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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-4033
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VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 63-0366371
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 298-3000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by referenced in Part III of this Form 10-K or any
amendment to this Form 10-K.
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State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES AS OF
FEBRUARY 26, 1999: $4,480,489,356
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, $1.00 PAR VALUE, AS OF FEBRUARY 26, 1999: 100,852,569 SHARES*
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the
year ended December 31, 1998, are incorporated by reference into Parts
I, II and IV of this Annual Report on Form 10-K.
(2) Portions of the registrant's annual proxy statement for the annual
meeting of its shareholders to be held on May 14, 1999, are
incorporated by reference into Part III of this Annual Report on Form
10-K.
*Adjusted to reflect a three-for-one stock split which was effected on March
10, 1999.
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VULCAN MATERIALS COMPANY
CROSS REFERENCE SHEET FOR DOCUMENTS INCORPORATED BY REFERENCE
HEADING IN ANNUAL REPORT PAGE IN
FORM 10-K TO SHAREHOLDERS FOR ANNUAL
ITEM NO. YEAR ENDED DECEMBER 31, 1998 REPORT
1. Business (Financial Results by Segment Financial Data for the 3 Years Ended
Business Segments) December 31, 1998-Note 12, Segment Data 53-54
Note 14, Acquisitions 55
3. Legal Proceedings Note 10, Other Commitments and Contingent Liabilities 53
7. Management's Discussion and Management's Discussion and Analysis of Results of
Analysis of Financial Condition Operations and Financial Condition 41-45
and Results of Operations
Financial Terminology 65
7A. Quantitative and Qualitative Management's Discussion and Analysis of Results of
Disclosures About Market Risk Operations and Financial Condition 44-45
8. Financial Statements and Consolidated Statements of Earnings 37
Supplementary Data Consolidated Balance Sheets 38
Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting
and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share
Quarterly Financial Data for Each of the 2 Years
Ended December 31, 1998 and 1997 (Unaudited) 63
14. Exhibits, Financial Statement Consolidated Statements of Earnings 37
Schedules and Reports on Consolidated Balance Sheets 38
Form 8-K Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting
and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share
Quarterly Financial Data for Each of the 2 Years
Ended December 31, 1998 and 1997 (Unaudited) 63
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HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1999
10. Directors and Executive Officers Election of Directors; Nominees for Election to the Board of
of the Registrant Directors; Directors Continuing in Office; Section 16(a)
Beneficial Ownership Reporting Compliance
11. Executive Compensation Compensation of Directors; Executive Compensation; Option
Grants in 1998; Report of the Compensation Committee;
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values; Shareholder Return Performance
Presentation; Retirement Income Plan; Employee Special
Severance Plan
12. Security Ownership of Certain Security Ownership of Certain Beneficial Owners;
Beneficial Owners and Management Security Holdings of Management
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VULCAN MATERIALS COMPANY
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
CONTENTS
PART ITEM PAGE
I 1 Business 1
2 Properties 4
3 Legal Proceedings 7
4 Submission of Matters to a Vote of Security Holders 8
4a. Executive Officers of the Registrant 9
II 5 Market for the Registrant's Common Equity and Related
Stockholder Matters 10
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
7A. Quantitative and Qualitative Disclosure About Market Risk11
8 Financial Statements and Supplementary Data 12
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 12
III 10 Directors and Executive Officers of the Registrant 12
11 Executive Compensation 12
12 Security Ownership of Certain Beneficial Owners and
Management 12
13 Certain Relationships and Related Transactions 13
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 13
-- Signatures 19
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PART I
ITEM 1. BUSINESS
Vulcan Materials Company, a New Jersey corporation incorporated in
1956, and its subsidiaries (together called the "Company") are principally
engaged in the production, distribution and sale of construction materials
("Construction Materials") and industrial and specialty chemicals
("Chemicals"). Construction Materials and Chemicals may each be considered both
a segment (or a line of business) and a class of similar products. The Company
is the nation's leading producer of construction aggregates.
All of the Company's products are marketed under highly competitive
conditions, including competition in price, service and product performance.
There are a substantial number of competitors in both the Construction
Materials segment and the Chemicals segment.
No material part of the business of either segment of the Company is
dependent upon a single customer or upon a few customers, the loss of any one
of which would have a materially adverse effect on the segment. The Company's
products are sold principally to private industry. Although large amounts of
construction materials are used in public works, relatively insignificant sales
are made directly to federal, state, county or municipal governments, or
agencies thereof.
The Company conducts research and development activities for both of
its business segments. The Construction Materials research and development
facility is located near Birmingham, Alabama. The Chemicals research and
development laboratories are located in Wichita, Kansas and Columbus, Georgia.
In general, the Company's research and development effort is directed to
applied technological development relating to the use of its Construction
Materials and Chemicals products as well as for the manufacturing or processing
of its Chemicals products. The Company spent approximately $1,091,000 in 1996,
$1,281,000 in 1997 and $984,000 in 1998 on research and development activities
for its Construction Materials segment. The Company spent approximately
$7,939,000 in 1996, $9,474,000 in 1997 and $8,641,000 in 1998 on research and
development activities for its Chemicals segment.
The Company estimates that capital expenditures for environmental
control facilities in the current fiscal year (1999) and the succeeding fiscal
year (2000) will be approximately $5,204,000 and $2,918,000, respectively, for
the Construction Materials segment, and $5,574,000 and $3,100,000,
respectively, for the Chemicals segment.
The Company's principal sources of energy are electricity, natural gas
and diesel fuel. The Company does not anticipate any material difficulties in
obtaining the required sources of energy required for its operations.
In 1998, the Construction Materials segment employed an average of
approximately 5,214 people. The Chemicals segment employed an average of
approximately 1,577 people. The Company's corporate office employed an average
of approximately 180 people. The Company considers its relationship with its
employees to be good.
Financial results of the Company for any individual quarter are not
necessarily indicative of results to be expected for the year, due primarily 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.
CONSTRUCTION MATERIALS
The Company's construction materials business consists of the
production and sale of construction aggregates. Construction aggregates include
crushed stone, sand, gravel, rock asphalt and crushed slag (a by-product of
steel production) and are employed in virtually all types of construction,
including highway construction and maintenance, and in the production of
asphaltic and portland cement concrete mixes. Aggregates also are widely used
as railroad track ballast. Crushed stone constituted approximately 80% of the
dollar volume of the Construction Materials segment's 1998 sales, as compared
to 79% in 1997 and 79% in 1996.
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Each type of aggregate is sold in competition with other types of
aggregates and in competition with other producers of the same type of
aggregate. Because of the relatively high transportation costs inherent in the
business, competition generally is limited to the areas in relatively close
proximity to production facilities. Noteworthy exceptions are the areas along
the Mississippi and Tennessee-Tombigbee river systems and the Gulf Coast which
are served by the Company's Reed quarry, areas served by rail-connected
quarries, and the areas along the U.S. coast served by ocean-going vessels that
transport stone from the Company's joint venture operation in Mexico. The
Company's construction aggregates are sold in 17 states primarily in the
Southeast, Midwest and Southwest regions of the United States and in the
District of Columbia.
During 1998, the Company acquired six quarries in Georgia, Illinois
and Tennessee and began production at greenfield aggregates operations in
Alabama, Georgia and Indiana.
Additionally, in January 1999, the Company acquired the stock of
CalMat Co., the leading producer of construction aggregates and asphalt mix in
California for $740 million, and since the beginning of 1999 has purchased five
quarries in Arkansas, three in Georgia and two in North Carolina.
Shipments to customers of all construction aggregates from the
Company's domestic operations in 1998 totaled approximately 165 million tons,
with crushed stone shipments to customers accounting for approximately 157
million tons.
In 1998, the Company, directly or through joint ventures, operated 137
permanent crushed stone plants in 13 states and Mexico for the production of
crushed limestone and granite with estimated reserves totaling approximately
8.3 billion tons.
In 1998, the Company, directly or through joint ventures, operated 9
sand and gravel plants, 4 slag plants and various other types of plants which
produce rock asphalt and other aggregates. Estimates of sand and gravel
reserves, calculated in a manner comparable to the estimates of stone reserves
set forth above, total approximately 27 million tons.
Other Construction Materials products and services include asphalt
mix, ready-mixed concrete, trucking services, barge transportation, a Mack
Truck distributorship, paving construction, dolomitic lime, emulsified asphalt
and several other businesses.
Environmental and zoning regulations have made it increasingly
difficult for the construction aggregates industry either to expand existing
quarries or to develop new quarries. Although it cannot be predicted what
policies will be adopted in the future by governmental bodies regarding
environmental controls which affect the construction materials industry, the
Company anticipates that future environmental control costs will not have a
materially adverse effect upon its business.
CHEMICALS
The Chemicals segment is organized into two business units: the
Chloralkali Business Unit which manages the Company's line of chloralkali
products and related businesses, and the Performance Systems Business Unit
which manages the Company's specialty chemicals and services business.
The principal chemicals produced by the Chloralkali Business Unit at
the Company's three chloralkali plants described in Item 2 below, are chlorine,
caustic soda (sodium hydroxide), muriatic acid, hydrochloric acid, caustic
potash (potassium hydroxide), potassium carbonate, chlorinated hydrocarbons and
calcium chloride. Chlorine and various hydrocarbons (primarily ethylene and
methanol) are used to produce an associated line of chlorinated hydrocarbon
products, including methylene chloride, perchloroethylene, chloroform, methyl
chloride, ethylene dichloride, carbon tetrachloride, methyl chloroform and
pentachlorophenol.
Principal markets for the Chloralkali Business Unit's chemical
products include pulp and paper, energy, food, pharmaceutical, cleaning,
chemical processing, fluorocarbons, water management and textiles. In the
paper-making industry, chlorine is used in pulp and paper bleaching, while
caustic soda is used primarily in the
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kraft and sulfite pulping processes. The Company supplies hydrochloric acid to
the energy industry for use in oil well stimulation and gas extraction. Caustic
soda also is used to demineralize water for steam production at electrical
energy facilities and to remove sulfur from gas and coal. Hydrochloric acid,
caustic soda, methylene chloride and caustic potash are used by the food and
pharmaceutical industries. Perchloroethylene, methylene chloride and methyl
chloroform are used in industrial cleaning applications. Perchloroethylene is
also used in the dry-cleaning industry.
The Chloralkali Business Unit's sales to the chemical processing
industry serve companies that produce organic and inorganic chemical
intermediates and finished products. Products sold to this market include
hydrochloric acid, chlorine, caustic soda, caustic potash and potassium
carbonate. Potassium carbonate is used in the manufacture of screen glass,
rubber antioxidants and other chemicals. The Company sells chloroform, methyl
chloroform, perchloroethylene and other chlorinated hydrocarbons to the
fluorocarbons market. Chlorine is used in water and sewage management, and
caustic soda and caustic potash are used in the production of soaps and
detergents. Chlorine also is used as an industrial bleaching agent, in cleaning
applications for the electronics industry, as a biocide in the fruit processing
industry and in various applications in the oil industry. Calcium chloride,
produced at the Company's Wichita complex, has several uses including de-icing
of roads, dust control, road stabilization and oil well completion.
In 1998, the Company announced the formation of a joint venture with
Mitsui & Co., Ltd, to construct a new chloralkali plant and expand ethylene
dichloride (EDC) production capacity at the Company's current manufacturing
site in Geismar, Louisiana. This joint venture was structured to take advantage
of the Company's manufacturing and domestic marketing capabilities and Mitsui's
access to global EDC markets. The facilities are under construction, with
production anticipated in early 2000.
The principal chemicals produced for the Performance Systems Business
Unit by the Company's Callaway Chemical Company subsidiaries include process
aids for the pulp and paper and textile industries and various water management
chemicals. Through its Vulcan Chemical Technologies, Inc. ("VCT") subsidiary,
the Performance Systems Business Unit assembles and markets small-scale
chlorine dioxide generators, and sells related chemicals (primarily sodium
chlorite manufactured by the Company) and services to the water management and
pulp and paper industries. VCT also assembles and markets equipment, and sells
related chemicals (primarily hydrogen peroxide purchased from others) and
services to the municipal and industrial water management markets.
Additionally, the Performance Systems Business Unit markets sodium chlorite
produced at the Chloralkali Business Unit's Wichita plant. Sodium chlorite is
used in the water management, food and beverage processing, pulp and paper,
textile and electronics industries. The Performance Systems Business Unit also
markets sodium hydrosulfite which is used primarily in the pulp and paper
industry and is produced at the Chloralkali Business Unit's Port Edwards plant.
The Company competes throughout the United States with numerous
companies, including some of the largest chemical companies, in the production
and sale of its lines of chemicals. The Company also competes for sales to
customers located outside the United States, with sales to such export
customers currently accounting for approximately 5% of the sales of the
Company's Chemicals segment.
The Company's underground reserves of salt, a basic raw material in
the production of chlorine and caustic soda, are located near its Wichita,
Kansas and Geismar, Louisiana plants. The Company purchases salt for its Port
Edwards, Wisconsin plant. Ethylene, methanol, and vinyl chloride monomer, the
other major raw materials used in the Chloralkali Business Unit, and various
chemicals used by the Performance Systems Business Unit are purchased from
several different suppliers. Sources of salt, ethylene, methanol, vinyl
chloride monomer and other various chemicals are believed to be adequate for
the Company's operations and the Company does not anticipate any material
difficulty in obtaining the raw materials which it uses.
Certain of the Company's chemical operations are subject to the
Resource Conservation and Recovery Act ("RCRA"). Under the corrective action
requirements of RCRA, the Environmental Protection Agency ("EPA") must identify
facilities subject to RCRA's hazardous waste permitting provisions where
practices in the past have caused releases of hazardous waste or constituents
thereof. The owner of any such facility is then required to conduct a Remedial
Facility Investigation ("RFI") defining the nature and extent of any such
releases. If the results of the RFI determine that constituent concentrations
from any such release exceed action levels
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specified by the EPA, the facility owner is further required to perform a
Corrective Measures Study ("CMS") identifying feasible technological
alternatives for addressing these releases. Depending upon the results reported
to the EPA in the RFI and CMS, the EPA subsequently may require Corrective
Measures Implementation ("CMI") by the facility owner - essentially,
implementation of a cleanup plan developed by the EPA based on the RFI and CMS.
The Company expects to incur RFI and CMS costs over the next several
years at its Geismar, Port Edwards and Wichita manufacturing facilities. For
each of these three facilities, the RFI and CMS results will determine whether
the EPA subsequently requires a CMI to address releases at the facility, and
the scope and cost of any such CMI. With respect to those RFI and CMS costs
that currently can be reasonably estimated, the Company has determined that its
accrued reserves are adequate to cover such costs. However, the total costs
which ultimately may be incurred by the Company in connection with discharging
its obligations under RCRA's corrective action requirements cannot reasonably
be estimated at this time.
Various other environmental regulations also have a restrictive effect
upon the chemicals industry, both as to production and sales, particularly the
production and sale of certain chemicals which are subject to regulation as
ozone depleting chemicals. The production and marketing of carbon tetrachloride
ended effective January 1, 1996, for most end uses except for exports to
Article 5 countries as defined by the Montreal Protocol on Ozone Depleting
Chemicals. The production of methyl chloroform for emissive applications also
ended effective January 1, 1996. Existing inventories of methyl chloroform may
continue to be marketed for emissive uses. In addition, methyl chloroform will
continue to be produced and marketed for non-emissive uses, while carbon
tetrachloride will continue to be produced and marketed for export to Article 5
countries. However, sales volume of both products will be lower than in prior
years.
FINANCIAL RESULTS BY BUSINESS SEGMENTS
Net sales, earnings, identifiable assets and related financial data
for each of the Company's business segments for the three years ended December
31, 1998, are reported on pages 53 and 54 (Note 12 of the Notes to Financial
Statements) in the Company's 1998 Annual Report to Shareholders, which
referenced pages of said Report are incorporated herein by reference.
ITEM 2. PROPERTIES
CONSTRUCTION MATERIALS
The Company's current estimate of approximately 8.3 billion tons of
zoned and permitted stone reserves is approximately 65 million tons more than
the estimate reported at the end of 1997. These reserves include stone reserves
in Mexico owned or controlled by the Company's Mexican joint venture. Increases
in the Company's reserves have resulted from 1998 acquisitions in Georgia,
Illinois and Tennessee and the opening of greenfield aggregates operations in
Alabama, Georgia and Indiana. Management believes that the quantities of zoned
and permitted reserves at the Company's stone quarries are sufficient to result
in an average quarry life of approximately 52 years at present operating
levels. See Note 1 to the table of the Company's 10 largest active stone
quarries on page 5 for a description of the method used by the Company for
estimating the years of life of stone reserves.
The foregoing estimates of reserves are of recoverable stone of
suitable quality for economic extraction, based on drilling and studies by the
Company's geologists and engineers, recognizing reasonable economic and
operating restraints as to maximum depth of overburden and stone excavation.
Of the 137 stone quarries which the Company operates directly or
through joint ventures, 37 are located on owned land, 24 are on land owned in
part and leased in part, and 76 are on leased land. While some of the Company's
leases run until reserves at the leased sites are exhausted, generally the
Company's leases have definite expiration dates which range from 1999 to 2105.
Most of the Company's leases have options to extend them well beyond their
current terms.
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Due to transportation costs, the marketing areas for most quarries in
the construction aggregates industry are limited, often consisting of a single
metropolitan area or one or more counties or portions thereof. The following
table itemizes the Company's 10 largest active stone quarries in terms of the
quantity of stone reserves, with nearby major metropolitan areas (if
applicable) shown in parentheses:
ESTIMATED
YEARS OF LIFE LEASE
AT AVERAGE EXPIRATION
RATE OF NATURE OF DATE, IF
LOCATION PRODUCT PRODUCTION(1 INTEREST APPLICABLE(2)
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McCook (Chicago), Illinois Limestone 81.5 Owned
Paducah, Kentucky Limestone 42.2 Leased (4)
Grayson (Atlanta), Georgia Granite Over 100 Owned
Playa Del Carmen, Mexico(3) Limestone Over 100 Owned
Gray Court (Greenville), South Carolina Granite Over 100 Owned
Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (4)
Kennesaw (Atlanta), Georgia Granite 39.2 75% Owned
25% Leased 2013
Manteno, Illinois Limestone Over 100 Leased (4)
Skippers, Virginia Granite 95.7 Leased 2016
Lawrenceville (Norfolk/Virginia
Beach), Virginia Granite 58.9 31% Owned
69% Leased (5)
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(1) Estimated years of life of stone reserves are based on the average
annual rate of production of the quarry for the most recent three-year
period, except that if reserves are acquired or if production has been
reactivated during that period, the estimated years of life are based
on the annual rate of production from the date of such acquisition or
reactivation. Revisions may be necessitated by such occurrences as
changes in zoning laws governing quarry properties, changes in stone
specifications required by major customers and passage of government
regulations applicable to quarry operations. Estimates also are
revised when and if additional geological evidence indicates that a
revision is necessary.
(2) Renewable by the Company through date shown.
(3) The Playa Del Carmen, Mexico location is owned by the Company's joint
venture in Mexico. Its ranking in this table is based on counting 49%
of its reserves, which represents the Company's ownership interest in
the entity which owns the reserves. This quarry's estimated years of
life at average rate of production is based on 100% of the reserves.
(4) Lease does not expire until reserves are exhausted. Surface rights at
the Paducah, Kentucky quarry are owned.
(5) Leases expire as follows: 8% in 2020, 9% in 2024, 47% in 2044 and 5%
in 2045.
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The estimated average life of the Company's sand and gravel
operations, calculated in the same manner as described in footnote (1) to the
table set out above, is approximately 11 years. Approximately 13% of the
Company's estimated 60 million tons of sand and gravel reserves are located on
owned land, with the remaining 87% located on leased land.
CHEMICALS
Manufacturing facilities for the chemicals produced by the Chloralkali
Business Unit are owned and operated by the Company at Wichita, Kansas,
Geismar, Louisiana, and Port Edwards, Wisconsin. With a few exceptions, the
Geismar and Wichita facilities produce the full line of products manufactured
by the Company's Chloralkali Business Unit. The Port Edwards plant produces
chlorine, caustic soda, muriatic acid, caustic potash, potassium carbonate and
sodium hydrosulfite.
All of the facilities at Wichita are located on a 1,518-acre tract of
land owned by the Company. Mineral rights for salt are held by the Company
under two leases that are automatically renewable from year to year unless
terminated by the Company and under several other leases which may be kept in
effect so long as production from the underlying properties is continued. In
addition, the Company owns 120 acres of salt reserves and 108 acres of water
reserves. The Company maintains an electric power cogeneration facility at the
Wichita plant site which is capable of generating approximately one-third of
the plant's electricity and two-thirds of its process steam requirements.
Effective July 1995, pursuant to a long-term agreement, the Company has placed
this facility in reserve and is purchasing all of its requirements for electric
power from a local utility at favorable rates.
The facilities at Geismar, Louisiana are located on a 2,185-acre tract
of land owned by the Company. Included in the facilities at the Geismar plant
is an electric power cogeneration facility owned by the Company which supplies
substantially all of the electricity and process steam required by the plant.
Mineral rights for salt are held under a lease expiring in 2007.
The plant facilities at Port Edwards, Wisconsin are located on a
34-acre tract of land, the surface rights to which are owned by the Company.
Currently, the Company purchases its salt and electrical power requirements for
the Port Edwards facility from regional sources of supply.
Manufacturing facilities for chemicals produced by the Performance
Systems Business Unit (other than sodium chlorite produced at Wichita and
sodium hydrosulfite produced at Port Edwards) are operated by subsidiaries of
the Company. Callaway Chemical Company owns a headquarters office building and
two production facilities in Columbus, Georgia and additional production
facilities in Smyrna, Georgia, Dalton, Georgia and Shreveport, Louisiana.
Callaway Chemical Limited has an office and small production facility on leased
property in Vancouver, British Columbia. Vulcan Chemical Technologies, Inc.,
leases its office and production facilities in West Sacramento, California.
The Company's Chemicals manufacturing facilities are designed to
permit a high degree of flexibility as to feedstocks, product mix and product
ratios; therefore, actual plant production capacities vary according to these
factors. Management does not believe, however, that there is material excess
production capacity at the Company's Chemicals facilities.
OTHER PROPERTIES
The Company relocated its corporate offices to a newly constructed
office complex near Birmingham, Alabama late in 1998. Headquarters staffs for
the Construction Materials and Chemicals segments, the Southern Division of the
Construction Materials segment, and Vulcan Gulf Coast Materials, Inc., also are
located in this complex. The space is leased through December 31, 2013 and
consists of approximately 189,000 square feet. The annual rental for each year
in the initial 5 year period, the second 5 year period and the final 5 year
period of the lease will be approximately $3.0 million, $3.2 million and $3.4
million, respectively.
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ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits in the ordinary course
of business. It is not possible to determine with precision the probable
outcome of or the amount of liability, if any, under these lawsuits; however,
in the opinion of the Company and its counsel, the disposition of these
lawsuits will not adversely affect the consolidated financial position of the
Company to a material extent.
In the course of its Construction Materials and Chemicals operations,
the Company is subject to occasional governmental proceedings and orders
pertaining to occupational health and safety or to protection of the
environment, such as proceedings or orders relating to noise abatement, air
emissions or water discharges. As part of its continuing program of
environmental stewardship, however, the Company has been able to resolve such
proceedings and to comply with such orders without any materially adverse
effects on its business.
In 1991, the Company received notification from the State of New
Jersey Department of Environmental Protection ("NJDEP") concerning a site
located in Newark, New Jersey, which the Company previously owned and upon
which the Company operated a chemicals production facility from the early 1960s
until 1974. The notification contends that hazardous substances and pollutants
contaminate the site and that a Remedial Investigation/Feasibility Study
("RI/FS") is required in order to determine the nature and extent of such
contamination and whether a remedial action plan with respect thereto should be
developed.
On August 20, 1993, two other allegedly responsible parties,
Safety-Kleen Environsystems Company and Bristol-Meyers Squibb Company
(collectively, the "Respondents"), entered into an Administrative Consent Order
("ACO") issued by the NJDEP concerning the site. The ACO contains certain
findings of fact by the NJDEP, together with provisions governing the conduct
by the Respondents of an RI/FS for the site and remedial actions, if any,
resulting therefrom. Under a separate agreement with the Respondents and
certain successors, the Company will share in the cost of the RI/FS. The
Company has been informally advised by the NJDEP that, if the Company continues
to participate in the RI/FS, the NJDEP will not seek to enforce a directive
issued in 1991 requiring the Company to pay $1 million to the NJDEP to be used
for the conduct of the RI/FS.
Depending upon the results of the RI/FS, NJDEP will determine what
site remediation is required under the ACO, if any. In that event, it is also
likely that the Respondents or the NJDEP will assert that the Company should
bear some responsibility in connection with such remediation. At this time,
however, it is impossible to predict the ultimate outcome of this matter.
In 1994, the Environmental Protection Agency (the "EPA") notified the
Company that it was among the approximately 880 potentially responsible parties
("PRPs") under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") with respect to the Jack's Creek/Sitkin Smelting
Superfund site located in Mifflin County, Pennsylvania, on which site the now
defunct Sitkin Smelting Company operated a secondary metals smelting facility
from 1958 to 1977. The EPA claims that there are releases and threatened
releases of various hazardous substances from the Site, including lead and
other metals in soils and certain waste and dross piles, and that the PRPs are
jointly and severally responsible for the costs of response at the Site. In
addition to the EPA's claims, the Pennsylvania Department of Environmental
Protection ("PADEP") has asserted a claim for investigation and response costs
allegedly incurred at the Site, and state and federal trustees have asserted
claims for alleged natural resources damages.
In September 1994, the EPA prepared a revised volumetric ranking based
on a review of certain Sitkin Smelting Company records reflecting transactions
only in the period of 1972 to 1977. Taking into consideration that certain PRPs
are "orphans" because these parties are bankrupt, have otherwise ceased
business, or cannot be located, the EPA's volumetric ranking also reallocated
the orphan shares otherwise attributable to these non-viable parties among the
viable remaining PRPs, including the Company. The EPA has classified the
Company as among the 73 significant PRPs at the Site. The EPA considers the
remaining PRPs de minimis or de micromis parties. In 1994 and 1995, the EPA
negotiated and entered into cash payment or separate settlements with over 160
of the de minimis parties. Approximately 240 other de minimis parties then
chose not to participate in settlement. The EPA has classified some 325
entities as de micromis parties. The EPA does not intend to pursue these de
micromis parties because of their allegedly small respective contributions to
the total volume of material shipped to the Site.
7
12
In September 1997, the EPA issued a Record of Decision ("ROD") for the
Site, which selected a remedy consisting of: (1) excavation of contaminated
soil from flood plains and uplands; (2) consolidation and capping of
contaminated soils and certain waste piles under a multi-layer cap; (3) removal
of certain contaminated sediments from Jack's Creek; and (4) excavation and
off-site treatment and disposal of soils with lead levels above 40,000 part per
million. The EPA estimated the capital cost of the remedy at $10,335,000, with
annual operation and maintenance costs of $164,000, computing to a total
present net worth of $12,500,000; however, there remain several uncertainties
and contingencies regarding this estimate.
Contemporaneous with issuing the ROD, the EPA issued "special notice
letters" to the Company and several hundred other PRPs, inviting "good faith"
offers to perform the remedy and pay response costs relating to the Site. The
special notice letter indicated that under the EPA's orphan share policy, for
those PRPs who agree to perform the remedy, the EPA would be prepared to forgo
recovery of up to $3.125 million in past costs and future oversight costs.
The Company and over 30 other PRPs have signed a PRP Organization
Agreement, forming the Jack's Creek PRP Group (the "PRP Group") to respond to
the claims asserted by the EPA, PADEP and others. In December 1998, the PRP
Group completed settlement negotiations with the EPA, the U.S. Department of
Justice, and PADEP, culminating in a proposed Consent Decree, which is to be
lodged with the U.S. District Court, wherein the PRP Group commits to design
and implement the remedy outlined in the ROD. In consideration of that
commitment, the EPA will forgive the unreimbursed past response costs it
allegedly incurred and certain future oversight costs it expects to incur. The
Consent Decree also incorporates both the PRP Group's settlement of PADEP's
claims for past response costs and future oversight costs and a settlement
between the PRP Group and some 100 de minimis parties. These de minimis
settlers will pay approximately $3.2 million into a "special fund" held by EPA,
95% of which amount will be available to reimburse the PRP Group for costs
incurred in design and implementation of the remedy. The Consent Decree does
not include any settlement of natural resource damage claims.
In January 1999, the PRP Group executed an Amended and Restated
Contribution Agreement, under which the costs of implementing the remedy under
the Consent Decree will be allocated among the PRP Group members; the Company's
allocated share is 1.96%. Concurrently, the PRP Group executed a settlement
agreement with the current owner and operator of the Site, providing for the
owner/operator's contribution of certain in-kind services and materials toward
performance of the remedy.
At present, the Company is not able to predict the likelihood of
either a favorable or unfavorable outcome as to the matters described above, or
the amount of potential loss in the event of any unfavorable outcome; however,
the Company does not believe that any such loss would affect the consolidated
financial statements of the Company to a material extent.
The Company's subsidiary, CalMat Co., which was acquired in January
1999, received a federal grand jury subpoena in 1998 requesting information
concerning its Fresno, California, asphalt operations. CalMat Co. is currently
providing information in response to the subpoena. Also, CalMat Co. has been
informed that it is a target of an investigation by the U.S. Department of
Justice, Antitrust Division, regarding possible violations of antitrust laws
regarding these operations for certain years prior to 1998. Based on information
available to it at this time, the Company does not anticipate that the outcome
of this investigation will have a material adverse effect on its consolidated
financial statements.
Note 10, Other Commitments and Contingent Liabilities on page 53 of
the Company's 1998 Annual Report to Shareholders is hereby incorporated by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the Company's security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1998.
8
13
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions and ages of the executive officers of the Company
are as follows:
NAME POSITION AGE
Donald M. James Chairman and Chief Executive Officer 50
Peter J. Clemens, III Executive Vice President, Finance & Administration and Treasurer 55
Guy M. Badgett, III Senior Vice President-Construction Materials, East and
President, Southeast Division 50
William F. Denson, III Senior Vice President, Law and Secretary 55
Robert A. Wason IV Senior Vice President, Corporate Development 47
Richard K. Carnwath Vice President, Planning and Development 50
J. Wayne Houston Vice President, Human Resources 49
Ejaz A. Khan Vice President and Controller 42
John A. Heilala President, Chloralkali Business Unit 58
John L. Holland President, Performance Systems Business Unit 56
William L. Glusac President, Midwest Division 48
Daniel J. Leemon President, Midsouth Division 60
Ronald G. McAbee President, Mideast Division 52
Thomas R. Ransdell President, Southwest Division 56
Daniel F. Sansone President, Vulcan Gulf Coast Materials Division 46
James W. Smack President, CalMat Division 55
The principal occupations of the executive officers during the past
five years are set forth below:
Donald M. James, was elected Chairman of the Board of Directors in May
1997. He became President and Chief Executive Officer in February 1997. He was
elected President and Chief Operating Officer in February 1996. In January
1994, Mr. James was elected President of the Southern Division and in August
1995, he was also elected Senior Vice President, South, Construction Materials
Group.
Peter J. Clemens, III, was elected Executive Vice President, Finance
and Administration and Treasurer in May 1997. He served as Executive Vice
President and Chief Administrative Officer from May 1996 to May 1997. Prior to
that time he served as Senior Vice President, West, Construction Materials
Group and Senior Vice President, Finance.
Guy M. Badgett, III, was elected Senior Vice President, Construction
Materials, East in February 1999. He was elected Chairman, Southern Division in
May 1997. He has served as President, Southeast Division, since 1992.
9
14
William F. Denson, III, was elected Senior Vice President, Law in
February 1998. Prior to that date he served as Vice President-Law. He has also
served as Secretary since April 1981.
Robert A. Wason IV was elected Senior Vice President, Corporate
Development in December 1998. From 1996 until 1998 he served as President,
Performance Systems Business Unit Prior to that time he had served as Executive
Vice President, Performance Systems.
Richard K. Carnwath has served as Vice President, Planning and
Development since 1985.
J. Wayne Houston was elected Vice President, Human Resources in
October 1997. Prior to that time he served as Director of Compensation and
Benefits.
Ejaz A. Khan was elected Vice President and Controller in February
1999. He has served as Controller since September of 1995 and prior to that
time he served as Controller, Chemicals Division.
John A. Heilala has served as President, Chloralkali Business Unit
since May 1996. From 1994 until 1996, he served as Executive Vice President,
Chloralkali, and prior to that time he served as Vice President, Manufacturing,
Chemicals Division.
John L. Holland joined the Company in December 1998 as President,
Performance Systems Business Unit. From August 1995 to October 1998 he served
as President of BetzDearborn Water Management Group and Group Vice President,
BetzDearborn, Inc. From April 1994 to August 1995 he served as Senior Vice
President Betz Labs, Inc.
and President Betz PaperChem, Inc.
William L. Glusac has served as President, Midwest Division, since
1994. Prior to that time he served as President, Southwest Division.
Daniel J. Leemon has served as President, Midsouth Division, since
1993. Prior to that time he served as Senior Vice President, West, Construction
Materials Group.
Ronald G. McAbee was appointed President of Mideast Division in
January 1999. Prior to that time he served as Vice President, East Region of
the Midsouth Division.
Thomas R. Ransdell has served as President, Southwest Division since
1994. He also served as President, Vulcan Gulf Coast Materials, Inc., from 1987
to May 1997.
Daniel F. Sansone was elected, President, Vulcan Gulf Coast Materials
Division in May 1997. From January 1994 to May 1997, he served as Vice
President, Finance. Prior to that time he served as Vice President and
Controller.
James W. Smack was appointed President of CalMat Division effective
January 1999. Prior to that time he served as President, Mideast Division.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("VMC"). As of February 26, 1999, the number of shareholders of record
approximated 3,609. The closing price of the Common Stock on the New York Stock
Exchange on February 26, 1999, was $44.917, which price reflects a
three-for-one stock split effected on March 10, 1999. The prices in the
following table represent the high and low sales prices for the Company's
Common Stock as reported on the New York Stock Exchange, which prices have been
adjusted to reflect the three-for-one split of the Company's Common Stock on
March 10, 1999.
10
15
QUARTER ENDED 1998 1997
--------------- ---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
March 31 $ 37.83 $ 31.50 $ 22.17 $ 18.42
June 30 39.90 34.83 26.88 20.42
September 30 40.75 33.63 30.15 26.13
December 31 44.67 31.33 34.65 28.15
Dividends paid in 1998 totaled $70,015,000, as compared with
$63,622,000 paid in 1997. On February 12, 1999, the Board of Directors
authorized a quarterly dividend of $.195 per share of Common Stock payable
March 10, 1999 to holders of record on February 24, 1999. This quarterly
dividend represents a 12.5% increase over quarterly dividends paid in 1998,
adjusted to reflect the stock split referenced above.
The Company's policy is to pay out a reasonable share of net cash
provided by operating activities as dividends, consistent on average with the
payout record of past years, and consistent with the goal of maintaining debt
ratios within prudent and generally acceptable limits. The future payment of
dividends, however, will be within the discretion of the Board of Directors of
the Company and depends on the Company's profitability, capital requirements,
financial condition, growth, business opportunities and other factors which the
Board of Directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of operations, per share data and balance sheet
data for each of the 5 years ended December 31, 1998 set forth below have been
derived from the audited consolidated financial statements of the Company. The
following data should be read in conjunction with the consolidated financial
statements of the Company and notes to consolidated financial statements on
pages 36 through 40 and 46 through 55 of the Company's 1998 Annual Report to
Shareholders, which are incorporated herein by reference.
Year Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------
(Amounts in millions, except per share date)
Net sales............................ $ 1,776.4 $ 1,678.6 $ 1,568.9 $ 1,461.0 $ 1,253.4
Net earnings......................... $ 255.9 $ 209.1 $ 188.6 $ 166.2 $ 98.0
Net earnings per:
Basic shares outstanding.......... $ 2.54 $ 2.06 $ 1.81 $ 1.56 $ 0.90
Diluted shares outstanding........ $ 2.50 $ 2.03 $ 1.79 $ 1.54 $ 0.89
Total assets......................... $ 1,658.6 $ 1,449.2 $ 1,320.6 $ 1,215.8 $ 1,181.1
Long-term obligations................ $ 76.5 $ 81.9 $ 85.5 $ 90.3 $ 97.4
Cash dividends declared per share.... $ 0.69 $ 0.62 $ 0.56 $ 0.49 $ 0.44
ALL SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED TO REFLECT THE THREE-FOR-ONE
SPLIT OF THE COMPANY'S COMMON STOCK, WHICH WAS EFFECTED ON MARCH 10, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 41 through 45 and "Financial Terminology" on page
65 of the Company's 1998 Annual Report to Shareholders are incorporated herein
by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 44 and 45 of the Company's 1998 Annual Report
to Shareholders is incorporated herein by reference.
11
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information relative to this item is included in the
Company's 1998 Annual Report to Shareholders on the pages shown below, which
are incorporated herein by reference:
PAGE
Consolidated Financial Statements 37-40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting and Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of
the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 3, 7, 7A, 8 and 14, the
Company's 1998 Annual Report to Shareholders is not deemed filed as part of
this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No information is required to be included herein pursuant to Item 304
of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On or before March 31, 1999, the Company will file a definitive proxy
statement with the Securities and Exchange Commission pursuant to Regulation
14A (the Company's "1999 Proxy Statement"). The information under the headings
"Election of Directors," "Nominees for Election to the Board of Directors" and
"Directors Continuing in Office" included in the 1999 Proxy Statement are
incorporated herein by reference. For the information required by Item 401 of
Regulation S-K concerning executive officers of the registrant, reference is
made to the information provided in Part I, Item 4(a) of this Annual Report on
Form 10-K. Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 240.16a-3(e) during 1998, and of Form
5 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e)
with respect to 1998, the Company has not identified any persons subject to
Section 16(a) of the Securities Exchange Act of 1934 who failed to file on a
timely basis required forms. The information set forth under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" included in the
Company's 1999 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "Compensation of Directors,"
"Executive Compensation," "Option Grants in 1998," "Report of the Compensation
Committee," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values," "Shareholder Return Performance Presentation," "Retirement
Income Plan" and "Employee Special Severance Plan" included in the Company's
1999 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Holdings of Management" included in the
Company's 1999 Proxy Statement is incorporated herein by reference.
12
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
An executive officer of the Company, Daniel F. Sansone, serves as the
chief executive officer of three companies in which the Company has a 51%, 50%
and 49% interest, respectively. Each of the companies reimburses the Company
for a portion of Mr. Sansone's salary and bonus. In 1998, the total amount of
this reimbursement was $154,000.
On January 6, 1999, the Company entered into a Consulting Agreement
with A. Frederick Gerstell, the vice chairman and a director of the Company.
Mr. Gerstell was the former chairman and chief executive officer of CalMat Co.,
which the Company acquired in early 1999. Pursuant to the Agreement, Mr.
Gerstell shall receive a monthly retainer of $10,600 per month for 17 months in
exchange for his consulting services. Mr. Gerstell also received a grant of
7,500 restricted shares of Common Stock on January 6, 1999. He will receive an
additional grant of 3,126 restricted shares on January 6, 2000, subject to
certain conditions.
Other than the foregoing, no information is required to be included
herein pursuant to Item 404 of Regulation S-K, which requires disclosure of
certain information with respect to certain relationships or related
transactions of the directors and management.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following financial statements are included in the Company's 1998
Annual Report to Shareholders on the pages shown below and are incorporated
herein by reference:
PAGE
Consolidated Statements of Earnings 37
Consolidated Balance Sheets 38
Consolidated Statements of Cash Flows 39
Consolidated Statements of Shareholders' Equity 40
Notes to Consolidated Financial Statements 46-55
Management's Responsibility for Financial Reporting and
Internal Control 36
Independent Auditors' Report 36
Net Sales, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of
the 2 Years Ended December 31, 1998 and 1997 (Unaudited) 63
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for the years ended
December 31, 1998, 1997 and 1996 is included in Part IV of this report on the
indicated pages:
Schedule II Valuation and Qualifying Accounts and Reserves 17
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is provided in the
financial statements or notes thereto.
13
18
Financial statements (and summarized financial information) of 50% or
less owned entities accounted for by the equity method have been omitted
because they do not, considered individually or in the aggregate, constitute a
significant subsidiary.
(A) (3) EXHIBITS
The exhibits required by Item 601 of Regulation S-K and indicated
below, other than Exhibit (12) which is on page 18 of this report, are either
incorporated by reference herein or accompany the copies of this report filed
with the Securities and Exchange Commission and the New York Stock Exchange.
Copies of such exhibits will be furnished to any requesting shareholder of the
Company upon payment of the costs of copying and transmitting the same.
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company.
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 12, 1999.
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and
among the Company, Goldman, Sachs & Co., Lehman Brothers and
Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3
filed on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the
Company and First Trust of New York (as successor trustee to
Morgan Guaranty Trust Company of New York) filed as Exhibit 4
to the Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended
and restated filed as Exhibit 10(a) to the Company's 1989
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy
statement for the annual meeting of its shareholders held May
16, 1991 (File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried
Employees filed as Exhibit 10(d) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not
Employees of the Company, as last amended and restated on
February 17, 1996 filed as Exhibit 10(g) to the Company's
1995 Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of
the Company filed as Exhibit 10(i) to the Company's 1997 Form
10-K Annual Report (File No. 1-4033).**
14
19
EXHIBIT (10)(J) Executive Deferred Compensation Plan.**
EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.**
EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated
January 6, 1999.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1998 (set forth on page 18 of
this report).
EXHIBIT (13) The Company's 1998 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998.
EXHIBIT (23) Consent of Deloitte & Touche LLP
EXHIBIT (24) Powers of Attorney
EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic
Submission Only).
EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic
Submission Only).
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1998, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1999,
as permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
*Incorporated by reference.
**Management Contract or Compensatory Plan.
(B) REPORTS ON FORM 8-K
The following sets forth information concerning Forms 8-K filed during
the fourth quarter ended December 31, 1998:
1. On October 19, 1998, the Company filed a Form 8-K reporting that
the Company's Board of Directors adopted a Shareholder Rights Plan.
2. On November 16, 1998, the Company filed a Form 8-K reporting that
the Company had entered into a definitive merger agreement providing for the
acquisition of CalMat Co. by the Company.
15
20
INDEPENDENT AUDITORS' REPORT
Vulcan Materials Company:
We have audited the consolidated financial statements of Vulcan Materials
Company and its subsidiary companies as of December 31, 1998, 1997 and 1996 and
for the years then ended, and have issued our report thereon dated February 5,
1999 (March 10, 1999 as to Note 15B); such consolidated financial statements
and report are included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Vulcan Materials Company and its subsidiary
companies, listed in Item 14. This consolidated financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements as a whole, presents fairly in all material
respects the information shown therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Birmingham, Alabama
February 5, 1999
16
21
SCHEDULE II
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 1998, 1997 and 1996
Amounts in Thousands
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------------------------------------------------------------------------------------
Balance at Additions Charges to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions Of Period
- -----------------------------------------------------------------------------------------------------------------------------
1998
Accrued Environmental Costs...................... $ 4,285 $ 6,848 $ 7,160 (1) $3,973
Doubtful Receivables............................. 7,548 1,312 1,469 (2) 7,391
All Other(3)..................................... 1,374 2,282 1,698 1,958
1997
Accrued Environmental Costs...................... $ 3,732 $ 1,069 $ 516 (1) $4,285
Doubtful Receivables............................. 8,106 885 1,443 (2) 7,548
All Other(3)..................................... 1,687 2,010 $ 208 2,531 1,374
1996
Accrued Environmental Costs...................... $ 2,765 $ 285 $ 3,000 $ 2,318 (1) $3,732
Doubtful Receivables............................. 8,176 732 802 (2) 8,106
All Other(3)..................................... 1,395 1,794 1,502 1,687
(1) Expenditures on environmental remediation projects.
(2) Write-offs of uncollected accounts and worthless notes, less
recoveries.
(3) Valuation and qualifying accounts and reserves for which additions,
deductions and balances are not individually significant.
17
22
EXHIBIT 12
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31
Amounts in Thousands
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Fixed charges:
Interest expenses before capitalization
Credits ................................. $ 7,224 $ 8,074 $ 9,263 $ 11,396 $ 10,699
Amortization of financing costs .......... 93 104 164 109 114
One-third of rental expense .............. 13,668 9,735 9,663 9,532 10,393
---------------------------------------------------------------------
Total fixed charges ................ $ 20,985 $ 17,913 $ 19,090 $ 21,037 $ 21,206
=====================================================================
Net earnings ................................ 255,908 209,145 188,595 166,240 97,976
Provisions for income taxes ................. 118,936 91,356 96,985 92,181 47,930
Fixed charges ............................... 20,985 17,913 19,090 21,037 21,206
Capitalized interest credits ................ (442) (1,160) (627) (297) (878)
Amortization of capitalized interest ........ 715 708 674 1,031 997
----------------------------------------------------------------------
Earnings before income taxes as
adjusted ................................ $ 396,102 $ 317,962 $ 304,717 $ 280,192 $ 167,231
======================================================================
Ratio of earnings to fixed charges .......... 18.9 17.8 16.0 13.3 7.9
18
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 19, 1999.
VULCAN MATERIALS COMPANY
By /s/ D. M. JAMES
---------------------------------
D. M. James
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ D. M. James
- ----------------------------------- Chairman and Chief Executive Officer March 19, 1999
D. M. James (Principal Executive Officer)
/s/ P.J. Clemens, III
- ----------------------------------- Executive Vice President, Finance March 19, 1999
P.J. Clemens, III and Administration and Treasurer
(Principal Financial Officer)
/s/ E.A. Khan
- ----------------------------------- Vice President, Controller March 19, 1999
E.A. Khan (Principal Accounting Officer)
The following directors:
Marion H. Antonini Director
Livio D. DeSimone Director
A. Frederick Gerstell Director
John K. Greene Director
Douglas J. McGregor Director
Ann D. McLaughlin Director
James V. Napier Director
Donald B. Rice Director
Herbert A. Sklenar Director
Orin R. Smith Director
By /s/ William F. Denson, III March 19, 1999
--------------------------------
William F. Denson, III
Attorney-in-Fact
19
24
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OF
VULCAN MATERIALS COMPANY
FILED MARCH 19, 1999
COMMISSION FILE NUMBER 1-4033
25
EXHIBIT INDEX
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company.
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 12, 1999.
EXHIBIT (4)(A) Distribution Agreement dated as of May 14, 1991, by and among
the Company, Goldman, Sachs & Co., Lehman Brothers and
Salomon Brothers Inc., filed as Exhibit 1 to the Form S-3
filed on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (4)(B) Indenture dated as of May 1, 1991, by and between the Company
and First Trust of New York (as successor trustee to Morgan
Guaranty Trust Company of New York) filed as Exhibit 4 to the
Form S-3 on May 2, 1991 (Registration No. 33-40284).*
EXHIBIT (10)(A) The Management Incentive Plan of the Company, as last amended
and restated filed as Exhibit 10(a) to the Company's 1989
Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(B) The 1991 Long-Range Performance Share Plan of the Company
filed as Exhibit A to the Company's definitive proxy
statement for the annual meeting of its shareholders held May
16, 1991 (File No. 1-4033).**
EXHIBIT (10)(C) The Employee Special Severance Plan of the Company filed as
Exhibit 10(g) to the Company's 1989 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(D) The Unfunded Supplemental Benefit Plan for Salaried Employees
filed as Exhibit 10(d) to the Company's 1989 Form 10-K Annual
Report (File No. 1-4033).**
EXHIBIT (10)(E) The 1983 Long-Term Incentive Plan, as last amended and
restated, filed as Exhibit 10(f) to the Company's 1989 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(F) The Deferred Compensation Plan for Directors Who Are Not
Employees of the Company, as last amended and restated on
February 17, 1996 filed as Exhibit 10(g) to the Company's
1995 Form 10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(G) The 1996 Long-Term Incentive Plan of the Company filed as
Exhibit 10(h) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(H) The Directors Deferred Stock Plan of the Company filed as
Exhibit 10(i) to the Company's 1995 Form 10-K Annual Report
(File No. 1-4033).**
EXHIBIT (10)(I) The Restricted Stock Plan for Nonemployee Directors of the
Company filed as Exhibit 10(i) to the Company's 1997 Form
10-K Annual Report (File No. 1-4033).**
EXHIBIT (10)(J) Executive Deferred Compensation Plan.**
EXHIBIT (10)(K) Unfunded Supplemental Benefit Plan for Salaried Employees.**
EXHIBIT (10)(L) Consulting Agreement with A. Frederick Gerstell dated
January 6, 1999.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1998 (set forth on page 18 of
this report).
26
EXHIBIT (13) The Company's 1998 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1998.
EXHIBIT (23) Consent of Deloitte & Touche LLP
EXHIBIT (24) Powers of Attorney
EXHIBIT (27)(A) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27)(B) Restated Financial Data Schedule for 1997 (Electronic
Submission Only).
EXHIBIT (27)(C) Restated Financial Data Schedule for 1996 (Electronic
Submission Only).
Information, financial statements and exhibits required by Form 11-K
with respect to the Company's Thrift Plan for Salaried Employees, Construction
Materials Divisions Hourly Employees Savings Plan and Chemicals Division Hourly
Employees Savings Plan, for the fiscal year ended December 31, 1998, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1999,
as permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
*Incorporated by reference.
**Management Contract or Compensatory Plan.