Vulcan Materials Co. announced results today for the third quarter ended Sept. 30, that included aggregate shipments decreasing 20% and prices increasing 2.4%.

Don James, Vulcan’s chairman and CEO, said, “Our employees continue to run the business in a cost-efficient manner. Although sales volumes in the third quarter were 19% to 29% lower than the prior year for our key product lines, overall gross profit as a percent of net sales equaled the prior year’s third quarter. Gross profit as a percent of net sales, excluding depreciation, depletion and amortization, increased to 34% from 31% in last year’s third quarter. Our ongoing focus on managing costs and improving productivity will enhance our ability to increase earnings as the economy recovers and construction activity improves. “Economic stimulus funds of $27 billion designated for highway projects are working their way into the U.S. economy. While 73% of these funds had been obligated to specific projects by the end of September, only $2.4 billion of these stimulus funds had been paid to contractors for construction work performed. Vulcan-served states generally have obligated funds for new highway projects at the same pace as other states; however, our states have lagged the rest of the country when it comes to starting stimulus-related construction. At the end of September, our states had spent less than 7% of their available stimulus funds for work performed compared to 12% for the rest of the country. These differences in spending patterns between Vulcan-served states and other states are due in part to the types of projects planned.” Third quarter earnings for aggregates declined as the impact of lower shipments more than offset the earnings benefit from improved prices, lower unit costs for diesel fuel and cost-control measures. Aggregates shipments declined 20% from the prior year due to weak demand and wet weather in certain key markets. Lower aggregates volumes reduced third quarter EBITDA by approximately $69 million versus the prior year. The increase in the average selling price for aggregates reflects wide variations across Vulcan-served markets. Many major markets realized price improvement from the prior year well above the 2.4% average, while markets in the West and in Florida reported year-over-year declines in average selling prices.

Stimulus projects in most Vulcan-served states were slow to get underway due in part to the types of projects being implemented by state transportation agencies. In Florida for example, most stimulus dollars are going to fund projects that will add lane capacity. These projects require more time for design and permitting. As a result, less than 1% of Florida’s highway stimulus dollars had been spent by the end of September. Illinois and Tennessee were exceptions, with pavement improvement projects comprising most of the shovel-ready work in those states, resulting in relatively higher levels of stimulus-funded spending during the third quarter. As a result, aggregates sales volumes in most of the markets in these two states outperformed other Vulcan-served markets.

Throughout the recession, the company has rationalized production, reduced operating hours, streamlined the work force and effectively managed spending, thereby offsetting some of the cost impact related to lower volumes. Aggregates cash fixed costs were 12% lower than in the prior year’s third quarter. In addition, the unit cost for diesel fuel decreased 43% from the prior year’s third quarter, increasing earnings $0.08 per diluted share.

Asphalt earnings in the third quarter were higher than last year’s third quarter as material margins improved due to lower costs for liquid asphalt, more than offsetting the earnings effect of a 19% decline in asphalt volumes. Concrete earnings decreased from the prior year’s third quarter due primarily to lower volumes.

Cement earnings declined from last year’s third quarter due to the effects of weaker sales volumes, slightly offset by lower energy costs.

“The construction environment remains challenging, reflecting continued weak private construction activity and uncertainty surrounding the timing and amount of a new multi-year federal highway program,” James said. “Given the failure of Congress to pass a fully funded extension of SAFETEA-LU, the previous highway bill that expired on Sept. 30, transportation construction activity from the regular multi-year federal highway program is uncertain.

“Despite these challenges, we believe the cost management actions we have taken, along with our disciplined approach to pricing, and the improved liquidity and financial flexibility we have achieved, will enable us to participate fully in the economic recovery. Plant operating costs and overhead expenses are being tightly managed as we continue to adjust our cost structure to match the weak demand environment. Our aggregates production in the third quarter was lower than our shipments, reducing inventory and conserving cash. As we have throughout this downturn, we continue to aggressively manage controllable costs and to focus on cash margins and earnings. “Debt reduction and achieving target debt ratios remain a priority use of cash flows. Through the first nine months of 2009, we reduced total debt by approximately $700 million. In the fourth quarter, our cash generation should be enhanced by a seasonal reduction in working capital requirements. For the full year, we now expect capital spending to be approximately $140 million, down from $175 million projected at the end of the second quarter and down sharply from the $353 million spent in 2008.

“Our outlook for aggregates demand in the fourth quarter now reflects further weakness expected in private construction as well as reduced highway construction activity. Our revised outlook for highway construction activity in the fourth quarter is due to the varied timing of spending of stimulus-related funding, the uncertainty regarding timing and duration of an extension of the federal highway bill as well as the lack of visibility regarding timing for ultimate passage of a new multi-year bill. Additionally, since our products are produced and consumed outside, weather can be a contributing factor to the timing of shipments, particularly in the fourth quarter. We expect higher selling prices for aggregates in 2009 to partially offset the earnings effects of lower volumes.

“Looking at demand for our products beyond 2009, Vulcan should benefit from our aggregates-focused strategy that is complemented by our asphalt and concrete operations in certain markets. Approximately $50 billion to $60 billion of stimulus-related construction has been identified that could use our products, including $27 billion for highways and bridges. Through the first nine months of 2009, highway construction awards have been buoyed by stimulus-related funding. Through September, contract awards for highways have increased 5% from the prior year and state departments of transportation and local governments continued to make good progress obligating stimulus dollars for transportation projects. In September, the Federal Highway Administration reported that approximately 4,000 stimulus-funded projects were under construction, involving $11 billion of stimulus funds. In addition, there are $8 billion of projects for which funds have been obligated but work has not yet begun. As of the end of September, approximately five months remain for each state to obligate the remaining federal stimulus funds apportioned for highways. Afterwards, unobligated funds must be returned to the Federal Highway Administration for redistribution.

“Our expectations for growth in demand for our products from stimulus-related construction activity, as well as improvement in residential construction, point toward growth in earnings. Our available production capacity, improved cost structure, and ongoing efforts to improve cash margins, position Vulcan to participate efficiently and effectively in the supply of material for stimulus projects and economic recovery.”