-----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, CNToBnW1hPkqdJROzIs43RcZAW788AfjkeNiJLvFTwMjUb67PaymzxrBJLdM7Tk5 eHwTsynGmIUbGCTrjbxmDg== 0000813621-97-000001.txt : 19970507 0000813621-97-000001.hdr.sgml : 19970507 ACCESSION NUMBER: 0000813621-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970321 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCOL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000813621 STANDARD INDUSTRIAL CLASSIFICATION: 1400 IRS NUMBER: 360724340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15661 FILM NUMBER: 97560362 BUSINESS ADDRESS: STREET 1: 1500 W SHURE DR SUITE 500 STREET 2: 1500 W SHURE DR CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 BUSINESS PHONE: 7083924600 MAIL ADDRESS: STREET 1: ONE N ARLINGTON 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-K 1 FORM 10-K =============================================================================== =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________ FORM 10-K (Mark one) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 |_| 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) (I.R.S. Employer Identification No.) One North Arlington, 1500 West Shure Drive, Suite 500 Arlington Heights, Illinois 60004-7803 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 394-8730 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: $.01 par value Common Stock (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. |_| The aggregate market value of the $.01 par value Common Stock, held by non-affiliates of the registrant on March 14, 1997, based upon the closing sale price on that date as reported in The Wall Street Journal was approximately $318,665,000. Registrant had 19,043,872 shares of $.01 par value Common Stock, outstanding as of March 14, 1997. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be dated on or about April 7, 1997, are incorporated by reference into Part III hereof. ================================================================================ ================================================================================ PART I Item 1. Business INTRODUCTION AMCOL International Corporation was originally incorporated in South Dakota in 1924 as the Bentonite Mining & Manufacturing Co. Its name was changed to American Colloid Company in 1927, and in 1959, the Company was reincorporated in Delaware. In 1995, its name was changed to AMCOL International Corporation. Except as otherwise noted, or indicated by context, the term "Company" refers to AMCOL International Corporation and its subsidiaries. The Company may be generally divided into three principal categories of operations: minerals, absorbent polymers and environmental. The Company also operates a transportation business primarily for delivery of its own products. In general, the Company's products are used for their liquid-absorption properties. The Company is a leading producer of bentonite products, which have a variety of applications, including use as a bonding agent to form sand molds for metal castings; as a cat litter; as a moisture barrier in commercial construction and landfills; and in a variety of other industrial, commercial and agricultural applications. The Company also manufactures absorbent polymers, predominantly superabsorbent polymers, for use in disposable baby diapers and other personal care items, such as adult incontinence and feminine hygiene products. The following table sets forth the percentage contributions to net sales of the Company attributable to its minerals, absorbent polymers, environmental and transportation segments for the last three calendar years.
Percentage of Sales ------------------------------------ 1996 1995 1994 Minerals.................................................................... 35.9% 40.2% 53.7% Absorbent polymers.......................................................... 38.0% 34.7% 22.1% Environmental............................................................... 20.1% 18.8% 16.1% Transportation.............................................................. 6.0% 6.3% 8.1% 100.0% 100.0% 100.0%
Net revenues, operating profit and identifiable assets attributable to each of the Company's business segments are set forth in Note 2 of the Company's Notes to Consolidated Financial Statements included elsewhere herein, which Note is incorporated herein by reference. MINERALS The Company's minerals business is principally conducted through its wholly owned subsidiaries, American Colloid Company in the United States and Volclay Ltd. in the United Kingdom. Commercially produced bentonite is a type of montmorillonite clay found in beds ranging in thickness from two to 10 feet under overburden of up to 120 feet. There are two basic types of bentonite, each having different chemical and physical properties. These are commonly known as sodium (western) bentonite and calcium (southern) bentonite. A third type of clay, a less pure variety of calcium montmorillonite called fuller's earth, is used as a form of cat litter and as a carrier for agri-chemicals in addition to other minor applications. The Company's principal bentonite products are marketed under various internationally registered trade names, including VOLCLAY and PANTHER CREEK. The Company's cat litter is sold under various trade names and private labels. Principal Markets and Products Durable Goods Metalcasting. In the formation of sand molds for metal castings, sand is bonded with bentonite and various other additives to yield the desired casting form and surface finish. The Company produces blended mineral binders containing sodium and calcium bentonites, sold under the trade name ADDITROL. In addition, several high-performance specialty products are sold to foundries and companies that service foundries. Iron Ore Pelletizing. The Company is a major supplier of sodium bentonite for use as a pelletizing aid in the production of taconite pellets in North America. Well Drilling. Sodium bentonite and leonardite are ingredients of drilling mud, which allow rock cuttings to be suspended and brought to the surface in oil and gas well drilling. Drilling mud lubricates the drilling bit and coats the underground formations to prevent hole collapse and drill bit seizing. The Company's primary trademark for this application is PREMIUM GEL. Other Industrial. The Company is a supplier of fuller's earth products for use as an oil and grease absorbent in industrial applications. It also produces bentonite and bentonite blends for the construction industry, which are used as a plasticizing agent in cement, plaster and bricks, and as an emulsifier in asphalt. Consumable Goods Cat Litter. The Company produces two types of cat litter products, a fuller's earth-based (traditional) product and a sodium bentonite-based, scoopable (clumping) litter. The Company's scoopable products' clump-forming capability traps urine, allowing for easy removal of the odor-producing elements from the litter box. Scoopable litter has grown to 45% of the U.S. grocery market for cat litter in 1996 from 0.4% in 1989, and to 58% of the mass merchandise market for cat litter from no representation in 1989. Both types of products are sold primarily to private label grocery and mass merchandisers, though the Company also sells its own brands to the grocery, pet store and mass markets. The Company's products are marketed under various trade names. Fine Chemicals. Purified grades of sodium bentonite are marketed to the pharmaceutical and cosmetics industries. Small amounts of purified bentonite act as a binding agent for pharmaceutical tablets, and bentonite's expansion quality also aids in tablet disintegration. Bentonite also acts as a suspension agent and thickener in lotions and has a variety of other specialized uses as a flow control additive. Agricultural. Sodium bentonite, calcium bentonite and fuller's earth are sold as pelletizing aids in livestock feed and as anticaking agents for feeds during storage or in transit. Fuller's earth and sodium bentonite are used as carriers for agri-chemicals. Fuller's earth is also used as a drying agent in blending liquid and dry fertilizers prior to application. Sales and Distribution In 1996, the top two customers accounted for approximately 11% of the Company's mineral sales, and the top five customers accounted for approximately 20% of such sales. The Company has established industry-specialized sales groups staffed with technically oriented salespersons serving each of the Company's major markets. Certain groups have networks of distributors and representatives, including companies that warehouse at strategic locations. Most of its customers in the metalcasting industry are served on a direct basis by teams of Company sales, technical and manufacturing personnel. The Company also provides training courses and laboratory testing for customers who use the Company's products in the metalcasting process. Sales to the oil well drilling industry are primarily made directly to oil well drilling mud service companies, both under the Company's trade name and under private label. Because bentonite is a major component of drilling mud, two service companies have captive bentonite operations. The Company's potential market, therefore, generally is limited to those oil well service organizations that are not vertically integrated, or do not have long-term supply arrangements with other producers. Sales to the cat litter market are made on a direct basis and through industry brokers. All sales to the iron ore pelletizing industry are made directly to the end user. Sales to the Company's remaining markets are made primarily through independent distributors and representatives. Competition Bentonite. The Company is one of the largest producers of bentonite products in the United States. There are at least four other major domestic producers of sodium bentonite and at least one other major domestic producer of calcium bentonite. Two of the domestic producers are companies primarily in other lines of business and have substantially greater financial resources than the Company. There is also substantial global competition. The Company's bentonite processing plants in the United Kingdom and Australia compete with a total of nine U.K. and Australian processors. Competition in both the Company's domestic and international markets is essentially a matter of product quality, price, delivery, service and technical support, and it historically has been very vigorous. Fuller's Earth. There are approximately five major competitors in the United States, some of which are larger and have substantially greater financial resources than the Company. Price, service, product quality and geographical proximity to the market are the principal methods of competition in the Company's markets for fuller's earth. Seasonality Although business activities in certain of the industries in which the Company's mineral products are sold (such as well drilling) are subject to factors such as weather conditions, the Company does not consider its mineral business, as a whole, to be seasonal. ENVIRONMENTAL Principal Products and Markets Through its wholly owned subsidiary, Colloid Environmental Technologies Company (CETCO), the Company sells sodium bentonite, products containing sodium bentonite and various other products and equipment for use in environmental and construction applications. CETCO sells bentonite and its geosynthetic clay liner products under the BENTOMAT and CLAYMAX trade names for lining and capping landfills and for containment in tank farms, leach pads, waste stabilization lagoons, slurry walls and decorative ponds. The Company's VOLCLAY Waterproofing System is sold to the non-residential construction industry. This line includes a product sold under the registered trade name VOLCLAY PANELS, consisting of biodegradable cardboard panels filled with sodium bentonite installed to prevent leakage through underground foundation walls. A waterproofing liner product with the trade name VOLTEX, a joint sealant product with the trade name WATERSTOP-RX and a waterproofing membrane for concrete split slabs and plaza areas sold under the trade name VOLCLAY SWELLTITE round out the principal components of the product line. CETCO sells elastomeric urethane coatings for use in vehicular traffic decks, roofs, balconies and pedestrian walkways. The products, sold under the trade name ACCOGUARD, are among the more environmentally friendly primers and coatings available to the construction industry. Bentonite-based flocculents and customized equipment are used to remove emulsified oils and heavy metals from wastewater. Bentonite-based products are formulated to solidify liquid waste for proper disposal in landfills. These products are sold primarily under the SYSTEM-AC, RM-10 and SORBOND trade names. CETCO also specializes in providing absorption equipment and services to the environmental remediation industry, water treatment systems employing dissolved air flotation technology, and activated carbon purification systems for the beverage and municipal water treatment industries. Its operations include a fully equipped engineering and fabrication facility for producing pressure vessels used in filtration applications. In addition, a network of regional service centers provides services and distribution to support markets such as remediation of petroleum-contaminated groundwater. The Company has a carbon regeneration facility, which allows for the regeneration and reuse of spent carbon obtained from its service centers. CETCO's CRUDESORB filtration technology is used on offshore oil drilling platforms to reduce oil and grease discharge to levels that comply with new regulations and to levels below those that can be achieved using traditional gravity separation technology. CETCO's filtration technology is marketed with all necessary equipment, proprietary filter media and trained professional staff for turnkey fluids treatment. CETCO's drilling products are used in environmental and geotechnical drilling applications, horizontal directional drilling and mineral exploration. The products are used to install monitoring wells and water wells, rehabilitate existing water wells and seal abandoned exploration drill holes. VOLCLAY GROUT, BENTOGROUT and VOLCLAY Tablets are among the trade names for products used in these applications. Competition CETCO has four principal competitors in the geosynthetic clay liner market. The construction and wastewater treatment product lines are specialized businesses that compete primarily with alternative technologies. The service center remediation business has three major competitors, one of which is substantially larger and with greater resources. The groundwater monitoring, well drilling and sealants products compete with the Company's traditional rivals in the sodium bentonite business. Competition is based on product quality, service, price, technical support and availability of product. Historically, the competition has been very vigorous. Sales and Distribution In 1996, no customer accounted for more than 5% of environmental sales. CETCO products are sold domestically and internationally. CETCO sells most of its products through independent distributors and commissioned representatives. Contract remediation work is done on a direct basis working with consulting engineers engaged by the customers. CETCO employs technically oriented marketing personnel to support its network of distributors and representatives. In the service center business, salespersons develop business in the regional markets to supplement contract remediation work performed for national accounts. Seasonality Much of the business in the environmental sector is impacted by weather and soil conditions. Many of the products cannot be applied in harsh weather conditions and, as such, sales and profits tend to be stronger April through October. As a result, the Company considers this segment to be seasonal. Research and Development The minerals and environmental segments share research and laboratory facilities. Technological developments are shared between the companies, subject to license agreements where appropriate. MINERALS/ENVIRONMENTAL COMMON OPERATIONAL FUNCTIONS Mineral Reserves Both the mineral and environmental segments have sodium bentonite reserves and processing plants. The discussion of mineral reserves that follows applies to both units. The Company has reserves of sodium and calcium bentonite at various locations in Wyoming, South Dakota, Montana, Nevada and Alabama; and reserves of fuller's earth in Tennessee and Illinois. At 1996 consumption rates, based on internal estimates, the Company believes that its proven reserves of commercially usable sodium bentonite will be adequate for approximately 30 years (although reserves for certain specialty uses and by plant location differ significantly from this 30-year period) and that its proven reserves of calcium bentonite and fuller's earth will be adequate for approximately 20 years and in excess of 40 years, respectively. While the Company, based upon its experience, believes that its reserve estimates are reasonable and its title and mining rights to its reserves are valid, the Company has not obtained any independent verification of such reserve estimates or such title or mining rights. The Company owns or controls the properties on which its reserves are located through long-term leases, royalty agreements and patented and unpatented mining claims. A majority of the Company's bentonite reserves are owned. All of the properties on which the Company's reserves are located are either physically accessible for the purposes of mining and hauling, or the cost of obtaining physical access would not be material. Of the total reserves, approximately 20% are located on unpatented mining claims owned or leased by the Company, on which the Company has the right to undertake regular mining activity. To retain possessory rights, a fee of $100 per year for each unpatented mining claim is required. The validity of title to unpatented mining claims is dependent upon numerous factual matters. The Company believes that the unpatented mining claims that it owns have been located in compliance with all applicable federal, state and local mining laws, rules and regulations. The Company is not aware of any material conflicts with other parties concerning its claims. From time to time, members of Congress as well as members of the executive branch of the federal government have proposed amendments to existing federal mining laws. The various amendments would have had a prospective effect on mining operations on federal lands and include, among other things, the imposition of royalty fees on the mining of unpatented claims, the elimination or restructuring of the patent system and an increase in fees for the maintenance of unpatented claims. To the extent that future proposals may result in the imposition of royalty fees on unpatented lands, the mining of the Company's unpatented claims may become uneconomic, and royalty rates for privately leased lands may be affected. The Company cannot predict the form that any amendments might ultimately take or whether or when any such amendments might be adopted. The Company's fuller's earth reserves are both owned and leased. The loss of any of the leased reserves could materially decrease the Company's reserves of fuller's earth, but it is believed that alternative economical reserves could be developed. The Company maintains a continuous program of exploration for additional reserves and attempts to acquire reserves sufficient to replenish its consumption each year, but it cannot assure that additional reserves will continue to become available. The Company oversees all of its mining operations, including its exploration activity and securing the necessary state and federal mining permits.
The following table shows a summary of minerals sold by the Company for the last five years in short tons: Tons of Minerals Sold (1) ---------------------------------------------------------------- 1996 1995 1994 1993 1992 Sodium Bentonite: (In Thousands) Belle Fourche, SD (4)....................... 4 133 203 147 124 Upton, WY................................... 418 434 424 351 334 Colony, WY.................................. 921 809 791 701 776 Lovell, WY.................................. 301 268 299 273 103 Calcium Bentonite: Aberdeen, MS (2)............................ 7 63 70 61 62 Sandy Ridge, AL............................. 183 170 174 167 155 Rock Springs, NV............................ 3 - - - - Fuller's Earth: Mounds, IL.................................. 201 203 242 239 225 Paris, TN (3)............................... 12 54 52 17 - Leonardite: Gascoyne, ND................................ 23 19 17 15 13 (1) May include minerals of a different type not mined at this location. (2) Mineral reserves sold in 1996. (3) Acquired in 1992 and commenced operations in 1993. (4) Beginning in late 1995, bentonite sold from Belle Fourche, SD, was processed in Colony, WY.
The Company estimates that available supplies of other materials utilized in its mineral business are sufficient to meet its production requirements for the foreseeable future. Mining and Processing Bentonite. Bentonite is surface-mined, generally with large earthmoving scrapers, and then loaded into trucks and off-highway haul wagons for movement to the processing plants. The mining and hauling of the Company's clay is done both by the Company and by independent contractors. Each of the Company's processing plants generally maintain stockpiles of unprocessed clay of approximately four to eight months' production requirements. At the processing plants, bentonite is dried, crushed and sent through grinding mills, where it is sized into shipping form, then chemically modified where needed and transferred to silos for automatic bagging or shipment in bulk. Virtually all production is shipped as processed, rather than stored for inventory. Fuller's Earth. Fuller's earth is also surface-mined using a combination of scrapers, dozers and loaders. Crude clay is then loaded into dump trucks and hauled to the processing plant where it is dried or calcined, crushed and screened. Inventories of unprocessed clay generally are no more than a two-week supply. Mining is thus performed on a year-round basis. Product Development and Patents The Company works actively with customers in each of its major markets to develop commercial applications of specialized grades of bentonite, and it maintains a bentonite research center and laboratory testing facility adjacent to its corporate headquarters as well as one in the United Kingdom. When a need for a product that will accomplish a particular goal is perceived, the Company will work to develop the product, research its marketability and study the feasibility of its production. The Company will also continue its practice of co-developing products with customers or others as new needs arise. The Company's development efforts emphasize markets with which it is familiar and products for which it believes there is a viable market. The Company holds a number of U.S. and international patents covering the use of bentonite and products containing bentonite. The Company follows the practice of obtaining patents on new developments whenever feasible. The Company, however, does not consider that any one or more of such patents is material to its minerals and environmental businesses as a whole. Regulation and Environmental The Company believes it is in material compliance with applicable regulations now in effect with respect to surface mining. Since reclamation of exhausted mining sites has been a regular part of the Company's surface mining operations for the past 28 years, maintaining compliance with current regulations has not had a material effect on its mining costs. The costs of reclamation are reflected in the prices of the bentonite sold. The grinding and handling of dried clay is part of the production process and, because it generates dust, the Company's mineral processing plants are subject to applicable clean air standards (including Title V of the Clean Air Act). All of the Company's plants are equipped with dust collection systems. The Company has not had, and does not presently anticipate, any significant problems in connection with its dust emission, though it expects ongoing expenditures for the maintenance of its dust collection systems and required annual fees. The Company's mineral operations are also subject to other federal, state, local and foreign laws and regulations relating to the environment and to health and safety matters. Certain of these laws and regulations provide for the imposition of substantial penalties for noncompliance. While the costs of compliance with, and penalties imposed under, these laws and regulations have not had a material adverse effect on the Company, future events, such as changes in, or modified interpretations of existing laws and regulations or enforcement policies or further investigation or evaluation of potential health hazards of certain products, may give rise to additional compliance and other costs that could have a material adverse effect on the Company. ABSORBENT POLYMERS Since the early 1970s, the Company has utilized a technique called modified bulk polymerization ("MBP") to manufacture water-soluble polymers for the oil well drilling industry. This technique has been modified to produce superabsorbent polymers ("SAP"), a category of polymers known for its extremely high water absorbency. Chemdal Corporation was formed in 1986 to manufacture and market absorbent polymers, with primary emphasis on SAP. To date, the Company's sales of SAP have been almost exclusively for use as an absorbent in personal care products, primarily disposable baby diapers. The Company produces SAP at its U.S. facility with an annual capacity of 70,000 tons, and at its U.K. facility with an annual capacity of 50,000 tons. Demand for the Company's products in the United States and Europe has grown significantly in recent years as the amount of SAP used in new diaper designs has increased. SAP is more absorbent than the fluff pulp used in traditional disposable diapers. The use of SAP in diapers allows for a thinner diaper that occupies less shelf space in stores and less landfill space. SAP also helps to hold moisture inside the diaper, thereby causing less irritation to the wearer's skin and reducing leakage. Based upon the Company's expectations regarding consumer and retail preferences, the Company believes that SAP will continue to be used in new diaper designs. While no assurance can be given that markets in developing countries will follow the trends of developed countries, the Company also believes that disposable diapers containing increasing amounts of SAP will gain more acceptance in developing countries as per capita incomes in those countries rise. Principal Products and Markets The Company's SAP is primarily marketed under the trade names ARIDALL and ASAP. To date, the Company's customers have been primarily private label and national brand diaper manufacturers. The Company believes that this segment of the diaper market has grown faster than the brand name segment, which currently accounts for the majority of that market. During 1995, the Company began selling to manufacturers of brand name personal care products and is seeking to increase its sales to that segment of the market. Sales and Distribution The Company sells SAP to the personal care market in the United States on a direct basis and, in other countries, both on a direct basis and through distributors. The Company expects to rely increasingly on a direct sales approach in the personal care market. The Company's direct sales efforts employ a team approach that includes both technical and marketing representatives. In 1996, the top two customers accounted for approximately 45% of the Company's polymer sales, and the top five customers accounted for approximately 60% of such sales. Research and Development The Company continually seeks to improve the performance of its absorbent polymers. It also intends to pursue additional applications for its absorbent polymers in other markets either directly, or indirectly through marketing or distribution arrangements. Polymers also have applications in water treatment and in cosmetics. The Company owns several patents relating to its original manufacturing process developed in the 1970s and to modifications of its process developed in the 1980s and 1990s, which relate to its current manufacturing process. The patents on the original process have begun to expire. The Company believes that the loss of the patent protection will not have a material impact on the business. The patents relating to the current modifications thereto expire at various times commencing in 2002. The Company follows the practice of obtaining patents on new developments whenever reasonably practicable. The Company also relies on unpatented know-how, trade secrets and improvements in connection with its SAP manufacturing process. There can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to or disclose the Company's trade secrets, or that the Company can meaningfully protect its rights to its unpatented trade secrets. Raw Materials The process used by the Company to produce SAP primarily uses acrylic acid and, to a lesser extent, potassium and sodium alkalies and catalysts. The Company's polymer operations are supplied by three major producers of acrylic acid. The Company has been able to obtain adequate supplies of acrylic acid to meet its production requirements to date. The Company knows of four acrylic acid suppliers in the United States, three in Europe and four in the Far East. The Company is aware that at least five of these suppliers manufacture SAP and, therefore, compete with the Company in this market. Potassium and sodium alkalies are available on a commercial basis worldwide with no meaningful limitations on availability. Catalysts are available from a small number of high-technology chemical manufacturers; however, the Company does not anticipate any difficulties in obtaining catalysts. Competition The Company believes that there are approximately four major polymer manufacturers and at least three importers that compete with its U.S. operation, several of which have substantially greater resources than the Company. The Company's U.K. operation competes with a total of approximately seven producers and at least four importers. Only two producers have substantially more production capacity and several producers have greater resources than the Company. Further, at least three of these competitors are vertically integrated and produce acrylic acid, the primary cost component of SAP. The competition in both the Company's domestic and international markets is primarily a matter of product quality and price, and it historically has been very vigorous. The Company believes that its polymer manufacturing process has enabled it to add polymer production capacity at a lower capital investment cost than that required by other processes currently in widespread commercial use. Regulation and Environmental The Company's production process for SAP consumes virtually all chemicals and other raw materials used in the process. Virtually all materials that are not consumed by the end product are recycled through the process. The Company's polymer plants, therefore, generate a minimal amount of chemical waste. The handling of dried polymer is part of the production process, and, because this generates dust, the Company's polymer plants must meet clean air standards. The Company's polymer plants are equipped with dust collection systems, and the Company believes that it is in material compliance with applicable state and federal clean air regulations. The Company's absorbent polymer business is subject to other federal, state, local and foreign laws and regulations relating to the environment and to health and safety matters. Certain of these laws and regulations provide for the imposition of substantial penalties for non-compliance. While the costs of compliance with, and penalties imposed under, these laws and regulations have not had a material adverse effect on the Company, future events, such as changes in or modified interpretations of existing laws and regulations or enforcement policies or further investigation or evaluation of potential health hazards of certain products, may give rise to additional compliance and other costs that could have a material adverse effect on the Company. TRANSPORTATION The Company operates a long-haul trucking business and a freight brokerage business primarily for delivery of its own products in package and bulk form throughout the continental United States. Through its transportation operations, the Company is better able to control costs, maintain delivery schedules and assure equipment availability. The long-haul trucking subsidiary performs transportation services on outbound movements from the Company's production plants and attempts to haul third parties' products on return trips whenever possible. In 1996, approximately 71% of the revenues of this segment involved the Company's products. FOREIGN OPERATIONS AND EXPORT SALES Approximately 41% of the Company's 1996 net sales were to customers in approximately 60 countries other than the United States. To enhance its overseas market penetration, the Company maintains mineral processing plants in the United Kingdom and Australia, as well as a blending plant in Canada. Through joint ventures, the Company also has the capability to process minerals in Mexico and China. Chartered vessels deliver large quantities of the Company's bulk, dried sodium bentonite to the plants in the United Kingdom and Australia, where it is processed and mixed with other clays and distributed throughout Europe and Australia. The Company's U.S. bentonite is also shipped in bulk to Japan. The Company also maintains a worldwide network of independent dealers, distributors and representatives. The Company produces absorbent polymers at its U.S. and U.K. plants, and serves markets in Western Europe, South America, Asia and the Middle East. The Company's international operations are subject to the usual risks of doing business abroad, such as currency devaluations, restrictions on the transfer of funds and import and export duties. The Company, to date, has not been materially affected by any of these risks. See Note 2 of the Company's Notes to Consolidated Financial Statements included elsewhere herein. This Note is incorporated by reference for sales attributed to foreign operations and export sales from the United States. EMPLOYEES As of December 31, 1996, the Company employed 1,451 persons, 289 of whom were employed overseas. At December 31, 1996, there were approximately 719, 320, 336 and 25 persons employed in the Company's minerals, absorbent polymers, environmental and transportation segments, respectively, along with 51 corporate employees. Operating plants are adequately staffed, and no significant labor shortages are presently foreseen. Approximately 102 of the Company's employees in the United States and approximately 37 of the Company's employees in the United Kingdom are represented by five labor unions, which have entered into separate collective bargaining agreements with the Company. Employee relations are considered good. Item 2. Properties The Company and its subsidiaries operate the following principal plants, mines and other facilities, all of which are owned, except as noted:
Location Principal Function MINERALS Belle Fourche, SD ................... Mine and process sodium bentonite Colony, WY (two plants).............. Mine and process sodium bentonite Upton, WY ........................... Mine and process sodium bentonite Mounds, IL .......................... Mine and process fuller's earth Paris, TN ........................... Mine and process fuller's earth Rock Springs, NV .................... Mine and process calcium bentonite and diatomaceous earth Gascoyne, ND ........................ Mine and process leonardite Letohatchee, AL ..................... Package and load calcium bentonite Sandy Ridge, AL ..................... Mine and process calcium bentonite; blend ADDITROL Columbus, OH (1) .................... Blend ADDITROL; process chromite sand Granite City, IL (1) ................ Package cat litter; process chromite sand Waterloo, IA ........................ Blend ADDITROL Albion, MI (1) ...................... Blend ADDITROL York, PA ............................ Blend ADDITROL; package cat litter Chattanooga, TN ..................... Blend ADDITROL Lufkin, TX .......................... Blend ADDITROL Neenah, WI .......................... Blend ADDITROL Toronto, Ontario, Canada ............ Blend ADDITROL Geelong, Victoria, Australia (1) .... Process bentonite; blend ADDITROL Birkenhead, Merseyside, U.K. (2) .... Process bentonite and chromite sand; blend ADDITROL; research laboratory and headquarters for Volclay Ltd. ENVIRONMENTAL Lovell, WY .......................... Mine and process sodium bentonite Villa Rica, GA ...................... Manufacture Bentomat geosynthetic clay liner Sulphur, LA ......................... Manufacture environmental equipment Fairmount, GA ....................... Manufacture Claymax geosynthetic clay liner Morgantown, WV (1) .................. Reactivate spent carbon for Regeneration Technologies, Inc. Salt Lake City, UT (1) .............. Sales and engineering for CETCO Various service centers (1) ......... Distribution and service facilities for CETCO recycling services Birkenhead, Merseyside, U.K. (2) .... Manufacture Bentomat geosynthetic clay liner, research laboratory and headquarters for CETCO Europe Ltd. Copenhagen, Denmark (1) ............. Sales and distribution for CETCO Europe Ltd. Toronto, Ontario, Canada ............ Sales and distribution for CETCO Canada Ltd. ABSORBENT POLYMERS Aberdeen, MS ........................ Manufacture absorbent polymers Birkenhead, Merseyside, U.K. ........ Manufacture absorbent polymers; research laboratory and headquarters for Chemdal Ltd. Palatine, IL (1) .................... Chemdal Corporation headquarters; research laboratory TRANSPORTATION Scottsbluff, NE ..................... Transportation headquarters and terminal CORPORATE Arlington Heights, IL (1) ........... Corporate headquarters; CETCO headquarters; Nanocor, Inc. headquarters; research laboratory Aberdeen, MS ........................ Process purified bentonites (Nanocor, Inc.) (1) Leased. (2) Certain offices & facilities are leased.
Item 3. Legal Proceedings The Company is party to a number of lawsuits arising in the normal course of its business. The Company does not believe that any pending litigation will have a material adverse effect on its consolidated financial position. The Company's processing operations require permits from various governmental authorities. From time to time, the Company has been contacted by government agencies with respect to required permits or compliance with existing permits, while the Company has been notified of certain situations of non-compliance, management does not expect the fines, if any, to be significant. Item 4. Submission of Matters to a Vote of Security Holders None. Executive Officers of Registrant
Name Age Principal Occupation for Last Five Years John Hughes 54 President and Chief Executive Officer of the Company since 1985; a Director since 1984. Peter L. Maul 47 Vice President of the Company since 1993 and President of Nanocor, Inc. since 1995; prior thereto, Vice President of Marketing at Chemstar, Inc. 1986-1992; prior thereto, Vice President of American Colloid Company. Roger P. Palmer 60 Senior Vice President of the Company since 1994 and President of Colloid Environmental Technologies Company since August 1994; prior thereto, Vice President since 1990 and Vice President and General Manager of Colloid Environmental Technologies Company since 1991. Clarence O. Redman 54 Secretary of the Company since 1982; a Director since 1989. Clarence Owen Redman Ltd. is a partner of Keck, Mahin & Cate, the law firm that serves as Corporate Counsel to the Company. Mr. Redman is also Chief Executive Officer of Keck, Mahin & Cate. Paul G. Shelton 47 Senior Vice President - Chief Financial Officer of the Company since 1994 and President of AMCOL International's transportation units since May 1994; prior thereto, Vice President - Chief Financial Officer since 1984; a Director since 1988. Lawrence E. Washow 44 Senior Vice President of the Company since 1994 and President of Chemdal International Corporation since September 1992; prior thereto, Vice President of the Company and Vice President and General Manager of Chemdal Corporation since 1986. Frank B. Wright, Jr. 48 Vice President of the Company and President of American Colloid Company since August 1996; prior thereto, Manager of International Business Development for American Colloid Company since October 1995; prior thereto, Managing Director of TRIMEX Minerals International until July 1993; prior thereto, President and Chief Executive Officer of Bentonite Corporation. All officers of the Company are elected annually by the Board of Directors for a term expiring at the annual meeting of directors following their election or when their respective successors are elected and shall have qualified. All directors are elected by the stockholders for a three-year term or until their respective successors are elected and shall have qualified.
PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common stock trades on the Nasdaq National Market tier of The Nasdaq Stock Market under the Symbol: ACOL. The following table sets forth, for the periods indicated, the high and low sale prices of the common stock, as reported by The Nasdaq Stock Market, and cash dividends declared per share.
Cash Dividends Declared Per Stock Price ------------------------------------ High Low Share Fiscal Year Ended December 31, 1996: 1st Quarter............................................ $17.000 $12.125 $.0700 2nd Quarter............................................ 15.125 10.750 .0700 3rd Quarter............................................ 15.875 13.375 .0700 4th Quarter............................................ 16.500 13.500 .0700 Fiscal Year Ended December 31, 1995: 1st Quarter............................................ 14.750 11.875 .0600 2nd Quarter............................................ 16.250 12.750 .0600 3rd Quarter............................................ 18.250 15.250 .0700 4th Quarter............................................ 17.375 14.125 .0700
____________________ As of February 24, 1997, there were 2,127 holders of record of the Common Stock, excluding shares held in street name. The Company has paid cash dividends every year for over 59 years. The Company intends to continue to pay cash dividends on its Common Stock, but the payment of dividends and the amount and timing of such dividends will depend on the Company's earnings, capital requirements, financial condition and other factors deemed relevant by the Company's Board of Directors. Item 6. Selected Financial Data The following is selected financial data for the Company and its subsidiaries for the five years ended December 31, 1996. Per share amounts have been adjusted to reflect a two-for-one stock split and a three-for-two stock split effected in the nature of stock dividends in June 1993 and January 1993, respectively. All per share calculations are fully diluted, based on weighted average number of common and common equivalent shares outstanding during the year.
SUMMARY OF OPERATIONS (Dollars in thousands, except per share amounts) PER SHARE 1996 1995 1994 1993 1992 Stockholders' Equity (1) $ 8.81 $ 8.13 $ 7.52 $ 6.82 $ 3.64 Net Income .78 .90 .78 .76 .52 Dividends .28 .26 .24 .20 .16 Shares Outstanding (2) 19,529,659 19,679,480 19,486,520 17,223,854 16,480,644 INCOME DATA Sales $ 405,347 $ 347,688 $ 265,443 $ 219,151 $ 182,669 Gross Profit 84,311 76,562 59,487 49,843 42,454 Operating Profit 32,337 32,397 23,991 21,312 16,510 Net Interest Expense (8,450) (6,727) (2,332) (3,036) (3,484) Net Other Income (Expense) (670) 1,217 544 474 (325) Pretax Income 23,217 26,887 22,203 18,750 12,701 Income Taxes 7,979 9,082 6,828 5,567 4,105 Net Income 15,225 17,771 15,283 13,120 8,506 BALANCE SHEET Current Assets $ 148,475 $ 126,337 $ 108,691 $ 95,870 $ 63,072 Net Property, Plant and Equipment 180,876 175,211 141,420 83,233 61,231 Total Assets 350,708 322,366 263,899 184,029 129,646 Current Liabilities 51,870 35,882 36,617 27,401 21,092 Long-term Debt 118,855 117,016 71,458 16,689 38,312 Shareholders' Equity 167,404 155,494 143,073 127,132 57,338 RATIO ANALYSIS Operating Margin 7.98% 9.32% 9.04% 9.72% 9.04% Pretax Margin 5.73 7.73 8.36 8.56 6.95 Effective Tax Rate 34.37 33.78 30.75 29.69 32.32 Net Margin 3.76 5.11 5.76 5.99 4.66 Return on Ending Assets 4.34 5.51 5.79 7.13 6.56 Return on Ending Equity 9.09 11.43 10.68 10.32 14.83 _______________________ (1) Based on the number of common shares outstanding at the end of the year, excluding common stock equivalents. (2) Weighted average common shares outstanding including common stock equivalents.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Financial Condition At December 31, 1996, the Company had outstanding debt of $127.8 million (including both long- and short-term debt) and cash and cash equivalents of $3.1 million, compared with $121.1 million in debt and $1.9 million in cash and cash equivalents at December 31, 1995. Long-term debt represented 41.5% of total capitalization at December 31, 1996, compared with 42.9% at December 31, 1995. The cumulative foreign translation adjustment in stockholders' equity increased by $5.2 million as a result of favorable translation rate for the Pound Sterling. This accounted for approximately half of the improvement in the long-term debt to total capitalization ratio, with the balance coming from the increase in current maturities of long-term debt. The Company had a current ratio of 2.86-to-1 at December 31, 1996, with approximately $96.6 million in working capital, compared with 3.52-to-1 and $90.5 million, respectively, at December 31, 1995. The $6.1 million (6.7%) increase in working capital resulted from sales growth of 16.6%, and included increases in accounts receivable of $15.1 million (22.7%) and inventories of $6.4 million (12.9%). Using a 360-day year, days sales outstanding increased to 72.4 days at December 31, 1996, compared with 68.8 days at the end of 1995. This 5.2% increase is primarily due to increased overseas business where terms of sale and collection periods are typically longer. Inventory turnover improved from 5.4 times in 1995 to 5.7 times in 1996. Increased focus on capital employed during 1997 is anticipated to yield lower days sales outstanding and higher inventory turnover. The Company's revolving credit facility of $100 million matures in October 2000. The Company had $33.7 million in unused, committed credit lines at December 31, 1996. The Company currently anticipates capital expenditures of approximately $35 million for 1997, which are comparable to 1996 capital investments. Construction of a minerals processing plant in Thailand, and a clay purification plant for Nanocor, Inc. in Aberdeen, MS, are included in the 1997 estimate; however, no acquisitions have been considered in the total. The current indicated annual dividend rate is $.28 per share. If the rate remains constant and the Board of Directors continues to declare dividends, the dividend payments will be approximately $5.4 million in 1997, or the same as was paid in 1996. Management believes that the Company has adequate resources to fund the capital expenditures discussed above, the dividend payments and anticipated increases in working capital requirements through its existing, committed credit lines, cash balances and operating cash flow. In addition to the capital expenditures which have been authorized by the Board of Directors, management continues to explore growth opportunities in the environmental and minerals markets, as well as further capacity expansion in the polymer segment. Results of Operations for the Three Years Ended December 31, 1996 Net sales increased by $57.7 million, or 16.6%, from 1995 to 1996, and by $82.2 million, or 31.0%, from 1994 to 1995. Operating profit was approximately the same in 1995 and 1996, compared with an increase of $8.4 million, or 35.0%, from 1994 to 1995. A review of sales, gross profit, general, selling and administrative expenses, and operating profit by segment follows: Minerals
Year Ended December 31, 1996 1995 1994 1996 vs. 1995 1995 vs. 1994 (Dollars in Thousands) Net sales................$145,623 100.0% $139,722 100.0% $142,607 100.0% $5,901 4.2% ($2,885) -2.0% Cost of sales............ 122,404 84.1% 112,706 80.7% 114,458 80.3% Gross profit............. 23,219 15.9% 27,016 19.3% 28,149 19.7% (3,797) -14.1% (1,133) -4.0% General, selling and administrative expenses 15,221 10.4% 14,743 10.5% 12,465 8.7% 478 3.2% 2,278 18.3% Operating profit......... 7,998 5.5% 12,273 8.8% 15,684 11.0% (4,275) -34.8% (3,411)-21.7%
Sales increased in 1996 primarily as a result of higher sales of cat litter. Sales decreased domestically from 1994 to 1995 as royalties declined by approximately $3.8 million, as anticipated, and the principal customer for clay carrier products switched to a local, non-clay alternative during mid-year 1995. Gross profit margins for 1996 decreased by 17.6% from the 1995 levels, which represented a decline from those of 1994 by approximately 2.3%. Price increases in 1995 offset much of the decline in profit margin that was anticipated as a result of lower royalties. The impact of the loss of the agricultural clay carrier customer was much more pronounced in 1996 than in 1995. General, selling and administrative expenses for 1996 increased by $.5 million, or 3.2%, compared with an increase of $2.3 million, or 18.3%, over 1994. The increase in costs for 1996 was largely related to costs associated with management changes. Higher costs for research and development, management information systems, and a more precise division of expenses shared between minerals and corporate accounted for the change from 1994 to 1995. The cat litter facilities added during 1995 have yet to be fully utilized. This temporary overcapacity depressed operating margins in 1996. Higher bentonite mining costs also adversely impacted the 1996 results and will continue into 1997. Absorbent Polymers
Year Ended December 31, 1996 1995 1994 1996 vs. 1995 1995 vs. 1994 (Dollars in Thousands) Net sales................$153,866 100.0% $120,762 100.0% $58,591 100.0% $33,104 27.4% $62,171 106.1% Cost of sales............ 123,448 80.2% 94,924 78.6% 43,325 73.9% Gross profit............. 30,418 19.8% 25,838 21.4% 15,266 26.1% 4,580 17.7% 10,572 69.3% General, selling and administrative expenses 10,791 7.0% 8,936 7.4% 7,307 12.5% 1,855 20.8% 1,629 22.3% Operating profit......... 19,627 12.8% 16,902 14.0% 7,959 13.6% 2,725 16.1% 8,943 112.4%
Sales of absorbent polymers for 1996 increased by 27.4% over 1995 levels on a unit sales volume increase of 43.1%. This compares with a 106.1% sales increase from 1994 to 1995 on a unit volume increase of 116.1%. The unit volume increase in 1995 was largely attributable to the growth in European market share, whereas the 1996 growth was divided more equally between the U.S. and U.K. facilities. Gross profit margins decreased by 7.5% in 1996, compared with a decline of 18.0% from 1994 to 1995. The gross margins decline in 1995 was the result of higher raw material costs, principally acrylic acid, and lower average unit selling prices. The 1996 gross profit margin decrease was primarily attributable to the cost of shipping products from the United States to the United Kingdom to meet customer demand in excess of the U.K. plant capacity in the first half of 1996. Increased capacity utilization in both the United States and United Kingdom offset the impact of yet lower average selling prices in 1996. While general, selling and administrative expenses have increased from 1994 to 1995 and from 1995 to 1996, the rate of increase is less than the rate of increase in sales. Much of the increased cost has been directed to research and development of new products unrelated to the current markets served. The Company aggressively expanded its capacity to produce absorbent polymers from 1994 to 1996. The Company began the three-year period with worldwide capacity of 50,000 metric tons, and ended with 120,000 metric tons. The Company's production capability is presently among the largest in the world. The expansions were undertaken ahead of the industry demand curve. Greater capacity utilization is anticipated during 1997. A price increase was announced in the fourth quarter of 1996. Despite this, management anticipates lower average unit selling prices as larger volume customers are expected to account for a greater proportion of the sales. Environmental
Year Ended December 31, 1996 1995 1994 1996 vs. 1995 1995 vs. 1994 (Dollars in Thousands) Net sales................ $81,480 100.0% $65,538 100.0% $42,609 100.0% $15,942 24.3% $22,929 53.8% Cost of sales............ 53,912 66.2% 44,522 67.9% 29,152 68.4% Gross profit............. 27,568 33.8% 21,016 32.1% 13,457 31.6% 6,552 31.2% 7,559 56.2% General, selling and administrative expenses 15,478 19.0% 12,209 18.6% 7,716 18.1% 3,269 26.8% 4,493 58.2% Operating profit......... 12,090 14.8% 8,807 13.4% 5,741 13.5% 3,283 37.3% 3,066 53.4%
Approximately 32% of the sales increase from 1995 to 1996 was attributable to acquisitions made in 1995, compared with approximately 50% from 1994 to 1995. Increased sales in international markets and higher sales of environmental liner products have been the primary drivers of growth over the past three years. Gross profit margins in 1996 improved by 5.3% from those of 1995. Lower manufacturing costs were the principal reason for the improvement. Inventory charges and changes in distribution during 1994 accounted for the difference between 1994 and 1995 gross profit margin. General, selling and administrative expenses increased 58.2% from 1994 to 1995, reflecting expansion of the international marketing group and additional staff associated with the Claymax acquisition. Further expansion of the international presence in Europe and Asia, as well as increased domestic selling expenses accounted for much of the 26.8% increase in general, selling and administrative expenses from 1995 to 1996. The rate of growth in this area is expected to be less than the sales growth rate in 1997. Transportation
Year Ended December 31, 1996 1995 1994 1996 vs. 1995 1995 vs. 1994 (Dollars in Thousands) Net sales................ $24,378 100.0% $21,666 100.0% $21,636 100.0% $2,712 12.5% $30 0.1% Cost of sales............ 21,272 87.3% 18,974 87.6% 19,021 87.9% Gross profit............. 3,106 12.7% 2,692 12.4% 2,615 12.1% 414 15.4% 77 2.9% General, selling and administrative expenses 1,870 7.7% 1,635 7.5% 1,590 7.3% 235 14.4% 45 2.8% Operating profit......... 1,236 5.0% 1,057 4.9% 1,025 4.8% 179 16.9% 32 3.1%
Increased brokerage of cat litter and environmental shipments have fueled the growth in transportation revenues over the past three years. The conversion of shipments of bentonite used in the manufacturing of environmental liner products from truck to rail offset the further revenue gains made in the shipment of cat litter products during 1995. Gross profit margins have benefited from the high volume levels, as well as greater truck availability during the three-year period. General, selling and administrative expenses reflect increased staffing levels to handle increased volume. No further staff increases are anticipated for 1997. Corporate
Year Ended December 31, 1996 1995 1994 1996 vs. 1995 1995 vs. 1994 (Dollars in Thousands) General, selling and administrative expenses $8,614 $6,642 $6,418 $1,972 29.7% $224 3.5% Operating loss........... (8,614) (6,642) (6,418)
Corporate costs include management information systems, human resources, investor relations and corporate communications, finance, purchasing, research costs for new markets and corporate governance costs. The Company is actively engaged in research and development efforts to create new applications for its reserves of bentonite. The Company has formed a wholly-owned subsidiary, Nanocor, Inc., to capitalize on its research and development progress in bentonite-based nanocomposites. When incorporated into plastics, bentonite-based nanocomposites can produce material with significantly improved properties that encompass a variety of commercial applications. Nanocor's technologies are still in the developmental stage, but management feels that these products have the potential to become a significant part of the Company's future growth. During 1996, Nanocor was issued two patents; nine more patent applications have been filed. The increase in corporate costs from 1995 to 1996 was almost entirely accounted for by the expanded activities of Nanocor. An incremental increase in research and development costs of approximately $1.1 million is expected for 1997 as Nanocor, Inc. expands its product development efforts. All costs associated with Nanocor, Inc. will continue to be included in corporate for 1997. Net Interest Expense Net interest expense increased by $1.7 million from 1995 to 1996. There was $.9 million of capitalized interest in 1995 compared with none in 1996. The $4.4 million increase in interest expense from 1994 to 1995 was the result of higher borrowing levels primarily associated with capital expenditures and acquisitions. Other Income (Expense) Foreign currency exchange losses accounted for approximately $.6 million, or 87% of other expense in 1996. Other income for 1995 included U.K. investment grants of approximately $.5 million and a $.6 million gain related to the cancellation of an interest rate swap compared with $.5 million of U.K. investment grants in 1994. Income Taxes The income tax rate for 1996 was 34.4% compared with 33.8% in 1995 and 30.8% in 1994. The estimated effective tax rate for 1997 is 37%. Earnings Per Share Earnings per share were calculated using the weighted average number of shares, including common stock equivalents, outstanding during the year. Stock options issued to key employees and directors are considered common stock equivalents. The weighted average shares outstanding were approximately 19.5 million shares in 1996 compared with approximately 19.7 million shares and 19.5 million shares in 1995 and 1994, respectively. Item 8. Financial Statements and Supplementary Data See the Index to Financial Statements and Financial Statement Schedules on Page F-1. Such Financial Statements and Schedules are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The table below lists the names and ages of all Directors, nominee for Director of the Company, and all positions each person holds with the Company. Board of Directors of the Registrant Arthur Brown, 56 (2) Chairman, President and Chief Executive Officer of Hecla Mining Company. Director since 1990. Robert E. Driscoll, III, 58 (2, 5) Retired Dean and Professor of Law, University of South Dakota. Director since 1985. Raymond A. Foos, 68 (2, 3) Retired Chairman of the Board, President and Chief Executive Officer of Brush Wellman, Inc. (manufacturer of beryllium and specialty materials). Director since 1981. John Hughes, 54 (1) President and Chief Executive Officer, AMCOL International Corporation. Director since 1984. Robert C. Humphrey, 78 (1, 3, 4) Retired Chairman of the Board, NBD Bank Evanston, N.A. Director since 1977, except for a three-month period in 1989. James A. McClung, 59 Vice President of FMC Corporation, a diversified producer of chemicals, machinery and other products for industry, government and other products for industry, government and agriculture. Nominee for Director. Jay D. Proops, 55 (1, 3, 4) Private investor and former Vice Chairman and co-founder of The Vigoro Corporation. Also a Director of Great Lakes Chemical Corporation. Director since June 1995. C. Eugene Ray, 64 (1, 2, 3, 4) Chairman of the Board, AMCOL International Corporation. Retired Executive Vice President - Finance of Signode Industries, Inc.(manufacturer of industrial strapping products). Director since 1981. Clarence O. Redman, 54 (1, 5) Secretary, AMCOL International Corporation. Clarence Owen Redman Ltd. is a partner of Keck, Mahin & Cate, the law firm that serves as Corporate Counsel to the Company. Mr. Redman is also Chief Executive Officer of Keck, Mahin & Cate. Director since 1989. Paul G. Shelton, 47 (1) Senior Vice President - Chief Financial Officer, AMCOL International Corporation. Director since 1988. Dale E. Stahl, 49 (1, 3, 4) President and Chief Operating Officer of Gaylord Container Corporation ("Gaylord"), a manufacturer and distributor of brown paper and packaging products. On September 14, 1992, Gaylord filed a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code. The Plan of Reorganization was confirmed on October 16, 1992. Director since June 1995. Audrey L. Weaver, 43 Private investor. Director since February 1997. Paul C. Weaver, 34 (1, 2) Senior Corporate Account Manager for ACNielsen Company. Director since May 1995. (1) Member of Executive Committee of the Board of Directors (2) Member of Audit Committee (3) Member of Compensation Committee (4) Member of Nominating Committee (5) Member of Option Committee Additional information regarding the directors of the Company is included under the caption "Election of Directors," "Information Concerning Members of the Board" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's proxy statement to be dated on or about April 7, 1997, and is incorporated herein by reference. Information regarding executive officers of the Company is included under a separate caption in Part I hereof, and is incorporated herein by reference, in accordance with General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K. Item 11. Executive Compensation Information regarding the above is included under the caption "Compensation and Other Transactions with Management" in the Company's proxy statement to be dated on or about April 7, 1997, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information regarding the above is included under the caption "Security Ownership" in the Company's proxy statement to be dated on or about April 7, 1997, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding the above is included under the caption "Compensation and Other Transactions with Management" in the Company's proxy statement to be dated on or about April 7, 1997, and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. See Index to Financial Statements and 2. Financial Statement Schedules on Page F-1. Such Financial Statements and Schedules are incorporated herein by reference. 3. See Index to Exhibits immediately following the signature page. (b) None. (c) See Index to Exhibits immediately following the signature page. (d) See Index to Financial Statements and Financial Statement Schedules on Page F-1. Item 14(a) Index to Financial Statements and Financial Statement Schedules
Page (1) Financial Statements: Independent Auditors' Report................................................................... F-2 Consolidated Balance Sheets, December 31, 1996 and 1995........................................ F-3 Consolidated Statements of Operations, Years ended December 31, 1996, 1995 and 1994.............................................. F-4 Consolidated Statements of Stockholders' Equity, Years ended December 31, 1996, 1995 and 1994.............................................. F-5 Consolidated Statements of Cash Flows, Years ended December 31, 1996, 1995 and 1994.............................................. F-6 Notes to Consolidated Financial Statements..................................................... F-7 (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts................................................ F-22
All other schedules called for under Regulation S-X are not submitted because they are not applicable or not required, or because the required information is not material. Independent Auditors' Report The Board of Directors and Stockholders AMCOL International Corporation: We have audited the consolidated financial statements of AMCOL International Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AMCOL International Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Chicago, Illinois March 14, 1997 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except per share amounts)
ASSETS December 31, 1996 1995 Current assets: Cash and cash equivalents.......................................................... $ 3,054 $ 1,888 Accounts receivable: Trade, less allowance for doubtful accounts of $2,663 and $1,601............... 78,666 65,267 Other.......................................................................... 2,853 1,162 Inventories........................................................................ 56,314 49,883 Prepaid expenses................................................................... 4,502 5,355 Current deferred tax asset......................................................... 3,086 2,782 Total current assets........................................................... 148,475 126,337 Property, plant, equipment, and mineral rights and reserves: Land and mineral rights and reserves............................................... 10,490 12,626 Depreciable assets................................................................. 288,876 263,904 299,366 276,530 Less accumulated depreciation...................................................... 118,490 101,319 180,876 175,211 Other assets: Goodwill, less accumulated amortization of $2,698 and $1,937....................... 13,922 14,109 Other intangible assets, less accumulated amortization of $7,972 and $6,464........ 7,435 6,709 21,357 20,818 $350,708 $322,366 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations........................................ $ 8,770 $ 3,875 Current capital lease obligations.................................................. 199 194 Accounts payable................................................................... 24,389 18,777 Accrued income taxes............................................................... 265 - Accrued liabilities................................................................ 18,247 13,036 Total current liabilities...................................................... 51,870 35,882 Long-term obligations: Long-term debt..................................................................... 118,574 116,517 Long-term capital lease obligations................................................ 281 499 118,855 117,016 Deferred income tax liabilities......................................................... 6,513 6,819 Estimated accrued reclamation........................................................... 4,638 4,826 Other liabilities....................................................................... 1,428 1,898 12,579 13,543 Minority interest in subsidiary......................................................... - 431 Stockholders' equity: Common stock, par value $.01 per share. Authorized 50,000,000 shares, issued 21,343,864 shares.............................................................. 213 213 shares Additional paid-in capital......................................................... 75,576 74,967 Retained earnings.................................................................. 96,579 86,703 Cumulative translation adjustments................................................. 2,868 (2,351) 175,236 159,532 Less: Treasury stock (2,345,516 shares in 1996 and 2,209,653 shares in 1995)............. (7,832) (4,038) 167,404 155,494 $350,708 $322,366
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Dollars in thousands, except per share amounts)
Year Ended December 31, -------------------------------------- 1996 1995 1994 Net sales...................................................................... $ 405,347 $ 347,688 $ 265,443 Cost of sales.................................................................. 321,036 271,126 205,956 Gross profit.............................................................. 84,311 76,562 59,487 General, selling and administrative expenses................................... 51,974 44,165 35,496 Operating profit.......................................................... 32,337 32,397 23,991 Other income (expense):........................................................ Interest expense, net..................................................... (8,450) (6,727) (2,332) Other, net................................................................ (670) 1,217 544 (9,120) (5,510) (1,788) Income before income taxes and minority interest.......................... 23,217 26,887 22,203 Income taxes................................................................... 7,979 9,082 6,828 Income before minority interest........................................... 15,238 17,805 15,375 Minority interest.............................................................. (13) (34) (92) Net income................................................................ $ 15,225 $ 17,771 $ 15,283 Earnings per share............................................................. $ .78 $ .90 $ .78
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Dollars in thousands, except per share amounts)
Common Stock Number Additional Cumulative of Paid-in Retained Translation Treasury Shares Amount Capital Earnings Adjustment Stock Total - - ----------------------------- Balance at December 31, 1993................... 21,343,864 $ 213 $ 70,674 $ 63,149 ($3,319) ($3,584) $ 127,133 Net income.................. - - - 15,283 - - 15,283 Cash dividends ($.24 per share)............. - - - (4,521) - - (4,521) Cumulative foreign exchange translation adjustment............. - - - - 1,454 - 1,454 Purchase of 33,956 treasury shares ................ - - - - - (443) (443) Sale of 420,142 treasury shares................. - - 3,605 - - 562 4,167 Balance at December 31, 1994................... 21,343,864 213 74,279 73,911 (1,865) (3,465) 143,073 Net income.................. - - - 17,771 - - 17,771 Cash dividends ($.26 per share)................. - - - (4,979) - - (4,979) Cumulative foreign exchange translation adjustment............. - - - - (486) - (486) Purchase of 58,000 treasury shares................. - - - - - (838) (838) Sale of 177,869 treasury shares................. - - 688 - - 265 953 Balance at December 31, 1995................... 21,343,864 213 74,967 86,703 (2,351) (4,038) 155,494 Net income.................. - - - 15,225 - - 15,225 Cash dividends ($.28 per share)................. - - - (5,349) - - (5,349) Cumulative foreign exchange translation adjustment............. - - - - 5,219 - 5,219 Purchase of 310,084 treasury shares........ - - - - - (4,186) (4,186) Sales of 174,221 treasury shares................. - - 609 - - 392 1,001 Balance at December 31, 1996................... 21,343,864 $ 213 $ 75,576 $ 96,579 $ 2,868 ($ 7,832) $ 167,404
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands)
Year Ended December 31, ------------------------------------- 1996 1995 1994 Cash flow from operating activities: Net income............................................................. $ 15,225 $ 17,771 $ 15,283 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization.......................... 27,907 21,289 14,442 Increase (decrease) in allowance for doubtful accounts............. 1,062 265 (500) Increase (decrease) in deferred income taxes....................... (306) 1,345 (651) Increase (decrease) in estimated accrued reclamation............... (188) (13) 8 Increase (decrease) in other noncurrent liabilities................ (414) (32) 623 (Gain) loss on sale of depreciable assets.......................... 63 (254) (356) Minority interest.................................................. 13 34 92 (Increase) decrease in current assets: Accounts receivable........................................... (16,152) (15,786) (11,289) Inventories................................................... (6,431) (7,218) (10,987) Prepaid expenses.............................................. 853 (3,142) 238 Current deferred tax asset.................................... (304) (266) (396) Increase (decrease) in current liabilities: Accounts payable.............................................. 5,613 (596) 8,345 Accrued income taxes.......................................... 265 (807) (1,482) Accrued liabilities........................................... 5,211 105 2,133 Net cash provided by operating activities................ 32,417 12,695 15,503 Cash flow from investing activities: Proceeds from sale of depreciable assets............................... 889 775 690 Sale of product line and mineral reserves.............................. 5,888 - - Acquisition of land, mineral reserves, and depreciable assets.......... (34,339) (62,782) (80,958) (Increase) decrease in other assets.................................... (1,801) (313) 29 Net cash used in investing activities..................... (29,363) (62,320) (80,239) Cash flow from financing activities: Proceeds from issuance of debt......................................... 10,345 109,984 77,715 Principal payments of debt and capital lease obligations............... (3,606) (63,864) (22,725) Proceeds from sale of treasury stock................................... 1,001 953 4,167 Purchase of treasury stock............................................. (4,186) (838) (443) Dividends paid......................................................... (5,349) (4,979) (4,521) Other.................................................................. 105 1 (56) Net cash provided by (used in) financing activities....... (1,690) 41,257 54,137 Cumulative translation adjustment........................................... (198) (133) 486 Net increase (decrease) in cash and cash equivalents........................ 1,166 (8,501) (10,113) Cash at beginning of year................................................... 1,888 10,389 20,502 Cash and cash equivalents at end of year.................................... $ 3,054 $ 1,888 $ 10,389 Supplemental Disclosures of Cash Flows Information: Actual cash paid for: Interest............................................................... $ 9,029 $ 7,791 $ 3,636 Income taxes........................................................... $ 6,759 $ 10,066 $ 9,143
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) (1) Summary of Significant Accounting Policies Company Operations AMCOL International Corporation (the Company) may be divided into three principal categories of operations: minerals, absorbent polymers and environmental. The Company also operates a transportation business primarily for delivery of its own products. The Company's revenues are derived 36% from the minerals operation, 38% from absorbent polymers, 20% from environmental and 6% from transportation operations. The Company's sales were approximately 59% domestic and 41% overseas. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All subsidiaries are wholly owned, except for a 49% interest in a Mexican subsidiary and a 33% interest in a Chinese subsidiary, which are accounted for at cost. The difference between the results based on the cost method and the equity method is immaterial. All material intercompany balances and transactions, including profits on inventories, have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Translation of Foreign Currencies The accounts and transactions of subsidiaries located outside of the United States are translated into U.S. dollars at rates of exchange in accordance with Statement of Financial Accounting Standards No.52, "Foreign Currency Translation." The assets and liabilities of these subsidiaries are translated at the rate of exchange at the balance sheet date. The statements of operations are translated at the weighted average monthly rate. Foreign exchange translation adjustments are accumulated as a separate component of stockholders' equity while realized exchange gains or losses are included in income. Inventories Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) or moving average methods. Exploration costs are expensed as incurred. Costs incurred in removing overburden and mining bentonite are capitalized as advance mining costs until the bentonite from such mining area is transported to the plant site, at which point the costs are included in crude bentonite stockpile inventory. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (1) Summary of Significant Accounting Policies (Continued) Property, Plant, Equipment, and Mineral Rights and Reserves Property, plant, equipment, and mineral rights and reserves are carried at cost. Depreciation is computed using the straight-line method for substantially all of the assets. Certain other assets, primarily field equipment, are depreciated on the units-of-production method. Mineral rights and reserves are depleted using the units-of-production method. Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill is being amortized on the straight-line method over periods of 10 to 40 years. Other intangibles, including trademarks and noncompete agreements, are amortized on the straight-line method over periods of up to 10 years. Income Taxes The Company and its U.S. subsidiaries file a consolidated tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect for the year in which those temporary differences are expected to be recovered or settled. Research and Development Research and development costs, included in general, selling and administrative expenses, were approximately $4,962, $4,801 and $2,353 for the years ended December 31, 1996, 1995 and 1994. Earnings Per Share Earnings per share is computed by dividing net income by the weighted average of common shares outstanding after consideration of the dilutive effect of stock options outstanding at the end of each period. The weighted average number of common and common equivalent shares outstanding was 19,529,659 for 1996, 19,679,480 for 1995 and 19,486,520 for 1994. Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less as cash equivalents. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (1) Summary of Significant Accounting Policies (Continued) Impairment of Long-Lived Assets The Company adopted the provisions of Statement of Financial Accounting Standards No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Stock Option Plans The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No.123, "Accounting for Stock-Based Compensation," but applies Accounting Principles Board Opinion No.25 and related interpretations in accounting for its plans. Reclassification Certain items in the 1995 and 1994 consolidated financial statements have been reclassified to comply with the consolidated financial statements presentation for 1996. (2) Business Segment and Geographic Area Information The Company operates in three major industry segments: minerals, absorbent polymers and environmental. The Company also operates a transportation business. The minerals segment mines, processes and distributes clays and products with similar applications to various industrial and consumer markets. The absorbent polymers segment produces and distributes superabsorbent polymers primarily for use in consumer markets. The environmental segment processes and distributes clays and products with similar applications for use as a moisture barrier in commercial construction, landfill liners and in a variety of other industrial and commercial applications. The transportation segment includes a long haul trucking business and a freight brokerage business, which provide services to both the Company's plants and outside customers. Intersegment sales are insignificant. Operating profit is defined as sales and other income directly related to a segment's operations, less operating expenses, which do not include interest costs. Identifiable assets by segments are those assets used in the Company's operations in that segment. Corporate assets are primarily cash and cash equivalents, corporate leasehold improvements and miscellaneous equipment. Export sales included in the United States were approximately $39,610, $28,691 and $17,430 for the years ended December 31, 1996, 1995 and 1994. One customer accounted for approximately 12% of sales in 1996. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (2) Business Segment and Geographic Area Information (Continued) The following summaries set forth certain financial information by business segment and geographic area for the years ended December 31, 1996, 1995 and 1994.
1996 1995 1994 Business Segment: Revenues: Minerals $ 145,623 $ 139,722 $ 142,607 Absorbent polymers................................................... 153,866 120,762 58,591 Environmental........................................................ 81,480 65,538 42,609 Transportation....................................................... 24,378 21,666 21,636 Total $ 405,347 $ 347,688 $ 265,443 Operating profit: Minerals $ 7,998 $ 12,273 $ 15,684 Absorbent polymers................................................... 19,627 16,902 7,959 Environmental........................................................ 12,090 8,807 5,741 Transportation....................................................... 1,236 1,057 1,025 Corporate (8,614) (6,642) (6,418) Total $ 32,337 $ 32,397 $ 23,991 Identifiable assets: Minerals $ 123,161 $ 130,185 $ 126,014 Absorbent polymers................................................... 148,405 126,392 95,121 Environmental........................................................ 65,360 54,329 31,344 Transportation....................................................... 1,167 1,235 1,242 Corporate 12,615 10,225 10,178 Total $ 350,708 $ 322,366 $ 263,899 Depreciation, depletion and amortization: Minerals $ 11,520 $ 10,748 $ 9,506 Absorbent polymers................................................... 11,179 7,176 3,476 Environmental........................................................ 3,908 2,432 906 Transportation....................................................... 43 35 30 Corporate 1,257 898 524 Total $ 27,907 $ 21,289 $ 14,442 Capital expenditures: Minerals $ 10,397 $ 20,021 $ 23,979 Absorbent polymers................................................... 17,358 24,178 44,606 Environmental........................................................ 5,414 16,775 10,373 Transportation....................................................... 26 61 66 Corporate 1,144 1,747 1,934 Total $ 34,339 $ 62,782 $ 80,958
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (2) Business Segment and Geographic Area Information (Continued)
1996 1995 1994 Geographic area: Sales to unaffiliated customers from: North America....................................................... $ 281,678 $ 255,920 $ 226,483 Europe .......................................................... 121,450 89,842 37,154 Australia 2,219 1,926 1,806 Total $ 405,347 $ 347,688 $ 265,443 Sales or transfers between geographic areas: North America....................................................... $ 15,858 $ 5,416 $ 4,086 Europe.............................................................. - 86 103 Australia - - - Total $ 15,858 $ 5,502 $ 4,189 Operating profit from: North America....................................................... $ 23,757 $ 23,047 $ 22,639 Europe.............................................................. 8,667 9,471 972 Australia 202 109 360 Adjustments and eliminations........................................ (289) (230) 20 Total $ 32,337 $ 32,397 $ 23,991 Identifiable assets in: North America....................................................... $ 243,390 $ 246,242 $ 199,175 Europe.............................................................. 105,909 73,175 65,886 Australia 2,069 2,314 1,582 Adjustments and eliminations........................................ (660) 635 (2,744) Total $ 350,708 $ 322,366 $ 263,899 (3) Inventories Inventories consisted of: 1996 1995 Advance mining..................................................................... $ 2,412 $ 2,678 Crude stockpile inventories.......................................................... 12,601 10,284 In-process inventories............................................................... 21,480 19,421 Other raw material, container, and supplies inventories.............................. 19,821 17,500
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (4) Property, Plant, Equipment, and Mineral Rights and Reserves Property, plant, equipment and mineral rights and reserves consisted of the following:
December 31, Depreciation/ Amortization- 1996 1995 Annual Rates Mineral rights and reserves..................................... $ 7,072 $ 10,084 Other land...................................................... 3,418 2,542 Buildings and improvements...................................... 66,307 48,969 2.2% to 20.0% Machinery and equipment......................................... 222,569 214,935 5.0% to 33.3% $299,366 $276,530
Depreciation and depletion were charged to income as follows:
1996 1995 1994 Depreciation expense........................................................ $25,249 $19,209 $13,045 Depletion expense........................................................... 593 587 588 $25,842 $19,796 $13,633
(5) Income Taxes The components of the provision for domestic and foreign income tax expense for the years ended December 31,1996, 1995 and 1994 consisted of:
1996 1995 1994 Income before income taxes and minority interest: Domestic............................................................... $ 21,910 $ 22,796 $ 21,810 Foreign................................................................ 1,307 4,091 393 $ 23,217 $ 26,887 $ 22,203 Provision for income taxes: Domestic Federal Current............................................................. $ 6,285 $ 5,283 $ 5,416 Deferred............................................................ (313) 390 (370) Domestic State Current............................................................. 837 1,358 1,548 Deferred............................................................ (26) 43 (38) Foreign Current............................................................. 1,467 1,362 911 Deferred............................................................ (271) 646 (639) $ 7,979 $ 9,082 $ 6,828
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (5) Income Taxes (Continued) The components of the deferred tax assets and liabilities as of December 31, 1996 and 1995 were as follows:
1996 1995 Deferred tax assets: Accounts receivable, due to allowance for doubtful accounts........................ $ 717 $ 620 Inventories, due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 and reserve for obsolete inventories....................... 881 1,036 Other.............................................................................. 9,216 7,022 Total deferred tax assets....................................................... 10,814 8,678 Deferred tax liabilities: Plant and equipment, due to differences in depreciation............................ (11,568) (9,379) Land and mineral reserves, due to differences in depletion......................... (2,026) (2,385) Inventories, due to change in accounting method.................................... (732) (915) Other.............................................................................. 85 (36) Total deferred tax liabilities.................................................. (14,241) (12,715) Net deferred tax liability...................................................... ($ 3,427) ($ 4,037)
The following analysis reconciles the statutory Federal income tax rate to the effective tax rates:
1996 1995 1994 Percent of Percent of Percent of Pretax Pretax Pretax Amount Income Amount Income Amount Income Domestic and foreign taxes on income at United States statutory rate............. $ 8,126 35.0% $ 9,410 35.0% $ 7,771 35.0% Increase (decrease) in taxes resulting from: Percentage depletion................... (263) (1.1) (840) (3.1) (781) (3.5) State taxes............................ 847 3.7 1,358 5.0 1,510 6.8 FSC Commission......................... (1,106) (4.8) (1,033) (3.8) (509) (2.3) Other.................................. 375 1.6 187 .7 (1,163) (5.2) $ 7,979 34.4% $ 9,082 33.8% $ 6,828 30.8%
(6) Long-term Debt
Long-term debt consisted of the following: December 31, 1996 1995 Short-term debt supported by revolving credit agreement................................. $ 66,290 $ 57,618 Term note, at 9.68% (Series D).......................................................... 8,560 11,420 Term note, at 7.36% (Series A).......................................................... 25,000 25,000 Term note, at 7.83% (Series B).......................................................... 10,000 10,000 Term note, at 8.10% (Series C).......................................................... 15,000 15,000 Industrial Revenue Bond, at 68% of prime................................................ 817 1,050 Other notes payable..................................................................... 1,677 304 127,344 120,392 Less current portion.................................................................... 8,770 3,875 $ 118,574 $ 116,517
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (6) Long-term Debt (Continued) The Company has a committed $100,000 revolving credit agreement, which matures October 31, 2000, with an option to extend for three one-year periods. As of December 31, 1996, there was $33,710 available in unused lines of credit. The revolving credit note is a multi-currency agreement, which allows the Company to borrow at an adjusted LIBOR rate plus .375% to .75%, depending upon debt to capitalization ratios and the amount of the credit line used. The Industrial Revenue Bond outstanding at December 31, 1996, is payable in equal semi-annual installments of $117 until the year 2000. The Aberdeen, Mississippi, bentonite operations of the Company are pledged as collateral. Maturities of long-term debt at December 31, 1996 are as follows:
1997 1998 1999 2000 2001 Thereafter Short-term debt supported by revolving credit agreement...... $ - $ - $ - $ 66,290 $ - $ - Term note, at 9.68% (Series D)...... 2,860 2,860 2,840 - - - Term note, at 7.36% (Series A)...... 4,000 9,500 11,500 - - - Term note, at 7.83% (Series B)...... - - - - 5,000 5,000 Term note, at 8.10% (Series C)...... - - - - - 15,000 Industrial Revenue Bond, at 68% of prime........................... 233 233 233 118 - - Other notes payable................. 1,677 - - - - - $ 8,770 $ 12,593 $ 14,573 $ 66,408 $ 5,000 $ 20,000
The estimated fair value of the term notes above at December 31, 1996, was $60,320 based on discounting future cash payments at current market interest rates for loans with similar terms and maturities. All loan agreements include covenants that require the maintenance of specific minimum amounts of working capital, tangible net worth and financial ratios and limit additional borrowings and guarantees. The Company is not required to maintain a compensating balance. (7) Financial Instruments The Company uses financial instruments, 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 its committed exposures. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (7) Financial Instruments (Continued) Realized and unrealized foreign exchange gains and losses are recognized and offset against foreign exchange gains or losses on the underlying exposures. At December 31, 1996, the Company had $6,703 of forward exchange contracts outstanding. The fair value of these contracts and the Company's other financial instruments (except for term notes - see note (6)) approximates their carrying value. (8) Leases The Company leases certain railroad cars, trailers, computer software, office equipment, and office and plant facilities. Total rent expense under operating lease agreements was approximately $2,483, $2,283 and $1,920 in 1996, 1995 and 1994, respectively. Rent expense on railroad cars is offset by mileage earnings paid by the railroads of approximately $63, $115 and $124 in 1996, 1995 and 1994, respectively. Railroad cars and computer software under capital leases are included in machinery and equipment as follows:
1996 1995 Railroad cars and computer software..................................................... $ 1,768 $ 1,768 Less accumulated amortization...................................................... 1,456 1,291
The following is a schedule of future minimum lease payments for the capital leases and for operating leases (with initial terms in excess of one year) as of December 1, 1996:
Operating Leases Capital Leases Domestic Foreign Total Year ending December 31: 1997.................................................... $ 229 $ 3,160 $ 252 $ 3,412 1998.................................................... 170 2,331 112 2,443 1999.................................................... 114 1,989 70 2,059 2000.................................................... - 944 56 1,000 2001.................................................... - 583 44 627 Thereafter.............................................. - 491 30 521 Total minimum lease payments................................. 513 $ 9,498 $ 564 $10,062 Less amount representing interest............................ 33 Present value of net minimum lease payments.................. $ 480
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (9) Employee Benefit Plans The Company has noncontributory pension plans covering substantially all of its domestic employees. The Company's funding policy is to contribute annually the maximum amount calculated using the actuarially determined entry age normal method that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to services to date, but also for those expected to be earned in the future. The plan is fully funded for tax purposes.
Pension cost in 1996, 1995 and 1994 was comprised of: 1996 1995 1994 Service cost................................................................ $ 1,108 $ 980 $ 996 Interest cost............................................................... 1,171 1,094 964 Actual return on plan assets................................................ (686) (1,988) 1,354 Net amortization and deferral............................................... (919) 482 (2,863) Net periodic pension cost................................................... $ 674 $ 568 $ 451
The following table summarizes the funded status and amounts recognized in the Company's balance sheet at December 31, 1996 and 1995:
1996 1995 Actuarial present value of benefit obligations-accumulated benefit obligation, including vested benefits of $11,867 in 1996 and $10,716 in 1995............................................................................. $12,755 $11,469 Projected benefit obligation.......................................................... ($18,107) ($15,966) Plan assets at fair value............................................................. 16,586 16,690 Projected benefit obligation (more) less than plan assets............................. (1,521) 724 Unrecognized net (gain) loss.......................................................... 333 (1,101) Unrecognized net obligation at January 1, 1986, being amortized over a period from 19-21 years.......................................................... (1,182) (1,319) Pension liability included in accrued liabilities..................................... ($2,370) ($1,696)
The Company's pension benefit plan was valued as of October 1, 1996, and 1995, respectively. Approximately 93% of the plan assets are invested in common stocks, corporate bonds and notes, and guaranteed income contracts purchased from insurance companies. The remainder of the plan assets are invested in cash and a real estate trust. The actuarial assumptions for both 1996 and 1995 were as follows: the weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5%; the rate of increase in future compensation levels was 5.5%; and the expected long-term rate of return on plan assets was 9.0%. In addition to the ERISA qualified plan outlined above, the Company has a supplementary pension plan that replaces those benefits that are lost as a result of ERISA limitations. The unfunded accrued liability for this plan was $366 at December 31, 1996. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (9) Employee Benefit Plans (continued) The Company also has a savings plan for its domestic personnel. The Company has contributed an amount equal to an employee's contribution up to a maximum of 4% of the employee's annual earnings. Company contributions are made using Company stock purchased on the open market. Company contributions under the savings plan were $1,130 in 1996, $985 in 1995 and $963 in 1994. The foreign pension plans, not subject to ERISA, are funded using individual annuity contracts and, therefore, are not included in the information noted above. (10) Stock Option Plans The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No.123 (FAS 123), "Accounting for Stock-Based Compensation," but applies Accounting Principles Board Opinion No.25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the Company's stock option plans. Had compensation cost for its stock option plans been determined consistent with FAS 123, the Company's net income would have been changed to the pro forma amounts indicated below:
1996 1995 Net income:................................. As reported................................ $ 15,225 $ 17,771 Pro forma.................................. $ 14,775 $ 17,544 Earnings per share:......................... As reported................................ $ 0.78 $ 0.90 Pro forma.................................. $ 0.76 $ 0.89
Under the stock option plans, the exercise price of each option equals the market price of the Company's stock on the date of the grant. For purposes of calculating the compensation cost consistent with FAS 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1996 and 1995, respectively: dividend yield of 1.82% and 2.26%, expected volatility of 42% for both years, risk free interest rates of 5.31% and 7.37%, and expected lives of six years. 1983 Incentive Stock Option Plan The Company reserved 1,800,000 shares of its common stock for issuance of incentive stock options to its officers and key employees. Options awarded under this plan, which entitle the optionee to one share of common stock, may be exercised at a price equal to the fair market value at the time of grant. Options awarded under the plan vest 40% after two years and continue to vest at the rate of 20% per year for each year thereafter, until they are fully vested. Options are exercisable as they vest and expire 10 years after the date of grant, except in the event of termination, retirement or death of the optionee, or a change in control of the Company. This plan expired during 1993, though options which were granted prior to its expiration continue to be valid until the individual option grants expire. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (10) Stock Option Plans (Continued)
1996 1995 1994 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Shares Shares Price Price Price Options outstanding at January 1............. 698,422 $6.18 873,975 $5.81 990,671 $5.50 Granted...................................... - - - - - - Exercised.................................... (169,221) 4.00 (171,869) 4.26 (113,756) 3.02 Cancelled.................................... (14,816) 9.80 (3,684) 7.20 (2,940) 8.61 Options outstanding at December 31........... 514,385 6.80 698,422 6.18 873,975 5.81 Options exercisable at December 31........... 414,443 471,675 430,664 Shares available for future grant at December 31............................... 0 0 0
1993 Stock Plan The Company reserved 840,000 shares of its common stock for issuance to its officers and key employees in the form of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights and phantom stock. Different terms and conditions apply to each form of award made under the plan. To date, only incentive stock options have been awarded. Options awarded under this plan, which entitle the optionee to one share of common stock, may be exercised at a price equal to the fair market value at the time of grant. Options awarded under the plan generally vest 40% after two years and continue to vest at the rate of 20% per year for each year thereafter, until they are fully vested, unless a different vesting schedule is established by the Option Committee of the Board of Directors on the date of grant. Options are exercisable as they vest and expire 10 years after the date of grant, except in the event of termination, retirement or death of the optionee or a change in control of the Company.
1996 1995 1994 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Options outstanding at January 1............. 318,140 $16.27 198,975 $18.91 84,150 $20.50 Granted...................................... 189,557 14.52 134,450 12.38 117,045 17.75 Exercised.................................... - - - - - - Cancelled.................................... (64,375) 14.88 (15,285) 16.47 (2,220) 17.75 Options outstanding at December 31........... 443,322 15.72 318,140 16.27 198,975 18.91 Options exercisable at December 31........... 34,456 0 0 Shares available for future grant at 396,678 521,860 641,025 December 31...............................
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (10) Stock Option Plans (Continued) 1987 Nonqualified Stock Option Plan The Company reserved 340,000 shares of its common stock for issuance of nonqualified stock options to officers and directors, as well as key employees. The stock options are exercisable at a price per share which may be no less than the fair market value at the time of grant according to the vesting provisions of the plan. Options awarded under the plan generally vest 40% after two years and continue to vest at the rate of 20% per year for each year thereafter, until fully vested. Options are exercisable as they vest and expire 10 years after the date of grant, except in the event of termination, retirement or death of the optionee, or a change in control of the Company.
1996 1995 1994 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Options outstanding at January 1............. 150,856 $ 5.15 140,656 $ 3.82 144,400 $ 3.57 Granted...................................... 7,000 11.63 17,000 15.75 2,256 17.75 Exercised.................................... (5,000) 2.92 (6,000) 2.92 (6,000) 2.92 Cancelled.................................... - - (800) 13.25 - - Options outstanding at December 31........... 152,856 5.52 150,856 5.15 140,656 3.82 Options exercisable at December 31........... 126,224 129,680 121,920 Shares available for future grant at 130,544 137,544 153,744 December 31...............................
All Stock Option Plans The following table summarizes information about stock options outstanding and exercisable at December 31, 1996:
Options Outstanding Options Exercisable Weighted Average Weighted Weighted Remaining Average Number of Average Number of Contractual Exercise Shares Exercise Range of exercise prices Shares Life (Yrs.) Price Price $ 2.334 - $ 3.917 350,201 3.69 $ 3.356 329,699 $ 3.321 4.667 - 11.750 294,584 4.90 9.553 208,144 8.645 12.375 - 15.375 282,607 8.83 13.703 4,470 12.965 15.750 - 20.500 183,171 9.32 18.828 32,810 17.750 Total 1,110,563 6.25 $10.184 575,123 $ 6.146
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (11) Accrued Liabilities
1996 1995 Estimated accrued severance taxes....................................................... $ 1,888 $ 1,048 Accrued employee benefits............................................................... 2,586 1,837 Accrued vacation pay.................................................................... 1,702 1,438 Accrued dividends....................................................................... 1,335 1,344 Accrued bonus........................................................................... 472 781 Accrued commissions..................................................................... 2,077 578 Other................................................................................... 8,187 6,010 $ 18,247 $ 13,036
(12) Quarterly Results (Unaudited) Unaudited summarized results for each quarter in 1996 and 1995 are as follows:
1996 Quarter -------------------------------------------------------- First Second Third Fourth Minerals.................................................... $ 34,557 $ 35,347 $ 37,260 $ 38,459 Absorbent Polymers.......................................... 32,046 34,102 38,744 48,974 Environmental............................................... 13,767 21,563 26,923 19,227 Transportation............................................. 5,166 5,749 6,619 6,844 Net Sales.............................................. $ 85,536 $ 96,761 $ 109,546 $ 113,504 Minerals.................................................... $ 4,704 $ 5,781 $ 7,006 $ 5,728 Absorbent Polymers.......................................... 6,326 6,108 7,623 10,361 Environmental............................................... 4,268 7,280 9,063 6,957 Transportation.............................................. 702 745 806 853 Gross Profit........................................... $ 16,000 $ 19,914 $ 24,498 $ 23,899 Minerals.................................................... $ 906 $ 1,831 $ 3,322 $ 1,939 Absorbent Polymers.......................................... 3,847 3,691 4,940 7,149 Environmental............................................... 710 3,358 5,078 2,944 Transportation.............................................. 269 265 351 351 Corporate................................................... (2,155) (2,290) (2,383) (1,786) Operating Profit....................................... $ 3,577 $ 6,855 $ 11,308 $ 10,597 Net Income.................................................. $ 1,131 $ 2,983 $ 5,875 $ 5,236 Earnings per common and common equivalent share:............ $ 0.06 $ 0.15 $ 0.30 $ 0.27
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (12) Quarterly Results (Unaudited) (continued)
1995 Quarter -------------------------------------------------------- First Second Third Fourth Minerals.................................................... $ 35,598 $ 34,968 $ 34,381 $ 34,775 Absorbent Polymers.......................................... 26,480 28,768 31,286 34,228 Environmental............................................... 11,424 14,656 21,612 17,846 Transportation............................................. 5,248 5,268 5,699 5,451 Net Sales.............................................. $ 78,750 $ 83,660 $ 92,978 $ 92,300 Minerals.................................................... $ 6,692 $ 7,704 $ 6,315 $ 6,305 Absorbent Polymers.......................................... 6,178 6,023 6,263 7,374 Environmental............................................... 3,863 5,069 6,305 5,779 Transportation.............................................. 643 633 719 697 Gross Profit........................................... $ 17,376 $ 19,429 $ 19,602 $ 20,155 Minerals.................................................... $ 2,949 $ 3,611 $ 3,340 $ 2,373 Absorbent Polymers.......................................... 4,084 3,700 3,869 5,249 Environmental............................................... 851 1,943 3,511 2,502 Transportation.............................................. 256 263 315 223 Corporate................................................... (1,582) (1,739) (1,406) (1,915) Operating Profit....................................... $ 6,558 $ 7,778 $ 9,629 $ 8,432 Net Income.................................................. $ 3,631 $ 4,688 $ 4,917 $ 4,535 Earnings per common and common equivalent share:............ $ 0.19 $ 0.24 $ 0.25 $ 0.23
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts (Dollars in thousands)
Additions Charged Balance Balance at Charged to to other Other charges add at end of beginning of costs and account (deduct) year Year Description year expenses describe describe 1996 Allowance for doubtful accounts $ 1,601 $ 2,013 $ - ($951)(1) $2,663 1995 Allowance for doubtful accounts $ 1,336 $ 769 $ - ($504)(1) $1,601 1994 Allowance for doubtful accounts $ 1,836 $ 978 $ - ($1,478)(1)(2) $1,336 ___________ (1) Bad debts written off. (2) During 1994, the Company acquired Aquatec and Hydron, which included allowance for doubtful accounts of $60 and $15, respectively.
SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 20, 1997 AMCOL INTERNATIONAL CORPORATION By: /s/ John Hughes John Hughes President; Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ John Hughes March 20, 1997 John Hughes President; Chief Executive Officer and Director /s/ Paul G. Shelton March 20, 1997 Paul G. Shelton Senior Vice President - Chief Financial Officer; Treasurer and Director /s/ C. Eugene Ray March 20, 1997 C. Eugene Ray Director; Chairman of the Board /s/ Jay D. Proops March 20, 1997 Jay D. Proops Director /s/ Robert C. Humphrey March 20, 1997 Robert C. Humphrey Director /s/ Robert E. Driscoll, III March 20, 1997 Robert E. Driscoll, III Director /s/ Raymond A. Foos March 20, 1997 Raymond A. Foos Director /s/ Clarence O. Redman March 20, 1997 Clarence O. Redman Director /s/ Arthur Brown March 20, 1997 Arthur Brown Director /s/ Dale E. Stahl March 20, 1997 Dale E. Stahl Director /s/ Audrey L. Weaver March 20, 1997 Audrey L. Weaver Director /s/ Paul C. Weaver March 20, 1997 Paul C. Weaver Director INDEX TO EXHIBITS
Exhibit Number 3.1 Restated Certificate of Incorporation of the Company (5), as amended (10) 3.2 Bylaws of the Company (10) 4 Article Fourth of the Company's Restated Certificate of Incorporation (5) 10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3)* 10.2 Executive Medical Reimbursement Plan (1)* 10.3 Lease Agreement for office space dated September 29, 1986, between the Company and American National Bank and Trust Company of Chicago (1); as amended (8) 10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6)* 10.5 Change in Control Agreement dated April 1, 1994, by and between Registrant and John Hughes (6)* 10.6 Change in Control Agreement dated April 1, 1994, by and between Registrant and Paul G. Shelton (6)* 10.7 Change in Control Agreement dated February 7, 1996, by and between Registrant and Lawrence E. Washow (10)* 10.8 Change in Control Agreement dated February 7, 1996, by and between Registrant and Roger P. Palmer (10)* 10.9 Change in Control Agreement dated January 24, 1994, by and between Registrant and Peter L. Maul (6)* 10.10 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)* 10.11 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10)* 10.12 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, and Third Amendment to Credit Agreement dated September 12, 1996. 10.13 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. 10.14 Change in Control Agreement dated August 21, 1996 by and between Registrant and Frank B. Wright, Jr. 21 Subsidiaries of the Company 23 Consent of KPMG Peat Marwick LLP 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, 1989. (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. * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K.
EX-10.12 2 SECOND AND THIRD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.12 AMCOL International Corporation Second Amendment to Credit Agreement Harris Trust and Savings Bank Chicago, Illinois NBD Bank Mt. Prospect, Illinois LaSalle National Bank Chicago, Illinois The Northern Trust Company 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 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. Amendments To Credit Agreement. Upon satisfaction of all of the conditions precedent specified in Section 2 of this Amendment, the Credit Agreement shall be amended as follows: Section 1.1. Section 7.2 of the Credit Agreement shall be amended by deleting the rating "A-XII" wherever the same appears therein and by substituting therefore the rating "A-VII." Section 2. Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent: Section 2.1. The Company, the Agent and the Banks shall have executed this Amendment (such execution may be in several counterparts and the several parties hereto may execute on separate counterparts). Section 2.2. Each of the representations and warranties set forth in Section 5 of the Credit Agreement shall be true and correct. Section 2.3. 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 3. Miscellaneous. Section 3.1. 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 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 3.2. 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 3.3. 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 28th day of March, 1996 AMCOL International Corporation (formerly known as American Colloid Company) By: /s/ Paul G. Shelton Its: Sr. 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/ Richard Bott Its: Vice President NBD Bank By: /s/ Robert D. Curtis Its: First Vice President LaSalle National Bank By: /s/ Douglas Lovette Its: First Vice President The Northern Trust Company By: /s/ Daniel R. Hintzen Its: Vice President AMCOL International Corporation Third Amendment to Credit Agreement Harris Trust and Savings Bank Chicago, Illinois The First National Bank of Chicago (as successor to NBD Bank) Chicago, Illinois LaSalle National Bank Chicago, Illinois The Northern Trust Company 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 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. Amendments To Credit Agreement. Upon satisfaction of all of the conditions precedent specified in Section 2 of this Amendment, the Credit Agreement shall be amended as follows: Section 1.1. Sections 7.15(g) and 7.15(i) of the Credit Agreement shall be amended in their entirety and as so amended shall be restated to read as follows: "(g) investments in, and loans and advances to, Restricted Subsidiaries (other than Domestic Subsidiaries) not in excess of $50,000,000 at any one time outstanding; (i) any other investments, loans and advances in an aggregate amount not to exceed the lesser of (x) $25,000,000 or (y) the difference between (a) $50,000,000 less (b) the amount of outstanding investments permitted by subsection (g) hereof." Section 2. Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent: Section 2.1. The Company, the Agent and the Banks shall have executed this Amendment (such execution may be in several counterparts and the several parties hereto may execute on separate counterparts). Section 2.2. The Company's new Domestic Subsidiary, Volclay International Corporation, a Delaware corporation ("Volclay International") shall have executed and delivered a Guaranty Assumption Agreement satisfactory to the Banks. Section 2.3. 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 and Volclay International, in a form satisfactory to the Banks. Section 2.4. Each of the representations and warranties set forth in Section 5 of the Credit Agreement shall be true and correct. 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 and that Amcol International Corp. has changed its name to Regeneration Technologies, Inc. Section 2.5. 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 3. Miscellaneous. Section 3.1. 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 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 3.2. 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 3.3. 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 12th day of September, 1996. AMCOL International Corporation (formerly known as American Colloid Company) By: /s/ Paul G. Shelton Its: Sr. 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/ Richard Bott Its: Vice President The First National Bank of Chicago (as successor to NBD Bank) By: /s/ Robert D. Curtis Its: First Vice President LaSalle National Bank By: /s/ Douglas Lovette Its: First Vice President The Northern Trust Company By: /s/ Daniel R. Hintzen Its: Vice President 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 Delaware Chemdal International Corporation Regeneration Technologies, Inc. (f.k.a. Amcol Delaware International Corp.) Colloid Environmental Technologies Company Delaware American Colloid Company (f.k.a. AES Acquisition, Inc. Delaware and American Colloid Mineral Company) Nanocor, Inc. Delaware Volclay International Corporation Delaware
EX-10.13 3 FIRST AMENDMENT TO NOTE AGREEMENT EXHIBIT 10.13 FIRST AMENDMENT TO NOTE AGREEMENT AND LIMITED WAIVER This First Amendment to Note Agreement and Limited Waiver (the "Agreement") is entered into as of this 30th day of September, 1996, between AMCOL INTERNATIONAL CORPORATION (formerly known as American Colloid Company), a Delaware corporation (the "Company") and PRINCIPAL MUTUAL LIFE INSURANCE COMPANY ("Principal Mutual"). RECITALS: The Company and Principal Mutual entered into a Note Agreement dated as of October 1, 1994 (the "Note Agreement"). In accordance with the terms of the Note Agreement, the Company issued $25,000,000 of its 7.36% Series A Senior Notes due June 30, 1999, $10,000,000 of its 7.83% Series B Senior Notes due June 30, 2002, $15,000,000 of its 8.10% Series C Senior Notes due June 30, 2006, and $17,140,000 of its 9.68% Series D Senior Notes due November 1, 1999 (collectively, the "Notes"). Principal Mutual is the holder of all of the Notes. Capitalized terms used but not defined herein shall have the meaning given such term in the Note Agreement. By letter dated August 8, 1996, the Company notified Principal Mutual that it is in violation of Section 5.16(g) of the Note Agreement with regard to excess advances to Restricted Subsidiaries. The Company has requested a waiver of said default and has proposed that Section 5.16 be modified. Pursuant to the Company's request, Principal Mutual is willing to amend the Note Agreement subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises set forth above and in consideration of the mutual covenants and conditions herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Principal Mutual hereby agree as follows: 1. Recitals Incorporated. The recitals set forth above are incorporated herein by reference. 2. Limited Waiver. Principal Mutual hereby waives compliance with Section 5.16(g) of the Note Agreement for the period June 1, 1996 through the date of this Agreement. 3. Amendments to Note Agreement. 3.1 Section 5.16(g) is deleted in its entirety and the following is inserted in lieu thereof: "(g) investments in, and loans and advances to, Restricted Subsidiaries (other than Subsidiary Guarantors) not in excess of $50,000,000 at any one time outstanding;" 3.2 Section 5.16(i) is deleted in its entirety and the following is inserted in lieu thereof: "(i) any other investments, loans and advances in an aggregate amount not to exceed the lesser of (A) $25,000,000 or (B) the difference between (1) $50,000,000 less (2) the amount of outstanding investments permitted by subsection (g) hereof." 3.3 Section 5.15(f)(i) is deleted and the following inserted in lieu thereof: "(f)...(i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of Section 5.6 through 5.14 and 5.16 and 5.17, inclusive, at the end of the period covered by the financial statements then being furnished, and" 3.4 Section 6.1(f) is deleted and the following inserted in lieu thereof: "(f) Default shall occur in the observance or performance of any covenant or agreement contained in Section 5.6 through 5.14 or 5.16 or 5.17 hereof; or" 4. Conditions Precedent. The effectiveness of this Agreement is subject to satisfaction of all the following conditions precedent: 4.1 Delivery to Principal Mutual of all Guaranty Agreements contemplated by Section 1.3 from Subsidiary Guarantors, including, but not limited to Volclay International Corporation, a Delaware corporation, and Regeneration Technologies, Inc. (formerly known as AMCOL International, Inc.) 4.2 Principal Mutual shall have received executed copies of all documents and proceedings taken in connection with the execution and delivery of this Agreement and the other instruments and documents contemplated hereby and an opinion of counsel to the Company and Volclay International and Regeneration Technologies, Inc., in a form and substance satisfactory to Principal Mutual. 5. Representations of the Company. The Company, by its execution and delivery of this Agreement, hereby represents and warrants to Principal Mutual as follows: 5.1 As of the date hereof, no Default or Event of Default under the Note Agreement, or under any other agreement to which the Company is subject, exists or is continuing. 5.2 The representations and warranties of the Company referred to in Section 3 of the Note Agreement are true and correct and complete in all material respects as if made on the date hereof, except as to those representations and warranties made as of the specific date, which are true and correct and materially complete as of such date. 5.3 No dissolution proceedings with respect to the Company have been commenced or are contemplated, and there has been no material adverse change in the business, condition or operation (financial or otherwise) of the Company taken as a whole since October 4, 1994. 5.4 This Agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company. 6. Miscellaneous. 6.1 Except as expressly set forth herein, the terms of this Agreement shall not operate as a waiver by Principal Mutual of any of the provisions of, or otherwise prejudice, remedies or powers under the Note Agreement, the Notes or applicable law and shall not operate as a waiver of or otherwise prejudice any rights it may have against any other Person. Except as set forth herein, none of the terms or provisions of either the Note Agreement or the Note shall be modified hereby, and each of the Note Agreement and the Notes, as modified herein, shall continue in full force and effect and are hereby ratified and affirmed. 6.2 All headings and captions preceding the text of the several sections of this Agreement are intended solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. 6.3 This Agreement embodies the entire agreement and understanding among the Company and Principal Mutual with regard to the matters set forth herein, and supersedes all prior agreements and undertakings relating to such matters. 6.4 This Agreement shall be governed by, and construed and enforced in accordance with Illinois law. 6.5 This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed shall be deemed an original and all of which taken together shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their authorized officers as of the date first written above. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By: /s/ Sarah J. Pitts Its: Counsel By: /s/ Annette M. Masterson Its: Director - Securities Investment AMCOL INTERNATIONAL CORPORATION (formerly known as American Colloid Company) By: /s/ Paul G. Shelton Its: Sr. Vice President cc: Robert Stephan Sarah Pitts EX-10.14 4 MATERIAL CONTRACTS EXHIBIT 10.14 AGREEMENT WHEREAS, AMCOL International Corporation (the "Company") considers it essential and in the best interests of the Company and its shareholders to foster the continued employment of its key management personnel; WHEREAS, Frank B. Wright, Jr. ("Employee") is considered a key management employee, currently serving as Vice President of the Company and President of its American Colloid Company subsidiary; and WHEREAS, the Company desires to assure the future continuity of Employee's services in the event of any actual or threatened "Change in Control" (as defined in Section 6 below) of the Company. IT IS THEREFORE AGREED AS FOLLOWS: 1. Effect of Agreement. This Agreement shall be effective and binding immediately upon its execution. However, except as specifically provided herein, this Agreement shall not alter materially Employee's duties and obligations to the Company and the remuneration and benefits which Employee may reasonably expect to receive from the Company in the absence of a Change in Control. 2. Employment On and After Change in Control. Provided that the employee is an employee of the Company immediately prior to a Change in Control, the Company shall employ Employee, and Employee shall accept such employment, effective upon such Change in Control for a period of twenty-four (24) months after said Change in Control subject to the terms and conditions stated herein. 3. Duties After Change in Control. Employee agrees that during the term of his employment with the Company after a Change in Control, he shall perform the duties described in Section 12 below and such other duties for the Company and its subsidiaries consistent with his experience and training as the Board of Directors of the Company (the "Board") or the Board's representatives shall determine from time to time, which duties shall be at least substantially equal in status, dignity and character to his duties at the date hereof. He shall also have the title of Vice President of the Company and President of American Colloid Company. Employee further agrees to devote his entire working time and attention to the business of the Company and its subsidiaries and use his best efforts to promote such business. 4. Compensation Prior to a Change in Control. Prior to a Change in Control the Company agrees to pay Employee compensation for his services in an amount, and to provide him with life insurance, disability, health and other benefits, as set by the Company from time to time. For the purpose of this Section, compensation does not include any bonus or other incentive compensation plan or stock purchase plan, which may vary from year to year at the discretion of the Company. 5. Termination of Employment Prior to a Change of Control. Employee shall be entitled to terminate his employment prior to a Change in Control at any time upon sixty (60) days' prior written notice. The Company, shall be able to terminate Employee's employment at any time prior to a Change in Control with or without cause upon sixty (60) days' prior written notice (or the payment of salary in lieu thereof). This Section shall not be construed to reduce any accrued benefits payable in connection with any termination of Employee's employment prior to a Change in Control. Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company or Employee to have Employee remain in the employment of the Company prior to a Change in Control. 6. Termination of Employment On or After Change in Control. (a) For purposes of this Agreement the term "Change in Control" means the change in the legal or beneficial ownership of fifty-one percent (51%) of the shares of the Company's common stock within a six-month period other than by death or operation of law, or the sale of ninety percent (90%) or more of the Company's assets within a six-month period. (b) Employee's employment on and after a Change in Control may be terminated with just cause by the Company at any time upon not less than ten (10) days' prior written notice. Prior to termination for just cause on and after a Change in Control, the Board of Directors shall by majority vote have declared that Employee's termination is for just cause specifically stating the basis for such determination. In the event such a termination occurs, the provisions of Sections 9(a) and 12 below shall apply. Employee's employment may be terminated on or after a Change in Control without just cause pursuant to the constructive termination procedures described in the next paragraph or by the Company giving Employee not less than thirty (30) days' prior written notice. In the event Employee's employment is terminated pursuant to the preceding sentence: (i) the provisions of Section 9(b) below shall apply; and (ii) although Employee's employment term shall be deemed terminated at the end of such notice period (or, in the case of a constructive termination described in the next paragraph, as of the date Employee notifies the Company of such termination), such termination shall in no way affect the term of this Agreement or Employee's duties and obligations under Section 12 below. For purposes of this Section 6(b), Employee shall be considered as having been terminated by the Company on or after a Change in Control for other than just cause provided that he has notified the Company of any of the following within ten (10) days of the occurrence thereof: (i) the assignment to Employee of any duties of substantially lesser status, dignity and character than the duties as a Vice President of the Company immediately prior to the effective date of the Change in Control; (ii) a post-Change in Control reduction by the Company in Employee's annual base salary or bonus or incentive plan (as in effect immediately prior to the effective date of the Change in Control); (iii)relocation of Employee's office to a location which is more than 35 miles from the location in which Employee principally works for the Company immediately prior to the effective date of the Change in Control; the relocation of the appropriate principal executive office of the Company or the Company's operating division or subsidiary for which Employee performed the majority of his services for the Company during the year prior to the effective date of the Change in Control to a location which is more than 35 miles from the location of such office immediately prior to such date (it being the understanding of the parties that the Employee shall relocate his residence from Denver to Chicago on or before January 1, 1997); or his being required by the Company in order to perform duties of substantially equal status, dignity and character to those duties he performed immediately prior to the effective date of the Change in Control to travel on the Company's business to a substantially greater extent than is consistent with his business travel obligations as of such date; or (iv) the failure of the Company to continue to provide Employee with benefits substantially equivalent to those enjoyed by him under any of the Company's life insurance, medical, health and accident or disability plans in which he was participating immediately prior to the effective date of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him immediately prior to effective date of the Change in Control, or the failure of the Company to provide him with at least the number of paid vacation days to which he is entitled on the basis of years of service under the Company's normal vacation policy in effect immediately prior to the effective date of the Change in Control. (c) In the event Employee's employment is terminated on or after a Change in Control in any manner not described in Section 6(b) above: (i) the provisions of Section 9(b) shall not apply and Employee shall instead receive the sums and benefits described in Section 9(a); and (ii) such termination shall in no way affect the term of this Agreement or Employee's duties or obligations under Section 12 below. (d) Any termination of employment of Employee following the commencement of any discussions by a shareholder or group of shareholders owning legally or beneficially more than 20% of the common stock or an officially designated representative of the Board of Directors with a third party that results within 180 days in a Change in Control shall (unless such termination is for cause or wholly unrelated to such discussions) be deemed to be a termination of Employee on and after a Change in Control for purposes of this Agreement. 7. Notice of Termination. Any termination by the Company or assertion of termination by Employee shall be communicated by written notice of termination to the other party at the following address: AMCOL International Corporation Mr. Frank B. Wright, Jr. One North Arlington AMCOL International Corporation 1500 West Shure Drive One North Arlington Arlington Heights, IL 60004 1500 West Shure Drive Attn: Chief Executive Officer Arlington Heights, IL 60004 8. Disability. If as a result of Employee's incapacity due to physical or mental illness, he shall have been absent from his duties with the Company for one hundred eighty (180) days within any twelve-(12)-consecutive-month period and within thirty (30) days after written notice of the Company's intention to terminate his employment is given, Employee shall not have returned to the performance of his duties with the Company substantially on a full-time basis, the Company may terminate his employment for disability. This shall not constitute a termination for the purposes of obtaining benefits pursuant to Section 9. 9. Benefits Upon Termination And Leave Of Employment On or After Change in the Control. (a) If Employee is terminated for just cause on or after a Change in Control, he shall only receive the accrued sums and benefits payable to him through the date he is terminated; the provisions of Section 9(b) below shall not be applicable in such case and Employee shall not receive (or shall cease receiving) the payments and benefits described in Section 9(b). (b) Subject to Employee's compliance with the provisions of Section 12(a) below, if Employee is terminated during the twenty-four (24) month period beginning on and continuing after a Change in Control other than for just cause (either at the discretion of the Company's management or constructively by the operation of Section 6), he shall receive the following payments and benefits in lieu of any other sums or benefits otherwise payable to him by the Company: (i) all then accrued pay, benefits, executive compensation and fringe benefits, including (but not limited to) pro rata bonus and incentive plan earnings; (ii) medical, health and disability benefits which are substantially similar to the benefits the Company is providing him as of the date of his employment is terminated for a period of twenty-four (24) months thereafter; and (iii)one dollar less than two times his base period compensation. The foregoing payments and benefits shall be deemed compensation payable for the duties to be performed by Employee pursuant to Section 12 below. For purposes of this Agreement, (A) Employee's "base period compensation" is the average annual "compensation" (as defined below) which was includable in his gross income for his base period (i.e., his most recent five taxable years ending before the date of the Change in Control); and (B) if Employee's base period includes a short taxable year or less than all of a taxable year, compensation for such short or incomplete taxable year shall be annualized before determining his average annual compensation for the base period. (In annualizing compensation, the frequency with which payments are expected to be made over an annual period shall be taken into account. Thus, any amount of compensation for such a short or incomplete taxable year that represents a payment that would not be made more than once per year shall not be annualized). The sum payable to Employee pursuant to Section 9(b)(iii) shall in any and all cases be reduced by any compensation which Employee receives, excluding stock option or other stock incentive bonus plan compensation from the date of the Change in Control until the termination date. For purposes of Section 9(iii) and the definitions pertaining to said Section, Employee's "compensation" is the compensation which was payable to him by the Company or a related entity determined without regard to the following Sections of the Internal Revenue Code of 1986, as amended (the "Code"): 125 (cafeteria plans), 402(a)(8) (cash or deferred arrangements), 402(h)(1)(B) (elective contributions to simplified employee pensions), and, in the case of employer contributions made pursuant to a salary reduction agreement, 403(b) (tax sheltered annuities). Except for the benefits described in Section 9(b)(ii) above, the sums due pursuant to this Section 9(b) shall be paid in up to two (2) annual installments commencing thirty (30) days after the sums become due. All sums due shall be subject to appropriate withholding and statutory requirements. Employee shall not be required to mitigate the amount of any payment provided for in this Section 9(b) by seeking other employment or otherwise. Notwithstanding anything stated in this Section 9(b) to the contrary, however, the amount of any payment or benefit provided for in this Section 9(b) shall be reduced by no more than 50% by any compensation earned by Employee as a result of employment by another employer and the Company shall not be required to provide medical, health and/or disability benefits to the extent such benefits would duplicate benefits received by Employee in connection with his employment with any new employer. Notwithstanding anything stated in this Agreement to the contrary, if the amounts which are payable and the benefits which are provided to Employee under this Agreement, either alone or together with other payments which Employee has a right to receive from the Company or any of its affiliates, would constitute a "parachute payment" (as defined in Code Section 280G), such amounts and benefits shall be reduced, as necessary, to the largest amount as will result in no portion of said amounts and benefits being either not deductible as a result of Code Section 280G or subject to the excise tax imposed by Code Section 4999. The determination of any reduction in said amounts and benefits pursuant to the foregoing proviso shall be made by the Company in good faith, and such determination shall be conclusive and binding on Employee. The amounts provided to Employee under this Agreement in connection with a Change in Control, if any, shall be deemed allocated to such amounts and/or benefits to be paid and/or provided as the Company's Board of Directors in its sole discretion shall determine. 10. Special Situations. The parties recognize that under certain circumstances a Change in Control may occur under conditions which make it inappropriate for Employee to receive the termination benefits or protection set forth in this Agreement. Therefore, in the event that a Change in Control occurs for any one of the following reasons, the provisions of Sections 2, 6 and 9 shall not apply: (a) the purchase of more than fifty percent (50%) of the stock of the Company by an employee stock ownership plan or similar employee benefit plan of which Employee is a participant; or (b) the purchase of more than fifty percent (50%) of the stock or ninety percent (90%) of the assets of the Company by a group of individuals or entities including Employee as a member or participant, including but not limited to those transactions commonly known as a leveraged or other forms of management buy- outs. 11. Disputes. Any dispute arising under this Agreement (except Section 12) shall be promptly submitted to arbitration under the Rules of the American Arbitration Association. An arbitrator is to be mutually agreed upon by the parties or upon failure of agreement, designated by the American Arbitration Association. 12. Non-Competition, Non-Solicitation, and Confidentiality. (a) In consideration of this Agreement and other good and valuable consideration, Employee agrees that for so long as he is employed by the Company and for twelve (12) months thereafter he shall not own manage, operate, control, be employed by or otherwise engage in any competitive business. Employee's agreement pursuant to the preceding sentence shall be in addition to any other agreement or legal obligation he may have with or to the Company. For purposes of the preceding sentence, a "competitive business" is any business engaged in the production, refinement or sale of Bentonite and/or any business conducted by the Company, its affiliates or any subsidiaries thereof as of the date Employee's employment is terminated. A business which is conducted by the Company, its affiliates or any subsidiaries which is subsequently sold by the Company is not a competitive business as of the date such business is sold. An "affiliate" of the Company is any company which either controls, is controlled by or is under common control with the Company. The phrase "any business conducted by the Company, its affiliates, joint ventures or any subsidiaries thereof" includes not only current businesses but also any new products, product lines or use of processes under development, consideration or investigation on the date Employee's employment with the Company is terminated. Employee also agrees that during the twelve (12) month period described in the first sentence of this Section 12(a) he will not directly or indirectly, on behalf of himself or any other person or entity, make a solicitation or conduct business, with any customer or potential customer of the Company with which he had contact while employed by the Company, its affiliates and/or any subsidiaries thereof, with respect to any products or services which are competitive with any business conducted by the Company, its affiliates or any subsidiaries thereof. For purposes of the preceding sentence, a "customer" is any person or entity that has purchased goods or services from the Company, its affiliates or any subsidiaries thereof within the twelve (12) month period ending on the date Employee's employment is terminated. A "potential customer" is any person or entity that the Company solicited for business within twelve (12) months prior to the date Employee's employment with the Company is terminated. The Company and Employee recognize that his responsibilities have included product development, sales and marketing of bentonite clay, fuller's earth and related products to various markets including without limitation the foundry, agricultural and well drilling industries and establishing contacts and business relationships on behalf of the Company in the domestic and international markets. Employee's contacts on behalf of the Company represent substantial assets of the Company which are entitled to protection. In recognition of this situation, the covenants set forth in this Section 12 shall apply to competitive businesses and solicitation in the United States, Australia, Japan, China, India, Thailand, Egypt, Canada, Mexico and those other countries of Europe, North America, South America and Asia in which the Company, its affiliates, joint ventures and subsidiaries are located or have conducted $100,000 or more of business during the twelve-month period ending on the date Employee's employment with the Company terminated. Before and forever after his termination or resignation, Employee shall keep confidential and refrain from utilizing or disseminating any confidential, proprietary or trade secret information of the Company for any purpose other than furthering the business interests of the Company. (b) During Employee's employment hereunder and during one (1) year following his resignation or the termination of his employment hereunder for any reason, Employee will not induce or attempt to influence any present or future employee of the Company, its affiliates or any subsidiaries thereof to leave its employ. (c) In consideration of the covenant not to compete the Company will pay one/twelfth (1/12) of Employee's annual base salary each month for a total of 12 months. The Company may at its sole discretion for any reason whatsoever not make these payments if it so elects and the covenant not to compete will end at the end of the month in which the Company elects to cease payment. 13. Other Agreements. Except to the extent expressly set forth herein, this Agreement shall not modify or lessen any benefit or compensation to which Employee is entitled under any agreement between Employee and the Company or under any plan maintained by the Company in which he participates or participated. Benefits or compensation shall be payable thereunder, if at all, according to the terms of the applicable plan(s) or agreement(s). The terms of this Agreement shall supersede any existing agreement between Employee and the Company executed prior to the date hereof to the extent any such Agreement is inconsistent with the terms hereof. 14. Successors; Binding Agreement. The Company will require any successor (whether direct or indirect by purchase, merger, consolidation or otherwise, to all or substantially all of the business and/or assets of the Company) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. This Agreement shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 15. Injunction. The remedy at law for any breach of Section 12 will be inadequate and the Company, its affiliates and any subsidiaries thereof would suffer continuing and irreparable injury to their business as a direct result of any such breach. Accordingly, notwithstanding anything stated herein, if Employee shall breach or fail to perform any term, condition or duty contained in Section 12 hereof, then, in such event, the Company shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain the specific performance thereof by Employee or to seek a temporary restraining order or injunctive relief, without any requirement to show actual damages or post bond, to restrict Employee from violating the provisions of Section 12; however, nothing herein shall be construed to prevent the Company seeking such other remedy in the courts, in case of any breach of this Agreement by Employee, as the Company may elect or invoke. If court proceedings are instituted by the Company to enforce Section 12 hereof, and the Company is the prevailing party, the Company shall receive, in addition to any damages awarded, reasonable attorneys' fees, court costs and ancillary expenses. 16. Miscellaneous. This Agreement may not be modified or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and such officers of the Company as may be specifically designated by its Board for that purpose. Except for any failure to give the ten (10) day notice described in Section 6(b) above, the failure of either party to this Agreement to object to any breach by the other party or the non-breaching party's conduct or conduct forbearance shall not constitute a waiver of that party's rights to enforce this Agreement. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of any subsequent breach by such other party or any similar or dissimilar provisions or conditions at the same or any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois. 17. Severability. The parties hereto intend this Agreement to be enforced to the maximum extent permitted by law. In the event any provision of this Agreement is deemed to be invalid or unenforceable by any court of competent jurisdiction, such provisions shall be deemed to be restricted in scope or otherwise modified to the extent necessary to render the same valid and enforceable. In the event the provisions of Section 12 cannot be modified or restricted so as to be valid and enforceable, then the same as well as the Company's obligation to make any payment or transfer any benefit to Employee in connection with any termination of Employee's employment shall be deemed excised from this Agreement, and this Agreement shall be construed and enforced as if such provisions had originally been incorporated herein as so restricted or modified or as if such provisions had not originally been contained herein, as the case may be. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect. 18. Survival. The obligations of the parties under this Agreement shall survive the term of this Agreement. 19. Term of Agreement. The term of this Agreement shall commence on August 21, 1996 and end on August 20, 1998. Provided, however, that in the event Employee's employment is terminated while this Agreement is in force, this Agreement shall terminate when the Company has made all payments to Employee required by Section 9 hereof and Employee has complied with the duties and obligations described in Section 12 hereof (all of which duties and obligations shall specifically survive the termination of the Employee's employment). To the extent necessary for the Company's enforcement of the provisions of Section 12 above (but only for such purpose), Employee's employment term shall be deemed to continue through the end of the Agreement term. Date: as of August 21, 1996. Employee AMCOL International Corporation /s/ Frank B. Wright, Jr. By: /s/ John Hughes Frank B. Wright, Jr. Its: President & CEO EX-21 5 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 AMCOL INTERNATIONAL CORPORATION SUBSIDIARY LISTING
Company Name Country State Ownership % AMCOL (Holdings) Ltd. England 100 AMCOL International Corporation USA DE Parent ACC-Chem Limited Cyprus 100 ACC-Colloid Technology Limited Cyprus 100 ACP Export, Inc. U.S. Virgin Islands 100 American Colloid Company USA DE 100 American Colloid Company Ltd. Canada Ontario 100 Ameri-Co Carriers, Inc. USA NE 100 CETCO Canada Ltd. Canada Ontario 100 CETCO (Europe) Limited England 100 CETCO Pty., Ltd. Australia 100 Chemdal Corporation USA DE 100 Chemdal International Corporation USA DE 100 Chemdal Limited England 100 Chemdal Pty., Ltd. Australia 100 Colloid Environmental Technologies Company (CETCO) USA DE 100 Colloid Abwassertechnik GmbH Germany 100 Foundry Supplies Limited England 100 Jianping Redhill Volclay Bentonite Co. Ltd. China 33 Montana Minerals Development Company USA 100 Nanocor, Inc. USA DE 100 Nanocor, Ltd. England 100 Nationwide Freight Service, Inc. USA NE 100 Regeneration Technologies, Inc. USA DE 100 Superior Absorbents, Inc. (Formerly Colloid-Piepho, Inc.) USA DE 100 Volclay de Mexico, S.A. de C.V. Mexico 49 Volclay International Corp. USA DE 100 Volclay Limited England 100 Volclay Pty., Ltd. Australia 60 Volclay Siam Ltd. Thailand 100
EX-23 6 CONSENTS OF EXPERTS AND COUNSEL EXHIBIT 23 Consent of KPMG Peat Marwick LLP The Board of Directors AMCOL International We consent to incorporation by reference in the registration statements Nos. 33-34109, 33-55540 and 33-73350 on Form S-8 of AMCOL International Corporation of our report dated March 14, 1997, relating to the consolidated balance sheets of AMCOL International Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, retained earnings, and cash flows and related schedule for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of AMCOL International Corporation. /s/ KPMG Peat Marwick LLP Chicago, Illinois March 20, 1997 EX-27 7 FDS --
5 0000813621 AMCOL INTERNATIONAL CORPORATION 1,000 USD 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1.00 3,054 0 84,182 2,663 56,314 148,475 299,366 118,490 350,708 51,870 0 0 0 213 0 350,708 405,347 405,347 321,036 373,010 670 0 8,450 23,217 7,979 15,225 0 0 0 15,225 .78 .78
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