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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, 1996
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
Indicated 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, 1997, 1,254,344 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 $37,630,320.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated by Reference Applicable Part of Form 10-K
- ----------------------------------- ----------------------------
Annual Report to Shareholders for the
Year Ended December 31, 1996 Part I and II
Proxy Statement Dated March 27, 1997 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 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,
1996, are set forth in Note 12 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-
SHOE PRODUCTS
Vulcan Corporation manufactures shoe lasts, which it sells to the footwear
manufacturing industry in the United States, and rubber heels and rubber
soling material, which is produced primarily for military orders. Vulcan's
shoe products are sold through its own sales force, manufacturers' agents and
distributors. During 1996, rubber heels and rubber soling material was
primarily produced for military orders. The Registrant had previously
produced rubber heels and rubber soling material for the footwear
manufacturing industry in the United States.
RUBBER PRODUCTS-
Vulcan has a 272,000 square foot building in Clarksville, Tennessee, devoted
entirely to the manufacture of rubber components and rubber sheet products.
This factory's main products are rubber sheet stock used as soling material
for the shoe industry. It also produces rubber flooring for sports
facilities, rubber backing for automobile mats and miscellaneous rubber
products.
LASTS-
Vulcan produces lasts in a well equipped factory at 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. Demand for
lasts varies according to the rapidity of change in shoe fashion.
BOWLING PRODUCTS
Vulcan Corporation has attained a substantial position in the bowling pin
industry as a result of developing a Surlyn-coated bowling pin which enabled
Vulcan to manufacture a superior product known as the Vultex II pin.
On June 9, 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 the two
companies, is located at the site of Vulcan Corporation'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 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.
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.
Sales to one unaffiliated major shoe products customer amounted to $3,492,000
in 1996. These sales represented 29% of the total shoe product sales. Sales
to one unaffiliated major bowling pin customer amounted to $748,000 in 1996.
This represents 38% of the total bowling pin sales.
Patents, trademarks, licenses, franchises and concessions are not material
factors in the business. Vulcan 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 1997.
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.
At December 31, 1996, the Registrant employed 177 people, down from 288 at the
end of 1995. The reduction in the Registrant's work force was in accordance
with a previously announced plan to reduce the rubber products work force.
The Company has commitments for capital expenditures of $62,000 at December
31, 1996.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales-
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). During 1996, sales were $1,899,000;
net income was $110,700; and assets were $1,260,700.
-2-
PART I
(Continued)
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.
Walnut Ridge, Arkansas Leased 37,900 Administrative offices and
manufacturing of shoe
lasts.
Blanchester, Ohio Leased 6,000 Sales and style office and
warehouse space.
Cincinnati, Ohio Owned 92,000 Corporate offices and
leasing of office space.
The age of the buildings ranges from approximately 34 to 73 years. The
structures are of steel, brick and concrete construction and are generally in
good condition. All but one plant is sprinklered. Excellent transportation
facilities are available for all factories. Most are located on rail sidings.
For more information regarding leased property, reference is made to Note 6 of
the Notes to Consolidated Financial Statements included under Part IV, Item
14(a)1 of this Form 10-K.
Item 3. Legal Proceedings.
The Registrant has been advised that it is a potentially responsible party,
together with 18 other parties, with regard to the Resolve, Inc. Superfund
Site, located in North Dartmouth, Massachusetts, with potential joint and
several liability of $5.7 million. The Resolve site was a waste chemical
reclamation facility. The environmental problem at the site involves soil
contamination including, particularly, PCB contaminants. The Registrant is
contesting all liability. It is the understanding of Registrant that clean-up
at the site involves treatment of contaminated soil and ground water. There
may be other potential clean-up liability at other sites of which the
Registrant has no specific knowledge.
The Registrant and its subsidiaries are involved in other litigation matters
and claims which are normal in the course of operations.
It is impossible to state with any certainty whether the Resolve site and
other matters referred to in this item will have a material impact on the
Company.
-3-
PART I
(Continued)
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, 1996, that require disclosure under this item.
-4-
PART II
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 651 shareholders of
record as of December 31, 1996. The high and low sales price and the
dividends paid for each quarterly period within the two most recent years
were as follows:
1996 1995
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
First 21-7/8 20-3/4 $.20 20-3/8 17-1/4 $.20
Second 25-1/2 21-1/8 $.20 20-3/8 19-1/2 $.20
Third 26-1/8 24-5/8 $.20 21-3/8 19-7/8 $.20
Fourth 32-7/8 25-3/4 $.20 21-3/4 21-1/8 $.20
Item 6. Selected Financial Data.
The information required by this item is set forth below:
1996 1995 1994 1993 1992
Net revenues $17,087,469 18,112,150 18,131,212 20,238,119 21,418,889
Income (loss)
before taxes 2,497,481 (574,769) 1,101,818 3,765,941 1,881,569
Income taxes
(benefit) 539,129 (486,746) 122,581 980,891 307,483
Cumulative effect
of change in
accounting for
income tax - - - - 281,400
Net income (loss) 1,958,352 (88,023) 979,237 2,785,050 1,855,486
Income (loss) per
common share 1.63 (.07) .76 2.18 1.53
Dividends per
common share .80 .80 .80 .80 .80
Property, plant
and equipment (net) 2,955,657 2,851,181 3,201,587 3,485,389 3,847,315
Depreciation 662,687 677,631 788,168 787,970 901,497
Current assets 28,500,783 23,624,962 17,660,662 11,888,722 11,662,651
Ratio current
assets to current
liabilities 3.62 to 1 2.80 to 1 3.48 to 1 6.36 to 1 4.19 to 1
Total assets 59,848,623 51,076,828 38,892,364 19,302,295 17,627,548
Long-term debt - - - - -
Redeemable
preferred stock
(solely at the
option of the
issuer) 66,060 66,060 66,060 66,335 66,335
Net unrealized
holding gain 27,983,826 21,977,823 12,765,774 - -
Total share-
holders' equity 43,948,759 36,105,488 29,338,281 16,743,814 14,375,138
Book value per
common share 35.04 29.72 22.84 12.95 11.41
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
effective January 1, 1994. The adoption of SFAS No. 115 resulted in an
increase in shareholders' equity of $12,765,774 at December 31, 1994. In
1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes," which
resulted in a cumulative effect of decreasing income taxes $281,400.
-5-
PART II
(Continued)
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 1996
Annual Report to Shareholders.
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.
Other information required by this item is set forth below:
Net Income (Loss)
Total Gross Net Per Common Share
Revenues Profit (Loss) Income (Loss) Outstanding
-------- ------------- ------------- -----------------
1996
----
First Quarter $ 4,330,872 (86,429) 127,695 .10
Second Quarter 4,080,935 629,670 678,607 .57
Third Quarter 4,356,254 439,089 359,581 .30
Fourth Quarter 4,319,408 340,365 792,469 .66
---------- --------- --------- -----
$17,087,469 1,322,695 1,958,352 1.63
========== ========= ========= =====
1995
----
First Quarter $ 4,316,619 (325,987) 85,644 .07
Second Quarter 4,647,245 (328,724) 8,457 .00
Third Quarter 4,410,432 (246,612) (41) .00
Fourth Quarter 4,737,854 (173,525) (182,083) (.14)
---------- --------- --------- -----
$18,112,150 (1,074,848) (88,023) (.07)
========== ========= ========= =====
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-6-
PART II
(Continued)
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 March 27, 1997, in connection with its
Annual Meeting to be held May 1, 1997.
-7-
PART III
(b) Identification of Executive Officers-
NAME AGE POSITION AND TIME IN OFFICE
Benjamin Gettler 71 President since November 1989;
Chairman of The Board since
June 1990; Director since 1960.
Vernon E. Bachman 59 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.
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by reference to
the Registrant's proxy statement dated March 27, 1997, in connection with its
annual meeting to be held May 1, 1997.
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 March 27, 1997, in connection with its
annual meeting to be held May 1, 1997.
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 March 27, 1997, in
connection with its Annual Meeting to be held May 1, 1997, which is
incorporated herein by reference.
-8-
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. 18
Consolidated Balance Sheets at December 31,
1996, and 1995. 19-20
Consolidated Statements of Income for Each
of the Three Years in the Period Ended
December 31, 1996. 21
Consolidated Statements of Shareholders'
Equity for Each of the Three Years in the
Period Ended December 31, 1996. 22-25
Consolidated Statements of Cash Flows for
Each of the Three Years in the Period
Ended December 31, 1996. 26
Notes to the Consolidated Financial
Statements for the Three Years Ended
December 31, 1996. 27-40
2. Financial Statement Schedule.
Independent Auditors' Report on Schedule. 55
Schedule II - Valuation and Qualifying Accounts. 56
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.
-9-
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 58
Balance Sheets at December 31, 1996 and 1995 59
Statements of Income for the years ended
December 31, 1996 and 1995 60
Statements of Partners' Capital for the years
ended December 31, 1996 and 1995 61
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 62
Notes to the financial statements for the years
ended December 31, 1996 and 1995 63-67
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 1996 Annual Report to
Shareholders 40
13. Registrant's 1996 Annual Report to Shareholders
is incorporated herein by reference. 11-40
20. Proxy Statement dated March 27, 1997, is
incorporated herein by reference. 44-53
21. Subsidiaries of the Registrant. 54
27. Financial Data Schedule
99.1 Independent Auditors' Report on Schedule 55
99.2 Valuation and Qualifying accounts 56
99.3 Vulcan-Brunswick Bowling Pin Company financial
statements 57-67
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended
December 31, 1996.
-10-
EXHIBIT 13
VULCAN INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1996
J.D. CLOUD & CO. P.L.L.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-11-
VULCAN INTERNATIONAL CORPORATION
Executive Officers
BENJAMIN GETTLER VERNON E BACHMAN
Chairman of the Board Vice President and
and President Secretary-Treasurer
Directors
BENJAMIN GETTLER
DENNIS J. BUCKLEY THOMAS D. GETTLER LEONARD ACONSKY
WILLIAM T. CRUTCHFIELD JAMES K. LEWIS STANLEY I. RAFALO, O.D.
VULCAN CORPORATION
(Operating Subsidiary)
Executive Officers
BENJAMIN GETTLER VERNON E. BACHMAN CONNIE F. ARMSTRONG
Chairman of the Board Vice President Secretary
and Controller
Operating Officers
VITO J. MANGIARACINA RICARDO M. DeFELICE
Vice President, Vice President,
Shoe Products Division Bowling Pin Sales Division
EDWARD A. RITTER
General Manager
Rubber Products Division
MICHAEL NEWTON CHARLES SMITH
General Manager Plant Manager,
Vulcan-Brunswick Bowling Pin Company Walnut Ridge, Arkansas
-12-
TO OUR SHAREHOLDERS:
The Company experienced a significant turn-around in 1996. Net income was
$1,958,352 compared to a loss of $88,023 in 1995. Net income per common share
outstanding was $1.63 compared to a loss of $.07 per share in 1995. These
results occurred despite a reduction in total revenues from $18,112,150 in
1995 to $17,087,469 in 1996.
The turn-around was the result of implementation of the decision made in early
1996 to discontinue the manufacture of civilian heels, soles and unit soles in
the Company's rubber division located in Clarksville, Tennessee. Those items
were being sold to domestic shoe manufacturers and shoe manufacturing in the
United States has declined precipitously as a result of foreign competition.
The discontinued items were more labor-intensive and, therefore, more
susceptible to that competition. Sales of discontinued items were
approximately $4 million in 1995. Development of new products and successful
sales efforts in remaining products substantially cushioned the sales volume
loss resulting from the downsizing. At the same time, cost reduction measures
resulted in cost savings substantially greater than the reduction in sales.
The Company's rubber division is now concentrating on the manufacture and sale
of rubber sheet stock and high density foam materials for the shoe industry,
as well as rubber products and rubber batch material for prime manufacturers
in various industries while also continuing to manufacture heels and soles for
military footwear. In 1996, the Company purchased a new machinery line for
the manufacture of high-density foam products and has been developing products
for that line. The Company's last and other plastic products, real estate and
other investments performed well in 1996. The Company's bowling pin division
showed a slight decline.
All of Vulcan's employees, particularly those at Clarksville, are to be
commended for making the extraordinary effort required to turn that plant
around and permit its continued operation.
BENJAMIN GETTLER
Chairman of the Board
and President
-13-
DESCRIPTION OF BUSINESS
Vulcan International Corporation 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:
SHOE PRODUCTS
Vulcan has two separate plants which manufacture components used by
manufacturers of footwear. One of those components is a shoe last. The shoe
last is the form over which shoes are manufactured and which determines the
shoe style, fit and shape. Demand for lasts varies according to the rapidity
in change of shoe fashion. Vulcan produces lasts in a 42,000 sq. ft. very
modern, well-equipped factory in Walnut Ridge, Arkansas.
Vulcan manufactures rubber components primarily for footwear manufacturers in
a 272,000 sq. ft. building located in Clarksville, Tennessee. Demand for
those products varies according to the volume of shoes manufactured in the
United States. That volume has declined precipitously since 1980 with the
result that less than 8% of non-rubber shoes sold in the United States were
manufactured in the U.S. in 1996. Approximately 40% of the products
manufactured at Clarksville in 1995 were heels, soles and unit soles for
civilian footwear manufacture. Effective April 1, 1996, the Company
discontinued the manufacture of those products. The Clarksville plant now
primarily manufactures rubber sheet stock and high density foam materials for
the shoe industry, as well as rubber products and rubber batch material for
prime manufacturers in various industries while also continuing to manufacture
heels and soles for military footwear.
BOWLING PINS
The Company is a 50% owner of a Joint Venture 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, as well as various private label names.
REAL ESTATE
On August 12, 1993, Vulcan purchased a majority interest in the upper seven
floors of the ten-story Cincinnati Club Building in downtown Cincinnati, Ohio,
and contracted to manage that space. Those floors contain approximately
60,000 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. Vulcan provided the financing for that company's purchase
of those three lower floors. 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 on the bottom of page 11 of this report.
-14-
MANAGEMENT ANALYSIS OF RECENT YEARS
1996 COMPARED TO 1995
- ---------------------
Sales of shoe products (including rubber products) decreased from $13,115,811
in 1995 to $12,104,816 in 1996. On April 1, 1996 the Company downsized its
rubber division by discontinuing the production of civilian heels and soles.
Those items were more labor intensive and, therefore, more susceptible to
foreign competition. The result of that decision was to reduce the workforce
in the rubber division from a high in 1995 of 256 to approximately 85 by the
end of 1996. During the year, the Company purchased a new machinery line for
the manufacture of foam products and has been developing products for that
line. Operating losses from sales (before taxes and interest) decreased from
$3,210,723 in 1995 to a loss of $30,498 in 1996. The reduction in losses was
a direct result of the downsizing of the rubber products division, the
elimination of all rubber heel and sole production except for military orders
and the cost reduction measures put into place after the downsizing.
Sales of the bowling pin segment of the business decreased from $3,117,971 in
1995 to $2,954,726 in 1996. As a result, operating profits from the bowling
pin sales and Vulcan's 50% interest in the Vulcan-Brunswick bowling pin
manufacturing joint venture decreased from $695,289 to $675,691 before taxes
and interest.
Gross gains on the sale or disposal of assets were $793,855 in 1996 compared
to $856,260 in 1995. In 1996 the gains were mainly from the sale of assets
from the rubber division after the downsizing and sale of timber from the
Company's Michigan timber tracts. In 1995 the gains were from the sale of the
Company's Blanchester, Ohio property, the continued sale of timber from the
Michigan timber tracts and the sale of marketable securities. Dividends and
interest income were $1,627,923 compared to $1,595,046 in 1995.
1995 COMPARED TO 1994
- ---------------------
Sales of shoe products (including rubber products) increased from $11,925,658
in 1994 to $13,115,811 in 1995. Operating loss from sales (before taxes and
interest) increased from $1,520,822 in 1994 to a loss of $3,210,723 in 1995 as
a direct result of the loss in the rubber products division. That increased
loss was caused by three factors: In 1995 there was an increase of
approximately 31% in the price of raw materials used in the manufacture of
rubber products; continued and increased foreign competition which was in
excess of 90% of the U.S. market in 1995 made it impossible to pass such cost
increases on to footwear manufacturing customers; and costs were incurred in
product development; however, the lag time between development and significant
sales of new products is between 12 and 24 months.
Sales of the bowling pin segment of the business decreased from $4,409,641 in
1994 to $3,117,971 in 1995. As a result, operating profits from the bowling
pin sales and Vulcan's 50% interest in the Joint Venture decreased from
$1,024,078 to $695,289 before taxes and interest.
Gross gains on the sale or disposal of assets and securities were $856,260
compared to $480,485. In 1995 the gains were from the sale of Blanchester,
Ohio property, the continued sale of timber from our Michigan timber tracts
and the sale of marketable securities. In 1994 the gains were from the sale
of timber and marketable securities. Dividends and interest income were
$1,595,046 compared to $1,523,410 in 1994.
-15-
1994 COMPARED TO 1993
- ---------------------
Sales of shoe products (including rubber products) continued its decline from
$14,925,488 in 1993 to $11,925,658 in 1994 primarily as a result of the
continued penetration of shoe imports. Operating profit from sales (before
taxes and interest) decreased from $699,988 in 1993 to a loss of $1,520,822 in
1994 as a direct result of loss of sales.
Sales of the bowling pin segment of the business increased from $3,934,359 to
$4,409,641. Operating profits from those bowling pin sales and Vulcan's 50%
interest in the Joint Venture increased from $829,663 to $1,024,078 before
taxes and interest. The cost of hard maple continued to remain firm and the
increased sales to foreign customers contributed to the Company's increased
profits.
Gross gains on the sale or disposal of assets and securities were $480,485
compared to $1,317,078 in 1993. In 1994 the gains were from the sale of
timber and marketable securities. In 1993 the gains were primarily from the
sale of a building in Springfield, Tennessee, timber and marketable
securities. Gross dividend and interest income were $1,523,410 compared to
$1,378,272 in 1993.
-16-
FINANCIAL POSITION, LIQUIDITY AND CAPITAL COMMITMENTS
The Company's cash requirements in 1996 were funded by short-term borrowings.
The Company expects to continue, when necessary, to utilize short-term
borrowing to meet cash requirements. Working capital increased $5,419,387
during the past year and inventories decreased $437,957. Capital expenditures
were $981,721 compared to total depreciation, and amortization of $677,621.
1996 1995
- ------------------------------------ ------------------------------------
Quarter High Low Dividend Quarter High Low Dividend
- ------- ---- --- -------- ------- ---- --- --------
1st 21 7/8 20 3/4 $.20 1st 20 3/8 17 1/4 $.20
2nd 25 1/2 21 1/8 $.20 2nd 20 3/8 19 1/2 $.20
3rd 26 1/8 24 5/8 $.20 3rd 21 3/8 19 7/8 $.20
4th 32 7/8 25 3/4 $.20 4th 21 3/4 21 1/8 $.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 1996 Vulcan International Corporation 10-K report filed with the
Securities and Exchange Commission will be furnished without charge upon a
shareholder's or beneficial owner as of the record date, March 17, 1997, 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
-17-
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, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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 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, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, the Company
has been advised that it is a potentially responsible party in certain
environmental matters. The amount of liability cannot be predicted at this
time.
/s/ J.D. CLOUD & CO. P.L.L.
Certified Public Accountants
Cincinnati, Ohio
February 15, 1997
-18-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31, 1996 and 1995
-ASSETS- 1996 1995
CURRENT ASSETS:
Cash $ 1,254,138 1,136,553
Marketable securities 23,981,345 18,423,949
Accounts receivable (less-allowance
for doubtful accounts-$282,847
in 1996; $221,952 in 1995) 2,490,485 2,767,804
Inventories 633,995 1,071,952
Prepaid expense 32,117 35,053
Refundable federal income tax 108,703 189,651
---------- ----------
TOTAL CURRENT ASSETS 28,500,783 23,624,962
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Land 88,581 88,581
Timberlands and timber cutting rights 716,993 716,993
Buildings and improvements 3,854,755 3,725,051
Machinery and equipment 10,699,288 14,702,233
Leasehold improvements 291,126 291,126
Construction-in-process 16,911 29,489
---------- ----------
Total 15,667,654 19,553,473
Less-Accumulated depreciation
and depletion 12,711,997 16,702,292
---------- ----------
PROPERTY, PLANT AND EQUIPMENT-NET 2,955,657 2,851,181
---------- ----------
MODELS AND PATTERNS-at nominal value 1 1
---------- ----------
INVESTMENT IN JOINT VENTURE 685,832 671,700
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Marketable securities 24,798,261 21,255,653
Note receivable 688,537 767,198
Other 2,219,552 1,906,133
---------- ----------
TOTAL DEFERRED CHARGES AND
OTHER ASSETS 27,706,350 23,928,984
---------- ----------
TOTAL ASSETS $59,848,623 51,076,828
========== ==========
-19-
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Notes payable-bank $ - 2,175,000
Accounts payable-
Trade 164,414 570,809
Other 230,515 32,965
Accrued salaries, wages and commissions 193,533 389,462
Accrued other expenses 540,316 453,432
Deferred income tax 6,736,265 4,786,941
---------- ----------
TOTAL CURRENT LIABILITIES 7,865,043 8,408,609
---------- ----------
OTHER LIABILITIES:
Deferred income tax 7,973,105 6,503,731
Other 24,109 23,609
---------- ----------
TOTAL OTHER LIABILITIES 7,997,214 6,527,340
---------- ----------
COMMITMENTS AND CONTINGENCIES (See Note 8)
MINORITY INTEREST IN PARTNERSHIP 37,607 35,391
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock-
$3.00 Prior Preferred-stated value
$100.00 per share,
Authorized 294 shares
Outstanding 280 shares 28,000 28,000
$4.50 Cumulative Preferred-stated value
$55.00 per share, redemption or
liquidation value $100.00 per share,
Authorized 720 shares
Outstanding 692 shares 38,060 38,060
Common-no par value,
Authorized 2,000,000 shares
Issued 1,999,512 shares 249,939 249,939
Additional paid-in capital 5,619,993 4,283,961
Retained earnings 23,782,656 22,796,484
Net unrealized holding gain 27,983,826 21,977,823
---------- ----------
57,702,474 49,374,267
Less-Common stock in treasury-at cost,
745,168 shares in 1996 and
784,640 shares in 1995 13,753,715 13,268,779
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 43,948,759 36,105,488
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $59,848,623 51,076,828
========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-20-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three years ended December 31, 1996
1996 1995 1994
REVENUES:
Net sales $15,459,546 16,517,104 16,607,802
Dividends and interest 1,627,923 1,595,046 1,523,410
---------- ---------- ----------
TOTAL REVENUES 17,087,469 18,112,150 18,131,212
---------- ---------- ----------
COST AND EXPENSES:
Cost of sales 14,136,851 17,591,952 15,770,356
General and administrative 1,775,703 2,525,261 2,265,883
Interest expense 130,711 110,081 79,921
---------- ---------- ----------
TOTAL COST AND EXPENSES 16,043,265 20,227,294 18,116,160
---------- ---------- ----------
EQUITY IN JOINT VENTURE INCOME 664,133 686,451 608,415
MINORITY INTEREST IN (INCOME)
OF PARTNERSHIP (4,711) (2,336) (2,134)
---------- ---------- ----------
INCOME (LOSS)-BEFORE GAIN ON
DISPOSAL OF ASSETS 1,703,626 (1,431,029) 621,333
---------- ---------- ----------
REALIZED GAIN ON SALE OF
MARKETABLE SECURITIES - 135,405 176,586
NET GAIN ON DISPOSAL OF PROPERTY
AND EQUIPMENT 793,855 720,855 303,899
---------- ---------- ----------
GAIN ON DISPOSAL OF ASSETS 793,855 856,260 480,485
---------- ---------- ----------
INCOME (LOSS)-BEFORE
INCOME TAXES 2,497,481 (574,769) 1,101,818
INCOME TAX PROVISION (BENEFIT) 539,129 (486,746) 122,581
---------- ---------- ----------
NET INCOME (LOSS) $ 1,958,352 (88,023) 979,237
========== ========== ==========
Net Income (Loss) Per Common
Share Outstanding $ 1.63 (.07) .76
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-21-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three years ended December 31, 1996
$3.00 Prior $4.50 Cumulative
Preferred Shares Preferred Shares Common
Outstanding Outstanding Stock
--------------- --------------- -------
Shares Amount Shares Amount
Balance at January 1, 1994 280 $28,000 697 38,335 249,939
Add-Net income for the year
Cumulative effect of
change in accounting
for marketable securities
Change in net unrealized
holding gain, net of tax
Sale of treasury shares
--- ------ --- ------ -------
280 28,000 697 38,335 249,939
Deduct-Dividends declared:
$3.00 per share-preferred
$4.50 per share-preferred
$ .80 per share-common
Purchase of treasury shares
Redemption of preferred
shares (5) (275)
--- ------ --- ------ -------
Balance at December 31, 1994 280 28,000 692 38,060 249,939
Add-Change in net unrealized
holding gain, net of tax
Sale of treasury shares
--- ------ --- ------ -------
280 28,000 692 38,060 249,939
Deduct-Net loss for the year
Dividends declared:
$3.00 per share-preferred
$4.50 per share-preferred
$ .80 per share-common
Purchase of treasury shares
--- ------ --- ------ -------
Balance at December 31, 1995 280 28,000 692 38,060 249,939
Add-Net income for the year
Change in net unrealized
holding gain, net of tax
Sale of treasury shares
--- ------ --- ------ -------
280 28,000 692 38,060 249,939
-22-
Deduct-Dividends declared:
$3.00 per share-preferred
$4.50 per share-preferred
$ .80 per share-common
Purchase of treasury shares
--- ------ --- ------ -------
Balance at December 31, 1996 280 $28,000 692 38,060 249,939
=== ====== === ====== =======
Additional
Paid-In Retained Net Unrealized
Capital Earnings Holding Gain
---------- -------- --------------
Balance at January 1, 1994 4,242,981 23,930,424
Add-Net income for the year 979,237
Cumulative effect of
change in accounting
for marketable securities 16,502,269
Change in net unrealized
holding gain, net of tax (3,736,495)
Sale of treasury shares 3,900
--------- ---------- ----------
4,246,881 24,909,661 12,765,774
Deduct-Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,131
$ .80 per share-common 1,025,220
Purchase of treasury shares
Redemption of preferred
shares (45)
--------- ---------- ----------
Balance at December 31, 1994 4,246,836 23,880,470 12,765,774
Add-Change in net unrealized
holding gain, net of tax 9,212,049
Sale of treasury shares 37,125
--------- ---------- ----------
4,283,961 23,880,470 21,977,823
Deduct-Net loss for the year 88,023
Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,114
$ .80 per share-common 992,009
Purchase of treasury shares
--------- ---------- ----------
Balance at December 31, 1995 4,283,961 22,796,484 21,977,823
Add-Net income for the year 1,958,352
Change in net unrealized
holding gain, net of tax 6,006,003
Sale of treasury shares 1,336,032
--------- ---------- ----------
5,619,993 24,754,836 27,983,826
-23-
Deduct-Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,114
$ .80 per share-common 968,226
Purchase of treasury shares
--------- ---------- ----------
Balance at December 31, 1996 5,619,993 23,782,656 27,983,826
========= ========== ==========
Total
Common Shareholders'
Treasury Shares Equity
-------------------- ------------
Shares Amount
Balance at January 1, 1994 711,966 11,745,865 16,743,814
Add-Net income for the year 979,237
Cumulative effect of
change in accounting
for marketable securities 16,502,269
Change in net unrealized
holding gain, net of tax (3,736,495)
Sale of treasury shares (300) (1,500) 5,400
------- ---------- ----------
711,666 11,744,365 30,494,225
Deduct-Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,130
$ .80 per share-common 1,025,220
Purchase of treasury shares 6,028 126,433 126,433
Redemption of preferred
shares 320
------- ---------- ----------
Balance at December 31, 1994 717,694 11,870,798 29,338,281
Add-Change in net unrealized
holding gain, net of tax 9,212,049
Sale of treasury shares (3,000) (15,000) 52,125
------- ---------- ----------
714,694 11,855,798 38,602,455
Deduct-Net loss for the year 88,023
Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,114
$ .80 per share-common 992,009
Purchase of treasury shares 69,946 1,412,981 1,412,981
------- ---------- ----------
Balance at December 31, 1995 784,640 13,268,779 36,105,488
Add-Net income for the year 1,958,352
Change in net unrealized
holding gain, net of tax 6,006,003
Sale of treasury shares (75,000) (325,092) 1,661,124
------- ---------- ----------
709,640 12,943,687 45,730,967
-24-
Deduct-Dividends declared:
$3.00 per share-preferred 840
$4.50 per share-preferred 3,114
$ .80 per share-common 968,226
Purchase of treasury shares 35,528 810,028 810,028
------- ---------- ----------
Balance at December 31, 1996 745,168 13,753,715 43,948,759
======= ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-25-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three years ended December 31, 1996
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 15,652,624 16,031,277 16,824,484
Cash paid to suppliers and employees (15,095,554) (18,173,744) (18,311,533)
Dividends and interest received 1,628,811 1,594,657 1,486,973
Interest paid (142,349) (104,101) (76,015)
Income tax refunds 194,199 - -
Income taxes paid (330,014) (7,802) (235,000)
---------- ---------- ----------
NET CASH FLOWS FROM
OPERATING ACTIVITIES 1,907,717 (659,713) (311,091)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable
securities - 326,293 1,011,627
Proceeds from sale of property
and equipment 992,533 802,983 305,967
Advances on notes receivable - (54,671) -
Purchase of marketable securities - (9,508) (16,228)
Purchase of property, plant and
equipment (981,721) (410,143) (565,884)
Distribution from joint venture 650,000 1,575,000 475,000
Collection on notes receivable 72,014 58,304 45,217
---------- ---------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES 732,826 2,288,258 1,255,699
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements 1,195,000 2,625,000 2,060,000
Principal payments under credit
agreements (3,370,000) (1,835,000) (1,675,000)
Proceeds from sale of treasury shares 1,434,250 - -
Purchase of common and preferred shares (810,028) (1,412,981) (126,753)
Cash dividends paid (972,180) (995,963) (1,029,190)
---------- ---------- ----------
NET CASH FLOWS FROM
FINANCING ACTIVITIES (2,522,958) (1,618,944) (770,943)
---------- ---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 117,585 9,601 173,665
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,136,553 1,126,952 953,287
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,254,138 1,136,553 1,126,952
========== ========== ==========
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 1,958,352 (88,023) 979,237
Adjustments:
Depreciation and amortization 677,621 694,790 812,575
Deferred income tax 324,697 (423,103) (63,426)
Equity in joint venture income and
minority interest (661,917) (684,115) (606,281)
Gain on sale of marketable securities - (135,405) (176,586)
Gain on sale of property and equipment (793,855) (720,855) (303,899)
Dividend reinvestments - - (30,467)
Stock compensation programs 226,875 52,125 5,400
(Increase) decrease in accounts
receivable 283,966 (431,848) 324,860
(Increase) decrease in inventories 437,957 1,043,737 (1,133,815)
Increase (decrease) in accounts
payable, accrued expenses and other (545,979) 32,984 (118,689)
---------- ---------- ----------
NET CASH FLOWS FROM
OPERATING ACTIVITIES $ 1,907,717 (659,713) (311,091)
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-26-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
It is the policy of the Company to employ 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 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.
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.
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. Lease obligations
transferring substantially all of the benefits and risks incident to the
ownership of property are considered capital leases and are accounted for as
the acquisition of an asset and the incurrence of a long-term obligation. All
other leases are accounted for as operating leases.
-27-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROPERTY, PLANT AND EQUIPMENT- (Continued)
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.
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 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.
INCOME TAXES-
Income tax expense (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, prepaid pension expense and
unrealized holding gains on marketable securities. Tax credits are recognized
by a reduction of income tax expense in the periods the credits arise for tax
purposes.
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.
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.
-28-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 (loss) 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.
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
1996
Current $ 3,756,586 20,224,759 23,981,345
Long-term 2,623,283 22,174,978 24,798,261
--------- ---------- ----------
$ 6,379,869 42,399,737 48,779,606
========= ========== ==========
1995
Current $ 3,756,586 14,667,363 18,423,949
Long-term 2,623,283 18,632,370 21,255,653
--------- ---------- ----------
Total $ 6,379,869 33,299,733 39,679,602
========= ========== ==========
The unrealized holding gains are included, net of deferred income tax, as a
component of shareholders' equity.
1996 1995
Realized gains on available-for-sale securities $ - 135,405
Gross proceeds on available-for-sale securities - 326,293
As of February 15, 1997, the fair value of marketable securities was
approximately $56,113,000 and the net unrealized holding gain was
approximately $32,824,000 net of deferred taxes of approximately $16,909,000.
-29-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 2 - MARKETABLE SECURITIES (Continued)
In 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". The cumulative effect of this change is
included in shareholders' equity at January 1, 1994.
NOTE 3 - INVENTORIES
Inventories at December 31, 1996 and 1995, were classified as follows:
December 31,
1996 1995
------------------------
Finished goods $203,394 498,630
Work in process 131,054 213,496
Raw materials 299,547 359,826
------- ---------
Total $633,995 1,071,952
======= =========
As indicated in Note 1, substantially all inventories are stated at cost
determined under the LIFO method. If valued at current replacement cost,
inventories would have been approximately $1,290,000 and $2,211,000 greater
than reported at December 31, 1996 and 1995, respectively.
In each of the years ended December 31, 1996 and 1995, 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 1996 and
1995 net income by approximately $431,000 and $28,000, respectively, or $.36
and $.02 per common share outstanding, respectively.
NOTE 4 - JOINT VENTURE
In June 1990 the Company acquired 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.
-30-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 4 - JOINT VENTURE (Continued)
Summarized financial information for VBBPC consists of the following:
December 31,
1996 1995
----------------------
Assets:
Current assets $ 2,365,653 1,648,167
Fixed assets 4,394,803 5,112,548
Other 3,296,100 3,380,399
---------- ----------
Total $10,056,556 10,141,114
========== ==========
Liabilities and Partners' Capital:
Current liabilities $ 468,706 477,634
Partners' capital 9,587,850 9,663,480
---------- ----------
Total $10,056,556 10,141,114
========== ==========
Statements of Operations Period ended December 31,
------------------------------------
1996 1995 1994
Net sales $13,373,665 15,611,634 14,244,561
Costs and expenses 12,162,770 13,870,734 13,394,648
Other income (expenses) 13,475 30,316 (17,661)
---------- ---------- ----------
Net income $ 1,224,370 1,771,216 832,252
========== ========== ==========
Company's equity in net
income of VBBPC $ 612,185 885,608 416,126
Adjustments 51,948 (199,157) 192,289
---------- ---------- ----------
Company's equity in net
income $ 664,133 686,451 608,415
========== ========== ==========
The Company's investment in the Joint Venture including accumulated income,
less distributions, since acquisition at December 31, 1996, is $685,832. The
Company's 50% interest in the net assets of VBBPC amounted to $5,028,278 at
December 31, 1996. Included in the Company's retained earnings at December
31, 1996, is $413,000 of undistributed earnings from the Joint Venture. 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,
1996 or 1995. 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.
-31-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 4 - JOINT VENTURE (Continued)
Transactions between VBBPC and the Company consist of the following at
December 31:
1996 1995 1994
Sales to VBBPC $ 315,000 427,000 346,000
Purchases from VBBPC 2,851,000 2,921,000 3,677,000
Administrative fees received
from VBBPC 30,000 30,000 30,000
Net amount due from (to)
VBBPC (197,000) 67,000 (33,000)
Distributions from VBBPC 650,000 1,575,000 475,000
NOTE 5 - NOTES PAYABLE
The Company maintains a revolving credit agreement with its bank that provides
for borrowings of up to $4,500,000 through August 1, 1997. Interest is
payable monthly at the federal funds rate plus 1.75%. Borrowings under the
agreement are secured by certain marketable equity securities. At December
31, 1995, borrowings under the agreement amounted to $2,175,000. There were no
borrowings, under the agreement, at December 31, 1996. The weighted average
interest rate was 7.16% and 7.65% for the respective years ended December 31,
1996 and 1995. Marketable securities pledged as collateral under the agreement
had a market value of approximately $19,255,000 at December 31, 1996.
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 - LEASES
The Company leases office space to various tenants under operating leases
expiring from 1997 to 2000. The company's basis in the property held for
lease at December 31, 1996 and 1995 is as follows:
1996 1995
Land $ 37,803 37,803
Building and improvements 483,772 384,841
------- -------
521,575 422,644
Less accumulated depreciation 74,372 36,623
------- -------
$447,203 386,021
======= =======
-32-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 6 - LEASES (Continued)
Minimum future rental income under noncancelable leases as of December 31,
1996, are as follows:
Year ending December 31,
1997 $374,000
1998 313,000
1999 226,000
2000 172,000
The Company incurred rental expense under operating leases for the years ended
December 31, 1996, 1995, and 1994 of approximately $12,000, $12,000 and
$18,000, respectively.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan for
certain eligible salaried and hourly employees. The net pension credit
recognized in the accompanying consolidated statements of income for the three
years ended December 31, 1996, consisted of:
1996 1995 1994
Service cost $ 57,536 81,209 83,694
Interest cost 487,918 468,549 449,436
Return on plan assets:
Actual (1,241,275) (2,094,418) 411,510
Deferred 424,972 1,416,777 (1,147,264)
Amortization of prior
service cost 90,715 90,715 90,715
Amortization of deferred gain - - (17,935)
Amortization of net
transition asset (131,001) (131,001) (131,001)
--------- --------- ---------
Net pension credit $ (311,135) (168,169) (260,845)
========= ========= =========
-33-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 7 - EMPLOYEE BENEFIT PLANS (Continued)
The funded status of the plan and amounts reported in the accompanying
consolidated balance sheets at December 31, 1996 and 1995 are summarized as
follows:
1996 1995
Actuarial present value of
benefit obligations:
Vested $ 7,591,908 6,975,320
Nonvested 14,533 15,676
---------- ----------
Accumulated benefit obligation $ 7,606,441 6,990,996
========== ==========
Projected benefit obligation $(7,854,252) (7,594,690)
Fair market value of plan assets 11,247,429 10,401,416
Excess of plan assets over
projected benefit obligation 3,393,177 2,806,726
Unrecognized prior service cost 482,125 572,840
Unrecognized net gain from actual
experience different from that assumed (1,093,716) (778,114)
Unrecognized net transition asset (655,002) (786,003)
---------- ----------
Prepaid pension expense $ 2,126,584 1,815,449
========== ==========
Significant actuarial assumptions used in the above computations include the
following:
1996 1995
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 4.5% 4.5%
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 union sponsored multi-employer pension plans amounted
to $12,000 in 1996, $13,400 in 1995 and $12,900 in 1994. The Company's
relative position and undertaking in regard to these plans is not readily
determinable. Company contributions to its defined contribution plan were
$24,200 in 1996, $39,900 in 1995 and $33,700 in 1994.
-34-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 7 - EMPLOYEE BENEFIT PLANS (Continued)
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 1993, the Company's Stock Option Committee granted options, under the plan,
to purchase not more than 50,000 shares of treasury stock at $19.75 per share.
There were 46,000 options outstanding which were exercised in 1996. In 1995,
the Company's Stock Option Committee granted options, under the plan, to
purchase not more than 25,000 shares of treasury stock at $20 per share.
During 1996, all of the outstanding stock options were exercised. The Company
recognized approximately $162,000 additional compensation expense related to
the exercise of the options.
Additional information relating to the option plan is as follows:
Year ended December 31,
1996 1995
Options outstanding January 1 71,000 46,000
Options granted - 25,000
Options exercised 71,000 -
Options expired - -
------ ------
Options outstanding at December 31 - 71,000
====== ======
Additionally, in 1995, the Company's Board of Directors adopted a resolution
making treasury shares available for purchase by the directors at the closing
market price 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.
NOTE 8 - CONTINGENCIES
The Company has been advised that it is a potentially responsible party,
together with 18 other parties, with regard to the Resolve, Inc. Superfund
Site, located in North Dartmouth, Massachusetts with potential joint and
several liability of $5.7 million. The Company is contesting any liability
for this site. The Company's liability cannot be estimated at this time.
There may be other potential clean-up liability at other sites of which the
Company has no specific knowledge.
-35-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 8 - CONTINGENCIES (Continued)
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.
NOTE 9 - REDEEMABLE PREFERRED STOCK
Upon liquidation or redemption, the holders of the $4.50 Cumulative Preferred
stock are entitled to receive $100.00 per share together with all unpaid
cumulative dividends in lieu of the stated value of $55.00 per share.
Redemption of this stock as well as the $3.00 Prior Preferred is not mandatory
and, therefore, is redeemable solely at the Company's option he aggregate of
the preference upon liquidation or redemption in excess of stated value
amounted to approximately $31,000 at December 31, 1996 and 1995.
NOTE 10 - 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.
Significant components of the Company's deferred tax liabilities and assets as
of December 31 are as follows:
1996 1995
Deferred tax liabilities:
Tax over book depreciation $ 174,717 293,934
Prepaid pension expense 749,158 641,466
Undistributed earnings of
domestic subsidiary 146,400 114,107
Unrealized holdings gains 14,415,910 11,321,909
---------- ----------
Total deferred tax liabilities 15,486,185 12,371,416
---------- ----------
Deferred tax assets:
Vacation accruals 47,855 85,175
Allowance for doubtful accounts 87,957 67,253
Accrued and deferred state income taxes 4,341 25,226
Contributions carryforward - 36,005
Alternative minimum tax
credit carryforward 636,662 867,085
---------- ----------
Total deferred tax assets 776,815 1,080,744
---------- ----------
Net deferred tax liabilities $14,709,370 11,290,672
========== ==========
-36-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 10 - INCOME TAXES (Continued)
Significant components of the income tax provision (benefit) are as follows:
1996 1995 1994
Current $214,432 (63,643) 186,007
Deferred 324,697 (423,103) (63,426)
------- -------- -------
$539,129 (486,746) 122,581
======= ======== =======
A reconciliation of income tax at the federal statutory rate of 34% to the
income tax provision (benefit) follows:
1996 1995 1994
Income taxes (benefit) at federal
statutory rate $ 849,143 (195,421) 374,618
Increase (reduction) in taxes
resulting from:
Domestic corporation
dividend received deduction (362,893) (356,567) (262,038)
Amortization 16,386 16,386 16,386
Other-net 36,493 48,856 (6,385)
------- ------- -------
Income tax provision (benefit) $ 539,129 (486,746) 122,581
======= ======= =======
NOTE 11 - FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, notes receivable with
interest rates similar to rates offered on other instruments with similar
maturities and terms, and current liabilities approximate fair value. The
fair value of marketable securities was determined based on quoted market
prices.
Financial instruments which potentially subject the Company to concentrations
of credit risk are cash investments and a note receivable. The Company places
its cash investments with high-credit-quality financial institutions. The
note receivable is secured by a mortgage on certain real estate in Cincinnati,
Ohio. The Company believes no significant concentration of credit risk exists
with respect to these financial instruments.
-37-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 12 - BUSINESS SEGMENTS
The Company operates principally in two industries, Shoe Products and Bowling
Pins. The operations in the Shoe Products Division involve the production of
shoe heels, soles and lasts for the shoe industry and other rubber products.
Total revenue by industry 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 $1,899,000 in 1996. 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 gains or losses realized on the disposal of
property and equipment and the sale of marketable securities.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry. Corporate assets consist principally
of cash, marketable securities and notes receivable. To reconcile industry
information with consolidated amounts, intersegment sales of $136,100 in 1996,
$40,200 in 1995 and $56,700 in 1994 have been eliminated.
More than ten percent of aggregate revenues of the segments were derived each
year from certain customers. The shoe products segment had sales to a single
customer amounting to $3,492,000 in 1996, $2,223,000 in 1995 and $1,448,000 in
1994. The bowling pin segment had sales to a single customer amounting to
$748,000 in 1996, $823,000 in 1995 and $808,000 in 1994.
-38-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 12 - BUSINESS SEGMENTS (Continued)
Information relative to the two major segments of the Company's operations
follows:
1996 1995 1994
SALES TO UNAFFILIATED CUSTOMERS:
Shoe Products Segment $12,104,816 13,115,811 11,925,658
Bowling Pins Segment 2,954,726 3,117,971 4,409,641
Other 400,004 283,322 272,503
---------- ---------- ----------
$15,459,546 16,517,104 16,607,802
========== ========== ==========
INTERSEGMENT SALES:
Shoe Products Segment $ 136,100 40,200 56,700
========== ========== ==========
OPERATING PROFIT (LOSS):
Shoe Products Segment $ (30,498) (3,210,723) (1,520,822)
Bowling Pins Segment 675,691 695,289 1,024,078
---------- ---------- ----------
645,193 (2,515,434) (496,744)
GENERAL CORPORATE INCOME 1,982,999 2,050,746 1,678,483
INTEREST EXPENSE (130,711) (110,081) (79,921)
---------- ---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES 2,497,481 (574,769) 1,101,818
INCOME TAX PROVISION (BENEFIT) 539,129 (486,746) 122,581
---------- ---------- ----------
NET INCOME (LOSS) $ 1,958,352 (88,023) 979,237
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Shoe Products Segment $ 583,292 621,094 742,922
Bowling Pins Segment 2,600 10,609 18,182
Corporate and Other 91,729 63,087 51,471
---------- ---------- ----------
$ 677,621 694,790 812,575
========== ========== ==========
IDENTIFIABLE ASSETS:
Shoe Products Segment $ 6,448,636 6,781,369 7,626,211
Bowling Pins Segment 1,584,317 1,553,993 2,598,509
Corporate Assets 51,815,670 42,741,466 28,667,644
---------- ---------- ----------
TOTAL ASSETS $59,848,623 51,076,828 38,892,364
========== ========== ==========
CAPITAL EXPENDITURES:
Shoe Products Segment $ 806,822 231,017 424,934
Bowling Pins Segment $ - - -
========== ========== ==========
-39-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 1996
(Continued)
NOTE 13 - COMPUTATION OF NET INCOME (LOSS) AND CASH DIVIDENDS
PER COMMON SHARE OUTSTANDING:
1996 1995 1994
a) Net income (loss) $1,958,352 (88,023) 979,237
b) Dividends on preferred shares 3,954 3,954 3,971
--------- --------- ---------
c) Net income (loss) attributable to
common shares $1,954,398 (91,977) 975,266
========= ========= =========
d) Dividends on common shares $ 968,226 992,009 1,025,220
========= ========= =========
Weighted average shares:
e) Common shares issued 1,999,512 1,999,512 1,999,512
f) Common treasury shares 799,642 756,928 717,561
--------- --------- ---------
g) Common shares outstanding 1,199,870 1,242,584 1,281,951
========= ========= =========
h) Income (loss) per common share
outstanding c/g $ 1.63 (.07) .76
========= ========= =========
i) Dividends paid per common share $ .80 .80 .80
========= ========= =========
-40-
VULCAN INTERNATIONAL CORPORATION
Five-Year Record
Selected Financial Data
1996 1995 1994 1993 1992
Net revenue $17,087,469 18,112,150 18,131,212 20,238,119 21,418,889
Income (loss)
before taxes 2,497,481 (574,769) 1,101,818 3,765,941 1,881,569
Income taxes
(benefit) 539,129 (486,746) 122,581 980,891 307,483
Cumulative effect of
change in accounting
income tax - - - - 281,400 (1)
Net income (loss) 1,958,352 (88,023) 979,237 2,785,050 1,855,486
Income (loss) per
common share 1.63 (.07) .76 2.18 1.53
Dividends per
common share .80 .80 .80 .80 .80
Property, plant and
equipment (net) 2,955,657 2,851,181 3,201,587 3,485,389 3,847,315
Depreciation 662,687 677,631 788,168 787,970 901,497
Current assets 28,500,783 23,624,962 17,660,662 11,888,722 11,662,651
Ratio current assets
to current
liabilities 3.62 to 1 2.80 to 1 3.48 to 1 6.36 to 1 4.19 to 1
Total assets 59,848,623 51,076,828 38,892,364 19,302,295 17,627,548
Long-term debt - - - - -
Redeemable preferred
stock (solely at the
option of the issuer) 66,060 66,060 66,060 66,335 66,335
Net unrealized
holding gain 27,983,826 21,977,823 12,765,774 (2) - -
Total shareholders'
equity 43,948,759 36,105,488 29,338,281 16,743,814 14,375,138
Book value per
common share 35.04 29.72 22.84 12.95 11.41
(1) Due to adoption of FAS No. 109
(2) Due to adoption of FAS No. 115
Selected Quarterly Financial Data
Net Income
(Loss) Per
Total Gross Net Common Share
Revenues Profit (Loss) Income (Loss) Outstanding
-------- ------------- ------------- -----------
1996
- ----
First Quarter $ 4,330,872 (86,429) 127,695 .10
Second Quarter 4,080,935 629,670 678,607 .57
Third Quarter 4,356,254 439,089 359,581 .30
Fourth Quarter 4,319,408 340,365 792,469 .66
---------- --------- --------- ----
$17,087,469 1,322,695 1,958,352 1.63
========== ========= ========= ====
1995
- ----
First Quarter $ 4,316,619 (325,987) 85,644 .07
Second Quarter 4,647,245 (328,724) 8,457 .00
Third Quarter 4,410,432 (246,612) (41) .00
Fourth Quarter 4,737,854 (173,525) (182,083) (.14)
---------- --------- --------- ----
$18,112,150 (1,074,848) (88,023) (.07)
========== ========= ========= ====
-41-
IN MEMORY
Dr. S. Sumner Rockwern
1910 - 1997
Dr. S. Sumner Rockwern, a long-time member of the Board of Directors of Vulcan
International Corporation, died on February 16, 1997 at the age of 86. Dr.
Rockwern served continuously on the Board of Directors since 1967 and on the
Executive Committee of the Board since 1974. In addition to his business and
investment interests, Dr. Rockwern was a highly respected physician in
Cincinnati for many years. Dr. Rockwern was a valued, respected, contributing
director for his entire thirty years of service to the Company. He will be
missed.
-42-
VULCAN INTERNATIONAL CORPORATION
Executive Office
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801
VULCAN CORPORATION
Office and Manufacturing Plan Accounting Offices
1151 College Street 30 Garfield Place
Clarksville, Tennessee Cincinnati, Ohio 45202
OTHER MANUFACTURING PLANTS
Antigo, Wisconsin
Walnut Ridge, Arkansas
SALES OFFICES
Blanchester, Ohio Cincinnati, Ohio Clarksville, Tennessee
Walnut Ridge, Arkansas
STOCK TRANSFER AND REGISTRAR
Chase Mellon
Shareholders Services
AUDITORS
J.D. Cloud & Co. P.L.L.
Cincinnati, Ohio
-43-
Exhibit 20
PROXY STATEMENT
VULCAN INTERNATIONAL CORPORATION
300 Delaware Avenue
Wilmington, Delaware 19801
Notice of Annual Meeting of Shareholders
To Be Held May 1, 1997
The Annual Meeting of Shareholders of Vulcan International Corporation will be
held at the Metropolitan Club, Salon 2, 19th Floor, 50 East RiverCenter
Boulevard, Covington, Kentucky on Thursday, May 1, 1997 at 1:45 p.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 March 17 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
March 27, 1997 VERNON E. BACHMAN, SECRETARY
PLEASE READ THE PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND RETURN
THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. YOU CAN SPARE
YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY RETURNING YOUR PROXY
CARD PROMPTLY.
-44-
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 March 17, 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company, as of March 17, 1997 had outstanding 1,254,344 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 March 17, 1997.
-45-
HOLDERS OF 5% OR MORE
Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial Ownership
- ------------------------------------------------------------------------------
Dimensional Fund
Advisors, Inc. Directly Owned: 43,948
1299 Ocean Avenue Indirectly Owned: 23,851 (1)
Santa Monica, CA 90401 Total Owned: 67,799 5.4%
(2) Benjamin Gettler Directly Owned: 331,915
9200 Old Indian Hill Rd. Indirectly Owned: 10,449
Cincinnati, OH 45243 Total Owned: 342,364 27.3%
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 (8) as of March 17, 1997 is set forth
below:
Amount and Nature of Beneficial Ownership Percent of Class
-----------------------------------------------------------------------------
Directly Owned: 421,843
Indirectly Owned: 33,602
Total Owned: 455,445 36.3%
The share ownership of each of the directors and nominees is set forth below
under the heading Election of Directors.
_______________
(1) Owned by advisory clients with respect to which Dimensional Fund
Advisors, Inc. advises that it has shared voting power.
(2) Does not include 17,051 common shares held by Stanley I. Rafalo as a
Trustee of various trusts for the benefit of persons related to Benjamin
Gettler. If those shares were included, the total shares directly and
indirectly owned would be 359,415 which is 28.7% of the common shares of
the Company.
____________________________________________________________________________
ELECTION OF DIRECTORS
The shares represented by the proxies will be voted for the election of the
seven (7) 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 1997. The following information is given with respect to the seven (7)
nominees based upon the records of the Company and information furnished by
each nominee as of March 17, 1997.
-46-
NOMINEES
Number of
First Shares Owned
Became Directly or Percent
Name and Principal Occupation Age Director In Indirectly (1) Owned
____________________________________________________________________________
Leonard Aconsky 66 l993 4,800 (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
Dennis J. Buckley 48 1991 90 (2)
General Counsel, Vulcan
International Corporation and
Subsidiaries
William T. Crutchfield 73 1963 59,097 4.7
Retired Vice President
Thomson McKinnon Securities, Inc.
Investment Services
Benjamin Gettler (3) 71 1960 342,364 27.3
Chairman of the Board and
President
Vulcan International Corporation
and its operating subsidiary
company, Vulcan Corporation
Thomas D. Gettler, Esq. (3) 38 1992 14,783 1.2
Attorney
James K. Lewis 71 1978 5,149 (2)
Retired Executive Vice President
The Central Trust Company, N.A.
Banking
Stanley I. Rafalo, O.D. (3) 72 1975 34,052 2.7
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 as owned directly by Stanley I. Rafalo
includes 17,051 shares of common capital stock of the Company held by him as a
trustee of various trusts for the benefit of persons related to Benjamin
Gettler, including 5,000 as trustee for Thomas D. Gettler.
-47-
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 1996, to the Chief Executive Officer and for each person who
was an executive officer and whose compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------------------- ------------
Other All other
Annual Compen-
Name and Year Salary($) Bonus(1) Compen- Options/ sation (5)
Principal Position sation ($) SARs (#) ($)
- ------------------------------------------------------------------------------------
Benjamin Gettler
Chairman of the Board
and President 1996 225,000 64,500 0 0 (2) 12,000
1995 225,000 64,500 0 71,000 (3) 12,000
1994 225,000 52,125 0 46,000 (4) 12,000
________
(1) A cash bonus of $64,500 was paid to Mr. Gettler in 1996. No cash bonus
was paid in 1994 or 1995. The amounts shown for 1995 and 1994 represent the
value of 3,000 shares of Vulcan common stock given in each of those years in
lieu of a cash bonus.
(2) Mr. Gettler exercised options on 71,000 shares during the year. There
were no options or shares outstanding at the end of 1996.
(3) Mr. Gettler did not exercise any options in 1995. At the end of 1995,
there were options on 46,000 shares outstanding at a price of $19.75 and
options for 25,000 shares outstanding at a price of $20.00 per share.
(4) Mr. Gettler did not exercise any options in 1994. At the end of 1994,
there were options on 46,000 shares outstanding at a price of $19.75 per
share.
(5) Director and Executive Committee Fees.
-48-
STOCK OPTION PLAN
The Vulcan International Corporation Stock Option Plan (the "Plan") was
adopted by the Board of Directors of the Company at its September 5, 1991
meeting. The purpose of the Plan is to provide additional incentives in order
that the Company may retain key personnel. The plan provides for the granting
of options to purchase totaling not more than 300,000 shares of common stock
from the Company's treasury shares of which 177,000 have not previously been
granted. The Plan is administered by a Stock Option Committee consisting of
not less than three (3) Directors of the Corporation who are not eligible to
receive options under the Plan. The current Committee consists of Directors
Crutchfield, Rafalo and Aconsky. The Committee determines the key employees
to whom the options are granted, the term of the option and the number of
shares of each grant subject to the option. The option price is such price as
may be determined by the Board of Directors. Each option continues for the
period determined by the Committee, which shall be not less than one (1) year
or more than three (3) years from the date of its grant. The Plan provides
that each key employee to whom an option is granted shall as a condition of
his right to exercise such option, agree to remain in the continuous
employment of the Company for a period of at least two years from the date of
exercise of the option, unless he is prevented from doing so by death or
disability. Under the Plan, the Company has the option to repurchase shares
from an optionee who terminates employment prior to the expiration of the
two-year period.
OPTION GRANTS IN LAST FISCAL YEAR
None
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
Value of
Number Unexercised
Unexercised In-the-Money
Shares Acquired Value Options Options
Name or Exercised (#) Realized ($) At Year End At Year End
- -----------------------------------------------------------------------------
Benjamin Gettler
Chairman of the Board
and President 71,000 $162,375 0 0
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 1995-1996 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, with a maximum of $150,000 for 1996.
Mr. Gettler has reached normal retirement age and has more than 30 years of
service. He is, therefore, entitled to retire at any time with current annual
benefits of $147,262, based upon the selection of a joint and survivor
benefit.
-49-
PERFORMANCE GRAPH
5-YEAR CUMULATIVE TOTAL RETURN
COMPARISON OF VULCAN INTERNATIONAL CORPORATION WITH
AMEX MARKET INDEX AND PEER GROUP INDEX
FISCAL YEAR ENDING
---------------------------------------------------------
COMPANY 1991 1992 1993 1994 1995 1996
VULCAN INTERNAT
CORP 100 117.69 136.61 117.59 151.08 221.71
PEER GROUP 100 128.27 172.57 132.86 181.22 210.91
BROAD MARKET 100 101.37 120.44 106.39 137.13 144.70
ASSUMES $100 INVESTED ON JANUARY 1, 1992
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1996
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 consists of the
complete list of suppliers to the shoe industry provided by the Footwear
Industries of America, the industry association:
Georgia Bonded Fibres
Goodyear Tire & Rubber Co.
Jaclyn Inc.
Katy Inc.
Lydall Inc.
Vista Resources Inc.
Vulcan International Corporation
-50-
DIRECTORS' MEETINGS, COMMITTEE INFORMATION, FEES AND
OTHER DIRECTOR TRANSACTIONS
There were five (5) meetings of the Board of Directors in 1996. All Directors
attended at least 75% of the total number of Directors' meetings and all
Directors attended at least 75% of Committee meetings held by committees on
which they served.
The Board of Directors has established two standing committees, namely, an
Executive Committee and an Audit and Compensation Committee. The Executive
Committee currently consists of Directors Crutchfield, B. Gettler, Rafalo and
Buckley and has, in the interim between meetings of the Board of Directors,
all of the powers of the Board subject to certain limitations. There were ten
(10) formal meetings of the Executive Committee in 1996.
The Audit and Compensation Committee currently consists of Messrs. Lewis, and
Rafalo. The Audit and Compensation Committee reviews the adequacy and
sufficiency of the Company's accounting procedures, reviews a report from the
independent CPAs prior to the publication of the audited financial statements
and considers and recommends to the Board of Directors the selection of the
independent CPAs to examine the consolidated financial statements of the
Company for the next year. The Committee also reviews and recommends salaries
and bonuses of Company executive officers. The Audit and Compensation
Committee had two meetings in 1996.
The Company pays each of its Directors $7,000 per year as a director fee. In
addition, the members of the Executive Committee are paid $5,000 per year for
serving on that Committee. 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 1996, pursuant to this Resolution, Mr. Aconsky
purchased 1,000 shares at a price of $25.75 per share.
During the year 1996, the Company and its subsidiary companies accrued a total
of $113,588 to the law firm of Gettler & Buckley for all legal services to
those companies and to Vulcan-Brunswick, a joint venture owned 50% by the
Company. Directors Benjamin Gettler and Dennis J. Buckley are members of
Gettler & Buckley.
-51-
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 officers of this Company and the
compensation paid to executives in similar positions in other companies as
well as the Company 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
1996 and his salary for 1997. 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. In the year preceding his death, Mr. Miller and Mr.
Gettler were paid a total of $497,000. The two offices were combined and Mr.
Gettler has carried out all of the duties of both offices.
The Company had a net loss in 1995. A number of strategic decisions were made
in early 1996 under the leadership of Mr. Gettler. As a result of those
strategic decisions and the follow-up required to execute those decisions, the
Company had experienced a significant turnaround, resulting in earnings of
over $1,500,000 through the first ten months of 1996.
During the past three years, Mr. Gettler's annual compensation has been as
follows:
Year Salary Bonus Total
---- ------ ----- -----
1995 $225,000 $64,500 $289,500
1994 225,000 52,125 277,125
1993 225,000 59,250 284,250
Mr. Gettler has advised the Committee that he does not want an increase in his
total annual compensation above that paid in 1995.
Based on all the foregoing, it is the determination of the Committee that the
cash bonus for the C.E.O. and President for 1996 should be the same amount as
in 1995, namely, $64,500. It is further the decision of the Committee that
his annual salary for 1997 shall be $275,000.
-52-
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The principal accountant of the Company is J. D. Cloud & Co. P.L.L., 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, 1996 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 May,
1997 Annual Meeting of Shareholders. Management is not aware of any intended
change of principal independent public accountants. Representatives of J. D.
Cloud & Co. P.L.L. 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
1998 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, 1997.
GENERAL
The Company, as of March 17, 1997 had outstanding 1,254,344 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 March 17, 1997.
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.
BENJAMIN GETTLER
Chairman of the Board
and President
-53-
Exhibit 21
VULCAN INTERNATIONAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
At December 31, 1996
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%
-54-
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, 1996 and 1995, and for each of
the three years in the period ended December 31, 1996, and have issued our
report thereon dated February 15, 1997; such Consolidated Financial Statements
and report are included in Part IV, Item 14(a)1 of this Form 10-K and the 1996
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. P.L.L.
Certified Public Accountants
Cincinnati, Ohio
February 15, 1997
-55-
EXHIBIT 99.2
Schedule II
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
1996 1995 1994
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 $221,952 207,436 154,460
Additions:
(1) Charged to costs and expenses 90,000 54,368 114,148
(2) Charged to Other Accounts - - -
Deductions:
Write off of bad debts 29,105 39,852 61,172
------- ------- -------
Balance at End of Period $282,847 221,952 207,436
======= ======= =======
-56-
EXHIBIT 99.3
VULCAN-BRUNSWICK BOWLING PIN COMPANY
FINANCIAL STATEMENTS
For the year ended December 31, 1996
J.D. CLOUD & CO. P.L.L.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-57-
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, 1996 and 1995, 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 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, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ J.D. CLOUD & CO. P.L.L.
Certified Public Accountants
Cincinnati, Ohio
February 5, 1997
-58-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
BALANCE SHEETS
At December 31, 1996 and 1995
- ASSETS - 1996 1995
CURRENT ASSETS:
Cash $ 666,431 160,202
Accounts receivable 859,620 259,456
Inventories 837,976 1,196,870
Prepaid expense 11,937 31,639
---------- ----------
TOTAL CURRENT ASSETS 2,375,964 1,648,167
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Land 72,251 66,077
Buildings and improvements 3,871,700 3,767,837
Machinery and equipment 4,582,407 4,938,974
Construction in progress - 230,109
---------- ----------
Total 8,526,358 9,002,997
Less - Accumulated depreciation 4,131,555 3,890,449
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 4,394,803 5,112,548
---------- ----------
OTHER ASSETS:
Product development costs and other
intangibles - at cost (less accumulated
amortization; 1996 - $606,292;
1995 - $512,404) 3,144,080 3,237,968
Other 152,020 142,431
---------- ----------
TOTAL OTHER ASSETS 3,296,100 3,380,399
---------- ----------
TOTAL ASSETS $10,066,867 10,141,114
========== ==========
- LIABILITIES AND PARTNERS' CAPITAL -
CURRENT LIABILITIES:
Accounts payable $ 235,870 243,666
Accrued expenses -
Salaries and wages 123,790 127,911
Taxes and other 119,357 106,057
---------- ----------
TOTAL CURRENT LIABILITIES 479,017 477,634
---------- ----------
PARTNERS' CAPITAL 9,587,850 9,663,480
---------- ----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $10,066,867 10,141,114
========== ==========
The accompanying notes to financial statements are an integral part of this
statement.
-59-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF INCOME
For the years ended December 31, 1996 and 1995
1996 1995
NET SALES $13,373,665 15,611,634
---------- ----------
COST AND EXPENSES:
Cost of sales 12,132,266 13,840,734
Administrative 30,000 30,000
Interest 504 -
---------- ----------
TOTAL COST AND EXPENSES 12,162,770 13,870,734
---------- ----------
INCOME FROM OPERATIONS 1,210,895 1,740,900
OTHER INCOME (EXPENSE) - NET 13,475 30,316
---------- ----------
NET INCOME $ 1,224,370 1,771,216
========== ==========
The accompanying notes to financial statements are an integral part of this
statement.
-60-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1996 and 1995
BRUNSWICK TOTAL
VULCAN BOWLING PIN PARTNERS'
CORPORATION CORPORATION CAPITAL
BALANCE - JANUARY 1, 1995 $ 5,521,132 5,521,132 11,042,264
Add - Net income 885,608 885,608 1,771,216
Less - Distributions (1,575,000) (1,575,000) (3,150,000)
---------- ---------- ----------
BALANCE - DECEMBER 31, 1995 4,831,740 4,831,740 9,663,480
Add - Net income 612,185 612,185 1,224,370
Less - Distributions (650,000) (650,000) (1,300,000)
---------- ---------- ----------
BALANCE - DECEMBER 31, 1996 $ 4,793,925 4,793,925 9,587,850
========== ========== ==========
The accompanying notes to financial statements are an integral part of this
statement.
-61-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996 and 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 12,786,051 16,559,209
Cash paid to suppliers and employees (10,884,561) (12,517,698)
Interest received 18,435 9,091
Interest paid (504) -
----------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,919,421 4,050,602
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (234,125) (1,065,017)
Proceeds from sale of property, plant and
equipment 120,933 9,000
----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES (113,192) (1,056,017)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreement 200,000 -
Principal payments under credit agreement (200,000) -
Distributions to partners (1,300,000) (3,150,000)
----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES (1,300,000) (3,150,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 506,229 (155,415)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 160,202 315,617
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 666,431 160,202
=========== ===========
RECONCILIATION OF NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,224,370 1,771,216
Depreciation 813,427 637,019
Amortization 93,888 93,888
(Gain) loss on disposal of property
and equipment 17,510 (9,000)
(Increase) decrease in accounts receivable (600,164) 935,350
Decrease in inventories 358,894 893,096
Decrease (increase) in prepaid expense
and other 10,113 (58,569)
Increase (decrease) in accounts payable
and accrued expenses 1,383 (212,398)
----------- -----------
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ 1,919,421 4,050,602
=========== ===========
The accompanying notes to financial statements are an integral part of this
statement.
-62-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 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 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-
In June 1990, Vulcan Corporation (Vulcan) and Brunswick Bowling and Billiards
Corporation (Brunswick) entered into 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 as
follows:
Buildings and improvements 15 to 39 years
Machinery and equipment 3 to 7 years
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.
-63-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(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, 1996 and 1995 consisted of:
1996 1995
Raw materials $ 311,821 426,845
Work in process 515,184 748,819
Supplies 10,971 21,206
-------- ---------
Total $ 837,976 1,196,870
======== =========
NOTE 3 - NOTE PAYABLE
The Joint Venture maintains a revolving credit agreement with its bank that
provides for borrowings of up to $1,500,000 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, 1996 and 1995.
-64-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Continued)
NOTE 4 - RETIREMENT PLAN
The Joint Venture maintains a defined benefit pension plan covering
substantially all union employees. Net pension expense recognized in the
accompanying statements of income consisted of:
1996 1995
Service cost $ 28,841 17,105
Interest cost 17,949 12,175
Return on plan assets:
Actual (14,832) (13,533)
Deferred (9,017) (6,340)
Amortization of unrecognized net
transition obligation 468 468
Amortization of prior service cost 2,465 1,132
Amortization of unrecognized net loss 2,917 -
------- -------
Net pension expense $ 28,791 11,007
======= =======
The funded status of the plan and amounts reported in the accompanying balance
sheets are summarized as follows:
1996 1995
Actuarial present value of
benefit obligations:
Vested $214,660 156,099
Nonvested 28,995 39,929
------- -------
Accumulated benefit obligation $243,655 196,028
======= =======
Fair market value of plan assets $329,810 279,779
Projected benefit obligation 301,615 248,996
Excess of plan assets over
projected benefit obligation 28,195 30,783
Unrecognized net loss 80,894 65,784
Unrecognized prior service cost 37,185 39,650
Unrecognized net transition obligation 5,746 6,214
------- -------
Prepaid pension expense $152,020 142,431
======= =======
-65-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(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:
1996 1995
Assumed discount rate 7.0% 7.0%
Expected long-term rate of return
on plan assets 8.0% 8.0%
Average remaining service period 18 years 18 years
NOTE 5 - RELATED PARTY TRANSACTIONS
The Joint Venture had 1996 and 1995 sales to Vulcan of approximately
$2,851,000 and $2,921,000, respectively, and 1996 and 1995 sales to Brunswick
of approximately $10,522,000 and $12,690,000, respectively.
The Joint Venture purchased raw materials from Vulcan for approximately
$315,000 in 1996 and $427,000 in 1995. The Joint Venture also paid accounting
and administrative fees of $30,000 to Vulcan in 1996 and 1995.
Accounts receivable from Brunswick amounted to $616,000 and $175,000 at
December 31, 1996 and 1995, respectively. Accounts receivable from Vulcan at
December 31, 1996, amounted to $232,000. Accounts payable to Vulcan amounted
to $35,000 and $67,000 at December 31, 1996 and 1995, 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.
-66-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Continued)
NOTE 6 - RISKS AND UNCERTAINTIES (Continued)
The Joint Venture currently purchases all its bowling pin bases from Vulcan.
Any disruption in the supply of the bowling pin bases could cause a delay in
manufacturing which could negatively affect operating results.
In 1995, the Joint Venture recorded a receivable of $75,479 from Vulcan
Corporation for bowling pin bottoms, manufactured by Vulcan, which were
replaced during 1995 by Brunswick. Vulcan, at that time, denied liability for
the replaced pin bottoms. Vulcan has advised that, while denying liability,
it will not contest the receivable.
Financial instruments which potentially subject the Joint Venture to
concentrations of credit risk are cash investments. The Joint Venture places
its cash investments with high-quality financial institutions. The Joint
Venture believes no significant concentration of credit risk exists with
respect to these cash investments.
-67-
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: March 25, 1997
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/ Dennis J. Buckley
- -------------------------- -------------------------------
By: Benjamin Gettler By: Dennis J. Buckley
(Director) (Director)
/s/ Stanley I. Rafalo
- --------------------------
By: Stanley I. Rafalo
(Director)
/s/ William T. Crutchfield
- --------------------------
By: William T. Crutchfield
(Director)
-68-