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UNITED STATES |
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TABLE OF CONTENTS |
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Independent Auditors' Report |
2 |
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INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of Vulcan Materials Company
Construction Materials Divisions Hourly Employees Savings Plan:
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VULCAN MATERIALS COMPANY STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2002 AND 2001 |
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ASSETS |
2002 |
2001 |
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INVESTMENTS [Cost of $53,449,493 (2002) |
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VULCAN MATERIALS COMPANY STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 |
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ADDITIONS (DEDUCTIONS) TO NET ASSETS |
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INVESTMENT INCOME: |
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: |
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1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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General - The financial statements of the Vulcan Materials Company Construction Materials Divisions Hourly Employees Savings Plan (the "Plan") have been prepared on the accrual basis of accounting. All assets of the Plan are held by the Northern Trust Company of Chicago, Illinois (the "Trustee"). Vulcan Materials Company ("Company") pays the administrative costs of the Plan, including the Trustee's fees and charges.Valuation of Investments - Investments other than guaranteed investment contracts are reported at fair value. Investments in securities traded on national and over-the-counter exchanges are valued at the closing bid price of the security as of the last day of the year. Loans to participants are valued at cost plus accrued interest which approximates fair value. The average cost of securities sold or distributed is used to determine net investment gains or losses realized. Security transactions are recorded on the settlement date. Distributions of common stock, if any, to participants are recorded at the market value of such stock at the time of distribution. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Investment manager fees are netted against Plan investment income. Expenses incurred in connection with the transfer of securities, such as brokerage commissions and transfer taxes, are added to the cost of such securities or deducted from the proceeds thereof. Valuation of Investments (Insurance Contracts) - Guaranteed investment contracts are included in the financial statements at contract value (which represents contributions made under the contract, plus earnings, less withdrawals and administrative expenses), because they are fully benefit responsive. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Risk and Uncertainties - The Plan invests in various securities including U.S. Government securities, corporate debt instruments, and corporate stocks. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for plan benefits. |
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2. |
DESCRIPTION OF THE PLAN |
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General - The Plan, established effective October 1, 1983 and most recently restated effective October 1, 2002 provides for additional investment options and daily valuation of individual account balances, and is defined contribution employee benefit plan. The purpose of the Plan is to provide for accumulation of savings for qualifying non-union hourly employees of the Company's Southeast, Mideast, Midsouth, Southwest, Western, Southern and Midwest Divisions and its wholly owned subsidiaries, Vulcan Gulf Coast Materials and RECO Transportation, LLC, (collectively, the "Participating Companies").Effective October 1, 2002, the Company amended and restated the Plan. In connection with the amended and restated Plan, the Company designated a portion of the Plan consisting of Vulcan Materials Company common stock fund as an Employee Stock Ownership Plan ("ESOP"). The Vulcan ESOP fund allows a Participant to elect to have the dividends paid on Vulcan Materials Company common stock reinvested in the Company's common stock or paid to the Participant in cash. Participation and Vesting - Generally, hourly employees qualify to participate on the first of the month following completion of two months of employment service. Participants are fully vested at all times. Funding - The Plan is funded through contributions by participants and the Participating Companies. The Plan provides for two types of employee contributions to the Plan: pay conversion contributions (pre-tax) and after-tax contributions. An employee may designate multiples of 1%, ranging from 1% to 35%, of earnings as either pay conversion contributions, after-tax contributions, or any combination of the two. Participating Companies expect to make matching contributions out of current and accumulated earnings and profits to match that portion of an employee's contribution (whether pre-tax, after-tax or both) amounting up to 4% of the employee's earnings. Matching contributions by Participating Companies are determined by their boards of directors and normally range from 50% to 75% depending on a participant's completed years of matching service. Pay conversion contributions, which are subject to annual increases pursuant to federal regulations, are limited to a maximum dollar amount of $11,000. Certain additional limits may be imposed on the amount of contributions by or on behalf of certain higher-paid employees. Investment Options - Participants' contributions are invested in the thirteen separate investment funds (see Note 5) of the Plan in proportions elected by the participant. The Participating Companies matching contributions are invested in the fund which invests primarily in the Company's common stock. Allocations and Determination of Accounts - Separate accounts are maintained for each participant for matched, unmatched, and Participating Companies contributions and accumulated earnings on each. Additionally, subaccounts are maintained for matched and unmatched accounts for the portion of each account that is attributable to pre-tax contributions and the portion attributable to after-tax contributions. Monthly net earnings are allocated to each participant's account in the ratio of the participant's account balance to total participants' account balances. Distributions and Withdrawals - A participant's total account is distributed upon retirement, disability, death or termination of employment unless the account value is greater than $5,000, in which case the participant may defer until age 70-1/2. As of December 31, 2002 and 2001, benefits of $4,025,071 and $2,797,961, respectively, were due to individuals who were separated from the Plan. Prior to a termination of employment, participants may make partial withdrawals or may withdraw their total account, except that if a participant has not maintained a participant contribution account for the 60 months immediately preceding the voluntary withdrawal, no Company contributions which have been on deposit less than 24 months will be distributed until 24 months after the earlier of the employee's withdrawal date or the employee's termination of employment. In addition, any in-service distribution from a participant's pre-tax contributions must meet the requirements of a "hardship withdrawal," as set forth in the plan document. Loans - Participants may apply for up to one loan at any time. The amount of the loan cannot exceed the lesser of 50% of the participant's total account or $50,000. If a loan is made, the participant shall execute a note payable to the Trustee in the amount of the loan and bearing interest at the prime interest rate plus 1%. The average rate of interest on loans approximated 8% and 9% in 2002 and 2001, respectively. A loan will be considered as an investment of the participant. The participant's investment accounts will be reduced pro rata by the amount of the loan. Any repayment made will be allocated to the participant's investment accounts in accordance with his current investment direction. Loans must be repaid in monthly installments through payroll deductions. The maximum number of monthly installments is 60. Plan Termination - In the event it becomes necessary to terminate the Plan, participants will receive a distribution of the amounts held for their accounts. |
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3. |
NET REALIZED INVESTMENT GAINS |
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Aggregate |
Aggregate |
Net Realized |
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2002 term fixed income investments Commingled funds holding principally common stock Commingled funds holding principally international equity instruments Fund holding Vulcan Materials Company common stock Total 2001 Fund holding principally intermediate- term fixed income investments Commingled funds holding principally common stock Commingled funds holding principally international equity instruments Fund holding Vulcan Materials Company common stock Total |
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4. |
INVESTMENTS |
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The Plan's investment assets consist of an interest in one of the investment accounts of the Vulcan Materials Company Master Trust ("Master Trust") administered by Northern Trust Company. Use of the Master Trust permits the commingling of investment assets of a number of employee benefit plans of the Participating Companies. Although the assets are commingled, the Company maintains supporting records for the purpose of allocating the investment assets and the related net earnings to the various participating employee benefit plans. |
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Thrift Plan Investment Account Chemicals Savings Account Construction Savings Account Net assets |
2002 331,857,156 31,111,905 51,915,949 $803,830,718 |
2001 404,199,810 34,635,694 52,206,236 $960,012,638 |
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The net assets of the Master Trust at December 31, 2002 and 2001 are summarized as follows: |
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fixed income investments and loans to participants Guaranteed investment contracts Fund holding principally real estate investments Fund holding principally venture capital and partnership investments Fund holding principally intermediate- term fixed income investments U.S. government securities Commingled funds holding principally common stock Commingled funds holding principally international equity instruments Fund holding Vulcan Materials Company common stock Derivatives Other equities Net assets |
2002 73,599,023 44,924 25,860,144 84,268,199 72,113,206 159,226,818 87,312,885 213,065,685 325,300 3,940,997 $803,830,718 |
2001 80,719,631 83,975 31,967,603 102,242,204 52,094,193 202,120,878 98,628,742 281,318,440 833,275 2,529,933 $960,012,638 |
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The total investment income (loss) by type of the Master Trust for the years ended December 31, 2002 and 2001 is summarized as follows: |
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Dividends Other Net investment gains (losses): Realized Unrealized Total |
2002 $12,045,779 6,319,623 260,289 (2,008,576) (148,282,806) $(131,665,691) |
2001 $15,518,683 7,115,588 1,927,259 146,036,813 (237,933,944) $(67,335,601) |
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Investments held by the Plan at December 31, 2002 and 2001 and changes in unrealized appreciation (depreciation) of investments for the years then ended, are as follows: |
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3,567,951 2,268,147 6,462,114 346,043 23,609,589 474,347 16,721,302 53,449,493 $5,452,974 Cost $39,512,390 3,406,483 2,220,852 5,917,051 310,028 21,493,651 490,254 14,158,200 47,996,519 $8,484,129 |
Market 3,567,951 2,281,346 5,133,848 261,764 23,609,589 474,347 16,558,429 51,887,274 $(318,962) Market Value $44,382,511 3,406,483 2,272,011 5,844,886 260,364 21,493,651 490,254 18,438,587 52,206,236 $7,823,725 |
Appreciation (1,562,219) $(5,771,936) Appreciation $4,870,121 4,209,717 $(660,404) |
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The guaranteed investment contracts were established in 1991 with Metropolitan Life with a guaranteed rate, net of insurance company charges, of 6.20% and an annual maturity date of May 1. Upon maturity, the Company renegotiates new terms on these contracts. The interest rate was 6.00% from January 1 - April 30, 2001; 5.75% from May 1 - December 31, 2001; 5.50% from January 1 - April 30, 2002; and 5.75% from May 1- December 31, 2002. |
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5. |
INVESTMENT PROGRAM |
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All contributions of Participating Companies are invested in the fund which consists of the Company's common stock. With respect to investment alternatives (1) the guaranteed investment contracts fund, (2) the S&P 500 index fund, (3) the large-cap value index fund, (4) the small-cap value index fund, (5) the large-cap growth index fund, (6) the small-cap growth index fund, (7) the international equity fund, (8) the Vulcan Materials Company common stock fund, and (9) through (13) the balanced funds, investment managers have been appointed whose duty it is to advise the Trustee as to particular investments to be made. At December 31, 2002, the investment managers were as follows: |
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(1) Guaranteed investment contracts fund |
Metropolitan Life Insurance Company |
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6. |
TAX STATUS |
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The Plan obtained its latest determination letter on January 10, 2003, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. |
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SIGNATURES |
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THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other person who administers the employee benefit plan) has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. |
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VULCAN MATERIALS COMPANY Charles D. Lockhart Chairman of the Administrative Committee |