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, 1998 ----------------- 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 or organization) (I.R.S. Employer Identification No.) 1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242 - --------------------------------------------------------------- ------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (205) 298-3000 -------------- 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 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. - -------------------------------------------------------------------------------- 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, 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 3 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 4 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 5 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. 6 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 2 7 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 3 8 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. 4 9 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) - ---------------------------------------------------------------------------------------------------------------- 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) - ----------------------------------- (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. 5 10 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. 6 11 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.