-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ETCt/mpSn2ELILRYWH3POUGhkHCBxl/rtP7I+gWYf7HQvcUP9Sh/vB5QtKfGiKNh 4rYaFRXXcuAxOpYkg+vpqw== 0000103973-98-000002.txt : 19980514 0000103973-98-000002.hdr.sgml : 19980514 ACCESSION NUMBER: 0000103973-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN MATERIALS CO CENTRAL INDEX KEY: 0000103973 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 630366371 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04033 FILM NUMBER: 98617655 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 March 31, 1998 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 April 30, 1998 Common Stock, $1 Par Value 33,457,342 VULCAN MATERIALS COMPANY FORM 10-Q QUARTER ENDED MARCH 31, 1998 Contents Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Earnings 2 Condensed Consolidated Statements of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 5 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13
PART I. FINANCIAL INFORMATION Item 1. Financial Statements VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS* (Amounts in thousands) March 31, December 31, March 31, ASSETS 1998 1997 1997 Current assets Cash and cash equivalents............................... $ 95,966 $ 128,566 $ 16,379 Accounts and notes receivable, less allowance for doubtful accounts: Mar. 31, 1998, $7,775; Dec. 31, 1997, $7,548; Mar. 31, 1997, $7,489................... 205,491 199,750 197,830 Inventories: Finished products..................................... 103,256 90,118 94,287 Raw materials......................................... 10,229 10,865 11,736 Products in process................................... 988 617 1,030 Operating supplies and other.......................... 30,069 30,759 30,615 Total inventories................................. 144,542 132,359 137,668 Deferred income taxes................................... 21,356 21,385 23,004 Prepaid expenses........................................ 6,784 5,072 5,899 Total current assets.............................. 474,139 487,132 380,780 Investments and long-term receivables..................... 64,942 63,482 59,589 Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization: Mar. 31, 1998, $1,335,324; Dec. 31, 1997, $1,311,781; Mar. 31, 1997, $1,261,594........................................ 827,307 808,419 777,214 Deferred charges and other assets......................... 106,025 90,213 97,507 Total............................................ $1,472,413 $1,449,246 $1,315,090 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term obligations............. $ 5,408 $ 5,408 $ 5,071 Notes payable........................................... 2,677 3,654 3,105 Trade payables and accruals............................. 114,577 112,547 103,234 Other current liabilities............................... 106,624 86,087 95,699 Total current liabilities........................ 229,286 207,696 207,109 Long-term obligations..................................... 81,931 81,931 85,635 Deferred income taxes..................................... 92,267 88,720 88,947 Other noncurrent liabilities.............................. 77,432 79,402 69,119 Shareholders' equity...................................... 991,497 991,497 864,280 Total............................................ $1,472,413 $1,449,246 $1,315,090 *Balance sheets as of March 31 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 March 31* 1998 1997 Net sales............................................ $358,963 $341,358 Cost of goods sold................................... 269,483 265,243 Gross profit on sales................................ 89,480 76,115 Selling, administrative and general expenses......... 46,729 43,896 Other operating costs................................ 2,369 864 Other income, net.................................... 15,895 3,235 Earnings before interest expense and income taxes.... 56,277 34,590 Interest expense..................................... 1,948 1,767 Earnings before income taxes......................... 54,329 32,823 Provision for income taxes........................... 17,820 10,897 Net earnings......................................... $ 36,509 $ 21,926 Basic earnings per share............................. $1.09 $0.64 Diluted earnings per share........................... $1.07 $0.64 Average common shares outstanding (in thousands)..................................... 33,608 34,040 Average common shares outstanding assuming dilution (in thousands)................... 34,051 34,415 Cash dividends per share of common stock............. $0.520 $0.470 Depreciation, depletion and amortization deducted above..................................... $ 31,188 $ 28,603 Effective tax rate................................... 32.8% 33.2% * 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 CASH FLOWS (Amounts in thousands) Three Months Ended March 31* 1998 1997 Operations Net earnings ................................................ $ 36,509 $ 21,926 Adjustments to reconcile net earnings to net cash provided by continuing operations: Depreciation, depletion and amortization................. 31,188 28,603 Increase in assets before effects of business acquisitions.................................. (19,420) (21,172) Increase in liabilities before effects of business acquisitions.................................. 18,281 10,198 Other, net............................................... (13,300) 3,930 Net cash provided by operations....................... 53,258 43,485 Investing Activities Purchases of property, plant and equipment................... (47,546) (37,933) Payment for business acquisitions (net of acquired cash)..... (3,396) - Cash escrow held for future property purchase................ (13,414) - Proceeds from sale of property, plant and equipment.......... 17,883 1,511 Investment in nonconsolidated companies...................... (1,591) - Net cash used for investing activities................ (48,064) (36,422) Financing Activities Net borrowings - commercial paper and bank lines of credit... (977) (184) Purchases of common stock.................................... (19,399) (25,309) Dividends paid............................................... (17,418) (16,007) Net cash used for financing activities................ (37,794) (41,500) Net decrease in cash and cash equivalents.................... (32,600) (34,437) Cash and cash equivalents at beginning of year............... 128,566 50,816 Cash and cash equivalents at end of period................... $ 95,966 $ 16,379 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized)................... $ 798 $ 444 Income taxes........................................... 4,379 3,240 *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. New Accounting Standards In June 1997 the FASB issued SFAS No. 130 "Reporting Comprehensive Income" (FAS 130) and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" (FAS 131). These pronouncements were required to be adopted for years beginning after December 15, 1997. There was no material impact on the Company's financial reporting resulting from the adoption of SFAS 130 and 131. In February 1998 the FASB issued SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits" (FAS 132), which is required to be adopted for years beginning after December 15, 1997. This new standard addresses disclosure only. Therefore, there will be no effect to earnings and the impact of FAS 132 on the Company's financial reporting is not expected to be material. 4. Accounting Policies for Certain Derivative Instruments The Company does not actively trade or speculate in derivative instruments. Commodity swap contracts are used to reduce fluctuations in prices for natural gas. The fair market values for such swaps purchased and outstanding as of March 31, 1998 and December 31, 1997, were not material. 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. 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 segment 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. Forward Looking Statements Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These include general business conditions, competitive factors, pricing, energy costs and other risks detailed in the Company's periodic reports. Year 2000 Issue The Company has conducted a risk assessment of its major business processes to identify the computer systems that could be affected by the Year 2000 issue. As a recommendation of this assessment, a Year 2000 Project Management Office has been established to coordinate compliance activities. The Company is actively assessing the extent of the problem as it relates to production equipment and automation, raw material procurement, distribution and packaging, as well as computer hardware and software. The Company presently believes that with planned modifications to existing software and conversions to new software, the Year 2000 issue will not pose significant operational problems. Despite our efforts, there can be no guarantee that the systems of other companies and government agencies on which the Company relies will be converted in a timely manner. Although at this time it is not possible to reasonably estimate the cost of compliance, based on the risk assessment, the Company believes that the cost to resolve this issue will not have a material impact on earnings. RESULTS OF OPERATIONS First Quarter 1998 as Compared with First Quarter 1997 Vulcan's first quarter 1998 sales, net earnings and earnings per share were at record levels. Net earnings of $36.5 million, and $1.07 per share (diluted), were both 67% higher than last year. The comparable 1997 earnings and earnings per share were $21.9 million and 64 cents, respectively. Sales in 1998 were $359.0 million, up 5% from last year's total of $341.4 million. The segment detail of that increase is as follows (amounts in millions): First Quarter Sales 1998 1997 Increase Construction Materials $193.3 $187.2 $ 6.1 Chemicals 165.7 154.2 11.5 Total $359.0 $341.4 $17.6 Construction Materials reported record first quarter sales of $193.3 million, up 3% from the 1997 first quarter. Excluding the impact of freight to remote distribution yards, average crushed stone prices increased 4%. Total stone shipments were virtually identical to last year's record level despite less favorable weather conditions. Chemicals sales of $165.7 million also were at a record first quarter level, up 7% from last year's first quarter. This growth was primarily due to higher prices for caustic soda. Average caustic soda prices in the first quarter of 1998 were up 33% from last year's first quarter prices. Earnings before interest expense and income taxes were $56.3 million as compared to $34.6 million in the same period last year. The segment detail of this result is shown in the following summary (amounts in millions): First Quarter Earnings Before Interest Expense and Income Taxes * 1998 1997 Increase Construction Materials $32.4 $15.8 $16.6 Chemicals 22.4 18.3 4.1 Segment earnings * 54.8 34.1 20.7 Interest income, etc. 1.5 .5 1.0 Total $56.3 $34.6 $21.7 * 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 segment with which it is related in terms of products and services. The Construction Materials segment reported record first quarter earnings of $32.4 million as compared with earnings of $15.8 million in the first quarter of 1997. This $16.7 million increase included $11.3 million referable to special items: gains from asset sale of $12.5 million offset somewhat by additional reserves for environmental and related costs of $1.2 million. The Chemicals segment reported first quarter earnings of $22.4 million, up significantly from last year's first quarter earnings of $18.3 million. This reflects principally the increase in caustic soda prices, partly offset by a special item of $3.7 million for additional reserves for environmental and related costs. Selling, administrative and general expenses of $46.7 million for the first quarter of 1998 increased 6% from the 1997 level. The increase reflects principally the impact of higher accruals for incentive-based compensation costs. Other income, net of other charges, was $15.9 million as compared with $3.2 million for the first quarter of 1997. The increase principally reflects gains from sales of assets within the Construction Materials segment. Also, earnings continued to increase from the Company's joint venture to supply limestone from Mexico to the U.S. Gulf Coast market. The provision for income taxes for the current quarter was $17.8 million as compared with 1997's provision of $10.9 million, reflecting the significant increase in pretax earnings of $21.5 million partially offset by a decline in the effective tax rate. The effective tax rate for the quarter was 32.8%, down from last year's first quarter rate of 33.2%. On April 17, 1998, Donald M. James, President and Chief Executive Officer, made certain statements concerning the Company's earnings outlook. Excerpts of the relevant press release quoting Mr. James are as follows: "Our first quarter results reflect the strength of the U.S. economy and our participation as a provider of core materials. Strong operating results from both business segments generated another record quarter, which was further enhanced by gains from sales of assets. "Relatively strong crushed stone shipments and improved pricing within our Construction Materials segment combined for record sales and operating earnings despite less favorable weather conditions. Based on our confidence in the continued strength and stability of the U.S. economy and the performance of our operations, we expect full year 1998 operating earnings in our Construction Materials segment to exceed 1997's record level. "First quarter sales for our Chemicals segment were at a record level, and earnings were well above 1997. The selling price of caustic soda increased 33 percent from the first quarter of 1997 while raw materials and natural gas costs declined. We believe these factors will continue to some extent throughout the year, and therefore remain confident that out Chemicals segment earnings in 1998 will exceed 1997's performance. "Overall, we expect that Vulcan's 1998 net earnings and earnings per share will exceed 1997's record results." LIQUIDITY AND CAPITAL RESOURCES Working Capital Working capital, exclusive of debt and cash items, totaled $159.5 million at March 31, 1998, $1.8 million under the 1997 year-end amount of $161.3 million. An increase in accrued liabilities, including income taxes, more than offset the seasonal increase in receivables and inventories. Working capital at March 31, 1998 decreased 5% from the same date last year as higher accrued liabilities offset increases in receivables and inventories. The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 2.1 as of March 31, 1998. This compares to the 2.3 ratio at year-end 1997 and the 1.8 ratio at March 31, 1997. Cash Flows Net cash provided by operations totaled $53.3 million in the first quarter of 1998, up $9.8 million from the $43.5 million generated in the same period last year. This increase reflects higher earnings and lower working capital requirements. Cash used for investing activities was $48.1 million as compared with the 1997 total of $36.4 million. This increase reflects higher purchases of property, plant and equipment, including a quarry in Tennessee. Net cash used for financing activities totaled $37.8 million, down from the 1997 amount of $41.5 million, due mainly to lower purchases of common stock. Cash and cash equivalents, which totaled $96.0 million at March 31, 1998, were up $79.6 million from the $16.4 million a year ago. On February 13, 1998, the Board of Directors declared a quarterly dividend of 52 cents per common share payable March 10, 1998. The new quarterly dividend represents a 10.6% (5 cents per share) increase over quarterly dividends paid in 1997. Property Additions Property additions totaled $54.6 million in 1998 as compared with $41.7 million in the first quarter of 1997. Short-term Borrowings Short-term borrowings as of March 31, 1998 and 1997 consisted of notes payable to banks totaling $2.7 million and $3.1 million, respectively. Long-term Obligations As of March 31, 1998, long-term obligations were 6.6% of long-term capital and 8.3% of shareholders' equity. The corresponding 1997 percentages were 7.7% and 9.9%. Common Stock Transactions Pursuant to the Company's long-standing common stock purchase program, 190,100 shares of common stock were purchased in the first quarter of 1998 at a total cost of $19.4 million, equal to an average price of $102.05 per share. Purchases of common stock in the first quarter of 1997 totaled 404,352 shares at a total cost of $25.3 million, equal to an average price of $62.59 per share. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (EDGAR filing only) (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended March 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VULCAN MATERIALS COMPANY Date May 13, 1998 /s/ E. A. Khan E. A. Khan Controller /s/ P. J. Clemens, III P. J. Clemens, III Executive Vice President - Finance and Administration EX-27 2
5 This schedule contains summary financial information extracted from the Consolidated Statement of Earnings for the three months ended March 31, 1998, and the Consolidated Balance Sheet as of March 31, 1998 and is qualified in its entirety by reference to such financial statements. 1000 3-MOS DEC-31-1998 MAR-31-1998 95966 0 213266 7775 144542 474139 2162631 1335324 1472413 229286 81931 0 0 46574 944923 1472413 358963 358963 269482 269482 2369 400 1948 54329 17820 36509 0 0 0 36509 1.09 1.07
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