Vulcan Materials restructures to save $30 million annually

Tina Grady Barbaccia

December 20, 2011

Birmingham, Ala.-based Vulcan Materials Co. is consolidating its eight divisions into four operating regions as part of ongoing efforts to reduce overhead costs and increase operating efficiency.

This initiative, publicly announced Dec. 20, is expected to generate an ongoing annualized pre-tax cost savings of nearly $30 million, in addition to about $25 million in annual pre-tax overhead reductions already implemented in 2011. The initiative, which senior management began developing earlier in the year, was approved by Vulcan’s Board of Directors at its regularly scheduled quarterly meeting on Dec. 9, 2011, following a preliminary review of the company’s proposal at the Board’s Oct. 14, 2011 meeting.

The new organizational structure is consistent with what Vulcan says is its “longstanding commitment to decentralized management of its sales, marketing and operating functions, and will enable the company to maintain close, local relationships with its customers.”

It also will allow the company to leverage significant investments in technology that have replaced legacy IT and financial reporting systems, according to the company. Vulcan says these new systems support improvement in administrative and operating efficiencies while also creating new opportunities for greater standardization and implementation of best practices throughout the organization.

The company expects that approximately 200 positions will be affected, with most coming from overhead and administrative staff.  Staffing at plant facilities will be largely unaffected.

“This consolidation is another important step in our ongoing efforts to optimize operational efficiency and better position the Company for improved performance,” Donald M. James, chairman and CEO, said in a written statement. “We are very mindful of the impact this initiative will have on affected employees and will work with them to make this transition as smooth as possible.”

Following the consolidation, Vulcan will have four regions: East, South, Central and West.

  • The East Region, which will comprise the company’s former Southeast and Mideast Divisions, will be headquartered in Atlanta and led by Michael R. Mills, senior vice president, East.  Mills, age 50, was President of Vulcan’s Southeast Division.
  • The South Region will comprise the company’s former Florida Rock and Southwest Divisions, and will include Vulcan’s quarry and harbor on Mexico’s Yucatan Peninsula and related shipping assets.  The South Region will be headquartered in Jacksonville, Florida and led by James T. Hill, Senior Vice President, South.  Hill, age 51, was President of the Company’s Florida Rock Division.
  • The Central Region will comprise the company’s former Midwest, Midsouth and Southern and Gulf Coast Divisions, excluding Vulcan’s Mexico facilities and related assets. The Central Region will be headquartered in Birmingham, Alabama and led by Stanley G. Bass, senior vice president, Central. Bass was president of the Midsouth and Southwest Divisions.
  • The West Region will comprise the company’s former Western Division facilities. It will be headquartered in Los Angeles and led by Alan D. Wessel, senior vice president, West. Wessel previously was President of the Western Division.

The senior vice presidents heading the newly formed regions will report to Danny R. Shepherd, executive vice president, Construction Materials.

As a result of the consolidation, Vulcan expects to record a charge of approximately $10 million on a pre-tax basis, or $0.05 per share after tax, during the fourth quarter of 2011.  This charge will consist primarily of severance costs.  Vulcan expects to substantially complete the consolidation in the first quarter of 2012.

Vulcan Materials will continue to report financial results for its four operating segments – Aggregates, Concrete, Asphalt Mix and Cement.

These plans relate to an action that was approved by Vulcan’s board prior to receiving a hostile takeover bid on Dec. 12 from Martin Marietta Materials, Inc. to exchange Vulcan common stock for Martin Marietta common stock.

Vulcan has not yet made a recommendation to its shareholders. Vulcan’s Board of Directors is continuing to review the offer and says the board intends to advise shareholders of its recommendation by Dec. 23, 2011 via a Solicitation/Recommendation statement on Schedule 14D-9 that will be filed with the Securities and Exchange Commission and made available to Vulcan shareholders, z according to a press release from Vulcan. The Board continues to advise shareholders to take no action at this time pending the completion of its review.

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