渥肯建材 (VMC) 2006 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the First Quarter 2006 Vulcan Materials Earnings Conference Call. My name is Fab, and I will be your coordinator for today. [OPERATOR INSTRUCTIONS] I would now like to turn the call over to Mr. Don James, Chairman and CEO. Please proceed, sir.

Good morning, and thank you for joining our first quarter conference call. With me today are Dan Sansone, our Senior Vice President and Chief Financial Officer; and Jim Smack, Senior Vice President of Construction Materials. Before I begin presenting our first quarter results and our outlook for the year, let me remind you that certain matters discussed in this conference call contain forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Descriptions of these risks and uncertainties are detailed in the Company's SEC reports, including the annual report on form 10-K. At the conclusion of my comments, we will be happy to respond to questions from those of you who have dialed into this call. Let me remind you that a replay will be available approximately two hours after the end of this call at our website.

Let's begin by taking a look at the record sales and earnings that were reported after the markets closed yesterday. Earnings from continuing operations were $72 million, or $0.70 per diluted share, as compared to our $0.21 creates per diluted reported in the last quarter in the first quarter. First quarter net earnings of $70 million, or $0.68 per diluted share, include a $0.02 per diluted share loss from discontinued operations. Net sales surpassed last year's first quarter record level by 34% This increase in sales contributed to a 77% increase in gross profit versus the prior year. Strong market demand for our products and favorable weather conditions combined to create significant operating leverage at our plants. Aggregate shipments are off to an excellent start, and the pricing momentum we experienced in 2005 has continued into 2006. As I have indicated, sales were at record first quarter levels. This occurred for all key products as a result of double-digit increases in both volume and price.

Specifically, aggregate pricing improved 15% from the prior year, and shipments increased 13% to record levels. Excluding recent acquisitions, aggregate shipments increased 12%. Favorable weather, particularly in Southern California and Georgia, where wet weather showed shipments and hindered plant operations last year, contributed to the increases. As most of you know, virtually all of our products are produced and consumed outdoors. As a result, in the first quarter when plant production capacity is typically not fully utilized, favorable weather allowed us to achieve strong operating leverage and improved costs. This opportunity for better operating leverage is typically less available in the second and third quarters when our plants are operating at seasonably high production rates. As I mentioned, our plant employees did an excellent job of managing costs, particularly in the face of rising energy costs. In the first quarter, unit costs for diesel fuel increased 31%, and reduced pretax earnings by $7 million.

Looking ahead, our challenge is to offset higher diesel fuel costs, we believe will persist throughout the rest of the year, by continuing to improve plant productive. Shipments for both asphalt and concrete were also higher than prior-year levels, due to improved demand and better weather. Asphalt revenues increased 60% and concrete revenues were up 29% above last year's levels. Earnings in both product lines improved despite sharply higher raw material costs. Costs for raw materials for asphalt and concrete product lines increased substantially. We were able to more than offset these cost increases with higher selling prices. Notable increases in raw material costs included a 46% increase in unit cost for liquid asphalt and a 20% increase in the cost of cement. Raw material cost for asphalt and concrete also included higher market-based transfer prices for aggregates which we produced and supplied internally.

Selling, administrative and general expenses as a percent of net sales decreased from 10.7% in the first quarter of 2005 to 10.1% in the current year, in spite of a $14 million increase in expense reflecting primarily higher provisions for incentive compensation and higher professional fees. Other income increased $11 million from the the prior year due to an increase in the carrying value of the ECU earn-out. The ECU earn-out agreement is accounted for as a derivative instrument. Accordingly, it's reported at fair value. In the first quarter, the carrying value increased $12 million, or $0.07 per diluted share. At the end of the first quarter, the carrying value of the ECU earn-out was $132 million. You may recall this earn-out is capped at $150 million. In the first quarter, we repurchased 272,000 shares of our stock at an average cost of $71.06 per share for a -- $71.06 for a total cost of $19 million. In January of this year, we completed the acquisition of a quarry in North Carolina. On February 1 of this year, we repaid $240 million of debt as scheduled. And on February 10 of this year, we raised our quarterly dividend 27.6% to an annual rate of $1.48 per share.

Turning to our outlook for the remainder of 2006. We expect another year of increased demand for aggregates and further growth in earnings. Construction spending should continue to benefit from economic expansion. Highway constructions should benefit from improving state and local tax receipts, and the passage of the multi-year federal highway bill in September of 2005. In California, our largest state in terms of revenue, public construction outlook has greatly improved. The California Department of Transportation is now projected to allocate approximately $3.7 billion for highways for fiscal year ending in June 30, 2006, a marked increase from the $900 million approved in the prior fiscal year. General fund revenues are up almost $4 billion from personal, corporate and sales and used tax collections since the 2005-2006 Budget Act. Governor Schwarzenegger has put forward a comprehensive proposal to implement $222 billion in state infrastructure improvements over the next 10 years. Transportation projects account for $107 billion of the total proposed amount, with funding utilizing both existing and now sources.

One new funding source contemplated by the plan is $68 billion in general obligation bonds. Efforts by the state legislature to put a bond proposal on the June ballot failed. However, leaders in the state legislature have reported they are close to an agreement on a reduced bond package in the range of $30 to $35 billion that they hope will be put on the November ballot. Another November ballot initiative by a transportation coalition which, we fully support, is to firewall Proposition 42 funds from any other use besides transportation projects. The new federal highway bill provides a 34% increase for California in the average annual funding level for highways compared to the average annual funding level of the prior six-year bill T21. This 34% average annual increase compares favorably -- or this 34% increase compares favorably to the U.S. average of 30% and the average of 28% in non-Vulcan-served states in the U.S.

Across all of our key markets in the United States, the recovery and private non-residential construction should continue, and residential construction activity should remain at high levels. As a result, we expect Vulcan's aggregate shipments to increase 3 to 4% above the record 260 million tons we shipped in 2005. We believe that the momentum underlying the 8% price improvement we achieved in 2005 will be sustained in 2006. Aggregates are used broadly, and demand in our markets is very good. And any markets that carry new reserves is, of course, very difficult and expensive. Additionally, higher prices are necessary to offset sharply higher input costs. Our full-year outlook for aggregates price improvement is 10 to 11% over 2005 levels. We expect the average cost for diesel fuel to increase above 2005 levels. The $0.10 per gallon increase in diesel fuel prices reduces pretax earnings for Vulcan by approximate $6 million annually. In both asphalt and concrete, we expect higher earrings than in 2005. In light of these assumptions, we expect earnings from continuing operations of $4.35 to $4.60 per diluted share for full-year 2006, and $1.15 to $1.30 per diluted share in the second quarter.

January 1 of this year, Vulcan adopted FAS-123r, share-based payment, which requires the expensing of stock options. The 2006 earnings guidance includes $0.06 per diluted share in expense referrible to the stock options for the full-year, and $0.01 in the second quarter. In the first quarter, the adoption of this standard resulted in a charge of $0.03 per diluted share for stock options. Additionally, our earnings guidance for continuing operations in 2006 does not assume any potential adjustment in the carrying value of the ECU earn-out beyond the $0.07 per diluted share recorded in the first quarter. Remaining costs related to the sale of our chemical business are expected to result in a loss of $0.05 per diluted share for the year. In recent years, we have generated significant value for our shareholders through the development and sale of reclaimed and surplus real estate. Our current estimate for real estate gains in 2006 ranges from 0 to 40 million of pre-taxed earnings. However, the timing of real estate sales is difficult, and as such, we have not included any future real estate gains in our earnings guidance for 2006. The continued the economic growth and the resulting strong demand in our markets presents us with some very good opportunities to reinvest in existing operations, as well as in new green field plants and distribution facilities.

Our current estimate for capital spending on property plan and equipment for the year is $300 to $350 million. The capital investment opportunities contemplated in this estimate provide attractive returns and will help us serve our customers and markets more effectively going forward. It will also help us reduce cost, as well as add additional plant capacity reserves and distribution capability. In late March, we announced a major capital project to expand the annual production capacity of our Sac Tun quarry on Mexico's Yucatan Peninsula from 9 million tons to approximately 12 million tons, and the purchase of a third Panamax-class ship to transport the additional aggregates volume. The increased production and transportation capacity will allow us to meet strong market growth and demand along the U.S. Gulf Coast, where the availability of local quality aggregates continues to decline.

At the end of 2006, Vulcan will celebrate 50 years as a New York Stock Exchange company. Our rich history of dedicated employees adding value for our shareholders through effective management of assets of the Company is reflected in our superior track record of total shareholder return. We believe we have the best employees operating the best assets in some of the best markets in the United States and, as a result, our shareholders have been rewarded for their confidence in our performance. Shareholders with a long-term outlook have found Vulcan to be a good steward of their investment. We are working hard to make 2006 another year of earnings growth and solid returns for our shareholders. We thank you for your interest in Vulcan. Now if our operator will give us the required instructions, we'll be happy to respond to your questions.

Thank you. [OPERATOR INSTRUCTIONS] Your first question comes from the line of David MacGregor with Longbow Research. Please proceed.

Yes, good morning. Great quarter, guys.

Thank you, David.

Just having gone through the numbers that you've cited here, I wanted to ask you about the assumptions you have in your annual guidance for mid-year price increases What are you expecting to develop there?

We will have price increases throughout the year in various markets for various products. The 10 to 11% is our best estimate, at this point, about what we will achieve for the full year. Obviously we will continue to look at that on a market-by-market, product-by-product basis. And if we see opportunities above that, we will certainly pursue them. But at this point, 10 to 11% is our best estimate.

And can you say how much of that comes from a mid-year increase versus what you've got already? It sounds as though, from the numbers you cited, your pricing is already very strong and that you might be taking a bit of a conservative posture here on the mid-year price increase.

Well, as we have said before, David, we don't have a time in which all products in all markets have price increases. That's a very market-specific activity. As I said, we hope to improve our margins every way we can, but at this point, the 10 to 11% includes some future price increase. But certainly we're not trying to predict every price increase we can possibly get throughout the rest of the year within that number.

Okay. Great. And the second question had to do with how much growth should we anticipate from acquisitions in 2006? What have you got in your guidance?

We have virtually nothing in our guidance for acquisitions in the remaining three quarters of the year. That's not to say we do not expect any, but it's very difficult to predict the timing of closing of transactions, and the earnings impact of those closings. So there is nothing built into our forecast for those.

Okay, and I realize you have nothing built into your forecast related to real estate sales. You cite a range of 0 to 40 million potentially. Should we expect any activity there this year? Talking in dollar terms, but just -- Is it anticipated that there would be any activity there at all this year?

Yes, we would currently expect there to be some gains from land sales. At this point -- Y you know, when they close and whether they close is difficult, but I would imagine we will have gains from land sales. That is not built into our forecast for earnings.

Great. Okay. Thanks very much and, again, a great quarter.

Thank you, David.

Thank you, and your next question comes from Jack Kasprzak with BB&T Capital Markets. Please proceed.

Thanks. Good morning, Don.

Hi, Jack.

I wanted to ask about the comment you made about residential construction, that it should remain at high levels. What would you say gives you the confidence that residential activity is going to remain at high levels? Are you just looking at the activity that is going on currently? Or is this also a product of talking to these customers, knowing what their plans are for future projects?

Our outlook, Jack, is based on two things. One is a microview. That is from the bottom up, from our sales organization at the division level across our markets. We also look at things from the macrolevel. That is by taking statistics from our markets at the macrolevel and we compare those. And certainly there has been extraordinarily robust growth in demand from housing over the last couple of years. We don't see that growth, but we see demand for housing at least through the remainder of 2006 to stay at high levels. It may be flat for the full-year, but it will be flat at a very high -- at a historically high level. So that's what we have built into our outlook, is that no growth in demand from housing but certainly no collapse for '06.

Got it. Okay. And then I wanted to ask about price increase realizations. A lot of times whether it's cement or aggregates, the price increase is announced and perhaps you don't necessarily get all of it. Timing can change. How would you describe your ability to pass along price increases in terms of getting a full realization or acceptance by the customers right now?

Very good.

Perfect. Congratulations on a great quarter. Thanks, guys.

Thanks, Jack.

Your next question comes from Ansley Lamond with Citigroup.

Thanks. Morning. Just following on from the previous question, really. If you could just comment a bit more on the kind of boost you're seeing from the highway spending from the states and maybe just comment if you're see any kind of kick back. Or is this -- from the states and the federal funding from the higher prices of aggregates. And if you could, there's a second question. The share buy backs -- Is the recent run in the share price mean -- Should we expect to see less share buy backs?

We're seeing growth in spending for highways coming both from the increased federal highway bill, but also from very robust collect -- tax collections and spending plans for state and local government. Rolled up together in terms of total dollars in highway spending or construction put in place, we're seeing something like an 11% increase in '06 over '05. The cost of higher pricing, that translates through into a smaller increase in aggregate volume measured by tons. But the 11% -- The highway programs are in place. We certainly have not seen states back off highway programs because of aggregate prices. There are many things increasing much faster in the market than aggregate prices. But aggregate pricing is not, in our view, a deterrent to highway spending. Share repurchases are something that we look at consistently. There are many variables we look at into whether we repurchase shares, when we repurchase, what we pay and we look at all sorts of things. Primarily our alternative uses for cash, the legal and regulatory rules relating to share repurchases and balance sheet. I don't think you should draw any conclusions from the amount of shares we might purchase in one quarter versus another quarter. We are consistently driven by trying to use cash in the best available opportunity for shareholders. Someone must be leaning into the microphone. We're getting a lot of feedback. If someone could back off a little, that would be very helpful. Thank you.

That's great. Thank you very much.

Thank you. Your next question comes from A.J. Karjorwal with Goldman Sachs.

Hi, good morning. My question was -- Looking at the 15% price increase in the first quarter, wondering whether this was a mix issue, whether California was more important in the quarter or whether there was some other geographic area that influenced the pricing in the quarter.

We did not get 15% price increases consistently in every market. I think that would go without saying, given our business model. We did get very significant price increases in every market, some stronger than others. Certainly, California was very strong.

Next question was: Given the tightness in supply in stone, were there any areas where you could not meet the demand?

Certainly in markets where there is a significant transportation component, that is a major factor. And those markets, of course, are primarily Gulf Coast and the South Atlantic Coast where we have to move by rail or by barge or by ship. And in virtually every one of those markets, our volume was constrained by transportation capacities.

Great. Thanks.

Your next question comes from Leo Larkin with Standard & Poor's Equity Research.

Good morning. I just have a few housekeeping questions. Guidance for DD&A for '06. The tax rate and interest expense.

Tax rate for '06. We are looking at a full-year rate of 32 and 1/2%. I will ask Dan Sansone, our Chief Financial Officer to respond on the DD&A and the interest expense item.

On the DD&A, line, we're probably going to be at the $220 to $225 million territory.

Okay.

I'm going to have to look up the interest number and I'll comment on that in a moment.

Okay. Thanks. That's very helpful.

[OPERATOR INSTRUCTIONS] Your next question comes from the line of Mike Betts with J.P. Morgan. Please proceed.

Yes. Good morning.

Morning, Mike.

I have three questions, if I could. The first was -- I know California is your largest state. But is it possible to give us some indication of the percentage of sales, maybe, last year that were from California? My second question is the substantial increase in CapEx, which I think you pretty well flagged in the past as well. Maybe can you give me an idea of whether, you know -- It looks to me as it's probably going to run at 1.3, 1.4 times depreciation. Is that just a 2006 sort of multiple? Or would you expect going forward to have CapEx maybe much higher than you've had in recent years? And the third and final question, and this is relating a bit to what happened when you revised the guidance in March. But from end of January, when you were talking about 6 to 8% price increases to the middle of March where you move that guidance to 10 to 11% -- My question is whether most of that is increase in the guidance is reflected better-than-expected recovery of the January price increases or the early-year price increases? Or did you change your assumptions for the rest of the year as well, at that stage?

Mike, California is roughly a quarter of our total sales.

Thank you.

And the reason for that, of course, is the higher mix of asphalt and concrete versus aggregates in California compared to most of our other markets. CapEx in 2006. The increase in Cap Ex for 2006 reflects robust markets and opportunities for very strong returns on incremental capital spending to increase our production and distribution capabilities, and to take cost out of our plants. We are -- That does not reflect a, sort of a permanent increase in CapEx spending. We look at that very much on a project-by-project basis and we have a lot of very, very good projects in the pipeline. Some we have referred to in press releases, the expansion of our production capability at our large quarry on the Yucatan Peninsula and additional ship capacity is a very, very favorable project. We certainly are continuing to look at additional opportunities for expansion of that operation, as well as other operations that serve high growth markets where existing aggregate reserves are either fully depleted or under stress. With respect to the change in our guidance for full-year price increases, I think that simply reflects the fact that demand and pricing was more robust as we went into the first quarter then we had projected back in the fall when we did our initial roll-up of pricing. It certainly reflects our view about what our opportunities are for the full-year, but as I indicated in response to an earlier question, it does not factor in every possible price increase we think we might be able to get in 2006.

Okay, thanks. Maybe just one follow up on California. And I take your point because it's a more sort of integrated business. If it's 25% of sales what sort of proportion of operating income would be California?

I don't think we'd disclose that, Mike.

Okay. No worries. Thanks very much, anyway.

Your next question comes from the line of Alan Mitrani with Sylvan Lake Asset Management.

Thank you. Excellent numbers. I'm still a bit confused, again, on the guidance. I'm sorry. I saw the strong first quarter numbers. I understand it weather-rated and the industry did well. But pricing is not necessarily weather-rated and did well. I just want to still try to reconcile the pricing expectations that you have for the year versus what you did in the first three months. And given where new home starts came in today and what non-resident construction has been doing this quarter so far, seemingly already through April. Can you talk a bit more about how it is you've updated your expectations through the year with your division heads in terms of what you're expecting for pricing and volume?

Sure. We meet formally with all of our divisions and review their most recent outlook on price and volume. We completed that process last week, which is our normal process to review that with them immediately before our conference call to update our guidance. Our 15% price increase in the first quarter, of course, is from the first quarter of last year. It's not a sequential price increase from -- comparing the fourth quarter of '05 to the first quarter of '04. We enjoyed significant price increases last year as the year went on, finishing the year at 8%. As a result of that, as we go forward -- When we compare full-year of '06 to full-year of '05, '05 was among the most robust pricing years we have had in recent history at least.. So we are putting 10 or 11% on top of 8% last year. So as we go forward through the year, the price increase, the percentage -- You know we're moving against a higher base period, if you will. So that's one reason we don't currently project 15% price increase throughout the remainder of the year on a quarter-over-quarter or year-over-year basis. Does that --

Yes. That does help. But I just want to -- Really what the question is, I guess, is how much of your expectation for full-year pricing do you already have in hand just from the roll-through of last year's prices plus the realization of the first quarter price increase?

A very significant percentage of the 10 to 11% is already in place.

Okay. So then if there is upside, you will update us just as you did this quarter and we'll see it in the future numbers.

Yes. We're not going to hide the ball from you.

Thank you.

When we see changes -- When we get outside of our range and believe that's reasonably certain, we have committed to come out so they're are not surprised at the end of the quarter.

Okay, and then -- Don, your response to one of the questioners regarding share buy backs just seemed a little cryptic to me. I know you guys have been active buyers of your stock over the last 10 years. Do you still find yourself stock a good value?

My lawyers won't let me soon answer that question. [LAUGHTER] I haven't sold my stock.

That's fair enough. Thank you.

Leo, the interest expense number for the year will probably settle in the range of $22 to $23 million.

Thank you.

your next question comes from the line of Daniel Lawrence with Citadel Investment Group.

Good morning. How are you? Hello?

Yes. Good morning.

Hi. A follow up to David and Alan's questions. I'm just trying to get a better sense here. How would you characterize your pricing power now versus, you know, the time when you guys raised your prices the last time around?

Well that sort of assumes weve raised our price all at one time.

Right.

Which is certainly not the way we do it. We have -- Because of strong demand, declining reserves in many of our markets and much more difficult transportation logistics for our sales, as well as competitors, we have very significant pricing opportunities in '06. We are committed to our aligned customers, so we work with them on price increases. We work with them to keep them supplied even in periods of market shortages. That is very important to us. That may mean from time to time we will not get the absolute level of price increase we might otherwise get if we abandoned our line of customers, but we're not going to do that. That's not our business strategy.

Understood. So recognizing that it is market-by -- is market specific, would you characterize your pricing power as stronger now than it was this time last year still?

Yes.

Okay. And then as a final follow up, there have been published reports of an expectation with some of the industry of [inaudible] price increase, as David alluded to earlier. How are you guys thinking about what type of price increase, either you or your competitors would be able to pass along? And what would be the magnitude of that, would you see being realistic?

We would expect to have future price increases as the year moves along. I'm not in position to quantify what we think that's going to be at this point.

Okay. Thank you very much.

[OPERATOR INSTRUCTIONS] Your next question is a follow up from David MacGregor with Longbow Research.

Yes, just with the discussion of Cap Ex on this call, you had said that CapEx would be 300 to 350. Could you remind us again how much of that is the Yucatan project?

There is -- That is a cash number, David.

Correct.

So the question of how much cash we'll spend on that project this year.

Right.

I would say probably $40 to $50 million would be my estimate of cash for '06 in that project.

Great. Thank you. And then the other question I had --

That includes a ship we're building in China plus the plant.

Right, so most of the expenditure on that is next year.

No. Much of it's this year.

The total value of the -- Could you remind me again the total value of the --

We have not disclosed that.

Okay.

If ask you me to break it down into '06 and '07, I will have disclosed something that we haven't disclosed.

You're refitting a vessel, aren't you?

Yes.

As opposed to purchasing a new one.

Yes.

I'm sorry. And then I had a long-term question for you. It seems as though you're picking up your production coming out of the Yucatan into the American market. You've got competitors that are bringing stone in from the Bahamas and from Nova Scotia and up in the Canadian Atlantic provinces. I just wanted to get your sense of -- Over the next two to three years, how much more offshore stone are we going to see coming into the United States market as opposed to the stone coming out of the quarry operations located in the United States?

I think we will certainly see an increase. At this point, offshore quarries serving the Atlantic Coast and the U.S. Gulf Coast are all in operation. There may be others attempting to secure offshore reserves. That is a very difficult process for any number of reasons including, not the least of which is, the political stability in some potential countries. It is a long-term process and one has to secure shipping in addition to reserves and production capacity. I expect there will be more demand for offshore supplies than there will be supply.

Okay.

In the next two, three years or so. So I expect the opportunities for companies like Vulcan who have, in existence, operations that can be expanded efficiently will be expanded. But the demand -- We'll still substantially see the supply from offshore quarries.

Okay. And then the last question, again, was kind of a higher-level question. But you're seeing consolidation globally among some of the construction materials companies and there is a gravity towards vertically integrated business models. And there are two or three large, vertically-integrated companies in the construction materials space that seem to have designs on growing their presence in the United States market. And one, most recently, has made a large acquisition that leaves them substantially short on stone, particularly in the southeast part of the country. I'm just wondering what your thoughts are in terms of the competitive landscape. How this shakes out over the next few years. Are these guys in -- Do you expect them to be buying up a lot of smaller stone companies and rolling them up? Do you think that Vulcan itself might be an acquisition candidate for some of these larger global, vertically-integrated companies? Any thoughts can you share on that?

We are a significant supplier to some of the companies you're referring to. I think it would be virtually impossible to replicate the quarry network that we have in our markets today, either through green field siting or acquisitions. Whether or not they would think of us as an acquisition target, I can't respond to because I don't know. I am sure they would love to have our aggregate positions. As I said, they are not -- really can't replicate the reserves in the fast-growing metropolitan marks and the distribution networks that we have. What happens beyond that is really up to them.

Okay. Thanks very much.

Thank you. Your next question is from Clyde Lewis with Citigroup.

Good morning, gentlemen. Apologies. I've got three questions, if I may, Don.

Okay.

Firstly, on Miami. I haven't picked up any of the latest news of some of the quarries and the liability -- or viability of some of the permits down there. I'm just wondering whether you can you say a little bit about what is currently happening in that market. It obviously has implications for where your rock from the Yucatan might go. Secondly, on competitive prices. You hoped you'd have a cracking first quarter. Can you give us an indication as to whether or not you think that's in line with the market or whether you think you're performing better than your peers in your respective areas.

The last I had was on acquisitions. You mentioned earlier that we might not have things in the pipeline. You're obviously looking at things. But I'm just wondering whether the price expectations of the sellers has altered at all. Certainly one of the -- [inaudible] have made a couple of acquisitions. They've announced another one recently. And I'm just wondering whether prices have changed or whether it's just the top-line selling price expectations that have changed in terms of the DCF calculations that some of these other guys are doing,

Yes. We are obviously monitoring the Lake Belt litigation where a federal judge in Miami has ruled that the permits issued by the Corp of Engineers for a number of companies, mining aggregate in the Lake Belt district in Miami were improperly issued. That litigation is going on. I believe there is another hearing set for mid-June where the judge will consider whether he will enjoin mining or not. Obviously that is a very, very significant development. Not only for the companies that are involved in that area, but for those of us who are not involved in that area who can otherwise supply the market from other sources. I have no ability to project how or when that litigation will resolve itself. Obviously we think that reserves in Florida are limited even in the best of circumstances ,and our strategy is to continue to grow our ability to supply Florida both by ship and by rail. And we are well on our way to doing that.

How did our performance in the first quarter compare to others in the industry? I guess I don't know the answer to that until I see everyone else's first quarter results. You know our earnings per share, on a comparable basis, essentially tripled in the first quarter. Our gross profit percent increased 77% on a 34% increase in revenues. I think we're hitting on at least seven of our eight cylinders, a prospect that's very good going forward. So I'm very happy with our first quarter. Four months and I'm certainly very optimistic about the remainder of the year. And I don't spend a whole lot of time worrying about how our competitors have done, as long as we're doing well.

My question really though, Don, was trying to find out whether or not -- on the pricing front whether, you know, your competitors are being less aggressive or maybe picking up a bit of market share. I'm trying to get a feeling for how that is playing out at the moment.

That is very market specific and it's very, very competitor-specific. We are shipping most everything we can produce, so I'm not --

Okay.

I'm not that worried about what our other -- what our competitors are doing. On acquisitions, we continue to believe that there are value-creating acquisitions available for us in markets in the United States. We continue to work hard. I have said before, there are virtually no acquisitions of aggregate assets that we don't get a kick at and we continue to look at those. And the key for us is how much improvement we can make in the operation of acquired assets. We find almost no acquisition, today or any time over the last five years for that matter, where we can buy, operate as they have been operated and create value for shareholders. We have got to find ways to reduce costs or improve efficiency, integrate with existing operations. There has to be some opportunity for us to achieve synergy from the acquisition, but that hasn't changed. And even at prices that are being paid today, we think there are -- If there are opportunities for Vulcan to achieve substantial synergies, then we will continue to view acquisitions favorably.

Okay. Thank you very much.

Your last question is a follow up from Alan Mitrani with Sylvan Lake Asset Management.

Just to follow up on the last question. So did you get a look at the two acquisitions that Hanson had done recently? The big one from General Dynamics in specifically?

I think my general statement stands. I won't comment on specific deals because often times there are confidentiality agreements.

Okay. Thank you.

There are no further questions at this time. I would now like to turn the call back over to Don James for closing statements.

Thank you all for your interest in Vulcan. We are extremely pleased, as I have indicated, with our first quarter. We hope to be extremely pleased with our second quarter when we report it, and the full year. We look forward to talking with you at that time. Thank you very much for joining us.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.