<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 11, 1999
VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
1-4033 63-0366371
- ------------------------- --------------------------------------
(Commission File Number) (I.R.S. Employer Identification Number)
One Metroplex Drive, Birmingham, Alabama
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (205) 298-3000
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Item 5. Other Events
On February 11, 1999, Vulcan Materials Company issued the following
press release:
VULCAN REVISES 1998 CASH PROVIDED BY OPERATIONS
Birmingham, Alabama, February 11, 1999 -- As part of its year-end
financial review process, Vulcan Materials Company (NYSE:VMC) has revised
certain items referable to net cash provided by operations from those reported
in the January 19, 1999, press release announcing the Company's fourth-quarter
and full-year 1998 results. The revised net cash provided by operations in 1998
is $362,596,000, an amount less than previously reported but 5 percent higher
than 1997 and the highest in the Company's history. This revision does not
impact the consolidated statements of earnings, but does affect both the
consolidated statements of cash flows and balance sheets.
The revised consolidated statements of cash flows and balance sheets
are attached. A revised version of our entire press release can be viewed on the
Company's web site at www.vulcanmat.com, or may be requested by calling (205)
298-3202.
Vulcan is a producer of industrial materials with significant positions
in two industries. It 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 entire January 19, 1999, press release, as revised, follows.]
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VULCAN ANNOUNCES RECORD 1998 AND 4TH QUARTER RESULTS
(As revised February 11, 1999)
Birmingham, Alabama, January 19, 1999 -- Vulcan Materials Company
(NYSE:VMC) today announced that 1998 sales, pretax earnings, net earnings and
diluted earnings per share were at record levels. Net earnings were
$255,908,000, or $7.51 per share, as compared with 1997 record net earnings and
earnings per share of $209,145,000 and $6.10. Net earnings and earnings per
share were up 22 percent and 23 percent, respectively. Sales in 1998 were
$1,776,434,000, up 6 percent from the 1997 record total of $1,678,581,000.
Pretax earnings totaled $374,844,000, up 25 percent from last year's record
amount of $300,501,000.
Fourth quarter results were also at record levels. Sales of
$442,181,000 were up 7 percent from the $414,296,000 reported in 1997. Pretax
earnings of $87,193,000 were up 20 percent from 1997's fourth quarter amount of
$72,841,000. Net earnings of $59,442,000 and earnings per share of $1.75 were at
record levels and were 16 percent and 17 percent higher, respectively, than the
comparable 1997 results of $51,149,000 and $1.49.
All results are preliminary, and, as yet, unaudited.
The Construction Materials segment reported record full-year sales of
$1,158,639,000, up 10 percent from the 1997 result of $1,050,978,000. Shipments
of crushed stone, the segment's principal product, increased nearly 8 percent,
reflecting strong demand in all major markets. Excluding the impact of freight
to remote distribution yards, the average sales price of crushed stone increased
over 4 percent. Full-year segment earnings of $307,431,000 also were at a record
level and increased 34 percent from 1997's level of $229,275,000. 1998 results
include pretax gains totaling approximately $14,326,000 from the sale of assets,
as compared to the 1997 total of approximately $3,400,000. Excluding the effects
of the gains referable to asset and business sales from both years' results,
1998 earnings were 30 percent higher than 1997. The increase was primarily the
result of higher crushed stone prices and shipments, as well as increased
earnings from other product lines.
For the quarter, Construction Materials reported record sales of
$304,452,000, up 18 percent from the fourth quarter of 1997. Crushed stone
shipments increased nearly 16 percent. Excluding the impact of freight to remote
distribution yards, the average sales price of crushed stone also increased over
4 percent. Record earnings of $75,126,000 were up 35 percent from the 1997 level
of $55,644,000. The increase was primarily the result of higher crushed stone
shipments and prices.
The Chemicals segment posted 1998 sales of $617,795,000, down 2 percent
from the 1997 level of $627,603,000. Higher prices for caustic soda were more
than offset by lower volume and prices for chlorine and some chlorine
derivatives. Chemicals reported 1998 earnings of $69,136,000, down 9 percent
from the 1997 level of $75,787,000. Excluding the impact of asset sales and
environmental provisions, earnings for the year were 2 percent above 1997
levels. Higher caustic soda prices and lower raw material costs offset lower
volume and prices for chlorine and some derivative products, and lower earnings
from Performance Systems.
Chemicals reported fourth quarter sales of $137,729,000, down 12
percent from last year. Sales benefited from higher prices for caustic soda, but
this was more than offset by lower volume and prices for chlorine and some
derivative products. Chemicals' fourth quarter earnings of $11,631,000 were down
35 percent from the 1997 level of $17,877,000. Similar to the full-year
comparison, higher caustic soda prices and lower raw material costs offset the
lower volume and prices for chlorine and some derivative products, and lower
earnings from Performance Systems.
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The Company's 1998 effective tax rate was 31.7 percent, up from the
1997 rate of 30.4 percent. The increase reflects principally a lesser impact of
favorable adjustments referable to tax audits for prior years.
Selling, administrative and general expenses of $198,956,000 increased
4 percent from the 1997 level. In addition to normal salary increases, this
reflects expenditures associated with several projects designed to enhance
operations and reduce future costs throughout the organization.
Other income, net of other charges, was $38,763,000 as compared with
the 1997 amount of $23,845,000. The increase principally reflects gains on sales
of assets, higher earnings from the Company's joint venture to supply limestone
from Mexico to the U.S. Gulf Coast market, and higher interest income.
Net cash provided by operations reached a record $362,596,000 in 1998,
5 percent higher than the $345,814,000 generated in 1997. This new record
reflects improved earnings and higher depreciation. Cash used for investing
activities was $200,771,000 as compared with the 1997 total of $156,728,000.
This increase reflects mainly greater investment in property, plant and
equipment as well as acquisitions. Net cash used for financing activities
totaled $109,823,000, down slightly from the 1997 amount of $111,336,000. Cash
and cash equivalents amounted to $180,568,000 at December 31, 1998, up from the
1997 year-end amount of $128,566,000.
During 1998, significant property additions within Construction
Materials included the acquisition of six quarries in Georgia, Illinois and
Tennessee, and the start-up of greenfield aggregates operations in Alabama,
Georgia and Indiana. Property additions within Chemicals 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
$90,000,000 for this project, with the majority of this funding to be provided
in 1999.
Pursuant to the Company's long-standing common stock purchase program,
610,700 shares of common stock were purchased in 1998 at a total cost of
$65,003,000, equal to an average price of $106.44 per share. Purchases of common
stock in 1997 totaled 630,856 shares at a cost of $43,060,000, equal to an
average price of $68.26 per share.
Donald M. James, Chairman and Chief Executive Officer of Vulcan,
stated, "I am very pleased to report that 1998 was another outstanding year for
Vulcan. We once again established new record highs in virtually all measures of
financial performance including sales, pretax earnings, net earnings and
earnings per share. In addition, this year the foundation was laid for continued
profitable growth with the passage of favorable legislation for highway
construction (TEA21) and the initiation of significant strategic growth projects
in both of our business segments.
"Continuing strong demand for construction aggregates generated the
fifth consecutive year of record financial performance in our Construction
Materials segment. Moreover, we added a number of quarries, strengthened our
distribution networks and negotiated the acquisition of CalMat Co., our largest
transaction ever.
"CalMat also finished 1998 with very strong earnings from operations.
The robust earnings recovery exhibited by CalMat during the second half of 1998
indicates significantly improving construction markets in California. Compared
to 1997, CalMat's sales were up 16 percent to $543,065,000 for the year and 26
percent for the fourth quarter. The acquisition of CalMat was completed earlier
this month and we are confident that the combination of the growing strength in
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CalMat's markets and CalMat's position in those markets will provide significant
opportunities for future earnings growth. CalMat's results are unaudited and not
included in Vulcan's 1998 results.
"As for our Chemicals business, 1998 results were in line with our
expectations. Improved prices for caustic soda and lower raw material costs
offset a significant portion of the earnings decline due to lower prices and
volumes for chlorine and some chlorinated derivatives, weaker earnings from
Performance Systems and the negative impact of non-operating items. We also
leveraged our existing infrastructure and provided for future earnings growth by
forming a joint venture with Mitsui. This joint venture is structured to take
advantage of Vulcan's manufacturing and domestic marketing capabilities and
Mitsui's access to global EDC markets. The facilities are under construction
with production anticipated early in 2000. We expect this joint venture to
generate attractive and relatively stable returns for Vulcan.
"With regard to 1999, our starting point is the assumption that
moderate growth in GDP, stable interest rates and the favorable impact of TEA21
will continue to provide a healthy economic environment for construction
activity in the U.S. We expect the market for construction aggregates to remain
strong. Demand in all major construction end-use markets should equal or exceed
their 1998 levels, with the exception of residential construction, which is
predicted to decline modestly. Based on this outlook, we expect 1999 earnings
from our Construction Materials segment, before the inclusion of CalMat, to
exceed 1998's record results. CalMat will significantly increase segment
earnings, but this will be offset by higher interest expense referable to the
acquisition. As has been communicated earlier, we expect to generate significant
cash flow from sales of certain CalMat real estate. Due to purchase accounting,
the earnings impact of these transactions will be insignificant.
"In 1999, our 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 for Chemicals. It is possible that both caustic
and chlorine prices may be lower than in 1998. Based on our current view, we
expect Chemicals' earnings to fall significantly below 1998's performance.
"All in all, we have a high level of confidence in the outlook for
Construction Materials. However, the volatile outlook for Chemicals makes it
challenging to project 1999 results for Chemicals. If Chemicals' markets
stabilize, Vulcan's net earnings and earnings per share should approximate
1998's record results. On the other hand, a continued deterioration in
Chemicals' markets could lead to a slight decline in total Company earnings.
"For 1999, we also expect a significantly more seasonal pattern of
quarterly earnings. Given the seasonal nature of the construction business and
the impact of relatively level quarterly charges for interest and depreciation,
depletion and amortization, CalMat will be significantly dilutive in the first
quarter and accretive for the balance of the year. Additionally, the first
quarter of 1999 will not include any significant gains from asset sales
comparable to those realized in 1998. Also, Chemicals' earnings in the first
quarter of 1998 were significantly higher than in any subsequent quarter.
Consequently, we expect that Chemicals' most difficult 1999 quarterly comparison
will be the first quarter. Thus we expect to report significantly lower earnings
for the first quarter of 1999 with subsequent gains over the remainder of the
year."
Vulcan is a producer of industrial materials with significant positions
in two industries. It 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.
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Certain matters discussed in this release 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 from time to time in the Company's SEC reports,
including the report on Form 10K for the year.
(Tables Follow)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VULCAN MATERIALS COMPANY
/s/ E. Starke Sydnor
-------------------------------
E. Starke Sydnor
Assistant General Counsel
Chemicals and Environmental
Date: February 17, 1999
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Table A
VULCAN MATERIALS COMPANY AND
SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
December 31 December 31
Consolidated Statements of Earnings ----------------------- ---------------------------
(Condensed and unaudited) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales ............................... $442,181 $414,296 $1,776,434 $1,678,581
Cost of goods sold ...................... 304,236 294,715 1,226,764 1,199,453
-------- -------- ---------- ----------
Gross profit on sales ................... 137,945 119,581 549,670 479,128
Selling, administrative and
general expenses ...................... 58,214 48,273 198,956 190,446
Other operating costs ................... 1,615 1,906 7,851 5,112
Other income, net ....................... 10,731 5,100 38,763 23,845
-------- -------- ---------- ----------
Earnings before interest
expense and income taxes .............. 88,847 74,502 381,626 307,415
Interest expense ........................ 1,654 1,661 6,782 6,914
-------- -------- ---------- ----------
Earnings before income taxes ............ 87,193 72,841 374,844 300,501
Provision for income taxes .............. 27,751 21,692 118,936 91,356
-------- -------- ---------- ----------
Net earnings ............................ $ 59,442 $ 51,149 $ 255,908 $ 209,145
========================================================================================================
Basic earnings per share ................ $ 1.77 $ 1.52 $ 7.61 $ 6.18
Diluted earning per share ............... $ 1.75 $ 1.49 $ 7.51 $ 6.10
========================================================================================================
Average common shares
outstanding (in thousands) ............ 33,528 33,688 33,618 33,828
Average common shares
outstanding assuming dilution
(in thousands) ........................ 33,974 34,208 34,059 34,283
Depreciation, depletion and
amortization deducted above ........... $ 35,313 $ 34,959 $ 137,792 $ 129,217
Effective tax rate ...................... 31.8% 29.8% 31.7% 30.4%
========================================================================================================
</TABLE>
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TABLE B
VULCAN MATERIALS COMPANY AND
SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
(Thousands of Dollars)
Three Months Ended Twelve Months Ended Variance
December 31 December 31 Fav/(Unfav)
Operating Results by Reportable ----------------------- ---------------------------- 1998 YTD vs
Segment (Unaudited) 1998 1997 1998 1997 1997 YTD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES
Construction Materials .................... $304,452 $258,039 $1,158,639 $1,050,978 $ 107,661
Chemicals ................................. 137,729 156,257 617,795 627,603 (9,808)
-------- -------- ---------- ---------- ---------
Total ................................. $442,181 $414,296 $1,776,434 $1,678,581 $ 97,853
======== ======== ========== ========== =========
EARNINGS BEFORE INTEREST EXPENSE
AND INCOME TAXES
Construction Materials .................... $ 75,126 $ 55,644 $ 307,431 $ 229,275 $ 78,156
Chemicals ................................. 11,631 17,877 69,136 75,787 (6,651)
-------- -------- ---------- ---------- ---------
Segment(*) earnings ................... 86,757 73,521 376,567 305,062 71,505
Interest income, etc....................... 2,090 981 5,059 2,353 2,706
-------- -------- ---------- ---------- ---------
Total ................................. $ 88,847 $ 74,502 $ 381,626 $ 307,415 $ 74,211
======== ======== ========== ========== =========
EARNINGS BEFORE INTEREST EXPENSE,
INCOME TAXES, DEPRECIATION AND
AMORTIZATION (EBITDA)**
Construction Materials .................... $ 98,696 $ 77,326 $ 398,181 $ 313,814 $ 84,367
Chemicals ................................. 23,374 31,154 116,179 120,465 (4,286)
-------- -------- ---------- ---------- ---------
Segment* EBITDA** ..................... $122,070 $108,480 $ 514,360 $ 434,279 $ 80,081
======== ======== ========== ========== =========
</TABLE>
* After allocation of corporate expenses and income, other than "interest
income, etc." (principally interest income earned on short-term investment
of funds and gains or losses on corporate financing transactions), and
after assignment of equity income to the segments with which it is related
in terms of products and services.
** EBITDA is presented because it is a widely accepted financial indicator of
a company's ability to service and/or incur indebtedness. However, EBITDA
should not be construed as an alternative to net income as a measure of a
company's operating results or to operating cash flow as a measure of
liquidity.
<PAGE> 9
REVISED
VULCAN MATERIALS COMPANY AND Table C
SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
(Thousands of Dollars)
Consolidated Balance Sheets December 31 December 31
(Condensed and unaudited) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents .................. $ 180,568 $ 128,566
Accounts and notes receivable .............. 221,261 199,750
Inventories ................................ 143,680 132,359
Deferred income taxes ...................... 24,923 21,385
Prepaid expenses ........................... 5,949 5,072
---------- ----------
Total current assets ................... 576,381 487,132
Investments and long-term receivables ...... 71,034 63,482
Property, plant and equipment, net ......... 895,785 808,419
Deferred charges and other assets .......... 115,412 90,213
---------- ----------
Total .................................. $1,658,612 $1,449,246
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt ....... $ 5,432 $ 5,408
Notes payable .............................. 2,353 3,654
Other current liabilities .................. 203,678 198,635
---------- ----------
Total current liabilities ................ 211,463 207,697
Long-term debt ............................. 76,533 81,931
Other noncurrent liabilities ............... 216,916 168,121
Shareholders' equity ....................... 1,153,700 991,497
---------- ----------
Total .................................. $1,658,612 $1,449,246
================================================================================
Current ratio .............................. 2.7 2.3
Property additions ......................... $ 230,324 $ 181,946
Capital employed(*) ........................ $1,454,935 $1,250,612
Common shareholders' equity per share ...... $ 34.41 $ 29.43
Common shares outstanding (in thousands) ... 33,531 33,689
================================================================================
</TABLE>
(*) The sum of interest-bearing debt, capitalized lease obligations, other
noncurrent liabilities and shareholders' equity.
See accompanying Note to Financial Statements
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REVISED
VULCAN MATERIALS COMPANY AND Table D
SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
(Thousands of Dollars)
Twelve Months Ended
December 31
Consolidated Statements of Cash Flows -------------------------
(Condensed and unaudited) 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net earnings ............................................................ $ 255,908 $ 209,145
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation, depletion and amortization ............................ 137,792 129,217
Increase in assets before effects of
business acquisitions ............................................. (33,624) (15,307)
Increase in liabilities before effects of
business acquisitions ............................................. 12,005 9,290
Other, net .......................................................... (9,485) 13,469
--------- ---------
Net cash provided by operations ................................... 362,596 345,814
--------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment .............................. (203,258) (161,238)
Payment for business acquisitions (net of acquired cash) ............... (24,874) (12,086)
Proceeds from sale of property, plant and equipment ..................... 27,054 16,446
Withdrawal of earnings from nonconsolidated companies ................... 307 150
--------- ---------
Net cash used for investing activities ............................ (200,771) (156,728)
--------- ---------
FINANCING ACTIVITIES
Net borrowings (payment) - commercial paper and bank lines of credit .... (1,301) 365
Payment of short-term debt .............................................. (5,193) (5,000)
Payment of long-term debt ............................................... (225) (19)
Purchases of common stock ............................................... (65,003) (43,060)
Dividends paid .......................................................... (70,015) (63,622)
Contributions from minority interest of consol subs ..................... 31,914 0
--------- ---------
Net cash used for financing activities ............................ (109,823) (111,336)
--------- ---------
Net decrease in cash and cash equivalents ............................... 52,002 77,750
Cash and cash equivalents at beginning of year .......................... 128,566 50,816
--------- ---------
Cash and cash equivalents at end of year ................................ $ 180,568 $ 128,566
========================================================================================================
</TABLE>
See accompanying Note to Financial Statements
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Table E
NOTES TO FINANCIAL STATEMENTS
1. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information referable to the Consolidated Statements of Cash Flows
for the years ended December 31 is summarized below (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) ................................ $ 7,250 $ 6,774
Income taxes ........................................................ 112,995 92,315
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Liabilities and long-term debt assumed in business acquisitions ....... 1,497 1,441
Fair value of stock issued in business acquisitions ................... 34,568 --
Debt issued in purchase of property, plant and equipment .............. 44 134
</TABLE>
