FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15661
AMCOL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-0724340
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</TABLE>
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
(Address of principal executive offices) (Zip Code)
(847) 394-8730
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 17, 1998
(Common stock, $.01 par value) 28,379,886
<PAGE>
AMCOL INTERNATIONAL CORPORATION
INDEX
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheet -
March 31, 1998 and December 31, 1997 1
Condensed Consolidated Statement of Operations -
three months ended March 31, 1998 and 1997 2
Condensed Consolidated Statement of Cash Flows -
three months ended March 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 6 Exhibits and Reports on Form 8-K 8
<PAGE>
Part I - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------------- -------------------
Current assets: *
<S> <C> <C>
Cash and cash equivalents $ 2,206 $ 3,077
Accounts receivable, net 96,311 89,611
Inventories 48,945 49,389
Prepaid expenses 4,303 5,109
Current deferred tax asset 3,035 3,084
Total current assets 154,800 150,270
Investment in and advances to joint ventures 2,910 3,035
Property, plant, equipment and mineral reserves 325,208 318,475
Less accumulated depreciation 150,505 143,151
174,703 175,324
Intangible assets, net 17,591 18,101
Other long-term assets, net 4,014 4,279
$ 354,018 $ 351,009
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 15,821 $ 15,024
Accounts payable 20,967 24,902
Accrued liabilities 34,531 27,315
Total current liabilities 71,319 67,241
Long-term debt 92,747 94,425
Deferred credits and other liabilities 13,583 13,400
Stockholders' equity:
Common stock 320 320
Additional paid-in capital 75,961 75,939
Foreign currency translation adjustment (1,202) (1,749)
Retained earnings 113,478 111,588
Treasury stock (12,188) (10,155)
176,369 175,943
$ 354,018 $ 351,009
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except number of shares and per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C>
Net sales $ 121,557 $ 107,918
Cost of sales 98,022 86,107
Gross profit 23,535 21,811
General, selling and administrative expenses 15,690 14,507
Operating profit 7,845 7,304
Other income (expense):
Interest expense, net (2,111) (2,162)
Other income, net (331) (105)
(2,442) (2,267)
Income before income taxes 5,403 5,037
Income taxes 1,945 1,864
Net income $ 3,458 $ 3,173
Weighted average common shares 28,491,827 28,538,330
Weighted average common and common
equivalent shares 29,115,871 29,183,102
Earnings per share
Basic $ .12 $ .11
Diluted $ .12 $ .11
Dividends declared per share $ .055 $ .047
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------
1998 1997
-------------------- --------------------
Cash flow from operating activities:
<S> <C> <C>
Net income $ 3,458 $3,173
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation, depletion, and amortization 8,209 7,567
Other 605 390
(Increase)/decrease in current assets (5,818) 538
Increase/(decrease) in current liabilities 3,281 1,889
Net cash provided by (used in) operations 9,735 13,557
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (5,540) (7,382)
Other (606) 395
Net cash used in investing activities (6,146) (6,987)
Cash flow from financing activities:
Net change in outstanding debt (881) (3,406)
Dividends paid (1,568) (1,331)
Treasury stock transactions (2,033) 172
Other 22 113
Net cash provided by financing activities (4,460) (4,452)
Net increase (decrease) in cash and cash equivalents (871) 2,118
Cash and cash equivalents at beginning of period 3,077 3,054
Cash and cash equivalents at end of period $ 2,206 $5,172
Supplemental disclosure of cash flows information
Cash paid for:
Interest $ 1,183 $ 686
Income taxes $ 298 $ 548
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
Note 1: BASIS OF PRESENTATION
The financial information included herein, other than the condensed
consolidated balance sheet as of December 31, 1997, has been prepared by
management without audit by independent certified public accountants who do not
express an opinion thereon. The condensed consolidated balance sheet as of
December 31, 1997, has been derived from and does not include all the
disclosures contained in the audited consolidated financial statements for the
year ended December 31, 1997. The information furnished herein includes all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim period, and all such adjustments are of
a normal recurring nature. Management recommends the accompanying consolidated
financial information be read in conjunction with the consolidated financial
statements and related notes included in the Company's 1997 Form 10-K which
accompanies the 1997 Corporate Report.
The results of operations for the three-month period ended March 31, 1998,
are not necessarily indicative of the results to be expected for the full year.
Certain items in the 1997 consolidated financial statements have been
reclassified to comply with the consolidated financial statements presentation
for 1998.
Note 2: INVENTORIES
Inventories at March 31, 1998 have been valued using the same methods
as at December 31, 1997. The composition of inventories at March 31, 1998
and December 31, 1997, was as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------------- --------------------
<S> <C> <C>
Crude stockpile and in-process inventories $ 35,480 $ 34,675
Other raw material, container and supplies inventories 13,465 14,714
$ 48,945 $ 49,389
</TABLE>
Note 3: EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share is
computed by dividing the net income by the weighted average common shares
outstanding after consideration of the dilutive effect of stock options
outstanding at the end of each period. The 1997 number of shares and earnings
per share have been restated to reflect the three-for-two stock split in
December 1997 and the adoption of SFAS No. 128.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4: DERIVATIVES
From time to time, the Company uses financial derivatives, principally
swaps, forward contracts and options in its management of foreign currency and
interest rate exposures. These contracts hedge transactions and balances for
periods consistent with committed exposures. As of March 31, 1998, derivatives
outstanding were related to foreign currency hedging and an interest rate swap
with a notional amount on $15 million of the outstanding revolving credit.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
Three Months Ended March 31, 1998 vs. 1997
Net sales increased by $13.6 million, or 12.6%, and gross profits and
operating profits increased by $1.7 million, or 7.9%, and $.5 million, or 7.4%,
respectively. Net interest expense decreased by $.1 million, or 2.4%, as March
31, 1998 debt (both long-term and short-term, net of cash) decreased by $13.3
million, or 11.1%, from the prior-year quarter. The decrease in interest expense
from the previous year was not as great as the debt reduction because the
weighted average interest rate for 1998 is higher than that of 1997. Earnings
per share were $.12 for the 1998 quarter compared with $.11 for the 1997
quarter. A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------------------------------------------------------------
1998 1997 1998 vs. 1997
------------------------- ---------------------- ---------------------------
Absorbent Polymers (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 54,656 100.0% $ 45,161 100.0% $ 9,495 21.0%
Cost of sales 44,032 80.6% 35,568 78.8%
Gross profit 10,624 19.4% 9,593 21.2% 1,031 10.7%
General, selling and
Administrative expenses 3,090 5.7% 3,015 6.7% 75 2.5%
Operating profit 7,534 13.7% 6,578 14.5% 956 14.5%
</TABLE>
Revenues increased by $9.5 million, or 21.0%, over the prior-year period.
Approximately 43% of the 1998 sales revenue growth was acquisition related. The
gross profit margin in the 1998 quarter includes lower margin business
associated with the acquisition.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------------------------------------------------------------
1998 1997 1998 vs. 1997
------------------------- ---------------------- ---------------------------
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 44,388 100.0% $ 39,258 100.0% $ 5,130 13.1%
Cost of sales 37,069 83.5% 33,153 84.4%
Gross profit 7,319 16.5% 6,105 15.6% 1,214 19.9%
General, selling and
Administrative expenses 4,333 9.8% 3,875 9.9% 458 11.8%
Operating profit 2,986 6.7% 2,230 5.7% 756 33.9%
</TABLE>
Sales increased by $5.1 million, or 13.1%, over the prior-year period.
Approximately 70% of the revenue growth in the 1998 quarter was attributable to
the European cat litter acquisition. The gross profit margin improved from the
prior year, however there was little margin associated with the European cat
litter acquisition as the material was still being manufactured on a toll
processed basis. The margin is expected to improve with the integration of these
products into the Company's processing operations during the second quarter.
Without the cat litter acquisition in the first quarter of 1998, the gross
profit would have been 17.9% compared to 15.6% in the prior year period.
On April 20, the Company closed the sale of its Mounds, IL plant and
mineral reserves, as well as the sale of its other fullers' earth mineral
reserves in Paris, TN and Rock Springs, NV. The divestiture is expected to
result in a loss of sales of approximately $15 million with little adverse
impact on the gross profit. The Company will no longer sell agricultural carrier
products, oil and grease absorbents or traditional cat litter, other than to the
specialty pet and farm and fleet market.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------------------------------------------------------------
1998 1997 1998 vs. 1997
------------------------- ---------------------- ---------------------------
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 15,695 100.0% $ 16,565 100.0% $ (870) (5.3)%
Cost of sales 10,934 69.7% 11,327 68.4%
Gross profit 4,761 30.3% 5,238 31.6% (477) (9.1)%
General, selling and
Administrative expenses 4,707 30.0% 4,309 26.0% 398 9.2%
Operating profit 54 .3% 929 5.6% (875) (94.2)%
</TABLE>
Sales decreased by $.9 million, or 5.3%, from the prior-year period.
Favorable weather conditions for the installation of liner products and strong
performance from the international sector during the 1997 quarter contrasted
sharply with the situation in 1998. Sales to the Asian market were down
approximately 75% from the prior year quarter as a result of the Asian financial
crisis. Liner product sales suffered from extremely wet weather in the warm
climates, where construction activity generally occurs during the first quarter.
General, selling and administrative expenses increased by 9.2%, primarily
related to the European unit.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Environmental (continued)
Generally, business in this segment accelerates during the second quarter
and peaks in the third quarter. The current outlook is for improved sales and
earnings in this area over those of the previous year. Weather conditions,
however, are a significant factor in the timing of many of the projects
involving the Company's products.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------------------------------------------------------------
1998 1997 1998 vs. 1997
------------------------- ---------------------- ---------------------------
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 6,818 100.0% $ 6,934 100.0% $ (116) (1.7)%
Cost of sales 5,987 87.8% 6,059 87.4%
Gross profit 831 12.2% 875 12.6% (44) (5.0)%
General, selling and
Administrative expenses 485 7.1% 504 7.3% (19) (3.8)%
Operating profit 346 5.1% 371 5.3% (25) (6.7)%
</TABLE>
Net sales decreased by $.1 million, or 1.7%, as a result of lower shipments
of environmental products in 1998 compared with 1997. During the 1997 quarter,
this unit benefited from the temporary shift of rail shipments to truck
shipments. Lower gross profit margin in the 1998 quarter was a result of lower
brokerage business.
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------------------------------------------------------------
1998 1997 1998 vs. 1997
------------------------- ---------------------- ---------------------------
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
Administrative expenses $ 3,075 $ 2,804 $271 9.7%
Operating loss (3,075) (2,804) (271) 9.7%
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance and corporate
governance costs. The start-up of the nanocomposite business is also included in
the corporate costs. More than 60% of the increase in costs is attributable to
the development and market launch of the Company's nanocomposite technology.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
At March 31, 1998, the Company had outstanding debt of $108.6 million
(including both long-term and short-term debt) and cash of $2.2 million compared
with $109.4 million in debt and $3.1 million in cash and cash equivalents at
December 31, 1997. The long-term debt represented 34.5% of total capitalization
at March 31, 1998, compared with 34.9% at December 31, 1997. The Company had a
current ratio of 2.17-to-1 at March 31, 1998, with approximately $83.5 million
in working capital compared with 2.23-to-1 and $83.0 million, respectively, at
December 31, 1997.
During the first quarter of 1998, the Company paid dividends of $1.6
million, and acquired property, plant and equipment totaling $5.5 million.
The Company had approximately $50.4 million in unused, committed credit
lines at March 31, 1998. These credit facilities, in conjunction with funds
generated from operations, are adequate to fund the capital expenditure program
approved by the board of directors at this time.
Forward Looking Statements
This filing contains certain forward-looking statements regarding the
company's expected performance for future periods and actual results for such
periods may materially differ. Such forward-looking statements are subject to
uncertainties, which include, but are not limited to, actual growth in AMCOL's
various markets, utilization of the company's plants and factories, customer
concentration in the absorbent polymers segment, operating costs, raw material
prices, weather, and delays in development production and marketing of new
products, and other factors detailed from time to time in the company's annual
report and other reports filed with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) See Index to Exhibits immediately following the signature page.
(b) No reports on Form 8-K have been filed during the quarter ended March
31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMCOL INTERNATIONAL CORPORATION
Date: April 20, 1998 /s/ John Hughes
John Hughes
President and Chief Executive Officer
Date: April 20, 1998 /s/ Paul G. Shelton
Paul G. Shelton
Senior Vice President and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
3.1 Restated Certificate of Incorporation of the Company (5), as amended (10)
3.2 Bylaws of the Company (10)
4 Article 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 (14)
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)
10.10AMCOL International Corporation Dividend Reinvestment and Stock Purchase
Plan (4); as amended (6)
10.11AMCOL International Corporation 1993 Stock Plan, as amended and restated
(10)
10.12Credit 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)
10.13Note 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)
10.14Change in Control Agreement dated August 21, 1996 by and between
Registrant and Frank B. Wright, Jr. (11)
10.15Change in Control Agreement dated February 17, 1998 by and between
Registrant and Gary L. Castagna (14)
21 Subsidiaries of the Company
27 Financial Data Schedule
(1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with
the Securities and Exchange Commission on July 27, 1987.
(2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1988.
(3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1993.
(4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
1992.
<PAGE>
(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.
(14) 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,
1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000813621
<NAME> AMCOL International Corporation
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 2,206
<SECURITIES> 0
<RECEIVABLES> 99,275
<ALLOWANCES> 2,964
<INVENTORY> 48,945
<CURRENT-ASSETS> 154,800
<PP&E> 325,208
<DEPRECIATION> 150,505
<TOTAL-ASSETS> 354,018
<CURRENT-LIABILITIES> 71,319
<BONDS> 0
0
0
<COMMON> 320
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 354,018
<SALES> 121,557
<TOTAL-REVENUES> 121,557
<CGS> 98,022
<TOTAL-COSTS> 113,712
<OTHER-EXPENSES> 331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,111
<INCOME-PRETAX> 5,403
<INCOME-TAX> 1,945
<INCOME-CONTINUING> 3,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,458
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
