Vulcan Announces Record Second Quarter Results; Significant Earnings Growth Projected for Full Year

Vulcan Materials Company (NYSE:VMC) announced today thatsecond quarter earnings from continuing operations increased 50percent to a record level of $1.47 per diluted share as compared to$0.98 per diluted share in the prior year. Second quarter earnings perdiluted share include $0.15 attributable to the sale of certaincontractual rights and $0.06 due to an increase in the carrying valueof the ECU earn-out (see Table E), partially offset by $0.03 referableto an adjustment to estimated income tax liabilities for prior years.Operating income was approximately $218 million, an increase of 42percent from the prior year's second quarter. Second quarter netearnings of $1.45 per diluted share include a $0.02 per diluted shareloss from discontinued operations.

Don James, Vulcan's Chairman and Chief Executive Officer, stated,"We are very pleased with the earnings growth realized in the secondquarter. Revenue in all three major product lines increased sharplyand margins continued to expand. The strong pricing momentum and soliddemand for our products we experienced in 2005 is continuing in 2006.

"Aggregates pricing improved 13 percent, driving aggregatesearnings and margins higher despite increased energy costs. Ourasphalt and concrete product lines also realized considerable growthin earnings and margins as price improvements more than offset highercosts for key raw materials. Following a very strong increase in thefirst quarter, second quarter shipments of aggregates were somewhatlower than a year ago. Year-to-date, aggregates shipments have met ourexpectations of 4 percent growth above our all-time record first-halfshipments in 2005 and are consistent with the upper end of our fullyear guidance for 2006."

Second quarter net sales were $808 million, an increase ofapproximately 15 percent from the prior year's level. Gross profitincreased 23 percent from the prior year due to improved pricing forall major product lines. As a percent of net sales, gross profitimproved to 32 percent from the 30 percent realized in the prior year.

The average unit price for aggregates, excluding freight to remotedistribution sites, increased 13 percent compared to the secondquarter of 2005. Aggregates shipments were approximately 2 percentlower than last year's record second quarter level. Shipments in thesecond quarter were influenced by the effects of extremely favorableweather in the first quarter which accelerated demand as well as byabnormally wet weather in certain key markets in the second quarter.Earnings from asphalt and concrete product lines improved as priceincreases more than offset the effects of lower shipments and highercosts for key raw materials.

Selling, administrative and general expenses increased $9 millionfrom the prior year due primarily to higher provisions for incentivecompensation, including a $1.6 million expense related to stockoptions for which there was no comparable amount in the prior year,and increased professional fees.

Other operating income in the second quarter was $27 millionhigher than the prior year's second quarter due principally to thesale of the Company's contractual rights to mine its Bellwood quarryin Atlanta, Georgia (Table E). The City of Atlanta plans to convertthe property into a city park and greenspace as part of a largereconomic growth and development project around the city's perimeter.The Company worked with city and county officials to achieve thismutually beneficial transaction. Over the next two years, the Companywill continue operating the quarry as it transitions customers to itsexisting 12 quarries in the greater Atlanta area and to a new, zonedsite purchased in 2004 in anticipation of the Bellwood sale.

Other income increased $10 million from the prior year's secondquarter due to an $11 million increase in the carrying value of theECU earn-out. This earn-out agreement is accounted for as a derivativeinstrument, with any adjustments to the carrying value recorded asother income or charges in continuing operations (Table E).

During the second quarter, the Company purchased 4,235,200 sharesof its common stock at a total cost of approximately $334 million,representing an average cost of $78.76 per share. Year to date, theCompany has purchased 4,507,322 shares at a total cost ofapproximately $353 million, representing an average cost of $78.30 pershare.

During the first six months of 2006, the Company completed 3acquisitions for a total cash expenditure of approximately $20million. The businesses acquired included 3 aggregates quarries inNorth Carolina, Virginia and Indiana.

All results are unaudited.

Outlook

"Construction spending remains strong due to continuing economicand infrastructure growth," observed Mr. James. "Our broad geographicfootprint, with operations strategically located in high growth U.S.markets, positions us to benefit from the continuing strength inconstruction activity and provides regional diversification. Highwayconstruction should benefit from both higher funding as a result ofthe new multi-year federal highway bill passed in 2005 and improvingstate and local tax receipts. The recovery in private nonresidentialconstruction appears to be broad-based and is evident in mostcategories of this end market. Approximately 75 percent of ouraggregates shipments go to public construction and privatenonresidential construction and we are well positioned to benefit fromgrowing demand in these end markets. Residential construction activityremains at high levels. Key markets such as Texas and Georgia continueto have significant backlogs of residential construction activitywhile in certain other markets, such as California, Arizona andFlorida, residential demand is slowing.

"California, which is our largest state by revenue, is poised forsignificant growth in its transportation construction activity. Thefiscal year 2007 budget, signed by the governor last month, allocatesapproximately $5 billion for new projects, an $800 million increasefrom the $4.2 billion allocated in 2006 and significantly more thanthe $900 million in 2005. In addition to this significant increase inhighway funding, the governor and state legislators in California haveapproved a $37 billion general bond issue for the November ballotwhich includes $20 billion for transportation projects.

"Overall, we expect the broad strength in public infrastructureand private nonresidential construction in our markets to more thanoffset weaker residential construction activity in certain keymarkets. As a result, we expect our full year aggregates shipments toincrease 2 to 4 percent from the record 260 million tons shipped in2005.

"The strong pricing momentum we experienced in 2005 is continuingin 2006. For the full year, we now expect the average price foraggregates to increase 12 to 13 percent. Unit cost for diesel fuel isprojected to continue to increase during the second half of 2006.Earnings from asphalt and concrete should increase from the prioryear's levels with improved product pricing more than offsettinghigher costs for key raw materials.

"In light of our year-to-date results and our outlook for theremainder of the year, we now expect earnings from continuingoperations for the full year to be in the range of $4.60 to $4.85 perdiluted share, compared to $3.30 per diluted share in 2005. We expectto earn $1.40 to $1.56 per diluted share from continuing operations inthe third quarter as compared to $1.23 per diluted share in the thirdquarter of 2005. In the third quarter of 2005, earnings per dilutedshare benefited by $0.06 from an adjustment to the carrying value ofthe ECU earn-out and by $0.10 from a reduction in estimated income taxliabilities for prior years and a favorable settlement of federalincome tax refund claims. Our earnings guidance for the third quarterand full year 2006 does not assume any potential adjustment in thecarrying value of the ECU earn-out beyond the $0.13 per diluted sharerecorded in the first half of the year.

"Additionally, our 2006 earnings guidance for continuingoperations includes $0.05 per diluted share in expense referable tostock options for the full year and $0.01 in the third quarter. Our2005 earnings from continuing operations did not include any expensefor stock options.

"Costs related to our former Chemicals business should result in afull year loss of $0.05 per diluted share from discontinuedoperations.

"In recent years, we have generated significant value for ourshareholders through the development and sale of reclaimed and surplusreal estate and we are continuing this process. Our current estimatefor real estate gains in the second half of 2006 ranges from $0 to $40million of pretax earnings. However, the timing of real estate salesis difficult to predict and as such, we have not included any futurereal estate gains in our current year earnings guidance."

In keeping with past practice, the Company will give quarterly andannual earnings guidance. The Company will issue press releases torevise such guidance if it is reasonably certain that comparableearnings per share, on either a quarterly or an annual basis, will beoutside its latest published estimates.

Conference Call

Vulcan will host a conference call at 10:00 a.m. CDT on August 1,2006. Investors and other interested parties may access theteleconference live by calling (800) 510-0146 approximately 10 minutesbefore the scheduled start. International participants can dial (617)614-3449. The access code is 21813582. A live webcast will beavailable via the Internet through Vulcan's home page atvulcanmaterials.com. The conference call will be recorded andavailable for replay approximately two hours after the call throughAugust 8, 2006.

Vulcan Materials Company, a member of the S&P 500 index, is thenation's largest producer of construction aggregates and a majorproducer of other construction materials.

Certain matters discussed in this release, including expectationsregarding future performance, contain forward-looking statements thatare subject to risks, assumptions and uncertainties that could causeactual results to differ materially from those projected. These risks,assumptions and uncertainties include, but are not limited to, thoseassociated with general economic and business conditions; changes ininterest rates; the timing and amount of federal, state and localfunding for infrastructure; changes in the level of spending forresidential and private nonresidential construction; the highlycompetitive nature of the construction materials industry; pricing;weather and other natural phenomena; energy costs; costs ofhydrocarbon-based raw materials; increasing healthcare costs; thetiming and amount of any future payments to be received by the Companyunder two earn-outs contained in the agreement for the divestiture ofthe Company's Chemicals business; and other risks, assumptions anduncertainties detailed from time to time in the Company's SEC reports,including the report on Form 10-K for the year. Forward-lookingstatements speak only as of the date hereof, and Vulcan assumes noobligation to update such statements.

Table A
Vulcan Materials Company
and Subsidiary Companies

(Amounts and shares in thousands, except
per share data)

Consolidated Statements Three Months Ended Six Months Ended
of Earnings June 30 June 30
------------------- -----------------------
(Condensed and unaudited) 2006 2005 2006 2005
---------------------------------------------------------------------

Net sales $807,781 $705,348 $1,450,053 $1,184,748
Delivery revenues 80,381 76,726 146,797 125,942
-------- -------- ---------- ----------
Total revenues 888,162 782,074 1,596,850 1,310,690

Cost of goods sold 550,045 494,973 1,028,654 882,139
Delivery costs 80,381 76,726 146,797 125,942
-------- -------- ---------- ----------
Cost of revenues 630,426 571,699 1,175,451 1,008,081
-------- -------- ---------- ----------

Gross profit 257,736 210,375 421,399 302,609
Selling, administrative
and general expenses 65,180 55,688 130,222 107,124
Other operating (income)
expense, net (25,392) 1,182 (25,524) 4,211
-------- -------- ---------- ----------
Operating income 217,948 153,505 316,701 191,274

Other income, net 10,756 680 22,849 2,234
Interest income 1,472 3,146 4,119 5,634
Interest expense 5,690 9,615 11,975 18,873
-------- -------- ---------- ----------
Earnings from continuing
operations before income
taxes 224,486 147,716 331,694 180,269
Provision for income
taxes 75,080 45,764 110,551 56,883
-------- -------- ---------- ----------
Earnings from continuing
operations 149,406 101,952 221,143 123,386
Earnings (loss) on
discontinued operations,
net of tax (1,715) 19,595 (3,534) 52,512
-------- -------- ---------- ----------
Net earnings $147,691 $121,547 $ 217,609 $ 175,898
=====================================================================
Basic earnings (loss) per share:
Earnings from continuing
operations $ 1.50 $ 1.00 $ 2.21 $ 1.20
Discontinued operations (0.01) 0.19 (0.03) 0.51
-------- -------- ---------- ----------
Net earnings per share $ 1.49 $ 1.19 $ 2.18 $ 1.71

Diluted earnings (loss) per share:
Earnings from continuing
operations $ 1.47 $ 0.98 $ 2.16 $ 1.18
Discontinued operations (0.02) 0.19 (0.03) 0.51
-------- -------- ---------- ----------
Net earnings per share $ 1.45 $ 1.17 $ 2.13 $ 1.69

=====================================================================
Weighted-average common
shares outstanding:
Basic 99,430 102,259 99,988 102,595
Assuming dilution 101,636 104,026 102,153 104,316
Cash dividends declared
per share of common
stock $ 0.37 $ 0.29 $ 0.74 $ 0.58
Depreciation, depletion,
accretion and amortization
from continuing
operations $ 54,785 $ 54,833 $ 107,999 $ 107,185
Effective tax rate 33.4% 31.0% 33.3% 31.6%
=====================================================================


Table B
Vulcan Materials Company
and Subsidiary Companies

(Amounts in thousands)

Consolidated Balance Sheets June 30 December 31 June 30
(Condensed and unaudited) 2006 2005 2005
---------------------------------------------------------------------

Assets
------
Cash and cash equivalents $ 71,191 $ 275,138 $ 286,134
Medium-term investments - 175,140 248,980
Accounts and notes receivable:
Accounts and notes
receivable, gross 612,484 480,647 430,490
Less: Allowance for
doubtful accounts (4,238) (4,277) (4,467)
----------- ----------- -----------
Accounts and notes
receivable, net 608,246 476,370 426,023
Inventories:
Finished products 204,114 170,539 167,620
Raw materials 10,138 9,602 7,738
Products in process 1,959 1,589 1,409
Operating supplies and
other 18,452 16,022 14,568
----------- ----------- -----------
Inventories 234,663 197,752 191,335
Deferred income taxes 19,441 23,184 36,264
Prepaid expenses 13,830 17,138 13,470
----------- ----------- -----------
Total current assets 947,371 1,164,722 1,202,206
Investments and long-term
receivables 6,729 6,942 6,994
Property, plant and equipment:
Property, plant and
equipment, cost 3,668,316 3,481,708 3,373,095
Less: Reserve for depr.,
depl., & amort (1,953,064) (1,877,741) (1,797,210)
----------- ----------- -----------
Property, plant and
equipment, net 1,715,252 1,603,967 1,575,885
Goodwill 630,802 617,083 636,582
Other assets 185,292 196,170 234,731
----------- ----------- -----------
Total assets $ 3,485,446 $ 3,588,884 $ 3,656,398
=========== =========== ===========



Liabilities and Shareholders' Equity
------------------------------------
Current maturities of long-
term debt $ 32,547 $ 272,067 $ 242,065
Short-term borrowings 217,000 - -
Trade payables and accruals 186,978 142,221 141,716
Other current liabilities 187,193 164,726 197,310
----------- ----------- -----------
Total current liabilities 623,718 579,014 581,091
Long-term debt 322,645 323,392 355,706
Deferred income taxes 278,778 275,065 326,363
Other noncurrent liabilities 289,608 284,872 300,560
Shareholders' equity 1,970,697 2,126,541 2,092,678
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 3,485,446 $ 3,588,884 $ 3,656,398
=====================================================================

Table C
Vulcan Materials Company
and Subsidiary Companies

(Amounts in thousands)

Six Months Ended
Consolidated Statements of Cash Flows June 30
(Condensed and unaudited) -------------------------
2006 2005
---------------------------------------------------------------------
Operating Activities
--------------------
Net earnings $ 217,609 $ 175,898
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion, accretion and
amortization 108,018 107,639
Net gain on sale of property, plant and
equipment (2,061) (3,091)
Net gain on sale of contractual rights (24,849) -
Contributions to pension plans (778) (502)
Increase in assets before initial
effects of business acquisitions and
dispositions (139,718) (147,847)
Increase in liabilities before initial
effects of business acquisitions and
dispositions 34,190 88,650
Other, net 1,690 (6,680)
---------- ---------
Net cash provided by operating
activities 194,101 214,067
---------- ---------


Investing Activities
--------------------
Purchases of property, plant and equipment (187,273) (100,125)
Proceeds from sale of property, plant and
equipment 4,742 4,347
Proceeds from sale of contractual rights,
net of cash transaction fees 24,888 -
Proceeds from sale of Chemicals business,
net of cash transaction fees - 213,624
Payment for partner's interest in
consolidated Chemicals joint venture - (62,701)
Payment for businesses acquired, net of
acquired cash (20,355) (72,715)
Purchases of medium-term investments - (203,360)
Proceeds from sales and maturities of
medium-term investments 175,140 133,590
Change in investments and long-term
receivables 240 544
Other, net 4,473 -
---------- ---------
Net cash provided by (used for)
investing activities 1,855 (86,796)
---------- ---------

Financing Activities
--------------------
Net short-term borrowings 217,000 -
Payment of short-term debt and current
maturities (240,305) (1,127)
Payment of long-term debt - (8,253)
Purchases of common stock (335,224) (69,005)
Dividends paid (73,855) (59,436)
Proceeds from exercise of stock options 19,537 25,187
Excess tax benefits from exercise of stock
options 9,626 -
Other, net 3,318 47
---------- ---------
Net cash used for financing
activities (399,903) (112,587)
---------- ---------

Net (decrease) increase in cash and cash
equivalents (203,947) 14,684
Cash and cash equivalents at beginning of
period 275,138 271,450
---------- ---------
Cash and cash equivalents at end of period $ 71,191 $ 286,134
=====================================================================

Table D

1. Supplemental Cash Flow Information

Supplemental information referable to the Condensed Consolidated
Statements of Cash Flows for the six months ended June 30 is
summarized below (amounts in thousands):
2006 2005
---------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
-------------------------------------------------
Cash paid during the period for:
Interest, net of amount capitalized $18,059 $18,936
Income taxes 57,958 61,697

Supplemental Schedule of Noncash Investing and
Financing Activities
---------------------------------------------------
Liabilities assumed in business acquisitions - 5,634
Accrued liabilities for purchases of property,
plant and equipment 15,194 4,943
Accrued liabilities for purchases of treasury stock 17,678 -
Noncash proceeds from the sale of the Chemicals
business:
Earn-outs - 128,167
Working capital adjustments - 13,559


2. Net Sales and Unit Shipments
(Amounts in thousands)

Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------------
Net Sales by Product 2006 2005 2006 2005
------------------- -----------------------

Aggregates, excluding freight
to remote distribution
sites $531,902 $480,431 $958,754 $808,906
Freight to remote
distribution sites 37,810 31,712 70,824 59,479
--------- --------- ----------- -----------
Aggregates 569,712 512,143 1,029,578 868,385
Asphalt mix 126,111 95,205 211,311 148,593
Concrete 72,510 66,788 137,083 116,833
Other products 39,448 31,212 72,081 50,937
--------- --------- ----------- -----------

Total net sales $807,781 $705,348 $1,450,053 $1,184,748
========= ========= =========== ===========

Unit Shipments

Aggregates
Customer tons 66,623 67,938 119,915 115,040
Internal tons * 3,485 3,848 6,357 6,426
--------- --------- ----------- -----------
Aggregates - tons 70,108 71,786 126,272 121,466
========= ========= =========== ===========

Asphalt mix - tons 3,041 3,254 5,305 5,107

Concrete - cubic yards 817 883 1,567 1,558

*Represents tons shipped to our non-aggregates operations (e.g.,
asphalt mix and concrete). Revenue from internal shipments is not
included in net sales as presented in the accompanying Consolidated
Statements of Earnings.

Table E

3. Reconciliation of Non- GAAP Performance Measures

(Amounts in thousands, except per share data)

Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2006 2005 2006 2005
------------------- -------------------

GAAP Earnings from continuing
operations before income
taxes $224,486 $147,716 $331,694 $180,269
Gain on sale of contractual
rights (1) (24,849) - (24,849) -
(Gain) loss from adjustment
in the carrying value
of the ECU earn-out (2) (10,805) 270 (22,986) 270
--------- --------- --------- ---------
Earnings from continuing operations
before income taxes,
excluding gains on sale of
contractual rights and adjustment
in the carrying value of the
ECU earn-out (3) $188,832 $147,986 $283,859 $180,539
========= ========= ========= =========

GAAP Earnings from continuing
operations, net of tax $149,406 $101,952 $221,143 $123,386
Gain on sale of contractual
rights, net of tax (1) (14,850) - (14,850) -
(Gain) loss from adjustment
in the carrying value
of the ECU earn-out, net
of tax (2) (6,475) 167 (13,775) 167
--------- --------- --------- ---------
Earnings from continuing operations,
excluding gains on sale of
contractual rights and
adjustment in the carrying value
of the ECU earn-out, net of
tax (3) $128,081 $102,119 $192,518 $123,553
========= ========= ========= =========

GAAP Diluted earnings per
share from continuing
operations $1.47 $0.98 $2.16 $1.18
After-tax gain per diluted share
resulting from the sale of
contractual rights (1) (0.15) - (0.15) -
After-tax gain per diluted share
resulting from the adjustment
in the carrying value of
the ECU earn-out (2) (0.06) - (0.13) -
--------- --------- --------- ---------
Earnings per share from continuing
operations, excluding gains
on sale of contractual
rights and adjustment in
the carrying value of the ECU
earn-out, net of tax (3) $1.26 $0.98 $1.88 $1.18
========= ========= ========= =========

(1) During the second quarter of 2006, the Company recognized a
$25 million pretax gain from the sale of its contractual
rights to mine the Bellwood quarry in Atlanta, Georgia. The
City of Atlanta plans to convert the property into a city park
and greenspace as part of a larger economic growth and
development project around the city's perimeter. The Company
worked with city and county officials to achieve this mutually
beneficial transaction. Over the next two years, the Company
will continue operating the quarry as it transitions customers
to its existing 12 quarries in the greater Atlanta area and to
a new, zoned site purchased in 2004 in anticipation of the
Bellwood sale.

(2) In June 2005, the Company sold substantially all the assets of
its Chemicals business, known as Vulcan Chemicals, to a
subsidiary of Occidental Chemical Corporation, Basic
Chemicals. Subject to certain conditions as defined in a
separate earn-out agreement, Basic Chemicals is required to
make future payments based on ECU and natural gas prices
during the five-year period beginning July 1, 2005, and is
capped at $150 million (ECU earn-out or ECU derivative). The
ECU earn-out is accounted for as a derivative instrument;
accordingly, it is reported at fair value. Changes to the fair
value of the ECU derivative are recorded within continuing
operations pursuant to SAB Topic 5:Z:5.

(3) The Company prepares and reports its financial statements in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP). Internally, management monitors the operating
performance of its construction materials business using
non-GAAP metrics similar to those above. These non-GAAP
measures exclude the effects of two items, described more
fully above: 1) the gain on the sale of contractual rights at
the Bellwood quarry in Atlanta, Georgia, during the second
quarter of 2006 (included in other operating income, net in
the accompanying condensed consolidated statements of
earnings), and 2) the ECU earn-out obtained in connection with
the June 2005 sale of our Chemicals business, including the
associated changes in carrying value (included in other
income, net in the accompanying condensed consolidated
statements of earnings).

In Management's opinion, these non-GAAP measures are important
indicators of the ongoing operations of our construction
materials business and provide better comparability between
reporting periods because they exclude items that may not be
indicative of or are unrelated to our core business and
provide a better baseline for analyzing trends in our core
operations. The Company does not, nor does it suggest that
investors should, consider such non-GAAP financial measures in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. The Company believes the
disclosure of the effects of these items increases the
reader's understanding of the underlying performance of the
business and that such non-GAAP financial measures provide
investors with an additional tool to evaluate our financial
results and assess our prospects for future performance.