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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-10219
VULCAN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0810265
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Delaware Avenue, Suite 1704, Wilmington, Delaware 19801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302) 427-5804
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common stock-no par value American Stock Exchange
Securities registered pursuant to 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
As of January 31, 2002, 1,101,605 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 $43,788,799.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated by Reference Applicable Part of Form 10-K
----------------------------------- ----------------------------
Annual Report to Shareholders for the
Year Ended December 31, 2001 Part I and II
Proxy Statement Dated April 9, 2002 Furnished
to Shareholders in Connection with Registrant's
Annual Meeting of Shareholders Part I and III
Articles of Incorporation and By-laws
filed on Form 8, file number 1-10219,
filed during 1992 Part IV
PART I
Item 1. Business.
(a) General Development of Business-
Vulcan International Corporation ("Vulcan", the "Company" or the "Registant")
is a Delaware holding company which is the owner of 100% of the common stock
of Vulcan Corporation, a manufacturer of the products described below.
(b) Financial Information About Industry Segments-
The sales, operating profit and identifiable assets attributable to each of
the Registrant's industry segments for the three years ended December 31,
2001, 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-
RUBBER AND PLASTICS:
RUBBER AND FOAM PRODUCTS-
Vulcan manufactures rubber and foam products in a 272,000 sq. ft. building
located in Clarksville, Tennessee. Approximately 50% of sales of those
products in 2001 were for use by shoe manufacturers in the United States.
The Company is concentrating on the manufacture of rubber sheet stock and
custom-mix materials for those manufacturers. The majority of the non-
footwear sales of products manufactured in Clarksville were for use as
sports flooring and automobile mats. The Rubber Division also manufactures
high-density foam products for sale to manufacturers for diverse uses.
PLASTICS-
Vulcan sold its plastics manufacturing assets in August 1999. Vulcan had
produced plastic products and shoe lasts in Walnut Ridge, Arkansas. A shoe
last is the form over which non-rubber shoes are manufactured and which
determines the shoe style, fit and shape.
BOWLING PINS-
In 1990, the Company entered into an agreement with Brunswick Bowling and
Billiards Corporation by the terms of which Vulcan and Brunswick formed a
joint venture for the manufacture of bowling pins using Vulcan's Surlyn
coating process. The Joint Venture, which is equally owned by Brunswick and
Vulcan Bowling Pin Company, a wholly owned subsidiary of Vulcan, is located
at the site of the Company's former Antigo, Wisconsin, bowling pin
manufacturing facility. This manufacturing Joint Venture is named the
Vulcan-Brunswick Bowling Pin Company. The Company accounts for its
investment in the Joint Venture under the equity method of accounting.
-1-
PART I
(Continued)
Item 1. Business. (Continued)
Vulcan Bowling Pin Company sells and services its bowling pins through its
own sales force as well as manufacturers' representatives in the United
States and through distributors in foreign countries under the name of Vultex
II and Vultuf, as well as various private label names. In 1999, Vulcan
Brunswick Bowling Pin Co. entered into an agreement with Winsome Industrial
Company, Ltd. located in Taiwan, pursuant to which it purchases bowling pins
manufactured by Winsome in Taiwan bearing the name Vultuf.
Raw materials used in shoe products and bowling products consist of the
following: hard maple, which is commercially available from countless
sawmills; Surlyn is available from Dupont; high density polyethylene plastic
resin is available from Phillips, Quantum, Gulf, A. Schulman, Inc. and
numerous other producers; nylon is available from Allied; synthetic rubbers
are available from Ameripol Synpol, Goodyear, Polysar, Goldsmith & Eggleston,
Inc. and a number of other concerns; fillers for rubber products such as clay
are available from W.R. Grace & Co., J.M. Huber and others; and pigments are
available from Uniroyal Chemical, Akrochem Corp., Monsanto and others.
Vulcan's products are sold through its own sales force, manufacturers' agents
and distributors.
REAL ESTATE-
Vulcan has a majority interest in the upper seven floors of the ten-story
Cincinnati Club Building in downtown Cincinnati, Ohio. These floors contain
approximately 56,000 square feet of finished office space and approximately
32,000 square feet of unfinished and common area space. Vulcan occupies a
substantial portion of the tenth floor of the building and manages the seven
floors of office space. The first three floors consist of public rooms owned
by a company which uses the space for public functions and a catering
service. There is direct access into the building from an eight-story
parking garage immediately adjacent to the Cincinnati Club Building owned
and operated by the City of Cincinnati. Vulcan Corporation also owns
undeveloped lands in Michigan from which it sells timber.
Patents, trademarks, licenses, franchises and concessions are not material
factors in the business. Vulcan Bowling Pin Company owns an American Bowling
Congress permit to label its Surlyn plastic-coated bowling pins as "ABC
approved".
No major expenditures for pollution controls are anticipated in 2002.
Expenditures thereafter should not be in excess of 5% of normal capital
expenditures in any one year. This rate of expenditure should not have a
significant effect on either the earnings or the competitive position of the
Registrant or any of its subsidiaries. See Item 3 - Legal Proceedings.
-2-
PART I
(Continued)
Item 1. Business. (Continued)
The Company has commitments for capital expenditures of approximately
$142,820 at December 31, 2001.
The Company had 73 employees at December 31, 2001.
(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) which during 2001, had sales of
$376,000; net income of $48,000; and assets of $1,091,000.
Item 2. Properties.
The following schedule summarizes certain information regarding buildings
owned or leased by the Registrant:
Type of Square
Location Ownership Footage
Clarksville, Tennessee Owned 272,000 Administrative offices and
manufacturing of rubber
soling and other rubber
products.
Cincinnati, Ohio Owned 88,000 Corporate offices and
leasing of office space.
The age of the buildings ranges from approximately 37 to 76 years. The
structures are of steel, brick and concrete construction and are generally
in good condition. The plant is sprinklered. Excellent transportation
facilities are available for the factory and it is located on a rail siding.
Item 3. Legal Proceedings.
The Company was advised by the U.S. Environmental Protection Agency ("EPA")
several years ago that it was one of at least 122 large generator potentially
responsible parties ("PRPs") with regard to remediation of the Union Chemical
Company, Inc. Site, South Hope, Maine, where the potential joint and several
liability was in the range of $15 million. The Company, along with many
other PRPs, entered into a consent agreement with U.S. EPA to remediate the
Site, and the Company is now a party to a Remedial Design/Remedial Action
Trust Agreement for the purpose of undertaking clean-up responsibilities
-3-
PART I
(Continued)
at the Site. Most of the remedial work has now been completed. In
2000, PRPs estimated that additional funds in the range of $1 million
would be required to complete remediation of the Site. The Company's
estimated share of that amount was approximately $5,000. The Company
made payment of that amount in late 2000. If the projected cost of
the remaining remediation tasks remains at approximately $1 million,
this will be the Company's final payment.
On March 1, 1990 the United States of America filed a Complaint against
the Company and others in the United States District Court for the
District of Massachusetts claiming that the Company was a potentially
responsible party with respect to the Re-Solve Superfund Site in North
Dartmouth, Massachusetts seeking to recover response costs incurred and
to be incurred in the future in connection with this Site.
Although the Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had
entered, pursuant to prior rulings, an unopposed "Final Judgment" against
the Company on September 22, 1999. The "Final Judgment" awarded damages
against the Company in favor of the United States in the amount of
$3,465,438, plus interest, for unreimbursed response costs, 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 Company
and its subsidiary Vulcan Corporation in the dollar amount of the judgment,
plus interest.
The Company had restated its 1999 financial statements to record an
estimated liability and decrease 1999 net income by $2,981,000, net of
$1,734,000 tax, for the judgment, accrued interest for past costs and a
discounted present value for estimated future costs in connection with
the site. This estimated liability was calculated based on the "Final
Judgment" and using other information provided by the U.S. EPA. The
Company expensed $151,000 and $140,000 after tax, for the years ended
December 31, 2001 and 2000, respectively for accrued interest and
amortization of estimated future costs related to this matter.
The Company is presently continuing an investigation into this matter
and intends to vigorously pursue all available legal remedies to set aside
all orders and liens relating to the asserted liability and to defend
itself against the underlying allegations. Counsel for the Company is
also vigorously pursuing settlement negotiations with Counsel for the
United States.
There may be other potential clean-up liability at other sites of which
the Company has no specific knowledge.
-4-
PART I
(Continued)
The Company has an interest in a partnership which owns certain real
estate. On August 13, 1999 a Complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an Amended
Complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Company believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
The Company appealed a real estate tax assessment from 1999 that had increased
the annual real estate tax by approximately $96,000. The local school board
has appealed the revision and reduced its initial appraised value of the
property. During 2001, the Company received a $96,000 refund of the additional
tax paid in 1999. The Company has recorded a liability of approximately
$119,000 related to this issue based on the revised value asserted by the local
school board. If the Company is successful, this liability will be recognized
as income.
The Company and its subsidiaries are involved in other litigation matters
and claims which are normal in the course of operations. Management believes
that the resolution of these matters will not have a material impact on the
Company's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the year
ended December 31, 2001, that require disclosure under this item.
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 433 shareholders of
record excluding individual participants in securities positions as of
December 31, 2001. The high and low sales price and the dividends paid
for each quarterly period within the two most recent years were as follows:
-5-
PART I
(Continued)
2001 2000
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
First 42.7500 34.2500 $.20 33.1250 30.8750 $.20
Second 40.5000 38.0000 $.20 33.8750 32.8125 $.20
Third 40.0000 38.7500 $.20 34.2500 32.8750 $.20
Fourth 40.2500 37.2400 $.20 34.5000 33.3750 $.20
Item 6. Selected Financial Data.
The information required by this item is set forth below:
2001 2000 1999(1) 1998 1997
------ ------ ------ ------ ------
Net revenues -
continuing
operations $10,660,422 11,246,242 10,919,627 10,582,060 11,373,204
Income (loss)from
continuing
operations before
taxes 3,615,612 1,874,729 (2,718,674) 1,664,416 1,971,419
Income tax
(benefit) 719,414 113,165 (1,317,658) 279,537 352,970
Net income (loss)
from continuing
operations 2,896,198 1,761,564 (1,401,016) 1,384,879 1,618,449
Income (loss) from
disposed operations,
net of tax - - (63,056) 69,637 167,356
Gain on sale of
disposed operations,
net of tax - - 988,845 - -
---------- ---------- ---------- ---------- ----------
Net income (loss) 2,896,198 1,761,564 (475,227) 1,454,516 1,785,805
========== ========== ========== ========== ==========
-6-
PART I
(Continued)
2001 2000 1999(1) 1998 1997
------ ------ ------ ------ ------
Income (loss) per
common share:
Continuing
operations 2.59 1.59 (1.25) 1.17 1.30
Discontinued
operations - - (0.06) 0.06 0.14
Gain on disposal
of discontinued
operations - - 0.88 - -
---- ---- ---- ---- ----
Net income (loss) 2.59 1.59 (0.43) 1.23 1.44
==== ==== ==== ==== ====
Property, plant
and equipment (net) 2,117,476 2,369,216 2,618,649 2,798,825 2,498,771
Depreciation 381,079 447,401 488,591 513,045 594,138
Current assets 44,333,695 55,493,494 53,278,872 53,506,019 38,900,356
Ratio current
assets to current
liabilities 2.60 to 1 2.54 to 1 2.48 to 1 2.99 to 1 3.38 to 1
Total assets 89,097,487 111,143,958 89,536,796 95,011,738 82,415,593
Long-term debt - - - - -
Accumulated other
comprehensive
income 46,599,325 60,846,586 47,852,421 52,506,224 43,211,515
Total share-
holders' equity 59,220,189 72,959,140 58,137,015 65,295,924 58,494,990
Dividends per
common share .80 .80 .80 .80 .80
Book value per
common share 53.75 64.03 52.54 57.46 48.05
(1) Results are reported as restated for the effect of an environmental
liability. The effect was to reduce 1999 income from continuing
operations before tax $4,715,458 and net income $2,980,947 net of
tax of $1,734,511.
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
2001 Annual Report to Shareholders.
-7-
PART II
(Continued)
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company's market risk primarily is represented by the risk of changes in
the value of marketable equity securities caused by fluctuations in equity
prices. Marketable securities, at December 31, 2001, are recorded at a fair
value of approximately $77,022,000, including net unrealized gains of
$70,605,000. Marketable securities have exposure to price risk. The
Company's available for sale marketable securities, at fair value, are
invested as follows; 66% in two financial institutions, 33% in ten
communications companies and 1% in other industries. The estimated
potential loss in fair value resulting from a hypothetical 10% decrease in
prices quoted by the stock exchange is approximately $7,702,200.
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:
2001
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues $2,726,171 2,740,765 2,411,550 2,781,936 10,660,422
Gross profit
(loss) (62,787) 237,548 44,538 9,740 229,039
Net income 699,137 1,021,566 274,589 900,906 2,896,198
Net income per
share 0.62 0.90 0.25 0.82 2.59
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues $3,035,723 2,832,089 2,955,112 2,423,318 11,246,242
Gross profit
(loss) (7,295) (29,818) 27,299 (214,857) (224,671)
Net income 169,266 163,495 862,774 566,029 1,761,564
Net income per
share 0.15 0.15 0.78 0.51 1.59
-8-
PART II
(Continued)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors-
The information required by this item is incorporated herein by reference to
the Registrant's Proxy Statement dated April 9, 2002, in connection with its
Annual Meeting to be held May 9, 2002.
(b) Identification of Executive Officers-
NAME AGE POSITION AND TIME IN OFFICE
Benjamin Gettler 76 President since November 1988;
Chairman of The Board since
June 1990; Director since 1960.
Vernon E. Bachman 64 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 April 9, 2002, in connection with its
annual meeting to be held May 9, 2002.
-9-
PART III
(Continued)
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 April 9, 2002, in connection with
its annual meeting to be held May 9, 2002.
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 April 9, 2002,
in connection with its Annual Meeting to be held May 9, 2002, which is
incorporated herein by reference.
-10-
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. 20
Consolidated Balance Sheets at December 31,
2001, and 2000. 21-22
Consolidated Statements of Income for Each
of the Three Years in the Period Ended
December 31, 2001. 23
Consolidated Statements of Shareholders'
Equity for Each of the Three Years in the
Period Ended December 31, 2001. 24-25
Consolidated Statements of Cash Flows for
Each of the Three Years in the Period
Ended December 31, 2001. 26-27
Notes to the Consolidated Financial
Statements for the Three Years Ended
December 31, 2001. 28-45
2. Financial Statement Schedule.
Independent Auditors' Report on Schedule. 67
Schedule II - Valuation and Qualifying Accounts. 68
All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
Separate financial statements of the Registrant or summarized financial
information concerning subsidiaries are not required.
-11-
PART IV
(Continued)
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(Continued)
3. Financial Statements.
The following financial statements of Vulcan International
Corporation's 50% owned Joint Venture, Vulcan-Brunswick
Bowling Pin Company, are included under this item:
Page
Independent Auditors' Report 70
Balance Sheets at December 31, 2001 and 2000 71
Statements of Income for the years ended
December 31, 2001 and 2000 72
Statements of Partners' Capital for the years
ended December 31, 2001 and 2000 73
Statements of Cash Flows for the years ended
December 31, 2001 and 2000 74
Notes to the financial statements for the years
ended December 31, 2001 and 2000 75-79
4. Exhibits.
3. Registrant's Articles of Incorporation and
By-Laws are incorporated herein by reference.
11. Statement regarding computation of per share
earnings is incorporated herein by reference
to Registrant's 2001 Annual Report to
Shareholders 48
13. Registrant's 2001 Annual Report to Shareholders
is incorporated herein by reference. 13-49
20. Proxy Statement dated April 9, 2002, is
incorporated herein by reference. 50-65
21. Subsidiaries of the Registrant. 66
99.1 Independent Auditors' Report on Schedule 67
99.2 Valuation and Qualifying accounts 68
99.3 Vulcan-Brunswick Bowling Pin Company financial
statements 69-79
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended
December 31, 2001.
-12-
VULCAN INTERNATIONAL CORPORATION
EXECUTIVE OFFICERS
BENJAMIN GETTLER VERNON E. BACHMAN
Chairman of the Board Vice President and
and President Secretary-Treasurer
SUBSIDIARY COMPANIES
--------------------
VULCAN CORPORATION
Benjamin Gettler
President
Edward Ritter
Vice President/Operating Manager
Vernon E. Bachman
Vice President/Controller
Connie F. Armstrong
Secretary
VULCAN BOWLING PIN COMPANY VULCAN BLANCHESTER
REALTY CO.
Ricardo DeFelice
Executive Vice President Benjamin Gettler
President
John F. Gabriel
Vice President John F. Gabriel
Vice President
Vernon E. Bachman
Secretary/Treasurer
-13-
TO OUR SHAREHOLDERS:
During the Year 2001, the Company's net income after taxes increased to
$2,896,198 from $1,761,564 in the Year 2000. Of those amounts,
$1,940,664 resulted from a net gain after tax on sale of property,
equipment, and investments in 2001 compared to a net gain after tax of
$884,013 in the Year 2000. A substantial part of the gains was due
to the Company's decision in the Year 2000, to reduce gradually its
holdings of non-dividend-paying securities. Income before gain on sale
of assets and before income tax was $1,192,889 in the Year 2001 compared
to $933,926 the previous year.
The Company's plans to expand its real estate operations by the acquisition
of one or more additional office buildings in the Cincinnati area has been
delayed due to circumstances which arose during the year 2001 both locally
and nationally. The local uncertainty, has been caused by the racial unrest
in Cincinnati following the April, 2001 riots, while the national uncertainty
has, obviously, been caused by the tragic events of September 11, 2001. It
is our view that it will take a period of time for those uncertainties to be
sufficiently dissipated in order to present a clearer view of values in the
Cincinnati real estate market.
In its Clarksville rubber operation, the Company continued its emphasis
on the development and sale of foam products. As a result, foam sales
increased 49% in 2001. That increase was not sufficient, however, to
overcome the decline in the sale of other rubber products with the result
that total Clarksville sales fell by 10.5%. The change in product mix
did, however, cause a 31% reduction in the operating loss at Clarksville.
This reduction encourages us to believe that we are heading in the right
direction. We are grateful for the understanding of our Clarksville
employees who agreed through their union, United Steel Workers of
America, District 9, to extend the current collective bargaining
agreement to October 28, 2005.
BENJAMIN GETTLER
Chairman of the Board
and President
-14-
DESCRIPTION OF BUSINESS
Vulcan International Corporation is a Delaware holding company which is the
owner of 100% of the common stock of Vulcan Corporation and 100% of the
common stock of Vulcan Bowling Pin Company as well as Vulcan Blanchester
Realty Co. Descriptions of each company's operations are set forth below.
RUBBER AND FOAM PRODUCTS
Vulcan manufactures rubber and foam products in a 272,000 sq. ft. building
located in Clarksville, Tennessee. Approximately 50% of sales of products
manufactured in Clarksville in 2001 were for use by shoe manufacturers in
the United States. The majority of such sales were non-cured custom-mixed
materials for use in military footwear. Non-footwear products manufactured
in Clarksville were primarily for use by various prime manufacturers,
including sports flooring, automobile mats, novelty items, recreational
land and water vehicles and foam and custom-mix rubber for various non-
footwear manufacturers.
BOWLING PINS
Vulcan Bowing Pin Company is a 50% owner of a Joint Venture with Brunswick
Bowling and Billiards Corporation which manufactures bowling pins in Antigo,
Wisconsin. The pins are manufactured from hard maple and coated with Surlyn.
Vulcan sells pins in the United States and worldwide under the name of Vultex
II and Vultuf, as well as various private label names.
REAL ESTATE OPERATIONS
The Company's wholly owned subsidiary, Vulcan Blanchester Realty Company
owns a majority interest in the upper seven floors of the ten-story
Cincinnati Club Building in downtown Cincinnati, Ohio, and manages that
space. These floors contain approximately 56,000 square feet of finished
office space and approximately 32,000 square feet of unfinished and common
area space. Vulcan occupies a substantial portion of the tenth floor of the
building. The first three floors consist of public rooms owned by a company
which uses the space for public functions and a catering service. There is
direct access into the building from an eight-story parking garage
immediately adjacent to the Cincinnati Club Building owned and operated by
the City of Cincinnati. A picture of the building appears below. In
addition, the Company owns approximately 14,000 acres of undeveloped land
in the Upper Peninsula of Michigan. Timber is harvested from that land and
sold both in domestic and foreign markets.
-15-
MANAGEMENT ANALYSIS OF RECENT YEARS
2001 COMPARED TO 2000
---------------------
Sales of the Rubber Division decreased from $6,844,877 in 2000 to $6,129,434
in 2001. The decreased sales in low margin custom mix and flooring was
offset by the increase in foam product sales. As a result the operating
loss (before taxes) decreased from $1,292,120 in 2000 to $892,131 in 2001.
Sales of the Bowling Pin Division increased from $1,716,428 in 2000 to
$1,783,318 in 2001. The operating profit of the division decreased from
$286,521 in 2000 to $140,009 in 2001. The decreased production of the
Joint Venture, which manufactures bowling pins, resulted in lower profit
for the year and was largely responsible for the decreased operating profit.
Operating profit (before taxes) in the real estate operations increased from
$287,927 in 2000 to $516,824 in 2001. The increase in profit reflects an
adjustment of the real estate appraisal which is being appealed through the
legal processes.
Net gains on the disposal of assets were $2,011,978 in 2001 compared to
$607,284 in 2000. In both years the gains were mainly from the sale of
marketable securities and net gains from call option contracts. Dividends
and interest (before tax) were $2,287,609 in 2001 compared to $2,180,836
in 2000.
2000 COMPARED TO 1999
---------------------
Sales in the Rubber Division decreased from $6,880,103 in 1999 to $6,844,877
in 2000. The increased sales in custom mix which is a low margin item and
foam products was offset by the decrease in flooring sales. As a result, the
operating loss (before taxes) increased from $1,179,291 in 1999 to $1,292,120
in 2000.
Sales of the Bowling Pin Division increased from $1,686,027 in 1999 to
$1,716,428 in 2000. The operating profit of the division decreased from
$733,963 in 1999 to $286,521 in 2000 due to an increase in the production
cost of bowling pins. In 1999 cash distributions in excess of basis was
included in the division operating profit in the amount of $410,123.
Operating profit (before taxes) in the real estate operations decreased from
$321,011 in 1999 to $287,927 in 2000 due to the write-off of the unamortized
portion of tenant improvements of a tenant whose lease expired on December
31, 2000.
Net gains on the disposal of equipment and investments were $607,284 in 2000
compared to $89,429 in 1999. In both years, the gains were mainly from the
sale of marketable securities as the result of a decision to reduce gradually
the Company's holdings of non-dividend paying securities. Dividends and
interest (before tax) were $2,180,839 compared to $1,907,509 in 1999.
-16-
MANAGEMENT ANALYSIS OF RECENT YEARS
(Continued)
1999 COMPARED TO 1998
---------------------
In the Rubber Division, the Company increased its sales of low margin custom
mix rubber and continued its research and development efforts to develop and
market additional higher margin foam products. As a result, sales of rubber
and foam products increased from $6,113,730 in 1998 to $6,880,103 in 1999
while operating loss (before taxes) increased from $960,571 in 1998 to
$1,179,291 in 1999.
Changes in bowling pin manufacturing resulted in substantially reduced costs
which were largely responsible for operating profit (before taxes) from the
bowling pin segment increasing from $215,079 in 1998 to $733,963 in 1999. In
1999 past distributions in excess of basis was included in the division
operating profit in the amount of $410,123.
Operating profit (before taxes) in the real estate operations segment fell
from $403,522 to $321,011, primarily as the result of a huge increase in
real estate taxes. The increase is being appealed through appropriate legal
processes.
Net gains on the disposal of equipment and investments were $89,429 in 1999
compared to $408,866 in 1998. In 1999, the gains were mainly from the sale
of marketable securities. In 1998, the gains were mainly from the sale of
excess equipment from the Clarksville, Tennessee plant. Dividends and
interest (before tax) were $1,907,509 compared to $1,828,520 in 1998.
In August of 1999, Vulcan International Corporation sold all of the assets of
its Last manufacturing plant in Walnut Ridge, Arkansas. Sales from the Last
Division were $1,621,268 in 1998 and $758,712 in the approximately 7 1/2
months it was owned by Vulcan in 1999. The sale of the Last Division
resulted in 1999 net earnings, including capital gains on the sale, of
$925,789 compared to net earnings of $69,637 on operations in 1998.
The Company restated the 1999 financial statements to recognize a
liability and expense, net of tax, of $2,980,947 for environmental costs
resulting from a Federal Court judgment which the Company is contesting.
-17-
FINANCIAL POSITION, LIQUIDITY AND CAPITAL COMMITMENTS
The Company's cash requirements in 2001 were funded by its cash flow and
short term borrowing. The working capital decreased $6,361,129 during
the current year. The decreased working capital was mainly a result of
the decreased value of marketable securities and a decrease in short term
borrowing. Capital expenditures were $139,259 compared to total depreciation
and amortization of $383,260.
COMMON STOCK PRICES
2001 2000
--------------------------------------------------------
QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ---- --- -------- ---- --- --------
First 42.7500 34.2500 .20 33.1250 30.8750 .20
Second 40.5000 38.0000 .20 33.8750 32.8125 .20
Third 40.0000 38.7500 .20 34.2500 32.8750 .20
Fourth 40.2500 37.2400 .20 34.5000 33.3750 .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 2001 Vulcan International Corporation 10-K report filed with
the Securities and Exchange Commission will be furnished without charge upon
request by a shareholder or beneficial owner as of the record date,
March 29, 2002, 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
-18-
EXHIBIT 13
VULCAN INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2001
J.D. CLOUD & CO. L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-19-
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, 2001 and 2000, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vulcan
International Corporation and subsidiaries at December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with U.S.
generally accepted accounting principles.
/s/ J.D. CLOUD & CO. L.L.P.
-------------------------------
Certified Public Accountants
Cincinnati, Ohio
February 14, 2002
-20-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31, 2001 and 2000
-ASSETS- 2001 2000
CURRENT ASSETS:
Cash $ 2,493,733 1,008,649
Marketable securities 39,981,369 50,383,925
Accounts receivable (less-allowance
for doubtful accounts-$91,367
in 2001; $152,974 in 2000) 1,428,693 3,072,529
Inventories 356,290 941,090
Prepaid expense 14,384 16,221
Refundable federal income tax 59,226 71,080
---------- -----------
TOTAL CURRENT ASSETS 44,333,695 55,493,494
---------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 88,581 88,581
Timberlands and timber cutting rights 700,393 700,393
Buildings and improvements 4,225,627 4,205,851
Machinery and equipment 6,674,350 6,720,810
---------- -----------
Total 11,688,951 11,715,635
Less-Accumulated depreciation
and depletion 9,571,475 9,346,419
---------- -----------
PROPERTY, PLANT AND EQUIPMENT-NET 2,117,476 2,369,216
---------- -----------
MODELS AND PATTERNS-at nominal value 1 1
---------- -----------
INVESTMENT IN JOINT VENTURE 69,010 70,528
---------- -----------
DEFERRED CHARGES AND OTHER ASSETS:
Marketable securities 37,040,858 48,153,115
Note receivable 220,248 342,185
Other 5,316,199 4,715,419
---------- -----------
TOTAL DEFERRED CHARGES AND
OTHER ASSETS 42,577,305 53,210,719
----------- -----------
TOTAL ASSETS $89,097,487 111,143,958
========== ===========
-21-
-LIABILITIES AND SHAREHOLDERS' EQUITY- 2001 2000
CURRENT LIABILITIES:
Notes payable - bank $ - 1,700,000
Accounts payable-
Trade 872,717 604,552
Other 4,696 26,616
Accrued salaries, wages and commissions 120,261 124,086
Accrued other expenses 5,554,500 5,282,172
Deferred income tax 10,480,454 14,093,872
---------- -----------
TOTAL CURRENT LIABILITIES 17,032,628 21,831,298
---------- -----------
OTHER LIABILITIES:
Deferred income tax 12,791,949 16,309,169
Other 37,470 33,285
---------- -----------
TOTAL OTHER LIABILITIES 12,829,419 16,342,454
---------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9) - -
MINORITY INTEREST IN PARTNERSHIP 15,251 11,066
---------- -----------
SHAREHOLDERS' EQUITY:
Common stock-no par value;
Authorized 2,000,000 shares; issued
1,999,512 shares 249,939 249,939
Additional paid-in capital 8,191,065 7,745,102
Retained earnings 26,562,597 24,565,375
Accumulated other comprehensive income 46,599,325 60,846,586
---------- -----------
81,602,926 93,407,002
Less-Common stock in treasury-at cost,
897,793 shares in 2001;
859,988 shares in 2000 22,382,737 20,447,862
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 59,220,189 72,959,140
---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $89,097,487 111,143,958
=========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-22-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three years ended December 31, 2001
2001 2000 1999
REVENUES:
Net sales $ 8,372,813 9,065,403 9,012,118
Dividends and interest 2,287,609 2,180,839 1,907,509
---------- ---------- ----------
TOTAL REVENUES 10,660,422 11,246,242 10,919,627
---------- ---------- ----------
COST AND EXPENSES:
Cost of sales 7,956,079 9,290,074 9,251,832
General and administrative 1,053,077 1,127,114 801,897
Environmental remediation costs 297,374 21,196 4,579,483
Interest expense 255,298 362,323 289,318
---------- ---------- ----------
TOTAL COST AND EXPENSES 9,561,828 10,800,707 14,922,530
---------- ---------- ----------
EQUITY IN JOINT VENTURE INCOME
AND MINORITY INTEREST, NET 94,295 488,391 836,756
---------- ---------- ----------
INCOME (LOSS) BEFORE GAIN
ON DISPOSAL OF ASSETS 1,192,889 933,926 (3,166,147)
NET GAIN ON SALE OF PROPERTY,
EQUIPMENT AND INVESTMENTS 2,422,723 940,803 447,473
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 3,615,612 1,874,729 (2,718,674)
INCOME TAX PROVISION (BENEFIT) 719,414 113 165 (1,317,658)
---------- ---------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 2,896,198 1,761,564 (1,401,016)
DISCONTINUED OPERATIONS:
Gain on sale of division assets,
net of income tax - - 988,845
Income (loss) from operations,
net of income tax - - (63,056)
---------- ---------- ----------
NET INCOME (LOSS) $ 2,896,198 1,791,564 (475,227)
========== ========== ==========
Income (Loss) Per Common Share:
Continuing operations $ 2.59 1.59 (1.25)
Discontinued operations - - (0.06)
Gain on disposal of
discontinued operations - - 0.88
---------- ---------- ----------
Net Income (Loss)per Common
Share Outstanding $ 2.59 1.59 (0.43)
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-23-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three years ended December 31, 2001
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income
------ ---------- -------- -------------
Balance at January 1, 1999 $249,939 5,626,843 25,054,570 52,506,224
Add-Sale of treasury shares 519,855
Deduct-Net loss for the year 475,227
Dividends declared-
$.80 per share 884,955
Net unrealized loss on
available-for-sale
securities (net of tax
benefit of $2,367,157) 4,595,070
Reclassification
adjustment for gains
included in net income
(net of tax of $30,257) 58,733
Purchase of treasury
shares
------- --------- ---------- ----------
Balance at December 31, 1999 249,939 6,146,698 23,694,388 47,852,421
Add-Net income for the year 1,761,564
Net unrealized gain on
available-for-sale
securities (net of taxes
of $6,864,059) 13,324,327
Sale of treasury shares 1,598,404
Deduct-Dividends declared-
$.80 per share 890,577
Reclassification
adjustment for gains
included in net income
(net of tax of
$170,084) 330,162
Purchase of treasury
shares
------- --------- ---------- ----------
Balance at December 31, 2000 249,939 7,745,102 24,565,375 60,846,586
Add-Net income for the year 2,896,198
Net unrealized loss on
available-for-sale
securities (net of tax
benefit of $6,832,881) (13,261,183)
Sale of treasury shares 445,963
Deduct-Dividends declared-
$.80 per share 898,976
Reclassification adjustment
for gains included in net
income (net of tax of
$507,980) 986,078
Purchase of treasury
shares
------- --------- ---------- ----------
Balance at December 31, 2001 $249,939 8,191,065 26,562,597 46,599,325
======= ========= ========== ==========
-24-
Common
Treasury Shares Total
Comprehensive ------------------- Shareholders'
Income (Loss) Shares Amount Equity
-------------- -------------------- ------------
Balance at January 1, 1999 863,177 18,141,652 65,295,924
Add- Sale of treasury shares (22,799) (111,393) 631,248
Deduct-Net loss for the year 475,227 475,227
Dividends declared-
$.80 per share 884,955
Net unrealized loss
on available-for-sale
securities (net of tax
benefit of $2,367,157) 4,595,070 4,595,070
Reclassification
adjustment for gains
included in net income
(net of tax of $30,257) 58,733 58,733
Purchase of treasury
shares 52,529 1,776,172 1,776,172
---------- ------- ---------- ----------
Balance at December 31, 1999 (5,129,030) 892,907 19,806,431 58,137,015
==========
Add-Net income for the year 1,761,564 1,761,564
Net unrealized gain on
available-for-sale
securities (net of
taxes of $6,864,059) 13,324,327 13,324,327
Sale of treasury shares (65,000) (418,471) 2,016,875
Deduct-Dividends declared-
$.80 per share 890,577
Reclassification
adjustment for gains
included in net
income (net of tax
of $170,084) 330,162 330,162
Purchase of treasury
shares 32,081 1,059,902 1,059,902
---------- ------- ---------- ----------
Balance at December 31, 2000 14,755,729 859,988 20,447,862 72,959,140
==========
Add-Net income for the year 2,896,198 2,896,198
Net unrealized loss on
available-for-sale
securities (net of
tax benefit of
$6,832,881) (13,261,183) (13,261,183)
Sale of treasury shares (16,500) (169,006) 614,969
Deduct-Dividends declared-
$.80 per share 898,976
Reclassification
adjustment for gains
included in net income
(net of tax of $507,980) 986,078 986,078
Purchase of treasury
shares 54,305 2,103,881 2,103,881
---------- ------- ---------- ----------
Balance at December 31, 2001 (11,351,063) 897,793 22,382,737 59,220,189
========== ======= ========== ==========
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, 2001
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 8,450,305 8,774,935 9,697,767
Cash paid to suppliers and employees (8,621,019) (10,545,516) (11,713,251)
Dividends and interest received 2,287,609 2,180,839 1,909,882
Interest paid (55,184) (169,144) (154,515)
Income taxes paid (486,083) (104,775) (257,867)
---------- ---------- ----------
NET CASH FLOWS FROM
OPERATING ACTIVITIES 1,575,628 136,339 (517,984)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment 513,245 335,173 1,080,719
Proceeds from sale of marketable
securities 1,896,981 811,106 92,716
Purchase of marketable securities (152) (69,838) -
Purchase of property, plant and
equipment (139,259) (224,878) (378,530)
Cash distribution from joint venture 100,000 418,000 900,000
Collection on notes receivable 114,279 107,725 25,928
---------- ---------- ----------
NET CASH FLOWS FROM
INVESTING ACTIVITIES 2,485,094 1,377,288 1,720,833
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements 565,000 1,085,000 5,486,319
Principal payments under credit
agreements (2,265,000) (1,195,000) (4,846,319)
Proceeds from sale of treasury shares 2,127,220 466,875 631,248
Purchase of common shares (2,103,882) (1,059,902) (1,776,172)
Cash dividends paid (898,976) (890,577) (884,955)
---------- ---------- ----------
NET CASH FLOWS FROM
FINANCING ACTIVITIES (2,575,638) (1,593,604) (1,389,879)
---------- ---------- ----------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 1,485,084 (79,977) (187,030)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,008,649 1,088,626 1,275,656
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 2,493,733 1,008,649 1,088,626
========== ========== ==========
-26-
2001 2000 1999
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 2,896,198 1,761,564 (475,227)
Adjustments:
Depreciation and amortization 383,260 452,550 493,666
Deferred income tax 208,860 (11,435)(1,357,431)
Equity in joint venture income and
minority interest (94,296) (488,391) (836,756)
Gain on sale of property, equipment
and investments (2,422,723) (940,803)(1,683,529)
Stock compensation programs 37,750 - -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable 101,494 (105,543) (58,689)
(Increase) decrease in inventories 584,800 182,313 (627,248)
Increase in prepaid pension asset (602,961) (863,595) (804,774)
Increase (decrease) in accounts
payable, accrued expenses and
other assets, net 483,246 149,679 4,832,004
---------- ---------- ---------
NET CASH FLOWS FROM
OPERATING ACTIVITIES $ 1,575,628 136,339 (517,984)
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-27-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
It is the policy of the Company to employ U.S. generally accepted accounting
principles in the preparation of its financial statements. A summary of the
Company's significant accounting policies follows:
ACCOUNTING ESTIMATES-
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BASIS OF CONSOLIDATION-
The consolidated financial statements include the accounts of Vulcan
International Corporation, its wholly-owned subsidiary companies and its
majority-owned partnership. Intercompany accounts and transactions have been
eliminated in consolidation.
MINORITY INTEREST-
Cincinnati Club Building Associates (CCBA) was formed in 1993 for the
purchase of certain commercial property in Cincinnati, Ohio. The Company's
offices are located in a portion of the property with the remainder available
for leasing. The Company's consolidated financial statements include 100% of
the assets, liabilities and income, or loss, of CCBA. The minority owner's
2.5% interest in CCBA is reflected as a minority interest in partnership and
a minority interest in (income) of partnership in the respective consolidated
balance sheets and consolidated statements of income.
INVESTMENT IN JOINT VENTURE-
In June 1990, the Company formed a Joint Venture (the Vulcan Brunswick
Bowling Pin Company) with Brunswick Bowling and Billiards Corporation to
manufacture bowling pins. The Company, through a wholly-owned subsidiary,
has an undivided 50% interest in the Joint Venture which is accounted for
under the equity method of accounting. Under this method, the Company
records the investment at its original cost adjusted for 50% of the Joint
Venture's income or loss since formation less any distributions received from
the Joint Venture.
MARKETABLE SECURITIES-
Marketable securities are classified as securities available-for-sale and,
accordingly, are recorded at fair market value. Marketable securities
available for current operations are classified as current assets while
securities held for non-current uses are classified as long-term assets.
Dividends and interest are recorded in income when earned. Unrealized
holding gains and losses, net of deferred tax, are included as a component
of shareholders' equity until realized. In computing realized gain or loss
on the sale of marketable securities, the cost of securities sold is
determined by the specific identification method.
-28-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVENTORIES-
Substantially all inventories are stated at cost under the last-in, first-out
(LIFO) method, which is not in excess of market.
PROPERTY, PLANT AND EQUIPMENT-
Property, plant and equipment are stated at cost. The Company provides for
depreciation over the estimated useful lives of the respective assets using
both straight line and accelerated methods. Buildings and improvements are
depreciated over 10 to 45 years, machinery and equipment over 3 to 11 years,
and leasehold improvements are amortized over the lives of the leases.
Timber depletion charges are based on the cost of timber cut.
DERIVIATIVE INSTRUMENTS-
The Company sold short-term option contracts on certain non-dividend paying
securities owned by the Company in order to reduce the amount of investment in
these securities. Option contracts are reported at their fair value as
determined by quoted market prices. Gains and losses on the contracts are
recorded in net gain on sale of property, equipment and investments in the
statements of income.
INCOME TAXES-
Income tax provision (benefit) includes the tax effects of all revenue and
expense transactions included in the determination of pretax accounting
income. Deferred income tax results from temporary differences in the
financial statement basis and tax basis of assets and liabilities. These
temporary differences apply principally to depreciation expense, allowance
for doubtful accounts, compensated absences and prepaid pension expense.
Tax credits are recognized by a reduction of income tax expense in the
periods the credits arise for tax purposes.
COMPREHENSIVE INCOME-
Other comprehensive income is reported in the statement of shareholders'
equity. The Company includes unrealized gains, or losses, on its available-
for-sale securities in comprehensive income and accumulated other
comprehensive income.
RETIREMENT PLANS-
The Company maintains a noncontributory defined benefit pension plan for
certain eligible salaried and hourly employees. Pension benefits are
determined annually by consulting actuaries and are based on average
compensation and years of service. Past service cost is amortized over
periods not exceeding 30 years.
-29-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RETIREMENT PLANS- (Continued)
The Company also maintains a noncontributory defined contribution pension
plan for certain eligible union employees. Contributions to the plan are
based upon a participant's hours of service.
The qualified plans are funded annually to meet the minimum funding
requirements of the Internal Revenue Code and the Employee Retirement
Income Security Act of 1974.
ADVERTISING COSTS-
Advertising costs are generally expensed as incurred.
CASH EQUIVALENTS-
For purposes of the statement of cash flows, the Company considers all time
deposits, certificates of deposit and other highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
NET INCOME PER SHARE-
Net income per share of common stock outstanding is computed on the basis of
the weighted average number of common shares outstanding during each year.
EFFECT OF RECENT ACCOUNTING STANDARDS-
Effective January 1, 2001 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 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 adoption of this standard was not significant.
NEW PROUNOUNCEMENTS-
The Financial Accounting Standards Board has issued Statement No. 141, Business
Combinations, effective for combinations after June 30, 2001, Statement No.
142, Goodwill and Other Intangible Assets, effective for goodwill and other
intangible assets acquired after June 30, 2001 and for other goodwill and other
intangible assets effective January 1, 2002, Statement No. 143, Accounting for
Asset Retirement Obligations, effective January 1, 2003, Statement No. 144,
Accounting For The Impairment or Disposal of Long-Lived Assets and for Long-
Lived Assets To Be Disposed Of, effective January 1, 2002. These standards
are not expected to have a significant impact on the Company's results of
operations.
-30-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 2 - MARKETABLE SECURITIES
The Company's investments in marketable securities have been classified as
available-for-sale securities and reported at their fair value as determined
by quoted market prices as follows:
Unrealized Fair
Cost Gains Value
------ ---------- -------
2001
Current $ 3,793,906 36,187,463 39,981,369
Long-term 2,623,283 34,417,575 37,040,858
--------- ---------- ----------
$ 6,417,189 70,605,038 77,022,227
========= ========== ==========
2000
Current $ 3,721,960 46,661,965 50,383,925
Long-term 2,623,283 45,529,832 48,153,115
--------- ---------- ----------
$ 6,345,243 92,191,797 98,537,040
========= ========== ==========
The unrealized holding gains are included, net of deferred income tax of
$24,005,714 and $31,345,211 at December 31, 2001 and 2000, respectively,
as a component of shareholders' equity.
Realized gains on available-for-sale securities during 2001 and 2000 were
$1,448,941 and $500,246, respectively and gross proceeds on the sale of the
securities were $1,566,217 and $535,026, respectively. Net realized and
unrealized gains from call option contracts for the years ended December 31,
2001 and 2000, were $326,505 and $127,969, respectively. Gross proceeds
were $330,764 and $197,807, respectively, for those same years.
The Company's available-for-sale marketable securities, at fair market value,
are invested as follows: 69% in two financial institutions, 30% in eleven
communication companies and 1% in other industries. The Company is subject
to the risk that the value of these securities may decline from the recorded
fair market values.
As of February 14, 2002, the fair value of marketable securities was
approximately $74,572,000 and the net unrealized holding gain was
approximately $44,985,000 net of deferred taxes of approximately
$23,174,000.
-31-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 3 - INVENTORIES
Inventories at December 31, 2001 and 2000, were classified as follows:
2001 2000
Finished goods $142,846 657,693
Work in process 64,853 72,992
Raw materials 148,591 210,405
------- -------
Total $356,290 941,090
======= =======
As indicated in Note 1, substantially all inventories are stated at cost
determined under the last-in, first-out (LIFO) method. If valued at current
replacement cost, inventories would have been approximately $917,000 and
$1,239,000 greater than reported at December 31, 2001 and 2000, respectively.
In the years ended December 31, 2001 and 2000, 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 2001 and
2000 net income by approximately $212,000 and $49,000, respectively, or $.19
and $.04 per weighted-average common share outstanding, respectively.
NOTE 4 - JOINT VENTURE
The Company, through a wholly-owned subsidiary, owns a 50% interest in a
Joint Venture, Vulcan Brunswick Bowling Pin Company (VBBPC) which
manufactures bowling pins in Antigo, Wisconsin, for Brunswick and the
Company.
Summarized financial information for VBBPC consists of the following:
2001 2000
Assets:
Current assets $1,640,465 1,343,660
Property, plant and equipment 2,753,814 3,036,156
Other 2,832,384 2,944,464
--------- ---------
Total $7,226,663 7,324,280
========= =========
Liabilities and Partners' Capital:
Current liabilities $ 248,750 279,883
Partners' capital 6,977,913 7,044,397
--------- ----------
Total $7,226,663 7,324,280
========= =========
-32-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 4 - JOINT VENTURE (Continued)
2001 2000 1999
Statements of Operations:
Net sales $4,177,916 9,261,854 9,191,563
Costs and expenses 4,061,802 8,464,507 8,487,964
Other income (net) 17,402 24,025 16,469
--------- ---------- ---------
Net income $ 133,516 821,372 720,068
========= ========== =========
Company's equity in net
income of VBBPC $ 66,758 410,686 360,034
Distribution in excess
of basis - - 410,123
Adjustments 31,724 77,842 66,754
---------- ---------- ---------
Company's equity in net
income $ 98,482 488,528 836,911
========== ========== =========
The Company, under the equity method of accounting, increases its investment
in VBBPC for its share of VBBPC's income and decreases its investment for
any distributions received. Distributions in excess of the Company's recorded
investment are included in current income.
The Company's 50% interest in the net assets of VBBPC amounted to $3,488,957
at December 31, 2001. There were no undistributed earnings from the Joint
Venture included in the Company's retained earnings at December 31, 2001.
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, 2001 or 2000. The Company adjusts its investment in VBBPC
through its equity in VBBPC's net income which is further adjusted to
reflect inventories on the last-in, first-out method of accounting.
Transactions between VBBPC and the Company consist of the following at
December 31:
2001 2000 1999
Sales to VBBPC $ - - 140,000
Purchases from VBBPC 905,000 1,743,000 1,751,000
Administrative fees received
from VBBPC 110,000 30,000 30,000
Net amount due to VBBPC 517,000 266,000 243,000
Cash distributions from VBBPC 100,000 418,000 900,000
-33-
Vulcan INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 5 - NOTES PAYABLE
The Company maintains a revolving credit agreement with its bank that
provides for borrowings of up to $6,000,000 through November 1, 2002.
Interest is payable monthly at the lesser of the federal funds rate plus
1.75% or a rate based on the Euro-Rate as determined by the bank in
accordance with its usual procedures. There were no borrowings at
December 31, 2001. Borrowings under the agreement were $1,700,000 at
December 31, 2000 and were secured by certain marketable equity
securities.
The weighted average interest rate was 6.73% and 7.78% for the respective
years ended December 31, 2001 and 2000. Marketable securities pledged as
collateral under the agreement had a market value of approximately
$22,405,900 at December 31, 2001.
The Company also maintains a revolving credit agreement with its bank that
provides for additional short-term borrowings of up to $5,000,000 at the
prime rate secured by certain real and personal property of the Company.
NOTE 6 - DISCONTINUED OPERATIONS
In August 1999, the Company completed the sale of its Walnut Ridge, Arkansas
plastics operations. In connection with the sale, the Company received a
note for $600,000. Total proceeds from the disposal of the plastics
operations were $1,322,319.
Net sales and income from discontinued operations are as follows:
1999
Net sales $758,712
=======
Income (loss) before income taxes (78,820)
Income tax expense (benefit) (15,764)
-------
Net income (loss) from operations $(63,056)
=======
The gain on the sale of division assets was $988,845, net of income taxes of
$247,211.
-34-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 7 - LEASES
The Company leases office space to various tenants under operating leases
expiring from 2002 to 2008. The Company's basis in the property held for
lease at December 31, 2001 and 2000 is as follows:
2001 2000
Land $ 37,803 37,803
Building and improvements 770,249 751,802
------- -------
808,052 789,605
Less accumulated depreciation 344,360 266,199
------- -------
$463,692 523,406
======= =======
Minimum future rental income under noncancelable leases as of December 31,
2001, is as follows:
Year ending December 31,
2002 $ 336,800
2003 383,100
2004 257,400
2005 210,300
2006 190,400
Thereafter 201,300
---------
$1,579,300
=========
The Company incurred rental expense under operating leases of approximately
$10,000 for the year ended December 31, 1999.
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory defined benefit pension plan for
certain eligible salaried and hourly employees. The funded status and net
pension credit recognized in the accompanying consolidated financial
statements consisted of:
-35-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 8 - EMPLOYEE BENEFITS PLANS (Continued)
2001 2000
Change in projected benefit obligations:
Benefit obligation - January 1, $ 8,280,133 8,411,541
Service cost 39,933 45,634
Interest cost 531,402 524,598
Actuarial (gain) loss 221,892 (71,233)
Benefits paid (653,222) (630,407)
---------- ----------
Projected benefit obligation -
December 31, 8,420,138 8,280,133
---------- ----------
Change in plan assets:
Fair value of plan assets - January 1, 13,943,244 15,641,737
Actual return on plan assets (1,021,851) (1,068,086)
Benefits paid (653,222) (630,407)
---------- ----------
Fair value of plan assets -
December 31, 12,268,171 13,943,244
---------- ----------
Funded status 3,848,033 5,663,111
Unrecognized prior service cost 41,193 86,960
Unrecognized net gain from actual
experience different from that assumed 1,393,134 (939,673)
Unrecognized net transition asset - (130,998)
---------- ----------
Prepaid pension expense - December 31, $ 5,282,360 4,679,400
========== ==========
2001 2000 1999
Components of net periodic
benefit costs:
Service cost $ 39,933 48,600 48,196
Interest cost 530,243 520,756 526,014
Return on plan assets:
Actual 1,021,851 1,068,086 (1,408,834)
Deferred (2,109,756) (2,460,752) 70,136
Amortization of prior
service cost 45,767 90,716 90,715
Amortization of net
transition asset (130,998) (131,001) (131,001)
--------- --------- ---------
Periodic pension benefit $ (602,960) (863,595) (804,774)
========= ========= =========
-36-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
Significant actuarial assumptions used in the above computations include the
following:
2001 2000
Assumed discount rate 6.5% 6.5%
Expected long-term rate of return on
plan assets 8.0% 8.0%
Rate of increase in future compensation levels 5.0% 5.0%
Average remaining service period 11 years 11 years
Pension plan assets are invested primarily in U.S. Government guaranteed debt
securities and publicly-traded stocks and bonds. The vested actuarial
present value of benefit obligations is based upon the participant's expected
date of separation or retirement.
Company contributions to its defined contribution plan were $16,000 in 2001,
$20,000 in 2000 and $20,000 in 1999.
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 November 2001, the Company's Board of Directors ratified a December 1999
resolution of its executive committee making treasury shares available for
purchase by directors, including directors of wholly-owned subsidiaries, at
the lowest price for which a sale is made on the date of exercise up to a
maximum of 25,000 shares per year. Shares purchased under this policy may
not be transferred for a period of six months to anyone other than the
Company, another director, or in the event of the death of the director,
to the director's estate. The resolution provided for said policy to
continue until rescinded by the Board of Directors. Two directors
purchased a total of 16,500 shares during the year under this resolution.
In 1999, the Company's Stock Option Committee granted options, expiring in
2002, to purchase not more than 50,000 shares of treasury stock at $31 per
share to the President of the Company. During 2000, all 50,000 options were
exercised. A note receivable of $1,550,000 was included in accounts
receivable at December 31, 2000, in connection with the exercised options.
Payment was received in 2001.
-37-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 8 - EMPLOYEE BENEFIT PLANS (Continued)
In 2001, the Company's Stock Option Committee granted options, expiring in
2004 to purchase not more than 50,000 shares of treasury stock at $37.24
per share to the President of the Company. No options were exercised under
this grant during 2001.
In November 2001, the Compensation Committee awarded the President of the
Company 1,000 shares of common stock, valued at $37,750, as additional
compensation for his services.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company was advised by the U.S. EPA several years ago that it was one of at
least 122 large generator potentially responsible parties ("PRPs") with regard
to remediation of the Union Chemical Company, Inc. Site, South Hope, Maine,
where the potential joint and several liability was in the range of $15
million. The Company, along with many other PRPs, entered into a consent
agreement with U.S. EPA to remediate the Site, and the Company is now a party
to a Remedial Design/Remedial Action Trust Agreement for the purpose of
undertaking clean-up responsibilities at the Site. Most of the remedial work
has now been completed. In 2000, PRPs estimated the additional funds in the
range of $1 million would be required to complete remediation of the Site.
The Company's estimated share of that amount was approximately $5,000. The
Company made payment of that amount in late 2000. If the projected cost of
the remaining remediation tasks remains at approximately $1 million, this will
be the Company's final payment. There may be other potential clean-up
liabilities at other sites of which the Company has no specific knowledge.
The Company has an interest in a partnership, CCBA, which owns certain real
estate. On August 13, 1999 a complaint for money damages, in excess
of $25,000, based upon breach of fiduciary duty was filed by the other
partner in the Court of Common Pleas in Hamilton County, Ohio.
Essentially, the plaintiff is seeking an adjustment of the capital
account balances which would result in a higher distribution of cash
flow. On March 27, 2001, the plaintiff threatened to file an amended
complaint that alleges damages of $1,062,000 and costs, plus punitive
damages of $2,000,000 on various grounds. The Company believes that
the suit is without merit and has been defending itself vigorously
against the issues raised.
CCBA appealed a real estate tax assessment from 1999 that had increased the
annual real estate tax by approximately $96,000. The local school board has
appealed the revision and reduced its initial appraised value of the property.
During 2001, the partnership received a $96,000 refund of the additional tax
paid in 1999. CCBA has recorded a liability of approximately $119,000 related
to this issue based on the revised value asserted by the local school board.
If CCBA is successful, this liability will be recognized as income.
-38-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
On March 1, 1990 the United States of America filed a complaint against the
Company and others in the United States District Court for the District of
Massachusetts claiming that the Company was a potentially responsible party
with respect to the Re-Solve, Inc. Superfund Site in North Dartmouth,
Massachusetts seeking to recover response costs incurred and to be incurred
in the future in connection with this site.
Although the Company had engaged counsel to represent it in that action,
the Company was first informed on March 28, 2001 that the Court had entered,
pursuant to prior rulings, an unopposed "Final Judgment" against the Company
on September 22, 1999. The "Final Judgment" awarded damages against the
Company in favor of the United States in the amount of $3,465,438, plus
interest, for unreimbursed response costs, plus any additional past
unreimbursed response costs, interest and certain future costs the United
States incurs at the site.
In accordance with Accounting Principles Board Opinion No. 20, Accounting
Changes, the Company restated its December 31, 1999 financial statements to
record an estimated liability and decrease net income by $2,981,000, net of
$1,734,000 tax, for the judgment, accrued interest for past costs and a
discounted present value for estimated future costs in connection with the
site. This estimated liability was calculated based on the "Final Judgment"
and using other information provided by the U.S. EPA. The Company expensed
$151,000 and $140,000, after tax, for the years ended December 31, 2001 and
2000, respectively for accrued interest and amortization of estimated future
costs related to this matter.
The liability for future costs is a significant estimate of the future costs
and it is subject to change as actual costs are incurred and reported by the
Environmental Protection Agency.
The Company is presently continuing an investigation into this matter and
intends to vigorously pursue all available legal remedies to set aside all
orders and liens relating to the asserted liability and to defend itself
against the underlying allegations. Counsel for the Company is also vigorously
pursuing settlement negotiations with counsel for the United States. To the
extent that the Company is able to settle this liability, or to obtain judicial
relief, for an amount less than it has accrued, the difference will be recorded
as income in the year the obligation is settled.
The Company is involved in other litigation matters and claims which are normal
in the course of operations. Management believes that the resolution of these
matters will not have a material effect on the Company's business or financial
condition.
At December 31, 2001 approximately 73% of the Company's labor force was subject
to collective bargaining agreements which expire in October 2005.
-39-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
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. During 2001, the Company used a
net operating loss carryforward of approximately $389,000.
Significant components of the Company's deferred tax liabilities and assets
as of December 31 are as follows:
2001 2000
Deferred tax liabilities:
Excess tax depreciation $ 57,023 76,289
Prepaid pension expense 1,822,818 1,620,905
Undistributed earnings of
domestic subsidiary 195,943 182,789
Unrealized holding gains 24,039,318 31,345,211
---------- ----------
Total deferred tax liabilities 26,115,102 33,225,194
---------- ----------
Deferred tax assets:
Vacation accruals 33,677 41,870
Allowance for doubtful accounts 31,066 52,011
Investment in joint venture 42,563 15,961
Accrued other expenses 38,638 1,711
Net operating loss carryforward - 135,736
Environmental remediation liability 1,753,507 1,675,604
Alternative minimum tax credit
and general business credit
carryforward 943,248 899,260
---------- ----------
Total deferred tax assets 2,842,699 2,822,153
---------- ----------
Net deferred tax liabilities $23,272,403 30,403,041
========== ==========
-40-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 10 - INCOME TAXES (Continued)
Significant components of the income tax provision are as follows:
2001 2000 1999
Current $510,554 124,600 39,773
Deferred 208,860 (11,435) (1,357,431)
------- ------- ---------
Income tax (benefit) from
continuing operations 719,414 113,165 (1,317,658)
Tax on discontinued and
disposed operations - - 231,447
------- ------- ---------
Total income tax
(benefit) $719,414 113,165 (1,086,211)
======= ======= =========
A reconciliation of income tax at the federal statutory rate of 34% to the
income tax provision follows:
2001 2000 1999
Income taxes from continuing
operations at federal statutory rate $1,229,308 637,408 (924,349)
Increase (reduction) in taxes
resulting from:
Domestic corporation dividend
received deduction (520,603) (495,751) (442,271)
Amortization - 16,386 16,386
Stock options - (42,500) -
Other-net 10,709 (2,378) 32,576
--------- ------- ---------
Income tax provision - current
operations 719,414 113,165 (1,317,658)
Income taxes on discontinued
and disposed operations - - 231,447
------- ------- ---------
Total income tax (benefit) $ 719,414 113,165 (1,086,211)
======= ======= =========
-41-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 11 - FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, notes receivable and
current liabilities approximate fair value. The fair value of marketable
securities and unexpired option contracts was determined based on quoted
market prices.
Financial instruments which potentially subject the Company to concentrations
of credit risk are cash investments which may, at times, exceed federally
insured limits, notes receivable and marketable securities. The Company
places its cash investments with high-credit-quality financial institutions.
The borrower's credit worthiness has been evaluated in connection with the
note receivable. The Company does not believe significant concentration of
credit risk exists with respect to these financial instruments.
Concentrations in marketable securities are as disclosed in Note 2.
NOTE 12 - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. The Company
has three reportable segments: rubber and foam, bowling pins, and real estate
operations. The rubber and foam segment produces foam products, uncured
rubber and other rubber products. Operations in the bowling pin segment
involve the sale of bowling pins and production of bowling pins through its
50% owned joint venture. The real estate operations segment consists of
rental real estate and undeveloped real estate from which income is currently
derived from the sale of timber. Total revenue by segment includes both
sales to unaffiliated customers, as reported in the Company's consolidated
income statement, and intersegment sales which are accounted for generally
at current market prices.
The Company sells its products principally within the United States. Sales
in various foreign countries totaled $376,266 in 2001, $544,365 in 2000 and
$386,000 in 1999. The Company does not have assets located outside the
United States.
Operating profit is total revenue less operating expenses. In computing
operating profit, the following items have not been added or deducted:
general corporate expenses, interest expense, federal and state income taxes,
dividend and interest income and nonrecurring gains or losses realized on the
sale of property, equipment and marketable securities. Revenue from timber
sales is reported in the consolidated statement of income under gains on sale
of property, equipment and investments.
-42-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 12 - BUSINESS SEGMENTS (Continued)
Identifiable assets are reported for the Company's operations in each
segment. Corporate assets consist principally of cash, marketable
securities, notes receivable and prepaid pension expense. To reconcile
industry information with consolidated amounts, intersegment sales of
$354,631 in 2001, $523,734 in 2000 and $403,586 in 1999 have been eliminated.
Information relative to the major segments of the Company's operations
follows:
2001 2000 1999
SALES TO UNAFFILIATED CUSTOMERS:
Rubber and Foam $ 6,129,434 6,844,877 6,880,103
Bowling Pins 1,783,318 1,716,428 1,686,027
Real Estate Operations 870,806 837,617 804,032
---------- ---------- ----------
$ 8,783,558 9,398,922 9,370,162
========== ========== ==========
INTERSEGMENT SALES:
Rubber and Foam $ 144,422 108,826 24,591
Discontinued Operations - - 3,931
Bowling Pins 210,208 414,908 375,064
---------- ---------- ----------
$ 354,630 523,734 403,586
========== ========== ==========
INTEREST INCOME:
Bowling Pins $ 25,641 38,267 28,506
Bowling Pins - Intercompany 4,959 4,959 4,959
Real Estate Operations 18,162 11,096 8,784
Corporate 51,157 42,231 11,938
---------- ---------- ----------
$ 99,919 96,553 54,187
========== ========== ==========
OPERATING PROFIT (LOSS):
Rubber and Foam $ (892,131) (1,292,120) (1,179,291)
Bowling Pins 140,009 286,521 733,963
Real Estate Operations 516,824 287,927 321,011
---------- ---------- ----------
SUBTOTAL (235,298) (717,672) (124,317)
GENERAL CORPORATE INCOME (LOSS) 4,111,167 2,959,683 (2,300,080)
INTEREST EXPENSE - INTERCOMPANY (4,959) (4,959) (4,959)
INTEREST EXPENSE - OTHER (255,298) (362,323) (289,318)
---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 3,615,612 1,874,729 (2,718,674)
-43-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 12 - BUSINESS SEGMENTS (Continued)
2001 2000 1999
INCOME TAX PROVISION (BENEFIT) 719,414 113,165 (1,317,658)
---------- ---------- ----------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS 2,896,198 1,761,564 (1,401,016)
DISCONITUED OPERATIONS:
Gain on disposal of division
assets, net of income tax - - 988,845
Income (loss) from operations,
net of income tax - - (63,056)
----------- --------- ---------
NET INCOME (LOSS) $ 2,896,198 1,761,564 (475,227)
=========== ========= =========
DEPRECIATION AND AMORTIZATION:
Rubber and Foam $ 260,164 304,683 346,438
Bowling Pins 424 594 832
Real Estate Operations 80,564 96,804 69,099
Corporate and Other 42,108 50,469 60,696
Discontinued Operations - - 16,601
----------- ---------- ----------
$ 383,260 452,550 493,666
=========== ========== ==========
IDENTIFIABLE ASSETS:
Rubber and Foam $ 2,395,488 4,371,872 3,237,810
Bowling Pins 1,441,660 1,929,508 1,762,718
Real Estate Operations 1,197,515 1,015,855 1,002,829
Corporate and Other 84,062,824 103,826,723 83,533,439
----------- ----------- ----------
$ 89,097,487 111,143,958 89,536,796
=========== ========== ==========
CAPITAL EXPENDITURES:
Rubber and Foam $ 112,767 126,936 119,254
Bowling Pins - - -
Real Estate Operations 19,775 92,922 212,147
Discontinued Operations - - 10,745
----------- ---------- ----------
$ 132,542 219,858 342,146
=========== ========== ==========
EQUITY IN JOINT VENTURE INCOME
INCLUDED IN BOWLING PIN SEGMENT
OPERATING INCOME $ 98,481 488,528 836,911
=========== ========== ==========
INVESTMENT IN JOINT VENTURE
INCLUDED IN BOWLING PIN
SEGMENT ASSETS $ 69,010 70,528 -
=========== ========== ==========
-44-
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three years ended December 31, 2001
(Continued)
NOTE 12 - BUSINESS SEGMENTS (Continued)
2001 2000 1999
REVENUES:
Total revenues for reportable
segments $ 8,783,558 9,398,922 9,370,162
Timber sales included in gain
on disposal of assets on
consolidated income statement (410,745) (333,519) (358,044)
----------- ---------- ----------
TOTAL CONSOLIDATED REVENUES $ 8,372,813 9,065,403 9,012,118
=========== ========== ==========
NOTE 13 - COMPUTATION OF NET INCOME AND CASH DIVIDENDS PER
COMMON SHARE OUTSTANDING:
2001 2000 1999
a) Income (loss) from operations $2,896,198 1,761,564 (1,401,016)
b) Income (loss) from discontinued
operations, net of tax - - (63,056)
c) Gain on sale of division assets,
net of tax - - 988,845
--------- --------- ---------
d) Net income (loss) $2,896,198 1,761,564 (475,227)
========= ========= =========
e) Dividends on common shares $ 898,976 890,577 884,955
========= ========= =========
Weighted average shares:
f) Common shares issued 1,999,512 1,999,512 1,999,512
g) Common treasury shares 879,934 888,213 879,149
--------- --------- ---------
h) Common shares outstanding 1,119,578 1,111,299 1,120,363
========= ========= =========
i) Income (loss) per common share
outstanding:
Continuing operations (a/h) $ 2.59 1.59 (1.25)
Discontinued operations (b/h) - - (.06)
Gain on sale of division
assets (c/h) - - .88
--------- --------- ---------
Net income (loss) per common
share outstanding $ 2.59 1.59 (.43)
========= ========= =========
j) Dividends paid per common share $ .80 .80 .80
========= ========= =========
-45-
VULCAN INTERNATIONAL CORPORATION
Five-Year Record
Selected Financial Data
2001 2000 1999(1) 1998 1997
------ ------ ------ ------ ------
Net revenues -
continuing
operations $10,660,422 11,246,242 10,919,627 10,582,060 11,373,204
Income (loss)from
continuing
operations before
taxes 3,615,612 1,874,729 (2,718,674) 1,664,416 1,971,419
Income taxes
(benefit) 719,414 113,165 (1,317,658) 279,537 352,970
Net income (loss)
from continuing
operations 2,896,198 1,761,564 (1,401,016) 1,384,879 1,618,449
Income (loss) from
disposed operations,
net of tax - - (63,056) 69,637 167,356
Gain on sale of
disposed operations,
net of tax - - 988,845 - -
---------- ---------- ---------- ---------- ----------
Net income (loss) 2,896,198 1,761,564 (475,227) 1,454,516 1,785,805
Income (loss) per
common share:
Continuing
operations 2.59 1.59 (1.25) 1.17 1.30
Discontinued
operations - - (0.06) 0.06 0.14
Gain on disposal
of discontinued
operations - - 0.88 - -
---- ---- ---- ---- ----
Net income (loss) 2.59 1.59 (0.43) 1.23 1.44
Dividends per
common share .80 .80 .80 .80 .80
Property, plant
and equipment (net) 2,117,476 2,369,216 2,618,649 2,798,825 2,498,771
Depreciation 381,079 447,401 488,591 513,045 594,138
Current assets 44,333,695 55,493,494 53,278,872 53,506,019 38,900,356
Ratio current
assets to current
liabilities 2.60 to 1 2.54 to 1 2.48 to 1 2.99 to 1 3.38 to 1
-46-
VULCAN INTERNATIONAL CORPORATION
Five-Year Record
Selected Financial Data
(Continued)
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Total assets 89,097,487 111,143,958 89,536,796 95,011,738 82,415,593
Long-term debt - - - - -
Accumulated other
comprehensive
income 46,599,325 60,846,586 47,852,421 52,506,224 43,211,515
Total share-
holders' equity 59,220,189 72,959,140 58,137,015 65,295,924 58,494,990
Book value per
common share 53.75 64.03 52.54 57.46 48.05
-47-
Selected Quarterly Financial Data
2001
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues $2,726,171 2,740,765 2,411,550 2,781,936 10,660,422
Gross profit
(loss) (62,787) 237,548 44,538 9,740 229,039
Net income 699,137 1,021,566 274,589 900,906 2,896,198
Net income per
share 0.62 0.90 0.25 0.82 2.59
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Total revenues $3,035,723 2,832,089 2,955,112 2,423,318 11,246,242
Gross profit
(loss) (7,295) (29,818) 27,299 (214,857) (224,671)
Net income 169,266 163,495 892,774 566,029 1,761,564
Net income per
share 0.15 0.15 0.78 0.51 1.59
-48-
VULCAN INTERNATIONAL CORPORATION
Corporate Office
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19801
VULCAN CORPORATION
Sales and Manufacturing
1151 College Street
Clarksville, Tennessee
(800) 251-3415
Directors:
Leonard Aconsky
Deliaan A. Gettler
Edward Ritter
VULCAN BOWLING PIN COMPANY VULCAN BLANCHESTER REALTY CO.
Antigo, Wisconsin Cincinnati, Ohio
(800) 447-1146 (513) 621-2850
Directors Directors
Ricardo DeFelice Leonard Aconsky
John Gabriel Vernon E. Bachman
Benjamin Gettler John Gabriel
Stanley I. Rafalo, O.D. Benjamin Gettler
ACCOUNTING OFFICES
30 Garfield Place, Suite 1040
Cincinnati, Ohio 45202
(513) 621-2850
(800) 447-1146
STOCK TRANSFER AND REGISTRAR
Fifth Third Bank
Shareholder Services
Cincinnati, Ohio 45202
(800) 837-2755
AUDITORS
J.D. Cloud & Co. L.L.P.
Cincinnati, Ohio
-49-
EXHIBIT 20
VULCAN INTERNATIONAL CORPORATION
300 Delaware Avenue
Wilmington, Delaware 19801
Notice of Annual Meeting of Shareholders
To Be Held May 9, 2002
The Annual Meeting of Shareholders of Vulcan International Corporation
will be held at 1151 E. College St., Clarksville, Tennessee, on
May 9, 2002 at 9:00 A.M. for the following purposes:
1. To elect Directors.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has established the close of business on March 29,
2002 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
April 9, 2002 VERNON E. BACHMAN, SECRETARY
PLEASE READ THE PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE. YOU CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY
SOLICITATION BY RETURNING YOUR PROXY CARD PROMPTLY.
-50-
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 29, 2002.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company, as of March 29, 2002 had outstanding 1,102,105 shares
of common capital stock, each of which is entitled to one vote. There are
no other voting or equity securities outstanding. There is set forth
below information with respect to the stock ownership of any person who
is known to be the beneficial owner of more than 5% of the Company's
common stock and the stock ownership of management as of February 1,
2002.
HOLDERS OF 5% OR MORE
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------------------------------------------------------------
(1)Barrington Companies Equities Directly Owned 60,600 5.5%
Partners, L.P., Ramius
Securities, LLC and
Musicmkaer.com, Inc.
(2)Dimensional Fund Advisors, Inc. Directly Owned: 59,499 5.4%
1299 Ocean Avenue
Santa Monica, CA 90401
(3)Fifth Third Bancorp Directly Owned 58,600 5.3%
38 Fountain Sq Plaza
Fifth Third Center
Cincinnati, OH 45263
(4)Deliaan A. Gettler Directly Owned: 3,100
1 Filson Place Indirectly Owned: 275,729
Cincinnati, OH 45202 Total Owned: 278,829 25.3%
(5)Benjamin Gettler Directly Owned: 161,915
1 Filson Place Indirectly Owned: 281,514
Cincinnati, OH 45202 Total Owned: 443,429 40.2%
(6)The PNC Finacial Services Directly Owned: 77,934 7.1%
Group, Inc.
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
-51-
(1) On October 1, 2001, the above-named three entities jointly filed Form
13D with the Securities and Exchange Commission reporting combined
ownership of 60,600 shares as the total owned by the three entities.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisor Act of 1940,
furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment
manager to certain other investment vehicles, including commingled
group trust. (These investment companies and investment vehicles
are the "Portfolios"). In its role as investment advisor and
investment manager, Dimensional possesses both investment and voting
power over 59,499 shares of Vulcan International Stock as of
12/31/01. The Portfolios own all securities reported in this
statement, and Dimensional disclaims beneficial ownership of such
securities.
(3) These shares are owned by Fifth Third Bank, a subsidiary of Fifth
Third Bancorp.
(4) Deliaan A. Gettler is the wife of Benjamin Gettler, Chairman of the
Board and President of the Company. The indirect shares listed for
Mrs. Gettler include 271,000 shares owned by the Gettler Family Special
1997 Trust of which she is Trustee; and 4,729 shares which she owns as
custodian for Benjamin R. Gettler, son of Mr. and Mrs. Gettler. It
does not include 161,915 shares directly owned by Mr. Gettler; 2,685
shares indirectly owned by Mr. Gettler as custodian for his daughter;
or 9,043 shares held by Stanley I. Rafalo as Trustee for an adult
daughter of Benjamin Gettler. If all of those shares were included,
the total shares directly and indirectly owned would be 452,472 which
is 41.1% of the common shares.
(5) The shares listed as indirectly owned by Mr. Gettler include 271,000
shares which Mrs. Gettler owns as Trustee of the Gettler Family Special
1997 Trust; 4,729 shares which Mrs. Gettler owns as custodian for
Benjamin R. Gettler; 3,100 shares which Mrs. Gettler owns directly; and
2,685 shares which Mr. Gettler owns indirectly as custodian for his
daughter. The total owned does not include 9,043 shares held by
Stanley I. Rafalo as Trustee for an adult daughter of Benjamin Gettler.
If those shares were included, the total shares directly and indirectly
owned would be 452,472 which is 41.1% of the common shares.
(6) The PNC Financial Services Group, Inc. and two wholly owned subsidiaries
hold these shares in fiduciary capacity under numerous trust
relationships, none of which relates to more than 5% of the shares, and
have sole or shared voting power, and sole or shared investment power
over these shares.
-52-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTED COMPLIANCE
The rules of the Security and Exchange Commission require that Vulcan
International Corporation disclose late filings of reports of stock
ownership, or changes in ownership, by its directors, officers, and 10%
stockholders. Based on its review of the copies of forms it received,
or written representation from reporting persons that they were not
required to file a Form 5, Vulcan International Corporation believes
that, during 2001, all reports required under section 16(a) of the
Securities and Exchange Act for its directors, officers and 10%
stockholders were filed on a timely basis.
SECURITY OWNERSHIP OF MANAGEMENT
The total number of equity securities of the Company owned by all
directors and officers of the Company as a group (6) as of February 1,
2002 is set forth below:
Amount and Nature of Beneficial Ownership Percent of Class
-----------------------------------------------------------------------
Directly Owned: 199,321 18.1%
Indirectly Owned: 290,557 26.4%
Total Owned: 489,878 44.5%
The share ownership of each of the directors and nominees is set forth
below under the heading Election of Directors.
ELECTION OF DIRECTORS
The shares represented by the proxies will be voted for the election of the
five (5) nominees listed below, each of whom is presently a Director. If
any such nominee shall be unable to serve (which is not now contemplated)
discretionary authority may be exercised to vote for a substitute. The
terms of all of the present Directors expire upon the election of their
successors in 2002. The following information is given with respect to the
five (5) nominees based upon the records of the Company and information
furnished by each nominee as of February 1, 2002.
-53-
NOMINEES
Number of
First Shares Owned
Name and Became Directly or Percent
Principal Occupation Age Director In Indirectly (1) Owned
-----------------------------------------------------------------------------
Leonard Aconsky 71 l993 6,300 (2)
Consultant to and director
of Acotech Services, a
consulting firm on building
life safety systems; retired
in 1993 as Vice-President and
World-Wide Technical
Coordinator WITCO, a manufacturer
of specialty chemical products;
Director, Vulcan Corporation,
operating subsidiary of Company
Edward B. Kerin 63 2001 - (2)
1998-2001 - Director of
Chemprene Inc., a manufacturer
of chemical rubber products,
Consultant 1994-98 Chief
Executive Officer, President
and Chairman of the Board of
Chemprene, Inc., a manufacturer
of chemical rubber products
(sold to Ammeraal, Inc. 1998);
1981-1994 corporate Vice President,
Witco Chemical Corporation
Benjamin Gettler (3)(4) 76 1960 443,429 40.2%
Chairman of the Board and
President Vulcan International
Corporation and its operating
subsidiary company, Vulcan
Corporation
Thomas D. Gettler, Esq. 43 1992 12,106 1.1%
Attorney
Stanley I. Rafalo, O.D. (4) 77 1975 28,043 2.5%
Doctor of Optometry
-54-
(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 includes shares owned directly and
indirectly by Deliaan A. Gettler, his wife. It does not include
shares referred to in footnote (4) below. Mr. Gettler disclaims
beneficial ownership of any of those shares.
(4) The number of shares shown as owned directly by Stanley I. Rafalo
includes 9,043 shares of common capital stock of the Company held by
him as Trustee for an adult daughter of Benjamin Gettler.
EXECUTIVE COMPENSATION
The following table shows the compensation and stock option awards for
the last three fiscal years, and other annual compensation and all other
compensation for 2001, to the Chief Executive Officer who was the only
executive officer whose compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------------------- ------------
Other
Annual
Name and Compen- Options/ All other
Principal sation SARs Compensation
Position Year Salary Bonus ($) (#) (1)
-----------------------------------------------------------------------------
Benjamin Gettler 2001 $275,000 (2) 0 50,000 $13,000
Chairman of the 2000 $275,000 $25,000 0 0 $13,000
Board and President 1999 $275,000 $25,000 0 50,000 (3) $13,000
(1) Director and Executive Committee Fees.
(2) Mr. Gettler was given 1,000 shares in lieu of a cash bonus. On the
date of the grant, those shares had a market value of $37,750.
(3) Mr. Gettler did not exercise any options in 1999. At the end of 1999,
there were options on 50,000 shares outstanding at a price of $31.00
per share. Those options were exercised in 2000 for which the Company
received $1,550,000 from Mr. Gettler.
-55-
STOCK OPTION PLAN
The Vulcan International Corporation Stock Option Plan (the "Plan") was
adopted by the Board of Directors of the Company in 1991. The purpose of the
Plan is to provide additional incentives in order that the Company may retain
key personnel. The Plan provides for the granting of options to purchase
totaling not more than 300,000 shares of common stock from the Company's
treasury shares of which 77,000 have not previously been granted. The Plan
is administered by a Stock Option Committee consisting of not less than three
(3) Directors of the Corporation who are not eligible to receive options
under the Plan. During the year 2001, the Committee consisted of Directors
Leonard Aconsky, Stanley I. Rafalo, and Thomas D. Gettler. 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 Option Committee.
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. During 2001, Mr. Benjamin Gettler
was granted an option for 50,000 shares at an exercise price of $37.24.
OPTION GRANTS IN LAST FISCAL YEAR
Benjamin Gettler - Chairman of the Board and President
Number of Options Granted (#/Sh) 50,000
%of Total Options Granted to
Employee in Fiscal Year 100%
Exercise Price ($/Sh) $37.24
Expiration Date November 6, 2004
Potential Realized Value at
Assumed Annual Rates of Stock
Prices Appreciation for Option:
5% $293,500
10% $616,500
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
None
-56-
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 2000-2001 Plan year was $-0-. For purposes of the Plan, annual
compensation means a participant's W-2 earnings for federal income tax
purposes, excluding commissions and taxable fringe benefits. Mr. Gettler
has reached normal retirement age and has more than 30 years of service.
Mr. Gettler currently receives $148,586 per year from the Plan based upon
his selection of a joint and 100% survivor benefit.
PERFORMANCE GRAPH
The following graph compares the cumulative total return (change in stock
price plus reinvested dividends) assuming $100 invested in the Common Stock
of the Company, in the American Stock Exchange ("AMEX") Market Value Index,
and in the Peer Group Index during the period from December 31, 1996 through
December 31, 2001.
(Graph submitted to SEC on Form SE on paper)
Value of Investment at December 31,
1996 1997 1998 1999 2000 2001
Vulcan International
Corporation 100.00 130.48 117.22 109.56 123.91 146.30
Selected Stock List 100.00 125.25 100.41 59.11 55.84 57.73
AMEX Market Index 100.00 120.33 118.69 147.88 146.16 139.43
ASSUMES $100 INVESTED ON JANUARY 1, 1996
ASSUMES DIVIDEND REINVESTED
-57-
COMPANIES COMPRISING THE PEER GROUP
The peer group used in constructing the graph in the Proxy Statement
showing the yearly percentage change in cumulative total return has always
included the complete list of suppliers to the shoe industry provided by the
Footwear Industries of America, the industry association. Since the Company
has reduced its reliance on the shoe industry and is now manufacturing foam
products, the Company has since 1998 included in its peer group the Rogers
Corp., which is a corporation listed on the American Stock Exchange and which
is in the business of processing and selling foam products. Accordingly, the
peer group for 2001 is:
Bontex (formerly Georgia Bonded Fibres)
Goodyear Tire & Rubber Co.
Jaclyn Inc.
Katy Ind.
Lydall Inc.
Rogers Corp.
Vista Resources Inc.
DIRECTORS' MEETINGS, COMMITTEE INFORMATION, FEES AND
OTHER DIRECTOR TRANSACTIONS
There were six (6) meetings of the Board of Directors in 2001. All
Directors attended at least 75% of the total number of Directors' meetings
held during their tenure and all Directors attended at least 75% of Committee
meetings held by committees on which they served during their tenure.
The Board of Directors has currently one standing committee, namely,
an Audit and Compensation Committee comprised of independent, non-employee
directors. The Audit and Compensation Committee currently consists of
Messrs. Leonard Aconsky, Edward B. Kerin, and Dr. Stanley I. Rafalo. The
Audit and Compensation Committee is responsible for overseeing the Company's
accounting functions and controls. The Committee has adopted a Charter to
set forth all of its specific responsibilities. As required by the Charter:
The Committee has reviewed and discussed the audited
financial statements with management;
The Committee has discussed with the independent auditors
the matters required to be discussed by Statement of Auditing
Standards No. 61 relating to conduct of the audit;
The Committee has received the written disclosures and the
letter from the independent accountants required by Independence
Standards Board Standard No. 1 and has discussed with the
independent accountant the independent accountant's independence;
and
-58-
Based on the review and discussions with management and the
representative of its independent auditors, the committee
recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form
10-K for the last fiscal year for filing with the Commission.
The Committee has reviewed and assessed the adequacy of the
Charter.
A copy of the Charter is included as an appendix to this proxy
statement.
The Committee also reviews and recommends the salary and bonus of the
Company's chief executive officer. The Audit and Compensation Committee
had two meetings in 2001.
The Company pays each of its Directors $8,000 per year as a director
fee. The members of the Audit and Compensation Committee are paid $300 per
meeting attended.
There is in effect a Resolution of the Board of Directors pursuant to
which any Director of the Company or any of the subsidiary companies may
purchase up to 25,000 treasury shares of company stock at the closing bid
on the American Stock Exchange on the date of the exercise of such election
to purchase. In the calendar year 2001, there was a total of 15,500 shares
purchased from the Company pursuant to this Resolution.
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed to the Company
for the fiscal year ended December 31, 2001 by the Company's principal
accounting firm, J.D. Cloud & Co. L.L.P.
Audit Fees $119,480
All Other Fees(a) $ 25,867(a)(b)
Total $145,347
(a) Includes fees for tax consulting and other non-audit services.
(b) The Audit Committee has considered whether the provision of these
services is compatible with maintaining the principal accountant's
independence.
-59-
AUDIT AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Committee's Compensation Policy
It is the policy of the Audit and 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 performance in the fiscal year in
question compared to prior fiscal years. The 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 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
2001 and his salary for 2002. The position of Chief Executive Officer and
President is held by a single individual, Mr. Benjamin Gettler.
The Company currently has only one officer who is paid over $100,000 per
year compared to three such officers prior to Mr. Gettler assuming the
position of Chief Executive Officer and President following the death of then
C.E.O. Lloyd Miller in April, 1990. Those offices were combined and Mr.
Gettler has carried out the duties of all three offices.
The year 2001 has been a very stressful year for the Company and its
Chief Executive Officer despite which the earnings of the Company have
continued to be more than sufficient to continue the regular dividend
payments and to lay the basis for future changes which we anticipate
will be beneficial to the Company and its shareholders.
During the past three years, Mr. Gettler's annual compensation has been as
follows:
Year Salary Bonus Total
---- ------ ----- -----
2001 $275,000 $ - $ -
2000 275,000 25,000 300,000
1999 275,000 25,500 300,000
Mr. Gettler has requested that there be no increase in his salary. Further,
he has pointed out that it is necessary for the Company to conserve its
cash. Accordingly, the Committee has determined that a bonus for the
Year 2001 should be provided to Mr. Gettler in the form of Company common
stock, namely 1,000 shares of such stock. The Committee also has
determined to keep Mr. Gettler's base salary at the same live in 2002 as
in 2001, namely $275,000.
-60-
Audit and Compensation Committee, November 26, 2001
Leonard Aconsky Edward B. Kerin Stanley I. Rafalo, Committee Members
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The principal accountant of the Company is J. D. Cloud & Co. L.L.P.,
certified public accountants. That firm has acted as the principal
accountant of the Company since 1956. At the meeting of the Board of
Directors following the May, 2001 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, 2002 Annual Meeting of Shareholders.
Management is not aware of any intended change of principal independent
public accountants. Representatives of J.D. Cloud & Co. L.L.P. are not
expected to attend the Annual Meeting.
PROPOSALS OF SECURITY HOLDERS
No shareholder proposals will be considered at this year's annual
meeting.
In the event that any security holder intends to present a proposal at
the 2003 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, 2002.
GENERAL
The Company, as of March 29, 2002 had outstanding 1,102,105 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 29, 2002.
The management knows of no other business to be brought before the
meeting for action by the shareholders. If any other matters properly come
before the meeting, the proxies in the enclosed form, unless otherwise
specified, will be voted on such matters in accordance with the judgment
of the Proxy Committee.
/s/BENJAMIN GETTLER
---------------------------
Chairman of the Board
and President
-61-
APPENDIX
AUDIT COMMITTEE CHARTER
The Audit Committee ("the Committee"), of the Board of Directors ("the
Board") of Vulcan International Corporation ("the Company"), will have
the oversight responsibility, authority and specific duties as described
below:
COMPOSITION
The Committee will be comprised of three or more directors as determined
by the Board. The members of the Committee will meet the independence
and experience requirements of the American Stock Exchange (AMEX). The
members of the Committee will be elected annually at the organizational
meeting of the full Board held in May and will be listed in the annual
report to shareholders.
RESPONSIBILITY
The Committee is part of the Board. Its primary function is to assist
the Board in fulfilling its oversight responsibilities with respect to
(i) the annual financial information to be provided to shareholders and
Securities and Exchange Commission (SEC); (ii) the system of internal
controls that management has established; and (iii) the internal and
external audit process. The Committee should have a clear understanding
with the independent accountants that they must maintain an open and
transparent relationship with the Committee, and that the ultimate
accountability of the independent accountants is to the Board and the
Committee. The Committee will make regular reports to the Board
concerning its activities.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted
the authority to investigate any matter or activity involving financial
accounting and financial reporting, as well as the internal controls of
the Company. All employees will be directed to cooperate with respect
thereto as requested by members of the Committee.
MEETINGS
The Committee is to meet as many times as the Committee deems necessary
to carry out its duties as set forth herein. The Committee is to meet
in separate executive sessions with the chief financial officer,
independent accountants and internal audit as it deems appropriate.
-62-
ATTENDANCE
Committee members will strive to be present at all meetings. As
necessary or desirable, the Committee Chair may request that members
of management and representatives of the independent accountants and
internal audit be present at Committee meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
1. Review and reassess the adequacy of this charter annually and
recommend any proposed changes to the Board for approval. This
should be done in compliance with applicable AMEX Audit
Committee Requirements.
2. Review with the Company's management, internal audit and
independent accountants the Company's accounting and financial
reporting controls.
3. Review with the Company's management, internal audit and
independent accountants significant accounting and reporting
principles, practices and procedures applied by the Company
in preparing its financial statements.
4. Review the scope and general extent of the independent
accountant's annual audit. The Committee's review should
include an explanation from the independent accountants of
the factors considered by the accountants in determining the
audit scope, including the major risk factors. The independent
accountants should confirm to the Committee that no limitations
have been placed on the scope or nature of their audit
procedures.
5. Inquire as to the independence of the independent accountants
and obtain from the independent accountants, at least annually,
a formal written statement delineating all relationships between
the independent accountants and the Company as contemplated by
Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees.
6. Have a predetermined arrangement with the independent accountants
that they will advise the Committee of any matters identified
through procedures followed for interim quarterly financial
statements, and that such notification as required under standards
for communication with Audit Committees is to be made prior to the
related press release or, if not practicable, prior to filing
Forms 10-Q.
-63-
7. At the completion of the annual audit, review with management,
internal audit and the independent accountants the following:
- The annual financial statements and related footnotes
and financial information to be included in the Company's
annual report to the shareholders and on Form 10-K.
- Results of the audit of the financial statements and
the related report thereon and, if applicable, a report
on changes during the year in accounting principles and
their application.
- Significant changes to the audit plan, if any, and any
serious disputes or difficulties with management
encountered during the audit.
- Other communications as required to be communicated by
the independent accountants by Statement of Auditing
Standards (SAS) No. 61 as amended by SAS No. 90 relating
to the conduct of the audit.
If deemed appropriate after such review and discussion, recommend
to the Board that the financial statements be included in the
Company's annual report on Form 10-K.
8. After preparation by management and review by internal audit and
independent accountants, approve the report required under SEC
rules to be included in the Company's annual proxy statement.
9. Discuss with the independent accountants the quality of the
Company's financial and accounting personnel. Also, elicit the
comments of management regarding the responsiveness of the
independent accountants to the Company's needs.
10. Meet with management, internal audit and the independent
accountants to discuss any relevant significant recommendations
that the independent accountants may have, if any, particularly
those characterized as 'material' or 'serious'.
11. Recommend to the Board the selection, retention or termination
of the Company's independent accountants.
-64-
VULCAN INTERNATIONAL CORPORATION
PROXY
The undersigned hereby appoints Leonard Aconsky, Thomas D. Gettler,
and Dr. Stanley I. Rafalo, or any of them with full power of substitution,
as the proxies of the undersigned to vote at the Annual Meeting of
Shareholders of Vulcan International Corporation to be held at 1151 E.
College St., Clarksville, Tennessee, on Thursday, May 9, 2002 at 9:00 a.m.
and at any adjournment thereof, all the shares of stock of the Company the
undersigned would be entitled to vote if personally present, hereby granting
to each of them full power and authority to act for and in the name of the
undersigned at said meeting and adjournments upon the following:
(1) The election of Directors and all nominees listed in
the Proxy Statement except as marked to the contrary below.
GRANTS WITHHOLDS
Leonard Aconsky, Benjamin Gettler, Thomas D. Gettler,
Edward B. Kerin, Stanley I. Rafalo, O.D. ----- -----
(INSTRUCTION: To withhold authority to vote for any individual nominee
or nominees, draw a line through that nominee's name.)
Please mark your votes as indicated in this example X
------
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED AS INSTRUCTED,
UNLESS OTHERWISE INDICATED. THIS PROXY WILL BE PRESUMED TO BE GRANTS ON ITEM
(1), AND FOR ON ITEM (2). ------
---
Dated ,2002
---------------------------
--------------------------------
Signature
--------------------------------
Signature
(When signing in any other capacity
than as an individual, please so
indicate.)
-65-
Exhibit 21
VULCAN INTERNATIONAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
At December 31, 2001
STATE OF PERCENTAGE
NAME OF CORPORATION INCORPORATION OF OWNERSHIP
------------------- ------------- ------------
Vulcan International Corporation Delaware Parent
Vulcan Corporation Tennessee 100%
Vulcan Blanchester Realty Co. Ohio 100%
Southern Heel Company Tennessee 100%
ACI International, Inc. Delaware 100%
Vulcan Bowling Pin Company Tennessee 100%
Cincinnati Club Building Associates
(Partnership) Ohio 97.51%
-66-
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors
Vulcan International Corporation
Wilmington, Delaware
We have audited the consolidated financial statements of Vulcan International
Corporation and subsidiaries as of December 31, 2001 and 2000, and for each of
the three years in the period ended December 31, 2001, and have issued our
report thereon dated February 14, 2002, such consolidated financial statements
and report are included in Part IV, Item 14(a)1 of this Form 10-K and the 2001
Annual Report to Shareholders and are incorporated herein by reference. Our
audit also included the financial statement schedule of Vulcan International
Corporation and subsidiaries listed in Part IV, Item 14(a)2. The financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information therein set forth.
/s/ J.D. CLOUD & CO. L.L.P.
----------------------------
Certified Public Accountants
Cincinnati, Ohio
February 14, 2002
-67-
EXHIBIT 99.2
Schedule II
VULCAN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
2001 2000 1999
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 $152,974 158,844 256,211
Additions:
(1) Charged to costs and expenses 24,000 188,829 12,000
(2) Charged to Other Accounts - - -
Deductions:
Write off of bad debts 85,607 194,699 109,367
------- ------- -------
Balance at End of Period $ 91,367 152,974 158,844
======= ======= =======
-68-
EXHIBIT 99.3
VULCAN-BRUNSWICK BOWLING PIN COMPANY
FINANCIAL STATEMENTS
For the year ended December 31, 2001
J.D. CLOUD & CO. L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
CINCINNATI, OHIO
-69-
INDEPENDENT AUDITORS' REPORT
To the Partners
Vulcan-Brunswick Bowling Pin Company
Antigo, Wisconsin
We have audited the accompanying balance sheets of Vulcan-Brunswick Bowling
Pin Company as of December 31, 2001 and 2000, and the related statements of
income for the four months ended April 27, 2001, and the eight months ended
December 31, 2001 and the related statements of income, partners' capital,
and cash flows for the years ended December 31, 2001 and 2000. These
financial statements are the responsibility of the Joint Venture's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vulcan-Brunswick Bowling Pin
Company at December 31, 2001 and 2000, and the results of its operations and
its cash flows for the periods and years then ended, in conformity with U.S.
generally accepted accounting principles.
/s/ J.D. CLOUD & CO. L.L.P.
----------------------------
Certified Public Accountants
Cincinnati, Ohio
February 4, 2002
-70-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
BALANCE SHEETS
At December 31, 2001 and 2000
- ASSETS - 2001 2000
CURRENT ASSETS:
Cash $ 174,004 116,119
Accounts receivable 870,982 535,571
Inventories 595,479 685,669
Prepaid expense - 6,301
--------- ---------
TOTAL CURRENT ASSETS 1,640,465 1,343,660
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 72,251 72,251
Buildings and improvements 4,041,403 4,026,487
Machinery and equipment 4,985,292 4,975,927
--------- ---------
Total 9,098,946 9,074,665
Less - Accumulated depreciation 6,345,132 6,038,509
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 2,753,814 3,036,156
--------- ---------
OTHER ASSETS:
Product development costs and other
intangibles - at cost (less accumulated
amortization; 2001 - $1,075,732;
2000 - $981,844) 2,674,640 2,768,528
Other 157,744 175,936
--------- ---------
TOTAL OTHER ASSETS 2,832,384 2,944,464
--------- ---------
TOTAL ASSETS $7,226,663 7,324,280
========= =========
- LIABILITIES AND PARTNERS' CAPITAL -
CURRENT LIABILITIES:
Accounts payable $ 86,012 94,060
Accrued expenses -
Salaries and wages 72,374 89,907
Taxes and other 90,364 95,916
--------- ---------
TOTAL CURRENT LIABILITIES 248,750 279,883
--------- ---------
PARTNERS' CAPITAL 6,977,913 7,044,397
--------- ---------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $7,226,663 7,324,280
========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-71-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF INCOME
For the years ended December 31, 2001 and 2000
Four months Eight Months
Ended Ended
April 27, December 31, Total
2001 2001 2001 2000
NET SALES $1,704,530 2,473,386 4,177,916 9,261,854
--------- --------- --------- ---------
COST AND EXPENSES:
Cost of sales 1,566,553 2,385,249 3,951,802 8,434,507
Administrative 10,000 100,000 110,000 30,000
--------- --------- --------- ---------
TOTAL COST AND
EXPENSES 1,576,553 2,485,249 4,061,802 8,464,507
--------- --------- --------- ---------
INCOME FROM
OPERATIONS 127,977 (11,863) 116,114 797,347
OTHER INCOME - NET 5,539 11,863 17,402 24,025
--------- --------- --------- ---------
NET INCOME $ 133,516 - 133,516 821,372
========= ========= ========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-72-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 2001 and 2000
VULCAN BRUNSWICK TOTAL
BOWLING PIN BOWLING PIN PARTNERS'
COMPANY CORPORATION CAPITAL
BALANCE - JANUARY 1, 2000 $3,529,512 3,529,513 7,059,025
Add - Net income 410,686 410,686 821,372
Less - Distributions (418,000) (418,000) (836,000)
--------- --------- ---------
BALANCE - DECEMBER 31, 2000 3,522,198 3,522,199 7,044,397
Add - Net income 66,758 66,758 133,516
Less - Distributions (100,000) (100,000) (200,000)
--------- --------- ---------
BALANCE - DECEMBER 31, 2001 $3,488,956 3,488,957 6,977,913
========= ========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-73-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2001 and 2000
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 3,842,505 9,191,250
Cash paid to suppliers and employees (3,577,741) (8,277,981)
Interest received 17,402 23,900
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 282,166 937,169
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (24,281) (98,241)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners (200,000) (836,000)
--------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 57,885 2,928
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 116,119 113,191
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 174,004 116,119
========= =========
RECONCILIATION OF NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Net income $ 133,516 821,372
Depreciation 306,623 338,525
Amortization 93,888 93,888
(Increase) in accounts receivable (335,411) (70,729)
(Increase) decrease in inventories 90,190 (201,306)
(Increase) decrease in prepaid expenses
and other 24,493 (1,948)
Decrease) in accounts payable and
accrued expenses (31,133) (42,633)
--------- ---------
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ 282,166 937,169
========= =========
The accompanying notes to financial statements are an integral part of this
statement.
-74-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Joint Venture is a Delaware general partnership formed for the purpose of
manufacturing bowling pins for its partners.
It is the policy of the Joint Venture to employ U.S. generally accepted
accounting principles in the preparation of its financial statements. A
summary of the Joint Venture's significant accounting policies follows:
ACCOUNTING ESTIMATES-
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
JOINT VENTURE-
Vulcan Bowling Pin Company (Vulcan) and Brunswick Bowling and Billiards
Corporation (Brunswick) have an agreement to manufacture all the bowling
pins sold by each of the partners. Under the agreement, Vulcan contributed
bowling pin manufacturing assets and Brunswick contributed cash and certain
of its bowling pin manufacturing assets to the Joint Venture. Each partner
received an undivided 50% interest in the Joint Venture's assets, liabilities,
revenues and expenses in exchange for their capital contribution.
INVENTORIES-
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY, PLANT AND EQUIPMENT-
Property, plant and equipment are stated at cost. Depreciation is provided in
amounts to relate the cost of depreciable assets to operations over their
estimated useful lives using straight-line and accelerated methods over
15 to 39 years for buildings and improvements and 3 to 7 years for machinery
and equipment.
INTANGIBLES-
Product development costs and other intangible assets consist principally of
manufacturing technology and represent the fair market value assigned to such
assets on the date the Joint Venture was formed. Intangible assets are
amortized over 40 years on a straight-line basis.
Effective January 1, 2002, the Joint Venture will be required to adopt Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. SFAS 142 will require that goodwill and certain other intangible assets
no longer be amortized but be tested for impairment as defined in SFAS 142.
-75-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
(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, 2001 and 2000 consisted of:
2001 2000
Finished goods $ 138,209 150,000
Raw materials 206,032 196,185
Work in process 237,014 314,873
Supplies 14,224 24,611
------- -------
Total $ 595,479 685,669
======= =======
NOTE 3 - NOTE PAYABLE
The Joint Venture maintains a revolving credit agreement with its bank that
provides for borrowings of up to $500,000 at the prime rate. Borrowings
under the credit agreement are guaranteed by the Joint Venture's partners and
are secured by a pledge of the general assets of the Joint Venture. There
were no borrowings at December 31, 2001 and 2000.
-76-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
(Continued)
NOTE 4 - RETIREMENT PLAN
The Joint Venture maintains a defined benefit pension plan covering
substantially all union employees. The funded status and net periodic
benefit cost recognized in the accompanying financial statements
consisted of:
2001 2000
Change in benefit obligations:
Benefit obligation - January 1, $ 380,438 362,559
Service cost 12,822 18,509
Interest cost 29,261 26,453
Actuarial (gain) loss 34,836 (21,131)
Settlements paid (168,589) -
Benefits paid - (5,952)
------- -------
Benefit obligation December 31, 288,768 380,438
------- -------
Change in plan assets:
Fair value of plan assets - January 1, 458,384 419,294
Actual return on plan assets 20,343 22,949
Employer contributions 10,583 22,093
Settlements paid (168,589) -
Benefits paid - (5,952)
------- -------
Fair value of plan assets -
December 31, 320,721 458,384
------- -------
Funded status 31,953 77,946
Unrecognized net loss 97,524 66,791
Unrecognized prior service cost 24,860 27,325
Unrecognized net transition obligation 3,407 3,874
------- -------
Prepaid pension expense -
December 31, 157,744 175,936
======= =======
Components of net periodic benefit costs:
Service cost 12,822 18,509
Interest cost 29,261 26,453
Return on plan assets:
Actual (20,343) (22,949)
Deferred (15,599) (10,090)
Recognition of previously
unrecognized gain 17,146 -
Amortization of unrecognized net
transition obligation 468 468
Amortization of prior service cost 2,465 2,465
Amortization of unrecognized net loss 2,556 5,247
------- -------
Periodic benefit cost $ 28,776 20,103
======= =======
-77-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
(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:
2001 2000
Assumed discount rate 7.50% 7.50%
Expected long-term rate of return
on plan assets 7.75% 7.75%
Average remaining service period 18 years 18 years
NOTE 5 - RELATED PARTY TRANSACTIONS
The Joint Venture had 2001 and 2000 sales to Vulcan of approximately
$905,000 and $1,743,000, respectively, and 2001 and 2000 sales to Brunswick
of approximately $3,016,000 and $7,519,000, respectively. For the
period from April 30, 2001 through December 31, 2001, Vulcan was solely
responsible for the operations of the Joint Venture.
By agreement, the Joint Venture produced pins for Brunswick at an agreed-upon
selling price. In addition, Brunswick contributed $256,900, included in sales
in the statement of income, for its agreed portion of the operating expenses.
The price paid for pins by Vulcan was based on the remaining operating costs and
expenses, resulting in no income or loss for the period April 30 through
December 31, 2001.
As indicated by the statement of income, the Joint Venture had net income of
$133,516 for the period January 1 through April 30, 2001. As a result of the
agreement, there was no income for the period April 30 through December 31,
2001.
The Joint Venture paid accounting and administrative fees of $110,000 and
$30,000 to Vulcan in 2001 and 2000, respectively.
Accounts receivable from Brunswick amounted to $324,000 and $266,000 at December
31, 2001 and 2000, respectively. Accounts receivable from Vulcan amounted to
$517,000 and $266,000 at December 31, 2001 and 2000, respectively.
-78-
VULCAN-BRUNSWICK BOWLING PIN COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
(Continued)
NOTE 6 - RISKS AND UNCERTAINTIES
The Joint Venture is involved in various claims and legal proceedings involving
matters incidental to its business. Management believes that the resolution of
these matters will not have a material effect on the Joint Venture's business or
financial condition.
The Joint Venture currently purchases all its bowling pin bases from one
manufacturer. Any disruption in the supply of the bowling pin bases could
cause a delay in manufacturing which could negatively affect operating
results.
At December 31, 2001 approximately 90% of the Joint Venture's workforce was
subject to a collective bargaining agreement that expires October 18, 2002.
Financial instruments which potentially subject the Joint Venture to
concentrations of credit risk are cash investments which may, at times, exceed
federally-insured limits. Management places the Joint Venture's cash
investments with high-quality financial institutions. Management believes no
significant concentration of credit risk exists with respect to these cash
investments.
-79-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Vulcan International Corporation has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
VULCAN INTERNATIONAL CORPORATION
/s/ Benjamin Gettler
------------------------------
By: Benjamin Gettler
Chairman of the Board,
President and Chief Executive Officer
/s/ Vernon E. Bachman
------------------------------
By: Vernon E. Bachman
Vice President, Secretary-Treasurer
Principal Accounting Officer
Date: March 29, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Benjamin Gettler /s/ Leonard Aconsky
-------------------------- ---------------------------
By: Benjamin Gettler By: Leonard Aconsky
(Director) (Director)
/s/ Stanley I. Rafalo
--------------------------
By: Stanley I. Rafalo
(Director)
-80-