<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
-----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 1-4033
VULCAN MATERIALS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
New Jersey 63-0366371
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1200 Urban Center Drive, Birmingham, Alabama 35242
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (205) 298-3000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Shares outstanding
Class at April 30, 1999
----- -----------------
<S> <C>
Common Stock, $1 Par Value 100,874,704
</TABLE>
<PAGE> 2
VULCAN MATERIALS COMPANY
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
Contents
<TABLE>
<CAPTION>
Page No.
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets................................. 1
Condensed Consolidated Statements of Earnings......................... 2
Condensed Consolidated Statements of Cash Flows....................... 3
Notes to Condensed Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition............................... 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk......................................................... 15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................... 16
SIGNATURES....................................................................................... 17
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS*
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 December 31 March 31
Assets 1999 1998 1998
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 44,559 $ 180,568 $ 95,966
Accounts and notes receivable, less allowance for doubtful
accounts: March 31, 1999, $12,739; December 31, 1998,
$7,391; March 31, 1998, $7,775 320,764 221,261 205,491
Inventories:
Finished products 131,805 99,814 103,256
Raw materials 13,249 10,466 10,229
Products in process 1,127 1,183 988
Operating supplies and other 37,346 32,217 30,069
------------------------------------------
Total inventories 183,527 143,680 144,542
Deferred income taxes 36,643 24,923 21,356
Prepaid expenses 11,735 5,949 6,784
------------------------------------------
Total current assets 597,228 576,381 474,139
Investments and long-term receivables 73,792 71,034 64,942
Property, plant and equipment, at cost less accumulated
depreciation, depletion and amortization:
March 31, 1999, $1,733,683; December 31, 1998,
$1,384,971; March 31, 1998, $1,335,324 1,424,810 895,784 827,307
Goodwill,net 571,404 94,008 63,719
Deferred charges and other assets 59,408 21,404 42,306
------------------------------------------
Total $2,726,642 $1,658,611 $1,472,413
==========================================
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term obligations $ 5,704 $ 5,432 $ 5,408
Notes payable 250,101 2,353 2,677
Trade payables and accruals 130,851 107,382 114,577
Other current liabilities 147,131 96,295 106,624
------------------------------------------
Total current liabilities 533,787 211,462 229,286
Long-term obligations 695,235 76,533 81,931
Deferred income taxes 172,164 98,473 92,268
Other noncurrent liabilities 153,677 118,443 77,431
Shareholders' equity 1,171,779 1,153,700 991,497
------------------------------------------
Total $2,726,642 $1,658,611 $1,472,413
==========================================
</TABLE>
* Balance sheets as of March 31 are unaudited.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE> 4
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS*
(Amounts and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
1999 1998
<S> <C> <C>
Net sales $482,222 $358,963
Cost of goods sold 384,011 269,483
-----------------------
Gross profit on sales 98,211 89,480
Selling, administrative and
general expenses 54,195 46,729
Other operating costs 4,030 2,355
Other income, net 11,445 15,881
-----------------------
Earnings before interest
expense and income taxes 51,431 56,277
Interest expense 11,605 1,948
-----------------------
Earnings before income taxes 39,826 54,329
Provision for income taxes 13,461 17,820
-----------------------
Net earnings $ 26,365 $ 36,509
=====================================================================
Basic earnings per share $ 0.26 $ 0.36
Diluted earnings per share $ 0.26 $ 0.36
=====================================================================
Average common shares
outstanding (in thousands)
Basic 100,764 100,825
Assuming Dilution 102,260 102,152
Cash dividends per share of common share $ 0.195 $ 0.173
Depreciation, depletion and
amortization deducted above $ 48,968 $ 33,079
Effective tax rate 33.8% 32.8%
=====================================================================
</TABLE>
* Unaudited
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
2
<PAGE> 5
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS*
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 26,365 $ 36,509
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion and amortization 48,968 33,079
Increase in assets before
effects of business acquisitions (108) (23,312)
Increase (decrease) in liabilities before
effects of business acquisitions (8,677) 18,406
Other, net (1,978) (13,014)
-------------------------
Net cash provided by operating activities 64,570 51,668
-------------------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (88,160) (47,547)
Payment for business acquisitions, net of acquired cash (767,181) (3,396)
Increase in cash escrow held for future property purchase (470) (13,414)
Proceeds from sale of property, plant and equipment 4,424 17,883
-------------------------
Net cash used for investing activities (851,387) (46,474)
-------------------------
FINANCING ACTIVITIES
Net borrowings (payments) - comm. paper and bank lines of credit 247,748 (977)
Payment of short-term debt (90,097) --
Proceeds from issuance of long-term debt 500,000 --
Purchases of common stock (49) (19,399)
Dividends paid (19,666) (17,418)
Contribution from minority interest of consolidated subsidiary 12,049 --
Other, net 823 --
-------------------------
Net cash provided (used) for financing activities 650,808 (37,794)
-------------------------
Net decrease in cash and cash equivalents (136,009) (32,600)
Cash and cash equivalents at beginning of year 180,568 128,566
-------------------------
Cash and cash equivalents at end of period $ 44,559 $ 95,966
==================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $ 7,348 $ 797
Income taxes 2,301 4,379
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Liabilities and long-term debt assumed in business acquisitions 383,214 --
Fair value of stock issued in business acquisitions 10,580 --
Debt issued in purchase of property, plant and equipment 645 --
==================================================================================================
</TABLE>
* Unaudited
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
3
<PAGE> 6
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying condensed financial statements have been prepared in
compliance with Form 10-Q instructions and thus do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the statements reflect all adjustments, including those of
a normal recurring nature, necessary to present fairly the results of
the reported interim periods. The statements should be read in
conjunction with the summary of accounting policies and notes to
financial statements included in the Company's latest annual report on
Form 10-K.
2. Acquisitions
In January 1999, the Company completed its $31.00 per share tender
offer for all of the outstanding shares of common stock of CalMat Co.
("CalMat") for a value of $740 million cash, plus $10 million of
estimated acquisition costs. As of the acquisition, CalMat had fixed
term debt of $118 million and $90 million in bank borrowings, both of
which were assumed by the Company. The acquisition was funded by cash
on hand and approximately $590 million of commercial paper. It is being
accounted for under purchase accounting, with the purchase price
allocated to the acquired assets and assumed liabilities based on
estimated fair market values. The excess of the purchase price over the
fair market value of net assets acquired is being amortized over 30
years. The estimated fair value of assets acquired and liabilities
assumed were considered to be the best estimates as of the acquisition
date and may be adjusted as more information is obtained.
These estimates are summarized as follows (in thousands):
<TABLE>
<S> <C>
Current assets $ 165,978
Investments & long term receivables 13,527
Property and equipment 545,971
Goodwill 443,128
Current liabilities (169,278)
Long-term debt (128,730)
Deferred income taxes (89,447)
Other non-current liabilities (31,149)
---------
Estimated Purchase Allocation $ 750,000
=========
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
Consideration consisted of:
Cash on hand $150,000
Debt financing (a) 590,000
Estimated direct acquisition costs 10,000
--------
$750,000
</TABLE>
(a) This debt financing was initially all commercial paper. On April 12,
1999, $500 million was converted to long-term debt.
On April 12, 1999, the Company issued $500 million of unsecured,
noncallable notes in two series of $250 million each due on April 1,
2004 and on April 1, 2009. The 2004 notes have a 5.75% coupon and the
2009 notes have a 6.00% coupon. The net proceeds of these notes were
used to retire a corresponding amount of the short-term commercial
paper borrowings incurred to acquire CalMat. Although completed after
the close of the quarter, the balance sheet and cash flow statements
reflect this transaction given that the Company had the ability and
intent to refinance this portion of commercial paper on a long-term
basis at March 31, 1999. The transaction was substantially in place
prior to the quarter-end and best reflects the current status.
The accompanying consolidated statement of earnings for the three
months ended March 31, 1999 includes the results of operations of
CalMat from its acquisition date which substantially included the
entire quarter.
The following unaudited pro forma consolidated results of operations
for the three month periods ended March 31, 1999 and 1998 assume that
the CalMat acquisition occurred as of January 1, 1998, (in millions,
except per share amounts):
<TABLE>
<CAPTION>
First Quarter Pro Forma
-----------------------------------
1999 1998 Increase
---- ---- --------
<S> <C> <C> <C>
Net Sales $482.2 $448.7 $33.5
Net Earnings 26.4 26.1 .3
Earnings per share:
Basic $ 0.26 $ 0.26 $ 0.00
Diluted $ 0.26 $ 0.26 $ 0.00
</TABLE>
Certain pro forma adjustments are based on preliminary estimates. Final
allocations will be made on the basis of further evaluations and,
therefore, such allocations may differ from those reflected in this pro
forma statement. The pro forma statement of earnings is not necessarily
indicative of the results of operations of the Company had the CalMat
acquisition occurred at the beginning of the period presented, nor is
it necessarily indicative of the results of future operations.
5
<PAGE> 8
In addition to CalMat, the Company acquired five Construction Materials
businesses in Arkansas, Georgia, and North Carolina, including eleven
quarries, in the first quarter. These acquisitions were not significant
and are not included in the preceding pro forma.
3. Segment Data
The Company's reportable segments are organized around products and
services and continue to be Construction Materials and Chemicals. The
accounting policies of the segments are the same as those described in
the summary of significant accounting polices in Form 10-K. The
Company's determination of segment earnings (a) recognizes equity in
the income or losses of nonconsolidated affiliates as part of segment
earnings; (b) reflects allocations of general corporate expenses to the
segments; (c) does not reflect interest revenue or expense; and (d) is
before income taxes.
Because the majority of the Company's activities are domestic, sales
and assets outside the United States are not material.
Following is the comparative segment financial disclosure (amounts in
millions):
<TABLE>
<CAPTION>
SEGMENT FINANCIAL DISCLOSURE Increase
FIRST QUARTER COMPARISON 1999 1998 (Decrease)
<S> <C> <C> <C>
NET SALES:
Construction Materials $ 346.6 $ 193.3 $ 153.3
Chemicals 135.6 165.7 (30.1)
-------- -------- --------
Total $ 482.2 $ 359.0 $ 123.2
======== ======== ========
EARNINGS (LOSS) BEFORE
INTEREST EXPENSE AND
INCOME TAXES
Construction Materials $ 39.6 $ 32.4 $ 7.2
Chemicals 10.8 22.4 (11.6)
-------- -------- --------
Segment earnings 50.4 54.8 (4.4)
Interest income, etc 1.0 1.5 (.5)
-------- -------- --------
Total $ 51.4 $ 56.3 $ (4.9)
======== ======== ========
IDENTIFIABLE ASSETS
Construction Materials $2,075.1 $ 789.6 $1,285.5
Chemicals 471.4 462.3 9.1
-------- -------- --------
Identifiable Assets 2,546.5 1,251.9 1,294.6
Investment in nonconsolidated affiliates
72.7 62.5 10.2
General corporate assets 62.9 62.0 .9
Cash items 44.6 96.0 (51.4)
-------- -------- --------
Total $2,726.7 $1,472.4 $1,254.3
======== ======== ========
</TABLE>
6
<PAGE> 9
4. Effective Tax Rate
In accordance with generally accepted accounting principles, it is the
Company's practice at the end of each interim reporting period to make
a best estimate of the effective tax rate expected to be applicable for
the full fiscal year. The rate so determined is used in providing for
income taxes on a current year-to-date basis.
5. New Accounting Standards
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). SFAS 133 is required to
be adopted for years beginning after June 15, 1999. The Company is
currently evaluating SFAS 133 and has not yet determined its impact on
the Company's consolidated financial statements.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL COMMENTS
Seasonality of the Company's Business
Results of any individual quarter are not necessarily indicative of results to
be expected for the year due principally to the effect that weather can have on
the sales and production volume of the Construction Materials segment. Normally,
the highest sales and earnings of the Construction Materials segment are
attained in the third quarter and the lowest are realized in the first quarter
when sales and earnings are substantially below the levels realized in all
subsequent quarters of the year.
Segment Sales and Earnings
Segment sales and earnings have been determined on a similar basis as used in
prior Form 10-Q reports. Segment earnings are earnings before interest and
income taxes and after allocation of corporate expenses and income, other than
"interest income, etc.," (principally interest income earned on cash items and
gains or losses on corporate financing transactions), and after assignment of
equity income to the segment with which it is related in terms of products and
services. Allocations are based primarily on average operating investment and
customer sales.
Forward Looking Statements
Certain matters discussed in this report contain forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected. These include general business conditions,
competitive factors, pricing, energy costs and other risks detailed in the
Company's periodic reports.
Year 2000 Issue
Vulcan recognizes the importance of Year 2000 issues and has made resolution of
these problems a priority by creating a Year 2000 Project Management Office with
the appropriate authority and resources. The Company's Year 2000 Plan includes
five stages--pre-project, planning, preparation, implementation and transition,
which will overlap to a significant degree. The Year 2000 Project Management
Office has organized teams at each major location to research Year 2000
compliance status, implement appropriate solutions, and conduct testing of
computer hardware and network equipment, computer software, production equipment
and instrumentation. It will also assist in identifying key customers and key
suppliers. Vulcan is
8
<PAGE> 11
currently in the preparation and implementation stages, coordinating the
necessary internal and external changes. The Company has received information
concerning the Year 2000 status of most significant suppliers and selected
customers, and believes plans are in place to appropriately remedy these issues
in a timely manner. The Company plans to have implemented corrections to
internal systems that are critical to its operations no later than the end of
the third quarter of 1999. While some noncritical systems may not be addressed
until after December 1999, Vulcan believes such systems will not significantly
disrupt operations.
The Company currently estimates that the total cost of implementing its Year
2000 Plan will not exceed $5.0 million. This estimate is based on presently
available information and will be updated as the Company finalizes its
assessment and continues with implementation. In particular, the estimate may
need to be increased once the Company has formulated its contingency plan. The
business partner readiness assessment was completed in April 1999.
Management believes that the Company's Year 2000 Plan will resolve the issue in
a timely manner. Nevertheless, since it is not possible to anticipate all
possible future outcomes, especially when third parties are involved, there
could be circumstances in which the Company would be unable to take customer
orders, manufacture and ship products, invoice customers or collect payments. In
particular, if third-party providers, due to the Year 2000 issue, fail to
provide Vulcan with components or materials that are necessary to manufacture
its products, with sufficient electrical power and other utilities to sustain
its manufacturing process, or with adequate, reliable means of transporting its
products to its customers, then any such failure could have a material adverse
effect on the business operations and financial performance of the Company. The
amount of potential liability and lost revenue has not been estimated.
The preliminary contingency plans were finalized in April 1999.
9
<PAGE> 12
RESULTS OF OPERATIONS
First Quarter 1999 as Compared with First Quarter 1998
Vulcan's first quarter 1999 sales of $482.2 million were at a record level. Net
earnings of $26.4 million, and $0.26 per share were second only to the record
first quarter 1998 earnings and earnings per share of $36.5 million and $0.36
per share, respectively. As expected, certain items identified in Vulcan's
January earnings release affected the first quarter earnings comparison.
Primarily, the Chemicals segment experienced significant pricing declines in
each of the two chloralkali co-products, caustic soda and chlorine. The
acquisition of CalMat in January 1999 also resulted in some dilution to first
quarter earnings.
Sales in 1999 were $482.2 million, up 34% from last year's total of $359.0
million. The segment detail of that increase is as follows (amounts in
millions):
<TABLE>
<CAPTION>
First Quarter Sales
-------------------------------
Increase
1999 1998 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Construction Materials $346.6 $193.3 $ 153.3
Chemicals 135.6 165.7 (30.1)
----- ----- ------
Total $482.2 $359.0 $ 123.2
===== ===== ======
</TABLE>
Construction Materials reported record first quarter sales of $346.6 million, up
79% from the 1998 first quarter. Excluding CalMat and the 20 other aggregates
operations added since the first quarter of 1998, aggregates sales and shipments
were up 14 and 10 percent, respectively. CalMat sales and aggregates shipments
were up 31 and 30 percent, respectively. Excluding the impact of CalMat and
freight to remote distribution yards, aggregates prices increased 3%. Chemicals'
first quarter sales of $135.6 million were down 18 percent from last year's
first quarter. This decline resulted from lower prices for caustic soda,
chlorine and several other chloralkali products, as ECU (Electro Chemical Unit )
values fell to their lowest levels in two decades.
10
<PAGE> 13
Earnings before interest expense and income taxes were $51.4 million as compared
to $56.3 million in the same period last year. The segment detail of this result
is shown in the following summary (amounts in millions):
<TABLE>
<CAPTION>
First Quarter Earnings Before
Interest Expense and Income Taxes *
-----------------------------------
Increase
1999 1998 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Construction Materials $39.6 $32.4 $ 7.2
Chemicals 10.8 22.4 (11.6)
----- ----- ------
Segment earnings * 50.4 54.8 (4.4)
Interest income, etc 1.0 1.5 (.5)
----- ----- ------
Total $51.4 $56.3 $ (4.9)
===== ===== ======
</TABLE>
* After allocation of corporate expense 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 segment with which it is related in terms
of products and services.
The Construction Materials segment reported record first quarter earnings of
$39.6 million up 22% from first quarter 1998. When non-comparable items are
excluded from the quarterly earnings comparison, the Construction Materials
segment earnings increased 46% from first quarter 1998. The Chemicals segment
reported first quarter earnings of $10.8 million, down 52% from last year's
first quarter earnings of $22.4 million. This reflects principally the lower
chloralkali prices, partly offset by lower raw material costs, favorable
non-operating items and improved margins within Performance Systems.
Selling, administrative and general expenses of $54.2 million for the first
quarter of 1999 increased 16% from the 1998 level. This increase reflects
primarily the addition of CalMat.
Other income, net of other charges, was $11.4 million as compared with $15.9
million for the first quarter of 1998. The decrease principally reflects
significantly lower gains from sales of assets somewhat offset by a
non-recurring settlement referable to a legal claim and higher earnings from the
Company's joint venture to supply limestone from Mexico to the U.S. Gulf Coast
market.
Interest expense of $11.6 million for the first quarter of 1999 increased $9.7
million from the first quarter of 1998. This increase resulted from the
financing of the CalMat acquisition.
11
<PAGE> 14
On April 12, 1999, the Company issued $500 million of unsecured notes. Although
completed after the close of the quarter, the balance sheet and cash flow
statements reflect this transaction as it was substantially in place prior to
the close and best reflects the current status.
On April 26, 1999, Donald M. James, Chairman and Chief Executive Officer, made
certain statements concerning the Company's earnings outlook. Excerpts of the
relevant press release quoting Mr. James are as follows:
"In the first quarter of 1999, Vulcan emerged as the leading
aggregates producer on the West Coast with the acquisition of
CalMat. We also acquired eleven additional quarries in our
traditional markets. Our Construction Materials markets are
stronger than ever, and TEA21 is just beginning to have a favorable
impact on our operations. The CalMat operations are improving,
yielding greater opportunities than initially anticipated. Assuming
a continuation of the strong construction activity in CalMat's
markets, we now expect CalMat to be modestly accretive to earnings
per share in 1999.
"We continue to have a high level of confidence in the strong
outlook for Construction Materials. However, the uncertain outlook
for Chemicals makes it challenging to project overall results for
the year. If Chemicals' markets stabilize, Vulcan's net earnings
and earnings per share could approximate 1998's record results. On
the other hand, a continued deterioration in Chemicals' markets
could lead to a slight decline in total Company earnings."
12
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $281.6 million at
March 31, 1999, $88.6 million over the 1998 year-end amount of $193.0 million.
This increase primarily resulted from the acquisition of CalMat. Working capital
at March 31, 1999 increased $122.1 million from the same date last year. This
increase also resulted primarily from the acquisition of CalMat.
The Company's current ratio, which is based on all components of working
capital, including cash and debt items, was 1.1 as of March 31, 1999. This
compares to the 2.7 ratio at year-end 1998 and the 2.1 ratio at March 31, 1998.
These decreases in the current ratio resulted from the increase in current debt
items and decrease in marketable securities and cash resulting from the
financing of the CalMat acquisition.
Cash Flows
Net cash provided by operations totaled $64.6 million in the first quarter of
1999, up $12.9 million from the $51.7 million generated in the same period last
year. This increase reflects higher depreciation, depletion and amortization
charges offset in part by the lower earnings. Cash used for investing activities
was $851.4 million as compared with the 1998 total of $46.5 million. This
increase principally reflects the increased business acquisitions. Net cash
provided by financing activities totaled $650.8 million, as compared to the 1998
used for financing activities of $37.8 million. This net increase of cash
provided for financing activities of $688.6 million resulted primarily from the
financing of the CalMat acquisition with commercial paper and long-term debt.
Cash and cash equivalents, which totaled $44.6 million at March 31, 1999, were
down $51.4 million from the $96.0 million a year ago.
On February 12, 1999, the Board of Directors declared a quarterly dividend of
19.5 cents per common share payable March 10, 1999. The new quarterly dividend
represents a 12.7% (2.2 cents per share) increase over quarterly dividends paid
in 1998.
13
<PAGE> 16
Short-term Borrowings
Short-term borrowings as of March 31, 1999 consisted of notes payable to banks
totaling $2.3 million and commercial paper of $247.8 million. The prior year
amount consisted solely of notes payable to banks of $2.7 million. As stated
above, on April 12, 1999, the Company issued $500 million of unsecured notes.
The balance sheet and cash flow statements reflect this transaction as it was
substantially in place prior to the close and best reflects the current status.
This transaction restated $500 million of short-term borrowings (commercial
paper) to long-term obligations.
Long-term Obligations
As of March 31, 1999, long-term obligations were 31.7% of long-term capital and
59.3% of shareholders' equity. The corresponding 1998 percentages were 6.6% and
8.3%.
Common Stock Transactions
On February 12, 1999, the Board of Directors approved an increase in the
authorized common stock from 160 million shares to 480 million shares and a
three-for-one stock split of the common stock effected on March 10, 1999.
The Company purchased 1,200 shares of common stock in the first quarter of 1999
at a total cost of $49.4 thousand, equal to an average price of $41.19 per
share. Purchases of common stock in the first quarter of 1998 totaled 570,300
shares at a total cost of $19.4 million, equal to an average price of $34.02 per
share.
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<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to certain market risks arising from transactions that
are entered into in the normal course of business. In order to manage or reduce
this market risk, the Company occasionally utilizes derivative financial
instruments.
To date, the Company has used commodity swap and option contracts to reduce its
exposure to fluctuations in prices for natural gas. The fair value of these
contracts as of March 31, 1999 and 1998 was not material. As a result of a 10%
reduction in the price of natural gas, the Company would experience a potential
loss in the fair value of the underlying commodity swap and option contracts
based on the fair value at March 31, 1999 of approximately $1.5 million.
The Company is exposed to interest rate risk due to its various long-term debt
instruments. As substantially all of this debt is at fixed rates, a decline in
market interest rates would potentially result in a subsequent increase in the
fair value of the liability. At March 31, 1999, the estimated fair value of
these debt instruments was $714.9 million. The effect of a hypothetical decline
in the market interest rate of 1% would increase the fair value of the liability
by approximately $41.8 million.
15
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule (EDGAR filing only)
Exhibit 27.2 - Restated Financial Data Schedule for 1998
(EDGAR filing only)
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on
January 7, 1999 pursuant to which the Company reported
under item 2 the acquisition of CalMat Co.
The Company filed a current report on Form 8-K on
February 9, 1999 pursuant to which the Company
reported under item 5 the Press Release for the fourth
quarter 1998.
The Company filed a current report on Form 8-K on
February 17, 1999 pursuant to which the Company
reported under item 5 the Amended Press Release for
the fourth quarter 1998.
The Company filed a current report on Form 8-K/A on
March 19, 1999 pursuant to which the Company reported
under item 2 and Item 7 the financial statements of
CalMat Co. and the combined proforma financial
information giving effect to the acquisition.
16
<PAGE> 19
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 thereunto duly authorized.
VULCAN MATERIALS COMPANY
Date May 17, 1999 /s/ E. A. Khan
------------------------ ------------------------------------
E. A. Khan
Vice President and Controller
/s/ P. J. Clemens, III
------------------------------------
P. J. Clemens, III
Executive Vice President - Finance
and Administration and Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS OF VULCAN MATERIALS COMPANY FOR THE THREE
MONTHS ENDED MARCH 31, 1999, AND THE CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 44,559
<SECURITIES> 0
<RECEIVABLES> 333,503
<ALLOWANCES> 12,739
<INVENTORY> 183,527
<CURRENT-ASSETS> 597,228
<PP&E> 3,158,493
<DEPRECIATION> 1,733,683
<TOTAL-ASSETS> 2,726,642
<CURRENT-LIABILITIES> 533,787
<BONDS> 695,235
0
0
<COMMON> 139,705
<OTHER-SE> 1,032,074
<TOTAL-LIABILITY-AND-EQUITY> 2,726,642
<SALES> 482,222
<TOTAL-REVENUES> 482,222
<CGS> 384,011
<TOTAL-COSTS> 384,011
<OTHER-EXPENSES> 4,030
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 11,605
<INCOME-PRETAX> 39,826
<INCOME-TAX> 13,461
<INCOME-CONTINUING> 26,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,365
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE FOR 1998 RESULTED FROM THE STOCK SPLIT
EFFECTED MARCH 10, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS OF VULCAN MATERIALS
COMPANY FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND THE CONSOLIDATED BALANCE
SHEET AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 95,966
<SECURITIES> 0
<RECEIVABLES> 213,266
<ALLOWANCES> 7,775
<INVENTORY> 144,542
<CURRENT-ASSETS> 474,139
<PP&E> 2,162,631
<DEPRECIATION> 1,335,324
<TOTAL-ASSETS> 1,472,413
<CURRENT-LIABILITIES> 229,286
<BONDS> 81,931
0
0
<COMMON> 139,722
<OTHER-SE> 851,775
<TOTAL-LIABILITY-AND-EQUITY> 1,472,413
<SALES> 358,963
<TOTAL-REVENUES> 358,963
<CGS> 269,483
<TOTAL-COSTS> 269,483
<OTHER-EXPENSES> 2,355
<LOSS-PROVISION> 400
<INTEREST-EXPENSE> 1,948
<INCOME-PRETAX> 54,329
<INCOME-TAX> 17,820
<INCOME-CONTINUING> 36,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,509
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
