 million of net cash provided from debt issuances and debt payments (see Note 7 to the condensed consolidated financial statements). Additionally, capital returned to our shareholders increased by $12.2 million as a result of higher dividends ($1.20 per share compared to $1.11 per share).

debt

Certain debt measures are presented below:

			September 30			December 31			September 30
dollars in millions			2022			2021			2021
Debt
Current maturities of long-term debt			$ 0.5			$ 5.2			$ 12.2
Short-term debt			312.0			0.0			0.0
Long-term debt			3,874.2			3,874.8			3,874.1
Total debt			$ 4,186.7			$ 3,880.0			$ 3,886.3
Capital
Total debt			$ 4,186.7			$ 3,880.0			$ 3,886.3
Total equity			6,878.9			6,567.7			6,449.1
Total capital			$ 11,065.6			$ 10,447.7			$ 10,335.4
Total Debt as a Percentage of Total Capital			37.8%			37.1%			37.6%
Weighted-average Effective Interest Rates
Line of credit 1			1.125%			1.125%			1.130%
Commercial paper			3.04%			N/A			N/A
Term debt			4.55%			3.68%			4.64%
Fixed versus Floating Interest Rate Debt
Fixed-rate debt			66.8%			72.1%			72.2%
Floating-rate debt			33.2%			27.9%			27.8%

1		Reflects the margin above SOFR for SOFR-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.

At September 30, 2022, total debt to trailing-twelve months Adjusted EBITDA was 2.6 times (2.5 times on a net debt basis reflecting $146.9 million of cash on hand). Our weighted-average debt maturity was 11.3 years.

delayed draw term loan, line of credit AND COMMERICAL PAPER PROGRAM

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 unsecured delayed draw term loan with a subset of the banks that provide our line of credit and terminated the bridge facility commitment. The delayed draw term loan was drawn in August 2021 for $1,600.0 million upon the acquisition of U.S. Concrete, was paid down to $1,100.0 million in September 2021 and was further paid down to $550.0 million in August 2022 (amounts repaid are no longer available for borrowing). In March 2022, the delayed draw term loan was amended to extend the maturity date from August 2024 to August 2026. 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, 2022, 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.

Our unsecured line of credit was amended in August 2022 to increase the amount from $1,000.0 million to $1,600.0 million and extend the maturity date from September 2026 to August 2027. Our line of credit contains covenants customary for an unsecured investment-grade facility. Covenants, borrowings, cost ranges and other details are described in Note 7 to the condensed consolidated financial statements. As of September 30, 2022, we were in compliance with the covenants, the margin for the Secured Overnight Financing Rate (SOFR) borrowings was 1.125%, the margin for base rate borrowings was 0.125%, and the commitment fee for the unused amount was 0.100%.

In August 2022, we established a $1,600.0 million commercial paper program and borrowed $550.0 million under the program. Commercial paper borrowings bear interest at rates determined at the time of issuance and as agreed between us and the commercial paper investors.

As of September 30, 2022, our available borrowing capacity under the line of credit was $1,210.0 million. Utilization of the borrowing capacity was as follows:

$312.0 million was borrowed

$78.0 million was used to support standby letters of credit

TERM DEBT

Essentially all of our $3,941.9 million (face value) of term debt (which includes the $550.0 million delayed draw term loan and the $550.0 million commercial paper) is unsecured. $2,840.2 million of such debt is governed by two essentially identical indentures that contain customary investment-grade type covenants. As of September 30, 2022, 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 retired these notes in September 2021.

CURRENT MATURITIES of long-term debt

The $0.5 million of current maturities of long-term debt as of September 30, 2022 is due as follows:

	Current
in millions	Maturities
Fourth quarter 2022	$0.0
First quarter 2023	0.5
Second quarter 2023	0.0
Third quarter 2023	0.0

debt ratings

Our debt ratings and outlooks as of September 30, 2022 are as follows:

			Short-term		Long-term		Outlook
Fitch			F2		BBB		Stable
Moody's			P-2		Baa2		Stable
Standard & Poor's			A-2		BBB+		Stable

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 millions	2022			2021			2021
Common stock shares at January 1,
issued and outstanding	132.7			132.5			132.5
Common Stock Issuances
Share-based compensation plans	0.2			0.2			0.2
Common Stock Purchases
Purchased and retired	0.0			0.0			0.0
Common stock shares at end of period,
issued and outstanding	132.9			132.7			132.7

As of September 30, 2022, 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 the 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.

There were no shares held in treasury as of September 30, 2022, December 31, 2021 and September 30, 2021.

There were no common stock purchases for the periods ended September 30, 2022, December 31, 2021 and September 30, 2021.

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.

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, 2021 (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 nine months ended September 30, 2022.

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

international business operations and relationships, including recent actions taken by the Mexican government with respect to our property and operations in that country

the highly competitive nature of the construction industry

the impact of future regulatory or legislative actions, including those relating to climate change, biodiversity, land use, wetlands, greenhouse gas emissions, the definition of minerals, tax policy and domestic and 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

labor relations, shortages and constraints

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

changes in interest rates

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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