<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
VULCAN MATERIALS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Pursuant to Item 304 of Regulation S-T, the following is an appendix
listing and providing a narrative description of all image information which
appears in the 1999 Proxy Statement.
The boxes appearing in the section entitled "NOMINEES FOR ELECTION TO
THE BOARD OF DIRECTORS" represent photographs of the individuals
discussed in this section.
<PAGE> 3
March 31, 1999
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of the
Shareholders of Vulcan Materials Company, which will be held in our new
corporate office in Liberty Park at 1200 Urban Center Drive, Birmingham,
Alabama, on Friday, May 14, 1999, at 10:00 a.m., Central Daylight Time. The
formal Notice of the Annual Meeting, the Proxy Statement and a proxy accompany
this letter.
We hope that you will be present at the meeting. Whether or not you
plan to attend, however, please execute and return your proxy or take advantage
of our new Internet and telephone voting systems so that we may be assured of
the presence of a quorum at the meeting. A postage-prepaid envelope is enclosed
for your convenience in replying by mail. Your prompt vote will be greatly
appreciated.
Our Annual Report to Shareholders for 1998 is enclosed. We trust you
will find it interesting and informative.
Sincerely yours,
DONALD M. JAMES
Chairman and
Chief Executive Officer
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<PAGE> 4
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD MAY 14, 1999
To the Shareholders of the Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting") of the
Shareholders of Vulcan Materials Company (the "Company") will be held in the
McCook Conference Room, 1200 Urban Center Drive, Birmingham, Alabama, on Friday,
May 14, 1999, at 10:00 a.m., Central Daylight Time, for the following purposes:
1. To elect four (4) directors to serve three-year terms and one (1)
director to serve a two-year term or until their successors are duly
elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for 1999.
3. To transact such other business as may properly come before the Annual
Meeting.
Holders of record of the Common Stock of the Company at the close of business on
March 26, 1999, are entitled to notice of and to vote at the Annual Meeting.
The Annual Meeting may be adjourned from time to time without notice other than
announcement at the meeting, or any adjournment thereof, and any business for
which notice is hereby given may be transacted at any such adjournment.
By Order of the Board of Directors,
WILLIAM F. DENSON, III
Secretary
1200 Urban Center Drive
Birmingham, Alabama 35242
March 31, 1999
- --------------------------------------------------------------------------------
NOTE -- PLEASE SIGN, DATE AND RETURN YOUR PROXy
AS PROMPTLY AS POSSIBLE
WHETHER YOU OWN ONE OR MANY SHARES.
- --------------------------------------------------------------------------------
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<PAGE> 5
PROXY STATEMENT FOR THE
ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD MAY 14, 1998
The accompanying proxy is solicited on behalf of the Board of Directors
of Vulcan Materials Company (the "Company") for use at the Annual Meeting of the
Shareholders of the Company (the "Annual Meeting") to be held in the McCook
Conference Room, 1200 Urban Center Drive, Birmingham, Alabama, at 10:00 a.m.,
Central Daylight Time, on Friday, May 14, 1999, and any adjournments thereof. A
shareholder giving a proxy may revoke it at any time before it is voted by
sending a letter of revocation to the Secretary of the Company, in care of First
Chicago Trust Company of New York, P. O. Box 8060, Edison, New Jersey
08818-9039. A proxy may also be revoked by signing and returning a ballot at the
Annual Meeting or by signing a proxy with a more recent date than that of the
proxy first given and returning it to the inspectors of election. Attendance at
the Annual Meeting by itself will not revoke a proxy. The mailing address of the
principal executive office of the Company is P. O. Box 385014, Birmingham,
Alabama 35238-5014. The approximate date on which this Proxy Statement and the
proxy are to be first mailed to shareholders is March 31, 1999.
GENERAL INFORMATION
On March 26, 1999, the record date for the Annual Meeting, the number
of issued and outstanding shares of Common Stock of the Company was 100,866,579.
The holders of each outstanding share of Common Stock of the Company on such
date are entitled to one vote per share with respect to each matter to be
considered at the Annual Meeting. There are no cumulative voting rights.
A majority of the outstanding shares of Common Stock, represented in
person or by proxy, is required to constitute a quorum at the Annual Meeting.
Shares of Common Stock of the Company, represented by proxies which have been
properly executed and duly returned, will be counted for purposes of determining
a quorum and will be voted at the Annual Meeting as specified by the
shareholders. Shares of Common Stock represented by a properly executed and
returned proxy will be treated as present at the Annual Meeting for purposes of
determining a quorum without regard to whether the proxy is marked as casting a
vote for or against or abstaining with respect to a particular matter. In
addition, shares of Common Stock represented by "broker non-votes" (i.e., shares
of Common Stock held in record name by brokers or nominees as to which a proxy
is received and (i) no instructions have been received from the beneficial owner
or person entitled to vote, (ii) the broker or nominee does not have
discretionary voting power and (iii) the record holder has indicated that it
does not have authority to vote such shares on the matter) generally will be
treated as present for purposes of determining a quorum, but will have the
effect as described below concerning the matters to be voted upon by the
shareholders at the Annual Meeting.
The affirmative vote of a plurality of the votes cast by the holders of
outstanding shares of Common Stock of the Company present in person or
represented by proxy at the Annual Meeting is necessary to elect the nominees
for directors named in the Proxy Statement. Under New Jersey
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<PAGE> 6
law, neither an abstention nor a broker non-vote is considered a vote for the
purpose of determining the number of votes cast on a proposal. Accordingly,
abstentions and broker non-votes with respect to the election of directors will
have no effect upon the election of directors at the Annual Meeting. The
affirmative vote of a majority of the votes cast by the holders of outstanding
shares of Common Stock of the Company present in person or represented by a
proxy at the Annual Meeting is necessary to ratify the appointment of Deloitte &
Touche as independent auditors for 1999. Therefore, abstentions and broker
non-votes with respect to the ratification of the Company's independent auditors
will have the same effect as negative votes.
Duly executed proxies without voting instructions will be voted in
accordance with the recommendations of the Board of Directors. As of the date of
this Proxy Statement, the Board of Directors does not know of any business to be
presented for consideration or action at the Annual Meeting other than that
described in this Proxy Statement.
The Board of Directors has adopted a policy pursuant to which all
proxies, ballots and tabulations relating to shareholder meetings are to be
maintained in confidence, except where disclosure may be required by applicable
law, where shareholders write comments on their proxy forms, where disclosure is
expressly requested by a shareholder, and in limited circumstances as determined
by the Board of Directors, such as proxy solicitations not approved and
recommended by the Board of Directors. The inspectors of election and the
tabulators of all proxies, ballots and voting results that identify shareholders
are independent and are not employees of the Company.
The costs of soliciting proxies on behalf of the Board of Directors
will be borne by the Company. In addition to use of the mails, proxies may be
solicited by personal interview, telephone or telegraph. The Company has
retained Georgeson & Company Inc. for a fee of $6,500 and the reimbursement of
out-of-pocket expenses, to assist in the solicitation of proxies from brokerage
firms, banks and other institutional holders. The Company will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred in forwarding proxy materials to, and obtaining proxies from,
beneficial owners of the Common Stock of the Company.
On March 10, 1999, the Company effected a 3-for-1 stock split.
Accordingly, all numbers in this Proxy Statement relating to shares of the
Company's Common Stock have been adjusted to reflect the stock split.
1. ELECTION OF DIRECTORS
The By-laws of the Company provide that the Board of Directors shall
consist of not fewer than nine nor more than 21 directors, the number of
directors within such minimum and maximum limits to be determined from time to
time by resolution of the Board of Directors. The Board of Directors has fixed
the number of directors of the Company at 12.
The Company's Certificate of Incorporation (Restated 1988) provides
that the Board of Directors shall be divided into three classes, each of which
serves for three years, with one class being elected each year.
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<PAGE> 7
The Board of Directors has nominated four persons for election as
directors to serve three-year terms expiring in 2002 and one person for election
as a director to serve a two-year term expiring in 2001. Unless otherwise
directed, proxies will be voted in favor of these five nominees. Should any of
the nominees be unable to accept election, the proxies will be voted for the
election of such other person or persons as the Board of Directors may
recommend. These nominees have consented to serve if elected, and the Board of
Directors has no reason to believe that any of the persons nominated will be
unable to accept election.
The following information about the nominees for director and the
directors continuing in office is provided below: (1) their ages as of March 31,
1999; (2) the year they first became directors of the Company; (3) their
principal occupations since 1994; (4) other directorships, including any
directorship of a company which has a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, is subject to the
reporting requirements of Section 15(d) of said Act or is registered as an
investment company under the Investment Company Act of 1940; and (5) memberships
on committees of the Board of Directors.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERMS EXPIRING IN 2002
[PHOTO]
PHILIP J. CARROLL
Age: 61.
Chairman and Chief Executive Officer of Fluor Corporation, Irvine, California
(an engineering, construction and diversified services company), since July,
1998; President and Chief Executive Officer of Shell Oil Company, Houston, Texas
(a leading oil and natural gas producer; manufacturer, transporter and marketer
of oil and chemicals products), prior thereto.
OTHER DIRECTORSHIPS: Boise Cascade Corporation; Fluor Corporation.
[PHOTO]
LIVIO D. DESIMONE
Age: 62. Director since 1987.
Chairman and Chief Executive Officer of Minnesota Mining & Manufacturing
Company, St. Paul, Minnesota (a diversified manufacturer).
OTHER DIRECTORSHIPS: Cargill, Incorporated; Dayton Hudson Corporation; General
Mills, Inc.; Minnesota Mining & Manufacturing Company.
COMMITTEE MEMBERSHIPS: Compensation; Executive; Governance and Succession;
Safety, Health and Environmental Affairs.
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<PAGE> 8
[PHOTO]
DONALD M. JAMES
Age: 50. Director since 1996.
Chairman and Chief Executive Officer of the Company since May, 1997; President
and Chief Executive Officer from February, 1997 to May, 1997; President and
Chief Operating Officer from February, 1996 to February, 1997; President of the
Company's Southern Division from 1994 to 1996; Senior Vice President, South,
Construction Materials Group of the Company from 1995 to 1996.
OTHER DIRECTORSHIPS: Protective Life Corporation; SouthTrust Corporation.
COMMITTEE MEMBERSHIPS: Executive.
[PHOTO]
ANN D. MCLAUGHLIN
Age: 57. Director since 1990.
Chairman, The Aspen Institute, Aspen, Colorado (an independent, nonprofit
organization whose programs are designed to enhance the ability of leaders to
understand national and international issues), since 1996; Vice Chairman of that
organization from 1993 to 1996; President, Federal City Council, Washington,
D.C. (a nonpartisan, nonprofit organization which is dedicated to improving the
nation's capital), from 1990 until 1995.
OTHER DIRECTORSHIPS: AMR Corporation; Donna Karan International, Inc.; Fannie
Mae; General Motors Corporation; Harman International Industries, Inc.; Host
Marriott Corporation; Kellogg Company; Nordstrom, Inc.; Union Camp Corporation.
COMMITTEE MEMBERSHIPS: Audit Review; Executive; Finance and Pension Funds;
Safety, Health and Environmental Affairs.
TERM EXPIRING IN 2001
[PHOTO]
HERBERT A. SKLENAR
Age 67. Director since 1973.
Chairman Emeritus of the Company since May, 1997; Chairman of the Board from
February, 1997 to May, 1997; Chairman and Chief Executive Officer prior thereto.
OTHER DIRECTORSHIPS: AmSouth Bancorporation; Protective Life Corporation;
Temple-Inland, Inc.
COMMITTEE MEMBERSHIPS: Finance and Pension Funds; Safety, Health and
Environmental Affairs.
THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE.
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<PAGE> 9
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2001
[PHOTO]
DOUGLAS J. MCGREGOR
Age: 58. Director since 1992.
Principal, C.A.M. Investments, Pepper Pike, Ohio (an investment firm), since
January, 1999; Chairman and Chief Executive Officer, M. A. Hanna Company,
Cleveland, Ohio (an international specialty chemicals company with interests in
formulated polymers), from July, 1997 until October, 1998; President and Chief
Executive Officer from January, 1997 to July, 1997; President and Chief
Operating Officer prior thereto.
OTHER DIRECTORSHIPS: KeyCorp.
COMMITTEE MEMBERSHIPS: Audit Review; Compensation; Safety, Health and
Environmental Affairs.
[PHOTO]
DONALD B. RICE
Age: 59. Director since 1986.(*)
President and Chief Executive Officer of UroGenesys, Inc., Santa Monica,
California (a biotechnology company developing therapeutics and diagnostic
testing for urogenital cancer), since 1996; President and Chief Operating
Officer of Teledyne, Inc., Los Angeles, California (a manufacturer of aviation,
electronic, industrial, specialty metal and consumer products) prior thereto.
OTHER DIRECTORSHIPS: Scios, Inc.; Unocal Corp.; UroGenesys, Inc.; Wells Fargo &
Company.
COMMITTEE MEMBERSHIPS: Audit Review; Executive; Finance and Pension Funds;
Governance and Succession.
(*) Dr. Rice was first elected a director in 1986, and served until May, 1989,
when he was appointed Secretary of the Air Force. He was reelected a director of
the Company by the Board of Directors on February 12, 1993.
[PHOTO]
ORIN R. SMITH
Age: 63. Director since 1983.
Chairman and Chief Executive Officer of Engelhard Corporation, Iselin, New
Jersey (provider of environmental technologies, performance products, engineered
materials and related services), since January, 1995; President and Chief
Executive Officer of that company prior thereto.
OTHER DIRECTORSHIPS: Engelhard Corporation; Ingersoll-Rand Company; Perkin-Elmer
Corporation; Summit Bancorporation.
COMMITTEE MEMBERSHIPS: Compensation; Executive; Governance and Succession;
Safety, Health and Environmental Affairs.
7
<PAGE> 10
TERMS EXPIRING IN 2000
[PHOTO]
MARION H. ANTONINI
Age: 68. Director since 1983.
Principal, Kohlberg & Company, Mount Kisco, New York (a private merchant banking
firm), since January, 1998; Chairman, Chief Executive Officer and President of
Welbilt Corporation, Stamford, Connecticut (a manufacturer and distributor of
commercial food service equipment and residential furnaces) prior thereto.
OTHER DIRECTORSHIPS: Colorspot Nurseries, Inc.; Engelhard Corporation; Holley
Performance Products, Inc.; Scientific-Atlanta, Inc.; Turbo Chef Technologies.
COMMITTEE MEMBERSHIPS: Compensation; Executive; Governance and Succession;
Finance and Pension Funds.
[PHOTO]
A. FREDERICK GERSTELL
Age: 61. Director since February, 1999.
Vice Chairman and Consultant of the Company since January, 1999; Chairman and
Chief Executive Officer of CalMat Co., Los Angeles, California (a leading
producer of construction aggregates, asphalt and ready mixed concrete), prior
thereto. OTHER
DIRECTORSHIPS: Farr Co.; Northern Trust Co. of California.
[PHOTO]
JOHN K. GREENE
Age: 69. Director since 1974.
Special Principal, William Blair & Company, Chicago, Illinois (an investment
banking firm), since 1995; Partner of that company prior thereto.
COMMITTEE MEMBERSHIPS: Audit Review; Governance and Succession; Finance and
Pension Funds.
[PHOTO]
JAMES V. NAPIER
Age: 62. Director since 1983.
Chairman of the Board of Scientific-Atlanta, Inc., Atlanta, Georgia (a
manufacturer and designer of telecommunication systems, satellite-based
communications networks, and instrumentation for industrial, telecommunications
and government applications).
OTHER DIRECTORSHIPS: Engelhard Corporation; Intelligent Systems, Inc.; McKesson
HBOC; Personnel Group of America, Inc.; Scientific-Atlanta, Inc.; Westinghouse
Air Brake Co.
COMMITTEE MEMBERSHIPS: Audit Review; Compensation; Finance and Pension Funds.
8
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BOARD OF DIRECTORS AND COMMITTEES
In 1998, the Board of Directors held nine meetings. The Board of
Directors has established six standing committees which have the
responsibilities set forth below.
The Executive Committee has the same powers as the Board of Directors,
except as limited by the New Jersey Business Corporation Act. In practice, the
powers of the Executive Committee are exercised only for matters that arise
between meetings of the Board of Directors. The Executive Committee met two
times in 1998.
The Audit Review Committee advises the Board of Directors and the
management of the Company from time to time with respect to internal controls,
systems and procedures, accounting policies and other significant aspects of the
financial management of the Company. The Audit Review Committee also reviews
with the firm of independent certified public accountants its audit procedures
and other significant aspects of the annual audit made by the firm, and advises
the Board of Directors of the adequacy of the audit by the independent certified
public accountants. The Audit Review Committee met two times during 1998.
The Compensation Committee interprets and administers the Company's
Management Incentive Plan, the 1991 Long-Range Performance Share Plan and the
1996 Long-Term Incentive Plan. It is comprised of nonemployee directors
ineligible to participate in these plans. The Compensation Committee also is
responsible for determining and fixing the amount of compensation paid to each
officer of the Company, each division president and each Chemicals Group
business unit president ("Senior Executives"). In addition, it determines and
fixes other benefits to be provided to such Senior Executives and certain other
employees of the Company. It also makes recommendations to the Board of
Directors concerning changes in the compensation of the directors of the
Company. The Compensation Committee met four times during 1998.
The Governance and Succession Committee: (a) conducts such meetings as
are appropriate with other directors, officers, other employees of the Company,
or any other persons whom it might select for purposes of discussing with them
(i) the tenure and selection of persons for membership on the Board of Directors
and (ii) the tenure and selection of a successor to the chief executive officer,
and (b) makes appropriate recommendations to the Board of Directors with respect
thereto. This Committee will consider nominees for director recommended by
shareholders for 2000 if such recommendations are made in writing, addressed to
the Committee, in care of the Secretary of the Company, at the principal office
of the Company, and are received by December 1, 1999. The Governance and
Succession Committee met two times during 1998.
The Safety, Health and Environmental Affairs ("SHE") Committee has the
responsibility for reviewing the Company's policies, practices and programs with
respect to the management of safety, health and environmental affairs and
monitoring the Company's compliance with safety, health and environmental laws
and regulations. The SHE Committee met two times during 1998.
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The Finance and Pension Funds Committee has responsibility for
overseeing the Company's financial affairs and recommending to the Board of
Directors financial policies and actions to accommodate the Company's goals and
operating strategies while maintaining a sound financial condition. Its
functions include keeping informed about the Company's financial condition,
recommending a dividend policy, reviewing and recommending changes in the
quarterly dividend payments, and evaluating and making recommendations
concerning the appropriate mix of debt and equity, incurrence of long-term debt,
and changes in the authorized limit of short-term debt. The Finance and Pension
Funds Committee is also responsible for overseeing the funding and management of
assets for pension plans sponsored by the Company. To fulfill these functions,
it establishes funding policies and methods consistent with pension plan
objectives and the Employee Retirement Income Security Act of 1974, selects and
removes investment managers, and appoints trustees for the pension plans. The
Finance and Pension Funds Committee met two times in 1998.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company
are paid a retainer of $30,000 per year, plus a fee of $1,500 for each meeting
actually attended.
Each member of a committee who is not an employee of the Company is
paid a fee of $1,500 for each committee meeting attended in person or by
telephone and for each unanimous consent to action in lieu of meeting executed.
In addition, each chairman of a committee who is not an employee of the Company
is paid a fee of $5,000 per year for service as chairman of a committee.
The Company has a Deferred Compensation Plan for Directors Who Are Not
Employees of the Company (the "Deferred Compensation Plan") under which payment
to nonemployee directors of their compensation as directors may be deferred for
certain periods or until they cease to be directors. Currently, five directors
are deferring their fees pursuant to the Deferred Compensation Plan. The
deferred amounts, at the election of the director, either (i) are credited with
interest at prescribed rates or (ii) are converted to the equivalent of that
number of shares of the Company's Common Stock (based on the market price at the
time of deferral) that could be purchased with the deferred amounts, and are
thereafter credited with amounts equal to dividends thereon (also converted to
stock equivalents). All payments under the Deferred Compensation Plan are in the
form of cash. The Deferred Compensation Plan provides that lump-sum payments of
all deferred compensation would be made within 30 days if (i) there is a Change
in Control (see the definition of "Change in Control" on page 26) and (ii) at
any time after a Change in Control the participating director ceases to be a
member of the Board of Directors, the Deferred Compensation Plan is terminated
or the Company's capital structure is changed materially. The Deferred
Compensation Plan was approved by the shareholders in 1993.
The Company also has a Deferred Stock Plan for Nonemployee Directors of
the Company (the "Deferred Stock Plan"), which was adopted by the Board of
Directors and approved by the shareholders of the Company in 1996. The Deferred
Stock Plan is designed to provide for the payment of a greater portion of the
compensation of nonemployee directors of the Company in
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the form of equity, thereby more closely aligning the interests of the
nonemployee directors with those of the other shareholders of the Company. Under
the Deferred Stock Plan, an account is established for each nonemployee director
to which deferred stock units are credited. Each deferred stock unit will
evidence the right to receive a share of Common Stock of the Company upon the
director's termination of service. The Deferred Stock Plan provides that each
nonemployee director will receive annual grants of deferred stock units
calculated by dividing an amount equal to 40% of the annual retainer payable to
nonemployee directors then in effect by the average daily closing price per
share of Common Stock of the Company for the 20 trading days prior to the date
of grant. On each date on which a regular cash dividend is paid on the Common
Stock, the account of each eligible nonemployee director will be credited with
additional deferred stock units corresponding to the cash dividend paid on the
number of shares of Common Stock evidenced by the deferred stock units credited
to the account of each such nonemployee director.
The entire balance of a nonemployee director's account will be paid to
the director, in either a lump sum or installments at the election of such
director, in shares of Common Stock of the Company, upon the director's
termination of service. The value of the deferred stock units is dependent upon
the fair market value of the shares of Common Stock of the Company, and
therefore is subject to market fluctuations in the value of the Company's Common
Stock until the date of distribution. The total number of shares of Common Stock
of the Company reserved for issuance pursuant to the Deferred Stock Plan is
300,000, subject to adjustment in the event of a stock split, reverse stock
split, reorganization or recapitalization.
The Company also has a Restricted Stock Plan for Nonemployee Directors
(the "Restricted Stock Plan"), which was approved by the Board of Directors in
1997. The Restricted Stock Plan was implemented to promote a greater identity of
interests between the Company's nonemployee directors and its shareholders
through increasing ownership of Common Stock by the nonemployee directors and to
assist the Company in attracting and retaining qualified individuals to serve as
nonemployee directors by affording them an opportunity to share in the future
success of the Company. Under the Restricted Stock Plan, 195 restricted shares
(the "Restricted Shares") are granted annually to each nonemployee director. The
Restricted Shares are held in special restricted accounts by the Company's
exchange agent and the nonemployee directors have no right to receive the shares
until the restrictions lapse or are waived, at which time the shares are
distributed in a lump sum payment. With the exception of the right to receive,
sell, assign, pledge or otherwise transfer the Restricted Shares, the
nonemployee director is entitled to all rights and benefits of a shareholder
with respect to the Restricted Shares, including the right to vote the shares.
The restrictions expire when the nonemployee director reaches age 70 (or the
then current mandatory retirement age), or the nonemployee director ceases to be
a director before reaching age 70 because of death or disability. The Chief
Executive Officer of the Company has the power to waive the restrictions in the
event the nonemployee director fails to remain a director for any reason other
than retirement at the mandatory age, death or disability.
In accordance with the Restricted Stock Plan, dividends paid on
Restricted Shares are credited to an account for each nonemployee director in
the form of deferred stock units. The number of deferred stock units is
determined by multiplying the per share dividend amount by the number of
Restricted Shares granted to the nonemployee director upon which restrictions
have not yet lapsed and deferred stock units previously credited to such
nonemployee director under
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the Restricted Stock Plan and dividing the product by the average daily closing
price per share of Common Stock for the 20 trading days prior to the dividend
payment date. The dividends held as deferred stock units will be paid to the
nonemployee director in the form of Common Stock upon the nonemployee director's
termination of service, regardless of whether or not the Restricted Shares are
ever distributed.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following is information regarding persons known to the Company to
have beneficial ownership of more than 5% of the outstanding Common Stock of the
Company, which is the only outstanding class of voting securities of the
Company.
<TABLE>
<CAPTION>
- ---------------------------------------------- ------------------------------ -------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------------------------------------- ------------------------------ -------------------------
<S> <C> <C>
State Farm Mutual Automobile Insurance 11,032,200 shares(1) 10.9%
Company and Affiliates
One State Farm Plaza
Bloomington, Illinois 61710
AmSouth Bancorporation 9,571,260 shares(2) 9.5%
AmSouth Sonat Tower
Birmingham, Alabama 35203
Gerald Ratner, as Attorney and Agent 7,207,551 shares(3) 7.2%
222 North LaSalle Street
Chicago, Illinois 60601
AMVESCAP PLC 6,704,394 shares(4) 6.7%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
(1) Based on information contained in the Schedule 13G, dated February 2, 1999,
filed with the Securities and Exchange Commission, as adjusted to reflect the
3-for-1 stock split effected on March 10, 1999. The total includes 8,373,600
shares over which State Farm Mutual Automobile Insurance Company holds sole
voting and dispositive power, 1,199,400 shares over which State Farm Investment
Management Corp. holds sole voting and dispositive power, and 1,459,200 shares
over which State Farm Employees Savings and Thrift Plan holds sole voting and
dispositive power. State Farm Mutual Automobile Insurance Company and each of
the various affiliated entities listed on Exhibit A to the Schedule 13G
expressly disclaim "beneficial ownership" as to all shares as to which such
entity has no right to receive the proceeds of sale of the security and
disclaims that it is part of a "group."
(2) Based on information contained in a Schedule 13G, dated February 16, 1999,
filed with the Securities and Exchange Commission, as adjusted to reflect the
3-for-1 stock split effected on March 10, 1999. The total consists exclusively
of shares of Common Stock held by estates and trusts of which AmSouth Bank, a
subsidiary of AmSouth Bancorporation, is a fiduciary. No single one of these
estates or trusts holds as much as 5% of the Common Stock of the Company. As
reported in the Schedule 13G, AmSouth Bank has shared voting power with respect
to 8,809,065 shares and shared dispositive power with respect to 8,211,135
shares.
12
<PAGE> 15
(3) The Company has been advised by Gerald Ratner that Lester Crown, members of
his family, and certain partnerships and trusts associated with the Crown family
are the beneficial owners of 7,207,551 shares of the Common Stock of the
Company, as adjusted to reflect a 3-for-1 stock split effected on March 10,
1999. Such persons, including Mr. Crown, disclaim that they act as a group for
purposes of Section 13 of the Securities Exchange Act of 1934 or otherwise and
disclaim that any one of such persons is the beneficial owner of shares owned by
any other such person.
(4) Based on information contained in a Schedule 13G, dated February 10, 1999,
filed with the Securities and Exchange Commission, as adjusted to reflect a
3-for-1 stock split effected on March 10, 1999. AMVESCAP PLC has shared voting
and dispositive power with respect to such shares with its subsidiaries AVZ,
Inc., AIM Management Group Inc., AMVESCAP Group Services, Inc., INVESCO, Inc.,
and INVESCO North American Holdings, Inc., each of which is a holding company,
and INVESCO Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management & Research, Inc. and INVESCO Realty Advisors, Inc., each of which is
a registered investment adviser under the Investment Advisers Act of 1940.
AMVESCAP PLC and each of the foregoing affiliated entities expressly disclaim
"beneficial ownership" of the securities covered by the Schedule 13G.
SECURITY HOLDINGS OF MANAGEMENT
The following table sets forth information, unless otherwise indicated,
as of March 1, 1999, regarding Common Stock and stock-based holdings of the
directors, the chief executive officer and the four other most highly
compensated executive officers which are based on the Common Stock of the
Company. The "Stock" column shows beneficial ownership, direct and indirect, and
the "Total" column shows all stock-based holdings, including those in the
"Stock" column. The value of their total holdings will increase or decrease with
changes in the price of the Company's Common Stock. All numbers have been
adjusted to reflect a 3-for-1 stock split effected on March 10, 1999.
<TABLE>
<CAPTION>
COMMON STOCK AND TOTAL STOCK-BASED HOLDINGS(1)
- --------------------------------------- ---------------- ------------------
NAME STOCK(2) TOTAL(3)
- --------------------------------------- ---------------- ------------------
<S> <C> <C>
Marion H. Antonini 13,145 86,244
Guy M. Badgett, III 63,363 78,464
Philip J. Carroll -0- -0-
Peter J. Clemens, III 168,927 187,157
Livio D. DeSimone 3,545 48,194
A. Frederick Gerstell 7,500 7,500
John K. Greene 72,623(4) 84,411(4)
Donald M. James 192,856 211,867
Daniel J. Leemon 84,864 101,451
Douglas J. McGregor 1,745(5) 28,492(5)
Ann D. McLaughlin 3,407 27,970
James V. Napier 3,545 12,295
Donald B. Rice 2,345(6) 10,085(6)
Herbert A. Sklenar 655,151 681,498
James W. Smack 69,069 83,713
Orin R. Smith 3,545 42,642
All Directors and Executive
Officers as a group (27 persons) 1,801,100(7) 2,251,761
</TABLE>
13
<PAGE> 16
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of March 1, 1999, that such person or
group has the right to acquire within sixty days after such date, or with
respect to which such person otherwise has, or shares, voting or investment
power. For purposes of computing beneficial ownership and the percentages of
outstanding shares held by each person or group of persons on a given date,
shares which such person or group has the right to acquire within sixty days
after such date are shares for which such person has beneficial ownership and
are deemed to be outstanding for purposes of computing the percentage for such
person, but are not deemed to be outstanding for the purpose of computing the
percentage of any other person. None of the directors or executive officers
listed in the table individually own in excess of 1% of the outstanding Common
Stock of the Company.
(2) With respect to employees of the Company, includes shares held under the
Company's Thrift Plan for Salaried Employees on March 1, 1999, to the extent the
beneficial ownership was vested in the persons listed. Also includes shares
beneficially owned by spouses of persons listed and other relatives living in
their households, whether or not interest in such shares is disclaimed by the
person listed. With respect to nonemployee directors, includes restricted shares
awarded under the Company's Restricted Stock Plan for Nonemployee Directors.
(3) With respect to the holdings of nonemployee directors, includes stock
equivalents as to which there are no voting rights and which will be paid
totally in cash under the Deferred Compensation Plan for Directors Who Are Not
Employees of the Company and deferred stock units held in an account for each
nonemployee director pursuant to the Company's Deferred Stock Plan for
Nonemployee Directors and Restricted Stock Plan for Nonemployee Directors (each
of which is more fully described beginning at page 10 hereof). With respect to
executive officers, these totals include shares awarded but not yet earned under
the 1991 Long-Range Performance Share Plan (which is more fully described at
Note 3 to the Summary Compensation Table on page 15) which carry no voting or
dividend rights. Also includes stock equivalents as to which there are no voting
rights and which will be paid totally in cash under the Company's Unfunded
Supplemental Benefit Plan for Salaried Employees.
(4) Includes 13,200 shares of the Common Stock of the Company held by John K.
Greene and a bank, as trustees under a trust created by Mr. Greene's mother. Mr.
Greene is an income beneficiary of this trust and has a special power of
appointment over the trust assets. Also includes a total of 9,600 shares which
are held in two trusts of which Mr. Greene and another individual are
co-trustees.
(5) Includes 1,350 shares which are held in a trust of which Mr. McGregor is the
trustee.
(6) Includes 1,200 shares which are held in a retirement trust of which Dr. Rice
is the trustee and full beneficiary.
(7) The Common Stock holdings of all directors and executive officers as a group
represents 1.8% of the outstanding Common Stock of the Company.
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for Mr. James and the four other executive officers of
the Company who were the most highly compensated for the fiscal year ended
December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- --------------------------
NAME AND OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) GRANTED(2) PAYOUTS(3) COMPENSATION(4)
(NUMBER OF
SHARES)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. James 1998 $591,668 $750,000 135,000 $253,152 $40,150
Chairman and 1997 $550,008 $505,803 180,000 $163,438 $27,711
Chief Executive Officer 1996 $378,402 $360,000 150,000 $ 56,108 $ 7,951
Peter J. Clemens, III 1998 $331,340 $320,000 39,000 $281,292 $33,827
Executive Vice President, 1997 $306,668 $253,500 44,175 $210,901 $28,727
Finance & Administration & 1996 $273,658 $215,000 46,575 $ 90,100 $17,466
Treasurer
Guy M. Badgett, III 1998 $242,504 $225,000 21,225 $203,906 $24,247
Senior Vice President, 1997 $220,337 $180,000 22,650 $107,146 $20,283
Construction Materials, 1996 $194,510 $147,000 22,200 $ 31,051 $12,420
East
Daniel J. Leemon 1998 $241,834 $225,000 19,800 $267,222 $25,000
President, 1997 $231,338 $192,000 22,650 $226,793 $21,531
Midsouth Division 1996 $221,510 $151,000 22,200 $ 80,655 $11,882
James W. Smack 1998 $213,668 $214,000 19,800 $203,906 $21,154
President, 1997 $200,340 $146,500 22,650 $159,695 $18,528
CalMat Division 1996 $189,670 $137,000 22,200 $ 36,028 $11,187
</TABLE>
(1) Consists of payments made under the Company's Management Incentive Plan
("MIP"). If a Change in Control (see the definition of "Change in Control" on
page 26) occurs in a given year, awards already determined by the Compensation
Committee for that year will be paid. If the Change in Control occurs after the
end of a given year, and the Compensation Committee has not determined an award,
participants will be entitled to the entire "target award" (as defined in the
MIP). Participants will receive pro rata portions of their target awards if the
Change in Control occurs before the end of the given year.
(2) See Option Grant Table on page 17 for more detail concerning the option
grants. All numbers have been adjusted to reflect a 3-for-1 stock split effected
by the Company on March 10, 1999.
(3) Represents the dollar value of performance shares paid under the Company's
1991 Long-Range Performance Share Plan (the "1991 Plan"). Payment of performance
share awards is subject to conditions for payment which are set by the
Compensation Committee. The Compensation Committee determined that payment with
respect to one-half of the award will be based on a comparison of the Company's
growth in earnings per share during the award period with the growth in earnings
per share of a group of comparison companies which was selected by the
15
<PAGE> 18
Compensation Committee at the time awards were made. Payment with respect to the
other one-half of the award will be based on a comparison of the Company's
return on investment performance with the return on investment performance of
the companies constituting the comparison group. Payments under the 1991 Plan
will be made only if the Company's performance in growth in earnings per share
or in return on investment places it in at least the 50th percentile in a
ranking of companies in the comparison group. However, regardless of the
Company's ranking in the comparison group, no payment with respect to the
earnings per share half of the award is made if the Company's average earnings
per share during the award period is less than the Company's average earnings
per share during the five years ended December 31, 1998. Likewise, no payment
with respect to the return on investment half of the award is made if the
Company's average pretax return on investment is less than the average
three-month U.S. Treasury Bill rate during the award period.
The Company's performance with respect to earnings per share or return on
investment must place it at the 50th percentile in the comparison group in order
to earn 50% of the half of the award allocated to such criterion. The Company's
performance with respect to earnings per share or return on investment must
place it at the 75th percentile in the comparison group in order to earn 100% of
the half of the award allocated to such criterion. The Company's performance
with respect to earnings per share or return on investment must place it in the
100th percentile in the comparison group in order to earn 150% of the half of
the award allocated to such criterion. Pro rata payments of all outstanding
awards will be made if, within two years of a Change in Control (see the
definition of "Change in Control" on page 26), a participant is terminated under
the circumstances described in the 1991 Plan.
Payments under the Plan are made in Common Stock valued at the average of the
high and low trading prices of the stock on the date of payment.
(4) These amounts consist of Company contributions made on behalf of the named
employee to the Company's Thrift Plan for Salaried Employees (the "Thrift Plan")
and to the Company's Unfunded Supplemental Benefit Plan for Salaried Employees
(the "Supplemental Plan"). Under the Supplemental Plan, participating employees
whose Company-matching contributions to the Thrift Plan have been reduced as a
result of the limitations imposed by Sections 401 and 415 of the Internal
Revenue Code are provided with a benefit that is essentially equal to the
benefit those employees would have received in the absence of such limitations.
The Compensation Committee designates the participants under the Supplemental
Plan. The following amounts were contributed pursuant to the Thrift Plan during
1998: Mr. James $6,400, Mr. Clemens $9,600, Mr. Badgett $9,600, Mr. Leemon
$9,600 and Mr. Smack $9,600. The following amounts were accrued pursuant to the
Supplemental Plan during 1998: Mr. James $33,750, Mr. Clemens $24,227, Mr.
Badgett $14,647, Mr. Leemon $15,400 and Mr. Smack $11,554.
16
<PAGE> 19
OPTION GRANTS IN 1998
The following table sets forth each grant of stock options during 1998
to Mr. James and the other named executive officers:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL EXERCISE OR EXPIRATION GRANT DATE
NAME UNDERLYING SHARES BASE PRICE DATE PRESENT VALUE
OPTIONS GRANTED ($)(2)
GRANTED(1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
D. M. James 135,000 13.21 $32.95 2/12/08 $692,550
P. J. Clemens, III 39,000 3.82 $32.95 2/12/08 $200,070
G. M. Badgett, III 21,225 2.08 $32.95 2/12/08 $108,884
D. J. Leemon 19,800 1.94 $32.95 2/12/08 $101,574
J. W. Smack 19,800 1.94 $32.95 2/12/08 $101,574
</TABLE>
(1) Reflects nonqualified options granted pursuant to the Company's 1996
Long-Term Incentive Plan. The option exercise price of all options granted
equals the fair market value of the shares of Common Stock of the Company on the
date of grant. The options are subject to vesting in 20% increments over a
five-year period, unless accelerated upon the optionee's death, disability or
retirement or upon a Change in Control of the Company. All numbers have been
adjusted to reflect a 3-for-1 stock split effected on March 10, 1999.
(2) Pursuant to the rules of the Securities and Exchange Commission, the Company
has elected to provide a grant date present value for these option grants
determined by a modified Black-Scholes pricing model. The assumptions utilized
in this model include: an expected volatility of 17.9% (derived by using daily
closing stock prices for the twelve months preceding the grant date), a dividend
yield of 2.1%, an interest rate of 5.6% (the rate on a U.S. Treasury note with a
maturity date of five years from the grant date), and an expected time of
exercise of six years from grant date. The Company does not believe that the
values estimated by the Black-Scholes model, or any other model, will
necessarily be indicative of the values to be realized by an executive.
17
<PAGE> 20
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth for each of Mr. James and the other
named executive officers the number and dollar value of unexercised options
outstanding at December 31, 1998. No stock options were exercised by the
executive officers named below during 1998. All numbers have been adjusted to
reflect a 3-for-1 stock split effected on March 10, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR END FISCAL YEAR END
-------------------------------------------------------------------------------------
NAME EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE(1) UNEXERCISABLE(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
D. M. James 96,000 369,000 $2,207,520 $6,568,718
P. J. Clemens, III 27,465 102,285 $ 634,001 $1,808,086
G. M. Badgett, III 13,410 52,665 $ 309,590 $ 915,909
D. J. Leemon 13,410 51,240 $ 309,590 $ 901,910
J. W. Smack 13,410 51,240 $ 309,590 $ 901,910
</TABLE>
(1) The number of securities underlying unexercised options consists of
presently exercisable nonqualified stock options granted under the Company's
1996 Long-Term Incentive Plan. The value of unexercised in-the-money options
represents the difference between the fair market value of the shares subject to
unexercised options as of December 31, 1998 and the option exercise price of the
shares. A fair market value of $42.7708 per share is used and is based upon the
high/low average price of the Common Stock on the New York Stock Exchange on
December 31, 1998, the final trading day of 1998, as adjusted to reflect the
3-for-1 stock split effected by the Company on March 10, 1999. The actual value,
if any, a person may realize as a result of such options will depend on the
excess of the stock price over the exercise price on the date the option is
exercised. The ultimate value of an option is dependent on the market value of
the Common Stock at a future date, which will depend to a large degree on the
efforts of the executive officers named above to bring future success to the
Company for the benefit of all shareholders.
(2) Consists of presently unexercisable nonqualified stock options granted under
the Company's 1996 Long-Term Incentive Plan. The value of the unexercisable
in-the-money options represents the difference between the fair market value of
the shares subject to the options as of December 31, 1998, and the option
exercise price of the shares. A fair market value of $42.7708 per share is used
and is based upon the high/low average price of the Common Stock on the New York
Stock Exchange on December 31, 1998, the final trading day of 1998, as adjusted
to reflect the 3-for-1 stock split effected by the Company on March 10, 1999.
The actual value, if any, a person may realize as a result of such options will
depend on the excess of the stock price over the exercise price on the date the
option is exercised. The ultimate value of an option is dependent on the market
value of the Common Stock at a future date, which will depend to a large degree
on the efforts of the executive officers named above to bring future success to
the Company for the benefit of all shareholders.
18
<PAGE> 21
REPORT OF THE COMPENSATION COMMITTEE
Under the supervision of the Compensation Committee of the Board of
Directors (the "Committee"), which is composed entirely of nonemployee
directors, the Company has developed and implemented performance-based
compensation policies and plans that are intended to enhance the profitability
of the Company and shareholder value by aligning closely the financial interests
of the Company's senior managers with those of its shareholders. The objective
of the Company is to provide a competitive compensation program that reflects
both Company and individual performance. The Committee believes that the senior
management of the Company is dedicated to achieving superior financial
performance and that the performance-based compensation policies and plans the
Committee has implemented contribute to achieving this management focus.
Compensation for senior management, including the Chief Executive Officer,
consists of base salary and annual and long-term incentive compensation. The
annual and long-term incentive compensation is directly related to the Company's
performance as measured by specific financial factors.
The Committee sets base salaries, determines the amounts payable under
the Management Incentive Plan, makes awards under the 1996 Long-Term Incentive
Plan (the "1996 Plan") and authorizes payments under the predecessor 1991
Long-Range Performance Share Plan (the "1991 Plan") for all officers of the
Company, division presidents and Chemicals Group business unit presidents (the
"Senior Executives"). This group includes Donald M. James, Chairman of the Board
and Chief Executive Officer and each of the other four executive officers named
in the Summary Compensation Table. In addition, the Committee determines the
total amount payable to all other eligible employees under the Management
Incentive Plan, makes awards under the 1996 Plan and authorizes payments under
the 1991 Plan to all other eligible employees.
BASE SALARY. The base salary of each Senior Executive (other than the
Chief Executive Officer) is established annually by the Committee based on the
recommendation of the Chief Executive Officer and is set independently from the
other elements of the compensation package. The recommendations of the Chief
Executive Officer are developed by a process which begins with the establishment
of a competitive market salary rate for each Senior Executive position. The
competitive market salary rate is based on a study conducted by the Company's
human resources staff of salaries paid to executives in comparable positions at
companies of comparable size to the Company. In order to set these market rates,
the Company's human resources staff relies on data from general industry
surveys. The companies in the Wilshire Materials and Services Index, the
performance of which is charted in the Shareholder Return Performance
Presentation, overlap to some extent with the companies in the surveys. The
competitive market rates are generally targeted to the medians of the salaries
identified in the surveys. The competitive market rate for each Senior Executive
is then reviewed by the Chief Executive Officer and individual salaries are
proposed to the Committee based on the established rate and the results of
individual performance evaluations that take into account, among other factors,
the achievement of individual, group and company-wide performance goals. The
resulting recommendations are then presented to the Committee, along with data
supporting the recommendations. The Committee typically follows the
recommendations of the Chief Executive Officer in setting the salaries of the
Senior Executives (other than the Chief Executive Officer). The 1997 base
salaries of the Senior Executives were increased in 1998 to reflect increases in
19
<PAGE> 22
competitive market rates and the performance of the Senior Executives. The
average of the salaries paid to the Senior Executives in 1998 was at the median
of the competitive market rates.
In establishing the Chief Executive Officer's salary, the Committee
also reviews the competitive market rate for his position, its assessment of his
performance and the Company's performance. Mr. James does not participate in
setting his own salary. In February, 1998, the Committee increased Mr. James'
salary based on its consideration of his performance with respect to a number of
factors, including significant improvement in the Company's financial
performance.
MANAGEMENT INCENTIVE PLAN. The purpose of the Management Incentive Plan
is to promote the profitability of the Company by providing incentive and reward
for those employees who lead the Company's efforts to improve the operating
progress and earnings of the Company. Annual incentive awards under the
Company's Management Incentive Plan are tied directly to the Company's
performance and that of individual profit centers as measured by specific
financial performance factors approved by the Committee. After the end of each
fiscal year and completion of the audit of the Company's financial statements
for that year, the Committee establishes the amount to be added to the
Management Incentive Plan fund, which amount, in accordance with the terms of
the Management Incentive Plan, cannot exceed 12 1/2% of consolidated net
earnings in excess of an amount equal to 6% of net capital for such year. The
amount added to the fund is usually well below the maximum allowable.
The Committee sets the target bonus for each Senior Executive; it is
equivalent to a specified percentage of each Senior Executive's base salary.
Generally, this percentage becomes greater as the level of the Senior
Executive's responsibility increases. The amount of any award to an individual
under the Management Incentive Plan may be lower or higher than the individual's
target bonus depending on the overall corporate or profit center or group
performance and the individual's personal performance.
During 1996, the Committee adopted Economic Profit ("EP") as the
primary financial performance measure upon which awards under the Management
Incentive Plan will be based. It is the view of the Committee and management
that improvement in EP is closely correlated with an increase in share price. EP
is derived by subtracting a capital charge from the Company's net operating
profit after taxes. EP performance for 1998 was compared to a targeted
performance level. Bonuses under the Management Incentive Plan are increased or
decreased proportionately in relation to the success (or failure) of the Senior
Executive in achieving EP objectives.
Also in 1996, the Committee determined that individual deferred bonus
accounts should be utilized in the administration of the Management Incentive
Plan. Such deferred bonus accounts are designed to enhance the motivational
value of the Management Incentive Plan by providing Management Incentive Plan
participants an equity-like stake in the future performance of the Company. Each
year the deferred bonus account will be credited or debited to reflect EP and
individual performance, and one-half of the resulting account balance will be
paid to the participant. The remaining account balance will be carried forward
for use in determining payments in subsequent years.
20
<PAGE> 23
In establishing the 1998 Management Incentive Plan awards, the
Committee reviewed with the Chief Executive Officer (Mr. James) management's
recommendations concerning the bonuses to be awarded and the target bonuses
established for each position. These recommendations did not include any
recommendations with respect to Mr. James.
The Management Incentive Plan payment to Mr. James with respect to 1998
was determined as described above. In addition, the Committee independently
evaluated Mr. James' performance in his role as Chief Executive Officer. The
Committee took note of the Company's record earnings per share in 1998. Earnings
per share were up 23%. He has also provided leadership in evaluating and
implementing growth opportunities such as the chloralkali joint venture with
Mitsui & Co. and the successful tender offer for CalMat Co. which commenced in
late 1998. The Committee also reviewed the total return to the Company's
shareholders in 1998 of 31.30% compared to the S&P 500 total return of 28.53%.
Based on 1998 performance, Mr. James' payment under the Management Incentive
Plan was 125% of his base salary.
LONG-TERM INCENTIVES. Long-term incentives are provided under the 1991
Plan and the 1996 Plan (collectively, the "Plans"). The purpose of the Plans is
to further the long-term growth in profitability of the Company by offering
long-term incentives to those executives who will be largely responsible for
such growth. The last award under the 1991 Plan was granted in 1995. No future
awards will be made under the 1991 Plan.
At the Annual Meeting in May 1996, the shareholders approved the
adoption of the 1996 Plan. The 1996 Plan authorizes the granting of nonqualified
stock options, incentive stock options, stock appreciation rights, restricted
stock and other stock-based incentives which may be adopted by the Committee. In
1998, long-term incentive awards were made exclusively in the form of
nonqualified stock options. The value of such stock option awards to the Senior
Executives was determined based on a percentage of the base salary market rate
for each Senior Executive. Generally, this percentage increases as the level of
the Senior Executive's responsibility increases.
The nonqualified stock options granted in 1998, have a ten-year term
and vest in equal amounts over a five-year period, unless accelerated due to the
retirement, death or disability of the optionee. The exercise price of the stock
options is equal to the market price of the Common Stock on the date of the
grant and, therefore, will have value only if the Company's stock price
increases, resulting in a commensurate benefit for the Company's shareholders.
Awards of performance shares under the 1991 Plan were made annually
through 1995 by the Committee and have a maturity period of five years (except
for awards for shorter periods made to executives who are within five years of
retirement). One performance share corresponds to one share of Common Stock, but
carries no voting or dividend rights. The Committee established conditions for
payment and selected a group of companies to which the Company's performance
would be compared over the five-year award period. As determined by the
Committee, payment with respect to one-half of each performance share award is
based on comparison of the Company's growth in earnings per share during the
award period with the growth in earnings per share of the comparison companies.
Payment with respect to the other
21
<PAGE> 24
one-half of the award is based on a comparison of the Company's return on
investment performance with the return on investment performance of the
comparison companies. The companies in the Wilshire Materials and Services
Index, which was used in the Shareholder Return Performance Presentation,
overlap to some extent with the companies in the comparison group. In setting
the number of shares to be awarded to each Senior Executive, the Committee used
a formulistic approach. The value of the performance shares awarded generally
was equal to a percentage of the sum of the market rate salary and the target
bonus for each Senior Executive. Generally, this percentage increases as the
level of the Senior Executive's responsibility increases.
In May 1998, the Committee determined that conditions established with
respect to performance shares awarded in 1993 had been met to the extent that
103.3% of the awards made in that year were earned and paid. The Company's
performance with respect to the five-year award period placed it at the 86th
percentile in return on investment and at the 67th percentile in growth in
earnings per share with respect to a comparison group of companies. The
performance share payment made to Mr. James in 1998 was the same percentage that
was paid to all other participants in the 1991 Plan.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Internal Revenue
Code Section 162(m), enacted in 1993, prohibits a public corporation from taking
a deduction for compensation in excess of $1 million paid to its chief executive
officer or any of its other highest paid executive officers. To date, none of
the executives named in the Summary Compensation Table, with the exception of
Mr. James, has received annual compensation exceeding $1 million.
Internal Revenue Service regulations exempt certain "qualified
performance-based compensation" from the application of the Section 162(m)
limitation. It is the Committee's understanding that awards and payments made
pursuant to the 1991 Plan and the options granted under the 1996 Plan should
qualify under the regulations as "performance-based" compensation. The
Management Incentive Plan has been approved by the shareholders and satisfies
several, but not all, of the criteria necessary to be deemed "qualified
performance-based compensation." The Committee will continue to review tax
consequences as well as other relevant considerations in connection with
compensation decisions.
COMPENSATION COMMITTEE
O. R. Smith, Chairman
M. H. Antonini
L. D. DeSimone
D. J. McGregor
J. V. Napier
22
<PAGE> 25
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph and table compare the performance of the Company's
Common Stock to that of the Standard & Poor's 500 Stock Index ("S&P 500") and
the Wilshire Materials and Services Index ("Wilshire M&S") for the period
commencing December 31, 1993, and ending on December 31, 1998. All of these
indices have been calculated by Wilshire Associates, Incorporated. The Wilshire
M&S Index is a market capitalization weighted index containing the public
equities of firms in the Materials and Services sector as defined by Wilshire
Associates, Incorporated. The Materials and Services sector includes the Company
and approximately 1,600 other corporations, some of which are in the mining and
chemicals industries. The Index is one of nine sectors that make up the Wilshire
5000. The graph assumes that the index value of the investment in the Company's
Common Stock and each index was 100 on December 31, 1993, and that all dividends
have been reinvested.
COMPARATIVE TOTAL RETURNS TO SHAREHOLDERS
<TABLE>
<CAPTION>
Index as of December 31
- ----------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vulcan (VMC) 100 111 130 141 242 318
S&P 500 Index 100 101 139 172 229 294
Wilshire M&S 100 98 123 140 161 162
- ----------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 26
RETIREMENT INCOME PLAN
The Retirement Income Plan for Salaried Employees of Vulcan Materials
Company (the "Retirement Plan") provides benefits under a funded noncontributory
defined benefit plan and covers most salaried employees, including all executive
officers. Under the Retirement Plan, normal retirement benefits are paid
commencing at age 65 (or later actual retirement) based on the participant's
years of benefit service under the Retirement Plan and the average of the
highest 36 consecutive months of eligible earnings. Eligible earnings under the
Retirement Plan include an employee's salary and any awards under the Company's
Management Incentive Plan, as described in the "Salary" and "Bonus" columns of
the Summary Compensation Table. The benefit amounts are subject to deductions
equal to 1.34% of a participant's monthly primary social security benefit for
each year of benefit service, up to a maximum of 50% of the primary social
security benefit. There were no contributions by the Company to the Retirement
Plan in 1998 due to the full funding limitations imposed by federal law.
Under Section 415 of the Internal Revenue Code, the maximum benefit
allowable under the Retirement Plan for an employee retiring at age 65 in 1998
is $130,000, an amount which may change each year in accordance with a
determination made by the Internal Revenue Service. In addition, Section 401 of
the Internal Revenue Code limits the amount of an employee's compensation which
may be taken into account under the Retirement Plan to $160,000, an amount which
also is subject to change each year in accordance with a similar determination.
Therefore, the Company has an Unfunded Supplemental Benefit Plan for Salaried
Employees (the "Supplemental Plan") which enables the Company to pay to any
person designated by the Compensation Committee whose pension under the
Retirement Plan has been reduced as a result of the limitations imposed by
Sections 401 and 415 of the Internal Revenue Code an amount equal to the
difference between the amount the person would have received under the
Retirement Plan had there been no limitations and the amount the person will
receive under the Retirement Plan after giving effect to the limitations.
The Supplemental Plan is unfunded and amounts due the employees covered
thereby are general obligations of the Company; however, the Supplemental Plan
contains provisions which allow for the creation of a trust to help ensure the
payment of benefits under the Supplemental Plan.
The Supplemental Plan provides for the vesting of excess retirement
benefits in the same manner that benefits vest under the Retirement Plan, which
is after five years. In addition, the Supplemental Plan provides for an
acceleration of the payment of excess retirement benefits in connection with a
Change in Control of the Company (see the definition of "Change in Control" on
page 26 below) if, simultaneously with or subsequent to the Change in Control,
the participant's employment is terminated, the Supplemental Plan is terminated
or the Company's capital structure is changed materially.
Assuming continuance of the Retirement Plan and the Supplemental Plan
in their present form, annual benefits payable to participating employees
(including executive officers) following retirement, in specific salary
classifications and with the continuous years of benefit service indicated, are
shown in the table below. Each amount in the table is based on the benefit
24
<PAGE> 27
applicable on December 31, 1998, to an employee retiring at age 65 payable in
the form of a single life annuity and is subject to the above-described
deduction for the primary social security benefit.
<TABLE>
<CAPTION>
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 25,200 33,600 40,650 47,700 54,750 58,000
150,000 37,800 50,400 60,975 71,550 82,125 87,000
200,000 50,400 67,200 81,300 95,400 109,500 116,000
250,000 63,000 84,000 101,625 119,250 136,875 145,000
300,000 75,600 100,800 121,950 143,100 164,250 174,000
350,000 88,200 117,600 142,275 166,950 191,625 203,000
400,000 100,800 134,400 162,600 190,800 219,000 232,000
500,000 126,000 168,000 203,250 238,500 273,750 290,000
600,000 151,200 201,600 243,900 286,200 328,500 348,000
700,000 176,400 235,200 284,550 333,900 383,250 406,000
800,000 201,600 268,800 325,200 381,600 438,000 464,000
900,000 226,800 302,400 365,850 429,300 492,750 522,000
1,000,000 252,000 336,000 406,500 477,000 547,500 580,000
</TABLE>
The benefit service accruals used to determine benefits under the
Retirement Plan as of December 31, 1998, for Mr. James and the four other
executive officers named in the Summary Compensation Table are shown below.
<TABLE>
<CAPTION>
- -----------------------------------------------------
YEARS OF
NAME BENEFIT SERVICE
AS OF 12/31/98
- -----------------------------------------------------
<S> <C>
Donald M. James 6
Peter J. Clemens, III 21 5/12
Guy M. Badgett, III 28 1/12
Daniel J. Leemon 17 5/12
James W. Smack 16 1/12
</TABLE>
25
<PAGE> 28
EMPLOYEE SPECIAL SEVERANCE PLAN
The Company's Employee Special Severance Plan (the "Special Severance
Plan") became effective in 1990, following adoption by the Board of Directors.
The Special Severance Plan covers all full-time salaried employees, including
the executive officers named in the Summary Compensation Table, and is designed
to reassure participants in the event of a Change in Control (as defined below)
of the Company, so that they can continue to focus their time and energy on
business-related concerns rather than personal concerns. A Change in Control is
defined as (1) the acquisition by any person, entity or group of 25% or more of
the outstanding shares of Company stock or the combined voting power of the
Company's outstanding voting securities, unless a majority of the continuing
directors determines that this acquisition does not constitute a Change in
Control; (2) the continuing directors cease to constitute a majority of the
Board of Directors; (3) approval by the Board of Directors of (a) a merger,
consolidation or reorganization of the Company, after which either (i) the
continuing directors do not constitute a majority of the directors of the
surviving corporation, or (ii) any person, entity or group controls more than
25% of the combined voting power, (b) any sale, lease or other transfer of all
or substantially all of the Company's assets, or (c) any plan or proposal for
the Company's dissolution or liquidation, unless a majority of the continuing
directors determine that such merger, consolidation, reorganization, sale,
lease, other transfer, liquidation or dissolution shall not be deemed a Change
in Control for purposes of the Special Severance Plan. A participant is entitled
to benefits under the Special Severance Plan if, within two years after a Change
in Control, the participant's employment is terminated without substantial cause
("Substantial Cause") or is voluntarily terminated by the participant for good
reason ("Good Reason"). Substantial Cause is defined as: (1) the participant's
willful and continued failure to substantially perform his duties after
receiving a written demand for substantial performance; (2) the participant's
willful engaging in an act of gross misconduct which is demonstrably injurious
to the Company; or (3) the participant's commission of an act of fraud intended
to result in substantial personal enrichment. Good Reason is defined as: (1) the
assignment to the participant of duties that are materially inconsistent with
his position or a change in the participant's title or office without his
consent; (2) a reduction in the participant's salary or the Company's failure to
increase the participant's salary by a specified percentage and by a specified
date; (3) a change in the participant's principal work location to a location
more than 50 miles from his current principal work location; (4) the Company's
failure to maintain any benefit or compensation plan (collectively, "Plans") in
which the participant was participating, a reduction of the participant's
benefits under the Plans, or the failure to provide the participant the number
of vacation days to which he is entitled; (5) the Company's failure to pay the
participant any compensation within seven days of its due date; (6) the
Company's failure to require any successor to the Company to assume the
obligations pursuant to the Special Severance Plan; or (7) the Company's
termination of the participant in a manner inconsistent with the Special
Severance Plan.
Benefits under the Special Severance Plan include a lump-sum payment
upon termination which, in the case of executives of the Company whose
compensation is determined by the Compensation Committee of the Board of
Directors, would be equal to two years' base salary. The lump-sum payments made
to other participants would be equal to two and one-half weeks' base salary
times the participant's years of service, subject to a maximum of two years'
base salary and a minimum ranging from one-fourth year's base salary to one
year's base salary,
26
<PAGE> 29
depending upon the participant's position with the Company. (The Special
Severance Plan also contains limitations on benefits which are designed to
prevent the payments made under the Special Severance Plan, when added to
payments which may be made to employees under other Company plans in the event
of a Change in Control, from exceeding certain limits imposed by the Internal
Revenue Code.) Benefits under the Special Severance Plan also include the
maintenance by the Company of all life insurance, accidental death and
dismemberment insurance and medical, dental and prescription drug plans in which
the participant was entitled to participate for up to one year from a
participant's termination.
The Special Severance Plan is unfunded, but contains provisions which
allow for the creation of a trust to help ensure the payment of benefits under
the Special Severance Plan.
2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Review Committee, which is composed of
directors who are not officers of the Company, the Board of Directors has
appointed Deloitte & Touche LLP, a firm of independent certified public
accountants, as independent auditors for the year 1999 and until their
successors are chosen. The function of the independent auditors is to audit the
accounts and records of the Company, to report on the consolidated balance
sheet, the related statements of consolidated earnings, consolidated
shareholders' equity and changes in consolidated financial position of the
Company and its subsidiaries, and to perform such other appropriate accounting
services as may be required by the Board of Directors. Although shareholder
ratification is not required, the Board of Directors has determined that it
would be desirable to request an expression from the shareholders as to whether
or not they concur in this appointment. If a majority of the shares voting at
the Annual Meeting fails to ratify the selection of Deloitte & Touche LLP as
independent auditors, the Board of Directors will consider the selection of
another independent certified public accounting firm.
The firm of Deloitte & Touche LLP, or its predecessors, Deloitte
Haskins & Sells and Haskins & Sells, has audited the Company's financial
statements since 1956. A representative of that firm will be present at the
Annual Meeting and will be given an opportunity to make a statement and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSAL TO RATIFY ITS INDEPENDENT AUDITORS.
27
<PAGE> 30
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
each of the Company's directors and executive officers, and any beneficial owner
of more than 10% of the Common Stock, is required to file with the Securities
and Exchange Commission (the "SEC") initial reports of beneficial ownership of
the Common Stock and reports of changes in beneficial ownership of the Common
Stock. Such persons also are required by SEC regulations to furnish the Company
with copies of all such reports. Based solely on its review of the copies of
such reports furnished to the Company for the year ended December 31, 1998, and
on the written representations made by such persons that no other reports were
required, the Company believes that during the year ended December 31, 1998, all
filing requirements applicable to its officers, directors and shareholders were
complied with in a timely manner.
SHAREHOLDER PROPOSALS FOR 2000
To be eligible for inclusion in the Company's Proxy Statement and form
of proxy for its 2000 annual meeting, a shareholder's proposal must be received
by the Company at its principal office no later than December 1, 1999. Proposals
should be addressed to William F. Denson, III, Secretary, P. O. Box 385014,
Birmingham, Alabama 35238-5014.
VULCAN MATERIALS COMPANY
WILLIAM F. DENSON, III
Secretary
1200 Urban Center Drive
Birmingham, Alabama 35242
March 31, 1999
28
<PAGE> 31
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL MEETING OF
SHAREHOLDERS
MAY 14, 1999
VULCAN MATERIALS COMPANY
<PAGE> 32
VULCAN MATERIALS COMPANY
P Annual Meeting of Shareholders May 14, 1999
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF VULCAN MATERIALS COMPANY
O
The undersigned hereby appoints LIVIO D. DeSIMONE, DONALD M. JAMES and
X ORIN R. SMITH, and each of them, with full power of substitution,
proxies to vote all shares of stock that the undersigned could vote if
Y present at the 1999 Annual Meeting of Shareholders to be held May 14,
1999, and at any adjournment or adjournments thereof, on all matters
coming before said meeting as set forth on the opposite side of this
card.
Election of Directors
Nominees for Election as Directors: (three year terms) 01 Philip J.
Carroll, 02 Livio D. DeSimone, 03 Donald M. James and 04 Ann D.
McLaughlin; (two year term), 05 Herbert A. Sklenar
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES (SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
If you are a participant in any of the following employee benefit
plans of the Company, this card also constitutes voting instructions
for any shares held for the stockholder in the Thrift Plan for
Salaried Employees, Construction Materials Divisions Hourly Employee
Savings Plan and the Chemicals Group Hourly Employees Savings Plan. If
you are a participant in any of these plans, your shares will be voted
in accordance with the terms of such plans.
(SEE REVERSE SIDE)
- --------------------------------------------------------------------------------
DETACH HERE
ABOVE IS YOUR PROXY CARD
<PAGE> 33
Please mark your
[X] votes as in this
example.
<TABLE>
<CAPTION>
This Proxy when properly executed will be voted in the manner directed herein.
If no direction is given, this Proxy will be voted FOR all of the Board of
Directors' nominees and FOR proposal 2.
- ------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR its nominees and FOR proposal 2.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Ratification of Deloitte &
Directors. [ ] [ ] Touche LLP as independent [ ] [ ] [ ]
(See reverse) auditors for the year 1999.
</TABLE>
For, except vote withhold from the following nominees(s)
- ----------------------------------------------------
Please sign name(s) exactly as printed hereon. If shares are held jointly,
each shareholder must sign. If signing as an attorney, administrator,
executor, guardian, or trustee, please give full title as such.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SIGNATURES(S) DATE
- -------------------------------------------------------------------------------
- DETACH HERE -
VOTER CONTROL NUMBER
TO VULCAN MATERIALS COMPANY SHAREHOLDERS:
Vulcan Materials Company encourages you to take advantage of two new and
convenient ways to vote your shares.
You may now vote your proxy 24 hours a day, 7 days a week, using either a
touch-tone telephone or through the Internet. This eliminates the need to return
this proxy card.
To vote your shares electronically, you must use the Voter Control Number
printed in the box above, just below the perforation. The series of numbers that
appear in the box above is your personal code to access the system. Your
telephone or internet vote authorizes the proxies named on the above proxy card
to vote your shares in the same manner as if you marked, signed and returned
your proxy card.
To Vote by Phone: On a touch-tone telephone dial 1-800-OK2-VOTE
(1-800-652-8683). You will be asked to enter the Voter
Control Number. Then follow the instructions.
To Vote by Internet: Log on the internet and go to the website
http://www.vote-by-net.com. Click on the "Proxy Voting"
icon. You will be asked to enter your voter control
number. Then follow the instructions.
To Vote by Mail: Mark, sign and date your proxy card and return it in the
enclosed postage-paid envelope. If you are voting by
telephone or the internet, please do not mail your proxy
card.
Your are invited to attend the 1999 Annual Meeting of Shareholders on Friday,
May 14, 1999, at 10:00 a.m. in the Corporate Headquarters of Vulcan Materials
Company, McCook Conference Room, 1200 Urban Center Drive, Birmingham, Alabama.
Thank you in advance for voting on these important issues.
William F. Denson, III
Secretary
