NOTE 1: BASIS OF PRESENTATION

Vulcan Materials Company (the “Company,” “Vulcan,” “we,” “our”), a New Jersey corporation, is the nation’s largest producer of construction aggregates, primarily crushed stone, sand and gravel; a major producer of asphalt mix and ready-mixed concrete and a leading producer of cement in Florida.

Our accompanying unaudited condensed consolidated financial statements were prepared in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X 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 our management, the statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the results of the reported interim periods. Operating results for the three month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. For further information, refer to the consolidated financial statements and footnotes included in our most recent Annual Report on Form 10-K.

Due to the 2005 sale of our Chemicals business as presented in Note 2, the operating results of the Chemicals business are presented as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Income.

RECLASSIFICATIONS

Certain items previously reported in specific financial statement captions have been reclassified to conform with the 2011 presentation.

CORRECTION OF PRIOR PERIOD FINANCIAL STATEMENTS

During 2010 we completed a comprehensive analysis of our deferred income tax balances and concluded that our deferred income tax liabilities were understated. The errors arose during 2008 and during periods prior to January 1, 2007, and are not material to previously issued financial statements. As a result, we did not amend previously filed financial statements but restated the December 31, 2009 balance sheet in our Annual Report on Form 10-K for the year ended December 31, 2010 and have restated the March 31, 2010 balance sheet presented in this Form 10-Q.

The errors that arose during 2008 related to the calculations of deferred income taxes referable to the Florida Rock acquisition and additional 2008 federal return adjustments. The correction of these errors resulted in a decrease to deferred income tax liabilities of $6,129,000, and an increase to goodwill referable to our Aggregates segment of $2,321,000 with an offsetting increase in current taxes payable of $8,450,000 for the year ended December 31, 2008.

The errors that arose during periods prior to January 1, 2007 resulted in an understatement of deferred income tax liabilities of $14,785,000. Based on the work performed to confirm the current and deferred income tax provisions recorded during 2007, 2008 and 2009, and to determine the correct deferred income tax account balances as of January 1, 2007, we were able to substantiate that the $14,785,000 understatement related to periods prior to January 1, 2007. The correction of these errors resulted in an increase to deferred income tax liabilities and a corresponding decrease to retained earnings of $14,785,000 as of January 1, 2007.

A summary of the effects of the correction of the errors on our Condensed Consolidated Balance Sheet as of March 31, 2010, is presented in the table below:

		As of March 31, 2010
		As								As
in thousands		Reported				Correction				Restated
Balance Sheet
Assets
Current deferred income taxes			$56,990				($1,950	)			$55,040
Prepaid expenses			51,538				(8,450	)			43,088
Total current assets			766,072				(10,400	)			755,672
Goodwill			3,093,979				2,321				3,096,300
Total assets			$8,474,882				($8,079	)			$8,466,803
Liabilities
Noncurrent deferred income taxes			$863,678				$6,706				$870,384
Total liabilities			4,411,882				6,706				4,418,588
Shareholders’ equity
Retained earnings			1,681,624				(14,785	)			1,666,839
Total shareholders’ equity			4,063,000				(14,785	)			4,048,215
Total liabilities and shareholders’ equity			$8,474,882				($8,079	)			$8,466,803

NOTE 2: DISCONTINUED OPERATIONS

In 2005, we sold substantially all the assets of our Chemicals business to Basic Chemicals, a subsidiary of Occidental Chemical Corporation. In addition to the initial cash proceeds, Basic Chemicals was required to make payments under two earn-out agreements subject to certain conditions. During 2007, we received the final payment under the ECU (electrochemical unit) earn-out, bringing cumulative cash receipts to its $150,000,000 cap.

Proceeds under the second earn-out agreement are based on the performance of the hydrochlorocarbon product HCC-240fa (commonly referred to as 5CP) from the closing of the transaction through December 31, 2012 (5CP earn-out). The primary determinant of the value for this earn-out is the level of growth in 5CP sales volume. At the June 7, 2005 closing date, the value assigned to the 5CP earn-out was limited to an amount that resulted in no gain on the sale of the business, as the gain was contingent in nature. A gain on disposal of the Chemicals business is recognized to the extent cumulative cash receipts under the 5CP earn-out exceed the initial value recorded.

In March 2011, we received a payment of $12,284,000 under the 5CP earn-out related to performance during the year ended December 31, 2010. During the first quarter of 2010, we received $8,794,000 under the 5CP earn-out related to the year ended December 31, 2009. These receipts were recorded as gains on disposal of discontinued operations. Through March 31, 2011, we have received a total of $54,991,000 under the 5CP earn-out, a total of $21,890,000 in excess of the receivable recorded on the date of disposition.

We are liable for a cash transaction bonus payable to certain former key Chemicals employees. This transaction bonus is payable if cash receipts realized from the two earn-out agreements described above exceed an established minimum threshold. The bonus is payable annually based on the prior year’s results. We expect the 2011 payout will be $1,228,000 and have accrued this amount as of March 31, 2011. In comparison, we had accrued $879,000 as of March 31, 2010.

The financial results of the Chemicals business are classified as discontinued operations in the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Income for all periods presented. There were no net sales or revenues from discontinued operations during the three month periods ended March 31, 2011 and 2010. Results from discontinued operations are as follows:

		Three Months Ended
						March 31
in thousands		2011				2010
Discontinued Operations
Pretax earnings from results			$5,306				$960
Gain on disposal, net of transaction bonus			11,056				7,915
Income tax provision			(6,473	)			(3,148	)
Earnings on discontinued operations, net of tax			$9,889				$5,727

The first quarter 2011 pretax earnings from results of discontinued operations of $5,306,000 include a $7,500,000 pretax gain recognized on recovery from an insurer in lawsuits involving perchloroethylene. This gain was offset in part by general and product liability costs, including legal defense costs, and environmental remediation costs associated with our former Chemicals business. The first quarter 2010 pretax earnings from results of discontinued operations of $960,000 include litigation settlements associated with our former Chemicals business offset in part by general and product liability costs, including legal defense costs, and environmental remediation costs.

NOTE 3: EARNINGS PER SHARE (EPS)

We report two earnings per share numbers: basic and diluted. These are computed by dividing net earnings by the weighted-average common shares outstanding (basic EPS) or weighted-average common shares outstanding assuming dilution (diluted EPS) as set forth below:

		Three Months Ended
						March 31
in thousands		2011				2010
Weighted-average common shares outstanding			129,078				126,692
Dilutive effect of
Stock options/SOSARs			0				0
Other stock compensation plans			0				0
Weighted-average common shares outstanding, assuming dilution			129,078				126,692

All dilutive common stock equivalents are reflected in our earnings per share calculations. Antidilutive common stock equivalents are not included in our earnings per share calculations. Because we operated at a loss in the first quarters of 2011 and 2010, shares of 322,000 and 476,000, respectively, that otherwise would have been included in our diluted weighted-average common shares outstanding computation for the quarters ended March 31, 2011 and 2010, were excluded.

The number of antidilutive common stock equivalents for which the exercise price exceeds the weighted-average market price, are as follows:

		Three Months Ended
						March 31
in thousands		2011				2010
Antidilutive common stock equivalents			5,695				4,414

NOTE 4: INCOME TAXES

Our income tax provision and the corresponding effective tax rate are based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. For interim financial reporting, except in circumstances as described in the following paragraph, we estimate the annual tax rate based on projected taxable income for the full year and record a quarterly tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of the year’s taxable income as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to our expected effective tax rate for the year. When this occurs, we adjust the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date income tax provision reflects the expected annual tax rate. Significant judgment is required in determining our effective interim tax rate and in evaluating our tax positions.

When application of the estimated annual effective tax rate distorts the financial results of an interim period, we calculate the income tax provision or benefit using an alternative methodology as prescribed by Accounting Standards Codification (ASC) 740-270-30-30 through 30-33. This alternative methodology results in an income tax provision or benefit based solely on the year-to-date pretax loss as adjusted for permanent differences on a pro rata basis.

We recognize an income tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the income tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. We consider resolution for an issue to occur at the earlier of settlement of an examination, the expiration of the statute of limitations, or when the issue is “effectively settled,” as described in ASC 740. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as we consider appropriate.

In the first quarters of 2011 and 2010, we applied the alternative methodology discussed above in the determination of the income tax provision from continuing operations.

We recorded income tax benefits from continuing operations of $37,430,000 in the first quarter of 2011 compared to $34,212,000 in the first quarter of 2010. The increase in our income tax benefit resulted mainly from the larger pretax loss and an increase in the depletion benefit partially offset by discrete income tax adjustments booked in the first quarter of 2011.

NOTE 5: MEDIUM-TERM INVESTMENTS

We held investments in money market and other money funds at The Reserve, an investment management company specializing in such funds, as follows: March 31, 2011 — $0, December 31, 2010 — $5,531,000 and March 31, 2010 — $5,532,000. The substantial majority of our investment was held in the Reserve International Liquidity Fund, Ltd. On September 15, 2008, Lehman Brothers Holdings Inc. filed for bankruptcy protection. In the following days, The Reserve announced that it was closing all of its money funds, some of which owned Lehman Brothers securities, and was suspending redemptions from and purchases of its funds, including the Reserve International Liquidity Fund.

As a result of the temporary suspension of redemptions and the uncertainty as to the timing of such redemptions, during 2008 we changed the classification of our investments in The Reserve funds from cash and cash equivalents to medium-term investments. We reduced the carrying value of our investment to its estimated fair value of $3,630,000 and $4,109,000 as of December 31, 2010 and March 31, 2010, respectively. See Note 7 for further discussion of the fair value determination.

During January 2011, we received $3,630,000 from the Reserve representing the final redemption of the investment. As a result of this redemption, we reclassified our investments in The Reserve funds from medium-term investments to cash and cash equivalents as of December 31, 2010.

NOTE 6: DERIVATIVE INSTRUMENTS

During the normal course of operations, we are exposed to market risks including fluctuations in interest rates, fluctuations in foreign currency exchange rates and changes in commodity pricing. From time to time, and consistent with our risk management policies, we use derivative instruments to hedge against these market risks. We do not utilize derivative instruments for trading or other speculative purposes. The interest rate swap agreements described below were designated as cash flow hedges of future interest payments.

In December 2007, we issued $325,000,000 of 3-year floating (variable) rate notes that bear interest at 3-month London Interbank Offered Rate (LIBOR) plus 1.25% per annum. Concurrently, we entered into a 3-year interest rate swap agreement in the stated (notional) amount of $325,000,000. Under this agreement, we paid a fixed interest rate of 5.25% and received 3-month LIBOR plus 1.25% per annum. Concurrent with each quarterly interest payment, the portion of this swap related to that interest payment was settled and the associated realized gain or loss was recognized. This swap agreement terminated December 15, 2010, coinciding with the maturity of the 3-year notes.

Additionally, during 2007, we entered into fifteen forward starting interest rate swap agreements for a total notional amount of $1,500,000,000. Upon the issuance in 2007 of the related fixed-rate debt, we terminated and settled these forward starting swaps for cash payments of $89,777,000. Amounts accumulated in other comprehensive loss are being amortized to interest expense over the term of the related debt. For the 12-month period ending March 31, 2012, we estimate that $8,352,000 of the pretax loss accumulated in OCI will be reclassified to earnings.

Derivative instruments are recognized at fair value in the accompanying Condensed Consolidated Balance Sheets. Fair values of derivative instruments designated as hedging instruments are as follows:

						Fair Value 1
						March 31				December 31				March 31
in thousands		Balance Sheet Location				2011				2010				2010
Liability Derivatives
Interest rate derivatives		Other current liabilities					$0				$0				$8,956
Total derivatives liability							$0				$0				$8,956

¹    See Note 7 for further discussion of the fair value determination.

The effects of the cash flow hedge derivative instruments on the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Income are as follows:

Three Months Ended

Location on

March 31

in thousands

Statements

2011

2010

Interest Rate Derivatives

Loss recognized in OCI

Other current

(effective portion)

liabilities

$0

($808

)

Loss reclassified from

Accumulated OCI

Interest

(effective portion)

expense

1,995

4,898

NOTE 7: FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as described below:

Level 1: Quoted prices in active markets for identical assets or liabilities

Level 2: Inputs that are derived principally from or corroborated by observable market data

Level 3: Inputs that are unobservable and significant to the overall fair value measurement

Our assets and liabilities that are subject to fair value measurements on a recurring basis are summarized below:

	Level 1
		March 31				December 31				March 31
in thousands		2011				2010				2010
Fair Value Recurring
Rabbi Trust
Mutual funds			$13,594				$13,960				$11,947
Equities			10,144				9,336				7,740
Net asset			$23,738				$23,296				$19,687
	Level 2
		March 31				December 31				March 31
in thousands		2011				2010				2010
Fair Value Recurring
Medium-term investments			$0				$0				$4,109
Interest rate derivative			0				0				(8,956	)
Rabbi Trust
Common/collective trust funds			1,323				2,431				2,769
Net asset (liability)			$1,323				$2,431				($2,078	)

The Rabbi Trust investments relate to funding for the executive nonqualified deferred compensation and excess benefit plans. The fair values of these investments are estimated using a market approach. The Level 1 investments include mutual funds and equity securities for which quoted prices in active markets are available. Investments in common/collective trust funds are stated at estimated fair value based on the underlying investments in those funds. The underlying investments are comprised of short-term, highly liquid assets in commercial paper, short-term bonds and treasury bills.

The medium-term investments were comprised of money market and other money funds, as more fully described in Note 5. Using a market approach, we estimated the fair value of these funds by applying our historical distribution ratio to the liquidated value of investments in The Reserve funds. Additionally, we estimated a discount against our investment balances to allow for the risk that legal and accounting costs and pending or threatened claims and litigation against The Reserve and its management would reduce the principal available for distribution.

The interest rate derivative consisted of an interest rate swap agreement applied to our $325,000,000 3-year notes issued December 2007 and paid December 2010. This agreement is more fully described in Note 6. This interest rate swap was measured at fair value using a market approach based on the prevailing market interest rate as of the measurement date.

The carrying values of our cash equivalents, restricted cash, accounts and notes receivable, current maturities of long-term debt, short-term borrowings, trade payables and other accrued expenses approximate their fair values because of the short-term nature of these instruments. Additional disclosures for derivative instruments and interest-bearing debt are presented in Notes 6 and 11, respectively.

Assets that were subject to fair value measurement on a nonrecurring basis are summarized below:

	As of December 31, 2010
						Impairment
in thousands		Level 3				Charges
Fair Value Nonrecurring
Property, plant & equipment			$1,536				$2,500
Assets held for sale			9,625				1,436
Totals			$11,161				$3,936

During the quarter ended December 31, 2010, we recorded a $3,936,000 loss on impairment of long-lived assets. We utilized an income approach to measure the fair value of the long-lived assets and determined that the carrying value of the assets exceeded the fair value. The loss on impairment represents the difference between the carrying value and the fair value (less costs to sell for assets held for sale) of the impacted long-lived assets.

NOTE 8: OTHER COMPREHENSIVE INCOME

Comprehensive income includes charges and credits to equity from nonowner sources and comprises two subsets: net earnings and other comprehensive income. The components of other comprehensive income are presented in the accompanying Condensed Consolidated Statements of Earnings and Comprehensive Income, net of applicable taxes.

Amounts accumulated in other comprehensive income (loss), net of tax, are as follows:

		March 31				December 31				March 31
in thousands		2011				2010				2010
Cash flow hedges			($37,687	)			($39,137	)			($46,956	)
Pension and postretirement plans			(135,985	)			(138,202	)			(144,093	)
Accumulated other comprehensive loss			($173,672	)			($177,339	)			($191,049	)

NOTE 9: SHAREHOLDERS’ EQUITY

In March 2010, we issued 1,190,000 shares of common stock to our qualified pension plan (par value of $1 per share) as described in Note 10. This transaction increased shareholders’ equity by $53,864,000 (common stock $1,190,000 and capital in excess of par $52,674,000).

In February 2011, we issued 372,992 shares (368,527 shares net of acquired cash) of common stock in connection with a business acquisition as described in Note 14.

We periodically issue shares of common stock to the trustee of our 401(k) savings and retirement plan to satisfy the plan participants’ elections to invest in our common stock. The resulting cash proceeds provide a means of improving cash flow, increasing shareholders’ equity and reducing leverage. Under this arrangement, the stock issuances and resulting cash proceeds were as follows: three months ended March 31, 2011 — no shares issued; and three months ended March 31, 2010 — issued 250,368 shares for cash proceeds of $11,249,000.

No shares were held in treasury as of March 31, 2011, December 31, 2010 and March 31, 2010. As of March 31, 2011, 3,411,416 shares may be repurchased under the current authorization of our Board of Directors.

NOTE 10: BENEFIT PLANS

The following tables set forth the components of net periodic benefit cost:

PENSION BENEFITS		Three Months Ended
		March 31
in thousands		2011				2010
Components of Net Periodic Benefit Cost
Service cost			$5,190				$4,808
Interest cost			10,542				10,405
Expected return on plan assets			(12,370	)			(12,535	)
Amortization of prior service cost			85				115
Amortization of actuarial loss			2,824				1,336
Net periodic pension benefit cost			$6,271				$4,129
Pretax reclassification from OCI included in net periodic pension benefit cost			$2,909				$1,451
OTHER POSTRETIREMENT BENEFITS		Three Months Ended
		March 31
in thousands		2011				2010
Components of Net Periodic Benefit Cost
Service cost			$1,197				$1,066
Interest cost			1,613				1,663
Amortization of prior service credit			(169	)			(182	)
Amortization of actuarial loss			287				222
Net periodic postretirement benefit cost			$2,928				$2,769
Pretax reclassification from OCI included in net periodic postretirement benefit cost			$118				$40

The reclassifications from other comprehensive income (OCI) noted in the tables above are related to amortization of prior service costs or credits and actuarial losses.

In March 2010, we contributed $72,500,000 ($18,636,000 in cash and $53,864,000 in stock — 1,190,000 shares valued at $45.26 per share) and an additional $1,300,000 in July 2010 to our qualified pension plans for the 2009 plan year. These contributions, along with the existing funding credits, should be sufficient to cover expected required contributions to the qualified plans through 2012.

As of December 31, 2008, our Master Pension Trust had assets invested at Westridge Capital Management, Inc. (WCM) with a reported fair value of $59,245,000. In February 2009, the New York District Court appointed a receiver over WCM due to allegations of fraud and other violations of federal commodities and securities laws by principals of a WCM affiliate. In light of these allegations, we reassessed the fair value of our investments at WCM and recorded a $48,018,000 write-down in the estimated fair value of these assets for the year ended December 31, 2008.

During 2010, the court-appointed receiver released $6,555,000 as a partial distribution and the Master Pension Trust received a $15,000,000 insurance settlement related to our WCM loss. In April 2011, the court-appointed receiver released an additional $22,041,000 to our Master Pension Trust. We intend to pursue all appropriate legal actions to recover additional amounts of our investments.

NOTE 11: CREDIT FACILITIES, SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings are summarized as follows:

March 31

December 31

March 31

dollars in thousands

2011

2010

2010

Short-term Borrowings

Bank borrowings

$300,000

$285,500

$0

Commercial paper

0

0

300,000

Total

$300,000

$285,500

$300,000

Bank Borrowings

Maturity

1 - 76 days

3 - 74 days

n/a

Weighted-average interest rate

0.60%

0.59%

n/a

Commercial Paper

Maturity

n/a

n/a

1 day

Weighted-average interest rate

n/a

n/a

0.34%

We utilize our bank lines of credit to access LIBOR-based short-term loans to fund our borrowing requirements. Unsecured bank lines of credit totaling $1,500,000,000 were maintained at March 31, 2011, all of which expire November 16, 2012. As of March 31, 2011, we had $300,000,000 of borrowings under the lines of credit. Interest rates referable to borrowings under these lines of credit are determined at the time of borrowing based on current market conditions. Pricing of bank loans was 30 basis points (0.30 percentage points) over LIBOR based on our long-term debt ratings at March 31, 2011. Bank loans totaled $300,000,000 as of March 31, 2011, of which $50,000,000 was borrowed on an overnight basis at 0.57%, $100,000,000 was borrowed for 90 days at 0.613% and $150,000,000 was borrowed for three months at 0.6095%.

All lines of credit extended to us in 2011 and 2010 were based solely on a commitment fee; no compensating balances were required. In the normal course of business, we maintain balances for which we are credited with earnings allowances. To the extent the earnings allowances are not sufficient to fully compensate banks for the services they provide, we pay the fee equivalent for the differences.

As of March 31, 2011, $52,000 of our long-term debt, including current maturities, was secured. This secured debt was assumed with the November 2007 acquisition of Florida Rock. All other debt obligations, both short-term borrowings and long-term debt, are unsecured.

In July 2010, we established a $450,000,000 5-year syndicated term loan with a floating rate based on a spread over LIBOR (1, 2, 3 or 6-month LIBOR options). The proceeds were used to repay outstanding borrowings, including the $100,000,000 outstanding balance of our 3-year syndicated term loan issued in 2008 and all outstanding commercial paper, and for general corporate purposes. As of March 31, 2011, the spread was 250 basis points (2.5 percentage points) above the 3-month LIBOR of 0.31% for a total rate of 2.81% on the $450,000,000 outstanding balance. The spread is capped at 2.5 percentage points. The loan requires quarterly principal payments of $10,000,000 starting in June 2013 and a final principal payment of $360,000,000 in July 2015.

Long-term debt is summarized as follows:

		March 31				December 31				March 31
in thousands		2011				2010				2010
Long-term Debt
5-year floating term loan issued 2010			$450,000				$450,000				$0
10.125% 2015 notes issued 20091			149,612				149,597				149,552
10.375% 2018 notes issued 20092			248,424				248,391				248,299
3-year floating term loan issued 2008			0				0				100,000
6.30% 5-year notes issued 20083			249,754				249,729				249,656
7.00% 10-year notes issued 20084			399,666				399,658				399,633
3-year floating notes issued 2007			0				0				325,000
5.60% 5-year notes issued 20075			299,801				299,773				299,692
6.40% 10-year notes issued 20076			349,856				349,852				349,840
7.15% 30-year notes issued 20077			249,326				249,324				249,319
Private placement notes			0				0				15,212
Medium-term notes			21,000				21,000				21,000
Industrial revenue bonds			14,000				14,000				17,550
Other notes			1,395				1,438				1,738
Total debt excluding short-term borrowings			$2,432,834				$2,432,762				$2,426,491
Less current maturities of long-term debt			5,238				5,246				325,344
Total long-term debt			$2,427,596				$2,427,516				$2,101,147
Estimated fair value of total long-term debt			$2,544,368				$2,559,059				$2,333,436

	1		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $388 thousand, December 31, 2010 - $403 thousand and March 31, 2010 - $448 thousand. The effective interest rate for these 2015 notes is 10.31%.
	2		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $1,576 thousand, December 31, 2010 - $1,609 thousand and March 31, 2010 - $1,701 thousand. The effective interest rate for these 2018 notes is 10.58%.
	3		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $246 thousand, December 31, 2010 - $271 thousand and March 31, 2010 - $344 thousand. The effective interest rate for these 5-year notes is 7.47%.
	4		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $334 thousand, December 31, 2010 - $342 thousand and March 31, 2010 - $367 thousand. The effective interest rate for these 10-year notes is 7.86%.
	5		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $199 thousand, December 31, 2010 - $227 thousand and March 31, 2010 - $308 thousand. The effective interest rate for these 5-year notes is 6.58%.
	6		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $144 thousand, December 31, 2010 - $148 thousand and March 31, 2010 - $160 thousand. The effective interest rate for these 10-year notes is 7.39%.
	7		Includes decreases for unamortized discounts, as follows: March 31, 2011 - $674 thousand, December 31, 2010 - $676 thousand and March 31, 2010 - $681 thousand. The effective interest rate for these 30-year notes is 8.04%.

The estimated fair values of long-term debt presented in the table above were determined by discounting expected future cash flows based on credit-adjusted interest rates on U.S. Treasury bills, notes or bonds, as appropriate. The fair value estimates were based on information available to us as of the respective balance sheet dates. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since those dates.

Our debt agreements do not subject us to contractual restrictions with regard to working capital or the amount we may expend for cash dividends and purchases of our stock. Our bank credit facilities (term loan and unsecured bank lines of credit) contain a covenant that our percentage of consolidated debt to total capitalization (total debt as a percentage of total capital) may not exceed 65%. Our total debt as a percentage of total capital was 41.2% as of March 31, 2011; 40.7% as of December 31, 2010; and 40.2% as of March 31, 2010.

NOTE 12: ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.

Recognition of a liability for an ARO is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the ARO is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.

We record all AROs for which we have legal obligations for land reclamation at estimated fair value. Essentially all these AROs relate to our underlying land parcels, including both owned properties and mineral leases. For the three month periods ended March 31, we recognized ARO operating costs related to accretion of the liabilities and depreciation of the assets as follows:

		Three Months Ended
		March 31
in thousands		2011				2010
ARO Operating Costs
Accretion			$2,172				$2,189
Depreciation			1,541				3,183
Total			$3,713				$5,372

ARO operating costs for our continuing operations are reported in cost of goods sold. AROs are reported within other noncurrent liabilities in our accompanying Condensed Consolidated Balance Sheets.

Reconciliations of the carrying amounts of our AROs are as follows:

		Three Months Ended
		March 31
in thousands		2011				2010
Asset Retirement Obligations
Balance at beginning of period			$162,730				$167,757
Liabilities incurred			0				0
Liabilities settled			(2,332	)			(2,377	)
Accretion expense			2,172				2,189
Revisions up (down)			21				(3,638	)
Balance at end of period			$162,591				$163,931

Revisions to our AROs during 2010 related primarily to extensions in the estimated settlement dates at numerous sites.

NOTE 13: STANDBY LETTERS OF CREDIT

We provide certain third parties with irrevocable standby letters of credit in the normal course of business. We use commercial banks to issue such letters to back our obligations to pay or perform when required to do so according to the requirements of an underlying agreement. The standby letters of credit listed below are cancelable only at the option of the beneficiaries who are authorized to draw drafts on the issuing bank up to the face amount of the standby letter of credit in accordance with its terms.

Our standby letters of credit as of March 31, 2011 are summarized in the table below:

		March 31
in thousands		2011
Standby Letters of Credit
Risk management requirement for insurance claims			$41,083
Payment surety required by utilities			133
Contractual reclamation/restoration requirements			9,097
Financial requirement for industrial revenue bond			14,231
Total			$64,544

Since banks consider letters of credit as contingent extensions of credit, we are required to pay a fee until they expire or are canceled. Substantially all our standby letters of credit have a one-year term and are renewable annually at the option of the beneficiary. Of the total $64,544,000 outstanding letters of credit as of March 31, 2011, $61,512,000 is backed by our $1,500,000,000 bank credit facility which expires November 16, 2012.

NOTE 14: ACQUISITIONS AND DIVESTITURES

During the first quarter of 2011, we acquired ten ready-mixed concrete facilities located in Georgia for total consideration of $18,898,000 net of acquired cash (441,026 shares of common stock valued at the closing date price of $42.85 per share). We issued 368,527 shares to the seller at closing and retained 72,499 shares to fulfill certain working capital adjustments and indemnification obligations.

As a result of this acquisition, we recognized $8,436,000 of amortizable intangible assets, none of which is expected to be deductible for income tax purposes. The amortizable intangible assets consist of contractual rights in place and will be amortized over an estimated weighted-average period of 20 years. The purchase price allocation for this 2011 acquisition is preliminary and subject to adjustment.

The pending divestiture of an aggregates production facility and ready-mixed concrete operation located outside the United States is presented in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2011, December 31, 2010 and March 31, 2010 as assets held for sale and liabilities of assets held for sale. We expect the transaction to close during 2011. Depreciation expense and amortization expense were suspended on the assets classified as held for sale. The major classes of assets and liabilities of assets classified as held for sale are as follows:

		March 31				December 31				March 31
in thousands		2011				2010				2010
Held for Sale
Current assets			$3,429				$3,460				$3,670
Property, plant & equipment, net			9,737				9,625				11,016
Other assets			115				122				153
Total assets held for sale			$13,281				$13,207				$14,839
Current liabilities			$356				$116				$425
Total liabilities of assets held for sale			$356				$116				$425

During the first quarter of 2010, we sold three aggregates facilities located in rural Virginia for approximately $42,750,000 (total cash consideration).

NOTE 15: GOODWILL

Changes in the carrying amount of goodwill by reportable segment from December 31, 2010 to March 31, 2011 are summarized below:

GOODWILL
in thousands		Aggregates				Concrete				Asphalt mix				Cement				Total
Gross Carrying Amount
Total as of December 31, 2010			$3,005,383				$0				$91,633				$252,664				$3,349,680
Goodwill of acquired businesses			0				0				0				0				0
Total as of March 31, 2011			$3,005,383				$0				$91,633				$252,664				$3,349,680
Accumulated Impairment Losses
Total as of December 31, 2010			$0				$0				$0				($252,664	)			($252,664	)
Goodwill impairment loss			0				0				0				0				0
Total as of March 31, 2011			$0				$0				$0				($252,664	)			($252,664	)
Goodwill, net of Accumulated Impairment Losses
Total as of December 31, 2010			$3,005,383				$0				$91,633				$0				$3,097,016
Total as of March 31, 2011			$3,005,383				$0				$91,633				$0				$3,097,016

NOTE 16: NEW ACCOUNTING STANDARDS

ACCOUNTING STANDARDS RECENTLY ADOPTED

ENHANCED DISCLOSURES FOR FAIR VALUE MEASUREMENTS As of and for the interim period ended March 31, 2011, we adopted Accounting Standards Update (ASU) No. 2010-6, “Improving Disclosures about Fair Value Measurements” as it relates to separate disclosures about purchases, sales, issuances and settlements applicable to Level 3 measurements. Our adoption of this standard had no impact on our financial position, results of operations or liquidity.

NOTE 17: SEGMENT REPORTING

We have four operating segments organized around our principal product lines: aggregates, concrete, asphalt mix and cement. The vast majority of our activities are domestic. We sell a relatively small amount of products outside the United States. Transactions between our reportable segments are recorded at prices approximating market levels. Management reviews earnings from the product line reporting units principally at the gross profit level.

SEGMENT FINANCIAL DISCLOSURE

		Three Months Ended
		March 31
in millions		2011				2010
Total Revenues
Aggregates 1
Segment revenues			$331.6				$341.3
Intersegment sales			(29.8	)			(32.0	)
Net sales			301.8				309.3
Concrete 2
Segment revenues			82.2				82.9
Intersegment sales			0.0				0.0
Net sales			82.2				82.9
Asphalt mix
Segment revenues			64.7				63.6
Intersegment sales			0.0				(0.6	)
Net sales			64.7				63.0
Cement 3
Segment revenues			16.5				17.9
Intersegment sales			(8.9	)			(8.6	)
Net sales			7.6				9.3
Total
Net sales			456.3				464.5
Delivery revenues			30.9				28.8
Total revenues			$487.2				$493.3
Gross Profit
Aggregates			$10.7				$15.4
Concrete			(14.4	)			(16.1	)
Asphalt mix			(0.2	)			1.1
Cement			(3.2	)			0.5
Total			($7.1	)			$0.9
Depreciation, Depletion, Accretion and Amortization
Aggregates			$70.1				$73.1
Concrete			13.0				13.0
Asphalt mix			2.0				2.2
Cement			4.3				4.4
Corporate and other unallocated			1.2				1.5
Total			$90.6				$94.2

	1		Includes crushed stone, sand and gravel, sand, other aggregates, as well as transportation and service revenues associated with the aggregates business.
	2		Includes ready-mixed concrete, concrete block, precast concrete, as well as building materials purchased for resale.
	3		Includes cement and calcium products.

NOTE 18: SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental information referable to our Condensed Consolidated Statements of Cash Flows is summarized below:

		Three Months Ended
		March 31
in thousands		2011				2010
Cash Payments (Refunds)
Interest (exclusive of amount capitalized)			$4,448				$7,035
Income taxes			(35,938	)			(2,657	)
Noncash Investing and Financing Activities
Accrued liabilities for purchases of property, plant & equipment			6,378				10,273
Stock issued for pension contribution (Note 9)			0				53,864
Amounts referable to business acquisition (Note 14)
Liabilities assumed			14,330				0
Fair value of equity consideration			18,898				0

NOTE 19: COMMITMENTS AND CONTINGENCIES

We are a defendant in various lawsuits in the ordinary course of business. It is not possible to determine with precision the outcome, or the amount of liability, if any, under these lawsuits, especially where the cases involve possible jury trials with as yet undetermined jury panels.

In addition to these lawsuits in which we are involved in the ordinary course of business, certain other material legal proceedings are more specifically described below. We contend that we are not liable in any of these matters and intend to defend ourselves vigorously.

PERCHLOROETHYLENE CASES

We are a defendant in cases involving perchloroethylene (perc), which was a product manufactured by our former Chemicals business. Perc is a cleaning solvent used in dry cleaning and other industrial applications. These cases involve various allegations of groundwater contamination or exposure to perc allegedly resulting in personal injury. Vulcan is vigorously defending all of these cases. At this time, we cannot determine the likelihood or reasonably estimate a range of loss pertaining to any of these matters, which are listed below:

§

CALIFORNIA WATER SERVICE COMPANY — On June 6, 2008, we were served in an action styled California Water Service Company v. Dow, et al., now pending in the San Mateo County Superior Court, California. According to the complaint, California Water Service Company “owns and/or operates public drinking water systems, and supplies drinking water to hundreds of thousands of residents and businesses throughout California.” The complaint alleges that water systems in a number of communities have been contaminated with perc. The plaintiff is seeking compensatory damages and punitive damages. Discovery is ongoing.

§

CITY OF SUNNYVALE CALIFORNIA — On January 6, 2009, we were served in an action styled City of Sunnyvale v. Legacy Vulcan Corporation, f/k/a Vulcan Materials Company, filed in the San Mateo County Superior Court, California. The plaintiffs are seeking cost recovery and other damages for alleged environmental contamination from perc and its degradation products at the Sunnyvale Town Center Redevelopment Project. Discovery is ongoing. A trial date of January 9, 2012 has been set.

§

SUFFOLK COUNTY WATER AUTHORITY — On May 4, 2010, we were served in an action styled Suffolk County Water Authority v. The Dow Chemical Company, et al., in the United States District Court for the Eastern District of New York. This case was subsequently dismissed and refiled in the Supreme Court for Suffolk County, State of New York. The complaint alleges that the plaintiff “owns and/or operates drinking water systems and supplies drinking water to thousands of residents and businesses, in Suffolk County, New York.” The complaint alleges that perc and its degradation products “have been and are contaminating and damaging Plaintiff’s drinking water supply wells.” The plaintiff is seeking compensatory and punitive damages. Discovery is ongoing.

§

ADDAIR — This is a purported class action case for medical monitoring and personal injury damages styled Addair et al. v. Processing Company, LLC, et al., pending in the Circuit Court of Wyoming County, West Virginia. The plaintiffs allege various personal injuries from exposure to perc used in coal sink labs. The perc manufacturing defendants, including Vulcan, have filed a motion for summary judgment. The Court has yet to rule on the motion but in the interim has stayed the litigation. As such, there has been no activity on this matter pending the Court’s ruling.

§

WEST VIRGINIA COAL SINK LAB LITIGATION — This is a mass tort action consisting of over 100 cases filed in 17 different counties in West Virginia from September 1 to October 13, 2010, for medical monitoring and personal injury damages for exposure to perc used in coal sink labs. The West Virginia Supreme Court of Appeals, in an order entered January 19, 2011, transferred all of these cases (referred to as Jeffrey Blount v. Arkema, Inc., et al.) to the West Virginia Mass Litigation Panel. No discovery has been conducted in this matter.

§

SANTARSIERO — This is a case styled Robert Santarsiero v. R.V. Davies, et al., pending in Supreme Court, New York County, New York. We were brought in as a third-party defendant by original defendant R.V. Davies. We recently learned that the plaintiff, who was alleging perc exposure, is now deceased. The case has been stayed pending further information about this development.

§

R.R. STREET INDEMNITY — Street, a former distributor of perc manufactured by us, alleges that we owe Street, and its insurer (National Union), a defense and indemnity in several of these litigation matters, as well as some prior litigation which we have now settled. National Union alleges that we are obligated to contribute to National Union’s share of defense fees, costs and any indemnity payments made on Street’s behalf. We have had discussions with Street about the nature and extent of indemnity obligations, if any, and to date there has been no resolution of these issues.

FLORIDA ANTITRUST LITIGATION — Our subsidiary, Florida Rock Industries, Inc., has been named as a defendant in a number of class action lawsuits filed in the United States District Court for the Southern District of Florida. The lawsuits were filed by several ready-mixed concrete producers and construction companies against a number of concrete and cement producers and importers in Florida. There are now two consolidated amended complaints: (1) on behalf of direct independent ready-mixed concrete producers, and (2) on behalf of indirect users of ready-mixed concrete. The other defendants include Cemex Corp., Votarantim Cimentos North America and Titan America. The complaints allege various violations under the federal antitrust laws, including price fixing and market allocations. We have no reason to believe that Florida Rock is liable for any of the matters alleged in the complaint, and we intend to defend the case vigorously. Discovery is ongoing.

IDOT/JOLIET ROAD — In September 2001, we were named a defendant in a suit brought by the Illinois Department of Transportation (IDOT), in the Circuit Court of Cook County, Chancery Division, Illinois, alleging damage to a 0.9-mile section of Joliet Road that bisects our McCook quarry in McCook, Illinois, a Chicago suburb. On May 18, 2010, we settled this lawsuit for $40,000,000 and recognized the full settlement as a charge to operations in the second quarter of 2010. Under the terms of the settlement we paid IDOT $20,000,000 in May 2010 and we paid the second installment of $20,000,000 on February 17, 2011. We are taking appropriate actions, including participating in two arbitrations in 2011, to recover the settlement amount in excess of the self-insured retention of $2,000,000, as well as a portion of our defense costs from our insurers. In February 2011, we completed the first arbitration with two of our three insurers. The arbitration panel awarded us a total of $25,546,000 in payment of their share of the settlement amount and attorneys’ fees. This award was recorded as income in the first quarter of 2011. The second arbitration is scheduled for May 2011.

LOWER PASSAIC RIVER CLEAN-UP — We have been sued as a third-party defendant in New Jersey Department of Environmental Protection, et al. v. Occidental Chemical Corporation, et al., a case brought by the New Jersey Department of Environmental Protection in the New Jersey Superior Court. The third-party complaint was filed on February 4, 2009. This suit by the New Jersey Department of Environmental Protection seeks recovery of past and future clean-up costs as well as unspecified economic damages, punitive damages, penalties and a variety of other forms of relief arising from alleged discharges into the Passaic River of dioxin and other unspecified hazardous substances. Our former Chemicals Division operated a plant adjacent to the Passaic River and has been sued as a third-party defendant, along with approximately 300 other parties. Additionally, Vulcan and approximately 70 other companies are parties to a May 2007 Administrative Order of Consent with the U.S. Environmental Protection Agency to perform a Remedial Investigation/Feasibility Study of the contamination in the lower 17 miles of the Passaic River. This study is ongoing. At this time, we cannot determine the likelihood or reasonably estimate a range of loss pertaining to this matter.

It is not possible to predict with certainty the ultimate outcome of these and other legal proceedings in which we are involved and a number of factors, including developments in ongoing discovery or adverse rulings, could cause actual losses to differ materially from accrued costs. No liability was recorded for claims and litigation for which a loss was determined to be only reasonably possible or for which a loss could not be reasonably estimated. In addition, losses on certain claims and litigation described above may be subject to limitations on a per occurrence basis by excess insurance, as described in our most recent Annual Report on Form 10-K.

ENHANCED DISCLOSURES FOR FAIR VALUE MEASUREMENTS As of and for the interim period ended March 31, 2011, we adopted Accounting Standards Update (ASU) No. 2010-6, “Improving Disclosures about Fair Value Measurements” as it relates to separate disclosures about purchases, sales, issuances and settlements applicable to Level 3 measurements. Our adoption of this standard had no impact on our financial position, results of operations or liquidity.

		As of March 31, 2010
		As								As
in thousands		Reported				Correction				Restated
Balance Sheet
Assets
Current deferred income taxes			$56,990				($1,950	)			$55,040
Prepaid expenses			51,538				(8,450	)			43,088
Total current assets			766,072				(10,400	)			755,672
Goodwill			3,093,979				2,321				3,096,300
Total assets			$8,474,882				($8,079	)			$8,466,803
Liabilities
Noncurrent deferred income taxes			$863,678				$6,706				$870,384
Total liabilities			4,411,882				6,706				4,418,588
Shareholders’ equity
Retained earnings			1,681,624				(14,785	)			1,666,839
Total shareholders’ equity			4,063,000				(14,785	)			4,048,215
Total liabilities and shareholders’ equity			$8,474,882				($8,079	)			$8,466,803

		Three Months Ended
						March 31
in thousands		2011				2010
Discontinued Operations
Pretax earnings from results			$5,306				$960
Gain on disposal, net of transaction bonus			11,056				7,915
Income tax provision			(6,473	)			(3,148	)
Earnings on discontinued operations, net of tax			$9,889				$5,727

		Three Months Ended
						March 31
in thousands		2011				2010
Weighted-average common shares outstanding			129,078				126,692
Dilutive effect of
Stock options/SOSARs			0				0
Other stock compensation plans			0				0
Weighted-average common shares outstanding, assuming dilution			129,078				126,692

		Three Months Ended
						March 31
in thousands		2011				2010
Antidilutive common stock equivalents			5,695				4,414