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, 1997
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, 1997:
1,249,744 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 2. Changes in Securities 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>
JUNE 30, DECEMBER 31,
1997 1996
UNAUDITED
<S> <C> <C>
-ASSETS-
CURRENT ASSETS:
Cash $ 2,245,919 1,254,138
Marketable securities (At fair market
value-June 30, 1997, and December 31,
1996, cost $3,756,586) 28,272,090 23,981,345
Accounts receivable 2,138,624 2,490,485
Inventories 715,857 633,995
Prepaid expense 56,264 140,820
---------- ----------
TOTAL CURRENT ASSETS 33,428,754 28,500,783
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 15,541,513 15,667,654
Less-Accumulated depreciation and depletion 12,888,671 12,711,997
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,652,842 2,955,657
---------- ----------
INVESTMENT IN JOINT VENTURE 397,433 685,832
---------- ----------
MARKETABLE SECURITIES (At fair market value-
June 30, 1997, and December 31, 1996, cost
$2,623,283) 27,517,008 24,798,261
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS 2,979,277 2,908,090
---------- ----------
TOTAL ASSETS $ 66,975,314 59,848,623
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 8,176,421 6,736,265
Other 922,958 1,128,778
---------- ----------
TOTAL CURRENT LIABILITIES 9,099,379 7,865,043
---------- ----------
OTHER LIABILITIES:
Deferred income tax 8,961,107 7,973,105
Commitments and contingencies - -
Minority interest in partnership 35,451 37,607
Other - 24,109
---------- ----------
TOTAL OTHER LIABILITIES 8,996,558 8,034,821
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 315,999
Additional paid-in capital 5,619,993 5,619,993
Retained earnings 24,307,393 23,782,656
Net unrealized holding gain 32,610,021 27,983,826
---------- ----------
62,787,346 57,702,474
Less-Common stock in treasury-at cost 13,907,969 13,753,715
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 48,879,377 43,948,759
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 66,975,314 59,848,623
========== ==========
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 5,852,702 7,657,329 2,996,387 3,700,332
Dividends 798,276 754,478 405,177 380,603
--------- --------- --------- ---------
TOTAL REVENUES 6,650,978 8,411,807 3,401,564 4,080,935
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 5,274,834 7,114,088 2,616,951 3,070,662
General and
administrative 850,514 1,037,963 520,768 571,890
Interest expense 15,305 72,451 - 36,412
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 6,140,653 8,224,502 3,137,719 3,678,964
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 309,054 317,899 178,753 208,071
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 819,379 505,204 442,598 610,042
NET GAIN ON SALE OF
PROPERTY AND
EQUIPMENT 510,074 459,090 113,806 287,741
--------- --------- --------- ---------
INCOME BEFORE
INCOME TAXES 1,329,453 964,294 556,404 897,783
INCOME TAX PROVISION 270,782 157,992 97,154 219,176
--------- --------- --------- ---------
NET INCOME $ 1,058,671 806,302 459,250 678,607
========= ========= ========= =========
NET INCOME PER
COMMON SHARE $ .84 .67 .36 .57
========= ========= ========= =========
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,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 6,208,115 7,907,585
Cash paid to suppliers and employees (6,233,267) (8,408,895)
Dividends received 798,276 754,478
Interest paid (15,305) (74,697)
Income tax refunds (payments) (170,000) 194,199
---------- ----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES 587,819 372,670
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment 561,700 568,717
Purchase of property and equipment (37,250) (813,971)
Collections on notes receivable 33,761 35,212
Distribution from joint venture 600,000 350,000
---------- ----------
NET CASH FLOWS FROM INVESTING
ACTIVITIES 1,158,211 139,958
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit agreements - (75,000)
Purchase of treasury shares and
redemption of preferred shares (251,454) (613,987)
Cash dividends paid (502,795) (482,864)
---------- ----------
NET CASH FLOWS FROM FINANCING
ACTIVITIES (754,249) (1,171,851)
---------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 991,781 (659,223)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,254,138 1,136,553
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 2,245,919 477,330
========== ==========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,058,671 806,302
Adjustments-
Depreciation and amortization 290,972 300,732
Deferred income taxes 44,931 32,359
Equity in joint venture income and
minority interest (309,054) (317,899)
Net gain on sale of property and
marketable securities (510,074) (459,090)
Stock compensation programs - 64,500
Decrease in accounts receivable 355,413 250,256
Increase in inventories (81,862) (65,979)
Decrease in accounts payable,
accrued expenses and other assets (261,178) (238,511)
---------- ----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ 587,819 372,670
========== ==========
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
a) Net income $ 1,058,671 806,302 459,250 678,607
b) Dividends on
preferred
shares 1,977 1,977 985 985
--------- --------- --------- ---------
c) Net income
attributable
to common
shares $ 1,056,694 804,325 458,265 677,622
========= ========= ========= =========
d) Cash
dividends
on common
shares $ 500,818 480,887 249,949 239,003
========= ========= ========= =========
Weighted Average
Shares:
e) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
f) Common
treasury
shares 747,088 797,153 748,864 804,420
--------- --------- --------- ---------
g) Common shares
outstanding 1,252,424 1,202,359 1,250,648 1,195,092
========= ========= ========= =========
h) Income per
common share
(c/g) $ .84 .67 .36 .57
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, 1997 and 1996
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, 1997, 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>
JUNE 30, DECEMBER 31,
1997 1996
UNAUDITED
<S> <C> <C>
Inventories consisted of:
Finished goods $ 307,771 203,394
Work in process 129,113 131,054
Raw materials 278,973 299,547
--------- ---------
Total inventories $ 715,857 633,995
========= =========
</TABLE>
-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, 1997 and 1996
(Continued)
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 1997, and for
the six-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 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, 1997, and the
related condensed consolidated statements of income and cash flows for the
six-month and three-month periods ended June 30, 1997 and 1996. 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, 1996, 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 15, 1997, 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, 1996, 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
July 31, 1997
-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, 1997, decreased
$1,804,627 or 23.6% over the corresponding period in 1996. Cost of sales
decreased $1,839,254 or 25.9% during the six-month period compared to the
corresponding six-month period in 1996. Net sales revenue for the second
quarter of 1997 decreased $703,945 or 19.0% and cost of sales decreased
$453,711 or 14.8% compared to the corresponding quarter in 1996. The
foregoing decreases were due primarily to the fact that on April 1, 1996, the
Company downsized its Rubber Division by discontinuing the production of
civilian heels and soles.
General and administrative expenses decreased $187,449 or 18.1% in the six-
month period ended June 30, 1997, as compared to the corresponding six-month
period in 1996. General and administrative expenses for the second quarter of
1997 decreased $51,122 or 8.9% compared to the corresponding quarter in 1996.
These decreases are principally due to the downsizing in the Company's Rubber
Division.
Interest expense for the six-month period ended June 30, 1997, decreased
$57,146 due to decreased borrowings. Interest expense for the second quarter
of 1997 decreased $36,412 compared to the corresponding quarter in 1996.
Gains on the sale of property and equipment were $510,074 for the six-month
period ended June 30, 1997, as compared to $459,090 for the corresponding
period in 1996. The 1997 gains are primarily due to timber sales. The 1996
gain was substantially the result of timber and equipment sales in the Shoe
Products Division. Gains on the sale of property and equipment were $113,806
in the second quarter of 1997 as compared to $287,741 in the second quarter of
1996, due primarily to timber sales.
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 distributions of
$600,000 from VBBPC during the first six months of 1997.
-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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 7,005,331 7,104,445 3,779,417 3,139,272
Costs and expenses 6,382,131 6,463,653 3,419,221 2,720,662
--------- --------- --------- ---------
Net income $ 623,200 640,792 360,196 418,610
========= ========= ========= =========
Company's 50% equity
in net income $ 311,600 320,396 180,098 209,305
========= ========= ========= =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the second quarter of 1997 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 used
principally 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 period ended June 30,
1997, 4,600 shares of treasury stock were acquired and 1,000 shares of prior
preferred and cumulative preferred shares were redeemed for $251,454 by the
use of cash from operations. There were approximately $93,200 of commitments
for capital expenditures as of June 30, 1997.
-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 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 2. Changes in Securities.
During the second quarter of 1997, the Company exercised its option to redeem
the $3.00 Prior Preferred and $4.50 Cumulative Preferred shares. The Company
paid a preference upon redemption of $31,140.
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, 1997.
-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 12, 1997 By: Benjamin Gettler
Date Chairman of the Board, President
and Chief Executive Officer
August 12, 1997 By: Vernon E. Bachman
Date 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 JUNE 30, 1997.
</LEGEND>
<CIK> 0000848446
<NAME> VULCAN INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,245,919
<SECURITIES> 55,789,098
<RECEIVABLES> 2,450,162
<ALLOWANCES> 311,538
<INVENTORY> 715,857
<CURRENT-ASSETS> 33,428,754
<PP&E> 2,652,842
<DEPRECIATION> 290,972
<TOTAL-ASSETS> 66,975,314
<CURRENT-LIABILITIES> 9,099,379
<BONDS> 0
0
0
<COMMON> 249,939
<OTHER-SE> 48,629,438
<TOTAL-LIABILITY-AND-EQUITY> 66,975,314
<SALES> 5,852,702
<TOTAL-REVENUES> 6,650,978
<CGS> 5,274,834
<TOTAL-COSTS> 5,274,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 11,336
<INTEREST-EXPENSE> 15,305
<INCOME-PRETAX> 1,329,453
<INCOME-TAX> 270,782
<INCOME-CONTINUING> 1,058,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,058,671
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
</TABLE>
