| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| New Jersey (State or other jurisdiction of incorporation ) |
1-4033 (Commission file number) |
63-0366371 (I.R.S. Employer Identification No.) |
| Shares outstanding | ||
| Class | at March 31, 2007 | |
| Common Stock, $1 Par Value | 95,290,665 |
2
| (Amounts in thousands) | ||||||||||||
| March 31 | December 31 | March 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
| (As Adjusted - | (As Adjusted - | |||||||||||
| See Note 2) | See Note 2) | |||||||||||
Assets |
||||||||||||
Cash and cash equivalents |
$ | 69,960 | $ | 55,230 | $ | 80,343 | ||||||
Medium-term investments |
— | — | 68,965 | |||||||||
Accounts and notes receivable: |
||||||||||||
Accounts and notes receivable, gross |
395,124 | 394,815 | 506,558 | |||||||||
Less: Allowance for doubtful accounts |
(3,108 | ) | (3,355 | ) | (4,539 | ) | ||||||
Accounts and notes receivable, net |
392,016 | 391,460 | 502,019 | |||||||||
Inventories: |
||||||||||||
Finished products |
235,307 | 214,508 | 201,904 | |||||||||
Raw materials |
10,950 | 9,967 | 10,977 | |||||||||
Products in process |
1,628 | 1,619 | 2,058 | |||||||||
Operating supplies and other |
18,531 | 17,443 | 17,499 | |||||||||
Inventories |
266,416 | 243,537 | 232,438 | |||||||||
Deferred income taxes |
22,165 | 25,579 | 20,959 | |||||||||
Prepaid expenses |
15,016 | 15,388 | 16,378 | |||||||||
Total current assets |
765,573 | 731,194 | 921,102 | |||||||||
Investments and long-term receivables |
2,383 | 6,664 | 6,864 | |||||||||
Property, plant and equipment: |
||||||||||||
Property, plant and equipment, cost |
4,026,960 | 3,897,618 | 3,582,868 | |||||||||
Less: Reserve for depr., depl. & amort |
(2,070,840 | ) | (2,028,504 | ) | (1,917,815 | ) | ||||||
Property, plant and equipment, net |
1,956,120 | 1,869,114 | 1,665,053 | |||||||||
Goodwill |
650,206 | 620,189 | 628,683 | |||||||||
Other assets |
196,633 | 200,673 | 185,255 | |||||||||
Total assets |
$ | 3,570,915 | $ | 3,427,834 | $ | 3,406,957 | ||||||
Liabilities and Shareholders’ Equity |
||||||||||||
Current maturities of long-term debt |
$ | 727 | $ | 630 | $ | 32,547 | ||||||
Short-term borrowings |
240,400 | 198,900 | — | |||||||||
Trade payables and accruals |
156,008 | 154,215 | 137,538 | |||||||||
Other current liabilities |
129,080 | 133,763 | 154,102 | |||||||||
Total current liabilities |
526,215 | 487,508 | 324,187 | |||||||||
Long-term debt |
321,503 | 322,064 | 322,859 | |||||||||
Deferred income taxes |
290,404 | 287,905 | 282,400 | |||||||||
Other noncurrent liabilities |
338,237 | 319,458 | 287,229 | |||||||||
Other commitments and contingencies
(Notes 13 & 19) |
||||||||||||
Shareholders’ equity |
2,094,556 | 2,010,899 | 2,190,282 | |||||||||
Total liabilities and shareholders’ equity |
$ | 3,570,915 | $ | 3,427,834 | $ | 3,406,957 | ||||||
3
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
| (As Adjusted - | ||||||||
| See Note 2) | ||||||||
Net sales |
$ | 630,187 | $ | 642,272 | ||||
Delivery revenues |
57,000 | 66,415 | ||||||
Total revenues |
687,187 | 708,687 | ||||||
Cost of goods sold |
462,992 | 478,378 | ||||||
Delivery costs |
57,000 | 66,415 | ||||||
Cost of revenues |
519,992 | 544,793 | ||||||
Gross profit |
167,195 | 163,894 | ||||||
Selling, administrative and general expenses |
74,402 | 65,012 | ||||||
Gain on sale of property, plant and equipment, net |
46,387 | 757 | ||||||
Other operating expense, net |
2,034 | 625 | ||||||
Operating earnings |
137,146 | 99,014 | ||||||
Other income, net |
1,202 | 12,093 | ||||||
Interest income |
1,323 | 2,647 | ||||||
Interest expense |
6,635 | 6,285 | ||||||
Earnings from continuing operations before
income taxes |
133,036 | 107,469 | ||||||
Provision for income taxes |
43,697 | 35,564 | ||||||
Earnings from continuing operations |
89,339 | 71,905 | ||||||
Discontinued operations (Note 3): |
||||||||
Loss from results of discontinued
operations |
(777 | ) | (3,033 | ) | ||||
Income tax benefit |
312 | 1,213 | ||||||
Loss on discontinued operations, net of tax |
(465 | ) | (1,820 | ) | ||||
Net earnings |
$ | 88,874 | $ | 70,085 | ||||
Basic earnings (loss) per share: |
||||||||
Earnings from continuing operations |
$ | 0.94 | $ | 0.72 | ||||
Discontinued operations |
(0.01 | ) | (0.02 | ) | ||||
Net earnings per share |
$ | 0.93 | $ | 0.70 | ||||
Diluted earnings (loss) per share: |
||||||||
Earnings from continuing operations |
$ | 0.91 | $ | 0.70 | ||||
Discontinued operations |
— | (0.02 | ) | |||||
Net earnings per share |
$ | 0.91 | $ | 0.68 | ||||
Weighted-average common shares outstanding: |
||||||||
Basic |
95,172 | 100,552 | ||||||
Assuming dilution |
97,778 | 102,346 | ||||||
Cash dividends declared per share of common stock |
$ | 0.46 | $ | 0.37 | ||||
Depreciation, depletion, accretion and
amortization from continuing operations |
$ | 60,801 | $ | 53,673 | ||||
Effective tax rate from continuing operations |
32.8 | % | 33.1 | % | ||||
4
| (Amounts in thousands) | ||||||||
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
| (As Adjusted - | ||||||||
| See Note 2) | ||||||||
Operating Activities |
||||||||
Net earnings |
$ | 88,874 | $ | 70,085 | ||||
Adjustments to reconcile net earnings to
net cash provided by operating activities: |
||||||||
Depreciation, depletion, accretion and amortization |
60,801 | 53,691 | ||||||
Net gain on sale of property, plant and equipment |
(46,387 | ) | (757 | ) | ||||
Contributions to pension plans |
(292 | ) | (318 | ) | ||||
Share-based compensation |
3,871 | 5,478 | ||||||
Increase in assets before initial
effects of business acquisitions and dispositions |
(21,652 | ) | (29,831 | ) | ||||
Increase (decrease) in liabilities before initial
effects of business acquisitions and dispositions |
11,710 | (23,187 | ) | |||||
Other, net |
1,220 | (3,144 | ) | |||||
Net cash provided by operating activities |
98,145 | 72,017 | ||||||
Investing Activities |
||||||||
Purchases of property, plant and equipment |
(122,636 | ) | (95,787 | ) | ||||
Proceeds from sale of property, plant and equipment |
50,823 | 2,572 | ||||||
Payment for businesses acquired, net of acquired cash |
(58,857 | ) | (13,681 | ) | ||||
Proceeds from sales and maturities of medium-term
investments |
— | 106,175 | ||||||
Decrease in investments and long-term receivables |
1,435 | 104 | ||||||
Other, net |
8,730 | (13 | ) | |||||
Net cash used for investing activities |
(120,505 | ) | (630 | ) | ||||
Financing Activities |
||||||||
Net short-term borrowings |
41,500 | — | ||||||
Payment of short-term debt and current maturities |
(320 | ) | (240,305 | ) | ||||
Payment of long-term debt |
(27 | ) | — | |||||
Purchases of common stock |
(4,800 | ) | (19,337 | ) | ||||
Dividends paid |
(43,762 | ) | (37,167 | ) | ||||
Proceeds from exercise of stock options |
22,980 | 14,644 | ||||||
Excess tax benefits from exercise of stock options |
15,501 | 7,161 | ||||||
Other, net |
6,018 | 8,822 | ||||||
Net cash provided by (used for) financing activities |
37,090 | (266,182 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
14,730 | (194,795 | ) | |||||
Cash and cash equivalents at beginning of period |
55,230 | 275,138 | ||||||
Cash and cash equivalents at end of period |
$ | 69,960 | $ | 80,343 | ||||
5
| 1. | Basis of Presentation | |
| Our accompanying condensed consolidated financial statements have been prepared in compliance with Form 10-Q instructions and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of our management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in our latest annual report on Form 10-K. | ||
| Due to the 2005 sale of our Chemicals business, as presented in Note 3, the operating results of the Chemicals business have been presented as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings. | ||
| 2. | Accounting Changes | |
| FIN 48 — On January 1, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, the financial statement effects of a tax position should initially be recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. | ||
| As a result of the implementation of FIN 48, we increased the liability for unrecognized tax benefits by $2,420,000, increased deferred tax assets by $1,480,000 and reduced retained earnings as of January 1, 2007 by $940,000. The total liability for unrecognized tax benefits as of January 1, 2007, amounted to $11,760,000. | ||
| During the first quarter of 2007, we recognized adjustments to our liability for prior year unrecognized tax benefits of $550,000, which increased our current tax provision and increased our liability balance. As of March 31, 2007, our total liability for unrecognized tax benefits amount to $12,310,000, of which $10,740,000 would affect the effective tax rate if recognized. | ||
| We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our total liability for unrecognized tax benefits were $2,310,000 as of March 31, 2007 and $2,060,000 as of January 1, 2007. | ||
| The U.S. Federal statute of limitations expires during the third quarter of 2007 for our 2002 and 2003 tax years. However, on our U.S. consolidated corporation income tax returns for those years, we anticipate having no single tax position generating a significant increase or decrease in our liability for unrecognized tax benefits within 12 months of this reporting date. | ||
| We file income tax returns in the U.S. federal and various state jurisdictions and one foreign jurisdiction. Generally, we are not subject to changes in income taxes by any taxing jurisdiction for the years prior to 2002. |
6
| FSP AUG AIR-1 — In September 2006, the FASB issued FASB Staff Position (FSP) No. AUG AIR-1, “Accounting for Planned Major Maintenance” (FSP AUG AIR-1). This FSP amends certain provisions in the American Institute of Certified Public Accountants Industry Audit Guide, “Audits of Airlines” (Airline Guide). The Airline Guide is the principal source of guidance on the accounting for planned major maintenance activities and permits four alternative methods of accounting for such activities. This guidance principally affects our accounting for periodic overhauls on our oceangoing vessels. Prior to January 1, 2007, we applied the accrue-in-advance method as prescribed by the Airline Guide, which required the accrual of estimated costs for the next scheduled overhaul over the period leading up to the overhaul. At that time, the actual cost of the overhaul was charged to the accrual, with any deficiency or excess charged or credited to expense. FSP AUG AIR-1 prohibits the use of the accrue-in-advance method, and was effective for fiscal years beginning after December 15, 2006. Accordingly, we adopted this FSP effective January 1, 2007, and have elected to use the deferral method of accounting for planned major maintenance as prescribed by the Airline Guide and allowed by FSP AUG AIR-1. Under the deferral method, the actual cost of each overhaul is capitalized and amortized over the period until the next overhaul. Additionally, the FSP must be applied retrospectively to the beginning of the earliest period presented in the financial statements. As a result of the retrospective application of this change in accounting standard, we have adjusted our financial statements for all prior periods presented to reflect using the deferral method of accounting for planned major maintenance. | ||
| The following tables reflect the effect of the retrospective application of FSP AUG AIR-1 on our Condensed Consolidated Balance Sheets (in thousands of dollars): |
| December 31, 2006 | ||||||||||||
| As Previously | Adjustment | |||||||||||
| Reported | Amount | As Adjusted | ||||||||||
Selected Balance Sheet Data: |
||||||||||||
Deferred income taxes |
$ | 25,764 | $ | (185 | ) | $ | 25,579 | |||||
Total current assets |
731,379 | (185 | ) | 731,194 | ||||||||
Other assets |
196,879 | 3,794 | 200,673 | |||||||||
Total assets |
3,424,225 | 3,609 | 3,427,834 | |||||||||
Other current liabilities |
139,942 | (6,179 | ) | 133,763 | ||||||||
Total current liabilities |
493,687 | (6,179 | ) | 487,508 | ||||||||
Shareholders’ equity (retained earnings) |
2,001,111 | 9,788 | 2,010,899 | |||||||||
Total liabilities and shareholders’ equity |
3,424,225 | 3,609 | 3,427,834 | |||||||||
| March 31, 2006 | ||||||||||||
| As Previously | Adjustment | |||||||||||
| Reported | Amount | As Adjusted | ||||||||||
Selected Balance Sheet Data: |
||||||||||||
Deferred income taxes |
$ | 21,108 | $ | (149 | ) | $ | 20,959 | |||||
Total current assets |
921,251 | (149 | ) | 921,102 | ||||||||
Other assets |
183,954 | 1,301 | 185,255 | |||||||||
Total assets |
3,405,805 | 1,152 | 3,406,957 | |||||||||
Other current liabilities |
163,004 | (8,902 | ) | 154,102 | ||||||||
Total current liabilities |
333,089 | (8,902 | ) | 324,187 | ||||||||
Shareholders’ equity (retained earnings) |
2,183,005 | 7,277 | 2,190,282 | |||||||||
Total liabilities and shareholders’ equity |
3,405,805 | 1,152 | 3,406,957 | |||||||||
7
| The following table reflects the effect of the retrospective application of FSP AUG AIR-1 on our Condensed Consolidated Statements of Earnings (in thousands of dollars, except per share data): |
| Three Months Ended March 31, 2006 | ||||||||||||
| As Previously | Adjustment | |||||||||||
| Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Earnings Data: |
||||||||||||
Net sales |
$ | 642,272 | $ | — | $ | 642,272 | ||||||
Cost of goods sold |
478,609 | (231 | ) | 478,378 | ||||||||
Cost of revenues |
545,024 | (231 | ) | 544,793 | ||||||||
Gross profit |
163,663 | 231 | 163,894 | |||||||||
Selling, administrative and general expenses |
65,042 | (30 | ) | 65,012 | ||||||||
Operating earnings |
98,753 | 261 | 99,014 | |||||||||
Earnings from continuing operations before
income taxes |
107,208 | 261 | 107,469 | |||||||||
Provision for income taxes |
35,471 | 93 | 35,564 | |||||||||
Earnings from continuing operations |
71,737 | 168 | 71,905 | |||||||||
Net earnings |
69,917 | 168 | 70,085 | |||||||||
Diluted earnings per share |
$ | 0.68 | $ | — | $ | 0.68 | ||||||
| The following table reflects the effect of the retrospective application of FSP AUG AIR-1 on our Condensed Consolidated Statement of Cash Flows (in thousands of dollars): |
| Three Months Ended March 31, 2006 | ||||||||||||
| As Previously | Adjustment | |||||||||||
| Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Cash Flows Data: |
||||||||||||
Net earnings |
$ | 69,917 | $ | 168 | $ | 70,085 | ||||||
Depreciation, depletion, accretion and
amortization |
53,232 | 459 | 53,691 | |||||||||
Increase in assets before initial effects of
business acquisitions and dispositions |
(29,759 | ) | (72 | ) | (29,831 | ) | ||||||
Decrease in liabilities before initial effects of
business acquisitions and dispositions |
(22,632 | ) | (555 | ) | (23,187 | ) | ||||||
Net cash provided by operating activities |
72,017 | — | 72,017 | |||||||||
| 3. | Discontinued Operations | |
| In June 2005, we sold substantially all the assets of our Chemicals business, known as Vulcan Chemicals, to Basic Chemicals, a subsidiary of Occidental Chemical Corporation. These assets consisted primarily of chloralkali facilities in Wichita, Kansas; Geismar, Louisiana and Port Edwards, Wisconsin; and the facilities of our Chloralkali joint venture located in Geismar. The purchaser also assumed certain liabilities relating to the Chemicals business, including the obligation to monitor and remediate all releases of hazardous materials at or from the three plant facilities. The decision to sell the Chemicals business was based on our desire to focus our resources on the Construction Materials business. | ||
| In consideration for the sale of the Chemicals business, Basic Chemicals made an initial cash payment of $214,000,000 and assumed certain liabilities relating to the business as described below. Concurrent with the sale transaction, we acquired the minority partner’s 49% interest in the joint venture for an initial cash payment of $62,701,000, and conveyed such interest to Basic Chemicals. The net initial cash proceeds of $151,299,000 were subject to adjustments for actual working capital balances at the closing date, transaction costs and income taxes. In September 2006, we received |
8
| additional cash proceeds of $10,202,000 related to adjustments for the actual working capital balance at the closing date. | ||
| Basic Chemicals is required to make future payments under two separate earn-out agreements subject to certain conditions. The first earn-out agreement is based on ECU (electrochemical unit) and natural gas prices during the five-year period beginning July 1, 2005, and is capped at $150,000,000 (ECU earn-out or ECU derivative). The ECU earn-out is accounted for as a derivative instrument; accordingly, it is reported at fair value. Changes to the fair value of the ECU derivative, if any, are recorded within continuing operations pursuant to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin Topic 5:Z:5, “Classification and Disclosure of Contingencies Relating to Discontinued Operations” (SAB Topic 5:Z:5). Future estimates of this derivative’s fair value could vary from period to period. Proceeds under the second earn-out agreement are determined based on the performance of the hydrochlorocarbon product HCC-240fa (commonly referred to as 5CP) from the closing of the transaction through December 31, 2012 (5CP earn-out). Under this earn-out agreement, cash plant margin for 5CP, as defined in the Asset Purchase Agreement, in excess of an annual threshold amount will be shared equally between Vulcan and Basic Chemicals. The primary determinant of the value for this earn-out is growth in 5CP sales volume. | ||
| The fair value of the consideration received in connection with the sale of the Chemicals business, including anticipated cash flows from the two earn-out agreements, is expected to exceed the net carrying value of the assets and liabilities sold. However, SFAS No. 5, “Accounting for Contingencies,” precludes the recognition of a contingent gain until realization is assured beyond a reasonable doubt. Accordingly, no gain was recognized on the Chemicals sale and the value recorded at the June 7, 2005 closing date referable to these two earn-outs was limited to $128,167,000. | ||
| The carrying amounts of the ECU and 5CP earn-outs are reflected in accounts and notes receivable — other and other noncurrent assets in the accompanying Condensed Consolidated Balance Sheets. The carrying amount of the ECU earn-out was as follows: March 31, 2007 — $20,913,000 (classified entirely as current), December 31, 2006 — $20,213,000 (classified entirely as current) and March 31, 2006 — $131,531,000 million (of which $114,432,000 was current). During the first three months of 2007, we recognized gains related to changes in the fair value of the ECU earn-out of $700,000 (reflected as a component of other income, net in our Condensed Consolidated Statements of Earnings). During 2006, we received payments of $127,859,000 under the ECU earn-out and recognized gains related to changes in its fair value of $28,722,000 (of which $12,181,000 was reflected as a component of other income, net in our Condensed Consolidated Statements of Earnings for the three months ended March 31, 2006). The carrying amount of the 5CP earn-out was as follows: March 31, 2007 — $20,828,000 (of which $9,112,000 was current), December 31, 2006 — $29,246,000 (of which $9,030,000 was current) and March 31, 2006 — $25,119,000 (of which $11,151,000 was current). | ||
| In March of 2007, we received payments of $8,418,000 under the 5CP earn-out related to the year ended December 31, 2006. During 2006, we received net payments of $3,856,000 under the 5CP earn-out related to the period from the closing of the transaction in June 2005 through December 31, 2005. Additionally, the final resolution during 2006 of adjustments for working capital balances at the closing date resulted in an increase to the carrying amount of the 5CP earn-out of $4,127,000. Since changes in the carrying amount of the ECU earn-out are reported in continuing operations, any gain or loss on disposal of the Chemicals business will ultimately be recognized to the extent remaining cash receipts under the 5CP earn-out exceed or fall short of its $20,828,000 carrying amount. |
9
| As a result of the sale of our Chemicals business, we incurred approximately $23.7 million of pretax exit and disposal charges and transaction fees, substantially all of which were recognized prior to 2006. | ||
| We are potentially liable for a cash transaction bonus payable in the future to certain key former Chemicals employees. This transaction bonus will be payable only if cash receipts realized from the two earn-out agreements described above exceed an established minimum threshold. Based on our evaluation of possible cash receipts from the earn-outs, the likely range for the contingent payments to certain key former Chemicals employees is between $0 and approximately $5 million. As of March 31, 2007, the calculated transaction bonus would be $0 and, as such, no liability for these contingent payments has been recorded. | ||
| Under the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” (FAS 144), the financial results of the Chemicals business are classified as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings for all periods presented. | ||
| There were no net sales or revenues from discontinued operations during the three month periods ended March 31, 2007 or March 31, 2006. Pretax losses from discontinued operations are as follows (in thousands of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Pretax loss |
$ | (777 | ) | $ | (3,033 | ) | ||
| The pretax losses from discontinued operations of $0.8 million and $3.0 million during the three month periods ended March 31, 2007 and March 31, 2006, respectively, primarily reflect charges related to general and product liability costs and environmental remediation costs associated with our former Chemicals businesses. | ||
| 4. | Earnings Per Share (EPS) | |
| We report two earnings per share numbers, basic and diluted. These are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS) as set forth below (in thousands of shares): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Weighted-average common shares outstanding
|
95,172 | 100,552 | ||||||
Dilutive effect of:
|
||||||||
Stock options |
2,141 | 1,374 | ||||||
Other |
465 | 420 | ||||||
Weighted-average common shares outstanding,
assuming dilution |
97,778 | 102,346 | ||||||
10
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Antidilutive common stock equivalents |
408 | 6 | ||||||
| 5. | Income Taxes | |
| Our effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, we estimate the annual tax rate based on projected taxable income for the full year and record a quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected effective tax rate for the year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions. | ||
| See Note 2 (FIN 48 caption) for a discussion of our adoption of FIN 48. | ||
| In accordance with FIN 48, we recognize a tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. | ||
| The 2007 first quarter effective tax rate from continuing operations of 32.8% was down 0.3% from the 33.1% effective tax rate for the three months ended March 31, 2006. This decrease primarily results from the scheduled increase in the deduction for certain domestic production activities arising under the American Jobs Creation Act of 2004 from 3% in 2006 to 6% in 2007. Generally and subject to certain limitations, this deduction is set to further increase to 9% in 2010 and thereafter. | ||
| 6. | Medium-term Investments | |
| We had no medium-term investments as of March 31, 2007 or December 31, 2006. As of March 31, 2006, our medium-term investments consisted of highly liquid securities with a contractual maturity in excess of three months at the time of purchase. We classify our medium-term investments as either available-for-sale or held-to-maturity. Investments classified as available-for-sale consist of variable rate demand obligations and are reported at fair value, which is equal to cost. Investments classified as held-to-maturity consist of fixed rate debt securities and are reported at cost. The |
11
| reported values of these investments by major security type are summarized below (in thousands of dollars): |
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Bonds, notes and other securities: |
||||||||||||
Variable rate demand obligations |
$ | — | $ | — | $ | 58,965 | ||||||
Other debt securities |
— | — | 10,000 | |||||||||
Total medium-term investments |
$ | — | $ | — | $ | 68,965 | ||||||
| While the contractual maturities for the variable rate demand obligations noted above are generally long term (longer than one year), these securities have certain economic characteristics of current (less than one year) investments because of their rate-setting mechanisms. Therefore, all our medium-term investments as of March 31, 2006 were classified as current assets based on our investing practices and intent. | ||
| Proceeds, gross realized gains and gross realized losses from sales and maturities of medium-term investments are summarized below (in thousands of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Proceeds |
$ | — | $ | 106,175 | ||||
Gross realized gains |
$ | — | insignificant | |||||
Gross realized losses |
$ | — | insignificant | |||||
| There were no transfers from either the available-for-sale or held-to-maturity categories to the trading category during the three months ended March 31, 2007 and 2006. Gross unrealized holding gains related to medium-term investments classified as held-to-maturity were $36,000 as of March 31, 2006. | ||
| 7. | Derivative Instruments | |
| We may periodically use derivative instruments to reduce our exposure to interest rate risk, currency exchange risk or price fluctuations on natural gas or other commodity energy sources subject to our risk management policies. | ||
| In connection with the sale of our Chemicals business, we entered into an earn-out agreement that requires the purchaser, Basic Chemicals, to make future payments capped at $150,000,000 based on ECU (electrochemical unit) and natural gas prices during the five-year period beginning July 1, 2005. We have not designated the ECU earn-out as a hedging instrument and, accordingly, gains and losses resulting from changes in the fair value, if any, are recognized in current earnings. Furthermore, pursuant to SAB Topic 5:Z:5, changes in fair value are recognized in continuing operations. During the three month periods ended March 31, 2007 and 2006, we recorded gains of $700,000 and $12,181,000, respectively. These gains are reflected in other income, net of other charges, in our accompanying Condensed Consolidated Statements of Earnings. | ||
| There was no impact to earnings due to hedge ineffectiveness during the three months ended March 31, 2007 and 2006. |
12
| 8. | Comprehensive Income | |
| Comprehensive income includes charges and credits to equity from nonowner sources and comprises two subsets: net earnings and other comprehensive income. Total comprehensive income comprises the following (in thousands of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
| (As Adjusted - | ||||||||
| See Note 2) | ||||||||
Net earnings |
$ | 88,874 | $ | 70,085 | ||||
Other comprehensive income: |
||||||||
Fair value adjustments to cash flow
hedges |
34 | — | ||||||
Amortization of prior service cost
included in net periodic benefit
costs for pension and
postretirement plans |
529 | — | ||||||
Total comprehensive income |
$ | 89,437 | $ | 70,085 | ||||
| 9. | Shareholders’ Equity | |
| On February 10, 2006, the Board of Directors increased to 10,000,000 shares the existing authorization to purchase common stock. As of March 31, 2007, 3,411,416 shares remained under the purchase authorization. | ||
| The number and cost of shares purchased during the periods presented and shares held in treasury at period end are shown below: |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Shares purchased: |
||||||||
Number |
44,123 | 272,122 | ||||||
Total cost (thousands) |
$ | 4,800 | $ | 19,337 | ||||
Average cost |
$ | 108.78 | $ | 71.06 | ||||
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Shares in treasury at period end: |
||||||||||||
Number |
44,414,307 | 45,098,644 | 39,096,748 | |||||||||
Average cost |
$ | 29.16 | $ | 28.78 | $ | 20.45 | ||||||
| All shares purchased in the three months ended March 31, 2007, were purchased directly from employees to satisfy income tax withholding requirements on shares issued pursuant to incentive compensation plans. Of the 272,122 shares purchased in the three months ended March 31, 2006, 221,400 shares were purchased in the open market and 50,722 shares were purchased directly from employees to satisfy income tax withholding requirements on shares issued pursuant to incentive compensation plans. |
13
| 10. | Benefit Plans | |
| The following tables set forth the components of net periodic benefit cost (in thousands of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
PENSION BENEFITS |
||||||||
Components of Net Periodic Benefit Cost: |
||||||||
Service cost |
$ | 5,172 | $ | 4,581 | ||||
Interest cost |
8,646 | 8,031 | ||||||
Expected return on plan assets |
(11,607 | ) | (10,993 | ) | ||||
Amortization of prior service cost |
189 | 267 | ||||||
Recognized actuarial loss |
456 | 434 | ||||||
Net periodic benefit cost |
$ | 2,856 | $ | 2,320 | ||||
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
OTHER POSTRETIREMENT BENEFITS |
||||||||
Components of Net Periodic Benefit Cost: |
||||||||
Service cost |
$ | 1,134 | $ | 904 | ||||
Interest cost |
1,398 | 1,190 | ||||||
Amortization of prior service cost |
(42 | ) | (42 | ) | ||||
Recognized actuarial loss |
253 | 119 | ||||||
Net periodic benefit cost |
$ | 2,743 | $ | 2,171 | ||||
| The net periodic benefit costs for pension plans and postretirement plans during the three months ended March 31, 2007 include pretax reclassifications from other comprehensive income totaling $645,000 and $211,000, respectively, which are related to amortization of prior service costs and actuarial losses. During the three months ended March 31, 2007 and 2006, contributions of $292,000 and $318,000, respectively, were made to our pension plans. | ||
| 11. | Credit Facilities, Short-term Borrowings and Long-term Debt | |
| Short-term borrowings are summarized as follows (in thousands of dollars): |
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Bank borrowings |
$ | 14,500 | $ | 2,500 | $ | — | ||||||
Commercial paper |
225,900 | 196,400 | — | |||||||||
Total short-term borrowings |
$ | 240,400 | $ | 198,900 | $ | — | ||||||
| Short-term borrowings outstanding as of March 31, 2007 consisted of $14,500,000 of bank borrowings at 5.545% maturing within April 2007 and $225,900,000 of commercial paper having maturities ranging from 2 to 5 days and interest rates ranging from 5.35% to 5.50%. We plan to reissue most, if not all, of these notes when they mature. These short-term borrowings are used for general corporate purposes, including working capital requirements. |
14
| Our policy is to maintain committed credit facilities at least equal to our outstanding commercial paper. Unsecured bank lines of credit totaling $770,000,000 were maintained at March 31, 2007, of which $200,000,000 expires September 14, 2007, $20,000,000 expires January 30, 2008 and $550,000,000 expires June 27, 2011. As of March 31, 2007, $14,500,000 of the lines of credit were drawn. Interest rates are determined at the time of borrowing based on current market conditions. | ||
| All our debt obligations, both short-term borrowings and long-term debt, are unsecured as of March 31, 2007. | ||
| Long-term debt is summarized as follows (in thousands of dollars): |
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
6.00% 10-year notes issued 1999 |
$ | 250,000 | $ | 250,000 | $ | 250,000 | ||||||
Private placement notes |
49,212 | 49,335 | 81,991 | |||||||||
Medium-term notes |
21,000 | 21,000 | 21,000 | |||||||||
Other notes |
2,018 | 2,359 | 2,415 | |||||||||
Total debt excluding short-term borrowings |
$ | 322,230 | $ | 322,694 | $ | 355,406 | ||||||
Less current maturities of long-term debt |
727 | 630 | 32,547 | |||||||||
Total long-term debt |
$ | 321,503 | $ | 322,064 | $ | 322,859 | ||||||
Estimated fair value of total long-term debt |
$ | 332,050 | $ | 332,611 | $ | 333,820 | ||||||
| Our debt agreements do not subject us to contractual restrictions with regard to working capital or the amount we may expend for cash dividends and purchases of our stock. The percentage of consolidated debt to total capitalization, as defined in our bank credit facility agreements, must be less than 60%. Our total debt as a percentage of total capital was 21.2% as of March 31, 2007; 20.6% as of December 31, 2006 (as adjusted — see Note 2); and 14.0% as of March 31, 2006 (as adjusted — see Note 2). | ||
| The estimated fair value amounts of long-term debt presented in the table above have been determined by discounting expected future cash flows based on interest rates on U.S. Treasury bills, notes or bonds, as appropriate. The fair value estimates are based on information available to us as of the respective balance sheet dates. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since those dates. | ||
| 12. | Asset Retirement Obligations | |
| SFAS No. 143, “Accounting for Asset Retirement Obligations” (FAS 143) applies to legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets. | ||
| FAS 143 requires recognition of a liability for an asset retirement obligation in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement. | ||
| We record all asset retirement obligations for which we have legal obligations for land reclamation at estimated fair value. Essentially all these asset retirement obligations relate to our underlying land parcels, including both owned properties and mineral leases. FAS 143 results in ongoing recognition |
15
| of costs related to the depreciation of the assets and accretion of the liability. For the three month periods ended March 31, we recognized operating costs related to FAS 143 as follows: 2007 — $4,545,000; and 2006 — $3,469,000. FAS 143 operating costs for our continuing operations are reported in cost of goods sold. FAS 143 asset retirement obligations are reported within other noncurrent liabilities in our accompanying Condensed Consolidated Balance Sheets. | ||
| A reconciliation of the carrying amount of our asset retirement obligations is as follows (in thousands of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
Balance at beginning of period |
$ | 114,829 | $ | 105,774 | ||||
Liabilities incurred |
174 | 347 | ||||||
Liabilities (settled) |
(3,085 | ) | (2,925 | ) | ||||
Accretion expense |
1,439 | 1,272 | ||||||
Revisions up |
1,512 | 5,366 | ||||||
Balance at end of period |
$ | 114,869 | $ | 109,834 | ||||
| 13. | Standby Letters of Credit | |
| We provide certain third parties with irrevocable standby letters of credit in the normal course of business. We use our commercial banks to issue standby letters of credit to secure our obligations to pay or perform when required to do so pursuant to the requirements of an underlying agreement or the provision of goods and services. The standby letters of credit listed below are cancelable only at the option of the beneficiary who is authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms. Since banks consider letters of credit as contingent extensions of credit, we are required to pay a fee until they expire or are cancelled. Substantially all of our standby letters of credit are renewable annually. | ||
| Our standby letters of credit as of March 31, 2007 are summarized in the table below (in thousands of dollars): |
| Amount | Term | Maturity | ||||||||||
Risk management requirement for insurance claims |
$ | 16,194 | One year | Renewable annually | ||||||||
Payment surety required by utilities |
100 | One year | Renewable annually | |||||||||
Contractual reclamation/restoration requirements |
35,752 | One year | Renewable annually | |||||||||
Total standby letters of credit |
$ | 52,046 | ||||||||||
| 14. | Acquisitions |
| During the three months ended March 31, 2007, we acquired the assets of the following facilities for cash payments of approximately $58,857,000 including acquisition costs and net of acquired cash: |
| — an aggregates production facility in Illinois | |||
| — an aggregates production facility in North Carolina |
| We have recorded the acquisitions above based on preliminary purchase price allocations which are subject to change. |
16
| 15. | Goodwill | |
| Changes in the carrying amount of goodwill for the periods presented below are summarized as follows (in thousands of dollars): |
Goodwill as of March 31, 2006 |
$ | 628,683 | ||
Goodwill of acquired businesses |
(2,800 | ) | ||
Purchase price allocation adjustments |
(5,694 | ) | ||
Goodwill as of December 31, 2006 |
$ | 620,189 | ||
Goodwill of acquired businesses* |
30,017 | |||
Purchase price allocation adjustments |
— | |||
Goodwill as of March 31, 2007 |
$ | 650,206 | ||
| * | The goodwill of acquired businesses for 2007 relates to the acquisitions listed in Note 14 above. We are currently evaluating the final purchase price allocations; therefore, the goodwill amount is subject to change. When finalized, the goodwill from these 2007 acquisitions is expected to be fully deductible for income tax purposes. |
| 16. | New Accounting Standards | |
| See Note 2 for a discussion of the accounting standards adopted in 2007. | ||
| In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (FAS 157), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies whenever other accounting standards require or permit assets or liabilities to be measured at fair value; accordingly, it does not expand the use of fair value in any new circumstances. Fair value under FAS 157 is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data; for example, a reporting entity’s own data. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. FAS 157 is effective for fiscal years beginning after November 15, 2007; we expect to adopt FAS 157 as of January 1, 2008. | ||
| In September 2006, the FASB issued FAS 158. In addition to the recognition provisions (which we adopted December 31, 2006), FAS 158 requires an employer to measure the plan assets and benefit obligations as of the date of its year-end balance sheet. This requirement is effective for fiscal years ending after December 15, 2008. We are currently evaluating the timing of our adoption of the measurement date provisions of FAS 158 and the estimated impact such adoption will have on our financial statements. | ||
| 17. | Enterprise Data — Continuing Operations | |
| Our Construction Materials business is organized in seven regional divisions that produce and sell aggregates and related products and services. All these divisions exhibit similar economic characteristics, product processes, products and services, types and classes of customers, methods of distribution and regulatory environments. Accordingly, they have been aggregated into one reporting segment for financial statement purposes. Customers use aggregates primarily in the construction and maintenance of highways, streets and other public works and in the construction of housing and commercial, industrial and other private nonresidential facilities. |
17
| The majority of our activities are domestic. We sell a relatively small amount of construction aggregates outside the United States. Due to the sale of our Chemicals business as described in Note 3, we have one reportable segment, Construction Materials, which constitutes continuing operations. | ||
| Net sales by product are summarized below (in millions of dollars): |
| Three Months Ended | ||||||||
| March 31 | ||||||||
| 2007 | 2006 | |||||||
NET SALES BY PRODUCT |
||||||||
Aggregates |
$ | 455.8 | $ | 459.9 | ||||
Asphalt mix |
96.8 | 85.6 | ||||||
Concrete |
48.0 | 64.6 | ||||||
Other |
29.6 | 32.2 | ||||||
Total |
$ | 630.2 | $ | 642.3 | ||||
| 18. | Supplemental Cash Flow Information | |
| Supplemental information referable to our Condensed Consolidated Statements of Cash Flows for the three months ended March 31 is summarized below (in thousands of dollars): |
| 2007 | 2006 | |||||||
Cash payments: |
||||||||
Interest (exclusive of amount capitalized) |
$ | 1,632 | $ | 6,999 | ||||
Income taxes |
3,145 | 9,154 | ||||||
Noncash investing and financing activities: |
||||||||
Accrued liabilities for purchases of property, plant
and equipment |
29,500 | 9,934 | ||||||
Debt issued for purchases of property, plant and equipment |
5 | — | ||||||
Proceeds receivable from exercise of stock options |
48 | — | ||||||
| 19. | Other Commitments and Contingencies | |
| We are a defendant in various lawsuits and legal proceedings which were specifically described in our most recent Annual Report on Form 10-K. Legal proceedings for which events have occurred subsequent to the filing of our most recent Annual Report on Form 10-K, which we believe are material to the development of such proceedings, are described below. | ||
| In September 2001, we were named a defendant in a suit brought by the Illinois Department of Transportation (IDOT), in the Circuit Court of Cook County, Chancery Division, Illinois, alleging damage to a 0.9-mile section of Joliet Road that bisects our McCook Quarry in McCook, Illinois, a Chicago suburb. IDOT seeks damages to “repair, restore, and maintain” the road or, in the alternative, judgment for the cost to “improve and maintain other roadways to accommodate” vehicles that previously used the road. The complaint also requests that the court enjoin any McCook Quarry operations that will further damage the road. The court in this case recently granted summary judgment in our favor on certain claims. If this ruling stands, we believe this could preclude certain damage claims by the plaintiffs. However, the court also granted the plaintiffs’ motion to amend their complaint to add a punitive damages claim, although the court made it clear that it was not ruling on the merits of this claim. Discovery is ongoing. | ||
| We produced and marketed industrial sand from 1988 to 1994. Since July 1993, we have been sued in numerous suits in a number of states by plaintiffs alleging that they contracted silicosis or incurred personal injuries as a result of exposure to, or use of, industrial sand used for abrasive blasting. As of April 19, 2007, the number of suits totaled 100, involving an aggregate of 566 plaintiffs. Of the pending suits, 51 with 494 plaintiffs are filed in Texas. The balance of the suits |
18
| have been brought by plaintiffs in state courts in Alabama, California, Florida, Louisiana and Mississippi. We are seeking dismissal of all suits on the grounds that plaintiffs were not exposed to our product. To date, we have been successful in getting dismissals without settlement payments from 548 cases involving 17,190 plaintiffs. | ||
| It is not possible to predict with certainty the ultimate outcome of these and other legal proceedings in which we are involved. As of March 31, 2007, we had recorded liabilities of $9,702,000 related to claims and litigation for which a loss was determined to be probable and reasonably estimable. For claims and litigation for which a loss was determined to be only reasonably possible, no liability was recorded. Furthermore, the potential range of such losses would not be material to our condensed consolidated financial statements. In addition, losses on certain claims and litigation may be subject to limitations on a per occurrence basis by excess insurance, as described in our most recent Annual Report on Form 10-K. | ||
| 20. | Major Pending Acquisition | |
| As noted in our most recent Annual Report on Form 10-K, on February 19, 2007 we signed a definitive agreement to acquire 100% of the stock of Florida Rock Industries, Inc. (Florida Rock), a leading producer of construction aggregates, cement, concrete and concrete products in the Southeast and Mid-Atlantic states, in exchange for cash and stock valued at approximately $4.6 billion based on the February 16, 2007 closing price of Vulcan common stock. Under the terms of the agreement, Vulcan shareholders will receive one share of common stock in a new holding company (whose subsidiaries will be Vulcan Materials and Florida Rock) for each Vulcan share. Florida Rock shareholders can elect to receive either 0.63 shares of the new holding company or $67.00 in cash for each Florida Rock share, subject to proration to ensure that in the aggregate 70% of Florida Rock shares will be converted into cash and 30% of Florida Rock shares will be converted into stock. We intend to finance the transaction with approximately $3.2 billion in debt and approximately $1.4 billion in stock based on the February 16, 2007 closing price of Vulcan common stock. We have received a firm commitment from Goldman, Sachs & Co. to provide bridge financing for the transaction. The transaction is intended to be non-taxable for Vulcan shareholders and nontaxable for Florida Rock shareholders to the extent they receive stock. The acquisition has been unanimously approved by the Boards of Directors of each company and is subject to approval by a majority of Florida Rock shareholders, regulatory approvals and customary closing conditions. The transaction is expected to close in mid-year 2007. |
19
20
21
22
23
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Short-term investments: |
||||||||||||
Cash equivalents |
$ | 69,960 | $ | 50,374 | $ | 80,343 | ||||||
Medium-term investments |
— | — | 68,965 | |||||||||
Total short-term investments |
$ | 69,960 | $ | 50,374 | $ | 149,308 | ||||||
Short-term borrowings: |
||||||||||||
Bank borrowings |
$ | 14,500 | $ | 2,500 | $ | — | ||||||
Commercial paper |
225,900 | 196,400 | — | |||||||||
Total short-term borrowings |
$ | 240,400 | $ | 198,900 | $ | — | ||||||
Net short-term (borrowings)/investments |
$ | (170,440 | ) | $ | (148,526 | ) | $ | 149,308 | ||||
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Private placement notes |
$ | — | $ | — | $ | 32,000 | ||||||
Other notes |
727 | 630 | 547 | |||||||||
Total |
$ | 727 | $ | 630 | $ | 32,547 | ||||||
24
| Mar. 31 | Dec. 31 | Mar. 31 | ||||||||||
| 2007 | 2006 | 2006 | ||||||||||
Debt: |
||||||||||||
Current maturities of long-term debt |
$ | 727 | $ | 630 | $ | 32,547 | ||||||
Short-term borrowings |
240,400 | 198,900 | — | |||||||||
Long-term debt |
321,503 | 322,064 | 322,859 | |||||||||
Total debt |
$ | 562,630 | $ | 521,594 | $ | 355,406 | ||||||
Capital: |
||||||||||||
Total debt |
$ | 562,630 | $ | 521,594 | $ | 355,406 | ||||||
Shareholders’ equity * |
2,094,556 | 2,010,899 | 2,190,282 | |||||||||
Total capital |
$ | 2,657,186 | $ | 2,532,493 | $ | 2,545,688 | ||||||
Ratio of total debt to total capital |
21.2 | % | 20.6 | % | 14.0 | % | ||||||
| * | As adjusted for December 31, 2006 and March 31, 2006. See Note 2 to the condensed consolidated financial statements. |
25
| Amount | Term | Maturity | ||||||||||
Risk management requirement for insurance claims |
$ | 16,194 | One year | Renewable annually | ||||||||
Payment surety required by utilities |
100 | One year | Renewable annually | |||||||||
Contractual reclamation/restoration requirements |
35,752 | One year | Renewable annually | |||||||||
Total standby letters of credit |
$ | 52,046 | ||||||||||
26
27
28
29
30
31
32
| (c) | Issuer Purchases of Equity Securities | ||
| The following table presents a summary of share purchases we made during the quarter ended March 31, 2007: |
| Total Number of Shares | Maximum Number of | |||||||||||||||
| Total Number of | Average Price | Purchased as Part of | Shares that May Yet be | |||||||||||||
| Shares Purchased | Paid per Share | Publicly Announced | Purchased Under the | |||||||||||||
| Period | (1) | (2) | Plans or Programs | Plans or Programs (3) | ||||||||||||
Jan. 1 - 31, 2007 |
— | $ | — | — | 3,455,539 | |||||||||||
Feb. 1 - 28, 2007 |
41,033 | $ | 108.32 | 41,033 | 3,414,506 | |||||||||||
Mar. 1 - 31, 2007 |
3,090 | $ | 114.90 | 3,090 | 3,411,416 | |||||||||||
Total |
44,123 | $ | 108.78 | 44,123 | ||||||||||||
| (1) | All shares purchased during the first quarter of 2007 were purchased directly from employees to satisfy income tax withholding requirements on shares issued pursuant to incentive compensation plans. | |
| (2) | The average price paid per share includes commission costs. | |
| (3) | On February 10, 2006, the Board of Directors authorized the Company to purchase up to 10,000,000 shares. As of March 31, 2007, there were 3,411,416 shares remaining under the authorization. We may make share purchases from time to time in the open market or through privately negotiated transactions, depending upon market, business, legal and other conditions. |
| We did not have any unregistered sales of equity securities during the first quarter of 2007. |
33
34
| VULCAN MATERIALS COMPANY | ||||||
Date May 1, 2007 |
||||||
| /s/ Ejaz A. Khan | ||||||
| Ejaz A. Khan Vice President, Controller and Chief Information Officer |
||||||
| /s/ Daniel F. Sansone | ||||||
| Daniel F. Sansone Senior Vice President, Chief Financial Officer |
35