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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-4033
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VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 63-0366371
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(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
ONE METROPLEX DRIVE, BIRMINGHAM, ALABAMA 35209
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 877-3000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to
Section 12(g) of the Act: NONE
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by referenced in Part III of this Form 10- K or any
amendment to this Form 10-K.
---
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES AS OF FEBRUARY 27,
1998: $3,343,016,477.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE, AS OF FEBRUARY 27, 1998: 33,567,727 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the year
ended December 31, 1997, are incorporated by reference into Parts I, II
and IV of this Annual Report on Form 10-K.
(2) Portions of the registrant's annual proxy statement for the annual
meeting of its shareholders to be held on May 8, 1998, are incorporated
by reference into Part III of this Annual Report on Form 10-K.
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VULCAN MATERIALS COMPANY
CROSS REFERENCE SHEET FOR DOCUMENTS INCORPORATED BY REFERENCE
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HEADING IN ANNUAL REPORT PAGE IN
FORM 10-K TO SHAREHOLDERS FOR ANNUAL
ITEM NO. YEAR ENDED DECEMBER 31, 1997 REPORT
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1. Business (Financial Results by Segment Financial Data for the 3 Years Ended
Business Segments) December 31, 1997 55
Note 12, Segment Data 71
Note 14, Acquisitions 72
3. Legal Proceedings Note 10, Other Commitments and Contingent Liabilities 70
7. Management's Discussion and Management's Discussion and Analysis of
Analysis of Financial Condition Financial Condition and Results of Operations 48-54
and Results of Operations
Financial Terminology 79
8. Financial Statements and Consolidated Statements of Earnings 44
Supplementary Data Consolidated Balance Sheets 45
Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting
and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial
Data for Each of the 2 Years Ended December 31,
1997 and 1996 (Unaudited) 77
14. Exhibits, Financial Statement Consolidated Statements of Earnings 44
Schedules and Reports on Consolidated Balance Sheets 45
Form 8-K Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting
and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial
Data for Each of the 2 Years Ended December 31,
1997 and 1996 (Unaudited) 77
HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1998
10. Directors and Executive Officers Election of Directors; Nominees for Election to the Board of
of the Registrant Directors; Directors Continuing in Office; Section 16(a)
Beneficial Ownership Reporting Compliance
11. Executive Compensation Compensation of Directors; Executive Compensation; Option
Grants in 1997; Report of the Compensation Committee;
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values; Shareholder Return Performance
Presentation; Retirement Income Plan; Employee Special
Severance Plan
12. Security Ownership of Certain Security Ownership of Certain Beneficial Owners;
Beneficial Owners and Management Security Holdings of Management
and Management
</TABLE>
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VULCAN MATERIALS COMPANY
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
CONTENTS
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PART ITEM PAGE
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I 1 Business 1
2 Properties 4
3 Legal Proceedings 7
4 Submission of Matters to a Vote of Security Holders 8
4 a. Executive Officers of the Registrant 8
II 5 Market for the Registrant's Common Equity and Related
Stockholder Matters 10
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
8 Financial Statements and Supplementary Data 11
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 12
III 10 Directors and Executive Officers of the Registrant 12
11 Executive Compensation 12
12 Security Ownership of Certain Beneficial Owners and
Management 12
13 Certain Relationships and Related Transactions 12
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 13
-- Signatures 19
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PART I
ITEM 1. BUSINESS
Vulcan Materials Company, a New Jersey corporation incorporated in
1956, and its subsidiaries (together called the "Company") are principally
engaged in the production, distribution and sale of construction materials
("Construction Materials") and industrial and specialty chemicals ("Chemicals").
Construction Materials and Chemicals may each be considered both a segment (or a
line of business) and a class of similar products. The Company is the nation's
leading producer of construction aggregates.
All of the Company's products are marketed under highly competitive
conditions, including competition in price, service and product performance.
There are a substantial number of competitors in both the Construction Materials
segment and the Chemicals segment.
No material part of the business of either segment of the Company is
dependent upon a single customer or upon a few customers, the loss of any one of
which would have a materially adverse effect on the segment. The Company's
products are sold principally to private industry. Although large amounts of
construction materials are used in public works, relatively insignificant sales
are made directly to federal, state, county or municipal governments, or
agencies thereof.
The Company conducts research and development activities for both of
its business segments. The Construction Materials research and development
facility is located near Birmingham, Alabama. The Chemicals research and
development laboratories are located in Wichita, Kansas and Columbus, Georgia.
In general, the Company's research and development effort is directed to applied
technological development for the use of its Construction Materials and
Chemicals products as well as for the manufacturing or processing of its
Chemicals products. The Company spent approximately $1,142,000 in 1995,
$1,091,000 in 1996 and $1,281,000 in 1997 on research and development activities
for its Construction Materials segment. The Company spent approximately
$9,159,000 in 1995, $7,939,000 in 1996 and $9,474,000 in 1997 on research and
development activities for its Chemicals segment.
The Company estimates that capital expenditures for environmental
control facilities in the current fiscal year (1998) and the succeeding fiscal
year (1999) will be approximately $3,733,000 and $1,798,000, respectively, for
the Construction Materials segment, and $4,393,000 and $4,437,000, respectively,
for the Chemicals segment.
The Company's principal sources of energy are electricity, natural gas
and diesel fuel. The Company does not anticipate any material difficulty in
obtaining the required sources of energy required for its operations.
In 1997, the Construction Materials segment employed an average of
approximately 5,399 people. The Chemicals segment employed an average of
approximately 1,619 people. The Company's corporate office employed an average
of approximately 162 people. The Company considers its relationship with its
employees to be good.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year, due primarily 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.
CONSTRUCTION MATERIALS
The Company's construction materials business consists of the
production and sale of crushed stone, sand, gravel, rock asphalt and crushed
slag (a by-product of steel production). Crushed stone constituted approximately
79% of the dollar volume of the Construction Materials segment's 1997 sales, as
compared to 79% in 1996 and 77% in 1995. Construction aggregates of suitable
characteristics are employed in virtually all types of construction, including
highway construction and maintenance, and in the production of asphaltic and
portland cement concrete mixes. They also are widely used as railroad track
ballast.
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Each type of aggregate is sold in competition with other types of
aggregates and in competition with other producers of the same type of
aggregate. Because of the relatively high transportation costs inherent in the
business, competition generally is limited to the areas in relatively close
proximity to production facilities. Noteworthy exceptions are the areas along
the Mississippi and Tennessee-Tombigbee river systems and the Gulf Coast which
are served by the Company's Reed quarry, areas served by rail-connected
quarries, and the areas along the U.S. coast served by ocean-going vessels that
transport stone from the Company's joint venture operation in Mexico. The
Company's construction aggregates are sold in 18 states primarily in the
Southeast, Midwest and Southwest regions of the United States and in the
District of Columbia.
During 1997, the Company acquired four quarries in Arkansas, Georgia
and Texas and a sand and gravel operation in Illinois.
Shipments to customers of all construction aggregates from the
Company's domestic operations in 1997 totaled approximately 155 million tons,
with crushed stone shipments to customers accounting for approximately 146
million tons.
In 1997, the Company, directly or through joint ventures, operated 132
permanent crushed stone plants in 13 states and Mexico for the production of
crushed limestone and granite with estimated reserves totaling approximately 8.2
billion tons.
In 1997, the Company, directly or through joint ventures, operated 12
sand and gravel plants, 4 slag plants and various other types of plants which
produce rock asphalt and other aggregates. Estimates of sand and gravel
reserves, calculated in a manner comparable to the estimates of stone reserves
set forth above, total approximately 60 million tons.
Other Construction Materials products and services include asphaltic
concrete, ready-mixed concrete, trucking services, barge transportation, a Mack
Truck distributorship, paving construction, dolomitic lime, emulsified asphalt
and several other businesses.
Environmental and zoning regulations have made it increasingly
difficult for the construction aggregates industry either to expand existing
quarries or to develop new quarries. Although it cannot be predicted what
policies will be adopted in the future by governmental bodies regarding
environmental controls which affect the construction materials industry, the
Company anticipates that future environmental control costs will not have a
materially adverse effect upon its business.
CHEMICALS
The Chemicals segment is organized into two business units: the
Chloralkali Business Unit which manages the Company's chloralkali and related
businesses, and the Performance Systems Business Unit which manages the
Company's specialty chemicals and services business.
The principal chemicals produced by the Chloralkali Business Unit at
the Company's three chloralkali plants described in Item 2 below, are chlorine,
caustic soda (sodium hydroxide), muriatic acid, hydrochloric acid, caustic
potash (potassium hydroxide), potassium carbonate, chlorinated hydrocarbons and
calcium chloride. Chlorine and various hydrocarbons (primarily ethylene and
methanol) are used to produce the Unit's line of chlorinated hydrocarbons,
including methylene chloride, perchloroethylene, chloroform, methyl chloride,
ethylene dichloride, carbon tetrachloride, methyl chloroform and
pentachlorophenol.
Principal markets for the Chloralkali Business Unit's chemical products
include pulp and paper, energy, food, pharmaceutical, cleaning, chemical
processing, fluorocarbons, water management and textiles. In the paper-making
industry, chlorine is used in pulp and paper bleaching, while caustic soda is
used primarily in the kraft and sulfite pulping process. The Company supplies
hydrochloric acid to the energy industry for use in oil well stimulation and gas
extraction. Caustic soda also is used to demineralize water for steam production
at electrical energy facilities and to remove sulfur from gas and coal.
Hydrochloric acid, caustic soda, methylene chloride and caustic potash are used
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by the food and pharmaceutical industries. Perchloroethylene, methylene chloride
and methyl chloroform are used in industrial cleaning applications.
Perchloroethylene is also used in the dry-cleaning industry.
The Chloralkali Business Unit's sales to the chemical processing
industry serve companies that produce organic and inorganic chemical
intermediates and finished products ranging from clay-based catalysts to
agricultural herbicides. Products sold to this market include hydrochloric acid,
chlorine, caustic soda, caustic potash and potassium carbonate. Potassium
carbonate is used in the manufacture of screen glass, rubber antioxidants and
other chemicals. The Company sells chloroform, methyl chloroform and
perchloroethylene to the fluorocarbons market. Chlorine is used in water and
sewage management, and caustic soda and caustic potash are used in the
production of soaps and detergents. Chlorine also is used as an industrial
bleaching agent, in cleaning applications for the electronics industry, as a
biocide in the fruit processing industry and in various applications in the oil
industry. Calcium chloride, produced at the Company's Wichita complex, has
several uses including de-icing of roads, dust control, road stabilization and
oil well completion.
The principal chemicals produced for the Performance Systems Business
Unit by the Company's Callaway Chemical Company subsidiaries include process
aids for the pulp and paper and textile industries and various water management
chemicals. Through its Vulcan Chemical Technologies, Inc. ("VCT") subsidiary,
the Performance Systems Business Unit assembles and markets small-scale chlorine
dioxide generators, and sells related chemicals (primarily sodium chlorite
manufactured by the Company) and services to the water management, food and
beverage processing and pulp and paper industries. This subsidiary also
assembles and markets equipment, and sells related chemicals (primarily hydrogen
peroxide purchased from others) and services to the municipal and industrial
water management markets. Additionally, the Performance Systems Business Unit
markets sodium chlorite produced at the Chloralkali Business Unit's Wichita
plant. Sodium chlorite is used in the water management, food and beverage
processing, pulp and paper, textile and electronics industries. The Performance
Systems Business Unit also markets sodium hydrosulfite which is used primarily
in the pulp and paper industry and produced at the Chloralkali Business Unit's
Port Edwards plant.
The Company competes throughout the United States with numerous
companies, including some of the largest chemical companies, in the production
and sale of its lines of chemicals. The Company also competes for sales to
customers located outside the United States, with sales to such customers
currently accounting for approximately 5% of the sales of the Company's
Chemicals segment.
The Company's underground reserves of salt, which is a basic raw
material in the production of chlorine and caustic soda, are located near its
Wichita, Kansas and Geismar, Louisiana plants. The Company purchases salt for
its Port Edwards, Wisconsin plant. Ethylene, methanol, and vinyl chloride
monomer, the other major raw materials used in the Chloralkali Business Unit,
and various chemicals used by the Performance Systems Business Unit are
purchased from several different suppliers. Sources of salt, ethylene, methanol,
vinyl chloride monomer and other various chemicals are believed to be adequate
for the Company's operations and the Company does not anticipate any material
difficulty in obtaining the raw materials which it uses.
Certain of the Company's chemical operations are subject to the
Resource Conservation and Recovery Act ("RCRA"). Under the corrective action
requirements of RCRA, the Environmental Protection Agency ("EPA") must identify
facilities subject to RCRA's hazardous waste permitting provisions where
practices in the past have caused releases of hazardous waste or constituents
thereof. The owner of any such facility is then required to conduct a Remedial
Facility Investigation ("RFI") defining the nature and extent of any such
releases described by the EPA. If the results of the RFI determine that
constituent concentrations from any such release exceed action levels specified
by the EPA, the facility owner is further required to perform a Corrective
Measures Study ("CMS") identifying feasible technological alternatives for
addressing these releases. Depending upon the results reported to the EPA in the
RFI and CMS, the EPA subsequently may require Corrective Measures Implementation
("CMI") by the facility owner--essentially, implementation of a cleanup plan
developed by the EPA based on the RFI and CMS.
The Company expects to incur RFI and CMS costs over the next several
years at its Geismar, Port Edwards and Wichita manufacturing facilities. For
each of these three facilities, the RFI and CMS results will determine whether
the EPA subsequently requires a CMI to address releases at the facility, and the
scope and cost of any such CMI. With respect to those RFI and CMS costs that
currently can be reasonably estimated, the Company has determined
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that its accrued reserves are adequate to cover such costs. However, the total
costs which ultimately may be incurred by the Company in connection with
discharging its obligations under RCRA's corrective action requirements cannot
reasonably be estimated at this time.
Various other environmental regulations also have a restrictive effect
upon the chemicals industry, both as to production and sales, particularly the
production and sale of certain chemicals which are subject to regulation as
ozone depleting chemicals. The production and marketing of carbon tetrachloride
ended effective January 1, 1996, for most end uses except for exports to Article
5 countries as defined by the Montreal Protocol on Ozone Depleting Chemicals.
The production of methyl chloroform for emissive applications also ended
effective January 1, 1996. Existing inventory of methyl chloroform may continue
to be marketed for emissive uses. In addition, methyl chloroform will continue
to be produced and marketed for non-emissive uses while carbon tetrachloride
will continue to be produced and marketed for export to Article 5 countries.
However, sales volume of both products will be lower than in prior years.
FINANCIAL RESULTS BY BUSINESS SEGMENTS
Net sales, earnings, identifiable assets and related financial data for
each of the Company's business segments for the three years ended December 31,
1997, are reported on pages 71 and 72 (Note 12 of the Notes to Financial
Statements) and on page 55 (under the caption "Segment Financial Data") in the
Company's 1997 Annual Report to Shareholders, which information at said pages is
incorporated herein by reference.
ITEM 2. PROPERTIES
CONSTRUCTION MATERIALS
The Company's current estimate of approximately 8.2 billion tons of
stone reserves is approximately 90 million tons more than the estimate reported
at the end of 1996. These reserves include stone reserves in Mexico owned or
controlled by the Company's Mexican joint venture. Increases in the Company's
reserves have resulted from 1997 acquisitions in Arkansas, Georgia and Texas and
the opening of a greenfield quarry in Alabama. Management believes that the
quantities of reserves at the Company's stone quarries are sufficient to result
in an average quarry life of approximately 56 years at present operating levels.
See Note 1 to the table of the Company's 10 largest active stone quarries at
page 5 for a description of the method used by the Company for estimating the
years of life of stone reserves.
The foregoing estimates of reserves are of recoverable stone of
suitable quality for economic extraction, based on drilling and studies by the
Company's geologists and engineers, recognizing reasonable economic and
operating restraints as to maximum depth of overburden and stone excavation.
Of the 132 stone quarries which the Company operates directly or
through joint ventures, 37 are located on owned land, 22 are on land owned in
part and leased in part, and 73 are on leased land. While some of the Company's
leases run until reserves at the leased sites are exhausted, generally the
Company's leases have definite expiration dates which range from 1998 to 2105.
Most of the Company's leases have options to extend them well beyond their
current terms.
Due to transportation costs, the marketing areas for most quarries in
the construction aggregates industry are limited, often consisting of a single
metropolitan area or one or more counties or portions thereof. The following
table itemizes the Company's 10 largest active stone quarries in terms of the
quantity of stone reserves, with nearby major metropolitan areas (if applicable)
shown in parentheses:
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ESTIMATED
YEARS OF LIFE LEASE
AT AVERAGE EXPIRATION
RATE OF NATURE OF DATE, IF
LOCATION PRODUCT PRODUCTION(1) INTEREST APPLICABLE(2)
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McCook (Chicago), Illinois Limestone 90.5(3) Owned
Paducah, Kentucky Limestone 41.1 Leased (5)
Grayson (Atlanta), Georgia Granite Over 100 Owned
Playa Del Carmen, Mexico(4) Limestone Over 100 Owned
Gray Court (Greenville), South Carolina Granite Over 100 Owned
Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (5)
Kennesaw (Atlanta), Georgia Granite 40.7 75% Owned
25% Leased 2013
Manteno, Illinois Limestone Over 100 Leased (5)
Skippers, Virginia Granite Over 100 Leased 2016
Lawrenceville (Norfolk/Virginia
Beach), Virginia Granite 69.9 31% Owned
69% Leased (6)
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(1) Estimated years of life of stone reserves are based on the average
annual rate of production of the quarry for the most recent three-year
period, except that if reserves are acquired or if production has been
reactivated during that period, the estimated years of life are based
on the annual rate of production from the date of such acquisition or
reactivation. Revisions may be necessitated by such occurrences as
changes in zoning laws governing quarry properties, changes in stone
specifications required by major customers and passage of government
regulations applicable to quarry operations. Estimates also are revised
when and if additional geological evidence indicates that a revision is
necessary.
(2) Renewable by the Company through date shown.
(3) For some time, the Metropolitan Water Reclamation District of Greater
Chicago ("MWRD") has had under consideration the condemnation of a
portion of this quarry in order to use it as a reservoir. The Company
believes that this action, if it occurs, could significantly reduce the
life of this quarry, but will not have a material effect on the
financial condition of the Company as a whole. In 1996, the MWRD
announced that it plans to have reservoirs created on real property it
owns near the McCook quarry and that its current plan does not include
using the McCook quarry as a reservoir.
(4) The Playa Del Carmen, Mexico location is owned by the Company's joint
venture in Mexico. Its ranking in this table is based on counting 49%
of its reserves, which represents the Company's ownership interest in
the entity which owns the reserves. This quarry's estimated years of
life at average rate of production is based on 100% of the reserves.
(5) Lease does not expire until reserves are exhausted. Surface rights at
the Paducah, Kentucky quarry are owned.
(6) Leases expire as follows: 19% in 2020, 13% in 2024 and 68% in 2044.
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The estimated average life of the Company's sand and gravel operations,
calculated in the same manner as described in footnote (1) to the table set out
above, is approximately 11 years. Approximately 13% of the Company's estimated
60 million tons of sand and gravel reserves are located on owned land, with the
remaining 87% located on leased land.
CHEMICALS
Manufacturing facilities for the chemicals produced by the Chloralkali
Business Unit are owned and operated by the Company at Wichita, Kansas, Geismar,
Louisiana, and Port Edwards, Wisconsin. With a few exceptions, the Geismar and
Wichita facilities produce the full line of products manufactured by the
Company's Chloralkali Business Unit. The Port Edwards plant produces chlorine,
caustic soda, muriatic acid, caustic potash, potassium carbonate and sodium
hydrosulfite.
All of the facilities at Wichita are located on a 1,396-acre tract of
land owned by the Company. Mineral rights for salt are held by the Company under
two leases that are automatically renewable from year to year unless terminated
by the Company and under several other leases which may be kept in effect so
long as production from the underlying properties is continued. In addition, the
Company owns 320 acres of salt reserves and 160 acres of water reserves. The
Company maintains an electric power cogeneration facility at the Wichita plant
site which is capable of generating approximately one-third of the plant's
electricity and two-thirds of its process steam requirements. Effective July
1995, pursuant to a long-term agreement, the Company has placed this facility in
reserve and is purchasing all of its requirements for electric power from a
local utility at favorable rates.
The facilities at Geismar, Louisiana are located on a 1,266-acre tract
of land owned by the Company. Included in the facilities at the Geismar plant is
an electric power cogeneration facility owned by the Company which supplies
substantially all of the electricity and process steam required by the plant.
Mineral rights for salt are held under a lease expiring in 2007.
The plant facilities at Port Edwards, Wisconsin are located on a
34-acre tract of land, the surface rights to which are owned by the Company.
Currently, the Company purchases its salt and electrical power requirements for
the Port Edwards facility from regional sources of supply.
Manufacturing facilities for chemicals produced by the Performance
Systems Business Unit (other than sodium chlorite produced at Wichita and sodium
hydrosulfite produced at Port Edwards) are operated by subsidiaries of the
Company. Callaway Chemical Company owns a headquarters office building and two
production facilities in Columbus, Georgia and additional facilities in Smyrna,
Georgia, Dalton, Georgia and Shreveport, Louisiana. Callaway Chemical Limited
has an office and small production facility on leased property in Vancouver,
British Columbia. Vulcan Chemical Technologies, Inc., leases its office and
production facilities in West Sacramento, California and owns a small production
facility and warehouse space near Kansas City, Missouri.
The Company's Chemicals manufacturing facilities are designed to permit
a high degree of flexibility as to feedstocks, product mix and by-product
ratios; therefore, actual plant production capacities vary according to these
factors. Management does not believe, however, that there is material excess
production capacity at the Company's Chemicals facilities.
OTHER PROPERTIES
The Company's corporate offices are located in an office complex near
Birmingham, Alabama. Headquarters staffs of the Construction Materials and
Chemicals segments, the Southern Division of the Construction Materials segment,
and Vulcan Gulf Coast Materials, Inc., also are located in this complex. The
space is occupied pursuant to several leases. The lease pursuant to which the
majority of the space is leased runs through December 31, 1998. The Company's
space in this complex is leased at an approximate annual rental, as of December
31, 1997, of $1,456,000, which is subject to limited escalation.
The Company will not renew the lease of the current location and will
move its corporate offices to a new facility effective January 1, 1999. Under a
lease entered into by the Company, the Company will begin leasing newly
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constructed corporate headquarters consisting of approximately 189,000 square
feet in January 1999. The lease runs through December 31, 2013. The annual
rental for each year in the initial 5 year period, the second 5 year period and
the final 5 year period of the lease will be approximately $3.2 million, $3.4
million and $3.7 million, respectively.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits in the ordinary course
of business. It is not possible to determine with precision the probable outcome
of or the amount of liability, if any, under these lawsuits; however, in the
opinion of the Company and its counsel, the disposition of these lawsuits will
not adversely affect the consolidated financial position of the Company to a
material extent.
In the course of its Construction Materials and Chemicals operations,
the Company is subject to occasional governmental proceedings and orders
pertaining to occupational health and safety or to protection of the
environment, such as proceedings or orders relating to noise abatement, air
emissions or water discharges. As part of its continuing program of
environmental stewardship, however, the Company has been able to resolve such
proceedings and to comply with such orders without any materially adverse
effects on its business.
In 1991, the Company received notification from the State of New Jersey
Department of Environmental Protection ("NJDEP") concerning a site located in
Newark, New Jersey, which the Company previously owned and upon which the
Company operated a chemicals production facility from the early 1960s until
1974. The notification contends that hazardous substances and pollutants
contaminate the site and that a Remedial Investigation/ Feasibility Study
("RI/FS") is required in order to determine the nature and extent of such
contamination and whether a remedial action plan with respect thereto should be
developed.
On August 20, 1993, two other allegedly responsible parties,
Safety-Kleen Environsystems Company and Bristol-Meyers Squibb Company
(collectively, the "Respondents"), entered into an Administrative Consent Order
("ACO") issued by the NJDEP concerning the site. The ACO contains certain
findings of fact by the NJDEP, together with provisions governing the conduct by
the Respondents of an RI/FS for the site and remedial actions, if any, resulting
therefrom. Under a separate agreement with the Respondents and certain
successors, the Company will share in the cost of the RI/FS. The Company has
been informally advised by the NJDEP that, if the Company continues to
participate in the RI/FS, the NJDEP will not seek to enforce a directive issued
in 1991 requiring the Company to pay $1 million to the NJDEP to be used for the
conduct of the RI/FS.
Depending upon the results of the RI/FS, NJDEP will determine what site
remediation is required under the ACO, if any. In that event, it is also likely
that the Respondents or the NJDEP will assert that the Company should bear some
responsibility in connection with such remediation. At this time, however, it is
impossible to predict the ultimate outcome of this matter.
In 1994, the EPA notified the Company that it was among the
approximately 880 potentially responsible parties ("PRPs") under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
with respect to the Jack's Creek/Sitkin Smelting Superfund site located in
Mifflin County, Pennsylvania, on which site the now defunct Sitkin Smelting
Company operated a secondary metals smelting facility from 1958 to 1977. The EPA
later and more particularly asserted that during the period 1972-1977 the PRPs
shipped to this site a collective total of some 286 million pounds of material
which allegedly contained CERCLA hazardous substances, including about 1.8
million pounds of material allegedly shipped by the Company's former Metals
Division.
The EPA has claimed that there are releases and threatened releases of
CERCLA hazardous substances from this site and advised, inter alia, that the EPA
may seek recovery of CERCLA response costs which the EPA has incurred or may
incur in the future in connection with the investigation and remediation of
environmental conditions at the site. The EPA subsequently asserted that by the
summer of 1996, the EPA had undertaken investigative and response actions with
respect to this site which cost a total of about $6.4 million.
In addition to the EPA's claims regarding investigation and response
costs, the U.S. Department of Interior ("DOI") has asserted a natural resources
damage claim of approximately $2.2 million. The DOI has not, however, quantified
or otherwise substantiated its natural resource damage claim. To date, the State
natural resource trustees
7
<PAGE> 11
have not formally asserted claims arising from alleged impacts to
state-protected natural resources, although such State trustee agencies have
reportedly conducted evaluations of the impacts of the site on certain natural
resources. Similarly, the Pennsylvania Department of Environmental Protection
("PADEP") has allegedly incurred costs for investigation and response at the
site. PADEP has indicated that it may assert a claim for such costs, but has not
yet formally asserted such a claim or stated the amount of the alleged
expenditures.
The Company and over 30 other PRPs have entered into an agreement
forming the Jack's Creek PRP Group (the "PRP Group") to respond to the claims
asserted by EPA, DOI, PADEP and others. The PRP Group has adopted a method for
allocating among its membership the costs of designing and implementing the
remediation of the site. Under this allocation arrangement, the Company's share
percentage would be about 2.1%, subject to rights of the PRP Group and its
members, including the Company, to seek contribution from other viable and
responsible parties.
On September 30, 1997, the EPA issued its Record of Decision ("ROD")
for the site. The ROD specifies a remedy consisting of dredging lead
contaminated sediments from a limited area of Jack's Creek near the site and
excavating lead contaminated soil within certain designated areas of the site,
followed by disposal of the most heavily contaminated soil at an appropriately
permitted off-site facility, together with consolidating on-site the dredged
sediments and the remainder of the excavated material, then covering the
consolidated sediments and soil with a multi-layer engineered cap. The EPA
estimates that the necessary engineering design work preliminary to implementing
the specified remedy and then implementing the resulting remedial design will
cost a total of about $12.5 million.
Contemporaneous with issuance of the ROD, the EPA issued "special
notice letters" to the Company and several hundred other PRP's, inviting "good
faith" offers to perform the remedy and pay certain response costs relating to
the site. The special notice letter indicated that under the EPA's orphan share
policy, for those PRP's who agree to perform the remedy, the EPA would be
prepared to forego recovery of up to $3.125 million in past and future response
costs. On December 11, 1997, the Jack's Creek PRP Group (on behalf of its
members, including the Company) submitted a good faith offer to the EPA in
response to the special notice letter.
The PRP Group is currently preparing to negotiate with the EPA an
enforceable agreement or judicial decree under which the PRP Group would fund
and perform the remedial design work and the implementation of the resultant
remedial design. The PRP Group is also negotiating with other PRPs an agreement
whereby the other PRPs could either resolve liabilities with respect to the site
by a cash payment to the PRP Group or participate as a member of the PRP Group
in the remedial design and implementation.
At present, the Company is not able to predict the likelihood of either
a favorable or unfavorable outcome as to the matters described above, or the
amount of potential loss in the event of any unfavorable outcome.
Note 10, Other Commitments and Contingent Liabilities on page 70 of the
Company's 1997 Annual Report to Shareholders is hereby incorporated by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1997.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions and ages of the executive officers of the Company
are as follows:
<TABLE>
<CAPTION>
NAME POSITION AGE
<S> <C> <C>
Donald M. James Chairman and Chief Executive Officer 49
Peter J. Clemens, III Executive Vice President, Finance and Administration and Treasurer 54
William F. Denson, III Senior Vice President, Law and Secretary 54
</TABLE>
8
<PAGE> 12
<TABLE>
<S> <C> <C>
Richard K. Carnwath Vice President, Planning and Development 49
J. Wayne Houston Vice President, Human Resources 48
Ejaz A. Khan Controller 41
John A. Heilala President, Chloralkali Business Unit 57
Robert A. Wason IV President, Performance Systems Business Unit 46
Guy M. Badgett, III Chairman, Southern Division and President, Southeast Division 49
Perry W. Donahoo President, Southern Division 43
William L. Glusac President, Midwest Division 47
Daniel J. Leemon President, Midsouth Division 59
Thomas R. Ransdell President, Southwest Division 55
Daniel F. Sansone President, Vulcan Gulf Coast Materials Divisions 45
James W. Smack President, Mideast Division 54
</TABLE>
The principal occupations of the executive officers during the past
five years are set forth below:
Donald M. James, was elected Chairman of the Board of Directors in May
1997. He became President and Chief Executive Officer in February 1997. He was
elected President and Chief Operating Officer in February 1996. Mr. James joined
the Company in 1992 as Senior Vice President and General Counsel. In January
1994, Mr. James was elected President of the Southern Division and in August
1995, he was also elected Senior Vice President, South, Construction Materials
Group.
Peter J. Clemens, III, was elected Executive Vice President, Finance
and Administration and Treasurer in May 1997. He served as Executive Vice
President and Chief Administrative Officer from May 1996 to May 1997. Prior to
that time he served as Senior Vice President, West, Construction Materials Group
and Senior Vice President, Finance.
William F. Denson, III, was elected Senior Vice President, Law in
February 1998. He has served as Secretary since April 1981. He served as Vice
President and Assistant General Counsel until he was elected Vice President, Law
effective January 1, 1994.
Richard K. Carnwath has served as Vice President, Planning and
Development since 1985.
J. Wayne Houston was elected Vice President, Human Resources in October
1997. Prior to that time he served as Director of Compensation and Benefits.
Ejaz A. Khan served as Controller, Chemicals Division, until September
1995, when he was elected Controller of the Company.
John A. Heilala has served as President, Chloralkali Business Unit
since May 1996. From 1994 until 1996, he served as Executive Vice President,
Chloralkali, and prior to that time he served as Vice President, Manufacturing,
Chemicals Division.
9
<PAGE> 13
Robert A. Wason IV has served as President, Performance Systems
Business Unit, since May 1996. From 1994 until 1996, he served as Executive Vice
President, Performance Systems, and prior to that time he served as Executive
Vice President, Administration and Business Development, Chemicals Division.
Guy M. Badgett, III, was elected Chairman, Southern Division in May
1997. He has served as President, Southeast Division, since 1992.
Perry W. Donahoo has served as President, Southern Division, since
October 1996. From August 1992 until June 1995, Mr. Donahoo served as President
of Reed Crushed Stone Company (formerly a subsidiary of the Company) and as
Executive Vice President, Southern Division, from June 1995 until October 1996.
William L. Glusac has served as President, Midwest Division, since
1994. Prior to that time he served as President, Southwest Division.
Daniel J. Leemon has served as President, Midsouth Division, since
1993. Prior to that time he served as Senior Vice President, West, Construction
Materials Group.
Thomas R. Ransdell has served as President, Southwest Division since
1994. He also served as President, Vulcan Gulf Coast Materials, Inc., from 1987
to May 1997.
Daniel F. Sansone was elected, President, Vulcan Gulf Coast Materials
Division in May 1997. From January 1994 to May 1997, he served as Vice
President, Finance. Prior to that time he served as Vice President and
Controller.
James W. Smack has served as President, Mideast Division, since 1991.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("VMC"). As of February 27, 1998, the number of shareholders of record
approximated 3,767. The closing price of the Common Stock on the New York Stock
Exchange on February 27, 1998, was $100 5/8. The prices in the table below
represent the high and low sales prices for the Company's Common Stock as
reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
QUARTER ENDED 1997 1996
- ------------- ---- ----
HIGH LOW HIGH LOW
----- ------ ----- -----
<S> <C> <C> <C> <C>
March 31 66 1/2 55 1/4 58 1/4 53 1/8
June 30 80 5/8 61 1/4 59 3/8 55 3/8
September 30 90 7/16 78 3/8 66 1/2 54 1/2
December 31 103 15/16 84 7/16 65 59 1/2
</TABLE>
Dividends paid in 1997 totaled $63,622,000, as compared with
$58,399,000 paid in 1996. On February 13, 1998, the Board of Directors
authorized a quarterly dividend of $.52 per share of Common Stock payable March
10, 1998 to holders of record on February 24, 1998. This quarterly dividend
represents a 10.66% increase over quarterly dividends paid in 1997.
The Company's policy is to pay out a reasonable share of net cash
provided by operating activities as dividends, consistent on average with the
payout record of past years, and consistent with the goal of maintaining debt
ratios within prudent and generally acceptable limits. The future payment of
dividends, however, will be within the discretion of the Board of Directors of
the Company and depends on the Company's profitability, capital requirements,
financial condition, growth, business opportunities and other factors which the
Board of Directors may deem relevant.
10
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations, per share data and balance sheet
data for each of the 5 years ended December 31, 1997 set forth below have been
derived from the audited consolidated financial statements of the Company. The
following data should be read in conjunction with the consolidated financial
statements of the Company and notes to consolidated financial statements on
pages 43 through 47 and 58 through 72 of the Company's 1997 Annual Report to
Shareholders, which are incorporated in this Annual Report on Form 10-K by
reference.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- --------
(Amounts in millions, except per share date)
<S> <C> <C> <C> <C> <C>
Net sales........................... $ 1,678.6 $1,568.9 $ 1,461.0 $ 1,253.4 $1,133.5
Net earnings........................ $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2
Net earnings per:
Basic shares outstanding.......... $ 6.18 $ 5.43 $ 4.68 $ 2.69 $ 2.40
Diluted shares outstanding........ $ 6.10 $ 5.36 $ 4.63 $ 2.67 $ 2.39
Total assets........................ $ 1,449.2 $1,320.6 $ 1,215.8 $ 1,181.1 $1,078.6
Long-term obligations............... $ 81.9 $ 85.5 $ 90.3 $ 97.4 $ 102.0
Cash dividends declared per share $ 1.88 $ 1.68 $ 1.46 $ 1.32 $ 1.26
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 48 through 54 and "Financial Terminology" on page
79 of the Company's 1997 Annual Report to Shareholders are incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information relative to this item is included in the
Company's 1997 Annual Report to Shareholders on the pages shown below, which are
incorporated herein by reference:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Financial Statements 44-47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial Data for Each of the 2 Years Ended
December 31, 1997 and 1996 (Unaudited) 77
</TABLE>
With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 3, 7, 8 and 14, the Company's
1997 Annual Report to Shareholders is not deemed filed as part of this Annual
Report on Form 10-K.
11
<PAGE> 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No information is required to be included herein pursuant to Item 304
of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On or before March 30, 1998, the Company will file a definitive proxy
statement with the Securities and Exchange Commission pursuant to Regulation 14A
(the Company's "1998 Proxy Statement"). The information under the headings
"Election of Directors," "Nominees for Election to the Board of Directors" and
"Directors Continuing in Office" included in the 1998 Proxy Statement are
incorporated herein by reference. For the information required by Item 401 of
Regulation S-K concerning executive officers of the registrant, reference is
made to the information provided in Part I, Item 4(a) of this Annual Report on
Form 10-K. Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 240.16a-3(e) during 1997, and of Form
5 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e)
with respect to 1997, the Company has identified certain persons subject to
Section 16(a) of the Securities Exchange Act of 1934 who failed to file on a
timely basis required forms. Information concerning such failure under the
heading "Section 16(a) Beneficial Ownership Reporting Compliance" included in
the Company's 1998 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "Compensation of Directors,"
"Executive Compensation," "Option Grants in 1997," "Report of the Compensation
Committee," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values," "Shareholder Return Performance Presentation," "Retirement
Income Plan" and "Employee Special Severance Plan" included in the Company's
1998 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Holdings of Management" included in the
Company's 1998 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
An executive officer of the Company serves as the chief executive
officer of three companies in which the Company has a 51%, 50% and 49% interest,
respectively. Each of the companies reimburses the Company for a portion of the
executive officer's salary and bonus. In 1997, the total amount of this
reimbursement was $150,000. Other than the foregoing, no information is required
to be included herein pursuant to Item 404 of Regulation S-K, which requires
disclosure of certain information with respect to certain relationships or
related transactions of the directors and management.
12
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following financial statements are included in the Company's 1997
Annual Report to Shareholders on the pages shown below and are incorporated
herein by reference:
<TABLE>
<S> <C>
Consolidated Statements of Earnings 44
Consolidated Balance Sheets 45
Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting and
Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial Data for Each of the 2 Years Ended
December 31, 1997 and 1996 (Unaudited) 77
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for the years ended December
31, 1997, 1996 and 1995 is included in Part IV of this report on the indicated pages:
Schedule II Valuation and Qualifying Accounts and Reserves 17
</TABLE>
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is provided in the
financial statements or notes thereto.
Financial statements (and summarized financial information) of 50% or
less owned entities accounted for by the equity method have been omitted because
they do not, considered individually or in the aggregate, constitute a
significant subsidiary.
(A) (3) EXHIBITS
The exhibits required by Item 601 of Regulation S-K and indicated
below, other than Exhibit (12) which is on page 18 of this report, are either
incorporated by reference herein or accompany the copies of this report filed
with the Securities and Exchange Commission and the New York Stock Exchange.
Copies of such exhibits will be furnished to any requesting shareholder of the
Company upon payment of the costs of copying and transmitting the same.
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the
Company filed as Exhibit 3(a) to the Company's 1988 Form 10-K
Annual Report (File No. 1-4033).*
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990,
and as last amended February 14, 1997, filed as Exhibit 3(ii)
to the Company's 1997 Form 10-K Annual Report (File No.
1-4033).*
13
<PAGE> 17
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and
among the Company, Goldman, Sachs & Co., Lehman Brothers and
Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3
filed on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the
Company and First Trust of New York (as successor trustee to
Morgan Guaranty Trust Company of New York) filed as Exhibit 4
to the Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last
amended and restated filed as Exhibit 10(a) to the Company's
1989 Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy statement
for the annual meeting of its shareholders held May 16, 1991
(File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees
filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual
Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are
Not Employees of the Company, as last amended and restated on
February 17, 1996 filed as Exhibit 10(g) to the Company's 1995
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the
Company.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1997 (set forth on page 18 of
this report).
EXHIBIT (13) The Company's 1997 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1997.
EXHIBIT (24) Powers of Attorney
EXHIBIT (27) Financial Data Schedule (Electronic Submission Only).
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1997, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1998, as
permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
- ---------------
* Incorporated by reference.
**Management Contract or Compensatory Plan.
14
<PAGE> 18
(B) REPORTS ON FORM 8-K
None.
15
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
Vulcan Materials Company:
We have audited the consolidated financial statements of Vulcan Materials
Company and its subsidiary companies as of December 31, 1997, 1996 and 1995 and
for the years then ended, and have issued our report thereon dated February 6,
1998; such consolidated financial statements and report are included in your
1997 Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of Vulcan
Materials Company and its subsidiary companies, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements as a whole, presents
fairly in all material respects the information shown therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Birmingham, Alabama
February 6, 1998
16
<PAGE> 20
SCHEDULE II
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 1997, 1996 and 1995
Amounts in Thousands
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------------------------------------------------------------------------
Balance at Additions Charges to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions Of Period
- ----------------------------------------------------------------------------------------------------------------
1997
<S> <C> <C> <C> <C> <C>
Accrued Environmental Costs............. $ 3,732 $ 1,069 $ 516(1) $ 4,285
Doubtful Receivables.................... 8,106 885 1,443(2) 7,548
All Other(3)............................ 1,687 2,010 $ 208 2,531 1,374
1996
Accrued Environmental Costs............. $ 2,765 $ 285 $ 3,000 $ 2,318(1) $ 3,732
Doubtful Receivables.................... 8,176 732 802(2) 8,106
All Other(3)............................ 1,395 1,794 1,502 1,687
1995
Accrued Environmental Costs............. $ 12,867 $ 3,998 $ 14,100(1) $ 2,765
Doubtful Receivables.................... 8,244 984 $ 18 1,070(2) 8,176
All Other(3)............................ 2,005 1,803 2,413 1,395
</TABLE>
- ---------------------------
(1) Expenditures on environmental remediation projects.
(2) Write-offs of uncollected accounts and worthless notes, less
recoveries.
(3) Valuation and qualifying accounts and reserves for which additions,
deductions and balances are not individually significant.
17
<PAGE> 21
EXHIBIT 12
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31
Amounts in Thousands
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expenses before capitalization
credits............................. $ 8,074 $ 9,263 $ 11,396 $ 10,699 $ 10,187
Amortization of financing costs...... 104 164 109 114 115
One-third of rental expense.......... 9,735 9,663 9,532 10,393 7,375
---------- ----------- ----------- ----------- -----------
Total fixed charges............. $ 17,913 $ 19,090 $ 21,037 $ 21,206 $ 17,677
========== =========== =========== =========== ===========
Net earnings............................ 209,145 188,595 166,240 97,976 88,229
Provisions for income taxes............. 91,356 96,985 92,181 47,930 36,993
Fixed charges........................... 17,913 19,090 21,037 21,206 17,677
Capitalized interest credits............ (1,160) (627) (297) (878) (1,016)
Amortization of capitalized interest.... 708 674 1,031 997 882
---------- ----------- ----------- ----------- -----------
Earnings before income taxes as
adjusted........................... $ 317,962 $ 304,717 $ 280,192 $ 167,231 $ 142,765
========== =========== =========== =========== ===========
Ratio of earnings to fixed charges...... 17.8 16.0 13.3 7.9 8.1
</TABLE>
18
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 27, 1998.
VULCAN MATERIALS COMPANY
By /s/ D. M. JAMES
----------------------------------------
D. M. James
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ D. M. James Chairman and Chief Executive Officer March 27, 1998
- ---------------------------------------- (Principal Executive Officer)
D. M. James
/s/ P.J. Clemens, III Executive Vice President, Finance March 27, 1998
- ---------------------------------------- and Administration and Treasurer
P.J. Clemens, III (Principal Financial Officer)
/s/ E.A. Khan Controller March 27, 1998
- ---------------------------------------- (Principal Accounting Officer)
E.A. Khan
The following directors:
Marion H. Antonini Director
Livio D. DeSimone Director
John K. Greene Director
Douglas J. McGregor Director
Ann D. McLaughlin Director
James V. Napier Director
Donald B. Rice Director
Herbert A. Sklenar Director
Orin R. Smith Director
By /s/ William F. Denson, III March 27, 1998
-------------------------------------
William F. Denson, III
Attorney-in-Fact
</TABLE>
19
<PAGE> 23
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OF
VULCAN MATERIALS COMPANY
FILED MARCH 27, 1998
COMMISSION FILE NUMBER 1-4033
<PAGE> 24
EXHIBIT INDEX
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company
filed as Exhibit 3(a) to the Company's 1988 Form 10-K Annual
Report (File No. 1-4033).*
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 14, 1997, filed as Exhibit 3(ii) to the
Company's 1997 Form 10-K Annual Report (File No. 1-4033).*
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and among
the Company, Goldman, Sachs & Co., Lehman Brothers and Salomon
Brothers Inc., filed as Exhibit 1 to the Form S-3 filed on May
2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the Company
and First Trust of New York (as successor trustee to Morgan
Guaranty Trust Company of New York) filed as Exhibit 4 to the
Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended
and restated filed as Exhibit 10(a) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy statement
for the annual meeting of its shareholders held May 16, 1991
(File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees
filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual
Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not
Employees of the Company, as last amended and restated on
February 17, 1996, filed as Exhibit 10(g) to the Company's 1995 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the
Company.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five
years ended December 31, 1997 (set forth on page 18 of this
report).
EXHIBIT (13) The Company's 1997 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1997.
EXHIBIT (24) Powers of Attorney
EXHIBIT (27.1) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27.2) Financial Data Schedule restated for the period ended
December 31, 1996 (Electronic Submission Only).
EXHIBIT (27.3) Financial Data Schedule restated for the period ended
December 31, 1995 (Electronic Submission Only).
</TABLE>
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1997, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1998, as
permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
- ---------------------
*Incorporated by reference.
**Management Contract or Compensatory Plan.
<PAGE> 1
EXHIBIT (10)(I)
VULCAN
MATERIALS COMPANY
RESTRICTED STOCK PLAN
FOR NONEMPLOYEE DIRECTORS
EFFECTIVE DATE NOVEMBER 1, 1997
AS APPROVED ON JULY 18, 1997
<PAGE> 2
VULCAN MATERIALS COMPANY
RESTRICTED STOCK PLAN FOR
NONEMPLOYEE DIRECTORS
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions............................................................. 1
Beneficiary........................................................ 1
Board.............................................................. 1
Change in Control.................................................. 1
Company............................................................ 1
Deferred Stock Unit................................................ 1
Effective Date..................................................... 1
Exchange Act....................................................... 2
Fair Market Value Per Share........................................ 2
Nonemployee Director............................................... 2
Plan............................................................... 2
Restricted Share................................................... 2
Share.............................................................. 2
2. Purposes and Effective Date............................................. 2
3. Eligibility............................................................. 2
4. Grants of Restricted Shares............................................. 2
5. Terms and Conditions of Grants of Restricted Shares..................... 2
6. Delivery of Restricted Shares........................................... 3
7. Deferred Stock Account.................................................. 4
8. Deferred Stock Units.................................................... 4
9. Distribution Attributable to Deferred Stock Units....................... 5
10. Effect of Change in Control............................................. 5
11. Amendment and Termination............................................... 5
12. Term.................................................................... 6
13. Compliance with SEC Regulations......................................... 6
14. Miscellaneous........................................................... 6
</TABLE>
<PAGE> 3
VULCAN MATERIALS COMPANY
RESTRICTED STOCK PLAN FOR
NONEMPLOYEE DIRECTORS
1. DEFINITIONS.
As used herein, the following terms shall have the meanings hereinafter
set forth:
(a) "Beneficiary" shall mean the individual or entity designated
by the Nonemployee Director to receive, upon the death of the Nonemployee
Director, undelivered Restricted Shares as to which the applicable restrictions
have expired and the balance of the Nonemployee Director's Account attributable
to Deferred Stock Units. If no such designation is made, or if the designated
individual predeceases the Nonemployee Director or the entity no longer exists,
then the Beneficiary shall be the Nonemployee Director's estate.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean
(1) The acquisition by any person, entity or "group,"
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(excluding any employee benefit plan of the Company or any of its subsidiaries
which acquires beneficial ownership of voting securities of the Company), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of either the then outstanding Shares or the
combined voting power of the Company's then outstanding voting securities, in
one transaction or a series of transactions; provided, however, that, if prior
to such an acquisition, a majority of the Continuing Directors determines that
such acquisition shall not, for purposes of the Plan, be deemed a Change in
Control, such acquisition shall not constitute a Change in Control hereunder;
(2) The cessation, for any reason, of the individuals
who, as of the date of a Change in Control, constitute the Board (the
"Continuing Directors") to constitute at least a majority of the Board, provided
that any person becoming a director of the Company subsequent to the Change in
Control Date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Continuing
Directors (other than in election or nomination of the individual whose initial
assumption of office is in connection with an actual or threatened solicitation
with respect to the election or removal of directors of the Company, as such
terms are used in Rule 14a-11 promulgated under the Exchange Act) shall be, for
purposes of the Plan, considered as though such person were a Continuing
Director, or
(3) Approval by the Board of (i) a merger, consolidation,
or reorganization of the Company in which, as a consequence of the transaction,
either the Continuing Directors do not constitute a majority of the directors of
the continuing or surviving corporation, or any person, entity or "group,"
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, controls
25% or more of the combined voting power of the continuing or surviving
corporation; (ii) any sale, lease or other transfer, in one transaction, or a
series of related transactions, of all or substantially all of the assets of the
Company; or (iii) any plan or proposal for the liquidation or dissolution of the
Company; provided, however, that if at the time of such approval, a majority of
the Continuing Directors determines that such merger, consolidation,
reorganization, sale, lease, other transfer, liquidation or dissolution shall
not, for purposes of the Plan, be deemed a Change in Control, such transaction
shall not constitute a Change in Control hereunder, and, provided further, that,
if a majority of the Continuing Directors so determines, a Change in Control
shall not be deemed to occur until the consummation of any such transaction.
(d) "Company" shall mean Vulcan Materials Company, a New Jersey
corporation.
(e) "Deferred Stock Unit shall mean the equivalent of one Share,
as established pursuant to this Plan.
(f) "Effective Date shall mean November 1, 1997.
1
<PAGE> 4
(g) "Exchange Act shall mean the Securities Exchange Act of 1934,
as amended.
(h) "Fair Market Value Per Share shall mean the average of the
daily closing prices of Shares as reported on the New York Stock Exchange for
the twenty (20) trading days prior to the date of determination, or if the
Shares are not listed on such exchange, on the principal United States
securities exchange registered under the Exchange Act on which the Shares are
listed.
(i) "Nonemployee Director shall mean any person who is a member of
the Board who is not, as of the date of a grant of Restricted Shares under this
Plan, an employee or an officer of the Company or any of its subsidiaries.
(j) "Plan shall mean this Vulcan Materials Company Restricted
Stock Plan for Nonemployee Directors, as it may be amended from time to time.
(k) "Restricted Share shall mean a Share granted to a Nonemployee
Director in accordance with paragraph 4 and subject to the restrictions set
forth in paragraph 5.
(l) "Share shall mean a share of the Company's common stock, $1.00
par value, and such other stock and securities as may be substituted therefor in
accordance with paragraph 6(b).
2. PURPOSES AND EFFECTIVE DATE.
The purposes of the Plan are to promote a greater identity of interests
between the Company's Nonemployee Directors and its stockholders through
increasing ownership of Company common stock by the Nonemployee Directors and to
assist the Company in attracting and retaining qualified individuals to serve as
Nonemployee Directors by affording them an opportunity to share in the future
successes of the Company.
The Plan was adopted on July 18, 1997 and shall become effective on
November 1, 1997. No grants of Restricted Shares shall be made until November,
1997.
3. ELIGIBILITY.
Each director who as of the date of any grant made pursuant to the Plan
is not an employee of the Company or any of its subsidiaries shall be eligible
to participate in the Plan.
4. GRANTS OF RESTRICTED SHARES.
(a) On or shortly after November 1, 1997, each Nonemployee
Director elected to office by the stockholders of the Company on May 16, 1997,
shall receive a grant of 65 Restricted Shares.
(b) So long as he or she remains a Nonemployee Director, an
additional grant of 65 Restricted Shares shall be made to each Nonemployee
Director on June 1, 1998, and on each June 1 thereafter (or on the next business
day, if June 1 is not a business day).
5. TERMS AND CONDITIONS OF GRANTS OF RESTRICTED SHARES.
(a) The terms and conditions set forth in this paragraph shall
apply to each grant of Restricted Shares. If required by the Company, each such
grant shall be evidenced by a written agreement that sets forth the specific
terms of the grant in accordance with the Plan and that is duly executed by or
on behalf of the Company and the Nonemployee Director.
(b) At the time of each grant, a share certificate or certificates
representing the number of Restricted Shares granted to a Nonemployee Director
shall be registered in the Nonemployee Director's name but shall be held by or
on
2
<PAGE> 5
behalf of the Company for the Nonemployee Director's account. As a condition to
receipt of the first award of Restricted Shares, each Nonemployee Director shall
execute and deliver to the Company a stock power in blank with respect to all
Restricted Shares that may be awarded to such Nonemployee Director in the
future. Such stock power shall be held in custody by the Secretary of the
Company and shall be used only to effect a transfer of Restricted Shares to the
Company in connection with a forfeiture of Restricted Shares by such Nonemployee
Director. The Nonemployee Director shall have all the rights and privileges of a
stockholder as to such Restricted Shares, including the right to receive
dividends and the right to vote such Restricted Shares, subject to the
restrictions set forth in subparagraph c and subject to deferrals of dividend
payments as provided in paragraph 7.
(c) The Restricted Shares granted to any Nonemployee Director
under paragraph 4 shall be subject to the following restrictions:
(i) Such Restricted Shares may not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed
of until such time as such restrictions have expired
as to such Restricted Shares as provided in
subparagraph (d).
(ii) A Nonemployee Director shall not be entitled to
delivery of a share certificate representing any
Restricted Shares until the expiration of such
restrictions as to such Restricted Shares.
(d) Except as otherwise provided in clause (ii) below or in
paragraph 10, the restrictions applicable to Restricted Shares covered by any
grant to any Nonemployee Director shall expire in accordance with the terms of
the following clause (i):
(i) Restrictions shall expire as to the Restricted Shares
on the date the Nonemployee Director attains age 70;
provided, however, that restrictions shall expire as
to Restricted Shares only if the Nonemployee Director
shall have remained a director of the Company
continuously from the date of grant of such
Restricted Shares to the scheduled expiration date.
(ii) If a Nonemployee Director ceases to be a director of
the Company before attaining age 70 because of death
or because he or she is totally and permanently
disabled as determined by a majority of the Board,
the restrictions on all Restricted Shares shall
expire as of the date the Nonemployee Director ceases
to be a director of the Company.
(e) All of the Restricted Shares granted to any Nonemployee
Director as to which the restrictions have not previously expired shall be
forfeited immediately, and all rights of such Nonemployee Director to such
Restricted Shares shall terminate without further obligation on the part of the
Company, if the Nonemployee Director shall cease to be a director of the Company
before age 70 for any reason other than as set forth in clause (ii) of
subparagraph (d) above or in paragraph 10; provided, however, that in cases of
special circumstances, the Chief Executive Officer or the Company may, in his
sole discretion, when he finds that a waiver would be in the best interest of
the Company, waive in whole or in part any or all remaining restrictions.
(f) As soon as practicable after the expiration of the
restrictions on any Restricted Shares as herein provided, a share certificate
for such Restricted Shares shall be delivered, free of all such restrictions, to
the Nonemployee Director (or to the Nonemployee Director's Beneficiary, if
applicable) subject to the withholding requirements of paragraph 6(d)(if
applicable).
6. DELIVERY OF RESTRICTED SHARES.
(a) Shares granted or delivered under the Plan may be authorized
but unissued Shares, Shares reacquired by the Company, or a combination of both,
as the Board may from time to time determine. Shares granted under the Plan but
subsequently forfeited shall continue to be otherwise available for the purposes
of the Plan.
3
<PAGE> 6
(b) In the event of any change in the outstanding Shares upon
which the stock equivalency hereunder is based, by reason of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination or exchange of shares, or any other change in corporate structure or
in the event of any dividend that is paid in Shares or other property, the
number and kind of Restricted Shares which may thereafter be granted under the
Plan shall be adjusted and the number and kind of Shares then being held by the
Company as Restricted Shares shall be adjusted in such a manner as a majority of
the Board shall determine to be fair under the circumstances; provided, however,
that if a Change in Control shall have occurred, then such determination shall
be made by a majority of the Continuing Directors. Any new or additional
Restricted Shares, or stock or other securities substituted therefor, to which
an Nonemployee Director may be entitled under this subparagraph shall be subject
to all of the terms and conditions of paragraph 5.
(c) The Company shall not be required to deliver any fractional
Share but shall pay, in lieu thereof, the fair market value (measured as of the
date restrictions lapse) of such fractional Share to the Nonemployee Director
(or the Nonemployee Director's Beneficiary, if applicable).
(d) Before the issuance or delivery of any Restricted Shares on
which the restrictions have expired, the Company shall require payment in cash
by the Nonemployee Director of any withholding taxes that the Company may be
required by law to pay with respect to the issuance or delivery of such Shares.
7. DEFERRED STOCK ACCOUNT.
The Company shall establish a deferred stock account (an "Account') for
each Nonemployee Director participating in the Plan. A Nonemployee Director
shall have no right to immediate payment of dividends on Restricted Shares. On
each Dividend Date (as defined below), the Company shall credit the Account with
the number of Deferred Stock Units determined in accordance with paragraph 8
below. Distributions from a Nonemployee Director's Account shall be made in
Shares upon the retirement of a Nonemployee Director, unless the distributions
are accelerated in accordance with paragraphs 9 or 10 below. The value of the
Deferred Stock Units is dependent upon the fair market value of the Shares on
the date the Shares are distributed to the Nonemployee Director, and is
therefore subject to market fluctuations in value until such distribution.
8. DEFERRED STOCK UNITS.
(a) There shall be credited to the Account of each Nonemployee
Director participating in the Plan Deferred Stock Units on each regular cash
dividend payment date (a "Dividend Date"). The number of such Deferred Stock
Units shall be determined by (i) multiplying the amount of the dividend by the
sum of (x) the total number of Deferred Stock Units (including fractional
Deferred Stock Units) credited to such Account immediately prior to the Dividend
Date and (y) the total number of Restricted Shares granted to such Nonemployee
Director upon which restrictions have not yet lapsed and (ii)dividing the
product by the Fair Market Value Per Share as of the day preceding the Dividend
Date.
(b) In the event of any change in the outstanding Shares upon
which the stock equivalency hereunder is based, by reason of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination or exchange of shares, or any other change in corporate structure or
in the event of any dividend that is paid in Shares or other property, the
number of Deferred Stock Units credited to the Account shall be adjusted in such
a manner as a majority of the Board shall determine to be fair under the
circumstances; provided, however, that if a Change in Control shall have
occurred, then such determination shall be made by a majority of the Continuing
Directors. In the case of dividends payable in property, the amount paid shall
be based on the fair market value of the property at the time of distribution of
the dividend, as determined by a majority of the Board, or, in the event of a
Change in Control, by a majority of the Continuing Directors.
4
<PAGE> 7
9. DISTRIBUTION ATTRIBUTABLE TO DEFERRED STOCK UNITS.
(a) Except as otherwise provided herein, the balance of each
Nonemployee Director's Account shall be paid to the Nonemployee Director, in a
lump sum, commencing at the beginning of the first quarter after the first
annual meeting of the shareholders of the Company following the date that such
director reaches the mandatory retirement age then in effect.
(b) In the event of the death of the Nonemployee Director prior to
such director's retirement or prior to the distribution of the entire balance in
such director's Account, the entire balance in the Account as of the date of the
Nonemployee Director's death shall be paid in Shares in a lump sum, to the
surviving beneficiary or beneficiaries as the Nonemployee Director may have
designated by notice in writing to the Company or by will, or, if no
beneficiaries are so designated, the legal representative of such director's
estate.
(c) If a Nonemployee Director shall become totally and permanently
disabled, as determined by a majority of the Board, while he or she is a
director of the Company, the entire balance in the Account as of the date of
such total and permanent disability shall be paid to such Nonemployee Director,
or his or her personal representative, in a lump sum, within one hundred twenty
(120) days of the date of such total and permanent disability.
(d) If a Nonemployee Director ceases to be a director of the
Company for any reason other than due to death or total and permanent
disability, including, without limitation, the failure of such person to be
re-elected as a director of the Company by the shareholders of the Company, the
balance of such director's Account as of the date such person ceases to be a
director of the Company shall be paid in a lump sum, to such director within one
hundred twenty (120) days of the date such person ceases to be a director of the
Company.
(e) All distributions of Deferred Stock Units made pursuant to
this Plan shall be in an amount equal to the number of Deferred Stock Units held
in the Account. On the date of any such distribution, the Company shall cause to
be issued and delivered to such Nonemployee Director a stock certificate
evidencing the Shares registered in the name of such Nonemployee Director, or
such other person as the Nonemployee Director my designate. Deferred Stock Units
representing fractional Shares shall be paid in cash.
10. EFFECT OF CHANGE IN CONTROL.
(a) Notwithstanding any other provision of the Plan, if a Change
in Control occurs and at any time after the occurrence of such Change in Control
either of the following events occurs:
(i) the Nonemployee Director ceases for any reason to be
a director of the Company; or
(ii) the Plan is terminated;
then the restrictions on all Restricted Shares shall expire and the
entire balance of the Account shall be payable in a lump sum to the
director in Shares. Such payment shall be made by the Company as
promptly as practicable, but not more than thirty (30) days following
the date on which the right to such payment arose.
(b) The Company shall promptly reimburse the director for all
legal fees and expenses reasonably incurred in successfully seeking to obtain or
enforce any right or benefit provided under this paragraph 10.
(c) This paragraph 10 may not be amended or modified after the
occurrence of a Change in Control.
11. AMENDMENT AND TERMINATION.
The Board may from time to time amend, suspend or terminate the Plan,
in whole or in part; provided, however, that without the Nonemployee Director's
consent, no such amendment, suspension or termination shall materially
5
<PAGE> 8
adversely affect the rights of any Nonemployee Director in respect of Restricted
Shares previously granted to such Nonemployee Director. Notwithstanding the
foregoing, the Board may, in any circumstance where it deems such approval
necessary or desirable, require stockholder approval as a condition to the
effectiveness of any amendment or modification of the Plan.
12. TERM.
The Plan shall continue in effect without limit unless and until the
Board otherwise determines.
13. COMPLIANCE WITH SEC REGULATIONS.
It is the Company's intent that the Plan comply with the provisions of
Section 16 of the Exchange Act and the rules promulgated thereunder. To the
extent that any provision of the Plan is later found not to be in compliance
with Section 16 or such rules, such provision shall be deemed to be null and
void.
14. MISCELLANEOUS.
(a) Neither the establishment of the Plan nor the payment of any
benefits hereunder nor any action taken hereunder shall be construed as giving
any individual any right to continue to serve as a director of the Company or
otherwise to be retained in the service of the Company.
(b) No Shares shall be issued hereunder unless and until counsel
for the Company shall be satisfied such issuance will be in compliance with
applicable federal, state and other securities laws and regulations.
(c) The expenses of the Plan shall be borne by the Company.
(d) Neither the Nonemployee Director nor any other person shall
have any interest in any fund or in any specific asset of the Company by reason
of amounts credited to the Account of such director, nor the right to exercise
any of the rights or privileges of a shareholder with respect to any Deferred
Stock Unit credited to such Account, nor the right to receive distribution under
the Plan except as expressly provided herein. Distributions hereunder shall be
made from the general funds of the Company, and the rights of the directors
shall be those of an unsecured general creditor of the Company.
(e) The Plan, the grant of Restricted Shares and Deferred Stock
Units thereunder, and the obligation of the Company to deliver Shares, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any governmental or regulatory agency or national securities
exchange as may be required. The Company shall not be required to issue or
deliver any certificates for Shares prior to the completion of any registration
or qualification of such Shares under any federal or state law or any ruling or
regulation of any governmental body or national securities exchange which the
Company shall, in its sole discretion, determine to be necessary or advisable.
(f) The Plan shall be administered by the Compensation Committee
selected by the Board. The Compensation Committee shall have the power to
interpret the Plan and, subject to its provisions, to make all determinations
necessary or desirable for the Plan's administration. The Compensation Committee
shall have the full discretionary authority to adopt rules and regulations for
carrying out the Plan, and to interpret, construe and implement the provisions
of the Plan. The Compensation Committee's determinations on these matters shall
be conclusive, except in the event of a Change in Control, in which case such
interpretation and determination shall be made by a majority of the Continuing
Directors.
(g) No rights or benefits under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, except by will or the laws of descent and distribution,
and any
6
<PAGE> 9
attempt thereat shall be void. No such right or benefit shall, before receipt
thereof, be in any manner liable for or subject to the recipient's debts,
contracts, liabilities, engagements, or torts.
(h) The provisions of this Plan shall apply to and be binding upon
the beneficiaries, distributees, and personal representatives, and any
successors in interest of the Nonemployee Director.
(i) The Company shall deduct from all distributions hereunder any
taxes required to be withheld by the federal, state or local law.
(j) The Plan shall be governed by, and construed in accordance
with, the laws of the State of Alabama, excluding any choice of law provisions
which may indicate the application of the laws of another jurisdiction.
Executed and adopted as of this 1st day of November, 1997, pursuant to
action taken by the Board of Directors of Vulcan Materials Company at its
meeting on July 18, 1997.
VULCAN MATERIALS COMPANY
By /s/ WILLIAM F. DENSON, III
------------------------------------------
Its Vice President
------------------------------------------
7
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING AND INTERNAL CONTROL
The Shareholders of Vulcan Materials Company:
Vulcan's management acknowledges and accepts its responsibility for all the
information contained in the financial statements and other sections of this
report. The statements were prepared in conformity with generally accepted
accounting principles appropriate in the circumstances and we believe they
reflect fairly the Company's financial position, results of operations and cash
flows for the periods shown. The financial statements necessarily reflect our
informed judgments and estimates of the expected outcome of numerous current
events and transactions.
The Company maintains an internal control structure which we believe
provides reasonable assurance that the Company's financial statements, books and
records accurately reflect the Company's financial condition, results of
operations and cash flows and that the Company's assets are safeguarded from
loss or unauthorized use. This internal control structure includes well-defined
and communicated policies and procedures, organizational structures that provide
for appropriate separations of responsibilities, high standards applied in the
selection and training of management personnel and adequate procedures for
properly assessing and applying accounting principles, including careful
consideration of the accuracy and appropriateness of all significant accounting
estimates. Vulcan also has an internal audit function that continually reviews
compliance with established policies and procedures.
The Company's independent auditors, Deloitte & Touche LLP, consider the
internal control structure as a part of their audits of the Company's financial
statements and provide an independent opinion as to the fairness of the
presentation of those statements. Their report is presented on the following
page.
The Board of Directors pursues its oversight role for the financial
statements and internal control structure in major part through the Audit Review
Committee, which is composed of five outside directors. In addition, the full
Board regularly reviews detailed management reports covering all aspects of the
Company's financial affairs. The Audit Review Committee meets periodically with
management, the independent auditors and the internal auditors to review the
work of each and to ensure that each is properly discharging its
responsibilities. To ensure independence, the Committee also meets on these
matters with the internal and independent auditors without the presence of
management representatives.
P. J. Clemens, III
Executive Vice President, Finance & Administration and Treasurer
E. A. Khan
Controller
February 6, 1998
42
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Shareholders of Vulcan Materials Company:
We have audited the accompanying consolidated balance sheets of Vulcan Materials
Company and its subsidiary companies as of December 31, 1997, 1996 and 1995, and
the related consolidated statements of earnings, shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Vulcan Materials Company and
its subsidiary companies at December 31, 1997, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Birmingham, Alabama
February 6, 1998
43
<PAGE> 3
CONSOLIDATED STATEMENTS OF EARNINGS
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31, 1997, 1996 and 1995
Amounts in thousands, except per share data 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales .......................................... $1,678,581 $1,568,945 $1,460,974
Cost of goods sold ................................. 1,199,453 1,115,442 1,044,710
---------- --------------------------
Gross profit on sales .............................. 479,128 453,503 416,264
Selling, administrative and general expenses ....... 190,446 175,128 159,829
Other operating costs .............................. 5,112 3,887 6,347
Other income, net
Interest income .................................. 3,190 3,179 1,099
Other, net ....................................... 20,655 16,549 18,333
---------- --------------------------
Total other income, net ............... 23,845 19,728 19,432
---------- --------------------------
Earnings before interest expense and income taxes .. 307,415 294,216 269,520
Interest expense (Note 4) .......................... 6,914 8,636 11,099
---------- --------------------------
Earnings before income taxes ....................... 300,501 285,580 258,421
Provision for income taxes (Note 7)
Current .......................................... 84,806 95,443 86,437
Deferred ......................................... 6,550 1,542 5,744
---------- --------------------------
Total provision for income taxes ...... 91,356 96,985 92,181
---------- --------------------------
Net earnings ....................................... $ 209,145 $ 188,595 $ 166,240
========== ==========================
Basic net earnings per share ....................... $ 6.18 $ 5.43 $ 4.68
Diluted net earnings per share ..................... $ 6.10 $ 5.36 $ 4.63
Dividends per share ................................ $ 1.88 $ 1.68 $ 1.46
Average common shares outstanding .................. 33,828 34,758 35,544
Average common shares outstanding, assuming dilution 34,283 35,173 35,933
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
44
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31, 1997, 1996 and 1995
Amounts in thousands, except per share data 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 2) ........................ $ 128,566 $ 50,816 $ 21,869
Accounts and notes receivable:
Customers, less allowance for doubtful accounts:
1997, $7,548; 1996, $8,106; 1995, $8,176 ............ 189,389 176,864 170,757
Other ................................................... 10,361 8,671 10,303
Inventories (Note 3) ..................................... 132,359 128,578 126,801
Deferred income taxes (Note 7) ............................ 21,385 23,474 26,555
Prepaid expenses .......................................... 5,072 5,642 5,836
---------- --------------------------
Total current assets ........................... 487,132 394,045 362,121
Investments and long-term receivables ....................... 63,482 61,274 56,272
Property, plant and equipment, net (Note 4) ................. 808,419 764,490 698,033
Deferred charges and other assets (Notes 8, 14) ............. 90,213 100,836 99,368
---------- --------------------------
Total .......................................... $1,449,246 $1,320,645 $1,215,794
========== ==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt ...................... $ 5,408 $ 5,021 $ 7,070
Notes payable (Note 2) .................................... 3,654 3,289 3,569
Trade payables and accruals ............................... 112,548 98,528 98,253
Accrued income taxes ...................................... 21,749 29,606 22,262
Accrued salaries and wages ................................ 41,858 38,253 28,658
Accrued interest .......................................... 1,360 1,221 1,300
Other accrued liabilities (Note 9) ........................ 21,120 18,736 16,297
---------- --------------------------
Total current liabilities ...................... 207,697 194,654 177,409
Long-term debt (Note 5) ..................................... 81,931 85,535 90,278
Deferred income taxes (Note 7) .............................. 88,719 86,968 85,935
Deferred management incentive and other compensation
(Note 9)................................................... 33,849 26,251 26,618
Other postretirement benefits (Note 8) ...................... 37,924 36,222 32,717
Other noncurrent liabilities (Note 10) ...................... 7,629 7,351 6,199
---------- --------------------------
Total liabilities .............................. 457,749 436,981 419,156
---------- --------------------------
Other commitments and contingent liabilities (Note 10) ...... 0 0 0
Shareholders' equity
Common stock, $1 par value ................................ 46,573 46,573 46,573
Capital in excess of par value ............................ 14,047 10,344 9,089
Retained earnings ......................................... 1,449,890 1,304,367 1,174,171
---------- --------------------------
Total .......................................... 1,510,510 1,361,284 1,229,833
Less cost of stock in treasury ............................ 519,013 477,620 433,195
---------- --------------------------
Total shareholders' equity ..................... 991,497 883,664 796,638
---------- --------------------------
Total .......................................... $1,449,246 $1,320,645 $1,215,794
========== ==========================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
45
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31, 1997, 1996 and 1995
Amounts in thousands 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings ............................................................... $ 209,145 $ 188,595 $ 166,240
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation, depletion and amortization ............................. 120,624 112,600 110,677
(Increase) decrease in assets before effects of business acquisitions:
Accounts and notes receivable ................................ (14,215) 1,381 3,634
Inventories ................................................. (3,751) 3,915 (11,899)
Deferred income taxes ....................................... 2,089 3,081 2,519
Prepaid expenses ............................................ 570 194 (362)
Increase (decrease) in liabilities before effects of business
acquisitions:
Accrued interest and income taxes ........................... 139 (105) (355)
Trade payables, accrual, etc ................................ (2,070) 14,118 (1,352)
Deferred income taxes ...................................... 1,752 1,032 3,428
Other noncurrent liabilities ............................... 9,578 4,290 7,255
Issuance of common stock in connection with stock-based
incentive plans ................................................. 5,451 2,010 699
Other, net ......................................................... 16,502 14,421 (14,028)
--------- --------- ---------
Net cash provided by operating activities ........................ 345,814 345,532 266,456
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................. (161,238) (151,767) (109,174)
Payment for business acquisitions .......................................... (12,086) (64,765) (27,172)
Proceeds from sale of property, plant and equipment ........................ 16,446 11,952 31,881
Net investment in nonconsolidated companies ................................ 150 (1,233) (1,913)
--------- -------------------------
Net cash used for investing activities ........................... (156,728) (205,813) (106,378)
--------- -------------------------
FINANCING ACTIVITIES
Net borrowings (payments) - commercial paper and bank lines of credit ...... 365 (280) (39,211)
Payment of short-term debt ................................................. (5,000) (6,849) (4,687)
Payment of long-term debt .................................................. (19) (62) (32)
Purchases of common stock (Note 11) ........................................ (43,060) (45,182) (50,148)
Dividends paid ............................................................. (63,622) (58,399) (51,848)
--------- -------------------------
Net cash used for financing activities ........................... (111,336) (110,772) (145,926)
--------- -------------------------
Net increase in cash and cash equivalents .................................. 77,750 28,947 14,152
Cash and cash equivalents at beginning of year ............................. 50,816 21,869 7,717
--------- -------------------------
Cash and cash equivalents at end of year ................................... $ 128,566 $ 50,816 $ 21,869
========= =========================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
46
<PAGE> 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31, 1997, 1996 and 1995
Amounts in thousands, except per share data
1997 1996 1995
SHARES AMOUNT Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock, $1 par value
Authorized: 160,000 shares
Issued (no changes in 1997, 1996
and 1995) ................... 46,573 $ 46,573 46,573 $ 46,573 46,573 $ 46,573
------- ---------- ------- ---------- ------- ----------
Capital in excess of par value
Balance at beginning of year .. 10,344 9,089 8,585
Distributions under stock-based
incentive plans .......... 3,784 1,253 438
Other ......................... (81) 2 66
---------- ---------- ----------
Balance at end of year ........ 14,047 10,344 9,089
---------- ---------- ----------
Retained earnings
Balance at beginning of year .. 1,304,367 1,174,171 1,059,779
Net earnings .................. 209,145 188,595 166,240
Cash dividends on common stock. (63,622) (58,399) (51,848)
---------- ---------- ----------
Balance at end of year ........ 1,449,890 1,304,367 1,174,171
---------- ---------- ----------
Common stock held in treasury
Balance at beginning of year .. (12,332) (477,620) (11,602) (433,195) (10,666) (383,308)
Purchase of common shares ..... (631) (43,060) (765) (45,182) (948) (50,148)
Distributions under stock-based
incentive plans .......... 78 1,667 35 757 12 261
------- ---------- ------- ---------- ------- ----------
Balance at end of year ........ (12,885) (519,013) (12,332) (477,620) (11,602) (433,195)
------- ---------- ------- ---------- ------- ----------
Total ................ $ 991,497 $ 883,664 $ 796,638
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
47
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Vulcan is the largest producer of construction aggregates in the United States
and is recognized as one of the nation's leading producers of chemicals. The
following is a discussion and analysis of the results of operations and the
financial condition of the Company. The discussion and analysis should be read
in connection with the historical financial information included in the
Consolidated Financial Statements and their notes.
RESULTS OF OPERATIONS
Vulcan's 1997 sales, net earnings and earnings per share were at record levels.
Net earnings and diluted earnings per share were $209.1 million and $6.10,
respectively. The comparable 1996 net earnings and diluted earnings per share
were $188.6 million and $5.36, respectively. Sales in 1997 were $1.679 billion,
up from the 1996 total of $1.569 billion. Pretax earnings totaled $300.5
million, up 5% from last year's amount of $285.6 million.
CONSTRUCTION MATERIALS
1997 VS. 1996 For the fifth consecutive year, Construction Materials sales
surpassed previous records. Net sales for 1997 totaled $1.051 billion, up 9%
from the 1996 result of $961.9 million. The 1997 result reflects a 6% increase
in shipments and a 3% rise in the average unit selling price of crushed stone,
the segment's principal product. Of the total increase in sales of $89.1
million, $63.3 million was related to increased volume and $25.8 million was due
to higher prices.
Segment earnings of $229.3 million, which are before interest expense
and income taxes, also were at a record level and were up 16% from 1996's record
level of $197.3 million. The favorable effects of higher crushed stone shipments
and prices as well as lower production costs were partially offset by higher
overhead costs due mainly to increased provisions associated with stock-based
incentive plans.
1996 VS. 1995 Net sales for 1996 totaled $961.9 million, up 9% from the 1995
result of $884.7 million. The 1996 result reflected a 7% increase in shipments
and a 3% rise in the average unit selling price of crushed stone. Of the total
increase in sales of $77.2 million, $54.4 million was related to increased
volume and $22.8 million was due to higher prices.
Segment earnings of $197.3 million were up 9% from 1995's record level
of $181.5 million. Results for 1996 include pretax gains totaling approximately
$5.2 million from the sale of assets, primarily surplus land, as compared to the
1995 total of $16.5 million. When gains referable to asset sales are excluded
from both years' results, 1996 earnings were 16% better than 1995 due
principally to higher crushed stone shipments and improved prices. The favorable
effects of higher volume and prices were partially offset by higher operating
costs due mainly to the full-year impact of new operations.
48
<PAGE> 8
CHEMICALS
1997 VS. 1996 Record 1997 sales of $627.6 million were up 3% from the record
1996 level of $607 million. The growth came primarily from increased Performance
Systems sales. Chloralkali sales were essentially unchanged from 1996 as the
effect of lower caustic soda prices was nearly offset by higher revenues from
chlorine and chlorine derivative products.
Segment earnings of $75.8 million in 1997 were down 20% from the record
1996 level of $94.7 million. The decrease primarily reflects a 34% decline in
caustic soda prices and higher raw material costs. This was partially offset by
higher pricing for chlorine and derivative products, as well as improved
earnings from Performance Systems.
1996 VS. 1995 Sales of $607.0 million were up 5% from the 1995 level of $576.3
million. Excluding the effects of 1995 and 1996 acquisitions from both years'
results, 1996 sales were effectively even with the prior year. Sales for
Performance Systems increased due to acquisitions as well as internal growth.
Sales for the Chloralkali Business Unit were virtually unchanged from 1995 as
the effect of lower caustic soda prices was offset by higher revenues from
chlorinated organic products and other inorganic products.
Segment earnings of $94.7 million in 1996 were up 8% from the 1995
level of $87.8 million. The increase reflected improved earnings in the
Performance Systems Business Unit. Earnings for the Chloralkali Business Unit
were even with results reported for 1995. Chloralkali results in 1995 included a
$7.1 million pretax charge referable to the Company's suspended joint venture
soda ash project as well as a $3.5 million charge for environmental remediation
at the Cleve Reber Superfund site. Chloralkali operating earnings declined in
1996 due to the decline in caustic soda prices, as well as higher costs
referable to energy and plant maintenance. These effects were partially offset
by higher earnings from chlorinated organic products.
In 1996, the Company's Chemicals segment completed several acquisitions
through its Performance Systems Business Unit, all with a focus on niche markets
in the water management, textile, industrial cleaning, food processing, mining,
and pulp and paper industries. The most significant of these was the acquisition
of Mayo Chemical Company during the second quarter. These acquisitions
contributed $22 million in sales during 1996.
AVERAGE OPERATING INCOME AFTER TAXES
CAPITAL EMPLOYED AS A PERCENT OF AVERAGE
(in millions of dollars) CAPITAL EMPLOYED
(percent)
[GRAPH] [GRAPH]
<PAGE> 9
SELLING, ADMINISTRATIVE AND GENERAL
Selling, administrative and general expenses of $190.4 million in 1997
increased 9% from the 1996 level of $175.1 million. This reflects principally
the effect that the 68% appreciation in the Company's share price during 1997
had on stock-based incentive compensation costs. In 1996, selling,
administrative and general expenses were up 10% from the 1995 level. This
reflects principally the impact of Chemicals acquisitions and expenses referable
to a significant project to redesign the Construction Materials' procurement
process.
INCOME TAXES
The Company's 1997 effective tax rate was 30.4%, down from the 1996
rate of 34.0%. The decrease reflects principally adjustments referable to tax
audits for prior years. The effective tax rate decreased in 1996 as well, from
the 1995 rate of 35.7%. This decrease also reflected principally adjustments
referable to tax audits for prior years, as well as the effect of statutory
depletion due to relatively higher Construction Materials earnings.
OUTLOOK
With regard to 1998, the Company's starting point is the assumption
that moderate growth in GDP and stable interest rates will continue to provide a
healthy economic environment for construction activity in the U.S. The market
for construction aggregates should remain strong, overall. Demand in all major
construction end-use markets should equal or exceed 1997 levels, with the
exception of residential construction, which is predicted to decline modestly.
Based on this outlook, 1998 earnings in the Construction Materials segment
should equal or exceed 1997's record result.
In 1998, the Chemicals segment should benefit from a continued recovery
in caustic soda pricing. Although caustic soda pricing in the fourth quarter of
1997 was 10% below the level realized in the fourth quarter of 1996, it was 27%
higher than the average for the first nine months of 1997. In addition to the
continued recovery in caustic soda pricing, earnings should be helped by the
effects of increased sales of chlorinated organics and higher Performance
Systems sales. Overall, Chemicals segment earnings are expected to exceed 1997's
level. Taking all of the current expectations into account, it is anticipated
that the Company's 1998 net earnings and earnings per share should exceed 1997's
record results.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS Net cash provided by operating activities amounted to $345.8 million
in 1997, virtually equal to 1996's total of $345.5 million. Net cash provided by
the Construction Materials segment increased 16% to $255.9 million, while net
cash provided by the Chemicals segment decreased $42.5 million, or 33%, to $86.3
million. The Company's long-standing ability to generate significant cash flows
enabled it to fund capital requirements internally, reduce long-term debt, and
return $106.7 million to shareholders through dividends and share purchases.
<PAGE> 10
Cash expenditures for property, plant and equipment, including
acquisitions, were $173.3 million in 1997, down $43.3 million. Cash spending for
acquisitions totaled $12.1 million compared with $64.8 million in 1996.
The Company's policy is to pay out a reasonable share of net cash
provided by operating activities as dividends consistent, on average, with the
payout record of past years, and consistent with the goal of maintaining debt
ratios within prudent and generally acceptable limits. Additionally, management
believes that purchases of the Company's stock frequently may represent an
attractive long-term investment. Management intends to continue buying shares
when appropriate based on prevailing market conditions and based on the
Company's cash position and long-term capital requirements.
NET CASH PROVIDED BY
OPERATING ACTIVITIES
(in millions of dollars)
[GRAPH]
WORKING CAPITAL Working capital, exclusive of debt and cash items (cash, cash
equivalents and short-term investments), totaled $161.3 million at December 31,
1997, up $3.2 million from the 1996 level. This compares with a decrease of
$16.7 million and an increase of $8.2 million in 1996 and 1995, respectively.
The current ratio increased 15% in 1997, primarily due to a higher cash
balance. The current ratio in 1996 remained unchanged from 1995, as higher cash
balances were offset by increased payables.
<PAGE> 11
PROPERTY ADDITIONS Property additions, including acquisitions, totaled $182.0
million in 1997, down marginally from the 1996 level of $187.2 million. As
explained on page 79, the Company classifies its property additions into three
categories based upon the predominant purpose of the project.
Profit-adding projects continued to bolster spending in both segments.
Within the Construction Materials segment, this included the acquisition of
stone quarries in Arkansas, Georgia and Texas; the opening of a greenfield
quarry in Alabama; and the purchase of a sand and gravel operation in Illinois.
Within the Chemicals segment, this included projects to expand chloromethanes
production capacity and to produce a new generation of chlorinated feedstocks.
Commitments for capital expenditures were $33.1 million at December 31, 1997.
Internally generated cash flow for the next year is expected to be adequate to
cover commitments.
PROPERTY ADDITIONS
(in millions of dollars)
[GRAPH]
SHORT-TERM BORROWINGS AND INVESTMENTS The Company was a net short-term investor
during 1997 as marketable securities reached a peak of $131.1 million, and
amounted to $111.3 million at year-end. During most of the years 1995 and 1996,
the Company was in a net short-term borrowing position. Short-term borrowings in
1996 reached a maximum of $48.2 million, averaged $9.7 million and were $3.3
million at year end. Comparable 1995 amounts were $93.9 million, $41.8 million
and $3.6 million, respectively.
The Company's policy is to maintain unused bank lines of credit and/or
committed credit facilities at least equal to its outstanding commercial paper.
Unsecured bank lines of credit totaling $130 million were maintained at the end
of 1997. Standard & Poor's Corporation and Moody's Investors Services, Inc. have
assigned ratings of A-1+ and P-1, respectively, to the Company's commercial
paper.
<PAGE> 12
LONG-TERM OBLIGATIONS During 1997 the Company reduced its total long-term
obligations by $3.6 million to $81.9 million as compared with a net decrease of
$4.8 million in 1996. During the three-year period ended December 31, 1997,
long-term obligations decreased cumulatively by $15.5 million from the $97.4
million outstanding at December 31, 1994.
During the same three-year period, shareholders' equity, net of common
stock purchases of $138.4 million and dividends of $173.8 million, increased by
$259.9 million to $991.5 million. In the future, the ratio of long-term debt to
total long-term capital will depend upon specific investment and financing
decisions. Nonetheless, management believes the Company's cash-generating
capability, along with its financial strength and business diversification, can
reasonably support a ratio of 25% to 30%. The actual ratio at the end of 1997
was 6.6%. The Company has made acquisitions from time to time and will continue
actively to pursue attractive investment opportunities. If financing is required
for this purpose, it may be accomplished either temporarily on a short-term
basis or by incurring long-term debt. The Company's commercial paper rating is
A-1+ by Standard & Poor's and P-1 by Moody's.
The Company's long-term borrowing requirements can be satisfied in
either the public debt or private placement markets. The Company's medium-term
notes issued in 1991 are rated AA- by Standard & Poor's and A1 by Moody's.
LONG-TERM OBLIGATIONS AS
A PERCENT OF LONG-TERM CAPITAL
(percent)
[GRAPH]
COMMON STOCK During 1997 the Company purchased 630,856 shares of its common
stock at a cost of $43.1 million, equal to an average price of $68.26 per share.
The acquired shares are being held for general corporate purposes, including
distributions under management incentive plans. The Company's decisions to
purchase shares of common stock are made based upon the common stock's valuation
and price, the Company's liquidity, its actual and projected needs for cash for
investment projects and regular dividends, and the Company's debt level.
<PAGE> 13
The number and cost of shares purchased during each of the last three
years is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Shares purchased:
Number .............. 630,856 765,400 947,908
Total cost
(millions)........... $ 43.1 $ 45.2 $ 50.1
Average cost ........ $ 68.26 $ 59.03 $ 52.90
Shares in treasury at
year-end:
Number .............. 12,885,004 12,332,047 11,602,590
Average cost ........ $ 39.48 $ 38.73 $ 37.34
</TABLE>
The number of shares remaining under the current purchase authorization
of the Board was 3,547,496 shares as of December 31, 1997.
NEW ACCOUNTING STANDARDS
In June 1997 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. These pronouncements must be adopted for
years beginning after December 15, 1997. The impact of SFAS Nos. 130 and 131 on
the Company's financial reporting is not expected to be material.
YEAR 2000 ISSUE
The "Year 2000" issue is the result of computer programs that were written using
two digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculations.
The Company has conducted a risk assessment of its major business processes to
identify the systems that could be affected by the Year 2000 issue and is in the
process of developing an implementation plan to address the issue. The Company
presently believes that with planned modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems. However, there can be no guarantee that the systems of
other Companies and government agencies on which the Company relies will be
converted in a timely manner. Although at this time it is not possible to
reasonably estimate the cost of compliance, based on the risk assessment, the
Company believes that the cost to resolve this issue will not have a material
impact on earnings.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
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 and uncertainties
detailed in the Company's periodic reports.
<PAGE> 14
SEGMENT FINANCIAL DATA
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
Amounts in millions 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Construction Materials .................. $1,051.0 $ 961.9 $ 884.7 $ 842.9 $ 756.7 $ 686.4
Chemicals ............................... 627.6 607.0 576.3 410.5 376.8 391.6
--------------------------------------------------------------------
Total ................................. $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 $1,078.0
====================================================================
EARNINGS (LOSS) BEFORE INTEREST
EXPENSE AND INCOME TAXES
Construction Materials .................. $ 229.3 $ 197.3 $ 181.5 $ 162.5 $ 116.7 $ 88.3
Chemicals ............................... 75.8 94.7 87.8 (7.3) 17.4 51.3
--------------------------------------------------------------------
Segment earnings ........................ 305.1 292.0 269.3 155.2 134.1 139.6
Interest income, etc .................... 2.3 2.2 0.2 0.5 0.3 0.9
--------------------------------------------------------------------
Total ................................. $ 307.4 $ 294.2 $ 269.5 $ 155.7 $ 134.4 $ 140.5
====================================================================
OPERATING INCOME (LOSS) AFTER TAXES
Construction Materials .................. $ 160.2 $ 134.9 $ 120.6 $ 108.8 $ 81.6 $ 65.3
Chemicals ............................... 51.4 58.0 52.7 (4.7) 11.5 32.7
Interest income, etc .................... 1.8 1.5 0.1 0.4 0.2 0.7
--------------------------------------------------------------------
Total ................................. $ 213.4 $ 194.4 $ 173.4 $ 104.5 $ 93.3 $ 98.7
====================================================================
NET CASH PROVIDED BY
OPERATING ACTIVITIES
Construction Materials .................. $ 255.9 $ 219.8 $ 182.9 $ 182.5 $ 156.6 $ 141.9
Chemicals ............................... 86.3 128.8 90.8 31.5 41.1 63.8
Net interest, other, net ................ 3.6 (3.1) (7.2) (5.7) (4.7) (4.6)
--------------------------------------------------------------------
Total ................................. $ 345.8 $ 345.5 $ 266.5 $ 208.3 $ 193.0 $ 201.1
====================================================================
AVERAGE CAPITAL EMPLOYED
Construction Materials .................. $ 737.5 $ 710.6 $ 681.5 $ 688.1 $ 707.4 $ 708.4
Chemicals ............................... 373.1 356.0 353.9 294.0 248.5 226.4
Cash items and other .................... 62.5 27.5 6.8 11.0 7.0 22.4
--------------------------------------------------------------------
Total ................................. $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9 $ 957.2
====================================================================
DEPRECIATION, DEPLETION AND AMORTIZATION
Construction Materials .................. $ 81.2 $ 75.2 $ 72.0 $ 72.8 $ 74.3 $ 75.5
Chemicals ............................... 39.5 37.4 38.7 33.9 28.5 27.8
--------------------------------------------------------------------
Total ................................. $ 120.7 $ 112.6 $ 110.7 $ 106.7 $ 102.8 $ 103.3
====================================================================
PROPERTY ADDITIONS*
Construction Materials
Replacement ............................ $ 65.8 $ 63.0 $ 53.2 $ 42.3 $ 39.4 $ 17.9
Environmental control .................. 2.5 2.5 3.5 2.2 1.7 1.6
Profit adding .......................... 57.2 58.6 37.7 24.8 18.2 37.0
--------------------------------------------------------------------
Total ................................. $ 125.5 $ 124.1 $ 94.4 $ 69.3 $ 59.3 $ 56.5
====================================================================
Chemicals
Replacement ............................ $ 26.2 $ 21.5 $ 15.8 $ 10.7 $ 9.3 $ 11.3
Environmental control .................. 2.4 7.4 4.9 1.7 5.4 10.1
Profit adding .......................... 27.9 34.2 10.5 78.1 26.6 20.6
--------------------------------------------------------------------
Total ................................. $ 56.5 $ 63.1 $ 31.2 $ 90.5 $ 41.3 $ 42.0
====================================================================
Total Company
Replacement ............................ $ 92.0 $ 84.5 $ 69.0 $ 53.0 $ 48.7 $ 29.2
Environmental control .................. 4.9 9.9 8.4 3.9 7.1 11.7
Profit adding .......................... 85.1 92.8 48.2 102.9 44.8 57.6
--------------------------------------------------------------------
Total ................................. $ 182.0 $ 187.2 $ 125.6 $ 159.8 $ 100.6 $ 98.5
====================================================================
INCREASE (DECREASE) IN WORKING CAPITAL **
Construction Materials .................. $ (8.7) $ (3.2) $ (9.9) $ 3.9 $ 2.6 $ 14.1
Chemicals ............................... 11.9 (13.5) 18.1 11.8 (8.3) (3.2)
--------------------------------------------------------------------
Total ................................. $ 3.2 $ (16.7) $ 8.2 $ 15.7 $ (5.7) $ 10.9
====================================================================
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Amounts in millions 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
Construction Materials .................. $ 648.1 $ 696.1 $ 645.7 $ 670.6 $ 625.5
Chemicals ............................... 359.4 409.2 430.5 382.6 297.8
--------------------------------------------------------
Total ................................. $1,007.5 $1,105.3 $1,076.2 $1,053.2 $ 923.3
========================================================
EARNINGS (LOSS) BEFORE INTEREST
EXPENSE AND INCOME TAXES
Construction Materials .................. $ 41.8 $ 112.0 $ 115.3 $ 141.5 $ 149.6
Chemicals ............................... 42.6 72.4 86.4 66.2 32.7
--------------------------------------------------------
Segment earnings ........................ 84.4 184.4 201.7 207.7 182.3
Interest income, etc .................... 0.3 2.6 5.8 5.2 4.8
--------------------------------------------------------
Total ................................. $ 84.7 $ 187.0 $ 207.5 $ 212.9 $ 187.1
========================================================
OPERATING INCOME (LOSS) AFTER TAXES
Construction Materials .................. $ 32.1 $ 77.3 $ 78.4 $ 94.7 $ 95.9
Chemicals ............................... 27.3 46.0 54.5 41.7 19.4
Interest income, etc .................... 0.1 1.8 4.3 3.8 3.4
--------------------------------------------------------
Total ................................. $ 59.5 $ 125.1 $ 137.2 $ 140.2 $ 118.7
========================================================
NET CASH PROVIDED BY
OPERATING ACTIVITIES
Construction Materials .................. $ 141.8 $ 130.2 $ 159.4 $ 115.3 $ 162.0
Chemicals ............................... 50.0 76.4 93.6 62.4 57.1
Net interest, other, net ................ (8.5) (6.5) (2.8) (2.4) (5.7)
--------------------------------------------------------
Total ................................. $ 183.3 $ 200.1 $ 250.2 $ 175.3 $ 213.4
========================================================
AVERAGE CAPITAL EMPLOYED
Construction Materials .................. $ 748.4 $ 656.8 $ 550.6 $ 485.2 $ 380.9
Chemicals ............................... 226.1 228.9 227.8 230.5 244.0
Cash items and other .................... 3.1 29.2 73.7 73.0 122.1
--------------------------------------------------------
Total ................................. $ 977.6 $ 914.9 $ 852.1 $ 788.7 $ 747.0
========================================================
DEPRECIATION, DEPLETION AND AMORTIZATION
Construction Materials .................. $ 80.4 $ 71.7 $ 63.6 $ 57.9 $ 48.8
Chemicals ............................... 29.3 28.5 27.3 28.0 28.9
--------------------------------------------------------
Total ................................. $ 109.7 $ 100.2 $ 90.9 $ 85.9 $ 77.7
========================================================
PROPERTY ADDITIONS*
Construction Materials
Replacement ............................ $ 26.9 $ 63.9 $ 62.8 $ 61.0 $ 41.3
Environmental control .................. 1.7 2.5 1.7 0.9 0.5
Profit adding .......................... 32.2 120.9 63.2 36.5 99.0
--------------------------------------------------------
Total ................................. $ 60.8 $ 187.3 $ 127.7 $ 98.4 $ 140.8
========================================================
Chemicals
Replacement ............................ $ 9.2 $ 13.0 $ 7.3 $ 9.0 $ 6.9
Environmental control .................. 1.6 3.6 3.4 2.0 3.0
Profit adding .......................... 14.1 18.6 8.3 6.3 2.0
--------------------------------------------------------
Total ................................. $ 24.9 $ 35.2 $ 19.0 $ 17.3 $ 11.9
========================================================
Total Company
Replacement ............................ $ 36.1 $ 76.9 $ 70.1 $ 70.0 $ 48.2
Environmental control .................. 3.3 6.1 5.1 2.9 3.5
Profit adding .......................... 46.3 139.5 71.5 42.8 101.0
--------------------------------------------------------
Total ................................. $ 85.7 $ 222.5 $ 146.7 $ 115.7 $ 152.7
========================================================
INCREASE (DECREASE) IN WORKING CAPITAL **
Construction Materials .................. $ (10.8) $ 37.0 $ (20.2) $ 47.0 $ (0.7)
Chemicals ............................... (0.5) (0.7) (8.2) 24.1 (5.0)
--------------------------------------------------------
Total ................................. $ (11.3) $ 36.3 $ (28.4) $ 71.1 $ (5.7)
========================================================
</TABLE>
* Refer to page 79 for a discussion of the three categories used by the
company to classify property additions.
** Exclusive of debt and cash items.
<PAGE> 16
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and all majority or wholly-owned subsidiary companies.
All significant intercompany transactions and accounts have been eliminated in
consolidation. Investments in joint ventures and the common stock of associated
companies in which the Company has ownership interests of 20% to 50% are
accounted for by the equity method. All other investments are carried at the
lower of cost or market, and income is recorded as dividends are received or
interest is earned.
CASH EQUIVALENTS The Company classifies as cash equivalents all highly liquid
securities with a maturity of three months or less at the time of purchase.
INVENTORIES The Company uses the last-in, first-out ("LIFO") method of
valuation for most of its inventories because it results in a better matching of
costs with revenues. Inventories, other than operating supplies, are stated at
the lower of cost, as determined by the LIFO method, or market. Such cost
includes raw materials, direct labor and production overhead. Substantially all
operating supplies are carried at average cost, which does not exceed market.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at
cost less allowances for accumulated depreciation, depletion and amortization.
The cost of properties held under capital leases is equal to the lower of the
net present value of the minimum lease payments or the fair value of the leased
property at the inception of the lease.
DEPRECIATION, DEPLETION AND AMORTIZATION Depreciation is computed by the
straight-line method at rates based upon the estimated service lives of the
various classes of assets, which include machinery and equipment, buildings, and
land improvements. Amortization of capitalized leases is included with
depreciation expense.
Cost depletion on depletable quarry land is computed by the unit of
production method based upon estimated recoverable units.
Leaseholds are amortized over varying periods not in excess of applicable
lease terms.
GOODWILL Goodwill represents the excess of the cost of net assets acquired in
business combinations over their fair value. Goodwill is amortized on a
straight-line basis over periods ranging from fifteen to thirty years.
OTHER COSTS Income is charged as costs are incurred for start-up of new
plants and for normal recurring costs of mineral exploration, removal of
overburden from active mineral deposits, and research and development.
<PAGE> 17
Repairs and maintenance are charged to costs and operating expenses.
Renewals and betterments which add materially to the utility or useful lives of
property, plant and equipment are capitalized.
Environmental expenditures that pertain to current operations or relate to
future revenues are expensed or capitalized consistent with the Company's
capitalization policy. Expenditures that relate to an existing condition caused
by past operations and do not contribute to future revenue are expensed.
Environmental compliance costs include maintenance and operating costs with
respect to pollution control facilities, the cost of ongoing monitoring programs
and similar costs. Costs are expensed and accrued as liabilities when
environmental assessments and/or remedial efforts are probable, and the cost can
be reasonably estimated. These amounts are accrued no later than the feasibility
study and/or when the Company commits to a formal plan of action.
INCOME TAXES Annual provisions for income taxes are based primarily on
reported earnings before income taxes and include appropriate provisions for
deferred income taxes resulting from the tax effect of the difference between
the tax basis of assets and liabilities and their carrying amounts for financial
reporting purposes. In addition, such provisions reflect adjustments for the
following items:
- - Permanent differences, principally the excess of percentage depletion
over the tax basis of depletable properties.
- - An estimate of additional cost that may be incurred, including interest
on deficiencies but excluding adjustments representing temporary
differences, upon final settlement of returns after audit by various
taxing authorities.
- - Balances or deficiencies in prior year provisions that become
appropriate as audits of those years progress.
EARNINGS PER SHARE In March 1997, the Financial Accounting Standards Board
("FASB") released Statement of Financial Accounting Standard ("SFAS") No. 128,
Earnings Per Share, which is effective for fiscal years ending after December
15, 1997. In accordance with this standard, the Company is now required to
report two separate earnings per share numbers, basic and diluted. Both are
computed by dividing net earnings by the average common shares outstanding
(basic EPS) or average common shares outstanding assuming dilution (diluted EPS)
as detailed below (in thousands of shares):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Average common shares
outstanding ............... 33,828 34,758 35,544
Dilutive effect of:
Stock options ............. 176 6 --
Performance shares ........ 279 409 389
------ ------ ------
Average common shares
outstanding assuming
dilution .................. 34,283 35,173 35,933
====== ====== ======
</TABLE>
Diluted earnings per share is the same number as the Company has previously been
reporting as earnings per share and includes the dilutive impact of options and
shares contingently issuable under long-term performance share plans.
<PAGE> 18
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS Certain items previously reported in specific financial
statement captions have been reclassified to conform with the 1997 presentation.
2. CASH
Bank lines of credit amounted to $130,000,000 at year-end 1997, 1996 and 1995.
At year-end 1997, 1996 and 1995, the Company did not have any commercial paper
outstanding but did have $2,900,000, $3,100,000 and $3,400,000, respectively, in
bank borrowings referable to a Canadian subsidiary.
All of the lines of credit extended to the Company in 1997, 1996 and 1995
were based on a commitment fee arrangement. The Company also maintained balances
or paid fees to compensate its banks for certain services. The Company was in
compliance with these informal compensation arrangements during all three years.
Because the arrangements are evaluated on a twelve-month average basis, the
Company does not consider any of its cash balances to be restricted as of any
specific date.
3. INVENTORIES
Inventories at December 31 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Finished products .... $ 90,118 $ 87,459 $ 90,009
Raw materials ........ 10,865 10,115 10,062
Products in process .. 617 873 979
Operating supplies
and other ......... 30,759 30,131 25,751
-------- -------- --------
Total inventories $132,359 $128,578 $126,801
======== ======== ========
</TABLE>
The above amounts include inventories valued under the LIFO method totaling
$99,321,000, $96,045,000 and $97,959,000 at December 31, 1997, 1996 and 1995,
respectively. Estimated current cost exceeded LIFO cost at December 31, 1997,
1996 and 1995 by $37,344,000, $35,747,000 and $36,899,000, respectively. If all
inventories valued at LIFO cost had been valued under the methods (substantially
average cost) used prior to the adoption of the LIFO method, the approximate
effect on net earnings would have been an increase of $973,000 ($0.03 per share
effect) in 1997, a decrease of $702,000 ($0.02 per share effect) in 1996 and an
increase of $4,784,000 ($0.13 per share effect) in 1995.
<PAGE> 19
4. PROPERTY, PLANT AND EQUIPMENT
Balances of major classes of assets and allowances for depreciation, depletion
and amortization at December 31 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Land and land
improvements ......... $ 211,058 $ 222,546 $ 203,920
Buildings ............... 81,805 82,049 77,732
Machinery and
equipment ............ 1,753,683 1,630,089 1,536,742
Leaseholds .............. 7,107 7,118 6,483
Construction in
progress ............. 66,547 60,362 34,559
---------- ---------- ----------
Total .............. 2,120,200 2,002,164 1,859,436
Less allowances for
depreciation,
depletion and
amortization ......... 1,311,781 1,237,674 1,161,403
---------- ---------- ----------
Property, plant and
equipment, net ....... $ 808,419 $ 764,490 $ 698,033
========== ========== ==========
</TABLE>
The Company capitalized interest costs of $1,160,000 in 1997, $627,000 in
1996 and $297,000 in 1995 with respect to qualifying construction projects.
Total interest costs incurred before recognition of the capitalized amount was
$8,074,000 in 1997, $9,263,000 in 1996 and $11,396,000 in 1995.
5. DEBT
Long-term debt, exclusive of current maturities, at December 31 is summarized as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Medium-term notes ...... $61,000 $66,000 $ 71,000
Variable rate pollution
control revenue bonds 8,200 8,200 1,200
6 5/8% pollution control
revenue bonds ....... -- -- 6,800
6 3/8% pollution control
revenue bonds ....... 5,800 5,800 5,800
Other notes ............ 6,931 5,535 5,478
------- ------- --------
Total ............. $81,931 $85,535 $ 90,278
======= ======= ========
Estimated fair value ... $93,142 $93,507 $101,782
======= ======= ========
</TABLE>
In May 1991 the Company filed a shelf registration statement with the
Securities and Exchange Commission for the registration of $200,000,000
principal amount of debt securities. The issuances of the medium-term notes in
1991 totaled $81,000,000. The dollar-weighted average maturity of the notes, as
calculated from the dates of issuance, approximated 13 years. Maturities
<PAGE> 20
at the time of issuance ranged from three to thirty years with a maximum of
$10,000,000 due in any one year. At that time, the weighted average interest
rate on the notes was 8.53% with a range of 7.59% to 8.85%. The $61,000,000 in
notes outstanding as of December 31, 1997 have a weighted average maturity of
9.3 years with a weighted average interest rate of 8.69%.
The 6 5/8% pollution control revenue bonds and the variable rate pollution
control revenue bonds were called and refunded in 1996. In connection with the
refunding, $8,200,000 of tax-exempt bonds were issued and currently bear
interest at a variable rate which is reset weekly by the remarketing agent. The
interest rate on these bonds may be changed to another variable rate option, or
to a fixed rate, in accordance with the provisions of the trust indenture. The 6
3/8% pollution control revenue bonds issued in 1992 mature in 2012.
Other notes include $3,000,000 representing a fixed rate tax-exempt
industrial development bond issue which matures in 2011 and notes issued for
businesses acquired.
The aggregate principal payments for the five years subsequent to December
31, 1997 are: 1998-$5,388,000; 1999-$5,412,000; 2000-$5,226,000;
2001-$5,208,000; and 2002-$5,491,000.
The Company is not subject to any contractual restrictions on the aggregate
amount of its indebtedness or minimum working capital, or the amount it may
expend for cash dividends and purchases of its stock.
The estimated fair value amounts of long-term debt have been determined by
discounting expected future cash flows using interest rates on U.S. Treasury
bills, notes or bonds, as appropriate. For cash equivalents, accounts and notes
receivable, accounts payable, accrued interest, and other applicable accrued
liabilities, the carrying amounts are a reasonable estimate of fair value. The
fair value estimates presented are based on information available to management
as of December 31, 1997, 1996 and 1995. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued since those dates.
6. OPERATING LEASES
Total rental expense of nonmineral leases, exclusive of rental payments made
under leases of one month or less, is summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Minimum rentals .............. $17,894 $17,188 $14,260
Contingent rentals (based
principally on usage) ..... 11,840 10,677 11,205
------- ------- -------
Total ............... $29,734 $27,865 $25,465
======= ======= =======
</TABLE>
Future minimum operating lease payments under all leases with initial or
remaining noncancellable lease terms in excess of one year, exclusive of mineral
leases, at December 31, 1997 range from $6,523,000 to $10,476,000 annually
through 2002 and aggregate $46,587,000 thereafter.
Lease agreements frequently include renewal options and require that the
Company pay for utilities, taxes, insurance and maintenance expense. Options to
purchase also are included in some lease agreements.
<PAGE> 21
7. INCOME TAXES
The components of earnings before income taxes are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Domestic ........... $294,904 $279,801 $253,991
Foreign ............ 5,597 5,779 4,430
-------- -------- --------
Total ........... $300,501 $285,580 $258,421
======== ======== ========
</TABLE>
Provisions for income taxes consist of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal .............. $ 73,767 $80,704 $72,332
State and local ...... 10,907 14,595 14,087
Foreign .............. 132 144 18
-------- ------- -------
Total ............. 84,806 95,443 86,437
-------- ------- -------
Deferred:
Federal .............. 5,231 1,446 4,861
State and local ...... 1,321 96 883
Foreign .............. (2) -- --
-------- ------- -------
Total ............. 6,550 1,542 5,744
-------- ------- -------
Total provision ......... $ 91,356 $96,985 $92,181
======== ======= =======
</TABLE>
The effective tax rate varied from the federal statutory income tax
rate due to the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Federal statutory tax rate ........ 35.0% 35.0% 35.0%
Increase (decrease) in tax
rate resulting from:
Depletion ...................... (5.0) (4.8) (4.5)
State and local income
taxes, net of federal
income tax benefit ........... 2.6 3.3 3.8
Miscellaneous items ............ (2.2) .5 1.4
------ ------ ------
Effective tax rate ................ 30.4% 34.0% 35.7%
====== ====== ======
</TABLE>
<PAGE> 22
Deferred income taxes on the balance sheet result from temporary
differences between the amount of assets and liabilities recognized for
financial reporting and tax purposes. The components of the net deferred income
tax liability are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets related to:
Accrual for post-
retirement benefits ............. $ 15,283 $ 14,149 $ 13,318
Accrual for environmental
reclamation ..................... 554 396 1,604
Accounts receivable,
principally allowance
for doubtful accounts ........... 3,248 3,493 3,592
Inventory adjustments ............. 5,748 6,101 7,278
Pensions, incentives and
deferred compensation ........... 11,844 10,463 10,066
Other items ....................... 10,714 10,339 9,518
-------- -------- --------
Total deferred
tax assets .................. 47,391 44,941 45,376
-------- -------- --------
Deferred tax liabilities
related to:
Fixed assets, principally
depreciation .................. 107,170 101,316 98,821
Other items ..................... 7,555 7,119 5,935
-------- -------- --------
Total deferred tax
liabilities ................ 114,725 108,435 104,756
-------- -------- --------
Net deferred tax liability ........... $ 67,334 $ 63,494 $ 59,380
======== ======== ========
</TABLE>
8. PENSION AND POSTRETIREMENT BENEFIT PLANS
PENSION PLANS The Company sponsors three noncontributory defined benefit
pension plans. These plans cover substantially all employees other than those
covered by union-administered plans. Normal retirement age is 65, but the plans
contain provisions for earlier retirement. Benefits for the Salaried Plan and
the Chemicals Hourly Plan are based on salaries or wages and years of service;
the Construction Materials Hourly Plan provides benefits equal to a flat dollar
amount for each year of service.
<PAGE> 23
Charges to earnings referable to Company-administered pension plans
totaled $4,695,000 in 1997, $5,185,000 in 1996 and $1,187,000 in 1995.
Components of the net periodic pension charges are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits
earned during the period ........ $ 11,228 $ 11,631 $ 8,665
Interest cost ...................... 20,987 19,069 18,019
Actual return on plan assets ....... (72,874) (43,867) (51,744)
Net amortization
and deferral .................... 45,354 18,352 26,247
-------- -------- --------
Net periodic pension
charge ........................ $ 4,695 $ 5,185 $ 1,187
======== ======== ========
</TABLE>
The Company's qualified pension plans have assets in excess of the
accumulated benefit obligation. Plan assets are composed primarily of marketable
domestic and international equity securities and corporate and government debt
securities. Unrecognized net plan assets at the implementation of SFAS No. 87,
Employers' Accounting for Pensions, in 1986, are being amortized over the
average of the covered employees' remaining service lives, which range from 12
to 16 years. The following table reconciles the funded status of all the
Company's plans with the related amounts recognized in the Company's
consolidated balance sheets at December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Actuarial present value
of benefit obligations:
Based on employment
service to date and
current salary levels:
Vested ...................... $(205,369) $(173,166) $(174,436)
Nonvested ................... (10,466) (8,693) (7,143)
--------- --------- ---------
Accumulated benefit
obligation ................ (215,835) (181,859) (181,579)
Effect of projected
future salary increases ....... (90,681) (85,430) (83,011)
--------- --------- ---------
Projected benefit
obligation .................... (306,516) (267,289) (264,590)
Plan assets at fair market
value ........................... 395,245 337,326 305,398
--------- --------- ---------
Plan assets in excess of
projected benefit
obligation ...................... 88,729 70,037 40,808
Unamortized portion of
unrecognized net asset
at implementation of
SFAS No. 87 ..................... (7,486) (10,212) (13,225)
Unrecognized net gain .............. (85,526) (68,163) (26,057)
Unrecognized prior
service cost .................... 10,722 12,632 8,148
--------- --------- ---------
Net prepaid pension cost ........ $ 6,439 $ 4,294 $ 9,674
========= ========= =========
</TABLE>
<PAGE> 24
Annual net periodic pension charges and credits are calculated using plan
assumptions as of the end of the prior year, whereas the funded status and
related pension obligations are determined using the assumptions as of the end
of the current year. Plan assumptions at December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Discount rates used to
determine the
pension obligations .............. 7.00% 7.50% 7.00%
Discount rates used
to determine the net
periodic cost .................... 7.50 7.00 8.50
Rates of increase in
compensation levels
(for salary-related plans) ....... 4.25 4.25 4.25
Expected long-term rates
of return on plan assets ......... 8.25 8.25 8.25
</TABLE>
The Company funds the pension trusts currently in amounts determined under
the individual entry age level premium method, including benefit increases
expected as a result of projected wage and salary increases occurring between
the date of valuation and the individual retirement dates.
Certain of the Company's hourly employees in unions are covered by
multi-employer defined benefit pension plans. Contributions to these plans
approximated $2,115,000 in 1997, $2,090,000 in 1996 and $1,859,000 in 1995. The
actuarial present value of accumulated plan benefits and net assets available
for benefits for employees in the union-administered plans are not determinable
from available information. Seventeen percent of the labor force is covered by
collective bargaining agreements and 7% are covered by labor agreements that
expire within one year.
POSTRETIREMENT PLANS In addition to pension benefits, the Company provides
certain health care benefits and life insurance for some retired employees.
Substantially all of the Company's salaried employees and, where applicable,
hourly employees may become eligible for those benefits if they reach at least
age 55 and meet certain service requirements while working for the Company.
Generally, Company-provided health care benefits terminate when covered
individuals become eligible for Medicare benefits or reach age 65, whichever
first occurs.
<PAGE> 25
The components of net periodic postretirement benefit costs are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits
attributed to service
during the period ......... $ 2,036 $ 2,045 $ 1,965
Interest cost ................ 3,464 3,013 3,558
Actual return on assets ...... (203) (196) (158)
Net amortization
and deferral .............. 124 88 209
------- ------- -------
Net periodic
postretirement
benefit cost .............. $ 5,421 $ 4,950 $ 5,574
======= ======= =======
</TABLE>
The Company funds the postretirement benefits plan each year through
contributions to a trust fund for health care benefits and through payments of
premiums to providers of life insurance. All assets of the plan relate to the
life insurance and are composed of reserves held by the insurer. The following
table sets forth the combined funded status of the plan and its reconciliation
with the related amounts recognized in the Company's consolidated balance sheets
at December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Accumulated
postretirement benefit
obligation:
Retirees ...................... $(13,044) $ (9,991) $(11,355)
Fully eligible active
plan participants ........... (15,968) (13,227) (13,658)
Other active plan
participants ................ (19,701) (20,415) (19,478)
-------- -------- --------
Total accumulated
postretirement
benefit obligation ........ (48,713) (43,633) (44,491)
Plan assets at fair
market value .................. 3,323 3,119 2,842
-------- -------- --------
Accumulated
postretirement benefit
obligation in excess of
plan assets ................... (45,390) (40,514) (41,649)
Unrecognized prior
service cost .................. 5 5 6
Unrecognized net loss ............ 6,261 4,287 7,726
-------- -------- --------
Accrued postretirement
benefit cost ................ $(39,124) $(36,222) $(33,917)
======== ======== ========
</TABLE>
<PAGE> 26
Annual net periodic postretirement benefit costs are calculated using plan
assumptions as of the end of the prior year, whereas the funded status and
related benefit obligations are determined using the assumptions as of the end
of the current year. Plan assumptions at December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Discount rates ................................. 7.00% 7.50% 7.00%
Expected long-term rate
of return on plan assets .................... 7.00 7.00 7.00
Rate of increase in per
capita claims cost:
First year ............................... 8.00 9.00 10.00
Ultimate rate ............................ 5.00 5.00 5.00
</TABLE>
If the health care cost trend rates were increased 1.0% each year, the
accumulated postretirement benefit obligation as of December 31, 1997 would have
increased by $5,065,000 (or 10.4%) and the aggregate of the service and interest
cost for 1997 would have increased by $758,000 (or 13.4%).
9. INCENTIVE PLANS
STOCK-BASED COMPENSATION PLANS The Company's 1996 Long-Term Incentive Plan
authorizes the granting of stock-based awards to key salaried employees of the
Company and its affiliates. The Plan permits the granting of stock options
(including incentive stock options), stock appreciation rights, restricted stock
and restricted stock units, performance share awards, dividend equivalents, and
other awards valued in whole or in part by reference to or otherwise based on
common stock of the Company. The number of shares available for awards is .95%
of the issued common shares of the Company (including treasury shares) as of the
first day of each calendar year plus the unused shares that are carried over
from prior years.
Stock options issued during 1997 and 1996 were granted at the fair market
value of the stock on the date of the grant. They vest ratably over five years
and expire ten years subsequent to the grant.
Performance share awards were granted through 1995. These awards are based
on the achievement of established performance goals and the majority of the
awards vest over five years. In 1995, 126,760 shares were awarded with a
weighted average grant date fair value of $39.35. Expense provisions referable
to these plans amounted to $11,671,000 in 1997, $4,373,000 in 1996 and
$6,742,000 in 1995. Expense provisions are affected by changes in the market
value of the Company's common stock.
<PAGE> 27
The Company applies Accounting Principle Board Opinion No. 25,
Accounting for Stock Issued to Employees, in accounting for its stock-based
compensation. Pro forma information regarding net earnings and earnings per
share is required by SFAS No. 123, Accounting for Stock-Based Compensation
("SFAS 123"), and has been determined as if the Company had accounted for its
employee stock options and performance share awards under the fair value method
of that Statement. The fair value for options was estimated at the date of the
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rate of 6.0%; dividend yields
of 2.9%; volatility factors of the expected market price of the Company's common
stock of 14.4%; and a weighted-average expected life of the option of five
years. The fair value for performance share awards was based on a discounted
fair market value of the Company's stock at grant date.
For purposes of pro forma disclosures, the estimated fair value of the
options and performance share awards is amortized to expense over the options'
vesting period. The effects of applying SFAS 123 on a pro forma basis would have
increased net earnings by approximately $4,234,000, $83,000 and $271,000 in
1997, 1996 and 1995, respectively. The impact on basic and diluted earnings per
share in 1997 would have been a $0.13 and $0.12 increase, respectively. There
would have been no change in 1996 earnings per share, but a $0.01 increase for
both basic and diluted earnings per share in 1995.
A summary of the Company's stock option activity, related information
as of December 31, 1997 and 1996, and changes during each year is presented
below:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year ......... 428,950 $56.61 -- $ --
Granted ................. 408,050 $63.96 429,800 $56.61
Exercised ............... 6,940 $57.57 -- $ --
Forfeited ............... 20,825 $57.47 850 $56.56
------- -------
Outstanding at end of year ... 809,235 $60.28 428,950 $56.61
======= =======
Options exercisable
at year-end ............... 159,765 $58.05 -- $ --
Weighted-average grant date
fair value of each option
granted during the year . $11.14 $10.35
</TABLE>
Exercise prices for substantially all options outstanding at December
31, 1997 ranged from $55.75 to $63.94. The weighted-average remaining
contractual life of the options is 8.75 years.
CASH BASED COMPENSATION PLANS The Company has a management incentive plan
under which cash awards may be made annually to officers and key employees.
Expense provisions referable to the plans amounted to $7,198,000 in 1997,
$8,500,000 in 1996 and $5,550,000 in 1995.
<PAGE> 28
10. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
In 1987 the Company formed three jointly owned companies with Industrias ICA,
S.A. de C.V., ("Indica"), a principal member of Grupo ICA, one of Mexico's
leading diversified industrial entities, to develop and operate a limestone
quarry on Mexico's Yucatan Peninsula and to import Mexican crushed stone for
sale along the U.S. Gulf Coast. The shareholder agreements for these three
companies provide that each sponsor will contribute its share of the equity
required to fund the joint venture. The Company's share of $71,903,000 had been
contributed as of December 31, 1997; Indica contributed a substantially equal
pro rata amount. The jointly owned companies have entered into credit agreements
which have loan balances totaling $23,890,000. The Company and Indica have
agreed to guarantee these loans on a several and pro rata basis equal to
approximately 50% each. Certain of the loan guarantees will be terminated if and
when the project meets defined financial tests. In addition, the Company has
approximately $2,205,000 outstanding from the three companies at December 31,
1997 as its share of loans to the joint venture. The carrying amount of net
assets of the entities located outside the United States was $55,034,000 as of
December 31, 1997.
Other commitments of the Company include the purchase of property, plant
and equipment approximating $33,137,000 at December 31, 1997.
The Company is a defendant in various lawsuits incident to the ordinary
course of business. It is not possible to determine with precision the probable
outcome or the amount of liability, if any, with respect to these lawsuits;
however, in the opinion of the Company and its counsel, the disposition of these
lawsuits will not adversely affect the consolidated financial statements of the
Company to a material extent.
The Company's consolidated balance sheets as of December 31 include accrued
environmental cleanup costs for the Chemicals segment of $4,285,000 in 1997,
$3,732,000 in 1996 and $2,765,000 in 1995.
Current liabilities reported on the Company's consolidated balance sheets
include accrued provisions for discontinued operations in the following amounts
as of December 31: $508,000 in 1997, $905,000 in 1996 and $1,805,000 in 1995. In
addition, other noncurrent liabilities include $144,000 in 1997, $240,000 in
1996 and $493,000 in 1995 referable to discontinued operations.
<PAGE> 29
11. COMMON STOCK
A total of 13,447,827 shares has been purchased at a cost of $530,912,000
pursuant to a common stock purchase plan initially authorized by the Board of
Directors in July 1985 and increased in subsequent years, and pursuant to a
tender offer during the period November 5, 1986 through December 4, 1986. The
number of shares remaining under the current purchase authorization was
3,547,496 shares as of December 31, 1997.
12. SEGMENT DATA
Operations in the Company's Construction Materials segment principally involve
the production and sale of aggregates and related products and services. Sales
are in 18 states located in the southeast, midwest and southwest regions of the
United States and the District of Columbia. Customers primarily use aggregates
in the construction and maintenance of highways, roads and streets and in the
construction of housing and nonresidential, commercial and industrial
facilities.
The Chemicals segment, through its Chloralkali and Performance Systems
operations, produces and sells chlorine, caustic soda, chlorinated organic
chemicals and other industrial chemicals principally to the chemical, pulp and
paper, energy, water management, food processing, pharmaceuticals and textile
industries.
Segment data referable to net sales to unaffiliated customers, property
additions, and depreciation, depletion and amortization are provided in Segment
Financial Data on pages 55.
The Company's determination of segment earnings recognizes equity in the
income or losses of nonconsolidated affiliates as part of segment earnings and
also reflects allocations of general corporate expenses to the segments. SFAS
No. 14, Financial Reporting for Segments of a Business Enterprise, does not
provide for the inclusion of these items in "operating profit or loss of
reportable segments." The net amounts of those items were expenses of
$17,336,000 in 1997, $16,231,000 in 1996 and $22,533,000 in 1995.
Segment earnings are reconciled with earnings before income taxes as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Segment Earnings:
Construction Materials ...... $ 229,275 $ 197,315 $ 181,528
Chemicals ................... 75,787 94,707 87,792
--------- --------- ---------
305,062 292,022 269,320
Interest income, etc ........... 2,353 2,194 200
Interest expense ............... (6,914) (8,636) (11,099)
--------- --------- ---------
Earnings before
income taxes ................ $ 300,501 $ 285,580 $ 258,421
========= ========= =========
</TABLE>
<PAGE> 30
Identifiable assets by segment at December 31 are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Construction Materials ............. $ 751,191 $ 719,618 $ 690,044
Chemicals .......................... 459,051 441,088 395,487
---------- ---------- ----------
Total identifiable assets .......... 1,210,242 1,160,706 1,085,531
Investment in
nonconsolidated affiliates ..... 61,036 56,043 50,780
General corporate assets ........... 49,402 53,080 57,614
Cash items ......................... 128,566 50,816 21,869
---------- ---------- ----------
Total assets ....................... $1,449,246 $1,320,645 $1,215,794
========== ========== ==========
</TABLE>
13. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information referable to the Consolidated Statements of Cash Flows
is summarized below (amounts in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash payments:
Interest (exclusive of
amount capitalized) .............................. $ 6,774 $ 8,715 $11,214
Income taxes ....................................... 92,315 85,492 85,324
Noncash investing and financing activities:
Amounts referable to business acquisitions:
Liabilities assumed .......................... 1,441 5,051 1,382
</TABLE>
14. ACQUISITIONS
At various dates during 1997 and 1996 the Company acquired the net assets and
businesses of several companies. The combined purchase price was approximately
$12,000,000 and $64,000,000, respectively. Funds for the purchases were
primarily provided by internally generated cash flows. The amount by which the
total cost of these acquisitions exceeded the fair value of the net assets
acquired was recognized as goodwill and will be amortized under the Company's
normal amortization policy.
All of the 1997 and 1996 acquisitions described above were accounted for as
purchases and accordingly, the results of operations of the acquired businesses
are included in the accompanying financial statements from their respective
dates of acquisition. On a pro forma basis, as if the net assets and businesses
had been acquired at the beginning of fiscal 1996 and 1995, respectively,
revenue, net income and earnings per share would not differ materially from the
amounts reflected in the accompanying consolidated financial statements for
1997, 1996 and 1995.
Goodwill recorded on the Company's balance sheet as of December 31, 1997
amounted to $59,345,000.
<PAGE> 31
NET SALES, NET EARNINGS AND EARNINGS PER SHARE
Vulcan Materials Company and Subsidiary Companies
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in millions,
except per share data 1997 1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES
First quarter ......... $ 341.4 $ 308.5 $ 294.4 $ 216.9 $ 214.1 $ 210.6 $ 197.0
Second quarter ........ 445.1 419.2 382.8 326.7 306.0 284.2 266.4
Third quarter ......... 477.9 443.6 422.0 360.4 331.4 312.3 289.3
Fourth quarter ........ 414.2 397.6 361.8 349.4 282.0 270.9 254.8
----------------------------------------------------------------------------------
Total ............. $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5 $1,078.0 $1,007.5
==================================================================================
GROSS PROFIT ON SALES
First quarter ......... $ 76.1 $ 70.1 $ 58.8 $ 21.0 $ 29.7 $ 35.6 $ 27.6
Second quarter ........ 136.5 129.3 113.2 77.4 74.0 74.5 66.7
Third quarter ......... 147.0 139.6 133.8 90.4 85.1 80.8 71.3
Fourth quarter ........ 119.5 114.5 110.5 79.4 57.9 58.2 46.5
----------------------------------------------------------------------------------
Total ............. $ 479.1 $ 453.5 $ 416.3 $ 268.2 $ 246.7 $ 249.1 $ 212.1
==================================================================================
NET EARNINGS (LOSS)
First quarter ......... $ 21.9 $ 20.1 $ 16.0 $ (5.2) $ (0.5) $ 7.6 $ (2.2)
Second quarter ........ 62.8 58.6 47.7 33.7 31.6 30.2 25.9
Third quarter ......... 73.3 62.1 59.1 37.6 36.6 35.8 30.2
Fourth quarter ........ 51.1 47.8 43.4 31.9 20.5 20.4 (1.3)
----------------------------------------------------------------------------------
Total ............. $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2 $ 94.0 $ 52.6
==================================================================================
BASIC EARNINGS (LOSS)
PER SHARE
First quarter ......... $ 0.64 $ 0.58 $ 0.44 $ (0.14) $ (0.01) $ 0.20 $ (0.06)
Second quarter ........ 1.86 1.67 1.34 0.92 0.85 0.80 0.68
Third quarter ......... 2.16 1.79 1.66 1.03 0.99 0.95 0.80
Fourth quarter ........ 1.52 1.39 1.24 0.88 0.57 0.55 (0.04)
----------------------------------------------------------------------------------
Total ............. $ 6.18 $ 5.43 $ 4.68 $ 2.69 $ 2.40 $ 2.50 $ 1.38
==================================================================================
DILUTED EARNINGS (LOSS)
PER SHARE
First quarter ......... $ 0.64 $ 0.57 $ 0.44 $ (0.14) $ (0.01) $ 0.20 $ (0.06)
Second quarter ........ 1.83 1.65 1.32 0.92 0.84 0.80 0.68
Third quarter ......... 2.14 1.77 1.64 1.02 0.99 0.94 0.79
Fourth quarter ........ 1.49 1.37 1.23 0.87 0.57 0.55 $ (0.03)
----------------------------------------------------------------------------------
Total ............. $ 6.10 $ 5.36 $ 4.63 $ 2.67 $ 2.39 $ 2.49 $ 1.38
==================================================================================
<CAPTION>
Amounts in millions,
except per share data 1990 1989 1988 1987
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES
First quarter ......... $ 232.0 $ 217.5 $ 202.7 $ 168.9
Second quarter ........ 295.7 293.7 284.5 237.9
Third quarter ......... 306.6 307.3 298.5 270.1
Fourth quarter ........ 271.0 257.7 267.5 246.4
---------------------------------------------
Total ............. $1,105.3 $1,076.2 $1,053.2 $ 923.3
=============================================
GROSS PROFIT ON SALES
First quarter ......... $ 52.3 $ 47.4 $ 46.8 $ 36.4
Second quarter ........ 88.6 90.5 93.9 79.5
Third quarter ......... 90.0 103.2 98.8 91.6
Fourth quarter ........ 60.5 58.9 64.5 64.6
---------------------------------------------
Total ............. $ 291.4 $ 300.0 $ 304.0 $ 272.1
=============================================
NET EARNINGS (LOSS)
First quarter ......... $ 18.7 $ 17.2 $ 15.6 $ 11.4
Second quarter ........ 39.6 43.5 46.0 38.7
Third quarter ......... 42.2 50.5 49.3 38.7
Fourth quarter ........ 19.8 19.7 25.1 27.4
---------------------------------------------
Total ............. $ 120.3 $ 130.9 $ 136.0 $ 116.2
=============================================
BASIC EARNINGS (LOSS)
PER SHARE
First quarter ......... $ 0.48 $ 0.42 $ 0.38 $ 0.27
Second quarter ........ 1.01 1.08 1.12 0.91
Third quarter ......... 1.10 1.25 1.20 0.92
Fourth quarter ........ 0.52 0.50 0.61 0.65
---------------------------------------------
Total ............. $ 3.11 $ 3.25 $ 3.31 $ 2.75
=============================================
DILUTED EARNINGS (LOSS)
PER SHARE
First quarter ......... $ 0.47 $ 0.42 $ 0.38 $ 0.27
Second quarter ........ 1.02 1.07 1.11 0.91
Third quarter ......... 1.08 1.25 1.19 0.91
Fourth quarter ........ 0.53 0.50 0.62 0.64
---------------------------------------------
Total ............. $ 3.10 $ 3.24 $ 3.30 $ 2.73
=============================================
</TABLE>
77
<PAGE> 32
FINANCIAL TERMINOLOGY
CAPITAL EMPLOYED
For the Company: the sum of interest-bearing debt, other noncurrent liabilities
and shareholders' equity; for a segment: the net sum of the segment's assets,
current liabilities, and allocated corporate assets and current liabilities,
exclusive of cash items and short-term debt
CASH ITEMS
The sum of cash, cash equivalents and short-term investments
COMMON SHAREHOLDERS' EQUITY
The sum of common stock (less the cost of common stock in treasury), capital in
excess of par value and retained earnings, as reported in the balance sheet
LONG-TERM CAPITAL
The sum of long-term debt, other noncurrent liabilities and shareholders' equity
OPERATING INCOME AFTER TAXES
For the Company: net earnings from operations plus the after-tax cost of
interest expense; for a segment: segment earnings less the segment's computed
share of the consolidated provision for income taxes
PROPERTY ADDITIONS*
Capitalized replacements of and additions to property, plant and equipment (and
such assets of businesses acquired), including capitalized leases, renewals and
betterments; each segment's property additions include allocated corporate
amounts
RATIO OF EARNINGS TO FIXED CHARGES
The sum of earnings from continuing operations before income taxes, amortization
of capitalized interest and fixed charges net of interest capitalization
credits, divided by fixed charges. Fixed charges are the sum of interest expense
before capitalization credits, amortization of financing costs and one-third of
rental expense.
SEGMENT EARNINGS
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.
SHORT-TERM DEBT
The sum of current interest-bearing debt, including current maturities of
long-term debt and interest-bearing notes payable
* The Company classifies its property additions into three categories based
upon the predominant purpose of the project expenditures. Thus, a project is
classified entirely as a replacement if that is the principal reason for making
the expenditure even though the project may involve some cost saving and/or
capacity improvement aspects. Likewise, a profit-adding project is classified
entirely as such if the principal reason for making the expenditure is to add
operating facilities at new locations (which occasionally replace facilities at
old locations), to add product lines, to expand the capacity of existing
facilities, to reduce costs, to increase mineral reserves or to improve
products, etc.
Property additions classified as environmental control expenditures do not
reflect those expenditures for environmental control activities, including
industrial health programs, which are expensed currently. Such expenditures are
made on a continuing basis and at significant levels in each of the Company's
segments. Frequently, profit-adding and major replacement projects also include
expenditures for environmental control purposes.
79
<PAGE> 1
EXHIBIT (21)
VULCAN MATERIALS COMPANY
SUBSIDIARIES
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
STATE OR OTHER % OWNED DIRECTLY
JURISDICTION OF OR INDIRECTLY
INCORPORATION BY VULCAN
ENTITY OR ORGANIZATION ----------
- ------ ---------------
Subsidiaries
- ------------
<S> <C> <C>
Atlantic Granite Company* South Carolina 33 1/3
Birmingham Slag Company* Alabama 100
Calizas Industriales del Carmen, S.A. de C.V. Mexico 49
Callaway Chemical Company New Jersey 100
Callaway Chemical Limited British Columbia 100
Dixie Sand and Gravel Company, Inc.* Tennessee 100
Knoxville Mack Distributors, Inc.* Tennessee 100
Lambert Bros., Inc.* Tennessee 100
Midsouth Machine and Service Company Tennessee 100
Reco Transportation, Inc. Kentucky 100
Statewide Transport, Inc. Texas 100
Vulcan Chemical Technologies, Inc. Delaware 100
Vulcan/ICA Distribution Company (Partnership) Texas 51
Vulcan Gulf Coast Aggregates, Inc. New Jersey 100
Vulcan Gulf Coast Materials, Inc. New Jersey 100
Vulcan Holdings, Inc. New Jersey 100
Vulcan International, Ltd. U.S. Virgin Islands 100
Vulcan Lands, Inc. New Jersey 100
Vulcan Soda Ash Company California 100
VULICA Shipping Company, Limited Bahamas 50
Wanatah Trucking Co., Inc. Indiana 100
Wesco Contracting Company* Tennessee 100
White's Mines, Inc.* Texas 100
</TABLE>
- -------------------
*Inactive
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Marion H. Antonini
-------------------------------
Marion H. Antonini
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Livio D. DeSimone
---------------------------
Livio D. DeSimone
<PAGE> 3
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 20th day of January, 1998.
/s/John K. Greene
-----------------------------
John K. Greene
<PAGE> 4
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 17th day of January, 1998.
/s/Donald M. James
--------------------------
Donald M. James
<PAGE> 5
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Douglas J. McGregor
--------------------------------
Douglas J. McGregor
<PAGE> 6
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Ann D. McLaughlin
--------------------------------
Ann D. McLaughlin
<PAGE> 7
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 23rd day of January, 1998.
/s/James V. Napier
--------------------------
James V. Napier
<PAGE> 8
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Donald B. Rice
------------------------
Donald B. Rice
<PAGE> 9
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Herbert A. Sklenar
-------------------------------
Herbert A. Sklenar
<PAGE> 10
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual Report
on Form 10-K for the year ended December 31, 1997 of said corporation to be
filed with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of January, 1998.
/s/Orin R. Smith
----------------------
Orin R. Smith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1997, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 128,566
<SECURITIES> 0
<RECEIVABLES> 196,937
<ALLOWANCES> 7,548
<INVENTORY> 132,359
<CURRENT-ASSETS> 487,132
<PP&E> 2,120,200
<DEPRECIATION> 1,311,781
<TOTAL-ASSETS> 1,449,246
<CURRENT-LIABILITIES> 207,697
<BONDS> 81,931
0
0
<COMMON> 46,573
<OTHER-SE> 944,924
<TOTAL-LIABILITY-AND-EQUITY> 1,449,246
<SALES> 1,678,581
<TOTAL-REVENUES> 1,678,581
<CGS> 1,199,453
<TOTAL-COSTS> 1,199,453
<OTHER-EXPENSES> 5,112
<LOSS-PROVISION> 662
<INTEREST-EXPENSE> 6,914
<INCOME-PRETAX> 300,501
<INCOME-TAX> 91,356
<INCOME-CONTINUING> 209,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,145
<EPS-PRIMARY> 6.18
<EPS-DILUTED> 6.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1996 CONFORMS WITH SFAS NO. 128. THIS
SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996, AND THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 50,816
<SECURITIES> 0
<RECEIVABLES> 184,970
<ALLOWANCES> 8,106
<INVENTORY> 128,578
<CURRENT-ASSETS> 394,045
<PP&E> 2,002,164
<DEPRECIATION> 1,237,674
<TOTAL-ASSETS> 1,320,645
<CURRENT-LIABILITIES> 194,654
<BONDS> 85,535
0
0
<COMMON> 46,573
<OTHER-SE> 837,091
<TOTAL-LIABILITY-AND-EQUITY> 1,320,645
<SALES> 1,568,945
<TOTAL-REVENUES> 1,568,945
<CGS> 1,115,442
<TOTAL-COSTS> 1,115,442
<OTHER-EXPENSES> 3,887
<LOSS-PROVISION> 652
<INTEREST-EXPENSE> 8,636
<INCOME-PRETAX> 285,580
<INCOME-TAX> 96,985
<INCOME-CONTINUING> 188,595
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,595
<EPS-PRIMARY> 5.43
<EPS-DILUTED> 5.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1995 CONFORMS WITH SFAS NO. 128.
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1995, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 21,869
<SECURITIES> 0
<RECEIVABLES> 178,933
<ALLOWANCES> 8,176
<INVENTORY> 126,801
<CURRENT-ASSETS> 362,121
<PP&E> 1,859,436
<DEPRECIATION> 1,161,403
<TOTAL-ASSETS> 1,215,794
<CURRENT-LIABILITIES> 177,409
<BONDS> 90,278
0
0
<COMMON> 46,573
<OTHER-SE> 750,065
<TOTAL-LIABILITY-AND-EQUITY> 1,215,794
<SALES> 1,460,974
<TOTAL-REVENUES> 1,460,974
<CGS> 1,044,710
<TOTAL-COSTS> 1,044,710
<OTHER-EXPENSES> 6,347
<LOSS-PROVISION> 983
<INTEREST-EXPENSE> 11,099
<INCOME-PRETAX> 258,421
<INCOME-TAX> 92,181
<INCOME-CONTINUING> 166,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,240
<EPS-PRIMARY> 4.68
<EPS-DILUTED> 4.63
</TABLE>
