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, 2001
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, 2001:
1,085,219 shares
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 5-10
Independent Accountants' Report 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-13
Item 3 Quantitative and Qualitative Disclosures
about Market Risks 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 14-15
Item 6. Exhibits and Reports on Form 8-K 15
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2001 2000
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 1,403,525 1,008,649
Marketable securities (at fair market value) 41,570,141 50,383,925
Accounts receivable 1,967,777 3,072,529
Inventories 572,914 941,090
Prepaid expense and tax 144,368 87,301
---------- -----------
TOTAL CURRENT ASSETS 45,658,725 55,493,494
---------- -----------
PROPERTY, PLANT AND EQUIPMENT-at cost 11,626,453 11,715,635
Less-Accumulated depreciation and depletion 9,492,024 9,346,419
---------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 2,134,429 2,369,216
---------- -----------
OTHER ASSETS:
Investment in joint venture 54,394 70,528
Marketable securities (at fair market value) 37,732,903 48,153,115
Deferred charges and other assets 5,190,201 5,057,605
---------- -----------
TOTAL OTHER ASSETS 42,977,498 53,281,248
---------- -----------
TOTAL ASSETS $90,770,652 111,143,958
========== ===========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $11,056,829 14,093,872
Note payable 565,000 1,700,000
Other 6,716,329 6,037,426
---------- -----------
TOTAL CURRENT LIABILITIES 18,338,158 21,831,298
---------- -----------
OTHER LIABILITIES:
Deferred income tax 12,866,104 16,309,169
Commitments and contingencies - -
Minority interest in partnership 10,407 11,066
Other liabilities 33,285 33,285
---------- -----------
TOTAL OTHER LIABILITIES 12,909,796 16,353,520
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 7,745,102 7,745,102
Retained earnings 25,881,836 24,565,375
Accumulated other comprehensive income 48,197,564 60,846,586
---------- -----------
82,074.441 93,407,002
Less-Common stock in treasury-at cost 22,551,743 20,447,862
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 59,522,698 72,959,140
---------- -----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $90,770,652 111,143,958
========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-1-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
Nine months ended Three months ended
September 30, September 30,
2001 2000 2001 2000
REVENUES:
Net sales $6,241,465 7,272,115 1,859,131 2,440,152
Dividends and interest 1,637,021 1,550,809 552,419 514,960
--------- --------- --------- ---------
TOTAL REVENUES 7,878,486 8,822,924 2,411,550 2,955,112
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 6,022,166 7,281,929 1,814,593 2,412,853
General and
administrative 1,458,904 1,226,645 483,173 421,720
Interest expense 233,798 287,754 63,580 93,707
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 7,714,868 8,796,328 2,361,346 2,928,280
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME AND
MINORITY INTEREST 84,524 333,597 350 100,773
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF ASSETS 248,142 360,193 50,554 127,605
NET GAIN ON SALE OF
PROPERTY, EQUIPMENT
AND SECURITIES 2,185,289 718,760 167,389 550,228
--------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 2,433,431 1,078,953 217,943 677,833
INCOME TAX PROVISION
(BENEFIT) 438,139 (116,582) (56,646) (184,941)
--------- --------- --------- ---------
NET INCOME $1,995,292 1,195,535 274,589 862,774
========= ========= ========= =========
NET INCOME PER SHARE $ 1.77 1.08 .25 .78
========= ========= ========= =========
DIVIDENDS PER
COMMON SHARE $ .60 .60 .20 -
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-2-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended
UNAUDITED
September 30, September 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 7,351,917 6,595,975
Cash paid to suppliers and employees (6,529,945) (8,044,999)
Dividends received 1,637,021 1,550,809
Interest paid (51,267) (140,418)
Income taxes paid (480,000) -
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,927,726 (38,633)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, equipment and
marketable securities 2,258,544 301,404
Purchase of property and equipment (58,735) (192,877)
Cash distribution from joint venture 100,000 300,000
Collection on notes receivable 85,054 89,328
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 2,384,863 497,855
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
credit agreements (1,135,000) 420,000
Sale of treasury shares - 466,875
Purchase of common shares (2,103,881) (768,344)
Cash dividends paid (678,832) (660,971)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (3,917,713) (542,440)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 394,876 (83,218)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,008,649 1,088,626
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,403,525 1,005,408
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,995,292 1,195,535
Adjustments-
Depreciation and amortization 290,017 327,967
Deferred income taxes 36,054 (256,269)
Equity in joint venture income and
minority interest (84,524) (333,597)
Net gain on sale of property and
marketable securities (2,185,289) (718,760)
(Increase) decrease in accounts
receivable 1,110,452 (676,140)
Decrease in inventories 368,176 460,268
Decrease in accounts payable,
accrued expenses and other assets 397,548 (37,637)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,927,726 (38,633)
========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-3-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
SCHEDULE SUPPORTING NET INCOME PER COMMON SHARE
AND DIVIDENDS PER COMMON SHARE
UNAUDITED
EXHIBIT 1
Nine months ended Three months ended
September 30, September 30,
2001 2000 2001 2000
a) Net income $1,995,292 1,195,535 274,589 862,774
========= ========= ========= =========
b) Cash dividends on
common shares 678,832 660,971 224,943 -
========= ========= ========= =========
Weighted Average
Shares:
c) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
d) Common
treasury shares 870,513 895,730 882,061 901,314
--------- --------- --------- ---------
e) Common shares
outstanding 1,128,999 1,103,782 1,117,451 1,098,198
========= ========= ========= =========
f) Net income per
common share $ 1.77 1.08 .25 .78
g) Dividends per
common share $ .60 .60 .20 -
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-4-
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, 2001 and 2000
On March 1, 1990 the United States of America filed a Complaint against the
Registrant and others in the United States District Court for the District
of Massachusetts claiming that the Registrant was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Registrant had engaged counsel to represent it in that action,
the Registrant was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Registrant on September 22, 1999. The "Final Judgment" awarded damages
against the Registrant in favor of the United States in the amount of
$3,465,438 for unreimbursed response costs and accrued interest, plus
any additional past unreimbursed response costs, interest and certain
future costs the United States incurs at the site. The United States filed
a notice of lien in certain jurisdictions on real property of the
Registrant and its subsidiary Vulcan Corporation in the dollar amount of
the judgment, plus interest.
The Registrant has recorded a liability of $3,968,300 including accrued
interest of $502,900 for past costs plus $1,151,600,(representing a
discounted present value of $1,750,000) for estimated future costs in
connection with the Site. The September 30, 2000 quarterly results were
restated to recognize interest on the liability as reported in the
Registrant's Form 10-K for the year ended December 31, 2000. The
liability for future costs is a significant estimate of the future costs
and it is subject to change as actual costs are incurred and reported by
the Environmental Protection Agency.
The Registrant is presently continuing an investigation into this matter and
intends to vigorously pursue all available legal remedies to set aside all
orders and liens relating to the asserted liability and to defend itself
against the underlying allegations.
The Registrant was advised by the U.S. Environmental Protection Agency
several years ago that it was one of at least 122 large generator potentially
responsible parties ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint and
several liability was in the range of $15 million. The Registrant, along with
many other PRP's, entered into a consent agreement with U.S. EPA to remediate
the Site, and the Registrant is now a party to a Remedial Design/Remedial
-5-
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, 2001 and 2000
(Continued)
Action Trust Agreement for the purpose of undertaking clean-up
responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated that additional funds of approximately
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
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. All such adjustments are of a normal recurring
nature.
There were no securities of the Registrant sold by the Registrant during the
nine months ended September 30, 2001, 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.
ACCOUNTING CHANGES
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 requires an entity to recognize all
derivatives, at their fair market value, as either assets or liabilities in
the statement of financial position. The effect of adopting this standard
was not significant.
-6-
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, 2001 and 2000
(Continued)
NEW PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement No. 141,
Business Combinations, effective for combinations after June 30, 2001,
Statement No. 142, Goodwill and Other Intangible Assets, effective for
goodwill and other intangible assets acquired after June 30, 2001 and for
other goodwill and other intangible assets effective January 1, 2002,
Statement No. 143, Accounting For Asset Retirement Obligations, effective
January 1, 2003, Statement No. 144, Accounting For The Impairment or Disposal
of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of, effective
January 1, 2002. These standards are not expected to have a significant
impact on the Corporation's results of operations.
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.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with current
period presentations.
INVENTORIES
SEPTEMBER 30, DECEMBER 31,
2001 2000
UNAUDITED
Inventories consisted of:
Finished goods $145,260 657,693
Work in process 132,811 72,992
Raw materials 294,843 210,405
------- -------
Total inventories $572,914 941,090
======= =======
-7-
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, 2001 and 2000
(Continued)
COMPREHENSIVE INCOME
During the nine months and three months ended September 30, 2001 and 2000
total other comprehensive income (loss) was as follows:
Nine months ended Three months ended
September 30, September 30,
2001 2000 2001 2000
c>
Net income $ 1,995,292 1,195,535 274,589 862,774
Other comprehensive
income, net of tax:
Unrealized gain (loss)
on marketable
securities (11,749,849) 9,001,815 (5,356,728) 7,609,716
Less: reclassification
adjustment for gains
included in net income (899,173) (352,455) (74,854) (352,455)
---------- --------- --------- ---------
Total comprehensive
income (loss) $(10,653,730) 9,844,895 (5,156,993) 8,120,035
========== ========= ========= =========
Accumulated comprehensive income consisted of unrealized holding gains on
securities available for sale of $48,197,564 at September 30, 2001 and
$60,846,586 at December 31, 2000.
INCOME TAXES
The provision for income taxes is a tax benefit for the nine months ended
September 30, 2000 and for the three months ended September 30, 2001 and 2000
due primarily to the use of the dividend received deduction which had been
limited in prior quarters. It is anticipated the full dividend received
deduction will be utilized during 2001. The full dividend received
deduction was utilized during 2000.
-8-
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, 2001 and 2000
(Continued)
BUSINESS SEGMENT INFORMATION
Reportable segments for the nine months and three months ended September 30,
2001 and 2000 are as follows:
Nine months ended Three months ended
September 30, September 30,
2001 2000 2001 2000
NET SALES:
Rubber and Foam Products $4,446,327 5,289,943 1,258,621 1,645,487
Bowling Pins 1,737,407 1,971,656 575,909 840,947
Real Estate Operations 658,419 571,722 116,001 146,099
Intersegment net sales (276,003) (376,912) (91,400) (176,175)
--------- --------- --------- ---------
6,566,150 7,456,409 1,859,131 2,456,358
Timber sales reported in
gain on sale of property
and equipment (324,685) (184,294) - (16,206)
--------- --------- --------- ---------
TOTAL SALES $6,241,465 7,272,115 1,859,131 2,440,152
========= ========= ========= =========
OPERATING PROFIT (LOSS)
FROM CONTINUING
OPERATIONS:
Rubber and Foam Products $ (582,164) (908,877) (201,693) (295,628)
Bowling Pins 64,214 304,065 8,327 116,137
Real Estate Operations 213,609 124,776 (36,635) (30,120)
--------- --------- --------- ---------
TOTAL OPERATING
PROFIT (LOSS) FROM
CONTINUING OPERATIONS (304,341) (480,036) (230,001) (209,611)
-9-
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, 2001 and 2000
(Continued)
Nine months ended Three months ended
September 30, September 30,
2001 2000 2001 2000
Interest expense - net (233,798) (287,754) (63,580) (93,707)
Other unallocated corporate
income - net 2,971,570 1,846,743 511,524 981,151
Income tax (provision)
benefit (438,139) 116,582 56,646 184,941
--------- --------- ------- ---------
NET INCOME $1,995,292 1,195,535 274,589 862,774
========= ========= ======= =========
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at September 30, 2001, 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.
-10-
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, 2001,
and the related condensed consolidated statements of income for the nine-
month and three-month periods ended September 30, 2001 and 2000 and the
related statements of cash flows for the nine-months ended September 30,
2001 and 2000. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established 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 U.S. generally accepted
auditing standards, the consolidated balance sheet of Vulcan International
Corporation and subsidiaries as of December 31, 2000, 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, 2001 and March 29, 2001, 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,
2000, 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
October 31, 2001
-11-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Net sales revenue from continuing operations for the nine months ended
September 30, 2001, decreased $1,030,650 or 14.2% over the corresponding
period in 2000. Cost of sales decreased $1,259,793 or 17.3% during the nine
months ended September 30, 2001 compared to the corresponding period in 2000.
Net sales revenue for the third quarter of 2000 decreased $581,021 or 23.8%
and cost of sales decreased $598,260 or 24.8% compared to the corresponding
quarter in 2000. These changes are due to decreased sales in the Company's
Rubber and Foam and Bowling Pin segments.
General and administrative expenses increased $232,259 or 18.9% in the nine
months ended September 30, 2001, as compared to the corresponding period in
2000. General and administrative expenses for the third quarter of 2001
increased $61,453 or 14.6% compared to the corresponding quarter in 2000.
These increases are primarily due to increased professional fees relating
to environmental matters.
Interest expense decreased $53,956 for the nine months ended September 30,
2001. Interest expense for the three month period ended September 30, 2001
decreased $30,127. These decreases were due to decreased borrowings under
the Company's line of credit agreement.
Gains on the sale of property, equipment and marketable securities were
$2,185,289 for the nine months ended September 30, 2001, as compared to
$718,760 for the corresponding period in 2000. Gains in 2001 were
primarily the result of the sale of marketable securities and timber.
Gains in 2000 were the result of the sales of marketable securities, timber
and equipment from the Company's rubber plant in Clarksville, Tennessee.
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
$100,000 from VBBPC during the first nine months of 2001. The Company's
interest in VBBPC is included in other assets at September 30, 2001.
For the period May 1, 2001 through December 31, 2001, Vulcan will bear the
economic risk of the joint venture and thus any profit or loss resulting
from operations during this period shall be allocated to Vulcan.
-12-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
Summarized income statement information for VBBPC consists of the following:
Nine Months Ended Three Months ended
September 30, September 30,
2001 2000 2001 2000
Net sales $2,935,079 6,344,149 503,741 2,048,001
Costs and expenses 2,767,348 5,675,261 503,741 1,846,138
--------- --------- ------- ---------
Net income $ 167,731 668,888 - 201,863
========= ========= ======= =========
Company's 50% equity
in net income $ 83,865 334,444 - 100,932
========= ========= ======= =========
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the third quarter of 2000 were funded
in part through earnings and noncash charges such as depreciation and
amortization and from the sale of timber, equipment and marketable securities.
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, depreciation and
amortization. During the nine months ended September 30, 2001, 54,305
shares of treasury stock were acquired for $2,103,881. There were
approximately $101,000 of commitments for capital expenditures as of
September 30, 2001.
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, 2000.
-13-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 1, 1990 the United States of America filed a Complaint against the
Registrant and others in the United States District Court for the District
of Massachusetts claiming that the Registrant was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Registrant had engaged counsel to represent it in that action,
the Registrant was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Registrant on September 22, 1999. The "Final Judgment" awarded damages
against the Registrant in favor of the United States in the amount of
$3,465,438 for unreimbursed response costs and accrued interest, plus
any additional past unreimbursed response costs, interest and certain
future costs the United States incurs at the site. The United States filed
a notice of lien in certain jurisdictions on real property of the
Registrant and its subsidiary Vulcan Corporation in the dollar amount of
the judgment, plus interest.
The Registrant has recorded a liability of $3,968,300 including accrued
interest of $502,900 for past costs plus $1,151,600,(representing a
discounted present value of $1,750,000) for estimated future costs in
connection with the Site. The September 30, 2000 quarterly results were
restated to recognize interest on the liability as reported in the
Registrant's Form 10-K for the year ended December 31, 2000. The
liability for future costs is a significant estimate of the future costs
and it is subject to change as actual costs are incurred and reported
by the Environmental Protection Agency.
The Registrant is presently continuing an investigation into this matter and
intends to vigorously pursue all available legal remedies to set aside all
orders and liens relating to the asserted liability and to defend itself
against the underlying allegations.
The Registrant was advised by the U.S. Environmental Protection Agency several
years ago that it was one of at least 122 large generator potentially
responsible parties ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint and
several liability was in the range of $15 million. The Registrant, along with
many other PRP's, entered into a consent agreement with U.S. EPA to remediate
the Site, and the Registrant is now a party to a Remedial Design/Remedial
Action Trust Agreement for the purpose of undertaking clean-up
responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated the additional funds in the range of
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. (Continued)
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
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
None
b. The Company was not required to file Form 8-K for the quarter
ended September 30, 2001.
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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 9, 2001 By: /s/Benjamin Gettler
-------------------- --------------------------------
Date Chairman of the Board, President
and Chief Executive Officer
November 9, 2001 By: /s/Vernon E. Bachman
-------------------- -----------------------------------
Date Vice President, Secretary-Treasurer
and Principal Accounting Officer
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