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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-4033
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VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
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NEW JERSEY 63-0366371
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 298-3000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by referenced in Part III of this Form 10-K or any
amendment to this Form 10-K.
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State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES AS OF
FEBRUARY 26, 1999: $4,480,489,356
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE, AS OF FEBRUARY 26, 1999: 100,852,569 SHARES*
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the
year ended December 31, 1998, are incorporated by reference into Parts
I, II and IV of this Annual Report on Form 10-K.
(2) Portions of the registrant's annual proxy statement for the annual
meeting of its shareholders to be held on May 14, 1999, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
*Adjusted to reflect a three-for-one stock split which was effected on March
10, 1999.
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VULCAN MATERIALS COMPANY
CROSS REFERENCE SHEET FOR DOCUMENTS INCORPORATED BY REFERENCE
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HEADING IN ANNUAL REPORT PAGE IN
FORM 10-K TO SHAREHOLDERS FOR ANNUAL
ITEM NO. YEAR ENDED DECEMBER 31, 1998 REPORT
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1. Business (Financial Results by Segment Financial Data for the 3 Years Ended
Business Segments) December 31, 1998-Note 12, Segment Data 53-54
Note 14, Acquisitions 55
3. Legal Proceedings Note 10, Other Commitments and Contingent Liabilities 53
7. Management's Discussion and Management's Discussion and Analysis of Results of
Analysis of Financial Condition Operations and Financial Condition 41-45
and Results of Operations
Financial Terminology 65
7A. Quantitative and Qualitative Management's Discussion and Analysis of Results of
Disclosures About Market Risk Operations and Financial Condition 44-45
8. Financial Statements and Consolidated Statements of Earnings 37
Supplementary Data Consolidated Balance Sheets 38
Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting
and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share
Quarterly Financial Data for Each of the 2 Years
Ended December 31, 1998 and 1997 (Unaudited) 63
14. Exhibits, Financial Statement Consolidated Statements of Earnings 37
Schedules and Reports on Consolidated Balance Sheets 38
Form 8-K Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting
and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share
Quarterly Financial Data for Each of the 2 Years
Ended December 31, 1998 and 1997 (Unaudited) 63
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HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1999
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10. Directors and Executive Officers Election of Directors; Nominees for Election to the Board of
of the Registrant Directors; Directors Continuing in Office; Section 16(a)
Beneficial Ownership Reporting Compliance
11. Executive Compensation Compensation of Directors; Executive Compensation; Option
Grants in 1998; Report of the Compensation Committee;
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values; Shareholder Return Performance
Presentation; Retirement Income Plan; Employee Special
Severance Plan
12. Security Ownership of Certain Security Ownership of Certain Beneficial Owners;
Beneficial Owners and Management Security Holdings of Management
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VULCAN MATERIALS COMPANY
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
CONTENTS
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PART ITEM PAGE
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I 1 Business 1
2 Properties 4
3 Legal Proceedings 7
4 Submission of Matters to a Vote of Security Holders 8
4a. Executive Officers of the Registrant 9
II 5 Market for the Registrant's Common Equity and Related
Stockholder Matters 10
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
7A. Quantitative and Qualitative Disclosure About Market Risk11
8 Financial Statements and Supplementary Data 12
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 12
III 10 Directors and Executive Officers of the Registrant 12
11 Executive Compensation 12
12 Security Ownership of Certain Beneficial Owners and
Management 12
13 Certain Relationships and Related Transactions 13
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 13
-- Signatures 19
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PART I
ITEM 1. BUSINESS
Vulcan Materials Company, a New Jersey corporation incorporated in
1956, and its subsidiaries (together called the "Company") are principally
engaged in the production, distribution and sale of construction materials
("Construction Materials") and industrial and specialty chemicals
("Chemicals"). Construction Materials and Chemicals may each be considered both
a segment (or a line of business) and a class of similar products. The Company
is the nation's leading producer of construction aggregates.
All of the Company's products are marketed under highly competitive
conditions, including competition in price, service and product performance.
There are a substantial number of competitors in both the Construction
Materials segment and the Chemicals segment.
No material part of the business of either segment of the Company is
dependent upon a single customer or upon a few customers, the loss of any one
of which would have a materially adverse effect on the segment. The Company's
products are sold principally to private industry. Although large amounts of
construction materials are used in public works, relatively insignificant sales
are made directly to federal, state, county or municipal governments, or
agencies thereof.
The Company conducts research and development activities for both of
its business segments. The Construction Materials research and development
facility is located near Birmingham, Alabama. The Chemicals research and
development laboratories are located in Wichita, Kansas and Columbus, Georgia.
In general, the Company's research and development effort is directed to
applied technological development relating to the use of its Construction
Materials and Chemicals products as well as for the manufacturing or processing
of its Chemicals products. The Company spent approximately $1,091,000 in 1996,
$1,281,000 in 1997 and $984,000 in 1998 on research and development activities
for its Construction Materials segment. The Company spent approximately
$7,939,000 in 1996, $9,474,000 in 1997 and $8,641,000 in 1998 on research and
development activities for its Chemicals segment.
The Company estimates that capital expenditures for environmental
control facilities in the current fiscal year (1999) and the succeeding fiscal
year (2000) will be approximately $5,204,000 and $2,918,000, respectively, for
the Construction Materials segment, and $5,574,000 and $3,100,000,
respectively, for the Chemicals segment.
The Company's principal sources of energy are electricity, natural gas
and diesel fuel. The Company does not anticipate any material difficulties in
obtaining the required sources of energy required for its operations.
In 1998, the Construction Materials segment employed an average of
approximately 5,214 people. The Chemicals segment employed an average of
approximately 1,577 people. The Company's corporate office employed an average
of approximately 180 people. The Company considers its relationship with its
employees to be good.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year, due primarily to
the effect that weather can have on the sales and production volume of the
Construction Materials segment. Normally, the highest sales and earnings of the
Construction Materials segment are attained in the third quarter and the lowest
are realized in the first quarter.
CONSTRUCTION MATERIALS
The Company's construction materials business consists of the
production and sale of construction aggregates. Construction aggregates include
crushed stone, sand, gravel, rock asphalt and crushed slag (a by-product of
steel production) and are employed in virtually all types of construction,
including highway construction and maintenance, and in the production of
asphaltic and portland cement concrete mixes. Aggregates also are widely used
as railroad track ballast. Crushed stone constituted approximately 80% of the
dollar volume of the Construction Materials segment's 1998 sales, as compared
to 79% in 1997 and 79% in 1996.
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Each type of aggregate is sold in competition with other types of
aggregates and in competition with other producers of the same type of
aggregate. Because of the relatively high transportation costs inherent in the
business, competition generally is limited to the areas in relatively close
proximity to production facilities. Noteworthy exceptions are the areas along
the Mississippi and Tennessee-Tombigbee river systems and the Gulf Coast which
are served by the Company's Reed quarry, areas served by rail-connected
quarries, and the areas along the U.S. coast served by ocean-going vessels that
transport stone from the Company's joint venture operation in Mexico. The
Company's construction aggregates are sold in 17 states primarily in the
Southeast, Midwest and Southwest regions of the United States and in the
District of Columbia.
During 1998, the Company acquired six quarries in Georgia, Illinois
and Tennessee and began production at greenfield aggregates operations in
Alabama, Georgia and Indiana.
Additionally, in January 1999, the Company acquired the stock of
CalMat Co., the leading producer of construction aggregates and asphalt mix in
California for $740 million, and since the beginning of 1999 has purchased five
quarries in Arkansas, three in Georgia and two in North Carolina.
Shipments to customers of all construction aggregates from the
Company's domestic operations in 1998 totaled approximately 165 million tons,
with crushed stone shipments to customers accounting for approximately 157
million tons.
In 1998, the Company, directly or through joint ventures, operated 137
permanent crushed stone plants in 13 states and Mexico for the production of
crushed limestone and granite with estimated reserves totaling approximately
8.3 billion tons.
In 1998, the Company, directly or through joint ventures, operated 9
sand and gravel plants, 4 slag plants and various other types of plants which
produce rock asphalt and other aggregates. Estimates of sand and gravel
reserves, calculated in a manner comparable to the estimates of stone reserves
set forth above, total approximately 27 million tons.
Other Construction Materials products and services include asphalt
mix, ready-mixed concrete, trucking services, barge transportation, a Mack
Truck distributorship, paving construction, dolomitic lime, emulsified asphalt
and several other businesses.
Environmental and zoning regulations have made it increasingly
difficult for the construction aggregates industry either to expand existing
quarries or to develop new quarries. Although it cannot be predicted what
policies will be adopted in the future by governmental bodies regarding
environmental controls which affect the construction materials industry, the
Company anticipates that future environmental control costs will not have a
materially adverse effect upon its business.
CHEMICALS
The Chemicals segment is organized into two business units: the
Chloralkali Business Unit which manages the Company's line of chloralkali
products and related businesses, and the Performance Systems Business Unit
which manages the Company's specialty chemicals and services business.
The principal chemicals produced by the Chloralkali Business Unit at
the Company's three chloralkali plants described in Item 2 below, are chlorine,
caustic soda (sodium hydroxide), muriatic acid, hydrochloric acid, caustic
potash (potassium hydroxide), potassium carbonate, chlorinated hydrocarbons and
calcium chloride. Chlorine and various hydrocarbons (primarily ethylene and
methanol) are used to produce an associated line of chlorinated hydrocarbon
products, including methylene chloride, perchloroethylene, chloroform, methyl
chloride, ethylene dichloride, carbon tetrachloride, methyl chloroform and
pentachlorophenol.
Principal markets for the Chloralkali Business Unit's chemical
products include pulp and paper, energy, food, pharmaceutical, cleaning,
chemical processing, fluorocarbons, water management and textiles. In the
paper-making industry, chlorine is used in pulp and paper bleaching, while
caustic soda is used primarily in the
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kraft and sulfite pulping processes. The Company supplies hydrochloric acid to
the energy industry for use in oil well stimulation and gas extraction. Caustic
soda also is used to demineralize water for steam production at electrical
energy facilities and to remove sulfur from gas and coal. Hydrochloric acid,
caustic soda, methylene chloride and caustic potash are used by the food and
pharmaceutical industries. Perchloroethylene, methylene chloride and methyl
chloroform are used in industrial cleaning applications. Perchloroethylene is
also used in the dry-cleaning industry.
The Chloralkali Business Unit's sales to the chemical processing
industry serve companies that produce organic and inorganic chemical
intermediates and finished products. Products sold to this market include
hydrochloric acid, chlorine, caustic soda, caustic potash and potassium
carbonate. Potassium carbonate is used in the manufacture of screen glass,
rubber antioxidants and other chemicals. The Company sells chloroform, methyl
chloroform, perchloroethylene and other chlorinated hydrocarbons to the
fluorocarbons market. Chlorine is used in water and sewage management, and
caustic soda and caustic potash are used in the production of soaps and
detergents. Chlorine also is used as an industrial bleaching agent, in cleaning
applications for the electronics industry, as a biocide in the fruit processing
industry and in various applications in the oil industry. Calcium chloride,
produced at the Company's Wichita complex, has several uses including de-icing
of roads, dust control, road stabilization and oil well completion.
In 1998, the Company announced the formation of a joint venture with
Mitsui & Co., Ltd, to construct a new chloralkali plant and expand ethylene
dichloride (EDC) production capacity at the Company's current manufacturing
site in Geismar, Louisiana. This joint venture was structured to take advantage
of the Company's manufacturing and domestic marketing capabilities and Mitsui's
access to global EDC markets. The facilities are under construction, with
production anticipated in early 2000.
The principal chemicals produced for the Performance Systems Business
Unit by the Company's Callaway Chemical Company subsidiaries include process
aids for the pulp and paper and textile industries and various water management
chemicals. Through its Vulcan Chemical Technologies, Inc. ("VCT") subsidiary,
the Performance Systems Business Unit assembles and markets small-scale
chlorine dioxide generators, and sells related chemicals (primarily sodium
chlorite manufactured by the Company) and services to the water management and
pulp and paper industries. VCT also assembles and markets equipment, and sells
related chemicals (primarily hydrogen peroxide purchased from others) and
services to the municipal and industrial water management markets.
Additionally, the Performance Systems Business Unit markets sodium chlorite
produced at the Chloralkali Business Unit's Wichita plant. Sodium chlorite is
used in the water management, food and beverage processing, pulp and paper,
textile and electronics industries. The Performance Systems Business Unit also
markets sodium hydrosulfite which is used primarily in the pulp and paper
industry and is produced at the Chloralkali Business Unit's Port Edwards plant.
The Company competes throughout the United States with numerous
companies, including some of the largest chemical companies, in the production
and sale of its lines of chemicals. The Company also competes for sales to
customers located outside the United States, with sales to such export
customers currently accounting for approximately 5% of the sales of the
Company's Chemicals segment.
The Company's underground reserves of salt, a basic raw material in
the production of chlorine and caustic soda, are located near its Wichita,
Kansas and Geismar, Louisiana plants. The Company purchases salt for its Port
Edwards, Wisconsin plant. Ethylene, methanol, and vinyl chloride monomer, the
other major raw materials used in the Chloralkali Business Unit, and various
chemicals used by the Performance Systems Business Unit are purchased from
several different suppliers. Sources of salt, ethylene, methanol, vinyl
chloride monomer and other various chemicals are believed to be adequate for
the Company's operations and the Company does not anticipate any material
difficulty in obtaining the raw materials which it uses.
Certain of the Company's chemical operations are subject to the
Resource Conservation and Recovery Act ("RCRA"). Under the corrective action
requirements of RCRA, the Environmental Protection Agency ("EPA") must identify
facilities subject to RCRA's hazardous waste permitting provisions where
practices in the past have caused releases of hazardous waste or constituents
thereof. The owner of any such facility is then required to conduct a Remedial
Facility Investigation ("RFI") defining the nature and extent of any such
releases. If the results of the RFI determine that constituent concentrations
from any such release exceed action levels
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specified by the EPA, the facility owner is further required to perform a
Corrective Measures Study ("CMS") identifying feasible technological
alternatives for addressing these releases. Depending upon the results reported
to the EPA in the RFI and CMS, the EPA subsequently may require Corrective
Measures Implementation ("CMI") by the facility owner - essentially,
implementation of a cleanup plan developed by the EPA based on the RFI and CMS.
The Company expects to incur RFI and CMS costs over the next several
years at its Geismar, Port Edwards and Wichita manufacturing facilities. For
each of these three facilities, the RFI and CMS results will determine whether
the EPA subsequently requires a CMI to address releases at the facility, and
the scope and cost of any such CMI. With respect to those RFI and CMS costs
that currently can be reasonably estimated, the Company has determined that its
accrued reserves are adequate to cover such costs. However, the total costs
which ultimately may be incurred by the Company in connection with discharging
its obligations under RCRA's corrective action requirements cannot reasonably
be estimated at this time.
Various other environmental regulations also have a restrictive effect
upon the chemicals industry, both as to production and sales, particularly the
production and sale of certain chemicals which are subject to regulation as
ozone depleting chemicals. The production and marketing of carbon tetrachloride
ended effective January 1, 1996, for most end uses except for exports to
Article 5 countries as defined by the Montreal Protocol on Ozone Depleting
Chemicals. The production of methyl chloroform for emissive applications also
ended effective January 1, 1996. Existing inventories of methyl chloroform may
continue to be marketed for emissive uses. In addition, methyl chloroform will
continue to be produced and marketed for non-emissive uses, while carbon
tetrachloride will continue to be produced and marketed for export to Article 5
countries. However, sales volume of both products will be lower than in prior
years.
FINANCIAL RESULTS BY BUSINESS SEGMENTS
Net sales, earnings, identifiable assets and related financial data
for each of the Company's business segments for the three years ended December
31, 1998, are reported on pages 53 and 54 (Note 12 of the Notes to Financial
Statements) in the Company's 1998 Annual Report to Shareholders, which
referenced pages of said Report are incorporated herein by reference.
ITEM 2. PROPERTIES
CONSTRUCTION MATERIALS
The Company's current estimate of approximately 8.3 billion tons of
zoned and permitted stone reserves is approximately 65 million tons more than
the estimate reported at the end of 1997. These reserves include stone reserves
in Mexico owned or controlled by the Company's Mexican joint venture. Increases
in the Company's reserves have resulted from 1998 acquisitions in Georgia,
Illinois and Tennessee and the opening of greenfield aggregates operations in
Alabama, Georgia and Indiana. Management believes that the quantities of zoned
and permitted reserves at the Company's stone quarries are sufficient to result
in an average quarry life of approximately 52 years at present operating
levels. See Note 1 to the table of the Company's 10 largest active stone
quarries on page 5 for a description of the method used by the Company for
estimating the years of life of stone reserves.
The foregoing estimates of reserves are of recoverable stone of
suitable quality for economic extraction, based on drilling and studies by the
Company's geologists and engineers, recognizing reasonable economic and
operating restraints as to maximum depth of overburden and stone excavation.
Of the 137 stone quarries which the Company operates directly or
through joint ventures, 37 are located on owned land, 24 are on land owned in
part and leased in part, and 76 are on leased land. While some of the Company's
leases run until reserves at the leased sites are exhausted, generally the
Company's leases have definite expiration dates which range from 1999 to 2105.
Most of the Company's leases have options to extend them well beyond their
current terms.
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Due to transportation costs, the marketing areas for most quarries in
the construction aggregates industry are limited, often consisting of a single
metropolitan area or one or more counties or portions thereof. The following
table itemizes the Company's 10 largest active stone quarries in terms of the
quantity of stone reserves, with nearby major metropolitan areas (if
applicable) shown in parentheses:
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ESTIMATED
YEARS OF LIFE LEASE
AT AVERAGE EXPIRATION
RATE OF NATURE OF DATE, IF
LOCATION PRODUCT PRODUCTION(1 INTEREST APPLICABLE(2)
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McCook (Chicago), Illinois Limestone 81.5 Owned
Paducah, Kentucky Limestone 42.2 Leased (4)
Grayson (Atlanta), Georgia Granite Over 100 Owned
Playa Del Carmen, Mexico(3) Limestone Over 100 Owned
Gray Court (Greenville), South Carolina Granite Over 100 Owned
Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (4)
Kennesaw (Atlanta), Georgia Granite 39.2 75% Owned
25% Leased 2013
Manteno, Illinois Limestone Over 100 Leased (4)
Skippers, Virginia Granite 95.7 Leased 2016
Lawrenceville (Norfolk/Virginia
Beach), Virginia Granite 58.9 31% Owned
69% Leased (5)
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(1) Estimated years of life of stone reserves are based on the average
annual rate of production of the quarry for the most recent three-year
period, except that if reserves are acquired or if production has been
reactivated during that period, the estimated years of life are based
on the annual rate of production from the date of such acquisition or
reactivation. Revisions may be necessitated by such occurrences as
changes in zoning laws governing quarry properties, changes in stone
specifications required by major customers and passage of government
regulations applicable to quarry operations. Estimates also are
revised when and if additional geological evidence indicates that a
revision is necessary.
(2) Renewable by the Company through date shown.
(3) The Playa Del Carmen, Mexico location is owned by the Company's joint
venture in Mexico. Its ranking in this table is based on counting 49%
of its reserves, which represents the Company's ownership interest in
the entity which owns the reserves. This quarry's estimated years of
life at average rate of production is based on 100% of the reserves.
(4) Lease does not expire until reserves are exhausted. Surface rights at
the Paducah, Kentucky quarry are owned.
(5) Leases expire as follows: 8% in 2020, 9% in 2024, 47% in 2044 and 5%
in 2045.
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The estimated average life of the Company's sand and gravel
operations, calculated in the same manner as described in footnote (1) to the
table set out above, is approximately 11 years. Approximately 13% of the
Company's estimated 60 million tons of sand and gravel reserves are located on
owned land, with the remaining 87% located on leased land.
CHEMICALS
Manufacturing facilities for the chemicals produced by the Chloralkali
Business Unit are owned and operated by the Company at Wichita, Kansas,
Geismar, Louisiana, and Port Edwards, Wisconsin. With a few exceptions, the
Geismar and Wichita facilities produce the full line of products manufactured
by the Company's Chloralkali Business Unit. The Port Edwards plant produces
chlorine, caustic soda, muriatic acid, caustic potash, potassium carbonate and
sodium hydrosulfite.
All of the facilities at Wichita are located on a 1,518-acre tract of
land owned by the Company. Mineral rights for salt are held by the Company
under two leases that are automatically renewable from year to year unless
terminated by the Company and under several other leases which may be kept in
effect so long as production from the underlying properties is continued. In
addition, the Company owns 120 acres of salt reserves and 108 acres of water
reserves. The Company maintains an electric power cogeneration facility at the
Wichita plant site which is capable of generating approximately one-third of
the plant's electricity and two-thirds of its process steam requirements.
Effective July 1995, pursuant to a long-term agreement, the Company has placed
this facility in reserve and is purchasing all of its requirements for electric
power from a local utility at favorable rates.
The facilities at Geismar, Louisiana are located on a 2,185-acre tract
of land owned by the Company. Included in the facilities at the Geismar plant
is an electric power cogeneration facility owned by the Company which supplies
substantially all of the electricity and process steam required by the plant.
Mineral rights for salt are held under a lease expiring in 2007.
The plant facilities at Port Edwards, Wisconsin are located on a
34-acre tract of land, the surface rights to which are owned by the Company.
Currently, the Company purchases its salt and electrical power requirements for
the Port Edwards facility from regional sources of supply.
Manufacturing facilities for chemicals produced by the Performance
Systems Business Unit (other than sodium chlorite produced at Wichita and
sodium hydrosulfite produced at Port Edwards) are operated by subsidiaries of
the Company. Callaway Chemical Company owns a headquarters office building and
two production facilities in Columbus, Georgia and additional production
facilities in Smyrna, Georgia, Dalton, Georgia and Shreveport, Louisiana.
Callaway Chemical Limited has an office and small production facility on leased
property in Vancouver, British Columbia. Vulcan Chemical Technologies, Inc.,
leases its office and production facilities in West Sacramento, California.
The Company's Chemicals manufacturing facilities are designed to
permit a high degree of flexibility as to feedstocks, product mix and product
ratios; therefore, actual plant production capacities vary according to these
factors. Management does not believe, however, that there is material excess
production capacity at the Company's Chemicals facilities.
OTHER PROPERTIES
The Company relocated its corporate offices to a newly constructed
office complex near Birmingham, Alabama late in 1998. Headquarters staffs for
the Construction Materials and Chemicals segments, the Southern Division of the
Construction Materials segment, and Vulcan Gulf Coast Materials, Inc., also are
located in this complex. The space is leased through December 31, 2013 and
consists of approximately 189,000 square feet. The annual rental for each year
in the initial 5 year period, the second 5 year period and the final 5 year
period of the lease will be approximately $3.0 million, $3.2 million and $3.4
million, respectively.
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ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits in the ordinary course
of business. It is not possible to determine with precision the probable
outcome of or the amount of liability, if any, under these lawsuits; however,
in the opinion of the Company and its counsel, the disposition of these
lawsuits will not adversely affect the consolidated financial position of the
Company to a material extent.
In the course of its Construction Materials and Chemicals operations,
the Company is subject to occasional governmental proceedings and orders
pertaining to occupational health and safety or to protection of the
environment, such as proceedings or orders relating to noise abatement, air
emissions or water discharges. As part of its continuing program of
environmental stewardship, however, the Company has been able to resolve such
proceedings and to comply with such orders without any materially adverse
effects on its business.
In 1991, the Company received notification from the State of New
Jersey Department of Environmental Protection ("NJDEP") concerning a site
located in Newark, New Jersey, which the Company previously owned and upon
which the Company operated a chemicals production facility from the early 1960s
until 1974. The notification contends that hazardous substances and pollutants
contaminate the site and that a Remedial Investigation/Feasibility Study
("RI/FS") is required in order to determine the nature and extent of such
contamination and whether a remedial action plan with respect thereto should be
developed.
On August 20, 1993, two other allegedly responsible parties,
Safety-Kleen Environsystems Company and Bristol-Meyers Squibb Company
(collectively, the "Respondents"), entered into an Administrative Consent Order
("ACO") issued by the NJDEP concerning the site. The ACO contains certain
findings of fact by the NJDEP, together with provisions governing the conduct
by the Respondents of an RI/FS for the site and remedial actions, if any,
resulting therefrom. Under a separate agreement with the Respondents and
certain successors, the Company will share in the cost of the RI/FS. The
Company has been informally advised by the NJDEP that, if the Company continues
to participate in the RI/FS, the NJDEP will not seek to enforce a directive
issued in 1991 requiring the Company to pay $1 million to the NJDEP to be used
for the conduct of the RI/FS.
Depending upon the results of the RI/FS, NJDEP will determine what
site remediation is required under the ACO, if any. In that event, it is also
likely that the Respondents or the NJDEP will assert that the Company should
bear some responsibility in connection with such remediation. At this time,
however, it is impossible to predict the ultimate outcome of this matter.
In 1994, the Environmental Protection Agency (the "EPA") notified the
Company that it was among the approximately 880 potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") with respect to the Jack's Creek/Sitkin Smelting
Superfund site located in Mifflin County, Pennsylvania, on which site the now
defunct Sitkin Smelting Company operated a secondary metals smelting facility
from 1958 to 1977. The EPA claims that there are releases and threatened
releases of various hazardous substances from the Site, including lead and
other metals in soils and certain waste and dross piles, and that the PRPs are
jointly and severally responsible for the costs of response at the Site. In
addition to the EPA's claims, the Pennsylvania Department of Environmental
Protection ("PADEP") has asserted a claim for investigation and response costs
allegedly incurred at the Site, and state and federal trustees have asserted
claims for alleged natural resources damages.
In September 1994, the EPA prepared a revised volumetric ranking based
on a review of certain Sitkin Smelting Company records reflecting transactions
only in the period of 1972 to 1977. Taking into consideration that certain PRPs
are "orphans" because these parties are bankrupt, have otherwise ceased
business, or cannot be located, the EPA's volumetric ranking also reallocated
the orphan shares otherwise attributable to these non-viable parties among the
viable remaining PRPs, including the Company. The EPA has classified the
Company as among the 73 significant PRPs at the Site. The EPA considers the
remaining PRPs de minimis or de micromis parties. In 1994 and 1995, the EPA
negotiated and entered into cash payment or separate settlements with over 160
of the de minimis parties. Approximately 240 other de minimis parties then
chose not to participate in settlement. The EPA has classified some 325
entities as de micromis parties. The EPA does not intend to pursue these de
micromis parties because of their allegedly small respective contributions to
the total volume of material shipped to the Site.
7
<PAGE> 12
In September 1997, the EPA issued a Record of Decision ("ROD") for the
Site, which selected a remedy consisting of: (1) excavation of contaminated
soil from flood plains and uplands; (2) consolidation and capping of
contaminated soils and certain waste piles under a multi-layer cap; (3) removal
of certain contaminated sediments from Jack's Creek; and (4) excavation and
off-site treatment and disposal of soils with lead levels above 40,000 part per
million. The EPA estimated the capital cost of the remedy at $10,335,000, with
annual operation and maintenance costs of $164,000, computing to a total
present net worth of $12,500,000; however, there remain several uncertainties
and contingencies regarding this estimate.
Contemporaneous with issuing the ROD, the EPA issued "special notice
letters" to the Company and several hundred other PRPs, inviting "good faith"
offers to perform the remedy and pay response costs relating to the Site. The
special notice letter indicated that under the EPA's orphan share policy, for
those PRPs who agree to perform the remedy, the EPA would be prepared to forgo
recovery of up to $3.125 million in past costs and future oversight costs.
The Company and over 30 other PRPs have signed a PRP Organization
Agreement, forming the Jack's Creek PRP Group (the "PRP Group") to respond to
the claims asserted by the EPA, PADEP and others. In December 1998, the PRP
Group completed settlement negotiations with the EPA, the U.S. Department of
Justice, and PADEP, culminating in a proposed Consent Decree, which is to be
lodged with the U.S. District Court, wherein the PRP Group commits to design
and implement the remedy outlined in the ROD. In consideration of that
commitment, the EPA will forgive the unreimbursed past response costs it
allegedly incurred and certain future oversight costs it expects to incur. The
Consent Decree also incorporates both the PRP Group's settlement of PADEP's
claims for past response costs and future oversight costs and a settlement
between the PRP Group and some 100 de minimis parties. These de minimis
settlers will pay approximately $3.2 million into a "special fund" held by EPA,
95% of which amount will be available to reimburse the PRP Group for costs
incurred in design and implementation of the remedy. The Consent Decree does
not include any settlement of natural resource damage claims.
In January 1999, the PRP Group executed an Amended and Restated
Contribution Agreement, under which the costs of implementing the remedy under
the Consent Decree will be allocated among the PRP Group members; the Company's
allocated share is 1.96%. Concurrently, the PRP Group executed a settlement
agreement with the current owner and operator of the Site, providing for the
owner/operator's contribution of certain in-kind services and materials toward
performance of the remedy.
At present, the Company is not able to predict the likelihood of
either a favorable or unfavorable outcome as to the matters described above, or
the amount of potential loss in the event of any unfavorable outcome; however,
the Company does not believe that any such loss would affect the consolidated
financial statements of the Company to a material extent.
The Company's subsidiary, CalMat Co., which was acquired in January
1999, received a federal grand jury subpoena in 1998 requesting information
concerning its Fresno, California, asphalt operations. CalMat Co. is currently
providing information in response to the subpoena. Also, CalMat Co. has been
informed that it is a target of an investigation by the U.S. Department of
Justice, Antitrust Division, regarding possible violations of antitrust laws
regarding these operations for certain years prior to 1998. Based on information
available to it at this time, the Company does not anticipate that the outcome
of this investigation will have a material adverse effect on its consolidated
financial statements.
Note 10, Other Commitments and Contingent Liabilities on page 53 of
the Company's 1998 Annual Report to Shareholders is hereby incorporated by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1998.
8
<PAGE> 13
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions and ages of the executive officers of the Company
are as follows:
<TABLE>
<CAPTION>
NAME POSITION AGE
<S> <C> <C>
Donald M. James Chairman and Chief Executive Officer 50
Peter J. Clemens, III Executive Vice President, Finance & Administration and Treasurer 55
Guy M. Badgett, III Senior Vice President-Construction Materials, East and
President, Southeast Division 50
William F. Denson, III Senior Vice President, Law and Secretary 55
Robert A. Wason IV Senior Vice President, Corporate Development 47
Richard K. Carnwath Vice President, Planning and Development 50
J. Wayne Houston Vice President, Human Resources 49
Ejaz A. Khan Vice President and Controller 42
John A. Heilala President, Chloralkali Business Unit 58
John L. Holland President, Performance Systems Business Unit 56
William L. Glusac President, Midwest Division 48
Daniel J. Leemon President, Midsouth Division 60
Ronald G. McAbee President, Mideast Division 52
Thomas R. Ransdell President, Southwest Division 56
Daniel F. Sansone President, Vulcan Gulf Coast Materials Division 46
James W. Smack President, CalMat Division 55
</TABLE>
The principal occupations of the executive officers during the past
five years are set forth below:
Donald M. James, was elected Chairman of the Board of Directors in May
1997. He became President and Chief Executive Officer in February 1997. He was
elected President and Chief Operating Officer in February 1996. In January
1994, Mr. James was elected President of the Southern Division and in August
1995, he was also elected Senior Vice President, South, Construction Materials
Group.
Peter J. Clemens, III, was elected Executive Vice President, Finance
and Administration and Treasurer in May 1997. He served as Executive Vice
President and Chief Administrative Officer from May 1996 to May 1997. Prior to
that time he served as Senior Vice President, West, Construction Materials
Group and Senior Vice President, Finance.
Guy M. Badgett, III, was elected Senior Vice President, Construction
Materials, East in February 1999. He was elected Chairman, Southern Division in
May 1997. He has served as President, Southeast Division, since 1992.
9
<PAGE> 14
William F. Denson, III, was elected Senior Vice President, Law in
February 1998. Prior to that date he served as Vice President-Law. He has also
served as Secretary since April 1981.
Robert A. Wason IV was elected Senior Vice President, Corporate
Development in December 1998. From 1996 until 1998 he served as President,
Performance Systems Business Unit Prior to that time he had served as Executive
Vice President, Performance Systems.
Richard K. Carnwath has served as Vice President, Planning and
Development since 1985.
J. Wayne Houston was elected Vice President, Human Resources in
October 1997. Prior to that time he served as Director of Compensation and
Benefits.
Ejaz A. Khan was elected Vice President and Controller in February
1999. He has served as Controller since September of 1995 and prior to that
time he served as Controller, Chemicals Division.
John A. Heilala has served as President, Chloralkali Business Unit
since May 1996. From 1994 until 1996, he served as Executive Vice President,
Chloralkali, and prior to that time he served as Vice President, Manufacturing,
Chemicals Division.
John L. Holland joined the Company in December 1998 as President,
Performance Systems Business Unit. From August 1995 to October 1998 he served
as President of BetzDearborn Water Management Group and Group Vice President,
BetzDearborn, Inc. From April 1994 to August 1995 he served as Senior Vice
President Betz Labs, Inc.
and President Betz PaperChem, Inc.
William L. Glusac has served as President, Midwest Division, since
1994. Prior to that time he served as President, Southwest Division.
Daniel J. Leemon has served as President, Midsouth Division, since
1993. Prior to that time he served as Senior Vice President, West, Construction
Materials Group.
Ronald G. McAbee was appointed President of Mideast Division in
January 1999. Prior to that time he served as Vice President, East Region of
the Midsouth Division.
Thomas R. Ransdell has served as President, Southwest Division since
1994. He also served as President, Vulcan Gulf Coast Materials, Inc., from 1987
to May 1997.
Daniel F. Sansone was elected, President, Vulcan Gulf Coast Materials
Division in May 1997. From January 1994 to May 1997, he served as Vice
President, Finance. Prior to that time he served as Vice President and
Controller.
James W. Smack was appointed President of CalMat Division effective
January 1999. Prior to that time he served as President, Mideast Division.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("VMC"). As of February 26, 1999, the number of shareholders of record
approximated 3,609. The closing price of the Common Stock on the New York Stock
Exchange on February 26, 1999, was $44.917, which price reflects a
three-for-one stock split effected on March 10, 1999. The prices in the
following table represent the high and low sales prices for the Company's
Common Stock as reported on the New York Stock Exchange, which prices have been
adjusted to reflect the three-for-one split of the Company's Common Stock on
March 10, 1999.
10
<PAGE> 15
<TABLE>
<CAPTION>
QUARTER ENDED 1998 1997
--------------- ---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
March 31 $ 37.83 $ 31.50 $ 22.17 $ 18.42
June 30 39.90 34.83 26.88 20.42
September 30 40.75 33.63 30.15 26.13
December 31 44.67 31.33 34.65 28.15
</TABLE>
Dividends paid in 1998 totaled $70,015,000, as compared with
$63,622,000 paid in 1997. On February 12, 1999, the Board of Directors
authorized a quarterly dividend of $.195 per share of Common Stock payable
March 10, 1999 to holders of record on February 24, 1999. This quarterly
dividend represents a 12.5% increase over quarterly dividends paid in 1998,
adjusted to reflect the stock split referenced above.
The Company's policy is to pay out a reasonable share of net cash
provided by operating activities as dividends, consistent on average with the
payout record of past years, and consistent with the goal of maintaining debt
ratios within prudent and generally acceptable limits. The future payment of
dividends, however, will be within the discretion of the Board of Directors of
the Company and depends on the Company's profitability, capital requirements,
financial condition, growth, business opportunities and other factors which the
Board of Directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations, per share data and balance sheet
data for each of the 5 years ended December 31, 1998 set forth below have been
derived from the audited consolidated financial statements of the Company. The
following data should be read in conjunction with the consolidated financial
statements of the Company and notes to consolidated financial statements on
pages 36 through 40 and 46 through 55 of the Company's 1998 Annual Report to
Shareholders, which are incorporated herein by reference.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------
(Amounts in millions, except per share date)
<S> <C> <C> <C> <C> <C>
Net sales............................ $ 1,776.4 $ 1,678.6 $ 1,568.9 $ 1,461.0 $ 1,253.4
Net earnings......................... $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0
Net earnings per:
Basic shares outstanding.......... $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90
Diluted shares outstanding........ $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89
Total assets......................... $ 1,658.6 $ 1,449.2 $ 1,320.6 $ 1,215.8 $ 1,181.1
Long-term obligations................ $ 76.5 $ 81.9 $ 85.5 $ 90.3 $ 97.4
Cash dividends declared per share.... $ 0.69 $ 0.62 $ 0.56 $ 0.49 $ 0.44
</TABLE>
ALL SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED TO REFLECT THE THREE-FOR-ONE
SPLIT OF THE COMPANY'S COMMON STOCK, WHICH WAS EFFECTED ON MARCH 10, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 41 through 45 and "Financial Terminology" on page
65 of the Company's 1998 Annual Report to Shareholders are incorporated herein
by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 44 and 45 of the Company's 1998 Annual Report
to Shareholders is incorporated herein by reference.
11
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information relative to this item is included in the
Company's 1998 Annual Report to Shareholders on the pages shown below, which
are incorporated herein by reference:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Financial Statements 37-40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of
the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
</TABLE>
With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 3, 7, 7A, 8 and 14, the
Company's 1998 Annual Report to Shareholders is not deemed filed as part of
this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No information is required to be included herein pursuant to Item 304
of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On or before March 31, 1999, the Company will file a definitive proxy
statement with the Securities and Exchange Commission pursuant to Regulation
14A (the Company's "1999 Proxy Statement"). The information under the headings
"Election of Directors," "Nominees for Election to the Board of Directors" and
"Directors Continuing in Office" included in the 1999 Proxy Statement are
incorporated herein by reference. For the information required by Item 401 of
Regulation S-K concerning executive officers of the registrant, reference is
made to the information provided in Part I, Item 4(a) of this Annual Report on
Form 10-K. Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 240.16a-3(e) during 1998, and of Form
5 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e)
with respect to 1998, the Company has not identified any persons subject to
Section 16(a) of the Securities Exchange Act of 1934 who failed to file on a
timely basis required forms. The information set forth under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" included in the
Company's 1999 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "Compensation of Directors,"
"Executive Compensation," "Option Grants in 1998," "Report of the Compensation
Committee," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values," "Shareholder Return Performance Presentation," "Retirement
Income Plan" and "Employee Special Severance Plan" included in the Company's
1999 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Holdings of Management" included in the
Company's 1999 Proxy Statement is incorporated herein by reference.
12
<PAGE> 17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
An executive officer of the Company, Daniel F. Sansone, serves as the
chief executive officer of three companies in which the Company has a 51%, 50%
and 49% interest, respectively. Each of the companies reimburses the Company
for a portion of Mr. Sansone's salary and bonus. In 1998, the total amount of
this reimbursement was $154,000.
On January 6, 1999, the Company entered into a Consulting Agreement
with A. Frederick Gerstell, the vice chairman and a director of the Company.
Mr. Gerstell was the former chairman and chief executive officer of CalMat Co.,
which the Company acquired in early 1999. Pursuant to the Agreement, Mr.
Gerstell shall receive a monthly retainer of $10,600 per month for 17 months in
exchange for his consulting services. Mr. Gerstell also received a grant of
7,500 restricted shares of Common Stock on January 6, 1999. He will receive an
additional grant of 3,126 restricted shares on January 6, 2000, subject to
certain conditions.
Other than the foregoing, no information is required to be included
herein pursuant to Item 404 of Regulation S-K, which requires disclosure of
certain information with respect to certain relationships or related
transactions of the directors and management.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following financial statements are included in the Company's 1998
Annual Report to Shareholders on the pages shown below and are incorporated
herein by reference:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Statements of Earnings 37
Consolidated Balance Sheets 38
Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting and
Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of
the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
</TABLE>
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for the years ended
December 31, 1998, 1997 and 1996 is included in Part IV of this report on the
indicated pages:
<TABLE>
<S> <C>
Schedule II Valuation and Qualifying Accounts and Reserves 17
</TABLE>
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is provided in the
financial statements or notes thereto.
13
<PAGE> 18
Financial statements (and summarized financial information) of 50% or
less owned entities accounted for by the equity method have been omitted
because they do not, considered individually or in the aggregate, constitute a
significant subsidiary.
(A) (3) EXHIBITS
The exhibits required by Item 601 of Regulation S-K and indicated
below, other than Exhibit (12) which is on page 18 of this report, are either
incorporated by reference herein or accompany the copies of this report filed
with the Securities and Exchange Commission and the New York Stock Exchange.
Copies of such exhibits will be furnished to any requesting shareholder of the
Company upon payment of the costs of copying and transmitting the same.
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company.
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 12, 1999.
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and
among the Company, Goldman, Sachs & Co., Lehman Brothers and
Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3
filed on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the
Company and First Trust of New York (as successor trustee to
Morgan Guaranty Trust Company of New York) filed as Exhibit 4
to the Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended
and restated filed as Exhibit 10(a) to the Company's 1989
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy
statement for the annual meeting of its shareholders held May
16, 1991 (File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried
Employees filed as Exhibit 10(d) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not
Employees of the Company, as last amended and restated on
February 17, 1996 filed as Exhibit 10(g) to the Company's
1995 Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of
the Company filed as Exhibit 10(i) to the Company's 1997 Form
10-K Annual Report (File No. 1-4033).**
14
<PAGE> 19
EXHIBIT (10)(J) Executive Deferred Compensation Plan.**
EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.**
EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated
January 6, 1999.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1998 (set forth on page 18 of
this report).
EXHIBIT (13) The Company's 1998 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998.
EXHIBIT (23) Consent of Deloitte & Touche LLP
EXHIBIT (24) Powers of Attorney
EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic
Submission Only).
EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic
Submission Only).
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1998, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1999,
as permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
*Incorporated by reference.
**Management Contract or Compensatory Plan.
(B) REPORTS ON FORM 8-K
The following sets forth information concerning Forms 8-K filed during
the fourth quarter ended December 31, 1998:
1. On October 19, 1998, the Company filed a Form 8-K reporting that
the Company's Board of Directors adopted a Shareholder Rights Plan.
2. On November 16, 1998, the Company filed a Form 8-K reporting that
the Company had entered into a definitive merger agreement providing for the
acquisition of CalMat Co. by the Company.
15
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
Vulcan Materials Company:
We have audited the consolidated financial statements of Vulcan Materials
Company and its subsidiary companies as of December 31, 1998, 1997 and 1996 and
for the years then ended, and have issued our report thereon dated February 5,
1999 (March 10, 1999 as to Note 15B); such consolidated financial statements
and report are included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Vulcan Materials Company and its subsidiary
companies, listed in Item 14. This consolidated financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements as a whole, presents fairly in all material
respects the information shown therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Birmingham, Alabama
February 5, 1999
16
<PAGE> 21
SCHEDULE II
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 1998, 1997 and 1996
Amounts in Thousands
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------------------------------------------------------------------------------------
Balance at Additions Charges to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions Of Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Accrued Environmental Costs...................... $ 4,285 $ 6,848 $ 7,160 (1) $3,973
Doubtful Receivables............................. 7,548 1,312 1,469 (2) 7,391
All Other(3)..................................... 1,374 2,282 1,698 1,958
1997
Accrued Environmental Costs...................... $ 3,732 $ 1,069 $ 516 (1) $4,285
Doubtful Receivables............................. 8,106 885 1,443 (2) 7,548
All Other(3)..................................... 1,687 2,010 $ 208 2,531 1,374
1996
Accrued Environmental Costs...................... $ 2,765 $ 285 $ 3,000 $ 2,318 (1) $3,732
Doubtful Receivables............................. 8,176 732 802 (2) 8,106
All Other(3)..................................... 1,395 1,794 1,502 1,687
</TABLE>
(1) Expenditures on environmental remediation projects.
(2) Write-offs of uncollected accounts and worthless notes, less
recoveries.
(3) Valuation and qualifying accounts and reserves for which additions,
deductions and balances are not individually significant.
17
<PAGE> 22
EXHIBIT 12
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31
Amounts in Thousands
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest expenses before capitalization
Credits ................................. $ 7,224 $ 8,074 $ 9,263 $ 11,396 $ 10,699
Amortization of financing costs .......... 93 104 164 109 114
One-third of rental expense .............. 13,668 9,735 9,663 9,532 10,393
---------------------------------------------------------------------
Total fixed charges ................ $ 20,985 $ 17,913 $ 19,090 $ 21,037 $ 21,206
=====================================================================
Net earnings ................................ 255,908 209,145 188,595 166,240 97,976
Provisions for income taxes ................. 118,936 91,356 96,985 92,181 47,930
Fixed charges ............................... 20,985 17,913 19,090 21,037 21,206
Capitalized interest credits ................ (442) (1,160) (627) (297) (878)
Amortization of capitalized interest ........ 715 708 674 1,031 997
----------------------------------------------------------------------
Earnings before income taxes as
adjusted ................................ $ 396,102 $ 317,962 $ 304,717 $ 280,192 $ 167,231
======================================================================
Ratio of earnings to fixed charges .......... 18.9 17.8 16.0 13.3 7.9
</TABLE>
18
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 19, 1999.
VULCAN MATERIALS COMPANY
By /s/ D. M. JAMES
---------------------------------
D. M. James
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ D. M. James
- ----------------------------------- Chairman and Chief Executive Officer March 19, 1999
D. M. James (Principal Executive Officer)
/s/ P.J. Clemens, III
- ----------------------------------- Executive Vice President, Finance March 19, 1999
P.J. Clemens, III and Administration and Treasurer
(Principal Financial Officer)
/s/ E.A. Khan
- ----------------------------------- Vice President, Controller March 19, 1999
E.A. Khan (Principal Accounting Officer)
The following directors:
Marion H. Antonini Director
Livio D. DeSimone Director
A. Frederick Gerstell Director
John K. Greene Director
Douglas J. McGregor Director
Ann D. McLaughlin Director
James V. Napier Director
Donald B. Rice Director
Herbert A. Sklenar Director
Orin R. Smith Director
By /s/ William F. Denson, III March 19, 1999
--------------------------------
William F. Denson, III
Attorney-in-Fact
</TABLE>
19
<PAGE> 24
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OF
VULCAN MATERIALS COMPANY
FILED MARCH 19, 1999
COMMISSION FILE NUMBER 1-4033
<PAGE> 25
EXHIBIT INDEX
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company.
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 12, 1999.
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and among
the Company, Goldman, Sachs & Co., Lehman Brothers and
Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3
filed on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the Company
and First Trust of New York (as successor trustee to Morgan
Guaranty Trust Company of New York) filed as Exhibit 4 to the
Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended
and restated filed as Exhibit 10(a) to the Company's 1989
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy
statement for the annual meeting of its shareholders held May
16, 1991 (File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees
filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual
Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not
Employees of the Company, as last amended and restated on
February 17, 1996 filed as Exhibit 10(g) to the Company's
1995 Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the
Company filed as Exhibit 10(i) to the Company's 1997 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(J) Executive Deferred Compensation Plan.**
EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.**
EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated
January 6, 1999.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1998 (set forth on page 18 of
this report).
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
EXHIBIT (13) The Company's 1998 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998.
EXHIBIT (23) Consent of Deloitte & Touche LLP
EXHIBIT (24) Powers of Attorney
EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic
Submission Only).
EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic
Submission Only).
</TABLE>
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1998, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1999,
as permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
*Incorporated by reference.
**Management Contract or Compensatory Plan.
<PAGE> 1
EXHIBIT 3(i)
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
(RESTATED 1988)
OF
VULCAN MATERIALS COMPANY
Dated February 19, 1999
Pursuant to the provisions of Chapter 7 of Title 14A of the New Jersey
Business Corporation Act (the "Act") and, in particular, Section 14A:7-15.1(3)
thereof, the undersigned corporation, having adopted an amendment to its
Certificate of Incorporation in connection with a share division, hereby
certifies as follows:
FIRST: The name of the corporation is Vulcan Materials Company (the
"Company").
SECOND: The date of adoption by the Board of Directors of the Company
of the resolutions approving the share division and this related amendment to
the Certificate of Incorporation was February 12, 1999.
THIRD: This Amendment to the Certificate of Incorporation of the
Company will not adversely affect the rights or preferences of the holders of
outstanding shares of any class or series and will not result in the percentage
of authorized shares that remain unissued after the share division exceeding
the percentage of authorized shares that was unissued before the share
division.
FOURTH: The only class of shares subject to the share division is the
common stock, par value $1.00 per share ("Common Stock"). The number of shares
of Common Stock subject to the share division is 46,568,324, consisting of
33,605,083 issued and outstanding shares and 12, 963,241 issued shares held by
the Company. Each issued share of Common Stock shall be split, or divided, into
three (3) shares of Common Stock.
FIFTH: The Certificate of Incorporation (Restated 1988) of the
Company is amended to increase the number of authorized shares of capital stock
of the Company from 165,000,000 shares to 485,000,000 shares, thereby
increasing the number of authorized shares of Common Stock of the Company from
160,000,000 shares to 480,000,00 shares. In connection therewith, the first
paragraph of Article IV of the Certificate of Incorporation (Restated 1988) of
the Company is deleted in its entirety and the following new paragraph is
substituted therefor:
"The aggregate number of shares which the Corporation is authorized to
issue is 485,000,000, divided into 480,000,000 shares of common Stock
of the par value of $1 per share and 5,000,000 shares of Preference
Stock without par value issuable in series."
<PAGE> 2
FOURTH: This Certificate of Amendment shall become effective as of
the close of business on February 24, 1999.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed on its behalf by its duly authorized officer as of the date first
above written.
VULCAN MATERIALS COMPANY
ATTEST:
By: /s/ E. Starke Sydnor By: /s/ Peter J. Clemens, III
--------------------------- --------------------------------
E. Starke Sydnor Peter J. Clemens, III
Assistant Secretary Executive Vice President
Finance and Administration
2
<PAGE> 1
EXHIBIT 3(ii)
BY - LAWS
VULCAN MATERIALS COMPANY
(Incorporated under the laws of the State of New Jersey)
Restated: February 2, 1990
Amended: June 27, 1990
March 27, 1991
February 5, 1992
(eff. 5/11/92)
May 11, 1992
December 8, 1992
February 12, 1993
March 5, 1995
February 17, 1996
May 17, 1996
February 14, 1997
February 12, 1999
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I Shareholders' Meetings
Section 1.1 Annual Meetings...................................................... 1
Section 1.2 Special Meetings..................................................... 1
Section 1.3 Notice and Purpose of Meetings....................................... 1
Section 1.4 Quorum and Adjournments.............................................. 1
Section 1.5 Organization......................................................... 2
Section 1.6 Voting............................................................... 2
Section 1.7 Selection of Inspectors.............................................. 3
Section 1.8 Duties of Inspectors................................................. 3
ARTICLE II Directors
Section 2.1 Number, Qualification, Tenure, Term,
Quorum, Vacancies, Removal
(a) Number, Qualification and Tenure............................ 4
(b) Term........................................................ 4
(c) Quorum...................................................... 5
Section 2.2 Meetings of the Board of Directors................................... 5
Section 2.3 Committees of the Board of Directors................................. 6
Section 2.4 Participation in Meetings by Means of
Conference Telephone or Similar Instrument........................... 7
Section 2.5 Action of Board of Directors and
Committees Without a Meeting......................................... 7
Section 2.6 Dividends............................................................ 7
Section 2.7 Conflict of Interest................................................. 8
ARTICLE III Officers
Section 3.1 (a) Corporate Officers.......................................... 8
(b) Group Officers.............................................. 8
(c) Division and Business Unit Officers......................... 9
Section 3.2 (a) Term and Removal of Officers of
the Corporation............................................. 9
(b) Term and Removal of Group and
Division Officers........................................... 9
Section 3.3 (a) Chairman of the Board....................................... 9
(b) Vice Chairman............................................... 9
Section 3.4 Chief Executive Officer.............................................. 10
Section 3.5 Chief Operating Officer.............................................. 10
Section 3.6 President............................................................ 10
Section 3.7 Chief Administrative Officer......................................... 10
Section 3.8 Vice Presidents...................................................... 11
Section 3.9 General Counsel...................................................... 11
Section 3.10 Secretary............................................................ 11
Section 3.11 Treasurer............................................................ 11
Section 3.12 Controller........................................................... 12
Section 3.13 Other Officers....................................................... 12
Section 3.14 Voting Corporation's Securities...................................... 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV Indemnification of Directors, Officers
and Employees......................................................................... 13
ARTICLE V Certificates of Stock
Section 5.1 Transfer of Shares................................................... 15
Section 5.2 Transfer Agent and Registrar......................................... 15
Section 5.3 Fixing Record Date................................................... 15
Section 5.4 Lost, Stolen or Destroyed Certificates............................... 15
ARTICLE VI Miscellaneous
Section 6.1 Fiscal Year.......................................................... 16
Section 6.2 Corporate Seal....................................................... 16
Section 6.3 Delegation of Authority.............................................. 16
Section 6.4 Notices.............................................................. 16
ARTICLE VII By-Laws and Their Amendments.......................................................... 17
ARTICLE VIII National Emergency.................................................................... 17
</TABLE>
<PAGE> 4
ARTICLE I
Shareholders' Meetings
SECTION 1.1. Annual Meetings
(a) The annual meeting of the shareholders of the
corporation may be held at such place within or without the State of
New Jersey as may be fixed by the Board of Directors, at 10 a.m.,
local time, or at such other hour as may be fixed by the Board of
Directors, on such day in April or May of each year as may be fixed by
the Board of Directors, for the purpose of electing directors and for
the transaction of such other business as may properly be brought
before the meeting.
(b) If the annual meeting for the election of directors
is not held in one of the months set forth in Section 1.1(a), the
Board of Directors shall cause the meeting to be held as soon
thereafter as convenient.
SECTION 1.2. Special Meetings
(a) Special meetings of the shareholders may be called
by the Board of Directors, the chairman of the Board of Directors or
the chief executive officer.
(b) Special meetings shall be held at such time and date
and at such place as shall have been fixed by the Board of Directors,
the chairman of the Board of Directors or by the chief executive
officer.
SECTION 1.3. Notice and Purpose of Meetings
Written notice of the time, place and purpose or purposes of every
meeting of shareholders shall be given, not less than ten nor more than 60 days
before the meeting, either personally or by mail, to each shareholder of record
entitled to vote at the meeting.
SECTION 1.4. Quorum and Adjournments
(a) A quorum at all meetings of shareholders shall
consist of the holders of record of a majority of the shares of the
issued and outstanding capital stock of the corporation, entitled to
vote thereat, present in person or by proxy, except as otherwise
provided by law or the Certificate of Incorporation.
(b) A shareholders' meeting may be adjourned to another
time or place, and, if no new record date is fixed, it shall not be
necessary to give notice of the adjourned meeting if the time and
place to which the meeting is adjourned are
1
<PAGE> 5
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting only such business is transacted as might have been
transacted at the original meeting. If after the adjournment a new
record date is fixed by the Board of Directors, notice of the
adjourned meeting shall be given to shareholders of record on the new
record date entitled to vote. Less than a quorum may adjourn the
meeting as herein provided.
SECTION 1.5. Organization
Meetings of the shareholders shall be presided over by the chief
executive officer, or, if he is not present, by a chairman to be chosen by a
majority of the shareholders entitled to vote who are present in person or by
proxy at the meeting. The Secretary of the corporation, or, in his or her
absence, an Assistant Secretary, shall act as secretary of every meeting, but
if neither the Secretary nor an Assistant Secretary is present, the meeting
shall choose any person present to act as secretary of the meeting.
SECTION 1.6. Voting
(a) At all meetings of the shareholders the voting need
not be by ballot, except that all elections for directors shall be by
ballot, and except that the voting shall be by ballot on all other
matters upon which voting by ballot is expressly required by the
Certificate of Incorporation or by the laws of the State of New
Jersey.
(b) The poll at all elections of directors shall be open
in accordance with the laws of the State of New Jersey.
(c) Subject to the foregoing provisions, the right of
any shareholder to vote at a meeting of shareholders shall be
determined on the basis of the number of shares registered in his or
her name on the date fixed as the record date for said meeting.
(d) Except as otherwise provided by statute or these
By-laws, any matter submitted to a vote of shareholders shall be viva
voce unless the person presiding at the meeting determines that the
voting shall be by ballot or unless the circumstances are such that
the will of the holders of a majority of shares entitled to vote
cannot be determined with certainty and the holder of a share entitled
to vote or his or her proxy shall demand a vote by ballot. In either
of such events a vote by ballot shall be taken.
2
<PAGE> 6
SECTION 1.7. Selection of Inspectors
(a) The Board of Directors may in advance of any
shareholders' meeting or any proposed shareholder action without a
meeting appoint one or more inspectors to act at the meeting or any
adjournment thereof or to receive consents of shareholders. If
inspectors are not so appointed for a shareholders' meeting or shall
fail to qualify, the person presiding at the shareholders' meeting
may, and upon the request of any shareholder entitled to vote thereat
shall, make such appointment.
(b) In case any person appointed as inspector fails to
appear or act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the meeting or at the meeting by the
person presiding.
(c) Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting or in tabulating
consents with strict impartiality and according to the best of his or
her ability.
(d) No person shall be elected a director in an election
for which he has served as an inspector.
SECTION 1.8. Duties of Inspectors
The inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting or the shares
entitled to consent, the existence of a quorum, the validity and effect of
proxies, and shall receive votes or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes or consents, determine the result, and do such acts as are proper to
conduct the election or vote or consents with fairness to all shareholders. If
there are three or more inspectors, the act of a majority shall govern. On
request of the person presiding at the meeting or any shareholder entitled to
vote thereat or of any officer, the inspectors shall make a report in writing
of any challenge, question or matter determined by them. Any report made by
them shall be prima facie evidence of the facts therein stated, and such report
shall be filed with the minutes of the meeting.
3
<PAGE> 7
ARTICLE II
Directors
SECTION 2.1. Number, Qualification, Tenure, Term, Quorum,
Vacancies, Removal
(a) Number, Qualification and Tenure. The business and
affairs of the corporation shall be managed by or under the direction
of its Board of Directors, consisting of 11 persons. However,
effective at 9:30 a.m., Central Daylight Time on May 14, 1999, the
Board of Directors shall consist of 12 persons, should an additional
director be elected by the shareholders. The number may, from time to
time, be increased or decreased by resolution adopted by a majority of
the entire Board of Directors, but the number shall not be less than
nine nor more than 21. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the affirmative
vote of two-thirds of the directors in office at the time. Directors
shall be at least 25 years of age and need not be United States
citizens or residents of New Jersey or shareholders of the
corporation.
Any outside director shall retire from the Board of Directors
at the annual meeting next following their 70th birthday, regardless
of the term for which they might have been elected; provided, however,
that current outside directors who continue to serve until the annual
meeting next following their 68th birthday shall have the option to
retire then. Any outside director who ceases to hold the position with
the business or professional organization with which such person was
associated when most recently elected a director shall automatically
be deemed to have offered his or her resignation as a director of the
corporation, and the Director and Management Succession Committee
shall make a recommendation to the Board of Directors with respect to
such resignation; and, if the deemed offer to resign is accepted by
the Board of Directors, such resignation shall be effective as of the
next annual meeting of shareholders.
Any inside director shall retire from the Board of Directors
at the annual meeting next following his or her 65th birthday;
provided, however, that any inside director who has served as chief
executive officer of the corporation and who has been requested by the
Board of Directors to do so shall serve until the next annual meeting
following his or her 69th birthday, but not thereafter.
An inside director is one who is or has been in the full-time
employment of the corporation, and an outside director is any other
director.
(b) Term. Directors shall be divided into three classes,
with the term of office of one class expiring each year. Except as
otherwise provided in the
4
<PAGE> 8
Certificate of Incorporation or these By-laws, directors shall be
chosen at annual meetings of the shareholders, and each director shall
be chosen to serve until the third succeeding annual meeting of
shareholders following his or her election and until his or her
successor shall have been elected and qualified.
(c) Quorum. A majority of the members of the Board of
Directors then acting, but, in no event less than one-third of the
entire Board of Directors, acting at a meeting duly assembled, shall
constitute a quorum for the transaction of business. Directors having
a personal or conflicting interest in any matter to be acted upon may
be counted in determining the presence of a quorum. If at any meeting
of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting, without further
notice, from time to time until a quorum shall have been obtained.
SECTION 2.2. Meetings of the Board of Directors
(a) Meetings of the Board of Directors shall be held at
such place within or without the State of New Jersey and at such time
and date as may from time to time be fixed by the Board of Directors,
or, if not so fixed, as may be specified in the notice of the meeting.
A meeting of the Board of Directors shall be held without notice
immediately after the annual meeting of the shareholders.
(b) Regular meetings of the Board of Directors shall be
held on such day of such months as may be fixed by the Board of
Directors. At any regular meeting of the Board of Directors any
business that comes before such meeting may be transacted except where
special notice is required by these By-laws.
(c) Special meetings of the Board of Directors may be
held on the call of the chairman of the Board of Directors, the chief
executive officer or any three directors.
(d) Notice of each regular meeting of the Board of
Directors, other than the meeting following the annual meeting of
shareholders, shall be given not less than seven days before the date
on which such regular meeting is to be held. Notice of each special
meeting of the Board of Directors shall be given to each member of the
Board of Directors not less than two days before the date upon which
such meeting is held. Notice of any such meeting may be given by mail,
telegraph, telephone, telex, facsimile transmission, personal service
or by personally advising the director orally. Notice of a meeting of
the Board of Directors may be waived in writing before or after the
meeting. Meetings may be held at any time without notice if all the
directors are present. Notice of special meetings of the Board of
Directors shall specify the purpose or purposes of the
5
<PAGE> 9
meeting. Neither the business to be transacted nor the purpose or
purposes of any meeting of the Board of Directors need be specified in
the notice of regular meetings or in the waiver of notice of any
regular or special meeting of the Board of Directors.
(e) Notice of an adjourned meeting of the Board of
Directors need not be given if the time and place are fixed at the
meeting adjourning and if the period of adjournment does not exceed
ten days in any one adjournment.
SECTION 2.3. Committees of the Board of Directors
(a) The Board of Directors, by resolution adopted by a
majority of the entire Board of Directors, may appoint from among its
members an Executive Committee and one or more other committees, each
of which shall have at least three members. To the extent provided in
such resolution each such committee shall have and may exercise all
the authority of the Board of Directors, except as expressly limited
by the New Jersey Business Corporation Act.
(b) The Board of Directors, by resolution adopted by a
majority of the entire Board of Directors, may: (1) fill any vacancy
in any such committee; (2) appoint one or more directors to serve as
additional members of any such committee; (3) appoint one or more
directors to serve as alternate members of any such committee, to act
in the absence or disability of members of any such committee with all
the powers of such absent or disabled members; (4) abolish any such
committee at its pleasure; and (5) remove any director from membership
on such committee at any time, with or without cause.
(c) The Executive Committee shall meet at such time or
times, and at such place within or outside the State of New Jersey, as
it shall designate or, in the absence of such designation, as shall be
designated by the person or persons calling the meeting; and it shall
make its own rules of procedure. Meetings may be held at any time
without notice if all members of the Executive Committee are present,
or if at any time before or after the meeting those not present waive
notice of the meeting in writing. A majority of the members of the
Executive Committee shall constitute a quorum thereof, but at any
meeting of the Committee at which all the members are not present no
action shall be taken except by the unanimous vote of those present.
(d) Meetings of any committee may be called by the
chairman of the Board of Directors, the chief executive officer, the
chairman of the committee, by any two members of the committee or as
provided in the resolution appointing the committee. Notice of such
meeting shall be given to each member of the
6
<PAGE> 10
committee by mail, telegraph, telephone, telex, facsimile
transmission, personal service or by personally advising the member
orally. Said notice shall state the time and place of any meeting of
any such committee and shall be fixed by the person or persons calling
the meeting.
(e) Actions taken at a meeting of any committee shall be
reported to the Board of Directors at its next meeting following such
committee meeting; except that, when the meeting of the Board of
Directors is held within two days after the committee meeting, such
report shall, if not made at the first meeting, be made to the Board
of Directors at its second meeting following such committee meeting.
SECTION 2.4. Participation in Meetings by Means of Conference
Telephone or Similar Instrument
Where appropriate communication facilities are available, any or all
directors may participate in all or any part of a meeting of the Board of
Directors or in a meeting of any committee of the Board of Directors by means
of a conference telephone or any means of communication by which the persons
participating in the meeting are able to hear each other as though he was or
they were present in person at such meeting. Such participation without
protesting prior to the conclusion of such participation the lack of notice of
such meeting shall constitute a waiver of notice by such participating director
or directors with respect to business transacted during such participation.
SECTION 2.5. Action of Board of Directors and Committees Without
a Meeting
Any action required or permitted to be taken pursuant to authorization
voted at a meeting of the Board of Directors or any committee of the Board of
Directors may be taken without a meeting if, prior or subsequent to such
action, all members of the Board of Directors or of such committee, as the case
may be, consent thereto in writing and such written consents are filed with the
minutes of the proceedings of the Board of Directors or committee.
SECTION 2.6. Dividends
Subject to the provisions of the laws of the State of New Jersey and
the Certificate of Incorporation, the Board of Directors shall have full power
to determine whether any and, if any, what part of any funds of the corporation
shall be declared in dividends and paid to shareholders; the division of the
whole or any part of such funds of the corporation shall rest wholly within the
lawful discretion of the Board of Directors, and it shall not be required at
any time, against such discretion, to divide or pay any part of such funds
among or to the shareholders as dividends or otherwise, and the Board of
Directors may fix a sum which may be set aside or reserved over and above the
capital paid in of the corporation as working capital for the corporation or as
a reserve
7
<PAGE> 11
for any proper purpose, and from time to time may increase, diminish and vary
the same in its absolute judgment and discretion.
SECTION 2.7. Conflict of Interest
No contract or other transaction between the corporation and one or
more of its directors, or between the corporation and any domestic or foreign
corporation, firm or association of any type or kind in which one or more of
its directors are directors or are otherwise interested, shall be void or
voidable solely by reason of such common directorship or interest, or solely
because such director or directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes or approves the contract or
transaction, or solely because his or their votes are counted for such purpose,
if any of the following is true: (1) the contract or other transaction is fair
and reasonable as to the corporation at the time it is authorized, approved or
ratified; or (2) the fact of the common directorship or interest is disclosed
or known to the Board of Directors or committee and the Board of Directors or
committee authorizes, approves, or ratifies the contract by unanimous written
consent, provided at least one director so consenting is disinterested, or by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (3) the fact of the
common directorship or interest is disclosed or known to the shareholders, and
they authorize, approve or ratify the contract or transaction.
The Board of Directors, by the affirmative vote of a majority of
directors in office and irrespective of any personal interest of any of them,
shall have authority to establish reasonable compensation of directors for
services to the corporation as directors, officers or otherwise.
ARTICLE III
Officers
SECTION 3.1
(a) Corporate Officers. Each year promptly after the
annual meeting of the shareholders, the Board of Directors shall elect
a Chairman of the Board, a President, one or more Vice Presidents,
with such designations, if any, as it may determine, a General
Counsel, a Secretary, a Treasurer, and a Controller, and from time to
time may elect or appoint one or more Assistants to any of such
officers, and such one or more Assistant Secretaries, Assistant
Treasurers, and Assistant Controllers, and such other officers,
agents, and employees, and with such designations, as it may deem
proper. Any two or more offices may be concurrently held by the same
person at the same time. The Chairman of the Board and the President
shall be chosen from among the directors.
8
<PAGE> 12
(b) Group Officers. The chief executive officer of the
corporation may appoint such officers of any group of the corporation
as he may deem proper, except that group senior vice presidents may be
appointed only by the Board of Directors. A group officer shall not be
an officer of the corporation, and shall serve as an officer only of
the group to which he is appointed, but a person who holds a group
office may also hold a corporate office or a division office, or both.
(c) Division and Business Unit Officers. The chief
executive officer of the corporation may appoint such officers of any
division or business unit of the corporation as he may deem proper,
except that division and business unit chairmen and presidents may be
appointed only by the Board of Directors. A division or business unit
officer shall not be an officer of the corporation, and shall serve as
an officer only of the division or business unit to which appointed,
but a person who holds a division or business unit office may also
hold a corporate office or a group office, or both.
SECTION 3.2
(a) Term and Removal of Officers of the Corporation. The
term of office of all officers shall be one year and until their
respective successors are elected and qualify, but any officer may be
removed from office, either with or without cause, at any time, by the
affirmative vote of a majority of the members of the Board of
Directors then in office.
(b) Term and Removal of Group and Division Officers.
Group senior vice presidents and division chairmen and presidents
shall serve at the pleasure of the Board of Directors. Group senior
vice presidents and division chairmen and presidents may be removed
from office, either with or without cause, at any time, by the Board
of Directors. Other group and division officers shall serve at the
pleasure of the chief executive officer of the corporation. Any other
group or division officer may be removed from office as a group or
division officer, either with or without cause, at any time, by the
chief executive officer of the corporation.
SECTION 3.3.
(a) Chairman of the Board. The Chairman of the Board may execute
bonds, mortgages, and bills of sale, assignments, conveyances, and all other
contracts, except those required by law to be otherwise signed and executed, or
except when the signing and execution thereof when permitted by law shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation. The Chairman of the Board shall preside at all meetings
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<PAGE> 13
of the Board of Directors. The Chairman of the Board shall perform such other
duties as may be assigned to him by the Board of Directors.
(b) Vice Chairman. The Vice Chairman shall advise and counsel
with the Chairman of the Board, and with other officers of the corporation on
any or all activities in which the corporation may engage, and shall perform
such other duties as may be assigned to him by the Chairman of the Board or the
Board of Directors.
SECTION 3.4. Chief Executive Officer
The Chief Executive Officer may execute bonds, mortgages, and bills of
sale, assignments, conveyances, and all other contracts, except those required
by law to be otherwise signed and executed, or except when the signing and
execution thereof when permitted by law shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation. The Chief
Executive Officer shall be responsible to the Board of Directors for planning
and directing the business of the corporation and for initiating and directing
those actions essential to its profitable growth and development and shall
perform such other duties as may be assigned to him by the Board of Directors.
SECTION 3.5. Chief Operating Officer
The Chief Operating Officer may execute bonds, mortgages, and bills of
sale, assignments, conveyances, and all other contracts, except those required
by law to be otherwise signed and executed, or except when the signing and
execution thereof when permitted by law shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation. The Chief
Operating Officer shall, subject to the authority and direction of the Chief
Executive Officer, have general and active management of the operating affairs
of the corporation and shall carry into effect the resolutions of the Board of
Directors and the orders of the Chief Executive Officer with respect to the
operating affairs of the corporation.
SECTION 3.6. President
The President may execute bonds, mortgages, and bills of sale,
assignments, conveyances, and all other contracts, except those required by law
to be otherwise signed and executed, or except when the signing and execution
thereof when permitted by law shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation. The President
shall perform such other duties as may be delegated to him by the Board of
Directors or the Chief Executive Officer.
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SECTION 3.7. Chief Administrative Officer
The Chief Administrative Officer shall be the chief administrative
officer of the corporation and shall supervise and manage the administrative
affairs of the corporation. He shall supervise and direct those officers and
agents of the corporation who are engaged in the administrative affairs of the
corporation. He shall perform such functions for the corporation as may be
designated by the chief executive officer or the chief operating officer, and
shall carry into effect the resolutions of the Board of Directors and the
orders of the chief executive officer or the chief operating officer with
respect to such functions.
SECTION 3.8. Vice Presidents
Each Vice President of the corporation may execute bonds, mortgages,
bills of sale, assignments, conveyances, and all other contracts, except where
required by law to be otherwise signed and executed. Each Vice President of the
corporation shall perform such functions for the corporation as may be
designated by the chief executive officer of the corporation, and shall carry
into effect the resolutions of the Board of Directors and the orders of the
chief executive officer of the corporation with respect to such functions.
SECTION 3.9. General Counsel
The General Counsel shall be the chief legal officer of the
corporation and shall have overall responsibility for all legal affairs of the
corporation. The General Counsel shall have management responsibility for the
corporation's legal department and its relationships with outside counsel. The
General Counsel's duties shall include providing legal advice to corporate and
division officers, confirming compliance with applicable laws, overseeing
litigation, reviewing significant agreements, participating in important
negotiations, and selecting all outside counsel. He shall perform such other
functions for the corporation as may be designated by the Board of Directors or
the chief executive officer.
SECTION 3.10. Secretary
The Secretary shall keep or cause to be kept the minutes of all
meetings of the shareholders, of the Board of Directors, of the Executive
Committee, and unless otherwise directed by the Board of Directors, the minutes
of meetings of other committees of the Board of Directors. He shall attend to
the giving or serving of all notices required to be given by law or by the
By-laws or as directed by the Board of Directors or the chief executive officer
of the corporation. He shall have custody of the seal of the corporation and
shall have authority to affix or cause the same or a facsimile thereof to be
affixed to any instrument requiring the seal and to attest the same. He shall
perform such other functions for the corporation as may be designated by the
Board of Directors or the chief executive officer of the corporation.
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<PAGE> 15
SECTION 3.11. Treasurer
The Treasurer shall be responsible for safeguarding the cash and
securities of the corporation and shall keep or cause to be kept a full and
accurate account of the receipts and disbursements of the corporation. He shall
perform such other functions for the corporation as may be designated by the
Board of Directors or the chief executive officer of the corporation.
SECTION 3.12. Controller
The Controller shall be the principal accounting officer of the
corporation, shall have supervision over the accounting records of the
corporation and shall be responsible for the preparation of financial
statements. He shall perform such other functions for the corporation as may be
designated by the Board of Directors or by the chief executive officer of the
corporation.
SECTION 3.13. Other Officers
The other officers of the corporation shall have such powers and
duties as generally pertain to their respective offices as well as such powers
and duties as from time to time may be designated by the Board of Directors or
by the chief executive officer of the corporation.
SECTION 3.14. Voting Corporation's Securities
Unless otherwise ordered by the Board of Directors, the chief
executive officer or his or her delegate, or, in the event of his or her
inability to act, such other officer as may be designated by the Board of
Directors to act in the absence of the chief executive officer shall have full
power and authority on behalf of the corporation to attend and to act and to
vote, and to execute a proxy or proxies empowering others to attend and to act
and to vote, at any meetings of security holders of the corporations in which
the corporation may hold securities, and at such meetings the chief executive
officer or such other officer of the corporation, or such proxy, shall possess
and may exercise any and all rights and powers incident to the ownership of
such securities, and which as the owner thereof the corporation might have
possessed and exercised, if present. The Secretary or any Assistant Secretary
may affix the corporate seal to any such proxy or proxies so executed by the
chief executive officer or such other officer and attest the same. The Board of
Directors by resolution from time to time may confer like powers upon any other
person or persons.
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ARTICLE IV
Indemnification of Directors, Officers and Employees
(a) Subject to the provisions of this Article IV, the
corporation shall indemnify the following persons to the fullest
extent permitted and in the manner provided by and the circumstances
described in the laws of the State of New Jersey, including Section
14A:3-5 of the New Jersey Business Corporation Act and any amendments
thereof or supplements thereto: (i) any person who is or was a
director, officer, employee or agent of the corporation; (ii) any
person who is or was a director, officer, employee or agent of any
constituent corporation absorbed by the corporation in a consolidation
or merger, but only to the extent that (a) the constituent corporation
was obligated to indemnify such person at the effective date of the
merger or consolidation or (b) the claim or potential claim of such
person for indemnification was disclosed to the corporation and the
operative merger or consolidation documents contain an express
agreement by the corporation to pay the same; (iii) any person who is
or was serving at the request of the corporation as a director,
officer, trustee, fiduciary, employee or agent of any other domestic
or foreign corporation, or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise,
whether or not for profit; and (iv) the legal representative of any of
the foregoing persons (collectively, a "Corporate Agent").
(b) Anything herein to the contrary notwithstanding, the
corporation shall not be obligated under this Article IV to provide
indemnification (i) to any bank, trust company, insurance company,
partnership or other entity, or any director, officer, employee or
agent thereof or (ii) to any other person who is not a director,
officer or employee of the corporation, in respect of any service by
such person or entity, whether at the request of the corporation or by
agreement therewith, as investment advisor, actuary, custodian,
trustee, fiduciary or consultant to any employee benefit plan.
(c) To the extent that any right of indemnification
granted hereunder requires any determination that a Corporate Agent
shall have been successful on the merits or otherwise in any
Proceeding (as hereinafter defined) or in defense of any claim, issue
or matter therein, the Corporate Agent shall be deemed to have been
"successful" if, without any settlement having been made by the
Corporate Agent, (i) such Proceeding shall have been dismissed or
otherwise terminated or abandoned without any judgment or order having
been entered against the Corporate Agent, (ii) such claim, issue or
other matter therein shall have been dismissed or otherwise eliminated
or abandoned as against the Corporate Agent,
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or (iii) with respect to any threatened Proceeding, the Proceeding
shall have been abandoned or there shall have been a failure for any
reason to institute the Proceeding within a reasonable time after the
same shall have been threatened or after any inquiry or investigation
that could have led to any such Proceeding shall have been commenced.
The Board of Directors or any authorized committee thereof shall have
the right to determine what constitutes a "reasonable time" or an
"abandonment" for purposes of this paragraph (c), and any such
determination shall be conclusive and final.
(d) To the extent that any right of indemnification
granted hereunder shall require any determination that the Corporate
Agent has been involved in a Proceeding by reason of his or her being
or having been a Corporate Agent, the Corporate Agent shall be deemed
to have been so involved if the Proceeding involves action allegedly
taken by the Corporate Agent for the benefit of the corporation or in
the performance of his or her duties or the course of his or her
employment for the corporation.
(e) If a Corporate Agent shall be a party defendant in a
Proceeding, other than a Proceeding by or in the right of the
corporation, and the Board of Directors or a duly authorized committee
of disinterested directors shall determine that it is in the best
interests of the corporation for the corporation to assume the defense
of any such Proceeding, the Board of Directors or such committee may
authorize and direct that the corporation assume the defense of the
Proceeding and pay all expenses in connection therewith without
requiring such Corporate Agent to undertake to pay or repay any part
thereof. Such assumption shall not affect the right of any such
Corporate Agent to employ his or her own counsel or to recover
indemnification under this By-law to the extent that he may be
entitled thereto.
(f) As used herein, the term "Proceeding" shall mean and
include any pending, threatened or completed civil, criminal,
administrative or arbitrative action, suit or proceeding, and any
appeal therein and any inquiry or investigation which could lead to
such action, suit or proceeding.
(g) The right to indemnification granted under this
Article IV shall not be exclusive of any other rights to which any
Corporate Agent seeking indemnification hereunder may be entitled.
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ARTICLE V
Certificates of Stock
SECTION 5.1. Transfer of Shares
Stock of the corporation shall be transferable in accordance with the
provisions of Chapter 8 of the Uniform Commercial Code as adopted in New Jersey
(N.J.S. 12A:8-101, et seq.) as amended from time to time, except as otherwise
provided in the New Jersey Business Corporation Act.
SECTION 5.2. Transfer Agent and Registrar
The Board of Directors may appoint one or more transfer agents and one
or more registrars of transfers and may require all stock certificates to bear
the signatures of such transfer agent and registrar, one of which signatures
may be a facsimile.
SECTION 5.3. Fixing Record Date
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or allotment of any right, or for the purpose of any other action, the Board of
Directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than 60 nor less
than ten days before the date of such meeting, nor more than 60 days prior to
any other action.
SECTION 5.4. Lost, Stolen or Destroyed Certificates
(a) Where a certificate for shares has been lost,
apparently destroyed, or wrongfully taken and the owner thereof fails
to so notify the corporation or the transfer agent of that fact within
a reasonable time after he has notice of it and the transfer agent or
the corporation registers a transfer of the shares before receiving
such a notification, the owner shall be precluded from asserting
against the corporation any claim for registering the transfer of such
shares or any claim to a new certificate.
(b) Subject to the foregoing, where the owner of shares
claims that the certificate representing shares has been lost,
destroyed or wrongfully taken, the corporation shall issue a new
certificate in place of the original certificate if the owner thereof
requests the issue of a new certificate before the corporation has
notice that the certificate has been acquired by a bona fide
purchaser, makes proof in affidavit form, satisfactory to the
Secretary or Assistant Secretary of the
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<PAGE> 19
corporation and to its transfer agent, of his or her ownership of the
shares represented by the certificate and that the certificate has
been lost, destroyed or wrongfully taken; files an indemnity bond for
an open or unspecified amount or if authorized in a specific case by
the corporation, for such fixed amount as the chief executive officer,
or a Vice President, or the Secretary of the corporation may specify,
in such form and with such surety as may be approved by the transfer
agent and the Secretary or Assistant Secretary of the corporation,
indemnifying the corporation and the transfer agent and registrar of
the corporation against all loss, cost and damage which may arise from
issuance of a new certificate in place of the original certificate;
and satisfies any other reasonable requirements imposed by the
corporation or transfer agent. In case of the surrender of the
original certificate, in lieu of which a new certificate has been
issued, or the surrender of such new certificate, for cancellation,
the bond of indemnity given as a condition of the issuance of such new
certificate may be surrendered.
ARTICLE VI
Miscellaneous
SECTION 6.l. Fiscal Year
The fiscal year of the corporation shall begin on the first day of
January in each year and shall end on the 31st day of December next following,
unless otherwise determined by the Board of Directors.
SECTION 6.2. Corporate Seal
The corporate seal of the corporation shall have inscribed thereon the
name of the corporation, the year 1956 and the words "Corporate Seal, New
Jersey."
SECTION 6.3. Delegation of Authority
Any provision of these By-laws granting authority to the Board of
Directors shall not be construed as indicating that such authority may not be
delegated by the Board of Directors to a committee to the extent authorized by
the New Jersey Business Corporation Act and these By-laws.
SECTION 6.4 Notices
In computing the period of time for the giving of any notice required
or permitted for any purpose, the day on which the notice is given shall be
excluded and the day on which the matter
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noticed is to occur shall be included. If notice is given by mail, telegraph,
telex or facsimile transmission, the notice shall be deemed to be given when
deposited in the mail, delivered to the telegraph or telex office or
transmitted via facsimile transmitter, addressed to the person to whom it is
directed at his or her last address as it appears on the records of the
corporation, with postage or charges prepaid thereon; provided, however, that
notice must be given by telegraph, telephone, telex, facsimile transmission,
personal service or by personally advising the person orally when, as
authorized in these By-laws, less than three days' notice is given. Notice to a
shareholder shall be addressed to the address of such shareholder as it appears
on the stock transfer records of the corporation.
ARTICLE VII
By-Laws and Their Amendments
Subject to the rights, if any, of the holders of any series of
Preference Stock then outstanding, the By-laws of the corporation shall be
subject to alteration, amendment or repeal, and new By-laws not inconsistent
with any provisions of the Certificate of Incorporation and not inconsistent
with the laws of the State of New Jersey may be made, either by the affirmative
vote of a majority of the votes cast at any annual or special meeting of
shareholders by the holders of shares entitled to vote thereon, or, except with
respect to By-laws adopted by the shareholders of the corporation which by
their terms may not be altered, amended or repealed by the Board of Directors,
by the affirmative vote of a majority of the whole Board of Directors at any
regular or special meeting of the Board of Directors.
ARTICLE VIII
National Emergency
For the purpose of this Article VIII a national emergency is hereby
defined as any period following an enemy attack on the continental United
States of America or any nuclear or atomic disaster as a result of which and
during the period that communication or the means of travel among states in
which the corporation's plants or offices are disrupted or made uncertain or
unsafe. Persons not directors of the corporation may conclusively rely upon a
determination by the Board of Directors of the corporation, at a meeting held
or purporting to be held pursuant to this Article VIII that a national
emergency as hereinabove defined exists regardless of the correctness of such
determination. During the existence of a national emergency under the foregoing
provisions of this Article VIII the following provisions shall become operative
but no other provisions of these By-laws shall become inoperative in such event
unless directly in conflict with this Article VIII or action taken pursuant
hereto:
(a) When it is determined in good faith by any director
that a national emergency exists, special meetings of the Board of
Directors may be called by such director and at any such special
meeting two directors shall constitute a quorum for the transaction of
business including without limiting the generality
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hereof the filling of vacancies among directors and officers of the
corporation and the election of additional officers. The act of a
majority of the directors present thereat shall be the act of the
Board of Directors. If at any such special meeting of the Board of
Directors there shall be only one director present such director
present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given of any such
adjournment. The director calling any such special meeting shall make
a reasonable effort to notify all other directors of the time and
place of such special meeting, and such effort shall be deemed to
constitute the giving of reasonable notice of such special meeting and
every director shall be deemed to have waived any requirement, of law
or otherwise, that any other notice of such special meeting be given.
The directors present at any such special meeting shall make
reasonable effort to notify all absent directors of any action taken
thereat, but failure to give such notice shall not affect the validity
of the action taken at any such meeting. Any action taken at any such
special meeting may be conclusively relied upon by all directors,
officers, employees, and agents of, and all persons dealing with, the
corporation.
(b) The Board of Directors shall have the power to
alter, amend, or repeal any Articles of these By-laws by the
affirmative vote of at least two-thirds of the directors present at
any special meeting attended by two or more directors and held in the
manner prescribed in paragraph (a) of this Article, if it is
determined in good faith by said two-thirds that such alteration,
amendment or repeal would be conducive to the proper direction of the
corporation's affairs.
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<PAGE> 1
EXHIBIT 10(J)
VULCAN MATERIALS COMPANY
EXECUTIVE DEFERRED
COMPENSATION PLAN
As Amended Through December 2, 1998
<PAGE> 2
CONTENTS
<TABLE>
<S> <C> <C>
Article 1 Establishment and Purpose 1
Article 2 Definitions 1
Article 3 Administration 4
Article 4 Eligibility and Participation 5
Article 5 Deferral Opportunities 5
Article 6 Individual Accounts and Crediting of Investment Returns 9
Article 7 Rabbi Trust 10
Article 8 Change in Control 10
Article 9 Beneficiary Designation 10
Article 10 Withholding Taxes 11
Article 11 Amendment and Termination 11
Article 12 Miscellaneous 12
</TABLE>
<PAGE> 3
VULCAN MATERIALS COMPANY
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Vulcan Materials Company, a New Jersey
corporation, hereby establishes, effective as of October 9, 1998 (the
"Effective Date"), a deferred compensation plan for key management employees as
described herein, which shall be known as the "Vulcan Materials Company
Executive Deferred Compensation Plan" (the "Plan").
1.2 PURPOSE. The primary purpose of the Plan is to provide
eligible employees of the Company with the opportunity to defer a portion of
their compensation in a tax-efficient manner. By adopting the Plan, the Company
desires to enhance its ability to attract and retain management employees of
outstanding competence.
ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have the meanings set forth below, and when the meaning is intended, the term
is capitalized:
(a) "Accrued Rabbi Trust Obligations" means the then
current aggregate deferred compensation account
balances of all Participants, consisting of each
Participant's deferrals and the net investment gain
or loss thereon.
(b) "Annual Bonus" means any incentive award based on an
assessment of performance, payable in cash by the
Company to a Participant with respect to the
Participant's services during a Plan Year. The Term
"Annual Bonus" shall not include incentive awards
that relate to a period exceeding one year. An
Annual Bonus shall be deemed to be earned when the
Participant performs the related services regardless
of when it is paid.
(c) "Base Salary" means all regular, basic wages, before
reduction for amounts deferred pursuant to the Plan
or any other plan of the Company, payable in cash to
a Participant for services to be rendered during the
Plan Year, exclusive of any Annual Bonus, Long-Term
Incentive Awards, other special fees, awards, or
incentive compensation, allowances, or amounts
designated by the Company as payment toward or
reimbursement of expenses.
(d) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(e) "Change in Control" means:
(1) the acquisition by any person, entity or
"group," within the meaning of Section 13(d)(3) or
(14)(d)(2) of the Exchange Act (excluding for this
purpose,
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any employee benefit plan of the Company or any of
its subsidiaries which acquires beneficial ownership
of voting securities of the Company), of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more
of either the then outstanding shares of Common
Stock or the combined voting power of the Company's
then outstanding voting securities, in one
transaction or a series of transactions; provided,
however, that, if prior to such an acquisition, a
majority of the Continuing Directors determines that
such acquisition shall not, for purposes of the
Plan, be deemed a Change in Control, such
acquisition shall not constitute a Change in Control
hereunder;
(2) individuals who, as of the Effective Date,
constitute the Board (the "Continuing Directors")
cease for any reason to constitute at least a
majority of the Board, provided that any person
becoming a director of the Company subsequent to the
Effective Date whose election, or nomination for
election by the Company's shareholders, was approved
by a vote of at least a majority of the Continuing
Directors (other than an election or nomination of
an individual whose initial assumption of office is
in connection with an actual or threatened
solicitation with respect to the election or removal
of directors of the Company, as such terms are used
in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of the
Plan, considered as though such person were a
Continuing Director; or
(3) approval by the Board of (i) a merger,
consolidation or reorganization of the Company in
which, as a consequence of the transaction, either
the Continuing Directors do not constitute a
majority of the directors of the continuing or
surviving corporation or any person, entity or
"group," within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, controls 25% or more
of the combined voting power of the continuing or
surviving corporation; (ii) any sale, lease or other
transfer, in one transaction or a series of
transactions, of all or substantially all of the
assets of the Company; or (iii) any plan or proposal
for the liquidation or dissolution of the Company;
provided, however, that, if at the time of such
approval, a majority of the Continuing Directors
determines that such merger, consolidation,
reorganization, sale, lease, other transfer,
liquidation or dissolution shall not, for purposes
of the Plan, be deemed a Change in Control, such
transaction shall not constitute a Change in Control
hereunder, and, provided further, that, if a
majority of the Continuing Directors so determines,
a Change in Control shall not be deemed to occur
until the consummation of any such transaction.
(f) "CEO" means the Chief Executive Officer of the
Company.
(g) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
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<PAGE> 5
(h) "Committee" means the Compensation Committee of the
Board (or any other committee designated by the
Board that is eligible to administer the Plan in
accordance with Rule16b-3 under the Exchange Act).
(i) "Company" means Vulcan Materials Company and also
includes any "Employing Company" as such term is
defined in the Salaried Retirement Income Plan.
(j) "Company Stock" means the common stock of the
Company.
(k) "Disability" shall have the meaning ascribed to such
term in the Company's long-term disability plan or,
if no plan is then in effect, shall mean the
determination by the Committee that the physical or
mental condition of a Participant renders such
Participant unable to carry out his or her duties
and obligations to the Company.
(l) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(m) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(n) "Long-Term Incentive Award" means a compensation
vehicle that provides for the accumulation of value
over a time period longer than one year, including,
but not limited to, stock options, restricted stock,
performance shares, and performance units; but the
term shall not include this Plan, any other elective
deferred compensation plan, or any tax-qualified or
nonqualified retirement plan of the Company.
(o) "Participant" means any key management employee of
the Company who has been approved by the Committee
for participation in the Plan under Section 4.1.
(p) "Payout Year" means the calendar year in which the
payout contemplated by Section 5.4 is made or
commences.
(q) "Plan Year" means the calendar year.
(r) "Rabbi Trust" means a grantor trust, as described in
Section 677 of the Code, that is established by the
Company as provided in Article 7.
(s) "Rabbi Trust Agreement" meaning the instrument
establishing the Rabbi Trust, as such instrument may
be amended from time to time.
(t) "Retirement" means a termination of a Participant's
employment with the Company that entitles such
Participant to immediate payment of a pension
benefit under the Salaried Retirement Income Plan.
3
<PAGE> 6
(u) "Salaried Retirement Income Plan" means the
Retirement Income Plan for Salaried Employees of
Vulcan Materials Company, and any successor plan
thereto.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the
Committee. In no event shall any member of the Committee be a Participant.
3.2 AUTHORITY OF THE COMMITTEE.
(a) Subject to the terms of the Plan, the Committee
shall have full power and discretionary authority (i) to select the employees
who are eligible to participate in the Plan, (ii) to determine the terms and
conditions of each Participant's participation in the Plan, (iii) to construe
and interpret the Plan and any agreement or instrument entered into under the
Plan, (iv) to establish, amend, and waive rules and regulations for the Plan's
administration, (v) subject to the provisions of Article 11, to amend the Plan
and any agreement or instrument entered into under the Plan or to terminate the
Plan, (vi) to appoint and remove the trustee and the recordkeeper for the Rabbi
Trust, and to direct the trustee and the recordkeeper with respect to their
duties under the agreements pertaining to the Rabbi Trust, and (vii) to make
any other determinations that may be necessary or advisable for the
administration of the Plan.
(b) To the extent permitted by law, the Committee (i)
may delegate any or all of its authority granted under the Plan to one or more
executives of the Company (provided that no executive of the Company who is a
Participant shall exercise any discretion with respect to his own participation
in the Plan) and (ii) may designate one or more individuals who are not
Participants (but who may be employees of the Company) to carry out ministerial
duties related to the administration of the Plan, except that the Committee
shall not delegate responsibility for any matter involving a person subject to
Section 16 of the Exchange Act if a decision by the Committee as to such matter
would have the effect of exempting a transaction under the Plan from the
application of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or any
successor rule thereunder.
3.3 DECISIONS BINDING. All determinations and decisions of the
Committee (or of any person to whom the Committee has delegated its authority)
under the Plan, including questions of construction and interpretation, shall
be final, conclusive, and binding on the employees of the Company, the
Participants and their beneficiaries and estates. Whenever the Plan authorizes
the Committee or any other person to exercise discretion with respect to any
matter, such discretion may be exercised in the sole and absolute discretion of
the Committee or such person, subject only to the terms of the Plan and
applicable requirements of law.
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ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Eligibility to participate in the Plan is
limited to a select group of management or highly compensated employees
consisting solely of key management employees who are nominated to participate
in the Plan by the CEO and who are approved by the Committee.
4.2 PARTICIPATION.
(a) Each employee approved for participation in the Plan
by the Committee shall have the opportunity to defer the receipt of
compensation otherwise payable to the Participant in accordance with the
provisions of Article V. This opportunity shall continue in effect until the
Participant is notified by the Committee that he has ceased to be eligible to
make such deferrals.
(b) The Committee may at any time and for any reason
determine that a Participant no longer is eligible to make deferrals under
Article V. Upon being notified in writing of the Committee's decision, such a
Participant shall become an inactive Participant that retains all of the rights
of a Participant under the Plan, except for the right to make further
deferrals.
ARTICLE 5. DEFERRAL OPPORTUNITIES
5.1 AMOUNTS WHICH MAY BE DEFERRED.
(a) An eligible Participant may irrevocably elect,
prior to any Plan Year, to defer (i) up to 50% of his Base Salary earned during
the Plan Year and (ii) up to 100% of his Annual Bonus for the Plan Year.
(b) In the event that a Participant first becomes
eligible to participate in the Plan after the beginning of a Plan Year
(including the Plan Year in which the Effective Date occurs), the Committee may
allow such Participant to elect to defer (i) up to 50% of his Base Salary
earned subsequent to the date on which a valid Deferral Election Form (as
described in Section 5.2) is received by the Company from the Participant and
(ii) for the Plan Year ended December 31, 1998 only, up to 100% of his Annual
Bonus for the entire Plan Year.
(c) The Committee, in its discretion, also may permit
the deferral of Long-Term Incentive Awards in accordance with such rules and
regulations as the Committee may establish.
(d) A Participant at all times shall be 100% vested in
his deferrals under the Plan and all earnings thereon.
5.2 TIMING OF DEFERRAL ELECTIONS. The election of a Participant
to defer compensation under the Plan shall be made within 30 calendar days
prior to the beginning of the Plan Year in which the compensation to be
deferred is earned, except that, if a Participant is notified during a Plan
Year that he is eligible to participate in the Plan for the remainder of the
Plan Year, such election shall be made within 30 calendar days following the
date of such notification. All deferral elections shall be made by means of a
"Deferral Election Form" that is executed by the Participant and delivered to
the
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<PAGE> 8
Company. The Deferral Election Form shall provide for the specification by an
eligible Participant of:
(a) the amount of compensation to be deferred during the Plan Year
in accordance with the terms of Section 5.1;
(b) the length of deferral of such deferred amounts, and the
earnings thereon, in accordance with the terms of Section
5.3; and
(c) the form of payout of such deferred amounts, and the
earnings thereon, in accordance with the terms of Section
5.4.
5.3 LENGTH OF DEFERRAL.
(a) Each Participant who makes a deferral election as to
any Plan Year may elect the length of such deferral by designating a Payout
Year. Such election shall be irrevocable except as otherwise provided in
paragraph (d). The deferral of Base Salary and the deferral of the Annual Bonus
in any Plan Year shall be considered separate deferral elections and each may
be deferred to a different Payout Year. Deferral elections are subject to the
following limitations, unless the Committee permits otherwise:
(i) The Payout Year designated shall be no earlier than
the second year following the end of the Plan Year in
which the compensation deferred is earned; and
(ii) The Payout Year shall not be later than the year
following the Participant's 65th birthday.
All deferral elections are subject to Section 8(a), which requires an immediate
lump-sum payment in the event of a Change in Control.
(b) In the event that a deferral election is made and no
Payout Year is designated, the Participant shall be deemed to have elected a
deferral until the Payout Year following the year of the Participant's
Retirement.
(c) Notwithstanding the Payout Years designated by a
Participant pursuant to this Section 5.3 or the form of payout elected by a
Participant pursuant to Section 5.4, if at any time prior to the end of any
deferral period a Participant's employment with the Company is terminated for
any reason other than Retirement or Disability (including termination of
employment by reason of the Participant's death), (i) all Payout Years shall be
accelerated to the year following the year in which the termination of the
Participant's employment occurs, and (ii) all deferred amounts, and the
earnings thereon, for all Plan Years shall be paid to the Participant in a
single lump-sum cash payment.
(d) Notwithstanding the length of deferral elected by a
Participant pursuant to paragraph (a) or the form of payout elected by such
Participant pursuant to Section 5.4(a), such Participant may
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<PAGE> 9
elect to receive an early payout of all or any portion of the deferral amount,
and the earnings thereon, with respect to any Payout Year in the form of a
single lump-sum cash payment. As a penalty for early payout, the Participant
shall forfeit an amount equal to 10% of the amount requested as a payout, such
that the actual payment shall be equal to 90% of the amount by which the
balance of the Participant's account for such Payout Year is reduced. Such
payout shall be made as soon as practicable following the receipt of the
Participant's request.
(e) If the Internal Revenue Service determines that a
Participant or beneficiary is subject to federal income tax on an amount
credited to the Participant's account under the Plan before that amount would
otherwise become payable under the Plan, the amount that is then subject to tax
shall be paid to the Participant or beneficiary in a single lump-sum cash
payment as soon as practicable after the Committee is notified of the Internal
Revenue Service's determination.
5.4 FORM OF PAYOUT.
(a) Each Participant who makes a deferral election as to
any Plan Year may elect as the form of payout either (i) a single lump-sum
payment or (ii) up to fifteen approximately equal annual installment payments
(such number to be specified by the Participant); provided that all
compensation (whether Base Salary or Annual Bonus) deferred to a specific
Payout Year (regardless of the Plan Year for which the compensation is
deferred) shall be payable in the same form. Such election shall be irrevocable
except as otherwise provided in Section 5.3(d). If no such election is made,
then all deferred amounts, and the earnings thereon, shall be paid in the form
of a single lump-sum payment. All deferral elections are subject to Section
8(a), which requires an immediate lump-sum payment in the event of a Change in
Control.
(b) Lump-sum and installment payments shall be made on
the following terms:
(i) LUMP-SUM PAYMENT. Each payout to be made in the form
of a single lump-sum payment shall be made in cash on or
before the last business day of March in the Payout Year.
(ii) INSTALLMENT PAYMENTS. The first installment payment
of a payout to be made in installments shall be made in
cash on or before the last business day of March in the
Payout Year. The remaining installment payments shall be
made in cash each year thereafter, on or before the last
business day of March of such year, until the entire
balance of such Participant's applicable account has been
paid in full. Earnings shall continue to accrue to the
Participant's account during the payment period. The
amount of each installment payment shall be equal to the
balance remaining in the applicable account immediately
prior to each such payment, multiplied by a fraction, the
numerator of which is one, and the denominator of which
is the number of installment payments remaining
(including the installment payment immediately due).
(c) Notwithstanding the form of payout elected by a
Participant pursuant to this Section 5.4, with respect to any Payout Year, such
Participant may, at any time at least one year prior to such
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<PAGE> 10
Payout Year, petition the Committee to allow the payout for such Payout Year to
be changed from a single lump-sum cash payout to an installment payout. The
Committee may allow or refuse such request.
(d) Following the termination of the employment of a
Participant due to Retirement or Disability, notwithstanding the forms of
payout elected by a Participant pursuant to this Section 5.4 for all remaining
Payout Years, if, on the date any lump-sum or installment payment is due, the
payment to be made would cause the aggregate amount of all of the Participant's
account balances under the Plan to fall below $50,000, then the amount due, and
the remaining balance of each of the Participant's accounts, shall be paid to
such Participant on such date in a single lump-sum cash payment.
(e) Notwithstanding the provisions of this Section 5.4,
if a Participant is a "covered employee" (within the meaning of Section
162(m)(3) of the Code) when a payment is scheduled to be made under the Plan,
any portion of the payment that would be nondeductible under Section 162(m) of
the Code (when considered with all other compensation that the Participant is
expected to receive in the same taxable year) shall be deferred, and shall be
paid on the earliest date on which it would be deductible under Section 162(m).
(f) If the Company fails to makes any payment due under
the Plan within 90 days after it first becomes due, the Committee shall direct
the trustee of the Rabbi Trust to make the payment from the Rabbi Trust (to the
extent there are assets in the Rabbi Trust available to make the payment).
5.5 FINANCIAL HARDSHIP.
(a) If a Participant establishes, to the satisfaction of
the Committee, severe financial hardship, the Committee, may:
(i) authorize the cessation of deferrals by
such Participant;
(ii) provide that all or a portion of the
amounts previously deferred by the Participant shall
immediately be paid in a single lump-sum cash
payment;
(iii) provide that all or a portion of the
installments payable over a period of time shall be
paid immediately in a single lump-sum cash payment;
or
(iv) provide for such other payment schedule as
deemed appropriate by the Committee under the
circumstances.
(b) Severe financial hardship will be deemed to exist in
the event of an unanticipated emergency that is caused by the Participant's
long and serious illness, impending bankruptcy, or a similar event that is
beyond the control of the Participant and that would result in severe financial
hardship to the Participant if cessation of deferrals or modified payments were
not permitted. The amount distributed pursuant to this Section 5.5 shall not
exceed that amount which the Committee determines
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<PAGE> 11
to be reasonably necessary for the Participant to meet the financial hardship
at the time of distribution. The Committee's decision with respect to the
severity of financial hardship and the manner in which, if at all, the
Participant's future deferral opportunities shall cease, and/or the manner in
which, if at all, the payment of deferred amounts to the Participant shall be
modified, shall be final, conclusive, and not subject to appeal.
ARTICLE 6. INDIVIDUAL ACCOUNTS AND CREDITING OF INVESTMENT RETURNS
6.1 PARTICIPANTS' ACCOUNTS.
(a) The Company shall establish and maintain a separate
bookkeeping account for each deferral made by a Participant, and the earnings
thereon. Deferrals shall be credited to a Participant's account as of the date
the amount deferred otherwise would have become due and payable to such
Participant. Each Participant shall be furnished a statement of his deferred
compensation account balances at least annually.
(b) The establishment and maintenance of such deferred
compensation accounts by the Company shall not be construed as entitling any
Participant to any specific assets of the Company. The rights of Participants
to receive any distribution under the Plan shall be an unsecured claim against
the general assets of the Company.
6.2 INVESTMENT RETURNS ON DEFERRED AMOUNTS.
(a) All compensation deferred by a Participant pursuant
to Section 5.1 shall be deemed invested, as directed by the Participant, in one
or more of the investment alternatives made available from time to time by the
Committee. Each such investment election shall be made (i) by means of the
execution by the Participant and delivery to the Company of a "New Investment
Election Form or (ii) by means of such other methods as the Committee shall
approve. The Committee shall specify the available investment alternatives and
may adopt such rules and procedures for the allocation of deferrals among such
investment alternatives as the Committee deems necessary or appropriate. An
investment election shall be effective for all subsequent deferrals under Plan
until the Participant makes a new investment election.
(b) A Participant shall be permitted, at any time and
from time to time, to reallocate his deferred compensation account balances
under the Plan among the investment alternatives then available, subject to
right of the Committee to impose such restrictions on a Participant's ability
to change investment elections as the Committee deems necessary or appropriate.
The election of a Participant to reallocate account balances shall be made by
means of a form provided to the Participant by the Committee for such purpose,
and shall become effective as soon as practicable after a properly-executed
form is received by the Committee from the Participant.
(c) The balances of each Participant's deferred
compensation accounts shall be credited with earnings and charged with losses
based upon the actual results that would have been achieved had such balances
actually been invested pursuant to the investment elections of the Participant.
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(d) The Company shall have no obligation to invest the
compensation deferred under the Plan, or the earnings thereon, in any of the
investment alternatives selected by Participants.
6.3 CHARGES AGAINST ACCOUNTS. All payments made to a Participant
under the Plan shall be charged against such Participant's accounts when and as
made.
ARTICLE 7. RABBI TRUST
7.1 ESTABLISHMENT OF A RABBI TRUST. As soon as administratively
practicable following the Effective Date, the Company shall establish an
irrevocable Rabbi Trust to accumulate assets that will assist the Company in
meeting its obligation under the Plan. The Rabbi Trust shall have an
independent trustee that is selected by the Company. The trust agreement with
respect to the Rabbi Trust shall provide that the assets of the Rabbi Trust
shall at all times be specifically subject to the claims of the Company's
general creditors in the event of the bankruptcy or insolvency (as defined by
the Rabbi Trust Agreement) of the Company.
7.2 FUNDING OF THE RABBI TRUST. The Company may contribute cash,
Company Stock, or any other asset to the Rabbi Trust, as the Company deems
appropriate. It is intended that the Rabbi Trust will hold assets with a value
approximately equal to the Accrued Rabbi Trust Obligations.
ARTICLE 8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control:
(a) The Company shall, within ten business days after
the Change in Control, accelerate all deferred amounts to the date of the
Change in Control and pay all such deferred amounts, and the earnings thereon,
to each Participant or Beneficiary in a single lump-sum cash payment.
(b) The composition of the Committee immediately prior
to the Change in Control shall not be changed after the Change in Control,
except with the consent of a majority of the Continuing Directors. If, after
the Change in Control, a member of the Committee resigns or is unable to serve
due to death or disability, the remaining members of the Committee shall
appoint a replacement.
(c) The Company promptly shall reimburse a Participant
for all legal fees and expenses reasonably incurred in successfully enforcing
any right or benefit under the Plan.
ARTICLE 9. BENEFICIARY DESIGNATION
9.1 DESIGNATION OF BENEFICIARY. Each Participant may designate a
beneficiary or beneficiaries who, upon the Participant's death, will receive
the amounts that otherwise would have been paid to the Participant under the
Plan. All such designations shall be signed by the Participant, and shall be in
such form as is prescribed by the Committee. Each designation shall be
effective as of the date delivered to the Committee (or to a Company employee
appointed by the Committee to receive such designations); provided that the
Committee must receive any beneficiary designation or
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change therein before the Participant's death. A Participant may change his
beneficiary designation at any time and from time to time on such form as is
prescribed by the Committee. In the event of the death of the Participant, the
payment of all amounts deferred under the Plan, and the earnings thereon, shall
be in accordance with the last written beneficiary designation signed and
delivered by the Participant and not revoked.
9.2 PAYMENT TO BENEFICIARY. If a Participant dies before the end
of the deferral period for any amount under the Plan, the payment of that
amount to the Participant's beneficiary or beneficiaries shall be made in a
single lump-sum cash payment as provided in Section 5.3. If a Participant dies
after installment payments have commenced, but before they have been completed,
the remaining payments shall be made to the Participant's beneficiary or
beneficiaries under the installment schedule elected by the Participant.
9.3 DEATH OF BENEFICIARY. In the event that all the beneficiaries
of a Participant predecease the Participant, all amounts deferred under the
Plan, and the earnings thereon, that would have been paid to the Participant
under the Plan shall be paid in a single lump-sum cash payment to the
Participant's estate, or to the person or persons designated in writing by the
Participant's estate.
9.4 INEFFECTIVE DESIGNATION. In the event a Participant does not
designate a beneficiary, or for any reason such designation is ineffective, in
whole or in part, the amounts that otherwise would have been paid to the
Participant under the Plan shall be paid in a single lump-sum cash payment to
the Participant's estate.
ARTICLE 10. WITHHOLDING OF TAXES
The Company shall have the right to either (i) require Participants to
remit to the Company, or any person or entity designated by the Committee to
administer the Plan, an amount sufficient to satisfy any applicable federal,
state, and local income and employment tax withholding requirements or (ii) to
deduct from any payment made pursuant to the Plan amounts sufficient to satisfy
such withholding requirements.
ARTICLE 11. AMENDMENT AND TERMINATION
The Company has the right to amend, suspend, or terminate the Plan at
any time by action of the Board of Directors, except that (i) no such
amendment, suspension, or termination shall, without the written consent of a
Participant, change the time or form of any payout under the Plan or otherwise
adversely affect, in any material respect, such Participant's rights with
respect to amounts theretofore deferred under the Plan, and the earnings
thereon, and (ii) following a Change in Control, the Company shall not amend
Section 5.4(f), Articles 3, 7 or 8, or this Article 11, and shall not amend any
other provision of the Plan in a manner that would alter the effect of Section
5.4(f), Articles 3, 7 or 8, or this Article 11.
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ARTICLE 12. MISCELLANEOUS
12.1 EMPLOYMENT. No provision of the Plan, nor any action taken by
the Committee or the Company pursuant to the Plan, shall give or be construed
as giving a Participant any right to be retained in the employ of the Company,
or affect or limit in any way the right of the Company to terminate his
employment.
12.2 NOTICE. Any notice required or permitted to be given to the
Committee or the Company under the Plan shall be sufficient if in writing and
hand delivered, sent by registered or certified mail, or deliver in any other
manner authorized by the Committee, to the Committee (or to a person designated
by the Committee to receive such notices). Such notices, if mailed, shall be
addressed to the principal executive offices of the Company. Notice to any
Participant shall be given in any manner authorized by the Committee and, if
mailed, shall be sent to the Participant's address as is set forth in the
records of the Company.
12.3 UNFUNDED PLAN. This Plan is intended to be an unfunded plan
for tax purposes and for purposes of Title I of ERISA. The Plan is intended
primarily to provide deferred compensation benefits for "a select group of
management or highly compensated employees" within the meaning of Sections 201,
301, and 401 of ERISA, and therefore is further intended to be exempt from the
provisions of Parts 2, 3, and 4 of Title I of ERISA. The Committee may
terminate the Plan for any or all Participants, subject to Article 11, in order
to achieve and maintain these intended results.
12.4 SUCCESSORS. All obligations of the Company under the Plan
shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect merger or consolidation, the
purchase of all or substantially all of the assets of the Company, or
otherwise. The provision of the Plan with respect to each Participant shall be
binding on such Participant's heirs, executors, administrators or other
successors in interest.
12.5 NONTRANSFERABILITY. The Committee may recognize the right of
an alternate payee named in a domestic relations order to receive all or a
portion of a Participant's benefit under the Plan, provided that (i) the
domestic relations order would be a "qualified domestic relations order" within
the meaning of Section 414(p) of the Code if Section 414(p) were applicable to
the Plan, (ii) the domestic relations order does not purport to give the
alternate payee any right to assets of the Company or its affiliates, and (iii)
the domestic relations order does not purport to give the alternate payee any
right to receive payments under the Plan before the Participant is eligible to
receive such payments. Except as set forth in the preceding sentence with
respect to domestic relations orders, and except as required under applicable
federal, state, or local laws concerning the withholding of tax, the rights of
any Participant or beneficiary to amounts deferred under the Plan, and the
earnings thereon, are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Participant or any beneficiary, other than by will or by the
laws of descent and distribution. In no event shall the Company make any
payment under the Plan to any assignee or creditor of a Participant or
beneficiary.
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12.6 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
12.7 COSTS OF THE PLAN. All costs of implementing and
administering the Plan shall be borne by the Company.
12.8 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the state of New Jersey, without giving effect to
any choice or conflict of law provision or rule.
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EXHIBIT 10(k)
UNFUNDED SUPPLEMENTAL BENEFIT PLAN
FOR SALARIED EMPLOYEES
Vulcan Materials Company
January 29, 1999
<PAGE> 2
CONTENTS
- -------------------------------------------------------------------------------
Article 1. Establishment and Purpose
Article 2. Definitions
Article 3. Administration
Article 4. Eligibility and Participation
Article 5. Supplemental Thrift Benefits
Article 6. Supplemental Retirement Benefits
Article 7. Rabbi Trust
Article 8. Change in Control
Article 9. Beneficiary Designation -- Supplemental Thrift Benefits
Article 10. Withholding Taxes
Article 11. Amendment and Termination
Article 12. Miscellaneous
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VULCAN MATERIALS COMPANY
UNFUNDED SUPPLEMENTAL BENEFIT PLAN FOR SALARIED EMPLOYEES
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. Vulcan Materials Company, a New Jersey corporation,
hereby amends and restates, effective as of January 29, 1999 (the "Effective
Date"), the Vulcan Materials Company Unfunded Supplemental Benefit Plan for
Salaried Employees (the "Plan").
1.2 PURPOSE. The primary purpose of the Plan is to make up for the
reduction in benefits attributable to the tax-qualified plan limits of the
Code, including Section 401(a)(17) and Section 415, and as a result of elective
deferrals under the Vulcan Materials Company Executive Deferred Compensation
Plan.
ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have the
meanings set forth below, and when the meaning is intended, the term is
capitalized:
(a) "Alternate Matching Contribution" means, with respect to
any Participant, an amount equal to (i) the Matching
Contribution that would have been made to the Investment
Account (as such term is defined in the Thrift Plan) of
the Participant for a given month were it not for the
application of such Limitations, minus (ii) the Matching
Contribution made to the Investment Account of such
Participant for such month, after application of the
Limitations.
(b) "Board" or "Board of Directors" means the Board of
Directors of the Company.
(c) "Change in Control" means:
(1) the acquisition by any person, entity or
"group," within the meaning of Section 13(d)(3) or
(14)(d)(2) of the Exchange Act (excluding for this
purpose, any employee benefit plan of the Company or any
of its subsidiaries which acquires beneficial ownership of
voting securities of the Company), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of either the then
outstanding shares of Common Stock or the combined voting
power of the Company's then outstanding voting securities,
in one transaction or a series of transactions; provided,
however, that, if prior to such an acquisition, a majority
of the Continuing Directors determines that such
acquisition shall not, for purposes of the Plan, be deemed
a Change in Control, such acquisition shall not constitute
a Change in Control hereunder;
(2) individuals who, as of the Effective Date,
constitute the Board (the "Continuing Directors") cease
for any reason to constitute at least a majority of the
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Board, provided that any person becoming a director of the
Company subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the
Continuing Directors (other than an election or nomination
of an individual whose initial assumption of office is in
connection with an actual or threatened solicitation with
respect to the election or removal of directors of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall
be, for purposes of the Plan, considered as though such
person were a Continuing Director; or
(3) approval by the Board of (i) a merger,
consolidation or reorganization of the Company in which,
as a consequence of the transaction, either the Continuing
Directors do not constitute a majority of the directors of
the continuing or surviving corporation or any person,
entity or "group," within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act, controls 25% or more of
the combined voting power of the continuing or surviving
corporation; (ii) any sale, lease or other transfer, in
one transaction or a series of transactions, of all or
substantially all of the assets of the Company; or (iii)
any plan or proposal for the liquidation or dissolution of
the Company; provided, however, that, if at the time of
such approval, a majority of the Continuing Directors
determines that such merger, consolidation,
reorganization, sale, lease, other transfer, liquidation
or dissolution shall not, for purposes of the Plan, be
deemed a Change in Control, such transaction shall not
constitute a Change in Control hereunder, and, provided
further, that, if a majority of the Continuing Directors
so determines, a Change in Control shall not be deemed to
occur until the consummation of any such transaction.
(d) "CEO" means the Chief Executive Officer of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the Compensation Committee of the Board
(or any other committee designated by the Board that is
eligible to administer the Plan in accordance with Rule
16b-3 under the Exchange Act).
(g) "Company" means Vulcan Materials Company and also includes
any Employing Company (as such term is defined in the
Retirement Plan).
(h) "Company Stock" means the common stock of the Company.
(i) "Disability" shall have the meaning ascribed to such term
in the Company's long-term disability plan or, if no plan
is then in effect, shall mean the determination by the
Committee that the physical or mental condition of a
Participant renders such Participant unable to carry out
his or her duties and obligations to the Company.
(j) "Early Retirement" shall have the same meaning as defined
under the Retirement Plan.
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(k) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Limitations" means:
(i) the limitations set forth in Section 415 of the Code;
(ii) the dollar limit imposed by Section 401(a)(17) of the
Code on the amount of compensation which may be taken into
account under the Thrift Plan and the Retirement Plan; and
(iii) the reduction in the compensation that is taken into
account under the Thrift Plan and the Retirement Plan
(determined without regard to the dollar limit imposed by
Section 401(a)(17) of the Code) to the extent that the
reduction is attributable to the Participant's election to
defer such compensation on a nonqualified basis under
Section 5.1 of the Vulcan Materials Company Executive
Deferred Compensation Plan.
(n) "Matching Contribution" shall have the same meaning as
defined under the Thrift Plan.
(o) "Normal Retirement Date" shall have the same meaning as
defined under the Retirement Plan.
(p) "Participant" means any key management employee of the
Company who has been approved by the Committee for
participation in the Plan under Section 4.1.
(q) "PBGC" means the Pension Benefit Guaranty Corporation.
(r) "Plan Year" means the period of 12 consecutive months
beginning each January 1 and ending December 31.
(s) "Rabbi Trust" means a grantor trust, as described in
Section 677 of the Code, that is established by the
Company as provided in Article 7.
(t) "Rabbi Trust Agreement" means the instrument establishing
the Rabbi Trust, as such instrument may be amended from
time to time.
(u) "Retirement Plan" means the Retirement Income Plan for
Salaried Employees of Vulcan Materials Company, as the
same may be from time to time amended.
(v) "Supplemental Retirement Benefits" means the benefits that
are payable under Sections 6.1, 6.2, 6.3 or 6.4 of the
Plan.
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(w) "Supplemental Thrift Benefits" means the benefits that are
payable under Article 5 of the Plan.
(x) "Termination of Employment Service" shall have the same
meaning as defined under the Retirement Plan.
(y) "Termination Due to Disability" of a Participant is deemed
to have occurred on the date that the Committee determines
the Disability of the Participant to be total and
permanent.
(z) "Thrift Plan" means the Vulcan Materials Company Thrift
Plan for Salaried Employees, as the same may be from time
to time amended.
(aa) "Vested Benefit" shall have the same meaning as defined
under the Retirement Plan.
(bb) "Vesting Date" shall have the same meaning as defined
under the Retirement Plan.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee. In no
event shall any member of the Committee be a Participant.
3.2 AUTHORITY OF THE COMMITTEE.
(a) Subject to the terms of the Plan, the Committee shall have
full power and discretionary authority (i) to determine the terms and
conditions of each Participant's participation in the Plan, (ii) to construe
and interpret the Plan and any agreement or instrument entered into under the
Plan, (iii) to establish, amend, and waive rules and regulations for the Plan's
administration, (iv) subject to the provisions of Article 11, to amend the Plan
and any agreement or instrument entered into under the Plan or to terminate the
Plan, (v) to appoint and remove the trustee and the recordkeeper for the Rabbi
Trust, and to direct the trustee and the recordkeeper with respect to their
duties under the agreements pertaining to the Rabbi Trust, and (vi) to make any
other determinations that may be necessary or advisable for the administration
of the Plan.
(b) To the extent permitted by law, the Committee (i) may
delegate any or all of its authority granted under the Plan to one or more
executives of the Company (provided that no executive of the Company who is a
Participant shall exercise any authority with respect to his own participation
in the Plan) and (ii) may designate one or more individuals who are not
Participants (but who may be employees of the Company) to carry out ministerial
duties related to the administration of the Plan, except that the Committee
shall not delegate responsibility for any matter involving a person subject to
Section 16 of the Exchange Act if a decision by the Committee as to such matter
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<PAGE> 7
would have the effect of exempting a transaction under the Plan from the
application of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or any
successor rule thereunder.
3.3 DECISIONS BINDING. All determinations and decisions of the Committee
(or of any person to whom the Committee has delegated its authority) under the
Plan, including questions of construction and interpretation, shall be final,
conclusive, and binding on the employees of the Company, the Participants and
their beneficiaries and estates. Whenever the Plan authorizes the Committee or
any other person to exercise discretion with respect to any matter, such
discretion may be exercised in the sole and absolute discretion of the
Committee or such person, subject only to the terms of the Plan and applicable
requirements of law.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Persons eligible to participate in this Plan shall be
limited to full-time, salaried employees of the Company, who are determined to
be "key employees" by the CEO and who are approved for participation by the
Committee. Further, to be eligible, an employee must be among a select group of
management or highly compensated employees of the Company, such that the Plan
qualifies for a "top hat" exemption under Title I of ERISA, as further
described in Section 12.3 herein.
4.2 PARTICIPATION.
(a) Unless otherwise determined by the Committee, Participants in
the Plan shall be eligible to receive both Supplemental Thrift Benefits and
Supplemental Retirement Benefits. Employees who have been approved for
participation in the Plan shall be notified in writing of such approval as soon
as administratively practicable thereafter.
(b) Subject to the following sentence, in the event a Participant
no longer meets the eligibility requirements for participation in the Plan,
such Participant shall retain all the rights of a Participant under the Plan,
except for (i) the right to receive further Alternative Matching Contributions
and (ii) the right to accrue additional Supplemental Retirement Benefits. If a
Participant no longer falls within a select group of management or highly
compensated employees of the Company, the Committee shall have the right to
distribute to the Participant in cash all of the Participant's benefits
previously accrued under the Plan.
ARTICLE 5. SUPPLEMENTAL THRIFT BENEFITS
5.1 PARTICIPANT ACCOUNTS.
(a) The Company shall establish and maintain a separate bookkeeping
account for the Alternative Matching Contributions, and the investment returns
thereon, of each Participant (a "Supplemental Thrift Benefits Account
Balance"). Each Participant shall be furnished with a statement of his account
balance at least annually.
(b) The establishment and maintenance of such accounts by the Company
shall not be construed as entitling any Participant to any specific assets of
the Company. The rights of
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<PAGE> 8
Participants to receive any distribution under the Plan shall be an unsecured
claim against the general assets of the Company.
5.2 ALTERNATIVE MATCHING CONTRIBUTIONS. If under the Thrift Plan a
Matching Contribution to a Participant is reduced by the application of the
Limitations, such Participant shall be entitled to have an Alternative Matching
Contribution credited to the Participant's Supplemental Thrift Benefits Account
Balance. Such credit shall be made at the same time as the Matching
Contribution (as so reduced) is made to the Participant under the Thrift Plan.
5.3 INVESTMENT RETURN.
(a) Each Participant's Supplemental Thrift Benefits Account Balance under
the Plan shall be deemed invested, at the Participant's election, in any
investment funds that are available for the investment of the Participant's
Matching Contributions Account under the Thrift Plan. A Participant shall make
an investment election (or change a previous election) in writing in a manner
acceptable to the Committee, and the Committee may adopt such rules and
procedures for the deemed investment of Participants' Supplemental Thrift
Benefits Account Balances as the Committee considers necessary or appropriate.
An investment election shall be effective for all amounts subsequently credited
to the Participant's Supplemental Thrift Benefits Account Balance until the
Participant makes a new investment election. If a Participant has not made an
investment election, the Participant's Supplemental Thrift Benefits Account
Balance shall be deemed invested and reinvested in the same proportions among
such investment funds as is the Matching Contributions Account of the
Participant under the Thrift Plan, subject to such restrictions and limitations
as the Committee may deem necessary or appropriate.
(b) Each Participant shall be entitled to an investment return
based on the deemed investment of the Participant's Supplemental Thrift
Benefits Account Balance, which shall be adjusted at such times and in such
manner as the Committee deems appropriate to reflect the investment results of
the investment funds in which such balance is deemed invested.
(c) The Company shall have no obligation to invest any amounts in
the investment funds in which the Supplemental Thrift Benefits Account Balances
of Participants are deemed invested.
5.4 CHARGES AGAINST ACCOUNTS. All payments made to a Participant under
the Plan shall be charged against such Participant's Supplemental Thrift
Benefits Account Balance when and as made.
5.5 DISTRIBUTIONS.
(a) Unless the Committee shall authorize another form of payment,
a Participant's Supplemental Thrift Benefits Account Balance shall be
distributed to the Participant, at the election of the Participant, in the form
of (i) a single lump-sum cash payment or (ii) installments over a period of ten
years. The Participant shall irrevocably elect a form of payment within 30
calendar days after he first becomes eligible to participate in the Plan (or,
if later, within 30 days after the date of the amendment adding the installment
option to the Plan). If no such election is made, the Participant's
Supplemental Thrift Benefits Account Balance shall be paid in a single lump-sum
cash payment.
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<PAGE> 9
Such distribution shall be made or such distributions shall commence within 30
calendar days after the Participant's Termination of Employment Service or
Termination Due to Disability.
(b) Notwithstanding that a Participant may have elected a single
lump-sum payment with respect to his Supplemental Thrift Benefits Account
Balance pursuant to paragraph (a), such Participant may, at any time at least
one year prior to the payment date, petition the Committee to allow the payment
to be changed to a ten-year installment payout. The Committee may allow or
refuse such request.
(c) If the Company fails to make any payment due under this
Article 5 within 90 days after it first becomes due, the payment shall be made
from the Rabbi Trust (to the extent assets in the Rabbi Trust are available to
make the payment).
ARTICLE 6. SUPPLEMENTAL RETIREMENT BENEFITS.
6.1 NORMAL RETIREMENT.
If a Participant retires at or after such Participant's Normal
Retirement Date in accordance with the provisions of the Retirement Plan, such
Participant shall be entitled to a Supplemental Retirement Benefit equal to (i)
the amount of such Participant's normal retirement benefit under the Retirement
Plan, based upon such Participant's election as to the form of benefit payment,
without regard to the Limitations, reduced by (ii) the amount of such
Participant's retirement benefit under the Retirement Plan, based upon such
Participant's election as to the form of benefit payment, after application of
the Limitations.
6.2 EARLY RETIREMENT.
If a Participant elects Termination of Employment Service in
order to take Early Retirement in accordance with the provisions of the
Retirement Plan, such Participant shall be entitled to a Supplemental
Retirement Benefit equal to (i) the amount of such Participant's early
retirement benefit under the Retirement Plan, based upon such Participant's
election as to the form of benefit payment, without regard to the Limitations,
reduced by (ii) the amount of such Participant's early retirement benefit under
the Retirement Plan, based upon such Participant's election as to the form of
benefit payment, after application of the Limitations.
6.3 VESTED BENEFIT.
If a Participant experiences a Termination of Employment Service
after reaching his Vesting Date under the Retirement Plan and is not entitled
to a Supplemental Retirement Benefit under Section 6.1 or Section 6.2, such
Participant shall be entitled to a Supplemental Retirement Benefit equal to (i)
the amount of such Participant's Vested Benefit computed under the Retirement
Plan, based on such Participant's election as to the form of benefit payment,
without regard to the Limitations, reduced by (ii) the amount of such
Participant's Vested Benefit computed under the Retirement Plan, based on such
Participant's election as to the form of benefit payment, after application of
the Limitations.
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<PAGE> 10
6.4 DEATH.
(a) All provisions of the Retirement Plan pertaining to the
designation of beneficiaries, including revocation thereof and the effect of a
failure to designate a beneficiary, shall also apply with the same force and
effect to the Plan. Each action taken by a Participant with respect to the
designation or revocation of a beneficiary or beneficiaries under the
Retirement Plan shall automatically extend to the Plan.
(b) If a Participant's beneficiary becomes eligible at any time
to receive a survivor annuity or death benefit payable prior to the
commencement of such Participant's retirement benefit under the Retirement
Plan, the beneficiary shall be entitled to a Supplemental Retirement Benefit
equal to (i) the amount of the survivor annuity or death benefit which the
beneficiary is entitled to receive under the Retirement Plan, without regard to
the Limitations, reduced by (ii) the amount of the survivor annuity or death
benefit which the beneficiary is entitled to receive under the Retirement Plan,
after application of the Limitations.
6.5 BENEFIT PAYMENTS.
(a) Except as otherwise provided in paragraph (b), the payment of
a Supplemental Retirement Benefit to which a Participant or such Participant's
beneficiary is entitled under the Plan shall be made in the same manner and
subject to the same conditions as is the corresponding benefit under the
Retirement Plan.
(b) If a Participant or such Participant's beneficiary is
entitled to a Supplemental Retirement Benefit and if the present value of such
Supplemental Retirement Benefit is $10,000 or less (determined as of the date
payment of such Supplemental Retirement Benefit is to be made using the
interest and mortality assumptions that are used under the Retirement Plan to
satisfy Section 417(e) of the Code), the Company shall have the option to pay
such Supplemental Retirement Benefit in the form of a single lump-sum cash
payment.
6.6 TAXABILITY OF BENEFITS PRIOR TO PAYMENT.
If the Internal Revenue Service determines that a Participant or
beneficiary is subject to federal income tax on any portion of a Supplemental
Retirement Benefit before that benefit would otherwise become payable under the
Plan, the amount that is then currently subject to tax shall be paid to the
Participant or beneficiary in a single lump-sum cash payment as soon as
practicable after the Committee is notified of the Internal Revenue Service's
determination.
ARTICLE 7. RABBI TRUST
7.1 ESTABLISHMENT OF A RABBI TRUST. As soon as administratively
practicable following the Effective Date, the Company shall establish an
irrevocable Rabbi Trust to accumulate assets that will assist the Company in
meeting its obligations under the Plan. The Rabbi Trust shall have an
independent trustee that is selected by the Company. The trust agreement with
respect to the Rabbi Trust shall provide that the assets of the Rabbi Trust
shall at all times be specifically subject to the claims of the Company's
creditors in the event of the bankruptcy or insolvency (as defined by the Rabbi
Trust Agreement) of the Company.
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<PAGE> 11
7.2 FUNDING OF THE RABBI TRUST. Except as otherwise provided in Article
8, the Company may contribute cash, Company Stock, or any other asset to the
Rabbi Trust when and as the Company deems appropriate.
ARTICLE 8. CHANGE IN CONTROL
8.1 FUNDING OF THE RABBI TRUST. Upon the occurrence of a Change in
Control, (i) the Company shall within ten business days thereafter contribute
to the Rabbi Trust in cash an amount sufficient to cover all Supplemental
Thrift Benefits and Supplemental Retirement Benefits accrued hereunder as of
date on which the Change in Control occurs and (ii) the Company, within 30 day
after the commencement of each Plan Year thereafter, shall contribute to the
Rabbi Trust in cash such additional amounts as shall be necessary to ensure
that the assets of the Rabbi Trust are at least sufficient to cover all
Supplemental Thrift Benefits and Supplemental Retirement Benefits accrued as of
the commencement of such Plan Year.
8.2 PAYMENT OF SUPPLEMENTAL THRIFT BENEFITS.
(a) If at any time after the occurrence of such Change in Control
any of the following events (each, an "Accelerating Event") occurs:
(i) a Participant's employment terminates for any reason; or
(ii) the Plan is terminated;
then the terminated Participant (in the case of clause (i)), or any Participant
(in the case of clause (ii), shall be entitled to receive a lump-sum cash
payment equal to: (A) such Participant's Supplemental Thrift Benefit and (B)
the present value (determined using the interest and mortality assumptions that
are used under the Retirement Plan to satisfy Section 417(e) of the Code) of
the Vested Benefit to which such Participant would be entitled pursuant to
Section 6.3 if the Accelerating Event constituted a Termination of Employment
Service by the Participant after reaching such Participant's Vesting Date under
the Retirement Plan.
(b) The Company shall make, or shall cause the Rabbi Trust to make,
the payments due under this Section 8.2 as soon as practicable, but not more
than 30 days following, the date on which a demand for payment is received from
the Participant.
8.3 COMPOSITION OF THE COMMITTEE. The composition of the Committee
immediately prior to the Change in Control shall not be changed after the
Change in Control, except with the consent of a majority of the Continuing
Directors. If, after the Change in Control, a member of the Committee resigns
or is unable to serve due to death or disability, the remaining members of the
Committee shall appoint a replacement.
8.4 REIMBURSEMENT OF FEES AND EXPENSES. Following a Change in Control,
the Company promptly shall reimburse a Participant for all legal fees and
expenses reasonably incurred in successfully enforcing any right or benefit
under the Plan.
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ARTICLE 9. BENEFICIARY DESIGNATION -- SUPPLEMENTAL THRIFT BENEFITS
9.1 DESIGNATION OF BENEFICIARY. Each Participant may designate a
beneficiary or beneficiaries who, upon the Participant's death, will receive
the Supplemental Thrift Benefits that otherwise would have been paid to the
Participant under the Plan. All such designations shall be signed by the
Participant, and shall be in such form as is prescribed by the Committee. Each
designation shall be effective as of the date delivered to the Committee (or to
a Company employee appointed by the Committee to receive such designations);
provided that the Committee must receive any beneficiary designation or change
therein before the Participant's death. A Participant may change his
beneficiary designation, at any time and from time to time, on such form as is
prescribed by the Committee. In the event of the death of the Participant, the
payment of all amounts deferred under the Plan, and the earnings thereon, shall
be in accordance with the last written beneficiary designation signed and
delivered by the Participant and not revoked.
9.2 PAYMENT TO BENEFICIARY. If a Participant dies before his Supplemental
Thrift Benefit has been paid in full, the payment thereof to the Participant's
beneficiary or beneficiaries shall be made in a single lump-sum cash payment as
soon as practicable following the Participant's death.
9.3 DEATH OF BENEFICIARY. In the event that all the beneficiaries of a
Participant predecease the Participant, the Supplemental Thrift Benefit that
would have been paid to the Participant under the Plan shall be paid in a
single lump-sum cash payment to the Participant's estate, or to the person or
persons designated in writing by the Participant's estate.
9.4 INEFFECTIVE DESIGNATION. In the event a Participant does not
designate a beneficiary with respect to his Supplemental Thrift Benefit, or for
any reason such designation is ineffective, in whole or in part, the
Supplemental Thrift Benefit that otherwise would have been paid to the
Participant under the Plan shall be paid in a single lump-sum cash payment to
the Participant's estate.
ARTICLE 10. WITHHOLDING OF TAXES
The Company shall have the right to either (i) require Participants to
remit to the Company, or any person or entity designated by the Committee to
administer the Plan, an amount sufficient to satisfy any applicable federal,
state, and local income and employment tax withholding requirements or (ii) to
deduct from any payment made pursuant to the Plan amounts sufficient to satisfy
such withholding requirements.
ARTICLE 11. AMENDMENT AND TERMINATION
The Company has the right to amend, suspend, or terminate the Plan at any
time by action of the Board of Directors, except that (i) no such amendment,
suspension, or termination shall, without the written consent of a Participant,
change the time or form of any payout under the Plan or otherwise adversely
affect, in any material respect, such Participant's rights with respect to
amounts theretofore accrued under the Plan, and (ii) following a Change in
Control, the Company shall not amend Section 5.5 (b), Articles 3, 7 or 8, or
this Article 11, and shall not amend any other provision of the Plan in a
manner that would alter the effect of Section 5.5(b), Articles 3, 7 or 8, or
this Article 11.
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ARTICLE 12. MISCELLANEOUS
12.1 EMPLOYMENT. No provision of the Plan, nor any action taken by the
Committee or the Company pursuant to the Plan, shall give or be construed as
giving a Participant any right to be retained in the employ of the Company, or
affect or limit in any way the right of the Company to terminate his
employment.
12.2 NOTICE. Any notice required or permitted to be given to the
Committee or the Company under the Plan shall be sufficient if in writing and
hand delivered, sent by registered or certified mail, or delivered in any other
manner authorized by the Committee, to the Committee (or to a person designated
by the Committee to receive such notices). Such notices, if mailed, shall be
addressed to the principal executive offices of the Company. Notice to any
Participant shall be given in any manner authorized by the Committee and, if
mailed, shall be sent to the Participant's address as is set forth in the
records of the Company.
12.3 UNFUNDED PLAN. This Plan is intended to be an unfunded plan for tax
purposes and for purposes of Title I of ERISA. The Plan is intended primarily
to provide deferred compensation benefits for "a select group of management or
highly compensated employees" within the meaning of Sections 201, 301, and 401
of ERISA, and therefore is further intended to be exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA. The Committee may terminate the Plan for
any or all Participants, subject to Article 11, in order to achieve and
maintain these intended results.
12.4 SUCCESSORS. All obligations of the Company under the Plan shall be
binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect merger or consolidation, the
purchase of all or substantially all of the assets of the Company, or
otherwise. The provision of the Plan with respect to each Participant shall be
binding on such Participant's heirs, executors, administrators or other
successors in interest.
12.5 NONTRANSFERABILITY. The Committee may recognize the right of an
alternate payee named in a domestic relations order to receive all or a portion
of a Participant's benefit under the Plan, provided that (i) the domestic
relations order would be a "qualified domestic relations order" within the
meaning of Section 414(p) of the Code if Section 414(p) were applicable to the
Plan, (ii) the domestic relations order does not purport to give the alternate
payee any right to assets of the Company or its affiliates, and (iii) the
domestic relations order does not purport to give the alternate payee any right
to receive payments under the Plan before the Participant is eligible to
receive such payments. Except as set forth in the preceding sentence with
respect to domestic relations orders, and except as required under applicable
federal, state, or local laws concerning the withholding of tax, the rights of
any Participant or beneficiary to amounts deferred under the Plan, and the
earnings thereon, are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Participant or any beneficiary, other than by will or by the
laws of descent and distribution. In no event shall the Company make any
payment under the Plan to any assignee or creditor of a Participant or
beneficiary.
12.6 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
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<PAGE> 14
12.7 COSTS OF THE PLAN. All costs of implementing and administering the
Plan shall be borne by the Company.
12.8 GOVERNING LAW. To the extent not preempted by federal law, the Plan
shall be governed by and construed in accordance with the laws of the state of
New Jersey, without giving effect to any choice or conflict of law provision or
rule.
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<PAGE> 1
EXHIBIT 10(L)
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of January 6, 1999 between VULCAN
MATERIALS COMPANY, a New Jersey corporation (the "Parent"), and A. FREDERICK
GERSTELL (the "Consultant").
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of
November 14, 1998 among CALMAT CO., a Delaware corporation (the "Company"),
Parent and ALB Acquisition Corp., a Delaware corporation ("ALB") and a wholly
owned subsidiary of Parent (the "Merger Agreement"), Parent has agreed to
acquire all of the outstanding common stock of the Company through the merger
of ALB with and into the Company (the "Merger");
WHEREAS, the Consultant has been employed by the Company for 23 years
and employed in the construction materials industry for 37 years and possesses
an intimate knowledge of the Company's business and industry;
WHEREAS, Parent, the Company and the Consultant recognize that the
continued application of the Consultant's experience, abilities and services to
the business of the Company and its affiliates would be extremely beneficial to
the Company and to Parent;
WHEREAS, subject to the provisions hereof, Parent wishes to be assured
that for at least the 17-month period following the effective time of the
Merger (the "Effective Time"), the Consultant will be available to consult with
the Company and Parent and that the Consultant will be restricted from
disclosing certain information concerning the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein set forth and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Effectiveness. This Agreement shall only become effective at
such time as the Merger becomes effective (the "Effective Time").
2. Term. Subject to Section 1 hereof, the term of this Agreement
shall commence at the Effective Time and shall expire 17 months thereafter (the
"Initial Term"). The Initial Term shall automatically renew for consecutive
12-month periods unless, at least 90 days prior to the end of the Initial Term
(or prior to the end of any successive 12-month period, if applicable), either
party hereto notifies the other party in writing
<PAGE> 2
that it does not wish to renew this Agreement for another 12-month period (the
Initial Term and each successive 12-month period, if any, being collectively
referred to as the "Term").
3. Duties/Location. From time to time during the Term, as and
when requested by the person then serving as chief executive officer of Parent
(the "CEO") or by the Board of Directors of Parent (the "Board"), the
Consultant will make himself available to consult and cooperate with and advise
the CEO or the Board, as applicable, to the best of his ability, with respect
to post-Merger transition matters involving the business and affairs of the
Company, as well as, with respect to Parent and its affiliates, investor
relations and legislative matters (through Consultant's serving as Chairman of
the National Stone Association). The Consultant will perform such services on a
limited time basis, subject to his reasonable availability. The performance of
the Consultant's duties in his capacity as Chairman of the National Stone
Association shall be deemed to be consulting services by the Consultant on
behalf of Parent and the Company under this Agreement. Except for any required
travel, Consultant shall be principally based in the Los Angeles, California
metropolitan region.
4. Compensation.
(a) Monthly Retainer Fee. In consideration of the Consultant's
agreements herein and his services as a consultant during the Term, the Company
shall pay to the Consultant a monthly retainer fee equal to $10,600 per month,
payable in a lump sum in arrears. Nothing herein shall limit or impair the
Consultant's entitlement to receive his vested benefits under the Company's
applicable plans and arrangements which are accrued as of the Effective Time.
Parent acknowledges and agrees that the Consultant's rights under Section 3.2
(but only relating to the Consultant's purchase rights with respect to his
current Company-provided automobile), 3.5 (relating to excise tax payments),
4.5 (relating to indemnification for acts of the Consultant occurring prior to
the Effective Time), 4.6 (relating to dispute resolution) and 4.7 (relating to
attorneys' fees) of his employment agreement with the Company dated as of April
13, 1993, as amended (as amended, the "Employment Agreement"), shall continue
in effect notwithstanding the earlier payment by the Company to the Consultant
of the severance benefits to which the Consultant was entitled under the
Employment Agreement as of the effective time of the Merger.
(b) Restricted Stock. At the Effective Time, Consultant shall
receive an initial grant of 2,500 shares of restricted common stock of Parent
("Restricted Stock"). On the first anniversary of the Effective
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<PAGE> 3
Time (the "First Anniversary"), all restrictions on such shares of Restricted
Stock shall lapse. On the First Anniversary, the Consultant shall receive a new
grant of 1,042 shares of Restricted Stock, provided that the Consultant's
services hereunder have not been terminated prior to such date. The
restrictions on these 1,042 shares of Restricted Stock shall lapse on the date
which is five months following the First Anniversary. Notwithstanding the
foregoing, in the event that the Consultant is involuntarily terminated as a
consultant to Parent for Cause or terminates as a consultant for other than
Good Reason (as each such term is defined herein) prior to any date on which
the restrictions on the Restricted Stock granted hereunder have lapsed, the
Consultant shall forfeit his entitlement to receive any such shares which are
then still subject to restrictions. In the event, during the Term, of (i) the
Consultant's death or disability, (ii) his termination by Parent other than for
Cause or (iii) his termination for Good Reason, the restrictions on all shares
of Restricted Stock which have been granted to him shall lapse, and, if the
event described in clause (i), (ii) or (iii) above occurs prior to the First
Anniversary, the Consultant (or the Consultant's estate) shall also receive the
1,042 shares which would have been granted to him on the First Anniversary,
free and clear of all restrictions. The Consultant shall be entitled to receive
all dividends declared and paid on shares of Restricted Stock during the period
that such shares are subject to restrictions and such dividends, once paid,
shall not thereafter be subject to forfeiture.
(c) Perquisites. During the Term, Parent shall provide, or cause
the Company to continue to provide, the Consultant with the perquisites that he
is being provided by the Company immediately prior to the Effective Time,
excluding a Company-provided automobile (although Parent shall preserve his
purchase rights under his Employment Agreement with respect to his current
Company-provided automobile), and reimbursement of country club membership dues
and tax and financial planning fees. Parent shall provide, or cause the Company
to provide, post-retirement medical, dental and life insurance benefits to
Consultant (and his eligible dependents) on the same basis that the Company
provided such benefits to its eligible retirees immediately prior to the
Effective Time or on such other basis as may be in effect for such eligible
retirees from time to time.
(d) Extensions of the Term After the Initial Term. Unless
otherwise agreed to by the parties hereto in writing, if the Term is extended
beyond the Initial Term pursuant to Section 2 hereof, the Consultant will be
paid the $10,600 monthly consulting retainer fee and receive a 2,500 share
grant of Restricted Stock during each such 12-month period in accordance with
the terms and conditions of Sections 4(a) and 4(b) hereof,
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<PAGE> 4
respectively, subject to a 10% increase (compounded for each 12-month period)
of the monthly consulting retainer fee and 2,500 share Restricted Stock grant
for each 12-month period that the Term is extended beyond the Initial Term. All
other provisions of this Agreement which are applicable during the Initial Term
shall continue to apply during any one-year extension thereof.
(e) Cause and Good Reason Definitions. For purposes hereof, (i)
"Cause" shall mean (A) the Consultant's conviction of, or plea of nolo
contendere to a charge of commission of, a felony or (B) the Consultant's
wilful and continued failure to substantially perform the consulting duties
required of him hereunder after receiving a written notice from the Company of
his failure to so perform and his failure to cure within 15 days after receipt
of such notice or (C) a violation in any material respect of Section 9 and (ii)
"Good Reason" shall mean (A) Parent's failure to pay or award the Consultant in
accordance with this Agreement any compensation or Restricted Stock (including
the release of restrictions thereon) after receipt of written notice from the
Consultant specifying such failure and Parent's failure to cure within 15 days
after Parent's receipt of such notice, (B) Parent's requiring the Consultant to
be principally based anywhere other than the Los Angeles metropolitan region,
or (C) any other breach by Parent of any other material provision of this
Agreement which is not cured by Parent within 15 days of Parent's receipt of
notice from the Consultant specifying such breach.
5. Office and Support Staff. Parent, at its own expense, (i)
shall provide the Consultant with suitable office space at the Company's
headquarters in Los Angeles or at such other location in the Los Angeles
metropolitan region as shall be reasonably acceptable to the Consultant during
the Term, and (ii) during the Initial Term only, shall continue to provide and
maintain for the Consultant the Consultant's office and parking space in
Beverly Hills, California. During the Term, the Consultant shall be provided
with secretarial assistance at the Company's headquarters in the Los Angeles,
California metropolitan area (including, if the Consultant so elects, the
services of the person serving as his secretary immediately prior to the
Effective Time if she is then in employment with the Company) commensurate with
his position as a consultant and past Company practice.
6. Travel. Consultant shall be entitled to travel on
business-related matters (and shall be reimbursed therefor by Parent (or Parent
shall cause Company to reimburse the Consultant) in accordance with Section 7
hereof) on a first-class basis on commercial airliners consistent with past
practice. The Consultant shall also be entitled to have his spouse accompany
him from time to time on business-related travel and be reimbursed
4
<PAGE> 5
by Parent (or Company, if applicable) therefor consistent with past Company
practice. Consultant shall travel on business-related matters only as
reasonably required in the performance of his consulting services.
7. Expenses. The Consultant shall be entitled to receive
reimbursement for all reasonable expenses incurred by the Consultant (in
accordance with policies and procedures substantially the same as those
established by the Board for its senior executive officers) in performing
services hereunder provided that the Consultant properly accounts therefor.
8. Termination of Agreement Prior to Expiration of the Term. If
the Consultant ceases to serve as a consultant to Parent prior to the
expiration of the Term, he shall be entitled to payment of all accrued but
unpaid monthly retainer fees under Section 4(a) through the date of termination
of the Consultant's services under this Agreement, including a prorated monthly
retainer for the month in which such date of termination occurs. If the
Consultant ceases to serve as a consultant to Parent prior to the expiration of
the Term due to (i) Good Reason, or (ii) his involuntary termination by Parent
without Cause, he shall receive, within five business days following his
ceasing to serve as a consultant, without any discounting, all of the monthly
retainer fees which would have been paid through the remainder of the Term. The
amounts payable in accordance with the two preceding sentences are in addition
to the Consultant's right to receive any shares of Restricted Stock to which he
is then entitled under Section 4(b) hereof. Nothing herein shall affect the
Consultant's rights under or pursuant to any Company benefit plan or
arrangement under which he has accrued vested benefits, including, without
limitation, his eligibility for retiree health benefits after the expiration of
the Term.
9. Confidential Information. The Consultant agrees that, during
the Term and thereafter, he will not, without the prior written consent of the
Board or unless otherwise required by law to be disclosed, use for his benefit
or disclose to any person, any information obtained or developed by him while
in the employ of the Company or while serving Parent hereunder (and, in each
case, information of their respective affiliates) with respect to any aspect of
the Company's, Parent's or their respective affiliates' business (including,
without limitation, information with respect to any customers, suppliers,
employees, financial affairs or methods of design, distribution, procurement or
production, of the Company, Parent or any of their subsidiaries or affiliates,
or any other confidential matter), except information which at the time is
available to others in the business or generally known to the public other than
as a result of disclosure by him not permitted hereunder.
5
<PAGE> 6
10. Specific Performance. The Consultant acknowledges that a
violation on his part of any of the covenants contained in Section 9 hereof
would cause immeasurable and irreparable damage to the Company and Parent. The
Consultant accordingly agrees, without limiting the remedies available to the
Company or Parent, that any violation of such covenants may be enjoined by any
court of competent jurisdiction.
11. Indemnification. In connection with his rendering of services
as a consultant to Parent in accordance with Section 3 of this Agreement,
Parent shall, or shall cause the Company to, indemnify the Consultant therefor
during the Term and thereafter to the fullest extent permitted by Parent's
by-laws in the same manner and following the same procedures as applicable to
senior executives of Parent (including reimbursement of all legal and other
fees and expenses). Parent's and Company's obligations under this provision
shall survive the expiration of the Term.
12. Severability. If for any reason any provision of this
Agreement shall be held invalid, such invalidity shall not affect any other
provision of this Agreement not so held invalid, and all other such provisions
shall to the full extent consistent with law continue in full force and effect.
If any such provision shall be held invalid in part, such invalidity shall in
no way affect the rest of such provision which, together with all other
provisions of this Agreement, shall likewise to the fullest extent consistent
with law continue in full force and effect.
13. Termination of Agreement. The Consultant acknowledges that in
the event that, prior to the end of the Term, he should die, terminate due to
disability, terminate voluntarily other than for Good Reason or be terminated
by Parent for Cause, Parent's obligations to make monthly retainer fees
pursuant to Section 4(a) hereof and any additional grants of Restricted Stock
(except upon certain terminations prior to the First Anniversary as described
in Section 4(b) hereof) shall cease as of such time and Parent shall be under
no further obligation to pay any such additional monthly payments under this
Agreement other than a prorated monthly consulting retainer fee for the month
in which the Consultant's death or other cessation of service occurs or grant
any additional shares of Restricted Stock. Nothing under this Section 13 shall
be construed as affecting the Consultant's right to receive shares of
Restricted Stock to which the Consultant (or his estate) is then entitled under
Section 4(b) hereof.
6
<PAGE> 7
14. Successors and Assigns. The provisions of this Agreement
shall be binding upon the heirs, executors and administrators of the Consultant
and upon the successors and assigns of the Company and Parent. Parent and the
Company shall require any successor to them to expressly assume in writing
their respective obligations hereunder.
15. Notice. Any notice or other communication hereunder to either
party shall be in writing and shall be deemed to have been duly given when
delivered personally or mailed by registered mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Consultant:
A. Frederick Gerstell
CalMat Co.
3200 San Fernando Road
Los Angeles, California 90065
if to Parent:
Vulcan Materials Company
One Metroplex Drive
Birmingham, Alabama 35209
Attention: General Counsel
7
<PAGE> 8
16. Miscellaneous. Except as provided in Section 4(a) hereof,
this Agreement constitutes the entire agreement between the parties concerning
the employment and consulting relationship between the Consultant and Parent
following the Effective Time and supersedes all prior agreements, commitments
and understandings between the parties relating to such subject matter,
including without limitation, the Employment Agreement (except as provided in
Section 4(a) hereof). No provision of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in
writing and is signed by the parties hereto. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions at the same or at any prior or
subsequent time.
17. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed to be an original, but each of which together will
constitute one and the same agreement.
18. Dispute Resolution. The Consultant and Parent shall have the
right, in addition to all other rights and remedies provided by law, at either
party's election, to seek arbitration in Los Angeles County, California, under
the rules of the American Arbitration Association, in the event of any dispute
concerning the Consultant's Services as a consultant under this Agreement.
Parent shall bear all costs of any dispute resolution, including all legal fees
and expenses.
19. Independent Contractor. The Consultant acknowledges that his
services hereunder are to be rendered as an independent contractor and that he
is solely responsible for the payment of all Federal, state, local and foreign
taxes that are required by applicable laws or regulations to be paid by the
Consultant with respect to all compensation hereunder and that neither Parent
nor Company shall withhold any such taxes on behalf of the Consultant.
20. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware without regard to its principles of conflicts of law.
8
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the Company and Parent and by the
Consultant on the date first above written.
VULCAN MATERIALS COMPANY
by /s/ Donald M. James
-------------------------------------
/s/ A. Frederick Gerstell
---------------------------------------
A. FREDERICK GERSTELL
Acknowledged and
Agreed to:
CALMAT CO.
by /s/ Wm. F. Denson III
-----------------------
<PAGE> 1
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING AND INTERNAL CONTROL
The Shareholders of Vulcan Materials Company:
Vulcan's management acknowledges and accepts its responsibility for all the
information contained in the financial statements and other sections of this
report. The statements were prepared in conformity with generally accepted
accounting principles appropriate in the circumstances, and we believe they
reflect fairly our Company's financial position, results of operations and cash
flows for the periods shown. The financial statements necessarily reflect our
informed judgments and estimates of the expected outcome of numerous current
events and transactions.
Our Company maintains an internal control structure which we believe provides
reasonable assurance that our Company's financial statements, books and records
accurately reflect our Company's financial condition, results of operations and
cash flows, and that our Company's assets are safeguarded from loss or
unauthorized use. This internal control structure includes well-defined and
communicated policies and procedures, organizational structures that provide for
appropriate separations of responsibilities, high standards applied in the
selection and training of management personnel and adequate procedures for
properly assessing and applying accounting principles, including careful
consideration of the accuracy and appropriateness of all significant accounting
estimates. Vulcan also has an internal audit function that continually reviews
compliance with established policies and procedures.
Our Company's independent auditors, Deloitte & Touche LLP, consider the
internal control structure as a part of their audits of our Company's financial
statements and provide an independent opinion as to the fairness of the
presentation of those statements. Their report is presented below.
Your Board of Directors pursues its oversight role for the financial
statements and internal control structure in major part through the Audit Review
Committee, which is composed of five outside directors. In addition, the full
Board regularly reviews detailed management reports covering all aspects of the
Company's financial affairs. The Audit Review Committee meets periodically with
management, the independent auditors and the internal auditors to review the
work of each and to ensure that each is properly discharging its
responsibilities. To ensure independence, the Committee also meets on these
matters with the internal and independent auditors without the presence of
management representatives.
/s/ Peter J. Clemens, III /s/ E. A. Khan
- ------------------------- -------------------------------
P.J. Clemens, III E. A. Khan
Executive Vice President, Controller
Finance & Administration
and Treasurer
February 5, 1999
- ---------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Shareholders of Vulcan Materials Company:
We have audited the accompanying consolidated balance sheets of Vulcan Materials
Company and its subsidiary companies as of December 31, 1998, 1997 and 1996, and
the related consolidated statements of earnings, shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Vulcan Materials Company and its
subsidiary companies at December 31, 1998, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
February 5, 1999
(March 10, 1999 as to Note 15B)
36
<PAGE> 2
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31
Amounts and shares in thousands, except per share data 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales .......................................................... $1,776,434 $1,678,581 $1,568,945
Cost of goods sold ................................................. 1,226,764 1,199,453 1,115,442
---------- ---------- ----------
Gross profit on sales .............................................. 549,670 479,128 453,503
Selling, administrative and general expenses ....................... 198,956 190,446 175,128
Other operating costs .............................................. 7,851 5,112 3,887
Other income, net
Interest income .................................................. 6,654 3,190 3,179
Other, net ....................................................... 32,109 20,655 16,549
---------- ---------- ----------
Total other income, net ........................................ 38,763 23,845 19,728
---------- ---------- ----------
Earnings before interest expense and income taxes .................. 381,626 307,415 294,216
Interest expense (Note 4) .......................................... 6,782 6,914 8,636
---------- ---------- ----------
Earnings before income taxes ....................................... 374,844 300,501 285,580
Provision for income taxes (Note 7)
Current .......................................................... 113,096 84,806 95,443
Deferred ......................................................... 5,840 6,550 1,542
---------- ---------- ----------
Total provision for income taxes ............................... 118,936 91,356 96,985
---------- ---------- ----------
Net earnings ....................................................... $ 255,908 $ 209,145 $ 188,595
========== ========== ==========
Basic net earnings per share (Note 11) ............................. $ 2.54 $ 2.06 $ 1.81
Diluted net earnings per share ..................................... $ 2.50 $ 2.03 $ 1.79
Dividends per share (Note 11) ...................................... $ 0.69 $ 0.63 $ 0.56
Average common shares outstanding (Note 11) ........................ 100,854 101,483 104,274
Average common shares outstanding,
assuming dilution ................................................ 102,177 102,850 105,518
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
All share and per share data have been restated to reflect the three-for-one
split of the Company's common stock, approved by the Board of Directors on
February 12, 1999 and effective March 10, 1999.
37
<PAGE> 3
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31
Amounts in thousands, except per share data 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Note 2) ...................................... $ 180,568 $ 128,566 $ 50,816
Accounts and notes receivable:
Customers, less allowance for doubtful accounts:
1998, $7,391; 1997, $7,548; 1996, $8,106 ............................ 210,690 189,389 176,864
Other ................................................................. 10,571 10,361 8,671
Inventories (Note 3) .................................................... 143,680 132,359 128,578
Deferred income taxes (Note 7) .......................................... 24,923 21,385 23,474
Prepaid expenses ........................................................ 5,949 5,072 5,642
---------- ---------- ----------
Total current assets ............................................... 576,381 487,132 394,045
Investments and long-term receivables ..................................... 71,034 63,482 61,274
Property, plant and equipment, net (Note 4) ............................... 895,785 808,419 764,490
Deferred charges and other assets (Notes 8, 14) ........................... 115,411 90,213 100,836
---------- ---------- ----------
Total .............................................................. $1,658,611 $1,449,246 $1,320,645
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt .................................... $ 5,432 $ 5,408 $ 5,021
Notes payable (Note 2) .................................................. 2,353 3,654 3,289
Trade payables and accruals ............................................. 107,382 112,548 98,528
Accrued income taxes .................................................... 21,470 21,749 29,606
Accrued salaries and wages .............................................. 45,665 41,858 38,253
Accrued interest ........................................................ 892 1,360 1,221
Other accrued liabilities (Note 9) ...................................... 28,268 21,120 18,736
---------- ---------- ----------
Total current liabilities .......................................... 211,462 207,697 194,654
Long-term debt (Note 5) ................................................... 76,533 81,931 85,535
Deferred income taxes (Note 7) ............................................ 98,472 88,719 86,968
Deferred management incentive
and other compensation (Note 9) ......................................... 37,572 33,849 26,251
Other postretirement benefits (Note 8) .................................... 41,998 37,924 36,222
Other noncurrent liabilities (Note 10) .................................... 38,874 7,629 7,351
---------- ---------- ----------
Total liabilities .................................................. 504,911 457,749 436,981
---------- ---------- ----------
Other commitments and contingent liabilities (Note 10) .................... 0 0 0
Shareholders' equity
Common stock, $1 par value .............................................. 139,705 46,573 46,573
Capital in excess of par value .......................................... 0 14,090 10,306
Retained earnings ....................................................... 1,588,145 1,449,847 1,304,405
---------- ---------- ----------
Total .............................................................. 1,727,850 1,510,510 1,361,284
Less cost of stock in treasury .......................................... 574,150 519,013 477,620
---------- ---------- ----------
Total shareholders' equity ......................................... 1,153,700 991,497 883,664
---------- ---------- ----------
Total .............................................................. $1,658,611 $1,449,246 $1,320,645
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
38
<PAGE> 4
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31
Amounts in thousands 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings ...................................................... $ 255,908 $ 209,145 $ 188,595
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion and amortization ...................... 137,792 129,217 121,257
Compensation expense incurred in connection
with stock-based incentive plans ............................ 6,847 5,451 2,010
(Increase) decrease in assets before effects of
business acquisitions:
Accounts and notes receivable .............................. (20,415) (14,215) 1,381
Inventories ................................................ (8,794) (3,751) 3,915
Deferred income taxes ...................................... (3,538) 2,089 3,081
Prepaid expenses ........................................... (877) 570 194
Increase (decrease) in liabilities before effects of
business acquisitions:
Accrued interest and income taxes .......................... (513) 139 (105)
Trade payables, accruals, etc .............................. (4,362) (2,070) 14,118
Deferred income taxes ...................................... 9,753 1,752 1,032
Other noncurrent liabilities ............................... 7,127 9,578 4,290
Other, net .................................................... (16,332) 7,909 5,764
--------- --------- ---------
Net cash provided by operating activities ................... 362,596 345,814 345,532
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ........................ (203,258) (161,238) (151,767)
Payment for business acquisitions,
net of cash acquired ............................................ (24,874) (12,086) (64,765)
Proceeds from sale of property, plant and equipment ............... 27,054 16,446 11,952
Net investment in nonconsolidated companies ....................... 307 150 (1,233)
--------- --------- ---------
Net cash used for investing activities ...................... (200,771) (156,728) (205,813)
--------- --------- ---------
FINANCING ACTIVITIES
Net borrowings (payments)--commercial paper
and bank lines of credit ........................................ (1,301) 365 (280)
Payment of short-term debt ........................................ (5,193) (5,000) (6,849)
Payment of long-term debt ......................................... (225) (19) (62)
Purchases of common stock (Note 11) ............................... (65,003) (43,060) (45,182)
Dividends paid .................................................... (70,015) (63,622) (58,399)
Contribution from minority interest of
consolidated subsidiary ......................................... 31,914 0 0
--------- --------- ---------
Net cash used for financing activities ...................... (109,823) (111,336) (110,772)
--------- --------- ---------
Net increase in cash and cash equivalents ......................... 52,002 77,750 28,947
Cash and cash equivalents at beginning of year .................... 128,566 50,816 21,869
--------- --------- ---------
Cash and cash equivalents at end of year .......................... $ 180,568 $ 128,566 $ 50,816
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
39
<PAGE> 5
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31 1998 1997 1996
Amounts and shares in thousands, except per share data Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common stock, $1 par value
Authorized: 1998,480,000 shares (Note 15B);
1997 and 1996, 160,000 shares
Issued at beginning of year ........................ 46,573 $ 46,573 46,573 $ 46,573 46,573 $ 46,573
Retired shares of predecessor companies (Note 11) .. (5) (5) 0 0 0 0
Three-for-one common stock split (Note 15B) ........ 93,137 93,137 0 0 0 0
------- ---------- ------ --------- ------ ----------
Issued at end of year .............................. 139,705 139,705 46,573 46,573 46,573 46,573
======= ---------- ====== --------- ====== ----------
Capital in excess of par value
Balance at beginning of year ....................... 14,090 10,306 9,053
Activity prior to stock split
Distributions under stock-based incentive plans .. 5,167 3,784 1,253
Treasury stock issued for acquisition ............ 26,383 0 0
Three-for-one common stock split (Note 15B) ........ (45,640) 0 0
---------- --------- ----------
Balance at end of year ............................. 0 14,090 10,306
---------- --------- ----------
Retained earnings
Balance at beginning of year ....................... 1,449,847 1,304,405 1,174,207
Net earnings ....................................... 255,908 209,145 188,595
Cash dividends on common stock ..................... (70,015) (63,622) (58,399)
Three-for-one common stock split (Note 15B) ........ (47,497) 0 0
Other .............................................. (98) (81) 2
---------- --------- ----------
Balance at end of year ............................. 1,588,145 1,449,847 1,304,405
---------- --------- ----------
Common stock held in treasury
Balance at beginning of year ....................... (12,885) (519,013) (12,332) (477,620) (11,602) (433,195)
Activity prior to stock split
Purchase of common shares ........................ (611) (65,003) (631) (43,060) (765) (45,182)
Treasury stock issued for acquisition ............ 384 8,187 0 0 0 0
Distributions under stock-based incentive plans .. 75 1,679 78 1,667 35 757
Three-for-one common stock split (Note 15B) ........ (26,072) 0 0 0 0 0
------- ---------- ------ ------ ------ ----------
Balance at end of year ............................. (39,109) (574,150) (12,885) (519,013) (12,332) (477,620)
======= ------- ====== ------ ====== ----------
Total .......................................... $1,153,700 $ 991,497 $ 883,664
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
40
<PAGE> 6
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Vulcan is the nation's foremost producer of construction aggregates, a major
producer of other construction materials and a leading chemicals manufacturer,
supplying chloralkali and other industrial chemicals. The following is a
discussion and analysis of the results of operations and the financial condition
of the Company. This discussion and analysis should be read in connection with
the historical financial information included in the consolidated financial
statements and their notes.
The information presented in this report reflects the three-for-one split of
the common stock approved by the Board of Directors on February 12, 1999. The
stock split was effective as of March 10, 1999.
RESULTS OF OPERATIONS
Vulcan's 1998 sales, net earnings and earnings per share were at record levels.
Net earnings and diluted earnings per share 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. Sales in 1998 were $1.776 billion,
up from the 1997 total of $1.679 billion. Pretax earnings totaled $374.8
million, up 25% from last year's amount of $300.5 million.
CONSTRUCTION MATERIALS
1998 VS. 1997 For the sixth consecutive year, Construction Materials sales
surpassed previous records. Net sales for 1998 totaled $1.159 billion, up 10%
from the 1997 result of $1.051 billion. The 1998 results reflect an 8% increase
in shipments and a 4% rise in the average unit selling price of crushed stone,
the segment's principal product. Of the total increase in sales of $107.6
million, $70.0 million was related to increased volume and $37.6 million was due
to higher prices.
Segment earnings of $307.4 million, which are before interest expense and
income taxes, also were at a record level and were up 34% from 1997's record
level of $229.3 million. 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>
1997 VS. 1996 Net sales for 1997 totaled $1.051 billion, up 9% from the 1996
result of $961.9 million. The 1997 result reflects a 6% increase in shipments
and a 3% rise in the average unit selling price of crushed stone, the segment's
principal product. Of the total increase in sales of $89.1 million, $63.3
million was related to increased volume and $25.8 million was due to higher
prices.
Segment earnings of $229.3 million, which are before interest expense and
income taxes, also were at a record level and were up 16% from 1996's record
level of $197.3 million. The favorable effects of higher crushed stone shipments
and prices, as well as lower production costs, were partially offset by higher
overhead costs due mainly to increased provisions associated with stock-based
incentive plans. This information is summarized below (in millions of dollars):
CONSTRUCTION MATERIALS 1997 VS. 1996
<TABLE>
<S> <C>
1996 earnings ................................ $ 197
-----
Higher earnings--crushed stone ............... 45
All other .................................... (13)
-----
1997 earnings ................................ $ 229
=====
</TABLE>
CHEMICALS
1998 VS. 1997 1998 sales of $617.8 million were down 2% 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.
Segment earnings of $69.2 million in 1998 were down 9% from the 1997 level of
$75.8 million. Excluding the impact of asset sales and environmental provisions,
earnings for the year were 2% above 1997 levels. Higher caustic soda prices and
lower raw material costs offset lower volumes and
NET EARNINGS
(in millions of dollars)
[GRAPH]
41
<PAGE> 7
prices for chlorine and some derivative products, and lower earnings from
Performance Systems. 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>
1997 VS. 1996 Sales of $627.6 million were up 3% from the record 1996 level of
$607.0 million. The growth came primarily from increased Performance Systems
sales. Chloralkali sales were essentially unchanged from 1996, as the effect of
lower caustic soda prices was nearly offset by higher revenues from chlorine and
chlorine derivative products.
Segment earnings of $75.8 million in 1997 were down 20% from the record 1996
level of $94.7 million. The decrease primarily reflected a 34% decline in
caustic soda prices and higher raw materials costs. This was partially offset by
higher pricing for chlorine and derivative products, as well as improved
earnings from Performance Systems. This information is summarized below (in
millions of dollars):
CHEMICALS 1997 VS. 1996
<TABLE>
<S> <C>
1996 earnings ................................ $ 95
----
Chloralkali sales prices/raw materials ....... (16)
All other .................................... (3)
----
1997 earnings ................................ $ 76
====
</TABLE>
NET CASH PROVIDED BY
OPERATING ACTIVITIES
(in millions of dollars)
[GRAPH]
SELLING, ADMINISTRATIVE AND GENERAL
Selling, administrative and general expenses of $199.0 million in 1998 increased
4% from the 1997 level of $190.4 million. In addition to normal salary
increases, this reflects expenditures associated with several projects designed
to enhance operations and reduce future costs throughout the organization. In
1997, selling, administrative and general expenses were up 9% from the 1996
level. This reflects principally the effect that the 68% appreciation in the
Company's share price during 1997 had on stock-based incentive compensation
costs.
OTHER INCOME
Other income, net of other charges, was $32.1 million as compared with the 1997
amount of $20.7 million. The increase principally reflects gains on sales of
assets and higher earnings from the Company's joint venture to supply limestone
from Mexico to the U.S. Gulf Coast market. The increase in 1997 versus 1996 was
due to the same factors.
INCOME TAXES
The Company's 1998 effective tax rate was 31.7%, up from the 1997 rate of 30.4%.
The increase reflects principally a lesser impact of adjustments referable to
tax audits for prior years. The effective tax rate decreased in 1997, from the
1996 rate of 34.0%. This decrease reflected principally adjustments referable to
tax audits for prior years.
1999 OUTLOOK
With regard to 1999, the Company's starting point is the assumption that
moderate growth in GDP and the favorable impact of TEA-21 will continue to
provide a healthy economic environment for construction activity in the United
States. The market for construction aggregates should remain strong overall.
Demand in all 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, 1999 earnings in the Construction Materials
segment, before the inclusion of CalMat, are expected to exceed 1998's record
result. CalMat will significantly increase segment earnings, but this will be
offset by higher interest expense referable to the acquisition.
In 1999, the Chemicals segment will face a challenging year. Uncertainties
regarding the Asian economies and related effects on the global economy,
combined with the expected advent of additional chloralkali capacity, continue
to cloud the outlook. Both caustic and chlorine prices may be lower than in
1998. Based on its current view, the Company expects Chemicals' earnings to fall
significantly below 1998's performance.
42
<PAGE> 8
All in all, Vulcan has a high level of confidence in the outlook for
Construction Materials. However, the volatile outlook for Chemicals makes it
difficult to project 1999 results for Chemicals and the Company. If Chemicals'
markets stabilize, Vulcan's net earnings and earnings per share could
approximate 1998's record results. On the other hand, a continued deterioration
in Chemicals' markets would likely lead to a slight decline in Vulcan's
earnings.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS Net cash provided by operating activities reached a fourth
consecutive record high a mounting to $362.6 million in 1998, as compared to
1997's total of $345.8 million. Net cash provided by the Construction Materials
segment increased 6% to $270.4 million, while net cash provided by the Chemicals
segment was relatively flat at $86.4 million. The Company's long-standing
ability to generate significant cash flows enabled it to fund capital
requirements internally, reduce long-term debt and return $135.0 million to
shareholders through dividends and share purchases.
Cash expenditures for property, plant and equipment, excluding acquisitions,
were $203.3 million in 1998, up $42.1 million. Cash spending for acquisitions,
including amounts referable to working capital and other balance sheet items,
totaled $24.9 million compared with $12.1 million in 1997.
The Company's 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, management believes that
purchases of the Company's stock frequently may represent an attractive
long-term investment and an attractive means of returning cash to shareholders.
Management intends to continue buying shares when appropriate based on
prevailing market conditions, the Company's cash position and long-term capital
requirements.
WORKING CAPITAL Working capital, exclusive of debt and cash items (cash, cash
equivalents and short-term investments), totaled $193.0 million at December 31,
1998, up $31.7 million from the 1997 level. This compares with an increase of
$3.2 million and a decrease of $16.7 million in 1997 and 1996, respectively.
The current ratio increased to 2.7 in 1998, primarily due to a higher cash
balance. The current ratio in 1997 was 2.3, higher than the 2.0 in 1996.
PROPERTY ADDITIONS Property additions, including acquisitions, totaled $230.3
million in 1998, up 26.5% from the 1997 level of $182.0 million. Property
additions included $18.6 million related to acquisitions and $8.4 million of
accruals referable to property. As explained on page 65, Vulcan classifies its
property additions into three categories based on the predominant purpose of the
project.
Profit-adding projects continued to bolster spending in both segments. Within
the Construction Materials segment, these included the acquisition of six stone
quarries in Georgia, Illinois and Tennessee, and the beginning of production at
greenfield aggregates operations in Alabama, Georgia and Indiana. Property
additions within the Chemicals segment included initial spending for a joint
venture with Mitsui & Co. announced in June. In addition to contributing its
existing EDC plant, Vulcan will invest a total of approximately $90.0 million in
this project, with the majority of this funding to be provided in 1999.
Commitments for capital expenditures were $32.4 million at December 31, 1998,
excluding expenditures for CalMat and Mitsui. As a result of the acquisition of
CalMat in January 1999, the Company will use a combination of short-term and
long-term borrowing in addition to internally generated cash flows to cover the
aforementioned commitments.
SHORT-TERM BORROWINGS AND INVESTMENTS The Company was a net short-term investor
during 1998 as marketable securities reached a peak of $219.8 million, and
amounted to $166.8 million at year end. The Company was also a net short-term
investor in 1997 when marketable securities peaked at $131.1 million and ended
at $111.3 million. During 1996, however, the Company was a net short-term
borrower
PROPERTY ADDITIONS
(in millions of dollars)
[GRAPH]
43
<PAGE> 9
as borrowings reached a maximum of $48.2 million and equaled $3.3 million at
year end.
The Company's policy is to maintain unused bank lines of credit and/or
committed credit facilities at least equal to its outstanding commercial paper.
Unsecured bank lines of credit totaling $225.0 million were maintained at the
end of 1998. In connection with its acquisition of CalMat, the Company entered
into a syndicated credit facility in the amount of $550.0 million effective in
January 1999, which resulted in total domestic lines of credit being increased
to $775.0 million. Concurrent with the closing of the aforementioned
acquisition, Standard & Poor's Ratings Group lowered the Company's commercial
paper rating from A-1+ to A-1, while Moody's Investors Service, Inc., maintained
its rating at the P-1 level.
LONG-TERM OBLIGATIONS During 1998, the Company reduced its total long-term
obligations by $5.4 million to $76.5 million, compared with a net decrease of
$3.6 million in 1997. During the three-year period ended December 31, 1998,
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, 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 long-term debt to total long-term capital will
depend upon specific investment and financing decisions. Nonetheless, management
believes the Company's cash-generating capability, along with its financial
strength and business diversification, can reasonably support a ratio of 30% to
35%. The actual ratio at the end of 1998 was 5.3%. Vulcan has made acquisitions
from time to time and will continue to actively pursue attractive investment
opportunities. If financing is required for this purpose, it may be accomplished
temporarily on a short-term basis or by incurring long-term debt.
LONG-TERM OBLIGATIONS
AS A PERCENT OF
LONG-TERM CAPITAL
[GRAPH]
In acquiring CalMat in January 1999, the Company liquidated all of its
marketable securities and issued commercial paper to purchase the CalMat common
stock tendered. In due course, the Company anticipates issuing long-term debt to
fund the acquisition.
Effective with the closing of the CalMat acquisition, Standard & Poor's
Ratings Group lowered the Company's long-term debt rating to A+ from AA-, while
Moody's Investors Service, Inc., maintained its rating at the A1 level.
COMMON STOCK During 1998, the Company purchased 1,832,100 shares of its common
stock at a cost of $65.0 million, equal to an average price of $35.48 per share.
The acquired shares are being held for general corporate purposes, including
distributions under management incentive plans. The Company's decisions to
purchase shares of common stock are made based on the common stock's valuation
and price, the Company's liquidity, its actual and projected needs for cash for
investment projects and regular dividends, and the Company's debt level.
The number and cost of shares purchased during each of the last three years is
shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Shares purchased:
Number ...................... 1,832,100 1,892,568 2,296,200
Total cost (millions) ....... $ 65.0 $ 43.1 $ 45.2
Average cost ................ $ 35.48 $ 22.75 $ 19.68
Shares in treasury at year end:
Number ...................... 39,108,657 38,655,012 36,996,141
Average cost ................ $ 14.68 $ 13.16 $ 12.91
</TABLE>
The number of shares remaining under the current purchase authorization of the
Board was 8,810,388 shares as of December 31, 1998.
MARKET RISK
The Company is exposed to certain market risks a rising from transactions that
are entered into in the normal course of business. In order to manage or reduce
this market risk, the Company occasionally utilizes derivative financial
instruments.
44
<PAGE> 10
To date, the Company has used commodity swap and option contracts to reduce its
exposure to fluctuations in prices for natural gas. The fair value of these
contracts as of December 31, 1998 and 1997 was not material. As a result of a
10% reduction in the price of natural gas, the Company would experience a
potential loss in the fair value of the underlying commodity swap and option
contracts for the year ended December 31, 1998 of approximately $160 thousand.
Year 2000 Issue
Vulcan recognizes the importance of Year 2000 issues and has made resolution of
these problems a priority by creating a Year 2000 Project Management Office with
the appropriate authority and resources. The Company's Year 2000 Plan includes
five stages--pre-project, planning, preparation, implementation and transition,
which will overlap to a significant degree. The Year 2000 Project Management
Office has organized teams at each major location to research Year 2000
compliance status, implement appropriate solutions, and conduct testing of
computer hardware and net work equipment, computer software, production
equipment and instrumentation. It will also assist in identifying key customers
and key suppliers. Vulcan is currently in the preparation and implementation
stages, coordinating the necessary internal and external changes. The Company
has received information concerning the Year 2000 status of significant
suppliers and selected customers, and believes plans are in place to
appropriately remedy these issues in a timely manner. The Company plans to have
implemented corrections to internal systems that are critical to its operations
no later than the end of the third quarter of 1999. While some noncritical
systems may not be addressed until after December 1999, Vulcan believes such
systems will not disrupt operations in a material manner.
The Company currently estimates that the total cost of implementing its Year
2000 Plan will not exceed $5.0 million. This estimate is based on presently
available information and will be updated as the Company finalizes its
assessment and continues with implementation. In particular, the estimate may
need to be increased once the Company has formulated its contingency plan. We
expect our business partner readiness assessment to be completed in April 1999.
Management believes that the Company's Year 2000 Plan will resolve the issue
in a timely manner. Nevertheless, since it is not possible to anticipate all
possible future outcomes, especially when third parties are involved, there
could be circumstances in which the Company would be unable to take customer
orders, manufacture and ship products, invoice customers or collect payments. In
particular, if third-party providers, due to the Year 2000 issue, fail to
provide Vulcan with components or materials that are necessary to manufacture
its products, with sufficient electrical power and other utilities to sustain
its manufacturing process, or with adequate, reliable means of transporting its
products to its customers, then any such failure could have a material adverse
effect on the business operations and financial performance of the Company. The
amount of potential liability and lost revenue has not been estimated.
Contingency plans will be finalized in the second quarter of 1999.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 is required to be adopted for years
beginning after June 15, 1999. The Company is currently evaluating SFAS 133 and
has not yet determined its impact on the Company's consolidated financial
statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain matters discussed in this report contain forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially from those projected. These include general business
conditions, competitive factors, pricing, energy costs and other risks and
uncertainties detailed in the Company's periodic reports.
AVERAGE CAPITAL
EMPLOYED
(in millions of dollars)
[GRAPH]
45
<PAGE> 11
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and all majority or wholly owned subsidiary companies.
All significant intercompany transactions and accounts have been eliminated in
consolidation. Investments in which the Company has ownership interests of 20%
to 50% are accounted for by the equity method. All other investments are carried
at the lower of cost or market, and income is recorded as dividends are received
or interest is earned.
CASH EQUIVALENTS The Company classifies as cash equivalents all highly liquid
securities with a maturity of three months or less at the time of purchase.
INVENTORIES The Company uses the last-in, first-out (LIFO) method of valuation
for most of its inventories because it results in a better matching of costs
with revenues. Inventories, other than operating supplies, are stated at the
lower of cost, as determined by the LIFO method, or market. Such cost includes
raw materials, direct labor and production overhead. Substantially all operating
supplies are carried at average cost, which does not exceed market.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost
less allowances for accumulated depreciation, depletion and amortization. The
cost of properties held under capital leases is equal to the lower of the net
present value of the minimum lease payments or the fair value of the leased
property at the inception of the lease.
DEPRECIATION, DEPLETION AND AMORTIZATION Depreciation is computed by the
straight-line method at rates based upon the estimated service lives of the
various classes of assets, which include machinery and equipment, buildings and
land improvements. Amortization of capitalized leases is included with
depreciation expense.
Cost depletion on depletable quarry land is computed by the
unit-of-production method based on estimated recoverable units.
Leaseholds are amortized over varying periods not in excess of applicable
lease terms.
GOODWILL Goodwill represents the excess of the cost of net assets acquired in
business combinations over their fair value. Goodwill is amortized on a
straight-line basis over periods ranging from 15 to 30 years.
OTHER COSTS Income is charged as costs are incurred for start-up of new plants
and for normal recurring costs of mineral exploration, removal of overburden
from active mineral deposits, and research and development.
Repairs and maintenance are charged to costs and operating expenses.
Renewals and betterments which add materially to the utility or useful lives of
property, plant and equipment are capitalized.
Environmental expenditures that pertain to current operations or relate to
future revenues are expensed or capitalized consistent with the Company's
capitalization policy. Expenditures that relate to an existing condition caused
by past operations and do not contribute to future revenue are expensed.
Environmental compliance costs include maintenance and operating costs with
respect to pollution control facilities, the cost of ongoing monitoring programs
and similar costs. Costs are expensed and accrued as liabilities when
environmental assessments and/or remedial efforts are probable, and the cost can
be reasonably estimated. These amounts are accrued no later than the feasibility
study and/or when the Company commits to a formal a plan of action.
INCOME TAXES Annual provisions for income taxes are based primarily on reported
earnings before income taxes and include appropriate provisions for deferred
income taxes resulting from the tax effect of the difference between the tax
basis of assets and liabilities and their carrying amounts for financial
reporting purposes. In addition, such provisions reflect adjustments for the
following items:
- - Permanent differences, principally the excess of percentage depletion
over the tax basis of depletable properties.
- - An estimate of additional cost that may be incurred, including interest
on deficiencies but excluding adjustments representing temporary
differences, upon final settlement of returns after audit by various
taxing authorities.
- - Balances or deficiencies in prior-year provisions that become
appropriate as audits of those years progress.
EARNINGS PER SHARE (EPS) In accordance with the Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 128, Earnings Per Share,
the Company reports two separate earnings per share numbers, basic and
46
<PAGE> 12
diluted. Both are computed by dividing net earnings by the average common shares
outstanding (basic EPS) or average common shares outstanding assuming dilution
(diluted EPS) as detailed below (in thousands of shares):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Average common shares outstanding ..................... 100,854 101,483 104,274
Dilutive effect of:
Stock options ....................................... 720 528 18
Performance shares and other ........................ 603 839 1,226
------- ------- -------
Average common shares outstanding,
assuming dilution ................................... 102,177 102,850 105,518
======= ======= =======
</TABLE>
All common stock equivalents are reflected in the Company's earnings per
share calculations; the Company had no anti-dilutive common stock equivalent
shares in 1998, 1997 and 1996. All earnings per share amounts have been
retroactively restated to reflect the three-for-one split of the common stock
approved by the Board of Directors on February 12, 1999 (see Note 15B).
RECENT ACCOUNTING PRONOUNCEMENTS In June 1997 the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income. This statement is now effective, but has no
impact on the Company. In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133 (SFAS 133),
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 is
required to be adopted for years beginning after June 15, 1999. The Company is
currently evaluating SFAS 133 and has not yet determined its impact on the
Company's consolidated financial statements.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS Certain items previously reported in specific financial
statement captions have been reclassified to conform with the 1998 presentation.
2. CASH
At year-end 1998, 1997 and 1996, the Company did not have any commercial paper
outstanding but did have $2,400,000, $2,900,000 and $3,100,000, respectively, in
bank borrowings.
All of the lines of credit extended to the Company in 1998, 1997 and 1996
were based solely on a commitment fee basis, and thus no compensating balances
were required. In the normal course of business, the Company maintains balances
for which it is credited with earnings allowances. To the extent the earnings
allowances are not sufficient to fully compensate banks for the services the
provide, the Company pays the fee equivalent for the differences. The Company
was in compliance with these informal compensation arrangements during all three
years. Because the arrangements are evaluated on a 12-month average basis, the
Company does not consider any of its cash balances to be restricted as of any
specific date.
3. INVENTORIES
Inventories at December 31 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Finished products ..................................... $99,814 $90,118 $ 87,459
Raw materials ......................................... 10,466 10,865 10,115
Products in process ................................... 1,183 617 873
Operating supplies and other .......................... 32,217 30,759 30,131
-------- -------- --------
Total inventories ................................... $143,680 $132,359 $128,578
======== ======== ========
</TABLE>
The above amounts include inventories valued under the LIFO method totaling
$107,178,000, $99,321,000 and $96,045,000 at December 31, 1998, 1997 and 1996,
respectively. Estimated current cost exceeded LIFO cost at December 31, 1998,
1997 and 1996 by $34,671,000, $37,344,000 and $35,747,000, respectively. If all
inventories valued at LIFO cost had been valued under the methods (substantially
average cost) used prior to the adoption of the LIFO method, the approximate
effect on net earnings would have been a decrease of $1,633,000 ($0.02 per share
effect) in 1998, an increase of $973,000 ($0.01 per share effect) in 1997 and a
decrease of $702,000 ($0.01 per share effect) in 1996.
47
<PAGE> 13
4. PROPERTY, PLANT AND EQUIPMENT
Balances of major classes of assets and allowances for depreciation, depletion
and amortization at December 31 are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Land and land improvements ............................ $ 210,601 $ 211,058 $ 222,546
Buildings ............................................. 83,609 81,805 82,049
Machinery and equipment ............................... 1,874,012 1,753,683 1,630,089
Leaseholds ............................................ 7,039 7,107 7,118
Construction in progress .............................. 105,495 66,547 60,362
---------- ---------- ----------
Total ............................................. 2,280,756 2,120,200 2,002,164
Less allowances for depreciation,
depletion and amortization .......................... 1,384,971 1,311,781 1,237,674
---------- ---------- ----------
Property, plant and
equipment, net ...................................... 895,785 $ 808,419 $ 764,490
========== ========== ==========
</TABLE>
The Company capitalized interest costs of $443,000 in 1998,$1,160,000 in 1997
and $627,000 in 1996 with respect to qualifying construction projects. Total
interest costs incurred before recognition of the capitalized amount were
$7,225,000 in 1998, $8,074,000 in 1997 and $9,263,000 in 1996.
5. DEBT
Long-term debt, exclusive of current maturities, at December 31 is summarized as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Medium-term notes ..................................... $56,000 $61,000 $66,000
Variable rate pollution control
revenue bonds ....................................... 8,200 8,200 8,200
63/8% pollution control
revenue bonds ....................................... 5,800 5,800 5,800
Other notes ........................................... 6,533 6,931 5,535
------- ------- -------
Total ............................................. $76,533 $81,931 $85,535
======= ======= =======
Estimated fair value .................................. $87,091 $93,142 $93,507
======= ======= =======
</TABLE>
In May 1991, the Company filed a shelf registration statement with the
Securities and Exchange Commission for the registration of $200,000,000
principal amount of debt securities. The issuances of the medium-term notes in
1991 totaled $81,000,000. The dollar-weighted average maturity of the notes, as
calculated from the dates of issuance, approximated 13 years. Maturities at the
time of issuance ranged from 3 to 30 years with a maximum of $10,000,000 due in
any one year. At that time, the weighted average interest rate on the notes was
8.53% with a range of 7.59% to 8.85%. The $56,000,000 in notes outstanding as of
December 31, 1998 have a weighted average maturity of 8 years with a weighted
average interest rate of 8.72%.
Certain fixed and variable rate pollution control revenue bonds were called
and refunded in 1996. In connection with the refunding, $8,200,000 of tax-exempt
bonds were issued and currently bear interest at a variable rate that is reset
weekly by the remarketing agent. The interest rate on these bonds may be changed
to another variable rate option, or to a fixed rate, in accordance with the
provisions of the trust indenture. The 6 3/8% pollution control revenue bonds
issued in 1992 mature in 2012.
Other notes include $3,000,000 representing a fixed rate, tax-exempt
industrial development bond issue which matures in 2011 and notes issued for
businesses acquired. The aggregate principal payments for the five years
subsequent to December 31, 1998 are: 1999-$5,432,000; 2000-$5,240,000;
2001-$5,211,000; 2002-$5,491,000; and 2003-$5,217,000.
The Company is not subject to any contractual restrictions with regard to
working capital, or the amount it may expend for cash dividends and purchases of
its stock. Pursuant to a provision in the Company's bank credit facility
agreements, the percentage of consolidated debt to total capitalization must be
less than 60%.
The estimated fair value amounts of long-term debt have been determined by
discounting expected future cash flows using interest rates on U.S. Treasury
bills, notes or bonds, as appropriate. For cash equivalents, accounts and notes
receivable, current portion of long-term debt, accounts payable, accrued
interest and other applicable accrued liabilities, the carrying amounts are a
reasonable estimate of fair value primarily due to their short-term nature. The
fair value estimates presented are based on information available to management
as of December 31, 1998, 1997 and 1996. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued since those dates.
48
<PAGE> 14
6. OPERATING LEASES
Total rental expense of nonmineral leases, exclusive of rental payments made
under leases of one month or less, is summarized as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Minimum rentals ....................................... $18,725 $17,894 $17,188
Contingent rentals (based
principally on usage) ............................... 15,410 11,840 10,677
------- ------- -------
Total ............................................. $34,135 $29,734 $27,865
======= ======= =======
</TABLE>
Future minimum operating lease payments under all leases with initial or
remaining noncancelable lease terms in excess of one year, exclusive of mineral
leases, at December 31, 1998 range from $8,445,000 to $14,457,000 annually
through 2003 and aggregate $49,171,000 thereafter.
Lease agreements frequently include renewal options and require that the
Company pay for utilities, taxes, insurance and maintenance expense. Options to
purchase also are included in some lease agreements.
7. INCOME TAXES
The components of earnings before income taxes are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Domestic .................................... $365,706 $294,834 $279,678
Foreign ..................................... 9,138 5,667 5,902
-------- -------- --------
Total ..................................... $374,844 $300,501 $285,580
======== ======== ========
</TABLE>
Provisions for income taxes consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Current:
Federal ............................................. $ 96,311 $ 73,767 $ 80,704
State and local ..................................... 16,544 10,907 14,595
Foreign ............................................. 241 132 144
--------- --------- --------
Total ............................................. 113,096 84,806 95,443
--------- --------- --------
Deferred:
Federal ............................................. 4,679 5,231 1,446
State and local ..................................... 1,181 1,321 96
Foreign ............................................. (20) (2) --
--------- --------- --------
Total ............................................. 5,840 6,550 1,542
--------- --------- --------
Total provision ....................................... $ 118,936 $ 91,356 $ 96,985
========= ========= ========
</TABLE>
The effective tax rate varied from the federal statutory income tax rate due
to the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Federal statutory tax rate ............................ 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
Depletion ......................................... (4.5) (5.0) (4.8)
State and local income taxes,
net of federal income
tax benefit ..................................... 3.0 2.6 3.3
Miscellaneous items ............................... (1.8) (2.2) 0.5
----- ---- ----
Effective tax rate .................................... 31.7% 30.4% 34.0%
===== ==== ====
</TABLE>
Deferred income taxes on the balance sheet result from temporary differences
between the amount of assets and liabilities recognized for financial reporting
and tax purposes. The components of the net deferred income tax liability are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Deferred tax assets related to:
Accrual for post retirement
benefits .......................................... $ 16,804 $ 15,283 $ 14,149
Accrual for environmental
reclamation ....................................... 371 554 396
Accounts receivable,
principally allowance
for doubtful accounts ............................. 2,918 3,248 3,493
Inventory adjustments ............................... 6,309 5,748 6,101
Pensions, incentives and
deferred compensation ............................. 17,477 11,844 10,463
Other items ......................................... 9,596 10,714 10,339
-------- -------- --------
Total deferred tax assets ....................... 53,475 47,391 44,941
-------- -------- --------
Deferred tax liabilities related to:
Fixed assets, principally
depreciation ...................................... 117,658 107,170 101,316
Other items ......................................... 9,366 7,555 7,119
-------- -------- --------
Total deferred tax liabilities .................. 127,024 114,725 108,435
-------- -------- --------
Net deferred tax liability .......................... $ 73,549 $ 67,334 $ 63,494
======== ======== ========
</TABLE>
49
<PAGE> 15
8. PENSION AND POST RETIREMENT BENEFIT PLANS
The Company has adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Post retirement Benefits.
PENSION PLANS The Company sponsors three noncontributory defined benefit pension
plans. These plans cover substantially all employees other than those covered by
union-administered plans. Normal retirement age is 65, but the plans contain
provisions for earlier retirement. Benefits for the Salaried Plan and two out of
four union groups in the Chemicals Hourly Plan are based on salaries or wages
and years of service; the Construction Materials Hourly Plan and two union
groups in the Chemicals Hourly Plan provide benefits equal to a flat dollar
amount for each year of service.
The following tables set forth the combined funded status of the plans and
their reconciliation with the related amounts recognized in the Company's
consolidated financial statements at December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year ............................. $ 306,516 $ 267,289 $ 264,590
Service cost .................................... 12,886 11,228 11,631
Interest cost ................................... 19,499 20,987 19,069
Amendments ...................................... 5,479 (1,014) 6,770
Actuarial (gain) loss ........................... 14,667 23,647 (22,316)
Benefits paid ................................... (14,289) (15,621) (12,455)
--------- --------- ---------
Benefit obligation at end of year ................ $ 344,758 $ 306,516 $ 267,289
========= ========= =========
Change in plan assets:
Fair value assets at
beginning of year ............................... $ 395,245 $ 337,325 $ 305,398
Actual return on plan assets .................. 63,827 72,875 43,867
Employer contribution ......................... 770 666 515
Benefits paid ................................. (14,289) (15,621) (12,455)
--------- --------- ---------
Fair value of assets
at end of year .............................. $ 445,553 $ 395,245 $ 337,325
========= ========= =========
Funded status ..................................... $ 100,795 $ 88,729 $ 70,037
Unrecognized net transition (asset) ............... (5,060) (7,486) (10,212)
Unrecognized net actuarial (gain) ................. (111,024) (91,536) (68,163)
Unrecognized prior service cost ................... 14,670 10,722 12,632
--------- --------- ---------
Net amount recognized ............................. $ (619) $ 429 $ 4,294
========= ========= =========
Amounts recognized in the statement of
financial position consists of:
Prepaid benefit cost .......................... $ 35,500 $ 32,959 $ 24,326
Accrued benefit liability ..................... (36,492) (33,402) (20,032)
Intangible assets ............................. 373 872 0
--------- --------- ---------
Net amount recognized ......................... $ (619) $ 429 $ 4,294
========= ========= =========
Components of net periodic benefit cost:
Service cost ..................................... $ 12,886 $ 11,228 $ 11,631
Interest cost .................................... 19,499 20,987 19,069
Expected return on plan assets ................... (28,643) (25,622) (23,651)
Amortization of transition (asset) ............... (2,425) (2,730) (3,013)
Amortization of prior service cost ............... 1,531 1,588 1,104
Recognized actuarial (gain) loss ................. (1,145) (756) 45
--------- --------- ---------
Net periodic benefit cost ........................ $ 1,703 $ 4,695 $ 5,185
========= ========= =========
Weighted-average assumptions
as of December 31:
Discount rate ................................. 6.75% 7.00% 7.50%
Expected return on assets ..................... 8.25% 8.25% 8.25%
Rate of compensation increase
(for salary-related plans) .................. 4.25% 4.25% 4.25%
</TABLE>
Plan assets are composed primarily of marketable domestic and international
equity securities and corporate and government debt securities. Vulcan sponsors
an unfunded nonqualified pension plan. The projected benefit obligation,
accumulated benefit obligation and fair value of assets for this plan were
$16,943,860, $11,169,918 and $0 as of December 31, 1998; $15,331,632,
$10,573,132 and $0 as of December 31, 1997; and $10,764,273, $7,863,951 and $0
as of December 31, 1996.
Certain of the Company's hourly employees in unions are covered by
multi-employer defined benefit pension plans. Contributions to these plans
approximated $2,159,000 in 1998, $2,115,000 in 1997 and $2,090,000 in 1996. The
actuarial present value of accumulated plan benefits and net assets available
for benefits for employees in the union-administered plans are not determinable
from available information. Fifteen percent of the labor force are covered by
collective bargaining agreements and 6% are covered by labor agreements that
expire within one year.
50
<PAGE> 16
POSTRETIREMENT PLANS In addition to pension benefits, the Company provides
certain health care benefits and life insurance for some retired employees.
Substantially all of the Company's salaried employees and, where applicable,
hourly employees, may become eligible for those benefits if they reach at least
age 55 and meet certain service requirements while working for the Company.
Generally, Company-provided health care benefits terminate when covered
individuals become eligible for Medicare benefits or reach age 65, whichever
first occurs.
The following tables set forth the combined funded status of the plan and
its reconciliation with the related amounts recognized in the Company's
consolidated financial statements at December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year ............................. $ 48,713 $ 43,633 $ 44,491
Service cost .................................... 2,134 2,036 2,045
Interest cost ................................... 3,367 3,464 3,013
Amendments ...................................... (146) 0 0
Actuarial (gain) loss ........................... (623) 2,099 (3,103)
Benefits paid ................................... (2,513) (2,519) (2,813)
--------- --------- ---------
Benefit obligation at end of year ............... $ 50,932 $ 48,713 $ 43,633
========= ========= =========
Change in plan assets:
Fair value of assets at
beginning of year ............................. $ 3,323 $ 3,119 $ 2,842
Actual return on plan assets .................... 167 203 197
Employer contribution ........................... 45 111 168
Benefits paid ................................... (51) (110) (88)
--------- --------- ---------
Fair value of assets
at end of year ................................ $ 3,484 $ 3,323 $ 3,119
========= ========= =========
Funded status ..................................... $ (47,448) $ (45,390) $ (40,514)
Unrecognized net loss ............................. 5,612 6,261 4,287
Unrecognized prior service cost ................... (162) 5 5
--------- --------- ---------
Net amount recognized.............................. $ (41,998) $ (39,124) $ (36,222)
========= ========= =========
Amounts recognized in the statement of financial
position consist of:
Accrued benefit liability ..................... $ (41,998) $ (39,124) $ (36,222)
========== ========= =========
Components of net periodic benefit cost:
Service cost ..................................... $ 2,134 $ 2,036 $ 2,045
Interest cost ................................... 3,367 3,464 3,013
Expected return on plan assets .................. (218) (218) (204)
Amortization of prior service cost .............. 21 1 1
Recognized actuarial loss ....................... 84 138 95
--------- --------- ---------
Net periodic benefit cost ....................... $ 5,388 $ 5,421 $ 4,950
========== ========= =========
</TABLE>
The Company funds the postretirement benefits plan each year through
contributions to a trust fund for health care benefits and through payments of
premiums to providers of life insurance. All assets of the plan relate to the
life insurance and are composed of reserves held by the insurer.
The weighted-average discount rates used as of December 31, 1998, 1997 and
1996 were 6.75%, 7.00% and 7.50%, respectively. For measurement purposes, a 7%
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 1999. The rate was assumed to decrease 1% each year to 5% for
2001 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. If the healthcare cost trend rates
were increased 1% each year, the accumulated postretirement benefit obligation
as of December 31, 1998 would have increased by $6,145,000, and the aggregate of
the service and interest cost for 1998 would have increased by $797,000.
Similarly, if the health care cost trend rates were decreased 1% each year, the
accumulated postretirement benefit obligation as of December 31, 1998 would have
decreased by $4,463,000, and the aggregate of the service and interest cost for
1998 would have decreased by $621,000.
51
<PAGE> 17
9. INCENTIVE PLANS
STOCK-BASED COMPENSATION PLANS The Company's 1996 Long-Term Incentive Plan
authorizes the granting of stock-based awards to key salaried employees of the
Company and its affiliates. The Plan permits the granting of stock options
(including incentive stock options), stock appreciation rights, restricted stock
and restricted stock units, performance share awards, dividend equivalents and
other awards valued in whole or in part by reference to or otherwise based on
common stock of the Company. The number of shares available for awards is .95%
of the issued common shares of the Company (including treasury shares) as of the
first day of each calendar year, plus the unused shares that are carried over
from prior years.
Stock options issued during 1998, 1997 and 1996 were granted at the fair
market value of the stock on the date of the grant. They vest ratably over five
years and expire 10 years subsequent to the grant.
Performance share awards were granted through 1995. These awards are based
on the achievement of established performance goals, and the majority of the
awards vest over five years. Expense provisions referable to these plans
amounted to $10,698,000 in 1998, $11,671,000 in 1997 and $4,373,000 in 1996.
Expense provisions are affected by changes in the market value of the Company's
common stock and performance versus a preselected peer group.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, in accounting for its stock-based compensation.
Pro forma information regarding net earnings and earnings per share is required
by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), and has
been determined as if the Company had accounted for its employee stock options
and performance share awards under the fair value method of that statement. The
fair value for options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.6%; dividend yields of 2.1%;
volatility factors of the expected market price of the Company's common stock of
17.9%; and a weighted-average expected life of the option of five years. The
fair value for performance share awards was based on a discounted fair market
value of the Company's stock at grant date.
For purposes of pro forma disclosures, the estimated fair value of the
options and performance share awards is amortized to expense over the options'
vesting period. The effects of applying SFAS 123 on a pro forma basis would have
increased net earnings by approximately $3,626,000, $4,386,000 and $83,000 in
1998, 1997 and 1996, respectively. The impact on basic and diluted earnings per
share in 1998 would have been a $0.03 and $0.04 increase, respectively.
Similarly, the impact in 1997 would have been a $0.04 and $0.05 increase,
respectively, and there would have been no change in 1996 earnings per share.
A summary of the Company's stock option activity, related information as of
December 31, 1998, 1997 and 1996, and changes during each year is presented
below:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year .................. 2,427,705 $ 20.09 1,286,850 $ 18.87 -- $ --
Granted at fair value ........................... 1,021,950 $ 33.13 1,224,150 $ 21.32 1,289,400 $ 18.87
Exercised ....................................... 95,010 $ 19.79 20,820 $ 19.19 -- $ --
Forfeited ....................................... 106,005 $ 25.12 62,475 $ 19.16 2,550 $ 18.85
---------- --------- ---------
Outstanding at year end ........................... 3,248,640 $ 24.04 2,427,705 $ 20.09 1,286,850 $ 18.87
========== ========= =========
Options exercisable at year end ................... 840,960 $ 19.73 479,295 $ 19.35 -- $ --
Weighted-average grant date
fair value of each option
granted during the year ......................... $ 4.80 3.71 $ 3.45
</TABLE>
52
<PAGE> 18
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICE OF SHARES LIFE (YEARS) PRICE OF SHARES PRICE
- ---------------- ---------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
$18.58-$19.73 1,128,855 7.38 $18.87 542,955 $18.86
21.31 1,136,985 8.12 $21.31 297,825 $21.31
$29.20-$32.95 965,700 9.12 $32.94 180 $29.20
$ 43.76 17,100 9.94 $43.76 NA NA
---------- -------
Total 3,248,640 8.17 $24.04 840,960 $19.73
========== ==== ====== ======= ======
</TABLE>
CASH-BASED COMPENSATION PLAN The Company has a management incentive plan under
which cash awards may be made annually to officers and key employees. Expense
provisions referable to the plan amounted to $10,250,000 in 1998, $7,198,000 in
1997 and $8,500,000 in 1996.
10. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
In 1998, the Company formed a joint venture with Mitsui & Co. to construct and
operate a new chloralkali plant and to expand ethylene dichloride (EDC)
capacity. Through the contribution of its existing EDC plant and a total of
approximately $90,000,000, the Company will own 51% of the joint venture and
manage the operation of the new facilities. The majority of the spending will
occur in 1999, and the joint venture is expected to begin production in early
2000.
Other commitments of the Company include the purchase of property, plant and
equipment approximating $32,441,000 at December 31, 1998, excluding the
expenditures for the CalMat acquisition (see Note 15A) and the Mitsui joint
venture.
The Company is a defendant in various lawsuits incident to the ordinary
course of business. It is not possible to determine with precision the probable
outcome or the amount of liability, if any, with respect to these lawsuits;
however, in the opinion of the Company and its counsel, the disposition of these
lawsuits will not adversely affect the consolidated financial statements of the
Company to a material extent.
11. SHAREHOLDERS' EQUITY
A total of 42,175,581 shares has been purchased at a cost of $595,915,000
pursuant to a common stock purchase plan initially authorized by the Board of
Directors in July 1985 and increased in subsequent years, and pursuant to a
tender offer during the period November 5, 1986 through December 4, 1986. The
number of shares remaining under the current purchase authorization was
8,810,388 shares as of December 31, 1998.
During 1998, 5,272 shares that had been held by predecessor companies were
identified and retired. There was no cash flow or earnings impact associated
with this change.
In October 1998, the Company adopted a Stockholder Rights Plan and pursuant
to the plan declared a dividend on its common stock of one right (a "Right") for
each share of common stock then outstanding and for each share of common stock
issued thereafter and prior to the time the Rights expire or become exercisable.
Each Right entitles holders to purchase one one-hundredth of a share of Series A
Participating Preference Stock at a price of $400. The Rights will become
exercisable 10 days after a public announcement that a person or group has
acquired 15% or more of the Company's common stock or intends to make a tender
or exchange offer which would result in such person or group acquiring 15% or
more of the Company's common stock. Under certain circumstances, the Rights will
entitle the holder to purchase Company common stock or the common stock of an
acquiring company having a market value of two times the exercise price of each
Right. The Rights expire on December 31, 2008 and, prior to the occurrence of
certain events, maybe redeemed at a price of $0.01 per Right.
12. SEGMENT DATA
On December 31, 1998, the Company adopted SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information (SFAS 131). SFAS 131
established standards for reporting information about segments in annual
financial statements and requires selected information about segments in interim
financial reports issued to stockholders. It also established standards for
related disclosures about products and services, and geographic areas. Segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to
53
<PAGE> 19
allocate resources and in assessing performance. Under this new standard, the
Company's reportable segments are organized around products and services and
continue to be Construction Materials and Chemicals. The accounting policies of
the segments are the same as those described in the summary of significant
accounting policies. The Company's determination of segment earnings (a)
recognizes equity in the income or losses of nonconsolidated affiliates as part
of segment earnings; (b) rejects allocations of general corporate expenses to
the segments; (c) does not reflect interest revenue or expense; and (d) is
before income taxes.
Operations in the Company's Construction Materials segment principally
involve the production and sale of aggregates and related products and services
provided by seven regional divisions. These divisions have been aggregated for
reporting purposes. At year end, sales are in 17 states located in the
southeast, midwest and southwest regions of the United States and the District
of Columbia. Customers primarily use aggregates in the construction and
maintenance of highways, roads and streets and in the construction of housing
and nonresidential, commercial and industrial facilities.
The Chemicals segment, through its Chloralkali and Performance Systems
operations, produces and sells chlorine, caustic soda, chlorinated organic
chemicals and other industrial chemicals principally to the chemical, pulp and
paper, energy, water management, pharmaceuticals and textile industries. These
business units have been aggregated for reporting purposes.
Because the majority of the Company's activities are domestic, sales and
assets outside the United States are not material.
<TABLE>
<CAPTION>
SEGMENT FINANCIAL DISCLOSURE
Amounts in millions 1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
NET SALES
Construction Materials ................... $ 1,158.6 $ 1,051.0 $ 961.9
Chemicals ................................ 617.8 627.6 607.0
---------- ---------- --------
Total ................................ $ 1,776.4 $ 1,678.6 $1,568.9
========== ========== ========
EARNINGS (LOSS) BEFORE
INTEREST EXPENSE AND
INCOME TAXES
Construction Materials ................... $ 307.4 $ 229.3 $ 197.3
Chemicals ................................ 69.2 75.8 94.7
---------- ---------- --------
Segment earnings ......................... 376.6 305.1 292.0
Interest income, etc ..................... 5.0 2.3 2.2
---------- ---------- --------
Total ................................ $ 381.6 $ 307.4 $ 294.2
========== ========== ========
IDENTIFIABLE ASSETS
Construction Materials ................... $ 894.6 $ 751.2 $ 719.6
Chemicals ................................ 452.7 459.0 441.1
---------- ---------- --------
Identifiable assets .................. 1,347.3 1,210.2 1,160.7
Investment in
nonconsolidated affiliates ............. 70.3 61.0 56.0
General corporate assets ................. 60.4 49.4 53.1
Cash items ............................... 180.6 128.6 50.8
---------- ---------- --------
Total ................................ $ 1,658.6 $ 1,449.2 $1,320.6
========== ========== ========
DEPRECIATION, DEPLETION
AND AMORTIZATION
Construction Materials ................... $ 90.8 $ 84.5 $ 80.0
Chemicals ................................ 47.0 44.7 41.3
---------- ---------- --------
Total ................................ $ 137.8 $ 129.2 $ 121.3
========== ========== ========
PROPERTY ADDITIONS
Construction Materials ................... $ 176.0 $ 125.5 $ 124.1
Chemicals ................................ 54.3 56.5 63.1
---------- ---------- --------
Total ................................ $ 230.3 $ 182.0 $ 187.2
========== ========== ========
SALES BY PRODUCT
Construction Materials
Aggregates:
Stone ................................ $ 928.8 $ 833.2 $ 760.3
Sand and gravel ...................... 27.5 27.7 25.4
Other aggregates ..................... 22.3 20.0 21.0
Other products and services:
Asphaltic products and
placement .......................... 76.9 72.9 63.7
Ready-mixed concrete ................. 19.7 17.5 16.3
Other ................................ 83.4 79.7 75.2
---------- ---------- --------
Total ............................ $ 1,158.6 $ 1,051.0 $ 961.9
========== ========== ========
Chemicals
Chloralkali-Inorganic. ................. $ 205.4 $ 181.7 $ 208.1
Chloralkali-Organic .................... 220.9 256.6 234.2
Performance Systems .................... 191.5 189.3 164.7
---------- ---------- --------
Total ............................ $ 617.8 $ 627.6 $ 607.0
========== ========== ========
</TABLE>
54
<PAGE> 20
13. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information referable to the
Consolidated Statements of Cash Flows is summarized below (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
Cash payments:
Interest (exclusive of
amount capitalized) ...................... $ 7,250 $ 6,774 $ 8,715
Income taxes ............................... 112,995 92,315 85,492
Noncash investing and
financing activities:
Amounts referable to business acquisitions:
Liabilities assumed .................... 1,497 1,441 5,051
Fair value of stock issued ............. 34,568 -- --
</TABLE>
14. ACQUISITIONS
At various dates during 1998, 1997 and 1996, the Company acquired the net assets
and businesses of several companies. The combined purchase prices were
approximately $59,000,000, $12,000,000 and $64,000,000, respectively. Funds for
the purchases were primarily provided by internally generated cash flows or
stock issuance. The amount by which the total cost of these acquisitions
exceeded the fair value of the net assets acquired was recognized as goodwill
and will be amortized under the Company's normal amortization policy.
All of the 1998, 1997 and 1996 acquisitions described above were accounted
for as purchases and, accordingly, the results of operations of the acquired
businesses are included in the accompanying financial statements from their
respective dates of acquisition. On a pro forma basis, as if the net assets and
businesses had been acquired at the beginning of fiscal 1997, 1996 and 1995,
respectively, revenue, net income and earnings per share would not differ
materially from the amounts rejected in the accompanying consolidated financial
statements for 1998, 1997 and 1996.
Goodwill recorded on the Company's balance sheet as of December 31, 1998,
1997 and 1996 amounted to $94,008,000, $59,345,000 and $69,523,000.
15. SUBSEQUENT EVENTS
A. CALMAT ACQUISITION In January 1999, the Company completed its $31.00 per
share tender offer for all of the outstanding shares of common stock of CalMat
Co. for a value of $740,000,000. The acquisition was funded by cash and
approximately $590,000,000 of commercial paper. It will be accounted for under
purchase accounting, with the purchase price allocated to the acquired assets
and assumed liabilities based on fair market value.
As of the acquisition, CalMat had fixed term debt of $118,000,000 and
$90,000,000 of bank borrowings. The aggregate principal payments for the fixed
term debt for the five years subsequent to December 31, 1998 are: 1999-$294,000;
2000-$303,000; 2001-$314,000; 2002-$2,355,000; and 2003-$35,161,000. In
addition, CalMat's operating lease obligations with initial or remaining
noncancelable lease terms in excess of one year, exclusive of mineral leases, at
December 31, 1998 range from $371,000 to $910,000 annually through 2003 and
aggregate $829,000 thereafter.
CalMat is a party to various lawsuits incident to the ordinary course of
business. It is not possible to determine with precision the probable outcome or
the amount of liability, if any, with respect to these lawsuits; however, in the
opinion of the Company and its counsel, the disposition of these lawsuits will
not adversely affect the consolidated financial statements of the Company to a
material extent.
B. STOCK SPLIT On February 12, 1999, the Board of Directors approved an increase
in the authorized common stock from 160,000,000 shares to 480,000,000 shares and
a three-for-one split of the common stock. Par value of the common stock will
remain $1 per share. The stock split was effective March 10, 1999.
The effect of the stock split has been recognized retroactively in the
shareholders' equity accounts on the balance sheets as of December 31, 1998, and
in all share and per share data in the accompanying consolidated financial
statements, Notes to Financial Statements and supplemental financial data.
Shareholders' equity accounts have been restated to reflect the reclassification
of an amount equal to the par value of the increase in issued common shares from
the capital in excess of par value and retained earnings accounts to the common
stock account.
55
<PAGE> 21
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Segment Financial Data
<TABLE>
<CAPTION>
Amounts in millions 1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Construction Materials $1,158.6 $1,051.0 $ 961.9 $ 884.7 $ 842.9 $ 756.7
Chemicals 617.8 627.6 607.0 576.3 410.5 376.8
-------- -------- -------- -------- -------- --------
Total $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5
======== ======== ======== ======== ======== ========
EARNINGS (LOSS) BEFORE
INTEREST EXPENSE AND
INCOME TAXES
Construction Materials $ 307.4 $ 229.3 $ 197.3 $ 181.5 $ 162.5 $ 116.7
Chemicals 69.2 75.8 94.7 87.8 (7.3) 17.4
-------- -------- -------- -------- -------- --------
Segment earnings 376.6 305.1 292.0 269.3 155.2 134.1
Interest income, etc. 5.0 2.3 2.2 0.2 0.5 0.3
-------- -------- -------- -------- -------- --------
Total $ 381.6 $ 307.4 $ 294.2 $ 269.5 $ 155.7 $ 134.4
======== ======== ======== ======== ======== ========
NET CASH PROVIDED BY
OPERATING ACTIVITIES
Construction Materials $ 270.4 $ 255.9 $ 219.8 $ 182.9 $ 182.5 $ 156.6
Chemicals 86.4 86.3 128.8 90.8 31.5 41.1
Net interest, other, net 5.8 3.6 (3.1) (7.2) (5.7) (4.7)
-------- -------- -------- -------- -------- --------
Total $ 362.6 $ 345.8 $ 345.5 $ 266.5 $ 208.3 $ 193.0
======== ======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
Construction Materials $ 894.6 $ 751.2 $ 719.6 $ 690.0 $ 678.8 $ 670.1
Chemicals 452.7 459.0 441.1 395.5 389.5 288.7
-------- -------- -------- -------- -------- --------
Identifiable assets 1,347.3 1,210.2 1,160.7 1,085.5 1,068.3 958.8
Investment in
nonconsolidated affiliates 70.3 61.0 56.0 50.8 53.9 51.1
General corporate assets 60.4 49.4 53.1 57.6 51.2 54.7
Cash items 180.6 128.6 50.8 21.9 7.7 14.0
-------- -------- -------- -------- -------- --------
Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6
======== ======== ======== ======== ======== ========
AVERAGE CAPITAL EMPLOYED
Construction Materials $ 827.8 $ 737.5 $ 710.6 $ 681.5 $ 688.1 $ 707.4
Chemicals 389.0 373.1 356.0 353.9 294.0 248.5
Cash items 122.0 62.5 27.5 6.8 11.0 7.0
-------- -------- -------- -------- -------- --------
Total $1,338.8 $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9
======== ======== ======== ======== ======== ========
DEPRECIATION, DEPLETION
AND AMORTIZATION
Construction Materials $ 90.8 $ 84.5 $ 80.0 $ 75.3 $ 77.0 $ 78.4
Chemicals 47.0 44.7 41.3 41.7 35.7 29.0
-------- -------- -------- -------- -------- --------
Total $ 137.8 $ 129.2 $ 121.3 $ 117.0 $ 112.7 $ 107.4
======== ======== ======== ======== ======== ========
PROPERTY ADDITIONS(*)
Construction Materials
Replacement $ 83.4 $ 65.8 $ 63.0 $ 53.2 $ 42.3 $ 39.4
Environmental control 4.3 2.5 2.5 3.5 2.2 1.7
Profit adding 88.3 57.2 58.6 37.7 24.8 18.2
-------- -------- -------- -------- -------- --------
Total $ 176.0 $ 125.5 $ 124.1 $ 94.4 $ 69.3 $ 59.3
======== ======== ======== ======== ======== ========
Chemicals
Replacement $ 20.2 $ 26.2 $ 21.5 $ 15.8 $ 10.7 $ 9.3
Environmental control 0.7 2.4 7.4 4.9 1.7 5.4
Profit adding 33.4 27.9 34.2 10.5 78.1 26.6
-------- -------- -------- -------- -------- --------
Total $ 54.3 $ 56.5 $ 63.1 $ 31.2 $ 90.5 $ 41.3
======== ======== ======== ======== ======== ========
Total Company
Replacement $ 103.6 $ 92.0 $ 84.5 $ 69.0 $ 53.0 $ 48.7
Environmental control 5.0 4.9 9.9 8.4 3.9 7.1
Profit adding 121.7 85.1 92.8 48.2 102.9 44.8
-------- -------- -------- -------- -------- --------
Total $ 230.3 $ 182.0 $ 187.2 $ 125.6 $ 159.8 $ 100.6
======== ======== ======== ======== ======== ========
INCREASE (DECREASE) IN
WORKING CAPITAL(**)
Construction Materials $ 19.5 $ (8.7) $ (3.2) $ (9.9) $ 3.9 $ 2.6
Chemicals 12.2 11.9 (13.5) 18.1 11.8 (8.3)
-------- -------- -------- -------- -------- --------
Total $ 31.7 $ 3.2 $ (16.7) $ 8.2 $ 15.7 $ (5.7)
======== ======== ======== ======== ======== ========
<CAPTION>
Amounts in millions 1992 1991 1990 1989 1988
-------- - ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET SALES
Construction Materials $ 686.4 $ 648.1 $ 696.1 $ 645.7 $ 670.6
Chemicals 391.6 359.4 409.2 430.5 382.6
-------- -------- -------- -------- --------
Total $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2
======== ======== ======== ======== ========
EARNINGS (LOSS) BEFORE
INTEREST EXPENSE AND
INCOME TAXES
Construction Materials $ 88.3 $ 41.8 $ 112.0 $ 115.3 $ 141.5
Chemicals 51.3 42.6 72.4 86.4 66.2
-------- -------- -------- -------- --------
Segment earnings 139.6 84.4 184.4 201.7 207.7
Interest income, etc. 0.9 0.3 2.6 5.8 5.2
-------- -------- -------- -------- --------
Total $ 140.5 $ 84.7 $ 187.0 $ 207.5 $ 212.9
======== ======== ======== ======== ========
NET CASH PROVIDED BY
OPERATING ACTIVITIES
Construction Materials $ 141.9 $ 141.8 $ 130.2 $ 159.4 $ 115.3
Chemicals 63.8 50.0 76.4 93.6 62.4
Net interest, other, net (4.6 (8.5 (6.5 (2.8 (2.4)
-------- -------- -------- -------- --------
Total $ 201.1 $ 183.3 $ 200.1 $ 250.2 $ 175.3
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
Construction Materials $ 688.9 $ 710.1 $ 764.4 $ 592.4 $ 539.9
Chemicals 285.2 267.6 270.3 270.6 283.4
-------- -------- -------- -------- --------
Identifiable assets 974.1 977.7 1,034.7 863.0 823.3
Investment in
nonconsolidated affiliates 43.4 39.1 32.6 21.6 15.4
General corporate assets 50.8 37.4 32.1 33.7 29.5
Cash items 15.6 18.9 18.6 84.2 89.4
-------- -------- -------- -------- --------
Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6
======== ======== ======== ======== ========
AVERAGE CAPITAL EMPLOYED
Construction Materials $ 708.4 $ 748.4 $ 656.8 $ 550.6 $ 485.2
Chemicals 226.4 226.1 228.9 227.8 230.5
Cash items 22.4 3.1 29.2 73.7 73.0
-------- -------- -------- -------- --------
Total $ 957.2 $ 977.6 $ 914.9 $ 852.1 $ 788.7
======== ======== ======== ======== ========
DEPRECIATION, DEPLETION
AND AMORTIZATION
Construction Materials $ 80.2 $ 84.9 $ 83.2 $ 73.0 $ 64.6
Chemicals 31.5 31.4 29.7 28.7 27.4
-------- -------- -------- -------- --------
Total $ 111.7 $ 116.3 $ 112.9 $ 101.7 $ 92.0
======== ======== ======== ======== ========
PROPERTY ADDITIONS(*)
Construction Materials
Replacement $ 17.9 $ 26.9 $ 63.9 $ 62.8 $ 61.0
Environmental control 1.6 1.7 2.5 1.7 0.9
Profit adding 37.0 32.2 120.9 63.2 36.5
-------- -------- -------- -------- --------
Total $ 56.5 $ 60.8 $ 187.3 $ 127.7 $ 98.4
======== ======== ======== ======== ========
Chemicals
Replacement $ 11.3 $ 9.2 $ 13.0 $ 7.3 $ 9.0
Environmental control 10.1 1.6 3.6 3.4 2.0
Profit adding 20.6 14.1 18.6 8.3 6.3
-------- -------- -------- -------- --------
Total $ 42.0 $ 24.9 $ 35.2 $ 19.0 $ 17.3
======== ======== ======== ======== ========
Total Company
Replacement $ 29.2 $ 36.1 $ 76.9 $ 70.1 $ 70.0
Environmental control 11.7 3.3 6.1 5.1 2.9
Profit adding 57.6 46.3 139.5 71.5 42.8
-------- -------- -------- -------- --------
Total $ 98.5 $ 85.7 $ 222.5 $ 146.7 $ 115.7
======== ======== ======== ======== ========
INCREASE (DECREASE) IN
WORKING CAPITAL(**)
Construction Materials $ 14.1 $ (10.8) $ 37.0 $ (20.2) $ 47.0
Chemicals (3.2 (0.5) (0.7) (8.2) 24.1
-------- -------- -------- -------- --------
Total $ 10.9 $ (11.3) $ 36.3 $ (28.4) $ 71.1
======== ======== ======== ======== ========
</TABLE>
* Refer to page 65 for a discussion of the three categories used by the Company
to classify property additions.
** Exclusive of debt and cash items.
56
<PAGE> 22
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Segment Information--Construction Materials
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES UNITS (in millions)
Aggregates:
Customer stone--tons 157.2 146.0 138.4 129.0 125.4 116.6
Customer sand and
gravel--tons 5.7 6.1 6.1 5.6 5.9 6.4
Customer other
aggregates--tons 2.5 3.1 2.2 1.8 2.1 1.7
--------------------------------------------------------
Total customer
sales--tons 165.4 155.2 146.7 136.4 133.4 124.7
JV and internal
sales--tons(*) 14.2 12.2 11.3 11.9 11.7 10.5
--------------------------------------------------------
Total aggregates--
tons 179.6 167.4 158.0 148.3 145.1 135.2
========================================================
Other construction materials:
Asphalt-mix
concrete--tons 1.9 1.8 1.7 1.7 1.5 1.6
Ready-mixed concrete--
cubic yards 0.4 0.4 0.3 0.4 0.3 0.3
SALES AMOUNTS (in millions)
Aggregates:
Stone $ 928.8 $ 833.2 $ 760.3 $679.9 $630.4 $557.1
Sand and gravel 27.5 27.7 25.4 23.1 24.4 24.8
Other aggregates 22.3 20.0 21.0 20.1 21.7 19.5
Other products and services:
Asphaltic products and
placement 76.9 72.9 63.7 69.2 65.0 64.3
Ready-mixed concrete 19.7 17.5 16.3 16.4 14.5 12.3
Other 83.4 79.7 75.2 76.0 86.9 78.7
--------------------------------------------------------
Total $1,158.6 $1,051.0 $ 961.9 $884.7 $842.9 $756.7
========================================================
<CAPTION>
1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES UNITS (in millions)
Aggregates:
Customer stone--tons 109.4 102.9 111.0 103.4 106.7
Customer sand and
gravel--tons 6.0 5.2 5.1 5.4 5.7
Customer other
aggregates--tons 1.9 1.6 1.8 2.0 2.1
-----------------------------------------
Total customer
sales--tons 117.3 109.7 117.9 110.8 114.5
JV and internal
sales--tons(*) 9.0 5.6 4.2 3.2 2.9
-----------------------------------------
Total aggregates--
tons 126.3 115.3 122.1 114.0 117.4
=========================================
Other construction materials:
Asphalt-mix
concrete--tons 1.5 1.2 1.7 1.4 1.6
Ready-mixed concrete--
cubic yards 0.3 0.3 0.3 0.3 0.3
SALES AMOUNTS (in millions)
Aggregates:
Stone $506.9 $483.2 $532.8 $498.9 $516.3
Sand and gravel 23.2 19.5 20.7 20.7 21.6
Other aggregates 20.4 21.2 21.3 22.8 23.5
Other products and services:
Asphaltic products and
placement 47.7 45.5 51.1 41.8 49.0
Ready-mixed concrete 12.4 12.1 10.7 11.9 9.2
Other 75.8 66.6 59.5 49.6 51.0
-----------------------------------------
Total $686.4 $648.1 $696.1 $645.7 $670.6
=========================================
</TABLE>
* Represents tons shipped by nonconsolidated businesses as well as tons sold to
the Company's nonaggregates operations.
<TABLE>
<CAPTION>
Ten-year Growth Five-year Growth
1988-1998 1993-1998
Units Amount Units Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL
COMPOUND GROWTH RATES
Stone 4.2% 6.5% 5.9% 10.5%
Sand and gravel 1.1% 3.1% -0.8% 2.9%
Other aggregates 1.4% -2.1% 3.2% -2.6%
</TABLE>
Sales by End Use
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES OF AGGREGATES (estimated)
Highway, road, street and
airport construction 34% 36% 36% 37% 39% 40% 40% 38% 37% 37%
Nonresidential, commercial
and industrial facilities 35 33 35 35 31 32 28 29 31 31
Residential buildings 19 18 17 15 16 15 15 16 18 20
Other public works--
dams, sewers and
water supply systems
(excluding buildings) 7 8 7 8 8 7 11 10 8 6
Railroad ballast 2 2 2 2 3 3 3 3 3 3
Nonconstruction use--
agricultural, chemical
and industrial 3 3 3 3 3 3 3 4 3 3
----------------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
==============================================================================================
</TABLE>
57
<PAGE> 23
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Segment Information--Chemicals
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES AMOUNTS(in millions)
Chloralkali--Inorganic $205.4 $181.7 $208.1 $221.8 $154.7 $158.4 $214.5 $215.6 $221.3 $205.9 $171.2
Chloralkali--Organic 220.9 256.6 234.2 223.3 193.3 207.2 170.9 143.8 187.9 224.6 211.4
Performance Systems 191.5 189.3 164.7 131.2 62.5 11.2 6.2 0.0 0.0 0.0 0.0
------------------------------------------------------------------------------------------------
Total $617.8 $627.6 $607.0 $576.3 $410.5 $376.8 $391.6 $359.4 $409.2 $430.5 $382.6
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ten-year Growth Five-year Growth
1988-1998 1993-1998
Amount Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
AVERAGE ANNUAL
COMPOUND GROWTH RATES
Chloralkali--Inorganic 2.0% 1.6%
Chloralkali--Organic 2.1% 5.1%
Performance Systems NA 83.0%
</TABLE>
Sales by End Use
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES OF CHEMICALS (estimated)
Process and intermediate
chemicals 58% 56% 58% 58% 58% 56% 54% 56% 53% 54%
Industrial durables and
nondurables 21 23 21 22 24 26 29 23 27 26
Consumer nondurables 21 21 21 20 18 18 17 21 20 20
-------------------------------------------------------------------------------------
100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
=====================================================================================
</TABLE>
58
<PAGE> 24
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Earnings and Supplementary Data
<TABLE>
<CAPTION>
Amounts in millions,
except per share data 1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5
Cost of goods sold 1,226.8 1,199.5 1,115.4 1,044.7 985.2 886.8
------------------------------------------------------------------------------
Gross profit on sales 549.6 479.1 453.5 416.3 268.2 246.7
Selling, administrative
and general expenses 199.0 190.4 175.1 159.8 125.0 111.1
Other operating costs 7.9 5.1 3.9 6.3 5.5 5.0
Other income (charges),
net 38.9 23.8 19.7 19.3 18.0 3.8
------------------------------------------------------------------------------
Earnings before
interest expense
and income taxes 381.6 307.4 294.2 269.5 155.7 134.4
Interest expense 6.8 6.9 8.6 11.1 9.8 9.2
------------------------------------------------------------------------------
Earnings before
income taxes 374.8 300.5 285.6 258.4 145.9 125.2
Provision for income taxes 118.9 91.4 97.0 92.2 47.9 37.0
------------------------------------------------------------------------------
Net earnings before
cumulative effect of
accounting changes 255.9 209.1 188.6 166.2 98.0 88.2
Cumulative effect of
accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------------------------
Net earnings $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2
==============================================================================
Diluted earnings per share:
Net earnings before
cumulative effect of
accounting changes $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80
Cumulative effect of
accounting changes 0.00 0.00 0.00 0.00 0.00 0.00
------------------------------------------------------------------------------
Net earnings $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80
==============================================================================
Operating income
after taxes $ 260.1 $ 213.4 $ 194.4 $ 173.4 $ 104.5 $ 93.3
As a percent of average
capital employed 19.4% 18.2% 17.8% 16.6% 10.5% 9.7
Gross profit on sales as
a percent of net sales 30.9% 28.5% 28.9% 28.5% 21.4% 21.8
Net earnings:
As a percent of
net sales 14.4% 12.5% 12.0% 11.4% 7.8% 7.8
As a percent of average
shareholders'
equity 24.0% 22.7% 22.4% 21.9% 13.6% 12.8
Effective tax rate 31.7% 30.4% 34.0% 35.7% 32.8% 29.5
SUPPLEMENTARY COST DATA
Energy $ 133.5 $ 137.7 $ 135.4 $ 122.4 $ 122.0 $ 124.7
Repairs and maintenance 159.2 161.1 151.8 141.1 128.6 120.0
Depreciation, depletion
and amortization 137.8 129.2 121.3 117.0 112.7 107.4
Taxes other than income:
Payroll 25.3 24.6 22.1 21.4 20.1 19.5
Property, franchise, etc. 20.6 17.6 20.3 19.6 19.8 18.0
Rentals 40.6 34.8 34.0 28.6 31.1 22.1
Royalties 21.9 21.4 20.3 17.8 17.3 15.8
Research and
development 9.6 10.8 9.0 10.3 8.3 6.1
Advertising 1.0 0.9 0.9 0.6 0.5 0.5
<CAPTION>
Amounts in millions,
except per share data 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2
Cost of goods sold 828.9 795.4 813.9 776.2 749.2
-----------------------------------------------------------------
Gross profit on sales 249.1 212.1 291.4 300.0 304.0
Selling, administrative
and general expenses 105.7 98.9 101.3 94.1 95.6
Other operating costs 5.3 28.2 6.2 4.9 3.3
Other income (charges),
net 2.4 (0.3) 3.1 2.5 7.8
-----------------------------------------------------------------
Earnings before
interest expense
and income taxes 140.5 84.7 187.0 203.5 212.9
Interest expense 9.8 11.3 7.8 6.1 6.7
-----------------------------------------------------------------
Earnings before
income taxes 130.7 73.4 179.2 197.4 206.2
Provision for income taxes 39.7 20.8 58.9 68.0 70.2
-----------------------------------------------------------------
Net earnings before
cumulative effect of
accounting changes 91.0 52.6 120.3 129.4 136.0
Cumulative effect of
accounting changes 3.0 0.0 0.0 1.5 0.0
-----------------------------------------------------------------
Net earnings $ 94.0 $ 52.6 $ 120.3 $ 130.9 $ 136.0
=================================================================
Diluted earnings per share:
Net earnings before
cumulative effect of
accounting changes $ 0.80 $ 0.46 $ 1.03 $ 1.07 $ 1.10
Cumulative effect of
accounting changes 0.03 0.00 0.00 0.01 0.00
-----------------------------------------------------------------
Net earnings $ 0.83 $ 0.46 $ 1.03 $ 1.08 $ 1.10
=================================================================
Operating income
after taxes $ 98.7 $ 59.5 $ 125.1 $ 137.2 $ 140.2
As a percent of average
capital employed 10.3% 6.1% 13.7% 16.1% 17.9%
Gross profit on sales as
a percent of net sales 23.1% 21.1% 26.4% 27.9% 28.9%
Net earnings:
As a percent of
net sales 8.4% 5.2% 10.9% 12.4% 12.9%
As a percent of average
shareholders'
equity 13.3% 7.7% 18.2% 20.5% 22.9%
Effective tax rate 30.4% 28.4% 32.9% 33.7% 34.0%
SUPPLEMENTARY COST DATA
Energy $ 119.8 $ 115.5 $ 118.3 $ 107.9 $ 110.7
Repairs and maintenance 115.7 111.4 109.4 108.1 108.0
Depreciation, depletion
and amortization 111.7 116.3 112.9 101.7 92.0
Taxes other than income:
Payroll 18.0 17.1 16.9 15.8 15.5
Property, franchise, etc. 17.9 17.3 15.8 14.1 13.4
Rentals 21.6 14.4 17.0 11.9 9.9
Royalties 14.3 13.8 16.0 15.2 14.8
Research and
development 5.4 5.4 6.1 5.1 4.6
Advertising 0.5 0.5 0.7 0.6 0.7
</TABLE>
All share and per share data have been restated to reflect the three-for-one
split of the Company's common stock, approved by the Board of Directors on
February 12, 1999 and effective March 10, 1999.
59
<PAGE> 25
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets and Other Financial Data
<TABLE>
<CAPTION>
As of December 31
Dollar amounts in millions 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 180.6 $ 128.6 $ 50.8 $ 21.9 $ 7.7 $ 14.0
Short-term investments 0.0 0.0 0.0 0.0 0.0 0.0
Accounts and
notes receivable 221.3 199.8 185.5 181.1 182.1 150.4
Inventories 143.7 132.4 128.6 126.8 112.5 105.0
Deferred income taxes 24.9 21.4 23.5 26.5 29.1 26.9
Prepaid expenses 5.9 4.9 5.6 5.8 5.4 6.3
-------------------------------------------------------------------------
Total current assets 576.4 487.1 394.0 362.1 336.8 302.6
Investments and long-term
receivables 71.0 63.5 61.3 56.3 58.1 56.5
Property, plant and
equipment, net 895.8 808.4 764.5 698.0 701.8 657.8
Deferred charges and
other assets 115.4 90.2 100.8 99.4 84.4 61.7
-------------------------------------------------------------------------
Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6
=========================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities(*) $ 211.5 $ 207.7 $ 194.6 $ 177.4 $ 211.3 $ 140.8
Long-term obligations(*) 76.5 81.9 85.5 90.3 97.4 102.0
Other noncurrent
liabilities 216.9 168.1 156.8 151.5 140.8 132.8
Shareholders' equity 1,153.7 991.5 883.7 796.6 731.6 703.0
-------------------------------------------------------------------------
Total $1,658.6 $1,449.2 $1,320.6 $1,215.8 $1,181.1 $1,078.6
=========================================================================
OTHER FINANCIAL DATA
Average capital employed:
Short-term debt(*) $ 8.0 $ 8.6 $ 14.1 $ 45.6 $ 39.4 $ 25.2
Long-term obligations(*) 78.5 82.6 86.9 93.3 99.1 105.6
Other noncurrent
liabilities 186.7 162.0 152.9 144.7 135.0 140.4
Shareholders' equity 1,065.6 919.9 840.2 758.6 719.6 691.7
-------------------------------------------------------------------------
Total $1,338.8 $1,173.1 $1,094.1 $1,042.2 $ 993.1 $ 962.9
=========================================================================
Working capital exclusive
of debt and cash items $ 193.0 $ 161.3 $ 158.1 $ 174.8 $ 166.6 $ 150.9
Current ratio 2.7 2.3 2.0 2.0 1.6 2.1
Average obligations(*)
as a percent of average
capital employed 6.5% 7.8% 9.2% 13.3% 13.9% 13.6
Long-term obligations(*)
as a percent of long-term
capital (year-end) 5.3% 6.6% 7.6% 8.7% 10.0% 10.9%
Ratio of earnings to fixed
charges--consolidated 18.9 17.8 16.0 13.3 7.9 8.1%
Average number
of employees 6,971 7,180 6,926 6,918 6,753 6,320
<CAPTION>
As of December 31
Dollar amounts in millions 1992 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 15.7 $ 19.0 $ 18.6 $ 84.3 $ 68.1
Short-term investments 0.0 0.0 0.0 0.0 21.3
Accounts and
notes receivable 151.4 138.1 152.9 136.9 149.3
Inventories 107.9 112.6 113.0 96.9 93.6
Deferred income taxes 24.6 11.9 7.0 11.6 15.5
Prepaid expenses 5.2 3.5 3.8 3.6 3.1
------------------------------------------------------------
Total current assets 304.8 285.1 295.3 333.3 350.9
Investments and long-term
receivables 50.0 40.7 33.8 22.9 17.1
Property, plant and
equipment, net 663.7 675.4 720.7 602.5 549.9
Deferred charges and
other assets 65.4 71.9 68.2 43.8 39.7
------------------------------------------------------------
Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities(*) $ 135.0 $ 135.4 $ 233.8 $ 140.9 $ 118.0
Long-term obligations(*) 107.3 111.1 44.7 55.2 62.0
Other noncurrent
liabilities 141.5 143.7 159.3 142.9 143.3
Shareholders' equity 700.1 682.9 680.2 663.5 634.3
------------------------------------------------------------
Total $1,083.9 $1,073.1 $1,118.0 $1,002.5 $ 957.6
============================================================
OTHER FINANCIAL DATA
Average capital employed:
Short-term debt(*) $ 24.1 $ 72.7 $ 62.1 $ 8.3 $ 4.0
Long-term obligations(*) 108.2 66.5 47.2 57.4 63.7
Other noncurrent
liabilities 138.4 155.7 144.1 135.0 127.4
Shareholders' equity 686.5 682.7 661.5 651.4 593.6
------------------------------------------------------------
Total $ 957.2 $ 977.6 $ 914.9 $ 852.1 $ 788.7
============================================================
Working capital exclusive
of debt and cash items $ 156.6 $ 145.7 $ 157.0 $ 120.8 $ 149.2
Current ratio 2.3 2.1 1.3 2.4 3.0
Average obligations(*)
as a percent of average
capital employed 13.8% 14.2% 12.0% 7.7% 8.6%
Long-term obligations(*)
as a percent of long-term
capital (year-end) 11.3% 11.8% 5.1% 6.4% 7.4%
Ratio of earnings to fixed
charges--consolidated 8.4 5.6 12.8 19.5 19.8
Average number
of employees 6,273 6,404 6,628 6,276 6,185
</TABLE>
* Includes capitalized lease obligations.
60
<PAGE> 26
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Amounts in millions 1998 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings before cumulative
effect of accounting changes $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation, depletion
and amortization 137.8 129.2 121.3 117.0 112.7 107.4
Compensation expense incurred
in connection with stock-
based incentive plans 6.8 5.5 2.0 0.7 1.0 0.9
Provision for impairment
and liquidation of assets 0.0 0.0 0.0 0.0 0.0 0.0
(Increase) decrease in
assets before effects of
business acquisitions (33.6) (15.3) 8.6 (6.1) (21.3) 0.8
Increase (decrease) in
liabilities before effects of
business acquisitions 12.0 9.4 19.3 9.0 24.4 (2.9)
Amortization of block
power purchase 0.0 0.0 0.0 0.0 0.0 0.0
Cumulative effect of
accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
Other, net (16.3) 7.9 5.7 (20.3) (6.5) (1.4)
-------------------------------------------------------------------
Net cash provided by
operating activities 362.6 345.8 345.5 266.5 208.3 193.0
-------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of property,
plant and equipment (203.3) (161.2) (151.8) (109.2) (100.1) (96.0)
Payment for business
acquisitions (24.9) (12.1) (64.8) (27.2) (87.6) (4.5)
Proceeds from sale of property,
plant and equipment 27.1 16.4 12.0 31.9 15.4 6.0
Proceeds from sale of segments 0.0 0.0 0.0 0.0 0.0 0.0
Investment in nonconsolidated
companies 0.0 0.0 (1.2) (1.9) (2.1) (9.6)
Withdrawal of earnings from
nonconsolidated companies 0.3 0.2 0.0 0.0 0.0 0.3
Cash provided by (used for)
short-term investments 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------
Net cash used for
investing activities (200.8) (156.7) (205.8) (106.4) (174.4) (103.8)
-------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 0.0 0.0 0.0 0.0 0.0 0.0
Net borrowings (payments)--
commercial paper and
bank lines of credit (1.3) 0.4 (0.3) (39.3) 42.8 0.0
Payment of short-term debt (5.2) (5.0) (6.8) (4.7) (1.9) (1.2)
Payment of long-term debt (0.2) 0.0 (0.1) 0.0 (4.4) (3.4)
Purchases of common stock (65.0) (43.1) (45.2) (50.1) (28.6) (40.0)
Dividends paid (70.0) (63.6) (58.4) (51.8) (48.1) (46.3)
Contribution from minority
interest of consolidated
subsidiaries 31.9 0 0 0 0 0
-------------------------------------------------------------------
Net cash used for
financing activities (109.8) (111.3) (110.8) (145.9) (40.2) (90.9)
-------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 52.0 77.8 28.9 14.2 (6.3) (1.7)
Cash and cash equivalents at
beginning of year 128.6 50.8 21.9 7.7 14.0 15.7
-------------------------------------------------------------------
Cash and cash equivalents at
end of year $ 180.6 $ 128.6 $ 50.8 $ 21.9 $ 7.7 $ 14.0
===================================================================
<CAPTION>
Amounts in millions 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings before cumulative
effect of accounting changes $ 91.0 $ 52.6 $ 120.3 $ 133.4 $ 136.0
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation, depletion
and amortization 111.7 116.3 112.9 101.7 92.0
Compensation expense incurred
in connection with stock-
based incentive plans 0.7 1.0 1.6 1.8 1.4
Provision for impairment
and liquidation of assets 0.0 21.1 0.0 0.0 0.0
(Increase) decrease in
assets before effects of
business acquisitions (18.6) 13.5 (5.5) 15.6 (31.1)
Increase (decrease) in
liabilities before effects of
business acquisitions 10.3 (14.6) (13.8) 16.1 (16.5)
Amortization of block
power purchase 0.0 0.0 2.5 3.2 3.2
Cumulative effect of
accounting changes 3.0 0.0 0.0 1.5 0.0
Other, net 3.0 (6.6) (17.9) (23.1) (9.7)
-------------------------------------------------------
Net cash provided by
operating activities 201.1 183.3 200.1 250.2 175.3
-------------------------------------------------------
INVESTING ACTIVITIES
Purchases of property,
plant and equipment (75.2) (63.6) (119.9) (102.9) (100.4)
Payment for business
acquisitions (33.2) (24.7) (117.9) (34.3) (20.1)
Proceeds from sale of property,
plant and equipment 8.9 2.6 4.3 4.2 6.1
Proceeds from sale of segments 0.0 0.0 0.0 0.0 25.9
Investment in nonconsolidated
companies (11.6) (13.0) (18.8) (9.0) (11.7)
Withdrawal of earnings from
nonconsolidated companies 0.4 0.0 2.7 0.3 0.5
Cash provided by (used for)
short-term investments 0.0 0.0 0.0 21.3 (2.5)
-------------------------------------------------------
Net cash used for
investing activities (110.7) (98.7) (249.6) (120.4) (102.2)
-------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 0.0 81.0 0.0 0.0 0.0
Net borrowings (payments)--
commercial paper and
bank lines of credit (9.8) (97.4) 107.1 0.0 0.0
Payment of short-term debt (3.8) (4.6) (11.7) (4.1) (30.1)
Payment of long-term debt (2.6) (12.3) (6.0) (6.0) (6.0)
Purchases of common stock (32.4) (5.2) (59.2) (58.4) (34.9)
Dividends paid (45.1) (45.7) (46.4) (45.1) (40.2)
Contribution from minority
interest of consolidated
subsidiaries 0 0 0 0 0
-------------------------------------------------------
Net cash used for
financing activities (93.7) (84.2) (16.2) (113.6) (111.2)
-------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (3.3) 0.4 (65.7) 16.2 (38.1)
Cash and cash equivalents at
beginning of year 19.0 18.6 84.3 68.1 106.2
-------------------------------------------------------
Cash and cash equivalents at
end of year $ 15.7 $ 19.0 $ 18.6 $ 84.3 $ 68.1
=======================================================
</TABLE>
61
<PAGE> 27
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Average Annual Compound Growth Rates(*)
<TABLE>
<CAPTION>
Ten-year Growth Five-year Growth
1988-1998 1993-1998
<S> <C> <C>
OPERATING DATA Net sales:
Construction Materials 6.1% 8.6%
Chemicals 5.7% 11.5%
-----------------------
Total 5.9% 9.6%
-----------------------
Earnings before interest expense and income taxes:
Construction Materials 11.4% 18.6%
Chemicals NA NA
-----------------------
Segment earnings 8.0% 23.1%
Net earnings 8.3% 24.7%
SHARE DATA Per common share:
Basic net earnings 10.4% 27.2%
Diluted net earnings 10.3% 27.0%
Dividends paid 6.9% 11.1%
Book value at year end 7.4% 12.5%
FINANCIAL POSITION Working capital at year end 6.9% 20.6%
Property, plant and equipment--gross, at year end 5.9% 6.0%
Property, plant and equipment--net, at year end 3.6% 6.1%
Average capital employed:
Construction Materials 3.6% 3.0%
Chemicals 6.6% 8.8%
Average shareholders' equity 4.9% 8.9%
OTHER DATA Depreciation, depletion and amortization:
Construction Materials 2.9% 4.0%
Chemicals 5.3% 8.7%
-----------------------
Total 3.6% 5.4%
-----------------------
Net cash provided by operating activities 6.7% 15.0%
Property additions 4.7% 15.1%
SELECTED NATIONAL Consumer price index for all urban consumers 3.2% 2.5%
PRICE INDICES Gross domestic product implicit price deflator 2.8% 2.0%
Producer price index for industrial commodities 1.7% 1.2%
</TABLE>
* The compound growth rates shown on this page and elsewhere herein were
computed by linear regression analysis of the logarithms of the annual data
values.
62
<PAGE> 28
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Net Sales, Net Earnings and Earnings Per Share
<TABLE>
<CAPTION>
Amounts in millions,
except per share data 1998 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
First quarter $ 359.0 $ 341.4 $ 308.5 $ 294.4 $ 216.9 $ 214.1
Second quarter 465.8 445.1 419.2 382.8 326.7 306.0
Third quarter 509.5 477.9 443.6 422.0 360.4 331.4
Fourth quarter 442.1 414.2 397.6 361.8 349.4 282.0
-------------------------------------------------------------------------------
Total $1,776.4 $1,678.6 $1,568.9 $1,461.0 $1,253.4 $1,133.5
===============================================================================
GROSS PROFIT ON SALES
First quarter $ 89.5 $ 76.1 $ 70.1 $ 58.8 $ 21.0 $ 29.7
Second quarter 146.9 136.5 129.3 113.2 77.4 74.0
Third quarter 175.3 147.0 139.6 133.8 90.4 85.1
Fourth quarter 137.9 119.5 114.5 110.5 79.4 57.9
-------------------------------------------------------------------------------
Total $ 549.6 $ 479.1 $ 453.5 $ 416.3 $ 268.2 $ 246.7
===============================================================================
NET EARNINGS (LOSS)
First quarter $ 36.5 $ 21.9 $ 20.1 $ 16.0 $ (5.2) $ (0.5)
Second quarter 70.0 62.8 58.6 47.7 33.7 31.6
Third quarter 89.9 73.3 62.1 59.1 37.6 36.6
Fourth quarter 59.5 51.1 47.8 43.4 31.9 20.5
-------------------------------------------------------------------------------
Total $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2
===============================================================================
BASIC EARNINGS (LOSS)
PER SHARE
First quarter $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00
Second quarter 0.69 0.62 0.56 0.45 0.31 0.28
Third quarter 0.89 0.72 0.60 0.55 0.34 0.33
Fourth quarter 0.60 0.51 0.46 0.41 0.30 0.19
-------------------------------------------------------------------------------
Total $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90 $ 0.80
===============================================================================
DILUTED EARNINGS (LOSS)
PER SHARE
First quarter $ 0.36 $ 0.21 $ 0.19 $ 0.15 $ (0.05) $ 0.00
Second quarter 0.68 0.61 0.55 0.44 0.31 0.28
Third quarter 0.88 0.71 0.59 0.55 0.34 0.33
Fourth quarter 0.58 0.50 0.46 0.40 0.29 0.19
-------------------------------------------------------------------------------
Total $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89 $ 0.80
===============================================================================
<CAPTION>
Amounts in millions,
except per share data 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
First quarter $ 210.6 $ 197.0 $ 232.0 $ 217.5 $ 202.7
Second quarter 284.2 266.4 295.7 293.7 284.5
Third quarter 312.3 289.3 306.6 307.3 298.5
Fourth quarter 270.9 254.8 271.0 257.7 267.5
-----------------------------------------------------------------
Total $1,078.0 $1,007.5 $1,105.3 $1,076.2 $1,053.2
=================================================================
GROSS PROFIT ON SALES
First quarter $ 35.6 $ 27.6 $ 52.3 $ 47.4 $ 46.8
Second quarter 74.5 66.7 88.6 90.5 93.9
Third quarter 80.8 71.3 90.0 103.2 98.8
Fourth quarter 58.2 46.5 60.5 58.9 64.5
-----------------------------------------------------------------
Total $ 249.1 $ 212.1 $ 291.4 $ 300.0 $ 304.0
=================================================================
NET EARNINGS (LOSS)
First quarter $ 7.6 $ (2.2) $ 18.7 $ 17.2 $ 15.6
Second quarter 30.2 25.9 39.6 43.5 46.0
Third quarter 35.8 30.2 42.2 50.5 49.3
Fourth quarter 20.4 (1.3) 19.8 19.7 25.1
-----------------------------------------------------------------
Total $ 94.0 $ 52.6 $ 120.3 $ 130.9 $ 136.0
=================================================================
BASIC EARNINGS (LOSS)
PER SHARE
First quarter $ 0.07 $ (0.02) $ 0.16 $ 0.14 $ 0.13
Second quarter 0.27 0.23 0.34 0.36 0.37
Third quarter 0.32 0.27 0.37 0.42 0.40
Fourth quarter 0.17 (0.02) 0.17 0.16 0.20
-----------------------------------------------------------------
Total $ 0.83 $ 0.46 $ 1.04 $ 1.08 $ 1.10
=================================================================
DILUTED EARNINGS (LOSS)
PER SHARE
First quarter $ 0.07 $ (0.02) $ 0.16 $ 0.14 $ 0.13
Second quarter 0.27 0.23 0.34 0.36 0.37
Third quarter 0.31 0.26 0.36 0.42 0.40
Fourth quarter 0.18 (0.01) 0.17 0.16 0.20
-----------------------------------------------------------------
Total $ 0.83 $ 0.46 $ 1.03 $ 1.08 $ 1.10
=================================================================
</TABLE>
All share and per share data have been restated to reflect the three-for-one
split of the Company's common stock, approved by the Board of Directors on
February 12, 1999 and effective March 10, 1999.
63
<PAGE> 29
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Common Stock Prices, Dividends and Related Data
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK PRICES (NYSE)
First quarter High $37.83 $22.17 $19.42 $19.21 $17.29 $18.71
Low 31.50 18.42 17.71 16.04 15.17 15.67
Close 36.50 21.63 18.88 19.17 16.17 17.25
Second quarter High 39.90 26.88 19.79 19.58 16.17 17.33
Low 34.83 20.42 18.46 18.00 14.67 13.42
Close 35.56 26.17 19.79 18.17 15.29 15.42
Third quarter High 40.75 30.15 22.17 20.13 18.00 16.58
Low 33.63 26.13 18.17 17.25 14.96 14.58
Close 33.73 29.00 20.00 17.67 17.96 16.13
Fourth quarter High 44.67 34.65 21.67 19.63 18.83 16.92
Low 31.33 28.15 19.83 17.50 15.50 14.50
Close 43.85 34.04 20.29 19.21 16.88 15.63
Year High 44.67 34.65 22.17 20.13 18.83 18.71
Low 31.33 18.42 17.71 16.04 14.67 13.42
Close 43.85 34.04 20.29 19.21 16.88 15.63
DIVIDENDS PAID PER SHARE
OF COMMON STOCK
First quarter $0.173 $0.157 $0.140 $0.122 $0.110 $0.105
Second quarter 0.173 0.157 0.140 0.122 0.110 0.105
Third quarter 0.173 0.157 0.140 0.122 0.110 0.105
Fourth quarter 0.173 0.157 0.140 0.122 0.110 0.105
-----------------------------------------------------------------------------
Total $0.693 $0.627 $0.560 $0.487 $0.440 $0.420
=============================================================================
OTHER DATA
Price earnings ratio (annual)
High 17.8 17.0 12.4 13.0 21.2 23.5
Low 12.5 9.1 9.9 10.4 16.5 16.8
Close 17.5 16.7 11.4 12.4 19.0 19.6
Dividends paid as a percent
of earnings per share 27.8% 30.8% 31.3% 31.5% 49.4% 52.7%
Shareholders' equity
per common share $11.29 $ 9.64 $ 8.37 $ 7.39 $ 6.65 $ 6.34
Ratio of stock price to
shareholders' equity per
common share at year end 3.8 3.5 2.4 2.5 2.5 2.4
Common shares outstanding
at year end (in millions) 100.6 101.1 102.7 104.9 107.7 109.0
Average common shares
outstanding (in millions) 100.9 101.5 104.3 106.6 109.3 110.3
Average common shares
outstanding, assuming
dilution (in millions) 102.2 102.8 105.5 107.8 110.0 110.9
<CAPTION>
1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK PRICES (NYSE)
First quarter High $13.42 $12.58 $15.54 $14.67 $12.75
Low 12.00 10.13 13.75 13.50 10.33
Close 13.08 11.42 15.13 14.25 12.50
Second quarter High 15.58 13.33 15.58 16.17 13.04
Low 12.54 11.29 14.42 14.17 12.17
Close 15.50 12.58 14.54 14.42 12.75
Third quarter High 15.50 13.08 15.13 16.00 13.17
Low 13.25 11.33 11.67 14.29 12.08
Close 13.58 12.96 12.25 15.54 12.79
Fourth quarter High 16.54 13.25 12.50 15.83 13.83
Low 13.17 11.21 9.79 14.21 12.50
Close 16.08 12.00 11.33 14.83 13.83
Year High 16.54 13.33 15.58 16.17 13.83
Low 12.00 10.13 9.79 13.50 10.33
Close 16.08 12.00 11.33 14.83 13.83
DIVIDENDS PAID PER SHARE
OF COMMON STOCK
First quarter $0.100 $0.100 $0.100 $0.093 $0.082
Second quarter 0.100 0.100 0.100 0.093 0.082
Third quarter 0.100 0.100 0.100 0.093 0.082
Fourth quarter 0.100 0.100 0.100 0.093 0.082
---------------------------------------------------------------
Total $0.400 $0.400 $0.400 $0.373 $0.327
===============================================================
OTHER DATA
Price earnings ratio (annual)
High 19.9 29.0 15.1 15.0 12.6
Low 14.5 22.0 9.5 12.5 9.4
Close 19.4 26.1 11.0 13.7 12.6
Dividends paid as a percent
of earnings per share 48.2% 87.0% 38.7% 34.6% 29.7%
Shareholders' equity
per common share $ 6.18 $ 5.96 $ 5.84 $ 5.48 $ 5.13
Ratio of stock price to
shareholders' equity per
common share at year end 2.6 2.0 1.9 2.6 2.7
Common shares outstanding
at year end (in millions) 111.7 114.0 114.3 118.5 122.3
Average common shares
outstanding (in millions) 112.8 114.2 116.0 120.7 123.2
Average common shares
outstanding, assuming
dilution (in millions) 113.3 114.6 116.5 121.2 123.7
</TABLE>
The Company's common stock is traded on the New York Stock Exchange (ticker
symbol VMC). As of January 29, 1999, the number of shareholders of record
approximated 3,611.
Dividends paid in 1998 totaled $70,015,000 as compared with $63,622,000 paid in
1997. On February 12, 1999, the Board of Directors authorized a quarterly
dividend of 19.5 cents per common share payable March 10, 1999. The new
quarterly dividend represents a 12.5% increase over quarterly dividends paid in
1998.
All share and per share data have been restated to reflect the three-for-one
split of the Company's common stock, approved by the Board of Directors on
February 12, 1999 and effective March 10, 1999.
64
<PAGE> 30
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
Financial Terminology
Capital Employed
For our Company: the sum of interest-bearing debt, other noncurrent liabilities
and shareholders' equity; for a segment: the net sum of the segment's assets,
current liabilities, and allocated corporate assets and current liabilities,
exclusive of cash items and short-term debt.
Cash Items
The sum of cash, cash equivalents and short-term investments.
Common Shareholders' Equity
The sum of common stock (less the cost of common stock in treasury), capital in
excess of par value and retained earnings, as reported in the balance sheet.
Long-term Capital
The sum of long-term debt, other noncurrent liabilities and shareholders'
equity.
Operating Income after Taxes
For our Company: net earnings from operations plus the after-tax cost of
interest expense; for a segment: segment earnings less the segment's computed
share of the consolidated provision for income taxes.
Property Additions
Capitalized replacements of and additions to property, plant and equipment (and
such assets of businesses acquired), including capitalized leases, renewals and
betterments; each segment's property additions include allocated corporate
amounts.
Our Company classifies its property additions into three categories
based upon the predominant purpose of the project expenditures. Thus, a project
is classified entirely as a replacement if that is the principal reason for
making the expenditure even though the project may involve some cost saving
and/or capacity improvement aspects. Likewise, a profit-adding project is
classified entirely as such if the principal reason for making the expenditure
is to add operating facilities at new locations (which occasionally replace
facilities at old locations), to add product lines, to expand the capacity of
existing facilities, to reduce costs, to increase mineral reserves or to improve
products, etc.
Property additions classified as environmental control expenditures do
not reflect those expenditures for environmental control activities, including
industrial health programs, which are expensed currently. Such expenditures are
made on a continuing basis and at significant levels in each of our Company's
segments. Frequently, profit-adding and major replacement projects also include
expenditures for environmental control purposes.
Ratio of Earnings to Fixed Charges
The sum of earnings from continuing operations before income taxes, amortization
of capitalized interest and fixed charges net of interest capitalization
credits, divided by fixed charges. Fixed charges are the sum of interest expense
before capitalization credits, amortization of financing costs and one-third of
rental expense.
Segment Earnings
Earnings before interest expense and income taxes and after allocation of
corporate expenses and income, other than "interest income, etc." (principally
interest income earned on cash items and gains or losses on corporate financing
transactions), and after assignment of equity income to the segments with which
it is related in terms of products and services. Allocations are based primarily
on one or a combination of the following factors: average gross investment,
average equity and sales.
Short-term Debt
The sum of current interest-bearing debt, including current maturities of
long-term debt and interest-bearing notes payable.
65
<PAGE> 1
EXHIBIT (21)
VULCAN MATERIALS COMPANY
SUBSIDIARIES
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF % OWNED DIRECTLY
INCORPORATION OR INDIRECTLY
ENTITY OR ORGANIZATION BY VULCAN
------ --------------- ---------
Subsidiaries
------------
<S> <C> <C>
Atlantic Granite Company* South Carolina 66-2/3
Birmingham Slag Company* Alabama 100
Callaway Chemical Company New Jersey 100
Callaway Chemical Limited British Columbia 100
Dixie Sand and Gravel Company, Inc.* Tennessee 100
Knoxville Mack Distributors, Inc.* Tennessee 100
Lambert Bros., Inc.* Tennessee 100
Midsouth Machine and Service Company Tennessee 100
RECO Transportation, Inc. Kentucky 100
Statewide Transport, Inc. Texas 100
Vulcan Aggregates Company, LLC Delaware 100
Vulcan Chemicals Investments, LLC Delaware 100
Vulcan Chemical Technologies, Inc. Delaware 100
Vulcan Chloralkali, LLC Delaware 51
Vulcan Construction Materials, LP Delaware 100
Vulcan/ICA Distribution Company (Partnership) Texas 51
Vulcan Gulf Coast Aggregates, Inc. New Jersey 100
Vulcan Gulf Coast Materials, Inc. New Jersey 100
Vulcan Holdings, Inc. New Jersey 100
Vulcan International, Ltd. U.S. Virgin Islands 100
Vulcan Lands, Inc. New Jersey 100
Vulcan Materials Finance Company Tennessee 100
Vulcan Soda Ash Company California 100
Wanatah Trucking Co., Inc. Indiana 100
Wesco Contracting Company* Tennessee 100
White's Mines, Inc.* Texas 100
</TABLE>
*Inactive
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-68895 of Vulcan Materials Company on Form S-3 of our reports dated February
5, 1999 (March 10, 1999 as to Note 15b), appearing in and incorporated by
reference in the Annual Report on Form 10-K of Vulcan Materials Company for the
year ended December 31, 1998 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Birmingham, Alabama
March 19, 1999
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Marion H. Antonini
-----------------------------
Marion H. Antonini
<PAGE> 2
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Livio D. DeSimone
-----------------------------
Livio D. DeSimone
<PAGE> 3
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ A. Frederick Gerstell
---------------------------------
A. Frederick Gerstell
<PAGE> 4
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ John K. Greene
---------------------------
John K. Greene
<PAGE> 5
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Donald M. James
----------------------------
Donald M. James
<PAGE> 6
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Douglas J. McGregor
--------------------------------
Douglas J. McGregor
<PAGE> 7
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Ann D. McLaughlin
-------------------------------
Ann D. McLaughlin
<PAGE> 8
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ James V. Napier
---------------------------
James V. Napier
<PAGE> 9
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Donald B. Rice
---------------------------
Donald B. Rice
<PAGE> 10
POWER OF ATTORNEY
The undersigned director of Vulcan Materials Company, a New Jersey
corporation, hereby nominates, constitutes and appoints William F. Denson, III,
and E. Starke Sydnor, and each of them, the true and lawful attorneys of the
undersigned to sign the name of the undersigned as director to the Annual
Report on Form 10-K for the year ended December 31, 1998 of said corporation to
be filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and to any and all amendments to said report.
The undersigned hereby grants to said attorneys full power of
substitution, resubstitution and revocation, all as fully as the undersigned
could do if personally present, hereby ratifying all that said attorneys or
their substitutes may lawfully do by virtue hereof.
IN WITNESS WHEREOF, the undersigned director of Vulcan Materials
Company has executed this Power of Attorney this 19th day of March, 1999.
/s/ Herbert A. Sklenar
-------------------------------
Herbert A. Sklenar
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1998, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 180,568
<SECURITIES> 0
<RECEIVABLES> 218,081
<ALLOWANCES> 7,391
<INVENTORY> 143,680
<CURRENT-ASSETS> 576,381
<PP&E> 2,280,756
<DEPRECIATION> 1,384,971
<TOTAL-ASSETS> 1,658,611
<CURRENT-LIABILITIES> 211,462
<BONDS> 76,533
0
0
<COMMON> 139,705
<OTHER-SE> 1,013,995
<TOTAL-LIABILITY-AND-EQUITY> 1,658,611
<SALES> 1,776,434
<TOTAL-REVENUES> 1,776,434
<CGS> 1,226,764
<TOTAL-COSTS> 1,226,764
<OTHER-EXPENSES> 7,851
<LOSS-PROVISION> 750
<INTEREST-EXPENSE> 6,782
<INCOME-PRETAX> 374,844
<INCOME-TAX> 118,936
<INCOME-CONTINUING> 255,908
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,908
<EPS-PRIMARY> 2.54
<EPS-DILUTED> 2.50
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1997 RESULTED FROM THE STOCK SPLIT
EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED
DECEMBER 31, 1997, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 128,566
<SECURITIES> 0
<RECEIVABLES> 196,937
<ALLOWANCES> 7,548
<INVENTORY> 132,359
<CURRENT-ASSETS> 487,132
<PP&E> 2,120,200
<DEPRECIATION> 1,311,781
<TOTAL-ASSETS> 1,449,246
<CURRENT-LIABILITIES> 207,697
<BONDS> 81,931
0
0
<COMMON> 46,573
<OTHER-SE> 944,924
<TOTAL-LIABILITY-AND-EQUITY> 1,449,246
<SALES> 1,678,581
<TOTAL-REVENUES> 1,678,581
<CGS> 1,199,453
<TOTAL-COSTS> 1,199,453
<OTHER-EXPENSES> 5,112
<LOSS-PROVISION> 662
<INTEREST-EXPENSE> 6,914
<INCOME-PRETAX> 300,501
<INCOME-TAX> 91,356
<INCOME-CONTINUING> 209,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,145
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1996 RESULTED FROM THE STOCK SPLIT
EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED
DECEMBER 31, 1996, AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 50,816
<SECURITIES> 0
<RECEIVABLES> 184,970
<ALLOWANCES> 8,106
<INVENTORY> 128,578
<CURRENT-ASSETS> 394,045
<PP&E> 2,002,164
<DEPRECIATION> 1,237,674
<TOTAL-ASSETS> 1,320,645
<CURRENT-LIABILITIES> 194,654
<BONDS> 85,535
0
0
<COMMON> 46,573
<OTHER-SE> 837,091
<TOTAL-LIABILITY-AND-EQUITY> 1,320,645
<SALES> 1,568,945
<TOTAL-REVENUES> 1,568,945
<CGS> 1,115,442
<TOTAL-COSTS> 1,115,442
<OTHER-EXPENSES> 3,887
<LOSS-PROVISION> 652
<INTEREST-EXPENSE> 8,636
<INCOME-PRETAX> 285,580
<INCOME-TAX> 96,985
<INCOME-CONTINUING> 188,595
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,595
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.79
</TABLE>
