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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, 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
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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
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(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 October 14, 2002
- -------------------------------------- -----------------------------------
(Common stock, $.01 par value) 27,799,723 Shares
AMCOL INTERNATIONAL CORPORATION
INDEX
Page No.
--------
Part I - Financial Information
- ------------------------------
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2002 and December 31, 2001 1
Condensed Consolidated Statements of Operations -
three and nine months ended September 30, 2002 and 2001 2
Condensed Consolidated Statements of Comprehensive Income -
three and nine months ended September 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 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 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 19
Item 4 Controls and Procedures 19
Part II - Other Information
- ---------------------------
Item 6 Exhibits and Reports on Form 8-K 19
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
ASSETS 2001 2002
(unaudited) *
==============================================================================================================================
Current assets:
Cash $ 9,259 $ 10,320
Accounts receivable, net 60,398 43,641
Inventories 37,748 34,593
Prepaid expenses 5,701 4,419
Net current assets of discontinued operations - 798
Current deferred tax assets 3,766 4,286
Income taxes receivable - 3,120
------------ ------------
Total current assets 116,872 101,177
------------ ------------
Investment in and advances to joint ventures 13,702 13,219
------------ ------------
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights and reserves 9,218 9,293
Depreciable assets 197,504 181,120
------------ ------------
206,722 190,413
Less: accumulated depreciation 126,318 118,065
------------ ------------
80,404 72,348
------------ ------------
Other assets:
Goodwill 4,633 193
Intangible assets, net 481 210
Long-term prepayments and other assets 8,642 4,410
Net non-current assets of discontinued operations - 311
Deferred tax assets 4,051 4,462
------------ ------------
17,807 9,586
------------ ------------
$ 228,785 $ 196,330
============ ============
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2002
(unaudited) *
==============================================================================================================================
Current liabilities:
Accounts payable $ 14,578 $ 9,239
Accrued liabilities 26,269 21,844
------------ ------------
Total current liabilities 40,847 31,083
------------ ------------
Long-term debt 29,053 13,245
------------ ------------
Minority interests in subsidiaries 691 523
Other liabilities 11,865 10,752
------------ ------------
12,556 11,275
------------ ------------
Stockholders' equity:
Common stock 320 320
Additional paid in capital 69,362 71,905
Retained earnings 98,642 91,018
Accumulated other comprehensive income (loss) 689 (2,688)
------------ ------------
169,013 160,555
Less:
Treasury stock 22,684 19,828
------------ ------------
146,329 140,727
------------ ------------
$ 228,785 $ 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)
- -------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-----------------------------------------------------
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
Continuing Operations
Net sales $ 221,072 $ 208,167 $ 85,196 $ 74,116
Cost of sales 167,837 158,307 63,882 56,003
---------- ----------- ----------- -----------
Gross profit 53,235 49,860 21,314 18,113
General, selling and administrative expenses 38,858 35,471 13,715 11,755
---------- ----------- ----------- -----------
Operating profit 14,377 14,389 7,599 6,358
---------- ----------- ----------- -----------
Other income (expense):
Investment income - 2,931 - 352
Change in value of interest rate swap - (401) - (85)
Interest expense, net (410) (2,065) (170) (411)
Other, net (92) 131 (15) 135
---------- ----------- ----------- -----------
(502) 596 (185) (9)
---------- ----------- ----------- -----------
Income before income taxes and equity
in income of joint ventures 13,875 14,985 7,414 6,349
Income tax expense 4,997 4,974 2,672 2,112
---------- ----------- ----------- -----------
Income before equity in income of
joint ventures 8,878 10,011 4,742 4,237
Income from joint ventures 487 332 40 89
Minority interest in net loss of subsidiary 87 19 76 19
---------- ----------- ----------- -----------
Income from continuing operations 9,452 10,362 4,858 4,345
---------- ----------- ----------- -----------
Discontinued Operations
Loss from operations (net of income taxes) - (355) - (257)
---------- ----------- ----------- -----------
Cumulative effect of change in accounting principle (net of taxes) - (182) - -
---------- ----------- ----------- -----------
Net income $ 9,452 $ 9,825 $ 4,858 $ 4,088
========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------
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)
- ----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------------------------------------
2001 2002 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 28,230,881 28,174,822 27,866,211 28,106,401
============= ============= ============ ============
Weighted average common and common equivalent shares
outstanding 30,370,517 30,684,498 29,890,911 30,911,806
============= ============= ============ ============
Basic earnings (loss) per share:
Continuing operations $ 0.33 $ 0.37 $ 0.17 0.16
------------- ------------- ------------ ------------
Discontinued operations - loss from operations - (0.01) - (0.01)
------------- ------------- ------------ ------------
Cumulative effect of change in accounting principle - (0.01) - -
------------- ------------- ------------ ------------
Net income $ 0.33 $ 0.35 $ 0.17 0.15
============= ============= ============ ============
Diluted earnings (loss) per share:
Continuing operations $ 0.31 $ 0.34 $ 0.16 0.14
------------- ------------- ------------ ------------
Discontinued operations - loss from operations - (0.01) - (0.01)
------------- ------------- ------------ ------------
Cumulative effect of change in accounting principle - (0.01) - -
------------- ------------- ------------ ------------
Net income $ 0.31 $ 0.32 $ 0.16 0.13
============= ============= ============ ============
Dividends declared per share $ 0.065 $ 0.040 $ 0.030 0.015
============= ============= ============ ============
- ----------------------------------------------------------------------------------------------------------------------------
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,
-----------------------------------------------------------
2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------
Net income $ 9,452 $ 9,825 $ 4,858 $ 4,088
Other comprehensive income (loss):
Foreign currency translation adjustment 447 (1,800) 3,377 847
------- ------- ------- -------
Comprehensive income $ 9,899 $ 8,025 $ 8,235 $ 4,935
======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------
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)
- -------------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
-----------------------------
2001 2002
=========================================================================================================================
Cash flow from operating activities:
Income from continuing operations $ 9,452 $ 10,362
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Depreciation, depletion, and amortization 14,292 12,426
Changes in assets and liabilities, net of effects of acquisitions:
Increase in current assets (11,338) (8,379)
Increase (decrease) in current liabilities 4,054 (3,415)
Increase in noncurrent liabilities 1,114 6,595
Other 1,580 (4,331)
-------------- ------------
Net cash provided by operating activities of continuing operations 19,154 13,258
-------------- ------------
Net cash used in discontinued operations - (5,818)
-------------- ------------
Cash flow from investing activities:
Tax payments related to the absorbent polymers segment sale - (128,351)
Acquisition of land, mineral reserves, and depreciable assets (10,111) (8,674)
Acquisitions (16,966) -
Other (3,703) 46
-------------- ------------
Net cash used in investing activities (30,780) (136,979)
-------------- ------------
Cash flow from financing activities:
Net change in outstanding debt 15,808 (26,782)
Proceeds from sales of treasury stock 1,382 1,734
Purchases of treasury stock (6,781) (6,492)
Cummulative effect of change in accounting principle (net of tax) - (182)
Dividends paid (1,828) (1,127)
Other 168 668
-------------- ------------
Net cash provided by (used in) financing activities 8,749 (32,181)
-------------- ------------
Effect of foreign currency rate changes on cash 1,816 (1,595)
Net decrease in cash and cash equivalents (1,061) (163,315)
-------------- ------------
Cash and cash equivalents at beginning of period 10,320 176,750
-------------- ------------
Cash and cash equivalents at end of period $ 9,259 $ 13,435
============== ============
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 469 $ 2,219
============== ============
Income taxes $ 879 $ 134,152
============== ============
- -------------------------------------------------------------------------------------------------------------------------
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 is 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 Annual
Report on 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 conform to the presentation for 2002.
Note 2: INVENTORIES
Inventories at September 30, 2002 have been valued using the same methods
as at December 31, 2001. The composition of inventories at September 30, 2002
and December 31, 2001, was as follows:
- -----------------------------------------------------------------------------------------
September 30, December 31,
2002 2001
- -----------------------------------------------------------------------------------------
Advance mining $ 3,024 $ 1,872
Crude stockpile inventories 8,651 11,524
In-process inventories 14,117 11,498
Other raw material, container, and supplies inventories 11,956 9,699
-------- --------
$ 37,748 $ 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 during each period. Diluted
earnings per share were computed by dividing net income by the weighted average
common shares outstanding after consideration of the dilutive effect of stock
options outstanding during each period.
- ---------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------------------------------------------
2001 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
Weighted average of common shares outstanding 28,230,881 28,174,822 27,866,211 28,106,401
Dilutive impact of stock options 2,139,636 2,509,676 2,024,700 2,805,405
------------- -------------- -------------- --------------
Weighted average of common and common equivalent
shares for the period 30,370,517 30,684,498 29,890,911 30,911,806
============= ============== ============== ==============
Common shares outstanding 27,776,608 28,223,444 27,776,608 28,223,444
============= ============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------------------
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. Effective January 1, 2002, the Company changed it's method
of allocating information technology expenses from the corporate segment to the
operating segment. The Company measures segment performance 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 and nine months ended September 30, 2002 and
2001.
- --------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------------------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Business Segment:
Revenues:
Minerals $ 125,330 $ 113,479 $ 46,502 $ 38,202
Environmental 79,735 78,238 33,216 30,550
Transportation 24,053 24,907 8,591 8,832
Intersegment shipping (8,046) (8,457) (3,113) (3,468)
--------- --------- -------- --------
Total $ 221,072 $ 208,167 $ 85,196 $ 74,116
========= ========= ======== ========
Operating profit (loss):
Minerals $ 10,907 $ 10,860 $ 4,386 $ 3,530
Environmental 11,471 12,104 5,950 5,372
Transportation 697 1,074 242 405
Corporate (8,698) (9,649) (2,979) (2,949)
--------- --------- -------- --------
Total $ 14,377 $ 14,389 $ 7,599 $ 6,358
========= ========= ======== ========
September 30, 2002 Dec. 31, 2001
=====================================
Assets:
Minerals $ 131,549 $ 106,391
Environmental 74,489 65,216
Transportation 1,685 1,282
Corporate 21,062 22,332
Discontinued operations - 1,109
--------- ---------
Total $ 228,785 $ 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. The Company concluded that SFAS No.
133 required the change in value of this agreement to be recognized 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 September 30, 2001 of $401 has been
reflected in operating results for the period.
Note 6: ACQUISITIONS
On May 1, 2002, the Company acquired all of the outstanding stock of Colin
Stewart Minchem, Ltd. (CSM), a specialty minerals and chemical company located
in the United Kingdom, in exchange for cash. The aggregate purchase price was
$15,164. CSM supplies intermediate products, industrial minerals, inorganic
chemicals, and additives to customers operating in the laundry detergent,
packaging, oil exploration and water treatment markets. The acquisition of CSM
provides an additional platform for the Company to expand its global operations
and presence. The results of CSM's operations have been included in the
condensed consolidated financial statements from the acquisition date.
The following tables summarize the estimated fair values of the assets
acquired and liabilities assumed at the date of the acquisition and unaudited
pro forma results of operations as if the acquisition of CSM had occurred on
January 1, 2001. The unaudited pro forma information is not necessarily
indicative of the combined results that would have occurred had the acquisition
taken place at the beginning of the periods presented, nor is it necessarily
indicative of future results.
9
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
- --------------------------------------------------------------------------------
At April 30,
2002
- --------------------------------------------------------------------------------
Current assets $ 5,940
Fixed assets 10,520
Goodwill 3,779
-------------
Total assets acquired $ 20,239
-------------
Current liabilities $ 3,023
Other liabilities 2,052
-------------
Total liabilities assumed $ 5,075
-------------
-------------
Net assets acquired $ 15,164
=============
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma Pro Forma
Nine Months Ended Nine Months Ended Three Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
----------------------------------------------------------------------------------------
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $ 231,305 $ 231,191 $ 85,196 $ 81,791
Income from continuing operations $ 10,227 $ 12,106 $ 4,858 $ 4,926
Net income 10,227 11,569 4,858 4,669
Basic earnings per share 0.36 0.41 0.17 0.17
Diluted earnings per share 0.34 0.38 0.16 0.15
- -------------------------------------------------------------------------------------------------------------------------------
The purchase price allocation has not been finalized as management is in
the process of analyzing the fair values of the acquired assets and liabilities.
Note 7: 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. In the
fourth quarter of 2001, the Company announced the sale of its U.K. metalcasting
operations. The U.K. cat litter and metalcasting businesses were both components
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 businesses for all periods presented.
Summary operating results for 2001 were as follows:
- ---------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
U.K. metalcasting and cat litter businesses September 30, September 30,
----------------------------------------------
2001 2001
- ---------------------------------------------------------------------------------------------------------
Net sales $ 7,330 $ 2,178
Operating loss (807) (264)
Income tax benefit 346 103
Net loss (355) (257)
- ---------------------------------------------------------------------------------------------------------
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.
Three Months Ended September 30, 2002 vs. 2001
Net sales for the 2002 three month period were $85.2 million, which
represented an increase of $11.1 million, or 14.9% from 2001 levels. Mineral
segment revenues increased by $8.3 million and environmental segment revenues
increased by $2.7 million. As previously reported, the Company acquired Colin
Stewart Minchem Limited (CSM), a U.K.-based specialty minerals company,
effective from May 1, 2002. Revenues from CSM accounted for 73.0% of the
Company's increase in sales from the 2001 period.
Gross profit increased by $3.2 million, or 17.7%, to $21.3 million in the
third quarter of 2002. As reported above, increased revenues from the minerals
segment resulted in $1.9 million of gross profit improvement. Increased revenues
and lower unit production costs at the domestic operations of the Company's
environmental segment accounted for the remaining increase in gross profit from
the prior year period. Gross margin for the period was 25.0% compared to 24.4%
in the previous year's quarter.
General, selling and administrative expenses increased by $2.0 million for
the third quarter of 2002 to $13.7 million. Additional overheads incurred at the
minerals segment, principally related to the CSM acquisition, contributed
approximately 51% of the increase. Approximately 43% of the increase in expenses
was attributed to the environmental segment.
Operating profit for the period was $7.6 million which was an increase of
$1.2 million, or approximately 20%, from the third quarter of 2001. The increase
followed the improvement in sales and gross profit.
Investment income of $0.4 million in the third quarter of 2001 was
attributed to the temporary investment of the remaining proceeds from the sale
of the absorbent polymers segment in June 2000. The Company utilized these
proceeds to reduce its long-term debt in September of 2001. Interest expense in
the third quarter of 2002 declined by $0.2 million from the prior year quarter,
or 59%, to $0.2 million due principally to lower average interest rates and
borrowing levels.
Income tax expense was $2.7 million in the current year quarter
comparedwith $2.1 million in the prior year period. The increase was due to
higher pre-tax income in the current year quarter together with an increase in
the effective income tax rate to 36.0% in the current year quarter compared with
33.3% in the prior year period. Earnings from businesses located in higher tax
regions accounted for the increase in the effective tax rate.
Losses from discontinued operations reported in the third quarter of 2001
represent operating results, after income taxes, of the U.K. metalcasting and
pet products businesses. The U.K. metalcasting
11
and pet products businesses were disposed of in the fourth quarter and first
quarter of 2001, respectively.
Net income for the third quarter was $4.9 million compared with $4.1
million in the prior year period, which was an increase of approximately 19%.
The increase was primarily attributed to higher operating profit earned in the
current year period. Diluted earnings per share for the current year quarter was
$0.16 compared with $0.13 per share in the prior year period, which was an
increase of approximately 23%. Lower average common and common equivalent shares
outstanding as well as higher net income contributed to the increase in earnings
per share.
Segment Analysis
- ----------------------------------------------------------------------------------------------------------------------
Quarter Ended September 30,
Minerals -----------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------
Product sales $ 42,608 91.6% $ 34,316 89.8%
Shipping revenue 3,894 8.4% 3,886 10.2%
-------- ------- -------- -------
Net sales 46,502 100.0% 38,202 100.0% 8,300 21.7%
-------- ------- -------- -------
Cost of sales - product 33,861 72.8% 27,421 71.8%
Cost of sales - shipping 3,894 8.4% 3,886 10.2%
-------- ------- -------- -------
Cost of sales 37,755 81.2% 31,307 82.0%
-------- ------- -------- -------
Gross profit 8,747 18.8% 6,895 18.0% 1,852 26.9%
General, selling and
administrative expenses 4,361 9.4% 3,365 8.8% 996 29.6%
-------- ------- -------- ------- -------
Operating profit 4,386 9.4% 3,530 9.2% 856 24.2%
- ----------------------------------------------------------------------------------------------------------------------
Effective from May 1, 2002, the Company acquired a U.K. specialty minerals
business, Colin Stewart Minchem (CSM). The segment includes the operating
results for CSM in the third quarter of 2002. A pro forma presentation of the
operating results of the Company assuming the CSM acquisition had been completed
on January 1, 2001 is included in Note 6 to the condensed consolidated financial
statements included with this filing.
Approximately 97% of the increase in sales for the third quarter of 2002
was attributed to CSM. Within the segment's other operations, higher revenue
from the domestic metalcasting business was offset by declines in the pet
products and oil well businesses.
The increase in gross profit primarily followed the improvement in sales.
Gross margin increased by 80 basis points from the prior year quarter due to
improved production costs incurred in the segment's domestic operations.
General, selling and administrative expenses increased primarily due to CSM
and increased research and market development costs associated with the
segment's health and beauty solutions business.
12
- ----------------------------------------------------------------------------------------------------------------------------
Environmental Quarter Ended September 30,
------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Product sales $ 30,637 92.2% $ 28,173 92.2%
Shipping revenue 2,579 7.8% 2,377 7.8%
--------- -------- --------- --------
Net sales 33,216 100.0% 30,550 100.0% 2,666 8.7%
--------- -------- --------- --------
Cost of sales - product 18,951 57.1% 17,909 58.6%
Cost of sales - shipping 2,579 7.7% 2,377 7.8%
--------- -------- --------- --------
Cost of sales 21,530 64.8% 20,286 66.4%
--------- -------- --------- --------
Gross profit 11,686 35.2% 10,264 33.6% 1,422 13.9%
General, selling and
administrative expenses 5,736 17.3% 4,892 16.0% 844 17.3%
--------- -------- --------- -------- --------
Operating profit 5,950 17.9% 5,372 17.6% 578 10.8%
- ----------------------------------------------------------------------------------------------------------------------------
Net sales increased by $2.7 million from the prior year period.
Approximately 63% of the increase was attributed to export shipments of lining
products. Increased lining product shipments in the domestic market and revenues
generated from the European offshore business unit also contributed to the
improvement in net sales from the prior year period.
Gross margin improved by 160 basis points from the prior year period.
Increased sales and lower unit production costs at the segment's domestic
operations largely contributed to the gross profit and margin improvement. The
lower unit production costs were the result of favorable raw material pricing
and higher production volumes.
General, selling and administrative expenses increased due to higher
compensation and benefit expenses, information technology costs, marketing and
promotion costs, and research and development spending.
- ----------------------------------------------------------------------------------------------------------------------------
Transportation Quarter Ended September 30,
------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Net sales $ 8,591 100.0% $ 8,832 100.0% $ (241) -2.7%
Cost of sales 7,710 89.7% 7,878 89.2%
--------- --------- --------- --------
Gross profit 881 10.3% 954 10.8% (73) -7.7%
General, selling and
administrative expenses 639 7.5% 549 6.2% 90 16.4%
--------- --------- --------- -------- -------
Operating profit 242 2.8% 405 4.6% (163) -40.2%
- ----------------------------------------------------------------------------------------------------------------------------
Net sales declined due to lower customer shipments. Increased general,
selling and administrative expenses were associated with higher compensation and
information technology costs.
13
- -------------------------------------------------------------------------------------------------------
Corporate Quarter Ended September 30,
---------------------------------------------
2002 2001 2002 vs. 2001
- -------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------------------
Intersegment shipping sales $ (3,113) $ (3,468)
Intersegment shipping costs (3,113) (3,468)
--------- --------
Gross profit - -
Corporate general, selling
and administrative expenses 1,863 1,837 26 1.4%
Nanocomposite business
development expenses 1,116 1,112 4 0.4%
--------- -------- ---------
Operating loss (2,979) (2,949) (30) -1.0%
- -------------------------------------------------------------------------------------------------------
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.
Corporate selling and administrative expenses include information
technology, legal and professional, human resources, investor relations and
certain officer and director costs. These expenses were relatively the same as
the prior year quarter levels.
Nanocomposite business development expenses are comprised of production,
research and development and marketing costs. Expenses were relatively flat
compared to the prior year third quarter.
Nine Months Ended September 30, 2002 vs. 2001
Net sales for the nine month period ended September 30, 2002 increased by
$12.9 million to $221.1 million, or 6.2%, from the prior year period. Mineral
segment sales increased by $11.9 million while environmental segment revenues
increased by $1.5 million. Transportation segment revenues declined by $0.9
million from the prior year period.
Gross profit increased by $3.4 million, or 6.8%, for the nine month
period. Gross margin was 24.1% for the nine months ended September 30, 2002
compared to 24.0% for the prior year period. The improvement in gross profit
followed the increase in sales.
General, selling and administrative expenses increased by $3.4 million,
or 9.5%, from the prior year period. Minerals segment overheads increased by
$2.0 million while environmental segment overheads increased by $2.2 million.
Corporate overheads declined by $0.8 million for the nine months period.
Operating profit for the nine months ended September 30, 2002 equaled the
prior year period result totaling $14.4 million. Operating margin declined by 40
basis points to 6.5% for the 2002 reporting period. The decline is attributed to
the large relative increase in general, selling and administrative expenses due
to the CSM acquisition and higher overall costs in certain areas.
Investment income of $2.9 million recorded in the nine months ended
September 30, 2001 was attributed to the temporary investment of the remaining
proceeds from the sale of the absorbent
14
polymers segment in June 2000. After payment of the remaining income taxes
attributed to the sale of the segment, the Company utilized a portion of these
proceeds to reduce its long-term debt in September of 2001. Consequently,
interest expense for the nine months ended September 30, 2002 declined by $1.6
million from the prior year quarter, or 80%, to $0.4 million.
In the nine month period ended September 30, 2001 the Company recorded a
loss of $401 thousand due to the change in value of an interest rate swap
contract. The loss was recognized under the 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 effective income tax rate for the nine months ended September 30,
2002 was 36% compared to 33% for the prior year period. The increased tax rate
in the current year was attributed to a greater portion of earnings generated in
regions with higher income tax rates.
The loss from discontinued operations reported in the 2001 period
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.
Income from joint ventures was $0.5 million for the nine months ended
September 30, 2002 compared with $0.3 million for the prior year period. The
increase was attributed to improved earnings recorded from an investment in an
Indian minerals company. The Company owns approximately 20% of the shares in
this Indian minerals company.
Net income was $9.5 million for the nine months ended September 30, 2002
compared to $9.8 million for the prior year period. The decline in net income
was primarily attributed to a higher effective tax rate in the current year
period and higher non-operating income realized in the 2001 period.
Segment Analysis
- ----------------------------------------------------------------------------------------------------------------------------
Minerals Nine Months Ended September 30,
------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Product sales $ 114,409 91.3% $ 101,676 89.6%
Shipping revenue 10,921 8.7% 11,803 10.4%
--------- -------- --------- --------
Net sales 125,330 100.0% 113,479 100.0% 11,851 10.4%
--------- -------- --------- --------
Cost of sales - product 91,666 73.1% 80,942 71.3%
Cost of sales - shipping 10,921 8.8% 11,803 10.4%
--------- -------- --------- --------
Cost of sales 102,587 81.9% 92,745 81.7%
--------- -------- --------- --------
Gross profit 22,743 18.1% 20,734 18.3% 2,009 9.7%
General, selling and
administrative expenses 11,836 9.4% 9,874 8.7% 1,962 19.9%
--------- -------- --------- -------- -------
Operating profit 10,907 8.7% 10,860 9.6% 47 0.4%
- ----------------------------------------------------------------------------------------------------------------------------
CSM contributed sales of $12.8 million since its acquisition, which was
effective from May 1, 2002. Excluding CSM, mineral segment revenues declined by
$1.0 million for the nine months ended
15
September 30, 2002. The segment recorded lower sales in its oil drilling, export
and pet products businesses which totaled approximately $5.0 million. Sales from
the metalcasting and international business units increased by a total of
approximately $4.0 million from the prior year period.
Gross profit, after excluding CSM, improved by approximately $0.5 million
from the prior year period despite lower sales. The improvement was driven by
lower unit production costs.
General, selling and administrative expenses associated with CSM were the
primary cause for the $2.0 million increase in the current year. The 2002 period
also experienced higher research and development and marketing costs related to
the segment's health and beauty solutions business.
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
Environmental ------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ---------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
Product sales $ 73,996 92.8% $ 72,409 92.5%
Shipping revenue 5,739 7.2% 5,829 7.5%
-------- ------ -------- ------
Net sales 79,735 100.0% 78,238 100.0% 1,497 1.9%
-------- ------ -------- ------
Cost of sales - product 45,987 57.7% 45,944 58.7%
Cost of sales - shipping 5,739 7.2% 5,829 7.5%
-------- ------ -------- ------
Cost of sales 51,726 64.9% 51,773 66.2%
-------- ------ -------- ------
Gross profit 28,009 35.1% 26,465 33.8% 1,544 5.8%
General, selling and
administrative expenses 16,538 20.7% 14,361 18.4% 2,177 15.2%
-------- ------ -------- ------ ------
Operating profit 11,471 14.4% 12,104 15.4% (633) -5.2%
- ---------------------------------------------------------------------------------------------------------------------
Net sales improved due to higher shipments of lining technology products to
domestic and international markets. The European offshore business also
increased from prior year sales.
Gross profit increased commensurate with sales. Gross margin improved by
130 basis points primarily from lower unit production costs at the segment's
U.S. production operations.
General, selling and administrative expenses increased due to higher
compensation and benefit expenses, information technology costs, marketing and
promotion costs, and research and development spending.
- ----------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
Transportation --------------------------------------------------------------------
2002 2001 2002 vs. 2001
- ----------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------
Net sales $ 24,053 100.0% $ 24,907 100.0% $ (854) -3.4%
Cost of sales 21,570 89.7% 22,246 89.3%
-------- ------ -------- ------
Gross profit 2,483 10.3% 2,661 10.7% (178) -6.7%
General, selling and
administrative expenses 1,786 7.4% 1,587 6.4% 199 12.5%
-------- ------ -------- ------ ------
Operating profit 697 2.9% 1,074 4.3% (377) -35.1%
- ----------------------------------------------------------------------------------------------------------------
Net sales declined due to lower customer shipments. Increased general,
selling and administrative expenses were associated with higher information
technology and compensation costs.
16
- -----------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
Corporate ----------------------------------------------------------
2002 2001 202 vs. 2001
- -----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------------------
Intersegment shipping sales $ (8,046) $ (8,457)
Intersegment shipping costs (8,046) (8,457)
-------- --------
Gross profit - -
Corporate general, selling
and administrative expenses 5,342 6,123 (781) -12.8%
Nanocomposite business
development expenses 3,356 3,526 (170) -4.8%
-------- -------- ------
Operating loss (8,698) (9,649) 951 -9.9%
- -----------------------------------------------------------------------------------------------------------
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 60% of the lower corporate administrative expenses in the
current year period were 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 decline in expenses is
associated with a restructuring of the business that was implemented in the
second quarter of 2001.
Liquidity and Capital Resources
Working capital was $76.0 million as of September 30, 2002 compared to
$70.1 million at December 31, 2001. The current ratio was 2.86-to-1 as of
September 30, 2002 compared to 3.26-to-1 at December 31, 2001.
For the nine months ended September 30, 2002, cash flow from operating
activities was $19.2 million compared to $13.3 million for the prior year
period. The Company also used $5.8 million of cash for discontinued operations
in the nine months ended September 30, 2001.
Accounts receivable were $60.4 million at September 30, 2002 which was an
increase of $16.8 million and $4.7 million from December 31, 2001 and September
30, 2001, respectively. Historically, the accounts receivable balance is highest
at the end of September due to higher sales recognized in the third quarter.
Days average sales outstanding in accounts receivable was 64 days at September
30, 2002, compared to 66 days at September 30, 2001.
The Company invested $10.1 million in capital expenditures in the current
year period compared to $8.7 million in the prior year period. A total of $17.0
million, including transaction costs, was utilized for acquisition of CSM and
the net assets of FNG Industries. Note 6 of the condensed consolidated financial
statements presents further information related to the CSM acquisition.
During the first nine months of 2002, a total of approximately 1.2 million
shares of the Company's common stock were repurchased at an aggregate value of
$6.8 million under the
17
authorization granted by the Company's board of directors in February 2001 and
May 2002. Approximately $5.4 million remains in the May 2002 stock repurchase
authorization as of September 30, 2002. Dividends paid in the nine month period
were $1.8 million. The Company received approximately $1.4 million from
employees, directors and officers upon exercise of stock options granted under
incentive and non-qualified plans.
Outstanding debt as of September 30, 2002 was $29.1 million which was an
increase of $15.8 million from December 31, 2001. Cash outlays for acquisitions
accounted for a majority of the increase in long-term debt in the nine month
period. Long-term debt represented 17% of total capitalization as of September
30, 2002 compared to 9% 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 September 30, 2002
the Company had approximately $102 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 identifiable 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 must 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
is reported as a change in accounting principle. In addition to the transitional
impairment test, the required annual impairment test must also be 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.
18
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 Note 5 "Derivatives"
under Item 1. There have been no material changes in the Company's market risk
during the nine months ended September 30, 2002. See disclosures as of December
31, 2001 in the Form 10-K, Item 7A.
Item 4: Controls and Procedures
Within the 90-day period prior to the filing of the report, an evaluation
was performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the Company's disclosure controls and
procedures. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect those controls subsequent to the
date the evaluation was carried out.
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, 2002.
19
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: October 26, 2002 /s/ Lawrence E. Washow
------------------------ --------------------------------------------
Lawrence E. Washow
President and Chief Executive Officer
Date: October 26, 2002 /s/ Gary L. Castagna
------------------------ --------------------------------------------
Gary L. Castagna
Senior Vice President and Chief Financial
Officer and Principal Accounting Officer
CERTIFICATIONS
11/01/2002 Lawrence E. Washow
11/01/2002 Gary L. Castagna
20
I, Lawrence E. Washow, certify that:
I have reviewed this quarterly report on Form 10-Q of AMCOL International
Corporation;
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;
The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is
being prepared;
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
The registrant's other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 1, 2002 /s/ Lawrence E. Washow
--------------------- ------------------------
Lawrence E. Washow
President and Chief Executive Officer
21
I, Gary L. Castagna, certify that:
I have reviewed this quarterly report on Form 10-Q of AMCOL International
Corporation;
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;
The registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is
being prepared;
evaluatedthe effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
The registrant's other certifying officer and I have indicated in this quarterly
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 1, 2002 /s/ Gary L. Castagna
--------------------- ----------------------
Gary L. Castagna
Senior Vice President, Chief Financial
Officer and Principal Accounting Officer
22
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 (22)
10.27 Employment Agreement dated March 15, 2002 by and between Registrant and
Peter M. Maul (22)
10.28 Employment Agreement dated March 15, 2002 by and between Registrant and
Gary Castagna (22)
10.29 Employment Agreement dated March 15, 2002 by and between Registrant and
Ryan F. McKendrick (22)
10.30 Employment Agreement dated March 15, 2002 by and between Registrant and
Lawrence E. Washow (22)
99.10 Certification of Periodic Financial Report Pursuant to 18 U.S.C.
Section 1350, dated November 1, 2002
** 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.
23
(6) Exhibit is incorporated by reference to the Registrant's Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1993.
(7) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
September 30, 1994.
(8) Exhibit is incorporated by reference to the Registrant's Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1994.
(9) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
September 30, 1995.
(10) Exhibit is incorporated by reference to the Registrant's Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1995.
(11) Exhibit is incorporated by reference to the Registrant's Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1996.
(13) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
June 30, 1997.
(15) Exhibit is incorporated by reference to the Registrant's Form S-8 (File
333-56017) filed with the Securities and Exchange Commission on June 4,
1998.
(16) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
June 30, 1998.
(18) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
September 30, 1999.
(19) Exhibit is incorporated by reference to the Registrant's Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1999.
(20) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
June 30, 2000.
(21) Exhibit is incorporated by reference to the Registrant's Form S-8 (File
333-68664) filed with the Securities and Exchange Commission on August
30, 2001.
(22) Exhibit is incorporated by reference to the Registrant's Form 10-Q
filed with the Securities and Exchange Commission for the quarter ended
March 31, 2002.
24