-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eF2GlnvIOZtYmXD8bpldiCz4ENsbvX/vndlk5afMeqltEIb8eRzR/alfRxt7/+VD BpOAVjW2/X9/ykqL2IC2Qg== 0000103973-94-000013.txt : 19940331 0000103973-94-000013.hdr.sgml : 19940331 ACCESSION NUMBER: 0000103973-94-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN MATERIALS CO CENTRAL INDEX KEY: 0000103973 STANDARD INDUSTRIAL CLASSIFICATION: 1400 IRS NUMBER: 630366371 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-04033 FILM NUMBER: 94518977 BUSINESS ADDRESS: STREET 1: ONE METROPLEX DR CITY: BIRMINGHAM STATE: AL ZIP: 35209 BUSINESS PHONE: 2058773000 MAIL ADDRESS: STREET 1: PO BOX 530187 CITY: BIRMINGHAM STATE: AL ZIP: 35253-0187 10-K 1 YEAR ENDING DECEMBER 31, 1993 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 1-4033 VULCAN MATERIALS COMPANY (Exact name of registrant as specified in its charter) New Jersey 63-0366371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Metroplex Drive, Birmingham, Alabama 35209 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (205) 877-3000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $1 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of February 28, 1994: Common Stock, $1 Par Value $1,784,219,068.88 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares outstanding at February 28, 1994 Common Stock, $1 Par Value 36,511,033 Documents Incorporated by Reference: Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1993, are incorporated by reference into Parts I, II and IV. Portions of the registrant's annual proxy statement for the annual meeting of its shareholders to be held on May 23, 1994, which will be filed within 120 days of the end of the fiscal year covered by this Report, are incorporated by reference into Part III. VULCAN MATERIALS COMPANY CROSS REFERENCE SHEET FOR DOCUMENTS INCORPORATED BY REFERENCE PAGE IN FORM 10-K HEADING IN ANNUAL REPORT TO SHAREHOLDERS ANNUAL ITEM NO. FOR YEAR ENDED DECEMBER 31, 1993 REPORT 1. Business (Financial Results Segment Financial Data 26-27 by Business Segments) Note 11, Segment Data 51 Note 13, Impairment and Liquidation of Assets 51 2. Properties Operations Directory 9 3. Legal Proceedings Note 9, Other Commitments and Contingent Liabilities 49-51 5. Market for the Registrant's Common Stock Market Prices Common Equity and Related and Dividends 28 Stockholder Matters 6. Selected Financial Data Selected Financial Data 25 7. Management's Discussion and Management's Discussion and 29-37 Analysis of Financial Analysis Condition and Results of Operations Financial Terminology 53 8. Financial Statements and Consolidated Statements of Earnings 40 Supplementary Data Consolidated Balance Sheets 41 Consolidated Statements of Cash Flows 42 Consolidated Statements of Shareholders' Equity 43 Notes to Financial Statements 44-51 Management's Responsibility for Financial Reporting and Internal Control 52 Independent Auditors' Report 52 Supplementary Information- Quarterly Financial Data (Unaudited) 38 14. Exhibits, Financial Management's Discussion and 29-37 Statement Analysis Schedules and Reports on Form 8-K Note 13, Impairment and Liquidation of Assets 51 HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 23, 1994 10. Directors and Executive Election of Directors, Nominees for Election Officers to the Board of Directors, Directors Continuing in Office 11. Executive Compensation Compensation of Directors, Executive Compensation, Shareholder Return Performance Presentation, Retirement Income Plan, Employee Special Severance Plan 12. Security Ownership of Security Owership of Certain Beneficial Certain Beneficial Owners Owners, Security Holdings of Management and Management VULCAN MATERIALS COMPANY FORM 10-K ANNUAL REPORT FISCAL YEAR ENDED DECEMBER 31, 1993 CONTENTS PART ITEM PAGE I 1 Business 2 Properties 3 Legal Proceedings 4 Submission of Matters to a Vote of Security Holders 4 a. Executive Officers of the Registrant II 5 Market for the Registrant's Common Equity and Related Stockholder Matters 6 Selected Financial Data 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Financial Statements and Supplementary Data 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure III 10 Directors and Executive Officers of the Registrant 11 Executive Compensation 12 Security Ownership of Certain Beneficial Owners and Management 13 Certain Relationships and Related Transactions IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K -- Signatures PART I ITEM 1. BUSINESS Vulcan Materials Company and its subsidiaries (together called the "Company") are principally engaged in the production, distribution and sale of construction materials ("Construction Materials") and industrial chemicals ("Chemicals"). Construction Materials and Chemicals may each be considered both a segment (or a line of business) and a class of similar products. The Company believes it is the nation's leading producer of construction aggregates. All of the Company's products are marketed under highly competitive conditions, including competition in price, service and product performance. There are a substantial number of competitors in both Construction Materials and Chemicals. No material part of the business of either segment of the Company is dependent upon a single customer or upon a few customers, the loss of any one of which would have a materially adverse effect on the segment. The Company's products are sold principally to private industry. Although large amounts of construction materials are used in public works, relatively insignificant sales are made directly to federal, state, county or municipal governments, or agencies thereof. The Company estimates that capital expenditures for environmental control facilities for the current fiscal year (1994) and the succeeding fiscal year (1995) will be approximately $10,301,000 and $11,820,000, respectively. Environmental and zoning regulations have made it increasingly difficult for the construction aggregates industry to expand existing quarries and to develop new quarry operations. Although it cannot be predicted what policies will be adopted in the future by governmental bodies regarding environmental controls, the Company anticipates that future environmental control costs will not have a materially adverse effect upon its business. Environmental regulations also have a restrictive effect upon the chemicals industry, both as to production and markets, especially the production of and markets for certain chemicals which are subject to regulation as ozone depleting chemicals. Regulatory developments under current law in the United States ultimately will result in the discontinuance of the production of carbon tetrachloride, which is used to produce chlorofluorocarbons (CFCs), and in the elimination of the market for methyl chloroform for emissive uses. However, the Company's manufacturing flexibility will allow it to manufacture other products without producing carbon tetrachloride and to serve other markets. The Clinton Administration, through the United States Environmental Protection Agency ("EPA"), has announced that it would seek authorization from Congress to conduct a study over the next three years which would develop a strategy for substituting, reducing, or prohibiting the use of chlorine and chlorinated compounds. The proposed study is one of several Administration recommendations dealing with the reauthorization of the Clean Water Act. It is uncertain whether legislation dealing with chlorine and chlorinated compounds will be enacted or, if enacted, what the terms of such legislation will be. Accordingly, the impact, if any, of any such legislation on the Company's Chemicals business cannot be predicted at this time. The Company's principal sources of energy are electricity, natural gas and diesel fuel. The Company does not anticipate any material difficulty in obtaining the required sources of energy or in obtaining the raw materials which it uses. The Company conducts research and development activities for both of its business segments. The Construction Materials research and development laboratory is located near Birmingham, Alabama. The research and development laboratory for Chemicals is located at the Wichita, Kansas, plant site. In general, the Company's research and development effort is directed to applied technological development for the use of its Construction Materials products and for the manufacture or processing of its Chemicals products. The Company spent approximately $5,401,000 in 1991, $5,435,000 in 1992, and $6,073,000 in 1993 on research and development activities for its two business segments. In 1993, the Company employed an average of approximately 6,300 people. As of December 31, 1993, about 22% of the Company's employees were represented by a number of national unions. The Company considers its relationship with its employees and their various representatives to be good. Results of any individual quarter are not necessarily indicative of results to be expected for the year, due principally to the effect that weather can have on the sales and production volume of the Construction Materials segment. Normally, the highest sales and earnings of the Construction Materials segment are attained in the third quarter and the lowest are realized in the first quarter. In 1987, the Company commenced a joint venture known as the Crescent Market Project (the "Project") with a Mexican partner, Grupo ICA, to supply construction aggregates principally to the United States Gulf Coast from a quarrying operation on the Yucatan Peninsula of Mexico through a wholly-owned subsidiary, Vulcan Gulf Coast Materials, Inc. The construction phase of the Project is now complete. Substantially all shipments from the Yucatan quarry are made by two self-unloading vessels owned by the Project. CONSTRUCTION MATERIALS The Company's construction aggregates business consists of the production and sale of crushed stone, sand, gravel, rock asphalt and crushed slag (a by-product of steel production). Crushed stone constituted approximately 74% of the dollar volume of the Construction Materials segment's 1993 sales. Construction aggregates of suitable characteristics are employed in virtually all types of construction, including highway construction and maintenance, and in the production of asphaltic and portland cement concrete mixes. They also are widely used as railroad track ballast. Each type of aggregate is sold in competition with other types of aggregates and in competition with other producers of the same type of aggregate. Because of the relatively high transportation costs inherent in the business, competition is generally limited to the areas in relatively close proximity to production facilities. Noteworthy exceptions are the areas along the rivers served by the Company's Reed businesses, which serve markets located along the Mississippi and Tennessee-Tombigbee river systems and the Gulf Coast, areas served by rail-connected quarries, and the areas along the Gulf Coast served by ocean-going vessels that transport stone from the quarrying operation in Mexico. The Company's construction aggregates are sold principally in portions of most of the southeastern states, portions of Texas, northern and central Illinois, northern Indiana, east central Iowa and southern Wisconsin. The Company, directly or through joint ventures, operates 128 domestic permanent and portable plants at quarries located in 14 states for the production of crushed limestone and granite with estimated reserves totaling approximately 7.4 billion tons. The foregoing estimates of reserves are of recoverable stone of suitable quality for economic extraction, based on drilling and studies by the Company's geologists and engineers, recognizing reasonable economic and operating restraints as to maximum depth of overburden and stone excavation. Not included are reserves at the Company's inactive and undeveloped sites. In 1993, the Company, directly or through joint ventures, operated 13 sand and gravel plants, five slag plants and individual plants producing rock asphalt, mineral filler, pulverized limestone and fine grind products. Estimates of sand and gravel reserves, made on a basis comparable to the estimates of stone reserves set forth above, total approximately 45 million tons. Other Construction Materials products and services include asphaltic concrete, ready-mixed concrete, trucking services, barge transportation, coal handling services, a Mack Truck distributorship, paving construction, dolomitic lime, emulsified asphalt, industrial sand and several other businesses. Shipments of all construction aggregates from the Company's domestic operations in 1993 totaled approximately 125 million tons, with crushed stone shipments to customers accounting for 117 million tons. CHEMICALS The principal chemicals produced by the Company at its three chloralkali plants described in Item 2, below, are chlorine, caustic soda (sodium hydroxide), muriatic acid, caustic potash (potassium hydroxide) and chlorinated hydrocarbons. In addition, the Company manufactures and sells anhydrous hydrogen chloride and hydrogen. Chlorine and various hydrocarbons (primarily ethylene and methanol) are used to produce the Company's line of chlorinated hydrocarbons, including carbon tetrachloride, methylene chloride, perchloroethylene, chloroform, methyl chloride, ethylene dichloride, methyl chloroform and pentachlorophenol. In October 1993, the Company authorized the construction of two additional plants at the Port Edwards facility. Construction began in February 1994, on a plant which will produce potassium carbonate. Potassium carbonate is used in the manufacture of screen glass, rubber antioxidants and other chemicals. Construction has also begun on a sodium hydrosulfide plant at Port Edwards. Sodium hydrosulfide is used in the pulp and paper industry as well as others. The potassium carbonate facility is scheduled to be completed during the fourth quarter of 1994. The sodium hydrosulfide facility is scheduled to be completed by the middle of 1994. In January 1994, the Company acquired the business and assets of Peroxidation Systems Inc., which are being operated through a wholly-owned subsidiary named Vulcan Peroxidation Systems Inc. ("Vulcan PSI"). Vulcan PSI provides equipment, chemicals and services to the municipal, industrial and environmental water treatment markets. In June 1992, the Company acquired the sodium chlorite business of Olin Corporation ("Olin"). Pursuant to the Acquisition Agreement ("Agreement"), the Company agreed to purchase the total output of the Olin sodium chlorite plant until such time as the Company completed a sodium chlorite plant at its Wichita facility. In February 1994, that plant was completed and, in accordance with the Agreement, the Olin facility will be decommissioned by the middle of 1994. During 1993, further progress was made by the Company in its evaluation and development of a possible joint venture to produce soda ash. Definitive capital cost estimates were completed and efforts now are focused on obtaining environmental permits. The Company competes throughout the United States with numerous companies, including some of the largest chemical companies, in the production and sale of its lines of chemicals. The Company also competes for sales to customers located outside of the United States, with sales to such customers currently accounting for approximately 11% of the Company's chemicals sales. Principal markets for the Company's chemical products and services include pulp and paper, energy, food and pharmaceutical, chemical processing, fluorocarbons and water treatment. Chlorine is used by the paper-making industry in pulp and paper bleaching, while caustic soda is used primarily in the kraft and sulfite pulping process. The Company supplies hydrochloric acid, caustic soda beads, caustic potash and fracturing sand to the energy industry for use in oil well stimulation and gas extraction. Caustic soda also is used to demineralize water for steam production at electrical energy facilities and to remove sulfur from gas and coal. Hydrochloric acid, caustic soda, methylene chloride and caustic potash are used by the food and pharmaceutical industries. The Company's sales to the chemical processing industry serve companies that produce organic and inorganic chemical intermediates and finished products ranging from clay-based catalysts to agricultural herbicides. Products sold to this market include hydrochloric acid, caustic soda beads, chlorine and liquid caustic soda. The Company sells carbon tetrachloride, perchloroethylene, chloroform and methyl chloroform to the fluorocarbons market. The Company's chlorine also is used in water and sewage treatment, and its caustic soda and caustic potash are used in the production of soaps and detergents. Sodium chlorite is used as a water disinfection and purification chemical where it has strong positions in both municipal and industrial markets. It also is used as an industrial bleaching agent, in cleaning applications for the electronics industry, as a biocide in the fruit processing industry and in various applications in the oil industry. Vulcan PSI markets equipment, chemicals, and services for the purification and decontamination of water and the control of hydrogen sulfide accumulations in wastewater treatment facilities. Calcium chloride, produced at the Company's Wichita complex, has a multitude of uses including de-icing of roads, dust control, road stabilization and oil well completion. The Company's underground reserves of salt, which is a basic raw material in the production of chlorine and caustic soda, are located at or near its Wichita, Kansas, and Geismar, Louisiana, plants. The Company purchases salt for its Port Edwards, Wisconsin, plant. Ethylene and methanol, the other major raw materials used in the Company's Chemicals operations, are purchased from several different suppliers. Sources of salt, ethylene and methanol are believed to be adequate for the Company's operations. The Company is subject to the corrective action requirements of the Resource Conservation and Recovery Act ("RCRA"). Under these requirements, the EPA must identify facilities subject to RCRA's hazardous waste permitting provisions where practices in the past have caused releases of hazardous waste or constituents thereof. The owner of any such facility is then required to conduct a Remedial Facility Investigation ("RFI") defining the nature and extent of any such releases described by the EPA. If the RFI results determine that constituent concentrations from any such release exceed action levels specified by the EPA, the facility owner is further required to perform a Corrective Measures Study ("CMS") identifying feasible technological alternatives for addressing these releases. Depending upon the results reported to the EPA in the RFI and CMS, the EPA subsequently may require Corrective Measures Implementation ("CMI") by the facility owner - essentially, implementation of a cleanup plan developed by the EPA based on the RFI and CMS. The Company expects to incur RFI/CMS costs over the next several years at its Geismar, Port Edwards and Wichita Chemicals manufacturing facilities. For each of these three facilities, the RFI/CMS results will determine whether the EPA subsequently requires CMI to address releases at the facility, and the scope and cost of any such CMI. With respect to those RFI/CMS costs that currently can be reasonably estimated, the Company has determined that its accrued reserves are adequate to cover such costs. However, the total costs which ultimately may be incurred by the Company in connection with discharging its obligations under RCRA's corrective action requirements cannot reasonably be estimated at this time. FINANCIAL RESULTS BY BUSINESS SEGMENTS Net sales, earnings, identifiable assets and related financial data for each of the Company's business segments for the three years ended December 31, 1993, are reported on page 51 (Note 11 of the Notes to Financial Statements) and on pages 26 and 27 (under the caption "Segment Financial Data") in the Company's 1993 Annual Report to Shareholders, which pages are incorporated herein by reference. ITEM 2. PROPERTIES CONSTRUCTION MATERIALS The Company's current estimate of approximately 7.4 billion tons of stone reserves is approximately 150 million tons less than the estimate reported at the end of 1992. Although increases in the Company's reserves have resulted from the acquisition of quarry sites in Tennessee and Texas, these increases have been more than offset by 1993 production tonnage and revisions in mining plans. Management believes that the quantities of reserves at the Company's stone quarries are sufficient to result in an average quarry life of more than 65 years at present operating levels. The locations of the Company's domestic stone quarries are shown on page 9 of the Company's 1993 Annual Report to Shareholders, which page is incorporated herein by reference. Of the 128 domestic stone quarries which the Company operates directly or through joint ventures, 37 are located on owned land, 23 are on land owned in part and leased in part, and 68 are on leased land. While some of the Company's leases run until reserves at the leased sites are exhausted, generally the Company's leases have definite expiration dates which range from 1994 to 2085. Most of the Company's leases have options to extend them well beyond their current terms. Due to transportation costs, the marketing areas for most quarries in the construction aggregates industry are limited, often consisting of a single metropolitan area or one or more counties or portions thereof. The following table itemizes the Company's 10 largest active stone quarries in terms of the quantity of stone reserves, with nearby major metropolitan areas shown in parentheses:
Estimated Years of Life Nature of At Average Interest Rate Of And Lease Location Product Production* Expiration Date** McCook (Chicago), Illinois Limestone 98 Owned Paducah, Kentucky Limestone 50 Leased *** Grayson (Atlanta), Georgia Granite Over 100 Owned Gray Court (Greenville), South Carolina Granite Over 100 Owned Warrenton, Virginia (Washington, D. C.) Diabase Over 100 Leased *** Kennesaw (Atlanta), Georgia Granite 75 75% Owned 25% Leased 2013 Skippers, Virginia Granite Over 100 Leased 2016 Stafford, Virginia Granite Over 100 Owned Lawrenceville (Norfolk/Virginia Granite 89 25% Owned Beach), Virginia 75% Leased 2014 Dalton, Georgia Limestone Over 100 Leased 2085 * Estimated years of life of stone reserves are based on the average annual rate of production for the most recent three-year period, except for reserves acquired or reactivated during that period, in which case the estimated years of life are based on a shorter period. Revisions may be necessitated by such occurrences as changes in zoning laws governing quarry properties, changes in stone specifications required by major customers and passage of government regulations applicable to quarry operations. Estimates also are revised when and if additional geological evidence indicates that a revision is necessary. ** Renewable through date shown. *** Lease does not expire until reserves are exhausted. Surface rights at the Paducah, Kentucky, quarry are owned.
The locations of the 13 sand and gravel operations which the Company operates directly or through joint ventures are shown on page 9 of the Company's 1993 Annual Report to Shareholders, which page is incorporated herein by reference. The estimated average life of these operations, calculated in the same manner as in the chart set out above, is approximately 9 years. Approximately 52% of the Company's estimated 45 million tons of sand and gravel reserves are located on owned land, with the remaining 48% located on leased land. CHEMICALS Facilities for the production of chemicals are owned and operated by the Company at Wichita, Kansas; Geismar, Louisiana; and Port Edwards, Wisconsin. Vulcan PSI leases its headquarters in Tucson, Arizona, as well as eleven offices in nine other states and one in Langen, Germany. With a few exceptions, the Geismar and Wichita facilities produce the full line of products manufactured in the Company's Chemicals business. The Port Edwards plant produces chlorine, caustic soda, muriatic acid and caustic potash. All of the plant facilities at Wichita are located on a 1,396-acre tract of land owned by the Company. The facilities are situated approximately 10 miles southwest of Wichita. Mineral rights for salt are held by the Company under two leases that are automatically renewable from year to year unless terminated by the Company and under several other leases which may be kept in effect so long as production from the underlying properties is continued. The Company operates an electric power cogeneration facility at the Wichita plant site which generates approximately one-third of the plant's electricity and two-thirds of its process steam requirements. In addition, the Company owns 160 acres of water reserves and 320 acres of salt reserves. The facilities at Geismar, Louisiana, are located on a 1,126-acre tract of land owned by the Company. Included in the facilities at the Geismar plant is an electric power cogeneration facility owned by the Company which supplies substantially all of the electricity and process steam required by the plant. Mineral rights for salt are held under a long-term lease expiring in 1997 with an option to renew for an additional 10 years. The plant facilities at Port Edwards, Wisconsin, are located on a 25-acre tract of land, the surface rights to which are owned by the Company. Currently, the Company purchases its salt requirements for the Port Edwards facility from regional sources of supply. The Company's Chemicals facilities are designed to permit a high degree of flexibility as to feedstocks, product mix and by-product ratios; therefore, actual plant production capacities vary according to these factors. Management does not believe, however, that there is material excess in production capacity at the Company's Chemicals facilities. OTHER PROPERTIES The Company's corporate offices are located in an office complex near Birmingham, Alabama. Headquarters staff of the Chemicals and Southern divisions, and of Vulcan Gulf Coast Materials, Inc., also are located in this complex. The space is occupied pursuant to a lease which runs through December 31, 1998. The Company has the option of extending this lease for two five-year periods. The Company's space in this complex is leased at an approximate annual rental, as of December 31, 1993, of $1,131,000, which is subject to limited escalation. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in various lawsuits incident to the ordinary course of business. It is not possible to determine with precision the probable outcome or the amount of liability, if any, under these lawsuits; however, in the opinion of the Company and its counsel, the disposition of these lawsuits will not adversely affect the consolidated financial statements of the Company to a material extent. In the course of its Construction Materials and Chemicals operations, the Company is subject to occasional governmental proceedings and orders pertaining to occupational health and safety and protection of the environment, such as proceedings or orders relating to noise abatement, air emissions or water discharges. As part of its continuing program of environmental stewardship, however, the Company has been able to resolve such proceedings and to comply with such orders without any materially adverse effect on its business. In May 1985, the Company received a letter from the United States Environmental Protection Agency ("EPA") regarding remedial actions at a chemical waste disposal site located in Ascension Parish, Louisiana. Records indicate that the Company generated a portion of the waste placed at the site and the EPA has deemed the Company a potentially responsible party ("PRP") with respect to the site under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"). On September 30, 1988, the EPA issued a Unilateral Administrative Order ("UAO") to the Company and other respondents. This UAO purported to require the respondents to clean up the site in accordance with a remedial plan developed by EPA's contractor. On February 5, 1991, following a review and revision process by the EPA, the EPA issued a revised UAO which included its final remedial plan. This revised UAO named the same respondents, including the Company, that were named in the EPA's initial UAO. In a letter dated April 9, 1991, the Company and three other companies that also generated waste placed at the site gave notice to the EPA that the signatory companies intend to comply with all lawful terms and conditions of the revised UAO. In December 1988, the Company and other PRPs received a letter from the EPA demanding reimbursement for approximately $1,540,000 in past costs and administrative expenses incurred by the EPA in connection with the foregoing matter. Effective June 8, 1992, the Company and other PRPs entered into a Site Participation Agreement ("Agreement") allocating among the parties those costs which are anticipated to be incurred or which might be incurred in connection with the remediation activity at the site and those costs which may be recovered by the EPA or other agencies in connection with their past response work or oversight work at the site. Moreover, in June 1992, the EPA orally informed the Company and other PRPs that it would seek to recover its response and oversight costs incurred to date, and toward that end has made a supplemental Information Request, pursuant to Section 104(e) of CERCLA, seeking information to support such recovery of costs. The Company responded to the supplemental Information Request on July 14, 1992. The demand by EPA for recovery of costs includes the amount previously demanded from the Company and the other parties in December 1988. Cleanup of the site will take an extended period, but the majority of the costs likely will be incurred in the first three years after commencement of site work, which began in late 1992. It is estimated that the parties, including the Company, to the aforementioned Agreement will incur a total cost of $34,700,000 to perform the work required by EPA's final remedial plan and payment of the EPA's past costs. The Company has reviewed this cost estimate and the information currently available to the Company relative to EPA's most recent request for recovery of its costs. On the basis of this review and the information currently available, the Company has determined that its accrued reserve should be adequate to cover its allocated share of currently anticipated site remediation costs and those response and oversight costs which may be recovered by the EPA. The Company will continue to review relevant cost information as it becomes available, particularly information relative to the EPA's request for recovery of its costs. The Company has begun to make payments from its accrued reserve pursuant to the Agreement. In June 1986 and December 1989, lawsuits were filed in Louisiana federal and state courts by over 100 people who live in the vicinity of the above-described waste disposal site and who claimed damages for mental anguish, personal injuries and/or diminution in property value as a result of alleged releases from said site. These suits named as defendants the owners and operators of the site and 17 chemical companies, including the Company, alleged to have contributed some part of the waste at the site. The lawsuits were consolidated into a single action in the United States District Court for the Middle District of Louisiana. All claims in the consolidated action subsequently either were dismissed or settled prior to trial, except that the heirs of a deceased plaintiff have reserved the right later to file a wrongful death action. The Company has received a letter dated August 2, 1991, from the State of New Jersey Department of Environmental Protection and Energy ("NJDEPE") concerning a site located in Newark, New Jersey, which the Company previously owned and upon which the Company operated a chemicals production facility from the early 1960s until 1974. The NJDEPE's letter contends that hazardous substances and pollutants contaminate the site and that a Remedial Investigation/Feasibility Study ("RI/FS") is required in order to determine the nature and extent of such contamination and to develop a remedial action plan with respect thereto. The Company has conducted a preliminary investigation with respect to this matter and the merits of the NJDEPE's contentions. Based upon its preliminary investigation and review, in a September 18, 1991, letter to the NJDEPE, the Company questioned the factual and legal bases for the NJDEPE's contention that the Company should bear some responsibility for remediating the site and asked the NJDEPE to reconsider its tentative position and decide that the Company should not be a responsible party at this site. On November 11, 1991, the Company received from the NJDEPE "a Directive and Notice to Insurers" (the "Directive"). It is not clear that the Directive was intended to be directly responsive to the factual and legal assertions made by the Company in its letter to the NJDEPE dated September 18, 1991. In this Directive, nevertheless, the NJDEPE purports to direct the Company to pay within thirty (30) days to the NJDEPE $1,000,000 to be used by the NJDEPE to conduct an RI/FS at the site. The NJDEPE also asserts that it may have the right to cause a lien to be placed against the real and personal property of the Company to secure the payment of any such amounts. If the Company fails to comply with the Directive, and it is later determined that the Company did not have sufficient grounds for such non-compliance, the Company could be subject to liability in an amount equal to three times the cost of the work performed by the NJDEPE and statutory penalties in an amount not to exceed $50,000 per day. Although the NJDEPE has not withdrawn its Directive, the NJDEPE has informally agreed that it will not need to enforce its Directive as long as the Company participates in the RI/FS for this site. On August 20, 1993, two other allegedly responsible parties, Safety-Kleen Environsystems Company and Bristol-Meyers Squibb Company (collectively, the "Respondents"), entered into an Administrative Consent Order ("ACO") issued by the NJDEPE concerning the site. The ACO contains certain findings of fact by the NJDEPE and enforceable provisions governing the conduct by the Respondents of an RI/FS for the site and remedial actions, if any, resulting therefrom. Under a separate agreement with Respondents and certain successors, the Company will share in the cost of the RI/FS. The Respondents estimate a cost of $250,000 to complete the RI. The cost of the FS depends upon the results of the RI. Depending, in turn, upon the results of the RI/FS, it is possible that the NJDEPE will require site remediation under the ACO. In that event, it is also possible that the Respondents or the NJDEPE will assert that the Company should bear some responsibility in connection with such remediation. At this time, however, it is impossible to predict the ultimate outcome of this matter. The Company received a letter dated October 21, 1991, from Chevron USA, Inc. ("Chevron"), in which Chevron contends that hazardous substances and pollutants contaminate a site owned by Chevron and located in Woodbridge Township, Middlesex County, New Jersey. The Company sold the site to Chevron in 1958 and owned and operated a detinning facility adjacent to the Chevron site until 1964. Chevron has advised the Company that, in response to the identification of the site as a former solid waste management unit and pursuant to the corrective action provisions of the Resource Conservation and Recovery Act ("RCRA"), Chevron is investigating the feasibility of corrective action and is seeking assistance from parties who may have been responsible for some or all of the contamination at the site. The Company and other allegedly responsible parties who received similar correspondence from Chevron and who previously owned or operated facilities on or adjacent to the site have had meetings with Chevron to discuss the status of the site. The parties have received information from Chevron relative to the contamination of the site, but have not verified this information by independent sampling. Given the information available to the Company regarding this site, the extent to which the Company's former operations may have contributed to contamination at the site cannot now be established or confirmed. For these reasons, it is impossible at this time for the Company to predict the outcome of this matter or the existence or extent of any liability of the Company with respect to this matter. On January 3, 1992, the Company received a General Notice Letter from the EPA regarding alleged releases or threatened releases of hazardous substances at a hazardous waste treatment, storage and disposal site in Greer, South Carolina, which was operated by Aqua-Tech Environmental, Inc., a South Carolina corporation. The EPA's letter advised that the Company may be considered a PRP under Section 107(a) of CERCLA. The Company confirmed that in 1987 it sent cylinders containing titanium tetrachloride to the site for disposal. On April 20, 1992, the Company became a party to a PRP Agreement whereby the signatories thereto agreed to cooperate in responding as a PRP group to the EPA. On April 24, 1992, the EPA issued a UAO to many of the PRPs, including the Company, directing that a removal action with respect to hazardous wastes on-site be undertaken by them. The UAO covers only the removal action; the EPA is considering whether to place the site on the National Priorities List for remediation purposes. On May 1, 1992, the Steering Committee of the PRP group notified the EPA of the intent of the participating PRPs to undertake the removal work required by the UAO. Work at the site began on May 4, 1992. To date, 179 PRPs have agreed to participate in the removal action and to share the costs of the removal action according to a series of interim allocations. The PRP group's consultant has estimated the cost of the removal action to be $14,000,000. Interim allocations raising this amount have been made among the PRP group. The Company has paid over $116,000 pursuant to these interim allocations. The only identified waste of the Company which remained at the site and required removal was one container which cost $355 to remove and dispose of. Because the Company already has paid more than its share of removal costs, the Company has withdrawn from further participation in the removal action as a member of the PRP group. It is impossible at this time to estimate whether the Company will recoup amounts previously paid for the removal action. Additional costs for the assessment and remediation of any contamination at the site have not been estimated. Moreover, the extent to which the site is contaminated and the extent to which the wastes the Company sent to the site may have contributed to any such contamination have not been estimated or confirmed. However, the Company does not believe that its potential share of any costs related to the site will adversely affect the consolidated financial statements of the Company to a material extent. On October 23, 1992, the Company received a letter from the EPA pursuant to Section 104(e) of CERCLA requesting information regarding waste generated by the Company and disposed at a sanitary landfill in Muskego, Wisconsin, which is operated by Waste Management of Wisconsin ("Muskego Landfill"). The Company responded to this request by stating that it had no knowledge of the generation of any solid waste by the Company's former aluminum recycling facility in Oak Creek, Wisconsin, which would have been disposed of in the Muskego Landfill. Nevertheless, the Company received on January 14, 1993, a UAO pursuant to Section 106(a) of CERCLA directing that the Company and 45 other respondents/PRPs perform remedial design and remedial action work with respect to the Muskego Landfill, which has been placed on the National Priorities List by the EPA for cleanup of the release of hazardous substances. The Company and other PRPs have formed a PRP Group to respond to the UAO and to formulate allocations for Waste Management's past response costs, totaling approximately $5,600,000, a remedial design study for the first phase of remediation, costing approximately $470,000, and first phase remedial work, costing an estimated $10,500,000. The Company has paid $4,800 toward administrative costs for the PRP Group and $6,000 for its share of the remedial design study. The Company's potential share of the ultimate cleanup cost cannot be determined precisely at this time, and the Company is engaged in negotiations as a member of the PRP Group with regard to a lump-sum payment in settlement of the Company's share of the costs relating to the first phase of remediation. However, the Company does not believe that its share of the costs for the first phase will exceed $20,000. Moreover, the Company does not believe that its potential share of such costs or of any additional costs for the second phase of remediation involving groundwater will adversely affect the consolidated financial statements of the Company to a material extent. During the spring of 1992, representatives of the EPA conducted certain inspections of the Company's chemicals manufacturing plant in Geismar, Louisiana. Subsequent to completing those inspections, on March 18, 1993, a Complaint, Compliance Order, and Notice of Opportunity for Hearing (the "Multimedia Complaint and Order") was issued to the Company by the EPA. In the Multimedia Complaint and Order, the EPA makes certain findings of fact and law, and based upon such findings, alleges multiple count violations of RCRA, CERCLA and the Clean Air Act, for which violations EPA seeks civil penalties in the total amount of $298,650. The Multimedia Complaint and Order also purports to impose upon the Company a civil compliance order requiring the Company to implement certain actions pertaining to hazardous wastes stored for longer than a year and to implement a tracking plan for plant wastes to ensure accurate determination, identification and labeling of hazardous and nonhazardous wastes generated and stored in containers at the plant. On April 30, 1993, the Company filed its Answer to Complaint and Compliance Order and Request for Hearing (the "Answer") with the EPA, including a request for an adjudicatory hearing as provided in the Multimedia Complaint and Order on all factual and legal issues raised by the Company in its Answer. Subsequent to the filing of its Answer, the Company and EPA have been engaged in negotiations regarding the settlement of this matter, which negotiations remain on-going. On March 9, 1994, the Company received a letter from the EPA concerning alleged releases or threatened releases of hazardous substances at the Jack's Creek/Sitkin Smelting Superfund Site located in Mifflin County, Pennsylvania, near the town of Maitland. The Sitkin Smelting Company operated a secondary smelting facility at the site from 1958 until declaring bankruptcy in 1977. The EPA's letter states that the Company may be considered a PRP pursuant to Section 107(a) of CERCLA. The EPA advised that it may order some or all of the PRPs to undertake response actions at the site and that PRPs may also be liable for costs the EPA incurs or has incurred in responding to any releases or threatened releases at the site. The EPA has already undertaken certain response actions at the site, and has completed an RI/FS. The Company is among the 880 PRPs that EPA has identified as having sold and shipped a total of approximately 307 million pounds of material to the business operated on the site. The EPA's documents indicate that the Company's shipments occurred between 1972 and 1977, totalled approximately 1.8 million pounds, and represent .84% of the total weight of the materials sent to this smelting facility. These shipments consisted primarily of sales of brass and metal parts which the Company believes were co-products of its former metals operation. The Company is currently conducting an investigation of this matter and anticipates participating in a meeting of PRPs who may form a steering committee to negotiate on behalf of all the PRPs the apportionment of the response costs with the EPA. The Company's share, if any, of past and future response costs associated with the site will be the subject of on-going discussions with other PRPs and the EPA. However, based on the limited information currently available to it, the Company does not believe that its ultimate share of such costs will adversely affect the consolidated financial statements of the Company to a material extent. As reported in the Company's Form 8-K Current Report dated June 12, 1992, an antidumping petition was filed on May 20, 1992, with the International Trade Commission ("ITC"), by two stone producers and a distributor in southeast Texas alleging that a U.S. industry was being injured by imports of crushed limestone from Mexico. The companies involved in the Crescent Market Project quarry and crush limestone from Mexico's Yucatan Peninsula for sale along the U.S. Gulf Coast. On June 29, 1992, the ITC, in a 5-0 vote (with one commissioner not participating), determined that a U.S. industry was not being injured by the importation of crushed limestone from Mexico. This ruling was appealed to the United States Court of International Trade ("CIT") where the determination of the ITC was sustained and the action was dismissed. The judgment of the CIT has now been appealed to the United States Court of Appeals for the Federal Circuit. Oral argument occurred on February 9, 1994, and a decision is now pending. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of 1993 to the Company's security holders through the solicitation of proxies or otherwise. ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT The names, positions and dates of birth of the executive officers (as defined in 17 CFR 240.3b-7) of the Company are as follows: Birth Name Position Date Herbert A. Sklenar Chairman, Chief Executive Officer and Director 6/07/31 William J. Grayson, Jr. Executive Vice President, Construction Materials 10/16/30 R. Morrieson Lord Senior Vice President, Human Resources 11/02/30 Richard K. Carnwath Vice President, Planning and Development 7/13/48 William F. Denson, III Vice President-Law and Secretary 8/01/43 Daniel F. Sansone Vice President-Finance and Treasurer 8/04/52 E. Starke Sydnor Assistant General Counsel 11/30/43 Peter J. Clemens, III Senior Vice President, West - Construction Materials Group 12/17/43 Harold D. Lambert Senior Vice President - Construction Materials Group 5/15/28 Robert L. Mayville Senior Vice President, Business Development and Operations Services - Construction Materials Group 10/03/34 Guy K. Mitchell, Jr. Senior Vice President, East - Construction Materials Group 12/08/48 Guy M. Badgett, III President, Southeast Division 4/28/48 Michael J. Ferris President, Chemicals Division 10/20/44 William L. Glusac President, Southwest Division 8/07/50 Donald M. James President, Southern Division 1/20/49 Daniel J. Leemon President, Midsouth Division 5/14/38 Thomas R. Ransdell President, Vulcan Gulf Coast Materials, Inc. 6/25/42 James W. Smack President, Mideast Division 4/01/43 Christopher G. White President, Midwest Division 5/16/40 The principal occupations of the executive officers during the past five years have been set forth below: Herbert A. Sklenar was elected President and Chief Executive Officer in May 1986. He was elected to his present position in May 1992. William J. Grayson, Jr., was elected Executive Vice President, Construction Materials Group, in February 1987. R. Morrieson Lord was elected Senior Vice President, Human Resources, in April 1979. Richard K. Carnwath was elected Vice President, Planning and Development, in July 1985. William F. Denson, III, was elected Secretary in April 1981 and continues to serve in that capacity. He served as Assistant General Counsel from May 1988 until May 1992, when he was appointed Vice President and Assistant General Counsel. He was elected to his present position as Vice President-Law effective January 1, 1994. Daniel F. Sansone joined the Company as Controller in January 1988 and was promoted to Vice President and Controller in May 1991. He was elected to his present position as Vice President-Finance and Treasurer effective January 1, 1994. E. Starke Sydnor became Assistant General Counsel in May 1988 and was elected a corporate officer in May 1992. Peter J. Clemens, III, served as Senior Vice President, Finance, from October 1983 until January 1, 1994, when he became Senior Vice President-West, Construction Materials Group. Harold D. Lambert served as President, Midsouth Division, from January 1970 until July 1993. He was appointed to his present position as Senior Vice President, Construction Materials Group effective August 1, 1993. Robert L. Mayville was appointed President, Mideast Division, in September 1985. In May 1991, he was appointed Senior Vice President, Business Development and Operations Services-Construction Materials Group. Guy K. Mitchell, Jr., served as Vice President, North Carolina, Mideast Division, until July 1989, when he was appointed President, Chattanooga Division. In May 1991, he was appointed Senior Vice President-East, Construction Materials Group. Guy M. Badgett, III, served as Vice President, Midsouth Division, until April 1991, when he was appointed Executive Vice President. He was appointed to his present position as President, Southeast Division, in July 1992. Michael J. Ferris was appointed President, Chemicals Division, in May 1987. William L. Glusac served as Vice President, East Tennessee and Kentucky, Midsouth Division, until March 1990, when he was appointed Executive Vice President, Southwest Division. In April 1991, he was appointed President, Southwest Division. Donald M. James joined the Company as Senior Vice President and General Counsel in December 1992 and was appointed to his present position as President, Southern Division, effective January 1, 1994. He was a partner with the Birmingham law firm of Bradley, Arant, Rose and White prior to joining the Company. Daniel J. Leemon was appointed President, Midwest Division, in 1984, and assumed the additional position of Chairman, Southwest Division, in December 1989. He was promoted to Senior Vice President-West, Construction Materials Group, in May 1991. He served in this position through July 1993, and was appointed to his present position as President, Midsouth Division, effective August 1, 1993. Thomas R. Ransdell was elected President of Vulcan Gulf Coast Materials, Inc., in 1987. James W. Smack served as Vice President-Virginia, Mideast Division, until May 1991, when he was appointed President, Mideast Division. Christopher G. White served as Vice President, Operations, Midwest Division, until he was appointed Executive Vice President of that Division in 1990. He served in the latter position until he was appointed President, Midwest Division, in May 1991. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS "Common Stock Market Prices and Dividends" on page 28 of the Company's 1993 Annual Report to Shareholders is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA "Selected Financial Data" on page 25 of the Company's 1993 Annual Report to Shareholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis" on pages 29 through 37 and "Financial Terminology" on page 53 of the Company's 1993 Annual Report to Shareholders are incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following information relative to this item is included in the Company's 1993 Annual Report to Shareholders on the pages shown below, which are incorporated herein by reference: Page Financial Statements and Notes 40-51 Management's Responsibility for Financial Reporting and Internal Control 52 Independent Auditors' Report 52 Supplementary Information-Quarterly Financial Data (Unaudited) 38 With the exception of the aforementioned information and the information incorporated by reference in Items 1, 3, 5, 6, 7 and 14, the Company's 1993 Annual Report to Shareholders is not deemed filed as part of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No information is required to be included in this report pursuant to Item 304 of Regulation S-K which requires disclosure of certain information if the registrant has changed accountants under specified circumstances. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Within 120 days of the close of the Company's fiscal year on December 31, 1993, the Company will file a definitive proxy statement with the Securities and Exchange Commission pursuant to Regulation 14A (the Company's "1994 Proxy Statement"). The information under the headings "Election of Directors," "Nominees for Election to the Board of Directors" and "Directors Continuing in Office" included in the 1994 Proxy Statement are incorporated herein by reference. For the information required by Item 401 of Regulation S-K concerning executive officers of the registrant, reference is also made to the information provided in Part I, Item 4a, of this Annual Report on Form 10-K. No information is required to be included in this report pursuant to Item 405 of Regulation S-K which requires disclosure of certain information concerning compliance with Section 16(b) of the Securities Exchange Act of 1934. ITEM 11. EXECUTIVE COMPENSATION The information under the headings "Compensation of Directors," "Executive Compensation," "Shareholder Return Performance Presentation," "Retirement Income Plan" and "Employee Special Severance Plan" included in the Company's 1994 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the headings "Security Ownership of Certain Beneficial Owners" and "Security Holdings of Management" included in the Company's 1994 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS No information is required to be included in this report pursuant to Item 404 of Regulation S-K, which requires disclosure of certain information with respect to certain relationships or related transactions of the directors and management. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) FINANCIAL STATEMENTS The following financial statements are included in the Company's 1993 Annual Report to Shareholders on the pages shown below and are incorporated herein by reference: Page Consolidated Statements of Earnings 40 Consolidated Balance Sheets 41 Consolidated Statements of Cash Flows 42 Consolidated Statements of Shareholders' Equity 43 Notes to Financial Statements 44-51 Management's Responsibility for Financial Reporting and Internal Control 52 Independent Auditors' Report 52 Supplementary Information-Quarterly Financial Data (Unaudited) 38 (a) (2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedules for the years ended December 31, 1993, 1992 and 1991 are included in Part IV (see Exhibits 99.1 through 99.5) of this report on the indicated pages: Schedule VI Property, Plant and Equipment Schedule VII Allowance for Depreciation, Depletion and Amortization Schedule IX Valuation and Qualifying Accounts and Reserves Schedule X Short-Term Borrowings Schedule XI Supplementary Income Statement Information Other schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the financial statements or notes thereto. Financial statements (and summarized financial information) of 50% or less owned entities accounted for by the equity method have been omitted because they do not, considered individually or in the aggregate, constitute a significant subsidiary. (a) (3) EXHIBITS The exhibits required by Item 601 of Regulation S-K and indicated below, other than Exhibits (11) and (12) which are on pages and of this report, are either incorporated by reference herein or accompany the copies of this report filed with the Securities and Exchange Commission and the New York Stock Exchange. Copies of such exhibits will be furnished to any requesting shareholder of the Company upon payment of the costs of copying and transmitting the same. (3)(a) Certificate of Incorporation (Restated 1988) of the Company. Exhibit 3(a) to the Company's 1988 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (3)(b) By-laws of the Company, as restated February 2, 1990, and as last amended February 12, 1993. Exhibit (3)(b) to the Company's 1992 Form 10-K Annual Report is incorporated herein by reference. (4) Exhibits 1 and 4 to the Form S-3 filed with the Securities and Exchange Commission by the Company on May 2, 1991, and registering $200,000,000 in debt securities is incorporated herein by reference. Form 8-K Report filed with the Securities and Exchange Commission by the Company on May 14, 1991, is incorporated herein by reference. The Company hereby agrees to furnish the Securities and Exchange Commission, upon request, all instruments defining the rights of holders of its other long-term debt or that of any of its consolidated subsidiaries. (10)(a) The Management Incentive Plan of the Company, as last amended and restated. Exhibit 10(a) to the Company's 1989 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (10)(b) The 1981 Long-Range Performance Share Plan of the Company, as last amended and restated. Exhibit 10(b) to the Company's 1989 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (10)(c) The 1991 Long-Range Performance Share Plan of the Company. Exhibit A to the Company's definitive proxy statement for the annual meeting of its shareholders held May 16, 1991 ("1991 Proxy Statement"), is incorporated herein by reference (File No. 1-4033). (10)(d) The Plan for Directors Emeriti and Other Eligible Directors, as last amended and restated. Exhibit 10(c) to the Company's 1990 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (10)(e) The Unfunded Supplemental Benefit Plan for Salaried Employees. Exhibit 10(d) to the Company's 1989 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (10)(f) The Deferred Compensation Plan for Directors Who Are Not Employees of the Company, as last amended and restated on December 8, 1992. Exhibit A to the Company's definitive proxy statement for the annual meeting of its shareholders held May 20, 1993 is incorporated herein by reference. (10)(g) The 1983 Long-Term Incentive Plan, as last amended and restated. Exhibit 10(f) to the Company's 1989 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (10)(h) The Stock Plan for Nonemployee Directors. Exhibit B to the Company's 1991 Proxy Statement is incorporated herein by reference (File No. 1-4033). (10)(i) The Employee Special Severance Plan of the Company. Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report is incorporated herein by reference (File No. 1-4033). (11) Computation of Earnings Per Share for the five years ended December 31, 1993. (page of this report) (12) Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 1993. (page of this report) (13) The Company's 1993 Annual Report to Shareholders. (pages 29 through 95 of the bound exhibits) (21) List of the Company's subsidiaries as of December 31, 1993. (page 96 of the bound exhibits) (24) Powers of Attorney for all directors whose names are signed to this Annual Report on Form 10-K pursuant to such Powers of Attorney. (pages 97 through 106 of the bound exhibits) Information, financial statements and exhibits required by Form 11-K with respect to the Company's Thrift Plan for Salaried Employees, Construction Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly Employees Savings Plan, for the fiscal year ended December 31, 1993, will be filed as one or more amendments to this Form 10-K on or before June 29, 1994, as permitted by Rule 15d-21 under the Securities Exchange Act of 1934. (b) REPORTS ON FORM 8-K On November 16, 1993, the Company filed a Form 8-K Report with the Securities and Exchange Commission with respect to the projected segment earnings for 1994. INDEPENDENT AUDITORS' REPORT Vulcan Materials Company: We have audited the accompanying consolidated balance sheets of Vulcan Materials Company and its subsidiary companies as of December 31, 1993, 1992 and 1991, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the years then ended, and have issued our report thereon dated February 4, 1994; such financial statements and report are included in your 1993 Annual Report to the Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Vulcan Materials Company and its subsidiary companies, listed in Item 14. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these schedules based on our audits. In our opinion, such supplemental schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information shown therein. /s/ Deloitte & Touche Birmingham, Alabama February 4, 1994 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 (Registrant) March 29, 1994 By /s/ H. A. Sklenar Date H. A. Sklenar Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ H. A. Sklenar Chairman, Chief Executive March 29, 1994 H. A. Sklenar Officer and Director (Principal Executive Officer) /s/ D. F. Sansone Vice President-Finance March 29, 1994 D. F. Sansone and Treasurer (Principal Financial Officer and Principal Accounting Officer) The following directors: Marion H. Antonini Director Livio D. DeSimone Director John K. Greene Director Richard H. Leet Director Douglas J. McGregor Director Ann D. McLaughlin Director James V. Napier Director Donald B. Rice Director Orin R. Smith Director By /s/ William F. Denson, III March 29, 1994 William F. Denson, III Attorney-in-Fact for each of the nine directors listed above EX-11 2 EARNINGS PER SHARE
EXHIBIT 11 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES COMPUTATION OF EARNINGS PER SHARE For the Years Ended December 31 Amounts in Thousands, Except Per Share Data 1993 1992 1991 1990 1989 Primary and fully diluted earnings: Average common shares outstanding............ 36,757 37,590 38,052 38,676 40,223 Common share equivalents: Performance Share Plan..................... 218 190 164 154 172 Total shares............................... 36,975 37,780 38,216 38,830 40,395 Net earnings from continuing operations................................... $88,229 $90,980 $52,580 $120,278 $133,420 Net earnings (loss) from discontinued operations................................... -- -- -- -- (4,051) Net earnings before cumulative effect of accounting changes........................ 88,229 90,980 52,580 120,278 129,369 Net earnings from cumulative effect of accounting changes........................ -- 3,005 -- -- 1,490 Net earnings $88,229 $93,985 $52,580 $120,278 $130,859 Primary and fully diluted earnings (loss) per share of common stock: Continuing operations........................ $2.39 $2.41 $1.38 $3.10 $3.30 Discontinued operations...................... -- -- -- -- (0.10) Earnings before cumulative effect of accounting changes...................... 2.39 2.41 1.38 3.10 3.20 Cumulative effect of accounting changes.................................... -- 0.08 -- -- 0.04 Net earnings................................. $2.39 $2.49 $1.38 $3.10 $3.24
EX-12 3 RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES For the Years Ended December 31 Amounts in Thousands 1993 1992 1991 1990 1989 Fixed charges: Interest expense before capitalization credits.................... $10,187 $ 10,441 $11,336 $ 9,349 $ 6,873 Amortization of financing costs............. 115 116 75 44 42 One-third of rental expense................. 7,375 8,711 4,815 5,678 3,979 Total fixed charges....................... $ 17,677 $ 19,268 $16,226 $ 15,071 $ 10,894 Net earnings from continuing operations.................................. $ 88,229 $ 90,980 $52,580 $120,278 $133,420 Provision for income taxes.................... 36,993 39,746 20,867 58,951 67,943 Fixed charges................................. 17,677 19,268 16,226 15,071 10,894 Capitalized interest credits.................. (1,016) (673) (131) (1,591) (756) Amortization of capitalized interest.......... 882 792 840 705 603 Earnings from continuing operations before income taxes as adjusted............. $142,765 $150,113 $90,382 $193,414 $212,104 Ratio of earnings to fixed charges............ 8.1 7.8 5.6 12.8 19.5
EX-13 4 ANNUAL REPORT OPERATIONS DIRECTORY DIVISION OFFICES CONSTRUCTION MATERIALS Mideast Division Southeast Division Winston-Salem, North Carolina Atlanta, Georgia Midsouth Division Southern Division Knoxville, Tennessee Birmingham, Alabama Midwest Division Southwest Division Chicago, Illinois San Antonio, Texas Vulcan Gulf Coast Materials, Inc. Birmingham, Alabama CHEMICALS Chemicals Division Birmingham, Alabama CONSTRUCTION MATERIALS AGGREGATES - PRODUCTION FACILITIES Crushed Stone Plants - Domestic ALABAMA Norcross Garrison Birmingham Rabun Montour Calera Red Oak Robins Childersburg Stockbridge Vinton Glencoe Villa Rica Helena KENTUCKY Huntsville ILLINOIS Brandenburg Lacon Bolingbrook Cecilia Ohatchee Casey Fort Knox Russellville Fairbury Lake City Scottsboro Joliet Lexington (2) Trinity Kankakee Tuscumbia Lemont MISSISSIPPI McCook-Hodgkins Iuka FLORIDA Momence Brooksville * Plainfield NORTH CAROLINA Pontiac Boone GEORGIA Sycamore Charlotte Adairsville Weston Concord Columbus Elkin Dalton INDIANA Enka Grayson Francesville Gold Hill Kennesaw Monon Henderson LaGrange Hendersonville Lithia Springs IOWA High Point Lithonia Cedar Rapids Mocksville Newnan Fairfax Morganton North Wilkesboro NORTH CAROLINA Maryville Richmond (continued) Morristown Skippers Rockingham Nashville (3) South Boston Stokesdale Parsons Warrenton Winston-Salem Readyville Yadkinville Rogersville WISCONSIN Savannah Milwaukee SOUTH CAROLINA Sevierville Oshkosh Anderson South Pittsburg Racine Blacksburg Tazewell * Sussex Gray Court Greenville TEXAS Liberty Abilene Lyman Brownwood Pacolet Eastland Knippa TENNESSEE San Antonio (3) Athens Weatherford (2) Bristol Chattanooga VIRGINIA Clarksville Boydton Cleveland Chatham Dayton Danville Franklin Edgerton Greeneville Garrisonville Holladay Gate City Kingsport Manassas Knoxville (2) Norton Lebanon Occoquan CRUSHED STONE PLANTS - INTERNATIONAL MEXICO Playa del Carmen * SLAG PLANTS SAND AND GRAVEL PLANTS ALABAMA ALABAMA INDIANA Birmingham (3) Huntsville Angola Gadsden Fremont FLORIDA Kimmell TENNESSEE Polk * Lafayette (2) Chattanooga Middlebury ILLINOIS South Bend Crystal Lake Decatur TENNESSEE Chattanooga WISCONSIN Oconomowoc OTHER AGGREGATES ALABAMA TEXAS Birmingham Uvalde Fine Grind Rock Asphalt Products Plant Plant ILLINOIS WISCONSIN Hodgkins Sussex Mineral Filler Pulverized Limestone Plant Plant * Joint Venture AGGREGATES - PRINCIPAL SALES YARDS ALABAMA SOUTH CAROLINA Mobile (3) Myrtle Beach FLORIDA TENNESSEE Jacksonville * Memphis Tampa * TEXAS GEORGIA Beaumont * Bainbridge Galveston * Houston * INDIANA Wanatah VIRGINIA Alexandria LOUISIANA Franklin New Orleans * (4) Norfolk Portsmouth NORTH CAROLINA Springfield Elizabeth City Suffolk Virginia Beach * Joint Venture OTHER PRODUCTS AND SERVICES ALABAMA ILLINOIS Birmingham McCook Conveyor Belt Service Facility Dock Facilities Utility Plant Dolomitic Lime Plant GEORGIA INDIANA Ringgold Wanatah Ready-mixed Concrete Plant Trucking Company Trenton Ready-mixed Concrete Plant KENTUCKY TENNESSEE Lake City Chattanooga Coal Handling Terminals (4) Asphaltic Concrete Barge Transportation Plants (2) Emulsified Asphalt Plant SOUTH CAROLINA Paving Construction Operation Anderson Ready-mixed Concrete Asphaltic Concrete Plant Plants (2) Paving Construction Operation Cleveland Liberty Asphaltic Concrete Plant Asphaltic Concrete Plant Dayton Pacolet Asphaltic Concrete Plant Asphaltic Concrete Plant Knoxville Crusher Repair Facility Emulsified Asphalt Plant Mack Truck Distributorship TEXAS BAHAMAS Abilene Nassau Asphaltic Concrete Plants (2) Ocean Shipping Operation * Brownwood Asphaltic Concrete Plant Eastland * Joint Venture Asphaltic Concrete Plant Fort Worth Asphaltic Concrete Plant San Antonio Asphaltic Concrete Plants (4) Ready-mixed Concrete Plants (3) Uvalde Trucking Company Voca Industrial Sand Plant Weatherford Asphaltic Concrete Plants (2) CHEMICALS PLANTS KANSAS LOUISIANA WISCONSIN Wichita Geismar Port Edwards VULCAN PEROXIDATION SYSTEMS ARIZONA Tucson Page 9
FINANCIAL REVIEW SELECTED FINANCIAL DATA Amounts and shares in millions, except per share data 1993 1992 1991 1990 1989 OPERATIONS Net sales................................................. $ 1,133.5 $ 1,078.0 $ 1,007.5 $ 1,105.3 $ 1,076.2 Gross profit.............................................. $ 246.7 $ 249.1 $ 212.1 $ 291.4 $ 300.0 As a percent of net sales............................. 21.8% 23.1% 21.1% 26.4% 27.9% Interest expense.......................................... $ 9.2 $ 9.8 $ 11.3 $ 7.8 $ 6.1 Net earnings from continuing operations.................. $ 88.2 $ 91.0 $ 52.6 $ 120.3 $ 133.4 As a percent of average shareholders' equity.......... 12.8% 13.3% 7.7% 18.2% 20.5% Net earnings (loss) from discontinued operations.......... $ - $ - $ - $ - $ (4.0) Cumulative effect of accounting changes................... $ - $ 3.0 $ - $ - $ 1.5 Net earnings.............................................. $ 88.2 $ 94.0 $ 52.6 $ 120.3 $ 130.9 Primary and fully diluted earnings per common share: Net earnings from continuing operations.............. $ 2.39 $ 2.41 $ 1.38 $ 3.10 $ 3.30 Net earnings (loss) from discontinued operations...... $ - $ - $ - $ - $ (0.10) Cumulative effect of accounting changes............... $ - $ 0.08 $ - $ - $ 0.04 Net earnings.......................................... $ 2.39 $ 2.49 $ 1.38 $ 3.10 $ 3.24 Effective tax rate........................................ 29.5% 30.4% 28.4% 32.9% 33.7% Operating income from continuing operations after taxes... $ 93.3 $ 98.7 $ 59.5 $ 125.1 $ 137.2 As a percent of average capital employed.............. 9.7% 10.3% 6.1% 13.7% 16.1% LIQUIDITY AND CAPITAL RESOURCES Working capital........................................... $ 161.8 $ 169.8 $ 149.8 $ 61.5 $ 192.3 Current ratio............................................. 2.1 2.3 2.1 1.3 2.4 Net cash provided by continuing operations................ $ 194.1 $ 199.1 $ 184.9 $ 205.9 $ 255.8 As a percent of long-term obligations (year end)...... 190.2% 185.6% 166.4% 460.9% 463.7% Ratio of earnings to fixed charges........................ 8.1 7.8 5.6 12.8 19.5 Total assets (year end)................................... $ 1,078.6 $ 1,083.9 $ 1,073.1 $ 1,118.0 $ 1,002.5 Average capital employed: Short-term debt....................................... $ 25.2 $ 24.1 $ 72.7 $ 62.1 $ 8.3 Long-term obligations................................. 105.6 108.2 66.5 47.2 57.4 Other noncurrent liabilities.......................... 140.4 138.4 155.7 144.1 135.0 Shareholders' equity.................................. 691.7 686.5 682.7 661.5 651.4 Total............................................. $ 962.9 $ 957.2 $ 977.6 $ 914.9 $ 852.1 Long-term obligations (year end).......................... $ 102.0 $ 107.3 $ 111.1 $ 44.7 $ 55.2 As a percent of long-term capital..................... 10.9% 11.3% 11.8% 5.1% 6.4% Dividends declared and paid per common share.............. $ 1.26 $ 1.20 $ 1.20 $ 1.20 $ 1.12 Total common stock dividends.............................. $ 46.3 $ 45.1 $ 45.7 $ 46.4 $ 45.1 Common shares outstanding (year end)...................... 36.3 37.2 38.0 38.1 39.5
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SEGMENT FINANCIAL DATA Amounts in millions Amount Percent of Company Total 1993 1992 1991 1990 1989 1993 1992 1991 1990 1989 NET SALES Construction Materials.. $ 756.7 $ 686.4 $ 648.1 $ 696.1 $ 645.7 67% 64% 64% 63% 60% Chemicals............... 376.8 391.6 359.4 409.2 430.5 33 36 36 37 40 Total........... $1,133.5 $1,078.0 $1,007.5 $1,105.3 $1,076.2 100% 100% 100% 100% 100% EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST EXPENSE AND INCOME TAXES Construction Materials.. $ 116.7 $ 88.3 $ 41.8 $ 112.0 $ 115.3 87% 63% 50% 60% 55% Chemicals............... 17.4 51.3 42.6 72.4 86.4 13 36 50 39 42 Segment earnings...... 134.1 139.6 84.4 184.4 201.7 100 99 100 99 97 Interest income, etc.... 0.3 0.9 0.3 2.6 5.8 - 1 - 1 3 Total........... $ 134.4 $ 140.5 $ 84.7 $ 187.0 $ 207.5 100% 100% 100% 100% 100% OPERATING INCOME FROM CONTINUING OPERATIONS AFTER TAXES Construction Materials.. $ 81.6 $ 65.3 $ 32.1 $ 77.3 $ 78.4 87% 66% 54% 62% 57% Chemicals............... 11.5 32.7 27.3 46.0 54.5 12 33 46 37 40 Interest income, etc.... 0.2 0.7 0.1 1.8 4.3 1 1 - 1 3 Total........... $ 93.3 $ 98.7 $ 59.5 $ 125.1 $ 137.2 100% 100% 100% 100% 100% NET CASH PROVIDED BY CONTINUING OPERATIONS Construction Materials.. $ 156.6 $ 141.9 $ 141.8 $ 130.2 $ 159.4 81% 71% 77% 63% 62% Chemicals............... 41.1 63.8 50.0 76.4 93.6 21 32 27 37 37 Interest expense, interest income, etc., net........... (3.6) (6.6) (6.9) (0.7) 2.8 (2) (3) (4) - 1 Total........... $ 194.1 $ 199.1 $ 184.9 $ 205.9 $ 255.8 100% 100% 100% 100% 100%
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SEGMENT FINANCIAL DATA Dollar amounts in millions Amount Percent of Company Total 1993 1992 1991 1990 1989 1993 1992 1991 1990 1989 PROPERTY ADDITIONS Construction Materials.. $ 59.3 $ 56.5 $60.8 $187.3 $127.7 59% 57% 71% 84% 87% Chemicals............... 41.3 42.0 24.9 35.2 19.0 41 43 29 16 13 Total........... $100.6 $ 98.5 $85.7 $222.5 $146.7 100% 100% 100% 100% 100% DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials.. $ 74.3 $ 75.5 $ 80.4 $ 71.7 $63.6 72% 73% 73% 72% 70% Chemicals............... 28.5 27.8 29.3 28.5 27.3 28 27 27 28 30 Total........... $102.8 $103.3 $109.7 $100.2 $90.9 100% 100% 100% 100% 100% AVERAGE CAPITAL EMPLOYED Construction Materials.. $707.4 $708.4 $748.4 $656.8 $550.6 73% 74% 77% 72% 65% Chemicals............... 248.5 226.4 226.1 228.9 227.8 26 24 23 25 27 Cash items.............. 7.0 22.4 3.1 29.2 73.7 1 2 - 3 8 Total........... $962.9 $957.2 $977.6 $914.9 $852.1 100% 100% 100% 100% 100% OPERATING INCOME FROM CONTINUING OPERATIONS AFTER TAXES AS A PERCENT OF AVERAGE CAPITAL EMPLOYED Construction Materials.. 11.5% 9.2% 4.3% 11.8% 14.2% Chemicals............... 4.6 14.5 12.1 20.1 23.9 Interest income, etc.... 3.0 3.0 5.1 6.1 6.0 Total........... 9.7% 10.3% 6.1% 13.7% 16.1% ________ Definitions of certain financial terms used in this report are provided on page 53.
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COMMON STOCK MARKET PRICES AND DIVIDENDS Range of Dividend Paid Common Stock Market Prices Per Share 1993 1992 Quarter Ended High Low High Low 1993 1992 March 31 . . . . . . . . . $56 1/8 $47 $40 1/4 $36 $.31 1/2 $ .30 June 30. . . . . . . . . . 52 40 1/4 46 3/4 37 5/8 .31 1/2 .30 September 30 . . . . . . . 49 3/4 43 3/4 46 1/2 39 3/4 .31 1/2 .30 December 31. . . . . . . . 50 3/4 43 1/2 49 5/8 39 1/2 .31 1/2 .30 $ 1.26 $1.20
The Company's common stock is traded on the New York Stock Exchange (tickler symbol VMC). As of January 31, 1994, the number of shareholders of record approximated 4,800. Dividends paid in 1993 totaled $46,296,000 as compared with $45,095,000 paid in 1992. On February 11, 1994, the Board of Directors authorized a quarterly dividend of 33 cents per common share payable March 10, 1994. The new quarterly dividend represents a 5% increase over quarterly dividends paid in 1993. During the last five years, the Company's dividend payout rate has averaged 48% of prior year net earnings. The Company's policy is to pay out a reasonable share of earnings as dividends consistent, on average, with the payout record of the last few years, and consistent with the goal of maintaining debt ratios within prudent and generally acceptable limits. Page 28 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Vulcan's net earnings in 1993 were $88.2 million, or $2.39 per share, as compared with net earnings and earnings per share before the cumulative effect of an accounting change, of $91.0 million and $2.41 in 1992. In 1992 the Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which resulted in net earnings of $3.0 million, or 8 cents per share. With the accounting change included, 1992 net earnings and earnings per share totaled $94.0 million and $2.49, respectively. Sales in 1993 were $1,133.5 million as compared to the 1992 total of $1,078.0 million. Pretax earnings were $125.2 million as compared to $130.7 million in 1992. SALES Sales were up 5% from the 1992 total. Construction Materials sales increased 10% while Chemicals sales declined 4%. Construction Materials sales increased principally because of improved shipments, while the Chemicals shortfall reflects lower prices and the effect on volume of a less favorable product mix. Specific elements of the change in sales from 1992 to 1993 are shown below (amounts in millions):
Increased Higher Total (Decreased) (Lower) Increase Unit Volume Prices (Decrease) Construction Materials . . . . . . . . $60.2 $10.1 $70.3 Chemicals . . . . . . . . . . . . . . (9.9) (4.9) (14.8) Total . . . . . . . . . . . . . . $50.3 $ 5.2 $55.5
The following table summarizes the increase in sales from 1991 to 1992 (amounts in millions):
Increased Lower Total Unit Volume Prices Increase Construction Materials . . . . . . . . $42.1 $(3.8) $38.3 Chemicals. . . . . . . . . . . . . . . 36.9 (4.6) 32.3 Total. . . . . . . . . . . . . . . $79.0 $(8.4) $70.6
Construction Materials sales in 1993 increased due to stronger demand for crushed stone, which reflected increased construction activity in most markets. Shipments of crushed stone improved 7% from the 1992 level. Slightly higher unit selling prices also contributed to the increase. The decline in Chemicals sales in 1993 reflects sharply lower caustic soda prices and unfavorable product mix changes, only partially offset by improved prices for chlorine and chlorinated organic products. Total Chemicals tons shipped remained at 1992 levels. However, sales were shifted from higher to lower margin products due to market conditions and the regulatory phase-out of certain products. The increase in Construction Materials sales in 1992 was principally due to higher volume, reflecting increased construction activity in some markets. The 1992 increase in Chemicals sales reflects strong demand for both organic and inorganic products and higher plant operating rates. Sales of sodium chlorite, which were initiated at mid-year, accounted for $6.1 million of the sales increase. Higher prices for organic products were more than offset by lower caustic soda prices. EARNINGS Earnings before interest expense and income taxes for 1993 were $134.4 million, down 4% from comparable 1992 earnings of $140.5 million. The 1992 amount was up 66% from the $84.7 million earned in 1991. Construction Materials segment earnings of $116.7 million, which are before interest expense and income taxes, increased 32% from 1992's level of $88.3 million. The increase principally reflects the impact of higher volume. Construction Materials segment earnings in 1992 were more than double the 1991 result of $41.8 million. The increase reflects the impacts of higher volume, lower production costs and the absence of significant unusual charges. In 1991 the Company recorded a provision of $16.2 million referable to the impairment of certain Construction Materials assets located in Texas. The Company also recorded provisions that year totaling $4.9 million for shutdown costs associated with the liquidation of its Construction Materials assets in south Florida. Both of these items are discussed in Note 13 to the financial statements. Chemicals segment earnings in 1993 of $17.4 million were down sharply from 1992's result of $51.3 million. The decline reflects net lower prices, a less favorable product mix, and higher energy, raw materials and other manufacturing costs. Bad debt expense also increased in 1993. Chemicals segment earnings in 1992 were $51.3 million, up 20% from 1991 earnings of $42.6 million. The increase reflects principally higher volume. Higher prices for organic products were more than offset by lower prices for caustic soda, and operating costs also increased in 1992. OPERATING COSTS AND EXPENSES Cost of goods sold of $886.8 million in 1993 increased 7% from 1992's level, principally as a result of higher volume in the Construction Materials segment and increased energy, raw materials and manufacturing costs in the Chemicals segment. Cost of goods sold increased 4% in 1992 from the 1991 amount, reflecting mainly higher volume in both segments, partially offset by lower unit costs in the Construction Materials segment. Repair and maintenance expenses were $120.0 million in 1993, up 4% from the 1992 amount due to higher volume in the Construction Materials segment. Total repair and maintenance expenses in 1992 were up 4% from the 1991 amount. The increase reflects principally higher scheduled maintenance expense in the Chemicals segment. Construction Materials repair and maintenance expenses in 1992 were up slightly from the 1991 level. Depreciation, depletion and amortization expense totaled $102.8 million in 1993, a slight decline from the 1992 amount of $103.3 million. The decrease reflects in part the effect of reduced spending for property additions in 1991 and 1992. Property additions increased 2% in 1993. Depreciation, depletion and amortization expense in 1992 decreased 6% from 1991, also as a result of the reduced capital spending. Energy costs (excluding depreciation and operating expenses referable to Chemicals cogeneration facilities) totaled $124.7 million, up 4% from the 1992 level. The increase relates mainly to higher natural gas prices in the Chemicals segment. The 4% increase in 1992 to $119.8 million is primarily due to higher production levels in the Chemicals segment. During the years 1985 to 1989, the Company recorded provisions totaling $28.8 million for environmental remediation at a now-closed third party waste disposal site to which the Chemicals segment last shipped waste materials in 1970. No additional provisions referable to this site have been made. The Company and other companies that also generated waste placed at the site have received approval of a cleanup plan from the United States Environmental Protection Agency. Preliminary cleanup activities at the site began in 1992. Although the cost of the cleanup and the Company's share thereof cannot be determined precisely at this time, the Company currently believes that the aforementioned provisions are adequate. Provisions for other environmental expenses for the last four years have not been material. Contingent liabilities for environmental remediation activities of the Chemicals segment and discontinued operations are discussed in Note 9 to the financial statements. Selling, administrative and general expenses totaled $111.1 million in 1993, up 5% from the 1992 level. This increase reflects principally higher bad debt provisions, higher professional fees and normal increases in personnel costs, partially offset by lower provisions for stock- based incentive plans. In 1992, selling, administrative and general expenses increased 7% from the 1991 level. This increase is due mainly to higher provisions for management incentive plans, which were severely restricted in 1991. Both the short-term incentive program and the long-term plans are designed to reflect Company performance and the costs of those plans are fully reflected in the Company's financial statements. Much of the change in expense in 1993 reflects movements in the price of the Company's stock as well as reduced payout estimates for certain long-term awards. Other operating costs totaled $5.0 million in 1993 as compared with $5.3 million in 1992. These costs were $28.2 million in 1991. The decrease from 1991 to 1992 reflects the absence in 1992 of the previously referenced impairment and liquidation provisions recorded in 1991. OTHER ITEMS Other income, net of other charges, was $3.7 million in 1993 as compared with $2.5 million in 1992. The increase reflects mainly improved results referable to current as well as discontinued joint ventures. Other income in 1992 compared favorably with a net charge of $.5 million in 1991. The favorable comparison reflects principally higher gains on the sale of assets and improved results from joint ventures. Interest expense was $9.2 million in 1993, down from the 1992 amount of $9.8 million. Interest expense in 1992 decreased from the 1991 amount of $11.2 million. The declines in both years reflect lower average borrowings as well as higher capitalized interest on construction projects. INCOME TAXES The Company's 1993 effective tax rate was 29.5%, down from the 1992 rate of 30.4%. The decrease reflects principally an increased favorable effect of statutory depletion and an adjustment to prior year accruals for state income taxes, partially offset by an increase in the federal statutory rate. The increase in the federal rate, including an adjustment to deferred taxes for the rate change, lowered 1993 earnings per share by 6 cents. The 1992 effective rate increased from the 1991 rate of 28.4% reflecting a decreased relative effect of statutory depletion, which had an abnormally high impact in 1991 because of the unusual charges mentioned earlier. As discussed in Note 7 to the financial statements, in 1992 the Company adopted Statement of Financial Accounting Standards (SFAS) NO. 109, Accounting for Income Taxes, which supersedes SFAS NO. 96. The Company previously adopted SFAS No. 96 in 1989. The principal change made by SFAS No. 109 is to revise the criteria for recognition and measurement of deferred tax assets. The cumulative effect of adopting SFAS No. 109 is to revise the criteria for recognition and measurement of deferred tax assets. The cumulative effect of adopting SFAS NO. 109 created net earnings of $3.0 million, which was equivalent to 8 cents per share. RETURN ON EQUITY AND CAPITAL The ratio of net earnings to average shareholders equity was 12.8% in 1993, as compared with the 1992 and 1991 returns of 13.3% and 7.7%, respectively. The ratio of operating income after taxes to average capital employed for the Company was 9.7% in 1993. Comparable returns in 1992 and 1991 were 10.3% and 6.1% respectively. The decreases in the 1993 return measures are due principally to the effect of lower earnings in the Chemicals segment, substantially offset by improved results from the Construction Materials segment. The increases in the 1992 return measures reflect higher earnings in both business segments. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Net cash provided by continuing operations amounted to $194.1 million in 1993, down $5.0 million, or 3%, from 1992's total of $199.1 million. Net cash provided by the Chemicals segment decreased by $22.7 million, principally as a result of lower earnings. Net cash provided by the Construction Materials segment increased $14.7 million due to higher earnings. Although mixed economic conditions affected both business segments throughout the year, the Company's ability to generate significant cash flows enabled it again to fund capital requirements internally, reduce total indebtedness and return cash to its shareholders. Net cash provided by segment operations in each of the last three years, including the effect of working capital changes, is summarized below (amounts in millions):
1993 1992 1991 Construction Materials . . . . . $156.6 $141.9 $141.8 Chemicals. . . . . . . . . . . . 41.1 63.8 50.0 Interest expense, interest income, etc., net. . . . . . . (3.6) (6.6) (6.9) Total. . . . . . . . . . . . . $194.1 $199.1 $184.9
Net cash used for investing activities totaled $103.8 million in 1993, down $6.9 million from the 1992 level. Cash expenditures for property, plant and equipment were $96.0 million in 1993, up $20.8 million, while cash investments of $9.6 million in associated companies decreased $2.0 million from comparable 1992 investments. Cash spending for acquisitions totaled $4.5 million as compared with $33.2 million in 1992. Net cash used for financing activities amounted to $90.9 million in 1993, down $2.8 million from the prior year's $93.7 million. Interest-bearing debt was reduced $4.6 million in 1993 compared with a net decrease of $16.2 million in 1992. Although no long-term debt was issued during 1992 or 1993, the Company issued $81.0 million of medium-term notes in 1991 that replaced the majority of its commercial paper and permitted prepayment of the remaining balance of its 10 1/4% debentures. Purchases of the Company's common stock increased by $7.6 million to $40.0 million in 1993. Cash and cash equivalents amounted to $14.0 million at December 31, 1993, down slightly from the 1992 year end balance of $15.7 million. WORKING CAPITAL Working capital, exclusive of debt and cash items (cash, cash equivalents and short-term investments), totaled $150.9 million at December 31, 1993, down $5.7 million from the 1992 level. This decrease compares with a working capital increase of $10.9 million in 1992 and a decrease of $11.3 million in 1991. Working capital increases referable to acquisitions amounted to $300,000 in 1993, $4.2 million in 1992 and $2.8 million in 1991. Accounts and notes receivable totaled $150.4 million at December 31, 1993, decreasing $1.0 million from the 1992 balance. Inventories at year end 1993 of $105.0 million were $2.9 million below the comparable 1992 level due to lower Construction Materials inventories. Current liabilities, excluding debt items, were $137.7 million at the end of 1993, up 4% from the 1992 total of $132.6 million due mainly to higher accrued liabilities in Chemicals. The increase in payables and accrued liabilities resulted principally from a reclassification of certain environmental liabilities from deferred to current accounts and an increase in accrued maintenance expenses. The Company's overall current position is summarized below (dollar amounts in millions and as of year end):
1993 1992 1991 Working capital, exclusive of debt and cash items . . . . . . . . $150.9 $156.6 $145.7 Cash and cash equivalents. . . . . . . 14.0 15.7 19.0 Short-term debt. . . . . . . . . . . . (1.7) (1.1) (13.2) Accrued interest . . . . . . . . . . . (1.4) (1.4) (1.7) Total working capital (including debt and cash items) . . . . . $161.8 $169.8 $149.8 Current ratio. . . . . . . . . . . . . 2.1 2.3 2.1 Acid test ratio. . . . . . . . . . . . 1.2 1.2 1.2 Turnover ratios:* Customer receivables: Construction Materials . . . . . 7.2 7.2 7.0 Chemicals. . . . . . . . . . . . 5.7 6.0 6.2 Total. . . . . . . . . . . . . 6.7 6.7 6.7 Inventories: Construction Materials . . . . . 6.8 6.1 5.6 Chemicals. . . . . . . . . . . . 10.5 12.5 9.9 Total. . . . . . . . . . . . . 7.8 7.6 6.7 * Calculated by dividing net sales and cost of goods sold by the average of month-end receivables and inventories, respectively.
The decrease in the current ratio from 1992 to 1993 was due to higher current liabilities, mainly accrued liabilities for materials and services, and slightly lower receivables and inventories. These were partially offset by a higher current portion of deferred taxes. The increase in the current ratio in 1992 over 1991 was due to higher current assets, mainly receivables and the current portion of deferred taxes, partially offset by lower inventories and cash. The turnover ratio for Construction Materials receivables remained constant at 7.2 in 1993. The small decrease in the Chemicals turnover ratio from 6.0 in 1992 to 5.7 in 1993 reflects slower remittances from customers. The increase in the Construction Materials turnover ratio from 7.0 in 1991 to 7.2 in 1992 resulted primarily from higher sales. Higher receivables, which reflected slower collections from customers, caused a small decrease in the turnover ratio for Chemicals from 6.2 in 1991 to 6.0 in 1992. Construction Materials achieved a better inventory turnover ratio in 1993 due to lower average inventory levels and higher sales volume. Chemicals inventory turnover declined from 12.5 in 1992 to 10.5 in 1993 due primarily to an increase in average inventory levels. Both segments had better inventory turnover ratios in 1992 over 1991 primarily due to lower average inventory levels in Construction Materials and Chemicals of 6% and 15%, respectively. PROPERTY ADDITIONS Property additions, including acquisitions, totaled $100.6 million in 1993, up slightly from the 1992 level of $98.5 million. The Company classifies its property additions into three categories based upon the predominant purpose of the project, as explained on page 53. The table below summarizes property additions by each category (amounts in millions):
Project Purpose 1993 1992 1991 Replacement. . . . . . . . . . . $ 48.7 $29.2 $36.1 Environmental control. . . . . . 7.1 11.6 3.3 Subtotal . . . . . . . . . . . 55.8 40.8 39.4 Profit adding: Acquisitions . . . . . . . . . 4.2 23.0 21.3 Other. . . . . . . . . . . . . 40.6 34.7 25.0 Subtotal . . . . . . . . . . . 44.8 57.7 46.3 Total. . . . . . . . . . . $100.6 $98.5 $85.7
Total property additions were higher in 1993 as increased spending for replacement projects in Construction Materials more than offset lower spending for environmental control and profit adding projects. The increase in property additions in 1992 reflects higher spending for profit adding and environmental control projects which more than offset lower replacement spending. Three Construction Materials acquisitions accounted for virtually all of the $23.0 million spent for businesses acquired. Three Chemicals environmental improvement projects comprised over half of the spending in that category. Two of those projects, the construction of a calcium chloride production facility and installation of penta-acid purification equipment, are primarily responsible for a reduction in the segment's reportable emissions of hazardous wastes of more than 60% in 1993 from the previous year. As a percent of net cash provided by continuing operations, spending for replacement and environmental control projects was 29% in 1993, 20% in 1992 and 21% in 1991. Commitments for capital expenditures were $11.7 million at December 31, 1993. This included $9.1 million referable to various Chemicals projects. SHORT-TERM BORROWINGS AND INVESTMENTS During most of 1992 and 1993, the Company was in a net short-term borrowing position. Short-term borrowings in 1993 reached a maximum of $64.0 million, averaged $25.5 million and were zero at year end. Comparable 1992 amounts were $56.3 million, $21.3 million and zero, respectively. The higher 1993 levels were attributable predominately to higher average levels of receivables and inventories as compared with 1992. Details pertaining to short-term borrowings during the last three years (dollar amounts in millions) are as follows:
1993 1992 1991 Year end. . . . . . . . . . . . . $ - $ - $ 9.8 Maximum outstanding . . . . . . . $64.0 $ 56.3 $ 128.0 Average outstanding . . . . . . . $25.5 $ 21.3 $ 75.0 Weighted average interest rate. . 3.2% 3.8% 6.5%
The above interest rate averages were computed using daily outstanding principal amounts. The Company's policy is to maintain unused bank lines of credit and/or committed credit facilities at least equal to its outstanding commercial paper. Unsecured bank lines of credit totaling $70.0 million were maintained at the end of 1993. Standard & Poor's Corporation and Moody's Investors Services, Inc. have assigned ratings of A-1+ and P-1, respectively, to the Company's commercial paper. It is the Company's policy to invest cash in excess of its operating requirements in interest- bearing securities having an original or remaining maturity of one year or less. When investing such temporarily excess funds, the Company's objectives, in order of their importance, are (1) to meet projected cash requirements; (2) to preserve the principal of each short-term investment; and (3) to realize the maximum available return consistent with the preceding objectives. The investment of excess cash during the last three years (dollar amounts in millions) is shown below:
1993 1992 1991 Maximum invested . . . . . . . . . . . . $ 26.2 $ 32.7 $ 25.5 Average invested . . . . . . . . . . . . $ 7.2 $ 21.9 $ 2.8 Taxable-equivalent yield . . . . . . . . 3.3% 4.3% 5.6% Year end . . . . . . . . . . . . . . . . $ - $ 15.7 $ 5.7 Average maturity (at year end, in days) . . . . . . . . - 7 13
LONG-TERM OBLIGATIONS During 1993 the Company reduced its total long-term obligations by $5.3 million to $102.0 million as compared with a net decrease of $3.8 million in 1992. In February 1992 the Company refunded 7 7/8%/8% tax exempt bonds in the amount of $5.8 million at the lower rate of 6 3/8%. In March 1992 the Company exercised its option to prepay a 10 3/4% capitalized lease obligation in the amount of $2.9 million. During the three-year period ended December 31, 1993, long-term obligations increased cumulatively by $57.4 million from the $44.7 million outstanding at December 31, 1990; however, total interest bearing obligations (including short-term debt) decreased $48.4 million during the same period. During the same three year period, shareholders' equity, net of common stock purchases of $77.6 million and dividends of $137.1 million, increased by $22.8 million to $703.0 million. The Company's overall long-term capital position is shown in the following table (dollar amounts in millions and as of year end):
1993 1992 1991 Long-term debt . . . . . . . . . . . . $102.0 $107.2 $108.4 Capitalized lease obligations. . . . . - .1 2.7 Total long-term obligations. . . . . 102.0 107.3 111.1 Other noncurrent liabilities . . . . . 132.8 141.5 143.7 Shareholders' equity . . . . . . . . . 703.0 700.1 682.9 Total long-term capital. . . . . . . $937.8 $948.9 $937.7 Long-term obligations as a percent of: . . . . . . . . . . Total long-term capital. . . . . . . 10.9% 11.3% 11.8% Shareholders' equity . . . . . . . . 14.5% 15.3% 16.3% Net cash provided by continuing operations as a percent of long-term obligations. . . . . . . . 190% 186% 166% Ratio of earnings to fixed charges. . . . . . . . . . . . 8.1 7.8 5.6
The ratio of earnings to fixed charges increased in 1993 as the decrease in earnings was offset by a decline in rental expense. The improvement in the 1992 ratio of earnings to fixed charges is attributable principally to higher earnings. At current debt levels, future ratios of earnings to fixed charges will reflect primarily changes in earnings. Although the future ratio of long-term obligations to total long-term capital will depend upon specific investment and financing decisions, management believes the Company's cash generating capability, along with its financial strength and business diversification, can reasonably support a ratio of 25% to 30%. The actual ratio at the end of 1993 was 10.9%. The Company has made acquisitions from time to time and will continue to actively pursue attractive investment opportunities. If financing is required for this purpose, it may be accomplished temporarily on a short-term basis or by incurring long-term debt. The Company's long-term borrowing requirements can be satisfied in either the public debt or private placement markets. Vulcan's medium-term notes issued in 1991 are rated AA- by Standard & Poor's and A1 by Moody's. In 1990 the Company adopted Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk. Refer to Note 9 to the financial statements for additional information. COMMON STOCK Common stock issued during 1993 totaled 21,479 shares valued at $903,000. Comparable figures in 1992 were 18,216 shares and $717,000. Common stock issued during 1993, 1992 and 1991 related to the Company's long-term management incentive plans. In addition, shares were issued in 1993 through the Stock Plan for Non-employee Directors. Shares held in the treasury were used to satisfy these distributions. During 1993 the Company purchased 895,015 shares of its common stock at a cost of $40.0 million, equal to an average price of $44.68 per share. The acquired shares are being held for general corporate purposes, including distributions under management incentive plans. The Company's decisions to purchase shares of common stock are made based upon the common stock's valuation and price, the Company's liquidity, its actual and projected needs for cash for investment projects and regular dividends, and the Company's debt level. Following are the number and cost of shares purchased during each of the last three years:
1993 1992 1991 Shares purchased: Number. . . . . . . . . . . 895,015 786,230 141,319 Total cost (millions) . . . $40.0 $32.4 $5.2 Average cost. . . . . . . . $44.68 $41.24 $36.92 Shares in treasury at year-end: Number. . . . . . . . . . . 10,224,218 9,350,682 8,582,668 Average cost. . . . . . . . $35.03 $34.05 $33.35
CAPITAL EMPLOYED During 1993 total average capital employed in continuing operations was $962.9 million, up $5.7 million from the 1992 average of $957.2 million. The latter figure reflects a decrease of $20.4 million, or 2%, from the $977.6 million employed on average in 1991. Average capital employed in the Company's business segments is shown in the table below (amounts in millions):
1993 1992 1991 Construction Materials . . . . . . . . $707.4 $708.4 $748.4 Chemicals. . . . . . . . . . . . . . . 248.5 226.4 226.1 Cash items . . . . . . . . . . . . . . 7.0 22.4 3.1 Total. . . . . . . . . . . . . . . . $962.9 $957.2 $977.6
The sources and deployment of the year-to-year increases in total average capital employed are shown below (amounts in millions; brackets indicate a decrease):
1992-93 1991-92 Sources: Short-term debt. . . . . . . . . . . $ 1.1 $(48.6) Long-term obligations. . . . . . . . (2.6) 41.6 Other noncurrent liabilities . . . . 2.0 (17.2) Shareholders' equity . . . . . . . . 5.2 3.8 Total . . . . . . . . . . . . . . $ 5.7 $(20.4) Deployment:. . . . . . . . . . . . . . Construction Materials . . . . . . . $ (1.0) $(40.0) Chemicals. . . . . . . . . . . . . . 22.0 .3 Cash items . . . . . . . . . . . . . (15.3) 19.3 Total . . . . . . . . . . . . . . $ 5.7 $(20.4)
During the period 1989 through 1993, total average capital employed in continuing operations has grown at an average annual compound rate of 4.2%, or by the cumulative amount of $179.1 million. During this period, interest-bearing debt has increased by $63.0 million and, as a percent of average capital employed, has increased from 8.6% to 13.6%. The following summary indicates the sources and deployment of the increase in average capital employed from 1989 to 1993 (amounts in millions):
Amount of Increase % of (Decrease) Total Sources: Short-term debt. . . . . . . . . . . $ 21.1 12 % Long-term obligations. . . . . . . . 41.9 24 Other noncurrent liabilities . . . . 13.1 8 Shareholders' equity . . . . . . . . 98.1 56 Total . . . . . . . . . . . . . . $174.2 100 % Deployment: Construction Materials . . . . . . . $222.2 128 % Chemicals. . . . . . . . . . . . . . 18.0 10 Cash items . . . . . . . . . . . . . (61.1) (35) Total continuing operations 179.1 103 Discontinued operations. . . . . . . . (4.9) (3) Total . . . . . . . . . . . . . . $174.2 100 %
SUMMARY OF INTERNAL CASH FLOWS AND TRANSACTIONS WITH INVESTORS Pages 60 and 61 of this report contain detailed information showing the principal elements of operating and investing cash flows referable to the Company's segments for each of the last 11 years. The table on page 62 summarizes these detailed cash flows and also shows the cash flows referable to nonsegment activities and transactions between the Company and its suppliers of invested capital, both lenders and shareholders. A cumulative summary of these flows for the five-year period ended December 31, 1993 is provided on the following page. As indicated in the table, the net cash flows referable to all of the Company's operating and investing activities, and to the tax deductibility of interest expense, totaled $365.6 million during the last five years. Transactions with capital suppliers during the same period required $429.1 million, including $417.7 million returned to shareholders and $11.4 million to lenders. Discontinued operations required $16.4 million. The net result of these cash flows was a decrease in cash items of $75.4 million from the end of 1988 to the end of 1993.
SUPPLEMENTARY INFORMATION - QUARTERLY FINANCIAL DATA Amounts in millions, except per share data First Second Third Fourth Total Quarter Quarter Quarter Quarter Year 1993 Net sales.............................................. $214.1 $306.0 $331.3 $282.1 $1,133.5 Gross profit........................................... 29.7 74.0 85.1 57.9 246.7 Net earnings (loss).................................... (0.5) 31.6 36.6 20.5 88.2 Primary and fully diluted earnings (loss) per share.... (0.01) 0.84 0.99 0.57 2.39 1992 Net sales.............................................. $210.6 $284.2 $312.3 $270.9 $1,078.0 Gross profit........................................... 35.6 74.5 80.8 58.2 249.1 Net earnings before cumulative effect of accounting change............................... 4.6 30.2 35.8 20.4 91.0 Cumulative effect of accounting change................. 3.0 - - - 3.0 Net earnings........................................... 7.6 30.2 35.8 20.4 94.0 Primary and fully diluted earnings per share: Before cumulative effect of accounting change...... 0.12 0.80 0.94 0.55 2.41 Cumulative effect of accounting change............. 0.08 - - - 0.08 Net earnings....................................... 0.20 0.80 0.94 0.55 2.49 1991 Net sales.............................................. $197.1 $266.4 $289.2 $254.8 $1,007.5 Gross profit........................................... 27.6 66.7 71.3 46.5 212.1 Net earnings (loss).................................... (2.2) 25.9 30.2 (1.3) 52.6 Primary and fully diluted earnings (loss) per share.... (0.06) 0.68 0.79 (0.03) 1.38
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CONSOLIDATED STATEMENTS OF EARNINGS Vulcan Materials Company and Subsidiary Companies For the Years Ended December 31, 1993, 1992, and 1991 Amounts and shares in thousands, except per share data 1993 1992 1991 Net sales............................................. $1,133,489 $1,078,035 $1,007,478 Cost of goods sold.................................... 886,764 828,951 795,346 Gross profit on sales................................. 246,725 249,084 212,132 Selling, administrative and general expenses.......... 111,085 105,749 98,859 Other operating costs Impairment and liquidation charges (Note 13)...... - - 21,147 Abandonments, idle facilities expense, etc........ 4,987 5,326 7,008 Total other operating costs................... 4,987 5,326 28,155 Other income (charges), net Interest income................................... 1,013 1,795 1,507 Other, net........................................ 2,727 690 (1,973) Total other income (charges), net............. 3,740 2,485 (466) Earnings before interest expense and income taxes..... 134,393 140,494 84,652 Interest expense (Note 4)............................. 9,171 9,768 11,205 Earnings before income taxes.......................... 125,222 130,726 73,447 Provision for income taxes (Note 7) Current........................................... 37,460 46,833 36,357 Deferred.......................................... (467) (7,087) (15,490) Total provision for income taxes.............. 36,993 39,746 20,867 Net earnings before cumulative effect of accounting change................................. 88,229 90,980 52,580 Cumulative effect of accounting change (Note 7)....... - 3,005 - Net earnings.......................................... $ 88,229 $ 93,985 $ 52,580 Primary and fully diluted earnings per share Net earnings before cumulative effect of accounting change............................. $2.39 $2.41 $1.38 Cumulative effect of accounting change (Note 7)... - 0.08 - Net earnings...................................... $2.39 $2.49 $1.38 Dividends per share .................................. $1.26 $1.20 $1.20 Average common and common equivalent shares outstanding 36,975 37,780 38,216 The accompanying Notes to Financial Statements are an integral part of these statements.
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CONSOLIDATED BALANCE SHEETS Vulcan Materials Company and Subsidiary Companies As of December 31, 1993, 1992 and 1991 Amounts in thousands 1993 1992 1991 ASSETS Current assets Cash and cash equivalents (Note 2).................................. $ 13,996 $ 15,669 $ 18,993 Accounts and notes receivable: Customers, less allowance for doubtful accounts: 1993, $7,284; 1992, $6,814; 1991, $6,267.................................. 141,606 142,454 130,439 Other........................................................... 8,798 8,941 7,699 Inventories (below estimated current cost by $32,986 for 1993, $32,371 for 1992 and $42,701 for 1991; Note 3).............. 105,017 107,948 112,636 Current portion of deferred income taxes............................ 26,898 24,604 11,900 Prepaid expenses.................................................... 6,298 5,213 3,480 Total current assets........................................ 302,613 304,829 285,147 Investments and long-term receivables................................... 56,505 49,970 40,699 Property, plant and equipment, net (Note 4)............................. 657,785 663,721 675,440 Deferred charges and other assets (Note 8).............................. 61,648 65,395 71,825 Total....................................................... $1,078,551 $1,083,915 $1,073,111 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities: Long-term debt.................................................. $ 1,671 $ 1,029 $ 1,660 Capitalized lease obligations................................... 70 70 1,827 Notes payable (Note 2).............................................. - - 9,763 Trade payables and accruals......................................... 89,504 81,775 67,951 Accrued income taxes................................................ 14,450 17,040 16,551 Accrued salaries and wages.......................................... 20,437 19,371 17,536 Accrued interest.................................................... 1,356 1,383 1,688 Other accrued liabilities (Note 9).................................. 13,327 14,368 18,412 Total current liabilities................................... 140,815 135,036 135,388 Long-term debt (Note 5)................................................. 102,035 107,205 108,434 Long-term capitalized lease obligations (Note 6)........................ - 70 2,672 Deferred income taxes (Note 7).......................................... 74,193 72,383 69,626 Deferred management incentive and other compensation (Note 8)........... 17,885 18,618 15,906 Other postretirement benefits (Note 8).................................. 27,377 24,880 22,491 Other noncurrent liabilities (Note 9)................................... 13,283 25,611 35,666 Other commitments and contingent liabilities (Note 9) Shareholders' equity Common stock, $1 par value.......................................... 46,573 46,573 46,573 Capital in excess of par value...................................... 4,587 3,962 3,463 Retained earnings (Note 5).......................................... 1,009,912 967,979 919,089 Total....................................................... 1,061,072 1,018,514 969,125 Less cost of stock in treasury...................................... 358,109 318,402 286,197 Total shareholders' equity.................................. 702,963 700,112 682,928 Total....................................................... $1,078,551 $1,083,915 $1,073,111 The accompanying Notes to Financial Statements are an integral part of these statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS Vulcan Materials Company and Subsidiary Companies For the Years Ended December 31, 1993, 1992 and 1991 Amounts in thousands 1993 1992 1991 OPERATIONS Net earnings before cumulative effect of accounting change......................... $ 88,229 $ 90,980 $ 52,580 Adjustments to reconcile net earnings to net cash provided by continuing operations: Depreciation, depletion and amortization................................... 102,780 103,345 109,725 Provisions for impairment and liquidation of assets (Note 13).............. - - 21,147 (Increase) decrease in assets before effects of business acquisitions: Accounts and notes receivable.......................................... 991 (11,760) 14,728 Inventories............................................................ 3,199 6,592 3,220 Current portion of deferred income taxes............................... (2,294) (12,704) (4,855) Prepaid expenses....................................................... (1,085) (681) 363 Increase (decrease) in liabilities before effects of business acquisitions: Accrued interest and income taxes...................................... (27) (305) (427) Trade payables, accruals, etc.......................................... 5,906 12,828 1,412 Deferred income taxes.................................................. 1,810 2,757 (15,546) Other noncurrent liabilities........................................... (10,564) (4,954) (57) Issuance of common stock in connection with Performance Share Plan......... 904 717 1,038 Other, net................................................................. 4,246 12,311 1,530 Net cash provided by continuing operations............................. 194,095 199,126 184,858 Net cash used for discontinued operations (Note 9)................................. (1,077) (1,031) (1,514) Cumulative effect of accounting change (Note 7).................................... - 3,005 - Net cash provided by operations........................................ 193,018 201,100 183,344 INVESTING ACTIVITIES Purchases of property, plant and equipment......................................... (95,977) (75,191) (63,645) Payment for business acquisitions ................................................. (4,507) (33,216) (24,719) Proceeds from sale of property, plant and equipment................................ 6,009 8,924 2,627 Investment in nonconsolidated companies............................................ (9,637) (11,609) (13,000) Withdrawal of earnings from nonconsolidated companies.............................. 301 400 25 Net cash used for investing activities................................. (103,811) (110,692) (98,712) FINANCING ACTIVITIES Net payments-commercial paper and bank lines of credit............................. - (9,803) (97,368) Proceeds from issuance of long-term debt (Note 5).................................. - - 81,000 Payment of short-term debt ........................................................ (1,184) (3,759) (4,607) Payment of long-term debt.......................................................... (3,414) (2,651) (12,335) Purchases of common stock (Note 10)................................................ (39,986) (32,424) (5,217) Dividends paid..................................................................... (46,296) (45,095) (45,664) Net cash used for financing activities................................. (90,880) (93,732) (84,191) Net increase (decrease) in cash and cash equivalents............................... (1,673) (3,324) 441 Cash and cash equivalents at beginning of year..................................... 15,669 18,993 18,552 Cash and cash equivalents at end of year........................................... $ 13,996 $ 15,669 $ 18,993 The accompanying Notes to Financial Statements are an integral part of these statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Vulcan Materials Company and Subsidiary Companies For the Years Ended December 31, 1993, 1992, and 1991 Amounts and shares in thousands 1993 1992 1991 Shares Amount Shares Amount Shares Amount Common stock, $1 par value Authorized, 160,000 shares Issued (no changes in 1993, 1992 and 1991)..... 46,573 $ 46,573 46,573 $ 46,573 46,573 $ 46,573 Capital in excess of par value Balance at beginning of year................... 3,962 3,463 2,758 Distributions under Performance Share Plan..... 604 499 705 Distributions under Stock Plan for Non-employee Directors...................... 21 - - Balance at end of year......................... 4,587 3,962 3,463 Retained earnings Balance at beginning of year................... 967,979 919,089 912,173 Net earnings................................... 88,229 93,985 52,580 Cash dividends on common stock................. (46,296) (45,095) (45,664) Balance at end of year......................... 1,009,912 967,979 919,089 Common stock held in treasury Balance at beginning of year................... (9,350) (318,402) (8,582) (286,197) (8,467) (281,312) Purchase of common shares...................... (895) (39,985) (786) (32,423) (141) (5,217) Distributions under Performance Share Plan..... 20 270 18 218 26 332 Distributions under Stock Plan for Non-Employee Directors...................... 1 8 - - - - Balance at end of year......................... (10,224) (358,109) (9,350) (318,402) (8,582) (286,197) Total...................................... $ 702,963 $ 700,112 $ 682,928 The accompanying Notes to Financial Statements are an integral part of these statements.
Page 43 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and all majority or wholly-owned subsidiary companies. All significant intercompany transactions and accounts have been eliminated in consolidation. Investments in joint ventures and the common stock of associated companies in which the Company has ownership interests of 20% to 50% are accounted for by the equity method. All other investments are carried at the lower of cost or market, and income is recorded as dividends are received or interest is earned. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The Company classifies as cash equivalents all highly liquid securities with a maturity of three months or less at the time of purchase. Other marketable securities with a maturity of over three months, but not more than one year, at the time of purchase, are classified as short-term investments. INVENTORIES The Company uses the last-in, first-out (LIFO) method of valuation for most of its inventories because it results in a better matching of costs with revenues. Inventories, other than operating supplies, are stated at the lower of cost, as determined by the LIFO method, or market. Such cost includes raw materials, direct labor and production overhead. Substantially all operating supplies are carried at average cost, which does not exceed market. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost less allowances for accumulated depreciation, depletion and amortization. The cost of properties held under capital leases is equal to the lower of the net present value of the minimum lease payments or the fair value of the leased property at the inception of the lease. DEPRECIATION, DEPLETION AND AMORTIZATION Depreciation is computed by the straight-line method at rates based upon the estimated service lives of the various classes of assets, which include machinery and equipment, buildings and land improvements. Amortization of capitalized leases is included with depreciation expense. Cost depletion on depletable quarry land is computed by the unit of production method based upon estimated recoverable units. Leaseholds are amortized over varying periods not in excess of applicable lease terms. OTHER COSTS Income is charged as costs are incurred for start-up of new plants and for normal recurring costs of mineral exploration, removal of overburden from active mineral deposits, and research and development. Repairs and maintenance are charged to costs and operating expenses. Renewals and betterments which add materially to the utility or useful lives of property, plant and equipment are capitalized. Environmental remediation costs are accrued as liabilities and expensed when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Costs are accrued no later than the feasibility study and/or when the Company commits to a formal plan of action. Environmental compliance costs include maintenance and operating costs with respect to pollution control facilities, the cost of ongoing monitoring programs and similar costs. Such costs are expensed as incurred. INCOME TAXES Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which supersedes and amends SFAS No. 96. The principal change made by SFAS No. 109 is to revise the criteria for recognition and measurement of deferred tax assets. The effect of the change in accounting method is disclosed in Note 7. Annual provisions for income taxes are based primarily on reported earnings before income taxes and include appropriate provisions for deferred income taxes resulting from the tax effect of the difference between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. In addition, such provisions reflect adjustments for the following items: Permanent differences, principally the excess of percentage depletion over the tax basis of depletable properties. An estimate of additional cost that may be incurred, including interest on deficiencies but excluding adjustments representing temporary differences, upon final settlement of returns after audit by various taxing authorities. Balances or deficiencies in prior year provisions that become appropriate as audits of those years progress. EARNINGS PER SHARE Primary and fully diluted earnings per share of common stock are computed by dividing net earnings by the weighted average number of common shares and common share equivalents outstanding during the year. Common share equivalents represent the number of shares contingently issuable under long-term performance share plans and the stock plan for non-employee directors. 2. CASH Bank lines of credit amounted to $70,000,000 and $60,000,000 at year end 1993 and 1992, respectively. These lines were not in use at the end of either year. At the end of 1991, bank lines totaled $95,000,000, of which $10,000,000 was used to back up commercial paper outstanding. All of the lines of credit extended to the Company in 1993, 1992, and 1991 were based on a commitment fee arrangement. The Company also maintained balances or paid fees to compensate its banks for certain services. The Company was in compliance with these informal compensation arrangements during all three years. Because the arrangements are evaluated on a twelve-month average basis, the Company does not consider any of its cash balances to be restricted as of any specific date. 3. INVENTORIES Inventories at December 31 are as follows (in thousands of dollars):
1993 1992 1991 Finished products . . . . . . . . . . $ 75,954 $ 74,684 $ 79,988 Raw materials . . . . . . . . . . . . 3,856 4,123 2,162 Products in process . . . . . . . . . 965 943 1,100 Operating supplies and other. . . . . 24,242 28,198 29,386 Total inventories . . . . . . . . . $105,017 $107,948 $112,636
The above amounts include inventories valued under the LIFO method totaling $80,614,000, $78,968,000 and $82,284,000 at December 31, 1993, 1992, and 1991, respectively. If all inventories valued at LIFO cost had been valued under the methods (substantially average cost) used prior to the adoption of the LIFO method, the approximate effect on net earnings would have been an increase of $387,000 ($.01 per share effect) in 1993, a decrease of $6,409,000 ($.17 per share effect) in 1992, and an increase of $3,904,000 ($.10 per share effect) in 1991. 4. PROPERTY, PLANT AND EQUIPMENT Balances of major classes of assets and allowances for depreciation, depletion and amortization at December 31 are as follows (in thousands of dollars):
1993 1992 1991 Land and land improvements. . . . . . $ 200,856 $ 198,272 $ 187,812 Buildings . . . . . . . . . . . . . . 62,995 61,088 58,978 Machinery and equipment . . . . . . . 1,372,667 1,317,671 1,271,425 Leaseholds. . . . . . . . . . . . . . 5,575 5,490 5,556 Construction in progress. . . . . . . 55,912 41,912 30,633 Total. . . . . . . . . . . . . . 1,698,005 1,624,433 1,554,404 Less allowances for depreciation, depletion and amortization. . . . . . . . . . 1,040,220 960,712 878,964 Property, plant and equipment, net. . . . . . . . . . . $ 657,785 $ 663,721 $ 675,440
The Company capitalized interest cost of $1,016,000 in 1993, $673,000 in 1992 and $131,000 in 1991 with respect to qualifying construction projects. Total interest cost incurred before recognition of the capitalized amount was $10,187,000 in 1993, $10,441,000 in 1992 and $11,336,000 in 1991. Balances referable to capitalized leases included in property, plant and equipment at December 31 are as follows (in thousands of dollars):
1993 1992 1991 Land and land improvements. . . . . . $ 16 $ 16 $ 16 Buildings . . . . . . . . . . . . . . 59 59 59 Machinery and equipment . . . . . . . 9,978 9,984 9,984 Total. . . . . . . . . . . . . . 10,053 10,059 10,059 Less allowance for amortization. . . . . . . . . . . . 9,128 8,842 8,547 Property, plant and equipment, net. . . . . . . . . . . $ 925 $ 1,217 $ 1,512
Amortization of capitalized leases amounted to $292,000 in 1993, $294,000 in 1992 and $300,000 in 1991. 5. DEBT Long-term debt, exclusive of current maturities, at December 31 is summarized as follows (in thousands of dollars):
1993 1992 1991 Medium-term notes . . . . . . . . . . . . . . $ 80,000 $ 81,000 $ 81,000 Notes issued for businesses acquired in 1987. . . . . . . . . . . . . . 2,478 5,863 5,863 6 5/8% pollution control revenue bonds . . . . . . . . . . . . . . . 6,800 6,800 6,800 7 7/8% and 8% pollution control revenue bonds . . . . . . . . . . . . . . . - - 5,800 6 3/8% pollution control revenue bonds . . . . . . . . . . . . . . . 5,800 5,800 - Variable rate pollution control revenue bonds . . . . . . . . . . . . . . . 3,350 3,700 4,000 Other notes . . . . . . . . . . . . . . . . . 3,607 4,042 4,971 Total . . . . . . . . . . . . . . . . . . $102,035 $107,205 $108,434
In May 1991 the Company filed a shelf registration statement with the Securities and Exchange Commission for the registration of $200,000,000 principal amount of debt securities. The issuances of medium-term notes in 1991 totaled $81,000,000. The net proceeds from the sale of the debt securities in 1991 were used for general corporate purposes, principally the reduction of commercial paper borrowings and long-term indebtedness. The dollar-weighted average maturity of the notes, as calculated from the dates of issuance, approximates 13 years. Maturities at the time of issuance ranged from three to thirty years with a maximum of $10,000,000 due in any one year. The weighted average interest rate on the notes is 8.53% with a range of 7.59% to 8.85%. In March 1991 the Company made a cash payment of $6,000,000 both to satisfy the sinking fund requirement of $3,000,000 for its 10 1/4% debentures and to exercise the option to retire an additional $3,000,000 of the debentures at par. In April 1991 the Company retired the remainder of its outstanding 10 1/4% debentures in the principal amount of $6,326,000. The early extinguishment of this debt resulted in a pretax charge of $233,000, representing the premium paid on the called debentures and the unamortized issuance costs. The notes issued for businesses acquired in 1987 consist of $1,648,000 in fixed rate notes (10.13%) due 2007 and $830,000 in variable rate notes due 2008. The fixed rate notes are payable in ten equal annual installments beginning in 1998. The variable rate notes, which are resettable every three years based upon a spread over a specified U.S. Treasury note index, are payable in three equal installments in 2002, 2005 and 2008, unless the holders exercise put options at earlier dates. In September 1993 the Company paid $3,385,000 to certain variable rate noteholders who elected to exercise put options on the three year anniversary of the reset date as specified in the notes. This reduced the principal balance of the variable rate notes from $4,215,000 to $830,000. The 6 5/8% pollution control revenue bonds issued on behalf of the Company in 1978 are payable in installments of $1,000,000 in the years 1998 and 1999 and installments of $1,200,000 in the years 2000-2003. The 7 7/8% and 8% pollution control revenue bonds issued in 1980 were refunded effective February 1, 1992, at an interest rate of 6 3/8%, and are now payable in 2012. The variable rate pollution control revenue bonds issued in 1981 and 1984 are due in 1996 ($1,400,000) and 1999 ($1,950,000), respectively. Other notes include various obligations with interest rates ranging from 7.49% to 10.00%. These relate principally to notes issued for acquired properties. The aggregate principal payments for the five years subsequent to December 31, 1993 are: 1994-$1,671,000; 1995-$4,687,000; 1996-$7,070,000; 1997-$5,400,000; and 1998-$6,565,000. As a result of its repayment of certain indebtedness during 1991, the Company is no longer subject to any contractual restrictions on the aggregate amount of its indebtedness or minimum working capital, or the amount it may expend for cash dividends and purchases of its stock. Disclosure of the estimated fair value of long-term debt and other financial instruments is made in accordance with the requirements of SFAS No. 107, Disclosure about Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. Based primarily on the present value of cash outflows, using year-end interest rates, the estimated fair value of long-term debt at December 31, 1993 is $114,372,000. This compares with a carrying value of $102,035,000. As of December 31, 1992, the estimated fair value of long-term debt is $114,797,000 and the carrying value is $107,205,000. These valuations have been determined by discounting expected future cash flows using interest rates on U.S. Treasury bills, notes or bonds, as appropriate. For cash equivalents, accounts and notes receivable, current portion of deferred income taxes, accounts payable, accrued income taxes, accrued interest and other applicable accrued liabilities, the carrying amounts are a reasonable estimate of fair value. The fair value estimates presented are based on information available to management as of December 31, 1993 and December 31, 1992. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since those dates. 6. LEASES Total rental expense of nonmineral leases, exclusive of rental payments made under leases of one month or less, is summarized as follows (in thousands of dollars):
1993 1992 1991 Minimum rentals . . . . . . . . . . . $ 7,600 $ 7,247 $ 6,762 Contingent rentals (based principally on usage) . . . . . . . 10,021 8,875 5,130 Total . . . . . . . . . . . . . . $17,621 $16,122 $11,892
Future minimum lease payments under all leases with initial or remaining noncancellable lease terms in excess of one year, exclusive of mineral leases, at December 31, 1993 are as follows (in thousands of dollars):
Capital Operating Leases Leases 1994. . . . . . . . . . . . . . . . . . . . . . . . . $75 $ 7,498 1995. . . . . . . . . . . . . . . . . . . . . . . . . 0 5,474 1996. . . . . . . . . . . . . . . . . . . . . . . . . 0 4,504 1997. . . . . . . . . . . . . . . . . . . . . . . . . 0 3,295 1998. . . . . . . . . . . . . . . . . . . . . . . . . 0 2,491 Remaining years . . . . . . . . . . . . . . . . . . . 0 7,162 Total minimum lease payments. . . . . . . . . . . . . 75 $30,424 Less: Amount representing interest . . . . . . . . . 5 Present value of net minimum lease payments . . . . . . . . . . . . . . . . . . $70
Lease agreements frequently include renewal options and require that the Company pay for utilities, taxes, insurance and maintenance expense. Options to purchase also are included in some lease agreements, particularly capital leases. 7. INCOME TAXES Effective January 1, 1992, the Company adopted SFAS No. 109, Accounting for Income Taxes. The cumulative effect of applying the new accounting method to years prior to 1992 increased net earnings by $3,005,000 ($.08 per share), which was reflected separately in the consolidated statement of earnings for the first quarter of 1992. The cumulative effect is not included in any of the summary information provided below. Implementation of the new method had no material impact on 1993 or 1992 earnings. The components of earnings before income taxes are as follows (in thousands of dollars):
1993 1992 1991 Domestic. . . . . . . . . . . . . . . $123,932 $132,370 $75,746 Foreign . . . . . . . . . . . . . . . 1,290 (1,644) (2,299) Total . . . . . . . . . . . . . . . $125,222 $130,726 $73,447
Provisions for income taxes consist of the following (in thousands of dollars):
1993 1992 1991 Current: Federal . . . . . . . . . . . . . . $33,179 $38,798 $ 30,369 State and local . . . . . . . . . . 4,277 8,016 5,958 Foreign . . . . . . . . . . . . . . 4 19 30 Total . . . . . . . . . . . . . . 37,460 46,833 36,357 Deferred: Federal . . . . . . . . . . . . . . (59) (5,988) (13,054) State and local . . . . . . . . . . (408) (1,099) (2,436) Total . . . . . . . . . . . . . . (467) (7,087) (15,490) Total provision . . . . . . . . . . . $36,993 $39,746 $ 20,867
The provisions for income taxes differ from amounts computed by applying the federal statutory rate to earnings before income taxes due to the following reasons (in thousands of dollars):
1993 1992 1991 Taxes at federal statutory rate . . . . . . . $43,828 $44,447 $24,972 Increase (decrease) in taxes resulting from: Depletion . . . . . . . . . . . . . . . . . (9,092) (8,114) (7,004) State and local income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . 2,516 4,563 2,325 Adjustment to December 31, 1992, net deferred income tax liability for enacted federal tax rate change . . . . . 1,110 0 0 Miscellaneous items . . . . . . . . . . . . (1,369) (1,150) 574 Total provision . . . . . . . . . . . . . . . $36,993 $39,746 $20,867
The effective tax rate on income differs from the U. S. statutory rate due to the following:
1993 1992 1991 Federal statutory tax rate. . . . . . . . . . 35.0% 34.0% 34.0% Increase (decrease) in tax rate resulting from: Depletion . . . . . . . . . . . . . . . . . (7.3) (6.2) (9.5) State and local income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . 2.0 3.5 3.2 Adjustment to December 31, 1992, net deferred income tax liability for enacted federal tax rate change . . . . . 0.9 0.0 0.0 Miscellaneous items . . . . . . . . . . . . . (1.1) (0.9) 0.7 Effective tax rate. . . . . . . . . . . . . . 29.5% 30.4% 28.4%
Deferred income taxes on the balance sheet result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax liability are as follows (in thousands of dollars):
1993 1992 1991 Deferred tax assets related to: Accrual for postretirement benefits . . . . . $11,117 $ 9,900 $ 8,093 Accrual for environmental reclamation . . . . 8,675 11,639 13,392 Accounts receivable, principally allowance for doubtful accounts . . . . . . 3,075 2,820 2,633 Inventory adjustments . . . . . . . . . . . . 7,231 6,985 6,376 Pensions, incentives and deferred compensation . . . . . . . . . . . 4,827 4,361 1,664 Other items . . . . . . . . . . . . . . . . . 6,126 5,633 6,559 Total deferred tax assets . . . . . . . . . 41,051 41,338 38,717 Deferred tax liabilities related to: Fixed assets, principally depreciation. . . . 83,175 84,461 92,239 Other items . . . . . . . . . . . . . . . . . 5,171 4,656 4,204 Total deferred tax liabilities. . . . . . . 88,346 89,117 96,443 Net deferred tax liability. . . . . . . . . . . $47,295 $47,779 $57,726
8. PENSION, OTHER POSTRETIREMENT BENEFIT AND INCENTIVE COMPENSATION PLANS In 1991 the Company merged seven of its hourly flat dollar pension plans into a single plan, reducing the total number of Company sponsored noncontributory, defined benefit pension plans from nine to three. These plans cover substantially all employees other than those covered by union-administered plans. Normal retirement age is 65, but the plans contain provisions for earlier retirement. Benefits for the Salaried Plan and the Chemicals Hourly Plan are based on salaries or wages and years of service; the Construction Materials Hourly Plan provides benefits equal to a flat dollar amount for each year of service. Charges to earnings referable to company-administered pension plans totaled $2,148,000 in 1993, $2,216,000 in 1992 and $561,000 in 1991. Components of the net periodic pension charges are as follows (in thousands of dollars):
1993 1992 1991 Service cost - benefits earned during the period . . . . . . . . . $ 8,286 $ 8,072 $ 6,438 Interest cost . . . . . . . . . . . . 16,195 15,465 14,108 Actual return on plan assets. . . . . (32,280) (15,176) (50,049) Net amortization and deferral . . . . 9,947 (6,145) 30,064 Net periodic pension charge . . . . $ 2,148 $ 2,216 $ 561
The Company's qualified pension plans have assets in excess of the accumulated benefit obligation. Plan assets are composed primarily of marketable domestic and international equity securities, corporate and government debt securities and real estate. Unrecognized net plan assets at the implementation of SFAS No. 87, Employers' Accounting for Pensions, in 1986 are being amortized over the average of the covered employees' remaining service lives, which range from 12 to 16 years. The following table reconciles the funded status of all the Company's plans with the related amounts recognized in the Company's consolidated balance sheets at December 31 (in thousands of dollars):
1993 1992 1991 Actuarial present value of benefit obligations: Based on employment service to date and current salary levels: Vested. . . . . . . . . . . . . . . . . . $(139,958) $(120,923) $(115,311) Nonvested . . . . . . . . . . . . . . . . (5,927) (5,087) (4,934) Accumulated benefit obligation . . . . . . . . . . . . . (145,885) (126,010) (120,245) Effect of projected future salary increases. . . . . . . . . . . . . (85,297) (71,511) (68,529) Projected benefit obligation. . . . . . . . . . . . . . . . (231,182) (197,521) (188,774) Plan assets at fair market value . . . . . . . . . . . . . . . . . . . 271,821 248,558 242,946 Plan assets in excess of projected benefit obligation. . . . . . . . . . . . . . . . . 40,639 51,037 54,172 Unamortized portion of unrecognized net asset at implementation of SFAS No. 87 . . . . . . . . . . . . . . . . (20,167) (23,638) (27,109) Unrecognized net gain . . . . . . . . . . . . (16,395) (22,300) (16,320) Unrecognized prior service cost. . . . . . . . . . . . . . . . 9,308 10,145 6,426 Net prepaid pension cost. . . . . . . . . . $ 13,385 $ 15,244 $ 17,169
Annual net periodic pension charges and credits are calculated using plan assumptions as of the end of the prior year, whereas the funded status and related pension obligations are determined using the assumptions as of the end of the current year. Plan assumptions at December 31 were as follows:
1993 1992 1991 1990 Discount rates used to determine the pension obligations - First 18 years. . . . . . . . . . 7.25% 8.00% 8.00% 9.00% - Thereafter . . . . . . . . . . . 7.25 6.75 6.75 7.50 Discount rates used to determine the net periodic cost and other recognized gains - First 18 years. . . . . . . . . . 8.00 8.00 8.00 9.00 - Thereafter . . . . . . . . . . . 6.75 6.75 6.75 7.50 Rates of increase in compensation levels (for salary-related plans). . . . . 5.50 5.50 5.50 6.00 Expected long-term rates of return on plan assets . . . . . . . 8.25 8.25 8.25 8.25
The Company funds the pension trusts currently in amounts determined under the individual entry age level premium method, including benefit increases expected as a result of projected wage and salary increases occurring between the date of valuation and the individual retirement dates. Certain of the Company's hourly employees in unions are covered by multi-employer defined benefit pension plans. Contributions to these plans approximated $1,637,000 in 1993, $1,281,000 in 1992 and $1,223,000 in 1991. The actuarial present value of accumulated plan benefits and net assets available for benefits for employees in the union-administered plans are not determinable from available information. In addition to pension benefits, the Company provides certain health care benefits and life insurance for some retired employees. Substantially all of the Company's salaried employees and, where applicable, hourly employees may become eligible for those benefits if they reach at least age 55 and meet certain service requirements while working for the Company. Generally, company-provided health care benefits terminate when covered individuals become eligible for Medicare benefits or reach age 65, whichever first occurs. Effective January 1, 1989, the Company changed to an accrual method of accounting for the aforementioned postretirement benefits based on actuarially determined costs to be accrued over the period from the date of hire to the full eligibility date of employees who are expected to qualify for benefits. In December 1990 the Financial Accounting Standards Board issued SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, which requires the use of an accrual method. Effective in 1992, the Company modified its benefit calculation methodology to fully comply with SFAS 106 with no significant effect on earnings. The cost of providing postretirement benefits under the accrual method amounted to $4,370,000 in 1993, $3,936,000 in 1992 and $3,749,000 in 1991. The components of net periodic postretirement benefit charges and credits are as follows (in thousands of dollars):
1993 1992 1991 Service cost - benefits attributed to service during the period. . . . . . . . $1,536 $1,418 $1,194 Interest cost . . . . . . . . . . . . . . . . 2,792 2,514 2,562 Actual return on assets . . . . . . . . . . . (136) (124) (127) Net amortization and deferral . . . . . . . . 178 128 120 Net periodic postretirement benefit cost. . . . . . . . . . . . . . . $4,370 $3,936 $3,749
If the 1993, 1992 and 1991 costs had been determined under the previous method, which recognized the cost of providing postretirement benefits by expensing the contributions when made, the amounts would have been $1,872,000, $1,547,000 and $1,275,000, respectively. The Company funds the postretirement benefits plan each year through contributions to a trust fund for health care benefits and through payments of premiums to providers of life insurance. All assets of the plan relate to the life insurance and are composed of reserves held by the insurer. The following table sets forth the combined funded status of the plan and its reconciliation with the related amounts recognized in the Company's consolidated balance sheet at December 31 (in thousands of dollars):
1993 1992 1991 Accumulated postretirement benefit obligation: Retirees. . . . . . . . . . . . . . . . . . $(11,471) $(10,032) $ (9,328) Fully eligible active plan participants . . . . . . . . . . . . (11,982) (10,788) (9,317) Other active plan participants. . . . . . . (16,004) (13,363) (12,015) Total accumulated postretirement benefit obligation. . . . . . . . . . . (39,457) (34,183) (30,660) Plan assets at fair market value. . . . . . . 2,378 2,171 1,995 Accumulated postretirement benefit obligation in excess of plan assets . . . . (37,079) (32,012) (28,665) Unrecognized prior service cost . . . . . . . 7 7 8 Unrecognized net loss . . . . . . . . . . . . 8,495 5,925 4,967 Accrued postretirement benefit cost . . . $(28,577) $(26,080) $(23,690)
Annual net periodic postretirement benefit charges and credits are calculated using plan assumptions as of the end of the prior year, whereas the funded status and related benefit obligations are determined using the assumptions as of the end of the current year. Plan assumptions at December 31 were as follows:
1993 1992 1991 1990 Discount rates - First 18 years. . . . . . . . . . 7.25% 8.00% 8.00% 9.00% - Thereafter . . . . . . . . . . . 7.25 6.75 6.75 7.50 Expected long-term rate of return on plan assets . . . . . . . 7.00 7.00 7.00 7.00 Rate of increase in per capita claims cost - First year . . . . . . . . . . . 13.0 14.0 7.5 7.5 - Ultimate rate . . . . . . . . . . 6.0 6.0 7.5 7.5
Effective December 31, 1992, the assumed annual rate of increase in per capita claims cost was changed to reflect current rates of claims cost increase. A decrease of 1.0% per year in the rate is assumed until an ultimate rate of 6.0% is achieved. If the health care cost trend rates were increased 1.0% each year, the accumulated postretirement benefit obligation as of December 31, 1993 would have increased by $2,662,000 (or 6.7%) and the aggregate of the service and interest cost for 1993 would have increased by $346,000 (or 8.0%). In November 1992, the Financial Accounting Standards Board issued SFAS No. 112, Employers' Accounting for Postemployment Benefits, and adoption is required by the Company in 1994. The Company anticipates no material impact from adoption. The Company has a number of incentive compensation plans under which awards are made to officers and other key employees. Expense provisions referable to the plans amounted to $4,295,000 in 1993, $7,467,000 in 1992 and $3,306,000 in 1991. The expense provisions for these plans reflect the cost of distributions payable currently as well as distributions that may be payable in future periods if certain conditions are satisfied. Expense provisions for certain of the plans also are affected by changes in the market value of the Company's common stock. 9. OTHER COMMITMENTS AND CONTINGENT LIABILITIES In 1987 the Company formed three jointly-owned companies with Industrias ICA, S.A. de C.V., ("Indica"), a principal member of Grupo ICA, one of Mexico's leading diversified industrial entities, to develop and operate a limestone quarry on Mexico's Yucatan Peninsula and to import Mexican crushed stone for sale along the U.S. Gulf Coast (the "Crescent Market Project"). The shareholder agreements for these three companies provide that each sponsor will contribute its share of the equity required to fund the project. The Company's share of $68,188,000 had been contributed by December 31, 1993; Indica contributed a substantially equal pro rata amount. Two of the jointly-owned companies have entered into term loan agreements to fund up to $90,750,000 of their investments. The current balance of these loans is $71,668,000. The Company and Indica have agreed to guarantee these loans on a several and pro rata basis equal to approximately 50% each. Certain of the loan guarantees will be terminated if and when the project meets defined financial tests. In addition, the Company has approximately $3,700,000 outstanding from the three companies at December 31, 1993 as its share of loans to the project. Other commitments of the Company include the purchase of property, plant and equipment approximating $11,661,000 at December 31, 1993. The Company is a defendant in various lawsuits incident to the ordinary course of business. It is not possible to determine with precision the probable outcome or the amount of liability, if any, under these lawsuits; however, in the opinion of the Company and its counsel, the disposition of these lawsuits will not adversely affect the consolidated financial statements of the Company to a material extent. As indicated in the Notes to Financial Statements in the Company's 1992 Annual Report, the Company received a letter from the United States Environmental Protection Agency ("EPA") in May 1985 regarding remedial actions at a chemical waste site in Ascension Parish, Louisiana. Records indicate that the Company generated a portion of the waste placed at the site, and the Company therefore has been deemed by the EPA to be a potentially responsible party ("PRP") with respect to the site under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"). On February 5, 1991, the EPA issued a unilateral administrative order ("UAO") which directs the named respondents, including the Company and other PRPs, to clean up the site. In a letter dated April 9, 1991, the Company, along with three other PRPs named in the UAO, gave notice to the EPA that they intend to comply with all lawful terms and conditions of the UAO. In December 1988, the Company and other PRPs received a letter from the EPA demanding reimbursement for approximately $1,540,000 in past costs and administrative expenses incurred by the EPA in connection with the foregoing matter. Effective June 8, 1992, the Company and other PRPs entered into a Site Participation Agreement ("Agreement") allocating among the parties those costs which are anticipated to be incurred or which might be incurred in connection with the remediation activity at the site and those costs which may be recovered by the EPA or other agencies in connection with their past response work or oversight work at the site. Moreover, in June, 1992, the EPA orally informed the Company and other PRPs that it would seek to recover its response and oversight costs incurred to date, and toward that end has made a supplemental Information Request, pursuant to Section 104(e) of CERCLA, seeking information to support such recovery of costs. The Company responded to the Information Request on July 14, 1992. The demand by EPA for recovery of costs includes the amount previously demanded from the Company and the other PRPs in December 1988. Cleanup of the site will take an extended period of time. Commencement of cleanup work at the site began in late 1992, and the majority of the costs likely will be incurred in the first three years. The engineering consultants and contractors engaged by the Company and other PRPs have estimated a total cost of $34,700,000 to complete the work required by EPA's final remedial plan. The Company has reviewed the cost estimates and information currently available relative to EPA's most recent request for recovery of its costs. On the basis of this review, the Company has determined that its accrued reserve is adequate to cover its allocated share of currently anticipated site remediation costs and those response and oversight costs which may be recovered by the EPA. The Company will continue to review relevant cost information as it becomes available, particularly information relative to the EPA's request for recovery of its costs. The Company has begun to make payments from its accrued reserve pursuant to the Agreement. The Company has been identified by government authorities and certain private parties as potentially responsible for cleanup costs at various other sites, including sites formerly owned and operated by the Company. The operations of the Company also continue to be affected by the compliance requirements of various laws, regulations, administrative orders and permits relating to protection of the environment. Although future costs of cleanup at other sites and the future costs of environmental compliance may be significant, the Company does not believe that these matters and the aforementioned potential share of cleanup costs for the Ascension Parish site will adversely affect the consolidated financial statements of the Company to a material extent. The Company's consolidated balance sheets as of December 31 include accrued environmental cleanup costs for the Chemicals segment of $19,100,000 for 1993, $26,530,000 for 1992 and $30,371,000 for 1991. These amounts include noncurrent liabilities of $5,701,000, $17,458,000 and $27,376,000, respectively. In the fourth quarter of 1987, the Company discontinued its former Metals segment and recorded a loss on disposal that reflected provisions for phaseout costs, including the estimated cost of contractual liabilities associated with environmental remediation at several Metals plants. Whereas the costs for many contractual liabilities associated with environmental remediation were reasonably ascertainable when an additional provision for estimated phaseout costs was recorded in 1989, the estimates for other such liabilities vary widely and could result in future increases, or possibly decreases, in the total provision for phaseout costs. Factors that might have an impact on such estimates include the results of further environmental testing, engineering analyses and planning, and negotiations among interested parties. The Company has completed several environmental remediation projects at certain of these Metals plants, and expenditures were within recorded provisions. While completion of these projects represents significant progress in addressing the contractual liabilities, several substantial remediation projects remain to be completed by the Company. Current liabilities reported on the Company's consolidated balance sheets include accrued provisions for discontinued operations in the following amounts as of December 31: $1,583,000 in 1993; $2,666,000 in 1992; and $3,706,000 in 1991. In addition, other noncurrent liabilities include $2,650,000 each in 1993, 1992 and 1991 referable to discontinued operations. An antidumping petition was filed on May 20, 1992, with the International Trade Commission ("ITC"), by two stone producers and a stone distributor in southwest Texas alleging that a U.S. industry was being injured by imports of crushed limestone from Mexico. The companies involved in the Crescent Market Project quarry and crush limestone from Mexico's Yucatan Peninsula for sale along the U.S. Gulf Coast. On June 29, 1992, the ITC, in a 5-0 vote (with one commissioner not participating), determined that there was no reasonable indication that an industry in the United States was materially injured or threatened with material injury by the importation of crushed limestone from Mexico. This ruling was appealed to the United States Court of International Trade ("CIT"), where the determination of the ITC was sustained and the action dismissed. The judgment of the CIT was then appealed to the United States Court of Appeals for the Federal Circuit, where oral argument was heard in February 1994. No decision has been rendered on the appeal. 10. COMMON STOCK A total of 10,499,963 shares has been purchased at a cost of $363,911,000 pursuant to a common stock purchase plan initially authorized by the Board of Directors in July 1985 and increased in subsequent years, and pursuant to a tender offer during the period November 5, 1986 through December 4, 1986. The number of shares remaining under purchase authorizations was 1,074,672 as of December 31, 1993. 11. SEGMENT DATA Operations in the Company's Construction Materials segment principally involve the production and sale of crushed aggregates and related products and services. The Chemicals segment produces and sells inorganic and organic chemicals. Segment data referable to net sales to unaffiliated customers, earnings, property additions, and depreciation, depletion and amortization are provided in Segment Financial Data on pages 60 and 61. The Company's determination of segment earnings recognizes equity in the income or losses of nonconsolidated affiliates of the Construction Materials segment as part of segment earnings and also reflects allocations of general corporate expenses to the segments. SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, does not provide for the inclusion of these items in "operating profit or loss of reportable segments." The net amounts of those items were expenses of $15,542,000 in 1993, $17,819,000 in 1992 and $17,475,000 in 1991. Segment earnings are reconciled with earnings before income taxes as follows (in thousands of dollars):
1993 1992 1991 Segment earnings. . . . . . . . . . . . . . . $134,089 $139,609 $84,407 Interest income, etc. . . . . . . . . . . . . 304 885 245 Interest expense. . . . . . . . . . . . . . . (9,171) (9,768) (11,205) Earnings before income taxes. . . . . . . . . $125,222 $130,726 $73,447
Identifiable assets by segment at December 31 are as follows (in thousands of dollars):
1993 1992 1991 Construction Materials. . . . . . . . . . . . $ 670,079 $ 688,898 $ 710,061 Chemicals . . . . . . . . . . . . . . . . . . 288,720 285,163 267,595 Total identifiable assets . . . . . . . . . . 958,799 974,061 977,656 Investment in nonconsolidated affiliates. . . . . . . . . . . . . . . . . 51,054 43,424 39,051 General corporate assets. . . . . . . . . . . 54,702 50,761 37,411 Cash items. . . . . . . . . . . . . . . . . . 13,996 15,669 18,993 Total assets. . . . . . . . . . . . . . . . . $1,078,551 $1,083,915 $1,073,111
12. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental information referable to the Consolidated Statements of Cash Flows is summarized below (amounts in thousands):
1993 1992 1991 Cash payments: Interest (exclusive of amount capitalized). . . . . . . . . . $ 9,198 $10,073 $11,632 Income taxes. . . . . . . . . . . . . . . 41,393 45,413 34,205 Noncash investing and financing activities: Amounts referable to business acquisitions: Other liabilities assumed. . . . . . . - 213 54 Debt issued in purchase of property, plant and equipment. . . . . - 191 40
13. IMPAIRMENT AND LIQUIDATION OF ASSETS In 1987 the Company acquired the White's Mines businesses, located in Texas. The long- range forecasts underlying that acquisition proved to be overly optimistic because of sharply lower oil prices and substantially weaker demand for construction materials. Updated long- term forecasts indicated no recovery to originally anticipated levels; consequently, management concluded that the Company's Texas assets should be written down to estimated recoverable value. In the fourth quarter of 1991, the Company recorded a pretax write-down of $16,217,000, which reduced consolidated net earnings by $10,088,000, or $.26 per common share. In the third quarter of 1991, the Company initiated a phased liquidation of its construction materials business in south and east Florida, which included two stone quarries, a sales yard and two ready-mixed concrete plants. This decision reflected both the effects of unattractive market conditions and significant real estate values associated with certain land parcels utilized in the business. Together, these factors made it difficult to earn acceptable returns on the assets employed at those locations. In the fourth quarter of 1991, the Company recorded a pretax provision of $4,930,000 for shutdown costs associated with the liquidation of these assets. As a result, consolidated net earnings were reduced by $3,067,000, or $.08 per common share. Due to potentially long lead-times and other uncertainties involved in selling real estate, any gains from such sales will be recorded when realized. MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING AND INTERNAL CONTROL The Shareholders of Vulcan Materials Company: Vulcan's management acknowledges and accepts its responsibility for all the information contained in the financial statements and other sections of this report. The statements were prepared in conformity with generally accepted accounting principles appropriate in the circumstances and we believe they reflect fairly the Company's financial position, results of operations and cash flows for the periods shown. The financial statements necessarily reflect our informed judgments and estimates of the expected outcome of numerous current events and transactions. The Company maintains an internal control structure which we believe provides reasonable assurance that the Company's financial statements, books and records accurately reflect the Company's financial condition, results of operations and cash flows and that the Company's assets are safeguarded from loss or unauthorized use. This internal control structure includes well-defined and communicated policies and procedures, organizational structures that provide for appropriate separations of responsibilities, high standards applied in the selection and training of management personnel, and adequate procedures for properly assessing and applying accounting principles, including careful consideration of the accuracy and appropriateness of all significant accounting estimates. Vulcan also has an internal audit function that continually reviews compliance with established policies and procedures. The Company's independent auditors, Deloitte & Touche, consider the internal control structure as a part of their audits of the Company's financial statements and provide an independent opinion as to the fairness of the presentation of those statements. Their report is presented below. The Board of Directors pursues its oversight role for the financial statements and internal control structure in major part through the Audit Review Committee, which is composed of five outside directors. In addition, the full Board regularly reviews detailed management reports covering all aspects of the Company's financial affairs. The Audit Review Committee meets periodically with management, the independent auditors and the internal auditors to review the work of each and to ensure that each is properly discharging its responsibilities. To ensure independence, the Committee also meets on these matters with the internal and independent auditors without the presence of management representatives. /s/ D. F. Sansone Vice President, Finance February 4, 1994 INDEPENDENT AUDITORS' REPORT The Shareholders of Vulcan Materials Company: We have audited the accompanying consolidated balance sheets of Vulcan Materials Company and its subsidiary companies as of December 31, 1993, 1992 and 1991, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vulcan Materials Company and its subsidiary companies at December 31, 1993, 1992 and 1991, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Deloitte & Touche Birmingham, Alabama February 4, 1994 Page 52 FINANCIAL TERMINOLOGY Capital employed For the Company: the sum of interest-bearing debt, capitalized lease obligations, other noncurrent liabilities and shareholders' equity; for a segment: the net sum of the segment's assets, current liabilities, and allocated corporate assets and current liabilities, exclusive of cash items and short-term debt Cash items The sum of cash, cash equivalents and short-term investments Common shareholders' The sum of common stock (less the cost of common equity stock in treasury), capital in excess of par value and retained earnings, as reported in the balance sheet Long-term capital The sum of long-term debt, long-term capitalized lease obligations, other noncurrent liabilities and shareholders' equity Operating income For the Company: net earnings from continuing from continuing operations plus the after-tax cost of interest operations after expense; for a segment: segment earnings less taxes the segment's computed share of the consolidated provision for income taxes Property additions * Capitalized replacements of and additions to property, plant and equipment (and such assets of businesses acquired), including capitalized leases, renewals and betterments; each segment's property additions include allocated corporate amounts Ratio of earnings The sum of earnings from continuing operations to fixed charges before income taxes, amortization of capitalized interest and fixed charges net of interest capitalization credits, divided by fixed charges. Fixed charges are the sum of interest expense before capitalization credits, amortization of financing costs and one-third of rental expense. Segment earnings Earnings before interest expense and income taxes and after allocation of corporate expenses and income, other than "interest income, etc.," (principally interest income earned on cash items and gains or losses on corporate financing transactions), and after assignment of equity income to the segments with which it is related in terms of products and services. Allocations are based primarily on one or a combination of the following factors: average gross investment, average equity and sales. Short-term debt The sum of current interest-bearing debt, including current maturities of long-term debt and capitalized lease obligations, and interest-bearing notes payable * The Company classifies its property additions into three categories based upon the predominant purpose of the project expenditures. Thus, a project is classified entirely as a replacement if that is the principal reason for making the expenditure even though the project may involve some cost saving and/or capacity improvement aspects. Likewise, a profit adding project is classified entirely as such if the principal reason for making the expenditure is to add operating facilities at new locations (which occasionally replace facilities at old locations), to add product lines, to expand the capacity of existing facilities, to reduce costs, to increase mineral reserves or to improve products, etc. Property additions classified as environmental control expenditures do not reflect those expenditures for environmental control activities, including industrial health programs, which are expensed currently. Such expenditures are made on a continuing basis and at significant levels in each of the Company's segments. Frequently, profit adding and major replacement projects also include expenditures for environmental control purposes. Page 53 EX-21 5 SUBSIDIARIES VULCAN MATERIALS COMPANY SUBSIDIARIES As of December 31, 1993 STATE OR OTHER % OWNED JURISDICTION OF DIRECTLY OR INCORPORATION INDIRECTLY ENTITY OR ORGANIZATION BY VULCAN Subsidiaries Atlantic Granite Company1 South Carolina 33 1/3 Birmingham Slag Company1 Alabama 100 BRT Transfer Terminal, Inc. Kentucky 100 Calizas Industriales del Carmen, S.A. de C.V. Mexico 49 Central States Materials, Inc. Kentucky 100 CSM Trucking Company, Inc. Tennessee 100 Dixie Sand and Gravel Company1 Tennessee 100 Knoxville Mack Distributors, Inc.1 Tennessee 100 Lambert Bros., Inc.1 Tennessee 100 Midsouth Machine and Service Company Tennessee 100 Reco Transportation, Inc. Kentucky 100 Reed Crushed Stone Company, Incorporated Kentucky 100 Reed Terminal Company, Inc. Kentucky 100 Statewide Transport, Inc. Texas 100 Vulcan/ICA Distribution Company (Partnership) Texas 52 Vulcan Gulf Coast Aggregates, Inc. New Jersey 100 Vulcan Gulf Coast Materials, Inc. New Jersey 100 Vulcan International, Ltd. U.S. Virgin Islands 100 Vulcan Lands, Inc. New Jersey 100 Vulcan Peroxidation Systems Inc.2 New Jersey 100 Vulcan Soda Ash Company California 100 VULICA Shipping Company, Limited Bahamas 50 Wanatah Trucking Co., Inc. Indiana 100 Wesco Contracting Company1 Tennessee 100 White's Mines, Inc.1 Texas 100 1 Inactive 2 Formed in January 1994 EX-24.1 6 POWER OF ATTORNEY STATE OF GEORGIA ) COUNTY OF FULTON ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 22nd day of February, 1994. /s/ James V. Napier James V. Napier STATE OF GEORGIA ) COUNTY OF FULTON ) On this 22 day of February in the year 1994, before me, Rheta Johnson, a Notary Public of said State, duly commissioned and sworn, personally appeared James V. Napier, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Rheta Johnson Notary Public in and for said State [SEAL] My Commission Expires: June 10, 1995 EX-24.2 7 POWER OF ATTORNEY STATE OF CONNECTICUT ) COUNTY OF FAIRFIELD ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 23rd day of February, 1994. /s/ Marion H. Antonini Marion H. Antonini STATE OF CONNECTICUT ) COUNTY OF FAIRFIELD ) On this 23rd day of February in the year 1994, before me, Kathleen W. Allen, a Notary Public of said State, duly commissioned and sworn, personally appeared Marion H. Antonini, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Kathleen W. Allen Notary Public in and for said State [SEAL] My Commission Expires: June 30, 1998 EX-24.3 8 POWER OF ATTORNEY STATE OF ILLINOIS ) COUNTY OF COOK ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 22nd day of February, 1994. /s/ John K. Greene John K. Greene STATE OF ILLINOIS ) COUNTY OF COOK ) On this 22nd day of February in the year 1994, before me, Renee N. Duba, a Notary Public of said State, duly commissioned and sworn, personally appeared John K. Greene, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Renee N. Duba Notary Public in and for said State [SEAL] My Commission Expires: September 4, 1994 EX-24.4 9 POWER OF ATTORNEY STATE OF GEORGIA ) COUNTY OF HALL ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 21 day of February, 1994. /s/ Richard H. Leet Richard H. Leet STATE OF GEORGIA ) COUNTY OF HALL ) On this 21st day of February in the year 1994, before me, Janey R. Smith, a Notary Public of said State, duly commissioned and sworn, personally appeared Richard H. Leet, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Janey R. Smith Notary Public in and for said State [SEAL] My Commission Expires: 1/24/98 EX-24.5 10 POWER OF ATTORNEY STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 22nd day of February, 1994. /s/ Donald B. Rice Donald B. Rice STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) On February 22, 1994, before me, Frances B. DeVincent, Notary Public, personally appeared Donald B. Rice, personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Frances B. DeVincent Notary Public in and for said State [SEAL] My Commission Expires: September 24, 1994 EX-24.6 11 POWER OF ATTORNEY STATE OF MINNESOTA ) COUNTY OF WASHINGTON ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 22nd day of February, 1994. /s/ Livio D. DeSimone Livio D. DeSimone STATE OF MINNESOTA ) COUNTY OF WASHINGTON ) On this 22nd day of February in the year 1994, before me, Joan Deshler, a Notary Public of said State, duly commissioned and sworn, personally appeared Livio D. DeSimone, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Joan F. Deshler Notary Public in and for said State [SEAL] My Commission Expires: July 26, 1997 EX-24.7 12 POWER OF ATTORNEY STATE OF OHIO ) COUNTY OF CUYAHOGA ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 21 day of February, 1994. /s/ Douglas J. McGregor Douglas J. McGregor STATE OF OHIO ) COUNTY OF CUYAHOGA ) On this 21 day of February in the year 1994, before me, Barbara A. Haag, a Notary Public of said State, duly commissioned and sworn, personally appeared Douglas J. McGregor, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Barbara A. Haag Notary Public in and for said State [SEAL] My Commission Expires: January 7, 1998 EX-24.8 13 POWER OF ATTORNEY DISTRICT OF COLUMBIA ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 24th day of February, 1994. /s/ Ann D. McLaughlin Ann D. McLaughlin DISTRICT OF COLUMBIA ) On this 24th day of February in the year 1994, before me, Sarah A. Agnew, a Notary Public of said State, duly commissioned and sworn, personally appeared Ann D. McLaughlin, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Sarah A. Agnew Notary Public in and for said State [SEAL] My Commission Expires: 5-31-96 EX-24.9 14 POWER OF ATTORNEY STATE OF NEW JERSEY ) COUNTY OF MIDDLESEX ) The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints W. F. Denson, III, and E. Starke Sydnor, and each of them, the true and lawful attorneys of the undersigned to sign the name of the undersigned as director to the End Report on Form 10-K for the year ended December 31, 1993 of said corporation to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and to any and all amendments to said report. The undersigned hereby grants to said attorneys full power of substitution, resubstitution and revocation, all as fully as the undersigned could do if personally present, hereby ratifying all that said attorneys or their substitutes may lawfully do by virtue hereof. IN WITNESS WHEREOF, the undersigned director of Vulcan Materials Company has executed this Power of Attorney this 1 day of March, 1994. /s/ Orin R. Smith Orin R. Smith STATE OF NEW JERSEY ) COUNTY OF MIDDLESEX ) On this 1st day of March in the year 1994, before me, Theresa Richards, a Notary Public of said State, duly commissioned and sworn, personally appeared Orin R. Smith, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. /s/ Theresa Richards Notary Public in and for said State [SEAL] My Commission Expires: June 27, 1995 EX-99.1 15 PROPERTY, PLANT & EQUIPMENT
SCHEDULE VI VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES PROPERTY, PLANT AND EQUIPMENT For the Years Ended December 31, 1993, 1992 and 1991 Amounts in Thousands Column A Column B Column C Column D Column E Column F Balance at Other Balance Beginning Additions Changes (1) at End Classification of Period at Cost Retirements Add (Deduct) of Period 1993 Land................................. $ 54,980 $ 604 $ 737 $ (21) $ 54,826 Depletable land ..................... 87,519 1,162 722 (134) 87,825 Land improvements.................... 55,773 3,083 749 98 58,205 Buildings............................ 61,088 2,427 551 31 62,995 Machinery and equipment.............. 1,317,671 78,948 27,395 3,443 1,372,667 Leaseholds........................... 5,490 325 300 60 5,575 Construction in progress............. 41,912 14,002 2 -- 55,912 Total............................. $1,624,433 $100,551 $30,456 $3,477 $1,698,005 1992 Land................................. $ 53,329 $ 2,068 $ 387 $ (30) $ 54,980 Depletable land...................... 80,721 6,830 203 171 87,519 Land improvements.................... 53,761 2,234 203 (19) 55,773 Buildings............................ 58,978 2,049 104 165 61,088 Machinery and equipment.............. 1,271,425 73,912 27,573 (93) 1,317,671 Leaseholds........................... 5,556 45 111 -- 5,490 Construction in progress............. 30,634 11,353 75 -- 41,912 Total............................. $1,554,404 $98,491 $28,656 $ 194 $1,624,433 1991 Land................................. $ 51,841 $ 1,784 $ 1,095 $ 799 $ 53,329 Depletable land...................... 89,838 5,904 14,066 (955) 80,721 Land improvements.................... 54,251 1,332 1,370 (452) 53,761 Buildings............................ 57,093 2,509 693 69 58,978 Machinery and equipment.............. 1,238,565 70,896 38,549 513 1,271,425 Leaseholds........................... 5,283 247 -- 26 5,556 Construction in progress............. 27,922 3,049 337 -- 30,634 Total............................. $1,524,793 $85,721 $56,110 $ -- $1,554,404 (1) Net reclassifications.
[TEXT] EX-99.2 16 ALLOWANCE FOR DEPRECIATION, DELPETION AND AMORTIZATION
SCHEDULE VII VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES ALLOWANCE FOR DEPRECIATION, DEPLETION AND AMORTIZATION For the Years Ended December 31, 1993, 1992 and 1991 Amounts in Thousands Column A Column B Column C Column D Column E Column F Additions Other Balance at Charged to Changes (1) Balance Beginning Costs and Add at End Classification of Period Expenses Retirements (Deduct) of Period 1993 Depletable land......................... $ 13,066 $ 960 $ 198 $ (1) $ 13,827 Land improvements....................... 27,624 3,146 741 641 30,670 Buildings............................... 35,857 2,814 432 (16) 38,223 Machinery and equipment................. 882,554 95,703 24,599 2,173 955,831 Leaseholds.............................. 1,611 157 100 1 1,669 Total................................ $960,712 $102,780 $26,070 $2,798 $1,040,220 1992 Depletable land......................... $ 11,948 $ 948 $ 25 $ 195 $ 13,066 Land improvements....................... 25,291 3,095 156 (606) 27,624 Buildings............................... 33,184 2,733 66 6 35,857 Machinery and equipment................. 807,074 96,424 21,544 600 882,554 Leaseholds.............................. 1,467 144 -- -- 1,611 Total................................ $878,964 $103,344 $21,791 $ 195 $ 960,712 1991 Depletable land......................... $ 12,160 $ 1,384 $ 1,595 $ (1) $ 11,948 Land improvements....................... 23,201 3,091 1,001 -- 25,291 Buildings............................... 30,844 2,739 399 -- 33,184 Machinery and equipment................. 736,559 102,382 31,867 -- 807,074 Leaseholds.............................. 1,338 128 -- 1 1,467 Total................................ $804,102 $109,724 $34,862 $ -- $ 878,964 (1) Net reclassifications.
EX-99.3 17 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE IX VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 1993, 1992 and 1991 Amounts in Thousands Column A Column B Column C Column D Column E Column F Additions Charged to Balance at Costs Balance Beginning and Other at End Description of Period Expenses Accounts Deductions of Period Reserves deducted from assets to which they apply: 1993 Accrued environmental costs.............. $26,530 $ (110) $7,320 (1) $19,100 Doubtful receivables..................... 6,814 1,237 767 (2) 7,284 Cash discounts........................... 92 1,411 1,391 (3) 112 Allowance for slow-moving inventories of finished products................... 460 -- -- 460 Allowance for slow-moving inventories of parts and supplies.................. 4,526 (2,572) 98 (5) 1,856 Total................................. $38,422 $ (34) $9,576 $28,812 1992 Accrued environmental costs.............. $30,371 $ 3,184 $7,025 (1) $26,530 Doubtful receivables..................... 6,267 1,666 1,119 (2) 6,814 Cash discounts........................... 89 1,409 1,406 (3) 92 Allowance for slow-moving inventories of finished products................... 513 (53) -- 460 Allowance for slow-moving inventories of parts and supplies.................. 4,663 (148) (11)(4) 4,526 Total................................. $41,903 $ 6,058 $9,539 $38,422 1991 Accrued environmental costs.............. $30,207 $ 2,797 $2,633 (1) $30,371 Doubtful receivables..................... 5,293 1,730 756 (2) 6,267 Cash discounts........................... 78 1,271 1,260 (3) 89 Allowance for slow-moving inventories of finished products................... 349 164 -- 513 Allowance for slow-moving inventories of parts and supplies.................. 4,424 239 -- 4,663 Total................................. $40,351 $ 6,201 $4,649 $41,903 (1) Expenditures on environmental remediation projects (2) Write-offs of uncollectible accounts and worthless notes, less recoveries (3) Cash discounts allowed (4) Write-offs of parts and supplies, less parts sold (5) Inventory revaluation
EX-99.4 18 SHORT-TERM BORROWINGS
SCHEDULE X VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SHORT-TERM BORROWINGS For the Years Ended December 31, 1993, 1992 and 1991 Dollar Amounts in Thousands Column A Column B Column C Column D Column E Column F Maximum Average Weighted Weighted Amount Amount Average Balance Average Outstanding Outstanding Interest Rate Category of Aggregate at End of Interest During the During the During the Short-Term Borrowings Period Rate Period Period (1) Period (2) Year ended December 31, 1993: Notes payable to banks................. $ -- -- $ 12,000 $ 1,327 3.34% Commercial paper....................... -- -- 63,000 24,202 3.23 All categories......................... -- -- 64,000 25,529 3.24 Year ended December 31, 1992: Notes payable to banks................. $ -- -- $ 9,500 $ 529 4.46% Commercial paper....................... -- -- 56,000 20,763 3.75 All categories......................... -- -- 56,300 21,292 3.77 Year ended December 31, 1991: Notes payable to banks................. $ -- -- $ 14,900 $ 1,430 6.70% Commercial paper....................... 9,763 5.79% 128,000 73,579 6.52 All categories......................... 9,763 5.79% 128,000 75,009 6.52 (1) The average amount outstanding during the period was computed by dividing the total of the daily outstanding principal balances by the actual number of days in the calendar year. (2) The weighted average interest rate during the period was computed by dividing the actual interest expense by the average amount outstanding during the period.
EX-99.5 19 SUPPLEMENTARY INCOME STATEMENT INFORMATION
SCHEDULE XI VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SUPPLEMENTARY INCOME STATEMENT INFORMATION For the Years Ended December 31, 1993, 1992 and 1991 Amounts in Thousands Charged to Costs and Expenses 1993 1992 1991 Repairs and maintenance........................ $120,018 $115,715 $111,407 Depreciation, depletion and amortization....... 102,780 103,344 109,724 Taxes other than income: Payroll...................................... 19,536 17,952 17,125 Property, franchise, etc..................... 17,967 17,924 17,325 Royalties...................................... 15,811 14,332 14,175 Advertising.................................... 460 512 537
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