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, 2003
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 June 30, 2003:
1,004,707 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 5-8
Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Item 3. Quantitative and Qualitative Disclosures
about Market Risks 11
Item 4. Controls and Procedures 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12-13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13-14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2003 2002
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 1,005,819 1,682,049
Marketable securities (At fair market value) 33,306,595 30,237,923
Accounts receivable 1,690,765 1,437,170
Inventories 1,209,443 702,518
Prepaid expense and tax 80,804 44,825
---------- ----------
TOTAL CURRENT ASSETS 37,293,426 34,104,485
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-at cost 11,704,158 11,679,978
Less-Accumulated depreciation and depletion 9,762,743 9,577,197
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 1,941,415 2,102,781
---------- ----------
OTHER ASSETS:
Investment in joint venture 160,902 20,805
Marketable securities (At fair market value) 32,170,183 27,615,871
Deferred charges and other assets 5,854,047 5,771,763
---------- ----------
TOTAL OTHER ASSETS 38,185,132 33,408,439
---------- ----------
TOTAL ASSETS $ 77,419,973 69,615,705
========== ==========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Notes payable $ 861,711 1,861,711
Deferred income tax 8,134,693 7,133,396
Other 6,850,664 6,766,590
---------- ----------
TOTAL CURRENT LIABILITIES 15,847,068 15,761,697
---------- ----------
OTHER LIABILITIES:
Deferred income tax 11,236,194 9,641,263
Commitments and contingencies - -
Minority interest in partnership 10,648 17,304
Other liabilities 37,470 34,531
---------- ----------
TOTAL OTHER LIABILITIES 11,284,312 9,693,098
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 8,253,926 8,205,825
Retained earnings 28,899,995 27,952,115
Accumulated other comprehensive income 39,124,596 34,013,394
---------- ----------
76,528,456 70,421,273
Less-Common stock in treasury-at cost 26,239,863 26,260,363
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 50,288,593 44,160,910
---------- ----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 77,419,973 69,615,705
========== ==========
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
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
REVENUES:
Net sales $4,735,319 4,580,483 2,527,283 2,213,777
Dividends 1,148,327 1,146,033 580,273 574,402
--------- --------- --------- ---------
TOTAL REVENUES 5,883,646 5,726,516 3,107,556 2,788,179
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 4,513,460 4,160,321 2,352,664 2,020,397
General and
administrative 943,558 944,683 461,195 465,169
Interest expense 64,781 93,014 26,986 45,688
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 5,521,799 5,198,018 2,840,845 2,531,254
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 139,449 139,992 68,052 71,489
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 501,296 668,490 334,763 328,414
NET GAIN ON SALE OF
PROPERTY, EQUIPTMENT
AND SECURITIES 683,766 568,390 135,865 141,688
--------- --------- --------- ---------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 1,185,062 1,236,880 470,628 470,102
INCOME TAX PROVISION 136,710 160,944 25,374 35,469
--------- --------- --------- ---------
NET INCOME $1,048,352 1,075,936 445,254 434,633
========= ========= ========= =========
NET INCOME PER SHARE $ 1.04 .98 .44 .40
========= ========= ========= =========
DIVIDENDS PER
COMMON SHARE $ .10 .40 .05 .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 six months ended
UNAUDITED
JUNE 30, JUNE 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 4,485,658 4,244,415
Cash paid to suppliers and employees (5,707,167) (5,847,852)
Dividends received 1,148,327 1,146,033
Interest paid (24,292) (15,298)
Income taxes paid (185,000) (145,000)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (282,474) (617,702)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, equipment
and securities 692,987 583,945
Purchase of property and equipment (42,752) (289,913)
Cash distribution from joint venture - 400,000
Collections on notes receivable and other 56,480 59,779
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 706,715 753,811
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under credit
agreements (1,000,000) -
Sale of treasury shares - 19,885
Purchase of common shares - (171,531)
Cash dividends paid (100,471) (440,842)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (1,100,471) (592,488)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (676,230) (456,379)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,682,049 2,493,733
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,005,819 2,037,354
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,048,352 1,075,936
Adjustments-
Depreciation and amortization 197,852 167,195
Deferred income taxes (36,817) (8,979)
Equity in joint venture income and
minority interest (139,449) (139,992)
Net gain on sale of property, equipment
and securities (683,766) (568,391)
(Increase) in accounts receivable (249,661) (328,233)
(Increase) in inventories (506,925) (289,478)
Increase (decrease) in accounts payable,
accrued expenses and other assets 87,940 (525,760)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (282,474) (617,702)
========= =========
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
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
a) Net income $1,048,352 1,075,936 445,254 434,633
========= ========= ========= =========
b) Cash
dividends
on common
shares $ 100,471 440,842 50,236 220,421
========= ========= ========= =========
Weighted Average
Shares:
c) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
d) Common
treasury
shares 994,860 897,725 994,805 898,022
--------- --------- --------- ---------
e) Common shares
outstanding 1,004,652 1,101,787 1,004,707 1,101,490
========= ========= ========= =========
f) Income per
common
share (a/e): $ 1.04 .98 .44 .40
g) Dividends
per common
share $ .10 .40 .05 .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 six months ended June 30, 2003 and 2002
UNAUDITED
On March 1, 1990 the United States of America filed a Complaint against the
Company and others in the United States District Court for the District
of Massachusetts claiming that the Company 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 Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Company on September 22, 1999. The "Final Judgment" awarded damages
against the Company in favor of the United States in the amount of
$3,465,438, plus interest, for unreimbursed response costs, 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 Company has accrued an estimated liability of $3,522,000, net of
$1,814,000 tax, for the judgment, accrued interest for the past costs and a
discounted present value for estimated future costs in connection with the
site. This estimated liability was calculated based on the "Final Judgment"
and using other information provided by the U.S. Environmental Protection
Agency ("EPA"). The Company expensed $28,000 and $14,000, after tax, for the
six months and three months ended June 30, 2003, as compared to $51,000 and
$25,000, after tax for the six months and three months ended June 30, 2002,
for accrued interest and amortization of estimated future costs related to this
matter.
On March 10, 2003 the U.S. Department of Justice announced a tentative
settlement of this matter for $3,800,000 plus interest from November 2002.
The total settlement will be payable within thirty days of the consent
decree being approved by the court and entered on the court docket. If the
settlement is approved by the court, the Company would recognize income of
approximately $983,000, net of tax of $507,000, for the difference between
the final settlement and the amount it has accrued. The Company expects to
settle this during the third quarter 2003. 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 EPA.
There may be other potential clean-up liabilities, at other sites of which
the Company has no specific knowledge.
-5-
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, 2003 and 2002
UNAUDITED
(Continued)
The Company has an interest in a partnership, CCBA, that 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. The
plaintiff claims that it is entitled to 45.24% of $827,000 and additional
damages. 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.
CCBA appealed a real estate tax assessment from 1999 that had increased the
annual real estate tax by approximately $96,000. The local school board has
appealed the revision and reduced its initial appraised value of the property.
During 2001, the partnership received a $96,000 refund of the additional tax
paid in 1999. CCBA has recorded a liability of approximately $123,000 related
to this issue based on the revised value asserted by the local school board.
If CCBA is successful, this liability will be recognized as income.
The Company is involved in other litigation matters and claims which are
normal in the course of operations. Management believes that the resolution
of these matters will not have a material effect on the Company's business or
financial condition.
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
six months ended June 30, 2003, 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.
-6-
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, 2003 and 2002
UNAUDITED
(Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. 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.
INVENTORIES
JUNE 30, DECEMBER 31,
2003 2002
UNAUDITED
Inventories consisted of:
Finished goods $ 595,896 506,240
Work in process 169,221 33,983
Raw materials 444,326 162,295
--------- -------
Total inventories $1,209,443 702,518
========= =======
COMPREHENSIVE INCOME
During the six months ended June 30, 2003 and 2002 total other comprehensive
income (loss) was as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
Net income $ 1,048,352 1,075,936 445,254 434,633
Other comprehensive
income (loss), net of tax:
Unrealized gain (loss)
on marketable securities 5,352,559 (5,559,449) 7,443,910 (6,849,887)
Less: reclassification
adjustment for gains
included in net income (241,357) (58,313) (12,427) (3,313)
--------- --------- --------- ---------
Total comprehensive
income (loss) $ 6,159,554 (4,541,826) 7,876,737 (6,418,567)
========= ========= ========= =========
Accumulated comprehensive income consists of unrealized holding gains on
securities available for sale of $39,124,596 at June 30, 2003 and
$34,013,394 at December 31, 2002.
-7-
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, 2003 and 2002
UNAUDITED
(Continued)
STOCK OPTIONS
Options to purchase not more than 50,000 shares of treasury stock at $33.20
per share, that were granted to the President of the Company in 2001 will
expire in 2008.
BUSINESS SEGMENT INFORMATION
Reportable segments for the six months and three months ended June 30, 2003
are as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
NET SALES FROM CONTINUING
OPERATIONS:
Rubber and Foam Products $3,704,210 3,491,472 2,151,535 1,755,320
Bowling Pins 936,322 888,733 287,531 356,616
Real Estate Operations 443,251 465,146 217,929 211,105
Intersegment net sales (129,978) (48,359) (19,715) (21,007)
--------- --------- --------- ---------
4,953,805 4,796,992 2,637,280 2,302,034
Timber sales reported in
gain on sale of property
and equipment (218,486) (216,509) (109,997) (88,257)
--------- --------- --------- ---------
TOTAL SALES FROM
CONTINUING OPEATIONS $4,735,319 4,580,483 2,527,283 2,213,777
========= ========= ========= =========
OPERATING PROFIT (LOSS)
FROM CONTINUING OPERATIONS:
Rubber and Foam Products $ (231,584) (104,077) (4,837) (60,683)
Bowling Pins 64,004 80,636 5,970 37,508
Real Estate Operations 150,067 193,178 61,476 75,364
--------- --------- --------- ---------
TOTAL OPERATING
PROFIT (LOSS) FROM
CONTINUING OPERATIONS (17,513) 169,737 62,609 52,189
Interest expense - net (64,781) (93,014) (26,986) (45,688)
Other unallocated corporate
income - net 1,267,356 1,160,157 435,005 463,601
Income tax provision (136,710) (160,944) (25,374) (35,469)
--------- --------- --------- ---------
NET INCOME $1,048,352 1,075,936 445,254 434,633
========= ========= ========= =========
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 2003, and for
the six 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.
-8-
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have reviewed the accompanying condensed consolidated balance sheet of
Vulcan International Corporation and subsidiaries as of June 30, 2003, and
the related condensed consolidated statements of income and cash flows for
the six month and three month periods ended June 30, 2003 and 2002. 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
U.S. 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 U.S. generally accepted
accounting principles.
We have audited, in accordance with U.S. generally accepted auditing
standards, the consolidated balance sheet of Vulcan International Corporation
and subsidiaries as of December 31, 2002, 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 11, 2003, 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, 2002, 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
August 1, 2003
-9-
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 months ended June 30, 2003, increased $154,836
or 3.4% over the corresponding period in 2002. Cost of sales increased
$353,139 or 8.5% during the six months ended June 30, 2003 compared to the
corresponding six month period in 2002. Net sales revenue for the second
quarter of 2003 increased $313,506 or 14.2% and cost of sales increased
$332,267 or 16.5% compared to the corresponding quarter in 2002. These
changes are due to increased sales and costs in the Company's Rubber and
Foam segment.
General and administrative expenses decreased $1,125 or 0.1% in the six
months ended June 30, 2003, as compared to the corresponding six month period
in 2002. General and administrative expenses for the second quarter of 2003
decreased $3,974 or 0.8% compared to the corresponding quarter in 2002.
Interest expense for the six months ended June 30, 2003 decreased $28,233.
Interest expense for the three months ended June 30, 2003 decreased $18,702.
The decreases are primarily due to decreased interest rates and reductions
in short-term debt. Interest of $41,404 and $20,735 was incurred for the
accrued EPA liability for the six months and three months ended June 30, 2003.
Gains on the sale of property, equipment and securities were $683,766 for
the six months ended June 30, 2003, as compared to $568,390 for the
corresponding period in 2002. Gains in 2003 and 2002 were primarily the
result of the sale of marketable securities and timber.
The Company has a 50% interest in a joint venture, Vulcan Brunswick Bowling
Pin Company (VBBPC) which manufactures bowling pins in Antigo, Wisconsin for
Brunswick and the Company. The Company's investment in VBBPC is included in
other assets at June 30, 2003.
Summarized income statement information for VBBPC consists of the following:
Six Months Ended June 30, Three Months ended June 30,
2003 2002 2003 2002
Net sales $3,082,144 3,106,068 1,502,328 1,588,129
Costs and expenses 2,801,949 2,823,698 1,365,753 1,443,753
--------- --------- --------- ---------
Net income $ 280,195 282,370 136,575 144,376
========= ========= ========= =========
Company's 50% equity
in net income $ 140,097 141,185 68,287 72,188
========= ========= ========= =========
-10-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the second quarter of 2003 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. In addition, the Company expects to fund its proposed
settlement regarding the Re-Solve, Inc. Superfund Site by accessing its
existing line of credit, the possible sale of securities and from its
operating cash flow. There were approximately $7,500 of commitments for
capital expenditures as of June 30, 2003.
During the six months ended June 30, 2003, 2000 shares of treasury stock
valued at $68,600 were issued to the President as bonus compensation.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
MARKETABLE SECURITIES
The fair value of marketable securities has increased $6,860,878 from
December 31, 2002 to July 31, 2003. At July 31, 2003 the fair value of
marketable securities was $64,714,672 as compared to $65,476,778 at
June 30, 2003.
The net unrealized holding gain at July 31, 2003 was approximately
$38,600,000 net of deferred taxes of approximately $19,900,000. The
Company is subject to the risk that fair value securities could decline
further.
Item 4. Controls and Procedures
a) Disclosure controls and procedures. The Chief Executive Officer and the
Principal Financial Officer have carried out an evaluation of the
effectiveness of the Company's disclosure controls and procedures that are
designed to ensure that information relating to the Company required to be
disclosed by the Company in the reports that it files or submits under the
Securities and Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms. Based upon this evaluation, these
officers have concluded, that as of June 30, 2003, the Company's disclosure
controls and procedures were adequate.
b) Changes in internal control over financial reporting. During the period
covered by this report, there were no changes in the Company's internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
-11-
PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 1, 1990 the United States of America filed a Complaint against the
Company and others in the United States District Court for the District
of Massachusetts claiming that the Company 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 Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Company on September 22, 1999. The "Final Judgment" awarded damages
against the Company in favor of the United States in the amount of
$3,465,438, plus interest, for unreimbursed response costs, 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 Company has accrued an estimated liability of $3,522,000, net of
$1,814,000 tax, for the judgment, accrued interest for the past costs and a
discounted present value for estimated future costs in connection with the
site. This estimated liability was calculated based on the "Final Judgment"
and using other information provided by the U.S. Environmental Protection
Agency ("EPA"). The Company expensed $28,000 and $14,000, after tax, for the
six months and three months ended June 30, 2003, as compared to $51,000 and
$25,000, after tax for the six months and three months ended June 30, 2002,
for accrued interest and amortization of estimated future costs related to this
matter.
On March 10, 2003 the U.S. Department of Justice announced a tentative
settlement of this matter for $3,800,000 plus interest from November 2002.
The total settlement will be payable within thirty days of the consent
decree being approved by the court and entered on the court docket. If the
settlement is approved by the court, the Company would recognize income of
approximately $983,000, net of tax of $507,000, for the difference between
the final settlement and the amount it has accrued. The Company expects to
settle this during the third quarter 2003. 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 EPA.
There may be other potential clean-up liabilities, at other sites of which
the Company has no specific knowledge.
-12-
PART II - OTHER INFORMATION
(Continued)
Item 1. Legal Proceedings. (Continued)
The Company has an interest in a partnership, CCBA, that 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. The
plaintiff claims that it is entitled to 45.24% of $827,000 and additional
damages. 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.
CCBA appealed a real estate tax assessment from 1999 that had increased the
annual real estate tax by approximately $96,000. The local school board has
appealed the revision and reduced its initial appraised value of the property.
During 2001, the partnership received a $96,000 refund of the additional tax
paid in 1999. CCBA has recorded a liability of approximately $123,000 related
to this issue based on the revised value asserted by the local school board.
If CCBA is successful, this liability will be recognized as income.
The Company is involved in other litigation matters and claims which are
normal in the course of operations. Management believes that the resolution
of these matters will not have a material effect on the Company's business or
financial condition.
Item 2. Changes in Securities and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders -
The Annual Meeting of the shareholders of Vulcan International Corporation was
held on May 8, 2003. The following matters were voted upon:
a. The following members of the Board of Directors of Vulcan
International Corporation were elected as directors by the
votes indicated:
Director For Against Withheld
Leonard Aconsky 826,331 114,024
Benjamin Gettler 826,463 113,892
Thomas D. Gettler 937,900 2,455
Edward B. Kerin 830,169 110,186
Stanley I. Rafalo, O.D. 825,552 114,803
-13-
PART II - OTHER INFORMATION
(Continued)
b. Approval and ratification of all purchases of Company stock by
the Company since May 9, 2002 and approval and ratification of the
action of the Board of Directors at its May 8, 2003 meeting
authorizing the purchase of up to 100,000 shares of the Company
at such times as the President may determine are in the best
interest of the Company:
For Against Withheld
939,068 0 1,287
Item 5. Other Information - Stanley I. Rafalo, O.D. passed away July 30,
2003. Mr. Rafalo was a member of the audit and compensation
committee and had been a member of the board of directors for forty
years.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 11 - Statement regarding computation of per share
earnings included in Part 1, Item 1 of this Form 10Q, page 4.
Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification of Benjamin
Gettler.
Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification of Vernon E.
Bachman.
Exhibit 32 - Section 1350 Certifications
b. The Company was not required to file Form 8-K for the quarter
ended June 30, 2003.
-14-
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
By: /s/ Benjamin Gettler
----------------------------------
Date August 12, 2003 Benjamin Gettler
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Vernon E. Bachman
-----------------------------------
Date August 12, 2003 Vernon E. Bachman
Vice President, Secretary-Treasurer
and Principal Accounting Officer
-15-
Exhibit 31.1
CERTIFICATIONS
In connection with the Quarterly Report of Vulcan International Corporation
on Form 10-Q for the period ending June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Benjamin Gettler, Chairman of the Board and Chief Executive Officer of
Vulcan International Corporation, certify, that:
(1) I have reviewed this report on Form 10-Q of Vulcan International
Corporation;
(2) Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all
material respects the financial condition, results of operations,
and cash flows of the registrant as of, and for, the periods
presented in this report;
(4) The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures, as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the
Registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
(5) The Registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors(or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are likely to adversely affect the registrant's
ability to record, process, summarize, and report financial
information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/ Benjamin Gettler
-------------------------------------
Benjamin Gettler
Chairman of the Board and
Chief Executive Officer
August 12, 2003
-16-
Exhibit 31.2
CERTIFICATIONS
In connection with the Quarterly Report of Vulcan International Corporation
on Form 10-Q for the period ending June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Vernon E. Bachman, Vice President and Secretary-Treasurer of Vulcan
International Corporation, certify, that:
(1) I have reviewed this report on Form 10-Q of Vulcan International
Corporation;
(2) Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all
material respects the financial condition, results of operations,
and cash flows of the registrant as of, and for, the periods
presented in this report;
(4) The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures, as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the
Registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
(5) The Registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant's board of directors(or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are likely to adversely affect the registrant's
ability to record, process, summarize, and report financial
information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/ Vernon E. Bachman
-------------------------------------
Vernon E. Bachman
Vice President and
Secretary-Treasurer
August 12, 2003
-17-
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vulcan International Corporation
(the "Company") on Form 10-Q for the period ending June 30, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
we, Benjamin Gettler, Chairman of the Board and Chief Executive Officer of
the Company and Vernon E. Bachman, Vice President and Secretary-Treasurer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Benjamin Gettler /s/ Vernon E. Bachman
-------------------------------- ---------------------------
Benjamin Gettler Vernon E. Bachman
Chairman of the Board and Vice President and
Chief Executive Officer Secretary-Treasurer
August 12, 2003 August 12, 2003
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