<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
-----------------------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________________ to _____________________
Commission file number 0-15661
---------------------------------------------------------
AMERICAN COLLOID COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-0724340
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(708) 392-4600
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 21, 1995
- ----------------------------------- -------------------------------------
(Common stock, $.01 par value) 19,144,715
<PAGE>
AMERICAN COLLOID COMPANY
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1 Financial Statements
Condensed Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 1
Condensed Consolidated Statement of Operations -
three months ended March 31, 1995 and 1994 2
Condensed Consolidated Statement of Cash Flows -
three months ended March 31, 1995 and 1994 3
Notes to Condensed Consolidated Financial Statements 4
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 5
PART II - OTHER INFORMATION
- ---------------------------
Item 6 Exhibits and Reports on Form 8-K 10
<PAGE>
Part I - FINANCIAL INFORMATION
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1995 1994*
---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,326 $10,389
Accounts receivable 56,399 50,908
Inventories 38,371 37,450
Advance mining 2,250 2,363
Prepaid expenses 1,861 2,213
Current deferred tax asset 2,526 2,516
---------- ------------
Total current assets 104,733 105,839
---------- ------------
Property, plant, equipment and mineral reserves 252,158 225,532
Less accumulated depreciation 88,370 84,112
---------- ------------
163,788 141,420
---------- ------------
Intangible assets 9,060 9,208
---------- ------------
Other long-term assets 4,440 4,580
---------- ------------
$282,021 $261,047
---------- ------------
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $3,334 $3,507
Accounts payable 16,918 19,373
Accrued income taxes 2,482 807
Accrued liabilities 14,460 12,930
---------- ------------
Total current liabilities 37,194 36,617
---------- ------------
Long-term debt 85,855 71,458
---------- ------------
Deferred credits and minority interest 11,593 11,653
---------- ------------
Stockholders' equity:
Common stock 213 213
Additional paid-in capital 74,626 74,279
Foreign currency translation adjustment 1,182 (1,865)
Retained earnings 74,645 72,157
Treasury stock (3,287) (3,465)
---------- ------------
147,379 141,319
---------- ------------
$282,021 $261,047
---------- ------------
---------- ------------
<FN>
*Condensed from audited financial statements.
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements
1
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1995
---------- ----------
<S> <C> <C>
Net sales $78,750 $57,846
Cost of sales 61,374 45,929
---------- ----------
Gross profit 17,376 11,917
General, selling and administrative expenses 10,818 7,864
---------- ----------
Operating profit 6,558 4,053
---------- ----------
Other income (expense):
Interest expense, net (1,068) (344)
Other income, net 142 77
---------- ----------
(926) (267)
---------- ----------
Income before income taxes and
minority interest 5,632 3,786
Income taxes 1,975 1,271
---------- ----------
Income before minority interest 3,657 2,515
Net income of minority interest (26) (25)
---------- ----------
Net income $3,631 $2,490
---------- ----------
---------- ----------
Weighted average common and common
equivalent shares 19,589,537 19,444,476
---------- ----------
Earnings per share $.19 $.13
---------- ----------
---------- ----------
Dividends declared per share $.06 $.06
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
2
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
THREE MONTHS ENDED
MARCH 31,
----------------------
1995 1994
------- -------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 3,631 $ 2,490
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion, and amortization 4,385 3,055
Other 232 150
(Increase)/decrease in current assets (6,318) (3,335)
Increase/(decrease) in current liabilities 750 (2,687)
------- -------
Net cash provided by (used in) operations 2,680 (327)
------- -------
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (25,060) (25,149)
Other 1,713 (178)
------- -------
Net cash used in investing activities (23,347) (25,327)
------- -------
Cash flow from financing activities:
Net change in outstanding debt 14,224 9,920
Dividends paid (1,145) (1,120)
Other 525 135
------- -------
Net cash provided by financing activities 13,604 8,935
------- -------
Net (decrease) in cash and cash equivalents (7,063) (16,719)
Cash and cash equivalents at
beginning of period 10,389 20,502
------- -------
Cash and cash equivalents at end of period $ 3,326 $ 3,783
------- -------
------- -------
Supplemental Disclosure of Cash Flows
Information (In thousands)
Actual cash paid for:
Interest $ 279 $ 90
------- -------
------- -------
Income taxes $ 497 $ 822
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein, other than the condensed
consolidated balance sheet as of December 31, 1994, has been prepared by
management without audit by independent certified public accountants who do
not express an opinion thereon. The condensed consolidated balance sheet as
of December 31, 1994, has been derived from and does not include all the
disclosures contained in the audited consolidated financial statements for
the year ended December 31, 1994. The information furnished herein includes
all adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim period, and all such adjustments are
of a normal recurring nature. Management recommends the accompanying
consolidated financial information be read in conjunction with the
consolidated financial statements and related notes included in the Company's
1994 Form 10-K which accompanies the 1994 Corporate Report.
The results of operations for the three month period ended March 31,
1995, are not necessarily indicative of the results to be expected for the
full year.
Certain items in the 1994 consolidated financial statements have been
reclassified to comply with the consolidated financial statements
presentation for 1995.
NOTE 2: INVENTORIES
Inventories at March 31, 1995 have been valued using the same methods as
at December 31, 1994. LIFO inventory values have been calculated based upon
anticipated ending inventory levels at December 31, 1995, and anticipated
mining costs for fiscal year 1995. The composition of inventories at March
31, 1995 and December 31, 1994, was as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-------- --------
<S> <C> <C>
Crude stockpile and in-process inventories $22,146 $21,922
Other raw material, container and
supplies inventories $16,225 $15,528
-------- --------
Other $38,371 $37,450
-------- --------
-------- --------
</TABLE>
NOTE 3: EARNINGS PER SHARE
Earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding and the dilutive effect of stock
options outstanding at the end of each period.
4
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
THREE MONTHS ENDED MARCH 31, 1995 VS. 1994
Net sales increased by $20.9 million, or 36.1%, while gross profits and
operating profits increased by $5.5 million, or 45.8%, and $2.5 million, or
61.8%, respectively. Net interest expense increased by $.7 million, or
210.5%, as March 31, 1995 debt (both long and short-term) increased by $58.1
million, or 186.9%, over the prior year quarter. Also, approximately $.4
million of interest related to plant expansion was capitalized in the 1995
quarter compared with $.1 million in the 1994 period. Other income included
a government grant for the U.K. polymer expansion, which more than offset the
provision for settlement of outstanding litigation. Earnings per share were
$.19 per share for the 1995 quarter compared with $.13 for the prior year.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
----------------------------------------------------------------
1995 1994 1995 VS. 1994
----------------- ------------------ ------------------
MINERALS (DOLLARS IN THOUSANDS) $ CHANGE % CHANGE
- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $39,097 100.0% $37,020 100.0% $2,077 5.6%
Cost of sales 31,070 79.5% 30,138 81.4%
------- ------ ------- -----
Gross profit 8,027 20.5% 6,882 18.6% 1,145 16.6%
General, selling and
administrative expenses 4,236 10.8% 3,289 8.9% 947 28.8%
------- ------ ------- -----
Operating profit 3,791 9.7% 3,593 9.7% 198 5.5%
</TABLE>
Sales increased by $2.1 million, or 5.6%, over the prior year period.
Continued strength in the durable goods sector, primarily metalcasting, and
further growth in cat litter provided much of the volume growth in the
minerals segment. The dollar was weaker in 1995 than in 1994, resulting in
higher translation rates for U.K. sales. The difference accounted for
approximately 20% of the sales increase. Price increases in certain markets
accounted for the gross profit margin improvement. The increase in general,
selling and administrative expenses was primarily related to increased
research activities and a more precise split of costs shared with corporate,
such as management information systems and corporate office support functions.
5
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
---------------------------------------------------------------------
1995 1994 1995 VS. 1994
------------------- ---------------------- ---------------------
ABSORBENT POLYMERS (DOLLARS IN THOUSANDS) $ CHANGE % CHANGE
- ------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $26,480 100.0% $12,205 100.0% $14,275 117.0%
Cost of sales 20,302 76.7% 9,045 74.1%
------- ------ ------- ------
Gross profit 6,178 23.3% 3,160 25.9% 3,018 95.5%
General, selling and
administrative expenses 2,094 7.9% 1,653 13.5% 441 26.7%
------- ------ ------- ------
Operating profit 4,084 15.4% 1,507 12.4% 2,577 171.0%
</TABLE>
Revenues increased by $14.3 million, or 117.0% over the prior year as
sales volume increased by 122.4%. The weaker U.S. dollar resulted in higher
translation rates for U.K. sales, accounting for approximately 7% of the
segment sales increase. Gross profit margins declined by 260 basis points,
as raw material costs increased and selling prices declined from the prior
year. Raw material costs are expected to rise again in the second quarter of
1995. It is anticipated that raw material costs will be stable or declining
in the third and fourth quarters of 1995.
Plant expansion in the U.S. continues. An additional 30,000 metric tons
of capacity is scheduled to be available in the third quarter of 1995. The
current worldwide capacity for the Company is 80,000 metric tons, which will
increase to 110,000 metric tons with the completion of the U.S. expansion.
6
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
---------------------------------------------------------------------
1995 1994 1995 VS. 1994
------------------- ---------------------- ---------------------
ENVIRONMENTAL (DOLLARS IN THOUSANDS) $ CHANGE % CHANGE
- ------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 7,925 100.0% $ 3,942 100.0% $ 3,983 101.0%
Cost of sales 5,397 68.1% 2,654 67.3%
------ ----- ------- -----
Gross profit 2,528 31.9% 1,288 32.7% 1,240 96.3%
General, selling and
administrative expenses 2,519 31.8% 1,129 28.7% 1,390 123.1%
------ ----- ------ -----
Operating profit 9 0.1% 159 4.0% (150) -94.3%
</TABLE>
Sales increased by $4.0 million, or 101.0%, over the prior year period.
Sales from businesses acquired during the second and third quarters of 1994
accounted for approximately 45% of the increase. Strong sales of products to
the construction industry (both domestic and international) also contributed
to the increase. General, selling and administrative expenses increased by
$1.4 million, or 123.1%. The acquired businesses accounted for approximately
41%, with additional sales and research staff and infrastructure costs
accounting for the balance of the increase.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
---------------------------------------------------------------------
1995 1994 1995 VS. 1994
------------------- ---------------------- ---------------------
TRANSPORTATION (DOLLARS IN THOUSANDS) $ CHANGE % CHANGE
- ------------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 5,248 100.0% $ 4,679 100.0% $ 569 12.2%
Cost of sales 4,605 87.7% 4,092 87.5%
------- ----- ------- -----
Gross profit 643 12.3% 587 12.5% 56 9.5%
General, selling and
administrative expenses 387 7.4% 365 7.8% 22 6.0%
------- ----- ------- -----
Operating profit 256 4.9% 222 4.7% 34 15.3%
</TABLE>
Shipments of cat litter and bentonite used for manufacturing
environmental liner products accounted for much of the higher sales volume.
Much of the bentonite used in manufacturing liner products has since been
converted to rail transportation. This loss of volume will have an adverse
impact on the segment revenues in the near term.
7
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
------------------------------------------------------------
1995 1994 1995 VS. 1994
------------------ --------------------- ------------------
CORPORATE (DOLLARS IN THOUSANDS) $ CHANGE % CHANGE
- --------- -------- --------
<S> <C> <C> <C> <C>
General, selling and
administrative expenses $ 1,582 $ 1,428 $ 154 10.8%
------- -------
Operating profit (1,582) (1,428)
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance, research
costs for new markets and corporate governance costs.
The 1995 quarter reflects a more precise split of shared costs with the
minerals segment. Higher management information systems costs and research
expenditures accounted for the increase in corporate expenses.
8
<PAGE>
AMERICAN COLLOID COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had outstanding debt of $89.2 million
(including both long and short term debt) and cash of $3.3 million compared
with $75 million in debt and $10.4 million in cash and cash equivalents at
December 31, 1994. The long-term debt to total capitalization at March 31,
1995 was 36.8% compared with 33.6% at December 31, 1994.
The Company had a current ratio of 2.82 to 1 at March 31, 1995 with
approximately $67.5 million in working capital compared with 2.89 to 1 and
$69.2 million, respectively, at December 31, 1994.
The Company had $27.7 million in unused, committed credit lines at March
31, 1995.
During the first quarter of 1995, the Company used its operating cash
flow plus $7.1 million of its cash reserves and $14.2 million of debt to pay
dividends of $1.1 million, and acquire property and equipment totaling $25.1
million.
The Company has adequate committed credit facilities to fund the capital
expenditure program approved by the Board of Directors at this time.
Management continues to explore other growth prospects in the
environmental sector, as well as yet further expansion in the polymer
segment. Additional capital may be required if these opportunities are
pursued.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits immediately following the signature page.
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN COLLOID COMPANY
Date: 5/1/95 /s/ John Hughes
------------------------ -----------------------------
John Hughes
President and Chief Executive Officer
Date: 5/1/95 /s/ Paul G. Shelton
----------------------- -------------------------------
Paul G. Shelton
Senior Vice President and
Chief Financial Officer
11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company(5)
3.2 Bylaws of the Company(1)
4 Article Fourth of the Company's Restated Certificate of Incorporation(5)
10.1 American Colloid Company 1983 Incentive Stock Option Plan(1); as amended(3)
10.2 American Colloid Company Pension Plan(3)
10.3 American Colloid Company Salaried Employees' Savings Plan and Trust(1); as amended(4)
10.4 Executive Medical Reimbursement Plan(1)
10.5 Lease Agreement for office space dated September 29, 1986 between the Company and American
National Bank and Trust Company of Chicago(1); as amended (8)
10.6 American Colloid Company 1987 Non-Qualified Stock Option Plan (2); as amended (6)
10.7 Change in Control Agreement dated April 1, 1994 by and between Registrant and John Hughes
(6)
10.8 Change in Control Agreement dated April 1, 1994 by and between Registrant and Paul G. Shelton
(6)
10.9 Change in Control Agreement dated December 15, 1992 by and between Registrant and Robert C.
Steele (4)
10.10 Change in Control Agreement dated December 21, 1992 by and between Lawrence E. Washow
(4)
10.11 Change in Control Agreement dated December 15, 1992 by and between Registrant and Roger P.
Palmer (4)
10.12 Change in Control Agreement dated January 24, 1994 by and between Registrant and Peter L.
Maul (6)
10.13 American Colloid Company Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)
10.14 American Colloid Company 1993 Stock Plan (6)
10.15 Credit Agreement by and among American Colloid Company and Harris Trust and Savings
Bank, individually and as agent, NBD Bank, LaSalle National Bank and the Northern Trust
Company dated October 4, 1994 (7)
10.16 Note Agreement dated October 1, 1994 between American Colloid Company and Principal
Mutual Life Insurance Company (7)
27 Financial Data Schedule
<FN>
___________________
(1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with the Securities and
Exchange Commission on July 27, 1987.
(2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1988.
(3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1989.
(4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1992.
(5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed with the Securities and
Exchange Commission on September 15, 1993.
(6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1993.
(7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and
Exchange Commission for the quarter ended September 30, 1994.
(8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1994.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,326
<SECURITIES> 0
<RECEIVABLES> 56,463
<ALLOWANCES> 1,697
<INVENTORY> 38,371
<CURRENT-ASSETS> 104,733
<PP&E> 252,158
<DEPRECIATION> 88,370
<TOTAL-ASSETS> 282,021
<CURRENT-LIABILITIES> 37,194
<BONDS> 85,855
<COMMON> 213
0
0
<OTHER-SE> 147,166
<TOTAL-LIABILITY-AND-EQUITY> 282,021
<SALES> 78,750
<TOTAL-REVENUES> 78,750
<CGS> 61,374
<TOTAL-COSTS> 72,193
<OTHER-EXPENSES> 142
<LOSS-PROVISION> 361
<INTEREST-EXPENSE> (1,201)
<INCOME-PRETAX> 5,632
<INCOME-TAX> 1,975
<INCOME-CONTINUING> 3,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,631
<EPS-PRIMARY> 0
<EPS-DILUTED> .19
</TABLE>
