10-Q 1 0001.txt FORM 10-Q 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) Delaware 36-0724340 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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 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 Part I, Item 1 - FINANCIAL INFORMATION AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS September 30, 2000 December 31, (Unaudited) 1999 --------------------- -------------------- Current assets: * 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
*Condensed from audited financial statements. The accompanying notes are an integral part of these condensed financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands)
Nine Months Ended Three Months Ended September 30, September 30, Continuing operations 2000 1999 2000 1999 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
The accompanying notes are an integral part of these condensed financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except number of shares and per share data) (continued)
Nine Months Ended Three Months Ended September 30, September 30, 2000 1999 2000 1999 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
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
Nine Months Ended September 30, Three Months Ended September 30, 2000 1999 2000 1999 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
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30, 2000 1999 Cash flow from operating activities: 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
The accompanying notes are an integral part of these condensed financial statements. 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:
September 30, 2000 December 31, 1999 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
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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands) (continued) Note 3: EARNINGS PER SHARE (continued)
Nine months ended September 30, Three months ended September 30, 2000 1999 2000 1999 Weighted average common 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
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. 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:
Nine months ended September 30, Three months ended September 30, 2000* 1999 2000 1999 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 *The 2000 information is for five months.
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:
Nine Months Ended September 30, 2000 1999 2000 vs. 1999 Minerals (Dollars in Thousands) $ Change % Change 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%)
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.
Nine Months Ended September 30, 2000 1999 2000 vs. 1999 Environmental (Dollars in Thousands) $ Change % Change 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%
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.
Nine Months Ended September 30, 2000 1999 2000 vs. 1999 Transportation (Dollars in Thousands) $ Change % Change 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%)
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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nine Months Ended September 30, 2000 1999 2000 vs. 1999 Corporate (Dollars in Thousands) $ Change % Change General, selling and 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%
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. 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:
Three Months Ended September 30, 2000 1999 2000 vs. 1999 Minerals (Dollars in Thousands) $ Change % Change 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%)
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. Three Months Ended September 30, 2000 1999 2000 vs. 1999 Environmental (Dollars in Thousands) $ Change % Change 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%
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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Three Months Ended September 30, 2000 1999 2000 vs. 1999 Transportation (Dollars in Thousands) $ Change % Change 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%)
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.
Three Months Ended September 30, 2000 1999 2000 vs. 1999 Corporate (Dollars in Thousands) $ Change % Change General, selling and 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%
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. 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. 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. 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 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 (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.