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, 1996
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
AMCOL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 36-0724340
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
(Address of principal executive offices) (Zip Code)
(847) 394-8730
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 25, 1996
(Common stock, $.01 par value) 19,143,727
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AMCOL INTERNATIONAL CORPORATION
INDEX
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Page No.
Part I - Financial Information
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Item 1 Financial Statements
Condensed Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 1
Condensed Consolidated Statement of Operations -
three months ended March 31, 1996 and 1995 2
Condensed Consolidated Statement of Cash Flows -
three months ended March 31, 1996 and 1995 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 9
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Part I - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS
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March 31, December 31,
1996 1995
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Current assets: *
Cash and cash equivalents $ 3,535 $ 1,888
Accounts receivable 66,044 66,429
Inventories 47,944 47,205
Advance mining 1,872 2,678
Prepaid expenses 5,426 5,355
Current deferred tax asset 2,782 2,782
Total current assets 127,603 126,337
Property, plant, equipment and mineral reserves 279,669 276,530
Less accumulated depreciation 105,977 101,319
173,692 175,211
Intangible assets 15,628 15,886
Other long-term assets 5,038 4,932
$ 321,961 $ 322,366
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 5,073 $ 4,069
Accounts payable 19,143 18,777
Accrued liabilities 13,961 13,036
Total current liabilities 38,177 35,882
Long-term debt 116,899 117,016
Deferred credits and minority interest 13,454 13,974
Stockholders' equity:
Common stock 213 213
Additional paid-in capital 75,069 74,967
Foreign currency translation adjustment (3,875) (2,351)
Retained earnings 86,494 86,703
Treasury stock (4,470) (4,038)
153,431 155,494
$ 321,961 $ 322,366
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*Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except number of shares and per share data)
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Three Months Ended
March 31,
1996 1995
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Net sales $ 85,536 $ 78,750
Cost of sales 69,536 61,374
Gross profit 16,000 17,376
General, selling and administrative expenses 12,423 10,818
Operating profit 3,577 6,558
Other income (expense):
Interest expense, net (2,055) (1,068)
Other income, net 255 142
(1,800) (926)
Income before income taxes and minority interest 1,777 5,632
Income taxes 640 1,975
Income before minority interest 1,137 3,657
Net income of minority interest (6) (26)
Net income $ 1,131 $ 3,631
Weighted average common and common
equivalent shares 19,659,827 19,589,537
Earnings per share $ .06 $ .19
Dividends declared per share $ .07 $ .06
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The accompanying notes are an integral part of these
condensed financial statements.
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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended
March 31,
1996 1995
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Cash flow from operating activities:
Net income $ 1,131 $ 3,631
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 6,382 4,385
Other (320) 232
(Increase)/decrease in current assets 185 (6,318)
Increase/(decrease) in current liabilities 2,323 750
Net cash provided by (used in) operations 9,701 (2,680)
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (8,643) (25,060)
Sale of mineral reserves 2,701 --
Other (391) 1,713
Net cash used in investing activities (6,333) (23,347)
Cash flow from financing activities:
Net change in outstanding debt (145) 14,224
Dividends paid (1,340) (1,145)
Other (236) 525
Net cash provided by financing activities (1,721) 13,604
Net (decrease) in cash and cash equivalents 1,647 (7,063)
Cash and cash equivalents at beginning of period 1,888 10,389
Cash and cash equivalents at end of period $ 3,535 $ 3,326
Supplemental Disclosure of Cash Flows Information (In thousands)
Actual cash paid for:
Interest $ 557 $ 279
Income taxes $ 259 $ 497
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The accompanying notes are an integral part of these
condensed financial statements.
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AMCOL INTERNATIONAL CORPORATION 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, 1995, 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, 1995, has been derived from and does not include all the
disclosures contained in the audited consolidated financial statements for the
year ended December 31, 1995. 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 1995 Form 10-K which
accompanies the 1995 Corporate Report.
The results of operations for the three month period ended March 31, 1996,
are not necessarily indicative of the results to be expected for the full year.
Certain items in the 1995 consolidated financial statements have been
reclassified to comply with the consolidated financial statements presentation
for 1996.
Note 2: INVENTORIES
Inventories at March 31, 1996 have been valued using the same methods as at
December 31, 1995. The composition of inventories at March 31, 1996 and December
31, 1995, was as follows:
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March 31, December 31,
1996 1995
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Crude stockpile and in-process inventories $ 31,121 $ 29,705
Other raw material, container and supplies inventories 16,823 17,500
$ 47,944 $ 47,205
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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.
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AMCOL INTERNATIONAL CORPORATION 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, 1996 vs. 1995
Net sales increased by $6.8 million, or 8.6%, while gross profits and
operating profits decreased by $1.4 million, or 7.9%, and $3.0 million, or
45.5%, respectively. Lower sales of agricultural carrier products and
underutilized cat litter capacity in the minerals segment were the primary
reasons for the gross profit decrease. Higher selling, general and
administrative expenses associated with the development of the nanocomposite
technology contributed to the lower operating profits. Net interest expense
increased by $1.0 million, or 92.4%, as March 31, 1996 debt (both long and
short-term) increased by $32.8 million, or 36.8%, over the prior year quarter.
Also, approximately $.4 million of interest related to plant expansion was
capitalized in the 1995 quarter. Earnings per share were $.06 for the 1996
quarter compared with $.19 for the 1995 quarter. A brief discussion by business
segment follows:
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Quarter Ended March 31,
------------------------------------------------------------------------------------
1996 1995 1996 v. 1995
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Minerals (Dollars in Thousands) $ Change % Change
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<S> <C> <C> <C> <C> <C> <C>
Net sales $ 38,002 100.0% $ 39,097 100.0% $(1,095) -2.8%
Cost of sales 32,117 84.5% 31,070 79.5%
Gross profit 5,885 15.5% 8,027 20.5% (2,142) -26.7%
General, selling and
administrative expenses 4,521 11.9% 4,236 10.8% 285 6.7%
Operating profit 1,364 3.6% 3,791 9.7% (2,427) -64.0%
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Sales decreased by $1.1 million, or 2.8% , over the prior year period.
Significantly lower sales to agricultural carrier market and marginally lower
sales to the durable goods markets accounted for the change. The incremental
impact of the loss of the carrier business was significant to the lower gross
profit in 1996. In addition, cost increases for packaging of cat litter, both
raw materials and labor, adversely affected domestic margins. The Company
expanded its litter packaging capability during the course of 1995, but current
demand does not support the additional fixed costs associated with the
facilities. Management is currently addressing the cost problems at these
operations, in addition to its overall cost structure. Dramatic improvement in
profitability is not anticipated for the second quarter of 1996. The increase in
general, selling and administrative expenses was related to activities of the
overseas subsidiaries. The U.K. operation has expanded its staff to service the
European environmental market. During the second quarter of 1996, this group
will become part of the environmental segment, resulting in restatement of prior
disclosures of both minerals and environmental segment results for prior
periods.
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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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Quarter Ended March 31,
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1996 1995 1996 v. 1995
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Absorbent Polymers (Dollars in Thousands) $ Change % Change
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Net sales $ 32,046 100.0% $26,480 100.0% $ 5,566 21.0%
Cost of sales 25,720 80.3% 20,302 76.7%
Gross profit 6,326 19.7% 6,178 23.3% 148 2.4%
General, selling and
administrative expenses 2,479 7.7% 2,094 7.9% 385 18.4%
Operating profit 3,847 12.0% 4,084 15.4% (237) -5.8%
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Revenues increased by $5.6 million, or 21.0% over the prior year period as
sales volume increased by 34.6%. Capacity utilization remained at approximately
the same level as the fourth quarter of 1995, however European sales demand
exceeded the U.K. plant production capability for its newer generation product,
requiring supplemental shipments of finished product from the U.S. at lower
margins. This situation is likely to continue until the third quarter of 1996,
when the current U.K. plant modification and expansion is completed. The U.S.
plant experienced lower shipments to Latin America as it undergoes a conversion
from using an outside distributor to direct selling in one of its major markets.
The lower sales are a result of the distributor reducing inventory levels in
anticipation of the change. General, selling and administrative expenses
increased by 18.4%. Bad debt provisions and increased costs associated with
trade and company meetings accounted for more than 70% of the increase.
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Quarter Ended March 31,
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1996 1995 1996 v. 1995
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Environmental (Dollars in Thousands) $ Change % Change
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Net sales $ 10,322 100.0% $ 7,925 100.0% $ 2,397 30.2%
Cost of sales 7,235 70.1% 5,397 68.1%
Gross profit 3,087 29.9% 2,528 31.9% 559 22.1%
General, selling and
administrative expenses 2,835 27.5% 2,519 31.8% 316 12.5%
Operating profit 252 2.4% 9 0.1% 243 2,700.0%
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Sales increased by $2.4 million, or 30.2%, over the prior year period.
Sales from businesses acquired during the second and third quarters of 1995
accounted for approximately 50% of the increase. International sales of other
environmental products accounted for approximately 80% of the balance of the
sales increase. General, selling and administrative expenses increased by 12.5%,
largely as a result of the increased staffing associated with the
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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
acquired businesses and increased marketing costs associated with international
sales. The first quarter is generally the worst quarter for sales and operating
profits in the environmental segment. First quarter 1996 results, while higher
than the previous year quarter in both sales and operating profits, were
hampered by extreme weather conditions in most of the United States, delaying
customers' installations.
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Quarter Ended March 31,
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1996 1995 1996 v. 1995
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Transportation (Dollars in Thousands) $ Change % Change
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Net sales $ 5,166 100.0% $ 5,248 100.0% $ (82) -1.6%
Cost of sales 4,464 86.4% 4,605 87.7%
Gross profit 702 13.6% 643 12.3% 59 9.2%
General, selling and
administrative expenses 433 8.4% 387 7.4% 46 11.9%
Operating profit 269 5.2% 256 4.9% 13 5.1%
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General, selling and administrative expenses increased as a result of
higher staffing of the brokerage operation. Higher brokerage margins offset the
increased costs. Rapidly rising fuel costs are likely to have an adverse impact
on the transportation operation margins beginning in the second quarter 1996.
Fuel surcharges may be implemented, but are unlikely to absorb the full impact
of the increased costs.
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Quarter Ended March 31,
------------------------------------------------------------------------------------
1996 1995 1996 v. 1995
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Corporate (Dollars in Thousands) $ Change % Change
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<S> <C> <C> <C> <C>
General, selling and
administrative expenses $ 2,155 $ 1,582 $ 573 36.2%
Operating loss ( 2,155) (1,582) (573) 36.2%
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Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance, and
corporate governance costs. The start-up of the nanocomposite business is also
included in the corporate costs. The increase in costs is primarily attributable
to the development and market launch of the Company's nanocomposite technology.
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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
At March 31, 1996, the Company had outstanding debt of $122.0 million
(including both long and short term debt) and cash of $3.5 million compared with
$121.1 million in debt and $1.9 million in cash and cash equivalents at December
31, 1995. The long-term debt to total capitalization at March 31, 1996 was 43.2%
compared with 42.9% at December 31, 1995.
The Company had a current ratio of 3.34 to 1 at March 31, 1996 with
approximately $89.4 million in working capital compared with 3.52 to 1 and $90.5
million, respectively, at December 31, 1995.
During the first quarter of 1996, the Company paid dividends of $1.3
million, and acquired property plant and equipment totaling $8.6 million. These
expenditures were funded from operations and from the sale of certain of its
mineral reserves. The proceeds from the sale of these minerals were $2.7
million.
The Company had $43.2 million in usused, committed credit lines at March
31, 1996. These credit facilities are adequate 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
and international minerals sectors, as well as yet further expansion in the
polymer segment.
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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, 1996.
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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.
AMCOL INTERNATIONAL CORPORATION
Date: 4/25/96 /s/ John Hughes
John Hughes
President and Chief Executive Officer
Date: 4/25/96 /s/ Paul G. Shelton
Paul G. Shelton
Senior Vice President and Chief Financial Officer
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INDEX TO EXHIBITS
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Exhibit
Number
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3.1 Restated Certificate of Incorporation of the Company (5), as amended (10)
3.2 Bylaws of the Company (10)
4 Article Fourth of the Company's Restated Certificate of Incorporation (5)
10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3)
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 AMCOL International Corporation 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 February 7, 1996, by and between Registrant and Robert C. Steele
(10)
10.10 Change in Control Agreement dated February 7, 1996, by and between Registrant and Lawrence E.
Washow (10)
10.11 Change in Control Agreement dated February 7, 1996, by and between Registrant and Roger P. Palmer
(10)
10.12 Change in Control Agreement dated January 24, 1994, by and between Registrant and Peter L. Maul (6)
10.13 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)
10.14 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10)
10.15 Credit Agreement by and among AMCOL International Corporation 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); as amended, First Amendment to Credit Agreement dated September 25, 1995 (9)
10.16 Note Agreement dated October 1, 1994, between AMCOL International Corporation and Principal Mutual
Life Insurance Company (7)
27 Financial Data Schedule
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(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.
(9) 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, 1995.
(10) 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, 1995.
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