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Previous: WADDELL & REED ADVISORS RETIREMENT SHARES INC, POS AMI, EX-99.B(P)RSCODE, 2000-10-30 |
Next: VULCAN MATERIALS CO, 10-Q, EX-27, 2000-10-30 |
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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 SEPTEMBER 30, 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 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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(Condensed and unaudited) |
September 30 |
December 31 |
September 30 |
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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 Minority interest 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 |
Nine Months Ended |
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(Condensed and unaudited) |
2000 |
1999 |
2000 |
1999 |
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Net earnings |
$ 85,950 |
$ 85,784 |
$ 185,272 |
$ 174,875 |
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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 in assets before effects of business acquisitions Increase (decrease) in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities |
165,256 (112,045) 27,200 (9,813) 255,870 |
152,463 (95,648) (8,681) (2,053) 220,956 |
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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 Withdrawal of earnings from nonconsolidated companies Net cash used for investing activities |
(36) 54,290 (3) 7,040 (215,445) |
(740,270) 64,084 -0- 4,020 (905,321) |
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bank lines of credit Payment of short-term debt Payment of long-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. In June 2000, the FASB further amended SFAS No. 133 addressing a limited number of implementation issues. The Company has appointed a team to implement SFAS 133. This team has been implementing SFAS 133, educating both financial and
non-financial personnel, inventorying embedded derivatives and addressing various other SFAS 133 related issues. We will adopt SFAS 133 and the corresponding amendments on January 1, 2001. SFAS 133, as amended, is not expected to have a material impact on
the Company's consolidated results of operations, financial position or cash flows.
4. Segment Data
The Company's reportable segments are Construction Materials and Chemicals and are organized around their products and services. 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 and income to the segments; (c) does
not reflect interest revenue or expense; and (d) is before income taxes. Allocations are based on average capital employed and customer sales.
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 |
Nine Months Ended |
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2000 |
1999 |
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1999 |
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NET SALES |
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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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 nine months ended September 30 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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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, weather conditions, pricing, the cyclical nature of the chemicals industry, energy costs, cost of hydrocarbon-based raw materials, and other risks and uncertainties detailed in the Company's periodic reports.
RESULTS OF OPERATIONS
Third Quarter 2000 as Compared with Third Quarter 1999
The Company's third quarter 2000 sales of $681.2 million were up 4% from the 1999 record of $656.4 million. Pretax earnings totaled $125.6 million and net earnings were $86.0 million, or $0.84 per share (diluted). The comparable results for the third
quarter of 1999 were $125.1 million, $85.8 million and $0.84 per share, respectively. The earnings comparison was negatively impacted nearly $0.10 per share from continuing increases in costs associated with diesel fuel, natural gas and hydrocarbon-based
raw materials.
Construction Materials reported record third quarter sales of $531.8 million, up nearly 2% from the 1999 third quarter of $523.0 million. For aggregates, our principal product, pricing improved 3% while volumes declined 2% overall and 3% excluding recent
acquisitions. This volume decline resulted from weaker private construction activity and delays in TEA-21 project implementation in some states. Chemicals' third quarter sales of $149.4 million were up 12% from the prior year's $133.4 million resulting
from improved pricing and volume for chloralkali products.
Earnings before interest and income taxes were $134.9 million as compared to $137.7 million in the same period last year. The Construction Materials segment reported third quarter earnings of $131.4 million, down 4% from third quarter 1999's record $137.0
million. Continuing improvements in aggregates pricing and non-energy related production costs were more than offset by approximately $8.0 million of increased costs for oil-based products and the impact of the 2% decline in aggregates shipments. The
Chemicals segment reported third quarter earnings of $3.5 million, up $2.8 million from the prior year's third quarter of $0.7 million. Several factors offset most of Chemicals' earnings gain resulting from increased sales, as follows: higher costs for
natural gas and hydrocarbon-based raw materials, significant start-up costs for the new Chloralkali joint venture and lower earnings in Performance Chemicals.
Selling, administrative and general expenses of $54.8 million were up 13% from third quarter 1999, due mainly to last year's non-recurring credits referable to stock-based compensation and to this year's additional cost to support the new Chloralkali
joint venture.
Minority interest income of $3.9 million reflected the minority partner's share of the Chloralkali joint venture's pretax loss.
Other income, net of other charges of $11.3 million was down $1.8 million from the 1999 level.
Interest expense of $10.5 million for the third quarter of 2000 decreased $3.2 million from the third quarter of 1999 due to a $117 million reduction in debt and the capitalized interest credit associated with the Chloralkali joint venture.
Year-to-Date Comparisons as of September 30, 2000 and September 30, 1999
Year-to-date, the Company's sales were a record while net earnings and earnings per share both increased 6% from the first nine months of 1999. Net earnings were $185.3 million, or $1.82 per share (diluted), as compared with 1999 earnings and earnings per
share of $174.9 million and $1.71 per share.
Sales of $1.9 billion for the first nine months of 2000 increased 6% from the comparable 1999 total of $1.8 billion. Construction Materials' sales of $1,412.1 million were up nearly 5% from 1999's $1,349.5 million. Aggregates pricing increased 3.5% while
volumes increased 1%, with new facilities accounting for approximately one-half of the volume increase. Chemicals' sales of $449.2 million were up 12% from 1999's $400.7 million.
Earnings before interest and income taxes were $301.2 million as compared to $295.0 million in the same period last year. At $288.8 million, earnings in the Construction Materials segment increased 2% from the prior year's $283.6 million. Year-to-date the
Chemicals segment reported earnings of $12.4 million, up $1.0 million from last year's earnings of $11.4 million. Earnings at both segments were negatively impacted by the higher costs for oil and natural gas-based products.
Selling, administrative and general expenses reflected an 8% increase when compared to the first nine months of 1999. This increase resulted primarily from increased costs within the Chemicals segment, including the additions to support the new
Chloralkali joint venture, higher provisions for charitable contributions and higher incentive compensation expense.
Other operating costs of $18.7 million increased $3.8 million from the prior year. This increase reflects higher amortization of goodwill.
Minority interest income of $6.3 million is referable to the minority partner's share of the Chloralkali joint venture's pretax loss.
Other income, net of other charges, was $26.2 million as compared with $29.2 million for 1999.
Interest expense of $32.7 million declined $6.2 million from 1999 due to both the reduction in debt and the capitalized interest credit associated with the Chloralkali joint venture.
On October 19, 2000, Donald M. James, Chairman and Chief Executive Officer, made certain statements concerning the Company's earnings outlook, as follows:
"The underlying operating strength of our businesses allowed us to overcome a nearly ten cents per share negative earnings impact from continuing increases in costs associated with diesel fuel, natural gas and hydrocarbon-based raw materials.
"In Construction Materials, we continued to realize improvements in aggregates pricing and non-energy related production costs. However, these improvements were more than offset by approximately $8 million of increased costs for oil-based products and the
impact of a 2 percent decline in aggregates shipments. Weaker private construction activity and delays in TEA-21 project implementation in some states affected shipments. Aggregates pricing improved 3 percent. For the quarter, Construction Materials
recorded earnings of $131 million on record sales of $532 million. Comparable 1999 results were $137 million in earnings on $523 million in sales.
"We are pleased with progress at CalMat where improvements in aggregates pricing and substantial reductions in operating costs have more than offset the negative impact of higher diesel and liquid asphalt costs. We are confident that we will also be able
to realize significant improvements in production costs at our new Tarmac operations. As previously announced, we purchased the South Carolina and Pennsylvania aggregates operations of Tarmac on October 3. We expect to complete this transaction with the
purchase of Tarmac's Virginia aggregates operations next week.
"Our Chemicals segment reported third quarter sales and earnings of $149 million and $3.5 million, respectively, versus prior year sales of $133 million and earnings of $0.7 million. Both sales and earnings benefited from improved pricing and volume for
chloralkali products. Most of the earnings gain resulting from increased sales was offset by higher costs for natural gas and hydrocarbon-based raw materials, significant start-up costs associated with our new joint venture chloralkali facility, and lower
earnings at Performance Chemicals.
"We are pleased that our new joint venture chloralkali facility is now fully operational. The joint venture's new EDC facility is expected to be on line in the fourth quarter. Production for both plants is fully committed.
"With regard to earnings for 2000, our Construction Materials business is on track to achieve a seventh consecutive year of record earnings. While improving chloralkali markets are leading to higher caustic soda pricing, our Chemicals business continues
to be impacted by increasing costs for energy and hydrocarbon-based raw materials. Since the full financial impact of caustic pricing improvements typically lags the announced effective date by several months, higher energy and raw material costs will
more than offset caustic soda pricing improvements in the fourth quarter. Hence, Chemical's earnings for 2000 are expected to fall below 1999's level.
"Overall we remain optimistic that we will approximate the record earnings achieved in 1998."
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $412.4 million at September 30, 2000, $108.9 million over the 1999 year-end amount of $303.5 million. Working capital at September 30, 2000 increased $40.5 million from the same date last year.
Both of these increases resulted primarily from increases in receivables attributable to the higher revenues.
The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.9 as of September 30, 2000. This compares to the 1.6 ratio at year-end 1999 and the 1.4 ratio at September 30, 1999. The increase in the
current ratio from the prior year resulted primarily from the $111.0 million reduction in commercial paper borrowing.
Cash Flows
Net cash provided by operating activities totaled $255.9 million for the first nine months of 2000, up $34.9 million from the $221.0 million generated in the same period last year. This increase resulted primarily from an increase in deferred income
taxes. Cash used for investing activities was $215.4 million as compared with the year-to-date 1999 total of $905.3 million. The amount for 1999 reflects the acquisition of CalMat. Net cash used for financing activities totaled $24.7 million. In 1999, the
Company generated $588.4 million of cash provided by financing activities due primarily to financing referable to the CalMat acquisition.
Cash and cash equivalents, which totaled $68.5 million at September 30, 2000, were down $16.1 million from a year ago.
Short-term Borrowings
Short-term borrowings of $109.3 million as of September 30, 2000 consisted of notes payable to banks totaling $10.3 million and commercial paper of $99.0 million. The prior year amount, $222.6 million, consisted of notes payable to banks of $2.1 million,
other notes payable of $.2 million and commercial paper of $220.3 million.
Long-term Obligations
As of September 30, 2000, long-term obligations were 25.9% of long-term capital and 46.9% of shareholders' equity. The corresponding 1999 percentages were 29.7% and 53.3%.
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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 September 30, 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 September 30, 2000 of approximately $1.4 million.
The Company is exposed to interest rate risk due to its various long-term debt instruments. Because substantially all of this debt is at fixed rates, a decline in interest rates would result in an increase in the fair market value of the liability. At
September 30, 2000, the estimated fair market value of these debt instruments was $669.8 million as compared to a book value of $683.3 million. The effect of a hypothetical decline in interest rates of 1% would increase the fair market value of the
liability by approximately $32.9 million.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3(ii) - By-Laws of the Company, as amended
Exhibit 27 - Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on October 13, 2000 pursuant to which the Company reported under item 5 the acquisition of the aggregates operations of Tarmac America, Inc. in the states of South Carolina, Pennsylvania and Maryland.
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 October 30, 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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