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 March 31, 1999
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) 427-5804
(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 March 31, 1999:
1,131,126 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 5-8
Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Item 3. Quantitative and Qualitative Disclosures
About Market Risks 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1999 1998
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 917,858 1,275,656
Marketable securities (At fair market value) 48,211,710 50,347,778
Accounts receivable 1,289,710 1,234,135
Inventories 713,032 512,220
Prepaid expense and tax 141,990 136,230
---------- ----------
TOTAL CURRENT ASSETS 51,274,300 53,506,019
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 14,343,792 14,240,507
Less-Accumulated depreciation and depletion 11,555,540 11,441,682
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,788,252 2,798,825
---------- ----------
OTHER ASSETS:
Investment in joint venture - 63,089
Marketable securities (At fair market value) 36,620,688 35,590,860
Deferred charges and other assets 3,126,680 3,052,945
---------- ----------
TOTAL OTHER ASSETS 39,747,368 38,706,894
---------- ----------
TOTAL ASSETS $ 93,809,920 95,011,738
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 14,958,540 15,686,091
Note payable 1,170,000 1,170,000
Other 1,048,594 1,035,504
---------- ----------
TOTAL CURRENT LIABILITIES 17,177,134 17,891,595
---------- ----------
OTHER LIABILITIES:
Deferred income tax 12,166,862 11,789,266
Commitments and contingencies - -
Joint venture and minority interest
in partnership 253,511 10,774
Other liabilities - 24,179
---------- ----------
TOTAL OTHER LIABILITIES 12,420,373 11,824,219
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 5,626,843 5,626,843
Retained earnings 24,874,010 25,054,570
Accumulated other comprehensive income 51,776,128 52,506,224
---------- ----------
82,526,920 83,437,576
Less-Common stock in treasury-at cost 18,314,507 18,141,652
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 64,212,413 65,295,924
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 93,809,920 95,011,738
========== ==========
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
For the three months ended
UNAUDITED
MARCH 31, MARCH 31,
1999 1998
REVENUES:
Net sales $ 2,314,981 2,998,491
Dividends 462,603 420,402
--------- ---------
TOTAL REVENUES 2,777,584 3,418,893
--------- ---------
COST AND EXPENSES:
Cost of sales 2,341,172 2,756,658
General and administrative 541,289 481,235
Interest expense 36,110 17,547
--------- ---------
TOTAL COST AND EXPENSES 2,918,571 3,255,440
--------- ---------
EQUITY IN JOINT VENTURE INCOME AND
MINORITY INTEREST 94,175 311,856
--------- ---------
INCOME (LOSS) BEFORE GAIN ON SALE OF ASSETS (46,812) 475,309
NET GAIN ON SALE OF PROPERTY AND EQUIPMENT 112,332 467,883
--------- ---------
INCOME BEFORE INCOME TAXES 65,520 943,192
INCOME TAX PROVISION 20,076 227,097
--------- ---------
NET INCOME $ 45,444 716,095
========= =========
NET INCOME PER COMMON SHARE $ .04 .59
========= =========
DIVIDENDS PER COMMON SHARE $ .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 three months ended
UNAUDITED
MARCH 31, MARCH 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 2,149,389 2,683,540
Cash paid to suppliers and employees (2,943,868) (3,624,633)
Dividends received 462,603 420,402
Interest paid (36,110) (17,547)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (367,986) (538,238)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, and equipment 112,332 475,855
Purchase of property and equipment (103,284) (61,552)
Cash distribution from joint venture 400,000 550,000
Collections on note receivable and other - 20,775
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 409,048 985,078
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common shares (172,855) (217,807)
Cash dividends paid (226,005) (242,269)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (398,860) (460,076)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (357,798) (13,236)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,275,656 2,141,676
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 917,858 2,128,440
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,444 716,095
Adjustments-
Depreciation and amortization 114,171 113,771
Deferred income tax 26,190 73,221
Equity in joint venture income and minority
interest (94,175) (311,856)
Net gain on sale of property and equipment (112,332) (467,883)
(Increase) decrease in accounts receivable (55,575) (201,453)
Increase in inventories (200,812) (343,782)
Decrease in accounts payable,
accrued expenses and other assets (90,897) (116,351)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (367,986) (538,238)
========= =========
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
For the three months ended
UNAUDITED
Exhibit "1"
MARCH 31, MARCH 31,
1999 1998
a) Net income $ 45,444 716,095
========= =========
b) Cash dividends on common shares $ 226,005 242,269
========= =========
Weighted Average Shares:
c) Common shares issued 1,999,512 1,999,512
d) Common treasury shares 865,556 787,401
--------- ---------
e) Common shares outstanding 1,133,956 1,212,111
========= =========
f) Income per common share (a/e) $ .04 .59
========= =========
g) Dividends per common share $ .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 three months ended March 31, 1999 and 1998
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 Registrant 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 will involve 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 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. All such adjustments are of a normal recurring
nature.
There were no securities of the Registrant sold by the Registrant during the
three months ended March 31, 1999, 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
5
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1999 and 1998
(Continued)
MARCH 31, DECEMBER 31,
1999 1998
UNAUDITED
Inventories consisted of:
Finished goods $ 279,042 206,445
Work in process 180,084 91,048
Raw materials 253,906 214,727
------- -------
Total inventories $ 713,032 512,220
======= =======
COMPREHENSIVE INCOME
During the three months ended March 31, 1999 and 1998 total other
comprehensive income (loss) was as follows:
1999 1998
Net income $ 45,444 716,095
Other comprehensive income, net of tax:
Unrealized gain (loss) on marketable
securities (730,096) 3,609,416
------- ---------
Total comprehensive income (loss) $(684,652) 4,325,511
======= =========
Accumulated comprehensive income consists of unrealized holding gains on
securities available for sale of $51,776,128 at March 31, 1999 and
$52,506,224 at December 31, 1998.
6
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1999 and 1998
(Continued)
BUSINESS SEGMENT INFORMATION
Effective December 31, 1998, Vulcan International Corporation adopted
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information." Segment operating
income and other unallocated corporate (expense) income for the three months
ended March 31, 1998 have been restated to conform with the current year
presentation. Reportable segments for the three months ended March 31
are as follows:
1999 1998
NET SALES:
Rubber and Plastics $1,761,130 2,050,903
Bowling Pins 527,927 1,018,293
Real Estate Operations 222,349 214,353
Intersegment net sales (84,093) (184,203)
--------- ---------
2,427,313 3,099,346
Timber sales reported in gain on
sale of property and equipment (112,332) (100,855)
--------- ---------
TOTAL SALES $2,314,981 2,998,491
========= =========
OPERATING PROFIT (LOSS):
Rubber and Plastics $ (434,640) (85,000)
Bowling Pins (51,648) (103,369)
Real Estate Operations 118,263 132,693
--------- ---------
TOTAL OPERATING PROFIT (LOSS) (368,025) (55,676)
Interest expense - net (36,110) (17,547)
Other unallocated corporate income - net 469,655 1,016,415
Income tax provision (20,076) (227,097)
--------- ---------
NET INCOME $ 45,444 716,095
========= =========
7
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1999 and 1998
(Continued)
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at March 31, 1999, and for
the three-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.
8
INDEPENDENT ACCOUNTANTS' 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 March 31, 1999, and
the related condensed consolidated statements of income and cash flows for the
three-month periods ended March 31, 1999 and 1998. 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 audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Vulcan International Corporation and
subsidiaries as of December 31, 1998, 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 22, 1999, 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, 1998, 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
May 7, 1999
9
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Net sales revenue for the three-month period ended March 31, 1999, decreased
$683,510 or 22.8% over the corresponding period in 1998. Cost of sales
decreased $415,486 or 15.1% during the three-month period. The foregoing
decreases are due primarily to decreased sales in the Rubber and Plastics
and Bowling Pins segments.
General and administrative expenses increased $60,054 or 12.5% in the
three-month period ended March 31, 1999, as compared to the corresponding
quarter in 1998 due primarily to increased costs involved in computer
conversion.
Interest expense for the three-month period ended March 31, 1999 increased
$18,563.
Gains on the sale of property and equipment were $112,332 for the three-month
period ended March 31, 1999, as compared to $467,883 for the corresponding
quarter in 1998. Gains in 1999 were the result of the sale of timber. Gains
in 1998 were the result of the sale of timber and excess equipment from the
Company's rubber plant in Clarksville, Tennessee.
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 nearly
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 form 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 a cash distribution of
$400,000 from VBBPC during the first quarter of 1999.
Summarized income statement information for VBBPC consists of the following:
Three Months ended March 31,
1999 1998
Net sales $2,086,352 3,903,746
Costs and expenses 1,896,684 3,277,367
--------- ---------
Net income $ 189,668 626,379
========= =========
Company's 50% equity in net income $ 94,834 313,189
========= =========
10
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the first quarter of 1999 were funded
in part through earnings, the sale of timber, noncash charges such as
depreciation and amortization, a $400,000 distribution from the joint venture
and from short-term borrownings. The cash from these transactions was used
principally in operations. The Company expects, when necessary, to use
short-term borrowings to meet cash requirements not fully provided by
earnings, depreciation and amortization. In the first quarter of 1999,
5,209 shares of treasury stock were acquired for $172,855. There were
approximately $21,100 of commitments for capital expenditures as of
March 31, 1999.
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, 1998.
11
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 Registrant 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 will involve 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.
12
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit SB 601 Page
No. Ref. No. Description No.
27 601(b)(27) Financial Data Schedule for
the Three Months Ended
March 31, 1999 14
b. The Company was not required to file Form 8-K for the quarter
ended March 31, 1999.
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
By: Benjamin Gettler
Date May 14, 1999 Benjamin Gettler
Chairman of the Board, President
and Chief Executive Officer
By: Vernon E. Bachman
Date May 14, 1999 Vernon E. Bachman
Vice President, Secretary-Treasurer
and Principal Accounting Officer
13