10-Q 1 d10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 ------------------------------------------------- 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 (IRS Employer of incorporation or organization) 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 November 8, 2001 --------------------------------- -------------------------------------- (Common stock, $.01 par value) 28,222,028 AMCOL INTERNATIONAL CORPORATION INDEX
Page No. -------- Part I - Financial Information ------------------------------ Item 1 Financial Statements Condensed Consolidated Balance Sheets - September 30, 2001 and December 31, 2000 1 Condensed Consolidated Statements of Operations - nine months ended September 30, 2001 and 2000 2 Condensed Consolidated Statements of Comprehensive Income - nine months ended September 30, 2001 and 2000 4 Condensed Consolidated Statements of Cash Flows - nine months ended September 30, 2001 and 2000 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3 Quantitative and Qualitative Disclosures About Market Risk 19 Part II - Other Information --------------------------- Item 6 Exhibits and Reports on Form 8-K 20
-2- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS September 30, December 31, 2001 2000* ------------- ------------ (Unaudited) Current assets: Cash $ 14,416 $ 10,057 Cash equivalents - 168,549 Accounts receivable, net 55,697 47,387 Inventories 33,151 33,385 Prepaid expenses 5,807 6,588 Current deferred tax assets 3,851 3,821 ------------- ------------ Total current assets 112,922 269,787 ------------- ------------ Investments in and advances to joint ventures 12,730 12,672 ------------- ------------ Property, plant, equipment and reserves 194,941 198,521 Less accumulated depreciation 119,546 118,369 ------------- ------------ 75,395 80,152 Intangible assets 427 465 Other long-term assets 9,194 11,052 ------------- ------------ $ 210,668 $ 374,128 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of debt $ - $ 1,042 Accounts payable 7,783 12,453 Accrued income taxes 3,984 135,095 Accrued liabilities 24,963 29,349 ------------- ------------ Total current liabilities 36,730 177,939 ------------- ------------ Long-term debt 25,594 51,334 ------------- ------------ Other long-term obligations 10,623 9,948 ------------- ------------ Minority interest in subsidiary 672 - ------------- ------------ Stockholders' equity: Common stock 320 320 Additional paid-in capital 71,882 75,536 Accumulated other comprehensive income (3,297) (1,495) Retained earnings 88,036 79,336 Treasury stock (19,892) (18,790) ------------- ------------ 137,049 134,907 ------------- ------------ $ 210,668 $ 374,128 ============= ============
*Condensed from audited financial statements. The accompanying notes are an integral part of these condensed consolidated financial statements. -1- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands)
Nine months ended Three months ended September 30, September 30, ---------------------- ---------------------- 2001 2000 2001 2000 --------- --------- --------- --------- CONTINUING OPERATIONS Net sales $ 215,802 $ 228,002 $ 76,068 $ 78,200 Cost of sales 165,238 175,180 57,717 60,021 --------- --------- --------- --------- Gross profit 50,564 52,822 18,351 18,179 General, selling and administrative expenses 36,983 39,338 12,260 13,270 Business realignment and other charges (credits) (223) 2,440 -- 2,440 --------- --------- --------- --------- Operating profit 13,804 11,044 6,091 2,469 --------- --------- --------- --------- Other income (expense): Investment income 2,931 6,717 352 3,633 Change in value of interest rate swap (401) -- -- -- Interest expense, net (2,233) (2,426) (595) (1,009) Other (expense) income, net 180 (374) 136 (323) --------- --------- --------- --------- 477 3,917 (107) 2,301 --------- --------- --------- --------- Income from continuing operations before income taxes and equity in income of joint ventures 14,281 14,961 5,984 4,770 --------- --------- --------- --------- Income taxes 4,625 5,950 2,004 2,021 --------- --------- --------- --------- Income from continuing operations before equity in income of joint ventures 9,656 9,011 3,980 2,749 Equity in income of joint ventures 332 333 89 182 Minority interest in net loss of subsidiary 19 -- 19 -- --------- --------- --------- --------- Income from continuing operations 10,007 9,344 4,088 2,931 --------- --------- --------- --------- DISCONTINUED OPERATIONS Income from operations of polymers segment (net of income taxes) -- 7,766 -- -- Gain on disposal of polymers segment (net of income taxes of $207,570) -- 314,064 -- 193 --------- --------- --------- --------- -- 321,830 -- 193 --------- --------- --------- --------- OTHER ITEMS Extraordinary loss on early extinguishment of debt (net of taxes) -- (443) -- -- Cumulative effect of change in accounting principle (net of taxes) (182) -- -- -- --------- --------- --------- --------- (182) (443) -- -- --------- --------- --------- --------- Net income $ 9,825 $ 330,731 $ 4,088 $ 3,124 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed financial statements -2- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine months ended Three months ended September 30, September 30, ----------------------------- ------------------------------ 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Weighted average common shares 28,174,822 27,316,498 28,106,401 27,943,373 =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding 30,684,498 29,334,941 30,911,806 30,781,245 =========== =========== =========== =========== Basic earnings per share Continuing operations $ 0.36 $ 0.34 $ 0.15 $ 0.10 ----------- ----------- ----------- ----------- Discontinued operations: From operations $ - $ 0.28 $ - $ - Gain on sale $ - $ 11.50 $ - $ 0.01 ----------- ----------- ----------- ----------- $ - $ 11.78 $ - $ 0.01 ----------- ----------- ----------- ----------- Extraordinary items $ - $ (0.02) $ - $ - ----------- ----------- ----------- ----------- Cumulative effect of change in accounting principle $ (0.01) $ - $ - $ - ----------- ----------- ----------- ----------- Total basic earnings per share $ 0.35 $ 12.10 $ 0.15 $ 0.11 =========== =========== =========== =========== Diluted earnings per share Continuing operations $ 0.33 $ 0.32 $ 0.13 $ 0.10 ----------- ----------- ----------- ----------- Discontinued operations: From operations $ - $ 0.26 $ - $ - Gain on sale $ - $ 10.71 $ - $ - ----------- ----------- ----------- ----------- $ - $ 10.97 $ - $ - ----------- ----------- ----------- ----------- Extraordinary items $ - $ (0.02) $ - $ - ----------- ----------- ----------- ----------- Cumulative effect of change in accounting principle $ (0.01) $ - $ - $ - ----------- ----------- ----------- ----------- Total diluted earnings per share $ 0.32 $ 11.27 $ 0.13 $ 0.10 =========== =========== =========== =========== Dividends declared per share $ 0.040 $ 0.150 $ 0.015 $ 0.010 =========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. -3- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS Of COMPREHENSIVE INCOME (Unaudited) (In thousands)
Nine months ended Three months ended September 30, September 30, ----------------------- --------------------- 2001 2000 2001 2000 -------- --------- ------- ------- Net income $ 9,825 $ 330,731 $ 4,088 $ 3,124 Other comprehensive income: Foreign currency translation adjustment (1,802) (5,361) 847 (452) Reclassification adjustment for foreign currency losses included in net income - 5,146 - - -------- --------- ------- ------- Comprehensive income $ 8,023 $ 330,516 $ 4,935 $ 2,672 ======== ========= ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. -4- AMCOL INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30, 2001 2000 ------------- ------------ Cash flows from operating activities: Income from continuing operations $ 10,007 $ 9,344 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation, depletion, and amortization 13,189 15,279 Change in value of interest rate swap 401 - Other 1,613 1,407 Increase in current assets (7,672) (3,148) Increase (decrease) in current liabilities (11,816) 2,599 ------------- ------------ Net cash provided by operating activities of continuing operations 5,722 25,481 ------------- ------------ Net cash provided by discontinued operations - 665 ------------- ------------ Cash flows from investing activities: Acquisition of land, mineral reserves, depreciable and intangible assets (8,732) (10,769) Tax payments related to absorbent polymers segment sale (128,351) - Net proceeds from sale of absorbent polymers segment - 605,222 Other (830) (6,889) ------------- ------------ Net cash provided by (used in) investing activities (137,913) 587,564 ------------- ------------ Cash flows from financing activities: Net change in outstanding debt (26,782) (38,075) Partial liquidation distribution - (384,829) Early extinguishment of debt - (443) Dividends paid (1,127) (4,057) Net treasury stock transactions (4,090) 6,893 ------------- ------------ Net cash used in financing activities (31,999) (420,511) ------------- ------------ Net increase (decrease) in cash and cash equivalents (164,190) 193,199 Cash and cash equivalents at beginning of period 178,606 3,954 ------------- ------------ Cash and cash equivalents at end of period $ 14,416 $ 197,153 ============= ============ Supplemental disclosure of cash flow information: Cash paid for: Interest $ 2,220 $ 4,848 ============= ============ Income taxes $ 134,153 $ 55,818 ============= ============
The accompanying notes are an integral part of these condensed consolidated financial statements -5- 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, 2000, 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, 2000, has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2000. The information furnished herein includes all adjustments which are, in the opinion of management, necessary for a fair statement of the results of the interim period, and all such adjustments are of a normal recurring nature. Management recommends the accompanying condensed consolidated financial information be read in conjunction with the consolidated financial statements and related notes included in the Company's 2000 Form 10-K which accompanies the 2000 Corporate Report. The results of operations for the nine-month period ended September 30, 2001, are not necessarily indicative of the results to be expected for the full year. Certain items in the 2000 condensed consolidated financial statements have been reclassified to comply with the presentation for 2001. Note 2: INVENTORIES Inventories at September 30, 2001 have been valued using the same methods as at December 31, 2000. The composition of inventories at September 30, 2001 and December 31, 2000, was as follows:
------------------------------------------------------------------------------------------ September 30, December 31, 2001 2000 ------------------------------------------------------------------------------------------ Crude stockpile $ 13,781 $ 14,292 ------------------------------------------------------------------------------------------ Finished goods 9,943 10,952 ------------------------------------------------------------------------------------------ Other raw material, container and supplies inventories 9,427 8,141 -------------- ------------- ------------------------------------------------------------------------------------------ $ 33,151 $ 33,385 ============== ============= ------------------------------------------------------------------------------------------
-6- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3: EARNINGS PER SHARE Basic earnings per share were computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share were computed by dividing the net income by the weighted average common shares outstanding after consideration of the dilutive effect of stock options outstanding during of each period.
Nine months ended Three months ended September 30, September 30, ------------------------------------ ----------------------------------- 2001 2000 2001 2000 ---------------- ----------------- ---------------- ---------------- Weighted average common shares outstanding - Basic 28,174,822 27,316,498 28,106,401 27,943,373 Assumed effect of exercise of stock options, treasury stock method 2,509,676 2,018,443 2,805,405 2,837,872 ---------------- ----------------- ---------------- ---------------- Weighted average common shares outstanding - Diluted 30,684,498 29,334,941 30,911,806 30,781,245 ================ ================= ================ ================
Note 4: BUSINESS SEGMENT 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. 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. -7- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following summaries set forth certain financial information by business segment as of and for the nine months ended September 30, 2001 and 2000.
Business Segment: Nine months ended September 30, ----------------------------------------------------- Revenues: 2001 2000 ------------------------ ---------------------- Minerals $ 119,770 $ 134,473 Environmental 79,582 76,794 Transportation 24,907 25,364 Intersegment shipping (8,457) (8,629) ------------------------ ---------------------- Total $ 215,802 $ 228,002 ======================== ====================== Operating profit (loss): Minerals $ 10,302 12,248 Environmental 12,077 $ 10,338 Transportation 1,074 1,125 Corporate (9,649) (12,667) ------------------------ ---------------------- Total $ 13,804 $ $ 11,044 ======================== ====================== Assets: September 30, 2001 December 31, 2000 ------------------------ ---------------------- Minerals $ 115,777 $ $ 122,942 Environmental 65,065 59,258 Transportation 2,290 1,791 Corporate 27,536 190,137 ------------------------ ---------------------- Total $ 210,668 $ $ 374,128 ======================== ======================
Note 5: 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 consistent with committed exposures. The Company uses variable rate credit facilities to finance its operations. These debt obligations expose the Company to variability in interest payments due to changes in interest rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense also decreases. Through June 15, 2001 the company was a party to an interest rate swap agreement with a bank in the notional amount of $15 million. The agreement gave the bank an option to extend the term. The interest rate swap agreement changed the variable rate cash flow exposure on a portion of the Company's borrowings under its committed credit facilities to fixed rate cash flows. -8- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The agreement called for the Company to make fixed rate payments and to receive variable rate cash flows based on the notional amount. This means the Company received funds if the variable rate (LIBOR) increased above the fixed rate, and paid the other party if LIBOR decreased below the fixed rate during the term of the agreement. Interest rate differentials were paid or received on a quarterly basis. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and for Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. It is the Company's judgement that SFAS No. 133 requires the Company to record the change in value of this agreement in its operating results in the period of change. Accordingly, the Company recognized the fair value of the swap and the option as of January 1, 2001 by recording the cumulative effect of a change in accounting principle in the amount of $182 (net of the related income tax benefit of $115) in the accompanying condensed consolidated statements of operations. The decline in the fair value of the swap and option during the period through its termination on June 15, 2001 of $401 has been reflected in operating results for the period. Note 6: 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 condensed consolidated financial statements. The condensed consolidated financial statements have been reclassified to report separately the 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. -9- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Summary information regarding the operating results of the absorbent polymers segment for the nine month period ended September 30, 2000 is as follows: ------------------------------------------------------------------------------- Nine months ------------------------------------------------------------------------------- ended ------------------------------------------------------------------------------- September 30 ------------------------------------------------------------------------------- 2000 ------------------------------------------------------------------------------- Net Sales $ 86,000 ------------------------------------------------------------------------------- Operating Profit 12,436 ------------------------------------------------------------------------------- Income taxes 3,920 ------------------------------------------------------------------------------- Net income 7,766 ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- *The information is for five months. Note 7: LITIGATION 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. In July 2001, the Company settled the dust litigation for a total cost that approximated the reserves previously recorded. -10- Item 2: AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. Nine Months Ended September 30, 2001 vs. 2000 --------------------------------------------- Net sales decreased by $12.2 million or 5.4% for the period. Gross profit decreased $2.3 million or 4.3% while operating profit increased $2.8 million or 25.0%. The decrease in sales and gross profit was primarily caused by lower volume and pricing in the Company's domestic minerals business. Sales also decreased by $3.3 million as a result of the exit from the U.K and European cat litter businesses as further explained below. Lower general, selling and administrative expenses of $2.4 million or 6.0% and $2.4 million of business realignment charges incurred in the 2000 period were the primary contributors to increased operating profit in the 2001 period. Reduced corporate costs and lower business development expenditures related to the nanocomposites unit were the reason for decreased general, selling and administrative expenses. The business realignment charges incurred in 2000 were comprised of an asset impairment charge of $1.5 million related to the U.K. cat litter operation and $0.9 million in professional fees related to exploration of alternatives to enhance shareholder value. In January 2001, the Company announced it had reached a decision to sell its European cat litter operations and exit the U.K. cat litter business. In connection with this decision, the Company recognized an asset impairment charge in the fourth quarter of 2000 to write-down the assets related to the U.K. operation to their estimated recoverable amount. The Company categorized the net operating results of the subject businesses, which consisted principally of wind-up activities, as business realignment and other charges (credits) in the first quarter. The net reduction in operating expenses of $0.2 million in the quarter reflects the proceeds realized from the disposal of certain cat litter assets during the period. Investment income earned in both periods represents earnings on short-term, interest bearing securities. The Company acquired these securities with a portion of the proceeds from the sale of its absorbent polymers segment to BASF AG on June 1, 2000. The reduction in investment income of $3.8 million or 56.4% for the nine month period reflects lower cash equivalents owned due to the payment of income taxes in the first quarter of 2001 related to the sale of the absorbent polymers business. The Company also used a portion of the remaining funds to reduce long-term debt during the third quarter of 2001. As a result of adopting the requirements of SFAS No. 133 and SFAS No. 138, the Company recorded a charge to earnings of $0.4 million before income taxes that related to the change in value of an interest rate swap and option agreement during nine months ended September 30, 2001. The change in value was attributed to the reduction in short-term interest rates during the period. The Company also recorded a charge of $0.2 million (net of tax) to recognize the cumulative effect of a change in accounting principle related to accounting for derivative instruments which represented the change in the value of the -11- interest rate swap and option agreement through December 31, 2000 measured as of January 1, 2001. The Company terminated the interest rate swap and option agreement in the second quarter of 2001. Net interest expense decreased $0.2 million or 8.0% from the prior year. Lower debt levels and interest rates in the current year were the cause for the decreased interest expense. The effective income tax rate was 32.4% in the current year compared to 39.8% in the prior year period. A tax provision was not required for taxable income recognized by the Company's U.K-based businesses due to utilization of tax deductions carried forward from previous years that related to the U.K. cat litter business. A tax benefit was not recognized for the $1.5 million asset impairment charge incurred in the 2000 period resulting in an increase in the effective tax rate. In preparation of its financial statements for the year ended December 31, 2000, management did not believe that it was more likely than not that the Company would realize the benefits of these future tax deductions in the U.K. Consequently, a full valuation allowance was provided against deferred tax assets related to these carryforward deductions. The tax benefit is expected to continue for the duration of the fiscal year. Income from continuing operations increased $0.7 million or 7.1% from the prior year period. Diluted earnings per share from continuing operations increased $0.01 or 3.1%. Weighted average common and common equivalent shares outstanding for the nine month period increased 4.6% due to a larger number of "in the money" stock options outstanding which resulted from an equity restructuring which took place in June 2000. Discontinued operations reflect the income earned from the absorbent polymers segment during the first five months of 2000 as well as the gain on the disposal of this segment. An extraordinary net charge of $0.4 million in 2000 was incurred as a result of early extinguishment of long-term debt. Following is a brief discussion for each business segment. Shipping revenues and costs for 2000 have been reclassified in the segment information to comply with the requirements of EITF 00-10, "Accounting for Shipping and Handling Fees and Costs".
------------------------------------------------------------------------------------------------------------- MINERALS Nine months ended September 30, ------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ------------------------------------------------------------------------------------------------------------- $ Change % Change ------------------------------------------------------------------------------------------------------------- Product sales $ 107,117 $ 119,307 ------------------------------------------------------------------------------------------------------------- Shipping revenue 12,653 15,166 ------------------------------------------------------------------------------------------------------------- Net sales 119,770 100.0% 134,473 100.0% (14,703) -10.9% ------------------------------------------------------------------------------------------------------------- Cost of sales-product 85,873 93,799 ------------------------------------------------------------------------------------------------------------- Cost of sales-shipping 12,653 15,166 ------------------------------------------------------------------------------------------------------------- Cost of sales 98,526 82.3% 108,965 81.0% ------------------------------------------------------------------------------------------------------------- Gross profit 21,244 17.7% 25,508 19.0% (4,264) -16.7% ------------------------------------------------------------------------------------------------------------- General, selling and ------------------------------------------------------------------------------------------------------------- administrative exp. 11,165 9.3% 11,760 8.7% (595) -5.1% ------------------------------------------------------------------------------------------------------------- Business realignment and ------------------------------------------------------------------------------------------------------------- other charges (223) -0.2% 1,500 0.0% (1,723) NM ------------------------------------------------------------------------------------------------------------- Operating profit $ 10,302 8.6% $ 12,248 9.1% (1,946) -15.9% -------------------------------------------------------------------------------------------------------------
-12- Net sales declined 10.9% from the prior-year period while operating profits decreased 15.9%. Excluding an asset impairment charge related to the U.K cat litter operation in 2000 of $1.5 million, operating profits would have decreased 25.1%. Lower volumes and pricing in the domestic minerals business and the exit from the U.K cat litter business caused the decrease in sales. Increased unit production costs in the domestic minerals business caused primarily by lower volume levels also reduced gross margins by 130 basis points. General, selling and administrative expenses declined due to lower operating expenses in the U.K. as a result of the exit from the cat litter business. As previously explained, the business realignment credit recognized in the current year period reflects the excess of proceeds received from the sale of certain assets related to the U.K. cat litter business over operating costs for the business.
--------------------------------------------------------------------------------------------------------------- ENVIRONMENTAL Nine months ended September 30, --------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 --------------------------------------------------------------------------------------------------------------- $ Change % Change --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Product sales $73,753 $70,177 --------------------------------------------------------------------------------------------------------------- Shipping revenue 5,829 6,617 --------------------------------------------------------------------------------------------------------------- Net sales 79,582 100.0% 76,794 100.0% 2,788 3.6% --------------------------------------------------------------------------------------------------------------- Cost of sales-product 47,094 45,568 --------------------------------------------------------------------------------------------------------------- Cost of sales-shipping 5,829 6,617 --------------------------------------------------------------------------------------------------------------- Cost of sales 52,923 66.5% 52,185 68.0% --------------------------------------------------------------------------------------------------------------- Gross profit 26,659 33.5% 24,609 32.0% 2,050 8.3% --------------------------------------------------------------------------------------------------------------- General, selling and --------------------------------------------------------------------------------------------------------------- administrative exp 14,582 18.3% 14,271 18.6% 311 2.2% --------------------------------------------------------------------------------------------------------------- Operating profit $12,077 15.2% $10,338 13.5% 1,739 16.8% ---------------------------------------------------------------------------------------------------------------
Operating profits improved 16.8% on a net sales increase of 3.6%. Gross margins expanded by 150 basis points primarily due to increased sales of more profitable products at the segment's European unit and lower production costs at that operation. Operating margins expanded due to flat general, selling and administrative expenses.
--------------------------------------------------------------------------------------------------------------- TRANSPORTATION Nine months ended September 30, --------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 --------------------------------------------------------------------------------------------------------------- $ Change % Change --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Net sales $24,907 100.0% $25,364 100.0% (457) -1.8% --------------------------------------------------------------------------------------------------------------- Cost of sales 22,246 89.3% 22,659 89.3% --------------------------------------------------------------------------------------------------------------- Gross profit 2,661 10.7% 2,705 10.7% (44) -1.6% --------------------------------------------------------------------------------------------------------------- General, selling and --------------------------------------------------------------------------------------------------------------- administrative exp. 1,587 6.4% 1,580 6.2% 7 0.4% --------------------------------------------------------------------------------------------------------------- Operating profit $ 1,074 4.3% $ 1,125 4.4% (51) -4.5% ---------------------------------------------------------------------------------------------------------------
Lower business levels contributed to a 1.8% decline in sales from the prior-year period. Lower sales and flat general, selling and administrative expenses further reduced operating margins by 4.5%. -13-
--------------------------------------------------------------------------------------------------------------- CORPORATE Nine months ended September 30, --------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 --------------------------------------------------------------------------------------------------------------- $ Change % Change --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Intersegment shipping revenues $ (8,457) $ (8,629) --------------------------------------------------------------------------------------------------------------- Intersegment shipping costs (8,457) (8,629) --------------------------------------------------------------------------------------------------------------- Gross profit -- -- --------------------------------------------------------------------------------------------------------------- General, selling and administrative exp. 6,123 6,984 (861) -12.3% --------------------------------------------------------------------------------------------------------------- Nanocomposites 3,526 4,743 (1,217) -25.7% --------------------------------------------------------------------------------------------------------------- Business realignment and --------------------------------------------------------------------------------------------------------------- other charges -- 940 (940) NM --------------------------------------------------------------------------------------------------------------- Operating loss $ (9,649) $(12,667) 3,018 23.8% ---------------------------------------------------------------------------------------------------------------
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 set forth above reflect the elimination of these intersegment transactions. Total corporate related costs fell 23.8% from the prior year. As previously mentioned in the 2000 period the Company incurred $0.9 million for professional fees related to exploration of alternatives to enhance shareholder value. The Company restructured its nanocomposites business development activities which resulted in a 25.7% reduction in spending from the prior year period. General, selling and administrative expenses decreased 12.3% due a decrease in personnel and legal costs. Three Months Ended September 30, 2001 vs. 2000 ---------------------------------------------- Net sales decreased $2.1 million or 2.7% from the prior-year period while operating profit increased $3.6 million or 59.5%. Lower sales were the result of a decrease in minerals segment shipments in both the U.S. and overseas markets. Gross margin improved 85 basis points from the prior-year period due to reduced production costs. General, selling and administrative expenses decreased 41.0% and were the primary contributor to the 490 basis point increase in operating margin. The prior-year period included an asset impairment charge of $1.5 million related to the U.K. cat litter operation and $0.9 million of professional fees related to exploration of alternatives to enhance shareholder value. Corporate costs, excluding business realignment charges, decreased $1.1 million, or 27.4%, from the prior-year quarter. Lower personnel and legal costs along with a restructuring of business development activities in the Company's nanocomposites unit reduced corporate costs. Investment income decreased $3.3 million or 90.3% from the prior year period. As previously described, investment income is earned on short-term, interest bearing securities that were acquired with a portion of the proceeds from the sale of the absorbent polymers segment on June 1, 2000. The decrease in investment income resulted from the lower amount of securities held in the current year period as income taxes related to the sale of the absorbent polymers segment were paid in the first quarter of 2001. The Company utilized the remaining proceeds to reduce long-term debt during the current year quarter. -14- Net interest expense decreased $0.4 million, or 41%, from the prior-year quarter. Lower average debt levels and interest rates were the cause for the reduction in interest expense. The effective tax rate for the quarter was 33.5% compared to 42.4% in the prior year. The current year rate reflects utilization of tax deductions related to the Company's U.K.-based businesses not previously recognized. Further explanation of this matter is provided in the nine month comparison section of the filing. In the prior year quarter a tax benefit was not recorded in conjunction with the $1.5 million asset impairment charge related to the U.K. operation. Income from continuing operations was $0.13 per diluted share, up $.03 or 30%, for the period as compared to the $0.10 per diluted share reported in the prior year. Weighted average common and common equivalent shares outstanding increased 0.4%.
--------------------------------------------------------------------------------------------------------------- MINERALS Quarter ended September 30, --------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 --------------------------------------------------------------------------------------------------------------- $ Change % Change --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- Product sales $35,537 $ 38,177 --------------------------------------------------------------------------------------------------------------- Shipping revenue 4,125 4,462 --------------------------------------------------------------------------------------------------------------- Net sales 39,662 100.0% 42,639 100.0% (2,977) -7.0% --------------------------------------------------------------------------------------------------------------- Cost of sales-product 28,454 30,546 --------------------------------------------------------------------------------------------------------------- Cost of sales-shipping 4,125 4,462 --------------------------------------------------------------------------------------------------------------- Cost of sales 32,579 82.1% 35,008 82.1% --------------------------------------------------------------------------------------------------------------- Gross profit 7,083 17.9% 7,631 17.9% (548) -7.2% --------------------------------------------------------------------------------------------------------------- General, selling and --------------------------------------------------------------------------------------------------------------- administrative exp. 3,794 9.6% 4,029 9.4% (235) -5.8% --------------------------------------------------------------------------------------------------------------- Business realignment and --------------------------------------------------------------------------------------------------------------- other charges -- 0.0% 1,500 NM (1,500) NM --------------------------------------------------------------------------------------------------------------- Operating profit $ 3,289 8.3% $ 2,102 4.9% 1,187 56.5% ---------------------------------------------------------------------------------------------------------------
Lower shipments in the domestic metalcasting market and the exit from the U.K. cat litter business were the primary reasons for the 7.0% decline in sales. Gross margin remained flat despite lower net sales due to as a result of exiting the unprofitable U.K. cat litter business. Operating margin improved 340 basis points due to an asset impairment charge of $1.5 million recorded in the 2000 quarter that related to the U.K. mineral operation. Operating margin in the prior year quarter would have been comparable to the current year excluding the effect of the asset impairment charge. -15-
---------------------------------------------------------------------------------------------------------------------------- ENVIRONMENTAL Quarter ended September 30, ---------------------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ---------------------------------------------------------------------------------------------------------------------------- $ Change % Change ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Product sales $28,665 $27,275 ---------------------------------------------------------------------------------------------------------------------------- Shipping revenue 2,377 2,747 ---------------------------------------------------------------------------------------------------------------------------- Net sales 31,042 100.0% 30,022 100.0% 1,020 3.4% ---------------------------------------------------------------------------------------------------------------------------- Cost of sales-product 18,351 17,666 ---------------------------------------------------------------------------------------------------------------------------- Cost of sales-shipping 2,377 2,747 ---------------------------------------------------------------------------------------------------------------------------- Cost of sales 20,728 66.8% 20,413 68.0% ---------------------------------------------------------------------------------------------------------------------------- Gross profit 10,314 33.2% 9,609 32.0% 705 7.3% ---------------------------------------------------------------------------------------------------------------------------- General, selling and ---------------------------------------------------------------------------------------------------------------------------- administrative exp. 4,967 16.0% 4,637 15.4% 330 7.1% ---------------------------------------------------------------------------------------------------------------------------- Operating profit 5,347 17.2% 4,972 16.6% 375 7.5% ----------------------------------------------------------------------------------------------------------------------------
Improved business levels in the European building materials, lining technologies and environmental offshore units contributed to the 3.4% increase in net sales. Gross margin expanded by 120 basis points as a result of improved production efficiencies at the European units.
---------------------------------------------------------------------------------------------------------------------------- TRANSPORTATION ---------------------------------------------------------------------------------------------------------------------------- Quarter ended September 30, ---------------------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ---------------------------------------------------------------------------------------------------------------------------- $ Change % Change ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Net sales $ 8,832 100.0% $ 8,832 100.0% 0.0% ---------------------------------------------------------------------------------------------------------------------------- Cost of sales 7,878 89.2% 7,893 89.4% ---------------------------------------------------------------------------------------------------------------------------- Gross profit 954 10.8% 939 10.6% 15 1.6% ---------------------------------------------------------------------------------------------------------------------------- General, selling and ---------------------------------------------------------------------------------------------------------------------------- administrative exp. 549 6.2% 543 6.1% 6 1.1% ---------------------------------------------------------------------------------------------------------------------------- Operating profit $ 405 4.6% $ 396 4.5% 9 2.3% ----------------------------------------------------------------------------------------------------------------------------
Business levels and profitability in the Company's transportation segment were comparable to the prior year quarter results.
---------------------------------------------------------------------------------------------------------------------------- CORPORATE ---------------------------------------------------------------------------------------------------------------------------- Quarter ended September 30, ---------------------------------------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ---------------------------------------------------------------------------------------------------------------------------- $ Change % Change ---------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Intersegment shipping revenues $(3,468) $(3,293) ---------------------------------------------------------------------------------------------------------------------------- Intersegment shipping costs (3,468) (3,293) ---------------------------------------------------------------------------------------------------------------------------- Gross profit -- -- ---------------------------------------------------------------------------------------------------------------------------- General, selling and ---------------------------------------------------------------------------------------------------------------------------- administrative exp. 1,838 2,414 (576) -23.9% ---------------------------------------------------------------------------------------------------------------------------- Nanocomposites 1,112 1,647 (535) -32.5% ---------------------------------------------------------------------------------------------------------------------------- Business realignment and ---------------------------------------------------------------------------------------------------------------------------- other charges -- 940 (940) NM ---------------------------------------------------------------------------------------------------------------------------- Operating loss $(2,950) $(5,001) 2,051 41.0% ----------------------------------------------------------------------------------------------------------------------------
The prior year quarter included $0.9 million related to professional fees incurred for the purpose of exploring alternatives in enhancing shareholder value. Lower personnel and legal costs contributed to the 23.9% decrease in general, selling and administrative expenses. The Company restructured the nanocomposites unit which resulted in a 32.5% decrease in expenses compared to the prior year quarter. -16- Liquidity and Capital Resources ------------------------------- The Company had working capital of approximately $76.2 million and a current ratio of 3.07-to-1 as of September 30, 2001, compared to approximately $91.8 million of working capital and a current ratio of 1.52-to-1 as of December 31, 2000. Cash equivalents and accrued income taxes related to the sale of the absorbent polymers segment significantly influenced the working capital and corresponding current ratio as of December 31, 2000. If the cash equivalents were offset by the accrued income taxes and the excess applied to long-term debt, working capital would be $58.4 million and the current ratio 2.36-to-1 as of December 31, 2000. For the nine months ended September 30, 2001, cash provided by operating activities from continuing operations was $5.7 million compared to $25.5 million for the prior year period. The decrease of $19.8 million from the prior year period was primarily attributed to increased accounts receivable in the Environmental segment, and a decrease in accounts payable and accrued liabilities related the Minerals segment, principally due to the settlement of the dust litigation in the U.K Dividends paid to shareholders were $1.1 million, acquired property, plant and equipment was $8.7 million and income tax payments related to the sale of the absorbent polymers segment were $128.4 million. As of September 30, 2001 the Company purchased approximately 1.74 million shares of its common stock at a total cost of $7.5 million. Approximately $2.5 million remains in the stock repurchase authorization approved by the Board of Directors in February 2001. Outstanding debt as of September 30, 2001 was $25.6 million while cash and cash equivalents totaled $14.4 million compared to $52.3 million and $178.6 million as of December 31, 2000, respectively. The decrease in cash equivalents was attributed to the payment of $128.4 million in 2001 for income taxes related to the gain on the sale of the absorbent polymers segment. The Company repaid long-term debt with the remaining cash equivalents during the third quarter of 2001. Long-term debt represented 15.7% of total capitalization as of September 30, 2001 compared to 27.6% as of December 31, 2000. The Company's revolving credit facility of $125 million matures in October 2003. As of September 30, 2001 the Company had approximately $108 million in unused, committed credit lines. The credit facilities combined with funds generated from operations are adequate to fund capital expenditures and other investments approved by the board of directors at this time. New Accounting Pronouncements ----------------------------- In July 2001, Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations and SFAS No. 142, Goodwill and Intangible Assets were issued. In October 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets was issued. SFAS No. 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method of accounting, and prohibits the use of the pooling-of-interests method for such transactions. SFAS No. 141 also requires identified intangible assets acquired in a business combination to be recognized as an asset apart from goodwill if they meet certain criteria. Management has adopted SFAS No. 141, which has had no material impact on its condensed consolidated financial statements. SFAS No. 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill, including that acquired before initial application of the -17- standard, should not be amortized but should be tested for impairment at least annually. Identified intangible assets should be amortized over their estimated useful lives and reviewed for impairment in accordance with SFAS No. 144. Within six months of initial application of the new standard, a transitional impairment test must be performed on all goodwill. Any impairment loss recognized as a result of the transitional impairment test should be reported as a change in accounting principle. In addition to the transitional impairment test, the required annual impairment test should be performed in the year of adoption of SFAS No. 142. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, (although early adoption would be permitted in certain circumstances) and must be adopted as of the beginning of a fiscal year. Retroactive application is not permitted. The Company is in the process of evaluating the impact that adoption of SFAS No. 142 may have on the financial statements; however, such impact, if any, is not known or reasonably estimable at this time. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains many of the fundamental provisions of that Statement. SFAS No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business. However, it retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company is in the process of evaluating the impact that adoption of SFAS No. 144 may have on the financial statements; however, such impact, if any, is not known or reasonably estimable at this time. Forward-Looking Statements -------------------------- Certain statements made from time-to-time by the Company, including statements in the Management's Discussion and Analysis section above, constitute "forward-looking statements" made in reliance upon the safe harbor contained in Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to the Company or its operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth, levels of capital expenditures, future dividends, expansion into global markets and the development of new products. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The Company's actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including, but not limited to, the actual growth in the Company's various markets, utilization of the Company's plants, competition in our business segments, operating costs, weather, currency exchange rates, currency devaluations, delays in development, production and marketing of new products, integration of acquired businesses, and other factors detailed from time-to-time in AMCOL's annual report and other reports filed with the Securities and Exchange Commission. -18- Item 3: Quantitative and Qualitative Disclosure About Market Risk The information required by this item is provided in Footnote 4 "Derivative Financial Instruments and Market Risks" under Item 1. -19- PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K -------------------------------- (a) See Index to Exhibits immediately following the signature page. (b) No reports on Form 8-K were filed during the quarter ended September 30, 2001. -20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMCOL INTERNATIONAL CORPORATION Date: November 8, 2001 /s/ Lawrence E. Washow -------------------------- -------------------------------------------------------------- Lawrence E. Washow President and Chief Operating Officer Date: November 8, 2001 /s/ Gary L. Castagna -------------------------- -------------------------------------------------------------- Gary L. Castagna Senior Vice President and Chief Financial Officer and Principal Accounting Officer
-21- 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) 10.10 AMCOL International Corporation 1993 Stock Plan, as amended and restated (10) 10.11 Credit Agreement by and among AMCOL International Corporation and Harris Trust and Savings Bank, individually and as agent, NBD Bank, LaSalle National Bank and the Northern Trust Company dated October 4, 1994 (7); First Amendment to Credit Agreement dated September 25, 1995 (9), 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), as amended (22) 10.16 Change in Control Agreement dated September 21, 2000, by and between Registrant and Ryan F. McKendrick (21) 10.17 Asset and Stock Purchase Agreement dated November 22, 1999 by and between the Registrant and BASF Aktiengesellschaft (19) 10.18 Change in Control Agreement dated September 28, 2000, by and between Registrant and Frank B. Wright, Jr. (21) 10.19 Change in Control Agreement dated September 22, 2000, by and between Registrant and Gary D. Morrison (21) 10.24 Special Retention Agreement dated September 18, 2000, by and between Registrant and Peter L. Maul ** (21) 10.25 Change of Control Agreement dated May 17, 2001, by and between Registrant and Gary Castagna (23) ** 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. -22- (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. (22) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-68664) filed with the Securities and Exchange Commission on August 30, 2001. (23) 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, 2001, as amended, filed August 15, 2001." -23-