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, 1996
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 June 30, 1996:
1,190,844 shares
<PAGE>
VULCAN INTERNATIONAL CORPORATION
INDEX
PAGE
Part I FINANCIAL INFORMATION
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 Accountant's Report 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
UNAUDITED
<S> <C> <C>
-ASSETS-
CURRENT ASSETS:
Cash $ 477,330 1,136,553
Marketable securities (At fair market
value-June 30, 1996, and December 31,
1995, cost $3,756,586) 20,760,036 18,423,949
Accounts receivable 2,520,798 2,767,804
Inventories 1,137,931 1,071,952
Prepaid expense 47,351 35,053
Refundable federal income tax - 189,651
---------- ----------
TOTAL CURRENT ASSETS 24,943,446 23,624,962
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 19,766,989 19,553,473
Less-Accumulated depreciation and
depletion 16,509,550 16,702,292
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 3,257,439 2,851,181
---------- ----------
INVESTMENT IN JOINT VENTURE 642,096 671,700
---------- ----------
MARKETABLE SECURITIES (At fair market value-
June 30, 1996, and December 31, 1995,
cost $2,623,283) 19,607,928 21,255,653
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS 2,726,330 2,673,332
---------- ----------
TOTAL ASSETS $ 51,177,239 51,076,828
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Notes payable-bank $ 2,100,000 2,175,000
Deferred income tax 5,612,903 4,786,941
Other 1,148,477 1,446,668
---------- ----------
TOTAL CURRENT LIABILITIES 8,861,380 8,408,609
---------- ----------
DEFERRED INCOME TAX 5,944,170 6,503,731
---------- ----------
OTHER LIABILITIES - 23,609
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTEREST IN PARTNERSHIP 37,888 35,391
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 315,999 315,999
Additional paid-in capital 4,333,543 4,283,961
Retained earnings 23,119,922 22,796,484
Net unrealized holding gain 22,432,185 21,977,823
---------- ----------
50,201,649 49,374,267
Less-Common stock in treasury-at cost 13,867,848 13,268,779
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 36,333,801 36,105,488
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 51,177,239 51,076,828
========== ==========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
-1-
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<CAPTION>
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 7,657,329 8,216,361 3,700,332 4,271,067
Dividends 754,478 747,503 380,603 376,178
--------- --------- --------- ---------
TOTAL REVENUES 8,411,807 8,963,864 4,080,935 4,647,245
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 7,114,088 8,871,072 3,070,662 4,599,791
General and
administrative 1,037,963 1,076,341 571,890 517,517
Interest expense 72,451 36,043 36,412 20,127
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 8,224,502 9,983,456 3,678,964 5,137,435
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 317,899 549,481 208,071 360,456
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
GAIN ON SALE OF
ASSETS 505,204 (470,111) 610,042 (129,734)
NET GAIN ON SALE OF
MARKETABLE
SECURITIES - 83,405 - 74,633
NET GAIN ON SALE OF
PROPERTY AND
EQUIPMENT 459,090 494,696 287,741 59,158
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAXES 964,294 107,990 897,783 4,057
INCOME TAX PROVISION
(BENEFIT) 157,992 13,889 219,176 (4,400)
--------- --------- --------- ---------
NET INCOME $ 806,302 94,101 678,607 8,457
========= ========= ========= =========
NET INCOME PER
COMMON SHARE $ .67 .07 .57 .00
========= ========= ========= =========
Dividends Per
Common Share $ .40 .40 .20 .20
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
UNAUDITED
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 7,907,585 8,354,236
Cash paid to suppliers and employees (8,408,895) (9,576,658)
Dividends received 754,478 747,503
Interest paid (74,697) (36,582)
Income tax refunds 194,199 -
---------- ----------
NET CASH FLOWS FROM OPERATING\
ACTIVITIES 372,670 (511,501)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable
securities - 124,293
Proceeds from sale of property and
equipment 568,717 576,823
Purchase of property and equipment (813,971) (187,821)
Collections on notes receivable 35,212 24,611
Purchase of investments - (64,179)
Distribution from joint venture 350,000 850,000
---------- ----------
NET CASH FLOWS FROM INVESTING
ACTIVITIES 139,958 1,323,727
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit agreements (75,000) (138,750)
Purchase of treasury shares (613,987) (1,059,852)
Cash dividends paid (482,864) (505,895)
---------- ----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES (1,171,851) (1,704,497)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (659,223) (892,271)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,136,553 1,126,952
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 477,330 234,681
========== ==========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 806,302 94,101
Adjustments-
Depreciation and amortization 300,732 334,523
Deferred income taxes 32,359 (31,443)
Equity in joint venture income and
minority interest (317,899) (549,481)
Net gain on sale of property and
marketable securities (459,090) (578,101)
Compensation paid with treasury shares 64,500 52,125
Decrease in accounts receivable 250,256 137,875
Increase in inventories (65,979) (95,696)
Increase (decrease) in accounts payable,
accrued expenses and other assets (238,511) 124,596
---------- ----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ 372,670 (511,501)
========== ==========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
-3-
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
SCHEDULE SUPPORTING NET INCOME PER COMMON SHARE
AND DIVIDENDS PER COMMON SHARE
UNAUDITED
EXHIBIT 1
<CAPTION>
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
a) Net income $ 806,302 94,101 678,607 8,457
b) Dividends on
preferred
shares 1,977 1,977 985 985
--------- --------- --------- ---------
c) Net income
attributable
to common
shares $ 804,325 92,124 677,622 7,472
========= ========= ========= =========
d) Cash
dividends
on common
shares $ 480,887 503,918 239,003 246,954
========= ========= ========= =========
Weighted Average
Shares:
e) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
f) Common
treasury
shares 797,153 735,769 804,420 755,591
--------- --------- --------- ---------
g) Common shares
outstanding 1,202,359 1,263,743 1,195,092 1,243,921
========= ========= ========= =========
h) Income per
common share
(c/g) $ .67 .07 .57 .00
i) Dividends
per common
share $ .40 .40 .20 .20
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
-4-
<PAGE>
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, 1996 and 1995
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 Registrant's partner, Brunswick Bowling and Billiard Corporation
(Brunswick),in its Joint Venture has made assertions against the Registrant
in connection with bowling pins bases (bases) manufactured by the Registrant
and supplied to the Joint Venture. Brunswick asserts that defective bases
were supplied to the Joint Venture and that they should be reimbursed by the
Registrant for their costs to replace the affected bases as well as other
losses arising from such base defects. The Registrant denies any liability
related to the replaced bases and it is the Registrant's position that, if
the materials were defective, the claims should be made against the supplier
of the raw materials used to produce the bases. The Registrant intends to
vigorously contest any claims in connection with this matter.
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, 1996, 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.
-5-
<PAGE>
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, 1996 and 1995
(Continued)
<TABLE>
INVENTORIES
<CAPTION>
June 30, December 31,
1996 1995
UNAUDITED
<S> <C> <C>
Inventories consisted of:
Finished goods $ 749,206 498,630
Work in process 127,404 213,496
Raw materials 261,321 359,826
--------- ---------
Total inventories $ 1,137,931 1,071,952
========= =========
</TABLE>
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 1996, and for the
six-month and the three-month periods then ended have been reviewed, prior to
filing, by the Registrant's independent accountants, J.D. Cloud & Co. P.L.L.,
whose report covering their review of the financial statements is included in
this report.
-6-
<PAGE>
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, 1996, and
the related condensed consolidated statements of income and cash flows for
the six-month and three-month periods ended June 30, 1996 and 1995. 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, 1995, 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 10, 1996, 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, 1995, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
Certified Public Accountants
Cincinnati, Ohio
August 8, 1996
-7-
<PAGE>
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, 1996, decreased
$559,032 or 6.8% over the corresponding period in 1995 due principally to a
lower sales volume in the shoe products division. Cost of sales decreased
$1,756,984 or 19.8% during the six-month period due principally to decreased
costs in the shoe products division. Net sales revenue for the second
quarter of 1996 decreased $570,735 or 13.4 and cost of sales decreased
$1,529,129 or 33.2% compared to the corresponding quarter in 1995 due
principally to lower sales in the shoe products division and decreased
costs in the shoe products division as mentioned above.
General and administrative expenses decreased $38,378 or 3.6% in the six-
month period ended June 30, 1996, as compared to the corresponding six-month
period in 1995 due principally to cost savings in connection with a reduction
in the Company's sales force. General and administrative expenses for the
second quarter of 1996 increased $54,373 or 10.5% compared to the
corresponding quarter in 1995 due to costs in connection with reducing the
workforce in the Rubber Division.
Interest expense for the six-month period ended June 30, 1996, increased
$36,408 due to increased borrowings. Interest expense for the second quarter
of 1996 increased $16,285 compared to the corresponding quarter in 1995.
There were no realized gains on marketable securities for the six months
ended June 30, 1996, as compared to $83,405 in the same period in 1995.
Realized gains on marketable securities for the quarter ended June 30, 1995
amounted to $74,633.
Gains on the sale of property and equipment were $459,090 for the six-month
period ended June 30, 1996, as compared to $494,696 for the corresponding
period in 1995. The 1996 gains are primarily due to timber sales and sales
of equipment in the Shoe Products Division. The 1995 gain was substantially
the result of the sale of the land and buildings in Blanchester, Ohio, and
timber. Gains on the sale of property and equipment were $287,741 in the
second quarter of 1996 as compared to $59,158 in the second quarter of 1995,
due primarily to timber sales and sales of equipment in the shoe Products
Division.
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
$350,000 from VBBPC during the first quarter of 1996.
-8-
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(Continued)
<TABLE>
Summarized income statement information for VBBPC consists of the following:
<CAPTION>
Six Months Ended June 30, Three Months ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 7,104,445 8,340,670 3,139,272 4,668,843
Costs and expenses 6,463,653 7,239,663 2,720,662 3,946,984
--------- --------- --------- ---------
Net income $ 640,792 1,101,007 418,610 721,859
========= ========= ========= =========
Company's 50% equity
in net income $ 320,396 550,503 209,305 360,929
========= ========= ========= =========
</TABLE>
In January 1996, the Registrant announced plans to permanently lay off
approximately 65% of its Rubber Division workforce in Clarksville, Tennessee.
The Registrant, in accordance with its previously announced workforce
reduction, began laying off personnel in late March, 1996. The Registrant
will no longer produce heels and soles, except for military orders. The
Registrant will continue to produce other rubber and foam products at the
Clarksville facility. There is not expected to be any significant change
in assets as a result of this downsizing. The Registrant does not expect to
incur significant costs resulting from this reduction in its product line
and workforce.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's cash requirements during the second quarter of 1996 were
funded in part through earnings and noncash charges such as depreciation and
amortization and from the sale of timber and equipment. The proceeds from
these transactions was used to purchase property and equipment and to
repurchase treasury shares. The Registrant expects to continue, when
necessary, to use short-term borrowings to meet cash requirements not fully
provided by earnings, depreciation and amortization. During the period ended
June 30, 1996, 27,028 shares of treasury stock were acquired for $613,987
by the use of cash from operations. There were approximately $70,000 of
commitments for capital expenditures as of June 30, 1996.
-9-
<PAGE>
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. 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 Registrant's partner, Brunswick Bowling and Billiard Corporation
(Brunswick), in its Joint Venture has made assertions against the Registrant
in connection with bowling pin bases (bases) manufactured by the Registrant
and supplied to the Joint Venture. Brunswick asserts that defective bases
were supplied to the Joint Venture and that they should be reimbursed by the
Registrant for their costs to replace the affected bases as well as other
losses arising from such base defects. The Registrant denies any liability
related to the replaced bases and it is the Registrant's position that, if
the materials were defective, the claims should be made against the supplier
of the raw materials used to produce the bases. The Registrant intends to
vigorously contest any claims in connection with this matter.
The Registrant and its subsidiaries are party to other litigation 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.
The Registrant was not required to file Form 8-K for the quarter ended June 30,
1996.
-10-
<PAGE>
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, 1996 By: Benjamin Gettler
Date Chairman of the Board, President
and Chief Executive Officer
August 14, 1996 By: Vernon E. Bachman
Date Vice President, Secretary-Treasurer
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION OF VULCAN INTERNATIONAL
CORPORATION. THIS INFORMATION IS SUMMARIZED FROM THE QUARTERLY REPORT ON FORM
10Q FOR THE SIX MONTHS ENDED JUNE 30, 1996.
</LEGEND>
<CIK> 0000848446
<NAME> VULCAN INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 477,330
<SECURITIES> 20,760,036
<RECEIVABLES> 2,463,950
<ALLOWANCES> 261,269
<INVENTORY> 1,137,931
<CURRENT-ASSETS> 24,943,446
<PP&E> 19,766,989
<DEPRECIATION> 16,509,550
<TOTAL-ASSETS> 51,177,239
<CURRENT-LIABILITIES> 8,861,380
<BONDS> 0
0
66,060
<COMMON> 249,939
<OTHER-SE> 36,017,802
<TOTAL-LIABILITY-AND-EQUITY> 51,177,239
<SALES> 7,657,329
<TOTAL-REVENUES> 8,411,807
<CGS> 7,114,088
<TOTAL-COSTS> 7,114,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 39,317
<INTEREST-EXPENSE> 72,451
<INCOME-PRETAX> 964,294
<INCOME-TAX> 157,992
<INCOME-CONTINUING> 806,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 806,302
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
