Key Vulcan-served markets in the Mid-Atlantic, Southeast, Midwest, and Southwest regions were hampered by an unusually large amount of rainfall throughout the quarter. Additionally, aggregates volumes were negatively affected by 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 highway bill. Construction activity on stimulus-related highway projects has varied widely in Vulcan-served states and in certain key states lagged the rest of the country. Florida, Virginia, California, and Georgia spent less than 10 percent of their highway-related stimulus funds by the end of 2009. Conversely, Illinois, Tennessee, and North Carolina spent 41, 36 and 23 percent, respectively, of stimulus funds by year end.
Segment earnings in asphalt and concrete were a slight loss due to the earnings effects of lower volumes and lower materials margins. Asphalt materials margins in the fourth quarter were lower than the prior year as lower selling prices for asphalt mix more than offset lower costs, including a 29 percent decline in the costs for liquid asphalt.
Selling, administrative and general (SAG) expenses in the fourth quarter declined $6 million from the prior year. This year-over-year decline in overhead costs is due mostly to reductions in employee-related expenses, which more than offset a year-over-year increase in project costs of $2.6 million related to the replacement of legacy IT systems. Additionally, the current year's fourth quarter included expenses of $8.5 million for the fair market value of donated real estate as compared to $5.1 million in the prior year. Excluding the effects of donated real estate from both years, SAG expenses declined 11 percent versus the prior year's fourth quarter.
Full Year Summary and Comparisons with the Prior Year
-- Net earnings were $30 million, including $19 million from continuing operations.
-- Cash earnings were $369 million from continuing operations and $12 million from discontinued operations.
-- Aggregates shipments declined 26 percent, reducing pretax earnings $334 million.
-- Aggregates pricing increased 3 percent.
-- Cash provided by operating activities was $453 million compared with $435 million in the prior year.
-- Full year capital spending was $110 million compared with $353 million in the prior year.
-- Free cash flow was $343 million compared with $82 million in the prior year.
-- Total debt was reduced by $810 million in 2009.
Commenting on the full year, Mr. James stated, "Throughout the period of protracted decline in demand for construction materials, Vulcan employees have managed costs aggressively. In 2009, their efforts further rationalized production and reduced operating hours, thereby offsetting some of the cost impact related to lower volumes. Their efforts also contributed to an increase in free cash flow, demonstrating the cash generation ability of our business even in the midst of an economic recession."
All results are unaudited.
Outlook Highlights and Commentary
Commenting on the Company's outlook, Mr. James stated, "Overall, the construction environment remains challenging, reflecting continued weak private nonresidential construction activity and uncertainty regarding the timing and amount of a new multi-year federal highway program.
"Since May of last year, highway construction awards have been buoyed by stimulus-related funding. Through December 2009, the Federal Highway Administration reported approximately $15 billion of stimulus-related highway projects under construction with $5.6 billion of these stimulus funds having been paid to contractors for work performed. During this same period, Vulcan-served states lagged the rest of the country in awarding and starting stimulus-related highway construction projects. These differences in awarding projects and spending patterns are due in part to the types of projects planned and to the proportion sub-allocated to Metropolitan Planning Organizations less accustomed to implementing a large number of projects. The above-average increase in our states in fourth quarter contract awards for highways provides some encouragement that construction activity in our states should improve in 2010.