UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10219
VULCAN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0810265
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Delaware Avenue, Suite 1704, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
(302) 427-804
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding shares of no par value common stock at June 30, 2001:
1,134,719 shares
VULCAN INTERNATIONAL CORPORATION
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Schedule Supporting Net Income Per Common
Share and Dividends Per Common Share 4
Notes to Condensed Consolidated Financial
Statements 5-8
Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Item 3 Quantitative and Qualitative Disclosures
about Market Risks 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12-13
Item 6. Exhibits and Reports on Form 8-K 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2001 2000
UNAUDITED
-ASSETS-
CURRENT ASSETS:
Cash $ 2,671,605 1,008,649
Marketable securities (At fair market value) 44,177,528 50,383,925
Accounts receivable 1,908,743 3,072,529
Inventories 361,727 941,090
Prepaid expense and tax - 87,301
---------- -----------
TOTAL CURRENT ASSETS 49,119,603 55,493,494
---------- -----------
PROPERTY, PLANT AND EQUIPMENT-at cost 11,590,354 11,715,635
Less-Accumulated depreciation and depletion 9,395,664 9,346,419
---------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 2,194,690 2,369,216
---------- -----------
OTHER ASSETS:
Investment in joint venture 54,394 70,528
Marketable securities (At fair market value) 43,361,531 48,153,115
Deferred charges and other assets 5,146,450 5,057,605
---------- -----------
TOTAL OTHER ASSETS 48,562,375 53,281,248
---------- -----------
TOTAL ASSETS $ 99,876,668 111,143,958
========== ===========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
CURRENT LIABILITIES:
Deferred income tax $ 12,005,955 14,093,872
Note payable - 1,700,000
Other 6,169,783 6,037,426
---------- -----------
TOTAL CURRENT LIABILITIES 18,175,738 21,831,298
---------- -----------
OTHER LIABILITIES:
Deferred income tax 14,815,183 16,309,169
Commitments and contingencies - -
Minority interest in partnership 10,757 11,066
Other liabilities 33,285 33,285
---------- -----------
TOTAL OTHER LIABILITIES 14,859,225 16,353,520
---------- -----------
SHAREHOLDERS' EQUITY:
Capital stock 249,939 249,939
Additional paid-in capital 7,745,102 7,745,102
Retained earnings 25,832,191 24,565,375
Accumulated other comprehensive income 53,629,146 60,846,586
---------- -----------
87,456,378 93,407,002
Less-Common stock in treasury-at cost 20,614,673 20,447,862
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 66,841,705 72,959,140
---------- -----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 99,876,668 111,143,958
========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-1-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
REVENUES:
Net sales $4,382,334 4,831,963 2,189,162 2,314,917
Dividends 1,084,602 1,035,849 551,603 517,172
--------- --------- --------- ---------
TOTAL REVENUES 5,466,936 5,867,812 2,740,765 2,832,089
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 4,207,573 4,869,076 1,951,614 2,344,735
General and
administrative 975,731 804,925 569,025 386,092
Interest expense 170,218 194,047 71,474 92,088
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 5,353,522 5,868,048 2,592,113 2,822,915
--------- --------- --------- ---------
EQUITY IN JOINT
VENTURE INCOME
AND MINORITY
INTEREST 84,174 232,824 18,504 114,911
--------- --------- --------- ---------
INCOME BEFORE
GAIN ON SALE OF
ASSETS 197,588 232,588 167,156 124,085
NET GAIN ON SALE OF
PROPERTY AND EQUIPMENT 2,017,900 168,532 1,182,764 81,048
--------- --------- ---------- ---------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 2,215,488 401,120 1,349,920 205,133
INCOME TAX PROVISION 494,785 68,359 328,354 41,638
--------- --------- --------- ---------
NET INCOME $1,720,703 332,761 1,021,566 163,495
========= ========= ========= =========
NET INCOME PER SHARE $ 1.52 .30 .90 .15
========= ========= ========= =========
DIVIDENDS PER
COMMON SHARE $ .40 .60 .20 .40
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-2-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
UNAUDITED
JUNE 30, JUNE 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 5,549,892 4,573,062
Cash paid to suppliers and employees (4,598,342) (5,729,094)
Dividends received 1,084,602 1,035,849
Interest paid (50,930) (78,426)
Income taxes paid (220,000) -
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,765,222 (198,609)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 2,084,808 169,738
Purchase of property and equipment (22,636) (125,317)
Cash distribution from joint venture 100,000 150,000
Collections on notes receivable and other 56,262 62,074
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES 2,218,434 256,495
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under credit
agreements (1,700,000) 565,000
Sale of treasury shares - 466,875
Purchase of common shares (166,811) (715,640)
Cash dividends paid (453,889) (441,366)
--------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES (2,320,700) (125,131)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,662,956 (67,245)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,008,649 1,088,626
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,671,605 1,021,381
========= =========
RECONCILIATION OF NET INCOME TO
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,720,703 332,761
Adjustments-
Depreciation and amortization 193,344 214,964
Deferred income taxes 136,172 111,741
Equity in joint venture income and
minority interest (84,174) (232,824)
Net gain on sale of property and
marketable securities (2,017,900) (168,532)
(Increase) decrease in accounts receivable 1,167,558 (258,901)
Decrease in inventories 579,363 49,748
Increase (decrease) in accounts payable,
accrued expenses and other assets 70,156 (247,566)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,765,222 (198,609)
========= =========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-3-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
SCHEDULE SUPPORTING NET INCOME PER COMMON SHARE
AND DIVIDENDS PER COMMON SHARE
UNAUDITED
EXHIBIT 1
For the six months ended For the three months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
a) Net income $1,720,703 332,761 1,021,566 163,495
========= ========= ========= =========
b) Cash
dividends
on common
shares $ 453,889 661,291 226,944 439,850
========= ========= ========= =========
Weighted Average
Shares:
c) Common shares
issued 1,999,512 1,999,512 1,999,512 1,999,512
d) Common
treasury
shares 864,491 892,907 864,491 894,906
--------- --------- --------- ---------
e) Common shares
outstanding 1,135,021 1,106,605 1,135,021 1,104,606
========= ========= ========= =========
f) Income per
common
share (a/e): $ 1.52 .30 .90 .15
g) Dividends
per common
share $ .40 .60 .20 .40
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
-4-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2001 and 2000
On March 1, 1990 the United States of America filed a Complaint against the
Registrant and others in the United States District Court for the District
of Massachusetts claiming that the Registrant was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Registrant had engaged counsel to represent it in that action,
the Registrant was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Registrant on September 22, 1999. The "Final Judgment" awarded damages
against the Registrant in favor of the United States in the amount of
$3,465,438 for unreimbursed response costs and accrued interest, plus
any additional past unreimbursed response costs, interest and certain
future costs the United States incurs at the site. The United States filed
a notice of lien in certain jurisdictions on real property of the
Registrant and its subsidiary Vulcan Corporation in the dollar amount of
the judgment, plus interest.
The Registrant has recorded a liability of $3,909,200 including accrued
interest of $443,800 for past costs plus $1,146,100,(representing a
discounted present value of $1,750,000) for estimated future costs in
connection with the Site. The June 30, 2000 quarterly results were
restated to recognize interest on the liability as reported in the
Registrant's Form 10-K for the year ended December 31, 2000. The
liability for future costs is a significant estimate of the future costs
and it is subject to change as actual costs are incurred and reported by
the Environmental Protection Agency.
The Registrant is presently continuing an investigation into this matter and
intends to vigorously pursue all available legal remedies to set aside all
orders and liens relating to the asserted liability and to defend itself
against the underlying allegations.
The Registrant was advised by the U.S. Environmental Protection Agency
several years ago that it was one of at least 122 large generator potentially
responsible parties ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint
and several liability was in the range of $15 million. The Registrant, along
with many other PRP's, entered into a consent agreement with U.S. EPA to
remediate the Site, and the Registrant is now a party to a Remedial
Design/Remedial
-5-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2001 and 2000
(Continued)
Action Trust Agreement for the purpose of undertaking clean-up
responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated that additional funds of approximately
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
The accompanying condensed consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to reflect a
fair presentation of financial position, results of operations and cash flows
for the interim periods. All such adjustments are of a normal recurring
nature.
There were no securities of the Registrant sold by the Registrant during the
six months ended June 30, 2001, that were not registered under the Securities
Act of 1933, in reliance upon an exemption from registration provided by
Section 4(2) of the Act.
ACCOUNTING CHANGES
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 requires an entity to recognize all
derivatives, at their fair market value, as either assets or liabilities in
the statement of financial position. The effect of adopting this standard
was not significant.
NEW PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement No. 141,
Business Combinations, and Statement No. 142, Goodwill and Other Intangible
Assets. Statement No. 141 will be effective for all business combinations
initiated after June 30, 2001. Statement No. 142 is effective for all
goodwill and other intangible assets acquired after June 30, 2001 and for
all other goodwill and other intangible assets effective January 1,2002.
These standards are not expected to have a significant impact to the
Company.
-6-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2001 and 2000
(Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with current
period presentation.
INVENTORIES
JUNE 30, DECEMBER 31,
2001 2000
UNAUDITED
Inventories consisted of:
Finished goods $ 144,224 657,693
Work in process 50,616 72,992
Raw materials 166,887 210,405
------- -------
Total inventories $ 361,727 941,090
======= =======
COMPREHENSIVE INCOME
During the six months ended June 30, 2001 and 2000 total other comprehensive
income (loss) was as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
Net income $ 1,720,703 332,761 1,021,566 163,495
Other comprehensive
income (loss), net of tax:
Unrealized gain (loss)
on marketable securities (6,393,121) 1,392,099 (1,450,686) (791,987)
Less: reclassification
adjustment for gains
included in net income (824,319) - (549,747) -
--------- --------- --------- ---------
Total comprehensive
income (loss) $(5,496,737) 1,724,860 (978,867) (628,492)
========= ========= ========= =========
-7-
PART I - FINANCIAL INFORMATION
(Continued)
Item 1. Financial Statements.
VULCAN INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2001 and 2000
(Continued)
Accumulated comprehensive income consists of unrealized holding gains on
securities available for sale of $53,629,146 at June 30, 2001 and
$60,846,586 at December 31, 2000.
BUSINESS SEGMENT INFORMATION
Reportable segments for the six months and three months ended June 30, 2001
are as follows:
For the six For the three
months ended months ended
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
NET SALES:
Rubber and Foam Products $3,187,706 3,644,456 1,654,313 1,871,292
Bowling Pins 1,161,498 1,130,709 551,416 350,620
Real Estate Operations 542,418 425,623 235,978 213,372
Intersegment net sales (184,603) (200,737) (126,299) (38,263)
--------- --------- --------- ---------
4,707,019 5,000,051 2,315,408 2,397,021
Timber sales reported in
gain on sale of property
and equipment (324,685) (168,088) (126,246) (82,104)
--------- --------- --------- ---------
TOTAL SALES $4,382,334 4,831,963 2,189,162 2,314,917
========= ========= ========= =========
OPERATING PROFIT (LOSS)
FROM CONTINUING OPERATIONS:
Rubber and Foam Products $ (380,471) (613,249) (41,753) (296,373)
Bowling Pins 55,887 187,928 4,352 81,908
Real Estate Operations 250,244 154,896 90,016 81,582
--------- --------- --------- ---------
TOTAL OPERATING
PROFIT (LOSS) FROM
CONTINUING OPERATIONS (74,340) (270,425) 52,615 (132,883)
Interest expense - net (170,218) (194,047) (72,074) (92,088)
Other unallocated corporate
income - net 2,460,046 865,592 1,369,379 430,104
Income tax provision (494,785) (68,359) (328,354) (41,638)
--------- --------- --------- ---------
NET INCOME $1,720,703 332,761 1,021,566 163,495
========= ========= ========= =========
REVIEW BY INDEPENDENT ACCOUNTANTS
The condensed consolidated financial statements at June 30, 2001, and for
the six month period then ended have been reviewed, prior to filing, by
the Registrant's independent accountants, J.D. Cloud & Co. L.L.P., whose
report covering their review of the financial statements is included in
this report.
-8-
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have reviewed the accompanying condensed consolidated balance sheet of
Vulcan International Corporation and subsidiaries as of June 30, 2001, and
the related condensed consolidated statements of income and cash flows for
the six month and three month periods ended June 30, 2001 and 2000. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
U.S. generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with U.S. generally accepted
accounting principles.
We have audited, in accordance with U.S. generally accepted auditing
standards, the consolidated balance sheet of Vulcan International Corporation
and subsidiaries as of December 31, 2000, and the related consolidated
statements of income, shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 10, 2001 and
March 29, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2000,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
J.D. CLOUD & CO. L.L.P.
Certified Public Accountants
Cincinnati, Ohio
August 3, 2001
-9-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Net sales revenue for the six month period ended June 30, 2001, decreased
$449,629 or 9.3% over the corresponding period in 2000. Cost of sales
decreased $661,503 or 13.6% during the six month period compared to the
corresponding six month period in 2000. Net sales revenue for the second
quarter of 2001 decreased $125,755 or 5.4% and cost of sales decreased
$393,121 or 16.8% compared to the corresponding quarter in 2000. These
changes are due to decreased sales in the Company's Rubber and Foam and
Bowling Pin segments.
General and administrative expenses increased $170,806 or 21.2% in the
six month period ended June 30, 2001, as compared to the corresponding six
month period in 2000. General and administrative expenses for the second
quarter of 2001 increased $182,933 or 47.4% compared to the corresponding
quarter in 2000. The increases are primarily due to increased professional
fees relating to environmental matters.
Interest expense for the six month period ended June 30, 2001 decreased
$23,829. Interest expense for the three month period ended June 30, 2001
decreased $20,614. The decreases were due to decreased borrowings under
the Company's line of credit agreement.
Gains on the sale of property, equipment and securities were $2,017,900 for
the six month period ended June 30, 2001, as compared to $168,532 for the
corresponding period in 2000. Gains in 2001 were primarily the result of
the sale of marketable securities and timber. Gains in 2000 were the result
of sales of marketable securities, timber and equipment from the Company's
rubber plant in Clarksville, Tennessee.
The Company has a 50% interest in a joint venture, Vulcan Brunswick Bowling
Pin Company (VBBPC) which manufactures bowling pins in Antigo, Wisconsin for
Brunswick and the Company. The Company's investment in VBBPC is included in
other assets at June 30, 2001.
For the period May 1, 2001 through December 31, 2001, Vulcan will bear the
economic risk of the joint venture and thus any profit or loss resulting
from operations during this period shall be allocated for tax and accounting
purposes to Vulcan.
Summarized income statement information for VBBPC consists of the following:
Six Months Ended June 30, Three Months ended June 30,
2001 2000 2001 2000
Net sales $2,120,883 4,296,148 804,982 2,151,060
Costs and expenses 1,953,152 3,829,123 768,067 1,920,233
--------- --------- ------- ---------
Net income $ 167,731 467,025 36,915 230,827
========= ========= ======= =========
Company's 50% equity
in net income $ 83,865 233,512 18,457 115,413
========= ========= ======= =========
-10-
PART I - FINANCIAL INFORMATION
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements during the second quarter of 2001 were funded
in part through earnings and noncash charges such as depreciation and
amortization and from the sale of timber, equipment and marketable
securities. The cash from these transactions was primarily used in
operations. The Company expects to continue, when necessary, to use short-
term borrowings to meet cash requirements not fully provided by earnings,
depreciation and amortization. During the six months ended June 30, 2001,
4,805 shares of treasury stock were acquired for $166,811. There were
approximately $2,000 of commitments for capital expenditures as of June 30,
2001.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
There have been no significant changes in the Company's market risk,
primarily associated with marketable securities, since December 31, 2000.
-11-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 1, 1990 the United States of America filed a Complaint against the
Registrant and others in the United States District Court for the District
of Massachusetts claiming that the Registrant was a potentially responsible
party with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this Site.
Although the Registrant had engaged counsel to represent it in that action,
the Registrant was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Registrant on September 22, 1999. The "Final Judgment" awarded damages
against the Registrant in favor of the United States in the amount of
$3,465,438 for unreimbursed response costs and accrued interest, plus
any additional past unreimbursed response costs, interest and certain
future costs the United States incurs at the site. The United States filed
a notice of lien in certain jurisdictions on real property of the
Registrant and its subsidiary Vulcan Corporation in the dollar amount of
the judgment, plus interest.
The Registrant has recorded a liability of $3,909,200 including accrued
interest of $443,800 for past costs plus $1,146,100,(representing a
discounted present value of $1,750,000) for estimated future costs in
connection with the Site. The June 30, 2000 quarterly results were
restated to recognize interest on the liability as reported in the
Registrant's Form 10-K for the year ended December 31, 2000. The
liability for future costs is a significant estimate of the future costs
and it is subject to change as actual costs are incurred and reported
by the Environmental Protection Agency.
The Registrant is presently continuing an investigation into this matter and
intends to vigorously pursue all available legal remedies to set aside all
orders and liens relating to the asserted liability and to defend itself
against the underlying allegations.
The Registrant was advised by the U.S. Environmental Protection Agency
several years ago that it was one of at least 122 large generator potentially
responsible parties ("PRP's") with regard to remediation of the Union
Chemical Company, Inc. Site, South Hope, Maine, where the potential joint and
several liability was in the range of $15 million. The Registrant, along
with many other PRP's, entered into a consent agreement with U.S. EPA to
remediate the Site, and the Registrant is now a party to a Remedial
Design/Remedial Action Trust Agreement for the purpose of undertaking clean-
up responsibilities at the Site. Most of the remedial work has now been
completed. In 2000, PRP's estimated the additional funds in the range of
$1 million would be required to complete remediation of the Site. The
Registrant's estimated share of that amount was approximately $5,000 and was
paid in 2000. If the projected cost of the remaining remediation tasks
remains at approximately $1 million, the Registrant will not have additional
payments. There may be other potential clean-up liabilities at other sites
of which the Registrant has no specific knowledge.
-12-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. (Continued)
The Registrant has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Registrant believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
The Registrant and its subsidiaries are party to other matters and claims
which are normal in the course of operations. While the results of
litigation and claims cannot be predicted with certainty, based on advice of
counsel, the Registrant believes that the final outcome of such matters will
not have a materially adverse effect on its consolidated financial condition.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
None
b. The Company was not required to file Form 8-K for the quarter
ended June 30, 2001.
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PART II - OTHER INFORMATION
(Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VULCAN INTERNATIONAL CORPORATION
By: /s/ Benjamin Gettler
----------------------------------
Date August 8, 2001 Benjamin Gettler
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Vernon E. Bachman
-----------------------------------
Date August 8, 2001 Vernon E. Bachman
Vice President, Secretary-Treasurer
and Principal Accounting Officer
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