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 September 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 October 29, 1999
(Common stock, $.01 par value) 26,795,517
<PAGE>
AMCOL INTERNATIONAL CORPORATION
INDEX
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheet -
September 30, 1999 and December 31, 1998 1
Condensed Consolidated Statement of Operations -
nine months and three months ended September 30, 1999
and 1998 2
Condensed Consolidated Statement of Comprehensive Income -
nine months and three months ended September 30, 1999 and 1998 2
Condensed Consolidated Statement of Cash Flows -
nine months ended September 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 12
Part II - Other Information
Item 6 Exhibits and Reports on Form 8-K 12
<PAGE>
Part I, Item I - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------------------- -------------------
Current assets: *
<S> <C> <C>
Cash and cash equivalents $ 5,472 $ 2,758
Accounts receivable, net 108,572 100,074
Inventories 40,522 52,093
Prepaid expenses 6,373 5,444
Current deferred tax asset 3,711 3,707
Total current assets 164,650 164,076
Investment in and advances to joint ventures 9,466 4,556
Property, plant, equipment and mineral reserves 347,685 325,681
Less accumulated depreciation 174,440 154,203
173,245 171,478
Intangible assets, net 14,452 16,308
Other long-term assets, net 2,670 1,446
$ 364,483 $ 357,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 3,383 $ 17,117
Accounts payable 16,475 21,969
Accrued liabilities 42,345 34,997
Total current liabilities 62,203 74,083
Long-term debt 99,344 96,268
Deferred credits and other liabilities 15,063 14,599
Stockholders' equity:
Common stock 320 320
Additional paid-in capital 76,026 76,238
Foreign currency translation adjustment (2,933) (1,756)
Retained earnings 144,775 127,262
Treasury stock (30,315) (29,150)
187,873 172,914
$ 364,483 $ 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>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 414,147 $ 384,596 $ 143,318 $ 137,404
Cost of sales 314,203 303,874 106,769 107,302
Gross profit 99,944 80,722 36,549 30,102
General, selling and administrative
expenses 58,572 49,973 19,839 18,189
Operating profit 41,372 30,749 16,710 11,913
Other income (expense):
Interest expense, net (5,264) (5,796) (1,604) (1,795)
Other income, net (804) (126) (685) 309
(6,068) (5,922) (2,289) (1,486)
Income before income taxes
and joint ventures 35,304 24,827 14,421 10,427
Income taxes 12,709 8,938 5,190 3,754
22,595 15,889 9,231 6,673
Equity interests in income of
joint ventures 268 - 144 -
Net income $ 22,863 $ 15,889 $ 9,375 $ 6,673
Weighted average common shares 26,762,283 28,201,685 26,763,593 27,903,626
Weighted average common and
common equivalent shares 27,147,789 28,737,153 27,328,232 28,345,811
Earnings per share
Basic $ .85 $ .56 $ .35 $ .24
Diluted $ .84 $ .55 $ .34 $ .24
Dividends declared per share $ .20 $ .17 $ .07 $ .06
</TABLE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------------- ------------------------------
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Net income $ 22,863 $ 15,889 $ 9,375 $6,673
Other comprehensive income:
Foreign currency translation adjustment (1,177) 854 139 (608)
Comprehensive income $ 21,686 $ 16,743 $ 9,514 $6,065
</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>
Nine Months Ended
September 30,
----------------------------------------------
1999 1998
-------------------- ----------------------
Cash flow from operating activities:
<S> <C> <C>
Net income $ 22,863 $15,889
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion, and amortization 28,190 24,567
Other 2,451 1,814
(Increase) decrease in current assets 646 (19,653)
Increase in current liabilities 1,854 8,284
Net cash provided by operating activities 56,004 30,901
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (32,311) (26,269)
Sale of product line and mineral reserves - 13,176
Other (3,594) (2,334)
Net cash used in investing activities (35,905) (15,427)
Cash flow from financing activities:
Net change in outstanding debt (10,658) 1,650
Dividends paid (5,350) (4,797)
Treasury stock transactions (1,377) (9,427)
Net cash used in financing activities (17,385) (12,574)
Net increase in cash and cash equivalents 2,714 2,900
Cash and cash equivalents at beginning of period 2,758 3,077
Cash and cash equivalents at end of period $ 5,472 $ 5,977
Supplemental disclosure of cash flows information
Actual cash paid for:
Interest $ 4,333 $ 5,306
Income taxes $ 13,956 $ 5,478
</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 nine-month period ended September 30,
1999, are not necessarily indicative of the results to be expected for the full
year.
Note 2: INVENTORIES
Inventories at September 30, 1999, have been valued using the same methods
as at December 31, 1998. The composition of inventories at September 30, 1999,
and December 31, 1998, was as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------------- -----------------------
<S> <C> <C>
Crude stockpile and in-process inventories $ 28,082 $ 36,699
Other raw material, container and supplies inventories 12,440 15,394
$ 40,522 $ 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 September 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 II - AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of 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.
Nine Months Ended September 30, 1999 vs. 1998
Net sales increased by $29.6 million, or 7.7%, while gross profit increased
by $19.2 million, or 23.8%, and operating profit increased by $10.6 million, or
34.5%. Lower polymer raw material costs, higher utilization of polymer plant
capacity and improved operating performance from the minerals segment accounted
for the improvement in operating profit, offsetting a significantly lower
operating profit from the environmental segment. Net interest expense decreased
by $.5 million, or 9.2%, as a result of lower average debt levels and interest
rates, as well as, $.2 million of capitalized interest in 1999. Other expenses
increased from $.1 million in 1998 to $.8 million in 1999. Net income increased
$7.0 million, or 43.9%, over the prior-year period. Earnings were $.84 per
diluted share for the 1999 period, compared with $.55 per diluted share for the
prior-year period on 5.5% fewer weighted average shares outstanding.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Absorbent Polymers $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 186,303 100.0% $ 160,625 100.0% $ 25,678 16.0%
Cost of sales 138,378 74.3% 127,763 79.5%
Gross profit 47,925 25.7% 32,862 20.5% 15,063 45.8%
General, selling and
administrative expenses 12,338 6.6% 9,374 5.8% 2,964 31.6%
Operating profit 35,587 19.1% 23,488 14.7% 12,099 51.5%
</TABLE>
Net sales increased by $25.7 million, or 16.0%, over the prior year. Gross
profit margins increased by 520 basis points, or 25.4%, 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.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Minerals $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 117,009 100.0% $ 122,959 100.0% $ (5,950) (4.8%)
Cost of sales 91,359 78.1% 101,906 82.9%
Gross profit 25,650 21.9% 21,053 17.1% 4,597 21.8%
General, selling and
administrative expenses 13,222 11.3% 13,545 11.0% (323) (2.4%)
Operating profit 12,428 10.6% 7,508 6.1% 4,920 65.5%
</TABLE>
Net sales decreased by $6.0 million, or 4.8%, from the prior-year period.
Much of the sales shortfall 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 480 basis points, or 28.1%. Improved
results of the U.K. cat litter operation and a more profitable U.S. product mix
accounted for the improvement.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Environmental $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 84,745 100.0% $ 77,420 100.0% $7,325 9.5%
Cost of sales 61,258 72.3% 53,369 68.9%
Gross profit 23,487 27.7% 24,051 31.1% (564) (2.3%)
General, selling and
Administrative expenses 19,292 22.8% 16,850 21.8% 2,442 14.4%
Operating profit 4,195 4.9% 7,201 9.3% (3,006) (41.7%)
</TABLE>
Net sales increased by $7.3 million, or 9.5%. Gross profit margins declined
by 340 basis points, or 10.9%, 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 $2.4 million, or 14.4%, reflecting higher
international marketing costs and expanded international infrastructure.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Transportation $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 26,090 100.0% $ 23,592 100.0% $ 2,498 10.6%
Cost of sales 23,208 89.0% 20,836 88.3%
Gross profit 2,882 11.0% 2,756 11.7% 126 4.6%
General, selling and
administrative expenses 1,607 6.2% 1,522 6.5% 85 5.6%
Operating profit 1,275 4.8% 1,234 5.2% 41 3.3%
</TABLE>
Net sales increased $2.5 million, or 10.6%. Gross profit margins declined
by 70 basis points, or 6.0%, as a result of lower brokerage margins.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Corporate $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 12,113 $ 8,682 $ 3,431 39.5%
Operating loss (12,113) (8,682) (3,431) 39.5%
</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 $3.4 million increase in costs is primarily attributable to
higher professional fees, increased occupancy costs, and higher incentive
compensation accruals.
Three Months Ended September 30, 1999 vs. 1998
Net sales increased by $5.9 million, or 4.3%, while gross profit increased
by $6.4 million, or 21.4%, and operating profit increased by $4.8 million, or
40.3%. Net interest expense decreased by $.2 million, or 10.6%, primarily due to
capitalized interest related to the polymer plant being constructed in Thailand.
Other expenses amounted to $.7 million in 1999 compared with $.3 million in
other income in 1998. Losses on asset dispositions and currency exchange losses
accounted for the 1999 other expenses. Net income increased by $2.7 million, or
40.5%, over the prior-year quarter. Earnings were $.34 per diluted share for the
1999 quarter, compared with $.24 per diluted share for the prior-year quarter on
3.6% fewer weighted average shares outstanding.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Absorbent Polymers $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 63,372 100.0% $ 53,922 100.0% $ 9,450 17.5%
Cost of sales 45,165 71.3% 42,315 78.5%
Gross profit 18,207 28.7% 11,607 21.5% 6,600 56.9%
General, selling and
administrative expenses 4,120 6.5% 3,213 6.0% 907 28.2%
Operating profit 14,087 22.2% 8,394 15.5% 5,693 67.8%
</TABLE>
Net sales increased by $9.5 million, or 17.5%, over the prior-year period.
Gross profit margins improved by 720 basis points, or 33.5% over the prior year,
primarily as a result of lower raw material costs and improved capacity
utilization.
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Minerals $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 39,319 100.0% $ 39,077 100.0% $ 242 .6%
Cost of sales 30,380 77.3% 32,267 82.6%
Gross profit 8,939 22.7% 6,810 17.4% 2,129 31.3%
General, selling and
administrative expenses 4,197 10.7% 5,043 12.9% (846) (16.8%)
Operating profit 4,742 12.0% 1,767 4.5% 2,975 168.4%
</TABLE>
Net sales increased by $.2 million, or .6%, over the prior-year period.
Gross profit margins improved by 530 basis points, or 30.5%, as a result of a
more favorable U.S. sales mix and improvement in the productivity of the U.K.
cat litter operation. General, selling and administrative expenses in 1999
decreased by 16.8%.
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Environmental $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 30,866 100.0% $ 35,179 100.0% $ (4,313) (12.3%)
Cost of sales 22,518 73.0% 24,524 69.7%
Gross profit 8,348 27.0% 10,655 30.3% (2,307) (21.7%)
General, selling and
administrative expenses 6,268 20.3% 6,330 18.0% (62) (1.0%)
Operating profit 2,080 6.7% 4,325 12.3% (2,245) (51.9%)
</TABLE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net sales decreased by $4.3 million, or 12.3%, primarily as a result of
lower sales of geosynthetic clay liners. Gross profit margins declined by 330
basis points, or 10.9%, as a result of the lower sales of liner products and
lower margins on the wastewater treatment business in non-U.S. markets. General,
selling and administrative expenses for 1999 included severance costs for
employees associated with the divested businesses.
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Transportation $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 9,761 100.0% $ 9,226 100.0% $ 535 5.8%
Cost of sales 8,706 89.2% 8,196 88.8%
Gross profit 1,055 10.8% 1,030 11.2% 25 2.4%
General, selling and
administrative expenses 555 5.7% 522 5.7% 33 6.3%
Operating profit 500 5.1% 508 5.5% (8) (1.6%)
</TABLE>
Net sales revenues increased 5.8%, 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.
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------------------------------------------------------------------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
1999 1998 1999 vs. 1998
------------------------- ---------------------- ----------------------------
Corporate $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 4,699 $ 3,081 $ 1,618 52.5%
Operating loss (4,699) (3,081) (1,618) 52.5%
</TABLE>
Higher professional fees were the primary cause of the $1.6 million, or
52.5%, increase in corporate expenses.
Liquidity and Capital Resources
At September 30, 1999, the Company had outstanding debt of $102.7 million
(including both long- and short-term debt) and cash of $5.5 million, compared
with $113.3 million in debt and $2.8 million in cash at December 31, 1998. The
long-term debt represented 34.6% of total capitalization at September 30, 1999,
compared with 35.8% at December 31, 1998.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company had a current ratio of 2.65-to-1 at September 30, 1999, with
approximately $102.4 million in working capital, compared with 2.21-to-1 and
$90.0 million, respectively, at December 31, 1998.
During the nine-month period of 1999, the Company generated $56.0 million
in cash from operations, compared with $30.9 million for the previous year
nine-month period. The Company paid dividends of $5.4 million, acquired
property, plant and equipment and intangible assets totaling $32.3 million, and
repaid debt totaling $10.6 million. These expenditures, plus $1.4 million in net
treasury share transactions, were funded from operations.
The Company had $54.2 million in unused, committed credit lines at
September 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 has
received responses from all third parties. The implementation phase is
substantially complete.
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. We have completed
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.
<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 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 even though alternative power generators are being
acquired for these major plants.
The Company continues to focus on solutions for the Year 2000 issues, and
expects to be Year 2000 compliant in a timely manner. However, a contingency
plan has been completed to address the Company's response should it, or
materially significant third parties, fail to achieve Year 2000 compliance in a
timely manner. 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.
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.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
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.
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
September30, 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: November 5, 1999 /s/ Larry Washow
Larry Washow
President and Chief Operating Officer
Date: November 5, 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 April 1, 1997, by and between Registrant and Peter L. Maul (12)
10.9 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)
10.10 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10)
10.11 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.
10.12 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.
10.13 Change in Control Agreement dated August 21, 1996 by and between Registrant and Frank B. Wright, Jr.
(11)
10.14 Change in Control Agreement dated February 17, 1998 by and between Registrant and Gary L. Castagna (14)
10.15 AMCOL International Corporation 1998 Long-Term Incentive Plan (15)
10.16 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>
EXHIBIT 10.11
AMCOL International Corporation
Fourth Amendment to Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
The First National Bank of
Chicago, Illinois
LaSalle National Bank
Chicago, Illinois
The Northern Trust Company
Chicago, Illinois
Bank of America National
Trust and Savings Association
Chicago, Illinois
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of October 4,
1994 as heretofore amended (the "Credit Agreement") by and among the
undersigned, AMCOL International Corporation (formerly known as American Colloid
Company), a Delaware corporation (the "Company"), Harris Trust and Savings Bank
in its capacity as Agent (the "Agent") and you (collectively, the "Banks"). The
Company applies to the Banks for their agreement to increase the aggregate
amount of the Revolving Credit to $125,000,000, extend the Termination Date of
the Revolving Credit, add Bank of America National Trust and Savings Association
as a Bank under the Credit Agreement and amend certain terms of the Credit
Agreement in the manner and on the terms and conditions set forth herein.
Capitalized terms used in this Amendment and not otherwise specifically defined
have the meaning given such terms in the Credit Agreement.
Section 1. Addition of New Bank.
Upon satisfaction of all of the conditions precedent set forth in Section 3
of this Amendment:
Section 1.1. Bank of America National Trust and Savings Association (the
"New Bank") shall assume the role of a Bank under the Credit Agreement with a
Commitment in the
<PAGE>
principal amount of $20,000,000 (the "New Commitment"). The New Bank shall have
all the rights and, from and after the date this Amendment becomes effective,
obligations currently held by all the Banks. The parties hereto consent to such
addition of the New Bank and the New Commitment under the Credit Agreement.
Notwithstanding anything contained herein to the contrary, the increase of the
Commitments contemplated by the addition of the New Bank shall not become
effective until the satisfaction of the conditions precedent set forth in
Section 3 hereof. Accordingly, all references in the Credit Agreement, Notes and
Guaranty Agreements (collectively, the "Loan Documents") to the terms "Bank" and
"Banks" shall be deemed to include, and be a reference to, the New Bank.
Section 1.2. All references in the Credit Agreement and the Loan Documents
to the Notes or any of them shall be deemed to include, and be a reference to,
the Revolving Credit Note issued pursuant hereto by the Company to the New Bank.
Section 1.3. The New Bank shall be deemed a Bank signatory to the Credit
Agreement and the following address and Commitment shall be deemed to appear on
the Banks' signature page in the Credit Agreement as so amended for the New
Bank:
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Daniel Lange
Commitment: $20,000,000 (16%)
Telephone: 312-828-2756
Telecopier: 312-828-6647
Section 2. Amendments To Credit Agreement.
Upon satisfaction of all of the conditions precedent specified in Section 3
of this Amendment, the Credit Agreement shall be amended as follows:
Section 2.1. The definition of "Termination Date" appearing in Section 4 of
the Credit Agreement shall be amended by deleting the date "October 31, 2000"
appearing therein and by substituting therefor the date "October 31, 2003".
Section 2.2. Section 4 of the Credit Agreement shall be further amended by
adding the following new definition thereto:
"Year 2000 Problem" means any significant risk that computer hardware,
software, or equipment containing embedded microchips essential to the
business or operations of the Company or any of its Subsidiaries will not,
in the case of dates or time periods occurring after December 31, 1999,
function at least as efficiently and reliably as in the case of times or
time periods occurring before January 1, 2000, including the making of
accurate leap year calculations.
<PAGE>
Section 2.3. Section 6 of the Credit Agreement shall be amended by adding
the following new Section 6.3 at the end thereof:
"Section 6.3. The Company is conducting a comprehensive review and
assessment of the computer applications of the Company and its Subsidiaries
and is making inquiry of their material suppliers, service vendors
(including data processors) and customers, with respect to any defect in
computer software, data bases, hardware, controls and peripherals related
to the occurrence of the year 2000 or the use at any time of any date which
is before, on and after December 31, 1999, in connection therewith. Based
on the foregoing review, assessment and inquiry, the Company believes that
no such defect could reasonably be expected to have a material adverse
effect on the business or financial affairs of the Company (or of the
Company and its Subsidiaries taken on a consolidated basis)."
Section 2.4. Subsections (e), (f), (g), (h) and (i) of Section 7.15 of the
Credit Agreement shall be deleted and the following subsections (e), (f), (g)
and (h) shall be inserted in their stead:
"(e) investments in, and loans and advances to, Domestic Subsidiaries;
(f) investments in, and loans and advances to, Restricted Subsidiaries
(other than Domestic Subsidiaries) provided such investments, loans and
advances at any one time outstanding do not exceed the sum of (i)
$100,000,000 plus (ii) the amount (if any) by which (A) $50,000,000 exceeds
(B) the aggregate amount outstanding on investments, loans and advances
permitted solely by virtue of subsection (h) of this Section;
(g) acquisitions, provided that (i) no Default or Event of Default
exists or would exist after giving effect to such acquisition, (ii) the
board of directors or other governing body of such Person whose property or
Voting Stock is being so acquired has approved the terms of such
acquisition and (iii) prior to each acquisition requiring consideration
from the Company and its Subsidiaries in excess of $10,000,000, (x) there
is delivered to the Banks a certificate, signed by the chief financial
officer of the Company, demonstrating that, taking into account such
acquisition and its effects, the Company will remain in compliance with the
covenants set forth in Sections 7.6, 7.7 and 7.8 hereof as of the date of
such acquisition and, based on projections believed by the Company to be
reasonable, at all times during the twelve month period following such date
and certifying that no Default or Event of Default has occurred or is
continuing hereunder as of the date of and immediately after giving effect
to such acquisition and (y) such certificate is true and correct; and
<PAGE>
(h) any other investments, loans and advances not otherwise permitted
by this Section in an aggregate amount not to exceed $50,000,000."
Section 2.5. Section 7 of the Credit Agreement shall be amended by adding
the following new Section 7.18 at the end thereof:
"Section 7.18. Year 2000 Assessment. The Company shall take all
actions necessary and commit adequate resources to assure that its
computer-based and other systems (and those of all Subsidiaries) are able
to effectively process dates, including dates before, on and after January
1, 2000, without experiencing any Year 2000 Problem that could cause a
material adverse effect on the business or financial affairs of the Company
(or of the Company and its Subsidiaries taken on a consolidated basis). At
the request of the Banks, the Company will provide the Banks with written
assurances and substantiations (including, but not limited to, the results
of internal or external audit reports prepared in the ordinary course of
business) reasonably acceptable to the Banks as to the capability of the
Company and its Subsidiaries to conduct its and their businesses and
operations before, on and after January 1, 2000, without experiencing a
Year 2000 Problem causing a material adverse effect on the business or
financial affairs of the Company (or of the Company and its Subsidiaries
taken on a consolidated basis)."
Section 2.6. The portion of the Banks' signature pages to the Credit
Agreement under the column headed "Amount of Commitments" shall be amended in
its entirety and as so amended shall read as follows:
Amount and
Percentage of
Commitments: Bank:
$35,000,000 Harris Trust and Savings Bank
(28%)
$25,000,000 The First National Bank of Chicago
(20%)
$15,000,000 LaSalle National Bank
(12%)
$30,000,000 The Northern Trust Company
(24%)
<PAGE>
Section 3. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
Section 3.1. The Company, the Agent and the Banks (including the New Bank)
shall have executed this Amendment (such execution may be in several
counterparts and the several parties hereto may execute on separate
counterparts).
Section 3.2. The Agent shall have received (i) for delivery to Bank of
America National Trust and Savings Association and The Northern Trust Company
(each an "Amending Bank") new Revolving Credit Notes payable to the order of
each Amending Bank in the face principal amount of its Commitment after giving
effect to this Amendment, such new Revolving Credit Notes to constitute
"Revolving Credit Notes" for all purposes of the Credit Agreement upon the
Agent's receipt of the same for each Amending Bank and (ii) for return to the
Company the existing Revolving Credit Notes heretofore issued to each Amending
Bank.
Section 3.3. The Agent shall have received an executed Guarantors' Consent
in the form attached hereto.
Section 3.4. The Banks shall have received copies (executed or certified as
may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Amendment and the other instruments and
documents contemplated hereby and an opinion of counsel to the Company in a form
satisfactory to the Banks.
Section 3.5. Each of the representations and warranties set forth in
Section 5 of the Credit Agreement shall be true and correct (except that the
representations contained in Section 5.4 of the Credit Agreement shall be deemed
to refer to the most recent financial statements of the Company delivered to the
Banks pursuant to Section 7.14 of the Credit Agreement). The Company further
represents and warrants that the Guarantors listed on Exhibit A hereto
constitute all of the Company's Domestic Subsidiaries existing as of the date
hereof
Section 3.6. The Company shall be in full compliance with all of the terms
and conditions of the Credit Agreement and no Event of Default or Default shall
have occurred and be continuing thereunder or shall result after giving effect
to this Amendment.
Section 4. Reallocation of Eurocurrency Loans.
If upon this Amendment becoming effective there are any Loans outstanding,
but in that event anything contained in the Credit Agreement to the contrary
notwithstanding, substantially concurrent with this Amendment becoming effective
there shall be such nonratable Borrowings and repayments under the Credit
Agreement, as amended hereby, so that, after giving effect thereto, each Bank
holds its ratable share (with ratably for such purposes to be determined in
accordance with the Banks' respective Commitments after giving effect to this
Amendment) of the total of the Loans then outstanding; provided, however, that
if there are any Eurocurrency
<PAGE>
Loans outstanding on such date, then in that event and to that extent nonratable
Loans and repayments shall not, unless the Company otherwise elects, it being
understood that such an election will be subject to payment of any amount due
the Banks (under Section 2.5 hereof) be made on such date but rather shall be
made on the last day of each interest period applicable to each Eurocurrency
Loan, all to the end that all Loans outstanding under the Credit Agreement shall
be made ratably from each Bank according to its Commitment in effect after given
effect to this Amendment at the earliest date on which the same can be
accomplished without requiring that a Eurocurrency Loan be paid on a date other
than the last day of the interest period applicable thereto. If during such
period, additional Borrowings are requested, the Company acknowledges and agrees
that it shall only request Borrowings in amounts which will permit the Loans for
each such Borrowing to be made ratably from each Bank according to its
Commitment in effect after giving effect to this Amendment and which will not
cause such Loans to exceed any Bank's Commitment. The parties hereto understand
and acknowledge and agree that the percentage of the New Bank's Commitments in
use in the form of Eurocurrency Loans may, upon the effectiveness of this
Amendment, be less than the percentage of the other Banks' Commitments in use in
the form of Eurocurrency Loans. The Commitment Fee accruing during this period
shall be allocated among the Banks in accordance with their Commitments after
giving effect to this Amendment.
Section 5. Miscellaneous.
Section 5.1. Except as specifically amended herein the Credit Agreement
shall continue in full force and effect. Reference to this specific Amendment
need not be made in any note, document, letter, certificate, the Credit
Agreement itself, the Revolving Credit Notes, the Guaranty Agreement or any
communication issued or made pursuant to or with respect thereto, any reference
to the Credit Agreement in any of such being sufficient to refer to the Credit
Agreement as amended hereby.
Section 5.2. The Company shall pay all fees and expenses (including
attorneys' fees) incurred by Harris Trust and Savings Bank and its counsel
incurred in connection with the drafting and preparation, and supervision of
legal matters in connection with this Amendment.
Section 5.3. This Amendment may be executed in any number of counterparts,
and by the different parties on different counterparts, all of which taken
together shall constitute one and the same Agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
<PAGE>
Dated as of this 15th day of December, 1998.
AMCOL International Corporation (formerly known as
American Colloid Company)
By /s/ Paul G. Shelton
Its Senior Vice President
Accepted and agreed to as of the day and year last above written.
Harris Trust and Savings Bank,
individually and as Agent
By /s/ Ray Whitacre
Its Vice President
The First National Bank of Chicago
By /s/ Barry Litwin
Its Senior Vice President
LaSalle National Bank
By /s/ Richard Bott
Its Senior Vice President
The Northern Trust Company
By /s/ Daniel R. Hintzen
Its Vice President
Bank of America National Trust
and Savings Association
By /s/ Daniel Lange
Its Vice President
<PAGE>
Guarantors' Consent
The undersigned are party to that certain Joint and Several Guaranty
Agreement dated as of October 4, 1994 (as supplemented, the "Guaranty
Agreement"), and hereby consent to the amendment of the Credit Agreement as set
forth above and confirm that such Guaranty Agreement and all of the
undersigneds' obligations thereunder remain in full force and effect. Without
limiting the generality of the foregoing, the undersigned acknowledge and agree
that all references to the "Credit Agreement" in the Guaranty Agreement shall be
deemed references to the Credit Agreement as amended by the Fourth Amendment to
Credit Agreement and further agree that any reference in such Guaranty to the
Company's former name, "American Colloid Company" shall be amended to be
references to the Company's new name "AMCOL International Corporation". The
undersigned further agree that the consent of the undersigned to any further
amendments of the Credit Agreement shall not be required as a result of this
consent having been obtained, except to the extent, if any, required by the
Guaranty Agreement referred to above.
Dated as of December __, 1998.
Ameri-Co Carriers, Inc.
By /s/ Paul G. Shelton
Its President
Nationwide Freight Service, Inc.
By /s/ Paul G. Shelton
Its President
Chemdal Corporation
By /s/ Paul G. Shelton
Its Treasurer
Superior Absorbents, Inc.
By /s/ Paul G. Shelton
Its Treasurer
<PAGE>
Montana Minerals Development Company
By /s/ Paul G. Shelton
Its Treasurer
Chemdal International Corporation
By /s/ Paul G. Shelton
Its Treasurer
Regeneration Technologies, Inc.
By /s/ Paul G. Shelton
Its Treasurer
Colloid Environmental Technologies
Company
By /s/ Paul G. Shelton
Its Treasurer
American Colloid Company (f.k.a. AES
Acquisition, Inc.and American
Colloid Mineral Company)
By /s/ Paul G. Shelton
Its Treasurer
Volclay International Corporation
By /s/ Paul G. Shelton
Its Treasurer
Nanocor, Inc.
By /s/ Paul G. Shelton
Its Treasurer
<PAGE>
Exhibit A
Domestic Subsidiaries
Name Jurisdiction of Incorporation
Ameri-Co Carriers, Inc. Nebraska
Nationwide Freight Service, Inc. Nebraska
Chemdal Corporation Delaware
Superior Absorbents, Inc. Delaware
Montana Minerals Development Company Montana
Chemdal International Corporation Delaware
Regeneration Technologies, Inc. (f.k.a. Amcol Delaware
International Corp.)
Colloid Environmental Technologies Company Delaware
American Colloid Company (f.k.a. AES Delaware
Acquisition, Inc. and American Colloid Mineral Company)
Nanocor, Inc. Delaware
Volclay International Corporation Delaware
<PAGE>
EXHIBIT 10.12
Conformed Copy
AMCOL International Corporation
___________________________________
Second Amendment
Dated as of December 15, 1998
to
Note Agreement
Dated as of October 1, 1994
___________________________________
Re: $25,000,000 7.36% Series A Senior Notes
Due June 30, 1999
$10,000,000 7.83% Series B Senior Notes
Due June 30, 2002
$15,000,000 8.10% Series C Senior Notes
Due June 30, 2006
and
$17,140,000 9.68% Series D Senior Notes
Due November 1, 1999
<PAGE>
AMCOL International Corporation
1500 West Shure Drive
Arlington Heights, Illinois 60004
Second Amendment
Dated as of December 15, 1998
To
Note Purchase Agreement
Dated as of October 1, 1994
Re: $25,000,000 7.36% Series A Senior Notes
Due June 30, 1999
$10,000,000 7.83% Series B Senior Notes
Due June 30, 2002
$15,000,000 8.10% Series C Senior Notes
Due June 30, 2006
$17,140,000 9.68% Series D Senior Notes
Due November 1, 1999
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0301
Reference is made to the Note Purchase Agreement, dated as of October 1,
1994 (the "Note Agreement"), between the undersigned, AMCOL International
Corporation, a Delaware corporation, formerly known as American Colloid Company
(the "Company"), and Principal Life Insurance Company, formerly known as
Principal Mutual Life Insurance Company (the "Noteholder"). Unless otherwise
herein defined or the context hereof shall otherwise require, capitalized terms
used in this Second Amendment (the or this "Second Amendment") shall have the
respective meanings specified in the Note Agreement.
Recitals:
A. The Company and the Noteholder have heretofore entered into the Note
Agreement. The Company has heretofore issued the $25,000,000 7.36% Series A
Senior Notes due June 30, 1999 (the "Series A Notes"), $10,000,000 7.83% Series
B Senior Notes due June 30, 2002 (the "Series B Notes"), $15,000,000 8.10%
Series C Senior Notes due June 30, 2006 (the "Series C Notes") and $17,140,000
9.68% Series D Senior Notes Due November 1, 1999 (the "Series D Notes," together
with the Series A Notes, the Series B Notes and the Series C Notes, the "Notes")
pursuant to the Note Agreement. The Noteholder is the holder of 100% of the
outstanding principal amount of the Notes.
<PAGE>
B. The Company and the Noteholder now desire to amend the Note Agreement in
the respects, but only in the respects, hereinafter set forth.
C. All requirements of law have been fully complied with and all other acts
and things necessary to make this Second Amendment a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
Now, therefore, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this Second Amendment set forth in section 3.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Noteholder do
hereby agree as follows:
Section 1. Amendments.
Section 1.1. Sections 5.16(e), (f), (g), (h) and (i) of the Note Agreement
shall be and are hereby amended in their entirety and as so amended shall be
restated to read as follows:
"(e) [Intentionally Reserved];
"(f) investments in, and loans and advances to, Subsidiary
Guarantors;
"(g) investments in, and loans and advances to, Restricted
Subsidiaries (other than Subsidiary Guarantors) provided
such investments, loans and advances at any one time
outstanding do not exceed the sum of (i) $100,000,000 plus
(ii) the amount (if any) by which (A) $50,000,000 exceeds
(B) the aggregate amount outstanding on investments, loans
and advances permitted solely by virtue of section 5.16(i)
hereof;
"(h) acquisitions, provided, that (i) no Default or Event of
Default exists or would exist after giving effect to such
acquisition, (ii) the board of directors or other governing
body of such Person whose property or Voting Stock is being
so acquired has approved the terms of such acquisition and
(iii) prior to each acquisition requiring consideration from
the Company and its Subsidiaries in excess of $10,000,000,
(x) there shall have been delivered to the Noteholder a
certificate signed by the chief financial officer of the
Company, demonstrating that, taking into account such
acquisition and its effects, the Company will remain in
compliance with the covenants set forth in section 5.6,
section 5.7 and section 5.8 hereof as of the date of such
acquisition and, based on projections believed by the
Company to be reasonable, at all times during the
twelve-month period following such date and certifying that
no Default or Event of Default has occurred and is
continuing hereunder as of the date of and immediately after
<PAGE>
giving effect to such acquisition and (y) such certificate
is true and correct; and
"(i) any other investments, loans and advances not otherwise
permitted by this Section in an aggregate amount not to
exceed $50,000,000."
Section 1.2. Section 5 of the Note Agreement shall be and is hereby
amended by adding the following new Section 5.18 at the end thereof:
"Section 5.18. Year 2000 Assessment. The Company shall take all
actions necessary and commit adequate resources to assure that its
computer-based and other systems (and those of all Subsidiaries) are
able to effectively process dates, including dates before, on and
after January 1, 2000, without experiencing any Year 2000 Problem that
could cause a material adverse effect on the business or financial
affairs of the Company (or of the Company and its Subsidiaries taken
on a consolidated basis). At the request of the Purchaser or
subsequent holders of the Notes, the Company will provide the
Purchaser or subsequent holders of the Notes with written assurances
and substantiations (including, but not limited to, the results of
internal or external audit reports prepared in the ordinary course of
business) reasonably acceptable to the Purchaser as to the capability
of the Company and its Subsidiaries to conduct its and their
businesses and operations before, on and after January 1, 2000,
without experiencing a Year 2000 Problem causing a material adverse
effect on the business or financial affairs of the Company (or of the
Company and its Subsidiaries taken on a consolidated basis)."
Section 1.3. Section 8 of the Note Agreement shall be and is hereby amended
by adding the following definition in the appropriate alphabetical position:
"'Year 2000 Problem' means any significant risk that computer
hardware, software, or equipment containing embedded microchips
essential to the business or operations of the Company or any of its
Subsidiaries will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as efficiently and reliably
as in the case of times or time periods occurring before January 1,
2000, including the making of accurate leap year calculations."
<PAGE>
Section 2. Representations and Warranties of the Company.
To induce the Noteholder to execute and deliver this Second Amendment
(which representations shall survive the execution and delivery of this Second
Amendment), the Company represents and warrants to the Noteholder that:
(a) this Second Amendment has been duly authorized, executed and
delivered by it and this Second Amendment constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors' rights
generally;
(b) the Note Agreement, as amended by this Second Amendment,
constitutes the legal, valid and binding obligation, contract and agreement
of the Company enforceable against it in accordance with its respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating
to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of this
Second Amendment (i) has been duly authorized by all requisite corporate
action, (ii) does not require the consent or approval of any governmental
or regulatory body or agency, and (iii) will not (A) violate (1) any
provision of law, statute, rule or regulation or its Certificate of
Incorporation or Bylaws, (2) any order of any court or any rule, regulation
or order of any other agency or government binding upon it, or (3) any
provision of any indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound, including,
without limitation, the Credit Agreement, as amended to date, or (B) result
in a breach or constitute (alone or with due notice or lapse of time or
both) a default under any indenture, agreement or other instrument referred
to in clause (iii)(A)(3) of this section 2.1(c);
(d) the Company is conducting a comprehensive review and assessment of
the computer applications of the Company and its Subsidiaries and is making
inquiry of their material suppliers, service vendors (including data
processors) and customers, with respect to any defect in computer software,
data bases, hardware, controls and peripherals related to the occurrence of
the year 2000 or the use at any time of any date which is before, on and
after December 31, 1999, in connection therewith. Based on the foregoing
review, assessment and inquiry, the Company believes that no such defect
could reasonably be expected to have a material adverse effect on the
business or financial affairs of the Company (or of the Company and its
Subsidiaries taken on a consolidated basis);
(e) as of the date hereof and after giving effect to this Second
Amendment, no Default or Event of Default has occurred which is continuing;
and
<PAGE>
(f) all the representations and warranties contained in Section 3 of
the Note Agreement and Exhibit C thereto are true and correct with the same
force and effect as if made by the Company on and as of the date hereof.
Section 3. Conditions to Effectiveness of This Second Amendment.
This Second Amendment shall not become effective until, and shall become
effective when, each and every one of the following conditions shall have been
satisfied:
(a) the Noteholder shall have received a written consent to this
Second Amendment duly executed by the Subsidiary Guarantors, which consent
shall be in form and substance satisfactory to such Noteholder;
(b) the Noteholder shall have received evidence satisfactory to it
that the Credit Agreement, as amended, is in full force and effect;
(c) the representations and warranties of the Company set forth in
Section 2 hereof are true and correct on and with respect to the date
hereof;
(d) the Noteholder shall have received the favorable opinion of
counsel to the Company as to the matters set forth in section 2.1(a),
section 2.1(b) and section 2.1(c) hereof, which opinion shall be in form
and substance satisfactory to such Noteholder; and
(e) all documents and proceedings shall be satisfactory to the
Noteholder and its special counsel.
Upon receipt of all of the foregoing, this Second Amendment shall become
effective.
Section 4. Payment of Noteholder's Counsel Fees and Expenses.
The Company agrees to pay upon demand, the reasonable fees and expenses of
Chapman and Cutler, counsel to the Noteholder, in connection with the
negotiation, preparation, approval, execution and delivery of this Second
Amendment.
Section 5. Miscellaneous.
Section 5.1. Construction. This Second Amendment shall be construed in
connection with and as part of the Note Agreement, and except as modified and
expressly amended by this Second Amendment, all terms, conditions and covenants
contained in the Note Agreement and the Notes are hereby ratified and shall be
and remain in full force and effect.
Section 5.2. Notices. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Second Amendment may refer to the Note Agreement without making specific
reference to this Second Amendment but
<PAGE>
nevertheless all such references shall include this Second Amendment unless the
context otherwise requires.
Section 5.3. Headings. The descriptive headings of the various Sections or
parts of this Second Amendment are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
Section 5.4. Governing Law. This Second Amendment shall be governed by and
construed in accordance
with Illinois law.
Section 5.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Second
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
AMCOL International Corporation (formerly known as
American Colloid Company)
By /s/ Paul G. Shelton
Its Senior Vice President
The foregoing is hereby
accepted and agreed to
as of the date first
above written:
Principal Life Insurance Company
By /s/ Sarah J. Pitts
Its Counsel
By /s/ James C. Fifield
Its Counsel
<PAGE>
Guarantors' Consent
The undersigned are party to that certain Guaranty Agreement dated as of
October 1, 1994 (as supplemented, the "Guaranty Agreement"), and hereby consent
to the amendment of the Note Purchase Agreement as set forth above and confirm
that such Guaranty Agreement and all of the obligations thereunder remain in
full force and effect. Without limiting the generality of the foregoing, the
undersigned acknowledge and agree that all references to the "Note Agreement" in
the Guaranty Agreement shall be deemed references to the Note Agreement as
amended by the Second Amendment to Note Agreement and further agree that any
reference in such Guaranty to the Company's former name, "American Colloid
Company" shall be amended to be references to the Company's new name "AMCOL
International Corporation". The undersigned further agree that the consent of
the undersigned to any further amendments of the Note Agreement shall not be
required as a result of this consent having been obtained, except to the extent,
if any, required by the Guaranty Agreement referred to above.
Dated as of December 15, 1998.
Ameri-Co Carriers, Inc.
By /s/ Paul G. Shelton
Its President
Nationwide Freight Service, Inc.
By /s/ Paul G. Shelton
Its President
Chemdal Corporation
By /s/ Paul G. Shelton
Its Treasurer
Superior Absorbents, Inc.
By /s/ Paul G. Shelton
Its Treasurer
<PAGE>
Montana Minerals Development Company
By /s/ Paul G. Shelton
Its Treasurer
Chemdal International Corporation
By /s/ Paul G. Shelton
Its Treasurer
Regeneration Technologies, Inc.
(f.k.a. AMCOL International Corp.)
By /s/ Paul G. Shelton
Its Treasurer
Colloid Environmental Technologies
Company
By /s/ Paul G. Shelton
Its Treasurer
American Colloid Company (f.k.a.
AES Acquisition, Inc.and American
Colloid Mineral Company)
By /s/ Paul G. Shelton
Its Treasurer
Nanocor, Inc.
By /s/ Paul G. Shelton
Its Treasurer
Volclay International Corporation
By /s/ Paul G. Shelton
Its Treasurer
<PAGE>
Exhibit A
Domestic Subsidiaries
Name Jurisdiction of Incorporation
Ameri-Co Carriers, Inc. Nebraska
Nationwide Freight Service, Inc. Nebraska
Chemdal Corporation Delaware
Superior Absorbents, Inc. Delaware
Montana Minerals Development Company Montana
Chemdal International Corporation Delaware
Regeneration Technologies, Inc. (f.k.a. AMCOL International Delaware
Corp.)
Colloid Environmental Technologies Company Delaware
American Colloid Company (f.k.a. AES Acquisition, Inc. and Delaware
American Colloid Mineral Company)
Nanocor, Inc. Delaware
Volclay International Corporation Delaware
<PAGE>
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