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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, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _________
Commission File Number: 0-15661
AMCOL INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<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)
</TABLE>
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 19, 1998, based upon the closing sale
price on that date as reported in The Wall Street Journal was approximately
$356,084,361.
Registrant had 28,526,571 shares of $.01 par value Common Stock,
outstanding as of March 19, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be dated on or about April 6, 1998, 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 Company. 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: absorbent polymers, minerals 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 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 Company
is also 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 following table sets forth the percentage contributions to net sales of
the Company attributable to its absorbent polymers, minerals, environmental and
transportation segments for the last three calendar years.
<TABLE>
<CAPTION>
Percentage of Sales
------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Absorbent polymers.......................................................... 41.1% 38.0% 34.7%
Minerals.................................................................... 34.1% 35.9% 40.2%
Environmental............................................................... 18.5% 20.1% 18.8%
Transportation.............................................................. 6.2% 6.0% 6.3%
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.
ABSORBENT POLYMERS
In the early 1970s, the Company utilized a technique called modified bulk
polymerization ("MBP") to manufacture water-soluble polymers for the oil well
drilling industry. This technique was 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 75,000 tons, and at its U.K. facility
with an annual capacity of 60,000 tons.
<PAGE>
Demand for SAP 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, and has been partially replacing fluff
pulp in 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 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. The Company's customers include private label and national brand diaper
manufacturers.
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
1997, the top two customers accounted for approximately 51% of the Company's
polymer sales, and the top five customers accounted for approximately 68% 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,
in cosmetics and as fire retardants.
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 relating to its current manufacturing process. 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 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. Nor can the Company
meaningfully protect its rights to its unpatented trade secrets.
<PAGE>
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.
Competition
The Company believes that there are 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 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 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.
<PAGE>
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 60 feet.
There are two basic types of bentonite, each having different chemical and
physical properties. These are commonly known as sodium (western) 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 has entered into an agreement to sell certain assets and mineral
reserves used in traditional cat litter, agri-chemicals, oil and grease
absorbents and anti-caking agents for animal feeds. See footnote 12 to the
financial statements.
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 48% of the U.S. grocery
market for cat litter in 1997 from 0.4% in 1989, and to 56% 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
<PAGE>
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.
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 1997, the top two customers accounted for approximately 12% of the
Company's mineral sales, and the top five customers accounted for approximately
22% 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 with 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 vigorous.
<PAGE>
Fuller's Earth. There are approximately five major competitors in the
United States, some of which are larger with substantially greater financial
resources than the Company. Price, service, product quality and geographical
proximity to the market are the principal factors 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.
ENVIRONMENTAL
Principal Products and Markets
Through its wholly owned subsidiaries, Colloid Environmental Technologies
Company (CETCO) and CETCO (Europe) Ltd., the Company sells sodium bentonite,
products containing sodium bentonite, and 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 VOLTEX, a waterproofing composite
comprised of two polypropylene geotextiles filled with sodium bentonite. VOLTEX
is installed to prevent leakage through underground foundation walls and slabs.
VOLCLAY PANELS, also used for below grade waterproofing of walls and slabs, 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 manufactures elastomeric urethane coatings sold under the ACCOGUARD
trade name for use in vehicular traffic decks, roofs, balconies and pedestrian
walkways. ADURON, an all-climate, reinforced urethane roofing system, is also
manufactured and sold by CETCO. The Company believes that these products are
among the more environmentally friendly primers and coatings available to the
construction industry.
Bentonite-based flocculants 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 markets such as
remediation of petroleum-contaminated groundwater. The Company also
<PAGE>
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.
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 vigorous.
Sales and Distribution
In 1997, 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.
<PAGE>
MINERALS/ENVIRONMENTAL COMMON OPERATIONAL FUNCTIONS
Mineral Reserves
Both the mineral and environmental segments have sodium bentonite reserves
and processing plants. The following discussion of mineral reserves applies to
both units.
The Company has reserves of sodium and calcium bentonite at various
locations in Wyoming, South Dakota, Montana, Nevada and Alabama, along with
reserves of fuller's earth in Tennessee and Illinois. At 1997 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 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, less than 25% 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 and
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.
<PAGE>
The following table shows a summary of minerals sold by the Company from
active mining areas for the last five years in short tons:
<TABLE>
<CAPTION>
Tons of Minerals Sold (1)
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1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Sodium Bentonite: (In Thousands)
Belle Fourche, SD (2)....................... 45 4 133 203 147
Upton, WY................................... 392 418 434 424 351
Colony, WY.................................. 830 921 809 791 701
Lovell, WY.................................. 350 301 268 299 273
Calcium Bentonite:
Sandy Ridge, AL............................. 193 183 170 174 167
Rock Springs, NV............................ 2 3 - - -
Fuller's Earth:
Mounds, IL.................................. 192 201 203 242 239
Paris, TN (3)............................... 22 12 54 52 17
Leonardite:
Gascoyne, ND................................ 30 23 19 17 15
<FN>
(1) May include minerals of a different type not mined at this location.
(2) Beginning in late 1995, bentonite sold from Belle Fourche, SD, was processed in Colony, WY.
(3) Acquired in 1992 and commenced operations in 1993.
</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 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 bentonite
processing plants generally maintains stockpiles of unprocessed clay equaling
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 bulk shipment.
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 processing plants where it is dried or calcined, crushed and screened.
Inventories of unprocessed clay generally are no more than a two-week supply.
Mining is performed on a year-round basis.
<PAGE>
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. 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 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 for surface mining. Since reclamation of exhausted
mining sites has been a regular part of the Company's surface mining operations
for the past 29 years, maintaining compliance with current regulations has not
had a material effect on mining costs. Reclamation costs are reflected in the
prices of the bentonite sold.
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, enforcement
policies, 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 1997, approximately 72% of the revenues of this segment involved
the Company's products.
<PAGE>
FOREIGN OPERATIONS AND EXPORT SALES
Approximately 41% of the Company's 1997 net sales were to customers in
approximately 61 countries other than the United States. To enhance its overseas
market penetration, the Company maintains mineral processing plants in the
United Kingdom, Australia and Thailand, 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, Australia and
Thailand, where it is processed and mixed with other clays and 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 fluctuations and 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, 1997, the Company employed 1,546 persons, 344 of whom
were employed outside of the United States. At December 31, 1997, there were
approximately 339, 708, 405 and 25 persons employed in the Company's absorbent
polymers, minerals, environmental and transportation segments, respectively,
along with 69 corporate employees. The corporate employees include personnel
engaged in the nanocomposite research and development effort. Operating plants
are adequately staffed, and no significant labor shortages are presently
foreseen. Approximately 106 of the Company's employees in the United States and
approximately 23 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
ABSORBENT POLYMERS
<S> <C>
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
MINERALS
Belle Fourche, SD.................... 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.
Rayong, Thailand..................... Process bentonite
ENVIRONMENTAL
Belle Fourche, SD.................... Mine and process sodium bentonite
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.
Geelong, Victoria, Australia (1)..... Sales and distribution for CETCO Pty. Ltd.
Toronto, Ontario, Canada............. Sales and distribution for CETCO Canada Ltd.
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 and 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>
Mark A. Anderson 38 Vice President of Corporate Development of the Company since 1997; prior
thereto, Vice President of Absorbent Technologies for Chemdal Corporation
since 1992.
Gary L. Castagna 36 Vice President of the Company and President of Chemdal International
Corporation since 1997; prior thereto, Vice President of Finance of Chemdal
Corporation since 1992 and Managing Director of Chemdal Ltd. since 1994.
John Hughes 55 President and Chief Executive Officer of the Company since 1985; a Director
since 1984.
Peter L. Maul 48 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 61 Senior Vice President of the Company since 1994 and President of Colloid
Environmental Technologies Company since 1994; prior thereto, Vice President
since 1990 and Vice President and General Manager of Colloid Environmental
Technologies Company since 1991.
Clarence O. Redman 55 Secretary of the Company since 1982. Clarence O. Redman is of counsel to the
law firm of Lord, Bissell & Brook, the law firm that serves as Corporate
Counsel to the Company, since October 1997; prior thereto, an individual and
corporate partner and Chief Executive Officer of the law firm of Keck, Mahin
& Cate; a Director since 1989.
</TABLE>
<PAGE>
Executive Officers of Registrant (continued)
<TABLE>
<S> <C> <C>
Paul G. Shelton 48 Senior Vice President and Chief Financial Officer of the Company and
President of AMCOL International's transportation units since 1994; prior
thereto, Vice President and Chief Financial Officer since 1984; a Director
since 1988.
Lawrence E. Washow 45 Executive Vice President and Chief Operating Officer of the Company since
1997; prior thereto, Senior Vice President of the Company since 1994 and
President of Chemdal International Corporation since 1992; a Director since
February 1998.
Frank B. Wright, Jr. 49 Vice President of the Company and President of American Colloid Company
since 1996; prior thereto, Manager of International Business Development for
American Colloid Company since 1995; prior thereto, Managing Director of
TRIMEX Minerals International until 1993; prior thereto, President and Chief
Executive Officer of Bentonite Corporation.
</TABLE>
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.
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.
Prices and cash dividends have been adjusted to reflect a three-for-two stock
split in December 1997, effected in the nature of a stock dividend.
<TABLE>
<CAPTION>
Stock Price Cash Dividends
High Low Declared Per Share
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1997: 1st Quarter.......... $13.333 $10.167 $.0467
2nd Quarter.......... 12.833 11.000 .0533
3rd Quarter.......... 14.083 10.917 .0533
4th Quarter.......... 17.250 13.000 .0550
Fiscal Year Ended December 31, 1996: 1st Quarter.......... 11.333 8.083 .0467
2nd Quarter.......... 10.083 7.167 .0467
3rd Quarter.......... 10.583 8.917 .0467
4th Quarter.......... 11.000 9.000 .0467
</TABLE>
As of February 26, 1998, there were 1,992 holders of record of the common
stock, excluding shares held in street name.
The Company has paid cash dividends every year for over 60 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, 1997. Per share amounts have
been adjusted to reflect a two-for-one stock split in June 1993 and
three-for-two stock splits in January 1993 and December 1997, effected in the
nature of stock dividends.
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
PER SHARE 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity (1) $ 6.18 $ 5.87 $ 5.42 $ 5.02 $ 4.55
Basic earnings (2) .74 .53 .62 .54 .53
Diluted earnings (3) .72 .52 .60 .52 .51
Dividends .21 .19 .17 .16 .13
Shares outstanding (3) 29,125,168 29,294,489 29,519,220 29,229,780 25,835,781
INCOME DATA
Sales $ 477,060 $ 405,347 $ 347,688 $ 265,443 $ 219,151
Gross profit 100,741 84,311 76,562 59,487 49,843
Operating profit 41,469 32,337 32,397 23,991 21,312
Net interest expense (8,628) (8,450) (6,727) (2,332) (3,036)
Net other income (expense) (398) (670) 1,217 544 474
Pretax income 32,443 23,217 26,887 22,203 18,750
Income taxes 11,399 7,979 9,082 6,828 5,567
Net income 21,044 15,225 17,771 15,283 13,120
BALANCE SHEET
Current assets $ 150,270 $ 147,773 $ 126,337 $ 108,691 $ 95,870
Net property, plant
and equipment 175,324 180,876 175,211 141,420 83,233
Total assets 351,009 350,708 322,366 263,899 184,029
Current liabilities 67,241 51,870 35,882 36,617 27,401
Long-term debt 94,425 118,855 117,016 71,458 16,689
Shareholders' equity 175,943 167,404 155,494 143,073 127,132
RATIO ANALYSIS
Operating margin 8.69% 7.98% 9.32% 9.04% 9.72%
Pretax margin 6.80 5.73 7.73 8.36 8.56
Effective tax rate 35.14 34.37 33.78 30.75 29.69
Net margin 4.41 3.76 5.11 5.76 5.99
Return on ending assets 6.00 4.34 5.51 5.79 7.13
Return on ending equity 11.96 9.09 11.43 10.68 10.32
<FN>
_______________________
(1) Based on the number of common shares outstanding at the end of the year.
(2) Based on the weighted average common shares outstanding for the year.
(3) Based on the weighted average common shares outstanding, including common stock equivalents, for the year.
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Financial Condition
At December 31, 1997, the Company had outstanding debt of $109.4 million
(including both long- and short-term debt) and cash and cash equivalents of $3.1
million, compared with $127.8 million in debt and $3.1 million in cash and cash
equivalents at December 31, 1996. Long-term debt represented 34.9% of total
capitalization at December 31, 1997, compared with 41.5% at December 31, 1996.
The Company had a current ratio of 2.23-to-1 at December 31, 1997, with
approximately $83.0 million in working capital, compared with 2.85-to-1 and
$95.9 million, respectively, at December 31, 1996. The reduced working capital
in 1997 was the result of lower inventories and higher maturities of long-term
debt.
The Company's revolving credit facility of $100 million matures in October
2000. The Company had $47.2 million in unused, committed credit lines at
December 31, 1997.
The Company currently anticipates capital expenditures of approximately $40
million for 1998.
The current indicated annual dividend rate is $.22 per share. If the rate
remains constant and the Board of Directors continues to declare dividends, the
dividend payments will be approximately $6.3 million in 1998.
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.
Results of Operations for the Three Years Ended December 31, 1997
Net sales increased by $71.7 million, or 17.7%, from 1996 to 1997, and by
$57.7 million, or 16.6%, from 1994 to 1995. Gross profit increased by $16.4
million, or 19.5%, from 1996 to 1997, compared to an increase of $7.7 million,
or 10.1%, from 1995 to 1996. Operating profit improved by $9.1 million, or
28.2%, from 1996 to 1997, whereas operating profit in 1995 and 1996 was the
same. Net income increased $5.8 million, or 38.2%, from 1996 to 1997, whereas
net income in 1996 was $2.5 million lower than that of 1995. Diluted earnings
per share were $.72, $.52 and $.60 in 1997, 1996 and 1995, respectively.
A review of sales, gross profit, general, selling and administrative
expenses, and operating profit by segment follows:
<TABLE>
<CAPTION>
Absorbent Polymers Year Ended December 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1997 vs. 1996 1996 vs. 1995
------------------- ------------------ ------------------ ----------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..............$.195,944 100.0% $ 153,866 100.0% $ 120,762 100.0% $42,078 27.3% $33,104 27.4%
Cost of sales............154,983 79.1% 123,448 80.2% 94,924 78.6%
Gross profit............ 40,961 20.9% 30,418 19.8% 25,838 21.4% 10,543 34.7% 4,580 17.7%
General, selling and
administrative 12,098 6.2% 10,791 7.0% 8,936 7.4% 1,307 12.1% 1,855 20.8%
expenses.................
Operating profit........ 28,863 14.7% 19,627 12.8% 16,902 14.0% 9,236 47.1% 2,725 16.1%
</TABLE>
<PAGE>
Sales of absorbent polymers for 1997 increased by 27.3% over 1996 levels on
a unit sales volume increase of 40.3%. This compares with a 27.4% sales increase
from 1995 to 1996 on a unit volume increase of 43.1%.
Gross profit margins increased by 5.6% in 1997 from 1996, compared with a
decline of 7.5% from 1995 to 1996. Margins improved in 1997 over 1996 primarily
as a result of higher capacity utilization, offsetting a decline in the average
selling price. 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. Greater capacity utilization in both the United States and United Kingdom
offset the impact of lower average selling prices in 1996 compared to 1995.
While general, selling and administrative expenses have increased from 1995
to 1996 and from 1996 to 1997, 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 has aggressively expanded its capacity to produce absorbent
polymers. Its current global capacity of 135,000 tons is among the largest in
the world. In addition, the Company intends to add approximately 13,000 tons
through debottlenecking in 1998 and has commitments for an additional 12,000
tons of toll processing capacity as a result of an acquisition late in 1997. The
margin on the sales of the toll-processed product is expected to be lower than
the average for manufactured products.
<TABLE>
<CAPTION>
Minerals Year Ended December 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1997 vs. 1996 1996 vs. 1995
------------------- ------------------ ------------------ ----------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..............$.162,895 100.0% $ 145,623 100.0% $ 139,722 100.0% $17,272 11.9% $ 5,901 4.2%
Cost of sales............135,610 83.2% 122,404 84.1% 112,706 80.7%
Gross profit............ 27,285 16.8% 23,219 15.9% 27,016 19.3% 4,066 17.5% (3,797) -14.1%
General, selling and
administrative 15,651 9.6% 15,221 10.4% 14,743 10.5% 430 2.8% 478 3.2%
expenses.................
Operating profit........ 11,634 7.2% 7,998 5.5% 12,273 8.8% 3,636 45.5% (4,275) -34.8%
</TABLE>
Sales increased in virtually all sectors of the minerals segment, except
for iron ore pelletizing, from 1996 to 1997. Metalcasting and cat litter sales
led the increase. Sales increased in 1996 primarily as a result of higher sales
of cat litter.
Gross profit margins increased by 5.7% from 1996 to 1997, compared to a
17.6% decrease from 1995 to 1996. Higher bentonite mining costs and the loss of
an agricultural clay carrier customer adversely impacted the 1996 margins.
Excess traditional cat litter capacity depressed margins over the past three
years.
General, selling and administrative expenses for increased by $.4 million
and $.5 million from 1996 to 1997 and 1995 to 1996, respectively. The increase
in costs in 1997 was attributable to international marketing costs, whereas the
increase in costs for 1996 was largely related to costs associated with
management changes.
<PAGE>
<TABLE>
<CAPTION>
Environmental Year Ended December 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1997 vs. 1996 1996 vs. 1995
------------------- ------------------ ------------------ ----------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...............$ 88,421 100.0% $ 81,480 100.0% $ 65,538 100.0% $ 6,941 8.5% $15,942 24.3%
Cost of sales............ 59,625 67.4% 53,912 66.2% 44,522 67.9%
Gross profit............ 28,796 32.6% 27,568 33.8% 21,016 32.1% 1,228 4.5% 6,522 31.2%
General, selling and
administrative 18,528 21.0% 15,478 19.0% 12,209 18.6% 3,050 19.7% 3,269 26.8%
expenses.................
Operating profit........ 10,268 11.6% 12,090 14.8% 8,807 13.5% (1,822) -15.1% 3,283 37.3%
</TABLE>
Sales increases in overseas markets, coupled with growth in most domestic
sectors, offset softness in the environmental liner market from 1996 to 1997.
Approximately 32% of the sales increase from 1995 to 1996 was attributable to
acquisitions made in 1995. Increased sales in international markets and higher
sales of environmental liner products were the primary sales growth drivers from
1995 to 1996.
Gross profit margins decreased 3.6% from 1996 to 1997 compared to a 5.3%
improvement from 1995 to 1996. Depressed prices in the environmental liner
market were the primary reason for the decline in gross profit margins in 1997.
Lower manufacturing costs were the principal reason for the improvement in the
gross profit margin from 1995 to 1996.
Expansion of the global marketing presence for all sectors accounted for
much of the increase in general, selling and administrative expenses of 19.7%
and 26.8% from 1996 to 1997, and from 1995 to 1996, respectively.
<TABLE>
<CAPTION>
Transportation Year Ended December 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1997 vs. 1996 1996 vs. 1995
------------------- ------------------ ------------------ ----------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...............$ 29,800 100.0% $ 24,378 100.0% $ 21,666 100.0% $ 5,422 22.2% $2,712 12.5%
Cost of sales............ 26,101 87.6% 21,272 87.3% 18,974 87.6%
Gross profit............ 3,699 12.4% 3,106 12.7% 2,692 12.4% 593 19.1% 414 15.4%
General, selling and
administrative 2,057 6.9% 1,870 7.7% 1,635 7.5% 187 10.0% 235 14.4%
expenses.................
Operating profit........ 1,642 5.5% 1,236 5.0% 1,057 4.9% 406 32.8% 179 16.9%
</TABLE>
Increased brokerage of cat litter and environmental shipments have fueled
the growth in transportation revenues over the past three years. Gross profit
margins vary based largely upon truck availability and sales mix between the
trucking and brokerage operations. General, selling and administrative expenses
reflect increased staffing levels to handle increased volume.
<TABLE>
<CAPTION>
Corporate Year Ended December 31,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1997 vs. 1996 1996 vs. 1995
------------------- ------------------ ------------------ ----------------- -----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
General, selling and
administrative $10,938 $8,614 $6,642 $ 2,324 27.0% $1,972 29.7%
expenses.................
Operating loss.......... (10,938) (8,614) (6,642) (2,324) 27.0% (1,972) 27.0%
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, finance, purchasing, research
related to developing new markets and corporate governance.
<PAGE>
The Company is actively engaged in research and development efforts to
create new applications for its bentonite reserves. The Company's wholly owned
subsidiary, Nanocor, Inc., is devoted to research and development of
bentonite-based nanocomposites. When incorporated into plastics, bentonite-based
nanocomposites can produce materials 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. To date,
Nanocor has been issued five patents; 12 more patent applications have been
filed. All costs associated with Nanocor, Inc. will continue to be included in
corporate for 1998.
Virtually all of the increased corporate costs from 1996 to 1997, and from
1995 to 1996, were attributable to Nanocor.
Net Interest Expense
Net interest expense increased by $1.7 million from 1995 to 1996, compared
with a $.2 million increase from 1996 to 1997. There was $.9 million of
capitalized interest in 1995 compared with none in 1996 and 1997.
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.
Income Taxes
The income tax rate for 1997 was 35.1% compared with 34.4% in 1996 and
33.8% in 1995. The estimated effective tax rate for 1998 is 36%.
Earnings Per Share
Diluted 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 common and common equivalent shares
outstanding were approximately 29.1 million in 1997 compared with approximately
29.3 million and 29.6 million in 1996 and 1995, respectively.
Impact of New Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which requires the prominent display of comprehensive income and its
components in the financial statements. In June 1997, the FASB also issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements. In February 1998, the FASB issued SFAS
No. 132, "Employers' Disclosure About Pension and Other Post-Retirement
Benefits," which amends certain financial statement disclosures. The Company is
required to comply with SFAS No. 130, SFAS No. 131 and SFAS No. 132 in fiscal
year 1998 and estimates their adoption will not have a material effect on the
consolidated financial statements.
<PAGE>
Year 2000 Issues
The Company's systems disaster recovery planning is a comprehensive,
ongoing process, which is updated as products are developed, tested and
modified. Disaster recovery for financial and other strategic systems is
provided at alternative locations serviced by third parties, or at
Company-maintained facilities.
In 1997, the Company commenced, for all of its systems, a Year 2000 date
conversion project to address all necessary code changes, testing and
implementation. Project completion is planned for mid-1999. No estimate of total
cost for this project is currently available; however, it is not expected to be
material. The Company expects its Year 2000 date conversion project to be
completed on a timely basis. However, there can be no assurance that the systems
of other companies on which the Company's systems rely also will be converted in
a timely manner, or that any such failure to convert by another company would
not have an adverse effect on the Company's systems.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 and all positions
each person holds with the Company.
Board of Directors of the Registrant
Arthur Brown, 57 (2)
Chairman, President and Chief Executive Officer of Hecla Mining Company, a miner
and processor of silver, gold and industrial minerals. Director since 1990.
Robert E. Driscoll, III, 59 (2, 3)
Retired Dean and Professor of Law, University of South Dakota. Director since
1985.
Raymond A. Foos, 69 (2, 3)
Retired Chairman of the Board, President and Chief Executive Officer of Brush
Wellman, Inc. a manufacturer of beryllium and specialty materials. Director
since 1981.
<PAGE>
John Hughes, 55 (1)
President and Chief Executive Officer of AMCOL International Corporation.
Director since 1984.
James A. McClung, 60 (1)
Vice President of FMC Corporation, a diversified producer of chemicals,
machinery and other products for industry, government and agriculture. Director
since May 1997.
Jay D. Proops, 56 (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
1995.
C. Eugene Ray, 65 (1, 2, 3, 4)
Chairman of the Board of AMCOL International Corporation. Retired Executive Vice
President - Finance of Signode Industries, Inc. a manufacturer of industrial
strapping products. Director since 1981.
Clarence O. Redman, 55 (1, 3)
Secretary of AMCOL International Corporation. Of counsel to the law firm of
Lord, Bissell & Brook, the law firm that serves as Corporate Counsel to the
Company. Prior thereto, Mr. Redman was an individual and corporate partner of
the law firm of Keck, Mahin & Cate as the sole shareholder and President of
Clarence Owen Redman Ltd. Mr. Redman and his professional corporation also
served as Chief Executive Officer of Keck, Mahin & Cate until September 1997. In
December 1997, Keck, Mahin & Cate filed a voluntary petition in bankruptcy under
Chapter 11 of the United States Bankruptcy Code. Also a director of U.S. Forest
Industries, Inc., a forest products company engaged in the production of wood
products used in residential, commercial and industrial applications. Director
since 1989.
Paul G. Shelton, 48 (1)
Senior Vice President and Chief Financial Officer of AMCOL International
Corporation. Director since 1988.
Dale E. Stahl, 50 (1, 3, 4)
President and Chief Operating Officer of Gaylord Container Corporation, a
manufacturer and distributor of brown paper and packaging products. Director
since 1995.
Lawrence E. Washow, 45
Executive Vice President and Chief Operating Officer of AMCOL International
Corporation. Director since February 1998.
Audrey L. Weaver, 43 (2)
Private investor. Director since February 1997.
Paul C. Weaver, 35 (1, 2, 4)
Managing partner of Consumer Aptitudes, Inc., a marketing research firm.
Director since 1995.
(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
<PAGE>
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 6, 1998, 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 6, 1998, 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 6,
1998,
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 6, 1998, 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>
Page
<S> <C> <C>
(1) Financial Statements:
Independent Auditors' Report................................................................... F-2
Consolidated Balance Sheets, December 31, 1997 and 1996........................................ F-3
Consolidated Statements of Operations,
Years ended December 31, 1997, 1996 and 1995.............................................. F-4
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1997, 1996 and 1995.............................................. F-5
Consolidated Statements of Cash Flows,
Years ended December 31, 1997, 1996 and 1995.............................................. 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, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, 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 20, 1998
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS
December 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 3,077 $ 3,054
Accounts receivable:
Trade, less allowance for doubtful accounts of $2,547 and $2,663............... 89,054 78,666
Other.......................................................................... 557 2,151
Inventories........................................................................ 49,389 56,314
Prepaid expenses................................................................... 5,109 4,502
Current deferred tax asset......................................................... 3,084 3,086
Total current assets........................................................... 150,270 147,773
Investment in and advances to joint ventures............................................ 3,035 1,802
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights and reserves............................................... 11,865 10,490
Depreciable assets................................................................. 306,610 288,876
318,475 299,366
Less accumulated depreciation...................................................... 143,151 118,490
175,324 180,876
Other assets:
Goodwill, less accumulated amortization of $3,599 and $2,698....................... 17,175 13,922
Other intangible assets, less accumulated amortization of $9,806 and $7,972........ 5,205 6,335
22,380 20,257
$351,009 $350,708
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations........................................ $ 14,856 $ 8,770
Current capital lease obligations.................................................. 168 199
Accounts payable................................................................... 24,902 24,389
Accrued income taxes............................................................... 1,677 265
Accrued liabilities................................................................ 25,638 18,247
Total current liabilities...................................................... 67,241 51,870
Long-term obligations:
Long-term debt..................................................................... 94,314 118,574
Long-term capital lease obligations................................................ 111 281
94,425 118,855
Deferred income tax liabilities......................................................... 6,690 6,513
Other liabilities....................................................................... 6,710 6,066
13,400 12,579
Stockholders' equity:
Common stock, par value $.01 per share. Authorized 50,000,000 shares, issued
32,015,796 shares (21,343,864 shares in 1996 prior to stock split)............. 320 213
shares
Additional paid-in capital......................................................... 75,939 75,576
Retained earnings.................................................................. 111,588 96,579
Cumulative translation adjustments................................................. (1,749) 2,868
186,098 175,236
Less:
Treasury stock (3,541,598 shares in 1997 and 3,518,274 shares in 1996)............. (10,155) (7,832)
175,943 167,404
$351,009 $350,708
</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,
--------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Net sales...................................................................... $ 477,060 $ 405,347 $ 347,688
Cost of sales.................................................................. 376,319 321,036 271,126
Gross profit.............................................................. 100,741 84,311 76,562
General, selling and administrative expenses................................... 59,272 51,974 44,165
Operating profit.......................................................... 41,469 32,337 32,397
Other income (expense):
Interest expense, net..................................................... (8,628) (8,450) (6,727)
Other, net................................................................ (398) (670) 1,217
(9,026) (9,120) (5,510)
Income before income taxes and minority interest.......................... 32,443 23,217 26,887
Income taxes................................................................... 11,399 7,979 9,082
Income before minority interest........................................... 21,044 15,238 17,805
Minority interest.............................................................. - (13) (34)
Net income................................................................ $ 21,044 $ 15,225 $ 17,771
Earnings per share
Basic..................................................................... $ .74 $ .53 $ .62
Diluted................................................................... $ .72 $ .52 $ .60
</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 (1) Amount Capital Earnings Adjustment Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 32,015,796 $ 213 $ 74,279 $ 73,911 ($1,865) ($3,465) $ 143,073
Net income.................. - - - 17,771 - - 17,771
Cash dividends ($.17
per share)............. - - - (4,979) - - (4,979)
Cumulative translation
adjustment............. - - - - (486) - (486)
Purchase of 87,000 treasury
shares................. - - - - - (838) (838)
Sale of 266,804 treasury
shares................. - - 688 - - 265 953
Balance at December 31,
1995................... 32,015,796 213 74,967 86,703 (2,351) (4,038) 155,494
Net income.................. - - - 15,225 - - 15,225
Cash dividends ($.19 per
share)................. - - - (5,349) - - (5,349)
Cumulative translation
adjustment............. - - - - 5,219 - 5,219
Purchase of 465,126
treasury shares........ - - - - - (4,186) (4,186)
Sale of 261,331 treasury
shares................. - - 609 - - 392 1,001
Balance at December 31,
1996................... 32,015,796 213 75,576 96,579 2,868 (7,832) 167,404
Net income.................. - - - 21,044 - - 21,044
Cash dividends ($.21 per
share)................. - - - (5,928) - - (5,928)
Cumulative translation
adjustment............. - - - - (4,617) - (4,617)
Three-for-two stock split... 107 (107) -
Purchase of 254,132
treasury shares........ - - - - - (2,921) (2,921)
Sales of 230,808 treasury
shares................. - - 363 - - 598 961
Balance at December 31,
1997................... 32,015,796 $ 320 $75,939 $111,588 ($1,749) ($10,155) $ 175,943
<FN>
(1) Reflects three-for-two stock split in December, 1997, effected in the nature of a stock dividend.
</FN>
</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,
-------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Cash flow from operating activities:
Net income............................................................. $21,044 $ 15,225 $ 17,771
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion, and amortization.......................... 31,912 27,907 21,289
Increase (decrease) in allowance for doubtful accounts............. (116) 1,062 265
Increase (decrease) in deferred income taxes....................... 177 (306) 1,345
Increase (decrease) in other noncurrent liabilities................ 777 (589) (11)
(Gain) loss on sale of depreciable assets.......................... 111 63 (254)
(Increase) decrease in current assets:
Accounts receivable........................................... (8,678) (15,450) (15,786)
Inventories................................................... 6,925 (6,431) (7,218)
Prepaid expenses.............................................. (607) 853 (3,142)
Current deferred tax asset.................................... 2 (304) (266)
Increase (decrease) in current liabilities:
Accounts payable.............................................. 513 5,613 (596)
Accrued income taxes.......................................... 1,412 265 (807)
Accrued liabilities........................................... 7,391 5,211 105
Net cash provided by operating activities................ 60,863 33,119 12,695
Cash flow from investing activities:
Proceeds from sale of depreciable assets............................... 787 889 775
Sale of product line and mineral reserves.............................. - 5,888 -
Acquisition of land, mineral reserves, and depreciable assets.......... (32,652) (34,339) (62,782)
Advances to joint ventures............................................. (1,233) (1,495) (147)
(Increase) decrease in other assets.................................... 343 (1,008) (166)
Net cash used in investing activities..................... (32,755) (30,065) (62,320)
Cash flow from financing activities:
Proceeds from issuance of debt......................................... 2,443 10,345 109,984
Principal payments of debt and capital lease obligations............... (20,818) (3,606) (63,864)
Proceeds from sale of treasury stock................................... 961 1,001 953
Purchase of treasury stock............................................. (2,921) (4,186) (838)
Dividends paid......................................................... (5,928) (5,349) (4,979)
Other.................................................................. - 105 1
Net cash provided by (used in) financing activities....... (26,263) (1,690) 41,257
Cumulative translation adjustment........................................... (1,822) (198) (133)
Net increase (decrease) in cash and cash equivalents........................ 23 1,166 (8,501)
Cash and cash equivalents at beginning of year.............................. 3,054 1,888 10,389
Cash and cash equivalents at end of year.................................... $ 3,077 $ 3,054 $ 1,888
Supplemental disclosures of cash flows information:
Cash paid for:
Interest............................................................... $ 8,908 $ 9,029 $ 7,791
Income taxes........................................................... $ 9,479 $ 6,759 $ 10,066
</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: absorbent polymers, minerals and
environmental. The Company also operates a transportation business primarily for
delivery of its own products. The Company's revenues are derived 41% from
absorbent polymers, 34% from minerals, 19% from environmental and 6% from
transportation operations. The Company's sales were approximately 59% domestic
and 41% outside of the United States.
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 49% interests in Mexican and Chinese joint ventures, 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 assets and liabilities of subsidiaries located outside of the United
States are translated into U.S. dollars 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 $6,273, $4,962 and $4,801 for the
years ended December 31, 1997, 1996 and 1995.
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted
average of common shares outstanding. Diluted earnings per share is computed by
dividing net income by the weighted average common shares outstanding after
consideration of the dilutive effect of stock options. Earnings per share
calculations reflect a three-for-two stock split in December 1997, effected in
the nature of a stock dividend. Prior year numbers have been restated upon the
adoption of SFAS No. 128.
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 1996 and 1995 consolidated financial statements have
been reclassified to comply with the consolidated financial statements
presentation for 1997.
(2) Business Segment and Geographic Area Information
The Company operates in three major industry segments: absorbent polymers,
minerals and environmental. The Company also operates a transportation business.
The absorbent polymers segment produces and distributes superabsorbent polymers
primarily for use in consumer markets. The minerals segment mines, processes and
distributes clays and products with similar applications to various industrial
and 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 $54,863,
$39,610 and $28,691 for the years ended December 31, 1997, 1996 and 1995. One
customer accounted for approximately 14% of sales in 1997.
<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, 1997, 1996 and
1995.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Business Segment:
Revenues:
Absorbent polymers................................................... $ 195,944 $ 153,866 $ 120,762
Minerals 162,895 145,623 139,722
Environmental........................................................ 88,421 81,480 65,538
Transportation....................................................... 29,800 24,378 21,666
Total $477,060 $ 405,347 $ 347,688
Operating profit:
Absorbent polymers................................................... $ 28,863 $ 19,627 $ 16,902
Minerals 11,634 7,998 12,273
Environmental........................................................ 10,268 12,090 8,807
Transportation....................................................... 1,642 1,236 1,057
Corporate (10,938) (8,614) (6,642)
Total $ 41,469 $ 32,337 $ 32,397
Identifiable assets:
Absorbent polymers................................................... $ 135,076 $ 148,405 $ 126,392
Minerals 127,959 123,161 130,185
Environmental........................................................ 68,268 65,360 54,329
Transportation....................................................... 1,209 1,167 1,235
Corporate 18,497 12,615 10,225
Total $ 351,009 $ 350,708 $ 322,366
Depreciation, depletion and amortization:
Absorbent polymers................................................... $ 14,032 $ 11,179 $ 7,176
Minerals 11,110 11,520 10,748
Environmental........................................................ 5,126 3,908 2,432
Transportation....................................................... 66 43 35
Corporate 1,578 1,257 898
Total $ 31,912 $ 27,907 $ 21,289
Capital expenditures:
Absorbent polymers................................................... $ 4,802 $ 17,358 $ 24,178
Minerals 14,494 10,397 20,021
Environmental........................................................ 6,598 5,414 16,775
Transportation....................................................... 112 26 61
Corporate 6,646 1,144 1,747
Total $ 32,652 $ 34,339 $ 62,782
</TABLE>
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>
1997 1996 1995
<S> <C> <C> <C>
Geographic area:
Sales to unaffiliated customers from:
North America..................................................... $ 343,114 $ 281,678 $ 255,920
Europe............................................................ 131,102 121,450 89,842
Australia......................................................... 2,844 2,219 1,926
Total........................................................ $ 477,060 $ 405,347 $ 347,688
Sales or transfers between geographic areas:
North America..................................................... $ 3,575 $ 15,858 $ 5,416
Europe............................................................ - - 86
Australia......................................................... - - -
Total........................................................ $ 3,575 $ 15,858 $ 5,502
Operating profit from:
North America..................................................... $ 26,156 $ 23,757 $ 23,047
Europe............................................................ 15,003 8,667 9,471
Australia......................................................... 305 202 109
Adjustments and eliminations...................................... 5 (289) (230)
Total........................................................ $ 41,469 $ 32,337 $ 32,397
Identifiable assets in:
North America..................................................... $ 244,581 $ 243,390 $ 246,242
Europe............................................................ 100,671 105,909 73,175
Australia......................................................... 2,102 2,069 2,314
Asia 3,780 - -
Adjustments and eliminations...................................... (125) (660) 635
Total........................................................ $ 351,009 $ 350,708 $ 322,366
</TABLE>
<TABLE>
<CAPTION>
(3) Inventories
Inventories consisted of:
1997 1996
<S> <C> <C>
Advance mining....................................................................... $ 2,199 $ 2,412
Crude stockpile inventories.......................................................... 15,564 12,601
In-process inventories............................................................... 16,912 21,480
Other raw material, container, and supplies inventories.............................. 14,714 19,821
$ 49,389 $ 56,314
</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>
Depreciation/
December 31, Amortization-
1997 1996 Annual Rates
<S> <C> <C> <C>
Mineral rights and reserves..................................... $ 5,931 $ 7,072
Other land...................................................... 5,530 3,418
Buildings and improvements...................................... 57,929 66,307 2.2% to 20.0%
Machinery and equipment......................................... 249,085 222,569 5.0% to 33.3%
$318,475 $299,366
</TABLE>
Depreciation and depletion were charged to income as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Depreciation expense........................................................ $28,922 $25,249 $19,209
Depletion expense........................................................... 368 593 587
$29,290 $25,842 $19,796
</TABLE>
(5) Income Taxes
The components of the provision for domestic and foreign income tax expense
for the years ended December 31, 1997, 1996 and 1995 consisted of:
<TABLE>
<CAPTION>
1997 1996 1995
Income before income taxes and minority interest:
<S> <C> <C> <C>
Domestic............................................................... $ 26,023 $ 21,910 $ 22,796
Foreign................................................................ 6,420 1,307 4,091
$ 32,443 $ 23,217 $ 26,887
Provision for income taxes:
Domestic Federal
Current............................................................. $ 8,575 $ 6,285 $ 5,283
Deferred............................................................ (806) (313) 390
Domestic State
Current............................................................. 1,471 837 1,358
Deferred............................................................ (96) (26) 43
Foreign
Current............................................................. 893 1,467 1,362
Deferred............................................................ 1,362 (271) 646
$ 11,399 $ 7,979 $ 9,082
</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, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts........................ $ 767 $ 717
Inventories, due to additional costs inventoried for tax purposes pursuant to the
Tax Reform Act of 1986 and reserve for obsolete inventories....................... 899 881
Net operating loss carryforward.................................................... 3,915 5,756
Other.............................................................................. 4,203 3,660
Total deferred tax assets....................................................... 9,784 10,814
Deferred tax liabilities:
Plant and equipment, due to differences in depreciation............................ (10,969) (11,568)
Land and mineral reserves, due to differences in depletion......................... (2,033) (2,026)
Inventories, due to change in accounting method.................................... (549) (732)
Other.............................................................................. 161 85
Total deferred tax liabilities.................................................. (13,390) (14,241)
Net deferred tax liability...................................................... ($ 3,606) ($ 3,427)
</TABLE>
The following analysis reconciles the statutory Federal income tax rate to
the effective tax rates:
<TABLE>
<CAPTION>
1997 1996 1995
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............. $ 11,355 35.0% $ 8,126 35.0% $ 9,410 35.0%
Increase (decrease) in taxes resulting from:
Percentage depletion................... (595) (1.8) (263) (1.1) (840) (3.1)
State taxes............................ 1,471 4.5 847 3.7 1,358 5.0
FSC commission......................... (1,158) (3.6) (1,106) (4.8) (1,033) (3.8)
Other.................................. 326 1.0 375 1.6 187 .7
$ 11,399 35.1% $ 7,979 34.4% $ 9,082 33.8%
</TABLE>
(6) Long-term Debt
<TABLE>
<CAPTION>
Long-term debt consisted of the following: December 31,
1997 1996
<S> <C> <C>
Short-term debt supported by revolving credit agreement................................. $ 52,817 $ 66,290
Term note, at 9.68% (Series D).......................................................... 5,700 8,560
Term note, at 7.36% (Series A).......................................................... 21,000 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................................................ 583 817
Other notes payable..................................................................... 4,070 1,677
109,170 127,344
Less current portion.................................................................... 14,856 8,770
$ 94,314 $ 118,574
</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, 1997, there was $47,183 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 .25% to .75%, depending upon
debt to capitalization ratios and the amount of the credit line used.
The Industrial Revenue Bond outstanding at December 31, 1997, is payable in
equal semi-annual installments of $117 until the year 2000.
Maturities of long-term debt at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Thereafter
<S> <C> <C> <C> <C> <C> <C>
Short-term debt supported by
revolving credit agreement...... $ - $ - $52,817 $ - $ - $ -
Term note, at 9.68% (Series D)...... 2,860 2,840 - - - -
Term note, at 7.36% (Series A)...... 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........................... 233 233 117 - - -
Other notes payable................. 2,263 1,807 - - - -
$14,856 $16,380 $52,934 $ 5,000 $ 5,000 $15,000
</TABLE>
The estimated fair value of the term notes above at December 31, 1997, was
$53,766 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, 1997, the Company had $10,950 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. The Company has entered into an interest rate swap with a notional amount
of $15 million. The effect of the swap is to fix interest on $15 million of the
amount outstanding on the revolving credit agreement at 6.30%. The termination
cost of the swap at December 31, 1997 was $362.
(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 $3,560, $4,299 and $3,961 in 1997,
1996 and 1995, respectively.
Railroad cars and computer software under capital leases are included
in machinery and equipment as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
<S> <C> <C>
Railroad cars and computer software................................................ $ 1,768 $ 1,768
Less accumulated amortization................................................. 1,603 1,456
$ 165 $ 312
</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 31, 1997:
<TABLE>
<CAPTION>
Operating Leases
Capital
Leases Domestic Foreign Total
Year ending December 31:
<S> <C> <C> <C> <C> <C>
1998.................................................... $ 178 $ 3,097 $ 105 $ 3,202
1999.................................................... 114 2,851 68 2,919
2000.................................................... - 1,789 53 1,842
2001.................................................... - 1,402 41 1,443
2002.................................................... - 1,242 6 1,248
Thereafter.............................................. - 7,532 - 7,532
Total minimum lease payments................................. 292 $17,913 $ 273 $18,186
Less amount representing interest............................ 13
Present value of net minimum lease payments.................. $ 279
</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 1997, 1996 and 1995 was comprised of: 1997 1996 1995
<S> <C> <C> <C>
Service cost................................................................ $ 1,284 $ 1,108 $ 980
Interest cost............................................................... 1,327 1,171 1,094
Actual return on plan assets................................................ (3,995) (686) (1,988)
Net amortization and deferral............................................... 2,424 (919) 482
Net periodic pension cost................................................... $ 1,041 $ 674 $ 568
</TABLE>
The following table summarizes the funded status and amounts recognized in
the Company's balance sheet at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $13,721 in
1997 and $11,867 in 1996......................................................... $ 14,926 $ 12,755
Projected benefit obligation.......................................................... ( $ 21,583) ( $ 18,107)
Plan assets at fair value............................................................. 19,686 16,586
Projected benefit obligation (more) less than plan assets............................. (1,898) (1,521)
Unrecognized net (gain) loss.......................................................... (468) 333
Unrecognized net obligation at January 1, 1986, being amortized over a
period from 19-21 years.......................................................... (1,046) (1,182)
Pension liability included in accrued liabilities..................................... ( $ 3,412) ( $ 2,370)
</TABLE>
The Company's pension benefit plan was valued as of October 1, 1997, and
1996, respectively. Approximately 95% 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 1997 and 1996, respectively, were as follows:
the weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% and 7.5%; the rate of
increase in future compensation levels was 5.25% and 5.5%; and the expected
long-term rate of return on plan assets was 9.0% and 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
$522 at December 31, 1997.
<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 $1,233 in 1997, $1,130 in 1996 and $985 in 1995. The Company
also has a deferred compensation plan and a 401(k) restoration plan for its
executives.
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>
<S> <C> <C> <C>
1997 1996 1995
<S> <C> <C> <C>
Net income:......................... As reported............................. $ 21,044 $ 15,225 $ 17,771
Pro forma............................... $ 20,115 $ 14,775 $ 17,544
Basic earnings per share:........... As reported............................. $ 0.74 $ 0.53 $ 0.62
Pro forma............................... $ 0.71 $ 0.51 $ 0.61
Diluted earnings per share:......... As reported............................. $ 0.72 $ 0.52 $ 0.60
Pro forma............................... $ 0.69 $ 0.51 $ 0.59
</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 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Risk-free interest rate...................................................... 6.2% 5.3% 7.4%
Expected life of option...................................................... 6 yrs 6 yrs 6 yrs
Expected dividend yield of stock............................................. 1.6% 1.8% 2.3%
Expected volatility of stock................................................. 42% 42% 42%
</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)
1983 Incentive Stock Option Plan
The Company reserved 2,700,000 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.
<TABLE>
<CAPTION>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 771,584 $ 4.53 1,047,641 $ 4.12 1,310,972 $ 3.87
Granted...................................... - - - - - -
Exercised.................................... (157,115) 3.18 (253,833) 2.67 (257,805) 2.84
Cancelled.................................... (3,285) 4.84 (22,224) 6.53 (5,526) 4.80
Options outstanding at December 31........... 611,184 4.88 771,584 4.53 1,047,641 4.12
Options exercisable at December 31........... 552,368 621,665 707,513
Shares available for future grant at
December 31............................... - - -
</TABLE>
1993 Stock Plan
The Company reserved 1,260,000 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.
<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>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 665,048 $ 10.48 477,250 $ 10.85 298,482 $12.61
Granted...................................... 287,772 11.83 284,366 9.68 201,700 8.25
Exercised.................................... (11,286) 8.99 - - - -
Cancelled.................................... (11,329) 10.69 (96,568) 9.92 (22,932) 10.98
Options outstanding at December 31........... 930,205 10.92 665,048 10.48 477,250 10.85
Options exercisable at December 31........... 125,229 51,684 0
Shares available for future grant at
December 31............................... 318,509 594,952 782,750
</TABLE>
1987 Nonqualified Stock Option Plan
The Company reserved 510,000 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>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1............. 229,284 $ 3.68 226,284 $ 3.43 210,984 $ 2.55
Granted...................................... 21,000 12.00 10,500 7.75 25,500 10.50
Exercised.................................... 62,400 1.94 7,500 1.95 9,000 1.95
Cancelled.................................... 5,046 9.51 - - 1,200 8.83
Options outstanding at December 31........... 182,838 5.07 229,284 3.68 226,284 3.43
Options exercisable at December 31........... 136,705 189,336 194,520
Shares available for future grant at
December 31............................... 179,862 195,816 206,316
</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)
All Stock Option Plans
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number of Contractual Exercise Number of Exercise
Range of exercise prices Shares Life (Yrs.) Price Shares Price
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.945 - $ 3.111 464,959 2.58 $ 2.506 464,959 $ 2.506
7.750 - 8.500 472,838 6.11 8.029 266,063 7.921
8.833 - 11.833 639,205 8.20 11.144 83,282 11.576
12.000 - 13.667 147,225 6.18 13.429 -- --
Total 1,724,227 5.94 $ 8.155 814,304 5.203
</TABLE>
(11) Accrued Liabilities
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Estimated accrued severance taxes....................................................... $ 2,169 $ 1,888
Accrued employee benefits............................................................... 3,501 2,586
Accrued vacation pay.................................................................... 1,835 1,702
Accrued dividends....................................................................... 1,565 1,335
Accrued bonus........................................................................... 2,011 472
Accrued commissions..................................................................... 3,630 2,077
Other................................................................................... 10,927 8,187
$ 25,638 $ 18,247
</TABLE>
(12) Subsequent Event
In March 1998, the Company agreed to sell its Mounds, IL, plant and mineral
reserves; its Paris, TN, mineral reserves; and certain mineral reserves in
Nevada to Oil-Dri Corporation of America. As a part of the transaction, the
Company agreed not to sell products made from fullers' earth to the cat litter
market (excluding the pet specialty market), the agricultural carrier market,
the oil and grease absorbent market, the turf and soil amendment market and the
animal feed additives market. The transaction has been approved by both Boards
of Directors, subject to completion of due diligence. The transaction,
anticipated to close on or before May 15, 1998, is not expected to produce a
gain or loss.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
(13) Quarterly Results (Unaudited)
Unaudited summarized results for each quarter in 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 Quarter
--------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C>
Absorbent polymers.......................................... $ 45,161 $ 45,041 $ 51,466 $ 54,276
Minerals.................................................... 39,258 38,563 39,826 45,248
Environmental............................................... 16,565 22,778 27,181 21,897
Transportation............................................. 6,934 7,108 7,657 8,101
Net sales.............................................. $ 107,918 $ 113,490 $ 126,130 $ 129,522
Absorbent polymers.......................................... $ 9,593 $ 8,830 $ 11,248 $ 11,290
Minerals.................................................... 6,105 6,400 7,212 7,568
Environmental............................................... 5,238 7,567 8,937 7,054
Transportation.............................................. 875 906 944 974
Gross profit........................................... $ 21,811 $ 23,703 $ 28,341 $ 26,886
Absorbent polymers.......................................... $ 6,578 $ 6,225 $ 7,916 $ 8,144
Minerals.................................................... 2,230 2,479 3,287 3,638
Environmental............................................... 929 3,002 4,319 2,018
Transportation.............................................. 371 395 444 432
Corporate................................................... (2,804) (2,635) (2,711) (2,788)
Operating profit....................................... $ 7,304 $ 9,466 $ 13,255 $ 11,444
Net income.................................................. $ 3,173 $ 4,282 $ 6,970 $ 6,619
Basic earnings per common share............................. $ 0.11 $ 0.15 $ 0.25 $ 0.23
Diluted earnings per common share:.......................... $ 0.11 $ 0.15 $ 0.24 $ 0.23
</TABLE>
<TABLE>
<CAPTION>
1996 Quarter
--------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C>
Absorbent polymers.......................................... $ 32,046 $ 34,102 $ 38,744 $ 48,974
Minerals.................................................... 34,557 35,347 37,260 38,459
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
Absorbent polymers.......................................... $ 6,326 $ 6,108 $ 7,623 $ 10,361
Minerals.................................................... 4,704 5,781 7,006 5,728
Environmental............................................... 4,268 7,280 9,063 6,957
Transportation.............................................. 702 745 806 853
Gross profit........................................... $ 16,000 $ 19,914 $ 24,498 $ 23,899
Absorbent polymers.......................................... $ 3,847 $ 3,691 $ 4,940 $ 7,149
Minerals.................................................... 906 1,831 3,322 1,939
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
Basic earnings per common share:............................ $ 0.04 $ 0.11 $ 0.20 $ 0.18
Diluted earnings per common share:.......................... $ 0.04 $ 0.10 $ 0.20 $ 0.18
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance
Balance at Charged to Charged at end
beginning costs and to other Other charges of
Year Description of year expenses accounts add (deduct) (1) year
<S> <C> <C> <C> <C> <C>
1997 Allowance for doubtful accounts $ 2,663 $ 1,644 $ - ($1,760) $2,547
1996 Allowance for doubtful accounts $ 1,601 $ 2,013 $ - ($951) $2,663
1995 Allowance for doubtful accounts $ 1,336 $ 769 $ - ($ 504) $1,601
<FN>
___________
(1) Bad debts written off.
</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 25, 1998
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 25, 1998
John Hughes
President and Chief Executive Officer
and Director
/s/ Lawrence E. Washow March 25, 1998
Lawrence E. Washow
Executive Vice President and Chief Operating
Officer and Director
/s/ Paul G. Shelton March 25, 1998
Paul G. Shelton
Senior Vice President and Chief Financial
Officer; Treasurer and Director
/s/ C. Eugene Ray March 25, 1998
C. Eugene Ray
Chairman of the Board and Director
/s/ Jay D. Proops March 25, 1998
Jay D. Proops
Director
/s/ James A. McClung March 25, 1998
James A. McClung
Director
/s/ Robert E. Driscoll, III March 25, 1998
Robert E. Driscoll, III
Director
<PAGE>
/s/ Raymond A. Foos March 25, 1998
Raymond A. Foos
Director
/s/ Clarence O. Redman March 25, 1998
Clarence O. Redman
Director
/s/ Arthur Brown March 25, 1998
Arthur Brown
Director
/s/ Dale E. Stahl March 25, 1998
Dale E. Stahl
Director
/s/ Audrey L. Weaver March 25, 1998
Audrey L. Weaver
Director
/s/ Paul C. Weaver March 25, 1998
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 Four of the Company's Restated Certificate of Incorporation (5)
10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3)*
10.2 Executive Medical Reimbursement Plan (1)*
10.3 Lease Agreement for office space dated September 29, 1986, between the Company and American National Bank and
Trust Company of Chicago; (1) First Amendment dated June 2, 1994 (8); Second Amendment dated June 2, 1997 (13)
10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6)*
10.5 Change in Control Agreement dated April 1, 1997, by and between Registrant and John Hughes (12)*
10.6 Change in Control Agreement dated April 1, 1997, by and between Registrant and Paul G. Shelton (12)*
10.7 Change in Control Agreement dated February 16, 1998, by and between Registrant and Lawrence E. Washow*
10.8 Change in Control Agreement dated February 7, 1996, by and between Registrant and Roger P. Palmer (10)*
10.9 Change in Control Agreement dated April 1, 1997, by and between Registrant and Peter L. Maul (12)*
10.10 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)*
10.11 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10)*
10.12 Credit Agreement by and among AMCOL International Corporation and Harris Trust and Savings Bank, individually and as
agent, NBD Bank, LaSalle National Bank and the Northern Trust Company dated October 4, 1994, (7); as amended, First
Amendment to Credit Agreement dated September 25, 1995 (9), as amended, Second Amendment to Credit Agreement dated
March 28, 1996, and Third Amendment to Credit Agreement dated September 12, 1996 (11)
10.13 Note Agreement dated October 1, 1994, between AMCOL International Corporation and Principal Mutual Life Insurance
Company, (7); as amended, First Amendment of Note Agreement dated September 30, 1996 (11)
10.14 Change in Control Agreement dated August 21, 1996 by and between Registrant and Frank B. Wright, Jr. (11)*
10.15 Change in Control Agreement dated February 17, 1998 by and between Registrant and Gary L. Castagna*
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,
1993.
(4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1992.
(5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed
with the Securities and Exchange Commission for the year ended September
15, 1993.
(6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1993.
(7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed
with the Securities and Exchange Commission for the quarter ended September
30, 1994.
(8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1994.
(9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed
with the Securities and Exchange Commission for the quarter ended September
30, 1995.
(10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1995.
(11) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1996.
(12) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed
with the Securities and Exchange Commission for the quarter ended March 31,
1997.
(13) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed
with the Securities and Exchange Commission for the quarter ended June 30,
1997.
* 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 10.7
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, Lawrence E. Washow ("Employee") is considered a key management
employee, currently serving as Executive Vice-President and Chief Operating
Officer of the Company; 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
thirty-six (36) 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 Executive
Vice-President and Chief Operating Officer. Employee further agrees to devote
his entire working
<PAGE>
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, at least equal to that which
he presently receives, only with such changes as shall be agreed upon between
Employee and the Company. 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.
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.
<PAGE>
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:
(i) the assignment to Employee of any duties of lesser status,
dignity and character than his duties immediately prior to
the effective date of the Change in Control or a substantial
reduction in the nature or status of his responsibilities
from those in effect 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
<PAGE>
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; 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.
(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
<PAGE>
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 Lawrence E. Washow
One North Arlington Executive Vice-President and
1500 West Shure Drive Chief Operating Officer
Arlington Heights, IL 60004 AMCOL International Corporation
ATTN: Chairman of the Board One North Arlington
1500 West Shure Drive
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 thirty-six (36) 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
<PAGE>
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 thirty-six
(36) months thereafter; and
(iii) one dollar less than three 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 from the Company from
the date of the Change in Control until the termination date, excluding any
non-qualified deferred compensation, stock option compensation or other
stock incentive bonus plan compensation so received. 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).
<PAGE>
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 three (3) annual
installments commencing thirty (30) days after the sums become due. If on
or after the date any payment becomes due hereunder the Company at any time
has a funded debt-to-total capitalization ratio which equals or exceeds
1:1, upon Employee's written request, the Company shall secure its payment
of the remaining annual installments with a letter of credit or other
security instrument as shall be reasonably acceptable to Employee. Such
letter of credit or other security instrument shall provide Employee with
the ability to receive the remaining installment(s) only if his payment is
delinquent. All sums due hereunder 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.
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
<PAGE>
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 buyouts.
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 thirty-six (36) 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 or similar minerals, absorbent polymers 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 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.
<PAGE>
Employee also agrees that during the thirty-six (36) 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 purchased goods or
services from the Company, its affiliates or any subsidiaries thereof
within the twenty-four (24) 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 contacts with, and analysis of, customers and potential customers
throughout the United States and certain foreign countries, in addition to
certain operational matters. Employee's contacts on behalf of the Company
represent a substantial asset of the Company which are entitled to
protection. In recognition of this situation, the covenants set forth in
this Section 12 shall apply to competition and solicitation in the United
States, United Kingdom, Germany, Japan, Canada, Thailand and those
countries in which the Company, its affiliates and/or the subsidiaries
thereof has (have) conducted $200,000 or more of the business during the
12-month period ending on the date Employee's employment with the Company
is 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 three (3) years
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.
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
<PAGE>
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.
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
<PAGE>
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.
19. Term of Agreement.
The term of this Agreement shall commence on April 1, 1998 and end on March
31, 2001. 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
<PAGE>
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: 2/16/98
Employee AMCOL International Corporation
/s/ Lawrence E. Washow By: /s/ John Hughes
Lawrence E. Washow Its: President & CEO
EXHIBIT 10.15
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, Gary L. Castagna ("Employee") is considered a key management
employee, currently serving as Vice President of the Company; 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.
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.
<PAGE>
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, at least equal to that which
he presently receives, only with such changes as shall be agreed upon between
Employee and the Company. 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.
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
<PAGE>
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:
(i) the assignment to Employee of any duties of lesser status,
dignity and character than his duties immediately prior to
the effective date of the Change in Control or a substantial
reduction in the nature or status of his responsibilities
from those in effect 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; or his being
<PAGE>
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.
(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.
<PAGE>
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 Gary L. Castagna
One North Arlington Vice-President
1500 West Shure Drive AMCOL International Corporation
Arlington Heights, IL 60004 One North Arlington
ATTN: Chairman of the Board 1500 West Shure Drive
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:
<PAGE>
(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 there-after; and
(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 from the Company from
the date of the Change in Control until the termination date, excluding any
non-qualified deferred compensation, stock option compensation or other
stock incentive bonus plan compensation so received. 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 three (3) annual
installments
<PAGE>
commencing thirty (30) days after the sums become due. If on or after the
date any payment becomes due hereunder the Company at any time has a funded
debt-to-total capitalization ratio which equals or exceeds 1:1, upon
Employee's written request, the Company shall secure its payment of the
remaining annual installments with a letter of credit or other security
instrument as shall be reasonably acceptable to Employee. Such letter of
credit or other security instrument shall provide Employee with the ability
to receive the remaining installment(s) only if his payment is delinquent.
All sums due hereunder 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.
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:
<PAGE>
(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 buyouts.
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 twenty-four (24) 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 or similar minerals, absorbent polymers 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 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 twenty-four (24) month period
described in the first sentence of this Section 12(a) he will not directly
or
<PAGE>
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 purchased goods or
services from the Company, its affiliates or any subsidiaries thereof
within the twenty-four (24) 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 contacts with, and analysis of, customers and potential customers
throughout the United States and certain foreign countries, in addition to
certain operational matters. Employee's contacts on behalf of the Company
represent a substantial asset of the Company which are entitled to
protection. In recognition of this situation, the covenants set forth in
this Section 12 shall apply to competition and solicitation in the United
States, United Kingdom, Germany, Japan, Canada, Thailand, and those
countries in which the Company, its affiliates and/or the subsidiaries
thereof has (have) conducted $200,000 or more of the business during the
12-month period ending on the date Employee's employment with the Company
is 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 two (2) years
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.
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,
<PAGE>
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.
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
<PAGE>
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.
19. Term of Agreement.
The term of this Agreement shall commence on April 1, 1998 and end on March
31, 2001. 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
<PAGE>
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:
Employee AMCOL International Corporation
/s/ Gary L. Castagna By: /s/ John Hughes
Gary L. Castagna 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 Holdings Canada Ltd. Canada Ontario 100
AMCOL International Corporation USA DE Parent
ACP Export, Inc. U.S. Virgin Islands 100
American Colloid Company USA DE 100
Ameri-Co Carriers, Inc. USA NE 100
CETCO Asia Sdn. Bhd. Malaysia 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 49
Montana Minerals Development Company USA MT 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 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 100
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
and subsidiaries of our report dated March 25, 1998, relating to the
consolidated balance sheets of AMCOL International Corporation and subsidiaries
as of December 31, 1997 and 1996, 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, 1997, which report appears
in the December 31, 1997, annual report on Form 10-K of AMCOL International
Corporation.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
March 25, 1998
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 3,077
<SECURITIES> 0
<RECEIVABLES> 92,158
<ALLOWANCES> 2,547
<INVENTORY> 49,389
<CURRENT-ASSETS> 150,270
<PP&E> 318,475
<DEPRECIATION> 143,151
<TOTAL-ASSETS> 351,009
<CURRENT-LIABILITIES> 67,241
<BONDS> 0
0
0
<COMMON> 320
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 351,009
<SALES> 477,060
<TOTAL-REVENUES> 477,060
<CGS> 376,317
<TOTAL-COSTS> 435,591
<OTHER-EXPENSES> 398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,628
<INCOME-PRETAX> 32,443
<INCOME-TAX> 11,399
<INCOME-CONTINUING> 21,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,044
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.72
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813621
<NAME> AMCOL INTERNATIONAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1996 APR-01-1996 JUL-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996
<EXCHANGE-RATE> 1.00 1.00 1.00 1.00 1.00
<CASH> 1,888 3,054 3,534 1,315 4,300
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 66,868 83,480 67,841 81,999 90,806
<ALLOWANCES> 1,601 2,663 1,797 1,864 2,144
<INVENTORY> 47,205 56,314 49,816 45,632 48,292
<CURRENT-ASSETS> 126,337 147,773 127,603 136,224 150,600
<PP&E> 276,530 299,366 279,669 281,875 288,673
<DEPRECIATION> 101,319 118,490 105,977 105,078 110,899
<TOTAL-ASSETS> 322,366 350,708 321,961 333,477 349,701
<CURRENT-LIABILITIES> 35,882 51,870 38,178 41,821 52,238
<BONDS> 117,016 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 213 213 213 213 213
<OTHER-SE> 155,281 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 322,366 350,708 321,961 333,477 349,701
<SALES> 347,688 405,347 85,536 182,297 291,843
<TOTAL-REVENUES> 347,688 405,347 85,536 182,297 291,843
<CGS> 271,126 321,036 69,536 146,383 231,431
<TOTAL-COSTS> 315,291 373,010 81,959 171,865 270,103
<OTHER-EXPENSES> 1,217 670 41 131 197
<LOSS-PROVISION> 769 0 0 0 0
<INTEREST-EXPENSE> 6,727 8,450 2,055 4,114 6,309
<INCOME-PRETAX> 26,887 23,217 1,777 6,449 15,628
<INCOME-TAX> 9,082 7,979 640 2,322 5,628
<INCOME-CONTINUING> 17,805 15,225 1,138 4,114 9,989
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 17,771 15,225 1,131 4,114 9,989
<EPS-PRIMARY> 0.62 0.53 .04 .14 .35
<EPS-DILUTED> 0.60 0.52 .04 .14 .34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813621
<NAME> AMCOL INTERNATIONAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-1-1997 JUL-1-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<EXCHANGE-RATE> 1.00 1.00 1.00
<CASH> 5,172 4,177 6,665
<SECURITIES> 0 0 0
<RECEIVABLES> 79,851 79,656 91,438
<ALLOWANCES> 2,850 2,179 2,385
<INVENTORY> 60,296 58,454 48,339
<CURRENT-ASSETS> 149,197 148,673 152,442
<PP&E> 302,623 308,167 312,654
<DEPRECIATION> 124,258 129,919 135,861
<TOTAL-ASSETS> 348,849 348,143 350,598
<CURRENT-LIABILITIES> 53,764 60,546 67,402
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 213 213 213
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 348,849 348,143 350,598
<SALES> 107,918 221,408 347,538
<TOTAL-REVENUES> 107,918 221,408 347,538
<CGS> 86,107 175,894 273,683
<TOTAL-COSTS> 100,614 204,638 317,513
<OTHER-EXPENSES> 105 580 548
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2,162 4,360 6,580
<INCOME-PRETAX> 5,037 11,830 22,897
<INCOME-TAX> 1,864 4,375 8,472
<INCOME-CONTINUING> 3,173 7,455 14,425
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,173 7,455 14,425
<EPS-PRIMARY> 0.11 0.26 0.51
<EPS-DILUTED> 0.11 0.26 0.50
</TABLE>
