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, 2000
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 November 8, 2000
(Common stock, $.01 par value) 28,355,889
<PAGE>
AMCOL INTERNATIONAL CORPORATION
INDEX
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations -
nine months and three months ended September 30, 2000 and 1999 2
Condensed Consolidated Statements of Comprehensive Income -
nine months and three months ended September 30, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosure About Market Risk 14
Part II - Other Information
Item 1 Legal Proceedings 14
Item 6 Exhibits and Reports on Form 8-K 14
<PAGE>
Part I, Item 1 - FINANCIAL INFORMATION
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
September 30,
2000 December 31,
(Unaudited) 1999
--------------------- --------------------
Current assets: *
<S> <C> <C>
Cash $ 5,069 $ 3,954
Cash equivalents 192,084 --
Accounts receivable, net 61,183 52,056
Inventories 31,883 30,965
Prepaid expenses 6,473 6,566
Net current assets of discontinued operations -- 40,147
Current deferred tax asset 6,340 6,347
Total current assets 303,032 140,035
Investment in and advances to joint ventures 10,826 9,111
Property, plant, equipment and mineral reserves 196,013 195,322
Less accumulated depreciation 114,557 106,062
81,456 89,260
Intangible assets, net 485 452
Net long-term assets of discontinued operations -- 80,046
Other long-term assets, net 12,968 5,047
$ 408,767 $ 323,951
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of debt $ 1,042 $ 509
Accounts payable 12,936 10,776
Accrued income taxes 167,620 2,301
Accrued liabilities 27,233 21,394
Total current liabilities 208,831 34,980
Long-term debt 55,306 93,914
Deferred credits and other liabilities 9,667 8,617
Stockholders' equity:
Common stock 320 320
Additional paid-in capital 74,904 76,440
Foreign currency translation adjustment (2,822) (2,607)
Retained earnings 84,115 142,270
Treasury stock (21,554) (29,983)
134,963 186,440
$ 408,767 $ 323,951
</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 STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
Continuing operations 2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 214,848 $ 227,844 $ 74,284 $ 79,944
Cost of sales 162,026 175,825 56,105 61,602
Gross profit 52,822 52,019 18,179 18,342
General, selling and administrative
expenses 39,286 44,977 13,270 14,462
Asset impairment and business
realignment expenses 2,440 -- 2,440 --
Operating profit 11,044 7,042 2,469 3,880
Other income (expense):
Investment income 6,717 -- 3,633 --
Interest expense, net (2,426) (2,906) (1,009) (954)
Other income, net (374) (622) (323) (670)
3,917 (3,528) 2,301 (1,624)
Income from continuing
operations before income taxes
and equity in income of joint
ventures 14,961 3,514 4,770 2,256
Income taxes 5,950 1,157 2,021 721
Income from continuing
operations before equity in
income of joint ventures 9,011 2,357 2,749 1,535
Equity in income of
joint ventures 333 268 182 144
Income from continuing
operations 9,344 2,625 2,931 1,679
Discontinued operations (Note 6)
Income from operations of
absorbent polymers segment
(net of income taxes) 7,766 20,238 -- 7,696
Gain on sale of absorbent
polymers segment (net of
income taxes of $207,570) 314,064 -- 193 --
321,064 20,238 193 7,696
Extraordinary loss on early
extinguishment of debt (net of
income tax benefit of $238) (443) -- -- --
Net income $ 330,731 $ 22,863 $ 3,124 $ 9,375
</TABLE>
The accompanying notes are an integral part
of these condensed financial statements.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except number of shares and per share data)
(continued)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Weighted average common shares 27,316,498 26,762,283 27,943,373 26,763,593
Weighted average common and
common equivalent shares 29,334,941 27,147,789 30,781,245 27,328,232
Basic earnings per share
Continuing operations $ .34 $ .10 $ .10 $ .06
Discontinued operations
From operations $ .28 $ .76 $ -- $ .29
Gain on sale $ 11.50 $ -- $ .01 $ --
$ 11.78 $ .76 $ .01 $ .29
Extraordinary item $ (.02) $ -- $ -- $ --
Net income $ 12.11 $ .85 $ .11 $ .35
Diluted earnings per share
Continuing operations $ .32 $ .10 $ .10 $ .06
Discontinued operations
From operations $ .26 $ .75 $ -- $ .28
Gain on sale $ 10.71 $ -- $ .01 $ --
$ 10.97 $ .75 $ .01 $ .28
Extraordinary item $ (.02) $ -- $ -- $ --
Net income $ 11.27 $ .84 $ .10 $ .34
</TABLE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended
September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $ 330,731 $ 22,863 $ 3,124 $9,375
Other comprehensive income:
Foreign currency translation adjustment (5,361) (1,177) (452) 139
Reclassification adjustment for
foreign currency losses included
in net income 5,146 -- -- --
Comprehensive income $ 330,516 $ 21,686 $ 2,672 $9,514
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flow from operating activities:
<S> <C> <C>
Income from continuing operations $ 9,344 $ 2,625
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation, depletion, and amortization 15,279 15,420
Other 1,407 1,944
(Increase) decrease in current assets (3,148) 5,625
Increase (decrease) in current liabilities 2,599 (4,618)
Net cash provided by operating activities of
continuing operations 25,481 20,996
Net cash provided by operating activities of
discontinued operations 665 1,319
Cash flow from investing activities:
Acquisition of land, mineral reserves,
depreciable and intangible assets (10,769) (15,019)
Net proceeds from sale of absorbent polymers segment 605,222 --
Other (6,889) (3,415)
Net cash provided by (used in) investing activities 587,564 (18,434)
Cash flow from financing activities:
Net change in outstanding debt (38,075) 2,114
Dividends paid (4,057) (5,350)
Partial liquidation distribution (384,829) --
Early extinguishment of debt (443) --
Treasury stock transactions 6,893 (1,377)
Net cash used in financing activities (420,511) (4,613)
Net increase (decrease) in cash and cash equivalents 193,199 (732)
Cash and cash equivalents at beginning of period 3,954 6,206
Cash and cash equivalents at end of period $ 197,153 $ 5,474
Supplemental disclosure of cash flow information
Actual cash paid for:
Interest $ 4,848 $ 4,333
Income taxes $ 55,818 $13,956
</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, 1999, has been prepared by
management without audit by independent certified public accountants pursuant to
the rules of the Securities and Exchange Commission for quarterly reports on
Form 10-Q and do not include all of the information and note disclosures
required by accounting principles generally accepted in the United States of
America. The condensed consolidated balance sheet as of December 31, 1999, has
been derived from and does not include all the disclosures contained in the
audited consolidated financial statements for the year ended December 31, 1999.
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 condensed
consolidated financial information be read in conjunction with the consolidated
financial statements and related notes included in the Company's 1999 Form 10-K,
which accompanies the 1999 Corporate Report.
The results of operations for the nine-month period ended September 30,
2000, are not necessarily indicative of the
results to be expected for the full year.
Note 2: INVENTORIES
Inventories at September 30, 2000 have been valued using the same methods
as at December 31, 1999. The composition of inventories at September 30, 2000
and December 31, 1999, was as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
<S> <C> <C>
Crude stockpile and in-process inventories $ 18,777 $ 19,099
Other raw material, container and supplies inventories 13,106 11,866
$ 31,883 $ 30,965
</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 during each period. The number of options outstanding increased in
connection with the partial liquidation associated with the sale of the
absorbent polymers segment. The dilutive impact of options was more significant
as a result of the increase in outstanding options.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
(continued)
Note 3: EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>
Nine months ended September 30, Three months ended September 30,
2000 1999 2000 1999
Weighted average common
<S> <C> <C> <C> <C>
shares outstanding - Basic 27,316,498 26,762,283 27,943,373 26,763,593
Assumed exercise of stock options 2,018,443 385,506 2,837,872 564,639
Weighted average common
shares outstanding - Diluted 29,334,941 27,147,789 30,781,245 27,328,232
</TABLE>
Note 4: DERIVATIVES
From time to time, the Company uses financial derivatives, principally
swaps, forward contracts and options in its management of foreign currency and
interest rate exposures. These contracts hedge transactions and balances for
periods consistent with committed exposures. As of September 30, 2000,
derivatives outstanding were related to foreign currency hedging and an interest
rate swap with a notional amount of $15 million of the outstanding revolving
credit.
Note 5: LITIGATION
In 1998, the following claims were filed in Chester, England against
certain of the Company's subsidiaries: Adams et al. v. AMCOL (Holdings) Limited
and Volclay Limited, (AKA Marie Geraldine O'Laughlin et al.), High Court of
Justice, QB Division, Chester District 1998 A. No. 206; and Anziani, et al. v.
AMCOL (Holdings) Limited and Volclay Limited, High Court of Justice, QB
Division, Chester District 1998 A. No. 365. The claims are for property damage,
nuisance and personal injury based on the alleged release of dust from Volclay
Limited's facility in Wallasey, England. It is the Company's understanding that
the claims are being made on behalf of up to 1,600 persons who at some point
during the period from 1965 to the present resided in the vicinity of the
Wallasey, England facility. The Company has notified its insurance carriers and
is currently engaged in the discovery process. One of the Company's insurance
carriers is seeking to void its insurance policy. The Company intends to defend
these cases vigorously. Based on information received to date, the Company
currently anticipates that its liability with respect to these claims will not
have a material adverse affect on the Company.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
(continued)
Note 6: DISCONTINUED OPERATIONS
In 1999, the Company announced that it had entered into an agreement to
sell its absorbent polymers segment to BASF AG, subject to the approval of the
Company's shareholders. The Company's shareholders approved the sale transaction
at a special meeting held on May 25, 2000, and accordingly, the absorbent
polymers segment is reported as a discontinued operation in the accompanying
condensed consolidated financial statements. The condensed consolidated
financial statements have been reclassified to report separately the net assets
and operating results of the absorbent polymers segment for all periods
presented.
The transaction closed on June 1, 2000, at which time the Company received
proceeds of approximately $656.5 million. The sale resulted in a pretax gain of
approximately $521.7 million ($314.1 million after income taxes), which was net
of estimated costs to be incurred in connection with the sale. The Company is
currently negotiating the final settlement of certain working capital items, and
expects to resolve these matters during the fourth quarter of 2000. Provisions
have been made for estimated working capital adjustments in determining the gain
on sale. Substantially all of the after-tax net proceeds from the sale
transaction were distributed to the Company's shareholders on June 30, 2000.
Summary operating results of the absorbent polymers segment for the nine
and three month periods ended September 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Nine months ended September 30, Three months ended September 30,
2000* 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 86,000 $ 186,912 $ -- $ 63,587
Operating profit 12,436 34,330 -- 12,830
Income taxes 3,920 11,552 -- 4,469
Net income 7,766 20,238 -- 7,696
<FN>
*The 2000 information is for five months.
</FN>
</TABLE>
<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.
Nine Months Ended September 30, 2000 vs. 1999
Net sales from continuing operations decreased by $13.0 million, or 5.7%,
while gross profit increased by $.8 million, or 1.5%, and operating profit
increased by $4.0 million, or 56.8%. General, selling and administrative
expenses were $3.2 million, or 7.1%, lower than the previous year. General,
selling and administrative expenses for 2000 included $2.4 million in special
charges: $1.5 million for asset impairments related to the U.K. operation; and
$.9 million for costs associated with business realignment activities.
Investment income related to the temporary investment of the proceeds from the
sale of the absorbent polymers segment amounted to $6.7 million for 2000. Net
interest expense decreased by $.5 million, or 16.5%, as a result of lower
average debt levels. Income from continuing operations was $9.3 million compared
with $2.6 million in the prior year period, an increase of $6.7 million.
Earnings from continuing operations were $.32 per diluted share for the 2000
period, compared with $.10 per diluted share for the prior-year period on 8.1%
higher weighted average shares outstanding. The investment income, net of taxes,
amounted to $.14 per diluted share, or approximately 64% of the improvement.
On June 1, 2000, the absorbent polymers segment was sold to BASF AG
resulting in a net gain of $314.1 million, or $10.71 per diluted share. The 2000
results were for five months compared to nine months for 1999. The income from
operations for the polymer segment prior to disposition amounted to $7.8
million, net of taxes, for the 2000 period compared to $20.2 million, net of
taxes, in the prior-year period. This equated to $.26 per diluted share compared
with $.75 per diluted share in 1999. An extraordinary net charge of $.4 million,
or $.02 per diluted share, was incurred in 2000 for the early extinguishment of
long-term debt.
A brief discussion by business segment follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999 2000 vs. 1999
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 119,307 100.0% $ 117,009 100.0% $ 2,298 2.0%
Cost of sales 93,799 78.6% 91,359 78.1%
Gross profit 25,508 21.4% 25,650 21.9% (142) (0.6%)
General, selling and
administrative expenses 11,760 9.9% 13,222 11.3% (1,462) (11.1%)
Asset impairment 1,500 1.3% -- -- 1,500 NM
Operating profit 12,248 10.3% 12,428 10.6% (180) (1.4%)
</TABLE>
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Sales increased by $2.3 million, or 2.0%, from the prior-year period.
Stronger international sales, with the exception of the U.K. operation,
accounted for the majority of the improvement. Gross profit margins decreased by
50 basis points, or 2.3%. The decrease in gross profit margins is primarily
related to lower prices on domestic bulk cat litter sold to major branded
customers. General, selling and administrative expenses were $1.5 million, or
11.1%, lower than the prior-year period. Reduced general, selling and
administrative expenses in the United Kingdom and lower domestic bad debt
provisions accounted for much of the change.
An asset impairment adjustment of $1.5 million was recorded in the third
quarter of 2000 related to the U.K. cat litter operation. The U.K. operation
operating losses, in addition to this charge, amounted to $2.3 million in the
2000 period compared with $2.2 million in the 1999 period. The Company has been
actively attempting to sell this business.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999 2000 vs. 1999
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 70,177 100.0% $ 84,745 100.0% $(14,568) (17.2%)
Cost of sales 45,568 64.9% 61,258 72.3%
Gross profit 24,609 35.1% 23,487 27.7% 1,122 4.8%
General, selling and
administrative expenses 14,271 20.3% 19,292 22.8% (5,021) (26.0%)
Operating profit 10,338 14.8% 4,195 4.9% 6,143 146.4%
</TABLE>
Sales decreased by $14.6 million, or 17.2%. Approximately 78% of the sales
decrease was related to businesses divested in 1999. Weakness in sales from the
U.K. operation accounted for the balance of the sales decrease. Sales for the
U.S. operations were higher in all sectors, with the exception of geosynthetic
clay liners and exports. Gross profit margins improved by 740 basis points, or
26.7%, primarily as a result of the divestitures of businesses in 1999. General,
selling and administrative expenses decreased by $5.0 million, or 26.0%,
reflecting the results of the divestitures and cost reduction initiatives
instituted in 1999.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999 2000 vs. 1999
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 25,364 100.0% $ 26,090 100.0% $ (726) (2.8%)
Cost of sales 22,659 89.3% 23,208 89.0%
Gross profit 2,705 10.7% 2,882 11.0% (177) (6.1%)
General, selling and
administrative expenses 1,580 6.2% 1,607 6.2% (27) (1.7%)
Operating profit 1,125 4.4% 1,275 4.8% (150) (11.8%)
</TABLE>
Revenues decreased $.7 million, or 2.8%. Gross profit margins declined by
30 basis points, or 2.7%, primarily as a result of higher fuel costs.
<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,
2000 1999 2000 vs. 1999
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 11,727 $ 10,856 $ 871 8.0%
Business realignment
expenses 940 -- 940 NM
Operating loss (12,667) (10,856) (1,811) 16.7%
</TABLE>
Corporate costs include management information systems, human resources,
investor relations and corporate communications, corporate finance and corporate
governance. The nanocomposite business is also included in the corporate costs.
The $.9 million, or 8.0%, increase in costs is attributable to increased
investments in nanocomposite business development. In addition, the Company
incurred $.9 million in business realignment expenses in 2000 related to its
exploration of alternatives to enhance shareholder value.
Three Months Ended September 30, 2000 vs. 1999
Net sales from continuing operations decreased by $5.7 million, or 7.1%,
gross profit decreased by $.2 million, or .9%, and operating profit decreased by
$1.4 million, or 36.4%. General, selling and administrative expenses increased
by $1.2 million, or 8.6%, as a result of $2.4 million in special charges: $1.5
million for asset impairments related to the U.K. operation; and $.9 million for
costs associated with business realignment activities. Investment income in the
2000 period related to the proceeds from the sale of the absorbent polymers
segment amounted to $3.6 million. Income from continuing operations amounted to
$2.9 million in 2000 compared to $1.7 million in 1999. Earnings from continuing
operations were $.10 per diluted share for the 2000 quarter, compared with $.06
per diluted share for the prior-year quarter on 12.6% higher weighted average
shares outstanding. The investment income, net of taxes, increased earnings by
$.07 per diluted share, while the special charges, net of taxes, reduced diluted
earnings per share by $.04 in the 2000 quarter.
<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>
Three Months Ended September 30,
2000 1999 2000 vs. 1999
Minerals (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 38,177 100.0% $ 39,319 100.0% $ (1,142) (2.9%)
Cost of sales 30,546 80.0% 30,380 77.3%
Gross profit 7,631 20.0% 8,939 22.7% (1,308) (14.6%)
General, selling and
administrative expenses 4,029 10.6% 4,197 10.7% (168) (4.0%)
Asset impairment 1,500 3.9% 1,500 NM
Operating profit 2,102 5.5% 4,742 12.0% (2,640) (55.7%)
</TABLE>
Sales decreased by $1.1 million, or 2.9%, from the prior-year period. The
decrease in sales was attributable to lower domestic sales to the cat litter
markets and lower sales in the United Kingdom. Gross profit margins decreased by
270 basis points, or 7.0%, due to lower selling prices for domestic bulk cat
litter sold to major branded customers, as well as lower sales volume in the
United Kingdom. General, selling and administrative expenses, before an asset
impairment charge, decreased by $.2 million, or 4.0%.
An adjustment of $1.5 million to reflect the impact of an asset impairment
associated with the U.K. cat litter assets was made during the 2000 quarter. In
addition to the asset impairment charge, the UK operation reported an operating
loss of $1.2 million for the quarter.
<TABLE>
<S> <C>
Three Months Ended September 30,
2000 1999 2000 vs. 1999
Environmental (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 27,275 100.0% $ 30,866 100.0% $ (3,591) (11.6%)
Cost of sales 17,666 64.8% 22,518 73.0%
Gross profit 9,609 35.2% 8,348 27.0% 1,261 15.1%
General, selling and
administrative expenses 4,637 17.0% 6,268 20.3% (1,631) (26.0%)
Operating profit 4,972 18.2% 2,080 6.7% 2,892 139.0%
</TABLE>
Sales decreased by $3.6 million, or 11.6%. Virtually all of the sales
decrease was related to businesses divested in 1999. Sales for the U.S.
operations were higher in all sectors, with the exception of geosynthetic clay
liners and exports. Sales for the European operations were lower in the 2000
period. Gross profit margins improved by 820 basis points, or 30.4%, primarily
as a result of the divestitures of businesses in 1999. General, selling and
administrative expenses decreased by $1.6 million, or 26.0%, reflecting the
results of the divestitures and cost reduction initiatives instituted in 1999.
<PAGE>
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999 2000 vs. 1999
Transportation (Dollars in Thousands) $ Change % Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 8,832 100.0% $ 9,761 100.0% $ (929) (9.5%)
Cost of sales 7,893 89.4% 8,706 89.2%
Gross profit 939 10.6% 1,055 10.8% (116) (11.0%)
General, selling and
administrative expenses 543 6.1% 555 5.7% (12) (2.2%)
Operating profit 396 4.5% 500 5.1% (104) (20.8%)
</TABLE>
Revenues decreased 9.5% as a result of reduced demand from certain large
customers. Gross margins declined by 20 basis points, or 1.9%, as a result of
lower sales volume and higher fuel costs.
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999 2000 vs. 1999
Corporate (Dollars in Thousands) $ Change % Change
General, selling and
<S> <C> <C> <C> <C>
administrative expenses $ 4,061 $ 3,442 $ 619 18.0%
Business realignment
expenses 940 940 NM
Operating loss (5,001) (3,442) 1,559 45.3%
</TABLE>
Higher expenditures for nanocomposite business development accounted for
the 18.0% increase in corporate costs. In addition, the Company incurred $.9
million in professional fees in 2000 related to its exploration of alternatives
to enhance shareholder value.
Liquidity and Capital Resources
At September 30, 2000, the Company had outstanding debt of $56.3 million
(including both long- and short-term debt), cash of $5.1 million and cash
equivalents of $192.1 million, compared with $94.4 million in debt and $4.0
million in cash at December 31, 1999. The cash equivalents of $192.1 million
primarily relate to the proceeds from the sale of the absorbent polymers
segment. Accrued income taxes related to the transaction totaled $167.6 million.
The Company currently intends to use the difference of $24.5 million to reduce
debt. On a proforma basis, net debt would be $26.8 million. The long-term debt
(on a proforma basis) would thus represent 16.2% of total capitalization at
September 30, 2000, compared with 33.5% at December 31, 1999.
<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 1.45-to-1 at September 30, 2000, with
approximately $94.2 million in working capital, compared with 2.64-to-1 and
$101.8 million, respectively, at December 31, 1999. The proforma current ratio
at September 30, 2000, excluding cash equivalents and accrued income taxes
related to the sale of the absorbent polymers segment, was 2.69-to-1, with
working capital of $69.7 million.
During the first nine months of 2000, the Company generated $25.5 million
in cash from continuing operations, compared with $21.0 million for the previous
year nine-month period. The Company paid dividends of $4.1 million and acquired
property, plant and equipment and intangible assets totaling $10.8 million. The
Company distributed $384.8 in net proceeds from the sale of the absorbent
polymers segment to its shareholders and repaid debt totaling approximately
$38.1 million.
The Company had approximately $80.1 million in unused, committed credit
lines at September 30, 2000. These credit facilities, in conjunction with funds
generated from operations, are adequate to fund the capital expenditure program
approved by the board of directors at this time.
Forward-Looking Statements
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, competition in the 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.
<PAGE>
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 1: Legal Proceedings
The information required by this item is provided in Footnote 5
"Litigation" under Item I.
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
September 30, 2000.
<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 13, 2000 /s/ Lawrence E. Washow
Lawrence E. Washow
President and Chief Executive Officer
Date: November 13, 2000 /s/ Paul G. Shelton
Paul G. Shelton
Senior Vice President and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
3.1 Restated Certificate of Incorporation of the Company (5), as amended
(10), 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)
10.7 Change in Control Agreement dated September 20, 2000, by and between
Registrant and Lawrence E. Washow
10.8 Change in Control Agreement dated September 22, 2000, by and between
Registrant and Peter L. Maul
10.9 AMCOL International Corporation Dividend Reinvestment and Stock
Purchase Plan (4); as amended (6)
10.10AMCOL International Corporation 1993 Stock Plan, as amended and
restated (10)
10.11Credit 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), Fourth Amendment to Credit Agreement
dated December 15, 1998 (18) and Fifth Amendment to Credit Agreement
dated May 26, 2000 (20)
10.15 AMCOL International Corporation 1998 Long-Term Incentive Plan (15)
10.16Change in Control Agreement dated September 21, 2000, by and between
Registrant and Ryan F. McKendrick
10.17Asset and Stock Purchase Agreement dated November 22, 1999 by and
between the Registrant and BASF Aktiengesellschaft (19)
10.18Change in Control Agreement dated September 28, 2000, by and between
Registrant and Frank B. Wright, Jr.
10.19Change in Control Agreement dated September 20, 2000, by and between
Registrant and Paul G. Shelton
10.20Change in Control Agreement dated September 22, 2000, by and between
Registrant and Gary D. Morrison
10.21Special Retention Agreement dated September 18, 2000, by and between
Registrant and Frank B. Wright, Jr. *
10.22Special Retention Agreement dated September 18, 2000, by and between
Registrant and Ryan F. McKendrick *
10.23Special Retention Agreement dated September 18, 2000, by and between
Registrant and Gary D. Morrison *
10.24Special Retention Agreement dated September 18, 2000, by and between
Registrant and Peter L. Maul *
27 Financial Data Schedule
* Portions of these exhibits have been omitted pursuant to a request for
confidential treatment
<PAGE>
(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.
(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.
(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.
(18) 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, 1999.
(19) 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, 1999.
(20) 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, 2000.
