SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15661
AMCOL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 36-0724340
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</TABLE>
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
(Address of principal executive offices) (Zip Code)
(847) 394-8730
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 16, 1999
(Common stock, $.01 par value) 26,742,529
<PAGE>
AMCOL INTERNATIONAL CORPORATION
INDEX
Page No.
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheet -
June 30, 1999 and December 31, 1998 1
Condensed Consolidated Statement of Operations -
six months and three months ended June 30, 1999 and 1998 2
Condensed Consolidated Statement of Cash Flows -
six months ended June 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3 Quantitative and Qualitative Disclosure About Market Risk 11
Part II - Other Information
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12
<PAGE>
Part I, Item 1 - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------- -------------------
Current assets: *
<S> <C> <C>
Cash and cash equivalents $ 5,009 $ 2,758
Accounts receivable, net 106,743 100,074
Inventories 42,190 52,093
Prepaid expenses 6,273 5,444
Current deferred tax asset 3,711 3,707
Total current assets 163,926 164,076
Investment in and advances to joint ventures 9,259 4,556
Property, plant, equipment and mineral reserves 337,549 325,681
Less accumulated depreciation 166,859 154,203
170,690 171,478
Intangible assets, net 14,999 16,308
Other long-term assets, net 1,286 1,446
$ 360,160 $ 357,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 3,789 $ 17,117
Accounts payable 21,223 21,969
Accrued liabilities 37,098 34,997
Total current liabilities 62,110 74,083
Long-term debt 102,962 96,268
Deferred credits and other liabilities 15,149 14,599
Stockholders' equity:
Common stock 320 320
Additional paid-in capital 76,045 76,238
Foreign currency translation adjustment (3,072) (1,756)
Retained earnings 137,274 127,262
Treasury stock (30,628) (29,150)
179,939 172,914
$ 360,160 $ 357,864
</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>
Six Months Ended June 30, Three Months Ended June 30,
---------------------------------- -----------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 270,829 $ 247,192 $ 141,870 $ 125,635
Cost of sales 207,434 196,572 108,828 98,550
Gross profit 63,395 50,620 33,042 27,085
General, selling and administrative
expenses 38,733 31,784 19,122 16,094
Operating profit 24,662 18,836 13,920 10,991
Other income (expense):
Interest expense, net (3,660) (4,001) (1,791) (1,890)
Other income, net (119) (435) (110) (104)
(3,779) (4,436) (1,901) (1,994)
Income before income taxes
and minority interests 20,883 14,400 12,019 8,997
Income taxes 7,519 5,184 4,328 3,239
Minority interests in income of
joint ventures 124 - 58 -
Net income $ 13,488 $ 9,216 7,749 5,758
Weighted average common shares 26,761,617 28,353,185 26,733,521 28,216,067
Weighted average common and
common equivalent shares 27,070,269 28,940,594 27,141,612 28,766,742
Earnings per share
Basic $ .50 $ .33 $ .29 $ .20
Diluted $ .50 $ .32 $ .29 $ .20
Dividends declared per share $ .13 $ .11 $ .07 $ .055
</TABLE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 13,488 $ 9,216 $ 7,749 $ 5,758
Other comprehensive income:
Foreign currency translation adjustment (1,316) 246 (375) (301)
Comprehensive income $ 12,172 $ 9,462 $ 7,374 $ 5,457
</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>
Six Months Ended
June 30,
----------------------------------------------
1999 1998
-------------------- --------------------
Cash flow from operating activities:
<S> <C> <C>
Net income $ 13,488 $ 9,216
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 18,356 16,220
Other 1,627 1,171
(Increase)/decrease in current assets 1,305 (11,656)
Increase in current liabilities 1,355 4,935
Net cash provided by operations 36,131 19,886
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (19,588) (15,336)
Sale of product line and mineral reserves - 13,176
Other (2,511) (2,143)
Net cash used in investing activities (22,099) (4,303)
Cash flow from financing activities:
Net change in outstanding debt (6,634) 575
Dividends paid (3,476) (3,123)
Treasury stock transactions (1,671) (8,954)
Net cash used by financing activities (11,781) (11,502)
Net increase in cash and cash equivalents 2,251 4,081
Cash and cash equivalents at beginning of period 2,758 3,077
Cash and cash equivalents at end of period $ 5,009 $ 7,158
Supplemental Disclosure of Cash Flows Information
Actual cash paid for:
Interest $ 3,315 $ 4,110
Income taxes $ 8,973 $ 1,793
</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, 1998, 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, 1998, has been derived from and does not include all the
disclosures contained in the audited consolidated financial statements for the
year ended December 31, 1998. The information furnished herein includes all
adjustments which are, in the opinion of management, necessary for a fair
statement of the financial position and operating results of the interim
periods, and all such adjustments are of a normal recurring nature. Management
recommends the accompanying consolidated financial information be read in
conjunction with the consolidated financial statements and related notes
included in the Company's 1998 Form 10-K, which accompanies the 1998 Corporate
Report.
The results of operations for the six-month period ended June 30, 1999, are
not necessarily indicative of the results to be expected for the full year.
Note 2: INVENTORIES
Inventories at June 30, 1999 have been valued using the same methods as at
December 31, 1998. The composition of inventories at June 30, 1999 and December
31, 1998, was as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
----------------------- -------------------------
<S> <C> <C>
Crude stockpile and in-process inventories $ 28,742 $ 36,699
Other raw material, container and supplies inventories 13,448 15,394
$ 42,190 $ 52,093
</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.
Note 4: DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISKS
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 June 30, 1999, 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.
<PAGE>
Item 2 - AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the Company's
financial position and operating results during the periods included in the
accompanying condensed consolidated financial statements.
Six Months Ended June 30, 1999 vs. 1998
Net sales increased by $23.6 million, or 9.6%, while gross profit increased
by $12.8 million, or 25.2%, and operating profit increased by $5.8 million, or
30.9%. Lower polymer raw material costs, higher utilization of polymer plant
capacity and better results from the minerals segment accounted for the
improvement in operating profit. Net interest expense decreased by $.3 million,
or 8.5%, as a result of lower average debt levels and interest rates. Net income
increased $4.3 million, or 46.4%, over the prior-year period. Earnings were $.50
per diluted share for the 1999 period, compared with $.32 per diluted share for
the prior-year period on 6.5% fewer weighted average shares outstanding.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Absorbent Polymers (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 122,931 100.0% $ 106,703 100.0% $ 16,228 15.2%
Cost of sales 93,213 75.8% 85,448 80.1%
Gross profit 29,718 24.2% 21,255 19.9% 8,463 39.8%
General, selling and
administrative expenses 8,218 6.7% 6,161 5.8% 2,057 33.4%
Operating profit 21,500 17.5% 15,094 14.1% 6,406 42.4%
</TABLE>
Revenues increased by $16.3 million, or 15.2%, over the prior year. Gross
profit margins increased by 430 basis points, or 21.6%, from the prior year,
primarily as a result of the lower raw material costs. Greater production volume
also helped increase the gross profit margin. The increase in general, selling
and administrative expenses is related to increased research and development
expenditures, the staffing of the Thailand plant, higher occupancy costs and
greater incentive compensation accruals.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 77,690 100.0% $ 83,883 100.0% $ (6,193) (7.4%)
Cost of sales 60,979 78.5% 69,640 83.0%
Gross profit 16,711 21.5% 14,243 17.0% 2,468 17.3%
General, selling and
administrative expenses 9,025 11.6% 8,502 10.1% 523 6.2%
Operating profit 7,686 9.9% 5,741 6.9% 1,945 33.9%
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Sales decreased by $6.1 million, or 7.4%, from the prior-year period. Much
of the sales shortfall from the prior-year period was accounted for by the
absence of sales in 1999 from the U.S. fuller's earth minerals business which
was sold in April, 1998. Sales to the U.S. metalcasting industry continue to
show improvement over the prior year, offsetting lower sales to the oil well and
iron ore pelletizing sectors. Gross profit margins improved by 450 basis points,
or 26.5%. A more profitable domestic product mix accounted for the improvement.
International general, selling and administrative expenses accounted for much of
the change from the prior year.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 53,879 100.0% $ 42,241 100.0% $ 11,638 27.6%
Cost of sales 38,740 71.9% 28,845 68.3%
Gross profit 15,139 28.1% 13,396 31.7% 1,743 13.0%
General, selling and
administrative expenses 13,024 24.2% 10,520 24.9% 2,504 23.8%
Operating profit 2,115 3.9% 2,876 6.8% (761) (26.5%)
</TABLE>
Sales increased by $11.6 million, or 27.6%, with approximately 44% of the
increase coming from acquisitions that were made late in the second quarter of
1998. Gross profit margins declined by 360 basis points, or 11.4%, primarily as
a result of lower margins on the oil-related wastewater treatment business in
non-U.S. markets, an inventory write-down in 1999, and higher sales allowances
in 1999. General, selling and administrative expenses increased by $2.5 million,
or 23.8%, reflecting higher international marketing costs and expanded
international infrastructure.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 16,329 100.0% $ 14,366 100.0% $ 1,963 13.7%
Cost of sales 14,502 88.8% 12,640 88.0%
Gross profit 1,827 11.2% 1,726 12.0% 101 5.9%
General, selling and
administrative expenses 1,052 6.4% 1,000 7.0% 52 5.2%
Operating profit 775 4.8% 726 5.0% 49 6.7%
</TABLE>
Revenues increased $2.0 million, or 13.7%. Gross profit margins declined by
80 basis points, or 6.7%, as a result of lower brokerage margins.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 7,414 $ 5,601 $ 1,813 32.4%
Operating loss (7,414) (5,601) (1,813) 32.4%
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance and corporate
governance. The start-up of the nanocomposite business is also included in the
corporate costs. The $1.8 million increase in costs is primarily attributable to
increased occupancy costs and higher incentive compensation accruals.
Three Months Ended June 30, 1999 vs. 1998
Net sales increased by $16.2 million, or 12.9%, while gross profit
increased by $6.0 million, or 22.0%, and operating profit increased by $2.9
million, or 26.6%. Net interest expense decreased by $.1 million, or 5.2%. Net
income increased by $2.0 million, or 34.6%, over the prior-year quarter.
Earnings were $.29 per diluted share for the 1999 quarter, compared with $.20
per diluted share for the prior-year quarter on 5.6% fewer weighted average
shares outstanding. A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Absorbent Polymers (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 64,607 100.0% $ 52,047 100.0% $ 12,560 24.1%
Cost of sales 48,604 75.2% 41,416 79.6%
Gross profit 16,003 24.8% 10,631 20.4% 5,372 50.5%
General, selling and
administrative expenses 4,030 6.2% 3,071 5.9% 959 31.5%
Operating profit 11,973 18.6% 7,560 14.5% 4,413 58.4%
</TABLE>
Revenues increased by $12.6 million, or 24.1%, over the prior year. Sales
volume for the 1999 quarter benefited from a spike in demand. It is anticipated
that volume will fall in the next quarter before resuming a more normal pace of
growth. Gross profit margins improved by 440 basis points, or 21.6% over the
prior year, primarily as a result of lower raw material costs and improved
capacity utilization.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 38,081 100.0% $ 39,495 100.0% $ (1,414) (3.6%)
Cost of sales 30,026 78.9% 32,571 82.5%
Gross profit 8,055 21.1% 6,924 17.5% 1,131 16.3%
General, selling and
administrative expenses 4,381 11.5% 4,169 10.6% 212 5.1%
Operating profit 3,674 9.6% 2,755 6.9% 919 33.4%
</TABLE>
Sales decreased by $1.4 million, or 3.6%, over the prior-year period,
primarily as a result of lower sales from the acquired U.K. cat litter business.
Gross profit margins improved by 360 basis points, or 20.6%, as a result of a
more favorable U.S. sales mix. General, selling and administrative expenses in
1999 increased by 5.1% as a result of higher spending in overseas markets.
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 30,697 100.0% $ 26,546 100.0% $ 4,151 15.6%
Cost of sales 22,662 73.8% 17,911 67.5%
Gross profit 8,035 26.2% 8,635 32.5% (600) (6.9%)
General, selling and
administrative expenses 6,642 21.6% 5,813 21.9% 829 14.3%
Operating profit 1,393 4.6% 2,822 10.6% (1,429) (50.6%)
</TABLE>
Sales increased by $4.2 million, or 15.6%. Approximately 25% of the sales
increase came from acquisitions. Gross profit margins declined by 630 basis
points, or 19.4%, primarily as a result of lower margins on the oil-related
wastewater treatment business in non-U.S. markets, an inventory charge in 1999
and higher sales allowances in 1999. General, selling and administrative
expenses increased by $.8 million, or 14.3%, reflecting higher international
costs.
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 8,485 100.0% $ 7,548 100.0% $ 937 12.4%
Cost of sales 7,536 88.8% 6,653 88.1%
Gross profit 949 11.2% 895 11.9% 54 6.0%
General, selling and
administrative expenses 522 6.2% 515 6.8% 7 1.4%
Operating profit 427 5.0% 380 5.1% 47 12.4%
</TABLE>
Revenues increased 12.4%, primarily as a result of increased business
unrelated to the Company's other business activities. Lower gross margins
reflected increased competition in the brokerage business.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ---------------------------
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 3,547 $ 2,526 $ 1,021 40.4%
Operating income (loss) (3,547) (2,526) (1,021) 40.4%
</TABLE>
Higher occupancy costs and increased incentive compensation accruals
accounted for much of the $1.0 million, or 40.4%, increase in corporate
expenses.
Liquidity and Capital Resources
At June 30, 1999, the Company had outstanding debt of $106.8 million
(including both long- and short-term debt) and cash of $5.0 million, compared
with $113.3 million in debt and $2.8 million in cash at December 31, 1998. The
long-term debt represented 36.4% of total capitalization at June 30, 1999,
compared with 35.8% at December 31, 1998.
The Company had a current ratio of 2.64-to-1 at June 30, 1999, with
approximately $101.8 million in working capital, compared with 2.21-to-1 and
$90.0 million, respectively, at December 31, 1998.
During 1999, The Company generated $36.1 million in cash from operations,
compared with $19.9 million for the previous year six-month period. The Company
paid dividends of $3.5 million, acquired property, plant and equipment and
intangible assets totaling $19.6 million, and repaid debt totaling $6.6 million.
These expenditures, plus $1.7 million in net treasury share transactions, were
funded from operations.
The Company had $50.3 million in unused, committed credit lines at June 30,
1999. 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.
Year 2000 Issues
In mid-1997, the Company started a Year 2000 date conversion project to
address all necessary code changes, testing and implementation for all of its
computer systems. Concurrently, the Company sent inquiries to its suppliers and
other key third parties to assess their ability to become Year 2000 compliant in
a timely manner. The internal evaluation stage is completed. The Company is
still awaiting responses from some third parties. The implementation phase is in
progress.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Year 2000 Issues (continued)
Many of the Company's computer systems rely on purchased software for which
the Company pays a maintenance fee. The maintenance fee covers the cost of
system upgrades, including the update for Year 2000 issues. As of June 30, 1999,
we have met our goal of completing the Year 2000 assessment, renovation and
remediation of the Company's financial reporting system, network and
telecommunications system and personal computer equipment.
With respect to the Company's non-information technology systems, the
Company has evaluated the presence of imbedded date chips in some of its plant
machinery and equipment, and has completed the renovation or replacement as
necessary.
Costs and expenses incurred to date in addressing the Year 2000 issue have
not been material, and based upon the Company's assessment and remediation
efforts to date, future costs of conversion or upgrades are not expected to be
material.
The Company does not believe that there is a material risk to its business
or financial condition related to its own systems from Year 2000 issues, but the
Company has no control over the ability of its key suppliers and other key third
parties to achieve Year 2000 compliance in a timely manner. For example, an
interruption in the supply of power to its plants and the inability to ship the
Company's products by rail are both issues that could have severe adverse
consequences to the Company's ability to carry on its business at current profit
levels. Should rail service become temporarily unavailable, the Company would
likely ship product by truck, but at a higher cost. A prolonged interruption in
the power supply to its major plants, in particular its absorbent polymer plants
in Aberdeen, Mississippi, and in the United Kingdom, however, is a risk that is
difficult to minimize.
While the Company continues to focus on solutions for the Year 2000 issues,
and expects to be Year 2000 compliant in a timely manner, a contingency plan is
being developed. Such plan is intended to address the Company's response should
it, or materially significant third parties, fail to achieve Year 2000
compliance in a timely manner. The contingency plan is expected to be finalized
by September 30, 1999. In addition, 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.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Year 2000 Issues (continued)
The Company's expectations about future costs necessary to achieve Year
2000 compliance, the impact on its operations and its ability to bring each of
its systems into Year 2000 compliance are forward-looking statements subject to
a number of uncertainties that could cause actual results to differ materially.
Such factors include the following: (i) the Company has no control over the
ability of its key suppliers and other third parties to achieve Year 2000
compliance; (ii) the nature and number of systems that require remediation may
exceed the Company's expectations in terms of complexity and scope; (iii) the
Company may not be able to complete all remediation and testing necessary in a
timely manner; and (iv) the Company may not be successful in properly
identifying all systems and programs that contain two-digit year codes.
Forward-Looking Statements
Certain statements made from time-to-time by the Company, including
statements in the Management's Discussion and Analysis section above, constitute
"forward-looking statements" made in reliance upon the safe harbor contained in
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements relating to the Company or its
operations that are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions, and statements relating to
anticipated growth, levels of capital expenditures, future dividends, expansion
into global markets and the development of new products. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. The Company's actual results, performance or achievements could
differ materially from the results, performance or achievements expressed in, or
implied by, these forward-looking statements as a result of various factors,
including, but not limited to the actual growth in AMCOL's various markets,
utilization of AMCOL's plants, customer concentration in the absorbent polymers
segment, competition in the absorbent polymers and minerals segments, operating
costs, raw material prices, weather, currency exchange rates, currency
devaluations, delays in development, production and marketing of new products,
integration of acquired businesses, and other factors detailed from time-to-time
in AMCOL's annual report and other reports filed with the Securities and
Exchange Commission.
Item 3 - Quantitative and Qualitative Disclosure About Market Risk
The information required by this item is provided in Footnote 4 "Derivative
Financial Instruments and Market Risks" under Item I.
<PAGE>
PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
(a) The Annual Stockholders Meeting of the Company was held on May
12, 1999.
(b) At the Annual Stockholders Meeting, the Stockholders voted on the
following uncontested matters. Each nominee for director was
elected by a vote of the Stockholders; and each matter was
approved by a vote of the Stockholders as follows:
1. Election of the below-named Nominees of the Board of Directors of
AMCOL International Corporation:
For Withheld
------------------------- -----------------------
Clarence O. Redman 23,454,867 265,452
Paul G. Shelton 23,483,073 237,246
Audrey Weaver 23,482,114 238,205
2. Ratification of Appointment of KPMG LLP as independent
accountants for the Company for its 1999 fiscal year.
For Against Abstain
----------------------- ----------------------- -------------------
23,579,545 16,330 124,444
Item 6: Exhibits and Reports on Form 8-K
(a) See Index to Exhibits immediately following the signature page.
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1999.
<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: July 20, 1999 /s/ Lawrence E. Washow
Lawrence E. Washow
President and Chief Operating Officer
Date: July 20, 1999 /s/ Paul G. Shelton
Paul G. Shelton
Senior Vice President and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (5), as amended (10), as amended (16)
3.2 Bylaws of the Company (10)
4 Article Four of the Company's Restated Certificate of Incorporation (5), as amended (16)
10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3)
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)
10.10 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, Third Amendment to Credit
Agreement dated September 12, 1996 (11) and Fourth Amendment to Credit Agreement dated December 15,
1998.
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); Second Amendment of Note Agreement dated December 15, 1998.
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 (14)
10.16 AMCOL International Corporation 1998 Long-Term Incentive Plan (15)
10.17 Change in Control Agreement dated February 4, 1999 by and between Registrant and Ryan F. McKendrick
(17)
27 Financial Data Schedule
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(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 on September 15, 1993.
(6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1993.
(7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and
Exchange Commission for the quarter ended September 30, 1994.
(8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1994.
(9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and
Exchange Commission for the quarter ended September 30, 1995.
(10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
(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.
(15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-56017) filed with the
Securities and Exchange Commission on June 4, 1998.
(16) 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, 1998.
(17) 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, 1998.
</TABLE>
<TABLE> <S> <C>
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<NAME> AMCOL International Corporation
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
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<CASH> 5,009
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<RECEIVABLES> 110,380
<ALLOWANCES> 4,095
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<CURRENT-ASSETS> 163,926
<PP&E> 337,641
<DEPRECIATION> 166,859
<TOTAL-ASSETS> 360,160
<CURRENT-LIABILITIES> 62,110
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0
0
<COMMON> 320
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<TOTAL-LIABILITY-AND-EQUITY> 360,160
<SALES> 270,829
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<CGS> 207,434
<TOTAL-COSTS> 246,167
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<INCOME-PRETAX> 20,883
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