1
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, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-4033
----------
VULCAN MATERIALS COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 63-0366371
- --------------------------------------------- ------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
ONE METROPLEX DRIVE, BIRMINGHAM, ALABAMA 35209
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 877-3000
--------------
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
- ------------------------------------- --------------------------------------
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
--- ---
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.
---
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 27,
1998: $3,343,016,477.
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 27, 1998: 33,567,727 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the year
ended December 31, 1997, 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 8, 1998, are incorporated
by reference into Part III of this Annual Report on Form 10-K.
2
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, 1997 REPORT
1. Business (Financial Results by Segment Financial Data for the 3 Years Ended
Business Segments) December 31, 1997 55
Note 12, Segment Data 71
Note 14, Acquisitions 72
3. Legal Proceedings Note 10, Other Commitments and Contingent Liabilities 70
7. Management's Discussion and Management's Discussion and Analysis of
Analysis of Financial Condition Financial Condition and Results of Operations 48-54
and Results of Operations
Financial Terminology 79
8. Financial Statements and Consolidated Statements of Earnings 44
Supplementary Data Consolidated Balance Sheets 45
Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting
and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial
Data for Each of the 2 Years Ended December 31,
1997 and 1996 (Unaudited) 77
14. Exhibits, Financial Statement Consolidated Statements of Earnings 44
Schedules and Reports on Consolidated Balance Sheets 45
Form 8-K Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting
and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial
Data for Each of the 2 Years Ended December 31,
1997 and 1996 (Unaudited) 77
HEADING IN PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1998
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 1997; 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
and Management
3
VULCAN MATERIALS COMPANY
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
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
4 a. Executive Officers of the Registrant 8
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
8 Financial Statements and Supplementary Data 11
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 12
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 13
-- Signatures 19
4
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 for 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 $1,142,000 in 1995,
$1,091,000 in 1996 and $1,281,000 in 1997 on research and development activities
for its Construction Materials segment. The Company spent approximately
$9,159,000 in 1995, $7,939,000 in 1996 and $9,474,000 in 1997 on research and
development activities for its Chemicals segment.
The Company estimates that capital expenditures for environmental
control facilities in the current fiscal year (1998) and the succeeding fiscal
year (1999) will be approximately $3,733,000 and $1,798,000, respectively, for
the Construction Materials segment, and $4,393,000 and $4,437,000, 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 difficulty in
obtaining the required sources of energy required for its operations.
In 1997, the Construction Materials segment employed an average of
approximately 5,399 people. The Chemicals segment employed an average of
approximately 1,619 people. The Company's corporate office employed an average
of approximately 162 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 crushed stone, sand, gravel, rock asphalt and crushed
slag (a by-product of steel production). Crushed stone constituted approximately
79% of the dollar volume of the Construction Materials segment's 1997 sales, as
compared to 79% in 1996 and 77% in 1995. Construction aggregates of suitable
characteristics are employed in virtually all types of construction, including
highway construction and maintenance, and in the production of asphaltic and
portland cement concrete mixes. They also are widely used as railroad track
ballast.
1
5
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 18 states primarily in the
Southeast, Midwest and Southwest regions of the United States and in the
District of Columbia.
During 1997, the Company acquired four quarries in Arkansas, Georgia
and Texas and a sand and gravel operation in Illinois.
Shipments to customers of all construction aggregates from the
Company's domestic operations in 1997 totaled approximately 155 million tons,
with crushed stone shipments to customers accounting for approximately 146
million tons.
In 1997, the Company, directly or through joint ventures, operated 132
permanent crushed stone plants in 13 states and Mexico for the production of
crushed limestone and granite with estimated reserves totaling approximately 8.2
billion tons.
In 1997, the Company, directly or through joint ventures, operated 12
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 60 million tons.
Other Construction Materials products and services include asphaltic
concrete, 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 chloralkali 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 the Unit's line of chlorinated hydrocarbons,
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 kraft and sulfite pulping process. 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
2
6
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 ranging from clay-based catalysts to
agricultural herbicides. 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 and
perchloroethylene 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.
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, food and
beverage processing and pulp and paper industries. This subsidiary 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 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 customers
currently accounting for approximately 5% of the sales of the Company's
Chemicals segment.
The Company's underground reserves of salt, which is 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 described by the EPA. If the results of the RFI determine that
constituent concentrations from any such release exceed action levels 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
3
7
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 inventory 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,
1997, are reported on pages 71 and 72 (Note 12 of the Notes to Financial
Statements) and on page 55 (under the caption "Segment Financial Data") in the
Company's 1997 Annual Report to Shareholders, which information at said pages is
incorporated herein by reference.
ITEM 2. PROPERTIES
CONSTRUCTION MATERIALS
The Company's current estimate of approximately 8.2 billion tons of
stone reserves is approximately 90 million tons more than the estimate reported
at the end of 1996. 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 1997 acquisitions in Arkansas, Georgia and Texas and
the opening of a greenfield quarry in Alabama. Management believes that the
quantities of reserves at the Company's stone quarries are sufficient to result
in an average quarry life of approximately 56 years at present operating levels.
See Note 1 to the table of the Company's 10 largest active stone quarries at
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 132 stone quarries which the Company operates directly or
through joint ventures, 37 are located on owned land, 22 are on land owned in
part and leased in part, and 73 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 1998 to 2105.
Most of the Company's leases have options to extend them well beyond their
current terms.
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:
4
8
ESTIMATED
YEARS OF LIFE LEASE
AT AVERAGE EXPIRATION
RATE OF NATURE OF DATE, IF
LOCATION PRODUCT PRODUCTION(1) INTEREST APPLICABLE(2)
- -------- ------- ------------- -------- -------------
McCook (Chicago), Illinois Limestone 90.5(3) Owned
Paducah, Kentucky Limestone 41.1 Leased (5)
Grayson (Atlanta), Georgia Granite Over 100 Owned
Playa Del Carmen, Mexico(4) Limestone Over 100 Owned
Gray Court (Greenville), South Carolina Granite Over 100 Owned
Warrenton, Virginia (Washington, D.C.) Diabase Over 100 Leased (5)
Kennesaw (Atlanta), Georgia Granite 40.7 75% Owned
25% Leased 2013
Manteno, Illinois Limestone Over 100 Leased (5)
Skippers, Virginia Granite Over 100 Leased 2016
Lawrenceville (Norfolk/Virginia
Beach), Virginia Granite 69.9 31% Owned
69% Leased (6)
- ---------------
(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) For some time, the Metropolitan Water Reclamation District of Greater
Chicago ("MWRD") has had under consideration the condemnation of a
portion of this quarry in order to use it as a reservoir. The Company
believes that this action, if it occurs, could significantly reduce the
life of this quarry, but will not have a material effect on the
financial condition of the Company as a whole. In 1996, the MWRD
announced that it plans to have reservoirs created on real property it
owns near the McCook quarry and that its current plan does not include
using the McCook quarry as a reservoir.
(4) 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.
(5) Lease does not expire until reserves are exhausted. Surface rights at
the Paducah, Kentucky quarry are owned.
(6) Leases expire as follows: 19% in 2020, 13% in 2024 and 68% in 2044.
5
9
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 1,396-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 320 acres of salt reserves and 160 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 1,266-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 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 and owns a small production
facility and warehouse space near Kansas City, Missouri.
The Company's Chemicals manufacturing facilities are designed to permit
a high degree of flexibility as to feedstocks, product mix and by-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's corporate offices are located in an office complex near
Birmingham, Alabama. Headquarters staffs of 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 occupied pursuant to several leases. The lease pursuant to which the
majority of the space is leased runs through December 31, 1998. The Company's
space in this complex is leased at an approximate annual rental, as of December
31, 1997, of $1,456,000, which is subject to limited escalation.
The Company will not renew the lease of the current location and will
move its corporate offices to a new facility effective January 1, 1999. Under a
lease entered into by the Company, the Company will begin leasing newly
6
10
constructed corporate headquarters consisting of approximately 189,000 square
feet in January 1999. The lease runs through December 31, 2013. 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 $3.2 million, $3.4
million and $3.7 million, respectively.
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 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
later and more particularly asserted that during the period 1972-1977 the PRPs
shipped to this site a collective total of some 286 million pounds of material
which allegedly contained CERCLA hazardous substances, including about 1.8
million pounds of material allegedly shipped by the Company's former Metals
Division.
The EPA has claimed that there are releases and threatened releases of
CERCLA hazardous substances from this site and advised, inter alia, that the EPA
may seek recovery of CERCLA response costs which the EPA has incurred or may
incur in the future in connection with the investigation and remediation of
environmental conditions at the site. The EPA subsequently asserted that by the
summer of 1996, the EPA had undertaken investigative and response actions with
respect to this site which cost a total of about $6.4 million.
In addition to the EPA's claims regarding investigation and response
costs, the U.S. Department of Interior ("DOI") has asserted a natural resources
damage claim of approximately $2.2 million. The DOI has not, however, quantified
or otherwise substantiated its natural resource damage claim. To date, the State
natural resource trustees
7
11
have not formally asserted claims arising from alleged impacts to
state-protected natural resources, although such State trustee agencies have
reportedly conducted evaluations of the impacts of the site on certain natural
resources. Similarly, the Pennsylvania Department of Environmental Protection
("PADEP") has allegedly incurred costs for investigation and response at the
site. PADEP has indicated that it may assert a claim for such costs, but has not
yet formally asserted such a claim or stated the amount of the alleged
expenditures.
The Company and over 30 other PRPs have entered into an agreement
forming the Jack's Creek PRP Group (the "PRP Group") to respond to the claims
asserted by EPA, DOI, PADEP and others. The PRP Group has adopted a method for
allocating among its membership the costs of designing and implementing the
remediation of the site. Under this allocation arrangement, the Company's share
percentage would be about 2.1%, subject to rights of the PRP Group and its
members, including the Company, to seek contribution from other viable and
responsible parties.
On September 30, 1997, the EPA issued its Record of Decision ("ROD")
for the site. The ROD specifies a remedy consisting of dredging lead
contaminated sediments from a limited area of Jack's Creek near the site and
excavating lead contaminated soil within certain designated areas of the site,
followed by disposal of the most heavily contaminated soil at an appropriately
permitted off-site facility, together with consolidating on-site the dredged
sediments and the remainder of the excavated material, then covering the
consolidated sediments and soil with a multi-layer engineered cap. The EPA
estimates that the necessary engineering design work preliminary to implementing
the specified remedy and then implementing the resulting remedial design will
cost a total of about $12.5 million.
Contemporaneous with issuance of the ROD, the EPA issued "special
notice letters" to the Company and several hundred other PRP's, inviting "good
faith" offers to perform the remedy and pay certain response costs relating to
the site. The special notice letter indicated that under the EPA's orphan share
policy, for those PRP's who agree to perform the remedy, the EPA would be
prepared to forego recovery of up to $3.125 million in past and future response
costs. On December 11, 1997, the Jack's Creek PRP Group (on behalf of its
members, including the Company) submitted a good faith offer to the EPA in
response to the special notice letter.
The PRP Group is currently preparing to negotiate with the EPA an
enforceable agreement or judicial decree under which the PRP Group would fund
and perform the remedial design work and the implementation of the resultant
remedial design. The PRP Group is also negotiating with other PRPs an agreement
whereby the other PRPs could either resolve liabilities with respect to the site
by a cash payment to the PRP Group or participate as a member of the PRP Group
in the remedial design and implementation.
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.
Note 10, Other Commitments and Contingent Liabilities on page 70 of the
Company's 1997 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 1997.
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 49
Peter J. Clemens, III Executive Vice President, Finance and Administration and Treasurer 54
William F. Denson, III Senior Vice President, Law and Secretary 54
8
12
Richard K. Carnwath Vice President, Planning and Development 49
J. Wayne Houston Vice President, Human Resources 48
Ejaz A. Khan Controller 41
John A. Heilala President, Chloralkali Business Unit 57
Robert A. Wason IV President, Performance Systems Business Unit 46
Guy M. Badgett, III Chairman, Southern Division and President, Southeast Division 49
Perry W. Donahoo President, Southern Division 43
William L. Glusac President, Midwest Division 47
Daniel J. Leemon President, Midsouth Division 59
Thomas R. Ransdell President, Southwest Division 55
Daniel F. Sansone President, Vulcan Gulf Coast Materials Divisions 45
James W. Smack President, Mideast Division 54
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. Mr. James joined
the Company in 1992 as Senior Vice President and General Counsel. 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.
William F. Denson, III, was elected Senior Vice President, Law in
February 1998. He has served as Secretary since April 1981. He served as Vice
President and Assistant General Counsel until he was elected Vice President, Law
effective January 1, 1994.
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 served as Controller, Chemicals Division, until September
1995, when he was elected Controller of the Company.
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.
9
13
Robert A. Wason IV has served as President, Performance Systems
Business Unit, since May 1996. From 1994 until 1996, he served as Executive Vice
President, Performance Systems, and prior to that time he served as Executive
Vice President, Administration and Business Development, Chemicals Division.
Guy M. Badgett, III, was elected Chairman, Southern Division in May
1997. He has served as President, Southeast Division, since 1992.
Perry W. Donahoo has served as President, Southern Division, since
October 1996. From August 1992 until June 1995, Mr. Donahoo served as President
of Reed Crushed Stone Company (formerly a subsidiary of the Company) and as
Executive Vice President, Southern Division, from June 1995 until October 1996.
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.
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 has served as President, Mideast Division, since 1991.
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 27, 1998, the number of shareholders of record
approximated 3,767. The closing price of the Common Stock on the New York Stock
Exchange on February 27, 1998, was $100 5/8. The prices in the table below
represent the high and low sales prices for the Company's Common Stock as
reported on the New York Stock Exchange.
QUARTER ENDED 1997 1996
- ------------- ---- ----
HIGH LOW HIGH LOW
----- ------ ----- -----
March 31 66 1/2 55 1/4 58 1/4 53 1/8
June 30 80 5/8 61 1/4 59 3/8 55 3/8
September 30 90 7/16 78 3/8 66 1/2 54 1/2
December 31 103 15/16 84 7/16 65 59 1/2
Dividends paid in 1997 totaled $63,622,000, as compared with
$58,399,000 paid in 1996. On February 13, 1998, the Board of Directors
authorized a quarterly dividend of $.52 per share of Common Stock payable March
10, 1998 to holders of record on February 24, 1998. This quarterly dividend
represents a 10.66% increase over quarterly dividends paid in 1997.
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.
10
14
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, 1997 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 43 through 47 and 58 through 72 of the Company's 1997 Annual Report to
Shareholders, which are incorporated in this Annual Report on Form 10-K by
reference.
Year Ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- --------
(Amounts in millions, except per share date)
Net sales........................... $ 1,678.6 $1,568.9 $ 1,461.0 $ 1,253.4 $1,133.5
Net earnings........................ $ 209.1 $ 188.6 $ 166.2 $ 98.0 $ 88.2
Net earnings per:
Basic shares outstanding.......... $ 6.18 $ 5.43 $ 4.68 $ 2.69 $ 2.40
Diluted shares outstanding........ $ 6.10 $ 5.36 $ 4.63 $ 2.67 $ 2.39
Total assets........................ $ 1,449.2 $1,320.6 $ 1,215.8 $ 1,181.1 $1,078.6
Long-term obligations............... $ 81.9 $ 85.5 $ 90.3 $ 97.4 $ 102.0
Cash dividends declared per share $ 1.88 $ 1.68 $ 1.46 $ 1.32 $ 1.26
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 48 through 54 and "Financial Terminology" on page
79 of the Company's 1997 Annual Report to Shareholders are incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information relative to this item is included in the
Company's 1997 Annual Report to Shareholders on the pages shown below, which are
incorporated herein by reference:
PAGE
Consolidated Financial Statements 44-47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting and Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial Data for Each of the 2 Years Ended
December 31, 1997 and 1996 (Unaudited) 77
With the exception of the aforementioned information and the
information incorporated by reference in Items 1, 3, 7, 8 and 14, the Company's
1997 Annual Report to Shareholders is not deemed filed as part of this Annual
Report on Form 10-K.
11
15
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 30, 1998, the Company will file a definitive proxy
statement with the Securities and Exchange Commission pursuant to Regulation 14A
(the Company's "1998 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 1998 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 1997, and of Form
5 and amendments thereto furnished to the Company pursuant to Rule 240.16a-3(e)
with respect to 1997, the Company has identified certain persons subject to
Section 16(a) of the Securities Exchange Act of 1934 who failed to file on a
timely basis required forms. Information concerning such failure under the
heading "Section 16(a) Beneficial Ownership Reporting Compliance" included in
the Company's 1998 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "Compensation of Directors,"
"Executive Compensation," "Option Grants in 1997," "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
1998 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 1998 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
An executive officer of the Company 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 the
executive officer's salary and bonus. In 1997, the total amount of this
reimbursement was $150,000. 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.
12
16
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 1997
Annual Report to Shareholders on the pages shown below and are incorporated
herein by reference:
Consolidated Statements of Earnings 44
Consolidated Balance Sheets 45
Consolidated Statements of Cash Flows 46
Consolidated Statements of Shareholders' Equity 47
Notes to Consolidated Financial Statements 58-72
Management's Responsibility for Financial Reporting and
Internal Control 42
Independent Auditors' Report 43
Supplementary Information-Quarterly Financial Data for Each of the 2 Years Ended
December 31, 1997 and 1996 (Unaudited) 77
(A) (2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule for the years ended December
31, 1997, 1996 and 1995 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.
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 filed as Exhibit 3(a) to the Company's 1988 Form 10-K
Annual Report (File No. 1-4033).*
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990,
and as last amended February 14, 1997, filed as Exhibit 3(ii)
to the Company's 1997 Form 10-K Annual Report (File No.
1-4033).*
13
17
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.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1997 (set forth on page 18 of
this report).
EXHIBIT (13) The Company's 1997 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1997.
EXHIBIT (24) Powers of Attorney
EXHIBIT (27) Financial Data Schedule (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, 1997, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1998, as
permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
- ---------------
* Incorporated by reference.
**Management Contract or Compensatory Plan.
14
18
(B) REPORTS ON FORM 8-K
None.
15
19
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, 1997, 1996 and 1995 and
for the years then ended, and have issued our report thereon dated February 6,
1998; such consolidated financial statements and report are included in your
1997 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 6, 1998
16
20
SCHEDULE II
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 1997, 1996 and 1995
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
- ----------------------------------------------------------------------------------------------------------------
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
1995
Accrued Environmental Costs............. $ 12,867 $ 3,998 $ 14,100(1) $ 2,765
Doubtful Receivables.................... 8,244 984 $ 18 1,070(2) 8,176
All Other(3)............................ 2,005 1,803 2,413 1,395
- ---------------------------
(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
21
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
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- --------
Fixed charges:
Interest expenses before capitalization
credits............................. $ 8,074 $ 9,263 $ 11,396 $ 10,699 $ 10,187
Amortization of financing costs...... 104 164 109 114 115
One-third of rental expense.......... 9,735 9,663 9,532 10,393 7,375
---------- ----------- ----------- ----------- -----------
Total fixed charges............. $ 17,913 $ 19,090 $ 21,037 $ 21,206 $ 17,677
========== =========== =========== =========== ===========
Net earnings............................ 209,145 188,595 166,240 97,976 88,229
Provisions for income taxes............. 91,356 96,985 92,181 47,930 36,993
Fixed charges........................... 17,913 19,090 21,037 21,206 17,677
Capitalized interest credits............ (1,160) (627) (297) (878) (1,016)
Amortization of capitalized interest.... 708 674 1,031 997 882
---------- ----------- ----------- ----------- -----------
Earnings before income taxes as
adjusted........................... $ 317,962 $ 304,717 $ 280,192 $ 167,231 $ 142,765
========== =========== =========== =========== ===========
Ratio of earnings to fixed charges...... 17.8 16.0 13.3 7.9 8.1
18
22
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 27, 1998.
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 27, 1998
- ---------------------------------------- (Principal Executive Officer)
D. M. James
/s/ P.J. Clemens, III Executive Vice President, Finance March 27, 1998
- ---------------------------------------- and Administration and Treasurer
P.J. Clemens, III (Principal Financial Officer)
/s/ E.A. Khan Controller March 27, 1998
- ---------------------------------------- (Principal Accounting Officer)
E.A. Khan
The following directors:
Marion H. Antonini Director
Livio D. DeSimone 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 27, 1998
-------------------------------------
William F. Denson, III
Attorney-in-Fact
19
23
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, 1997
OF
VULCAN MATERIALS COMPANY
FILED MARCH 27, 1998
COMMISSION FILE NUMBER 1-4033
24
EXHIBIT INDEX
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
EXHIBIT (3)(I) Certificate of Incorporation (Restated 1988) of the Company
filed as Exhibit 3(a) to the Company's 1988 Form 10-K Annual
Report (File No. 1-4033).*
EXHIBIT (3)(II) By-laws of the Company, as restated February 2, 1990, and as
last amended February 14, 1997, filed as Exhibit 3(ii) to the
Company's 1997 Form 10-K Annual Report (File No. 1-4033).*
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.**
EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges for the five
years ended December 31, 1997 (set forth on page 18 of this
report).
EXHIBIT (13) The Company's 1997 Annual Report to Shareholders.
EXHIBIT (21) List of the Company's subsidiaries as of December 31, 1997.
EXHIBIT (24) Powers of Attorney
EXHIBIT (27.1) Financial Data Schedule (Electronic Submission Only).
EXHIBIT (27.2) Financial Data Schedule restated for the period ended
December 31, 1996 (Electronic Submission Only).
EXHIBIT (27.3) Financial Data Schedule restated for the period ended
December 31, 1995 (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, 1997, will be
filed as one or more amendments to this Form 10-K on or before June 29, 1998, as
permitted by Rule 15d-21 under the Securities Exchange Act of 1934.
- ---------------------
*Incorporated by reference.
**Management Contract or Compensatory Plan.