<PAGE>
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, 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 March 31, 1996:
1,203,213 shares
<PAGE>
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
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
UNAUDITED
<S> <C> <C>
-ASSETS-
CURRENT ASSETS:
Cash $ 226,124 1,136,553
Marketable securities (At fair market
value-March 31, 1996, and December 31,
1995, cost $3,756,586) 20,249,129 18,423,949
Accounts receivable 2,738,789 2,767,804
Inventories 1,213,879 1,071,952
Prepaid expense 15,122 35,053
Refundable federal income tax 211,367 189,651
---------- ----------
TOTAL CURRENT ASSETS 24,654,410 23,624,962
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 19,200,726 19,553,473
Less-Accumulated depreciation and depletion 16,411,664 16,702,292
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,789,062 2,851,181
---------- ----------
INVESTMENT IN JOINT VENTURE 432,791 671,700
---------- ----------
MARKETABLE SECURITIES (At fair market value-
March 31, 1996, and December 31, 1995, cost
$2,623,283) 20,267,018 21,255,653
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS 2,702,770 2,673,332
---------- ----------
TOTAL ASSETS $ 50,846,051 51,076,828
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Notes payable-bank $ 2,100,000 2,175,000
Deferred income tax 5,418,429 4,786,941
Other 881,448 1,446,668
---------- ----------
TOTAL CURRENT LIABILITIES 8,399,877 8,408,609
---------- ----------
DEFERRED INCOME TAX 6,117,200 6,503,731
---------- ----------
OTHER LIABILITIES - 23,609
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTEREST IN PARTNERSHIP 36,655 35,391
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 315,999 315,999
Additional paid-in capital 4,333,543 4,283,961
Retained earnings 22,681,303 22,796,484
Net unrealized holding gain 22,529,968 21,977,823
---------- ----------
49,860,813 49,374,267
Less-Common stock in treasury-at cost 13,568,494 13,268,779
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 36,292,319 36,105,488
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 50,846,051 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
For the three months ended
UNAUDITED
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
<S> <C> <C>
REVENUES:
Net sales $ 3,956,997 3,945,294
Dividends 373,875 371,325
--------- ---------
TOTAL REVENUES 4,330,872 4,316,619
--------- ---------
COST AND EXPENSES:
Cost of sales 4,043,426 4,271,281
General and administrative 466,073 558,824
Interest expense 36,039 15,916
--------- ---------
TOTAL COST AND EXPENSES 4,545,538 4,846,021
--------- ---------
EQUITY IN JOINT VENTURE INCOME AND
MINORITY INTEREST 109,828 189,025
--------- ---------
LOSS BEFORE GAIN ON SALE OF ASSETS (104,838) (340,377)
NET GAIN ON SALE OF SECURITIES - 8,772
NET GAIN ON SALE OF PROPERTY AND EQUIPMENT 171,349 435,538
--------- ---------
INCOME - BEFORE INCOME TAXES 66,511 103,933
INCOME TAX PROVISION (BENEFIT) (61,184) 18,289
--------- ---------
NET INCOME $ 127,695 85,644
========= =========
NET INCOME PER COMMON SHARE $ .10 .07
========= =========
DIVIDENDS PER COMMON SHARE $ .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 three months ended
UNAUDITED
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 3,987,619 4,349,051
Cash paid to suppliers and employees (5,052,924) (4,980,283)
Dividends received 373,875 371,325
Interest paid (38,201) (22,902)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (729,631) (282,809)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities - 25,000
Proceeds from sale of property, and equipment 268,820 515,848
Purchase of property and equipment (184,521) (32,105)
Distribution from joint venture 350,000 550,000
Collections on note receivable 17,412 12,175
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 451,711 1,070,918
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit agreements (75,000) (1,135,000)
Purchase of common shares (314,633) -
Cash dividends paid (242,876) (257,956)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (632,509) (1,392,956)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (910,429) (604,847)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,136,553 1,126,952
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 226,124 522,105
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 127,695 85,644
Adjustments-
Depreciation and amortization 150,497 169,730
Deferred income taxes (39,468) (14,753)
Equity in joint venture income and minority
interest (109,828) (189,025)
Net gain on sale of property and marketable
securities (171,349) (444,310)
Compensation paid with treasury shares 64,500 52,125
Decrease in accounts receivable 30,622 403,757
Increase in inventories (141,927) (278,186)
Increase (decrease) in accounts payable,
accrued expenses and other assets (640,373) (67,791)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (729,631) (282,809)
========= =========
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
For the three months ended
UNAUDITED
Exhibit "1"
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
<S> <C> <C>
a) Net income $ 127,695 85,644
b) Dividends on preferred shares 992 992
--------- ---------
c) Net income attributable to
common shares $ 126,703 84,652
========= =========
d) Cash dividends on common shares $ 241,884 256,964
========= =========
Weighted Average Shares:
e) Common shares issued 1,999,512 1,999,512
f) Common treasury shares 789,887 715,727
--------- ---------
g) Common shares outstanding 1,209,625 1,283,785
========= =========
h) Income per common share (c/g) $ .10 .07
========= =========
i) Dividends per common share $ .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 three months ended March 31, 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
three months ended March 31, 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.
<TABLE>
INVENTORIES
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
UNAUDITED
<S> <C> <C>
Inventories consisted of:
Finished goods $ 606,982 498,630
Work in process 279,392 213,496
Raw materials 313,543 345,864
Supplies 13,962 13,962
--------- ---------
Total inventories $1,213,879 1,071,952
========= =========
</TABLE>
5
<PAGE>
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, 1996 and 1995
(Continued)
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at March 31, 1996, and for
the three-month period 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 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, 1996, and
the related condensed consolidated statements of income and cash flows for
the three-month periods ended March 31, 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 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.
J.D. CLOUD & CO. P.L.L.
Certified Public Accountants
Cincinnati, Ohio
April 29, 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 three-month period ended March 31, 1996, increased
$11,703 or 0.3% over the corresponding period in 1995. Cost of sales
decreased $227,855 or 5.3% during the three-month period due principally to
decreased inventory costs for both shoe products and rubber products. The
increase in inventories at March 31, 1996, as compared to December 31, 1995,
is due primarily to increases in bowling pin inventories.
General and administrative expenses decreased $92,751 or 16.6% in the three-
month period ended March 31, 1996, as compared to the corresponding quarter
in 1995 due principally to cost savings in connection with a reduction in the
Company's sales force.
Interest expense for the three-month period ended March 31, 1996, increased
$20,123 due to increased borrowings.
There were no realized gains on marketable securities for the three months
ended March 31, 1996, as compared to $8,772 for the same period in 1995.
Gains on the sale of property and equipment were $171,349 for the three-month
period ended March 31, 1996, as compared to $435,538 for the corresponding
quarter in 1995. The 1996 gain was substantially the result of the sale of
timber. The 1995 gain was substantially the result of the sale of land and a
building in Blanchester, Ohio, and the sale of timber.
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 in the first quarter of 1996.
<TABLE>
Summarized income statement information for VBBPC consists of the following:
<CAPTION>
Three Months ended March 31,
1996 1995
<S> <C> <C>
Net sales $3,965,173 3,671,827
Costs and expenses 3,742,991 3,292,679
--------- ---------
Net income 222,182 379,148
========= =========
Company's 50% equity in net income $ 111,091 189,574
========= =========
</TABLE>
In January 1996, the Company announced plans to permanently lay off
approximately 65% of its Rubber Division work force in Clarksville, Tennessee.
The Company, in accordance with its previously announced work force reduction,
began laying off personnel in late March, 1996. The Company will no longer
produce heels and soles, except for military orders. The Company will
continue to produce other rubber and foam products at the Clarksville
facility. All assets to be disposed of in connection with the changes in
production have not been identified. The Company does not expect to incur
significant costs resulting from this reduction in its product line and work
force.
8
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the first quarter of 1996 were funded
in part through earnings and noncash charges such as depreciation and
amortization and from the sale of timber and fixed assets. The cash from
these transactions was used to reduce the Company's short-term debt and
repurchase treasury shares. The Company expects to continue, when necessary,
to use short-term borrowings to meet cash requirements not fully provided by
earnings, depreciation and amortization. In the first quarter of 1996,
14,659 shares of treasury stock were acquired for $314,633. There were
approximately $650,000 of commitments for capital expenditures as of March 31,
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 Billiards 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.
10
<PAGE>
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
<TABLE>
<CAPTION>
Exhibit SB 601 Page
No. Ref. No. Description No.
<C> <C> <S> <C>
27 601(b)(27) Financial Data Schedule for
the Three Months Ended
March 31, 1996 12
</TABLE>
b. The Company was not required to file Form 8-K for the quarter
ended March 31, 1996.
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 3, 1996 Benjamin Gettler
Chairman of the Board, President
and Chief Executive Officer
By: Vernon E. Bachman
Date May 3, 1996 Vernon E. Bachman
Vice President, Secretary-Treasurer
and Principal Accounting Officer
11
<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 QUARTER ENDED MARCH 31, 1996.
</LEGEND>
<CIK> 0000848446
<NAME> VULCAN INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 226,124
<SECURITIES> 20,249,129
<RECEIVABLES> 2,654,110
<ALLOWANCES> 245,638
<INVENTORY> 1,213,879
<CURRENT-ASSETS> 24,654,410
<PP&E> 19,200,726
<DEPRECIATION> 16,411,664
<TOTAL-ASSETS> 50,846,051
<CURRENT-LIABILITIES> 8,399,877
<BONDS> 0
0
66,060
<COMMON> 249,939
<OTHER-SE> 35,976,320
<TOTAL-LIABILITY-AND-EQUITY> 50,846,051
<SALES> 3,956,997
<TOTAL-REVENUES> 4,330,872
<CGS> 4,043,426
<TOTAL-COSTS> 4,043,426
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,686
<INTEREST-EXPENSE> 36,039
<INCOME-PRETAX> (43,317)
<INCOME-TAX> (61,184)
<INCOME-CONTINUING> 127,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,695
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
