Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-Q

(Mark One)

(  X  )

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

 (      )

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

  (I.R.S. Employer

    incorporation or organization)

Identification Number)

300 Delaware Avenue,  Suite 1704,  Wilmington, Delaware   19801

(Address of principal executive offices, including Zip Code)

(302) 427-5804

(Registrant's telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   __  No   _X_

The number of shares outstanding of the issuer's common stock, without par value, as of September 30,

 2004 was 1,006,707 shares.

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2004 and 2003

UNAUDITED

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.

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.

RECLASSIFICATION

Certain prior period data has been reclassified to conform to the current year presentation.

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:

INVENTORIES

- 4 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

EARNINGS PER COMMON SHARE

Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is adjusted for the dilutive effects of stock options.  The diluted average number of common shares outstanding has been increased for the assumed exercise of stock options with proceeds used to purchase treasury shares at the average market price for the period.  The computations were as follows for the nine and three months ended

September 30:

- 5 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

INCOME TAX

In June, 2004, the Company completed all matters pertaining to the sale of its bowling pin operations, including the provision of services required of the Company pursuant to such sale.  In September, 2004, in connection with the filing of the Company's federal income tax return, management was advised that the Company is now classified as a Personal Holding Company under Internal Revenue Service regulations due to the percentage of passive income received by the Company, together with the concentration of ownership of over 50% of the Company's common stock by five shareholders as the term "shareholders" is defined by IRS regulations.  Management believes that such classification should not result in additional taxation under the Personal Holding Company regulations during the year 2004.

LEGAL MATTERS

The Company has an interest in a partnership, Cincinnati Club Building Associates ("CCBA"), that owns certain real estate.  On August 13, 1999 a Complaint for money damages in excess of $25,000, based upon breach of fiduciary duty was filed by the other partner in the Court of Common Pleas in Hamilton County, Ohio.  Essentially, the plaintiff is seeking an adjustment of the capital account balances which would result in a higher distribution of cash flow to the plaintiff.  The Court of Common Pleas in Hamilton County, Ohio, in 2003, granted summary judgment in the Company’s favor.  On  January 6, 2004, the plaintiff appealed this decision.  The Court of Appeals First Appellate District of Ohio, Hamilton County, Ohio upheld the decision of the Court of Common Pleas on October 8, 2004 in favor of the Company.

CCBA appealed a real estate tax assessment from 1999 that had increased the annual real estate tax and was granted a revision.  CCBA received a $96,000 refund of the additional tax paid in 1999.  During 2001, the local school board appealed the revision.  In 2003, the Ohio Board of Tax Appeals ruled in favor of CCBA.  The school board appealed that ruling to the Ohio Supreme Court.  A settlement agreement and dismissal of the suit was reached in May, 2004.  CCBA had recorded a liability of approximately $135,500 related to this issue based on the revised value asserted by the local school board.  The reversal of this liability has been recognized as income in 2004.

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.

- 6 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

COMPREHENSIVE INCOME

Total comprehensive income (loss) was as follows:

Accumulated other comprehensive income consists of unrealized holding gains, net of tax, on securities available for sale of $43,207,706 at September 30, 2004 and $44,627,575 at December 31, 2003.

- 7 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

DISCONTINUED OPERATIONS

In March, 2004, the Company completed the sale of its 50% interest in a Joint Venture, Vulcan Brunswick Bowling Pin Company (“VBBP”), to Brunswick Bowling and Billiards Company (“Brunswick”) for $2,000,000.  VBBP manufactures bowling pins in Antigo, Wisconsin.  Pursuant to this sale, the Company does not have a right to any net profits from VBBP after December 31, 2002.  In March, 2004 , Brunswick also purchased the Company’s bowling pin business for $716,890.  The prior period’s financial statements have been restated to present the results of operations from bowling pin operations as discontinued operations.  For business segment reporting purposes, the financial results from bowling pin operations were previously reported in the segment “Bowling Pins”.

Net sales and income (loss) from discontinued operations are as follows:

STOCK OPTIONS

Options to purchase not more than 50,000 shares of treasury stock at $37.24 per share, that were granted to the President of the Company in 2001 will expire in 2008.  In 2003, the options were changed to decrease the option exercise price to $33.20 per share.  The closing price of the stock at September 30, 2004 was $44.60.  As a result, the Company accrued an additional compensation expense liability of $42,500 related to these stock options in the nine month period ended September 30, 2004.  No options were exercised under this grant in 2003 or 2004.

The Company applies APB No. 25 and related interpretations in accounting for stock options.  Had compensation expense for the stock option been determined based on the fair value or modification dates in accordance with SFAS. No. 123, the Company’s net income and earnings per share would have been adjusted to the pro forma amounts as follows:

- 8 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

STOCK OPTIONS (Continued)

POSTRETIREMENT BENEFITS

The Company maintains a noncontributory defined benefit pension plan for certain eligible salaried and hourly employees.  SFAS No. 132 (Revised), "Employees' Disclosure about Pension and Other Postretirement Benefits", requires the components of net periodic pension cost to be disclosed on an interim basis as follows:

Components of net periodic pension cost:

- 9 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

POSTRETIREMENT BENEFITS (Continued)

The Company previously disclosed in its financial statements for the year ended December 31, 2003 that it did not expect to make any contribution to its pension plan over the year ending December 31, 2004.  As of September 30, 2004, no contributions have been made and the Company anticipates that no contributions will be made during the rest of 2004.

BUSINESS SEGMENT INFORMATION

Reportable segments are as follows:

- 10 -

VULCAN INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2004 and 2003

UNAUDITED

(Continued)

BUSINESS SEGMENT INFORMATION (Continued)

REVIEW BY INDEPENDENT ACCOUNTANTS

The condensed consolidated financial statements at September 30, 2004, and for the three and nine month periods  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.

- 11 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Vulcan International Corporation

Wilmington, Delaware

We have reviewed the accompanying condensed consolidated balance sheet of Vulcan International Corporation and subsidiaries as of September 30, 2004, and the related condensed consolidated statements of income and cash flows for the nine month and three month periods ended September 30, 2004 and 2003.  These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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 the standards of the Public Company Accounting Oversight Board, 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 Interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vulcan International Corporation and subsidiaries as of December 31, 2003, 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 27, 2004, 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, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

J.D. CLOUD & CO. L.L.P.

Certified Public Accountants

Cincinnati, Ohio

October 25, 2004

- 12 -

PART I - FINANCIAL INFORMATION

(Continued)

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of

Operations.

Net sales revenue for the nine months ended September 30, 2004, increased $187,195 or 3.1% over the corresponding period in 2003.  Cost of sales increased $3,798 or .1% during the nine months ended September 30, 2004 compared to the corresponding nine month period in 2003.  Plant operating expenses increased $28,610 or 3.1% over the corresponding period in 2003.  Net sale revenue for the third quarter of 2004 decreased $560,149 or 25.8% and cost of sales decreased $511,587 or 29.4% compared to the corresponding quarter in 2003. Plant operating expenses increased $21,820 or 7.6% compared to the corresponding quarter in 2003.  The change for the three months ended September 30, 2004 is due to decreased sales and costs in the Company's Rubber and Foam segment, primarily related to lower sales to companies that provide footwear to the U.S. military.

General and administrative expenses increased $15,542 or 1.2% in the nine months ended September 30, 2004, as compared to the corresponding nine month period in 2003.  General and administrative expenses for the third quarter of 2004 decreased $199,144 or 42.3% compared to the corresponding quarter in 2003.  A decrease in compensation expense related to the Company's stock option plan accounted for most of the decrease in general and administrative expenses for the quarter ended September 30, 2004.

Interest expense for the nine months ended September 30, 2004 decreased $10,434.  There was no interest expense in the three months ended September 30, 2004 as compared to a decrease in interest expense of $29,079 in the corresponding period in 2003. The decreases are due to decreased interest rates and elimination of  short-term debt.

Gains on the sale of property, equipment and securities were $482,711 for the nine months ended September 30, 2004, as compared to $849,456 for the corresponding period in 2003. Gain on sale of property, equipment and securities for the third quarter of 2004 were $43,352 as compared to $165,690 for the same period in 2003.  Gains in 2004 and 2003 were primarily the result of the sale of marketable securities and timber.  

Total assets declined from December 31, 2003 and September 30, 2004 primarily due to a general decline in the market value of marketable securities.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash requirements during the third quarter of 2004 were funded in part through earnings as well as 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.  There were approximately $20,200 of commitments for capital expenditures as of September 30, 2004.

During the nine months ended September 30, 2004, 2000 shares of treasury stock valued at $81,000 were issued to the President as bonus compensation.

- 13 -

PART I - FINANCIAL INFORMATION

(Continued)

Item 3.     Quantitative and Qualitative Disclosures about Market Risks.

MARKETABLE SECURITIES

The fair value of marketable securities has decreased $2,872,914 from December 31, 2003 to October 25, 2004.  At October 25, 2004 the fair value of marketable securities was $68,746,000 as compared to $71,618,914 at September 30, 2004.

The net unrealized holding gain at October 25 was approximately $41,312,000 net of deferred taxes of approximately $21,282,000.  The Company is subject to the risk that fair value securities could decline further.

Item 4.     Controls and Procedures

a)

Disclosure controls and procedures.  The Chief Executive Officer and the Principal Financial Officer have carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures that are designed to ensure that information relating to the Company required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.  Based upon this evaluation, these officers have concluded, that as of September 30, 2004, the Company's disclosure controls and procedures were adequate.

b)   Changes in internal control over financial reporting.  During the period covered by this report, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

- 14 -

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings – Not applicable

Item 2. Changes in Securities and Use of Proceeds - Not Applicable

Item 3. Defaults Upon Senior Securities - Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable

Item 5. Other Information - Not Applicable

Item 6. Exhibits and Reports on Form 8-K.

a .  Exhibits

Exhibit 11 - Statement regarding computation of per share earnings is included in Part 1,

  Item 1 of this Form 10Q, page 5.

Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification of Benjamin Gettler.

Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification of Vernon E. Bachman.

Exhibit 32 - Section 1350 Certifications

b.   Form 8-K was filed August 5, 2004 under Items 9 and 12 to announce the Company's   earnings for the quarter ended June 30,2004.

- 15 -

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

Date:  November 10, 2004

By:  /s/Benjamin Gettler

Benjamin Gettler

Chairman of the Board, President

and Chief Executive Officer

Date:  November 10, 2004

By:  /s/Vernon E. Bachman

Vernon E. Bachman

Vice President, Secretary-Treasurer

and Principal Accounting Officer

- 16 -