SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 April 30, 1995
Common Stock, $1 Par Value 35,858,944
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
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 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)
March 31, December 31, March 31,
Assets 1995 1994 1994
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Current assets
Cash and cash equivalents.......................... $ 1,502 $ 7,717 $ 2
Accounts and notes receivable, less allowance for
doubtful accounts: Mar. 31, 1995, $8,571; Dec. 31,
1994, $8,244; Mar. 31, 1994, $7,447.............. 186,724 182,128 149,028
Inventories:
Finished products................................ 88,744 77,721 82,964
Raw materials.................................... 10,947 9,248 5,553
Products in process.............................. 1,110 623 1,271
Operating supplies and other..................... 26,434 24,889 24,706
Total inventories........................... 127,235 112,481 114,494
Deferred income taxes.............................. 28,034 29,074 26,053
Prepaid expenses................................... 6,528 5,398 10,367
Total current assets........................ 350,023 336,798 299,944
Investments and long-term receivables................ 58,859 58,138 56,689
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization: Mar. 31,
1995, $1,121,863; Dec. 31, 1994, $1,107,132; Mar. 31,
1994, $1,060,169.................................... 698,817 701,757 658,633
Deferred charges and other assets..................... 83,223 84,451 64,803
Total........................................ $1,190,922 $1,181,144 $1,080,069
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term obligation........... $ 4,703 $ 4,687 $ 1,745
Notes payable........................................ 33,689 42,779 7,457
Other current liabilities............................ 184,856 163,882 143,300
Total current liabilities..................... 223,248 211,348 152,502
Long-term obligations.................................. 97,193 97,380 101,956
Deferred income taxes.................................. 82,823 82,507 75,121
Other noncurrent liabilities........................... 55,516 58,280 57,323
Other commitments and contingent liabilities...........
Shareholders' equity................................... 732,142 731,629 693,167
Total......................................... $1,190,922 $1,181,144 $1,080,069
<FN>
*Balance sheets as of March 31 are unaudited.
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts and shares in thousands, except per share data)
Three Months Ended
March 31*
1995 1994
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Net sales...........................................$ 294,388 $ 216,893
Cost of goods sold.................................. 235,602 195,883
Gross profit on sales............................... 58,786 21,010
Selling, administrative and general expenses........ 37,394 27,841
Other operating costs............................... 1,243 1,338
Other income, net................................... 6,853 2,695
Earnings (loss) before interest expense
and income taxes.................................. 27,002 (5,474)
Interest expense.................................... 2,521 2,210
Earnings (loss) before income taxes................. 24,481 (7,684)
Provision for income taxes.......................... 8,519 (2,458)
Net earnings (loss).................................$ 15,962 $ (5,226)
Primary and fully diluted earnings (loss) per
share of common stock............................. $0.44 ($0.14)
Average common and common equivalent
shares outstanding**.............................. 36,094 36,718
Cash dividends per share of common stock............ $0.365 $0.33
Depreciation, depletion and amortization
deducted above.................................... $26,848 $26,834
Effective tax rate.................................. 34.8% 32.0%
<FN>
* Unaudited
**Primary and fully diluted earnings (loss) per share of common stock is
computed by dividing the net loss by the weighted average number of
common shares and common share equivalents outstanding during the
period. Common share equivalents represent the number of shares
contingently issuable under a long-range performance share plan.
Refer to Exhibit 11 for computation.
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Three Months Ended
March 31*
1995 1994
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Operations
Net earnings (loss).........................................$ 15,962 $ (5,226)
Adjustments to reconcile net earnings (loss) to net cash
provided by continuing operations:
Depreciation, depletion and amortization................ 26,848 26,834
Increase in assets before effects of
business acquisitions................................. (19,440) (8,630)
Increase in liabilities before effects of
business acquisitions................................. 16,917 2,168
Other, net.............................................. (2,910) 939
Net cash provided by continuing operations........... 37,377 16,085
Net cash used for discontinued operations................... (327) (139)
Net cash provided by operations...................... 37,050 15,946
Investing Activities
Purchases of property, plant and equipment.................. (24,204) (23,475)
Proceeds from sale of property, plant and equipment......... 5,987 3,031
Investment in nonconsolidated companies..................... (577) (328)
Withdrawal of earnings from nonconsolidated companies....... 250 -
Net cash used for investing activities............... (18,544) (20,772)
Financing Activities
Net borrowings - commercial paper and bank lines of credit.. (9,090) 7,400
Payment of short-term debt.................................. (157) (164)
Payment of long-term debt................................... (15) (4,357)
Purchases of common stock................................... (2,372) -
Dividends paid.............................................. (13,087) (12,047)
Net cash used for financing activities............... (24,721) (9,168)
Net decrease in cash and cash equivalents................... (6,215) (13,994)
Cash and cash equivalents at beginning of year.............. 7,717 13,996
Cash and cash equivalents at end of period..................$ 1,502 $ 2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)..................$ 846 $ 423
Income taxes.......................................... 1,385 815
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. Subsequent Events
Albright & Wilson Americas Inc. signed a memorandum of understanding on
April 5, 1995, with Vulcan Materials Company to sell its wholly owned
subsidiary, Rio Linda Chemical Company, Inc. to Vulcan. Rio Linda, based
in Sacramento, California, manufactures small-scale chlorine dioxide
generators for the food and water industries. In the year ending December
31, 1994, Rio Linda achieved sales of $12.1 million. The sale to Vulcan is
expected to close on May 31, 1995.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Amounts and shares in thousands, except per share data)
Three Months Ended
March 31
1995 1994
Primary and fully diluted earnings (loss):
Average common shares outstanding 35,867 36,491
Common share equivalents:
Performance share plan 227 227
Total shares 36,094 36,718
Net earnings (loss) $15,962 $(5,226)
Primary and fully diluted earnings (loss)
per share of common stock: 0.44 ($0.14)
<TABLE>
<CAPTION>
EXHIBIT 12
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands)
For the Years Ended December 31
1994 1993 1992 1991 1990
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Fixed charges:
Interest expense before
capitalization credits .........$ 10,699 $ 10,187 $ 10,441 $ 11,336 $ 9,349
Amortization of financing costs .......... 114 115 116 75 44
One-third of rental expense .......... 10,393 7,375 8,711 4,815 5,678
Total fixed charges .........$ 21,206 $ 17,677 $ 19,268 $ 16,226 $ 15,071
Net earnings from continuing
operations .........$ 97,976 $ 88,229 $ 90,980 $ 52,580 $120,278
Provision for income taxes .......... 47,930 36,993 39,746 20,867 58,951
Fixed charges .......... 21,206 17,677 19,268 16,226 15,071
Capitalized interest credits .......... (878) (1,016) (673) (131) (1,591)
Amortization of capitalized interest .......... 997 882 792 840 705
Earnings from continuing operations
before income taxes as adjusted .........$167,231 $142,765 $150,113 $ 90,382 $193,414
Ratio of earnings to fixed charges .......... 7.9 8.1 7.8 5.6 12.8
For the Three Months
Ended March 31, 1995
Fixed charges:
Interest expense before
capitalization credits .........$ 2,681
Amortization of financing costs .......... 28
One-third of rental expense .......... 1,964
Total fixed charges .........$ 4,673
Net earnings .........$ 15,962
Provision for income taxes .......... 8,519
Fixed charges .......... 4,673
Capitalized interest credits .......... (160)
Amortization of capitalized interest .......... 266
Earnings before income taxes
as adjusted .........$ 29,260
Ratio of earnings to fixed charges .......... 6.3
<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 three months ended March 31, 1995, were
$710,000 and for the one-year periods ended December 31, 1994, 1993,
1992, 1991, and 1990 were $2,666,000, $2,731,000, $3,583,000, $3,525,000
and $2,535,000, 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
FIRST QUARTER 1995 AS COMPARED WITH FIRST QUARTER 1994
Vulcan's first quarter sales were at a record level and net earnings improved
substantially from the 1994 result. Net earnings were $16.0 million, or 44
cents per share, as compared with a net loss of $5.2 million, or 14 cents per
share in 1994's first quarter.
Sales for the first quarter were $294.4 million, up 36% from last year's total
of $216.9 million. The segment detail of that increase is as follows:
First Quarter Sales
1995 1994 Increase
Construction Materials $155.5 $133.5 $22.0
Chemicals 138.9 83.4 55.5
Total $294.4 $216.9 $77.5
Construction Materials reported record first quarter sales, reflecting a
16% increase from the 1994 first quarter. The increase reflects continued
improvement in the demand for crushed stone as well as higher unit selling
prices. Favorable weather conditions in the first quarter also contributed
to the improved result. Shipments and average prices of crushed stone in the
quarter increased 15% and 4%, respectively, from last year's levels.
Chemicals sales were also at a record first quarter level and increased 67%
from last year's first quarter. The increase partially reflects the
acquisition of Callaway Chemical Company as of August 1, 1994. Excluding the
effect of that acquisition, first quarter Chemicals sales increased 37% due
principally to sharply higher caustic soda prices and higher prices for
chlorinated organic products.
Cost of goods sold in the first quarter of 1995 increased 20% from the 1994
level. The increase reflects the acquisition of Callaway Chemical Company,
higher raw material prices in the Chemicals segment and higher Construction
Materials volume.
Earnings before interest expense and income taxes were $27.0 million as
compared to a loss of $5.5 million in the same period last year. The segment
detail of this result is shown in the following summary (amount in millions):
First Quarter Earnings Before
Interest Expense and Income Taxes
1995 1994 Increase
Construction Materials $10.5 $(1.4) $11.9
Chemicals 16.5 (4.2) 20.7
Segment earnings * 27.0 (5.6) 32.6
Interest income, etc. - .1 (.1)
Total $27.0 $(5.5) $32.5
* 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.
The Construction Materials segment increase reflects higher volume and prices,
the effects of which were partially offset by increased operating costs. In
the first quarter of 1995, the Company sold its Iowa crushed stone operations
and four sand and gravel operations in northeast Indiana for a pretax gain of
$3.8 million. The first quarter of 1994 included nonrecurring gains on sales
of assets of $1.5 million. The Chemicals segment improvement reflects the
effects of higher selling prices for caustic soda and for chlorinated organic
products, which were partially offset by higher raw materials costs. Average
caustic soda prices were over three times the first quarter 1994 level and
were up 31% from the fourth quarter of 1994. In addition, Chemicals benefited
from the earnings of Callaway Chemical Company in the first quarter.
Selling, administrative and general expenses of $37.4 million for the first
quarter of 1995 increased 34% from the 1994 level. This increase reflects
principally the effect of the Callaway Chemical Company acquisition and higher
provisions for management incentive plans.
Other income, net of other charges, was $6.9 million in the first quarter as
compared with the 1994 total of $2.7 million. The favorable comparison
reflects an increase in gains on sales of assets, including the aforementioned
gain from the sale of the Iowa and Indiana operations. In addition, results
from the Crescent Market Project (the Company's joint venture to supply
limestone from Mexico to the U.S. Gulf Coast) improved again in 1995.
The provision for income taxes for the current quarter was $8.5 million, as
compared with last year's first quarter credit of $2.5 million. The increase
primarily reflects the higher pretax earnings. The effective tax rate for the
quarter was 34.8%, up from last year's first quarter rate of 32.0%.
On April 24, 1995, H.A. Sklenar, Chairman and Chief Executive Officer, made
certain statements concerning the Company's earnings outlook. Excerpts of the
relevant press release quoting Mr. Sklenar are as follows:
"Both of Vulcan's businesses reported much stronger first quarter
results in 1995. For Construction Materials, the 15% increase in
stone shipments reflected stronger demand as well as relatively
favorable weather conditions. All major sectors of demand for
aggregates, with the exception of residential construction, were
stronger in 1995 as compared with a year earlier. We currently
expect further growth in total aggregate demand during the
remainder of the year - albeit at a rate of increase less than the
increase in our first quarter stone shipments. The result should
be another year of record Construction Materials earnings.
"The recovery in caustic soda prices was the major factor
contributing to the improved sales and earnings in the Chemicals
segment. In addition, stronger market conditions for chlorinated
organic product permitted price increases in excess of raw material
cost increases for the first time since raw material costs began to
increase sharply in the second quarter of 1994. Favorable market
conditions for caustic and for chlorinated organics, and inclusion
of the full year's results of Callaway Chemical Company will
continue to benefit 1995 earnings comparisons for the segment. The
result should be a substantial earnings recovery for our Chemicals
business in 1995.
"Vulcan's first quarter performance enhances our expectation that
1995 will be a year of record net earnings and earnings per share
for the Company. "
LIQUIDITY AND CAPITAL RESOURCES
CONDENSED CONSOLIDATED BALANCE SHEETS - MARCH 31, 1995
AS COMPARED WITH DECEMBER 31, 1994 AND MARCH 31, 1994
AND
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPARISONS FOR THE YEAR TO DATE AS OF
MARCH 31, 1995 AND MARCH 31, 1994
Working Capital
Working capital, exclusive of debt and cash items, totaled $166.8 at March 31,
1995, and approximated the 1994 year-end amount of $166.6 million.
Inventories increased due primarily to seasonal build-ups in the Construction
Materials segment, offset by higher current liabilities. Working capital at
March 31, 1995 increased 4% from the same date last year. Higher receivables
and inventories due to increased sales and the acquisition of Callaway
Chemical Company were offset by higher current liabilities.
The Company's current ratio, which is based on all components of working
capital, including cash and debt items, was 1.6 as of March 31, 1995. This
was equal to the year-end 1994 ratio but down from a 2.0 ratio at March 31,
1994.
Cash Flows
Net cash provided by continuing operations totaled $37.4 million in the first
quarter of 1995, up sharply from the $16.1 million generated in the same
period last year. The increase reflects primarily higher earnings. Cash used
for investing activities was $18.5 million as compared with the 1994 total of
$20.8 million. Net cash used for financing activities totaled $24.7 million,
up from the 1994 amount of $9.2 million. The change reflects principally a
decrease in net borrowings.
Cash and cash equivalents, which totaled $1.5 million at March 31, 1995,
decreased $6.2 million in the first quarter of 1995 as compared with a
decrease of $14.0 million in the same period last year.
On February 16, 1995, the Board of Directors authorized a quarterly dividend
of 36 1/2 cents per common share. The new dividend represents a 10.6% (3 1/2
cents per share) increase over quarterly dividends paid in 1994.
Property Additions
Property additions totaled $26.1 million in 1995 as compared with $29.4
million in the first quarter of 1994. In the first quarter of 1994, the
Company acquired Peroxidation Systems Inc.
Short-Term Borrowings
Short-term borrowings as of March 31, 1995 and 1994 consisted of notes payable
to banks totaling $33.7 million and $7.5 million, respectively.
Long-Term Obligations
As of March 31, 1995, long-term obligations were 10% of long-term capital and
13.3% of shareholders' equity; the corresponding 1994 percentages were 11.0%
and 14.7%.
Common Stock Transactions
Pursuant to the Company's common stock purchase program, 47,700 shares of
common stock were purchased in the first quarter of 1995 at a total cost of
$2.4 million, equal to an average price of $49.72 per share. There were no
purchases of common stock in the first quarter of 1994.
PART II. OTHER INFORMATION
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
March 31, 1995.
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 /s/ D. F. Sansone
D. F. Sansone
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings for the three months ended March 31,
1995, and the Consolidated Balance Sheet as of March 31, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
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<ALLOWANCES> 8571
<INVENTORY> 127235
<CURRENT-ASSETS> 350023
<PP&E> 1820680
<DEPRECIATION> 1121863
<TOTAL-ASSETS> 1190922
<CURRENT-LIABILITIES> 223248
<BONDS> 97193
<COMMON> 46573
0
0
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</TABLE>
