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Registration No. 333-142060
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155 East 21st Street, Jacksonville, Florida 32206
TO BE HELD AUGUST 14, 2007
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For information about Vulcan: | For information about Florida Rock: | |||||
By Mail: | Vulcan Materials Company | By Mail: | Florida Rock Industries, Inc. | |||
1200 Urban Center Drive | 155 East 21st Street | |||||
Birmingham, Alabama 35242 | Jacksonville, Florida 32206 | |||||
Attention: Office of the Secretary | Attention: Office of the Secretary | |||||
By Telephone: | 205-298-3000 | By Telephone: | 904-355-1781 |
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Annex A | Agreement and Plan of Merger, as amended | |
Annex B | Support Agreement | |
Annex C | Shareholders Agreement | |
Annex D | Opinion of Lazard Frères & Co. LLC | |
Annex E | Form of Holdco Amended and Restated Certificate of Incorporation | |
Annex F | Form of Holdco Amended and Restated By-Laws | |
Annex G | Vulcan Materials Company Annual Report onForm 10-K for the year ended December 31, 2006 | |
Annex H | Vulcan Materials Company Proxy Statement for its 2007 Annual Meeting of Shareholders | |
Annex I | Vulcan Materials Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 | |
Annex J | Vulcan Materials Company Current Report onForm 8-K dated July 12, 2007 |
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Q. | What is the proposed transaction for which I am being asked to vote? | |
A. | You, as a shareholder of Florida Rock Industries, Inc., are being asked to vote to approve at a special meeting an Agreement and Plan of Merger dated as of February 19, 2007, as amended on April 9, 2007, which we refer to in this proxy statement/prospectus as the “merger agreement,” entered into by and among Vulcan Materials Company, Florida Rock Industries, Inc., Virginia Holdco, Inc., Virginia Merger Sub, Inc. and Fresno Merger Sub, Inc. In this proxy statement/prospectus, we also refer to Vulcan Materials Company as “Vulcan,” to Florida Rock Industries, Inc. as “Florida Rock,” and to Virginia Holdco, Inc. as “Holdco.” | |
Subject to the terms and conditions of the merger agreement, Virginia Merger Sub, Inc. (a wholly owned subsidiary of Holdco) will merge with and into Vulcan (which we refer to as the “Vulcan merger”), and Fresno Merger Sub, Inc. (a wholly owned subsidiary of Holdco) will merge with and into Florida Rock (which we refer to as the “Florida Rock merger”). We refer to the Vulcan merger and the Florida Rock merger together as the “mergers,” and neither merger will occur unless both do. Vulcan and Florida Rock will survive their respective mergers as wholly owned subsidiaries of Holdco. | ||
You are also being asked to vote to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. | ||
Q. | Are Vulcan shareholders being asked to vote on the proposed transaction? | |
A. | No. No vote of Vulcan shareholders is required to approve the merger agreement. | |
Q. | What will I receive for my Florida Rock shares in the Florida Rock merger? | |
A. | You may make one of the following elections, or a combination of the two, regarding the type of merger consideration you wish to receive in exchange for your shares of Florida Rock common stock: | |
• a cash election to receive $67.00 in cash, without interest, for each share of Florida Rock common stock; or | ||
• a share election to receive 0.63 of a share of Holdco common stock for each share of Florida Rock common stock. | ||
If you make a cash election or a share election, the form of merger consideration that you actually receive as a Florida Rock shareholder may be adjusted as a result of the proration procedures pursuant to the merger agreement as described in this proxy statement/prospectus under “The Mergers — Florida Rock Shareholders Making Cash and Share Elections” on page 55. These proration procedures are designed to ensure that 30% of Florida Rock shares outstanding immediately prior to the Florida Rock merger are converted into Holdco shares and 70% of Florida Rock shares outstanding immediately prior to the Florida Rock merger are converted into cash. | ||
Q. | How and when do I make a cash election or a share election? | |
A. | You should carefully review and follow the instructions accompanying the form of election provided together with this proxy statement/prospectus. To make a cash election or a share election, Florida Rock shareholders of record must properly complete, sign and send the form of election and any stock certificates representing their Florida Rock shares to The Bank of New York, the Exchange Agent, at the following address: |
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By mail: The Bank of New York Florida Rock Industries, Inc. P.O. Box 859208 Braintree, MA 02185-9208 | By overnight courier: The Bank of New York Florida Rock Industries, Inc. 161 Bay State Drive Braintree, MA 02184 | By hand: The Bank of New York Reorganization Services 101 Barclay Street Receive and Deliver Window Street Level New York, NY 10286 | By facsimile transmission: (for eligible institutions only) 781-930-4939 To confirm facsimile only: (Tel.) 781-930-4900 |
Questions regarding the cash or share elections should be directed to D. F. King & Co., Inc., the Information Agent, at 800-347-4750 (banks and brokers call collect: 212-269-5550). | ||
The exchange agent must receive the form of election and any stock certificates representing Florida Rock shares, a book-entry transfer of shares or a guarantee of delivery as described in the instructions accompanying the form of election by the election deadline.The election deadline will be 5:00 p.m., New York City time, on August 14, 2007, the date of the special meeting, unless the completion of the Florida Rock merger will occur more than four business days following the date of the special meeting, in which case the election deadline will be extended until two business days before the completion of the Florida Rock merger. Vulcan and Florida Rock will publicly announce the election deadline at least five business days prior to the anticipated completion date of the Florida Rock merger. | ||
If you own Florida Rock shares in “street name” through a bank, broker or other nominee and you wish to make an election, you should seek instructions from the financial institution holding your shares concerning how to make your election. | ||
If you are a participant in the Florida Rock Industries, Inc. Profit Sharing and Deferred Earnings Plan or The Arundel Corporation Profit Sharing and Savings Plan and you wish to make an election, you will receive instructions from your plan administrator concerning how to make your election with respect to Florida Rock shares allocated to your account. | ||
Q. | Can I elect to receive cash consideration for a portion of my Florida Rock shares and share consideration for my remaining Florida Rock shares? | |
A. | Yes. The form of election allows an election to be made for cash consideration or share consideration for all or any portion of your Florida Rock shares. | |
Q. | Can I change my election after the form of election has been submitted? | |
A. | Yes. You may revoke your election prior to the election deadline by submitting a written notice of revocation to the exchange agent or by submitting new election materials. Revocations must specify the name in which your shares are registered on the stock transfer books of Florida Rock and such other information as the exchange agent may request. If you wish to submit a new election, you must do so in accordance with the election procedures described in this proxy statement/prospectus and the form of election. If you instructed a broker to submit an election for your shares, you must follow your broker’s directions for changing those instructions.Whether you revoke your election by submitting a written notice of revocation or by submitting new election materials, the notice or materials must be received by the exchange agent by the election deadline in order for the revocation to be valid. | |
Q. | May I transfer Florida Rock shares after an election is made? | |
A. | No. Florida Rock shareholders who have made elections will be unable to sell or otherwise transfer their shares after making the election, unless the election is properly revoked before the election deadline or unless the merger agreement is terminated. | |
Q. | What if I do not send a form of election or it is not received? | |
A. | If the exchange agent does not receive a properly completed form of election from you before the election deadline, together with any stock certificates representing the shares you wish to exchange for cash or shares of Holdco common stock, properly endorsed for transfer, a book-entry transfer of shares or a guarantee of delivery as described in the form of election, then you will have no control over the type of merger consideration you receive. As a result, your Florida Rock shares may be exchanged for cash consideration, share consideration or a combination of cash consideration and share consideration consistent with the proration procedures contained in the merger agreement and described under “The Mergers — Florida Rock Shareholders Making Cash and Share Elections” beginning on page 55. Because the value of the share consideration and cash consideration may differ and other shareholders would likely elect the consideration having the higher value, in such a circumstance you would likely receive the |
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consideration having the lower value at the time.You bear the risk of delivery and should send any form of election by courier or by hand to the appropriate addresses shown in the form of election. | ||
If you do not make a valid election with respect to the Florida Rock shares you own of record, after the completion of the Florida Rock merger, you will receive written instructions from the exchange agent on how to exchange your Florida Rock stock certificates for the shares of Holdco common stockand/or cash that you are entitled to receive in the Florida Rock merger as a non-electing Florida Rock shareholder. | ||
Q. | May I submit a form of election even if I do not vote to approve the merger agreement? | |
A. | Yes. You may submit a form of election even if you vote against the approval of the merger agreement or abstain with respect to the approval of the merger agreement. | |
Q. | What shareholder approvals are needed for Florida Rock? | |
A. | Approval of the merger agreement requires the affirmative vote of a majority of the outstanding shares of Florida Rock common stock. | |
Each holder of Florida Rock common stock is entitled to one vote per share. | ||
As of July 13, 2007, the record date for determining shareholders entitled to vote at the special meeting, there were 66,690,854 shares of Florida Rock common stock outstanding. | ||
Pursuant to a support agreement with certain members and affiliates of the Baker family, such members and affiliates of the Baker family have agreed to vote certain shares of Florida Rock common stock beneficially owned by them, representing approximately 9.9% of the outstanding shares of Florida Rock common stock, in favor of the approval of the merger agreement. | ||
The affirmative vote of a majority of the votes cast at the special meeting is required to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger agreement. | ||
Q. | When and where is the special meeting? | |
A. | The special meeting will be held at Florida Rock’s headquarters located at 155 East 21st Street, Jacksonville, Florida 32206, on August 13, 2007 at 9:00 a.m., local time. | |
Q. | What is the recommendation of the Florida Rock Board of Directors? | |
A. | The Florida Rock Board of Directors unanimously (with Edward L. Baker, John D. Baker II and Thompson S. Baker II abstaining) recommends a vote FOR the approval of the merger agreement and a vote FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. | |
Q. | Why was the merger agreement amended? | |
A. | The merger agreement was amended on April 9, 2007, for the purpose of providing that certificates representing shares of Vulcan common stock immediately prior to the Vulcan merger will from and after the Vulcan merger represent the same number of shares of Holdco common stock. Consequently, no new certificates representing shares of Holdco common stock will be issued in exchange for existing certificates representing shares of Vulcan common stock. | |
Q. | What do I need to do now? | |
A. | After carefully reading and considering the information contained in this proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed postage-paid envelope, or, if available, by submitting your voting instruction by telephone or through the Internet, as soon as possible so that your shares may be represented and voted at the special meeting. If you hold shares registered in the name of a broker, bank or other nominee, that broker, bank or other nominee has enclosed or will provide a voting instruction card for use in directing your broker, bank or other nominee how to vote those shares. | |
Q. | Should I send in my stock certificates with my proxy card or my form of election? | |
A. | Please DO NOT send your Florida Rock stock certificates with your proxy card. You should send in your Florida Rock stock certificates to the exchange agent with your form of election. | |
If you wish to make an election with respect to your Florida Rock shares, prior to the election deadline, you should send your completed, signed form of election together with your Florida Rock stock certificates, properly endorsed for transfer, a book-entry transfer of your Florida Rock shares or a guarantee of delivery to |
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the exchange agent as described in the form of election. If your shares are held in “street name,” you should follow your broker’s instructions for making an election with respect to your shares. If you are a participant in the Florida Rock Industries, Inc. Profit Sharing and Deferred Earnings Plan or The Arundel Corporation Profit Sharing and Savings Plan and you wish to make an election, you will receive instructions from your plan administrator concerning how to make your election with respect to Florida Rock shares allocated to your account. | ||
If you make no election with respect to your Florida Rock shares, after the completion of the Florida Rock merger you will receive a letter of transmittal for you to use in surrendering any Florida Rock stock certificates you have at that time. | ||
Q. | If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me? | |
A. | If you hold your shares in “street name” and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. Generally, your broker, bank or other nominee does not have discretionary authority to vote on the merger proposal. Accordingly, your broker, bank or other nominee will vote your shares held by it in “street name” only if you provide instructions to it on how to vote. You should follow the directions your broker, bank or other nominee provides. Shares that are not voted because you do not properly instruct your broker, bank or other nominee will have the effect of votes against the approval of the merger agreement. Broker non-votes will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. | |
Q. | If I beneficially own Florida Rock shares held pursuant to any Florida Rock Plan, will I be able to vote on approval of the merger agreement and elect whether to receive cash or share consideration? | |
A. | If your shares are held through the Florida Rock Industries, Inc. Profit Sharing and Deferred Earnings Plan or The Arundel Corporation Profit Sharing and Savings Plan, which we refer to in this proxy statement/prospectus collectively as the “Florida Rock Plans,” you must instruct your plan administrator on how to vote your shares. If you hold shares through any Florida Rock Plan, your shares in the plan may be voted even if you do not instruct the trustee how to vote, as explained in this proxy statement/prospectus under “The Special Meeting — Voting and Election by Participants in the Florida Rock Plans” beginning on page 22. Participants in the Florida Rock Industries, Inc. Profit Sharing and Deferred Earnings Plan and The Arundel Corporation Profit Sharing and Savings Plan will be able to direct how they want Florida Rock shares allocated to their accounts as of the record date to be voted and whether they want to elect cash consideration or share consideration to be allocated to their accounts in exchange for each Florida Rock share in their accounts as of the closing date. | |
Q. | What if I don’t vote? | |
A. | If you fail to respond with a vote on the merger proposal, or if you respond and indicate that you are abstaining from voting, it will have the same effect as a vote against the approval of the merger agreement. A non-response or abstention will have no effect with respect to the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. If you respond but do not indicate how you want to vote, your proxy will be counted as a vote in favor of approving the merger agreement and a vote in favor of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. If you hold your shares through any Florida Rock Plan, your shares in the plan may be voted even if you do not instruct the trustee how to vote as explained in your voting instructions. | |
Q. | Can I change my vote after I have delivered my proxy? | |
A. | Yes. You can change your vote at any time before your proxy is voted at the special meeting. If you are a holder of record, you can do so by: | |
• filing a written notice of revocation with the Secretary, Florida Rock Industries, Inc., 155 E. 21st Street, Jacksonville, Florida 32206. | ||
• submitting a new proxy before the special meeting. | ||
• attending the special meeting and voting in person. Attendance at the special meeting will not in and of itself constitute revocation of a proxy. | ||
For shares held beneficially by you, you may change your vote only by submitting new voting instructions to your broker or nominee. If you submit your voting instruction through the Internet or by telephone, you can |
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change your vote by submitting a voting instruction at a later date, in which case your later-submitted voting instruction will be recorded and your earlier voting instruction will be revoked. If the special meeting is postponed or adjourned, it will not affect the ability of shareholders of record as of the record date to exercise their voting rights or to revoke any previously granted proxy using the methods described above. | ||
Q. | What does it mean if I receive more than one proxy card or more than one email instructing me to vote? | |
A. | If you receive more than one proxy card or more than one email instructing you to vote, your shares are registered in more than one name or are registered in different accounts. Please complete, date, sign and return each proxy card, and respond to each email, to ensure that all your shares are voted. | |
Q. | What does it mean if multiple members of my household are shareholders but we received only one set of proxy materials? | |
A. | If you hold shares in “street name,” in accordance with a notice sent to certain brokers, banks or other nominees, we are sending only one proxy statement/prospectus to an address unless we received contrary instructions from any shareholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. | |
Q. | Am I entitled to appraisal rights? | |
A. | No. Under the Florida Business Corporation Act (the “FBCA”), Florida Rock shareholders are not entitled to appraisal rights in connection with the Florida Rock merger. | |
Q. | What are the tax consequences to Florida Rock shareholders of the mergers? | |
A. | Assuming that the mergers are completed as currently contemplated, we expect that the exchange of shares by a Florida Rock shareholder solely for Holdco common stock will be nontaxable to such shareholder for U.S. federal income tax purposes, except in respect of any cash that such shareholder receives in lieu of fractional shares of Holdco common stock. We expect that a Florida Rock shareholder who exchanges shares of Florida Rock common stock for a combination of Holdco common stock and cash will only recognize gain up to the amount of cash received. We expect that the exchange of shares of Florida Rock common stock by a Florida Rock shareholder solely for cash will be taxable to such shareholder for U.S. federal income tax purposes. | |
Tax matters are very complicated. You should be aware that the tax consequences to you of either merger may depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences to you of the mergers. For more information regarding the tax consequences of the mergers, please see “The Mergers — Material United States Federal Income Tax Consequences” beginning on page 51. | ||
Q. | When are the mergers expected to be completed? | |
A. | We expect to complete the mergers in the third calendar quarter of 2007. Because the Florida Rock merger is subject to shareholder approval and because the mergers are subject to governmental approvals, we cannot predict the exact timing of their completion. | |
Q. | Who can help answer my questions? | |
A. | If you have any questions about the mergers or how to submit your proxy or make an election, or if you need additional copies of this proxy statement/prospectus, the form of election or the enclosed proxy card or voting instruction card, you should contact: |
48 Wall Street
New York, NY 10005
Toll Free: 800-347-4750
Banks and Brokers Call Collect: 212-269-5550
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(1) | To be renamed “Vulcan Materials Company” |
(2) | To be renamed “VMC Corp.” |
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Vulcan | Florida Rock | Vulcan Pro Forma | Florida Rock Pro | |||||||||||||
Date | Closing Price | Closing Price | Equivalent(1) | Forma Equivalent(2) | ||||||||||||
February 16, 2007 | $ | 111.81 | $ | 46.96 | $ | 111.81 | $ | 70.44 | ||||||||
July 13, 2007 | $ | 114.42 | $ | 67.83 | $ | 114.42 | $ | 72.08 |
(1) | The pro forma equivalent per share value of Vulcan common stock is calculated by multiplying the Vulcan closing price by the Vulcan merger exchange ratio of 1.0. | |
(2) | The pro forma equivalent per share value of Florida Rock common stock is calculated by multiplying the Vulcan closing price by the Florida Rock merger exchange ratio of 0.63. |
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• | approval of the merger agreement by the Florida Rock shareholders; | |
• | absence of any legal prohibition on completion of the transaction; | |
• | receipt of opinions of counsel to Vulcan (with respect to Vulcan common stock) and Florida Rock (with respect to Florida Rock common stock) to the effect that the exchanges of Vulcan common stock or Florida Rock common stock for Holdco common stock will qualify for tax-free treatment for U.S. federal income tax purposes; and | |
• | material accuracy, as of the closing, of the representations and warranties made by the parties and material compliance by the parties with their respective obligations under the merger agreement. |
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Three Months Ended | ||||||||||||||||||||||||||||
March 31 | Years Ended December 31 | |||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Earnings Data: | ||||||||||||||||||||||||||||
Net sales | $ | 630,187 | $ | 642,272 | $ | 3,041,093 | $ | 2,614,965 | $ | 2,213,160 | $ | 2,086,944 | $ | 1,980,576 | ||||||||||||||
Depreciation, depletion, amortization and accretion | 60,801 | 53,673 | 226,351 | 222,400 | 211,327 | 216,122 | 205,185 | |||||||||||||||||||||
Operating earnings(1) | 137,146 | 99,014 | 695,089 | 476,836 | 403,729 | 378,318 | 375,575 | |||||||||||||||||||||
Interest expense, net | 5,312 | 3,638 | 20,139 | 20,519 | 34,681 | 49,635 | 51,251 | |||||||||||||||||||||
Earnings from continuing operations before income taxes(2) | 133,036 | 107,469 | 703,491 | 480,695 | 377,362 | 335,080 | 329,195 | |||||||||||||||||||||
Earnings from continuing operations | 89,339 | 71,905 | 480,178 | 344,128 | 262,496 | 237,513 | 233,236 | |||||||||||||||||||||
Basic earnings per share from continuing operations | $ | 0.94 | $ | 0.72 | $ | 4.92 | $ | 3.37 | $ | 2.56 | $ | 2.33 | $ | 2.29 | ||||||||||||||
Diluted earnings per share from continuing operations | $ | 0.91 | $ | 0.70 | $ | 4.81 | $ | 3.31 | $ | 2.53 | $ | 2.31 | $ | 2.28 | ||||||||||||||
Basic weighted average common shares outstanding | 95,172 | 100,552 | 97,577 | 102,179 | 102,447 | 101,849 | 101,709 | |||||||||||||||||||||
Diluted weighted average common shares outstanding | 97,778 | 102,346 | 99,777 | 104,085 | 103,664 | 102,710 | 102,515 | |||||||||||||||||||||
Balance Sheet Data (end of period): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 69,960 | $ | 80,343 | $ | 55,230 | $ | 275,138 | $ | 271,450 | $ | 147,769 | $ | 127,008 | ||||||||||||||
Working capital(3) | 239,358 | 596,915 | 243,686 | 593,835 | 998,158 | 507,290 | 491,979 | |||||||||||||||||||||
Total assets | 3,570,915 | 3,406,957 | 3,427,834 | 3,590,423 | 3,667,546 | 3,636,860 | 3,448,221 | |||||||||||||||||||||
Long-term debt | 321,503 | 322,859 | 322,064 | 323,392 | 604,522 | 607,654 | 857,757 | |||||||||||||||||||||
Total shareholders’ equity | 2,094,556 | 2,190,282 | 2,010,899 | 2,133,649 | 2,020,790 | 1,802,836 | 1,696,986 | |||||||||||||||||||||
Book value per common share | $ | 21.98 | $ | 21.77 | $ | 21.26 | $ | 21.27 | $ | 19.68 | $ | 17.71 | $ | 16.71 |
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(1) | Operating earnings during the year ended December 31, 2006 include a pretax gain of $24.8 million related to the sale of contractual rights to mine the Bellwood Quarry in Atlanta, Georgia. Operating earnings also reflect pretax gains on the sale of property, plant and equipment, including real estate sales, as follows: for the years ended December 31, 2006 — $5.6 million; 2005 — $8.3 million; 2004 — $23.8 million; 2003 — $27.8 million; 2002 — $9.1 million; and for the three months ended March 31, 2007 — $46.4 million; 2006 — $0.8 million. | |
(2) | Earnings from continuing operations before income taxes include pretax gains of $28.7 million and $20.4 million during the years ended December 31, 2006 and 2005, respectively, and pretax gains of $0.7 million and $12.2 million during the three months ended March 31, 2007 and 2006, respectively, related to the increase in the carrying value of the ECU (electrochemical unit) earn-out received in connection with the 2005 sale of Vulcan’s Chemicals business. Earnings from continuing operations are presented before the cumulative effect of accounting changes. | |
(3) | Working capital as of December 31, 2004 includes the total assets and total liabilities, including noncurrent assets and noncurrent liabilities, of Vulcan’s former Chemicals business, which was sold in 2005. At December 31, 2004, the assets and liabilities of this business were classified as assets held for sale ($458.2 million) and liabilities of assets held for sale including minority interest ($188.4 million). |
Six Months Ended March 31 | Years Ended September 30 | |||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Earnings Data: | ||||||||||||||||||||||||||||
Net sales | $ | 529,865 | $ | 652,334 | $ | 1,328,271 | $ | 1,126,608 | $ | 926,609 | $ | 728,674 | $ | 707,459 | ||||||||||||||
Depreciation, depletion, amortization and accretion | 38,742 | 35,592 | 74,687 | 64,558 | 63,628 | 63,126 | 66,152 | |||||||||||||||||||||
Operating earnings(1) | 107,491 | 152,125 | 319,475 | 249,473 | 175,928 | 112,299 | 106,447 | |||||||||||||||||||||
Interest (income) expense, net | (1,956 | ) | (1,069 | ) | (2,902 | ) | 295 | 1,340 | (659 | ) | 2,412 | |||||||||||||||||
Earnings from continuing operations before income taxes | 109,795 | 157,199 | 330,084 | 255,632 | 177,953 | 116,308 | 106,320 | |||||||||||||||||||||
Earnings from continuing operations | 70,489 | 99,825 | 211,409 | 157,653 | 113,670 | 75,601 | 68,895 | |||||||||||||||||||||
Basic earnings per share from continuing operations | $ | 1.08 | $ | 1.52 | $ | 3.22 | $ | 2.41 | $ | 1.75 | $ | 1.17 | $ | 1.08 | ||||||||||||||
Diluted earnings per share from continuing operations | $ | 1.06 | $ | 1.49 | $ | 3.16 | $ | 2.36 | $ | 1.72 | $ | 1.15 | $ | 1.06 | ||||||||||||||
Basic weighted average common shares outstanding | 65,447 | 65,618 | 65,621 | 65,306 | 64,810 | 64,420 | 63,934 | |||||||||||||||||||||
Diluted weighted average common shares outstanding | 66,634 | 66,892 | 66,829 | 66,764 | 66,133 | 65,464 | 65,144 | |||||||||||||||||||||
Balance Sheet Data (end of period): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 57,818 | $ | 43,025 | $ | 93,353 | $ | 68,921 | $ | 45,891 | $ | 38,135 | $ | 3,845 | ||||||||||||||
Working capital | 116,177 | 116,494 | 153,925 | 121,545 | 39,435 | 94,371 | 39,406 | |||||||||||||||||||||
Total assets | 1,318,937 | 1,163,313 | 1,236,260 | 1,052,991 | 934,929 | 886,154 | 733,349 | |||||||||||||||||||||
Long-term debt | 16,308 | 16,525 | 16,423 | 18,437 | 41,927 | 118,964 | 43,695 | |||||||||||||||||||||
Total shareholders’ equity | 990,102 | 836,612 | 915,896 | 747,933 | 620,880 | 574,422 | 510,647 | |||||||||||||||||||||
Book value per common share | $ | 15.01 | $ | 12.72 | $ | 14.02 | $ | 11.41 | $ | 9.55 | $ | 8.89 | $ | 7.94 |
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(1) | Operating earnings include pretax gains on the sale of real estate for the fiscal years ended September 30 as follows: 2006 — $3.6 million; 2005 — $6.4 million; 2004 — $13.2 million; 2003 — $3.6 million; 2002 — $2.8 million. Operating earnings include pretax gains on the sale of real estate for the six month periods ended March 31 as follows: 2007 — $4.0 million; 2006 — $1.7 million. |
For the Three | For The Year | |||||||
Months Ended | Ended | |||||||
March 31, | December 31, | |||||||
2007 | 2006 | |||||||
(Amounts in thousands, | ||||||||
except per share data) | ||||||||
Net sales | $ | 920,169 | $ | 4,354,198 | ||||
Depreciation, depletion, amortization and accretion | 93,965 | 362,263 | ||||||
Operating earnings | 189,905 | 953,339 | ||||||
Interest expense, net | 49,787 | 199,983 | ||||||
Earnings from continuing operations before income taxes | 142,197 | 789,604 | ||||||
Earnings from continuing operations | 97,610 | 544,677 | ||||||
Basic earnings per share from continuing operations | $ | 0.91 | $ | 4.95 | ||||
Diluted earnings per share from continuing operations | $ | 0.89 | $ | 4.85 | ||||
Weighted-average common shares outstanding — basic | 107,636 | 110,041 | ||||||
Weighted-average common shares outstanding — diluted | 110,242 | 112,241 |
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As of March 31, 2007 | ||||
(Amounts in thousands, | ||||
except per share data) | ||||
Cash and cash equivalents | $ | 127,778 | ||
Working capital | (857,633 | ) | ||
Total assets | 9,078,281 | |||
Long-term debt | 2,337,811 | |||
Total shareholders’ equity | 3,515,126 | |||
Book value per common share | $ | 32.62 |
For the Three | ||||||||
Months Ended | For the Year | |||||||
March 31, | Ended December 31, | |||||||
Vulcan Historical per Share Data | 2007 | 2006 | ||||||
Basic earnings from continuing operations | $ | 0.94 | $ | 4.92 | ||||
Diluted earnings from continuing operations | 0.91 | 4.81 | ||||||
Cash dividends | 0.46 | 1.48 | ||||||
Book value (as of March 31, 2007) | 21.98 |
For the Three | For the Twelve | |||||||
Months Ended | Months Ended | |||||||
December 31, | September 30, | |||||||
Florida Rock Historical per Share Data | 2006 | 2006 | ||||||
Basic earnings from continuing operations | $ | 0.68 | $ | 3.22 | ||||
Diluted earnings from continuing operations | 0.67 | 3.16 | ||||||
Cash dividends | 0.15 | 0.60 | ||||||
Book value (as of March 31, 2007) | 15.01 |
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For the Three | ||||||||
Months Ended | For the Year Ended | |||||||
March 31, | December 31, | |||||||
Unaudited Pro Forma Combined per Share Data | 2007 | 2006 | ||||||
Basic earnings from continuing operations | $ | 0.91 | $ | 4.95 | ||||
Diluted earnings from continuing operations | 0.89 | 4.85 | ||||||
Cash dividends | 0.41 | 1.31 | ||||||
Book value (as of March 31, 2007) | 32.62 |
For the Three | For the Twelve | |||||||
Months Ended | Months Ended | |||||||
December 31, | September 30, | |||||||
Unaudited Pro Forma Equivalent per Share Data for Florida Rock | 2006 | 2006 | ||||||
Basic earnings from continuing operations | $ | 0.57 | $ | 3.12 | ||||
Diluted earnings from continuing operations | 0.56 | 3.06 | ||||||
Cash dividends | 0.26 | 0.83 | ||||||
Book value (as of March 31, 2007) | 20.55 |
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• | the possibility that the companies may be unable to obtain shareholder or regulatory approvals required for the mergers; | |
• | the possibility that problems may arise in successfully integrating the businesses of the two companies; | |
• | the possibility that the mergers may involve unexpected costs; | |
• | the possibility that the combined company may be unable to achieve cost-cutting synergies; | |
• | the possibility that the businesses may suffer as a result of uncertainty surrounding the mergers; | |
• | the possibility that the industry may be subject to future regulatory or legislative actions; | |
• | the outcome of pending legal proceedings; | |
• | changes in interest rates; | |
• | the timing and amount of federal, state and local funding for infrastructure; | |
• | changes in the level of spending for residential and private nonresidential construction; | |
• | the highly competitive nature of the construction materials industry; | |
• | pricing; | |
• | weather and other natural phenomena; | |
• | energy costs; | |
• | costs of hydrocarbon-based raw materials; | |
• | increasing healthcare costs; | |
• | the timing and amount of any future payments to be received under two earn-outs contained in the agreement for the divestiture of Vulcan’s chemicals business; and | |
• | other risks and uncertainties. |
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• | Filing a written notice of revocation with the Secretary, Florida Rock Industries, Inc., 155 E. 21st Street, Jacksonville, Florida 32206. | |
• | Submitting a new proxy before the special meeting. | |
• | Attending the special meeting and voting in person. Attendance at the special meeting will not in and of itself constitute revocation of a proxy. |
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• | If you fail to properly provide any instructions as to how you want the shares allocated to your plan account to be voted, your plan shares will be voted ratably FOR and AGAINST the approval of the merger agreement, in the same proportion as for those plan shares for which specific directions have been received. | |
• | If you return a properly signed voting instruction but do not specifically indicate how you want your shares to be voted on the approval of the merger agreement, your plan shares will be voted FOR the approval of the merger agreement. | |
• | If you indicate you wish to abstain, your shares will not be voted, which will have the same effect as a vote AGAINST the approval of the merger agreement. |
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• | the fact that Florida Rock shareholders will receive total blended cash and stock consideration of $68.03 per share, based on the closing price of Vulcan’s common stock on February 16, 2007, the last full trading day which preceded the announcement of the transaction, representing a premium of approximately 45% over the closing price per share of Florida Rock common stock on February 16, 2007; | |
• | the analysis, presentation and oral opinion of Lazard delivered on February 19, 2007, and subsequently confirmed in writing as of that day, to the effect that, as of the date of such opinion, and based upon and subject to the various considerations, assumptions and limitations set forth in the opinion, the merger consideration to be provided to Florida Rock shareholders pursuant to the merger agreement is fair from a financial point of view to the holders of Florida Rock common stock (the written opinion of Lazard is attached as Annex D to this proxy statement/prospectus and discussed in detail under “— Opinion of Florida Rock’s Financial Advisor” beginning on page 34), taking into account the contingent nature of Lazard’s compensation; | |
• | the Florida Rock board of directors’ belief that the Florida Rock merger represented the highest and best value reasonably available to Florida Rock’s shareholders for their Florida Rock shares based upon the industry and business knowledge of the management and board of directors of Florida Rock and after considering the opinion of Lazard that, as of the date of the opinion and based on and subject to the considerations, assumptions and limitations described in the opinion, the merger consideration to be paid to the holders of Florida Rock common stock (other than Vulcan and its direct and indirect wholly-owned subsidiaries) in the Florida Rock merger was fair, from a financial point of view, to such holders, and the related financial presentation; | |
• | the opportunity for Florida Rock shareholders to elect cash or stock consideration, which will enable many shareholders to receive immediate cash value while those shareholders who wish to continue to participate in the combined company will have the chance to do so, subject to the proration provisions of the merger agreement, and will provide Florida Rock shareholders with a measure of value assurance in the event of a decline in the price of Vulcan common stock; | |
• | because the exchange ratio is fixed, Florida Rock shareholders who receive Holdco common stock will benefit from any increase in the trading price of Vulcan common stock between the announcement of the transaction and the closing of the Florida Rock merger; | |
• | the expectation that the exchange of Florida Rock common stock for Holdco common stock, pursuant to the mergers, generally would be nontaxable to Florida Rock shareholders to the extent of the Holdco common stock they receive; | |
• | the Florida Rock board of directors’ analysis and understanding of Florida Rock’s strategic alternatives as an independent company in the context of both uncertainty in the commercial and home building markets in the southeast generally and Florida in particular and the increasingly competitive and rapidly consolidating heavy building materials industry, including the business, financial and execution risks associated with remaining independent; | |
• | the Florida Rock board of directors’ analysis of the business, operations, financial performance, earnings and prospects of Florida Rock on an independent basis, and the Florida Rock board of directors’ belief, based on its analysis and understanding, that the combined company would be better able to succeed in light of the risks and potential rewards associated with Florida Rock continuing to operate as an independent entity and other alternatives reasonably available to Florida Rock, including growth through the acquisition of or merger with other companies or assets; | |
• | historical and current information concerning Vulcan’s business, financial performance and condition, operations, management, competitive position and prospects, before and after giving effect to the Florida Rock merger and the Florida Rock merger’s potential effect on shareholder value; |
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• | the board of directors’ and management’s assessment that the Florida Rock merger and Vulcan’s operating strategy were consistent with Florida Rock’s long-term operating strategy to seek to profitably grow its business by expanding its geographic scope and product offerings to serve customer needs; | |
• | given the current environment in the heavy building materials industry, the advantages that the Florida Rock board of directors believed the combined company, with an expanded geographic reach and greater emphasis on the aggregates business, would have, including the Florida Rock board of directors’ belief that access to Vulcan’s size and scope would place Florida Rock in a better position to take advantage of growth opportunities, meet competitive pressures and serve customers more efficiently; | |
• | the fact that customers served by the combined company would benefit from greater resources and opportunities; and | |
• | the terms and conditions of the merger agreement, including: |
• | the cash and stock election provisions described above; | |
• | the limited number and nature of the conditions to Vulcan’s obligation to close the Florida Rock merger; | |
• | the ability which Florida Rock retains to provide confidential due diligence information to, and engage in discussions with, a third party that makes an unsolicited bona fide written proposal to engage in a business combination transaction, provided that the Florida Rock board of directors determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the Florida Rock board of directors’ fiduciary duties under applicable law and concludes in good faith, after consultation with its outside legal counsel and financial advisors, that the proposal is more favorable to Florida Rock shareholders, from a financial point of view, than the transactions contemplated by the merger agreement (please see the section entitled “The Merger Agreement — No Solicitation of Alternative Transactions” beginning on page 63 of this proxy statement-prospectus); | |
• | the conclusion of the Florida Rock board of directors that the $135 million termination fee, and the circumstances when such fee may be payable, were reasonable in light of the benefits of the Florida Rock merger and commercial practice; and | |
• | the fact that the Florida Rock merger is subject to the approval of the merger agreement by Florida Rock shareholders. |
• | the fact that Florida Rock will no longer exist as an independent company and, except to the extent its shareholders elect and receive shares of Holdco common stock in the Florida Rock merger, its shareholders will not participate in Florida Rock’s growth or benefit from any future increase in the value of Florida Rock or from any synergies that may be created by the Florida Rock merger; | |
• | the fact that under the terms of the merger agreement, Florida Rock is restricted in its ability to solicit other acquisition proposals; | |
• | the fact that under the terms of the merger agreement, Florida Rock is restricted in its ability to operate its business during the period between the signing of the merger agreement and the completion of the Florida Rock merger; | |
• | the $135 million termination fee payable to Vulcan upon the occurrence of certain events, and the potential effect of such termination fee on the decision by a third party to make a competing acquisition proposal that may be more advantageous to Florida Rock shareholders; | |
• | the fact that under the terms of the merger agreement, Florida Rock is required to hold a meeting of Florida Rock shareholders to approve the merger agreement, including under circumstances where an alternative transaction has been proposed that may be more advantageous to Florida Rock shareholders; | |
• | the risk that the Florida Rock merger might not be consummated in a timely manner or at all; | |
• | the negative impact of any customer confusion or delay in purchase commitments, the potential loss of one or more large customers as a result of any such customer’s unwillingness to do business with the combined company; |
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• | the possible loss of key management or other personnel; | |
• | the fact that Florida Rock officers and employees will have expended extensive efforts attempting to complete the Florida Rock merger and will experience significant distractions from their work during the pendency of the Florida Rock merger and Florida Rock will have incurred substantial transaction costs in connection with the Florida Rock merger even if the Florida Rock merger is not consummated; | |
• | the risk to Florida Rock’s business, sales, operations and financial results in the event that the Florida Rock merger is not consummated; | |
• | the potential conflicts of interest of Florida Rock directors and officers in connection with the Florida Rock merger which include, but are not limited to: the treatment of stock options held by directors and executive officers of Florida Rock in the Florida Rock merger; the vesting and accelerated payment of certain retirement benefits and the potential payment of certain severance benefits to executive officers; the continued employment after the mergers of Thompson S. Baker II as President of the Florida Rock division of Holdco; John D. Baker II’s service as a director of Holdco after the mergers; the purchase by Edward L. Baker and John D. Baker II from Florida Rock of a 6,300 acre property immediately prior to the mergers; the support agreement between Vulcan and the Baker Shareholders; the shareholders agreement among Vulcan, Holdco and the Baker Shareholders; and the indemnification of former Florida Rock officers and directors by Holdco (please see “— Interests of Certain Persons in the Florida Rock Merger” beginning on page 46); | |
• | the challenges and costs of combining the operations of two large companies and the substantial expenses to be incurred in connection with the Florida Rock merger, including the risks that delays or difficulties in completing the integration could adversely affect the combined company’s operating results and preclude the achievement of some benefits anticipated from the Florida Rock merger; | |
• | the fact that gains arising from the cash portion of the merger consideration would be taxable to Florida Rock shareholders for United States federal income tax purposes; | |
• | because the exchange ratio is fixed, Florida Rock shareholders who receive Holdco common stock will be adversely affected by any decrease in the trading price of Vulcan common stock between the announcement of the transaction and the closing of the Florida Rock merger; and | |
• | various other applicable risks associated with the combined company and the Florida Rock merger, including those described in the section of this proxy statement/prospectus entitled “Risk Factors” beginning on page 14. |
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• | reviewed the financial terms and conditions of the merger agreement; | |
• | analyzed certain publicly available historical business and financial information relating to Florida Rock and Vulcan; | |
• | reviewed various internal financial forecasts and other data provided to Lazard by management of Florida Rock relating to the business of Florida Rock, various internal financial forecasts and other data provided to Lazard by management of Vulcan relating to the business of Vulcan and the anticipated synergies from the mergers provided to Lazard by the managements of Florida Rock and Vulcan; | |
• | held discussions with members of the senior management of Florida Rock with respect to the business and prospects of Florida Rock; | |
• | held discussions with members of the senior management of Vulcan with respect to the business and prospects of Vulcan; | |
• | reviewed public information with respect to certain other companies in lines of businesses Lazard believed to be generally comparable to the businesses of Florida Rock and Vulcan; | |
• | reviewed the financial terms of certain business combinations involving companies in lines of businesses Lazard believed to be generally comparable to the businesses of Florida Rock and Vulcan; | |
• | reviewed the historical stock prices and trading volumes of Florida Rock common stock and Vulcan common stock; and | |
• | conducted such other financial studies, analyses and investigations as Lazard deemed appropriate. |
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• | Martin Marietta Materials, Inc.; | |
• | Vulcan; and | |
• | Hanson PLC. |
• | CRH PLC; | |
• | Eagle Materials Inc.; | |
• | Rinker Group, Ltd.; | |
• | Texas Industries, Inc.; and | |
• | U.S. Concrete Inc. |
• | Cemex S.A.B. de C.V.; | |
• | Lafarge S.A.; and | |
• | Holcim Ltd. |
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Multiple of | ||
Enterprise Value to | ||
Projected | ||
2007 EBITDA | ||
Aggregates | ||
Martin Marietta | 10.8x | |
Vulcan Materials | 11.3x | |
Hanson | 9.4x | |
Diversified | ||
CRH | 8.8x | |
Eagle Materials | 8.8x | |
Rinker Group | 7.5x | |
Texas Industries | 10.4x | |
U.S. Concrete | 6.7x | |
Cement | ||
Cemex | 8.0x | |
Lafarge | 7.5x | |
Holcim | 7.6x |
Aggregates Unit | Concrete Unit | Cement Unit | ||||
Range | Range | Range | ||||
Projected 2007 EBITDA Multiples | 10.3x - 11.3x | 6.7x - 8.8x | 7.1x - 8.1x |
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Date Publicly Announced | Acquiror | Target | ||
Recent Transactions: | ||||
October 2006 | Cemex S.A.B. de C.V. | Rinker Group, Ltd.* | ||
June 2006 | Cementos Portland Valderrivas SA | Corporacion Uniland S.A. | ||
May 2006 | Lafarge S.A. | Lafarge N.A. (47% public minority) | ||
July 2005 | Spohn Cement GmbH | HeidelbergCement AG (78% minority) | ||
October 2005 | Camargo Correa S.A. | Loma Negra S.A. | ||
January 2005 | Holcim Ltd. | Aggregate Industries Ltd. | ||
September 2004 | Cemex S.A.B. de C.V. | RMC Group Plc | ||
Other Transactions: | ||||
January 2001 | Lafarge S.A. | Blue Circle Industries Plc | ||
June 2000 | CRS | Florida Crushed Stone Co. | ||
November 1999 | Hanson Plc | Pioneer Cement Ltd. | ||
October 1999 | Anglo American plc group | Tarmac Ltd. | ||
November 1998 | Vulcan | Calmat Co. | ||
October 1997 | Lafarge S.A. | Redland Stone |
* | Used latest offer bid. |
Transaction | TV as a Multiple of | |||||||
Value | LTM EBITDA | |||||||
($ in millions) | ||||||||
Cemex/Rinker Group | $ | 12,767 | 9.4x | |||||
Cementos Portland Valderrives/Corporacion Uniland | $ | 2,705 | 13.2x | |||||
Lafarge SA/Lafarge NA | $ | 6,962 | 8.3x | |||||
Spohn Cement/HeidelbergCement | $ | 12,711 | 8.1x | |||||
Camargo Correa/Loma Negra | $ | 1,025 | 11.6x | |||||
Holcim/Aggregate Industries | $ | 4,659 | 9.8x | |||||
Cemex/RMC | $ | 5,800 | 7.6x | |||||
Lafarge SA/Blue Circle Industries | $ | 7,536 | 8.6x | |||||
CSR/Florida Crushed Stone | $ | 348 | 8.5x | |||||
Hanson/Pioneer | $ | 2,389 | 8.5x | |||||
Anglo American/Tarmac | $ | 2,828 | 7.8x | |||||
Vulcan Materials/Calmat | $ | 883 | 11.0x | |||||
Lafarge SA/Redland Stone | $ | 3,686 | 8.3x |
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Unit | Discount Rate Ranges | EBITDA Exit Multiples | ||
Aggregates (without new projects) | 10.0% - 12.0% | 8.0x - 9.0x | ||
New Projects in Aggregates | 10.0% - 12.0% | 8.0x - 9.0x | ||
Southern Concrete | 10.0% - 12.0% | 6.0x - 7.0x | ||
Northern Concrete | 10.0% - 12.0% | 6.0x - 7.0x | ||
Cement | 8.0% - 10% | 6.0x - 7.0x | ||
Corporate | 10.0% - 12.0% | 7.0x |
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Aggregates Unit | Asphalt Unit | Ready-Mix Unit | ||||
Range | Range | Range | ||||
Projected 2007 EBITDA Multiples | 10.3x - 11.3x | 6.7x - 8.8x | 7.1x - 8.1x |
Unit | Discount Rate Ranges | EBITDA Exit Multiples | ||
Aggregates | 10.0% - 12.0% | 8.0x - 9.0x | ||
Asphalt | 10.0% - 12.0% | 6.0x - 7.0x | ||
Ready-Mix | 8.0% - 10.0% | 6.0x - 7.0x | ||
Other | 10.0% - 12.0% | 6.0x - 7.0x | ||
Corporate | 10.0% - 12.0% | 7.0x | ||
Other Cash Flow Items | 10.0% - 12.0% | NA |
�� | |||||||||||||||||||||
2007E | 2008E | 2009E | 2010E | 2011E | |||||||||||||||||
Accretion/(Dilution) | Accretion/(Dilution) | Accretion/(Dilution) | Accretion/(Dilution) | Accretion/(Dilution) | |||||||||||||||||
Scenario 1 | (1.9 | ) | % | 1.5 | % | 5.5 | % | 8.7 | % | 12.2 | % | ||||||||||
Scenario 2 | 3.4 | % | 6.0 | % | 9.3 | % | 11.8 | % | 12.4 | % | |||||||||||
Scenario 3 | (1.7 | ) | % | 2.7 | % | 7.1 | % | 10.9 | % | 14.4 | % | ||||||||||
Scenario 4 | 3.6 | % | 7.2 | % | 10.8 | % | 14.0 | % | 14.6 | % |
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• | necessarily consist of numerous assumptions with respect to, among other things, industry performance, general business, economic, market and financial conditions, all of which are difficult or impossible to |
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predict and many of which are beyond Florida Rock’s control and may not prove to have been, or may no longer be, accurate; |
• | do not necessarily reflect revised prospects for Florida Rock’s business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the Florida Rock financial projections were prepared; | |
• | are not necessarily indicative of current values or future performance, which may be materially more favorable or less favorable than as set forth below; and | |
• | involve risks and uncertainties and should not be regarded as a representation or guarantee that they will be achieved. |
Projected Calendar Year Ending December 31 | ||||||||||||||||||||
2007E | 2008E | 2009E | 2010E | 2011E | ||||||||||||||||
($ in millions except per share data) | ||||||||||||||||||||
Revenue | $ | 1,369.6 | $ | 1,531.6 | $ | 1,645.9 | $ | 1,765.4 | $ | 1,920.0 | ||||||||||
EBITDA(b) | $ | 378.9 | $ | 450.0 | $ | 537.6 | $ | 612.6 | $ | 706.4 | ||||||||||
Operating Profit | $ | 297.9 | $ | 359.6 | $ | 440.3 | $ | 517.7 | $ | 615.2 | ||||||||||
Net Interest Income | $ | 3.8 | $ | 7.7 | $ | 20.2 | $ | 39.1 | $ | 61.7 | ||||||||||
Tax Expense | $ | 108.1 | $ | 130.9 | $ | 161.0 | $ | 193.6 | $ | 234.2 | ||||||||||
Net Income | $ | 193.6 | $ | 236.4 | $ | 299.5 | $ | 363.1 | $ | 442.6 | ||||||||||
Earnings Per Share(c) | $ | 2.85 | $ | 3.48 | $ | 4.41 | $ | 5.34 | $ | 6.51 | ||||||||||
Capital Expenditures | $ | 272.6 | $ | 175.7 | $ | 65.5 | $ | 63.9 | $ | 61.6 | ||||||||||
Depreciation, Amortization and Depletion Expense | $ | 80.9 | $ | 90.4 | $ | 97.3 | $ | 94.9 | $ | 91.3 | ||||||||||
Increase in Net Working Capital(d) | $ | 3.0 | $ | 3.0 | $ | 3.0 | $ | 3.0 | $ | 3.0 |
(a) | Excludes any new projects in Florida Rock’s Aggregates unit. | |
(b) | EBITDA means net earnings (loss) before interest expense (income), income tax expense (benefit) and depreciation, amortization and depletion expense and is before the cumulative effect of a change in accounting principle, if applicable. EBITDA is not a financial measurement prepared in accordance with U.S. GAAP. See “ — Non-GAAP Financial Measures” for Florida Rock’s reasons for including EBITDA data in this proxy statement/prospectus and for a reconciliation of EBITDA to net income, as net income is a financial measurement prepared in accordance with U.S. GAAP. | |
(c) | Based on 68.0 million fully diluted shares outstanding. | |
(d) | Net working capital means working capital less cash. Net working capital is not a financial measurement prepared in accordance with U.S. GAAP. See “ — Non-GAAP Financial Measures” for Florida Rock’s reasons |
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for including net working capital data in this proxy statement/prospectus and for a reconciliation of increases (decreases) in net working capital to increases (decreases) in working capital, as working capital is a financial measurement prepared in accordance with U.S. GAAP. |
Projected Calendar Year Ending December 31 | ||||||||||||||||||||
2007E | 2008E | 2009E | 2010E | 2011E | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Net Income | $ | 193.6 | $ | 236.4 | $ | 299.5 | $ | 363.1 | $ | 442.6 | ||||||||||
Plus: Net Interest (Income) Expense | ($ | 3.8 | ) | ($ | 7.7 | ) | ($ | 20.2 | ) | ($ | 39.1 | ) | ($ | 61.7 | ) | |||||
Plus: Tax Expense | $ | 108.1 | $ | 130.9 | $ | 161.0 | $ | 193.6 | $ | 234.2 | ||||||||||
Plus: Depreciation, | ||||||||||||||||||||
Amortization and Depletion Expense | $ | 80.9 | $ | 90.4 | $ | 97.3 | $ | 94.9 | $ | 91.3 | ||||||||||
EBITDA | $ | 378.9 | $ | 450.0 | $ | 537.6 | $ | 612.6 | $ | 706.4 | ||||||||||
Projected Calendar Year Ending December 31 | ||||||||||||||||||||
2007E | 2008E | 2009E | 2010E | 2011E | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Increase (Decrease) in Working Capital | ($ | 17.8 | ) | $ | 151.0 | $ | 331.3 | $ | 394.1 | $ | 472.4 | |||||||||
Less: Increase (Decrease) in Cash | $ | (20.8 | ) | $ | 148.0 | $ | 328.3 | $ | 391.1 | $ | 469.4 | |||||||||
Increase (Decrease) in Net Working Capital | $ | 3.0 | $ | 3.0 | $ | 3.0 | $ | 3.0 | $ | 3.0 | ||||||||||
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• | enhance its coast-to coast geographic footprint and further diversify its regional exposure; | |
• | enhance its position in fast-growing, highly attractive Florida markets; and | |
• | build on its successful aggregates-focused business mix in top growth states. |
• | the likelihood that the mergers will be completed on a timely basis; | |
• | the mergers give Vulcan a significant presence in Florida and enhance its footprint in its regional markets; | |
• | historical and current information concerning Florida Rock’s and Vulcan’s respective businesses, financial performance and condition, operations, management, competitive positions and prospects, before and after giving effect to the mergers and the mergers’ potential effect on shareholder value; and | |
• | the terms and conditions of the merger agreement, including: |
• | that not more than 30% of the outstanding shares of Florida Rock common stock can be converted into shares of Holdco common stock in the Florida Rock merger; | |
• | restrictions on Florida Rock’s ability to solicit other acquisition proposals; and | |
• | Florida Rock’s agreement to pay Vulcan a $135 million termination fee in connection with certain terminations of the merger agreement. |
• | the dilution associated with the shares that Holdco will issue under the Florida Rock merger; | |
• | the risk that the mergers might not be consummated in a timely manner or that the closing of the mergers will not occur despite the parties’ efforts; | |
• | the negative impact of any customer confusion or delay in purchase commitments or the potential loss of one or more large customers as a result of any such customer’s unwillingness to do business with the combined company; | |
• | possible loss of key management or other personnel; | |
• | the effort and distraction required of Vulcan personnel, and the substantial expenses to be absorbed by Vulcan, in connection with attempting to complete the mergers; | |
• | the challenges and costs of combining the operations of two independent companies, including the risks that delays or difficulties in completing the integration could adversely affect the combined company’s operating results and preclude the achievement of some anticipated benefits; | |
• | the risk that anticipated synergies and cost savings will not be fully realized; | |
• | conditions in the Florida housing market; and | |
• | various other applicable risks associated with the combined company and the transaction, including those described in the section of this proxy statement/prospectus entitled “Risk Factors.” |
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Amount and Nature of | Percent of | |||||||
Name and Title | Beneficial Ownership(1) | Class | ||||||
Edward L. Baker | 8,285,675(2)(3)(4)(5)(6) | 12.4 | % | |||||
Chairman | ||||||||
John D. Baker II | 8,272,737(2)(3)(5)(6)(7) | 12.4 | % | |||||
President, CEO and Director | ||||||||
Thompson S. Baker II | 260,847(8) | * | ||||||
Vice President and Director | ||||||||
Alvin R. Carpenter | 55,680 | * | ||||||
Director | ||||||||
Robert P. Crozer | 8,828 | * | ||||||
Director | ||||||||
John A. Delaney | 12,634 | * | ||||||
Director | ||||||||
J. Dix Druce, Jr. | 19,583 | * | ||||||
Director | ||||||||
Luke E. Fichthorn III | 149,101 | * | ||||||
Director | ||||||||
William P. Foley II | 17,479 | * | ||||||
Director | ||||||||
George J. Hossenlopp | 88,935 | * | ||||||
President, Southern Concrete Group | ||||||||
Francis X. Knott | 17,445 | * | ||||||
Director | ||||||||
John D. Milton, Jr. | 303,961 | * | ||||||
Executive Vice President, Treasurer, CFO and Director | ||||||||
William H. Walton, III | 15,267 | * | ||||||
Director | ||||||||
All Directors and Officers as a group (20 people) | 17,865,366 | 26.3 | % |
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* | Less than 1% | |
(1) | Except for shares noted in the footnotes below, the listed person has sole voting and investment power of shares listed by their name. The figures shown above include options to purchase the following number of shares that are exercisable within 60 days of July 12, 2007 (including all options that will become exercisable by virtue of the merger): Edward L. Baker — 180,282 shares, John D. Baker II — 180,282 shares; Thompson S. Baker II — 128,550 shares; Alvin R. Carpenter — 11,828 shares; Robert P. Crozer — 8,828 shares; John A. Delaney — 10,328 shares; J. Dix Druce, Jr. — 11,828 shares; Luke E. Fichthorn III — 11,828 shares; William P. Foley II — 8,328 shares; Francis X. Knott — 10,828 shares; George Hossenlopp — 78,000 shares; John D. Milton, Jr. — 294,375 shares; and William H. Walton III — 11,828 shares. | |
(2) | Edward L. Baker and John D. Baker II are shareholders (with shared voting power) of the general partner of Baker Holdings, LP, which owns 11,050,080 shares of Florida Rock common stock. Each of them holds a pecuniary interest in 4,284,192 shares owned by Baker Holdings, LP, and each of them disclaims beneficial ownership of the shares owned by Baker Holdings, LP except to the extent of their pecuniary interest. In the table above, 4,284,192 of the shares owned by Baker Holdings, LP are included in the reported beneficial ownership of John D. Baker II, and the remaining 6,765,888 shares are included in the reported beneficial ownership of Edward L. Baker. | |
(3) | Edward L. Baker and John D. Baker II are trustees (with shared voting power) and income beneficiaries of the Cynthia L. Baker Trust, which owns 375,000 shares of Florida Rock common stock. In the table above, one-half of the shares (187,500 shares) owned by the Cynthia L. Baker Trust are included in the reported beneficial ownership of each of Edward L. Baker and John D. Baker II, who disclaim beneficial ownership except to the extent of their pecuniary interest. | |
(4) | Includes 394,941 shares held in trust for the benefit of children of John D. Baker II as to which Edward L. Baker has sole voting power and sole investment power but as to which he disclaims beneficial ownership; 162,071 shares in the Profit Sharing and Deferred Earnings Plan of the Company; and 13,603 shares held by the wife of Edward L. Baker as to which he disclaims any beneficial interest. | |
(5) | Includes for John D. Baker II 135,000 shares held in a trust administered by an independent trustee for the benefit of his spouse and children. The beneficial ownership total shown for John D. Baker II does not include an aggregate of 394,941 shares held by certain trusts that are administered by Edward L. Baker, as trustee, for the benefit of Mr. Baker’s children. Both Edward L. Baker and John D. Baker II disclaim beneficial ownership of these shares. | |
(6) | The Thompson S. Baker Living Trust owns 5,832 shares, as to which Edward L. Baker and John D. Baker II have shared voting and dispositive powers. The table attributes to Edward Baker 1,944 shares as to which he has a pecuniary interest and an additional 1,944 shares in which another person has a pecuniary interest. The remaining 1,944 shares in which John D. Baker II has a pecuniary interest are included in the shares shown for John D. Baker II. | |
(7) | Includes 517,657 shares owned by his wife’s living trust as to which John D. Baker II disclaims any beneficial interest. | |
(8) | Includes 27,648 shares owned by the wife and three minor children of Thompson S. Baker II, as to which Thompson S. Baker II disclaims any beneficial interest. |
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Shares Underlying Options | Unrealized Value(1) | |||||||||||||||||||||||||||
Exercisable | Unexercisable | |||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||
Average | Average | Currently | Currently | |||||||||||||||||||||||||
Number of | Exercise | Number of | Exercise | Exercisable | Unexercisable | |||||||||||||||||||||||
Name and Title | Shares | Price | Shares | Price | Options | Options(2) | Total | |||||||||||||||||||||
Edward L. Baker | 122,532 | $ | 18.53 | 57,750 | $ | 36.61 | $ | 5,939,126 | $ | 1,754,978 | $ | 7,694,104 | ||||||||||||||||
Chairman | ||||||||||||||||||||||||||||
John D. Baker II | 122,532 | $ | 18.53 | 57,750 | $ | 36.61 | $ | 5,939,126 | $ | 1,754,978 | $ | 7,694,104 | ||||||||||||||||
President, CEO and Director | ||||||||||||||||||||||||||||
Thompson S. Baker II | 81,550 | $ | 19.95 | 47,000 | $ | 37.07 | $ | 3,837,016 | $ | 1,406,176 | $ | 5,243,192 | ||||||||||||||||
Vice President and Director | ||||||||||||||||||||||||||||
Alvin R. Carpenter | 11,828 | $ | 47.71 | 0 | — | $ | 228,168 | $ | 0 | $ | 228,168 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
Robert P. Crozer | 8,828 | $ | 55.45 | 0 | — | $ | 150,429 | $ | 0 | $ | 150,429 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
John A. Delaney | 10,328 | $ | 49.96 | 0 | — | $ | 187,358 | $ | 0 | $ | 187,358 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
J. Dix Druce, Jr. | 11,828 | $ | 47.71 | 0 | — | $ | 228,168 | $ | 0 | $ | 228,168 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
Luke E. Fichthorn III | 11,828 | $ | 47.71 | 0 | — | $ | 228,168 | $ | 0 | $ | 228,168 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
William P. Foley II | 8,328 | $ | 46.79 | 0 | — | $ | 168,333 | $ | 0 | $ | 168,333 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
George J. Hossenlopp | 39,500 | $ | 25.12 | 38,500 | $ | 36.61 | $ | 1,654,185 | $ | 1,169,985 | $ | 2,824,170 | ||||||||||||||||
President, Southern Concrete Group | ||||||||||||||||||||||||||||
Francis X. Knott | 10,828 | $ | 47.34 | 0 | — | $ | 212,838 | $ | 0 | $ | 212,838 | |||||||||||||||||
Director | ||||||||||||||||||||||||||||
John D. Milton, Jr. | 246,250 | $ | 13.95 | 48,125 | $ | 36.61 | $ | 13,063,300 | $ | 1,462,482 | $ | 14,525,782 | ||||||||||||||||
Executive Vice President, Treasurer, CFO and Director | ||||||||||||||||||||||||||||
William H. Walton, III | 11,828 | $ | 47.71 | 0 | — | $ | 228,178 | $ | 0 | $ | 228,178 | |||||||||||||||||
Director |
(1) | Calculated based on the assumption that the director or officer will receive $67.00 per share minus the exercise price upon consummation of the Florida Rock merger (without giving effect to any tax withholding). | |
(2) | All currently unexercisable options will become fully vested and exercisable prior to, and as a result of, the merger. |
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• | a citizen or individual resident of the United States; | |
• | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; |
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• | an estate the income of which is subject to United States federal income tax regardless of its source; or | |
• | a trust if, in general, the trust is subject to the supervision of a court within the United States, and one or more U.S. persons have the authority to control all significant decisions of the trust. |
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• | certificates representing all of the Florida Rock shares covered by the form of election, duly endorsed in blank or otherwise in a form acceptable for transfer on Florida Rock’s books (or appropriate evidence as to the loss, theft or destruction, appropriate evidence as to the ownership of that certificate by the claimant, and appropriate and customary indemnification, as described in the form of election); or |
• | a properly completed and signed notice of guaranteed delivery, as described in the instructions accompanying the form of election, from a firm which is a member of a registered national securities exchange or a commercial bank or trust company having an office or correspondent in the United States, provided that the actual stock certificates are in fact delivered to the exchange agent by the time set forth in the notice of guaranteed delivery; or |
• | if the Florida Rock shares are held in book-entry form, the documents specified in the instructions accompanying the form of election. |
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• | 30% of the Florida Rock shares outstanding immediately prior to the effective time of the Florida Rock merger will be converted into the right to receive 0.63 of a share of Holdco common stock per share; and | |
• | 70% of the Florida Rock shares outstanding immediately prior to the effective time of the Florida Rock merger will be converted into the right to receive cash consideration of $67.00 per share, without interest. |
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• | receiving election forms; | |
• | determining in accordance with the merger agreement the merger consideration to be received by each holder of shares of Florida Rock common stock; and | |
• | exchanging the applicable merger consideration for certificates formerly representating shares of Florida Rock common stock or for Florida Rock shares represented by book-entry. |
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• | the number of shares available for grants under the Florida Rock and Vulcan stock plans is appropriately adjusted to reflect the mergers; | |
• | the stock plans and awards issued thereunder expire at the same time they would have expired absent the occurrence of the mergers; and | |
• | options and other awards granted under a Florida Rock stock plan after the mergers are not granted to individuals who were employed, immediately before the mergers, by Vulcan or any of its subsidiaries and options and other awards granted under a Vulcan stock plan after the mergers are not granted to individuals who were employed, immediately before the mergers, by Florida Rock or any of its subsidiaries. |
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• | an effective registration statement under the Securities Act covering the resale of those shares; | |
• | an exemption under paragraph (d) of Rule 145 under the Securities Act; or | |
• | any other applicable exemption under the Securities Act. |
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• | the merger agreement has been approved by the affirmative vote of the holders of a majority of the outstanding shares of Florida Rock common stock; | |
• | the shares of Holdco common stock to be issued in the mergers and reserved for issuance in connection with the mergers have been authorized for listing on the New York Stock Exchange (the “NYSE”); | |
• | the waiting period applicable to the mergers under the HSR Act has been terminated or has expired and no governmental authority has required any action in connection with the transaction, except as would not, individually or in the aggregate, be reasonably expected to result in a material adverse effect on Vulcan, Florida Rock or Holdco, and all other regulatory approvals necessary for the completion of the mergers have been obtained and are in full force and effect; | |
• | the registration statement covering the Holdco shares has been declared effective by the SEC and is not subject to any stop order or proceedings seeking a stop order; and | |
• | no restraining order or injunction prohibiting completion of the mergers is in effect and completion of the mergers is not illegal under any applicable law, rule, regulation or order. |
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• | truth and correctness of the representations and warranties of the other party, generally subject to any exceptions that have not had, and would not reasonably be expected to have, a material adverse effect on the other party after the mergers; | |
• | the other party’s performance in all material respects of all obligations that are required by the merger agreement to be performed on or prior to the closing date; | |
• | each of Vulcan’s and Florida Rock’s receipt of an opinion from its counsel to the effect that the exchange of Florida Rock common stock and Vulcan common stock for Holdco common stock pursuant to the mergers, taken together, will be treated for federal income tax purposes as a transaction described in Section 351 of the Code and, in the letter received by Vulcan, the additional opinion that the Vulcan merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; and | |
• | as to Vulcan’s obligation to complete the Vulcan merger only, absence of action with respect to the mergers taken by any court or government entity or any law, injunction, order or decree enacted, promulgated or issued with respect to the mergers by any court or other governmental entity in effect, other than the application of the waiting period provisions of the HSR Act and the waiting period or similar provisions of applicable antitrust laws, rules or regulations, that would reasonably be expected to result in a judgment that would have any of the following effects: (i) challenging or seeking to make illegal, to delay, or otherwise to restrain or prohibit the mergers, (ii) seeking to restrain or prohibit Vulcan’s or Holdco’s ownership or operation (or that of its respective subsidiaries or affiliates) of all or any material portion of the business or assets of Florida Rock and its subsidiaries, taken as a whole, or of Vulcan and its subsidiaries, taken as a whole, or (iii) seeking to compel Vulcan or Holdco or any of their respective subsidiaries to sell, hold separate, or otherwise dispose of any of its or Florida Rock’s business or assets or materially restricting the conduct of its or Florida Rock’s business if doing so would, individually or in the aggregate, reasonably be expected to result in a material adverse effect on Florida Rock. |
• | changes in prevailing economic or market conditions or the securities, credit or financial markets in the United States or elsewhere, except to the extent those changes have a materially disproportionate effect on Florida Rock or Vulcan (as applicable) and their respective subsidiaries relative to other similarly situated participants in the industries in which Florida Rock and Vulcan operate; | |
• | changes or events affecting the industries in which Florida Rock and Vulcan operate generally, except to the extent those changes have a materially disproportionate effect on Florida Rock or Vulcan (as applicable) and their respective subsidiaries relative to other similarly situated participants in the industries in which Florida Rock and Vulcan operate; | |
• | changes in generally accepted accounting principles applicable to either of Florida Rock and Vulcan or their respective subsidiaries; | |
• | changes in laws, rules or regulations of general applicability or interpretations by any governmental entity; | |
• | the announcement of the merger agreement; | |
• | the impact of changes in the housing or commercial building markets in the State of Florida, whether occurring prior to or after the date of the merger agreement; | |
• | any weather-related or other force majeure event, except to the extent those events have a materially disproportionate effect on Florida Rock or Vulcan (as applicable) and their respective subsidiaries relative to other similarly situated participants in the industries in which Florida Rock and Vulcan operate; or |
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• | any developments, including adverse judgments, in the litigation matter pending in the federal district court for the Southern District of Florida in which the court has ruled that certain permits issued for the Lake Belt region of Florida, including the permit for Florida Rock’s Miami, Florida quarry, were invalidly issued. |
• | initiate, solicit, encourage or knowingly facilitate any inquires or the making of an acquisition proposal (as described below); | |
• | have any discussions with, or provide any confidential information or data to, any person relating to an acquisition proposal, or engage in any negotiations concerning an acquisition proposal, or knowingly facilitate any effort or attempt to make or implement an acquisition proposal; or | |
• | approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar agreement related to any acquisition proposal or propose or agree to do any of the foregoing. |
• | a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Florida Rock or any of its significant subsidiaries, other than acquisitions permitted by the terms of the merger agreement; |
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• | any purchase or sale of 20% or more of the consolidated assets of Florida Rock and its subsidiaries (including stock of its subsidiaries), taken as a whole; or | |
• | any purchase or sale of, or tender or exchange offer for, the voting securities of Florida Rock that, if completed, would result in any person beneficially owning securities representing 20% or more of its total voting power or of the total voting power of the surviving parent entity in the transaction, or any of its significant subsidiaries. |
• | the Florida Rock shareholders meeting has not occurred; | |
• | Florida Rock has complied in all material respects with the restrictions on the solicitation of acquisition proposals described above; | |
• | the board of directors of Florida Rock, after consultation with outside legal counsel, determines in good faith that failure to take such action would be inconsistent with the board’s fiduciary duties under applicable law; | |
• | the board of directors of Florida Rock, after consultation with outside legal counsel and financial advisors, concludes in good faith that there is a reasonable likelihood that the acquisition proposal constitutes or is reasonably likely to result in a superior proposal (as described below); and | |
• | prior to providing confidential information, Florida Rock enters into a confidentiality agreement with the person making the inquiry or proposal having terms that are no less favorable to the party providing the information than those in the specified confidentiality agreement between Vulcan and Florida Rock. |
• | the Florida Rock shareholders meeting has not occurred; | |
• | Florida Rock has complied in all material respects with the restrictions on the solicitation of acquisition proposals described above; | |
• | the board of directors of Florida Rock, after consultation with outside counsel, determines in good faith that the failure to take such action would be inconsistent with the board’s fiduciary duties under applicable law; | |
• | the board of directors of Florida Rock, after consultation with its outside legal counsel and financial advisors, concludes in good faith that the acquisition proposal constitutes or is reasonably likely to result in a superior proposal (as described below); | |
• | Florida Rock provides Vulcan at least four business days advance notice of its intention to change its recommendation, specifies the material terms and conditions of the superior proposal, provides the identity of the party making the proposal and furnishes Vulcan with material documents (such four business days advance notice to be given again if there is any significant revision to the superior proposal); and | |
• | prior to withdrawing or making a change in recommendation, Florida Rock negotiates with Vulcan in good faith to make adjustments to the merger agreement such that the acquisition proposal would no longer constitute a superior proposal. |
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• | is more favorable to the shareholders of Florida Rock from a financial point of view than the mergers; and | |
• | is fully financed or reasonably capable of being fully financed, reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on the terms proposed. |
• | notify Vulcan as promptly as practicable of any acquisition proposal or any request for nonpublic information relating to Florida Rock by any third party considering making, or that has made, an acquisition proposal, of the identity of such third party, the material terms and conditions of any inquiries, proposals or offers, update on the status of the terms of any such proposals, offers, discussions or negotiations on a current basis, and furnish copies of any information provided to such third party; | |
• | immediately terminate any activities, discussions or negotiations existing as of the date of the merger agreement with any parties conducted before that date with respect to any acquisition proposal; | |
• | not release any third party from, or waive any provisions of, any confidentiality or standstill agreement relating to a possible acquisition proposal; and | |
• | use reasonable best efforts to inform its and its subsidiaries’ respective directors, officers and key employees of the foregoing restrictions in the merger agreement. |
• | if any governmental entity of competent jurisdiction: |
• | that must grant a regulatory approval under applicable laws has denied approval of the mergers and the denial has become final and non-appealable; or | |
• | issues an order, decree or ruling or takes any other action permanently restraining, enjoining or otherwise prohibiting either of the mergers, and the order, decree, ruling or other action has become final andnon-appealable; |
• | if both mergers are not completed on or before November 19, 2007, except that this right to terminate will not be available to a party whose failure to comply with any provision of the merger agreement was the cause of, or resulted in, the failure of the mergers to be completed by that date; | |
• | the other party is in breach of its representations, warranties, covenants or agreements set forth in the merger agreement and the breach would prevent satisfaction by the other party of the relevant closing condition and the breach is not cured within 30 days of written notice of the breach or, by its nature, cannot be cured within that time period; or | |
• | if the Florida Rock shareholders do not approve the merger agreement at the Florida Rock shareholders meeting. |
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• | the board of directors of Florida Rock fails to make or effects a change in its recommendation that the Florida Rock shareholders vote in favor of the approval of the merger agreement or takes any other action inconsistent with that recommendation that is adverse to Vulcan in any material respect; | |
• | Florida Rock breaches its obligation to hold its shareholders meeting to vote on approval of the merger agreement or to prepare and mail to Florida Rock shareholders the proxy statement/prospectus; or | |
• | Florida Rock materially breaches the “no solicitation” provisions described above. |
• | if Vulcan terminates the merger agreement due to (1) the failure of Florida Rock’s board of directors to recommend that Florida Rock shareholders vote in favor of approval of the merger agreement, or the withdrawal or change in Florida Rock’s board of directors’ recommendation that Florida Rock shareholders vote in favor of approval of the merger agreement, in each case that is adverse in any material respect to Vulcan or (2) the material breach by Florida Rock of its obligation under the merger agreement to call a meeting of, and use its reasonable best efforts to obtain approval by, Florida Rock shareholders of the merger agreement, including failure to prepare and mail the proxy statement/prospectus to shareholders, then Florida Rock must pay the termination fee on the second business day following termination; | |
• | if (1) Vulcan terminates the merger agreement because of the material breach of Florida Rock of the “no solicitation” restrictions described above, or either of Florida Rock and Vulcan terminates the merger agreement because the approval of the merger agreement by the Florida Rock shareholders was not obtained at the Florida Rock shareholders meeting, (2) a competing acquisition proposal for 50% or more of the assets or voting power of Florida Rock was publicly announced at or before the date of Florida Rock shareholders meeting and (3) within 12 months after this termination of the merger agreement, Florida Rock or any of its subsidiaries enters into a definitive agreement for, or completes, an acquisition proposal for 50% or more of the assets or voting power of Florida Rock, then Florida Rock must pay the termination fee on the second business day following such execution or consummation; and | |
• | if (1) either of Florida Rock and Vulcan terminates the merger agreement because both mergers have not been completed by November 19, 2007, or Vulcan terminates the merger agreement because of a breach by Florida Rock that causes a condition to the Florida Rock merger to not be satisfied, (2) a competing acquisition proposal for 50% or more of the assets or voting power of Florida Rock was publicly announced before the merger agreement was terminated and (3) within 12 months after this termination of the merger agreement, Florida Rock or any of its subsidiaries enters into a definitive agreement for, or completes, an acquisition proposal for 50% or more of the assets or voting power of Florida Rock, then Florida Rock must pay the termination fee on the second business day following such execution or consummation. |
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• | enter into any new material line of business; | |
• | change its or its subsidiaries’ operating policies in any respect that is material to Florida Rock, except as required by law or policies of a governmental entity; | |
• | incur or commit to any capital expenditures or any obligations or liabilities in connection with capital expenditures, other than in the ordinary course of business consistent with past practice within specified limits; | |
• | enter into or amend any agreement between Florida Rock or any of its subsidiaries, on one hand, and, on the other hand, any (A) present or former officer or director of Florida Rock or any of its subsidiaries or any or such officer’s or director’s immediate family members, (B) record or beneficial owner of more than 5% of the Florida Rock common stock or (C) any affiliate of such officer, director or owner since September 30, 2005; or | |
• | enter into, terminate or change any material leases, contracts or agreements except in the ordinary course of business consistent with past practice. |
• | the repurchase, redemption or other acquisition any shares of its capital stock; | |
• | the amendment of the restated articles of incorporation or restated bylaws of Florida Rock; | |
• | the acquisition or disposition of assets; | |
• | the incurrence or the guarantee of indebtedness; | |
• | the taking of actions that would result, or would reasonably be expected to result, in the inability to obtain the required regulatory approvals; | |
• | the adoption of changes in accounting methods, any material tax election or annual tax period, the filing of any material amended tax return, the entering into of any closing agreement with respect to a material amount of taxes, the settlement of any material tax claim or the surrender of any right to claim a refund of a material amount of taxes; | |
• | changes in employee benefit plans and compensation of its directors, executive officers and employees; | |
• | the settling or compromise of any material litigation for amounts in excess of a specified limit; | |
• | the purchase of any policies of directors’ and officers’ liability insurance, except to the extent permitted by the merger agreement; and | |
• | the restriction of any party from conducting, after the closing, any line of business in any geographic area. |
• | the declaration or payment of dividends and changes in capital stock, except that each of Florida Rock and Vulcan may pay its regular quarterly cash dividend on dates consistent with past practice in an amount per share no greater than the most recent quarterly dividend declared by the applicable company prior to execution of the merger agreement, which was $0.46 per share for Vulcan and $0.15 per share for Florida Rock; | |
• | the combination, splitting or reclassifying of capital stock; |
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• | the issuance or sale of capital stock, voting debt or other equity interests; | |
• | the acquisition of assets or other entities; | |
• | the taking of actions that would reasonably be expected to prevent (1) the exchange of Florida Rock common stock and Vulcan common stock for Holdco common stock pursuant to the mergers, taken together, from qualifying as a transaction described in Section 351 of the Code or (2) the Vulcan merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; and | |
• | the liquidation or recapitalization of either of Florida Rock or Vulcan or its significant subsidiaries. |
• | take all actions necessary under the merger agreement and applicable laws to consummate the mergers as soon as practicable; and | |
• | as promptly as practicable, (1) make the appropriate filings pursuant to the HSR Act and other applicable laws and (2) supply any information or materials required by these laws or applicable regulatory authorities; |
• | extend the time for the performance of any of the obligations or other acts provided for in the merger agreement; |
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• | waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; and | |
• | waive compliance with any of the agreements or conditions contained in the merger agreement. |
• | if the mergers are completed, the surviving corporations will pay any property or transfer taxes imposed on either party in connection with the mergers; and | |
• | all expenses and fees incurred in connection with the filing, printing and mailing of this proxy statement/prospectus and the registration statement of which it is a part will be shared equally by Vulcan and Florida Rock. |
• | may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | |
• | have been qualified by disclosures that were made to Vulcan or Florida Rock in connection with the negotiation of the merger agreement, which disclosures are not reflected in the merger agreement; | |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and | |
• | were made only as of the date of the merger agreement or such other date or dates as may be specified in the merger agreement and are subject to more recent developments. |
• | corporate organization and similar corporate matters; | |
• | capital structure; | |
• | authorization of the merger agreement and absence of conflicts; | |
• | documents filed with the SEC, financial statements included in those documents and regulatory reports filed with governmental entities; | |
• | absence of material undisclosed liabilities; | |
• | information supplied in connection with this proxy statement/prospectus and the registration statement of which it is a part; | |
• | compliance with applicable laws and reporting requirements; | |
• | legal proceedings; | |
• | taxes; | |
• | subsidiaries; | |
• | absence of certain changes or events; | |
• | board approval and applicable state takeover laws; | |
• | environmental matters; and |
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• | brokers and finders. |
• | material agreements; | |
• | employee benefits matters; | |
• | the shareholder vote required to approve the merger agreement; | |
• | ownership of properties; | |
• | intellectual property; | |
• | labor and employment matters; | |
• | insurance; | |
• | customers; | |
• | related-party transactions; | |
• | plant and equipment; and | |
• | opinion of Florida Rock’s financial advisor. |
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Estimated Years of Life(1) | ||||||||||||
Vulcan | Florida Rock | Pro Forma | ||||||||||
Historical | Historical | Combined | ||||||||||
By Region: | ||||||||||||
Mideast | 57 | 16 | 51 | |||||||||
Midsouth | 62 | 41 | 61 | |||||||||
Midwest | 42 | 42 | ||||||||||
Southeast | 45 | 46 | 45 | |||||||||
Southern and Gulf Coast | 41 | 90 | 43 | |||||||||
Southwest | 43 | 43 | ||||||||||
Western | 18 | 18 | ||||||||||
Florida | 9 | 25 | 23 | |||||||||
Total | 44 | 31 | 42 |
(1) | Estimated years of life of aggregates reserves are based on an average, by regional division, of a combination of actual annual production over the most recent three-year period and budgeted production for the 2007 fiscal year. The total pro forma combined estimated years of life is based on an average annual production of 302 million tons. |
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Vulcan Common Stock | Florida Rock Common Stock | |||||||||||||||||||||||
Market Price | Market Price | |||||||||||||||||||||||
High | Low | Dividends | High | Low | Dividends | |||||||||||||||||||
2004 | ||||||||||||||||||||||||
First quarter | $ | 50.53 | $ | 45.65 | $ | 0.26 | $ | 26.67 | $ | 21.91 | $ | 0.11 | ||||||||||||
Second quarter | 48.78 | 41.94 | 0.26 | 30.33 | 24.10 | 0.11 | ||||||||||||||||||
Third quarter | 51.18 | 44.30 | 0.26 | 28.81 | 23.93 | 0.11 | ||||||||||||||||||
Fourth quarter | 55.53 | 46.85 | 0.26 | 33.53 | 26.50 | 0.80 | ||||||||||||||||||
2005 | ||||||||||||||||||||||||
First quarter | $ | 59.67 | $ | 52.36 | $ | 0.29 | $ | 39.90 | $ | 30.53 | $ | 0.13 | ||||||||||||
Second quarter | 65.99 | 52.36 | 0.29 | 43.80 | 36.17 | 0.13 | ||||||||||||||||||
Third quarter | 74.55 | 64.04 | 0.29 | 49.21 | 36.00 | 0.15 | ||||||||||||||||||
Fourth quarter | 76.31 | 60.72 | 0.29 | 64.62 | 48.16 | 0.15 | ||||||||||||||||||
2006 | ||||||||||||||||||||||||
First quarter | $ | 89.16 | $ | 66.98 | $ | 0.37 | $ | 67.98 | $ | 45.30 | $ | 0.15 | ||||||||||||
Second quarter | 93.85 | 70.44 | 0.37 | 60.50 | 48.65 | 0.15 | ||||||||||||||||||
Third quarter | 80.18 | 65.85 | 0.37 | 66.10 | 43.61 | 0.15 | ||||||||||||||||||
Fourth quarter | 92.00 | 76.81 | 0.37 | 50.31 | 35.71 | 0.15 | ||||||||||||||||||
2007 | ||||||||||||||||||||||||
First quarter | $ | 125.79 | $ | 87.27 | $ | 0.46 | $ | 46.40 | $ | 37.00 | $ | 0.15 | ||||||||||||
Second quarter | 128.62 | 111.46 | 0.46 | 69.00 | 42.83 | 0.15 | ||||||||||||||||||
Third quarter | n/a | n/a | n/a | 69.94 | 66.34 | 0.15 |
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Pro Forma | ||||||||||||||||
Vulcan | Florida Rock | Adjustments | Pro Forma | |||||||||||||
Historical | Historical | (Note 3) | Combined | |||||||||||||
(Amounts in thousands) | ||||||||||||||||
Cash and cash equivalents | $ | 69,960 | $ | 57,818 | $ | — | $ | 127,778 | ||||||||
Accounts and notes receivable, net | 392,016 | 148,356 | 55,669 | (a) | 596,041 | |||||||||||
Inventories | 266,416 | 54,648 | 12,489 | (b) | 333,553 | |||||||||||
Deferred income taxes | 22,165 | 3,637 | — | 25,802 | ||||||||||||
Prepaid expenses | 15,016 | 8,171 | — | 23,187 | ||||||||||||
Total current assets | 765,573 | 272,630 | 68,158 | 1,106,361 | ||||||||||||
Investments and long-term receivables | 2,383 | — | — | 2,383 | ||||||||||||
Property, plant and equipment, net | 1,956,120 | 801,752 | 826,661 | (c) | 3,584,533 | |||||||||||
Goodwill | 650,206 | 176,752 | 2,899,861 | (d) | 3,726,819 | |||||||||||
Other assets | 196,633 | 67,803 | 378,555 | (e) | 658,185 | |||||||||||
15,194 | (f) | |||||||||||||||
Total assets | $ | 3,570,915 | $ | 1,318,937 | $ | 4,188,429 | $ | 9,078,281 | ||||||||
Current maturities of long-term debt | $ | 727 | $ | 3,280 | $ | — | $ | 4,007 | ||||||||
Short-term borrowings | 240,400 | — | 1,281,326 | (g) | 1,521,726 | |||||||||||
Trade payables and other accruals | 285,088 | 153,173 | — | 438,261 | ||||||||||||
Total current liabilities | 526,215 | 156,453 | 1,281,326 | 1,963,994 | ||||||||||||
Long-term debt | 321,503 | 16,308 | 2,000,000 | (g) | 2,337,811 | |||||||||||
Deferred income taxes | 290,404 | 95,221 | 468,829 | (h) | 854,454 | |||||||||||
Other noncurrent liabilities | 338,237 | 60,853 | 7,806 | (i) | 406,896 | |||||||||||
Total liabilities | 1,476,359 | 328,835 | 3,757,961 | 5,563,155 | ||||||||||||
Preferred stock | — | — | — | — | ||||||||||||
Common stock | 139,705 | 6,595 | (38,545 | )(j) | 107,755 | |||||||||||
Capital in excess of par value | 228,300 | 51,126 | 1,284,403 | (j) | 1,563,829 | |||||||||||
Retained earnings | 3,026,219 | 935,579 | (2,113,872 | )(j) | 1,847,926 | |||||||||||
Accumulated other comprehensive loss | (4,384 | ) | (3,198 | ) | 3,198 | (j) | (4,384 | ) | ||||||||
Treasury stock | (1,295,284 | ) | — | 1,295,284 | (j) | — | ||||||||||
Total shareholders’ equity | 2,094,556 | 990,102 | 430,468 | 3,515,126 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 3,570,915 | $ | 1,318,937 | $ | 4,188,429 | $ | 9,078,281 | ||||||||
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Historical | ||||||||||||||||
Vulcan | Florida Rock | |||||||||||||||
For the | For the Twelve | |||||||||||||||
Year Ended | Months Ended | Pro Forma | ||||||||||||||
December 31, | September 30, | Adjustments | Pro Forma | |||||||||||||
2006 | 2006 | (Note 3) | Combined | |||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||
Net sales | $ | 3,041,093 | $ | 1,328,271 | $ | (15,166 | )(k) | $ | 4,354,198 | |||||||
Delivery revenues | 301,382 | 39,518 | — | 340,900 | ||||||||||||
Total revenues | 3,342,475 | 1,367,789 | (15,166 | ) | 4,695,098 | |||||||||||
Cost of goods sold | 2,109,189 | 882,341 | 61,225 | (l) | 3,037,589 | |||||||||||
(15,166 | )(k) | |||||||||||||||
Delivery costs | 301,382 | 39,745 | — | 341,127 | ||||||||||||
Cost of revenues | 2,410,571 | 922,086 | 46,059 | 3,378,716 | ||||||||||||
Gross profit | 931,904 | 445,703 | (61,225 | ) | 1,316,382 | |||||||||||
Selling, administrative and general expenses | 264,276 | 129,797 | — | 394,073 | ||||||||||||
Gain on sale of property, plant and equipment, net | 5,557 | 3,569 | — | 9,126 | ||||||||||||
Other operating income, net | 21,904 | — | — | 21,904 | ||||||||||||
Operating earnings | 695,089 | 319,475 | (61,225 | ) | 953,339 | |||||||||||
Other income, net | 28,541 | 7,707 | — | 36,248 | ||||||||||||
Interest income | 6,171 | 3,161 | — | 9,332 | ||||||||||||
Interest expense | 26,310 | 259 | 182,746 | (m) | 209,315 | |||||||||||
Earnings from continuing operations before income taxes | 703,491 | 330,084 | (243,971 | ) | 789,604 | |||||||||||
Provision for income taxes | 223,313 | 118,675 | (97,061 | )(n) | 244,927 | |||||||||||
Earnings from continuing operations | $ | 480,178 | $ | 211,409 | $ | (146,910 | ) | $ | 544,677 | |||||||
Earnings per share from continuing operations: | ||||||||||||||||
Basic | $ | 4.92 | $ | 3.22 | $ | 4.95 | ||||||||||
Diluted | $ | 4.81 | $ | 3.16 | $ | 4.85 | ||||||||||
Weighted-average common shares outstanding — basic | 97,577 | 65,621 | (53,157 | ) | 110,041 | |||||||||||
Weighted-average common shares outstanding — diluted | 99,777 | 66,829 | (54,365 | ) | 112,241 |
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Historical | ||||||||||||||||
Vulcan | Florida Rock | |||||||||||||||
For the Three | For the Three | |||||||||||||||
Months Ended | Months Ended | Pro Forma | ||||||||||||||
March 31, | December 31, | Adjustments | Pro Forma | |||||||||||||
2007 | 2006 | (Note 3) | Combined | |||||||||||||
(Amounts in thousands, except per share data) | ||||||||||||||||
Net sales | $ | 630,187 | $ | 287,059 | $ | 2,923 | (k) | $ | 920,169 | |||||||
Delivery revenues | 57,000 | 8,290 | — | 65,290 | ||||||||||||
Total revenues | 687,187 | 295,349 | 2,923 | 985,459 | ||||||||||||
Cost of goods sold | 462,992 | 195,138 | 14,147 | (l) | 675,200 | |||||||||||
2,923 | (k) | |||||||||||||||
Delivery costs | 57,000 | 8,788 | — | 65,788 | ||||||||||||
Cost of revenues | 519,992 | 203,926 | 17,070 | 740,988 | ||||||||||||
Gross profit | 167,195 | 91,423 | (14,147 | ) | 244,471 | |||||||||||
Selling, administrative and general expenses | 74,402 | 28,489 | — | 102,891 | ||||||||||||
Gain on sale of property, plant and equipment, net | 46,387 | 3,972 | — | 50,359 | ||||||||||||
Other operating expense | 2,034 | — | — | 2,034 | ||||||||||||
Operating earnings | 137,146 | 66,906 | (14,147 | ) | 189,905 | |||||||||||
Other income, net | 1,202 | 877 | — | 2,079 | ||||||||||||
Interest income | 1,323 | 1,285 | — | 2,608 | ||||||||||||
Interest expense | 6,635 | 92 | 45,668 | (m) | 52,395 | |||||||||||
Earnings from continuing operations before income taxes | 133,036 | 68,976 | (59,815 | ) | 142,197 | |||||||||||
Provision for income taxes | 43,697 | 24,697 | (23,807 | )(n) | 44,587 | |||||||||||
Earnings from continuing operations | $ | 89,339 | $ | 44,279 | $ | (36,008 | ) | $ | 97,610 | |||||||
Earnings per share from continuing operations: | ||||||||||||||||
Basic | $ | 0.94 | $ | 0.68 | $ | 0.91 | ||||||||||
Diluted | $ | 0.91 | $ | 0.67 | $ | 0.89 | ||||||||||
Weighted-average common shares outstanding — basic | 95,172 | 65,339 | (52,875 | ) | 107,636 | |||||||||||
Weighted-average common shares outstanding — diluted | 97,778 | 66,453 | (53,989 | ) | 110,242 |
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1. | Basis of Pro Forma Presentation |
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2. | Preliminary Purchase Price |
(Amounts in millions, | ||||
except per share data) | ||||
Aggregate purchase price of Florida Rock common stock(1) | $ | 4,513.6 | ||
Cash settlement of Florida Rock stock options(2) | 143.1 | |||
Vulcan’s direct transaction costs(3) | 30.0 | |||
Total preliminary purchase price | $ | 4,686.7 | ||
(1) Outstanding shares of Florida Rock common stock | 65.9 | |||
70% of outstanding shares of Florida Rock common stock | 46.2 | |||
Exchanged for $67.00 in cash per share | $ | 67.00 | ||
Cash consideration paid | $ | 3,093.0 | ||
30% of outstanding shares of Florida Rock common stock | 19.8 | |||
Exchange ratio | 0.63 | |||
Holdco shares to be issued | 12.5 | |||
Average closing price per share of Vulcan common stock, adjusted for dividends, for the four trading days centered around February 19, 2007 | $ | 113.97 | ||
Issuance of Holdco common stock | $ | 1,420.6 | ||
Aggregate price paid for Florida Rock common stock | $ | 4,513.6 | ||
(2) Cash settlement per share issuable under stock options | $ | 67.00 | ||
Weighted-average exercise price per share issuable under stock options as of March 31, 2007 | 23.59 | |||
$ | 43.41 | |||
Number of stock options converted to right to receive option consideration as of March 31, 2007 | 3.3 | |||
Liability assumed for cash settlement of Florida Rock stock options | $ | 143.1 | ||
(3) Represents Vulcan’s estimated direct transaction costs related to the mergers, which are comprised of the following: | ||||
Investment banker fees | $ | 18.2 | ||
Legal and accounting fees | 8.6 | |||
Other | 3.2 | |||
Total of Vulcan’s estimated direct transaction costs | $ | 30.0 | ||
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3. | Pro Forma Adjustments |
(Amounts in millions) | ||||
Florida Rock’s historical net book value | $ | 990.1 | ||
Elimination of Florida Rock’s historical goodwill | (176.8 | ) | ||
Adjustment to accounts receivable | 55.7 | |||
Adjustment to inventory | 12.5 | |||
Adjustment to property, plant and equipment | 826.7 | |||
Adjustment to identifiable intangible assets | 378.5 | |||
Adjustment to deferred income taxes | (468.8 | ) | ||
Adjustment to noncurrent accrued liabilities | (7.8 | ) | ||
Goodwill | 3,076.6 | |||
Total preliminary purchase price | $ | 4,686.7 | ||
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Accumulated | ||||||||||||||||||||
Capital in | Other | |||||||||||||||||||
Common | Excess of | Retained | Comprehensive | Treasury | ||||||||||||||||
Stock | par Value | Earnings | Loss | Stock | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Eliminate Florida Rock historical amounts | $ | (6,595 | ) | $ | (51,126 | ) | $ | (935,579 | ) | $ | 3,198 | $ | — | |||||||
Record issuance of Holdco common stock (12,464,000 shares) in exchange for 30% of outstanding Florida Rock common stock | 12,464 | 1,408,106 | ||||||||||||||||||
Cancel Vulcan historical treasury stock | (44,414 | ) | (72,577 | ) | (1,178,293 | ) | 1,295,284 | |||||||||||||
Total pro forma adjustments to shareholders’ equity | $ | (38,545 | ) | $ | 1,284,403 | $ | (2,113,872 | ) | $ | 3,198 | $ | 1,295,284 | ||||||||
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4. | Unaudited Pro Forma Combined Earnings Per Share |
Weighted-Average Shares | ||||||||
For the | For the | |||||||
Three Months Ended | Year Ended | |||||||
(Amounts in thousands) | March 31, 2007 | December 31, 2006 | ||||||
Vulcan historical weighted-average common shares outstanding — basic | 95,172 | 97,577 | ||||||
Estimated shares of Holdco common stock issued to Florida Rock shareholders | 12,464 | 12,464 | ||||||
Pro forma weighted-average common shares outstanding — basic | 107,636 | 110,141 | ||||||
Vulcan historical weighted-average common shares outstanding — diluted | 97,778 | 99,777 | ||||||
Estimated shares of Holdco common stock issued to Florida Rock shareholders | 12,464 | 12,464 | ||||||
Pro forma weighted-average common shares outstanding — diluted | 110,242 | 112,241 | ||||||
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• | 10 days following the date of any public announcement that a person or group of affiliated or associated persons (an “acquiring person”) has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Holdco common stock, or | |
• | 10 business days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer that would result in a person beneficially owning 15% or more of the outstanding Holdco common stock. |
• | the rights will be evidenced by the common share certificates and will be transferred only with them, | |
• | all common share certificates will contain a notation incorporating the terms of the rights agreement by reference, and | |
• | the surrender for transfer of any certificates for common stock outstanding will also constitute the transfer of the rights associated with the common stock represented by the certificates. |
• | Holdco is acquired in a merger or other business combination, | |
• | an acquiring firm merges into Holdco, or | |
• | 50% or more of Holdco’s assets or earning power is sold or transferred, |
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• | 10 business days following the date of any public announcement that a person or group of affiliated or associated persons (an “acquiring person”) has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Florida Rock common stock, or | |
• | 10 business days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer that would result in a person beneficially owning 15% or more of the outstanding Florida Rock common stock. |
• | the rights will be evidenced by the common share certificates and will be transferred only with them, | |
• | all common share certificates will contain a notation incorporating the terms of the rights agreement by reference, and | |
• | the surrender for transfer of any certificates for common stock outstanding will also constitute the transfer of the rights associated with the common stock represented by the certificates. |
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• | Florida Rock is acquired in a merger or other business combination, other than in connection with the Florida Rock merger, | |
• | an acquiring firm merges into Florida Rock, other than in connection with the Florida Rock merger, or | |
• | 50% or more of Florida Rock’s assets or earning power is sold or transferred, |
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• | the name, age, business address and residence address of such person; | |
• | the principal occupation or employment of such person; | |
• | the class and number of any shares of Florida Rock or any subsidiary of Florida Rock which are beneficially owned by such person; and |
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• | any other information relating to such person that is required to be disclosed in solicitations for proxies for election of directors pursuant to any then-existing rule or regulation promulgated under the Exchange Act. |
• | the name and record address of such shareholder; and | |
• | the class and number of shares of the corporation which are beneficially owned by such shareholder. |
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• | in breach of the officer’s or director’s duty of loyalty to the corporation or its shareholders, which the director or officer knows or believes to be contrary to the best interests of the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; | |
• | not in good faith or involving a knowing violation of law; or | |
• | resulting in receipt by the officer or director of an improper personal benefit. |
• | a violation of the criminal law, unless the director had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful; | |
• | a transaction from which the director derived an improper personal benefit; | |
• | unlawful payment of distributions; | |
• | in a proceeding by or in the right of the corporation, a conscious disregard for the best interest of the corporation, or willful misconduct; or | |
• | in a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. |
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• | acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; and | |
• | in a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. |
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• | the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; or | |
• | the fact of the common directorship or interest is disclosed or known to the board or committee and the board or committee authorizes, approves, or ratifies the contract or transaction by unanimous written consent, provided at least one director so consenting is disinterested, or by affirmative vote of a majority of the disinterested directors, even if less than a quorum; or | |
• | the fact of the common directorship or interest is disclosed or known to the shareholders, and they authorize, approve or ratify the contract or transaction. |
• | the interest of the director is disclosed or otherwise known to the board of directors or committee that authorized the transaction by sufficient vote (without counting the interested director’s vote); or | |
• | the interest of the director is disclosed or otherwise known to the shareholders and the shareholders approve or ratify the transaction; or | |
• | the transaction is fair and reasonable as to the corporation at the time it was approved by the board of directors, a committee or the shareholders. |
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• | the plan of merger does not make an amendment to the certificate of incorporation of the surviving corporation which is required by the NJBCA to be approved by the shareholders; | |
• | each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and rights, immediately after; | |
• | the number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable on conversion of other securities or on exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 40% the total number of voting shares of the surviving corporation outstanding immediately before the merger; and | |
• | the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable on conversion of other securities or on exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 40% the total number of participating shares of the surviving corporation outstanding immediately before the merger. |
• | the articles of the surviving corporation will not differ, with certain exceptions, from its articles before the merger and each shareholder of the surviving corporation whose shares were outstanding immediately prior to the merger will hold the same number of shares, with identical designations, preferences, limitations and relative rights, immediately after the merger; and | |
• | the merger is of a subsidiary into a parent, provided the parent owns at least 80% of the subsidiary. |
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• | the board of directors approves the business combination prior to the share acquisition date; | |
• | the holders of two-thirds of the corporation’s voting stock not beneficially owned by the interested stockholder approve the business combination by an affirmative vote; or |
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• | the transaction meets certain requirements designed to ensure, among other things, that the shareholders unaffiliated with the interested stockholder receive for their shares the higher of (i) the maximum price paid by the interested stockholder during the five years preceding the announcement date or the date the interested stockholder became such, whichever is higher, or (ii) the market value of the corporation’s common stock on the announcement date or the interested stockholder’s share acquisition date, whichever yields a higher price. |
• | the affiliated transaction has been approved by a majority of the disinterested directors; | |
• | the corporation has not had more than 300 shareholders of record at any time during the three years preceding the announcement date; | |
• | the interested shareholder has been the beneficial owner of at least 80% of the corporation’s outstanding voting shares for at least five years preceding the announcement date; | |
• | the interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares, excluding shares acquired directly from the corporation in transactions not approved by a majority of the disinterested directors; | |
• | the corporation is an investment company registered under the Investment Company Act of 1940; or | |
• | the price paid to shareholders in connection with the affiliated transaction meets the statutory test of “fairness.” |
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• | the corporation would be unable to pay its debts as they become due in the usual course of its business; or | |
• | its total assets would be less than its total liabilities. |
• | the corporation would not be able to pay its debts as they become due in the usual course of business; or | |
• | the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential dissolution rights of shareholders whose preferential rights are superior to those receiving the distribution. |
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(File No. 001-07159) | Period | |
Annual Report onForm 10-K | Fiscal year ended September 30, 2006 | |
Quarterly Reports onForm 10-Q | Quarter ended December 31, 2006 | |
Proxy Statement on Schedule 14A | Annual meeting held February 7, 2007 | |
Current Reports onForm 8-K | October 11, 2006, December 13, 2006, February 21, 2007, February 27, 2007 | |
Description of Florida Rock’s common stock set forth in Florida Rock’s registration statements filed pursuant to Section 12 of the Exchange Act, including any amendment or report filed for the purpose of updating such description | Filed on February 17, 1998 |
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1200 Urban Center Drive
Birmingham, Alabama 35242
205-298-3000
155 East 21st Street
Jacksonville, Florida 32206
904-355-1781
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Page | ||||||
ARTICLE I | THE MERGERS | A-1 | ||||
1.1. | Organization of Holdco | A-1 | ||||
1.2. | Organization of Merger Subs | A-1 | ||||
1.3. | The Mergers | A-2 | ||||
1.4. | Effective Time of the Mergers | A-2 | ||||
1.5. | Closing | A-2 | ||||
1.6. | Charters and Bylaws of the Surviving Corporations and Holdco | A-2 | ||||
1.7. | Directors | A-2 | ||||
1.8. | Officers | A-3 | ||||
ARTICLE II | EFFECTS OF THE MERGERS | A-3 | ||||
2.1. | Conversion of Florida Rock Securities | A-3 | ||||
(a) Conversion of Florida Rock Common Stock | A-3 | |||||
(b) Florida Rock and Vulcan-Owned Shares | A-3 | |||||
(c) Conversion of Fresno Merger Sub Stock | A-4 | |||||
(d) Adjustments | A-4 | |||||
2.2. | Florida Rock Election Procedures | A-4 | ||||
2.3. | Florida Rock Proration | A-5 | ||||
2.4. | Conversion of Vulcan Securities | A-6 | ||||
(a) Conversion of Vulcan Common Stock | A-6 | |||||
(b) Vulcan and Florida Rock-Owned Shares | A-6 | |||||
(c) Conversion of Virginia Merger Sub Stock | A-6 | |||||
(d) Cancellation of Holdco Common Stock | A-6 | |||||
(e) Treatment of Vulcan Certificates and Vulcan Book-Entry Shares | A-6 | |||||
2.5. | Exchange of Florida Rock Certificates and Florida Rock Book-Entry Shares | A-7 | ||||
(a) Deposit of Merger Consideration | A-7 | |||||
(b) Exchange Procedures | A-7 | |||||
(c) Distributions with Respect to Unexchanged Shares | A-8 | |||||
(d) No Fractional Shares | A-8 | |||||
(e) Termination of Exchange Fund | A-8 | |||||
(f) No Liability | A-9 | |||||
(g) Withholding | A-9 | |||||
2.6. | Florida Rock Options and Other Stock-Based Awards | A-9 | ||||
2.7. | Vulcan Options and Other Stock-Based Awards | A-10 | ||||
2.8. | Stock Plans | A-10 | ||||
ARTICLE III | REPRESENTATIONS AND WARRANTIES | A-10 | ||||
3.1. | Representations and Warranties of Florida Rock | A-10 | ||||
(a) Organization, Standing and Power | A-10 | |||||
(b) Capital Structure | A-12 | |||||
(c) Authority | A-12 | |||||
(d) SEC Documents | A-13 | |||||
(e) Undisclosed Liabilities | A-13 | |||||
(f) Compliance with Applicable Laws and Reporting Requirements | A-14 |
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(g) Legal Proceedings | A-14 | |||||
(h) Taxes | A-14 | |||||
(i) Certain Agreements | A-16 | |||||
(j) Benefit Plans | A-16 | |||||
(k) Subsidiaries | A-19 | |||||
(l) Absence of Certain Changes or Events | A-19 | |||||
(m) Board Approval; Florida Rock Rights Agreement | A-19 | |||||
(n) Vote Required | A-20 | |||||
(o) Properties | A-20 | |||||
(p) Intellectual Property | A-21 | |||||
(q) Environmental Matters | A-21 | |||||
(r) Labor and Employment Matters | A-22 | |||||
(s) Information Supplied | A-22 | |||||
(t) Insurance | A-22 | |||||
(u) Customers | A-23 | |||||
(v) Related Party Transactions | A-23 | |||||
(w) Plants and Equipment | A-23 | |||||
(x) Brokers or Finders | A-23 | |||||
(y) Opinion of Florida Rock Financial Advisor | A-23 | |||||
3.2. | Representations and Warranties of Vulcan | A-23 | ||||
(a) Organization, Standing and Power | A-23 | |||||
(b) Capital Structure | A-24 | |||||
(c) Authority | A-25 | |||||
(d) SEC Documents | A-25 | |||||
(e) Undisclosed Liabilities | A-26 | |||||
(f) Information Supplied | A-26 | |||||
(g) Compliance with Applicable Laws and Reporting Requirements | A-26 | |||||
(h) Legal Proceedings | A-27 | |||||
(i) Taxes | A-27 | |||||
(j) Subsidiaries | A-27 | |||||
(k) Absence of Certain Changes or Events | A-27 | |||||
(l) Board Approval; Vulcan Rights Agreement | A-27 | |||||
(m) Environmental Matters | A-28 | |||||
(n) Brokers or Finders | A-28 | |||||
ARTICLE IV | COVENANTS RELATING TO CONDUCT OF BUSINESS | A-28 | ||||
4.1. | Covenants of Florida Rock | A-28 | ||||
(a) Ordinary Course | A-28 | |||||
(b) Dividends; Changes in Stock | A-28 | |||||
(c) Issuance of Securities | A-29 | |||||
(d) Governing Documents, Etc. | A-29 | |||||
(e) No Acquisitions | A-29 | |||||
(f) No Dispositions | A-29 | |||||
(g) Indebtedness | A-29 | |||||
(h) Other Actions | A-30 |
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Page | ||||||
(i) Accounting Methods; Tax Matters | A-30 | |||||
(j) Tax-Free Qualification | A-30 | |||||
(k) Compensation and Benefit Plans | A-30 | |||||
(l) No Liquidation | A-30 | |||||
(m) Litigation | A-30 | |||||
(n) No Restrictions on Business | A-30 | |||||
(o) Insurance | A-31 | |||||
(p) Other Agreements | A-31 | |||||
4.2. | Covenants of Vulcan | A-31 | ||||
(a) Dividends; Changes in Stock | A-31 | |||||
(b) Issuance of Securities | A-31 | |||||
(c) No Acquisitions | A-31 | |||||
(d) Tax-Free Qualification | A-31 | |||||
(e) No Liquidation | A-31 | |||||
(f) Other Agreements | A-31 | |||||
4.3. | Advice of Changes; Government Filings | A-32 | ||||
4.4. | Control of Other Party’s Business | A-32 | ||||
ARTICLE V | ADDITIONAL AGREEMENTS | A-32 | ||||
5.1. | Preparation of Proxy Statement/Prospectus; Florida Rock Shareholders Meeting | A-32 | ||||
5.2. | Access to Information; Confidentiality | A-33 | ||||
5.3. | Reasonable Best Efforts | A-33 | ||||
5.4. | Acquisition Proposals | A-35 | ||||
5.5. | Affiliates | A-37 | ||||
5.6. | Stock Exchange Listing | A-37 | ||||
5.7. | Employee Benefit Plans | A-37 | ||||
5.8. | Section 16 Matters | A-38 | ||||
5.9. | Fees and Expenses | A-39 | ||||
5.10. | Governance | A-39 | ||||
5.11. | Indemnification; Directors’ and Officers’ Insurance | A-39 | ||||
5.12. | Public Announcements | A-40 | ||||
5.13. | Additional Agreements | A-41 | ||||
ARTICLE VI | CONDITIONS PRECEDENT | A-41 | ||||
6.1. | Conditions to Each Party’s Obligation to Effect the Merger | A-41 | ||||
(a) Shareholder Approval | A-41 | |||||
(b) Exchange Listing | A-41 | |||||
(c) Requisite Regulatory Approvals | A-41 | |||||
(d) Form S-4 | A-41 | |||||
(e) No Injunctions or Restraints; Illegality | A-41 | |||||
6.2. | Conditions to Obligations of Vulcan | A-41 | ||||
(a) Representations and Warranties | A-41 | |||||
(b) Performance of Obligations of Florida Rock | A-42 | |||||
(c) Tax Opinion | A-42 | |||||
(d) Absence of Legal Restraint | A-42 |
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Page | ||||||
6.3. | Conditions to Obligations of Florida Rock | A-42 | ||||
(a) Representations and Warranties | A-42 | |||||
(b) Performance of Obligations of Vulcan | A-43 | |||||
(c) Tax Opinion | A-43 | |||||
ARTICLE VII | TERMINATION AND AMENDMENT | A-43 | ||||
7.1. | Termination | A-43 | ||||
7.2. | Effect of Termination | A-44 | ||||
7.3. | Amendment | A-44 | ||||
7.4. | Extension; Waiver | A-45 | ||||
ARTICLE VIII | GENERAL PROVISIONS | A-45 | ||||
8.1. | Non-survival of Representations, Warranties and Agreements | A-45 | ||||
8.2. | Notices | A-45 | ||||
8.3. | Interpretation | A-46 | ||||
8.4. | Counterparts | A-46 | ||||
8.5. | Entire Agreement; No Third Party Beneficiaries | A-46 | ||||
8.6. | Governing Law | A-46 | ||||
8.7. | Severability | A-47 | ||||
8.8. | Assignment | A-47 | ||||
8.9. | Submission to Jurisdiction | A-47 | ||||
8.10. | Enforcement | A-47 | ||||
8.11. | WAIVER OF JURY TRIAL | A-47 |
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Section | ||
Acquisition Proposal | 5.4(a) | |
Acquisitions | 4.1(e) | |
Affiliate Transaction | 3.1(v) | |
Agreement | Preamble | |
Baker Group | Recitals | |
Cancelled Shares | 2.1(b) | |
Cash Cap Number | 2.3(a) | |
Cash Consideration | 2.1(a) | |
Cash Electing Florida Rock Share | 2.1(a) | |
Cash Election | 2.1(a) | |
Cash Election Number | 2.3(b) | |
Cash Percentage | 2.3(a) | |
Change in Florida Rock Recommendation | 5.1(b) | |
Closing | 1.5 | |
Closing Date | 1.5 | |
Code | Recitals | |
Collective Bargaining Agreements | 3.1(r) | |
Confidentiality Agreement | 5.2 | |
Controlled Group Liability | 3.1(j) | |
Converted Shares | 2.1(b) | |
Covered Employees | 5.7(a) | |
EBITDA | 3.1(a) | |
Effective Time | 1.4(b) | |
Electing Florida Rock Share | 2.1(a) | |
Election Date | 2.2(d) | |
Employee Benefit Plan | 3.1(j) | |
Employment Agreement | 3.1(j) | |
Encumbrance | 3.1(o) | |
Environmental Claim | 3.1(q) | |
Environmental Laws | 3.1(q) | |
Environmental Permits | 3.1(q) | |
ERISA | 3.1(j) | |
ERISA Affiliate | 3.1(j) | |
Exchange Act | 2.2(d) | |
Exchange Agent | 2.2(a) | |
Exchange Fund | 2.5(a) | |
Exchange Ratio | 2.1(a) | |
Excluded Shares | 2.1(b) | |
Existing D&O Policy | 5.11(c) | |
FBCA | 1.3(c) | |
Florida Rock | Preamble | |
Florida Rock Articles of Merger | 1.4(b) | |
Florida Rock Board Approval | 3.1(m) |
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Section | ||
Florida Rock Book-Entry Shares | 2.2(a) | |
Florida Rock Bylaws | 1.6(a) | |
Florida Rock Certificates | 2.2(a) | |
Florida Rock Charter | 1.6(a) | |
Florida Rock Common Stock | 2.1(a) | |
Florida Rock Consideration | 2.1(a) | |
Florida Rock Contracts | 3.1(i) | |
Florida Rock Disclosure Letter | 3.1 | |
Florida Rock Indemnified Parties | 5.11(a) | |
Florida Rock Intellectual Property | 3.1(p) | |
Florida Rock Merger | 1.3(b) | |
Florida Rock Permits | 3.1(f) | |
Florida Rock Permitted Encumbrances | 3.1(o) | |
Florida Rock Permitted Liens | 3.1(o) | |
Florida Rock Preferred Stock | 3.1(b) | |
Florida Rock Recommendation | 5.1(b) | |
Florida Rock Rights Agreement | 3.1(m) | |
Florida Rock SEC Documents | 3.1(d) | |
Florida Rock Shareholders Meeting | 5.1(b) | |
Florida Rock Stock Option | 2.6(a) | |
Florida Rock Stock Plans | 3.1(b) | |
Florida Rock Stock Units | 2.6(c) | |
Florida Rock Surviving Corporation | 1.3(b) | |
Florida Rock Termination Fee | 7.2(b) | |
Form of Election | 2.2(c) | |
Form S-4 | 5.1(a) | |
Fresno Merger Sub | Preamble | |
GAAP | 3.1(a) | |
Goldman Sachs | 3.2(n) | |
Governmental Entity | 3.1(c) | |
Hazardous Materials | 3.1(q) | |
Holdco | Preamble | |
Holdco Common Stock | 1.1 | |
HSR Act | 3.1(c) | |
Indemnified Parties | 5.11(b) | |
Infringe | 3.1(p) | |
Initial Effective Time | 1.4(a) | |
Injunction | 6.1(e) | |
Insiders | 5.8 | |
Insurance Amount | 5.11(c) | |
knowledge | 8.3 | |
known | 8.3 | |
Lazard | 3.1(x) | |
Liens | 1.1 |
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Section | ||
material adverse effect | 3.1(a) | |
Merger Consideration | 2.4(a) | |
Merger Subs | Preamble | |
Mergers | 1.3(b) | |
MSHA | 3.1(q) | |
Multiemployer Plan | 3.1(j) | |
Multiple Employer Plan | 3.1(j) | |
NJBCA | 1.3(c) | |
Non-Electing Florida Rock Holders | 2.5(b) | |
Non-Electing Florida Rock Share | 2.1(a) | |
NYSE | 2.5(d) | |
Option Consideration | 2.6(b) | |
OSHA | 3.1(q) | |
Patriot | 3.1(a) | |
PBGC | 3.1(j) | |
proceedings | 3.1(h) | |
Proxy Statement/Prospectus | 5.1(a) | |
Public Proposal | 7.2(b) | |
Qualified Plans | 3.1(j) | |
Real Properties | 3.1(o) | |
Real Property Leases | 3.1(o) | |
Required Florida Rock Vote | 3.1(n) | |
Requisite Regulatory Approvals | 6.1(c) | |
RSUs | 2.7(b) | |
SEC | 3.1(a) | |
Section 16 Information | 5.8 | |
Securities Act | 3.1(b) | |
Shortfall Number | 2.3(c) | |
Significant Subsidiary | 3.1(a) | |
Stock Consideration | 2.1(a) | |
Stock Electing Florida Rock Share | 2.1(a) | |
Stock Election | 2.1(a) | |
Subsidiary | 3.1(a) | |
Superior Proposal | 5.4(f) | |
Support Agreement | Recitals | |
Tax | 3.1(h) | |
Taxes | 3.1(h) | |
Tax Return | 3.1(h) | |
Violation | 3.1(c) | |
Virginia Merger Sub | Preamble | |
Voting Debt | 3.1(b) | |
Vulcan | Preamble | |
Vulcan Benefit Plans | 5.7(a) | |
Vulcan Board Approval | 3.2(l) |
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Section | ||
Vulcan By-laws | 1.6(b) | |
Vulcan Certificate of Merger | 1.4(a) | |
Vulcan Charter | 1.6(b) | |
Vulcan Common Stock | 2.4(a) | |
Vulcan Consideration | 2.4(a) | |
Vulcan Disclosure Letter | 3.2 | |
Vulcan Indemnified Parties | 5.11(b) | |
Vulcan Merger | 1.3(a) | |
Vulcan Permits | 3.2(g) | |
Vulcan Preferred Stock | 3.2(b) | |
Vulcan SAR | 2.7(a) | |
Vulcan SEC Documents | 3.2(d) | |
Vulcan Stock Option | 2.7(a) | |
Vulcan Stock Plans | 3.2(b) | |
Vulcan Surviving Corporation | 1.3(a) | |
Withdrawal Liability | 3.1(j) |
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Attention: | Edward D. Herlihy, Esq. |
A-45
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Attention: | Thomas Roberts, Esq. |
A-46
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A-47
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By: | /s/ Donald M. James |
Title: | Chairman and Chief Executive Officer |
By: | /s/ John D. Baker, II |
Title: | President and Chief Executive |
By: | /s/ Daniel F. Sansone |
Title: | President and Treasurer |
By: | /s/ William F. Denson, III |
Title: | Vice President and Secretary |
By: | /s/ Ejaz A. Khan |
Title: | Chairman |
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as general partner
by: | /s/ John D. Baker, II |
by: | /s/ Edward L. Baker |
by: | /s/ Edward L. Baker |
by: | /s/ John D. Baker, II |
by: | /s/ Anne D. Baker |
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By: | /s/ Donald M. James |
Title: | Chairman and Chief Executive Officer |
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Stock Election | ||||||||
Shareholder Name | Specified Shares | Shares | ||||||
1. Baker Holdings, L.P. | 2,855,838 | 2,855,838 | ||||||
2. Edward L. Baker | ||||||||
a. Edward L. Baker Living Trust — Trustee | 326,354 | 188,644 | ||||||
b. Edward L. Baker | 50,934 | 0 | ||||||
3. John D. Baker II | ||||||||
a. John D. Baker II Living Trust — Trustee | 2,725,181 | 1,362,591 | ||||||
4. Anne Baker | ||||||||
a. Anne D. Baker Living Trust | 517,657 | 258,829 | ||||||
Total | 6,475,964 | 4,665,902 |
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1200 Urban Center Drive
Birmingham, Alabama 35242
Attn: General Counsel
Facsimile:(205) 298-2960
c/o Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
Attn: General Counsel
Facsimile:(205) 298-2960
155 East 21st Street
Jacksonville, Florida 32206
Attention: John D. Baker II
Facsimile:(904) 791-1810
1802 Bayberry Court
Suite 410
Richmond, Virginia 23226
Attention: Thomas S. Word, Jr., Esq.
Facsimile:(804) 673-1790
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by: | /s/ Donald M. James Name: Donald M. James Title: Chairman and Chief Executive Officer |
by: | /s/ Daniel F. Sansone Name: Daniel F. Sansone Title: President and Treasurer |
by: | BAKER INVESTMENT HOLDINGS, INC., |
by: | /s/ John D. Baker, II John D. Baker, II, President |
by: | /s/ Edward L. Baker Edward L. Baker, as trustee |
by: | /s/ Edward L. Baker Edward L. Baker |
by: | /s/ John D. Baker, II John D. Baker, II, as trustee |
by: | /s/ Anne D. Baker Anne D. Baker, as trustee |
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D-2
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By: | /s/ Michael J. Biondi |
Managing Director and Co-Chairman
of Investment Banking
D-3
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Name | Residence or Business Address | |||||
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By: |
Title: |
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Section 1.01 | ANNUAL MEETINGS |
Section 1.02 | SPECIAL MEETINGS |
Section 1.03 | NOTICE AND PURPOSE OF MEETINGS |
Section 1.04 | QUORUM AND ADJOURNMENTS |
Section 1.05 | ORGANIZATION |
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Section 1.06 | VOTING |
Section 1.07 | SELECTION OF INSPECTORS |
Section 1.08 | DUTIES OF INSPECTORS |
Section 2.01 | NUMBER, QUALIFICATION, TENURE, TERM, QUORUM, VACANCIES, REMOVAL |
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Section 2.02 | MEETINGS OF THE BOARD OF DIRECTORS |
F-3
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Section 2.03 | COMMITTEES OF THE BOARD OF DIRECTORS |
Section 2.04 | PARTICIPATION IN MEETINGS BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR INSTRUMENT |
Section 2.05 | ACTION OF BOARD OF DIRECTORS AND COMMITTEES WITHOUT A MEETING |
Section 2.06 | DIVIDENDS |
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Section 2.07 | CONFLICT OF INTEREST |
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Section 3.03 | CHAIRMAN AND VICE CHAIRMAN |
Section 3.04 | CHIEF EXECUTIVE OFFICER |
Section 3.05 | CHIEF OPERATING OFFICER |
Section 3.06 | PRESIDENT |
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Section 3.07 | CHIEF ADMINISTRATIVE OFFICER |
Section 3.08 | VICE PRESIDENTS |
Section 3.09 | GENERAL COUNSEL |
Section 3.10 | ASSOCIATE GENERAL COUNSEL |
Section 3.11 | SECRETARY |
Section 3.12 | TREASURER |
Section 3.13 | CONTROLLER |
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Section 3.14 | OTHER OFFICERS |
Section 3.15 | VOTING CORPORATION’S SECURITIES |
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Section 5.01 | TRANSFER OF SHARES |
Section 5.02 | TRANSFER AGENT AND REGISTRAR |
Section 5.03 | FIXING RECORD DATE |
Section 5.04 | LOST, STOLEN OR DESTROYED CERTIFICATES |
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Section 6.01 | FISCAL YEAR |
Section 6.02 | CORPORATE SEAL |
Section 6.03 | DELEGATION OF AUTHORITY |
Section 6.04 | NOTICES |
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Washington, D.C. 20549
OF THE SECURITIES EXCHANGE ACT OF 1934
New Jersey | 63-0366371 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered | |||
Common Stock, $1 par value | New York Stock Exchange |
Aggregate market value of voting stock held by non-affiliates as of June 30, 2006: | $ | 7,468,430,143 | ||
Number of shares of common stock, $1.00 par value, outstanding as of February 16, 2007: | 95,011,123 |
(1) | Portions of the registrant’s 2006 Annual Report to Shareholders are incorporated by reference into Parts I, II and IV of this Annual Report onForm 10-K. |
(2) | Portions of the registrant’s annual proxy statement for the annual meeting of its shareholders to be held on May 11, 2007, are incorporated by reference into Part III of this Annual Report on Form10-K. |
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Item 1. | Business |
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Item 1A. | Risk Factors |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Estimated | Percentage of Aggregates Reserves by Rock Type | |||||||||||||||||||
Years of Life(1) | Limestone | Granite | Sand & Gravel | Other(2) | ||||||||||||||||
By Regional Division: | ||||||||||||||||||||
Mideast | 57 | 18.1 | % | 33.5 | % | 1.1 | % | 47.3 | % | |||||||||||
Midsouth | 62 | 98.8 | % | — | 1.2 | % | — | |||||||||||||
Midwest | 42 | 97.8 | % | — | 2.2 | % | — | |||||||||||||
Southeast | 45 | 7.5 | % | 92.5 | % | — | — | |||||||||||||
Southern and Gulf Coast | 39 | 99.7 | % | — | 0.3 | % | — | |||||||||||||
Southwest | 43 | 92.5 | % | — | 1.2 | % | 6.3 | % | ||||||||||||
Western | 18 | — | 8.0 | % | 79.0 | % | 13.0 | % | ||||||||||||
Total | 44 | 53.4 | % | 26.7 | % | 5.6 | % | 14.3 | % |
(1) | Estimated years of life of aggregates reserves are based on the average annual rate of production of each regional division 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 facility properties, changes in aggregates specifications required by major customers and passage of government regulations applicable to aggregates operations. Estimates also are revised when and if additional geological evidence indicates that a revision is necessary. For 2006, the total three-year average annual rate of production was 258 million tons based on annual rates of production as follows: 2006 — 263 million tons, 2005 — 265 million tons, and 2004 — 247 million tons. | |
(2) | Other: amphibolite, argillite, basalt, diabase, diorite, gabbro, gneiss, latite, quartzite, rock asphalt, and traprock. |
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Estimated | ||||||||||||||||
Years of Life | Lease | |||||||||||||||
Average | At Average | Expiration | ||||||||||||||
Name of Quarry | Annual | Rate of | Nature of | Date, if | Distribution | |||||||||||
(nearest major metropolitan area) | Product | Production Rate | Production(1) | Interest | Applicable | Method | ||||||||||
(millions of tons) | ||||||||||||||||
Sactun (Cancun), Mexico | Limestone | 8.1 | 85.1 | Owned | — | oceangoingvessels, truck | ||||||||||
Hanover (Harrisburg), Pennsylvania | Limestone | 4.1 | Over 100 | Owned | — | truck, rail | ||||||||||
McCook (Chicago), Illinois | Limestone | 7.6 | 65.4 | Owned | — | truck | ||||||||||
Grayson (Atlanta), Georgia | Granite | 1.9 | Over 100 | Owned | — | truck | ||||||||||
Rockingham (Charlotte), North Carolina | Granite | 4.8 | 55.0 | 28% Leased 72% Owned | (2) | truck, rail | ||||||||||
Gray Court (Greenville), South Carolina | Granite | 1.2 | Over 100 | Owned | — | truck | ||||||||||
Gold Hill (Charlotte), North Carolina | Argillite | 1.3 | Over 100 | 34% Leased 66% Owned | (3) | truck | ||||||||||
Geronimo (San Antonio), Texas | Limestone | 0.5 | Over 100 | Leased | (4) | truck | ||||||||||
Grand Rivers (Paducah), Kentucky | Limestone | 7.6 | 26.4 | Leased | (5) | truck, rail, barge | ||||||||||
Jack (Richmond), Virginia | Granite | 2.5 | 69.0 | 87% Leased 13% Owned | (6) | truck, rail, barge |
(1) | Estimated years of life of aggregates reserves are based on the average annual rate of production of the facility 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 facility properties, changes in aggregates specifications required by major customers and passage of government regulations applicable to aggregates operations. Estimates also are revised when and if additional geological evidence indicates that a revision is necessary. | |
(2) | Leases expire as follows: 82% in 2025 and 18% in 2027. | |
(3) | Leases expire as follows: 74% in 2058 and 26% in 2044. | |
(4) | Lease renewable by us through 2044. | |
(5) | Lease does not expire until reserves are exhausted. The surface rights are owned by us. | |
(6) | Lease renewable by us through 2159. |
Item 3. | Legal Proceedings |
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• | general economic and business conditions; | |
• | changes in interest rates; | |
• | the timing and amount of federal, state and local funding for infrastructure; | |
• | changes in the level of spending for residential and private nonresidential construction; | |
• | the highly competitive nature of the construction materials industry; | |
• | pricing; | |
• | weather and other natural phenomena; | |
• | energy costs; | |
• | costs of hydrocarbon-based raw materials; | |
• | increasing healthcare costs; | |
• | our ability to manage and successfully integrate acquisitions; | |
• | the timing and amount of any future payments to be received under two earn-outs contained in the agreement for the divestiture of our Chemicals business; | |
• | the risks set forth in Item 1A “Risk Factors,” and Item 3 “Legal Proceedings”; in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” set forth in the 2006 Annual Report to Shareholders, which is incorporated by reference in Item 7 and Item 7A; and in Note 12 “Other |
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Commitments and Contingencies” to the Consolidated Financial Statements set forth in the 2006 Annual Report to Shareholders, which is incorporated by reference in Item 8; and |
• | other risks and uncertainties |
Item 4. | Submission of Matters to a Vote of Security Holders |
Name | Position | Age | ||||
Donald M. James | Chairman and Chief Executive Officer | 58 | ||||
Guy M. Badgett, III | Senior Vice President, Construction Materials Group | 58 | ||||
William F. Denson, III | Senior Vice President, General Counsel and Secretary | 63 | ||||
Ronald G. McAbee | Senior Vice President, Construction Materials-West | 59 | ||||
Daniel F. Sansone | Senior Vice President and Chief Financial Officer | 54 | ||||
Danny R. Shepherd | Senior Vice President, Construction Materials-East | 55 | ||||
Robert A. Wason IV | Senior Vice President, Corporate Development | 55 | ||||
Ejaz A. Khan | Vice President, Controller and Chief Information Officer | 49 |
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Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Common Stock Prices | Dividends | |||||||||||
2006 | High | Low | Declared | |||||||||
First Quarter | $ | 89.16 | $ | 66.98 | $ | .37 | ||||||
Second Quarter | 93.85 | 70.44 | .37 | |||||||||
Third Quarter | 80.18 | 65.85 | .37 | |||||||||
Fourth Quarter | 92.00 | 76.81 | .37 |
2005 | High | Low | ||||||||||
First Quarter | $ | 59.67 | $ | 52.36 | $ | .29 | ||||||
Second Quarter | 65.99 | 52.36 | .29 | |||||||||
Third Quarter | 74.55 | 64.04 | .29 | |||||||||
Fourth Quarter | 76.31 | 60.72 | .29 |
Total Number of | ||||||||||||||||
Total | Shares Purchased as | Maximum Number of | ||||||||||||||
Number | Average | Part of | Shares that May Yet be | |||||||||||||
of Shares | Price Paid per | Publicly Announced | Purchased Under the | |||||||||||||
Period | Purchased | Share(1) | Plans or Programs | Plans or Programs(2) | ||||||||||||
October 1 - 31, 2006 | 11,100 | $ | 77.45 | 11,100 | 3,455,539 | |||||||||||
November 1 - 30, 2006 | — | — | — | 3,455,539 | ||||||||||||
December 1 - 31, 2006 | — | — | — | 3,455,539 | ||||||||||||
Total | 11,100 | $ | 77.45 | 11,100 | ||||||||||||
(1) | The average price paid per share includes commission costs. | |
(2) | On February 10, 2006, the Board of Directors authorized the Company to repurchase up to 10,000,000 shares. Through December 31, 2006, a total of 6,544,461 shares had been repurchased pursuant to this authorization. We may make share repurchases from time to time in the open market or through privately negotiated transactions, depending upon market, business, legal and other conditions. |
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Item 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(Amounts in millions, except per share data) | ||||||||||||||||||||
Net sales | $ | 3,041.1 | $ | 2,615.0 | $ | 2,213.2 | $ | 2,086.9 | $ | 1,980.6 | ||||||||||
Total revenues | $ | 3,342.5 | $ | 2,895.3 | $ | 2,454.3 | $ | 2,309.6 | $ | 2,175.8 | ||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 477.5 | $ | 343.8 | $ | 261.2 | $ | 237.5 | $ | 233.2 | ||||||||||
Earnings (loss) on discontinued operations, net of tax(1) | (10.0 | ) | 44.9 | 26.2 | (23.7 | ) | (42.8 | ) | ||||||||||||
Cumulative effect of accounting changes(2) | — | — | — | (18.8 | ) | (20.5 | ) | |||||||||||||
Net earnings | $ | 467.5 | $ | 388.7 | $ | 287.4 | $ | 195.0 | $ | 169.9 | ||||||||||
Basic — per share: | ||||||||||||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 4.89 | $ | 3.37 | $ | 2.55 | $ | 2.33 | $ | 2.29 | ||||||||||
Discontinued operations | (0.10 | ) | 0.43 | 0.26 | (0.23 | ) | (0.42 | ) | ||||||||||||
Cumulative effect of accounting changes | — | — | — | (0.19 | ) | (0.20 | ) | |||||||||||||
Net earnings | $ | 4.79 | $ | 3.80 | $ | 2.81 | $ | 1.91 | $ | 1.67 | ||||||||||
Diluted — per share: | ||||||||||||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 4.79 | $ | 3.30 | $ | 2.52 | $ | 2.31 | $ | 2.28 | ||||||||||
Discontinued operations | (0.10 | ) | 0.43 | 0.25 | (0.23 | ) | (0.42 | ) | ||||||||||||
Cumulative effect of accounting changes | — | — | — | (0.18 | ) | (0.20 | ) | |||||||||||||
Net earnings | $ | 4.69 | $ | 3.73 | $ | 2.77 | $ | 1.90 | $ | 1.66 | ||||||||||
Pro forma assuming FAS 143 applied retroactively: | ||||||||||||||||||||
Net earnings | $ | 168.4 | ||||||||||||||||||
Net earnings per share, basic | $ | 1.66 | ||||||||||||||||||
Net earnings per share, diluted | $ | 1.64 | ||||||||||||||||||
Total assets | $ | 3,424.2 | $ | 3,588.9 | $ | 3,665.1 | $ | 3,636.9 | $ | 3.448.2 | ||||||||||
Long-term obligations | $ | 322.1 | $ | 323.4 | $ | 604.5 | $ | 607.7 | $ | 857.8 | ||||||||||
Shareholders’ equity | $ | 2,001.1 | $ | 2,126.5 | $ | 2,014.0 | $ | 1,802.8 | $ | 1,697.0 | ||||||||||
Cash dividends declared per share | $ | 1.48 | $ | 1.16 | $ | 1.04 | $ | 0.98 | $ | 0.94 |
(1) | Discontinued operations includes the results from operations attributable to our former Chloralkali and Performance Chemicals businesses, divested in 2005 and 2003, respectively. | |
(2) | The 2003 accounting change relates to our adoption of FAS 143, “Asset Retirement Obligations.” The $18.8 millionnet-of-tax cumulative effect adjustment represents the impact of recording asset retirement obligations, at estimated fair value, for which we have legal obligations for land reclamation. The 2002 accounting change relates to our adoption of FAS 142, “Goodwill and Other Intangible Assets.” The $20.5 millionnet-of-tax cumulative effect adjustment represents the full impairment of goodwill in the Performance Chemicals reporting unit. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Page | ||||
Consolidated Financial Statements | 40-43 | |||
Notes to Consolidated Financial Statements | 44-70 | |||
Management’s Report on Internal Control Over Financial Reporting | 37 | |||
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements | 39 | |||
Net Sales, Total Revenues, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 2006 and 2005 (Unaudited) | 78 |
Gross Profit | 2006 | 2005 | ||||||
(Amounts in millions) | ||||||||
First quarter | $ | 163.7 | $ | 92.2 | ||||
Second quarter | 257.7 | 210.4 | ||||||
Third quarter | 273.3 | 227.3 | ||||||
Fourth quarter | 237.3 | 178.6 | ||||||
Total | $ | 932.0 | $ | 708.5 | ||||
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
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Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions and Director Independence |
Item 14. | Principal Accountant Fees and Services |
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Item 15. | Exhibits and Financial Statement Schedules |
Page | ||||
Consolidated Statements of Earnings | 40 | |||
Consolidated Balance Sheets | 41 | |||
Consolidated Statements of Cash Flows | 42 | |||
Consolidated Statements of Shareholders’ Equity | 43 | |||
Notes to Consolidated Financial Statements | 44-70 | |||
Management’s Report on Internal Control Over Financial Reporting | 37 | |||
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements | 39 | |||
Net Sales, Total Revenues, Net Earnings and Earnings Per Share Quarterly Financial Data for Each of the 2 Years Ended December 31, 2006 and 2005 (Unaudited) | 78 |
Schedule II | Valuation and Qualifying Accounts and Reserves | 18 |
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VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 2006, 2005, and 2004
Column C | Column D | |||||||||||||||||||
Column B | Additions | Additions | Column F | |||||||||||||||||
Balance at | Charged to | Charged to | Balance at | |||||||||||||||||
Column A | Beginning | Costs and | Other | Column E | End | |||||||||||||||
Description | of Period | Expenses | Accounts | Deductions | of Period | |||||||||||||||
Amounts in thousands | ||||||||||||||||||||
2006 | ||||||||||||||||||||
Accrued Environmental Costs | $ | 9,544 | $ | 3,937 | — | $ | 87 | $ | 13,394 | |||||||||||
Asset Retirement Obligations | 105,774 | 5,499 | $ | 20,362 | (2) | 16,806 | (1) | 114,829 | ||||||||||||
Doubtful Receivables | 4,359 | 1,338 | — | 2,342 | (3) | 3,355 | ||||||||||||||
Self-Insurance Reserves | 42,508 | 24,950 | — | 22,261 | (4) | 45,197 | ||||||||||||||
All Other(6) | 10,769 | 5,560 | — | 9,561 | (5) | 6,768 | ||||||||||||||
2005 | ||||||||||||||||||||
Accrued Environmental Costs | $ | 20,126 | $ | 3,278 | — | $ | 13,860 | $ | 9,544 | |||||||||||
Asset Retirement Obligations | 108,408 | 5,273 | $ | 4,658 | (2) | 12,565 | (1) | 105,774 | ||||||||||||
Doubtful Receivables | 7,545 | 676 | — | 3,862 | (3) | 4,359 | ||||||||||||||
Self-Insurance Reserves | 45,557 | 18,774 | — | 21,823 | (4) | 42,508 | ||||||||||||||
All Other(6) | 13,260 | 5,203 | — | 7,694 | (5) | 10,769 | ||||||||||||||
2004 | ||||||||||||||||||||
Accrued Environmental Costs | $ | 21,149 | $ | 2,456 | — | $ | 3,479 | $ | 20,126 | |||||||||||
Asset Retirement Obligations | 107,683 | 5,375 | $ | 4,402 | (2) | 9,052 | (1) | 108,408 | ||||||||||||
Doubtful Receivables | 8,718 | 1,815 | — | 2,988 | (3) | 7,545 | ||||||||||||||
Self-Insurance Reserves | 38,809 | 49,720 | — | 42,972 | (4) | 45,557 | ||||||||||||||
All Other(6) | 11,906 | 6,400 | — | 5,046 | (5) | 13,260 |
(1) | Expenditures on environmental remediation projects. Additionally, the 2005 amount includes a deduction of $10,282,000 related to certain environmental liabilities included in the sale of our former Chemicals business. | |
(2) | New liabilities incurred and net up/down revisions to asset retirement obligations. Additionally, the 2005 amount includes a reduction of $17,949,000 due to the sale of our former Chemicals business. | |
(3) | Expenditures and liability reductions related to settlements of asset retirement obligations. | |
(4) | Write-offs of uncollected accounts and worthless notes, less recoveries. Additionally, the 2005 amount includes a deduction of $1,206,000 related to certain doubtful receivables included in the sale of our former Chemicals business. | |
(5) | Expenditures on self-insurance reserves. | |
(6) | Valuation and qualifying accounts and reserves for which additions, deductions and balances are individually insignificant. |
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By | /s/ Donald M. James |
Signature | Title | Date | ||||
/s/ Donald M. James Donald M. James | Chairman, Chief Executive Officer and Director (Principal Executive Officer) | February 26, 2007 | ||||
/s/ Daniel F. Sansone Daniel F. Sansone | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | February 26, 2007 | ||||
/s/ Ejaz A. Khan Ejaz A. Khan | Vice President, Controller and Chief Information Officer (Principal Accounting Officer) | February 26, 2007 | ||||
The following directors: | ||||||
Philip J. Carroll, Jr. | Director | |||||
Livio D. DeSimone | Director | |||||
Phillip W. Farmer | Director | |||||
H. Allen Franklin | Director | |||||
Douglas J. McGregor | Director | |||||
James V. Napier | Director | |||||
Donald B. Rice | Director | |||||
Orin R. Smith | Director | |||||
Vincent J. Trosino | Director | |||||
By | /s/ By William F. Denson, III William F. Denson, III Attorney-in-Fact | February 26, 2007 |
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Exhibit (3)(a) | Certificate of Incorporation (Restated 1988) as amended in 1989 and 1999 filed as Exhibit 3(a) to the Company’s Annual Report onForm 10-K for the year ended December 31, 1989 filed on March 30, 1990 and Exhibit 3(i) to the Company’s Annual Report onForm 10-K for the year ended December 31, 1999 filed on March 28, 2000.(1) | |
Exhibit (3)(b) | By-laws, as restated February 2, 1990, and as last amended October 14, 2005, filed as Exhibit 3(a) to the Company’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2005 filed October 28, 2005.(1) | |
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 theForm S-3 filed on May 2, 1991 (RegistrationNo. 33-40284).(1) | |
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 theForm S-3 on May 2, 1991 (RegistrationNo. 33-40284).(1) | |
Exhibit (4)(c) | Senior Debt Indenture between the Company and The Bank of New York as trustee, dated as of August 31, 2001 filed as Exhibit 4.1 to the Company’s Registration Statement onForm S-3A filed on September 5, 2001 (RegistrationNo. 333-67586).(1) | |
Exhibit (4)(d) | Subordinated Debt Indenture between the Company and The Bank of New York as trustee, dated August 31, 2001 filed as Exhibit 4.3 to the Company’s Registration Statement onForm S-3A filed on September 5, 2001 (RegistrationNo. 333-67586).(1) | |
Exhibit (10)(a) | The Management Incentive Plan of the Company, as amended filed as Exhibit 10(a) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2002 filed on March 28, 2003.(1,2) | |
Exhibit (10)(b) | The Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(d) to the Company’s Annual Report onForm 10-K for the year ended December 31, 1989 filed on March 30, 1990.(1,2) | |
Exhibit (10)(c) | Amendment to the Unfunded Supplemental Benefit Plan for Salaried Employees filed as Exhibit 10(c) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2001 filed on March 27, 2002.(1,2) | |
Exhibit (10)(d) | The Amendment and Restatement of the Deferred Compensation Plan for Directors Who Are Not Employees of the Company filed as Exhibit 10(d) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2001 filed on March 27, 2002.(1,2) | |
Exhibit (10)(e) | The 2006 Omnibus Long-Term Incentive Plan of the Company filed as Appendix C to the Company’s 2006 Proxy Statement on Schedule 14A filed on April 13, 2006.(1,2) | |
Exhibit (10)(f) | The Deferred Stock Plan for Nonemployee Directors of the Company filed as Exhibit 10(f) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2001 filed on March 27, 2002.(1,2) | |
Exhibit (10)(g) | The Restricted Stock Plan for Nonemployee Directors of the Company, as amended and restated filed as Appendix C to the Company’s 2004 Proxy Statement on Schedule 14A filed on April 14, 2004.(1,2) | |
Exhibit (10)(h) | Executive Deferred Compensation Plan, as amended filed as Exhibit 10(h) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2002 filed on March 28, 2003.(1,2) | |
Exhibit (10)(i) | Change of Control Employment Agreement Form filed as Exhibit 10(a) to the Company’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2004 filed on July 30, 2004.(1,2) | |
Exhibit (10)(j) | Change of Control Employment Agreement Form filed as Exhibit 10(j) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2002 filed on March 28, 2003.(1,2) | |
Exhibit (10)(k) | Executive Incentive Plan of the Company filed as Exhibit 10(n) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2000 filed on March 30, 2001.(1,2) | |
Exhibit (10)(l) | Supplemental Executive Retirement Agreement filed as Exhibit 10 to the Company’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2001 filed on November 2, 2001.(1,2) |
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Exhibit (10)(m) | Rights Agent Agreement dated October 19, 1998 between Vulcan Materials Company and The Bank of New York, as amended July 15, 2002, filed as Exhibit 10(m) to the Company’s Annual Report onForm 10-K for the year ended December 31, 2002 filed on March 28, 2003.(1) | |
Exhibit (10)(n) | Form Stock Option Award Agreement filed as Exhibit 10(o) to the Company’s Report onForm 8-K filed December 20, 2005.(1,2) | |
Exhibit (10)(o) | Form Director Stock Unit Award Agreement filed as Exhibit 10(p) to the Company’sForm 8-K filed July 21, 2006.(1,2) | |
Exhibit (10)(p) | Form Performance Share Unit Award Agreement.(2) | |
Exhibit (10)(q) | Form Stock Only Stock Appreciation Rights Agreement.(2) | |
Exhibit (10)(r) | Form Employee Deferred Stock Unit Award Amended Agreement.(2) | |
Exhibit (10)(s) | 2007 Compensation Arrangements.(2) | |
Exhibit (10)(t) | Asset Purchase Agreement dated October 11, 2004 among Vulcan Materials Company, Vulcan Chloralkali, LLC and Basic Chemicals Company, LLC, as amended, filed as Exhibit 99.1 to the Company’s Current Report onForm 8-K dated October 15, 2004.(1) | |
Exhibit (12) | Computation of Ratio of Earnings to Fixed Charges for the five years ended December 31, 2006. | |
Exhibit (13) | The Company’s 2006 Annual Report to Shareholders, portions of which are incorporated by reference in thisForm 10-K. Those portions of the 2006 Annual Report to Shareholders that are not incorporated by reference shall not be deemed to be “filed” as part of this report. | |
Exhibit (18) | Letter dated February 28, 2006 of Deloitte & Touche LLP, Independent Registered Public Accounting Firm for Vulcan Materials Company and its subsidiary companies regarding a change in accounting principles, filed as Exhibit 18 to the Company’s 2005Form 10-K Annual Report filed on February 28, 2006.(1) | |
Exhibit (21) | List of the Company’s subsidiaries as of December 31, 2006. | |
Exhibit (23) | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. | |
Exhibit (24) | Powers of Attorney. | |
Exhibit (31)(a) | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
Exhibit (31)(b) | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
Exhibit (32)(a) | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. | |
Exhibit (32)(b) | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |
(1) | Incorporated by reference. | |
(2) | Management contract or compensatory plan. |
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• | Use the Internet at the web address shown on your proxy card; | |
• | Use the touch-tone telephone number shown on your proxy card; or | |
• | Complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided. |
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TO BE HELD MAY 11, 2007
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1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 2007
• | Via Internet; | |
• | By telephone; | |
• | By mail; or | |
• | In person at the annual meeting. |
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• | election of three directors to serve three-year terms; and | |
• | ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2007. |
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• | by giving timely written notice of the revocation to the Secretary of our company; | |
• | by executing and delivering a proxy with a later date; | |
• | by voting by telephone or via Internet at a later date (in which case only the last vote is counted); or | |
• | by voting in person at the annual meeting. |
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Douglas J. McGregor Age: 66. Director since 1992. Blue Point Capital Partners, Cleveland, Ohio (a national private equity firm), since January 2003; retired President and Chief Operating Officer, Burlington Industries, Inc., Greensboro, North Carolina (a leading soft goods manufacturer with interests in apparel, home fashions, carpets and rugs), from June 2000 until December 2002. Committee memberships: Audit; Finance and Pension Funds; Safety, Health and Environmental Affairs. |
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Donald B. Rice Age: 67. Director since 1986.(*) Chairman (since 2002), President and Chief Executive Officer of Agensys, Inc., Santa Monica, California (a biotechnology company developing monoclonal antibody therapeutics for cancer), since 1996. Committee memberships: Audit; Executive; Finance and Pension Funds; Governance. (*)Dr. Rice was first elected a director in 1986, and served until May 1989, when he was appointed Secretary of the Air Force. He was reelected a director of Vulcan by the Board of Directors on February 12, 1993. | ||
Vincent J. Trosino Age: 66. Director since 2003. Retired President, Vice Chairman of the Board and Chief Operating Officer of State Farm Mutual Automobile Insurance Company, Bloomington, Illinois (a mutual insurance company), from 1998 until December 2006. Committee memberships: Finance and Pension Funds; Safety, Health and Environmental Affairs. |
recommends a vote FOR each of the nominees named above.
Philip J. Carroll, Jr. Age: 69. Director since 1999. Retired Chairman and Chief Executive Officer of Fluor Corporation, Aliso Viejo, California (an engineering, construction and diversified services company), from July 1998 to February 2002. Other directorships: BAE Systems; Texas Medical Center; Envirofuels, LLC. Committee memberships: Compensation; Executive; Governance; Safety, Health and Environmental Affairs. | ||
Donald M. James Age: 58. Director since 1996. Chairman and Chief Executive Officer of Vulcan since May 1997. Other directorships: The Southern Company; Wachovia Corporation. Committee memberships: Executive. | ||
Orin R. Smith Age: 71. Director since 1983. Retired Chairman and Chief Executive Officer of Engelhard Corporation, Iselin, New Jersey (provider of environmental technologies, performance products, engineered materials and related services), from January 1995 to December 2000. Other directorships: Applera Corporation; Ingersoll-Rand Company. Committee memberships: Compensation; Executive; Governance; Safety, Health and Environmental Affairs. |
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Phillip W. Farmer Age: 68. Director since 1999. Retired Chairman of the Board of Harris Corporation, Melbourne, Florida (an international communications equipment company) from February 2003 until June 2003; Chairman and Chief Executive Officer from July 1995 to February 2003. Other directorships: George Weston, Limited. Committee memberships: Audit; Finance and Pension Funds; Governance. | ||
H. Allen Franklin Age: 62. Director since 2001. Retired Chairman and Chief Executive Officer of Southern Company, Atlanta, Georgia (a super-regional energy company in the Southeast and a leading U.S. producer of energy) from April 2004 until July 2004; Chairman, President and Chief Executive Officer from April 2001 to March 2004. Committee memberships: Audit; Compensation; Safety, Health and Environmental Affairs. | ||
James V. Napier Age: 70. Director since 1983. Retired Chairman of the Board of Scientific-Atlanta, Inc., Atlanta, Georgia (a manufacturer and designer of telecommunication systems, satellite-based communications networks, and instrumentation for industrial, telecommunications and government applications) from 1992 to 2000. Other directorships: Intelligent Systems, Inc.; McKesson Corporation; WABTEC, Corp. Committee memberships: Audit; Compensation; Executive; Finance and Pension Funds. |
PRACTICES OF THE BOARD OF DIRECTORS
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• | The name and address of the shareholder who intends to make the nomination(s) and of the person or persons to be nominated; | |
• | A representation that the shareholder is a holder of record or a beneficial holder of stock entitled to vote at the meeting (including the number of shares the shareholder owns) and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; | |
• | A description of all arrangements and understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; | |
• | Such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission (whether or not such rules are applicable) had each nominee been nominated, or intended to be nominated, by the Board of Directors, including the candidate’s name, biographical information, and qualifications; and | |
• | The written consent of each nominee to serve as a director if so elected, with such written consent attached thereto. |
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• | Executive Committee; | |
• | Audit Committee; | |
• | Compensation Committee; | |
• | Governance Committee; | |
• | Safety, Health and Environmental Affairs Committee; and | |
• | Finance and Pension Funds Committee. |
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• | Hire, evaluate and, when appropriate, replace the independent registered public accounting firm, whose duty it is to audit our books and accounts for the fiscal year in which it is appointed; | |
• | Determine the compensation to be paid to the independent registered public accounting firm and, in its sole discretion, approve all audit and engagement fees and terms and pre-approve all auditing and non-auditing services of such firm, other than certain de minimis non-audit services; | |
• | Review and discuss with management the independent registered public accounting firm and internal auditors our internal reporting, audit procedures and the adequacy and effectiveness of our disclosure controls and procedures; | |
• | Review and discuss with management and the independent registered public accounting firm the audited financial statements to be included in our Annual Report onForm 10-K, the quarterly financial statements to be included in our Quarterly Reports onForm 10-Q, our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the selection, application and disclosure of accounting policies used in our financial statements; | |
• | Review and discuss with management with quarterly earnings press releases and financial information and earnings guidance provided to analysts and rating agencies; | |
• | Review and discuss with management all existing related-party transactions and approve any proposed related-party transactions to ensure that they are in our best interest; and | |
• | Review and reassess the adequacy of the Audit Committee Charter adopted by the Board of Directors, and recommend proposed changes to the Board of Directors. |
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• | identifies individuals qualified to become Board members consistent with criteria established in its charter; | |
• | recommends to the Board director nominees for the next annual meeting of shareholders; and | |
• | evaluates individuals suggested by shareholders as director nominees. |
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c/o Corporate Secretary
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
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c/o Corporate Secretary
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
Name and Address of | Amount and Nature of | Percent of | ||||||
Beneficial Owner | Beneficial Ownership | Class | ||||||
State Farm Mutual Automobile Insurance Company and Affiliates | 11,072,672 shares(1 | ) | 11.72 | % | ||||
One State Farm Plaza Bloomington, Illinois 61710 | ||||||||
Davis Selected Advisors, L.P. | 8,234,304 shares(2 | )(4) | 8.72 | % | ||||
2949 East Elvira Road, Suite 101 Tucson, Arizona 85706 | ||||||||
Regions Financial Corporation | 5,772,762 shares(3 | )(4) | 6.11 | % | ||||
1900 Fifth Avenue North Birmingham, Alabama 35203 |
(1) | Based on information contained in the Schedule 13G/A, dated February 3, 2007, filed with the Securities and Exchange Commission. According to this Schedule 13G/A, the total includes the following shares over which the listed entities have sole or share either or both voting and dispositive power: |
Affiliate | Shares | |||
State Farm Mutual Automobile Insurance Company | 8,399,798 | |||
State Farm Life Insurance Company | 3,635 | |||
State Farm Fire and Casualty Company | 3,216 | |||
State Farm Growth Fund | 1,039,200 | |||
State Farm Balanced Fund | 160,200 | |||
State Farm Variable Product Trust | 4,615 | |||
State Farm Insurance Companies Employee Retirement Trust | 2,808 | |||
State Farm Insurance Companies Savings and Thrift Plan for U.S. Employees | ||||
-Equities Account | 1,208,400 | |||
-Balanced Account | 250,800 |
(2) | Based on information contained in the Schedule 13G/A, dated February 3, 2007, filed with the Securities and Exchange Commission. According to this Schedule 13G/A, the total includes the following shares over which the listed entities have sole | |
(3) | Based on information contained in a Schedule 13G dated February 14, 2007, filed with the Securities and Exchange Commission. | |
(4) | Has sole voting and investment power over these shares. |
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Amount and | ||||||||
Nature of | ||||||||
Stock-Based | Percent of | |||||||
Name | Ownership | Class | ||||||
Directors(1) | ||||||||
Philip J. Carroll, Jr. | 19,555 | * | ||||||
Livio D. DeSimone | 65,754 | * | ||||||
Phillip W. Farmer(2) | 20,619 | * | ||||||
H. Allen Franklin | 14,043 | * | ||||||
Douglas J. McGregor(3) | 53,533 | * | ||||||
James V. Napier | 22,249 | * | ||||||
Donald B. Rice | 39,460 | * | ||||||
Orin R. Smith | 64,134 | * | ||||||
Vincent J. Trosino | 13,001 | * | ||||||
Chief Executive Officer and other Executive Officers(4) | ||||||||
Donald M. James | 1,629,152 | 1.7 | % | |||||
Guy M. Badgett, III | 314,015 | * | ||||||
James W. Smack | 246,823 | * | ||||||
Daniel F. Sansone | 234,304 | * | ||||||
Ronald G. McAbee | 156,191 | * | ||||||
All Directors and Executive Officers as a group(17 persons) | 3,345,948 | 3.5 | % |
* | Less than 1% of issued and outstanding shares of our company’s common stock. | |
(1) | Beneficial ownership for the directors includes all shares held of record or in street name, and, if noted, by trusts or family members. The amounts also include restricted shares granted under our Restricted Stock Plan for Nonemployee Directors and phantom shares settled in stock accrued under the Directors’ Deferred Compensation Plan, and the Deferred Stock Plan for Nonemployee Directors, as follows: |
Phantom Shares | ||||||||||||
Shares Owned | Held | |||||||||||
Directly or | Restricted | Pursuant to | ||||||||||
Indirectly | Shares | Plans | ||||||||||
Philip J. Carroll, Jr. | 0 | 5,950 | 13,605 | |||||||||
Livio D. DeSimone | 25,303 | 6,185 | 34,266 | |||||||||
Phillip W. Farmer | 1,000 | 5,550 | 13,055 | |||||||||
H. Allen Franklin | 0 | 4,000 | 10,043 | |||||||||
Douglas J. McGregor | 1,350 | 6,185 | 45,998 | |||||||||
James V. Napier | 3,550 | 6,185 | 12,514 | |||||||||
Donald B. Rice | 21,950 | 6,185 | 11,325 | |||||||||
Orin R. Smith | 3,150 | 6,185 | 54,799 | |||||||||
Vincent J. Trosino | 5,500 | 2,000 | 5,501 |
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(2) | Held in a trust of which Mr. Farmer is the trustee. | |
(3) | Includes 1,350 shares held in a trust of which Mr. McGregor is the trustee. | |
(4) | Beneficial ownership for the executive officers includes shares held of record or in street name. The amounts also include shares that may be acquired upon the exercise of options which are presently exercisable or that will become exercisable on or before May 1, 2007, and shares credited to the executives’ accounts under our Thrift Plan for Salaried Employees (“Thrift Plan”) as follows: |
Shares Owned | ||||||||||||
Directly or | Exercisable | |||||||||||
Indirectly | Options | Thrift Plan | ||||||||||
Donald M. James | 111,843 | 1,490,200 | 18,790 | |||||||||
Guy M. Badgett, III | 24,003 | 250,250 | 38,362 | |||||||||
James W. Smack | 5,055 | 203,255 | 38,374 | |||||||||
Daniel F. Sansone | 28,611 | 188,400 | 16,456 | |||||||||
Ronald G. McAbee | 3,465 | 129,825 | 22,079 |
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Number of securities | ||||||||||||
remaining available for | ||||||||||||
Number of securities to | Weighted-average | future issuance under | ||||||||||
be issued upon exercise | exercise price of | equity compensation plans | ||||||||||
of outstanding options, | outstanding options, | (excluding securities | ||||||||||
warrants and rights | warrants and rights | reflected in column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders(1) | ||||||||||||
1996 Long Term Incentive Plan (For Employees) | ||||||||||||
Stock Options | 6,768,562 | $ | 48.76 | |||||||||
Performance Share Units | 376,800 | |||||||||||
Deferred Stock Units | 304,338 | |||||||||||
Employees — Total | 7,449,700 | (2 | ) | |||||||||
Deferred Stock Plan for Non-employee Directors | 13,281 | (2 | ) | |||||||||
Restricted Stock Plan for Non-employee Directors | 54,384 | (2 | ) | |||||||||
2006 Long-Term Incentive Plan — Employees | ||||||||||||
Stock Only Stock | ||||||||||||
Appreciation Rights | 0 | |||||||||||
PSUs | 0 | |||||||||||
Deferred Stock Units for Non-employee Directors | 16,427 | |||||||||||
Total | 16,427 | 5,383,573 | ||||||||||
Equity compensation plans not approved by security holders | None | None | ||||||||||
Total | 7,533,792 | 48.76 | 5,383,573 |
(1) | All of our company’s equity compensation plans have been approved by the shareholders of our company. Column (a) sets forth the number of shares of common stock issuable upon the exercise of options, warrants or rights outstanding under the 2006 Omnibus Long-Term Incentive Plan (“2006 LTIP”), the 1996 Long-Term Incentive Plan (“1996 LTIP”), the Deferred Stock Plan for Nonemployee Directors and the Restricted Stock Plan for Nonemployee Directors. The weighted-average exercise price of outstanding stock options is shown in Column (b). The remaining number of shares that may be issued under the 2006 LTIP are shown in Column (c). | |
(2) | Future grants will not be made under these plans. The plans will be used only for the administration and payment of grants that were outstanding when the 2006 LTIP was approved. |
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Orin R. Smith, Chair
Philip J. Carroll, Jr.
Livio D. DeSimone
H. Allen Franklin
James V. Napier
• | Keeping our salary and benefits competitive with industrial companies of similar size so that we are able to hire officers of high caliber and keep our current management team from seeking more attractive employment opportunities from competing companies; | |
• | Linking a meaningful portion of the executive officers’ compensation to the company’s performance, and their ability to create shareholder value, over the short term and the long term; | |
• | Motivating, recognizing and rewarding individual excellence; | |
• | Paying a meaningful portion of an executive’s total compensation in our company’s common stock, to facilitate the accumulation of significant ownership of our stock by the executive officers in order to align the interests of management with the interests of our shareholders; and | |
• | Motivating the officers to achieve our strategic goals and operational plans. |
• | Oversee the design and development of compensation and benefit plans and policies; | |
• | Administer cash bonus and stock plans; | |
• | Review compensation recommendations made by the Chief Executive Officer for other executive officers; and | |
• | Determine and set all elements of compensation for the Chief Executive Officer and other executive officers. |
• | base salary | |
• | short-term cash bonus | |
• | long-term incentive awards | |
• | deferred compensation |
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• | perquisites and other benefits | |
• | retirement and pension benefits |
• | Conducts an annual study of and recommends levels for Board compensation; | |
• | Advises management and the Compensation Committee regarding competitive practice, the design of new programs, and new rules and regulations relating to executive compensation; and | |
• | Conducts periodic comprehensive studies of executive compensation and makes recommendations regarding the components of executive compensation. |
• | individual performance | |
• | recent and long-term company performance | |
• | competitive or market levels |
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• | superior performance in generating increasing levels of EP; | |
• | behavior that compliments our strategic goals; and | |
• | adherence to our high ethical business standards. |
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• | Base Pay |
• | Short-Term Bonus |
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• | the named executive officer’s individual performance; | |
• | the safety, health and environmental performance record of our company and its Divisions; | |
• | consistent above target performance for the most recent 3 years; and | |
• | successful implementation of our strategic objectives. |
Amount of | ||||||||
‘‘Average Annual Bonus” | ||||||||
expressed | % of ‘‘Average | |||||||
as a percentage of | Annual Bonus” | |||||||
base salary | Paid | |||||||
Donald M. James | 100 | % | 275.6 | % | ||||
Guy M. Badgett | 60 | % | 271.5 | % | ||||
James W. Smack | 60 | % | 272.7 | % | ||||
Daniel F. Sansone | 60 | % | 258.4 | % | ||||
Ronald G. McAbee | 55 | % | 284.3 | % |
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• | Long-Term Equity Based Incentives |
• | to motivate financial performance over the long-term; | |
• | to recognize and reward superior financial performance; | |
• | to provide a retention element to our compensation program; | |
• | to help executive officers accumulate shares of Vulcan stock to ensure congruence with our shareholders’ interest; and | |
• | to promote compliance with the stock ownership guidelines for executives. |
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Multiple of Salary | ||||
Ownership | ||||
Name | Guidelines(1) | |||
D.M. James | 7x | |||
G.M. Badgett | 3x | |||
J.W. Smack | 3x | |||
D.F. Sansone | 3x | |||
R.G. McAbee | 3x |
(1) | Types of ownership counted toward the guidelines include the following: |
• | Stock-based thrift plan holdings; | |
• | Direct holdings; | |
• | Indirect holdings, such as shares owned by a family member, shares held in trust for the benefit of the named executive officer or family member, or shares for which such officer is trustee; | |
• | Stock-based holdings in the excess benefit plans; | |
• | Vestedin-the-money options represented by the spread between the exercise price and the fair market value of options; and | |
• | Vested deferred stock units. |
• | Benefits and Perquisites |
• | Change in Control Protections |
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• | Retirement and Pension Benefits |
Benefit | Reason for Providing Benefit | |
Retirement Income Plan | This pension plan is available to all salaried employees of our company. | |
Unfunded Supplemental Benefit Plan | The Unfunded Supplemental Benefit Plan counts pay ineligible to be counted under the Pension Plan and the 401(k) plan due to Internal Revenue rules. This plan is designed to provide retirement income benefits, as a percentage of pay, which are similar for all employees regardless of compensation levels. The Unfunded Supplemental Plan eliminates the effect of tax limitations on the payment of retirement benefits, except to the extent that it is an unfunded plan and a general obligation of our company. | |
Supplemental Executive Retirement Agreement | Only Mr. James has a SERA. The effect of the SERA is to give Mr. James 1.2 years of service credit for every year he participates in the Retirement Income Plan. The purpose of the SERA is to provide an incentive and retention device. The Plan will provide Mr. James with a full career pension in the event that he works until age 65. |
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All Other | All Other | |||||||||||||||||||||||||||||||||||||||||||||||
Stock | Option | |||||||||||||||||||||||||||||||||||||||||||||||
Awards: | Awards: | Exercise | ||||||||||||||||||||||||||||||||||||||||||||||
Number of | Number of | or Base | Closing | Grant date | ||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | Shares of | Securities | Price of | Market | fair value of | ||||||||||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive Plan Awards | Under Equity Incentive Plan Awards | Stock | Underlying | Option | Price of | stock and | ||||||||||||||||||||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units | Options | Awards | Underlying | option awards | |||||||||||||||||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) (1) | Security | ($/Sh) (2) | ||||||||||||||||||||||||||||||||||||
D.M. James | 1/24/06 | $ | 0 | $ | 1,125,000 | $ | 5,770,000 | — | — | — | — | 169,800 | $ | 69.31 | $ | 69.35 | $ | 2,843,471 | ||||||||||||||||||||||||||||||
G.M. Badgett | — | $ | 0 | $ | 267,005 | $ | 2,164,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
J.W. Smack | — | $ | 0 | $ | 264,002 | $ | 2,164,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
D.F. Sansone | — | $ | 0 | $ | 267,005 | $ | 2,164,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
R.G. McAbee | — | $ | 0 | $ | 226,875 | N/A | (3) | — | — | — | — | — | — | — | — |
(1) | Exercise price was determined using the high/low average price of the common stock on the grant date as per the 1996 LTIP. | |
(2) | Reflects nonqualified options granted pursuant to the 1996 LTIP . Grant date present values for these options was calculated using a Black-Scholes pricing model. For the January 24, 2006 grant, the assumptions used to determine the value of the options include: an expected volatility of 26.18% (derived using the daily closing stock prices for the five years preceding the grant date, a dividend yield of 2.16%, and interest rate of 4.34% (the rate of a U.S. Treasury note with a maturity date on five years from the grant date), and an expected time of exercise of five years from grant date. | |
(3) | No individual maximum is applicable since this payment was made under MIP plan, which has no individual cap. |
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Change in Pension | ||||||||||||||||||||||||||||||||||||
Value And | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Stock | Incentive Plan | Deferred | ||||||||||||||||||||||||||||||||||
Name and | Salary | Bonus | Awards (1) | Option Awards (1) | Compensation (2) | Compensation | All Other | Total | ||||||||||||||||||||||||||||
Principal Position | Year | ($) | ($) | ($) | ($) | ($) | Earnings ($)(3) | Compensation ($)(4) | ($) | |||||||||||||||||||||||||||
Donald M. James | 2006 | $ | 1,114,168 | $ | 0 | $ | 3,406,064 | $ | 4,366,486 | $ | 3,100,000 | $ | 3,703,312 | $ | 332,457 | $ | 16,022,487 | |||||||||||||||||||
Chairman and Chief Executive Officer | ||||||||||||||||||||||||||||||||||||
Guy M. Badgett, III | 2006 | $ | 441,674 | $ | 0 | $ | 538,936 | $ | 268,281 | $ | 725,000 | $ | 287,749 | $ | 73,296 | $ | 2,334,936 | |||||||||||||||||||
Senior Vice President, Construction Materials Group | ||||||||||||||||||||||||||||||||||||
James W. Smack | 2006 | $ | 437,504 | $ | 0 | $ | 354,298 | $ | 195,823 | $ | 720,000 | $ | (85,148 | ) | $ | 63,814 | $ | 1,686,291 | ||||||||||||||||||
Senior Vice President, Construction Materials Group | ||||||||||||||||||||||||||||||||||||
Daniel F. Sansone | 2006 | $ | 442,508 | $ | 0 | $ | 353,528 | $ | 184,008 | $ | 690,000 | $ | 360,514 | $ | 67,137 | $ | 2,097,695 | |||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Ronald G. McAbee | 2006 | $ | 409,376 | $ | 0 | $ | 309,339 | $ | 140,689 | $ | 645,000 | $ | 539,357 | $ | 57,205 | $ | 2,100,966 | |||||||||||||||||||
Senior Vice President, Construction Materials Group |
(1) | These columns represent the dollar amount of the 2006 accounting expense recognized for these awards granted in 2006 and prior years. Therefore, the values shown here are not representative of the amounts that may eventually be realized by an executive. The sum of the amounts shown for Mr. James is $7,772,550, of which $4,929,069 is referable to prior year awards. | |
Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for Stock Awards and Option Awards in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-based Payments.” For Option Awards, the fair value is estimated as of the date of grant using the Black-Scholes option pricing model, which requires the use of certain assumptions, including the risk-free interest rate, dividend yield, volatility and expected term. The risk-free interest rate is based on the yield at the date of grant of a U.S. Treasury security with a maturity period equal to or approximating the option’s expected term. The dividend yield assumption is based on our historical dividend payouts. The volatility assumption is based on the historical volatility of our common stock over a period equal to the option’s expected term and the market-based implied volatility derived from options trading on our common stock. The expected term of options granted is based on historical experience and expectations about future exercises and represents the period of time that options granted are expected to be outstanding. For Performance Share Awards, the fair value is estimated on the date of grant using a Monte Carlo simulation model. For Deferred Stock Units, the fair value is estimated on the date of grant based on the market price of our stock on the grant date. | ||
(2) | The Executive Incentive Plan (EIP) and the Management Incentive Plan (MIP) payments were made on March 12, 2007. See discussion of EIP/MIP plans under heading “Compensation Discussion and Analysis” above. None of the named executive officers elected to defer their 2006 EIP or MIP payment. |
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(3) | Includes only the amount of change in pension value since our company does not provide any above market earnings on deferred compensation. | |
(4) | Includes personal use of company auto, nonqualified thrift plan contributions, company-paid life insurance premiums, and deferred stock unit dividend equivalents granted in 2006, as set forth in the following table: |
Company | ||||||||||||||||||||||||
Non-Qualified | Qualified | Paid Life | DSU | Personal Use | ||||||||||||||||||||
Thrift Plan | Thrift Plan | Insurance | Dividend | of Company | ||||||||||||||||||||
Name | Contributions | Contributions | Premiums | Equivalents | Auto | Total | ||||||||||||||||||
D.M. James | $ | 188,567 | $ | 13,000 | $ | 1,440 | $ | 126,888 | $ | 2,562 | $ | 332,457 | ||||||||||||
G.M. Badgett | $ | 34,704 | $ | 13,000 | $ | 1,440 | $ | 22,285 | $ | 1,867 | $ | 73,296 | ||||||||||||
J.W. Smack | $ | 33,857 | $ | 13,000 | $ | 1,440 | $ | 13,403 | $ | 2,114 | $ | 63,814 | ||||||||||||
D.F. Sansone | $ | 39,565 | $ | 13,000 | $ | 1,440 | $ | 13,085 | $ | 47 | $ | 67,137 | ||||||||||||
R.G. McAbee | $ | 33,608 | $ | 9,000 | $ | 1,440 | $ | 11,896 | $ | 1,261 | $ | 57,205 |
Option Awards | Stock Awards | |||||||||||||||
Number of | Value | Number of | Value | |||||||||||||
Shares Acquired | Realized on | Shares Acquired | Realized on | |||||||||||||
Name | on Exercise (#) | Exercise ($)(1) | on Vesting (#)(2) | Vesting ($)(3) | ||||||||||||
D.M. James | 180,000 | $ | 10,462,787 | 58,534 | $ | 4,623,601 | ||||||||||
G.M. Badgett | 22,650 | $ | 1,278,511 | 9,667 | $ | 763,596 | ||||||||||
J.W. Smack | 22,650 | $ | 1,465,154 | 5,662 | $ | 447,241 | ||||||||||
D.F. Sansone | 4,875 | $ | 343,038 | 5,112 | $ | 403,797 | ||||||||||
R.G. McAbee | 0 | $ | 0 | 4,281 | $ | 338,156 |
(1) | Calculated by multiplying the difference between the market price of the common stock at exercise and the option exercise price by the number of options exercised. | |
(2) | Represents the common stock portion of Performance Share Units earned under the 1996 LTIP, which were paid out in 50% cash and in 50% stock. | |
(3) | Calculated by multiplying the number of performance share units vested by the high/low average price of the common stock on the vesting date. |
• | Deferred Compensation Plan |
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Registrant | Aggregate | Aggregate | ||||||||||||||||||
Executive | Contributions in | Earnings in | Aggregate | Balance at | ||||||||||||||||
Contributions in | Last Fiscal | Last Fiscal | Withdrawals/ | Last Fiscal | ||||||||||||||||
Last Fiscal Year | Year(1) | Year(1) | Distributions | Year(2) | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
D.M. James | $ | 118,168 | $ | 0 | $ | 448,596 | $ | 0 | $ | 2,094,331 | ||||||||||
G.M. Badgett | $ | 0 | $ | 0 | $ | 5,310 | $ | 0 | $ | 34,861 | ||||||||||
D.F. Sansone | $ | 0 | $ | 0 | $ | 144,915 | $ | 0 | $ | 1,043,172 | ||||||||||
J.W. Smack | $ | 0 | $ | 0 | $ | 141,428 | $ | 0 | $ | 3,203,503 | ||||||||||
R.G. McAbee | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
(1) | These amounts are not reported in the Summary Compensation Table. | |
(2) | Includes both the executive contributions and the earnings on those contributions. The amounts contributed by the executives are included in the amounts reported in the Summary Compensation Table in the year of deferral. The earnings are not reported as our company does not provide for above market earnings on deferred compensation. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan Awards: | |||||||||||||||||||||||||||||||||||
Incentive | Market or | |||||||||||||||||||||||||||||||||||
Equity Incentive | Market | Plan Awards: | Payout | |||||||||||||||||||||||||||||||||
Number of | Number of | Plan Awards: | Number | Value of | Number | Value of | ||||||||||||||||||||||||||||||
Securities | Securities | Number | of Shares | Shares or | of Unearned | Unearned | ||||||||||||||||||||||||||||||
Underlying | Underlying | of Securities | or Units | Units of | Shares, Units | Shares, Units or | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Underlying | Option | of Stock | Stock That | or Other | Other Rights | |||||||||||||||||||||||||||||
Options | Options | Unexercised | Exercise | Option | That Have | Have Not | Rights That Have | That Have | ||||||||||||||||||||||||||||
# | # | Unearned | Price | Expiration | Not Vested | Vested $ | Not Vested | Not Vested $ | ||||||||||||||||||||||||||||
Name | Exercisable | Unexerciseable | Options # | $ | Date | #(11) | (13) | #(12) | (13) | |||||||||||||||||||||||||||
D.M. James | 135,000 | 0 | $ | 32.9467 | 2/12/2008 | 33,172 | (6) | $ | 2,981,168 | 60,000 | (9) | $ | 5,392,200 | |||||||||||||||||||||||
195,000 | 0 | $ | 45.1667 | 2/11/2009 | 32,557 | (7) | $ | 2,925,898 | 72,000 | (10) | $ | 6,470,640 | ||||||||||||||||||||||||
220,000 | 0 | $ | 42.3438 | 2/10/2010 | 45,328 | (8) | $ | 4,073,627 | ||||||||||||||||||||||||||||
200,000 | 0 | $ | 44.9000 | 2/9/2011 | ||||||||||||||||||||||||||||||||
160,000 | (1) | 40,000 | $ | 45.9500 | 2/7/2012 | |||||||||||||||||||||||||||||||
87,000 | (2) | 58,000 | $ | 31.4650 | 2/13/2013 | |||||||||||||||||||||||||||||||
52,000 | (3) | 78,000 | $ | 46.7600 | 2/12/2014 | |||||||||||||||||||||||||||||||
58,400 | (4) | 87,600 | $ | 57.0950 | 2/10/2015 | |||||||||||||||||||||||||||||||
118,000 | (5) | 0 | $ | 68.6300 | 12/8/2015 | |||||||||||||||||||||||||||||||
169,800 | (5) | 0 | $ | 69.3100 | 1/24/2016 | |||||||||||||||||||||||||||||||
G.M. Badgett | 21,225 | 0 | $ | 32.9467 | 2/12/2008 | 5,528 | (6) | $ | 496,801 | 9,820 | (9) | $ | 882,523 | |||||||||||||||||||||||
30,225 | 0 | $ | 45.1667 | 2/11/2009 | 5,426 | (7) | $ | 487,635 | 8,600 | (10) | $ | 772,882 | ||||||||||||||||||||||||
38,000 | 0 | $ | 42.3438 | 2/10/2010 | 8,539 | (8) | $ | 767,400 | ||||||||||||||||||||||||||||
31,000 | 0 | $ | 44.9000 | 2/9/2011 | ||||||||||||||||||||||||||||||||
24,800 | (1) | 6,200 | $ | 45.9500 | 2/7/2012 | |||||||||||||||||||||||||||||||
16,800 | (2) | 11,200 | $ | 31.4650 | 2/13/2013 | |||||||||||||||||||||||||||||||
10,000 | (3) | 15,000 | $ | 46.7600 | 2/12/2014 | |||||||||||||||||||||||||||||||
10,400 | (4) | 15,600 | $ | 57.0950 | 2/10/2015 | |||||||||||||||||||||||||||||||
51,000 | (5) | 0 | $ | 68.6300 | 12/8/2015 | |||||||||||||||||||||||||||||||
Smack, J.W. | 19,800 | 0 | $ | 32.9467 | 2/12/2008 | 3,318 | (6) | $ | 298,189 | 5,892 | (9) | $ | 529,514 | |||||||||||||||||||||||
30,225 | 0 | $ | 45.1667 | 2/11/2009 | 3,256 | (7) | $ | 292,617 | 8,600 | (10) | $ | 772,882 | ||||||||||||||||||||||||
30,000 | 0 | $ | 42.3438 | 2/10/2010 | 5,165 | (8) | $ | 464,179 | ||||||||||||||||||||||||||||
20,000 | 0 | $ | 44.9000 | 2/9/2011 | ||||||||||||||||||||||||||||||||
16,000 | (1) | 4,000 | $ | 45.9500 | 2/7/2012 | |||||||||||||||||||||||||||||||
9,600 | (2) | 6,400 | $ | 31.4650 | 2/13/2013 | |||||||||||||||||||||||||||||||
6,000 | (3) | 9,000 | $ | 46.7600 | 2/12/2014 | |||||||||||||||||||||||||||||||
10,400 | (4) | 15,600 | $ | 57.0950 | 2/10/2015 | |||||||||||||||||||||||||||||||
51,000 | (5) | 0 | $ | 68.6300 | 12/8/2015 | |||||||||||||||||||||||||||||||
D.F. Sansone | 23,025 | 0 | $ | 32.9467 | 2/12/2008 | 3,318 | (6) | $ | 298,189 | 6,000 | (9) | $ | 539,220 | |||||||||||||||||||||||
17,775 | 0 | $ | 45.1667 | 2/11/2009 | 3,256 | (7) | $ | 292,617 | 4,600 | (10) | $ | 413,402 | ||||||||||||||||||||||||
29,000 | 0 | $ | 42.3438 | 2/10/2010 | 4,850 | (8) | $ | 435,870 | 4,000 | (10) | $ | 359,480 | ||||||||||||||||||||||||
19,000 | 0 | $ | 44.9000 | 2/9/2011 | ||||||||||||||||||||||||||||||||
15,200 | (1) | 3,800 | $ | 45.9500 | 2/7/2012 | |||||||||||||||||||||||||||||||
9,000 | (2) | 6,000 | $ | 31.4650 | 2/13/2013 | |||||||||||||||||||||||||||||||
4,800 | (3) | 7,200 | $ | 46.7600 | 2/12/2014 | |||||||||||||||||||||||||||||||
5,600 | (4) | 8,400 | $ | 57.0950 | 2/10/2015 | |||||||||||||||||||||||||||||||
4,800 | (4) | 7,200 | $ | 54.8350 | 5/13/2015 | |||||||||||||||||||||||||||||||
51,000 | (5) | 0 | $ | 68.6300 | 12/8/2015 | |||||||||||||||||||||||||||||||
H-29
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Equity | Plan Awards: | |||||||||||||||||||||||||||||||||||
Incentive | Market or | |||||||||||||||||||||||||||||||||||
Equity Incentive | Market | Plan Awards: | Payout | |||||||||||||||||||||||||||||||||
Number of | Number of | Plan Awards: | Number | Value of | Number | Value of | ||||||||||||||||||||||||||||||
Securities | Securities | Number | of Shares | Shares or | of Unearned | Unearned | ||||||||||||||||||||||||||||||
Underlying | Underlying | of Securities | or Units | Units of | Shares, Units | Shares, Units or | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Underlying | Option | of Stock | Stock That | or Other | Other Rights | |||||||||||||||||||||||||||||
Options | Options | Unexercised | Exercise | Option | That Have | Have Not | Rights That Have | That Have | ||||||||||||||||||||||||||||
# | # | Unearned | Price | Expiration | Not Vested | Vested $ | Not Vested | Not Vested $ | ||||||||||||||||||||||||||||
Name | Exercisable | Unexerciseable | Options # | $ | Date | #(11) | (13) | #(12) | (13) | |||||||||||||||||||||||||||
R.G. McAbee | 5,250 | 0 | $ | 32.9467 | 2/12/2008 | 3,318 | (6) | $ | 298,189 | 5,892 | (9) | $ | 529,514 | |||||||||||||||||||||||
17,775 | 0 | $ | 45.1667 | 2/11/2009 | 3,256 | (7) | $ | 292,617 | 5,000 | (10) | $ | 449,350 | ||||||||||||||||||||||||
23,000 | 0 | $ | 42.3438 | 2/10/2010 | 3,795 | (8) | $ | 341,057 | ||||||||||||||||||||||||||||
15,000 | 0 | $ | 44.9000 | 2/9/2011 | ||||||||||||||||||||||||||||||||
12,000 | (1) | 3,000 | $ | 45.9500 | 2/7/2012 | |||||||||||||||||||||||||||||||
6,600 | (2) | 4,400 | $ | 31.4650 | 2/13/2013 | |||||||||||||||||||||||||||||||
6,000 | (3) | 9,000 | $ | 46.7600 | 2/12/2014 | |||||||||||||||||||||||||||||||
6,000 | (4) | 9,000 | $ | 57.0950 | 2/10/2015 | |||||||||||||||||||||||||||||||
30,000 | (5) | 0 | $ | 68.6300 | 12/8/2015 |
(1) | Options with vesting dates of2/7/03,2/7/04,2/7/05,2/7/06, and2/7/07. | |
(2) | Options with vesting dates of1/1/04,1/1/05,1/1/06,1/1/07, and1/1/08. | |
(3) | Options with vesting dates of1/1/05,1/1/06,1/1/07,1/1/08, and1/1/09. | |
(4) | Options with vesting dates of12/31/05,12/31/06,12/31/07,12/31/08, and12/31/09. | |
(5) | Options fully vested at grant date, with a three-year resale restriction. |
(6) | DSUs with vesting dates of3/1/07,3/1/08,31/09,3/1/10, and3/1/11. | |
(7) | DSUs with vesting dates of3/1/08,3/1/09,31/10,3/1/11, and3/1/12. | |
(8) | DSUs with vesting dates of3/1/09,3/1/10,31/11,3/1/12, and3/1/13. |
(9) | PSUs with vesting date of1/1/2007. | |
(10) | PSUs with vesting date of12/31/2007. | |
(11) | DSUs include dividend equivalents through12/31/2006. | |
(12) | PSUs adjusted for company performance through12/31/2006. | |
(13) | Calculated by multiplying the number of shares by the closing price of the common stock on the New York Stock Exchange on December 29, 2006, the last trading day of the year. |
H-30
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Pension Benefits | ||||||||||||||
Number of | Present | |||||||||||||
years of | value of | Payments | ||||||||||||
credited | accumulated | during last | ||||||||||||
service | benefit | fiscal Year | ||||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||||
D.M. James | Retirement Income Plan | 14 | 430,545 | 0 | ||||||||||
Supplemental Benefit Plan | 14 | 5,027,773 | 0 | |||||||||||
Supp. Executive Retirement Agreement | 14 | 6,502,488 | 0 | |||||||||||
G.M. Badgett | Retirement Income Plan | 361/12 | 1,038,634 | 0 | ||||||||||
Supplemental Benefit Plan | 361/12 | 2,475,603 | 0 | |||||||||||
J.W. Smack | Retirement Income Plan | 242/12 | 891,327 | 0 | ||||||||||
Supplemental Benefit Plan | 242/12 | 2,137,126 | 0 | |||||||||||
D.F. Sansone | Retirement Income Plan | 1810/12 | 437,721 | 0 | ||||||||||
Supplemental Benefit Plan | 1810/12 | 1,043,966 | 0 | |||||||||||
R.G. McAbee | Retirement Income Plan | 33 | 1,024,627 | 0 | ||||||||||
Supplemental Benefit Plan | 33 | 1,925,757 | 0 |
• | Discount rate of 5.70% | |
• | Mortality based on the 2000RP combined healthy table | |
• | Lump sum payments after 2007 are based on estimated PPA provisions | |
• | SERP and SERA benefits assumed to be paid as a 10 Year Certain Annuity | |
• | For the Qualified Plan, 50% of the12/31/2000 benefit is assumed to be paid as a lump sum, with the remainder of the accrued benefit assumed to be paid as a single life annuity | |
• | Retirement Income Plan |
H-31
Table of Contents
• | Unfunded Supplemental Benefit Plan |
• | Supplemental Executive Retirement Agreement |
H-32
Table of Contents
• | $5,000 Board meeting fee for in-person attendance; | |
• | $3,000 Committee meeting fee for in-person attendance; | |
• | $1,500 Board and committee fees for telephonic meetings or actions by written consent; | |
• | $10,000 Audit Committee chair retainer fee; and | |
• | $5,000 Retainer fee for all other committee chairs. |
H-33
Table of Contents
Change in | ||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||
Fees | Value and | |||||||||||||||||||||||||||
Earned or | Non-Equity | Deferred | ||||||||||||||||||||||||||
Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name(1) | Cash | Awards(2) | Awards | Compensation | Earnings | Compensation(3) | Total | |||||||||||||||||||||
Philip J. Carroll | $ | 120,500 | $ | 83,293 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 203,793 | ||||||||||||||
Livio D. DeSimone | $ | 110,000 | $ | 106,770 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 216,770 | ||||||||||||||
Phillip W. Farmer | $ | 108,000 | $ | 69,780 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 177,780 | ||||||||||||||
H. Allen Franklin | $ | 115,500 | $ | 39,124 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 154,624 | ||||||||||||||
Douglas J. McGregor | $ | 103,500 | $ | 65,533 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 169,033 | ||||||||||||||
James V. Napier | $ | 125,500 | $ | 106,770 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 232,270 | ||||||||||||||
Donald B. Rice | $ | 117,500 | $ | 70,728 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 188,228 | ||||||||||||||
Orin R. Smith | $ | 116,000 | $ | 87,822 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 203,822 | ||||||||||||||
Vincent J. Trosino | $ | 91,500 | $ | 33,459 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 124,959 |
(1) | Donald M. James, Chief Executive Officer and Chairman of the Board, is not included in this table as he is an employee of our company and receives no additional compensation for his service as director. Mr. James’ compensation is shown in the Summary Compensation Table. | |
(2) | This column represents the dollar amount of the 2006 accounting expense recognized for these awards granted in 2006 and prior years. Therefore, the values shown here are not representative of the amounts that may eventually be realized by a director. Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for Stock Awards in accordance with the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-based Payments.” For Deferred Stock Units and Restricted Stock, the fair value is estimated on the date of grant based on the market price of our stock on the grant date. At December 31, 2006, the aggregate number of restricted stock units and deferred stock units accumulated on their account for all years of service, including dividend equivalent units were: |
Name | Units | |||
Philip J. Carroll | 6,802 | |||
Livio D. DeSimone | 34,411 | |||
Phillip W. Farmer | 7,038 | |||
H. Allen Franklin | 4,273 | |||
Douglas J. McGregor | 9,108 | |||
James V. Napier | 12,658 | |||
Donald B. Rice | 31,058 | |||
Orin R. Smith | 12,258 | |||
Vincent J. Trosino | 7,586 |
(3) | None of the directors received perquisites or other personal benefits in excess of $10,000. |
H-34
Table of Contents
• | Description of Termination and Change in Control Events |
• | Termination Events | |
• | Retirement or Retirement Eligible — Termination of a named executive officer who is at least 55 years old and has at least one year of credited service. | |
• | Resignation — Voluntary termination of a named executive officer who is not retirement eligible. | |
• | Lay Off — Termination by Vulcan of a named executive officer who is not retirement eligible. | |
• | Involuntary Termination — Termination of a named executive officer for cause. Cause includes individual performance below minimum performance standards and misconduct. | |
• | Death or Disability — Termination of a named executive officer due to death or disability. | |
• | CIC-Related Events | |
• | Acquisition by another entity of 20% or more of our common stock, or following a merger with another entity our shareholders own 65% or less of the company surviving the merger. | |
• | Involuntary CIC Termination or Voluntary CIC Termination for Good Reason — Employment is terminated within two years of a CIC, other than for cause, or the employee voluntarily terminates for Good Reason. |
H-35
Table of Contents
Lay Off | ||||||||||
(Involuntary | ||||||||||
Retirement/ | Termination | Involuntary | ||||||||
Retirement | Not For | Death or | Termination | |||||||
Program | Eligible | Cause) | Resignation | Disability | (For Cause) | |||||
Pension: - Qualified Plan - Non-Qualified Plan -SERA | Participant may commence benefit payment | Participant is considered Terminated Vested | Participant is considered Terminated Vested | Spouse may commence survivor benefit on or after the date that the Participant would have attained age 55 | Participant may commence benefit payment or will be Terminated Vested depending on age | |||||
Executive Deferred Compensation | Payment commences the year after retirement in the form elected | Payout made the year following the year of termination in a lump sum | Payout made the year following the year of termination in a lump sum | Payment commences the year after death or disability in the form elected | Payout made the year following the year of termination in a lump sum | |||||
MIP and EIP | Eligible to receive full payment | Eligible to receive full payment | Eligible to receive full payment | Eligible to receive full payment | No payment | |||||
Stock Options | Full term to exercise vested options; non-vested options continue to vest; Noncompetition agreement required for exercising vested options. | Non-vested options forfeited; 30 days to exercise vested options | Non-vested options forfeited; 30 days to exercise vested options | Vesting accelerated. Under death, estate has one year to exercise. Under disability, have full remaining term to exercise. | Forfeit all, vested and non-vested | |||||
DSUs | If age 62 or older, deemed fully vested; otherwise forfeit non-vested DSUs | Non-vested are forfeited | Non-vested are forfeited | Vesting is accelerated on a pro-rata basis | Non-vested are forfeited | |||||
PSUs | Deemed fully vested | Non-vested are forfeited | Non-vested are forfeited | Vesting is accelerated on a pro-rata basis | Forfeit all, vested and non-vested | |||||
Thrift Plan | May take payment or defer until age 701/2 | May take payment or defer until age 701/2 | May take payment or defer until age 701/2 | Account distributed by March 1 of the following year | May take payment or defer until age 701/2 | |||||
Supplemental Thrift Plan | May take payment or defer until age 701/2 | May take payment or defer until age 701/2 | May take payment or defer until age 701/2 | Account distributed by March 1 of the following year | May take payment or defer until age 701/2 | |||||
Severance Benefits | None | None | None | None | None | |||||
Health Benefits | May continue to age 65 if age + service at least 70 | Coverage ceases; eligible for coverage extension under COBRA | Coverage ceases; eligible for coverage extension under COBRA | Under age 55, 3 months spousal extension, then COBRA; over age 55, same as retiree | Under age 55, same as resignation; over age 55, same as retiree |
H-36
Table of Contents
Plan or Program | CIC | CIC with Termination | ||
Pension: • Qualified Plan • Non-Qualified • SERA | No impact | Service ceases except to the extent that additional service is provided under the terms of the CIC agreements | ||
Executive Deferred Compensation Plan | Accelerate all deferred amounts and pay lump sum within 10 business days | Accelerate all deferred amounts and pay lump sum within 10 business days | ||
EIP | The amount paid will be equal to the greater of (A) the average bonus during the three preceding years, (B) the target bonus, or (C) the bonus determined under the Plan for the year in which the CIC occurs. | The amount paid will be equal to the greater of (A) the average bonus during the three preceding years, (B) the target bonus, or (C) the bonus determined under the Plan for the year in which the CIC occurs. | ||
MIP | The amount paid will be equal to the greater of (A) the target bonus, or (B) the bonus as determined under the Plan based upon our company’s actual performance. | The amount paid will be equal to the greater of (A) the target bonus, or (B) the bonus as determined under the Plan based upon our company’s actual performance; shall be paid within 90 days of CIC. | ||
Stock Options | Immediately deemed fully vested and exercisable; remaining term to exercise | Immediately deemed fully vested and exercisable; remaining term to exercise | ||
DSUs | All immediately deemed non-forfeitable; pay on 90th day following a Change in Control | All immediately deemed non-forfeitable; pay on 90th day following a Change in Control | ||
PSUs | All immediately deemed non-forfeitable; pay no later that 21/2 months after end of award period | All immediately deemed non-forfeitable; pay no later that 21/2 months after end of award period | ||
Thrift Plan | No impact | Service ceases except to the extent that additional service is provided under the terms of the CIC agreements. Participant entitled to distribution | ||
Supplemental Thrift Plan | No impact | Participant entitled to distribution | ||
Severance Benefits | No Impact | Payment is 3 times the named executive’s annual base salary, short-term bonus and LTI amount. | ||
Health Benefits | No impact | 3 year coverage extension |
• | Potential Payments |
H-37
Table of Contents
Resignation or | Death | |||||||||||||||
Involuntary | (Monthly | CIC (Value | ||||||||||||||
Retirement | Retirement | Payments to a | of Enhanced | |||||||||||||
(Monthly Payments) | (Monthly Payments) | Spouse) | Benefits)(1) | |||||||||||||
Name | ($) | ($) | ($) | ($) | ||||||||||||
D.M. James | Tax-Qualified | 2,760 | Same as Retirement | 2,513 | 0 | |||||||||||
Non-Qualified | 35,497 | Same as Retirement | 32,316 | 0 | ||||||||||||
SERA | 63,945 | Same as Retirement | 58,213 | 8,270,886 | ||||||||||||
Defined Contribution | 0 | None | 0 | 604,701 | ||||||||||||
G.M. Badgett | Tax-Qualified | 6,846 | Same as Retirement | 5,802 | 0 | |||||||||||
Non-Qualified | 18,011 | Same as Retirement | 15,264 | 1,634,918 | ||||||||||||
Defined Contribution | 0 | None | 0 | 143,111 | ||||||||||||
J.W. Smack | Tax-Qualified | 6,486 | Same as Retirement | 4,216 | 0 | |||||||||||
Non-Qualified | 17,242 | Same as Retirement | 11,208 | 453,746 | ||||||||||||
Defined Contribution | 0 | None | 0 | 140,571 | ||||||||||||
D.F. Sansone | Tax-Qualified | Not Eligible | Not Eligible | Not Eligible | 0 | |||||||||||
Non-Qualified | Not Eligible | Not Eligible | Not Eligible | 1,056,053 | ||||||||||||
Defined Contribution | 0 | None | 0 | 157,694 | ||||||||||||
R.G. McAbee | Tax-Qualified | 6,966 | Same as Retirement | 5,371 | 0 | |||||||||||
Non-Qualified | 14,502 | Same as Retirement | 11,182 | 1,075,122 | ||||||||||||
Defined Contribution | 0 | None | 0 | 127,823 |
(1) | Value of retirement and defined contribution enhancements are payable in lump sum in the event of a CIC. |
H-38
Table of Contents
CIC | ||||||||||||||||
Retirement | (With or Without Termination) | |||||||||||||||
Number of | Total Number of | Number of | Total Number of | |||||||||||||
Deferred Stock | Deferred Stock | Deferred Stock | Deferred Stock | |||||||||||||
Units with | Units following | Units with | Units following | |||||||||||||
Accelerated | Accelerated | Accelerated | Accelerated | |||||||||||||
Vesting | Vesting | Vesting | Vesting | |||||||||||||
Name | (#) | (#) | (#) | (#) | ||||||||||||
D.M. James | 0 | 0 | 111,057 | 111,057 | ||||||||||||
G.M. Badgett | 0 | 0 | 19,493 | 19,493 | ||||||||||||
J.W. Smack | 11,739 | 11,739 | 11,739 | 11,739 | ||||||||||||
D.F. Sansone | 0 | 0 | 11,424 | 11,424 | ||||||||||||
R.G. McAbee | 0 | 0 | 10,369 | 10,369 |
CIC | ||||||||||||||||
Retirement | (With or Without Termination) | |||||||||||||||
Number of | Total Number of | Number of | Total Number of | |||||||||||||
Performance | Performance Share | Performance | Performance Share | |||||||||||||
Share Units with | Units following | Share Units with | Units following | |||||||||||||
Accelerated | Accelerated | Accelerated | Accelerated | |||||||||||||
Vesting | Vesting | Vesting | Vesting | |||||||||||||
Name | (#) | (#) | (#) | (#) | ||||||||||||
D.M. James | 36,000 | 66,000 | 36,000 | 66,000 | ||||||||||||
G.M. Badgett | 4,300 | 9,300 | 4,300 | 9,300 | ||||||||||||
J.W. Smack | 4,300 | 7,300 | 4,300 | 7,300 | ||||||||||||
D.F. Sansone | 0 | 3,000 | 4,300 | 7,300 | ||||||||||||
R.G. McAbee | 2,500 | 5,500 | 2,500 | 5,500 |
CIC | ||||||||||||||||
Retirement | (With or Without Termination) | |||||||||||||||
Number of | Total Number of | Number of | Total Number of | |||||||||||||
Options with | Options following | Options with | Options following | |||||||||||||
Accelerated Vesting | Accelerated Vesting | Accelerated Vesting | Accelerated Vesting | |||||||||||||
Name | (#) | (#) | (#) | (#) | ||||||||||||
D.M. James | 263,600 | 1,658,800 | 263,600 | 1,658,800 | ||||||||||||
G.M. Badgett | 48,000 | 281,450 | 48,000 | 281,450 | ||||||||||||
J.W. Smack | 35,000 | 228,025 | 35,000 | 228,025 | ||||||||||||
D.F. Sansone | 0 | 179,200 | 32,600 | 211,800 | ||||||||||||
R.G. McAbee | 25,400 | 147,025 | 25,400 | 147,025 |
H-39
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Severance | ||||
Amount | ||||
Name | ($) | |||
D.M. James | $ | 23,368,750 | ||
G.M. Badgett | $ | 5,570,000 | ||
J.W. Smack | $ | 5,520,000 | ||
D.F. Sansone | $ | 5,430,000 | ||
R.G. McAbee | $ | 4,680,000 |
280G | ||||
Tax | ||||
Gross-Up | ||||
Name | ($)(1) | |||
D.M. James | $ | 19,923,501 | ||
G.M. Badgett | $ | 4,240,761 | ||
J.W. Smack | $ | 3,303,191 | ||
D.F. Sansone | $ | 3,810,719 | ||
R.G. McAbee | $ | 3,622,367 |
(1) | Based on payment of equity components of compensation valued at $89.87, the value of our company’s common stock as of December 29, 2006. |
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2006 | 2005 | |||||||
Audit Fees(1) | $ | 2,467,082 | $ | 2,721,002 | ||||
Audit Related Fees(2) | 732,618 | 135,000 | ||||||
Tax Fees(3) | 423,777 | 76,738 | ||||||
All Other Fees | 0 | 0 | ||||||
Total | $ | 3,623,477 | $ | 2,932,740 |
(1) | Consists of fees for the audit of our financial statements including the attestation report on management’s assessment of our company’s internal control over financial reporting, the review of our quarterly financial statements, the issuance of comfort letters and the provision of attestation services in connection with statutory and regulatory filings and engagements. | |
(2) | Consists of fees for the audits of our employee benefit plans ($217,000 in 2006 and $135,000 in 2005). Also includes fees for merger and acquisition due diligence services related to proposed business acquisitions. | |
(3) | Consists of tax fees for services related to proposed business acquisitions, including consultation on tax restructuring with our company’s management and outside legal and tax advisors. |
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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
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(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarter ended March 31, 2007 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
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 |
Table of Contents
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Item 1. | Financial Statements |
March 31 | December 31 | March 31 | ||||||||||
2007 | 2006 | 2006 | ||||||||||
(As Adjusted — | (As Adjusted — | |||||||||||
See Note 2) | See Note 2) | |||||||||||
(Amounts in thousands) | ||||||||||||
(Condensed and unaudited) | ||||||||||||
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 | ||||||
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Three Months Ended | ||||||||
March 31 | ||||||||
2007 | 2006 | |||||||
(As Adjusted — | ||||||||
See Note 2) | ||||||||
(Condensed and unaudited) | ||||||||
(Amounts and shares in thousands, except per share data) | ||||||||
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 | % |
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Three Months Ended | ||||||||
March 31 | ||||||||
2007 | 2006 | |||||||
(As Adjusted — | ||||||||
See Note 2) | ||||||||
(Amounts in thousands) | ||||||||
(Condensed and unaudited) | ||||||||
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 | ||||
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1. | Basis of Presentation |
2. | Accounting Changes |
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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 |
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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 |
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 |
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Three Months Ended March 31 | ||||||||
2007 | 2006 | |||||||
Pretax loss | $ | (777 | ) | $ | (3,033 | ) |
4. | Earnings Per Share (EPS) |
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 | ||||||
Three Months Ended | ||||||||
March 31 | ||||||||
2007 | 2006 | |||||||
Antidilutive common stock equivalents | 408 | 6 |
5. | Income Taxes |
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6. | Medium-term Investments |
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 | ||||||
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Three Months Ended | ||||||
March 31 | ||||||
2007 | 2006 | |||||
Proceeds | $ | — | $106,175 | |||
Gross realized gains | $ | — | insignificant | |||
Gross realized losses | $ | — | insignificant |
7. | Derivative Instruments |
8. | Comprehensive Income |
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 |
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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 |
10. | Benefit Plans |
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 | ||||
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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 | ||||
11. | Credit Facilities, Short-term Borrowings and Long-term Debt |
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 | $ | — | ||||||
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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 | ||||||
12. | Asset Retirement Obligations |
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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 |
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 |
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15. | Goodwill |
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 |
17. | Enterprise Data — Continuing Operations |
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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 |
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 |
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20. | Major Pending Acquisition |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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 | ||||||
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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. |
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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 | ||||||
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Secretary
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Total Number of Shares | Maximum Number of | |||||||||||||||
Purchased as Part of | Shares that May Yet be | |||||||||||||||
Total Number of | Average Price | Publicly Announced | Purchased Under the | |||||||||||||
Period | Shares Purchased(1) | Paid per Share(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. |
Item 6. | Exhibits |
Exhibit 31(a) — | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 31(b) — | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 32(a) — | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 32(b) — | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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PURSUANT TO SECTION 13 OR 15(D) OF THE
July 12, 2007
New Jersey (State or other jurisdiction of incorporation) | I-4033 (Commission File Number) | 63-0366371 (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant toRule 14a-12 under the Exchange Act (17 CFR240.14a-12) |
o | Pre-commencement communications pursuant toRule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b)) |
o | Pre-commencement communications pursuant toRule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c)) |
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Item 8.01 | Other Events |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |||
23 | .1 | Consent of Deloitte & Touche LLP | ||
99 | .1 | Revised Selected Financial Data, revised Management’s Discussion and Analysis of Financial Condition and Results of Operations, revised Financial Statements and Supplementary Data for the years ended December 31, 2006, 2005 and 2004, and revised Computation of Ratio of Earnings to Fixed Charges (Part II, Items 6, 7 and 8 and Exhibit 12 of our Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on February 26, 2007) |
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By: | /s/ William F. Denson, III |
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Item 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
(Amounts in millions, except per share data) | ||||||||||||||||||||
Net sales | $ | 3,041.1 | $ | 2,615.0 | $ | 2,213.2 | $ | 2,086.9 | $ | 1,980.6 | ||||||||||
Total revenues | $ | 3,342.5 | $ | 2,895.3 | $ | 2,454.3 | $ | 2,309.6 | $ | 2,175.8 | ||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 480.2 | $ | 344.1 | $ | 262.5 | $ | 237.5 | $ | 233.2 | ||||||||||
Earnings (loss) on discontinued operations, net of tax(1) | (10.0 | ) | 44.9 | 26.2 | (23.7 | ) | (42.8 | ) | ||||||||||||
Cumulative effect of accounting changes(2) | — | — | — | (18.8 | ) | (20.5 | ) | |||||||||||||
Net earnings | $ | 470.2 | $ | 389.0 | $ | 288.7 | $ | 195.0 | $ | 169.9 | ||||||||||
Basic — per share: | ||||||||||||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 4.92 | $ | 3.37 | $ | 2.56 | $ | 2.33 | $ | 2.29 | ||||||||||
Discontinued operations | (0.10 | ) | 0.44 | 0.26 | (0.23 | ) | (0.42 | ) | ||||||||||||
Cumulative effect of accounting changes | — | — | — | (0.19 | ) | (0.20 | ) | |||||||||||||
Net earnings | $ | 4.82 | $ | 3.81 | $ | 2.82 | $ | 1.91 | $ | 1.67 | ||||||||||
Diluted — per share: | ||||||||||||||||||||
Earnings from continuing operations before cumulative effect of accounting changes | $ | 4.81 | $ | 3.31 | $ | 2.53 | $ | 2.31 | $ | 2.28 | ||||||||||
Discontinued operations | (0.10 | ) | 0.43 | 0.25 | (0.23 | ) | (0.42 | ) | ||||||||||||
Cumulative effect of accounting changes | — | — | — | (0.18 | ) | (0.20 | ) | |||||||||||||
Net earnings | $ | 4.71 | $ | 3.74 | $ | 2.78 | $ | 1.90 | $ | 1.66 | ||||||||||
Pro forma assuming FAS 143 applied retroactively: | ||||||||||||||||||||
Net earnings | $ | 168.4 | ||||||||||||||||||
Net earnings per share, basic | $ | 1.66 | ||||||||||||||||||
Net earnings per share, diluted | $ | 1.64 | ||||||||||||||||||
Total assets | $ | 3,427.8 | $ | 3,590.4 | $ | 3,667.5 | $ | 3,636.9 | $ | 3.448.2 | ||||||||||
Long-term obligations | $ | 322.1 | $ | 323.4 | $ | 604.5 | $ | 607.7 | $ | 857.8 | ||||||||||
Shareholders’ equity | $ | 2,010.9 | $ | 2,133.6 | $ | 2,020.8 | $ | 1,802.8 | $ | 1,697.0 | ||||||||||
Cash dividends declared per share | $ | 1.48 | $ | 1.16 | $ | 1.04 | $ | 0.98 | $ | 0.94 |
(1) | Discontinued operations includes the results from operations attributable to our former Chloralkali and Performance Chemicals businesses, divested in 2005 and 2003, respectively. | |
(2) | The 2003 accounting change relates to our adoption of FAS 143, “Asset Retirement Obligations.” The $18.8 million net-of-tax cumulative effect adjustment represents the impact of recording asset retirement obligations, at estimated fair value, for which we have legal obligations for land reclamation. The 2002 accounting change relates to our adoption of FAS 142, “Goodwill and Other Intangible Assets.” The $20.5 million net-of-tax cumulative effect adjustment represents the full impairment of goodwill in the Performance Chemicals reporting unit. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2005 | $ | 481 | ||
Higher aggregates earnings | 164 | |||
Higher asphalt mix earnings | 45 | |||
Higher earnings for all other products | 23 | |||
Higher selling, administrative and general expenses | (32 | ) | ||
Gain on sale of contractual rights to mine | 25 | |||
Higher gain on contingent ECU earn-out | 8 | |||
All other | (11 | ) | ||
2006 | $ | 703 | ||
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2004 | $ | 377 | ||
Higher aggregates earnings | 111 | |||
Higher asphalt mix earnings | 9 | |||
Higher selling, administrative and general expenses | (36 | ) | ||
Lower gains on sale of property, plant and equipment | (16 | ) | ||
Gain on contingent ECU earn-out | 20 | |||
Lower net interest expense | 14 | |||
All other | 2 | |||
2005 | $ | 481 | ||
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2006 | 2005 | 2004 | ||||||||||
Short-term investments: | ||||||||||||
Cash equivalents | $ | 50,374 | $ | 273,315 | $ | 259,522 | ||||||
Medium-term investments | — | 175,140 | 179,210 | |||||||||
Total short-term investments | $ | 50,374 | $ | 448,455 | $ | 438,732 | ||||||
Short-term borrowings: | ||||||||||||
Bank borrowings | $ | 2,500 | $ | — | $ | — | ||||||
Commercial paper | 196,400 | — | — | |||||||||
Total short-term borrowings | $ | 198,900 | $ | — | $ | — | ||||||
Net short-term (borrowings) investments | $ | (148,526 | ) | $ | 448,455 | $ | 438,732 | |||||
2006 | 2005 | 2004 | ||||||||||
6.40%5-year notes issued 2001* | $ | — | $ | 239,535 | $ | (80 | ) | |||||
Private placement notes | — | 32,000 | — | |||||||||
Medium-term notes | — | — | 2,000 | |||||||||
Other notes | 630 | 532 | 1,306 | |||||||||
Total | $ | 630 | $ | 272,067 | $ | 3,226 | ||||||
* | Includes a decrease in valuation for the fair value of short-term interest rate swaps, as follows: December 31, 2005 — $465 thousand and December 31, 2004 — $80 thousand. |
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2006 | 2005 | 2004 | ||||||||||
Debt: | ||||||||||||
Current maturities of long-term debt | $ | 630 | $ | 272,067 | $ | 3,226 | ||||||
Short-term borrowings | 198,900 | — | — | |||||||||
Long-term debt | 322,064 | 323,392 | 604,522 | |||||||||
Total debt | $ | 521,594 | $ | 595,459 | $ | 607,748 | ||||||
Capital: | ||||||||||||
Total debt | $ | 521,594 | $ | 595,459 | $ | 607,748 | ||||||
Shareholders’ equity | 2,010,899 | 2,133,649 | 2,020,790 | |||||||||
Total capital | $ | 2,532,493 | $ | 2,729,108 | $ | 2,628,538 | ||||||
Total debt as a percentage of total capital | 20.6 | % | 21.8 | % | 23.1 | % | ||||||
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Payments Due by Year | ||||||||||||||||||||||
Note Reference | Total | 2007 | 2008 – 2009 | 2010 – 2011 | Thereafter | |||||||||||||||||
Cash Contractual Obligations | ||||||||||||||||||||||
Short-term borrowings: | ||||||||||||||||||||||
Principal payments | Note 6 | $ | 198.9 | $ | 198.9 | $ | — | $ | — | $ | — | |||||||||||
Interest payments | 0.4 | 0.4 | — | — | — | |||||||||||||||||
Long-term debt: | ||||||||||||||||||||||
Principal payments | Note 6 | 321.4 | 0.7 | 283.7 | 20.3 | 16.7 | ||||||||||||||||
Interest payments | Note 6 | 64.2 | 20.6 | 31.1 | 6.1 | 6.4 | ||||||||||||||||
Operating leases | Note 7 | 80.1 | 16.6 | 25.4 | 13.5 | 24.6 | ||||||||||||||||
Mineral royalties | Note 12 | 91.5 | 11.4 | 18.2 | 11.0 | 50.9 | ||||||||||||||||
Unconditional purchase obligations: | ||||||||||||||||||||||
Capital | Note 12 | 72.5 | 72.5 | — | — | — | ||||||||||||||||
Noncapital(1) | Note 12 | 89.5 | 29.3 | 20.9 | 12.2 | 27.1 | ||||||||||||||||
Benefit plans(2) | Note 10 | 416.5 | 31.7 | 69.6 | 78.0 | 237.2 | ||||||||||||||||
Total cash contractual obligations(3) | $ | 1,335.0 | $ | 382.1 | $ | 448.9 | $ | 141.1 | $ | 362.9 | ||||||||||||
(1) | Noncapital unconditional purchase obligations relate primarily to transportation and electrical contracts. |
(2) | Payments in “Thereafter” column for benefit plans are for the years 2012 – 2016. |
(3) | The above table excludes discounted asset retirement obligations in the amount of $114.8 million at December 31, 2006, the majority of which have an estimated settlement date beyond 2011 (see Note 17 to the Consolidated Financial Statements). |
Amount and Year of Expiration | ||||||||||||||||||||
Total Facilities | 2007 | 2008 – 2009 | 2010 – 2011 | Thereafter | ||||||||||||||||
Contingent Credit Facilities | ||||||||||||||||||||
Lines of credit | $ | 760.0 | $ | 210.0 | $ | — | $ | 550.0 | $ | — | ||||||||||
Standby letters of credit | 66.7 | 66.7 | — | — | — | |||||||||||||||
Total contingent credit facilities | $ | 826.7 | $ | 276.7 | $ | — | $ | 550.0 | $ | — | ||||||||||
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Amount | Term | Maturity | ||||||
Standby Letters of Credit | ||||||||
Risk management requirement for insurance claims | $ | 16.2 | One year | Renewable annually | ||||
Payment surety required by contract | 14.9 | — | February 2007 | |||||
Payment surety required by utilities | 0.1 | One year | Renewable annually | |||||
Contractual reclamation/restoration requirements | 35.5 | One year | Renewable annually | |||||
Total standby letters of credit | $ | 66.7 | ||||||
2006 | 2005 | 2004 | ||||||||||
Shares purchased: | ||||||||||||
Number | 6,757,361 | 3,588,738 | — | |||||||||
Total cost (millions) | $ | 522.8 | $ | 228.5 | $ | — | ||||||
Average cost | $ | 77.37 | $ | 63.67 | $ | — | ||||||
Shares in treasury at year end: | ||||||||||||
Number | 45,098,644 | 39,378,985 | 37,045,535 | |||||||||
Average cost | $ | 28.78 | $ | 19.94 | $ | 15.32 |
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• | Discount Rate— The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future. |
• | Expected Return on Plan Assets — We project the future return on plan assets based principally on prior performance and our expectations for future returns for the types of investments held by the plan as well as the expected long-term asset allocation of the plan. These projected returns reduce the recorded net benefit costs. |
• | Rate of Compensation Increase — For salary-related plans only, we project employees’ annual pay increases, which are used to project employees’ pension benefits at retirement. |
• | Rate of Increase in the Per Capita Cost of Covered Healthcare Benefits — We project the expected increases in the cost of covered healthcare benefits. |
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(Favorable) Unfavorable | ||||||||||||||||
0.5% Increase | 0.5% Decrease | |||||||||||||||
Increase (Decrease) | Increase (Decrease) | Increase (Decrease) | Increase (Decrease) | |||||||||||||
in Benefit Obligation | in Benefit Cost | in Benefit Obligation | in Benefit Cost | |||||||||||||
Actuarial Assumptions | ||||||||||||||||
Discount rate: | ||||||||||||||||
Pension | $(38.3 | ) | $ | (2.4 | ) | $42.6 | $ | 2.8 | ||||||||
Other postretirement benefits | (3.7 | ) | (0.2 | ) | 4.0 | 0.2 | ||||||||||
Expected return on plan assets | not applicable | (2.7 | ) | not applicable | 2.7 | |||||||||||
Rate of compensation increase (for salary-related plans) | 9.1 | 1.3 | (8.0 | ) | (1.3 | ) | ||||||||||
Rate of increase in the per capita cost of covered healthcare benefits | 4.4 | 0.7 | (3.9 | ) | (0.6 | ) |
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ITEM 8. | Financial Statements and Supplementary Data |
Donald M. James Chairman and Chief Executive Officer | Daniel F. Sansone Senior Vice President, Chief Financial Officer | |
February 26, 2007 |
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For the Years Ended December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Amounts and shares in thousands, except per share data | ||||||||||||
Net sales | $ | 3,041,093 | $ | 2,614,965 | $ | 2,213,160 | ||||||
Delivery revenues | 301,382 | 280,362 | 241,175 | |||||||||
Total revenues | 3,342,475 | 2,895,327 | 2,454,335 | |||||||||
Cost of goods sold | 2,109,189 | 1,906,151 | 1,628,811 | |||||||||
Delivery costs | 301,382 | 280,362 | 241,175 | |||||||||
Cost of revenues | 2,410,571 | 2,186,513 | 1,869,986 | |||||||||
Gross profit | 931,904 | 708,814 | 584,349 | |||||||||
Selling, administrative and general expenses | 264,276 | 232,411 | 196,232 | |||||||||
Gain on sale of property, plant and equipment, net | 5,557 | 8,295 | 23,801 | |||||||||
Other operating (income) expense, net | (21,904 | ) | 7,862 | 8,189 | ||||||||
Operating earnings | 695,089 | 476,836 | 403,729 | |||||||||
Other income, net | 28,541 | 24,378 | 8,314 | |||||||||
Interest income | 6,171 | 16,627 | 5,599 | |||||||||
Interest expense | 26,310 | 37,146 | 40,280 | |||||||||
Earnings from continuing operations before income taxes | 703,491 | 480,695 | 377,362 | |||||||||
Provision for income taxes | ||||||||||||
Current | 221,094 | 132,250 | 107,200 | |||||||||
Deferred | 2,219 | 4,317 | 7,666 | |||||||||
Total provision for income taxes | 223,313 | 136,567 | 114,866 | |||||||||
Earnings from continuing operations | 480,178 | 344,128 | 262,496 | |||||||||
Discontinued operations (Note 2) | ||||||||||||
Earnings (loss) from results of discontinued operations | (16,624 | ) | 83,683 | 48,839 | ||||||||
Minority interest in earnings of a consolidated subsidiary | — | (11,232 | ) | (9,037 | ) | |||||||
Income tax benefit (provision) | 6,660 | (27,529 | ) | (13,630 | ) | |||||||
Earnings (loss) on discontinued operations, net of income taxes | (9,964 | ) | 44,922 | 26,172 | ||||||||
Net earnings | $ | 470,214 | $ | 389,050 | $ | 288,668 | ||||||
Basic earnings (loss) per share | ||||||||||||
Earnings from continuing operations | $ | 4.92 | $ | 3.37 | $ | 2.56 | ||||||
Discontinued operations | $ | (0.10 | ) | $ | 0.44 | $ | 0.26 | |||||
Net earnings per share | $ | 4.82 | $ | 3.81 | $ | 2.82 | ||||||
Diluted earnings (loss) per share | ||||||||||||
Earnings from continuing operations | $ | 4.81 | $ | 3.31 | $ | 2.53 | ||||||
Discontinued operations | $ | (0.10 | ) | $ | 0.43 | $ | 0.25 | |||||
Net earnings per share | $ | 4.71 | $ | 3.74 | $ | 2.78 | ||||||
Dividends declared per share | $ | 1.48 | $ | 1.16 | $ | 1.04 | ||||||
Weighted-average common shares outstanding | 97,577 | 102,179 | 102,447 | |||||||||
Weighted-average common shares outstanding, assuming dilution | 99,777 | 104,085 | 103,664 | |||||||||
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As of December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Amounts and shares in thousands, except per share data | ||||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 55,230 | $ | 275,138 | $ | 271,450 | ||||||
Medium-term investments | — | 175,140 | 179,210 | |||||||||
Accounts and notes receivable | ||||||||||||
Customers, less allowance for doubtful accounts: | ||||||||||||
2006 — $3,355; 2005 — $4,277; 2004 — $5,196 | 344,114 | 329,299 | 268,719 | |||||||||
Other | 47,346 | 147,071 | 12,894 | |||||||||
Inventories | 243,537 | 197,752 | 177,184 | |||||||||
Deferred income taxes | 25,579 | 23,046 | 34,341 | |||||||||
Prepaid expenses | 15,388 | 17,138 | 15,846 | |||||||||
Assets held for sale | — | — | 458,223 | |||||||||
Total current assets | 731,194 | 1,164,584 | 1,417,867 | |||||||||
Investments and long-term receivables | 6,664 | 6,942 | 7,226 | |||||||||
Property, plant and equipment, net | 1,869,114 | 1,603,967 | 1,536,493 | |||||||||
Goodwill | 620,189 | 617,083 | 600,181 | |||||||||
Other assets | 200,673 | 197,847 | 105,779 | |||||||||
Total assets | $ | 3,427,834 | $ | 3,590,423 | $ | 3,667,546 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Current maturities of long-term debt | $ | 630 | $ | 272,067 | $ | 3,226 | ||||||
Short-term borrowings | 198,900 | — | — | |||||||||
Trade payables and accruals | 154,215 | 142,221 | 95,312 | |||||||||
Accrued salaries, wages and management incentives | 74,084 | 68,544 | 45,355 | |||||||||
Accrued interest | 4,671 | 10,691 | 10,740 | |||||||||
Current portion of income taxes | 11,980 | 37,870 | 40,830 | |||||||||
Other accrued liabilities | 43,028 | 39,356 | 35,811 | |||||||||
Liabilities of assets held for sale | — | — | 188,435 | |||||||||
Total current liabilities | 487,508 | 570,749 | 419,709 | |||||||||
Long-term debt | 322,064 | 323,392 | 604,522 | |||||||||
Deferred income taxes | 287,905 | 277,761 | 351,191 | |||||||||
Deferred management incentive and other compensation | 69,966 | 61,779 | 55,108 | |||||||||
Other postretirement benefits | 85,308 | 69,537 | 70,646 | |||||||||
Asset retirement obligations | 114,829 | 105,774 | 90,906 | |||||||||
Noncurrent self-insurance reserve | 33,519 | 31,616 | 33,291 | |||||||||
Other noncurrent liabilities | 15,836 | 16,166 | 21,383 | |||||||||
Total liabilities | 1,416,935 | 1,456,774 | 1,646,756 | |||||||||
Other commitments and contingencies (Note 12) | ||||||||||||
Shareholders’ equity | ||||||||||||
Common stock, $1 par value — 139,705 shares issued as of 2006, 2005 and 2004 | 139,705 | 139,705 | 139,705 | |||||||||
Capital in excess of par value | 191,695 | 136,675 | 76,222 | |||||||||
Retained earnings | 2,982,526 | 2,644,535 | 2,373,730 | |||||||||
Accumulated other comprehensive loss | (4,953 | ) | (2,213 | ) | (1,309 | ) | ||||||
Treasury stock at cost | (1,298,074 | ) | (785,053 | ) | (567,558 | ) | ||||||
Total shareholders’ equity | 2,010,899 | 2,133,649 | 2,020,790 | |||||||||
Total liabilities and shareholders’ equity | $ | 3,427,834 | $ | 3,590,423 | $ | 3,667,546 | ||||||
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For the Years Ended December 31 | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Amounts in thousands | ||||||||||||
Operating Activities | ||||||||||||
Net earnings | $ | 470,214 | $ | 389,050 | $ | 288,668 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion, accretion and amortization | 226,370 | 222,868 | 246,388 | |||||||||
Net gain on sale of property, plant and equipment | (5,557 | ) | (9,414 | ) | (23,973 | ) | ||||||
Net gain on sale of contractual rights | (24,841 | ) | — | — | ||||||||
Contributions to pension plans | (1,433 | ) | (29,100 | ) | (7,327 | ) | ||||||
Share-based compensation | 14,352 | 17,170 | 4,212 | |||||||||
(Increase) decrease in assets before initial effects of business acquisitions and dispositions | ||||||||||||
Accounts and notes receivable | (56,599 | ) | (64,782 | ) | (14,876 | ) | ||||||
Inventories | (28,552 | ) | (6,210 | ) | 5,815 | |||||||
Deferred income taxes | (2,534 | ) | 11,296 | (29 | ) | |||||||
Prepaid expenses | 1,801 | (1,291 | ) | (1,827 | ) | |||||||
Customer long-term receivables | — | — | 108 | |||||||||
Other assets | 9,895 | (55,055 | ) | (6,672 | ) | |||||||
Increase (decrease) in liabilities before initial effects of business acquisitions and dispositions | ||||||||||||
Accrued interest and income taxes | (35,806 | ) | (3,008 | ) | 16,766 | |||||||
Trade payables and other accruals | 2,968 | 40,224 | 7,636 | |||||||||
Deferred income taxes | 11,848 | (73,467 | ) | 11,801 | ||||||||
Other noncurrent liabilities | (1,602 | ) | 41,066 | 49,351 | ||||||||
Other, net | (1,175 | ) | (6,163 | ) | 4,574 | |||||||
Net cash provided by operating activities | 579,349 | 473,184 | 580,615 | |||||||||
Investing Activities | ||||||||||||
Purchases of property, plant and equipment | (435,207 | ) | (215,646 | ) | (203,800 | ) | ||||||
Proceeds from sale of property, plant and equipment | 7,918 | 10,629 | 48,377 | |||||||||
Proceeds from sale of contractual rights, net of cash transaction fees | 24,849 | — | — | |||||||||
Proceeds from sale of Chemicals business, net of cash transaction fees | 141,916 | 209,254 | — | |||||||||
Payment for minority partner’s interest in consolidated Chemicals joint venture | — | (65,172 | ) | — | ||||||||
Payment for businesses acquired, net of acquired cash | (20,531 | ) | (93,965 | ) | (34,555 | ) | ||||||
Purchases of medium-term investments | — | (313,490 | ) | (378,463 | ) | |||||||
Proceeds from sales and maturities of medium-term investments | 175,140 | 317,560 | 473,147 | |||||||||
Change in investments and long-term receivables | 304 | 596 | 789 | |||||||||
Other, net | 604 | 1,062 | — | |||||||||
Net cash used for investing activities | (105,007 | ) | (149,172 | ) | (94,505 | ) | ||||||
Financing Activities | ||||||||||||
Net short-term borrowings (payments) | 198,900 | — | (29,000 | ) | ||||||||
Payment of short-term debt and current maturities | (272,532 | ) | (3,350 | ) | (249,794 | ) | ||||||
Payment of long-term debt | — | (8,253 | ) | (195 | ) | |||||||
Purchases of common stock | (522,801 | ) | (228,479 | ) | — | |||||||
Dividends paid | (144,082 | ) | (118,229 | ) | (106,331 | ) | ||||||
Proceeds from exercise of stock options | 28,889 | 37,940 | 21,508 | |||||||||
Excess tax benefits from exercise of stock options | 17,376 | — | — | |||||||||
Other, net | — | 47 | 1,383 | |||||||||
Net cash used for financing activities | (694,250 | ) | (320,324 | ) | (362,429 | ) | ||||||
Net (decrease) increase in cash and cash equivalents | (219,908 | ) | 3,688 | 123,681 | ||||||||
Cash and cash equivalents at beginning of year | 275,138 | 271,450 | 147,769 | |||||||||
Cash and cash equivalents at end of year | $ | 55,230 | $ | 275,138 | $ | 271,450 | ||||||
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For the Years Ended December 31 | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Amounts and shares in thousands, except per share data | ||||||||||||||||||||||||
Common stock, $1 par value Authorized: 480,000 shares in 2006, 2005 and 2004 | ||||||||||||||||||||||||
Issued at beginning of year | 139,705 | $ | 139,705 | 139,705 | $ | 139,705 | 139,705 | $ | 139,705 | |||||||||||||||
Issued at end of year | 139,705 | 139,705 | 139,705 | 139,705 | 139,705 | 139,705 | ||||||||||||||||||
Capital in excess of par value | ||||||||||||||||||||||||
Balance at beginning of year | 136,675 | 76,222 | 49,664 | |||||||||||||||||||||
Issuances of stock under share-based compensation plans | 22,915 | 27,996 | 15,032 | |||||||||||||||||||||
Share-based compensation expense | 14,352 | 17,170 | 4,212 | |||||||||||||||||||||
Excess tax benefits from exercise of stock options | 17,376 | 15,287 | 7,314 | |||||||||||||||||||||
Accrued dividends on share-based compensation awards | 377 | — | — | |||||||||||||||||||||
Balance at end of year | 191,695 | 136,675 | 76,222 | |||||||||||||||||||||
Retained earnings | ||||||||||||||||||||||||
Balance at beginning of year | 2,644,535 | 2,373,730 | 2,185,839 | |||||||||||||||||||||
Cumulative effect of accounting change (Note 18) | 12,236 | — | 5,532 | |||||||||||||||||||||
Balance at beginning of year adjusted for accounting change | 2,656,771 | 2,373,730 | 2,191,371 | |||||||||||||||||||||
Net earnings | 470,214 | 389,050 | 288,668 | |||||||||||||||||||||
Cash dividends on common stock | (144,082 | ) | (118,229 | ) | (106,331 | ) | ||||||||||||||||||
Accrued dividends on share-based compensation awards | (377 | ) | — | — | ||||||||||||||||||||
Other | — | (16 | ) | 22 | ||||||||||||||||||||
Balance at end of year | 2,982,526 | 2,644,535 | 2,373,730 | |||||||||||||||||||||
Accumulated other comprehensive (loss) income, net of taxes | ||||||||||||||||||||||||
Balance at beginning of year | (2,213 | ) | (1,309 | ) | 2,649 | |||||||||||||||||||
Fair value adjustment to cash flow hedges, net of reclassification adjustment | 75 | 62 | (2,711 | ) | ||||||||||||||||||||
Minimum pension liability adjustment | (1,027 | ) | (966 | ) | (1,247 | ) | ||||||||||||||||||
Balance at end of year before adjustment for initial effects of FAS 158 | (3,165 | ) | (2,213 | ) | (1,309 | ) | ||||||||||||||||||
Adjustment for initial effects of FAS 158, funded status of pension and postretirement benefit plans (Note 1) | (1,788 | ) | — | — | ||||||||||||||||||||
Balance at end of year | (4,953 | ) | (2,213 | ) | (1,309 | ) | ||||||||||||||||||
Common stock held in treasury | ||||||||||||||||||||||||
Balance at beginning of year | (39,379 | ) | (785,053 | ) | (37,046 | ) | (567,558 | ) | (37,894 | ) | (575,021 | ) | ||||||||||||
Purchase of common shares | (6,757 | ) | (522,801 | ) | (3,589 | ) | (228,479 | ) | — | — | ||||||||||||||
Issuances of stock under share-based compensation plans | 1,037 | 9,780 | 1,256 | 10,984 | 848 | 7,463 | ||||||||||||||||||
Balance at end of year | (45,099 | ) | (1,298,074 | ) | (39,379 | ) | (785,053 | ) | (37,046 | ) | (567,558 | ) | ||||||||||||
Total | $ | 2,010,899 | $ | 2,133,649 | $ | 2,020,790 | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||
Net earnings | $ | 470,214 | $ | 389,050 | $ | 288,668 | ||||||||||||||||||
Other comprehensive loss | (952 | ) | (904 | ) | (3,958 | ) | ||||||||||||||||||
Total comprehensive income | $ | 469,262 | $ | 388,146 | $ | 284,710 | ||||||||||||||||||
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Note 1 | Summary of Significant Accounting Policies |
2006 | 2005 | 2004 | ||||||||||
Bonds, notes and other securities: | ||||||||||||
Variable rate demand obligations | $ | — | $ | 165,140 | $ | 179,210 | ||||||
Other debt securities | — | 10,000 | — | |||||||||
Total | $ | — | $ | 175,140 | $ | 179,210 | ||||||
2006 | 2005 | 2004 | ||||||||||
Proceeds | $175,140 | $317,560 | $473,147 | |||||||||
Gross realized gains | insignificant | insignificant | insignificant | |||||||||
Gross realized losses | insignificant | insignificant | insignificant |
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2006 | 2005 | 2004 | ||||||||||
Depreciation | ||||||||||||
Continuing operations | $ | 209,195 | $ | 207,107 | $ | 198,098 | ||||||
Discontinued operations | 19 | 21 | 34,031 | |||||||||
Total | $ | 209,214 | $ | 207,128 | $ | 232,129 | ||||||
Depletion | ||||||||||||
Continuing operations | $ | 6,768 | $ | 6,823 | $ | 5,727 | ||||||
Discontinued operations | — | — | — | |||||||||
Total | $ | 6,768 | $ | 6,823 | $ | 5,727 | ||||||
Accretion | ||||||||||||
Continuing operations | $ | 5,499 | $ | 4,826 | $ | 4,345 | ||||||
Discontinued operations | — | 447 | 1,030 | |||||||||
Total | $ | 5,499 | $ | 5,273 | $ | 5,375 | ||||||
Amortization of Leaseholds and Capitalized Leases | ||||||||||||
Continuing operations | $ | 155 | $ | 297 | $ | 297 | ||||||
Discontinued operations | — | — | — | |||||||||
Total | $ | 155 | $ | 297 | $ | 297 | ||||||
Amortization of Intangibles | ||||||||||||
Continuing operations | $ | 4,734 | $ | 3,347 | $ | 2,860 | ||||||
Discontinued operations | — | — | — | |||||||||
Total | $ | 4,734 | $ | 3,347 | $ | 2,860 | ||||||
Total Depreciation, Depletion, Accretion and Amortization | ||||||||||||
Continuing operations | $ | 226,351 | $ | 222,400 | $ | 211,327 | ||||||
Discontinued operations | 19 | 468 | 35,061 | |||||||||
Total | $ | 226,370 | $ | 222,868 | $ | 246,388 | ||||||
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Construction | ||||||||||||
Materials | Chemicals* | Total | ||||||||||
Goodwill as of December 31, 2003 | $ | 579,442 | $ | 375 | $ | 579,817 | ||||||
Goodwill of acquired businesses | 20,739 | — | 20,739 | |||||||||
Less goodwill as of December 31, 2004 classified as assets held for sale | — | 375 | 375 | |||||||||
Goodwill as of December 31, 2004 | $ | 600,181 | $ | — | $ | 600,181 | ||||||
Goodwill of acquired businesses | 18,836 | — | 18,836 | |||||||||
Purchase price allocation adjustments | (1,934 | ) | — | (1,934 | ) | |||||||
Goodwill as of December 31, 2005 | $ | 617,083 | $ | — | $ | 617,083 | ||||||
Goodwill of acquired businesses** | 8,800 | — | 8,800 | |||||||||
Purchase price allocation adjustments | (5,694 | ) | — | (5,694 | ) | |||||||
Goodwill as of December 31, 2006 | $ | 620,189 | $ | - | $ | 620,189 | ||||||
* | Goodwill for the former Chemicals segment is classified as assets held for sale as of December 31, 2004. | |
** | The goodwill of acquired businesses for 2006 relates to the acquisitions listed in Note 19. We are currently evaluating the final purchase price allocation for some of these acquisitions; therefore, the goodwill amount is subject to change. When finalized, the goodwill from the 2006 acquisitions is expected to be fully deductible for income tax purposes. |
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• | the nominal vesting period or | |
• | the period until the employee’s award becomes nonforfeitable upon reaching eligible retirement age under the terms of the award. |
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Unrecognized | Expected | |||||||
Compensation | Weighted-Average | |||||||
Expense | Recognition (Years) | |||||||
Deferred stock units | $ | 6,004 | 2.8 | |||||
Performance shares | 2,261 | 1.0 | ||||||
Stock options | 9,995 | 1.3 | ||||||
Total/weighted-average | $ | 18,260 | 1.8 | |||||
2005 | 2004 | |||||||
Net earnings, as reported | $ | 389,050 | $ | 288,668 | ||||
Add: Total share-based employee compensation expense included in reported net earnings under intrinsic value based methods for all awards, net of related tax effects(1) | 19,285 | 4,495 | ||||||
Deduct: Total share-based employee compensation expense determined under fair value based method for all awards (including $9,082 related to the December 2005 option grant), net of related tax effects(2) | (25,349 | ) | (8,767 | ) | ||||
Pro forma net earnings | $ | 382,986 | $ | 284,396 | ||||
Earnings per share: | ||||||||
Basic — as reported | $ | 3.81 | $ | 2.82 | ||||
Basic — pro forma | $ | 3.75 | $ | 2.78 | ||||
Diluted — as reported | $ | 3.74 | $ | 2.78 | ||||
Diluted — pro forma | $ | 3.68 | $ | 2.74 |
(1) | Reflects compensation expense related to deferred stock units, stock option modifications primarily for terminated Chemicals employees and performance share awards. | |
(2) | Reflects compensation expense related to deferred stock units, stock options and performance share awards. |
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• | Discount Rate— The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future. | |
• | Expected Return on Plan Assets— We project the future return on plan assets based principally on prior performance and our expectations for future returns for the types of investments held by the plan as well as the expected long-term asset allocation of the plan. These projected returns reduce the recorded net benefit costs. | |
• | Rate of Compensation Increase— For salary-related plans only, we project employees’ annual pay increases, which are used to project employees’ pension benefits at retirement. | |
• | Rate of Increase in the Per Capita Cost of Covered Healthcare Benefits — We project the expected increases in the cost of covered healthcare benefits. |
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2006 | 2005 | 2004 | ||||||||||
Weighted-average common shares outstanding | 97,577 | 102,179 | 102,447 | |||||||||
Dilutive effect of: | ||||||||||||
Stock options | 1,758 | 1,448 | 921 | |||||||||
Other | 442 | 458 | 296 | |||||||||
Weighted-average common shares outstanding, assuming dilution | 99,777 | 104,085 | 103,664 | |||||||||
2006 | 2005 | 2004 | ||||||||||
Antidilutive common stock equivalents | 6 | 1,192 | 2 |
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Note 2 | Discontinued Operations, Assets Held for Sale and Liabilities of Assets Held for Sale |
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2006 | 2005 | |||||||
Proceeds from sale of Chemicals business, net of cash transaction fees: | ||||||||
Initial proceeds from Basic Chemicals | $ | — | $ | 214.0 | ||||
Working capital adjustment received | 10.1 | — | ||||||
Transaction costs | — | (4.7 | ) | |||||
5CP earn-out | 3.9 | — | ||||||
ECU earn-out | 127.9 | — | ||||||
Subtotal cash received | $ | 141.9 | $ | 209.3 | ||||
Payment for minority partner’s interest in consolidated Chemicals joint venture: | ||||||||
Initial payment for minority partner’s interest | $ | — | $ | (62.7 | ) | |||
Working capital adjustments paid | — | (2.5 | ) | |||||
Subtotal cash paid | $ | — | $ | (65.2 | ) | |||
Net cash proceeds from the 2005 sale of the Chemicals business | $ | 141.9 | $ | 144.1 | ||||
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2006 | 2005 | 2004 | ||||||||||
Net sales | $ | — | $ | 339.7 | $ | 611.9 | ||||||
Total revenues | — | 364.4 | 666.8 | |||||||||
Pretax earnings (loss) | (16.6 | ) | 83.7 | 48.8 |
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2004 | ||||
Accounts and notes receivable | $ | 88.5 | ||
Inventories | 37.5 | |||
Prepaid expenses | 0.9 | |||
Investments and long-term receivables | 9.4 | |||
Property, plant and equipment, net | 321.4 | |||
Goodwill | 0.4 | |||
Other assets | 0.1 | |||
Total assets | $ | 458.2 | ||
Current liabilities | $ | 61.5 | ||
Asset retirement obligations | 17.5 | |||
All other noncurrent liabilities | 8.4 | |||
Minority interest in a consolidated subsidiary | 101.0 | |||
Total liabilities including minority interest | $ | 188.4 | ||
Note 3 | Inventories |
2006 | 2005 | 2004 | ||||||||||
Finished products | $ | 214,508 | $ | 170,539 | $ | 158,350 | ||||||
Raw materials | 9,967 | 9,602 | 6,512 | |||||||||
Products in process | 1,619 | 1,589 | 937 | |||||||||
Operating supplies and other | 17,443 | 16,022 | 11,385 | |||||||||
Total inventories | $ | 243,537 | $ | 197,752 | $ | 177,184 | ||||||
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Note 4 | Property, Plant and Equipment |
2006 | 2005 | 2004 | ||||||||||
Land and land improvements | $ | 757,157 | $ | 713,208 | $ | 670,608 | ||||||
Buildings | 87,681 | 83,070 | 81,987 | |||||||||
Machinery and equipment | 2,751,459 | 2,499,651 | 2,376,820 | |||||||||
Leaseholds | 7,514 | 5,838 | 5,650 | |||||||||
Deferred asset retirement costs | 116,595 | 97,233 | 74,996 | |||||||||
Construction in progress | 177,212 | 82,708 | 54,132 | |||||||||
Total | 3,897,618 | 3,481,708 | 3,264,193 | |||||||||
Less allowances for depreciation, depletion and amortization | 2,028,504 | 1,877,741 | 1,727,700 | |||||||||
Property, plant and equipment, net | $ | 1,869,114 | $ | 1,603,967 | $ | 1,536,493 | ||||||
Note 5 | Derivative Instruments |
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Note 6 | Credit Facilities, Short-term Borrowings and Long-term Debt |
2006 | 2005 | 2004 | ||||||||||
Bank borrowings | $ | 2,500 | $ | — | $ | — | ||||||
Commercial paper | 196,400 | — | — | |||||||||
Total short-term borrowings | $ | 198,900 | $ | — | $ | — | ||||||
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2006 | 2005 | 2004 | ||||||||||
6.40%5-year notes issued 2001* | $ | — | $ | 239,535 | $ | 239,744 | ||||||
6.00%10-year notes issued 1999 | 250,000 | 250,000 | 250,000 | |||||||||
Private placement notes | 49,335 | 82,209 | 83,139 | |||||||||
Medium-term notes | 21,000 | 21,000 | 23,000 | |||||||||
Tax-exempt bonds | — | — | 8,200 | |||||||||
Other notes | 2,359 | 2,715 | 3,665 | |||||||||
Total debt excluding short-term borrowings | $ | 322,694 | $ | 595,459 | $ | 607,748 | ||||||
Less current maturities of long-term debt | 630 | 272,067 | 3,226 | |||||||||
Total long-term debt | $ | 322,064 | $ | 323,392 | $ | 604,522 | ||||||
Estimated fair value of long-term debt | $ | 332,611 | $ | 339,291 | $ | 645,502 | ||||||
* | Includes a reduction in valuation for the fair value of interest rate swaps, as follows: December 31, 2005 — $465 thousand and December 31, 2004 — $256 thousand. |
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Note 7 | Operating Leases |
2006 | 2005 | 2004 | ||||||||||
Minimum rentals | $ | 28,364 | $ | 22,758 | $ | 18,388 | ||||||
Contingent rentals (based principally on usage) | 33,021 | 26,372 | 17,613 | |||||||||
Total | $ | 61,385 | $ | 49,130 | $ | 36,001 | ||||||
Note 8 | Accrued Environmental Costs |
2006 | 2005 | 2004 | ||||||||||
Continuing operations: | ||||||||||||
Construction Materials | $ | 7,792 | $ | 5,164 | $ | 5,802 | ||||||
Chemicals | 5,602 | 4,380 | 4,034 | |||||||||
Discontinued operations | — | — | 10,290 | |||||||||
Total | $ | 13,394 | $ | 9,544 | $ | 20,126 | ||||||
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Note 9 | Income Taxes |
2006 | 2005 | 2004 | ||||||||||
Domestic | $ | 678,080 | $ | 456,614 | $ | 364,819 | ||||||
Foreign | 25,411 | 24,081 | 12,543 | |||||||||
Total | $ | 703,491 | $ | 480,695 | $ | 377,362 | ||||||
2006 | 2005 | 2004 | ||||||||||
Current | ||||||||||||
Federal | $ | 178,468 | $ | 108,457 | $ | 85,622 | ||||||
State and local | 36,695 | 17,974 | 17,439 | |||||||||
Foreign | 5,931 | 5,819 | 4,139 | |||||||||
Total | 221,094 | 132,250 | 107,200 | |||||||||
Deferred | ||||||||||||
Federal | 627 | 1,953 | 7,911 | |||||||||
State and local | 2,254 | 3,155 | 322 | |||||||||
Foreign | (662 | ) | (791 | ) | (567 | ) | ||||||
Total | 2,219 | 4,317 | 7,666 | |||||||||
Total provision | $ | 223,313 | $ | 136,567 | $ | 114,866 | ||||||
2006 | 2005 | 2004 | ||||||||||
Federal statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Increase (decrease) in tax rate resulting from: | ||||||||||||
Depletion | (4.6 | ) | (5.9 | ) | (5.7 | ) | ||||||
State and local income taxes, net of federal income tax benefit | 3.5 | 3.4 | 3.1 | |||||||||
U.S. Production Activities Deduction | (0.8 | ) | (0.7 | ) | — | |||||||
Provision for uncertain tax positions, prior year tax liabilities and refund claims | (0.2 | ) | (2.7 | ) | (1.2 | ) | ||||||
Miscellaneous items | (1.2 | ) | (0.7 | ) | (0.8 | ) | ||||||
Effective tax rate | 31.7 | % | 28.4 | % | 30.4 | % | ||||||
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2006 | 2005 | 2004 | ||||||||||
Deferred tax assets related to: | ||||||||||||
Postretirement benefits | $ | 30,049 | $ | 29,356 | $ | 27,603 | ||||||
Accruals for asset retirement obligations and environmental accruals | 10,788 | 22,379 | 32,317 | |||||||||
Accounts receivable, principally allowance for doubtful accounts | 1,429 | 1,808 | 3,007 | |||||||||
Inventory adjustments | 11,989 | 8,748 | 7,454 | |||||||||
Deferred compensation, vacation pay and incentives | 25,221 | 30,322 | 30,926 | |||||||||
Self-insurance reserves | 17,589 | 16,618 | 17,800 | |||||||||
Other items | 18,669 | 2,455 | 3,943 | |||||||||
Total deferred tax assets | 115,734 | 111,686 | 123,050 | |||||||||
Deferred tax liabilities related to: | ||||||||||||
Fixed assets | 300,936 | 301,726 | 398,267 | |||||||||
Pensions | 26,665 | 22,576 | 17,679 | |||||||||
Goodwill | 34,697 | 27,489 | 19,607 | |||||||||
Other items | 15,762 | 14,610 | 4,347 | |||||||||
Total deferred tax liabilities | 378,060 | 366,401 | 439,900 | |||||||||
Net deferred tax liability | $ | 262,326 | $ | 254,715 | $ | 316,850 | ||||||
2006 | 2005 | 2004 | ||||||||||
Deferred income taxes: | ||||||||||||
Current assets | $ | (25,579 | ) | $ | (23,046 | ) | $ | (34,341 | ) | |||
Deferred liabilities | 287,905 | 277,761 | 351,191 | |||||||||
Net deferred tax liability | $ | 262,326 | �� | $ | 254,715 | $ | 316,850 | |||||
Note 10 | Benefit Plans |
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2006 | 2005 | 2004 | ||||||||||
Change in Benefit Obligation | ||||||||||||
Benefit obligation at beginning of year | $ | 535,686 | $ | 524,332 | $ | 455,493 | ||||||
Service cost | 18,322 | 20,013 | 18,913 | |||||||||
Interest cost | 32,122 | 30,706 | 29,243 | |||||||||
Amendments | (1,441 | ) | (1,094 | ) | 280 | |||||||
Discontinued operations | — | (18,169 | ) | — | ||||||||
Actuarial loss | 26,531 | 7,325 | 43,106 | |||||||||
Benefits paid | (31,579 | ) | (27,427 | ) | (22,703 | ) | ||||||
Benefit obligation at end of year | $ | 579,641 | $ | 535,686 | $ | 524,332 | ||||||
Change in Plan Assets | ||||||||||||
Fair value of assets at beginning of year | $ | 557,036 | $ | 519,550 | $ | 478,617 | ||||||
Actual return on plan assets | 84,209 | 35,897 | 56,309 | |||||||||
Employer contribution | 1,518 | 29,016 | 7,327 | |||||||||
Benefits paid | (31,579 | ) | (27,427 | ) | (22,703 | ) | ||||||
Fair value of assets at end of year | $ | 611,184 | $ | 557,036 | $ | 519,550 | ||||||
Funded status | $ | 31,543 | $ | 21,350 | $ | (4,782 | ) | |||||
Unrecognized net actuarial loss | n/a | 6,967 | 18,511 | |||||||||
Unrecognized prior service cost | n/a | 6,448 | 11,285 | |||||||||
Net amount recognized | $ | 31,543 | $ | 34,765 | $ | 25,014 | ||||||
Amounts Recognized in the Consolidated Balance Sheets | ||||||||||||
Noncurrent assets (2006)/Prepaid benefit cost (2005 and 2004) | $ | 68,517 | $ | 61,703 | $ | 56,639 | ||||||
Current liabilities | (1,584 | ) | — | — | ||||||||
Noncurrent liabilities (2006)/Accrued benefit liability (2005 and 2004) | (35,390 | ) | (30,918 | ) | (34,851 | ) | ||||||
Intangible asset | n/a | 396 | 1,206 | |||||||||
Accumulated other comprehensive loss | n/a | 3,584 | 2,020 | |||||||||
Net amount recognized | $ | 31,543 | $ | 34,765 | $ | 25,014 | ||||||
Amounts Recognized in Accumulated Other Comprehensive Income | ||||||||||||
Net actuarial gain | $ | (9,389 | ) | n/a | n/a | |||||||
Prior service cost | 3,939 | n/a | n/a | |||||||||
Minimum pension liability | n/a | $ | 3,584 | $ | 2,020 | |||||||
Total amount recognized | $ | (5,450 | ) | $ | 3,584 | $ | 2,020 | |||||
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2006 | 2005 | 2004 | ||||||||||
Components of Net Periodic Pension Benefit Cost | ||||||||||||
Service cost | $ | 18,322 | $ | 20,013 | $ | 18,913 | ||||||
Interest cost | 32,122 | 30,706 | 29,243 | |||||||||
Expected return on plan assets | (43,970 | ) | (42,065 | ) | (40,806 | ) | ||||||
Amortization of prior service cost | 1,067 | 2,211 | 2,505 | |||||||||
Recognized actuarial loss (gain) | 1,737 | 1,318 | (167 | ) | ||||||||
Net periodic pension benefit cost | $ | 9,278 | $ | 12,183 | $ | 9,688 | ||||||
Assumptions | ||||||||||||
Weighted-average assumptions used to determine benefit obligation at November 30 for 2006 and 2005 and December 31 for 2004 | ||||||||||||
Discount rate | 5.70 | % | 5.75 | % | 5.75 | % | ||||||
Rate of compensation increase (for salary-related plans): | ||||||||||||
Inflation | 2.25 | % | 2.25 | % | 2.25 | % | ||||||
Merit/Productivity | 2.50 | % | 2.50 | % | 2.50 | % | ||||||
Total rate of compensation increase | 4.75 | % | 4.75 | % | 4.75 | % | ||||||
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 | ||||||||||||
Discount rate | 5.75 | % | 5.40 | % | 6.25 | % | ||||||
Expected return on assets | 8.25 | % | 8.25 | % | 8.25 | % | ||||||
Rate of compensation increase (for salary-related plans): | ||||||||||||
Inflation | 2.25 | % | 2.25 | % | 2.80 | % | ||||||
Merit/Productivity | 2.50 | % | 2.50 | % | 2.20 | % | ||||||
Total rate of compensation increase | 4.75 | % | 4.75 | % | 5.00 | % | ||||||
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Percentage of | ||||||||||||||
Allocation Range | Plan Assets at December 31 | |||||||||||||
Asset Category | 2007 | 2006 | 2005 | 2004 | ||||||||||
Equity securities | 50% – 77% | 66 | % | 72 | % | 71 | % | |||||||
Debt securities | 15% – 27% | 17 | % | 20 | % | 20 | % | |||||||
Real estate | — | — | — | — | ||||||||||
Other | 10% – 25% | 17 | % | 8 | % | 9 | % | |||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||
Pension | ||||
Employer Contributions | ||||
2004 | $ | 7,327 | ||
2005 | 29,100 | |||
2006 | 1,433 | |||
2007 (estimated) | 1,584 |
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Pension | ||||
Estimated Future Benefit Payments | ||||
2007 | $ | 26,196 | ||
2008 | 27,751 | |||
2009 | 29,591 | |||
2010 | 31,035 | |||
2011 | 32,821 | |||
2012 – 2016 | 197,093 |
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2006 | 2005 | 2004 | ||||||||||
Change in Benefit Obligation | ||||||||||||
Benefit obligation at beginning of year | $ | 89,735 | $ | 100,878 | $ | 94,850 | ||||||
Service cost | 3,617 | 4,188 | 4,369 | |||||||||
Interest cost | 4,760 | 5,160 | 5,677 | |||||||||
Amendments | (82 | ) | — | — | ||||||||
Discontinued operations | — | (19,604 | ) | — | ||||||||
Actuarial (gain) loss | (101 | ) | 5,116 | 640 | ||||||||
Benefits paid | (7,124 | ) | (6,003 | ) | (4,658 | ) | ||||||
Benefit obligation at end of year | $ | 90,805 | $ | 89,735 | $ | 100,878 | ||||||
Change in Plan Assets | ||||||||||||
Fair value of assets at beginning of year | $ | — | $ | — | $ | — | ||||||
Actual return on plan assets | — | — | — | |||||||||
Fair value of assets at end of year | $ | — | $ | — | $ | — | ||||||
Funded status | $ | (90,805 | ) | $ | (89,735 | ) | $ | (100,878 | ) | |||
Unrecognized net actuarial loss | n/a | 15,410 | 31,342 | |||||||||
Unrecognized prior service cost | n/a | (767 | ) | (1,110 | ) | |||||||
Net amount recognized | $ | (90,805 | ) | $ | (75,092 | ) | $ | (70,646 | ) | |||
Amounts Recognized in the Consolidated Balance Sheets | ||||||||||||
Current liabilities | $ | (5,497 | ) | $ | (5,555 | ) | $ | — | ||||
Noncurrent liabilities (2006)/Accrued postretirement benefits (2005 and 2004) | (85,308 | ) | (69,537 | ) | (70,646 | ) | ||||||
Net amount recognized | $ | (90,805 | ) | $ | (75,092 | ) | $ | (70,646 | ) | |||
Amounts Recognized in Accumulated Other Comprehensive Income | ||||||||||||
Net actuarial loss | $ | 14,272 | n/a | n/a | ||||||||
Prior service cost (credit) | (680 | ) | n/a | n/a | ||||||||
Total amount recognized | $ | 13,592 | n/a | n/a | ||||||||
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2006 | 2005 | 2004 | ||||||||||
Components of Net Periodic Postretirement Benefit Cost | ||||||||||||
Service cost | $ | 3,617 | $ | 4,188 | $ | 4,369 | ||||||
Interest cost | 4,760 | 5,160 | 5,677 | |||||||||
Expected return on plan assets | — | — | — | |||||||||
Amortization of prior service credit | (168 | ) | (167 | ) | (194 | ) | ||||||
Amortization of actuarial loss | 478 | 1,215 | 1,078 | |||||||||
Net periodic postretirement benefit cost | $ | 8,687 | $ | 10,396 | $ | 10,930 | ||||||
Assumptions | ||||||||||||
Weighted-average assumptions used to determine benefit obligation at November 30 for 2006 and 2005 and December 31 for 2004 | ||||||||||||
Discount rate | 5.50 | % | 5.50 | % | 5.50 | % | ||||||
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31 | ||||||||||||
Discount rate | 5.50 | % | 5.31 | % | 6.25 | % | ||||||
Expected return on assets | n/a | n/a | n/a | |||||||||
Assumed Healthcare Cost Trend Rates at December 31 | ||||||||||||
Healthcare cost trend rate assumed for next year | 9 | % | 9 | % | 10 | % | ||||||
Rate to which the cost trend rate gradually declines | 5 | % | 5 | % | 5 | % | ||||||
Year that the rate reaches the rate it is assumed to maintain | 2011 | 2010 | 2010 |
One-Percentage-Point | One-Percentage-Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost | $ | 988 | $ | (850 | ) | |||
Effect on postretirement benefit obligation | 8,823 | (7,737 | ) |
Postretirement | ||||
Employer Contributions | ||||
2004 | $ | 4,658 | ||
2005 | 6,003 | |||
2006 | 6,566 | |||
2007(estimated) | 5,497 |
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Postretirement | ||||
Estimated Future Benefit Payments | ||||
2007 | $ | 5,497 | ||
2008 | 5,852 | |||
2009 | 6,384 | |||
2010 | 6,848 | |||
2011 | 7,264 | |||
2012 – 2016 | 40,125 |
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Note 11 | Incentive Plans |
Weighted-Average | ||||||||
Number | Grant Date | |||||||
of Shares | Fair Value | |||||||
Nonvested at beginning of year | 301,314 | $ | 40.44 | |||||
Granted | — | $ | — | |||||
Dividend equivalents accrued | 4,664 | $ | 79.31 | |||||
Vested | (2,396 | ) | $ | 43.79 | ||||
Cancelled/forfeited | (1,712 | ) | $ | 40.38 | ||||
Nonvested at December 31, 2006 | 301,870 | $ | 41.01 | |||||
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Weighted-Average | ||||||||
Number | Grant Date | |||||||
of Shares(1) | Fair Value | |||||||
Nonvested at beginning of year | 281,084 | $ | 46.90 | |||||
Granted | — | $ | — | |||||
Vested | (93,334 | ) | $ | 37.05 | ||||
Cancelled/forfeited | (2,300 | ) | $ | 50.89 | ||||
Nonvested at December 31, 2006 | 185,450 | $ | 51.81 | |||||
(1) | The number of common shares issued related to performance shares may range from 0% to 200% of the number of performance shares shown in the table above based on the achievement of established internal financial performance targets and ourthree-year-average TSR performance relative to thethree-year-average TSR performance of a preselected comparison group. |
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2006 | 2005 | 2004 | ||||||||||
Fair value | $ | 16.95 | $ | 16.35 | $ | 6.58 | ||||||
Risk-free interest rate | 4.34 | % | 4.19 | % | 3.58 | % | ||||||
Dividend yields | 2.16 | % | 2.12 | % | 2.10 | % | ||||||
Volatility | 26.22 | % | 26.87 | % | 20.29 | % | ||||||
Expected term | 5.05 years | 5.56 years | 7.00 years |
Weighted-Average | ||||||||||||||||
Remaining | Aggregate | |||||||||||||||
Number | Weighted-Average | Contractual | Intrinsic | |||||||||||||
of Shares | Exercise Price | Life (Years) | Value | |||||||||||||
(In thousands) | ||||||||||||||||
Outstanding at beginning of year | 7,510,066 | $ | 46.38 | |||||||||||||
Granted | 176,170 | $ | 69.60 | |||||||||||||
Exercised | (890,064 | ) | $ | 32.49 | ||||||||||||
Forfeited or expired | (27,610 | ) | $ | 57.98 | ||||||||||||
Outstanding at December 31, 2006 | 6,768,562 | $ | 48.76 | 5.48 | $ | 281,835 | ||||||||||
Vested and expected to vest | 6,524,120 | $ | 48.84 | 5.47 | $ | 271,130 | ||||||||||
Exercisable at December 31, 2006 | 5,567,366 | $ | 49.15 | 5.16 | $ | 229,680 | ||||||||||
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Note 12 | Other Commitments and Contingencies |
Amount | Term | Maturity | ||||||||
Standby Letters of Credit | ||||||||||
Risk management requirement for insurance claims | $ | 16.2 | One year | Renewable annually | ||||||
Payment surety required by contract | 14.9 | — | February 2007 | |||||||
Payment surety required by utilities | 0.1 | One year | Renewable annually | |||||||
Contractual reclamation/restoration requirements | 35.5 | One year | Renewable annually | |||||||
Total standby letters of credit | $ | 66.7 | ||||||||
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Note 13 | Shareholders’ Equity |
2006 | 2005 | 2004 | ||||||||||
Shares purchased: | ||||||||||||
Number | 6,757,361 | 3,588,738 | — | |||||||||
Total cost (thousands) | $ | 522,801 | $ | 228,479 | $ | — | ||||||
Average cost | $ | 77.37 | $ | 63.67 | $ | — | ||||||
Shares in treasury at year end: | ||||||||||||
Number | 45,098,644 | 39,378,985 | 37,045,535 | |||||||||
Average cost | $ | 28.78 | $ | 19.94 | $ | 15.32 | ||||||
Note 14 | Other Comprehensive Income (Loss) |
Before-tax | Tax (Expense) | Net-of-tax | ||||||||||
Amount | Benefit | Amount | ||||||||||
December 31, 2006 | ||||||||||||
Fair value adjustment to cash flow hedges | $ | 115 | $ | (40 | ) | $ | 75 | |||||
Minimum pension liability adjustment | (1,662 | ) | 635 | (1,027 | ) | |||||||
Total other comprehensive income (loss) | $ | (1,547 | ) | $ | 595 | $ | (952 | ) | ||||
December 31, 2005 | ||||||||||||
Reclassification adjustment for cash flow hedge amounts included in net earnings | $ | 99 | $ | (37 | ) | $ | 62 | |||||
Minimum pension liability adjustment | (1,564 | ) | 598 | (966 | ) | |||||||
Total other comprehensive income (loss) | $ | (1,465 | ) | $ | 561 | $ | (904 | ) | ||||
December 31, 2004 | ||||||||||||
Fair value adjustment to cash flow hedges | $ | (9,396 | ) | $ | 3,534 | $ | (5,862 | ) | ||||
Less reclassification adjustment for amounts included in net earnings | 5,051 | (1,900 | ) | 3,151 | ||||||||
Minimum pension liability adjustment | (2,020 | ) | 773 | (1,247 | ) | |||||||
Total other comprehensive income (loss) | $ | (6,365 | ) | $ | 2,407 | $ | (3,958 | ) | ||||
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Note 15 | Enterprise Data — Continuing Operations |
2006 | 2005 | 2004 | ||||||||||
Net Sales by Product | ||||||||||||
Aggregates | $ | 2,131.9 | $ | 1,884.0 | $ | 1,622.1 | ||||||
Asphalt mix | 500.2 | 371.4 | 272.6 | |||||||||
Concrete | 260.7 | 252.1 | 225.0 | |||||||||
Other | 148.3 | 107.5 | 93.5 | |||||||||
Total | $ | 3,041.1 | $ | 2,615.0 | $ | 2,213.2 | ||||||
Note 16 | Supplemental Cash Flow Information |
2006 | 2005 | 2004 | ||||||||||
Cash payments: | ||||||||||||
Interest (exclusive of amount capitalized) | $ | 32,616 | $ | 37,331 | $ | 44,191 | ||||||
Income taxes | 219,218 | 211,985 | 90,129 | |||||||||
Noncash investing and financing activities: | ||||||||||||
Accrued liabilities for purchases of property, plant and equipment | 32,941 | 14,244 | 5,898 | |||||||||
Debt issued for purchases of property, plant and equipment | 177 | — | — | |||||||||
Proceeds receivable from exercise of stock options | 31 | — | — | |||||||||
Amounts referable to business acquisitions: | ||||||||||||
Liabilities assumed | — | 4,684 | — | |||||||||
Noncash proceeds from the sale of the Chemicals business: | ||||||||||||
Earn-outs (Note 2) | — | 127,979 | — | |||||||||
Working capital adjustments | — | 14,255 | — |
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Note 17 | Asset Retirement Obligations |
Asset retirement obligations as of December 31, 2003 | $ | 107,683 | ||
Liabilities incurred | 173 | |||
Liabilities (settled) | (9,291 | ) | ||
Accretion expense | 5,375 | |||
Revisions up (down) | 4,468 | |||
Less asset retirement obligations classified as liabilities of assets held for sale | (17,502 | ) | ||
Asset retirement obligations as of December 31, 2004 | $ | 90,906 | ||
Liabilities incurred | 3,767 | |||
Liabilities (settled) | (12,437 | ) | ||
Accretion expense | 4,826 | |||
Revisions up (down) | 18,712 | |||
Asset retirement obligations as of December 31, 2005 | $ | 105,774 | ||
Liabilities incurred | 1,021 | |||
Liabilities (settled) | (16,806 | ) | ||
Accretion expense | 5,499 | |||
Revisions up (down) | 19,341 | |||
Asset retirement obligations as of December 31, 2006 | $ | 114,829 | ||
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Note 18 | Accounting Changes |
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 accrued liabilities | 49,207 | (6,179 | ) | 43,028 | ||||||||
Total current liabilities | 493,687 | (6,179 | ) | 487,508 | ||||||||
Total shareholders’ equity | 2,001,111 | 9,788 | 2,010,899 | |||||||||
Total liabilities and shareholders’ equity | 3,424,225 | 3,609 | 3,427,834 |
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December 31, 2005 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Balance Sheet Data: | ||||||||||||
Deferred income taxes | $ | 23,184 | $ | (138 | ) | $ | 23,046 | |||||
Total current assets | 1,164,722 | (138 | ) | 1,164,584 | ||||||||
Other assets | 196,170 | 1,677 | 197,847 | |||||||||
Total assets | 3,588,884 | 1,539 | 3,590,423 | |||||||||
Other accrued liabilities | 47,621 | (8,265 | ) | 39,356 | ||||||||
Total current liabilities | 579,014 | (8,265 | ) | 570,749 | ||||||||
Deferred income taxes | 275,065 | 2,696 | 277,761 | |||||||||
Total liabilities | 1,462,343 | (5,569 | ) | 1,456,774 | ||||||||
Total shareholders’ equity | 2,126,541 | 7,108 | 2,133,649 | |||||||||
Total liabilities and shareholders’ equity | 3,588,884 | 1,539 | 3,590,423 |
December 31, 2004 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Balance Sheet Data: | ||||||||||||
Deferred income taxes | $ | 34,433 | $ | (92 | ) | $ | 34,341 | |||||
Total current assets | 1,417,959 | (92 | ) | 1,417,867 | ||||||||
Other assets | 103,274 | 2,505 | 105,779 | |||||||||
Total assets | 3,665,133 | 2,413 | 3,667,546 | |||||||||
Other accrued liabilities | 42,791 | (6,980 | ) | 35,811 | ||||||||
Total current liabilities | 426,689 | (6,980 | ) | 419,709 | ||||||||
Deferred income taxes | 348,613 | 2,578 | 351,191 | |||||||||
Total liabilities | 1,651,158 | (4,402 | ) | 1,646,756 | ||||||||
Total shareholders’ equity | 2,013,975 | 6,815 | 2,020,790 | |||||||||
Total liabilities and shareholders’ equity | 3,665,133 | 2,413 | 3,667,546 |
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Year Ended December 31, 2006 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Earnings Data: | ||||||||||||
Net sales | $ | 3,041,093 | $ | — | $ | 3,041,093 | ||||||
Cost of goods sold | 2,109,099 | 90 | 2,109,189 | |||||||||
Cost of revenues | 2,410,481 | 90 | 2,410,571 | |||||||||
Gross profit | 931,994 | (90 | ) | 931,904 | ||||||||
Selling, administrative and general expenses | 264,396 | (120 | ) | 264,276 | ||||||||
Operating earnings | 695,059 | 30 | 695,089 | |||||||||
Earnings from continuing operations before income taxes | 703,461 | 30 | 703,491 | |||||||||
Provision for income taxes | 225,963 | (2,650 | ) | 223,313 | ||||||||
Earnings from continuing operations | 477,498 | 2,680 | 480,178 | |||||||||
Net earnings | 467,534 | 2,680 | 470,214 | |||||||||
Basic earnings per share | $ | 4.79 | $ | 0.03 | $ | 4.82 | ||||||
Diluted earnings per share | $ | 4.69 | $ | 0.02 | $ | 4.71 |
Year Ended December 31, 2005 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Earnings Data: | ||||||||||||
Net sales | $ | 2,614,965 | $ | — | $ | 2,614,965 | ||||||
Cost of goods sold | 1,906,489 | (338 | ) | 1,906,151 | ||||||||
Cost of revenues | 2,186,851 | (338 | ) | 2,186,513 | ||||||||
Gross profit | 708,476 | 338 | 708,814 | |||||||||
Selling, administrative and general expenses | 232,531 | (120 | ) | 232,411 | ||||||||
Operating earnings | 476,378 | 458 | 476,836 | |||||||||
Earnings from continuing operations before income taxes | 480,237 | 458 | 480,695 | |||||||||
Provision for income taxes | 136,402 | 165 | 136,567 | |||||||||
Earnings from continuing operations | 343,835 | 293 | 344,128 | |||||||||
Net earnings | 388,757 | 293 | 389,050 | |||||||||
Basic earnings per share | $ | 3.80 | $ | 0.01 | $ | 3.81 | ||||||
Diluted earnings per share | $ | 3.73 | $ | 0.01 | $ | 3.74 |
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Year Ended December 31, 2004 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Earnings Data: | ||||||||||||
Net sales | $ | 2,213,160 | $ | — | $ | 2,213,160 | ||||||
Cost of goods sold | 1,630,487 | (1,676 | ) | 1,628,811 | ||||||||
Cost of revenues | 1,871,662 | (1,676 | ) | 1,869,986 | ||||||||
Gross profit | 582,673 | 1,676 | 584,349 | |||||||||
Selling, administrative and general expenses | 196,352 | (120 | ) | 196,232 | ||||||||
Operating earnings | 401,933 | 1,796 | 403,729 | |||||||||
Earnings from continuing operations before income taxes | 375,566 | 1,796 | 377,362 | |||||||||
Provision for income taxes | 114,353 | 513 | 114,866 | |||||||||
Earnings from continuing operations | 261,213 | 1,283 | 262,496 | |||||||||
Net earnings | 287,385 | 1,283 | 288,668 | |||||||||
Basic earnings per share | $ | 2.81 | $ | 0.01 | $ | 2.82 | ||||||
Diluted earnings per share | $ | 2.77 | $ | 0.01 | $ | 2.78 |
Year Ended December 31, 2006 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Cash Flows Data: | ||||||||||||
Net earnings | $ | 467,534 | $ | 2,680 | $ | 470,214 | ||||||
Depreciation, depletion, accretion and amortization | 224,696 | 1,674 | 226,370 | |||||||||
Increase in deferred income tax assets | (2,580 | ) | 46 | (2,534 | ) | |||||||
Decrease in other assets | 13,686 | (3,791 | ) | 9,895 | ||||||||
Increase in trade payables and other accruals | 881 | 2,087 | 2,968 | |||||||||
Increase in deferred income tax liabilities | 14,544 | (2,696 | ) | 11,848 | ||||||||
Net cash provided by operating activities | 579,349 | — | 579,349 |
Year Ended December 31, 2005 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Cash Flows Data: | ||||||||||||
Net earnings | $ | 388,757 | $ | 293 | $ | 389,050 | ||||||
Depreciation, depletion, accretion and amortization | 220,956 | 1,912 | 222,868 | |||||||||
Decrease in deferred income tax assets | 11,249 | 47 | 11,296 | |||||||||
Increase in other assets | (53,971 | ) | (1,084 | ) | (55,055 | ) | ||||||
Increase in trade payables and other accruals | 41,510 | (1,286 | ) | 40,224 | ||||||||
Decrease in deferred income tax liabilities | (73,585 | ) | 118 | (73,467 | ) | |||||||
Net cash provided by operating activities | 473,184 | — | 473,184 |
Year Ended December 31, 2004 | ||||||||||||
As Previously | Adjustment | |||||||||||
Reported | Amount | As Adjusted | ||||||||||
Selected Statement of Cash Flows Data: | ||||||||||||
Net earnings | $ | 287,385 | $ | 1,283 | $ | 288,668 | ||||||
Depreciation, depletion, accretion and amortization | 245,050 | 1,338 | 246,388 | |||||||||
Increase in deferred income tax assets | (75 | ) | 46 | (29 | ) | |||||||
Increase in other assets | (5,384 | ) | (1,288 | ) | (6,672 | ) | ||||||
Increase in trade payables and other accruals | 9,482 | (1,846 | ) | 7,636 | ||||||||
Increase in deferred income tax liabilities | 11,334 | 467 | 11,801 | |||||||||
Net cash provided by operating activities | 580,615 | — | 580,615 |
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Note 19 | Acquisitions |
• | an aggregates production facility and asphalt mix plant in Indiana | |
• | an aggregates production facility in North Carolina | |
• | an aggregates production facility in Virginia |
• | five aggregates production facilities and five asphalt mix plants in Arizona | |
• | an aggregates production facility in Georgia |
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• | four aggregates production facilities in Indiana | |
• | an aggregates production facility in Tennessee |
• | an aggregates production facility in South Carolina | |
• | three aggregates production facilities in Tennessee | |
• | an aggregates production facility in Virginia |
Note 20 | Subsequent Event |
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2006 | 2005 | |||||||
Amounts in millions, | ||||||||
except per share data | ||||||||
Net Sales | ||||||||
First quarter | $ | 642.3 | $ | 479.4 | ||||
Second quarter | 807.8 | 705.3 | ||||||
Third quarter | 848.3 | 749.4 | ||||||
Fourth quarter | 742.7 | 680.9 | ||||||
Total | $ | 3,041.1 | $ | 2,615.0 | ||||
Total Revenues | ||||||||
First quarter | $ | 708.7 | $ | 528.6 | ||||
Second quarter | 888.2 | 782.1 | ||||||
Third quarter | 929.3 | 830.0 | ||||||
Fourth quarter | 816.3 | 754.6 | ||||||
Total | $ | 3,342.5 | $ | 2,895.3 | ||||
Gross Profit | ||||||||
First quarter | $ | 163.9 | $ | 92.5 | ||||
Second quarter | 257.9 | 210.4 | ||||||
Third quarter | 272.9 | 227.2 | ||||||
Fourth quarter | 237.2 | 178.7 | ||||||
Total | $ | 931.9 | $ | 708.8 | ||||
Operating Earnings (Loss) | ||||||||
First quarter | $ | 99.0 | $ | 38.0 | ||||
Second quarter | 218.1 | 153.5 | ||||||
Third quarter | 206.4 | 164.9 | ||||||
Fourth quarter | 171.6 | 120.4 | ||||||
Total | $ | 695.1 | $ | 476.8 | ||||
Earnings (Loss) from Continuing Operations Before Cumulative Effect of Accounting Changes | ||||||||
First quarter | $ | 71.9 | $ | 21.6 | ||||
Second quarter | 152.3 | 102.0 | ||||||
Third quarter | 140.9 | 128.3 | ||||||
Fourth quarter | 115.1 | 92.2 | ||||||
Total | $ | 480.2 | $ | 344.1 | ||||
Basic Earnings (Loss) Per Share from Continuing Operations Before Cumulative Effect of Accounting Changes | ||||||||
First quarter | $ | 0.72 | $ | 0.21 | ||||
Second quarter | 1.53 | 1.00 | ||||||
Third quarter | 1.47 | 1.25 | ||||||
Fourth quarter | 1.20 | 0.91 | ||||||
Total | $ | 4.92 | $ | 3.37 | ||||
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2006 | 2005 | |||||||
Amounts in millions, | ||||||||
except per share data | ||||||||
Diluted Earnings (Loss) Per Share from Continuing Operations Before Cumulative Effect of Accounting Changes | ||||||||
First quarter | $ | 0.70 | $ | 0.21 | ||||
Second quarter | 1.50 | 0.98 | ||||||
Third quarter | 1.44 | 1.23 | ||||||
Fourth quarter | 1.17 | 0.89 | ||||||
Total | $ | 4.81 | $ | 3.31 | ||||
Net Earnings (Loss) | ||||||||
First quarter | $ | 70.1 | $ | 54.5 | ||||
Second quarter | 150.6 | 121.6 | ||||||
Third quarter | 135.7 | 122.2 | ||||||
Fourth quarter | 113.8 | 90.7 | ||||||
Total | $ | 470.2 | $ | 389.0 | ||||
Basic Net Earnings (Loss) Per Share | ||||||||
First quarter | $ | 0.70 | $ | 0.53 | ||||
Second quarter | 1.51 | 1.19 | ||||||
Third quarter | 1.42 | 1.19 | ||||||
Fourth quarter | 1.19 | 0.90 | ||||||
Full year | $ | 4.82 | $ | 3.81 | ||||
Diluted Net Earnings (Loss) Per Share | ||||||||
First quarter | $ | 0.68 | $ | 0.52 | ||||
Second quarter | 1.48 | 1.17 | ||||||
Third quarter | 1.39 | 1.17 | ||||||
Fourth quarter | 1.16 | 0.88 | ||||||
Full year | $ | 4.71 | $ | 3.74 | ||||
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COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31
2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
Amounts in thousands | ||||||||||||||||||||
Fixed charges: | ||||||||||||||||||||
Interest expense before capitalization credits | $ | 31,310 | $ | 39,080 | $ | 42,260 | $ | 55,345 | $ | 56,601 | ||||||||||
Amortization of financing costs | 363 | 711 | 611 | 291 | 298 | |||||||||||||||
One-third of rental expense | 27,240 | 22,520 | 16,553 | 15,140 | 16,976 | |||||||||||||||
Total fixed charges | $ | 58,913 | $ | 62,311 | $ | 59,424 | $ | 70,776 | $ | 73,875 | ||||||||||
Earnings from continuing operations before income taxes | $ | 703,491 | $ | 480,695 | $ | 377,362 | $ | 335,080 | $ | 329,195 | ||||||||||
Fixed charges | 58,913 | 62,311 | 59,424 | 70,776 | 73,875 | |||||||||||||||
Capitalized interest credits | (5,000 | ) | (1,934 | ) | (1,980 | ) | (2,116 | ) | (2,896 | ) | ||||||||||
Amortization of capitalized interest | 1,241 | 1,054 | 839 | 624 | 463 | |||||||||||||||
Earnings before income taxes as adjusted | $ | 758,645 | $ | 542,126 | $ | 435,645 | $ | 404,364 | $ | 400,637 | ||||||||||
Ratio of earnings to fixed charges | 12.9 | 8.7 | 7.3 | 5.7 | 5.4 |
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