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, 1996
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 October 31, 1996
Common Stock, $1 Par Value 34,663,348
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Earnings 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Exhibit 11 - Computation of Earnings Per Share 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 6
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<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 1996 1995 1995
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Current assets
Cash and cash equivalents............................... $ 23,057 $ 21,869 $ 9,319
Accounts and notes receivable, less allowance for
doubtful accounts: Sept. 30, 1996, $8,434; Dec. 31,
1995, $8,176; Sept. 30, 1995, $8,712................... 229,595 181,060 235,808
Inventories:
Finished products..................................... 83,431 90,009 82,678
Raw materials......................................... 10,730 10,062 9,974
Products in process................................... 600 979 1,089
Operating supplies and other.......................... 29,540 25,751 25,989
Total inventories................................ 124,301 126,801 119,730
Deferred income taxes................................... 28,259 26,555 26,490
Prepaid expenses........................................ 7,659 5,836 9,693
Total current assets............................. 412,871 362,121 401,040
Investments and long-term receivables..................... 60,699 56,272 61,660
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization: Sept. 30,
1996, $1,219,381; Dec. 31, 1995, $1,161,404; Sept 30,
1995, $1,164,734........................................ 754,409 698,033 706,022
Deferred charges and other assets......................... 99,483 99,368 91,458
Total............................................ $1,327,462 $1,215,794 $1,260,180
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term obligations............. $ 6,565 $ 7,070 $ 5,716
Notes payable........................................... 18,178 3,569 80,274
Trade payables and accruals............................. 92,167 98,253 101,307
Other current liabilities............................... 91,402 68,517 79,287
Total current liabilities........................ 208,312 177,409 266,584
Long-term obligations..................................... 85,314 90,278 91,778
Deferred income taxes..................................... 89,626 85,935 84,897
Other noncurrent liabilities.............................. 68,067 65,534 63,217
Shareholders' equity...................................... 876,143 796,638 753,704
Total............................................ $1,327,462 $1,215,794 $1,260,180
<FN>
* Balance sheets as of September 30 are unaudited.
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts and shares in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30* September 30*
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales........................................$ 443,626 $ 421,981 $ 1,171,389 $ 1,099,188
Cost of goods sold............................... 304,028 288,114 832,341 793,348
Gross profit on sales............................ 139,598 133,867 339,048 305,840
Selling, administrative and general expenses..... 44,185 39,578 126,018 115,760
Other operating costs............................ 862 1,046 2,684 3,287
Other income, net................................ 3,903 2,562 15,319 12,900
Earnings before interest
expense and income taxes....................... 98,454 95,805 225,665 199,693
Interest expense................................. 1,903 3,054 6,363 8,650
Earnings before income taxes..................... 96,551 92,751 219,302 191,043
Provision for income taxes....................... 34,442 33,603 78,510 68,202
Net earnings ....................................$ 62,109 $ 59,148 $ 140,792 $ 122,841
Primary and fully diluted earnings per
share of common stock.......................... $1.77 $1.64 $3.99 $3.40
Average common and common equivalent
shares outstanding**........................... 35,089 35,984 35,265 36,087
Cash dividends per share of common stock......... $0.420 $0.365 $1.260 $1.095
Depreciation, depletion and amortization
deducted above................................. $29,071 $28,184 $82,708 $82,302
Effective tax rate............................... 35.7% 36.2% 35.8% 35.7%
<FN>
* Unaudited
** Primary and fully diluted earnings per share of common stock is computed by
dividing the net earnings by the weighted average number of common shares
and common share equivalents outstanding during the period. Common share
equivalents primarily represent the number of shares contingently
issuable under long-range performance share plans. 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*
1996 1995
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Operations
Net earnings .............................................. $ 140,792 $ 122,841
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Depreciation, depletion and amortization............... 82,708 82,302
Increase in assets before effects of
business acquisitions................................ (38,942) (57,994)
Increase in liabilities before effects of
business acquisitions................................ 18,721 2,918
Other, net............................................. 17,307 (1,580)
Net cash provided by continuing operations.......... 220,586 148,487
Net cash used for discontinued operations.................. (935) (725)
Net cash provided by operations..................... 219,651 147,762
Investing Activities
Purchases of property, plant and equipment................. (117,704) (77,499)
Payment for business acquisitions (net of acquired cash)... (54,588) (21,027)
Proceeds from sale of property, plant and equipment........ 9,732 9,493
Investment in nonconsolidated companies.................... (1,615) (1,512)
Withdrawal of earnings from nonconsolidated companies...... -- 250
Net cash used for investing activities.............. (164,175) (90,295)
Financing Activities
Net borrowings - commercial paper and bank lines of credit. 14,609 37,495
Payment of short-term debt................................. (5,470) (4,541)
Payment of long-term debt.................................. (120) (32)
Purchases of common stock.................................. (19,409) (49,700)
Dividends paid............................................. (43,898) (39,087)
Net cash used for financing activities.............. (54,288) (55,865)
Net increase in cash and cash equivalents.................. 1,188 1,602
Cash and cash equivalents at beginning of year............. 21,869 7,717
Cash and cash equivalents at end of period................. $ 23,057 $ 9,319
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized).................$ 4,901 $ 6,750
Income taxes......................................... 68,980 68,013
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Liabilities assumed in business acquisition............$ 4,720 $ 1,382
<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.
<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
1996 1995 1996 1995
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Primary and fully diluted earnings:
Average common shares outstanding...... 34,713 35,481 34,834 35,737
Common share equivalents............. 376 503 431 350
Total shares................... 35,089 35,984 35,265 36,087
Net earnings.............................$ 62,109 $ 59,148 $ 140,792 $ 122,841
Primary and fully diluted earnings per
share of common stock:...............$ 1.77 $ 1.64 $ 3.99 $ 3.40
</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.
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 segment 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
Third Quarter 1996 as Compared with Third Quarter 1995
Vulcan's sales, net earnings and earnings per share were at record levels for
the third quarter. Net earnings were $62.1 million, or $1.77 per share, as
compared with 1995 earnings and earnings per share of $59.1 million and $1.64.
Net earnings and earnings per share were up 5% and 8%, respectively, from
comparable 1995 results.
Third quarter sales in 1996 were $443.6 million, up 5% from last year's total
of $422.0 million. The segment detail of that increase is as follows (amounts
in millions):
Third Quarter Sales
1996 1995 Increase
Construction Materials $285.5 $269.8 $15.7
Chemicals 158.1 152.2 5.9
Total $443.6 $422.0 $21.6
Third quarter Construction Materials sales were up 6% from last year's third
quarter total. Shipments of crushed stone increased 6%. Excluding the impact
of freight to remote distribution yards, the average sales price of crushed
stone increased 2%. The increase in stone revenues was partially offset by
declines in certain other product lines. Chemicals sales increased 4% from
last year's level due to increased sales in the Performance Systems Business
Unit, partly offset by lower sales for the Chloralkali Business Unit.
Performance Systems results benefited from the acquisition of Mayo Chemical
Company in the second quarter of 1996, as well as increased sales at Callaway
Chemical Company. Lower Chloralkali sales reflect a decline in caustic
soda prices.
Earnings before interest expense and income taxes were $98.5 million as
compared to $95.8 million in the same period last year. The segment detail
of this result is shown in the following summary (amount in millions):
Third Quarter Earnings Before
Interest Expense and Income Taxes *
Increase
1996 1995 (Decrease)
Construction Materials $73.1 $67.8 $5.3
Chemicals 25.3 28.0 (2.7)
Segment earnings* 98.4 95.8 2.6
Interest income, etc. .1 - .1
Total $98.5 $95.8 $2.7
* After allocation of corporate expense and income,
other than "interest income, etc." (principally
interest income earned on short-term investment of
funds and gains or losses on corporate financing
transactions), and after assignment of equity income
to the segment with which it is related in terms of
products and services.
The Construction Materials segment reported record third quarter earnings of
$73.1 million, up 8% from 1995 earnings of $67.8 million. The increase
reflects higher volume and improved prices. The Chemicals segment recorded
third quarter earnings of $25.3 million as compared with earnings of $28.0
million in 1995. The decrease of 10% reflects principally the effect of lower
caustic soda prices.
Selling, administrative and general expenses of $44.2 million increased 12%
from the 1995 third quarter level. This reflects principally the effect of
acquisitions and higher accruals referable to management incentive plans.
Other income, net of other charges, was $3.9 million, up from the $2.6 million
from the third quarter of 1995. This reflects lower miscellaneous charges and
improved results from the Crescent Market Project (the Company's joint venture
to supply limestone from Mexico to the U. S. Gulf Coast market).
The effective tax rate for the quarter was 35.7%, down slightly from last
year's third quarter rate of 36.2%. The decrease mainly reflects a greater
effect on the tax rate of statutory depletion because of relatively higher
Construction Materials earnings.
Year-To-Date Comparisons as of September 30, 1996 and September 30, 1995
Vulcan's sales, net earnings and earnings per share were at record levels for
the first nine months of 1996. Net earnings were $140.8 million, or $3.99 per
share, as compared with 1995 earnings and earnings per share of $122.8 million
and $3.40. Net earnings and earnings per share were up 15% and 17%,
respectively, from comparable 1995 results.
Sales of $1.2 billion for the first nine months of 1996 increased 7% from the
1995 total of $1.1 billion. Sales of the segments are summarized as follows
(amounts in millions):
Sales for the Nine Months
Ended September 30
1996 1995 Increase
Construction Materials $ 714.1 $ 663.5 $50.6
Chemicals 457.3 435.7 21.6
Total $1,171.4 $1,099.2 $72.2
Construction Materials sales were up 8% over 1995. Crushed stone shipments
increased 6%, while prices, exclusive of freight to distribution yards,
increased 3%. Chemicals sales increased 5% due to increased sales in the
Performance Systems Business Unit.
Earnings for the current year to date before interest expense and income taxes
were $225.7 million, up 13% from the 1995 result. Segment detail is shown
below (amounts in millions):
Earnings before Interest Expense
and Income Taxes for the
Nine Months Ended September 30
1996 1995 Increase
Construction Materials $144.1 $132.0 $12.1
Chemicals 79.8 67.7 12.1
Segment earnings * 223.9 199.7 24.2
Interest income, etc. 1.8 - 1.8
Total $225.7 $199.7 $26.0
* After allocation of corporate expense and income,
other than "interest income, etc." (principally
interest income earned on short-term investment of
funds and gains or losses on corporate financing
transactions), and after assignment of equity income
to the segment with which it is related in terms of
products and services.
Construction Materials earnings increased 9% due to higher volumes and prices.
Chemicals earnings increased 18%, reflecting increased contribution from
Performance Systems, higher Chloralkali volume and lower raw materials costs.
Selling, administrative and general expenses increased 9% due to the impact of
acquisitions and the costs of a project to redesign the Construction Materials
segment's procurement process.
The provision for income taxes during the first nine months was $78.5 million
as compared with 1995's provision of $68.2 million, reflecting increases in
pretax earnings and the effective tax rate. The effective tax rate for the
period was 35.8%, up from last year's rate of 35.7%.
On October 21, 1996, 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:
"Strong stone shipments in Vulcan's Construction Materials
segment accounted for most of the improvement in overall
1996 third quarter results. Construction activity in most
regions benefited from strong demand. For the fourth
quarter of 1996, we think stone shipments and earnings from
operations may exceed last year's record levels; however,
segment earnings are expected to be down somewhat from last
year's record results due to lower gains from land sales,
which were especially large in last year's fourth quarter.
Notwithstanding these significantly lower gains,
Construction Materials segment earnings for the full year
probably will exceed 1995's record level.
"Third quarter earnings for our Chemicals segment were
lower than the comparable 1995 result. The Chloralkali
Business Unit's results were hurt by a softening in liquid
caustic soda prices, which declined 13% from last year's
third quarter level and were down 5% from this year's
second quarter. Third quarter 1995 Chloralkali earnings
included a $3.5 million charge for environmental
remediation at the Cleve Reber Superfund site in Louisiana.
For the fourth quarter of 1996, continued softness in
liquid caustic soda prices as well as higher energy costs
are expected to result in significantly lower Chloralkali
operating earnings. For the full year, Chloralkali
earnings are expected to approximate 1995's record level
due to the absence of the significant unusual charges
recorded in last year's second half."
Certain matters discussed above contain forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected. These include general business conditions,
competitive factors, pricing, weather conditions, energy costs and other
risks and uncertainties detailed from time to time in the Company's reports
with the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital exclusive of debt and cash items totaled $209.0 million at
September 30, 1996, 20% above the 1995 year-end amount of $174.8 million.
Higher receivables were partially offset by higher current liabilities.
Working capital at September 30, 1996 decreased slightly from the same date
last year. Higher inventories were offset by higher accrued liabilities.
The Company's current ratio, which is based on all components of working
capital, including cash and debt items, was 2.0 as of September 30, 1996 and
year-end 1995.
Cash Flows
Cash provided by continuing operations during the first nine months totaled
$220.6 million, up 49% from the $148.5 million generated in the same period
last year. This increase reflects higher earnings, a reduction in escrow
deposits referable to land transactions and less increase in working
capital. Cash used for investing activities was $164.2 million, as compared
with the 1995 total of $90.3 million. This increase reflects higher purchases
of property, plant and equipment and higher spending for business
acquisitions. Cash used for financing activities totaled $54.3 million, down
from the 1995 amount of $55.9 million. The decrease reflects lower purchases
of common stock, offset by lower net borrowings.
Property Additions
Property additions in the first nine months of 1996 totaled $147.0 million as
compared with $92.5 million in the same period last year. During the first
quarter of 1996 the Construction Materials segment acquired the assets and
real property of Lester's Material Service, Inc. for use as an aggregate
distribution yard. During the second quarter of 1996 the Construction
Materials segment acquired all of the assets associated with the existing
Cherokee quarry from Martin Marietta.
In the second quarter of 1996, the Chemicals segment acquired Mayo Chemical
Company, Inc. and Miller-Aldridge Chemicals, Inc. Mayo was incorporated into
Callaway Chemical Company and Miller-Aldridge was incorporated into Vulcan
Chemical Technologies, Inc. In the third quarter of 1996, the Chemicals
segment acquired the municipal drinking water treatment business of the Drew
Industrial Division of Ashland Chemical Company. The Drew business, which has
annual sales of approximately $6 million, will be combined with the municipal
water treatment segment of Vulcan Chemical Technologies, Inc.
Short-term Borrowings
Short-term borrowings as of September 30, 1996 and 1995 consisted of notes
payable to banks totaling $18.2 million and $80.3 million, respectively.
Long-term Borrowings
As of September 30, 1996, long-term obligations were 7.6% of long-term capital
and 9.7% of shareholders' equity. The corresponding 1995 percentages were
9.2% and 12.2%.
Common Stock Transactions
Pursuant to the Company's common stock purchase program, 105,500 shares of
common stock were purchased in the third quarter of 1996 at a total cost of
$6.0 million, equal to an average price of $57.18 per share. In the first
nine months of 1996, 343,200 shares were purchased at a total cost of $19.4
million, or $56.56 per share.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings per Share *
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the nine months
ended September 30, 1996.
_____________________
* Included in Part I
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 13, 1996 /s/ E. A. Khan
E. A. Khan
Controller
/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 nine months ended September 30, 1996,
and the Consolidated Balance Sheet as of September 30, 1996, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> SEP-30-1996
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<BONDS> 85314
0
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</TABLE>
