Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the quarter ended December 31, 2019.
Higher segment earnings in Aggregates and Asphalt helped drive 15 percent year-over-year growth in the Company's fourth quarter earnings from continuing operations. Solid shipment growth, up 4 percent, and compounding price improvements, up 5.5 percent, led to improved earnings in aggregates. Asphalt earnings benefited from double-digit revenue growth and improving unit margins.
Full year revenues were $4.9 billion, up 12 percent as compared to the prior year, and net earnings were $618 million, an increase of 20 percent. Adjusted EBITDA increased 12 percent to $1.27 billion. At year end, total debt was $2.8 billion, or 2.2 times trailing-twelve month Adjusted EBITDA.
Tom Hill, Chairman and Chief Executive Officer, said, "2019 marks another year of strong earnings growth and cash generation. We are particularly proud of our people who worked hard to achieve these results while ensuring another year of world-class safety performance. Widespread improvements in pricing helped drive 8 percent growth in our industry-leading unit profitability and double-digit growth in Adjusted EBITDA, a strong result despite some higher than expected costs in the fourth quarter. Industry leadership in safety and pace-setting unit margins are both evidence of our strong and healthy business. Going forward, our compounding unit margins and our disciplined capital allocation position us to increase our cash flows and improve our return on invested capital again in 2020.
"Looking ahead, demand in our markets will continue to benefit from higher levels of highway funding and continued growth in residential and nonresidential markets. This visibility into demand growth has already set the stage for solid price improvement in 2020. Price improvement coupled with our four strategic initiatives (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing) should continue to increase unit profitability. For the full year, we expect earnings from continuing operations between $5.20 and $5.80 per diluted share with Adjusted EBITDA between $1.385 and $1.485 billion."
Highlights as of December 31, 2019 include:
Fourth Quarter Full Year Amounts in millions, except per unit data 2019 2018 2019 2018 Total revenues $1,186.2 $1,088.0 $4,929.1 $4,382.9 Gross profit $ 293.1 $ 275.3 $1,255.9 $1,100.9 Aggregates segment Segment sales $ 960.2 $ 874.0 $3,990.3 $3,513.6 Freight-adjusted revenue $ 720.6 $ 657.6 $3,014.2 $2,667.3 Gross profit $ 274.5 $ 256.4 $1,146.6 $ 991.9 Shipments (tons) 51.6 49.7 215.5 201.4 Freight-adjusted sales price per ton $ 13.96 $ 13.23 $ 13.99 $ 13.25 Gross profit per ton $ 5.32 $ 5.16 $ 5.32 $ 4.93 Asphalt, Concrete & Calcium segment gross profit $ 18.6 $ 18.9 $ 109.3 $ 109.1 Selling, Administrative and General (SAG) $ 95.8 $ 84.4 $ 370.5 $ 333.4 SAG as % of Total revenues 8.1% 7.8% 7.5% 7.6% Earnings from continuing operations before income taxes $ 166.0 $ 153.9 $ 757.7 $ 623.3 Net earnings $ 141.1 $ 124.0 $ 617.7 $ 515.8 Adjusted EBIT $ 202.8 $ 195.8 $ 895.4 $ 785.5 Adjusted EBITDA $ 298.5 $ 285.6 $1,270.0 $1,131.7 Earnings from continuing operations per diluted share $ 1.07 $ 0.93 $ 4.67 $ 3.87 Adjusted earnings from continuing operations per diluted share $ 1.08 $ 0.99 $ 4.70 $ 4.05
Aggregates Fourth quarter segment sales increased 10 percent, and gross profit increased 7 percent to $275 million, or $5.32 per ton. These improvements resulted from growth in shipments and improved pricing.
Fourth quarter aggregates shipments increased 4 percent as compared to the prior year quarter. Markets in the Southeast and Southwest reported strong shipment growth, including double-digit growth in Florida and along the Gulf Coast. All of the Company's key markets reported year-over-year price growth. For the quarter, freight-adjusted average sales price increased 5.5 percent (4.8 percent on mix-adjusted basis) versus the prior year's quarter. The 70 basis points benefit from mix was due in part to above average growth in the Company's remote-served markets. Positive trends in booking pace, along with demand visibility and customer confidence, support our expectations for continued price improvement.
Fourth quarter profitability was negatively impacted by higher repairs and maintenance costs, geographic volume mix including higher sales volumes in rail-served remote markets, as well as lower tipping fees for clean fill.
For the full year, segment sales increased 14 percent, driven by 7 percent (6 percent same-store) volume growth and 5.6 percent price growth (5.2 percent on mix-adjusted basis). Gross profit increased 16 percent, and unit profitability grew by 8 percent to $5.32 per ton. The Company remains focused on compounding its industry-leading unit margins. Cash gross profit for the year was $6.74 per ton.
Asphalt, Concrete and Calcium Asphalt segment gross profit was $11 million for the fourth quarter, an increase of $4 million from the prior year. Asphalt mix shipments increased 10 percent and selling prices increased 3 percent in the fourth quarter. California, the Company's largest asphalt market, reported volume growth in the fourth quarter after a soft first half of the year due in part to weather. The average unit cost for liquid asphalt was 12 percent lower than the prior year quarter. Gross profit per ton in the quarter improved by 52 percent to $3.64.
Concrete segment gross profit was $7 million, $5 million lower than the prior year. Shipments increased 1 percent, and average selling prices increased 2 percent when compared to the prior year's fourth quarter. Project delays, along with higher repair and maintenance costs, contributed to the year-over-year decline in gross profit.
Calcium segment gross profit was $0.8 million, up from the prior year quarter.
For the full year, Asphalt segment gross profit increased 12 percent to $63 million. Gross profit improved year-over-year in each of the last 3 quarters, despite a 6 percent increase in the unit cost of liquid asphalt for the year. Concrete gross profit was $43 million for the full year, down from $50 million in 2018. Backlogs remain good. The majority of the year-over-year change occurred in the fourth quarter as a result of project delays.
Capital Allocation and Financial Position
In 2019, the Company realized strong cash generation, and return on invested capital improved 130 basis points to 13.9 percent on an Adjusted EBITDA basis.
Full year core operating and maintenance capital investment totaled $239 million, and internal growth projects investment was $165 million. The Company's full-year expectations for 2020 include $275 million for core operating and maintenance capital and $200 million for internal growth projects that are largely underway. During the year, the Company returned $167 million to shareholders through dividends and share repurchases.
At year-end, total debt was $2.8 billion, or 2.2 times trailing-twelve month Adjusted EBITDA, down from 2.6 times at the end of the prior year. The Company's weighted-average debt maturity was 14 years, and the weighted-average interest rate was 4.4 percent.
Selling, Administrative and General (SAG)
SAG expense was $96 million in the quarter compared to $84 million in the prior year. The year-over-year increase was due mainly to compensation-related expense as well as higher professional fees. For the full year, SAG expense was $371 million, or 7.5 percent of total revenues, 10 basis points lower than the prior year. The Company remains focused on further leveraging its overhead structure.
Regarding the Company's outlook, Mr. Hill stated, "In 2020, we expect another year of strong earnings growth. Vulcan-served markets should continue to benefit from public construction demand, led by higher levels of highway funding in our key states. We anticipate residential construction in our markets to continue strengthening after experiencing some softness in certain markets during the second half of 2019. Private nonresidential construction activity should also improve as leading indicators point to positive growth in 2020. Demand fundamentals, including population and employment growth, continue to support longer-term growth in residential and nonresidential construction. We are seeing a positive pricing environment driven by shipment momentum in private demand and visibility of public demand. Our focus remains the same - compounding our unit margins through all parts of the cycle and improving our returns on capital."
Management expectations for 2020 include:
-- Aggregates shipments growth of 2 to 4 percent
-- Aggregates freight-adjusted price increase of 4 to 6 percent
-- 10 to 15 percent growth in Asphalt, Concrete and Calcium gross profit, collectively
-- SAG expenses of approximately $365 million
-- Interest expense of approximately $125 million
-- Depreciation, depletion, accretion and amortization expense of approximately $385 million
-- An effective tax rate of approximately 20 percent
-- Earnings from continuing operations of $5.20 to $5.80 per diluted share
-- Adjusted EBITDA of $1.385 to $1.485 billion
Vulcan will host a conference call at 10:00 a.m. CT on February 18, 2020. A webcast will be available via the Company's website at www.vulcanmaterials.com. Investors and other interested parties may access the teleconference live by calling 800-347-6311, or 323-794-2094 if outside the U.S., approximately 10 minutes before the scheduled start. The conference ID is 6815558. The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.
Vulcan Materials Company, a member of the S&P 500 Index with headquarters in Birmingham, Alabama, is the nation's largest producer of construction aggregates - primarily crushed stone, sand and gravel - and a major producer of aggregates-based construction materials, including asphalt mix and ready-mixed concrete. For additional information about Vulcan, go to www.vulcanmaterials.com.
FORWARD-LOOKING STATEMENT DISCLAIMER
This document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales. These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document. These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.
Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements. The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: general economic and business conditions; Vulcan's 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 Vulcan's 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 Vulcan's 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 Vulcan's products; weather and other natural phenomena, including the impact of climate change and the availability of water; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; 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; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's 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 Vulcan does business and how Vulcan's products are distributed; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement. Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.
Table A Vulcan Materials Company and Subsidiary Companies (in thousands, except per share data) Three Months Ended Twelve Months Ended Consolidated Statements of Earnings December 31 December 31 (Condensed and unaudited) 2019 2018 2019 2018 Total revenues $1,186,152 $1,088,047 $4,929,103 $4,382,869 Cost of revenues 893,071 812,763 3,673,202 3,281,924 Gross profit 293,081 275,284 1,255,901 1,100,945 Selling, administrative and general expenses 95,801 84,382 370,548 333,371 Gain on sale of property, plant & equipment and businesses 12,770 6,570 23,752 14,944 Other operating expense, net (16,474) (10,983) (31,647) (34,805) Operating earnings 193,576 186,489 877,458 747,713 Other nonoperating income, net 3,289 292 9,243 13,000 Interest expense, net 30,835 32,857 129,000 137,423 Earnings from continuing operations before income taxes 166,030 153,924 757,701 623,290 Income tax expense 23,434 29,645 135,198 105,449 Earnings from continuing operations 142,596 124,279 622,503 517,841 Loss on discontinued operations, net of tax (1,504) (256) (4,841) (2,036) Net earnings $141,092 $124,023 $617,662 $515,805 Basic earnings (loss) per share Continuing operations $1.08 $0.94 $4.71 $3.91 Discontinued operations ($0.01) $0.00 ($0.04) ($0.01) Net earnings $1.07 $0.94 $4.67 $3.90 Diluted earnings (loss) per share Continuing operations $1.07 $0.93 $4.67 $3.87 Discontinued operations ($0.01) $0.00 ($0.04) ($0.02) Net earnings $1.06 $0.93 $4.63 $3.85 Weighted-average common shares outstanding Basic 132,467 132,060 132,300 132,393 Assuming dilution 133,467 133,369 133,385 133,926 Depreciation, depletion, accretion and amortization $95,671 $89,783 $374,596 $346,246 Effective tax rate from continuing operations 14.1% 19.3% 17.8% 16.9%
Table B Vulcan Materials Company and Subsidiary Companies (in thousands) Consolidated Balance Sheets December 31 December 31 (Condensed and unaudited) 2019 2018 Assets Cash and cash equivalents $271,589 $40,037 Restricted cash 2,917 4,367 Accounts and notes receivable Accounts and notes receivable, gross 573,241 542,868 Allowance for doubtful accounts (3,125) (2,090) Accounts and notes receivable, net 570,116 540,778 Inventories Finished products 391,666 372,604 Raw materials 31,318 27,942 Products in process 5,604 3,064 Operating supplies and other 29,720 25,720 Inventories 458,308 429,330 Other current assets 76,396 64,633 Total current assets 1,379,326 1,079,145 Investments and long-term receivables 60,709 44,615 Property, plant & equipment Property, plant & equipment, cost 8,749,217 8,457,619 Allowances for depreciation, depletion & amortization (4,433,179) (4,220,312) Property, plant & equipment, net 4,316,038 4,237,307 Operating lease right-of-use assets, net 408,189 0 Goodwill 3,167,061 3,165,396 Other intangible assets, net 1,091,475 1,095,378 Other noncurrent assets 225,995 210,289 Total assets $10,648,793 $9,832,130 Liabilities Current maturities of long-term debt 25 23 Short-term debt 0 133,000 Trade payables and accruals 265,159 216,473 Other current liabilities 270,379 253,054 Total current liabilities 535,563 602,550 Long-term debt 2,784,315 2,779,357 Deferred income taxes, net 633,039 567,283 Deferred revenue 179,880 186,397 Operating lease liabilities 388,042 0 Other noncurrent liabilities 506,097 493,640 Total liabilities $5,026,936 $4,629,227 Equity Common stock, $1 par value 132,371 131,762 Capital in excess of par value 2,791,353 2,798,486 Retained earnings 2,895,871 2,444,870 Accumulated other comprehensive loss (197,738) (172,215) Total equity $5,621,857 $5,202,903 Total liabilities and equity $10,648,793 $9,832,130
Table C Vulcan Materials Company and Subsidiary Companies (in thousands) Twelve Months Ended Consolidated Statements of Cash Flows December 31 (Condensed and unaudited) 2019 2018 Operating Activities Net earnings $617,662 $515,805 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion, accretion and amortization 374,596 346,246 Noncash operating lease expense 35,344 0 Net gain on sale of property, plant & equipment and businesses (23,752) (14,944) Contributions to pension plans (8,882) (109,631) Share-based compensation expense 31,843 25,215 Deferred tax expense (benefit) 76,011 64,639 Cost of debt purchase 0 6,922 Changes in assets and liabilities before initial effects of business acquisitions and dispositions (147,218) (6,974) Other, net 28,518 5,499 Net cash provided by operating activities $984,122 $832,777 Investing Activities Purchases of property, plant & equipment (384,094) (469,088) Proceeds from sale of property, plant & equipment 22,661 22,210 Proceeds from sale of businesses 1,744 11,256 Payment for businesses acquired, net of acquired cash (44,151) (221,419) Other, net (11,997) (12,850) Net cash used for investing activities ($415,837) ($669,891) Financing Activities Proceeds from short-term debt 366,900 739,900 Payment of short-term debt (499,900) (606,900) Payment of current maturities and long-term debt (23) (892,055) Proceeds from issuance of long-term debt 0 850,000 Debt issuance and exchange costs 0 (45,513) Settlements of interest rate derivatives 0 3,378 Purchases of common stock (2,602) (133,983) Dividends paid (163,973) (148,109) Share-based compensation, shares withheld for taxes (38,585) (31,846) Net cash used for financing activities ($338,183) ($265,128) Net increase (decrease) in cash and cash equivalents and restricted cash 230,102 (102,242) Cash and cash equivalents and restricted cash at beginning of year 44,404 146,646 Cash and cash equivalents and restricted cash at end of year $274,506 $44,404
Table D Segment Financial Data and Unit Shipments (in thousands, except per unit data) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Total Revenues Aggregates 1 $960,164 $873,996 $3,990,275 $3,513,649 Asphalt 2 206,331 185,819 855,821 733,182 Concrete 95,258 92,595 395,627 401,999 Calcium 2,118 1,974 8,191 8,110 Segment sales $1,263,871 $1,154,384 $5,249,914 $4,656,940 Aggregates intersegment sales (77,719) (66,337) (320,811) (274,071) Total revenues $1,186,152 $1,088,047 $4,929,103 $4,382,869 Gross Profit Aggregates $274,516 $256,374 $1,146,649 $991,858 Asphalt 11,073 6,627 63,023 56,480 Concrete 6,664 11,795 43,151 49,893 Calcium 828 488 3,078 2,714 Total $293,081 $275,284 $1,255,901 $1,100,945 Depreciation, Depletion, Accretion and Amortization Aggregates $77,787 $73,221 $305,046 $281,641 Asphalt 8,856 8,562 35,199 31,290 Concrete 3,958 3,035 13,620 12,539 Calcium 55 65 232 272 Other 5,015 4,900 20,499 20,504 Total $95,671 $89,783 $374,596 $346,246 Average Unit Sales Price and Unit Shipments Aggregates Freight-adjusted revenues 3 $720,584 $657,580 $3,014,157 $2,667,291 Aggregates - tons 51,620 49,716 215,465 201,375 Freight-adjusted sales price 4 $13.96 $13.23 $13.99 $13.25 Other Products Asphalt Mix - tons 3,041 2,769 12,665 11,318 Asphalt Mix - sales price $57.87 $56.03 $57.79 $55.13 Ready-mixed concrete - cubic yards 744 737 3,104 3,223 Ready-mixed concrete - sales price $126.97 $124.34 $126.38 $123.35 Calcium - tons 78 69 294 285 Calcium - sales price $27.30 $28.48 $27.85 $28.44 1Includes product sales (crushed stone, sand and gravel, sand, and other aggregates), as well as freight & delivery costs that we pass along to our customers, and service revenues related to aggregates. 2Includes product sales, as well as service revenues from our asphalt construction paving business. 3Freight-adjusted revenues are Aggregates segment sales excluding freight & delivery revenues and immaterial other revenues related to services, such as landfill tipping fees that are derived from our aggregates business. 4Freight-adjusted sales price is calculated as freight-adjusted revenues divided by aggregates unit shipments.
Appendix 1 1. Reconciliation of Non-GAAP Measures Aggregates segment freight-adjusted revenues is not a Generally Accepted Accounting Principle (GAAP) measure. 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: Aggregates Segment Freight-Adjusted Revenues (in thousands, except per ton data) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Aggregates segment Segment sales $960,164 $873,996 $3,990,275 $3,513,649 Less: Freight & delivery revenues 1 225,139 203,518 921,064 796,929 Other revenues 14,441 12,898 55,054 49,429 Freight-adjusted revenues $720,584 $657,580 $3,014,157 $2,667,291 Unit shipment - tons 51,620 49,716 215,465 201,375 Freight-adjusted sales price $13.96 $13.23 $13.99 $13.25 1At 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 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). 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. Reconciliations of these metrics to their nearest GAAP measures are presented below: Aggregates Segment Incremental Gross Profit Margin in Accordance with GAAP (dollars in thousands) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Aggregates segment Gross profit $274,516 $256,374 $1,146,649 $991,858 Segment sales $960,164 $873,996 $3,990,275 $3,513,649 Gross profit margin 28.6% 29.3% 28.7% 28.2% Incremental gross profit margin 21.1% 32.5% Aggregates Segment Incremental Gross Profit Flow-through Rate (Non-GAAP) (dollars in thousands) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Aggregates segment Gross profit $274,516 $256,374 $1,146,649 $991,858 Segment sales $960,164 $873,996 $3,990,275 $3,513,649 Less: Freight & delivery revenues 1 225,139 203,518 921,064 796,929 Segment sales excluding freight & delivery $735,025 $670,478 $3,069,211 $2,716,720 Gross profit flow-through rate 37.3% 38.2% 37.4% 36.5% Incremental gross profit flow-through rate 28.1% 43.9% 1At the segment level, freight & delivery revenues include intersegment freight & delivery (which are eliminated at the consolidated level) and freight to remote distribution sites. GAAP does not define "Aggregates segment 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. 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: Aggregates Segment Cash Gross Profit (in thousands, except per ton data) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Aggregates segment Gross profit $274,516 $256,374 $1,146,649 $991,858 Depreciation, depletion, accretion and amortization 77,787 73,221 305,046 281,641 Aggregates segment cash gross profit $352,303 $329,595 $1,451,695 $1,273,499 Unit shipments - tons 51,620 49,716 215,465 201,375 Aggregates segment cash gross profit per ton $6.82 $6.63 $6.74 $6.32
Appendix 2 Reconciliation of Non-GAAP Measures (Continued) 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: EBITDA and Adjusted EBITDA (in thousands) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Net earnings $141,092 $124,023 $617,662 $515,805 Income tax expense 23,434 29,645 135,198 105,449 Interest expense, net 30,835 32,857 129,000 137,423 Loss on discontinued operations, net of tax 1,504 256 4,841 2,036 EBIT $196,865 $186,781 $886,701 $760,713 Depreciation, depletion, accretion and amortization 95,671 89,783 374,596 346,246 EBITDA $292,536 $276,564 $1,261,297 $1,106,959 Gain on sale of businesses (9,289) 0 (13,353) (2,929) Property donation 10,847 0 10,847 0 Business interruption claims recovery 0 0 0 (2,253) Charges associated with divested operations 3,033 8,497 3,033 18,545 Business development 1 1,345 0 1,748 5,202 Restructuring charges 2 0 513 6,457 6,219 Adjusted EBITDA $298,472 $285,574 $1,270,029 $1,131,743 Depreciation, depletion, accretion and amortization (95,671) (89,783) (374,596) (346,246) Adjusted EBIT $202,801 $195,791 $895,433 $785,497 1Represents non-routine charges associated with acquisitions including the cost impact of purchase accounting inventory valuations. 2Restructuring charges are included within other operating expenses. The 2019 charges relate to a managerial restructuring. Similar to our presentation of Adjusted EBITDA, we present Adjusted Diluted EPS from continuing operations to provide a more consistent comparison of earnings performance from period to period. Adjusted Diluted EPS from Continuing Operations (Adjusted Diluted EPS) Three Months Ended Twelve Months Ended December 31 December 31 2019 2018 2019 2018 Diluted EPS from continuing operations $1.07 $0.93 $4.67 $3.87 Items included in Adjusted EBITDA above 0.01 0.06 0.03 0.14 Debt refinancing costs 0.00 0.00 0.00 0.04 Adjusted Diluted EPS $1.08 $0.99 $4.70 $4.05 The following reconciliation to the mid-point of the range of 2020 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: 2020 Projected EBITDA (in millions) Mid-point Net earnings $735 Income tax expense 190 Interest expense, net 125 Discontinued operations, net of tax 0 Depreciation, depletion, accretion and amortization 385 Projected EBITDA $1,435
Appendix 3 Reconciliation of Non-GAAP Measures (Continued) 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. Return on Invested Capital (in thousands) 2019 2018 Adjusted EBITDA $1,270,029 $1,131,743 Property, plant & equipment 4,281,342 4,095,448 Goodwill 3,165,685 3,150,290 Other intangible assets 1,084,113 1,095,218 Fixed and Intangible Assets $8,531,140 $8,340,956 Current Assets 1,224,316 1,125,912 Less: Cash and cash equivalents 93,528 68,349 Less: Deferred tax 12,633 0 Adjusted Current Assets 1,118,155 1,057,563 Current Liabilities 599,319 626,188 Less: Current maturities of long-term debt 24 8,295 Less: Short-term borrowings 89,700 178,600 Adjusted Current Liabilities 509,595 439,293 Adjusted Net Working Capital $608,560 $618,270 Average Invested Capital $9,139,700 $8,959,226 Return on Invested Capital 13.9% 12.6%
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