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Vulcan Materials Company

Vulcan Materials Company

1200 Urban Center Drive
Birmingham, Alabama 35242
U.S.A.
Telephone: (205) 298-3000
Fax: (205) 298-2963
Web site: http://www.vulcanmaterials.com

Public Company
Incorporated:
1956
Employees: 10,000
Sales: $3.02 billion (2001)
Stock Exchanges: New York
Ticker Symbol: VMC
NAIC: 212319 Other Crushed and Broken Stone Mining and Quarrying (pt); 212321 Construction Sand and Gravel Mining; 324121 Asphalt Paving Mixture and Block Manufacturing; 325181 Alkalies and Chlorine Manufacturing

Vulcan Materials Company, with headquarters in Birmingham, Alabama, is the largest producer of construction aggregates in the United States and a leader in the world market. Construction aggregates include crushed stone, sand, gravel, and slag, which are used in the construction of highways, commercial buildings, and houses. The company operates quarries serving 22 states as well as Washington D.C., Mexico, Aruba, Chile, and the Cayman Islands. Revenue from crushed stone excavated in Vulcan quarries accounts for the vast majority of the companys total sales, though its two chemical business units are also leaders within their industry for industrial and commercial use of caustics and chlorine-based solvents.

Vulcan produces a variety of chemicals, including chlorine, caustic soda (sodium hydroxide), caustic potash (potassium hydroxide), and chlorinated solvents. The primary market for chlorine is in the treatment of water and sewage, manufacturing pulp and paper, and as a major ingredient in many other manufacturing processes. Caustic soda is used mainly in the production of aluminum, soap and detergent products, and wood pulp. Caustic potash is utilized in the production of other potassium chemicals as well as in fine soaps and lotions. Lastly, chlorinated solvents are employed for cleaning metals and textiles and as an intermediate chemical in the manufacture of other materials.

Background: Birmingham Slag Company, 1909-56

Vulcan Materials was created in 1956 when the Birmingham Slag Company of Birmingham, Alabama, merged with the Vulcan Detinning Company of New Jersey. Birmingham Slag had been founded in 1909 by Solon Jacob and Henry Badham, two entrepreneurs who decided to turn a waste product of the steel industry, slag, into a commodity they could sell. Slag is the nonmetallic residue left behind in the process of smelting iron ore. The city of Birmingham had long been a center for steel-making, and the industry had been stockpiling huge amounts of slag by the time Vulcan Detinning came along.

Jacob and Badham built a processing plant next to the Tennessee Coal, Iron, and Railroad Companys slag pile in nearby Ensley, Alabama, and began selling the material as ballast for railroad tracks. Fortuitously, the founding of Birmingham slag occurred one year after the Ford Motor Company introduced its famous Model T automobile. When the country began demanding more paved roads, Birmingham Slag discovered that it possessed the perfect construction material.

Despite its early success, Birmingham Slag was for sale by 1916. Charles Lincoln Ireland, an Ohio banker whose family was operating stone quarries in Ohio, Kentucky, and West Virginia, purchased a controlling interest in the company. He sent his three sonsGlenn, Eugene, and Barneyto Alabama to run Birmingham Slag. Charles, in the meantime, went off to Central America to buy surplus equipment being sold after the completion of the Panama Canal. He returned with two steam shovels, a steam hoist, a star drill, and other equipment purchased at the bargain-basement price of $6,590.

The Irelands opened a new slag processing plant in Ensley in 1918. They also opened plants in the central Alabama towns of Fairfield and Wylam and in northern Alabama near Muscle Shoals. In 1919 and 1920 the company secured contracts to process slag at three more Alabama steel millsRepublic Steel in Thomas, Central Iron and Steel Company in Holt, and Gulf States Steel Company in Alabama City. Despite plenty of business after World War I, finances were tight. Records indicate that during this period the Ireland family often had to guarantee loans at the First National Bank of Birmingham personally to meet the companys payroll. Nevertheless, Birmingham Slag was ready when state legislators passed the 1922 Alabama Bond Issue for Good Roads, setting off a boom in road construction.

In 1923 Birmingham Slag formed the Montgomery Gravel Company and began providing sand and gravel for a dam being built in Cherokee Bluffs, Alabama. It expanded this business the next year by creating the Atlanta Aggregate Company to market sand and gravel in Georgia. By the 1930s Birmingham Slag also owned several ready-mix concrete plants and was producing asphalt and concrete blocks.

In 1939 Birmingham Slag signed a contract with the newly formed Tennessee Valley Authority (TVA) to dredge part of the Tennessee River so a dam and power plant could be built at Watts Bar, thus marking yet another business expansion for the company. Birmingham Slag continued to prosper during World War II, providing aggregates and concrete for such wartime efforts as the Manhattan Project in Oak Ridge, Tennessee; the Hunts ville, Alabama, Redstone Arsenal; and a major munitions depot at Fort McClellan in Anniston, Alabama.

After the war, construction of the new federal interstate highway system proposed in the early 1950s presented a potential bonanza for Birmingham Slag. The company, however, needed more capital than a family-owned business could muster in order to take advantage of the opportunity. In addition, Charles W. Ireland, the grandson of the Ohio banker, had become president of Birmingham Slag in 1951 and was looking for ways to lessen the inheritance taxes family members faced. The answer presented itself in the form of a merger with the publicly traded Vulcan Detinning Company of Sewaren, New Jersey.

Vulcan Detinning Company: 1902-56

Vulcan Detinning had been formed in 1902 by Adolph Kern, who owned the Vulcan Metal Refining Company in Sewaren and the Vulcan Western Company of Chicago. The new company, Vulcan Detinning, used a process developed in Germany to recover pure tin from tin-plated scrap. Kern subsequently helped establish a rival company in Pennsylvania, the Republic Chemical Company. In 1912 he left Vulcan Detinning to join Republic Chemical, taking the companys trade secrets with him and setting off a series of lawsuits. Vulcan Detinning and Republic Chemical merged in 1920, after Kern was no longer associated with either company.

William J. Buttfieldwho had joined Vulcan Detinning as a director in 1912, when Kern left for Republic Chemicalguided Vulcan Detinning through the early part of the 20th century. During the Depression of the 1930s he used his commodities brokerage background to shift the companys resources into importing coffee and rubber. Vulcan Detinning continued to pay dividends even though the Sewaren detinning plant was closed from 1932 until 1937. Employees were kept on the payroll and were occupied with the repairing and reconditioning of plant facilities. By 1940 Vulcan Detinning was again flourishing although the Sewaren plant, reopened in 1937, was closed permanently in 1938. Buttfield was also credited with being one of the industrialists who in the months preceding the Japanese attack on Pearl Harbor, finally convinced the United States to begin stockpiling critical materials such as tin.

The merger between Birmingham Slag and Vulcan Detinning was completed in 1956. At the time, Alfred Buttfield, the son of William J. Buttfield, was president of Vulcan Detinning. He became chairman of the board of the newly named Vulcan Materials Company.

A New Era: 1957-66

Until the merger, Birmingham Slag, although successful, had been a modestly sized regional company. Vulcan Materials Company was traded on the New York Stock Exchange and quickly became a company of national importance. The merger allowed Vulcan to diversify and create a business less dependent on the construction industry, as well as raise capital for expansion. From 1956 to 1960 Vulcans net worth increased almost sevenfold to $72 million from $11 million. It also became the largest producer of construction aggregates material in the country.

Although Charles W. Ireland was credited with providing the vision for Vulcans rapid growth, Bernard A. Monaghan was considered its architect. Monaghan, a Rhodes Scholar and graduate of Harvard University Law School, was the Ireland familys corporate attorney. He negotiated the merger with Vulcan Detinning and later orchestrated the acquisition of a dozen construction aggregate companies through the 1950s and into the early 1960s. He joined Vulcan in 1958 as executive vice-president and, soon after, became president and chief executive officer.

One of the companies with which Monaghan negotiated a merger was Lambert Brothers, Inc., an Appalachian quarrying company with a storied history. The nine Lambert brothers, from a family of 15, were low-income Smoky Mountain residents who, according to company lore, started with a mule and a wheelbarrow and built a $9 million business in one generation. During the 1930s they moved their portable rock crushing equipment throughout the Appalachian states and as far west as Oklahoma to work on road construction. The story of their success is peppered with tales of bare-knuckled fights and high stakes poker. By the mid-1950s Lambert Brothers was the largest rock-quarrying firm in the United States.

Company Perspectives:

Vulcan Materials Company provides infrastructure materials required by the U.S. economy. Vulcan is the nations foremost producer of construction aggregates: primarily stone, sand, and gravel. Aggregates are used in nearly all forms of construction. We are also a leader in the production of other construction materials, as well as a major manufacturer of chemicals. Our Chemicals segment produces caustic soda, chlorine, and other industrial and specialty chemicals.

It was during this period of rapid expansion that Vulcan also became a chemicals manufacturer. In 1957 it bought the Union Chemical and Materials Corporation of Chicago, a construction aggregate company in the booming Midwest market that had merged with the Frontier Chemical Company. Frontier produced sodium hydroxide (caustic soda), chlorine, and hydrochloric acid for the oil industry at plants in Texas and Kansas.

The mergers with Union Chemical, Lambert Brothers, and seven other companies owned by the Lamberts were approved by Vulcans stockholders in one fell swoop in 1957. At the time, Fortune magazine called it one of the most complex corporate acquisitions ever arranged. Vulcan continued its strategy of buying family-owned aggregate businesses over the next 30 years. In 1982 in a story entitled Cinderella, a Forbes correspondent observed that Vulcan had created a quasi-monopoly in the crushed stone business by buying more than 90 quarries in the 1950s and 1960s when quarries were a dime a dozen.

Expansion and Refocusing: Late 1960s to Early 1990s

In 1967 Vulcan purchased Aluminum and Magnesium, Inc., an Ohio-based aluminum recycler. Until 1988 when Vulcan sold its metals division, detinning and aluminum recycling had formed the nucleus of the metals processing business. Vulcan also spent ten years in oil and natural gas exploration, forming a joint venture in 1975 with Oklahoma-based Southport Exploration, Inc. Vulcan acquired Southport Exploration in 1981 but sold the business in 1985.

In July 1987 Vulcan formally announced its Crescent Market Project, a $170 million joint venture with one of Latin Americas largest construction conglomerates, Ingenieros Civiles Asso-ciados, S.C. (Grupo ICA), to quarry limestone from the wilds of the Yucatan Peninsula. Vulcan had first looked to Mexico as a potential quarry site to serve the Gulf Coast area of the United States in 1973. The idea had been abandoned and then revived in 1978. In 1981 the company began a concentrated effort to locate quarry sites in the Mexican state of Quintana Roo. Afterwards, Pete Wiese, the Vulcan geologist who headed the exploration, described the effort in the companys annual magazine, Profile: Quintana Roo was pretty unsettled. I had a machete and I would just get out of the car and cut through the jungle to the coast and see what I could see.

The joint venture eventually settled on a site about 45 miles south of Cancun and only a few hundred yards from ancient Mayan ruins that had been built out of the same tan limestone. An agreement was made with the Mexican National Institute of Archeology and History to underwrite the cost of locating, mapping, and conserving the ruins. The Crescent Market Project also included construction of a deep water port, which required dredging more than three million tons of stone from the harbor at Playa del Carmen.

Overcoming technological and logistical challenges, including Hurricane Gilbertwhich battered the Yucatan coast in 1988 and caused more than $400,000 damage to the stone processing plant then under constructionVulcan and Grupo ICA began shipping stone from Mexico to the United States in 1990. Most of the Mexican limestone was destined to become construction material aggregates, but because of a high calcium content was also being used in products as diverse as fertilizer and toothpaste. The Mexican quarry won the National Stone Association Showplace Award in 1990, its first year of operation.

In 1991 the quarry shipped 2.5 million tons of limestone, about a third of the estimated annual capacity. By late 1992 Vulcan, looking ahead to a recovering economy and refocused attention on the nations infrastructure, was estimating that the Crescent Market Project would become profitable in 1993.

The W.H. Blount, a refitted Panamax-class vessel named for a former chief executive officer and then chairman emeritus of Vulcan Materials, was put into operation in March 1991 to carry limestone from the Mexican quarry. More than 700 feet long and 100 feet wide, the W.H. Blount was one of the largest self-unloading ships in service. It could carry more than 64,000 tons of limestone, or about 2,667 truckloads. A second, similar ship was put into service in late 1992.

Key Dates:

1902:
Adolf Kern creates Vulcan Detinning Company in Se waren, New Jersey.
1909:
Solon Jacob and Henry Badham found Birmingham Slag Company in Birmingham, Alabama.
1956:
Birmingham Slag Company and Vulcan Detinning Company merge to form Vulcan Materials Company.
1957:
Vulcan Materials buys and merges with several companies, including Lambert Brothers and Union Chemical and Materials Corporation.
1960:
Vulcan Materials is ranked as the nations largest producer of construction aggregates material.
1967:
Vulcan acquires Ohio-based Aluminum and Magnesium, Inc.
1975:
The company begins natural gas and oil exploration through a joint venture with Oklahomas Southport Exploration, Inc.
1981:
Vulcan buys Southport Exploration.
1985:
Vulcan sells Southport Exploration and exits the natural gas and oil business.
1987:
Vulcan begins its ambitious Crescent Market Project, a $170 million joint venture in Mexico.
1990:
First stone from Mexican quarry begins shipping.
1992:
Sales top the billion-dollar mark for the first time.
1994:
Chemicals division splits into two separate units: Chloralkali Business and Performance Systems Business.
1998:
Vulcan buys CalMat and is buoyed by the passage of TEA-21 for federal highway construction.
1999:
Sales top $2 billion for the first time.
2001:
Vulcan buys out Grupo ICAs half of the Crescent Market joint venture.
2002:
Twenty-five of Vulcans quarries in the United States and Mexico win prestigious environmental awards.

Aside from the Crescent Market Project (which had begun in 1987), Vulcan continued with other acquisitions, taking on Texas-based Whites Mines, Inc. and two affiliated companies for $89 million that year. At the time, it was the largest acquisition in the companys long history. The purchase gave Vulcan control of five more quarries, including the Uvalde limestone quarry west of San Antonio. The quarry produced rock asphalt, a stone naturally impregnated with asphalt, making it a natural paving material.

Three years later, in 1990, Vulcan surpassed the Whites Mines acquisition by paying more than $110 million for the Reed Crushed Stone Company, Inc. and two related companies. Included in the purchase was the Reed quarry near Paducah, Kentucky, the largest single crushed stone quarry in the country. The purchase also included a fleet of barges and a coal transshipping and blending business, putting Vulcan Materials in the coal-handling business for the first time.

Environmental Concerns: Early 1990s

Vulcans chemical business was heavily regulated and often prompted public concerns about environmental health and safety. In 1990 Vulcan committed to reducing hazardous emissions at its chemical plants by 90 percent over the next five years, primarily by turning hydrochloric acid into calcium chloride, which could be used as a dust stabilizer and deicer. Vulcan had been disposing of excess hydrochloric acid, a waste product of other chemical production processes, by pumping the acid into limestone deposits a mile below ground in a deep-well injection process permitted and approved by the Environmental Protection Agency (EPA). The limestone neutralized the acid; however, it was still considered a hazardous emission for reporting purposes under Title III of the Federal Superfund Amendment and Reauthorization Act. This resulted in Vulcan being listed among the worst polluters in the United States.

In order to change its status as a major polluter, Vulcan completed construction of a new calcium chloride facility at its Wichita, Kansas, chemical manufacturing complex early in 1993. Even before it opened, the plant received a Certificate for Environmental Achievement from Renew America, a national environmental organization based in Washington, D.C. The processing facility, with a capacity of 18 million pounds per year, was designed by Tetra Technologies, which also distributed the calcium chloride. Used primarily to purify drinking water, calcium chloride also served as a biocide in the fruit-processing industry and as a cleaning material in electronics.

In addition to its construction of the calcium chloride facility, Vulcans chemicals division was phasing out production of chlorofluorocarbons (CFCs) and assisting in the development of nonozone depleting CFC replacements. Vulcan was a member of two major trade associationsthe National Stone Association and the Chemical Manufacturers Associationwhich were active in addressing environmental health and safety concerns. The company also participated in the Wildlife Habitat Enhancement Council, a nonprofit organization that encouraged the development of wildlife sanctuaries on corporate owned lands. In 1990 the Vulcan quarry in Warrenton, Virginia, was the first site in the nation to be certified by the Wildlife Habitat Enhancement Council; Vulcan also received the Virginia Conservationist of the Year Award for its efforts at the quarry. As of 1992, 15 Vulcan quarries had been certified by the organization.

Historically, Vulcan Materials two principal businesses provided economic stability; construction aggregates did well when the chemical market was depressed and vice-versa. Construction spending in the United States, however, when adjusted for inflation, decreased every year between 1986 and 1991, the longest continual decline since the Great Depression. With the economy in recession, the company recorded three straight years of lower net income from a high of $136 million on net sales of $1.05 billion in 1988 to $52.6 million on net sales of $1.01 billion in 1991. In 1992 net sales increased by 7 percent to $1.07 billion, while net earnings rose by 79 percent to $93.98 million.

Entering 1993 the company was encouraged by a recovering economy and by the renewed focus on upgrading and expanding the nations highways. Though the U.S. Congress had passed the Intermodal Surface Transportation Efficiency Act in December 1991, its effects were not fully in play until 1993. Vulcan benefited from the increased federal spending on highway construction, especially in crushed stoneshipments rose to 117 million tons, eight tons higher than the previous yearand prices went up for the first time in five years. Real estate, also part of Vulcans construction division, recovered slightly for the year but remained relatively soft. Vulcans chemicals division, however, suffered during 1993 with both lower sales and earnings. Despite the construction of a new sodium chlorine plant in Wichita, Kansas, a sharp decline in caustic soda prices caused an imbalance in chlorine products. Luckily for Vulcan, its construction divisions strong results offset the chemical units woes and year-end net sales climbed slightly to $1.13 billion for 1993.

Acquisitions and Growth: Mid- to Late 1990s

To shore up its difficulties with its chemicals division, Vulcan invested heavily in acquisitions and the construction of new facilities to increase the units scope and the breadth of its involvement in new and emerging technologies. Three 1994 acquisitions fit this trend: the first was the Tucson-based Peroxidation Systems, Inc., an established municipal, industrial, and environmental water treatment firm (renamed Vulcan Peroxidation Systems, Inc.); the second and third were both part of Exxon Corporation and became wholly owned subsidiaries of Vulcan as Callaway Chemical Company (based in Georgia) and Callaway Chemical Limited (based in Vancouver, British Columbia). The latter buys marked Vulcans serious entrance into the production of chemicals used in the paper, textile, and water treatment industries. The disparate focuses of these acquisitions from Vulcans core chemical operations led to the formation of two separate business unitsthe Chloralkali unit (consisting of its traditional operations of caustics and chlorine-based products) and the Performance Systems unit (covering the newer operations in paper, pulp, textile, and environmental water treatment).

Despite its efforts to expand the chemical division and prevent its complete reliance on the frequently unstable caustic and chlorine marketthe chemicals unit posted its first loss in 24 years. Vulcans management was not, however, overly concerned since they believed in its long-term outlook and knew it would take time to recoup acquisition costs. Another reason was the performance of its construction division, which experienced record growth. Sales of stone and related construction materials were way up, and even the real estate market had rebounded. A jump in both the construction of residential homes and federal highways pushed the divisions earnings up 39 percent to $162 million, offsetting the chemical units loss of $7.3 million and bringing Vulcans overall earnings to $98 million on net sales just shy of $1.3 billion for 1994.

By 1995 Vulcans long-term vision for its chemicals division paid off handsomelythe unit enjoyed a robust market in caustics and chlorine, and turned its previous years loss into earnings of more than $87 million. The construction division maintained its record-breaking growth, too, shipping more than 136 million tons of crushed stone and other aggregates to bring earnings to $182 million on sales of $885 million. Vulcan reached overall net sales of just under $1.5 billion for 1995 as a new company president took the reins. Donald M. James, who had joined Vulcan in 1992 as a senior vice-president and general counsel, took on the added responsibilities of chief executive in 1996 as Howard Sklenar ended his nearly 25 years of service with Vulcan by retiring from daily operations. Sklenar was named chairman emeritus in 1997 when James assumed the title of chairman.

In the last years of the century, Vulcan grew steadily until a phenomenal leap in 1999 took the company well over the $2 billion net sales mark. Sales for 1997 and 1998 posted respectable single-digit gains of 6 and 7 percent, respectively, while earnings from 1996 to 1997 climbed 11 percent and from 1997 to 1998, doubled to 22 percent. Yet 1999 took Vulcan into a vastly different arena, with net sales soaring by 33 percent from 1998s $1.8 billion to 1999s $2.4 billion. This growth was due in part to several acquisitions and joint ventures, including the 1998 purchase of CalMat Company, Californias leading aggregates producer, and Vulcans ongoing joint venture with Grupo ICA, which was shipping millions of tons of limestone throughout Mexico and the United States. Another joint venture was with Mitsui & Co., Ltd., which teamed with Vulcan to build a new plant and substantially increase production of various caustic chemicals. Additionally, Vulcans construction division began to reap the benefits of the federal governments TEA-21, a new highway rebuilding and construction bill passed in 1998, which provided $157 billion over the next six years for the refurbishment and new construction of national highways.

An Eye to the Future: The 2000s

By the year 2000, Vulcan had expanded its construction aggregates empire to have facilities in 21 states, the District of Columbia, and Mexico, with 236 operational quarries. The following year, Vulcan bought Grupo ICAs portion of their Mexican joint venture, the Crescent Market Companies, paying over $121 million for sole ownership of the Playa del Carmen operations. Despite the size and scope of its businesses, Vulcan was an enormous yet rather quiet conglomerate. Many Americans did not know the Vulcan name (except perhaps in the Star Trek sense), but the company was satisfied with what it termed its boring image. In its 2001 annual report, Vulcan poked fun at itself while admitting the aggregates industry might not be exciting to the average person, stating, Sexy? No. But very profitable. Yet to Vulcan, its shareholders, and Wall Street, being profitable was all that mattered. By the numbers, Vulcan Materials hit overall revenues of $3.02 billion for 2001 with net sales at $2.5 billion and earnings climbing to nearly $381 million.

Though more than once in its long history Vulcan Materials had been on the EPAs hit list, Vulcan had instead become a poster company for environmental concerns and even a leader in the beautification of quarries. Twenty-four Vulcan quarries in the United States and its Crescent quarry in Mexico won top honors from the National Stone, Sand & Gravel Associations About Face Awards in early 2002. Vulcan Materials Company continued to be the countrys leading aggregates producer, as well as a major force in the production of chloralkali compounds and derivatives for industrial and commercial use.

Principal Subsidiaries

Vulcan Chemical Technologies, Inc.; Vulcan Gulf Coast Materials, Inc.; Vulcan Materials Company; Vulcan Performance Chemicals, Inc.; Wanatah Trucking Company Inc.

Principal Competitors

The Dow Chemical Company; Lafarge North America Inc.; Martin Marietta Materials, Inc.; Florida Rock Industries, Inc.; CRH plc.

Further Reading

Archibald, Robert, and Robert Beard, Making Waves in Gulf Coast Markets, Pit & Quarry, June 1991.

Blevins, Dallas R., and Jessie L. Forbes, Vulcan Materials: Alabamas Share of the Fortune (unpublished), University of Montevallo, Alabama, 1984.

Blount, W. Houston, The Past As a Challenge to the Future, speech delivered to The Newcomen Society in North America, Birmingham, Alabama, October 13, 1982.

Bonnie, Fred, The Low Cost of a High Public Relations Profile, Shillings Mining Review, January 2, 1993.

Carmichael, Jane, Cinderella, Forbes, March 15, 1982.

Connel, Greg, Rolling with the Changes, Pit & Quarry, January 1990.Pierce, Frank, Vulcan Materials Company: Alabamas Share of the

Fortune, Journal of the Birmingham Historical Society, December 1985.

Vulcan Quarries Recognized for Outstanding Beautification Efforts, Pit & Quarry, March 2002, P 17.

Vulcan to Acquire CalMat, Pit & Quarry, December 1998, P 9.

Vulcan to Purchase 50 Percent Share of Vulcan/ICA Joint Venture, Birmingham Business Journal, January 19, 2001, P 9.

Vulcan Ranked Among Worlds Best-Managed Companies, Pit & Quarry, October 2000, P 16.

Weaver, Bronwyn, Community Involvement Rewrites Familiar Story, Pit & Quarry, June 1990.

Wolf, Terry, eRocks: If Youre Not Serving Customers Online Maybe Its Time to Start Thinking About It, Pit & Quarry, October 2000, pS2.

Dean Boyer

update: Nelson Rhodes

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Vulcan Materials Company

Vulcan Materials Company

1 Metroplex Drive
Birmingham, Alabama 35209
U.S.A.
(205) 877-3000
Fax: (205) 877-3094

Public Company
Incorporated: 1956
Employees: 6,400
Sales: $1.08 billion
Stock Exchanges: New York
SICs: 1429 Crushed & Broken Stone Nee; 1442 Construction Sand & Gravel; 2951 Asphalt Paving Mixtures & Blocks; 2812 Alkalies & Chlorine

Vulcan Materials Company, with headquarters in Birmingham, Alabama, is the largest producer of construction aggregates in the United States and a leader in the world market. Construction aggregates include crushed stone, sand and gravel, and slag, which are used in the construction of roadways, commercial buildings, and houses. The company operates quarries in 14 of the United States and, through a joint venture, runs one in Mexico. Revenue from crushed stone excavated in Vulcan quarries accounts for approximately 60 percent of the companys total sales.

Vulcan also produces chemicals for industrial use at plants in Kansas, Louisiana, and Wisconsin. These chemicals include: chlorine, caustic soda (sodium hydroxide), caustic potash (potassium hydroxide), and chlorinated solvents. The primary market for chlorine is in the treatment of water and sewage, manufacturing pulp and paper, and as a major ingredient in many other manufacturing processes. Caustic soda is used mainly in the production of alumina, soap and detergent products, and wood pulp. Caustic potash is utilized in the production of other potassium chemicals as well as in fine soaps and lotions. Finally, chlorinated solvents are employed for cleaning metals and textiles and as an intermediate chemical in the manufacture of other materials.

Vulcan Materials was created in 1956 when the Birmingham Slag Company of Birmingham, Alabama, merged with the Vulcan Detinning Company. Birmingham Slag had been founded in 1909 by Solon Jacob and Henry Badham, two entrepreneurs who decided to turn a waste product of the steel industry, slag, into a commodity they could sell. Slag is the nonmetalic residue left behind in the process of smelting iron ore. The city of Birmingham, as it still is today, was a center for steel making, and the industry was stockpiling huge amounts of slag.

Jacob and Badham built a processing plant next to the Tennessee Coal, Iron and Railroad Companys slag pile in nearby Ensley, Alabama, and began selling the material as ballast for railroad tracks. Fortuitously, the founding of Birmingham slag occurred one year after the Ford Motor Company introduced its famous Model T automobile. When the country began demanding more paved roads, Birmingham Slag discovered that it possessed the perfect construction material.

By 1916, despite its early success, Birmingham Slag was for sale. Charles Lincoln Ireland, an Ohio banker whose family was operating stone quarries in Ohio, Kentucky, and West Virginia, purchased a controlling interest in the company. He sent his three sonsGlenn, Eugene, and Barneyto Alabama to run Birmingham Slag. Charles, in the meantime, went off to Central America to buy surplus equipment being sold after the completion of the Panama Canal. He returned with two steam shovels, a steam hoist, a star drill, and other equipment purchased at the bargain-basement price of $6,590.

The Irelands opened a new slag-processing plant in Ensley in 1918. They also opened plants in the central Alabama towns of Fairfield and Wylam and in northern Alabama near Muscle Shoals. In 1919 and 1920 the company secured contracts to process slag at three more Alabama steel millsRepublic Steel in Thomas, Central Iron and Steel Company in Holt, and Gulf States Steel Company in Alabama City. Despite plenty of post-World War I business, however, finances were tight. Records indicate that during this period the Ireland family often had to guarantee loans at the First National Bank of Birmingham personally to meet the companys payroll. Nevertheless, Birmingham Slag was ready when state legislators passed the 1922 Alabama Bond Issue for Good Roads, setting off a boom in road construction.

In 1923 Birmingham Slag formed the Montgomery Gravel Company and began providing sand and gravel for a dam being built in Cherokee Bluffs, Alabama. It expanded this business the next year by creating the Atlanta Aggregate Company to market sand and gravel in Georgia. By the 1930s Birmingham Slag also owned several ready-mixed concrete plants and was producing asphalt and concrete blocks.

In 1939 Birmingham Slag signed a contract with the newly formed Tennessee Valley Authority (TVA) to dredge part of the Tennessee River so a dam and power plant could be built at Watts Bar, thus marking yet another business expansion for the company. Birmingham Slag continued to prosper during World War II, providing aggregates and concrete for such wartime efforts as the Manhattan Project in Oak Ridge, Tennessee; the Huntsville, Alabama, Redstone Arsenal; and a major munitions depot at Fort McClellan in Anniston, Alabama.

After the war, construction of the new federal interstate highway system, proposed in the early 1950s, presented a potential bonanza for Birmingham Slag. The company, however, needed more capital than a family-owned business could muster in order to take advantage of the opportunity. In addition, Charles W. Ireland, the grandson of the Ohio banker, had become president of Birmingham Slag in 1951 and was looking for ways to lessen the inheritance taxes that family members faced. The answer presented itself in the form of a merger with the publicly traded Vulcan Detinning Company of Sewaren, New Jersey.

Vulcan Detinning had been formed in 1902 by Adolph Kern, who owned the Vulcan Metal Refining Company in Sewaren and the Vulcan Western Company of Chicago. The new company, Vulcan Detinning, used a process that had been developed in Germany to recover pure tin from tin-plated scrap. Later, Kern quietly helped establish a rival company in Pennsylvania, the Republic Chemical Company. In 1912 he left Vulcan Detinning to join Republic Chemical, taking the companys trade secrets with him and setting off a series of lawsuits. Vulcan Detinning and Republic Chemical merged in 1920, after Kern was no longer associated with either company.

William J. Buttfieldwho had joined Vulcan Detinning as a director in 1912, when Kern left for Republic Chemicalguided Vulcan Detinning through the early part of the twentieth century. During the Depression of the 1930s he used his commodities brokerage background to shift the companys resources into importing coffee and rubber. Vulcan Detinning continued to pay dividends even though the Sewaren detinning plant was closed from 1932 until 1937. Employees were kept on the payroll and were occupied with the repairing and reconditioning of plant facilities. By 1940 Vulcan Detinning was again flourishing, although the Sewaren plant, reopened in 1937, was closed permanently in 1938. Buttfield is also credited with being one of the industrialists who in the months preceding the Japanese attack on Pearl Harbor, finally convinced the United States to begin stockpiling critical materials, such as tin.

The merger between Birmingham Slag and Vulcan Detinning was completed in 1956. At the time, Alfred Buttfield, the son of William J. Buttfield, was president of Vulcan Detinning. He became chairman of the board of the newly named Vulcan Materials Company.

Until the merger, Birmingham Slag, although successful, had been a modest-sized, regional company. Vulcan Materials Company was traded on the New York Stock Exchange and quickly became a company of national importance. The merger allowed Vulcan to diversify and create a business less dependent on the construction industry, as well as raise the capital for expansion. From 1956 to 1960 Vulcans net worth increased almost seven-fold, to $72 million from $11 million. It also became the largest producer of construction aggregates material in the country.

Although Charles W. Ireland is credited with providing the vision for Vulcans rapid growth, Bernard A. Monaghan is considered the architect. Monaghan, a Rhodes Scholar and graduate of Harvard University Law School, was the Irelands family and corporate attorney. He negotiated the merger with Vulcan Detinning and later orchestrated the acquisition of a dozen more construction aggregate companies through the 1950s and into the early 1960s. He joined Vulcan in 1958 as executive vice-president and, soon after, became president and chief executive officer.

One of the companies with which Monaghan negotiated a merger was Lambert Brothers, Inc., an Appalachian quarrying company with a storied history. The nine Lambert brothers, from a family of 15, were low-income Smoky Mountain residents who, according to company lore, started with a mule and a wheelbarrow and built a $9 million-a-year business in one generation. During the 1930s they moved their portable rock-crushing equipment throughout the Appalachian states and as far west as Oklahoma to work on road construction. The story of their success is peppered with tales of bare-knuckled fights and high-stakes poker. By the mid 1950s Lambert Brothers was the largest rock-quarrying firm in the United States.

It was during this period of rapid expansion that Vulcan also became a chemicals manufacturer. In 1957 it bought the Union Chemical and Materials Corporation of Chicago, a construction aggregate company in the booming Midwest market that had merged with the Frontier Chemical Company. Frontier produced sodium hydroxide (caustic soda), chlorine, and hydrochloric acid for the oil industry at plants in Texas and Kansas.

The mergers with Union Chemical, Lambert Brothers, and seven other companies owned by the Lamberts were approved by Vulcans stockholders in one fell swoop in 1957. At the time, Fortune magazine called it one of the most complex corporate acquisitions ever arranged. Vulcan continued its strategy of buying family-owned aggregate businesses over the next 30 years. In 1982 in a story entitled Cinderella, a Forbes correspondent observed that Vulcan had created a quasi-monopoly in the crushed stone-business by buying more than 90 quarries in the 1950s and 1960s when quarries were a dime a dozen.

In 1967 Vulcan purchased Aluminum and Magnesium, Inc., an Ohio-based aluminum recycler. Until 1988, when Vulcan sold its metals division, detinning and aluminum recycling had formed the nucleus of the metals processing business. Vulcan also spent ten years in oil and natural gas exploration, forming a joint venture in 1975 with Oklahoma-based Southport Exploration, Inc. Vulcan acquired Southport Exploration in 1981 but sold the business in 1985.

In July of 1987 Vulcan formally announced its Crescent Market Project, a $170 million joint venture with one of Latin Americas largest construction conglomerates, Ingenieros Civiles Associados, S.C. (Grupo 1C A), to quarry limestone from the wilds of the Yucatan Peninsula. Vulcan had first looked to Mexico as a potential quarry site to serve the Gulf Coast area of the United States in 1973. The idea was abandoned and then revived in 1978. In 1981 the company began a concentrated effort to locate quarry sites in the Mexican state of Quintana Roo. Afterwards, Pete Wiese, the Vulcan geologist who headed the exploration, described the effort in the companys annual magazine, Profile: Quintana Roo was pretty unsettled. I had a machete and I would just get out of the car and cut through the jungle to the coast and see what I could see.

The joint venture eventually settled on a site about 45 miles south of Cancún and only a few hundred yards from ancient Mayan ruins that had been built out of the same tan limestone.

An agreement was made with the Mexican National Institute of Archeology and History to underwrite the cost of locating, mapping, and conserving the ruins. The Crescent Market Project also included construction of a deep-water port, which required dredging more than three million tons of stone from the harbor at Playa del Carmen.

Overcoming technological and logistical challenges, including Hurricane Gilbertwhich battered the Yucatan coast in 1988 causing more than $400,000 damage to the stone processing plant then under constructionVulcan and Grupo ICA began shipping stone from Mexico to the United States in 1990. Most of the Mexican limestone was destined to become construction material aggregates, but because of a high calcium content, was also being used in products as diverse as fertilizer and toothpaste.

The Mexican quarry won the National Stone Association Showplace Award in 1990, its first year of operation. In 1991 the quarry shipped 2.5 million tons of limestone, about a third of the estimated annual capacity. By late 1992 Vulcan, looking ahead to a recovering economy and refocused attention on the nations infrastructure, was estimating that the Crescent Market Project would become profitable in 1993.

The W. H. Blount, a refitted Panamax-class vessel named for a former chief executive officer and then-chairman emeritus of Vulcan Materials, was put into operation in March of 1991 to carry limestone from the Mexican quarry. More than 700 feet long and 100 feet wide, the W. H. Blount was one of the largest self-unloading ships in service. It could carry more than 64,000 tons of limestone, or about 2,667 truckloads. A second, similar ship was put into service in late 1992.

Aside from the Crescent Market Project, which had begun in 1987, Vulcan continued with other acquisitions, taking on Texas-based Whites Mines, Inc. and two affiliated companies for $89 million that year. At the time, it was the largest acquisition in the companys long history. The purchase gave Vulcan control of five more quarries, including the Uvalde limestone quarry west of San Antonio. The quarry produces rock asphalt, a stone that is naturally impregnated with asphalt, making it a natural paving material.

Three years later, in 1990, Vulcan surpassed the Whites Mines acquisition by paying more than $110 million for the Reed Crushed Stone Company, Inc., and two related companies. Included in the purchase was the Reed quarry near Paducah, Kentucky, the largest single crushed-stone quarry in the country. The purchase also included a fleet of barges and a coal transshipping and blending business, putting Vulcan Materials in the coal-handling business for the first time.

Vulcans chemical business was heavily regulated and often prompted public concerns about environmental health and safety. In 1990 Vulcan committed to reducing hazardous emissions at its chemical plants by 90 percent over the next five years, primarily by turning hydrochloric acid into calcium chloride, which can be used as a dust stabilizer and deicer. Vulcan had been disposing of excess hydrochloric acid, a waste product of other chemical production processes, by pumping the acid into limestone deposits a mile below ground in a deep-well injection process permitted and approved by the Environmental Protection Agency (EPA). The limestone neutralized the acid; however, it was still considered a hazardous emission for reporting purposes under Title III of the Federal Superfund Amendment and Reauthorization Act. This resulted in Vulcan being listed among the worst polluters in the United States.

In order to change its status as a major polluter, Vulcan completed construction of a new calcium chloride facility at its Wichita, Kansas, chemical manufacturing complex early in 1993. Even before it opened, the plant received a Certificate for Environmental Achievement from Renew America, a national environmental organization based in Washington, D.C. The processing facility, with a capacity of 18 million pounds per year, was designed by Tetra Technologies, which also distributed the calcium chloride. Used primarily to purify drinking water, it also serves as a biocide in the fruit-processing industry and as a cleaning material in electronics.

In addition to its construction of the calcium chloride facility, Vulcans chemicals division was phasing out production of chlorofluorocarbons (CFCs) and assisting in the development of nonozone depleting CFC replacements.

Vulcan is also a member of two major trade associationsthe National Stone Association and the Chemical Manufacturers Associationthat are active in addressing environmental health and safety concerns. The company participates in the Wildlife Habitat Enhancement Council, a nonprofit organization that encourages the development of wildlife sanctuaries on corporate-owned lands. In 1990 Vulcan Materials quarry in Warrenton, Virginia, was the first site in the nation to be certified by the Wildlife Habitat Enhancement Council; Vulcan also received the Virginia Conservationist of the Year Award that year for its efforts at the quarry. As of 1992, 15 Vulcan Materials quarries had been certified by the organization.

Historically, Vulcan Materials two principal businesses have provided economic stability; construction aggregates did well when the chemical market was depressed and vice versa. However, construction spending in the United States, adjusted for inflation, decreased every year between 1986 and 1991, the longest continual decline since the Great Depression. With the economy in recession, the company recorded three straight years of lower net income, from a high of $136 million on sales of $1.05 billion in 1988 to $52.6 million on sales of $1.01 billion in 1991. In 1992 sales increased by 7 percent to $1.078 billion, while net earnings rose by 79 percent to $93.98 million. Entering 1993, the company was encouraged by indications that the economy was recovering and by a renewed national focus on rebuilding the infrastructure. The United States Congress had passed the Intermodal Surface Transportation Efficiency Act in December of 1991, and federal spending on highway construction was expected to be $18.4 billion in 1993, a 30 percent increase over 1990.

Principal Subsidiaries

Vulcan Gulf Coast Materials, Inc.

Further Reading

The Vulcan Detinning Company, Profile, fall 1978; The Merger Years 1956-1961, Profile, spring 1979; Carmichael, Jane, Cinderella, Forbes, March 15, 1982; Blount, W. Houston, The Past as a Challenge to the Future, speech delivered to The Newcomen Society in North America, Birmingham, Alabama, October 13, 1982; Blevins, Dallas R. and Jessie L. Forbes, Vulcan Materials: Alabamas Share of the Fortune (unpublished), University of Montevallo, Alabama, 1984; Pierce, Frank, Vulcan Materials Company: Alabamas Share of the Fortune, Journal of the Birmingham Historical Society, December 1985; Interview: Pete Clemens, Profile, 1988; The Crescent Market Project, Profile, 1988; Interview: Bill Gray son, Profile, 1988; Whites Mines: Vulcan Expands in a Texas-size Way, Profile, 1988; Charles Ireland: 1916-1987, Profile, 1988; Barney Monaghan: 1916-1987, Profile, 1988; Connel, Greg, Rolling With the Changes, Pit & Quarry, January 1990; Weaver, Bronwyn, Community Involvement Rewrites Familiar Story, Pit & Quarry, June 1990; Archibald, Robert, and Robert Beard, Making Waves in Gulf Coast Markets, Pit & Quarry, June 1991; Ransdell, Tom, Up and Running in Mexico, Profile, 1992; Obstacle Course to International Success in Mexico, Profile, 1992; Protecting the Physical and Historical Environment, Profile, 1992; Life in Playa del Carmen, Profile, 1992; An Interview With Houston Blount, Profile, 1992; Bonnie, Fred, The Low Cost of a High Public Relations Profile, Shillings Mining Review, January 2, 1993; England, Ed, and Irene Preston, The Birmingham Slag Company, Profile; The Lambert Brothers, Profile; Vulcans Mideast Division, Profile; The Chemicals Division/A Frontier Success Story, Profile; The Campbell Limestone Company, Profile.

Dean Boyer

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