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SECURITIES AND EXCHANGE COMMISSION
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
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Shares outstanding
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VULCAN MATERIALS COMPANY
QUARTER ENDED SEPTEMBER 30, 2001 Contents |
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Page No. |
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PART I |
FINANCIAL INFORMATION
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Item 1. |
Financial Statements
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Item 2. |
Management's Discussion and Analysis of Results
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Item 3. |
Quantitative and Qualitative Disclosures About
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Item 6. |
Exhibits and Reports on Form 8-K |
16 |
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See accompanying Notes to Condensed Consolidated Financial Statements
See accompanying Notes to Condensed Consolidated Financial Statements
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Vulcan Materials Company
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(Thousands of Dollars)
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(Condensed and unaudited) |
2001 |
2000 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, depletion and amortization Increase in assets before effects of business acquisitions Increase in liabilities before effects of business acquisitions Other, net Net cash provided by operating activities |
209,327 (93,897) 56,730 (5,560) 344,177 |
165,256 (112,045) 27,200 (9,813) 255,870 |
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Purchases of property, plant and equipment Payment for business acquisitions, net of acquired cash Proceeds from sale of property, plant and equipment Withdrawal of earnings from nonconsolidated companies Net cash used for investing activities |
(129,262) 18,017 -0- (344,984) |
(36) 54,290 7,037 (215,445) |
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bank lines of credit Payment of short-term debt Payment of long-term debt Net proceeds from issuance of long-term debt Dividends paid Contributions from minority interest of consolidated subsidiary Other, net Net cash provided by (used for) financing activities |
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See accompanying Notes to Condensed Consolidated Financial Statements
VULCAN MATERIALS COMPANY AND SUBSIDIARY COMPANIES
1. Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in compliance with Form 10-Q instructions and thus do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company's latest annual report on Form 10-K.
2.
Earnings Per Share (EPS)
The Company reports two separate earnings per share numbers, basic and diluted. Both are computed by dividing net earnings by the average common shares outstanding (basic EPS) or average common shares outstanding assuming dilution (diluted EPS) as detailed below (in thousands of shares):
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Three Months Ended
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Nine Months Ended
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2001 |
2000 |
2001 |
2000 |
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Average common shares outstanding
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101,504
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101,203
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101,412
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100,958
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All dilutive common stock equivalents are reflected in the Company's earnings per share calculation; the Company had 198 and 966,476 antidilutive common stock equivalents as of September 30, 2001 and 2000, respectively.
3.
Effective Tax Rate
In accordance with accounting principles generally accepted in the United States of America, it is the Company's practice at the end of each interim reporting period to make a best estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a current year-to-date basis.
4. Derivative Instruments
Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging Activities," as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities.
Natural gas used by the Company in its Chemicals segment is subject to price volatility caused by supply conditions, political and economic variables and other unpredictable factors. The Company uses over-the-counter commodity swap and option contracts to manage the volatility related to future natural gas purchases. These instruments have been designated as effective cash flow hedges in accordance with FAS 133. Accordingly, the fair value of the open contracts, which extend through December 2003, has been reflected as a component of other comprehensive loss of $11.3 million, net of income taxes of $7.3 million, in the Company's consolidated balance sheet as of September 30, 2001. If market prices for natural gas remained at the September 30, 2001 level, $9.5 million of this total loss would be classified into earnings within the next twelve months. No cash flow hedges were discontinued and there was no impact to earnings due to hedge ineffectiveness during the quarter and nine months ended September 30, 2001.
5. Comprehensive Income
Total comprehensive income is comprised primarily of net earnings and net unrealized losses on cash flow hedges. Total comprehensive income for the three months ended September 30, 2001 and 2000 was $93.8 million and $85.9 million, respectively. Total comprehensive income for the nine months ended September 30, 2001 and 2000 was $166.1 million and $185.1 million, respectively.
6.
New Accounting Standards
In July 2001 the Financial Accounting Standards Board (FASB) issued SFAS No. 141 "Business Combinations" (FAS 141) and SFAS No. 142 "Goodwill and Other Intangible Assets" (FAS 142). FAS 141 applies to all business combinations initiated after June 30, 2001 and requires the purchase method of accounting for business combinations, thereby, prohibiting the pooling-of-interest (pooling) method. Additionally, it requires the initial recognition of acquired intangible assets apart from goodwill and specifies disclosures regarding a business combination. FAS 142 will be effective for fiscal years beginning after December 15, 2001. Under this pronouncement, goodwill and intangible assets with indefinite lives will no longer be amortized but reviewed at least annually for impairment. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives with no set maximum life. In addition, the useful lives of recognized intangible assets acquired in transactions completed before July 1, 2001 will be reassessed and the remaining amortization periods adjusted accordingly.
The Company is currently evaluating the impact of adopting the new accounting standards on its consolidated financial statements. While the ultimate impact of the new standards is yet to be determined, goodwill amortization expense for the quarter and nine months ended September 30, 2001 were approximately $6 million and $20 million, respectively.
7. Segment Data
The Company's reportable segments are Construction Materials and Chemicals and are organized around their products and services. The accounting policies of the segments are the same as those described in the summary of significant accounting polices in the notes to the consolidated financial statements on Form 10-K. The Company's determination of segment earnings (a) recognizes equity in the income or losses of nonconsolidated companies as part of segment earnings; (b) reflects allocations of general corporate expenses and income to the segments; (c) does not reflect interest income or expense; and (d) is before income taxes. Allocations are based on average capital employed and net sales.
Because the majority of the Company's activities are domestic, sales and assets outside the United States are not material.
Following is the comparative segment financial disclosure (amounts in millions):
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Three Months Ended
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Nine Months Ended
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2001 |
2000 |
2001 |
2000 |
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NET SALES
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Sept. 30
Dec. 31
Sept. 30
IDENTIFIABLE ASSETS
2001
2000
2000
Construction Materials
Chemicals
Identifiable Assets
Investment in nonconsolidated affiliates
General corporate assets
Cash items
Total
$ 2,696.2
620.1
3,316.3
1.2
93.0
65.7
$ 3,476.2
$ 2,375.2
639.5
3,014.7
59.5
99.1
55.3
$ 3,228.6
$ 2,186.0
636.5
2,822.5
64.8
73.7
68.5
$ 3,029.5
8.
Supplemental Cash Flow Information
Supplemental information referable to the Consolidated Statements of Cash Flows for the nine months ended September 30 is summarized below (amounts in thousands).
2001
2000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest, net of amount capitalized
Income taxes
$ 34,590
17,149
$ 23,851
61,044
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Liabilities and long-term debt assumed in business
acquisitions
Fair value of stock issued in business acquisitions
$ 18,826
-0-
$ -0-
1,300
9.
Acquisition and New Debt Issuance
On February 7, 2001, the Company issued $240.0 million of five-year senior unsecured notes due February 1, 2006, with a coupon of 6.40%. The Company used approximately $121.1 million of the net proceeds from the sale of the notes to fund its acquisition of the ownership interest in the Crescent Market Companies from Empresas ICA Sociedad Controladora, S.A. de C.V. The acquisition was accounted for using the purchase method, and, accordingly, the purchase price was allocated to the remaining assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.
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Item 2. Management's Discussion and Analysis of Results
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GENERAL COMMENTS
Seasonality of the Company's Business
Results of any individual quarter are not necessarily indicative of results to be expected for the year due principally to the effect that weather can have on the sales and production volume of the Construction Materials segment. Normally, the highest sales and earnings of the Construction Materials segment are attained in the third quarter and the lowest are realized in the first quarter when sales and earnings are substantially below the levels realized in all subsequent quarters of the year.
Segment Earnings
Segment earnings are earnings before net interest and income taxes and after allocation of corporate expenses and income, and after assignment of equity income or loss to the segments with which it is related in terms of products and services. Allocations are based on average capital employed and net sales.
Forward-Looking Statements
Certain matters discussed in this report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These include general business conditions, competitive factors, pricing, weather, energy costs, cost of hydrocarbon-based raw materials, and other risks and uncertainties detailed in the Company's periodic reports.
RESULTS OF OPERATIONS
The comparative analysis in this Management's Discussion and Analysis of Results of Operations and Financial Condition is based on net sales and cost of goods sold, which exclude delivery revenues and costs, and is consistent with the basis by which management reviews the Company's results of operations.
Third Quarter 2001 as Compared with Third Quarter 2000
The Company's sales, pretax earnings and net earnings were at record levels for the third quarter. Net sales of $766.0 million and pretax earnings of $132.2 million increased 12% and 5%, respectively, from the $681.2 million and $125.6 million realized in the third quarter of 2000. Net earnings of $92.2 million or $0.90 per share (diluted) were 7% higher than the $86.0 million or $0.84 per share achieved in the third quarter of 2000.
Construction Materials reported record third quarter net sales of $604.4 million, up 14% from the 2000 third quarter of $531.8 million. Although demand in some markets was lower than anticipated, particularly during the last three weeks of September, aggregates shipments were up nearly 10% overall and 2% at the Company's legacy operations. Excluding the impact of freight to remote sales yards, aggregates prices increased nearly 4%. Chemicals' third quarter net sales of $161.6 million were up 8% from the prior year's $149.4 million. This increase in net sales resulted from improved pricing for caustic soda and sales from the new consolidated chloralkali joint venture.
Earnings before interest and income taxes were $146.6 million as compared to $134.9 million in the same period last year. The Construction Materials segment reported record third quarter earnings of $144.1 million, up 10% from prior year's third quarter of $131.4 million. The Chemicals segment reported third quarter earnings of $2.5 million, down $1.0 million from the 2000 third quarter of $3.5 million. The benefits in this segment from improved pricing for caustic soda were more than offset by lower prices for chlorinated products, higher manufacturing costs and lower volumes, as demand for most products remained soft.
Selling, administrative and general expenses of $60.2 million increased 13% from the third quarter of 2000 level due primarily to the effects of the consolidation of the Crescent Market Companies and the addition of the Tarmac operations.
Minority interest income of $1.5 million reflected the minority partner's share of the consolidated chloralkali joint venture's pretax loss.
Other income, net of other charges, was $1.0 million as compared with $9.8 million for the third quarter of 2000. This decrease was due primarily to lower gains from asset sales and the consolidation of the Crescent Market Companies, which was previously accounted for by the equity method.
Interest expense of $15.4 million increased $4.9 million from the third quarter of 2000 as a result of net increased borrowings to fund both the Tarmac acquisition and the purchase of the remaining interest in the Crescent Market Companies.
Year-to-Date Comparisons as of September 30, 2001 and September 30, 2000
Year-to-date, the Company's sales were a record while net earnings and earnings per share decreased 4% and 5%, respectively, from the first nine months of 2000. Net earnings were $177.6 million, or $1.73 per share (diluted), as compared with 2000 earnings and earnings per share of $185.3 million and $1.82 per share.
Net sales of $2.1 billion for the first nine months of 2001 increased 13% from the comparable 2000 total of $1.9 billion. Construction Materials' net sales of $1,593.6 million were up 13% from 2000's $1,412.1 million. Aggregates pricing, excluding the impact of freight to remote sales yards, increased 3.5% while volumes increased 8%, with new facilities accounting for all but .3% of the volume increase. Chemicals' net sales of $502.0 million were up 12% from 2000's $449.2 million. Approximately three-quarters of this increase in sales was attributable to the new consolidated chloralkali joint venture.
Earnings before interest and income taxes were $303.1 million as compared to $301.2 million in the same period last year. The Construction Materials segment earned $299.2 million as compared to the prior year's $288.8 million. This increase resulted primarily from increased sales volume and pricing partially offset by the first quarter accelerated spending to upgrade the Tarmac facilities acquired in October 2000 and lower gains from asset sales. Year-to-date the Chemicals segment reported earnings of $3.9 million, down $8.5 million from last year's earnings of $12.4 million. This segment's earnings benefit from improved caustic soda pricing was more than offset by the adverse effects of higher costs for natural gas and hydrocarbon-based raw materials, lower volumes, higher manufacturing costs and lower prices for chlorinated products.
Selling, administrative and general expenses reflected an 11% increase when compared to the first nine months of 2000. This increase resulted primarily from consolidation of the Crescent Market Companies and the addition of the Tarmac operations.
Minority interest income of $7.5 million reflected the minority partner's share of the consolidated chloralkali joint venture's pretax loss.
Other income, net of other charges, was $4.7 million as compared with $22.1 million for the first nine months of 2000. This decrease was attributable to this year's consolidation of the Crescent Market Companies, which was previously accounted for by the equity method, and lower gains from asset sales referable to Construction Materials.
Interest expense of $47.0 million increased $14.3 million from 2000 as a result of net increased borrowings to fund both the Tarmac acquisition and the purchase of the remaining interest in the Crescent Market Companies.
On October 22, 2001, Donald M. James, Chairman and Chief Executive Officer, made certain statements concerning the Company's third quarter results, as follows:
"Our company continued to deliver solid results despite a weakened economy made worse by the tragic events of September 11
th
. Our Construction Materials segment achieved record third quarter sales and earnings on record volumes. The Chemicals segment earned $2.5 million and continued to be adversely impacted by the slowing demand in the industrial sector of the economy. "
Additionally, Mr. James made certain statements pertaining to the outlook for 2001, as follows:
"While there is considerable uncertainty in the economy, our Construction Materials segment should continue to benefit from relatively strong and stable public sector spending, which comprises more than 50 percent of this segment's business. However, in the fourth quarter, weakening economic conditions may impact private sector demand for aggregates and are likely to reduce demand in the Chemicals segment. We continue to take actions to streamline our Performance Chemicals business to improve our competitive position in a very difficult specialty chemicals industry. We expect these actions to result in charges of approximately $0.07 per share. Excluding these charges, we estimate fourth quarter earnings per share of $0.45 to $0.55 and full year earnings of $2.18 to $2.28.
"As we look forward to 2002 and beyond, publicly funded construction projects should continue to provide a solid base for our construction materials business. The strong position we enjoy in the faster growth markets across the United States should enable our construction materials business to benefit from economic recovery in the private sector. In addition, we continue to identify and pursue cost improvement opportunities in the former CalMat and Tarmac operations. Our chemicals business, in which relatively small increases in demand can generate significant improvement in earnings, is also well positioned to benefit from a recovery in the industrial sector. Overall, we believe that Vulcan's businesses provide both downside protection and upside potential during times of economic uncertainty. We expect to provide specific guidance for 2002 in our year-end press release."
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital, exclusive of debt and cash items, totaled $407.8 million at September 30, 2001, an increase of $54.5 over the $353.3 million at December 31, 2000. This increase resulted from the Company's purchase of its partner's interest in the Crescent Market Companies and the resulting consolidation of these companies and normal seasonal increases in working capital offset in part by the deferral of the third quarter federal income tax payment as permitted under the 2001 Tax Act.
The Company's current ratio, which is based on all components of working capital, including cash and debt items, was 1.7 as of September 30, 2001. This compares to the 1.2 ratio at year-end 2000 and the 1.9 ratio at September 30, 2000. The increase in the current ratio from the prior year-end resulted primarily from a $184.5 million reduction in commercial paper borrowings.
Cash Flows
Net cash provided by operating activities totaled $344.2 million in the first nine months of 2001, up from the $255.9 million generated in the same period last year. This $88.3 million increase in cash provided reflected higher earnings before depreciation, depletion and amortization charges resulting from the acquisition of Tarmac and the Crescent Market Companies and an increase in accrued federal income taxes resulting from the recent Tax Bill's special deferral of the third quarter 2001 payment until October 1. Net cash used for investing activities of $345.0 million increased $129.6 million from the year-to-date 2000 total of $215.4 million due primarily to payments for the acquisitions noted above. Net cash provided by financing activities totaled $11.2 million for the nine months ended September 2001 resulting primarily from the first quarter $240.0 long-term debt issuance net of the year-to-date $159.7 million reduction in commercial paper and bank borrowing. Year-to-date 2000, the Company used $24.7 million of cash for financing activities.
Cash and cash equivalents, which totaled $65.7 million at September 30, 2001, were down $2.8 million from a year ago.
Short-term Borrowings
Short-term borrowings of $110.6 million as of September 30, 2001 consisted of notes payable to banks totaling $46.0 million and commercial paper of $64.6 million. The September 30, 2000 amount, $109.3 million, consisted of notes payable to banks of $10.3 million and commercial paper of $99.0 million. The year-end amount, $270.3 million, consisted of notes payable to banks of $21.2 million and commercial paper of $249.1 million.
Long-term Obligations
As of September 30, 2001, long-term obligations were 30.4% of long-term capital and 58.0% of shareholders' equity. The corresponding third quarter 2000 percentages were 25.9% and 46.9% and the year-end 2000 percentages were 25.8% and 46.6%.
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Item 3. Quantitative and Qualitative Disclosure
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The Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. In order to manage or reduce this market risk, the Company occasionally utilizes derivative financial instruments.
To date, the Company has used commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of these contracts, which have been designated as cash flow hedges, was $18.6 million, reflected as a component of other comprehensive loss as of September 30, 2001. As a result of a 10% reduction in the price of natural gas, the Company would experience a potential decline in the fair value of the underlying commodity swap and option contracts based on the fair value at September 30, 2001 of approximately $4.2 million.
The Company is exposed to interest rate risk due to its various long-term debt instruments. Because substantially all of this debt is at fixed rates, a decline in interest rates would result in an increase in the fair market value of the liability. At September 30, 2001, the estimated fair market value of these debt instruments was $961.4 million as compared to a book value of $923.5 million. The effect of a hypothetical decline in interest rates of 1% would increase the fair market value of the liability by approximately $40.5 million.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 - Supplemental Executive Retirement Agreement
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on January 31, 2001, pursuant to which the Company reported under item 5 the January 22, 2001, release of its fourth quarter and year 2000 results of operations with a copy of the press release attached.
The Company filed a Current Report on Form 8-K on February 7, 2001, pursuant to which the Company reported under item 5 the execution on February 2, 2001 of an Underwriting Agreement and related Pricing Agreement with Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia Securities, Inc., Banc of America Securities LLC, and Banc One Capital Markets, Inc. in connection with the offer and sale of $240,000,000 aggregate principal amount of the Company's 6.40% Notes due 2006.
The Company filed a Current Report on Form 8-K on March 8, 2001, pursuant to which the Company reported under item 5 the March 6, 2001 press release showing the effect of an arbitration award upon 2000 earnings per share with a copy of the press release and the corresponding revisions of the financial statements for fiscal year 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VULCAN MATERIALS COMPANY
Date
November 2, 2001
E. A. Khan
Vice President, Controller and Chief Information Officer
M. E. Tomkins
Senior Vice President and Chief Financial Officer
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Exhibit 10
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
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THIS AGREEMENT is made as of the 28
th
day of September, 2001, by and between VULCAN MATERIALS COMPANY, a New Jersey corporation (the "Company"), and DONALD M. JAMES (the "Executive").
WHEREAS, the Executive has been employed by the Company in valuable executive service to the Company; and
WHEREAS, the Company desires to reward such past service and to encourage and reward the continued employment of the Executive with the Company until his retirement and to promote his devotion to his duties on behalf of the Company without uncertainty or concern as to his retirement income security or that of his spouse;
NOW, THEREFORE, the Company and the Executive hereby enter into this Supplemental Executive Retirement Agreement as hereinafter provided:
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ARTICLE I.
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Section 1.1
Effective Date
. This Agreement shall be effective as of May 11, 2001 (the "Effective Date").
Section 1.2
Defined Terms
. The definitions of capitalized terms used in this Agreement (if not provided where a capitalized term initially appears) are provided in the last Article hereof.
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ARTICLE II.
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Section 2.1
Additional Service Credit for Purposes of Calculating the Retirement Benefit
. Anything to the contrary notwithstanding, except as set forth below with respect to the maximum number of years of Benefit Service under the Retirement Income Plan, for all purposes under the Retirement Income Plan and the Supplemental Benefit Plan, the Executive's service with the Company or its affiliates shall be the sum of (x) and (y):
(x) the total number of years and partial years of the Executive's active employment with the Company or its affiliates during which substantial services were rendered as an employee, commencing on December 15, 1992 (the date the Executive was first employed by the Company) and ending on the date the Executive ceases to perform services as an employee for the Company or its affiliates; and
(y) the number equal to the product of (a) the number of years and partial years of the Executive's active employment with the Company or its affiliates as determined in clause (x) above and (b) 1.2;
provided, however, that in no event shall the Executive's "Benefit Service" under the Retirement Income Plan exceed forty (40) years regardless of his actual years of service.
Section 2.2
Termination on or after a Change of Control
. Upon a termination by the Executive entitling him to receive benefits pursuant to Section 6(a) of the Employment Agreement, the amount payable to the Executive under Section 6(a)(i)(C) of the Employment Agreement shall be determined as if the phrase "if the Executive's employment continued for three years after the Date of Termination" in subclause (a) of such Section 6(a)(i)(C) read "if the Executive's employment continued for 6.6 years after the Date of Termination," in order to give effect to Section 2.1 of this Agreement. Notwithstanding, the foregoing, in no event shall the Executive's "Benefit Service" under the Retirement Income Plan exceed forty (40) years regardless of his actual years of service, nor shall the Executive be entitled to benefits under Section 6(a)(i)(C) of the Employment Agreement that would be duplicative of the benefits provided hereunder.
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ARTICLE III.
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Section 3.1
General
. Except as otherwise specifically provided in the Agreement, the Committee shall be responsible for administration of the Agreement.
Section 3.2
Administrative Rules
. The Committee may adopt such rules of procedure as it deems desirable for the conduct of its affairs, except to the extent that such rules conflict with the provisions of the Agreement.
Section 3.3
Duties
. The Committee shall have the following rights, powers and duties:
(A) The decision of the Committee in matters within its jurisdiction shall be final, binding and conclusive upon the Company and upon any person affected by such decision.
(B) The Committee shall have the duty and authority to interpret and construe the provisions of the Agreement, to decide any question that may arise regarding the rights of the Executive hereunder and to exercise such powers as the Committee may deem necessary for the administration of the Agreement.
(C) The Committee shall maintain full and complete records of its decisions. Its records shall contain all relevant data pertaining to the Executive and his rights and duties under the Agreement. The Committee shall maintain a bookkeeping account with respect to payment of any Retirement Benefit.
(D) Notwithstanding any other provision of this Agreement, upon and after the occurrence of a Change of Control (as defined in the Employment Agreement) and within the six-month period immediately preceding a Change of Control, the Committee's authority and powers shall not be used to interpret or construe the provisions hereof in any way (or to take any other action) that would adversely affect any right given the Executive by this Agreement.
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ARTICLE IV.
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Section 4.1
Amendment and Termination
. This Agreement may be amended or modified only with the written consent of the parties hereto.
Section 4.2
No Assignment
. The Executive shall not have the power to pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in advance any interest in amounts payable hereunder of any of the payments provided for herein, nor shall any interest in amounts payable hereunder or in any payments be subject to seizure for payments of any debts, judgments, alimony or separate maintenance, or be reached or transferred by operation of law in the event of bankruptcy, insolvency or otherwise.
Section 4.3
Successors and Assigns
. The provisions of the Agreement are binding upon and inure to the benefit of each Company, its successors and assigns, and the Executive, his beneficiaries, heirs and legal representatives.
Section 4.4
Governing Law
. The Agreement shall be subject to and construed in accordance with the laws of the State of New Jersey without giving effect to any conflict or choice of law principles or rules, to the extent not preempted by the provisions of ERISA.
Section 4.5
No Guarantee of Employment
. No provisions of this Agreement, nor any action taken by the Committee or the Company pursuant to this Agreement, shall give or be construed as giving the Executive any right to be retained in the employ of the Company, or affect or limit in any way the right of the Company to terminate the Executive's employment.
Section 4.6
Severability
. If any provision of the Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Agreement, but the Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.
Section 4.7
Notification of Addresses
. The Executive shall file with the Committee, from time to time, in writing, the post office address of the Executive and each change of post office address. Any communication, statement or notice addressed to the last post office address filed with the Committee (or if no such address was filed with the Committee, then to the last post office address of the Executive as shown on the Company's records) shall be binding on the Executive for all purposes of the Agreement and neither the Committee nor the Company shall be obliged to search for or ascertain the whereabouts of the Executive.
Section 4.8
Bonding
. The Committee and all agents and advisors employed by it shall not be required to be bonded, except as may otherwise be required by ERISA.
Section 4.9
Taxes
. The Company shall have the right to withhold from any cash or other amounts due or to become due from the Company to the Executive (including by reducing the amount of any Retirement Benefit payable in the future) the amount of any federal, state and local taxes required to be withheld or otherwise deducted and paid by the Company with respect to the vesting or payment of any Retirement Benefit hereunder.
Section 4.10
No Funding
. This Agreement is intended primarily to provide deferred compensation benefits to a select member of management and highly compensated employee within the meaning of Section 201, 301 and 401 of ERISA. There shall be no funding of the benefit amounts to be paid pursuant to this Agreement. The Agreement shall not confer upon the Executive (or beneficiary or any other person) any security interest or any other right, title or interest of any kind in or to any property of the Company. The Agreement shall constitute merely the unsecured promise of the Company to make the benefit payments provided for herein. Notwithstanding the foregoing provisions of this Section 4.10, the Company, in its discretion, may establish a trust to pay the benefit amounts hereunder, which trust shall be subject to the claims of the Company's general creditors in the event of the Company's bankruptcy or insolvency. If such a trust is established, the Company shall remain responsible for the payment of any benefit amounts provided hereunder that are not paid in accordance with the provisions hereof by such trust.
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ARTICLE V.
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Section 5.1
Definitions
. Wherever used in the Agreement, the following words and phrases shall have the meaning set forth below, unless the context plainly requires a different meaning:
"
Agreement
" means this Supplemental Executive Retirement Agreement, as set forth herein and as amended from time to time.
"
Board
" means the Board of Directors of the Company.
"
Committee
" shall mean the Compensation Committee of the Board , as such Committee is established and comprised in accordance with the Supplemental Benefit Plan.
"
Company
" means Vulcan Materials Company, a New Jersey corporation, and any successor to its business and/or assets that assumes and agrees to perform this Agreement by operation of law, or otherwise.
"
ERISA
" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular ERISA section shall include any provision that modifies, replaces, or supersedes it.
"
Employment Agreement
" means the Employment Agreement between the Company and the Executive, dated as of February 10, 2000, as it may be amended from time to time.
"
Executive
" means Donald M. James.
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Retirement Benefit
" means the benefits payable to the Executive under the Retirement Income Plan and the Supplemental Benefit Plan, after giving effect to Section 2.1 of this Agreement.
"
Retirement Income Plan
" means the Retirement Income Plan for Salaried Employees of Vulcan Materials Company, as amended from time to time, or any successor plan.
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Supplemental Benefit Plan
" means the Vulcan Materials Company Unfunded Supplemental Benefit Plan for Salaried Employees, as amended from time to time, or any successor plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
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VULCAN MATERIALS COMPANY
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