<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): January 6, 1999
VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
1-4033 63-0366371
(Commission File Number) (I.R.S. Employer Identification Number)
1200 Urban Center Drive, Birmingham, Alabama
(Address of principal executive offices)
Registrant's telephone number, including area code (205) 298-3000
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On January 6, 1999, Vulcan Materials Company (the "Company") filed its
original Form 8-K with respect to the acquisition of CalMat Co. CalMat Co. has
been merged with and into a wholly-owned subsidiary of the Company. This Form
8-K/A is filed to furnish financial statements of CalMat Co. and the combined
pro forma financial information giving effect to the Company's acquisition of
CalMat Co. The original Form 8-K is also amended such that the information
reported under Item 5 is deemed reported under Item 2.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired:
CalMat Co. and Subsidiaries Consolidated Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1998
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998
Consolidated Statements of Cash Flow for the years ended
December 31, 1996, 1997 and 1998
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information
The unaudited pro forma combined financial statements of the
Company giving effect to the acquisition of CalMat Co.:
Unaudited Pro Forma Combined Balance Sheet December 31, 1998
Unaudited Pro Forma Combined Statement of Earnings for the
year ended December 31, 1998
Notes to Unaudited Pro Forma Combined Financial Statements
(c) Exhibits
There are no additional exhibits filed with this Amendment.
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
CalMat Co.
Los Angeles, California
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of CalMat Co.
and subsidiaries (the "Company") at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
March 2, 1999
1
<PAGE> 4
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(Amounts in thousands, except share data) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 2,519
Cash held in trust for section 1031 exchanges 5,910 5,547
Trade accounts receivable, less allowance for discounts and
doubtful accounts ($5,826 in 1998 and $5,898 in 1997) 99,388 75,305
Income taxes receivable 6,816 6,252
Inventories 16,779 15,466
Prepaid expenses 4,023 4,187
Deferred income taxes 11,183 9,536
Installment notes receivable and other assets 6,474 2,740
-------------------------
Total current assets 150,573 121,552
Installment notes receivable and other assets 34,285 34,059
Costs in excess of net assets of businesses acquired, net 49,657 48,719
Property, plant and equipment:
Land and deposits 189,511 193,332
Buildings, machinery and equipment 538,504 504,889
Construction in progress 40,826 38,447
-------------------------
768,841 736,668
Less: accumulated depreciation and depletion (312,870) (305,190)
-------------------------
Property, plant and equipment, net 455,971 431,478
-------------------------
Total assets $ 690,486 $ 635,808
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,850 $ 32,257
Accrued liabilities 37,256 38,872
Notes and bonds payable - current portion 37,697 337
Dividends payable -- 2,346
-------------------------
Total current liabilities 122,803 73,812
Notes and bonds payable - long-term portion 118,230 118,401
Other liabilities and deferred credits 31,149 37,701
Deferred income taxes 64,559 59,349
-------------------------
Total liabilities 336,741 289,263
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, par value $1; authorized 5,000,000 shares;
none issued or outstanding
Common stock, par value $1; authorized 100,000,000 shares;
issued and outstanding 23,861,775 shares in 1998 and 23,578,860 shares in 1997 23,862 23,579
Additional paid-in capital 54,682 48,374
Retained earnings 275,201 274,592
-------------------------
Total stockholders' equity 353,745 346,545
-------------------------
Total liabilities and stockholders' equity $ 690,486 $ 635,808
=========================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
(Amounts in thousands, except per share data) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales and operating revenues $ 533,763 $ 460,973 $ 399,083
Net gains on sale of real estate 3,618 5,377 5,500
Other income 9,580 6,462 3,312
---------------------------------------
546,961 472,812 407,895
Costs and expenses:
Cost of products sold and operating expenses 438,434 394,764 347,163
Selling, general and administrative expenses 47,312 44,908 37,746
Interest expense 8,794 7,713 5,944
Other expenses 3,232 1,783 1,864
Special charges 26,084 -- --
---------------------------------------
523,856 449,168 392,717
Income before income taxes 23,105 23,644 15,178
Federal and state income taxes 15,198 7,042 5,844
---------------------------------------
Net income $ 7,907 $ 16,602 $ 9,334
=======================================
Per share data:
Net income - basic $ .33 $ .71 $ .40
Net income - diluted $ .33 $ .70 $ .40
Cash dividends $ .30 $ .40 $ .40
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
(Amounts in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,907 $ 16,602 $ 9,334
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation, cost depletion and amortization 39,751 35,158 31,803
Net gains from sale of real estate (3,618) (5,377) (5,500)
Net loss (gains) on disposal of property, plant and equipment 1,502 (444) (224)
Deferred income taxes 3,563 5,355 700
Changes in operating assets and liabilities
Trade accounts receivable, net (25,695) (22,242) 9,716
Inventories, prepaid expenses and other assets (10,828) (12,097) (8,895)
Accounts payable, accrued liabilities and other liabilities 6,197 18,389 3,100
Federal and state income taxes (564) (4,091) (2,798)
Other (177) 145 3
---------------------------------------
Cash provided by operating activities 18,038 31,398 37,239
---------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (63,748) (41,783) (54,320)
Proceeds from sale of property, plant and equipment 2,587 1,612 835
Proceeds from sale of real estate 11,090 16,709 11,297
Installment notes receivable, net 2,788 (2,008) 6,817
Businesses acquired (21,458) (23,610) --
Proceeds from sale of business 14,363 -- --
Other -- -- (129)
---------------------------------------
Cash used for investing activities (54,378) (49,080) (35,500)
---------------------------------------
FINANCING ACTIVITIES
Stock options exercised 6,437 6,319 991
Net borrowings (payments) - bank lines of credit 37,500 6,000 (48,000)
Principal payments on notes and bonds payable (312) (3,178) (98)
Retirement of senior notes -- -- (35,000)
Proceeds from senior notes -- -- 115,000
Payment of cash dividends (9,492) (9,306) (9,285)
Hedge costs and other loan fees, net 51 138 428
---------------------------------------
Cash provided by (used for) financing activities 34,184 (27) 24,036
---------------------------------------
Increase (decrease) in cash (2,156) (17,709) 25,775
(Increase) decrease in cash held in trust for section 1031 exchanges 363 3,101 (8,648)
---------------------------------------
Increase (decrease) in cash and cash equivalents (2,519) (14,608) 17,127
Balance, beginning of year 2,519 17,127 --
---------------------------------------
Balance, end of year $ -- $ 2,519 $ 17,127
=======================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 8,733 $ 7,501 $ 6,569
Income taxes 13,768 6,533 7,711
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
CALMAT CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended December 31, 1998, 1997 and 1996
Additional Total
Common Paid-In Retained Stockholders'
(Amounts in thousands) Stock Capital Earnings Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 23,182 $ 40,588 $ 267,379 $ 331,149
Net income for 1996 -- -- 9,334 9,334
Stock options exercised 58 933 -- 991
Cash dividends declared -- -- (9,282) (9,282)
------------------------------------------------------
BALANCE, DECEMBER 31, 1996 23,240 41,521 267,431 332,192
Net income for 1997 -- -- 16,602 16,602
Common stock repurchased (4) (4) (107) (115)
Stock options exercised 343 6,908 -- 7,251
Employee stock purchase plan -- (51) -- (51)
Cash dividends declared -- -- (9,334) (9,334)
------------------------------------------------------
BALANCE, DECEMBER 31, 1997 23,579 48,374 274,592 346,545
Net income for 1998 -- -- 7,907 7,907
Common stock repurchased (6) (6) (152) (164)
Stock options exercised 289 6,370 -- 6,659
Employee stock purchase plan -- (56) -- (56)
Cash dividends declared -- -- (7,146) (7,146)
------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 23,862 $ 54,682 $ 275,201 $ 353,745
------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 8
CALMAT CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUBSEQUENT EVENT - ACQUISITION OF CALMAT CO. BY VULCAN MATERIALS
COMPANY
On November 20, 1998 Vulcan Materials Company ("Vulcan Materials")
tendered an offer to acquire all of the outstanding shares of CalMat Co. and
subsidiaries (the "Company") for $31.00 per share in cash. The acquisition
became effective at the close of business on January 6, 1999. Under the terms
of the Agreement and Plan of Acquisition dated as of November 14, 1998 by and
among the Company, Vulcan Materials and ALB Acquisition Corporation, a
wholly-owned subsidiary of Vulcan Materials (the "Acquisition Agreement"), the
Company agreed not to pay its regular quarterly dividend of $0.10 per share for
the fourth quarter of 1998. As a result of the acquisition, the Company has
become a wholly-owned subsidiary of Vulcan Materials. Various acquisition
related costs, including costs of payouts under certain employment agreements,
costs of liquidation of stock option and other employee benefit plans, and
professional fees were incurred in 1998 and will be incurred in 1999. The
following summarizes the costs included in pre-tax special charges in 1998 and
the costs that will be recognized in 1999 by the Company:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Costs under certain employment agreements and benefit plans $ 25,419 $ 35,859
Professional and other fees 665 10,616
------------------------
Total special charges $ 26,084 $ 46,475
</TABLE>
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of CalMat Co. and all of its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances
and highly liquid investments with a maturity of three months or less when
purchased.
INVENTORIES: Inventories are recorded when purchased or produced and are stated
at the lower of cost or market.
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED: Costs in excess of the
fair value of net assets of businesses acquired are amortized on a
straight-line basis over periods not exceeding 40 years. Accumulated
amortization of such costs was $16.2 million and $14.4 million at December 31,
1998 and 1997, respectively. The addition to costs in excess of net assets of
businesses acquired in 1998 was $2.7 million. The Company periodically assesses
whether there has been a permanent impairment in the value of goodwill and
other intangible assets by considering factors such as expected future
operating income, current operating results, trends and prospects, as well as
the effects of demand, competition, and other economic factors. Management
believes no impairment has occurred.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is carried at
cost. Depreciation is computed using straight-line rates over estimated useful
lives (5 to 35 years for plant structures and components and 4 to 25 years for
machinery and equipment). Depletion of rock and sand deposits is computed using
the units-of-production method based upon estimated recoverable quantities of
rock and sand. Significant expenditures which add materially to the utility or
useful lives of property, plant and equipment are capitalized. All other
maintenance and repair costs are charged to current operations. The cost and
related accumulated depreciation of assets replaced, retired or otherwise
disposed of are eliminated from the property accounts, and any gain or loss is
reflected in income. The Company periodically assesses whether there has been a
permanent impairment in the value of property, plant and equipment by
considering factors such as expected future operating income, current operating
results, trends and prospects, as well as the effects of demand, competition,
and other economic factors. Management believes no impairment has occurred.
RECLAMATION COSTS: The estimated costs of reclamation associated with mining
activities are accrued during production. Such costs are taken into account in
determining the cost of production. The reserve for reclamation costs was $15.6
million and $14.9 million at December 31, 1998 and 1997, respectively. Of these
balances, the non-current portions of $13.6 million and $13.7 million were
included in other liabilities and deferred credits at December 31, 1998 and
1997, respectively.
6
<PAGE> 9
INCOME TAXES: Income taxes are determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Deferred income taxes are determined using the liability method and arise from
differences in bases between tax reporting and financial reporting.
ENVIRONMENTAL COSTS: Environmental remediation expenditures that relate to
current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated. Estimated liabilities
are not discounted to present value. Generally, the timing of these accruals
coincides with completion of a feasibility study or the Company's commitment to
a formal plan of action. The reserve for environmental remediation costs was
$4.8 million and $5.3 million at December 31, 1998 and 1997, respectively. Of
these balances, the non-current portions of $4.2 million and $4.5 million were
included in other liabilities and deferred credits at December 31, 1998 and
1997, respectively.
SELF-INSURANCE: The Company is self-insured up to certain levels for
automobile, product and general liability. The Company is also self-insured up
to certain levels for health care claims for eligible active and retired
employees. The Company accrues its estimated costs monthly in connection with
its portion of insurance losses/claims. Claims paid by the Company are charged
against the reserve. Additionally, the Company maintains a reserve for claims
incurred but not reported based on actuarially estimated costs.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
REVENUE RECOGNITION: Sales and operating revenues are recorded upon shipment of
product, net of discounts, if any, and include revenue earned pursuant to the
terms of property leasing contracts. Gains and losses on real estate are
recorded upon consummation of the transaction. Other income relates primarily
to interest and dividend income, miscellaneous rental income and gains on sale
of fixed assets which are recognized in accordance with the terms of various
contractual arrangements or upon receipt (as applicable).
NOTE 3: ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll, vacation and other benefits $ 14,054 $ 13,928
Profit sharing 4,810 5,537
Other 18,392 19,407
--------------------------
$ 37,256 $ 38,872
==========================
</TABLE>
NOTE 4: FEDERAL AND STATE TAXES
Income before income taxes and the related income tax expense for the years
ended December 31, are as follows:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES $ 23,105 $ 23,644 $ 15,178
-------------------------------------------
INCOME TAX EXPENSE $ 15,198 $ 7,042 $ 5,844
-------------------------------------------
</TABLE>
7
<PAGE> 10
Income tax expense consists of the following for the years ended December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL INCOME TAX:
Currently payable $ 10,426 $ 3,862 $ 4,672
Deferred 3,185 1,484 (169)
------------------------------------------
13,611 5,346 4,503
------------------------------------------
STATE INCOME TAX:
Currently payable 885 1,029 1,327
Deferred 702 667 14
------------------------------------------
1,587 1,696 1,341
------------------------------------------
$ 15,198 $ 7,042 $ 5,844
==========================================
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at December
31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 36,623 $ 36,240
Real estate exchanges 29,755 29,441
Purchase accounting basis differences 13,865 13,247
Depletion and other land basis adjustments 2,134 3,715
Other 5,689 7,594
-------------------------
Gross deferred tax liabilities 88,066 90,237
-------------------------
Postretirement benefits (4,467) (4,587)
Impairment of long-lived assets (14,826) (16,252)
Net operating loss carryforwards (2,419) (2,566)
Reclamation and environmental accruals (8,617) (8,266)
Inventory valuation reserves (3,383) (3,114)
Compensation (2,734) (4,007)
Other (663) (4,198)
-------------------------
Gross deferred tax assets (37,109) (42,990)
Valuation allowance 2,419 2,566
-------------------------
$ 53,376 $ 49,813
=========================
</TABLE>
A reconciliation of income tax expense to the federal statutory income tax rate
is as follows for the years ended December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense at statutory rates $ 8,087 $ 8,275 $ 5,312
Less effect of:
Federal tax benefit of state income tax 577 543 384
Nondeductible compensation (9,294) -- --
Percentage depletion 1,933 1,804 1,593
Goodwill and other amortization (462) (462) (462)
Settlement of tax audit -- 762 --
Other 1,722 282 (706)
-------------------------------------------
Reported federal income tax expense 13,611 5,346 4,503
Reported state income tax expense 1,587 1,696 1,341
-------------------------------------------
$ 15,198 $ 7,042 $ 5,844
===========================================
</TABLE>
8
<PAGE> 11
At December 31, 1998, the Company had alternative minimum tax credit
carry forwards of approximately $2.8 million available to offset regular tax in
future years.
The Company's federal consolidated income tax returns have been
examined and settlements have been reached for all years through 1989. The
Company believes that adequate provision has been made for possible assessments
of additional taxes.
NOTE 5: NOTES AND BONDS PAYABLE
Notes and bonds payable consist of the following at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank lines of credit $ 37,500 $ --
Senior notes 115,000 115,000
Notes payable 2,665 2,927
Municipal improvement bonds 762 811
--------------------------
Total 155,927 118,738
Less current portion 37,697 337
--------------------------
Long-term portion $ 118,230 $ 118,401
==========================
</TABLE>
At December 31, 1998, the Company had a formal committed revolving
credit facility with a group of banks totaling $75.0 million which will expire
in 2003. In addition, the Company also had a committed revolving promissory
note with a major commercial bank totaling $30.0 million which will expire in
1999. The Company pays a facility fee on both committed facilities. Short-term
bank borrowings under these credit facilities were $37.5 million and zero at
December 31, 1998 and 1997, respectively, and bore interest rates equal to or
less than the prime bank lending rate which was 7.75% at December 31, 1998.
The $115.0 million of senior notes outstanding at December 31, 1998
and 1997 were issued pursuant to a note purchase agreement dated December 18,
1996 between the Company and a group of institutional investors. This private
placement of senior notes was issued in four tranches at interest rates ranging
from 7.19% through 7.66%, with maturities beginning in December 2003 through
December 2011.
The loan agreements contain certain covenants which address the
incurrence of additional debt, creation of liens, and maintenance of minimum
net worth and financial ratios.
Maturities of notes and bonds payable during the next five years are
as follows: 1999, $37.7 million; 2000, $0.2 million; 2001, $0.2 million; 2002,
$2.3 million; and 2003, $35.1 million.
NOTE 6: STOCK OPTIONS AND STOCK PURCHASE PLAN
At December 31, 1998, the Company had three stock option plans: the
1990 Stock Option Plan, the 1993 Stock Option Plan and the 1998 Stock Option
Plan. Under these plans, the Company has authorized the issuance of options up
to 600,000, 900,000 and 1,000,000 shares of common stock for the 1990, 1993 and
1998 plans, respectively, to executives and certain employees as determined by
the Stock Option Sub-Committee of the Management Development and Compensation
Committee of the Board of Directors. The price of the shares subject to each
option was set by the Committee but could not be less than the fair market
value of the shares at the date of grant. Options generally became exercisable
in four annual installments beginning one year after the date of grant and
expired ten years after the date of grant. In 1998, 1997 and 1996, 82,500,
97,213 and 92,484 options expired, respectively.
9
<PAGE> 12
Stock option activity and the weighted average option exercise price for the
years 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted-Average Weighted-Average Weighted-Average
(Share amounts in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the beginning of the year 1,977 $ 21.46 2,027 $ 20.54 1,797 $ 21.28
Granted 576 17.88 443 24.96 549 17.79
Exercised (288) 20.04 (341) 19.01 (58) 17.05
Forfeited and expired (218) 25.23 (152) 25.19 (261) 20.63
-------------------------------------------------------------------
Outstanding at the end of the year 2,047 $ 20.37 1,977 $ 21.43 2,027 $ 20.54
===================================================================
Exercisable at the end of the year 2,047 $ 20.70 1,071 $ 21.44 1,229 $ 22.12
-------------------------------------------------------------------
Available for future options 580 42 431
-------------------------------------------------------------------
</TABLE>
Pursuant to the Merger Agreement, all of the Company's stock option
plans were terminated and pursuant to the terms of the plans, all non-vested
options were accelerated effective December 28, 1998. Also pursuant to the
Merger Agreement, on January 6, 1999, all of the option holders were paid the
difference between $31.00 per share and the exercise price per share for each
option they held. The cost to liquidate the plans was $1.7 million and $20.9
million in 1998 and 1999, respectively.
The weighted average fair value at date of grant for options granted
during 1997 and 1996 was $7.23 and $3.53 per option, respectively. The fair
value of options at date of grant was estimated using the Black Scholes model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Expected life (years) 4.75 3.5
Interest rate 5.94% 6.31%
Volatility 0.2716 0.1972
Dividend yield 1.62% 2.15%
</TABLE>
Prior to the liquidation of the stock option plans, the Company
applied Accounting Principles Board Opinion No.25, "Accounting for Stock Issued
to Employees" and related Interpretations in accounting for its stock option
plans. Accordingly, no compensation cost has been recognized for these plans.
Had compensation cost for the Company's plans been determined based on the fair
value at the grant dates for awards under the plans consistent with the method
of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company would
have recorded stock-based compensation expense of $3.2 million ($1.9 million
after tax or $0.08 per share) in 1997 and $0.9 million ($0.7 million after tax
or $0.03 per share) in 1996.
Effective July 1, 1997, the Company adopted an Employee Stock Purchase
Plan to provide all employees the opportunity to purchase the Company's stock
at a discount through payroll deduction. The price an employee paid for one
share of common stock was 85% of the lower of the stock price at the first or
at the last business day of a calendar quarter. During 1998 and 1997, 15,768
shares and 7,810 shares, respectively, were purchased by employees. Pursuant to
the Merger Agreement, this plan was terminated effective December 1, 1998.
NOTE 7: EARNINGS PER SHARE
Basic and diluted earnings per share were computed using the method
prescribed by SFAS No. 128, "Earnings Per Share (EPS)". Basic EPS was computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted EPS is similar
to basic EPS except that the denominator was increased to include the number of
additional common shares that would have been outstanding if dilutive potential
common shares had been issued.
10
<PAGE> 13
In accordance with SFAS No. 128, net income per common share computations
for the years ended December 31, 1998, 1997 and 1996 were as follows (amounts
and shares in thousands, except per share data):
<TABLE>
<CAPTION>
For the year ended December 31, 1998
------------------------------------
Net Income Shares Per Share
------------------------------------
<S> <C> <C> <C>
Basic EPS $ 7,907 23,775 $ 0.33
Effect of dilutive securities-options -- 227 --
------------------------------------
Diluted EPS $ 7,907 24,002 $ 0.33
====================================
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
------------------------------------
Net Income Shares Per Share
------------------------------------
<S> <C> <C> <C>
Basic EPS $ 16,602 23,313 $ 0.71
Effect of dilutive securities-options -- 411 (.01)
------------------------------------
Diluted EPS $ 16,602 23,724 $ 0.70
====================================
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1996
------------------------------------
Net Income Shares Per Share
------------------------------------
<S> <C> <C> <C>
Basic EPS $ 9,334 23,226 $ 0.40
Effect of dilutive securities-options 37 --
------------------------------------
Diluted EPS $ 9,334 23,263 $ 0.40
====================================
</TABLE>
NOTE 8: FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company has no involvement with derivative financial instruments
and does not use them for trading purposes.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of periodic temporary
investments of excess cash and trade receivables. The Company places its
temporary excess cash investments in high quality short-term money market
instruments through several high credit quality financial institutions. A
significant portion of the Company's sales are to customers in the construction
industry, and, as such, the Company is directly affected by the well-being of
that industry. However, the credit risk associated with trade receivables is
minimal due to the Company's large customer base and ongoing control procedures
which monitor the credit worthiness of customers. The Company generally obtains
lien rights on all major projects. Historically, the Company has not
experienced significant losses on trade receivables.
11
<PAGE> 14
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company using available market
information and valuation methodologies described below. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein may not be indicative
of the amounts that the Company could realize among willing parties in a
current market transaction.
The carrying values of cash equivalents, trade receivables, accounts
payable and bank lines of credit approximate fair values due to the short-term
maturities of these instruments. The carrying amounts and estimated fair values
of the Company's other financial instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
(Amounts in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes receivable $ 948 $ 960 $ 3,740 $ 3,685
Notes and bonds payable 155,926 166,464 118,738 124,611
</TABLE>
The methods and assumptions used to estimate the fair value of each class of
financial instruments are as follows:
NOTES RECEIVABLE: The fair value was estimated using the expected future cash
flows discounted at market interest rates.
NOTES AND BONDS PAYABLE: The fair value was estimated by discounting the future
cash flows using rates currently available for debt of similar terms and
maturity.
NOTE 9: RETIREMENT PLANS
The Company has a trusteed 401(k) and a profit-sharing plan, and a
money purchase pension plan to provide funds from which retirement benefits are
paid to substantially all salaried employees of the Company and its wholly owned
subsidiaries, including officers and directors who are also employees. Annual
contributions to these plans made by the Company approximate 15.0% of the
aggregate compensation paid or accrued each year to participants in the plans.
The Company contributes to various union pension plans as specified by certain
union agreements, and non-union pension plans which cover substantially all
hourly employees. Pension expense related to these plans totaled $10.0 million
in 1998, $9.9 million in 1997 and $8.8 million in 1996.
The Company also has a non-qualified, defined benefit Supplemental
Executive Retirement Plan ("SERP") for certain key executives. Benefits earned
under the SERP are fully vested at age 55 and seven years of service, however,
the full amount of accrued benefit will not begin until age 62. Pension expense
related to the SERP was $24.8 million, $1.2 million and $1.1 million in 1998,
1997 and 1996, respectively. As a result of the merger, the Company paid $27.1
million as of December 31, 1998 to liquidate both vested and non-vested benefits
under the SERP.
The Company provides certain health care and life insurance benefits to
eligible retired employees. Salaried and non-union hourly participants generally
become eligible after reaching age 62 with 20 years of service or after reaching
age 65 with 15 years of service. The health care plan is contributory and the
life insurance plan is noncontributory. The plans are unfunded.
12
<PAGE> 15
The following table sets forth the plans' funded status reconciled
with the amount included in the caption other liabilities and deferred credits
in the Company's balance sheets at December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees $ 4,865 $ 4,010 $ 5,165
Fully eligible active plan participants 783 562 630
Other active plan participants 2,298 1,480 1,472
-------------------------------------------
7,946 6,052 7,267
Plan assets at fair value -- -- --
-------------------------------------------
Accumulated Postretirement Benefit Obligation in excess of plan assets 7,946 6,052 7,267
-------------------------------------------
Unrecognized prior service cost 989 1,169 1,348
Unrecognized net gain 1,384 3,621 2,178
-------------------------------------------
Accrued postretirement benefit cost at December 31 $ 10,319 $ 10,842 $ 10,793
===========================================
</TABLE>
The net periodic postretirement benefit cost for 1998, 1997 and 1996
included the following components:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits attributed to service during the period $ 290 $ 263 $ 290
Interest cost on the Accumulated Postretirement Benefit Obligation 390 507 554
Net amortization (420) (295) (180)
---------------------------------------
Net periodic postretirement benefit cost $ 260 $ 475 $ 664
=======================================
(Amounts in thousands) 1998 1997
- --------------------------------------------------------------------------------------------------
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 6,052 $ 7,267
Service cost 290 263
Interest cost 390 507
Benefits paid net of retiree contributions (783) (427)
Actuarial (gain)/ loss $ 1,997 (1,558)
-------------------------
Benefit obligation at end of year $ 7,946 $ 6,052
=========================
</TABLE>
For measurement purposes, a 10.6% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998; the rate was
assumed to decrease gradually to 6.0% by 2011 and remain at that level
thereafter. The weighted-average discount rate used in determining the
Accumulated Postretirement Benefit Obligation was 6.5% in 1998, 7.0% in 1997,
and 7.5% in 1996.
The health care cost trend rate assumption has a significant effect on
the amounts reported. To illustrate, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the Accumulated
Postretirement Benefit Obligation as of December 31, 1998 by $0.9 million and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $0.1 million.
Alternatively, decreasing assumed health care cost trend rates by one
percentage point in each year would decrease the Accumulated Postretirement
Benefit Obligation as of December 31, 1998 by $0.8 million and the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost for the year then ended by $0.1 million.
13
<PAGE> 16
NOTE 10: COMMITMENTS AND CONTINGENCIES
The Company had surety bonds and standby letters of credit outstanding
totaling approximately $68.3 million at December 31, 1998, which collateralize
various insurance and performance obligations.
The Company has retained certain self-insurance risks with respect to
automobile, product and general liability and certain health care claims.
The Company has been named by the U.S. Environmental Protection Agency
("EPA") as a defendant in a civil action involving one "Superfund" cleanup
site. The Company is one of many entities so named. To date, the Company has
contributed approximately $300,000 to fund certain interim remedial actions at
the site as part of two partial settlements of this matter (which in part
remain subject to court approval). The EPA recently reached a decision as to
the Final Remedy to be implemented for the site and currently estimates the
total cost for implementation to be shared by all parties to be $289 million.
Although the Company's share of any liability is still undetermined, and the
ultimate outcome of this action cannot be predicted with certainty, the Company
believes that this matter will be resolved without a material adverse effect on
its financial position or results of operations. The Company's belief is based
on its position that the wastes attributed to it at the site were not
hazardous, its extremely small share of the waste at the site compared to
wastes attributable to the other defendants, and its belief that it has
recourse to insurance coverage for at least a substantial portion of any
resulting liability.
At two other sites, the Company has been named as a potentially
responsible party. With respect to one site, the Company entered a settlement
with the EPA which was not material to the financial position of the Company.
With respect to the other site, the EPA has indicated that it will not pursue a
claim against the Company.
In June 1998, the Company received a federal grand jury subpoena
citing possible antitrust violations and requesting information concerning its
Fresno, California asphalt operations. The Company is continuing to provide
information in response to the subpoena. Also, the Company has been informed
that it is a target of an investigation by the U.S. Department of Justice,
Antitrust Division, regarding possible violations of antitrust laws at these
operations. Based on information available to it at this time, the Company does
not anticipate that the outcome of the investigation will have a material
adverse effect on its results of operations, cash flows or financial position.
The Company is subject to various legal proceedings, claims and
liabilities which arise in the ordinary course of its business. In the opinion
of management, the amount of ultimate liability with respect to these actions
will not have a material adverse effect on the Company's results of operations,
cash flows or financial position.
NOTE 11: BUSINESS SEGMENT INFORMATION
The Company operates principally in two business segments:
Construction Materials and Properties. Operations in the Construction Materials
Division include the mining and sale of aggregates (rock, sand and gravel), the
manufacture and sale of ready mixed concrete, and the manufacture and sale of
hot-mix asphalt. The Construction Materials Division also markets Guardtop(R),
an asphalt surface sealer, and is a distributor of paving reinforcement fabric.
These products are used primarily in commercial and residential construction,
public construction projects and projects to build, expand and repair roads and
highways.
The Construction Materials Division operates aggregates processing
plants at 29 locations serving the Los Angeles, San Diego, Bakersfield, Fresno,
Ventura, Santa Barbara, Sacramento and San Francisco Bay areas of California as
well as Phoenix, Arizona and Albuquerque, New Mexico. Ready mixed concrete
batch plants are operated at 30 locations in these
14
<PAGE> 17
markets except for the Los Angeles, Sacramento and San Francisco Bay areas. Of
the 30 ready mixed concrete locations, 10 are sites which also have aggregates
processing plants. Asphalt plants are operated at 34 locations in metropolitan
Los Angeles and San Diego, Sacramento, San Francisco Bay and San Joaquin Valley
areas of California as well as Phoenix, Arizona and Albuquerque, New Mexico. Of
the 34 asphalt plant locations, 20 are sites which also have aggregates
processing plants and/or ready mixed concrete plants.
CalMat's 34,000 acres of fee owned and leased lands are managed and
overseen by the Company's Properties Division in conjunction with the Resource
Management Department of the Construction Materials Division. The Resource
Management Department is responsible for the merger of all property used in the
Company's aggregates operations and for obtaining all necessary land use
entitlements for aggregates operations and planning for reclamation of the land
once reserves are depleted. The Properties Division is responsible for
maximizing the value of property not used in the construction materials
business by developing, selling or leasing these properties. Income sources for
the Properties Division include rentals, landfill operations and self-storage
facilities.
15
<PAGE> 18
The following is business segment information for the years ended
December 31:
<TABLE>
<CAPTION>
(Amounts in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Construction Materials $ 512,000 $ 440,672 $ 377,452
Properties - Operations 21,763 20,301 21,631
Properties - Real estate gains 3,618 5,377 5,500
Corporate and other 9,580 6,462 3,312
---------------------------------------
Total $ 546,961 $ 472,812 $ 407,895
=======================================
INCOME BEFORE INCOME TAXES:
Construction Materials $ 57,349 $ 27,408 $ 17,134
Properties - Operations 8,847 9,077 9,362
Properties - Real estate gains 3,618 5,377 5,500
Corporate and unallocated expenses, net (14,796) (13,801) (11,678)
Interest expense (8,794) (7,713) (5,944)
Other income 2,965 3,296 804
Special charges (26,084) -- --
---------------------------------------
Total $ 23,105 $ 23,644 $ 15,178
=======================================
IDENTIFIABLE ASSETS (AS OF DECEMBER 31):
Construction Materials $ 544,040 $ 493,737 $ 439,148
Properties 100,743 106,551 117,360
Corporate and other 45,703 35,520 44,208
---------------------------------------
Total $ 690,486 $ 635,808 $ 600,716
=======================================
DEPRECIATION, COST DEPLETION AND AMORTIZATION:
Construction Materials $ 36,079 $ 31,856 $ 28,272
Properties 2,877 2,490 2,674
Corporate and other 795 812 857
---------------------------------------
Total $ 39,751 $ 35,158 $ 31,803
=======================================
CAPITAL EXPENDITURES AND BUSINESS EXPANSION:
Construction Materials $ 77,909 $ 59,229 $ 39,421
Properties 6,386 5,407 14,862
Corporate and other 911 757 37
---------------------------------------
Total $ 85,206 $ 65,393 $ 54,320
=======================================
</TABLE>
16
<PAGE> 19
Income from operations by business segment represents total revenues
less direct operating expenses, segment selling, general and administrative
expenses and certain allocated corporate general and administrative expenses.
Corporate and unallocated expenses include corporate administrative expenses
and support expenses not allocated to business segments. Assets classified as
corporate and other consist primarily of cash and cash equivalents, notes
receivable, general office facilities and other assets.
A substantial portion of the Company's revenues and income before
income taxes results from construction materials operations located in Southern
California.
NOTE 12: OTHER INFORMATION
The Company announced on July 14, 1998 that it has entered into a
letter of intent to exchange certain of its assets located in Pleasanton,
California, with Hanson, PLC, London, England for cash and certain assets owned
by Hanson's Cornerstone C&M, Inc. entity ("Cornerstone"). The Company's assets
subject to the letter of intent include its aggregates reserves, aggregates
processing plant, landfill, and recycling operations located in Pleasanton,
California. The Cornerstone assets that would be acquired by the Company
include eight aggregates facilities, nine ready mixed concrete plants, seven
asphalt plants, two portable ready mixed concrete plants, two portable asphalt
plants, eight commercial recycling sites and a construction contracting
business. These operations are located in California, Idaho, and Washington.
The transaction is subject to the successful negotiation and execution of a
definitive agreement between the parties. There is no assurance that a
definitive agreement will be reached. The Company filed a Notification and
Report Form with the Federal Trade Commission and the Department of Justice as
required under the Hart-Scott-Rodino Act/Antitrust Improvements Act of 1976,
and the required waiting period has expired. Management does not anticipate
making any further announcements concerning this matter until a definitive
agreement has been reached or a decision to terminate the discussions has been
made.
17
<PAGE> 20
NOTE 13: QUARTERLY OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1998 Quarter Ended
- -----------------------------------------------------------------------------------------------------------------------
(Amounts in thousands, except per share data) March 31 June 30 Sept. 30 Dec. 31 Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 94,751 $ 133,377 $ 158,407 $ 160,426 $ 546,961
Gross profit 9,710 24,705 37,553 36,559 108,527
Net income (loss) (2,491) 6,247 15,976 (11,825) (a) 7,907
Net income (loss) per share (b) - diluted (.11) .26 .67 (.49) (a) .33
Net income (loss) per share (b) - basic (.11) .26 .67 (.50) (a) .33
</TABLE>
<TABLE>
<CAPTION>
1997 Quarter Ended
- -----------------------------------------------------------------------------------------------------------------------
(Amounts in thousands, except per share data) March 31 June 30 Sept. 30 Dec. 31 Year
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 90,619 $ 118,437 $ 136,343 $ 127,413 $ 472,812
Gross profit 10,905 22,012 26,458 18,673 78,048
Net income (loss) (638) 5,486 9,264 2,490 16,602
Net income (loss) per share (b) - diluted (.03) .23 .39 .10 .70
Net income (loss) per share (b) - basic (.03) .24 .39 .11 .71
</TABLE>
(a) Includes a charge, net of tax benefit, of $25.2 million, or $1.05 per
share, related to the merger by Vulcan Materials Company as discussed
in Note 1.
(b) The sum of the quarterly net income per share amounts may not equal
the year because quarterly and annual figures are required to be
independently calculated.
18
<PAGE> 21
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
FOR THE ACQUISITION OF CALMAT CO.
The following unaudited pro forma combined financial statements and explanatory
notes reflect the acquisition of CalMat Co. (CalMat) by Vulcan Materials
Company, Inc. (Vulcan). In January 1999, Vulcan completed its $31.00 per share
tender offer for all of the outstanding shares of common stock of 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 Vulcan. The acquisition was
funded by cash on hand and approximately $590 million of commercial paper. It
will be accounted for under purchase accounting, with the purchase price
allocated to the acquired assets and assumed liabilities based on estimated
fair market value.
The pro forma balance sheet assumes that the acquisition was consummated on
December 31, 1998. The pro forma combined statement of earnings for the year
ended December 31, 1998 assumes that the acquisition was consummated on January
1, 1998.
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 the pro forma financial
statements.
The pro forma statement of earnings is not necessarily indicative of the
results of operations of Vulcan had the CalMat acquisition occurred at the
beginning of the period presented, nor is it necessarily indicative of the
results of future operations. These statements should be read in conjunction
with the separate historical financial statements and notes thereto of Vulcan
(incorporated by reference in Vulcan's Annual Report on Form 10-K for the year
ended December 31, 1998) and CalMat included herein.
19
<PAGE> 22
VULCAN MATERIALS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
VULCAN MATERIALS PRO FORMA PRO FORMA
COMPANY AND CALMAT CO AND ADJUSTMENTS COMBINED
SUBSIDIARIES SUBSIDIARIES (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 180,568 $ 5,910 $(160,000)b $ 26,478
Accounts receivable 221,261 106,204 327,465
Inventories 143,680 16,779 1,343 b 161,802
Deferred income taxes 24,923 11,183 14,062 a 50,168
Prepaid expenses 5,949 4,023 9,972
Other 0 6,474 6,474
----------- --------- --------- -----------
Total current assets 576,381 150,573 (144,595) 582,359
INVESTMENTS & LONG
TERM RECEIVABLES 71,034 34,285 (20,758)b 84,561
PROPERTY, PLANT & 0
EQUIPMENT, NET 895,785 455,971 90,000 b 1,441,756
GOODWILL 94,008 49,657 (49,657)b 537,136
443,128 b
OTHER ASSETS 21,403 0 21,403
----------- --------- --------- -----------
$ 1,658,611 $ 690,486 $ 318,118 $ 2,667,215
=========== ========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current debt $ 7,785 $ 37,697 $ 52,500 a $ 687,982
590,000 b
Trade payables and accruals 107,382 47,850 (6,025)a 149,207
Accrued liabilities 96,295 37,256 133,551
----------- --------- --------- -----------
Total current liabilities 211,462 122,803 636,475 970,740
LONG-TERM DEBT 76,533 118,230 10,500 b 205,263
DEFERRED INCOME TAXES 98,472 64,559 24,888 b 187,919
OTHER NON-CURRENT
LIABILITIES 118,444 31,149 149,593
----------- --------- --------- -----------
Total liabilities 504,911 336,741 671,863 1,513,515
----------- --------- --------- -----------
SHAREHOLDERS' EQUITY
Common stock 139,705 23,862 (23,862)b 139,705
Capital in excess of par 0 54,682 (54,682)b 0
Retained earnings 1,588,145 275,201 (275,201)b 1,588,145
----------- --------- --------- -----------
Total 1,727,850 353,745 (353,745) 1,727,850
Less cost of stock in treasury 574,150 0 574,150
----------- --------- --------- -----------
Total shareholders' equity 1,153,700 353,745 (353,745) 1,153,700
----------- --------- --------- -----------
$ 1,658,611 $ 690,486 $ 318,118 $ 2,667,215
=========== ========= ========= ===========
</TABLE>
See notes to unaudited pro forma combined financial statements.
20
<PAGE> 23
VULCAN MATERIALS COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
VULCAN MATERIALS PRO FORMA PRO FORMA
COMPANY AND CALMAT CO AND ADJUSTMENTS COMBINED
SUBSIDIARIES SUBSIDIARIES (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES $ 1,776,434 $ 533,763 $ (20,985)g $ 2,289,212
COST OF GOODS SOLD 1,226,764 438,434 (20,985)g 1,644,213
----------- --------- --------- -----------
GROSS PROFIT ON SALES 549,670 95,329 0 644,999
SELLING, ADMINISTRATIVE &
GENERAL 198,956 47,312 246,268
OTHER OPERATING COSTS 7,851 3,232 13,116 c 24,199
SPECIAL CHARGES 0 26,084 (26,084)a 0
INTEREST EXPENSE 6,782 8,794 35,338 b 49,414
(1,500)d
OTHER INCOME, NET 38,763 13,198 (8,400)f 43,561
----------- --------- --------- -----------
EARNINGS BEFORE
INCOME TAXES 374,844 23,105 (29,270) 368,679
PROVISION FOR
INCOME TAXES 118,936 15,198 (16,159)e 117,975
----------- --------- --------- -----------
NET EARNINGS $ 255,908 $ 7,907 $ (13,111) $ 250,704
=========== ========= ========= ===========
EARNINGS PER SHARE
Basic $ 2.54 $ 2.49
Diluted $ 2.50 $ 2.45
AVERAGE COMMON SHARES OUTSTANDING
Basic 100,854 100,854
Diluted 102,177 102,177
</TABLE>
See notes to unaudited pro forma combined financial statements.
21
<PAGE> 24
VULCAN MATERIALS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
a) To reflect additional borrowings of CalMat used to retire all
outstanding stock options for cash and repayment of certain
obligations, subsequent to year end but prior to closing, associated
with the change in control, summarized as follows:
<TABLE>
<S> <C>
Accounts payable $ (6,025)
Retained earnings (32,413)
Deferred income taxes (14,062)
---------
Bank borrowings $ (52,500)
---------
</TABLE>
b) To record Vulcan's purchase of CalMat for $31.00 per share, or $740
million cash, plus estimated direct acquisition costs of $10 million.
The consideration paid and allocation of the excess purchase price
over the historical net assets acquired is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Consideration paid:
Cash on hand $ 150,000
Commercial paper 590,000
Estimated direct acquisition costs 10,000
---------
750,000
---------
Historical net assets of CalMat:
Historical net assets 353,745
CalMat change of control payments made subsequent to year end
but prior to closing (see "a" above) (32,413)
Historical intangibles and certain other assets of CalMat
without continuing value:
Investments (20,758)
Goodwill (49,657)
---------
250,917
---------
Estimated excess of purchase price over historical net assets acquired $ 499,083
=========
Estimated allocation of excess purchase price over (including fair value adjustments):
Property, plant and equipment (1) $ 90,000
Inventories 1,343
Long-term debt (10,500)
Deferred income taxes (2) (24,888)
Goodwill 443,128
---------
$ 499,083
=========
</TABLE>
(1) Entire estimated fair value adjustment is related to
non-depreciable real estate.
(2) Deferred income taxes are primarily attributable to the
difference in the income tax and financial reporting
basis of assets arising from the fair market value
adjustments.
22
<PAGE> 25
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS ADJUSTMENTS
a) To eliminate various acquisition costs incurred by CalMat during 1998,
principally related to certain employment agreements and benefit
plans.
b) To record interest expense associated with $642.5 million of
acquisition related debt, assuming an interest rate of 5.5% (Vulcan's
estimated weighted average borrowing rate during 1998).
c) To record amortization of goodwill ($393 million) on a straight-line
basis over its estimated thirty-year life.
d) To record amortization of debt premium over the remaining average
eight-year life of the CalMat debt assumed.
e) To tax effect the pro forma adjustments described above, excluding the
amortization of goodwill and certain costs associated with the
employment agreements referred to in "a" above.
f) To eliminate interest income associated with the cash on hand used to
partially fund the acquisition, assuming an interest rate of 5.25%
(Vulcan's estimated weighted average rate during 1998).
g) To reclass transportation costs to conform with Vulcan's accounting
policies
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VULCAN MATERIALS COMPANY
/s/ William F. Denson, III
----------------------------------------
William F. Denson, III
Senior Vice President, Law and Secretary
Date: March 19, 1999
24
