-----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, TswEy/ZXSVzrzgzyWjJpjE3mjnPL5eURKqY4NTZQ1+oqwJVwiP1jVDKN9EL1C5BP 7qgEuRW+jpt+JblW7HexaQ== 0000950144-99-002901.txt : 19990322 0000950144-99-002901.hdr.sgml : 19990322 ACCESSION NUMBER: 0000950144-99-002901 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990319 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-K SEC ACT: SEC FILE NUMBER: 001-04033 FILM NUMBER: 99569320 BUSINESS ADDRESS: STREET 1: ONE METROPLEX DRIVE CITY: BIRMINGHAM STATE: AL ZIP: 35242 BUSINESS PHONE: 2052983000 MAIL ADDRESS: STREET 1: PO BOX 530187 CITY: BIRMINGHAM STATE: AL ZIP: 35253-0187 10-K 1 VULCAN MATERIALS COMPANY 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) {X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1998 ----------------- OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 incorporation or organization) (I.R.S. Employer Identification No.) 1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242 - --------------------------------------------------------------- ------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (205) 298-3000 -------------- 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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark 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 referenced in Part III of this Form 10-K or any amendment to this Form 10-K. ---- State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES AS OF FEBRUARY 26, 1999: $4,480,489,356 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $1.00 PAR VALUE, AS OF FEBRUARY 26, 1999: 100,852,569 SHARES* DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1998, are incorporated by reference into Parts I, II and IV of this Annual Report on Form 10-K. (2) Portions of the registrant's annual proxy statement for the annual meeting of its shareholders to be held on May 14, 1999, are incorporated by reference into Part III of this Annual Report on Form 10-K. *Adjusted to reflect a three-for-one stock split which was effected on March 10, 1999. - -------------------------------------------------------------------------------- 2 VULCAN MATERIALS COMPANY CROSS REFERENCE SHEET FOR DOCUMENTS INCORPORATED BY REFERENCE
HEADING IN ANNUAL REPORT PAGE IN FORM 10-K TO SHAREHOLDERS FOR ANNUAL ITEM NO. YEAR ENDED DECEMBER 31, 1998 REPORT 1. Business (Financial Results by Segment Financial Data for the 3 Years Ended Business Segments) December 31, 1998-Note 12, Segment Data 53-54 Note 14, Acquisitions 55 3. Legal Proceedings Note 10, Other Commitments and Contingent Liabilities 53 7. Management's Discussion and Management's Discussion and Analysis of Results of Analysis of Financial Condition Operations and Financial Condition 41-45 and Results of Operations Financial Terminology 65 7A. Quantitative and Qualitative Management's Discussion and Analysis of Results of Disclosures About Market Risk Operations and Financial Condition 44-45 8. Financial Statements and Consolidated Statements of Earnings 37 Supplementary Data Consolidated Balance Sheets 38 Consolidated Statements of Cash Flows 39 Consolidated Statements of Shareholders' Equity 40 Notes to Consolidated Financial Statements 46-55 Management's Responsibility for Financial Reporting and Internal Control 36 Independent Auditors' Report 36 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63 14. Exhibits, Financial Statement Consolidated Statements of Earnings 37 Schedules and Reports on Consolidated Balance Sheets 38 Form 8-K Consolidated Statements of Cash Flows 39 Consolidated Statements of Shareholders' Equity 40 Notes to Consolidated Financial Statements 46-55 Management's Responsibility for Financial Reporting and Internal Control 36 Independent Auditors' Report 36 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
3 HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 14, 1999
10. Directors and Executive Officers Election of Directors; Nominees for Election to the Board of of the Registrant Directors; Directors Continuing in Office; Section 16(a) Beneficial Ownership Reporting Compliance 11. Executive Compensation Compensation of Directors; Executive Compensation; Option Grants in 1998; Report of the Compensation Committee; Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values; Shareholder Return Performance Presentation; Retirement Income Plan; Employee Special Severance Plan 12. Security Ownership of Certain Security Ownership of Certain Beneficial Owners; Beneficial Owners and Management Security Holdings of Management
4 VULCAN MATERIALS COMPANY ANNUAL REPORT ON FORM 10-K FISCAL YEAR ENDED DECEMBER 31, 1998 CONTENTS
PART ITEM PAGE I 1 Business 1 2 Properties 4 3 Legal Proceedings 7 4 Submission of Matters to a Vote of Security Holders 8 4a. Executive Officers of the Registrant 9 II 5 Market for the Registrant's Common Equity and Related Stockholder Matters 10 6 Selected Financial Data 11 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 7A. Quantitative and Qualitative Disclosure About Market Risk11 8 Financial Statements and Supplementary Data 12 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 12 III 10 Directors and Executive Officers of the Registrant 12 11 Executive Compensation 12 12 Security Ownership of Certain Beneficial Owners and Management 12 13 Certain Relationships and Related Transactions 13 IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13 -- Signatures 19
5 PART I ITEM 1. BUSINESS Vulcan Materials Company, a New Jersey corporation incorporated in 1956, and its subsidiaries (together called the "Company") are principally engaged in the production, distribution and sale of construction materials ("Construction Materials") and industrial and specialty 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 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 the Construction Materials segment and the Chemicals segment. 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 conducts research and development activities for both of its business segments. The Construction Materials research and development facility is located near Birmingham, Alabama. The Chemicals research and development laboratories are located in Wichita, Kansas and Columbus, Georgia. In general, the Company's research and development effort is directed to applied technological development relating to the use of its Construction Materials and Chemicals products as well as for the manufacturing or processing of its Chemicals products. The Company spent approximately $1,091,000 in 1996, $1,281,000 in 1997 and $984,000 in 1998 on research and development activities for its Construction Materials segment. The Company spent approximately $7,939,000 in 1996, $9,474,000 in 1997 and $8,641,000 in 1998 on research and development activities for its Chemicals segment. The Company estimates that capital expenditures for environmental control facilities in the current fiscal year (1999) and the succeeding fiscal year (2000) will be approximately $5,204,000 and $2,918,000, respectively, for the Construction Materials segment, and $5,574,000 and $3,100,000, respectively, for the Chemicals segment. The Company's principal sources of energy are electricity, natural gas and diesel fuel. The Company does not anticipate any material difficulties in obtaining the required sources of energy required for its operations. In 1998, the Construction Materials segment employed an average of approximately 5,214 people. The Chemicals segment employed an average of approximately 1,577 people. The Company's corporate office employed an average of approximately 180 people. The Company considers its relationship with its employees to be good. Financial results of the Company for any individual quarter are not necessarily indicative of results to be expected for the year, due primarily 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. CONSTRUCTION MATERIALS The Company's construction materials business consists of the production and sale of construction aggregates. Construction aggregates include crushed stone, sand, gravel, rock asphalt and crushed slag (a by-product of steel production) and are employed in virtually all types of construction, including highway construction and maintenance, and in the production of asphaltic and portland cement concrete mixes. Aggregates also are widely used as railroad track ballast. Crushed stone constituted approximately 80% of the dollar volume of the Construction Materials segment's 1998 sales, as compared to 79% in 1997 and 79% in 1996. 6 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 generally is limited to the areas in relatively close proximity to production facilities. Noteworthy exceptions are the areas along the Mississippi and Tennessee-Tombigbee river systems and the Gulf Coast which are served by the Company's Reed quarry, areas served by rail-connected quarries, and the areas along the U.S. coast served by ocean-going vessels that transport stone from the Company's joint venture operation in Mexico. The Company's construction aggregates are sold in 17 states primarily in the Southeast, Midwest and Southwest regions of the United States and in the District of Columbia. During 1998, the Company acquired six quarries in Georgia, Illinois and Tennessee and began production at greenfield aggregates operations in Alabama, Georgia and Indiana. Additionally, in January 1999, the Company acquired the stock of CalMat Co., the leading producer of construction aggregates and asphalt mix in California for $740 million, and since the beginning of 1999 has purchased five quarries in Arkansas, three in Georgia and two in North Carolina. Shipments to customers of all construction aggregates from the Company's domestic operations in 1998 totaled approximately 165 million tons, with crushed stone shipments to customers accounting for approximately 157 million tons. In 1998, the Company, directly or through joint ventures, operated 137 permanent crushed stone plants in 13 states and Mexico for the production of crushed limestone and granite with estimated reserves totaling approximately 8.3 billion tons. In 1998, the Company, directly or through joint ventures, operated 9 sand and gravel plants, 4 slag plants and various other types of plants which produce rock asphalt and other aggregates. Estimates of sand and gravel reserves, calculated in a manner comparable to the estimates of stone reserves set forth above, total approximately 27 million tons. Other Construction Materials products and services include asphalt mix, ready-mixed concrete, trucking services, barge transportation, a Mack Truck distributorship, paving construction, dolomitic lime, emulsified asphalt and several other businesses. Environmental and zoning regulations have made it increasingly difficult for the construction aggregates industry either to expand existing quarries or to develop new quarries. Although it cannot be predicted what policies will be adopted in the future by governmental bodies regarding environmental controls which affect the construction materials industry, the Company anticipates that future environmental control costs will not have a materially adverse effect upon its business. CHEMICALS The Chemicals segment is organized into two business units: the Chloralkali Business Unit which manages the Company's line of chloralkali products and related businesses, and the Performance Systems Business Unit which manages the Company's specialty chemicals and services business. The principal chemicals produced by the Chloralkali Business Unit at the Company's three chloralkali plants described in Item 2 below, are chlorine, caustic soda (sodium hydroxide), muriatic acid, hydrochloric acid, caustic potash (potassium hydroxide), potassium carbonate, chlorinated hydrocarbons and calcium chloride. Chlorine and various hydrocarbons (primarily ethylene and methanol) are used to produce an associated line of chlorinated hydrocarbon products, including methylene chloride, perchloroethylene, chloroform, methyl chloride, ethylene dichloride, carbon tetrachloride, methyl chloroform and pentachlorophenol. Principal markets for the Chloralkali Business Unit's chemical products include pulp and paper, energy, food, pharmaceutical, cleaning, chemical processing, fluorocarbons, water management and textiles. In the paper-making industry, chlorine is used in pulp and paper bleaching, while caustic soda is used primarily in the 2 7 kraft and sulfite pulping processes. The Company supplies hydrochloric acid 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. Perchloroethylene, methylene chloride and methyl chloroform are used in industrial cleaning applications. Perchloroethylene is also used in the dry-cleaning industry. The Chloralkali Business Unit's sales to the chemical processing industry serve companies that produce organic and inorganic chemical intermediates and finished products. Products sold to this market include hydrochloric acid, chlorine, caustic soda, caustic potash and potassium carbonate. Potassium carbonate is used in the manufacture of screen glass, rubber antioxidants and other chemicals. The Company sells chloroform, methyl chloroform, perchloroethylene and other chlorinated hydrocarbons to the fluorocarbons market. Chlorine is used in water and sewage management, and caustic soda and caustic potash are used in the production of soaps and detergents. Chlorine 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. Calcium chloride, produced at the Company's Wichita complex, has several uses including de-icing of roads, dust control, road stabilization and oil well completion. In 1998, the Company announced the formation of a joint venture with Mitsui & Co., Ltd, to construct a new chloralkali plant and expand ethylene dichloride (EDC) production capacity at the Company's current manufacturing site in Geismar, Louisiana. This joint venture was structured to take advantage of the Company's manufacturing and domestic marketing capabilities and Mitsui's access to global EDC markets. The facilities are under construction, with production anticipated in early 2000. The principal chemicals produced for the Performance Systems Business Unit by the Company's Callaway Chemical Company subsidiaries include process aids for the pulp and paper and textile industries and various water management chemicals. Through its Vulcan Chemical Technologies, Inc. ("VCT") subsidiary, the Performance Systems Business Unit assembles and markets small-scale chlorine dioxide generators, and sells related chemicals (primarily sodium chlorite manufactured by the Company) and services to the water management and pulp and paper industries. VCT also assembles and markets equipment, and sells related chemicals (primarily hydrogen peroxide purchased from others) and services to the municipal and industrial water management markets. Additionally, the Performance Systems Business Unit markets sodium chlorite produced at the Chloralkali Business Unit's Wichita plant. Sodium chlorite is used in the water management, food and beverage processing, pulp and paper, textile and electronics industries. The Performance Systems Business Unit also markets sodium hydrosulfite which is used primarily in the pulp and paper industry and is produced at the Chloralkali Business Unit's Port Edwards plant. 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 the United States, with sales to such export customers currently accounting for approximately 5% of the sales of the Company's Chemicals segment. The Company's underground reserves of salt, a basic raw material in the production of chlorine and caustic soda, are located near its Wichita, Kansas and Geismar, Louisiana plants. The Company purchases salt for its Port Edwards, Wisconsin plant. Ethylene, methanol, and vinyl chloride monomer, the other major raw materials used in the Chloralkali Business Unit, and various chemicals used by the Performance Systems Business Unit are purchased from several different suppliers. Sources of salt, ethylene, methanol, vinyl chloride monomer and other various chemicals are believed to be adequate for the Company's operations and the Company does not anticipate any material difficulty in obtaining the raw materials which it uses. Certain of the Company's chemical operations are subject to the Resource Conservation and Recovery Act ("RCRA"). Under the corrective action requirements of RCRA, the Environmental Protection Agency ("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. If the results of the RFI determine that constituent concentrations from any such release exceed action levels 3 8 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 and CMS costs over the next several years at its Geismar, Port Edwards and Wichita manufacturing facilities. For each of these three facilities, the RFI and CMS results will determine whether the EPA subsequently requires a CMI to address releases at the facility, and the scope and cost of any such CMI. With respect to those RFI and 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. Various other environmental regulations also have a restrictive effect upon the chemicals industry, both as to production and sales, particularly the production and sale of certain chemicals which are subject to regulation as ozone depleting chemicals. The production and marketing of carbon tetrachloride ended effective January 1, 1996, for most end uses except for exports to Article 5 countries as defined by the Montreal Protocol on Ozone Depleting Chemicals. The production of methyl chloroform for emissive applications also ended effective January 1, 1996. Existing inventories of methyl chloroform may continue to be marketed for emissive uses. In addition, methyl chloroform will continue to be produced and marketed for non-emissive uses, while carbon tetrachloride will continue to be produced and marketed for export to Article 5 countries. However, sales volume of both products will be lower than in prior years. 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, 1998, are reported on pages 53 and 54 (Note 12 of the Notes to Financial Statements) in the Company's 1998 Annual Report to Shareholders, which referenced pages of said Report are incorporated herein by reference. ITEM 2. PROPERTIES CONSTRUCTION MATERIALS The Company's current estimate of approximately 8.3 billion tons of zoned and permitted stone reserves is approximately 65 million tons more than the estimate reported at the end of 1997. These reserves include stone reserves in Mexico owned or controlled by the Company's Mexican joint venture. Increases in the Company's reserves have resulted from 1998 acquisitions in Georgia, Illinois and Tennessee and the opening of greenfield aggregates operations in Alabama, Georgia and Indiana. Management believes that the quantities of zoned and permitted reserves at the Company's stone quarries are sufficient to result in an average quarry life of approximately 52 years at present operating levels. See Note 1 to the table of the Company's 10 largest active stone quarries on page 5 for a description of the method used by the Company for estimating the years of life of stone reserves. 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. Of the 137 stone quarries which the Company operates directly or through joint ventures, 37 are located on owned land, 24 are on land owned in part and leased in part, and 76 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 1999 to 2105. Most of the Company's leases have options to extend them well beyond their current terms. 4 9 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 (if applicable) shown in parentheses:
ESTIMATED YEARS OF LIFE LEASE AT AVERAGE EXPIRATION RATE OF NATURE OF DATE, IF LOCATION PRODUCT PRODUCTION(1 INTEREST APPLICABLE(2) - ---------------------------------------------------------------------------------------------------------------- McCook (Chicago), Illinois Limestone 81.5 Owned Paducah, Kentucky Limestone 42.2 Leased (4) Grayson (Atlanta), Georgia Granite Over 100 Owned Playa Del Carmen, Mexico(3) Limestone Over 100 Owned Gray Court (Greenville), South Carolina Granite Over 100 Owned Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (4) Kennesaw (Atlanta), Georgia Granite 39.2 75% Owned 25% Leased 2013 Manteno, Illinois Limestone Over 100 Leased (4) Skippers, Virginia Granite 95.7 Leased 2016 Lawrenceville (Norfolk/Virginia Beach), Virginia Granite 58.9 31% Owned 69% Leased (5)
- ----------------------------------- (1) Estimated years of life of stone reserves are based on the average annual rate of production of the quarry for the most recent three-year period, except that if reserves are acquired or if production has been reactivated during that period, the estimated years of life are based on the annual rate of production from the date of such acquisition or reactivation. 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. (2) Renewable by the Company through date shown. (3) The Playa Del Carmen, Mexico location is owned by the Company's joint venture in Mexico. Its ranking in this table is based on counting 49% of its reserves, which represents the Company's ownership interest in the entity which owns the reserves. This quarry's estimated years of life at average rate of production is based on 100% of the reserves. (4) Lease does not expire until reserves are exhausted. Surface rights at the Paducah, Kentucky quarry are owned. (5) Leases expire as follows: 8% in 2020, 9% in 2024, 47% in 2044 and 5% in 2045. 5 10 The estimated average life of the Company's sand and gravel operations, calculated in the same manner as described in footnote (1) to the table set out above, is approximately 11 years. Approximately 13% of the Company's estimated 60 million tons of sand and gravel reserves are located on owned land, with the remaining 87% located on leased land. CHEMICALS Manufacturing facilities for the chemicals produced by the Chloralkali Business Unit are owned and operated by the Company at Wichita, Kansas, Geismar, Louisiana, and Port Edwards, Wisconsin. With a few exceptions, the Geismar and Wichita facilities produce the full line of products manufactured by the Company's Chloralkali Business Unit. The Port Edwards plant produces chlorine, caustic soda, muriatic acid, caustic potash, potassium carbonate and sodium hydrosulfite. All of the facilities at Wichita are located on a 1,518-acre tract of land owned by the Company. 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. In addition, the Company owns 120 acres of salt reserves and 108 acres of water reserves. The Company maintains an electric power cogeneration facility at the Wichita plant site which is capable of generating approximately one-third of the plant's electricity and two-thirds of its process steam requirements. Effective July 1995, pursuant to a long-term agreement, the Company has placed this facility in reserve and is purchasing all of its requirements for electric power from a local utility at favorable rates. The facilities at Geismar, Louisiana are located on a 2,185-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 lease expiring in 2007. The plant facilities at Port Edwards, Wisconsin are located on a 34-acre tract of land, the surface rights to which are owned by the Company. Currently, the Company purchases its salt and electrical power requirements for the Port Edwards facility from regional sources of supply. Manufacturing facilities for chemicals produced by the Performance Systems Business Unit (other than sodium chlorite produced at Wichita and sodium hydrosulfite produced at Port Edwards) are operated by subsidiaries of the Company. Callaway Chemical Company owns a headquarters office building and two production facilities in Columbus, Georgia and additional production facilities in Smyrna, Georgia, Dalton, Georgia and Shreveport, Louisiana. Callaway Chemical Limited has an office and small production facility on leased property in Vancouver, British Columbia. Vulcan Chemical Technologies, Inc., leases its office and production facilities in West Sacramento, California. The Company's Chemicals manufacturing facilities are designed to permit a high degree of flexibility as to feedstocks, product mix and product ratios; therefore, actual plant production capacities vary according to these factors. Management does not believe, however, that there is material excess production capacity at the Company's Chemicals facilities. OTHER PROPERTIES The Company relocated its corporate offices to a newly constructed office complex near Birmingham, Alabama late in 1998. Headquarters staffs for the Construction Materials and Chemicals segments, the Southern Division of the Construction Materials segment, and Vulcan Gulf Coast Materials, Inc., also are located in this complex. The space is leased through December 31, 2013 and consists of approximately 189,000 square feet. The annual rental for each year in the initial 5 year period, the second 5 year period and the final 5 year period of the lease will be approximately $3.0 million, $3.2 million and $3.4 million, respectively. 6 11 ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in various lawsuits in the ordinary course of business. It is not possible to determine with precision the probable outcome of 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 position 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 or to 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 effects on its business. In 1991, the Company received notification from the State of New Jersey Department of Environmental Protection ("NJDEP") 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 notification 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 whether a remedial action plan with respect thereto should be developed. 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 NJDEP concerning the site. The ACO contains certain findings of fact by the NJDEP, together with 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 the Respondents and certain successors, the Company will share in the cost of the RI/FS. The Company has been informally advised by the NJDEP that, if the Company continues to participate in the RI/FS, the NJDEP will not seek to enforce a directive issued in 1991 requiring the Company to pay $1 million to the NJDEP to be used for the conduct of the RI/FS. Depending upon the results of the RI/FS, NJDEP will determine what site remediation is required under the ACO, if any. In that event, it is also likely that the Respondents or the NJDEP 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. In 1994, the Environmental Protection Agency (the "EPA") notified the Company that it was among the approximately 880 potentially responsible parties ("PRPs") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") with respect to the Jack's Creek/Sitkin Smelting Superfund site located in Mifflin County, Pennsylvania, on which site the now defunct Sitkin Smelting Company operated a secondary metals smelting facility from 1958 to 1977. The EPA claims that there are releases and threatened releases of various hazardous substances from the Site, including lead and other metals in soils and certain waste and dross piles, and that the PRPs are jointly and severally responsible for the costs of response at the Site. In addition to the EPA's claims, the Pennsylvania Department of Environmental Protection ("PADEP") has asserted a claim for investigation and response costs allegedly incurred at the Site, and state and federal trustees have asserted claims for alleged natural resources damages. In September 1994, the EPA prepared a revised volumetric ranking based on a review of certain Sitkin Smelting Company records reflecting transactions only in the period of 1972 to 1977. Taking into consideration that certain PRPs are "orphans" because these parties are bankrupt, have otherwise ceased business, or cannot be located, the EPA's volumetric ranking also reallocated the orphan shares otherwise attributable to these non-viable parties among the viable remaining PRPs, including the Company. The EPA has classified the Company as among the 73 significant PRPs at the Site. The EPA considers the remaining PRPs de minimis or de micromis parties. In 1994 and 1995, the EPA negotiated and entered into cash payment or separate settlements with over 160 of the de minimis parties. Approximately 240 other de minimis parties then chose not to participate in settlement. The EPA has classified some 325 entities as de micromis parties. The EPA does not intend to pursue these de micromis parties because of their allegedly small respective contributions to the total volume of material shipped to the Site. 7 12 In September 1997, the EPA issued a Record of Decision ("ROD") for the Site, which selected a remedy consisting of: (1) excavation of contaminated soil from flood plains and uplands; (2) consolidation and capping of contaminated soils and certain waste piles under a multi-layer cap; (3) removal of certain contaminated sediments from Jack's Creek; and (4) excavation and off-site treatment and disposal of soils with lead levels above 40,000 part per million. The EPA estimated the capital cost of the remedy at $10,335,000, with annual operation and maintenance costs of $164,000, computing to a total present net worth of $12,500,000; however, there remain several uncertainties and contingencies regarding this estimate. Contemporaneous with issuing the ROD, the EPA issued "special notice letters" to the Company and several hundred other PRPs, inviting "good faith" offers to perform the remedy and pay response costs relating to the Site. The special notice letter indicated that under the EPA's orphan share policy, for those PRPs who agree to perform the remedy, the EPA would be prepared to forgo recovery of up to $3.125 million in past costs and future oversight costs. The Company and over 30 other PRPs have signed a PRP Organization Agreement, forming the Jack's Creek PRP Group (the "PRP Group") to respond to the claims asserted by the EPA, PADEP and others. In December 1998, the PRP Group completed settlement negotiations with the EPA, the U.S. Department of Justice, and PADEP, culminating in a proposed Consent Decree, which is to be lodged with the U.S. District Court, wherein the PRP Group commits to design and implement the remedy outlined in the ROD. In consideration of that commitment, the EPA will forgive the unreimbursed past response costs it allegedly incurred and certain future oversight costs it expects to incur. The Consent Decree also incorporates both the PRP Group's settlement of PADEP's claims for past response costs and future oversight costs and a settlement between the PRP Group and some 100 de minimis parties. These de minimis settlers will pay approximately $3.2 million into a "special fund" held by EPA, 95% of which amount will be available to reimburse the PRP Group for costs incurred in design and implementation of the remedy. The Consent Decree does not include any settlement of natural resource damage claims. In January 1999, the PRP Group executed an Amended and Restated Contribution Agreement, under which the costs of implementing the remedy under the Consent Decree will be allocated among the PRP Group members; the Company's allocated share is 1.96%. Concurrently, the PRP Group executed a settlement agreement with the current owner and operator of the Site, providing for the owner/operator's contribution of certain in-kind services and materials toward performance of the remedy. At present, the Company is not able to predict the likelihood of either a favorable or unfavorable outcome as to the matters described above, or the amount of potential loss in the event of any unfavorable outcome; however, the Company does not believe that any such loss would affect the consolidated financial statements of the Company to a material extent. The Company's subsidiary, CalMat Co., which was acquired in January 1999, received a federal grand jury subpoena in 1998 requesting information concerning its Fresno, California, asphalt operations. CalMat Co. is currently providing information in response to the subpoena. Also, CalMat Co. has been informed that it is a target of an investigation by the U.S. Department of Justice, Antitrust Division, regarding possible violations of antitrust laws regarding these operations for certain years prior to 1998. Based on information available to it at this time, the Company does not anticipate that the outcome of this investigation will have a material adverse effect on its consolidated financial statements. Note 10, Other Commitments and Contingent Liabilities on page 53 of the Company's 1998 Annual Report to Shareholders is hereby incorporated by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to the Company's security holders through the solicitation of proxies or otherwise during the fourth quarter of 1998. 8 13 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The names, positions and ages of the executive officers of the Company are as follows:
NAME POSITION AGE Donald M. James Chairman and Chief Executive Officer 50 Peter J. Clemens, III Executive Vice President, Finance & Administration and Treasurer 55 Guy M. Badgett, III Senior Vice President-Construction Materials, East and President, Southeast Division 50 William F. Denson, III Senior Vice President, Law and Secretary 55 Robert A. Wason IV Senior Vice President, Corporate Development 47 Richard K. Carnwath Vice President, Planning and Development 50 J. Wayne Houston Vice President, Human Resources 49 Ejaz A. Khan Vice President and Controller 42 John A. Heilala President, Chloralkali Business Unit 58 John L. Holland President, Performance Systems Business Unit 56 William L. Glusac President, Midwest Division 48 Daniel J. Leemon President, Midsouth Division 60 Ronald G. McAbee President, Mideast Division 52 Thomas R. Ransdell President, Southwest Division 56 Daniel F. Sansone President, Vulcan Gulf Coast Materials Division 46 James W. Smack President, CalMat Division 55
The principal occupations of the executive officers during the past five years are set forth below: Donald M. James, was elected Chairman of the Board of Directors in May 1997. He became President and Chief Executive Officer in February 1997. He was elected President and Chief Operating Officer in February 1996. In January 1994, Mr. James was elected President of the Southern Division and in August 1995, he was also elected Senior Vice President, South, Construction Materials Group. Peter J. Clemens, III, was elected Executive Vice President, Finance and Administration and Treasurer in May 1997. He served as Executive Vice President and Chief Administrative Officer from May 1996 to May 1997. Prior to that time he served as Senior Vice President, West, Construction Materials Group and Senior Vice President, Finance. Guy M. Badgett, III, was elected Senior Vice President, Construction Materials, East in February 1999. He was elected Chairman, Southern Division in May 1997. He has served as President, Southeast Division, since 1992. 9 14 William F. Denson, III, was elected Senior Vice President, Law in February 1998. Prior to that date he served as Vice President-Law. He has also served as Secretary since April 1981. Robert A. Wason IV was elected Senior Vice President, Corporate Development in December 1998. From 1996 until 1998 he served as President, Performance Systems Business Unit Prior to that time he had served as Executive Vice President, Performance Systems. Richard K. Carnwath has served as Vice President, Planning and Development since 1985. J. Wayne Houston was elected Vice President, Human Resources in October 1997. Prior to that time he served as Director of Compensation and Benefits. Ejaz A. Khan was elected Vice President and Controller in February 1999. He has served as Controller since September of 1995 and prior to that time he served as Controller, Chemicals Division. John A. Heilala has served as President, Chloralkali Business Unit since May 1996. From 1994 until 1996, he served as Executive Vice President, Chloralkali, and prior to that time he served as Vice President, Manufacturing, Chemicals Division. John L. Holland joined the Company in December 1998 as President, Performance Systems Business Unit. From August 1995 to October 1998 he served as President of BetzDearborn Water Management Group and Group Vice President, BetzDearborn, Inc. From April 1994 to August 1995 he served as Senior Vice President Betz Labs, Inc. and President Betz PaperChem, Inc. William L. Glusac has served as President, Midwest Division, since 1994. Prior to that time he served as President, Southwest Division. Daniel J. Leemon has served as President, Midsouth Division, since 1993. Prior to that time he served as Senior Vice President, West, Construction Materials Group. Ronald G. McAbee was appointed President of Mideast Division in January 1999. Prior to that time he served as Vice President, East Region of the Midsouth Division. Thomas R. Ransdell has served as President, Southwest Division since 1994. He also served as President, Vulcan Gulf Coast Materials, Inc., from 1987 to May 1997. Daniel F. Sansone was elected, President, Vulcan Gulf Coast Materials Division in May 1997. From January 1994 to May 1997, he served as Vice President, Finance. Prior to that time he served as Vice President and Controller. James W. Smack was appointed President of CalMat Division effective January 1999. Prior to that time he served as President, Mideast Division. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange ("VMC"). As of February 26, 1999, the number of shareholders of record approximated 3,609. The closing price of the Common Stock on the New York Stock Exchange on February 26, 1999, was $44.917, which price reflects a three-for-one stock split effected on March 10, 1999. The prices in the following table represent the high and low sales prices for the Company's Common Stock as reported on the New York Stock Exchange, which prices have been adjusted to reflect the three-for-one split of the Company's Common Stock on March 10, 1999. 10 15
QUARTER ENDED 1998 1997 --------------- ---- ---- HIGH LOW HIGH LOW ---- --- ---- --- March 31 $ 37.83 $ 31.50 $ 22.17 $ 18.42 June 30 39.90 34.83 26.88 20.42 September 30 40.75 33.63 30.15 26.13 December 31 44.67 31.33 34.65 28.15
Dividends paid in 1998 totaled $70,015,000, as compared with $63,622,000 paid in 1997. On February 12, 1999, the Board of Directors authorized a quarterly dividend of $.195 per share of Common Stock payable March 10, 1999 to holders of record on February 24, 1999. This quarterly dividend represents a 12.5% increase over quarterly dividends paid in 1998, adjusted to reflect the stock split referenced above. The Company's policy is to pay out a reasonable share of net cash provided by operating activities as dividends, consistent on average with the payout record of past years, and consistent with the goal of maintaining debt ratios within prudent and generally acceptable limits. The future payment of dividends, however, will be within the discretion of the Board of Directors of the Company and depends on the Company's profitability, capital requirements, financial condition, growth, business opportunities and other factors which the Board of Directors may deem relevant. ITEM 6. SELECTED FINANCIAL DATA The selected statement of operations, per share data and balance sheet data for each of the 5 years ended December 31, 1998 set forth below have been derived from the audited consolidated financial statements of the Company. The following data should be read in conjunction with the consolidated financial statements of the Company and notes to consolidated financial statements on pages 36 through 40 and 46 through 55 of the Company's 1998 Annual Report to Shareholders, which are incorporated herein by reference.
Year Ended December 31, ---------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------------------------------------------------------------- (Amounts in millions, except per share date) Net sales............................ $ 1,776.4 $ 1,678.6 $ 1,568.9 $ 1,461.0 $ 1,253.4 Net earnings......................... $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 Net earnings per: Basic shares outstanding.......... $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90 Diluted shares outstanding........ $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 Total assets......................... $ 1,658.6 $ 1,449.2 $ 1,320.6 $ 1,215.8 $ 1,181.1 Long-term obligations................ $ 76.5 $ 81.9 $ 85.5 $ 90.3 $ 97.4 Cash dividends declared per share.... $ 0.69 $ 0.62 $ 0.56 $ 0.49 $ 0.44
ALL SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED TO REFLECT THE THREE-FOR-ONE SPLIT OF THE COMPANY'S COMMON STOCK, WHICH WAS EFFECTED ON MARCH 10, 1999. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 41 through 45 and "Financial Terminology" on page 65 of the Company's 1998 Annual Report to Shareholders are incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 44 and 45 of the Company's 1998 Annual Report to Shareholders is incorporated herein by reference. 11 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following information relative to this item is included in the Company's 1998 Annual Report to Shareholders on the pages shown below, which are incorporated herein by reference:
PAGE Consolidated Financial Statements 37-40 Notes to Consolidated Financial Statements 46-55 Management's Responsibility for Financial Reporting and Internal Control 36 Independent Auditors' Report 36 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
With the exception of the aforementioned information and the information incorporated by reference in Items 1, 3, 7, 7A, 8 and 14, the Company's 1998 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 herein pursuant to Item 304 of Regulation S-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT On or before March 31, 1999, the Company will file a definitive proxy statement with the Securities and Exchange Commission pursuant to Regulation 14A (the Company's "1999 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 1999 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 made to the information provided in Part I, Item 4(a) of this Annual Report on Form 10-K. Based solely on a review of Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e) during 1998, and of Form 5 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e) with respect to 1998, the Company has not identified any persons subject to Section 16(a) of the Securities Exchange Act of 1934 who failed to file on a timely basis required forms. The information set forth under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" included in the Company's 1999 Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information under the headings "Compensation of Directors," "Executive Compensation," "Option Grants in 1998," "Report of the Compensation Committee," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values," "Shareholder Return Performance Presentation," "Retirement Income Plan" and "Employee Special Severance Plan" included in the Company's 1999 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 1999 Proxy Statement is incorporated herein by reference. 12 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS An executive officer of the Company, Daniel F. Sansone, serves as the chief executive officer of three companies in which the Company has a 51%, 50% and 49% interest, respectively. Each of the companies reimburses the Company for a portion of Mr. Sansone's salary and bonus. In 1998, the total amount of this reimbursement was $154,000. On January 6, 1999, the Company entered into a Consulting Agreement with A. Frederick Gerstell, the vice chairman and a director of the Company. Mr. Gerstell was the former chairman and chief executive officer of CalMat Co., which the Company acquired in early 1999. Pursuant to the Agreement, Mr. Gerstell shall receive a monthly retainer of $10,600 per month for 17 months in exchange for his consulting services. Mr. Gerstell also received a grant of 7,500 restricted shares of Common Stock on January 6, 1999. He will receive an additional grant of 3,126 restricted shares on January 6, 2000, subject to certain conditions. Other than the foregoing, no information is required to be included herein 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 1998 Annual Report to Shareholders on the pages shown below and are incorporated herein by reference:
PAGE Consolidated Statements of Earnings 37 Consolidated Balance Sheets 38 Consolidated Statements of Cash Flows 39 Consolidated Statements of Shareholders' Equity 40 Notes to Consolidated Financial Statements 46-55 Management's Responsibility for Financial Reporting and Internal Control 36 Independent Auditors' Report 36 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
(A) (2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule for the years ended December 31, 1998, 1997 and 1996 is included in Part IV of this report on the indicated pages: Schedule II Valuation and Qualifying Accounts and Reserves 17
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. 13 18 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 Exhibit (12) which is on page 18 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. EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company. EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as last amended February 12, 1999. EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and among the Company, Goldman, Sachs & Co., Lehman Brothers and Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3 filed on May 2, 1991 (Registration No. 33-40284).* EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the Company and First Trust of New York (as successor trustee to Morgan Guaranty Trust Company of New York) filed as Exhibit 4 to the Form S-3 on May 2, 1991 (Registration No. 33-40284).* EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended and restated filed as Exhibit 10(a) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company filed as Exhibit A to the Company's definitive proxy statement for the annual meeting of its shareholders held May 16, 1991 (File No. 1-4033).** EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and restated, filed as Exhibit 10(f) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not Employees of the Company, as last amended and restated on February 17, 1996 filed as Exhibit 10(g) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the Company filed as Exhibit 10(i) to the Company's 1997 Form 10-K Annual Report (File No. 1-4033).** 14 19 EXHIBIT (10)(J) Executive Deferred Compensation Plan.** EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.** EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated January 6, 1999.** EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 1998 (set forth on page 18 of this report). EXHIBIT (13) The Company's 1998 Annual Report to Shareholders. EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998. EXHIBIT (23) Consent of Deloitte & Touche LLP EXHIBIT (24) Powers of Attorney EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only). EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic Submission Only). EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic Submission Only). 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, 1998, will be filed as one or more amendments to this Form 10-K on or before June 29, 1999, as permitted by Rule 15d-21 under the Securities Exchange Act of 1934. *Incorporated by reference. **Management Contract or Compensatory Plan. (B) REPORTS ON FORM 8-K The following sets forth information concerning Forms 8-K filed during the fourth quarter ended December 31, 1998: 1. On October 19, 1998, the Company filed a Form 8-K reporting that the Company's Board of Directors adopted a Shareholder Rights Plan. 2. On November 16, 1998, the Company filed a Form 8-K reporting that the Company had entered into a definitive merger agreement providing for the acquisition of CalMat Co. by the Company. 15 20 INDEPENDENT AUDITORS' REPORT Vulcan Materials Company: We have audited the consolidated financial statements of Vulcan Materials Company and its subsidiary companies as of December 31, 1998, 1997 and 1996 and for the years then ended, and have issued our report thereon dated February 5, 1999 (March 10, 1999 as to Note 15B); such consolidated financial statements and report are included in your 1998 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Vulcan Materials Company and its subsidiary companies, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements as a whole, presents fairly in all material respects the information shown therein. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Birmingham, Alabama February 5, 1999 16 21 SCHEDULE II VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 1998, 1997 and 1996 Amounts in Thousands
Column A Column B Column C Column D Column E Column F - ---------------------------------------------------------------------------------------------------------------------------- Balance at Additions Charges to Balance at Beginning Costs and Other End Description of Period Expenses Accounts Deductions Of Period - ----------------------------------------------------------------------------------------------------------------------------- 1998 Accrued Environmental Costs...................... $ 4,285 $ 6,848 $ 7,160 (1) $3,973 Doubtful Receivables............................. 7,548 1,312 1,469 (2) 7,391 All Other(3)..................................... 1,374 2,282 1,698 1,958 1997 Accrued Environmental Costs...................... $ 3,732 $ 1,069 $ 516 (1) $4,285 Doubtful Receivables............................. 8,106 885 1,443 (2) 7,548 All Other(3)..................................... 1,687 2,010 $ 208 2,531 1,374 1996 Accrued Environmental Costs...................... $ 2,765 $ 285 $ 3,000 $ 2,318 (1) $3,732 Doubtful Receivables............................. 8,176 732 802 (2) 8,106 All Other(3)..................................... 1,395 1,794 1,502 1,687
(1) Expenditures on environmental remediation projects. (2) Write-offs of uncollected accounts and worthless notes, less recoveries. (3) Valuation and qualifying accounts and reserves for which additions, deductions and balances are not individually significant. 17 22 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
1998 1997 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------- Fixed charges: Interest expenses before capitalization Credits ................................. $ 7,224 $ 8,074 $ 9,263 $ 11,396 $ 10,699 Amortization of financing costs .......... 93 104 164 109 114 One-third of rental expense .............. 13,668 9,735 9,663 9,532 10,393 --------------------------------------------------------------------- Total fixed charges ................ $ 20,985 $ 17,913 $ 19,090 $ 21,037 $ 21,206 ===================================================================== Net earnings ................................ 255,908 209,145 188,595 166,240 97,976 Provisions for income taxes ................. 118,936 91,356 96,985 92,181 47,930 Fixed charges ............................... 20,985 17,913 19,090 21,037 21,206 Capitalized interest credits ................ (442) (1,160) (627) (297) (878) Amortization of capitalized interest ........ 715 708 674 1,031 997 ---------------------------------------------------------------------- Earnings before income taxes as adjusted ................................ $ 396,102 $ 317,962 $ 304,717 $ 280,192 $ 167,231 ====================================================================== Ratio of earnings to fixed charges .......... 18.9 17.8 16.0 13.3 7.9
18 23 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 on March 19, 1999. VULCAN MATERIALS COMPANY By /s/ D. M. JAMES --------------------------------- D. M. James 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/ D. M. James - ----------------------------------- Chairman and Chief Executive Officer March 19, 1999 D. M. James (Principal Executive Officer) /s/ P.J. Clemens, III - ----------------------------------- Executive Vice President, Finance March 19, 1999 P.J. Clemens, III and Administration and Treasurer (Principal Financial Officer) /s/ E.A. Khan - ----------------------------------- Vice President, Controller March 19, 1999 E.A. Khan (Principal Accounting Officer) The following directors: Marion H. Antonini Director Livio D. DeSimone Director A. Frederick Gerstell Director John K. Greene Director Douglas J. McGregor Director Ann D. McLaughlin Director James V. Napier Director Donald B. Rice Director Herbert A. Sklenar Director Orin R. Smith Director By /s/ William F. Denson, III March 19, 1999 -------------------------------- William F. Denson, III Attorney-in-Fact
19 24 EXHIBITS TO FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OF VULCAN MATERIALS COMPANY FILED MARCH 19, 1999 COMMISSION FILE NUMBER 1-4033 25 EXHIBIT INDEX FORM 10-K FISCAL YEAR ENDED DECEMBER 31, 1998 EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company. EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as last amended February 12, 1999. EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and among the Company, Goldman, Sachs & Co., Lehman Brothers and Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3 filed on May 2, 1991 (Registration No. 33-40284).* EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the Company and First Trust of New York (as successor trustee to Morgan Guaranty Trust Company of New York) filed as Exhibit 4 to the Form S-3 on May 2, 1991 (Registration No. 33-40284).* EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended and restated filed as Exhibit 10(a) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company filed as Exhibit A to the Company's definitive proxy statement for the annual meeting of its shareholders held May 16, 1991 (File No. 1-4033).** EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and restated, filed as Exhibit 10(f) to the Company's 1989 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not Employees of the Company, as last amended and restated on February 17, 1996 filed as Exhibit 10(g) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the Company filed as Exhibit 10(i) to the Company's 1997 Form 10-K Annual Report (File No. 1-4033).** EXHIBIT (10)(J) Executive Deferred Compensation Plan.** EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.** EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated January 6, 1999.** EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 1998 (set forth on page 18 of this report).
26 EXHIBIT (13) The Company's 1998 Annual Report to Shareholders. EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998. EXHIBIT (23) Consent of Deloitte & Touche LLP EXHIBIT (24) Powers of Attorney EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only). EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic Submission Only). EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic Submission Only).
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, 1998, will be filed as one or more amendments to this Form 10-K on or before June 29, 1999, as permitted by Rule 15d-21 under the Securities Exchange Act of 1934. *Incorporated by reference. **Management Contract or Compensatory Plan. EX-3.(I) 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3(i) CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION (RESTATED 1988) OF VULCAN MATERIALS COMPANY Dated February 19, 1999 Pursuant to the provisions of Chapter 7 of Title 14A of the New Jersey Business Corporation Act (the "Act") and, in particular, Section 14A:7-15.1(3) thereof, the undersigned corporation, having adopted an amendment to its Certificate of Incorporation in connection with a share division, hereby certifies as follows: FIRST: The name of the corporation is Vulcan Materials Company (the "Company"). SECOND: The date of adoption by the Board of Directors of the Company of the resolutions approving the share division and this related amendment to the Certificate of Incorporation was February 12, 1999. THIRD: This Amendment to the Certificate of Incorporation of the Company will not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and will not result in the percentage of authorized shares that remain unissued after the share division exceeding the percentage of authorized shares that was unissued before the share division. FOURTH: The only class of shares subject to the share division is the common stock, par value $1.00 per share ("Common Stock"). The number of shares of Common Stock subject to the share division is 46,568,324, consisting of 33,605,083 issued and outstanding shares and 12, 963,241 issued shares held by the Company. Each issued share of Common Stock shall be split, or divided, into three (3) shares of Common Stock. FIFTH: The Certificate of Incorporation (Restated 1988) of the Company is amended to increase the number of authorized shares of capital stock of the Company from 165,000,000 shares to 485,000,000 shares, thereby increasing the number of authorized shares of Common Stock of the Company from 160,000,000 shares to 480,000,00 shares. In connection therewith, the first paragraph of Article IV of the Certificate of Incorporation (Restated 1988) of the Company is deleted in its entirety and the following new paragraph is substituted therefor: "The aggregate number of shares which the Corporation is authorized to issue is 485,000,000, divided into 480,000,000 shares of common Stock of the par value of $1 per share and 5,000,000 shares of Preference Stock without par value issuable in series." 2 FOURTH: This Certificate of Amendment shall become effective as of the close of business on February 24, 1999. IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on its behalf by its duly authorized officer as of the date first above written. VULCAN MATERIALS COMPANY ATTEST: By: /s/ E. Starke Sydnor By: /s/ Peter J. Clemens, III --------------------------- -------------------------------- E. Starke Sydnor Peter J. Clemens, III Assistant Secretary Executive Vice President Finance and Administration 2 EX-3.(II) 3 BY-LAWS OF THE COMPANY 1 EXHIBIT 3(ii) BY - LAWS VULCAN MATERIALS COMPANY (Incorporated under the laws of the State of New Jersey) Restated: February 2, 1990 Amended: June 27, 1990 March 27, 1991 February 5, 1992 (eff. 5/11/92) May 11, 1992 December 8, 1992 February 12, 1993 March 5, 1995 February 17, 1996 May 17, 1996 February 14, 1997 February 12, 1999 2 INDEX
PAGE ---- ARTICLE I Shareholders' Meetings Section 1.1 Annual Meetings...................................................... 1 Section 1.2 Special Meetings..................................................... 1 Section 1.3 Notice and Purpose of Meetings....................................... 1 Section 1.4 Quorum and Adjournments.............................................. 1 Section 1.5 Organization......................................................... 2 Section 1.6 Voting............................................................... 2 Section 1.7 Selection of Inspectors.............................................. 3 Section 1.8 Duties of Inspectors................................................. 3 ARTICLE II Directors Section 2.1 Number, Qualification, Tenure, Term, Quorum, Vacancies, Removal (a) Number, Qualification and Tenure............................ 4 (b) Term........................................................ 4 (c) Quorum...................................................... 5 Section 2.2 Meetings of the Board of Directors................................... 5 Section 2.3 Committees of the Board of Directors................................. 6 Section 2.4 Participation in Meetings by Means of Conference Telephone or Similar Instrument........................... 7 Section 2.5 Action of Board of Directors and Committees Without a Meeting......................................... 7 Section 2.6 Dividends............................................................ 7 Section 2.7 Conflict of Interest................................................. 8 ARTICLE III Officers Section 3.1 (a) Corporate Officers.......................................... 8 (b) Group Officers.............................................. 8 (c) Division and Business Unit Officers......................... 9 Section 3.2 (a) Term and Removal of Officers of the Corporation............................................. 9 (b) Term and Removal of Group and Division Officers........................................... 9 Section 3.3 (a) Chairman of the Board....................................... 9 (b) Vice Chairman............................................... 9 Section 3.4 Chief Executive Officer.............................................. 10 Section 3.5 Chief Operating Officer.............................................. 10 Section 3.6 President............................................................ 10 Section 3.7 Chief Administrative Officer......................................... 10 Section 3.8 Vice Presidents...................................................... 11 Section 3.9 General Counsel...................................................... 11 Section 3.10 Secretary............................................................ 11 Section 3.11 Treasurer............................................................ 11 Section 3.12 Controller........................................................... 12 Section 3.13 Other Officers....................................................... 12 Section 3.14 Voting Corporation's Securities...................................... 12
3 ARTICLE IV Indemnification of Directors, Officers and Employees......................................................................... 13 ARTICLE V Certificates of Stock Section 5.1 Transfer of Shares................................................... 15 Section 5.2 Transfer Agent and Registrar......................................... 15 Section 5.3 Fixing Record Date................................................... 15 Section 5.4 Lost, Stolen or Destroyed Certificates............................... 15 ARTICLE VI Miscellaneous Section 6.1 Fiscal Year.......................................................... 16 Section 6.2 Corporate Seal....................................................... 16 Section 6.3 Delegation of Authority.............................................. 16 Section 6.4 Notices.............................................................. 16 ARTICLE VII By-Laws and Their Amendments.......................................................... 17 ARTICLE VIII National Emergency.................................................................... 17
4 ARTICLE I Shareholders' Meetings SECTION 1.1. Annual Meetings (a) The annual meeting of the shareholders of the corporation may be held at such place within or without the State of New Jersey as may be fixed by the Board of Directors, at 10 a.m., local time, or at such other hour as may be fixed by the Board of Directors, on such day in April or May of each year as may be fixed by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. (b) If the annual meeting for the election of directors is not held in one of the months set forth in Section 1.1(a), the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. SECTION 1.2. Special Meetings (a) Special meetings of the shareholders may be called by the Board of Directors, the chairman of the Board of Directors or the chief executive officer. (b) Special meetings shall be held at such time and date and at such place as shall have been fixed by the Board of Directors, the chairman of the Board of Directors or by the chief executive officer. SECTION 1.3. Notice and Purpose of Meetings Written notice of the time, place and purpose or purposes of every meeting of shareholders shall be given, not less than ten nor more than 60 days before the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting. SECTION 1.4. Quorum and Adjournments (a) A quorum at all meetings of shareholders shall consist of the holders of record of a majority of the shares of the issued and outstanding capital stock of the corporation, entitled to vote thereat, present in person or by proxy, except as otherwise provided by law or the Certificate of Incorporation. (b) A shareholders' meeting may be adjourned to another time or place, and, if no new record date is fixed, it shall not be necessary to give notice of the adjourned meeting if the time and place to which the meeting is adjourned are 1 5 announced at the meeting at which the adjournment is taken, and at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. If after the adjournment a new record date is fixed by the Board of Directors, notice of the adjourned meeting shall be given to shareholders of record on the new record date entitled to vote. Less than a quorum may adjourn the meeting as herein provided. SECTION 1.5. Organization Meetings of the shareholders shall be presided over by the chief executive officer, or, if he is not present, by a chairman to be chosen by a majority of the shareholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the corporation, or, in his or her absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the meeting shall choose any person present to act as secretary of the meeting. SECTION 1.6. Voting (a) At all meetings of the shareholders the voting need not be by ballot, except that all elections for directors shall be by ballot, and except that the voting shall be by ballot on all other matters upon which voting by ballot is expressly required by the Certificate of Incorporation or by the laws of the State of New Jersey. (b) The poll at all elections of directors shall be open in accordance with the laws of the State of New Jersey. (c) Subject to the foregoing provisions, the right of any shareholder to vote at a meeting of shareholders shall be determined on the basis of the number of shares registered in his or her name on the date fixed as the record date for said meeting. (d) Except as otherwise provided by statute or these By-laws, any matter submitted to a vote of shareholders shall be viva voce unless the person presiding at the meeting determines that the voting shall be by ballot or unless the circumstances are such that the will of the holders of a majority of shares entitled to vote cannot be determined with certainty and the holder of a share entitled to vote or his or her proxy shall demand a vote by ballot. In either of such events a vote by ballot shall be taken. 2 6 SECTION 1.7. Selection of Inspectors (a) The Board of Directors may in advance of any shareholders' meeting or any proposed shareholder action without a meeting appoint one or more inspectors to act at the meeting or any adjournment thereof or to receive consents of shareholders. If inspectors are not so appointed for a shareholders' meeting or shall fail to qualify, the person presiding at the shareholders' meeting may, and upon the request of any shareholder entitled to vote thereat shall, make such appointment. (b) In case any person appointed as inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding. (c) Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting or in tabulating consents with strict impartiality and according to the best of his or her ability. (d) No person shall be elected a director in an election for which he has served as an inspector. SECTION 1.8. Duties of Inspectors The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting or the shares entitled to consent, the existence of a quorum, the validity and effect of proxies, and shall receive votes or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do such acts as are proper to conduct the election or vote or consents with fairness to all shareholders. If there are three or more inspectors, the act of a majority shall govern. On request of the person presiding at the meeting or any shareholder entitled to vote thereat or of any officer, the inspectors shall make a report in writing of any challenge, question or matter determined by them. Any report made by them shall be prima facie evidence of the facts therein stated, and such report shall be filed with the minutes of the meeting. 3 7 ARTICLE II Directors SECTION 2.1. Number, Qualification, Tenure, Term, Quorum, Vacancies, Removal (a) Number, Qualification and Tenure. The business and affairs of the corporation shall be managed by or under the direction of its Board of Directors, consisting of 11 persons. However, effective at 9:30 a.m., Central Daylight Time on May 14, 1999, the Board of Directors shall consist of 12 persons, should an additional director be elected by the shareholders. The number may, from time to time, be increased or decreased by resolution adopted by a majority of the entire Board of Directors, but the number shall not be less than nine nor more than 21. Any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of two-thirds of the directors in office at the time. Directors shall be at least 25 years of age and need not be United States citizens or residents of New Jersey or shareholders of the corporation. Any outside director shall retire from the Board of Directors at the annual meeting next following their 70th birthday, regardless of the term for which they might have been elected; provided, however, that current outside directors who continue to serve until the annual meeting next following their 68th birthday shall have the option to retire then. Any outside director who ceases to hold the position with the business or professional organization with which such person was associated when most recently elected a director shall automatically be deemed to have offered his or her resignation as a director of the corporation, and the Director and Management Succession Committee shall make a recommendation to the Board of Directors with respect to such resignation; and, if the deemed offer to resign is accepted by the Board of Directors, such resignation shall be effective as of the next annual meeting of shareholders. Any inside director shall retire from the Board of Directors at the annual meeting next following his or her 65th birthday; provided, however, that any inside director who has served as chief executive officer of the corporation and who has been requested by the Board of Directors to do so shall serve until the next annual meeting following his or her 69th birthday, but not thereafter. An inside director is one who is or has been in the full-time employment of the corporation, and an outside director is any other director. (b) Term. Directors shall be divided into three classes, with the term of office of one class expiring each year. Except as otherwise provided in the 4 8 Certificate of Incorporation or these By-laws, directors shall be chosen at annual meetings of the shareholders, and each director shall be chosen to serve until the third succeeding annual meeting of shareholders following his or her election and until his or her successor shall have been elected and qualified. (c) Quorum. A majority of the members of the Board of Directors then acting, but, in no event less than one-third of the entire Board of Directors, acting at a meeting duly assembled, shall constitute a quorum for the transaction of business. Directors having a personal or conflicting interest in any matter to be acted upon may be counted in determining the presence of a quorum. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting, without further notice, from time to time until a quorum shall have been obtained. SECTION 2.2. Meetings of the Board of Directors (a) Meetings of the Board of Directors shall be held at such place within or without the State of New Jersey and at such time and date as may from time to time be fixed by the Board of Directors, or, if not so fixed, as may be specified in the notice of the meeting. A meeting of the Board of Directors shall be held without notice immediately after the annual meeting of the shareholders. (b) Regular meetings of the Board of Directors shall be held on such day of such months as may be fixed by the Board of Directors. At any regular meeting of the Board of Directors any business that comes before such meeting may be transacted except where special notice is required by these By-laws. (c) Special meetings of the Board of Directors may be held on the call of the chairman of the Board of Directors, the chief executive officer or any three directors. (d) Notice of each regular meeting of the Board of Directors, other than the meeting following the annual meeting of shareholders, shall be given not less than seven days before the date on which such regular meeting is to be held. Notice of each special meeting of the Board of Directors shall be given to each member of the Board of Directors not less than two days before the date upon which such meeting is held. Notice of any such meeting may be given by mail, telegraph, telephone, telex, facsimile transmission, personal service or by personally advising the director orally. Notice of a meeting of the Board of Directors may be waived in writing before or after the meeting. Meetings may be held at any time without notice if all the directors are present. Notice of special meetings of the Board of Directors shall specify the purpose or purposes of the 5 9 meeting. Neither the business to be transacted nor the purpose or purposes of any meeting of the Board of Directors need be specified in the notice of regular meetings or in the waiver of notice of any regular or special meeting of the Board of Directors. (e) Notice of an adjourned meeting of the Board of Directors need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten days in any one adjournment. SECTION 2.3. Committees of the Board of Directors (a) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an Executive Committee and one or more other committees, each of which shall have at least three members. To the extent provided in such resolution each such committee shall have and may exercise all the authority of the Board of Directors, except as expressly limited by the New Jersey Business Corporation Act. (b) The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may: (1) fill any vacancy in any such committee; (2) appoint one or more directors to serve as additional members of any such committee; (3) appoint one or more directors to serve as alternate members of any such committee, to act in the absence or disability of members of any such committee with all the powers of such absent or disabled members; (4) abolish any such committee at its pleasure; and (5) remove any director from membership on such committee at any time, with or without cause. (c) The Executive Committee shall meet at such time or times, and at such place within or outside the State of New Jersey, as it shall designate or, in the absence of such designation, as shall be designated by the person or persons calling the meeting; and it shall make its own rules of procedure. Meetings may be held at any time without notice if all members of the Executive Committee are present, or if at any time before or after the meeting those not present waive notice of the meeting in writing. A majority of the members of the Executive Committee shall constitute a quorum thereof, but at any meeting of the Committee at which all the members are not present no action shall be taken except by the unanimous vote of those present. (d) Meetings of any committee may be called by the chairman of the Board of Directors, the chief executive officer, the chairman of the committee, by any two members of the committee or as provided in the resolution appointing the committee. Notice of such meeting shall be given to each member of the 6 10 committee by mail, telegraph, telephone, telex, facsimile transmission, personal service or by personally advising the member orally. Said notice shall state the time and place of any meeting of any such committee and shall be fixed by the person or persons calling the meeting. (e) Actions taken at a meeting of any committee shall be reported to the Board of Directors at its next meeting following such committee meeting; except that, when the meeting of the Board of Directors is held within two days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board of Directors at its second meeting following such committee meeting. SECTION 2.4. Participation in Meetings by Means of Conference Telephone or Similar Instrument Where appropriate communication facilities are available, any or all directors may participate in all or any part of a meeting of the Board of Directors or in a meeting of any committee of the Board of Directors by means of a conference telephone or any means of communication by which the persons participating in the meeting are able to hear each other as though he was or they were present in person at such meeting. Such participation without protesting prior to the conclusion of such participation the lack of notice of such meeting shall constitute a waiver of notice by such participating director or directors with respect to business transacted during such participation. SECTION 2.5. Action of Board of Directors and Committees Without a Meeting Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board of Directors or any committee of the Board of Directors may be taken without a meeting if, prior or subsequent to such action, all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and such written consents are filed with the minutes of the proceedings of the Board of Directors or committee. SECTION 2.6. Dividends Subject to the provisions of the laws of the State of New Jersey and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any and, if any, what part of any funds of the corporation shall be declared in dividends and paid to shareholders; the division of the whole or any part of such funds of the corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the shareholders as dividends or otherwise, and the Board of Directors may fix a sum which may be set aside or reserved over and above the capital paid in of the corporation as working capital for the corporation or as a reserve 7 11 for any proper purpose, and from time to time may increase, diminish and vary the same in its absolute judgment and discretion. SECTION 2.7. Conflict of Interest No contract or other transaction between the corporation and one or more of its directors, or between the corporation and any domestic or foreign corporation, firm or association of any type or kind in which one or more of its directors are directors or are otherwise interested, shall be void or voidable solely by reason of such common directorship or interest, or solely because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes or approves the contract or transaction, or solely because his or their votes are counted for such purpose, if any of the following is true: (1) the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; or (2) the fact of the common directorship or interest is disclosed or known to the Board of Directors or committee and the Board of Directors or committee authorizes, approves, or ratifies the contract by unanimous written consent, provided at least one director so consenting is disinterested, or by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (3) the fact of the common directorship or interest is disclosed or known to the shareholders, and they authorize, approve or ratify the contract or transaction. The Board of Directors, by the affirmative vote of a majority of directors in office and irrespective of any personal interest of any of them, shall have authority to establish reasonable compensation of directors for services to the corporation as directors, officers or otherwise. ARTICLE III Officers SECTION 3.1 (a) Corporate Officers. Each year promptly after the annual meeting of the shareholders, the Board of Directors shall elect a Chairman of the Board, a President, one or more Vice Presidents, with such designations, if any, as it may determine, a General Counsel, a Secretary, a Treasurer, and a Controller, and from time to time may elect or appoint one or more Assistants to any of such officers, and such one or more Assistant Secretaries, Assistant Treasurers, and Assistant Controllers, and such other officers, agents, and employees, and with such designations, as it may deem proper. Any two or more offices may be concurrently held by the same person at the same time. The Chairman of the Board and the President shall be chosen from among the directors. 8 12 (b) Group Officers. The chief executive officer of the corporation may appoint such officers of any group of the corporation as he may deem proper, except that group senior vice presidents may be appointed only by the Board of Directors. A group officer shall not be an officer of the corporation, and shall serve as an officer only of the group to which he is appointed, but a person who holds a group office may also hold a corporate office or a division office, or both. (c) Division and Business Unit Officers. The chief executive officer of the corporation may appoint such officers of any division or business unit of the corporation as he may deem proper, except that division and business unit chairmen and presidents may be appointed only by the Board of Directors. A division or business unit officer shall not be an officer of the corporation, and shall serve as an officer only of the division or business unit to which appointed, but a person who holds a division or business unit office may also hold a corporate office or a group office, or both. SECTION 3.2 (a) Term and Removal of Officers of the Corporation. The term of office of all officers shall be one year and until their respective successors are elected and qualify, but any officer may be removed from office, either with or without cause, at any time, by the affirmative vote of a majority of the members of the Board of Directors then in office. (b) Term and Removal of Group and Division Officers. Group senior vice presidents and division chairmen and presidents shall serve at the pleasure of the Board of Directors. Group senior vice presidents and division chairmen and presidents may be removed from office, either with or without cause, at any time, by the Board of Directors. Other group and division officers shall serve at the pleasure of the chief executive officer of the corporation. Any other group or division officer may be removed from office as a group or division officer, either with or without cause, at any time, by the chief executive officer of the corporation. SECTION 3.3. (a) Chairman of the Board. The Chairman of the Board may execute bonds, mortgages, and bills of sale, assignments, conveyances, and all other contracts, except those required by law to be otherwise signed and executed, or except when the signing and execution thereof when permitted by law shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chairman of the Board shall preside at all meetings 9 13 of the Board of Directors. The Chairman of the Board shall perform such other duties as may be assigned to him by the Board of Directors. (b) Vice Chairman. The Vice Chairman shall advise and counsel with the Chairman of the Board, and with other officers of the corporation on any or all activities in which the corporation may engage, and shall perform such other duties as may be assigned to him by the Chairman of the Board or the Board of Directors. SECTION 3.4. Chief Executive Officer The Chief Executive Officer may execute bonds, mortgages, and bills of sale, assignments, conveyances, and all other contracts, except those required by law to be otherwise signed and executed, or except when the signing and execution thereof when permitted by law shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Executive Officer shall be responsible to the Board of Directors for planning and directing the business of the corporation and for initiating and directing those actions essential to its profitable growth and development and shall perform such other duties as may be assigned to him by the Board of Directors. SECTION 3.5. Chief Operating Officer The Chief Operating Officer may execute bonds, mortgages, and bills of sale, assignments, conveyances, and all other contracts, except those required by law to be otherwise signed and executed, or except when the signing and execution thereof when permitted by law shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Operating Officer shall, subject to the authority and direction of the Chief Executive Officer, have general and active management of the operating affairs of the corporation and shall carry into effect the resolutions of the Board of Directors and the orders of the Chief Executive Officer with respect to the operating affairs of the corporation. SECTION 3.6. President The President may execute bonds, mortgages, and bills of sale, assignments, conveyances, and all other contracts, except those required by law to be otherwise signed and executed, or except when the signing and execution thereof when permitted by law shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The President shall perform such other duties as may be delegated to him by the Board of Directors or the Chief Executive Officer. 10 14 SECTION 3.7. Chief Administrative Officer The Chief Administrative Officer shall be the chief administrative officer of the corporation and shall supervise and manage the administrative affairs of the corporation. He shall supervise and direct those officers and agents of the corporation who are engaged in the administrative affairs of the corporation. He shall perform such functions for the corporation as may be designated by the chief executive officer or the chief operating officer, and shall carry into effect the resolutions of the Board of Directors and the orders of the chief executive officer or the chief operating officer with respect to such functions. SECTION 3.8. Vice Presidents Each Vice President of the corporation may execute bonds, mortgages, bills of sale, assignments, conveyances, and all other contracts, except where required by law to be otherwise signed and executed. Each Vice President of the corporation shall perform such functions for the corporation as may be designated by the chief executive officer of the corporation, and shall carry into effect the resolutions of the Board of Directors and the orders of the chief executive officer of the corporation with respect to such functions. SECTION 3.9. General Counsel The General Counsel shall be the chief legal officer of the corporation and shall have overall responsibility for all legal affairs of the corporation. The General Counsel shall have management responsibility for the corporation's legal department and its relationships with outside counsel. The General Counsel's duties shall include providing legal advice to corporate and division officers, confirming compliance with applicable laws, overseeing litigation, reviewing significant agreements, participating in important negotiations, and selecting all outside counsel. He shall perform such other functions for the corporation as may be designated by the Board of Directors or the chief executive officer. SECTION 3.10. Secretary The Secretary shall keep or cause to be kept the minutes of all meetings of the shareholders, of the Board of Directors, of the Executive Committee, and unless otherwise directed by the Board of Directors, the minutes of meetings of other committees of the Board of Directors. He shall attend to the giving or serving of all notices required to be given by law or by the By-laws or as directed by the Board of Directors or the chief executive officer of the corporation. He shall have custody of the seal of the corporation and shall have authority to affix or cause the same or a facsimile thereof to be affixed to any instrument requiring the seal and to attest the same. He shall perform such other functions for the corporation as may be designated by the Board of Directors or the chief executive officer of the corporation. 11 15 SECTION 3.11. Treasurer The Treasurer shall be responsible for safeguarding the cash and securities of the corporation and shall keep or cause to be kept a full and accurate account of the receipts and disbursements of the corporation. He shall perform such other functions for the corporation as may be designated by the Board of Directors or the chief executive officer of the corporation. SECTION 3.12. Controller The Controller shall be the principal accounting officer of the corporation, shall have supervision over the accounting records of the corporation and shall be responsible for the preparation of financial statements. He shall perform such other functions for the corporation as may be designated by the Board of Directors or by the chief executive officer of the corporation. SECTION 3.13. Other Officers The other officers of the corporation shall have such powers and duties as generally pertain to their respective offices as well as such powers and duties as from time to time may be designated by the Board of Directors or by the chief executive officer of the corporation. SECTION 3.14. Voting Corporation's Securities Unless otherwise ordered by the Board of Directors, the chief executive officer or his or her delegate, or, in the event of his or her inability to act, such other officer as may be designated by the Board of Directors to act in the absence of the chief executive officer shall have full power and authority on behalf of the corporation to attend and to act and to vote, and to execute a proxy or proxies empowering others to attend and to act and to vote, at any meetings of security holders of the corporations in which the corporation may hold securities, and at such meetings the chief executive officer or such other officer of the corporation, or such proxy, shall possess and may exercise any and all rights and powers incident to the ownership of such securities, and which as the owner thereof the corporation might have possessed and exercised, if present. The Secretary or any Assistant Secretary may affix the corporate seal to any such proxy or proxies so executed by the chief executive officer or such other officer and attest the same. The Board of Directors by resolution from time to time may confer like powers upon any other person or persons. 12 16 ARTICLE IV Indemnification of Directors, Officers and Employees (a) Subject to the provisions of this Article IV, the corporation shall indemnify the following persons to the fullest extent permitted and in the manner provided by and the circumstances described in the laws of the State of New Jersey, including Section 14A:3-5 of the New Jersey Business Corporation Act and any amendments thereof or supplements thereto: (i) any person who is or was a director, officer, employee or agent of the corporation; (ii) any person who is or was a director, officer, employee or agent of any constituent corporation absorbed by the corporation in a consolidation or merger, but only to the extent that (a) the constituent corporation was obligated to indemnify such person at the effective date of the merger or consolidation or (b) the claim or potential claim of such person for indemnification was disclosed to the corporation and the operative merger or consolidation documents contain an express agreement by the corporation to pay the same; (iii) any person who is or was serving at the request of the corporation as a director, officer, trustee, fiduciary, employee or agent of any other domestic or foreign corporation, or any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, whether or not for profit; and (iv) the legal representative of any of the foregoing persons (collectively, a "Corporate Agent"). (b) Anything herein to the contrary notwithstanding, the corporation shall not be obligated under this Article IV to provide indemnification (i) to any bank, trust company, insurance company, partnership or other entity, or any director, officer, employee or agent thereof or (ii) to any other person who is not a director, officer or employee of the corporation, in respect of any service by such person or entity, whether at the request of the corporation or by agreement therewith, as investment advisor, actuary, custodian, trustee, fiduciary or consultant to any employee benefit plan. (c) To the extent that any right of indemnification granted hereunder requires any determination that a Corporate Agent shall have been successful on the merits or otherwise in any Proceeding (as hereinafter defined) or in defense of any claim, issue or matter therein, the Corporate Agent shall be deemed to have been "successful" if, without any settlement having been made by the Corporate Agent, (i) such Proceeding shall have been dismissed or otherwise terminated or abandoned without any judgment or order having been entered against the Corporate Agent, (ii) such claim, issue or other matter therein shall have been dismissed or otherwise eliminated or abandoned as against the Corporate Agent, 13 17 or (iii) with respect to any threatened Proceeding, the Proceeding shall have been abandoned or there shall have been a failure for any reason to institute the Proceeding within a reasonable time after the same shall have been threatened or after any inquiry or investigation that could have led to any such Proceeding shall have been commenced. The Board of Directors or any authorized committee thereof shall have the right to determine what constitutes a "reasonable time" or an "abandonment" for purposes of this paragraph (c), and any such determination shall be conclusive and final. (d) To the extent that any right of indemnification granted hereunder shall require any determination that the Corporate Agent has been involved in a Proceeding by reason of his or her being or having been a Corporate Agent, the Corporate Agent shall be deemed to have been so involved if the Proceeding involves action allegedly taken by the Corporate Agent for the benefit of the corporation or in the performance of his or her duties or the course of his or her employment for the corporation. (e) If a Corporate Agent shall be a party defendant in a Proceeding, other than a Proceeding by or in the right of the corporation, and the Board of Directors or a duly authorized committee of disinterested directors shall determine that it is in the best interests of the corporation for the corporation to assume the defense of any such Proceeding, the Board of Directors or such committee may authorize and direct that the corporation assume the defense of the Proceeding and pay all expenses in connection therewith without requiring such Corporate Agent to undertake to pay or repay any part thereof. Such assumption shall not affect the right of any such Corporate Agent to employ his or her own counsel or to recover indemnification under this By-law to the extent that he may be entitled thereto. (f) As used herein, the term "Proceeding" shall mean and include any pending, threatened or completed civil, criminal, administrative or arbitrative action, suit or proceeding, and any appeal therein and any inquiry or investigation which could lead to such action, suit or proceeding. (g) The right to indemnification granted under this Article IV shall not be exclusive of any other rights to which any Corporate Agent seeking indemnification hereunder may be entitled. 14 18 ARTICLE V Certificates of Stock SECTION 5.1. Transfer of Shares Stock of the corporation shall be transferable in accordance with the provisions of Chapter 8 of the Uniform Commercial Code as adopted in New Jersey (N.J.S. 12A:8-101, et seq.) as amended from time to time, except as otherwise provided in the New Jersey Business Corporation Act. SECTION 5.2. Transfer Agent and Registrar The Board of Directors may appoint one or more transfer agents and one or more registrars of transfers and may require all stock certificates to bear the signatures of such transfer agent and registrar, one of which signatures may be a facsimile. SECTION 5.3. Fixing Record Date For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or allotment of any right, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than 60 nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. SECTION 5.4. Lost, Stolen or Destroyed Certificates (a) Where a certificate for shares has been lost, apparently destroyed, or wrongfully taken and the owner thereof fails to so notify the corporation or the transfer agent of that fact within a reasonable time after he has notice of it and the transfer agent or the corporation registers a transfer of the shares before receiving such a notification, the owner shall be precluded from asserting against the corporation any claim for registering the transfer of such shares or any claim to a new certificate. (b) Subject to the foregoing, where the owner of shares claims that the certificate representing shares has been lost, destroyed or wrongfully taken, the corporation shall issue a new certificate in place of the original certificate if the owner thereof requests the issue of a new certificate before the corporation has notice that the certificate has been acquired by a bona fide purchaser, makes proof in affidavit form, satisfactory to the Secretary or Assistant Secretary of the 15 19 corporation and to its transfer agent, of his or her ownership of the shares represented by the certificate and that the certificate has been lost, destroyed or wrongfully taken; files an indemnity bond for an open or unspecified amount or if authorized in a specific case by the corporation, for such fixed amount as the chief executive officer, or a Vice President, or the Secretary of the corporation may specify, in such form and with such surety as may be approved by the transfer agent and the Secretary or Assistant Secretary of the corporation, indemnifying the corporation and the transfer agent and registrar of the corporation against all loss, cost and damage which may arise from issuance of a new certificate in place of the original certificate; and satisfies any other reasonable requirements imposed by the corporation or transfer agent. In case of the surrender of the original certificate, in lieu of which a new certificate has been issued, or the surrender of such new certificate, for cancellation, the bond of indemnity given as a condition of the issuance of such new certificate may be surrendered. ARTICLE VI Miscellaneous SECTION 6.l. Fiscal Year The fiscal year of the corporation shall begin on the first day of January in each year and shall end on the 31st day of December next following, unless otherwise determined by the Board of Directors. SECTION 6.2. Corporate Seal The corporate seal of the corporation shall have inscribed thereon the name of the corporation, the year 1956 and the words "Corporate Seal, New Jersey." SECTION 6.3. Delegation of Authority Any provision of these By-laws granting authority to the Board of Directors shall not be construed as indicating that such authority may not be delegated by the Board of Directors to a committee to the extent authorized by the New Jersey Business Corporation Act and these By-laws. SECTION 6.4 Notices In computing the period of time for the giving of any notice required or permitted for any purpose, the day on which the notice is given shall be excluded and the day on which the matter 16 20 noticed is to occur shall be included. If notice is given by mail, telegraph, telex or facsimile transmission, the notice shall be deemed to be given when deposited in the mail, delivered to the telegraph or telex office or transmitted via facsimile transmitter, addressed to the person to whom it is directed at his or her last address as it appears on the records of the corporation, with postage or charges prepaid thereon; provided, however, that notice must be given by telegraph, telephone, telex, facsimile transmission, personal service or by personally advising the person orally when, as authorized in these By-laws, less than three days' notice is given. Notice to a shareholder shall be addressed to the address of such shareholder as it appears on the stock transfer records of the corporation. ARTICLE VII By-Laws and Their Amendments Subject to the rights, if any, of the holders of any series of Preference Stock then outstanding, the By-laws of the corporation shall be subject to alteration, amendment or repeal, and new By-laws not inconsistent with any provisions of the Certificate of Incorporation and not inconsistent with the laws of the State of New Jersey may be made, either by the affirmative vote of a majority of the votes cast at any annual or special meeting of shareholders by the holders of shares entitled to vote thereon, or, except with respect to By-laws adopted by the shareholders of the corporation which by their terms may not be altered, amended or repealed by the Board of Directors, by the affirmative vote of a majority of the whole Board of Directors at any regular or special meeting of the Board of Directors. ARTICLE VIII National Emergency For the purpose of this Article VIII a national emergency is hereby defined as any period following an enemy attack on the continental United States of America or any nuclear or atomic disaster as a result of which and during the period that communication or the means of travel among states in which the corporation's plants or offices are disrupted or made uncertain or unsafe. Persons not directors of the corporation may conclusively rely upon a determination by the Board of Directors of the corporation, at a meeting held or purporting to be held pursuant to this Article VIII that a national emergency as hereinabove defined exists regardless of the correctness of such determination. During the existence of a national emergency under the foregoing provisions of this Article VIII the following provisions shall become operative but no other provisions of these By-laws shall become inoperative in such event unless directly in conflict with this Article VIII or action taken pursuant hereto: (a) When it is determined in good faith by any director that a national emergency exists, special meetings of the Board of Directors may be called by such director and at any such special meeting two directors shall constitute a quorum for the transaction of business including without limiting the generality 17 21 hereof the filling of vacancies among directors and officers of the corporation and the election of additional officers. The act of a majority of the directors present thereat shall be the act of the Board of Directors. If at any such special meeting of the Board of Directors there shall be only one director present such director present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given of any such adjournment. The director calling any such special meeting shall make a reasonable effort to notify all other directors of the time and place of such special meeting, and such effort shall be deemed to constitute the giving of reasonable notice of such special meeting and every director shall be deemed to have waived any requirement, of law or otherwise, that any other notice of such special meeting be given. The directors present at any such special meeting shall make reasonable effort to notify all absent directors of any action taken thereat, but failure to give such notice shall not affect the validity of the action taken at any such meeting. Any action taken at any such special meeting may be conclusively relied upon by all directors, officers, employees, and agents of, and all persons dealing with, the corporation. (b) The Board of Directors shall have the power to alter, amend, or repeal any Articles of these By-laws by the affirmative vote of at least two-thirds of the directors present at any special meeting attended by two or more directors and held in the manner prescribed in paragraph (a) of this Article, if it is determined in good faith by said two-thirds that such alteration, amendment or repeal would be conducive to the proper direction of the corporation's affairs. 18 EX-10.(J) 4 EXECUTIVE DEFERRED COMPENSATION PLAN 1 EXHIBIT 10(J) VULCAN MATERIALS COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN As Amended Through December 2, 1998 2 CONTENTS Article 1 Establishment and Purpose 1 Article 2 Definitions 1 Article 3 Administration 4 Article 4 Eligibility and Participation 5 Article 5 Deferral Opportunities 5 Article 6 Individual Accounts and Crediting of Investment Returns 9 Article 7 Rabbi Trust 10 Article 8 Change in Control 10 Article 9 Beneficiary Designation 10 Article 10 Withholding Taxes 11 Article 11 Amendment and Termination 11 Article 12 Miscellaneous 12
3 VULCAN MATERIALS COMPANY EXECUTIVE DEFERRED COMPENSATION PLAN ARTICLE 1. ESTABLISHMENT AND PURPOSE 1.1 ESTABLISHMENT. Vulcan Materials Company, a New Jersey corporation, hereby establishes, effective as of October 9, 1998 (the "Effective Date"), a deferred compensation plan for key management employees as described herein, which shall be known as the "Vulcan Materials Company Executive Deferred Compensation Plan" (the "Plan"). 1.2 PURPOSE. The primary purpose of the Plan is to provide eligible employees of the Company with the opportunity to defer a portion of their compensation in a tax-efficient manner. By adopting the Plan, the Company desires to enhance its ability to attract and retain management employees of outstanding competence. ARTICLE 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below, and when the meaning is intended, the term is capitalized: (a) "Accrued Rabbi Trust Obligations" means the then current aggregate deferred compensation account balances of all Participants, consisting of each Participant's deferrals and the net investment gain or loss thereon. (b) "Annual Bonus" means any incentive award based on an assessment of performance, payable in cash by the Company to a Participant with respect to the Participant's services during a Plan Year. The Term "Annual Bonus" shall not include incentive awards that relate to a period exceeding one year. An Annual Bonus shall be deemed to be earned when the Participant performs the related services regardless of when it is paid. (c) "Base Salary" means all regular, basic wages, before reduction for amounts deferred pursuant to the Plan or any other plan of the Company, payable in cash to a Participant for services to be rendered during the Plan Year, exclusive of any Annual Bonus, Long-Term Incentive Awards, other special fees, awards, or incentive compensation, allowances, or amounts designated by the Company as payment toward or reimbursement of expenses. (d) "Board" or "Board of Directors" means the Board of Directors of the Company. (e) "Change in Control" means: (1) the acquisition by any person, entity or "group," within the meaning of Section 13(d)(3) or (14)(d)(2) of the Exchange Act (excluding for this purpose, 1 4 any employee benefit plan of the Company or any of its subsidiaries which acquires beneficial ownership of voting securities of the Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities, in one transaction or a series of transactions; provided, however, that, if prior to such an acquisition, a majority of the Continuing Directors determines that such acquisition shall not, for purposes of the Plan, be deemed a Change in Control, such acquisition shall not constitute a Change in Control hereunder; (2) individuals who, as of the Effective Date, constitute the Board (the "Continuing Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the Continuing Directors (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of the Plan, considered as though such person were a Continuing Director; or (3) approval by the Board of (i) a merger, consolidation or reorganization of the Company in which, as a consequence of the transaction, either the Continuing Directors do not constitute a majority of the directors of the continuing or surviving corporation or any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, controls 25% or more of the combined voting power of the continuing or surviving corporation; (ii) any sale, lease or other transfer, in one transaction or a series of transactions, of all or substantially all of the assets of the Company; or (iii) any plan or proposal for the liquidation or dissolution of the Company; provided, however, that, if at the time of such approval, a majority of the Continuing Directors determines that such merger, consolidation, reorganization, sale, lease, other transfer, liquidation or dissolution shall not, for purposes of the Plan, be deemed a Change in Control, such transaction shall not constitute a Change in Control hereunder, and, provided further, that, if a majority of the Continuing Directors so determines, a Change in Control shall not be deemed to occur until the consummation of any such transaction. (f) "CEO" means the Chief Executive Officer of the Company. (g) "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2 5 (h) "Committee" means the Compensation Committee of the Board (or any other committee designated by the Board that is eligible to administer the Plan in accordance with Rule16b-3 under the Exchange Act). (i) "Company" means Vulcan Materials Company and also includes any "Employing Company" as such term is defined in the Salaried Retirement Income Plan. (j) "Company Stock" means the common stock of the Company. (k) "Disability" shall have the meaning ascribed to such term in the Company's long-term disability plan or, if no plan is then in effect, shall mean the determination by the Committee that the physical or mental condition of a Participant renders such Participant unable to carry out his or her duties and obligations to the Company. (l) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (n) "Long-Term Incentive Award" means a compensation vehicle that provides for the accumulation of value over a time period longer than one year, including, but not limited to, stock options, restricted stock, performance shares, and performance units; but the term shall not include this Plan, any other elective deferred compensation plan, or any tax-qualified or nonqualified retirement plan of the Company. (o) "Participant" means any key management employee of the Company who has been approved by the Committee for participation in the Plan under Section 4.1. (p) "Payout Year" means the calendar year in which the payout contemplated by Section 5.4 is made or commences. (q) "Plan Year" means the calendar year. (r) "Rabbi Trust" means a grantor trust, as described in Section 677 of the Code, that is established by the Company as provided in Article 7. (s) "Rabbi Trust Agreement" meaning the instrument establishing the Rabbi Trust, as such instrument may be amended from time to time. (t) "Retirement" means a termination of a Participant's employment with the Company that entitles such Participant to immediate payment of a pension benefit under the Salaried Retirement Income Plan. 3 6 (u) "Salaried Retirement Income Plan" means the Retirement Income Plan for Salaried Employees of Vulcan Materials Company, and any successor plan thereto. 2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term shall include the feminine, the plural shall include the singular, and the singular shall include the plural. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Committee. In no event shall any member of the Committee be a Participant. 3.2 AUTHORITY OF THE COMMITTEE. (a) Subject to the terms of the Plan, the Committee shall have full power and discretionary authority (i) to select the employees who are eligible to participate in the Plan, (ii) to determine the terms and conditions of each Participant's participation in the Plan, (iii) to construe and interpret the Plan and any agreement or instrument entered into under the Plan, (iv) to establish, amend, and waive rules and regulations for the Plan's administration, (v) subject to the provisions of Article 11, to amend the Plan and any agreement or instrument entered into under the Plan or to terminate the Plan, (vi) to appoint and remove the trustee and the recordkeeper for the Rabbi Trust, and to direct the trustee and the recordkeeper with respect to their duties under the agreements pertaining to the Rabbi Trust, and (vii) to make any other determinations that may be necessary or advisable for the administration of the Plan. (b) To the extent permitted by law, the Committee (i) may delegate any or all of its authority granted under the Plan to one or more executives of the Company (provided that no executive of the Company who is a Participant shall exercise any discretion with respect to his own participation in the Plan) and (ii) may designate one or more individuals who are not Participants (but who may be employees of the Company) to carry out ministerial duties related to the administration of the Plan, except that the Committee shall not delegate responsibility for any matter involving a person subject to Section 16 of the Exchange Act if a decision by the Committee as to such matter would have the effect of exempting a transaction under the Plan from the application of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or any successor rule thereunder. 3.3 DECISIONS BINDING. All determinations and decisions of the Committee (or of any person to whom the Committee has delegated its authority) under the Plan, including questions of construction and interpretation, shall be final, conclusive, and binding on the employees of the Company, the Participants and their beneficiaries and estates. Whenever the Plan authorizes the Committee or any other person to exercise discretion with respect to any matter, such discretion may be exercised in the sole and absolute discretion of the Committee or such person, subject only to the terms of the Plan and applicable requirements of law. 4 7 ARTICLE 4. ELIGIBILITY AND PARTICIPATION 4.1 ELIGIBILITY. Eligibility to participate in the Plan is limited to a select group of management or highly compensated employees consisting solely of key management employees who are nominated to participate in the Plan by the CEO and who are approved by the Committee. 4.2 PARTICIPATION. (a) Each employee approved for participation in the Plan by the Committee shall have the opportunity to defer the receipt of compensation otherwise payable to the Participant in accordance with the provisions of Article V. This opportunity shall continue in effect until the Participant is notified by the Committee that he has ceased to be eligible to make such deferrals. (b) The Committee may at any time and for any reason determine that a Participant no longer is eligible to make deferrals under Article V. Upon being notified in writing of the Committee's decision, such a Participant shall become an inactive Participant that retains all of the rights of a Participant under the Plan, except for the right to make further deferrals. ARTICLE 5. DEFERRAL OPPORTUNITIES 5.1 AMOUNTS WHICH MAY BE DEFERRED. (a) An eligible Participant may irrevocably elect, prior to any Plan Year, to defer (i) up to 50% of his Base Salary earned during the Plan Year and (ii) up to 100% of his Annual Bonus for the Plan Year. (b) In the event that a Participant first becomes eligible to participate in the Plan after the beginning of a Plan Year (including the Plan Year in which the Effective Date occurs), the Committee may allow such Participant to elect to defer (i) up to 50% of his Base Salary earned subsequent to the date on which a valid Deferral Election Form (as described in Section 5.2) is received by the Company from the Participant and (ii) for the Plan Year ended December 31, 1998 only, up to 100% of his Annual Bonus for the entire Plan Year. (c) The Committee, in its discretion, also may permit the deferral of Long-Term Incentive Awards in accordance with such rules and regulations as the Committee may establish. (d) A Participant at all times shall be 100% vested in his deferrals under the Plan and all earnings thereon. 5.2 TIMING OF DEFERRAL ELECTIONS. The election of a Participant to defer compensation under the Plan shall be made within 30 calendar days prior to the beginning of the Plan Year in which the compensation to be deferred is earned, except that, if a Participant is notified during a Plan Year that he is eligible to participate in the Plan for the remainder of the Plan Year, such election shall be made within 30 calendar days following the date of such notification. All deferral elections shall be made by means of a "Deferral Election Form" that is executed by the Participant and delivered to the 5 8 Company. The Deferral Election Form shall provide for the specification by an eligible Participant of: (a) the amount of compensation to be deferred during the Plan Year in accordance with the terms of Section 5.1; (b) the length of deferral of such deferred amounts, and the earnings thereon, in accordance with the terms of Section 5.3; and (c) the form of payout of such deferred amounts, and the earnings thereon, in accordance with the terms of Section 5.4. 5.3 LENGTH OF DEFERRAL. (a) Each Participant who makes a deferral election as to any Plan Year may elect the length of such deferral by designating a Payout Year. Such election shall be irrevocable except as otherwise provided in paragraph (d). The deferral of Base Salary and the deferral of the Annual Bonus in any Plan Year shall be considered separate deferral elections and each may be deferred to a different Payout Year. Deferral elections are subject to the following limitations, unless the Committee permits otherwise: (i) The Payout Year designated shall be no earlier than the second year following the end of the Plan Year in which the compensation deferred is earned; and (ii) The Payout Year shall not be later than the year following the Participant's 65th birthday. All deferral elections are subject to Section 8(a), which requires an immediate lump-sum payment in the event of a Change in Control. (b) In the event that a deferral election is made and no Payout Year is designated, the Participant shall be deemed to have elected a deferral until the Payout Year following the year of the Participant's Retirement. (c) Notwithstanding the Payout Years designated by a Participant pursuant to this Section 5.3 or the form of payout elected by a Participant pursuant to Section 5.4, if at any time prior to the end of any deferral period a Participant's employment with the Company is terminated for any reason other than Retirement or Disability (including termination of employment by reason of the Participant's death), (i) all Payout Years shall be accelerated to the year following the year in which the termination of the Participant's employment occurs, and (ii) all deferred amounts, and the earnings thereon, for all Plan Years shall be paid to the Participant in a single lump-sum cash payment. (d) Notwithstanding the length of deferral elected by a Participant pursuant to paragraph (a) or the form of payout elected by such Participant pursuant to Section 5.4(a), such Participant may 6 9 elect to receive an early payout of all or any portion of the deferral amount, and the earnings thereon, with respect to any Payout Year in the form of a single lump-sum cash payment. As a penalty for early payout, the Participant shall forfeit an amount equal to 10% of the amount requested as a payout, such that the actual payment shall be equal to 90% of the amount by which the balance of the Participant's account for such Payout Year is reduced. Such payout shall be made as soon as practicable following the receipt of the Participant's request. (e) If the Internal Revenue Service determines that a Participant or beneficiary is subject to federal income tax on an amount credited to the Participant's account under the Plan before that amount would otherwise become payable under the Plan, the amount that is then subject to tax shall be paid to the Participant or beneficiary in a single lump-sum cash payment as soon as practicable after the Committee is notified of the Internal Revenue Service's determination. 5.4 FORM OF PAYOUT. (a) Each Participant who makes a deferral election as to any Plan Year may elect as the form of payout either (i) a single lump-sum payment or (ii) up to fifteen approximately equal annual installment payments (such number to be specified by the Participant); provided that all compensation (whether Base Salary or Annual Bonus) deferred to a specific Payout Year (regardless of the Plan Year for which the compensation is deferred) shall be payable in the same form. Such election shall be irrevocable except as otherwise provided in Section 5.3(d). If no such election is made, then all deferred amounts, and the earnings thereon, shall be paid in the form of a single lump-sum payment. All deferral elections are subject to Section 8(a), which requires an immediate lump-sum payment in the event of a Change in Control. (b) Lump-sum and installment payments shall be made on the following terms: (i) LUMP-SUM PAYMENT. Each payout to be made in the form of a single lump-sum payment shall be made in cash on or before the last business day of March in the Payout Year. (ii) INSTALLMENT PAYMENTS. The first installment payment of a payout to be made in installments shall be made in cash on or before the last business day of March in the Payout Year. The remaining installment payments shall be made in cash each year thereafter, on or before the last business day of March of such year, until the entire balance of such Participant's applicable account has been paid in full. Earnings shall continue to accrue to the Participant's account during the payment period. The amount of each installment payment shall be equal to the balance remaining in the applicable account immediately prior to each such payment, multiplied by a fraction, the numerator of which is one, and the denominator of which is the number of installment payments remaining (including the installment payment immediately due). (c) Notwithstanding the form of payout elected by a Participant pursuant to this Section 5.4, with respect to any Payout Year, such Participant may, at any time at least one year prior to such 7 10 Payout Year, petition the Committee to allow the payout for such Payout Year to be changed from a single lump-sum cash payout to an installment payout. The Committee may allow or refuse such request. (d) Following the termination of the employment of a Participant due to Retirement or Disability, notwithstanding the forms of payout elected by a Participant pursuant to this Section 5.4 for all remaining Payout Years, if, on the date any lump-sum or installment payment is due, the payment to be made would cause the aggregate amount of all of the Participant's account balances under the Plan to fall below $50,000, then the amount due, and the remaining balance of each of the Participant's accounts, shall be paid to such Participant on such date in a single lump-sum cash payment. (e) Notwithstanding the provisions of this Section 5.4, if a Participant is a "covered employee" (within the meaning of Section 162(m)(3) of the Code) when a payment is scheduled to be made under the Plan, any portion of the payment that would be nondeductible under Section 162(m) of the Code (when considered with all other compensation that the Participant is expected to receive in the same taxable year) shall be deferred, and shall be paid on the earliest date on which it would be deductible under Section 162(m). (f) If the Company fails to makes any payment due under the Plan within 90 days after it first becomes due, the Committee shall direct the trustee of the Rabbi Trust to make the payment from the Rabbi Trust (to the extent there are assets in the Rabbi Trust available to make the payment). 5.5 FINANCIAL HARDSHIP. (a) If a Participant establishes, to the satisfaction of the Committee, severe financial hardship, the Committee, may: (i) authorize the cessation of deferrals by such Participant; (ii) provide that all or a portion of the amounts previously deferred by the Participant shall immediately be paid in a single lump-sum cash payment; (iii) provide that all or a portion of the installments payable over a period of time shall be paid immediately in a single lump-sum cash payment; or (iv) provide for such other payment schedule as deemed appropriate by the Committee under the circumstances. (b) Severe financial hardship will be deemed to exist in the event of an unanticipated emergency that is caused by the Participant's long and serious illness, impending bankruptcy, or a similar event that is beyond the control of the Participant and that would result in severe financial hardship to the Participant if cessation of deferrals or modified payments were not permitted. The amount distributed pursuant to this Section 5.5 shall not exceed that amount which the Committee determines 8 11 to be reasonably necessary for the Participant to meet the financial hardship at the time of distribution. The Committee's decision with respect to the severity of financial hardship and the manner in which, if at all, the Participant's future deferral opportunities shall cease, and/or the manner in which, if at all, the payment of deferred amounts to the Participant shall be modified, shall be final, conclusive, and not subject to appeal. ARTICLE 6. INDIVIDUAL ACCOUNTS AND CREDITING OF INVESTMENT RETURNS 6.1 PARTICIPANTS' ACCOUNTS. (a) The Company shall establish and maintain a separate bookkeeping account for each deferral made by a Participant, and the earnings thereon. Deferrals shall be credited to a Participant's account as of the date the amount deferred otherwise would have become due and payable to such Participant. Each Participant shall be furnished a statement of his deferred compensation account balances at least annually. (b) The establishment and maintenance of such deferred compensation accounts by the Company shall not be construed as entitling any Participant to any specific assets of the Company. The rights of Participants to receive any distribution under the Plan shall be an unsecured claim against the general assets of the Company. 6.2 INVESTMENT RETURNS ON DEFERRED AMOUNTS. (a) All compensation deferred by a Participant pursuant to Section 5.1 shall be deemed invested, as directed by the Participant, in one or more of the investment alternatives made available from time to time by the Committee. Each such investment election shall be made (i) by means of the execution by the Participant and delivery to the Company of a "New Investment Election Form or (ii) by means of such other methods as the Committee shall approve. The Committee shall specify the available investment alternatives and may adopt such rules and procedures for the allocation of deferrals among such investment alternatives as the Committee deems necessary or appropriate. An investment election shall be effective for all subsequent deferrals under Plan until the Participant makes a new investment election. (b) A Participant shall be permitted, at any time and from time to time, to reallocate his deferred compensation account balances under the Plan among the investment alternatives then available, subject to right of the Committee to impose such restrictions on a Participant's ability to change investment elections as the Committee deems necessary or appropriate. The election of a Participant to reallocate account balances shall be made by means of a form provided to the Participant by the Committee for such purpose, and shall become effective as soon as practicable after a properly-executed form is received by the Committee from the Participant. (c) The balances of each Participant's deferred compensation accounts shall be credited with earnings and charged with losses based upon the actual results that would have been achieved had such balances actually been invested pursuant to the investment elections of the Participant. 9 12 (d) The Company shall have no obligation to invest the compensation deferred under the Plan, or the earnings thereon, in any of the investment alternatives selected by Participants. 6.3 CHARGES AGAINST ACCOUNTS. All payments made to a Participant under the Plan shall be charged against such Participant's accounts when and as made. ARTICLE 7. RABBI TRUST 7.1 ESTABLISHMENT OF A RABBI TRUST. As soon as administratively practicable following the Effective Date, the Company shall establish an irrevocable Rabbi Trust to accumulate assets that will assist the Company in meeting its obligation under the Plan. The Rabbi Trust shall have an independent trustee that is selected by the Company. The trust agreement with respect to the Rabbi Trust shall provide that the assets of the Rabbi Trust shall at all times be specifically subject to the claims of the Company's general creditors in the event of the bankruptcy or insolvency (as defined by the Rabbi Trust Agreement) of the Company. 7.2 FUNDING OF THE RABBI TRUST. The Company may contribute cash, Company Stock, or any other asset to the Rabbi Trust, as the Company deems appropriate. It is intended that the Rabbi Trust will hold assets with a value approximately equal to the Accrued Rabbi Trust Obligations. ARTICLE 8. CHANGE IN CONTROL Upon the occurrence of a Change in Control: (a) The Company shall, within ten business days after the Change in Control, accelerate all deferred amounts to the date of the Change in Control and pay all such deferred amounts, and the earnings thereon, to each Participant or Beneficiary in a single lump-sum cash payment. (b) The composition of the Committee immediately prior to the Change in Control shall not be changed after the Change in Control, except with the consent of a majority of the Continuing Directors. If, after the Change in Control, a member of the Committee resigns or is unable to serve due to death or disability, the remaining members of the Committee shall appoint a replacement. (c) The Company promptly shall reimburse a Participant for all legal fees and expenses reasonably incurred in successfully enforcing any right or benefit under the Plan. ARTICLE 9. BENEFICIARY DESIGNATION 9.1 DESIGNATION OF BENEFICIARY. Each Participant may designate a beneficiary or beneficiaries who, upon the Participant's death, will receive the amounts that otherwise would have been paid to the Participant under the Plan. All such designations shall be signed by the Participant, and shall be in such form as is prescribed by the Committee. Each designation shall be effective as of the date delivered to the Committee (or to a Company employee appointed by the Committee to receive such designations); provided that the Committee must receive any beneficiary designation or 10 13 change therein before the Participant's death. A Participant may change his beneficiary designation at any time and from time to time on such form as is prescribed by the Committee. In the event of the death of the Participant, the payment of all amounts deferred under the Plan, and the earnings thereon, shall be in accordance with the last written beneficiary designation signed and delivered by the Participant and not revoked. 9.2 PAYMENT TO BENEFICIARY. If a Participant dies before the end of the deferral period for any amount under the Plan, the payment of that amount to the Participant's beneficiary or beneficiaries shall be made in a single lump-sum cash payment as provided in Section 5.3. If a Participant dies after installment payments have commenced, but before they have been completed, the remaining payments shall be made to the Participant's beneficiary or beneficiaries under the installment schedule elected by the Participant. 9.3 DEATH OF BENEFICIARY. In the event that all the beneficiaries of a Participant predecease the Participant, all amounts deferred under the Plan, and the earnings thereon, that would have been paid to the Participant under the Plan shall be paid in a single lump-sum cash payment to the Participant's estate, or to the person or persons designated in writing by the Participant's estate. 9.4 INEFFECTIVE DESIGNATION. In the event a Participant does not designate a beneficiary, or for any reason such designation is ineffective, in whole or in part, the amounts that otherwise would have been paid to the Participant under the Plan shall be paid in a single lump-sum cash payment to the Participant's estate. ARTICLE 10. WITHHOLDING OF TAXES The Company shall have the right to either (i) require Participants to remit to the Company, or any person or entity designated by the Committee to administer the Plan, an amount sufficient to satisfy any applicable federal, state, and local income and employment tax withholding requirements or (ii) to deduct from any payment made pursuant to the Plan amounts sufficient to satisfy such withholding requirements. ARTICLE 11. AMENDMENT AND TERMINATION The Company has the right to amend, suspend, or terminate the Plan at any time by action of the Board of Directors, except that (i) no such amendment, suspension, or termination shall, without the written consent of a Participant, change the time or form of any payout under the Plan or otherwise adversely affect, in any material respect, such Participant's rights with respect to amounts theretofore deferred under the Plan, and the earnings thereon, and (ii) following a Change in Control, the Company shall not amend Section 5.4(f), Articles 3, 7 or 8, or this Article 11, and shall not amend any other provision of the Plan in a manner that would alter the effect of Section 5.4(f), Articles 3, 7 or 8, or this Article 11. 11 14 ARTICLE 12. MISCELLANEOUS 12.1 EMPLOYMENT. No provision of the Plan, nor any action taken by the Committee or the Company pursuant to the Plan, shall give or be construed as giving a Participant any right to be retained in the employ of the Company, or affect or limit in any way the right of the Company to terminate his employment. 12.2 NOTICE. Any notice required or permitted to be given to the Committee or the Company under the Plan shall be sufficient if in writing and hand delivered, sent by registered or certified mail, or deliver in any other manner authorized by the Committee, to the Committee (or to a person designated by the Committee to receive such notices). Such notices, if mailed, shall be addressed to the principal executive offices of the Company. Notice to any Participant shall be given in any manner authorized by the Committee and, if mailed, shall be sent to the Participant's address as is set forth in the records of the Company. 12.3 UNFUNDED PLAN. This Plan is intended to be an unfunded plan for tax purposes and for purposes of Title I of ERISA. The Plan is intended primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA, and therefore is further intended to be exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Committee may terminate the Plan for any or all Participants, subject to Article 11, in order to achieve and maintain these intended results. 12.4 SUCCESSORS. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger or consolidation, the purchase of all or substantially all of the assets of the Company, or otherwise. The provision of the Plan with respect to each Participant shall be binding on such Participant's heirs, executors, administrators or other successors in interest. 12.5 NONTRANSFERABILITY. The Committee may recognize the right of an alternate payee named in a domestic relations order to receive all or a portion of a Participant's benefit under the Plan, provided that (i) the domestic relations order would be a "qualified domestic relations order" within the meaning of Section 414(p) of the Code if Section 414(p) were applicable to the Plan, (ii) the domestic relations order does not purport to give the alternate payee any right to assets of the Company or its affiliates, and (iii) the domestic relations order does not purport to give the alternate payee any right to receive payments under the Plan before the Participant is eligible to receive such payments. Except as set forth in the preceding sentence with respect to domestic relations orders, and except as required under applicable federal, state, or local laws concerning the withholding of tax, the rights of any Participant or beneficiary to amounts deferred under the Plan, and the earnings thereon, are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or any beneficiary, other than by will or by the laws of descent and distribution. In no event shall the Company make any payment under the Plan to any assignee or creditor of a Participant or beneficiary. 12 15 12.6 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 12.7 COSTS OF THE PLAN. All costs of implementing and administering the Plan shall be borne by the Company. 12.8 GOVERNING LAW. The Plan shall be governed by and construed in accordance with the laws of the state of New Jersey, without giving effect to any choice or conflict of law provision or rule. 13 EX-10.(K) 5 UNFUNDED SUPPLEMENTAL BENEFIT PLAN 1 EXHIBIT 10(k) UNFUNDED SUPPLEMENTAL BENEFIT PLAN FOR SALARIED EMPLOYEES Vulcan Materials Company January 29, 1999 2 CONTENTS - ------------------------------------------------------------------------------- Article 1. Establishment and Purpose Article 2. Definitions Article 3. Administration Article 4. Eligibility and Participation Article 5. Supplemental Thrift Benefits Article 6. Supplemental Retirement Benefits Article 7. Rabbi Trust Article 8. Change in Control Article 9. Beneficiary Designation -- Supplemental Thrift Benefits Article 10. Withholding Taxes Article 11. Amendment and Termination Article 12. Miscellaneous 1 3 VULCAN MATERIALS COMPANY UNFUNDED SUPPLEMENTAL BENEFIT PLAN FOR SALARIED EMPLOYEES ARTICLE 1. ESTABLISHMENT AND PURPOSE 1.1 ESTABLISHMENT. Vulcan Materials Company, a New Jersey corporation, hereby amends and restates, effective as of January 29, 1999 (the "Effective Date"), the Vulcan Materials Company Unfunded Supplemental Benefit Plan for Salaried Employees (the "Plan"). 1.2 PURPOSE. The primary purpose of the Plan is to make up for the reduction in benefits attributable to the tax-qualified plan limits of the Code, including Section 401(a)(17) and Section 415, and as a result of elective deferrals under the Vulcan Materials Company Executive Deferred Compensation Plan. ARTICLE 2. DEFINITIONS 2.1 DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below, and when the meaning is intended, the term is capitalized: (a) "Alternate Matching Contribution" means, with respect to any Participant, an amount equal to (i) the Matching Contribution that would have been made to the Investment Account (as such term is defined in the Thrift Plan) of the Participant for a given month were it not for the application of such Limitations, minus (ii) the Matching Contribution made to the Investment Account of such Participant for such month, after application of the Limitations. (b) "Board" or "Board of Directors" means the Board of Directors of the Company. (c) "Change in Control" means: (1) the acquisition by any person, entity or "group," within the meaning of Section 13(d)(3) or (14)(d)(2) of the Exchange Act (excluding for this purpose, any employee benefit plan of the Company or any of its subsidiaries which acquires beneficial ownership of voting securities of the Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities, in one transaction or a series of transactions; provided, however, that, if prior to such an acquisition, a majority of the Continuing Directors determines that such acquisition shall not, for purposes of the Plan, be deemed a Change in Control, such acquisition shall not constitute a Change in Control hereunder; (2) individuals who, as of the Effective Date, constitute the Board (the "Continuing Directors") cease for any reason to constitute at least a majority of the 2 4 Board, provided that any person becoming a director of the Company subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the Continuing Directors (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of the Plan, considered as though such person were a Continuing Director; or (3) approval by the Board of (i) a merger, consolidation or reorganization of the Company in which, as a consequence of the transaction, either the Continuing Directors do not constitute a majority of the directors of the continuing or surviving corporation or any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, controls 25% or more of the combined voting power of the continuing or surviving corporation; (ii) any sale, lease or other transfer, in one transaction or a series of transactions, of all or substantially all of the assets of the Company; or (iii) any plan or proposal for the liquidation or dissolution of the Company; provided, however, that, if at the time of such approval, a majority of the Continuing Directors determines that such merger, consolidation, reorganization, sale, lease, other transfer, liquidation or dissolution shall not, for purposes of the Plan, be deemed a Change in Control, such transaction shall not constitute a Change in Control hereunder, and, provided further, that, if a majority of the Continuing Directors so determines, a Change in Control shall not be deemed to occur until the consummation of any such transaction. (d) "CEO" means the Chief Executive Officer of the Company. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" means the Compensation Committee of the Board (or any other committee designated by the Board that is eligible to administer the Plan in accordance with Rule 16b-3 under the Exchange Act). (g) "Company" means Vulcan Materials Company and also includes any Employing Company (as such term is defined in the Retirement Plan). (h) "Company Stock" means the common stock of the Company. (i) "Disability" shall have the meaning ascribed to such term in the Company's long-term disability plan or, if no plan is then in effect, shall mean the determination by the Committee that the physical or mental condition of a Participant renders such Participant unable to carry out his or her duties and obligations to the Company. (j) "Early Retirement" shall have the same meaning as defined under the Retirement Plan. 3 5 (k) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Limitations" means: (i) the limitations set forth in Section 415 of the Code; (ii) the dollar limit imposed by Section 401(a)(17) of the Code on the amount of compensation which may be taken into account under the Thrift Plan and the Retirement Plan; and (iii) the reduction in the compensation that is taken into account under the Thrift Plan and the Retirement Plan (determined without regard to the dollar limit imposed by Section 401(a)(17) of the Code) to the extent that the reduction is attributable to the Participant's election to defer such compensation on a nonqualified basis under Section 5.1 of the Vulcan Materials Company Executive Deferred Compensation Plan. (n) "Matching Contribution" shall have the same meaning as defined under the Thrift Plan. (o) "Normal Retirement Date" shall have the same meaning as defined under the Retirement Plan. (p) "Participant" means any key management employee of the Company who has been approved by the Committee for participation in the Plan under Section 4.1. (q) "PBGC" means the Pension Benefit Guaranty Corporation. (r) "Plan Year" means the period of 12 consecutive months beginning each January 1 and ending December 31. (s) "Rabbi Trust" means a grantor trust, as described in Section 677 of the Code, that is established by the Company as provided in Article 7. (t) "Rabbi Trust Agreement" means the instrument establishing the Rabbi Trust, as such instrument may be amended from time to time. (u) "Retirement Plan" means the Retirement Income Plan for Salaried Employees of Vulcan Materials Company, as the same may be from time to time amended. (v) "Supplemental Retirement Benefits" means the benefits that are payable under Sections 6.1, 6.2, 6.3 or 6.4 of the Plan. 4 6 (w) "Supplemental Thrift Benefits" means the benefits that are payable under Article 5 of the Plan. (x) "Termination of Employment Service" shall have the same meaning as defined under the Retirement Plan. (y) "Termination Due to Disability" of a Participant is deemed to have occurred on the date that the Committee determines the Disability of the Participant to be total and permanent. (z) "Thrift Plan" means the Vulcan Materials Company Thrift Plan for Salaried Employees, as the same may be from time to time amended. (aa) "Vested Benefit" shall have the same meaning as defined under the Retirement Plan. (bb) "Vesting Date" shall have the same meaning as defined under the Retirement Plan. 2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term shall include the feminine, the plural shall include the singular, and the singular shall include the plural. ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Committee. In no event shall any member of the Committee be a Participant. 3.2 AUTHORITY OF THE COMMITTEE. (a) Subject to the terms of the Plan, the Committee shall have full power and discretionary authority (i) to determine the terms and conditions of each Participant's participation in the Plan, (ii) to construe and interpret the Plan and any agreement or instrument entered into under the Plan, (iii) to establish, amend, and waive rules and regulations for the Plan's administration, (iv) subject to the provisions of Article 11, to amend the Plan and any agreement or instrument entered into under the Plan or to terminate the Plan, (v) to appoint and remove the trustee and the recordkeeper for the Rabbi Trust, and to direct the trustee and the recordkeeper with respect to their duties under the agreements pertaining to the Rabbi Trust, and (vi) to make any other determinations that may be necessary or advisable for the administration of the Plan. (b) To the extent permitted by law, the Committee (i) may delegate any or all of its authority granted under the Plan to one or more executives of the Company (provided that no executive of the Company who is a Participant shall exercise any authority with respect to his own participation in the Plan) and (ii) may designate one or more individuals who are not Participants (but who may be employees of the Company) to carry out ministerial duties related to the administration of the Plan, except that the Committee shall not delegate responsibility for any matter involving a person subject to Section 16 of the Exchange Act if a decision by the Committee as to such matter 5 7 would have the effect of exempting a transaction under the Plan from the application of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or any successor rule thereunder. 3.3 DECISIONS BINDING. All determinations and decisions of the Committee (or of any person to whom the Committee has delegated its authority) under the Plan, including questions of construction and interpretation, shall be final, conclusive, and binding on the employees of the Company, the Participants and their beneficiaries and estates. Whenever the Plan authorizes the Committee or any other person to exercise discretion with respect to any matter, such discretion may be exercised in the sole and absolute discretion of the Committee or such person, subject only to the terms of the Plan and applicable requirements of law. ARTICLE 4. ELIGIBILITY AND PARTICIPATION 4.1 ELIGIBILITY. Persons eligible to participate in this Plan shall be limited to full-time, salaried employees of the Company, who are determined to be "key employees" by the CEO and who are approved for participation by the Committee. Further, to be eligible, an employee must be among a select group of management or highly compensated employees of the Company, such that the Plan qualifies for a "top hat" exemption under Title I of ERISA, as further described in Section 12.3 herein. 4.2 PARTICIPATION. (a) Unless otherwise determined by the Committee, Participants in the Plan shall be eligible to receive both Supplemental Thrift Benefits and Supplemental Retirement Benefits. Employees who have been approved for participation in the Plan shall be notified in writing of such approval as soon as administratively practicable thereafter. (b) Subject to the following sentence, in the event a Participant no longer meets the eligibility requirements for participation in the Plan, such Participant shall retain all the rights of a Participant under the Plan, except for (i) the right to receive further Alternative Matching Contributions and (ii) the right to accrue additional Supplemental Retirement Benefits. If a Participant no longer falls within a select group of management or highly compensated employees of the Company, the Committee shall have the right to distribute to the Participant in cash all of the Participant's benefits previously accrued under the Plan. ARTICLE 5. SUPPLEMENTAL THRIFT BENEFITS 5.1 PARTICIPANT ACCOUNTS. (a) The Company shall establish and maintain a separate bookkeeping account for the Alternative Matching Contributions, and the investment returns thereon, of each Participant (a "Supplemental Thrift Benefits Account Balance"). Each Participant shall be furnished with a statement of his account balance at least annually. (b) The establishment and maintenance of such accounts by the Company shall not be construed as entitling any Participant to any specific assets of the Company. The rights of 6 8 Participants to receive any distribution under the Plan shall be an unsecured claim against the general assets of the Company. 5.2 ALTERNATIVE MATCHING CONTRIBUTIONS. If under the Thrift Plan a Matching Contribution to a Participant is reduced by the application of the Limitations, such Participant shall be entitled to have an Alternative Matching Contribution credited to the Participant's Supplemental Thrift Benefits Account Balance. Such credit shall be made at the same time as the Matching Contribution (as so reduced) is made to the Participant under the Thrift Plan. 5.3 INVESTMENT RETURN. (a) Each Participant's Supplemental Thrift Benefits Account Balance under the Plan shall be deemed invested, at the Participant's election, in any investment funds that are available for the investment of the Participant's Matching Contributions Account under the Thrift Plan. A Participant shall make an investment election (or change a previous election) in writing in a manner acceptable to the Committee, and the Committee may adopt such rules and procedures for the deemed investment of Participants' Supplemental Thrift Benefits Account Balances as the Committee considers necessary or appropriate. An investment election shall be effective for all amounts subsequently credited to the Participant's Supplemental Thrift Benefits Account Balance until the Participant makes a new investment election. If a Participant has not made an investment election, the Participant's Supplemental Thrift Benefits Account Balance shall be deemed invested and reinvested in the same proportions among such investment funds as is the Matching Contributions Account of the Participant under the Thrift Plan, subject to such restrictions and limitations as the Committee may deem necessary or appropriate. (b) Each Participant shall be entitled to an investment return based on the deemed investment of the Participant's Supplemental Thrift Benefits Account Balance, which shall be adjusted at such times and in such manner as the Committee deems appropriate to reflect the investment results of the investment funds in which such balance is deemed invested. (c) The Company shall have no obligation to invest any amounts in the investment funds in which the Supplemental Thrift Benefits Account Balances of Participants are deemed invested. 5.4 CHARGES AGAINST ACCOUNTS. All payments made to a Participant under the Plan shall be charged against such Participant's Supplemental Thrift Benefits Account Balance when and as made. 5.5 DISTRIBUTIONS. (a) Unless the Committee shall authorize another form of payment, a Participant's Supplemental Thrift Benefits Account Balance shall be distributed to the Participant, at the election of the Participant, in the form of (i) a single lump-sum cash payment or (ii) installments over a period of ten years. The Participant shall irrevocably elect a form of payment within 30 calendar days after he first becomes eligible to participate in the Plan (or, if later, within 30 days after the date of the amendment adding the installment option to the Plan). If no such election is made, the Participant's Supplemental Thrift Benefits Account Balance shall be paid in a single lump-sum cash payment. 7 9 Such distribution shall be made or such distributions shall commence within 30 calendar days after the Participant's Termination of Employment Service or Termination Due to Disability. (b) Notwithstanding that a Participant may have elected a single lump-sum payment with respect to his Supplemental Thrift Benefits Account Balance pursuant to paragraph (a), such Participant may, at any time at least one year prior to the payment date, petition the Committee to allow the payment to be changed to a ten-year installment payout. The Committee may allow or refuse such request. (c) If the Company fails to make any payment due under this Article 5 within 90 days after it first becomes due, the payment shall be made from the Rabbi Trust (to the extent assets in the Rabbi Trust are available to make the payment). ARTICLE 6. SUPPLEMENTAL RETIREMENT BENEFITS. 6.1 NORMAL RETIREMENT. If a Participant retires at or after such Participant's Normal Retirement Date in accordance with the provisions of the Retirement Plan, such Participant shall be entitled to a Supplemental Retirement Benefit equal to (i) the amount of such Participant's normal retirement benefit under the Retirement Plan, based upon such Participant's election as to the form of benefit payment, without regard to the Limitations, reduced by (ii) the amount of such Participant's retirement benefit under the Retirement Plan, based upon such Participant's election as to the form of benefit payment, after application of the Limitations. 6.2 EARLY RETIREMENT. If a Participant elects Termination of Employment Service in order to take Early Retirement in accordance with the provisions of the Retirement Plan, such Participant shall be entitled to a Supplemental Retirement Benefit equal to (i) the amount of such Participant's early retirement benefit under the Retirement Plan, based upon such Participant's election as to the form of benefit payment, without regard to the Limitations, reduced by (ii) the amount of such Participant's early retirement benefit under the Retirement Plan, based upon such Participant's election as to the form of benefit payment, after application of the Limitations. 6.3 VESTED BENEFIT. If a Participant experiences a Termination of Employment Service after reaching his Vesting Date under the Retirement Plan and is not entitled to a Supplemental Retirement Benefit under Section 6.1 or Section 6.2, such Participant shall be entitled to a Supplemental Retirement Benefit equal to (i) the amount of such Participant's Vested Benefit computed under the Retirement Plan, based on such Participant's election as to the form of benefit payment, without regard to the Limitations, reduced by (ii) the amount of such Participant's Vested Benefit computed under the Retirement Plan, based on such Participant's election as to the form of benefit payment, after application of the Limitations. 8 10 6.4 DEATH. (a) All provisions of the Retirement Plan pertaining to the designation of beneficiaries, including revocation thereof and the effect of a failure to designate a beneficiary, shall also apply with the same force and effect to the Plan. Each action taken by a Participant with respect to the designation or revocation of a beneficiary or beneficiaries under the Retirement Plan shall automatically extend to the Plan. (b) If a Participant's beneficiary becomes eligible at any time to receive a survivor annuity or death benefit payable prior to the commencement of such Participant's retirement benefit under the Retirement Plan, the beneficiary shall be entitled to a Supplemental Retirement Benefit equal to (i) the amount of the survivor annuity or death benefit which the beneficiary is entitled to receive under the Retirement Plan, without regard to the Limitations, reduced by (ii) the amount of the survivor annuity or death benefit which the beneficiary is entitled to receive under the Retirement Plan, after application of the Limitations. 6.5 BENEFIT PAYMENTS. (a) Except as otherwise provided in paragraph (b), the payment of a Supplemental Retirement Benefit to which a Participant or such Participant's beneficiary is entitled under the Plan shall be made in the same manner and subject to the same conditions as is the corresponding benefit under the Retirement Plan. (b) If a Participant or such Participant's beneficiary is entitled to a Supplemental Retirement Benefit and if the present value of such Supplemental Retirement Benefit is $10,000 or less (determined as of the date payment of such Supplemental Retirement Benefit is to be made using the interest and mortality assumptions that are used under the Retirement Plan to satisfy Section 417(e) of the Code), the Company shall have the option to pay such Supplemental Retirement Benefit in the form of a single lump-sum cash payment. 6.6 TAXABILITY OF BENEFITS PRIOR TO PAYMENT. If the Internal Revenue Service determines that a Participant or beneficiary is subject to federal income tax on any portion of a Supplemental Retirement Benefit before that benefit would otherwise become payable under the Plan, the amount that is then currently subject to tax shall be paid to the Participant or beneficiary in a single lump-sum cash payment as soon as practicable after the Committee is notified of the Internal Revenue Service's determination. ARTICLE 7. RABBI TRUST 7.1 ESTABLISHMENT OF A RABBI TRUST. As soon as administratively practicable following the Effective Date, the Company shall establish an irrevocable Rabbi Trust to accumulate assets that will assist the Company in meeting its obligations under the Plan. The Rabbi Trust shall have an independent trustee that is selected by the Company. The trust agreement with respect to the Rabbi Trust shall provide that the assets of the Rabbi Trust shall at all times be specifically subject to the claims of the Company's creditors in the event of the bankruptcy or insolvency (as defined by the Rabbi Trust Agreement) of the Company. 9 11 7.2 FUNDING OF THE RABBI TRUST. Except as otherwise provided in Article 8, the Company may contribute cash, Company Stock, or any other asset to the Rabbi Trust when and as the Company deems appropriate. ARTICLE 8. CHANGE IN CONTROL 8.1 FUNDING OF THE RABBI TRUST. Upon the occurrence of a Change in Control, (i) the Company shall within ten business days thereafter contribute to the Rabbi Trust in cash an amount sufficient to cover all Supplemental Thrift Benefits and Supplemental Retirement Benefits accrued hereunder as of date on which the Change in Control occurs and (ii) the Company, within 30 day after the commencement of each Plan Year thereafter, shall contribute to the Rabbi Trust in cash such additional amounts as shall be necessary to ensure that the assets of the Rabbi Trust are at least sufficient to cover all Supplemental Thrift Benefits and Supplemental Retirement Benefits accrued as of the commencement of such Plan Year. 8.2 PAYMENT OF SUPPLEMENTAL THRIFT BENEFITS. (a) If at any time after the occurrence of such Change in Control any of the following events (each, an "Accelerating Event") occurs: (i) a Participant's employment terminates for any reason; or (ii) the Plan is terminated; then the terminated Participant (in the case of clause (i)), or any Participant (in the case of clause (ii), shall be entitled to receive a lump-sum cash payment equal to: (A) such Participant's Supplemental Thrift Benefit and (B) the present value (determined using the interest and mortality assumptions that are used under the Retirement Plan to satisfy Section 417(e) of the Code) of the Vested Benefit to which such Participant would be entitled pursuant to Section 6.3 if the Accelerating Event constituted a Termination of Employment Service by the Participant after reaching such Participant's Vesting Date under the Retirement Plan. (b) The Company shall make, or shall cause the Rabbi Trust to make, the payments due under this Section 8.2 as soon as practicable, but not more than 30 days following, the date on which a demand for payment is received from the Participant. 8.3 COMPOSITION OF THE COMMITTEE. The composition of the Committee immediately prior to the Change in Control shall not be changed after the Change in Control, except with the consent of a majority of the Continuing Directors. If, after the Change in Control, a member of the Committee resigns or is unable to serve due to death or disability, the remaining members of the Committee shall appoint a replacement. 8.4 REIMBURSEMENT OF FEES AND EXPENSES. Following a Change in Control, the Company promptly shall reimburse a Participant for all legal fees and expenses reasonably incurred in successfully enforcing any right or benefit under the Plan. 10 12 ARTICLE 9. BENEFICIARY DESIGNATION -- SUPPLEMENTAL THRIFT BENEFITS 9.1 DESIGNATION OF BENEFICIARY. Each Participant may designate a beneficiary or beneficiaries who, upon the Participant's death, will receive the Supplemental Thrift Benefits that otherwise would have been paid to the Participant under the Plan. All such designations shall be signed by the Participant, and shall be in such form as is prescribed by the Committee. Each designation shall be effective as of the date delivered to the Committee (or to a Company employee appointed by the Committee to receive such designations); provided that the Committee must receive any beneficiary designation or change therein before the Participant's death. A Participant may change his beneficiary designation, at any time and from time to time, on such form as is prescribed by the Committee. In the event of the death of the Participant, the payment of all amounts deferred under the Plan, and the earnings thereon, shall be in accordance with the last written beneficiary designation signed and delivered by the Participant and not revoked. 9.2 PAYMENT TO BENEFICIARY. If a Participant dies before his Supplemental Thrift Benefit has been paid in full, the payment thereof to the Participant's beneficiary or beneficiaries shall be made in a single lump-sum cash payment as soon as practicable following the Participant's death. 9.3 DEATH OF BENEFICIARY. In the event that all the beneficiaries of a Participant predecease the Participant, the Supplemental Thrift Benefit that would have been paid to the Participant under the Plan shall be paid in a single lump-sum cash payment to the Participant's estate, or to the person or persons designated in writing by the Participant's estate. 9.4 INEFFECTIVE DESIGNATION. In the event a Participant does not designate a beneficiary with respect to his Supplemental Thrift Benefit, or for any reason such designation is ineffective, in whole or in part, the Supplemental Thrift Benefit that otherwise would have been paid to the Participant under the Plan shall be paid in a single lump-sum cash payment to the Participant's estate. ARTICLE 10. WITHHOLDING OF TAXES The Company shall have the right to either (i) require Participants to remit to the Company, or any person or entity designated by the Committee to administer the Plan, an amount sufficient to satisfy any applicable federal, state, and local income and employment tax withholding requirements or (ii) to deduct from any payment made pursuant to the Plan amounts sufficient to satisfy such withholding requirements. ARTICLE 11. AMENDMENT AND TERMINATION The Company has the right to amend, suspend, or terminate the Plan at any time by action of the Board of Directors, except that (i) no such amendment, suspension, or termination shall, without the written consent of a Participant, change the time or form of any payout under the Plan or otherwise adversely affect, in any material respect, such Participant's rights with respect to amounts theretofore accrued under the Plan, and (ii) following a Change in Control, the Company shall not amend Section 5.5 (b), Articles 3, 7 or 8, or this Article 11, and shall not amend any other provision of the Plan in a manner that would alter the effect of Section 5.5(b), Articles 3, 7 or 8, or this Article 11. 11 13 ARTICLE 12. MISCELLANEOUS 12.1 EMPLOYMENT. No provision of the Plan, nor any action taken by the Committee or the Company pursuant to the Plan, shall give or be construed as giving a Participant any right to be retained in the employ of the Company, or affect or limit in any way the right of the Company to terminate his employment. 12.2 NOTICE. Any notice required or permitted to be given to the Committee or the Company under the Plan shall be sufficient if in writing and hand delivered, sent by registered or certified mail, or delivered in any other manner authorized by the Committee, to the Committee (or to a person designated by the Committee to receive such notices). Such notices, if mailed, shall be addressed to the principal executive offices of the Company. Notice to any Participant shall be given in any manner authorized by the Committee and, if mailed, shall be sent to the Participant's address as is set forth in the records of the Company. 12.3 UNFUNDED PLAN. This Plan is intended to be an unfunded plan for tax purposes and for purposes of Title I of ERISA. The Plan is intended primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA, and therefore is further intended to be exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Committee may terminate the Plan for any or all Participants, subject to Article 11, in order to achieve and maintain these intended results. 12.4 SUCCESSORS. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger or consolidation, the purchase of all or substantially all of the assets of the Company, or otherwise. The provision of the Plan with respect to each Participant shall be binding on such Participant's heirs, executors, administrators or other successors in interest. 12.5 NONTRANSFERABILITY. The Committee may recognize the right of an alternate payee named in a domestic relations order to receive all or a portion of a Participant's benefit under the Plan, provided that (i) the domestic relations order would be a "qualified domestic relations order" within the meaning of Section 414(p) of the Code if Section 414(p) were applicable to the Plan, (ii) the domestic relations order does not purport to give the alternate payee any right to assets of the Company or its affiliates, and (iii) the domestic relations order does not purport to give the alternate payee any right to receive payments under the Plan before the Participant is eligible to receive such payments. Except as set forth in the preceding sentence with respect to domestic relations orders, and except as required under applicable federal, state, or local laws concerning the withholding of tax, the rights of any Participant or beneficiary to amounts deferred under the Plan, and the earnings thereon, are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or any beneficiary, other than by will or by the laws of descent and distribution. In no event shall the Company make any payment under the Plan to any assignee or creditor of a Participant or beneficiary. 12.6 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 12 14 12.7 COSTS OF THE PLAN. All costs of implementing and administering the Plan shall be borne by the Company. 12.8 GOVERNING LAW. To the extent not preempted by federal law, the Plan shall be governed by and construed in accordance with the laws of the state of New Jersey, without giving effect to any choice or conflict of law provision or rule. 13 EX-10.(L) 6 CONSULTING AGREEMENT WITH A. FREDERICK GERSTELL 1 EXHIBIT 10(L) CONSULTING AGREEMENT CONSULTING AGREEMENT dated as of January 6, 1999 between VULCAN MATERIALS COMPANY, a New Jersey corporation (the "Parent"), and A. FREDERICK GERSTELL (the "Consultant"). WHEREAS, pursuant to an Agreement and Plan of Merger dated as of November 14, 1998 among CALMAT CO., a Delaware corporation (the "Company"), Parent and ALB Acquisition Corp., a Delaware corporation ("ALB") and a wholly owned subsidiary of Parent (the "Merger Agreement"), Parent has agreed to acquire all of the outstanding common stock of the Company through the merger of ALB with and into the Company (the "Merger"); WHEREAS, the Consultant has been employed by the Company for 23 years and employed in the construction materials industry for 37 years and possesses an intimate knowledge of the Company's business and industry; WHEREAS, Parent, the Company and the Consultant recognize that the continued application of the Consultant's experience, abilities and services to the business of the Company and its affiliates would be extremely beneficial to the Company and to Parent; WHEREAS, subject to the provisions hereof, Parent wishes to be assured that for at least the 17-month period following the effective time of the Merger (the "Effective Time"), the Consultant will be available to consult with the Company and Parent and that the Consultant will be restricted from disclosing certain information concerning the Company; and NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Effectiveness. This Agreement shall only become effective at such time as the Merger becomes effective (the "Effective Time"). 2. Term. Subject to Section 1 hereof, the term of this Agreement shall commence at the Effective Time and shall expire 17 months thereafter (the "Initial Term"). The Initial Term shall automatically renew for consecutive 12-month periods unless, at least 90 days prior to the end of the Initial Term (or prior to the end of any successive 12-month period, if applicable), either party hereto notifies the other party in writing 2 that it does not wish to renew this Agreement for another 12-month period (the Initial Term and each successive 12-month period, if any, being collectively referred to as the "Term"). 3. Duties/Location. From time to time during the Term, as and when requested by the person then serving as chief executive officer of Parent (the "CEO") or by the Board of Directors of Parent (the "Board"), the Consultant will make himself available to consult and cooperate with and advise the CEO or the Board, as applicable, to the best of his ability, with respect to post-Merger transition matters involving the business and affairs of the Company, as well as, with respect to Parent and its affiliates, investor relations and legislative matters (through Consultant's serving as Chairman of the National Stone Association). The Consultant will perform such services on a limited time basis, subject to his reasonable availability. The performance of the Consultant's duties in his capacity as Chairman of the National Stone Association shall be deemed to be consulting services by the Consultant on behalf of Parent and the Company under this Agreement. Except for any required travel, Consultant shall be principally based in the Los Angeles, California metropolitan region. 4. Compensation. (a) Monthly Retainer Fee. In consideration of the Consultant's agreements herein and his services as a consultant during the Term, the Company shall pay to the Consultant a monthly retainer fee equal to $10,600 per month, payable in a lump sum in arrears. Nothing herein shall limit or impair the Consultant's entitlement to receive his vested benefits under the Company's applicable plans and arrangements which are accrued as of the Effective Time. Parent acknowledges and agrees that the Consultant's rights under Section 3.2 (but only relating to the Consultant's purchase rights with respect to his current Company-provided automobile), 3.5 (relating to excise tax payments), 4.5 (relating to indemnification for acts of the Consultant occurring prior to the Effective Time), 4.6 (relating to dispute resolution) and 4.7 (relating to attorneys' fees) of his employment agreement with the Company dated as of April 13, 1993, as amended (as amended, the "Employment Agreement"), shall continue in effect notwithstanding the earlier payment by the Company to the Consultant of the severance benefits to which the Consultant was entitled under the Employment Agreement as of the effective time of the Merger. (b) Restricted Stock. At the Effective Time, Consultant shall receive an initial grant of 2,500 shares of restricted common stock of Parent ("Restricted Stock"). On the first anniversary of the Effective 2 3 Time (the "First Anniversary"), all restrictions on such shares of Restricted Stock shall lapse. On the First Anniversary, the Consultant shall receive a new grant of 1,042 shares of Restricted Stock, provided that the Consultant's services hereunder have not been terminated prior to such date. The restrictions on these 1,042 shares of Restricted Stock shall lapse on the date which is five months following the First Anniversary. Notwithstanding the foregoing, in the event that the Consultant is involuntarily terminated as a consultant to Parent for Cause or terminates as a consultant for other than Good Reason (as each such term is defined herein) prior to any date on which the restrictions on the Restricted Stock granted hereunder have lapsed, the Consultant shall forfeit his entitlement to receive any such shares which are then still subject to restrictions. In the event, during the Term, of (i) the Consultant's death or disability, (ii) his termination by Parent other than for Cause or (iii) his termination for Good Reason, the restrictions on all shares of Restricted Stock which have been granted to him shall lapse, and, if the event described in clause (i), (ii) or (iii) above occurs prior to the First Anniversary, the Consultant (or the Consultant's estate) shall also receive the 1,042 shares which would have been granted to him on the First Anniversary, free and clear of all restrictions. The Consultant shall be entitled to receive all dividends declared and paid on shares of Restricted Stock during the period that such shares are subject to restrictions and such dividends, once paid, shall not thereafter be subject to forfeiture. (c) Perquisites. During the Term, Parent shall provide, or cause the Company to continue to provide, the Consultant with the perquisites that he is being provided by the Company immediately prior to the Effective Time, excluding a Company-provided automobile (although Parent shall preserve his purchase rights under his Employment Agreement with respect to his current Company-provided automobile), and reimbursement of country club membership dues and tax and financial planning fees. Parent shall provide, or cause the Company to provide, post-retirement medical, dental and life insurance benefits to Consultant (and his eligible dependents) on the same basis that the Company provided such benefits to its eligible retirees immediately prior to the Effective Time or on such other basis as may be in effect for such eligible retirees from time to time. (d) Extensions of the Term After the Initial Term. Unless otherwise agreed to by the parties hereto in writing, if the Term is extended beyond the Initial Term pursuant to Section 2 hereof, the Consultant will be paid the $10,600 monthly consulting retainer fee and receive a 2,500 share grant of Restricted Stock during each such 12-month period in accordance with the terms and conditions of Sections 4(a) and 4(b) hereof, 3 4 respectively, subject to a 10% increase (compounded for each 12-month period) of the monthly consulting retainer fee and 2,500 share Restricted Stock grant for each 12-month period that the Term is extended beyond the Initial Term. All other provisions of this Agreement which are applicable during the Initial Term shall continue to apply during any one-year extension thereof. (e) Cause and Good Reason Definitions. For purposes hereof, (i) "Cause" shall mean (A) the Consultant's conviction of, or plea of nolo contendere to a charge of commission of, a felony or (B) the Consultant's wilful and continued failure to substantially perform the consulting duties required of him hereunder after receiving a written notice from the Company of his failure to so perform and his failure to cure within 15 days after receipt of such notice or (C) a violation in any material respect of Section 9 and (ii) "Good Reason" shall mean (A) Parent's failure to pay or award the Consultant in accordance with this Agreement any compensation or Restricted Stock (including the release of restrictions thereon) after receipt of written notice from the Consultant specifying such failure and Parent's failure to cure within 15 days after Parent's receipt of such notice, (B) Parent's requiring the Consultant to be principally based anywhere other than the Los Angeles metropolitan region, or (C) any other breach by Parent of any other material provision of this Agreement which is not cured by Parent within 15 days of Parent's receipt of notice from the Consultant specifying such breach. 5. Office and Support Staff. Parent, at its own expense, (i) shall provide the Consultant with suitable office space at the Company's headquarters in Los Angeles or at such other location in the Los Angeles metropolitan region as shall be reasonably acceptable to the Consultant during the Term, and (ii) during the Initial Term only, shall continue to provide and maintain for the Consultant the Consultant's office and parking space in Beverly Hills, California. During the Term, the Consultant shall be provided with secretarial assistance at the Company's headquarters in the Los Angeles, California metropolitan area (including, if the Consultant so elects, the services of the person serving as his secretary immediately prior to the Effective Time if she is then in employment with the Company) commensurate with his position as a consultant and past Company practice. 6. Travel. Consultant shall be entitled to travel on business-related matters (and shall be reimbursed therefor by Parent (or Parent shall cause Company to reimburse the Consultant) in accordance with Section 7 hereof) on a first-class basis on commercial airliners consistent with past practice. The Consultant shall also be entitled to have his spouse accompany him from time to time on business-related travel and be reimbursed 4 5 by Parent (or Company, if applicable) therefor consistent with past Company practice. Consultant shall travel on business-related matters only as reasonably required in the performance of his consulting services. 7. Expenses. The Consultant shall be entitled to receive reimbursement for all reasonable expenses incurred by the Consultant (in accordance with policies and procedures substantially the same as those established by the Board for its senior executive officers) in performing services hereunder provided that the Consultant properly accounts therefor. 8. Termination of Agreement Prior to Expiration of the Term. If the Consultant ceases to serve as a consultant to Parent prior to the expiration of the Term, he shall be entitled to payment of all accrued but unpaid monthly retainer fees under Section 4(a) through the date of termination of the Consultant's services under this Agreement, including a prorated monthly retainer for the month in which such date of termination occurs. If the Consultant ceases to serve as a consultant to Parent prior to the expiration of the Term due to (i) Good Reason, or (ii) his involuntary termination by Parent without Cause, he shall receive, within five business days following his ceasing to serve as a consultant, without any discounting, all of the monthly retainer fees which would have been paid through the remainder of the Term. The amounts payable in accordance with the two preceding sentences are in addition to the Consultant's right to receive any shares of Restricted Stock to which he is then entitled under Section 4(b) hereof. Nothing herein shall affect the Consultant's rights under or pursuant to any Company benefit plan or arrangement under which he has accrued vested benefits, including, without limitation, his eligibility for retiree health benefits after the expiration of the Term. 9. Confidential Information. The Consultant agrees that, during the Term and thereafter, he will not, without the prior written consent of the Board or unless otherwise required by law to be disclosed, use for his benefit or disclose to any person, any information obtained or developed by him while in the employ of the Company or while serving Parent hereunder (and, in each case, information of their respective affiliates) with respect to any aspect of the Company's, Parent's or their respective affiliates' business (including, without limitation, information with respect to any customers, suppliers, employees, financial affairs or methods of design, distribution, procurement or production, of the Company, Parent or any of their subsidiaries or affiliates, or any other confidential matter), except information which at the time is available to others in the business or generally known to the public other than as a result of disclosure by him not permitted hereunder. 5 6 10. Specific Performance. The Consultant acknowledges that a violation on his part of any of the covenants contained in Section 9 hereof would cause immeasurable and irreparable damage to the Company and Parent. The Consultant accordingly agrees, without limiting the remedies available to the Company or Parent, that any violation of such covenants may be enjoined by any court of competent jurisdiction. 11. Indemnification. In connection with his rendering of services as a consultant to Parent in accordance with Section 3 of this Agreement, Parent shall, or shall cause the Company to, indemnify the Consultant therefor during the Term and thereafter to the fullest extent permitted by Parent's by-laws in the same manner and following the same procedures as applicable to senior executives of Parent (including reimbursement of all legal and other fees and expenses). Parent's and Company's obligations under this provision shall survive the expiration of the Term. 12. Severability. If for any reason any provision of this Agreement shall be held invalid, such invalidity shall not affect any other provision of this Agreement not so held invalid, and all other such provisions shall to the full extent consistent with law continue in full force and effect. If any such provision shall be held invalid in part, such invalidity shall in no way affect the rest of such provision which, together with all other provisions of this Agreement, shall likewise to the fullest extent consistent with law continue in full force and effect. 13. Termination of Agreement. The Consultant acknowledges that in the event that, prior to the end of the Term, he should die, terminate due to disability, terminate voluntarily other than for Good Reason or be terminated by Parent for Cause, Parent's obligations to make monthly retainer fees pursuant to Section 4(a) hereof and any additional grants of Restricted Stock (except upon certain terminations prior to the First Anniversary as described in Section 4(b) hereof) shall cease as of such time and Parent shall be under no further obligation to pay any such additional monthly payments under this Agreement other than a prorated monthly consulting retainer fee for the month in which the Consultant's death or other cessation of service occurs or grant any additional shares of Restricted Stock. Nothing under this Section 13 shall be construed as affecting the Consultant's right to receive shares of Restricted Stock to which the Consultant (or his estate) is then entitled under Section 4(b) hereof. 6 7 14. Successors and Assigns. The provisions of this Agreement shall be binding upon the heirs, executors and administrators of the Consultant and upon the successors and assigns of the Company and Parent. Parent and the Company shall require any successor to them to expressly assume in writing their respective obligations hereunder. 15. Notice. Any notice or other communication hereunder to either party shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by registered mail, return receipt requested, postage prepaid, addressed as follows: if to the Consultant: A. Frederick Gerstell CalMat Co. 3200 San Fernando Road Los Angeles, California 90065 if to Parent: Vulcan Materials Company One Metroplex Drive Birmingham, Alabama 35209 Attention: General Counsel 7 8 16. Miscellaneous. Except as provided in Section 4(a) hereof, this Agreement constitutes the entire agreement between the parties concerning the employment and consulting relationship between the Consultant and Parent following the Effective Time and supersedes all prior agreements, commitments and understandings between the parties relating to such subject matter, including without limitation, the Employment Agreement (except as provided in Section 4(a) hereof). No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing and is signed by the parties hereto. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions at the same or at any prior or subsequent time. 17. Counterparts. This Agreement may be executed in counterparts, each of which will be deemed to be an original, but each of which together will constitute one and the same agreement. 18. Dispute Resolution. The Consultant and Parent shall have the right, in addition to all other rights and remedies provided by law, at either party's election, to seek arbitration in Los Angeles County, California, under the rules of the American Arbitration Association, in the event of any dispute concerning the Consultant's Services as a consultant under this Agreement. Parent shall bear all costs of any dispute resolution, including all legal fees and expenses. 19. Independent Contractor. The Consultant acknowledges that his services hereunder are to be rendered as an independent contractor and that he is solely responsible for the payment of all Federal, state, local and foreign taxes that are required by applicable laws or regulations to be paid by the Consultant with respect to all compensation hereunder and that neither Parent nor Company shall withhold any such taxes on behalf of the Consultant. 20. Governing Law. This Agreement shall be governed by the laws of the State of Delaware without regard to its principles of conflicts of law. 8 9 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the Company and Parent and by the Consultant on the date first above written. VULCAN MATERIALS COMPANY by /s/ Donald M. James ------------------------------------- /s/ A. Frederick Gerstell --------------------------------------- A. FREDERICK GERSTELL Acknowledged and Agreed to: CALMAT CO. by /s/ Wm. F. Denson III ----------------------- EX-13 7 THE COMPANY'S 1998 ANNUAL REPORT TO SHAREHOLDERS 1 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES 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 our 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. Our Company maintains an internal control structure which we believe provides reasonable assurance that our Company's financial statements, books and records accurately reflect our Company's financial condition, results of operations and cash flows, and that our 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. Our Company's independent auditors, Deloitte & Touche LLP, consider the internal control structure as a part of their audits of our Company's financial statements and provide an independent opinion as to the fairness of the presentation of those statements. Their report is presented below. Your 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/ Peter J. Clemens, III /s/ E. A. Khan - ------------------------- ------------------------------- P.J. Clemens, III E. A. Khan Executive Vice President, Controller Finance & Administration and Treasurer February 5, 1999 - --------------------------------------------------------------------------- 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, 1998, 1997 and 1996, 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, 1998, 1997 and 1996, 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 LLP Birmingham, Alabama February 5, 1999 (March 10, 1999 as to Note 15B) 36 2 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31 Amounts and shares in thousands, except per share data 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------- Net sales .......................................................... $1,776,434 $1,678,581 $1,568,945 Cost of goods sold ................................................. 1,226,764 1,199,453 1,115,442 ---------- ---------- ---------- Gross profit on sales .............................................. 549,670 479,128 453,503 Selling, administrative and general expenses ....................... 198,956 190,446 175,128 Other operating costs .............................................. 7,851 5,112 3,887 Other income, net Interest income .................................................. 6,654 3,190 3,179 Other, net ....................................................... 32,109 20,655 16,549 ---------- ---------- ---------- Total other income, net ........................................ 38,763 23,845 19,728 ---------- ---------- ---------- Earnings before interest expense and income taxes .................. 381,626 307,415 294,216 Interest expense (Note 4) .......................................... 6,782 6,914 8,636 ---------- ---------- ---------- Earnings before income taxes ....................................... 374,844 300,501 285,580 Provision for income taxes (Note 7) Current .......................................................... 113,096 84,806 95,443 Deferred ......................................................... 5,840 6,550 1,542 ---------- ---------- ---------- Total provision for income taxes ............................... 118,936 91,356 96,985 ---------- ---------- ---------- Net earnings ....................................................... $ 255,908 $ 209,145 $ 188,595 ========== ========== ========== Basic net earnings per share (Note 11) ............................. $ 2.54 $ 2.06 $ 1.81 Diluted net earnings per share ..................................... $ 2.50 $ 2.03 $ 1.79 Dividends per share (Note 11) ...................................... $ 0.69 $ 0.63 $ 0.56 Average common shares outstanding (Note 11) ........................ 100,854 101,483 104,274 Average common shares outstanding, assuming dilution ................................................ 102,177 102,850 105,518
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. All share and per share data have been restated to reflect the three-for-one split of the Company's common stock, approved by the Board of Directors on February 12, 1999 and effective March 10, 1999. 37 3 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
As of December 31 Amounts in thousands, except per share data 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents (Note 2) ...................................... $ 180,568 $ 128,566 $ 50,816 Accounts and notes receivable: Customers, less allowance for doubtful accounts: 1998, $7,391; 1997, $7,548; 1996, $8,106 ............................ 210,690 189,389 176,864 Other ................................................................. 10,571 10,361 8,671 Inventories (Note 3) .................................................... 143,680 132,359 128,578 Deferred income taxes (Note 7) .......................................... 24,923 21,385 23,474 Prepaid expenses ........................................................ 5,949 5,072 5,642 ---------- ---------- ---------- Total current assets ............................................... 576,381 487,132 394,045 Investments and long-term receivables ..................................... 71,034 63,482 61,274 Property, plant and equipment, net (Note 4) ............................... 895,785 808,419 764,490 Deferred charges and other assets (Notes 8, 14) ........................... 115,411 90,213 100,836 ---------- ---------- ---------- Total .............................................................. $1,658,611 $1,449,246 $1,320,645 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt .................................... $ 5,432 $ 5,408 $ 5,021 Notes payable (Note 2) .................................................. 2,353 3,654 3,289 Trade payables and accruals ............................................. 107,382 112,548 98,528 Accrued income taxes .................................................... 21,470 21,749 29,606 Accrued salaries and wages .............................................. 45,665 41,858 38,253 Accrued interest ........................................................ 892 1,360 1,221 Other accrued liabilities (Note 9) ...................................... 28,268 21,120 18,736 ---------- ---------- ---------- Total current liabilities .......................................... 211,462 207,697 194,654 Long-term debt (Note 5) ................................................... 76,533 81,931 85,535 Deferred income taxes (Note 7) ............................................ 98,472 88,719 86,968 Deferred management incentive and other compensation (Note 9) ......................................... 37,572 33,849 26,251 Other postretirement benefits (Note 8) .................................... 41,998 37,924 36,222 Other noncurrent liabilities (Note 10) .................................... 38,874 7,629 7,351 ---------- ---------- ---------- Total liabilities .................................................. 504,911 457,749 436,981 ---------- ---------- ---------- Other commitments and contingent liabilities (Note 10) .................... 0 0 0 Shareholders' equity Common stock, $1 par value .............................................. 139,705 46,573 46,573 Capital in excess of par value .......................................... 0 14,090 10,306 Retained earnings ....................................................... 1,588,145 1,449,847 1,304,405 ---------- ---------- ---------- Total .............................................................. 1,727,850 1,510,510 1,361,284 Less cost of stock in treasury .......................................... 574,150 519,013 477,620 ---------- ---------- ---------- Total shareholders' equity ......................................... 1,153,700 991,497 883,664 ---------- ---------- ---------- Total .............................................................. $1,658,611 $1,449,246 $1,320,645 ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 38 4 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 Amounts in thousands 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net earnings ...................................................... $ 255,908 $ 209,145 $ 188,595 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization ...................... 137,792 129,217 121,257 Compensation expense incurred in connection with stock-based incentive plans ............................ 6,847 5,451 2,010 (Increase) decrease in assets before effects of business acquisitions: Accounts and notes receivable .............................. (20,415) (14,215) 1,381 Inventories ................................................ (8,794) (3,751) 3,915 Deferred income taxes ...................................... (3,538) 2,089 3,081 Prepaid expenses ........................................... (877) 570 194 Increase (decrease) in liabilities before effects of business acquisitions: Accrued interest and income taxes .......................... (513) 139 (105) Trade payables, accruals, etc .............................. (4,362) (2,070) 14,118 Deferred income taxes ...................................... 9,753 1,752 1,032 Other noncurrent liabilities ............................... 7,127 9,578 4,290 Other, net .................................................... (16,332) 7,909 5,764 --------- --------- --------- Net cash provided by operating activities ................... 362,596 345,814 345,532 --------- --------- --------- INVESTING ACTIVITIES Purchases of property, plant and equipment ........................ (203,258) (161,238) (151,767) Payment for business acquisitions, net of cash acquired ............................................ (24,874) (12,086) (64,765) Proceeds from sale of property, plant and equipment ............... 27,054 16,446 11,952 Net investment in nonconsolidated companies ....................... 307 150 (1,233) --------- --------- --------- Net cash used for investing activities ...................... (200,771) (156,728) (205,813) --------- --------- --------- FINANCING ACTIVITIES Net borrowings (payments)--commercial paper and bank lines of credit ........................................ (1,301) 365 (280) Payment of short-term debt ........................................ (5,193) (5,000) (6,849) Payment of long-term debt ......................................... (225) (19) (62) Purchases of common stock (Note 11) ............................... (65,003) (43,060) (45,182) Dividends paid .................................................... (70,015) (63,622) (58,399) Contribution from minority interest of consolidated subsidiary ......................................... 31,914 0 0 --------- --------- --------- Net cash used for financing activities ...................... (109,823) (111,336) (110,772) --------- --------- --------- Net increase in cash and cash equivalents ......................... 52,002 77,750 28,947 Cash and cash equivalents at beginning of year .................... 128,566 50,816 21,869 --------- --------- --------- Cash and cash equivalents at end of year .......................... $ 180,568 $ 128,566 $ 50,816 ========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 39 5 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31 1998 1997 1996 Amounts and shares in thousands, except per share data Shares Amount Shares Amount Shares Amount - ----------------------------------------------------------------------------------------------------------------------------------- Common stock, $1 par value Authorized: 1998,480,000 shares (Note 15B); 1997 and 1996, 160,000 shares Issued at beginning of year ........................ 46,573 $ 46,573 46,573 $ 46,573 46,573 $ 46,573 Retired shares of predecessor companies (Note 11) .. (5) (5) 0 0 0 0 Three-for-one common stock split (Note 15B) ........ 93,137 93,137 0 0 0 0 ------- ---------- ------ --------- ------ ---------- Issued at end of year .............................. 139,705 139,705 46,573 46,573 46,573 46,573 ======= ---------- ====== --------- ====== ---------- Capital in excess of par value Balance at beginning of year ....................... 14,090 10,306 9,053 Activity prior to stock split Distributions under stock-based incentive plans .. 5,167 3,784 1,253 Treasury stock issued for acquisition ............ 26,383 0 0 Three-for-one common stock split (Note 15B) ........ (45,640) 0 0 ---------- --------- ---------- Balance at end of year ............................. 0 14,090 10,306 ---------- --------- ---------- Retained earnings Balance at beginning of year ....................... 1,449,847 1,304,405 1,174,207 Net earnings ....................................... 255,908 209,145 188,595 Cash dividends on common stock ..................... (70,015) (63,622) (58,399) Three-for-one common stock split (Note 15B) ........ (47,497) 0 0 Other .............................................. (98) (81) 2 ---------- --------- ---------- Balance at end of year ............................. 1,588,145 1,449,847 1,304,405 ---------- --------- ---------- Common stock held in treasury Balance at beginning of year ....................... (12,885) (519,013) (12,332) (477,620) (11,602) (433,195) Activity prior to stock split Purchase of common shares ........................ (611) (65,003) (631) (43,060) (765) (45,182) Treasury stock issued for acquisition ............ 384 8,187 0 0 0 0 Distributions under stock-based incentive plans .. 75 1,679 78 1,667 35 757 Three-for-one common stock split (Note 15B) ........ (26,072) 0 0 0 0 0 ------- ---------- ------ ------ ------ ---------- Balance at end of year ............................. (39,109) (574,150) (12,885) (519,013) (12,332) (477,620) ======= ------- ====== ------ ====== ---------- Total .......................................... $1,153,700 $ 991,497 $ 883,664 ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 40 6 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Vulcan is the nation's foremost producer of construction aggregates, a major producer of other construction materials and a leading chemicals manufacturer, supplying chloralkali and other industrial chemicals. The following is a discussion and analysis of the results of operations and the financial condition of the Company. This discussion and analysis should be read in connection with the historical financial information included in the consolidated financial statements and their notes. The information presented in this report reflects the three-for-one split of the common stock approved by the Board of Directors on February 12, 1999. The stock split was effective as of March 10, 1999. RESULTS OF OPERATIONS Vulcan's 1998 sales, net earnings and earnings per share were at record levels. Net earnings and diluted earnings per share were $255.9 million and $2.50, respectively. The comparable 1997 net earnings and diluted earnings per share were $209.1 million and $2.03, respectively. Sales in 1998 were $1.776 billion, up from the 1997 total of $1.679 billion. Pretax earnings totaled $374.8 million, up 25% from last year's amount of $300.5 million. CONSTRUCTION MATERIALS 1998 VS. 1997 For the sixth consecutive year, Construction Materials sales surpassed previous records. Net sales for 1998 totaled $1.159 billion, up 10% from the 1997 result of $1.051 billion. The 1998 results reflect an 8% increase in shipments and a 4% rise in the average unit selling price of crushed stone, the segment's principal product. Of the total increase in sales of $107.6 million, $70.0 million was related to increased volume and $37.6 million was due to higher prices. Segment earnings of $307.4 million, which are before interest expense and income taxes, also were at a record level and were up 34% from 1997's record level of $229.3 million. This increase reflects the favorable effects of higher crushed stone shipments and prices, as well as increased earnings from other products. This information is summarized below (in millions of dollars): CONSTRUCTION MATERIALS 1998 VS. 1997 1997 earnings ................................. $ 229 ----- Higher volume/prices--crushed stone ........... 58 Higher earnings--other products ............... 14 Gains on asset sales .......................... 11 All other ..................................... (5) ----- 1998 earnings ................................. $ 307 =====
1997 VS. 1996 Net sales for 1997 totaled $1.051 billion, up 9% from the 1996 result of $961.9 million. The 1997 result reflects a 6% increase in shipments and a 3% rise in the average unit selling price of crushed stone, the segment's principal product. Of the total increase in sales of $89.1 million, $63.3 million was related to increased volume and $25.8 million was due to higher prices. Segment earnings of $229.3 million, which are before interest expense and income taxes, also were at a record level and were up 16% from 1996's record level of $197.3 million. The favorable effects of higher crushed stone shipments and prices, as well as lower production costs, were partially offset by higher overhead costs due mainly to increased provisions associated with stock-based incentive plans. This information is summarized below (in millions of dollars): CONSTRUCTION MATERIALS 1997 VS. 1996 1996 earnings ................................ $ 197 ----- Higher earnings--crushed stone ............... 45 All other .................................... (13) ----- 1997 earnings ................................ $ 229 =====
CHEMICALS 1998 VS. 1997 1998 sales of $617.8 million were down 2% from the record 1997 level of $627.6 million. Higher prices for caustic soda were more than offset by lower volumes and prices for chlorine and some chlorine derivatives. Segment earnings of $69.2 million in 1998 were down 9% from the 1997 level of $75.8 million. Excluding the impact of asset sales and environmental provisions, earnings for the year were 2% above 1997 levels. Higher caustic soda prices and lower raw material costs offset lower volumes and NET EARNINGS (in millions of dollars) [GRAPH] 41 7 prices for chlorine and some derivative products, and lower earnings from Performance Systems. This information is summarized below (in millions of dollars): CHEMICALS 1998 VS.1997 1997 earnings ....................................... $ 76 ---- Chloralkali sales prices/raw materials .............. 27 Chloralkali sales volumes ........................... (13) Asset sales/environmental provisions ................ (8) All other ........................................... (13) ---- 1998 earnings ....................................... $ 69 ====
1997 VS. 1996 Sales of $627.6 million were up 3% from the record 1996 level of $607.0 million. The growth came primarily from increased Performance Systems sales. Chloralkali sales were essentially unchanged from 1996, as the effect of lower caustic soda prices was nearly offset by higher revenues from chlorine and chlorine derivative products. Segment earnings of $75.8 million in 1997 were down 20% from the record 1996 level of $94.7 million. The decrease primarily reflected a 34% decline in caustic soda prices and higher raw materials costs. This was partially offset by higher pricing for chlorine and derivative products, as well as improved earnings from Performance Systems. This information is summarized below (in millions of dollars): CHEMICALS 1997 VS. 1996 1996 earnings ................................ $ 95 ---- Chloralkali sales prices/raw materials ....... (16) All other .................................... (3) ---- 1997 earnings ................................ $ 76 ====
NET CASH PROVIDED BY OPERATING ACTIVITIES (in millions of dollars) [GRAPH] SELLING, ADMINISTRATIVE AND GENERAL Selling, administrative and general expenses of $199.0 million in 1998 increased 4% from the 1997 level of $190.4 million. In addition to normal salary increases, this reflects expenditures associated with several projects designed to enhance operations and reduce future costs throughout the organization. In 1997, selling, administrative and general expenses were up 9% from the 1996 level. This reflects principally the effect that the 68% appreciation in the Company's share price during 1997 had on stock-based incentive compensation costs. OTHER INCOME Other income, net of other charges, was $32.1 million as compared with the 1997 amount of $20.7 million. The increase principally reflects gains on sales of assets and higher earnings from the Company's joint venture to supply limestone from Mexico to the U.S. Gulf Coast market. The increase in 1997 versus 1996 was due to the same factors. INCOME TAXES The Company's 1998 effective tax rate was 31.7%, up from the 1997 rate of 30.4%. The increase reflects principally a lesser impact of adjustments referable to tax audits for prior years. The effective tax rate decreased in 1997, from the 1996 rate of 34.0%. This decrease reflected principally adjustments referable to tax audits for prior years. 1999 OUTLOOK With regard to 1999, the Company's starting point is the assumption that moderate growth in GDP and the favorable impact of TEA-21 will continue to provide a healthy economic environment for construction activity in the United States. The market for construction aggregates should remain strong overall. Demand in all major construction end-use markets should equal or exceed 1998 levels, with the exception of residential construction, which may decline modestly. Based on this outlook, 1999 earnings in the Construction Materials segment, before the inclusion of CalMat, are expected to exceed 1998's record result. CalMat will significantly increase segment earnings, but this will be offset by higher interest expense referable to the acquisition. In 1999, the Chemicals segment will face a challenging year. Uncertainties regarding the Asian economies and related effects on the global economy, combined with the expected advent of additional chloralkali capacity, continue to cloud the outlook. Both caustic and chlorine prices may be lower than in 1998. Based on its current view, the Company expects Chemicals' earnings to fall significantly below 1998's performance. 42 8 All in all, Vulcan has a high level of confidence in the outlook for Construction Materials. However, the volatile outlook for Chemicals makes it difficult to project 1999 results for Chemicals and the Company. If Chemicals' markets stabilize, Vulcan's net earnings and earnings per share could approximate 1998's record results. On the other hand, a continued deterioration in Chemicals' markets would likely lead to a slight decline in Vulcan's earnings. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities reached a fourth consecutive record high a mounting to $362.6 million in 1998, as compared to 1997's total of $345.8 million. Net cash provided by the Construction Materials segment increased 6% to $270.4 million, while net cash provided by the Chemicals segment was relatively flat at $86.4 million. The Company's long-standing ability to generate significant cash flows enabled it to fund capital requirements internally, reduce long-term debt and return $135.0 million to shareholders through dividends and share purchases. Cash expenditures for property, plant and equipment, excluding acquisitions, were $203.3 million in 1998, up $42.1 million. Cash spending for acquisitions, including amounts referable to working capital and other balance sheet items, totaled $24.9 million compared with $12.1 million in 1997. The Company's policy is to pay out a reasonable share of net cash provided by operating activities as dividends, consistent with the payout record of past years on average, and consistent with the goal of maintaining debt ratios within prudent and generally acceptable limits. Additionally, management believes that purchases of the Company's stock frequently may represent an attractive long-term investment and an attractive means of returning cash to shareholders. Management intends to continue buying shares when appropriate based on prevailing market conditions, the Company's cash position and long-term capital requirements. WORKING CAPITAL Working capital, exclusive of debt and cash items (cash, cash equivalents and short-term investments), totaled $193.0 million at December 31, 1998, up $31.7 million from the 1997 level. This compares with an increase of $3.2 million and a decrease of $16.7 million in 1997 and 1996, respectively. The current ratio increased to 2.7 in 1998, primarily due to a higher cash balance. The current ratio in 1997 was 2.3, higher than the 2.0 in 1996. PROPERTY ADDITIONS Property additions, including acquisitions, totaled $230.3 million in 1998, up 26.5% from the 1997 level of $182.0 million. Property additions included $18.6 million related to acquisitions and $8.4 million of accruals referable to property. As explained on page 65, Vulcan classifies its property additions into three categories based on the predominant purpose of the project. Profit-adding projects continued to bolster spending in both segments. Within the Construction Materials segment, these included the acquisition of six stone quarries in Georgia, Illinois and Tennessee, and the beginning of production at greenfield aggregates operations in Alabama, Georgia and Indiana. Property additions within the Chemicals segment included initial spending for a joint venture with Mitsui & Co. announced in June. In addition to contributing its existing EDC plant, Vulcan will invest a total of approximately $90.0 million in this project, with the majority of this funding to be provided in 1999. Commitments for capital expenditures were $32.4 million at December 31, 1998, excluding expenditures for CalMat and Mitsui. As a result of the acquisition of CalMat in January 1999, the Company will use a combination of short-term and long-term borrowing in addition to internally generated cash flows to cover the aforementioned commitments. SHORT-TERM BORROWINGS AND INVESTMENTS The Company was a net short-term investor during 1998 as marketable securities reached a peak of $219.8 million, and amounted to $166.8 million at year end. The Company was also a net short-term investor in 1997 when marketable securities peaked at $131.1 million and ended at $111.3 million. During 1996, however, the Company was a net short-term borrower PROPERTY ADDITIONS (in millions of dollars) [GRAPH] 43 9 as borrowings reached a maximum of $48.2 million and equaled $3.3 million at year end. 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 $225.0 million were maintained at the end of 1998. In connection with its acquisition of CalMat, the Company entered into a syndicated credit facility in the amount of $550.0 million effective in January 1999, which resulted in total domestic lines of credit being increased to $775.0 million. Concurrent with the closing of the aforementioned acquisition, Standard & Poor's Ratings Group lowered the Company's commercial paper rating from A-1+ to A-1, while Moody's Investors Service, Inc., maintained its rating at the P-1 level. LONG-TERM OBLIGATIONS During 1998, the Company reduced its total long-term obligations by $5.4 million to $76.5 million, compared with a net decrease of $3.6 million in 1997. During the three-year period ended December 31, 1998, long-term obligations decreased cumulatively by $13.8 million from the $90.3 million outstanding at December 31, 1995. During the same three-year period, shareholders' equity, net of common stock purchases of $153.3 million and dividends of $192.0 million, increased by $357.1 million to $1,153.7 million. In the future, the ratio of long-term debt to total long-term capital will depend upon specific investment and financing decisions. Nonetheless, management believes the Company's cash-generating capability, along with its financial strength and business diversification, can reasonably support a ratio of 30% to 35%. The actual ratio at the end of 1998 was 5.3%. Vulcan 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. LONG-TERM OBLIGATIONS AS A PERCENT OF LONG-TERM CAPITAL [GRAPH] In acquiring CalMat in January 1999, the Company liquidated all of its marketable securities and issued commercial paper to purchase the CalMat common stock tendered. In due course, the Company anticipates issuing long-term debt to fund the acquisition. Effective with the closing of the CalMat acquisition, Standard & Poor's Ratings Group lowered the Company's long-term debt rating to A+ from AA-, while Moody's Investors Service, Inc., maintained its rating at the A1 level. COMMON STOCK During 1998, the Company purchased 1,832,100 shares of its common stock at a cost of $65.0 million, equal to an average price of $35.48 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 on 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. The number and cost of shares purchased during each of the last three years is shown below:
1998 1997 1996 ---------------------------------------- Shares purchased: Number ...................... 1,832,100 1,892,568 2,296,200 Total cost (millions) ....... $ 65.0 $ 43.1 $ 45.2 Average cost ................ $ 35.48 $ 22.75 $ 19.68 Shares in treasury at year end: Number ...................... 39,108,657 38,655,012 36,996,141 Average cost ................ $ 14.68 $ 13.16 $ 12.91
The number of shares remaining under the current purchase authorization of the Board was 8,810,388 shares as of December 31, 1998. MARKET RISK The Company is exposed to certain market risks a rising from transactions that are entered into in the normal course of business. In order to manage or reduce this market risk, the Company occasionally utilizes derivative financial instruments. 44 10 To date, the Company has used commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of these contracts as of December 31, 1998 and 1997 was not material. As a result of a 10% reduction in the price of natural gas, the Company would experience a potential loss in the fair value of the underlying commodity swap and option contracts for the year ended December 31, 1998 of approximately $160 thousand. Year 2000 Issue Vulcan recognizes the importance of Year 2000 issues and has made resolution of these problems a priority by creating a Year 2000 Project Management Office with the appropriate authority and resources. The Company's Year 2000 Plan includes five stages--pre-project, planning, preparation, implementation and transition, which will overlap to a significant degree. The Year 2000 Project Management Office has organized teams at each major location to research Year 2000 compliance status, implement appropriate solutions, and conduct testing of computer hardware and net work equipment, computer software, production equipment and instrumentation. It will also assist in identifying key customers and key suppliers. Vulcan is currently in the preparation and implementation stages, coordinating the necessary internal and external changes. The Company has received information concerning the Year 2000 status of significant suppliers and selected customers, and believes plans are in place to appropriately remedy these issues in a timely manner. The Company plans to have implemented corrections to internal systems that are critical to its operations no later than the end of the third quarter of 1999. While some noncritical systems may not be addressed until after December 1999, Vulcan believes such systems will not disrupt operations in a material manner. The Company currently estimates that the total cost of implementing its Year 2000 Plan will not exceed $5.0 million. This estimate is based on presently available information and will be updated as the Company finalizes its assessment and continues with implementation. In particular, the estimate may need to be increased once the Company has formulated its contingency plan. We expect our business partner readiness assessment to be completed in April 1999. Management believes that the Company's Year 2000 Plan will resolve the issue in a timely manner. Nevertheless, since it is not possible to anticipate all possible future outcomes, especially when third parties are involved, there could be circumstances in which the Company would be unable to take customer orders, manufacture and ship products, invoice customers or collect payments. In particular, if third-party providers, due to the Year 2000 issue, fail to provide Vulcan with components or materials that are necessary to manufacture its products, with sufficient electrical power and other utilities to sustain its manufacturing process, or with adequate, reliable means of transporting its products to its customers, then any such failure could have a material adverse effect on the business operations and financial performance of the Company. The amount of potential liability and lost revenue has not been estimated. Contingency plans will be finalized in the second quarter of 1999. NEW ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities. SFAS 133 is required to be adopted for years beginning after June 15, 1999. The Company is currently evaluating SFAS 133 and has not yet determined its impact on the Company's consolidated financial statements. SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION 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 and uncertainties detailed in the Company's periodic reports. AVERAGE CAPITAL EMPLOYED (in millions of dollars) [GRAPH] 45 11 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED 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 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 The Company classifies as cash equivalents all highly liquid securities with a maturity of three months or less at the time of purchase. 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 on estimated recoverable units. Leaseholds are amortized over varying periods not in excess of applicable lease terms. GOODWILL Goodwill represents the excess of the cost of net assets acquired in business combinations over their fair value. Goodwill is amortized on a straight-line basis over periods ranging from 15 to 30 years. 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 expenditures that pertain to current operations or relate to future revenues are expensed or capitalized consistent with the Company's capitalization policy. Expenditures that relate to an existing condition caused by past operations and do not contribute to future revenue are expensed. Environmental compliance costs include maintenance and operating costs with respect to pollution control facilities, the cost of ongoing monitoring programs and similar costs. Costs are expensed and accrued as liabilities when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. These amounts are accrued no later than the feasibility study and/or when the Company commits to a formal a plan of action. INCOME TAXES 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 (EPS) In accordance with the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 128, Earnings Per Share, the Company reports two separate earnings per share numbers, basic and 46 12 diluted. Both are computed by dividing net earnings by the average common shares outstanding (basic EPS) or average common shares outstanding assuming dilution (diluted EPS) as detailed below (in thousands of shares):
1998 1997 1996 ------- ------- ------- Average common shares outstanding ..................... 100,854 101,483 104,274 Dilutive effect of: Stock options ....................................... 720 528 18 Performance shares and other ........................ 603 839 1,226 ------- ------- ------- Average common shares outstanding, assuming dilution ................................... 102,177 102,850 105,518 ======= ======= =======
All common stock equivalents are reflected in the Company's earnings per share calculations; the Company had no anti-dilutive common stock equivalent shares in 1998, 1997 and 1996. All earnings per share amounts have been retroactively restated to reflect the three-for-one split of the common stock approved by the Board of Directors on February 12, 1999 (see Note 15B). RECENT ACCOUNTING PRONOUNCEMENTS In June 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income. This statement is now effective, but has no impact on the Company. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities. SFAS 133 is required to be adopted for years beginning after June 15, 1999. The Company is currently evaluating SFAS 133 and has not yet determined its impact on the Company's consolidated financial statements. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain items previously reported in specific financial statement captions have been reclassified to conform with the 1998 presentation. 2. CASH At year-end 1998, 1997 and 1996, the Company did not have any commercial paper outstanding but did have $2,400,000, $2,900,000 and $3,100,000, respectively, in bank borrowings. All of the lines of credit extended to the Company in 1998, 1997 and 1996 were based solely on a commitment fee basis, and thus no compensating balances were required. In the normal course of business, the Company maintains balances for which it is credited with earnings allowances. To the extent the earnings allowances are not sufficient to fully compensate banks for the services the provide, the Company pays the fee equivalent for the differences. The Company was in compliance with these informal compensation arrangements during all three years. Because the arrangements are evaluated on a 12-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):
1998 1997 1996 -------- -------- ------- Finished products ..................................... $99,814 $90,118 $ 87,459 Raw materials ......................................... 10,466 10,865 10,115 Products in process ................................... 1,183 617 873 Operating supplies and other .......................... 32,217 30,759 30,131 -------- -------- -------- Total inventories ................................... $143,680 $132,359 $128,578 ======== ======== ========
The above amounts include inventories valued under the LIFO method totaling $107,178,000, $99,321,000 and $96,045,000 at December 31, 1998, 1997 and 1996, respectively. Estimated current cost exceeded LIFO cost at December 31, 1998, 1997 and 1996 by $34,671,000, $37,344,000 and $35,747,000, 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 a decrease of $1,633,000 ($0.02 per share effect) in 1998, an increase of $973,000 ($0.01 per share effect) in 1997 and a decrease of $702,000 ($0.01 per share effect) in 1996. 47 13 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):
1998 1997 1996 ---------- ---------- ---------- Land and land improvements ............................ $ 210,601 $ 211,058 $ 222,546 Buildings ............................................. 83,609 81,805 82,049 Machinery and equipment ............................... 1,874,012 1,753,683 1,630,089 Leaseholds ............................................ 7,039 7,107 7,118 Construction in progress .............................. 105,495 66,547 60,362 ---------- ---------- ---------- Total ............................................. 2,280,756 2,120,200 2,002,164 Less allowances for depreciation, depletion and amortization .......................... 1,384,971 1,311,781 1,237,674 ---------- ---------- ---------- Property, plant and equipment, net ...................................... 895,785 $ 808,419 $ 764,490 ========== ========== ==========
The Company capitalized interest costs of $443,000 in 1998,$1,160,000 in 1997 and $627,000 in 1996 with respect to qualifying construction projects. Total interest costs incurred before recognition of the capitalized amount were $7,225,000 in 1998, $8,074,000 in 1997 and $9,263,000 in 1996. 5. DEBT Long-term debt, exclusive of current maturities, at December 31 is summarized as follows (in thousands of dollars):
1998 1997 1996 ------- ------- ------- Medium-term notes ..................................... $56,000 $61,000 $66,000 Variable rate pollution control revenue bonds ....................................... 8,200 8,200 8,200 63/8% pollution control revenue bonds ....................................... 5,800 5,800 5,800 Other notes ........................................... 6,533 6,931 5,535 ------- ------- ------- Total ............................................. $76,533 $81,931 $85,535 ======= ======= ======= Estimated fair value .................................. $87,091 $93,142 $93,507 ======= ======= =======
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 the medium-term notes in 1991 totaled $81,000,000. The dollar-weighted average maturity of the notes, as calculated from the dates of issuance, approximated 13 years. Maturities at the time of issuance ranged from 3 to 30 years with a maximum of $10,000,000 due in any one year. At that time, the weighted average interest rate on the notes was 8.53% with a range of 7.59% to 8.85%. The $56,000,000 in notes outstanding as of December 31, 1998 have a weighted average maturity of 8 years with a weighted average interest rate of 8.72%. Certain fixed and variable rate pollution control revenue bonds were called and refunded in 1996. In connection with the refunding, $8,200,000 of tax-exempt bonds were issued and currently bear interest at a variable rate that is reset weekly by the remarketing agent. The interest rate on these bonds may be changed to another variable rate option, or to a fixed rate, in accordance with the provisions of the trust indenture. The 6 3/8% pollution control revenue bonds issued in 1992 mature in 2012. Other notes include $3,000,000 representing a fixed rate, tax-exempt industrial development bond issue which matures in 2011 and notes issued for businesses acquired. The aggregate principal payments for the five years subsequent to December 31, 1998 are: 1999-$5,432,000; 2000-$5,240,000; 2001-$5,211,000; 2002-$5,491,000; and 2003-$5,217,000. The Company is not subject to any contractual restrictions with regard to working capital, or the amount it may expend for cash dividends and purchases of its stock. Pursuant to a provision in the Company's bank credit facility agreements, the percentage of consolidated debt to total capitalization must be less than 60%. The estimated fair value amounts of long-term debt 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 long-term debt, accounts payable, accrued interest and other applicable accrued liabilities, the carrying amounts are a reasonable estimate of fair value primarily due to their short-term nature. The fair value estimates presented are based on information available to management as of December 31, 1998, 1997 and 1996. 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. 48 14 6. OPERATING 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):
1998 1997 1996 ------- ------- ------- Minimum rentals ....................................... $18,725 $17,894 $17,188 Contingent rentals (based principally on usage) ............................... 15,410 11,840 10,677 ------- ------- ------- Total ............................................. $34,135 $29,734 $27,865 ======= ======= =======
Future minimum operating lease payments under all leases with initial or remaining noncancelable lease terms in excess of one year, exclusive of mineral leases, at December 31, 1998 range from $8,445,000 to $14,457,000 annually through 2003 and aggregate $49,171,000 thereafter. 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. 7. INCOME TAXES The components of earnings before income taxes are as follows (in thousands of dollars):
1998 1997 1996 -------- -------- -------- Domestic .................................... $365,706 $294,834 $279,678 Foreign ..................................... 9,138 5,667 5,902 -------- -------- -------- Total ..................................... $374,844 $300,501 $285,580 ======== ======== ========
Provisions for income taxes consist of the following (in thousands of dollars):
1998 1997 1996 --------- --------- -------- Current: Federal ............................................. $ 96,311 $ 73,767 $ 80,704 State and local ..................................... 16,544 10,907 14,595 Foreign ............................................. 241 132 144 --------- --------- -------- Total ............................................. 113,096 84,806 95,443 --------- --------- -------- Deferred: Federal ............................................. 4,679 5,231 1,446 State and local ..................................... 1,181 1,321 96 Foreign ............................................. (20) (2) -- --------- --------- -------- Total ............................................. 5,840 6,550 1,542 --------- --------- -------- Total provision ....................................... $ 118,936 $ 91,356 $ 96,985 ========= ========= ========
The effective tax rate varied from the federal statutory income tax rate due to the following:
1998 1997 1996 ------ ----- ----- Federal statutory tax rate ............................ 35.0% 35.0% 35.0% Increase (decrease) in tax rate resulting from: Depletion ......................................... (4.5) (5.0) (4.8) State and local income taxes, net of federal income tax benefit ..................................... 3.0 2.6 3.3 Miscellaneous items ............................... (1.8) (2.2) 0.5 ----- ---- ---- Effective tax rate .................................... 31.7% 30.4% 34.0% ===== ==== ====
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):
1998 1997 1996 ------ ------ ------ Deferred tax assets related to: Accrual for post retirement benefits .......................................... $ 16,804 $ 15,283 $ 14,149 Accrual for environmental reclamation ....................................... 371 554 396 Accounts receivable, principally allowance for doubtful accounts ............................. 2,918 3,248 3,493 Inventory adjustments ............................... 6,309 5,748 6,101 Pensions, incentives and deferred compensation ............................. 17,477 11,844 10,463 Other items ......................................... 9,596 10,714 10,339 -------- -------- -------- Total deferred tax assets ....................... 53,475 47,391 44,941 -------- -------- -------- Deferred tax liabilities related to: Fixed assets, principally depreciation ...................................... 117,658 107,170 101,316 Other items ......................................... 9,366 7,555 7,119 -------- -------- -------- Total deferred tax liabilities .................. 127,024 114,725 108,435 -------- -------- -------- Net deferred tax liability .......................... $ 73,549 $ 67,334 $ 63,494 ======== ======== ========
49 15 8. PENSION AND POST RETIREMENT BENEFIT PLANS The Company has adopted the disclosure requirements of Statement of Financial Accounting Standards No. 132, Employers' Disclosures about Pensions and Other Post retirement Benefits. PENSION PLANS The Company sponsors three noncontributory defined benefit pension plans. 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 two out of four union groups in the Chemicals Hourly Plan are based on salaries or wages and years of service; the Construction Materials Hourly Plan and two union groups in the Chemicals Hourly Plan provide benefits equal to a flat dollar amount for each year of service. The following tables set forth the combined funded status of the plans and their reconciliation with the related amounts recognized in the Company's consolidated financial statements at December 31 (in thousands of dollars):
1998 1997 1996 --------- --------- --------- Change in benefit obligation: Benefit obligation at beginning of year ............................. $ 306,516 $ 267,289 $ 264,590 Service cost .................................... 12,886 11,228 11,631 Interest cost ................................... 19,499 20,987 19,069 Amendments ...................................... 5,479 (1,014) 6,770 Actuarial (gain) loss ........................... 14,667 23,647 (22,316) Benefits paid ................................... (14,289) (15,621) (12,455) --------- --------- --------- Benefit obligation at end of year ................ $ 344,758 $ 306,516 $ 267,289 ========= ========= ========= Change in plan assets: Fair value assets at beginning of year ............................... $ 395,245 $ 337,325 $ 305,398 Actual return on plan assets .................. 63,827 72,875 43,867 Employer contribution ......................... 770 666 515 Benefits paid ................................. (14,289) (15,621) (12,455) --------- --------- --------- Fair value of assets at end of year .............................. $ 445,553 $ 395,245 $ 337,325 ========= ========= ========= Funded status ..................................... $ 100,795 $ 88,729 $ 70,037 Unrecognized net transition (asset) ............... (5,060) (7,486) (10,212) Unrecognized net actuarial (gain) ................. (111,024) (91,536) (68,163) Unrecognized prior service cost ................... 14,670 10,722 12,632 --------- --------- --------- Net amount recognized ............................. $ (619) $ 429 $ 4,294 ========= ========= ========= Amounts recognized in the statement of financial position consists of: Prepaid benefit cost .......................... $ 35,500 $ 32,959 $ 24,326 Accrued benefit liability ..................... (36,492) (33,402) (20,032) Intangible assets ............................. 373 872 0 --------- --------- --------- Net amount recognized ......................... $ (619) $ 429 $ 4,294 ========= ========= ========= Components of net periodic benefit cost: Service cost ..................................... $ 12,886 $ 11,228 $ 11,631 Interest cost .................................... 19,499 20,987 19,069 Expected return on plan assets ................... (28,643) (25,622) (23,651) Amortization of transition (asset) ............... (2,425) (2,730) (3,013) Amortization of prior service cost ............... 1,531 1,588 1,104 Recognized actuarial (gain) loss ................. (1,145) (756) 45 --------- --------- --------- Net periodic benefit cost ........................ $ 1,703 $ 4,695 $ 5,185 ========= ========= ========= Weighted-average assumptions as of December 31: Discount rate ................................. 6.75% 7.00% 7.50% Expected return on assets ..................... 8.25% 8.25% 8.25% Rate of compensation increase (for salary-related plans) .................. 4.25% 4.25% 4.25%
Plan assets are composed primarily of marketable domestic and international equity securities and corporate and government debt securities. Vulcan sponsors an unfunded nonqualified pension plan. The projected benefit obligation, accumulated benefit obligation and fair value of assets for this plan were $16,943,860, $11,169,918 and $0 as of December 31, 1998; $15,331,632, $10,573,132 and $0 as of December 31, 1997; and $10,764,273, $7,863,951 and $0 as of December 31, 1996. Certain of the Company's hourly employees in unions are covered by multi-employer defined benefit pension plans. Contributions to these plans approximated $2,159,000 in 1998, $2,115,000 in 1997 and $2,090,000 in 1996. 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. Fifteen percent of the labor force are covered by collective bargaining agreements and 6% are covered by labor agreements that expire within one year. 50 16 POSTRETIREMENT PLANS 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. The following tables set forth the combined funded status of the plan and its reconciliation with the related amounts recognized in the Company's consolidated financial statements at December 31 (in thousands of dollars):
1998 1997 1996 --------- --------- --------- Change in benefit obligation: Benefit obligation at beginning of year ............................. $ 48,713 $ 43,633 $ 44,491 Service cost .................................... 2,134 2,036 2,045 Interest cost ................................... 3,367 3,464 3,013 Amendments ...................................... (146) 0 0 Actuarial (gain) loss ........................... (623) 2,099 (3,103) Benefits paid ................................... (2,513) (2,519) (2,813) --------- --------- --------- Benefit obligation at end of year ............... $ 50,932 $ 48,713 $ 43,633 ========= ========= ========= Change in plan assets: Fair value of assets at beginning of year ............................. $ 3,323 $ 3,119 $ 2,842 Actual return on plan assets .................... 167 203 197 Employer contribution ........................... 45 111 168 Benefits paid ................................... (51) (110) (88) --------- --------- --------- Fair value of assets at end of year ................................ $ 3,484 $ 3,323 $ 3,119 ========= ========= ========= Funded status ..................................... $ (47,448) $ (45,390) $ (40,514) Unrecognized net loss ............................. 5,612 6,261 4,287 Unrecognized prior service cost ................... (162) 5 5 --------- --------- --------- Net amount recognized.............................. $ (41,998) $ (39,124) $ (36,222) ========= ========= ========= Amounts recognized in the statement of financial position consist of: Accrued benefit liability ..................... $ (41,998) $ (39,124) $ (36,222) ========== ========= ========= Components of net periodic benefit cost: Service cost ..................................... $ 2,134 $ 2,036 $ 2,045 Interest cost ................................... 3,367 3,464 3,013 Expected return on plan assets .................. (218) (218) (204) Amortization of prior service cost .............. 21 1 1 Recognized actuarial loss ....................... 84 138 95 --------- --------- --------- Net periodic benefit cost ....................... $ 5,388 $ 5,421 $ 4,950 ========== ========= =========
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 weighted-average discount rates used as of December 31, 1998, 1997 and 1996 were 6.75%, 7.00% and 7.50%, respectively. For measurement purposes, a 7% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1999. The rate was assumed to decrease 1% each year to 5% for 2001 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. If the healthcare cost trend rates were increased 1% each year, the accumulated postretirement benefit obligation as of December 31, 1998 would have increased by $6,145,000, and the aggregate of the service and interest cost for 1998 would have increased by $797,000. Similarly, if the health care cost trend rates were decreased 1% each year, the accumulated postretirement benefit obligation as of December 31, 1998 would have decreased by $4,463,000, and the aggregate of the service and interest cost for 1998 would have decreased by $621,000. 51 17 9. INCENTIVE PLANS STOCK-BASED COMPENSATION PLANS The Company's 1996 Long-Term Incentive Plan authorizes the granting of stock-based awards to key salaried employees of the Company and its affiliates. The Plan permits the granting of stock options (including incentive stock options), stock appreciation rights, restricted stock and restricted stock units, performance share awards, dividend equivalents and other awards valued in whole or in part by reference to or otherwise based on common stock of the Company. The number of shares available for awards is .95% of the issued common shares of the Company (including treasury shares) as of the first day of each calendar year, plus the unused shares that are carried over from prior years. Stock options issued during 1998, 1997 and 1996 were granted at the fair market value of the stock on the date of the grant. They vest ratably over five years and expire 10 years subsequent to the grant. Performance share awards were granted through 1995. These awards are based on the achievement of established performance goals, and the majority of the awards vest over five years. Expense provisions referable to these plans amounted to $10,698,000 in 1998, $11,671,000 in 1997 and $4,373,000 in 1996. Expense provisions are affected by changes in the market value of the Company's common stock and performance versus a preselected peer group. The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock-based compensation. Pro forma information regarding net earnings and earnings per share is required by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), and has been determined as if the Company had accounted for its employee stock options and performance share awards under the fair value method of that statement. The fair value for options was estimated at the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 5.6%; dividend yields of 2.1%; volatility factors of the expected market price of the Company's common stock of 17.9%; and a weighted-average expected life of the option of five years. The fair value for performance share awards was based on a discounted fair market value of the Company's stock at grant date. For purposes of pro forma disclosures, the estimated fair value of the options and performance share awards is amortized to expense over the options' vesting period. The effects of applying SFAS 123 on a pro forma basis would have increased net earnings by approximately $3,626,000, $4,386,000 and $83,000 in 1998, 1997 and 1996, respectively. The impact on basic and diluted earnings per share in 1998 would have been a $0.03 and $0.04 increase, respectively. Similarly, the impact in 1997 would have been a $0.04 and $0.05 increase, respectively, and there would have been no change in 1996 earnings per share. A summary of the Company's stock option activity, related information as of December 31, 1998, 1997 and 1996, and changes during each year is presented below:
1998 1997 1996 --------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------------------------------------------------------------------- Outstanding at beginning of year .................. 2,427,705 $ 20.09 1,286,850 $ 18.87 -- $ -- Granted at fair value ........................... 1,021,950 $ 33.13 1,224,150 $ 21.32 1,289,400 $ 18.87 Exercised ....................................... 95,010 $ 19.79 20,820 $ 19.19 -- $ -- Forfeited ....................................... 106,005 $ 25.12 62,475 $ 19.16 2,550 $ 18.85 ---------- --------- --------- Outstanding at year end ........................... 3,248,640 $ 24.04 2,427,705 $ 20.09 1,286,850 $ 18.87 ========== ========= ========= Options exercisable at year end ................... 840,960 $ 19.73 479,295 $ 19.35 -- $ -- Weighted-average grant date fair value of each option granted during the year ......................... $ 4.80 3.71 $ 3.45
52 18 The following table summarizes information about stock options outstanding and exercisable at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE EXERCISE PRICE OF SHARES LIFE (YEARS) PRICE OF SHARES PRICE - ---------------- ---------- ----------- --------- --------- -------- $18.58-$19.73 1,128,855 7.38 $18.87 542,955 $18.86 21.31 1,136,985 8.12 $21.31 297,825 $21.31 $29.20-$32.95 965,700 9.12 $32.94 180 $29.20 $ 43.76 17,100 9.94 $43.76 NA NA ---------- ------- Total 3,248,640 8.17 $24.04 840,960 $19.73 ========== ==== ====== ======= ======
CASH-BASED COMPENSATION PLAN The Company has a management incentive plan under which cash awards may be made annually to officers and key employees. Expense provisions referable to the plan amounted to $10,250,000 in 1998, $7,198,000 in 1997 and $8,500,000 in 1996. 10. OTHER COMMITMENTS AND CONTINGENT LIABILITIES In 1998, the Company formed a joint venture with Mitsui & Co. to construct and operate a new chloralkali plant and to expand ethylene dichloride (EDC) capacity. Through the contribution of its existing EDC plant and a total of approximately $90,000,000, the Company will own 51% of the joint venture and manage the operation of the new facilities. The majority of the spending will occur in 1999, and the joint venture is expected to begin production in early 2000. Other commitments of the Company include the purchase of property, plant and equipment approximating $32,441,000 at December 31, 1998, excluding the expenditures for the CalMat acquisition (see Note 15A) and the Mitsui joint venture. 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, with respect to 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. 11. SHAREHOLDERS' EQUITY A total of 42,175,581 shares has been purchased at a cost of $595,915,000 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 the current purchase authorization was 8,810,388 shares as of December 31, 1998. During 1998, 5,272 shares that had been held by predecessor companies were identified and retired. There was no cash flow or earnings impact associated with this change. In October 1998, the Company adopted a Stockholder Rights Plan and pursuant to the plan declared a dividend on its common stock of one right (a "Right") for each share of common stock then outstanding and for each share of common stock issued thereafter and prior to the time the Rights expire or become exercisable. Each Right entitles holders to purchase one one-hundredth of a share of Series A Participating Preference Stock at a price of $400. The Rights will become exercisable 10 days after a public announcement that a person or group has acquired 15% or more of the Company's common stock or intends to make a tender or exchange offer which would result in such person or group acquiring 15% or more of the Company's common stock. Under certain circumstances, the Rights will entitle the holder to purchase Company common stock or the common stock of an acquiring company having a market value of two times the exercise price of each Right. The Rights expire on December 31, 2008 and, prior to the occurrence of certain events, maybe redeemed at a price of $0.01 per Right. 12. SEGMENT DATA On December 31, 1998, the Company adopted SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information (SFAS 131). SFAS 131 established standards for reporting information about segments in annual financial statements and requires selected information about segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services, and geographic areas. Segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to 53 19 allocate resources and in assessing performance. Under this new standard, the Company's reportable segments are organized around products and services and continue to be Construction Materials and Chemicals. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company's determination of segment earnings (a) recognizes equity in the income or losses of nonconsolidated affiliates as part of segment earnings; (b) rejects allocations of general corporate expenses to the segments; (c) does not reflect interest revenue or expense; and (d) is before income taxes. Operations in the Company's Construction Materials segment principally involve the production and sale of aggregates and related products and services provided by seven regional divisions. These divisions have been aggregated for reporting purposes. At year end, sales are in 17 states located in the southeast, midwest and southwest regions of the United States and the District of Columbia. Customers primarily use aggregates in the construction and maintenance of highways, roads and streets and in the construction of housing and nonresidential, commercial and industrial facilities. The Chemicals segment, through its Chloralkali and Performance Systems operations, produces and sells chlorine, caustic soda, chlorinated organic chemicals and other industrial chemicals principally to the chemical, pulp and paper, energy, water management, pharmaceuticals and textile industries. These business units have been aggregated for reporting purposes. Because the majority of the Company's activities are domestic, sales and assets outside the United States are not material.
SEGMENT FINANCIAL DISCLOSURE Amounts in millions 1998 1997 1996 ---------- ---------- -------- NET SALES Construction Materials ................... $ 1,158.6 $ 1,051.0 $ 961.9 Chemicals ................................ 617.8 627.6 607.0 ---------- ---------- -------- Total ................................ $ 1,776.4 $ 1,678.6 $1,568.9 ========== ========== ======== EARNINGS (LOSS) BEFORE INTEREST EXPENSE AND INCOME TAXES Construction Materials ................... $ 307.4 $ 229.3 $ 197.3 Chemicals ................................ 69.2 75.8 94.7 ---------- ---------- -------- Segment earnings ......................... 376.6 305.1 292.0 Interest income, etc ..................... 5.0 2.3 2.2 ---------- ---------- -------- Total ................................ $ 381.6 $ 307.4 $ 294.2 ========== ========== ======== IDENTIFIABLE ASSETS Construction Materials ................... $ 894.6 $ 751.2 $ 719.6 Chemicals ................................ 452.7 459.0 441.1 ---------- ---------- -------- Identifiable assets .................. 1,347.3 1,210.2 1,160.7 Investment in nonconsolidated affiliates ............. 70.3 61.0 56.0 General corporate assets ................. 60.4 49.4 53.1 Cash items ............................... 180.6 128.6 50.8 ---------- ---------- -------- Total ................................ $ 1,658.6 $ 1,449.2 $1,320.6 ========== ========== ======== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials ................... $ 90.8 $ 84.5 $ 80.0 Chemicals ................................ 47.0 44.7 41.3 ---------- ---------- -------- Total ................................ $ 137.8 $ 129.2 $ 121.3 ========== ========== ======== PROPERTY ADDITIONS Construction Materials ................... $ 176.0 $ 125.5 $ 124.1 Chemicals ................................ 54.3 56.5 63.1 ---------- ---------- -------- Total ................................ $ 230.3 $ 182.0 $ 187.2 ========== ========== ======== SALES BY PRODUCT Construction Materials Aggregates: Stone ................................ $ 928.8 $ 833.2 $ 760.3 Sand and gravel ...................... 27.5 27.7 25.4 Other aggregates ..................... 22.3 20.0 21.0 Other products and services: Asphaltic products and placement .......................... 76.9 72.9 63.7 Ready-mixed concrete ................. 19.7 17.5 16.3 Other ................................ 83.4 79.7 75.2 ---------- ---------- -------- Total ............................ $ 1,158.6 $ 1,051.0 $ 961.9 ========== ========== ======== Chemicals Chloralkali-Inorganic. ................. $ 205.4 $ 181.7 $ 208.1 Chloralkali-Organic .................... 220.9 256.6 234.2 Performance Systems .................... 191.5 189.3 164.7 ---------- ---------- -------- Total ............................ $ 617.8 $ 627.6 $ 607.0 ========== ========== ========
54 20 13. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental information referable to the Consolidated Statements of Cash Flows is summarized below (in thousands of dollars):
1998 1997 1996 ---------------------------------- Cash payments: Interest (exclusive of amount capitalized) ...................... $ 7,250 $ 6,774 $ 8,715 Income taxes ............................... 112,995 92,315 85,492 Noncash investing and financing activities: Amounts referable to business acquisitions: Liabilities assumed .................... 1,497 1,441 5,051 Fair value of stock issued ............. 34,568 -- --
14. ACQUISITIONS At various dates during 1998, 1997 and 1996, the Company acquired the net assets and businesses of several companies. The combined purchase prices were approximately $59,000,000, $12,000,000 and $64,000,000, respectively. Funds for the purchases were primarily provided by internally generated cash flows or stock issuance. The amount by which the total cost of these acquisitions exceeded the fair value of the net assets acquired was recognized as goodwill and will be amortized under the Company's normal amortization policy. All of the 1998, 1997 and 1996 acquisitions described above were accounted for as purchases and, accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from their respective dates of acquisition. On a pro forma basis, as if the net assets and businesses had been acquired at the beginning of fiscal 1997, 1996 and 1995, respectively, revenue, net income and earnings per share would not differ materially from the amounts rejected in the accompanying consolidated financial statements for 1998, 1997 and 1996. Goodwill recorded on the Company's balance sheet as of December 31, 1998, 1997 and 1996 amounted to $94,008,000, $59,345,000 and $69,523,000. 15. SUBSEQUENT EVENTS A. CALMAT ACQUISITION In January 1999, the Company completed its $31.00 per share tender offer for all of the outstanding shares of common stock of CalMat Co. for a value of $740,000,000. The acquisition was funded by cash and approximately $590,000,000 of commercial paper. It will be accounted for under purchase accounting, with the purchase price allocated to the acquired assets and assumed liabilities based on fair market value. As of the acquisition, CalMat had fixed term debt of $118,000,000 and $90,000,000 of bank borrowings. The aggregate principal payments for the fixed term debt for the five years subsequent to December 31, 1998 are: 1999-$294,000; 2000-$303,000; 2001-$314,000; 2002-$2,355,000; and 2003-$35,161,000. In addition, CalMat's operating lease obligations with initial or remaining noncancelable lease terms in excess of one year, exclusive of mineral leases, at December 31, 1998 range from $371,000 to $910,000 annually through 2003 and aggregate $829,000 thereafter. CalMat is a party to 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, with respect to 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. B. STOCK SPLIT On February 12, 1999, the Board of Directors approved an increase in the authorized common stock from 160,000,000 shares to 480,000,000 shares and a three-for-one split of the common stock. Par value of the common stock will remain $1 per share. The stock split was effective March 10, 1999. The effect of the stock split has been recognized retroactively in the shareholders' equity accounts on the balance sheets as of December 31, 1998, and in all share and per share data in the accompanying consolidated financial statements, Notes to Financial Statements and supplemental financial data. Shareholders' equity accounts have been restated to reflect the reclassification of an amount equal to the par value of the increase in issued common shares from the capital in excess of par value and retained earnings accounts to the common stock account. 55 21 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Segment Financial Data
Amounts in millions 1998 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- -------- NET SALES Construction Materials $1,158.6 $1,051.0 $ 961.9 $ 884.7 $ 842.9 $ 756.7 Chemicals 617.8 627.6 607.0 576.3 410.5 376.8 -------- -------- -------- -------- -------- -------- Total $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 ======== ======== ======== ======== ======== ======== EARNINGS (LOSS) BEFORE INTEREST EXPENSE AND INCOME TAXES Construction Materials $ 307.4 $ 229.3 $ 197.3 $ 181.5 $ 162.5 $ 116.7 Chemicals 69.2 75.8 94.7 87.8 (7.3) 17.4 -------- -------- -------- -------- -------- -------- Segment earnings 376.6 305.1 292.0 269.3 155.2 134.1 Interest income, etc. 5.0 2.3 2.2 0.2 0.5 0.3 -------- -------- -------- -------- -------- -------- Total $ 381.6 $ 307.4 $ 294.2 $ 269.5 $ 155.7 $ 134.4 ======== ======== ======== ======== ======== ======== NET CASH PROVIDED BY OPERATING ACTIVITIES Construction Materials $ 270.4 $ 255.9 $ 219.8 $ 182.9 $ 182.5 $ 156.6 Chemicals 86.4 86.3 128.8 90.8 31.5 41.1 Net interest, other, net 5.8 3.6 (3.1) (7.2) (5.7) (4.7) -------- -------- -------- -------- -------- -------- Total $ 362.6 $ 345.8 $ 345.5 $ 266.5 $ 208.3 $ 193.0 ======== ======== ======== ======== ======== ======== IDENTIFIABLE ASSETS Construction Materials $ 894.6 $ 751.2 $ 719.6 $ 690.0 $ 678.8 $ 670.1 Chemicals 452.7 459.0 441.1 395.5 389.5 288.7 -------- -------- -------- -------- -------- -------- Identifiable assets 1,347.3 1,210.2 1,160.7 1,085.5 1,068.3 958.8 Investment in nonconsolidated affiliates 70.3 61.0 56.0 50.8 53.9 51.1 General corporate assets 60.4 49.4 53.1 57.6 51.2 54.7 Cash items 180.6 128.6 50.8 21.9 7.7 14.0 -------- -------- -------- -------- -------- -------- Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6 ======== ======== ======== ======== ======== ======== AVERAGE CAPITAL EMPLOYED Construction Materials $ 827.8 $ 737.5 $ 710.6 $ 681.5 $ 688.1 $ 707.4 Chemicals 389.0 373.1 356.0 353.9 294.0 248.5 Cash items 122.0 62.5 27.5 6.8 11.0 7.0 -------- -------- -------- -------- -------- -------- Total $1,338.8 $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9 ======== ======== ======== ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials $ 90.8 $ 84.5 $ 80.0 $ 75.3 $ 77.0 $ 78.4 Chemicals 47.0 44.7 41.3 41.7 35.7 29.0 -------- -------- -------- -------- -------- -------- Total $ 137.8 $ 129.2 $ 121.3 $ 117.0 $ 112.7 $ 107.4 ======== ======== ======== ======== ======== ======== PROPERTY ADDITIONS(*) Construction Materials Replacement $ 83.4 $ 65.8 $ 63.0 $ 53.2 $ 42.3 $ 39.4 Environmental control 4.3 2.5 2.5 3.5 2.2 1.7 Profit adding 88.3 57.2 58.6 37.7 24.8 18.2 -------- -------- -------- -------- -------- -------- Total $ 176.0 $ 125.5 $ 124.1 $ 94.4 $ 69.3 $ 59.3 ======== ======== ======== ======== ======== ======== Chemicals Replacement $ 20.2 $ 26.2 $ 21.5 $ 15.8 $ 10.7 $ 9.3 Environmental control 0.7 2.4 7.4 4.9 1.7 5.4 Profit adding 33.4 27.9 34.2 10.5 78.1 26.6 -------- -------- -------- -------- -------- -------- Total $ 54.3 $ 56.5 $ 63.1 $ 31.2 $ 90.5 $ 41.3 ======== ======== ======== ======== ======== ======== Total Company Replacement $ 103.6 $ 92.0 $ 84.5 $ 69.0 $ 53.0 $ 48.7 Environmental control 5.0 4.9 9.9 8.4 3.9 7.1 Profit adding 121.7 85.1 92.8 48.2 102.9 44.8 -------- -------- -------- -------- -------- -------- Total $ 230.3 $ 182.0 $ 187.2 $ 125.6 $ 159.8 $ 100.6 ======== ======== ======== ======== ======== ======== INCREASE (DECREASE) IN WORKING CAPITAL(**) Construction Materials $ 19.5 $ (8.7) $ (3.2) $ (9.9) $ 3.9 $ 2.6 Chemicals 12.2 11.9 (13.5) 18.1 11.8 (8.3) -------- -------- -------- -------- -------- -------- Total $ 31.7 $ 3.2 $ (16.7) $ 8.2 $ 15.7 $ (5.7) ======== ======== ======== ======== ======== ======== Amounts in millions 1992 1991 1990 1989 1988 -------- - ------- -------- -------- -------- NET SALES Construction Materials $ 686.4 $ 648.1 $ 696.1 $ 645.7 $ 670.6 Chemicals 391.6 359.4 409.2 430.5 382.6 -------- -------- -------- -------- -------- Total $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2 ======== ======== ======== ======== ======== EARNINGS (LOSS) BEFORE INTEREST EXPENSE AND INCOME TAXES Construction Materials $ 88.3 $ 41.8 $ 112.0 $ 115.3 $ 141.5 Chemicals 51.3 42.6 72.4 86.4 66.2 -------- -------- -------- -------- -------- Segment earnings 139.6 84.4 184.4 201.7 207.7 Interest income, etc. 0.9 0.3 2.6 5.8 5.2 -------- -------- -------- -------- -------- Total $ 140.5 $ 84.7 $ 187.0 $ 207.5 $ 212.9 ======== ======== ======== ======== ======== NET CASH PROVIDED BY OPERATING ACTIVITIES Construction Materials $ 141.9 $ 141.8 $ 130.2 $ 159.4 $ 115.3 Chemicals 63.8 50.0 76.4 93.6 62.4 Net interest, other, net (4.6 (8.5 (6.5 (2.8 (2.4) -------- -------- -------- -------- -------- Total $ 201.1 $ 183.3 $ 200.1 $ 250.2 $ 175.3 ======== ======== ======== ======== ======== IDENTIFIABLE ASSETS Construction Materials $ 688.9 $ 710.1 $ 764.4 $ 592.4 $ 539.9 Chemicals 285.2 267.6 270.3 270.6 283.4 -------- -------- -------- -------- -------- Identifiable assets 974.1 977.7 1,034.7 863.0 823.3 Investment in nonconsolidated affiliates 43.4 39.1 32.6 21.6 15.4 General corporate assets 50.8 37.4 32.1 33.7 29.5 Cash items 15.6 18.9 18.6 84.2 89.4 -------- -------- -------- -------- -------- Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6 ======== ======== ======== ======== ======== AVERAGE CAPITAL EMPLOYED Construction Materials $ 708.4 $ 748.4 $ 656.8 $ 550.6 $ 485.2 Chemicals 226.4 226.1 228.9 227.8 230.5 Cash items 22.4 3.1 29.2 73.7 73.0 -------- -------- -------- -------- -------- Total $ 957.2 $ 977.6 $ 914.9 $ 852.1 $ 788.7 ======== ======== ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials $ 80.2 $ 84.9 $ 83.2 $ 73.0 $ 64.6 Chemicals 31.5 31.4 29.7 28.7 27.4 -------- -------- -------- -------- -------- Total $ 111.7 $ 116.3 $ 112.9 $ 101.7 $ 92.0 ======== ======== ======== ======== ======== PROPERTY ADDITIONS(*) Construction Materials Replacement $ 17.9 $ 26.9 $ 63.9 $ 62.8 $ 61.0 Environmental control 1.6 1.7 2.5 1.7 0.9 Profit adding 37.0 32.2 120.9 63.2 36.5 -------- -------- -------- -------- -------- Total $ 56.5 $ 60.8 $ 187.3 $ 127.7 $ 98.4 ======== ======== ======== ======== ======== Chemicals Replacement $ 11.3 $ 9.2 $ 13.0 $ 7.3 $ 9.0 Environmental control 10.1 1.6 3.6 3.4 2.0 Profit adding 20.6 14.1 18.6 8.3 6.3 -------- -------- -------- -------- -------- Total $ 42.0 $ 24.9 $ 35.2 $ 19.0 $ 17.3 ======== ======== ======== ======== ======== Total Company Replacement $ 29.2 $ 36.1 $ 76.9 $ 70.1 $ 70.0 Environmental control 11.7 3.3 6.1 5.1 2.9 Profit adding 57.6 46.3 139.5 71.5 42.8 -------- -------- -------- -------- -------- Total $ 98.5 $ 85.7 $ 222.5 $ 146.7 $ 115.7 ======== ======== ======== ======== ======== INCREASE (DECREASE) IN WORKING CAPITAL(**) Construction Materials $ 14.1 $ (10.8) $ 37.0 $ (20.2) $ 47.0 Chemicals (3.2 (0.5) (0.7) (8.2) 24.1 -------- -------- -------- -------- -------- Total $ 10.9 $ (11.3) $ 36.3 $ (28.4) $ 71.1 ======== ======== ======== ======== ========
* Refer to page 65 for a discussion of the three categories used by the Company to classify property additions. ** Exclusive of debt and cash items. 56 22 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Segment Information--Construction Materials
1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------- SALES UNITS (in millions) Aggregates: Customer stone--tons 157.2 146.0 138.4 129.0 125.4 116.6 Customer sand and gravel--tons 5.7 6.1 6.1 5.6 5.9 6.4 Customer other aggregates--tons 2.5 3.1 2.2 1.8 2.1 1.7 -------------------------------------------------------- Total customer sales--tons 165.4 155.2 146.7 136.4 133.4 124.7 JV and internal sales--tons(*) 14.2 12.2 11.3 11.9 11.7 10.5 -------------------------------------------------------- Total aggregates-- tons 179.6 167.4 158.0 148.3 145.1 135.2 ======================================================== Other construction materials: Asphalt-mix concrete--tons 1.9 1.8 1.7 1.7 1.5 1.6 Ready-mixed concrete-- cubic yards 0.4 0.4 0.3 0.4 0.3 0.3 SALES AMOUNTS (in millions) Aggregates: Stone $ 928.8 $ 833.2 $ 760.3 $679.9 $630.4 $557.1 Sand and gravel 27.5 27.7 25.4 23.1 24.4 24.8 Other aggregates 22.3 20.0 21.0 20.1 21.7 19.5 Other products and services: Asphaltic products and placement 76.9 72.9 63.7 69.2 65.0 64.3 Ready-mixed concrete 19.7 17.5 16.3 16.4 14.5 12.3 Other 83.4 79.7 75.2 76.0 86.9 78.7 -------------------------------------------------------- Total $1,158.6 $1,051.0 $ 961.9 $884.7 $842.9 $756.7 ======================================================== 1992 1991 1990 1989 1988 - ----------------------------------------------------------------------------------- SALES UNITS (in millions) Aggregates: Customer stone--tons 109.4 102.9 111.0 103.4 106.7 Customer sand and gravel--tons 6.0 5.2 5.1 5.4 5.7 Customer other aggregates--tons 1.9 1.6 1.8 2.0 2.1 ----------------------------------------- Total customer sales--tons 117.3 109.7 117.9 110.8 114.5 JV and internal sales--tons(*) 9.0 5.6 4.2 3.2 2.9 ----------------------------------------- Total aggregates-- tons 126.3 115.3 122.1 114.0 117.4 ========================================= Other construction materials: Asphalt-mix concrete--tons 1.5 1.2 1.7 1.4 1.6 Ready-mixed concrete-- cubic yards 0.3 0.3 0.3 0.3 0.3 SALES AMOUNTS (in millions) Aggregates: Stone $506.9 $483.2 $532.8 $498.9 $516.3 Sand and gravel 23.2 19.5 20.7 20.7 21.6 Other aggregates 20.4 21.2 21.3 22.8 23.5 Other products and services: Asphaltic products and placement 47.7 45.5 51.1 41.8 49.0 Ready-mixed concrete 12.4 12.1 10.7 11.9 9.2 Other 75.8 66.6 59.5 49.6 51.0 ----------------------------------------- Total $686.4 $648.1 $696.1 $645.7 $670.6 =========================================
* Represents tons shipped by nonconsolidated businesses as well as tons sold to the Company's nonaggregates operations.
Ten-year Growth Five-year Growth 1988-1998 1993-1998 Units Amount Units Amount - -------------------------------------------------------------------------------- AVERAGE ANNUAL COMPOUND GROWTH RATES Stone 4.2% 6.5% 5.9% 10.5% Sand and gravel 1.1% 3.1% -0.8% 2.9% Other aggregates 1.4% -2.1% 3.2% -2.6%
Sales by End Use
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 - ----------------------------------------------------------------------------------------------------------------------------------- SALES OF AGGREGATES (estimated) Highway, road, street and airport construction 34% 36% 36% 37% 39% 40% 40% 38% 37% 37% Nonresidential, commercial and industrial facilities 35 33 35 35 31 32 28 29 31 31 Residential buildings 19 18 17 15 16 15 15 16 18 20 Other public works-- dams, sewers and water supply systems (excluding buildings) 7 8 7 8 8 7 11 10 8 6 Railroad ballast 2 2 2 2 3 3 3 3 3 3 Nonconstruction use-- agricultural, chemical and industrial 3 3 3 3 3 3 3 4 3 3 ---------------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ==============================================================================================
57 23 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Segment Information--Chemicals
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 - ---------------------------------------------------------------------------------------------------------------------------- SALES AMOUNTS(in millions) Chloralkali--Inorganic $205.4 $181.7 $208.1 $221.8 $154.7 $158.4 $214.5 $215.6 $221.3 $205.9 $171.2 Chloralkali--Organic 220.9 256.6 234.2 223.3 193.3 207.2 170.9 143.8 187.9 224.6 211.4 Performance Systems 191.5 189.3 164.7 131.2 62.5 11.2 6.2 0.0 0.0 0.0 0.0 ------------------------------------------------------------------------------------------------ Total $617.8 $627.6 $607.0 $576.3 $410.5 $376.8 $391.6 $359.4 $409.2 $430.5 $382.6 ================================================================================================
Ten-year Growth Five-year Growth 1988-1998 1993-1998 Amount Amount - --------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL COMPOUND GROWTH RATES Chloralkali--Inorganic 2.0% 1.6% Chloralkali--Organic 2.1% 5.1% Performance Systems NA 83.0%
Sales by End Use
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------------ SALES OF CHEMICALS (estimated) Process and intermediate chemicals 58% 56% 58% 58% 58% 56% 54% 56% 53% 54% Industrial durables and nondurables 21 23 21 22 24 26 29 23 27 26 Consumer nondurables 21 21 21 20 18 18 17 21 20 20 ------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% =====================================================================================
58 24 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Consolidated Statements of Earnings and Supplementary Data
Amounts in millions, except per share data 1998 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------- Net sales $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 Cost of goods sold 1,226.8 1,199.5 1,115.4 1,044.7 985.2 886.8 ------------------------------------------------------------------------------ Gross profit on sales 549.6 479.1 453.5 416.3 268.2 246.7 Selling, administrative and general expenses 199.0 190.4 175.1 159.8 125.0 111.1 Other operating costs 7.9 5.1 3.9 6.3 5.5 5.0 Other income (charges), net 38.9 23.8 19.7 19.3 18.0 3.8 ------------------------------------------------------------------------------ Earnings before interest expense and income taxes 381.6 307.4 294.2 269.5 155.7 134.4 Interest expense 6.8 6.9 8.6 11.1 9.8 9.2 ------------------------------------------------------------------------------ Earnings before income taxes 374.8 300.5 285.6 258.4 145.9 125.2 Provision for income taxes 118.9 91.4 97.0 92.2 47.9 37.0 ------------------------------------------------------------------------------ Net earnings before cumulative effect of accounting changes 255.9 209.1 188.6 166.2 98.0 88.2 Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 ------------------------------------------------------------------------------ Net earnings $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 ============================================================================== Diluted earnings per share: Net earnings before cumulative effect of accounting changes $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80 Cumulative effect of accounting changes 0.00 0.00 0.00 0.00 0.00 0.00 ------------------------------------------------------------------------------ Net earnings $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80 ============================================================================== Operating income after taxes $ 260.1 $ 213.4 $ 194.4 $ 173.4 $ 104.5 $ 93.3 As a percent of average capital employed 19.4% 18.2% 17.8% 16.6% 10.5% 9.7 Gross profit on sales as a percent of net sales 30.9% 28.5% 28.9% 28.5% 21.4% 21.8 Net earnings: As a percent of net sales 14.4% 12.5% 12.0% 11.4% 7.8% 7.8 As a percent of average shareholders' equity 24.0% 22.7% 22.4% 21.9% 13.6% 12.8 Effective tax rate 31.7% 30.4% 34.0% 35.7% 32.8% 29.5 SUPPLEMENTARY COST DATA Energy $ 133.5 $ 137.7 $ 135.4 $ 122.4 $ 122.0 $ 124.7 Repairs and maintenance 159.2 161.1 151.8 141.1 128.6 120.0 Depreciation, depletion and amortization 137.8 129.2 121.3 117.0 112.7 107.4 Taxes other than income: Payroll 25.3 24.6 22.1 21.4 20.1 19.5 Property, franchise, etc. 20.6 17.6 20.3 19.6 19.8 18.0 Rentals 40.6 34.8 34.0 28.6 31.1 22.1 Royalties 21.9 21.4 20.3 17.8 17.3 15.8 Research and development 9.6 10.8 9.0 10.3 8.3 6.1 Advertising 1.0 0.9 0.9 0.6 0.5 0.5 Amounts in millions, except per share data 1992 1991 1990 1989 1988 - ------------------------------------------------------------------------------------------------ Net sales $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2 Cost of goods sold 828.9 795.4 813.9 776.2 749.2 ----------------------------------------------------------------- Gross profit on sales 249.1 212.1 291.4 300.0 304.0 Selling, administrative and general expenses 105.7 98.9 101.3 94.1 95.6 Other operating costs 5.3 28.2 6.2 4.9 3.3 Other income (charges), net 2.4 (0.3) 3.1 2.5 7.8 ----------------------------------------------------------------- Earnings before interest expense and income taxes 140.5 84.7 187.0 203.5 212.9 Interest expense 9.8 11.3 7.8 6.1 6.7 ----------------------------------------------------------------- Earnings before income taxes 130.7 73.4 179.2 197.4 206.2 Provision for income taxes 39.7 20.8 58.9 68.0 70.2 ----------------------------------------------------------------- Net earnings before cumulative effect of accounting changes 91.0 52.6 120.3 129.4 136.0 Cumulative effect of accounting changes 3.0 0.0 0.0 1.5 0.0 ----------------------------------------------------------------- Net earnings $ 94.0 $ 52.6 $ 120.3 $ 130.9 $ 136.0 ================================================================= Diluted earnings per share: Net earnings before cumulative effect of accounting changes $ 0.80 $ 0.46 $ 1.03 $ 1.07 $ 1.10 Cumulative effect of accounting changes 0.03 0.00 0.00 0.01 0.00 ----------------------------------------------------------------- Net earnings $ 0.83 $ 0.46 $ 1.03 $ 1.08 $ 1.10 ================================================================= Operating income after taxes $ 98.7 $ 59.5 $ 125.1 $ 137.2 $ 140.2 As a percent of average capital employed 10.3% 6.1% 13.7% 16.1% 17.9% Gross profit on sales as a percent of net sales 23.1% 21.1% 26.4% 27.9% 28.9% Net earnings: As a percent of net sales 8.4% 5.2% 10.9% 12.4% 12.9% As a percent of average shareholders' equity 13.3% 7.7% 18.2% 20.5% 22.9% Effective tax rate 30.4% 28.4% 32.9% 33.7% 34.0% SUPPLEMENTARY COST DATA Energy $ 119.8 $ 115.5 $ 118.3 $ 107.9 $ 110.7 Repairs and maintenance 115.7 111.4 109.4 108.1 108.0 Depreciation, depletion and amortization 111.7 116.3 112.9 101.7 92.0 Taxes other than income: Payroll 18.0 17.1 16.9 15.8 15.5 Property, franchise, etc. 17.9 17.3 15.8 14.1 13.4 Rentals 21.6 14.4 17.0 11.9 9.9 Royalties 14.3 13.8 16.0 15.2 14.8 Research and development 5.4 5.4 6.1 5.1 4.6 Advertising 0.5 0.5 0.7 0.6 0.7
All share and per share data have been restated to reflect the three-for-one split of the Company's common stock, approved by the Board of Directors on February 12, 1999 and effective March 10, 1999. 59 25 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Consolidated Balance Sheets and Other Financial Data
As of December 31 Dollar amounts in millions 1998 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 180.6 $ 128.6 $ 50.8 $ 21.9 $ 7.7 $ 14.0 Short-term investments 0.0 0.0 0.0 0.0 0.0 0.0 Accounts and notes receivable 221.3 199.8 185.5 181.1 182.1 150.4 Inventories 143.7 132.4 128.6 126.8 112.5 105.0 Deferred income taxes 24.9 21.4 23.5 26.5 29.1 26.9 Prepaid expenses 5.9 4.9 5.6 5.8 5.4 6.3 ------------------------------------------------------------------------- Total current assets 576.4 487.1 394.0 362.1 336.8 302.6 Investments and long-term receivables 71.0 63.5 61.3 56.3 58.1 56.5 Property, plant and equipment, net 895.8 808.4 764.5 698.0 701.8 657.8 Deferred charges and other assets 115.4 90.2 100.8 99.4 84.4 61.7 ------------------------------------------------------------------------- Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6 ========================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities(*) $ 211.5 $ 207.7 $ 194.6 $ 177.4 $ 211.3 $ 140.8 Long-term obligations(*) 76.5 81.9 85.5 90.3 97.4 102.0 Other noncurrent liabilities 216.9 168.1 156.8 151.5 140.8 132.8 Shareholders' equity 1,153.7 991.5 883.7 796.6 731.6 703.0 ------------------------------------------------------------------------- Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6 ========================================================================= OTHER FINANCIAL DATA Average capital employed: Short-term debt(*) $ 8.0 $ 8.6 $ 14.1 $ 45.6 $ 39.4 $ 25.2 Long-term obligations(*) 78.5 82.6 86.9 93.3 99.1 105.6 Other noncurrent liabilities 186.7 162.0 152.9 144.7 135.0 140.4 Shareholders' equity 1,065.6 919.9 840.2 758.6 719.6 691.7 ------------------------------------------------------------------------- Total $1,338.8 $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9 ========================================================================= Working capital exclusive of debt and cash items $ 193.0 $ 161.3 $ 158.1 $ 174.8 $ 166.6 $ 150.9 Current ratio 2.7 2.3 2.0 2.0 1.6 2.1 Average obligations(*) as a percent of average capital employed 6.5% 7.8% 9.2% 13.3% 13.9% 13.6 Long-term obligations(*) as a percent of long-term capital (year-end) 5.3% 6.6% 7.6% 8.7% 10.0% 10.9% Ratio of earnings to fixed charges--consolidated 18.9 17.8 16.0 13.3 7.9 8.1% Average number of employees 6,971 7,180 6,926 6,918 6,753 6,320 As of December 31 Dollar amounts in millions 1992 1991 1990 1989 1988 - ------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 15.7 $ 19.0 $ 18.6 $ 84.3 $ 68.1 Short-term investments 0.0 0.0 0.0 0.0 21.3 Accounts and notes receivable 151.4 138.1 152.9 136.9 149.3 Inventories 107.9 112.6 113.0 96.9 93.6 Deferred income taxes 24.6 11.9 7.0 11.6 15.5 Prepaid expenses 5.2 3.5 3.8 3.6 3.1 ------------------------------------------------------------ Total current assets 304.8 285.1 295.3 333.3 350.9 Investments and long-term receivables 50.0 40.7 33.8 22.9 17.1 Property, plant and equipment, net 663.7 675.4 720.7 602.5 549.9 Deferred charges and other assets 65.4 71.9 68.2 43.8 39.7 ------------------------------------------------------------ Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6 ============================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities(*) $ 135.0 $ 135.4 $ 233.8 $ 140.9 $ 118.0 Long-term obligations(*) 107.3 111.1 44.7 55.2 62.0 Other noncurrent liabilities 141.5 143.7 159.3 142.9 143.3 Shareholders' equity 700.1 682.9 680.2 663.5 634.3 ------------------------------------------------------------ Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6 ============================================================ OTHER FINANCIAL DATA Average capital employed: Short-term debt(*) $ 24.1 $ 72.7 $ 62.1 $ 8.3 $ 4.0 Long-term obligations(*) 108.2 66.5 47.2 57.4 63.7 Other noncurrent liabilities 138.4 155.7 144.1 135.0 127.4 Shareholders' equity 686.5 682.7 661.5 651.4 593.6 ------------------------------------------------------------ Total $ 957.2 $ 977.6 $ 914.9 $ 852.1 $ 788.7 ============================================================ Working capital exclusive of debt and cash items $ 156.6 $ 145.7 $ 157.0 $ 120.8 $ 149.2 Current ratio 2.3 2.1 1.3 2.4 3.0 Average obligations(*) as a percent of average capital employed 13.8% 14.2% 12.0% 7.7% 8.6% Long-term obligations(*) as a percent of long-term capital (year-end) 11.3% 11.8% 5.1% 6.4% 7.4% Ratio of earnings to fixed charges--consolidated 8.4 5.6 12.8 19.5 19.8 Average number of employees 6,273 6,404 6,628 6,276 6,185
* Includes capitalized lease obligations. 60 26 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Consolidated Statements of Cash Flows
Amounts in millions 1998 1997 1996 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings before cumulative effect of accounting changes $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 137.8 129.2 121.3 117.0 112.7 107.4 Compensation expense incurred in connection with stock- based incentive plans 6.8 5.5 2.0 0.7 1.0 0.9 Provision for impairment and liquidation of assets 0.0 0.0 0.0 0.0 0.0 0.0 (Increase) decrease in assets before effects of business acquisitions (33.6) (15.3) 8.6 (6.1) (21.3) 0.8 Increase (decrease) in liabilities before effects of business acquisitions 12.0 9.4 19.3 9.0 24.4 (2.9) Amortization of block power purchase 0.0 0.0 0.0 0.0 0.0 0.0 Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 Other, net (16.3) 7.9 5.7 (20.3) (6.5) (1.4) ------------------------------------------------------------------- Net cash provided by operating activities 362.6 345.8 345.5 266.5 208.3 193.0 ------------------------------------------------------------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (203.3) (161.2) (151.8) (109.2) (100.1) (96.0) Payment for business acquisitions (24.9) (12.1) (64.8) (27.2) (87.6) (4.5) Proceeds from sale of property, plant and equipment 27.1 16.4 12.0 31.9 15.4 6.0 Proceeds from sale of segments 0.0 0.0 0.0 0.0 0.0 0.0 Investment in nonconsolidated companies 0.0 0.0 (1.2) (1.9) (2.1) (9.6) Withdrawal of earnings from nonconsolidated companies 0.3 0.2 0.0 0.0 0.0 0.3 Cash provided by (used for) short-term investments 0.0 0.0 0.0 0.0 0.0 0.0 ------------------------------------------------------------------- Net cash used for investing activities (200.8) (156.7) (205.8) (106.4) (174.4) (103.8) ------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt 0.0 0.0 0.0 0.0 0.0 0.0 Net borrowings (payments)-- commercial paper and bank lines of credit (1.3) 0.4 (0.3) (39.3) 42.8 0.0 Payment of short-term debt (5.2) (5.0) (6.8) (4.7) (1.9) (1.2) Payment of long-term debt (0.2) 0.0 (0.1) 0.0 (4.4) (3.4) Purchases of common stock (65.0) (43.1) (45.2) (50.1) (28.6) (40.0) Dividends paid (70.0) (63.6) (58.4) (51.8) (48.1) (46.3) Contribution from minority interest of consolidated subsidiaries 31.9 0 0 0 0 0 ------------------------------------------------------------------- Net cash used for financing activities (109.8) (111.3) (110.8) (145.9) (40.2) (90.9) ------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 52.0 77.8 28.9 14.2 (6.3) (1.7) Cash and cash equivalents at beginning of year 128.6 50.8 21.9 7.7 14.0 15.7 ------------------------------------------------------------------- Cash and cash equivalents at end of year $ 180.6 $ 128.6 $ 50.8 $ 21.9 $ 7.7 $ 14.0 =================================================================== Amounts in millions 1992 1991 1990 1989 1988 - ---------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings before cumulative effect of accounting changes $ 91.0 $ 52.6 $ 120.3 $ 133.4 $ 136.0 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 111.7 116.3 112.9 101.7 92.0 Compensation expense incurred in connection with stock- based incentive plans 0.7 1.0 1.6 1.8 1.4 Provision for impairment and liquidation of assets 0.0 21.1 0.0 0.0 0.0 (Increase) decrease in assets before effects of business acquisitions (18.6) 13.5 (5.5) 15.6 (31.1) Increase (decrease) in liabilities before effects of business acquisitions 10.3 (14.6) (13.8) 16.1 (16.5) Amortization of block power purchase 0.0 0.0 2.5 3.2 3.2 Cumulative effect of accounting changes 3.0 0.0 0.0 1.5 0.0 Other, net 3.0 (6.6) (17.9) (23.1) (9.7) ------------------------------------------------------- Net cash provided by operating activities 201.1 183.3 200.1 250.2 175.3 ------------------------------------------------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (75.2) (63.6) (119.9) (102.9) (100.4) Payment for business acquisitions (33.2) (24.7) (117.9) (34.3) (20.1) Proceeds from sale of property, plant and equipment 8.9 2.6 4.3 4.2 6.1 Proceeds from sale of segments 0.0 0.0 0.0 0.0 25.9 Investment in nonconsolidated companies (11.6) (13.0) (18.8) (9.0) (11.7) Withdrawal of earnings from nonconsolidated companies 0.4 0.0 2.7 0.3 0.5 Cash provided by (used for) short-term investments 0.0 0.0 0.0 21.3 (2.5) ------------------------------------------------------- Net cash used for investing activities (110.7) (98.7) (249.6) (120.4) (102.2) ------------------------------------------------------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt 0.0 81.0 0.0 0.0 0.0 Net borrowings (payments)-- commercial paper and bank lines of credit (9.8) (97.4) 107.1 0.0 0.0 Payment of short-term debt (3.8) (4.6) (11.7) (4.1) (30.1) Payment of long-term debt (2.6) (12.3) (6.0) (6.0) (6.0) Purchases of common stock (32.4) (5.2) (59.2) (58.4) (34.9) Dividends paid (45.1) (45.7) (46.4) (45.1) (40.2) Contribution from minority interest of consolidated subsidiaries 0 0 0 0 0 ------------------------------------------------------- Net cash used for financing activities (93.7) (84.2) (16.2) (113.6) (111.2) ------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (3.3) 0.4 (65.7) 16.2 (38.1) Cash and cash equivalents at beginning of year 19.0 18.6 84.3 68.1 106.2 ------------------------------------------------------- Cash and cash equivalents at end of year $ 15.7 $ 19.0 $ 18.6 $ 84.3 $ 68.1 =======================================================
61 27 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Average Annual Compound Growth Rates(*)
Ten-year Growth Five-year Growth 1988-1998 1993-1998 OPERATING DATA Net sales: Construction Materials 6.1% 8.6% Chemicals 5.7% 11.5% ----------------------- Total 5.9% 9.6% ----------------------- Earnings before interest expense and income taxes: Construction Materials 11.4% 18.6% Chemicals NA NA ----------------------- Segment earnings 8.0% 23.1% Net earnings 8.3% 24.7% SHARE DATA Per common share: Basic net earnings 10.4% 27.2% Diluted net earnings 10.3% 27.0% Dividends paid 6.9% 11.1% Book value at year end 7.4% 12.5% FINANCIAL POSITION Working capital at year end 6.9% 20.6% Property, plant and equipment--gross, at year end 5.9% 6.0% Property, plant and equipment--net, at year end 3.6% 6.1% Average capital employed: Construction Materials 3.6% 3.0% Chemicals 6.6% 8.8% Average shareholders' equity 4.9% 8.9% OTHER DATA Depreciation, depletion and amortization: Construction Materials 2.9% 4.0% Chemicals 5.3% 8.7% ----------------------- Total 3.6% 5.4% ----------------------- Net cash provided by operating activities 6.7% 15.0% Property additions 4.7% 15.1% SELECTED NATIONAL Consumer price index for all urban consumers 3.2% 2.5% PRICE INDICES Gross domestic product implicit price deflator 2.8% 2.0% Producer price index for industrial commodities 1.7% 1.2%
* The compound growth rates shown on this page and elsewhere herein were computed by linear regression analysis of the logarithms of the annual data values. 62 28 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Net Sales, Net Earnings and Earnings Per Share
Amounts in millions, except per share data 1998 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- NET SALES First quarter $ 359.0 $ 341.4 $ 308.5 $ 294.4 $ 216.9 $ 214.1 Second quarter 465.8 445.1 419.2 382.8 326.7 306.0 Third quarter 509.5 477.9 443.6 422.0 360.4 331.4 Fourth quarter 442.1 414.2 397.6 361.8 349.4 282.0 ------------------------------------------------------------------------------- Total $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 =============================================================================== GROSS PROFIT ON SALES First quarter $ 89.5 $ 76.1 $ 70.1 $ 58.8 $ 21.0 $ 29.7 Second quarter 146.9 136.5 129.3 113.2 77.4 74.0 Third quarter 175.3 147.0 139.6 133.8 90.4 85.1 Fourth quarter 137.9 119.5 114.5 110.5 79.4 57.9 ------------------------------------------------------------------------------- Total $ 549.6 $ 479.1 $ 453.5 $ 416.3 $ 268.2 $ 246.7 =============================================================================== NET EARNINGS (LOSS) First quarter $ 36.5 $ 21.9 $ 20.1 $ 16.0 $ (5.2) $ (0.5) Second quarter 70.0 62.8 58.6 47.7 33.7 31.6 Third quarter 89.9 73.3 62.1 59.1 37.6 36.6 Fourth quarter 59.5 51.1 47.8 43.4 31.9 20.5 ------------------------------------------------------------------------------- Total $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 =============================================================================== BASIC EARNINGS (LOSS) PER SHARE First quarter $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00 Second quarter 0.69 0.62 0.56 0.45 0.31 0.28 Third quarter 0.89 0.72 0.60 0.55 0.34 0.33 Fourth quarter 0.60 0.51 0.46 0.41 0.30 0.19 ------------------------------------------------------------------------------- Total $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90 $ 0.80 =============================================================================== DILUTED EARNINGS (LOSS) PER SHARE First quarter $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00 Second quarter 0.68 0.61 0.55 0.44 0.31 0.28 Third quarter 0.88 0.71 0.59 0.55 0.34 0.33 Fourth quarter 0.58 0.50 0.46 0.40 0.29 0.19 ------------------------------------------------------------------------------- Total $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80 =============================================================================== Amounts in millions, except per share data 1992 1991 1990 1989 1988 - --------------------------------------------------------------------------------------------- NET SALES First quarter $ 210.6 $ 197.0 $ 232.0 $ 217.5 $ 202.7 Second quarter 284.2 266.4 295.7 293.7 284.5 Third quarter 312.3 289.3 306.6 307.3 298.5 Fourth quarter 270.9 254.8 271.0 257.7 267.5 ----------------------------------------------------------------- Total $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2 ================================================================= GROSS PROFIT ON SALES First quarter $ 35.6 $ 27.6 $ 52.3 $ 47.4 $ 46.8 Second quarter 74.5 66.7 88.6 90.5 93.9 Third quarter 80.8 71.3 90.0 103.2 98.8 Fourth quarter 58.2 46.5 60.5 58.9 64.5 ----------------------------------------------------------------- Total $ 249.1 $ 212.1 $ 291.4 $ 300.0 $ 304.0 ================================================================= NET EARNINGS (LOSS) First quarter $ 7.6 $ (2.2) $ 18.7 $ 17.2 $ 15.6 Second quarter 30.2 25.9 39.6 43.5 46.0 Third quarter 35.8 30.2 42.2 50.5 49.3 Fourth quarter 20.4 (1.3) 19.8 19.7 25.1 ----------------------------------------------------------------- Total $ 94.0 $ 52.6 $ 120.3 $ 130.9 $ 136.0 ================================================================= BASIC EARNINGS (LOSS) PER SHARE First quarter $ 0.07 $ (0.02) $ 0.16 $ 0.14 $ 0.13 Second quarter 0.27 0.23 0.34 0.36 0.37 Third quarter 0.32 0.27 0.37 0.42 0.40 Fourth quarter 0.17 (0.02) 0.17 0.16 0.20 ----------------------------------------------------------------- Total $ 0.83 $ 0.46 $ 1.04 $ 1.08 $ 1.10 ================================================================= DILUTED EARNINGS (LOSS) PER SHARE First quarter $ 0.07 $ (0.02) $ 0.16 $ 0.14 $ 0.13 Second quarter 0.27 0.23 0.34 0.36 0.37 Third quarter 0.31 0.26 0.36 0.42 0.40 Fourth quarter 0.18 (0.01) 0.17 0.16 0.20 ----------------------------------------------------------------- Total $ 0.83 $ 0.46 $ 1.03 $ 1.08 $ 1.10 =================================================================
All share and per share data have been restated to reflect the three-for-one split of the Company's common stock, approved by the Board of Directors on February 12, 1999 and effective March 10, 1999. 63 29 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Common Stock Prices, Dividends and Related Data
1998 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------- COMMON STOCK PRICES (NYSE) First quarter High $37.83 $22.17 $19.42 $19.21 $17.29 $18.71 Low 31.50 18.42 17.71 16.04 15.17 15.67 Close 36.50 21.63 18.88 19.17 16.17 17.25 Second quarter High 39.90 26.88 19.79 19.58 16.17 17.33 Low 34.83 20.42 18.46 18.00 14.67 13.42 Close 35.56 26.17 19.79 18.17 15.29 15.42 Third quarter High 40.75 30.15 22.17 20.13 18.00 16.58 Low 33.63 26.13 18.17 17.25 14.96 14.58 Close 33.73 29.00 20.00 17.67 17.96 16.13 Fourth quarter High 44.67 34.65 21.67 19.63 18.83 16.92 Low 31.33 28.15 19.83 17.50 15.50 14.50 Close 43.85 34.04 20.29 19.21 16.88 15.63 Year High 44.67 34.65 22.17 20.13 18.83 18.71 Low 31.33 18.42 17.71 16.04 14.67 13.42 Close 43.85 34.04 20.29 19.21 16.88 15.63 DIVIDENDS PAID PER SHARE OF COMMON STOCK First quarter $0.173 $0.157 $0.140 $0.122 $0.110 $0.105 Second quarter 0.173 0.157 0.140 0.122 0.110 0.105 Third quarter 0.173 0.157 0.140 0.122 0.110 0.105 Fourth quarter 0.173 0.157 0.140 0.122 0.110 0.105 ----------------------------------------------------------------------------- Total $0.693 $0.627 $0.560 $0.487 $0.440 $0.420 ============================================================================= OTHER DATA Price earnings ratio (annual) High 17.8 17.0 12.4 13.0 21.2 23.5 Low 12.5 9.1 9.9 10.4 16.5 16.8 Close 17.5 16.7 11.4 12.4 19.0 19.6 Dividends paid as a percent of earnings per share 27.8% 30.8% 31.3% 31.5% 49.4% 52.7% Shareholders' equity per common share $11.29 $ 9.64 $ 8.37 $ 7.39 $ 6.65 $ 6.34 Ratio of stock price to shareholders' equity per common share at year end 3.8 3.5 2.4 2.5 2.5 2.4 Common shares outstanding at year end (in millions) 100.6 101.1 102.7 104.9 107.7 109.0 Average common shares outstanding (in millions) 100.9 101.5 104.3 106.6 109.3 110.3 Average common shares outstanding, assuming dilution (in millions) 102.2 102.8 105.5 107.8 110.0 110.9 1992 1991 1990 1989 1988 - ----------------------------------------------------------------------------------------------- COMMON STOCK PRICES (NYSE) First quarter High $13.42 $12.58 $15.54 $14.67 $12.75 Low 12.00 10.13 13.75 13.50 10.33 Close 13.08 11.42 15.13 14.25 12.50 Second quarter High 15.58 13.33 15.58 16.17 13.04 Low 12.54 11.29 14.42 14.17 12.17 Close 15.50 12.58 14.54 14.42 12.75 Third quarter High 15.50 13.08 15.13 16.00 13.17 Low 13.25 11.33 11.67 14.29 12.08 Close 13.58 12.96 12.25 15.54 12.79 Fourth quarter High 16.54 13.25 12.50 15.83 13.83 Low 13.17 11.21 9.79 14.21 12.50 Close 16.08 12.00 11.33 14.83 13.83 Year High 16.54 13.33 15.58 16.17 13.83 Low 12.00 10.13 9.79 13.50 10.33 Close 16.08 12.00 11.33 14.83 13.83 DIVIDENDS PAID PER SHARE OF COMMON STOCK First quarter $0.100 $0.100 $0.100 $0.093 $0.082 Second quarter 0.100 0.100 0.100 0.093 0.082 Third quarter 0.100 0.100 0.100 0.093 0.082 Fourth quarter 0.100 0.100 0.100 0.093 0.082 --------------------------------------------------------------- Total $0.400 $0.400 $0.400 $0.373 $0.327 =============================================================== OTHER DATA Price earnings ratio (annual) High 19.9 29.0 15.1 15.0 12.6 Low 14.5 22.0 9.5 12.5 9.4 Close 19.4 26.1 11.0 13.7 12.6 Dividends paid as a percent of earnings per share 48.2% 87.0% 38.7% 34.6% 29.7% Shareholders' equity per common share $ 6.18 $ 5.96 $ 5.84 $ 5.48 $ 5.13 Ratio of stock price to shareholders' equity per common share at year end 2.6 2.0 1.9 2.6 2.7 Common shares outstanding at year end (in millions) 111.7 114.0 114.3 118.5 122.3 Average common shares outstanding (in millions) 112.8 114.2 116.0 120.7 123.2 Average common shares outstanding, assuming dilution (in millions) 113.3 114.6 116.5 121.2 123.7
The Company's common stock is traded on the New York Stock Exchange (ticker symbol VMC). As of January 29, 1999, the number of shareholders of record approximated 3,611. Dividends paid in 1998 totaled $70,015,000 as compared with $63,622,000 paid in 1997. On February 12, 1999, the Board of Directors authorized a quarterly dividend of 19.5 cents per common share payable March 10, 1999. The new quarterly dividend represents a 12.5% increase over quarterly dividends paid in 1998. All share and per share data have been restated to reflect the three-for-one split of the Company's common stock, approved by the Board of Directors on February 12, 1999 and effective March 10, 1999. 64 30 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Financial Terminology Capital Employed For our Company: the sum of interest-bearing debt, 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' Equity The sum of common stock (less the cost of common 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, other noncurrent liabilities and shareholders' equity. Operating Income after Taxes For our Company: net earnings from operations plus the after-tax cost of interest expense; for a segment: segment earnings less 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. Our 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 our Company's segments. Frequently, profit-adding and major replacement projects also include expenditures for environmental control purposes. Ratio of Earnings to Fixed Charges The sum of earnings from continuing operations 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 interest-bearing notes payable. 65 EX-21 8 LIST OF THE COMPANY'S SUBSIDIARIES 1 EXHIBIT (21) VULCAN MATERIALS COMPANY SUBSIDIARIES AS OF DECEMBER 31, 1998
STATE OR OTHER JURISDICTION OF % OWNED DIRECTLY INCORPORATION OR INDIRECTLY ENTITY OR ORGANIZATION BY VULCAN ------ --------------- --------- Subsidiaries ------------ Atlantic Granite Company* South Carolina 66-2/3 Birmingham Slag Company* Alabama 100 Callaway Chemical Company New Jersey 100 Callaway Chemical Limited British Columbia 100 Dixie Sand and Gravel Company, Inc.* Tennessee 100 Knoxville Mack Distributors, Inc.* Tennessee 100 Lambert Bros., Inc.* Tennessee 100 Midsouth Machine and Service Company Tennessee 100 RECO Transportation, Inc. Kentucky 100 Statewide Transport, Inc. Texas 100 Vulcan Aggregates Company, LLC Delaware 100 Vulcan Chemicals Investments, LLC Delaware 100 Vulcan Chemical Technologies, Inc. Delaware 100 Vulcan Chloralkali, LLC Delaware 51 Vulcan Construction Materials, LP Delaware 100 Vulcan/ICA Distribution Company (Partnership) Texas 51 Vulcan Gulf Coast Aggregates, Inc. New Jersey 100 Vulcan Gulf Coast Materials, Inc. New Jersey 100 Vulcan Holdings, Inc. New Jersey 100 Vulcan International, Ltd. U.S. Virgin Islands 100 Vulcan Lands, Inc. New Jersey 100 Vulcan Materials Finance Company Tennessee 100 Vulcan Soda Ash Company California 100 Wanatah Trucking Co., Inc. Indiana 100 Wesco Contracting Company* Tennessee 100 White's Mines, Inc.* Texas 100
*Inactive EX-23 9 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-68895 of Vulcan Materials Company on Form S-3 of our reports dated February 5, 1999 (March 10, 1999 as to Note 15b), appearing in and incorporated by reference in the Annual Report on Form 10-K of Vulcan Materials Company for the year ended December 31, 1998 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Birmingham, Alabama March 19, 1999 EX-24 10 POWERS OF ATTORNEY 1 EXHIBIT (24) POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Marion H. Antonini ----------------------------- Marion H. Antonini 2 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Livio D. DeSimone ----------------------------- Livio D. DeSimone 3 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ A. Frederick Gerstell --------------------------------- A. Frederick Gerstell 4 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ John K. Greene --------------------------- John K. Greene 5 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Donald M. James ---------------------------- Donald M. James 6 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Douglas J. McGregor -------------------------------- Douglas J. McGregor 7 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Ann D. McLaughlin ------------------------------- Ann D. McLaughlin 8 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ James V. Napier --------------------------- James V. Napier 9 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Donald B. Rice --------------------------- Donald B. Rice 10 POWER OF ATTORNEY The undersigned director of Vulcan Materials Company, a New Jersey corporation, hereby nominates, constitutes and appoints William 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 Annual Report on Form 10-K for the year ended December 31, 1998 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 19th day of March, 1999. /s/ Herbert A. Sklenar ------------------------------- Herbert A. Sklenar EX-27.(A) 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 DEC-31-1998 180,568 0 218,081 7,391 143,680 576,381 2,280,756 1,384,971 1,658,611 211,462 76,533 0 0 139,705 1,013,995 1,658,611 1,776,434 1,776,434 1,226,764 1,226,764 7,851 750 6,782 374,844 118,936 255,908 0 0 0 255,908 2.54 2.50
EX-27.(B) 12 RESTATED FINANCIAL DATA SCHEDULE FOR 1997
5 THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1997 RESULTED FROM THE STOCK SPLIT EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1997, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1997 DEC-31-1997 128,566 0 196,937 7,548 132,359 487,132 2,120,200 1,311,781 1,449,246 207,697 81,931 0 0 46,573 944,924 1,449,246 1,678,581 1,678,581 1,199,453 1,199,453 5,112 662 6,914 300,501 91,356 209,146 0 0 0 209,145 2.06 2.03
EX-27.(C) 13 RESTATED FINANCIAL DATA SCHEDULE FOR 1996
5 THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1996 RESULTED FROM THE STOCK SPLIT EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1996, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1996 DEC-31-1996 50,816 0 184,970 8,106 128,578 394,045 2,002,164 1,237,674 1,320,645 194,654 85,535 0 0 46,573 837,091 1,320,645 1,568,945 1,568,945 1,115,442 1,115,442 3,887 652 8,636 285,580 96,985 188,595 0 0 0 188,595 1.81 1.79
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