-----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, DELuKF8D+BJz37sdyYHXVI+g1V9BmPqJkc9EDFN3LmXnXGzW+vXE7KA67RqhHNgu cmRKtBCNnVZQLgL1mQFlGg== 0000950129-01-000886.txt : 20010223 0000950129-01-000886.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950129-01-000886 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICO INC CENTRAL INDEX KEY: 0000353567 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 760566682 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08327 FILM NUMBER: 1543419 BUSINESS ADDRESS: STREET 1: 11490 WESTHEIMER RD STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77067 BUSINESS PHONE: 2817214200 MAIL ADDRESS: STREET 1: 11490 WESTHEIMER STREET 2: STE 1000 CITY: HOUSTON STATE: TX ZIP: 77077 10-Q 1 h84150e10-q.txt ICO INC - DATED DECEMBER 31, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 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 0-10068 ------- ICO, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Texas 76-0566682 ------------------------ ------------------------------------ (State of incorporation) (IRS Employer Identification Number) 11490 Westheimer, Suite 1000, Houston, Texas 77077 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (281) 721-4200 ------------------ (Telephone Number) 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 --- --- Common stock, without par value 22,686,987 shares outstanding as of February 13, 2001 2 ICO, INC. INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 2000 and September 30, 2000.................................................................................. 3 Consolidated Statements of Operations for the Three Months ended December 31, 2000 and 1999................................................................... 4 Consolidated Statements of Comprehensive Income for the Three Months ended December 31, 2000 and 1999....................................................... 5 Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2000 and 1999...................................................... 6 Notes to Consolidated Financial Statements.......................................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................................... 13 Item 3. Quantitative and Qualitative Disclosures About Market Risks......................................... 19 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................................................... 20 Item 2. Changes in Securities (no response required)........................................................ - Item 3. Defaults upon Senior Securities (no response required).............................................. - Item 4. Submission of Matters to a Vote of Security Holders (no response required).......................... - Item 5. Other Information (no response required)............................................................ - Item 6. Exhibits and Reports on Form 8-K.................................................................... 20
The accompanying notes are an integral part of these financial statements. -2- 3 ICO, INC. CONSOLIDATED BALANCE SHEET (Unaudited and in thousands, except share data)
DECEMBER 31, SEPTEMBER 30, 2000 2000 ------------ ------------- ASSETS Current assets: Cash and cash equivalents $ 31,093 $ 38,955 Trade accounts receivables (less allowance for doubtful accounts of $2,108 and $1,995, respectively) 62,142 59,349 Inventories 28,291 29,412 Deferred tax asset 2,591 2,936 Prepaid expenses and other 3,530 4,320 --------- --------- Total current assets 127,647 134,972 --------- --------- Property, plant and equipment, net 105,092 104,749 Goodwill 50,925 50,293 Deferred tax asset 3,926 3,417 Debt offering costs 3,062 3,178 Other 2,211 2,568 --------- --------- Total assets $ 292,863 $ 299,177 ========= ========= LIABILITIES, STOCKHOLDERS' EQUITY AND ACCUMULATED OTHER COMPREHENSIVE LOSS Current liabilities: Short-term borrowings and current portion of long-term debt Accounts payable $ 10,413 $ 10,339 Accrued interest 20,712 25,307 Accrued salaries and wages 1,062 4,129 Income taxes payable 2,300 3,070 Other accrued expenses 1,959 2,809 Total current liabilities 11,259 11,600 --------- --------- 47,705 57,254 Deferred income taxes 5,539 5,143 Long-term liabilities 1,379 1,272 Long-term debt, net of current portion 140,991 140,236 --------- --------- Total liabilities 195,614 203,905 --------- --------- Commitments and contingencies Stockholders' equity: Preferred stock, without par value - 500,000 shares authorized; 322,500 shares issued and outstanding with a liquidation preference of $32,250 13 13 Junior participating preferred stock, without par value - 50,000 shares authorized; 0 shares issued and outstanding -- -- Common stock, without par value - 50,000,000 shares authorized; 22,686,987 and 22,678,107 shares issued and outstanding, respectively 40,257 40,236 Additional paid-in capital 105,333 105,333 Accumulated other comprehensive loss (11,069) (13,230) Accumulated deficit (37,285) (37,080) --------- --------- Total stockholders' equity 97,249 95,272 --------- --------- Total liabilities and stockholders' equity $ 292,863 $ 299,177 ========= =========
The accompanying notes are an integral part of these financial statements. -3- 4 ICO, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited and in thousands, except share data)
THREE MONTHS ENDED DECEMBER 31, ---------------------- 2000 1999 -------- -------- Revenues: Petrochemical processing sales and services $ 49,558 $ 52,044 Oilfield sales and services 30,932 21,977 -------- -------- Total net revenues 80,490 74,021 -------- -------- Cost and expenses: Cost of sales and services 62,328 56,159 Selling, general and administrative 10,384 10,338 Depreciation 3,218 3,453 Amortization of intangibles 616 646 -------- -------- 76,546 70,596 -------- -------- Operating income 3,944 3,425 -------- -------- Other income (expense): Interest income 577 427 Interest expense (3,625) (3,482) -------- -------- (3,048) (3,055) -------- -------- Income before taxes 896 370 Provision for income taxes 557 349 -------- -------- Net income 339 21 Preferred stock dividends 544 544 -------- -------- Net loss applicable to common stock $ (205) $ (523) ======== ======== Basic and diluted loss per share (see Note 3) $ (.01) $ (.02) ======== ========
The accompanying notes are an integral part of these financial statements. -4- 5 ICO, INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited and in thousands)
THREE MONTHS ENDED DECEMBER 31, ------------------- 2000 1999 ------- ------- Net Income $ 339 $ 21 Other comprehensive income (loss) Foreign currency translation adjustment 2,054 (1,759) Unrealized gain on foreign currency hedges 107 -- ------- ------- Comprehensive income (loss) $ 2,500 $(1,738) ======= =======
The accompanying notes are an integral part of these financial statements. -5- 6 ICO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited and in thousands)
THREE MONTHS ENDED DECEMBER 31, ---------------------- 2000 1999 -------- -------- Cash flows from operating activities: Net income $ 339 $ 21 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 3,834 4,099 Receivables (1,673) (2,928) Inventories 1,846 (2,156) Prepaid expenses and other assets 1,100 (391) Income taxes payable (861) 828 Deferred taxes 231 (261) Accounts payable (5,411) 4,143 Accrued interest (3,067) (3,091) Accrued expenses (1,449) (3,003) -------- -------- Total adjustments (5,450) (2,760) -------- -------- Net cash used for operating activities (5,111) (2,739) -------- -------- Cash flows used for investing activities: Capital expenditures (2,017) (2,676) Dispositions of property, plant and equipment 116 79 -------- -------- Net cash used for investing activities (1,901) (2,597) -------- -------- Cash flows provided by (used for) financing activities: Payment of dividend on preferred stock (544) (544) Additional debt 575 1,202 Reductions of debt (917) (630) -------- -------- Net cash provided by (used for) financing activities (886) 28 -------- -------- Effect of exchange rates on cash 36 (173) -------- -------- Net decrease in cash and equivalents (7,862) (5,481) Cash and equivalents at beginning of period 38,955 37,439 -------- -------- Cash and equivalents at end of period $ 31,093 $ 31,958 ======== ======== Supplemental disclosures of cash flow information: Cash received (paid) during the period for: Interest received $ 625 $ 338 Interest paid (6,687) (6,543) Income taxes paid (1,355) (175)
The accompanying notes are an integral part of these financial statements. -6- 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. BASIS OF FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial Statements," and accordingly do not include all information and footnotes required under generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the Annual Report on Form 10-K for the year ended September 30, 2000 for ICO, Inc. (the "Company"). In the opinion of management, these interim financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position as of December 31, 2000, the results of operations for the three months ended December 31, 2000 and 1999 and the changes in its cash position for the three months ended December 31, 2000 and 1999. Results of operations for the three-month period ended December 31, 2000 are not necessarily indicative of the results that may be expected for the year ending September 30, 2001. For additional information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended September 30, 2000. NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS During June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires that companies recognize all derivative instruments as either assets or liabilities on the balance sheet and measure those instruments at fair value. As required, the Company implemented SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," October 1, 2000. Due to the Company's limited use of derivative instruments, the impact of adopting SFAS No. 133 was not material to the Company's financial statements. Certain reclassifications have been made to prior year amounts in order to conform to current year classifications. -7- 8 NOTE 3. EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY Earnings per share is based on earnings applicable to common shareholders and is calculated using the weighted average number of common shares outstanding and in accordance with SFAS 128, "Earnings per Share". During the three months ended December 31, 2000 and December 31, 1999, the potentially dilutive effects of the Company's exchangeable preferred stock (would have an anti-dilutive effect) and common stock options and warrants, with exercise prices exceeding fair market value of the underlying common shares, have been excluded from diluted earnings per share. Additionally, the potentially dilutive effects of common stock options have been excluded from diluted earnings per share for those periods in which the Company generated a net loss. The total amount of anti-dilutive securities for the three months ended December 31, 2000 and 1999 were 5,629,000 and 5,691,000, respectively.
THREE MONTHS ENDED DECEMBER 31, ---------------------------------------------------------------------------------------------- 2000 1999 -------------------------------------------- -------------------------------------------- (In thousands, except share data) Income Shares Amount Income Shares Amount ----------- ---------- ----------- ----------- ---------- ----------- Net Income $ 339 $ 21 Less: Preferred stock dividends 544 544 ----------- ----------- BASIC EPS (205) 22,686,987 $ (.01) (523) 22,406,506 $ (.02) =========== =========== EFFECT OF DILUTIVE SECURITIES Options -- -- -- -- ----------- ----------- ----------- ----------- DILUTED EPS $ (205) 22,686,987 $ (.01) $ (523) 22,406,506 $ (.02) =========== =========== =========== =========== =========== ===========
NOTE 4. INVENTORIES Inventories consisted of the following:
DECEMBER 31, 2000 SEPTEMBER 30, 2000 ----------------- ------------------ (In thousands) Finished Goods $13,045 $13,073 Raw Materials 10,511 11,668 Supplies 3,376 3,441 Work in Progress 1,359 1,230 ------- ------- $28,291 $29,412 ======= =======
-8- 9 NOTE 5. SEGMENT AND FOREIGN OPERATIONS INFORMATION The Company's two reportable segments consist of the primary products and services provided by the Company to customers: Petrochemical Processing Services and Oilfield Services. The Petrochemical Processing segment provides size reduction, compounding, concentrates manufacturing, distribution and related services. The primary customers of the Petrochemical Processing segment include large producers of petrochemicals, end users, such as rotational molders, and polymer distributors. The Oilfield Service business segment provides oilfield tubular and sucker rod inspection, reconditioning and coating services and also sells equipment to customers. This segment's customers includes leading integrated oil companies, large independent oil and gas exploration and production companies, drilling contractors, steel producers and processors and oilfield supply companies. There are no material inter-segment revenues included in the segment information disclosed below. The Company evaluates the performance of its segments based upon revenues and operating income. Summarized financial information of the Company's reportable segments for the three months ended December 31, 2000 and 1999 is shown in the following tables.
Petrochemical Other Processing Oilfield Reconciling Services Services Items* Total ------------- -------- ----------- ------- THREE MONTHS ENDED (in thousands) DECEMBER 31, 2000 Revenues $49,558 $30,932 $ -- $80,490 Operating Income (Loss) 1,057 4,965 (2,078) 3,944 Depreciation 1,862 1,248 108 3,218 Amortization of intangibles 429 64 123 616 Expenditures for additions to long-lived assets 1,260 746 11 2,017 THREE MONTHS ENDED DECEMBER 31, 1999 Revenues 52,044 21,977 -- 74,021 Operating Income (Loss) 4,298 1,949 (2,822) 3,425 Depreciation 2,086 1,257 110 3,453 Amortization of intangibles 462 64 120 646 Expenditures for additions to long-lived assets 1,570 968 138 2,676
* Consists primarily of corporate overhead expenses and capital expenditures.
Petrochemical Other Processing Oilfield Reconciling Services Services Items** Total ------------- -------- ----------- ------- (in thousands) AS OF DECEMBER 31, 2000 Total Assets $173,965 $ 77,994 $ 40,904 $292,863
** Consists of unallocated corporate assets including: cash, deferred tax assets, unamortized bond offering expenses, and corporate fixed assets. -9- 10 A reconciliation of total segment operating income to consolidated income before taxes is as follows:
THREE MONTHS ENDED DECEMBER 31, -------------------- 2000 1999 ------- ------- (in thousands) Total operating income for reportable segments $ 3,944 $ 3,425 Interest income 577 427 Interest expense (3,625) (3,482) ------- ------- Consolidated income (loss) before income taxes $ 896 $ 370 ======= =======
NOTE 6. LEGAL PROCEEDINGS The Company is a named defendant in four cases involving four plaintiffs, for personal injury claims alleging exposure to silica resulting in silicosis-related disease. The cases were initiated on May 13, 1991 (by Odilon Martinez, et al., in Texas state court in Ector County); November 21, 1991 (by Roberto Bustillos, et al., in Texas state court in Ector County); August 25, 1992 (by James Glidwell, et al., in Texas state court in Ector County); and January 4, 2000 (by Pilar Olivas, et al., in Texas state court in Harris County). For the most part, the Company is generally protected under workers' compensation law from claims under these suits except to the extent a judgment is awarded against the Company for intentional tort. The standard of liability applicable to all of the Company's pending personal injury cases alleging exposure to silica is intentional tort, a stricter standard than the gross negligence standard applicable to wrongful death cases. One suit against the Company, which was settled and came to an end in the fourth quarter of fiscal 2000, involved negligence claims that, in theory, could have circumvented the Company's immunity protections under the workers' compensation law, although even if such circumvention had occurred, the Company believed that this litigation, referred to as the Roark litigation, would not have had a material adverse effect on the financial condition or results of operations of the Company. As described in more detail below, the Roark litigation named the Company and Baker Hughes, Inc. ("Baker Hughes"), among others, as defendants and fell within the provisions of an agreement between the Company and Baker Hughes that limited the Company's obligations in the litigation. During the fourth quarter of fiscal 2000, the Company, Baker Hughes and the plaintiff in the Roark litigation entered into a settlement that brought an end to the Roark litigation. The terms of the settlement did not have a material adverse effect on the Company's financial condition or results of operations. The Company currently has one pending silicosis-related suit in which wrongful death is alleged. This case was filed on April 4, 2000 by Delma Orozco, individually and as representative of the estate of Lazaro Orozco, et al., in Texas state court in Ector County. In fiscal 1993, the Company settled two other silicosis-related suits, both of which alleged wrongful death caused by silicosis-related diseases, which resulted in a total charge of $605,000. In 1994, the Company was dismissed without liability from two suits alleging intentional tort against the Company for silicosis-related disease. In 1996, the Company obtained a non-suit in two other intentional tort cases and in early 1997 was non-suited in an additional tort case. During the second quarter of fiscal 1998, three cases involving alleged silicosis-related deaths were settled. The Company was fully insured for all three cases and, as a result, did not incur any settlement costs. During the second quarter of fiscal 1998, the Company was non-suited in one intentional tort case, and during the fourth quarter of fiscal 1998, the Company was non-suited in two additional tort cases. During the second quarter of fiscal 1999, the Company was non-suited in one intentional tort case, and during the fourth quarter of fiscal 1999, the Company was non-suited in an additional intentional tort case. During the third quarter of fiscal 2000, the Company was non-suited in two additional intentional tort cases. The Company and its counsel cannot at this time predict with any reasonable certainty the outcome of any of the remaining silicosis-related suits or whether or in what circumstances additional suits may be filed. Except as described below, the Company does not believe, however, that such suits will have a material adverse effect on its financial condition, results of operations or cash flows. The Company has in effect, in some instances, general liability and employer's liability insurance policies applicable to the referenced suits; however, the extent and amount of coverage is limited and the Company has been advised by certain insurance carriers of a reservation of rights with regard to policy obligations pertaining to the suits because of various exclusions in the policies. If an adverse judgment is obtained against the Company in any of the referenced suits which is ultimately determined not to be covered by insurance, the amount of such judgment could have a material adverse effect on the financial condition, results of operations and/or cash flows of the Company. -10- 11 The Company's agreement with Baker Hughes, pursuant to which Baker Hughes Tubular Services ("BHTS") was acquired by the Company, provides that Baker Hughes will reimburse the Company for 50% of the BHTS environmental remediation costs in excess of $318,000, with Baker Hughes' total reimbursement obligation being limited to $2,000,000 (current BHTS obligation is limited to $1,650,000). BHTS is a responsible party at two hazardous waste disposal sites that are currently undergoing remediation pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). Under CERCLA, persons who were responsible for generating the hazardous waste disposed of at a site where hazardous substances are being released into the environment are jointly and severally liable for the costs of cleaning up environmental contamination, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injuries and property damage allegedly caused by hazardous substances released into the environment. The two sites where BHTS is a responsible party are the French Limited site northeast of Houston, Texas, and the Sheridan site near Hempstead, Texas. Remediation of the French Limited site has been completed, with only natural attenuation of contaminants in groundwater occurring at this time. Remediation has not yet commenced at the Sheridan site. Current plans for cleanup of this site, as set forth in the federal Record of Decision, call for on-site bioremediation of the soils in tanks and natural attenuation of contaminants in the groundwater. However, treatability studies to evaluate possible new remedies for the soils, such as in-place bioremediation, are being conducted as part of a Remedial Technology Review Program. Based on the completed status of the remediation at the French Limited site and BHTS's minimal contribution of wastes at both of the sites, the Company believes that its future liability under the agreement with Baker Hughes with respect to these two sites will not be material. During December 1996, an agreement was signed by the Company and Baker Hughes to settle the litigation of a dispute concerning the assumption of certain liabilities in connection with the acquisition of BHTS in 1992. The agreement stipulates that with regard to future occupational health claims, the parties shall share costs equally with the Company's obligations being limited to $500,000 for each claim and a maximum contingent liability of $5,000,000 ($4,500,000 net of payments the Company has made to date pursuant to the terms of the agreement) in the aggregate, for all claims. This agreement governed the Company's liability with respect to the Roark litigation, which involved occupational health claims arising out of Roark's employment at BHTS. On November 21, 1997, in an action initiated by the Company in October 1994, a Texas state court jury awarded the Company approximately $13,000,000 in the trial of its case against John Wood Group PLC relating to the 1994 contract for the purchase of the operating assets of NDT Systems, Inc. and certain related entities. The trial court subsequently entered a judgment for $15,750,000 in the Company's favor, which includes pre-judgment interest on the jury award. The Wood Group appealed the judgment. On March 9, 2000, the Court of Appeals for the First District of Texas reversed the judgment entered by the trial court and, as to all but one of ICO's claims, ordered that ICO have no recovery. As to that remaining breach of contract claim seeking recovery of a contract payment of $500,000, the Court of Appeals remanded the cause to the trial court for further proceedings. The Court of Appeals overruled ICO's motion for rehearing and rehearing en banc. ICO filed a petition for review in the Texas Supreme Court and the Texas Supreme Court denied ICO's petition for review on February 8, 2001. ICO will be filing a motion for rehearing from the Texas Supreme Court's denial of ICO's petition for review. Depending upon the Texas Supreme Court's ruling on that motion for rehearing, ICO may seek further relief in the district court on the portion of the case remanded by the Court of Appeals. ICO Tubular Services, Inc., a now-defunct subsidiary of the Company, has been named as a Respondent in an arbitration claim made on August 7, 1998, by Oil Country Tubular Limited ("OCTL"), a company based in India. The claim arises out of a transaction between OCTL and Baker Hughes Tubular Services, Inc. (BHTS) whereby BHTS sold a plant in Canada to OCTL and entered into a separate Foreign Collaboration Agreement (FCA) to provide certain practical and technical assistance in setting up the plant and making it operational in India. OCTL paid $2,400,000 for the FCA and $2,800,000 for the plant. In its claim brought in the Court of Arbitration of the International Chamber of Commerce, OCTL claims, among other items, it did not receive technical assistance, spare parts, and certain raw materials that were necessary for its oil field tubular services plant in India and that BHTS owed it under the FCA. The Company is involved by virtue of its acquisition in 1992 of BHTS. The Company had only peripheral knowledge of the dispute between OCTL and Baker Hughes Incorporated prior to the filing of OCTL's claim. The Company objected to the jurisdiction of the arbitration tribunal on the ground that the Company is not a party to the FCA, the FCA having been assigned to Tuboscope Incorporated prior to ICO's purchase of BHTS. After a hearing on that objection, the arbitral tribunal entered a decision in March 2000, holding that it did have jurisdiction over the Company. OCTL submitted an Amended Statement of Claim in November, 2000. While the total amount of OCTL's claims remain unclear, it has alleged approximately $8,700,000 in losses due to past contractual breaches, plus approximately $7,900,000 in "liquidated damages" it claims to have paid to third parties because of production losses that allegedly resulted from -11- 12 contractual breaches, and an unspecified amount of damages from lost sales. While the outcome of this arbitration matter cannot be predicted, the Company plans to contest the claims vigorously. Regardless of the liability of facts, about which the Company has no knowledge at this point, the Company believes the damage claim is exaggerated. The Company, Baker Hughes, and Tuboscope have entered into a separate agreement to arbitrate which entity would be responsible to pay any award the ICC arbitral panel may enter. The Company is also named as a defendant in certain other lawsuits arising in the ordinary course of business. The outcome of these lawsuits cannot be predicted with certainty. -12- 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements contained in all parts of this document, including, but not limited to, timing of new services or facilities, ability to compete, effects of compliance with laws, matters relating to operating facilities, effect and cost of litigation and remediation, future liquidity, future capital expenditures, future acquisitions, future market conditions, reductions in expenses, derivative transactions, marketing plans, demand for the Company's products and services, future growth plans, oil and gas company spending, financial results, and any other statements which are not historical facts are forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve substantial risks and uncertainties. When words such as "anticipate", "believe", "estimate", "intend", "expect", "plan" and similar expressions are used, they are intended to identify the statements as forward-looking. Actual results, performance or achievements can differ materially from results suggested by these forward-looking statements due to a number of factors, including effects of the Company's indebtedness, the state of the oil and gas industry, demand for the Company's products and services, oil and gas prices, the rig count, the effect of the business cycle and the level of business activity, the Company's proprietary technology, risks relating to acquisitions, the Company's ability to integrate specialty chemical operations and to manage any growth, the risks of international operations and currency risks, operations risks and risks regarding regulation, as well as those described in the Company's annual report on Form 10-K for the fiscal year ended September 30, 2000. INTRODUCTION The Company has two operating segments: petrochemical processing and oilfield services. Petrochemical processing revenues are derived from (1) grinding petrochemicals into powders (size reduction) using a variety of methods, including ambient grinding, cryogenic grinding and jet milling, providing ancillary services and selling grinding and other equipment manufactured by the Company, (2) compounding sales and services, which include the manufacture and sale of concentrates, and (3) distributing plastic powders. The Company's distribution operations typically utilize the Company's size reduction and compounding facilities to process petrochemical products prior to sale. Oilfield services revenues include revenues derived from (1) exploration sales and services (new tubular goods inspection), (2) production sales and services (reclamation, reconditioning and inspection of used tubular goods and sucker rods), (3) corrosion control services (coating of tubular goods and sucker rods), and (4) other sales and services (transportation services and oilfield engine sales and services in Canada). Service revenues in both of the Company's business segments are recognized as the services are performed or, in the case of product sales, revenues are generally recognized upon shipment to third parties. Cost of sales and services for the petrochemical processing and oilfield services segments is primarily comprised of compensation and benefits to non-administrative employees, occupancy costs, repair and maintenance, electricity and equipment costs and supplies, and, in the case of concentrate manufacturing operations and the Company's distribution business, purchased raw materials. Selling, general and administrative expenses consist primarily of compensation and related benefits to the sales and marketing, executive management, management information system support, accounting, legal, human resources and other administrative employees of the Company, other sales and marketing expenses, communications costs, systems costs, insurance costs and legal and accounting professional fees. Gross profits as a percentage of revenue for the distribution and concentrate manufacturing businesses generally are significantly lower than those generated by the Company's size reduction services. Several of the Company's petrochemical processing subsidiaries, including the Company's concentrate manufacturing and distribution operations, typically buy raw materials, improve the material and then sell the finished product. In contrast, many of the Company's size reduction operations, particularly the U.S. locations, typically involve processing customer-owned material (referred to as toll processing). The Company's distribution businesses are, however, less capital intensive relative to the Company's other petrochemical businesses, and both the distribution and concentrate manufacturing businesses generated good returns on invested capital. Performing distribution activities also allows the Company's processing operations to be scheduled more efficiently and enhances the Company's relationships with the end users of the processed material. Demand for the Company's petrochemical processing products and services tends to be driven by overall economic factors and , particularly, consumer spending. The trend of applicable resin prices also impacts customer demand. As resin prices are falling, customers tend to destock their inventories and, therefore, reduce their need for the Company's products and services. Conversely, as resin prices are rising, customers often build their inventories and accelerate their purchases of products and services from the Company. Additionally, demand for the Company's petrochemical processing revenues tends to be seasonal with customer demand being weakest during the Company's first fiscal quarter, due to the holiday -13- 14 season and in the U.S. also due to property taxes levied on customers' inventories on December 31 of each year. The Company's fourth fiscal quarter also tends to be soft, in terms of customer demand, due to vacation periods in the Company's European markets. The demand for the Company's oilfield products and services depends upon oil and natural gas prices and the level of oil and natural gas production and exploration activity. In addition to changes in commodity prices, exploration and production activities are affected by worldwide economic conditions, supply and demand for oil and natural gas, seasonal trends and the political stability of oil-producing countries. The oil and gas industry has been highly volatile over the past several years, due primarily to the volatility of oil and natural gas prices. During fiscal 1996 and 1997, the oil and gas service industry generally experienced increased demand and improved product and service pricing as a result of improved commodity prices and greater levels of oil and gas exploration and production activity, due largely to a strong world economy. In fiscal 1998, however, oil prices declined significantly versus fiscal 1997 levels. While gas prices also declined during this period, they declined to a lesser extent. These trends were attributed to, among other factors, an excess worldwide oil supply, lower domestic energy demand resulting from an unseasonably warm winter and a decline in demand due to the economic downturn in Southeast Asia. As oil and, to a lesser extent, natural gas prices declined during this period, demand for oilfield products and services, including those provided by the Company, softened. Oil and gas prices continued to fall sharply in the first half of fiscal 1999, with oil prices (as measured by the spot market price for West Texas Intermediate Crude) reaching a low of less than $11.00 per barrel and natural gas prices (as measured by the Henry Hub spot market price) reaching a low of $1.65 per mcf during the first quarter of fiscal 1999. This 25-year low, in real dollar terms, resulted in extremely depressed levels of oilfield exploration and production activity with the U.S. drilling rig count falling to an average of only 523 rigs during the third quarter of fiscal 1999. The Company's oilfield service revenues and income were adversely impacted by these factors. Over the course of fiscal 2000, oil and gas prices generally increased. During the first quarter of fiscal 2001, the price of oil rose to an average of $31.97 per barrel and natural gas prices rose to an average of $6.44 per mcf. These trends have resulted in a strong recovery in demand for oilfield services generally, including those provided by the Company, with the U.S. rig count rising to an average of 1,075 during the first quarter of fiscal 2001. Furthermore, the Company believes that many oil and gas companies will increase their capital spending levels in calendar year 2001, compared to the year 2000. While the predicted increase in spending is not assured, if correct, the demand for the Company's oilfield services should continue to improve. The Company is also optimistic that, if oil and gas prices remain at or near their present levels, market conditions will remain very favorable for the Company's oilfield services. -14- 15 LIQUIDITY AND CAPITAL RESOURCES The following are considered by management as key measures of liquidity applicable to the Company:
DECEMBER 31, 2000 SEPTEMBER 30, 2000 ----------------- ------------------ Cash and cash equivalents $31,093,000 $38,955,000 Working capital 79,942,000 77,718,000 Current ratio 2.7 2.4 Debt-to-capitalization .61 to 1 .61 to 1
Cash and cash equivalents decreased $7,862,000 during the three months ended December 31, 2000 due to the factors described below. The Company's net working capital increased during the three months ended December 31, 2000 from $77,718,000 at September 30, 2000 to $79,942,000 at December 31, 2000 as a result of the factors described below. For the three months ended December 31, 2000, cash used for operating activities increased to $5,111,000 from $2,739,000 for the three months ended December 31, 1999. The increase in cash used for operating activities occurred despite higher net income due to the various changes in working capital accounts (particularly changes of inventory and accounts payable). Capital expenditures totaled $2,017,000 during the three months ended December 31, 2000, of which $1,260,000 related to the petrochemical processing business, $746,000 related to the oilfield services business, and the remaining were general corporate expenditures. These expenditures were made primarily to expand the Company's operating capacity. The Company anticipates that available cash and/or existing credit facilities will be sufficient to fund remaining fiscal 2001 capital expenditure requirements. Cash flows used for financing activities decreased to cash used of $886,000 during the three months ended December 31, 2000 from cash provided of $28,000 during the three months ended December 31, 2000. The decrease was primarily the result of lower borrowings. As of December 31, 2000, the Company had approximately $11,857,000 of additional borrowing capacity available under various foreign credit arrangements. Currently, the Company does not have a domestic credit facility. The Company anticipates that existing cash balances and the additional borrowing capacity provided under the foreign credit facilities will be an adequate source of liquidity for the remainder of fiscal 2001. The terms of the Company's Senior Notes limit the amount of liens and additional indebtedness incurred by the Company. The terms of the Senior Notes indenture also restrict the Company's ability to pay dividends on preferred and common stock; however, the terms of the Senior Notes do allow for dividend payments on currently outstanding preferred stock, in accordance with the terms of the preferred stock, and up to $.22 per share, per annum on common stock, in the absence of any default or event of default on the Senior Notes. The above limitations may not be decreased, but may be increased based upon the Company's results of operations and other factors. The Company's foreign facilities are generally secured by assets owned by subsidiaries of the Company and also carry various financial covenants. The indenture pursuant to which the Company's Senior Notes were issued contains a number of covenants including: a prohibition on the incurrence of indebtedness and the issuance of stock that is redeemable or is convertible or exchangeable for debt, provided that the Company may incur additional indebtedness if the consolidated interest coverage ratio, as defined in the indenture, will be at least 2.0 to 1.0 after such indebtedness is incurred; a prohibition on certain restricted payments, including, among others, the payment of any dividends, the purchase or redemption of any capital stock or the early retirement of any debt subordinate to the Senior Notes, subject to certain exceptions; certain prohibitions on creating liens on the Company's assets unless the Senior Notes are equally and ratably secured; prohibitions on transactions with affiliates; a prohibition against restrictions on the ability of the Company's subsidiaries to pay dividends or make certain distributions, payments or advances to the Company, restrictions on the sale of assets of the Company unless (i) the Company receives the fair market value of such properties or assets, determined pursuant to the indenture, (ii) the Company receives 75% of the purchase price for such assets in cash or cash equivalents and (iii) the proceeds of such sale are applied pursuant to the indenture; a change of control provision that requires the Company to repurchase all of the Senior Notes at a repurchase price in cash equal to 101% of the principal amount of the Senior Notes upon the occurrence of a change of control ("change of control" means (i) the sale, lease or other disposition of all or -15- 16 substantially all of the assets of the Company and its restricted subsidiaries, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) any person or group becoming the beneficial owner of more than 50% of the total voting power of the voting stock of the Company, (iv) or a majority of the members of the Board of Directors no longer being "continuing directors" ["continuing directors" means the members of the Board of Directors on the date of the indenture and members that were nominated for election or elected to the Board of Directors with the affirmative vote of a majority of the "continuing directors" who were members of the Board at the time of such nomination or election]); a prohibition of certain sale/leaseback transactions; and restrictions on guarantees of certain indebtedness by the Company's restricted subsidiaries. The indenture also restricts certain mergers, consolidations or dispositions of all or substantially all of the Company's assets. RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, -------------------------------------------- % OF % OF NET REVENUES (000'S) 2000 TOTAL 1999 TOTAL ------- ----- ------- ----- Distribution $18,928 38 $22,767 44 Size Reduction Services and Other Sales and Services 10,325 21 11,206 21 Compounding Sales and Services 20,305 41 18,071 35 ------- --- ------- --- Total Petrochemical Processing 49,558 100 52,044 100 ------- ------- Exploration Sales and Services 10,835 35 6,626 30 Production Sales and Services 9,715 32 8,426 38 Corrosion Control Sales and Services 7,203 23 4,792 22 Other Sales and Services 3,179 10 2,133 10 ------- --- ------- --- Total Oilfield Services Revenues 30,932 100 21,977 100 ------- ------- Total $80,490 $74,021 ======= =======
THREE MONTHS ENDED DECEMBER 31, ---------------------------------------------- % OF % OF OPERATING PROFIT (LOSS) (000'S) 2000 TOTAL 1999 TOTAL ------- ----- ------- ----- Petrochemical Processing $ 1,057 18 $ 4,298 69 Oilfield Services 4,965 82 1,945 31 ------- --- ------- --- Total Operations 6,022 100 6,247 100 General Corporate Expenses (2,078) (2,822) ------- ------- Total $ 3,944 $ 3,425 ======= =======
Three Months Ended December 31, 2000 Compared to the Three Months Ended December 31, 1999 REVENUES. First quarter fiscal 2001 revenues improved to $80,490,000, an increase of $6,469,000 or 9%. The increase was due to revenue improvements of the Company's oilfield service business, partially offset by a revenue decline within the Petrochemical Processing business. Petrochemical processing revenues declined $2,486,000 (5%) during the first quarter of fiscal 2001 compared to the same quarter of fiscal 2000. The decline resulted from lower size reduction and distribution revenues, partially offset by an increase in compounding revenues. Size reduction revenues were $10,325,000 during the first quarter of fiscal 2001, a decline of $881,000 (8%). This decline was driven by weakness in the Company's European markets where customer -16- 17 demand dropped during the quarter. Additionally, the strength of the U.S. Dollar, which rose almost 16% versus the Euro during the quarter, had the effect of reducing overall European revenues $3,439,000. The softening demand is the result of a decline in polymer prices and increased competitive pressures in certain markets, as well as a general slowing of many European economies. A decline in polymer prices tends to reduce demand for the Company's petrochemical processing services as customers seek to minimize inventories. Also, falling resin prices ultimately reduces revenues from distribution and other services that involve the purchase and resale of polymers. Compounding revenues increased $2,234,000 (12%) during the first quarter of fiscal 2001 to $20,305,000. This increase is mostly due to the capacity expansion during the past year at the Company's largest compounding facility in LaPorte, Texas. Distribution revenues declined $3,839,000 (17%) to $18,928,000 due to lower revenues in Europe and Southeast Asia. The European decline was primarily due to lower sales volumes resulting from the factors described above and the strengthening of the U.S. Dollar versus the Euro. The Southeast Asian decline was driven by factors similar to those affecting the Company's European markets. Oilfield Service revenues increased $8,955,000 or 41% to $30,932,000 during the first quarter of fiscal 2001 compared to the same quarter of fiscal 2000. All major product lines within Oilfield Services experienced revenue growth during the quarter. Strong customer demand for the Company's Oilfield Services is being driven by higher oil and gas prices and, in turn, higher rig counts. Compared to the first quarter of fiscal 2000, the average U.S. benchmark oil price increased 23% to $31.97, the average benchmark natural gas price increased 160% to $6.44, the average U.S. drilling rig count increased 28% to 1,075, and the average Canadian drilling rig count increased 11% to 378, during the first quarter of fiscal 2001. Demand is very strong for the Company's Oilfield Services, and the Company believes that demand is likely to remain strong if oil and gas prices remain at or near their current levels. COST AND EXPENSES Gross margins (calculated as the difference between net revenues and cost of sales, divided by net revenues) declined to 22.6% in the first quarter of fiscal 2001 compared to 24.1% in the first quarter of fiscal 2000. The decline occurred due to a gross margin decline in the Petrochemical Processing business segment, partially offset by the improvement of gross margins within the Oilfield Service business segment. Petrochemical processing gross margins declined to 17.3% during the first quarter of fiscal 2001 compared to 22.7% during the same quarter of fiscal 2000. The gross margin decline was the result of lower revenues caused by a combination of lower volumes and, to a lesser extent, lower selling prices, a less favorable revenue mix and the fact that distribution gross margins declined as a result of falling polymer prices and competitive pressures. Oilfield Service gross margins improved to 31.0% during the first quarter of fiscal 2001 compared to 27.6% during the first quarter of fiscal 2000. The improvement is mostly due to the benefits of higher volumes, resulting from increased customer demand and, to a lesser extent, modest pricing improvements. Depreciation and amortization expenses decreased from $4,099,000 during the first quarter of fiscal 2000 to $3,834,000 during the same quarter of fiscal 2001. This decline was the result of the effects of the strengthening U.S. Dollar, partially offset by the impact of capital expenditures. Selling, general and administrative expenses increased slightly to $10,384,000 during the first quarter of fiscal 2001, compared to $10,338,000 during the same quarter of fiscal 2000. The increase was primarily the result of higher Oilfield Service selling, general and administrative expenses consistent with the 41% revenue increase, offset, in part, by lower corporate overhead expenses. As a percentage of revenues, selling, general and administrative expenses improved to 12.9% in the first quarter of fiscal 2001, compared to 14.0% for the same quarter of fiscal 2000. OPERATING INCOME Operating income increased from $3,425,000 for the three months ended December 31, 1999, to $3,944,000 for the three months ended December 31, 2000. This increase was due to the changes in revenues and costs and expenses discussed above. INCOME TAXES The Company's effective income tax rate decreased to 62% during the three months ended December 31, 2000 compared to 94% during the three months ended December 31, 1999. The tax rate decrease was due to the relation -17- 18 between pre-tax income and permanent differences, as well as a change in the mix of pre-tax income or loss generated by the Company's operations in various taxing jurisdictions. NET INCOME For the three months ended December 31, 2000, the Company had net income of $339,000 compared to net income of $21,000 for the same period in fiscal 2000, due to the factors described above. FOREIGN CURRENCY TRANSLATION The fluctuations of the U.S. dollar against the Euro, Swedish krona, British pound, Canadian dollar, New Zealand dollar, and the Australian dollar have impacted the translation of revenues and expenses of the Company's international operations. The table below summarizes the impact of changing exchange rates for the above currencies for the three months ended December 31, 2000 compared to the exchange rates used to translate the three months ended December 31, 1999.
THREE MONTHS ENDED DECEMBER 31, 2000 ----------------- Net revenues $(4,580,890) Earnings before interest, taxes, depreciation, and amortization (321,837) Operating income (97,165) Pre-tax income (22,390) Net income (33,211)
-18- 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposures include debt obligations carrying variable interest rates, and forward purchase contracts intended to hedge accounts payable obligations denominated in currencies other than a given operation's functional currency. The Company's strategy has typically been to finance only working capital with variable interest rate debt and to fix interest rates for the financing of long-term assets. Forward currency contracts are used by the Company as a method to establish a fixed functional currency cost for certain raw material purchases denominated in non-functional currency (usually the U.S. dollar). The following table summarizes the Company's market-sensitive financial instruments. These transactions are considered non-trading activities.
ON-BALANCE SHEET DECEMBER 31, 2000 FINANCIAL INSTRUMENTS ------------------------------------------------------------------ - --------------------- US$ EQUIVALENT WEIGHTED AVERAGE Variable interest rate debt: IN THOUSANDS INTEREST RATE EXPECTED MATURITY ------------ ---------------- ----------------- CURRENCY DENOMINATION Dutch Guilders $ 462 6.04% less than one year British Pounds Sterling 2,259 7.25% less than one year French Francs 42 5.69% less than one year Italian Lira 3,306 5.61% less than one year New Zealand Dollar 800 7.76% less than one year Swedish Krona 214 4.95% less than one year Australian Dollar 87 8.75% less than one year
ANTICIPATED TRANSACTIONS AND RELATED DERIVATIVES Forward Exchange Agreements (000s): RECEIVE US$/PAY NZ$: Contract Amount US$1,000 Average Contractual Exchange Rate (NZ$/US$) .4145 Expected Maturity Dates January 2001 through April 2001 RECEIVE US$/PAY AUSTRALIAN $: Contract Amount US$923 Average Contractual Exchange Rate (A$/US$) .5363 Expected Maturity Dates January 2001 through April 2001 RECEIVE US$/PAY FRENCH FRANCS Contract Amount US$150 Average Contractual Exchange Rate (FRF/US$) .1378 Expiration Date December, 2001
-19- 20
ON-BALANCE SHEET FINANCIAL INSTRUMENTS DECEMBER 31, 1999 - --------------------- US$ EQUIVALENT WEIGHTED AVERAGE Variable interest rate long-term debt: IN THOUSANDS INTEREST RATE EXPECTED MATURITY -------------- ------------------ ----------------- CURRENCY DENOMINATION Dutch Guilders $ 1,583 4.50% less than one year British Pounds Sterling 726 6.81% less than one year French Francs 58 3.74% 2001 Italian Lira 4,432 3.55% less than one year Canadian Dollar 3,762 7.48% various through 2004
ANTICIPATED TRANSACTIONS AND RELATED DERIVATIVES Forward Exchange Agreements (in 000s): RECEIVE US$/PAY NZ$: Contract Amounts US$878 Average Contractual Exchange Rate (NZ$/US$) .5208 Expected Maturity Dates January 2000 through April 2000 RECEIVE US$/PAY AUSTRALIAN $: Contract Amounts US$1,597 Average Contractual Exchange Rate (A$/US$) .6489 Expected Maturity Dates January 2000 through April 2000
PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 6 to the Consolidated Financial Statements included in Part I, Item 1, of this quarterly report on Form 10-Q. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Reference is hereby made to the exhibit index which appears on page 21. (b) There were no reports on Form 8-K during the Company's first fiscal quarter. -20- 21 The following instruments and documents are included as Exhibits to this Form 10-Q. Exhibits incorporated by reference are so indicated by parenthetical information. EXHIBIT NO. EXHIBIT 2.1 -- Plan of Merger of ICO Merger Sub, Inc. with and into ICO, Inc. (filed as Exhibit 2.4 to Form 10-Q dated August 13, 1998) 3.1 -- Articles of Incorporation of the Company dated March 20, 1998 (filed as Exhibit 3.1 to Form 10-Q dated August 13, 1998) 3.2 -- Statement of Resolution of $6.75 Convertible Exchangeable Preferred Stock dated March 30, 1998 (filed as Exhibit 3.2 to Form 10-K dated December 23, 1998) 3.3 -- Certificate of Designation of Junior Participating Preferred Stock of ICO Holdings, Inc. dated March 30, 1998 (filed as Exhibit 3.3 to Form 10-K dated December 23, 1998) 3.4 -- Amended and Restated By-Laws of the Company dated May 12, 1999 (filed as Exhibit 3.4 to Form 10-Q dated May 14, 1999). 4.1 -- Indenture dated as of June 9, 1997 between the Company, as issuer, and Fleet National Bank, as trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.1 to Form S-4 dated June 17, 1997) 4.2 -- First Supplemental Indenture and Amendment dated April 1,1998 between the Company, as issuer, and State Street and Trust Company (formerly Fleet National Bank), as trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.2 to Form 10-Q dated May 15, 1998) 4.3 -- Second Supplemental Indenture and Amendment dated April 1, 1998 between ICO P&O, Inc., a wholly owned subsidiary of the Registrant, and State Street and Trust Company (formerly Fleet National Bank), as trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.3 to Form 10-Q dated May 15, 1998) 4.4 -- Warrant Agreement -- Series A, dated as of September 1, 1992, between the Registrant and Society National Bank (filed as Exhibit 4 to the Registrant's Annual Report on Form 10-K for 1992) 4.5 -- Stock Registration Rights Agreement dated April 30, 1996 by and between the Company, a subsidiary of the Company and the Wedco Shareholders Group, as defined (filed as Exhibit 4.4 to Form S-4 dated March 15, 1996) 4.6 -- Shareholder Rights Agreement dated April 1, 1998 by and between the Registrant and Harris Trust and Savings Bank, as rights agent (filed as Exhibit 4.7 to Form 10-Q for the quarter ended March 31, 1998) 10.1 -- ICO, Inc. 1985 Stock Option Plan, as amended (filed as Exhibit B to the Registrant's Definitive Proxy Statement dated April 27, 1987 for the Annual Meeting of Shareholders) 10.2 -- Second Amended and Restated 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc. (filed as Exhibit A to the Registrant's Definitive Proxy Statement dated January 26, 1999 for the Annual Meeting of Shareholders) 10.3 -- 1994 Stock Option Plan of ICO, Inc. (filed as Exhibit A to Registrant's Definitive Proxy Statement dated June 24, 1994 for the Annual Meeting of Shareholders) 10.4 -- ICO, Inc. 1995 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement dated August 10, 1995 for the Annual Meeting of Shareholders) 10.5 -- ICO, Inc. 1996 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement dated August 29, 1996 for the Annual Meeting of Shareholders) 10.6 -- ICO, Inc. 1998 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement dated January 23, 1998 for the Annual Meeting of Shareholders) 10.7 -- Willoughby International Stockholders Agreement dated April 30, 1996 (filed as Exhibit 10.9 to Form S-4 dated March 15, 1996) 10.8 -- Consulting Agreement -- William E. Willoughby (filed as Exhibit 10.13 to Form S-4 dated March 15, 1996) -21- 22 EXHIBIT NO. EXHIBIT 10.9 -- Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.14 to Form S-4 dated March 15, 1996) 10.10 -- Addendum to Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.15 to form S-4 dated March 15, 1996) 10.11 -- Non-Competition Covenant William E. Willoughby (filed as Exhibit 10.11 to Form S-4 dated March 15, 1996) 10.12 -- Stockholders Agreement respecting voting of shares of certain former Wedco common shareholders (filed as Exhibit 10.21 to Form S-4 dated March 15, 1996) 10.13 -- Stockholders Agreement respecting voting of shares of certain ICO common shareholders (filed as Exhibit 10.22 to Form S-4 dated March 15, 1996) 10.14 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Asher O. Pacholder and amendments thereto (filed as Exhibit 10.16 to Form 10-K dated December 29, 1997) 10.15 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Sylvia A. Pacholder and amendments thereto (filed as Exhibit 10.17 to Form 10-K dated December 29, 1997). 10.16 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Jon C. Biro (filed as Exhibit 10.20 to Form 10-K dated December 23, 1998) 10.17 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Isaac H. Joseph (filed as Exhibit 10.21 to Form 10-K dated December 23, 1998) 10.18 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Robin E. Pacholder (filed as Exhibit 10.18 to Form 10-K dated December 17, 1999) 10.19 -- Employment Agreement dated August 5, 1999 by and between the Registrant and David M. Gerst (filed as Exhibit 10.19 to Form 10-K dated December 17, 1999) 10.20** -- Amendment dated September 4, 1998 to Employment Agreement dated April 1, 1998 by and between the registrant and Asher O. Pacholder 10.21** -- Amendment dated September 4, 1998 to Employment Agreement dated April 1, 1998 by and between the registrant and Sylvia A. Pacholder 21 -- Subsidiaries of the Company (Filed as exhibit 21 to Form 10-K dated December 19, 2000) - ---------- ** Filed herewith -22- 23 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. ICO, Inc. --------------------------------------- (Registrant) /s/ Asher O. Pacholder --------------------------------------- February 13, 2001 Asher O. Pacholder Chairman and Chief Financial Officer (Principal Financial Officer) /s/ Jon C. Biro --------------------------------------- Jon C. Biro Senior Vice President, Chief Accounting Officer and Treasurer (Principal Accounting Officer) 24 EXHIBIT INDEX EXHIBIT NO. EXHIBIT 10.20** -- Amendment dated September 4, 1998 to Employment Agreement dated April 1, 1998 by and between the registrant and Asher O. Pacholder 10.21** -- Amendment dated September 4, 1998 to Employment Agreement dated April 1, 1998 by and between the registrant and Sylvia A. Pacholder - ---------- ** Filed herewith EX-10.20 2 h84150ex10-20.txt AMEND.TO EMPLOYMENT AGREEMENT - ASHER O PACHOLDER 1 EXHIBIT 10.20 THIRD AMENDMENT TO EMPLOYMENT AGREEMENT The Employment Agreement (the "Agreement") between ICO, Inc., a Texas corporation (the "Company") and Asher O. Pacholder (the "Executive") dated April 1, 1995, as amended by the First Amendment to Employment Agreement dated June 14, 1996 and as amended by the Second Amendment to Employment Agreement dated February 7, 1997, is amended hereby as follows: Paragraph 3(a) of the Agreement is deleted in its entirety and the following paragraph 3(a) substituted in its place. (a) During the Employment Period, Executive shall be engaged as the Chairman of the Board of the Company, and the Company agrees to use its best efforts to cause Executive to be nominated and elected as a director of the Company; subject, however, to the Executive's reelection by the shareholders of the Company at the annual shareholders' meeting when his applicable class of directors is to be voted upon by the shareholders. In addition, during the Employment Period, Executive shall be engaged as the Chief Financial Officer of the Company. In such positions, executive shall have such duties and authority as are reasonably accorded and expected of a Chairman of the Board and Chief Financial Officer consistent with the By-Laws of the Company and shall have such other duties and authority as shall be reasonably determined form time to time by the Board. Paragraph 5(c)(i) of the Agreement is deleted in its entirety and the following paragraph 5(c)(i) substituted in its place. (i) Executive ceasing for any reason to be either the Chairman of the Board or Chief Financial Officer of the Company, other than by death, disability or termination by the Executive of employment with the Company other than for Good Reason; Paragraph 6(b) of the Agreement is amended to replace the words "three-year" in the first sentence thereof with "five-year." Paragraph 6(d)(i)(C) of the Agreement is amended to replace the first word thereof "three" with "five." Paragraph 6(d)(iv) of the Agreement is amended to replace the fourth word thereof "three" with "five." Paragraph 6(d)(i)(B) of the Agreement is amended to replace the words "a particular year" in the fourth line thereof with "the particular year in which the termination occurs." 2 Except as amended by this Third Amendment, all other provisions of the Agreement, as amended to date, hereby are ratified and affirmed. In witness whereof, the Executive has set his hand hereunto, and, pursuant to the authorization from the Compensation Committee of the Board of Directors, the Company has caused these presents to be executed in its name on its behalf, this 4th day of September, 1998. /s/ Asher O. Pacholder ----------------------- Asher O. Pacholder ICO, Inc. By: /s/ Jon C. Biro ------------------- Name: Jon C. Biro ----------------- Title: SVP - Treasurer --------------- EX-10.21 3 h84150ex10-21.txt AMEND.TO EMPLOYMENT AGREEMENT - SYLVIA A PACHOLDER 1 EXHIBIT 10.21 THIRD AMENDMENT TO EMPLOYMENT AGREEMENT The Employment Agreement (the "Agreement") between ICO, Inc., a Texas corporation (the "Company") and Sylvia A. Pacholder (the "Executive") dated April 1, 1995, as amended by the First Amendment to Employment Agreement dated June 14, 1996 and as amended by the Second Amendment to Employment Agreement dated February 7, 1997, is amended hereby as follows: Paragraph 6(b) of the Agreement is amended to replace the words "three-year" in the first sentence thereof with "five-year." Paragraph 6(d)(i)(C) of the Agreement is amended to replace the first word thereof "three" with "five." Paragraph 6(d)(iv) of the Agreement is amended to replace the fourth word thereof "three" with "five." Paragraph 6(d)(i)(B) of the Agreement is amended to replace the words "a particular year" in the fourth line thereof with "the particular year in which the termination occurs." Except as amended by this Third Amendment, all other provisions of the Agreement, as amended to date, hereby are ratified and affirmed. In witness whereof, the Executive has set her hand hereunto, and, pursuant to the authorization from the Compensation Committee of the Board of Directors, the Company has caused these presents to be executed in its name on its behalf, this 4th day of September, 1998. /s/ Sylvia A. Pacholder ----------------------------------- Sylvia A. Pacholder ICO, Inc. By: /s/ Jon C. Biro ------------------------------- Name: Jon C. Biro ----------------------------- Title: Sr. Vice President/Treasurer ---------------------------- -----END PRIVACY-ENHANCED MESSAGE-----