UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10219
VULCAN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0810265
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Delaware Avenue, Suite 1704, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
(302) 427-804
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding shares of no par value common stock at June 30, 1998:
1,199,444 shares
VULCAN INTERNATIONAL CORPORATION
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Schedule Supporting Net Income Per Common
Share and Dividends Per Common Share 4
Notes to Condensed Consolidated Financial
Statements 5-6
Independent Accountants' Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Item 3 Quantitative and Qualitative Disclosures
about Market Risks 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1998 1997
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 1,406,774 2,141,676
Marketable securities (At fair market
value) 36,868,020 34,328,808
Accounts receivable 2,185,083 1,718,037
Inventories 686,703 611,959
Prepaid tax and expense 187,679 99,876
---------- ----------
TOTAL CURRENT ASSETS 41,334,259 38,900,356
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 13,684,032 14,873,913
Less-Accumulated depreciation and depletion 11,296,129 12,375,142
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,387,903 2,498,771
---------- ----------
OTHER ASSETS:
Investment in joint venture - 350,696
Marketable securities (At fair market
value) 35,467,281 37,526,937
Deferred charges and other assets 3,247,700 3,138,833
---------- ----------
TOTAL OTHER ASSETS 38,714,981 41,016,466
---------- ----------
TOTAL ASSETS $ 82,437,143 82,415,593
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 11,102,047 10,245,689
Other 1,029,476 1,254,396
---------- ----------
TOTAL CURRENT LIABILITIES 12,131,523 11,500,085
---------- ----------
OTHER LIABILITIES:
Deferred income tax 11,673,837 12,358,733
Commitments and contingencies - -
Minority interest in partnership 32,913 37,426
Other liabilities 138,268 24,359
---------- ----------
TOTAL OTHER LIABILITIES 11,845,018 12,420,518
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 5,626,843 5,619,993
Retained earnings 24,895,418 24,543,468
Accumulated other comprehensive income:
Net unrealized holding gain 43,527,971 43,211,515
---------- ----------
74,300,171 73,624,915
Less-Common stock in treasury-at cost 15,839,569 15,129,925
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 58,460,602 58,494,990
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 82,437,143 82,415,593
========== ==========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-1-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
REVENUES:
Net sales $5,289,944 5,852,702 2,404,951 2,996,387
Dividends 849,196 798,276 428,794 405,177
--------- --------- --------- ---------
TOTAL REVENUES 6,139,140 6,650,978 2,833,745 3,401,564
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 5,208,695 5,274,834 2,460,749 2,616,951
General and
administrative 719,065 850,514 342,616 520,768
Interest expense 17,547 15,305 - -
--------- -------- --------- ---------
TOTAL COST AND
EXPENSES 5,945,307 6,140,653 2,803,365 3,137,719
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 258,200 309,054 (53,656) 178,753
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 452,033 819,379 (23,276) 442,598
NET GAIN ON SALE OF
PROPERTY AND
EQUIPMENT 524,798 510,074 56,915 113,806
--------- --------- ---------- ---------
INCOME BEFORE
INCOME TAXES 976,831 1,329,453 33,639 556,404
INCOME TAX PROVISION 141,084 270,782 (86,013) 97,154
---------- --------- --------- ---------
NET INCOME $ 835,747 1,058,671 119,652 459,250
========= ========= ========= =========
NET INCOME PER
COMMON SHARE $ .69 .84 .10 .36
========= ========= ========= =========
DIVIDENDS PER
COMMON SHARE $ .40 .40 .20 .20
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-2-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
UNAUDITED
JUNE 30, JUNE 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 4,815,420 6,208,115
Cash paid to suppliers and employees (6,175,355) (6,233,267)
Dividends received 849,196 798,276
Interest paid (17,547) (15,305)
Income tax payments (237,500) (170,000)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (765,786) 587,819
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 536,752 561,700
Purchase of property and equipment (103,938) (37,250)
Cash distribution from joint venture 750,000 600,000
Collections on notes receivable and other 34,662 33,761
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 1,217,476 1,158,211
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of treasury shares 7,825 -
Purchase of common and preferred shares (710,619) (251,454)
Cash dividends paid (483,798) (502,795)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (1,186,592) (754,249)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (734,902) 991,781
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,141,676 1,254,138
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,406,774 2,245,919
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 835,747 1,058,671
Adjustments-
Depreciation and amortization 205,406 290,972
Deferred income taxes 8,416 44,931
Equity in joint venture income and
minority interest (258,200) (309,054)
Net gain on sale of property and
marketable securities (524,798) (510,074)
(Increase) decrease in accounts
receivable (474,524) 355,413
Increase in inventories (74,744) (81,862)
Decrease in accounts payable,
accrued expenses and other assets (483,089) (261,178)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (765,786) 587,819
========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-3-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
SCHEDULE SUPPORTING NET INCOME PER COMMON SHARE
AND DIVIDENDS PER COMMON SHARE
UNAUDITED
EXHIBIT 1
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
a) Net income $ 835,747 1,058,671 119,652 459,250
b) Dividends on
preferred
shares - 1,977 - 985
--------- --------- --------- ---------
c) Net income
attributable
to common
shares $ 835,747 1,056,694 119,652 458,265
========= ========= ========= =========
d) Cash
dividends
on common
shares $ 483,798 500,818 241,529 249,949
========= ========= ========= =========
Weighted Average
Shares:
e) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
f) Common
treasury
shares 789,465 747,088 791,505 748,864
--------- --------- --------- ---------
g) Common shares
outstanding 1,210,047 1,252,424 1,208,007 1,250,648
========= ========= ========= =========
h) Income per
common share
(c/g) $ .69 .84 .10 .36
i) Dividends
per common
share $ .40 .40 .20 .20
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-4-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 1998 and 1997
The Registrant has been advised that it is a potentially responsible party,
together with 18 other parties, with regard to the Resolve, Inc. Superfund
Site, located in North Dartmouth, Massachusetts, with potential joint and
several liability of $5.7 million. The Resolve site was a waste chemical
reclamation facility. The environmental problem at the site involves soil
contamination including, particularly, PCB contaminants. It is the
understanding of Registrant that clean-up at the site involves treatment of
contaminated soil and ground water. The Registrant is contesting all
liability. There may be other potential clean-up liability at other sites of
which the registrant has no specific knowledge.
The accompanying condensed consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to reflect a
fair presentation of financial position, results of operations and cash flows
for the interim periods.
There were no securities of the Registrant sold by the Registrant during the
six months ended June 30, 1998, that were not registered under the Securities
Act of 1933, in reliance upon an exemption from registration provided by
Section 4(2) of the Act.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORIES
JUNE 30, DECEMBER 31,
1998 1997
UNAUDITED
Inventories consisted of:
Finished goods $291,520 220,117
Work in process 126,234 119,116
Raw materials 268,949 272,726
------- -------
Total inventories $686,703 611,959
======= =======
-5-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 1998 and 1997
(Continued)
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard No. 130,
Reporting Comprehensive Income, effective January 1, 1998. The adoption
of this Statement had no impact on the Company's net income or shareholders'
equity. During the six months ended June 30, 1998 and 1997 total other
comprehensive income, net of tax, amounted to $316,456 and $5,373,805,
respectively. Accumulated comprehensive income consists of unrealized
holding gains on securities available for sale.
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 1998, and for
the six-month period then ended have been reviewed, prior to filing, by
the Registrant's independent accountants, J.D. Cloud & Co. L.L.P., whose
report covering their review of the financial statements is included in
this report.
-6-
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have reviewed the accompanying condensed consolidated balance sheet of
Vulcan International Corporation and subsidiaries as of June 30, 1998, and
the related condensed consolidated statements of income and cash flows for
the six-month and three-month periods ended June 30, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Vulcan International Corporation
and subsidiaries as of December 31, 1997, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 12, 1998, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1997, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
J.D. CLOUD & CO. L.L.P.
Certified Public Accountants
Cincinnati, Ohio
August 4, 1998
-7-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Net sales revenue for the six-month period ended June 30, 1998, decreased
$562,758 or 9.6% over the corresponding period in 1997. Cost of sales
decreased $66,139 or 1.3% during the six-month period compared to the
corresponding six-month period in 1997. Net sales revenue for the second
quarter of 1998 decreased $591,436 or 19.7% and cost of sales decreased
$156,202 or 6.0% compared to the corresponding quarter in 1997. The
foregoing decreases were due primarily to decreased sales in the Rubber and
Plastics segment and increased costs in the Wood Products segment.
General and administrative expenses decreased $131,449 or 15.5% in the six-
month period ended June 30, 1998, as compared to the corresponding six-month
period in 1997. General and administrative expenses for the second quarter of
1998 decreased $178,152 or 34.2% compared to the corresponding quarter in
1997. These decreases are principally due to the downsizing in the Company's
Rubber and Plastics segment.
Interest expense for the six-month period ended June 30, 1998, increased
$2,242.
Gains on the sale of property and equipment were $524,798 for the six-month
period ended June 30, 1998, as compared to $510,074 for the corresponding
period in 1997. 1998 gains were the result of the sales of assets and timber.
The 1997 gain was substantially the result of timber sales. Gains on the sale
of property and equipment were $56,915 in the second quarter of 1998 as
compared to $113,806 in the second quarter of 1997.
The Company has examined the problem Year 2000 Compliance with its technical
advisors. They state that most of the Company's current accounting software
is Year 2000 Compliant. As to the remaining software, it is anticipated that
in the near future current software vendors will offer upgrades to make such
software Year 2000 Compliant without material upgrade costs to the Company.
Their examination of hardware with regard to Year 2000 Compliance is near
complete. All hardware which has been tested is Year 2000 Compliant. With
respect to certain older pieces of hardware, the Company is awaiting
verification of Year 2000 Compliance from the appropriate vendors.
The Company has a 50% interest in a joint venture, Vulcan Brunswick Bowling
Pin Company (VBBPC) which manufactures bowling pins in Antigo, Wisconsin, for
Brunswick and the Company. The Company received cash distributions of
$750,000 from VBBPC during the first six months of 1998. The excess of cash
distributions over the Company's investment in VBBPC is included in other
liabilities at June 30, 1998.
-8-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
Summarized income statement information for VBBPC consists of the following:
Six Months Ended June 30, Three Months ended June 30,
1998 1997 1998 1997
Net sales $6,839,390 7,005,331 2,935,644 3,779,417
Costs and expenses 6,317,313 6,382,131 3,039,946 3,419,221
--------- --------- --------- ---------
Net income $ 522,077 623,200 (104,302) 360,196
========= ========= ========== =========
Company's 50% equity
in net income $ 261,039 311,600 (52,151) 180,098
========= ========= ========== =========
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the second quarter of 1998 were funded
in part through earnings and noncash charges such as depreciation and
amortization, a $200,000 distribution from the joint venture and from the sale
of timber and equipment. The cash from these transactions was primarily used
in operations. The Company expects to continue, when necessary, to use
short-term borrowings to meet cash requirements not fully provided by
earnings, depreciation and amortization. During the six months ended June 30,
1998, 18,100 shares of treasury stock were acquired for $710,619. There were
approximately $545,600 of commitments for capital expenditures as of June 30,
1998.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
There have been no significant changes in the Company's market risk, primarily
associated with marketable securities, since December 31, 1997.
-9-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Registrant has been advised that it is a potentially responsible party,
together with 18 other parties, with regard to the Resolve, Inc. Superfund
Site, located in North Dartmouth, Massachusetts, with potential joint and
several liability of $5.7 million. The Resolve site was a waste chemical
reclamation facility. The environmental problem at the site involves soil
contamination including, particularly, PCB contaminants. The Company is
contesting all liability. The Company's liability, if any, cannot be
estimated at this time. It is the understanding of Registrant that clean-up
at the site involves treatment of contaminated soil and ground water. There
may be other potential clean-up liability at other sites of which the
Registrant has no specific knowledge.
The Registrant and its subsidiaries are party to other matters and claims
which are normal in the course of operations. While the results of
litigation and claims cannot be predicted with certainty, based on advice of
counsel, the Registrant believes that the final outcome of such matters will
not have a materially adverse effect on its consolidated financial condition.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit SB 601 Page
No. Ref. No. Description No.
27 602 (b) (27) Financial Data Schedule
for the Six Months Ended
June 30, 1998 12
b. The Company was not required to file Form 8-K for the quarter
ended June 30, 1998.
-10-
PART II - OTHER INFORMATION
(Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VULCAN INTERNATIONAL CORPORATION
August 14, 1998 By: Benjamin Gettler
Date Chairman of the Board, President
and Chief Executive Officer
August 14, 1998 By: Vernon E. Bachman
Date Vice President, Secretary-Treasurer
and Principal Accounting Officer
-11-