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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
Registrant's telephone number, including area code (302) 427-5804
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common stock-no par value American Stock Exchange
Securities registered pursuant to 12(g) of the Act:
NONE
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
As of January 31, 2001, 1,134,724 common shares were outstanding, and the
aggregate market value of the common shares (based upon the closing price of
these shares on the American Stock Exchange) of Vulcan International
Corporation held by nonaffiliates was approximately $40,452,911.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated by Reference Applicable Part of Form 10-K
- ----------------------------------- ----------------------------
Annual Report to Shareholders for the
Year Ended December 31, 2000 Part I and II
Proxy Statement Dated May 10, 2001 Furnished
to Shareholders in Connection with Registrant's
Annual Meeting of Shareholders Part I and III
Articles of Incorporation and By-laws
filed on Form 8, file number 1-10219,
filed during 1992 Part IV
PART I
Item 1. Business.
(a) General Development of Business-
Vulcan International Corporation ("Vulcan", the "Company" or the "Registant")
is a Delaware holding company which is the owner of 100% of the common stock
of Vulcan Corporation, a manufacturer of the products described below.
(b) Financial Information About Industry Segments-
The sales, operating profit and identifiable assets attributable to each of
the Registrant's industry segments for the three years ended December 31,
2000, are set forth in Note 13 of the Notes to Consolidated Financial
Statements included under Part IV, Item 14(a)1 of this Form 10-K.
(c) Narrative Description of Business-
RUBBER AND PLASTICS:
RUBBER AND FOAM PRODUCTS-
Vulcan manufactures rubber and foam products in a 272,000 sq. ft. building
located in Clarksville, Tennessee. Approximately 33% of sales of those
products in 2000 were for use by shoe manufacturers in the United States.
The Company is concentrating on the manufacture of rubber sheet stock and
custom-mix materials for those manufacturers. The majority of the non-
footwear sales of products manufactured in Clarksville were for use as
sports flooring and automobile mats. The Rubber Division also manufactures
high-density foam products for sale to manufacturers for diverse uses.
PLASTICS-
Vulcan sold its plastics manufacturing assets in August 1999. Vulcan had
produced plastic products and shoe lasts in Walnut Ridge, Arkansas. A shoe
last is the form over which non-rubber shoes are manufactured and which
determines the shoe style, fit and shape.
BOWLING PINS-
In 1990, the Company entered into an agreement with Brunswick Bowling and
Billiards Corporation by the terms of which Vulcan and Brunswick formed a
joint venture for the manufacture of bowling pins using Vulcan's Surlyn
coating process. The Joint Venture, which is equally owned by Brunswick and
Vulcan Bowling Pin Company, a wholly owned subsidiary of Vulcan, is located
at the site of the Company's former Antigo, Wisconsin, bowling pin
manufacturing facility. This manufacturing Joint Venture is named the
Vulcan-Brunswick Bowling Pin Company. The Company accounts for its
investment in the Joint Venture under the equity method of accounting.
-1-
PART I
(Continued)
Item 1. Business. (Continued)
Vulcan Bowling Pin Company sells and services its bowling pins through its
own sales force as well as manufacturers' representatives in the United
States and through distributors in foreign countries under the name of Vultex
II and Vultuf, as well as various private label names. In 1999, Vulcan
Brunswick Bowling Pin Co. entered into an agreement with Winsome Industrial
Company, Ltd. located in Taiwan, pursuant to which it purchases bowling pins
manufactured by Winsome in Taiwan bearing the name Vultuf. These pins are
sold solely outside of the United States.
Raw materials used in shoe products and bowling products consist of the
following: hard maple, which is commercially available from countless
sawmills; Surlyn is available from Dupont; high density polyethylene plastic
resin is available from Phillips, Quantum, Gulf, A. Schulman, Inc. and
numerous other producers; nylon is available from Allied; synthetic rubbers
are available from Ameripol Synpol, Goodyear, Polysar, Goldsmith & Eggleston,
Inc. and a number of other concerns; fillers for rubber products such as clay
are available from W.R. Grace & Co., J.M. Huber and others; and pigments are
available from Uniroyal Chemical, Akrochem Corp., Monsanto and others.
Vulcan's products are sold through its own sales force, manufacturers' agents
and distributors.
REAL ESTATE-
Vulcan has a majority interest in the upper seven floors of the ten-story
Cincinnati Club Building in downtown Cincinnati, Ohio. These floors contain
approximately 56,000 square feet of finished office space and approximately
32,000 square feet of unfinished and common area space. Vulcan occupies a
substantial portion of the tenth floor of the building and manages the seven
floors of office space. The first three floors consist of public rooms owned
by a company which uses the space for public functions and a catering
service. There is direct access into the building from an eight-story
parking garage immediately adjacent to the Cincinnati Club Building owned
and operated by the City of Cincinnati. Vulcan Corporation also owns
undeveloped lands in Michigan from which it sells timber.
Patents, trademarks, licenses, franchises and concessions are not material
factors in the business. Vulcan Bowling Pin Company owns an American Bowling
Congress permit to label its Surlyn plastic-coated bowling pins as "ABC
approved".
No major expenditures for pollution controls are anticipated in 2001.
Expenditures thereafter should not be in excess of 5% of normal capital
expenditures in any one year. This rate of expenditure should not have a
significant effect on either the earnings or the competitive position of the
Registrant or any of its subsidiaries. See Item 3 - Legal Proceedings.
-2-
PART I
(Continued)
Item 1. Business. (Continued)
The Company has commitments for capital expenditures of approximately $5,400
at December 31, 2000.
(d) Financial Information About Foreign and Domestic Operations and Export
The Registrant's entire operations are within the United States. Export
sales of all products are handled by ACI International, Inc., a domestic
international sales corporation (DISC) which during 2000, had sales of
$544,000; net income of $60,000; and assets of $1,057,000.
Item 2. Properties.
The following schedule summarizes certain information regarding buildings
owned or leased by the Registrant:
Type of Square
Location Ownership Footage
Clarksville, Tennessee Owned 272,000 Administrative offices and
manufacturing of rubber
soling and other rubber
products.
Cincinnati, Ohio Owned 88,000 Corporate offices and
leasing of office space.
The age of the buildings ranges from approximately 37 to 76 years. The
structures are of steel, brick and concrete construction and are generally
in good condition. The plant is sprinklered. Excellent transportation
facilities are available for the factory and it is located on a rail siding.
Item 3. Legal Proceedings.
The Company was advised by the U.S. Environmental Protection Agency ("EPA")
several years ago that it was one of at least 122 large generator potentially
responsible parties ("PRPs") 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 Company, along with many
other PRPs, entered into a consent agreement with U.S. EPA to remediate the
Site, and the Company 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, PRPs estimated that additional funds in the range of $1 million
would be required to complete remediation of the Site. The Company's
estimated share of that amount was approximately $5,000. The Company
-3-
made payment of that amount in late 2000. If the projected cost of
the remaining remediation tasks remains at approximately $1 million,
this will be the Company's final payment.
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 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.
In accordance with Accounting Principles Board Opinion No. 20, Accounting
Changes, the Company has restated the December 31, 1999 financial statements
to reflect a liability of $3,601,414 including accrued interest of $135,976
for past costs plus $1,114,044 (representing a discounted present value) for
estimated future costs in connection with the Site. The effect of the
adjustment was to decrease income from continuing operations by $4,715,458,
decrease tax expense by $1,734,511 and decrease net income by $2,980,947 or
$2.66 per share. The 2000 quarterly results were also restated to recognize
interest on the liability and to amortize the discount for estimated future
costs. The effect was to decrease the 2000 quarterly results $140,440, net
of tax of $72,346.
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.
There may be other potential clean-up liability at other sites of which
the Registrant has no specific knowledge.
The Company 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 Company believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
-4-
PART I
(Continued)
The Registrant and its subsidiaries are 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 impact on the
Company's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the year
ended December 31, 2000, that require disclosure under this item.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The common stock of Vulcan International Corporation is listed and traded on
the American Stock Exchange. There were approximately 448 shareholders of
record as of December 31, 2000. The high and low sales price and the
dividends paid for each quarterly period within the two most recent years
were as follows:
2000 1999
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
First 33.1250 30.8750 $.20 36.3750 32.6250 $.20
Second 33.8750 32.8125 $.20 38.1250 32.5625 $.20
Third 34.2500 32.8750 $.20 37.2500 27.7500 $.20
Fourth 34.5000 33.3750 $.20 31.5000 26.7500 $.20
-5-
PART I
(Continued)
Item 6. Selected Financial Data.
The information required by this item is set forth below:
2000 1999(1) 1998 1997 1996
------ ------ ------ ------ ------
Net revenues -
continuing
operations $11,246,242 10,919,627 10,582,060 11,373,204 14,301,258
Income (loss)from
continuing
operations before
taxes 1,874,729 (2,718,674) 1,664,416 1,971,419 2,227,789
Income tax
(benefit) 113,165 (1,317,658) 279,537 352,970 474,499
Net income (loss)
from continuing
operations 1,761,564 (1,401,016) 1,384,879 1,618,449 1,753,290
Income (loss) from
disposed operations,
net of tax - (63,056) 69,637 167,356 205,062
Gain on sale of
disposed operations,
net of tax - 988,845 - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) 1,761,564 (475,227) 1,454,516 1,785,805 1,958,352
Income (loss) per
common share:
Continuing
operations as
previously
reported 1.59 1.41 1.17 1.30 1.46
Effect of
restatement - (2.66) - - -
---------- ---------- ---------- ---------- ---------
Continuing
operations
as restated 1.59 (1.25) 1.17 1.30 1.46
Discontinued
operations - (0.06) 0.06 0.14 0.17
Gain on disposal
of discontinued
operations - 0.88 - - -
---- ---- ---- ---- ----
Net income (loss) 1.59 (0.43) 1.23 1.44 1.63
==== ==== ==== ==== ====
Dividends per
common share .80 .80 .80 .80 .80
-6-
PART I
(Continued)
Item 6. Selected Financial Data. (Continued)
2000 1999(1) 1998 1997 1996
------ ------ ------ ------ ------
Property, plant
and equipment (net) 2,369,216 2,618,649 2,798,825 2,498,771 2,955,657
Depreciation 447,401 488,591 513,045 594,138 662,687
Current assets 55,493,494 53,278,872 53,506,019 38,900,356 28,500,783
Ratio current
assets to current
liabilities 2.54 to 1 2.48 to 1 2.99 to 1 3.38 to 1 3.62 to 1
Total assets 111,143,958 89,536,796 95,011,738 82,415,593 59,848,623
Long-term debt - - - - -
Redeemable
preferred stock
(solely at the
option of the
issuer) - - - - 66,060
Accumulated other
comprehensive
income 60,846,586 47,852,421 52,506,224 43,211,515 27,983,826
Total share-
holders' equity 72,959,140 58,137,015 65,295,924 58,494,990 43,948,759
Book value per
common share 64.03 52.54 57.46 48.05 35.04
[FN]
(1) Results are reported as restated for the effect of an environmental
liability. The effect was to reduce 1999 income from continuing
operations before tax $4,715,458 and net income $2,980,947 net of
tax of $1,734,511.
The selected financial data presented above has been reclassified to reflect
the Company's sale of it's Walnut Ridge Plastics division in August 1999.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this item is incorporated by reference to the
2000 Annual Report to Shareholders.
-7-
PART I
(Continued)
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company's market risk primarily is represented by the risk of changes in
the value of marketable equity securities caused by fluctuations in equity
prices. Marketable securities, at December 31, 2000, are recorded at a fair
value of approximately $98,537,000, including net unrealized gains of
$92,192,000. Marketable securities have exposure to price risk. The
Company's available for sale marketable securities, at fair value, are
invested as follows; 66% in two financial institutions, 33% in ten
communications companies and 1% in other industries. The estimated
potential loss in fair value resulting from a hypothetical 10% decrease in
prices quoted by the stock exchange is $9,853,700.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements required by this item are included
under Part IV, Item 14(a)1 of this Form 10-K.
The Company restated the 1999 financial statements and 1999 and 2000
quarterly results for the effect of an environmental liability as
discussed in Item 3, Legal Proceedings. The effect of the restatement
was to decrease 1999 income from operations and net income
$2,980,947 or $2.66 per share. The 2000 quarterly results were reduced
$140,440 or .12 per share as a result of the restatement. Other
information required by this item is set forth below:
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues $3,035,723 2,832,089 2,955,112 2,423,318 11,246,242
Gross profit
(loss) (7,295) (29,818) 27,299 (214,857) (224,671)
Income from
continuing
operations
as previously
reported 202,244 196,801 896,407 606,552 1,902,004
Effect of
restatement,
net of tax (2) (32,978) (33,306) (33,633) (40,523) (140,440)
Income from
continuing
operations
as restated 169,266 163,495 862,774 566,029 1,761,564
Net income 169,266 163,495 862,774 566,029 1,761,564
-8-
PART I
(Continued)
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Earnings per share:
From continuing
operations as
previously
reported .18 .18 .81 .54 1.71
Effect of
restatement,
net of tax (2) (0.03) (0.03) (0.03) (0.03) (0.12)
From continuing
operations as
restated 0.15 0.15 0.78 0.51 1.59
Net income 0.15 0.15 0.78 0.51 1.59
1999
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues(1) $2,541,003 2,543,723 3,313,022 2,521,879 10,919,627
Gross profit
(loss)(1) (1,295) 9,510 124,419 (372,348) (239,714)
Income from
continuing
operations
as previously
reported 65,361 309,435 326,686 878,449 1,579,931
Effect of
restatement,
net of tax (2) (2,889,792) (29,234) (29,519) (32,402) (2,980,947)
Income (loss)
from continuing
operations as
restated (2,824,431) 280,201 297,167 846,047 (1,401,016)
Net income (loss) (2,844,348) 338,008 1,184,850 846,263 (475,227)
Earnings per
share:
From continuing
operations as
previously
reported 0.06 0.28 0.30 0.77 1.41
Effect of
restatement,
net of tax (2) (2.58) (0.03) (0.02) (0.03) (2.66)
From continuing
operations
as restated (2.52) 0.25 0.28 0.74 (1.25)
Net income (loss) (2.54) 0.30 1.06 0.75 (0.43)
-9-
PART II
(Continued)
[FN]
(1) Represents income from continuing operations, adjusted to give
retroactive effect to the disposition of Walnut Ridge plastics
operations.
(2) Quarterly results of operations are restated for the environmental
liability discovered by the Company in March, 2001 but related to 1999.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors-
The information required by this item is incorporated herein by reference to
the Registrant's Proxy Statement dated May 10, 2001, in connection with its
Annual Meeting to be held June 5, 2001.
(b) Identification of Executive Officers-
NAME AGE POSITION AND TIME IN OFFICE
Benjamin Gettler 75 President since November 1988;
Chairman of The Board since
June 1990; Director since 1960.
Vernon E. Bachman 63 Vice President and Treasurer
since November 1991; Secretary
since 1973.
There are no family relationships among the officers listed and there are no
arrangements or understandings pursuant to which any of them were elected as
officers.
The officers are elected annually and serve at the pleasure of the Board of
Directors. There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any director or executive officer during the past
five years.
-10-
PART III
(Continued)
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by reference to
the Registrant's proxy statement dated May 10, 2001, in connection with its
annual meeting to be held June 5, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Any person after acquiring directly or indirectly the beneficial ownership of
more than 5 percent of the Registrant's common stock is required to send to
the Registrant at its principal executive office, by registered or certified
mail, and to each exchange where the stock is traded and filed with the SEC,
a statement containing information required by Schedule 13D or 13G, as
appropriate. If any material change occurs in the facts set forth in the
statement filed, the shareholder is required to file an appropriate
amendment with each party with whom the original schedules were filed.
Other information required by this item is incorporated herein by reference
to the Registrant's proxy statement dated May 10, 2001, in connection with
its annual meeting to be held June 5, 2001.
Item 13. Certain Relationships and Related Transactions.
There were no significant items to report under this caption other than
those reported in the Registrant's Proxy Statement dated May 10, 2001,
in connection with its Annual Meeting to be held June 5, 2001, which is
incorporated herein by reference.
-11-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
The following Consolidated Financial Statements of Vulcan
International Corporation and subsidiaries are included under
this item (see attached shareholders report and proxy
statement):
Page
Independent Auditors' Report. 21
Consolidated Balance Sheets at December 31,
2000, and 1999. 22-23
Consolidated Statements of Income for Each
of the Three Years in the Period Ended
December 31, 2000. 24
Consolidated Statements of Shareholders'
Equity for Each of the Three Years in the
Period Ended December 31, 2000. 25-26
Consolidated Statements of Cash Flows for
Each of the Three Years in the Period
Ended December 31, 2000. 27-28
Notes to the Consolidated Financial
Statements for the Three Years Ended
December 31, 2000. 29-47
2. Financial Statement Schedule.
Independent Auditors' Report on Schedule. 67
Schedule II - Valuation and Qualifying Accounts. 68
All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
Separate financial statements of the Registrant or summarized financial
information concerning subsidiaries are not required.
-12-
PART IV
(Continued)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(Continued)
3. Financial Statements.
The following financial statements of Vulcan International
Corporation's 50% owned Joint Venture, Vulcan-Brunswick
Bowling Pin Company, are included under this item:
Page
Independent Auditors' Report 70
Balance Sheets at December 31, 2000 and 1999 71
Statements of Income for the years ended
December 31, 2000 and 1999 72
Statements of Partners' Capital for the years
ended December 31, 2000 and 1999 73
Statements of Cash Flows for the years ended
December 31, 2000 and 1999 74
Notes to the financial statements for the years
ended December 31, 2000 and 1999 75-79
4. Exhibits.
3. Registrant's Articles of Incorporation and
By-Laws are incorporated herein by reference.
11. Statement regarding computation of per share
earnings is incorporated herein by reference
to Registrant's 2000 Annual Report to
Shareholders 51
13. Registrant's 2000 Annual Report to Shareholders
is incorporated herein by reference. 16-53
20. Proxy Statement dated April 30, 2001, is
incorporated herein by reference. 54-65
21. Subsidiaries of the Registrant. 66
99.1 Independent Auditors' Report on Schedule 67
99.2 Valuation and Qualifying accounts 68
99.3 Vulcan-Brunswick Bowling Pin Company financial
statements 70-79
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended
December 31, 2000.
-13-
EXHIBIT 13
VULCAN INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2000
J.D. CLOUD & CO. L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-14-
VULCAN INTERNATIONAL CORPORATION
EXECUTIVE OFFICERS
BENJAMIN GETTLER VERNON E. BACHMAN
Chairman of the Board Vice President and
and President Secretary-Treasurer
SUBSIDIARY COMPANIES
--------------------
VULCAN CORPORATION
Benjamin Gettler
President
Edward Ritter
Vice President/Operating Manager
Vernon E. Bachman
Vice President/Controller
Connie F. Armstrong
Secretary
VULCAN BOWLING PIN COMPANY VULCAN BLANCHESTER
REALTY CO.
Ricardo DeFelice
Executive Vice President Benjamin Gettler
President
John F. Gabriel
Vice President John F. Gabriel
Vice President
Vernon E. Bachman
Secretary/Treasurer
-15-
TO OUR SHAREHOLDERS:
Vulcan continued to evolve in 2000.
During the year 2000, the officers and directors of Vulcan International
Corporation continued on the course of evolving Vulcan from its start as a
manufacturer of shoe lasts to a company diversified in foam and rubber
products and real estate.
During the year we were able to complete the development of a 2-lb. density
foam and the technology to produce it with consistent quality. The 2-lb.
density foam product has a greater share of the marketplace than the higher-
density foam products which we had previously developed which constituted
almost our entire foam sales in the Year 2000. In 2001, we are hopeful
that we will increase Rubber Division sales as a result of our foam product
development efforts.
Ongoing efforts to expand the Company's Real Estate Division have met with
disappointing results. We continue to search for property within our area
of expertise and we anticipate that success will eventually reward those
efforts. We will, however, continue to reject any prospective deals which
we decide are not of benefit to the Company and its shareholders.
Net income from continuing operations including net capital gains for the
12-month period ended December 31, 2000, increased to $1,761,564 from
a restated loss of $1,401,016 in 1999. Per share earnings from
continuing operations including net capital gains rose from a restated
loss of $1.25 in 1999 to net income of $1.59 in 2000. The 1999 results
were restated to recognize costs associated with an environmental
remediation site. The Company had engaged legal counsel to represent it
in these matters but was not informed of a judgment against it until
March 28, 2001. Accordingly, the Company restated its 1999 financial
statements in accordance with Accounting Principles Board Opinion No. 20,
Accounting Changes.
We appreciate the support and efforts of all Vulcan employees in making
the difficult transition in which we are involved.
BENJAMIN GETTLER
Chairman of the Board
and President
-16-
DESCRIPTION OF BUSINESS
Vulcan International Corporation is a Delaware holding company which is the
owner of 100% of the common stock of Vulcan Corporation and 100% of the
common stock of Vulcan Bowling Pin Company as well as Vulcan Blanchester
Realty Co. Descriptions of each company's operations are set forth below.
RUBBER AND FOAM PRODUCTS
Vulcan manufactures rubber and foam products in a 272,000 sq. ft. building
located in Clarksville, Tennessee. Approximately 50% of sales of those
products in 2000 were for use by shoe manufacturers in the United States.
The Company is concentrating on the manufacture of rubber sheet stock and
custom-mix materials for those manufacturers. The majority of the non-
footwear products manufactured in Clarksville were foam for use by various
prime manufacturers, sports flooring, automobile mats and custom-mix
rubber for non-footwear manufacturers.
BOWLING PINS
Vulcan Bowing Pin Company is a 50% owner of a Joint Venture with Brunswick
Bowling and Billiards Corporation which manufactures bowling pins in Antigo,
Wisconsin. The pins are manufactured from hard maple and coated with Surlyn.
Vulcan sells pins in the United States and worldwide under the name of Vultex
II and Vultuf, as well as various private label names.
REAL ESTATE OPERATIONS
On August 12, 1993, Vulcan Blanchester Realty Company purchased a majority
interest in the upper seven floors of the ten-story Cincinnati Club Building
in downtown Cincinnati, Ohio, and manages that space. These floors contain
approximately 56,000 square feet of finished office space and approximately
32,000 square feet of unfinished and common area space. Vulcan occupies a
substantial portion of the tenth floor of the building. The first three
floors consist of public rooms owned by a company which uses the space for
public functions and a catering service. There is direct access into the
building from an eight-story parking garage immediately adjacent to the
Cincinnati Club Building owned and operated by the City of Cincinnati. A
picture of the building appears below. In addition, the Company owns
approximately 14,000 acres of undeveloped land in the Upper Peninsula of
Michigan. Timber is harvested from that land and sold both in domestic
and foreign markets.
-17-
MANAGEMENT ANALYSIS OF RECENT YEARS
2000 COMPARED TO 1999
- ---------------------
Sales in the Rubber Division decreased from $6,880,103 in 1999 to $6,844,877
in 2000. The increased sales in custom mix which is a low margin item and
foam products was offset by the decrease in flooring sales. As a result, the
operating loss (before taxes) increased from $1,179,291 in 1999 to $1,292,120
in 2000.
Sales of the Bowling Pin Division increased from $1,686,027 in 1999 to
$1,716,428 in 2000. The operating profit of the division decreased from
$733,963 in 1999 to $286,521 in 2000 due to an increase in the production
cost of bowling pins. In 1999 a cash distribution in excess of basis was
included in the division operating profit in the amount of $410,123.
Operating profit (before taxes) in the real estate operations decreased from
$321,011 in 1999 to $287,927 in 2000 due to the write-off of the unamortized
portion of tenant improvements of a tenant whose lease expired on December
31, 2000.
Net gains on the disposal of equipment and investments were $607,284 in 2000
compared to $89,429 in 1999. In both years, the gains were mainly from the
sale of marketable securities. Dividends and interest (before tax) were
$2,180,839 compared to $1,907,509 in 1999.
1999 COMPARED TO 1998
- ---------------------
In the Rubber Division, the Company increased its sales of low margin custom
mix rubber and continued its research and development efforts to develop and
market higher margin additional foam products. As a result, sales of rubber
and foam products increased from $6,113,730 in 1998 to $6,880,103 in 1999
while operating loss (before taxes) increased from $960,571 in 1998 to
$1,179,291 in 1999.
Changes in bowling pin manufacturing resulted in substantially reduced costs
which were largely responsible for operating profit (before taxes) from the
bowling pin segment increasing from $215,079 in 1998 to $733,963 in 1999.
Operating profit (before taxes) in the real estate operations segment fell
from $403,522 to $321,011, primarily as the result of a huge increase in real
estate taxes. The increase is being appealed through appropriate legal
processes.
Net gains on the disposal of equipment and investments were $89,429 in 1999
compared to $408,866 in 1998. In 1999, the gains were mainly from the sale
of marketable securities. In 1998, the gains were mainly from the sale of
excess equipment from the Clarksville, Tennessee plant. Dividends and
interest (before tax) were $1,907,508 compared to $1,828,520 in 1998.
-18-
MANAGEMENT ANALYSIS OF RECENT YEARS
(Continued)
In August of 1999, Vulcan International Corporation sold all of the assets of
its last manufacturing plant in Walnut Ridge, Arkansas. Sales from the Last
Division were $1,621,268 in 1998 and $758,712 in the approximately 7 1/2
months it was owned by Vulcan in 1999. The sale of the Last Division
resulted in 1999 net earnings, including capital gains on the sale, of
$925,789 compared to net earnings of $69,637 on operations in 1998.
The Company restated the 1999 financial statements to recognize a
liability and expense, net of tax, of $2,980,947 for environmental costs.
The Company had engaged legal counsel for representation on this matter,
but management was not made aware of a final judgment against the Company
until March 28, 2001.
1998 COMPARED TO 1997
- ---------------------
Sales of rubber and plastic products (47% of which were sales to the shoe
industry) decreased from $9,332,565 in 1997 to $7,734,998 in 1998.
Operating losses of the Company's rubber and plastic business segment
(before taxes) increased from $322,956 in 1997 to $873,525 in 1998. The
primary cause of these losses was the almost total elimination of sales of
components for military footwear in the last half of 1998 resulting from an
inventory-cutting program of the U.S. Department of Defense. Such sales
constituted 46% of shoe component sales of the Company's rubber and plastic
business segment. Plastic products consisted primarily of shoe last.
Operating profit (before taxes) from the bowling pin segment decreased from
$512,975 in 1997 to $215,079 in 1998. Sales increased during the first half
of the year; however, in the second half of 1998, the severe recession in the
Far East eliminated most sales to that area of the world, which had been a
major purchaser of bowling pins.
Operating profit (before taxes) in the real estate operations segment fell
from $618,238 to $403,522. That reduction in net profit in the Company's
real estate operations segment resulted entirely from reduced sales of timber
due to two factors: a) adverse weather conditions which limited timber
harvesting from the Company's undeveloped real estate in the Upper Peninsula
of Michigan and b) reduced sales of timber veneer to the Far East.
Net gains on the sale or disposal of equipment and investments were $408,866
in 1998 compared to $116,622 in 1997. In 1998 the gains mainly were from
the sale of excess equipment from the Clarksville, Tennessee plant. In 1997
the gains were mainly from the sales of acreage in Wisconsin. Dividends and
interest income (before tax) were $1,828,520 compared to $1,794,152 in 1997.
-19-
FINANCIAL POSITION, LIQUIDITY AND CAPITAL COMMITMENTS
The Company's cash requirements in 2000 were funded by its cash flow and
short term borrowing. The working capital increased $1,893,000 during the
current year. The increased working capital was mainly the result of the
increased value of marketable securities and decrease in short term
borrowing. Capital expenditures were $224,878 compared to total
depreciation and amortization of $452,550.
2000 1999
--------------------------------------------------------
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
1st 33.1250 30.8750 .20 36.3750 32.6250 .20
2nd 33.8750 32.8125 .20 38.1250 32.5625 .20
3rd 34.2500 32.8750 .20 37.2500 27.7500 .20
4th 34.5000 32.3750 .20 31.5000 26.7500 .20
The common stock of Vulcan International Corporation is listed on the
American Stock Exchange. The high and low sale prices and the dividends
paid for each quarterly period within the two most recent years were as
shown.
FORM 10-K
A copy of the 2000 Vulcan International Corporation 10-K report filed with
the Securities and Exchange Commission will be furnished without charge upon
request by a shareholder or beneficial owner as of the record date, March 29,
2001, of securities entitled to vote at the annual meeting of shareholders.
Requests should be addressed to:
Vernon E. Bachman
Vice President
Secretary/Treasurer
Vulcan International Corporation
30 Garfield Place
Cincinnati, OH 45202
-20-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have audited the accompanying consolidated balance sheets of Vulcan
International Corporation (a Delaware Corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vulcan
International Corporation and subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with U.S.
generally accepted accounting principles.
As discussed in Note 10 to the financial statements, management was first
informed on March 28, 2001 about certain environmental matters resulting in
the understatement of liabilities as of December 31, 1999. Accordingly,
the December 31, 1999 financial statements have been restated to recognize
these environmental liabilities.
/s/ J.D. CLOUD & CO. L.L.P.
-------------------------------
Certified Public Accountants
Cincinnati, Ohio
February 14, 2001
except for Note 10
dated March 29, 2001
-21-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31, 2000 and 1999
-ASSETS- 2000 1999
CURRENT ASSETS:
Cash $ 1,008,649 1,088,626
Marketable securities 50,383,925 49,554,152
Accounts receivable (less-allowance
for doubtful accounts-$152,974
in 2000; $158,844 in 1999) 3,072,529 1,409,773
Inventories 941,090 1,123,403
Prepaid expense 16,221 18,170
Refundable federal income tax 71,080 84,748
----------- ----------
TOTAL CURRENT ASSETS 55,493,494 53,278,872
----------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Land 88,581 88,581
Timberlands and timber cutting rights 700,393 700,393
Buildings and improvements 4,205,851 4,186,696
Machinery and equipment 6,720,810 6,663,799
----------- ----------
Total 11,715,635 11,639,469
Less-Accumulated depreciation
and depletion 9,346,419 9,020,820
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-NET 2,369,216 2,618,649
----------- ----------
MODELS AND PATTERNS-at nominal value 1 1
----------- ----------
INVESTMENT IN JOINT VENTURE 70,528 -
----------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Marketable securities 48,153,115 29,329,505
Note receivable 342,185 457,123
Other 4,715,419 3,852,646
----------- ----------
TOTAL DEFERRED CHARGES AND
OTHER ASSETS 53,210,719 33,639,274
----------- ----------
TOTAL ASSETS $111,143,958 89,536,796
=========== ==========
-22-
-LIABILITIES AND SHAREHOLDERS' EQUITY- 2000 1999
CURRENT LIABILITIES:
Notes payable - bank $ 1,700,000 1,810,000
Accounts payable-
Trade 604,552 559,867
Other 26,616 26,210
Accrued salaries, wages and commissions 124,086 133,768
Accrued other expenses 5,282,172 5,108,653
Deferred income tax 14,093,872 13,857,063
----------- ----------
TOTAL CURRENT LIABILITIES 21,831,298 21,495,561
----------- ----------
OTHER LIABILITIES:
Deferred income tax 16,309,169 9,863,414
Other 33,285 29,877
----------- ----------
TOTAL OTHER LIABILITIES 16,342,454 9,893,291
----------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10) - -
MINORITY INTEREST IN PARTNERSHIP 11,066 10,929
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock-no par value;
Authorized 2,000,000 shares; issued
1,999,512 shares 249,939 249,939
Additional paid-in capital 7,745,102 6,146,698
Retained earnings 24,565,375 23,694,388
Accumulated other comprehensive income 60,846,586 47,852,421
----------- ----------
93,407,002 77,943,446
Less-Common stock in treasury-at cost,
859,988 shares in 2000;
892,907 shares in 1999 20,447,862 19,806,431
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 72,959,140 58,137,015
----------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $111,143,958 89,536,796
=========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-23-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three years ended December 31, 2000
2000 1999 1998
REVENUES:
Net sales $ 9,065,403 9,012,118 8,753,540
Dividends and interest 2,180,839 1,907,509 1,828,520
---------- ---------- ----------
TOTAL REVENUES 11,246,242 10,919,627 10,582,060
---------- ---------- ----------
COST AND EXPENSES:
Cost of sales 9,290,074 9,251,832 8,833,209
General and administrative 1,127,114 801,897 1,183,349
Environmental remediation costs 21,196 4,579,483 -
Interest expense 362,323 289,318 41,135
---------- ---------- ----------
TOTAL COST AND EXPENSES 10,800,707 14,922,530 10,057,693
---------- ---------- ----------
EQUITY IN JOINT VENTURE INCOME
AND MINORITY INTEREST, NET 488,391 836,756 458,026
---------- ---------- ----------
INCOME (LOSS) BEFORE GAIN
ON DISPOSAL OF ASSETS 923,856 (2,742,307) 982,393
NET GAIN ON SALE OF PROPERTY,
EQUIPMENT AND INVESTMENTS 940,803 447,473 682,023
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,874,729 (2,718,674) 1,664,416
INCOME TAX PROVISION (BENEFIT) 113,165 (1,317,658) 279,537
---------- ---------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 1,761,564 (1,401,016) 1,384,879
DISCONTINUED OPERATIONS:
Gain on sale of division assets,
net of income tax - 988,845 -
Income (loss) from operations,
net of income tax - (63,056) 69,637
---------- ---------- ----------
NET INCOME (LOSS) $ 1,761,564 (475,227) 1,454,516
========== ========== ==========
Income (Loss) Per Common Share:
Continuing operations $ 1.59 (1.25) 1.17
Discontinued operations - (0.06) 0.06
Gain on disposal of
discontinued operations - 0.88 -
---------- ---------- ----------
Net Income (Loss) per
Common Share Outstanding $ 1.59 (0.43) 1.23
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-24-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three years ended December 31, 2000
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income
------ ---------- -------- -------------
Balance at January 1, 1998 $249,939 5,619,993 24,543,468 43,211,515
Add-Net income for the year 1,454,516
Net unrealized gain on
available-for-sale
securities (net of taxes
of $4,788,183)
Sale of treasury shares 6,850 9,294,709
Deduct-Dividends declared-
$.80 per share 943,414
Purchase of treasury
shares
------- --------- ---------- ----------
Balance at December 31, 1998 249,939 5,626,843 25,054,570 52,506,224
Add-Sale of treasury shares 519,855
Deduct-Net loss for the year 475,227
Dividends declared-
$.80 per share 884,955
Net unrealized loss on
available-for-sale
securities (net of tax
benefit of $2,367,157) 4,595,070
Reclassification adjustment
for gains included in net
income (net of tax of
$30,257) 58,733
Purchase of treasury shares
------- --------- ---------- ----------
Balance at December 31, 1999 249,939 6,146,698 23,694,388 47,852,421
Add-Net income for the year 1,761,564
Net unrealized gain on
available-for-sale
securities (net of taxes
of $6,864,059)
Sale of treasury shares 1,598,404 13,324,327
Deduct-Dividends declared-
$.80 per share 890,577
Reclassification adjustment
for gains included in net
income (net of tax of
$170,084) 330,162
Purchase of treasury
shares
------- --------- ---------- ----------
Balance at December 31, 2000 $249,939 7,745,102 24,565,375 60,846,586
======= ========= ========== ==========
-25-
Total
Comprehensive Common Shareholders'
Income (Loss) Treasury Shares Equity
-------------- -------------------- ------------
Shares Amount
Balance at January 1, 1998 782,168 15,129,925 58,494,990
Add-Net income for the year 1,454,516 1,454,516
Net unrealized gain on
available-for-sale
securities (net of taxes
of $4,788,183) 9,294,709 9,294,709
Sale of treasury shares (200) (975) 7,825
Deduct-Dividends declared-
$.80 per share 943,414
Purchase of treasury
shares 81,209 3,012,702 3,012,702
---------- ------- ---------- ----------
Balance at December 31, 1998 10,749,225 863,177 18,141,652 65,295,924
==========
Add-Sale of treasury shares (22,799) (111,393) 631,248
Deduct-Net loss for the year 475,227 475,227
Dividends declared-
$.80 per share 884,955
Net unrealized loss
on available-for-sale
securities (net of
tax benefit of
$2,367,157) 4,595,070 4,595,070
Reclassification
adjustment for gains
included in net
income (net of tax
of $30,257) 58,733 58,733
Purchase of treasury
shares 52,529 1,776,172 1,776,172
---------- ------- ---------- ----------
Balance at December 31, 1999 (5,129,030) 892,907 19,806,431 58,137,015
==========
Add-Net income for the year 1,761,564 1,761,564
Net unrealized gain on
available-for-sale
securities (net of
taxes of $6,864,059) 13,324,327 13,324,327
Sale of treasury shares (65,000) (418,471) 2,016,875
Deduct-Dividends declared-
$.80 per share 890,577
Reclassification
adjustment for gains
included in net income
(net of tax of $170,084) 330,162 330,162
Purchase of treasury
shares 32,081 1,059,902 1,059,902
---------- ------- ---------- ----------
Balance at December 31, 2000 14,755,729 859,988 20,447,862 72,959,140
========== ======= ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-26-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three years ended December 31, 2000
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 8,774,935 9,697,767 10,769,076
Cash paid to suppliers and employees (10,545,516) (11,713,251)(11,657,332)
Dividends and interest received 2,180,839 1,909,882 1,831,036
Interest paid (169,144) (154,515) (35,019)
Income taxes paid (104,775) (257,867) (271,870)
---------- ---------- ----------
NET CASH FLOWS FROM
OPERATING ACTIVITIES 136,339 (517,984) 635,891
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment 335,173 1,080,719 675,984
Proceeds from sale of marketable
securities 811,106 92,716 -
Purchase of marketable securities (69,838) - -
Purchase of property, plant and
equipment (224,878) (378,530) (807,121)
Cash distribution from joint venture 418,000 900,000 750,000
Collection on notes receivable 107,725 25,928 657,517
---------- ---------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES 1,377,288 1,720,833 1,276,380
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements 1,085,000 5,486,319 1,770,000
Principal payments under credit
agreements (1,195,000) (4,846,319) (600,000)
Proceeds from sale of treasury shares 466,875 631,248 7,825
Purchase of common shares (1,059,902) (1,776,172) (3,012,702)
Cash dividends paid (890,577) (884,955) (943,414)
---------- ---------- ----------
NET CASH FLOWS FROM
FINANCING ACTIVITIES (1,593,604) (1,389,879) (2,778,291)
---------- ---------- ----------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (79,977) (187,030) (866,020)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,088,626 1,275,656 2,141,676
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,008,649 1,088,626 1,275,656
========== ========== ==========
-27-
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 1,761,564 (475,227) 1,454,516
Adjustments:
Depreciation and amortization 452,550 493,666 523,796
Deferred income tax (11,435) (1,357,431) 82,751
Equity in joint venture income and
minority interest (488,391) (836,756) (458,026)
Gain on sale of property, equipment
and investments (940,803) (1,683,529) (682,024)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (105,543) (58,689) 408,784
(Increase) decrease in inventories 182,313 (627,248) 99,739
Increase in prepaid pension asset (863,595) (804,774) (538,218)
Increase (decrease) in accounts
payable, accrued expenses and
other assets, net 149,679 4,832,004 (255,427)
---------- ----------- ---------
NET CASH FLOWS FROM
OPERATING ACTIVITIES $ 136,339 (517,984) 635,891
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-28-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
It is the policy of the Company to employ U.S. generally accepted accounting
principles in the preparation of its financial statements. A summary of the
Company's significant accounting policies follows:
ACCOUNTING 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.
BASIS OF CONSOLIDATION-
The consolidated financial statements include the accounts of Vulcan
International Corporation, its wholly-owned subsidiary companies and its
majority-owned partnership. Intercompany accounts and transactions have been
eliminated in consolidation.
MINORITY INTEREST-
Cincinnati Club Building Associates (CCBA) was formed in 1993 for the
purchase of certain commercial property in Cincinnati, Ohio. The Company's
offices are located in a portion of the property with the remainder available
for leasing. The Company's consolidated financial statements include 100% of
the assets, liabilities and income, or loss, of CCBA. The minority owner's
2.5% interest in CCBA is reflected as a minority interest in partnership and
a minority interest in (income) of partnership in the respective consolidated
balance sheets and consolidated statements of income.
INVESTMENT IN JOINT VENTURE-
In June 1990, the Company formed a Joint Venture (the Vulcan Brunswick
Bowling Pin Company) with Brunswick Bowling and Billiards Corporation to
Manufacture bowling pins. The Company, through a wholly-owned subsidiary,
has an undivided 50% interest in the Joint Venture which is accounted for
under the equity method of accounting. Under this method, the Company
records the investment at its original cost adjusted for 50% of the Joint
Venture's income or loss since formation less any distributions received from
the Joint Venture.
MARKETABLE SECURITIES-
Marketable securities are classified as securities available-for-sale and,
accordingly, are recorded at fair market value. Marketable securities
available for current operations are classified as current assets while
securities held for non-current uses are classified as long-term assets.
Dividends and interest are recorded in income when earned. Unrealized
holding gains and losses, net of deferred tax, are included as a component
of shareholders' equity until realized. In computing realized gain or loss
on the sale of marketable securities, the cost of securities sold is
determined by the specific identification method.
-29-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVENTORIES-
Substantially all inventories are stated at cost under the last-in, first-out
(LIFO) method, which is not in excess of market.
PROPERTY, PLANT AND EQUIPMENT-
Property, plant and equipment are stated at cost. The Company provides for
depreciation over the estimated useful lives of the respective assets using
both straight line and accelerated methods. Buildings and improvements are
depreciated over 10 to 45 years, machinery and equipment over 3 to 11 years,
and leasehold improvements are amortized over the lives of the leases.
Timber depletion charges are based on the cost of timber cut.
DERIVIATIVE INSTRUMENTS-
Short-term option contracts are used by the Company on certain marketable
securities not paying dividends as a way of generating current income and to
hedge against fluctuations in the value of these securities. Proceeds
received by the Company are recorded as a current liability until the
contract to sell the underlying securities is either called or expires.
The Company then recognizes any gain or loss on the contract. Gains and
losses on the contracts are recorded in net gain on sale of property,
equipment and investments in the statements of income.
INCOME TAXES-
Income tax provision (benefit) includes the tax effects of all revenue and
expense transactions included in the determination of pretax accounting
income. Deferred income tax results from temporary differences in the
financial statement basis and tax basis of assets and liabilities. These
temporary differences apply principally to depreciation expense, allowance
for doubtful accounts, compensated absences and prepaid pension expense.
Tax credits are recognized by a reduction of income tax expense in the
periods the credits arise for tax purposes.
COMPREHENSIVE INCOME-
Other comprehensive income is reported in the statement of shareholders'
equity. The Company includes unrealized gains, or losses, on its available-
for-sale securities in comprehensive income and accumulated other
comprehensive income.
RETIREMENT PLANS-
The Company maintains a noncontributory defined benefit pension plan for
certain eligible salaried and hourly employees. Pension benefits are
determined annually by consulting actuaries and are based on average
compensation and years of service. Past service cost is amortized over
periods not exceeding 30 years.
-30-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RETIREMENT PLANS- (Continued)
The Company also maintains a noncontributory defined contribution pension
plan for certain eligible union employees. Contributions to the plan are
based upon a participant's hours of service.
The qualified plans are funded annually to meet the minimum funding
requirements of the Internal Revenue Code and the Employee Retirement
Income Security Act of 1974.
ADVERTISING COSTS-
Advertising costs are generally expensed as incurred.
CASH EQUIVALENTS-
For purposes of the statement of cash flows, the Company considers all time
deposits, certificates of deposit and other highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
NET INCOME PER SHARE-
Net income per share of common stock outstanding is computed on the basis of
the weighted average number of common shares outstanding during each year
after giving effect to dividends on preferred shares.
EFFECT OF RECENT ACCOUNTING STANDARDS-
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires an
entity to recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at
fair value. SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133 established the effective date for the new standard as fiscal
years beginning after June 15, 2000. The adoption of this standard in
2001 is not expected to have a significant effect.
-31-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 2 - MARKETABLE SECURITIES
The Company's investments in marketable securities have been classified as
available-for-sale securities and reported at their fair value as determined
by quoted market prices as follows:
Unrealized Fair
Cost Gains Value
------ ---------- -------
2000
Current $ 3,721,960 46,661,965 50,383,925
Long-term 2,623,283 45,529,832 48,153,115
--------- ---------- ----------
Total $ 6,345,243 92,191,797 98,537,040
========= ========== ==========
1999
Current $ 3,756,740 45,797,412 49,554,152
Long-term 2,623,283 26,706,222 29,329,505
--------- ---------- ----------
Total $ 6,380,023 72,503,634 78,883,657
========= ========== ==========
The unrealized holding gains are included, net of deferred income tax of
$31,345,211 and $24,651,236 at December 31, 2000 and 1999, respectively,
as a component of shareholders' equity.
Realized gains on available-for-sale securities during 2000 and 1999 were
$500,246 and $88,990, respectively and gross proceeds on the sale of the
securities were $535,026 and 92,716, respectively. Net realized gains from
call option contracts for the year ended December 31, 2000 were $127,969
and gross proceeds were $197,807.
The Company's available-for-sale marketable securities, at fair market value,
are invested as follows: 66% in two financial institutions, 33% in ten
communication companies and 1% in other industries. The Company is subject
to the risk that the value of these securities may decline from the recorded
fair market values.
As of February 15, 2001, the fair value of marketable securities was
approximately $97,172,000 and the net unrealized holding gain was
approximately $30,887,000 net of deferred taxes of approximately
$59,957,000.
-32-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 3 - INVENTORIES
Inventories at December 31, 2000 and 1999, were classified as follows:
2000 1999
Finished goods $657,693 484,888
Work in process 72,992 145,623
Raw materials 210,405 492,892
------- ---------
Total $941,090 1,123,403
======= =========
As indicated in Note 1, substantially all inventories are stated at cost
determined under the last-in, first-out (LIFO) method. If valued at current
replacement cost, inventories would have been approximately $1,239,000 and
$1,189,000 greater than reported at December 31, 2000 and 1999, respectively.
In the years ended December 31, 2000 and 1998, inventory quantities were
reduced. These reductions resulted in liquidations of LIFO inventory
quantities carried at lower costs prevailing in prior years as compared with
the cost of current purchases. The inventory reductions increased 2000 and
1998 net income by approximately $49,000 and $41,000, respectively, or $.04
and $.03 per weighted average common share outstanding, respectively.
NOTE 4 - JOINT VENTURE
The Company, through a wholly-owned subsidiary, owns 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.
Summarized financial information for VBBPC consists of the following:
2000 1999
Assets:
Current assets $1,343,660 1,068,739
Property, plant and equipment 3,036,156 3,276,440
Other 2,944,464 3,036,362
--------- ---------
Total $7,324,280 7,381,541
========= =========
Liabilities and Partners' Capital:
Current liabilities $ 279,883 322,516
Partners' capital 7,044,397 7,059,025
--------- ----------
Total $7,324,280 7,381,541
========= =========
-33-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 4 - JOINT VENTURE (Continued)
2000 1999 1998
Statements of Operations:
Net sales $9,261,854 9,191,563 10,975,183
Costs and expenses 8,464,507 8,487,964 10,111,724
Other income (net) 24,025 16,469 34,600
--------- ---------- ----------
Net income $ 821,372 720,068 898,059
========= ========== ==========
Company's equity in net
income of VBBPC $ 410,686 360,034 449,029
Distribution in excess
of basis - 410,123 -
Adjustments 77,842 66,754 13,365
---------- ---------- ---------
Company's equity in net
income $ 488,528 836,911 462,394
========== ========== =========
The Company, under the equity method of accounting, increases its investment
in VBBPC for its share of VBBPC's income and decreases its investment for
any distributions received. Distributions in excess of the Company's recorded
investment are included in current income.
The Company's 50% interest in the net assets of VBBPC amounted to $3,522,198
at December 31, 2000. There were no undistributed earnings from the Joint
Venture included in the Company's retained earnings at December 31, 2000.
The Company is also jointly and severally liable under VBBPC's revolving
loan agreement. There were no borrowings under the loan agreement at
December 31, 2000 or 1999. The Company adjusts its investment in VBBPC
through its equity in VBBPC's net income which is further adjusted to
reflect inventories on the last-in, first-out method of accounting.
Transactions between VBBPC and the Company consist of the following at
December 31:
2000 1999 1998
Sales to VBBPC $ - 140,000 250,000
Purchases from VBBPC 1,743,000 1,751,000 2,005,000
Administrative fees received
from VBBPC 30,000 30,000 30,000
Net amount due to VBBPC 266,000 243,000 82,000
Cash distributions from VBBPC 418,000 900,000 750,000
-34-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 5 - NOTES PAYABLE
The Company maintains a revolving credit agreement with its bank that
provides for borrowings of up to $6,000,000 through July 31, 2001. Interest
is payable monthly at the lesser of the federal funds rate plus 1.75% or a
rate based on the Euro-Rate as determined by the bank in accordance with its
usual procedures. The resulting rate paid by the Company at December 31,
2000 was 7.83%. Borrowings under the agreement were $1,700,000 and
$1,810,000 at December 31, 2000 and 1999, respectively, and are secured by
certain marketable equity securities.
The weighted average interest rate was 7.78% and 6.66% for the respective
years ended December 31, 2000 and 1999. Marketable securities pledged as
collateral under the agreement had a market value of approximately
$14,870,000 at December 31, 2000.
The Company also maintains a revolving credit agreement with its bank that
provides for additional short-term borrowings of up to $5,000,000 at the
prime rate secured by certain real and personal property of the Company.
NOTE 6 - DISCONTINUED OPERATIONS
In August 1999, the Company completed the sale of its Walnut Ridge, Arkansas
plastics operations. The prior period's financial statements have been
reclassified to present the results of operations from Walnut Ridge as
discontinued operations. For business segment reporting purposes, the
financial results from Walnut Ridge were previously reported in the segment
"Rubber and Plastics." In connection with the sale, the Company received a
note for $600,000. Total proceeds from the disposal of the plastics
operations were $1,322,319.
Net sales and income from discontinued operations are as follows:
1999 1998
Net sales $758,712 1,621,208
======= =========
Income (loss) before income taxes (78,820) 87,046
Income tax expense (benefit) (15,764) 17,409
------- ---------
Net income (loss) from operations $(63,056) 69,637
======= =========
The gain on the sale of division assets was $988,845, net of income taxes of
$247,211.
-35-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 7 - LEASES
The Company leases office space to various tenants under operating leases
expiring from 2000 to 2007. The Company's basis in the property held for
lease at December 31, 2000 and 1999 is as follows:
2000 1999
Land $ 37,803 37,803
Building and improvements 751,802 750,240
------- -------
789,605 788,043
Less accumulated depreciation 266,199 231,056
------- -------
$523,406 556,987
======= =======
Minimum future rental income under noncancelable leases as of December 31,
2000, is as follows:
Year ending December 31,
2001 $300,932
2002 318,827
2003 323,383
2004 191,725
2005 132,021
The Company incurred rental expense under operating leases of approximately
$10,000 and $12,000 for the years ended December 31, 1999 and 1998,
respectively.
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan for
certain eligible salaried and hourly employees. The funded status and net
pension credit recognized in the accompanying consolidated financial
statements consisted of:
-36-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 8 - EMPLOYEE BENEFITS PLANS (Continued)
2000 1999
Change in benefit obligations:
Benefit obligation - January 1, $ 8,411,541 8,378,668
Service cost 45,634 45,254
Interest cost 524,598 531,093
Actuarial (gain) loss (71,233) 36,941
Benefits paid (630,407) (580,415)
---------- ----------
Benefit obligation - December 31, 8,280,133 8,411,541
---------- ----------
Change in plan assets:
Fair value of plan assets - January 1, 15,641,737 14,813,318
Actual return on plan assets (1,068,086) 1,408,834
Benefits paid (630,407) (580,415)
---------- ----------
Fair value of plan assets -
December 31, 13,943,244 15,641,737
---------- ----------
Funded status 5,663,111 7,230,196
Unrecognized prior service cost 86,960 315,591
Unrecognized net gain from actual
experience different from that assumed (939,673) (3,467,983)
Unrecognized net transition asset (130,998) (261,999)
---------- ----------
Prepaid pension expense - December 31, $ 4,679,400 3,815,805
========== ==========
2000 1999 1998
Components of net periodic
benefit costs:
Service cost $ 48,600 48,196 56,329
Interest cost 520,756 526,014 527,039
Return on plan assets:
Actual 1,068,086 (1,408,834) (2,433,671)
Deferred (2,460,752) 70,136 1,352,369
Amortization of prior
service cost 90,716 90,715 90,717
Amortization of net
transition asset (131,001) (131,001) (131,001)
--------- --------- ---------
Periodic pension benefit $ (863,595) (804,774) (538,218)
========= ========= =========
-37-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
Significant actuarial assumptions used in the above computations include the
following:
2000 1999
Assumed discount rate 6.5% 6.5%
Expected long-term rate of return on
plan assets 8.0% 8.0%
Rate of increase in future compensation levels 5.0% 5.0%
Average remaining service period 15 years 15 years
Pension plan assets are invested primarily in U.S. Government guaranteed debt
securities and publicly-traded stocks and bonds. The vested actuarial
present value of benefit obligations is based upon the participant's expected
date of separation or retirement.
Company contributions to its defined contribution plan were $20,000 in 2000
$18,000 in 1999 and $16,000 in 1998.
The Company maintains a stock option plan that provides for the granting of
options to certain key employees to purchase shares of treasury stock at such
price as may be determined by the Board of Directors. If the employee
voluntarily leaves the Company within two years of exercising a stock option,
for reasons other than death or disability, the Company may, at its option,
reacquire the employee's stock at the original exercise price within three
months of the employee's termination.
In January 2000, the Company's Board of Directors ratified a December 1999
resolution of its executive committee making treasury shares available for
purchase by Directors at the lowest price for which a sale is made on the
date of exercise up to a maximum of 25,000 shares per year. Shares purchased
under this policy may not be transferred for a period of six months to anyone
other than the Company, another director, or in the event of the death of the
director, to the director's estate. The resolution provided for said policy
to continue until rescinded by the Board of Directors. One director
purchased 15,000 shares during the year under this resolution.
-38-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
In 1999, the Company's Stock Option Committee granted options, expiring in
2002, to purchase not more than 50,000 shares of treasury stock at $31 per
share to the President of the Company. During 2000, all 50,000 options were
exercised. A note receivable, included in accounts receivable, of $1,550,000
at December 31, 2000 is due by April 25, 2001 in connection with the
exercised options.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company 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 ("PRPs") 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 Company, along with many other
PRPs, entered into a consent agreement with U.S. EPA to remediate the Site,
and the Company 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, PRPs estimated the
additional funds in the range of $1 million would be required to complete
remediation of the Site. The Company's estimated share of that amount was
approximately $5,000. The Company made payment of that amount in late 2000.
If the projected cost of the remaining remediation tasks remains at
approximately $1 million, this will be the Company's final payment. There
may be other potential clean-up liabilities at other sites of which the Company
has no specific knowledge.
The Company 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 Company believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
The Company is involved in litigation matters and other 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.
At December 31, 2000 approximately 77% of the Company's labor force was
subject to collective bargaining agreements which expire in October 2002.
-39-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 10 - SUBSEQUENT EVENT
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.
In accordance with Accounting Principles Board Opinion No. 20, Accounting
Changes, the Company has restated the December 31, 1999 financial statements
to reflect a liability of $3,601,414 including accrued interest of $135,976
for past costs plus $1,114,044,(representing a discounted present value) for
estimated future costs in connection with the Site. The effect of the
adjustment was to decrease income from continuing operations by $4,715,458,
decrease tax expense by $1,734,511 and decrease net income by $2,980,947 or
$2.66 per share. The 2000 quarterly results were also restated to recognize
interest on the liability and to amortize the discount for estimated future
costs. The effect of the restatement was to decrease the 2000 quarterly
results $140,440, net of tax of $72,346.
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.
-40-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 11 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Alternative
minimum tax credits may be carried forward indefinitely. In accordance with
SFAS No. 109, a deferred tax liability of $158,000 is not recognized for
undistributed earnings of a subsidiary arising before 1993. These earnings
will be subject to tax when distributed. The Company's net operating loss
carryovers of $399,223 expire in 2020.
Significant components of the Company's deferred tax liabilities and assets
as of December 31 are as follows:
2000 1999
Deferred tax liabilities:
Excess tax depreciation $ 76,289 76,419
Prepaid pension expense 1,620,905 1,326,945
Undistributed earnings of
domestic subsidiary 182,789 169,571
Unrealized holding gains 31,345,211 24,651,212
---------- ----------
Total deferred tax liabilities 33,225,194 26,224,147
---------- ----------
Deferred tax assets:
Vacation accruals 41,870 42,318
Allowance for doubtful accounts 52,011 54,007
Investment in joint venture 15,961 -
Accrued other expenses 1,711 14,498
Net operating loss carryforward 135,736 -
Environmental remediation liability 1,675,604 1,603,256
Alternative minimum tax credit
and general business credit
carryforward 899,260 789,591
---------- ----------
Total deferred tax assets 2,822,153 2,503,670
---------- ----------
Net deferred tax liabilities $30,403,041 23,720,477
========== ==========
-41-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 11 - INCOME TAXES (Continued)
Significant components of the income tax provision are as follows:
2000 1999 1998
Current $124,600 39,773 196,786
Deferred (11,435) (1,357,431) 82,751
------- --------- -------
Income tax (benefit) from
continuing operations 113,165 (1,317,658) 279,537
Tax on discontinued and
disposed operations - 231,447 17,409
------- --------- -------
Total income tax
(benefit) $113,165 (1,086,211) 296,946
======= ========= =======
A reconciliation of income tax at the federal statutory rate of 34% to the
income tax provision follows:
2000 1999 1998
Income taxes from continuing
operations at federal statutory rate $ 637,408 (924,349) 565,902
Increase (reduction) in taxes
resulting from:
Domestic corporation dividend
received deduction (495,751) (442,271) (320,641)
Amortization 16,386 16,386 16,386
Stock options (42,500) - -
Other-net (2,378) 32,576 17,890
------- --------- -------
Income tax provision - current
operations 113,165 (1,317,658) 279,537
Income taxes on discontinued
and disposed operations - 231,447 17,409
------- --------- -------
Total income tax (benefit) $ 113,165 (1,086,211) 296,946
======= ========= =======
-42-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 12 - FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, notes receivable and
current liabilities approximate fair value. The fair value of marketable
securities was determined based on quoted market prices. The carrying amount
of unexpired call option contracts is based on proceeds received on the sale
of the call options, while the fair value of these contracts is based on
broker quotations. The carrying amount and fair value of unexpired call
option contracts at December 31, 2000 is $78,273 and $49,370, respectively.
Financial instruments which potentially subject the Company to concentrations
of credit risk are cash investments which may, at times, exceed federally
insured limits, notes receivable and marketable securities. The Company
places its cash investments with high-credit-quality financial institutions.
The borrower's credit worthiness has been evaluated in connection with the
note receivable. The Company does not believe significant concentration of
credit risk exists with respect to these financial instruments.
Concentrations in marketable securities are as disclosed in Note 2.
NOTE 13 - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. The Company
has three reportable segments: rubber and foam, bowling pins, and real estate
operations. The rubber and foam segment produces foam products, uncured
rubber and other rubber products. Operations in the bowling pin segment
involve the sale of bowling pins and production of bowling pins through its
50% owned joint venture. The real estate operations segment consists of
rental real estate and undeveloped real estate from which income is currently
derived from the sale of timber. Total revenue by segment includes both
sales to unaffiliated customers, as reported in the Company's consolidated
income statement, and intersegment sales which are accounted for generally
at current market prices.
The Company sells its products principally within the United States. Sales
in various foreign countries totaled $544,365 in 2000, $386,000 in 1999 and
$537,000 in 1998. The Company does not have assets located outside the
United States.
Operating profit is total revenue less operating expenses. In computing
operating profit, the following items have not been added or deducted:
general corporate expenses, interest expense, federal and state income taxes,
dividend and interest income and nonrecurring gains or losses realized on the
sale of property, equipment and marketable securities. Revenue from timber
sales is reported in the consolidated statement of income under gains on sale
of property, equipment and investments.
-43-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 13 - BUSINESS SEGMENTS (Continued)
Identifiable assets are reported for the Company's operations in each
segment. Corporate assets consist principally of cash, marketable
securities, notes receivable and prepaid pension expense. To reconcile
industry information with consolidated amounts, intersegment sales of
$523,734 in 2000, $403,586 in 1999 and $534,937 in 1998 have been eliminated.
More than ten percent of aggregate revenues were derived from certain
customers. The rubber and foam segment had sales to a single customer
amounting to $904,000 in 1998.
Information relative to the major segments of the Company's operations
follows:
2000 1999 1998
SALES TO UNAFFILIATED CUSTOMERS:
Rubber and Foam $ 6,844,877 6,880,103 6,113,730
Bowling Pins 1,716,428 1,686,027 2,221,122
Real Estate Operations 837,617 804,032 691,846
---------- ---------- ----------
$ 9,398,922 9,370,162 9,026,698
========== ========== ==========
INTERSEGMENT SALES:
Rubber and Foam $ 108,826 24,591 35,041
Discontinued Operations - 3,931 68,978
Bowling Pins 414,908 375,064 430,918
---------- ---------- ----------
$ 523,734 403,586 534,937
========== ========== ==========
INTEREST INCOME:
Bowling Pins $ 38,267 28,506 31,920
Bowling Pins - Intercompany 4,959 4,959 4,881
Real Estate Operations 11,096 8,784 50,571
Corporate 48,550 11,938 25,660
---------- ---------- ----------
$ 102,872 54,187 113,032
========== ========== ==========
OPERATING PROFIT (LOSS):
Rubber and Foam $(1,292,120) (1,179,291) (960,571)
Bowling Pins 286,521 733,963 215,079
Real Estate Operations 287,927 321,011 403,522
---------- ---------- ----------
SUBTOTAL (717,672) (124,317) (341,970)
-44-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 13 - BUSINESS SEGMENTS (Continued)
2000 1999 1998
GENERAL CORPORATE INCOME (LOSS) 2,959,683 (2,300,080) 2,052,402
INTEREST EXPENSE - INTERCOMPANY (4,959) (4,959) (4,881)
INTEREST EXPENSE - OTHER (362,323) (289,318) (41,135)
---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,874,729 (2,718,674) 1,664,416
INCOME TAX PROVISION (BENEFIT) 113,165 (1,317,658) 279,537
---------- ---------- ----------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS 1,761,564 (1,401,016) 1,384,879
DISCONITUED OPERATIONS:
Gain on disposal of division
assets, net of income tax - 988,845 -
Income (loss) from operations,
net of income tax - (63,056) 69,637
----------- --------- ---------
NET INCOME (LOSS) $ 1,761,564 (475,227) 1,454,516
=========== ========= =========
DEPRECIATION AND AMORTIZATION:
Rubber and Foam $ 304,683 346,438 393,561
Bowling Pins 594 832 490
Real Estate Operations 96,804 69,099 53,715
Corporate and Other 50,469 60,696 38,114
Discontinued Operations - 16,601 37,916
----------- ---------- ----------
$ 452,550 493,666 523,796
=========== ========== ==========
IDENTIFIABLE ASSETS:
Rubber and Foam $ 4,371,872 3,237,810 2,910,662
Bowling Pins 1,929,508 1,762,718 1,558,381
Real Estate Operations 1,015,855 1,002,829 823,484
Corporate and Other 103,826,723 83,533,439 89,438,698
Discontinued Operations - - 280,513
----------- ---------- ----------
$111,143,958 89,536,796 95,011,738
=========== ========== ==========
CAPITAL EXPENDITURES:
Rubber and Foam $ 126,936 119,254 594,018
Bowling Pins - - 3,396
Real Estate Operations 92,922 212,147 54,503
Discontinued Operations - 10,745 5,486
----------- ---------- ----------
$ 219,858 342,146 657,403
=========== ========== ==========
EQUITY IN JOINT VENTURE INCOME
INCLUDED IN BOWLING PIN OPERATING
INCOME $ 488,528 836,911 462,394
=========== ========== ==========
-45-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 13 - BUSINESS SEGMENTS (Continued)
2000 1999 1998
INVESTMENT IN JOINT VENTURE
INCLUDED IN BOWLING PIN
SEGMENT ASSETS $ 70,528 - 63,089
=========== ========== ==========
REVENUES:
Total revenues for reportable
segments $ 9,398,922 9,370,162 9,026,698
Timber sales included in gain
on disposal of assets on
consolidated income statement (333,519) (358,044) (273,158)
----------- ---------- ----------
TOTAL CONSOLIDATED REVENUES $ 9,065,403 9,012,118 8,753,540
=========== ========== ==========
-46-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2000
(Continued)
NOTE 14 - COMPUTATION OF NET INCOME AND CASH DIVIDENDS PER
COMMON SHARE OUTSTANDING:
2000 1999 1998
a) Income (loss) from operations $1,761,564 (1,401,016) 1,384,879
b) Income (loss) from discontinued
operations, net of tax - (63,056) 69,637
c) Gain on sale of division assets,
net of tax - 988,845 -
--------- --------- ---------
d) Net income (loss) $1,761,564 (475,227) 1,454,516
========= ========= =========
e) Dividends on common shares $ 890,577 884,955 943,414
========= ========= =========
Weighted average shares:
f) Common shares issued 1,999,512 1,999,512 1,999,512
g) Common treasury shares 888,213 879,149 815,780
--------- --------- ---------
h) Common shares outstanding 1,111,299 1,120,363 1,183,732
========= ========= =========
i) Income (loss) per common share
outstanding:
Continuing operations (a/h) $ 1.59 (1.25) 1.17
Discontinued operations (b/h) - (.06) .06
Gain on sale of division
assets (c/h) - .88 -
--------- --------- ---------
Net income (loss) per common
share outstanding $ 1.59 (.43) 1.23
========= ========= =========
j) Dividends paid per common share $ .80 .80 .80
========= ========= =========
-47-
VULCAN INTERNATIONAL CORPORATION
Five-Year Record
Selected Financial Data
2000 1999(1) 1998 1997 1996
------ ------ ------ ------ ------
Net revenues -
continuing
operations $11,246,242 10,919,627 10,582,060 11,373,204 14,301,258
Income (loss)from
continuing
operations before
taxes 1,874,729 (2,718,674) 1,664,416 1,971,419 2,227,789
Income taxes
(benefit) (113,165) (1,317,658) 279,537 352,970 474,499
Net income (loss)
from continuing
operations 1,761,564 (1,401,016) 1,384,879 1,618,449 1,753,290
Income (loss) from
disposed operations,
net of tax - (63,056) 69,637 167,356 205,062
Gain on sale of
disposed operations,
net of tax - 988,845 - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) 1,761,564 (475,227) 1,454,516 1,785,805 1,958,352
Income (loss) per
common share:
Continuing
operations as
previously
reported 1.59 1.41 1.17 1.30 1.46
Effect of
restatement - (2.66) - - -
---------- ---------- ---------- ---------- ---------
Continuing
operations
as restated 1.59 (1.25) 1.17 1.30 1.46
Discontinued
operations - (0.06) 0.06 0.14 0.17
Gain on disposal
of discontinued
operations - 0.88 - - -
---- ---- ---- ---- ----
Net income (loss) 1.59 (0.43) 1.23 1.44 1.63
==== ==== ==== ==== ====
Dividends per
common share .80 .80 .80 .80 .80
Property, plant
and equipment (net) 2,369,216 2,618,649 2,798,825 2,498,771 2,955,657
Depreciation 447,401 488,591 513,045 594,138 662,687
Current assets 55,493,494 53,278,872 53,506,019 38,900,356 28,500,783
Ratio current
assets to current
liabilities 2.54 to 1 2.48 to 1 2.99 to 1 3.38 to 1 3.62 to 1
-48-
VULCAN INTERNATIONAL CORPORATION
Five-Year Record
Selected Financial Data
(Continued)
2000 1999(1) 1998 1997 1996
------ ------ ------ ------ ------
Total assets 111,143,958 89,536,796 95,011,738 82,415,593 59,848,623
Long-term debt - - - - -
Redeemable
preferred stock
(solely at the
option of the
issuer) - - - - 66,060
Accumulated other
comprehensive
income 60,846,586 47,852,421 52,506,224 43,211,515 27,983,826
Total share-
holders' equity 72,959,140 58,137,015 65,295,924 58,494,990 43,948,759
Book value per
common share 64.03 52.54 57.46 48.05 35.04
[FN]
(1) Results are reported as restated for the effect of an environmental
liability. The effect was to reduce 1999 income from continuing
operations before tax by $4,715,458 and net income by $2,980,947 net of
tax of $1,734,511.
-49-
Selected Quarterly Financial Data
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenue $3,035,723 2,832,089 2,955,112 2,423,318 11,246,242
Gross profit
(loss) (7,295) (29,818) 27,299 (214,857) (224,671)
Income from
continuing
operations
as previously
reported 202,244 196,801 896,407 606,552 1,902,004
Effect of
restatement,
net of tax (2) (32,978) (33,306) (33,633) (40,523) (140,440)
Income from
continuing
operations
as restated 169,266 163,495 862,774 566,029 1,761,564
Net income 169,266 163,495 862,774 566,029 1,761,564
Earnings per share:
From continuing
operations as
previously reported, 0.18 0.18 0.81 0.54 1.71
Effect of
restatement,
net of tax (2) (0.03) (0.03) (0.03) (0.03) (0.12)
From continuing
operations as
restated 0.15 0.15 0.78 0.51 1.59
Net income 0.15 0.15 0.78 0.51 1.59
-50-
Selected Quarterly Financial Data
1999
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenue(1) $2,541,003 2,543,723 3,313,022 2,521,879 10,919,627
Gross profit
(loss)(1) (1,295) 9,510 124,419 (372,348) (239,714)
Income from
continuing
operations
as previously
reported 65,361 309,435 326,686 878,449 1,579,931
Effect of
restatement,
net of tax (2) (2,889,792) (29,234) (29,519) (32,402) (2,980,947)
Income (loss)
from continuing
operations as
restated (2,824,431) 280,201 297,167 846,047 (1,401,016)
Net income (loss) (2,844,348) 338,008 1,184,850 846,263 (475,227)
Earnings per
share:
From operations
as previously
reported 0.06 0.28 0.30 0.77 1.41
Effect of
restatement,
net of tax (2) (2.58) (0.03) (0.02) (0.03) (2.66)
From continuing
operations
as restated (2.52) 0.25 0.28 0.74 (1.25)
Net income (loss) (2.54) 0.30 1.06 0.75 (0.43)
[FN]
(1) Represents income from continuing operations, adjusted
to give retroactive effect to the disposition of Walnut
Ridge plastics operations.
(2) Quarterly results of operations are restated for the
environmental liability discovered by the Company in
March, 2001 but related to 1999.
-51-
IN MEMORY
Mr. William T. Crutchfield
Mr. William T. Crutchfield, a longtime member of the Board of Directors of
Vulcan International Corporation, died on May 13, 2000 at the age of 76.
Mr. Crutchfield had served continuously on the Board of Directors since
1963 and on the Executive Committee of the Board since 1974. Mr. Crutchfield
had been a successful securities and investment professional for many years
and was a valued, respected, contributing Director for his entire 37 years
of service to the Company. He will be missed by all of his friends at
Vulcan.
-52-
VULCAN INTERNATIONAL CORPORATION
Corporate Office
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801
VULCAN CORPORATION
Sales and Manufacturing
1151 College Street
Clarksville, Tennessee
(800) 251-3415
Directors:
Leonard Aconsky
Deliaan A. Gettler
Edward Ritter
VULCAN BOWLING PIN COMPANY VULCAN BLANCHESTER REALTY CO.
Antigo, Wisconsin Cincinnati, Ohio
(800) 447-1146 (513) 621-2850
Directors Directors
Ricardo DeFelice Leonard Aconsky
John Gabriel Vernon E. Bachman
Benjamin Gettler John Gabriel
Stanley I. Rafalo, O.D. Benjamin Gettler
ACCOUNTING OFFICES
30 Garfield Place, Suite 1040
Cincinnati, Ohio 45202
(513) 621-2850
(800) 447-1146
STOCK TRANSFER AND REGISTRAR
Fifth Third Bank
Shareholder Services
AUDITORS
J.D. Cloud & Co. L.L.P.
Cincinnati, Ohio
-53-
EXHIBIT 20
VULCAN INTERNATIONAL CORPORATION
300 Delaware Avenue
Wilmington, Delaware 19801
Notice of Annual Meeting of Shareholders
To Be Held June 5, 2001
The Annual Meeting of Shareholders of Vulcan International Corporation
will be held at 1151 E. College St., Clarksville, Tennessee on
Tuesday June 5, 2001 at 11 A.M. for the following purposes:
1. To elect Directors.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has established the close of business on May 5,
2001 as the record date for determining those shareholders who will
be entitled to vote at the meeting.
Wilmington, Delaware BY ORDER OF THE BOARD OF DIRECTORS
May 10, 2001 VERNON E. BACHMAN, SECRETARY
PLEASE READ THE PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE. YOU CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY
SOLICITATION BY RETURNING YOUR PROXY CARD PROMPTLY.
-54-
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of and at
the cost of Vulcan International Corporation (the "Company"). Under the
Delaware statutes, any shareholder may revoke a proxy by voting in
person at the meeting or by delivering a later dated proxy or other
writing revoking the proxy before it is voted at the meeting.
The Board of Directors has established as the record date for
determining shareholders entitled to notice and to vote at the meeting,
the close of business May 5, 2001.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company, as of February 1, 2001 had outstanding 1,134,724 shares
of common capital stock, each of which is entitled to one vote. There are
no other voting or equity securities outstanding. There is set forth
below information with respect to the stock ownership of any person who
is known to be the beneficial owner of more than 5% of the Company's
common stock and the stock ownership of management as of February 1,
2001.
HOLDERS OF 5% OR MORE
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
- ------------------------------------------------------------------------
Dimensional Fund Advisors, Inc. Directly Owned: 59,499 5.2%
1299 Ocean Avenue Indirectly Owned:
Santa Monica, CA 90401 Total Owned: 59,499
(1)Deliaan A. Gettler Directly Owned: 3,100 26.1%
1 Filson Place Indirectly Owned: 292,729
Cincinnati, OH 45202 Total Owned: 295,829
(2)Benjamin Gettler Directly Owned: 128,915 37.7%
1 Filson Place Indirectly Owned: 298,514
Cincinnati, OH 45202 Total Owned: 427,429
Lloyd I. Miller III Directly Owned: 91,215 8.7%
4550 Gordon Dr. Indirectly Owned: 7,000
Naples, FL 33940 Total Owned: 98,215
(3)The PNC Finacial Services Directly Owned: 65,084 5.7%
Group, Inc. Indirectly Owned:
One PNC Plaza Total Owned: 65,084
249 Fifth Avenue
Pittsburgh, PA 15222
-55-
[FN]
(1) Deliaan A. Gettler is the wife of Benjamin Gettler, Chairman of the
Board and President of the Company. The indirect shares listed for
Mrs. Gettler include 288,000 shares owned by the Gettler Family Special
1997 Trust of which she is Trustee; and 4,729 shares which she owns as
custodian for Benjamin R. Gettler, son of Mr. and Mrs. Gettler. It
does not include 128,915 shares directly owned by Mr. Gettler; 2,685
shares indirectly owned by Mr. Gettler as custodian for his daughter;
or 9,043 shares held by Stanley I. Rafalo as Trustee for an adult
daughter of Benjamin Gettler. If all of those shares were included,
the total shares directly and indirectly owned would be 436,472 which
is 38.5% of the common shares.
(2) The shares listed as indirectly owned by Mr. Gettler include 288,000
shares which Mrs. Gettler owns as Trustee of the Gettler Family Special
1997 Trust; 4,729 shares which Mrs. Gettler owns as custodian for
Benjamin R. Gettler; 3,100 shares which Mrs. Gettler owns directly; and
2,685 shares which Mr. Gettler owns indirectly as custodian for his
daughter. The total owned does not include 9,043 shares held by
Stanley I. Rafalo as Trustee for an adult daughter of Benjamin Gettler.
If those shares were included, the total shares directly and indirectly
owned would be 436,472 which is 38.5% of the common shares.
(3) The PNC Financial Services Group, Inc. and two wholly owned subsidiaries
hold these shares in fiduciary capacity under numerous trust
relationships, none of which relates to more than 5% of the shares, and
have sole or shared voting power, and sole or shared investment power
over these shares.
SECURITY OWNERSHIP OF MANAGEMENT
The total number of equity securities of the Company owned by all
directors and officers of the Company as a group (6) as of February 1,
2001 is set forth below:
Amount and Nature of Beneficial Ownership Percent of Class
- -----------------------------------------------------------------------
Directly Owned: 166,021 14.6%
Indirectly Owned: 307,557 27.1%
Total Owned: 473,578 41.7%
The share ownership of each of the directors and nominees is set forth
below under the heading Election of Directors.
-56-
ELECTION OF DIRECTORS
The shares represented by the proxies will be voted for the election of the
five (5) nominees listed below, each of whom is presently a Director. If
any such nominee shall be unable to serve (which is not now contemplated)
discretionary authority may be exercised to vote for a substitute. The
terms of all of the present Directors expire upon the election of their
successors in 2001. The following information is given with respect to the
five (5) nominees based upon the records of the Company and information
furnished by each nominee as of February 1, 2001.
NOMINEES
Number of
First Shares Owned
Name and Became Directly or Percent
Principal Occupation Age Director In Indirectly (1) Owned
- ------------------------------------------------------------------------
Leonard Aconsky 70 l993 5,800 (2)
Consultant to and director
of Acotech Services, a
consulting firm on building
life safety systems; retired
in 1993 as Vice-President and
World-Wide Technical
Coordinator WITCO, a manufacturer
of specialty chemical products;
Director, Vulcan Corporation,
operating subsidiary of Company
Edward B. Kerin 62 - - (2)
1998-2001 - Director of
Chemprene Inc., a manufacturer
of chemical rubber products,
Consultant 1994-98 Chief
Executive Officer, President
and Chairman of the Board of
Chemprene, Inc., a manufacturer
of chemical rubber products
(sold to Ammeraal, Inc. 1998);
1981-1994 corporate Vice President,
Witco Chemical Corporation
Benjamin Gettler (3)(4) 75 1960 427,429 37.7%
Chairman of the Board and
President Vulcan International
Corporation and its operating
subsidiary company, Vulcan
Corporation
-57-
Thomas D. Gettler, Esq. 42 1992 12,106 1.1%
Attorney
Stanley I. Rafalo, O.D. (4) 76 1975 28,043 2.5%
Doctor of Optometry
(1) This report of share ownership is pursuant to Securities & Exchange
Commission regulations and, therefore, includes shares of close
family members residing in nominees' households for which shares
Directors disclaim beneficial ownership.
(2) Ownership is less than 1%.
(3) The number of shares shown include shares owned directly and
indirectly by Deliaan A. Gettler, his wife. It does not include
shares referred to in footnote (4) below. Mr. Gettler disclaims
beneficial ownership of any of those shares.
(4) The number of shares shown as owned directly by Stanley I. Rafalo
includes 9,043 shares of common capital stock of the Company held by
him as Trustee for an adult daughter of Benjamin Gettler.
EXECUTIVE COMPENSATION
The following table shows the compensation and stock option awards for
the last three fiscal years, and other annual compensation and all other
compensation for 2000, to the Chief Executive Officer who was the only
executive officer whose compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------------------- ------------
Other
Annual
Name and Compen- Options/ All other
Principal sation SARs Compensation
Position Year Salary Bonus ($) (#) (1)
- -----------------------------------------------------------------------------
Benjamin Gettler
Chairman of the
Board and President 2000 $275,000 $25,000 0 0 (2) $13,000
1999 275,000 25,000 0 50,000 (3) 13,000
1998 275,000 25,000 0 0 13,000
-58-
(1) Director and Executive Committee Fees.
(2) Mr. Gettler exercised options on 50,000 shares during the year. There
were no options on shares outstanding at the end of 2000.
(3) Mr. Gettler did not exercise any options in 1999. At the end of 1999,
there were options on 50,000 shares outstanding at a price of $31.00
per share.
STOCK OPTION PLAN
The Vulcan International Corporation Stock Option Plan (the "Plan") was
adopted by the Board of Directors of the Company in 1991. The purpose of the
Plan is to provide additional incentives in order that the Company may retain
key personnel. The Plan provides for the granting of options to purchase
totaling not more than 300,000 shares of common stock from the Company's
treasury shares of which 127,000 have not previously been granted. The Plan
is administered by a Stock Option Committee consisting of not less than three
(3) Directors of the Corporation who are not eligible to receive options
under the Plan. During the year 2000, the Committee consisted of Directors
Rafalo, Aconsky and William T. Crutchfield until his death on May 13, 2000.
The current Committee consists of Directors Thomas Gettler, Stanley Rafalo
and Leonard Aconsky. No options have been granted by the current Committee.
The Committee determines the key employees to whom the options are granted,
the term of the option and the number of shares of each grant subject to the
option. The option price is such price as may be determined by the Board of
Directors. Each option continues for the period determined by the Committee,
which shall be not less than one (1) year or more than three (3) years from
the date of its grant. The Plan provides that each key employee to whom an
option is granted shall as a condition of his right to exercise such option,
agree to remain in the continuous employment of the Company for a period of
at least two years from the date of exercise of the option, unless he is
prevented from doing so by death or disability. Under the Plan, the Company
has the option to repurchase shares from an optionee who terminates
employment prior to the expiration of the two-year period.
OPTION GRANTS IN LAST FISCAL YEAR
None
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
Options Shares Number Value of
Acquired Unexercised Unexercised
or Value Options In-The-Money
Exercised Realized At Year Options
Name (#) ($) End At Year End
- -----------------------------------------------------------------------------
Benjamin Gettler
Chairman of the
Board and President 50,000 $125,000 0 0
-59-
PENSIONS
Under the terms of the Company's retirement Plan for salaried employees,
salaried personnel are entitled to retire at age 65 with benefits computed
on the basis of salary and length of service. The maximum length of service
which can be taken into account is 30 years. The method of computing
benefits under the retirement plan is: the number of years of employment
multiplied by the sum of 1.0% of average monthly salary and .65% of such
salary in excess of Social Security covered compensation (all based on the
highest 60 consecutive monthly salaries). The aggregate contribution made
for the 1999-2000 Plan year was $-0-. For purposes of the Plan, annual
compensation means a participant's W-2 earnings for federal income tax
purposes, excluding commissions and taxable fringe benefits. Mr. Gettler
has reached normal retirement age and has more than 30 years of service.
Mr. Gettler currently receives $148,586 per year from the Plan based upon
his selection of a joint and 100% survivor benefit.
PERFORMANCE GRAPH
5-YEAR CUMULATIVE TOTAL RETURN
COMPARISON OF VULCAN INTERNATIONAL CORPORATION WITH
AMEX MARKET INDEX AND PEER GROUP INDEX
(Graph submitted to SEC on Form SE on paper)
FISCAL YEAR ENDING
1995 1996 1997 1998 1999 2000
VULCAN INTERNATIONAL
CORPORATION 100.00 146.75 191.48 172.01 160.78 180.36
CUSTOMER SELECTED STOCK LIST 100.00 115.61 144.78 116.08 68.24 64.27
AMEX MARKET INDEX 100.00 105.52 126.97 125.25 156.15 154.23
ASSUMES $100 INVESTED ON JANUARY 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2000
-60-
COMPANIES COMPRISING THE PEER GROUP
The peer group used in constructing the graph in the Proxy Statement
showing the yearly percentage change in cumulative total return has always
included the complete list of suppliers to the shoe industry provided by the
Footwear Industries of America, the industry association. Since the Company
has reduced its reliance on the shoe industry and is now manufacturing foam
products, the Company has since 1998 included in its peer group the Rogers
Corp., which is a corporation listed on the American Stock Exchange and which
is in the business of processing and selling foam products. Accordingly, the
peer group for 2000 is:
Bontex (formerly Georgia Bonded Fibres)
Goodyear Tire & Rubber Co.
Jaclyn Inc.
Katy Ind.
Lydall Inc.
Rogers Corp.
Vista Resources Inc.
DIRECTORS' MEETINGS, COMMITTEE INFORMATION, FEES AND
OTHER DIRECTOR TRANSACTIONS
There were six (6) meetings of the Board of Directors in 2000. All
Directors attended at least 75% of the total number of Directors' meetings
held during their tenure and all Directors attended at least 75% of Committee
meetings held by committees on which they served during their tenure.
The Board of Directors has currently one standing committee, namely,
an Audit and Compensation Committee. The Audit and Compensation Committee
currently consists of Messrs. Leonard Aconsky, Dr. Stanley I. Rafalo, and
Thomas D. Gettler. The Audit and Compensation Committee is responsible for
overseeing the Company's accounting functions and controls. The Committee
has adopted a Charter to set forth all of its specific responsibilities.
As required by the Charter:
The Committee has reviewed and discussed the audited
financial statements with management;
The Committee has discussed with the independent auditors
the matters required to be discussed by Independent Standards
Board Standard No. 1;
The Committee has received the written disclosures and the
letter from the independent accountants required by Independence
Standards Board Standard No. 1 and has discussed with the
independent accountant the independent accountant's independence;
and
-61-
Based on the review and discussions with management and the
representative of its independent auditors, the committee
recommends to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form
10-K for the last fiscal year for filing with the Commission.
The Committee also reviews and recommends the salary and bonus of the
Company's chief executive officer. The Audit and Compensation Committee
had two meetings in 2000.
The Company pays each of its Directors $8,000 per year as a director
fee. The members of the Audit and Compensation Committee are paid $300 per
meeting attended.
There is in effect a Resolution of the Board of Directors pursuant to
which any Director may purchase up to 25,000 treasury shares of company stock
at the closing bid on the American Stock Exchange on the date of the exercise
of such election to purchase. In the calendar year 2000, there were a total
of 15,000 shares purchased from the Company pursuant to this Resolution.
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to the Company
for the fiscal year ended December 31, 2000 by the Company's principal
accounting firm, J.D. Cloud & Co. L.L.P.
Audit Fees $104,911
Financial Information Systems Design
and Implementation Fees $ 0
All Other Fees $ 23,189(a)(b)
Total $128,100
[FN]
(a) Includes fees for tax consulting and other non-audit services.
(b) The Audit Committee has considered whether the provision of these
services is compatible with maintaining the principal accountant's
independence.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Committee's Compensation Policy
It is the policy of the Compensation Committee that the Company's
Executive Officers should be compensated in accordance with the
responsibilities of their position, and their performance in office.
Included among the factors considered by the Compensation Committee in
carrying out such compensation policies are the historical compensation paid
-62-
officers of this Company and the compensation paid to executives in similar
positions in other companies as well as performance in the fiscal year in
question compared to prior fiscal years. The Compensation Committee
reviews all relevant factors relating to such performance, including the
general economic climate and the climate of the particular industries in
which this Company is involved.
In carrying out the foregoing policies, the Compensation Committee also
used the factors and criteria set forth hereinafter in determining the annual
compensation of the Chief Executive Officer and President of the Company for
2000 and his salary for 2001. The position of Chief Executive Officer and
President is held by a single individual, Mr. Benjamin Gettler.
The Company currently has only one officer who is paid over $100,000 per
year compared to three such officers prior to Mr. Gettler assuming the
position of Chief Executive Officer and President following the death of then
C.E.O. Lloyd Miller in April, 1990. Those offices were combined and Mr.
Gettler has carried out the duties of all three offices.
In the first ten months of 2000 (the latest financial information
available to the Committee as of the date of this report), the Company
had an unaudited consolidated net profit after tax on continuing
operations of $1,731,456 compared to $911,372 in the first ten months
of 1999.
During the past three years, Mr. Gettler's annual compensation has been as
follows:
Year Salary Bonus Total
---- ------ ----- -----
1999 $275,000 $25,000 $300,000
1998 275,000 25,000 300,000
1997 275,000 25,500 300,000
Mr. Gettler has requested that there be no increase in his salary or bonus.
Accordingly, the Committee has determined to keep Mr. Gettler's base salary
at the same level in 2001 as in 2000, namely, $275,000. In addition, the
Committee has determined that a bonus for this year of $25,000 is
appropriate.
Audit and Compensation Committee, December 1, 2000
Leonard Aconsky Thomas D. Gettler Stanley I. Rafalo, Committee Members
-63-
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The principal accountant of the Company is J. D. Cloud & Co. L.L.P.,
certified public accountants. That firm has acted as the principal
accountant of the Company since 1956. At the meeting of the Board of
Directors following the May, 2000 meeting, the Board again selected that
firm to continue to serve as the Company's principal independent public
accountants. The practice of the Board of Directors in making a selection
at such meeting has been followed by the Company since 1956. The same
practice will be followed after the June, 2001 Annual Meeting of Shareholders.
Management is not aware of any intended change of principal independent
public accountants. Representatives of J. D. Cloud & Co. L.L.P. are not
expected to attend the Annual Meeting.
PROPOSALS OF SECURITY HOLDERS
No shareholder proposals will be considered at this year's annual
meeting.
In the event that any security holder intends to present a proposal at
the 2002 annual meeting of the Company and such security holder desires that
the proposal be included in the Company's proxy statement and form of proxy
relating to that meeting, such proposal must be received by the Company by no
later than 4:30 P.M. December 1, 2001.
GENERAL
The Company, as of February 1, 2001 had outstanding 1,134,724 shares of
capital stock, each of which is entitled to one vote. The record date for
determining shareholders entitled to notice and to vote at the meeting is
close of business May 5, 2001.
The management knows of no other business to be brought before the
meeting for action by the shareholders. If any other matters properly come
before the meeting, the proxies in the enclosed form, unless otherwise
specified, will be voted on such matters in accordance with the judgment
of the Proxy Committee.
/s/BENJAMIN GETTLER
---------------------------
Chairman of the Board
and President
-64-
VULCAN INTERNATIONAL CORPORATION
PROXY
The undersigned hereby appoints Leonard Aconsky, Thomas D. Gettler,
and Dr. Stanley I. Rafalo, or any of them with full power of substitution,
as the proxies of the undersigned to vote at the Annual Meeting of
Shareholders of Vulcan International Corporation to be held at 1151 E.
College St., Clarksville, Tennessee, on Tuesday, June 5, 2001 at 11 A.M.
and at any adjournment thereof, all the shares of stock of the Company the
undersigned would be entitled to vote if personally present, hereby granting
to each of them full power and authority to act for and in the name of the
undersigned at said meeting and adjournments upon the following:
(Continued on reverse side)
Please mark
your votes as
indicated in
this example X
------
(1) The election of Directors and all
nominees listed in the Proxy Statement
except as marked to the contrary below.
(INSTRUCTION: To withhold authority to vote for
any individual nominee or nominees, draw a line
through that nominee's name.)
GRANTS WITHHOLDS
Leonard Aconsky, Benjamin Gettler, Thomas D. Gettler,
Edward B. Kerin, Stanley I. Rafalo, O.D.
- ----- -----
(2) In their discretion, the proxies are authorized to vote upon other
business as may properly come before the meeting.
THIS PROXY, SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED AS INSTRUCTED,
UNLESS OTHERWISE INDICATED. THIS PROXY
WILL BE PRESUMED TO BE GRANTS ON ITEM (1).
------
Dated ,2001
---------------------------
--------------------------------
Signature
--------------------------------
Signature
(When signing in any other capacity
than as an individual, please so
indicate.)
-65-
Exhibit 21
VULCAN INTERNATIONAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
At December 31, 2000
STATE OF PERCENTAGE
NAME OF CORPORATION INCORPORATION OF OWNERSHIP
- ------------------- ------------- ------------
Vulcan International Corporation Delaware Parent
Vulcan Corporation Tennessee 100%
Vulcan Blanchester Realty Co. Ohio 100%
Southern Heel Company Tennessee 100%
ACI International, Inc. Delaware 100%
Vulcan Bowling Pin Company Tennessee 100%
Cincinnati Club Building Associates
(Partnership) Ohio 97.51%
-66-
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have audited the Consolidated Financial Statements of Vulcan International
Corporation and subsidiaries as of December 31, 2000 and 1999, and for each of
the three years in the period ended December 31, 2000, and have issued our
report thereon dated February 14, 2001, except for Note 10 dated March 29, 2001;
such Consolidated Financial Statements and report are included in Part IV, Item
14(a)1 of this Form 10-K and the 2000 Annual Report to Shareholders and are
incorporated herein by reference. Our audit also included the financial
statement schedule of Vulcan International Corporation and subsidiaries listed
in Part IV, Item 14(a)2. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information therein set forth.
/s/ J.D. CLOUD & CO. L.L.P.
----------------------------
Certified Public Accountants
Cincinnati, Ohio
February 14, 2001
-67-
EXHIBIT 99.2
Schedule II
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
2000 1999 1998
The following reserve is deducted in
the balance sheet from the asset to
which it applies
Reserve for Doubtful Accounts
Receivable:
Balance at Beginning of Period $158,844 256,211 260,417
Additions:
(1) Charged to costs and expenses 188,829 12,000 12,000
(2) Charged to Other Accounts - - -
Deductions:
Write off of bad debts 194,699 109,367 16,206
------- ------- -------
Balance at End of Period $152,974 158,844 256,211
======= ======= =======
-68-
EXHIBIT 99.3
VULCAN-BRUNSWICK BOWLING PIN COMPANY
FINANCIAL STATEMENTS
For the year ended December 31, 2000
J.D. CLOUD & CO. L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-69-
INDEPENDENT AUDITORS' REPORT
To the Partners
Vulcan-Brunswick Bowling Pin Company
Antigo, Wisconsin
We have audited the accompanying balance sheets of Vulcan-Brunswick Bowling
Pin Company as of December 31, 2000 and 1999, and the related statements of
income, partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Joint Venture's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vulcan-Brunswick Bowling Pin
Company at December 31, 2000 and 1999, and the results of its operations and
its cash flows for the years then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ J.D. CLOUD & CO. L.L.P.
----------------------------
Certified Public Accountants
Cincinnati, Ohio
February 1, 2001
-70-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
BALANCE SHEETS
At December 31, 2000 and 1999
- ASSETS - 2000 1999
CURRENT ASSETS:
Cash $ 116,119 113,191
Accounts receivable 535,571 464,842
Inventories 685,669 484,363
Prepaid expense 6,301 6,343
--------- ---------
TOTAL CURRENT ASSETS 1,343,660 1,068,739
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 72,251 72,251
Buildings and improvements 4,026,487 3,997,934
Machinery and equipment 4,975,927 4,939,710
--------- ---------
Total 9,074,665 9,009,895
Less - Accumulated depreciation 6,038,509 5,733,455
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 3,036,156 3,276,440
--------- ---------
OTHER ASSETS:
Product development costs and other
intangibles - at cost (less accumulated
amortization; 2000 - $981,844;
1999 - $887,956) 2,768,528 2,862,416
Other 175,936 173,946
--------- ---------
TOTAL OTHER ASSETS 2,944,464 3,036,362
--------- ---------
TOTAL ASSETS $7,324,280 7,381,541
========= =========
- LIABILITIES AND PARTNERS' CAPITAL -
CURRENT LIABILITIES:
Accounts payable $ 94,060 150,964
Accrued expenses -
Salaries and wages 89,907 72,894
Taxes and other 95,916 98,658
--------- ---------
TOTAL CURRENT LIABILITIES 279,883 322,516
--------- ---------
PARTNERS' CAPITAL 7,044,397 7,059,025
--------- ---------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $7,324,280 7,381,541
========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-71-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF INCOME
For the years ended December 31, 2000 and 1999
2000 1999
NET SALES $9,261,854 9,191,563
--------- ----------
COST AND EXPENSES:
Cost of sales 8,434,507 8,457,964
Administrative 30,000 30,000
--------- ---------
TOTAL COST AND EXPENSES 8,464,507 8,487,964
--------- ---------
INCOME FROM OPERATIONS 797,347 703,599
OTHER INCOME - NET 24,025 16,469
--------- ---------
NET INCOME $ 821,372 720,068
========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-72-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 2000 and 1999
VULCAN BRUNSWICK TOTAL
BOWLING PIN BOWLING PIN PARTNERS'
COMPANY CORPORATION CAPITAL
BALANCE - JANUARY 1, 1999 $4,069,478 4,069,479 8,138,957
Add - Net income 360,034 360,034 720,068
Less - Distributions (900,000) (900,000) (1,800,000)
--------- --------- ---------
BALANCE - DECEMBER 31, 1999 3,529,512 3,529,513 7,059,025
Add - Net income 410,686 410,686 821,372
Less - Distributions (418,000) (418,000) (836,000)
--------- --------- ---------
BALANCE - DECEMBER 31, 2000 $3,522,198 3,522,199 7,044,397
========= ========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-73-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2000 and 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 9,191,250 9,393,078
Cash paid to suppliers and employees (8,277,981) (7,741,810)
Interest received 23,900 16,469
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 937,169 1,667,737
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (98,241) (105,383)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (836,000) (1,800,000)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,928 (237,646)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 113,191 350,837
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 116,119 113,191
========= =========
RECONCILIATION OF NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Net income $ 821,372 720,068
Depreciation 338,525 401,084
Amortization 93,888 93,888
(Increase) decrease in accounts
receivable (70,729) 201,515
(Increase) decrease in inventories (201,306) 166,553
Increase in prepaid expenses and other (1,948) (2,310)
Increase (decrease) in accounts payable
and accrued expenses (42,633) 86,939
--------- ----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ 937,169 1,667,737
========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-74-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Joint Venture is a Delaware general partnership formed for the purpose of
manufacturing bowling pins for its partners.
It is the policy of the Joint Venture to employ U.S. generally accepted
accounting principles in the preparation of its financial statements. A
summary of the Joint Venture's significant accounting policies follows:
ACCOUNTING 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.
JOINT VENTURE-
Vulcan Bowling Pin Company (Vulcan) and Brunswick Bowling and Billiards
Corporation (Brunswick) have an agreement to manufacture all the bowling
pins sold by each of the partners. Under the agreement, Vulcan contributed
bowling pin manufacturing assets and Brunswick contributed cash and certain
of its bowling pin manufacturing assets to the Joint Venture. Each partner
received an undivided 50% interest in the Joint Venture's assets, liabilities,
revenues and expenses in exchange for their capital contribution.
INVENTORIES-
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY, PLANT AND EQUIPMENT-
Property, plant and equipment are stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated useful lives using straight-line and accelerated methods over
15 to 39 years for buildings and improvements and 3 to 7 years for machinery
and equipment.
INTANGIBLES-
Product development costs and other intangible assets consist principally of
manufacturing technology and represent the fair market value assigned to such
assets on the date the Joint Venture was formed. Intangible assets are
amortized over 40 years on a straight-line basis.
-75-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES-
No provision for federal or state income tax is provided in the accompanying
financial statements since the partners are required to report their
proportionate share of the Joint Venture's income or loss on their respective
tax returns in accordance with the Internal Revenue Code and applicable state
law.
RETIREMENT PLAN-
The Joint Venture maintains a defined benefit pension plan covering
substantially all union employees. Pension benefits are determined annually
by consulting actuaries and are generally based on a fixed amount for each
year of service. The qualified plan is funded in accordance with the
collective bargaining agreement and to meet the funding requirements of the
Internal Revenue Code and the Employee Retirement Income Security Act of 1974.
CASH EQUIVALENTS-
For purposes of the statement of cash flows, the Joint Venture considers all
time deposits, certificates of deposit and other highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
NOTE 2 - INVENTORIES
Inventories at December 31, 2000 and 1999 consisted of:
2000 1999
Finished goods $ 150,000 -
Raw materials 196,185 155,795
Work in process 314,873 310,595
Supplies 24,611 17,973
------- -------
Total $ 685,669 484,363
======= =======
NOTE 3 - NOTE PAYABLE
The Joint Venture maintains a revolving credit agreement with its bank that
provides for borrowings of up to $500,000 at the prime rate. Borrowings
under the credit agreement are guaranteed by the Joint Venture's partners and
are secured by a pledge of the general assets of the Joint Venture. There
were no borrowings at December 31, 2000 and 1999.
-76-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
(Continued)
NOTE 4 - RETIREMENT PLAN
The Joint Venture maintains a defined benefit pension plan covering
substantially all union employees. The funded status and net periodic
benefit cost recognized in the accompanying financial statements
consisted of:
2000 1999
Change in benefit obligations:
Benefit obligation - January 1, $362,559 382,683
Service cost 18,509 22,470
Interest cost 26,453 22,758
Actuarial (gain) loss (21,131) (25,715)
Benefits paid (5,952) (39,637)
------- -------
Benefit obligation December 31, 380,438 362,559
------- -------
Change in plan assets:
Fair value of plan assets - January 1, 419,294 416,844
Actual return on plan assets 22,949 20,598
Employer contributions 22,093 21,489
Benefits paid (5,952) (39,637)
------- -------
Fair value of plan assets -
December 31, 458,384 419,294
------- -------
Funded status 77,946 56,735
Unrecognized net loss 66,791 83,079
Unrecognized prior service cost 27,325 29,790
Unrecognized net transition obligation 3,874 4,342
------- -------
Prepaid pension expense -
December 31, $175,936 173,946
======= =======
Components of net periodic benefit costs:
Service cost $ 18,509 22,470
Interest cost 26,453 22,758
Return on plan assets:
Actual (22,949) (20,598)
Deferred (10,090) (11,004)
Amortization of unrecognized net
transition obligation 468 468
Amortization of prior service cost 2,465 2,465
Amortization of unrecognized net loss 5,247 2,338
------- -------
Periodic benefit cost $ 20,103 18,897
======= =======
-77-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
(Continued)
NOTE 4 - RETIREMENT PLAN (Continued)
Pension plan assets are invested primarily in group annuity contracts
valued at contract value. Significant actuarial assumptions used in the
above computations include the following:
2000 1999
Assumed discount rate 7.75% 6.75%
Expected long-term rate of return
on plan assets 7.75% 7.75%
Average remaining service period 18 years 18 years
NOTE 5 - RELATED PARTY TRANSACTIONS
The Joint Venture had 2000 and 1999 sales to Vulcan of approximately
$1,743,000 and $1,751,000, respectively, and 2000 and 1999 sales to Brunswick
of approximately $7,519,000 and $7,440,000, respectively.
The Joint Venture purchased raw materials from Vulcan for approximately
$141,000 in 1999. The Joint Venture also paid accounting and administrative
fees of $30,000 to Vulcan in 2000 and 1999.
Accounts receivable from Brunswick amounted to $266,000 and $192,000 at
December 31, 2000 and 1999, respectively. Accounts receivable from Vulcan
amounted to $266,000 and $243,000 at December 31, 2000 and 1999, respectively.
NOTE 6 - RISKS AND UNCERTAINTIES
The Joint Venture is involved in various claims and legal proceedings
involving matters incidental to its business. Management believes that the
resolution of these matters will not have a material effect on the Joint
Venture's business or financial condition.
The Joint Venture currently purchases all its bowling pin bases from one
manufacturer. Any disruption in the supply of the bowling pin bases could
cause a delay in manufacturing which could negatively affect operating
results.
-78-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
(Continued)
NOTE 6 - RISKS AND UNCERTAINTIES (Continued)
At December 31, 2000 approximately 90% of the Joint Venture's workforce was
subject to a collective bargaining agreement that expires October 18, 2001.
Financial instruments which potentially subject the Joint Venture to
concentrations of credit risk are cash investments which may, at times,
exceed federally-insured limits. Management places the Joint Venture's
cash investments with high-quality financial institutions. Management
believes no significant concentration of credit risk exists with
respect to these cash investments.
-79-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Vulcan International Corporation has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
VULCAN INTERNATIONAL CORPORATION
/s/ Benjamin Gettler
------------------------------
By: Benjamin Gettler
Chairman of the Board,
President and Chief Executive Officer
/s/ Vernon E. Bachman
------------------------------
By: Vernon E. Bachman
Vice President, Secretary-Treasurer
Principal Accounting Officer
Date: April 16, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Benjamin Gettler /s/ Leonard Aconsky
- -------------------------- ---------------------------
By: Benjamin Gettler By: Leonard Aconsky
(Director) (Director)
/s/ Stanley I. Rafalo
- --------------------------
By: Stanley I. Rafalo
(Director)
-80-
April 16, 2001
Securities and Exchange Commission
Washington, D.C. 20549
Re: Vulcan International Corporation
Annual Report on Form 10-K
Dear Sir or Madam:
On behalf of Vulcan International Corporation, we are transmitting
herewith the attached Form 10-K for the twelve months ended
December 31, 2000.
The common shares of Vulcan International Corporation are traded
on the AMEX.
If you have any questions regarding this filing, please call us
at (513) 621-1188.
Sincerely,
/s/ J.D. CLOUD & CO. L.L.P.
-----------------------------
J.D. CLOUD & CO. L.L.P.