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, 1998
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) 427-804
(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, 1998:
1,150,444 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
Item 3 Quantitative and Qualitative Disclosures
about Market Risks 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>
SEPTEMBER 30, DECEMBER 31,
1998 1997
UNAUDITED
<S> <C> <C>
-ASSETS-
CURRENT ASSETS:
Cash $ 467,933 2,141,676
Marketable securities (At fair market
value) 38,021,469 34,328,808
Accounts receivable 2,495,241 1,718,037
Inventories 645,285 611,959
Prepaid tax and expense 210,015 99,876
---------- ----------
TOTAL CURRENT ASSETS 41,839,943 38,900,356
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 14,184,717 14,873,913
Less-Accumulated depreciation and depletion 11,387,516 12,375,142
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 2,797,201 2,498,771
---------- ----------
OTHER ASSETS:
Investment in joint venture - 350,696
Marketable securities (At fair market
value) 29,659,050 37,526,937
Deferred charges and other assets 2,740,997 3,138,833
---------- ----------
TOTAL OTHER ASSETS 32,400,047 41,016,466
---------- ----------
TOTAL ASSETS $77,037,191 82,415,593
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Notes payable - bank $ 1,040,000 -
Accounts payable and accrued expenses 1,252,873 1,254,396
Deferred income tax 11,494,936 10,245,689
---------- ----------
TOTAL CURRENT LIABILITIES 13,787,809 11,500,085
---------- ----------
OTHER LIABILITIES:
Deferred income tax 9,710,131 12,358,733
Commitments and contingencies - -
Minority interest in partnership 9,530 37,426
Other liabilities 155,346 24,359
---------- ----------
TOTAL OTHER LIABILITIES 9,875,007 12,420,518
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 5,626,843 5,619,993
Retained earnings 24,733,996 24,543,468
Accumulated other comprehensive income:
Net unrealized holding gain 40,455,824 43,211,515
---------- ----------
71,066,602 73,624,915
Less-Common stock in treasury-at cost 17,692,227 15,129,925
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 53,374,375 58,494,990
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $77,037,191 82,415,593
========== ==========
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,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES:
Net sales $7,804,973 8,745,217 2,515,029 2,892,515
Dividends 1,278,232 1,203,700 429,036 405,424
--------- --------- --------- ---------
TOTAL REVENUES 9,083,205 9,948,917 2,944,065 3,297,939
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 7,669,365 7,957,353 2,460,670 2,682,519
General and
administrative 1,101,856 1,254,121 382,791 403,607
Interest expense 21,906 15,305 4,359 -
--------- -------- --------- ---------
TOTAL COST AND
EXPENSES 8,793,127 9,226,779 2,847,820 3,086,126
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME(LOSS)
AND MINORITY
INTEREST 240,160 454,017 (18,040) 144,963
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 530,238 1,176,155 78,205 356,776
NET GAIN ON SALE OF
PROPERTY AND
EQUIPMENT 530,214 549,232 5,416 39,158
--------- --------- ---------- ---------
INCOME BEFORE
INCOME TAXES 1,060,452 1,725,387 83,621 395,934
INCOME TAX PROVISION 153,999 313,500 12,915 42,718
--------- --------- --------- ---------
NET INCOME $ 906,453 1,411,887 70,706 353,216
========= ========= ========= =========
NET INCOME PER
COMMON SHARE $ .76 1.13 .06 .29
========= ========= ========= =========
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 September 30,
UNAUDITED
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 6,952,651 8,794,127
Cash paid to suppliers and employees (8,732,349) (8,997,618)
Dividends received 1,278,232 1,203,700
Interest paid (21,906) (15,305)
Income tax payments (237,500) (240,000)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (760,872) 744,904
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 545,120 619,277
Purchase of property and equipment (633,452) (138,401)
Collections on notes receivable and other 656,839 53,639
Cash distribution from joint venture 750,000 700,000
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 1,318,507 1,234,515
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under credit agreements 1,040,000 -
Sale of treasury shares 7,825 -
Purchase of treasury shares (2,563,277) (697,085)
Cash dividends paid (715,926) (750,383)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (2,231,378) (1,447,468)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,673,743) 531,951
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,141,676 1,254,138
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 467,933 1,786,089
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 906,453 1,411,887
Adjustments-
Depreciation and amortization 323,983 440,340
Deferred income taxes 20,224 30,120
Equity in joint venture income and
minority interest (240,160) (454,017)
Net gain on sale of property and
marketable securities (530,214) (549,232)
(Increase) decrease in accounts
receivable (852,322) 48,910
Increase in inventories (33,326) (205,389)
Increase (decrease) in accounts payable,
accrued expenses and other assets (355,510) 22,285
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (760,872) 744,904
========= =========
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,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
a) Net income $ 906,453 1,411,887 70,706 353,216
b) Dividends on
preferred
shares - 1,977 - -
--------- --------- --------- ---------
c) Net income
attributable
to common
shares $ 906,453 1,409,910 70,706 353,216
========= ========= ========= =========
d) Cash
dividends
on common
shares $ 715,926 748,406 232,128 247,588
========= ========= ========= =========
Weighted Average
Shares:
e) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
f) Common
treasury
shares 800,587 749,923 822,470 755,500
--------- --------- --------- ---------
g) Common shares
outstanding 1,198,925 1,249,589 1,177,042 1,244,012
========= ========= ========= =========
h) Income per
common share
(c/g) $ .76 1.13 .06 .29
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, 1998 and 1997
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, 1998, 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,
1998 1997
UNAUDITED
<S> <C> <C>
Inventories consisted of:
Finished goods $247,911 220,117
Work in process 159,313 119,116
Raw materials 238,061 272,726
------- -------
Total inventories $645,285 611,959
======= =======
</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, 1998 and 1997
(Continued)
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard No. 130,
Reporting Comprehensive Income, effective January 1, 1998. The adoption
of this Statement had no impact on the Company's net income or shareholders'
equity. During the nine months ended September 30, 1998 and 1997 total other
comprehensive income(loss) related to unrealized holding gains on securities
available for sale, net of tax, amounted to $(2,755,691) and $8,085,408
respectively. Accumulated comprehensive income consists of unrealized holding
gains on securities available for sale.
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at September 30, 1998, 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, 1998,
and the related condensed consolidated statements of income and cash flows for
the nine-month and three-month periods ended September 30, 1998 and 1997.
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, 1997, 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 12, 1998, 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, 1997, 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 11, 1998
-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, 1998,
decreased $940,244 or 10.8% over the corresponding period in 1997. Cost of
sales decreased $287,988 or 3.6% during the nine-month period compared to the
corresponding nine-month period in 1997. Net sales revenue for the third
quarter of 1998 decreased $377,486 or 13.1% and cost of sales decreased
$221,849 or 8.3% compared to the corresponding quarter in 1997. The
foregoing decreases were due primarily to decreased sales in the Rubber and
Plastics and Wood Products segments and increased costs in the Wood Products
segment.
General and administrative expenses decreased $152,265 or 12.1% in the nine-
month period ended September 30, 1998, as compared to the corresponding
nine-month period in 1997. General and administrative expenses for the third
quarter of 1998 decreased $20,816 or 5.2% compared to the corresponding
quarter in 1997. These decreases are principally due to the downsizing in the
Company's Rubber and Plastics segment and general costcutting throughout the
Company.
Interest expense for the nine-month period ended September 30, 1998, increased
$6,601. Interest expense for the three-month period ended September 30, 1998,
increased $4,359. These increases are due to increased borrowings.
Gains on the sale of property and equipment were $530,214 for the nine-month
period ended September 30, 1998, as compared to $549,232 for the corresponding
period in 1997. 1998 gains were the result of the sales of assets and timber.
The 1997 gain was substantially the result of timber sales. Gains on the sale
of property and equipment were $5,417 in the third quarter of 1998 as compared
to $39,158 in the third quarter of 1997.
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 from 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 cash distributions of
$750,000 from VBBPC during the first nine months of 1998. The excess of cash
distributions over the Company's investment in VBBPC is included in other
liabilities at September 30, 1998.
-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 Ended Three Months ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $8,988,990 10,602,480 2,149,600 3,597,149
Costs and expenses 8,501,068 9,687,766 2,183,755 3,305,635
--------- --------- --------- ---------
Net income(loss) $ 487,922 914,714 (34,155) 291,514
========= ========= ========== =========
Company's 50% equity
in net income(loss) $ 243,961 457,357 (17,078) 145,757
========= ========= ========== =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the third quarter of 1998 were funded
in part through earnings, the sale of timber and equipment, noncash charges
such as depreciation and amortization and from short-term borrowings. The
cash from these transactions was primarily used in operations. The Company
expects to continue, when necessary, to use short-term borrowings to meet cash
requirements not fully provided by earnings. During the nine months ended
September 30, 1998, 67,000 shares of treasury stock were acquired for
$2,563,277 pursuant to a public announcement made at the annual shareholders'
meeting in May 1998 that this Company was to purchase up to 100,000 shares.
There were approximately $119,700 of commitments for capital
expenditures as of September 30, 1998.
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, 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. The Company 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 involves 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.
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>
27 602 (b) (27) Financial Data Schedule
for the Nine Months Ended
September 30, 1998 12
</TABLE>
b. The Company was not required to file Form 8-K for the quarter
ended September 30, 1998.
-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, 1998 By: Benjamin Gettler
Date Chairman of the Board, President
and Chief Executive Officer
November 12, 1998 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 SEPTEMBER 30, 1998.
</LEGEND>
<CIK> 0000848446
<NAME> VULCAN INTERNATIONAL
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 467,933
<SECURITIES> 67,680,519
<RECEIVABLES> 2,749,916
<ALLOWANCES> 254,675
<INVENTORY> 645,285
<CURRENT-ASSETS> 41,839,943
<PP&E> 2,797,201
<DEPRECIATION> 323,983
<TOTAL-ASSETS> 77,037,191
<CURRENT-LIABILITIES> 13,787,809
<BONDS> 0
0
0
<COMMON> 249,939
<OTHER-SE> 53,124,436
<TOTAL-LIABILITY-AND-EQUITY> 77,037,191
<SALES> 7,804,973
<TOTAL-REVENUES> 9,083,205
<CGS> 7,669,365
<TOTAL-COSTS> 7,669,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,906
<INCOME-PRETAX> 1,060,452
<INCOME-TAX> 153,999
<INCOME-CONTINUING> 906,453
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 906,453
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
