-----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, CLXbuxSTks9Z+sEX/gwgs9TWKi6yzQQNSm7jJkkAVDh5RYyWwE11ww+x30YQaLIq yGBu/0Kwt0Yg04zh2OL+ZA== 0000813621-01-000001.txt : 20010327 0000813621-01-000001.hdr.sgml : 20010327 ACCESSION NUMBER: 0000813621-01-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCOL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000813621 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 360724340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14447 FILM NUMBER: 1578788 BUSINESS ADDRESS: STREET 1: 1500 W SHURE DR STREET 2: ONE N ARLINGTON CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 BUSINESS PHONE: 8473948730 MAIL ADDRESS: STREET 1: 1500 W SHURE DR STREET 2: 1500 W SHURE DR SUITE 500 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN COLLOID CO DATE OF NAME CHANGE: 19920703 10-K 1 0001.txt 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, 2000 |_| 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. X The aggregate market value of the $.01 par value Common Stock held by non-affiliates of the registrant on March 21, 2001, based upon the closing sale price on that date as reported in The Wall Street Journal was approximately $95,277,055. Registrant had 27,963,106 shares of $.01 par value Common Stock outstanding as of March 21, 2001. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be dated on or before April 10, 2001 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 Company. 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 operates in two major industry segments: minerals 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 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. The following table sets forth the percentage contributions to net sales of the Company attributable to its minerals, environmental and transportation segments for the last three calendar years. The percentages include intersegment shipping revenues.
Percentage of Sales 2000 1999 1998 Minerals................................................................... 57.5% 53.9% 56.4% Environmental.............................................................. 31.7% 35.6% 34.0% Transportation............................................................. 10.8% 10.5% 9.6% 100.0% 100.0% 100.0%
Net revenues, operating profit, assets, depreciation, depletion and amortization, capital expenditures and research and development expenditures attributable to each of the Company's business segments are set forth in Note 3 of the Company's Notes to Consolidated Financial Statements included elsewhere herein, which Note is incorporated herein by reference. DISCONTINUED OPERATIONS The Company sold its absorbent polymers business to BASF Aktiengesellschaft ("BASF") under the terms of an Asset and Stock Purchase Agreement dated November 22, 1999 (the "Purchase Agreement"), as amended. The Purchase Agreement provided for the transfer to BASF of the following: (i) all of the shares of capital stock of the Company's indirect subsidiaries: Chemdal Corporation and Chemdal Asia Ltd.; and (ii) all other assets of the Company and its designated subsidiaries related primarily to the absorbent polymers business. The total consideration paid to the Company by BASF was $656.5 million. The sale was approved by the Company's shareholders in May 2000 and the transaction closed on June 1, 2000. The Company adopted a plan of partial liquidation in connection with the sale of the absorbent polymers business pursuant to which the Company distributed $14.00 per share to its shareholders, a significant portion of the net proceeds from the sale, on June 30, 2000. Chemdal Corporation was formed in 1986 to manufacture and market absorbent polymers, with primary emphasis on superabsorbent polymers ("SAP"), a category of polymers known for extremely high water absorbency. The Company's sales of SAP were almost exclusively for use as an absorbent in personal care products, primarily disposable baby diapers. The Company produced SAP at its U.S. and U.K. facilities, having a combined annual capacity of 160,000 metric tons. The Company completed construction of a 20,000 metric ton plant in Thailand that began production in the latter part of March 2000. MINERALS The Company's minerals business is principally conducted through its wholly owned subsidiaries, American Colloid Company in the United States and Canada, Volclay Ltd. in the United Kingdom, Volclay Siam Ltd. in Thailand, Volclay Korea Ltd. in South Korea, Volclay Pty., Ltd. in Australia, and through its joint venture companies, Redhill Volclay Company Ltd. in China, Volclay de Mexico in Mexico, Ashapura Volclay Ltd. in India, Egypt Mining & Drilling Chemicals Co. in Egypt, Top Dog Ltd. in the United Kingdom and Nissho Iwai Bentonite Company in Japan. The Company also has a 20% equity interest in Ashapura Minechem Ltd., a publicly traded Indian bentonite producer. Commercially produced bentonite is a type of montmorillonite clay found in beds ranging in thickness from two to 50 feet under overburden of up to 60 feet. There are two basic types of bentonite, each having different chemical and physical properties. These are commonly known as sodium bentonite and calcium bentonite. Sodium bentonite is generally referred to as western bentonite because it predominately occurs in the Western United States. Sodium bentonites of lesser purity occur outside the United States. Calcium bentonite is generally referred to as southern bentonite in the United States and as fuller's earth outside the United States. Calcium bentonites mined outside the United States are commonly activated with sodium carbonate to produce properties similar to natural sodium bentonite. A third type of clay mineral, a less pure variety of calcium montmorillonite called fuller's earth in the United States, is used as "traditional" cat litter. In April 1998, the Company sold its fuller's earth reserves and associated business to Oil-Dri Corporation of America (Oil-Dri). As part of the sale agreement, Oil-Dri supplies the Company's brands of traditional fuller's earth cat litter for sale to the pet trade sector of the domestic cat litter market. The Company's principal bentonite products are marketed under various internationally registered trade names, including VOLCLAY, PANTHER CREEK, PREMIUM GEL and ADDITROL. The Company's cat litter is sold under various trade names and private labels. Trade names include NATURAL SELECT, CAREFREE KITTY, PREMIUM CHOICE, CAT TAILS, CATS PAW and PAMPER CAT. Principal Products and Markets Durable Goods Metalcasting. In the formation of sand molds for metal castings, sand is bonded with bentonite and various other additives to yield desired casting form and surface finish. The Company produces blended mineral binders containing sodium and calcium bentonite, 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 supplies sodium bentonite for use as a pelletizing aid in the production of taconite pellets in North America. Well Drilling. Sodium bentonite and leonardite, a form of oxidized lignite mined and processed by the Company in North Dakota, are components of drilling fluids used in oil and gas well drilling. Bentonite imparts thickening and suspension properties, which facilitate the transport of rock cuttings to the surface during the drilling process. Drilling fluids lubricate the drilling bit and coat 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 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 and markets a sodium bentonite-based, scoopable (clumping) cat litter. The Company markets a traditional cat litter to complement its line of scoopable cat litter products to the pet trade sector of the market. The Company's scoopable products' clump-forming capability traps urine, allowing for easy removal of the odor-producing elements from the litter box. Scoopable cat litter has grown to 58% of the U.S. grocery market for cat litter in 2000 from 0.4% in 1989, and to 68% of the mass merchandise market for cat litter from no representation in 1989. The scoopable cat litter 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 swelling property aids in tablet disintegration. Bentonite also acts as a thickening and suspension agent in lotions. Other specialized uses include flow control additives and beverage clarification. Agricultural. Sodium bentonite and calcium bentonites are sold as pelletizing aids in livestock feed and as anticaking agents for livestock feed in storage or during transit. Sales and Distribution In 2000, the top three customers of the minerals segment were located in North America and accounted for approximately 19% of the segment sales worldwide. 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 products at strategic locations. Most 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 and gas well drilling industry are primarily made directly to oil and gas well drilling fluid service companies, both under the Company's trade name and under private label. Because bentonite is a major component of drilling fluids, two service companies have captive bentonite operations. The Company's potential market, therefore, generally is limited to those service organizations that are not vertically integrated, or do not have long-term supply arrangements with other bentonite 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 The Company is one of the largest producers of bentonite products globally. There are at least four other major North American producers of sodium bentonite and at least one other major domestic producer of calcium bentonite. Two of the North American producers are companies primarily in other lines of business with substantially greater financial resources than the Company. There is also substantial global competition. The Company's bentonite operations outside North America compete with more than 10 other bentonite producers. Competition, in both the Company's domestic and international markets, is essentially a matter of product quality, price, logistics, service and technical support. With greater attention to market growth opportunities in emerging economic regions, competition among the significant bentonite producers has become quite vigorous. Seasonality Although business activities in certain of the industries in which the Company's mineral products are sold, e.g. oil and gas well drilling and construction, are subject to factors such as weather, the Company does not consider its minerals business, as a whole, to be seasonal. ENVIRONMENTAL Principal Products and Markets Through its wholly owned subsidiaries, Colloid Environmental Technologies Company (CETCO) in the United States and Canada, CETCO Korea Ltd., CETCO Environmental Technologies Pte. Ltd. (Singapore), CETCO Poland Sp. z o.o. and CETCO (Europe) Ltd. in the United Kingdom, the Company sells sodium bentonite, products containing sodium bentonite, and other products, services, 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 wetlands reclamation applications. The Company's VOLCLAY Waterproofing System is sold to the non-residential construction industry. This line includes VOLTEX, a waterproofing composite comprised of two polypropylene geotextiles filled with sodium bentonite. VOLTEX is installed to prevent leakage through underground foundation walls and slabs. The following products round out the principal components of the product line: VOLCLAY PANELS, also used for below-grade waterproofing of walls and slabs; WATERSTOP-RX, a joint sealant product; and VOLCLAY SWELLTITE, a waterproofing membrane for concrete split slabs and plaza areas. Bentonite-based flocculants 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's environmental offshore services group employs CRUDESORB filtration technology, used primarily on offshore oil production platforms. CETCO employs several technologies to allow platform operators to maintain compliance with regulatory requirements governing discharge of waste generated during oil production. CETCO's filtration technology is marketed with all necessary equipment, proprietary filter media and trained professional service personnel. The Company is also actively involved in providing wastewater treatment solutions to pipeline operators and the cruise line industry to enable operators to meet wastewater discharge requirements. 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. Horizontal and directional drilling applications utilizing HYDRAUL-EZ represent a new market area for CETCO drilling products. 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 groundwater monitoring, well drilling and sealants products compete with the Company's traditional rivals in the sodium bentonite business. The environmental offshore services group competes with several larger oil services companies using different technology. Competition is based on product quality, service, price, technical support and availability of product. Historically, the competition has been vigorous. Sales and Distribution In 2000, one customer accounted for approximately 8% of the environmental segment sales. CETCO products are sold domestically and internationally. CETCO sells most of its products through independent distributors and commissioned representatives. CETCO employs technically oriented marketing personnel to support its network of distributors and representatives. Offshore customers are primarily major oil companies sold on a direct basis. 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. MINERALS/ENVIRONMENTAL COMMON OPERATIONAL FUNCTIONS Mineral Reserves The Company has reserves of sodium and calcium bentonite at various locations throughout North America including Wyoming, South Dakota, Montana and Alabama. The Company, indirectly through its joint venture companies, has access to bentonite deposits in China, Egypt, India and Mexico. At 2000 consumption rates and product mix, the Company estimates its proven reserves of commercially usable sodium bentonite at more than 30 years. The Company estimates its proven reserves of calcium bentonite at 15 years. 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 Company's total bentonite reserves in North America, less than 34% are 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 and 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 maintains a continuous program of worldwide 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 from active mining areas for the last three years in short tons, as well as mineral reserves by major mineral category:
All amounts are in thousands of tons Tons Sold Wet Tons Assigned Unassigned Conversion Mining Claims of Reserves Reserves Reserves Factor 2000 1999 1998 Owned Unpatented Leased ** Sodium Bentonite Assigned Belle/Colony, SD 1,003 920 857 22,764 22,764 77.47% 4,736 4,853 13,175 Upton, WY 142 247 346 3,715 3,715 77.47% 379 768 2,568 Lovell, WY 226 286 329 26,869 26,869 77.47% 18,340 6,448 2,081 TOTAL ASSIGNED 1,371 1,453 1,532 53,348 53,348 -- 23,455 12,069 17,824 Other / Unassigned (SD, WY, MT, NV) 2 -- -- 63,133 41 63,092 77.47% 54,646 6,449 2,038 TOTAL OTHER / UNASSIGNED 2 -- -- 63,133 41 63,092 54,646 6,449 2,038 TOTAL SODIUM BENTONITE 1,373 1,453 1,532 116,481 53,389 63,092 78,101 18,518 19,862 45.8% 54.2% 67.1% 15.9% 17.1% Calcium Bentonite Assigned Sandy Ridge, AL 193 205 195 3,925 3,925 -- 72.70% 1,714 -- 2,211 Rock Springs, NV (1),(2) -- -- 1 -- -- -- -- -- -- TOTAL ASSIGNED 193 205 196 3,925 3,925 -- 1,714 -- 2,211 Other / Unassigned -- -- -- 147 -- 147 72.70% -- -- 147 TOTAL OTHER / UNASSIGNED -- -- -- 147 -- 147 -- -- 147 TOTAL CALCIUM BENTONITE 193 205 196 4,072 3,925 147 1,714 -- 2,358 96.4% 3.6% 42.1% 0.0% 57.9% Leonardite Gascoyne, SD 26 22 24 701 701 -- 67.42% -- -- 701 TOTAL LEONARDITE 26 22 24 701 701 -- -- -- 701 100.0% 0.0% 0.0% 0.0% 100.0% TOTALS 1,592 1,680 1,752 121,254 58,015 63,239 79,815 18,518 22,921 47.8% 52.2% 65.8% 15.3% 18.9% Fuller's Earth Mounds, IL (3) -- -- 60 Paris, TN (1) -- -- 7 TOTAL FULLER'S EARTH -- -- 67 GRAND TOTALS 1,592 1,680 1,819 121,254 58,015 63,239 -- 79,815 18,518 22,921 47.8% 52.2% 65.8% 15.3% 18.9% ** Quantity of reserves that would be owned if patent was granted. (1) Mineral reserves sold in 1998 to Oil-Dri Corporation of America. (2) Plant sold in January 1999 to Nolind Enterprises LLC. (3) Plant and mineral reserves sold in 1998 to Oil-Dri Corporation of America.
Assigned reserves means reserves which could be reasonably expected to be processed in existing plants. Unassigned reserves means reserves which will require additional expenditures for processing facilities. Conversion factor means the percentage of reserves that will be available for sale after processing. The Company estimates that available supplies of other materials utilized in its minerals business are sufficient to meet its production requirements for the foreseeable future. Mining and Processing Bentonite is surface-mined, generally with large earthmoving scrapers, and then loaded into trucks and off-highway haul wagons for movement to 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 bentonite processing plants generally maintains stockpiles of unprocessed clay equaling 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 bulk shipment. Virtually all production is shipped as processed, rather than stored for inventory. 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. It maintains a bentonite research center and laboratory testing facility adjacent to its corporate headquarters. When a need for a product that will accomplish a particular goal is perceived, the Company works to develop the product, research its marketability and study the feasibility of its production. The Company also co-develops products with customers, or others, as 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. Research and Development All Company business segments share research and laboratory facilities adjacent to the corporate headquarters. Technological developments are shared between the companies, subject to license agreements where appropriate. Regulation and Environmental The Company believes it is in material compliance with applicable regulations now in effect for surface mining. Since reclamation of exhausted mining sites has been a regular part of the Company's surface mining operations for the past 32 years, maintaining compliance with current regulations has not had a material effect on mining costs. Reclamation costs 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 regulatory 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, enforcement policies, and 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 finished products throughout the continental United States. Through its transportation operation, the Company is better able to control costs, maintain delivery schedules and assure equipment availability for delivery of its products. 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 2000, approximately 58% of the revenues of this segment involved the Company's products. CORPORATE ACTIVITIES - NANOCOMPOSITE PRODUCT DEVELOPMENT The Company is always seeking to develop broader-based technologies that may use bentonite for new, value-added applications. One such technology is nanocomposites for the plastics industry. In 1995, the Company established its Nanocor subsidiary to develop surface-modified bentonites suitable for the emerging nanocomposite market. The primary raw material is bentonite. For some applications, material will be purchased from third party suppliers. Surface treatment chemicals, added in the production process, are readily available on the merchant market. The Company is focusing its development on the use of bentonite as a functional additive for plastics. The technology consists of dispersing highly purified bentonite of nanometer size (one-billionth of a meter) in plastic resins. Plastic nanocomposites are specially engineered composite materials that exhibit superior mechanical, thermal, barrier and flame-retardant properties with lower densities than conventional composites, resulting in significantly lighter plastic articles. Nanocor has identified commercial applications for Nanomer products in the consumer packaging, engineered products and performance coatings markets. Nanocor has established collaborative relationships with industry leaders in its primary target markets to facilitate the development and commercial introduction of Nanomer products. Plastic nanocomposites provide better gas and moisture barrier protection and have more strength, stiffness, dimensional stability and heat resistance than plastics without additives. Plastic nanocomposites are generally able to achieve physical performance improvements comparable to or better than conventional composites at much lower densities. Plastic nanocomposites are also able to improve the strength and thermal stability properties of a plastic more consistently than conventional composites. Plastic nanocomposites are generally created through a two-step process. First, the nanometer size clay or synthetic chemical structure is purified and then conditioned to make it compatible with and dispersible in a plastic. The conditioning process varies depending on the type of plastic used. In the second step, the conditioned nanometer size material is dispersed in the plastic. The Company has a nanocomposite production facility in Aberdeen, MS. Sales to date have been insignificant. All costs associated with the development, production and sales of nanocomposites are included in corporate costs. FOREIGN OPERATIONS AND EXPORT SALES Approximately 26% of the Company's 2000 net sales were to customers in countries other than the United States. To enhance its overseas market penetration, the Company maintains mineral processing plants in the United Kingdom, Australia, Korea and Thailand, as well as a blending plant in Canada. Through joint ventures, the Company also has the capability to process minerals in Egypt, India, Mexico and China. Chartered vessels deliver large quantities of the Company's bulk, dried sodium bentonite to the plants in the United Kingdom, Australia and Thailand, where it is processed and mixed with other clays and distributed throughout Europe, Australia and Southeast Asia. The Company's U.S. bentonite is also shipped in bulk to Japan, where it is sold by the Japanese joint venture. The Company also maintains a worldwide network of independent dealers, distributors and representatives. The Company manufactures geosynthetic clay liners in the United Kingdom and Poland, primarily for the European market. The Company's international operations are subject to the usual risks of doing business abroad, such as currency fluctuations and devaluation, restrictions on the transfer of funds and import and export duties. See Note 3 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, 2000, the Company employed 1,064 persons, 264 of whom were employed outside of the United States. At December 31, 2000, there were approximately 745, 228 and 27 persons employed in the Company's minerals, environmental and transportation segments, respectively, along with 64 corporate employees. The corporate employees include personnel engaged in the nanocomposite research and development effort. Operating plants are adequately staffed, and no significant labor shortages are presently foreseen. Approximately 67 of the Company's employees in the United States and approximately 22 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 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 Lovell, WY (3)............................ Mine and process sodium bentonite Upton, WY................................. Mine and process sodium bentonite Paris, TN................................. Package cat litter 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 Butler, GA................................ Blend ADDITROL York, PA.................................. Blend ADDITROL; package cat litter Chattanooga, TN........................... Blend ADDITROL Lufkin, TX................................ Blend ADDITROL Neenah, WI................................ Blend ADDITROL Troy, IN.................................. Blend ADDITROL Toronto, Ontario, Canada (3).............. Blend ADDITROL Geelong, Victoria, Australia (1)(3)....... Process bentonite; blend ADDITROL Birkenhead, Merseyside, U.K. (2)(3)....... Process bentonite and chromite sand; blend ADDITROL; package cat litter; research laboratory; headquarters for Volclay Ltd. Rayong, Thailand.......................... Process bentonite Kyung-Buk, South Korea.................... Mine and process bentonite ENVIRONMENTAL Lovell, WY (3)............................ Manufacture Bentomat and Claymax geosynthetic clay liners Villa Rica, GA............................ Manufacture components for geosynthetic clay liners Fairmount, GA............................. Manufacture Bentomat and Claymax geosynthetic clay liners Birkenhead, Merseyside, U.K. (2)(3)....... Manufacture Bentomat geosynthetic clay liner; research laboratory; headquarters for CETCO Europe Ltd. Szczytno, Poland ......................... Manufacture Bentomat and Claymax geosynthetic clay liners Copenhagen, Denmark (1)................... Sales and distribution for CETCO (Europe) Ltd. Geelong, Victoria, Australia (1)(3)....... Sales and distribution for CETCO products Toronto, Ontario, Canada (3).............. Sales and distribution for CETCO Canada Ltd. Tanager, Norway (1)....................... Sales and distribution for CETCO (Europe) Ltd. Singapore (1)............................. Sales and distribution for CETCO Environmental Technologies Pte Ltd. Seoul, South Korea (1).................... Sales and distribution for CETCO Korea Ltd. Paris, France (1) ........................ Sales and distribution for CETCO (Europe) Ltd. TRANSPORTATION Scottsbluff, NE........................... Transportation headquarters and terminal CORPORATE Arlington Heights, IL (1)................. Corporate headquarters; CETCO headquarters; American Colloid Company headquarters; Nanocor, Inc. headquarters; research laboratory Aberdeen, MS.............................. Process purified bentonite (Nanocor, Inc.) (1) Leased (2) Certain offices and facilities are leased. (3) Shared facilities between minerals and environmental segment.
Item 3. Legal Proceedings In 1998, the following claims were filed in Chester, England against certain of the Company's subsidiaries: Adams, et al. v. AMCOL (Holdings) Limited and Volclay Limited, (AKA Marie Geraldine O'Laughlin, et al.), High Court of Justice, QB Division, Chester District 1998 A. No. 206; and Anziani, et al. v. AMCOL (Holdings) Limited and Volclay Limited, High Court of Justice, QB Division, Chester District 1998 A. No. 365. The claims are for property damage, nuisance and personal injury based on the alleged accidental release of dust from Volclay Limited's facility in Wallasey, England. The claims are being made on behalf of up to 1,600 persons who, at some point during the period from 1965 to the present, resided in the vicinity of the Wallasey, England facility. As previously announced, the Company has set up a reserve for inactive and active U.K. litigation of $6.5 million. 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 or the cost of compliance, 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 Gary L. Castagna 39 Senior Vice President of the Company since February 2001; prior thereto, a consultant to AMCOL since June 2000; prior thereto, Vice President of the Company and President of Chemdal International Corporation (this business, a former subsidiary of AMCOL, consisted of the absorbent polymers business that was sold to BASF AG in June 2000) since August 1997; prior thereto, Vice President of Finance for Chemdal International Corporation. Will become Chief Financial Officer of the Company in April 2001. Lloyd F. Love 54 Vice President and Chief Information Officer of the Company since July 1999; prior thereto, Chief Information Officer of Baxter Credit Union since 1997; prior thereto, Vice President, Information Services of Caremark International since 1992 (acquired by MedPartners in mid-1996). Peter L. Maul 51 Vice President of the Company since 1993 and President of Nanocor, Inc. since 1995. Ryan F. McKendrick 49 Vice President of the Company and President of Colloid Environmental Technologies Company since November 1998; prior thereto, Vice President of Colloid Environmental Technologies Company since 1994. Gary Morrison 45 Vice President of the Company and President of American Colloid Company since February 2000; prior thereto, ExecutiveVice President of American Colloid Company since 1998; prior thereto, Vice President of American Colloid Company since 1994.
Executive Officers of Registrant (continued) Name Age Principal Occupation for Last Five Years Clarence O. Redman 58 Secretary of the Company since 1982. Clarence O. Redman is of counsel to the law firm of Lord, Bissell & Brook, the law firm that serves as Corporate Counsel to the Company, since October 1997; prior thereto, an individual and corporate partner and Chief Executive Officer of the law firm of Keck, Mahin & Cate; a Director since 1989. Paul G. Shelton 51 Senior Vice President and Chief Financial Officer of the Company and President of AMCOL International's transportation units since 1994; a Director from 1988 until November, 2000. Retiring as Chief Financial Officer in April 2001. Lawrence E. Washow 47 Chief Executive Officer since May 2000; President of the Company since May 1998; Chief Operating Officer of the Company since 1997; prior thereto, Senior Vice President of the Company since 1994 and President of Chemdal International Corporation since 1992; a Director since February, 1998. Frank B. Wright, Jr. 52 Vice President of the Company and President of Volclay International Corporation; also President of American Colloid Company from August, 1996 to February, 2000; prior thereto, Manager of International Business Development for American Colloid Company since 1995.
All executive 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. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common stock trades on The New York Stock Exchange under the symbol ACO. The following table sets forth, for the periods indicated, the high and low closing sale prices of the common stock, as reported by The New York Stock Exchange, and cash dividends declared per share.
Stock Price Cash Dividends High Low Declared Per Share Fiscal Year Ended December 31, 2000: 1st Quarter........ $16.125 $13.625 $.0700 2nd Quarter........ 17.500 12.813 .0700 3rd Quarter........ 5.375 3.000 .0100 4th Quarter........ 7.375 4.250 .0100 Fiscal Year Ended December 31, 1999: 1st Quarter........ $11.375 $8.250 $.0600 2nd Quarter........ 14.750 8.875 .0700 3rd Quarter........ 15.125 13.250 .0700 4th Quarter........ 17.750 12.000 .0700
The Company has paid cash dividends every year for over 63 years. In addition, the Company distributed $14.00 per share to its shareholders on June 30, 2000 in connection with a plan of partial liquidation related to the sale of the absorbent polymers business. As of February 19, 2001, there were 3,284 holders of record of the common stock, excluding shares held in street name. Item 6. Selected Financial Data The following is selected financial data for the Company and its subsidiaries for the five years ended December 31, 2000. Per share amounts have been adjusted to reflect a three-for-two stock split in December 1997, effected in the form of a stock dividend. SUMMARY OF OPERATIONS (In thousands, except ratios and share and per share amounts)
Operations Data 2000 1999 1998 1997 1996 Net sales $ 304,065 $ 316,983 $ 319,317 $ 301,550 $ 272,203 Gross profit 69,927 68,894 64,713 59,780 53,893 General, selling and administrative expenses 52,590 61,525 55,744 47,174 41,183 Business realignment and other charges 13,857 14,529 -- -- -- Operating profit (loss) 3,480 (7,160) 8,969 12,606 12,710 Investment income 9,816 -- -- -- -- Net interest expense (3,241) (3,440) (2,997) (1,341) (941) Net other income (expense) 310 (1,070) 156 61 (398) Pretax income (loss) 10,365 (11,670) 6,128 11,326 11,371 Income taxes (benefit) 7,532 (2,907) 2,213 3,866 3,828 Equity in income (loss) of joint ventures 470 448 8 -- (13) Income (loss) from continuing operations 3,303 (8,315) 3,923 7,460 7,530 Income from discontinued operations 323,377 30,549 18,162 13,584 7,695 Extraordinary loss on early extinguishment of debt (443) -- -- -- -- Net income 326,237 22,234 22,085 21,044 15,225 Per Share Data Basic earnings (loss) per share (2) Continuing operations $ 0.12 ($ 0.31) $ 0.14 $ 0.26 $ 0.26 Discontinued operations 11.75 1.14 0.65 0.48 0.27 Extraordinary loss (0.02) -- -- -- -- Net income 11.85 0.83 0.79 0.74 0.53 Diluted earnings (loss) per share (3) Continuing operations 0.11 (0.30) 0.14 0.26 0.26 Discontinued operations 10.80 1.12 0.64 0.47 0.26 Extraordinary loss (0.01) -- -- -- -- Net income 10.90 0.82 0.78 0.72 0.52 Stockholders' equity (1) 4.69 6.94 6.44 6.18 5.87 Dividends 0.16 0.27 0.23 0.21 0.19 Partial liquidation distribution 14.00 -- -- -- -- Shares Outstanding Data End of period 28,781,304 26,852,056 26,869,372 28,474,198 28,497,522 Weighted average for the period-basic 27,523,157 26,772,569 27,918,391 28,488,527 28,697,736 Incremental impact of stock options 2,433,533 426,694 467,469 636,641 596,753 Weighted average for the period- diluted 29,956,690 27,199,263 28,385,860 29,125,168 29,294,489 (1) Based on the number of common shares outstanding at the end of the year. (2) Based on the weighted average common shares outstanding for the year. (3) Based on the weighted average common shares outstanding, including common stock equivalents, for the year.
SUMMARY OF OPERATIONS (continued) (In thousands, except ratios and share and per share amounts)
Balance Sheet Data 2000 1999 1998 1997 1996 Current assets $ 269,787 $ 140,035 $ 145,201 $ 134,452 $ 132,818 Cash equivalents included in current assets 168,549 -- -- -- -- Net current assets of discontinued operations included in current assets -- 40,147 33,614 34,818 37,192 Net property and equipment 80,152 89,260 92,063 90,885 85,324 Long-term assets 11,517 85,545 91,651 103,883 115,216 Net long-term assets of discontinued operations included in long-term assets -- 80,046 73,897 81,504 93,863 Total assets 374,128 323,951 333,461 332,255 333,358 Current liabilities 177,939 34,980 55,208 51,423 36,213 Accrued income taxes related to sale of discontinued operations included in current liabilities 135,095 -- -- -- -- Long-term debt 51,334 93,914 96,268 94,425 118,855 Other long-term liabilities 9,948 8,617 9,071 10,464 10,886 Stockholders' equity 134,907 186,440 172,914 175,943 167,404 Other Statistics for Continuing Operations Depreciation and amortization $ 18,996 $ 20,255 $ 18,360 $ 17,880 $ 16,728 Capital expenditures 16,152 18,144 28,038 27,850 16,981 Gross profit margin 23.00% 21.73% 20.27% 19.82% 19.80% Operating profit (loss) margin 1.14% (2.26%) 2.81% 4.18% 4.67% Operating profit margin before business realignment and other charges 5.70% 2.32% 2.81% 4.18% 4.67% Pretax profit (loss) margin 3.41% (3.68%) 1.92% 3.76% 4.18% Effective tax (benefit) rate (1) 72.67% (24.91%) 36.11% 34.13% 33.66% Net profit (loss) margin 1.09% (2.62%) 1.23% 2.47% 2.77% Return on ending equity 2.45% (4.46%) 2.27% 4.24% 4.50% (1) The effective tax (benefit) rate in 2000, 1999 and 1998 reflects valuation allowances established for the tax effect of net operating losses incurred in the United Kingdom. It is not known whether future operations will generate sufficient taxable income to realize the deferred tax asset.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Financial Resources On June 1, 2000, the Company sold its superabsorbent polymer business to BASF AG. The sale resulted in a gain of $316.3 million, net of taxes of $209.0 million. Substantially all of the net proceeds of the sale were distributed to the shareholders in the form of a partial liquidation distribution. The distribution amounted to $14.00 per share. At December 31, 2000, the Company had outstanding debt of $52.4 million (including both long- and short-term debt) and cash and cash equivalents of $178.6 million, compared with $94.4 million in debt and $4.0 million in cash at December 31, 1999. A large portion of the cash equivalents on hand at December 31, 2000 will be used to pay estimated accrued income taxes of approximately $135.1 million in the early part of 2001. Long-term debt represented 27.6% of total capitalization at December 31, 2000, compared with 35.8% at December 31, 1999. The Company had a current ratio of 1.52-to-1 at December 31, 2000, with approximately $91.8 million in working capital, compared with 4.00-to-1 and $105.1 million, respectively, at December 31, 1999. At December 31, 2000, current assets included $168.5 million in cash equivalents and current liabilities included $135.1 million in accrued income taxes related to the absorbent polymers sale. If these two items were eliminated from the balance sheet and the excess cash equivalents were applied to long-term debt, the proforma working capital would have been $58.4 million, and the current ratio would have been 2.36-to-1. The Company's revolving credit facility of $125 million matures in October 2003. The Company had $83.0 million in unused, committed credit lines at December 31, 2000. The Company renegotiated its debt covenants as a result of the sale of the absorbent polymers segment. The $125 million revolver remains in place. During 2000, the Company spent $16.2 million on capital expenditures and made $3.1 million in additional investments in joint ventures. The Company sold $10.3 million in treasury stock related to stock option exercises, paid $4.3 million in dividends and repaid $49.7 million of debt. This activity was funded from cash generated from operations in 2000 totaling $36.6 million, as well as from the repayment of the absorbent polymers segment intercompany debt as a part of the sale of the business. Management believes that the Company has adequate resources to fund the capital expenditures, dividend payments and anticipated working capital requirements through its existing committed credit lines, cash balances and future operating cash flow. Results of Operations for the Three Years Ended December 31, 2000 Shipping revenues and costs have been reclassified in the segment information that appears below to comply with the requirements of EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." Net sales decreased by $12.9 million, or 4.1%, from 1999 to 2000, and by $2.3 million, or 0.7%, from 1998 to 1999. The decrease in sales from 1999 to 2000 was primarily related to the divestiture of a number of underperforming environmental segment businesses in late 1999. Gross profit increased by $1.0 million, or 1.5%, from 1999 to 2000, compared to an increase of $4.2 million, or 6.5%, from 1998 to 1999. Operating profit, prior to special charges, improved by $10.0 million, or 135.3%, from 1999 to 2000. Operating profit for 1999, prior to special charges, was $1.6 million, or 17.8%, lower than in 1998. The operating profit for 2000 was reduced by $13.9 million for asset impairment charges related to the U.K. cat litter operation, a legal settlement accrual and expenses associated with exploring opportunities to enhance shareholder value. The operating profit for 1999 was reduced by $14.5 million as a result of write downs of the carrying value of certain intangible and long-term assets in the minerals and environmental segments. Income from continuing operations for 2000, after special charges, amounted to $3.3 million compared to a loss of $8.3 million in 1999 and a $3.9 million profit in 1998. During 2000, the special charges, net of tax, amounted to $.43 per diluted share compared with write-downs in 1999 of $.37 per diluted share. Diluted earnings (loss) per share from continuing operations was $.11, ($.30) and $.14 in 2000, 1999 and 1998, respectively. The weighted average shares outstanding, including the dilutive impact of stock options, for 2000 were 10.1% higher in 2000 than in 1999. The diluted shares were 4.2% lower in 1999 than in 1998. The absorbent polymers segment was reflected as a discontinued operation for all periods presented. Discontinued operations contributed $10.80 per diluted share in 2000 compared to $1.12 and $.64 in 1999 and 1998, respectively. In addition, the Company reported a loss of $.01 per share on the early extinguishment of debt in 2000. A review of sales, gross profit, general, selling and administrative expenses, and operating profit by segment follows:
Minerals Year Ended December 31, 2000 1999 1998 2000 vs. 1999 1999 vs. 1998 (Dollars in Thousands) Product sales.......... $161,283 88.8% $156,537 88.4% $164,049 87.9% Shipping revenue....... 20,250 11.2% 20,454 11.6% 22,625 12.1% Net sales.............. 181,533 100.0% 176,991 100.0% 186,674 100.0% $ 4,542 2.6% ($9,683) ( 5.2%) Cost of sales - product 126,352 69.6% 121,864 68.9% 135,650 72.7% Cost of sales - 20,250 11.2% 20,454 11.5% 22,625 12.1% shipping............... Cost of sales.......... 146,602 80.8% 142,318 80.4% 158,275 84.8% Gross profit......... 34,931 19.2% 34,673 19.6% 28,399 15.2% 258 0.7% 6,274 22.1% General, selling and administrative expenses............... 16,792 9.3% 17,432 9.8% 18,268 9.8% ( 640) ( 3.7%) ( 836) ( 4.6%) Business realignment and other charges...... 11,500 6.3% 2,954 1.7% -- -- 8,546 289.3% 2,954 NM Operating profit..... 6,639 3.6% 14,287 8.1% 10,131 5.4% ( 7,648) ( 53.5%) 4,156 41.0%
Sales increased by $4.5 million from 1999 to 2000 compared to a decrease in sales of $9.7 million from 1998 to 1999. The increase in sales for 2000 was primarily related to the inclusion of a U.K. pet products joint venture in 2000. This venture produced little profit, and the Company is in the process of selling its ownership interest. The decrease in sales from 1998 to 1999 was related to decreased sales of fuller's earth ($3.8 million), a business sold in April 1998, and $6.5 million lower sales from U.K. minerals operations, primarily cat litter. In 1999, the Company reduced its commitment to the U.S. iron ore pelletizing market resulting in a sales decrease of $2.1 million, but this was more than offset by a sales increase to the domestic metalcasting and cat litter markets. The gross profit margin decreased by 2.0% due to lower selling prices for domestic bulk cat litter sold to major branded customers as well as lower production volume in the United Kingdom. The gross profit margin increased by 28.9% from 1998 to 1999. Domestic gross profits improved by approximately $4.0 million, U.K. gross profit improved by approximately $.9 million and other overseas units' gross profit improved by $1.3 million from 1998 to 1999. General, selling and administrative expenses were $.6 million, or 3.7%, lower in 2000 than 1999, and $.8 million, or 4.6%, lower in 1999 than in 1998. Lower domestic personnel costs accounted for the majority of the change. Excluding asset impairment and legal accrual charges, the U.K. minerals operations generated operating losses of $3.2 million, $2.9 million and $4.8 million in 2000, 1999 and 1998, respectively. The losses were related to the cat litter operation. The Company has decided to exit the U.K. cat litter market and has sold its European cat litter business. It is anticipated that the exit will be complete by the end of the first quarter of 2001. The restructuring of the operation included asset impairment charges, inventory write-downs and redundancy costs totaling $5.0 million. During 1999, the Company wrote down goodwill of approximately $3.0 million related to its U.K. and Canadian operations. In each case, the Company's evaluation of the carrying value of the assets was based upon anticipated performance and a review of projected future cash flows. In addition, the Company recorded a $6.5 million accrual in 2000 for pending litigation in the United Kingdom.
Environmental Year Ended December 31, 2000 1999 1998 2000 vs. 1999 1999 vs. 1998 (Dollars in Thousands) Product sales.......... $ 91,180 91.3% $107,975 92.3% $104,501 93.0% Shipping revenue....... 8,694 8.7% 9,055 7.7% 7,858 7.0% Net sales.............. 99,874 100.0% 117,030 100.0% 112,359 100.0% ($17,156)( 14.7%) $ 4,671 4.2% Cost of sales - product 59,776 59.9% 77,515 66.2% 71,859 64.0% Cost of sales - 8,694 8.7% 9,055 7.8% 7,858 7.0% shipping............... Cost of sales.......... 68,470 68.6% 86,570 74.0% 79,717 71.0% Gross profit......... 31,404 31.4% 30,460 26.0% 32,642 29.0% 944 3.1% ( 2,182) ( 6.7%) General, selling and administrative expenses............... 19,643 19.7% 26,551 22.7% 23,448 20.9% ( 6,908) ( 26.0%) 3,103 13.2% Business realignment and other charges...... -- -- 11,575 9.9% -- -- (11,575) NM 11,575 NM Operating profit 11,761 11.7% ( 7,666) ( 6.6%) 9,194 8.2% 19,427 253.4% (16,860) (183.4%) (loss).................
Sales decreased by $17.2 million, or 14.7%, from 1999 to 2000, primarily as a result of the divestiture of a number of underperforming businesses in the latter part of 1999. Sales increased by $4.7 million from 1998 to 1999. The sales increase from 1998 to 1999 was largely related to businesses acquired during 1998. The gross profit margin improved by 20.8% in 2000 from 1999, compared with a decrease of 10.3% from 1998 to 1999. Lower gross profits from businesses that were divested during the year, coupled with lower profits from the domestic sales of environmental liner products, accounted for the reduced margins in 1999. General, selling and administrative expenses decreased by $6.9 million, or 26.0%, from 1999 to 2000. The restructuring activities involving the divestiture of businesses, as well as elimination of certain positions within the segment, accounted for the change. International expansion accounted for much of the increase in general, selling and administrative expenses of 13.2% from 1998 to 1999. Approximately 58% of the 1999 increase in general, selling and administrative expenses was attributable to acquisitions made in 1998. During 1999, the Company also incurred bad debt expense of approximately $.4 million. During 1999, the Company sold or closed operations that incurred more than $5.5 million in operating losses. In the process of evaluating its ongoing business operations, the Company wrote down the carrying value of certain intangible and fixed assets by approximately $11.6 million. This charge included $2.1 million related to the January 2000 sale of its Norwegian business. The remainder of the write down was largely related to goodwill not expected to be recovered by future cash flows. These actions accounted for much of the improved profitability in 2000.
Transportation Year Ended December 31, 2000 1999 1998 2000 vs. 1999 1999 vs. 1998 (Dollars in Thousands) Net sales.............. $ 34,036 100.0% $ 34,632 100.0% $ 31,887 100.0% ($ 596) ( 1.7%) $ 2,745 8.6% Cost of sales.......... 30,444 89.4% 30,871 89.1% 28,215 88.5% Gross profit......... 3,592 10.6% 3,761 10.9% 3,672 11.5% ( 169) ( 4.5%) 89 2.4% General, selling and administrative 2,115 6.2% 2,130 6.2% 2,037 6.4% ( 15) ( 0.7%) 93 4.6% expenses............... Operating profit..... 1,477 4.4% 1,631 4.7% 1,635 5.1% ( 154) ( 9.4%) ( 4) (0.2%)
Sales decreased by $.6 million, or 1.7%, from 1999 to 2000 due in part to loss of the absorbent polymers shipments and lower shipments from third party customers. The majority of the sales increase from 1998 to 1999 came from customers unrelated to AMCOL's other business units. The gross profit margin was 2.8% lower in 2000 than in 1999, primarily as a result of higher fuel costs. The gross profit margin was 5.2% lower in 1999 than in 1998, primarily as a result of lower margins from brokered shipments. The gross profit margin varies based largely upon truck availability and sales mix between the trucking and brokerage operations. The increase in general, selling and administrative expenses from 1998 to 1999 reflected increased staffing levels to handle increased volume. Higher fuel costs continue to impact the transportation segment. Higher insurance costs and a tight market for drivers will also impact the future profitability of this segment.
Corporate Year Ended December 31, 2000 1999 1998 2000 vs. 1999 1999 vs. 1998 (Dollars in Thousands) Intersegment shipping ($11,378) ($11,670) ($11,603) sales.................. Intersegment shipping ( 11,378) ( 11,670) ( 11,603) costs.................. Gross profit......... -- -- -- Corporate general, selling and administrative expenses............. 8,010 10,278 7,793 ($2,268) ( 22.1%) $ 2,485 31.9% Nanocomposite business development expenses. 6,030 5,134 4,198 896 17.5% 936 22.3% Business realignment and other charges.... 2,357 -- -- 2,357 NM -- -- Operating loss....... ( 16,397) ( 15,412) ( 11,991) 985 6.4% 3,421 28.5%
Intersegment shipping revenues and costs were related to services provided by the transportation segment for the minerals and environmental segments. The services were provided at arms length rates, and billed by the transportation segment to the minerals and environmental segments, who in turn billed their customers. The intersegment shipping sales and costs in the table above reflect the elimination of these intersegment transactions. Corporate costs include management information systems, human resources, investor relations and corporate communications, finance, purchasing, research related to developing the nanocomposite technology and corporate governance. Corporate general, selling and administrative expenses decreased by $2.3 million, or 22.1%, from 1999 to 2000. Lower incentive compensation ($1.5 million), reduced investor relations expenses and reduced executive headcount accounted for the change. General, selling and administrative expenses increased $2.5 million, or 31.9%, from 1998 to 1999. Approximately $1.6 million of the increase was accounted for by higher incentive compensation ($1.0 million) and increased occupancy costs ($.6 million). The Company is actively engaged in research and development efforts to create new applications for its bentonite reserves. The Company's wholly owned subsidiary, Nanocor, Inc., is devoted to research and development of bentonite-based nanocomposites. When incorporated into plastics, bentonite-based nanocomposites can produce materials 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. As of February 28, 2001, Nanocor had been issued 24 patents; 5 more patents have been allowed; and 13 patent applications were pending. All costs associated with nanocomposite product development, including the costs associated with its production facility, were included in corporate expenses for the years presented. Nanocomposite costs increased $.9 million, or 17.5%, from 1999 to 2000 and $.9 million, or 22.3%. from 1998 to 1999. During 2000, the Company engaged Lehman Brothers to help management evaluate various strategic options to enhance shareholder value. The Company engaged in significant discussions involving the disposition of its businesses, including the sale of certain parts and the potential spin-off of the Nanocor, Inc. subsidiary. In the process, the Company incurred approximately $2.4 million in professional fees. These expenses have been included as a component of business realignment expenses. Investment Income Investment income in 2000 was related to the temporary investment of the proceeds from the sale of the absorbent polymers segment. Investment income, net of income taxes, amounted to approximately $.20 per diluted share. The investments will be used to pay income taxes in the first quarter of 2001. Investments in excess of accrued income taxes may be used to repay outstanding loans under the revolving credit agreement. Net Interest Expense Net interest expense amounted to $3.2 million, $3.4 million and $3.0 million in 2000, 1999 and 1998, respectively. Average interest rates in 2000 were 48 basis points higher than 1999; the 1999 rates were 42 basis points lower than 1998. Lower average debt levels in 2000 offset the impact of the higher interest rates when comparing to the 1999 interest expense. Other Income (Expense) Other income for 2000 amounted to $.3 million compared to $1.1 million in expense for 1999 and $.2 million in other income in 1998. The 2000 income consisted of gains on sales of fixed assets and foreign exchange transaction gains while the expenses in 1999 were entirely related to foreign exchange transaction losses. Income Taxes The effective income tax rate for 2000 was 72.7% compared with a tax benefit rate of 24.9 % in 1999 and an effective tax rate of 36.1% in 1998. Income taxes for 2000, 1999 and 1998 included valuation allowances of $5.3 million, $1.7 million and $.8 million, respectively, related to the U.K. minerals unit net operating loss carryforward, and a legal accrual recorded in 2000. The tax benefit rate was also lower than would be expected because $2.7 million of the write down of intangible assets recognized in 1999 was not tax deductible. The effective tax rate for 2001 is currently estimated at 36%. Earnings Per Share Diluted earnings per share was calculated using the weighted average number of shares of common stock, including common share equivalents, outstanding during the year. Stock options issued to key employees and directors were considered common share equivalents. As a result of the partial liquidation following the sale of the absorbent polymers segment, all outstanding unexercised options at June 30, 2000 were adjusted. The value of the options remained the same as before the payment of the partial liquidation, however the number of options increased and the exercise prices were reduced. This resulted in a significantly greater number of common share equivalents during the second half of 2000. The weighted average number of shares of common stock and common stock equivalent shares outstanding was approximately 30.0 million in 2000, 27.2 million in 1999 and 28.4 million in 1998. There were 28.8 million shares outstanding, excluding common share equivalents, at December 31, 2000 compared to 26.9 million at December 31, 1999. The 1.9 million-share increase was related to the exercise of stock options. Diluted income (loss) from continuing operations was $.11, ($.30) and $.14 in 2000, 1999 and 1998, respectively. Special charges and investment income impacted the reported numbers. An analysis detailing the effects of these items on diluted earnings per share from continuing operations appears below:
Year Ended December 31, 2000 1999 1998 Business realignment and other charges.......................................... ($ .43) ($.37) $ -- Investment income............................................................... .20 -- -- Income from operations excluding the above...................................... .34 .07 .14 Diluted income (loss) from continuing operations $.11 ($.30) $ .14
The absorbent polymers segment was sold to BASF AG on June 1, 2000. The operating results for the absorbent polymers segment were reclassified to discontinued operations for all periods presented. Diluted income from discontinued operations for 2000 amounted to $10.80 per share, including $10.56 from the gain on the sale of the segment, compared to $1.12 for 1999 and $.64 for 1998. The income from discontinued operations in 2000 was for the five months ended May 31, 2000 compared with full year results in 1999 and 1998. An extraordinary loss of $.01 per share related to the early extinguishment of long-term debt was recorded in 2000. Forward Looking Statements Certain statements made from time to time by the Company, including statements in the Management's Discussion and Analysis of Financial Condition and Results of Operation section above, constitute "forward-looking statements" made in reliance upon the safe harbor contained in Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to the Company or its operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth, levels of capital expenditures, future dividends, expansion into global markets and the development of new products. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The Company's actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including without limitation the following: Competition Minerals. The minerals market is very competitive. We believe competition is essentially a matter of product quality, price, delivery, service and technical support. Several of our competitors in the U.S. market are larger and have substantially greater financial resources. If we fail to compete successfully based on these or other factors, we may lose customers or fail to recruit new customers and our business and future financial results could be materially and adversely affected. ......... Reliance on Metalcasting and Construction Industries Approximately 51% of our minerals segment's sales and 28% of our environmental segment's sales in 2000 were to the metalcasting and construction markets, respectively. The metalcasting and construction markets depend heavily upon the strength of the domestic and international economies. If these economies weaken, demand for products by the metalcasting and construction markets may decline and our business or future financial results may be adversely affected in the minerals and environmental segments, respectively. Regulatory and Legal Matters Our operations are subject to various federal, state, local and foreign laws and regulations relating to the environment and to health and safety matters. Substantial penalties may be imposed if we violate certain of these laws and regulations. If these laws or regulations are changed or interpreted differently in the future, it may become difficult or expensive for us to comply. In addition, investigations or evaluations of our products by government agencies may require us to adopt additional safety measures or precautions. If our costs to comply with such laws and regulations in the future materially increase, our business and future financial results could be materially and adversely affected. The Company may be subject to adverse litigation results in addition to as future changes in laws and regulations that may negatively impact its operations and profits. Risks of International Expansion An important part of our business strategy is to expand internationally. We intend to seek acquisitions, joint ventures and strategic alliances globally. Currently, our business outside the United States represents approximately 26% of our consolidated sales. The approximate breakdown of the sales outside of the United States for 2000 was as follows: Europe 58%; Latin America (including Mexico) 4%; Asia 37%; and Africa along with the Middle East 1%. As we expand internationally, we will be subject to increased risks, which may include the following: currency exchange or price control laws; currency translation adjustments; political and economic instability; unexpected changes in regulatory requirements; tariffs and other trade barriers; longer accounts receivable collection cycles; and adverse tax consequences. The above listed events could result in sudden, and potentially prolonged, changes in demand for the Company's products. Also, we may have difficulty enforcing agreements and collecting accounts receivable through a foreign country's legal system. At December 31, 2000, approximately 41% of the gross accounts receivable were due from customers outside of the United States and Canada. The breakdown of the overseas balance was as follows: Europe 59%; Latin America (including Mexico) 12%; Asia 26%; and Africa and the Middle East 3%. Volatility of Stock Price The stock market has been extremely volatile in recent years. These broad market fluctuations may adversely affect the market price of our common stock. In addition, factors such as the following may have a significant effect on the market price of our common stock: fluctuations in our financial results; our introduction of new services or products; announcements of acquisitions, strategic alliances or joint ventures by us, our customers or our competitors; changes in analysts' recommendations regarding our common stock; and general economic conditions. There can be no assurance that the price of our common stock will increase in the future or be maintained at its recent levels. Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivatives and for hedging activities. As issued, SFAS No. 133 was effective for all quarters of all years beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued, effectively deferring the date of required adoption of SFAS No. 133 to quarters of all years beginning after June 15, 2000. Subsequently, SFAS No. 133 was amended by SFAS No.138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The Company will adopt SFAS No. 133 and SFAS No. 138, as required, in fiscal year 2001. At this time, the Company does not expect the adoption of these pronouncements to have a significant effect on the financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a multinational corporation that manufactures and markets products in countries throughout the world, the Company is subject to certain market risks, including those related to foreign currency, interest rates and government actions. The Company uses a variety of practices to manage these market risks, including, when considered appropriate, derivative financial instruments. The Company uses derivative financial instruments only for risk management and does not use them for trading or speculative purposes. Exchange Rate Sensitivity The Company is exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. The Company's primary exposures are to changes in exchange rates for the U.S. dollar versus the Euro, the British pound, the Canadian dollar, the Australian dollar, the Mexican peso, the Thai baht and the Korean won. The Company also has significant exposure to changes in exchange rates between the British pound and the Euro. The Company's various currency exposures often offset each other, providing a natural hedge against currency risk. Periodically, specific foreign currency transactions (e.g. inventory purchases, royalty payments, etc.) are hedged with forward contracts to reduce the foreign currency risk. Gains and losses on these foreign currency hedges are included in the basis of the underlying hedged transactions. As of December 31, 2000, the Company had no outstanding foreign currency contracts. Interest Rate Sensitivity The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted average interest rates by expected maturity dates for debt obligations. Weighted average variable rates are based on implied forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency. The instruments' actual cash flows are denominated in U.S. dollars (US), Korean won (WON) and Thai baht (THB) as indicated in parentheses.
Expected Maturity Date Fair 2001 2002 2003 2004 2005 Thereafter Total Value (US$ equivalent in thousands) Long-term debt: Variable rate (US)....... 43,042 1,042 520 - - 5,000 49,604 49,604 Average interest rate.... 6.5% 6.5% 6.5% - - - - - Variable rate (WON)...... 791 - - - - - 791 791 Average interest rate.... 8.4% - - - - - - - Variable rate (THB)...... 1,981 - - - - - 1,981 1,981 Average interest rate.... 5.5% - - - - - - - 45,814 1,042 520 - - 5,000 52,376 52,376 Debt to be refinanced.... (44,772) 2,772 42,000 - - - - Total......................... $ 1,042 $ 3,814 $42,520 $ - $ - $5,000 $ 52,376 $52,376
The Company periodically uses interest rate swaps to manage interest rate risk on debt securities. These instruments allow the Company to exchange variable rate debt into fixed rate or fixed rate debt into variable rate. Interest rate differentials paid or received on these arrangements are recognized as adjustments to interest expense over the life of the agreements. At December 31, 2000, the Company had one interest rate swap outstanding, which expires in September 2002, in a notional amount of $15 million. The agreement is extendable at the other party's option until September 2004. The fair value of this agreement results in an unrecognized loss at December 31, 2000, of $.3 million. The Company is exposed to credit risk on certain assets, primarily cash equivalents, short-term investments and accounts receivable. The credit risk associated with cash equivalents and short-term investments is mitigated by the Company's policy of investing in securities with high credit ratings and investing through major financial institutions with high credit ratings. The Company provides credit to customers in the ordinary course of business and performs ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks. The Company's accounts receivable financial instruments are carried at amounts that approximate fair value. Item 8. Financial Statements and Supplementary Data See the Index to Financial Statements and Financial Statement Schedule on Page F-1. Such Financial Statements and Schedule 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 and all positions each person holds with the Company or other organizations. Board of Directors of the Registrant Arthur Brown, 60 (1, 2) Chairman, President and Chief Executive Officer of Hecla Mining Company, a miner and processor of silver, gold and industrial minerals. Director since 1990. Robert E. Driscoll, III, 62 (1, 2) Retired Dean and Professor of Law, University of South Dakota. Director since 1985. John Hughes, 58 (3, 4) Chairman of the Board of Directors since May 1998; Chief Executive Officer of the Company since 1985; a Director since 1984. Mr. Hughes retired as Chief Executive Officer in May 2000. Jay D. Proops, 59 (2, 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 1995. C. Eugene Ray, 68 (1, 2, 3, 4) Retired Executive Vice President - Finance of Signode Industries, Inc., a manufacturer of industrial strapping products. Director since 1981. Clarence O. Redman, 58 (2, 3) Secretary of AMCOL International Corporation. Of counsel to the law firm of Lord, Bissell & Brook, the law firm that serves as Corporate Counsel to the Company. Previously, Mr. Redman was an individual and corporate partner of the law firm of Keck, Mahin & Cate as the sole shareholder and President of Clarence Owen Redman Ltd. Mr. Redman and his professional corporation also served as Chief Executive Officer of Keck, Mahin & Cate until September 1997. In December 1997, Keck, Mahin & Cate filed a voluntary petition in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. Director since 1989. Dale E. Stahl, 53 (1, 2, 3, 4) President and Chief Operating Officer of Inland Paperboard and Packaging, Inc., a manufacturer of containerboard and corrugated boxes since June 2000; prior thereto, President and Chief Operating Officer of Gaylord Container Corporation, a manufacturer and distributor of brown paper and packaging products. Director since 1995. Lawrence E. Washow, 47 (3) Chief Executive Officer of the Company since May 2000, President of the Company since May 1998; Chief Operating Officer of the Company since 1997; prior thereto, Senior Vice President of the Company since 1994 and President of Chemdal International Corporation until August 1997; a Director since 1998. Audrey L. Weaver, 46 (2) Private investor. Director since 1997. Paul C. Weaver, 38 (3, 4) Managing partner of Consumer Aptitudes, Inc., a marketing research firm. Director since 1995. James A. McClung retired in May 2000 after four years as a director. Paul G. Shelton resigned from the Board of Directors in November 2000 after serving as a director for thirteen years. (1) Member of Audit Committee (2) Member of Compensation Committee (3) Member of Executive Committee (4) Member of Nominating Committee Additional information regarding the directors of the Company is included under the captions "Information Concerning Nominees," "Information Concerning Continuing Members of the Board" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's proxy statement to be dated on or before April 10, 2001, 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 captions "Names Officers' Compensation"and "Stock Performance" in the Company's proxy statement to be dated on or before April 10, 2001, 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 before April 10, 2001, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information regarding the above is included under the captions "Certain Relationships and Transactions" in the Company's proxy statement to be dated on or before April 10, 2001, and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K (a) 1. See Index to Financial Statements on Page F-1. 2. See Financial Statement Schedule on Page F-1. Such Financial Statements and Schedule 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 Schedule on Page F-1. Item 14(a) Index to Financial Statements and Financial Statement Schedule Page (1) Financial Statements: Independent Auditors' Report............................................F-2 Consolidated Balance Sheets, December 31, 2000 and 1999.................F-3 Consolidated Statements of Operations, Years ended December 31, 2000, 1999 and 1998............................F-4 Consolidated Statements of Comprehensive Income, Years ended December 31, 2000, 1999 and 1998............................F-5 Consolidated Statements of Stockholders' Equity, Years ended December 31, 2000, 1999 and 1998............................F-6 Consolidated Statements of Cash Flows, Years ended December 31, 2000, 1999 and 1998............................F-7 Notes to Consolidated Financial Statements..............................F-8 (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts.........................F-28 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 auditing standards generally accepted in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. 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 LLP Chicago, Illinois March 5, 2001 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except share and per share amounts)
ASSETS December 31, 2000 1999 Current assets: Cash $ 10,057 $ 3,954 Cash equivalents.................................................................. 168,549 -- Accounts receivable: Trade, less allowance for doubtful accounts of $2,323 and $2,539.............. 44,692 48,930 Other......................................................................... 2,695 3,126 Inventories....................................................................... 33,385 30,965 Prepaid expenses.................................................................. 6,588 6,566 Net current assets of discontinued operations..................................... -- 40,147 Current deferred tax assets....................................................... 3,821 6,347 Total current assets.......................................................... 269,787 140,035 Investment in and advances to joint ventures........................................... 12,672 9,111 Property, plant, equipment, and mineral rights and reserves: Land and mineral rights and reserves.............................................. 9,857 9,968 Depreciable assets................................................................ 188,664 185,354 198,521 195,322 Less: accumulated depreciation.................................................... 118,369 106,062 80,152 89,260 Other assets: Goodwill and other intangible assets, less accumulated amortization of $219 and $580 465 452 Long-term prepayments and other assets............................................ 5,137 1,534 Net non-current assets of discontinued operations................................. -- 80,046 Deferred tax assets............................................................... 5,915 3,513 11,517 85,545 $374,128 $323,951
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, 2000 1999 Current liabilities: Current maturities of long-term debt.............................................. 1,042 509 Accounts payable.................................................................. 12,453 10,776 Accrued income taxes.............................................................. 135,095 2,301 Accrued liabilities............................................................... 29,349 21,394 Total current liabilities..................................................... 177,939 34,980 Long-term debt......................................................................... 51,334 93,914 Minority interests in subsidiaries..................................................... 4 925 Other liabilities...................................................................... 9,944 7,692 9,948 8,617 Stockholders' equity: Common stock, par value $.01 per share. Authorized 100,000,000 shares, issued 32,015,771 shares............................................................. 320 320 Additional paid-in capital........................................................ 75,536 76,440 Retained earnings................................................................. 79,336 142,270 Cumulative other comprehensive income (loss) ..................................... (1,495) (2,607) 153,697 216,423 Less: Treasury stock (3,234,467 shares in 2000 and 5,163,715 shares in 1999)............ (18,790) (29,983) 134,907 186,440 $374,128 $323,951
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Dollars in thousands)
Year Ended December 31, 2000 1999 1998 Continuing Operations Net sales....................................................................... $ 304,065 $ 316,983 $ 319,317 Cost of sales................................................................... 234,138 248,089 254,604 Gross profit............................................................... 69,927 68,894 64,713 General, selling and administrative expenses.................................... 52,590 61,525 55,744 Business realignment and other charges.......................................... 13,857 14,529 -- Operating profit (loss).................................................... 3,480 (7,160) 8,969 Other income (expense): Investment income.......................................................... 9,816 -- -- Interest expense, net...................................................... (3,241) (3,440) (2,997) Other, net................................................................. 310 (1,070) 156 6,885 (4,510) (2,841) Income (loss) from continuing operations before income taxes and equity in income of joint ventures............................................ 10,365 (11,670) 6,128 Income tax expense (benefit).................................................... 7,532 (2,907) 2,213 Income (loss) from continuing operations before equity in income of joint ventures......................................................... 2,833 (8,763) 3,915 Equity in income of joint ventures.............................................. 470 448 8 Income (loss) from continuing operations................................... 3,303 (8,315) 3,923 Discontinued Operations Income from operations of absorbent polymers segment (net of income taxes).................................................. 7,047 30,549 18,162 Gain on disposal of absorbent polymers segment (net of income taxes of $208,964)........................................................... 316,330 -- -- Income from discontinued operations........................................ 323,377 30,549 18,162 Extraordinary Loss on early extinguishment of debt (net of income tax benefit of $238)....................................................... (443) -- -- Net income................................................................. $ 326,237 $ 22,234 $ 22,085
(Continued) AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Continued) (Dollars in thousands, except per share amounts)
Year Ended December 31, 2000 1999 1998 Earnings per share Basic earnings (loss) per share: Continuing operations...................................................... $ .12 $ (.31) $ .14 Discontinued operations: From absorbent polymers operations..................................... .26 1.14 .65 Gain on sale of absorbent polymers segment............................. 11.49 -- -- 11.75 1.14 .65 Extraordinary item......................................................... (.02) -- -- Net income................................................................. $ 11.85 $ .83 $ .79 Diluted earnings (loss) per share: Continuing operations...................................................... $ .11 $ (.30) $ .14 Discontinued operations: From absorbent polymers operations..................................... .24 1.12 .64 Gain on sale of absorbent polymers segment............................. 10.56 -- -- 10.80 1.12 .64 Extraordinary item......................................................... (.01) $ -- -- Net income................................................................. $ 10.90 $ .82 $ .78
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Dollars in thousands)
Year Ended December 31, 2000 1999 1998 Net income...................................................................... $ 326,237 $ 22,234 $ 22,085 Other comprehensive income (loss): Foreign currency translation adjustment.................................... (4,034) (851) (7) Reclassification adjustment for foreign currency losses included in net income............................................................. 5,146 -- -- Comprehensive income............................................................ $ 327,349 $ 21,383 $ 22,078
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Dollars in thousands, except share and per share amounts)
Common Stock Cumulative Other Additional Comprehensive Paid-in Retained Income Treasury Capital Earnings (Loss) Stock Total Number of Shares (1) Amount =================================================================================================================================== Balance at December 31, 1997......................... 32,015,771 $ 320 $ 75,939 $ 111,588 ($ 1,749) ($10,155) $ 175,943 Net income........................ - - - 22,085 - - 22,085 Cash dividends ($.23 per share)....................... - - - (6,411) - - (6,411) Translation adjustment for 1998... - - - - (7) - (7) Purchase of 1,829,041 treasury shares.............. - - - - - (19,898) (19,898) Sales of 224,240 treasury shares pursuant to options................... - - 299 - - 903 1,202 Balance at December 31, 1998......................... 32,015,771 320 76,238 127,262 (1,756) ( 29,150) 172,914 Net income........................ - - - 22,234 - - 22,234 Cash dividends ($.27 per share)....................... - - - (7,226) - - (7,226) Translation adjustment for 1999... - - - - (851) - (851) Purchase of 226,600 treasury shares.............. - - - - - (2,040) (2,040) Sales of 209,284 treasury shares pursuant to options................... - - 202 - - 1,207 1,409 Balance at December 31, 1999......................... 32,015,771 320 76,440 142,270 (2,607) (29,983) 186,440 Net income........................ - - - 326,237 - - 326,237 Partial liquidation distribution.. - - - (384,829) - - (384,829) Cash dividends ($.16 per share)....................... - - - (4,342) - - (4,342) Translation adjustment for 2000... - - - - (4,034) - (4,034) Reclassification adjustment for foreign currency losses included in net income....... - - - - 5,146 - 5,146 Sales of 1,929,248 treasury shares pursuant to options................... - - (904) - - 11,193 10,289 Balance at December 31, 2000......................... 32,015,771 $ 320 $ 75,536 $79,336 ($ 1,495) ($ 18,790) $ 134,907 (1) Reflects three-for-two stock split in December 1997, effected in the form of a stock dividend.
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands)
Year Ended December 31, 2000 1999 1998 Cash flow from operating activities: Income (loss) from continuing operations............................... $ 3,303 ($ 8,315) $ 3,923 Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities Depreciation, depletion, and amortization.......................... 18,996 20,255 18,360 Equity in income of joint ventures................................. (470) (448) (8) Increase (decrease) in allowance for doubtful accounts............. (216) 933 519 Increase (decrease) in deferred income taxes....................... 124 (8,966) (2,549) (Gain) loss on sale of depreciable assets.......................... (153) 252 (72) Write down of fixed and intangible assets.......................... 2,995 13,238 - Increase in other noncurrent liabilities........................... 2,252 1,115 304 (Increase) decrease in current assets: Accounts receivable........................................... 4,885 3,702 (5,369) Inventories................................................... (2,420) 9,649 (3,112) Prepaid expenses.............................................. (22) (1,613) (918) Increase (decrease) in current liabilities: Accounts payable.............................................. 1,677 (3,296) (4,941) Accrued income taxes.......................................... (2,303) (1,177) 1,801 Accrued liabilities........................................... 7,955 (724) 4,842 Net cash provided by operating activities of continuing operations........................................... 36,603 24,605 12,780 Net cash provided by (used in) discontinued operations.... (327) 17,804 27,036 Net cash provided by operating activities................................... Cash flow from investing activities: Proceeds from sale of depreciable assets............................... 1,426 2,378 543 Net proceeds from sale of absorbent polymers segment before taxes...... 654,581 - - Tax payments related to the absorbent polymers segment sale............ (75,587) - - Sale of product line and mineral reserves.............................. - - 13,176 Acquisition of land, mineral reserves, and depreciable assets.......... (16,152) (18,144) (28,038) Advances to joint ventures............................................. (3,091) (4,117) (1,503) (Increase) decrease in other assets.................................... (4,524) 677 368 Net cash provided by (used in) investing activities....... 556,653 (19,206) (15,454) Cash flow from financing activities: Proceeds from issuance of debt......................................... 7,604 263 16,687 Principal payments of debt............................................. (49,651) (17,648) (12,761) Proceeds from sales of treasury stock.................................. 10,289 1,409 1,202 Purchases of treasury stock............................................ - (2,040) (19,898) Partial liquidation distribution....................................... (384,829) - - Premium paid for early extinguishment of debt.......................... (443) - - Dividends paid......................................................... (4,342) (7,226) (6,411) Net cash used in financing activities..................... (421,372) (25,242) (21,181) Effect of foreign currency rate changes on cash............................. 3,095 (213) (722) Net increase (decrease) in cash and cash equivalents........................ 174,652 (2,252) 2,459 Cash and cash equivalents at beginning of year.............................. 3,954 6,206 3,747 Cash and cash equivalents at end of year.................................... $ 178,606 $ 3,954 $ 6,206 Supplemental disclosures of cash flow information: Cash paid for: Interest............................................................... $ 5,163 $ 5,890 $ 6,420 Income taxes .......................................................... $ 88,762 $ 17,563 $ 9,815
See accompanying notes to consolidated financial statements. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share and per share amounts) (1) Summary of Significant Accounting Policies Company Operations AMCOL International Corporation (the Company) operates in two principal areas of activity: minerals and environmental. The Company also operates a transportation business primarily for delivery of its own products. In 2000, the Company's revenues were derived 57% from minerals, 32% from environmental and 11% from transportation operations. The Company's sales in 2000 were approximately 74% domestic and 26% outside of the United States. Further descriptions of the Company's products, its principal markets and the relative significance of its operations are included in Note 3, "Business Segment and Geographic Area Information." During 2000, the Company sold its absorbent polymers business. The Company has reclassified the results of operations and net assets of its absorbent polymers business as discontinued operations. Accordingly all amounts included in the notes to consolidated financial statements pertain to continuing operations except where otherwise noted. See further discussion in Note 2, "Discontinued Operations." Principles of Consolidation The consolidated financial statements include the accounts of the Company and its foreign and domestic subsidiaries. All subsidiaries greater than 50% owned by the Company are consolidated. All subsidiaries are wholly owned, except India (50% and 20%), Mexico (49%), China (49%), Egypt (25%), Japan (19%) and a consolidated joint venture in England which is 74% owned. The Mexican, Chinese and Egyptian joint ventures are accounted for using the equity method. The Indian investments were made in 1999, and are also accounted for using the equity method. The Japanese investment is recorded at cost. All material intercompany balances and transactions between wholly owned subsidiaries, including profits on inventories, have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results likely differ from those estimates, but management believes that such differences are immaterial. Translation of Foreign Currencies The assets and liabilities of subsidiaries located outside of the United States are translated into U.S. dollars 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. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (1) Summary of Significant Accounting Policies (Continued) Inventories Inventories are valued at the lower of cost or net realizable value. 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. 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 of acquired businesses. Goodwill is amortized on the straight-line method over periods of five to 40 years. Other intangibles, including trademarks and noncompete agreements, are amortized on the straight-line method over the expected periods to be benefited, which extend up to 10 years. Impairment of Long-Lived Assets Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value as estimated by discounted cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs of disposal. 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 years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Revenue Recognition Product revenue is recognized when products are shipped to customers. Allowances for discounts, rebates, and estimated returns are recorded at the time of sale. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (1) Summary of Significant Accounting Policies (Continued) Shipping Revenues and Costs In the fourth quarter of 2000, the Company adopted the requirements of the Emerging Issues Task Force Consensus on Issue No. 00-10 ("EITF 00-10"), "Accounting for Shipping and Handling Fees and Costs". EITF 00-10 requires the Company to report shipping and handling costs that are passed on to customers as sales revenue and cost of sales in the Company's consolidated statements of operations. In conjunction with the adoption, the Company reclassified certain amounts that had previously been recorded as offsets (reductions) of sales. In 2000, 1999 and 1998, the reclassifications resulted in increased sales and cost of sales of $17,566, $17,839 and $18,880, respectively. The reclassifications had no effect on previously reported income or earnings per share. Research and Development Research and development costs are included in general, selling and administrative expenses and amounted to approximately $4,813, $3,733 and $3,513 for the years ended December 31, 2000, 1999 and 1998, respectively. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted average common shares outstanding after consideration of the dilutive effect of stock options. A reconciliation between the number of shares used to compute basic and diluted earnings per share follows:
2000 1999 1998 Weighted average of common shares outstanding for the year.............. 27,523,157 26,772,569 27,918,391 Dilutive impact of stock options........................................ 2,433,533 426,694 467,469 Weighted average of common and common equivalent shares for the year.... 29,956,690 27,199,263 28,385,860 Common shares outstanding at December 31................................ 28,781,304 26,852,056 26,869,372
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 the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its fixed plan stock options. As such, compensation expense is recorded on the grant date only if the market price of the underlying stock exceeds the exercise price. Reclassifications Certain items in the 1999 and 1998 consolidated financial statements have been reclassified to conform with the consolidated financial statement presentation for 2000. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (2) Discontinued Operations In 2000, the Company sold its absorbent polymers segment to BASF AG. Accordingly, the absorbent polymers segment is reported as a discontinued operation in the accompanying consolidated financial statements. The consolidated financial statements have been reclassified to report separately the net assets and operating results of the absorbent polymers segment for all periods presented. The transaction closed on June 1, 2000, at which time the Company received gross proceeds of approximately $656,500. The sale resulted in a pretax gain of approximately $525,300 ($316,300 after income taxes), which was net of costs incurred in connection with the sale. The net proceeds from the sale transaction were used to fund a partial liquidation distribution to the Company's shareholders on June 30, 2000. Summary operating results of the absorbent polymers segment for 2000, 1999 and 1998 were as follows:
2000* 1999 1998 Net sales $ 86,000 $ 253,629 $ 221,750 Operating profit 12,436 51,850 33,251 Income taxes 4,639 15,571 8,838 Net income 7,047 30,549 18,162 *The 2000 information is for five months.
A portion of the Company's interest expense has been allocated to discontinued operations based upon the debt balances attributable to these operations. Net interest expense allocated to discontinued operations was $1,180, $2,956 and $4,936 in 2000, 1999 and 1998, respectively. (3) Business Segment and Geographic Area Information The Company operates in two major industry segments: minerals 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 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. The Company identifies segments based on management responsibility and the nature of the business activities of each component of the Company. Intersegment sales are insignificant, other than intersegment shipping, which is disclosed in the following table. The Company measures segment profit based on operating profit. Operating profit is defined as sales less cost of sales and general, selling and administrative expenses related to a segment's operations. The costs deducted to arrive at operating profit do not include interest or income taxes. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (3) Business Segment and Geographic Area Information (Continued) Segment assets are those assets used in the Company's operations in that segment. Corporate assets include cash and cash equivalents, corporate leasehold improvements, the nanocomposite plant investment and other miscellaneous equipment. The following summaries set forth certain financial information by business segment and geographic area as of and for the years ended December 31, 2000, 1999 and 1998.
2000 1999 1998 Business Segment: Revenues: Minerals...................................................... $ 181,533 $ 176,991 $ 186,674 Environmental................................................. 99,874 117,030 112,359 Transportation................................................ 34,036 34,632 31,887 Intersegment shipping......................................... (11,378) (11,670) (11,603) Total..................................................... $ 304,065 $ 316,983 $319,317 Operating profit (loss): Minerals...................................................... $ 6,639 $ 14,287 $ 10,131 Environmental................................................. 11,761 (7,666) 9,194 Transportation................................................ 1,477 1,631 1,635 Corporate..................................................... (16,397) (15,412) (11,991) Total..................................................... $ 3,480 ($ 7,160) $ 8,969 Assets: Minerals...................................................... $ 122,942 $ 119,247 $ 121,085 Environmental................................................. 59,258 62,409 83,674 Transportation................................................ 1,791 1,439 932 Corporate..................................................... 190,137 20,663 20,259 Discontinued operations....................................... - 120,193 107,511 Total..................................................... $ 374,128 $ 323,951 $ 333,461 Depreciation, depletion and amortization: Minerals...................................................... $ 11,938 $ 12,030 $ 10,306 Environmental................................................. 4,257 5,766 6,249 Transportation................................................ 45 64 70 Corporate..................................................... 2,756 2,395 1,735 Total..................................................... $ 18,996 $ 20,255 $ 18,360 Capital expenditures: Minerals...................................................... $ 8,905 $ 8,874 $ 12,396 Environmental................................................. 5,221 6,571 11,175 Transportation................................................ 56 49 30 Corporate..................................................... 1,970 2,650 4,437 Total..................................................... $ 16,152 $ 18,144 $ 28,038 Research and development expenses: Minerals...................................................... $ 1,372 $ 1,051 $ 497 Environmental................................................. 1,453 1,147 1,035 Corporate..................................................... 1,988 1,535 1,981 Total..................................................... $ 4,813 $ 3,733 $ 3,513
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (3) Business Segment and Geographic Area Information (Continued)
2000 1999 1998 Geographic area: Sales to unaffiliated customers shipped from: North America...................................................... $ 247,539 $ 248,583 $ 251,490 Europe............................................................. 43,110 55,669 59,652 Asia 10,719 9,980 5,812 Australia.......................................................... 2,697 2,751 2,363 Total......................................................... $ 304,065 $ 316,983 $ 319,317 Operating profit (loss) from: North America...................................................... $ 15,748 $ 3,366 $ 12,250 Europe............................................................. (13,812) (8,992) (3,491) Asia 1,176 (1,935) 48 Australia.......................................................... 368 401 162 Total......................................................... $ 3,480 $ (7,160) $ 8,969 Identifiable assets in: North America...................................................... $ 321,791 $ 143,815 $ 163,203 Europe............................................................. 36,032 41,030 48,298 Asia 13,844 16,337 12,509 Australia.......................................................... 2,461 2,576 1,940 Discontinued operations............................................ - 120,193 107,511 Total......................................................... $ 374,128 $ 323,951 $ 333,461
(4) Inventories Inventories at December 31 consisted of:
2000 1999 Advance mining....................................................................... $ 1,287 $ 1,450 Crude stockpile inventories.......................................................... 13,005 9,822 In-process inventories............................................................... 10,952 7,827 Other raw material, container, and supplies inventories.............................. 8,141 11,866 $ 33,385 $ 30,965
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (5) Property, Plant, Equipment, and Mineral Rights and Reserves Property, plant, equipment and mineral rights and reserves consisted of the following:
Depreciation/ December 31, Amortization 2000 1999 Annual Rates Mineral rights and reserves..................................... $ 5,739 $ 6,006 Other land...................................................... 4,118 3,962 Buildings and improvements...................................... 42,415 42,358 4.9% to 25.0% Machinery and equipment......................................... 146,249 142,996 10.0% to 50.0% $198,521 $195,322
Depreciation and depletion were charged to income as follows:
2000 1999 1998 Depreciation expense................................................... $18,252 $16,798 $14,751 Depletion expense...................................................... 610 863 367 $18,862 $17,661 $15,118
(6) Income Taxes Total income tax expense (benefit) for the years ended December 31, 2000, 1999 and 1998 was allocated as follows:
2000 1999 1998 Income from continuing operations..................................... $ 7,532 ($ 2,907) $ 2,213 Discontinued operations............................................... 213,603 15,571 8,838 Extraordinary item.................................................... (238) -- -- $ 220,897 $ 12,664 $ 11,051
Domestic and foreign components of income (loss) from continuing operations before income taxes and equity in income of joint ventures are shown below:
2000 1999 1998 Income (loss) from continuing operations before income taxes and equity in income of joint ventures Domestic $ 23,032 ($ 3,549) $ 11,642 Foreign............................................................... (12,667) (8,121) (5,514) $ 10,365 ($ 11,670) $ 6,128
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (6) Income Taxes (Continued) The components of the provision (benefit) for income taxes attributable to income (loss) from continuing operations before income taxes and equity in income of joint ventures for the years ended December 31, 2000, 1999 and 1998 consisted of:
2000 1999 1998 Provision (benefit) for income taxes: Federal: Current............................................................. $ 4,622 $ 2,852 $ 3,743 Deferred............................................................ 512 (7,208) (2,076) State: Current............................................................. 712 948 813 Deferred............................................................ 51 (721) (208) Foreign: Current............................................................. 2,074 (28) 206 Deferred............................................................ (439) 1,250 (265) $ 7,532 ($2,907) $ 2,213
The Company's federal income tax returns have been audited through 1997. The Internal Revenue Service is currently auditing the 1998 federal income tax return. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2000 and 1999 were as follows:
2000 1999 Deferred tax assets attributable to: Accounts receivable, due to allowance for doubtful accounts........................ $ 633 $ 704 Inventories ....................................................................... 527 714 Net foreign operating loss carryforward............................................ 7,842 2,517 Accrued pension liability.......................................................... 1,973 2,314 Capital losses carried forward..................................................... 546 2,431 Book amortization in excess of tax allowance....................................... 3,925 4,284 Other.............................................................................. 4,509 4,077 Total deferred tax assets....................................................... 19,955 17,041 Valuation allowance................................................................ (7,842) (2,517) Deferred tax assets, net of allowance........................................... 12,113 14,524 Deferred tax liabilities attributable to: Plant and equipment, due to differences in depreciation............................ (669) (2,669) Land and mineral reserves, due to differences in depletion......................... (1,708) (1,843) Inventories, due to change in accounting method from LIFO to FIFO.................. -- (152) Total deferred tax liabilities.................................................. (2,377) (4,664) Net deferred tax assets......................................................... $ 9,736 $ 9,860
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (6) Income Taxes (Continued) The Company recorded a valuation allowance in 2000, 1999 and 1998 for the tax effect of the net operating loss of its U.K. minerals unit that resulted in a net operating loss carryforward. In order to fully realize the benefits of the U.K. net operating loss carryforward, the Company will need to generate sufficient taxable income in the future. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will not realize the benefits of these deductible differences and has established a valuation allowance for the total amount of the U.K. net operating loss carryforward. However, the amount of the deferred tax asset considered realizable could change in the near term if estimates of future taxable income during the carryforward period are increased or additional tax planning strategies are identified. The following analysis reconciles the statutory Federal income tax rate to the effective tax rates related to income from continuing operations before income taxes and equity in income of joint ventures:
2000 1999 1998 Percent Percent Percent of Pretax of Pretax of Pretax Amount Income Amount Income Amount Income Provision (benefit) for income taxes at U.S. statutory rates.......................... $ 3,628 35.0% ($ 4,085) (35.0%) $ 2,145 35.0% Increase (decrease) in taxes resulting from: Percentage depletion.................. (1,190) (11.5) (875) (7.5) (1,017) (16.6) State taxes........................... 463 4.5 616 5.3 528 8.6 Export incentives..................... (632) (6.1) (518) (4.4) (853) (13.9) Valuation allowance................... 5,325 51.4 1,717 14.7 800 13.1 Nondeductible goodwill write down..... -- -- 935 8.0 -- -- Other................................. (62) (0.6) (697) (6.0) 610 9.9 $ 7,532 72.7% ($ 2,907) (24.9%) $ 2,213 36.1%
(7) Long-term Debt Long-term debt consisted of the following:
December 31, 2000 1999 Short-term debt supported by revolving credit agreement................................. $ 42,000 $ 64,776 Term note, at 7.83% (Series B).......................................................... - 10,000 Term note, at 8.10% (Series C).......................................................... - 15,000 Industrial revenue bond................................................................. 5,000 - Other notes payable..................................................................... 5,376 4,647 52,376 94,423 Less: current portion................................................................... 1,042 509 $ 51,334 $ 93,914
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (7) Long-term Debt (continued) The Company has a committed $125,000 revolving credit agreement, which matures October 31, 2003, with an option to extend for three additional one-year periods. As of December 31, 2000, there was $83,000 in borrowing capacity available under the line of credit. The revolving credit agreement is a multi-currency arrangement, which allows the Company to borrow at an adjusted LIBOR rate plus .25% to .75%, depending upon debt to capitalization ratios and the amount of the credit line used. During 2000, the Company borrowed $5,000 using an industrial revenue bond to finance the construction of a plant in Butler, Georgia. The note, which matures in 2015, has a variable interest rate and is secured by the plant assets. Maturities of long-term debt at December 31, 2000, were as follows:
2001 2002 2003 2004 2005 Thereafter Short-term debt supported by revolving credit agreement...... $ - $ - $42,000 $ - $ - $ - Industrial revenue bond and other notes payable................... 1,042 3,814 520 - - 5,000 $ 1,042 $ 3,814 $42,520 $ - $ - $ 5,000
The estimated fair value of the above notes at December 31, 2000, was approximately as stated 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 various financial ratios, and limit additional borrowings and guarantees. The Company is not required to maintain compensating balances. During 2000, the Company renegotiated its debt covenants to reflect the sale of the absorbent polymers segment. The $125,000 revolving credit agreement remains in place, but the payment of $25,000 in term notes was accelerated as a part of the transaction resulting in an extraordinary loss from the early extinguishment of debt amounting to $443, net of income taxes. (8) Market Risks and Financial Instruments As a multinational corporation that manufactures and markets products in countries throughout the world, the Company is subject to certain market risks, including those related to foreign currency, interest rates and government actions. The Company uses a variety of practices to manage these market risks, including, when considered appropriate, derivative financial instruments. The Company uses derivative financial instruments only for risk management and does not use them for trading or speculative purposes. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (8) Market Risks and Financial Instruments (continued) Exchange Rate Sensitivity The Company is exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. The Company's primary exposures are to changes in exchange rates for the U.S. dollar versus the Euro, the British pound, the Canadian dollar, the Australian dollar, the Mexican peso, the Thai baht and the Korean won. The Company also has significant exposure to changes in exchange rates between the British pound and the Euro. The Company's various currency exposures often offset each other, providing a natural hedge against currency risk. Periodically, specific foreign currency transactions (e.g. inventory purchases, royalty payments, etc.) are hedged with forward contracts to reduce the foreign currency risk. Gains and losses on these foreign currency hedges are included in the basis of the underlying hedged transactions. As of December 31, 2000, the Company had no outstanding foreign currency contracts. Interest Rate Sensitivity The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted average interest rates by expected maturity dates for debt obligations. Weighted average variable rates are based on implied forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency. The instruments' actual cash flows are denominated in U.S. dollars (US), Korean won (WON) and Thai baht (THB) as indicated in parentheses.
Expected Maturity Date Fair 2001 2002 2003 2004 2005 Thereafter Total Value (US$ equivalent in thousands) Long-term debt: Variable rate (US)....... 43,042 1,042 520 - - 5,000 49,604 49,604 Average interest rate.... 6.5% 6.5% 6.5% - - - - - Variable rate (WON)...... 791 - - - - - 791 791 Average interest rate.... 8.4% - - - - - - - Variable rate (THB)...... 1,981 - - - - - 1,981 1,981 Average interest rate.... 5.5% - - - - - - - 45,814 1,042 520 - - 5,000 52,376 52,376 Debt to be refinanced.... (44,772) 2,772 42,000 - - - - Total......................... $ 1,042 $ 3,814 $42,520 $ - $ - $5,000 $ 52,376 $52,376
The Company periodically uses interest rate swaps to manage interest rate risk on debt securities. These instruments allow the Company to exchange variable rate debt into fixed rate or fixed rate debt into variable rate. Interest rate differentials paid or received on these arrangements are recognized as adjustments to interest expense over the life of the agreements. At December 31, 2000, the Company had one interest rate swap outstanding, which expires in September 2002, in a notional amount of $15,000. The agreement is extendable at the other party's option until September 2004.The fair value of this agreement results in an unrecognized loss at December 31, 2000, of $296. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (8) Market Risks and Financial Instruments (Continued) The Company is exposed to credit risk on certain assets, primarily cash equivalents, short-term investments and accounts receivable. The credit risk associated with cash equivalents and short-term investments is mitigated by the Company's policy of investing in securities with high credit ratings and investing through major financial institutions with high credit ratings. The Company provides credit to customers in the ordinary course of business and performs ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks. The Company's accounts receivable financial instruments are carried at amounts that approximate fair value. (9) Leases The Company has several noncancelable leases for railroad cars, trailers, computer software, office equipment, certain automobiles, and office and plant facilities. Total rent expense under operating lease agreements was approximately $3,148, $3,607 and $3,359 in 2000, 1999 and 1998, respectively. Additionally, the Company has two domestic facilities that are being subleased. The following is a schedule of future minimum lease payments for operating leases (with initial terms in excess of one year) and related sublease income as of December 31, 2000:
Minimum Lease Sublease Payments Rental Income Domestic Foreign Total Year ending December 31: 2001.................................................. $ 2,723 $ 198 $ 2,921 ($ 595) 2002.................................................. 2,262 115 2,377 (678) 2003.................................................. 1,656 83 1,739 (699) 2004.................................................. 1,499 83 1,582 (720) 2005.................................................. 1,422 83 1,505 (682) Thereafter............................................ 3,644 83 3,727 (867) Total minimum lease payments (income)....................... $ 13,206 $ 645 $ 13,851 ($ 4,241)
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (10) Employee Benefit Plans The Company has noncontributory pension plans covering substantially all of its domestic employees. The benefits are based upon years of service and qualifying compensation. 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 following tables set forth pension obligations included in the Company's balance sheet at December 31, 2000 and 1999:
Pension Benefits 2000 1999 Change in benefit obligations: Beginning benefit obligation........................................................ $ 24,617 $ 24,782 Service cost........................................................................ 1,311 1,708 Interest cost....................................................................... 1,593 1,581 Effect of curtailment............................................................... (1,640) - Effect of special termination benefits.............................................. 400 - Actuarial (gain) loss............................................................... (3,130) (2,463) Benefits paid....................................................................... (1,936) (991) Ending benefit obligation........................................................... $ 21,215 $ 24,617 Change in plan assets: Beginning fair value................................................................ $ 21,773 $ 18,426 Actual return....................................................................... 3,819 3,216 Company contribution................................................................ 917 1,122 Benefits paid....................................................................... (1,936) (991) Ending fair value................................................................... $24,573 $21,773 Funded status of the plan........................................................... $ 3,358 ($ 2,844) Unrecognized actuarial and investment gains, net.................................... (6,838) (1,997) Prior service cost.................................................................. 457 625 Transition asset.................................................................... (635) (772) Accrued pension cost liability...................................................... ($ 3,658) ($ 4,988)
Pension cost was comprised of:
2000 1999 1998 Service cost - benefits earned during the year.............................. $ 1,311 $ 1,708 $ 1,510 Interest cost on accumulated benefit obligation............................. 1,593 1,581 1,481 Expected return on plan assets.............................................. (1,994) (1,647) (1,733) Net amortization and deferral............................................... (218) (101) (101) Net periodic pension cost................................................... 692 1,541 1,157 Curtailment gain............................................................ (1,104) - - Net periodic pension cost (income) after curtailment........................ $ (412) $ 1,541 $ 1,157
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (10) Employee Benefit Plans (continued) The curtailment in 2000 was related to the sale of the absorbent polymers segment. All of the domestic absorbent polymers' employees were given full vesting and paid their accrued pension benefit. The valuations of the Company's pension benefit plans were performed as of October 1, 2000 and 1999. The plan assets are invested in common stocks, corporate bonds and notes, and guaranteed income contracts purchased from insurance companies. The key actuarial assumptions used to measure benefit obligations in the Company's pension plans were as follows: the weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.50% in 2000 and 7.25% in 1999; the rate of increase in future compensation levels was 5.75% in both years; and the expected long-term rate of return on plan assets was 9.0% for both years. In addition to the qualified plans outlined above, the Company sponsors a supplementary pension plan that provides benefits in excess of qualified plan limitations for certain employees. The unfunded, accrued liability for this plan was $1,467 and $1,024 at December 31, 2000 and 1999, respectively. The Company also has a savings plan for its U.S. personnel. The Company makes annual contributions in an amount equal to an employee's contributions 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 $1,349 in 2000, $1,361 in 1999 and $1,280 in 1998. The Company also has a deferred compensation plan and a 401(k) restoration plan for its executives. The foreign pension plans, which are not subject to ERISA, are funded using individual annuity contracts and, therefore, are not included in the information noted above. (11) 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 the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans. Because the exercise price of each option granted equals the market price of the Company's common stock at the date of grant, no compensation cost has been recognized for the Company's stock option plans. Had compensation cost for the Company's stock option plans been determined using the fair value method of accounting described in FAS 123, the Company's net income would have been changed to the pro forma amounts indicated below:
2000 1999 1998 Net income:.................... As reported........ $326,237 $ 22,234 $ 22,085 Pro forma.......... $325,557 $ 21,188 $ 20,966 Basic earnings per share:...... As reported........ $ 11.85 $ 0.83 $ 0.79 Pro forma.......... $ 11.83 $ 0.79 $ 0.75 Diluted earnings per share:.... As reported........ $ 10.90 $ 0.82 $ 0.78 Pro forma.......... $ 10.87 $ 0.78 $ 0.74
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (11) Stock Option Plans (continued) 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 2000, 1999 and 1998:
2000 1999 1998 Risk-free interest rate................... 6.4% 4.9% 5.6% Expected life of option................... 7 yrs. 6 yrs. 6 yrs. Expected dividend yield of stock.......... 1.0% 2.6% 1.7% Expected volatility of stock.............. 50% 45% 40%
In connection with the sale of the Company's absorbent polymers business to BASF AG, and the payment of a partial liquidation distribution to the Company's shareholders (See Note 2, "Discontinued Operations"), the number of shares underlying outstanding options was increased and the option price per share was reduced in order to reflect the effects of the Company's equity restructuring on outstanding option awards. As a result, immediately following the equity restructuring, the aggregate intrinsic value of each option equaled the aggregate intrinsic value before the equity restructuring. Further, vesting provisions and the option period of each original grant remained the same. These adjustments to the number of shares and the option price per share were made effective June 30, 2000, and the tables which follow separately display option activity before and after the equity restructuring. The 1983, 1987 and 1993 Plans The Company has reserved shares of its common stock for issuance of incentive and nonqualified stock options to its directors, officers and key employees in its 1983 Incentive Stock Option Plan, 1993 Stock Plan and 1987 Nonqualified Stock Option Plan. Options awarded under these plans, which entitle the optionee to one share of common stock, may be exercised at a price equal to the fair market value of the underlying common stock at the time of grant. Options awarded under these plans 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 Compensation 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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (11) Stock Option Plans (Continued) Theseplans are expired as of December 31, 2000, though options that were granted prior to expiration of the plans continue to be valid until the individual option grants expire. Changes in options outstanding are summarized as follows:
Expired Stock Option Plans June 30, 2000 December 31, 1999 December 31, 1998 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Options outstanding at January 1........... 1,478,256 $ 9.91 1,722,305 $ 9.48 1,723,852 $ 8.16 Granted.................................... - - - - 285,065 13.13 Exercised.................................. (585,920) 8.68 (182,424) 5.19 (224,240) 3.54 Cancelled.................................. (33,251) 9.13 (61,625) 11.71 (62,372) 10.94 Options outstanding end of period.......... 859,085 10.78 1,478,256 9.91 1,722,305 9.48 Options exercisable at December 31......... 974,832 950,139 Shares available for future grant at December 31............................. - -
Expired Stock Option Plans December 31, 2000 Weighted Average Exercise Shares Price Options outstanding prior to equity restructuring.............................. 859,085 $ 10.78 Adjustment due to equity restructuring......................................... 4,100,584 Options outstanding upon equity restructuring.................................. 4,959,669 1.86 Granted........................................................................ - - Exercised...................................................................... (1,249,472) 1.63 Cancelled...................................................................... (29,480) 2.07 Options outstanding at December 31............................................. 3,680,717 1.94 Options exercisable at December 31............................................. 2,558,277 Shares available for future grant at December 31............................... -
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (11) Stock Option Plans (Continued) 1998 Long-Term Incentive Plan The Company reserved 1,900,000 shares of its common stock (after adjustment for the equity restructuring related to the sale of the absorbent polymers segment) for issuance to its officers, directors and key employees. This plan provides for the award 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 nonqualified 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 of the underlying common stock 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 Compensation 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.
1998 Long-Term Incentive Plan June 30, 2000 December 31, 1999 December 31, 1998 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Options outstanding at January 1........... 312,845 $ 9.64 20,000 $ 14.06 -- $ -- Granted.................................... -- -- 306,000 9.33 20,000 14.06 Exercised.................................. (49,825) 9.00 -- -- -- -- Cancelled.................................. (27,277) 9.64 (13,155) 9.00 -- -- Options outstanding at end of period....... 235,743 9.78 312,845 9.64 20,000 14.06 Options exercisable at end of period....... 5,600 -- Shares available for future grant at December 31............................. 1,587,155 1,880,000
1998 Long-Term Incentive Plan December 31, 2000 Weighted Average Exercise Shares Price Options outstanding prior to equity restructuring.............................. 235,743 9.78 Adjustment due to equity restructuring......................................... 1,117,187 Options outstanding upon equity restructuring.................................. 1,352,930 $ 1.70 Granted........................................................................ 288,500 3.88 Exercised...................................................................... (44,019) 1.57 Cancelled...................................................................... (22,964) 1.72 Options outstanding at December 31............................................. 1,574,447 2.10 Options exercisable at December 31............................................. 48,214 Shares available for future grant at December 31............................... 231,709
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (11) Stock Option Plans (Continued) All Stock Option Plans The following table summarizes information about stock options outstanding and exercisable at December 31, 2000:
Options Outstanding Options Exercisable Weighted Average Weighted Weighted Number Remaining Average Number Average of Contractual Exercise Of Exercise Range of exercise prices Shares Life (Yrs.) Price Shares Price $ 0.339 - $ 1.568 1,861,712 6.12 $ 1.483 758,923 $ 1.362 1.786 - 2.062 1,739,858 5.15 1.975 1,247,556 1.966 2.091 - 2.450 1,366,594 6.57 2.304 600,012 2.316 3.875 - 3.875 287,000 9.54 3.875 - -- Total 5,255,164 6.10 1.990 2,606,491 1.871
(12) Accrued Liabilities Accrued liabilities at December 31 consisted of:
2000 1999 Accrued severance taxes................................................................. $ 1,656 $ 1,385 Estimated accrued legal settlement...................................................... 6,500 -- Accrued employee benefits............................................................... 3,675 4,987 Accrued vacation pay.................................................................... 1,446 1,837 Accrued bonus........................................................................... 2,403 2,420 Accrued commissions..................................................................... 1,712 -- Other................................................................................... 11,957 10,765 $ 29,349 $ 21,394
(13) Contingencies 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. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except share and per share amounts) (14) Quarterly Results (Unaudited) Unaudited summarized results for each quarter in 2000 and 1999 are as follows:
2000 Quarter First Second Third Fourth Minerals.................................................... $ 47,166 $ 44,668 $ 42,639 $ 47,060 Environmental............................................... 19,945 26,827 30,022 23,081 Transportation.............................................. 7,935 8,597 8,832 8,672 Intersegment shipping...................................... (2,269) (3,067) (3,293) (2,749) Net sales............................................. $ 72,777 $ 77,025 $ 78,200 $ 76,063 Minerals.................................................... $ 9,368 $ 8,509 $ 7,631 $ 9,423 Environmental............................................... 6,700 8,300 9,609 6,795 Transportation.............................................. 838 928 939 887 Gross profit.......................................... $ 16,906 $ 17,737 $ 18,179 $ 17,105 Minerals.................................................... $ 5,524 $ 4,122 $ 2,102 $ (5,109) Environmental............................................... 2,046 3,320 4,972 1,423 Transportation.............................................. 323 406 396 352 Corporate................................................... (3,984) (3,682) (5,001) (3,730) Operating profit (loss)............................... $ 3,909 $ 4,166 $ 2,469 ($ 7,064) Income (loss) from continuing operations.................... $ 2,285 $ 4,128 $ 2,931 ($ 6,041) Discontinued operations and extraordinary loss.............. $ 3,452 $ 317,742 $ 193 $ 1,547 Net income (loss)........................................... $ 5,737 $ 321,870 $ 3,124 ($ 4,494) Basic earnings (loss) per share............................. $ 0.21 $ 11.88 $ 0.11 ($ 0.16) Diluted earnings (loss) per share........................... $ 0.21 $ 11.67 $ 0.10 ($ 0.14)
1999 Quarter First Second Third Fourth Minerals.................................................... $ 43,674 $ 43,246 $ 45,463 $ 44,608 Environmental............................................... 24,607 33,729 33,585 25,110 Transportation............................................. 7,844 8,485 9,761 8,542 Intersegment shipping...................................... (2,225) (3,347) (3,389) (2,709) Net sales............................................. $ 73,900 $ 82,113 $ 85,420 $ 75,550 Minerals.................................................... $ 8,656 $ 8,055 $ 8,939 $ 9,023 Environmental............................................... 7,104 8,035 8,348 6,973 Transportation.............................................. 878 949 1,055 879 Gross profit.......................................... $ 16,638 $ 17,039 $ 18,342 $ 16,875 Minerals.................................................... $ 4,012 $ 3,674 $ 4,742 $ 1,859 Environmental............................................... 722 1,393 2,080 (11,861) Transportation.............................................. 348 427 500 356 Corporate................................................... (3,867) (3,547) (3,442) (4,556) Operating profit (loss)............................... $ 1,215 $ 1,947 $ 3,880 ($ 14,202) Income (loss) from continuing operations.................... $ 258 $ 688 $ 1,679 ($ 10,940) Discontinued operations..................................... $ 5,481 $ 7,061 $ 7,696 $ 10,311 Net income (loss)........................................... $ 5,739 $ 7,749 $ 9,375 ($ 629) Basic earnings (loss) per share............................. $ 0.21 $ 0.29 $ 0.35 ($ 0.02) Diluted earnings (loss) per share........................... $ 0.21 $ 0.29 $ 0.34 ($ 0.02)
The sum of earnings per share for the 2000 quarters does not equal the full year amount due to rounding and the impact of changes in the average shares outstanding. AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (Dollars in thousands, except per share amounts) (15) Business Realignment and Other Charges As a result of the poor operating performance of some of the Company's subsidiaries, recoverability of their long-lived assets was assessed. That assessment indicated certain intangibles and fixed assets would not be recovered through future undiscounted cash flows expected to be generated by their operations. As a result, asset impairment charges were recorded in both 2000 and 1999. Details of the components of the charges are contained in the table below. The assets were written down to fair value as estimated by discounting expected future cash flows using an incremental borrowing rate. In 1998, the following claims were filed in Chester, England against certain of the Company's subsidiaries: Adams, et al. v. AMCOL (Holdings) Limited and Volclay Limited, (AKA Marie Geraldine O'Laughlin, et al.), High Court of Justice, QB Division, Chester District 1998 A. No. 206; and Anziani, et al. v. AMCOL (Holdings) Limited and Volclay Limited, High Court of Justice, QB Division, Chester District 1998 A. No. 365. The claims are for property damage, nuisance and personal injury based on the alleged accidental release of dust from Volclay Limited's facility in Wallasey, England. The claims are being made on behalf of up to 1,600 persons who, at some point during the period from 1965 to the present, resided in the vicinity of the Wallasey, England facility. During the second half of 2000, the Company was informed that its insurance carrier had denied coverage related to this matter and cancelled the applicable insurance policy. The Company intends to vigorously pursue reinstatement of the insurance policy, however, as a matter of prudent accounting practice, the Company accrued the estimated settlement and related legal fees of $6,500 during the fourth quarter of 2000. During 2000, the Company engaged Lehman Brothers to help management evaluate various strategic options to enhance shareholder value. The Company engaged in significant discussions regarding the disposition of its businesses, including the sale of certain parts and the potential spin-off of the Nanocor, Inc. subsidiary. In the process, the Company incurred approximately $2,400 in professional fees. These expenses have been included as a component of business realignment and other charges. The business realignment and other charges included the following:
2000 1999 Write-down of assets and exit costs associated with the U.K. cat litter operation: Impairment of fixed assets........................................................... $ 2,438 $ -- Inventory obsolescence provisions.................................................... 2,010 -- Severance pay and contract termination costs......................................... 552 -- 5,000 -- Provision for U.K. litigation........................................................... 6,500 -- Expenses associated with business realignment activities............................................................... 2,357 -- Write-down of goodwill and asset impairments: Minerals segment..................................................................... -- 2,954 Environmental segment................................................................ -- 9,470 Write-down of assets associated with the Norwegian environmental business............... -- 2,105 Amount charged to operating profit...................................................... 13,857 14,529 Income tax benefit associated with the above............................................ 907 4,503 Impact on income from continuing operations............................................. $ 12,950 $ 10,026 Diluted earnings per share impact....................................................... $ 0.43 $ 0.37
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts (Dollars in thousands)
Additions Charged Balance Balance at Charged to (credited) at end beginning costs and to other Other charges of Year Description of year expenses accounts (2) add (deduct) (1) year 2000 Allowance for doubtful accounts $ 2,539 $ 957 ($ 353) ($ 820) $2,323 1999 Allowance for doubtful accounts $ 1,606 $ 2,581 $ - ($1,648) $2,539 1998 Allowance for doubtful accounts $ 1,087 $ 1,373 $ - ($ 854) $1,606 (1) Bad debts written off. (2) Disposition of business units.
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, 2001 AMCOL INTERNATIONAL CORPORATION By: /s/ Lawrence E. Washow Lawrence E. Washow President and 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, 2001 John Hughes Chairman of the Board and Director /s/ Lawrence E. Washow March 20, 2001 Lawrence E. Washow President and Chief Executive Officer and Director /s/ Paul G. Shelton March 20, 2001 Paul G. Shelton Senior Vice President and Chief Financial Officer; Treasurer and Chief Accounting Officer /s/ C. Eugene Ray March 20, 2001 C. Eugene Ray Director /s/ Jay D. Proops March 20, 2001 Jay D. Proops Director /s/ Robert E. Driscoll, III March 20, 2001 Robert E. Driscoll, III Director /s/ Clarence O. Redman March 20, 2001 Clarence O. Redman Director /s/ Arthur Brown March 20, 2001 Arthur Brown Director /s/ Dale E. Stahl March 20, 2001 Dale E. Stahl Director /s/ Audrey L. Weaver March 20, 2001 Audrey L. Weaver Director /s/ Paul C. Weaver March 20, 2001 Paul C. Weaver Director INDEX TO EXHIBITS Exhibit Number 3.1 Restated Certificate of Incorporation of the Company (5), as amended (10), as amended (16) 3.2 Bylaws of the Company (10) 4 Article Four of the Company's Restated Certificate of Incorporation (5), as amended (16) 10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3)* 10.3 Lease Agreement for office space dated September 29, 1986, between the Company and American National Bank and Trust Company of Chicago; (1) First Amendment dated June 2, 1994 (8); Second Amendment dated June 2, 1997 (13) 10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6)* 10.7 Change in Control Agreement dated September 20, 2000, by and between Registrant and Lawrence E. Washow (21)* 10.8 Change in Control Agreement dated September 22, 2000, by and between Registrant and Peter L. Maul (21)* 10.9 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6)* 10.10AMCOL International Corporation 1993 Stock Plan, as amended and restated (10)* 10.11Credit Agreement by and among AMCOL International Corporation and Harris Trust and Savings Bank, individually and as agent, NBD Bank, LaSalle National Bank and the Northern Trust Company dated October 4, 1994, (7); as amended, First Amendment to Credit Agreement dated September 25, 1995 (9), as amended, Second Amendment to Credit Agreement dated March 28, 1996, Third Amendment to Credit Agreement dated September 12, 1996 (11), Fourth Amendment to Credit Agreement dated December 15, 1998 (18) and Fifth Amendment to Credit Agreement dated May 26, 2000 (20) 10.15 AMCOL International Corporation 1998 Long-Term Incentive Plan (15)* 10.16Change in Control Agreement dated September 21, 2000, by and between Registrant and Ryan F. McKendrick (21)* 10.17Asset and Stock Purchase Agreement dated November 22, 1999 by and between the Registrant and BASF Aktiengesellschaft (19) 10.18Change in Control Agreement dated September 28, 2000, by and between Registrant and Frank B. Wright, Jr. (21)* 10.19Change in Control Agreement dated September 20, 2000, by and between Registrant and Paul G. Shelton (21)* 10.20Change in Control Agreement dated September 22, 2000, by and between Registrant and Gary D. Morrison (21)* 10.21Special Retention Agreement dated September 18, 2000, by and between Registrant and Frank B. Wright, Jr. ** (21)* 10.22Special Retention Agreement dated September 18, 2000, by and between Registrant and Ryan F. McKendrick ** (21)* 10.23Special Retention Agreement dated September 18, 2000, by and between Registrant and Gary D. Morrison ** (21)* 10.24Special Retention Agreement dated September 18, 2000, by and between Registrant and Peter L. Maul ** (21)* 21 Subsidiary List 23 Consent of KPMG LLP 27 Financial Data Schedule * 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. ** Portions of these exhibits have been omitted pursuant to a request for confidential treatment. (1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with the Securities and Exchange Commission on July 27, 1987. (2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1988. (3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1992. (5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed with the Securities and Exchange Commission on September 15, 1993. (6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1994. (8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1994. (9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1995. (10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1995. (11) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. (13) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1997. (15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-56017) filed with the Securities and Exchange Commission on June 4, 1998. (16) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1998. (18) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1999. (19) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. (20) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 2000. (21) 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, 2000. * 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. Exhibit 21 AMCOL INTERNATIONAL CORPORATION SUBSIDIARY LISTING
Company Name Country State Ownership % ACP Export, Inc. U.S. Virgin Islands 100 AMCOL (Holdings) Ltd. England 100 AMCOL Holdings Canada Ltd. Canada Ontario 100 AMCOL International Corporation USA DE Parent American Colloid Company USA DE 100 Ameri-Co Carriers, Inc. USA NE 100 Ashapura Minechem Ltd. India 20 Ashapura Volclay Private Limited India 50 CETCO (Europe) Limited England 100 CETCO Australia Pty. Ltd. Australia 100 CETCO Environmental Technologies Pte Ltd Singapore 100 CETCO Holdings B.V. Netherlands 100 CETCO Korea Ltd. Korea 100 CETCO-POLAND Sp. z o. o Poland 100 Colloid Environmental Technologies Company USA DE 100 Egypt Bentonite & Derivatives Company Egypt 25 Egypt Mining & Drilling Chemicals Company Egypt 25 Montana Minerals Development Company USA MT 100 Nanocor, Inc. USA DE 100 Nanocor, Ltd. England 100 Nationwide Freight Service, Inc. USA NE 100 Nissho Iwai Bentonite Co., Ltd. Japan 19 Redhill Volclay Co. Ltd. China 49 Top Dog Distribution Ltd. England 74 Volclay de Mexico, S.A. de C.V. Mexico 49 Volclay Holdings B.V. Netherlands 100 Volclay International Corporation USA DE 100 Volclay Korea Ltd. Korea 100 Volclay Limited England 100 Volclay Pty. Ltd. Australia 100 Volclay Siam Ltd. Thailand 100
Exhibit 23 The Board of Directors AMCOL International Corporation: We consent to incorporation by reference in the registration statements (Nos. 33-34109, 33-55540, 33-73350 and 333-56017) on Form S-8 of AMCOL International Corporation of our report dated March 5, 2001, relating to the consolidated balance sheets of AMCOL International Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000, and the related schedule which report appears in the December 31, 2000 annual report on Form 10-K of AMCOL International Corporation. Chicago, Illinois March 23, 2001 EX-27 2 0002.txt FDS --
5 0000813621 AMCOL INTERNATIONAL CORPORATION 1,000 USD 12-MOS DEC-31-2000 JAN-01-2000 DEC-31-2000 1.00 10,057 168,549 49,710 2,323 33,385 269,787 198,521 118,369 374,128 177,939 0 0 0 320 0 374,128 304,065 304,065 234,138 300,585 310 0 3,241 10,365 7,532 2,833 323,377 443 0 326,237 11.85 10.90
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