UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10219
VULCAN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0810265
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Delaware Avenue, Suite 1704, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
(302) 427-804
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding shares of no par value common stock at June 30, 2002:
1,098,105 shares
VULCAN INTERNATIONAL CORPORATION
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Schedule Supporting Net Income Per Common
Share and Dividends Per Common Share 4
Notes to Condensed Consolidated Financial
Statements 5-8
Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Item 3 Quantitative and Qualitative Disclosures
about Market Risks 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12-13
Item 6. Exhibits and Reports on Form 8-K 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2002 2001
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 2,037,354 2,493,733
Marketable securities (At fair market value) 34,056,058 39,981,369
Accounts receivable 1,760,930 1,428,693
Inventories 645,768 356,290
Prepaid expense and tax 113,435 73,610
---------- -----------
TOTAL CURRENT ASSETS 38,613,545 44,333,695
---------- -----------
PROPERTY, PLANT AND EQUIPMENT-at cost 11,700,033 11,688,951
Less-Accumulated depreciation and depletion 9,469,749 9,571,475
---------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 2,230,284 2,117,476
---------- -----------
OTHER ASSETS:
Investment in joint venture - 69,010
Marketable securities (At fair market value) 34,457,225 37,040,858
Deferred charges and other assets 5,621,608 5,536,448
---------- -----------
TOTAL OTHER ASSETS 40,078,833 42,646,316
---------- -----------
TOTAL ASSETS $ 80,922,662 89,097,487
========== ===========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 8,476,301 10,480,454
Other 6,223,642 6,552,174
---------- -----------
TOTAL CURRENT LIABILITIES 14,699,943 17,032,628
---------- -----------
OTHER LIABILITIES:
Deferred income tax 11,893,124 12,791,949
Commitments and contingencies - -
Joint venture and minority interest
in partnership 206,249 15,251
Other liabilities 37,470 37,470
---------- -----------
TOTAL OTHER LIABILITIES 12,136,843 12,844,670
---------- -----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 8,205,825 8,191,065
Retained earnings 27,197,692 26,562,597
Accumulated other comprehensive income 40,981,563 46,599,325
---------- -----------
76,635,019 81,602,926
Less-Common stock in treasury-at cost 22,549,143 22,382,737
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 54,085,876 59,220,189
---------- -----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 80,922,662 89,097,487
========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-1-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
REVENUES:
Net sales $4,580,483 4,382,334 2,213,777 2,189,162
Dividends 1,146,033 1,084,602 574,402 551,603
--------- --------- --------- ---------
TOTAL REVENUES 5,726,516 5,466,936 2,788,179 2,740,765
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 4,160,321 4,207,573 2,020,397 1,951,614
General and
administrative 944,683 975,731 465,169 569,025
Interest expense 93,014 170,218 45,688 71,474
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 5,198,018 5,353,522 2,531,254 2,592,113
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 139,992 84,174 71,489 18,504
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 668,490 197,588 328,414 167,156
NET GAIN ON SALE OF
PROPERTY AND EQUIPMENT 568,390 2,017,900 141,688 1,182,764
--------- --------- --------- ---------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 1,236,880 2,215,488 470,102 1,349,920
INCOME TAX PROVISION 160,944 494,785 35,469 328,354
--------- --------- --------- ---------
NET INCOME $1,075,936 1,720,703 434,633 1,021,566
========= ========= ========= =========
NET INCOME PER SHARE $ .98 1.52 .40 .90
========= ========= ========= =========
DIVIDENDS PER
COMMON SHARE $ .40 .40 .20 .20
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-2-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
UNAUDITED
JUNE 30, JUNE 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 4,244,415 5,549,892
Cash paid to suppliers and employees (5,847,852) (4,598,342)
Dividends received 1,146,033 1,084,602
Interest paid (15,298) (50,930)
Income taxes paid (145,000) (220,000)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES (617,702) 1,765,222
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 583,945 2,084,808
Purchase of property and equipment (289,913) (22,636)
Cash distribution from joint venture 400,000 100,000
Collections on notes receivable and other 59,779 56,262
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 753,811 2,218,434
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under credit
agreements - (1,700,000)
Sale of treasury shares 19,885 -
Purchase of common shares (171,531) (166,811)
Cash dividends paid (440,842) (453,889)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (592,488) (2,320,700)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (456,379) 1,662,956
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,493,733 1,008,649
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,037,354 2,671,605
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,075,936 1,720,703
Adjustments-
Depreciation and amortization 167,195 193,344
Deferred income taxes (8,979) 136,172
Equity in joint venture income and
minority interest (139,992) (84,174)
Net gain on sale of property and
marketable securities (568,391) (2,017,900)
(Increase) decrease in accounts receivable (328,233) 1,167,558
Decrease in inventories (289,478) 579,363
Increase (decrease) in accounts payable,
accrued expenses and other assets (525,760) 70,156
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (617,702) 1,765,222
========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-3-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
SCHEDULE SUPPORTING NET INCOME PER COMMON SHARE
AND DIVIDENDS PER COMMON SHARE
UNAUDITED
EXHIBIT 1
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
a) Net income $1,075,936 1,720,703 434,633 1,021,566
========= ========= ========= =========
b) Cash
dividends
on common
shares $ 440,842 453,889 220,421 226,944
========= ========= ========= =========
Weighted Average
Shares:
c) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
d) Common
treasury
shares 897,725 864,491 898,022 864,491
--------- --------- --------- ---------
e) Common shares
outstanding 1,101,787 1,135,021 1,101,490 1,135,021
========= ========= ========= =========
f) Income per
common
share (a/e): $ .98 1.52 .40 .90
g) Dividends
per common
share $ .40 .40 .20 .20
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-4-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2002 and 2001
On March 1, 1990 the United States of America filed a Complaint against the
Company and others in the United States District Court for the District
of Massachusetts claiming that the Company was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Company on September 22, 1999. The "Final Judgment" awarded damages
against the Company in favor of the United States in the amount of
$3,465,438 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 1999 the Company recorded an estimated liability of $2,981,000, net of
$1,734,000 tax, for the judgment, accrued interest for the past costs and a
discounted present value for estimated future costs in connection with the
site. This estimated liability was calculated based on the "Final Judgment"
and using other information provided by the U.S. EPA. The Company expensed
$151,000 and $140,000, after tax, for the years ended December 31, 2001 and
2000 and $51,000 and $25,000, after tax, for the six months and three months
ended June 30, 2002, for accrued interest and amortization of estimated future
costs related to this matter.
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 Company 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. Counsel for the Company is also
vigorously pursuing settlement negotiations with counsel for the United
States. To the extent that the Company is able to settle this liability,
or to obtain judicial relief, for an amount less than it has accrued, the
difference will be recorded as income in the year the obligation is settled.
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 ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint and
several liability was in the range of $15 million. The Company, along with
many other PRP's, 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
-5-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2002 and 2001
(Continued)
Action Trust Agreement for the purpose of undertaking clean-up
responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated that additional funds of approximately
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
CCBA appealed a real estate tax assessment from 1999 that had increased the
annual real estate tax by approximately $96,000. The local school board has
appealed the revision and reduced its initial appraised value of the property.
During 2001, the partnership received a $96,000 refund of the additional tax
paid in 1999. CCBA has recorded a liability of approximately $119,000 related
to this issue based on the revised value asserted by the local school board.
If CCBA is successful, this liability will be recognized as income.
The Company is involved in other litigation matters and claims which are
normal in the course of operations. Management believes that the resolution
of these matters will not have a material effect on the Company's business or
financial condition.
The accompanying condensed consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to reflect a
fair presentation of financial position, results of operations and cash flows
for the interim periods. All such adjustments are of a normal recurring
nature.
There were no securities of the Registrant sold by the Registrant during the
six months ended June 30, 2002, that were not registered under the Securities
Act of 1933, in reliance upon an exemption from registration provided by
Section 4(2) of the Act.
-6-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2002 and 2001
(Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
JUNE 30, DECEMBER 31,
2002 2001
UNAUDITED
Inventories consisted of:
Finished goods $ 309,034 142,846
Work in process 70,837 64,853
Raw materials 265,897 148,591
------- -------
Total inventories $ 645,768 356,290
======= =======
COMPREHENSIVE INCOME
During the six months ended June 30, 2002 and 2001 total other comprehensive
income (loss) was as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
Net income $ 1,075,936 1,720,703 434,633 1,021,566
Other comprehensive
income (loss), net of tax:
Unrealized gain (loss)
on marketable securities (5,559,449)(6,393,121) (6,849,887) (1,450,686)
Less: reclassification
adjustment for gains
included in net income (58,313) (824,319) (3,313) (549,747)
--------- --------- --------- ---------
Total comprehensive
income (loss) $(4,541,826)(5,496,737) (6,418,567) (978,867)
========= ========= ========= =========
Accumulated comprehensive income consists of unrealized holding gains on
securities available for sale of $40,981,563 at June 30, 2002 and
$46,599,325 at December 31, 2001.
-7-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2002 and 2001
(Continued)
STOCK OPTIONS
In May 2002, the Company's Board of Directors adopted a resolution amending
the Company's stock option plan to provide that the maximum time with which
all currently outstanding stock options may be exercised is changed from three
years to seven years. Options to purchase not more than 50,000 shares of
treasury stock that were granted to the President of the Company in 2001
will expire in 2008.
BUSINESS SEGMENT INFORMATION
Reportable segments for the six months and three months ended June 30, 2002
are as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
NET SALES FROM CONTINUING
OPERATIONS:
Rubber and Foam Products $3,491,472 3,187,706 1,755,320 1,654,313
Bowling Pins 888,733 1,161,498 356,616 551,416
Real Estate Operations 465,146 542,418 211,105 235,978
Intersegment net sales (48,359) (184,603) (21,007) (126,299)
--------- --------- --------- ---------
4,796,992 4,707,019 2,302,034 2,315,408
Timber sales reported in
gain on sale of property
and equipment (216,509) (324,685) (88,257) (126,246)
--------- --------- --------- ---------
TOTAL SALES FROM $4,580,483 4,382,334 2,213,777 2,189,162
CONTINUING OPERATIONS ========= ========= ========= =========
OPERATING PROFIT (LOSS)
FROM CONTINUING OPERATIONS:
Rubber and Foam Products $ (104,077) (380,471) (60,683) (41,753)
Bowling Pins 80,636 55,887 37,508 4,352
Real Estate Operations 193,178 250,244 75,364 90,016
--------- --------- --------- ---------
TOTAL OPERATING
PROFIT (LOSS) FROM
CONTINUING OPERATIONS 169,737 (74,340) 52,189 52,615
Interest expense - net (93,014) (170,218) (45,688) (71,474)
Other unallocated corporate
income - net 1,160,157 2,460,046 463,601 1,368,779
Income tax provision (160,944) (494,785) (35,469) (328,354)
--------- --------- --------- ---------
NET INCOME $1,075,936 1,720,703 434,633 1,021,566
========= ========= ========= =========
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 2002, and for
the six month period then ended have been reviewed, prior to filing, by
the Registrant's independent accountants, J.D. Cloud & Co. L.L.P., whose
report covering their review of the financial statements is included in
this report.
-8-
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have reviewed the accompanying condensed consolidated balance sheet of
Vulcan International Corporation and subsidiaries as of June 30, 2002, and
the related condensed consolidated statements of income and cash flows for
the six month and three month periods ended June 30, 2002 and 2001. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
U.S. generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with U.S. generally accepted
accounting principles.
We have audited, in accordance with U.S. generally accepted auditing
standards, the consolidated balance sheet of Vulcan International Corporation
and subsidiaries as of December 31, 2001, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 14, 2002, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2001, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
J.D. CLOUD & CO. L.L.P.
Certified Public Accountants
Cincinnati, Ohio
July 31, 2002
-9-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Net sales revenue for the six month period ended June 30, 2002, increased
$198,149 or 4.5% over the corresponding period in 2001. Cost of sales
decreased $47,252 or 1.1% during the six month period compared to the
corresponding six month period in 2001. Net sales revenue for the second
quarter of 2002 decreased $24,615 or 1.1% and cost of sales increased
$68,783 or 3.5% compared to the corresponding quarter in 2001. These
changes are due to increased sales in the Company's Rubber and Foam segment.
General and administrative expenses decreased $31,048 or 3.2% in the
six month period ended June 30, 2002, as compared to the corresponding six
month period in 2001. General and administrative expenses for the second
quarter of 2002 decreased $103,856 or 18.3% compared to the corresponding
quarter in 2001. The decreases are primarily due to decreased professional
fees relating to environmental matters.
Interest expense for the six month period ended June 30, 2002 decreased
$77,204. Interest expense for the three month period ended June 30, 2002
decreased $25,786. The decreases were due to decreased borrowings under
the Company's line of credit agreement.
Gains on the sale of property, equipment and securities were $568,390 for
the six month period ended June 30, 2002, as compared to $2,017,900 for the
corresponding period in 2001. Gains in 2002 and 2001 were primarily the
result of the sale of marketable securities and timber.
The Company has a 50% interest in a joint venture, Vulcan Brunswick Bowling
Pin Company (VBBPC) which manufactures bowling pins in Antigo, Wisconsin for
Brunswick and the Company. The Company received cash distributions of
$400,000 from VBBPC during the second quarter of 2002. The excess of cash
distributions over the Company's investment in VBBPC is included in other
liabilities at June 30, 2002.
Summarized income statement information for VBBPC consists of the following:
Six Months Ended June 30, Three Months ended June 30,
2002 2001 2002 2001
Net sales $3,106,068 2,120,883 1,588,129 804,982
Costs and expenses 2,823,698 1,953,152 1,443,753 768,067
--------- --------- --------- ---------
Net income $ 282,370 167,731 144,376 36,915
========= ========= ========= =========
Company's 50% equity
in net income $ 141,185 83,865 72,188 18,457
========= ========= ========= =========
-10-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the second quarter of 2002 were funded
in part through earnings and noncash charges such as depreciation and
amortization and from the sale of timber, equipment and marketable securities.
The cash from these transactions was primarily used in operations. The
Company expects to continue, when necessary, to use short-term borrowings to
meet cash requirements not fully provided by earnings, depreciation and
amortization. During the six months ended June 30, 2002, 4,114 shares of
treasury stock were acquired for $171,531 and 500 shares of treasury stock
were sold to a director for $19,885 pursuant to the right of any director to
purchase up to 25,000 shares at market price in any 12 month period. There
were approximately $54,000 of commitments for capital expenditures as of June
30, 2002.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
MARKETABLE SECURITIES
The fair value of marketable securities has declined $19,047,000 from
December 31, 2001 to July 31, 2002. At July 31, 2002 the fair value of
marketable securities was $57,974,763 as compared to $68,513,283 at
June 30, 2002.
The net unrealized holding gain at July 31, 2002 was approximately
$34,026,000 net of deferred taxes of approximately $17,529,000. The
Company is subject to the risk that fair value securities could decline
further.
-11-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 1, 1990 the United States of America filed a Complaint against the
Company and others in the United States District Court for the District
of Massachusetts claiming that the Company was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Company on September 22, 1999. The "Final Judgment" awarded damages
against the Company in favor of the United States in the amount of
$3,465,438 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 1999 the Company recorded an estimated liability of $2,981,000, net of
$1,734,000 tax, for the judgment, accrued interest for the past costs and a
discounted present value for estimated future costs in connection with the
site. This estimated liability was calculated based on the "Final Judgment"
and using other information provided by the U.S. EPA. The Company expensed
$151,000 and $140,000, after tax, for the years ended December 31, 2001 and
2000 and $51,000 and $25,000, after tax, for the six months and three months
ended June 30, 2002, for accrued interest and amortization of estimated future
costs related to this matter.
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 Company 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. Counsel for the Company is also
vigorously pursuing settlement negotiations with counsel for the United
States. To the extent that the Company is able to settle this liability,
or to obtain judicial relief, for an amount less than it has accrued, the
difference will be recorded as income in the year the obligation is settled.
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 ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint and
several liability was in the range of $15 million. The Company, along with
many other PRP's, 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
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings. (Continued)
Action Trust Agreement for the purpose of undertaking clean-up
responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated that additional funds of approximately
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
CCBA appealed a real estate tax assessment from 1999 that had increased the
annual real estate tax by approximately $96,000. The local school board has
appealed the revision and reduced its initial appraised value of the property.
During 2001, the partnership received a $96,000 refund of the additional tax
paid in 1999. CCBA has recorded a liability of approximately $119,000 related
to this issue based on the revised value asserted by the local school board.
If CCBA is successful, this liability will be recognized as income.
The Company and its subsidiaries are party to other matters and claims which
are normal in the course of operations. While the results of litigation and
claims cannot be predicted with certainty, based on advice of counsel, the
Company believes that the final outcome of such matters will not have a
materially adverse affect on its consolidated financial condition.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
None
b. The Company was not required to file Form 8-K for the quarter
ended June 30, 2002.
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PART II - OTHER INFORMATION
(Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VULCAN INTERNATIONAL CORPORATION
By: /s/ Benjamin Gettler
----------------------------------
Date August 12, 2002 Benjamin Gettler
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Vernon E. Bachman
-----------------------------------
Date August 12, 2002 Vernon E. Bachman
Vice President, Secretary-Treasurer
and Principal Accounting Officer
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