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 Annual Report on Form 10-K for the year ended December 31, 2006 (Form 10-K) and Current Report on Form 8-K filed on July 12, 2007 updating the historical financial statements included in our Form 10-K for the retrospective application of a change in accounting principle, as described in Note 2 (FSP AUG AIR-1 caption).

Due to the 2005 sale of our Chemicals business, as presented in Note 3, the operating results of the Chemicals business have been presented as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings.

FIN 48 — On January 1, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, the financial statement effects of a tax position should initially be recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

As a result of the implementation of FIN 48, we increased the liability for unrecognized tax benefits by $2,420,000, increased deferred tax assets by $1,480,000 and reduced retained earnings as of January 1, 2007 by $940,000. The total liability for unrecognized tax benefits as of January 1, 2007, amounted to $11,760,000.

We recognized net adjustments to decrease our liability for prior year unrecognized tax benefits of $1,310,000by $2,665,000 during the secondthird quarter of 2007 and $1,860,000$805,000 during the first halfnine months of 2007. As of JuneSeptember 30, 2007, our total liability for unrecognized tax benefits amounts to $13,620,000,$10,955,000, of which $11,860,000$8,727,000 would affect the effective tax rate if recognized.

We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our total liability for unrecognized tax benefits were $2,670,000$2,490,000 as of JuneSeptember 30, 2007 and $2,060,000 as of January 1, 2007.

The U.S. Federal statute of limitations expiresexpired during the third quarter of 2007 for our 2002 and 2003 tax years. However, onyears resulting in a $5,660,000 decrease in our U.S. consolidated corporation incomeliability, with no significant decrease in any single tax returns for those years, weposition. We anticipate having no single tax position generating a significant increase or decrease in our liability for unrecognized tax benefits within 12 months of this reporting date.

We file income tax returns in the U.S. federal and various state jurisdictions and one foreign jurisdiction. Generally, we are not subject to changes in income taxes by any taxing jurisdiction for the years prior to 2002.

FSP AUG AIR-1 — On January 1, 2007, we adopted FASB Staff Position (FSP) No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities” (FSP AUG AIR-1). This FSP amended certain provisions in the American Institute of Certified Public Accountants Industry Audit Guide, “Audits of Airlines” (Airline Guide). The Airline Guide is the principal source of guidance on the accounting for planned major maintenance activities and permits four alternative methods of accounting for such activities. This guidance principally affects our accounting for periodic overhauls on our oceangoing vessels. Prior to January 1, 2007, we applied the accrue-in-advance method as permitted by the Airline Guide, which allowed for the accrual of estimated costs for the next scheduled overhaul over the period leading up to the overhaul. At the time of the overhaul, the actual cost of the overhaul was charged to the accrual, with any deficiency or excess charged or credited to expense. FSP AUG AIR-1 prohibits the use of the accrue-in-advance method, and was effective for fiscal years beginning after December 15, 2006. Accordingly, we adopted this FSP effective January 1, 2007, and have elected to use the deferral method of accounting for planned major maintenance as permitted by the Airline Guide and allowed by FSP AUG AIR-1. Under the deferral method, the actual cost of each overhaul is capitalized when incurred and amortized over the period until the next overhaul. Additionally, the FSP must be applied retrospectively to the beginning of the earliest period presented in the financial statements. As a result of the retrospective application of this change in accounting standard,principle, we have adjusted our financial statements for all prior periods presented to reflect using the deferral method of accounting for planned major maintenance.

The following table reflects the effect of the retrospective application of FSP AUG AIR-1 on our Condensed Consolidated Balance Sheet (in thousands of dollars):

The following tables reflect the effect of the retrospective application of FSP AUG AIR-1 on our Condensed Consolidated Statements of Earnings (in thousands of dollars, except per share data):

During the second quarter of 2006, we determined that the cumulative undistributed earnings at a certain wholly owned foreign subsidiary would be indefinitely reinvested offshore, and accordingly reversed the associated deferred tax liability pursuant to Accounting Principles Board Opinion No. 23, “Accounting for Income Taxes — Special Areas.” One result of the retrospective application of FSP AUG AIR-1 was an increase in the cumulative undistributed earnings at this foreign subsidiary, and an increase in the associated cumulative deferred tax liability. Consistent with our prior determination that the cumulative undistributed earnings would be indefinitely reinvested offshore, the deferred tax liability arising from the retrospective adjustments was reversed, resulting in the net favorable adjustmentsadjustment to the provision for income taxes for the three and sixnine months ended JuneSeptember 30, 20072006 of $2,766,000 and $2,673,000, respectively.$2,661,000.

In June 2005, we sold substantially all the assets of our Chemicals business, known as Vulcan Chemicals, to Basic Chemicals, a subsidiary of Occidental Chemical Corporation. These assets consisted 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 purchaser also assumed certain liabilities relating to the Chemicals business, including the obligation to monitor and remediate all releases of hazardous materials at or from the Wichita, Geismar and Port Edwards plant facilities. The decision to sell the Chemicals business was based on our desire to focus our resources on the Construction Materials business.

In consideration for the sale of the Chemicals business, Basic Chemicals made an initial cash payment of $214,000,000. Concurrent with the sale transaction, we acquired the minority partner’s 49% interest in the joint venture for an initial cash payment of $62,701,000, and conveyed such interest to Basic Chemicals. The net initial cash proceeds of $151,299,000 were subject to adjustments for actual working capital balances at the closing date, transaction costs and income taxes. In September 2006 we received additional cash proceeds of $10,202,000 related to adjustments for the actual working capital balance at the closing date.

Basic Chemicals has completed payments under one earn-out agreement and is required to make additional payments under twoa separate earn-out agreementsagreement subject to certain conditions. The first earn-out agreement iswas based on ECU (electrochemical unit) and natural gas prices during the five-year period beginning July 1, 2005, and iswas capped at $150,000,000 (ECU earn-out or ECU derivative). During the third quarter of 2007, we received the final payment under the ECU earn-out of $22,142,000, bringing cumulative cash receipts to the $150,000,000 cap. The ECU earn-out iswas accounted for as a derivative instrument; accordingly, it iswas reported at fair value. Changes to the fair value of the ECU derivative if any, arewere recorded within continuing operations pursuant to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin Topic 5:Z:5, “Classification and Disclosure of Contingencies Relating to Discontinued Operations” (SAB Topic 5:Z:5). Proceeds under the second earn-out agreement are determined based on the performance of the hydrochlorocarbon product HCC-240fa (commonly referred to as 5CP) from the closing of the transaction through December 31, 2012 (5CP earn-out). Under this earn-out agreement, cash plant margin for 5CP, as defined in the Asset Purchase Agreement, in excess of an annual threshold amount is shared equally between Vulcan and Basic Chemicals. The primary determinant of the value for this earn-out is the level of growth in 5CP sales volume.

The fair value of the consideration received in connection with the sale of the Chemicals business, including past and anticipated future cash flows from the two earn-out agreements, is expected to exceed the net carrying value of the assets and liabilities sold. However, SFAS No. 5, “Accounting for Contingencies,” precludes the recognition of a contingent gain until realization is assured beyond a reasonable doubt. Accordingly, no gain was recognized on the Chemicals sale and the value recorded at the June 7, 2005 closing date referable to these two earn-outs was limited to $128,167,000.

As described in Note 19, we were named one of several defendants in a claim filed by the city of Modesto, California for alleged contamination from a dry cleaning compound, perchloroethylene, produced by several manufacturers, including our former Chemicals business. During the third quarter of 2007, we settled with the city and recorded an additional $14.1 million of pretax charges, including legal defense costs, in discontinued operations. The 2007 and 2006prior year’s third quarter includes pretax charges, including legal defense costs, of $8.4 million related to the same litigation that ultimately resulted in the settlement during the third quarter of 2007. The remaining losses from discontinued operations primarily reflect charges related to other general and product liability costs and environmental remediation costs associated with our former Chemicals businesses.

We report two 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 set forth below (in thousands of shares):

to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.

Earnings. During the third quarter of 2007, we received the final payment under the ECU earn-out of $22,142,000, bringing cumulative cash receipts to the $150,000,000 cap.

During Maythe second and Junethird quarter of 2007, we entered into eleventhirteen forward starting interest rate swap agreements for a total notional amount of $1.1 billion.$1,225.0 million. The objective of these swap agreements is to hedge against the variability of forecastedfuture interest payments attributable to changes in interest rates on a portion of the anticipated fixed-rate debt issuance in 2007 to fund the cash portion of the acquisition of Florida Rock (see Note 20 for details). As of JuneSeptember 30, 2007, we had entered into five 5-year swap agreements with a blended swap rate of 5.25%5.27% on an aggregate notional amount of $500 million, and six 10-year swap agreements with a blended swap rate of 5.57%5.59% on an aggregate notional amount of $600 million and two 30-year swap agreements with a blended swap rate of 5.83% on an aggregate notional amount of $125 million. EachOur actual interest cost will be based on these blended swap agreement reflectsrates and credit spreads to which we are exposed. During the fourth quarter, we extended each of the thirteen outstanding swap agreements from their initial or previously extended termination date to reflect a mandatory earlynew termination date of August 30, 2007, at which timeDecember 14, 2007.

Also during the fourth quarter, we expect that the swaps will be settled in cash for their then fair value. However, if the Florida Rock acquisition does not close prior to August 30, or if we choose to issue the aforementioned fixed-rate debt after that date, then we plan to roll theentered into two additional forward starting interest rate swap agreements forwardwith termination dates of December 14, 2007 and a combined notional amount of $275.0 million, bringing the total notional amount for all of our swap agreements to coincide with$1.5 billion. The combined effect of entering into these new swap agreements and extending the remaining swap agreements to reflect a new, targeted debt issuance date.termination date of December 14, 2007, was to increase the blended swap rate on the 5-year swap agreements to 5.29%, increase the aggregate notional amount of the 10-year swap agreements to $750 million and reduce the related blended swap rate to 5.51%, and increase the aggregate notional amount of the 30-year swap agreements to $250 million and reduce the related blended swap rate to 5.58%.

We have designated these swap agreements as cash flow hedges pursuant to Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133). Accordingly, the fair values of the swaps are recorded as an asset or liability in the accompanying JuneSeptember 30, 2007 Condensed Consolidated Balance Sheet, withSheet. To the extent these cash flow hedges are effective, changes in their fair value are recorded directly in shareholders’ equity, net of tax, as other comprehensive income or loss. Any ineffectiveness is recorded as a gain or loss in current earnings. On the date the swaps terminate, either by their terms or earlier if we choose to issue the aforementioned fixed rate debt prior to December 14, 2007, they will be settled in cash for their then fair value. The amounts, if any, accumulated in other comprehensive income when the swaps settle will be amortized into earnings as an adjustment to interest expense over the applicable term of the anticipated debt issuance.

At JuneSeptember 30, 2007, we recognized assets totaling $14,211,000$107,000 (included in other noncurrent assets) and, liabilities totaling $3,141,000$33,906,000 (included in other noncurrent liabilities), and an accumulated other comprehensive loss of $19,114,000, net of tax of $12,783,000, in the accompanying JuneSeptember 30, 2007 Condensed Consolidated Balance Sheet related to these interest rate swap agreements, andagreements. During the third quarter of 2007, we recognized a gainloss of $6,634,000$25,748,000 in other comprehensive income, net of tax of $17,220,000.

During the three and nine months ended September 30, 2007, we recognized a deferred tax liabilityloss of $4,437,000.

Comprehensive income includes charges and credits to equity from nonowner sources and comprises two subsets: net earnings and other comprehensive income.income (loss). Total comprehensive income comprises the following (in thousands of dollars):

The following tables set forth the components of net periodic benefit cost (in thousands of dollars):