-----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, CxHaCgdUTRNbtK/X5F07sn9sGuR3iOXj5IhJCcjjxSNmOcnPhHRcPJXJ3p0EKEPc EFFS5QXd6WP7JZViKR6WSA== 0000950144-99-006264.txt : 19990518 0000950144-99-006264.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950144-99-006264 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VULCAN MATERIALS CO CENTRAL INDEX KEY: 0000103973 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 630366371 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04033 FILM NUMBER: 99626277 BUSINESS ADDRESS: STREET 1: PO BOX 385014 CITY: BIRMINGHAM STATE: AL ZIP: 352385014 BUSINESS PHONE: 2052983000 MAIL ADDRESS: STREET 1: PO BOX 530187 CITY: BIRMINGHAM STATE: AL ZIP: 35253-0187 10-Q 1 VULCAN MATERIALS COMPANY 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 ----------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ Commission file number 1-4033 VULCAN MATERIALS COMPANY ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 63-0366371 - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
1200 Urban Center Drive, Birmingham, Alabama 35242 -------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (205) 298-3000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Shares outstanding Class at April 30, 1999 ----- ----------------- Common Stock, $1 Par Value 100,874,704
2 VULCAN MATERIALS COMPANY FORM 10-Q QUARTER ENDED MARCH 31, 1999 Contents
Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets................................. 1 Condensed Consolidated Statements of Earnings......................... 2 Condensed Consolidated Statements of Cash Flows....................... 3 Notes to Condensed Consolidated Financial Statements.................. 4 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition............................... 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................................... 15 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...................................... 16 SIGNATURES....................................................................................... 17
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS* (Amounts in thousands)
March 31 December 31 March 31 Assets 1999 1998 1998 Current Assets Cash and cash equivalents $ 44,559 $ 180,568 $ 95,966 Accounts and notes receivable, less allowance for doubtful accounts: March 31, 1999, $12,739; December 31, 1998, $7,391; March 31, 1998, $7,775 320,764 221,261 205,491 Inventories: Finished products 131,805 99,814 103,256 Raw materials 13,249 10,466 10,229 Products in process 1,127 1,183 988 Operating supplies and other 37,346 32,217 30,069 ------------------------------------------ Total inventories 183,527 143,680 144,542 Deferred income taxes 36,643 24,923 21,356 Prepaid expenses 11,735 5,949 6,784 ------------------------------------------ Total current assets 597,228 576,381 474,139 Investments and long-term receivables 73,792 71,034 64,942 Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization: March 31, 1999, $1,733,683; December 31, 1998, $1,384,971; March 31, 1998, $1,335,324 1,424,810 895,784 827,307 Goodwill,net 571,404 94,008 63,719 Deferred charges and other assets 59,408 21,404 42,306 ------------------------------------------ Total $2,726,642 $1,658,611 $1,472,413 ========================================== Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term obligations $ 5,704 $ 5,432 $ 5,408 Notes payable 250,101 2,353 2,677 Trade payables and accruals 130,851 107,382 114,577 Other current liabilities 147,131 96,295 106,624 ------------------------------------------ Total current liabilities 533,787 211,462 229,286 Long-term obligations 695,235 76,533 81,931 Deferred income taxes 172,164 98,473 92,268 Other noncurrent liabilities 153,677 118,443 77,431 Shareholders' equity 1,171,779 1,153,700 991,497 ------------------------------------------ Total $2,726,642 $1,658,611 $1,472,413 ==========================================
* Balance sheets as of March 31 are unaudited. The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS* (Amounts and shares in thousands, except per share data)
Three Months Ended March 31 ----------------------- 1999 1998 Net sales $482,222 $358,963 Cost of goods sold 384,011 269,483 ----------------------- Gross profit on sales 98,211 89,480 Selling, administrative and general expenses 54,195 46,729 Other operating costs 4,030 2,355 Other income, net 11,445 15,881 ----------------------- Earnings before interest expense and income taxes 51,431 56,277 Interest expense 11,605 1,948 ----------------------- Earnings before income taxes 39,826 54,329 Provision for income taxes 13,461 17,820 ----------------------- Net earnings $ 26,365 $ 36,509 ===================================================================== Basic earnings per share $ 0.26 $ 0.36 Diluted earnings per share $ 0.26 $ 0.36 ===================================================================== Average common shares outstanding (in thousands) Basic 100,764 100,825 Assuming Dilution 102,260 102,152 Cash dividends per share of common share $ 0.195 $ 0.173 Depreciation, depletion and amortization deducted above $ 48,968 $ 33,079 Effective tax rate 33.8% 32.8% =====================================================================
* Unaudited The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 2 5 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS* (Amounts in thousands)
Three Months Ended March 31 ------------------------- 1999 1998 OPERATING ACTIVITIES Net earnings $ 26,365 $ 36,509 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 48,968 33,079 Increase in assets before effects of business acquisitions (108) (23,312) Increase (decrease) in liabilities before effects of business acquisitions (8,677) 18,406 Other, net (1,978) (13,014) ------------------------- Net cash provided by operating activities 64,570 51,668 ------------------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (88,160) (47,547) Payment for business acquisitions, net of acquired cash (767,181) (3,396) Increase in cash escrow held for future property purchase (470) (13,414) Proceeds from sale of property, plant and equipment 4,424 17,883 ------------------------- Net cash used for investing activities (851,387) (46,474) ------------------------- FINANCING ACTIVITIES Net borrowings (payments) - comm. paper and bank lines of credit 247,748 (977) Payment of short-term debt (90,097) -- Proceeds from issuance of long-term debt 500,000 -- Purchases of common stock (49) (19,399) Dividends paid (19,666) (17,418) Contribution from minority interest of consolidated subsidiary 12,049 -- Other, net 823 -- ------------------------- Net cash provided (used) for financing activities 650,808 (37,794) ------------------------- Net decrease in cash and cash equivalents (136,009) (32,600) Cash and cash equivalents at beginning of year 180,568 128,566 ------------------------- Cash and cash equivalents at end of period $ 44,559 $ 95,966 ================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest (net of amount capitalized) $ 7,348 $ 797 Income taxes 2,301 4,379 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Liabilities and long-term debt assumed in business acquisitions 383,214 -- Fair value of stock issued in business acquisitions 10,580 -- Debt issued in purchase of property, plant and equipment 645 -- ==================================================================================================
* Unaudited The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3 6 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying condensed financial statements have been prepared in compliance with Form 10-Q instructions and thus do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company's latest annual report on Form 10-K. 2. Acquisitions 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. ("CalMat") for a value of $740 million cash, plus $10 million of estimated acquisition costs. As of the acquisition, CalMat had fixed term debt of $118 million and $90 million in bank borrowings, both of which were assumed by the Company. The acquisition was funded by cash on hand and approximately $590 million of commercial paper. It is being accounted for under purchase accounting, with the purchase price allocated to the acquired assets and assumed liabilities based on estimated fair market values. The excess of the purchase price over the fair market value of net assets acquired is being amortized over 30 years. The estimated fair value of assets acquired and liabilities assumed were considered to be the best estimates as of the acquisition date and may be adjusted as more information is obtained. These estimates are summarized as follows (in thousands): Current assets $ 165,978 Investments & long term receivables 13,527 Property and equipment 545,971 Goodwill 443,128 Current liabilities (169,278) Long-term debt (128,730) Deferred income taxes (89,447) Other non-current liabilities (31,149) --------- Estimated Purchase Allocation $ 750,000 =========
4 7 Consideration consisted of: Cash on hand $150,000 Debt financing (a) 590,000 Estimated direct acquisition costs 10,000 -------- $750,000
(a) This debt financing was initially all commercial paper. On April 12, 1999, $500 million was converted to long-term debt. On April 12, 1999, the Company issued $500 million of unsecured, noncallable notes in two series of $250 million each due on April 1, 2004 and on April 1, 2009. The 2004 notes have a 5.75% coupon and the 2009 notes have a 6.00% coupon. The net proceeds of these notes were used to retire a corresponding amount of the short-term commercial paper borrowings incurred to acquire CalMat. Although completed after the close of the quarter, the balance sheet and cash flow statements reflect this transaction given that the Company had the ability and intent to refinance this portion of commercial paper on a long-term basis at March 31, 1999. The transaction was substantially in place prior to the quarter-end and best reflects the current status. The accompanying consolidated statement of earnings for the three months ended March 31, 1999 includes the results of operations of CalMat from its acquisition date which substantially included the entire quarter. The following unaudited pro forma consolidated results of operations for the three month periods ended March 31, 1999 and 1998 assume that the CalMat acquisition occurred as of January 1, 1998, (in millions, except per share amounts):
First Quarter Pro Forma ----------------------------------- 1999 1998 Increase ---- ---- -------- Net Sales $482.2 $448.7 $33.5 Net Earnings 26.4 26.1 .3 Earnings per share: Basic $ 0.26 $ 0.26 $ 0.00 Diluted $ 0.26 $ 0.26 $ 0.00
Certain pro forma adjustments are based on preliminary estimates. Final allocations will be made on the basis of further evaluations and, therefore, such allocations may differ from those reflected in this pro forma statement. The pro forma statement of earnings is not necessarily indicative of the results of operations of the Company had the CalMat acquisition occurred at the beginning of the period presented, nor is it necessarily indicative of the results of future operations. 5 8 In addition to CalMat, the Company acquired five Construction Materials businesses in Arkansas, Georgia, and North Carolina, including eleven quarries, in the first quarter. These acquisitions were not significant and are not included in the preceding pro forma. 3. Segment Data 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 polices in Form 10-K. The Company's determination of segment earnings (a) recognizes equity in the income or losses of nonconsolidated affiliates as part of segment earnings; (b) reflects allocations of general corporate expenses to the segments; (c) does not reflect interest revenue or expense; and (d) is before income taxes. Because the majority of the Company's activities are domestic, sales and assets outside the United States are not material. Following is the comparative segment financial disclosure (amounts in millions):
SEGMENT FINANCIAL DISCLOSURE Increase FIRST QUARTER COMPARISON 1999 1998 (Decrease) NET SALES: Construction Materials $ 346.6 $ 193.3 $ 153.3 Chemicals 135.6 165.7 (30.1) -------- -------- -------- Total $ 482.2 $ 359.0 $ 123.2 ======== ======== ======== EARNINGS (LOSS) BEFORE INTEREST EXPENSE AND INCOME TAXES Construction Materials $ 39.6 $ 32.4 $ 7.2 Chemicals 10.8 22.4 (11.6) -------- -------- -------- Segment earnings 50.4 54.8 (4.4) Interest income, etc 1.0 1.5 (.5) -------- -------- -------- Total $ 51.4 $ 56.3 $ (4.9) ======== ======== ======== IDENTIFIABLE ASSETS Construction Materials $2,075.1 $ 789.6 $1,285.5 Chemicals 471.4 462.3 9.1 -------- -------- -------- Identifiable Assets 2,546.5 1,251.9 1,294.6 Investment in nonconsolidated affiliates 72.7 62.5 10.2 General corporate assets 62.9 62.0 .9 Cash items 44.6 96.0 (51.4) -------- -------- -------- Total $2,726.7 $1,472.4 $1,254.3 ======== ======== ========
6 9 4. Effective Tax Rate In accordance with generally accepted accounting principles, it is the Company's practice at the end of each interim reporting period to make a best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis. 5. New Accounting Standards In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). 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. 7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION GENERAL COMMENTS Seasonality of the Company's Business Results of any individual quarter are not necessarily indicative of results to be expected for the year due principally to the effect that weather can have on the sales and production volume of the Construction Materials segment. Normally, the highest sales and earnings of the Construction Materials segment are attained in the third quarter and the lowest are realized in the first quarter when sales and earnings are substantially below the levels realized in all subsequent quarters of the year. Segment Sales and Earnings Segment sales and earnings have been determined on a similar basis as used in prior Form 10-Q reports. Segment earnings are earnings before interest and income taxes and after allocation of corporate expenses and income, other than "interest income, etc.," (principally interest income earned on cash items and gains or losses on corporate financing transactions), and after assignment of equity income to the segment with which it is related in terms of products and services. Allocations are based primarily on average operating investment and customer sales. Forward Looking Statements Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These include general business conditions, competitive factors, pricing, energy costs and other risks detailed in the Company's periodic reports. Year 2000 Issue 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 network equipment, computer software, production equipment and instrumentation. It will also assist in identifying key customers and key suppliers. Vulcan is 8 11 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 most 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 significantly disrupt operations. 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. The business partner readiness assessment was 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. The preliminary contingency plans were finalized in April 1999. 9 12 RESULTS OF OPERATIONS First Quarter 1999 as Compared with First Quarter 1998 Vulcan's first quarter 1999 sales of $482.2 million were at a record level. Net earnings of $26.4 million, and $0.26 per share were second only to the record first quarter 1998 earnings and earnings per share of $36.5 million and $0.36 per share, respectively. As expected, certain items identified in Vulcan's January earnings release affected the first quarter earnings comparison. Primarily, the Chemicals segment experienced significant pricing declines in each of the two chloralkali co-products, caustic soda and chlorine. The acquisition of CalMat in January 1999 also resulted in some dilution to first quarter earnings. Sales in 1999 were $482.2 million, up 34% from last year's total of $359.0 million. The segment detail of that increase is as follows (amounts in millions):
First Quarter Sales ------------------------------- Increase 1999 1998 (Decrease) ---- ---- ---------- Construction Materials $346.6 $193.3 $ 153.3 Chemicals 135.6 165.7 (30.1) ----- ----- ------ Total $482.2 $359.0 $ 123.2 ===== ===== ======
Construction Materials reported record first quarter sales of $346.6 million, up 79% from the 1998 first quarter. Excluding CalMat and the 20 other aggregates operations added since the first quarter of 1998, aggregates sales and shipments were up 14 and 10 percent, respectively. CalMat sales and aggregates shipments were up 31 and 30 percent, respectively. Excluding the impact of CalMat and freight to remote distribution yards, aggregates prices increased 3%. Chemicals' first quarter sales of $135.6 million were down 18 percent from last year's first quarter. This decline resulted from lower prices for caustic soda, chlorine and several other chloralkali products, as ECU (Electro Chemical Unit ) values fell to their lowest levels in two decades. 10 13 Earnings before interest expense and income taxes were $51.4 million as compared to $56.3 million in the same period last year. The segment detail of this result is shown in the following summary (amounts in millions):
First Quarter Earnings Before Interest Expense and Income Taxes * ----------------------------------- Increase 1999 1998 (Decrease) ---- ---- ---------- Construction Materials $39.6 $32.4 $ 7.2 Chemicals 10.8 22.4 (11.6) ----- ----- ------ Segment earnings * 50.4 54.8 (4.4) Interest income, etc 1.0 1.5 (.5) ----- ----- ------ Total $51.4 $56.3 $ (4.9) ===== ===== ======
* After allocation of corporate expense and income, other than "interest income, etc." (principally interest income earned on short-term investment of funds and gains or losses on corporate financing transactions), and after assignment of equity income to the segment with which it is related in terms of products and services. The Construction Materials segment reported record first quarter earnings of $39.6 million up 22% from first quarter 1998. When non-comparable items are excluded from the quarterly earnings comparison, the Construction Materials segment earnings increased 46% from first quarter 1998. The Chemicals segment reported first quarter earnings of $10.8 million, down 52% from last year's first quarter earnings of $22.4 million. This reflects principally the lower chloralkali prices, partly offset by lower raw material costs, favorable non-operating items and improved margins within Performance Systems. Selling, administrative and general expenses of $54.2 million for the first quarter of 1999 increased 16% from the 1998 level. This increase reflects primarily the addition of CalMat. Other income, net of other charges, was $11.4 million as compared with $15.9 million for the first quarter of 1998. The decrease principally reflects significantly lower gains from sales of assets somewhat offset by a non-recurring settlement referable to a legal claim and higher earnings from the Company's joint venture to supply limestone from Mexico to the U.S. Gulf Coast market. Interest expense of $11.6 million for the first quarter of 1999 increased $9.7 million from the first quarter of 1998. This increase resulted from the financing of the CalMat acquisition. 11 14 On April 12, 1999, the Company issued $500 million of unsecured notes. Although completed after the close of the quarter, the balance sheet and cash flow statements reflect this transaction as it was substantially in place prior to the close and best reflects the current status. On April 26, 1999, Donald M. James, Chairman and Chief Executive Officer, made certain statements concerning the Company's earnings outlook. Excerpts of the relevant press release quoting Mr. James are as follows: "In the first quarter of 1999, Vulcan emerged as the leading aggregates producer on the West Coast with the acquisition of CalMat. We also acquired eleven additional quarries in our traditional markets. Our Construction Materials markets are stronger than ever, and TEA21 is just beginning to have a favorable impact on our operations. The CalMat operations are improving, yielding greater opportunities than initially anticipated. Assuming a continuation of the strong construction activity in CalMat's markets, we now expect CalMat to be modestly accretive to earnings per share in 1999. "We continue to have a high level of confidence in the strong outlook for Construction Materials. However, the uncertain outlook for Chemicals makes it challenging to project overall results for the year. 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 could lead to a slight decline in total Company earnings." 12 15 LIQUIDITY AND CAPITAL RESOURCES Working Capital Working capital, exclusive of debt and cash items, totaled $281.6 million at March 31, 1999, $88.6 million over the 1998 year-end amount of $193.0 million. This increase primarily resulted from the acquisition of CalMat. Working capital at March 31, 1999 increased $122.1 million from the same date last year. This increase also resulted primarily from the acquisition of CalMat. The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.1 as of March 31, 1999. This compares to the 2.7 ratio at year-end 1998 and the 2.1 ratio at March 31, 1998. These decreases in the current ratio resulted from the increase in current debt items and decrease in marketable securities and cash resulting from the financing of the CalMat acquisition. Cash Flows Net cash provided by operations totaled $64.6 million in the first quarter of 1999, up $12.9 million from the $51.7 million generated in the same period last year. This increase reflects higher depreciation, depletion and amortization charges offset in part by the lower earnings. Cash used for investing activities was $851.4 million as compared with the 1998 total of $46.5 million. This increase principally reflects the increased business acquisitions. Net cash provided by financing activities totaled $650.8 million, as compared to the 1998 used for financing activities of $37.8 million. This net increase of cash provided for financing activities of $688.6 million resulted primarily from the financing of the CalMat acquisition with commercial paper and long-term debt. Cash and cash equivalents, which totaled $44.6 million at March 31, 1999, were down $51.4 million from the $96.0 million a year ago. On February 12, 1999, the Board of Directors declared a quarterly dividend of 19.5 cents per common share payable March 10, 1999. The new quarterly dividend represents a 12.7% (2.2 cents per share) increase over quarterly dividends paid in 1998. 13 16 Short-term Borrowings Short-term borrowings as of March 31, 1999 consisted of notes payable to banks totaling $2.3 million and commercial paper of $247.8 million. The prior year amount consisted solely of notes payable to banks of $2.7 million. As stated above, on April 12, 1999, the Company issued $500 million of unsecured notes. The balance sheet and cash flow statements reflect this transaction as it was substantially in place prior to the close and best reflects the current status. This transaction restated $500 million of short-term borrowings (commercial paper) to long-term obligations. Long-term Obligations As of March 31, 1999, long-term obligations were 31.7% of long-term capital and 59.3% of shareholders' equity. The corresponding 1998 percentages were 6.6% and 8.3%. Common Stock Transactions On February 12, 1999, the Board of Directors approved an increase in the authorized common stock from 160 million shares to 480 million shares and a three-for-one stock split of the common stock effected on March 10, 1999. The Company purchased 1,200 shares of common stock in the first quarter of 1999 at a total cost of $49.4 thousand, equal to an average price of $41.19 per share. Purchases of common stock in the first quarter of 1998 totaled 570,300 shares at a total cost of $19.4 million, equal to an average price of $34.02 per share. 14 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. In order to manage or reduce this market risk, the Company occasionally utilizes derivative financial instruments. 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 March 31, 1999 and 1998 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 based on the fair value at March 31, 1999 of approximately $1.5 million. The Company is exposed to interest rate risk due to its various long-term debt instruments. As substantially all of this debt is at fixed rates, a decline in market interest rates would potentially result in a subsequent increase in the fair value of the liability. At March 31, 1999, the estimated fair value of these debt instruments was $714.9 million. The effect of a hypothetical decline in the market interest rate of 1% would increase the fair value of the liability by approximately $41.8 million. 15 18 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27.1 - Financial Data Schedule (EDGAR filing only) Exhibit 27.2 - Restated Financial Data Schedule for 1998 (EDGAR filing only) (b) Reports on Form 8-K The Company filed a current report on Form 8-K on January 7, 1999 pursuant to which the Company reported under item 2 the acquisition of CalMat Co. The Company filed a current report on Form 8-K on February 9, 1999 pursuant to which the Company reported under item 5 the Press Release for the fourth quarter 1998. The Company filed a current report on Form 8-K on February 17, 1999 pursuant to which the Company reported under item 5 the Amended Press Release for the fourth quarter 1998. The Company filed a current report on Form 8-K/A on March 19, 1999 pursuant to which the Company reported under item 2 and Item 7 the financial statements of CalMat Co. and the combined proforma financial information giving effect to the acquisition. 16 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VULCAN MATERIALS COMPANY Date May 17, 1999 /s/ E. A. Khan ------------------------ ------------------------------------ E. A. Khan Vice President and Controller /s/ P. J. Clemens, III ------------------------------------ P. J. Clemens, III Executive Vice President - Finance and Administration and Treasurer 17 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS OF VULCAN MATERIALS COMPANY FOR THE THREE MONTHS ENDED MARCH 31, 1999, AND THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 MAR-31-1999 44,559 0 333,503 12,739 183,527 597,228 3,158,493 1,733,683 2,726,642 533,787 695,235 0 0 139,705 1,032,074 2,726,642 482,222 482,222 384,011 384,011 4,030 165 11,605 39,826 13,461 26,365 0 0 0 26,365 0.26 0.26
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1998 RESULTED FROM THE STOCK SPLIT EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS OF VULCAN MATERIALS COMPANY FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 95,966 0 213,266 7,775 144,542 474,139 2,162,631 1,335,324 1,472,413 229,286 81,931 0 0 139,722 851,775 1,472,413 358,963 358,963 269,483 269,483 2,355 400 1,948 54,329 17,820 36,509 0 0 0 36,509 0.36 0.36
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