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, 2002 ---------------------------------------------- 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 (IRS Employer Identification No.) incorporation or organization) 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 May 7, 2002 ------------------------------------ ----------------------------------- (Common stock, $.01 par value) 28,519,982 AMCOL INTERNATIONAL CORPORATION INDEX Page No. -------- Part I - Financial Information ------------------------------ Item 1 Financial Statements Condensed Consolidated Balance Sheets - March 31, 2002 and December 31, 2001 1 Condensed Consolidated Statements of Operations - three months ended March 31, 2002 and 2001 2 Condensed Consolidated Statements of Comprehensive Income - three months ended March 31, 2002 and 2001 4 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 2002 and 2001 5 Notes to Condensed Consolidated Financial Statements 6 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 14 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
--------------------------------------------------------------------------------------- ASSETS March 31, December 31, 2002 2001 (unaudited) --------------------------------------------------------------------------------------- Current assets: Cash $ 8,503 $ 10,320 Accounts receivable, net 40,473 43,641 Inventories 34,600 34,593 Prepaid expenses 4,582 4,419 Net current assets of discontinued operations 798 798 Current deferred tax assets 4,288 4,286 Income taxes receivable 3,010 3,120 --------- --------- Total current assets 96,254 101,177 --------- --------- Investment in and advances to joint ventures 13,423 13,219 --------- --------- Property, plant, equipment, and mineral rights and reserves: Land and mineral rights and reserves 8,994 9,293 Depreciable assets 184,214 181,120 --------- --------- 193,208 190,413 Less: accumulated depreciation 121,879 118,065 --------- --------- 71,329 72,348 --------- --------- Other assets: Goodwill and other intangible assets, net 368 403 Long-term prepayments and other assets 7,503 4,410 Net non-current assets of discontinued operations 311 311 Deferred tax assets 4,437 4,462 --------- --------- 12,619 9,586 --------- --------- $ 193,625 $ 196,330 ========= ========= --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 2002 2001 --------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 7,782 $ 9,239 Accrued liabilities 18,017 21,844 --------- --------- Total current liabilities 25,799 31,083 --------- --------- Long-term debt 15,458 13,245 --------- --------- Minority interests in subsidiaries 775 523 Other liabilities 11,389 10,752 --------- --------- 12,164 11,275 --------- --------- Stockholders' equity: Common stock 320 320 Additional paid in capital 70,286 71,905 Retained earnings 91,122 91,018 Cumulative other comprehensive loss (3,072) (2,688) --------- --------- 158,656 160,555 Less: Treasury stock 18,452 19,828 --------- --------- 140,204 140,727 --------- --------- $ 193,625 $ 196,330 ========= ========= ---------------------------------------------------------------------------------------
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)
------------------------------------------------------------------------------------------ Three Months Ended March 31, ------------------ 2002 2001 ------------------------------------------------------------------------------------------ Continuing Operations Net sales $ 57,341 $ 64,378 Cost of sales 44,688 49,321 -------- -------- Gross profit 12,653 15,057 General, selling and administrative expenses 12,030 11,923 -------- -------- Operating profit 623 3,134 -------- -------- Other income (expense): Investment income -- 2,150 Change in value of interest rate swap -- (316) Interest expense, net (92) (771) Other, net (30) 75 -------- -------- (122) 1,138 -------- -------- Income before income taxes and equity in income of joint ventures 501 4,272 Income tax expense 176 1,350 -------- -------- Income before equity in income of joint ventures 325 2,922 Income from joint ventures 204 132 Minority interest in net loss of subsidiary 3 -- -------- -------- Income from continuing operations 532 3,054 -------- -------- Discontinued Operations Loss from operations (net of income taxes) -- (142) -------- -------- Cummulative effect of change in accounting principle (net of taxes) -- (182) -------- -------- Net income $ 532 $ 2,730 ======== ======== ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
-------------------------------------------------------------------------------------------- Three Months Ended March 31, ------------------ 2002 2001 -------------------------------------------------------------------------------------------- Weighted average common shares outstanding 28,454,530 28,664,185 =========== =========== Weighted average common and common equivalent shares outstanding 30,921,786 31,221,631 =========== =========== Basic earnings (loss) per share: Continuing operations $ 0.02 $ 0.11 ----------- ----------- Discontinued operations - loss from operations -- (0.01) ----------- ----------- Cummulative effect of change in accounting principle -- (0.01) ----------- ----------- Net income $ 0.02 $ 0.09 =========== =========== Diluted earnings (loss) per share: Continuing operations $ 0.02 $ 0.10 ----------- ----------- Discontinued operations - loss from operations -- (0.01) ----------- ----------- Cummulative effect of change in accounting principle -- (0.01) ----------- ----------- Net income $ 0.02 $ 0.08 =========== =========== Dividends declared per share $ 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) ------------------------------------------------------------------------------- Three Months Ended March 31, ------------------- 2002 2001 ------------------------------------------------------------------------------- Net income $ 532 $ 2,730 Other comprehensive income (loss): Foreign currency translation adjustment (384) (2,684) ------- ------- Comprehensive income $ 148 $ 46 ======= ======= ------------------------------------------------------------------------------- The accompanying notes are an integral part of these condensed consolidated financial statements. 4 AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
----------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------- 2002 2001 ----------------------------------------------------------------------------------------------------------- Cash flow from operating activities: Income from continuing operations $ 532 $ 3,054 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation, depletion, and amortization 4,152 4,185 Change in value of interest rate swap -- 316 Other 903 188 Decrease in current assets 2,866 4,790 Decrease in current liabilities (5,285) (4,207) --------- --------- Net cash provided by operating activities of continuing operations 3,168 8,326 --------- --------- Net cash used in discontinued operations -- (1,448) --------- --------- Cash flow from investing activities: Tax payments related to the absorbent polymers segment sale -- (125,477) Acquisition of land, mineral reserves, and depreciable assets (3,366) (1,382) Other (3,412) (2,088) --------- --------- Net cash used in investing activities (6,778) (128,947) --------- --------- Cash flow from financing activities: Net change in outstanding debt 2,213 3,252 Proceeds from sales of treasury stock 877 1,200 Purchases of treasury stock (1,120) (5,119) Cummulative effect of change in accounting principle (net of tax) -- (182) Dividends paid (429) (288) Other 252 -- --------- --------- Net cash provided by (used in) financing activities 1,793 (1,137) --------- --------- Net decrease in cash and cash equivalents (1,817) (123,206) Cash and cash equivalents at beginning of period 10,320 176,750 --------- --------- Cash and cash equivalents at end of period $ 8,503 $ 53,544 ========= ========= Supplemental disclosures of cash flow information: Cash paid for: Interest $ 1,074 $ 753 ========= ========= Income taxes $ 1,569 $ 126,157 ========= ========= -----------------------------------------------------------------------------------------------------------
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, 2001, has been prepared by management and are unaudited. The condensed consolidated balance sheet as of December 31, 2001, has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2001. 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 2001 Form 10-K which accompanies the 2001 Corporate Report. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain items in the 2001 condensed consolidated financial statements have been reclassified to comply with the presentation for 2002. Note 2: INVENTORIES Inventories at March 31, 2002 have been valued using the same methods as at December 31, 2001. The composition of inventories at March 31, 2002 and December 31, 2001, was as follows: -------------------------------------------------------------------------------- March 31, December 31, 2002 2001 -------------------------------------------------------------------------------- Advance mining $ 2,248 $ 1,872 Crude stockpile inventories 11,758 11,524 In-process inventories 12,692 11,498 Other raw material, container, and supplies inventories 7,902 9,699 ------- ------- $34,600 $34,593 ======= ======= -------------------------------------------------------------------------------- 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.
------------------------------------------------------------------------------------------------ Three Months Ended March 31, ----------------------- 2002 2001 ------------------------------------------------------------------------------------------------ Weighted average of common shares outstanding 28,454,530 28,664,185 Dilutive impact of stock options 2,467,256 2,557,446 ---------- ---------- Weighted average of common and common equivalent shares for the period 30,921,786 31,221,631 ========== ========== Common shares outstanding 28,555,026 27,892,306 ========== ========== ------------------------------------------------------------------------------------------------
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 three months ended March 31, 2002 and 2001. -------------------------------------------------------------------------------- Three Months Ended March 31, --------------------------- 2002 2001 -------------------------------------------------------------------------------- Business Segment: Revenues: Minerals $ 33,690 $ 38,837 Environmental 18,493 20,113 Transportation 7,384 7,562 Intersegment shipping (2,226) (2,134) --------- --------- Total $ 57,341 $ 64,378 ========= ========= Operating profit (loss): Minerals $ 2,217 $ 3,677 Environmental 939 2,680 Transportation 226 307 Corporate (2,759) (3,530) --------- --------- Total $ 623 $ 3,134 ========= ========= March 31, 2002 December 31, 2001 ============== ================= Assets: Minerals $ 105,985 $ 106,391 Environmental 60,788 65,216 Transportation 1,830 1,282 Corporate 23,913 22,332 Discontinued operations 1,109 1,109 --------- --------- Total $ 193,625 $ 196,330 ========= ========= -------------------------------------------------------------------------------- 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 change in the fair value of the swap and option during the period through March 31, 2001 of $316 has been reflected in operating results for the period. Note 6: DISCONTINUED OPERATIONS In 2000 the Company announced its intention to close its U.K. cat litter business. Certain assets used in the business were sold to various outside parties for cash proceeds of $720. The closure was completed in 2001. The U.K. cat litter business was a component of the Company's minerals segment. The consolidated financial statements have been reclassified to report separately the net assets and operating results of the U.K. metalcasting and cat litter business for all periods presented. Summary operating results for 2001 were as follows: -------------------------------------------------------------------------------- Three Months Ended U.K. metalcasting and cat litter businesses March 31, ------------------ 2001 -------------------------------------------------------------------------------- Net sales $ 2,800 Operating loss (359) Income tax benefit (59) Net loss (142) -------------------------------------------------------------------------------- 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 2002 vs. 2001 ----------------------------------------- Net sales for the three month period were $57.3 million, which represented a decrease of $7.0 million, or 10.9% from 2001 levels. Approximately 73% of the decline was attributed to the lower pricing and volumes in the Company's domestic minerals business units. Lower sales in the environmental segment's offshore and European business units accounted for the remainder of the decrease. Gross profit declined by $2.4 million, or 16.7%, to $12.7 million in the first quarter of 2002. Approximately 52% of the decline was attributed to the minerals segment and 48% to the environmental segment. Gross margin for the period was 22.1% compared to 23.4% in the previous year's period. General, selling and administrative expenses remained relatively flat at $12.0 million. Increases in minerals, environmental and transportation segment expenses were offset by a decline in corporate costs. The Company increased its allocation of information technology expenses from its corporate segment to its operating segments in the 2002 period. This accounted for a majority of the decrease in corporate expenses. Operating profit for the period was $623 thousand which was a decrease of $2.5 million, or approximately 80%, from the first quarter of 2001. The decline followed the decrease in sales and gross profit. Investment income of $2.2 million in the first quarter of 2001 was attributed to the temporary investment of the remaining proceeds from the sale of the absorbent polymers segment which was sold in June 2000. The Company utilized these proceeds to reduce its long-term debt in September of 2001. Consequently, interest expense in the first quarter of 2002 declined by $679 thousand from the prior year quarter, or 88%, to $92 thousand. In the first quarter of 2001 the Company recorded a loss of $316 thousand due to the change in value of an interest rate swap contract. The loss was recognized under the new requirements of Statement on 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. The Company also reported a loss on the cumulative effect of a change in accounting principle of $182 thousand in the first quarter of 2001 that was associated with implementation of this accounting pronouncement. The loss from discontinued operations reported in the first quarter of 2001 reflects the net loss incurred, after income taxes, in the UK metalcasting and cat litter businesses. The UK metalcasting and cat litter businesses were disposed of in the fourth quarter and first quarter of 2001, respectively. 10 Net income for the first quarter of $532 thousand compared with $2.7 million in the prior year period. The decline was primarily attributed to lower operating profit in the current year period and the net interest income realized in the prior year period.
-------------------------------------------------------------------------------------- Minerals Quarter Ended March 31, -------------------------------------------------------- 2002 2001 2002 vs. 2001 ----------------------------------------------- ------------------ ------------------- (Dollars in Thousands) ----------------------------------------------- ------------------ ------------------- Product sales $31,060 92.2% $33,868 87.2% Shipping revenue 2,630 7.8% 4,969 12.8% ------- ----- ------- ----- Net sales 33,690 100.0% 38,837 100.0% (5,147) (13.3%) ------- ----- ------- ----- Cost of sales - product 25,491 75.7% 27,047 69.6% Cost of sales - shipping 2,630 7.8% 4,969 12.8% ------- ----- ------- ----- Cost of sales 28,121 83.5% 32,016 82.4% ------- ----- ------- ----- Gross profit 5,569 16.5% 6,821 17.6% (1,252) (18.4%) General, selling and administrative expenses 3,352 9.9% 3,144 8.1% 208 6.6% ------- ----- ------- ----- ------ Operating profit 2,217 6.6% 3,677 9.5% (1,460) (39.7%) --------------------------------------------------------------------------------------
The decrease in net sales was primarily attributed to lower pricing in the pet products business, lower shipments to the domestic oil drilling market and lower exports from the domestic minerals unit. Reduced gross profit from the prior year period was caused by the decrease in sales. General, selling and administrative expenses increased primarily due to increased information technology costs and increased research and market development costs associated with the segment's health and beauty solutions business.
--------------------------------------------------------------------------------------- Environmental Quarter Ended March 31, --------------------------------------------------------- 2002 2001 2002 vs. 2001 ------------------------------------------------ -------------------- ----------------- (Dollars in Thousands) ------------------------------------------------ -------------------- ----------------- Product sales $17,220 93.1% $18,869 93.8% Shipping revenue 1,273 6.9% 1,244 6.2% ------- ----- ------- ----- Net sales 18,493 100.0% 20,113 100.0% (1,620) -8.1% ------- ----- ------- ----- Cost of sales - product 10,919 59.0% 11,433 56.8% Cost of sales - shipping 1,273 6.9% 1,244 6.2% ------- ----- ------- ----- Cost of sales 12,192 65.9% 12,677 63.0% Gross profit 6,301 34.1% 7,436 37.0% (1,135) -15.3% General, selling and administrative expenses 5,362 29.0% 4,756 23.6% 606 12.7% ------- ----- ------- ----- ------ Operating profit (loss) 939 5.1% 2,680 13.3% (1,741) -65.0% ---------------------------------------------------------------------------------------
The decline in sales was associated with lower revenues from the segment's offshore and European business units. Gross profit decreased in conjunction with lower sales and higher unit production costs at the European business unit. General, selling and administrative expenses increased due to higher information technology costs, additional marketing and promotion costs, and increased research and development spending. 11 ------------------------------------------------------------------------------- Transportation Quarter Ended March 31, --------------------------------------------------- 2002 2001 2002 vs. 2001 -------------------------------------------- ----------------- ---------------- (Dollars in Thousands) -------------------------------------------- ----------------- ---------------- Net sales $7,384 100.0% $7,562 100.0% $ (178) (2.4%) Cost of sales 6,601 89.4% 6,759 89.4% ------ ----- ------ ----- Gross profit 783 10.6% 803 10.6% (20) (2.5%) General, selling and administrative expenses 557 7.5% 496 6.6% 61 12.3% ------ ----- ------ ----- ------ Operating profit 226 3.1% 307 4.1% (81) (26.4%) ------------------------------------------------------------------------------- Net sales declined due to lower customer shipments. Increased general, selling and administrative expenses were associated with higher information technology costs. -------------------------------------------------------------------------------- Quarter Ended March 31, --------------------------------------- 2002 2001 2002 vs. 2001 -------- ----------- ------------------ (Dollars in Thousands) ------------------------------------------------- ----------- ------------------ Intersegment shipping sales $(2,226) $(2,134) Intersegment shipping costs (2,226) (2,134) ------- ------- Gross profit -- -- Corporate general, selling and administrative expenses 1,590 2,205 (615) -27.9% Nanocomposite business development expenses 1,169 1,325 (156) (11.8%) ------- ------- ---- Operating loss (2,759) (3,530) 771 (21.8%) -------------------------------------------------------------------------------- Intersegment shipping sales and costs are related to billings from the transportation segment to the domestic minerals and environmental segments for services. These services are invoiced to the minerals and environmental segments at arms-length rates and those costs are subsequently charged to customers. Intersegment sales and costs reported above reflect the elimination of these transactions. Approximately 50% of the lower corporate administrative expenses in the current year period was associated with increased allocation of these costs to the minerals, environmental and transportation segments. The remaining decrease was attributed to lower personnel and legal costs. Nanocomposite business development expenses are comprised of production, research and development and marketing costs. The 11.8% reduction in expenses from the prior year quarter is associated with a restructuring of the business that was implemented in the second quarter of 2001. Liquidity and Capital Resources ------------------------------- Working capital was $70.5 million as of March 31, 2002 compared to $70.0 million at December 31, 2001. The current ratio was 3.7-to-1 as of March 31, 2002 compared to 3.3-to-1 at December 31, 2001. For the three months ended March 31, 2002, cash flow from operating activities was $3.2 million compared to $8.3 million for the prior year period. Lower net income, a smaller decrease in current assets and a larger decrease in current liabilities in the current year period were the primary reasons for lower operating cash flow in the current year period. The Company invested $3.4 million in capital expenditures in the current year period compared to $1.4 million in the prior year period. A total of 175 12 thousand shares of the Company's common stock were repurchased at an aggregate value of $1.1 million under the plan authorized by the Company's board of directors in February 2001. Approximately $1.0 million remains in the stock repurchase authorization as of March 31, 2002. Dividends paid in the first quarter were $429 thousand. The Company received approximately $877 thousand from employees, directors and officers upon exercise of stock options granted under incentive and non-qualified plans. Outstanding debt as of March 31, 2002 was $15.5 million which was an increase of $2.2 million from December 31, 2001. Cash totaled $8.5 million compared to $10.3 million at December 31, 2001. Long-term debt represented 9.9% of total capitalization as of March 31, 2002 compared to 8.6% as of December 31, 2001. The Company has a revolving credit facility of $125 million with financial institutions that matures in October 2003. As of March 31, 2002 the Company had approximately $110 million in unused, committed credit lines. The credit facilities combined with funds generated from operations are expected to be 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. 142, Goodwill and Intangible Assets, was issued. 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 standard, will no longer be amortized, but should be tested for impairment at least annually. Identified intangible assets will continue to 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 will be reported as a change in accounting principle. In addition to the transitional impairment test, the required annual impairment test must also performed in the year of adoption of SFAS No. 142. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, and must be adopted as of the beginning of a fiscal year. The Company adopted SFAS No. 142 effective January 1, 2002. The adoption of SFAS No. 142 had no impact on the financial statements. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143") which addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company is required to adopt SFAS No. 143 on January 1, 2003 Management is currently evaluating the impact of the adoption of SFAS 143 on the Company's consolidated financial statements. 13 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, and 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 5 "Derivative" under Item 1. There have been no material changes in the company's market risk during the three months ended March 31, 2002. See disclosures as of December 31, 2001 in the Form 10-K, Item 7A. 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, 2002. 14 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: May 7, 2002 /s/ Lawrence E. Washow --------------- -------------------------------------------------- Lawrence E. Washow President and Chief Operating Officer Date: May 7, 2002 /s/ Gary L. Castagna --------------- -------------------------------------------------- Gary L. Castagna Senior Vice President and Chief Financial Officer and Principal Accounting Officer 15 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) 10.9 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 (21) 10.17 Asset and Stock Purchase Agreement dated November 22, 1999 by and between the Registrant and BASF Aktiengesellschaft (19) 10.26 Employment Agreement dated March 15, 2002 by and between Registrant and Gary D. Morrison. 10.27 Employment Agreement dated March 15, 2002 by and between Registrant and Peter M. Maul. 10.28 Employment Agreement dated March 15, 2002 by and between Registrant and Gary Castagna. 10.29 Employment Agreement dated March 15, 2002 by and between Registrant and Ryan F. McKendrick. 10.30 Employment Agreement dated March 15, 2002 by and between Registrant and Lawrence E. Washow. ** Portions of these exhibits have been omitted pursuant to a request for confidential treatment. -------------------- (1) Exhibit is incorporated by reference to the Registrant's Form 10 filed with the Securities and Exchange Commission on July 27, 1987. (2) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1988. (3) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1992. (5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed with the Securities and Exchange Commission on September 15, 1993. (6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1993. (7) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1994. (8) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1994. (9) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1995. (10) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1995. (11) Exhibit is incorporated by reference to the Registrant's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. (13) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1997. (15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File 333-56017) filed with the Securities and Exchange Commission on June 4, 1998. (16) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1998. (18) Exhibit is incorporated by reference to the Registrant's Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 1999. 16 (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 S-8 (File 333-68664) filed with the Securities and Exchange Commission on August 30, 2001. 17