SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4033
VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 63-0366371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Metroplex Drive, Birmingham, Alabama 35209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (205) 877-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Shares outstanding
Class at July 31, 1994
Common Stock, $1 Par Value 36,532,689
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED JUNE 30, 1994
Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets. . . . . . . .
Condensed Consolidated Statements of Earnings. . . .
Condensed Consolidated Statements of Cash Flows. . .
Notes to Condensed Consolidated Financial Statements
Exhibit 11 - Computation of Earnings Per Share . . .
Exhibit 12 - Computation of Ratio of Earnings
to Fixed Charges. . . . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . .
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . .
Exhibit 1 - Press release dated August 1, 1994 . . .
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . .
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS*
(Amounts in thousands)
June 30, Dec. 31, June 30,
Assets 1994 1993 1993
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Current assets
Cash and cash equivalents...............................$ 19,932 $ 13,996 $ 3,602
Accounts and notes receivable, less allowance for
doubtful accounts: June 30, 1994, $7,594; Dec. 31,
1993, $7,284; June 30, 1993, $8,957................... 198,409 150,404 192,090
Inventories:
Finished products..................................... 77,786 75,954 86,737
Raw materials......................................... 5,487 3,856 4,924
Products in process................................... 1,318 965 905
Operating supplies and other.......................... 25,546 24,242 27,475
Total inventories................................ 110,137 105,017 120,041
Deferred income taxes................................... 26,142 26,898 25,648
Prepaid expenses........................................ 19,213 6,298 17,222
Total current assets............................. 373,833 302,613 358,603
Investments and long-term receivables..................... 56,641 56,505 55,986
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization: June 30,
1994, $1,080,037; Dec. 31, 1993, $1,040,220; June 30,
1993, $1,002,694........................................ 660,063 657,785 661,681
Deferred charges and other assets......................... 64,482 61,648 67,922
Total............................................$ 1,155,019 $1,078,551 $ 1,144,192
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term obligations.............$ 4,749 $ 1,741 $ 821
Notes payable........................................... 45,233 - 59,777
Other current liabilities............................... 159,395 139,074 152,610
Total current liabilities........................ 209,377 140,815 213,208
Long-term obligations..................................... 97,698 102,035 106,771
Deferred income taxes..................................... 76,454 74,193 71,792
Other noncurrent liabilities (Note 3)..................... 55,647 58,545 67,524
Other commitments and contingent liabilities (Note 3).....
Shareholders' equity...................................... 715,843 702,963 684,897
Total............................................$ 1,155,019 $1,078,551 $ 1,144,192
<FN>
* Balance sheets as of June 30 are unaudited.
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30* June 30*
1994 1993 1994 1993
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Net sales...........................................$ 326,704 $ 305,940 $ 543,597 $ 520,063
Cost of goods sold................................... 249,355 231,867 445,238 416,296
Gross profit on sales................................ 77,349 74,073 98,359 103,767
Selling, administrative and general expenses......... 28,631 26,995 56,472 54,320
Other operating costs................................ 1,199 1,003 2,537 2,102
Other income, net.................................... 4,170 679 6,865 1,056
Earnings before interest
expense and income taxes........................... 51,689 46,754 46,215 48,401
Interest expense..................................... 2,205 2,490 4,415 4,884
Earnings before income taxes......................... 49,484 44,264 41,800 43,517
Provision for income taxes........................... 15,750 12,623 13,292 12,402
Net earnings .......................................$ 33,734 $ 31,641 $ 28,508 $ 31,115
Primary and fully diluted earnings per
share of common stock.............................. $0.92 $0.84 $0.78 $0.83
Average common and common equivalent
shares outstanding**............................... 36,771 37,220 36,743 37,315
Cash dividends per share of common stock............. $0.33 $0.315 $ 0.66 $ 0.63
Depreciation, depletion and amortization
deducted above..................................... $25,802 $25,288 $52,636 $50,246
Effective tax rate................................... 31.8% 28.5% 31.8% 28.5%
<FN>
* Unaudited
** Primary and fully diluted earnings per share of common stock are
computed by dividing net earnings by the weighted average number of
common shares and common share equivalents outstanding during the
period. Common share equivalents represent the number of shares
contingently issuable under a long-range performance share plan.
Refer to Exhibit 11 for computation.
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Six Months Ended
June 30*
1994 1993
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Operations
Net earnings ...............................................$ 28,508 $ 31,115
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Depreciation, depletion and amortization................ 52,636 50,246
Increase in assets before effects of
business acquisitions................................. (62,589) (65,573)
Increase in liabilities before effects of
business acquisitions................................. 17,890 16,387
Other, net.............................................. 1,744 (1,433)
Net cash provided by continuing operations........... 38,189 30,742
Net cash used for discontinued operations................... (415) (429)
Net cash provided by operations...................... 37,774 30,313
Investing Activities
Purchases of property, plant and equipment.................. (51,109) (47,498)
Payment for business acquisitions (net of acquired cash).... - (1,443)
Proceeds from sale of property, plant and equipment......... 5,131 1,648
Investment in nonconsolidated companies..................... (1,159) (6,847)
Withdrawal of earnings from nonconsolidated companies....... - 1
Net cash used for investing activities............... (47,137) (54,139)
Financing Activities
Net borrowings - commercial paper and bank lines of credit.. 45,233 59,777
Payment of short-term debt.................................. (1,459) (753)
Payment of long-term debt................................... (4,374) (30)
Purchases of common stock................................... - (23,871)
Dividends paid.............................................. (24,101) (23,364)
Net cash provided by financing activities............ 15,299 11,759
Net increase (decrease) in cash and cash equivalents........ 5,936 (12,067)
Cash and cash equivalents at beginning of year.............. 13,996 15,669
Cash and cash equivalents at end of period..................$ 19,932 $ 3,602
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)..................$ 4,283 $ 4,811
Income taxes.......................................... 3,597 10,298
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Liabilities assumed in business acquisition.............$ 5,761 $ -
Fair value of stock issued in business acquisition...... 7,476 -
<FN>
*Unaudited
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed financial statements have been prepared in
compliance with Form 10-Q instructions and thus do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the statements reflect all adjustments, including those of a
normal recurring nature, necessary to present fairly the results of the
reported interim periods. The statements should be read in conjunction
with the summary of accounting policies and notes to financial statements
included in the Company's latest annual report on Form 10-K. The reporting
of segment data required by Statement of Financial Accounting Standards No.
14, Financial Reporting for Segments of a Business Enterprise, is confined
to complete financial statements as provided in the Company's Form 10-K and
annual report to shareholders.
2. Effective Tax Rate
In accordance with generally accepted accounting principles, it is the
Company's practice at the end of each interim reporting period to make a
best estimate of the effective tax rate expected to be applicable for the
full fiscal year. The rate so determined is used in providing for income
taxes on a current year-to-date basis.
3. Contingent Liabilities
On March 9, 1994, the Company received a letter from the EPA concerning
alleged releases or threatened releases of hazardous substances at the
Jack's Creek/Sitkin Smelting Superfund Site located in Mifflin County,
Pennsylvania, near the town of Maitland. The Sitkin Smelting Company
operated a secondary smelting facility at the site from 1958 until
declaring bankruptcy in 1977. The EPA's letter states that the Company
may be considered a potentially responsible party ("PRP") pursuant to
Section 107(a) of CERCLA. The EPA advised that it may order some or all
of the PRPs to undertake response actions at the site and that PRPs may
also be liable for costs the EPA incurs or has incurred in responding to
any releases or threatened releases at the site. The EPA has already
undertaken certain response actions at the site, and has completed a
remedial investigation and feasibility study ("RI/FS").
The Company is among the 880 PRPs that EPA has initially identified as
having sold and shipped a total of approximately 307 million pounds of
material alleged to contain hazardous substances to the business operated
on the site. The EPA's documents indicate that the Company's shipments
occurred between 1972 and 1977, totalled approximately 1.8 million pounds,
and represent 0.63% of the total weight of the materials sent to this
smelting facility. These shipments consisted primarily of sales of brass
and other nonferrous metal parts and materials with valuable metal
content which the Company believes were co-products of its former
metals operation.
The EPA has designated the Company as one of 73 de maximus PRPs at the
site. The EPA considers the remaining PRPs de minimis or de micromis
parties. EPA has stated its intention to negotiate a cash payment
settlement with the approximately 450 de minimis parties. EPA has
classified another 325 entities as de micromis parties who EPA does not
intend to pursue because of their alleged small contribution to the volume
of material shipped to the site. Although the record of decision ("ROD")
for the site is not expected to be issued until 1995, the EPA currently
advocates a remedy for the site which has been estimated to cost $56.2
million. Based on the total volume of materials sent to the site and
considering the fact that certain PRPs are considered "orphans" because
these PRPs are in bankruptcies, have otherwise ceased business operations,
or cannot be located, the EPA has preliminarily advocated a reallocation of
percentages among the remaining and viable parties which would result in a
percentage attributed to the Company of 0.86% of the total of materials
sent to the site.
In addition to the EPA's assertions that the Company and other PRPs are
responsible for response costs related to the remediation of the site, the
Department of Interior (DOI) has asserted a natural resources damages claim
which it indicates it would be willing to settle for a total payment of
approximately $2.2 million, the cost of which would be allocated among the
PRPs. To date, the State natural resource trustees have not asserted
claims arising from impacts on State-protected natural resources.
Similarly, the Pennsylvania Department of Environmental Resources ("DER")
has allegedly incurred costs of investigation and response at this site,
but DER has not yet asserted a claim for recovery of such costs.
The Company and twenty-three (23) other PRPs have signed a PRP Organization
Agreement to respond to the claims of the EPA and DOI and to negotiate an
allocation of response costs related to the site. The Company's share, if
any, of past and future response costs associated with the site will be the
subject of on-going discussions with other PRPs, the EPA, the DOI and
potentially also the DER and State natural resource trustees. Based on the
limited information currently available to it, the Company does not believe
that its ultimate share of such costs will adversely affect the
consolidated financial statements of the Company to a material extent.
The Company's consolidated balance sheets include accrued environmental
cleanup costs for the Chemicals segment of $13,514,000 as of June 30, 1994,
$19,100,000 as of December 31, 1993 and $22,311,000 as of June 30, 1993.
These amounts include noncurrent liabilities of $529,000, $5,701,000 and
$15,239,000, respectively.
4. Subsequent Events
On August 1, 1994, the assets and business of Callaway Chemical Company
were acquired from Exxon Chemical Company. In a related transaction, the
assets and business of Comcor Chemicals Limited were acquired from Exxon
Corporation's affiliated Canadian company, Imperial Oil Limited. Callaway
Chemical Company will operate under its current name as a wholly-owned
subsidiary of Vulcan. The Comcor business will become Callaway Chemicals
Limited, a wholly-owned Canadian subsidiary of Vulcan. The two businesses
will be integrated and managed as a single unit.
The Company paid cash for the assets acquired. The purchase price paid for
all assets, including net working capital, was approximately $84 million.
Funds for the purchase price were obtained by the Company through issuance
and sale of short-term notes.
During the three-year period 1991 through 1993, the acquired businesses
reported unaudited average annual revenues of $92 million and unaudited
pretax operating income of $7.9 million. During the same period, earnings
before interest, taxes and depreciation ("EBITD") averaged $10.6 million.
These results do not purport to be indicative of results of operations
which may be obtained in the future.
Callaway Chemical, headquartered in Columbus, Georgia, is a leading
supplier of process aids for the pulp and paper, water treating and textile
industries. Comcor, based in Vancouver, British Columbia, manufactures and
supplies pulp and paper process aids principally in Canada. The two
businesses employ approximately 300 people.
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Amounts and shares in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
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Primary and fully diluted earnings:
Average common shares outstanding.......... 36,521 36,985 36,505 37,092
Common share equivalents:
Performance share plan................... 250 235 238 223
Total shares....................... 36,771 37,220 36,743 37,315
Net earnings................................. $ 33,734 $ 31,641 $ 28,508 $ 31,115
Primary and fully diluted earnings per
share of common stock:................... $ 0.92 $ 0.84 $ 0.78 $ 0.83
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 12
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands)
For the Years Ended December 31
1993 1992 1991 1990 1989
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Fixed charges:
Interest expense before
capitalization credits ..................$ 10,187 $ 10,441 $ 11,336 $ 9,349 $ 6,873
Amortization of financing costs ................... 115 116 75 44 42
One-third of rental expense ................... 7,375 8,711 4,815 5,678 3,979
Total fixed charges ..................$ 17,677 $ 19,268 $ 16,226 $ 15,071 $ 10,894
Net earnings from continuing
operations ..................$ 88,229 $ 90,980 $ 52,580 $120,278 $133,420
Provision for income taxes ................... 36,993 39,746 20,867 58,951 67,943
Fixed charges ................... 17,677 19,268 16,226 15,071 10,894
Capitalized interest credits ................... (1,016) (673) (131) (1,591) (756)
Amortization of capitalized interest................... 882 792 840 705 603
Earnings from continuing operations
before income taxes as adjusted ..................$142,765 $150,113 $ 90,382 $193,414 $212,104
Ratio of earnings to fixed charges ................... 8.1 7.8 5.6 12.8 19.5
For the Six Months
Ended June 30, 1994
Fixed charges:
Interest expense before
capitalization credits ..................$ 4,797
Amortization of financing costs ................... 57
One-third of rental expense ................... 3,979
Total fixed charges ..................$ 8,833
Net earnings ..................$ 28,508
Provision for income taxes ................... 13,292
Fixed charges ................... 8,833
Capitalized interest credits ................... (382)
Amortization of capitalized interest................... 452
Earnings before income taxes
as adjusted ..................$ 50,703
Ratio of earnings to fixed charges ................... 5.7
<FN>
NOTE: Since 1987, the Company has guaranteed a portion of certain debts of
two of the entities through which it participates in the Crescent
Market Project. In addition, since February 1994, the Company has
guaranteed a portion of certain debt of a third entity. The fixed
charges associated with such guaranties (under which the Company has
not been required to make any payments) for the six months ended
June 30, 1994, were $1,267,000 and for the one-year periods ended
December 31, 1993, 1992, 1991, 1990, and 1989 were $2,731,000,
$3,583,000, $3,525,000, $2,535,000 and $1,406,000, respectively.
Because the Company's ownership interests in the Crescent Market
Project are accounted for by the equity method, these amounts have
not been included in the computation of the ratios of earnings to
fixed charges presented above.
</TABLE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
GENERAL COMMENTS
Seasonality of the Company's Business
Results of any individual quarter are not necessarily indicative of results
to be expected for the year due principally to the effect that weather can
have on the sales and production volume of the Construction Materials
segment. Normally, the highest sales and earnings of the Construction
Materials segment are attained in the third quarter and the lowest are
realized in the first quarter when sales and earnings are substantially
below the levels realized in all subsequent quarters of the year.
Basis of Determining Sales Volume and Price Variances
Sales volume variances are calculated by multiplying the period-to-period
change in sales units by the prior period's unit sales prices. Sales price
variances are calculated by multiplying the period-to-period change in unit
sales prices by the current period's sales units. To the extent that products
and market areas are combined for these computations, the resultant "volume"
and "price" variances may each be affected by period-to-period changes in the
"mix" of product and market area sales.
Segment Sales and Earnings
Segment sales and earnings have been determined on the same basis as used in
prior Form 10-Q reports. Segment earnings are earnings before interest
expense and income taxes and after allocation of corporate expenses and
income, other than "interest income, etc.," (principally interest income
earned on cash items and gains or losses on corporate financing transactions),
and after assignment of equity income to the segments with which it is related
in terms of products and services. Allocations are based primarily on one or
a combination of the following factors: average gross investment, average
equity and sales.
RESULTS OF OPERATIONS
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
SECOND QUARTER 1994 AS COMPARED WITH SECOND QUARTER 1993
Sales in the second quarter were $326.7 million, up 7% from 1993's second
quarter. The segment detail of that increase is as follows (amounts in
millions):
Second Quarter Sales
Increase
1994 1993 (Decrease)
Construction Materials $236.8 $209.9 $26.9
Chemicals 89.9 96.0 (6.1)
Total $326.7 $305.9 $20.8
Construction Materials sales of $236.8 million were up 13% from the same
quarter last year. This increase reflects continued improvement in the
demand for crushed stone as well as higher unit selling prices. Shipments
and average prices of crushed stone in the quarter increased 8% and 5%,
respectively, from last year's level. Chemicals sales of $89.9 million
decreased 6% from last year's second quarter total. This decline was the
result of lower caustic soda and chlorinated organics prices. The average
price of caustic soda improved slightly from the first quarter 1994 level but
was down more than 50% from last year's second quarter average.
Cost of goods sold in the second quarter of 1994 increased 8% from 1993 levels
reflecting primarily higher volumes in the Construction Materials segment.
As a percent of sales, cost of goods sold was 76% in the second quarter of
both years.
Selling, administrative and general expenses of $28.6 million increased 6%
from the 1993 second quarter level, due primarily to higher provisions for
stock-based incentive plans.
Other income, net of other charges, improved from comparable 1993 levels,
reflecting higher gains on sales of assets and improved results from joint
ventures.
Earnings before interest expense and income taxes were $51.7 million in the
second quarter of 1994, up 11% from comparable 1993 earnings. The segment
detail of this result is shown in the following summary (amount in millions):
Second Quarter Earnings (Loss) Before
Interest Expense and Income Taxes
Increase
1994 1993 (Decrease)
Construction Materials $55.8 $42.2 $ 13.6
Chemicals (4.2) 4.5 (8.7)
Segment earnings * 51.6 46.7 4.9
Interest income, etc. .1 .1 -
Total $51.7 $46.8 $ 4.9
* After allocation of corporate expense and income, other than
"interest income, etc." (principally interest income earned on
short-term investment of funds and gains or losses on corporate
financing transactions), and after assignment of equity income
to the segments with which it is related in terms of products
and services.
Construction Materials segment earnings were $55.8 million in the second
quarter of 1994, up 32% from last year's second quarter level. Higher stone
volume and, to a lesser extent, higher prices contributed to the improved
result. The Chemicals segment recorded a loss of $4.2 million as compared
with last year's second quarter earnings of $4.5 million. Lower prices were
the principal cause of the decline.
The provision for income taxes for the second quarter was $15.8 million, as
compared with last year's second quarter expense of $12.6 million. The
increase reflects the higher pretax earnings as well as the higher tax rate.
Net earnings and earnings per share totaled $33.7 million and 92 cents, up 7%
and 10%, respectively, from 1993 levels.
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
YEAR-TO-DATE COMPARISONS AS OF
JUNE 30, 1994 AND JUNE 30, 1993
Sales for the first half of 1994 were $23.5 million up from the same period in
1993, with all of the improvement in the Construction Materials segment.
Sales of the segments are summarized as follows (amounts in millions):
Sales for the Six Months
Ended June 30
Increase
1994 1993 (Decrease)
Construction Materials $370.3 $331.3 $39.0
Chemicals 173.3 188.8 (15.5)
Total $543.6 $520.1 $23.5
Construction Materials sales were $370.3 million, up 12% over 1993. Crushed
stone shipments were up 8% and average prices improved 5%. Chemicals sales
of $173.3 million declined 8% due primarily to depressed caustic soda prices.
Cost of goods sold for the first six months of 1994 increased 7% primarily
because of increased volume in both segments. As a percent of sales, cost
of goods sold in 1994 and 1993 was 82% and 80%, respectively.
Selling, administrative and general expenses were $56.5 million, an increase
of 4% over the first half of last year, reflecting principally higher
provisions for stock-based incentive plans.
Other income, net of other charges, increased from comparable 1993 levels.
This reflected higher gains on the sales of assets and improved results from
joint ventures.
First half earnings before interest expense and income taxes were $46.2
million, a decrease of 5% from comparable 1993 earnings of $48.4 million.
Segment detail is shown below (amounts in millions):
Earnings (Loss) Before Interest Expense
and Income Taxes for the
Six Months Ended June 30
Increase
1994 1993 (Decrease)
Construction Materials $54.4 $34.6 $ 19.8
Chemicals (8.4) 13.6 (22.0)
Segment earnings * 46.0 48.2 (2.2)
Interest income .2 .2 -
Total $46.2 $48.4 $ (2.2)
* After allocation of corporate expense and income, other than
"interest income, etc." (principally interest income earned
on short- term investment of funds and gains or losses on
corporate financing transactions), and after assignment of
equity income to the segments with which it is related in
terms of products and services.
Construction Materials segment earnings were $54.4 million, up 57% from last
year. The increase was the result of higher volumes as well as improved sales
prices. The Chemicals segment had a loss of $8.4 million as compared to
1993's first half earnings of $13.6 million, reflecting principally net lower
prices.
The provision for income taxes for the first half of 1994 was $13.3 million as
compared with last year's expense of $12.4 million. The increase reflects the
effect of the higher tax rate, partially offset by lower earnings.
Net earnings of $28.5 million and earnings per share of 78 cents were down 8%
and 6%, respectively, from the corresponding first half 1993 results.
Acquisition of Callaway Chemical Company
On August 1, 1994, the assets and business of Callaway Chemical Company were
acquired from Exxon Chemical Company. In a related transaction, the assets
and business of Comcor Chemicals Limited were acquired from Exxon
Corporation's affiliated Canadian company, Imperial Oil Limited. Callaway
Chemical Company will operate under its current name as a wholly-owned
subsidiary of Vulcan. The Comcor business will become Callaway Chemicals
Limited, a wholly-owned Canadian subsidiary of Vulcan. The two businesses
will be integrated and managed as a single unit.
During the three-year period 1991 through 1993, the acquired businesses
reported unaudited average annual revenues of $92 million and unaudited pretax
operating income of $7.9 million. During the same period, earnings before
interest, taxes and depreciation ("EBITD") averaged $10.6 million. These
results do not purport to be indicative of results of operations which may
be obtained in the future.
Callaway Chemical, headquartered in Columbus, Georgia, is a leading supplier
of process aids for the pulp and paper, water treating and textile industries.
Comcor, based in Vancouver, British Columbia, manufactures and supplies pulp
and paper process aids principally in Canada. The two businesses employ
approximately 300 people.
The acquisition of Callaway represents a significant milestone in Vulcan
Chemicals' pursuit of profitable growth opportunities in targeted businesses.
From 1989 to 1993, the acquired businesses' revenues and EBITD grew at average
annual rates of 7.9% and 10.0%, respectively. Callaway's strong positions in
several attractive businesses offer above average growth prospects in its
existing products and services and provide a platform for additional growth
via product line extensions and additions.
Outlook
On July 19, 1994, H. A. Sklenar, Chairman and Chief Executive Officer of
Vulcan made certain statements concerning the Company's earnings outlook.
Excerpts of the relevant press release quoting Mr. Sklenar are as follows:
"Improved demand from all major sectors of the construction
economy was evident in the second quarter as higher stone
shipments and improved selling prices produced a sharp
increase in Construction Materials earnings. We expect these
trends to continue, with the result that full year
Construction Materials earnings should be up significantly
from 1993's level.
"Results in our Chemicals business continue to be very
disappointing. However, recent developments in the caustic
soda market suggest that the worst may be behind us. Caustic
demand is strengthening, supplies are tight, and spot prices
are firming. If these trends continue, results should
improve from first half levels. Despite this improved
outlook, Chemicals full-year 1994 segment earnings probably
will be at or near the break-even level."
LIQUIDITY AND CAPITAL RESOURCES
CONDENSED CONSOLIDATED BALANCE SHEETS - JUNE 30, 1994
AS COMPARED WITH DECEMBER 31, 1993 AND JUNE 30, 1993
AND
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPARISONS FOR THE YEAR TO DATE AS OF
JUNE 30, 1994 AND JUNE 30, 1993
Working Capital
Working capital, exclusive of debt and cash items, was $196.0 million at
June 30, 1994, up 30% from the 1993 year-end total. Receivables were up due
to increased sales. As compared to last year's June 30 level, working
capital decreased 4%, principally reflecting a decrease in inventories.
As of June 30, 1993, working capital, exclusive of debt and cash items,
was $203.8 million. This was a 30% increase from the 1992 year-end total.
Receivables were up due to increased sales and inventories were higher due
primarily to build-ups in the Chemicals segment.
The Company's current ratio, which is based on all components of working
capital, including cash and debt items, was 1.8 as of June 30, 1994, down
from a 2.1 ratio at year-end 1993 but up from 1.7 at June 30, 1993.
Cash Flows
First half net cash provided by operations totaled $37.8 million, up
significantly from the $30.3 million generated in the same period last year.
The increase reflects principally a lower increase in working capital during
the first six months of 1994 as compared to 1993. Cash used for investing
activities totaled $47.1 million, as compared with $54.1 million in last
year's first half. This decrease reflects higher proceeds from the sale of
property, plant and equipment, decreased investment in nonconsolidated
companies and the lack of cash payments for business acquisitions in 1994,
partially offset by higher purchases of property, plant and equipment. Cash
provided by financing activities totaled $15.3 million in the first half of
1994, up from $11.8 million provided in 1993; this change reflects the absence
of any common stock purchases in 1994, which more than offset the impact of
lower net borrowings.
Cash and cash equivalents, which totaled $19.9 million at June 30, 1994,
increased $5.9 million in the first half of 1994. This compares with last
year's decrease of $12.1 million.<PAGE>
Property Additions
Property Additions
Property additions in the first six months of 1994 totaled $57.1 million as
compared with $49.2 million in the same period last year. The increase
reflects principally the stock for assets acquisition of Peroxidation Systems,
Inc. by the Chemicals segment. This business is being operated under the name
of Vulcan Peroxidation Systems, Inc. (VPSI). Headquartered in Tucson,
Arizona, VPSI provides equipment, chemicals and services to the municipal,
industrial and environmental water treatment markets.
Short-Term Borrowings
Short-term borrowings as of June 30, 1994 consisted of notes payable to banks
totaling $45.2 million. There were no short-term borrowings as of
December 31, 1993. Short- term borrowings as of June 30, 1993 totaled
$59.8 million of commercial paper.
Long-Term Obligations
As of June 30, 1994, long-term obligations were 10.3% of long-term capital and
13.6% of shareholders' equity. The corresponding 1993 percentages were 11.5%
and 15.6%.
Common Stock Transactions
There were no share purchases made pursuant to the Company's common stock
purchase program in the first half of 1994. Second quarter 1993 purchases
were 512,800 shares at a total cost of $22.5 million. This was equal to an
average price per share of $43.91. For the first half of 1993, common stock
purchases totaled 540,364 shares at a cost of $23.9 million, equal to $44.18
per share.
The Company's purchases of shares of common stock are made based upon the
common stock's valuation and price, the Company's liquidity and its actual and
projected needs for cash for investment projects and regular dividends, and
the Company's levels of debt.
Acquisition of Callaway Chemical Company
The purchase price for the assets acquired of Callaway Chemical Company and
Comcor Chemicals Limited, including net working capital, was approximately $84
million and was paid on August 1, 1994. Funds for the purchase price were
obtained by the Company through issuance and sale of short-term notes.
Capital expenditures in the acquired businesses for the remainder of 1994,
1995 and 1996 are projected to be approximately $4 million to $6 million
per year.
PART II. OTHER INFORMATION
Item 5. Other Information
The press release dated August 1, 1994, announcing the transfer of the assets
and business of Callaway Chemical Company and Comcor Chemicals Limited to
Vulcan Materials Company is shown as Exhibit 1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits furnished in accordance with Item 601 of Regulation S-K
and included in Part I:
Exhibit 11 - Computation of Earnings per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended June 30, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
` VULCAN MATERIALS COMPANY
Date 1994 /s/ D. F. Sansone
D. F. Sansone
Vice President, Finance
EXHIBIT 1
VULCAN CHEMICALS
News Release
Press Contacts: Vulcan Chemicals
David Donaldson
(205) 877-3022
Exxon Chemical
Vin Hoey
(713) 870-6221
Imperial Oil
Richard O'Farrell
(416) 968-4875
FOR IMMEDIATE RELEASE
August 1, 1994
VULCAN ACQUIRES CALLAWAY CHEMICAL COMPANY,
COMCOR CHEMICALS LIMITED
Birmingham, Alabama - Vulcan Chemicals announced today that it has concluded
agreements with Exxon Chemical Company, a division of Exxon Corporation,
resulting in the transfer of the assets and business of Exxon's Callaway
Chemical Company unit to Vulcan Chemicals. In a related transaction, the
assets and business of Comcor Chemicals Limited were transferred to Vulcan
by Exxon Corporation's affiliated Canadian company, Imperial Oil Limited.
Callaway Chemical Company will operate under its current name as a
wholly-owned subsidiary of Vulcan. The Comcor business will become Callaway
Chemical Limited, a wholly-owned Canadian subsidiary of Vulcan. The two
businesses will be integrated and managed as a single unit.
Combined 1993 sales of the two acquired companies were approximately $90
million. The two businesses employ approximately 300 people.
According to Vulcan Chemicals' President Mike Ferris, "We are proud to welcome
the employees of these two companies into our company, and look forward to a
long and productive future together. Callaway Chemical Company and Callaway
Chemical Limited will be excellent complements to Vulcan's strategic focus on
water management and pulp and paper chemicals. The companies also enhance
Vulcan's existing relationship with the textile industry, and provide a good
foundation for continued growth."
Callaway Chemical, headquartered in Columbus, Georgia, is a leading supplier
of process aids for the pulp and paper, water treating and textile industries.
Comcor, based in Vancouver, British Columbia, manufactures and supplies pulp
and paper process aids principally in Canada.
Vulcan Chemicals, a division of Vulcan Materials Company (NYSE:VMC) based
in Birmingham, Alabama, manufactures basic industrial chemicals including
chlorine, caustic soda, and a diversified line of chlorinated organic
chemicals. Through its wholly-owned subsidiary, Vulcan Peroxidation Systems
Inc., the company is a key supplier of equipment, chemicals, and services to
the municipal, industrial and environmental water treatment markets. With its
newest wholly-owned subsidiaries, Callaway Chemical Company and Callaway
Chemical Limited, the company is also a leading supplier of process aids
for the pulp and paper, water treating and textile industries.
(END)
