-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DhdgfZmOX8CqGfg9TXLnPorkELnQTJVcIVM+zslfD3K4ZUcx1Uj1RbDhfMQ5xAzW opZxAqSiEchfsaob+oaQpQ== 0000813621-99-000010.txt : 19991110 0000813621-99-000010.hdr.sgml : 19991110 ACCESSION NUMBER: 0000813621-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCOL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000813621 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 360724340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14447 FILM NUMBER: 99744675 BUSINESS ADDRESS: STREET 1: 1500 W SHURE DR STREET 2: ONE NORTH ARLINGTON CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 BUSINESS PHONE: 8473948730 MAIL ADDRESS: STREET 1: 1500 W SHURE DR STREET 2: 1500 W SHURE DR SUITE 500 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN COLLOID CO DATE OF NAME CHANGE: 19920703 10-Q 1 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, 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) 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 October 29, 1999 (Common stock, $.01 par value) 26,795,517 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 Part I, Item I - FINANCIAL INFORMATION AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) ASSETS
September 30, December 31, 1999 1998 --------------------- ------------------- Current assets: * 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
*Condensed from audited financial statements. The accompanying notes are an integral part of these condensed financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except number of shares and per share data)
Nine Months Ended Three Months Ended September 30, September 30, ---------------------------------- ---------------------------------- 1999 1998 1999 1998 --------------- --------------- --------------- --------------- 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
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In thousands)
Nine Months Ended Three Months Ended September 30, September 30, ---------------------------------- ------------------------------ 1999 1998 1999 1998 --------------- --------------- -------------- ------------- 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
The accompanying notes are an integral part of these condensed financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30, ---------------------------------------------- 1999 1998 -------------------- ---------------------- Cash flow from operating activities: 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
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, 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:
September 30, 1999 December 31, 1998 ------------------------- ----------------------- 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
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. 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:
Nine Months Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Absorbent Polymers $ Change % Change 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%
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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nine Months Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Minerals $ Change % Change 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%
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.
Nine Months Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Environmental $ Change % Change 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%)
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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Nine Months Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Transportation $ Change % Change 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%
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.
Nine Months Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Corporate $ Change % Change General, selling and administrative expenses $ 12,113 $ 8,682 $ 3,431 39.5% Operating loss (12,113) (8,682) (3,431) 39.5%
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. 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:
Quarter Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Absorbent Polymers $ Change % Change 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%
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.
Quarter Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Minerals $ Change % Change 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%
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%.
Quarter Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Environmental $ Change % Change 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%)
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.
Quarter Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Transportation $ Change % Change 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%)
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.
Quarter Ended September 30, -------------------------------------------------------------------------------------- (Dollars in Thousands) -------------------------------------------------------------------------------------- 1999 1998 1999 vs. 1998 ------------------------- ---------------------- ---------------------------- Corporate $ Change % Change General, selling and administrative expenses $ 4,699 $ 3,081 $ 1,618 52.5% Operating loss (4,699) (3,081) (1,618) 52.5%
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. 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. 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. 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. 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 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) 10.5 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
(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.
EX-10.11 2 MATERIAL CONTRACTS 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 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. 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 (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%) 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 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. 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 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 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 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 EX-10.12 3 MATERIAL CONTRACTS 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 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. 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 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." 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 (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 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 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 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 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 EX-27 4 FDS
5 0000813621 AMCOL International Corporation 1,000 USD 9-MOS DEC-31-1999 JAN-1-1999 SEP-30-1999 1.00 5,472 0 113,065 4,493 40,522 164,650 347,685 174,440 364,483 62,203 0 0 0 320 0 364,483 414,147 414,147 314,203 372,775 804 0 5,264 35,304 12,709 22,863 0 0 0 22,863 .85 .84
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