<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-68895
Prospectus Supplement to Prospectus dated March 31, 1999.
$500,000,000
(VULCAN MATERIALS COMPANY LOGO)
$250,000,000 5.75% Notes due April 1, 2004
$250,000,000 6.00% Notes due April 1, 2009
----------------------
Vulcan Materials Company is offering two series of notes that will pay
interest on April 1 and October 1 of each year. Vulcan will make the first
interest payment on October 1, 1999. Vulcan will issue the notes only in
denominations of $1,000 and integral multiples of $1,000.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Per
5.75% Note Total 6.00% Note Total
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Initial public offering price....... 99.900% $249,750,000 99.396% $248,490,000
Underwriting discount............... 0.600% $ 1,500,000 0.650% $ 1,625,000
Proceeds, before expenses, to
Vulcan............................ 99.300% $248,250,000 98.746% $246,865,000
</TABLE>
The initial public offering prices set forth above do not include accrued
interest, if any. Interest on the notes will accrue from April 12, 1999 and must
be paid by the purchaser if the notes are delivered after April 12, 1999.
----------------------
The underwriters expect to deliver the notes in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York on April 12, 1999.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
----------------------
Prospectus Supplement dated April 7, 1999.
<PAGE> 2
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the notes we are offering. The
second part, the prospectus, gives more general information, some of which may
not apply to the notes. If the description of the notes varies between this
prospectus supplement and the accompanying prospectus, you should rely on the
information in this prospectus supplement.
SUMMARY INFORMATION ABOUT VULCAN MATERIALS COMPANY
AND SUBSIDIARIES
The following is a summary of our business. It does not contain all the
information that may be important to you. Before you decide to invest in any
notes, you should read the information in this section, together with the more
detailed information and financial data contained elsewhere in this prospectus
supplement, in the accompanying prospectus, and in documents and financial
statements that we have incorporated by reference in the accompanying
prospectus.
We are the nation's leading producer of construction aggregates, a major
producer of other construction materials and a leading chemicals manufacturer,
supplying chloralkali and other industrial chemicals. We operate through two
business segments, construction materials and chemicals. For the year ended
December 31, 1998, we generated revenues of $1.776 billion and segment earnings
of $376.6 million.
In January 1999, we acquired the outstanding common stock of CalMat Co.
for $740 million in cash. We also agreed to assume CalMat debt and incurred
acquisition costs for a total of $218 million. The acquisition further
solidifies our position as the nation's largest producer of construction
aggregates. In the discussion of our business set forth below, where we have
presented financial data that gives effect to our acquisition of CalMat, we have
assumed that we completed our acquisition of CalMat on December 31, 1998 for
balance sheet data and on January 1, 1998 for income statement data. Unless we
state otherwise, in discussing our construction materials segment, we have
included CalMat's business.
Our business strategy is to strengthen further our leading position in the
construction aggregates industry and to maintain profitable growth in the
chemicals business.
CONSTRUCTION MATERIALS SEGMENT
We are the largest producer of construction aggregates in the United
States. Our aggregates business consists primarily of the production and sale of
crushed stone, sand and gravel, rock asphalt, and crushed slag. In addition to
construction aggregates, we produce asphalt mix, ready-mix concrete, and
recycled concrete and provide services related to asphalt and paving
construction. On a pro forma basis, after giving effect to our acquisition of
CalMat, sales of these products and services would have accounted for
approximately 73% of our 1998 revenues.
We sell our products in 20 states, primarily in the Southeast, Midwest,
Southwest, and Western regions of the United States. We operate 190 aggregates
plants, 51 asphalt plants, 35 ready-mix concrete plants, and numerous other
production and distribution facilities.
Before giving effect to the acquisition of CalMat, we shipped a record 180
million tons of aggregates in 1998, surpassing our 1997 record of 167 million
tons. After giving effect to the acquisition of CalMat, we would have shipped
212 million tons of aggregates in 1998.
We have the largest quantity of aggregates reserves in the industry. Our
estimated reserves of aggregates, including CalMat's reserves, totaled 9.2
billion tons at the end of 1998, sufficient for over 40 years of operations at
current production levels.
Construction aggregates are employed in virtually all types of
construction, including highway construction and maintenance and the production
of asphalt mix and ready-mix
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<PAGE> 3
concrete. During the last five years, slightly over half of our aggregates
production was used in the construction and maintenance of highways, roads,
streets, and other public works, including public buildings. The remainder was
used in housing construction, in nonresidential, commercial and industrial
facilities, as railroad ballast, and in non-construction uses such as
agriculture and various industrial applications.
Our business strategy for our construction materials segment focuses on
preserving and strengthening our leadership positions in existing markets,
pursuing profitable growth in current and new market areas, maintaining a strong
reserve position, reducing production costs, and achieving strong performance in
safety, health, and environmental stewardship and community relations. During
1998, we acquired six quarries in Georgia, Illinois, and Tennessee and began
production at newly developed aggregates operations in Alabama, Georgia, and
Indiana. In the first quarter of 1999, we purchased five quarries in Arkansas,
four in Georgia, and two in North Carolina in addition to the CalMat
acquisition.
In 1998, our construction materials segment realized cost savings from
capital investments made to upgrade equipment and improve operating
efficiencies. We are also realizing significant cost savings from our redesigned
procurement process.
The addition of CalMat's assets to ours creates the first coast-to-coast
construction aggregates company in the nation, selling products in 20
southeastern, mid-western, southwestern, and western states from Virginia to
California. The acquisition is expected to increase our share of aggregates
sales in the United States to approximately 8%. We also expect the acquisition
to generate cost savings from the exchange of best practices, improved
purchasing practices, reduced selling and administrative costs, and a larger
capital base.
In June 1998, a $216 billion, six-year transportation authorization, the
Transportation Equity Act for the 21st Century, or TEA-21, was signed into law.
TEA-21 should provide a solid underpinning for the aggregates business over the
next six years. Compared to expenditures under the previous transportation act
of 1991, average annual federal highway spending is expected to increase 53% in
states served by us and 35% in other states. Highway construction accounts for
approximately 34% of our aggregates shipments, excluding CalMat, and almost
one-third of highway construction is funded by federal highway spending. As a
result, TEA-21's boost to federal highway spending alone is expected to increase
average annual United States aggregates demand by 5% to 6% over 1997.
In the past, increases in federal spending have been matched by similar
increases in state highway spending, though with a time lag. The impact of state
matching will depend on the amount and timing of the matching, as well as the
specifics of states' administration of highway programs. Assuming states match
at historical levels, we believe TEA-21 will increase average annual aggregates
demand in markets we serve by 8% to 10% over 1997.
In 1998, 1997 and 1996, our construction materials segment, excluding
CalMat, generated revenues of $1,158.6 million, $1,051.0 million, and $961.9
million, respectively, and segment earnings of $307.4 million, $229.3 million,
and $197.3 million, respectively. After giving effect to our acquisition of
CalMat, our construction materials segment would have generated revenues of
$1,671.4 million in 1998 and segment earnings of $352.3 million for the same
period.
Our construction materials segment, excluding CalMat, contributed
approximately 65%, 63%, and 61% to our consolidated revenues for 1998, 1997, and
1996, respectively. Excluding CalMat, we derived approximately 82%, 75%, and 68%
of our segment earnings from our construction materials segment for 1998, 1997,
and 1996, respectively. On a pro forma basis, after giving effect to the CalMat
acquisition, our construction materials segment would have contributed
approximately 73% to our consolidated revenues for 1998 and 84% to our segment
earnings for 1998.
S-2
<PAGE> 4
CHEMICALS SEGMENT
Our chemicals segment is organized into two business units: the
chloralkali business unit and the performance systems business unit.
CHLORALKALI BUSINESS UNIT
The chloralkali business unit produces chlorine, caustic soda,
hydrochloric acid, potassium chemicals, and chlorinated organic chemicals. These
products are marketed in North America, the Far East, and Western Europe.
Principal end markets for these products include the chemical processing,
energy, environmental services, refrigerants, polymers, food and
pharmaceuticals, metal cleaning, pulp and paper, cleaning chemicals, textiles,
and water management industries. The chloralkali business unit operates three
chemical plants and maintains distribution terminals throughout the United
States.
Our strategy for the chloralkali business is to enhance profitability by
maximizing production facility operating rates, expanding core businesses, and
entering new markets.
PERFORMANCE SYSTEMS BUSINESS UNIT
The performance systems business unit offers specialty and custom chemical
products, services, technologies, and manufacturing capabilities to a number of
industries including pulp and paper, textiles, and water management.
The performance systems business unit is the largest North American
producer of sodium chlorite and a leading provider of systems for generating
chlorine dioxide. It also manufactures the broadest product line of phosphonates
of any commercial producer in the United States. Performance systems markets its
products in North and South America, the Far East, and Western Europe.
Performance systems' strategy is to broaden its product lines to better
serve target industries, integrate acquired businesses, and expand into
international markets.
In 1998, 1997 and 1996, our chemicals segment generated revenues of $617.8
million, $627.6 million, and $607.0 million, respectively, and segment earnings
of $69.2 million, $75.8 million, and $94.7 million, respectively. Before giving
effect to our acquisition of CalMat, the chemicals group contributed
approximately 35%, 37%, and 39% to our consolidated revenues and approximately
18%, 25%, and 32% to our segment earnings for 1998, 1997, and 1996,
respectively. On a pro forma basis, after giving effect to the CalMat
acquisition, our chemicals segment would have contributed approximately 27% to
our consolidated revenues for 1998 and 16% to our segment earnings for 1998.
RECENT DEVELOPMENTS IN OUR BUSINESS
CONSTRUCTION MATERIALS
In January 1999, we acquired CalMat Co. CalMat manufactures and sells
construction materials, including aggregates, asphalt mix, and ready-mix
concrete. It operates 29 aggregates processing plants, 34 asphalt plants, and 30
ready-mix concrete plants in California, Arizona, and New Mexico. CalMat also
owns, leases, manages, and sells industrial office buildings and undeveloped
property.
For the year ended December 31, 1998, CalMat generated revenues of $512.8
million, pro forma to give effect to the reclassification of transportation
costs to conform with our accounting policies. At December 31, 1998, CalMat had
total assets of $690.5 million and total debt of $155.9 million. Over the next
two years, we expect to divest CalMat real estate which is not being used in the
construction materials business.
CHEMICALS
In June 1998, we formed a joint venture with Mitsui & Co., Ltd. to
construct and operate a new chloralkali plant and to expand ethylene dichloride,
or EDC, capacity at our Geismar, Louisiana facility. EDC is a critical material
used in the manufacture of vinyl and polyvinyl chloride products. We own 51% of
the joint venture, and Mitsui owns 49%. We plan to contribute our existing EDC
plant to the joint venture and invest an additional $90
S-3
<PAGE> 5
million. Mitsui will buy all of the EDC produced by the joint venture. We expect
the joint venture to begin production in the second quarter of 2000.
USE OF PROCEEDS
We estimate that we will receive approximately $494,535,000 from the sale
of the notes, after deducting estimated underwriting discounts and offering
expenses. We intend to use the net proceeds from the sale of the notes to retire
a corresponding amount of short-term commercial paper borrowings that we
incurred in connection with the acquisition of CalMat in the first quarter of
1999. These borrowings bear interest at an effective rate of approximately 5%
per year, and they mature on various dates, the latest of which is April 30,
1999.
RATIO OF EARNINGS TO FIXED CHARGES
Our ability to generate earnings to pay our fixed charges is shown below.
These computations include us and our subsidiaries, but do not include CalMat
Co.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.................. 18.9 17.8 16.0 13.3 7.9
</TABLE>
We have computed our ratio of earnings to fixed charges for each period by
dividing earnings by fixed charges for that period. For purposes of these
computations, we calculated "earnings" by adding our pre-tax income, our fixed
charges and the amount we amortize for capitalized interest, and we then
subtracted the credits we take for capitalized interest. We determined "fixed
charges" by adding the interest we pay on our indebtedness, one-third of all our
rental expenses, and the amount we amortize for debt financing costs. One-third
of all our rental expenses is the approximate portion that represents interest.
On a pro forma basis after giving effect to our acquisition of CalMat and
our sale of the notes, as if both events were completed as of January 1, 1998,
our ratio of earnings to fixed charges for the year ended December 31, 1998
would have been 6.0.
S-4
<PAGE> 6
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and as adjusted to give effect to our acquisition of CalMat, the sale of $500
million of notes, and the application of the proceeds from the sale of notes
(after deducting approximately $3.7 million in estimated expenses). We derived
the actual data in this table from our audited consolidated financial statements
for the year ended December 31, 1998, which we have incorporated by reference
into the accompanying prospectus by reference to our Annual Report on Form 10-K
for the year ended December 31, 1998. We prepared the pro forma financial data
based on the audited financial statements of CalMat for the year ended December
31, 1998 and the unaudited pro forma combined financial statements of us and
CalMat, both of which we incorporated by reference into the accompanying
prospectus by reference to our Current Report on Form 8-K/A, dated January 6,
1999 (filed March 19, 1999). You should read the financial data below in
conjunction with these financial statements and the explanatory notes to these
financial statements. In particular, you should read the notes to the unaudited
pro forma combined financial statements included in our Form 8-K/A for an
explanation of the assumptions we used to prepare the pro forma data below.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------
PRO FORMA PRO FORMA
FOR AFTER
ACQUISITION GIVING EFFECT TO
ACTUAL OF CALMAT THE OFFERING
---------- ----------------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Short-Term Debt:
Current portion of long-term debt.............. $ 5,432 $ 5,432 $ 5,432
Notes payable.................................. 2,353 2,550 2,550
Commercial paper(a)............................ -- 680,000 185,465(b)
---------- ----------- ----------
Total short-term debt....................... $ 7,785 $ 687,982 $ 193,447
---------- ----------- ----------
Long-Term Debt:
Medium term notes.............................. $ 56,000 $ 56,000 $ 56,000
CalMat long-term debt at fair market
value(c).................................... -- 128,730 128,730
Pollution control revenue bonds, other......... 20,533 20,533 20,533
Notes offered hereby(d)........................ -- -- 498,240
---------- ----------- ----------
Total long-term debt........................ $ 76,533 $ 205,263 $ 703,503
---------- ----------- ----------
Shareholders' Equity........................... $1,153,700 $ 1,153,700 $1,153,700
---------- ----------- ----------
Total Capitalization...................... $1,238,018 $ 2,046,945 $2,050,650
========== =========== ==========
</TABLE>
- ---------------
(a) Shortly after the CalMat acquisition, Vulcan paid off CalMat bank
borrowings in the amount of $90 million by issuing a corresponding amount
of commercial paper.
(b) Assumes the repayment of commercial paper in the amount of $494.5 million
using the proceeds (after deducting expenses) of the offering of $500
million of notes.
(c) Under purchase accounting, the book value of the CalMat debt of $118.2
million was adjusted to reflect fair market value.
(d) Stated net of an issuance discount of $1.76 million.
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<PAGE> 7
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical and pro forma
consolidated financial data for us and our subsidiaries as of the dates and for
the periods set forth below. The pro forma financial data gives effect to our
acquisition of CalMat, the sale of $500 million of notes, and the application of
the net proceeds from the sale of notes as if these events had occurred on
December 31, 1998 in the case of balance sheet data and January 1, 1998, in the
case of income statement data. We derived the historical balance sheet data and
income statement data from our audited consolidated financial statements. We
incorporated our consolidated financial statements as of and for the years ended
December 31, 1998, 1997 and 1996 in the accompanying prospectus by reference to
our annual report to shareholders, which is incorporated in our Annual Report on
Form 10-K for the year ended December 31, 1998. We prepared the pro forma
financial data based on the audited financial statements of CalMat for the year
ended December 31, 1998 and the unaudited pro forma combined financial
statements of us and CalMat, both of which we incorporated by reference into the
accompanying prospectus by reference to our Current Report on Form 8-K/A, dated
January 6, 1999 (filed March 19, 1999). You should read the financial data below
in conjunction with these financial statements and the explanatory notes to
these financial statements. In particular, you should read the notes to the
unaudited pro forma combined financial statements included in our Form 8-K/A for
an explanation of the assumptions we used to prepare the pro forma data below.
The information in the table below reflects a three-for-one split of our common
stock which was effected on March 10, 1999.
S-6
<PAGE> 8
<TABLE>
<CAPTION>
PRO FORMA(A) HISTORICAL
------------ --------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
------------ ---------- ---------- ---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $2,289,212 $1,776,434 $1,678,581 $1,568,945 $1,460,974 $1,253,360
Cost of goods sold........ 1,644,213 1,226,764 1,199,453 1,115,442 1,044,710 985,198
---------- ---------- ---------- ---------- ---------- ----------
Gross profit.......... 644,999 549,670 479,128 453,503 416,264 268,162
Selling, general &
administrative
expense................. 246,268 198,956 190,446 175,128 159,829 125,036
Other operating costs..... 24,199 7,851 5,112 3,887 6,347 5,526
---------- ---------- ---------- ---------- ---------- ----------
Earnings from
operations.......... 374,532 342,863 283,570 274,488 250,088 137,600
Interest income........... 7,532 6,654 3,190 3,179 1,099 1,224
Interest expense.......... 51,984 6,782 6,914 8,636 11,099 9,821
Total other income
(charges), net(b)....... 36,029 32,109 20,655 16,549 18,333 16,903
---------- ---------- ---------- ---------- ---------- ----------
Income before
income taxes........ 366,109 374,844 300,501 285,580 258,421 145,906
Provision for income
taxes................... 117,155 118,936 91,356 96,985 92,181 47,930
---------- ---------- ---------- ---------- ---------- ----------
Net income............ $ 248,954 $ 255,908 $ 209,145 $ 188,595 $ 166,240 $ 97,976
========== ========== ========== ========== ========== ==========
Net diluted earnings per
share................... $ 2.44 $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89
BALANCE SHEET DATA:
Total cash and cash
equivalents............. $ 26,478 $ 180,568 $ 128,566 $ 50,816 $ 21,869 $ 7,717
Net working capital
exclusive of debt and
cash items(c)........... 274,587 193,028 161,291 158,105 174,783 166,614
Total assets.............. 2,670,920 1,658,611 1,449,246 1,320,645 1,215,794 1,181,144
Short-term debt........... 193,447 7,785 9,062 8,310 10,639 47,466
Long-term debt............ 703,503 76,533 81,931 85,535 90,278 97,380
Shareholders' equity...... 1,153,700 1,153,700 991,497 883,664 796,638 731,629
Total capitalization...... 2,050,650 1,238,018 1,082,490 977,509 897,555 876,475
CASH FLOW DATA:
Net cash provided by
operations.............. $ 364,176 $ 362,596 $ 345,814 $ 345,532 $ 266,456 $ 208,259
Capital expenditures...... 267,006 203,258 161,238 151,767 109,174 100,090
Payment of dividends...... 79,507 70,015 63,622 58,399 51,849 48,109
Purchase of treasury
stock................... 65,003 65,003 43,060 45,182 50,148 28,612
OTHER DATA:
Ratio of earnings to fixed
charges................. 6.0x 18.9x 17.8x 16.0x 13.3x 7.9x
Debt to total capital..... 43.7% 6.8% 8.4% 9.6% 11.2% 16.5%
Depreciation, depletion
and amortization........ $ 191,353 $ 137,792 $ 129,217 $ 121,257 $ 116,997 $ 112,666
</TABLE>
- ---------------
(a) The pro forma calculations reflect interest expense on the sale of $500
million of notes at an interest rate of 5.875%. This rate differs from the
5.5% rate that we used in the January 6, 1999 (filed March 19, 1999) 8-K/A
to calculate interest related to the financing of the CalMat acquisition.
(b) Includes earnings from our Mexican joint venture accounted for under the
equity method and net gains or losses on disposition of assets in the normal
course of business.
(c) Excludes accrued interest associated with debt.
S-7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We are the nation's leading producer of construction aggregates, a major
producer of other construction materials and a leading chemicals manufacturer,
supplying chloralkali and other industrial chemicals. In this section, we
discuss and analyze the results of operations and financial condition of us and
our subsidiaries on a consolidated basis. You should read this discussion and
analysis in connection with the financial information included in our
consolidated financial statements and the related notes which are incorporated
in the accompanying prospectus.
The information presented in this section reflects a three-for-one split
of our common stock which was approved by our board of directors on February 12,
1999. The stock split was effected on March 10, 1999. Unless we state otherwise,
the information presented in this section for 1998 does not reflect our
acquisition of CalMat.
RESULTS OF OPERATIONS
Our 1998 net sales, net earnings and earnings per share were at record
levels. Our net earnings and diluted earnings per share for 1998 were $255.9
million and $2.50, respectively. The comparable 1997 net earnings and diluted
earnings per share were $209.1 million and $2.03, respectively. Our net sales in
1998 were $1.776 billion, up from the 1997 total of $1.679 billion. Our pretax
earnings in 1998 totaled $374.8 million, up 25% from the 1997 amount of $300.5
million.
CONSTRUCTION MATERIALS
1998 VS. 1997. For the sixth consecutive year, net sales by our
construction materials segment surpassed previous records. Net sales of the
segment for 1998 totaled $1.159 billion, a 10% increase from net sales in 1997.
The results of the construction materials segment for 1998 reflect an 8%
increase in shipments and a 4% rise in the average unit selling price of crushed
stone, the segment's principal product. $70.0 million of the total increase in
net sales of $107.6 million was related to increased volume and $37.6 million
was due to higher prices.
Earnings for our construction materials segment for 1998 were a record
$307.4 million before interest expense and income taxes, a 34% increase from
$229.3 million for 1997. This increase reflects the favorable effects of higher
crushed stone shipments and prices, as well as increased earnings from other
products. This information is summarized below (in millions of dollars):
CONSTRUCTION MATERIALS 1998 VS. 1997
<TABLE>
<S> <C>
1997 earnings...................... $229
----
Higher volume/prices -- crushed
stone............................ 58
Higher earnings -- other
products......................... 14
Gains on asset sales............... 11
All other.......................... (5)
----
1998 earnings...................... $307
====
</TABLE>
CHEMICALS
1998 VS. 1997. Net sales by our chemicals segment for 1998 decreased 2%
to $617.8 million from the record 1997 level of $627.6 million. Higher prices
for caustic soda were more than offset by lower volumes and prices for chlorine
and some chlorine derivatives.
Earnings of our chemicals segment for 1998 decreased 9% to $69.2 million
from $75.8 million for 1997. Excluding the impact of asset sales and
environmental provisions, earnings for our chemicals segment for 1998 were 2%
above earnings for 1997. Higher caustic soda prices and lower raw material costs
offset lower volumes and prices for chlorine and some derivative products and
lower earnings by our performance systems
S-8
<PAGE> 10
business unit. This information is summarized below (in millions of dollars):
CHEMICALS 1998 VS. 1997
<TABLE>
<S> <C>
1997 earnings......................... $76
---
Chloralkali sales prices/raw
materials........................... 27
Chloralkali sales volumes............. (13)
Asset sales/environmental
provisions.......................... (8)
All other............................. (13)
---
1998 earnings......................... $69
===
</TABLE>
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Our selling, administrative and general expenses of $199.0 million in 1998
increased 4% from $190.4 million in 1997. In addition to normal salary
increases, this increase reflects expenditures associated with several projects
designed to enhance operations and reduce future costs throughout our business.
OTHER INCOME
Our other income, net of other charges, was $32.1 million in 1998 compared
with $20.7 million in 1997. This increase principally reflects gains on sales of
assets and higher earnings from our joint venture that supplies limestone from
Mexico to the U.S. Gulf Coast market.
INCOME TAXES
Our effective tax rate was 31.7% in 1998, up from 30.4% in 1997. This
increase reflects a lesser impact of adjustments related to tax audits for prior
years.
1999 OUTLOOK
With regard to our outlook for 1999, our starting point is the assumption
that moderate growth in gross domestic product and the favorable impact of
TEA-21 will continue to provide a healthy economic environment for construction
activity in the United States. We think that the market for construction
aggregates should remain strong overall. We believe that demand in most major
construction end-use markets should equal or exceed 1998 levels, with the
exception of residential construction, which may decline modestly. Based on this
outlook, we expect earnings for 1999 in our construction materials segment,
before the inclusion of CalMat, to exceed our results in 1998. We believe that
CalMat will increase earnings of our construction materials segment, but this
increase will be offset by higher interest expense related to the acquisition.
In 1999, we expect our chemicals segment to face a challenging year. It is
difficult to forecast the performance of the chemicals segment because of
uncertainties regarding the Asian economies and related effects on the global
economy and because of expected additional chloralkali industry capacity. Both
caustic soda and chlorine prices may be lower than in 1998. Based on our current
view, we expect earnings for our chemicals segment in 1999 to fall significantly
below earnings in 1998.
We have a high level of confidence in the outlook for our construction
materials segment. However, the volatile outlook for our chemicals segment makes
it difficult to project 1999 results for the chemicals segment and for our
company as a whole. If the chemicals segment's markets stabilize, our net
earnings and earnings per share could approximate our record results for 1998.
On the other hand, a continued deterioration in the chemicals segment's markets
would likely lead to a slight decline in our earnings.
S-9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The amount of net cash generated by our operating activities in 1998
reached a record high for the fourth year in a row. The amount of net cash was
$362.6 million in 1998, compared to $345.8 million in 1997. Net cash provided by
our construction materials segment increased to $270.4 million in 1998, a 6%
increase from 1997, while net cash provided by our chemicals segment was
relatively flat at $86.4 million. We used our cash flows to fund capital
requirements internally, reduce long-term debt, and return $135.0 million to our
shareholders through dividends and share repurchases.
Our cash expenditures for property, plant and equipment, excluding
acquisitions, were $203.3 million in 1998, up $42.1 million compared to 1997.
Our cash spending for acquisitions, including amounts attributable to working
capital and other items on our balance sheet, totaled $24.9 million in 1998
compared with $12.1 million in 1997.
Our policy is to pay out a reasonable share of net cash provided by
operating activities as dividends, consistent with the payout record of past
years on average and consistent with the goal of maintaining debt ratios within
prudent and generally acceptable limits. Additionally, we believe that purchases
of our stock frequently may represent an attractive long-term investment and an
attractive means of returning cash to our shareholders. We intend to continue
buying shares when appropriate based on prevailing market conditions, our cash
position, and our long-term capital requirements.
WORKING CAPITAL
The working capital available to us, exclusive of debt, cash, cash
equivalents, and short-term investments, totaled $193.0 million at December 31,
1998, up $31.7 million from the amount at December 31, 1997. This increase was
primarily due to an increase in sales.
Our current ratio of assets to liabilities increased to 2.7 in 1998
compared to 2.3 in 1997, primarily due to a higher cash balance.
PROPERTY ADDITIONS
The amount of property we added to our operations, including acquisitions,
totaled $230.3 million in 1998, up 26.5% from $182.0 million in 1997. Property
additions included $18.6 million related to acquisitions and $8.4 million of
accruals related to property.
We continued to increase spending in our construction materials and
chemicals segments. Within the construction materials segment, in 1998 we
acquired six stone quarries in Georgia, Illinois and Tennessee and began
production at newly developed aggregates operations in Alabama, Georgia, and
Indiana. During the first quarter of 1999, we purchased five quarries in
Arkansas, four in Georgia, and two in North Carolina in addition to the CalMat
acquisition. Property additions within our chemicals segment included initial
spending for a joint venture with Mitsui & Co. announced in June. In addition to
contributing our existing EDC plant, we will invest a total of approximately $90
million in the joint venture, with the majority of this funding to be provided
in 1999.
Our commitments for capital expenditures were $32.4 million at December
31, 1998, excluding expenditures for CalMat and Mitsui. We will use a
combination of short-term and long-term borrowing in addition to internally
generated cash flows to cover the commitments mentioned above.
SHORT-TERM BORROWINGS AND INVESTMENTS
We were a net short-term investor during 1998 as our short-term
investments reached a peak of $219.8 million and totaled $166.8 million at year
end.
In acquiring CalMat in January 1999, we liquidated all of our short-term
investments and issued $590.0 million of commercial paper. Shortly after the
CalMat acquisition, we issued an additional $90.0 million of commercial paper to
repay CalMat's bank debt of $90.0 million. Our policy is to maintain unused bank
lines of credit and/or committed credit facilities at least equal to our
outstanding commercial paper. We maintained unsecured bank lines of credit
totaling $225.0
S-10
<PAGE> 12
million at the end of 1998. Consistent with our policy, we entered into a
syndicated credit facility in the amount of $550.0 million effective in January
1999, which resulted in our total domestic lines of credit being increased to
$775.0 million. We intend to use the proceeds of the offering of the notes to
repay some of these short-term borrowings. Concurrent with the closing of the
CalMat acquisition, Standard & Poor's Ratings Group lowered our commercial paper
rating from A-1+ to A-1, while Moody's Investors Service, Inc. maintained its
rating at the P-1 level.
After giving effect to the short-term financing related to the CalMat
acquisition, the note offering and the application of net proceeds from the note
offering, we are confident that our expected cash flow during 1999 will provide
us with adequate liquidity to meet our financial commitments for 1999 without
incurring material additional indebtedness.
LONG-TERM BORROWINGS
During 1998, we reduced our total long-term obligations by $5.4 million to
$76.5 million. During the three-year period ended December 31, 1998, our
long-term obligations decreased cumulatively by $13.8 million from the $90.3
million outstanding at December 31, 1995.
During the same three-year period, our shareholders' equity, net of common
stock purchases of $153.3 million and dividends of $192.0 million, increased by
$357.1 million to $1,153.7 million.
In the future, the ratio of our total debt to our total capital will
depend upon specific investment and financing decisions. Nonetheless, we believe
our cash-generating capability, along with our financial strength and business
diversification, can reasonably support a ratio of 35% to 40%. The actual ratio
at the end of 1998 was 6.8%. At December 31, 1998, CalMat had $115 million of
senior notes outstanding with maturities beginning in December 2003 through
December 2011. On a pro forma basis after giving effect to the debt we assumed
in connection with the CalMat acquisition, our ratio of total debt to total
capital at the end of 1998 would have been 43.7%. Our ratio may increase further
if we obtain additional financing in connection with acquisitions and other
attractive investment opportunities which we continue to actively pursue.
The note offering will result in an increase in long-term debt and a
corresponding decrease in short-term borrowings.
Effective with the closing of the CalMat acquisition, Standard & Poor's
Ratings Group lowered our long-term debt rating to A+ from AA-, while Moody's
Investors Service, Inc. maintained its rating at the A1 level.
S-11
<PAGE> 13
DESCRIPTION OF THE NOTES
The following description of the two series of notes supplements the more
general description of the debt securities that appears in the accompanying
prospectus. You should read this section together with the section entitled
"Description of Debt Securities" in the prospectus. If there are any
inconsistencies between this section and the prospectus, you should rely on the
information in this section.
The 5.75% notes and the 6.00% notes will each:
- - be debt securities as described in the accompanying prospectus;
- - mature on April 1, 2004 and April 1, 2009, respectively ;
- - bear interest at a rate of 5.75% per year and 6.00% per year, respectively;
- - be limited to $250 million aggregate principal amount;
- - be issued under an indenture dated as of May 1, 1991 between us and The Bank
of New York, and represent a new and separate series under the indenture;
- - be our unsecured and unsubordinated debt;
- - rank equally with all of our existing and future unsecured and unsubordinated
debt; and
- - be issued in registered book-entry form only, in denominations of $1,000 or
integral multiples of $1,000.
Holders of the notes will not be permitted to convert the notes into our
common stock or to exchange the notes for our common stock. We will not be
permitted to redeem the notes prior to their maturity. We will not be required
to make any sinking fund payments to retire the notes prior to maturity.
We will pay interest on the notes semi-annually on April 1 and October 1
of each year to the persons in whose names the notes are registered at the close
of business on the preceding March 15 and September 15, respectively. We will
make the first interest payment on October 1, 1999, and interest will begin to
accrue from April 12, 1999.
RANKING OF THE NOTES COMPARED TO OUR OTHER DEBT
Payment of principal and interest on the notes will rank;
- - junior to all of our currently existing and future secured debt;
- - equally with all of our currently existing and future unsecured and
unsubordinated debt and guaranteed debt; and
- - senior to all of our future subordinated debt.
As of December 31, 1998, on a pro forma basis, after giving effect to the
sale of the notes, the application of net proceeds from the sale, and our
acquisition of CalMat, we would have had approximately:
- - $8.8 million of secured debt that would have ranked senior to the notes; and
- - $484.4 million of debt and guaranteed debt that would have ranked equally with
the notes.
We had no debt as of December 31, 1998 that would have ranked junior to
the notes.
STRUCTURAL SUBORDINATION OF THE NOTES TO THE OBLIGATIONS OF OUR SUBSIDIARIES
The notes will be our obligations exclusively, and they will not be
obligations of our subsidiaries. Because we conduct a significant amount of our
operations through subsidiaries, our cash flow and consequent ability to meet
our debt obligations, including the notes, partially depend on the earnings of
our subsidiaries and the distribution or other payment of those earnings to us.
In addition, as a result of our corporate structure, the notes will be
effectively subordinated to all the obligations, including debt, of our
subsidiaries. Our subsidiaries including CalMat, currently have $120.5 million
in debt
S-12
<PAGE> 14
which would rank structurally senior to the notes. We expect eventually to
transfer to subsidiaries substantially all of our assets and operations.
DISCHARGE OF OUR OBLIGATIONS THROUGH DEFEASANCE
The accompanying prospectus describes how we may be discharged from our
obligations under the notes by depositing cash or other securities with the
trustee.
RESTRICTIVE COVENANTS
We have agreed to restrict our and our subsidiaries' activities for the
benefit of the holders of the notes. These restrictions limit our and our
subsidiaries' ability to incur secured debt and to engage in sale and leaseback
transactions. These restrictions are summarized in the accompanying prospectus
and are set forth in full in the indenture. The indenture does not contain
restrictions that would limit our or our subsidiaries' ability to issue
additional unsecured debt or to engage in highly leveraged transactions.
BOOK-ENTRY FORM OF THE NOTES
The notes will be delivered in book-entry form as described in the
accompanying prospectus.
S-13
<PAGE> 15
UNDERWRITING
Vulcan and the underwriters for the offering named below have entered into
an underwriting agreement and a pricing agreement with respect to the notes.
Subject to certain conditions, each underwriter has severally agreed to purchase
the principal amount of notes indicated in the following table.
<TABLE>
<CAPTION>
Principal Amount Principal Amount
Underwriters of 5.75% Notes of 6.00% Notes
- ------------ ---------------- ----------------
<S> <C> <C>
Goldman, Sachs & Co......................................... $125,000,000 $125,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 75,000,000 75,000,000
Credit Suisse First Boston Corporation...................... 25,000,000 25,000,000
Morgan Stanley & Co. Incorporated........................... 25,000,000 25,000,000
------------ ------------
Total.......................................... $250,000,000 $250,000,000
============ ============
</TABLE>
----------------------
Notes sold by the underwriters to the public will initially be offered at
the initial public offering prices set forth on the cover of this prospectus
supplement. Any notes sold by the underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to 0.350% and 0.400%
of the principal amount of the 5.75% notes and the 6.00% notes, respectively.
Any such securities dealers may resell any notes purchased from the underwriters
to certain other brokers or dealers at a discount from the initial public
offering price of up to 0.250% and 0.250% of the principal amount of the 5.75 %
notes and the 6.00% notes, respectively. If all the 5.75% notes and the 6.00%
notes are not sold at the initial offering price, the underwriters may change
the offering price and the other selling terms.
The notes are new issues of securities with no established trading market.
Vulcan has been advised by the underwriters that the underwriters intend to make
a market in the notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the notes.
In connection with the offering, the underwriters may purchase and sell
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased notes sold by
or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
Vulcan estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$580,000.
Vulcan has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-14
<PAGE> 16
LEGAL OPINION REGARDING THE NOTES
William F. Denson, III, our Senior Vice President-Law and Secretary, will
issue a legal opinion on our behalf about the validity of the notes offered by
this prospectus supplement. As of February 28, 1999, Mr. Denson beneficially
owned 24,003 shares of our common stock, held awards of 10,890 shares of our
common stock under a long-range performance share plan, held stock options for
the purchase of 77,775 shares of our common stock under a long-term incentive
plan, and held 31,905 shares of our common stock under a thrift plan for
salaried employees. Covington & Burling, Washington, DC, has advised us, and
Alston & Bird LLP, Atlanta, Georgia, has advised the underwriters, with regard
to various matters related to the notes and this prospectus supplement. Alston &
Bird LLP also acts as our counsel from time to time in various matters.
EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in the accompanying prospectus by reference to our Annual
Report on Form 10-K for the year ended December 31, 1998, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated in the accompanying prospectus by reference, and have been so
incorporated in reliance on the report of Deloitte & Touche LLP given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of CalMat Co. as of December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998, incorporated in the accompanying prospectus by reference to our Current
Report on Form 8-K/A dated January 6, 1999 and filed March 19, 1999, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including the
documents we incorporate by reference, contain "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. Generally, these statements relate to future financial
performance, results of operations, business plans or strategies, projected or
anticipated revenues, expenses, earnings, or levels of capital expenditures.
Statements to the effect that we or our management "anticipate," "believe,"
"estimate," "expect," "plan," "predict," or "project" a particular result or
course of events, or that a result or event "should" occur, and other similar
expressions, identify these forward-looking statements. These statements are
subject to numerous risks, uncertainties, and assumptions, including but not
limited to general business conditions, competitive factors, pricing, energy
costs, and other risks and uncertainties discussed in the reports we
periodically file with the Securities and Exchange Commission. These risks,
uncertainties, and assumptions may cause our actual results or performance to be
materially different from those expressed or implied by the forward-looking
statements. We caution prospective investors that forward-looking statements are
not guarantees of future performance and that actual results, developments, and
business decisions may vary significantly from those expressed in or implied by
the forward-looking statements.
S-15
<PAGE> 17
$700,000,000
VULCAN MATERIALS COMPANY
Debt Securities
-------------------------
Vulcan Materials Company may from time to time sell up to $700,000,000
aggregate principal amount of debt securities. We will provide the specific
terms of each offering of debt securities in supplements to this prospectus. You
should read this prospectus and any supplement carefully before you invest.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
This prospectus is dated March 31, 1999.
<PAGE> 18
INFORMATION ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this process, we may sell the debt securities described in this prospectus in
one or more offerings up to a total principal amount of $700,000,000. This
prospectus provides you with a general description of the debt securities we may
offer. Each time we offer to sell debt securities, we will provide a supplement
to the prospectus that will contain specific information about the terms of that
particular offering. The prospectus supplement may also add, update or change
information contained in this prospectus. Before you invest, you should read
carefully both this prospectus and any prospectus supplement together with the
additional information described under the heading "Where You Can Find More
Information About Us."
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You can also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our common stock is listed on the New York Stock Exchange. You can inspect
the reports and other information we file at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" into this prospectus
information contained in the documents we file with the SEC. This means that we
can disclose important information to you by referring you to our SEC filings.
The information contained in our SEC filings is an important part of this
prospectus. Because this information is important, you should read it before you
invest in any debt securities. We are incorporating by reference the following
documents which we have filed with the SEC (file number 1-4033):
1. Our annual report on Form 10-K for the year ended December 31,
1998; and
2. Our current reports on Form 8-K dated January 6, 1999 (as amended
March 19, 1999), January 19, 1999 and February 11, 1999.
We are also incorporating into this prospectus any documents that we file
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus and until we sell all the
debt securities. Information contained in the documents that we file later with
the SEC will automatically update and supersede the information contained in
this prospectus or in the documents listed above. As a result, before you invest
in any debt securities, you should read all of the filings that we make with the
SEC after March 31, 1999.
i
<PAGE> 19
You may request a copy of these SEC filings, at no cost, by writing or
calling:
William F. Denson, III
Senior Vice President-Law and Secretary
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
Telephone: (205) 298-3000
You should rely only on the information that we incorporate by reference or
provide in this prospectus, any prospectus supplement and any pricing
supplement. We have not authorized anyone to give you different information.
ii
<PAGE> 20
SUMMARY INFORMATION ABOUT VULCAN MATERIALS COMPANY
We are principally engaged in the production, distribution and sale of
construction materials and industrial and specialty chemicals. We are the
largest producer of construction aggregates in the United States and are one of
the nation's leading producers of chemicals. We have our own operations, and we
also operate through subsidiaries. Our principal executive offices are located
at 1200 Urban Center Drive, Birmingham, Alabama 35242, and our telephone number
is (205) 298-3000. A more detailed description of our business and our
subsidiaries is contained in the documents that we have incorporated by
reference in this prospectus, which are listed under the heading "Where You Can
Find More Information About Us."
USE OF PROCEEDS FROM THE SALE OF DEBT SECURITIES
Unless we inform you otherwise in the applicable prospectus supplement, we
will use the net proceeds that we receive from the sale of the debt securities
for general corporate purposes. General corporate purposes may include:
- working capital;
- capital expenditures;
- acquisitions of, or investments in, businesses and assets;
- repurchase of our common stock; and
- redemption or repayment of our indebtedness.
We have not allocated a specific portion of the net proceeds for any
particular use at this time. Until we apply the net proceeds of any sale of debt
securities for specific purposes, we may invest the net proceeds of any sale in
short-term marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES
Our ability to generate earnings to pay our fixed charges is shown below.
These computations include us and our subsidiaries.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges......... 18.9 17.8 16.0 13.3 7.9
</TABLE>
We have computed our ratio of earnings to fixed charges for each period by
dividing earnings by fixed charges for that period. For purposes of these
computations, we calculated "earnings" by adding our pre-tax income, our fixed
charges and the amount we amortize for capitalized interest, and we then
subtracted the credits we take for capitalized interest. We determined "fixed
charges" by adding the interest we pay on our indebtedness, one-third of all our
rental expenses, and the amount we amortize for debt financing costs. One-third
of all our rental expenses is the approximate portion that represents interest.
<PAGE> 21
FINANCIAL INFORMATION GIVING EFFECT TO STOCK SPLIT
On February 12, 1999, our board of directors approved an increase in our
authorized common stock from 160 million shares to 480 million shares and a
three-for-one stock split of our common stock. The stock split became effective
on March 10, 1999. We have set forth below financial data related to our common
stock, for the time periods set forth below, which is restated to give effect to
the stock split. The financial data for the periods set forth below is based on
our audited financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings Per Share:
Basic.............................. $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90
Diluted............................ $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89
Weighted Avg. Shares Outstanding (in
millions):
Basic.............................. 100.9 101.5 104.3 106.6 109.3
Diluted............................ 102.2 102.8 105.5 107.8 110.0
Cash Dividends Per Share............. $ 0.69 $ 0.63 $ 0.56 $ 0.49 $ 0.44
</TABLE>
DESCRIPTION OF THE DEBT SECURITIES
We provide information to you about the debt securities in three separate
documents that progressively provide more detail:
1. This Prospectus
General information that may or may not apply to each series of debt
securities.
2. The Prospectus Supplement
More specific than the prospectus. To the extent information differs
from the prospectus, you should rely on the information in the
prospectus supplement.
3. The Pricing Supplement
Provides final details about a specific series or tranche of debt
securities. To the extent information differs from the prospectus or
the prospectus supplement, you should rely on the information in the
pricing supplement.
ABOUT THE INDENTURE
We will issue the debt securities under an indenture dated as of May 1,
1991, between us and Morgan Guaranty Trust Company of New York, as trustee. The
Bank of New York is the current trustee under the indenture, replacing Morgan
Guaranty.
We have summarized selected provisions of the indenture below. This summary
is not complete. It does not describe some of the exceptions and qualifications
contained in the indenture. We urge you to read the indenture because the
indenture, rather than the following summary, defines your rights as a
2
<PAGE> 22
holder of debt securities. The indenture is an exhibit to our registration
statement No. 333-68895, related to the debt securities, that we filed with the
SEC. You can read and copy the indenture at the SEC's public reference room in
Washington, D.C. or we will send you a free copy if you write us or call us at
the address or phone number listed under "Where You Can Find More Information
About Us."
In the summary that follows, we have included references to article and
section numbers of the indenture so that you can easily locate the provisions
that we summarized.
BRIEF SUMMARY OF THE INDENTURE
The debt securities will be our direct and unsecured obligations and will
rank equally with all our other unsecured and unsubordinated indebtedness. The
indenture does not limit the amount of debt securities that we may issue.
(Section 301).
The indenture permits us to issue debt securities in one or more series.
Each series of debt securities may have different terms. The particular terms of
any series of debt securities will be established by resolution of our board of
directors or by a supplemental indenture relating to that series. (Section 301).
The prospectus supplement applicable to each series of debt securities will
describe the specific terms of the series of debt securities being offered.
These terms will include some or all of the following:
- the title of the series of debt securities;
- the aggregate principal amount of the debt securities we are offering for
sale;
- the date or dates on which we will pay the principal on the debt
securities;
- the annual rate or rates, (which may be fixed or variable), or the method
used to determine the rate or rates, (including any commodity, commodity
index or stock exchange index), at which the debt securities will bear
interest and the dates from which any interest will accrue;
- the dates on which any interest will be payable;
- the currency or currency unit in which the principal of, and the interest
or any premium on, the debt securities are payable;
- the terms and conditions upon which we may, at our option, redeem the
debt securities;
- any obligation we have to redeem or repurchase all or some of the debt
securities as required by any sinking fund or another similar provision,
at the option of holders of debt securities;
- the manner in which the amounts of payment of the principal of, or the
interest or any premium on, the debt securities will be determined if
these amounts are determined by reference to an index, such as a
commodity index, stock exchange index or financial index;
3
<PAGE> 23
- the portion of the principal amount of the debt securities which is due
upon acceleration, if it is less than the total principal amount of the
debt securities;
- any addition to or change in the events of default described in this
prospectus or the indenture with respect to any debt securities;
- any addition to or change in the covenants described in this prospectus
or the indenture with respect to any debt securities;
- whether the debt securities will be issued in the form of one or more
global debt securities; and
- any other terms of the debt securities. (Section 301).
We may sell debt securities which are due and payable upon acceleration
based on an event of default, at a value which is less than their principal
amount. These types of debt securities are referred to as original issue
discount securities. If we sell them, we will describe in a prospectus
supplement the federal income tax and accounting consequences and other special
considerations applicable to them.
RESTRICTIVE COVENANTS
We have agreed to restrict our activities, as summarized below, for the
benefit of holders of the debt securities. The restrictive covenants summarized
in this section will apply to each series of debt securities unless we tell you
otherwise in the applicable prospectus supplement.
RESTRICTIONS ON SECURED DEBT. We have agreed that we will not, and each of
our subsidiaries will not, issue, assume or guarantee any debt secured by a
pledge, mortgage or other lien (1) on a principal property owned or leased by us
or any subsidiary or (2) on any shares of stock or debt of any subsidiary,
unless we secure the debt securities equally and ratably with or prior to the
debt secured by the lien. If we secure the debt securities in this manner, we
have the option of securing any of our other debt or obligations, or those of
any subsidiary, equally and ratably with the debt securities, as long as the
other debt or obligations are not subordinate to the debt securities. This
covenant has significant exceptions; it does not apply to the following liens:
- liens on the property, shares of stock or debt of any corporation
existing at the time the corporation becomes our subsidiary;
- liens in favor of us or one of our subsidiaries;
- liens in favor of U.S. governmental bodies to secure progress, advance or
other payments required under any contract or provision of any statute;
- liens on property, shares of stock or debt, either:
- existing at the time we acquire the property, stock or debt, including
acquisition through merger or consolidation;
- securing all or part of the cost of acquiring the property, stock or
debt or constructing on the property; or
4
<PAGE> 24
- securing debt to finance the purchase price of the property, stock or
debt or the cost of constructing on the property that were incurred
prior to or at the time the property, stock or debt was acquired or
within 120 days after we acquire the property, stock or debt or
complete construction on the property; and
- any extension, renewal or replacement of the liens described above if the
extension, renewal or replacement is limited to the same property, shares
or debt that secured the lien that was extended, except that if the debt
secured by a lien is increased as a result of the extension, renewal or
replacement, we will be required to include the increase when we compute
the amount of debt that is subject to this covenant. (Section 1008).
In addition, this covenant restricting secured debt does not apply to any
debt that either we or any of our subsidiaries issue, assume or guarantee if the
total principal amount of the debt, when added to (1) all of the other
outstanding debt that this covenant would otherwise restrict, and (2) the total
amount of remaining rent, discounted by 10% per year, that we or any subsidiary
owes under any lease arising out of a sale and leaseback transaction, is less
than or equal to 10% of the combined net tangible assets of us and our
subsidiaries. (Section 1008). When we talk about combined net tangible assets,
we mean, in general, the aggregate amount of the assets of us and our
consolidated subsidiaries after deducting (a) all current liabilities and (b)
all goodwill, trade names, trademarks, patents, and similar intangible assets.
(Section 101).
When we talk about a principal property, we mean, in general, any facility
that we or any subsidiary leases or owns, together with the land on which the
facility is built, which is used primarily for manufacturing or processing and
which has a gross book value in excess of 1% of the combined net tangible assets
of us and our subsidiaries. (Section 101).
LIMITATION ON SALE AND LEASEBACKS. We have agreed that neither we nor any
of our subsidiaries will enter into a sale and leaseback transaction related to
a principal property which would take effect more than 120 days after the
construction and commencement of full operation of the property, except for
temporary leases for a term of not more than three years and except for leases
between us and a subsidiary or between our subsidiaries, unless one of the
following applies:
- we or our subsidiary could have incurred debt secured by a lien on the
principal property to be leased back in an amount equal to the remaining
rent, discounted by 10% per year, for that sale and leaseback
transaction, without being required to equally and ratably secure the
debt securities as required by the "Restrictions on Secured Debt"
covenant described above, or
- within 120 days after the sale or transfer, we apply to the retirement of
our long-term debt, which is debt with a maturity of a year or more, an
amount of cash at least equal to (1) the net proceeds of the sale of the
principal property sold and leased back under the sale and leaseback
arrangement, or (2) the fair market value of the principal property sold
and leased back under the arrangement, whichever is greater. (Section
1009).
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<PAGE> 25
CONSOLIDATION, MERGER, SALE OF ASSETS
We have agreed, for the benefit of the holders of the debt securities, to a
covenant restricting our activities in connection with a consolidation, merger
or sale of our assets substantially as an entirety. The indenture generally
permits us to consolidate with or merge into another entity. It also generally
permits us to sell all or substantially all our assets to another entity. We
have agreed, however, not to complete a consolidation, merger or sale of our
assets as an entirety unless all of the following conditions are met:
- the remaining or acquiring entity is a corporation, partnership or trust
and it assumes all of our obligations under the indenture, including
making all principal, interest and any premium payments, when due, on the
debt securities and performing our covenants under the indenture;
- immediately after giving effect to the consolidation, merger or sale, no
event of default would occur or be continuing; and
- if, as a result of the consolidation, merger or sale, our properties or
assets would become subject to a mortgage, pledge or other lien that
would not be permitted by the indenture, the remaining or acquiring
entity will secure the debt securities equally and ratably with or prior
to the debt secured by the mortgage, pledge or lien. (Section 801).
If we complete a consolidation, merger or sale of assets, we will be
released from all our liabilities and obligations under the indenture and the
debt securities. In addition, the remaining or acquiring corporation will be
substituted for us in the indenture with the same effect as if it had been an
original party to the indenture. As a result, the remaining or acquiring
corporation will be permitted to exercise our rights and powers under the
indenture. (Section 802).
EVENTS OF DEFAULT
Each of the following is an event of default with respect to the debt
securities of any series:
- our failure to pay interest on the debt securities of that series for a
period of 30 days after the interest is due;
- our failure to pay the principal of, or any premium on, the debt
securities of that series when the principal or premium is due;
- our failure to make any sinking fund payment as required by the terms of
the debt securities of that series;
- our failure to perform or breach of any covenant or warranty in the
indenture, other than a covenant or warranty we have included solely for
the benefit of another series of debt securities for a period of 60 days
after (1) we receive written notice from the trustee or (2) we and the
trustee receive written notice from at least 10% of the holders of the
debt securities of that series, specifying the default or breach and
asking us to remedy it;
- events described in the indenture involving our bankruptcy, insolvency or
reorganization; and
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<PAGE> 26
- any other event of default provided for that series of debt securities.
(Section 501).
If an event of default for any series of debt securities occurs and is
continuing, either the trustee or the holders of at least 25% in principal
amount of the debt securities of that series is permitted to require us to
immediately pay the principal of, and any interest on, the debt securities of
that series. The holders of a majority in principal amount of the outstanding
debt securities of the series affected by the default may, under the
circumstances specified in the indenture, rescind their request to accelerate
payment of that series. (Section 502).
A holder of a debt security of any series may pursue any remedy under the
indenture only if all of the following occur:
- the holder gives the trustee written notice of a continuing event of
default for that series;
- the holders of at least 25% in principal amount of the outstanding debt
securities of that series make a written request to the trustee to
institute proceedings;
- the holder offers the trustee indemnity reasonably satisfactory to the
trustee for any expenses or liabilities that the trustee might incur in
pursuing the remedy;
- the trustee fails to act for a period of 60 days after receiving the
notice, request and offer of indemnity described above; and
- during the 60-day period, the holders of a majority in principal amount
of the debt securities do not give the trustee a direction inconsistent
with the written request that the trustee institute proceedings. (Section
507).
This provision does not, however, affect the right of a holder of a debt
security to sue for enforcement of an overdue payment. (Section 509).
In most cases, holders of a majority in principal amount of the outstanding
debt securities of a series may direct the time, method and place of:
- conducting any proceeding for any remedy available to the trustee; or
- exercising any trust or power conferred on the trustee with respect to
that series. (Section 512).
The indenture requires us to file each year with the trustee a statement
specifying whether or not we are in default of any of our covenants or
obligations under the indenture. (Section 1004).
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<PAGE> 27
AMENDMENT, SUPPLEMENTATION AND WAIVER OF INDENTURE TERMS
As a general rule, we may amend or supplement the indenture if the holders
of 66 2/3% in principal amount of the debt securities of all series affected by
the amendment or supplement, acting as one class, consent to it. This general
rule does not apply if the amendment or supplement would do any of the
following, which require the consent of the holders of 100% of the debt
securities affected:
- change the stated maturity of any debt security;
- change the time for payment of interest on any debt security;
- reduce the rate of interest on any debt security;
- reduce the principal amount of any debt security;
- reduce the premium payable on the redemption of the debt security or
change the time at which the debt security may or must be redeemed;
- make payments on the debt securities payable in currency other than as
originally stated in the debt securities;
- impair the holder's right to sue to enforce any payment on the debt
security after the payment is due;
- waive a continuing default or event of default regarding any payment of
principal, interest or any premium on the debt securities; or
- reduce the percentage in principal amount of debt securities whose
holders must consent to an amendment or supplement to the indenture or a
waiver of its provisions. (Sections 513 and 902).
We may amend or supplement the indenture or waive any provision of it
without the consent of any holders of debt securities:
- to cure any ambiguity, omission, defect or inconsistency;
- to provide for the assumption of our obligations under the indenture by a
successor upon any merger or consolidation or the sale of substantially
all our assets;
- to add covenants that would benefit the holders of any debt securities;
or
- to make any change that does not adversely affect any outstanding debt
securities of any series in any material respect.
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The holders of 66 2/3% in principal amount of debt securities of any series
may waive, as to that series, the requirement that we comply with the covenants
in the indenture summarized above under "Restrictions on Secured Debt" and
"Limitations on Sales and Leasebacks." (Section 1010). The holders of a majority
in principal amount of the debt securities of any series may waive any other
past default under the indenture with respect to that series, except for the
following defaults which cannot be waived without the consent of 100% of the
holders of debt securities of that series:
- a default in the payment of the principal of or any premium or interest
on debt securities of that series; and
- a default under any covenant or provision of the indenture which cannot
be modified or amended without the consent of 100% of the holders of the
debt securities of that series. (Section 513).
DISCHARGE OF OUR OBLIGATIONS THROUGH DEFEASANCE
If we irrevocably deposit with the trustee money or government securities
in an amount sufficient to pay the principal and interest, and any premium or
sinking fund payments, on the debt securities of a series on the scheduled due
dates for these payments, then, at our option, either of the following will
occur:
- we will be discharged from substantially all of our obligations with
respect to debt securities of that series and will be deemed to have paid
the entire indebtedness represented by the debt securities. This is
generally referred to as "legal defeasance."
or
- we will no longer have any obligation to comply with the restrictive
covenants in the indenture summarized above under "Restrictions on
Secured Debt," "Limitations on Sale and Leasebacks" and "Consolidation,
Merger, Conveyance, Transfer or Lease," in which case any failure on our
part to comply with these covenants will not constitute an event of
default under the indenture. This is generally referred to as "covenant
defeasance."
If we discharge our obligations under a series of debt securities in either
way, we will still be obligated to register the transfer or exchange of debt
securities; replace stolen, lost or mutilated debt securities; and maintain
paying agencies for the holders of the debt securities of the series affected.
The rights of the holders of debt securities of that series to receive
principal, interest, and any premium payments will also survive the discharge,
except that the holders will have the right to receive payments solely from the
trust fund created by our deposit of money or government securities.
In order for us to exercise either legal defeasance or covenant defeasance,
we need to meet all of the following conditions:
- on the date we deposit the money or government securities with the
trustee, no event of default with respect to the debt securities of the
series discharged would occur or be continuing;
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- the defeasance will not result in a breach or violation of, or a default
under, the indenture or any other agreement or instrument to which we are
a party; and
- we will be required to deliver to the trustee a legal opinion stating
that the holders of the debt securities affected will not recognize
income, gain or loss for federal income tax purposes as a result of the
defeasance.
The legal opinion must also state that the holders will be subject to
federal income tax in the same amount, in the same manner and at the same times
as would have been the case if the deposit and defeasance had not occurred. If
we elect legal defeasance, that opinion of counsel must be based upon a ruling
from the United States Internal Revenue Service to that effect. (Sections 1302,
1303, 1304).
In addition, if all the debt securities of a series are due and payable
within one year or are to be called for redemption within one year, we can be
discharged from all our obligations with respect to the debt securities of that
series if we irrevocably deposit with the trustee money in an amount sufficient
to pay the entire principal amount of the debt securities at maturity or on
redemption. (Section 401).
If we exercise our option to effect a covenant defeasance with respect to
the debt securities of any series and at a later date those debt securities are
declared due and payable on an accelerated basis because an event of default
occurred regarding a covenant other than the covenants defeased, there may be a
shortfall in the amount we owe. If we elect covenant defeasance and payment on
the debt securities is accelerated, the amount of money and securities we
deposited with the trustee as defeasance related payments may not be sufficient
to pay amounts due on the debt securities at the time of their acceleration,
even though they would be sufficient to pay amounts due on the debt securities
at the time of their stated maturity. In this event, we would remain liable for
the payments due upon acceleration.
GOVERNING LAW
New York law will govern the indenture and the debt securities. (Section
112).
REGARDING THE TRUSTEE
The trustee is not obligated to exercise its powers under the indenture at
the request of any holders of debt securities unless the holders have offered to
the trustee reasonably satisfactory indemnity or security against expenses or
liabilities which the trustee might incur in complying with the request of the
holders. (Section 603).
The current trustee, the Bank of New York, provides us with a variety of
commercial banking services in the ordinary course of business, including
providing demand deposit and custody accounts and providing related cash
management services.
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FORM, EXCHANGE, REGISTRATION AND TRANSFER OF DEBT SECURITIES
We will issue the debt securities in registered form, without coupons. We
will issue the debt securities in one of the following forms:
- in the form of certificates in definitive form, in denominations of
$1,000 and multiples of $1,000, registered in the name of the holders of
the debt securities. (Section 302); or
- in the form of one or more global notes registered in the name of the
Depositary Trust Company, New York, New York, or its nominee. If we issue
debt securities in the form of a global note, DTC will place the debt
securities in book-entry form.
When we issue a series of debt securities, we will let you know in the
prospectus supplement for the series the form that the debt securities will
take.
CERTIFICATED DEBT SECURITIES. You may transfer or exchange certificated
debt securities at any office we maintain for this purpose. We will not charge a
service charge to register the transfer or exchange of debt securities. We may,
however, require you to pay any tax or other governmental charge required in
connection with the registration. (Section 305). Unless we inform you otherwise
in a prospectus supplement, we will make payments on certificated debt
securities at the office of the trustee. We will make interest payments to the
person in whose name the debt security is registered at the close of business on
the record date for interest payment. You may effect the transfer of
certificated debt securities only by surrendering the certificate representing
those certificated debt securities and having us or the trustee reissue the
certificate or issue a new certificate to the new holder.
If we call any debt securities for redemption, neither the security
registrar nor the transfer agent will be required to register the transfer or
exchange of any debt security either:
(1) during a period beginning 15 days prior to the mailing of the
relevant notice of redemption and ending at the close of business on the
day of mailing of the notice, or
(2) after the notice of redemption is mailed, except that if a debt
security is being redeemed in part, we will register the transfer and
exchange of the unredeemed portion of the debt security. (Section 305).
GLOBAL DEBT SECURITIES AND THE BOOK-ENTRY SYSTEM. If we issue debt
securities in the form of one or more global notes, each global note will be
registered in the name of, and deposited with, DTC or its nominee. DTC was
created to hold securities deposited by its participating organizations, such as
brokers or underwriters, so that its participants could clear and settle
securities transactions between each other though electronic computerized
book-entry changes in their accounts rather than by physically exchanging
securities certificates. This book-entry system eliminates the need to
physically transfer certificates to register transfers, pledges or other
transactions. Participants in DTC include securities brokers and dealers
(including any underwriters of the debt securities), banks, trust companies, and
clearing corporations. Non-participants, such as securities brokers and dealers,
banks and trust companies, can
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beneficially own securities held by DTC only though a participant. The rules
that apply to DTC and its participants are on file with the SEC.
If we issue a global note to DTC, we will not issue certificates to each
holder. Instead, DTC will keep a computerized record of its participants whose
clients have purchased beneficial ownership of the debt securities represented
by the global note. Likewise, DTC's participants will keep a record of their
clients. When we issue a global note, DTC will credit the computerized accounts
of its participants with the respective portion of the principal amount of the
global note that each participant beneficially owns. The underwriters, dealers
or agents distributing the debt securities will designate which accounts to
credit. DTC's computerized records will show beneficial ownership of a global
note by participants, and the computerized records of participants will show
beneficial ownership of a global note by persons who beneficially own debt
securities through participants.
So long as DTC or its nominee is the registered owner of a global note, we
will consider DTC or its nominee to be the sole owner or holder of the debt
securities represented by the global note for all purposes under the indenture.
As a result, except as set forth below, owners of beneficial interests in a
global note:
- will not be entitled to have the debt securities represented by the
global note registered in their names;
- will not receive or be entitled to receive physical delivery of a
certificate in definitive form representing the debt securities; and
- will not be considered the owners or holders of the debt securities under
the indenture.
As a result, any participant with DTC which owns a beneficial interest in a
global note will be dependent on DTC's procedures, and any person who is not a
participant with DTC will be dependent on its participant's procedures, to
exercise any of the rights of a holder of debt securities under the indenture.
We understand, however, that under DTC's usual practice, neither DTC nor
its nominee will consent or vote with respect to the debt securities. Instead,
when a vote or consent is required, DTC mails a proxy to the issuer as soon as
possible after the record date for the vote or consent. The proxy assigns DTC's
or its nominee's consenting or voting right to those participants of DTC who
beneficially own the debt securities, as shown on the accounts of DTC as of the
record date. The Company is permitted under the indenture to give effect to
these proxies. (Section 308).
We will wire principal and interest payments to DTC or its nominee. We and
the trustee will treat DTC or its nominee as the owner of the global notes for
all purposes. Accordingly, we, the trustee and any paying agent will have no
direct responsibility or liability to pay amounts due on the global notes to
owners of beneficial interests in the global notes. Consistent with DTC's
current practice, we expect that immediately after DTC receives a principal,
interest or premium payment from us, DTC will credit participants' accounts with
payments in amounts proportionate to their respective holdings of beneficial
interests in the global notes as shown on DTC's records. However, making sure
that payments are passed-
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through to beneficial owners of a global note will be the sole responsibility of
the participants and not of DTC, the trustee or us.
DTC is owned by a number of its participants and by the New York Stock
Exchange, the American Stock Exchange, and the National Association of
Securities Dealers, Inc. DTC has informed us that it is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the United States Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act.
We will provide certificated notes in definitive form in exchange for a
global note only if:
- DTC notifies us that it is unwilling or unable to continue as depositary;
- DTC ceases to be a clearing agency registered under applicable law and a
successor depositary is not appointed by us within 90 days; or
- we determine not to require all of the debt securities of a series to be
represented by a global note.
If we issue debt securities in definitive form in exchange for a global
security, an owner of a beneficial interest in the global security will be
entitled to have debt securities equal in principal amount to the beneficial
interest registered in its name and will be entitled to physical delivery of its
debt securities in definitive form. (Section 305).
DISTRIBUTION OF THE DEBT SECURITIES
We may sell debt securities through agents, underwriters or dealers, or
directly to one or more purchasers.
AGENTS
We may sell debt securities through agents designated by us from time to
time. We will name any agent involved in the offer or sale of debt securities
and will list commissions payable by us to these agents in the applicable
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of their appointment, unless we state otherwise
in the prospectus supplement.
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<PAGE> 33
UNDERWRITERS
If we use underwriters for a sale of debt securities, the underwriters will
acquire the debt securities for their own account. The underwriters may resell
the debt securities from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The underwriters will be obligated to purchase
all of the debt securities of the series offered if any of the debt securities
of that series are purchased. Underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and
may also receive commissions from the purchasers of debt securities for whom
they may act as agent. Underwriters may sell debt securities to or through
dealers. These dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time. We will identify any underwriters or dealers involved
in the offer or sale of debt securities and describe their compensation in the
applicable prospectus supplement.
DELAYED DELIVERY
We may authorize underwriters, dealers or agents to solicit offers by
institutions to purchase debt securities from us at the public offering price
stated in the applicable prospectus supplement under delayed delivery contracts
providing for the payment and delivery on a specified date in the future. If we
sell debt securities under these delayed delivery contracts, the applicable
prospectus supplement will state that as well as the conditions to which these
delayed delivery contracts will be subject and the commissions payable for that
solicitation.
DIRECT SALES
We may sell debt securities directly to one or more purchasers. In this
case, we will not engage underwriters or agents in the offer and sale of debt
securities.
INDEMNIFICATION OF, AND ORDINARY TRANSACTIONS WITH,
UNDERWRITERS, DEALERS AND AGENTS
We may have agreements with the underwriters, dealers or agents who
participate in the distribution of debt securities to indemnify them against
some types of liabilities, including liabilities under the Securities Act, and
to contribute to payments which these underwriters, dealers or agents may be
required to make. Underwriters, dealers and agents may engage in transactions
with, or perform services for, us or our subsidiaries in the ordinary course of
their business.
NO ASSURANCE OF LIQUID MARKET
Each series of debt securities will be a new issue of securities with no
established trading market. We cannot assure you that there will be liquidity in
the trading market for any debt securities we issue.
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<PAGE> 34
STABILIZATION AND PENALTY BIDS
Until the distribution of the debt securities is completed, rules of the
SEC may limit the ability of underwriters and some selling group members to bid
for and purchase the debt securities. As an exception to these rules,
underwriters are permitted to engage in transactions that stabilize the price of
the debt securities. These transactions include bids or purchases for the
purpose of pegging, fixing or maintaining the price of the debt securities.
If any underwriters create a short position in the debt securities in
connection with an offering, i.e., if they sell more debt securities than are
set forth in the cover page of the applicable prospectus supplement, the
underwriters may reduce that short position by purchasing debt securities in the
open market.
Underwriters may also impose a penalty bid on some of the selling group
members. This means that if the underwriters purchase debt securities in the
open market to reduce the underwriters' short position or to stabilize the price
of the debt securities, they may reclaim the amount of the selling concession
from the selling group members who sold those debt securities as part of the
offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the market if these purchases did not occur. The imposition of a
penalty bid might also have an effect on the price of the debt securities to the
extent that it discourages resales of the debt securities.
Neither we nor the underwriters are making any representations or
predictions regarding the direction or size of any effect that the transactions
described above may have on the price of the debt securities. The underwriters
are not required to engage in any of the transactions described above, and if
the underwriters engage in any of these market-making activities, they may
discontinue them at any time without notice.
LEGAL OPINION REGARDING THE DEBT SECURITIES
William F. Denson, III, our Senior Vice President-Law and Secretary, will
issue a legal opinion on our behalf about the validity of the debt securities
offered by this prospectus. As of February 28, 1999, after giving effect to our
3-for-1 stock split which was effected on March 10, 1999, Mr. Denson
beneficially owned 24,003 shares of our common stock, held awards of 10,890
shares of our common stock under a long-range performance share plan, held stock
options for the purchase of 77,775 shares of our common stock under a long-term
incentive plan, and held 31,905 shares of our common stock under a thrift plan
for salaried employees. Covington & Burling, Washington, DC, advises us, and
Alston & Bird LLP, Atlanta, Georgia, advises the underwriters and agents, with
regard to various matters related to the debt securities and this prospectus.
Alston & Bird LLP also acts as our counsel from time to time in various matters.
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EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from our Annual Report on
Form 10-K for the year ended December 31, 1998, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated in this prospectus by reference, and have been so incorporated in
reliance upon the reports of Deloitte & Touche LLP given upon their authority as
experts in accounting and auditing.
The consolidated financial statements of CalMat Co. and subsidiaries as of
December 31, 1998, and 1997 and for each of the three years in the period ended
December 31, 1998, incorporated in this prospectus by reference from our current
report on Form 8-K/A dated January 6, 1999 and filed March 19, 1999, have been
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
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No dealer, salesperson, or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the accompanying prospectus. You must not rely on any unauthorized
information or representations. This prospectus supplement and the accompanying
prospectus are an offer to sell only the notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus supplement and the accompanying prospectus is
current only as of the date of this prospectus supplement.
----------------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus Supplement....... S-1
Summary Information About Vulcan
Materials Company and Subsidiaries... S-1
Use of Proceeds........................ S-4
Ratio Of Earnings To Fixed Charges..... S-4
Capitalization......................... S-5
Selected Historical and Pro Forma
Consolidated Financial Data.......... S-6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... S-8
Description of the Notes............... S-12
Underwriting........................... S-14
Legal Opinion Regarding the Notes...... S-15
Experts................................ S-15
Cautionary Note Regarding Forward-
Looking Statements................... S-15
Prospectus
Information About This Prospectus...... i
Where You Can Find More Information
About Us............................. i
Summary Information About Vulcan
Materials Company.................... 1
Use of Proceeds from the Sale of Debt
Securities........................... 1
Ratio of Earnings to Fixed Charges..... 1
Financial Information Giving Effect to
Stock Split.......................... 2
Description of the Debt Securities..... 2
Distribution of the Debt Securities.... 13
Legal Opinion Regarding the Debt
Securities........................... 15
Experts................................ 16
</TABLE>
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$500,000,000
VULCAN MATERIALS COMPANY
$250,000,000 5.75% Notes
due April 1, 2004
$250,000,000 6.00% Notes
due April 1, 2009
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(VULCAN MATERIALS COMPANY LOGO)
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
MORGAN STANLEY DEAN WITTER
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