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SECURITIES AND EXCHANGE COMMISSION |
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(Mark One) |
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 |
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o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 |
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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:
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Shares outstanding |
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VULCAN MATERIALS COMPANY QUARTER ENDED MARCH 31, 2000 Contents |
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Page No. |
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Item 1. |
Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Results |
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Item 3. |
Quantitative and Qualitative Disclosures About |
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Item 1. |
Legal Proceedings |
12 |
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Item 6. |
Exhibits and Reports on Form 8-K |
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PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Vulcan Materials Company |
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Consolidated Balance Sheets (Condensed and unaudited) |
March 31 |
December 31 |
March 31 |
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Assets Accounts and notes receivable: Accounts and notes receivable, gross Less: Allowance for doubtful accounts Accounts and notes receivable, net Inventories Finished products Raw materials Products in process Operating supplies and other Inventories Deferred income taxes Prepaid expenses Total current assets Investments and long-term receivables Property, plant and equipment: Property, plant and equipment, cost Less: Reserve for depr., depl., & amort. Property, plant and equipment, net Goodwill Deferred charges and other assets Total Liabilities and Shareholders' Equity Current maturities of long-term debt Notes payable Trade payables and accruals Other current liabilities Total current liabilities Long-term debt Deferred income taxes Other noncurrent liabilities Shareholders' equity Total Current ratio |
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See accompanying Notes to Financial Statements
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Vulcan Materials Company |
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(Thousands of Dollars) |
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Three Months Ended |
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(Condensed and unaudited) |
2000 |
1999 |
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Net Earnings |
$ 23,261 |
$ 26,365 |
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Average common shares outstanding, |
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Cash dividends per share |
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Depreciation, depletion and |
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See accompanying Notes to Financial Statements
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Vulcan Materials Company |
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(Thousands of Dollars) |
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(Condensed and unaudited) |
2000 |
1999 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization (Increase) decrease in assets before effects of business acquisitions Increase (decrease) in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities |
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48,968 5,810 (10,394) (1,977) 68,772 |
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Purchases of property, plant and equipment Payment for business acquisitions, net of acquired cash Proceeds from sale of property, plant and equipment Investment in nonconsolidated subsidiaries Net cash used for investing activities |
-0- 4,212 (3) (93,001) |
(767,181) 4,424 -0- (850,918) |
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bank lines of credit Payment of short-term debt Proceeds from issuance of long-term debt Purchases of common stock Dividends paid Contributions from minority interest of consolidated subsidiary Other, net Net cash provided by (used for) financing activities |
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See accompanying Notes to Financial Statements
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. 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.
3. New Accounting Standards
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). In May 1999, the FASB amended SFAS No. 133 deferring the effective date to all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company is currently evaluating SFAS 133 and has not yet determined its impact on the Company's consolidated financial statements.
4. 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):
SEGMENT FINANCIAL DISCLOSURE
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Three Months Ended |
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2000 |
1999 |
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NET SALES |
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Mar. 31, 2000 |
Mar. 31, 1999 |
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IDENTIFIABLE ASSETS |
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5. Supplemental Cash Flow Information
Supplemental information referable to the Consolidated Statements of Cash Flows for the three months ended March 31 is summarized below (amounts in thousands).
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2000 |
1999 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
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Cash paid during the period for: |
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Liabilities and long-term debt assumed in business |
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Item 2. Management's Discussion and Analysis of Results |
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 earnings are earnings before interest and income taxes and after allocation of corporate expenses and income, and after assignment of equity income to the segments with which it is related in terms of products and services. Allocations are based
on average capital employed 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 and uncertainties detailed in the Company's periodic reports.
RESULTS OF OPERATIONS
First Quarter 2000 as Compared with First Quarter 1999
The Company's first quarter 2000 sales of $515.0 million were up 7% from the 1999 first quarter record of $482.2 million. Pretax earnings totaled $34.8 million, and net earnings were $23.3 million or $.23 per share (diluted). The comparable results for
the first quarter of 1999 were $39.8 million, $26.4 million and $.26 per share, respectively.
Construction Materials reported record first quarter sales of $366.3 million, up 6% from the 1999 first quarter of $346.6 million. Aggregates revenues were up 9% resulting from increases in volumes and pricing of 5% and 4%, respectively. Chemicals' first
quarter sales of $148.7 million were up 10% from the prior year's $135.6 million.
Earnings before interest and income taxes were $44.7 million as compared to $50.4 million in the same period last year. The Construction Materials segment earnings of $37.7 million were down 5% from first quarter 1999. However, excluding the impact of a
positive legal settlement in the prior year, earnings were up almost 7% as lower operating costs neutralized the impact of higher costs for oil products. The Chemicals segment's reported first quarter earnings of $7.0 million were down $3.8 million from
the 1999 level due to higher raw materials and energy costs and an outage at the Geismar complex. This outage was necessary to link the new joint venture chloralkali plant with our existing facilities.
Selling, administrative and general expenses of $54.9 million for the first quarter of 1999 increased slightly from the 1999 level of $54.2 million.
Other operating costs of $6.0 million increased $2.0 million from the prior year. This increase reflects increased amortization of goodwill associated with the CalMat acquisition resulting from the purchase accounting adjustment booked in the fourth
quarter of 1999.
Other income, net of other charges, was $6.4 million as compared with $10.5 million for the first quarter of 1999. Results for the first quarter of 1999 included a positive legal settlement which had no counterpart in 2000.
The effective tax rate for the quarter was 33.1%, down slightly from last year's first quarter rate of 33.8%.
On April 18, 2000, 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:
"Results for the quarter provided solid evidence of the underlying strength of our businesses. We are confident that for the full year we will achieve record earnings in line with our earlier expectations.
"Construction Materials benefited from strong construction activity in both the public and private sectors. Compared to last year, aggregates sales volumes increased 5 percent, with prices up 4 percent. The sharp gain in earnings generated by the higher
aggregates revenues was masked by a 3 cents per share favorable legal settlement recorded in the first quarter of 1999 and a 4 cents per share negative impact of higher costs for oil products this year. While higher oil prices may persist in 2000, the
impact on quarterly earnings comparisons should be less significant as the year progresses. With the benefits of TEA-21 beginning to be realized, the outlook for construction activity and aggregates demand is excellent. As a result, Construction Materials
is on track to deliver its seventh consecutive year of record earnings.
"As expected, Chemicals benefited from continued improvements in chloralkali prices. However, in comparison to the first quarter of 1999, the resulting earnings gains were substantially offset by higher raw materials and energy costs. In addition, the
quarterly earnings comparison was adversely impacted 2 cents per share due to an outage during the last nine days of March at our Geismar complex. This was necessary to link the new joint venture chloralkali plant with our existing facilities. We also
took this opportunity to conduct major maintenance which otherwise would have occurred later in 2000.
"Looking forward, industry experts continue to predict improvements in chloralkali prices driven mainly by strong demand for chlorine. As most of our chlorine goes into higher value downstream products, chlorine price increases typically have a less
immediate impact on our results than do similar changes for caustic soda. Caustic soda prices have not yet risen to levels predicted by industry experts, who expect more substantial improvement in the latter part of the year. Nonetheless, Chemicals'
earnings for 2000 should be sharply higher, approximately doubling 1999 results.
"Because the performance in both business segments is improving, we continue to project record earnings for the Company in 2000, consistent with our earlier expectations."
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $309.1 million at March 31, 2000, $5.6 million over the 1999 year-end amount of $303.5 million. Working capital at March 31, 2000 increased $34.0 million from the same date last year.
The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.5 as of March 31, 2000. This compares to the 1.6 ratio at year-end 1999 and the 1.1 ratio at March 31, 1999. The ratio at March 31, 1999
resulted from the then short term financing of the CalMat acquisition.
Cash Flows
Net cash provided by operating activities totaled $69.4 million in the first quarter of 1999, slightly up from the $68.8 million generated in the same period last year. Cash used for investing activities was $93.0 million as compared with the first
quarter 1999 total of $850.9 million. This amount for the first quarter of 1999 reflects the acquisition of CalMat. Net cash used by financing activities totaled $8.0 million, as compared to the 1999 net cash provided by financing activities of $650.8
million. The 1999 cash provided by financing resulted from the financing of the CalMat acquisition.
Cash and cash equivalents, which totaled $21.2 million at March 31, 2000, were down $28.0 million from a year ago.
Short-term Borrowings
Short-term borrowings of $91.5 million as of March 31, 2000 consisted of notes payable to banks totaling $9.7 million, commercial paper of $81.6 million, and other notes payable of $.2 million. The prior year amount consisted of notes payable to banks of
$2.3 million and commercial paper of $247.8 million.
Long-term Obligations
As of March 31, 2000, long-term obligations were 28.1% of long-term capital and 52.6% of shareholders' equity. The corresponding 1999 percentages were 31.7% and 59.3%.
Common Stock Transactions
For a number of years, the Company has regularly purchased its own shares in the open market under its long-standing share purchase program. Factors considered in such purchases include cash flow generation, alternative investment opportunities, debt
levels, and share price. The Company purchased no shares of common stock in the first quarter of 2000. Purchases of common stock in the first quarter of 1999 totaled 1,200 shares previously owned by CalMat and purchased as part of the acquisition at a
total cost of $49.4 thousand, equal to an average price of $41.19 per share. The amount, if any, of future share purchases will be determined by management from time to time based upon various factors, including those listed above.
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Item 3. Quantitative and Qualitative Disclosure |
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, 2000 and 1999 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, 2000 of approximately $1.6 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, 2000, the estimated fair value of these debt instruments was $670.2 million. The effect of a hypothetical decline in the market interest rate of 1% would increase the fair value of the liability by approximately $34.6 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in the Company's 1999 Form 10-K, in July 1996, the Company received a copy of a Complaint filed by Amoco Chemical Company ("Amoco") in the U.S. District Court (Southern District of Texas); the Company is included among the more than
100 named defendants. The Complaint alleges that certain of the defendants are present or former owners or operators of a Texas smelting facility most recently operated by the now bankrupt Tex Tin Corporation (the "Tex Tin Site") and that the remainder of
the defendants, including the Company, generated Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") hazardous substances which were sent to the Tex Tin Site. The Complaint further alleges that plaintiff, Amoco, together with
defendant Tex Tin Corporation, entered into a March 1990 Administrative Consent Order ("ACO") with the Environmental Protection Agency ("EPA"), and that under the ACO, Amoco conducted certain remedial investigations until May 1993, during which time the
Tex Tin Site was included on the National Priorities List ("NPL") as a Superfund site. The Tex Tin Site was removed then from the NPL by order of the U.S. Court of Appeals (D.C. Circuit). The action brought by Amoco asserts that Amoco spent over $8
million in conducting these past remedial investigations, that Amoco will incur costs in the future relating to the Tex Tin Site, and that all such costs, together with pre- and post-judgment interest, are CERCLA response costs for which defendants are
liable to Amoco, either jointly and severally or in contribution. The Company had previously received a September 1989 CERCLA §104(e) Notice Letter from EPA-Region 6 asserting that the Company is a Potentially Responsible Person ("PRP") liable for remediation of the Tex Tin Site and reimbursement of EPA oversight costs. In September
1998, the Tex Tin Site was again placed on the NPL, and in May 1999, a Record of Decision ("ROD") was issued by the EPA proposing a remedy for the Tex Tin Site with an estimated total cost of approximately $28 million. At the direction of the Court, the
parties to this litigation, including the Company, were participants in mediated negotiations, both as to settlement of the litigation brought by Amoco and a related CERCLA settlement under which the remediation of the Tex Tin Superfund Site would be
effectuated. The Company participated in the mediation with 15 other companies on a joint defense basis.
Now, the Company and other settling defendants, including agencies of the United States, are signatories to a Consent Decree which is to be lodged in early May 2000, with the U.S. District Court, Southern District of Texas, Galveston Division. Assuming
entry of the Consent Decree upon expiration of the public comment period, these matters will be settled under the Consent Decree: (i) litigation brought by Amoco for recovery of damages; (ii) claims for past CERCLA response costs respectively incurred by
EPA and the State of Texas in connection with the Tex Tin Site; and, (iii) claims of the trustees for natural resource damages relating to the Tex Tin Site. In addition and pursuant to the terms and conditions of the Consent Decree, the remaining cleanup
of the Tex Tin Site will be funded and/or conducted by the settling defendants, including the Company, and future CERCLA response costs which will be incurred by the EPA and the State of Texas in connection with oversight of the remediation will be
reimbursed by the settling defendants, including the Company. Under the settlement to be effectuated by the Consent Decree, the settling defendants, including the Company, will receive statutory contribution protection under CERCLA and covenants not to
sue from EPA and the State of Texas. Assuming that cleanup of the Tex Tin Site can be completed at or near the costs currently estimated, the reserve accrued by the Company and referable to this matter is adequate in amount to fund the obligations of the
Company under the Consent Decree.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended March 31, 1999.
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 April 27, 2000
E. A. Khan
Vice President, Controller and Chief Information Officer
P. J. Clemens, III
Executive Vice President - Finance and Administration
and Treasurer
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