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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-K
(Mark one)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
|_| 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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<S> <C>
DELAWARE 36-0724340
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
One North Arlington, 1500 West Shure Drive, Suite 500
Arlington Heights, Illinois 60004-7803
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (847) 394-8730
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes x No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. |_|
The aggregate market value of the $.01 par value Common Stock, held by
non-affiliates of the registrant on March 14, 1997, based upon the closing sale
price on that date as reported in The Wall Street Journal was approximately
$318,665,000.
Registrant had 19,043,872 shares of $.01 par value Common Stock,
outstanding as of March 14, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be dated on or about April 7, 1997, are
incorporated by reference into Part III hereof.
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<PAGE>
PART I
Item 1. Business
INTRODUCTION
AMCOL International Corporation was originally incorporated in South Dakota
in 1924 as the Bentonite Mining & Manufacturing Co. Its name was changed to
American Colloid Company in 1927, and in 1959, the Company was reincorporated in
Delaware. In 1995, its name was changed to AMCOL International Corporation.
Except as otherwise noted, or indicated by context, the term "Company" refers to
AMCOL International Corporation and its subsidiaries.
The Company may be generally divided into three principal categories of
operations: minerals, absorbent polymers and environmental. The Company also
operates a transportation business primarily for delivery of its own products.
In general, the Company's products are used for their liquid-absorption
properties. The Company is a leading producer of bentonite products, which have
a variety of applications, including use as a bonding agent to form sand molds
for metal castings; as a cat litter; as a moisture barrier in commercial
construction and landfills; and in a variety of other industrial, commercial and
agricultural applications. The Company also manufactures absorbent polymers,
predominantly superabsorbent polymers, for use in disposable baby diapers and
other personal care items, such as adult incontinence and feminine hygiene
products.
The following table sets forth the percentage contributions to net sales of
the Company attributable to its minerals, absorbent polymers, environmental and
transportation segments for the last three calendar years.
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Percentage of Sales
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<S> <C> <C> <C>
1996 1995 1994
Minerals.................................................................... 35.9% 40.2% 53.7%
Absorbent polymers.......................................................... 38.0% 34.7% 22.1%
Environmental............................................................... 20.1% 18.8% 16.1%
Transportation.............................................................. 6.0% 6.3% 8.1%
100.0% 100.0% 100.0%
</TABLE>
Net revenues, operating profit and identifiable assets attributable to each
of the Company's business segments are set forth in Note 2 of the Company's
Notes to Consolidated Financial Statements included elsewhere herein, which Note
is incorporated herein by reference.
MINERALS
The Company's minerals business is principally conducted through its wholly
owned subsidiaries, American Colloid Company in the United States and Volclay
Ltd. in the United Kingdom.
Commercially produced bentonite is a type of montmorillonite clay found in
beds ranging in thickness from two to 10 feet under overburden of up to 120
feet. There are two basic types of bentonite, each having different chemical and
physical properties. These are commonly known as sodium (western)
<PAGE>
bentonite and calcium (southern) bentonite. A third type of clay, a less
pure variety of calcium montmorillonite called fuller's earth, is used as a form
of cat litter and as a carrier for agri-chemicals in addition to other minor
applications.
The Company's principal bentonite products are marketed under various
internationally registered trade names, including VOLCLAY and PANTHER CREEK.
The Company's cat litter is sold under various trade names and private labels.
Principal Markets and Products
Durable Goods
Metalcasting. In the formation of sand molds for metal castings, sand is
bonded with bentonite and various other additives to yield the desired casting
form and surface finish. The Company produces blended mineral binders containing
sodium and calcium bentonites, sold under the trade name ADDITROL. In addition,
several high-performance specialty products are sold to foundries and companies
that service foundries.
Iron Ore Pelletizing. The Company is a major supplier of sodium bentonite
for use as a pelletizing aid in the production of taconite pellets in North
America.
Well Drilling. Sodium bentonite and leonardite are ingredients of drilling
mud, which allow rock cuttings to be suspended and brought to the surface in oil
and gas well drilling. Drilling mud lubricates the drilling bit and coats the
underground formations to prevent hole collapse and drill bit seizing. The
Company's primary trademark for this application is PREMIUM GEL.
Other Industrial. The Company is a supplier of fuller's earth products for
use as an oil and grease absorbent in industrial applications. It also produces
bentonite and bentonite blends for the construction industry, which are used as
a plasticizing agent in cement, plaster and bricks, and as an emulsifier in
asphalt.
Consumable Goods
Cat Litter. The Company produces two types of cat litter products, a
fuller's earth-based (traditional) product and a sodium bentonite-based,
scoopable (clumping) litter. The Company's scoopable products' clump-forming
capability traps urine, allowing for easy removal of the odor-producing elements
from the litter box. Scoopable litter has grown to 45% of the U.S. grocery
market for cat litter in 1996 from 0.4% in 1989, and to 58% of the mass
merchandise market for cat litter from no representation in 1989. Both types of
products are sold primarily to private label grocery and mass merchandisers,
though the Company also sells its own brands to the grocery, pet store and mass
markets. The Company's products are marketed under various trade names.
Fine Chemicals. Purified grades of sodium bentonite are marketed to the
pharmaceutical and cosmetics industries. Small amounts of purified bentonite act
as a binding agent for pharmaceutical tablets, and bentonite's expansion quality
also aids in tablet disintegration. Bentonite also acts as a suspension agent
and thickener in lotions and has a variety of other specialized uses as a flow
control additive.
<PAGE>
Agricultural. Sodium bentonite, calcium bentonite and fuller's earth are
sold as pelletizing aids in livestock feed and as anticaking agents for feeds
during storage or in transit. Fuller's earth and sodium bentonite are used as
carriers for agri-chemicals. Fuller's earth is also used as a drying agent in
blending liquid and dry fertilizers prior to application.
Sales and Distribution
In 1996, the top two customers accounted for approximately 11% of the
Company's mineral sales, and the top five customers accounted for approximately
20% of such sales.
The Company has established industry-specialized sales groups staffed with
technically oriented salespersons serving each of the Company's major markets.
Certain groups have networks of distributors and representatives, including
companies that warehouse at strategic locations.
Most of its customers in the metalcasting industry are served on a direct
basis by teams of Company sales, technical and manufacturing personnel. The
Company also provides training courses and laboratory testing for customers who
use the Company's products in the metalcasting process.
Sales to the oil well drilling industry are primarily made directly to oil
well drilling mud service companies, both under the Company's trade name and
under private label. Because bentonite is a major component of drilling mud, two
service companies have captive bentonite operations. The Company's potential
market, therefore, generally is limited to those oil well service organizations
that are not vertically integrated, or do not have long-term supply arrangements
with other producers.
Sales to the cat litter market are made on a direct basis and through
industry brokers. All sales to the iron ore pelletizing industry are made
directly to the end user. Sales to the Company's remaining markets are made
primarily through independent distributors and representatives.
Competition
Bentonite. The Company is one of the largest producers of bentonite
products in the United States. There are at least four other major domestic
producers of sodium bentonite and at least one other major domestic producer of
calcium bentonite. Two of the domestic producers are companies primarily in
other lines of business and have substantially greater financial resources than
the Company. There is also substantial global competition. The Company's
bentonite processing plants in the United Kingdom and Australia compete with a
total of nine U.K. and Australian processors. Competition in both the Company's
domestic and international markets is essentially a matter of product quality,
price, delivery, service and technical support, and it historically has been
very vigorous.
Fuller's Earth. There are approximately five major competitors in the
United States, some of which are larger and have substantially greater financial
resources than the Company. Price, service, product quality and geographical
proximity to the market are the principal methods of competition in the
Company's markets for fuller's earth.
Seasonality
Although business activities in certain of the industries in which the
Company's mineral products are sold (such as well drilling) are subject to
factors such as weather conditions, the Company does not consider its mineral
business, as a whole, to be seasonal.
<PAGE>
ENVIRONMENTAL
Principal Products and Markets
Through its wholly owned subsidiary, Colloid Environmental Technologies
Company (CETCO), the Company sells sodium bentonite, products containing sodium
bentonite and various other products and equipment for use in environmental and
construction applications.
CETCO sells bentonite and its geosynthetic clay liner products under the
BENTOMAT and CLAYMAX trade names for lining and capping landfills and for
containment in tank farms, leach pads, waste stabilization lagoons, slurry walls
and decorative ponds.
The Company's VOLCLAY Waterproofing System is sold to the non-residential
construction industry. This line includes a product sold under the registered
trade name VOLCLAY PANELS, consisting of biodegradable cardboard panels filled
with sodium bentonite installed to prevent leakage through underground
foundation walls. A waterproofing liner product with the trade name VOLTEX, a
joint sealant product with the trade name WATERSTOP-RX and a waterproofing
membrane for concrete split slabs and plaza areas sold under the trade name
VOLCLAY SWELLTITE round out the principal components of the product line.
CETCO sells elastomeric urethane coatings for use in vehicular traffic
decks, roofs, balconies and pedestrian walkways. The products, sold under the
trade name ACCOGUARD, are among the more environmentally friendly primers and
coatings available to the construction industry.
Bentonite-based flocculents and customized equipment are used to remove
emulsified oils and heavy metals from wastewater. Bentonite-based products are
formulated to solidify liquid waste for proper disposal in landfills. These
products are sold primarily under the SYSTEM-AC, RM-10 and SORBOND trade
names.
CETCO also specializes in providing absorption equipment and services to
the environmental remediation industry, water treatment systems employing
dissolved air flotation technology, and activated carbon purification systems
for the beverage and municipal water treatment industries. Its operations
include a fully equipped engineering and fabrication facility for producing
pressure vessels used in filtration applications. In addition, a network of
regional service centers provides services and distribution to support markets
such as remediation of petroleum-contaminated groundwater. The Company has a
carbon regeneration facility, which allows for the regeneration and reuse of
spent carbon obtained from its service centers.
CETCO's CRUDESORB filtration technology is used on offshore oil drilling
platforms to reduce oil and grease discharge to levels that comply with new
regulations and to levels below those that can be achieved using traditional
gravity separation technology. CETCO's filtration technology is marketed with
all necessary equipment, proprietary filter media and trained professional staff
for turnkey fluids treatment.
CETCO's drilling products are used in environmental and geotechnical
drilling applications, horizontal directional drilling and mineral exploration.
The products are used to install monitoring wells and water wells, rehabilitate
existing water wells and seal abandoned exploration drill holes. VOLCLAY GROUT,
BENTOGROUT and VOLCLAY Tablets are among the trade names for products used in
these applications.
<PAGE>
Competition
CETCO has four principal competitors in the geosynthetic clay liner market.
The construction and wastewater treatment product lines are specialized
businesses that compete primarily with alternative technologies. The service
center remediation business has three major competitors, one of which is
substantially larger and with greater resources. The groundwater monitoring,
well drilling and sealants products compete with the Company's traditional
rivals in the sodium bentonite business. Competition is based on product
quality, service, price, technical support and availability of product.
Historically, the competition has been very vigorous.
Sales and Distribution
In 1996, no customer accounted for more than 5% of environmental sales.
CETCO products are sold domestically and internationally. CETCO sells most of
its products through independent distributors and commissioned representatives.
Contract remediation work is done on a direct basis working with consulting
engineers engaged by the customers.
CETCO employs technically oriented marketing personnel to support its
network of distributors and representatives. In the service center business,
salespersons develop business in the regional markets to supplement contract
remediation work performed for national accounts.
Seasonality
Much of the business in the environmental sector is impacted by weather and
soil conditions. Many of the products cannot be applied in harsh weather
conditions and, as such, sales and profits tend to be stronger April through
October. As a result, the Company considers this segment to be seasonal.
Research and Development
The minerals and environmental segments share research and laboratory
facilities. Technological developments are shared between the companies, subject
to license agreements where appropriate.
MINERALS/ENVIRONMENTAL COMMON OPERATIONAL FUNCTIONS
Mineral Reserves
Both the mineral and environmental segments have sodium bentonite reserves
and processing plants. The discussion of mineral reserves that follows applies
to both units.
The Company has reserves of sodium and calcium bentonite at various
locations in Wyoming, South Dakota, Montana, Nevada and Alabama; and reserves of
fuller's earth in Tennessee and Illinois. At 1996 consumption rates, based on
internal estimates, the Company believes that its proven reserves of
commercially usable sodium bentonite will be adequate for approximately 30 years
(although reserves for certain specialty uses and by plant location differ
significantly from this 30-year period) and that its proven reserves of calcium
bentonite and fuller's earth will be adequate for approximately 20 years and in
excess of 40 years, respectively. While the Company, based upon its experience,
believes that its reserve estimates are reasonable and its title and mining
rights to its reserves are valid, the Company has not obtained any independent
verification of such reserve estimates or such title or mining rights. The
Company owns or controls the properties on which its reserves are located
through
<PAGE>
long-term leases, royalty agreements and patented and unpatented mining
claims. A majority of the Company's bentonite reserves are owned. All of the
properties on which the Company's reserves are located are either physically
accessible for the purposes of mining and hauling, or the cost of obtaining
physical access would not be material.
Of the total reserves, approximately 20% are located on unpatented mining
claims owned or leased by the Company, on which the Company has the right to
undertake regular mining activity. To retain possessory rights, a fee of $100
per year for each unpatented mining claim is required. The validity of title to
unpatented mining claims is dependent upon numerous factual matters. The Company
believes that the unpatented mining claims that it owns have been located in
compliance with all applicable federal, state and local mining laws, rules and
regulations. The Company is not aware of any material conflicts with other
parties concerning its claims. From time to time, members of Congress as well as
members of the executive branch of the federal government have proposed
amendments to existing federal mining laws. The various amendments would have
had a prospective effect on mining operations on federal lands and include,
among other things, the imposition of royalty fees on the mining of unpatented
claims, the elimination or restructuring of the patent system and an increase in
fees for the maintenance of unpatented claims. To the extent that future
proposals may result in the imposition of royalty fees on unpatented lands, the
mining of the Company's unpatented claims may become uneconomic, and royalty
rates for privately leased lands may be affected. The Company cannot predict the
form that any amendments might ultimately take or whether or when any such
amendments might be adopted.
The Company's fuller's earth reserves are both owned and leased. The loss
of any of the leased reserves could materially decrease the Company's reserves
of fuller's earth, but it is believed that alternative economical reserves could
be developed.
The Company maintains a continuous program of exploration for additional
reserves and attempts to acquire reserves sufficient to replenish its
consumption each year, but it cannot assure that additional reserves will
continue to become available.
The Company oversees all of its mining operations, including its
exploration activity and securing the necessary state and federal mining
permits.
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The following table shows a summary of minerals sold by the Company for the last five years in short tons:
Tons of Minerals Sold (1)
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1996 1995 1994 1993 1992
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Sodium Bentonite: (In Thousands)
Belle Fourche, SD (4)....................... 4 133 203 147 124
Upton, WY................................... 418 434 424 351 334
Colony, WY.................................. 921 809 791 701 776
Lovell, WY.................................. 301 268 299 273 103
Calcium Bentonite:
Aberdeen, MS (2)............................ 7 63 70 61 62
Sandy Ridge, AL............................. 183 170 174 167 155
Rock Springs, NV............................ 3 - - - -
Fuller's Earth:
Mounds, IL.................................. 201 203 242 239 225
Paris, TN (3)............................... 12 54 52 17 -
Leonardite:
Gascoyne, ND................................ 23 19 17 15 13
<PAGE>
<FN>
(1) May include minerals of a different type not mined at this location.
(2) Mineral reserves sold in 1996.
(3) Acquired in 1992 and commenced operations in 1993.
(4) Beginning in late 1995, bentonite sold from Belle Fourche, SD, was processed in Colony, WY.
</FN>
</TABLE>
The Company estimates that available supplies of other materials utilized
in its mineral business are sufficient to meet its production requirements for
the foreseeable future.
Mining and Processing
Bentonite. Bentonite is surface-mined, generally with large earthmoving
scrapers, and then loaded into trucks and off-highway haul wagons for movement
to the processing plants. The mining and hauling of the Company's clay is done
both by the Company and by independent contractors. Each of the Company's
processing plants generally maintain stockpiles of unprocessed clay of
approximately four to eight months' production requirements.
At the processing plants, bentonite is dried, crushed and sent through
grinding mills, where it is sized into shipping form, then chemically modified
where needed and transferred to silos for automatic bagging or shipment in bulk.
Virtually all production is shipped as processed, rather than stored for
inventory.
Fuller's Earth. Fuller's earth is also surface-mined using a combination of
scrapers, dozers and loaders. Crude clay is then loaded into dump trucks and
hauled to the processing plant where it is dried or calcined, crushed and
screened. Inventories of unprocessed clay generally are no more than a two-week
supply. Mining is thus performed on a year-round basis.
Product Development and Patents
The Company works actively with customers in each of its major markets to
develop commercial applications of specialized grades of bentonite, and it
maintains a bentonite research center and laboratory testing facility adjacent
to its corporate headquarters as well as one in the United Kingdom. When a need
for a product that will accomplish a particular goal is perceived, the Company
will work to develop the product, research its marketability and study the
feasibility of its production. The Company will also continue its practice of
co-developing products with customers or others as new needs arise. The
Company's development efforts emphasize markets with which it is familiar and
products for which it believes there is a viable market.
The Company holds a number of U.S. and international patents covering the
use of bentonite and products containing bentonite. The Company follows the
practice of obtaining patents on new developments whenever feasible. The
Company, however, does not consider that any one or more of such patents is
material to its minerals and environmental businesses as a whole.
Regulation and Environmental
The Company believes it is in material compliance with applicable
regulations now in effect with respect to surface mining. Since reclamation of
exhausted mining sites has been a regular part of the Company's surface mining
operations for the past 28 years, maintaining compliance with current
regulations has not had a material effect on its mining costs. The costs of
reclamation are reflected in the prices of the bentonite sold.
<PAGE>
The grinding and handling of dried clay is part of the production process
and, because it generates dust, the Company's mineral processing plants are
subject to applicable clean air standards (including Title V of the Clean Air
Act). All of the Company's plants are equipped with dust collection systems. The
Company has not had, and does not presently anticipate, any significant problems
in connection with its dust emission, though it expects ongoing expenditures for
the maintenance of its dust collection systems and required annual fees.
The Company's mineral operations are also subject to other federal, state,
local and foreign laws and regulations relating to the environment and to health
and safety matters. Certain of these laws and regulations provide for the
imposition of substantial penalties for noncompliance. While the costs of
compliance with, and penalties imposed under, these laws and regulations have
not had a material adverse effect on the Company, future events, such as changes
in, or modified interpretations of existing laws and regulations or enforcement
policies or further investigation or evaluation of potential health hazards of
certain products, may give rise to additional compliance and other costs that
could have a material adverse effect on the Company.
ABSORBENT POLYMERS
Since the early 1970s, the Company has utilized a technique called modified
bulk polymerization ("MBP") to manufacture water-soluble polymers for the oil
well drilling industry. This technique has been modified to produce
superabsorbent polymers ("SAP"), a category of polymers known for its extremely
high water absorbency. Chemdal Corporation was formed in 1986 to manufacture and
market absorbent polymers, with primary emphasis on SAP. To date, the Company's
sales of SAP have been almost exclusively for use as an absorbent in personal
care products, primarily disposable baby diapers. The Company produces SAP at
its U.S. facility with an annual capacity of 70,000 tons, and at its U.K.
facility with an annual capacity of 50,000 tons.
Demand for the Company's products in the United States and Europe has grown
significantly in recent years as the amount of SAP used in new diaper designs
has increased. SAP is more absorbent than the fluff pulp used in traditional
disposable diapers. The use of SAP in diapers allows for a thinner diaper that
occupies less shelf space in stores and less landfill space. SAP also helps to
hold moisture inside the diaper, thereby causing less irritation to the wearer's
skin and reducing leakage. Based upon the Company's expectations regarding
consumer and retail preferences, the Company believes that SAP will continue to
be used in new diaper designs. While no assurance can be given that markets in
developing countries will follow the trends of developed countries, the Company
also believes that disposable diapers containing increasing amounts of SAP will
gain more acceptance in developing countries as per capita incomes in those
countries rise.
Principal Products and Markets
The Company's SAP is primarily marketed under the trade names ARIDALL and
ASAP. To date, the Company's customers have been primarily private label and
national brand diaper manufacturers. The Company believes that this segment of
the diaper market has grown faster than the brand name segment, which currently
accounts for the majority of that market. During 1995, the Company began selling
to manufacturers of brand name personal care products and is seeking to increase
its sales to that segment of the market.
<PAGE>
Sales and Distribution
The Company sells SAP to the personal care market in the United States on a
direct basis and, in other countries, both on a direct basis and through
distributors. The Company expects to rely increasingly on a direct sales
approach in the personal care market. The Company's direct sales efforts employ
a team approach that includes both technical and marketing representatives. In
1996, the top two customers accounted for approximately 45% of the Company's
polymer sales, and the top five customers accounted for approximately 60% of
such sales.
Research and Development
The Company continually seeks to improve the performance of its absorbent
polymers. It also intends to pursue additional applications for its absorbent
polymers in other markets either directly, or indirectly through marketing or
distribution arrangements. Polymers also have applications in water treatment
and in cosmetics.
The Company owns several patents relating to its original manufacturing
process developed in the 1970s and to modifications of its process developed in
the 1980s and 1990s, which relate to its current manufacturing process. The
patents on the original process have begun to expire. The Company believes that
the loss of the patent protection will not have a material impact on the
business. The patents relating to the current modifications thereto expire at
various times commencing in 2002.
The Company follows the practice of obtaining patents on new developments
whenever reasonably practicable. The Company also relies on unpatented know-how,
trade secrets and improvements in connection with its SAP manufacturing process.
There can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques, or otherwise
gain access to or disclose the Company's trade secrets, or that the Company can
meaningfully protect its rights to its unpatented trade secrets.
Raw Materials
The process used by the Company to produce SAP primarily uses acrylic acid
and, to a lesser extent, potassium and sodium alkalies and catalysts. The
Company's polymer operations are supplied by three major producers of acrylic
acid. The Company has been able to obtain adequate supplies of acrylic acid to
meet its production requirements to date.
The Company knows of four acrylic acid suppliers in the United States,
three in Europe and four in the Far East. The Company is aware that at least
five of these suppliers manufacture SAP and, therefore, compete with the Company
in this market.
Potassium and sodium alkalies are available on a commercial basis worldwide
with no meaningful limitations on availability. Catalysts are available from a
small number of high-technology chemical manufacturers; however, the Company
does not anticipate any difficulties in obtaining catalysts.
<PAGE>
Competition
The Company believes that there are approximately four major polymer
manufacturers and at least three importers that compete with its U.S. operation,
several of which have substantially greater resources than the Company. The
Company's U.K. operation competes with a total of approximately seven producers
and at least four importers. Only two producers have substantially more
production capacity and several producers have greater resources than the
Company. Further, at least three of these competitors are vertically integrated
and produce acrylic acid, the primary cost component of SAP. The competition in
both the Company's domestic and international markets is primarily a matter of
product quality and price, and it historically has been very vigorous. The
Company believes that its polymer manufacturing process has enabled it to add
polymer production capacity at a lower capital investment cost than that
required by other processes currently in widespread commercial use.
Regulation and Environmental
The Company's production process for SAP consumes virtually all chemicals
and other raw materials used in the process. Virtually all materials that are
not consumed by the end product are recycled through the process. The Company's
polymer plants, therefore, generate a minimal amount of chemical waste.
The handling of dried polymer is part of the production process, and,
because this generates dust, the Company's polymer plants must meet clean air
standards. The Company's polymer plants are equipped with dust collection
systems, and the Company believes that it is in material compliance with
applicable state and federal clean air regulations. The Company's absorbent
polymer business is subject to other federal, state, local and foreign laws and
regulations relating to the environment and to health and safety matters.
Certain of these laws and regulations provide for the imposition of substantial
penalties for non-compliance. While the costs of compliance with, and penalties
imposed under, these laws and regulations have not had a material adverse effect
on the Company, future events, such as changes in or modified interpretations of
existing laws and regulations or enforcement policies or further investigation
or evaluation of potential health hazards of certain products, may give rise to
additional compliance and other costs that could have a material adverse effect
on the Company.
TRANSPORTATION
The Company operates a long-haul trucking business and a freight brokerage
business primarily for delivery of its own products in package and bulk form
throughout the continental United States. Through its transportation operations,
the Company is better able to control costs, maintain delivery schedules and
assure equipment availability. The long-haul trucking subsidiary performs
transportation services on outbound movements from the Company's production
plants and attempts to haul third parties' products on return trips whenever
possible. In 1996, approximately 71% of the revenues of this segment involved
the Company's products.
FOREIGN OPERATIONS AND EXPORT SALES
Approximately 41% of the Company's 1996 net sales were to customers in
approximately 60 countries other than the United States. To enhance its overseas
market penetration, the Company maintains mineral processing plants in the
United Kingdom and Australia, as well as a blending plant in Canada. Through
joint ventures, the Company also has the capability to process minerals in
Mexico and China. Chartered vessels deliver large quantities of the Company's
bulk, dried sodium bentonite to the plants in the United Kingdom and Australia,
where it is processed and mixed with other clays and
<PAGE>
distributed throughout Europe and Australia. The Company's U.S. bentonite
is also shipped in bulk to Japan. The Company also maintains a worldwide network
of independent dealers, distributors and representatives.
The Company produces absorbent polymers at its U.S. and U.K. plants, and
serves markets in Western Europe, South America, Asia and the Middle East.
The Company's international operations are subject to the usual risks of
doing business abroad, such as currency devaluations, restrictions on the
transfer of funds and import and export duties. The Company, to date, has not
been materially affected by any of these risks.
See Note 2 of the Company's Notes to Consolidated Financial Statements
included elsewhere herein. This Note is incorporated by reference for sales
attributed to foreign operations and export sales from the United States.
EMPLOYEES
As of December 31, 1996, the Company employed 1,451 persons, 289 of whom
were employed overseas. At December 31, 1996, there were approximately 719, 320,
336 and 25 persons employed in the Company's minerals, absorbent polymers,
environmental and transportation segments, respectively, along with 51 corporate
employees. Operating plants are adequately staffed, and no significant labor
shortages are presently foreseen. Approximately 102 of the Company's employees
in the United States and approximately 37 of the Company's employees in the
United Kingdom are represented by five labor unions, which have entered into
separate collective bargaining agreements with the Company. Employee relations
are considered good.
<PAGE>
Item 2. Properties
The Company and its subsidiaries operate the following principal plants,
mines and other facilities, all of which are owned, except as noted:
<TABLE>
<CAPTION>
Location Principal Function
MINERALS
<S> <C>
Belle Fourche, SD ................... Mine and process sodium bentonite
Colony, WY (two plants).............. Mine and process sodium bentonite
Upton, WY ........................... Mine and process sodium bentonite
Mounds, IL .......................... Mine and process fuller's earth
Paris, TN ........................... Mine and process fuller's earth
Rock Springs, NV .................... Mine and process calcium bentonite and diatomaceous earth
Gascoyne, ND ........................ Mine and process leonardite
Letohatchee, AL ..................... Package and load calcium bentonite
Sandy Ridge, AL ..................... Mine and process calcium bentonite; blend ADDITROL
Columbus, OH (1) .................... Blend ADDITROL; process chromite sand
Granite City, IL (1) ................ Package cat litter; process chromite sand
Waterloo, IA ........................ Blend ADDITROL
Albion, MI (1) ...................... Blend ADDITROL
York, PA ............................ Blend ADDITROL; package cat litter
Chattanooga, TN ..................... Blend ADDITROL
Lufkin, TX .......................... Blend ADDITROL
Neenah, WI .......................... Blend ADDITROL
Toronto, Ontario, Canada ............ Blend ADDITROL
Geelong, Victoria, Australia (1) .... Process bentonite; blend ADDITROL
Birkenhead, Merseyside, U.K. (2) .... Process bentonite and chromite sand; blend ADDITROL;
research laboratory and headquarters for Volclay Ltd.
ENVIRONMENTAL
Lovell, WY .......................... Mine and process sodium bentonite
Villa Rica, GA ...................... Manufacture Bentomat geosynthetic clay liner
Sulphur, LA ......................... Manufacture environmental equipment
Fairmount, GA ....................... Manufacture Claymax geosynthetic clay liner
Morgantown, WV (1) .................. Reactivate spent carbon for Regeneration Technologies, Inc.
Salt Lake City, UT (1) .............. Sales and engineering for CETCO
Various service centers (1) ......... Distribution and service facilities for CETCO recycling services
Birkenhead, Merseyside, U.K. (2) .... Manufacture Bentomat geosynthetic clay liner, research laboratory
and headquarters for CETCO Europe Ltd.
Copenhagen, Denmark (1) ............. Sales and distribution for CETCO Europe Ltd.
Toronto, Ontario, Canada ............ Sales and distribution for CETCO Canada Ltd.
ABSORBENT POLYMERS
Aberdeen, MS ........................ Manufacture absorbent polymers
Birkenhead, Merseyside, U.K. ........ Manufacture absorbent polymers; research laboratory and
headquarters for Chemdal Ltd.
Palatine, IL (1) .................... Chemdal Corporation headquarters; research laboratory
TRANSPORTATION
Scottsbluff, NE ..................... Transportation headquarters and terminal
CORPORATE
Arlington Heights, IL (1) ........... Corporate headquarters; CETCO headquarters;
Nanocor, Inc. headquarters; research laboratory
Aberdeen, MS ........................ Process purified bentonites (Nanocor, Inc.)
<FN>
(1) Leased.
(2) Certain offices & facilities are leased.
</FN>
</TABLE>
<PAGE>
Item 3. Legal Proceedings
The Company is party to a number of lawsuits arising in the normal course
of its business. The Company does not believe that any pending litigation will
have a material adverse effect on its consolidated financial position.
The Company's processing operations require permits from various
governmental authorities. From time to time, the Company has been contacted by
government agencies with respect to required permits or compliance with existing
permits, while the Company has been notified of certain situations of
non-compliance, management does not expect the fines, if any, to be significant.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of Registrant
<TABLE>
<CAPTION>
Name Age Principal Occupation for Last Five Years
<S> <C> <C>
John Hughes 54 President and Chief Executive Officer of the Company since 1985; a Director
since 1984.
Peter L. Maul 47 Vice President of the Company since 1993 and President of Nanocor, Inc.
since 1995; prior thereto, Vice President of Marketing at Chemstar, Inc.
1986-1992; prior thereto, Vice President of American Colloid Company.
Roger P. Palmer 60 Senior Vice President of the Company since 1994 and President of Colloid
Environmental Technologies Company since August 1994; prior thereto, Vice
President since 1990 and Vice President and General Manager of Colloid
Environmental Technologies Company since 1991.
Clarence O. Redman 54 Secretary of the Company since 1982; a Director since 1989. Clarence Owen
Redman Ltd. is a partner of Keck, Mahin & Cate, the law firm that serves as
Corporate Counsel to the Company. Mr. Redman is also Chief Executive Officer
of Keck, Mahin & Cate.
Paul G. Shelton 47 Senior Vice President - Chief Financial Officer of the Company since 1994
and President of AMCOL International's transportation units since May 1994;
prior thereto, Vice President - Chief Financial Officer since 1984; a
Director since 1988.
Lawrence E. Washow 44 Senior Vice President of the Company since 1994 and President of Chemdal
International Corporation since September 1992; prior thereto, Vice
President of the Company and Vice President and General Manager of Chemdal
Corporation since 1986.
Frank B. Wright, Jr. 48 Vice President of the Company and President of American Colloid Company
since August 1996; prior thereto, Manager of International Business
Development for American Colloid Company since October 1995; prior thereto,
Managing Director of TRIMEX Minerals International until July 1993; prior
thereto, President and Chief Executive Officer of Bentonite Corporation.
<FN>
All officers of the Company are elected annually by the Board of Directors
for a term expiring at the annual meeting of directors following their election
or when their respective successors are elected and shall have qualified. All
directors are elected by the stockholders for a three-year term or until their
respective successors are elected and shall have qualified.
</FN>
</TABLE>
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the Symbol: ACOL. The following table sets forth, for
the periods indicated, the high and low sale prices of the common stock, as
reported by The Nasdaq Stock Market, and cash dividends declared per share.
<TABLE>
<CAPTION>
Cash Dividends
Declared
Per
Stock Price
------------------------------------
High Low Share
<S> <C> <C> <C>
Fiscal Year Ended December 31, 1996:
1st Quarter............................................ $17.000 $12.125 $.0700
2nd Quarter............................................ 15.125 10.750 .0700
3rd Quarter............................................ 15.875 13.375 .0700
4th Quarter............................................ 16.500 13.500 .0700
Fiscal Year Ended December 31, 1995:
1st Quarter............................................ 14.750 11.875 .0600
2nd Quarter............................................ 16.250 12.750 .0600
3rd Quarter............................................ 18.250 15.250 .0700
4th Quarter............................................ 17.375 14.125 .0700
</TABLE>
____________________
As of February 24, 1997, there were 2,127 holders of record of the Common
Stock, excluding shares held in street name.
The Company has paid cash dividends every year for over 59 years. The
Company intends to continue to pay cash dividends on its Common Stock, but the
payment of dividends and the amount and timing of such dividends will depend on
the Company's earnings, capital requirements, financial condition and other
factors deemed relevant by the Company's Board of Directors.
<PAGE>
Item 6. Selected Financial Data
The following is selected financial data for the Company and its
subsidiaries for the five years ended December 31, 1996. Per share amounts have
been adjusted to reflect a two-for-one stock split and a three-for-two stock
split effected in the nature of stock dividends in June 1993 and January 1993,
respectively. All per share calculations are fully diluted, based on weighted
average number of common and common equivalent shares outstanding during the
year.
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(Dollars in thousands, except per share amounts)
PER SHARE 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Stockholders' Equity (1) $ 8.81 $ 8.13 $ 7.52 $ 6.82 $ 3.64
Net Income .78 .90 .78 .76 .52
Dividends .28 .26 .24 .20 .16
Shares Outstanding (2) 19,529,659 19,679,480 19,486,520 17,223,854 16,480,644
INCOME DATA
Sales $ 405,347 $ 347,688 $ 265,443 $ 219,151 $ 182,669
Gross Profit 84,311 76,562 59,487 49,843 42,454
Operating Profit 32,337 32,397 23,991 21,312 16,510
Net Interest Expense (8,450) (6,727) (2,332) (3,036) (3,484)
Net Other Income (Expense) (670) 1,217 544 474 (325)
Pretax Income 23,217 26,887 22,203 18,750 12,701
Income Taxes 7,979 9,082 6,828 5,567 4,105
Net Income 15,225 17,771 15,283 13,120 8,506
BALANCE SHEET
Current Assets $ 148,475 $ 126,337 $ 108,691 $ 95,870 $ 63,072
Net Property, Plant
and Equipment 180,876 175,211 141,420 83,233 61,231
Total Assets 350,708 322,366 263,899 184,029 129,646
Current Liabilities 51,870 35,882 36,617 27,401 21,092
Long-term Debt 118,855 117,016 71,458 16,689 38,312
Shareholders' Equity 167,404 155,494 143,073 127,132 57,338
RATIO ANALYSIS
Operating Margin 7.98% 9.32% 9.04% 9.72% 9.04%
Pretax Margin 5.73 7.73 8.36 8.56 6.95
Effective Tax Rate 34.37 33.78 30.75 29.69 32.32
Net Margin 3.76 5.11 5.76 5.99 4.66
Return on Ending Assets 4.34 5.51 5.79 7.13 6.56
Return on Ending Equity 9.09 11.43 10.68 10.32 14.83
<FN>
_______________________
(1) Based on the number of common shares outstanding at the end of the year, excluding common stock equivalents.
(2) Weighted average common shares outstanding including common stock equivalents.
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Financial Condition
At December 31, 1996, the Company had outstanding debt of $127.8 million
(including both long- and short-term debt) and cash and cash equivalents of $3.1
million, compared with $121.1 million in debt and $1.9 million in cash and cash
equivalents at December 31, 1995. Long-term debt represented 41.5% of total
capitalization at December 31, 1996, compared with 42.9% at December 31, 1995.
The cumulative foreign translation adjustment in stockholders' equity increased
by $5.2 million as a result of favorable translation rate for the Pound
Sterling. This accounted for approximately half of the improvement in the
long-term debt to total capitalization ratio, with the balance coming from the
increase in current maturities of long-term debt.
The Company had a current ratio of 2.86-to-1 at December 31, 1996, with
approximately $96.6 million in working capital, compared with 3.52-to-1 and
$90.5 million, respectively, at December 31, 1995. The $6.1 million (6.7%)
increase in working capital resulted from sales growth of 16.6%, and included
increases in accounts receivable of $15.1 million (22.7%) and inventories of
$6.4 million (12.9%). Using a 360-day year, days sales outstanding increased to
72.4 days at December 31, 1996, compared with 68.8 days at the end of 1995. This
5.2% increase is primarily due to increased overseas business where terms of
sale and collection periods are typically longer. Inventory turnover improved
from 5.4 times in 1995 to 5.7 times in 1996. Increased focus on capital employed
during 1997 is anticipated to yield lower days sales outstanding and higher
inventory turnover.
The Company's revolving credit facility of $100 million matures in October
2000. The Company had $33.7 million in unused, committed credit lines at
December 31, 1996.
The Company currently anticipates capital expenditures of approximately $35
million for 1997, which are comparable to 1996 capital investments. Construction
of a minerals processing plant in Thailand, and a clay purification plant for
Nanocor, Inc. in Aberdeen, MS, are included in the 1997 estimate; however, no
acquisitions have been considered in the total.
The current indicated annual dividend rate is $.28 per share. If the rate
remains constant and the Board of Directors continues to declare dividends, the
dividend payments will be approximately $5.4 million in 1997, or the same as was
paid in 1996.
Management believes that the Company has adequate resources to fund the
capital expenditures discussed above, the dividend payments and anticipated
increases in working capital requirements through its existing, committed credit
lines, cash balances and operating cash flow. In addition to the capital
expenditures which have been authorized by the Board of Directors, management
continues to explore growth opportunities in the environmental and minerals
markets, as well as further capacity expansion in the polymer segment.
Results of Operations for the Three Years Ended December 31, 1996
Net sales increased by $57.7 million, or 16.6%, from 1995 to 1996, and by
$82.2 million, or 31.0%, from 1994 to 1995. Operating profit was approximately
the same in 1995 and 1996, compared with an increase of $8.4 million, or 35.0%,
from 1994 to 1995. A review of sales, gross profit, general, selling and
administrative expenses, and operating profit by segment follows:
<PAGE>
Minerals
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1996 vs. 1995 1995 vs. 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................$145,623 100.0% $139,722 100.0% $142,607 100.0% $5,901 4.2% ($2,885) -2.0%
Cost of sales............ 122,404 84.1% 112,706 80.7% 114,458 80.3%
Gross profit............. 23,219 15.9% 27,016 19.3% 28,149 19.7% (3,797) -14.1% (1,133) -4.0%
General, selling and
administrative expenses 15,221 10.4% 14,743 10.5% 12,465 8.7% 478 3.2% 2,278 18.3%
Operating profit......... 7,998 5.5% 12,273 8.8% 15,684 11.0% (4,275) -34.8% (3,411)-21.7%
</TABLE>
Sales increased in 1996 primarily as a result of higher sales of cat
litter. Sales decreased domestically from 1994 to 1995 as royalties declined by
approximately $3.8 million, as anticipated, and the principal customer for clay
carrier products switched to a local, non-clay alternative during mid-year 1995.
Gross profit margins for 1996 decreased by 17.6% from the 1995 levels,
which represented a decline from those of 1994 by approximately 2.3%. Price
increases in 1995 offset much of the decline in profit margin that was
anticipated as a result of lower royalties. The impact of the loss of the
agricultural clay carrier customer was much more pronounced in 1996 than in
1995.
General, selling and administrative expenses for 1996 increased by $.5
million, or 3.2%, compared with an increase of $2.3 million, or 18.3%, over
1994. The increase in costs for 1996 was largely related to costs associated
with management changes. Higher costs for research and development, management
information systems, and a more precise division of expenses shared between
minerals and corporate accounted for the change from 1994 to 1995.
The cat litter facilities added during 1995 have yet to be fully utilized.
This temporary overcapacity depressed operating margins in 1996. Higher
bentonite mining costs also adversely impacted the 1996 results and will
continue into 1997.
Absorbent Polymers
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1996 vs. 1995 1995 vs. 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................$153,866 100.0% $120,762 100.0% $58,591 100.0% $33,104 27.4% $62,171 106.1%
Cost of sales............ 123,448 80.2% 94,924 78.6% 43,325 73.9%
Gross profit............. 30,418 19.8% 25,838 21.4% 15,266 26.1% 4,580 17.7% 10,572 69.3%
General, selling and
administrative expenses 10,791 7.0% 8,936 7.4% 7,307 12.5% 1,855 20.8% 1,629 22.3%
Operating profit......... 19,627 12.8% 16,902 14.0% 7,959 13.6% 2,725 16.1% 8,943 112.4%
</TABLE>
Sales of absorbent polymers for 1996 increased by 27.4% over 1995 levels on
a unit sales volume increase of 43.1%. This compares with a 106.1% sales
increase from 1994 to 1995 on a unit volume increase of 116.1%. The unit volume
increase in 1995 was largely attributable to the growth in European market
share, whereas the 1996 growth was divided more equally between the U.S. and
U.K. facilities.
<PAGE>
Gross profit margins decreased by 7.5% in 1996, compared with a decline of
18.0% from 1994 to 1995. The gross margins decline in 1995 was the result of
higher raw material costs, principally acrylic acid, and lower average unit
selling prices. The 1996 gross profit margin decrease was primarily attributable
to the cost of shipping products from the United States to the United Kingdom to
meet customer demand in excess of the U.K. plant capacity in the first half of
1996. Increased capacity utilization in both the United States and United
Kingdom offset the impact of yet lower average selling prices in 1996.
While general, selling and administrative expenses have increased from 1994
to 1995 and from 1995 to 1996, the rate of increase is less than the rate of
increase in sales. Much of the increased cost has been directed to research and
development of new products unrelated to the current markets served.
The Company aggressively expanded its capacity to produce absorbent
polymers from 1994 to 1996. The Company began the three-year period with
worldwide capacity of 50,000 metric tons, and ended with 120,000 metric tons.
The Company's production capability is presently among the largest in the world.
The expansions were undertaken ahead of the industry demand curve. Greater
capacity utilization is anticipated during 1997.
A price increase was announced in the fourth quarter of 1996. Despite this,
management anticipates lower average unit selling prices as larger volume
customers are expected to account for a greater proportion of the sales.
Environmental
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1996 vs. 1995 1995 vs. 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $81,480 100.0% $65,538 100.0% $42,609 100.0% $15,942 24.3% $22,929 53.8%
Cost of sales............ 53,912 66.2% 44,522 67.9% 29,152 68.4%
Gross profit............. 27,568 33.8% 21,016 32.1% 13,457 31.6% 6,552 31.2% 7,559 56.2%
General, selling and
administrative expenses 15,478 19.0% 12,209 18.6% 7,716 18.1% 3,269 26.8% 4,493 58.2%
Operating profit......... 12,090 14.8% 8,807 13.4% 5,741 13.5% 3,283 37.3% 3,066 53.4%
</TABLE>
Approximately 32% of the sales increase from 1995 to 1996 was attributable
to acquisitions made in 1995, compared with approximately 50% from 1994 to 1995.
Increased sales in international markets and higher sales of environmental liner
products have been the primary drivers of growth over the past three years.
Gross profit margins in 1996 improved by 5.3% from those of 1995. Lower
manufacturing costs were the principal reason for the improvement. Inventory
charges and changes in distribution during 1994 accounted for the difference
between 1994 and 1995 gross profit margin.
General, selling and administrative expenses increased 58.2% from 1994 to
1995, reflecting expansion of the international marketing group and additional
staff associated with the Claymax acquisition. Further expansion of the
international presence in Europe and Asia, as well as increased domestic selling
expenses accounted for much of the 26.8% increase in general, selling and
administrative expenses from 1995 to 1996. The rate of growth in this area is
expected to be less than the sales growth rate in 1997.
<PAGE>
Transportation
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1996 vs. 1995 1995 vs. 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $24,378 100.0% $21,666 100.0% $21,636 100.0% $2,712 12.5% $30 0.1%
Cost of sales............ 21,272 87.3% 18,974 87.6% 19,021 87.9%
Gross profit............. 3,106 12.7% 2,692 12.4% 2,615 12.1% 414 15.4% 77 2.9%
General, selling and
administrative expenses 1,870 7.7% 1,635 7.5% 1,590 7.3% 235 14.4% 45 2.8%
Operating profit......... 1,236 5.0% 1,057 4.9% 1,025 4.8% 179 16.9% 32 3.1%
</TABLE>
Increased brokerage of cat litter and environmental shipments have fueled
the growth in transportation revenues over the past three years. The conversion
of shipments of bentonite used in the manufacturing of environmental liner
products from truck to rail offset the further revenue gains made in the
shipment of cat litter products during 1995. Gross profit margins have benefited
from the high volume levels, as well as greater truck availability during the
three-year period. General, selling and administrative expenses reflect
increased staffing levels to handle increased volume. No further staff increases
are anticipated for 1997.
Corporate
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1996 vs. 1995 1995 vs. 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
General, selling and
administrative expenses $8,614 $6,642 $6,418 $1,972 29.7% $224 3.5%
Operating loss........... (8,614) (6,642) (6,418)
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, finance, purchasing, research
costs for new markets and corporate governance costs.
The Company is actively engaged in research and development efforts to
create new applications for its reserves of bentonite. The Company has formed a
wholly-owned subsidiary, Nanocor, Inc., to capitalize on its research and
development progress in bentonite-based nanocomposites. When incorporated into
plastics, bentonite-based nanocomposites can produce material with significantly
improved properties that encompass a variety of commercial applications.
Nanocor's technologies are still in the developmental stage, but management
feels that these products have the potential to become a significant part of the
Company's future growth. During 1996, Nanocor was issued two patents; nine more
patent applications have been filed. The increase in corporate costs from 1995
to 1996 was almost entirely accounted for by the expanded activities of Nanocor.
An incremental increase in research and development costs of approximately
$1.1 million is expected for 1997 as Nanocor, Inc. expands its product
development efforts. All costs associated with Nanocor, Inc. will continue to be
included in corporate for 1997.
<PAGE>
Net Interest Expense
Net interest expense increased by $1.7 million from 1995 to 1996. There was
$.9 million of capitalized interest in 1995 compared with none in 1996. The $4.4
million increase in interest expense from 1994 to 1995 was the result of higher
borrowing levels primarily associated with capital expenditures and
acquisitions.
Other Income (Expense)
Foreign currency exchange losses accounted for approximately $.6 million,
or 87% of other expense in 1996. Other income for 1995 included U.K. investment
grants of approximately $.5 million and a $.6 million gain related to the
cancellation of an interest rate swap compared with $.5 million of U.K.
investment grants in 1994.
Income Taxes
The income tax rate for 1996 was 34.4% compared with 33.8% in 1995 and
30.8% in 1994. The estimated effective tax rate for 1997 is 37%.
Earnings Per Share
Earnings per share were calculated using the weighted average number of
shares, including common stock equivalents, outstanding during the year. Stock
options issued to key employees and directors are considered common stock
equivalents. The weighted average shares outstanding were approximately 19.5
million shares in 1996 compared with approximately 19.7 million shares and 19.5
million shares in 1995 and 1994, respectively.
Item 8. Financial Statements and Supplementary Data
See the Index to Financial Statements and Financial Statement Schedules on
Page F-1. Such Financial Statements and Schedules are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The table below lists the names and ages of all Directors, nominee for
Director of the Company, and all positions each person holds with the Company.
Board of Directors of the Registrant
Arthur Brown, 56 (2) Chairman, President and Chief Executive Officer of
Hecla Mining Company. Director since 1990.
<PAGE>
Robert E. Driscoll, III, 58 (2, 5)
Retired Dean and Professor of Law, University of South Dakota. Director since
1985.
Raymond A. Foos, 68 (2, 3)
Retired Chairman of the Board, President and Chief Executive Officer of
Brush Wellman, Inc. (manufacturer of
beryllium and specialty materials). Director since 1981.
John Hughes, 54 (1)
President and Chief Executive Officer, AMCOL International Corporation.
Director since 1984.
Robert C. Humphrey, 78 (1, 3, 4)
Retired Chairman of the Board, NBD Bank Evanston, N.A. Director since 1977,
except for a three-month period in 1989.
James A. McClung, 59
Vice President of FMC Corporation, a diversified producer of chemicals,
machinery and other products for industry, government and other products for
industry, government and agriculture. Nominee for Director.
Jay D. Proops, 55 (1, 3, 4)
Private investor and former Vice Chairman and co-founder of The Vigoro
Corporation. Also a Director of Great Lakes Chemical Corporation. Director
since June 1995.
C. Eugene Ray, 64 (1, 2, 3, 4)
Chairman of the Board, AMCOL International Corporation. Retired Executive
Vice President - Finance of Signode Industries, Inc.(manufacturer of industrial
strapping products). Director since 1981.
Clarence O. Redman, 54 (1, 5)
Secretary, AMCOL International Corporation. Clarence Owen Redman Ltd. is a
partner of Keck, Mahin & Cate, the law firm that serves as Corporate Counsel
to the Company. Mr. Redman is also Chief Executive Officer of Keck, Mahin &
Cate. Director since 1989.
Paul G. Shelton, 47 (1)
Senior Vice President - Chief Financial Officer, AMCOL International
Corporation. Director since 1988.
Dale E. Stahl, 49 (1, 3, 4)
President and Chief Operating Officer of Gaylord Container Corporation
("Gaylord"), a manufacturer and distributor of brown paper and packaging
products. On September 14, 1992, Gaylord filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code. The Plan
of Reorganization was confirmed on October 16, 1992. Director since June
1995.
Audrey L. Weaver, 43
Private investor. Director since February 1997.
Paul C. Weaver, 34 (1, 2)
Senior Corporate Account Manager for ACNielsen Company. Director since May 1995.
<PAGE>
(1) Member of Executive Committee of the Board of Directors
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of Nominating Committee
(5) Member of Option Committee
Additional information regarding the directors of the Company is included
under the caption "Election of Directors," "Information Concerning Members of
the Board" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's proxy statement to be dated on or about April 7, 1997, and is
incorporated herein by reference. Information regarding executive officers of
the Company is included under a separate caption in Part I hereof, and is
incorporated herein by reference, in accordance with General Instruction G(3) to
Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
Item 11. Executive Compensation
Information regarding the above is included under the caption "Compensation
and Other Transactions with Management" in the Company's proxy statement to be
dated on or about April 7, 1997, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding the above is included under the caption "Security
Ownership" in the Company's proxy statement to be dated on or about April 7,
1997, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding the above is included under the caption "Compensation
and Other Transactions with Management" in the Company's proxy statement to be
dated on or about April 7, 1997, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. See Index to Financial Statements and
2. Financial Statement Schedules on Page F-1.
Such Financial Statements and Schedules are incorporated
herein by reference.
3. See Index to Exhibits immediately following the signature
page.
(b) None.
(c) See Index to Exhibits immediately following the signature page.
(d) See Index to Financial Statements and Financial Statement Schedules
on Page F-1.
<PAGE>
Item 14(a) Index to Financial Statements and Financial Statement Schedules
<TABLE>
<CAPTION>
Page
<S> <C> <C>
(1) Financial Statements:
Independent Auditors' Report................................................................... F-2
Consolidated Balance Sheets, December 31, 1996 and 1995........................................ F-3
Consolidated Statements of Operations,
Years ended December 31, 1996, 1995 and 1994.............................................. F-4
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1996, 1995 and 1994.............................................. F-5
Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995 and 1994.............................................. F-6
Notes to Consolidated Financial Statements..................................................... F-7
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts................................................ F-22
</TABLE>
All other schedules called for under Regulation S-X are not submitted
because they are not applicable or not required, or because the required
information is not material.
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
AMCOL International Corporation:
We have audited the consolidated financial statements of AMCOL
International Corporation and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AMCOL
International Corporation and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 14, 1997
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS
December 31,
1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 3,054 $ 1,888
Accounts receivable:
Trade, less allowance for doubtful accounts of $2,663 and $1,601............... 78,666 65,267
Other.......................................................................... 2,853 1,162
Inventories........................................................................ 56,314 49,883
Prepaid expenses................................................................... 4,502 5,355
Current deferred tax asset......................................................... 3,086 2,782
Total current assets........................................................... 148,475 126,337
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights and reserves............................................... 10,490 12,626
Depreciable assets................................................................. 288,876 263,904
299,366 276,530
Less accumulated depreciation...................................................... 118,490 101,319
180,876 175,211
Other assets:
Goodwill, less accumulated amortization of $2,698 and $1,937....................... 13,922 14,109
Other intangible assets, less accumulated amortization of $7,972 and $6,464........ 7,435 6,709
21,357 20,818
$350,708 $322,366
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations........................................ $ 8,770 $ 3,875
Current capital lease obligations.................................................. 199 194
Accounts payable................................................................... 24,389 18,777
Accrued income taxes............................................................... 265 -
Accrued liabilities................................................................ 18,247 13,036
Total current liabilities...................................................... 51,870 35,882
Long-term obligations:
Long-term debt..................................................................... 118,574 116,517
Long-term capital lease obligations................................................ 281 499
118,855 117,016
Deferred income tax liabilities......................................................... 6,513 6,819
Estimated accrued reclamation........................................................... 4,638 4,826
Other liabilities....................................................................... 1,428 1,898
12,579 13,543
Minority interest in subsidiary......................................................... - 431
Stockholders' equity:
Common stock, par value $.01 per share. Authorized 50,000,000 shares, issued
21,343,864 shares.............................................................. 213 213
shares
Additional paid-in capital......................................................... 75,576 74,967
Retained earnings.................................................................. 96,579 86,703
Cumulative translation adjustments................................................. 2,868 (2,351)
175,236 159,532
Less:
Treasury stock (2,345,516 shares in 1996 and 2,209,653 shares in 1995)............. (7,832) (4,038)
167,404 155,494
$350,708 $322,366
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales...................................................................... $ 405,347 $ 347,688 $ 265,443
Cost of sales.................................................................. 321,036 271,126 205,956
Gross profit.............................................................. 84,311 76,562 59,487
General, selling and administrative expenses................................... 51,974 44,165 35,496
Operating profit.......................................................... 32,337 32,397 23,991
Other income (expense):........................................................
Interest expense, net..................................................... (8,450) (6,727) (2,332)
Other, net................................................................ (670) 1,217 544
(9,120) (5,510) (1,788)
Income before income taxes and minority interest.......................... 23,217 26,887 22,203
Income taxes................................................................... 7,979 9,082 6,828
Income before minority interest........................................... 15,238 17,805 15,375
Minority interest.............................................................. (13) (34) (92)
Net income................................................................ $ 15,225 $ 17,771 $ 15,283
Earnings per share............................................................. $ .78 $ .90 $ .78
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Common Stock
Number Additional Cumulative
of Paid-in Retained Translation Treasury
Shares Amount Capital Earnings Adjustment Stock Total
- - -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 21,343,864 $ 213 $ 70,674 $ 63,149 ($3,319) ($3,584) $ 127,133
Net income.................. - - - 15,283 - - 15,283
Cash dividends ($.24
per share)............. - - - (4,521) - - (4,521)
Cumulative foreign
exchange translation
adjustment............. - - - - 1,454 - 1,454
Purchase of 33,956 treasury
shares ................ - - - - - (443) (443)
Sale of 420,142 treasury
shares................. - - 3,605 - - 562 4,167
Balance at December 31,
1994................... 21,343,864 213 74,279 73,911 (1,865) (3,465) 143,073
Net income.................. - - - 17,771 - - 17,771
Cash dividends ($.26 per
share)................. - - - (4,979) - - (4,979)
Cumulative foreign
exchange translation
adjustment............. - - - - (486) - (486)
Purchase of 58,000 treasury
shares................. - - - - - (838) (838)
Sale of 177,869 treasury
shares................. - - 688 - - 265 953
Balance at December 31,
1995................... 21,343,864 213 74,967 86,703 (2,351) (4,038) 155,494
Net income.................. - - - 15,225 - - 15,225
Cash dividends ($.28 per
share)................. - - - (5,349) - - (5,349)
Cumulative foreign
exchange translation
adjustment............. - - - - 5,219 - 5,219
Purchase of 310,084
treasury shares........ - - - - - (4,186) (4,186)
Sales of 174,221 treasury
shares................. - - 609 - - 392 1,001
Balance at December 31,
1996................... 21,343,864 $ 213 $ 75,576 $ 96,579 $ 2,868 ($ 7,832) $ 167,404
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1995 1994
Cash flow from operating activities:
<S> <C> <C> <C>
Net income............................................................. $ 15,225 $ 17,771 $ 15,283
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion, and amortization.......................... 27,907 21,289 14,442
Increase (decrease) in allowance for doubtful accounts............. 1,062 265 (500)
Increase (decrease) in deferred income taxes....................... (306) 1,345 (651)
Increase (decrease) in estimated accrued reclamation............... (188) (13) 8
Increase (decrease) in other noncurrent liabilities................ (414) (32) 623
(Gain) loss on sale of depreciable assets.......................... 63 (254) (356)
Minority interest.................................................. 13 34 92
(Increase) decrease in current assets:
Accounts receivable........................................... (16,152) (15,786) (11,289)
Inventories................................................... (6,431) (7,218) (10,987)
Prepaid expenses.............................................. 853 (3,142) 238
Current deferred tax asset.................................... (304) (266) (396)
Increase (decrease) in current liabilities:
Accounts payable.............................................. 5,613 (596) 8,345
Accrued income taxes.......................................... 265 (807) (1,482)
Accrued liabilities........................................... 5,211 105 2,133
Net cash provided by operating activities................ 32,417 12,695 15,503
Cash flow from investing activities:
Proceeds from sale of depreciable assets............................... 889 775 690
Sale of product line and mineral reserves.............................. 5,888 - -
Acquisition of land, mineral reserves, and depreciable assets.......... (34,339) (62,782) (80,958)
(Increase) decrease in other assets.................................... (1,801) (313) 29
Net cash used in investing activities..................... (29,363) (62,320) (80,239)
Cash flow from financing activities:
Proceeds from issuance of debt......................................... 10,345 109,984 77,715
Principal payments of debt and capital lease obligations............... (3,606) (63,864) (22,725)
Proceeds from sale of treasury stock................................... 1,001 953 4,167
Purchase of treasury stock............................................. (4,186) (838) (443)
Dividends paid......................................................... (5,349) (4,979) (4,521)
Other.................................................................. 105 1 (56)
Net cash provided by (used in) financing activities....... (1,690) 41,257 54,137
Cumulative translation adjustment........................................... (198) (133) 486
Net increase (decrease) in cash and cash equivalents........................ 1,166 (8,501) (10,113)
Cash at beginning of year................................................... 1,888 10,389 20,502
Cash and cash equivalents at end of year.................................... $ 3,054 $ 1,888 $ 10,389
Supplemental Disclosures of Cash Flows Information:
Actual cash paid for:
Interest............................................................... $ 9,029 $ 7,791 $ 3,636
Income taxes........................................................... $ 6,759 $ 10,066 $ 9,143
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies
Company Operations
AMCOL International Corporation (the Company) may be divided into three
principal categories of operations: minerals, absorbent polymers and
environmental. The Company also operates a transportation business primarily for
delivery of its own products. The Company's revenues are derived 36% from the
minerals operation, 38% from absorbent polymers, 20% from environmental and 6%
from transportation operations. The Company's sales were approximately 59%
domestic and 41% overseas.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its foreign and domestic subsidiaries. All subsidiaries are wholly owned,
except for a 49% interest in a Mexican subsidiary and a 33% interest in a
Chinese subsidiary, which are accounted for at cost. The difference between the
results based on the cost method and the equity method is immaterial. All
material intercompany balances and transactions, including profits on
inventories, have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Translation of Foreign Currencies
The accounts and transactions of subsidiaries located outside of the United
States are translated into U.S. dollars at rates of exchange in accordance with
Statement of Financial Accounting Standards No.52, "Foreign Currency
Translation." The assets and liabilities of these subsidiaries are translated at
the rate of exchange at the balance sheet date. The statements of operations are
translated at the weighted average monthly rate. Foreign exchange translation
adjustments are accumulated as a separate component of stockholders' equity
while realized exchange gains or losses are included in income.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) or moving average methods. Exploration costs
are expensed as incurred. Costs incurred in removing overburden and mining
bentonite are capitalized as advance mining costs until the bentonite from such
mining area is transported to the plant site, at which point the costs are
included in crude bentonite stockpile inventory.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies (Continued)
Property, Plant, Equipment, and Mineral Rights and Reserves
Property, plant, equipment, and mineral rights and reserves are carried at
cost. Depreciation is computed using the straight-line method for substantially
all of the assets. Certain other assets, primarily field equipment, are
depreciated on the units-of-production method. Mineral rights and reserves are
depleted using the units-of-production method.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired. Goodwill is being amortized on the straight-line method
over periods of 10 to 40 years. Other intangibles, including trademarks and
noncompete agreements, are amortized on the straight-line method over periods of
up to 10 years.
Income Taxes
The Company and its U.S. subsidiaries file a consolidated tax return.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be in effect for the year in which those temporary differences are
expected to be recovered or settled.
Research and Development
Research and development costs, included in general, selling and
administrative expenses, were approximately $4,962, $4,801 and $2,353 for the
years ended December 31, 1996, 1995 and 1994.
Earnings Per Share
Earnings per share is computed by dividing net income by the weighted
average of common shares outstanding after consideration of the dilutive effect
of stock options outstanding at the end of each period. The weighted average
number of common and common equivalent shares outstanding was 19,529,659 for
1996, 19,679,480 for 1995 and 19,486,520 for 1994.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less as
cash equivalents.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards No.121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of," on January 1, 1996. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets.
Stock Option Plans
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation," but applies Accounting Principles Board Opinion No.25 and related
interpretations in accounting for its plans.
Reclassification
Certain items in the 1995 and 1994 consolidated financial statements have
been reclassified to comply with the consolidated financial statements
presentation for 1996.
(2) Business Segment and Geographic Area Information
The Company operates in three major industry segments: minerals, absorbent
polymers and environmental. The Company also operates a transportation business.
The minerals segment mines, processes and distributes clays and products with
similar applications to various industrial and consumer markets. The absorbent
polymers segment produces and distributes superabsorbent polymers primarily for
use in consumer markets. The environmental segment processes and distributes
clays and products with similar applications for use as a moisture barrier in
commercial construction, landfill liners and in a variety of other industrial
and commercial applications. The transportation segment includes a long haul
trucking business and a freight brokerage business, which provide services to
both the Company's plants and outside customers.
Intersegment sales are insignificant. Operating profit is defined as sales
and other income directly related to a segment's operations, less operating
expenses, which do not include interest costs.
Identifiable assets by segments are those assets used in the Company's
operations in that segment. Corporate assets are primarily cash and cash
equivalents, corporate leasehold improvements and miscellaneous equipment.
Export sales included in the United States were approximately $39,610,
$28,691 and $17,430 for the years ended December 31, 1996, 1995 and 1994. One
customer accounted for approximately 12% of sales in 1996.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(2) Business Segment and Geographic Area Information (Continued)
The following summaries set forth certain financial information by business
segment and geographic area for the years ended December 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
1996 1995 1994
Business Segment:
Revenues:
<S> <C> <C> <C>
Minerals $ 145,623 $ 139,722 $ 142,607
Absorbent polymers................................................... 153,866 120,762 58,591
Environmental........................................................ 81,480 65,538 42,609
Transportation....................................................... 24,378 21,666 21,636
Total $ 405,347 $ 347,688 $ 265,443
Operating profit:
Minerals $ 7,998 $ 12,273 $ 15,684
Absorbent polymers................................................... 19,627 16,902 7,959
Environmental........................................................ 12,090 8,807 5,741
Transportation....................................................... 1,236 1,057 1,025
Corporate (8,614) (6,642) (6,418)
Total $ 32,337 $ 32,397 $ 23,991
Identifiable assets:
Minerals $ 123,161 $ 130,185 $ 126,014
Absorbent polymers................................................... 148,405 126,392 95,121
Environmental........................................................ 65,360 54,329 31,344
Transportation....................................................... 1,167 1,235 1,242
Corporate 12,615 10,225 10,178
Total $ 350,708 $ 322,366 $ 263,899
Depreciation, depletion and amortization:
Minerals $ 11,520 $ 10,748 $ 9,506
Absorbent polymers................................................... 11,179 7,176 3,476
Environmental........................................................ 3,908 2,432 906
Transportation....................................................... 43 35 30
Corporate 1,257 898 524
Total $ 27,907 $ 21,289 $ 14,442
Capital expenditures:
Minerals $ 10,397 $ 20,021 $ 23,979
Absorbent polymers................................................... 17,358 24,178 44,606
Environmental........................................................ 5,414 16,775 10,373
Transportation....................................................... 26 61 66
Corporate 1,144 1,747 1,934
Total $ 34,339 $ 62,782 $ 80,958
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(2) Business Segment and Geographic Area Information (Continued)
<TABLE>
<CAPTION>
1996 1995 1994
Geographic area:
Sales to unaffiliated customers from:
<S> <C> <C> <C>
North America....................................................... $ 281,678 $ 255,920 $ 226,483
Europe .......................................................... 121,450 89,842 37,154
Australia 2,219 1,926 1,806
Total $ 405,347 $ 347,688 $ 265,443
Sales or transfers between geographic areas:
North America....................................................... $ 15,858 $ 5,416 $ 4,086
Europe.............................................................. - 86 103
Australia - - -
Total $ 15,858 $ 5,502 $ 4,189
Operating profit from:
North America....................................................... $ 23,757 $ 23,047 $ 22,639
Europe.............................................................. 8,667 9,471 972
Australia 202 109 360
Adjustments and eliminations........................................ (289) (230) 20
Total $ 32,337 $ 32,397 $ 23,991
Identifiable assets in:
North America....................................................... $ 243,390 $ 246,242 $ 199,175
Europe.............................................................. 105,909 73,175 65,886
Australia 2,069 2,314 1,582
Adjustments and eliminations........................................ (660) 635 (2,744)
Total $ 350,708 $ 322,366 $ 263,899
(3) Inventories
Inventories consisted of:
1996 1995
Advance mining..................................................................... $ 2,412 $ 2,678
Crude stockpile inventories.......................................................... 12,601 10,284
In-process inventories............................................................... 21,480 19,421
Other raw material, container, and supplies inventories.............................. 19,821 17,500
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(4) Property, Plant, Equipment, and Mineral Rights and Reserves
Property, plant, equipment and mineral rights and reserves consisted of the
following:
<TABLE>
<CAPTION>
December 31, Depreciation/
Amortization-
1996 1995 Annual Rates
<S> <C> <C> <C>
Mineral rights and reserves..................................... $ 7,072 $ 10,084
Other land...................................................... 3,418 2,542
Buildings and improvements...................................... 66,307 48,969 2.2% to 20.0%
Machinery and equipment......................................... 222,569 214,935 5.0% to 33.3%
$299,366 $276,530
</TABLE>
Depreciation and depletion were charged to income as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Depreciation expense........................................................ $25,249 $19,209 $13,045
Depletion expense........................................................... 593 587 588
$25,842 $19,796 $13,633
</TABLE>
(5) Income Taxes
The components of the provision for domestic and foreign income tax
expense for the years ended December 31,1996, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
Income before income taxes and minority interest:
Domestic............................................................... $ 21,910 $ 22,796 $ 21,810
Foreign................................................................ 1,307 4,091 393
$ 23,217 $ 26,887 $ 22,203
Provision for income taxes:
Domestic Federal
Current............................................................. $ 6,285 $ 5,283 $ 5,416
Deferred............................................................ (313) 390 (370)
Domestic State
Current............................................................. 837 1,358 1,548
Deferred............................................................ (26) 43 (38)
Foreign
Current............................................................. 1,467 1,362 911
Deferred............................................................ (271) 646 (639)
$ 7,979 $ 9,082 $ 6,828
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(5) Income Taxes (Continued)
The components of the deferred tax assets and liabilities as of December
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts........................ $ 717 $ 620
Inventories, due to additional costs inventoried for tax purposes pursuant to the
Tax Reform Act of 1986 and reserve for obsolete inventories....................... 881 1,036
Other.............................................................................. 9,216 7,022
Total deferred tax assets....................................................... 10,814 8,678
Deferred tax liabilities:
Plant and equipment, due to differences in depreciation............................ (11,568) (9,379)
Land and mineral reserves, due to differences in depletion......................... (2,026) (2,385)
Inventories, due to change in accounting method.................................... (732) (915)
Other.............................................................................. 85 (36)
Total deferred tax liabilities.................................................. (14,241) (12,715)
Net deferred tax liability...................................................... ($ 3,427) ($ 4,037)
</TABLE>
The following analysis reconciles the statutory Federal income tax rate to
the effective tax rates:
<TABLE>
<CAPTION>
1996 1995 1994
Percent of Percent of Percent of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
<S> <C> <C> <C> <C> <C> <C>
Domestic and foreign taxes on income at
United States statutory rate............. $ 8,126 35.0% $ 9,410 35.0% $ 7,771 35.0%
Increase (decrease) in taxes resulting from:
Percentage depletion................... (263) (1.1) (840) (3.1) (781) (3.5)
State taxes............................ 847 3.7 1,358 5.0 1,510 6.8
FSC Commission......................... (1,106) (4.8) (1,033) (3.8) (509) (2.3)
Other.................................. 375 1.6 187 .7 (1,163) (5.2)
$ 7,979 34.4% $ 9,082 33.8% $ 6,828 30.8%
</TABLE>
(6) Long-term Debt
<TABLE>
<CAPTION>
Long-term debt consisted of the following: December 31,
1996 1995
<S> <C> <C>
Short-term debt supported by revolving credit agreement................................. $ 66,290 $ 57,618
Term note, at 9.68% (Series D).......................................................... 8,560 11,420
Term note, at 7.36% (Series A).......................................................... 25,000 25,000
Term note, at 7.83% (Series B).......................................................... 10,000 10,000
Term note, at 8.10% (Series C).......................................................... 15,000 15,000
Industrial Revenue Bond, at 68% of prime................................................ 817 1,050
Other notes payable..................................................................... 1,677 304
127,344 120,392
Less current portion.................................................................... 8,770 3,875
$ 118,574 $ 116,517
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(6) Long-term Debt (Continued)
The Company has a committed $100,000 revolving credit agreement, which
matures October 31, 2000, with an option to extend for three one-year periods.
As of December 31, 1996, there was $33,710 available in unused lines of credit.
The revolving credit note is a multi-currency agreement, which allows the
Company to borrow at an adjusted LIBOR rate plus .375% to .75%, depending upon
debt to capitalization ratios and the amount of the credit line used.
The Industrial Revenue Bond outstanding at December 31, 1996, is payable in
equal semi-annual installments of $117 until the year 2000. The Aberdeen,
Mississippi, bentonite operations of the Company are pledged as collateral.
Maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 Thereafter
<S> <C> <C> <C> <C> <C> <C>
Short-term debt supported by
revolving credit agreement...... $ - $ - $ - $ 66,290 $ - $ -
Term note, at 9.68% (Series D)...... 2,860 2,860 2,840 - - -
Term note, at 7.36% (Series A)...... 4,000 9,500 11,500 - - -
Term note, at 7.83% (Series B)...... - - - - 5,000 5,000
Term note, at 8.10% (Series C)...... - - - - - 15,000
Industrial Revenue Bond, at 68% of
prime........................... 233 233 233 118 - -
Other notes payable................. 1,677 - - - - -
$ 8,770 $ 12,593 $ 14,573 $ 66,408 $ 5,000 $ 20,000
</TABLE>
The estimated fair value of the term notes above at December 31, 1996, was
$60,320 based on discounting future cash payments at current market interest
rates for loans with similar terms and maturities.
All loan agreements include covenants that require the maintenance of
specific minimum amounts of working capital, tangible net worth and financial
ratios and limit additional borrowings and guarantees. The Company is not
required to maintain a compensating balance.
(7) Financial Instruments
The Company uses financial instruments, principally swaps, forward
contracts and options, in its management of foreign currency and interest rate
exposures. These contracts hedge transactions and balances for periods
consistent with its committed exposures.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(7) Financial Instruments (Continued)
Realized and unrealized foreign exchange gains and losses are recognized
and offset against foreign exchange gains or losses on the underlying exposures.
At December 31, 1996, the Company had $6,703 of forward exchange contracts
outstanding. The fair value of these contracts and the Company's other financial
instruments (except for term notes - see note (6)) approximates their carrying
value.
(8) Leases
The Company leases certain railroad cars, trailers, computer software,
office equipment, and office and plant facilities. Total rent expense under
operating lease agreements was approximately $2,483, $2,283 and $1,920 in 1996,
1995 and 1994, respectively. Rent expense on railroad cars is offset by mileage
earnings paid by the railroads of approximately $63, $115 and $124 in 1996, 1995
and 1994, respectively.
Railroad cars and computer software under capital leases are included in
machinery and equipment as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Railroad cars and computer software..................................................... $ 1,768 $ 1,768
Less accumulated amortization...................................................... 1,456 1,291
</TABLE>
The following is a schedule of future minimum lease payments for the
capital leases and for operating leases (with initial terms in excess of one
year) as of December 1, 1996:
<TABLE>
<CAPTION>
Operating Leases
Capital
Leases Domestic Foreign Total
Year ending December 31:
<S> <C> <C> <C> <C>
1997.................................................... $ 229 $ 3,160 $ 252 $ 3,412
1998.................................................... 170 2,331 112 2,443
1999.................................................... 114 1,989 70 2,059
2000.................................................... - 944 56 1,000
2001.................................................... - 583 44 627
Thereafter.............................................. - 491 30 521
Total minimum lease payments................................. 513 $ 9,498 $ 564 $10,062
Less amount representing interest............................ 33
Present value of net minimum lease payments.................. $ 480
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(9) Employee Benefit Plans
The Company has noncontributory pension plans covering substantially all of
its domestic employees. The Company's funding policy is to contribute annually
the maximum amount calculated using the actuarially determined entry age normal
method that can be deducted for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to services to date, but
also for those expected to be earned in the future. The plan is fully funded for
tax purposes.
<TABLE>
<CAPTION>
Pension cost in 1996, 1995 and 1994 was comprised of: 1996 1995 1994
<S> <C> <C> <C>
Service cost................................................................ $ 1,108 $ 980 $ 996
Interest cost............................................................... 1,171 1,094 964
Actual return on plan assets................................................ (686) (1,988) 1,354
Net amortization and deferral............................................... (919) 482 (2,863)
Net periodic pension cost................................................... $ 674 $ 568 $ 451
</TABLE>
The following table summarizes the funded status and amounts recognized in
the Company's balance sheet at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Actuarial present value of benefit obligations-accumulated benefit
obligation, including vested benefits of $11,867 in 1996 and $10,716 in
1995............................................................................. $12,755 $11,469
Projected benefit obligation.......................................................... ($18,107) ($15,966)
Plan assets at fair value............................................................. 16,586 16,690
Projected benefit obligation (more) less than plan assets............................. (1,521) 724
Unrecognized net (gain) loss.......................................................... 333 (1,101)
Unrecognized net obligation at January 1, 1986, being amortized over a
period from 19-21 years.......................................................... (1,182) (1,319)
Pension liability included in accrued liabilities..................................... ($2,370) ($1,696)
</TABLE>
The Company's pension benefit plan was valued as of October 1, 1996, and
1995, respectively. Approximately 93% of the plan assets are invested in common
stocks, corporate bonds and notes, and guaranteed income contracts purchased
from insurance companies. The remainder of the plan assets are invested in cash
and a real estate trust.
The actuarial assumptions for both 1996 and 1995 were as follows: the
weighted average discount rate used in determining the actuarial present value
of the projected benefit obligation was 7.5%; the rate of increase in future
compensation levels was 5.5%; and the expected long-term rate of return on plan
assets was 9.0%.
In addition to the ERISA qualified plan outlined above, the Company has a
supplementary pension plan that replaces those benefits that are lost as a
result of ERISA limitations. The unfunded accrued liability for this plan was
$366 at December 31, 1996.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(9) Employee Benefit Plans (continued)
The Company also has a savings plan for its domestic personnel. The Company
has contributed an amount equal to an employee's contribution up to a maximum of
4% of the employee's annual earnings. Company contributions are made using
Company stock purchased on the open market. Company contributions under the
savings plan were $1,130 in 1996, $985 in 1995 and $963 in 1994.
The foreign pension plans, not subject to ERISA, are funded using
individual annuity contracts and, therefore, are not included in the information
noted above.
(10) Stock Option Plans
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No.123 (FAS 123), "Accounting for Stock-Based
Compensation," but applies Accounting Principles Board Opinion No.25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for the Company's stock option plans. Had compensation cost
for its stock option plans been determined consistent with FAS 123, the
Company's net income would have been changed to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net income:................................. As reported................................ $ 15,225 $ 17,771
Pro forma.................................. $ 14,775 $ 17,544
Earnings per share:......................... As reported................................ $ 0.78 $ 0.90
Pro forma.................................. $ 0.76 $ 0.89
</TABLE>
Under the stock option plans, the exercise price of each option equals the
market price of the Company's stock on the date of the grant. For purposes of
calculating the compensation cost consistent with FAS 123, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 1996 and 1995, respectively: dividend yield of 1.82% and 2.26%,
expected volatility of 42% for both years, risk free interest rates of 5.31% and
7.37%, and expected lives of six years.
1983 Incentive Stock Option Plan
The Company reserved 1,800,000 shares of its common stock for issuance of
incentive stock options to its officers and key employees. Options awarded under
this plan, which entitle the optionee to one share of common stock, may be
exercised at a price equal to the fair market value at the time of grant.
Options awarded under the plan vest 40% after two years and continue to vest at
the rate of 20% per year for each year thereafter, until they are fully vested.
Options are exercisable as they vest and expire 10 years after the date of
grant, except in the event of termination, retirement or death of the optionee,
or a change in control of the Company.
This plan expired during 1993, though options which were granted prior to
its expiration continue to be valid until the individual option grants expire.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(10) Stock Option Plans (Continued)
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Shares Shares
Price Price Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 698,422 $6.18 873,975 $5.81 990,671 $5.50
Granted...................................... - - - - - -
Exercised.................................... (169,221) 4.00 (171,869) 4.26 (113,756) 3.02
Cancelled.................................... (14,816) 9.80 (3,684) 7.20 (2,940) 8.61
Options outstanding at December 31........... 514,385 6.80 698,422 6.18 873,975 5.81
Options exercisable at December 31........... 414,443 471,675 430,664
Shares available for future grant at
December 31............................... 0 0 0
</TABLE>
1993 Stock Plan
The Company reserved 840,000 shares of its common stock for issuance to its
officers and key employees in the form of incentive stock options, nonqualified
stock options, restricted stock, stock appreciation rights and phantom stock.
Different terms and conditions apply to each form of award made under the plan.
To date, only incentive stock options have been awarded. Options awarded under
this plan, which entitle the optionee to one share of common stock, may be
exercised at a price equal to the fair market value at the time of grant.
Options awarded under the plan generally vest 40% after two years and continue
to vest at the rate of 20% per year for each year thereafter, until they are
fully vested, unless a different vesting schedule is established by the Option
Committee of the Board of Directors on the date of grant. Options are
exercisable as they vest and expire 10 years after the date of grant, except in
the event of termination, retirement or death of the optionee or a change in
control of the Company.
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 318,140 $16.27 198,975 $18.91 84,150 $20.50
Granted...................................... 189,557 14.52 134,450 12.38 117,045 17.75
Exercised.................................... - - - - - -
Cancelled.................................... (64,375) 14.88 (15,285) 16.47 (2,220) 17.75
Options outstanding at December 31........... 443,322 15.72 318,140 16.27 198,975 18.91
Options exercisable at December 31........... 34,456
0 0
Shares available for future grant at 396,678 521,860 641,025
December 31...............................
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(10) Stock Option Plans (Continued)
1987 Nonqualified Stock Option Plan
The Company reserved 340,000 shares of its common stock for issuance of
nonqualified stock options to officers and directors, as well as key employees.
The stock options are exercisable at a price per share which may be no less than
the fair market value at the time of grant according to the vesting provisions
of the plan. Options awarded under the plan generally vest 40% after two years
and continue to vest at the rate of 20% per year for each year thereafter, until
fully vested. Options are exercisable as they vest and expire 10 years after the
date of grant, except in the event of termination, retirement or death of the
optionee, or a change in control of the Company.
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 150,856 $ 5.15 140,656 $ 3.82 144,400 $ 3.57
Granted...................................... 7,000 11.63 17,000 15.75 2,256 17.75
Exercised.................................... (5,000) 2.92 (6,000) 2.92 (6,000) 2.92
Cancelled.................................... - - (800) 13.25 - -
Options outstanding at December 31........... 152,856 5.52 150,856 5.15 140,656 3.82
Options exercisable at December 31........... 126,224 129,680 121,920
Shares available for future grant at 130,544 137,544 153,744
December 31...............................
</TABLE>
All Stock Option Plans
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Number of Average
Number of Contractual Exercise Shares Exercise
Range of exercise prices Shares Life (Yrs.) Price Price
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2.334 - $ 3.917 350,201 3.69 $ 3.356 329,699 $ 3.321
4.667 - 11.750 294,584 4.90 9.553 208,144 8.645
12.375 - 15.375 282,607 8.83 13.703 4,470 12.965
15.750 - 20.500 183,171 9.32 18.828 32,810 17.750
Total 1,110,563 6.25 $10.184 575,123 $ 6.146
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(11) Accrued Liabilities
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Estimated accrued severance taxes....................................................... $ 1,888 $ 1,048
Accrued employee benefits............................................................... 2,586 1,837
Accrued vacation pay.................................................................... 1,702 1,438
Accrued dividends....................................................................... 1,335 1,344
Accrued bonus........................................................................... 472 781
Accrued commissions..................................................................... 2,077 578
Other................................................................................... 8,187 6,010
$ 18,247 $ 13,036
</TABLE>
(12) Quarterly Results (Unaudited)
Unaudited summarized results for each quarter in 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 Quarter
--------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C>
Minerals.................................................... $ 34,557 $ 35,347 $ 37,260 $ 38,459
Absorbent Polymers.......................................... 32,046 34,102 38,744 48,974
Environmental............................................... 13,767 21,563 26,923 19,227
Transportation............................................. 5,166 5,749 6,619 6,844
Net Sales.............................................. $ 85,536 $ 96,761 $ 109,546 $ 113,504
Minerals.................................................... $ 4,704 $ 5,781 $ 7,006 $ 5,728
Absorbent Polymers.......................................... 6,326 6,108 7,623 10,361
Environmental............................................... 4,268 7,280 9,063 6,957
Transportation.............................................. 702 745 806 853
Gross Profit........................................... $ 16,000 $ 19,914 $ 24,498 $ 23,899
Minerals.................................................... $ 906 $ 1,831 $ 3,322 $ 1,939
Absorbent Polymers.......................................... 3,847 3,691 4,940 7,149
Environmental............................................... 710 3,358 5,078 2,944
Transportation.............................................. 269 265 351 351
Corporate................................................... (2,155) (2,290) (2,383) (1,786)
Operating Profit....................................... $ 3,577 $ 6,855 $ 11,308 $ 10,597
Net Income.................................................. $ 1,131 $ 2,983 $ 5,875 $ 5,236
Earnings per common and common equivalent share:............ $ 0.06 $ 0.15 $ 0.30 $ 0.27
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(12) Quarterly Results (Unaudited) (continued)
<TABLE>
<CAPTION>
1995 Quarter
--------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C>
Minerals.................................................... $ 35,598 $ 34,968 $ 34,381 $ 34,775
Absorbent Polymers.......................................... 26,480 28,768 31,286 34,228
Environmental............................................... 11,424 14,656 21,612 17,846
Transportation............................................. 5,248 5,268 5,699 5,451
Net Sales.............................................. $ 78,750 $ 83,660 $ 92,978 $ 92,300
Minerals.................................................... $ 6,692 $ 7,704 $ 6,315 $ 6,305
Absorbent Polymers.......................................... 6,178 6,023 6,263 7,374
Environmental............................................... 3,863 5,069 6,305 5,779
Transportation.............................................. 643 633 719 697
Gross Profit........................................... $ 17,376 $ 19,429 $ 19,602 $ 20,155
Minerals.................................................... $ 2,949 $ 3,611 $ 3,340 $ 2,373
Absorbent Polymers.......................................... 4,084 3,700 3,869 5,249
Environmental............................................... 851 1,943 3,511 2,502
Transportation.............................................. 256 263 315 223
Corporate................................................... (1,582) (1,739) (1,406) (1,915)
Operating Profit....................................... $ 6,558 $ 7,778 $ 9,629 $ 8,432
Net Income.................................................. $ 3,631 $ 4,688 $ 4,917 $ 4,535
Earnings per common and common equivalent share:............ $ 0.19 $ 0.24 $ 0.25 $ 0.23
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Charged Balance
Balance at Charged to to other Other charges add at end of
beginning of costs and account (deduct) year
Year Description year expenses describe describe
<S> <C> <C> <C> <C> <C> <C>
1996 Allowance for doubtful accounts $ 1,601 $ 2,013 $ - ($951)(1) $2,663
1995 Allowance for doubtful accounts $ 1,336 $ 769 $ - ($504)(1) $1,601
1994 Allowance for doubtful accounts $ 1,836 $ 978 $ - ($1,478)(1)(2) $1,336
___________
<FN>
(1) Bad debts written off.
(2) During 1994, the Company acquired Aquatec and Hydron, which included allowance for doubtful accounts of $60
and $15, respectively.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 20, 1997
AMCOL INTERNATIONAL CORPORATION
By: /s/ John Hughes
John Hughes
President; Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ John Hughes March 20, 1997
John Hughes
President; Chief Executive Officer
and Director
/s/ Paul G. Shelton March 20, 1997
Paul G. Shelton
Senior Vice President - Chief Financial
Officer; Treasurer and Director
/s/ C. Eugene Ray March 20, 1997
C. Eugene Ray
Director; Chairman of the Board
/s/ Jay D. Proops March 20, 1997
Jay D. Proops
Director
/s/ Robert C. Humphrey March 20, 1997
Robert C. Humphrey
Director
/s/ Robert E. Driscoll, III March 20, 1997
Robert E. Driscoll, III
Director
/s/ Raymond A. Foos March 20, 1997
Raymond A. Foos
Director
<PAGE>
/s/ Clarence O. Redman March 20, 1997
Clarence O. Redman
Director
/s/ Arthur Brown March 20, 1997
Arthur Brown
Director
/s/ Dale E. Stahl March 20, 1997
Dale E. Stahl
Director
/s/ Audrey L. Weaver March 20, 1997
Audrey L. Weaver
Director
/s/ Paul C. Weaver March 20, 1997
Paul C. Weaver
Director
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
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); as amended (8)
10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6)*
10.5 Change in Control Agreement dated April 1, 1994, by and between Registrant and John Hughes (6)*
10.6 Change in Control Agreement dated April 1, 1994, by and between Registrant and Paul G. Shelton (6)*
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 January 24, 1994, by and between Registrant and Peter L. Maul (6)*
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.
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.
10.14 Change in Control Agreement dated August 21, 1996 by and between Registrant and Frank B. Wright, Jr.
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
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.
(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.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this
Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K.
</FN>
</TABLE>
EXHIBIT 10.12
AMCOL International Corporation
Second Amendment to Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
NBD Bank
Mt. Prospect, Illinois
LaSalle National Bank
Chicago, Illinois
The Northern Trust Company
Chicago, Illinois
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of October 4,
1994 as heretofore amended (the "Credit Agreement") by and among the
undersigned, AMCOL International Corporation (formerly known as American Colloid
Company), a Delaware corporation (the "Company"), Harris Trust and Savings Bank
in its capacity as Agent (the "Agent") and you (collectively, the "Banks"). The
Company applies to the Banks for their agreement to amend certain terms of the
Credit Agreement in the manner and on the terms and conditions set forth herein.
Capitalized terms used in this Amendment and not otherwise specifically defined
have the meaning given such terms in the Credit Agreement.
Section 1. Amendments To Credit Agreement.
Upon satisfaction of all of the conditions precedent specified in Section 2
of this Amendment, the Credit Agreement shall be amended as follows:
Section 1.1. Section 7.2 of the Credit Agreement shall be amended by
deleting the rating "A-XII" wherever the same appears therein and by
substituting therefore the rating "A-VII."
Section 2. Conditions Precedent. The effectiveness of this Amendment is
subject to the satisfaction of all of the following conditions precedent:
Section 2.1. The Company, the Agent and the Banks shall have executed this
Amendment (such execution may be in several counterparts and the several parties
hereto may execute on separate counterparts).
<PAGE>
Section 2.2. Each of the representations and warranties set forth in
Section 5 of the Credit Agreement shall be true and correct.
Section 2.3. The Company shall be in full compliance with all of the terms
and conditions of the Credit Agreement and no Event of Default or Default shall
have occurred and be continuing thereunder or shall result after giving effect
to this Amendment.
Section 3. Miscellaneous.
Section 3.1. Except as specifically amended herein the Credit Agreement
shall continue in full force and effect. Reference to this specific Amendment
need not be made in any note, document, letter, certificate, the Credit
Agreement itself, the Notes, the Guaranty Agreement or any communication issued
or made pursuant to or with respect thereto, any reference to the Credit
Agreement in any of such being sufficient to refer to the Credit Agreement as
amended hereby.
Section 3.2. The Company shall pay all fees and expenses (including
attorneys' fees) incurred by Harris Trust and Savings Bank and its counsel
incurred in connection with the drafting and preparation, and supervision of
legal matters in connection with this Amendment.
Section 3.3. This Amendment may be executed in any number of counterparts,
and by the different parties on different counterparts, all of which taken
together shall constitute one and the same Agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
<PAGE>
Dated as of this 28th day of March, 1996
AMCOL International Corporation
(formerly known as American Colloid
Company)
By: /s/ Paul G. Shelton
Its: Sr. Vice President
Accepted and agreed to as of the day and year last above written.
Harris Trust and Savings Bank,
individually and as Agent
By: /s/ Richard Bott
Its: Vice President
NBD Bank
By: /s/ Robert D. Curtis
Its: First Vice President
LaSalle National Bank
By: /s/ Douglas Lovette
Its: First Vice President
The Northern Trust Company
By: /s/ Daniel R. Hintzen
Its: Vice President
<PAGE>
AMCOL International Corporation
Third Amendment to Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
The First National Bank of Chicago (as
successor to NBD Bank)
Chicago, Illinois
LaSalle National Bank
Chicago, Illinois
The Northern Trust Company
Chicago, Illinois
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of October 4,
1994 as heretofore amended (the "Credit Agreement") by and among the
undersigned, AMCOL International Corporation (formerly known as American Colloid
Company), a Delaware corporation (the "Company"), Harris Trust and Savings Bank
in its capacity as Agent (the "Agent") and you (collectively, the "Banks"). The
Company applies to the Banks for their agreement to amend certain terms of the
Credit Agreement in the manner and on the terms and conditions set forth herein.
Capitalized terms used in this Amendment and not otherwise specifically defined
have the meaning given such terms in the Credit Agreement.
Section 1. Amendments To Credit Agreement.
Upon satisfaction of all of the conditions precedent specified in Section 2
of this Amendment, the
Credit Agreement shall be amended as follows:
Section 1.1. Sections 7.15(g) and 7.15(i) of the Credit Agreement shall be
amended in their entirety and as so amended shall be restated to read as
follows:
"(g) investments in, and loans and advances to, Restricted
Subsidiaries (other than Domestic Subsidiaries) not in excess of
$50,000,000 at any one time outstanding;
(i) any other investments, loans and advances in an aggregate amount
not to exceed the lesser of (x) $25,000,000 or (y) the difference between
(a) $50,000,000 less (b) the amount of outstanding investments permitted by
subsection (g) hereof."
Section 2. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
<PAGE>
Section 2.1. The Company, the Agent and the Banks shall have executed this
Amendment (such execution may be in several counterparts and the several parties
hereto may execute on separate counterparts).
Section 2.2. The Company's new Domestic Subsidiary, Volclay International
Corporation, a Delaware corporation ("Volclay International") shall have
executed and delivered a Guaranty Assumption Agreement satisfactory to the
Banks.
Section 2.3. The Banks shall have received copies (executed or certified as
may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Amendment and the other instruments and
documents contemplated hereby and an opinion of counsel to the Company and
Volclay International, in a form satisfactory to the Banks.
Section 2.4. Each of the representations and warranties set forth in
Section 5 of the Credit Agreement shall be true and correct. The Company further
represents and warrants that the Guarantors listed on Exhibit A hereto
constitute all of the Company's Domestic Subsidiaries existing as of the date
hereof and that Amcol International Corp. has changed its name to Regeneration
Technologies, Inc.
Section 2.5. The Company shall be in full compliance with all of the terms
and conditions of the Credit Agreement and no Event of Default or Default shall
have occurred and be continuing thereunder or shall result after giving effect
to this Amendment.
Section 3. Miscellaneous.
Section 3.1. Except as specifically amended herein the Credit Agreement
shall continue in full force and effect. Reference to this specific Amendment
need not be made in any note, document, letter, certificate, the Credit
Agreement itself, the Notes, the Guaranty Agreement or any communication issued
or made pursuant to or with respect thereto, any reference to the Credit
Agreement in any of such being sufficient to refer to the Credit Agreement as
amended hereby.
Section 3.2. The Company shall pay all fees and expenses (including
attorneys' fees) incurred by Harris Trust and Savings Bank and its counsel
incurred in connection with the drafting and preparation, and supervision of
legal matters in connection with this Amendment.
Section 3.3. This Amendment may be executed in any number of counterparts,
and by the different parties on different counterparts, all of which taken
together shall constitute one and the same Agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
Dated as of this 12th day of September, 1996.
AMCOL International Corporation
(formerly known as American Colloid
Company)
By: /s/ Paul G. Shelton
Its: Sr. Vice President
<PAGE>
Accepted and agreed to as of the day and year last above written.
Harris Trust and Savings Bank,
individually and as Agent
By: /s/ Richard Bott
Its: Vice President
The First National Bank of Chicago
(as successor to NBD Bank)
By: /s/ Robert D. Curtis
Its: First Vice President
LaSalle National Bank
By: /s/ Douglas Lovette
Its: First Vice President
The Northern Trust Company
By: /s/ Daniel R. Hintzen
Its: Vice President
<PAGE>
Exhibit A
Domestic Subsidiaries
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
<S> <C>
Ameri-Co Carriers, Inc. Nebraska
Nationwide Freight Service, Inc. Nebraska
Chemdal Corporation Delaware
Superior Absorbents, Inc. Delaware
Montana Minerals Development Company Montana
Delaware
Chemdal International Corporation
Regeneration Technologies, Inc. (f.k.a. Amcol Delaware
International Corp.)
Colloid Environmental Technologies Company Delaware
American Colloid Company (f.k.a. AES Acquisition, Inc. Delaware
and American Colloid Mineral Company)
Nanocor, Inc. Delaware
Volclay International Corporation Delaware
</TABLE>
<PAGE>
EXHIBIT 10.13
FIRST AMENDMENT TO NOTE AGREEMENT
AND LIMITED WAIVER
This First Amendment to Note Agreement and Limited Waiver (the "Agreement") is
entered into as of this 30th day of September, 1996, between AMCOL INTERNATIONAL
CORPORATION (formerly known as American Colloid Company), a Delaware corporation
(the "Company") and PRINCIPAL MUTUAL LIFE INSURANCE COMPANY ("Principal
Mutual").
RECITALS:
The Company and Principal Mutual entered into a Note Agreement dated as of
October 1, 1994 (the "Note Agreement"). In accordance with the terms of the Note
Agreement, the Company issued $25,000,000 of its 7.36% Series A Senior Notes due
June 30, 1999, $10,000,000 of its 7.83% Series B Senior Notes due June 30, 2002,
$15,000,000 of its 8.10% Series C Senior Notes due June 30, 2006, and
$17,140,000 of its 9.68% Series D Senior Notes due November 1, 1999
(collectively, the "Notes"). Principal Mutual is the holder of all of the Notes.
Capitalized terms used but not defined herein shall have the meaning given such
term in the Note Agreement.
By letter dated August 8, 1996, the Company notified Principal Mutual that it is
in violation of Section 5.16(g) of the Note Agreement with regard to excess
advances to Restricted Subsidiaries. The Company has requested a waiver of said
default and has proposed that Section 5.16 be modified.
Pursuant to the Company's request, Principal Mutual is willing to amend the Note
Agreement subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth above and in
consideration of the mutual covenants and conditions herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and Principal Mutual hereby agree as follows:
1. Recitals Incorporated. The recitals set forth above are incorporated herein
by reference.
2. Limited Waiver. Principal Mutual hereby waives compliance with Section
5.16(g) of the Note Agreement for the period June 1, 1996 through the date of
this Agreement.
3. Amendments to Note Agreement.
3.1 Section 5.16(g) is deleted in its entirety and the following is
inserted in lieu thereof:
"(g) investments in, and loans and advances to, Restricted
Subsidiaries (other than Subsidiary Guarantors) not in excess of
$50,000,000 at any one time outstanding;"
<PAGE>
3.2 Section 5.16(i) is deleted in its entirety and the following is
inserted in lieu thereof:
"(i) any other investments, loans and advances in an aggregate amount
not to exceed the lesser of (A) $25,000,000 or (B) the difference
between (1) $50,000,000 less (2) the amount of outstanding investments
permitted by subsection (g) hereof."
3.3 Section 5.15(f)(i) is deleted and the following inserted in lieu
thereof:
"(f)...(i) the information and computations (in sufficient detail)
required in order to establish whether the Company was in compliance
with the requirements of Section 5.6 through 5.14 and 5.16 and 5.17,
inclusive, at the end of the period covered by the financial
statements then being furnished, and"
3.4 Section 6.1(f) is deleted and the following inserted in lieu thereof:
"(f) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.6 through 5.14 or 5.16 or
5.17 hereof; or"
4. Conditions Precedent. The effectiveness of this Agreement is subject to
satisfaction of all the following conditions precedent:
4.1 Delivery to Principal Mutual of all Guaranty Agreements contemplated by
Section 1.3 from Subsidiary Guarantors, including, but not limited to
Volclay International Corporation, a Delaware corporation, and Regeneration
Technologies, Inc. (formerly known as AMCOL International, Inc.)
4.2 Principal Mutual shall have received executed copies of all documents
and proceedings taken in connection with the execution and delivery of this
Agreement and the other instruments and documents contemplated hereby and
an opinion of counsel to the Company and Volclay International and
Regeneration Technologies, Inc., in a form and substance satisfactory to
Principal Mutual.
5. Representations of the Company. The Company, by its execution and delivery
of this Agreement, hereby represents and warrants to Principal Mutual as
follows:
5.1 As of the date hereof, no Default or Event of Default under the Note
Agreement, or under any other agreement to which the Company is subject,
exists or is continuing.
5.2 The representations and warranties of the Company referred to in
Section 3 of the Note Agreement are true and correct and complete in all
material respects as if made on the date hereof, except as to those
representations and warranties made as of the specific date, which are true
and correct and materially complete as of such date.
5.3 No dissolution proceedings with respect to the Company have been
commenced or are contemplated, and there has been no material adverse
change in the business, condition or operation (financial or otherwise) of
the Company taken as a whole since October 4, 1994.
<PAGE>
5.4 This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company.
6. Miscellaneous.
6.1 Except as expressly set forth herein, the terms of this Agreement shall
not operate as a waiver by Principal Mutual of any of the provisions of, or
otherwise prejudice, remedies or powers under the Note Agreement, the Notes
or applicable law and shall not operate as a waiver of or otherwise
prejudice any rights it may have against any other Person. Except as set
forth herein, none of the terms or provisions of either the Note Agreement
or the Note shall be modified hereby, and each of the Note Agreement and
the Notes, as modified herein, shall continue in full force and effect and
are hereby ratified and affirmed.
6.2 All headings and captions preceding the text of the several sections of
this Agreement are intended solely for convenience of reference and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
6.3 This Agreement embodies the entire agreement and understanding among
the Company and Principal Mutual with regard to the matters set forth
herein, and supersedes all prior agreements and undertakings relating to
such matters.
6.4 This Agreement shall be governed by, and construed and enforced in
accordance with Illinois law.
6.5 This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed an original
and all of which taken together shall constitute one and the same
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers as of the date first written above.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Sarah J. Pitts
Its: Counsel
By: /s/ Annette M. Masterson
Its: Director - Securities Investment
AMCOL INTERNATIONAL CORPORATION
(formerly known as American Colloid Company)
By: /s/ Paul G. Shelton
Its: Sr. Vice President
cc: Robert Stephan
Sarah Pitts
EXHIBIT 10.14
AGREEMENT
WHEREAS, AMCOL International Corporation (the "Company") considers it
essential and in the best interests of the Company and its shareholders to
foster the continued employment of its key management personnel;
WHEREAS, Frank B. Wright, Jr. ("Employee") is considered a key management
employee, currently serving as Vice President of the Company and President of
its American Colloid Company subsidiary; and
WHEREAS, the Company desires to assure the future continuity of Employee's
services in the event of any actual or threatened "Change in Control" (as
defined in Section 6 below) of the Company.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Effect of Agreement.
This Agreement shall be effective and binding immediately upon its
execution. However, except as specifically provided herein, this Agreement shall
not alter materially Employee's duties and obligations to the Company and the
remuneration and benefits which Employee may reasonably expect to receive from
the Company in the absence of a Change in Control.
2. Employment On and After Change in Control. Provided that the employee is
an employee of the Company immediately prior to a Change in Control, the Company
shall employ Employee, and Employee shall accept such employment, effective upon
such Change in Control for a period of twenty-four (24) months after said Change
in Control subject to the terms and conditions stated herein.
3. Duties After Change in Control. Employee agrees that during the term of
his employment with the Company after a Change in Control, he shall perform the
duties described in Section 12 below and such other duties for the Company and
its subsidiaries consistent with his experience and training as the Board of
Directors of the Company (the "Board") or the Board's representatives shall
determine from time to time, which duties shall be at least substantially equal
in status, dignity and character to his duties at the date hereof. He shall also
have the title of Vice President of the Company and President of American
Colloid Company. Employee further agrees to devote his entire working time and
attention to the business of the Company and its subsidiaries and use his best
efforts to promote such business.
4. Compensation Prior to a Change in Control. Prior to a Change in Control
the Company agrees to pay Employee compensation for his services in an amount,
and to provide him with life insurance, disability, health and other benefits,
as set by the Company from time to time. For the purpose of this Section,
compensation does not include any bonus or other incentive compensation plan or
stock purchase plan, which may vary from year to year at the discretion of the
Company.
<PAGE>
5. Termination of Employment Prior to a Change of Control. Employee shall
be entitled to terminate his employment prior to a Change in Control at any time
upon sixty (60) days' prior written notice. The Company, shall be able to
terminate Employee's employment at any time prior to a Change in Control with or
without cause upon sixty (60) days' prior written notice (or the payment of
salary in lieu thereof). This Section shall not be construed to reduce any
accrued benefits payable in connection with any termination of Employee's
employment prior to a Change in Control.
Nothing expressed or implied in this Agreement shall create any right
or duty on the part of the Company or Employee to have Employee remain in
the employment of the Company prior to a Change in Control.
6. Termination of Employment On or After Change in Control.
(a) For purposes of this Agreement the term "Change in Control" means
the change in the legal or beneficial ownership of fifty-one
percent (51%) of the shares of the Company's common stock within
a six-month period other than by death or operation of law, or
the sale of ninety percent (90%) or more of the Company's assets
within a six-month period.
(b) Employee's employment on and after a Change in Control may be
terminated with just cause by the Company at any time upon not
less than ten (10) days' prior written notice. Prior to
termination for just cause on and after a Change in Control, the
Board of Directors shall by majority vote have declared that
Employee's termination is for just cause specifically stating the
basis for such determination. In the event such a termination
occurs, the provisions of Sections 9(a) and 12 below shall apply.
Employee's employment may be terminated on or after a Change in
Control without just cause pursuant to the constructive
termination procedures described in the next paragraph or by the
Company giving Employee not less than thirty (30) days' prior
written notice. In the event Employee's employment is terminated
pursuant to the preceding sentence:
(i) the provisions of Section 9(b) below shall apply; and
(ii) although Employee's employment term shall be deemed
terminated at the end of such notice period (or, in the case
of a constructive termination described in the next
paragraph, as of the date Employee notifies the Company of
such termination), such termination shall in no way affect
the term of this Agreement or Employee's duties and
obligations under Section 12 below.
For purposes of this Section 6(b), Employee shall be considered
as having been terminated by the Company on or after a Change in
Control for other than just cause provided that he has notified
the Company of any of the following within ten (10) days of the
occurrence thereof:
<PAGE>
(i) the assignment to Employee of any duties of substantially
lesser status, dignity and character than the duties as a
Vice President of the Company immediately prior to the
effective date of the Change in Control;
(ii) a post-Change in Control reduction by the Company in
Employee's annual base salary or bonus or incentive plan (as
in effect immediately prior to the effective date of the
Change in Control);
(iii)relocation of Employee's office to a location which is more
than 35 miles from the location in which Employee
principally works for the Company immediately prior to the
effective date of the Change in Control; the relocation of
the appropriate principal executive office of the Company or
the Company's operating division or subsidiary for which
Employee performed the majority of his services for the
Company during the year prior to the effective date of the
Change in Control to a location which is more than 35 miles
from the location of such office immediately prior to such
date (it being the understanding of the parties that the
Employee shall relocate his residence from Denver to Chicago
on or before January 1, 1997); or his being required by the
Company in order to perform duties of substantially equal
status, dignity and character to those duties he performed
immediately prior to the effective date of the Change in
Control to travel on the Company's business to a
substantially greater extent than is consistent with his
business travel obligations as of such date; or
(iv) the failure of the Company to continue to provide Employee
with benefits substantially equivalent to those enjoyed by
him under any of the Company's life insurance, medical,
health and accident or disability plans in which he was
participating immediately prior to the effective date of the
Change in Control, the taking of any action by the Company
which would directly or indirectly materially reduce any of
such benefits or deprive him of any material fringe benefit
enjoyed by him immediately prior to effective date of the
Change in Control, or the failure of the Company to provide
him with at least the number of paid vacation days to which
he is entitled on the basis of years of service under the
Company's normal vacation policy in effect immediately prior
to the effective date of the Change in Control.
(c) In the event Employee's employment is terminated on or after a
Change in Control in any manner not described in Section 6(b)
above:
(i) the provisions of Section 9(b) shall not apply and Employee
shall instead receive the sums and benefits described in
Section 9(a); and
(ii) such termination shall in no way affect the term of this
Agreement or Employee's duties or obligations under Section
12 below.
<PAGE>
(d) Any termination of employment of Employee following the
commencement of any discussions by a shareholder or group of
shareholders owning legally or beneficially more than 20% of the
common stock or an officially designated representative of the
Board of Directors with a third party that results within 180
days in a Change in Control shall (unless such termination is for
cause or wholly unrelated to such discussions) be deemed to be a
termination of Employee on and after a Change in Control for
purposes of this Agreement.
7. Notice of Termination. Any termination by the Company or assertion of
termination by Employee shall be communicated by written notice of termination
to the other party at the following address:
AMCOL International Corporation Mr. Frank B. Wright, Jr.
One North Arlington AMCOL International Corporation
1500 West Shure Drive One North Arlington
Arlington Heights, IL 60004 1500 West Shure Drive
Attn: Chief Executive Officer Arlington Heights, IL 60004
8. Disability. If as a result of Employee's incapacity due to physical or
mental illness, he shall have been absent from his duties with the Company for
one hundred eighty (180) days within any twelve-(12)-consecutive-month period
and within thirty (30) days after written notice of the Company's intention to
terminate his employment is given, Employee shall not have returned to the
performance of his duties with the Company substantially on a full-time basis,
the Company may terminate his employment for disability. This shall not
constitute a termination for the purposes of obtaining benefits pursuant to
Section 9.
9. Benefits Upon Termination And Leave Of Employment On or After Change in
the Control.
(a) If Employee is terminated for just cause on or after a Change in
Control, he shall only receive the accrued sums and benefits
payable to him through the date he is terminated; the provisions
of Section 9(b) below shall not be applicable in such case and
Employee shall not receive (or shall cease receiving) the
payments and benefits described in Section 9(b).
(b) Subject to Employee's compliance with the provisions of Section
12(a) below, if Employee is terminated during the twenty-four
(24) month period beginning on and continuing after a Change in
Control other than for just cause (either at the discretion of
the Company's management or constructively by the operation of
Section 6), he shall receive the following payments and benefits
in lieu of any other sums or benefits otherwise payable to him by
the Company:
(i) all then accrued pay, benefits, executive compensation and
fringe benefits, including (but not limited to) pro rata
bonus and incentive plan earnings;
(ii) medical, health and disability benefits which are
substantially similar to the benefits the Company is
providing him as of the date of his employment is terminated
for a period of twenty-four (24) months thereafter; and
<PAGE>
(iii)one dollar less than two times his base period
compensation.
The foregoing payments and benefits shall be deemed compensation
payable for the duties to be performed by Employee pursuant to
Section 12 below. For purposes of this Agreement, (A) Employee's
"base period compensation" is the average annual "compensation"
(as defined below) which was includable in his gross income for
his base period (i.e., his most recent five taxable years ending
before the date of the Change in Control); and (B) if Employee's
base period includes a short taxable year or less than all of a
taxable year, compensation for such short or incomplete taxable
year shall be annualized before determining his average annual
compensation for the base period. (In annualizing compensation,
the frequency with which payments are expected to be made over an
annual period shall be taken into account. Thus, any amount of
compensation for such a short or incomplete taxable year that
represents a payment that would not be made more than once per
year shall not be annualized). The sum payable to Employee
pursuant to Section 9(b)(iii) shall in any and all cases be
reduced by any compensation which Employee receives, excluding
stock option or other stock incentive bonus plan compensation
from the date of the Change in Control until the termination
date. For purposes of Section 9(iii) and the definitions
pertaining to said Section, Employee's "compensation" is the
compensation which was payable to him by the Company or a related
entity determined without regard to the following Sections of the
Internal Revenue Code of 1986, as amended (the "Code"): 125
(cafeteria plans), 402(a)(8) (cash or deferred arrangements),
402(h)(1)(B) (elective contributions to simplified employee
pensions), and, in the case of employer contributions made
pursuant to a salary reduction agreement, 403(b) (tax sheltered
annuities).
Except for the benefits described in Section 9(b)(ii) above, the
sums due pursuant to this Section 9(b) shall be paid in up to two
(2) annual installments commencing thirty (30) days after the
sums become due. All sums due shall be subject to appropriate
withholding and statutory requirements. Employee shall not be
required to mitigate the amount of any payment provided for in
this Section 9(b) by seeking other employment or otherwise.
Notwithstanding anything stated in this Section 9(b) to the
contrary, however, the amount of any payment or benefit provided
for in this Section 9(b) shall be reduced by no more than 50% by
any compensation earned by Employee as a result of employment by
another employer and the Company shall not be required to provide
medical, health and/or disability benefits to the extent such
benefits would duplicate benefits received by Employee in
connection with his employment with any new employer.
Notwithstanding anything stated in this Agreement to the
contrary, if the amounts which are payable and the benefits which
are provided to Employee under this Agreement, either alone or
together with other payments which Employee has a right to
receive from the Company or any of its affiliates, would
constitute a "parachute payment" (as defined in Code Section
280G), such amounts and benefits shall be reduced, as necessary,
to the largest amount as will result in no portion of said
amounts and benefits being either not deductible as a result of
Code Section 280G or subject to the excise tax imposed by Code
Section 4999. The determination of any reduction in said amounts
and benefits pursuant to the foregoing proviso shall be made by
the Company in good faith, and such determination shall be
conclusive and binding on Employee. The amounts provided to
Employee under this Agreement in connection with a Change in
Control, if any, shall be deemed allocated to such amounts and/or
benefits to be paid and/or provided as the Company's Board of
Directors in its sole discretion shall determine.
<PAGE>
10. Special Situations. The parties recognize that under certain
circumstances a Change in Control may occur under conditions which make it
inappropriate for Employee to receive the termination benefits or protection set
forth in this Agreement. Therefore, in the event that a Change in Control occurs
for any one of the following reasons, the provisions of Sections 2, 6 and 9
shall not apply:
(a) the purchase of more than fifty percent (50%) of the stock of the
Company by an employee stock ownership plan or similar employee
benefit plan of which Employee is a participant; or
(b) the purchase of more than fifty percent (50%) of the stock or ninety
percent (90%) of the assets of the Company by a group of individuals
or entities including Employee as a member or participant, including
but not limited to those transactions commonly known as a leveraged or
other forms of management buy- outs.
11. Disputes. Any dispute arising under this Agreement (except Section 12)
shall be promptly submitted to arbitration under the Rules of the American
Arbitration Association. An arbitrator is to be mutually agreed upon by the
parties or upon failure of agreement, designated by the American Arbitration
Association.
12. Non-Competition, Non-Solicitation, and Confidentiality.
(a) In consideration of this Agreement and other good and valuable
consideration, Employee agrees that for so long as he is employed
by the Company and for twelve (12) months thereafter he shall not
own manage, operate, control, be employed by or otherwise engage
in any competitive business. Employee's agreement pursuant to the
preceding sentence shall be in addition to any other agreement or
legal obligation he may have with or to the Company. For purposes
of the preceding sentence, a "competitive business" is any
business engaged in the production, refinement or sale of
Bentonite and/or any business conducted by the Company, its
affiliates or any subsidiaries thereof as of the date Employee's
employment is terminated. A business which is conducted by the
Company, its affiliates or any subsidiaries which is subsequently
sold by the Company is not a competitive business as of the date
such business is sold. An "affiliate" of the Company is any
company which either controls, is controlled by or is under
common control with the Company. The phrase "any business
conducted by the Company, its affiliates, joint ventures or any
subsidiaries thereof" includes not only current businesses but
also any new products, product lines or use of processes under
development, consideration or investigation on the date
Employee's employment with the Company is terminated.
Employee also agrees that during the twelve (12) month period
described in the first sentence of this Section 12(a) he will not
directly or indirectly, on behalf of himself or any other person
or entity, make a solicitation or conduct business, with any
customer or potential customer of the Company with which he had
contact while employed by the Company, its affiliates and/or any
subsidiaries thereof, with respect to any products or services
which are competitive with any business conducted by the Company,
its affiliates or any subsidiaries thereof. For purposes of the
preceding sentence, a "customer" is any person or entity that has
<PAGE>
purchased goods or services from the Company, its affiliates or
any subsidiaries thereof within the twelve (12) month period
ending on the date Employee's employment is terminated. A
"potential customer" is any person or entity that the Company
solicited for business within twelve (12) months prior to the
date Employee's employment with the Company is terminated.
The Company and Employee recognize that his responsibilities have
included product development, sales and marketing of bentonite
clay, fuller's earth and related products to various markets
including without limitation the foundry, agricultural and well
drilling industries and establishing contacts and business
relationships on behalf of the Company in the domestic and
international markets. Employee's contacts on behalf of the
Company represent substantial assets of the Company which are
entitled to protection. In recognition of this situation, the
covenants set forth in this Section 12 shall apply to competitive
businesses and solicitation in the United States, Australia,
Japan, China, India, Thailand, Egypt, Canada, Mexico and those
other countries of Europe, North America, South America and Asia
in which the Company, its affiliates, joint ventures and
subsidiaries are located or have conducted $100,000 or more of
business during the twelve-month period ending on the date
Employee's employment with the Company terminated.
Before and forever after his termination or resignation, Employee
shall keep confidential and refrain from utilizing or
disseminating any confidential, proprietary or trade secret
information of the Company for any purpose other than furthering
the business interests of the Company.
(b) During Employee's employment hereunder and during one (1) year
following his resignation or the termination of his employment
hereunder for any reason, Employee will not induce or attempt to
influence any present or future employee of the Company, its
affiliates or any subsidiaries thereof to leave its employ.
(c) In consideration of the covenant not to compete the Company will
pay one/twelfth (1/12) of Employee's annual base salary each
month for a total of 12 months. The Company may at its sole
discretion for any reason whatsoever not make these payments if
it so elects and the covenant not to compete will end at the end
of the month in which the Company elects to cease payment.
13. Other Agreements. Except to the extent expressly set forth herein, this
Agreement shall not modify or lessen any benefit or compensation to which
Employee is entitled under any agreement between Employee and the Company or
under any plan maintained by the Company in which he participates or
participated. Benefits or compensation shall be payable thereunder, if at all,
according to the terms of the applicable plan(s) or agreement(s). The terms of
this Agreement shall supersede any existing agreement between Employee and the
Company executed prior to the date hereof to the extent any such Agreement is
inconsistent with the terms hereof.
14. Successors; Binding Agreement. The Company will require any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise, to
all or substantially all of the business and/or assets of the Company) to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.
<PAGE>
This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
15. Injunction. The remedy at law for any breach of Section 12 will be
inadequate and the Company, its affiliates and any subsidiaries thereof would
suffer continuing and irreparable injury to their business as a direct result of
any such breach. Accordingly, notwithstanding anything stated herein, if
Employee shall breach or fail to perform any term, condition or duty contained
in Section 12 hereof, then, in such event, the Company shall be entitled to
institute and prosecute proceedings in any court of competent jurisdiction,
either in law or in equity, to obtain the specific performance thereof by
Employee or to seek a temporary restraining order or injunctive relief, without
any requirement to show actual damages or post bond, to restrict Employee from
violating the provisions of Section 12; however, nothing herein shall be
construed to prevent the Company seeking such other remedy in the courts, in
case of any breach of this Agreement by Employee, as the Company may elect or
invoke. If court proceedings are instituted by the Company to enforce Section 12
hereof, and the Company is the prevailing party, the Company shall receive, in
addition to any damages awarded, reasonable attorneys' fees, court costs and
ancillary expenses.
16. Miscellaneous. This Agreement may not be modified or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
Employee and such officers of the Company as may be specifically designated by
its Board for that purpose. Except for any failure to give the ten (10) day
notice described in Section 6(b) above, the failure of either party to this
Agreement to object to any breach by the other party or the non-breaching
party's conduct or conduct forbearance shall not constitute a waiver of that
party's rights to enforce this Agreement. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of any subsequent breach by such other party or any
similar or dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Illinois.
17. Severability. The parties hereto intend this Agreement to be enforced
to the maximum extent permitted by law. In the event any provision of this
Agreement is deemed to be invalid or unenforceable by any court of competent
jurisdiction, such provisions shall be deemed to be restricted in scope or
otherwise modified to the extent necessary to render the same valid and
enforceable. In the event the provisions of Section 12 cannot be modified or
restricted so as to be valid and enforceable, then the same as well as the
Company's obligation to make any payment or transfer any benefit to Employee in
connection with any termination of Employee's employment shall be deemed excised
from this Agreement, and this Agreement shall be construed and enforced as if
such provisions had originally been incorporated herein as so restricted or
modified or as if such provisions had not originally been contained herein, as
the case may be. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
18. Survival. The obligations of the parties under this Agreement shall
survive the term of this Agreement.
<PAGE>
19. Term of Agreement. The term of this Agreement shall commence on August
21, 1996 and end on August 20, 1998. Provided, however, that in the event
Employee's employment is terminated while this Agreement is in force, this
Agreement shall terminate when the Company has made all payments to Employee
required by Section 9 hereof and Employee has complied with the duties and
obligations described in Section 12 hereof (all of which duties and obligations
shall specifically survive the termination of the Employee's employment). To the
extent necessary for the Company's enforcement of the provisions of Section 12
above (but only for such purpose), Employee's employment term shall be deemed to
continue through the end of the Agreement term.
Date: as of August 21, 1996.
Employee AMCOL International Corporation
/s/ Frank B. Wright, Jr. By: /s/ John Hughes
Frank B. Wright, Jr. Its: President & CEO
EXHIBIT 21
AMCOL INTERNATIONAL CORPORATION
SUBSIDIARY LISTING
<TABLE>
<CAPTION>
Company Name Country State Ownership %
<S> <C> <C> <C>
AMCOL (Holdings) Ltd. England 100
AMCOL International Corporation USA DE Parent
ACC-Chem Limited Cyprus 100
ACC-Colloid Technology Limited Cyprus 100
ACP Export, Inc. U.S. Virgin Islands 100
American Colloid Company USA DE 100
American Colloid Company Ltd. Canada Ontario 100
Ameri-Co Carriers, Inc. USA NE 100
CETCO Canada Ltd. Canada Ontario 100
CETCO (Europe) Limited England 100
CETCO Pty., Ltd. Australia 100
Chemdal Corporation USA DE 100
Chemdal International Corporation USA DE 100
Chemdal Limited England 100
Chemdal Pty., Ltd. Australia 100
Colloid Environmental Technologies Company (CETCO) USA DE 100
Colloid Abwassertechnik GmbH Germany 100
Foundry Supplies Limited England 100
Jianping Redhill Volclay Bentonite Co. Ltd. China 33
Montana Minerals Development Company USA 100
Nanocor, Inc. USA DE 100
Nanocor, Ltd. England 100
Nationwide Freight Service, Inc. USA NE 100
Regeneration Technologies, Inc. USA DE 100
Superior Absorbents, Inc. (Formerly Colloid-Piepho, Inc.) USA DE 100
Volclay de Mexico, S.A. de C.V. Mexico 49
Volclay International Corp. USA DE 100
Volclay Limited England 100
Volclay Pty., Ltd. Australia 60
Volclay Siam Ltd. Thailand 100
</TABLE>
EXHIBIT 23
Consent of KPMG Peat Marwick LLP
The Board of Directors
AMCOL International
We consent to incorporation by reference in the registration statements Nos.
33-34109, 33-55540 and 33-73350 on Form S-8 of AMCOL International Corporation
of our report dated March 14, 1997, relating to the consolidated balance sheets
of AMCOL International Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, retained earnings,
and cash flows and related schedule for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 10-K of AMCOL International Corporation.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813621
<NAME> AMCOL INTERNATIONAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.00
<CASH> 3,054
<SECURITIES> 0
<RECEIVABLES> 84,182
<ALLOWANCES> 2,663
<INVENTORY> 56,314
<CURRENT-ASSETS> 148,475
<PP&E> 299,366
<DEPRECIATION> 118,490
<TOTAL-ASSETS> 350,708
<CURRENT-LIABILITIES> 51,870
<BONDS> 0
0
0
<COMMON> 213
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 350,708
<SALES> 405,347
<TOTAL-REVENUES> 405,347
<CGS> 321,036
<TOTAL-COSTS> 373,010
<OTHER-EXPENSES> 670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,450
<INCOME-PRETAX> 23,217
<INCOME-TAX> 7,979
<INCOME-CONTINUING> 15,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,225
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
