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 March 31, 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 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 April 16, 2001 ------------------------------------ ---------------------------------- (Common stock, $.01 par value) 27,925,537 AMCOL INTERNATIONAL CORPORATION INDEX
Page No. -------- Part I - Financial Information ------------------------------ Item 1 Financial Statements Condensed Consolidated Balance Sheets - March 31, 2001 and December 31, 2000 1 Condensed Consolidated Statements of Operations - three months ended March 31, 2001 and 2000 2 Condensed Consolidated Statements of Comprehensive Income - three months ended March 31, 2001 and 2000 3 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 2001 and 2000 4 Notes to Condensed Consolidated Financial Statements 5 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3 Quantitative and Qualitative Disclosures About Market Risk 14 Part II - Other Information --------------------------- Item 6 Exhibits and Reports on Form 8-K 15
Part I - Item 1: FINANCIAL INFORMATION AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
ASSETS March 31, December 31, 2001 2000 ------------------ -------------- Current assets: * Cash and cash equivalents $ 54,698 $ 178,606 Accounts receivable, net 46,902 47,387 Inventories 30,428 33,385 Prepaid expenses 5,705 6,588 Current deferred tax assets 3,813 3,821 ------------------ -------------- Total current assets 141,546 269,787 ------------------ -------------- Investment in and advances to joint ventures 12,738 12,672 ------------------ -------------- Property, plant, equipment and mineral reserves 196,819 198,521 Less accumulated depreciation 120,810 118,369 ------------------ -------------- 76,009 80,152 ------------------ -------------- Intangible assets, net 443 465 ------------------ -------------- Other long-term assets, net 10,587 11,052 ------------------ -------------- $ 241,323 $ 374,128 ================== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of debt $ 1,042 $ 1,042 Accounts payable 8,175 12,453 Accrued liabilities 36,292 164,444 ------------------ -------------- Total current liabilities 45,509 177,939 ------------------ -------------- Long-term debt 54,586 51,334 ------------------ -------------- Other liabilities 10,482 9,948 ------------------ -------------- Stockholders' equity: Common stock 320 320 Additional paid-in capital 74,618 75,536 Foreign currency translation adjustment (4,179) (1,495) Retained earnings 81,777 79,336 Treasury stock (21,790) (18,790) ------------------ -------------- 130,746 134,907 ------------------ -------------- $ 241,323 $ 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, except number of shares and per share data)
Three Months Ended March 31, ------------------------------------------ Continuing Operations 2001 2000 --------------------- --------------- -------------- Net sales $ 67,438 $ 72,777 Cost of sales 52,212 55,871 --------------- -------------- Gross profit 15,226 16,906 General, selling and administrative expenses 12,452 12,997 Business realignment and other charges (credits) (223) -- --------------- -------------- Operating profit 2,997 3,909 --------------- -------------- Other income (expense): Investment income 2,150 Interest expense, net (813) (585) Change in value of interest rate swap (316) -- Other (expense) income, net 54 (51) --------------- -------------- 1,075 (636) --------------- -------------- Income before income taxes and equity in income of joint ventures 4,072 3,273 Income taxes 1,292 1,118 --------------- -------------- Income from continuing operations before equity in income of joint ventures 2,780 2,155 Equity in income of joint ventures 132 130 --------------- -------------- Income from continuing operations 2,912 2,285 --------------- -------------- Discontinued Operations ----------------------- Income from operations of absorbent polymers segment (net of tax) -- 3,452 Cumulative effect of change in accounting principle (net of tax) (182) -- --------------- -------------- Net income $ 2,730 $ 5,737 =============== ============== Weighted average common shares 28,664,185 26,908,499 =============== ============== Weighted average common and common equivalent shares 31,221,631 27,429,410 =============== ============== Earnings per share ------------------ Basic earnings per share Continuing operations $ .10 $ .08 Discontinued operations -- .13 Cumulative effect of change in accounting principle -- -- --------------- -------------- Net income $ .10 $ .21 =============== ============== Diluted earnings per share Continuing operations $ .09 $ .08 Discontinued operations -- $ .13 Cumulative effect of change in accounting principle -- -- --------------- -------------- Net income $ .09 $ .21 =============== ============== Dividends declared per share $ .01 $ .07 =============== ==============
The accompanying notes are an integral part of these condensed consolidated financial statements. -2- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Uaudited) (In thousands)
Three Months Ended March 31, ---------------------------------------------------- 2001 2000 -------------------- ------------------ Net income $ 2,730 $ 5,737 Other comprehensive income Foreign currency translation adjustment (2,684) (492) -------------------- ------------------ Comprehensive income $ 46 $ 5,245 ==================== ==================
The accompanying notes are an integral part of these condensed consolidated financial statements. -3- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended March 31, ---------------------------------------- 2001 2000 -------------- ------------- Cash flow from operating activities: Income from continuing operations $ 2,912 $ 2,285 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation, depletion, and amortization 4,445 4,385 Change in value of interest rate swap 316 Other (3) 566 Decrease in current assets 4,294 1,144 Decrease in current liabilities (6,838) (1,601) -------------- ------------- Net cash provided by operating activities of continuing operations 5,126 6,779 -------------- ------------- Net cash provided by discontinued operations -- 4,363 -------------- ------------- Cash flow from investing activities: Acquisition of land, mineral reserves, depreciable and intangible assets (1,340) (4,446) Tax payments related to absorbent polymers segment sale (125,477) Other (1,262) (328) -------------- ------------- Net cash used in investing activities (128,079) (4,774) -------------- ------------- Cash flow from financing activities: Net change in outstanding debt 3,252 (2,872) Dividends paid (288) (1,885) Stock option and treasury stock transactions, net (3,919) 746 -------------- ------------- Net cash used in financing activities (955) (4,011) -------------- ------------- Net increase (decrease) in cash and cash equivalents (123,908) 2,357 Cash and cash equivalents at beginning of period 178,606 3,954 -------------- ------------- Cash and cash equivalents at end of period $ 54,698 $ 6,311 ============== ============= Supplemental disclosure of cash flow information: Cash paid for: Interest $ 753 $ 1,584 -------------- ------------- Income taxes $ 126,157 $ 1,791 ============== =============
The accompanying notes are an integral part of these condensed consolidated financial statements. -4- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands, except share data) 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 three-month period ended March 31, 2001, are not necessarily indicative of the results to be expected for the full year. Certain items in the 2000 consolidated financial statements have been reclassified to comply with the condensed consolidated financial statement presentation for 2001. Note 2: INVENTORIES Inventories at March 31, 2001 have been valued using the same methods as at December 31, 2000. The composition of inventories at March 31, 2001 and December 31, 2000, was as follows:
March 31, 2001 December 31, 2000 ---------------------- ------------------ Crude stockpile $ 12,649 $ 14,292 Finished goods 10,724 10,952 Other raw material, container and supplies inventories 7,055 8,141 -------- -------- $ 30,428 $ 33,385 ======== ========
-5- 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 at the end of each period.
Three months ended March 31 ------------------------------- 2001 2000 ---------- ---------- Weighted average common shares outstanding - Basic 28,664,185 26,908,499 Assumed exercise of stock options 2,557,446 520,911 ---------- ---------- Weighted average common 31,221,631 27,429,410 shares outstanding - Diluted ========== ==========
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. -6- 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 three months ended March 31, 2001 and 2000.
Three Months Ended March 31, ------------------------------------------ Business Segment: 2001 2000 ---------------- ------------------------------------------ Revenues: Minerals......................................................... $ 41,554 $ 47,166 Environmental.................................................... 20,456 19,945 Transportation................................................... 7,562 7,935 Intersegment shipping............................................ (2,134) (2,269) -------- -------- Total.......................................................... $ 67,438 $ 72,777 ======== ======== Operating profit (loss): Minerals......................................................... $ 3,571 $ 5,524 Environmental.................................................... 2,649 2,046 Transportation................................................... 307 323 Corporate........................................................ (3,530) (3,984) -------- -------- Total........................................................... $ 2,997 $ 3,909 ======== ======== Assets: March 31, 2001 December 31, 2000 -------------- ----------------- Minerals......................................................... $114,686 $122,942 Environmental.................................................... 57,603 59,258 Transportation................................................... 1,995 1,791 Corporate........................................................ 69,039 190,137 -------- -------- Total............................................................. $243,323 $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. -7- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Management believes it is prudent to limit the variability of a portion of the Company's interest payments. To meet this objective, management has entered into an interest rate swap agreement to manage fluctuations in cash flows resulting from interest rate risk. The interest rate swap agreement is in the notional principal amount of $15 million , and expires in September 2002. Under the terms of the agreement, the counterparty financial institution has the option to extend the agreement until September 2004. The interest rate swap agreement changes the variable rate cash flow exposure on a portion of the Company's borrowings under its committed credit facilities to fixed rate cash flows. The agreement calls for the Company to make fixed rate payments and to receive variable rate cash flows based on the notional amount. This means the Company may receive funds if the variable rate (LIBOR) increases above the fixed rate, and must pay the other party if LIBOR decreases below the fixed rate during the term of the agreement. Interest rate differentials are 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 change in the fair value of the swap and option during the period ended March 31, 2001 of $316 has been reflected in operating results for the period. 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. -8- 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 three month period ended March 31, 2000 is as follows: Three months ended ------------------ March 31, 2000 -------------- Net sales $50,610 Operating profit 6,340 Income taxes 1,460 Net income 3,452 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. -9- 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. Three Months Ended March 31, 2001 vs. 2000 ------------------------------------------ Net sales for the period decreased by $5.3 million or 7.3%, while gross profit and operating profit decreased $1.7 million or 9.9%, and $0.9 million or 23.3%, respectively. Decreased volume and pricing in the Company's domestic minerals business was the cause for the lower sales, gross profit and operating profit. General, selling and administrative expenses decreased $0.5 million, 4.2%, primarily due to reduced corporate costs. In January, 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 operating activities 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. Cat litter operations in the U.K. ceased at the end of March 2001. Investment income of $2.1 million 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 , and held the investments until the accrued income taxes relating to the sale of that business became due. Approximately $125.5 million in taxes relating to the sale were paid during the first quarter of 2001. The remaining funds may be used to repay outstanding loans under the Company's revolving credit agreement, or for other corporate purposes. As a result of implementing the requirements of SFAS No. 133 and SFAS No. 138, the Company recorded a charge to earnings of $0.3 million related to the change in value of an interest rate swap and option agreement during the three months ended March 31, 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 value of the interest rate swap and option agreement measured as of January 1, 2001. -10- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net interest expense increased $0.2 million or 39%, from the prior year. This is primarily attributed to the allocation of a portion of interest expense incurred in 2000 to discontinued operations. The portion of the Company's interest expense allocated to discontinued operations for the first quarter of 2000 was $0.9 million. The effective income tax rate was 31.7% in 2001 compared to 34.2% in 2000. A tax provision was not required for taxable income generated by the Company's U.K.-based businesses due to utilization of net operating losses carried forward from previous years that related to the U.K. cat litter business. A full valuation allowance was provided against these deferred tax assets at December 31, 2000, as management did not believe the Company would realize the benefits of the net operating loss carryforward generated by its U.K-based businesses. Net income decreased $3.0 million or 52%. The 2000 income included $3.5 million of income from discontinued operations related to the absorbent polymers business which was sold to BASF AG in the second quarter of 2000. Diluted earnings per share from continuing operations increased by $0.01 per share or 12.5%, to $0.09. Weighted average number of common and common equivalent shares outstanding increased by 13.8% due to a larger number of "in the money" stock options outstanding as a result of the adjustments made to outstanding options at time of the equity restructuring in June of 2000. 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".
Quarter Ended March 31, -------------------------------------------------------------------- 2001 2000 2001 vs. 2000 --------------- ----------------- ------------------ Minerals (Dollars in Thousands) $ Change % Change -------- -------- -------- Product sales $36,249 $42,208 Shipping revenue 5,305 4,958 ------- ------- Net sales 41,554 100.0% 47,166 100.0% ($5,612) (11.9%) ------- ----- ------- ----- Cost of sales - product 29,310 32,840 Cost of sales - shipping 5,305 4,958 ------- ------- Cost of sales 34,615 83.3% 37,798 80.1% ------- ----- ------- ----- Gross profit 6,939 16.7% 9,368 19.9% ( 2,429) (25.9%) General, selling and administrative expenses 3,591 8.6% 3,844 8.1% (253) (6.6%) Business realignment and other charges (credits) (223) (0.5%) -- -- (223) NM ------- ----- ------- ----- Operating profit 3,571 8.6% 5,524 11.8% ( 1,953) (35.4%)
Lower volume in the domestic metal casting products business and lower volume and pricing in the domestic cat litter business contributed to a reduction in net sales from the prior year. The 3.2% reduction in gross profit was caused by higher unit production costs incurred due to the lower volume levels mentioned above. Lower operating expenses in the U.K. minerals operation contributed to the reduction in general, selling and administrative expenses. -11- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As previously described, the Company announced in January that it was selling its European cat litter operations and exiting its U.K. cat litter business. The Company categorized the operating activities of the U.K. cat litter business, as business realignment and other charges (credits) in the first quarter of 2001. The reduction in operating expenses shown in this category principally reflects the net proceeds from the disposal of cat litter assets, which more than offset other costs incurred during the quarter. Cat litter operations in the U.K. ceased at the end of March 2001.
Quarter Ended March 31, -------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ---------------------------- ---------------------- ------------------------- Environmental (Dollars in Thousands) $ Change % Change ------------- -------- -------- Product sales $19,212 $18,435 Shipping revenue 1,244 1,510 ------- ------- Net sales 20,456 100.0% 19,945 100.0% 511 2.6% ------- ----- ------- ----- Cost of sales - product 11,728 11,735 Cost of sales - shipping 1,244 1,510 ------- ------- Cost of sales 12,972 63.4% 13,245 66.4% ------- ----- ------- ----- Gross profit 7,484 36.6% 6,700 33.6% 784 11.7% General, selling and administrative expenses 4,835 23.6% 4,654 23.3% 181 3.9% ------- ----- ------- ----- Operating profit 2,649 13.0% 2,046 10.3% 603 29.5%
Sales and operating profits increased through growth in the segment's drilling products, building materials and offshore businesses. Improved production efficiencies at the segment's European manufacturing operations contributed to the increase in gross margins. Higher general, selling and administrative expenses were the result of increased operating expenses in the environmental offshore business. Historically, business in this segment is stronger during the second and third quarters of the year.
Quarter Ended March 31, ------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ---------------- ---------------- ---------------- Transportation (Dollars in Thousands) $ Change % Change -------------- -------- -------- Net sales $7,562 100.0% $7,935 100.0% ($373) (4.7%) Cost of sales 6,759 89.4% 7,097 89.4% ------ ----- ------ ----- Gross profit 803 10.6% 838 10.6% (35) (4.2)% General, selling and administrative expenses 496 6.6% 515 6.5% (19) (3.7)% ------ ----- ------ ----- Operating profit 307 4.0% 323 4.1% (16) (5.0)%
The decrease in net sales and gross profit is primarily due to increased competition and escalating fuel costs, as well as, the loss of sales to the polymer segment compared to the prior year. -12- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Quarter Ended March 31, ---------------------------------------------------------------------------------------------- 2001 2000 2001 vs. 2000 ------------------------------ ---------------------- ----------------------- Corporate (Dollars in Thousands) $ Change % Change --------- -------- -------- Intersegment shipping revenues ($2,134) ($2,269) Intersegment shipping costs ( 2,134) ( 2,269) -------- ------- Gross profit -- -- General, selling and administrative expenses 2,205 2,532 ($327) (12.9%) Nanocomposite product development expenses 1,325 1,452 ( 127) (8.7%) -------- ------- Operating loss ( 3,530) ( 3,984) 454 11.4%
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. Corporate costs include management information systems, human resources, investor relations and corporate communications, finance, corporate governance costs and research related to developing the nanocomposite technology. Lower general, selling and administrative expenses were due to reduced personnel costs and lower information technology expenses. Liquidity and Capital Resources ------------------------------- At March 31, 2001, the Company had outstanding debt of $55.6 million (including both long-term and short-term debt) and cash and cash equivalents of $54.7 million compared with $52.4 million in debt and $178.6 million in cash and cash equivalents at December 31, 2000. The substantial reduction in cash and cash equivalents was primarily related to the $125.5 million in tax payments related to the sale of the absorbent polymers segment made in the first quarter of 2001. The long-term debt represented 29.5% of total capitalization at March 31, 2001, compared with 27.6% at December 31, 2000. The Company had a current ratio of 3.11-to-1 at March 31, 2001, with approximately $96.0 million in working capital compared with 1.52-to-1 and $91.8 million, respectively, at December 31, 2000. The change in working capital included a decrease in cash and cash equivalents of $123.9 million, a decrease in inventories of $3.0 million and a reduction in current liabilities of $132.4 million. The decrease in cash and accrued liabilities was due to the payment of income taxes related to the gain on the sale of the absorbent polymers business during the first quarter of 2001. -13- AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity and Capital Resources (continued) ------------------------------------------- During the first quarter of 2001, the Company paid dividends of $0.3 million and acquired property, plant and equipment totaling $1.3 million. During 2001, the Company's board of directors authorized the purchase of $10 million of the Company's common stock. The Company purchased $4.2 million of treasury stock during the first quarter. The Company had approximately $79 million in unused, committed credit lines with its five-bank lending consortium at March 31, 2001. Management believes that the credit facilities with the banks, together with funds generated from operations, will be adequate to fund the current capital expenditure and share repurchase programs approved by the board of directors. 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. 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 I. -14- 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 March 31, 2001. -15- 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: April 17, 2001 /s/ Lawrence E. Washow ---------------------- --------------------------------------------- Lawrence E. Washow President and Chief Operating Officer Date: April 17, 2001 /s/ Gary L. Castagna ---------------------- --------------------------------------------- Gary L. Castagna Senior Vice President and Chief Financial Officer and Principal Accounting Officer -16- 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)* 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)* 27 Financial Data Schedule ** 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. -17- (15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-56017) filed with the Securities and Exchange Commission on June 4, 1998. (16) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1998. (18) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1999. (19) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. (20) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 2000. (21) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 2000. * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K. -18-