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SECURITIES AND EXCHANGE COMMISSION |
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_____________________________ |
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation) |
(Commission file number) |
(I.R.S. Employer Identification No.) |
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1200 Urban Center Drive |
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Registrant's telephone number including area code |
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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
Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 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, 2004
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Page No. |
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Financial |
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Item 3. |
Quantitative and Qualitative Disclosures About |
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Item 4. |
27 |
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Item 1. |
28 |
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Item 2 |
Changes in Securities, Use of Proceeds and Issuer |
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Item 6. |
30 |
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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 Medium-term investments 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 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 Minority interest in a consolidated subsidiary Other commitments and contingencies (Notes 11 & 15) Shareholders' equity Total Current ratio |
$ 1,302 48,000 157,606 169,485 376,393 607,158 341,949 268,341 95,277 1,946,936 $ 3,636,054 2.8 |
$ 249,721 29,000 129,361 134,870 542,952 607,654 338,913 252,518 91,987 1,802,836 $ 3,636,860 1.9 |
$ 284,783 30,500 138,307 132,197 585,787 608,188 361,312 248,002 91,138 1,765,173 $ 3,659,600 1.8 |
See accompanying Notes to Condensed Consolidated Financial Statements
3
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Vulcan Materials Company |
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(Amounts in thousands, except per share data) |
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Three Months Ended |
Nine Months Ended |
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(Condensed and unaudited) |
2004 |
2003 |
2004 |
2003 |
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Net earnings |
$ 98,962 |
$ 99,149 |
$ 201,753 |
$ 137,624 |
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Earnings from continuing operations before cumulative effect of accounting change Discontinued operations Cumulative effect of accounting change Net earnings per share Diluted earnings per share: Earnings from continuing operations before cumulative effect of accounting change Discontinued operations Cumulative effect of accounting change Net earnings per share |
$ 0.97 - -- -- $ 0.97 $ 0.96 - -- -- $ 0.96 |
$ 0.92 0.05 -- $ 0.97 $ 0.91 0.05 -- $ 0.96 |
$ 1.98 (0.01) -- $ 1.97 $ 1.96 (0.01) -- $ 1.95 |
$ 1.60 (0.06) (0.19) $ 1.35 $ 1.58 (0.06) (0.18) $ 1.34 |
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Basic Assuming dilution |
102,502 103,659 |
101,859 102,805 |
102,361 103,513 |
101,812 102,583 |
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Depreciation, depletion, accretion and amortization |
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Effective tax rate |
34.7% |
24.8% |
30.7% |
27.1% |
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Vulcan Materials Company |
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Nine Months Ended |
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(Condensed and unaudited) |
2004 |
2003 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion, accretion and amortization Cumulative effect of accounting change Increase in assets before effects of business acquisitions Increase in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities |
191,047 - -- (100,420) 77,144 (5,893) 363,631 |
208,097 18,811 (102,566) 106,190 (16,907) 351,249 |
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Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Payment for business acquisitions, net of acquired cash (Increase) decrease in medium-term investments Change in investments and long-term receivables Net cash used for investing activities |
26,665 (29,433) 4,974 661 (139,150) |
48,387 (2,493) (4,972) (5,075) (103,930) |
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of credit Payment of short-term debt and current maturities Payment of long-term debt Dividends paid Proceeds from exercise of stock options Other, net Net cash used for financing activities |
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See accompanying Notes to Condensed Consolidated Financial Statements
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Our accompanying condensed consolidated 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of our 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 our latest annual report on Form 10-K.
Due to the divestiture of the components of the Chemicals segment's Performance Chemicals business unit (Note 3), the operating results of this business unit have been presented as discontinued operations in our accompanying Condensed Consolidated Statements of Earnings.
Minority interest reflected in the accompanying Condensed Consolidated Statements of Earnings consists of the minority partner's share of the Chloralkali joint venture's earnings or loss. We are the majority partner of this joint venture with a 51% interest and as such our consolidated financial statements include the accounts of this joint venture.
Certain items previously reported in specific financial statement captions have been reclassified to conform to this presentation.
2. Stock-based Compensation
The pro forma effect on net earnings and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-based Compensation" (FAS 123), and SFAS No. 148, "Accounting for Stock-based Compensation - Transition and Disclosure, an Amendment of FASB Statement No. 123" (FAS 148), to stock-based employee compensation for the three months and nine months ended September 30 is illustrated below (amounts in thousands, except per share data):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Net earnings, as reported |
$ 98,962 |
$ 99,149 |
$ 201,753 |
$ 137,624 |
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Pro forma net earnings |
$ 97,894 |
$ 98,084 |
$ 198,548 |
$ 134,239 |
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Earnings per share: Diluted, as reported Diluted, pro forma |
$0.96 $0.94 |
$0.96 $0.95 |
$1.95 $1.92 |
$1.34 $1.31 |
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The impact related to discontinued operations was immaterial to our Condensed Consolidated Statements of Earnings.
3. Discontinued Operations
During 2003 we sold our Performance Chemicals businesses resulting in the classification of their financial results as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings. The Performance Chemicals business unit consisted of specialty chemicals production and services businesses and was one of the two business units within our Chemicals segment.
Operating results of our discontinued operations which excludes gain on disposal were as follows (in millions of dollars):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Net sales |
$ 0.0 |
$ 5.2 |
$ 0.8 |
$ 62.5 |
Assets and liabilities of our discontinued operations were not considered material for separate presentation in the accompanying Condensed Consolidated Balance Sheets. The major classes of assets and liabilities of our discontinued operations for the periods presented were as follows (in millions of dollars):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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Current assets |
$ 0.9 |
$ 8.4 |
$ 26.3 |
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Current liabilities |
$ 2.1 |
$ 4.5 |
$ 8.2 |
4. Earnings Per Share (EPS)
We report two separate earnings per share numbers, basic and diluted. These are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS) as detailed below (in thousands of shares):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Weighted-average common shares outstanding |
102,502 |
101,859 |
102,361 |
101,812 |
Antidilutive common stock equivalents are not included in our earnings per share calculations. The number of antidilutive common stock equivalents is summarized as follows (in thousands of shares):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Antidilutive common stock equivalents |
7 |
4,095 |
6 |
4,100 |
5. Effective Tax Rate
In accordance with accounting principles generally accepted in the United States of America, it is our practice for the end of each interim reporting period to make a best estimate of the effective tax rate expected for the full fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis. In addition, during the third quarter of 2004 we recorded an increase in estimated income tax liability for open audit years.
6. Derivative Instruments
Natural gas used in our Chemicals segment is subject to price volatility caused by supply conditions, political and economic variables, and other unpredictable factors. We use over-the-counter commodity swap and option contracts to manage the volatility related to future natural gas purchases. We have designated these instruments as effective cash flow hedges in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). Accordingly, the fair value of the open contracts, which extend through March 2005, has been reflected as a favorable component of accumulated other comprehensive income of $2,307,000 less income tax expense of $867,000 in our consolidated financial statements as of September 30, 2004. If market prices for natural gas remained at the September 30, 2004 level, earnings of $2,307,000 would be classified into pretax earnings within the next 12 months. Comparatively, as of September 30, 2003, our consolidated financial statements reflected the fair val
ue of the open contracts as a component of accumulated other comprehensive income of $1,865,000, less income tax expense of $702,000.
In the quarter ended December 31, 2003, we entered into an interest rate swap agreement for a stated (notional) amount of $50,000,000 under which we pay the six-month London Interbank Offered Rate (LIBOR) plus a fixed spread and receive a fixed rate of interest of 6.40% from the counterparty to the agreement. We have designated this instrument as an effective fair value hedge in accordance with FAS 133. Accordingly, the mark-to-market value of the hedge, which will terminate February 1, 2006, has been reflected in our Condensed Consolidated Balance Sheets with an adjustment to record the underlying hedged debt at its fair value. As of September 30, 2004, the estimated fair value of our interest rate swap agreement reflected projected payments of $25,000.
There was no impact to earnings due to hedge ineffectiveness during the quarters and nine months ended September 30, 2004 and 2003.
7. Comprehensive Income
Comprehensive income includes charges and credits to equity from nonowner sources. Comprehensive income comprises two subsets: net earnings and other comprehensive income (loss). Our other comprehensive income (loss) includes fair value adjustments to cash flow hedges pertaining to our commodity swap and option contracts to purchase natural gas. Total comprehensive income is detailed below (in thousands of dollars):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Net earnings |
$ 98,962 |
$ 99,149 |
$ 201,753 |
$ 137,624 |
8. Benefit Plans
The following tables set forth the components of net periodic benefit cost (in thousands of dollars):
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Components of Net Periodic Benefit Cost: |
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Net periodic benefit cost |
$ 1,678 |
$ 1,807 |
$ 5,033 |
$ 4,784 |
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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Components of Net Periodic Benefit Cost: |
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Net periodic benefit cost |
$ 2,685 |
$ 1,820 |
$ 8,373 |
$ 5,242 |
We also sponsor unfunded, nonqualified pension plans. The pension expense for these plans was as follows: three months ended September 30, 2004 - $744,000 and 2003 - $777,000; and nine months ended September 30, 2004 - $2,233,000 and 2003 - $2,316,000.
We previously disclosed in the notes to our financial statements for the quarter ended June 30, 2004 our expectation to contribute the estimated maximum deductible pension contribution of $7,000,000 in 2004. Our current expectations are that the estimated maximum deductible pension contribution is $6,363,000 and to contribute said amount in the fourth quarter of 2004. During the nine months ended September 30, 2004 and 2003, no contributions were made to the pension plans.
9. Long-term Debt
Long-term debt is detailed below (in thousands of dollars):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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6.40% 5-year notes issued 2001* |
$ 239,975 |
$ 240,000 |
$ 240,000 |
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Total debt excluding notes payable |
$ 608,460 |
$ 857,375 |
$ 892,971 |
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Total long-term debt |
$ 607,158 |
$ 607,654 |
$ 608,188 |
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Estimated fair value of long-term debt |
$ 655,543 |
$ 675,249 |
$ 684,268 |
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10. Accounting Change
On January 1, 2003, we adopted SFAS No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). FAS 143 applies to legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.
FAS 143 requires recognition of a liability for an asset retirement obligation in the period in which it is incurred, at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.
Prior to the adoption of FAS 143, we accrued the estimated cost of land reclamation over the life of the reserves based on tons sold in relation to total estimated tons. With the adoption of FAS 143, we recorded all asset retirement obligations, at estimated fair value, for which we have legal obligations for land reclamation. Essentially all of these asset retirement obligations related to our underlying land parcels, including both owned properties and mineral leases. Adoption of this standard resulted in an increase in long-term assets of $44,341,000; an increase in long-term liabilities of $63,152,000; and a cumulative effect of adoption that reduced shareholders' equity and 2003 net earnings by $18,811,000. Additionally, FAS 143 results in ongoing costs related to the depreciation of the assets and accretion of the liability. For the three and nine months ended September 30, 2004, we recognized FAS 143 related operating costs totaling $3,167,000 and $8,951,000, respectively. For the three and nine month
s ended September 30, 2003, we recognized FAS 143 related operating costs totaling $2,554,000 (including $7,000 related to discontinued operations) and $7,355,000 (including $68,000 related to discontinued operations), respectively. With the exception of the costs related to discontinued operations, all FAS 143 related operating costs are reported within cost of goods sold in our accompanying Condensed Consolidated Statements of Earnings.
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Our asset retirement obligations are reported in our accompanying Condensed Consolidated Balance Sheets within the total for other noncurrent liabilities. A reconciliation of the carrying amount of our asset retirement obligations since adoption is as follows (in thousands of dollars):
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Asset retirement obligations as of December 31, 2002 |
$ -- |
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Cumulative effect adjustment |
99,259 |
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Asset retirement obligations as of September 30, 2003 |
$ 108,763 |
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Liabilities incurred |
-- |
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Asset retirement obligations as of December 31, 2003 |
$ 107,683 |
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Liabilities incurred |
40 |
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Asset retirement obligations as of September 30, 2004 |
$ 111,497 |
The $99,259,000 cumulative effect portion of the asset retirement obligations during the 2003 adoption of FAS 143 was partially offset by amounts previously accrued under generally accepted accounting principles in effect prior to the issuance of FAS 143.
11. Guarantees
We have guarantee contracts in the form of irrevocable standby letters of credit. Our commercial banks issue these standby letters of credit to secure our obligations to pay or perform when required to do so pursuant to the requirements of an underlying agreement or the provision of goods and services. The standby letters of credit listed below are cancelable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. Since banks consider letters of credit as contingent extensions of credit, we are required to pay a fee until they expire or are cancelled.
Our standby letters of credit as of September 30, 2004 are summarized in the table below (in thousands of dollars):
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Amount |
Term |
Maturity |
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Risk management requirement for insurance claims |
$ 19,437 |
One year |
Renewable annually |
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Total standby letters of credit |
$ 26,002 |
12. Acquisitions
For the nine months ended September 30, 2004, we have acquired three aggregates facilities in Tennessee and one aggregates facility in Virginia for a cost of approximately $29,433,000, which was paid in cash. All of these acquisitions related to our Construction Materials segment.
13. Segment Data
We have two reportable segments, Construction Materials and Chemicals, which 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 the notes to our consolidated financial statements on our latest annual report on Form 10-K. Our determination of segment earnings (a) does not reflect discontinued operations; (b) recognizes equity in the earnings or losses of nonconsolidated companies as part of segment earnings, (c) reflects allocations of general corporate expenses to the segments; (d) does not reflect interest income or expense; and (e) is before income taxes. Allocations are based on a trailing 12-month average capital employed and net sales.
As the result of our decision to sell our Performance Chemicals businesses, the results of operations of this business unit, which were previously included in our Chemicals segment's earnings, have been reclassified as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings
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Three Months Ended |
Nine Months Ended |
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2004 |
2003 |
2004 |
2003 |
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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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14. Supplemental Cash Flow Information
Supplemental information referable to our Condensed Consolidated Statements of Cash Flows for the nine months ended September 30 is summarized below (in thousands of dollars):
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2004 |
2003 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW |
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15. Commitments and Contingencies
As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report on Form 10-Q for the quarters ended March 30, 2004 and June 30, 2004, we have been named as one of numerous defendants in 218 lawsuits in Mississippi and Texas by 11,009 plaintiffs, seven cases in California with 132 plaintiffs, two cases in Louisiana with two plaintiffs, one case in Kentucky with 454 plaintiffs, one case in West Virginia with 22 plaintiffs, one case in Illinois with one plaintiff, two cases in Florida with 2 plaintiffs and one case in Ohio with 1 plaintiff. The first of these lawsuits was filed in July 1993, and the most recent case was filed in August 2004. Most of the actions are in state court in the state in which it was filed; however, a number have been removed to Federal district court. The plaintiffs in the cases in Mississippi and Texas allege personal injuries arising from silicosis and failure to adequately warn, related to exposure to and use of industrial sand used
for abrasive blasting. We produced and marketed industrial sand from 1988 to 1994, primarily in Texas. In the cases in California, Kentucky, West Virginia, Illinois, Ohio and Florida, the plaintiffs allege personal injuries relating to exposure to silica, and the cases in Louisiana relate to liability as a premises owner on which sand blasting was used. We are seeking dismissal from the cases in Mississippi, Kentucky, California, West Virginia, Ohio and Florida because there was no exposure by the plaintiffs to Vulcan's product in those states.
As previously reported on Form 10-K for the year ended December 31, 2003, we have been named as a defendant in multiple lawsuits filed in 2001 and 2002 in state court and federal district court in Louisiana. The lawsuits claim damages for various personal injuries allegedly resulting from releases of chemicals at our Geismar, Louisiana, plant in 2001. To date, 87 lawsuits, involving approximately 3,015 named plaintiffs have been filed. A trial for the issues of causation and damages for 10 plaintiffs related to the April 2001 release was held in July 2004. Five of these plaintiffs were dismissed during the trial. A jury awarded the remaining 5 plaintiffs an aggregate award of $201,000. Additionally, on October 5, 2004, the judge granted our motion for summary judgment dismissing approximately 2,000 to 2,100 plaintiffs subject to a show cause hearing in
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November. We estimate 1,265 plaintiffs will remain after that hearing. The next cases are bench trials scheduled for the fourth quarter of 2004.
As previously reported on Form 10-K for the year ended December 31, 2003, we are involved in an action filed in November 1998 by the City of Modesto in state court in California. This claim arose from allegations of perchloroethylene contamination of municipal water wells in the City of Modesto and alleges certain claims against us and other chemical and equipment manufacturers, distributors and dry cleaners. The trial of this case is currently set for February 2005. We intend to defend this action vigorously.
Although the ultimate outcome is uncertain, it is our opinion that the disposition of these described lawsuits, as well as certain other lawsuits, will not have a material adverse affect on our consolidated financial position.
16. Subsequent Event
On October 11, 2004, we entered into an agreement to sell essentially all of the assets of our Chemicals segment to a subsidiary of Occidental Chemical Corporation. These assets consist primarily of chloralkali facilities in Wichita, Kansas; Geismar, Louisiana and Port Edwards, Wisconsin and the facilities of our Chloralkali joint venture located in Geismar. The decision to sell the chemicals business was based on our desire to focus our resources on the construction materials business.
The transaction, which has been structured as a purchase of assets, involves an initial cash payment, contingent future payments under two earn-out provisions, and the transfer of certain liabilities. The initial payment will result in net cash proceeds of approximately $155 million after taxes, transaction costs and the cost of acquiring the minority partner's 49% share of the Chloralkali joint venture. In addition to the cash purchase price, we will also be entitled to receive cash payments under two separate earn-outs, subject to certain conditions. The first earn-out is based on ECU (electrochemical unit) and natural gas prices during the five-year period following the closing and is capped at $150 million. Payments under the second earn-out will be determined based primarily on the performance of the hydrochlorocarbon product HCC-240fa (commonly referred to as 5CP) from the closing of the transaction through 2012. Under this earn-out provision, cash plant margin for HCC-240fa in excess of an agreed upon
threshold, and after certain capital expenditures, will be shared equally with the purchaser. Based on our outlook for ECU values, natural gas prices and marketplace performance of the HCC-240fa product, we project pretax undiscounted earn-out proceeds of approximately $145 million, although there can be no assurance as to the ultimate amount received. The purchaser will also assume certain liabilities relating to the chemicals business, including the obligation to monitor and remediate historical and future releases of hazardous materials at or from the three plant facilities. We will retain certain other liabilities of the chemicals business.
Closing of the transaction, which is anticipated to occur during the first half of 2005, is subject to customary regulatory and other closing conditions. The total cash costs to be incurred in connection with the transaction are estimated to be approximately $0.02 per diluted share, and consist primarily of transaction fees. As of September 30, 2004, we performed an impairment test of the related long-lived assets. The test indicated no impairment of the Chemicals segment assets. We will continue to assess the Chemicals segment assets for impairment on a quarterly basis or as significant new information becomes available. The assessment will compare the anticipated initial proceeds from the sale of the net assets and our estimate of the probable receipts from the earn-out provisions to
the carrying value of the assets. There can be no assurance as to the future amount received from the earn-outs, if any.
As this event was not approved by the Board of Directors until the fourth quarter, the related assets and liabilities are classified as held and used in the accompanying Condensed Consolidated Balance Sheets. The major classes of assets and liabilities for the periods presented were as follows (in millions of dollars):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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Current assets |
$ 116.5 |
$ 124.7 |
$ 116.0 |
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Current liabilities |
$ 57.0 |
$ 49.6 |
$ 51.2 |
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Minority interest in a consolidated subsidiary |
$ 95.3 |
$ 92.0 |
$ 91.1 |
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Item 2. Management's Discussion and Analysis of Financial |
GENERAL COMMENTS
Seasonality of our 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 volumes of our Construction Materials segment. Normally, the highest sales and earnings of our 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 Earnings
Segment earnings are earnings from continuing operations before interest and income taxes and after allocation of corporate expenses and income, other than interest, to the segment with which it is related in terms of products and services. Allocations are based on a trailing 12-month average capital employed and net sales.
Forward-Looking Statements
Certain matters discussed in this report, including expectations regarding future performance, contain forward-looking statements that are subject to risks, assumptions and uncertainties that could cause our actual results to differ materially from those projected. These risks, assumptions and uncertainties include, but are not limited to, those associated with general business conditions; the timing and amount of federal, state and local funding for infrastructure; the highly competitive nature of the industries in which we operate; pricing; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; increasing healthcare costs; and other risks, assumptions and uncertainties detailed from time to time in our periodic reports. Forward-looking statements speak only as of the date hereof, and we assume no obligation to update such statements.
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RESULTS OF OPERATIONS
The following comparative analysis is based on net sales and cost of goods sold, which exclude delivery revenues and costs, and is consistent with the basis on which management reviews results of operations.
Third Quarter 2004 as Compared with Third Quarter 2003
We announced record third quarter net sales of $803.9 million and earnings from continuing operations of $0.96 per diluted share, a 5% increase from last year's $0.91 per diluted share. Net earnings of $99.0 million, or $0.96 per diluted share approximated last year's record third quarter when net earnings were $99.1 million, or $0.96 per diluted share.
For the quarter, Construction Materials' net sales were $649.3 million, a 5% increase from the prior year's $616.2 million. Net sales benefited from improved pricing for aggregates and ready-mixed concrete and stronger volumes in asphalt. Aggregates pricing increased over 3% and shipments increased modestly over last year's record third quarter levels. Extreme weather in the third quarter had an adverse impact on shipments and plant operations in Georgia, North Carolina, Florida and Alabama. However, in California, Texas, Virginia and Arizona, where markets were not impacted by adverse weather, shipments were strong. Third quarter net sales in our Chemicals segment of $154.6 million increased 18% from the prior year. Third quarter pricing for caustic soda was slightly lower than the prior year, but up significantly from the second quarter. Pricing improved for most other products, including chlorine and chlorinated organics. Sales volumes of 5CP continued to reflect strong growth.
Earnings from continuing operations before interest and income taxes of $159.6 million were up $21.8 million or 16% from the third quarter of 2003. Construction Materials segment earnings were $148.7 million compared to $144.1 million in the prior year. The favorable earnings effects from improved pricing and higher volumes were somewhat reduced by higher costs for diesel fuel and liquid asphalt, healthcare and performance-based compensation. Additionally, higher operating costs in certain plants due to heavy rains and flooding, as well as planned activities related to plant improvement projects, negatively impacted earnings in the quarter. Chemicals recorded segment earnings of $10.9 million, a $17.2 million improvement from the prior year's loss of $6.3 million. Earnings benefited from the aforementioned pricing improvements and continued strong growth in 5CP sales volumes.
Selling, administrative and general expenses of $60.4 million increased $3.6 million or 6% from the prior year third quarter due primarily to higher costs for healthcare and performance-based compensation. Other operating expense of $0.6 million decreased $1.4 million due to higher gains on asset sales and a reduction in asset abandonment costs partly offset by increased environmental remediation accruals. Minority interest in earnings of $2.0 million represented a $0.5 million increase from the comparable prior year as the improved earnings in the Chloralkali joint venture resulted in an increase in the minority partner's share of the earnings.
Interest expense of $9.1 million decreased $4.7 million resulting from the reduction in outstanding debt due to the retirement of $243.0 million of debt in the second quarter of 2004.
Our effective tax rate from continuing operations was 34.7% for the third quarter of 2004, up from the 2003 rate of 24.8% for the comparable period. This increase reflects higher estimated income tax liabilities for open audit years, the recovery in the chemicals business which has a higher effective tax rate and higher state taxes.
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Year-to-Date Comparisons as of September 30, 2004 and September 30, 2003
Net sales of $2.1 billion for the first nine months of 2004 increased 7% from the comparable 2003 total of $2.0 billion. Earnings from continuing operations before cumulative effect of accounting changes were $202.7 million, or $1.96 per diluted share. Comparable 2003 earnings were $162.5 million, or $1.58 per diluted share. As described in Note 3 to the Condensed Consolidated Financial Statements, our Performance Chemicals business unit is reported in discontinued operations pursuant to FAS 144. Loss on discontinued operations totaled $1.0 million, or $0.01 per diluted share for the first nine months of 2004 compared with a $6.1 million loss, or $0.06 per diluted share in 2003. The year-to-date September 2003 results included gain on disposal of discontinued operations in the pretax amount of $6.4 million.
The cumulative effect of accounting change in the first quarter of 2003 resulted from our adoption of FAS 143 as described in Note 10 to the Condensed Consolidated Financial Statements. This adoption resulted in a cumulative, one-time, non-cash charge of $18.8 million or $0.18 per diluted share.
Net earnings for the first nine months of 2004 of $201.8 million or $1.95 per diluted share reflected a $1.0 million loss, or $0.01 per diluted share impact, from the divestiture of our Performance Chemicals business unit. Comparatively, the net earnings of $137.6 million or $1.34 per diluted share for the first nine months of 2003 reflected both the $6.1 million loss, or $0.06 per diluted share impact, from the divestiture of our Performance Chemicals business unit, and the $18.8 million charge, or $0.18 per diluted share impact, from the adoption of FAS 143.
Construction Materials' net sales of $1.7 billion were up $100.9 million, or 6%, from the first nine months of 2003. This increase resulted primarily from higher aggregates shipments and prices and higher ready-mixed concrete volumes. Aggregates shipments and pricing increased 5% and 2%, respectively, and ready-mixed concrete volumes increased 10%. The Chemicals segment reported net sales of $438.0 million for the first nine months of 2004, up $41.7 million or 11% from the comparable period in 2003. Volumes for caustic soda, chlorine and chlorinated organics were up from the first nine months of 2003. However, caustic soda pricing, while rising in recent quarters, was lower than the prior year by 25%.
Earnings from continuing operations before interest and income taxes of $319.6 million were up $58.8 million from the first nine months of 2003. Construction Materials' segment earnings were $312.8 million compared to $282.3 million in the prior year. The favorable earnings impact from the aforementioned increase in net sales was partially offset by higher costs for diesel fuel and liquid asphalt, healthcare and performance-based compensation. Year-to-date, the Chemicals segment's earnings improved $28.3 million resulting in earnings of $6.8 million compared to a loss of $21.5 million in the prior year. This earnings improvement was due primarily to increased volume, improved pricing for chlorinated organics products, better results in our Chloralkali joint venture and increased operating leverage resulting from better operating performance and improved plant reliability.
Selling, administrative and general expenses of $172.0 million increased $10.6 million or 7% from the first nine months of 2003 due primarily to increased costs for healthcare and incentive compensation. Other operating income of $2.5 million was favorable $9.7 million as a result of higher gains on sale of assets, lower asset abandonment costs, lower environmental remediation accruals and lower asset impairment charges. Improved results in our Chloralkali joint venture resulted in an increase in the minority partner's interest in earnings of $4.8 million. Other income, net of other charges, of $8.4 million increased $6.7 million due mostly to insurance refunds and lower current year charges related to non-operating liabilities.
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Year-to-date interest expense of $31.4 million decreased $9.5 million resulting from the reduction in outstanding debt as $243.0 million in outstanding notes were retired in April as scheduled.
Our effective tax rate from continuing operations was 30.7% for the year, as projected through September 30 2004, up from 27.1% for the comparable period of 2003. This increase reflects higher estimated income tax liabilities for open audit years, the recovery in the chemicals business which has a higher effective tax rate and higher state taxes.
As noted in the Subsequent Event Note to the Condensed Consolidated Financial Statements (Note 16), on October 11, 2004, we entered into an agreement to sell essentially all of the assets of our Chemicals segment to a subsidiary of Occidental Chemical Corporation. Closing of the transaction, which is anticipated to occur during the first half of 2005, will result in the elimination of our Chemicals segment operating results. The total cash costs to be incurred in connection with the transaction are estimated to be approximately $0.02 per diluted share, and consist primarily of transaction fees. We will assess the Chemicals segment assets for impairment on a quarterly basis or as significant new information becomes available. The assessment will compare the anticipated initial proceeds from the sale of the net assets and our estimate of the probable receipts from the earn-out provisions to the carrying value of the assets. There can be no assurance as to the future amount received from the earn-outs, if any.
LIQUIDITY AND CAPITAL RESOURCES
We believe that we have sufficient financial resources, including cash provided by operating activities and ready access to the capital markets, to fund business requirements in the future including capital expenditures, dividend payments, potential future acquisitions and debt service obligations.
On October 11, 2004, we entered into an agreement to sell essentially all of the assets of our Chemicals segment to a subsidiary of Occidental Chemical Corporation, (See Note 16 to the Condensed Consolidated Financial Statements). Proceeds from the sale will be used for general corporate purposes. We believe that the sale will not have a significant effect on our ability to fund business requirements in the future including capital expenditures, dividend payments, potential future acquisitions and debt service obligations.
Cash Flows
Net cash provided by operating activities equaled $363.6 million in the first nine months of 2004, up nearly 4% from the $351.2 million generated in the same period last year. This $12.4 million increase in cash provided by operating activities resulted primarily from higher cash earnings. Net cash used for investing activities of $139.2 million increased $35.2 million from the first nine months of 2003. This increase in cash used for investing activities resulted from a $26.9 million increase in payments for business acquisitions, a $21.7 million reduction in proceeds from the sale of property, plant and equipment and a $2.2 million increase in capital purchases partially offset by a $15.6 million decrease in investments (including medium-term) and long-term receivables. Net cash used for financing activities increased $206.6 million from the first nine months of 2003 to total $294.5 million for the nine months ended September 30, 2004. This increase in cash used for financing activities result
ed primarily from the 2004 scheduled debt payments: $243.0 million in the second quarter and $5.0 million in the third quarter.
Working Capital
Working capital, the excess of current assets over current liabilities, totaled $693.3 million at September 30, 2004. This represented a $186.1 million increase from our December 31, 2003 level and a $241.7 million increase from our September 30, 2003 level. Both of these increases resulted primarily from increases in internally generated cash. The increase in working capital from year-end 2003 resulted primarily in a decrease in current maturities of $248.4 million and a seasonal increase of receivables of $97.0 million partially offset by a decrease in cash items of $70.0 million and an increase in notes payable of $19.0 million. The increase in working capital from September 30, 2003 resulted primarily in a decrease in current maturities of $283.5 million and an increase in cash items of $16.5 million.
The current ratio was 2.8 as of September 30, 2004. This compares to the 1.9 ratio at year-end 2003 and the 1.8 ratio at September 30, 2003.
Short-term Borrowings
Short-term borrowings consisted of the following (in thousands of dollars):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
|
|
Commercial paper Total notes payable |
40,000 $ 48,000 |
-- $ 29,000 |
-- $ 30,500 |
We issued $40.0 million of commercial paper in the third quarter of 2004 to fund current working capital needs in lieu of liquidating short-term investments with favorable terms. We plan to continue this practice from time to time as circumstances warrant.
Unsecured bank lines of credit totaling $350.0 million were maintained at September 30, 2004, none of which was drawn down. In addition, the Chloralkali joint venture had an uncommitted bank credit facility in the amount of $30.0 million available at September 30, 2004, of which $8.0 million was drawn, as noted above in the bank borrowings.
Current Maturities
Current maturities of long-term debt are summarized below (in thousands of dollars):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
|
|
|
|
|
|
|
Total |
$ 1,302 |
$ 249,721 |
$ 284,783 |
Scheduled debt payments during 2004 included $243.0 million in the second quarter to retire the 5.75% five-year notes issued in 1999 and $5.0 million in the third quarter to retire an 8.55% medium-term note issued in 1991.
Long-term Obligations
Long-term obligations and measures are summarized below (amounts in thousands, except percentages):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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Long-term obligations: |
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The calculations of total debt to total capital are summarized below (amounts in thousands, except percentages):
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Sept. 30 |
Dec. 31 |
Sept. 30 |
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Debt: |
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Capital: |
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In the future, the ratio of total debt to total capital will depend upon specific investment and financing decisions. Nonetheless, management believes our cash-generating capability, combined with our financial strength and current business diversification, can comfortably support a ratio of 30% to 35%. We have made acquisitions from time to time and will continue to pursue attractive investment opportunities. Such acquisitions could be funded by using internally generated cash flow or issuing debt or equity securities.
Our standby letters of credit as of September 30, 2004 are summarized in the table below (in thousands of dollars):
|
Amount |
Term |
Maturity |
|
|
Risk management requirement for insurance claims |
$ 19,437 |
One year |
Renewable annually |
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Total standby letters of credit |
$ 26,002 |
CRITICAL ACCOUNTING POLICIES
We follow certain significant accounting policies when preparing our consolidated financial statements. A summary of these policies is included in our latest annual report on Form 10-K. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our ac
tual results may differ from these estimates.
We believe that estimates, assumptions and judgments involved in the accounting policies described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our most recent annual report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies.
Additionally, we consider that the following expanded policies on income taxes and impairment of long-lived assets excluding goodwill to be critical accounting policies due to the significant level of estimates, assumptions and judgments and their potential impact on our consolidated financial statements.
Income Taxes
Our effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. On an interim basis, we estimate the annual tax rate based upon projected taxable income for the full year and record a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year's taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected effective tax rate for the year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision equals the expected annual tax rate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions.
In accordance with SFAS No. 109, "Accounting for Income Taxes" (FAS 109), we recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns for which we have already properly recorded the tax benefit in the income statement. At least quarterly, we assess the likelihood that the deferred tax asset balance will be recovered from future taxable income. We take into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of a realization of a deferred tax asset. To the extent recovery is unlikely, a valuation allowance is established against the deferred tax asset, increasing our income tax expense in the year such determination is made.
The Accounting Principles Board Opinion No. 23, "Accounting for Income Taxes, Special Areas" (APB 23), does not require United States income taxes to be provided on foreign earnings when such earnings are indefinitely reinvested offshore. We have determined that foreign earnings are to be repatriated as soon as practicable, therefore, United States income taxes are provided when foreign earnings are recorded.
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We establish accruals for certain tax contingencies when, despite the belief that our tax return positions are fully supported, we believe that certain positions are likely to be challenged and that our position may not be fully sustained. The tax contingency accruals are adjusted due to changing circumstances, such as the progress of tax audits, case law and emerging legislation. Our effective tax rate includes the impact of tax contingency accruals as considered appropriate by management.
A number of years may elapse before a particular matter, for which we have recorded a contingent liability, is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. In the United States, the Internal Revenue Service has substantially completed its audits of our tax years 1999 through 2001. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe our tax contingency accruals are adequate to address known tax contingencies. Favorable resolution of such contingencies could be recognized as a reduction in our effective tax rate in the year of resolution. Unfavorable settlement of any particular issue could increase the effective tax rate and may require the use of cash in the year of resolution. Our tax contingency accruals are presented in the balance sheet within current liabilities.
Impairment of Long-lived Assets Excluding Goodwill
We evaluate the carrying value of long-lived assets, including intangible assets subject to amortization, when events and circumstances warrant such a review. The carrying value of long-lived assets is considered impaired when the projected future undiscounted cash flows from such assets are less than their carrying value. In that event, a loss is recognized equal to the amount by which the carrying value exceeds the fair value of the long-lived assets. We periodically review the appropriateness of the estimated useful lives of our long-lived assets.
In connection with the planned disposition of the Chemicals segment (as noted in Note 16 to the Notes to Condensed Consolidated Financial Statements), we performed an impairment test of the related long-lived assets. As of the September 30, 2004 measurement date, the test indicated no impairment of the Chemicals segment assets. The impairment test was based on our estimate of the probability of selling the business as compared to continuing to operate the business as of September 30, 2004. Under the sale estimate, the fair value is comprised of the initial proceeds from the sale of the net assets and our current estimate of the likely receipts from the earn-out provisions based on an expected future cash flow analysis. We will continue to reevaluate the Chemicals segment for potential impairment of the long-lived assets on a quarterly basis or as significant new information becomes available.
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INVESTOR ACCESS TO COMPANY FILINGS
We make available on our website, vulcanmaterials.com, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as all Forms 4 and 5 filed by our executive officers and directors, as soon as the filings are made publicly available by the Securities and Exchange Commission on its EDGAR database, at sec.gov. In addition to accessing copies of our reports online, you may request a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2003, at no charge, by writing to:
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William F. Denson, III |
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Item 3. Quantitative and Qualitative Disclosures |
We are 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, we utilize derivative financial instruments. To date, we have used commodity swap and option contracts to reduce our exposure to fluctuations in prices for natural gas. The fair values of these contracts were as follows: September 30, 2004 - $2,307,000 favorable; December 31, 2003 - $4,246,000 favorable; and September 30, 2003 - $1,865,000 favorable. As a result of a hypothetical 10% reduction in the price of natural gas, we would experience a potential decline in the fair value of our underlying commodity swap and option contracts based on the fair value at September 30, 2004 of approximately $931,000.
We are exposed to interest rate risk due to our various long-term debt instruments. Substantially all of our debt is at fixed rates; therefore, a decline in interest rates would result in an increase in the fair market value of the liability. At times, we use interest rate swap agreements to manage this risk. In November 2003, we entered into an interest rate swap agreement with a counterparty in the stated (notional) amount of $50,000,000. Under this agreement, we pay a variable London Interbank Offered Rate (LIBOR) plus a fixed spread and receive a fixed rate of interest of 6.40% from the counterparty. The six-month LIBOR rates approximated 2.20% at September 30, 2004. The interest rate swap agreement is scheduled to terminate February 1, 2006 coinciding with the maturity of our 6.40% five-year notes issued in 2001 in the amount of $240,000,000. The realized gains and losses upon settlement related to the interest rate swap agreement are reflected in interest expense concurrent with the hedged interest pay
ments on the debt. The estimated fair values of this agreement were as follows: September 30, 2004 - $25,000 unfavorable and December 31, 2003 - $302,000 favorable.
We do not enter into derivative financial instruments for speculative or trading purposes.
At September 30, 2004, the estimated fair market value of our debt instruments was $656,846,000 as compared to our book value of $608,460,000. The effect of a hypothetical decline in interest rates of 1% would increase our fair market value of the liability by approximately $19,601,000.
We are exposed to certain economic risks related to the costs of our pension and other postretirement benefit plans. These economic risks include changes in the discount rate for AA-rated corporate bonds, the expected return on plan assets, the rate of compensation increase for salaried employees and the rate of increase in the per capita cost of covered healthcare benefits. The impact of a change in these assumptions on our annual pension and other postretirement benefits costs is discussed in our latest annual report on Form 10-K.
We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports we file with the Securities and Exchange Commission (SEC) is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer, with the participation of other management officials, evaluated the effectiveness of the design and operation of the disclosure controls and procedures as of September 30, 2004. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to m
aterial information required to be included in our periodic SEC filings. No significant changes were made to our internal controls or other factors that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report on Form 10-Q for the quarters ended March 30, 2004 and June 30, 2004, we have been named as one of numerous defendants in 218 lawsuits in Mississippi and Texas by 11,009 plaintiffs, seven cases in California with 132 plaintiffs, two cases in Louisiana with two plaintiffs, one case in Kentucky with 454 plaintiffs, one case in West Virginia with 22 plaintiffs, one case in Illinois with one plaintiff, two cases in Florida with 2 plaintiffs and one case in Ohio with 1 plaintiff. The first of these lawsuits was filed in July 1993, and the most recent case was filed in August 2004. Most of the actions are in state court in the state in which it was filed; however, a number have been removed to Federal district court. The plaintiffs in the cases in Mississippi and Texas allege personal injuries arising from silicosis and failure to adequately warn, related to exposure to and use of industrial sand used
for abrasive blasting. We produced and marketed industrial sand from 1988 to 1994, primarily in Texas. In the cases in California, Kentucky, West Virginia, Illinois, Ohio and Florida, the plaintiffs allege personal injuries relating to exposure to silica, and the cases in Louisiana relate to liability as a premises owner on which sand blasting was used. We are seeking dismissal from the cases in Mississippi, Kentucky, California, West Virginia, Ohio and Florida because there was no exposure by the plaintiffs to Vulcan's product in those states.
As previously reported on Form 10-K for the year ended December 31, 2003, we have been named as a defendant in multiple lawsuits filed in 2001 and 2002 in state court and federal district court in Louisiana. The lawsuits claim damages for various personal injuries allegedly resulting from releases of chemicals at our Geismar, Louisiana, plant in 2001. To date, 87 lawsuits, involving approximately 3,015 named plaintiffs have been filed. A trial for the issues of causation and damages for 10 plaintiffs related to the April 2001 release was held in July 2004. Five of these plaintiffs were dismissed during the trial. A jury awarded the remaining 5 plaintiffs an aggregate award of $201,000. Additionally, on October 5, 2004, the judge granted our motion for summary judgment dismissing approximately 2,000 to 2,200 plaintiffs, subject to a show cause hearing in November. We estimate 1,265 plaintiffs will remain after that hearing. The next cases are bench trials scheduled for the fourth quarter of 2004.
As previously reported on Form 10-K for the year ended December 31, 2003, we are involved in an action filed in November 1998 by the City of Modesto in state court in California. This claim arose from allegations of perchloroethylene contamination of municipal water wells in the City of Modesto and alleges certain claims against us and other chemical and equipment manufacturers, distributors and dry cleaners. The trial of this case is currently set for February 2005. We intend to defend this action vigorously.
Although the ultimate outcome is uncertain, it is our opinion that the disposition of these described lawsuits, as well as certain other lawsuits, will not have a material adverse affect on our consolidated financial position.
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Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities
Our Board of Directors previously authorized a share repurchase program under which we may purchase up to 12,000,000 shares of the Company's outstanding common stock. As of September 30, 2004, the number of shares remaining under this authorization was 8,473,988. We may make repurchases from time to time in the open market or through privately negotiated transactions, depending upon market, business, legal and other conditions.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3(a) - By-laws, as restated February 2,1990, and as last amended May 14, 2004.
Exhibit 31(a) - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31(b) - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32(a) - Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32(b) - Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K on July 29, 2004, pursuant to which we furnished our earnings release dated July 28, 2004, regarding our second quarter 2004 financial results.
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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 29, 2004
/s/ Ejaz A. Khan
Ejaz A. Khan
Vice President, Controller and Chief Information Officer
/s/ Mark E. Tomkins
Mark E. Tomkins
Senior Vice President, Chief Financial Officer and
Treasurer
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