SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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)
<TABLE>
<S> <C>
Delaware 36-0724340
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</TABLE>
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 18, 1997
(Common stock, $.01 par value) 18,958,268
<PAGE>
AMCOL INTERNATIONAL CORPORATION
INDEX
Part I - Financial Information
<TABLE>
<S> <C> <C>
Item 1 Financial Statements Page No.
Condensed Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 1
Condensed Consolidated Statement of Operations -
six months and three months ended June 30, 1997 and 1996 2
Condensed Consolidated Statement of Cash Flows -
six months ended June 30, 1997 and 1996 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 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
Part I, Item I - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------- -------------------
<S> <C> <C>
Current assets: *
Cash and cash equivalents $ 4,177 $ 3,054
Accounts receivable, net 78,370 81,519
Inventories 58,454 56,314
Prepaid expenses 5,380 4,502
Current deferred tax asset 3,145 3,086
Total current assets 149,526 148,475
Property, plant, equipment and mineral reserves 308,167 299,366
Less accumulated depreciation 129,919 118,490
178,248 180,876
Intangible assets, net 14,604 15,217
Other long-term assets, net 5,765 6,140
$ 348,143 $ 350,708
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 16,884 $ 8,969
Accounts payable 19,900 24,389
Accrued liabilities 23,762 18,512
Total current liabilities 60,546 51,870
Long-term debt 106,314 118,855
Deferred credits and other liabilities 12,573 12,579
Stockholders' equity:
Common stock 213 213
Additional paid-in capital 75,728 75,576
Foreign currency translation adjustment 919 2,868
Retained earnings 101,186 96,579
Treasury stock (9,336) (7,832)
168,710 167,404
$ 348,143 $ 350,708
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
-1-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------------- -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 221,408 $ 182,297 $ 113,490 $ 96,761
Cost of sales 175,894 146,383 89,787 76,847
Gross profit 45,514 35,914 23,703 19,914
General, selling and administrative
expenses 28,744 25,482 14,237 13,059
Operating profit 16,770 10,432 9,466 6,855
Other income (expense):
Interest expense, net (4,360) (4,114) (2,198) (2,059)
Other income, net (580) 131 (475) (124)
(4,940) (3,983) (2,673) (2,183)
Income from operations 11,830 6,449 6,793 4,672
Income taxes 4,375 2,322 2,511 1,682
Income before minority interest 7,455 4,127 4,282 2,990
Net income of minority interest - (13) - (7)
Net income $ 7,455 $ 4,114 4,282 2,983
Weighted average common and
common equivalent shares 19,432,195 19,540,809 19,407,928 19,475,371
Earnings per share $ .38 $ .21 $ .22 $ .15
Dividends declared per share $ .15 $ .14 $ .08 $ .07
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
-2-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------------
1997 1996
-------------------- --------------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 7,455 $ 4,114
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 15,347 13,048
Other (406) (436)
(Increase)/decrease in current assets 707 (10,723)
Increase/(decrease) in current liabilities 761 5,963
Net cash provided by operations 23,864 11,966
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (13,509) (21,339)
Sale of product line and mineral reserves - 6,155
Other (406) 1,234
Net cash used in investing activities (13,915) (13,950)
Cash flow from financing activities:
Net change in outstanding debt (4,626) 5,015
Dividends paid (2,848) (2,675)
Other (1,352) (929)
Net cash provided (used) by financing activities (8,826) 1,411
Net increase (decrease) in cash and cash equivalents 1,123 (573)
Cash and cash equivalents at beginning of period 3,054 1,888
Cash and cash equivalents at end of period $ 4,177 $ 1,315
Supplemental Disclosure of Cash Flows Information
Actual cash paid for:
Interest $ 4,327 $ 2,386
Income taxes $ 3,272 $ 816
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
-3-
<PAGE>
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, 1996, 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, 1996, has been derived from and does not include all the
disclosures contained in the audited consolidated financial statements for the
year ended December 31, 1996. The information furnished herein includes all
adjustments which are, in the opinion of management, necessary for a fair
statement of the financial position and operating results of the interim
periods, 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 1996 Form 10-K which accompanies the 1996 Corporate
Report.
The results of operations for the six-month period ended June 30, 1997, are
not necessarily indicative of the results to be expected for the full year.
Note 2: INVENTORIES
Inventories at June 30, 1997 have been valued using the same methods as at
December 31, 1996. The composition of inventories at June 30, 1997 and December
31, 1996, was as follows:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
----------------------- -----------------------
<S> <C> <C>
Crude stockpile and in-process inventories $ 41,692 $ 36,493
Other raw material, container and supplies inventories 16,762 19,821
$ 58,454 $ 56,314
</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.
Note 4: DERIVATIVES
From time to time, the Company uses financial derivatives, principally
swaps, forward contracts and options in its management of foreign currency and
interest rate exposures. These contracts hedge transactions and balances for
periods consisted with its committed exposures. As of June 30, 1997 the only
derivatives outstanding were related to foreign currency.
-4-
<PAGE>
Item II - 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 the Company's
financial position and operating results during the periods included in the
accompanying condensed consolidated financial statements.
Six Months Ended June 30, 1997 vs. 1996
Net sales increased by $39.1 million, or 21.5%, while gross profit
increased by $9.6 million, or 26.7%, and operating profit increased by $6.3
million, or 60.8%. Higher utilization of polymer plant capacity and better
results from the minerals segment accounted for most of the improvement in sales
and profits Net interest expense increased by $.2 million, or 6.0%, as a result
of higher average debt levels. Other expense for 1997 included $.4 million
related to currency exchange losses. Earnings were $.38 per share for the 1997
period, compared with $.21 per share for the prior year period on slightly fewer
weighted average shares outstanding.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 77,821 100.0% $ 69,904 100.0% $ 7,917 11.3%
Cost of sales 65,316 83.9% 59,419 85.0%
Gross profit 12,505 16.1% 10,485 15.0% 2,020 19.3%
General, selling and
administrative expenses 7,796 10.0% 7,748 11.1% 48 .6%
Operating profit 4,709 6.1% 2,737 3.9% 1,972 72.0%
</TABLE>
Sales increased by $7.9 million, or 11.3%, from the prior-year period.
Higher sales of cat litter and metalcasting products offset declines in sales of
refining chemicals (a business that was sold in the second quarter of 1996) and
shipments to the iron ore pelletizing market. Reduced sales to the iron ore
pelletizing market are anticipated to continue, although the remaining shipments
will reflect higher unit selling prices. Gross profit margins improved by 110
basis points. Product mix and better cat litter plant utilization accounted for
the change. General, selling and administrative expenses for 1997 included
approximately $.4 million associated with international ventures, which provide
access to cost-effective, local clay sources as alternatives to products shipped
from the United States. Management anticipates that such expenditures will
continue at this pace for the balance of 1997.
-5-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Absorbent Polymers (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 90,202 100.0% $ 66,148 100.0% $ 24,054 36.4%
Cost of sales 71,779 79.6% 53,714 81.2%
Gross profit 18,423 20.4% 12,434 18.8% 5,989 48.2%
General, selling and
administrative expenses 5,620 6.2% 4,896 7.4% 724 14.8%
Operating profit 12,803 14.2% 7,538 11.4% 5,265 69.8%
</TABLE>
Revenues increased by $24.1 million, or 36.4%, over the prior year as sales
volume increased 50.2%. Gross profit margins improved by 160 basis points from
the prior year, reflecting higher plant capacity utilization.
The current worldwide superabsorbent polymer capacity for the Company is
estimated at 130,000 metric tons, following debottlenecking of the U.S. and U.K.
plants.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 39,343 100.0% $ 35,330 100.0% $ 4,013 11.4%
Cost of sales 26,538 67.5% 23,782 67.3%
Gross profit 12,805 32.5% 11,548 32.7% 1,257 10.9%
General, selling and
administrative expenses 8,874 22.6% 7,480 21.2% 1,394 18.6%
Operating profit 3,931 9.9% 4,068 11.5% (137) (3.4%)
</TABLE>
Sales increased by $4.0 million, or 11.4%. Gross profit margins declined by
20 basis points. General, selling and administrative expenses increased by $1.4
million, or 18.6%, reflecting higher international marketing costs and higher
costs associated with the European environmental unit.
-6-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 14,042 100.0% $10,915 100.0% $ 3,127 28.6%
Cost of sales 12,261 87.3% 9,468 86.7%
Gross profit 1,781 12.7% 1,447 13.3% 334 23.1%
General, selling and
administrative expenses 1,015 7.2% 913 8.4% 102 11.2%
Operating profit 766 5.5% 534 4.9% 232 43.4%
</TABLE>
Revenues increased $3.1 million, or 28.6%, as a result of stronger
shipments of cat litter and environmental products. This unit also benefited
from increased truck shipments due to weather-related difficulties experienced
by the railroads in the first quarter of 1997. Gross profit margins declined by
60 basis points as a result of lower aggregate brokerage margins.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 5,439 $ 4,445 $ 994 22.4%
Operating loss (5,439) (4,445) (994) 22.4%
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance, and
corporate governance costs. The $1.0 million increase in costs is primarily
attributable to the development and launch of the Company's nanocomposite
technology.
-7-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Three Months Ended June 30, 1997 vs. 1996
Net sales increased by $16.7 million, or 17.3%, while gross profit
increased by $3.8 million, or 19.0%, and operating profit increased by $2.6
million, or 38.1%. Net interest expense increased by $.1 million, or 6.8%. Other
expense in 1997 included $.3 million in exchange losses. Earnings were $.22 per
share for 1997 quarter compared with $.15 per share for the prior-year quarter
on slightly fewer weighted average shares outstanding.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 38,563 100.0% $ 35,347 100.0% $ 3,216 9.1%
Cost of sales 32,163 83.4% 29,566 83.6%
Gross profit 6,400 16.6% 5,781 16.4% 619 10.7%
General, selling and
administrative expenses 3,921 10.2% 3,950 11.2% (29) (.7%)
Operating profit 2,479 6.4% 1,831 5.2% 648 35.4%
</TABLE>
Sales increased by $3.2 million, or 9.1%, over the prior year period,
primarily as a result of higher shipments of cat litter and metalcasting
products. Gross profit margins improved by 20 basis points. General, selling and
administrative expenses in 1996 included approximately $.4 million of severance
costs related to management changes, whereas the 1997 quarter included
approximately $.2 million associated with the international ventures.
-8-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Absorbent Polymers (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 45,041 100.0% $34,102 100.0% $ 10,939 32.1%
Cost of sales 36,211 80.4% 27,994 82.1%
Gross profit 8,830 19.6% 6,108 17.9% 2,722 44.6%
General, selling and
administrative expenses 2,605 5.8% 2,417 7.1% 188 7.8%
Operating profit 6,225 13.8% 3,691 10.8% 2,534 68.7%
</TABLE>
Revenues increased by $10.9 million, or 32.1%, over the prior year as sales
volume increased 43.9%. Volume growth on a sequential quarter basis was
adversely impacted by slower than expected demand from one of the unit's major
customers. Continued volume growth is anticipated, though the pace of growth is
likely to slow from that of the previous year. Gross profit margins improved by
170 basis points, primarily as a result of improved capacity utilization.
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 22,778 100.0% $21,563 100.0% $ 1,215 5.6%
Cost of sales 15,211 66.8% 14,283 66.2%
Gross profit 7,567 33.2% 7,280 33.8% 287 3.9%
General, selling and
administrative expenses 4,565 20.0% 3,922 18.2% 643 16.4%
Operating profit 3,002 13.2% 3,358 15.6% (356) (10.6%)
</TABLE>
Sales increased by $1.2 million, or 5.6%. Weather related delays in the
United States caused the pace of growth to slow from the first quarter of 1997,
primarily in the geosynthetic clay liner market. Export sales and sales of U.K.
manufactured products were hampered by the strong U.S. dollar and British pound.
Gross profit margins declined by 60 basis points as a result of the lower
margins on liners and lower international sales The backlog for liner sales is
strong, and sales are expected to rebound, however international sales will
continue to be impacted as long as the dollar and pound remain strong in
relation to other currencies. General, selling and administrative expenses
increased by $.6 million, reflecting the addition of personnel, higher
international marketing costs and increased infrastructure costs related to the
European unit associated with building a stronger international presence.
-9-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 7,108 100.0% $ 5,749 100.0% $ 1,359 23.6%
Cost of sales 6,202 87.3% 5,004 87.0%
Gross profit 906 12.7% 745 13.0% 161 21.6%
General, selling and
administrative expenses 511 7.2% 480 8.3% 31 6.5%
Operating profit 395 5.5% 265 4.7% 130 49.1%
</TABLE>
Revenues increased 23.6%, primarily as a result of increased cat litter
shipments and more business with customers unrelated to the Company's other
business segments.
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1997 1996 1997 vs. 1996
------------------------- ---------------------- ---------------------------
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 2,635 $ 2,290 $ 345 15.1%
Operating loss (2,635) (2,290) (345) 15.1%
</TABLE>
Increased costs associated with the development and launch of the
nanocomposite business accounted for the increase in corporate expenses.
-10-
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity and Capital Resources
At June 30, 1997, the Company had outstanding debt of $123.2 million
(including both long-and short-term debt) and cash of $4.2 million compared with
$127.8 million in debt and $3.1 million in cash at December 31, 1996. The
long-term debt represented 38.7% of total capitalization at June 30, 1997
compared with 41.5% at December 31, 1996.
The Company had a current ratio of 2.47-to-1 at June 30, 1997, with
approximately $89.0 million in working capital compared with 2.86-to-1 and $96.6
million, respectively, at December 31, 1996. The lower current ratio reflected
the reclassification of $9.5 million of debt which matures during the next
twelve months.
During 1997, the Company paid dividends of $2.8 million and acquired
property, plant and equipment totaling $13.5 million. These expenditures, plus a
$4.6 million reduction in debt, were funded from operations. Capital
expenditures for 1997 are currently anticipated to be in the $30 to $35 million
range.
The Company had $38.8 million in unused, committed credit lines at June 30,
1997. These credit facilities, in conjunction with funds generated from
operations, are adequate to fund the capital expenditure program approved by the
Board of Directors at this time.
Forward Looking Statements
This filing contains certain forward-looking statements regarding the
Company's expected performance for future periods and actual results for such
periods may materially differ. Such forward-looking statements are subject to
uncertainties, which include, but are not limited to, actual growth in AMCOL's
various markets, utilization of the Company's plants, customer concentration in
the absorbent polymers segment, operating costs, raw material prices, weather,
currency exchange rates, and delays in development, production and marketing of
new products, and other factors detailed from time to time in the Company's
annual report and other reports filed with the Securities and Exchange
Commission.
-11-
<PAGE>
PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
(a) The Annual Stockholders Meeting of the Company was held on May 15,
1997.
(b) At the Annual Stockholders Meeting, the Stockholders voted on the
following uncontested matters. Each nominee for director was elected
by a vote of the Stockholders; and each matter was approved by a vote
of the Stockholders as follows:
1. Election of the below-named Nominees of the Board of Directors of
AMCOL International Corporation:
<TABLE>
<CAPTION>
For Against
------------------------- -----------------------
<S> <C> <C>
Robert E. Driscoll III 15,167,621.658 139,085.500
James A. McClung 15,166,766.137 139,941.021
C. Eugene Ray 15,167,618.598 139,088.560
Dale E. Stahl 15,165,957.720 140,749.438
</TABLE>
2. Ratification of Appointment of KPMG Peat Marwick LLP as
independent accountants for the Company for its 1997 fiscal year.
<TABLE>
<CAPTION>
For Against Abstain
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
15,249,490.595 9,529.518 47,687.045
</TABLE>
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 June 30, 1997.
-12-
<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.
AMCOL INTERNATIONAL CORPORATION
Date: 7/21/97 /s/ John Hughes
John Hughes
President and Chief Executive Officer
Date: 7/21/97 /s/ Paul G. Shelton
Paul G. Shelton
Senior Vice President and Chief Financial Officer
-13-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
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)
10.2 Executive Medical Reimbursement Plan (1)
10.3 Lease Agreement for office space dated September 29, 1986, between
the Company and American National Bank and Trust Company of Chicago;
(1) First Amendment dated June 2, 1994 (8); Second Amendment dated
June 2, 1997
10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan
(2); as amended (6)
10.5 Change in Control Agreement dated April 1, 1997, by and between
Registrant and John Hughes (12)
10.6 Change in Control Agreement dated April 1, 1997, by and between
Registrant and Paul G. Shelton (12)
10.7 Change in Control Agreement dated February 7, 1996, by and between
Registrant and Lawrence E. Washow (10)
10.8 Change in Control Agreement dated February 7, 1996, by and between
Registrant and Roger P. Palmer (10)
10.9 Change in Control Agreement dated April 1, 1997 by and between
Registrant and Peter L. Maul (12)
10.10 AMCOL International Corporation Dividend Reinvestment and Stock
Purchase Plan (4); as amended (6)
10.11 AMCOL International Corporation 1993 Stock Plan, as amended and
restated (10)
10.12 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), as amended, Second Amendment to Credit
Agreement dated March 28, 1996, and Third Amendment to Credit
Agreement dated September 12, 1996 (11)
10.13 Note Agreement dated October 1, 1994, between AMCOL International
Corporation and Principal Mutual Life Insurance Company, (7); as
amended, First Amendment of Note Agreement dated September 30, 1996
(11)
10.14 Change in Control Agreement dated August 21, 1996 by and between
Registrant and Frank B. Wright, Jr. (11)
27 Financial Data Schedule
(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, 1993.
(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 for the year ended
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.
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<PAGE>
(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.
(11) 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, 1996.
(12) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter
ended March 31, 1997.
-15-
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Amendment") is made as of the 2nd day
of June, 1997, by and between ESKO PROPERTIES, INC., as agent for the owners of
the Building (as hereinafter defined), having an office at 305 Royal Poinciana
Plaza, Palm Beach, Florida 33480 ("Landlord"), and AMCOL INTERNATIONAL CORP., a
Delaware corporation, having an office at One North Arlington, 1500 Shure Drive,
Arlington Heights, Illinois 60004 ("Tenant"), with reference to the following
recitals:
A. American National Bank and Trust Company of Chicago as Trustee under
Trust Agreement dated July 1, 1984 and known as Trust No. 62164 ("ANB") and
Tenant entered into that certain Lease dated September 29, 1986, as modified by
First Addendum to Lease dated June 2, 1994 (the "First Amendment"), and as
supplemented by Cross Easement Agreement and Grant of License dated October 24,
1994 (as so modified and supplemented, the "Lease"), respecting certain premises
on the fifth floor (the "Premises") at the building known as One North
Arlington, located at 1500 Shure Drive in Arlington Heights, Illinois (the
"Building"). Landlord is presently the owner of the Building and
successor-in-interest to ANB.
B. The parties hereto wish to provide for certain modifications to the
Lease, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do agree as follows:
1. CAPITALIZED TERMS. All capitalized terms used but not defined in this
Amendment shall have the meanings ascribed to them in the Lease.
2. EXTENSION OF TERM. The Term of the Lease is hereby extended to July 31,
2008 (the "Expiration Date").
3. EXTENSION OPTION. Tenant shall have one (1) option to extend the Term of
the Lease for an additional eight (8) years (the "Extended Term") upon giving
Landlord written notice thereof (the "Extension Notice") at least seventeen (17)
months prior to the Expiration Date. All of the terms and provisions of the
Lease shall remain in effect during the Extended Term, except that Tenant shall
have no further right to extend the Term of the Lease and the Base Rent payable
with respect to the Premises shall be Market Rent, as agreed to between Landlord
and Tenant within the thirty (30) day period following the date on which Tenant
shall have given Landlord the Extension Notice. "Market Rent" shall be the rent
anticipated to be generally payable, taking into account the lease term,
leasehold improvement allowance and other concessions, as of the commencement
date of the Extended Term in the northwest suburban Chicago area for similar
space in office buildings comparable in quality and location to the Building. If
Landlord and Tenant shall be unable to agree on the then Market Rent for
purposes of
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<PAGE>
this Paragraph 3 within such thirty (30) day period, then the Market Rent
shall be determined by arbitration in accordance with the provisions of
Paragraph 13 of this Amendment.
4. ADDED SPACE. Effective on the later to occur of (a) August 1, 1998 and
(b) sixty (60) days after Landlord shall deliver possession of the Added Space
(as hereinafter defined) to Tenant (the "Added Space Commencement Date"), the
Added Space shall be included in the Premises demised under the Lease provided,
however, that if Landlord fails to deliver possession of the Added Space on or
before September 1, 1998, Tenant shall be entitled to a credit from its Base
Rent in the amount equal to two (2) days' Base Rent for every one (1) day that
such failure continues after September 1, 1998. Landlord agrees to deliver
possession of the Added Space in a broom clean condition with all personal
property of previous tenant removed. The "Added Space" shall consist of the
entire sixth floor of the Building, comprising 22,525 rentable square feet
("rsf"), and the entire seventh floor of the Building, comprising 14,040 rsf.
Tenant shall have the right to commence its leasehold improvement work in the
Added Space, provided that Tenant shall comply with the requirements of Sections
9; 13(f); 14 (g), (i), (l) - (p); 17 (a); and 18 of the Lease with respect to
such work and, prior to commencement of such work, Tenant shall provide to
Landlord certificates evidencing the insurance coverage required by Section 18.
Effective on the Added Space Commencement Date, and subject to rent adjustments,
Tenant shall pay to Landlord with respect to the Added Space an annual Base Rent
of Four Hundred Seventy-Five Thousand Three Hundred Forty-Five and 00/100
Dollars ($475,345.00), in twelve (12) monthly installments of Thirty-Nine
Thousand Six Hundred Twelve and 08/100 Dollars ($39,612.08). On each anniversary
of the Added Space Commencement Date (each, an "Adjustment Date" for purposes of
this Paragraph) the Base Rent with respect to the Added Space shall be increased
by three percent (3%) over the Base Rent in effect immediately prior to such
Adjustment Date (said amount due pursuant to this increase shall be the new Base
Rent until the next Adjustment Date).
5. 5TH FLOOR SPACE. Effective November 1, 2001, (a) the rentable area of
the fifth floor of the Building included within the Premises (the "5th Floor
Space") shall be deemed to be 26,274 rsf, and the calculation of Base Rent and
Additional Rent payable with respect to the 5th Floor Space shall be based on
such revised rentable area after such date; and (b) in lieu of the Base Rent
specified in Section 3 of the First Amendment, Tenant shall pay Base Rent with
respect to the 5th Floor Space at a rental rate per rsf equal to the rental rate
per rsf then payable with respect to the Added Space, as escalated pursuant to
Paragraph 4 of this Amendment. On November 1, 2002 and on each November 1
thereafter (each, an "Adjustment Date" for purposes of this Paragraph) such Base
Rent with respect to the 5th Floor Space shall be increased by three percent
(3%) over the Base Rent in effect immediately prior to such Adjustment Date
(said amount due pursuant to this increase shall be the new Base Rent until the
next Adjustment Date).
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<PAGE>
6. ADDITIONAL RENT. Section 3 of the Lease shall be amended as follows: (a)
effective as of the Added Space Commencement Date, Tenant's Pro Rate Share shall
be increased to reflect the addition of the Added Space to the Premises, (b)
effective as of the rent commencement date for the 4th Floor Space (as
hereinafter defined), Tenant's Pro Rata Share shall be increased to reflect the
addition of the 4th Floor Space to the Premises; (c) effective as of the rent
commencement date for any First Offer Space (as hereinafter defined), Tenant's
Pro Rata Share shall be increased to reflect the addition of such First Offer
Space to the Premises; (d) with respect to the Added Space and, if applicable,
the 4th Floor Space, and, if applicable, any First Offer Space, the definition
of Operating Expenses as set forth in Section 3(B) of the Lease shall include a
property management fee equal to three percent (3%) of the annual gross income
of the Building (the "Management Fee"); and (e) effective as of November 1,
2001, Tenant's Pro Rata Share of Operating Expenses with respect to the 5th
Floor Space shall include the Management Fee and shall reflect the new rentable
area of 26,274 rsf.
7. LEASEHOLD IMPROVEMENT ALLOWANCES. Landlord shall pay to Tenant with
respect to the Added Space a leasehold improvement allowance of (a) $15.00 per
rsf, or $548,475.00, payable on the Added Space Commencement Date; and (b) $2.41
per rsf, or $88,121.65, payable on November 1, 1998. Landlord shall pay to
Tenant with respect to the 5th Floor Space a leasehold improvement allowance of
(a) $5.00 per rsf, or 127,395.00, as provided in Section 8 of the First
Amendment, payable on October 1, 1998; and (b) $10.50 per rsf, or $275,877.00,
payable on November 1, 2001. Notwithstanding the foregoing provisions of this
Paragraph 7, Landlord shall not be obligated to pay Tenant the foregoing
leasehold improvement allowances unless and until, with respect to each such
leasehold improvement allowance, Tenant shall provide to Landlord reasonable
documentation showing the expenditure of at least two thirds (2/3) of the amount
of such leasehold improvement allowance for leasehold improvements in the
Premises. Neither Landlord nor Tenant shall charge any supervisory or other fees
in connection with the foregoing leasehold improvement work. Tenant shall
perform all such leasehold improvement work in accordance with the provisions of
Section 14 (i) of the Lease, provided that Landlord shall approve Tenant's plans
and specifications for such work and the estimated cost of such work prior to
the commencement of the work. Notwithstanding anything herein or in the Lease to
the contrary, Tenant shall have the right to contract with any responsible
general contractor to perform the leasehold improvement work, provided Tenant
and such general contractor otherwise fulfill the requirements of Section 14(i)
of the Lease, and provided further that Landlord has approved such general
contractor, which approval Landlord agrees will not be unreasonably withheld,
delayed or conditioned.
8. PARKING. The reference in Section 12 of the Lease to three (3)
designated underground parking spaces in the Building shall be deemed changed,
effective on the Added Space Commencement Date, to nine (9) underground parking
spaces free of charge to Tenant. If in the future Tenant shall lease the entire
fourth floor of the Building, the reference to nine (9) underground parking
spaces shall be deemed changed, effective on the date the entire fourth floor is
added to the Premises, to twelve (12) underground parking spaces free of charge
to Tenant.
-3-
<PAGE>
9. 4TH FLOOR RIGHT OF FIRST OFFER. Landlord agrees that if it shall enter
into serious negotiations with a third party to lease all or part of the fourth
floor (the "Offered Space"), then Landlord shall advise Tenant and present to
Tenant the terms under which Landlord would, in fact, lease the Offered Space to
such party including the term, square footage, rental rate, leasehold
improvement allowance, if any, and rental concessions, if any (the Basic Terms).
Landlord agrees with respect to the initial leasing of space on the fourth floor
that it shall not offer for lease less than 10,000 rsf or enter into serious
negotiations for less than 10,000 rsf. Tenant shall have the right to lease the
Offered Space or, at Tenant's option, the entire unleased part of the fourth
floor commencing on the latter of (1) August 31, 1998, and (2) the sixtieth
(60th) day after (i) Tenant notifies Landlord of its election to lease the
Offered Space or the entire unleased part of the fourth floor (the "Commencement
Date" as used in this paragraph) and (ii) Landlord delivers possession of said
space to Tenant. Tenant must exercise its right herein granted within ten (10)
business days after notice from Landlord advising Tenant of the third party's
negotiations and presenting Tenant with the Basic Terms. Such notice from Tenant
to Landlord shall specify Tenant's election to lease either the Offered Space or
the entire unleased part of the fourth floor. If Tenant exercises such right,
then the parties agree to promptly modify the Lease so as to add to the Premises
as of the Commencement Date either the Offered Space or the entire unleased part
of the fourth floor, as the case may be, at the lesser of (1) the Basic Terms,
and (2) the then escalated Basic Rent per rsf, three percent (3%) annual
escalation, Additional Rent, and the leasehold improvement allowance per rsf for
the Added Space prorated to reflect the remaining Term of the Lease. If Tenant
does not elect to lease either the Offered Space or the entire unleased part of
the fourth floor, as aforesaid, by notice to Landlord within the time limit
provided above, then Landlord shall be free for a period of one hundred twenty
(120) days thereafter to enter into a third-party lease for the Offered Space on
terms the economic value of which are not less than ninety percent (90%) of the
Basic Terms on a net present value basis. If no such third party lease for the
Offered Space results, then Tenant's right of first offer shall revive for the
entire fourth floor. Should part, but not all, of the fourth floor be leased,
then Tenant shall have the right of first offer with respect to all of the
remaining space (if exercised, Tenant must take all of the remaining space) on
the terms as provided above, but Landlord may offer for lease less than 10,000
rsf and enter into serious negotiations for less than 10,000 rsf.
10. BUILDING-WIDE RIGHT OF FIRST OFFER. Provided that Tenant shall have
previously committed to lease the entire fourth floor of the Building, Tenant
shall have a continuing right of first offer with regard to space in the
Building which may become available for lease ("First Offer Space"). Tenant's
rights under this Paragraph 10 shall be subordinate to the right of Landlord to
extend or renew the leases of other tenants in the Building. Subject to the
foregoing, Landlord shall offer Tenant the opportunity to lease First Offer
Space prior to offering such space to another party by submitting to Tenant in
writing a description of the First Offer Space (the "RFO Notice") no earlier
than seventeen (17) months prior to the date such First Offer Space, if
comprising an entire floor or more, will be vacant and no earlier than twelve
(12) months prior to the date that such First Offer Space, if comprising less
than an entire floor, will be vacant. The RFO Notice shall include the market
terms upon which Landlord is willing to lease the
-4-
<PAGE>
First Offer Space, including lease term, rental rate, leasehold
improvements and any other concessions. Tenant shall thereafter have twenty-one
(21) days within which to exercise its option to lease the First Offer Space
upon the terms contained in the RFO Notice or upon such market terms mutually
agreed to by Landlord and Tenant within such 21-day period. If Tenant rejects
the First Offer Space or does not exercise its option to lease the First Offer
Space within such 21-day period, Tenant shall have no further rights with
respect to such First Offer Space thereafter, provided that Landlord shall
re-offer such First Offer Space to Tenant pursuant to this paragraph prior to
offering it to a third party on terms the net present value of which is less
than 90% of the net present value of the terms upon which such First Offer Space
was offered to Tenant. As a condition of Tenant's right of first offer under
this Paragraph 10 ("this RFO"), Tenant agrees that if another tenant having not
more than 10,000 rsf in the Building makes its lease extension or renewal
conditional upon an expansion into First Offer Space that Tenant wishes to lease
pursuant to this Paragraph 10, then, at Landlord's request, Tenant shall be
obligated to lease the premises then occupied by such other tenant in addition
to leasing such First Offer Space.
11. SIGNAGE. Subject to Landlord's prior approval of the design of Tenant's
signage, and subject to the authority of the governing municipality, Tenant
shall have the right to place and maintain, at Tenant's sole expense, two (2)
exterior signs on the west and north faces of the Building, approximately in the
location of the two existing "Allstate" signs and not larger than such Allstate
signs. Tenant shall perform, at its sole expense, any required repairs to such
signage and, if the signage is illuminated, shall pay the electrical charges
with respect to the operation of such signage provided such electrical service
is separately metered. Landlord shall cause the Allstate signs to be removed
from the face of the Building no later than September 1, 1998. Landlord may
provide other tenants in the Building with monument signage, provided that, in
such event, Tenant also is allowed to have its name on the monument sign(s) with
Tenant having the right to be placed at the top of such monument signage. Upon
the expiration or earlier termination of the Lease, Tenant shall remove all of
its signage from the Building, the Premises and such monuments, if any; shall
restore the Building, Premises or monument surfaces, as the case may be, to
their condition prior to the installation of Tenant's signage; and shall repair
any damage caused by the removal of such signage. The foregoing provision of
this Paragraph 11 shall survive the expiration or earlier termination of the
Lease.
12. INAPPLICABLE PROVISIONS. The parties agree that the provisions of
Sections 4 (other than the first two sentences thereof) and 32 and Exhibit C of
the Lease shall not apply with respect to the Added Space or the 4th Floor
Space.
13. DISPUTE RESOLUTION. If any dispute shall arise under any provision of
the Lease and no mechanism for resolution of such dispute is specified in such
provision, such dispute shall be resolved by binding arbitration in accordance
with the following provisions:
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<PAGE>
(a) If the parties are unable to agree on the determination of Market Rent
under Paragraph 3 of this Amendment, either party may initiate arbitration
pursuant to this Paragraph 13(a) by giving written notice thereof to the other
party, and within ten (10) days thereafter each party shall provide the other
party with written notice of the name and address of the person designated to
act, at each party's own expense, as the arbitrator on its behalf. Within thirty
(30) days thereafter, the two (2) arbitrators so chosen shall decide the
dispute, rendering a written statement setting forth the Market Rent. In
determining Market Rent the arbitrators shall use the present value of the
rental stream and leasehold improvement allowance, if any (taking into account
all landlord concessions and other economic factors, if any) over the proposed
lease term and using a discount rate equal to one percent (1%) plus the current
prime rate of interest per annum then being charged by American National Bank
and Trust Company of Chicago. The arbitrators' statement of Market Rent shall be
binding upon both parties. If the arbitrators are unable to agree on the Market
Rent and thereby resolve the dispute, then if the arbitrators' respective
determinations of Market Rent differ by less than five percent (5%), Market Rent
shall be deemed to be the arithmetic average of such two numbers; otherwise, the
two arbitrators shall provide the parties with written memoranda explaining the
methodology they each used to determine Market Rent and such arbitrators shall
jointly appoint, within the following ten (10) days, a third arbitrator who,
within thirty (30) days thereafter, shall determine Market Rent by selecting
either Landlord's designated arbitrator's determination or Tenant's designated
arbitrator's determination according to whichever of the two amounts is closer
to Market Rent in the opinion of such third arbitrator. The third arbitrator,
upon selecting one of the two amounts (the "Closer Number"), shall have the
right, but is not required, to adjust the Closer Number by up to two percent
(2%) in the direction of the other number. The costs of such third arbitrator
shall be shared equally by Landlord and Tenant. Landlord and Tenant agree that
all of the arbitrators selected shall be persons with at least ten (10) years'
continuous experience in the business of appraising and/or leasing commercial
office buildings in the northwest suburban Chicago area.
(b) All other disputes shall be resolved in accordance with the Expedited
Procedures set forth by the American Arbitration Association for expedited
arbitration.
14. BROKERAGE. Landlord and Tenant represent and warrant to each other that
they have had no dealings with any real estate broker or agent in connection
with this Amendment other than Podolsky Northstar Realty Partners, LLC
("Landlord's Broker") and Grubb & Ellis Company ("Tenant's Broker"), and each
covenants to indemnify, defend and hold harmless the other from and against any
and all claims, liabilities, costs or damages (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by the indemnified party
as a result of a breach of the foregoing representation and warranty. This
Paragraph 14 shall survive the expiration or earlier termination of the Lease.
Landlord agrees to pay a brokerage commission (the "Commission") to Landlord's
Broker in connection with this Amendment pursuant to separate agreement, with
the understanding that Landlord's Broker has entered into an agreement with
Tenant's Broker for the payment to Tenant's Broker of a portion of the
Commission as
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<PAGE>
payment in full of any and all commission, compensation or other amounts
due to Tenant's Broker in connection with this Amendment.
15. FULL FORCE AND EFFECT. Except as herein expressly modified, all of the
terms, conditions and provisions of the Lease shall remain in full force and
effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Amendment as of the day and year first above written.
Landlord:
ESKO PROPERTIES, INC.
By: /s/ Sydney Kohl
Attest: /s/Traci Donaldson
Tenant:
AMCOL INTERNATIONAL CORP.
By: /s/ John Hughes
Attest: /s/ Traci Donaldson
-7-
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(Replace this text with the legend)
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<NAME> AMCOL INTERNATIONAL CORPORATION
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
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<CASH> 4,177
<SECURITIES> 0
<RECEIVABLES> 80,549
<ALLOWANCES> 2,179
<INVENTORY> 58,454
<CURRENT-ASSETS> 149,526
<PP&E> 308,167
<DEPRECIATION> 129,919
<TOTAL-ASSETS> 348,143
<CURRENT-LIABILITIES> 60,546
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0
0
<COMMON> 213
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<TOTAL-LIABILITY-AND-EQUITY> 348,143
<SALES> 221,408
<TOTAL-REVENUES> 221,408
<CGS> 175,894
<TOTAL-COSTS> 204,638
<OTHER-EXPENSES> 580
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<INTEREST-EXPENSE> 4,360
<INCOME-PRETAX> 11,830
<INCOME-TAX> 4,375
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