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 September 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 September 30, 1997:
1,237,944 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 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
UNAUDITED
<S> <C> <C>
-ASSETS-
CURRENT ASSETS:
Cash $ 1,786,089 1,254,138
Marketable securities (At fair market
value-September 30, 1997, cost $3,756,350;
and December 31, 1996, cost $3,756,586) 28,857,828 23,981,345
Accounts receivable 2,441,626 2,490,485
Inventories 839,384 633,995
Prepaid expense 106,840 140,820
---------- ----------
TOTAL CURRENT ASSETS 34,031,767 28,500,783
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 15,296,613 15,667,654
Less-Accumulated depreciation and depletion 12,708,801 12,711,997
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,587,812 2,955,657
---------- ----------
INVESTMENT IN JOINT VENTURE 443,190 685,832
---------- ----------
MARKETABLE SECURITIES (At fair market value-
September 30, 1997, and December 31, 1996, cost
$2,623,283) 32,172,160 24,798,261
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS 2,992,730 2,908,090
---------- ----------
TOTAL ASSETS $ 72,227,659 59,848,623
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 8,367,126 6,736,265
Other 1,288,103 1,128,778
---------- ----------
TOTAL CURRENT LIABILITIES 9,655,229 7,865,043
---------- ----------
OTHER LIABILITIES:
Deferred income tax 10,537,598 7,973,105
Commitments and contingencies - -
Minority interest in partnership 36,246 37,607
Other - 24,109
---------- ----------
TOTAL OTHER LIABILITIES 10,573,844 8,034,821
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 315,999
Additional paid-in capital 5,619,993 5,619,993
Retained earnings 24,413,020 23,782,656
Net unrealized holding gain 36,069,234 27,983,826
---------- ----------
66,352,186 57,702,474
Less-Common stock in treasury-at cost 14,353,600 13,753,715
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 51,998,586 43,948,759
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 72,227,659 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 nine months ended For the three months ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 8,745,217 11,635,032 2,892,515 3,977,703
Dividends 1,203,700 1,133,029 405,424 378,551
--------- ---------- --------- ---------
TOTAL REVENUES 9,948,917 12,768,061 3,297,939 4,356,254
--------- ---------- --------- ---------
COST AND EXPENSES:
Cost of sales 7,957,353 10,652,702 2,682,519 3,538,614
General and
administrative 1,254,121 1,503,081 403,607 465,118
Interest expense 15,305 111,142 - 38,691
--------- ---------- --------- ---------
TOTAL COST AND
EXPENSES 9,226,779 12,266,925 3,086,126 4,042,423
--------- ---------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 454,017 387,083 144,963 69,184
--------- ---------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 1,176,155 888,219 356,776 383,015
NET GAIN ON SALE OF
PROPERTY AND
EQUIPMENT 549,232 494,196 39,158 35,106
--------- ---------- --------- ---------
INCOME BEFORE
INCOME TAXES 1,725,387 1,382,415 395,934 418,121
INCOME TAX PROVISION 313,500 216,532 42,718 58,540
--------- ---------- --------- ---------
NET INCOME $ 1,411,887 1,165,883 353,216 359,581
========= ========== ========= =========
NET INCOME PER
COMMON SHARE $ 1.13 .97 .29 .30
========= ========== ========= =========
DIVIDENDS PER
COMMON SHARE $ .60 .60 .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 nine months ended
UNAUDITED
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 8,794,127 11,206,059
Cash paid to suppliers and employees (8,997,618) (11,696,137)
Dividends received 1,203,700 1,133,029
Interest paid (15,305) (112,636)
Income tax payments (240,000) ( 40,801)
---------- ----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 744,904 489,514
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment 619,277 626,436
Purchase of property and equipment (138,401) (913,240)
Collections on notes receivable and other 53,639 50,913
Distribution from joint venture 700,000 500,000
---------- ----------
NET CASH FLOWS FROM INVESTING ACTIVITIES 1,234,515 264,109
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under credit agreements - 195,000
Purchase of treasury shares (697,085) (810,028)
Cash dividends paid (750,383) (720,327)
---------- ----------
NET CASH FLOWS FROM FINANCING ACTIVITIES (1,447,468) (1,335,355)
---------- ----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 531,951 (581,732)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,254,138 1,136,553
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,786,089 554,821
========== ==========
RECONCILIATION OF NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,411,887 1,165,883
Adjustments-
Depreciation and amortization 440,340 478,113
Deferred income taxes 30,120 4,000
Equity in joint venture income and
minority interest (454,017) (387,083)
Net gain on sale of property and
marketable securities (549,232) (494,196)
Stock compensation programs - 64,500
(Increase) decrease in accounts receivable 48,910 (428,973)
(Increase) decrease in inventories (205,389) 174,824
Increase (decrease) in accounts payable,
accrued expenses and other assets 22,285 (87,554)
---------- ----------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 744,904 489,514
========== ==========
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 nine months ended For the three months ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
a) Net income $ 1,411,887 1,165,883 353,216 359,581
b) Dividends on
preferred
shares 1,977 2,969 - 992
--------- --------- --------- ---------
c) Net income
attributable
to common
shares $ 1,409,910 1,162,914 353,216 358,589
========= ========= ========= =========
d) Cash
dividends on
common shares $ 748,406 717,358 247,588 236,471
========= ========= ========= =========
Weighted Average
Shares:
e) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
f) Common
treasury shares 749,923 803,144 755,500 814,836
--------- --------- --------- ---------
g) Common shares
outstanding 1,249,589 1,196,368 1,244,012 1,184,676
========= ========= ========= =========
h) Income per
common share
(c/g) $ 1.13 .97 .29 .30
i) Dividends per
common share $ .60 .60 .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 nine months ended September 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
nine months ended September 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>
SEPTEMBER 30, DECEMBER 31,
1997 1996
UNAUDITED
<S> <C> <C>
Inventories consisted of:
Finished goods $252,621 203,394
Work in process 252,994 131,054
Raw materials 333,769 299,547
------- -------
Total inventories $839,384 633,995
======= =======
</TABLE>
-5-
<PAGE>
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 1997 and 1996
(Continued)
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at September 30, 1997, and for
the nine-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-
<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 September 30, 1997,
and the related condensed consolidated statements of income and cash flows for
the nine-month and three-month periods ended September 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. L.L.P.
Certified Public Accountants
Cincinnati, Ohio
November 3, 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 nine-month period ended September 30, 1997,
decreased $2,889,815 or 24.8% over the corresponding period in 1996. Cost of
sales decreased $2,695,349 or 25.3% during the nine-month period compared to
the corresponding nine-month period in 1996. Net sales revenue for the third
quarter of 1997 decreased $1,085,188 or 27.3% and cost of sales decreased
$856,095 or 24.2% 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 $248,960 or 16.6% in the
nine-month period ended September 30, 1997, as compared to the corresponding
period in 1996. General and administrative expenses for the third quarter of
1997 decreased $61,511 or 13.2% 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 nine-month period ended September 30, 1997, decreased
$95,837 due to decreased borrowings. Interest expense for the third quarter
of 1997 decreased $38,691 compared to the corresponding quarter in 1996.
Gains on the sale of property and equipment were $549,232 for the nine-month
period ended September 30, 1997, as compared to $494,196 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 $39,158
in the third quarter of 1997 as compared to $35,106 in the third 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 cash distributions of
$700,000 from VBBPC during the first nine 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>
Nine Months Three Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $10,602,480 10,202,174 3,597,149 3,097,729
Costs and expenses 9,687,766 9,420,968 3,305,635 2,957,315
---------- ---------- --------- ---------
Net income $ 914,714 781,206 291,514 140,414
========== ========== ========= =========
Company's 50% equity
in net income $ 457,357 390,603 145,757 70,207
========== ========= ========= =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the third quarter of 1997 were funded
in part through earnings and noncash charges such as depreciation and
amortization, a $100,000 distribution from the joint venture and from the sale
of timber. 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 September
30, 1997, 11,800 shares of treasury stock were acquired and 1,000 shares of
prior preferred and cumulative preferred shares were redeemed for $697,085 by
the use of cash from operations. There were approximately $70,400 of
commitments for capital expenditures as of September 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
September 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
November 12, 1997 By: Benjamin Gettler
- ----------------- Chairman of the Board, President
Date and Chief Executive Officer
November 12, 1997 By: Vernon E. Bachman
- ----------------- Vice President, Secretary-Treasurer
Date 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 SEPTEMBER 30, 1997.
</LEGEND>
<CIK> 0000848446
<NAME> VULCAN INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,786,089
<SECURITIES> 61,029,988
<RECEIVABLES> 2,765,164
<ALLOWANCES> 323,538
<INVENTORY> 839,384
<CURRENT-ASSETS> 34,031,767
<PP&E> 2,587,812
<DEPRECIATION> 440,340
<TOTAL-ASSETS> 72,227,659
<CURRENT-LIABILITIES> 9,655,229
<BONDS> 0
0
0
<COMMON> 249,939
<OTHER-SE> 51,748,647
<TOTAL-LIABILITY-AND-EQUITY> 72,227,659
<SALES> 8,745,217
<TOTAL-REVENUES> 9,948,917
<CGS> 7,957,353
<TOTAL-COSTS> 7,957,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,000
<INTEREST-EXPENSE> 15,305
<INCOME-PRETAX> 1,725,387
<INCOME-TAX> 313,500
<INCOME-CONTINUING> 1,411,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,411,887
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
