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, 1997
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, 1997
Common Stock, $1 Par Value 33,782,493
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
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
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 5
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<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 1997 1996 1996
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Current assets
Cash and cash equivalents.............................. $ 16,379 $ 50,816 $ 19,980
Accounts and notes receivable, less allowance for
doubtful accounts: Mar. 31, 1997, $7,489; Dec. 31,
1996, $8,106; Mar. 31, 1996, $8,454................... 197,830 185,535 175,668
Inventories:
Finished products.................................... 94,287 87,459 93,680
Raw materials........................................ 11,736 10,115 9,636
Products in process.................................. 1,030 873 902
Operating supplies and other......................... 30,615 30,131 29,483
Total inventories............................... 137,668 128,578 133,701
Deferred income taxes.................................. 23,004 23,474 26,975
Prepaid expenses....................................... 5,899 5,642 20,981
Total current assets............................ 380,780 394,045 377,305
Investments and long-term receivables.................... 59,589 61,274 56,896
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization: Mar. 31,
1997, $1,261,594; Dec. 31, 1996, $1,237,674; Mar. 31,
1996, $1,183,668....................................... 777,214 764,490 710,717
Deferred charges and other assets........................ 97,507 100,836 82,162
Total........................................... $1,315,090 $1,320,645 $1,227,080
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term obligations............ $ 5,071 $ 5,021 $ 6,997
Notes payable.......................................... 3,105 3,289 3,253
Trade payables and accruals............................ 103,234 98,528 105,366
Other current liabilities.............................. 95,699 87,816 77,869
Total current liabilities....................... 207,109 194,654 193,485
Long-term obligations.................................... 85,635 85,535 90,178
Deferred income taxes.................................... 88,947 86,968 86,820
Other noncurrent liabilities............................. 69,119 69,824 60,854
Shareholders' equity..................................... 864,280 883,664 795,743
Total........................................... $1,315,090 $1,320,645 $1,227,080
<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*
1997 1996
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Net sales.......................................... $341,358 $308,541
Cost of goods sold................................. 265,243 238,407
Gross profit on sales.............................. 76,115 70,134
Selling, administrative and general expenses....... 43,896 38,919
Other operating costs.............................. 864 829
Other income, net.................................. 3,235 3,240
Earnings before interest
expense and income taxes......................... 34,590 33,626
Interest expense................................... 1,767 2,171
Earnings before income taxes....................... 32,823 31,455
Provision for income taxes......................... 10,897 11,324
Net earnings ...................................... $ 21,926 $ 20,131
Primary and fully diluted earnings per
share of common stock............................ $0.64 $0.57
Average common and common equivalent
shares outstanding**............................. 34,415 35,439
Cash dividends per share of common stock........... $0.470 $0.420
Depreciation, depletion and amortization
deducted above................................... $28,603 $26,165
Effective tax rate................................. 33.2% 36.0%
<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 stock option and long-range performance
share plans.
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*
1997 1996
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Operations
Net earnings .............................................. $ 21,926 $ 20,131
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Depreciation, depletion and amortization............... 28,603 26,165
Increase in assets before effects of
business acquisitions................................ (21,172) (17,073)
Increase in liabilities before effects of
business acquisitions................................ 10,198 10,824
Other, net............................................. 4,032 14,852
Net cash provided by continuing operations.......... 43,587 54,899
Net cash used for discontinued operations.................. (102) (483)
Net cash provided by operations..................... 43,485 54,416
Investing Activities
Purchases of property, plant and equipment................. (37,933) (32,391)
Payment for business acquisitions (net of acquired cash)... - (8,375)
Proceeds from sale of property, plant and equipment........ 1,511 5,966
Net cash used for investing activities.............. (36,422) (34,800)
Financing Activities
Net borrowings - commercial paper and bank lines of credit. (183) (316)
Payment of short-term debt................................. (1) (158)
Purchases of common stock.................................. (25,309) (6,351)
Dividends paid............................................. (16,007) (14,680)
Net cash used for financing activities.............. (41,500) (21,505)
Net decrease in cash and cash equivalents.................. (34,437) (1,889)
Cash and cash equivalents at beginning of year............. 50,816 21,869
Cash and cash equivalents at end of period................. $ 16,379 $ 19,980
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)................. $ 444 $ 487
Income taxes......................................... 3,240 1,525
<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. New Accounting Standards
In February 1997 the Financial Accounting Standard Board issued SFAS
No. 128 "Earnings per Share" (EPS), which will be effective for periods
ending after December 15, 1997. Early adoption is not permitted. This
new standard simplifies the method for computing EPS previously found
in APB Opinion No. 15 and makes the calculation comparable to
international standards. The presentation of primary and fully-diluted
EPS will be replaced with basic and diluted EPS. The effects on the
Company of applying SFAS 128 would be immaterial to 1997 and 1996 EPS.
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.
Forward Looking Statements
Certain matters discussed in this report contain forward-looking statements
that are subject to risks and uncertainties that could cause actual results
to differ materially from those projected. These include general business
conditions, competitive factors, pricing, energy costs and other risks
detailed in the Company's periodic reports.
RESULTS OF OPERATIONS
First Quarter 1997 as Compared with First Quarter 1996
Vulcan's first quarter 1997 sales, net earnings and earnings per share were at
record levels. Net earnings of $21.9 million, or 64 cents per share, were 9%
and 12%, respectively, higher than last year. The comparable 1996 earnings
and earnings per share were $20.1 million and 57 cents, respectively.
Sales in 1997 were $341.4 million, up 11% from last year's total of
$308.5 million. The segment detail of that increase is as follows
(amounts in millions):
First Quarter Sales
1997 1996 Increase
Construction Materials $187.2 $159.7 $27.5
Chemicals 154.2 148.8 5.4
Total $341.4 $308.5 $32.9
Construction Materials reported record first quarter sales of $187.2 million,
up 17% from the 1996 first quarter. Excluding the impact of freight to remote
distribution yards, average crushed stone prices increased nearly 6%. Total
stone shipments increased 17% from last year's levels. Chemicals sales of
$154.2 million also were at a record first quarter level, up 4% from last
year's first quarter. The increase was due principally to higher volumes for
chlorinated organic products and the inclusion of Performance Systems' 1996
acquisitions. Average caustic soda prices in the first quarter of 1997 were
down 40% from last year's first quarter prices.
Earnings before interest expense and income taxes were $34.6 million as
compared to $33.6 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 (Loss) Before
Interest Expense and Income Taxes *
Increase
1997 1996 (Decrease)
Construction Materials $15.8 $ 2.9 $12.9
Chemicals 18.3 30.2 (11.9)
Segment earnings * 34.1 33.1 1.0
Interest income, etc. .5 .5 -
Total $34.6 $33.6 $ 1.0
* 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.
The Construction Materials segment reported record first quarter earnings
of $15.8 million as compared with earnings of $2.9 million in the first quarter
of 1996. This increase reflects higher volume, improved prices and lower
operating costs. The Chemicals segment reported first quarter earnings of
$18.3 million, down significantly from last year's first quarter earnings of
$30.2 million. This reflects principally the decline in caustic soda prices,
partly offset by price increases for chlorine and increased earnings
contributions from chlorinated organic products and the Performance Systems
Business Unit.
Selling, administrative and general expenses of $43.9 million for the first
quarter of 1997 increased 13% from the 1996 level. The increase reflects
principally the impact of Performance Systems' 1996 acquisitions and higher
accruals for management incentive plans and pension costs.
Other income, net of other charges, was $3.2 million in the first quarter of
1997 and of 1996.
The provision for income taxes for the current quarter was $11.0 million as
compared with 1996's provision of $11.3 million, reflecting a decrease in the
effective tax rate. The decrease reflects principally the greater impact of
adjustments to close out provisions referable to completed tax audits for
prior years, as well as the greater effect of statutory depletion because of
relatively higher Construction Materials earnings. The effective tax rate
for the quarter was 33.2%, down from last year's first quarter rate of 36.0%.
On April 21, 1997, D. M. James, President and Chief Executive Officer, made
certain statements concerning the Company's earnings outlook. Excerpts of the
relevant press release quoting Mr. James are as follows:
"Strong operating results in Vulcan's Construction Materials
segment accounted for the significant improvement in 1997 first
quarter results. Aided by a strong economy and relatively
favorable weather conditions, construction activity in most
major markets proceeded at a brisk pace. Reduced production
costs also contributed to the earnings improvement. Assuming
a continuation of strong economic conditions, we expect
Construction Materials earnings for the full year to surpass
1996's record level.
"As anticipated, first quarter earnings comparisons for the
Chemicals segment were adversely impacted by the significant
decline in caustic soda prices. The Chloralkali Business Unit
also experienced slightly higher energy and raw materials
costs. However, higher sales volumes for chlorinated organic
products, as well as improved pricing for chlorine and
chlorinated products, partly offset these negative earnings
impacts. Also, the Performance Systems Business Unit reported
increased earnings. Presently, the outlook for caustic soda
pricing remains uncertain and we expect lower caustic soda
prices to continue to impact Chemicals' earnings comparison
for the remaining quarters of 1997. However, this effect
increasingly should be offset by improving earnings from the
Performance Systems Business Unit and from chlorinated organic
products. All in all, although we expect Chemicals earnings
for the full year to decline significantly from 1996's record
level, quarterly comparisons for the remainder of 1997
should improve.
"If our outlooks for both segments hold up, and with the
benefit of a lower effective tax rate, we should be able to
report another year of record net earnings and earnings per
share for the Company."
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $168.0 million
at March 31, 1997, $9.9 million above the 1996 year-end amount of $158.1
million. Higher receivables and inventories, due primarily to seasonal
build-ups in the Construction Materials segment, were offset by higher current
liabilities. Working capital at March 31, 1997 decreased 5% from the same
date last year. Higher receivables and inventories, due to increased sales,
and lower prepaid expenses were partially 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 1.8 as of March 31, 1997.
This was 0.2 lower than the year-end 1996 and March 31, 1996 ratio of 2.0.
Cash Flows
Net cash provided by continuing operations totaled $43.6 million in the first
quarter of 1997, down from the $54.9 million generated in the same period last
year. The decrease primarily reflects the release in 1996 of escrowed
deposits referable to land sales and increased working capital requirements.
Cash used for investing activities was $36.4 million as compared with the 1996
total of $34.8 million. This change reflects higher capital spending and
lower proceeds from the sale of property, plant and equipment. Net cash used
for financing activities totaled $41.5 million, up from the 1996 amount of
$21.5 million due mainly to greater purchases of common stock and increased
dividends.
Cash and cash equivalents, which totaled $16.3 million at March 31, 1997,
were down from $20.0 million a year ago.
On February 14, 1997, the Board of Directors authorized a quarterly dividend
of 47 cents per common share payable March 10, 1997. The new quarterly
dividend represents a 12% increase over quarterly dividends paid in 1996.
Property Additions
Property additions totaled $41.7 million in 1997 as compared with $42.5
million in the first quarter of 1996. There were no acquisitions during
the first quarter of 1997.
Short-term Borrowings
Short-term borrowings as of March 31, 1997 and 1996 consisted of notes payable
to banks totaling $3.1 million and $3.3 million, respectively.
Long-term Obligations
As of March 31, 1997, long-term obligations were 7.7% of long-term capital and
9.9% of shareholders' equity. The corresponding 1996 percentages were 8.7%
and 11.3%.
Common Stock Transactions
Pursuant to the Company's long-standing common stock purchase program,
404,352 shares of common stock were purchased in the first quarter of 1997
at a total cost of $25.3 million, equal to an average price of $62.59
per share. Purchases of common stock in the first quarter of 1996 totaled
115,600 shares at a total cost of $6.4 million, equal to an average price
of $54.94 per share.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended March 31, 1997.
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 May 12, 1997 /s/ E. A. Khan
E. A. Khan
Controller
/s/ D. F. Sansone
D. F. Sansone
Vice President - Finance
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<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings for the three months ended March 31,
1997, and the Consolidated Balance Sheet as of March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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</TABLE>
