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 September 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:
Class at October 31, 1994
Common Stock, $1 Par Value 36,532,689
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 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 1. Legal Proceedings
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 COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS*
(Amounts in thousands)
September 30, December 31, September 30,
Assets 1994 1993 1993
<S> <C> <C> <C>
Current assets
Cash and cash equivalents............................. $ 8,502 $ 13,996 $ 10,091
Accounts and notes receivable, less allowance for
doubtful accounts: Sept. 30, 1994, $8,139; Dec. 31,
1993, $7,284; Sept. 30, 1993, $6,691................ 211,618 150,404 202,798
Inventories:
Finished products................................... 75,250 75,954 86,737
Raw materials....................................... 8,397 3,856 4,924
Products in process................................. 1,019 965 905
Operating supplies and other........................ 24,977 24,242 16,357
Total inventories.............................. 109,643 105,017 108,923
Deferred income taxes................................. 24,478 26,898 27,354
Prepaid expenses...................................... 12,866 6,298 12,409
Total current assets........................... 367,107 302,613 361,575
Investments and long-term receivables................... 57,590 56,505 56,049
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization:
Sept. 30, 1994, $1,099,928; Dec. 31, 1993,
$1,040,220; Sept. 30, 1993, $1,022,698................ 717,019 657,785 656,599
Deferred charges and other assets....................... 74,104 61,648 64,251
Total.......................................... $1,215,820 $1,078,551 $1,138,474
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term obligations........... $ 4,684 $ 1,741 $ 737
Notes payable......................................... 76,843 - 50,705
Other current liabilities............................. 154,573 139,074 148,032
Total current liabilities...................... 236,100 140,815 199,474
Long-term obligations................................... 97,539 102,035 103,178
Deferred income taxes................................... 77,672 74,193 73,214
Other noncurrent liabilities(Note 3).................... 63,120 58,545 68,757
Other commitments and contingent liabilities (Note 3)...
Shareholders' equity.................................... 741,389 702,963 693,851
Total.......................................... $1,215,820 $1,078,551 $1,138,474
<FN>
*Balance sheets as of September 30 are unaudited.
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30* September 30*
1994 1993 1994 1993
Net sales...........................................$ 360,359 $ 331,467 $ 903,956 $ 851,530
Cost of goods sold................................... 269,950 246,375 715,188 662,671
Gross profit on sales................................ 90,409 85,092 188,768 188,859
Selling, administrative and general expenses......... 33,753 29,683 90,225 84,003
Other operating costs............................. 1,771 1,424 4,308 3,526
Other income, net.................................... 3,051 1,804 9,916 2,860
Earnings from continuing operations
before interest expense and income taxes........... 57,936 55,789 104,151 104,190
Interest expense..................................... 2,804 2,345 7,219 7,229
Earnings from continuing operations
before income taxes................................ 55,132 53,444 96,932 96,961
Provision for income taxes........................... 17,532 16,880 30,824 29,282
Net earnings .......................................$ 37,600 $ 36,564 $ 66,108 $ 67,679
Primary and fully diluted earnings per
share of common stock.............................. $1.02 $0.99 $1.80 $1.82
Average common and common equivalent
shares outstanding**............................... 36,763 36,718 36,750 37,114
Cash dividends per share of common stock............. $0.33 $0.315 $0.99 $0.945
Depreciation, depletion and amortization
deducted above..................................... $27,055 $25,308 $79,691 $75,554
Effective tax rate................................... 31.8% 31.6% 31.8% 30.2%
<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)
Nine Months Ended
September 30*
1994 1993
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Operations
Net earnings .............................................. $66,108 $67,679
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Depreciation, depletion and amortization................ 79,691 75,554
Increase in assets before effects of
business acquisitions................................. (50,897) (62,056)
Increase in liabilities before effects of
business acquisitions................................. 15,646 14,934
Other, net.............................................. 3,832 4,046
Net cash provided by continuing operations........... 114,380 100,157
Net cash used for discontinued operations................... (660) (757)
Net cash provided by operations...................... 113,720 99,400
Investing Activities
Purchases of property, plant and equipment.................. (76,313) (66,709)
Payment for business acquisitions (net of acquired cash).... (78,630) (3,281)
Proceeds from sale of property, plant and equipment......... 6,721 2,297
Investment in nonconsolidated companies..................... (1,779) (8,987)
Withdrawal of earnings from nonconsolidated companies....... - 301
Net cash used for investing activities............... (150,001) (76,379)
Financing Activities
Net borrowings - commercial paper and bank lines of credit.. 76,843 50,705
Payment of short-term debt.................................. (1,668) (1,045)
Payment of long-term debt................................... (8,233) (3,414)
Purchases of common stock................................... - (39,980)
Dividends paid.............................................. (36,155) (34,865)
Net cash provided by financing activities............ 30,787 (28,599)
Net decrease in cash and cash equivalents................... (5,494) (5,578)
Cash and cash equivalents at beginning of year.............. 13,996 15,669
Cash and cash equivalents at end of period.................. $ 8,502 $10,091
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized).................. $ 5,297 $ 5,471
Income taxes.......................................... 26,996 30,688
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Liabilities assumed in business acquisition............. $16,041 $ -
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 October 5, 1994, the Company received an Administrative Complaint,
Findings of Violation, Notice of Proposed Assessment of a Civil Penalty
and Notice of Opportunity to Request a Hearing Thereon (the
"Complaint") from the EPA alleging that the Company violated various
provisions of the Clean Water Act. The Complaint proposes to issue a
final order assessing administrative penalties in the amount of
$125,000. The Company has requested a hearing to contest certain of
the violations alleged and the amount of the penalty, but no hearing
date has yet been set. The Company does not believe that any penalty
imposed will adversely affect the consolidated financial statements of
the Company to a material effect.
As previously reported in the Company's 10-K, during the spring of
1992, representatives of the EPA conducted certain inspections of the
Company's chemicals manufacturing plant in Geismar, Louisiana.
Subsequent to completing those inspections, on March 18, 1993, a
Complaint, Compliance Order, and Notice of Opportunity for Hearing (the
"Multimedia Complaint and Order") was issued to the Company by the EPA.
In the Multimedia Complaint and Order, the EPA made certain findings of
fact and law, and based upon such findings, alleged multiple count
violations of RCRA, CERCLA and the Clean Air Act, for which violations
EPA sought civil penalties in the total amount of $298,650. On
April 30, 1993, the Company filed its Answer to Complaint and
Compliance Order and Request for Hearing (the "Answer") with the EPA,
including a request for an adjudicatory hearing as provided in the
Multimedia Complaint and Order on all factual and legal issues raised
by the Company in its Answer. Subsequent to filing the Answer, the
Company and EPA engaged in negotiations regarding the settlement of
this matter. These settlements have reached a conclusion, and the
Company expects to enter into an Administrative Consent Agreement and
Consent Order (the "Consent Order") pursuant to which the Company will
pay civil penalties totalling $164,370 to the EPA. In addition, the
Consent Order provides that the Company will pay $15,000 as a
Supplemental Environmental Project to the State of Louisiana.
On October 6, 1994, a complaint was filed in the United States District
Court for the Western District of Oklahoma by 325 individual plaintiffs
against 70 defendants, including the Company. Plaintiffs allege
personal injuries and damages arising from exposure to chemicals,
solvents, minerals and metals in connection with plaintiffs' employment
at Tinker Air Force Base in Oklahoma City, Oklahoma. Plaintiffs seek
actual damages in the amount of $400,000,000 and exemplary damages
in the amount of $850,000,000 from all defendants. At this
point, the extent of the Company's liability, if any, in this
matter is unknown, and the potential for economic loss to the
Company cannot be gauged with any certainty at this time.
As previously reported in the Company's Form 8-K Current Report dated
June 12, 1992, an antidumping petition was filed on May 20, 1992, with
the International Trade Commission ("ITC"), by two stone producers and
a distributor in southeast Texas alleging that a U.S. industry was
being injured by imports of crushed limestone from Mexico. The
companies involved in the Crescent Market Project quarry and crush
limestone from Mexico's Yucatan Peninsula for sale along the U.S. Gulf
Coast. On June 29, 1992, the ITC, in a 5-0 vote (with one commissioner
not participating), determined that a U.S. industry was not being
injured by the importation of crushed limestone from Mexico. This
ruling was appealed to the United States Court of International Trade
("CIT") where the determination of the ITC was sustained and the action
was dismissed. The judgment of the CIT was appealed to the United
States Court of Appeals for the Federal Circuit. Oral argument
occurred on February 9, 1994. On September 15, 1994, the United States
Court of Appeals for the Federal Circuit affirmed the ruling of
the CIT.
The Company's consolidated balance sheets include accrued environmental
cleanup costs for the Chemicals segment of $9,506,600 as of
September 30, 1994, $19,100,000 as of December 31, 1993 and $20,419,000
as of September 30, 1993. These amounts include noncurrent liabilities
of $5,701,000 at September 30, 1994 and December 31, 1993 and
$15,239,000 at September 30, 1993.
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Amounts and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
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Primary and fully diluted earnings:
Average common shares outstanding.......... 36,533 36,503 36,514 36,894
Common share equivalents:
Performance share plan................... 230 215 236 220
Total shares....................... 36,763 36,718 36,750 37,114
Net earnings................................. $37,600 $36,564 $66,108 $67,679
Primary and fully diluted earnings per
share of common stock: $ 1.02 $ 0.99 $ 1.80 $ 1.82
</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
<S> <C> <C> <C> <C> <C>
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 $212,104
Ratio of earnings to fixed charges .......... 8.1 7.8 5.6 12.8 19.5
For the Nine Months
Ended September 30, 1994
Fixed charges:
Interest expense before
capitalization credits .........$ 7,773
Amortization of financing costs .......... 86
One-third of rental expense .......... 6,058
Total fixed charges .........$ 13,917
Net earnings .........$ 66,108
Provision for income taxes .......... 30,824
Fixed charges .......... 13,917
Capitalized interest credits .......... (554)
Amortization of capitalized interest .......... 683
Earnings before income taxes
as adjusted .........$110,978
Ratio of earnings to fixed charges .......... 8.0
<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 nine months ended September 30, 1994, were
$1,972,000 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 $1,046,000, respectively. Because the Company's ownership interest
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
THIRD QUARTER 1994 AS COMPARED WITH THIRD QUARTER 1993
Sales in the third quarter of $360.4 million increased 9% from the 1993 third
quarter level. The segment detail of that increase is as follows (amounts
in millions):
Third Quarter Sales
Increase
1994 1993 (Decrease)
Construction Materials $251.1 $234.1 $ 17.0
Chemicals 109.3 97.4 11.9
Total $360.4 $331.5 $ 28.9
Construction Materials sales totaled $251.1 million in the third quarter,
up 7% from the same period 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 4% and 5%, respectively, from last year's levels. Chemicals sales
of $109.3 million increased 12% from last year's third quarter level. This
increase reflects the acquisition of Callaway Chemical Company on August 1,
1994. Excluding the effects of 1994 acquisitions, third quarter Chemicals
sales decreased 8% from last year's level due to lower caustic soda volume
as well as lower volumes and prices in certain chlorinated organic products.
These declines were partially offset by higher caustic soda prices, as well
as improved prices for chlorine and muriatic acid. The average price of
caustic soda increased sharply from the second quarter level and also exceeded
the 1993 third quarter price.
Cost of goods sold in the third quarter of 1994 increased 10% from 1993
levels. The increase reflected the acquisition of Callaway Chemical, higher
operating costs in the Construction Materials segment and higher raw materials
prices and costs related to production outages at both major plants in the
Chemicals segment.
Selling, administrative and general expenses of $33.8 million increased 14%
from last year's third quarter level, principally reflecting the effect of
acquisitions by the Chemicals segment.
Other income, net of other charges, totaled $3.1 million in the third quarter,
up $1.2 million as compared to the same period last year. The increase
principally reflects higher gains on the sales of assets and improved results
referable to joint ventures. The profitability of the Crescent Market Project
continues to improve. Favorable earnings comparisons for the third quarter
and the nine months to date reflect higher volumes and prices in most areas of
the market served by the Project.
Earnings before interest expense and income taxes were $57.9 million in the
third quarter of 1994, up 4% from comparable 1993 earnings. The segment
detail of this result is shown in the following summary (amount in millions):
Third Quarter Earnings (Loss) Before
Interest Expense and Income Taxes
Increase
1994 1993 (Decrease)
Construction Materials $59.4 $51.1 $ 8.3
Chemicals (1.7) 4.7 (6.4)
Segment earnings * 57.7 55.8 1.9
Interest income, etc. .2 - .2
Total $57.9 $55.8 $ 2.1
* 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 $59.4 million, up 16% from the
1993 level. Higher volumes and prices contributed equally to the improved
result, which was partially offset by higher operating costs. The Chemicals
segment reported a loss of $1.7 million as compared with last year's third
quarter earnings of $4.7 million. Higher raw materials prices and costs
related to production outages, as well as lower volume, were the principal
causes of the earnings decline. Plant outages adversely impacted third
quarter Chemicals pretax earnings by approximately $5 million, equivalent
to 8 cents per share.
The provision for income taxes for the third quarter was $17.5 million,
as compared with last year's third quarter expense of $16.9 million. The
increase reflects the higher pretax earnings as well as the higher tax rate.
Net earnings and earnings per share totaled $37.6 million, as compared with
$36.6 million for the third quarter of 1993. Earnings per share for the
quarter were $1.02, up 3% from the 99 cents earned in the same period
last year.
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
YEAR-TO-DATE COMPARISONS AS OF
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
Sales for the first nine months of 1994 were up $52.5 million from the same
period in 1993. Sales of the segments are summarized as follows (amounts
in millions):
Sales for the Nine Months
Ended September 30
Increase
1994 1993 (Decrease)
Construction Materials $621.4 $565.4 $56.0
Chemicals 282.6 286.1 (3.5)
Total $904.0 $851.5 $52.5
Construction Materials sales were $621.4 million, up 10% over 1993. Crushed
stone shipments increased 6% and average prices improved 5%. Chemicals sales
of $282.6 million declined slightly due primarily to depressed caustic soda
prices, offset by the effect of acquisitions.
Cost of goods sold for the current year-to-date increased 8% due to higher
volumes in the Construction Materials segment, the Chemicals acquisitions
and higher operating costs in both segments.
Selling, administrative and general expenses were $90.2 million, up 7% over
comparable 1993 levels. This reflected the effect of acquisitions by the
Chemicals segment and higher provisions for stock based incentive plans.
Other income, net of other charges, increased $7.1 million from comparable
1993 levels due to higher gains on the sales of assets and improved results
from joint ventures.
Earnings for the current year-to-date before interest expense and income taxes
were $104.2 million, equal to comparable 1993 earnings. Segment detail is
shown below (amounts in millions):
Third Quarter Earnings (Loss) Before
Interest Expense and Income Taxes
Increase
1994 1993 (Decrease)
Construction Materials $113.8 $ 85.7 $ 28.1
Chemicals (10.1) 18.3 (28.4)
Segment earnings * 103.7 104.0 (.3)
Interest income .5 .2 .3
Total $104.2 $104.2 $ -
* 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 $113.8 million, up 33% from last
year. The increase was the result of higher volumes as well as improved sales
prices. The Chemicals segment had a loss of $10.1 million as compared with
1993 earnings of $18.3 million, reflecting principally net lower prices.
The provision for income taxes for the first nine months of 1994 was $30.8
million as compared with last year's expense of $29.3 million. The increase
reflects the higher tax rate.
Net earnings of $66.1 million and earnings per share of $1.80 decreased
slightly from comparable 1993 levels.
Outlook
On October 21, 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:
"After unusually wet weather in July depressed crushed stone
sales, shipments recovered to strong levels in August and
September. This resulted in a 4% volume increase for the
quarter as compared with last year's third quarter shipments.
Demand levels continue to be strong in most of our crushed
stone markets so weather will again be an important variable
impacting the fourth quarter results of our Construction
Materials segment.
"Caustic soda prices improved sharply in the third quarter.
As a result, for the first time since the fourth quarter of
1991, Vulcan's average price for caustic soda reflected an
increase as compared with the same quarter of the preceding
year. Unfortunately, sharply higher raw material costs for
our organic products and two plant outages - one of which was
unplanned - more than offset the favorable effect of improved
pricing. Our current view is that caustic prices will
continue to improve into 1995, so we are optimistic about next
year's earnings prospects for our Chemicals segment.
"For the fourth quarter, we expect normal operating results to
produce a good earnings improvement for the Chemicals segment,
especially if we succeed in achieving needed price increases
for our chlorosolvents. However, some or all of the
improvement may be offset by an additional accrual for
environmental remediation costs at the Cleve Rever superfund
site. Remediation of that site has been underway since August
1993, but testing for regulatory approvals of the incinerator
have only recently been concluded. We expect to reach a
decision regarding the need for an additional accrual in light
of information available at year-end."
LIQUIDITY AND CAPITAL RESOURCES
CONDENSED CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1994
AS COMPARED WITH DECEMBER 31, 1993 AND SEPTEMBER 30, 1993
AND
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPARISONS FOR THE YEAR TO DATE AS OF
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
Working Capital
Working capital, exclusive of debt and cash items, was $207.3 million at
September 30, 1994, up 37% from the 1993 year-end total. This included the
impact of acquisitions of the Chemicals segment. Receivables were also
impacted by increased sales. Working capital was level with last year's third
quarter amount, as an increase in receivables was offset by a higher level of
other current liabilities. These increases were related to the Chemicals
acquisitions.
The Company's current ratio, which is based on all components of working
capital, including cash and debt items, was 1.6 as of September 30, 1994.
This was down from a 2.1 ratio at year-end 1993 and a 1.8 ratio at
September 30, 1993.
Cash Flows
Cash provided from continuing operations in the first nine months of 1994
amounted to $114.4 million, up 14% from the $100.2 million generated in the
same period last year. The increase reflects primarily a lower increase in
working capital during the first nine months of 1994 as compared with 1993.
Cash used for investing activities was $150.0 million as compared with the
1993 total of $76.4 million, reflecting an increase in spending for business
acquisitions. Net cash provided by financing activities totaled $30.8
million. The comparable 1993 amount was a $28.6 million use of funds. The
change reflects the lack of treasury stock purchases in 1994 and an increase
in net borrowings.
Cash and cash equivalents, which totaled $8.5 million at September 30, 1994,
decreased $5.5 million in the first nine months of 1994 as compared with a
similar decrease last year of $5.6 million.
Property Additions
Property additions in the first nine months of 1994 totaled $142.5 million as
compared with 1993's comparable level of $70.1 million. This increase
reflects principally acquisitions by the Chemicals segment.
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's affiliated
company, Imperial Oil Limited. The total purchase price paid for all assets
approximated $83 million, which included $60 million for plant, property and
equipment. Callaway Chemical is a leading supplier of process aids for the
pulp and paper, water treatment and textile industries. Comcor, which is
being operated as Callaway Chemical Limited, manufactures and supplies pulp
and paper process aids, principally in Canada.
Peroxidation Systems Inc. was acquired in January 1994 and is being operated
under the name of Vulcan Peroxidation Systems Inc. (VPSI). VPSI provides
equipment, chemicals and services to the municipal, industrial and
environmental water treatment markets.
Short-Term Borrowings
Short-term borrowings as of September 30, 1994 consisted of notes payable to
banks totaling $76.8 million. There were no short-term borrowings as of
December 31, 1993. Short-term borrowings as of September 30, 1993 totaled
$50.7 million of commercial paper.
Long-Term Obligations
As of September 30, 1994, long-term obligations were 10.0% of long-term
capital and 13.2% of shareholders' equity. The corresponding 1993 percentages
were 11.0% and 14.9%.
Common Stock Transactions
There were no share purchases made pursuant to the Company's common stock
purchase program in the first nine months of 1994. Third quarter 1993
purchases were 354,524 shares at a total cost of $16.1 million, equal to an
average price per share of $45.44. For the first nine months of 1993, common
stock purchases totaled 894,888 shares at a cost of $40.0 million, equal to
$44.68 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 3 of the Notes to Condensed Consolidated Financial
Statements are incorporated herein by reference.
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 September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VULCAN MATERIALS COMPANY
Date November 14, 1994 /s/ D. F. Sansone
Vice President, Finance
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<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of September 30, 1994 and the Consolidated
Statements of Earnings for the nin months ended September 30, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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