-----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, OVq/tZHQHzEbwKz15bj++WKpkQhNd+cqPZdNkR17gsDSvY2iLAZ5Rr+6WjfFZ1Bv kP/9eWdYng4AZZVh/l2vdw== 0000813621-97-000004.txt : 19970725 0000813621-97-000004.hdr.sgml : 19970725 ACCESSION NUMBER: 0000813621-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970721 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMCOL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000813621 STANDARD INDUSTRIAL CLASSIFICATION: 1400 IRS NUMBER: 360724340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15661 FILM NUMBER: 97642966 BUSINESS ADDRESS: STREET 1: 1500 W SHURE DR SUITE 500 STREET 2: 1500 W SHURE DR CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 BUSINESS PHONE: 7083924600 MAIL ADDRESS: STREET 1: ONE N ARLINGTON STREET 2: 1500 W SHURE DR SUITE 500 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60004-7803 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN COLLOID CO DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-15661 AMCOL INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-0724340 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803 (Address of principal executive offices) (Zip Code) (847) 394-8730 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 18, 1997 (Common stock, $.01 par value) 18,958,268 AMCOL INTERNATIONAL CORPORATION INDEX Part I - Financial Information Item 1 Financial Statements Page No. Condensed Consolidated Balance Sheet - June 30, 1997 and December 31, 1996 1 Condensed Consolidated Statement of Operations - six months and three months ended June 30, 1997 and 1996 2 Condensed Consolidated Statement of Cash Flows - six months ended June 30, 1997 and 1996 3 Notes to Condensed Consolidated Financial Statements 4 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II - Other Information Item 4 Submission of Matters to a Vote of Security Holders 12 Item 6 Exhibits and Reports on Form 8-K 12
Part I, Item I - FINANCIAL INFORMATION AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands) ASSETS
June 30, December 31, 1997 1996 --------------------- ------------------- Current assets: * Cash and cash equivalents $ 4,177 $ 3,054 Accounts receivable, net 78,370 81,519 Inventories 58,454 56,314 Prepaid expenses 5,380 4,502 Current deferred tax asset 3,145 3,086 Total current assets 149,526 148,475 Property, plant, equipment and mineral reserves 308,167 299,366 Less accumulated depreciation 129,919 118,490 178,248 180,876 Intangible assets, net 14,604 15,217 Other long-term assets, net 5,765 6,140 $ 348,143 $ 350,708 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of debt $ 16,884 $ 8,969 Accounts payable 19,900 24,389 Accrued liabilities 23,762 18,512 Total current liabilities 60,546 51,870 Long-term debt 106,314 118,855 Deferred credits and other liabilities 12,573 12,579 Stockholders' equity: Common stock 213 213 Additional paid-in capital 75,728 75,576 Foreign currency translation adjustment 919 2,868 Retained earnings 101,186 96,579 Treasury stock (9,336) (7,832) 168,710 167,404 $ 348,143 $ 350,708
*Condensed from audited financial statements. The accompanying notes are an integral part of these condensed financial statements. -1- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (In thousands, except number of shares and per share data)
Six Months Ended Three Months Ended June 30, June 30, ---------------------------------- ----------------------------------- 1997 1996 1997 1996 --------------- --------------- --------------- --------------- Net sales $ 221,408 $ 182,297 $ 113,490 $ 96,761 Cost of sales 175,894 146,383 89,787 76,847 Gross profit 45,514 35,914 23,703 19,914 General, selling and administrative expenses 28,744 25,482 14,237 13,059 Operating profit 16,770 10,432 9,466 6,855 Other income (expense): Interest expense, net (4,360) (4,114) (2,198) (2,059) Other income, net (580) 131 (475) (124) (4,940) (3,983) (2,673) (2,183) Income from operations 11,830 6,449 6,793 4,672 Income taxes 4,375 2,322 2,511 1,682 Income before minority interest 7,455 4,127 4,282 2,990 Net income of minority interest - (13) - (7) Net income $ 7,455 $ 4,114 4,282 2,983 Weighted average common and common equivalent shares 19,432,195 19,540,809 19,407,928 19,475,371 Earnings per share $ .38 $ .21 $ .22 $ .15 Dividends declared per share $ .15 $ .14 $ .08 $ .07
The accompanying notes are an integral part of these condensed financial statements. -2- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands)
Six Months Ended June 30, ---------------------------------------------- 1997 1996 -------------------- -------------------- Cash flow from operating activities: Net income $ 7,455 $ 4,114 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 15,347 13,048 Other (406) (436) (Increase)/decrease in current assets 707 (10,723) Increase/(decrease) in current liabilities 761 5,963 Net cash provided by operations 23,864 11,966 Cash flow from investing activities: Acquisition of land, mineral reserves, depreciable and intangible assets (13,509) (21,339) Sale of product line and mineral reserves - 6,155 Other (406) 1,234 Net cash used in investing activities (13,915) (13,950) Cash flow from financing activities: Net change in outstanding debt (4,626) 5,015 Dividends paid (2,848) (2,675) Other (1,352) (929) Net cash provided (used) by financing activities (8,826) 1,411 Net increase (decrease) in cash and cash equivalents 1,123 (573) Cash and cash equivalents at beginning of period 3,054 1,888 Cash and cash equivalents at end of period $ 4,177 $ 1,315 Supplemental Disclosure of Cash Flows Information Actual cash paid for: Interest $ 4,327 $ 2,386 Income taxes $ 3,272 $ 816
The accompanying notes are an integral part of these condensed financial statements. -3- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands) Note 1: BASIS OF PRESENTATION The financial information included herein, other than the condensed consolidated balance sheet as of December 31, 1996, has been prepared by management without audit by independent certified public accountants who do not express an opinion thereon. The condensed consolidated balance sheet as of December 31, 1996, has been derived from and does not include all the disclosures contained in the audited consolidated financial statements for the year ended December 31, 1996. The information furnished herein includes all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position and operating results of the interim periods, and all such adjustments are of a normal recurring nature. Management recommends the accompanying consolidated financial information be read in conjunction with the consolidated financial statements and related notes included in the Company's 1996 Form 10-K which accompanies the 1996 Corporate Report. The results of operations for the six-month period ended June 30, 1997, are not necessarily indicative of the results to be expected for the full year. Note 2: INVENTORIES Inventories at June 30, 1997 have been valued using the same methods as at December 31, 1996. The composition of inventories at June 30, 1997 and December 31, 1996, was as follows:
June 30, 1997 December 31, 1996 ----------------------- ----------------------- Crude stockpile and in-process inventories $ 41,692 $ 36,493 Other raw material, container and supplies inventories 16,762 19,821 $ 58,454 $ 56,314
Note 3: EARNINGS PER SHARE Earnings per share are computed by dividing net income by the weighted average number of common shares outstanding and the dilutive effect of stock options outstanding at the end of each period. Note 4: DERIVATIVES From time to time, the Company uses financial derivatives, principally swaps, forward contracts and options in its management of foreign currency and interest rate exposures. These contracts hedge transactions and balances for periods consisted with its committed exposures. As of June 30, 1997 the only derivatives outstanding were related to foreign currency. -4- Item II - AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of the Company's financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. Six Months Ended June 30, 1997 vs. 1996 Net sales increased by $39.1 million, or 21.5%, while gross profit increased by $9.6 million, or 26.7%, and operating profit increased by $6.3 million, or 60.8%. Higher utilization of polymer plant capacity and better results from the minerals segment accounted for most of the improvement in sales and profits Net interest expense increased by $.2 million, or 6.0%, as a result of higher average debt levels. Other expense for 1997 included $.4 million related to currency exchange losses. Earnings were $.38 per share for the 1997 period, compared with $.21 per share for the prior year period on slightly fewer weighted average shares outstanding. A brief discussion by business segment follows:
Six Months Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Minerals (Dollars in Thousands) $ Change % Change Net sales $ 77,821 100.0% $ 69,904 100.0% $ 7,917 11.3% Cost of sales 65,316 83.9% 59,419 85.0% Gross profit 12,505 16.1% 10,485 15.0% 2,020 19.3% General, selling and administrative expenses 7,796 10.0% 7,748 11.1% 48 .6% Operating profit 4,709 6.1% 2,737 3.9% 1,972 72.0%
Sales increased by $7.9 million, or 11.3%, from the prior-year period. Higher sales of cat litter and metalcasting products offset declines in sales of refining chemicals (a business that was sold in the second quarter of 1996) and shipments to the iron ore pelletizing market. Reduced sales to the iron ore pelletizing market are anticipated to continue, although the remaining shipments will reflect higher unit selling prices. Gross profit margins improved by 110 basis points. Product mix and better cat litter plant utilization accounted for the change. General, selling and administrative expenses for 1997 included approximately $.4 million associated with international ventures, which provide access to cost-effective, local clay sources as alternatives to products shipped from the United States. Management anticipates that such expenditures will continue at this pace for the balance of 1997. -5- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Six Months Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Absorbent Polymers (Dollars in Thousands) $ Change % Change Net sales $ 90,202 100.0% $ 66,148 100.0% $ 24,054 36.4% Cost of sales 71,779 79.6% 53,714 81.2% Gross profit 18,423 20.4% 12,434 18.8% 5,989 48.2% General, selling and administrative expenses 5,620 6.2% 4,896 7.4% 724 14.8% Operating profit 12,803 14.2% 7,538 11.4% 5,265 69.8%
Revenues increased by $24.1 million, or 36.4%, over the prior year as sales volume increased 50.2%. Gross profit margins improved by 160 basis points from the prior year, reflecting higher plant capacity utilization. The current worldwide superabsorbent polymer capacity for the Company is estimated at 130,000 metric tons, following debottlenecking of the U.S. and U.K. plants.
Six Months Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Environmental (Dollars in Thousands) $ Change % Change Net sales $ 39,343 100.0% $ 35,330 100.0% $ 4,013 11.4% Cost of sales 26,538 67.5% 23,782 67.3% Gross profit 12,805 32.5% 11,548 32.7% 1,257 10.9% General, selling and administrative expenses 8,874 22.6% 7,480 21.2% 1,394 18.6% Operating profit 3,931 9.9% 4,068 11.5% (137) (3.4%)
Sales increased by $4.0 million, or 11.4%. Gross profit margins declined by 20 basis points. General, selling and administrative expenses increased by $1.4 million, or 18.6%, reflecting higher international marketing costs and higher costs associated with the European environmental unit. -6- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Six Months Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Transportation (Dollars in Thousands) $ Change % Change Net sales $ 14,042 100.0% $10,915 100.0% $ 3,127 28.6% Cost of sales 12,261 87.3% 9,468 86.7% Gross profit 1,781 12.7% 1,447 13.3% 334 23.1% General, selling and administrative expenses 1,015 7.2% 913 8.4% 102 11.2% Operating profit 766 5.5% 534 4.9% 232 43.4%
Revenues increased $3.1 million, or 28.6%, as a result of stronger shipments of cat litter and environmental products. This unit also benefited from increased truck shipments due to weather-related difficulties experienced by the railroads in the first quarter of 1997. Gross profit margins declined by 60 basis points as a result of lower aggregate brokerage margins.
Six Months Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Corporate (Dollars in Thousands) $ Change % Change General, selling and administrative expenses $ 5,439 $ 4,445 $ 994 22.4% Operating loss (5,439) (4,445) (994) 22.4%
Corporate costs include management information systems, human resources, investor relations and corporate communications, corporate finance, and corporate governance costs. The $1.0 million increase in costs is primarily attributable to the development and launch of the Company's nanocomposite technology. -7- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three Months Ended June 30, 1997 vs. 1996 Net sales increased by $16.7 million, or 17.3%, while gross profit increased by $3.8 million, or 19.0%, and operating profit increased by $2.6 million, or 38.1%. Net interest expense increased by $.1 million, or 6.8%. Other expense in 1997 included $.3 million in exchange losses. Earnings were $.22 per share for 1997 quarter compared with $.15 per share for the prior-year quarter on slightly fewer weighted average shares outstanding. A brief discussion by business segment follows:
Quarter Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Minerals (Dollars in Thousands) $ Change % Change Net sales $ 38,563 100.0% $ 35,347 100.0% $ 3,216 9.1% Cost of sales 32,163 83.4% 29,566 83.6% Gross profit 6,400 16.6% 5,781 16.4% 619 10.7% General, selling and administrative expenses 3,921 10.2% 3,950 11.2% (29) (.7%) Operating profit 2,479 6.4% 1,831 5.2% 648 35.4%
Sales increased by $3.2 million, or 9.1%, over the prior year period, primarily as a result of higher shipments of cat litter and metalcasting products. Gross profit margins improved by 20 basis points. General, selling and administrative expenses in 1996 included approximately $.4 million of severance costs related to management changes, whereas the 1997 quarter included approximately $.2 million associated with the international ventures. -8- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Quarter Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Absorbent Polymers (Dollars in Thousands) $ Change % Change Net sales $ 45,041 100.0% $34,102 100.0% $ 10,939 32.1% Cost of sales 36,211 80.4% 27,994 82.1% Gross profit 8,830 19.6% 6,108 17.9% 2,722 44.6% General, selling and administrative expenses 2,605 5.8% 2,417 7.1% 188 7.8% Operating profit 6,225 13.8% 3,691 10.8% 2,534 68.7%
Revenues increased by $10.9 million, or 32.1%, over the prior year as sales volume increased 43.9%. Volume growth on a sequential quarter basis was adversely impacted by slower than expected demand from one of the unit's major customers. Continued volume growth is anticipated, though the pace of growth is likely to slow from that of the previous year. Gross profit margins improved by 170 basis points, primarily as a result of improved capacity utilization.
Quarter Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Environmental (Dollars in Thousands) $ Change % Change Net sales $ 22,778 100.0% $21,563 100.0% $ 1,215 5.6% Cost of sales 15,211 66.8% 14,283 66.2% Gross profit 7,567 33.2% 7,280 33.8% 287 3.9% General, selling and administrative expenses 4,565 20.0% 3,922 18.2% 643 16.4% Operating profit 3,002 13.2% 3,358 15.6% (356) (10.6%)
Sales increased by $1.2 million, or 5.6%. Weather related delays in the United States caused the pace of growth to slow from the first quarter of 1997, primarily in the geosynthetic clay liner market. Export sales and sales of U.K. manufactured products were hampered by the strong U.S. dollar and British pound. Gross profit margins declined by 60 basis points as a result of the lower margins on liners and lower international sales The backlog for liner sales is strong, and sales are expected to rebound, however international sales will continue to be impacted as long as the dollar and pound remain strong in relation to other currencies. General, selling and administrative expenses increased by $.6 million, reflecting the addition of personnel, higher international marketing costs and increased infrastructure costs related to the European unit associated with building a stronger international presence. -9- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Quarter Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Transportation (Dollars in Thousands) $ Change % Change Net sales $ 7,108 100.0% $ 5,749 100.0% $ 1,359 23.6% Cost of sales 6,202 87.3% 5,004 87.0% Gross profit 906 12.7% 745 13.0% 161 21.6% General, selling and administrative expenses 511 7.2% 480 8.3% 31 6.5% Operating profit 395 5.5% 265 4.7% 130 49.1%
Revenues increased 23.6%, primarily as a result of increased cat litter shipments and more business with customers unrelated to the Company's other business segments.
Quarter Ended June 30, ------------------------------------------------------------------------------------- 1997 1996 1997 vs. 1996 ------------------------- ---------------------- --------------------------- Corporate (Dollars in Thousands) $ Change % Change General, selling and administrative expenses $ 2,635 $ 2,290 $ 345 15.1% Operating loss (2,635) (2,290) (345) 15.1%
Increased costs associated with the development and launch of the nanocomposite business accounted for the increase in corporate expenses. -10- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources At June 30, 1997, the Company had outstanding debt of $123.2 million (including both long-and short-term debt) and cash of $4.2 million compared with $127.8 million in debt and $3.1 million in cash at December 31, 1996. The long-term debt represented 38.7% of total capitalization at June 30, 1997 compared with 41.5% at December 31, 1996. The Company had a current ratio of 2.47-to-1 at June 30, 1997, with approximately $89.0 million in working capital compared with 2.86-to-1 and $96.6 million, respectively, at December 31, 1996. The lower current ratio reflected the reclassification of $9.5 million of debt which matures during the next twelve months. During 1997, the Company paid dividends of $2.8 million and acquired property, plant and equipment totaling $13.5 million. These expenditures, plus a $4.6 million reduction in debt, were funded from operations. Capital expenditures for 1997 are currently anticipated to be in the $30 to $35 million range. The Company had $38.8 million in unused, committed credit lines at June 30, 1997. These credit facilities, in conjunction with funds generated from operations, are adequate to fund the capital expenditure program approved by the Board of Directors at this time. Forward Looking Statements This filing contains certain forward-looking statements regarding the Company's expected performance for future periods and actual results for such periods may materially differ. Such forward-looking statements are subject to uncertainties, which include, but are not limited to, actual growth in AMCOL's various markets, utilization of the Company's plants, customer concentration in the absorbent polymers segment, operating costs, raw material prices, weather, currency exchange rates, and delays in development, production and marketing of new products, and other factors detailed from time to time in the Company's annual report and other reports filed with the Securities and Exchange Commission. -11- PART II - OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders (a) The Annual Stockholders Meeting of the Company was held on May 15, 1997. (b) At the Annual Stockholders Meeting, the Stockholders voted on the following uncontested matters. Each nominee for director was elected by a vote of the Stockholders; and each matter was approved by a vote of the Stockholders as follows: 1. Election of the below-named Nominees of the Board of Directors of AMCOL International Corporation:
For Against ------------------------- ----------------------- Robert E. Driscoll III 15,167,621.658 139,085.500 James A. McClung 15,166,766.137 139,941.021 C. Eugene Ray 15,167,618.598 139,088.560 Dale E. Stahl 15,165,957.720 140,749.438
2. Ratification of Appointment of KPMG Peat Marwick LLP as independent accountants for the Company for its 1997 fiscal year.
For Against Abstain ----------------------- ----------------------- ----------------------- 15,249,490.595 9,529.518 47,687.045
Item 6: Exhibits and Reports on Form 8-K (a) See Index to Exhibits immediately following the signature page. (b) No reports on Form 8-K have been filed during the quarter ended June 30, 1997. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMCOL INTERNATIONAL CORPORATION Date: 7/21/97 /s/ John Hughes John Hughes President and Chief Executive Officer Date: 7/21/97 /s/ Paul G. Shelton Paul G. Shelton Senior Vice President and Chief Financial Officer -13- INDEX TO EXHIBITS Exhibit Number 3.1 Restated Certificate of Incorporation of the Company (5), as amended (10) 3.2 Bylaws of the Company (10) 4 Article Fourth of the Company's Restated Certificate of Incorporation (5) 10.1 AMCOL International Corporation 1983 Incentive Stock Option Plan (1); as amended (3) 10.2 Executive Medical Reimbursement Plan (1) 10.3 Lease Agreement for office space dated September 29, 1986, between the Company and American National Bank and Trust Company of Chicago; (1) First Amendment dated June 2, 1994 (8); Second Amendment dated June 2, 1997 10.4 AMCOL International Corporation 1987 Non-Qualified Stock Option Plan (2); as amended (6) 10.5 Change in Control Agreement dated April 1, 1997, by and between Registrant and John Hughes (12) 10.6 Change in Control Agreement dated April 1, 1997, by and between Registrant and Paul G. Shelton (12) 10.7 Change in Control Agreement dated February 7, 1996, by and between Registrant and Lawrence E. Washow (10) 10.8 Change in Control Agreement dated February 7, 1996, by and between Registrant and Roger P. Palmer (10) 10.9 Change in Control Agreement dated April 1, 1997 by and between Registrant and Peter L. Maul (12) 10.10 AMCOL International Corporation Dividend Reinvestment and Stock Purchase Plan (4); as amended (6) 10.11 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10) 10.12 Credit Agreement by and among AMCOL International Corporation and Harris Trust and Savings Bank, individually and as agent, NBD Bank, LaSalle National Bank and the Northern Trust Company dated October 4, 1994, (7); as amended, First Amendment to Credit Agreement dated September 25, 1995 (9), as amended, Second Amendment to Credit Agreement dated March 28, 1996, and Third Amendment to Credit Agreement dated September 12, 1996 (11) 10.13 Note Agreement dated October 1, 1994, between AMCOL International Corporation and Principal Mutual Life Insurance Company, (7); as amended, First Amendment of Note Agreement dated September 30, 1996 (11) 10.14 Change in Control Agreement dated August 21, 1996 by and between Registrant and Frank B. Wright, Jr. (11) 27 Financial Data Schedule (1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with the Securities and Exchange Commission on July 27, 1987. (2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1988. (3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1992. (5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed with the Securities and Exchange Commission for the year ended 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. -14- (8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1994. (9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1995. (10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1995. (11) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. (12) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended March 31, 1997. -15- EX-10.3 2 LEASE AGREEMENT SECOND AMENDMENT TO LEASE THIS SECOND AMENDMENT TO LEASE (this "Amendment") is made as of the 2nd day of June, 1997, by and between ESKO PROPERTIES, INC., as agent for the owners of the Building (as hereinafter defined), having an office at 305 Royal Poinciana Plaza, Palm Beach, Florida 33480 ("Landlord"), and AMCOL INTERNATIONAL CORP., a Delaware corporation, having an office at One North Arlington, 1500 Shure Drive, Arlington Heights, Illinois 60004 ("Tenant"), with reference to the following recitals: A. American National Bank and Trust Company of Chicago as Trustee under Trust Agreement dated July 1, 1984 and known as Trust No. 62164 ("ANB") and Tenant entered into that certain Lease dated September 29, 1986, as modified by First Addendum to Lease dated June 2, 1994 (the "First Amendment"), and as supplemented by Cross Easement Agreement and Grant of License dated October 24, 1994 (as so modified and supplemented, the "Lease"), respecting certain premises on the fifth floor (the "Premises") at the building known as One North Arlington, located at 1500 Shure Drive in Arlington Heights, Illinois (the "Building"). Landlord is presently the owner of the Building and successor-in-interest to ANB. B. The parties hereto wish to provide for certain modifications to the Lease, upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and other good and adequate consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do agree as follows: 1. CAPITALIZED TERMS. All capitalized terms used but not defined in this Amendment shall have the meanings ascribed to them in the Lease. 2. EXTENSION OF TERM. The Term of the Lease is hereby extended to July 31, 2008 (the "Expiration Date"). 3. EXTENSION OPTION. Tenant shall have one (1) option to extend the Term of the Lease for an additional eight (8) years (the "Extended Term") upon giving Landlord written notice thereof (the "Extension Notice") at least seventeen (17) months prior to the Expiration Date. All of the terms and provisions of the Lease shall remain in effect during the Extended Term, except that Tenant shall have no further right to extend the Term of the Lease and the Base Rent payable with respect to the Premises shall be Market Rent, as agreed to between Landlord and Tenant within the thirty (30) day period following the date on which Tenant shall have given Landlord the Extension Notice. "Market Rent" shall be the rent anticipated to be generally payable, taking into account the lease term, leasehold improvement allowance and other concessions, as of the commencement date of the Extended Term in the northwest suburban Chicago area for similar space in office buildings comparable in quality and location to the Building. If Landlord and Tenant shall be unable to agree on the then Market Rent for purposes of -1- this Paragraph 3 within such thirty (30) day period, then the Market Rent shall be determined by arbitration in accordance with the provisions of Paragraph 13 of this Amendment. 4. ADDED SPACE. Effective on the later to occur of (a) August 1, 1998 and (b) sixty (60) days after Landlord shall deliver possession of the Added Space (as hereinafter defined) to Tenant (the "Added Space Commencement Date"), the Added Space shall be included in the Premises demised under the Lease provided, however, that if Landlord fails to deliver possession of the Added Space on or before September 1, 1998, Tenant shall be entitled to a credit from its Base Rent in the amount equal to two (2) days' Base Rent for every one (1) day that such failure continues after September 1, 1998. Landlord agrees to deliver possession of the Added Space in a broom clean condition with all personal property of previous tenant removed. The "Added Space" shall consist of the entire sixth floor of the Building, comprising 22,525 rentable square feet ("rsf"), and the entire seventh floor of the Building, comprising 14,040 rsf. Tenant shall have the right to commence its leasehold improvement work in the Added Space, provided that Tenant shall comply with the requirements of Sections 9; 13(f); 14 (g), (i), (l) - (p); 17 (a); and 18 of the Lease with respect to such work and, prior to commencement of such work, Tenant shall provide to Landlord certificates evidencing the insurance coverage required by Section 18. Effective on the Added Space Commencement Date, and subject to rent adjustments, Tenant shall pay to Landlord with respect to the Added Space an annual Base Rent of Four Hundred Seventy-Five Thousand Three Hundred Forty-Five and 00/100 Dollars ($475,345.00), in twelve (12) monthly installments of Thirty-Nine Thousand Six Hundred Twelve and 08/100 Dollars ($39,612.08). On each anniversary of the Added Space Commencement Date (each, an "Adjustment Date" for purposes of this Paragraph) the Base Rent with respect to the Added Space shall be increased by three percent (3%) over the Base Rent in effect immediately prior to such Adjustment Date (said amount due pursuant to this increase shall be the new Base Rent until the next Adjustment Date). 5. 5TH FLOOR SPACE. Effective November 1, 2001, (a) the rentable area of the fifth floor of the Building included within the Premises (the "5th Floor Space") shall be deemed to be 26,274 rsf, and the calculation of Base Rent and Additional Rent payable with respect to the 5th Floor Space shall be based on such revised rentable area after such date; and (b) in lieu of the Base Rent specified in Section 3 of the First Amendment, Tenant shall pay Base Rent with respect to the 5th Floor Space at a rental rate per rsf equal to the rental rate per rsf then payable with respect to the Added Space, as escalated pursuant to Paragraph 4 of this Amendment. On November 1, 2002 and on each November 1 thereafter (each, an "Adjustment Date" for purposes of this Paragraph) such Base Rent with respect to the 5th Floor Space shall be increased by three percent (3%) over the Base Rent in effect immediately prior to such Adjustment Date (said amount due pursuant to this increase shall be the new Base Rent until the next Adjustment Date). -2- 6. ADDITIONAL RENT. Section 3 of the Lease shall be amended as follows: (a) effective as of the Added Space Commencement Date, Tenant's Pro Rate Share shall be increased to reflect the addition of the Added Space to the Premises, (b) effective as of the rent commencement date for the 4th Floor Space (as hereinafter defined), Tenant's Pro Rata Share shall be increased to reflect the addition of the 4th Floor Space to the Premises; (c) effective as of the rent commencement date for any First Offer Space (as hereinafter defined), Tenant's Pro Rata Share shall be increased to reflect the addition of such First Offer Space to the Premises; (d) with respect to the Added Space and, if applicable, the 4th Floor Space, and, if applicable, any First Offer Space, the definition of Operating Expenses as set forth in Section 3(B) of the Lease shall include a property management fee equal to three percent (3%) of the annual gross income of the Building (the "Management Fee"); and (e) effective as of November 1, 2001, Tenant's Pro Rata Share of Operating Expenses with respect to the 5th Floor Space shall include the Management Fee and shall reflect the new rentable area of 26,274 rsf. 7. LEASEHOLD IMPROVEMENT ALLOWANCES. Landlord shall pay to Tenant with respect to the Added Space a leasehold improvement allowance of (a) $15.00 per rsf, or $548,475.00, payable on the Added Space Commencement Date; and (b) $2.41 per rsf, or $88,121.65, payable on November 1, 1998. Landlord shall pay to Tenant with respect to the 5th Floor Space a leasehold improvement allowance of (a) $5.00 per rsf, or 127,395.00, as provided in Section 8 of the First Amendment, payable on October 1, 1998; and (b) $10.50 per rsf, or $275,877.00, payable on November 1, 2001. Notwithstanding the foregoing provisions of this Paragraph 7, Landlord shall not be obligated to pay Tenant the foregoing leasehold improvement allowances unless and until, with respect to each such leasehold improvement allowance, Tenant shall provide to Landlord reasonable documentation showing the expenditure of at least two thirds (2/3) of the amount of such leasehold improvement allowance for leasehold improvements in the Premises. Neither Landlord nor Tenant shall charge any supervisory or other fees in connection with the foregoing leasehold improvement work. Tenant shall perform all such leasehold improvement work in accordance with the provisions of Section 14 (i) of the Lease, provided that Landlord shall approve Tenant's plans and specifications for such work and the estimated cost of such work prior to the commencement of the work. Notwithstanding anything herein or in the Lease to the contrary, Tenant shall have the right to contract with any responsible general contractor to perform the leasehold improvement work, provided Tenant and such general contractor otherwise fulfill the requirements of Section 14(i) of the Lease, and provided further that Landlord has approved such general contractor, which approval Landlord agrees will not be unreasonably withheld, delayed or conditioned. 8. PARKING. The reference in Section 12 of the Lease to three (3) designated underground parking spaces in the Building shall be deemed changed, effective on the Added Space Commencement Date, to nine (9) underground parking spaces free of charge to Tenant. If in the future Tenant shall lease the entire fourth floor of the Building, the reference to nine (9) underground parking spaces shall be deemed changed, effective on the date the entire fourth floor is added to the Premises, to twelve (12) underground parking spaces free of charge to Tenant. -3- 9. 4TH FLOOR RIGHT OF FIRST OFFER. Landlord agrees that if it shall enter into serious negotiations with a third party to lease all or part of the fourth floor (the "Offered Space"), then Landlord shall advise Tenant and present to Tenant the terms under which Landlord would, in fact, lease the Offered Space to such party including the term, square footage, rental rate, leasehold improvement allowance, if any, and rental concessions, if any (the Basic Terms). Landlord agrees with respect to the initial leasing of space on the fourth floor that it shall not offer for lease less than 10,000 rsf or enter into serious negotiations for less than 10,000 rsf. Tenant shall have the right to lease the Offered Space or, at Tenant's option, the entire unleased part of the fourth floor commencing on the latter of (1) August 31, 1998, and (2) the sixtieth (60th) day after (i) Tenant notifies Landlord of its election to lease the Offered Space or the entire unleased part of the fourth floor (the "Commencement Date" as used in this paragraph) and (ii) Landlord delivers possession of said space to Tenant. Tenant must exercise its right herein granted within ten (10) business days after notice from Landlord advising Tenant of the third party's negotiations and presenting Tenant with the Basic Terms. Such notice from Tenant to Landlord shall specify Tenant's election to lease either the Offered Space or the entire unleased part of the fourth floor. If Tenant exercises such right, then the parties agree to promptly modify the Lease so as to add to the Premises as of the Commencement Date either the Offered Space or the entire unleased part of the fourth floor, as the case may be, at the lesser of (1) the Basic Terms, and (2) the then escalated Basic Rent per rsf, three percent (3%) annual escalation, Additional Rent, and the leasehold improvement allowance per rsf for the Added Space prorated to reflect the remaining Term of the Lease. If Tenant does not elect to lease either the Offered Space or the entire unleased part of the fourth floor, as aforesaid, by notice to Landlord within the time limit provided above, then Landlord shall be free for a period of one hundred twenty (120) days thereafter to enter into a third-party lease for the Offered Space on terms the economic value of which are not less than ninety percent (90%) of the Basic Terms on a net present value basis. If no such third party lease for the Offered Space results, then Tenant's right of first offer shall revive for the entire fourth floor. Should part, but not all, of the fourth floor be leased, then Tenant shall have the right of first offer with respect to all of the remaining space (if exercised, Tenant must take all of the remaining space) on the terms as provided above, but Landlord may offer for lease less than 10,000 rsf and enter into serious negotiations for less than 10,000 rsf. 10. BUILDING-WIDE RIGHT OF FIRST OFFER. Provided that Tenant shall have previously committed to lease the entire fourth floor of the Building, Tenant shall have a continuing right of first offer with regard to space in the Building which may become available for lease ("First Offer Space"). Tenant's rights under this Paragraph 10 shall be subordinate to the right of Landlord to extend or renew the leases of other tenants in the Building. Subject to the foregoing, Landlord shall offer Tenant the opportunity to lease First Offer Space prior to offering such space to another party by submitting to Tenant in writing a description of the First Offer Space (the "RFO Notice") no earlier than seventeen (17) months prior to the date such First Offer Space, if comprising an entire floor or more, will be vacant and no earlier than twelve (12) months prior to the date that such First Offer Space, if comprising less than an entire floor, will be vacant. The RFO Notice shall include the market terms upon which Landlord is willing to lease the -4- First Offer Space, including lease term, rental rate, leasehold improvements and any other concessions. Tenant shall thereafter have twenty-one (21) days within which to exercise its option to lease the First Offer Space upon the terms contained in the RFO Notice or upon such market terms mutually agreed to by Landlord and Tenant within such 21-day period. If Tenant rejects the First Offer Space or does not exercise its option to lease the First Offer Space within such 21-day period, Tenant shall have no further rights with respect to such First Offer Space thereafter, provided that Landlord shall re-offer such First Offer Space to Tenant pursuant to this paragraph prior to offering it to a third party on terms the net present value of which is less than 90% of the net present value of the terms upon which such First Offer Space was offered to Tenant. As a condition of Tenant's right of first offer under this Paragraph 10 ("this RFO"), Tenant agrees that if another tenant having not more than 10,000 rsf in the Building makes its lease extension or renewal conditional upon an expansion into First Offer Space that Tenant wishes to lease pursuant to this Paragraph 10, then, at Landlord's request, Tenant shall be obligated to lease the premises then occupied by such other tenant in addition to leasing such First Offer Space. 11. SIGNAGE. Subject to Landlord's prior approval of the design of Tenant's signage, and subject to the authority of the governing municipality, Tenant shall have the right to place and maintain, at Tenant's sole expense, two (2) exterior signs on the west and north faces of the Building, approximately in the location of the two existing "Allstate" signs and not larger than such Allstate signs. Tenant shall perform, at its sole expense, any required repairs to such signage and, if the signage is illuminated, shall pay the electrical charges with respect to the operation of such signage provided such electrical service is separately metered. Landlord shall cause the Allstate signs to be removed from the face of the Building no later than September 1, 1998. Landlord may provide other tenants in the Building with monument signage, provided that, in such event, Tenant also is allowed to have its name on the monument sign(s) with Tenant having the right to be placed at the top of such monument signage. Upon the expiration or earlier termination of the Lease, Tenant shall remove all of its signage from the Building, the Premises and such monuments, if any; shall restore the Building, Premises or monument surfaces, as the case may be, to their condition prior to the installation of Tenant's signage; and shall repair any damage caused by the removal of such signage. The foregoing provision of this Paragraph 11 shall survive the expiration or earlier termination of the Lease. 12. INAPPLICABLE PROVISIONS. The parties agree that the provisions of Sections 4 (other than the first two sentences thereof) and 32 and Exhibit C of the Lease shall not apply with respect to the Added Space or the 4th Floor Space. 13. DISPUTE RESOLUTION. If any dispute shall arise under any provision of the Lease and no mechanism for resolution of such dispute is specified in such provision, such dispute shall be resolved by binding arbitration in accordance with the following provisions: -5- (a) If the parties are unable to agree on the determination of Market Rent under Paragraph 3 of this Amendment, either party may initiate arbitration pursuant to this Paragraph 13(a) by giving written notice thereof to the other party, and within ten (10) days thereafter each party shall provide the other party with written notice of the name and address of the person designated to act, at each party's own expense, as the arbitrator on its behalf. Within thirty (30) days thereafter, the two (2) arbitrators so chosen shall decide the dispute, rendering a written statement setting forth the Market Rent. In determining Market Rent the arbitrators shall use the present value of the rental stream and leasehold improvement allowance, if any (taking into account all landlord concessions and other economic factors, if any) over the proposed lease term and using a discount rate equal to one percent (1%) plus the current prime rate of interest per annum then being charged by American National Bank and Trust Company of Chicago. The arbitrators' statement of Market Rent shall be binding upon both parties. If the arbitrators are unable to agree on the Market Rent and thereby resolve the dispute, then if the arbitrators' respective determinations of Market Rent differ by less than five percent (5%), Market Rent shall be deemed to be the arithmetic average of such two numbers; otherwise, the two arbitrators shall provide the parties with written memoranda explaining the methodology they each used to determine Market Rent and such arbitrators shall jointly appoint, within the following ten (10) days, a third arbitrator who, within thirty (30) days thereafter, shall determine Market Rent by selecting either Landlord's designated arbitrator's determination or Tenant's designated arbitrator's determination according to whichever of the two amounts is closer to Market Rent in the opinion of such third arbitrator. The third arbitrator, upon selecting one of the two amounts (the "Closer Number"), shall have the right, but is not required, to adjust the Closer Number by up to two percent (2%) in the direction of the other number. The costs of such third arbitrator shall be shared equally by Landlord and Tenant. Landlord and Tenant agree that all of the arbitrators selected shall be persons with at least ten (10) years' continuous experience in the business of appraising and/or leasing commercial office buildings in the northwest suburban Chicago area. (b) All other disputes shall be resolved in accordance with the Expedited Procedures set forth by the American Arbitration Association for expedited arbitration. 14. BROKERAGE. Landlord and Tenant represent and warrant to each other that they have had no dealings with any real estate broker or agent in connection with this Amendment other than Podolsky Northstar Realty Partners, LLC ("Landlord's Broker") and Grubb & Ellis Company ("Tenant's Broker"), and each covenants to indemnify, defend and hold harmless the other from and against any and all claims, liabilities, costs or damages (including, without limitation, reasonable attorneys' fees and disbursements) incurred by the indemnified party as a result of a breach of the foregoing representation and warranty. This Paragraph 14 shall survive the expiration or earlier termination of the Lease. Landlord agrees to pay a brokerage commission (the "Commission") to Landlord's Broker in connection with this Amendment pursuant to separate agreement, with the understanding that Landlord's Broker has entered into an agreement with Tenant's Broker for the payment to Tenant's Broker of a portion of the Commission as -6- payment in full of any and all commission, compensation or other amounts due to Tenant's Broker in connection with this Amendment. 15. FULL FORCE AND EFFECT. Except as herein expressly modified, all of the terms, conditions and provisions of the Lease shall remain in full force and effect. IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Amendment as of the day and year first above written. Landlord: ESKO PROPERTIES, INC. By: /s/ Sydney Kohl Attest: /s/Traci Donaldson Tenant: AMCOL INTERNATIONAL CORP. By: /s/ John Hughes Attest: /s/ Traci Donaldson -7- EX-27 3 FDS --
5 (Replace this text with the legend) 0000813621 AMCOL INTERNATIONAL CORPORATION 1,000 USD 3-MOS DEC-31-1997 APR-1-1997 JUN-30-1997 1.00 4,177 0 80,549 2,179 58,454 149,526 308,167 129,919 348,143 60,546 0 0 0 213 0 348,143 221,408 221,408 175,894 204,638 580 0 4,360 11,830 4,375 7,455 0 0 0 7,455 .38 .38
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