SECURITIES AND EXCHANGE COMMISSION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H+mVY2XVhBEYo/D2Vcz/ys5+m7kCmS8awr8cucKSp0AX3iyQuEpeU5VN3HBMZz7G +IFLEEPLSIwigTDa0CHqwg== 0000103973-04-000182.txt : 20040730 0000103973-04-000182.hdr.sgml : 20040730 20040730093622 ACCESSION NUMBER: 0000103973-04-000182 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN MATERIALS CO CENTRAL INDEX KEY: 0000103973 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 630366371 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04033 FILM NUMBER: 04940733 BUSINESS ADDRESS: STREET 1: 1200 URBAN CENTER DRIVE CITY: BIRMINGHAM STATE: AL ZIP: 35242 BUSINESS PHONE: 2052983000 MAIL ADDRESS: STREET 1: PO BOX 385014 CITY: BIRMINGHAM STATE: AL ZIP: 35238-5014 10-Q 1 q210q2004.htm 10-Q 2Q 2004 SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
_____________________________
FORM 10-Q
	(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
VULCAN MATERIALS COMPANY (Exact name of registrant as specified in its charter)
New Jersey (State or other jurisdiction of incorporation)		1-4033 (Commission file number)	63-0366371 (I.R.S. Employer Identification No.)
1200 Urban Center Drive Birmingham, Alabama 35242 (Address of principal executive offices) (zip code)
(205) 298-3000 Registrant's telephone number including area code

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 by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class
Common Stock, $1 Par Value

Shares outstanding
at June 30, 2004
102,245,955

VULCAN MATERIALS COMPANY

FORM 10-Q
QUARTER ENDED JUNE 30, 2004

Contents

			Page No.
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Earnings Condensed Consolidated Statements of Cash Flows Notes to Condensed Consolidated Financial Statements	3 4 5 6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
	Item 4.	Controls and Procedures	24
PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	25
	Item 4.	Submission of Matters to a Vote of Security Holders	26
	Item 6.	Exhibits and Reports on Form 8-K	27
SIGNATURES			28

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Vulcan Materials Company and Subsidiary Companies	(Amounts in Thousands)
Consolidated Balance Sheets (Condensed and unaudited)	June 30 2004	December 31 2003	June 30 2003
Assets Cash and cash equivalents Medium-term investments 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 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 Other noncurrent liabilities Minority interest in a consolidated subsidiary Commitments and contingencies (Notes 11 & 15) Shareholders' equity Total Current ratio	$ 230,924 - -- 437,372 (8,788) 428,584 175,194 7,793 832 32,447 216,266 35,848 17,730 929,352 20,666 4,201,564 (2,313,330) 1,888,234 579,817 95,832 $ 3,513,901 $ 6,302 21,000 152,831 141,057 321,190 607,537 356,080 268,582 93,271 1,867,241 $ 3,513,901 2.9	$ 416,689 4,974 368,671 (8,718) 359,953 174,778 7,483 476 36,639 219,376 34,358 14,892 1,050,242 21,111 4,115,646 (2,222,998) 1,892,648 579,817 93,042 $ 3,636,860 $ 249,721 29,000 129,361 134,870 542,952 607,654 338,913 252,518 91,987 1,802,836 $ 3,636,860 1.9	$ 183,631 - -- 436,043 (9,104) 426,939 183,331 11,310 532 36,017 231,190 36,069 15,253 893,082 21,257 4,175,632 (2,203,506) 1,972,126 578,473 85,148 $ 3,550,086 $ 284,082 33,148 148,415 103,841 569,486 613,980 353,376 234,008 89,662 1,689,574 $ 3,550,086 1.6

See accompanying Notes to Condensed Consolidated Financial Statements

Vulcan Materials Company and Subsidiary Companies
(Amounts in thousands, except per share data)

Consolidated Statements of Earnings	Three Months Ended June 30		Six Months Ended June 30
(Condensed and unaudited)	2004	2003	2004	2003
Net sales Delivery revenues Total revenues Cost of goods sold Delivery costs Cost of revenues Gross profit Selling, administrative and general expenses Other operating income (expense), net Minority interest in (earnings) losses of a consolidated subsidiary Other income (expense), net Earnings from continuing operations before interest and income taxes Interest income Interest expense Earnings from continuing operations before income taxes Provision for income taxes Earnings from continuing operations before cumulative effect of accounting change Discontinued operations: Loss from discontinued operations Loss on disposal of discontinued operations Income tax benefit Loss on discontinued operations, net of income taxes Cumulative effect of accounting changes, net of income taxes	$ 738,894 77,426 816,320 561,166 77,426 638,592 177,728 58,074 4,727 (2,094) 3,559 125,846 1,239 9,269 117,816 29,891 87,925 (210) - -- 81 (129) --	$ 694,787 72,028 766,815 535,230 72,028 607,258 159,557 53,965 (606) 2,852 (391) 107,447 924 13,643 94,728 28,410 66,318 (4,419) (12,638) 6,763 (10,294) --	$ 1,299,970 133,812 1,433,782 1,036,170 133,812 1,169,982 263,800 111,587 3,123 (1,284) 5,968 160,020 2,999 22,314 140,705 37,078 103,627 (1,351) - -- 515 (836) --	$ 1,213,675 119,871 1,333,546 984,631 119,871 1,104,502 229,044 104,620 (5,156) 2,996 744 123,008 1,922 27,129 97,801 29,340 68,461 (7,540) (10,780) 7,145 (11,175) (18,811)
Net earnings	$ 87,796	$ 56,024	$ 102,791	$ 38,475
Basic earnings per share: Earnings from continuing operations before cumulative effect of accounting change Discontinued operations Cumulative effect of accounting change Net earnings per share Diluted earnings per share: Earnings from continuing operations before cumulative effect of accounting change Discontinued operations Cumulative effect of accounting change Net earnings per share	$ 0.86 - -- -- $ 0.86 $ 0.85 - -- -- $ 0.85	$ 0.65 (0.10) -- $ 0.55 $ 0.65 (0.10) -- $ 0.55	$ 1.01 (0.01) -- $ 1.00 $ 1.00 (0.01) -- $ 0.99	$ 0.67 (0.11) (0.18) $ 0.38 $ 0.67 (0.11) (0.18) $ 0.38
Weighted-average common shares outstanding: Basic Assuming dilution	102,389 103,454	101,798 102,571	102,289 103,438	101,789 102,468
Cash dividends per share of common stock	$ 0.260	$ 0.245	$ 0.520	$ 0.490
Depreciation, depletion, accretion and amortization from continuing operations	$ 63,752	$ 66,949	$127,244	$132,009
Effective tax rate	25.4%	30.0%	26.4%	30.0%

See accompanying Notes to Condensed Consolidated Financial Statements

Vulcan Materials Company and Subsidiary Companies	(Amounts in Thousands)
Consolidated Statements of Cash Flows	Six Months Ended June 30
(Condensed and unaudited)	2004	2003
Operating Activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion, accretion and amortization Cumulative effect of accounting change Increase in assets before effects of business acquisitions Increase in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities	$ 102,791 127,246 - -- (75,308) 58,372 (6,569) 206,532	$ 38,475 137,074 18,811 (102,664) 65,262 10,196 167,154
Investing Activities Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Payment for business acquisitions, net of acquired cash Decrease in medium-term investments Change in investments and long-term receivables Net cash used for investing activities	(99,261) 24,110 (28,808) 4,974 393 (98,592)	(101,524) 12,062 (2,493) - -- (5,342) (97,297)
Financing Activities Net payments - commercial paper and bank lines of credit Payment of short-term debt and current maturities Payment of long-term debt Dividends paid Proceeds from exercise of stock options Other, net Net cash used for financing activities	(8,000) (244,179) (195) (53,085) 10,371 1,383 (293,705)	(4,149) (1,015) - -- (49,758) 923 (2,955) (56,954)
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	(185,765) 416,689 $ 230,924	12,903 170,728 $ 183,631

See accompanying Notes to Condensed Consolidated Financial Statements

VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Our 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 our 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 our latest annual report on Form 10-K.

Due to the divestiture of the components of the Chemicals segment's Performance Chemicals business unit (Note 3), the operating results of these businesses have been presented as discontinued operations in our accompanying Condensed Consolidated Statements of Earnings.

Minority interest reflected in the accompanying Condensed Consolidated Statements of Earnings consists of the minority partner's share of the Chloralkali joint venture's earnings or loss. We are this joint venture's majority partner with a 51% interest and as such our consolidated financial statements include the accounts of this joint venture.

Certain items previously reported in specific financial statement captions have been reclassified to conform to this presentation.

2. Stock-based Compensation

The pro forma effect on net earnings and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-based Compensation" (FAS 123), and SFAS No. 148, "Accounting for Stock-based Compensation - Transition and Disclosure, an Amendment of FASB Statement No. 123" (FAS 148), to stock-based employee compensation for the three months and six months ended June 30 is illustrated below (amounts in thousands, except per share data):

	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
Net earnings, as reported Add: Total stock-based employee compensation expense included in reported net earnings under intrinsic value based method for all awards, net of related tax effects Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	$ 87,796 941 (2,014)	$ 56,024 213 (1,373)	$ 102,791 2,193 (4,329)	$ 38,475 497 (2,817)
Pro forma net earnings	$ 86,723	$ 54,864	$ 100,655	$ 36,155
Earnings per share: Basic, as reported Basic, pro forma Diluted, as reported Diluted, pro forma	$0.86 $0.85 $0.85 $0.84	$0.55 $0.54 $0.55 $0.53	$1.00 $0.98 $0.99 $0.97	$0.38 $0.36 $0.38 $0.35

The impact related to discontinued operations was immaterial to our Condensed Consolidated Statements of Earnings.

3. Discontinued Operations

During 2003 we sold our Performance Chemicals businesses resulting in the classification of their financial results as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings. The Performance Chemicals business unit consisted of specialty chemicals production and services businesses and was one of the two business units within our Chemicals segment.

Operating results of our discontinued operations were as follows (in millions of dollars):

Three Months Ended
    June 30

Six Months Ended
    June 30

    2004

    2003

    2004

    2003

Net sales
Total revenues
Loss before interest and income taxes
Pretax loss

$ 0.0
$ 0.0
$ (0.1)
$ (0.2)

$ 25.8
$ 27.9
$ (16.9)
$ (17.1)

$ 0.8
$ 0.8
$ (1.1)
$ (1.4)

$ 57.3
$ 61.3
$ (18.1)
$ (18.3)

Assets and liabilities of our discontinued operations were not considered material for separate presentation in the accompanying Condensed Consolidated Balance Sheets. The major classes of assets and liabilities of our discontinued operations for the periods presented were as follows (in millions of dollars):

June 30
  2004

Dec. 31
  2003

June 30
  2003

Current assets
Property, plant and equipment, net
Other assets
  Total assets

$  0.8
- --
    --
$  0.8

$  8.4
- --
    --
$  8.4

$ 42.6
20.4
  11.7
$ 74.7

Current liabilities
Other noncurrent liabilities
  Total liabilities

$  2.1
     3.2
$   5.3

$  4.5
     3.1
$   7.6

$ 10.6
     2.5
$ 13.1

4. Earnings Per Share (EPS)

We report two separate earnings per share numbers, basic and diluted. These are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS) as detailed below (in thousands of shares):

	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
Weighted-average common shares outstanding Dilutive effect of: Stock options Other Weighted-average common shares outstanding, assuming dilution	102,389 766 299 103,454	101,798 535 238 102,571	102,289 862 287 103,438	101,789 472 207 102,468

Antidilutive common stock equivalents are not included in our earnings per share calculations. The number of antidilutive common stock equivalents is summarized as follows (in thousands of shares):

	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
Antidilutive common stock equivalents	1,685	4,164	515	4,164

5. Effective Tax Rate

In accordance with accounting principles generally accepted in the United States of America, it is our practice for the end of each interim reporting period to make a best estimate of the effective tax rate expected for the full fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis. In addition, during the second quarter of 2004 we recorded a reduction in estimated income tax liability for open audit years and a tax refund.

6. Derivative Instruments

Natural gas used in our Chemicals segment is subject to price volatility caused by supply conditions, political and economic variables, and other unpredictable factors. We use over-the-counter commodity swap and option contracts to manage the volatility related to future natural gas purchases. We have designated these instruments as effective cash flow hedges in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). Accordingly, the fair value of the open contracts, which extend through March 2005, has been reflected as a favorable component of accumulated other comprehensive income of $2,507,000 less income tax expense of $943,000 in our consolidated financial statements as of June 30, 2004. If market prices for natural gas remained at the June 30, 2004 level, earnings of $2,507,000 would be classified into pretax earnings within the next 12 months. Comparatively, as of June 30, 2003, our consolidated financial statements reflected the fair value of the open contracts as a component of accumulated other comprehensive income of $5,002,000, less income tax expense of $1,881,000.

In the quarter ended December 31, 2003, we entered into an interest rate swap agreement for a stated (notional) amount of $50,000,000 under which we pay the six-month London Interbank Offered Rate (LIBOR) plus a fixed spread and receive a fixed rate of interest of 6.40% from the counterparty to the agreement. We have designated this instrument as an effective fair value hedge in accordance with FAS 133. Accordingly, the mark-to-market value of the hedge, which will terminate February 1, 2006, has been reflected in our Condensed Consolidated Balance Sheets with an adjustment to record the underlying hedged debt at its fair value. As of June 30, 2004, the estimated fair value of our interest rate swap agreement reflected projected payments of $236,000.

There was no impact to earnings due to hedge ineffectiveness during the quarters ended June 30, 2004 and 2003.

7. Comprehensive Income

Comprehensive income includes charges and credits to equity from nonowner sources. Comprehensive income comprises two subsets: net earnings and other comprehensive income (loss). Our other comprehensive income (loss) includes fair value adjustments to cash flow hedges pertaining to our commodity swap and option contracts to purchase natural gas. Total comprehensive income is detailed below (in thousands of dollars):

Three Months Ended
    June 30

Six Months Ended
    June 30

    2004

    2003

    2004

    2003

Net earnings
Other comprehensive income:
  Fair value adjustments to cash
    flow hedges
Total comprehensive income

$ 87,796

    (575)
$ 87,221

$ 56,024

     528
$ 56,552

$ 102,791

    (1,085)
$ 101,706

$ 38,475

      683
$ 39,158

8. Benefit Plans

The following tables set forth the components of net periodic benefit cost (in thousands of dollars):

PENSION BENEFITS	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
Components of Net Periodic Benefit Cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized actuarial gain	$ 4,522 6,932 (10,181) 554 (72)	$ 4,768 7,196 (10,189) 572 (540)	$ 8,996 13,853 (20,403) 1,075 (166)	$ 8,885 13,543 (19,620) 1,093 (924)
Net periodic benefit cost	$ 1,755	$ 1,807	$ 3,355	$ 2,977

POSTRETIREMENT BENEFITS	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
Components of Net Periodic Benefit Cost: Service cost Interest cost Amortization of prior service cost Recognized actuarial loss	$ 1,055 1,368 (46) 245	$ 766 1,111 (57) --	$ 2,260 2,942 (103) 589	$ 1,443 2,093 (114) --
Net periodic benefit cost	$ 2,622	$ 1,820	$ 5,688	$ 3,422

We also sponsor unfunded, nonqualified pension plans. The pension expense for these plans was as follows: three months ended June 30, 2004 - $683,000 and 2003 - $777,000; and six months ended June 30, 2004 - $1,489,000 and 2003 - $1,540,000.

We previously disclosed in our financial statements for the year ended December 31, 2003 our expectation to contribute $4,000,000 to our pension plans in 2004. Currently, we expect to contribute in 2004 the maximum deductible pension contribution, which is estimated at $7,000,000. During the six months ended June 30, 2004 and 2003, no contributions were made to the pension plans.

9. Long-term Debt

Long-term debt is detailed below (in thousands of dollars):

June 30
  2004

Dec. 31
  2003

June 30
  2003

6.40% 5-year notes issued 2001*
5.75% 5-year notes issued 1999
6.00% 10-year notes issued 1999
Private placement notes
Medium-term notes
Tax-exempt bonds
Other notes

$ 239,764
- --
250,000
83,630
28,000
8,200
     4,245

$ 240,000
243,000
250,000
84,121
28,000
8,200
     4,054

$ 240,000
243,000
250,000
119,848
33,000
8,200
     4,014

  Total debt excluding notes payable
Less current maturities of long-term debt

$ 613,839
    6,302

$ 857,375
  249,721

$ 898,062
  284,082

Total long-term debt

$ 607,537

$ 607,654

$ 613,980

Estimated fair value of long-term debt

$ 650,780

$ 675,249

$ 700,613

* Includes a $236.0 thousand reduction in valuation at June 30, 2004 for the fair value of interest rate swaps.

On April 1, 2004, we made a scheduled debt payment using available cash in the principal amount of $243,000,000 related to the 5.75% five-year notes issued in 1999.

10. Accounting Change

On January 1, 2003, we adopted SFAS No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS 143 applies to legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.

FAS 143 requires us to recognize a liability for an asset retirement obligation in the period in which it is incurred, at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.

Prior to the adoption of FAS 143, we accrued the estimated cost of land reclamation over the life of the reserves based on tons sold in relation to total estimated tons. With the adoption of FAS 143, we recorded all asset retirement obligations, at estimated fair value, for which we have legal obligations for land reclamation. Essentially all of these asset retirement obligations related to our underlying land parcels, including both owned properties and mineral leases. This accounting change resulted in an increase in long-term assets of $44,341,000; an increase in long-term liabilities of $63,152,000; and a cumulative effect of adoption that reduced shareholders' equity and 2003 net earnings by $18,811,000. Additionally, FAS 143 results in ongoing costs related to the depreciation of the assets and accretion of the liability. For the three and six months ended June 30, 2004, we recognized FAS 143 related operating costs totaling $2,274,000 and $5,063,000, respectively. For the three and six months ended Ju ne 30, 2003, we recognized FAS 143 related operating costs totaling $2,421,000 (including $28,000 related to discontinued operations) and $4,801,000 (including $61,000 related to discontinued operations), respectively. With the exception of the costs related to discontinued operations, all FAS 143 related operating costs are reported within cost of goods sold in our accompanying Condensed Consolidated Statements of Earnings.

Our asset retirement obligations are reported in our accompanying Condensed Consolidated Balance Sheets within the total for other noncurrent liabilities. A reconciliation of the carrying amount of our asset retirement obligations since adoption is as follows (in thousands of dollars):

Asset retirement obligations as of December 31, 2002

$        --

    Cumulative effect adjustment
    Liabilities incurred
    Liabilities (settled)
    Accretion expense
    Revisions up (down)

99,259
- --
(3,453)
2,517
         456

Asset retirement obligations as of June 30, 2003

$  98,779

    Liabilities incurred
    Liabilities (settled)
    Accretion expense
    Revisions up (down)

--
(4,960)
2,613
    11,251

Asset retirement obligations as of December 31, 2003

$ 107,683

    Liabilities incurred
    Liabilities (settled)
    Accretion expense
    Revisions up (down)

33
(2,014)
2,790
     4,652

Asset retirement obligations as of June 30, 2004

$ 113,144

The $99,259,000 cumulative effect portion of the asset retirement obligations during the 2003 adoption of FAS 143 was partially offset by amounts previously accrued under generally accepted accounting principles in effect prior to the issuance of FAS 143.

11. Guarantees

We have guarantee contracts in the form of irrevocable standby letters of credit. Our commercial banks issue these standby letters of credit to secure our obligations to pay or perform when required to do so pursuant to the requirements of an underlying agreement or the provision of goods and services. The standby letters of credit listed below are cancelable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. Since banks consider letters of credit as contingent extensions of credit, we are required to pay a fee until they expire or are cancelled.

Our standby letters of credit as of June 30, 2004 are summarized in the table below (in thousands of dollars):

Amount

  Term

   Maturity

Risk management requirement for insurance claims
Payment surety required by utilities
Contractual reclamation/restoration requirements

$ 18,547
5,100
   1,465

One year
One year
One year

Renewable annually
Renewable annually
Renewable annually

    Total standby letters of credit

$ 25,112

12. Acquisitions

As of June 30, 2004, we acquired the following for a cost of approximately $28,808,000, which was paid in cash:

--
- --
- --

Columbia Rock Products - an aggregates facility in Tennessee.
Tri-State Lime and Stone, Inc. - an aggregates facility in Virginia.
Titan Construction Materials, LLC - two aggregates facilities in Tennessee.

All of these acquisitions related to our Construction Materials segment.

13. Segment Data

We have two reportable segments, Construction Materials and Chemicals, which 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 our consolidated financial statements on our latest annual report on Form 10-K. Our determination of segment earnings (a) does not reflect discontinued operations; (b) recognizes equity in the earnings or losses of nonconsolidated companies as part of segment earnings, (c) reflects allocations of general corporate expenses to the segments; (d) does not reflect interest income or expense; and (e) is before income taxes. Allocations are based on a trailing 12-month average capital employed and net sales.

As the result of our decision to sell our Performance Chemicals businesses, the results of operations of this business unit, which were previously included in our Chemicals segment's earnings have been reclassified as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings.

Because the majority of our activities are domestic, sales and assets outside the United States are not material.

Following is the comparative segment financial disclosure (amounts in millions):

	Three Months Ended June 30		Six Months Ended June 30
	2004	2003	2004	2003
NET SALES Construction Materials Chemicals Total	$ 584.7 154.2 $ 738.9	$ 556.6 138.2 $ 694.8	$ 1,016.6 283.4 $ 1,300.0	$ 948.7 265.0 $ 1,213.7
TOTAL REVENUES Construction Materials Chemicals Total	$ 647.9 168.4 $ 816.3	$ 615.8 151.0 $ 766.8	$ 1,122.3 311.5 $ 1,433.8	$ 1,044.2 289.3 $ 1,333.5
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST AND INCOME TAXES Construction Materials Chemicals Total	$ 121.4 4.4 $ 125.8	$ 119.0 (11.6) $ 107.4	$ 164.0 (4.0) $ 160.0	$ 138.2 (15.2) $ 123.0

June 30
   2004

Dec. 31
   2003

June 30
   2003

IDENTIFIABLE ASSETS
  Construction Materials
  Chemicals
     Identifiable Assets
  General corporate assets and other
  Cash items
       Total

$ 2,705.2
     495.6
3,200.8
82.2
      230.9
$ 3,513.9

$ 2,620.1
     518.8
3,138.9
81.3
      416.7
$ 3,636.9

$ 2,733.0
     568.1
3,301.1
65.4
     183.6
$ 3,550.1

14. Supplemental Cash Flow Information

Supplemental information referable to our Condensed Consolidated Statements of Cash Flows for the six months ended June 30 is summarized below (amounts in thousands):

  2004

  2003

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
  Cash paid (refunded) during the period for:
      Interest, net of amount capitalized
      Income taxes

$ 25,855
11,493

$ 27,220
(2,641)

15. Commitments and Contingencies

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report of Form 10-Q for the quarter ended March 30, 2004, we have been named as one of numerous defendants in 199 lawsuits in Mississippi and Texas by 11,173 plaintiffs, six cases in California with 131 plaintiffs, two cases in Louisiana with two plaintiffs, one case in Kentucky with 454 plaintiffs, one case in West Virginia with 22 plaintiffs and one case in Illinois with one plaintiff. The first of these lawsuits was filed in July 1993, and the most recent case was filed in June 2004. Most of the actions are in state court in the state in which it was filed; however, a number have been removed to Federal district court. The plaintiffs in the cases in Mississippi and Texas allege personal injuries arising from silicosis, or the threat of contracting silicosis, and failure to adequately warn, related to exposure to and use of industrial sand used for abrasive blasting. We produced and marketed industri al sand from 1988 to 1994, primarily in Texas. In the cases in California, Kentucky, West Virginia and Illinois, the plaintiffs allege personal injuries relating to exposure to silica, and the cases in Louisiana relate to liability as a premises owner on which sand blasting was used. We are seeking dismissal from the cases in Mississippi, Kentucky, California and West Virginia because the plaintiffs in those cases were not exposed to Vulcan's product.

Although the ultimate outcome is uncertain, it is our opinion that the disposition of these described lawsuits, as well as certain other lawsuits, will not adversely affect our consolidated financial position to a material extent.

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations

GENERAL COMMENTS

Seasonality of our 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 our Construction Materials segment. Normally, the highest sales and earnings of our 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 from continuing operations before interest and income taxes and after allocation of corporate expenses and income, other than interest, to the segment with which it is related in terms of products and services. Allocations are based on a trailing 12-month average capital employed and net sales.

Forward-Looking Statements

Certain matters discussed in this report contain forward-looking statements that are subject to risks, assumptions and uncertainties that could cause our actual results to differ materially from those projected. These risks, assumptions and uncertainties include, but are not limited to, those associated with general business conditions; the timing and amount of federal, state and local funding for infrastructure; the highly competitive nature of the industries in which we operate; pricing; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; increasing pension and healthcare costs; and other risks, assumptions and uncertainties detailed from time to time in our periodic reports.

RESULTS OF OPERATIONS

The following comparative analysis is based on net sales and cost of goods sold, which exclude delivery revenues and costs, and is consistent with the basis on which management reviews results of operations.

Second Quarter 2004 as Compared with Second Quarter 2003

We announced record second quarter net sales of $738.9 million and record net earnings of $87.8 million, or $0.85 per diluted share. In the prior year, net earnings were $56.0 million, or $0.55 per diluted share. Second quarter earnings from continuing operations were $0.85 per diluted share, a 31% increase from last year's second quarter of $0.65 per diluted share.

For the quarter, Construction Materials' net sales were $584.7 million, a 5% increase from the prior year. The sales increase resulted from stronger sales of aggregates and ready-mixed concrete. Aggregates shipments and pricing increased approximately 6% and 2%, respectively. Ready-mixed concrete volumes increased from the prior year due to strong residential demand. Asphalt volumes were down primarily as a result of lower highway spending in our California markets and wet weather in our Texas markets. Second quarter net sales in our Chemicals segment increased 12% to $154.2 million due to stronger volumes in most products. Volumes for caustic soda and chlorine were stronger in the second quarter; however, pricing for caustic soda weakened from the prior year more than offsetting the earnings impact of increased volumes. Volumes and pricing for chlorinated organics improved compared to the prior year's second quarter.

Earnings from continuing operations before interest and income taxes of $125.8 million were up $18.4 million from the second quarter of 2003. Construction Materials segment earnings were $121.4 million compared to $119.0 million in the prior year. This $2.4 million increase resulted primarily from the aforementioned higher aggregates volume and improved pricing which were offset by higher operating costs and lower production at four aggregates plants where major improvement and expansion projects have been underway, and by lower asphalt volumes and higher costs for diesel, healthcare and incentive compensation. Chemicals recorded segment earnings of $4.4 million as compared to a loss of $11.6 million in the second quarter of 2003. In addition to the favorable impact of volume and pricing for chlorine and chlorinated organics, earnings benefited from improved plant reliability and better operating performance. Lower costs for energy and certain key raw materials also contributed to the earnings improvement. A dditionally, earnings in our joint venture with Mitsui also increased due to improved plant operations and stronger sales volumes.

Selling, administrative and general expenses of $58.1 million increased $4.1 million or 8% from the prior year second quarter due principally to higher costs for healthcare and performance-based incentive compensation. Conversely, other operating income of $4.7 million increased $5.3 million due primarily to higher gains on sale of real estate and lower environmental remediation accruals. Minority interest in earnings of $2.1 million represented a $5.0 million increase from the comparable prior year as the improved earnings in the Chloralkali joint venture resulted in an increase in the minority partner's share of the earnings. Other income, net of other charges, of $3.6 million increased $4.0 million due mostly to liability insurance reimbursements and accruals.

Interest expense of $9.3 million decreased $4.4 million resulting from the reduction in outstanding debt due primarily to the April 1, 2004 retirement of $243.0 million in five-year notes with available cash.

Our effective tax rate was 25.4% for the second quarter of 2004, down from the 2003 rate of 30.0% for the comparable period. This decrease reflects a reduction in estimated income tax liability for open audit years and a tax refund.

Year-to-Date Comparisons as of June 30, 2004 and June 30, 2003

Net sales of $1.3 billion for the first six months of 2004 increased 7% from the comparable 2003 total of $1.2 billion. Earnings from continuing operations before cumulative effect of accounting changes were $103.6 million, or $1.00 per diluted share. Comparable 2003 earnings were $68.5 million, or $0.67 per diluted share. As described in Note 3 to the Condensed Consolidated Financial Statements, our Performance Chemicals business unit is reported in discontinued operations pursuant to FAS 144. Loss on discontinued operations totaled $0.8 million, or $0.01 per diluted share for the first six months of 2004 compared with an $11.2 million loss, or $0.11 per diluted share in 2003. The 2003 results included loss on disposal of discontinued operations in the pretax amount of $10.8 million.

The cumulative effect of accounting change in the first quarter of 2003 resulted from our adoption of FAS 143 as described in Note 10 to the Condensed Consolidated Financial Statements. This adoption resulted in a cumulative, one-time, non-cash charge of $18.8 million or $0.18 per diluted share.

Net earnings for the first half of 2004 of $102.8 million or $0.99 per diluted share reflected an $0.8 million loss, or $0.01 per diluted share impact, from the divestiture of our Performance Chemicals business unit. Comparatively, the net earnings of $38.5 million or $0.38 per diluted share for the first six months of 2003 reflected both the $11.2 million loss, or $0.11 per diluted share impact, from the divestiture of our Performance Chemicals business unit, and the $18.8 million charge, or $0.18 per diluted share impact, from the adoption of FAS 143.

Construction Materials' net sales of $1.0 billion were up $67.9 million, or 7%, from the first half of 2003. This increase resulted primarily from higher aggregates shipments and prices and higher ready-mixed concrete volumes. Aggregates shipments and pricing increased 7% and 2%, respectively, and ready-mixed concrete volumes increased 15%. These year-to-date volume increases were primarily attributable to the first quarter's unseasonably favorable weather conditions and stronger overall construction activity. Asphalt volumes were down marginally (2%) from the first half of 2003. Our Chemicals segment reported net sales of $283.4 million for the first six months of 2004, up $18.4 million or 7% from the first half of 2003. Volumes for caustic soda, chlorine and chlorinated organics were up from the first six months of 2003. However, caustic soda pricing was down significantly.

Earnings from continuing operations before interest and income taxes of $160.0 million were up $37.0 million from the first six months of 2003. Construction Materials' segment earnings were $164.0 million compared to $138.2 million in the prior year. This $25.8 million increase was primarily attributable to the first quarter when volumes were up significantly due to the unseasonably favorable weather conditions and stronger construction activity. Second quarter earnings increased $2.4 million over the comparable prior period. Year-to-date, the Chemicals segment's earnings improved $11.2 million resulting in a $4.0 million loss as compared to a loss of $15.2 million in the prior year. This earnings improvement was due primarily to increased volume, improved results in our Chloralkali joint venture and lower costs resulting from better operating performance and improved plant reliability.

Selling, administrative and general expenses of $111.6 million increased $7.0 million or 7% from the first half of 2003 due primarily to increased costs for healthcare and incentive compensation. Other operating income of $3.1 million increased $8.3 million resulting from higher gains on sale of real estate, lower environmental remediation accruals and lower asset impairment charges. Improved results in our Chloralkali joint venture resulted in an increase in the minority partner's interest in earnings of $4.3 million. Other income, net of other charges, of $6.0 million increased $5.2 million due mostly to liability insurance reimbursements and accruals.

Year-to-date interest expense of $22.3 million decreased $4.8 million resulting from the reduction in outstanding debt.

Our effective tax rate was 26.4% for the first half of 2004, down from the 2003 rate of 30.0% for the comparable period. This decrease reflects a reduction in estimated income tax liability for open audit years and a tax refund.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient financial resources, including cash provided by operating activities and ready access to the capital markets, to fund business requirements in the future including capital expenditures, dividend payments, potential future acquisitions and debt service obligations.

Cash Flows

Net cash provided by operating activities equaled $206.5 million in the first half of 2004, up nearly 24% from the $167.2 million generated in the same period last year. This $39.3 million increase in cash provided by operating activities resulted primarily from higher cash earnings. Net cash used for investing activities of $98.6 million increased $1.3 million from the first six months of 2003 due to the $26.3 million increase in payments for business acquisitions partially offset by a $12.0 million increase in proceeds from the sale of property, plant and equipment, a $10.7 million decrease in investments (including medium-term) and long-term receivables, and a $2.3 million decrease in capital purchases. Net cash used for financing activities increased $236.8 million from the first half of 2003 to total $293.7 million for the six months ended June 30, 2004. This increase in cash used for financing activities resulted primarily from the April 1, 2004 debt payment in the principal amount of $243 .0 million related to 5.75% five-year notes issued in 1999.

Working Capital

Working capital, the excess of current assets over current liabilities, totaled $608.2 million at June 30, 2004. This represented a $100.9 million increase from our December 31, 2003 level and a $284.6 million increase from our June 30, 2003 level. Both of these increases resulted primarily from increases in internally generated cash. The increase in working capital from year-end 2003 resulted primarily in a decrease in current maturities of $243.4 million partially offset by a decrease in cash items of $185.8 million. The increase in working capital from June 30, 2003 resulted primarily in a decrease in current maturities of $277.8 million and an increase in cash items of $47.3 million.

The current ratio was 2.9 as of June 30, 2004. This compares to the 1.9 ratio at year-end 2003 and the 1.6 ratio at June 30, 2003. The increases in the current ratio resulted primarily from the above-mentioned debt payment.

Short-term Borrowings

Short-term borrowings consisted of the following (in thousands of dollars):

June 30
   2004

Dec. 31
   2003

June 30
   2003

Bank borrowings
Other notes payable
  Total notes payable

$ 21,000
       --
$ 21,000

$ 29,000
       --
$ 29,000

$ 33,000
      148
$ 33,148

Unsecured bank lines of credit totaling $350.0 million were maintained at June 30, 2004, none of which was in use. In addition, the Chloralkali joint venture had an uncommitted bank credit facility in the amount of $30.0 million available at June 30, 2004, of which $21.0 million was drawn, as noted above.

Current Maturities

Current maturities of long-term debt are summarized below (in thousands of dollars):

	June 30 2004	Dec. 31 2003	June 30 2003
5.75% 5-year notes payable in 2004 Private placement notes Medium-term notes Other notes	$ -- - -- 5,000 1,302	$ 243,000 - -- 5,000 1,721	$ 243,000 35,000 5,000 1,082
Total	$ 6,302	$ 249,721	$ 284,082

On April 1, 2004, we made the scheduled debt payment in the principal amount of $243.0 million related to the five-year notes issued in 1999.

Long-term Obligations

Long-term obligations and measures are summarized below (amounts in thousands, except percentages):

	June 30 2004	Dec. 31 2003	June 30 2003
Long-term obligations: Long-term debt Total long-term obligations	$ 607,537 $ 607,537	$ 607,654 $ 607,654	$ 613,980 $ 613,980
Long-term capital: Long-term debt Deferred income taxes Other noncurrent liabilities Shareholders' equity Total long-term capital	$ 607,537 356,080 268,582 1,867,241 $ 3,099,440	$ 607,654 338,913 252,518 1,802,836 $ 3,001,921	$ 613,980 353,376 234,008 1,689,574 $ 2,890,938
Long-term obligations as a percent of: Long-term capital Shareholders' equity	19.6% 32.5%	20.2% 33.7%	21.2% 36.3%

The calculations of total debt to total capital are summarized below (amounts in thousands, except percentages):

	June 30 2004	Dec. 31 2003	June 30 2003
Debt: Current maturities of long-term debt Notes payable Long-term debt Total debt	$ 6,302 21,000 607,537 $ 634,839	$ 249,721 29,000 607,654 $ 886,375	$ 284,082 33,148 613,980 $ 931,210
Capital: Total debt Shareholders' equity Total capital	$ 634,839 1,867,241 $ 2,502,080	$ 886,375 1,802,836 $ 2,689,211	$ 931,210 1,689,574 $ 2,620,784
Ratio of total debt to total capital	25.4%	33.0%	35.5%

In the future, the ratio of total debt to total capital will depend upon specific investment and financing decisions. Nonetheless, management believes our cash-generating capability, combined with our financial strength and business diversification, can comfortably support a ratio of 30% to 35%. We have made acquisitions from time to time and will continue to pursue attractive investment opportunities. Such acquisitions could be funded by using internally generated cash flow or issuing debt or equity securities.

Guarantees

We have guarantee contracts in the form of irrevocable standby letters of credit. Our commercial banks issue standby letters of credit to secure our obligations to pay or perform when required to do so pursuant to the requirements of an underlying agreement or the provision of goods and services. The standby letters of credit listed below are cancelable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. Since banks consider letters of credit as contingent extensions of credit, we are required to pay a fee until the standby letters of credit expire or are cancelled.

Our standby letters of credit as of June 30, 2004 are summarized in the table below (in thousands of dollars):

	Amount	Term	Maturity
Risk management requirement for insurance claims Payment surety required by utilities Contractual reclamation/restoration requirements	$ 18,547 5,100 1,465	One year One year One year	Renewable annually Renewable annually Renewable annually
Total standby letters of credit	$ 25,112

CRITICAL ACCOUNTING POLICIES

We follow certain significant accounting policies when preparing our consolidated financial statements. A summary of these policies is included in our latest annual report on Form 10-K. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances. The result of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our act ual results may differ from these estimates.

We believe that estimates, assumptions and judgments involved in the accounting policies described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our most recent annual report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies.

INVESTOR ACCESS TO COMPANY FILINGS

We make available on our website, vulcanmaterials.com, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as all Forms 4 and 5 filed by our executive officers and directors, as soon as the filings are made publicly available by the Securities and Exchange Commission on its EDGAR database, at sec.gov. In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2003, at no charge, by writing to:

William F. Denson, III
Secretary
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242

Item 3. Quantitative and Qualitative Disclosures
About Market Risk

We are 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, we utilize derivative financial instruments. To date, we have used commodity swap and option contracts to reduce our exposure to fluctuations in prices for natural gas. The fair values of these contracts were as follows: June 30, 2004 - $2,507,000 favorable; December 31, 2003 - $4,246,000 favorable; and June 30, 2003 - $5,002,000 favorable. As a result of a hypothetical 10% reduction in the price of natural gas, we would experience a potential decline in the fair value of our underlying commodity swap and option contracts based on the fair value at June 30, 2004 of approximately $993,000.

We are exposed to interest rate risk due to our various long-term debt instruments. Substantially all of our debt is at fixed rates; therefore, a decline in interest rates would result in an increase in the fair market value of the liability. At times, we use interest rate swap agreements to manage this risk. In November 2003, we entered into an interest rate swap agreement with a counterparty in the stated (notional) amount of $50,000,000. Under this agreement, we pay a variable London Interbank Offered Rate (LIBOR) plus a fixed spread and receive a fixed rate of interest of 6.40% from the counterparty. The six-month LIBOR rates approximated 1.94% at June 30, 2004. The interest rate swap agreement is scheduled to terminate February 1, 2006 coinciding with the maturity of our 6.40% five-year notes issued in 2001 in the amount of $240,000,000. The realized gains and losses upon settlement related to the interest rate swap agreement are reflected in interest expense concurrent with the hedged interest payments on the debt. The estimated fair values of this agreement were as follows: June 30, 2004 - $236,000 unfavorable and December 31, 2003 - $302,000 favorable.

We do not enter into derivative financial instrument for speculative or trading purposes.

At June 30, 2004, the estimated fair market value of our debt instruments was $657,083,000 as compared to our book value of $613,839,000. The effect of a hypothetical decline in interest rates of 1% would increase our fair market value of the liability by approximately $20,564,000.

We are exposed to certain economic risks related to the costs of our pension and other postretirement benefit plans. These economic risks include changes in the discount rate for AA-rated corporate bonds, the expected return on plan assets, the rate of compensation increase for salaried employees and the rate of increase in the per capita cost of covered healthcare benefits. The impact of a change in these assumptions on our annual pension and other postretirement benefits costs is discussed in our latest annual report on Form 10-K.

Item 4. Controls and Procedures

We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports we file with the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other management officials, evaluated the effectiveness of the design and operation of the disclosure controls and procedures as of June 30, 2004. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to materi al information required to be included in our periodic SEC filings. No significant changes were made to our internal controls or other factors that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report on Form 10-Q for the quarter ended March 30, 2004, we have been named as one of numerous defendants in 199 lawsuits in Mississippi and Texas by 11,173 plaintiffs, six cases in California with 131 plaintiffs, two cases in Louisiana with two plaintiffs, one case in Kentucky with 454 plaintiffs, one case in West Virginia with 22 plaintiffs and one case in Illinois with one plaintiff. The first of these lawsuits was filed in July 1993, and the most recent case was filed in June 2004. Most of the actions are in state court in the state in which it was filed; however, a number have been removed to Federal district court. The plaintiffs in the cases in Mississippi and Texas allege personal injuries arising from silicosis, or the threat of contracting silicosis, and failure to adequately warn, related to exposure to and use of industrial sand used for abrasive blasting. We produced and marketed industri al sand from 1988 to 1994, primarily in Texas. In the cases in California, Kentucky, West Virginia and Illinois, the plaintiffs allege personal injuries relating to exposure to silica, and the cases in Louisiana relate to liability as a premises owner on which sand blasting was used. We are seeking dismissal from the cases in Mississippi, Kentucky, California and West Virginia because the plaintiffs in those cases were not exposed to Vulcan's product.

It is our opinion that the disposition of these described lawsuits will not adversely affect our consolidated financial position to a material extent.

Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Shareholders was held on May 14, 2004. The results of the voting at the Annual Meeting are set forth below:

1.	The shareholders elected the following directors to hold office until the annual meeting in the year indicated:
		Term	Number of Shares
	Director	Expiring	For	Withhold
	Orin R. Smith Douglas J. McGregor Donald B. Rice Vincent J. Trosino	2006 2007 2007 2007	87,202,731 86,656,316 86,663,488 87,482,008	6,335,875 6,882,290 6,875,118 6,056,598

2.

The shareholders approved the Restricted Plan for Nonemployee Directors:

Number of
Shares

For
Against
Abstain

68,989,448
7,417,341
5,589,740

3.

The shareholders ratified the appointment of the firm Deloitte & Touche LLP as independent certified public accountants to audit the books of the Company for the year 2004:

Number of
Shares

For
Against
Abstain

92,249,957
745,063
543,586

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 10(a) - Change of Control Employment Agreement Form.

Exhibit 31(a) - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31(b) - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32(a) - Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32(b) - Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

We filed a Current Report on Form 8-K on April 29, 2004, pursuant to which we furnished our earnings release dated April 28, 2004, regarding our first quarter 2004 financial results.

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 30, 2004

/s/ Ejaz A. Khan
Ejaz A. Khan
Vice President, Controller and Chief Information Officer

/s/ Mark E. Tomkins
Mark E. Tomkins
Senior Vice President, Chief Financial Officer and
Treasurer

EX-10 2 exh10a-2ndqtr10q2004.htm EXHIBIT 10(A) CHANGE OF CONTROL EMPLOYMENT AGREEMENT FORM Exhibit 10(i)

Exhibit 10(a)

FORM OF EMPLOYMENT AGREEMENT

          AGREEMENT by and between Vulcan Materials Company, a New Jersey corporation (the "Company") and (Named Executive - See Schedule A) (the "Executive"), dated as of the ___ day of __________, _____.

          The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accompl ish these objectives, the Board has caused the Company to enter into this Agreement.

          NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

          1.          Certain Definitions.

          (a)           The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment.

          (b)          The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

          2.          Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:

          (a)          The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or

          (b)          Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered

<PAGE 1>

as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

          (c)          Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or al l or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incum bent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

          (d)          Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

          3.          Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period").

          4.          Terms of Employment.

          (a)          Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

                    (ii)          During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Execu tive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.

          (b)          Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the

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Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.

                    (ii)          Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the greater of (A) the average of the Executive's bonuses under the Company's Management Incentive Plan, or any comparable bonus under any predecessor or successor plan (the "Bonus Plan") for the last three full fiscal years prior to the Effective Date and (B) the Executive's annual bonus under the Bonus Plan, determined based on the target annual bonus percentage and the Annual Base Salary in effect with respect to the Executive immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs (and, in all cases, annualized in the event that the Executive was not employed by the Company for t he whole of any such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.

                    (iii)          Long-Term Incentives. During the Employment Period, the Executive shall be entitled to participate in all long-term incentive plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive , those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

                    (iv)          Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

                    (v)          Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any t ime during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

                    (vi)          Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

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                    (vii)          Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

                    (viii)          Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

                    (ix)          Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

          5.          Termination of Employment.

          (a)          Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Ex ecutive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness or injury which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative.

          (b)          Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:

                    (i)          the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or

                    (ii)          the willful engaging by the Executive in illegal conduct which is materially and demonstrably injurious to the Company.

          For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the B oard at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

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          (c)          Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:

                    (i)          the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

                    (ii)          any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

                    (iii)          the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;

                    (iv)          any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or

                    (v)          any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive.

          (d)          Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of T ermination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.

          (e)          Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

          6.          Obligations of the Company upon Termination.

          (a)          Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:

                    (i)          the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

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                              A.          the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Annual Bonus for the full fiscal year in which the Date of Termination occurs, determined based on actual individual and corporate performance through the Date of Termination, and (II) the Recent Annual Bonus (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive, including, without limitation, amounts credited to the "bonus bank" (the "Bonus Bank") pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and

                              B.          the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary, (y) the Highest Annual Bonus and (z) the aggregate dollar value of the annual long-term incentive awards granted to the Executive as determined in accordance with the Company's policies and procedures for determining annual long-term incentive awards as in effect immediately prior to the Effective Date based on the Executive's Annual Base Salary and the Executive's annual long-term incentive award percentage in effect immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs; and

                              C.          an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and the Unfunded Supplemental Benefit Plan for Salaried Employees or its successor plan or any other excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; and

                              D.          an amount equal to the additional Company matching contributions that would have been made on the Executive's behalf in the Company's Thrift Plan for Salaried Employees or any successor plan (the "Thrift Plan") (assuming continued participation on the same basis as immediately prior to the Effective Date), plus the additional amount of any benefit the Executive would have accrued under the SERP as a result of contribution limitations in the Thrift Plan, which the Executive would receive if the Executive's employment continued for three years after the Date of Termination, assuming for this purpose that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii) and that the Company's matching contributions are determin ed pursuant to the applicable provisions of the Thrift Plan and the SERP, as in effect during the 12-month period immediately prior to the Effective Date; and

                    (ii)          for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; and

                    (iii)          for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide to the Executive and/or the Executive's family fringe benefits at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(vii) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in

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effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; and

                    (iv)          upon the Date of Termination, the Executive shall have the right and option to purchase the automobile which the Company was providing to the Executive immediately prior to the Date of Termination in accordance with the Company's practice for retiring employees as in effect immediately prior to the Effective Date; and

                    (v)          the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion, provided that the aggregate cost of such services shall not exceed $50,000; and

                    (vi)          to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits").

          (b)          Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and s uch affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.

          (c)          Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disab ility, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.

          (d)          Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, including, without limitation, amounts credited to the Bonus Bank pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Be nefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.

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          7.          Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

          8.          Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, o r liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").

          9.          Certain Additional Payments by the Company.

          (a)          Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (inclu ding any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to the Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payment, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of the Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive a nd the Payments, in the aggregate, shall be reduced to the Reduced Amount.

          (b)          Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the det erminations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the

<PAGE 8>

calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

          (c)          The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

                    (i)          give the Company any information reasonably requested by the Company relating to such claim,

                    (ii)          take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

                    (iii)          cooperate with the Company in good faith in order effectively to contest such claim, and

                    (iv)          permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdict ion and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other is sue raised by the Internal Revenue Service or any other taxing authority.

          (d)           If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance s hall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

<PAGE 9>

          10.          Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an ass erted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

          11.          Successors.

          (a)          This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.

          (b)           This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

          (c)          The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

          12.          Miscellaneous.

          (a)          This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

          (b)          All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

          If to the Executive:

                    The most recent address on file at the Company

          If to the Company:

                    Vulcan Materials Company
                    P.O. Box 385014
                    Birmingham, Alabama 35238-5014
                    Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

          (c)          The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

          (d)          The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

<PAGE 10>

          (e)          The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

          (f)          The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement; provided, that this Agreement may not be terminated by the Company if it is reasonably demonstrated by the Executive that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control. From and after the Effective Date this Agreement shall s upersede any other agreement between the parties with respect to the subject matter hereof.

          IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

	[Named Executive]
	VULCAN MATERIALS COMPANY By: Name: Donald M. James Title: Chairman and Chief Executive Officer
Schedule A to Exhibit 10(i)
In accordance with Item 601(a)(4) of Regulation S-K, the following executive entered into an Employment Agreement substantially in the form as Exhibit 10(i). All agreements were substantially identical in all material respects except as to the name of the executive and the date of execution. Following is a list of executives who are party to such an agreement:
Guy M. Badgett, III Sherrod B. Clarke, Jr. J. Thomas Hill J. Wayne Houston Ejaz A. Khan D. Gray Kimel, Jr. Ronald G. McAbee Bradley C. Rosenwald Daniel F. Sansone Danny R. Shepherd James W. Smack Robert R. Vogel

<PAGE 11>

EX-31 3 exhibit31-sec302.htm EXHIBIT 31(A) & (B) CERTIFICATIONS SEC 302 CEO & CFO CERTIFICATIONS

EXHIBIT 31(a)
Certification of Chief Executive Officer
I, Donald M. James, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Vulcan Materials Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Vulcan Materials Company as of, and for, the periods presented in this quarterly report;
4.	Vulcan Materials Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Vulcan Materials Company and have:
a)		designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to Vulcan Materials Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)		evaluated the effectiveness of Vulcan Materials Company's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
c)		disclosed in this quarterly report any change in Vulcan Materials Company's internal control over financial reporting that occurred during Vulcan Materials Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Vulcan Materials Company's internal control over financial reporting.
5.	Vulcan Materials Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Vulcan Materials Company's auditors and the audit committee of Vulcan Materials Company's Board of Directors:
a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Vulcan Materials Company's ability to record, process, summarize and report financial information; and
b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Vulcan Materials Company's internal control over financial reporting.
Date July 30, 2004
			/s/ Donald M. James Donald M. James Chairman and Chief Executive Officer

EXHIBIT 31(b)
Certification of Chief Financial Officer
I, Mark E. Tomkins, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Vulcan Materials Company;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Vulcan Materials Company as of, and for, the periods presented in this quarterly report;
4.	Vulcan Materials Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Vulcan Materials Company and have:
a)		designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to Vulcan Materials Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)		evaluated the effectiveness of Vulcan Materials Company's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
c)		disclosed in this quarterly report any change in Vulcan Materials Company's internal control over financial reporting that occurred during Vulcan Materials Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Vulcan Materials Company's internal control over financial reporting.
5.	Vulcan Materials Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Vulcan Materials Company's auditors and the audit committee of Vulcan Materials Company's Board of Directors:
a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Vulcan Materials Company's ability to record, process, summarize and report financial information; and
b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Vulcan Materials Company's internal control over financial reporting.
Date July 30, 2004
			/s/ Mark E. Tomkins Mark E. Tomkins Senior Vice President, Chief Financial Officer and Treasurer

EX-32 4 exhibit32-sec906.htm EXHIBIT 32(A) & (B) CERTIFICATIONS SEC 906 CEO & CFO EXHIBIT 99

EXHIBIT 32(a)

Certificate of Chief Executive Officer of Vulcan Materials Company Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Donald M. James, Chairman and Chief Executive Officer of Vulcan Materials Company, certify that the Quarterly Report on Form 10-Q (the "Report") for the quarter ended June 30, 2004, filed with the Securities and Exchange Commission on the date hereof:
(i)	fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Vulcan Materials Company.
		/s/Donald M. James Donald M. James Chairman and Chief Executive Officer July 30, 2004
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Vulcan Materials Company and will be retained by Vulcan Materials Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32(b)

Certificate of Chief Financial Officer of Vulcan Materials Company Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Mark E. Tomkins, Senior Vice President and Chief Financial Officer of Vulcan Materials Company, certify that the Quarterly Report on Form 10-Q (the "Report") for the quarter ended June 30, 2004, filed with the Securities and Exchange Commission on the date hereof:
(i)	fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Vulcan Materials Company.
		/s/Mark E. Tomkins Mark E. Tomkins Senior Vice President and Chief Financial Officer July 30, 2004
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Vulcan Materials Company and will be retained by Vulcan Materials Company and furnished to the Securities and Exchange Commission or its staff upon request.

-----END PRIVACY-ENHANCED MESSAGE-----

Asset retirement obligations as of December 31, 2002	$ --
Cumulative effect adjustment Liabilities incurred Liabilities (settled) Accretion expense Revisions up (down)	99,259 - -- (3,453) 2,517 456
Asset retirement obligations as of June 30, 2003	$ 98,779
Liabilities incurred Liabilities (settled) Accretion expense Revisions up (down)	-- (4,960) 2,613 11,251
Asset retirement obligations as of December 31, 2003	$ 107,683
Liabilities incurred Liabilities (settled) Accretion expense Revisions up (down)	33 (2,014) 2,790 4,652
Asset retirement obligations as of June 30, 2004	$ 113,144

	2004	2003
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid (refunded) during the period for: Interest, net of amount capitalized Income taxes	$ 25,855 11,493	$ 27,220 (2,641)

2.	The shareholders approved the Restricted Plan for Nonemployee Directors:
			Number of Shares
		For Against Abstain	68,989,448 7,417,341 5,589,740

3.	The shareholders ratified the appointment of the firm Deloitte & Touche LLP as independent certified public accountants to audit the books of the Company for the year 2004:
			Number of Shares
		For Against Abstain	92,249,957 745,063 543,586