-----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, BSr32KJT9dppr6dfjc3M5sxqdFXaA5VmRFL8+IsBOC7nmOFtp8FHut1AHT7R79UT lkJ66RMG6FhTjhFDc6E8Ng== 0000950144-00-003867.txt : 20000329 0000950144-00-003867.hdr.sgml : 20000329 ACCESSION NUMBER: 0000950144-00-003867 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000328 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: 581344 BUSINESS ADDRESS: STREET 1: 1200 URBAN CENTER DRIVE CITY: BIRMINGHAM STATE: AL ZIP: 352242 BUSINESS PHONE: 2052983000 MAIL ADDRESS: STREET 1: PO BOX 385014 CITY: BIRMINGHAM STATE: AL ZIP: 35238-5014 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, 1999 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: Title of each class Name of each exchange on 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 29, 2000: $3,982,494,047 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 29, 2000: 100,734,902 SHARES DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1999, 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 12, 2000, are incorporated by reference into Part III of this Annual Report on Form 10-K. - ------------------------------------------------------------------------------- 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, 1999 REPORT 1. Business (Financial Results by Segment Financial Data for the 3 Years Ended Business Segments) December 31, 1999-Note 11, Segment Data 52-53 3. Legal Proceedings Note 9, Other Commitments and Contingent Liabilities 52 7. Management's Discussion and Management's Discussion and Analysis of Results of Analysis of Financial Condition Operations and Financial Condition 40-44 and Results of Operations Financial Terminology 64 7A. Quantitative and Qualitative Management's Discussion and Analysis of Results of Disclosures About Market Risk Operations and Financial Condition 44 8. Financial Statements and Consolidated Statements of Earnings 36 Supplementary Data Consolidated Balance Sheets 37 Consolidated Statements of Cash Flows 38 Consolidated Statements of Shareholders' Equity 39 Notes to Consolidated Financial Statements 45-54 Management's Responsibility for Financial Reporting and Internal Control 35 Independent Auditors' Report 35 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1999 and 1998 (Unaudited) 62 14. Exhibits, Financial Statement Consolidated Statements of Earnings Schedules and Report on Consolidated Balance Sheets 36 Form 8-K Consolidated Statements of Cash Flows 37 Consolidated Statements of Shareholders' Equity 38 Notes to Consolidated Financial Statements 39 Management's Responsibility for Financial Reporting 45-54 and Internal Control Independent Auditors' Report 35 Net Sales, Net Earnings and Earnings Per Share 35 Quarterly Financial Data for Each of the 2 Years Ended December 31, 1999 and 1998 (Unaudited) 62 HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 12, 2000 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
3 11. Executive Compensation Compensation of Directors; Executive Compensation; Option Grants in 1999; 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: Change in Control Employment Agreements. 12. Security Ownership of Certain Stock Ownership of Certain Beneficial Owners; Beneficial Owners and Stock Ownership of Management Management
4 VULCAN MATERIALS COMPANY ANNUAL REPORT ON FORM 10-K FISCAL YEAR ENDED DECEMBER 31, 1999 CONTENTS
PART ITEM PAGE I 1 Business 1 2 Properties 4 3 Legal Proceedings 6 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 Risk 11 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 13 Form 8-K -- Signatures 19
5 PART 1 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 are both reported as segments. The Company 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 and specialty chemicals. 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 in 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 $1,281,000 in 1997, $984,000 in 1998 and $1,231,000 in 1999 on research and development activities for its Construction Materials segment. The Company spent approximately $9,474,000 in 1997, $8,641,000 in 1998 and $8,803,000 in 1999 on research and development activities for its Chemicals segment. The Company estimates that capital expenditures for environmental control facilities in the current fiscal year (2000) and the succeeding fiscal year (2001) will be approximately $11,500,000 and $4,200,000, respectively, for the Construction Materials segment, and $7,000,000 and $1,500,000, 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 difficulty in obtaining the required sources of energy required for its operations. In 1999, the Construction Materials segment employed an average of approximately 7,520 people. The Chemicals segment employed an average of approximately 1,540 people. The Company's corporate office employed an average of approximately 185 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 and other construction materials and related services. Construction aggregates include crushed stone, sand and gravel, rock asphalt, recrushed concrete and crushed slag (a by-product of steel production) and are 6 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. Construction aggregates constituted approximately 66% of the dollar volume of the Construction Materials segment's 1999 sales, as compared to 84% in both 1998 and 1997. Each type of aggregate is sold in competition with other types of aggregates and in competition with other producers of the same type of aggregates. 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 river quarries, 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 21 states and the District of Columbia. In January 1999, the Company acquired the stock of CalMat Co., the leading producer of construction aggregates and asphalt mix in California. Additionally, during 1999, the Company acquired 20 construction aggregates facilities and opened four greenfield sites. Shipments to customers of all construction aggregates from the Company's domestic operations in 1999 totaled approximately 220 million tons. As of year-end 1999, the Company, either directly or indirectly or through joint ventures, operated 193 permanent reserve-supplied aggregates production facilities in 17 states and Mexico for the production of crushed stone (limestone and granite), sand and gravel, and rock asphalt with estimated reserves totaling approximately 9.5 billion tons. As of year-end 1999, the Company, either directly or indirectly or through joint ventures, operated 19 recrushed concrete plants, 4 slag plants, and various other types of plants which produce fine grind, dolomitic lime and other aggregates. Other Construction Materials products and services include asphalt mix and related products, ready-mixed concrete, trucking services, barge transportation, paving construction, and several other businesses. As of year-end 1999, the Company operated 58 asphalt plants in 8 states and 32 ready-mixed concrete plants in 5 states. 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 Chemicals Business Unit which manages the Company's specialty chemicals and services business. The principal inorganic chemicals produced by the Chloralkali Business Unit's three manufacturing facilities described in Item 2 below are chlorine, caustic soda (sodium hydroxide), caustic potash (potassium hydroxide), hydrochloric acid (muriatic acid) and potassium carbonate. In addition, the Chloralkali Business Unit uses chlorine or hydrogen chloride and various hydrocarbons (primarily, ethylene, methanol and vinyl chloride monomer) to produce an associated and varied line of chlorinated hydrocarbon products, including methyl chloride, methylene chloride, chloroform, ethylene dichloride, perchloroethylene, methyl chloroform and 2 7 pentachlorophenol. Principal markets for the Chloralkali Business Unit's chemical products include pulp and paper, energy, food, pharmaceuticals, cleaning, chemical processing, fluorocarbons, water management and textiles. In the paper industry caustic soda is used primarily in the kraft and sulfite pulping processes. Chlorine is used in potable water disinfection and sewage management, to remove impurities from recycled aluminum and as an ingredient to make other chlorinated products. Caustic soda and caustic potash are used in the production of soaps and detergents. Caustic soda also is used to demineralize water for steam production at electrical energy facilities and to remove sulfur from gas and coal. The Company supplies hydrochloric acid to the energy industry for stimulation of oil and gas wells. Hydrochloric acid, caustic soda, caustic potash and methylene chloride 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 and in the manufacture of refrigerants. Ethylene dichloride (EDC) is used in the manufacture of PVC and pentachlorophenol is used in wood or utility pole treatment. 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 segment include hydrochloric acid, chlorine, caustic soda, caustic potash, potassium carbonate and various chlorinated hydrocarbons. Potassium carbonate is used in the manufacture of screen glass, rubber antioxidants, cleansers, chocolate and other chemicals. The Company sells chloroform, methyl chloroform, perchloroethylene and other chlorinated hydrocarbons to the fluorocarbons market as feedstock for manufacturing refrigerants. In 1998, the Company announced the formation of a joint venture with Mitsui & Co., Ltd., to construct a new chloralkali plant and expand 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. It is anticipated that the new chloralkali plant will begin production in June 2000, and the expanded EDC plant will begin production in October 2000. In February 2000, the Company combined its specialty chemicals businesses into one business unit called Vulcan Performance Chemicals. The new business unit includes Callaway Chemical Company, Callaway's Mayo Division, Callaway Chemical Limited, Vulcan Chemical Technologies and Vulcan's sodium chlorite business. These businesses formerly operated as the Company's Performance Systems Business Unit. Vulcan Performance Chemicals offers a blend of products, services, technologies and manufacturing capabilities for customers in a variety of industries, with emphasis on pulp and paper, textiles and water management. Additionally, Vulcan Performance Chemicals intends to expand into the petrochemical, mining and utilities markets. 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 11% of the sales of the Company's Chemicals segment. Underground reserves of salt, a basic raw material used by the Chloralkali Business Unit in the production of chlorine and caustic soda, are located near the Company's 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 as raw materials by Vulcan Performance Chemicals are purchased from several different suppliers. Sources of salt, ethylene, methanol, vinyl chloride monomer and various other raw material 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 past practices 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 3 8 RFI determine that constituent concentrations from any such release exceed action levels specified by the EPA, the facility owner is further required to perform a Corrective Measures Study ("CMS") identifying feasible technological alternatives for addressing these releases. Depending upon the results reported to the EPA in the RFI and CMS, the EPA subsequently may require Corrective Measures Implementation ("CMI") by the facility owner - essentially, implementation of a cleanup plan developed by the EPA based on the RFI and CMS. The Company expects to incur RFI and CMS costs over the next several years at its Geismar 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, 1999, are reported on pages 52 and 53 (Note 11 of the Notes to Financial Statements) in the Company's 1999 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 9.5 billion tons of zoned and permitted aggregates reserves is approximately 1.2 billion tons more than the estimate reported at the end of 1998. These reserves include aggregates reserves in Mexico owned or controlled by the Company's Mexican joint venture. Increases in the Company's reserves have resulted from 1999 acquisitions. Management believes that the quantities of zoned and permitted reserves at the Company's aggregates facilities are sufficient to result in an average life of approximately 45 years at present operating levels. See Note 1 to the table of the Company's 10 largest active aggregates facilities on page 5 for a description of the method used by the Company for estimating the years of life of reserves. The foregoing estimates of reserves are of recoverable stone, sand and gravel 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 193 permanent reserve-supplied aggregates production facilities which the Company operates directly or through joint ventures, 67 are located on owned land, 30 are on land owned in part and leased in part, and 96 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 2000 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 aggregates facilities 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 aggregates facilities in terms of the quantity of aggregates 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 77.3 Owned Paducah, Kentucky Limestone 41.0 Leased (4) Grayson (Atlanta), Georgia Granite Over 100 Owned Playa Del Carmen, Mexico (3) Limestone 98.8 Owned Gray Court (Greenville), South Carolina Granite Over 100 Owned Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (4) Kennesaw (Atlanta), Georgia Granite 37.5 Owned Manteno, Illinois Limestone Over 100 Leased (4) Skippers, Virginia Granite 91.6 Leased 2016 Lawrenceville (Norfolk/Virginia Granite 57.5 31% Owned Beach), Virginia 69% Leased (5)
- -------------------------------- (1) Estimated years of life of aggregates reserves are based on the average annual rate of production of the facility 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 facility properties, changes in aggregates specifications required by major customers and passage of government regulations applicable to aggregates 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 facility'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 facility are owned. (5) Leases expire as follows: 8% in 2020, 9% in 2024, 47% in 2044 and 5% in 2045. 5 10 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 Wichita facility also manufactures sodium chlorite for the Performance Chemicals Business Unit. The Port Edwards plant produces chlorine, caustic soda, muriatic acid, caustic potash and potassium carbonate, and manufactures sodium hydrosulfite for the Performance Chemicals Business Unit. 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. The Company has placed this cogeneration facility in reserve and is purchasing most of its requirements for electric power from a local utility at favorable rates pursuant to a long-term agreement. Through a separate agreement with this utility, the Company does operate its cogeneration unit upon the request of the utility at various times during the summer peak electricity demand period, selling the cogenerated electricity to the utility under profitable rates. The facilities at Geismar 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 which may be extended, at the Company's option, through 2037. The plant facilities at Port Edwards 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 Vulcan Performance Chemicals (other than sodium chlorite and sodium hydrosulfite which are respectively produced at Wichita and Port Edwards) are operated by subsidiaries of the Company. The Performance Chemicals Business Unit owns two production facilities in Columbus, Georgia and additional production facilities in Smyrna, Georgia, Dalton, Georgia and Shreveport, Louisiana. The Performance Chemicals Business Unit also has an office and small production facility on leased property in Vancouver, British Columbia. The Company's Chemicals manufacturing facilities are designed to permit a high degree of flexibility as to raw material 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 in 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 In the course of its Construction Materials and Chemicals operations, the Company is subject to occasional governmental proceedings and orders pertaining to occupational safety and health 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 stewardship in safety, health and environmental matters, the Company has been able to resolve such proceedings and to comply with such orders without any materially adverse affects on its business. The Company also 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 addition to those lawsuits in which the Company is involved in the ordinary course of business, certain other legal proceedings involving the Company are more specifically described below. The Company received an August 1991 letter 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 NJDEP's letter asserts 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 site remedial action plan should be developed. In November 1991, the Company received from the NJDEP a "Directive and Notice to Insurers" (the "Directive") purporting to direct the Company to pay within thirty (30) days to the NJDEP $1,000,000 to be used by it in conducting an RI/FS at the site. The NJDEP also asserted that it may have the right to cause a lien to be placed against the real and personal property of the Company to secure the payment of any such amounts. Although the NJDEP has not withdrawn its Directive, the NJDEP has informally agreed that it would not seek to enforce its Directive if the Company participated in the RI/FS for this site. In August 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 in regard to 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 Respondents and certain successors, the Company shared in the cost of the RI/FS. The results of the now completed RI/FS have been presented to the NJDEP, and the Department is in the process of determining what site remediation is required under the ACO, if any. If site remediation is required, the Respondents or the NJDEP might assert that the Company should bear some responsibility in connection with such remediation. In a March 1994 letter, the EPA notified the Company that it was a potentially responsible party ("PRP") under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") with respect to the Jack's Creek/Sitkin Smelting Superfund Site (the "Site") in Pennsylvania, a secondary smelting facility that operated from 1958 until declaring bankruptcy in 1977. The Pennsylvania Department of Environmental Protection ("PADEP") also 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 1997, the EPA issued a Record of Decision ("ROD") for the Site, which included selection of a remedy. The EPA estimated the total costs of implementing and thereafter operating and maintaining the selected remedy to be a total net present value of $12,500,000; however, there remain several uncertainties and contingencies regarding this estimate. The Company and over 30 other PRPs formed the Jack's Creek PRP Group (the "PRP Group") to respond to the claims asserted by the EPA, the PADEP and others. In December 1998, the PRP Group entered into a settlement with the EPA, the U.S. Department of Justice and the PADEP. That settlement is embodied in a Consent Decree now lodged with the U.S. District Court. Under the Consent Decree, the PRP Group commits to design and implement the remedy selected 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 the 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 the EPA, 7 12 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 allocating the costs of implementing the remedy pursuant to the Consent Decree 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. In July 1996, the Company received a copy of a Complaint filed by Amoco Chemical Company ("Amoco") in the U.S. District Court (Southern District of Texas); the Company is included among the more than 100 named defendants. The Complaint alleges that certain of the defendants are present or former owners or operators of a Texas smelting facility most recently operated by the now bankrupt Tex Tin Corporation (the "Tex Tin Site") and that the remainder of the defendants, including the Company, generated CERCLA hazardous substances which were sent to the Tex Tin Site. The Complaint further alleges that plaintiff, Amoco, together with defendant Tex Tin Corporation, entered into a March 1990 ACO with the EPA, and that under the ACO, Amoco conducted certain remedial investigations until May 1993, during which time the Tex Tin Site was included on the National Priorities List ("NPL") as a Superfund site. The Tex Tin Site was removed then from the NPL by order of the U.S. Court of Appeals (D.C. Circuit). The action brought by Amoco asserts that Amoco spent over $8 million in conducting these past remedial investigations, that Amoco will incur costs in the future relating to the Tex Tin Site, and that all such costs, together with pre- and post-judgment interest, are CERCLA response costs for which defendants are liable to Amoco, either jointly and severally or in contribution. The Company had previously received a September 1989 CERCLA ss.104(e) Notice Letter from EPA-Region 6 asserting that the Company is a PRP liable for remediation of the Tex Tin Site and reimbursement of EPA oversight costs. In September 1998, the Tex Tin Site was again placed on the NPL, and in May 1999, a ROD was issued by the EPA proposing a remedy for the Tex Tin Site with an estimated total cost of approximately $28 million. At the direction of the Court, the parties to this litigation, including the Company, are participating in on-going mediated negotiations, both as to settlement of the pending litigation and a related CERCLA settlement under which the remediation of the Tex Tin Superfund Site would be effectuated. The Company is participating in the mediation with 15 other companies on a joint defense basis. At present, the Company cannot predict the likelihood of either a favorable or unfavorable outcome as to any of the matters specifically described above, or the amount of any potential loss or losses in the event of any unfavorable outcome or outcomes as to any and all of the above-described matters; however, the Company does not believe that any such loss or losses would affect the consolidated financial position 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. The subpoena was issued as part of an investigation by the U.S. Department of Justice, Antitrust Division ("DOJ") into possible violations of antitrust laws by CalMat Co. regarding these operations for certain years prior to 1998. Shortly after the Company received the subpoena, the DOJ advised the Company that CalMat Co. was a target of this investigation. On February 29, 2000 after CalMat Co. responded to the subpoena and several CalMat Co. employees testified before the Grand Jury, the DOJ advised the Company that its investigation of this matter has been closed. Note 9, Other Commitments and Contingent Liabilities on page 52 of the Company's 1999 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 1999. 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 51 Peter J. Clemens, III Executive Vice President, Finance & Administration and Treasurer 56 Guy M. Badgett, III Senior Vice President-Construction Materials, East, and 51 President, Southeast Division William F. Denson, III Senior Vice President, General Counsel and Secretary 56 Robert A. Wason IV Senior Vice President, Corporate Development 48 Richard K. Carnwath Vice President, Planning and Development 51 J. Wayne Houston Vice President, Human Resources 50 Ejaz A. Khan Vice President, Controller and Chief Information Officer 43 John A. Heilala President, Chloralkali Business Unit 59 John L. Holland President, Performance Chemicals Business Unit 57 William L. Glusac President, Midwest Division 49 Daniel J. Leemon President, Midsouth Division 61 Ronald G. McAbee President, Mideast Division 53 Thomas R. Ransdell President, Southwest Division 57 Daniel F. Sansone President, Vulcan Gulf Coast Materials Division 47 President, Southern Division James W. Smack President, CalMat Division 56
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. Prior to that he served as President and Chief Operating Officer. 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 and General Counsel in May 1999. Prior to that date he served as Senior 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 was appointed as Chief Information Officer as well in February 2000. Prior to that he served as Controller. John A. Heilala has served as President, Chloralkali Business Unit since May 1996. From 1994 until 1996, he served as Executive Vice President, Chloralkali. John L. Holland joined the Company in December 1998 as President of the newly-renamed Performance Chemicals Business Unit. Prior to that he served as President of BetzDearborn Water Management Group and Group Vice President, BetzDearborn, Inc. William L. Glusac has served as President, Midwest Division, since 1994. Daniel J. Leemon has served as President, Midsouth Division, since 1993. 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 appointed President, Southern Division in July 1999 and President, Vulcan Gulf Coast Materials Division in May 1997. Prior to that time he served as Vice President, Finance. 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 (ticker symbol VMC). As of February 29, 2000, the number of shareholders of record approximated 3,618. The closing price of the Common Stock on the New York Stock Exchange on February 29, 2000, was $40.00. 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.
QUARTER ENDED 1999 1998 ------------- ---- ---- HIGH LOW HIGH LOW ---- --- ---- --- March 31 $ 48.13 $ 40.75 $ 37.83 $ 31.50 June 30 50.75 39.63 39.90 34.83 September 30 51.25 34.31 40.75 33.63 December 31 44.13 34.81 44.67 31.33
10 15 Dividends paid in 1999 totaled $78,730,000, as compared with $70,015,000 paid in 1998. On February 11, 2000, the Board of Directors authorized a quarterly dividend of $.21 per share of Common Stock payable March 10, 2000 to holders of record on February 25, 2000. This quarterly dividend represents a 7.7% increase over quarterly dividends paid in 1999. 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, 1999 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 35 through 39 and 45 through 54 of the Company's 1999 Annual Report to Shareholders, which are incorporated herein by reference.
Year Ended December 31 - ------------------------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ (Amounts in millions, except per share data) Net sales $2,355.8 $1,776.4 $1,678.6 $1,568.9 $1,461.0 Net earnings $ 239.7 $ 255.9 $ 209.1 $ 188.6 $ 166.2 Net earnings per: Basic shares outstanding $ 2.38 $ 2.54 $ 2.06 $ 1.81 $ 1.56 Diluted shares outstanding $ 2.35 $ 2.50 $ 2.03 $ 1.79 $ 1.54 Total assets $2,839.5 $1,658.6 $1,449.2 $1,320.6 $1,215.8 Long-term obligations $ 698.9 $ 76.5 $ 81.9 $ 85.5 $ 90.3 Cash dividends declared per share $ 0.78 $ 0.69 $ 0.63 $ 0.56 $ 0.49
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 40 through 44 and "Financial Terminology" on page 64 of the Company's 1999 Annual Report to Shareholders are incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK "Management's Discussion and Analysis of Results of Operations and Financial Condition" on page 44 of the Company's 1999 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 1999 Annual Report to Shareholders on the pages shown below, which are incorporated herein by reference:
PAGE Consolidated Financial Statements 36-39 Notes to Consolidated Financial Statements 45-54 Management's Responsibility for Financial Reporting and Internal Control 35 Independent Auditors' Report 35 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 1999 and 1998 (Unaudited) 62
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 1999 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 30, 2000, the Company will file a definitive proxy statement with the Securities and Exchange Commission pursuant to Regulation 14A (the Company's "2000 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 2000 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, except that Guy M. Badgett, III, Senior Vice President-Construction Materials, East, Robert A. Wason IV, Senior Vice President, Corporate Development, and Daniel J. Leemon, President, Midsouth Division, all filed a Form 5 late with respect to shares gifted to family members. The information set forth under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" included in the Company's 2000 Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information under the headings "Compensation of Directors," "Executive Compensation," "Option Grants in 1999," "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 "Change in Control Employment Agreements" included in the Company's 2000 Proxy Statement is incorporated herein by reference. 12 17 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the headings "Stock Ownership of Certain Beneficial Owners" and "Stock Ownership of Management" included in the Company's 2000 Proxy Statement is incorporated herein by reference. 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 1999, 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 former chairman and chief executive officer of CalMat Co., which the Company acquired in 1999. Pursuant to the Consulting Agreement, Mr. Gerstell receives a monthly retainer of $10,600 in exchange for his consulting services. This Consulting Agreement will terminate in June 2000. Mr. Gerstell also received a grant of 3,126 restricted shares pursuant to the Consulting Agreement on January 6, 2000. 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 1999 Annual Report to Shareholders on the pages shown below and are incorporated herein by reference:
PAGE Consolidated Statements of Earnings 36 Consolidated Balance Sheets 37 Consolidated Statements of Cash Flows 38 Consolidated Statements of Shareholders' Equity 39 Notes to Consolidated Financial Statements 45-54 Management's Responsibility for Financial Reporting and Internal Control 35 Independent Auditors' Report 35 Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for 62 each of the 2 Years Ended December 31, 1999 and 1998 (Unaudited)
13 18 (A) (2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule for the years ended December 31, 1999, 1998 and 1997 is included in Part IV of this report on the indicated page: 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. 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 filed as Exhibit 3(i) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1) EXHIBIT(3)(II) By-laws of the Company, as restated February 2, 1990, and as last amended February 12, 1999, filed as Exhibit 3(ii) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1) 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).(1) 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).(1) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2)
14 19 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) EXHIBIT (10)(J) Executive Deferred Compensation Plan filed as Exhibit 10(j) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2) EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(k) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2) EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated January 6, 1999 filed as Exhibit 10(l) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2) EXHIBIT (10)(M) Change in Control Employment Agreement Form. [single trigger](2) EXHIBIT (10)(N) Change in Control Employment Agreement Form.[double trigger](2) EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 1999 (set forth on page 18 of this report). EXHIBIT (13) The Company's 1999 Annual Report to Shareholders. EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1999. EXHIBIT (23) Consent of Deloitte & Touche LLP EXHIBIT (24) Powers of Attorney EXHIBIT (27) Financial Data Schedule (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, 1999, will be filed as one or more amendments to this Form 10-K on or before June 28, 2000, as permitted by Rule 15d-21 under the Securities Exchange Act of 1934. (1) Incorporated by reference. (2) Management Contract or Compensatory Plan. 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, 1999, 1998 and 1997 and for the years then ended, and have issued our report thereon dated February 4, 2000; such consolidated financial statements and report are included in your 1999 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 4, 2000 16 21 SCHEDULE II VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 1999, 1998 and 1997 Amounts in Thousands
Column A Column B Column C Column D Column E Column F - --------------------------------------- -------------- --------------- -------------- --------------- --------------- Additions Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts Deductions Of Period - --------------------------------------- -------------- --------------- -------------- --------------- --------------- 1999 Accrued Environmental Costs $ 3,973 $ 145 $ 4,844 $ 162 (1) $ 8,800 Accrued Reclamation Costs 0 3,144 23,460 3,045 23,559 Doubtful Receivables 7,391 (40) 5,381 3,010 (2) 9,722 All Other(3) 1,958 6,772 7,512 7,257 8,985 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
(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 individually insignificant. 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
1999 1998 1997 1996 1995 - ------------------------------------------------ ------------- ------------- ------------- -------------- ------------- Fixed charges: Interest expenses before capitalization Credits $ 53,022 $ 7,224 $ 8,074 $ 9,263 $ 11,396 Amortization of financing costs 267 93 104 164 109 One-third of rental expense 20,798 13,668 9,735 9,663 9,532 ----------- ----------- ----------- ---------- --------- Total fixed charges $ 74,087 $ 20,985 $ 17,913 $ 19,090 $ 21,037 ========== ========== ========== ========== ========== Net earnings 239,693 255,908 209,145 188,595 166,240 Provisions for income taxes 111,868 118,936 91,356 96,985 92,181 Fixed charges 74,087 20,985 17,913 19,090 21,037 Capitalized interest credits (4,445) (442) (1,160) (627) (297) Amortization of capitalized interest 693 715 708 674 1,031 ---------- ---------- ---------- ---------- ----------- Earnings before income taxes as adjusted $ 421,896 $ 396,102 $ 317,962 $ 304,717 $ 280,192 ========== ========== ========== ========== ========== Ratio of earnings to fixed charges 5.7 18.9 17.8 16.0 13.3
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 28, 2000. 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 28, 2000 - ------------------------------------- (Principal Executive Officer) D. M. James /s/ P. J. Clemens, III Executive Vice President, Finance March 28, 2000 - ------------------------------------- and Administration and Treasurer P. J. Clemens, III (Principal Financial Officer) /s/ E. A. Khan Vice President, Controller March 28, 2000 - ------------------------------------ and Chief Information Officer E.A. Khan (Principal Accounting Officer)
The following directors: Marion H. Antonini Director Philip J. Carroll, Jr. Director Livio D. DeSimone Director Phillip W. Farmer 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 -------------------------------- William F. Denson, III March 28, 2000 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, 1999 OF VULCAN MATERIALS COMPANY FILED MARCH 28, 2000 COMMISSION FILE NUMBER 1-4033 25 EXHIBIT INDEX FORM 10-K FISCAL YEAR ENDED DECEMBER 31, 1999 EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company filed as Exhibit 3(i) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1) EXHIBIT(3)(II) By-laws of the Company, as restated February 2, 1990, and as last amended February 12, 1999, filed as Exhibit 3(ii) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1) 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).(1) 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).(1) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) 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).(1)(2) EXHIBIT (10)(J) Executive Deferred Compensation Plan filed as Exhibit 10(j) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2) EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(k) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2)
26 EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated January 6, 1999 filed as Exhibit 10(l) to the Company's 1998 Form 10-K Annual Report (File No. 1-4033).(1)(2) EXHIBIT (10)(M) Change in Control Employment Agreement Form. [single trigger](2) EXHIBIT (10)(N) Change in Control Employment Agreement Form.[double trigger](2) EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 1999 (set forth on page 18 of this report). EXHIBIT (13) The Company's 1999 Annual Report to Shareholders. EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1999. EXHIBIT (23) Consent of Deloitte & Touche LLP EXHIBIT (24) Powers of Attorney EXHIBIT (27) Financial Data Schedule (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, 1999, will be filed as one or more amendments to this Form 10-K on or before June 28, 2000, as permitted by Rule 15d-21 under the Securities Exchange Act of 1934. (1) Incorporated by reference. (2) Management Contract or Compensatory Plan. EX-10.(M) 2 CHANGE IN CONTROL EMPLOYMENT AGREEMENT FORM 1 EXHIBIT 10(M) FORM OF EMPLOYMENT AGREEMENT AGREEMENT by and between Vulcan Materials Company, a New Jersey corporation (the "Company") and (Named Executive - See Schedule A) (the "Executive"), dated as of the ___ day of February, 2000. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any 2 such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times 2 3 the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the greater of (A) the average of the Executive's bonuses under the Company's Management Incentive Plan, or any comparable bonus under any predecessor or successor plan (the "Bonus Plan") for the last three full fiscal years prior to the Effective Date and (B) the Executive's annual bonus under the Bonus Plan, determined based on the target annual bonus percentage and the Annual Base Salary in effect with respect to the Executive immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs (and, in all cases, annualized in the event that the Executive was not employed by the Company for the whole of any such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Long-Term Incentives. During the Employment Period, the Executive shall be entitled to participate in all long-term incentive plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 3 4 (vi) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (ix) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness or injury which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct which is materially and demonstrably injurious to the Company. 4 5 For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. 5 6 (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Annual Bonus for the full fiscal year in which the Date of Termination occurs, determined based on actual individual and corporate performance through the Date of Termination, and (II) the Recent Annual Bonus (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive, including, without limitation, amounts credited to the "bonus bank" (the "Bonus Bank") pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary, (y) the Highest Annual Bonus and (z) the aggregate dollar value of the annual long-term incentive awards granted to the Executive as determined in accordance with the Company's policies and procedures for determining annual long-term incentive awards as in effect immediately prior to the Effective Date based on the Executive's Annual Base Salary and the Executive's annual long-term incentive award percentage in effect immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs; and C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and the Unfunded Supplemental Benefit Plan for Salaried Employees or its successor plan or any other excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; and D. an amount equal to the additional Company matching contributions that would have been made on the Executive's behalf in the Company's Thrift Plan for Salaried Employees or any successor plan (the "Thrift Plan") (assuming continued participation on the same basis as immediately prior to the Effective Date), plus the additional amount of any benefit the Executive would have accrued under the SERP as a result of contribution limitations in the Thrift Plan, which the Executive would receive if the Executive's employment continued for three years after 6 7 the Date of Termination, assuming for this purpose that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii) and that the Company's matching contributions are determined pursuant to the applicable provisions of the Thrift Plan and the SERP, as in effect during the 12-month period immediately prior to the Effective Date; and (ii) for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; and (iii) for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide to the Executive and/or the Executive's family fringe benefits at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(vii) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; and (iv) upon the Date of Termination, the Executive shall have the right and option to purchase the automobile which the Company was providing to the Executive immediately prior to the Date of Termination in accordance with the Company's practice for retiring employees as in effect immediately prior to the Effective Date; and (v) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion, provided that the aggregate cost of such services shall not exceed $50,000; and (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their benefi- 7 8 ciaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, including, without limitation, amounts credited to the Bonus Bank pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement 8 9 or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to the Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payment, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of the Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and 9 10 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would 10 11 be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: The most recent address on file at the Company If to the Company: Vulcan Materials Company P.O. Box 385014 Birmingham, Alabama 35238-5014 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement; provided, that this Agreement may not be terminated by the Company if it is reasonably demonstrated by the Executive that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. 11 12 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ---------------------------------- [Named Executive] VULCAN MATERIALS COMPANY By: ------------------------------- Name: Donald M. James Title: Chairman and Chief Executive Officer 12 13 SCHEDULE A TO EXHIBIT 10(M) In accordance with Item 601(a)(4) of Regulation S-K, the following executive entered into an Employment Agreement substantially in the form as Exhibit 10(m). All agreements were substantially identical in all material respects except as to the name of the executive and the date of execution. Following is a list of executives who are party to such an agreement: Guy M. Badgett, III Richard K. Carnwath William L. Glusac John A. Heilala John L. Holland J. Wayne Houston Ejaz A. Khan Daniel J. Leemon Ronald G. McAbee Thomas R. Ransdell Daniel F. Sansone James W. Smack EX-10.(N) 3 CHANGE IN CONTROL EMPLOYMENT AGREEEMNT FORM 1 EXHIBIT 10(N) FORM OF EMPLOYMENT AGREEMENT AGREEMENT by and between Vulcan Materials Company, a New Jersey corporation (the "Company") and (Named Executive - See Schedule A) (the "Executive"), dated as of the ___ day of February, 2000. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any 2 such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times 2 3 the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the greater of (A) the average of the Executive's bonuses under the Company's Management Incentive Plan, or any comparable bonus under any predecessor or successor plan (the "Bonus Plan") for the last three full fiscal years prior to the Effective Date and (B) the Executive's annual bonus under the Bonus Plan, determined based on the target annual bonus percentage and the Annual Base Salary in effect with respect to the Executive immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs (and, in all cases, annualized in the event that the Executive was not employed by the Company for the whole of any such fiscal year) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Long-Term Incentives. During the Employment Period, the Executive shall be entitled to participate in all long-term incentive plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 3 4 (vi) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (ix) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness or injury which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct which is materially and demonstrably injurious to the Company. 4 5 For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding and except as set forth below, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement (the "30-day Window Trigger"); provided, however, that, in the event, a resolution is duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination, finding that, in the good faith opinion of such Incumbent Board, the Company is or will be the surviving corporation following the occurrence of a Change of Control event described in Section 2(c) hereof, the 30-day Window Trigger shall be inapplicable. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 5 6 thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Annual Bonus for the full fiscal year in which the Date of Termination occurs, determined based on actual individual and corporate performance through the Date of Termination, and (II) the Recent Annual Bonus (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, to the extent not theretofore paid and (3) any compensation previously deferred by the Executive, including, without limitation, amounts credited to the "bonus bank" (the "Bonus Bank") pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary, (y) the Highest Annual Bonus and (z) the aggregate dollar value of the annual long-term incentive awards granted to the Executive as determined in accordance with the Company's policies and procedures for determining annual long-term incentive awards as in effect immediately prior to the Effective Date based on the Executive's Annual Base Salary and the Executive's annual long-term incentive award percentage in effect immediately prior to the Effective Date for the fiscal year in which the Effective Date occurs; and C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and the Unfunded Supplemental Benefit Plan for Salaried Employees or its successor plan or any other excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; and 6 7 D. an amount equal to the additional Company matching contributions that would have been made on the Executive's behalf in the Company's Thrift Plan for Salaried Employees or any successor plan (the "Thrift Plan") (assuming continued participation on the same basis as immediately prior to the Effective Date), plus the additional amount of any benefit the Executive would have accrued under the SERP as a result of contribution limitations in the Thrift Plan, which the Executive would receive if the Executive's employment continued for three years after the Date of Termination, assuming for this purpose that the Executive's compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii) and that the Company's matching contributions are determined pursuant to the applicable provisions of the Thrift Plan and the SERP, as in effect during the 12-month period immediately prior to the Effective Date; and (ii) for three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(v) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; and (iii) or three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide to the Executive and/or the Executive's family fringe benefits at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(vii) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; and (iv) upon the Date of Termination, the Executive shall have the right and option to purchase the automobile which the Company was providing to the Executive immediately prior to the Date of Termination in accordance with the Company's practice for retiring employees as in effect immediately prior to the Effective Date; and (v) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion, provided that the aggregate cost of such services shall not exceed $50,000; and (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate 7 8 and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, including, without limitation, amounts credited to the Bonus Bank pursuant to the Bonus Plan (less any administrative credits included in the Bonus Bank), and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 8 9 9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to the Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payment, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of the Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, 9 10 (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. 10 11 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: The most recent address on file at the Company If to the Company: Vulcan Materials Company P.O. Box 385014 Birmingham, Alabama 35238-5014 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement; provided, that this Agreement may not be terminated by the Company if it is reasonably demonstrated by the Executive that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. 11 12 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. -------------------------------------- [Named Executive] VULCAN MATERIALS COMPANY By: --------------------------------- Name: Donald M. James Title: Chairman and Chief Executive Officer 12 13 SCHEDULE A TO EXHIBIT 10(N) In accordance with Item 601(a)(4) of Regulation S-K, the following executives entered into an Employment Agreement substantially in the form as Exhibit 10(n). All agreements were substantially identical in all material respects except as to the name of the executive and the date of execution. Following is a list of executives who are party to such an agreement: Donald M. James Peter J. Clemens, III William F. Denson, III Robert A. Wason IV EX-13 4 THE COMPANY'S 1999 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES FINANCIAL CONTENTS 35 Management's Responsibility for Financial Reporting and Internal Control 35 Independent Auditors' Report 36 Consolidated Statements of Earnings 37 Consolidated Balance Sheets 38 Consolidated Statements of Cash Flows 39 Consolidated Statements of Shareholders' Equity 40 Management's Discussion and Analysis of Results of Operations and Financial Condition 45 Notes to Consolidated Financial Statements 55 Segment Financial Data 56 Segment Information--Construction Materials 57 Segment Information--Chemicals 58 Consolidated Statements of Earnings and Supplementary Data 59 Consolidated Balance Sheets and Other Financial Data 60 Consolidated Statements of Cash Flows 61 Average Annual Compound Growth Rates 62 Net Sales, Net Earnings and Earnings Per Share 63 Common Stock Prices, Dividends and Related Data 64 Financial Terminology 65 How to Reach Us/General Information
2 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 that 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 well-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 six 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. P.J. Clemens III E.A. Khan Executive Vice President, Vice President and Finance & Administration Controller and Treasurer February 4,2000 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, 1999, 1998 and 1997, 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, 1999, 1998 and 1997, 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 4, 2000 35 3 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS
1999 1998 1997 For the years ended December 31 ------------------------------------------ Amounts and shares in thousands, except per share data Net sales ............................................................... $2,355,778 $1,776,434 $1,678,581 Cost of goods sold ...................................................... 1,769,327 1,226,764 1,199,453 ------------------------------------------ Gross profit on sales ................................................... 586,451 549,670 479,128 Selling, administrative and general expenses ............................ 205,643 198,956 190,446 Other operating costs ................................................... 22,714 7,447 5,112 Other income, net ....................................................... 37,713 31,705 20,655 ------------------------------------------ Earnings before interest and income taxes ............................... 395,807 374,972 304,225 Interest income ......................................................... 4,330 6,654 3,190 Interest expense ........................................................ 48,576 6,782 6,914 ------------------------------------------ Earnings before income taxes ............................................ 351,561 374,844 300,501 Provision for income taxes Current .............................................................. 90,708 113,096 84,806 Deferred ............................................................. 21,160 5,840 6,550 ------------------------------------------ Total provision for income taxes ................................... 111,868 118,936 91,356 ------------------------------------------ Net earnings ............................................................ $ 239,693 $ 255,908 $ 209,145 ========================================== Basic net earnings per share ............................................ $ 2.38 $ 2.54 $ 2.06 Diluted net earnings per share .......................................... $ 2.35 $ 2.50 $ 2.03 Dividends per share ..................................................... $ 0.78 $ 0.69 $ 0.63 Average common shares outstanding ....................................... 100,895 100,854 101,483 Average common shares outstanding, assuming dilution .................... 102,190 102,177 102,850
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 36 4 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
1999 1998 1997 As of December 31 --------------------------------------- Amounts in thousands, except per share data ASSETS Current assets Cash and cash equivalents ..................................................... $ 52,834 $ 180,560 $ 128,566 Accounts and notes receivable: Customers, less allowance for doubtful accounts: 1999, $9,722; 1998, $7,391; 1997, $7,548 ................................. 314,357 210,690 189,389 Other ...................................................................... 15,334 10,571 10,361 Inventories ................................................................... 178,734 143,680 132,359 Deferred income taxes ......................................................... 52,931 24,923 21,385 Prepaid expenses .............................................................. 10,534 5,949 5,072 ---------------------------------------- Total current assets .................................................. 624,724 576,373 487,132 Investments and long-term receivables ........................................... 77,064 71,034 63,482 Property, plant and equipment, net .............................................. 1,639,715 895,785 808,419 Goodwill ........................................................................ 454,783 94,008 59,345 Deferred charges and other assets ............................................... 43,207 21,411 30,868 ---------------------------------------- Total ................................................................. $2,839,493 $1,658,611 $1,449,246 ======================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt .......................................... $ 6,175 $ 5,432 $ 5,408 Notes payable ................................................................. 101,695 2,353 3,654 Trade payables and accruals ................................................... 136,056 107,382 112,548 Accrued income taxes .......................................................... 15,689 21,470 21,749 Accrued salaries and wages .................................................... 58,463 45,665 41,858 Accrued interest .............................................................. 10,390 892 1,360 Other accrued liabilities ..................................................... 58,174 28,268 21,120 ---------------------------------------- Total current liabilities ............................................. 386,642 211,462 207,697 Long-term debt .................................................................. 698,862 76,533 81,931 Deferred income taxes ........................................................... 250,833 98,472 88,719 Deferred management incentive and other compensation ........................................................ 28,702 37,572 33,849 Other post retirement benefits ................................................... 52,465 41,998 37,924 Other noncurrent liabilities .................................................... 98,336 38,874 7,629 ---------------------------------------- Total liabilities ..................................................... 1,515,840 504,911 457,749 ---------------------------------------- Other commitments and contingent liabilities Shareholders' equity Common stock, $1 par value .................................................... 139,705 139,705 46,573 Capital in excess of par value ................................................ 17,854 0 14,090 Retained earnings ............................................................. 1,749,212 1,588,145 1,449,847 ---------------------------------------- Total ................................................................. 1,906,771 1,727,850 1,510,510 Less cost of stock in treasury ................................................ 583,118 574,150 519,013 ---------------------------------------- Total shareholders' equity ............................................ 1,323,653 1,153,700 991,497 ---------------------------------------- Total ................................................................. $2,839,493 $1,658,611 $1,449,246 ========================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 37 5 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
1999 1998 1997 For the years ended December 31 --------------------------------------- Amounts in thousands OPERATING ACTIVITIES Net earnings ................................................... $ 239,693 $ 255,908 $ 209,145 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization .................. 207,108 137,792 129,217 (Increase) decrease in assets before effects of business acquisitions: Accounts and notes receivable ........................ 32,977 (20,415) (14,215) Inventories .......................................... (11,529) (8,794) (3,751) Deferred income taxes ................................ (28,007) (3,538) 2,089 Prepaid expenses ..................................... (294) (877) 570 Investments .......................................... (22,164) (7,860) (2,358) Deferred charges ..................................... (5,451) 5,230 9,276 Increase (decrease) in liabilities before effects of business acquisitions: Accrued interest and income taxes .................... 3,717 (792) (7,718) Trade payables, accruals, etc ........................ (32,240) (4,083) 5,678 Deferred income taxes ................................ 24,015 9,753 1,752 Other noncurrent liabilities ......................... (2,102) 7,126 9,578 Other, net ................................................ (2,754) (13,705) 866 --------------------------------------- Net cash provided by operating activities .......... 402,969 355,745 340,129 --------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment ...................... (314,650) (203,258) (161,238) Payment for businesses acquired, net of acquired cash ......................................... (780,440) (24,874) (12,086) Proceeds from sale of property, plant and equipment ............ 103,067 27,055 16,446 Withdrawal from nonconsolidated subsidiaries ................... 16,134 307 150 --------------------------------------- Net cash used for investing activities ............. (975,889) (200,770) (156,728) --------------------------------------- FINANCING ACTIVITIES Net borrowings (payments) -- commercial paper and bank lines of credit ..................................... 91,342 (1,301) 365 Payment of short-term debt ..................................... (96,276) (5,193) (5,000) Payment of long-term debt ...................................... (1,180) (225) 0 Proceeds from issuance of long-term debt ....................... 496,875 0 0 Purchases of common stock ...................................... (12,508) (65,003) (43,060) Dividends paid ................................................. (78,730) (70,015) (63,622) Contributions from minority interest of consolidated subsidiary ................................... 36,064 31,914 0 Other, net ..................................................... 9,607 6,842 5,666 --------------------------------------- Net cash provided by (used for) financing activities 445,194 (102,981) (105,651) --------------------------------------- Net increase (decrease) in cash and cash equivalents ........... (127,726) 51,994 77,750 Cash and cash equivalents at beginning of year ................. 180,560 128,566 50,816 --------------------------------------- Cash and cash equivalents at end of year ....................... $ 52,834 $ 180,560 $ 128,566 =======================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 38 6 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
1999 1998 1997 For the years ended December 31 Amounts and shares in thousands, --------------------------------------------------------------------- except per share data SHARES AMOUNT Shares Amount Shares Amount Common stock, $1 par value Authorized: 1999 and 1998, 480,000 shares; 1997, 160,000 shares Issued at beginning of year ......................... 139,705 $ 139,705 46,573 $ 46,573 46,573 $ 46,573 Retired shares of predecessor companies ............. 0 0 (5) (5) 0 0 Three-for-one common stock split .................... 0 0 93,137 93,137 0 0 ------- ------- ------- ------- ------ ---------- Issued at end of year ............................... 139,705 139,705 139,705 139,705 46,573 46,573 ======= ------- ======= ------- ====== ---------- Capital in excess of par value Balance at beginning of year ........................... 0 14,090 10,306 Activity prior to stock split Distributions under stock-based incentive plans, net of tax benefit ............... 0 5,167 3,784 Treasury stock issued for acquisition ............... 0 26,383 0 Three-for-one common stock split ....................... 0 (45,640) 0 Distributions under stock-based incentive plans, net of tax benefit ................. 9,081 0 0 Treasury stock issued for acquisition .................. 8,773 0 0 ----------- ----------- ---------- Balance at end of year ................................. 17,854 0 14,090 ----------- ----------- ---------- Retained earnings Balance at beginning of year ........................... 1,588,145 1,449,847 1,304,405 Net earnings ........................................... 239,693 255,908 209,145 Cash dividends on common stock ......................... (78,730) (70,015) (63,622) Three-for-one common stock split ....................... 0 (47,497) 0 Other .................................................. 104 (98) (81) ----------- ----------- ---------- Balance at end of year ................................. 1,749,212 1,588,145 1,449,847 ----------- ----------- ---------- Common stock held in treasury Balance at beginning of year ........................... (39,109) (574,150) (12,885) (519,013) (12,332) (477,620) Activity prior to stock split Purchase of common shares ........................... 0 0 (611) (65,003) (631) (43,060) Treasury stock issued for acquisition ............... 0 0 384 8,187 0 0 Distributions under stock-based incentive plans ................................... 0 0 75 1,679 78 1,667 Three-for-one common stock split ....................... 0 0 (26,072) 0 0 0 Purchase of common shares .............................. (336) (12,508) 0 0 0 0 Treasury stock issued for acquisition .................. 242 1,806 0 0 0 0 Distributions under stock-based incentive plans ..................................... 233 1,734 0 0 0 0 --------- ----------- --------- ----------- -------- ---------- Balance at end of year ................................. (38,970) (583,118) (39,109) (574,150) (12,885) (519,013) ========= ----------- ========= ----------- ======== ---------- Total .......................................... $ 1,323,653 $ 1,153,700 $ 991,497 =========== =========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 39 7 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. RESULTS OF OPERATIONS Vulcan's 1999 sales of $2.4 billion were at a record level, up from the 1998 total of $1.8 billion. Net earnings and diluted earnings per share were $239.7 million and $2.35, respectively. The comparable 1998 net earnings and diluted earnings per share were $255.9 million and $2.50, respectively. The decline in earnings is attributable to lower earnings from the Chemicals segment, which faced historic lows in combined pricing for caustic soda and chlorine. Pretax earnings totaled $351.6 million, down 6% from last year's amount of $374.8 million. CONSTRUCTION MATERIALS 1999 VS. 1998 For the seventh consecutive year, Construction Materials' sales surpassed previous records. Net sales for 1999 totaled $1.8 billion, up 56% from the 1998 result of $1.2 billion. Record aggregates shipments of 220 million tons increased 22% over the record 1998 level. These results include the impact of the January [GRAPH] 1999 acquisition of CalMat Co. ("CalMat"). Excluding 1999 acquisitions, the 1999 results reflect a 2% increase in shipments and a 3% rise in the average unit selling price of aggregates. Of the total increase in sales of $652.0 million, $572.7 million resulted from the CalMat acquisition, $50.8 million related to other volume increases and $28.5 million was due to higher prices. Segment earnings of $370.0 million, which are before interest and income taxes, also were at a record level and were up 20% from 1998's record level of $307.3 million. This increase reflects the favorable effects of higher aggregates pricing and shipments, somewhat offset by higher costs. This information is summarized below (in millions of dollars):
Construction Materials 1999 vs. 1998 1998 earnings $307 ---- Aggregates pricing 26 Aggregates volume 48 All other (11) ---- 1999 earnings $370 ====
1998 VS. 1997 Net sales for 1998 totaled $1.2 billion, up 10% from the 1997 results of $1.1 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 $307.3 million, which are before interest and income taxes, also were at a record level and were up 34% from 1997's record level of $228.8 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 =====
40 8 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CHEMICALS 1999 VS. 1998 1999 sales of $545.2 million were down 12% from the 1998 level of $617.8 million. This decline resulted solely from pricing as the combined price for caustic soda and chlorine reached a 25-year low during 1999. Despite the steep price decline, the segment achieved meaningful earnings through value-added downstream products, higher volume, controlled spending and improved earnings from Performance Chemicals. At $25.8 million, segment earnings were down 62% from the 1998 level of $67.6 million. This information is summarized below (in millions of dollars): Chemicals 1999 VS. 1998 1998 earnings $ 68 ---- Chloralkali sales prices/raw materials (81) Chloralkali sales volumes 14 Chloralkali manufacturing costs 6 All other 19 ---- 1999 earnings $ 26 ====
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 $67.6 million in 1998 were down 10% from the 1997 level of $75.5 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 of set lower volumes and prices for chlorine and some derivative products, and lower earnings from Performance Chemicals. 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 (14) ---- 1998 earnings $ 68 ====
SELLING, ADMINISTRATIVE AND GENERAL Selling, administrative and general expenses of $205.6 million in 1999 increased 3% from the 1998 level of $199.0 million. This reflects principally the addition of CalMat, offset by lower charges for incentive plans. In 1998, selling, administrative and general expenses were up 4% from the 1997 level. In addition to normal salary increases, this change reflects expenditures associated with several projects designed to enhance operations and reduce future costs throughout the organization. OTHER OPERATING COSTS Other operating costs of $22.7 million in 1999 increased $15.3 million from the 1998 level of $7.4 million. This reflects the higher amortization of goodwill referable to acquisitions. OTHER INCOME Other income, net of other charges, was $37.7 million as compared with the 1998 amount of $31.7 million. The increase principally reflects income from legal settlements and higher earnings from the Company's joint venture to supply limestone from Mexico to the U.S. Gulf Coast market, partly offset by lower gains from the sale of assets. In 1998, other income, net of other charges, increased $11.0 million from the 1997 level. This reflects principally increased gains on sales of assets and higher earnings from the Company's Mexican joint venture. INCOME TAXES The Company's 1999 effective tax rate was 31.8%, up slightly from the 1998 rate of 31.7%. The effective tax rate increased in 1998 from the 1997 rate of 30.4%. This increase reflected principally a lesser impact of adjustments referable to tax audits for prior years. [GRAPH] Net Cash Provided By Operating Activities (In millions) 41 9 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) 2000 OUTLOOK With regard to 2000, 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 1999 levels, with the exception of residential construction, which may decline modestly. Based on this outlook and improving margins at CalMat, 2000 earnings in the Construction Materials segment are expected to exceed 1999's record result. As far as the Chemicals segment is concerned, industry analysts expect a continuation of the improving trend in chloralkali pricing that began in the fourth quarter of 1999, and prices for both chlorine and caustic soda are projected to increase significantly. Based on these projections, Chemicals is expected to experience a sharp recovery in 2000 with earnings that could approach those realized in 1998. Overall, the Company expects to report record earnings for 2000. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS Net cash provided by operating activities reached a record high amounting to $403.0 million in 1999, as compared to 1998's total of $355.7 million. Net cash provided by the Construction Materials segment increased 50% to $386.7 million, while net cash provided by the Chemicals segment declined 56% to $43.3 million. Cash expenditures for property, plant and equipment, excluding acquisitions, were $314.7 million in 1999, up $111.4 million from the 1998 level. Cash spending for acquisitions, including amounts referable to working capital and other balance sheet items, totaled $780.4 million compared with $24.9 million in 1998. 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. WORKING CAPITAL Working capital, exclusive of debt and cash items (cash, cash equivalents and short-term investments), totaled $303.5 million at December 31, 1999,up $110.5 million from the 1998 level. This increase is principally due to the acquisition of CalMat, and compares with increases of$31.7 million and $3.2 million in 1998 and 1997, respectively. The current ratio decreased to 1.6 in 1999, primarily due to a lower cash balance and higher debt resulting from recent acquisitions. The current ratio in 1998 was 2.7, higher than the 2.3 in 1997. PROPERTY ADDITIONS Property additions, including acquisitions, totaled $1,027.7 million in 1999, up $797.4 million from the 1998 level of $230.3 million. Property additions included $670.1 million related to the CalMat acquisition, $39.5 million for all other acquisitions, $36.2 million for CalMat post-acquisition additions and $95.3 million referable to the Chemicals joint venture, of which approximately one-half was funded by Mitsui & Co., Ltd. ("Mitsui"). As explained on page 64, 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, in addition to CalMat, these included the acquisition of 20 quarries and the beginning of production at four greenfield aggregates operations. Property additions within the Chemicals segment included spending for the joint venture with Mitsui. In addition to contributing its existing EDC plant, Vulcan will invest a total of approximately $90.0 million in this project, of which approximately $48.6 million was provided in 1999. Commitments for capital expenditures were $40.7 million at December 31,1999,excluding the joint venture. The Company expects to cover commitments using internally generated cash flow combined with a modest level of short-term borrowing. [GRAPH] Property Additions (in millions) [ ] Chemicals [ ] Construction Materials 42 10 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SHORT-TERM BORROWINGS AND INVESTMENTS The Company was a net short-term borrower during 1999 as combined commercial paper and bank borrowing reached a peak of $756.5 million, and amounted to $93.5 million at year end. The Company was a net short-term investor in 1998 when marketable securities peaked at $219.8 million and ended the year at $166.8 million. During 1997, the Company also maintained a net short-term investing position as investments reached a maximum of $131.1 million and equaled $111.3 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 $330.0 million were maintained at the end of 1999. 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. The Company's commercial paper is rated A-1/P-1 by Standard & Poor's Ratings Group and Moody's Investors Service, Inc., respectively. LONG-TERM OBLIGATIONS During 1999, the Company increased its total long-term Obligations by $622.3 million to $698.9 million, compared with a net decrease of $5.4 million in 1998. During the three-year period ended December 31, 1999, long-term obligations increased cumulatively by $613.4 million from the $85.5 million outstanding at December 31, 1996. During the same three-year period, shareholders' equity, net of common Stock purchases of $120.6 million and dividends of $212.4 million, increased by $440.0 million to $1.3 billion. In the future, the ratio of long-term debt to total 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 1999 was 28.5%. The Company has made acquisitions from time to time and will continue to actively pursue attractive investment opportunities. If financing is required for this purpose, it may be accomplished temporarily on a short-term basis or by incurring long-term debt. 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 April 1999, the Company issued long-term debt in the amount of $500 million, which reduced commercial paper outstanding by a like amount. Standard & Poor's and Moody's, respectively, rate the Company's public long-term debt issues at the A+/A1 level. COMMON STOCK During 1999, the Company purchased 336,400 shares of its common stock at a cost of $12.5 million, equal to an average price of $37.18 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:
1999 1998 1997 ----------------------------------------- Shares purchased: Number 336,400 1,832,100 1,892,568 Total cost (millions) $ 12.5 $ 65.0 $ 43.1 Average cost $ 37.18 $ 35.48 $ 22.75 Shares in treasury at year end: Number 38,970,426 39,108,657 38,655,012 Average cost $ 14.96 $ 14.68 $ 13.16
The number of shares remaining under the current purchase authorization of the Board of Directors was 8,473,988 shares as of December 31, 1999. [GRAPH] Long-term Debt As A Percent Of Total Capital 43 11 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) 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 December 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 for the year ended December 31, 1999 of approximately $1.5 million. The Company is exposed to interest rate risk due to its various long-term debt instruments. Because substantially all of this debt is at fixed rates, a decline in interest rates would result in an increase in the fair market value of the liability. At December 31, 1999, the estimated fair market value of these debt instruments was $666.8 million. The effect of a hypothetical decline in interest rates of 1% would increase the fair market value of the liability by approximately $35.5 million. [GRAPH] Average Capital Employed (In millions) [ ] Other [ ] Chemicals [ ] Construction Materials YEAR 2000 ISSUE The Company implemented the corrections to internal systems critical to its operations by September 30, 1999, spending less than the original estimate of $5.0 million to implement its Year 2000 Plan. Mission-critical systems and equipment entered the year 2000 without any noteworthy problems. Minor Year 2000 problems were fixed as they were discovered without the Company activating contingency plans. Although no remaining Year 2000 problems are anticipated, the Year 2000 Project Management Office continues to monitor the business processes. The Company recognized the importance of Year 2000 issues and began remediation efforts on internal business systems in 1996 and made resolution of Year 2000 issues a priority across the Company in 1997 by creating a Year 2000 Project Management Office with the appropriate authority and resources. The Company's Year 2000 Plan included five stages--pre-project, planning, preparation, implementation and transition. The Year 2000 Project Management Office 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. Contingency planning and business partner communication were also key parts of the project. NEW ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). In May 1999, the FASB amended SFAS 133 deferring the effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. 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. 44 12 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 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. The Company evaluates goodwill for impairment by comparing projected discounted future cash flows to carrying amounts of good will using a discount rate based on the cost of capital of that business. If such evaluation indicates impairment, the Company would record a charge to operations in the period such impairment is determined. 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 over burden from active mineral deposits, and research and development. Repairs and maintenance are charged to costs and operating expenses. Renewals and betterments that add materially to the utility or useful lives of property, plant and equipment are capitalized. The Company accrues the estimated cost of reclamation over the life of the reserves based on tons sold in relation to total estimated tons. 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 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. 45 13 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) EARNINGS PER SHARE (EPS) The Company reports two separate earnings per share numbers, basic and 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):
1999 1998 1997 --------------------------------- Average common shares outstanding 100,895 100,854 101,483 Dilutive effect of: Stock options 858 720 528 Performance shares and other 437 603 839 --------------------------------- Average common shares outstanding, assuming dilution 102,190 102,177 102,850 =================================
All common stock equivalents are reflected in the Company's earnings per share calculations; the Company had 869,752 antidilutive common stock equivalents in 1999. There were no similar shares in 1998 or 1997. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). In May 1999, the FASB amended SFAS 133 deferring the effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. 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 1999 presentation. 2. INVENTORIES Inventories at December 31 are as follows (in thousands of dollars):
1999 1998 1997 ------------------------------------ Finished products $131,032 $ 99,814 $ 90,118 Raw materials 13,735 10,466 10,865 Products in process 933 1,183 617 Operating supplies and other 33,034 32,217 30,759 ------------------------------------ Total inventories $178,734 $143,680 $132,359 ====================================
The above amounts include inventories valued under the LIFO method totaling $123,268,000, $107,178,000 and $99,321,000 at December 31, 1999, 1998 and 1997, respectively. Estimated current cost exceeded LIFO cost at December 31, 1999, 1998 and 1997 by $35,225,000, $34,671,000 and $37,344,000, 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 an increase of $197,000 ($0.00 per share effect) in 1999,a decrease of $1,633,000 ($0.02 per share effect) in 1998 and an increase of $973,000 ($0.01 per share effect) in 1997. 3. 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):
1999 1998 1997 ------------------------------------------ Land and land improvements $ 609,578 $ 210,601 $ 211,058 Buildings 97,057 83,609 81,805 Machinery and equipment 2,246,314 1,874,012 1,753,683 Leaseholds 7,049 7,039 7,107 Construction in progress 189,899 105,495 66,547 ------------------------------------------ Total 3,149,897 2,280,756 2,120,200 Less allowances for depreciation, depletion and amortization 1,510,182 1,384,971 1,311,781 ------------------------------------------ Property, plant and equipment, net $1,639,715 $ 895,785 $ 808,419 ==========================================
46 14 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES The Company capitalized interest costs of $4,445,000 in 1999, $443,000 in 1998 and $1,160,000 in 1997 with respect to qualifying construction projects. Total interest costs incurred before recognition of the capitalized amount were $53,021,000 in 1999, $7,225,000 in 1998 and $8,074,000 in 1997. 4. DEBT At year end 1999, the Company had $91,600,000 of commercial paper outstanding. The remaining balance of notes payable for 1999,1998 and 1997 consisted of bank borrowings or other notes. All of the lines of credit extended to the Company in 1999, 1998 and 1997 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 they provide, the Company pays the fee equivalent for the differences. Long-term debt, exclusive of current maturities, at December 31 is summarized as follows (in thousands of dollars):
1999 1998 1997 ------------------------------------ 5.75% 5-year notes issued 1999 $ 250,000 $ 0 $ 0 6.00% 10-year notes issued 1999 250,000 0 0 Private placement notes 125,541 0 0 Medium-term notes 51,000 56,000 61,000 Tax-exempt bonds 17,000 17,000 17,000 Other notes 8,099 3,533 3,931 Unamortized discount 1999 notes (2,778) 0 0 ------------------------------------ Total $ 698,862 $76,533 $81,931 ==================================== Estimated fair value $ 660,589 $87,091 $93,142 ====================================
In April 1999, the Company accessed the public debt market by issuing $500,000,000 of five-year and 10-year notes in two tranches of $250,000,000 each. The 5.75% coupon notes mature in April 2004 and the 6.00% notes mature in April 2009. The combined discount from par recorded on these notes is being amortized over the lives of the notes. The private placement notes were issued by CalMat in December 1996 in a series of four notes at interest rates ranging from 7.19% to 7.66%. Maturities on the notes range from December 2003 to December 2011. The Company entered into an agreement with the note-holders effective February 1999 whereby it guaranteed the payment of principal and interest. During 1991, the Company issued $81,000,000 of medium-term notes ranging in maturity from three to 30 years, and in interest rate from 7.59% to 8.85%. The $51,000,000 in notes outstanding as of December 31, 1999 have a weighted-average maturity of 8.7 years with a weighted-average interest rate of 8.62%. The $17,000,000 of tax-exempt bonds consist of three separate issues: (1) $8,200,000 of variable rate bonds maturing in 2009; (2) $3,000,000 of 7.50% coupon bonds maturing in 2011; and (3) $5,800,000 of 6.375% coupon bonds maturing in 2012. Other notes of $8,099,000 were issued at various times to acquire land or businesses. The aggregate principal payments for the five years subsequent to December 31,1999 are: 2000 -- $6,175,000; 2001 -- $6,175,000; 2002 -- $7,762,000; 2003 -- $40,811,000; and 2004 -- $254,224,000. The Company's debt agreements do not subject it 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, 1999, 1998 and 1997. 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. 47 15 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. 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):
1999 1998 1997 --------------------------------- Minimum rentals $26,145 $18,725 $17,894 Contingent rentals (based principally on usage) 15,920 15,410 11,840 --------------------------------- Total $42,065 $34,135 $29,734 =================================
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, 1999 range from $9,194,000 to $17,991,000 annually through 2004 and aggregate $47,306,000 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. 6. INCOME TAXES The components of earnings before income taxes are as follows (in thousands of dollars):
1999 1998 1997 ------------------------------------ Domestic $343,625 $365,706 $294,834 Foreign 7,936 9,138 5,667 ------------------------------------ Total $351,561 $374,844 $300,501 ====================================
Provisions for income taxes consist of the following (in thousands of dollars):
1999 1998 1997 ---------------------------------------- Current: Federal $ 79,443 $ 96,311 $ 73,767 State and local 11,048 16,544 10,907 Foreign 217 241 132 ---------------------------------------- Total 90,708 113,096 84,806 ---------------------------------------- Deferred: Federal 18,535 4,679 5,231 State and local 2,630 1,181 1,321 Foreign (5) (20) (2) ---------------------------------------- Total 21,160 5,840 6,550 ---------------------------------------- Total provision $ 111,868 $ 118,936 $ 91,356 ========================================
The effective tax rate varied from the federal statutory income tax rate due to the following:
1999 1998 1997 ----------------------------- Federal statutory tax rate 35.0% 35.0% 35.0% Increase (decrease) in tax rate resulting from: Depletion (5.9) (4.5) (5.0) State and local income taxes, net of federal income tax benefit 2.5 3.0 2.6 Amortization of goodwill 1.4 0.2 0.2 Miscellaneous items (1.2) (2.0) (2.4) ----------------------------- Effective tax rate 31.8% 31.7% 30.4% =============================
Deferred income taxes on the balance sheet result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax liability are as follows (in thousands of dollars):
1999 1998 1997 ------------------------------------ Deferred tax assets related to: Post retirement benefits $ 20,876 $ 16,804 $ 15,283 Reclamation and environmental accruals 11,342 371 554 Accounts receivable, principally allowance for doubtful accounts 4,911 2,918 3,248 Inventory adjustments 7,906 6,309 5,748 Pensions, incentives and deferred compensation 18,587 17,477 11,844 Other items 8,808 9,596 10,714 ------------------------------------ Total deferred tax assets 72,430 53,475 47,391 ------------------------------------ Deferred tax liabilities related to: Fixed assets 255,947 117,658 107,170 Other items 14,385 9,366 7,555 ------------------------------------ Total deferred tax liabilities 270,332 127,024 114,725 ------------------------------------ Net deferred tax liability $197,902 $ 73,549 $ 67,334 ====================================
48 16 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES 7. PENSION AND POSTRETIREMENT BENEFIT PLANS 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):
1999 1998 1997 ---------- ---------- ---------- Change in benefit obligation: Benefit obligation at beginning of year $ 344,758 $ 306,516 $ 267,289 Service cost 14,961 12,886 11,228 Interest cost 21,135 19,499 20,987 Amendments 0 5,479 (1,014) Actuarial (gain) loss (40,757) 14,667 23,647 Benefits paid (16,567) (14,289) (15,621) ---------- ---------- ---------- Benefit obligation at end of year $ 323,530 $ 344,758 $ 306,516 ========== ========== ========== Change in plan assets: Fair value of assets at beginning of year $ 445,553 $ 395,245 $ 337,325 Actual return on plan assets 72,865 63,827 72,875 Employer contribution 770 770 666 benefits paid (16,567) (14,289) (15,621) ---------- ---------- ---------- Fair value of assets at end of year $ 502,621 $ 445,553 $ 395,245 ========== ========== ========== Funded status $ 179,091 $ 100,795 $ 88,729 Unrecognized net transition (asset) (2,678) (5,060) (7,486) Unrecognized net actuarial (gain) (190,164) (111,024) (91,536) Unrecognized prior service cost 12,778 14,670 10,722 ---------- ---------- ---------- Net amount recognized $ (973) $ (619) $ 429 ========== ========== ========== Amounts recognized on the Consolidated Balance Sheets: Prepaid benefit cost $ 37,238 $ 35,500 $ 32,959 Accrued benefit liability (38,211) (36,492) (33,402) Intangible assets 0 373 872 ---------- ---------- ---------- Net amount recognized $ (973) $ (619) $ 429 ========== ========== ========== Components of net periodic benefit cost: Service cost $ 14,961 $ 12,886 $ 11,228 Interest cost 21,135 19,499 20,987 Expected return on plan assets (32,505) (28,643) (25,622) Amortization of transition (asset) (2,382) (2,425) (2,730) Amortization of prior service cost 1,892 1,531 1,588 Recognized actuarial (gain) (1,977) (1,145) (756) ---------- ---------- ---------- Net periodic benefit cost $ 1,124 $ 1,703 $ 4,695 ========== ========== ========== Weighted-average assumptions as of December 31: Discount rate 7.50% 6.75% 7.00% 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. The Company sponsors an unfunded, nonqualified pension plan. The projected benefit obligation, accumulated benefit obligation and fair value of assets for this plan were $16,585,000, $11,064,000 and $0 as of December 31,1999; $16,944,000, $11,170,000 and $0 as of December 31,1998; and $15,332,000, $10,573,000 and $0 as of December 31,1997. Certain of the Company's hourly employees in unions are covered by multiemployer defined benefit pension plans. Contributions to these plans approximated $7,038,000 in 1999, $2,159,000 in 1998 and $2,115,000 in 1997. 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. Thirty-five percent of the labor force are covered by collective bargaining agreements. 49 17 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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):
1999 1998 1997 ---------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 50,932 $ 48,713 $ 43,633 Service cost 1,964 2,134 2,036 Interest cost 3,480 3,367 3,464 Amendments 7,946 (146) 0 Actuarial (gain) loss (7,334) (623) 2,099 Benefits paid (2,668) (2,513) (2,519) ---------------------------------------------- Benefit obligation at end of year $ 54,320 $ 50,932 $ 48,713 ============================================== Change in plan assets: Fair value of assets at beginning of year $ 3,484 $ 3,323 $ 3,119 Actual return on plan assets 128 167 203 Employer contribution 0 45 111 benefits paid (124) (51) (110) ---------------------------------------------- Fair value of assets at end of year $ 3,488 $ 3,484 $ 3,323 ============================================== Funded status $ (50,832) $ (47,448) $ (45,390) Unrecognized net (gain) loss (1,482) 5,612 6,261 Unrecognized prior service cost (151) (162) 5 ---------------------------------------------- Net amount recognized $ (52,465) $ (41,998) $ (39,124) ============================================== Amounts recognized on the Consolidated Balance Sheets: Accrued benefit liability $ (52,465) $ (41,998) $ (39,124) ============================================== Components of net periodic benefit cost: Service cost $ 1,964 $ 2,134 $ 2,036 Interest cost 3,480 3,367 3,464 Expected return on plan assets (244) (218) (218) Amortization of prior service cost (11) 21 1 Recognized actuarial loss 0 84 138 ---------------------------------------------- Net periodic benefit cost $ 5,189 $ 5,388 $ 5,421 ==============================================
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, 1999, 1998 and 1997 were 7.50%,6.75% and 7.00%, respectively. For measurement purposes, a 6% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease 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 health care cost trend rates were increased 1% each year, the accumulated postretirement benefit obligation as of December 31,1999 would have increased by $5,351,000, and the aggregate of the service and interest cost for 1999 would have increased by $716,000. Similarly, if the health care cost trend rates were decreased 1% each year, the accumulated postretirement benefit obligation as of December 31, 1999 would have decreased by $4,169,000, and the aggregate of the service and interest cost for 1999 would have decreased by $599,000. 8. 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 50 18 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES number of shares available for awards is 0.95% 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 1999, 1998 and 1997 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 $3,313,000 in 1999, $10,698,000 in 1998 and $11,671,000 in 1997. 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 5.2%; dividend yields of 1.7%; volatility factors of the expected market price of the Company's common stock of 21.4%; 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 decreased net earnings by approximately $1,253,000 in 1999 and increased net earnings by approximately $3,626,000 and $4,386,000 in 1998 and 1997, respectively. For 1999, the impact on both basic and diluted earnings per share would have been a $0.02 decrease. 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. A summary of the Company's stock option activity, related information as of December 31, 1999, 1998 and 1997, and changes during each year is presented below:
1999 1998 1997 --------------------------- --------------------------- -------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- ------- ------- ------- ------- ------- Outstanding at beginning of year 3,248,640 $ 24.04 2,427,705 $ 20.09 1,286,850 $ 18.87 Granted at fair value 963,400 $ 45.17 1,021,950 $ 33.13 1,224,150 $ 21.32 Exercised (60,109) $ 45.46 (95,010) $ 19.79 (20,820) $ 19.19 Forfeited (59,085) $ 29.47 (106,005) $ 25.12 (62,475) $ 19.16 --------- -------- --------- Outstanding at year end 4,092,846 $ 28.96 3,248,640 $ 24.04 2,427,705 $ 20.09 ========= ========= ========= Options exercisable at year end 1,405,331 $ 21.73 840,960 $ 19.73 479,295 $ 19.35 Weighted-average grant date fair value of each option granted during the year $7.27 $4.80 $3.71
51 19 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table summarizes information about stock options outstanding and exercisable at December 31,1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE Weighted- Average Weighted- Weighted- Remaining Average Average Number Contractual Exercise Number Exercise Range of Exercise Price of Shares Life (Years) Price of Shares Price - ----------------------------------------------------------------------------------------------------------------------------- $18.58-$19.73 1,094,260 6.38 $ 18.87 717,520 $ 18.87 $21.31 1,093,501 7.12 $ 21.31 488,986 $ 21.31 $29.20-$32.95 935,085 8.12 $ 32.94 195,405 $ 32.94 $43.75-$45.17 970,000 9.12 $ 45.14 3,420 $ 43.76 --------- --------- Total 4,092,846 7.62 $ 28.96 1,405,331 $ 21.73 ========= =========
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 $6,832,000 in 1999, $10,250,000 in 1998 and $7,198,000 in 1997. 9. OTHER COMMITMENTS AND CONTINGENT LIABILITIES In 1998, the Company formed a joint venture with Mitsui 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 in cash, the Company will own 51% of the joint venture and manage the operation of the new facilities. As of December 31, 1999, the Company had a remaining commitment of over $40,000,000 for this venture, which is expected to be fully operational by the end of 2000. Other commitments for the purchase of property, plant and equipment were $40,697,000 at December 31, 1999. 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. The Company's Consolidated Balance Sheets as of December 31 include accrued environmental cleanup costs by segment, as follows: Chemicals 1999 -- $5,406,000, 1998 -- $3,973,000 and 1997 -- $3,732,000; Construction Materials 1999 -- $3,394,000, 1998 -- $0 and 1997 -- $0. The accrued environmental cleanup costs in the Construction Materials segment relate solely to the CalMat facilities acquired in 1999. The Company's Consolidated Balance Sheets as of December 31 include accrued land reclamation costs for the Construction Materials segment of $23,559,000 in 1999, $0 in 1998 and $0 in 1997. This accrued cost relates to the newly acquired CalMat facilities. 10. SHAREHOLDERS' EQUITY 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 remained at $1 per share. The increase in authorized shares and the stock split were effective March 10,1999. The effect of the stock split was recognized retroactively 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 Consolidated Financial Statements and supplemental financial data. Shareholders' equity accounts were 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. A total of 42,511,981 shares has been purchased at a cost of $608,423,000 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 8,473,988 shares as of December 31,1999. 11. 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 policies. The Company's 52 20 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES 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. The Company's Construction Materials segment produces and sells aggregates and related products and services in eight regional divisions. These divisions have been aggregated for reporting purposes. At year end, sales are in 21 states and the District of Columbia. Customers use aggregates primarily in the construction and maintenance of highways, streets and other public works and in the construction of housing and commercial, industrial and other nonresidential facilities. The Chemicals segment, through its Chloralkali and Performance Chemicals 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
1999 1998 1997 Amounts in millions ------------------------------------------ NET SALES Construction Materials ..................................... $ 1,810.6 $ 1,158.6 $ 1,051.0 Chemicals .................................................. 545.2 617.8 627.6 ------------------------------------------ Total ................................................... $ 2,355.8 $ 1,776.4 $ 1,678.6 ========================================== EARNINGS BEFORE INTEREST AND INCOME TAXES Construction Materials ..................................... $ 370.0 $ 307.3 $ 228.8 Chemicals .................................................. 25.8 67.6 75.5 ------------------------------------------ Total ................................................... $ 395.8 $ 374.9 $ 304.3 ========================================== IDENTIFIABLE ASSETS Construction Materials ..................................... $ 2,101.3 $ 894.6 $ 751.2 Chemicals .................................................. 547.7 452.7 459.0 ------------------------------------------ Identifiable Assets ..................................... 2,649.0 1,347.3 1,210.2 Investment in nonconsolidated affiliates ................... 65.3 70.3 61.0 General corporate assets ................................... 72.4 60.4 49.4 Cash items ................................................. 52.8 180.6 128.6 ------------------------------------------ Total ................................................... $ 2,839.5 $ 1,658.6 $ 1,449.2 ========================================== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials ..................................... $ 160.7 $ 90.8 $ 84.5 Chemicals .................................................. 46.4 47.0 44.7 ------------------------------------------ Total ................................................... $ 207.1 $ 137.8 $ 129.2 ========================================== PROPERTY ADDITIONS Construction Materials ..................................... $ 909.6 $ 176.0 $ 125.5 Chemicals .................................................. 118.1 54.3 56.5 ------------------------------------------ Total ................................................... $ 1,027.7 $ 230.3 $ 182.0 ========================================== SALES BY PRODUCT Construction Materials Aggregates ................................................ $ 1,193.0 $ 978.6 $ 880.9 Asphaltic products and placement .......................... 289.9 76.9 72.9 Ready-mixed concrete ...................................... 206.6 19.7 17.5 Other ..................................................... 121.1 83.4 79.7 ------------------------------------------ Total ................................................... $ 1,810.6 $ 1,158.6 $ 1,051.0 ========================================== Chemicals Chloralkali -- Inorganic .................................. 149.0 $ 205.4 $ 181.7 Chloralkali -- Organic .................................... 209.7 220.9 256.6 Performance Chemicals ..................................... 186.5 191.5 189.3 ------------------------------------------ Total ................................................... $ 545.2 $ 617.8 $ 627.6 ==========================================
53 21 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES Notes to Consolidated Financial Statements (continued) 12. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental information referable to the Consolidated Statements of Cash Flows is summarized below (in thousands of dollars):
1999 1998 1997 ---------------------------------------- Cash payments: Interest (exclusive of amount capitalized) $ 39,079 $ 7,249 $ 6,774 Income taxes 85,756 112,995 92,315 Noncash investing and financing activities: Amounts referable to business acquisitions: Liabilities assumed 480,087 1,497 1,441 Fair value of stock issued 10,580 34,568 0 Debt issued in purchase of assets, net of liabilities 8,645 0 0
13. 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 for a value of $739,412,000 cash, plus $9,167,000 of direct acquisition costs. As of the acquisition, CalMat had fixed-term debt of $130,595,000 and $90,197,000 in bank borrowings, both of which were assumed by the Company. The acquisition was funded by cash on hand and approximately $590,000,000 of commercial paper. It was accounted for as a purchase, with the excess of the purchase price over the fair value of net assets acquired recognized as goodwill to be amortized over 30 years. The allocation of the purchase was as follows (in thousands of dollars): Allocation of CalMat purchase price: Current assets $ 172,595 Investments and long-term receivables 20,958 Property, plant and equipment 670,088 Goodwill 361,948 Current liabilities (190,972) Long-term debt (130,595) Deferred income taxes (128,345) Other noncurrent liabilities (27,098) --------- Total purchase price $ 748,579 ========= Consideration consisted of: Cash on hand $ 149,412 Debt financing 590,000 Direct acquisition costs 9,167 --------- Total consideration $ 748,579 =========
The accompanying Consolidated Statements of Earnings for the year ended December 31, 1999 include the results of operations of CalMat from its acquisition date. The following pro forma consolidated statement of earnings for the 12 months ended December 31, 1999 and 1998 assumes that the Calmat acquisition occurred as of January 1, 1998 (in millions of dollars, except per share data): PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
Twelve months ended 1999 1998 December 31 ---------------------------- Net sales $ 2,355.8 $ 2,289.2 Net earnings $ 239.7 $ 249.0 Earnings per share: Basic $ 2.38 $ 2.47 Diluted $ 2.35 $ 2.44
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. In addition to the 1999 CalMat acquisition, at various dates during 1999, 1998 and 1997, the Company acquired the net assets and businesses of several companies. The combined purchase prices were approximately $56,000,000, $59,000,000 and $12,000,000, 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 1999, 1998 and 1997 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. Except as noted above for the CalMat acquisition, on a pro forma basis, as if the net assets and businesses had been acquired at the beginning of fiscal 1998, 1997 and 1996, respectively, revenue, net income and earnings per share would not differ materially from the amounts reflected in the accompanying consolidated financial statements for 1999, 1998 and 1997. Goodwill and the allowances for amortization at December 31 are as follows (in thousands of dollars):
1999 1998 1997 ---------------------------------------- Goodwill $494,900 $114,124 $ 82,607 Less allowances for amortization 40,117 20,116 23,262 ---------------------------------------- Goodwill, net $454,783 $ 94,008 $ 59,345 ========================================
54 22 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SEGMENT FINANCIAL DATA
1999 1998 1997 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- -------- -------- Amounts in millions NET SALES Construction Materials $1,810.6 $1,158.6 $1,051.0 $ 961.9 $ 884.7 $ 842.9 $ 756.7 $ 686.4 Chemicals 545.2 617.8 627.6 607.0 576.3 410.5 376.8 391.6 -------- -------- -------- -------- -------- -------- -------- -------- Total $2,355.8 $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 $1,078.0 ======== ======== ======== ======== ======== ======== ======== ======== EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES Construction Materials $ 370.0 $ 307.3 $ 228.8 $ 196.3 $ 181.1 $ 162.1 $ 116.2 $ 87.7 Chemicals 25.8 67.6 75.5 94.7 87.3 (7.6) 17.2 51.0 -------- -------- -------- -------- -------- -------- -------- -------- Total $ 395.8 $ 374.9 $ 304.3 $ 291.0 $ 268.4 $ 154.5 $ 133.4 $ 138.7 ======== ======== ======== ======== ======== ======== ======== ======== NET CASH PROVIDED BY OPERATING ACTIVITIES Construction Materials $ 386.7 $ 257.0 $ 264.2 $ 217.5 $ 182.9 $ 182.5 $ 156.6 $ 141.9 Chemicals 43.3 98.9 78.2 127.4 90.8 31.5 41.1 63.8 Net interest, other, net (27.0) (0.2) (2.3) (5.1) (7.9) (6.7) (5.6) (5.3) -------- -------- -------- -------- -------- -------- -------- -------- Total $ 403.0 $ 355.7 $ 340.1 $ 339.8 $ 265.8 $ 207.3 $ 192.1 $ 200.4 ======== ======== ======== ======== ======== ======== ======== ======== IDENTIFIABLE ASSETS Construction Materials $2,101.3 $ 894.6 $ 751.2 $ 719.6 $ 690.0 $ 678.8 $ 670.1 $ 688.9 Chemicals 547.7 452.7 459.0 441.1 395.5 389.5 288.7 285.2 -------- -------- -------- -------- -------- -------- -------- -------- Identifiable assets 2,649.0 1,347.3 1,210.2 1,160.7 1,085.5 1,068.3 958.8 974.1 Investment in nonconsolidated affiliates 65.3 70.3 61.0 56.0 50.8 53.9 51.1 43.4 General corporate assets 72.4 60.4 49.4 53.1 57.6 51.2 54.7 50.8 Cash items 52.8 180.6 128.6 50.8 21.9 7.7 14.0 15.6 -------- -------- -------- -------- -------- -------- -------- -------- Total $2,839.5 $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6 $1,083.9 ======== ======== ======== ======== ======== ======== ======== ======== AVERAGE CAPITAL EMPLOYED Construction Materials $1,981.1 $ 827.8 $ 737.5 $ 710.6 $ 681.5 $ 688.1 $ 707.4 $ 708.4 Chemicals 428.4 389.0 373.1 356.0 353.9 294.0 248.5 226.4 Cash items 66.5 122.0 62.5 27.5 6.8 11.0 7.0 22.4 -------- -------- -------- -------- -------- -------- -------- -------- Total $2,476.0 $1,338.8 $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9 $ 957.2 ======== ======== ======== ======== ======== ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials $ 160.7 $ 90.8 $ 84.5 $ 80.0 $ 75.3 $ 77.0 $ 78.4 $ 80.2 Chemicals 46.4 47.0 44.7 41.3 41.7 35.7 29.0 31.5 -------- -------- -------- -------- -------- -------- -------- -------- Total $ 207.1 $ 137.8 $ 129.2 $ 121.3 $ 117.0 $ 112.7 $ 107.4 $ 111.7 ======== ======== ======== ======== ======== ======== ======== ======== PROPERTY ADDITIONS* Construction Materials Replacement $ 73.6 $ 83.4 $ 65.8 $ 63.0 $ 53.2 $ 42.3 $ 39.4 $ 17.9 Environmental control 4.7 4.3 2.5 2.5 3.5 2.2 1.7 1.6 Profit-adding 831.3 88.3 57.2 58.6 37.7 24.8 18.2 37.0 -------- -------- -------- -------- -------- -------- -------- -------- Total $ 909.6 $ 176.0 $ 125.5 $ 124.1 $ 94.4 $ 69.3 $ 59.3 $ 56.5 ======== ======== ======== ======== ======== ======== ======== ======== Chemicals Replacement $ 15.8 $ 20.2 $ 26.2 $ 21.5 $ 15.8 $ 10.7 $ 9.3 $ 11.3 Environmental control 0.8 0.7 2.4 7.4 4.9 1.7 5.4 10.1 Profit-adding 101.5 33.4 27.9 34.2 10.5 78.1 26.6 20.6 -------- -------- -------- -------- -------- -------- -------- -------- Total $ 118.1 $ 54.3 $ 56.5 $ 63.1 $ 31.2 $ 90.5 $ 41.3 $42.0 ======== ======== ======== ======== ======== ======== ======== ======== Total Company Replacement $ 89.4 $ 103.6 $ 92.0 $ 84.5 $ 69.0 $ 53.0 $ 48.7 $ 29.2 Environmental control 5.5 5.0 4.9 9.9 8.4 3.9 7.1 11.7 Profit-adding 932.8 121.7 85.1 92.8 48.2 102.9 44.8 57.6 -------- -------- -------- -------- -------- -------- -------- -------- Total $1,027.7 $ 230.3 $ 182.0 $ 187.2 $ 125.6 $ 159.8 $ 100.6 $ 98.5 ======== ======== ======== ======== ======== ======== ======== ======== INCREASE (DECREASE) IN WORKING CAPITAL** Construction Materials $ 102.7 $ 19.5 $ (8.7) $ (3.2) $ (9.9) $ 3.9 $ 2.6 $ 14.1 Chemicals 7.8 12.2 11.9 (13.5) 18.1 11.8 (8.3) (3.2) -------- -------- -------- -------- -------- -------- -------- -------- Total $ 110.5 $ 31.7 $ 3.2 $ (16.7) $ 8.2 $ 15.7 $ (5.7) $ 10.9 ======== ======== ======== ======== ======== ======== ======== ======== 1991 1990 1989 -------- -------- -------- NET SALES Construction Materials $ 648.1 $ 696.1 $ 645.7 Chemicals 359.4 409.2 430.5 -------- -------- -------- Total $1,007.5 $1,105.3 $1,076.2 ======== ======== ======== EARNINGS (LOSS) BEFORE INTEREST AND INCOME TAXES Construction Materials $ 40.7 $ 112.0 $ 115.3 Chemicals 42.5 71.3 81.5 -------- -------- -------- Total $ 83.2 $ 183.3 $ 196.8 ======== ======== ======== NET CASH PROVIDED BY OPERATING ACTIVITIES Construction Materials $ 141.8 $ 130.2 $ 159.4 Chemicals 50.0 76.4 93.6 Net interest, other, net (9.5) (8.1) (4.6) -------- -------- -------- Total $ 182.3 $ 198.5 $ 248.4 ======== ======== ======== IDENTIFIABLE ASSETS Construction Materials $ 710.1 $ 764.4 $ 592.4 Chemicals 267.6 270.3 270.6 -------- -------- -------- Identifiable assets 977.7 1,034.7 863.0 Investment in nonconsolidated affiliates 39.1 32.6 21.6 General corporate assets 37.4 32.1 33.7 Cash items 18.9 18.6 84.2 -------- -------- -------- Total $1,073.1 $1,118.0 $1,002.5 ======== ======== ======== AVERAGE CAPITAL EMPLOYED Construction Materials $ 748.4 $ 656.8 $ 550.6 Chemicals 226.1 228.9 227.8 Cash items 3.1 29.2 73.7 -------- -------- -------- Total $ 977.6 $ 914.9 $ 852.1 ======== ======== ======== DEPRECIATION, DEPLETION AND AMORTIZATION Construction Materials $ 84.9 $ 83.2 $ 73.0 Chemicals 31.4 29.7 28.7 -------- -------- -------- Total $ 116.3 $ 112.9 $ 101.7 ======== ======== ======== PROPERTY ADDITIONS* Construction Materials Replacement $ 26.9 $ 63.9 $ 62.8 Environmental control 1.7 2.5 1.7 Profit-adding 32.2 120.9 63.2 -------- -------- -------- Total $ 60.8 $ 187.3 $ 127.7 ======== ======== ======== Chemicals Replacement $ 9.2 $ 13.0 $ 7.3 Environmental control 1.6 3.6 3.4 Profit-adding 14.1 18.6 8.3 -------- -------- -------- Total $ 24.9 $ 35.2 $ 19.0 ======== ======== ======== Total Company Replacement $ 36.1 $ 76.9 $ 70.1 Environmental control 3.3 6.1 5.1 Profit-adding 46.3 139.5 71.5 -------- -------- -------- Total $ 85.7 $ 222.5 $ 146.7 ======== ======== ======== INCREASE (DECREASE) IN WORKING CAPITAL** Construction Materials $ (10.8) $ 37.0 $ (20.2) Chemicals (0.5) (0.7) (8.2) -------- -------- -------- Total $ (11.3) $ 36.3 $ (28.4) ======== ======== ========
* Refer to page 64 for a discussion of the three categories used by the Company to classify property additions. ** Exclusive of debt and cash items. 55 23 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SEGMENT INFORMATION--CONSTRUCTION MATERIALS
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 -------------------------------------------------------------------------------------------- In millions SALES UNITS Aggregates: Customer sales-tons 195.4 165.4 155.2 146.7 136.4 133.4 124.7 117.3 109.7 117.9 110.8 JV and internal sales-tons* 24.6 14.2 12.2 11.3 11.9 11.7 10.5 9.0 5.6 4.2 3.2 -------------------------------------------------------------------------------------------- Total aggregates-tons 220.0 179.6 167.4 158.0 148.3 145.1 135.2 126.3 115.3 122.1 114.0 Other construction materials: Asphalt mix-tons 13.1 2.7 2.5 2.5 2.5 2.3 2.5 1.9 1.6 2.0 1.8 Ready-mixed concrete- cubic yards 3.6 0.4 0.4 0.3 0.4 0.3 0.3 0.3 0.3 0.3 0.3 SALES AMOUNTS Aggregates $1,193.0 $ 978.6 $ 880.9 $806.7 $723.1 $676.5 $601.4 $550.5 $523.9 $574.8 $542.4 Other products and services: Asphaltic products and placement 289.9 76.9 72.9 63.7 69.2 65.0 64.3 47.7 45.5 51.1 41.8 Ready-mixed concrete 206.6 19.7 17.5 16.3 16.4 14.5 12.3 12.4 12.1 10.7 11.9 Other 121.1 83.4 79.7 75.2 76.0 86.9 78.7 75.8 66.6 59.5 49.6 -------------------------------------------------------------------------------------------- Total $1,810.6 $1,158.6 $1,051.0 $961.9 $884.7 $842.9 $756.7 $686.4 $648.1 $696.1 $645.7 ============================================================================================
* Represents tons shipped by nonconsolidated businesses as well as tons sold to the Company's nonaggregates operations.
TEN-YEAR GROWTH FIVE-YEAR GROWTH 1989-1999 1994-1999 Units Amount Units Amount ---------------------------------------------------- AVERAGE ANNUAL COMPOUND GROWTH RATES Aggregates 5.4% 8.1% 7.6% 11.6% Asphalt mix 12.5% 12.9% 36.4% 25.4% Ready-mixed concrete 13.1% 18.5% 40.2% 48.7%
SALES BY END USE
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 ---------------------------------------------------------------------------- SALES OF AGGREGATES (ESTIMATED) Public construction: Highways, streets and airports 34% 34% 35% 37% 39% 40% 40% 40% 39% 37% Other public works 11 8 9 9 10 9 10 13 12 11 Government buildings 9 10 11 11 11 10 12 10 9 8 ---------------------------------------------------------------------------- Public total 54 52 55 57 60 59 62 63 60 56 ---------------------------------------------------------------------------- Private construction: Residential buildings 19 20 18 18 16 17 16 16 16 18 Private nonresidential buildings 22 23 22 20 19 18 17 15 17 20 Railroad ballast 2 2 2 2 2 3 2 3 3 3 Private nonconstruction: Agricultural, chemical and industrial 3 3 3 3 3 3 3 3 4 3 ---------------------------------------------------------------------------- Private total 46 48 45 43 40 41 38 37 40 44 ---------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ============================================================================
56 24 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES SEGMENT INFORMATION--CHEMICALS
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 -------------------------------------------------------------------------------------------- In millions SALES AMOUNTS Chloralkali-Inorganic $ 149.0 $ 205.4 $ 181.7 $208.1 $221.8 $154.7 $158.4 $214.5 $215.6 $221.3 $205.9 Chloralkali-Organic 209.7 220.9 256.6 234.2 223.3 193.3 207.2 170.9 143.8 187.9 224.6 Performance Chemicals 186.5 191.5 189.3 164.7 131.2 62.5 11.2 6.2 0.0 0.0 0.0 -------------------------------------------------------------------------------------------- Total $ 545.2 $ 617.8 $ 627.6 $607.0 $576.3 $410.5 $376.8 $391.6 $359.4 $409.2 $430.5 ============================================================================================
TEN-YEAR GROWTH FIVE-YEAR GROWTH 1989-1999 1994-1999 AMOUNT AMOUNT --------------- ---------------- AVERAGE ANNUAL COMPOUND GROWTH RATES Chloralkali-Inorganic -1.9% -1.6% Chloralkali-Organic 2.5% 1.3% Performance Chemicals NA 21.3%
SALES BY END USE
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 ---------------------------------------------------------------------------- SALES OF CHEMICALS (ESTIMATED) Process and intermediate chemicals 60% 58% 56% 58% 58% 58% 56% 54% 56% 53% Industrial durables and nondurables 22 21 23 21 22 24 26 29 23 27 Consumer nondurables 18 21 21 21 20 18 18 17 21 20 --------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% ===========================================================================
57 25 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS AND SUPPLEMENTARY DATA
1999 1998 1997 1996 1995 1994 -------------------------------------------------------------------- Amounts in millions, except per share data Net sales $2,355.8 $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 Cost of goods sold 1,769.3 1,226.8 1,199.5 1,115.4 1,044.7 985.2 -------------------------------------------------------------------- Gross profit on sales 586.5 549.6 479.1 453.5 416.3 268.2 Selling, administrative and general expenses 205.6 199.0 190.4 175.1 159.8 125.0 Other operating costs 22.7 7.4 5.1 3.9 6.3 5.5 Other income (charges), net 37.6 31.7 20.7 16.5 18.2 16.8 -------------------------------------------------------------------- Earnings before interest and income taxes 395.8 374.9 304.3 291.0 268.4 154.5 Interest income 4.3 6.7 3.2 3.2 1.1 1.2 Interest expense 48.5 6.8 6.9 8.6 11.1 9.8 -------------------------------------------------------------------- Earnings before income taxes 351.6 374.8 300.5 285.6 258.4 145.9 Provision for income taxes 111.9 118.9 91.4 97.0 92.2 47.9 -------------------------------------------------------------------- Net earnings before cumulative effect of accounting changes 239.7 255.9 209.1 188.6 166.2 98.0 Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 -------------------------------------------------------------------- Net earnings $ 239.7 $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 ==================================================================== Diluted earnings per share: Net earnings before cumulative effect of accounting changes $ 2.35 $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 Cumulative effect of accounting changes 0.00 0.00 0.00 0.00 0.00 0.00 -------------------------------------------------------------------- Net earnings $ 2.35 $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 ==================================================================== Operating income after taxes $ 270.8 $ 260.1 $ 213.4 $ 194.4 $ 173.4 $ 104.5 As a percent of average capital employed 10.9% 19.4% 18.2% 17.8% 16.6% 10.5% Gross profit on sales as a percent of net sales 24.9% 30.9% 28.5% 28.9% 28.5% 21.4% Net earnings: As a percent of net sales 10.2% 14.4% 12.5% 12.0% 11.4% 7.8% As a percent of average shareholders' equity 19.4% 24.0% 22.7% 22.4% 21.9% 13.6% Effective tax rate 31.8% 31.7% 30.4% 34.0% 35.7% 32.8% SUPPLEMENTARY COST DATA Energy $ 174.2 $ 133.5 $ 137.7 $ 135.4 $ 122.4 $ 122.0 Repairs and maintenance 236.7 159.2 161.1 151.8 141.1 128.6 Taxes other than income: Payroll 34.2 25.3 24.6 22.1 21.4 20.1 Property, franchise, etc. 35.9 20.6 17.6 20.3 19.6 19.8 Rentals 62.4 40.6 34.8 34.0 28.6 31.1 Royalties 44.5 21.9 21.4 20.3 17.8 17.3 Research and development 10.0 9.6 10.8 9.0 10.3 8.3 Advertising 1.2 1.0 0.9 0.9 0.6 0.5 1993 1992 1991 1990 1989 ---------------------------------------------------------- Net sales $1,133.5 $1,078.0 $1,007.5 $1,105.3 $1,076.2 Cost of goods sold 886.8 828.9 795.4 813.9 776.2 ---------------------------------------------------------- Gross profit on sales 246.7 249.1 212.1 291.4 300.0 Selling, administrative and general expenses 111.1 105.7 98.9 101.3 94.1 Other operating costs 5.0 5.3 28.2 6.2 4.9 Other income (charges), net 2.8 0.6 (1.8) (0.6) (4.2) ---------------------------------------------------------- Earnings before interest and income taxes 133.4 138.7 83.2 183.3 196.8 Interest income 1.0 1.8 1.5 3.7 6.7 Interest expense 9.2 9.8 11.3 7.8 6.1 ---------------------------------------------------------- Earnings before income taxes 125.2 130.7 73.4 179.2 197.4 Provision for income taxes 37.0 39.7 20.8 58.9 68.0 ---------------------------------------------------------- Net earnings before cumulative effect of accounting changes 88.2 91.0 52.6 120.3 129.4 Cumulative effect of accounting changes 0.0 3.0 0.0 0.0 1.5 ---------------------------------------------------------- Net earnings $ 88.2 $ 94.0 $ 52.6 $ 120.3 $ 130.9 ========================================================== Diluted earnings per share Net earnings before cumulative effect of accounting changes $ 0.80 $ 0.80 $ 0.46 $ 1.03 $ 1.07 Cumulative effect of accounting changes 0.00 0.03 0.00 0.00 0.01 ---------------------------------------------------------- Net earnings $ 0.80 $ 0.83 $ 0.46 $ 1.03 $ 1.08 ========================================================== Operating income after taxes $ 93.3 $ 98.7 $ 59.5 $ 125.1 $ 137.2 As a percent of average capital employed 9.7% 10.3% 6.1% 13.7% 16.1% Gross profit on sales as a percent of net sales 21.8% 23.1% 21.1% 26.4% 27.9% Net earnings: As a percent of net sales 7.8% 8.4% 5.2% 10.9% 12.4% As a percent of average shareholders' equity 12.8% 13.3% 7.7% 18.2% 20.5% Effective tax rate 29.5% 30.4% 28.4% 32.9% 33.7% SUPPLEMENTARY COST DATA Energy $ 124.7 $ 119.8 $ 115.5 $ 118.3 $ 107.9 Repairs and maintenance 120.0 115.7 111.4 109.4 108.1 Taxes other than income: Payroll 19.5 18.0 17.1 16.9 15.8 Property, franchise, etc. 18.0 17.9 17.3 15.8 14.1 Rentals 22.1 21.6 14.4 17.0 11.9 Royalties 15.8 14.3 13.8 16.0 15.2 Research and development 6.1 5.4 5.4 6.1 5.1 Advertising 0.5 0.5 0.5 0.7 0.6
58 26 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS AND OTHER FINANCIAL DATA
1999 1998 1997 1996 1995 ----------------------------------------------------------- As of December 31 Dollar amounts in millions ASSETS Cash and cash equivalents $ 52.8 $ 180.6 $ 128.6 $ 50.8 $ 21.9 Accounts and notes receivable 329.7 221.3 199.8 185.5 181.1 Inventories 178.7 143.7 132.4 128.6 126.8 Deferred income taxes 52.9 24.9 21.4 23.5 26.5 Prepaid expenses 10.6 5.9 4.9 5.6 5.8 ----------------------------------------------------------- Total current assets 624.7 576.4 487.1 394.0 362.1 Investments and long-term receivables 77.1 71.0 63.5 61.3 56.3 Property, plant and equipment, net 1,639.7 895.8 808.4 764.5 698.0 Goodwill 454.8 94.0 59.3 69.5 53.7 Deferred charges and other assets 43.2 21.4 30.9 31.3 45.7 ----------------------------------------------------------- Total $2,839.5 $1,658.6 $1,449.2 $1,320.6 $1,215.8 =========================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities* $ 386.6 $ 211.5 $ 207.7 $ 194.6 $ 177.4 Long-term obligations* 698.9 76.5 81.9 85.5 90.3 Other noncurrent liabilities 430.3 216.9 168.1 156.8 151.5 Shareholders' equity 1,323.7 1,153.7 991.5 883.7 796.6 ----------------------------------------------------------- Total $2,839.5 $1,658.6 $1,449.2 $1,320.6 $1,215.8 =========================================================== OTHER FINANCIAL DATA Average capital employed: Short-term debt* $ 295.0 $ 8.0 $ 8.6 $ 14.1 $ 45.6 Long-term obligations* 608.1 78.5 82.6 86.9 93.3 Other noncurrent liabilities 339.8 186.7 162.0 152.9 144.7 Shareholders' equity 1,233.1 1,065.6 919.9 840.2 758.6 ----------------------------------------------------------- Total $2,476.0 $1,338.8 $1,173.1 $1,094.1 $1,042.2 =========================================================== Working capital exclusive of debt and cash items $ 303.5 $ 193.0 $ 161.3 $ 158.1 $ 174.8 Current ratio 1.6 2.7 2.3 2.0 2.0 Average obligations* as a percent of average capital employed 36.5% 6.5% 7.8% 9.2% 13.3% Long -- term obligations* as a percent of long-term capital (year-end) 28.5% 5.3% 6.6% 7.6% 8.7% Ratio of earnings to fixed charges-consolidated 5.7 18.9 17.8 16.0 13.3 Average number of employees 9,243 6,971 7,180 6,926 6,918 1994 1993 1992 1991 1990 1989 -------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 7.7 $ 14.0 $ 15.7 $ 19.0 $ 18.6 $ 84.3 Accounts and notes receivable 182.1 150.4 151.4 138.1 152.9 136.9 Inventories 112.5 105.0 107.9 112.6 113.0 96.9 Deferred income taxes 29.1 26.9 24.6 11.9 7.0 11.6 Prepaid expenses 5.4 6.3 5.2 3.5 3.8 3.6 -------------------------------------------------------------------- Total current assets 336.8 302.6 304.8 285.1 295.3 333.3 Investments and long-term receivables 58.1 56.5 50.0 40.7 33.8 22.9 Property, plant and equipment, net 701.8 657.8 663.7 675.4 720.7 602.5 Goodwill 46.7 20.0 21.6 24.5 26.1 7.3 Deferred charges and other assets 37.7 41.7 43.8 47.4 42.1 36.5 -------------------------------------------------------------------- Total $1,181.1 $1,078.6 $1,083.9 $1,073.1 $1,118.0 $1,002.5 ==================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities* 211.3 $ 140.8 $ 135.0 $ 135.4 $ 233.8 $ 140.9 Long-term obligations* 97.4 102.0 107.3 111.1 44.7 55.2 Other noncurrent liabilities 140.8 132.8 141.5 143.7 159.3 142.9 Shareholders' equity 731.6 703.0 700.1 682.9 680.2 663.5 -------------------------------------------------------------------- Total $1,181.1 $1,078.6 $1,083.9 $1,073.1 $1,118.0 $1,002.5 ==================================================================== OTHER FINANCIAL DATA Average capital employed: Short-term debt* 39.4 $ 25.2 $ 24.1 $ 72.7 62.1 $ 8.3 Long-term obligations* 99.1 105.6 108.2 66.5 47.2 57.4 Other noncurrent liabilities 135.0 140.4 138.4 155.7 144.1 135.0 Shareholders' equity 719.6 691.7 686.5 682.7 661.5 651.4 -------------------------------------------------------------------- Total $ 993.1 $ 962.9 $ 957.2 $ 977.6 914.9 $ 852.1 ==================================================================== Working capital exclusive of debt and cash items $ 166.6 $ 150.9 $ 156.6 $ 145.7 $ 157.0 $ 120.8 Current ratio 1.6 2.1 2.3 2.1 1.3 2.4 Average obligations* as a percent of average capital employed 13.9% 13.6% 13.8% 14.2% 12.0% 7.7% Long-term obligations* as a percent of long-term capital (year-end) 10.0% 10.9% 11.3% 11.8% 5.1% 6.4% Ratio of earnings to fixed charges--consolidated 7.9 8.1 8.4 5.6 12.8 19.5 Average number of employees 6,753 6,320 6,273 6,404 6,628 6,276
* Includes capitalized lease obligations. 59 27 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 ------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net earnings before cumulative effect of accounting changes $ 239.7 $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 $ 91.0 $ 52.6 $ 120.3 $ 133.4 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization 207.1 137.8 129.2 121.3 117.0 112.7 107.4 111.7 116.3 112.9 101.7 Provision for impairment and liquidation of assets -- -- -- -- -- -- -- -- 21.1 -- -- (Increase) decrease in assets before effects of business acquisitions (34.5) (36.3) (8.4) 8.6 (6.1) (21.3) 0.8 (18.6) 13.5 (5.5) 15.6 Increase (decrease) in liabilities before effects of business acquisitions (6.6) 12.0 9.3 19.3 9.0 24.4 (2.9) 10.3 (14.6) (13.8) 16.1 Cumulative effect of accounting changes -- -- -- -- -- -- -- 3.0 -- -- 1.5 Other, net (2.7) (13.7) 0.9 2.0 (20.3) (6.5) (1.4) 3.0 (6.6) (15.4) (19.9) ------------------------------------------------------------------------------------------------ Net cash provided by operating activities 403.0 355.7 340.1 339.8 265.8 207.3 192.1 200.4 182.3 198.5 248.4 ------------------------------------------------------------------------------------------------ INVESTING ACTIVITIES Purchases of property, plant and equipment (314.7) (203.3) (161.2) (151.8) (109.2) (100.1) (96.0) (75.2) (63.6) (119.9) (102.9) Payment for business acquisitions (780.4) (24.9) (12.1) (64.8) (27.2) (87.6) (4.5) (33.2) (24.7) (117.9) (34.3) Proceeds from sale of property, plant and equipment 103.1 27.1 16.4 12.0 31.9 15.4 6.0 8.9 2.6 4.3 4.2 Investment in nonconsolidated companies -- -- -- (1.2) (1.9) (2.1) (9.6) (11.6) (13.0) (18.8) (9.0) Withdrawal of earnings from nonconsolidated companies 16.1 0.3 0.2 -- -- -- 0.3 0.4 -- 2.7 0.3 Cash provided by short-term investments -- -- -- -- -- -- -- -- -- -- 21.3 ------------------------------------------------------------------------------------------------ Net cash used for investing activities (975.9) (200.8) (156.7) (205.8) (106.4) (174.4) (103.8) (110.7) (98.7) (249.6) (120.4) ------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Proceeds from issuance of long-term debt 496.9 -- -- -- -- -- -- -- 81.0 -- -- Net borrowings (payments)-- commercial paper and bank lines of credit 91.3 (1.3) 0.4 (0.3) (39.3) 42.8 -- (9.8) (97.4) 107.1 -- Payment of short-term debt (96.3) (5.2) (5.0) (6.8) (4.7) (1.9) (1.2) (3.8) (4.6) (11.7) (4.1) Payment of long-term debt (1.2) (0.2) -- (0.1) -- (4.4) (3.4) (2.6) (12.3) (6.0) (6.0) Purchases of common stock (12.5) (65.0) (43.1) (45.2) (50.1) (28.6) (40.0) (32.4) (5.2) (59.2) (58.4) Dividends paid (78.7) (70.0) (63.6) (58.4) (51.8) (48.1) (46.3) (45.1) (45.7) (46.4) (45.1) Contribution from minority interest of consolidated subsidiaries 36.0 31.9 -- -- -- -- -- -- -- -- -- Other, net 9.6 6.9 5.7 5.7 0.7 1.0 0.9 0.7 1.0 1.6 1.8 ------------------------------------------------------------------------------------------------ Net cash provided by (used for) financing activities 445.1 (102.9) (105.6) (105.1) (145.2) (39.2) (90.0) (93.0) (83.2) (14.6) (111.8) ------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents (127.8) 52.0 77.8 28.9 14.2 (6.3) (1.7) (3.3) 0.4 (65.7) 16.2 Cash and cash equivalents at beginning of year 180.6 128.6 50.8 21.9 7.7 14.0 15.7 19.0 18.6 84.3 68.1 ------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 52.8 $ 180.6 $ 128.6 $ 50.8 $ 21.9 $ 7.7 $ 14.0 $ 15.7 $ 19.0 $ 18.6 $ 84.3 ================================================================================================
60 28 VULCAN MATERIAL COMPANY AND SUBSIDIARY COMPANIES AVERAGE ANNUAL COMPOUND GROWTH RATES*
TEN-YEAR GROWTH FIVE-YEAR GROWTH 1989-1999 1994-1999 ----------------------------------- OPERATING DATA Net sales: Construction Materials ............................................. 9.0% 14.4% Chemicals .......................................................... 5.4% 4.9% ----------------------------- Total ............................................................ 7.9% 11.5% ----------------------------- Earnings before interest and income taxes: Construction Materials ............................................. 16.8% 18.3% Chemicals .......................................................... NA NA ----------------------------- Segment earnings ................................................. 12.0% 17.9% Net earnings ......................................................... 11.7% 18.3% SHARE DATA Per common share: Basic net earnings ................................................. 13.8% 20.3% Diluted net earnings ............................................... 13.6% 20.1% Dividends paid ..................................................... 7.6% 12.2% Book value at year end ............................................. 8.7% 14.5% FINANCIAL POSITION Working capital at year end .......................................... 10.0% 17.3% Property, plant and equipment -- gross, at year end .................. 6.9% 10.3% Property, plant and equipment -- net, at year end .................... 6.3% 15.5% Average capital employed: Construction Materials ............................................. 6.8% 18.4% Chemicals .......................................................... 7.6% 6.5% Average shareholders' equity ......................................... 6.1% 11.5% OTHER DATA Depreciation, depletion and amortization: Construction Materials ............................................. 3.9% 13.0% Chemicals .......................................................... 5.8% 5.2% ----------------------------- Total ........................................................... 4.6% 10.8% ----------------------------- Net cash provided by operating activities ............................ 7.5% 12.8% Property additions ................................................... 13.2% 37.3% SELECTED NATIONAL PRICE INDICES Consumer price index for all urban consumers ......................... 2.9% 2.3% Gross domestic product implicit price deflator ....................... 2.2% 1.6% Producer price index for industrial commodities ...................... 1.3% 0.6%
* 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. 61 29 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES NET SALES, NET EARNINGS AND EARNINGS PER SHARE
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 ------------------------------------------------------------------------------------------------------------ AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NET SALES First quarter $ 482.2 $ 359.0 $ 341.4 $ 308.5 $ 294.4 $ 216.9 $ 214.1 $ 210.6 $ 197.0 $ 232.0 $ 217.5 Second quarter 611.5 465.8 445.1 419.2 382.8 326.7 306.0 284.2 266.4 295.7 293.7 Third quarter 656.4 509.5 477.9 443.6 422.0 360.4 331.4 312.3 289.3 306.6 307.3 Fourth quarter 605.7 442.1 414.2 397.6 361.8 349.4 282.0 270.9 254.8 271.0 257.7 ------------------------------------------------------------------------------------------------------------ Total $2,355.8 $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 $1,078.0 $1,007.5 $1,105.3 $1,076.2 ============================================================================================================ GROSS PROFIT ON SALES First quarter $ 98.2 $ 89.5 $ 76.1 $ 70.1 $ 58.8 $ 21.0 $ 29.7 $ 35.6 $ 27.6 $ 52.3 $ 47.4 Second quarter 158.4 146.9 136.5 129.3 113.2 77.4 74.0 74.5 66.7 88.6 90.5 Third quarter 178.9 175.3 147.0 139.6 133.8 90.4 85.1 80.8 71.3 90.0 103.2 Fourth quarter 151.0 137.9 119.5 114.5 110.5 79.4 57.9 58.2 46.5 60.5 58.9 ------------------------------------------------------------------------------------------------------------ Total $ 586.5 $ 549.6 $ 479.1 $ 453.5 $ 416.3 $ 268.2 $ 246.7 $ 249.1 $ 212.1 $ 291.4 $ 300.0 ============================================================================================================ NET EARNINGS (LOSS) First quarter $ 26.4 $ 36.5 $ 21.9 $ 20.1 $ 16.0 $ (5.2) $ (0.5) $ 7.6 $ (2.2) $ 18.7 $ 17.2 Second quarter 62.7 70.0 62.8 58.6 47.7 33.7 31.6 30.2 25.9 39.6 43.5 Third quarter 85.8 89.9 73.3 62.1 59.1 37.6 36.6 35.8 30.2 42.2 50.5 Fourth quarter 64.8 59.5 51.1 47.8 43.4 31.9 20.5 20.4 (1.3) 19.8 19.7 ------------------------------------------------------------------------------------------------------------ Total $ 239.7 $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 $ 94.0 $ 52.6 $ 120.3 $ 130.9 ============================================================================================================ BASIC EARNINGS (LOSS) PER SHARE First quarter $ 0.26 $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00 $ 0.07 $ (0.02) $ 0.16 $ 0.14 Second quarter 0.62 0.69 0.62 0.56 0.45 0.31 0.28 0.27 0.23 0.34 0.36 Third quarter 0.85 0.89 0.72 0.60 0.55 0.34 0.33 0.32 0.27 0.37 0.42 Fourth quarter 0.64 0.59 0.51 0.46 0.41 0.30 0.19 0.17 (0.02) 0.17 0.16 ------------------------------------------------------------------------------------------------------------ Full year $ 2.38 $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90 $ 0.80 $ 0.83 $ 0.46 $ 1.04 $ 1.08 ============================================================================================================ DILUTED EARNINGS (LOSS) PER SHARE First quarter $ 0.26 $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00 $ 0.07 $ (0.02) $ 0.16 $ 0.14 Second quarter 0.61 0.68 0.61 0.55 0.44 0.31 0.28 0.27 0.23 0.34 0.36 Third quarter 0.84 0.88 0.71 0.59 0.55 0.34 0.33 0.31 0.26 0.36 0.42 Fourth quarter 0.64 0.58 0.50 0.46 0.40 0.29 0.19 0.18 (0.01) 0.17 0.16 ------------------------------------------------------------------------------------------------------------ Full year $ 2.35 $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80 $ 0.83 $ 0.46 $ 1.03 $ 1.08 ============================================================================================================
62 30 VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES COMMON STOCK PRICES, DIVIDENDS AND RELATED DATA
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 --------------------------------------------------------------------------------------------------- COMMON STOCK PRICES (NYSE) First quarter High $ 48.13 $37.83 $22.17 $19.42 $19.21 $17.29 $18.71 $13.42 $12.58 $15.54 $14.67 Low 40.75 31.50 18.42 17.71 16.04 15.17 15.67 12.00 10.13 13.75 13.50 Close 41.31 36.50 21.63 18.88 19.17 16.17 17.25 13.08 11.42 15.13 14.25 Second quarter High 50.75 39.90 26.88 19.79 19.58 16.17 17.33 15.58 13.33 15.58 16.17 Low 39.63 34.83 20.42 18.46 18.00 14.67 13.42 12.54 11.29 14.42 14.17 Close 48.25 35.56 26.17 19.79 18.17 15.29 15.42 15.50 12.58 14.54 14.42 Third quarter High 51.25 40.75 30.15 22.17 20.13 18.00 16.58 15.50 13.08 15.13 16.00 Low 34.31 33.63 26.13 18.17 17.25 14.96 14.58 13.25 11.33 11.67 14.29 Close 36.63 33.73 29.00 20.00 17.67 17.96 16.13 13.58 12.96 12.25 15.54 Fourth quarter High 44.13 44.67 34.65 21.67 19.63 18.83 16.92 16.54 13.25 12.50 15.83 Low 34.81 31.33 28.15 19.83 17.50 15.50 14.50 13.17 11.21 9.79 14.21 Close 39.94 43.85 34.04 20.29 19.21 16.88 15.63 16.08 12.00 11.33 14.83 Year High 51.25 44.67 34.65 22.17 20.13 18.83 18.71 16.54 13.33 15.58 16.17 Low 34.31 31.33 18.42 17.71 16.04 14.67 13.42 12.00 10.13 9.79 13.50 Close 39.94 43.85 34.04 20.29 19.21 16.88 15.63 16.08 12.00 11.33 14.83 DIVIDENDS PAID PER SHARE OF COMMON STOCK First quarter $ 0.195 $0.173 $0.157 $0.140 $0.122 $0.110 $0.105 $0.100 $0.100 $0.100 $0.093 Second quarter 0.195 0.173 0.157 0.140 0.122 0.110 0.105 0.100 0.100 0.100 0.093 Third quarter 0.195 0.173 0.157 0.140 0.122 0.110 0.105 0.100 0.100 0.100 0.093 Fourth quarter 0.195 0.173 0.157 0.140 0.122 0.110 0.105 0.100 0.100 0.100 0.093 --------------------------------------------------------------------------------------------------- Total $ 0.780 $0.693 $0.627 $0.560 $0.487 $0.440 $0.420 $0.400 $0.400 $0.400 $0.373 =================================================================================================== OTHER DATA Price earnings ratio (annual) High 21.8 17.8 17.0 12.4 13.0 21.2 23.5 19.9 29.0 15.1 15.0 Low 14.6 12.5 9.1 9.9 10.4 16.5 16.8 14.5 22.0 9.5 12.5 Close 17.0 17.5 16.7 11.4 12.4 19.0 19.6 19.4 26.1 11.0 13.7 Dividends paid as a percent of earnings per share 33.3% 27.8% 30.8% 31.3% 31.5% 49.4% 52.7% 48.2% 87.0% 38.7% 34.6% Shareholders' equity per common share $ 12.95 $11.29 $ 9.64 $ 8.37 $ 7.39 $ 6.65 $ 6.34 $ 6.18 $ 5.96 $ 5.84 $ 5.48 Ratio of stock price to shareholders' equity per common share at year end 3.1 3.8 3.5 2.4 2.5 2.5 2.4 2.6 2.0 1.9 2.6 Common shares outstanding at year end (in millions) 100.7 100.6 101.1 102.7 104.9 107.7 109.0 111.7 114.0 114.3 118.5 Average common shares outstanding (in millions) 100.9 100.9 101.5 104.3 106.6 109.3 110.3 112.8 114.2 116.0 120.7 Average common shares outstanding, assuming dilution (in millions) 102.2 102.2 102.8 105.5 107.8 110.0 110.9 113.3 114.6 116.5 121.2
The Company's commons stock is traded on the New York Stock Exchange (ticker symbol VMC). As of January 31, 2000, the number of shareholders of record approximated 3,655. Dividends paid in 1999 totaled $78,730,000 as compared with $70,015,000 paid in 1998. On February 11, 2000, the Board of Directors authorized a quarterly dividend of 21 cents per common share payable March 10, 2000. The new quarterly dividend represents a 7.7% increase over quarterly dividends paid in 1999. 63 31 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 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 Net earnings from operations plus the after-tax cost of interest expense. 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 on 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 and income taxes and after allocation of corporate expenses and income, and after assignment of equity income to the segments with which it is related in terms of products and services. Allocations are based on capital employed and average customer sales. SHORT-TERM DEBT The sum of current interest-bearing debt, including current maturities of long-term debt and interest-bearing notes payable. 64 EX-21 5 LIST OF THE COMPANY'S SUBSIDIARIES 1 EXHIBIT 21 VULCAN MATERIALS COMPANY SUBSIDIARIES AS OF DECEMBER 31, 1999 (ACTIVE SUBSIDIARIES ONLY)
STATE OR OTHER % OWNED JURISDICTION OF DIRECTLY INCORPORATION OR INDIRECTLY ENTITY OR ORGANIZATION BY VULCAN ------ --------------- --------- SUBSIDIARIES: Allied Concrete & Materials Co. Arizona 100 Allied Concrete, Inc. Arizona 100 Atlantic Granite Company South Carolina 66-2/3 Azusa Rock, Inc. California 100 Callaway Chemical Company New Jersey 100 Callaway Chemical De Mexico S DeRL DE CV Mexico 100 Callaway Chemical Limited British Columbia 100 CalMat Co. Delaware 100 CalMat Co. of Arizona Arizona 100 CalMat Co. of Central California California 100 CalMat Co. of New Mexico New Mexico 100 CalMat Land Co. California 100 CalMat Leasing Co. Arizona 100 CalMat Properties Co. California 100 Graves W. Yates Transportation, Inc. Texas 100 Kirst Construction Co., Inc. California 100 Palomar Transit Mix Co. California 100 R.C. Fulfer Company, Inc Texas 100 RECO Transportation, LLC Delaware 100 Reliance Transport Co. California 100 Rio Norte Este Co. California 100 River Bend Corp. California 100 Sanger Rock and Sand California 100 Sloan Canyon Sand Co. California 100 Statewide Transport, Inc. Texas 100 Triangle Rock Products, Inc. California 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 International, Ltd. U.S. Virgin Islands 100 Vulcan International Holdings ApS Denmark 100 Vulcan Lands, Inc. New Jersey 100 Vulcan Materials Finance Company Tennessee 100 Vulcan Shipping Company, Limited Bahamas 50 Vulcan Soda Ash Company California 100 Wanatah Trucking Co., Inc Indiana 100 Western Environmental Contracting, Inc. California 100
EX-23 6 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 4, 2000, appearing in and incorporated by reference in the Annual Report on Form 10-K of Vulcan Materials Company for the year ended December 31, 1999, 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 26, 2000 EX-24 7 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, 1999 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 15th day of March, 2000. /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, 1999 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 15th day of March, 2000. /s/ Philip J. Carroll, Jr. ----------------------------------- Philip J. Carroll, Jr. 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, 1999 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 15th day of March, 2000. /s/ Livio D. DeSimone --------------------------------- Livio D. DeSimonei 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, 1999 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 15th day of March, 2000. /s/ Phillip W. Farmer -------------------------------- Phillip W. Farmer 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, 1999 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 15th day of March, 2000. /s/ John K. Greene ----------------------------- John K. Greene 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, 1999 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 15th day of March, 2000. /s/ Donald M. James ------------------------------ Donald M. James 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, 1999 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 15th day of March, 2000. /s/ Douglas J. McGregor ----------------------------------- Douglas J. McGregor 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, 1999 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 15th day of March, 2000. /s/ Ann D. McLaughlin ---------------------------------- Ann D. McLaughlin 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, 1999 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 15th day of March, 2000. /s/ James V. Napier ---------------------------- James V. Napier 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, 1999 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 15th day of March, 2000. /s/ Donald B. Rice ---------------------------- Donald B. Rice 11 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, 1999 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 15th day of March, 2000. /s/ Herbert A. Sklenar ------------------------------ Herbert A. Sklenar 12 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, 1999 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 15th day of March, 2000. /s/ Orin R. Smith -------------------------- Orin R. Smith EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR YEAR ENDED DECEMBER 31, 1999, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1999 DEC-31-1999 52,834 0 339,413 9,722 178,734 624,724 3,149,897 1,510,182 2,839,493 386,642 698,862 0 0 139,705 1,183,948 2,839,493 2,355,778 2,355,778 1,769,327 1,769,327 22,714 (109) 48,576 351,561 111,868 239,693 0 0 0 239,693 2.38 2.35
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