-----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, s3fmLF5cprexOA/LGovMdPXkgkirUUHbmI8V5ONZwLhes5ctNl4FbLCko/5WJ3Me VjiebWZt51riLFU7CvvbYQ== 0000103973-94-000022.txt : 19940824 0000103973-94-000022.hdr.sgml : 19940824 ACCESSION NUMBER: 0000103973-94-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04033 FILM NUMBER: 94544154 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-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4033 VULCAN MATERIALS COMPANY (Exact name of registrant as specified in its charter) New Jersey 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 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares outstanding Class at July 31, 1994 Common Stock, $1 Par Value 36,532,689 VULCAN MATERIALS COMPANY FORM 10-Q QUARTER ENDED JUNE 30, 1994 Contents Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets. . . . . . . . Condensed Consolidated Statements of Earnings. . . . Condensed Consolidated Statements of Cash Flows. . . Notes to Condensed Consolidated Financial Statements Exhibit 11 - Computation of Earnings Per Share . . . Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges. . . . . . . . . . . . . . . . . Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . PART II OTHER INFORMATION Item 5. Other Information . . . . . . . . . . . . . . . . . . . Exhibit 1 - Press release dated August 1, 1994 . . . Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I. FINANCIAL INFORMATION Item 1. Financial Statements VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS* (Amounts in thousands) June 30, Dec. 31, June 30, Assets 1994 1993 1993 Current assets Cash and cash equivalents...............................$ 19,932 $ 13,996 $ 3,602 Accounts and notes receivable, less allowance for doubtful accounts: June 30, 1994, $7,594; Dec. 31, 1993, $7,284; June 30, 1993, $8,957................... 198,409 150,404 192,090 Inventories: Finished products..................................... 77,786 75,954 86,737 Raw materials......................................... 5,487 3,856 4,924 Products in process................................... 1,318 965 905 Operating supplies and other.......................... 25,546 24,242 27,475 Total inventories................................ 110,137 105,017 120,041 Deferred income taxes................................... 26,142 26,898 25,648 Prepaid expenses........................................ 19,213 6,298 17,222 Total current assets............................. 373,833 302,613 358,603 Investments and long-term receivables..................... 56,641 56,505 55,986 Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization: June 30, 1994, $1,080,037; Dec. 31, 1993, $1,040,220; June 30, 1993, $1,002,694........................................ 660,063 657,785 661,681 Deferred charges and other assets......................... 64,482 61,648 67,922 Total............................................$ 1,155,019 $1,078,551 $ 1,144,192 Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term obligations.............$ 4,749 $ 1,741 $ 821 Notes payable........................................... 45,233 - 59,777 Other current liabilities............................... 159,395 139,074 152,610 Total current liabilities........................ 209,377 140,815 213,208 Long-term obligations..................................... 97,698 102,035 106,771 Deferred income taxes..................................... 76,454 74,193 71,792 Other noncurrent liabilities (Note 3)..................... 55,647 58,545 67,524 Other commitments and contingent liabilities (Note 3)..... Shareholders' equity...................................... 715,843 702,963 684,897 Total............................................$ 1,155,019 $1,078,551 $ 1,144,192 * Balance sheets as of June 30 are unaudited. The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Amounts and shares in thousands, except per share data) Three Months Ended Six Months Ended June 30* June 30* 1994 1993 1994 1993 Net sales...........................................$ 326,704 $ 305,940 $ 543,597 $ 520,063 Cost of goods sold................................... 249,355 231,867 445,238 416,296 Gross profit on sales................................ 77,349 74,073 98,359 103,767 Selling, administrative and general expenses......... 28,631 26,995 56,472 54,320 Other operating costs................................ 1,199 1,003 2,537 2,102 Other income, net.................................... 4,170 679 6,865 1,056 Earnings before interest expense and income taxes........................... 51,689 46,754 46,215 48,401 Interest expense..................................... 2,205 2,490 4,415 4,884 Earnings before income taxes......................... 49,484 44,264 41,800 43,517 Provision for income taxes........................... 15,750 12,623 13,292 12,402 Net earnings .......................................$ 33,734 $ 31,641 $ 28,508 $ 31,115 Primary and fully diluted earnings per share of common stock.............................. $0.92 $0.84 $0.78 $0.83 Average common and common equivalent shares outstanding**............................... 36,771 37,220 36,743 37,315 Cash dividends per share of common stock............. $0.33 $0.315 $ 0.66 $ 0.63 Depreciation, depletion and amortization deducted above..................................... $25,802 $25,288 $52,636 $50,246 Effective tax rate................................... 31.8% 28.5% 31.8% 28.5% * Unaudited ** Primary and fully diluted earnings per share of common stock are computed by dividing net earnings by the weighted average number of common shares and common share equivalents outstanding during the period. Common share equivalents represent the number of shares contingently issuable under a long-range performance share plan. Refer to Exhibit 11 for computation. The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Six Months Ended June 30* 1994 1993 Operations Net earnings ...............................................$ 28,508 $ 31,115 Adjustments to reconcile net earnings to net cash provided by continuing operations: Depreciation, depletion and amortization................ 52,636 50,246 Increase in assets before effects of business acquisitions................................. (62,589) (65,573) Increase in liabilities before effects of business acquisitions................................. 17,890 16,387 Other, net.............................................. 1,744 (1,433) Net cash provided by continuing operations........... 38,189 30,742 Net cash used for discontinued operations................... (415) (429) Net cash provided by operations...................... 37,774 30,313 Investing Activities Purchases of property, plant and equipment.................. (51,109) (47,498) Payment for business acquisitions (net of acquired cash).... - (1,443) Proceeds from sale of property, plant and equipment......... 5,131 1,648 Investment in nonconsolidated companies..................... (1,159) (6,847) Withdrawal of earnings from nonconsolidated companies....... - 1 Net cash used for investing activities............... (47,137) (54,139) Financing Activities Net borrowings - commercial paper and bank lines of credit.. 45,233 59,777 Payment of short-term debt.................................. (1,459) (753) Payment of long-term debt................................... (4,374) (30) Purchases of common stock................................... - (23,871) Dividends paid.............................................. (24,101) (23,364) Net cash provided by financing activities............ 15,299 11,759 Net increase (decrease) in cash and cash equivalents........ 5,936 (12,067) Cash and cash equivalents at beginning of year.............. 13,996 15,669 Cash and cash equivalents at end of period..................$ 19,932 $ 3,602 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized)..................$ 4,283 $ 4,811 Income taxes.......................................... 3,597 10,298 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Liabilities assumed in business acquisition.............$ 5,761 $ - Fair value of stock issued in business acquisition...... 7,476 - *Unaudited The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying condensed financial statements have been prepared in compliance with Form 10-Q instructions and thus do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company's latest annual report on Form 10-K. The reporting of segment data required by Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise, is confined to complete financial statements as provided in the Company's Form 10-K and annual report to shareholders. 2. Effective Tax Rate In accordance with generally accepted accounting principles, it is the Company's practice at the end of each interim reporting period to make a best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis. 3. Contingent Liabilities 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 potentially responsible party ("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 a remedial investigation and feasibility study ("RI/FS"). The Company is among the 880 PRPs that EPA has initially identified as having sold and shipped a total of approximately 307 million pounds of material alleged to contain hazardous substances 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 0.63% of the total weight of the materials sent to this smelting facility. These shipments consisted primarily of sales of brass and other nonferrous metal parts and materials with valuable metal content which the Company believes were co-products of its former metals operation. The EPA has designated the Company as one of 73 de maximus PRPs at the site. The EPA considers the remaining PRPs de minimis or de micromis parties. EPA has stated its intention to negotiate a cash payment settlement with the approximately 450 de minimis parties. EPA has classified another 325 entities as de micromis parties who EPA does not intend to pursue because of their alleged small contribution to the volume of material shipped to the site. Although the record of decision ("ROD") for the site is not expected to be issued until 1995, the EPA currently advocates a remedy for the site which has been estimated to cost $56.2 million. Based on the total volume of materials sent to the site and considering the fact that certain PRPs are considered "orphans" because these PRPs are in bankruptcies, have otherwise ceased business operations, or cannot be located, the EPA has preliminarily advocated a reallocation of percentages among the remaining and viable parties which would result in a percentage attributed to the Company of 0.86% of the total of materials sent to the site. In addition to the EPA's assertions that the Company and other PRPs are responsible for response costs related to the remediation of the site, the Department of Interior (DOI) has asserted a natural resources damages claim which it indicates it would be willing to settle for a total payment of approximately $2.2 million, the cost of which would be allocated among the PRPs. To date, the State natural resource trustees have not asserted claims arising from impacts on State-protected natural resources. Similarly, the Pennsylvania Department of Environmental Resources ("DER") has allegedly incurred costs of investigation and response at this site, but DER has not yet asserted a claim for recovery of such costs. The Company and twenty-three (23) other PRPs have signed a PRP Organization Agreement to respond to the claims of the EPA and DOI and to negotiate an allocation of response costs related to the site. 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, the EPA, the DOI and potentially also the DER and State natural resource trustees. 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. The Company's consolidated balance sheets include accrued environmental cleanup costs for the Chemicals segment of $13,514,000 as of June 30, 1994, $19,100,000 as of December 31, 1993 and $22,311,000 as of June 30, 1993. These amounts include noncurrent liabilities of $529,000, $5,701,000 and $15,239,000, respectively. 4. Subsequent Events On August 1, 1994, the assets and business of Callaway Chemical Company were acquired from Exxon Chemical Company. In a related transaction, the assets and business of Comcor Chemicals Limited were acquired from Exxon Corporation's affiliated Canadian company, Imperial Oil Limited. Callaway Chemical Company will operate under its current name as a wholly-owned subsidiary of Vulcan. The Comcor business will become Callaway Chemicals Limited, a wholly-owned Canadian subsidiary of Vulcan. The two businesses will be integrated and managed as a single unit. The Company paid cash for the assets acquired. The purchase price paid for all assets, including net working capital, was approximately $84 million. Funds for the purchase price were obtained by the Company through issuance and sale of short-term notes. During the three-year period 1991 through 1993, the acquired businesses reported unaudited average annual revenues of $92 million and unaudited pretax operating income of $7.9 million. During the same period, earnings before interest, taxes and depreciation ("EBITD") averaged $10.6 million. These results do not purport to be indicative of results of operations which may be obtained in the future. Callaway Chemical, headquartered in Columbus, Georgia, is a leading supplier of process aids for the pulp and paper, water treating and textile industries. Comcor, based in Vancouver, British Columbia, manufactures and supplies pulp and paper process aids principally in Canada. The two businesses employ approximately 300 people.
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE (Amounts and shares in thousands, except per share data) Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 Primary and fully diluted earnings: Average common shares outstanding.......... 36,521 36,985 36,505 37,092 Common share equivalents: Performance share plan................... 250 235 238 223 Total shares....................... 36,771 37,220 36,743 37,315 Net earnings................................. $ 33,734 $ 31,641 $ 28,508 $ 31,115 Primary and fully diluted earnings per share of common stock:................... $ 0.92 $ 0.84 $ 0.78 $ 0.83
EXHIBIT 12 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Amounts in thousands) For the Years Ended December 31 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 $212,104 Ratio of earnings to fixed charges ................... 8.1 7.8 5.6 12.8 19.5 For the Six Months Ended June 30, 1994 Fixed charges: Interest expense before capitalization credits ..................$ 4,797 Amortization of financing costs ................... 57 One-third of rental expense ................... 3,979 Total fixed charges ..................$ 8,833 Net earnings ..................$ 28,508 Provision for income taxes ................... 13,292 Fixed charges ................... 8,833 Capitalized interest credits ................... (382) Amortization of capitalized interest................... 452 Earnings before income taxes as adjusted ..................$ 50,703 Ratio of earnings to fixed charges ................... 5.7 NOTE: Since 1987, the Company has guaranteed a portion of certain debts of two of the entities through which it participates in the Crescent Market Project. In addition, since February 1994, the Company has guaranteed a portion of certain debt of a third entity. The fixed charges associated with such guaranties (under which the Company has not been required to make any payments) for the six months ended June 30, 1994, were $1,267,000 and for the one-year periods ended December 31, 1993, 1992, 1991, 1990, and 1989 were $2,731,000, $3,583,000, $3,525,000, $2,535,000 and $1,406,000, respectively. Because the Company's ownership interests in the Crescent Market Project are accounted for by the equity method, these amounts have not been included in the computation of the ratios of earnings to fixed charges presented above.
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition GENERAL COMMENTS Seasonality of the Company's Business Results of any individual quarter are not necessarily indicative of results to be expected for the year due principally to the effect that weather can have on the sales and production volume of the Construction Materials segment. Normally, the highest sales and earnings of the Construction Materials segment are attained in the third quarter and the lowest are realized in the first quarter when sales and earnings are substantially below the levels realized in all subsequent quarters of the year. Basis of Determining Sales Volume and Price Variances Sales volume variances are calculated by multiplying the period-to-period change in sales units by the prior period's unit sales prices. Sales price variances are calculated by multiplying the period-to-period change in unit sales prices by the current period's sales units. To the extent that products and market areas are combined for these computations, the resultant "volume" and "price" variances may each be affected by period-to-period changes in the "mix" of product and market area sales. Segment Sales and Earnings Segment sales and earnings have been determined on the same basis as used in prior Form 10-Q reports. Segment earnings are 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. RESULTS OF OPERATIONS CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS SECOND QUARTER 1994 AS COMPARED WITH SECOND QUARTER 1993 Sales in the second quarter were $326.7 million, up 7% from 1993's second quarter. The segment detail of that increase is as follows (amounts in millions): Second Quarter Sales Increase 1994 1993 (Decrease) Construction Materials $236.8 $209.9 $26.9 Chemicals 89.9 96.0 (6.1) Total $326.7 $305.9 $20.8 Construction Materials sales of $236.8 million were up 13% from the same quarter last year. This increase reflects continued improvement in the demand for crushed stone as well as higher unit selling prices. Shipments and average prices of crushed stone in the quarter increased 8% and 5%, respectively, from last year's level. Chemicals sales of $89.9 million decreased 6% from last year's second quarter total. This decline was the result of lower caustic soda and chlorinated organics prices. The average price of caustic soda improved slightly from the first quarter 1994 level but was down more than 50% from last year's second quarter average. Cost of goods sold in the second quarter of 1994 increased 8% from 1993 levels reflecting primarily higher volumes in the Construction Materials segment. As a percent of sales, cost of goods sold was 76% in the second quarter of both years. Selling, administrative and general expenses of $28.6 million increased 6% from the 1993 second quarter level, due primarily to higher provisions for stock-based incentive plans. Other income, net of other charges, improved from comparable 1993 levels, reflecting higher gains on sales of assets and improved results from joint ventures. Earnings before interest expense and income taxes were $51.7 million in the second quarter of 1994, up 11% from comparable 1993 earnings. The segment detail of this result is shown in the following summary (amount in millions): Second Quarter Earnings (Loss) Before Interest Expense and Income Taxes Increase 1994 1993 (Decrease) Construction Materials $55.8 $42.2 $ 13.6 Chemicals (4.2) 4.5 (8.7) Segment earnings * 51.6 46.7 4.9 Interest income, etc. .1 .1 - Total $51.7 $46.8 $ 4.9 * After allocation of corporate expense and income, other than "interest income, etc." (principally interest income earned on short-term investment of funds 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. Construction Materials segment earnings were $55.8 million in the second quarter of 1994, up 32% from last year's second quarter level. Higher stone volume and, to a lesser extent, higher prices contributed to the improved result. The Chemicals segment recorded a loss of $4.2 million as compared with last year's second quarter earnings of $4.5 million. Lower prices were the principal cause of the decline. The provision for income taxes for the second quarter was $15.8 million, as compared with last year's second quarter expense of $12.6 million. The increase reflects the higher pretax earnings as well as the higher tax rate. Net earnings and earnings per share totaled $33.7 million and 92 cents, up 7% and 10%, respectively, from 1993 levels. CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS YEAR-TO-DATE COMPARISONS AS OF JUNE 30, 1994 AND JUNE 30, 1993 Sales for the first half of 1994 were $23.5 million up from the same period in 1993, with all of the improvement in the Construction Materials segment. Sales of the segments are summarized as follows (amounts in millions): Sales for the Six Months Ended June 30 Increase 1994 1993 (Decrease) Construction Materials $370.3 $331.3 $39.0 Chemicals 173.3 188.8 (15.5) Total $543.6 $520.1 $23.5 Construction Materials sales were $370.3 million, up 12% over 1993. Crushed stone shipments were up 8% and average prices improved 5%. Chemicals sales of $173.3 million declined 8% due primarily to depressed caustic soda prices. Cost of goods sold for the first six months of 1994 increased 7% primarily because of increased volume in both segments. As a percent of sales, cost of goods sold in 1994 and 1993 was 82% and 80%, respectively. Selling, administrative and general expenses were $56.5 million, an increase of 4% over the first half of last year, reflecting principally higher provisions for stock-based incentive plans. Other income, net of other charges, increased from comparable 1993 levels. This reflected higher gains on the sales of assets and improved results from joint ventures. First half earnings before interest expense and income taxes were $46.2 million, a decrease of 5% from comparable 1993 earnings of $48.4 million. Segment detail is shown below (amounts in millions): Earnings (Loss) Before Interest Expense and Income Taxes for the Six Months Ended June 30 Increase 1994 1993 (Decrease) Construction Materials $54.4 $34.6 $ 19.8 Chemicals (8.4) 13.6 (22.0) Segment earnings * 46.0 48.2 (2.2) Interest income .2 .2 - Total $46.2 $48.4 $ (2.2) * After allocation of corporate expense and income, other than "interest income, etc." (principally interest income earned on short- term investment of funds 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. Construction Materials segment earnings were $54.4 million, up 57% from last year. The increase was the result of higher volumes as well as improved sales prices. The Chemicals segment had a loss of $8.4 million as compared to 1993's first half earnings of $13.6 million, reflecting principally net lower prices. The provision for income taxes for the first half of 1994 was $13.3 million as compared with last year's expense of $12.4 million. The increase reflects the effect of the higher tax rate, partially offset by lower earnings. Net earnings of $28.5 million and earnings per share of 78 cents were down 8% and 6%, respectively, from the corresponding first half 1993 results. Acquisition of Callaway Chemical Company On August 1, 1994, the assets and business of Callaway Chemical Company were acquired from Exxon Chemical Company. In a related transaction, the assets and business of Comcor Chemicals Limited were acquired from Exxon Corporation's affiliated Canadian company, Imperial Oil Limited. Callaway Chemical Company will operate under its current name as a wholly-owned subsidiary of Vulcan. The Comcor business will become Callaway Chemicals Limited, a wholly-owned Canadian subsidiary of Vulcan. The two businesses will be integrated and managed as a single unit. During the three-year period 1991 through 1993, the acquired businesses reported unaudited average annual revenues of $92 million and unaudited pretax operating income of $7.9 million. During the same period, earnings before interest, taxes and depreciation ("EBITD") averaged $10.6 million. These results do not purport to be indicative of results of operations which may be obtained in the future. Callaway Chemical, headquartered in Columbus, Georgia, is a leading supplier of process aids for the pulp and paper, water treating and textile industries. Comcor, based in Vancouver, British Columbia, manufactures and supplies pulp and paper process aids principally in Canada. The two businesses employ approximately 300 people. The acquisition of Callaway represents a significant milestone in Vulcan Chemicals' pursuit of profitable growth opportunities in targeted businesses. From 1989 to 1993, the acquired businesses' revenues and EBITD grew at average annual rates of 7.9% and 10.0%, respectively. Callaway's strong positions in several attractive businesses offer above average growth prospects in its existing products and services and provide a platform for additional growth via product line extensions and additions. Outlook On July 19, 1994, H. A. Sklenar, Chairman and Chief Executive Officer of Vulcan made certain statements concerning the Company's earnings outlook. Excerpts of the relevant press release quoting Mr. Sklenar are as follows: "Improved demand from all major sectors of the construction economy was evident in the second quarter as higher stone shipments and improved selling prices produced a sharp increase in Construction Materials earnings. We expect these trends to continue, with the result that full year Construction Materials earnings should be up significantly from 1993's level. "Results in our Chemicals business continue to be very disappointing. However, recent developments in the caustic soda market suggest that the worst may be behind us. Caustic demand is strengthening, supplies are tight, and spot prices are firming. If these trends continue, results should improve from first half levels. Despite this improved outlook, Chemicals full-year 1994 segment earnings probably will be at or near the break-even level." LIQUIDITY AND CAPITAL RESOURCES CONDENSED CONSOLIDATED BALANCE SHEETS - JUNE 30, 1994 AS COMPARED WITH DECEMBER 31, 1993 AND JUNE 30, 1993 AND CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS COMPARISONS FOR THE YEAR TO DATE AS OF JUNE 30, 1994 AND JUNE 30, 1993 Working Capital Working capital, exclusive of debt and cash items, was $196.0 million at June 30, 1994, up 30% from the 1993 year-end total. Receivables were up due to increased sales. As compared to last year's June 30 level, working capital decreased 4%, principally reflecting a decrease in inventories. As of June 30, 1993, working capital, exclusive of debt and cash items, was $203.8 million. This was a 30% increase from the 1992 year-end total. Receivables were up due to increased sales and inventories were higher due primarily to build-ups in the Chemicals segment. The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.8 as of June 30, 1994, down from a 2.1 ratio at year-end 1993 but up from 1.7 at June 30, 1993. Cash Flows First half net cash provided by operations totaled $37.8 million, up significantly from the $30.3 million generated in the same period last year. The increase reflects principally a lower increase in working capital during the first six months of 1994 as compared to 1993. Cash used for investing activities totaled $47.1 million, as compared with $54.1 million in last year's first half. This decrease reflects higher proceeds from the sale of property, plant and equipment, decreased investment in nonconsolidated companies and the lack of cash payments for business acquisitions in 1994, partially offset by higher purchases of property, plant and equipment. Cash provided by financing activities totaled $15.3 million in the first half of 1994, up from $11.8 million provided in 1993; this change reflects the absence of any common stock purchases in 1994, which more than offset the impact of lower net borrowings. Cash and cash equivalents, which totaled $19.9 million at June 30, 1994, increased $5.9 million in the first half of 1994. This compares with last year's decrease of $12.1 million. Property Additions Property Additions Property additions in the first six months of 1994 totaled $57.1 million as compared with $49.2 million in the same period last year. The increase reflects principally the stock for assets acquisition of Peroxidation Systems, Inc. by the Chemicals segment. This business is being operated under the name of Vulcan Peroxidation Systems, Inc. (VPSI). Headquartered in Tucson, Arizona, VPSI provides equipment, chemicals and services to the municipal, industrial and environmental water treatment markets. Short-Term Borrowings Short-term borrowings as of June 30, 1994 consisted of notes payable to banks totaling $45.2 million. There were no short-term borrowings as of December 31, 1993. Short- term borrowings as of June 30, 1993 totaled $59.8 million of commercial paper. Long-Term Obligations As of June 30, 1994, long-term obligations were 10.3% of long-term capital and 13.6% of shareholders' equity. The corresponding 1993 percentages were 11.5% and 15.6%. Common Stock Transactions There were no share purchases made pursuant to the Company's common stock purchase program in the first half of 1994. Second quarter 1993 purchases were 512,800 shares at a total cost of $22.5 million. This was equal to an average price per share of $43.91. For the first half of 1993, common stock purchases totaled 540,364 shares at a cost of $23.9 million, equal to $44.18 per share. The Company's purchases of shares of common stock are made based upon the common stock's valuation and price, the Company's liquidity and its actual and projected needs for cash for investment projects and regular dividends, and the Company's levels of debt. Acquisition of Callaway Chemical Company The purchase price for the assets acquired of Callaway Chemical Company and Comcor Chemicals Limited, including net working capital, was approximately $84 million and was paid on August 1, 1994. Funds for the purchase price were obtained by the Company through issuance and sale of short-term notes. Capital expenditures in the acquired businesses for the remainder of 1994, 1995 and 1996 are projected to be approximately $4 million to $6 million per year. PART II. OTHER INFORMATION Item 5. Other Information The press release dated August 1, 1994, announcing the transfer of the assets and business of Callaway Chemical Company and Comcor Chemicals Limited to Vulcan Materials Company is shown as Exhibit 1. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits furnished in accordance with Item 601 of Regulation S-K and included in Part I: Exhibit 11 - Computation of Earnings per Share Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended June 30, 1994. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ` VULCAN MATERIALS COMPANY Date 1994 /s/ D. F. Sansone D. F. Sansone Vice President, Finance EX-99 2 EXHIBIT 1: PRESS RELEASE EXHIBIT 1 VULCAN CHEMICALS News Release Press Contacts: Vulcan Chemicals David Donaldson (205) 877-3022 Exxon Chemical Vin Hoey (713) 870-6221 Imperial Oil Richard O'Farrell (416) 968-4875 FOR IMMEDIATE RELEASE August 1, 1994 VULCAN ACQUIRES CALLAWAY CHEMICAL COMPANY, COMCOR CHEMICALS LIMITED Birmingham, Alabama - Vulcan Chemicals announced today that it has concluded agreements with Exxon Chemical Company, a division of Exxon Corporation, resulting in the transfer of the assets and business of Exxon's Callaway Chemical Company unit to Vulcan Chemicals. In a related transaction, the assets and business of Comcor Chemicals Limited were transferred to Vulcan by Exxon Corporation's affiliated Canadian company, Imperial Oil Limited. Callaway Chemical Company will operate under its current name as a wholly-owned subsidiary of Vulcan. The Comcor business will become Callaway Chemical Limited, a wholly-owned Canadian subsidiary of Vulcan. The two businesses will be integrated and managed as a single unit. Combined 1993 sales of the two acquired companies were approximately $90 million. The two businesses employ approximately 300 people. According to Vulcan Chemicals' President Mike Ferris, "We are proud to welcome the employees of these two companies into our company, and look forward to a long and productive future together. Callaway Chemical Company and Callaway Chemical Limited will be excellent complements to Vulcan's strategic focus on water management and pulp and paper chemicals. The companies also enhance Vulcan's existing relationship with the textile industry, and provide a good foundation for continued growth." Callaway Chemical, headquartered in Columbus, Georgia, is a leading supplier of process aids for the pulp and paper, water treating and textile industries. Comcor, based in Vancouver, British Columbia, manufactures and supplies pulp and paper process aids principally in Canada. Vulcan Chemicals, a division of Vulcan Materials Company (NYSE:VMC) based in Birmingham, Alabama, manufactures basic industrial chemicals including chlorine, caustic soda, and a diversified line of chlorinated organic chemicals. Through its wholly-owned subsidiary, Vulcan Peroxidation Systems Inc., the company is a key supplier of equipment, chemicals, and services to the municipal, industrial and environmental water treatment markets. With its newest wholly-owned subsidiaries, Callaway Chemical Company and Callaway Chemical Limited, the company is also a leading supplier of process aids for the pulp and paper, water treating and textile industries. (END) -----END PRIVACY-ENHANCED MESSAGE-----