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Proc-Type: 2001,MIC-CLEAR
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SECURITIES AND EXCHANGE COMMISSION (Mark One) x
o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares outstanding VULCAN MATERIALS COMPANY
WASHINGTON, D.C. 20549
FORM 10-Q/A
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-4033
VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of
incorporation or organization)
63-0366371
(I.R.S. Employer
Identification No.)
1200 Urban Center Drive, Birmingham, Alabama 35242
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (205) 298-3000
APPLICABLE ONLY TO CORPORATE ISSUERS:
Class
Common Stock, $1 Par Value
at March 31, 2001
101,083,866
QUARTER ENDED MARCH 31, 2001
EXPLANATORY NOTE
Subsequent to the issuance of the Company's first quarter 2001 consolidated financial statements, management determined that the Company's practice of netting third-party delivery costs against amounts billed to customers for delivery was
inconsistent with Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs (EITF 00-10). EITF 00-10 requires amounts billed to customers for delivery costs to be classified as a component of total revenues, and the
related delivery costs to be classified as either a component of total cost of revenues or separately reported within the Statements of Earnings. Accordingly, the consolidated Statements of Earnings have been restated to reflect the recording of these
amounts pursuant to EITF 00-10. The effect of the restatement is to increase total revenues and costs of revenues for the quarters ended March 31, 2001 and 2000. Gross profit, earnings before income taxes, net earnings and the related per share amounts were not affected.
No attempt has been made in this Form 10-Q/A to update disclosures for events subsequent to the initial filing date of May 10, 2001.
VULCAN MATERIALS COMPANY QUARTER ENDED MARCH 31, 2001 Contents |
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Item 1. |
Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Results |
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Item 3. |
Quantitative and Qualitative Disclosures About |
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Item 1. |
Legal Proceedings |
15 |
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Item 6. |
Exhibits and Reports on Form 8-K |
16 |
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PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Vulcan Materials Company |
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(Condensed and unaudited) |
March 31 |
December 31 |
March 31 |
Assets Accounts and notes receivable: Accounts and notes receivable, gross Less: Allowance for doubtful accounts Accounts and notes receivable, net Inventories: Finished products Raw materials Products in process Operating supplies and other Inventories Deferred income taxes Prepaid expenses Total current assets Investments and long-term receivables Property, plant and equipment: Property, plant and equipment, cost Less: Reserve for depr., depl., & amort. Property, plant and equipment, net Goodwill Deferred charges and other assets Total Liabilities and Shareholders' Equity Current maturities of long-term debt Notes payable Trade payables and accruals Other current liabilities Total current liabilities Long-term debt Deferred income taxes Minority interest Other noncurrent liabilities Shareholders' equity Total Current ratio |
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See accompanying Notes to Condensed Consolidated Financial Statements
Vulcan Materials Company |
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(Thousands of Dollars) |
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Three Months Ended |
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(Condensed and unaudited) |
2001 |
2000 |
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Net earnings |
$ 5,720 |
$ 23,261 |
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Average common shares outstanding, |
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Cash dividends per share |
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Depreciation, depletion and |
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See accompanying Notes to Condensed Consolidated Financial Statements
Vulcan Materials Company |
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(Thousands of Dollars) |
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(Condensed and unaudited) |
2001 |
2000 |
Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization (Increase) decrease in assets before effects of business acquisitions Increase (decrease) in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities |
66,998 24,334 (24,469) 3,332 75,915 |
53,119 (23,205) 18,654 (2,438) 69,391 |
Purchases of property, plant and equipment Payment for business acquisitions, net of acquired cash Proceeds from sale of property, plant and equipment Other, net Net cash used for investing activities |
(122,960) 4,123 -0- (213,480) |
- -0- 4,212 (3) (93,001) |
bank lines of credit Payment of short-term debt Net proceeds from issuance of long-term debt Dividends paid Contributions from minority interest of consolidated subsidiary Other, net Net cash provided by (used for) financing activities |
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See accompanying Notes to Condensed Consolidated Financial Statements
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in compliance with Form 10-Q instructions and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. The
statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company's latest annual report on Form 10-K.
2. Earnings Per Share (EPS)
The Company reports two separate earnings per share numbers, basic and diluted. Both are computed by dividing net earnings by the average common shares outstanding (basic EPS) or average common shares outstanding assuming dilution (diluted EPS) as
detailed below (in thousands of shares):
Three Months Ended |
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2001 |
2000 |
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Average common shares outstanding |
101,323 |
100,734 |
All dilutive common stock equivalents are reflected in the Company's earnings per share calculation; the Company had 1,265,383 and 1,321,445 antidilutive common stock equivalents as of March 31, 2001 and 2000, respectively.
3. Effective Tax Rate
In accordance with accounting principles generally accepted in the United States of America, it is the Company's practice at the end of each interim reporting period to make a best estimate of the effective tax rate expected to be applicable for the full
fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis.
4. Derivative Instruments
Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other contracts and for hedging activities.
Natural gas used by the Company in its Chemicals segment is subject to price volatility caused by supply conditions, political and economic variables and other unpredictable factors. The Company uses over-the-counter commodity swap and option contracts
to manage the volatility related to anticipated natural gas purchases. These instruments have been designated as effective cash flow hedges in accordance with SFAS 133. The adoption of SFAS No. 133 did not materially impact the Company's consolidated
financial statements as of March 31, 2001.
5. Segment Data
The Company's reportable segments are Construction Materials and Chemicals and are organized around their products and services. The accounting policies of the segments are the same as those described in the summary of significant accounting polices in
the notes to the consolidated financial statements on Form 10-K. The Company's determination of segment earnings (a) recognizes equity in the income or losses of nonconsolidated affiliates as part of segment earnings; (b) reflects allocations of general
corporate expenses and income to the segments; (c) does not reflect interest income or expense; and (d) is before income taxes. Allocations are based on average capital employed and net sales.
Because the majority of the Company's activities are domestic, sales and assets outside the United States are not material.
Following is the comparative segment financial disclosure (amounts in millions):
SEGMENT FINANCIAL DISCLOSURE
Three Months Ended |
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2001 |
2000 |
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NET SALES |
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March 31 |
Dec. 31 |
March 31 |
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IDENTIFIABLE ASSETS |
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6. Supplemental Cash Flow Information
Supplemental information referable to the Consolidated Statements of Cash Flows for the three months ended March 31 is summarized below (amounts in thousands).
2001 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
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7. Acquisition and New Debt Issuance
On February 7, 2001, the Company issued $240.0 million of five-year senior unsecured notes due February 1, 2006, with a coupon of 6.40%. The Company used approximately $121.1 million of the net proceeds from the sale of the notes to fund its acquisition
of the ownership interest in the Crescent Market Companies from Empresas ICA Sociedad Controladora, S.A. de C.V. The acquisition was accounted for using the purchase method, and, accordingly, the purchase price was allocated to the remaining assets
acquired and liabilities assumed based on their estimated fair values at the acquisition date.
8. Restatement
Subsequent to the issuance of the Company's first quarter 2001 consolidated financial statements, management determined that the Company's practice of netting third-party delivery costs against amounts billed to customers for delivery was inconsistent
with Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs (EITF 00-10). EITF 00-10 requires amounts billed to customers for delivery costs to be classified as a component of total revenues, and the related
delivery costs to be classified as either a component of total cost of revenues or separately reported within the Statements of Earnings. Accordingly, the consolidated Statements of Earnings have been restated to reflect the appropriate recording of these
amounts. The effect of the restatement is to increase total revenues and costs of revenues for the quarters ended March 31, 2001 and 2000 by $51,290,000 and $50,378,000, respectively. Gross profit, earnings before income taxes, net earnings and the
related per share amounts were not affected.
Item 2. Management's Discussion and Analysis of Results |
GENERAL COMMENTS
Seasonality of the Company's Business
Results of any individual quarter are not necessarily indicative of results to be expected for the year due principally to the effect that weather can have on the sales and production volume of the Construction Materials segment. Normally, the highest
sales and earnings of the Construction Materials segment are attained in the third quarter and the lowest are realized in the first quarter when sales and earnings are substantially below the levels realized in all subsequent quarters of the year.
Segment Earnings
Segment earnings are earnings before net interest and income taxes and after allocation of corporate expenses and income, and after assignment of equity income or loss to the segments with which it is related in terms of products and services.
Allocations are based on average capital employed and net sales.
Forward-Looking Statements
Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These include general business conditions, competitive
factors, pricing, weather, energy costs, cost of hydrocarbon-based raw materials, and other risks and uncertainties detailed in the Company's periodic reports.
Restatement
Subsequent to the issuance of the Company's first quarter 2001 consolidated financial statements, management determined that the Company's practice of netting third-party delivery costs against amounts billed to customers for delivery was
inconsistent with Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs (EITF 00-10). EITF 00-10 requires amounts billed to customers for delivery costs to be classified as a component of total revenues, and the
related delivery costs to be classified as either a component of total cost of revenues or separately reported within the Statements of Earnings. Accordingly, the consolidated Statements of Earnings have been restated to reflect the appropriate recording
of these amounts. The effect of the restatement is to increase total revenues and costs of revenues for the quarters ended March 31, 2001 and 2000. Gross profit, earnings before income taxes, net earnings and the related per share amounts were not affected.
The comparative analysis in this Management's Discussion and Analysis of Results of Operations and Financial Condition is based on net sales and cost of goods sold, which exclude delivery revenue and costs, and is consistent with the basis
management reviews the Company's results of operations.
RESULTS OF OPERATIONS
First Quarter 2001 as Compared with First Quarter 2000
The Company's first quarter 2001 net sales of $569.1 million were up 11% from the 2000 first quarter record of $515.0 million. Pretax earnings totaled $8.6 million and net earnings were $5.7 million, or $0.06 per share (diluted). The comparable results
for the first quarter of 2000 were $34.8 million, $23.3 million and $.23 per share, respectively.
Construction Materials reported record first quarter net sales of $399.6 million, up 9% from the 2000 first quarter of $366.3 million. The sales increase was due to the addition of the Tarmac operations and the acquisition of our joint venture partner's
interest in the Crescent Market Companies. Previously, results of the Crescent Market Companies were reported under the equity method of accounting. Excluding the effect of recent acquisitions, aggregates revenues approximated the prior year's as higher
prices offset lower volume. Chemicals' first quarter net sales of $169.5 million were up 14% from the prior year's $148.7 million due primarily to the impact of the Chloralkali joint venture and improved pricing for caustic soda.
Earnings before interest and income taxes were $22.3 million as compared to $44.7 million in the same period last year. The Construction Materials segment reported first quarter earnings of $23.8 million, down 37% from first quarter 2000's $37.7 million.
Improvements in aggregates pricing were more than offset by accelerated spending to upgrade the Tarmac facilities acquired in October 2000, the effect of lower aggregates shipments from traditional operations, and lower gains from asset sales. The
Chemicals segment reported a first quarter loss of $1.5 million, down $8.5 million from the prior year's first quarter earnings of $7.0 million. The earnings benefit from improved caustic soda pricing was more than offset by the adverse effects of higher
costs for natural gas, restricted operating rates at the Chloralkali joint venture due to reduced operating rates by key customers, and lower sales at Performance Chemicals.
Selling, administrative and general expenses of $58.9 million reflected a 10% increase from first quarter 2000. This increase was due mainly to the change in the accounting for the Crescent Market Companies from the equity method to consolidation and the
addition of the Tarmac operations.
Minority interest income of $5.4 million reflected the minority partner's share of the Chloralkali joint venture's pretax loss.
Other income (expense), net of other charges was down $6.2 million for the first quarter. This decrease was mostly attributable to the aforementioned change in accounting for the Crescent Market Companies and lower gains from asset sales. Interest
expense increased $4.2 million primarily due to Construction Materials' acquisitions.
On April 23, 2001, Donald M. James, Chairman and Chief Executive Officer, made certain statements concerning the Company's first quarter results, as follows:
''Earnings comparisons with the first quarter of 2000 were impacted by the effects of sharply higher natural gas prices and a slowing economy on our Chemicals segment, as well as accelerated spending to upgrade the Tarmac facilities acquired in October
2000. We are pleased with the progress that has been made at the Tarmac operations, and we expect full year results to be in line with our earlier expectations. As we have mentioned previously, first quarter aggregates shipments and earnings are subject
to significant variation due to weather and are therefore not necessarily indicative of results for the full year.
"Additionally, in the first quarter we acquired our partner's interest in the Crescent Market Companies, as well as two aggregates operations in Tennessee and one in Illinois."
The following pertains to the Company's outlook for 2001 and includes statements by Mr. James:
Consistent with prior guidance, the Construction Materials segment is expected to deliver full year earnings of $425 to $450 million, approximately 15% above the prior year record. In line with the past several years, pricing for aggregates is expected
to increase 3 to 4%. Total aggregates shipments are expected to increase 8%, with the traditional operations up 2%.
With respect to the outlook for the Chemicals segment, while caustic soda pricing has improved and natural gas costs are in line with previous guidance, the current economic slowdown has softened demand from the manufacturing sector. As a result, overall
volumes as well as prices for chlorine and derivative products are expected to be lower. Consequently, the full year outlook is for Chemicals to earn approximately $50 million as compared to the previous estimate of $70 to $80 million.
"Based on recently reported industry data, the value of highway contracts awarded during the twelve months ended March 31, 2001 for Vulcan-served states is up 15% over the preceding twelve months. The benefit of the ramp-up of highway projects on
Construction Materials combined with the impacts of higher caustic soda prices and the absence of special charges in Chemicals should result in higher earnings. As compared to the prior year, we expect slightly higher earnings comparisons in the second
quarter with significant improvements to follow in the second half. As a result, we believe earnings per share will be at record levels, in the range of $2.65 to $2.85, compared to the $2.16 in 2000."
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $394.5 million at March 31, 2001, $41.2 million over the 2000 year-end amount of $353.3 million. This increase resulted primarily from our purchase of our partner's interest in the Crescent
Market Companies and the resulting consolidation of these companies. Previously, the Crescent Market Companies were reported on the equity method. Working capital at March 31, 2001 increased $85.4 million from the same date last year. This increase from
first quarter 2000 resulted from both the fourth quarter 2000 Tarmac acquisition and the before mentioned first quarter 2001 Crescent Market Companies purchase.
The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.5 as of March 31, 2001. This compares to the 1.2 ratio at year-end 2000 and the 1.5 ratio at March 31, 2000. The increase in the
current ratio from the prior year-end resulted primarily from a reduction in commercial paper of $104.9 million.
Cash Flows
Net cash provided by operating activities totaled $75.9 million for the first quarter of 2001, up $6.5 million from the $69.4 million generated in the same period last year. This increase resulted primarily from reductions in working capital items, net
of acquisitions, most notably Tarmac and the Crescent Market Companies. Net cash used for investing activities of $213.5 million increased $120.5 million from the first quarter 2000 total of $93.0 million due primarily to payments for the acquisitions
noted above. Net cash provided by financing activities of $111.2 million increased $119.2 million from the $8.0 million net cash used for financing activities in the first quarter of 2000. This increase resulted from the current quarter's issuance of
$240.0 million of long-term debt net of the $105.0 million combined reduction in commercial paper and bank borrowing.
Cash and cash equivalents, which totaled $28.9 million at March 31, 2001, were down $7.7 million from a year ago.
Short-term Borrowings
Short-term borrowings of $165.4 million as of March 31, 2001 consisted of notes payable to banks totaling $21.2 million and commercial paper of $144.2 million. The prior year amount, $91.5 million, consisted of notes payable to banks of $9.7 million,
commercial paper of $81.6 million and other notes payable of $.2 million.
Long-term Obligations
As of March 31, 2001, long-term obligations were 31.9% of long-term capital and 63.3% of shareholders' equity. The corresponding first quarter 2000 percentages were 28.1% and 52.6%.
Item 3. Quantitative and Qualitative Disclosure |
The Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. In order to manage or reduce this market risk, the Company occasionally utilizes derivative financial instruments.
To date, the Company has used commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of these contracts as of March 31, 2001 and 2000 was not material. As a result of a 10% reduction in the
price of natural gas, the Company would experience a potential loss in the fair value of the underlying commodity swap and option contracts based on the fair value at March 31, 2001 of approximately $2.1 million.
The Company is exposed to interest rate risk due to its various long-term debt instruments. Because substantially all of this debt is at fixed rates, a decline in interest rates would result in an increase in the fair market value of the liability. At
March 31, 2001, the estimated fair market value of these debt instruments was $941.7 million as compared to a book value of $929.9 million. The effect of a hypothetical decline in interest rates of 1% would increase the fair market value of the liability
by approximately $42.6 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is named as a defendant in nine lawsuits filed in state court in Louisiana. The lawsuits claim damages for various personal injuries allegedly resulting from releases of chemicals at the Company's Geismar, Louisiana, chloralkali plant earlier this year. The suits have been filed within the past month, and some of them purport to be class actions, although no class has been certified. No discovery has taken place. Based on the information currently available to it, the Company does not believe that the ultimate resolution of these suits will have a materially adverse impact on the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on January 31, 2001, pursuant to which the Company reported under item 5 the January 22, 2001, release of its fourth quarter and year 2000 results of operations with a copy of the press release attached.
The Company filed a Current Report on Form 8-K on February 7, 2001, pursuant to which the Company reported under item 5 the execution on February 2, 2001 of an Underwriting Agreement and related Pricing Agreement with Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia Securities, Inc., Banc of America Securities LLC, and Banc One Capital Markets, Inc. in connection with the offer and sale of $240,000,000 aggregate principal amount of the Company's 6.40% Notes due 2006.
The Company filed a Current Report on Form 8-K on March 8, 2001, pursuant to which the Company reported under item 5 the March 6, 2001 press release showing the effect of an arbitration award upon 2000 earnings per share with a copy of the press release and the corresponding revisions of the financial statements for fiscal year 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VULCAN MATERIALS COMPANY
Date July 13, 2001
 
E. A. Khan
Vice President, Controller and Chief Information Officer
M. E. Tomkins
Senior Vice President and Chief Financial Officer
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