UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the quarterly period ended June 30, 2006 | |
or | |
|
|
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to______________ to ______________ |
|
Commission file number 0-15661 |
|
AMCOL INTERNATIONAL CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware |
| 36-0724340 |
| ||
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois |
| 60004-7803 |
| ||
(Address of principal executive offices) |
| (Zip Code) |
(847) 394-8730 |
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x | No o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o | No x |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
| Outstanding at July 31, 2006 |
| ||
(Common stock, $.01 par value) |
| 29,981,579 Shares |
AMCOL INTERNATIONAL CORPORATION
INDEX
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| Page No. |
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Part I - Financial Information |
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Item 1 | Financial Statements Condensed Consolidated Balance Sheets – June 30, 2006 and December 31, 2005 | 3 |
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| Condensed Consolidated Statements of Operations – three and six months ended June 30, 2006 and 2005 | 5 |
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| 6 | |
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| Condensed Consolidated Statements of Cash Flows – six months ended June 30, 2006 and 2005 | 7 |
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| 8 | |
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Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
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Item 3 | 30 | |
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Item 4 | 30 | |
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Part II - Other Information |
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Item 1A | 31 | |
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Item 2 | 31 | |
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Item 4 | 32 | |
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Item 6 | 32 |
2
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Item 1. Financial Statements
ASSETS |
| June 30, |
| December 31, |
| ||
|
|
| |||||
|
| (unaudited) |
| * |
| ||
Current assets: |
|
|
|
|
|
|
|
Cash |
| $ | 13,743 |
| $ | 15,997 |
|
Accounts receivable, net |
|
| 123,437 |
|
| 101,725 |
|
Inventories |
|
| 72,894 |
|
| 75,455 |
|
Prepaid expenses |
|
| 12,396 |
|
| 9,068 |
|
Current deferred tax assets |
|
| 3,863 |
|
| 3,698 |
|
Income taxes receivable |
|
| 4,204 |
|
| 4,864 |
|
Assets held for sale |
|
| 401 |
|
| 402 |
|
|
|
|
| ||||
Total current assets |
|
| 230,938 |
|
| 211,209 |
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|
|
| ||||
Investment in and advances to affiliates and joint ventures |
|
| 23,295 |
|
| 19,730 |
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|
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|
| ||||
Property, plant, equipment, and mineral rights and reserves: |
|
|
|
|
|
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Land and mineral rights |
|
| 15,652 |
|
| 12,761 |
|
Depreciable assets |
|
| 270,958 |
|
| 252,430 |
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|
|
|
| ||||
|
|
| 286,610 |
|
| 265,191 |
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Less: accumulated depreciation |
|
| 174,780 |
|
| 165,127 |
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|
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|
| ||||
|
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| 111,830 |
|
| 100,064 |
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| ||||
Other assets: |
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|
|
|
|
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Goodwill |
|
| 21,719 |
|
| 20,644 |
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Intangible assets, net |
|
| 2,493 |
|
| 3,009 |
|
Deferred tax assets |
|
| 5,043 |
|
| 4,579 |
|
Other assets |
|
| 10,994 |
|
| 9,294 |
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|
|
|
| ||||
|
|
| 40,249 |
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| 37,526 |
|
|
|
|
| ||||
|
| $ | 406,312 |
| $ | 368,529 |
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|
Continued…
3
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY |
| June 30, |
| December 31, |
| ||
|
|
| |||||
|
| (unaudited) |
| * |
| ||
Current liabilities: |
|
|
|
|
|
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Accounts payable |
| $ | 28,568 |
| $ | 24,722 |
|
Accrued liabilities |
|
| 32,925 |
|
| 38,547 |
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|
|
| ||||
Total current liabilities |
|
| 61,493 |
|
| 63,269 |
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Long-term debt |
|
| 52,790 |
|
| 34,838 |
|
|
|
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Minority interests in subsidiaries |
|
| 262 |
|
| 259 |
|
Deferred compensation |
|
| 7,691 |
|
| 7,045 |
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Other liabilities |
|
| 14,639 |
|
| 14,262 |
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|
|
|
| ||||
|
|
| 22,592 |
|
| 21,566 |
|
|
|
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| ||||
Stockholders’ equity: |
|
|
|
|
|
|
|
Common stock |
|
| 320 |
|
| 320 |
|
Additional paid in capital |
|
| 75,500 |
|
| 72,194 |
|
Retained earnings |
|
| 198,859 |
|
| 184,125 |
|
Accumulated other comprehensive income |
|
| 12,858 |
|
| 8,644 |
|
|
|
|
| ||||
|
|
| 287,537 |
|
| 265,283 |
|
Less: |
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|
|
|
|
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Treasury stock |
|
| 18,100 |
|
| 16,427 |
|
|
|
|
| ||||
|
|
| 269,437 |
|
| 248,856 |
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|
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|
| ||||
|
| $ | 406,312 |
| $ | 368,529 |
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*Condensed from audited financial statements. |
The accompanying notes are an integral part of these condensed consolidated financial statements. |
4
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
|
| Six Months Ended |
| Three Months Ended |
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| 2006 |
| 2005 |
| 2006 |
| 2005 |
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Continuing operations |
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Net sales |
| $ | 295,465 |
| $ | 258,394 |
| $ | 152,701 |
| $ | 136,344 |
|
Cost of sales |
|
| 220,041 |
|
| 192,146 |
|
| 113,006 |
|
| 99,776 |
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Gross profit |
|
| 75,424 |
|
| 66,248 |
|
| 39,695 |
|
| 36,568 |
|
General, selling and administrative expenses |
|
| 48,549 |
|
| 44,552 |
|
| 24,867 |
|
| 23,107 |
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| ||||||||
Operating profit |
|
| 26,875 |
|
| 21,696 |
|
| 14,828 |
|
| 13,461 |
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| ||||||||
Other income (expense): |
|
|
|
|
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|
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Interest expense, net |
|
| (1,095 | ) |
| (805 | ) |
| (618 | ) |
| (444 | ) |
Other, net |
|
| 532 |
|
| (991 | ) |
| 320 |
|
| (886 | ) |
|
|
|
|
|
| ||||||||
|
|
| (563 | ) |
| (1,796 | ) |
| (298 | ) |
| (1,330 | ) |
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| ||||||||
Income before income taxes and income from affiliates and joint ventures |
|
| 26,312 |
|
| 19,900 |
|
| 14,530 |
|
| 12,131 |
|
Income tax expense |
|
| 7,268 |
|
| 4,457 |
|
| 3,860 |
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| 2,973 |
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| ||||||||
Income before income from affiliates and joint ventures |
|
| 19,044 |
|
| 15,443 |
|
| 10,670 |
|
| 9,158 |
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Income from affiliates and joint ventures |
|
| 2,586 |
|
| 1,027 |
|
| 1,249 |
|
| 360 |
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| ||||||||
Income from continuing operations |
|
| 21,630 |
|
| 16,470 |
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| 11,919 |
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| 9,518 |
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Discontinued operations: |
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|
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Gain on disposal (including income tax benefits of $5,255 in 2005) |
|
| — |
|
| 4,755 |
|
| — |
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| 4,755 |
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Income from discontinued operations |
|
| — |
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| 4,755 |
|
| — |
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| 4,755 |
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|
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| ||||||||
Net income |
| $ | 21,630 |
| $ | 21,225 |
| $ | 11,919 |
| $ | 14,273 |
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|
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| ||||||||
Weighted average common shares outstanding |
|
| 29,880 |
|
| 29,407 |
|
| 29,971 |
|
| 29,480 |
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|
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|
|
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| ||||||||
Weighted average common and common equivalent shares outstanding |
|
| 31,011 |
|
| 30,772 |
|
| 30,937 |
|
| 30,773 |
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| ||||||||
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
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Continuing operations |
| $ | 0.72 |
| $ | 0.56 |
| $ | 0.40 |
| $ | 0.32 |
|
Discontinued operations - Gain on disposal |
|
| — |
|
| 0.16 |
|
| — |
|
| 0.16 |
|
|
|
|
|
|
| ||||||||
Basic earnings per share |
| $ | 0.72 |
| $ | 0.72 |
| $ | 0.40 |
| $ | 0.48 |
|
|
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| ||||||||
Diluted earnings per share: |
|
|
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|
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Continuing operations |
| $ | 0.70 |
| $ | 0.54 |
| $ | 0.39 |
| $ | 0.31 |
|
Discontinued operations - Gain on disposal |
|
| — |
|
| 0.15 |
|
| — |
|
| 0.15 |
|
|
|
|
|
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| ||||||||
Diluted earnings per share |
| $ | 0.70 |
| $ | 0.69 |
| $ | 0.39 |
| $ | 0.46 |
|
|
|
|
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| ||||||||
Dividends declared per share |
| $ | 0.23 |
| $ | 0.18 |
| $ | 0.12 |
| $ | 0.09 |
|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
|
| Six Months Ended |
| Three Months Ended |
| ||||||||
|
|
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| ||||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
|
|
|
|
|
| ||||||||
Net income |
| $ | 21,630 |
| $ | 21,225 |
| $ | 11,919 |
| $ | 14,273 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability |
|
| — |
|
| 169 |
|
| — |
|
| 55 |
|
Foreign currency translation adjustment |
|
| 4,214 |
|
| (5,320 | ) |
| 3,283 |
|
| (3,822 | ) |
|
|
|
|
|
| ||||||||
Comprehensive income |
| $ | 25,844 |
| $ | 16,074 |
| $ | 15,202 |
| $ | 10,506 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
| Six Months Ended June 30, |
| ||||
|
|
| |||||
|
| 2006 |
| 2005 |
| ||
|
|
|
| ||||
Cash flow from operating activities: |
|
|
|
|
|
|
|
Net income |
| $ | 21,630 |
| $ | 21,225 |
|
Adjustments to reconcile from net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
Gain on disposal of discontinued operations |
|
| — |
|
| (4,755 | ) |
Depreciation, depletion, and amortization |
|
| 10,089 |
|
| 9,828 |
|
Changes in assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
|
|
Decrease (increase) in current assets |
|
| (22,563 | ) |
| (13,630 | ) |
Decrease (increase) in noncurrent assets |
|
| (1,895 | ) |
| 400 |
|
Increase (decrease) in current liabilities |
|
| (647 | ) |
| (4,962 | ) |
Increase (decrease) in noncurrent liabilities |
|
| 1,024 |
|
| 321 |
|
Other |
|
| (1,838 | ) |
| (1,389 | ) |
|
|
|
| ||||
Net cash provided by (used in) operating activities |
|
| 5,800 |
|
| 7,038 |
|
|
|
|
| ||||
Cash flow from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
| (20,525 | ) |
| (11,733 | ) |
Acquisitions, net of cash |
|
| (1,270 | ) |
| (1,632 | ) |
Other |
|
| 219 |
|
| 75 |
|
|
|
|
| ||||
Net cash used in investing activities |
|
| (21,576 | ) |
| (13,290 | ) |
|
|
|
| ||||
Cash flow from financing activities: |
|
|
|
|
|
|
|
Net change in outstanding debt |
|
| 15,168 |
|
| 10,255 |
|
Proceeds from sales of treasury stock |
|
| 2,214 |
|
| 944 |
|
Purchases of treasury stock |
|
| (3,219 | ) |
| — |
|
Dividends paid |
|
| (6,893 | ) |
| (5,324 | ) |
Excess tax benefits from stock-based compensation |
|
| 1,931 |
|
| — |
|
|
|
|
| ||||
Net cash provided by financing activities |
|
| 9,201 |
|
| 5,875 |
|
|
|
|
| ||||
Effect of foreign currency rate changes on cash |
|
| 4,321 |
|
| (2,779 | ) |
|
|
|
| ||||
Net increase (decrease) in cash and cash equivalents |
|
| (2,254 | ) |
| (3,156 | ) |
|
|
|
| ||||
Cash and cash equivalents at beginning of period |
|
| 15,997 |
|
| 17,594 |
|
|
|
|
| ||||
Cash and cash equivalents at end of period |
| $ | 13,743 |
| $ | 14,438 |
|
|
|
|
| ||||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
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Cash paid for: |
|
|
|
|
|
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|
Interest |
| $ | 1,089 |
| $ | 775 |
|
|
|
|
| ||||
Income taxes |
| $ | 5,033 |
| $ | 2,648 |
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
Note 1: | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Company Operations
AMCOL International Corporation (the Company) operates in two principal segments: minerals and environmental. We also operate a transportation business, whose activities include delivering our own products. Intersegment revenues are eliminated in the corporate segment. The composition of our revenues by segment is as follows:
|
| Six Months Ended |
| Three Months Ended |
| ||||||||
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|
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| ||||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
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| ||||||||
Minerals |
|
| 54 | % |
| 57 | % |
| 51 | % |
| 55 | % |
Environmental |
|
| 41 | % |
| 37 | % |
| 44 | % |
| 39 | % |
Transportation |
|
| 9 | % |
| 9 | % |
| 8 | % |
| 9 | % |
Intersegment Shipping |
|
| -4 | % |
| -3 | % |
| -3 | % |
| -3 | % |
|
|
|
|
|
| ||||||||
|
|
| 100 | % |
| 100 | % |
| 100 | % |
| 100 | % |
|
|
|
|
|
|
Further descriptions of our products, principal markets and the relative significance of our operations are included in Note 4, “Business Segment Information.”
Basis of Presentation
The financial information included herein has been prepared by management and, other than the condensed consolidated balance sheet as of December 31, 2005, is unaudited. The condensed consolidated balance sheet as of December 31, 2005 has been derived from, but does not include all of the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2005. The information furnished herein includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations and cash flows for the interim periods ended June 30, 2006 and 2005, and the financial position of the Company as of June 30, 2006, and all such adjustments are of a normal recurring nature. Management recommends that the accompanying condensed consolidated financial information be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2005, as amended.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
8
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
New Accounting Standards
As discussed in Note 5, we adopted the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123(R), Share Based Payment effective January 1, 2006.
We adopted Emerging Issues Task Force (“EITF”) Issue No. 04-6, Accounting for Stripping Costs Incurred during Production in the Mining Industry, effective January 1, 2006. This guidance requires that, once production has commenced from a mine, production-related stripping costs be accounted for as a current cost of production. It also requires that these costs be included within inventories to the extent that minerals extracted from the mine are still on hand at each period end. Issue 04-6 does not address the accounting for stripping costs incurred in the pre-production phase of a mine site. These costs are deferred and amortized on a units-of-production basis over the estimated life of each mine site. Our adoption of this guidance did not have a material impact on our consolidated financial statements. Deferred stripping costs, which had been reported within inventory in periods prior to January 1, 2006, have been reclassified into prepaid expenses.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 is effective for fiscal years beginning after December 15, 2006 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We have not yet determined the impact this standard will have when we adopt it for our fiscal year beginning January 1, 2007.
9
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
Note 2: | EARNINGS PER SHARE |
The table below provides further share information used in computing our earnings per share for the periods presented herein. Basic earnings per share was computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per share was 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.
|
| Six Months Ended |
| Three Months Ended |
| ||||||||
|
|
|
| ||||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
|
|
|
|
|
| ||||||||
Weighted average number of common shares outstanding |
|
| 29,879,651 |
|
| 29,407,401 |
|
| 29,971,338 |
|
| 29,480,365 |
|
Dilutive impact of stock options |
|
| 1,131,238 |
|
| 1,365,027 |
|
| 965,578 |
|
| 1,292,833 |
|
|
|
|
|
|
| ||||||||
Weighted average number of common and common equivalent shares for the period |
|
| 31,010,889 |
|
| 30,772,428 |
|
| 30,936,916 |
|
| 30,773,198 |
|
|
|
|
|
|
| ||||||||
Number of common shares outstanding at the end of the period |
|
| 29,990,445 |
|
| 29,707,649 |
|
| 29,990,445 |
|
| 29,707,649 |
|
|
|
|
|
|
| ||||||||
Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share |
|
| 208,036 |
|
| 195,933 |
|
| 290,950 |
|
| 293,900 |
|
|
|
|
|
|
|
Note 3: | ADDITIONAL BALANCE SHEET INFORMATION |
Inventories at June 30, 2006 have been valued using the same methods as at December 31, 2005. Our inventories are comprised of the following components:
|
| June 30, |
| December 31, |
| ||
|
|
|
| ||||
Crude stockpile inventories |
| $ | 19,219 |
| $ | 20,833 |
|
In-process inventories |
|
| 27,904 |
|
| 25,935 |
|
Other raw material, container, and supplies inventories |
|
| 25,771 |
|
| 28,687 |
|
|
|
|
| ||||
|
| $ | 72,894 |
| $ | 75,455 |
|
|
|
|
|
We mine various minerals using a surface mining process that requires the removal of overburden. Under various governmental regulations, we are obligated to restore the land comprising each mining site to its original condition at the completion of mining activity. The obligation is adjusted to reflect the passage of time and changes in estimated future cash outflows. A reconciliation of the activity within our reclamation obligation is as follows:
10
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
|
| Six Months Ended |
| Three Months Ended |
| ||
|
|
|
| ||||
|
| 2006 |
| 2006 |
| ||
|
|
|
| ||||
Balance at beginning of period |
| $ | 4,966 |
| $ | 5,071 |
|
Settlement of obligations |
|
| (504 | ) |
| (162 | ) |
Liabilities incurred and accretion expense |
|
| 1,062 |
|
| 615 |
|
|
|
|
| ||||
Balance at end of period |
| $ | 5,524 |
| $ | 5,524 |
|
|
|
|
|
A reconciliation of the activity within our accrued warranty obligation is as follows:
|
| Six Months Ended |
| Three Months> Ended |
| ||
|
|
|
| ||||
|
| 2006 |
| 2006 |
| ||
|
|
|
| ||||
Balance at beginning of period |
| $ | 1,823 |
| $ | 1,159 |
|
Charged to costs and expenses |
|
| (285 | ) |
| 19 |
|
Net settlements |
|
| (475 | ) |
| (100 | ) |
Foreign currency translation |
|
| 44 |
|
| 29 |
|
|
|
|
| ||||
Balance at end of period |
| $ | 1,107 |
| $ | 1,107 |
|
|
|
|
|
Note 4: | BUSINESS SEGMENT INFORMATION |
We operate in two principal industry segments: minerals and environmental. We also operate 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 our other segments as well as third-party customers.
We identify 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. We measure segment performance based on operating profit, which is defined as net 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 operations of that segment. Corporate assets include cash and cash equivalents, corporate leasehold improvements, the nanocomposite plant investment and other miscellaneous equipment.
11
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
The following summaries set forth certain financial information by business segment:
|
| Six Months Ended |
| Three Months Ended |
| ||||||||
|
|
|
| ||||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
|
|
|
|
|
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minerals |
| $ | 158,189 |
| $ | 148,325 |
| $ | 78,118 |
| $ | 74,877 |
|
Environmental |
|
| 121,989 |
|
| 96,138 |
|
| 66,859 |
|
| 53,834 |
|
Transportation |
|
| 25,319 |
|
| 23,580 |
|
| 12,848 |
|
| 12,595 |
|
Intersegment shipping |
|
| (10,032 | ) |
| (9,649 | ) | $ | (5,124 | ) |
| (4,962 | ) |
|
|
|
|
|
| ||||||||
Total |
| $ | 295,465 |
| $ | 258,394 |
| $ | 152,701 |
| $ | 136,344 |
|
|
|
|
|
|
| ||||||||
Operating profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minerals |
| $ | 18,238 |
| $ | 18,460 |
| $ | 9,471 |
| $ | 10,665 |
|
Environmental |
|
| 17,393 |
|
| 12,644 |
|
| 9,662 |
|
| 7,507 |
|
Transportation |
|
| 1,415 |
|
| 1,293 |
|
| 732 |
|
| 720 |
|
Corporate |
|
| (10,171 | ) |
| (10,701 | ) |
| (5,037 | ) |
| (5,431 | ) |
|
|
|
|
|
| ||||||||
Total |
| $ | 26,875 |
| $ | 21,696 |
| $ | 14,828 |
| $ | 13,461 |
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 30, 2006 |
| Dec. 31, 2005 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minerals |
| $ | 202,071 |
| $ | 186,718 |
|
|
|
|
|
|
|
Environmental |
|
| 165,706 |
|
| 146,588 |
|
|
|
|
|
|
|
Transportation |
|
| 3,205 |
|
| 3,027 |
|
|
|
|
|
|
|
Corporate |
|
| 35,330 |
|
| 32,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 406,312 |
| $ | 368,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5: | STOCK OPTION PLANS |
Prior to 2003, we accounted for our stock-based compensation awards under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost was reflected in net income prior to 2003, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.
Effective January 1, 2003, we adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and elected to apply those provisions prospectively, in accordance with SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement No. 123, to all employee awards granted, modified, or settled after January 1, 2003. Awards granted after 2002 vest over three years.
12
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
Effective January 1, 2006, we adopted SFAS 123(R), Share Based Payment, under the modified prospective transition method. This adoption neither significantly affected our statement of operations, balance sheet or statement of comprehensive income for the three and six months ended June 30, 2006 nor would it have materially affected our financial statements in prior years. Statement 123(R) does require, however, that the benefits of tax deductions in excess of recognized compensation cost be reported as a financing cash flow rather than as an operating cash flow as required prior to January 1, 2006; this has the effect of reducing net operating cash flows and increasing net financing cash flows for all periods after December 31, 2005. For the six months ended June 30, 2006, this amount was $1,931. While we can not estimate what those amounts will be in the future (because they depend on, amongst other factors, when employees exercise options), the amount of operating cash flows recognized for such excess tax deductions for the six months ended June 30, 2005 (and hence the amount that would have been reclassified as a cash inflow from financing activities if SFAS 123(R) had been applicable in the prior period) was $1,411.
Note 6: | EMPLOYEE BENEFIT PLANS |
|
| Six Months Ended |
| Three Months Ended |
| ||||||||
|
|
|
| ||||||||||
|
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| ||||
|
|
|
|
|
| ||||||||
Service cost |
|
| 869 |
|
| 925 |
|
| 434 |
|
| 463 |
|
Interest cost |
|
| 994 |
|
| 987 |
|
| 497 |
|
| 493 |
|
Expected return on plan assets |
|
| (1,260 | ) |
| (1,136 | ) |
| (630 | ) |
| (568 | ) |
Amortization of transition (asset) / obligation |
|
| — |
|
| (44 | ) |
| — |
|
| (22 | ) |
Amortization of prior service cost |
|
| 15 |
|
| 15 |
|
| 8 |
|
| 8 |
|
|
|
|
|
|
| ||||||||
Net periodic benefit cost |
|
| 618 |
|
| 747 |
|
| 309 |
|
| 374 |
|
|
|
|
|
|
|
We previously disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2005 that we expected to contribute $1,000 to our pension plan in 2006. That full contribution was made in the first quarter of 2006.
13
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
Note 7: | INCOME TAXES |
Our effective tax rate for the six months ended June 30, 2006 was 27.6%, which differs from the U.S. Federal statutory rate of 35% largely due to depletion deductions and differences in local tax rates on the income from our foreign subsidiaries. In the six month period ending June 30, 2006, we increased our provision for taxes owed by $282 largely due to provision to return differences. Excluding the effect of these differences, the effective tax rate for the period ending June 30, 2006 would have been 26.6%.
Our effective tax rate for the six months ended June 30, 2005 was 22.4%, which varies from the U.S. Federal statutory rate of 35% for the same depletion and foreign tax rates mentioned above. Additionally, the 22.4% includes a further reduction to income tax expense of $845 largely due to changes in estimates related to both our UK and domestic tax returns for 2004 and the effective tax rate used to calculate deferred taxes; excluding this benefit, the effective tax rate for the six months ended June 30, 2005 would have been 26.6%.
Note 8: | ACQUISITIONS |
We made payments of $1,270 in the six months ended June 30, 2006 to former owners of businesses we acquired pursuant to contingent payment arrangements associated with those acquisitions. These payments had the effect of increasing the amount of goodwill previously recorded. No such payments were made in the three month period ended June 30, 2006.
Note 9: | CONTINGENCIES |
We are party to a number of lawsuits arising in the normal course of business. We do not believe that any pending litigation will have a material adverse effect on our consolidated financial statements.
Note 10: | DISCONTINUED OPERATIONS |
In 2004, we filed an amended tax return seeking a refund of state taxes paid on the sale of the our absorbent polymers segment that occurred in 2000. No amounts for this refund was reflected in our financial statements prior to the quarter ended June 30, 2005. In June 2005, we successfully settled our claim with the state for $7,800 and recorded a net income tax receivable of $5,255, accrued professional fees of $500 and a gain on the sale of discontinued operations of $4,755. We received payment from the state in July 2005. No amounts relating to discontinued operations were recorded in the three or six months ended June 30, 2006.
14
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
Note 11: | SUBSEQUENT EVENT |
In July 2006, the United States Internal Revenue Service (IRS) concluded its audit of our amended income tax returns we filed in 2004 which will result in refunds of approximately $11,893, which we expect to collect in the second half of 2006. As a result of the IRS audit conclusion, we will recognize additional benefits which are not recorded in our financial statements as of June 30, 2006. In the three months ending September 30, 2006, we expect to record the following amounts: a benefit from discontinued operations of $686, a reduction to our income tax expense of $3,181, and professional fees of $661 within general, selling and administrative expenses that relate to fees payable to advisors under contingent fee arrangements.
15
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking Statements
From time to time, certain statements we make, including statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section, 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 our Company or our operations that are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, and statements relating to anticipated growth and levels of capital expenditures. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our 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 without limitation the following: actual performance in our various markets; conditions in the metalcasting and construction industries; operating costs; competition; currency exchange rates and devaluations; delays in development, production and marketing of new products; and other factors set forth from time to time in our reports filed with the Securities and Exchange Commission.
Overview
We are a global, specialty minerals company and earn our revenues and profits from a diverse group of industrial and consumer product lines. Our minerals segment operates manufacturing facilities in North America, Europe and Asia-Pacific regions and has three principal market applications: metalcasting, pet products and specialty minerals. Our environmental segment also operates manufacturing facilities in those same regions. The environmental segment’s principal markets are lining technologies, building materials and water treatment. Additionally, we have a transportation segment that provides trucking services for our domestic minerals and environmental businesses as well as third parties.
The principal mineral that we utilize to generate revenues is bentonite. We own or lease bentonite reserves in the United States, China and Australia. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India and Mexico. Bentonite deposits have varying physical properties which require us to identify which markets our reserves can serve. We believe that our understanding of bentonite properties, mining methods, processing and application to markets are the core components of our longevity and future prospects.
Our customers are engaged in various end-markets and geographies. Customers in the mineral segment range from foundries that produce castings for automotive, industrial, and transportation equipment, including heavy-duty trucks and railroad cars, to producers of consumer goods, including cat box filler, cosmetics and detergents. The customers for our lining technologies and building materials products are predominantly engineering contractors. The oilfield services customer base is primarily comprised of oil service or exploration companies. A significant portion of our products have been used in the same applications for decades and have experienced minimal technological obsolescence. A majority of our business is performed under short-term agreements; therefore, terms of sale, such as pricing and volume, can change within our fiscal year.
16
The majority of our revenues are generated in North America; consequently, the state of the United States economy impacts our revenues. Our fastest growing markets are in the Asia-Pacific and Central European regions, which have continued to outpace the United States in economic growth in recent years.
Sustainable, long-term profit growth is our primary objective. We employ a number of strategic initiatives to achieve this goal:
| • | Organic growth: The central component of our growth strategy is expansion of our product lines and market presence. We have a history of commitment to research and development and using this resource to bring innovative products to market. We believe this approach to growth offers the best probability of achieving our long-term goals at the lowest risk. |
|
|
|
| • | Globalization: We have expanded our manufacturing and marketing organizations into European and Asia-Pacific regions over the last 40 years. This operating experience enables us to expand further into emerging markets. We see the significant opportunities in the Asia-Pacific region for expanding our revenues and earnings over the long-term as a number of markets we serve, such as metalcasting and lining technologies, are expected to grow. We expect to take advantage of these growth areas either through our wholly owned subsidiaries or investments in affiliates and joint ventures. |
|
|
|
| • | Mineral development: Bentonite is a component in a majority of the products we produce. Since it is a natural material, we must continually expand our reserve base to maintain a long-term business. Our goal is to add new reserves to replace the bentointe mined each year. Furthermore, we need to assure new reserves meet the physical property requirements for our diverse product lines and are economical to mine. Our organization is committed to developing its global reserve base to meet these requirements. |
|
|
|
| • | Acquisitions: We continually seek opportunities to add complementary businesses to our portfolio of products. Over the last four years, we have acquired a number of businesses. A strong financial position will enable us to continue to acquire businesses which, in our assessment, are fairly valued and fit with our growth strategy. |
A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K, as amended, for the year ended December 31, 2005. In general, the significance of these risks has not materially changed over the past year.
17
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. We evaluate the accounting policies and estimates used to prepare the financial statements on an ongoing basis. We consider the accounting policies used in preparing our financial statements to be critical accounting policies when they are both important to the portrayal of our financial condition and results of operations, and require us to make estimates, complex judgments, and assumptions, including with respect to events which are inherently uncertain. As a result, actual results could differ from these estimates. For more information on our critical accounting policies, one should also read our Annual Report on Form 10-K, as amended, for the year ended December 31, 2005.
Analysis of Results of Operations
Following is a discussion and analysis that describes certain factors that have affected, and may continue to affect, our financial position and operating results. This discussion should be read with the accompanying condensed consolidated financial statements. In addition, as discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements in Item 1, we have reclassified certain prior year amounts to conform to the current year’s presentation. The following discussion and analysis of results of operations and financial condition are based upon such reclassified financial data.
Three months ended June 30, 2006 vs. June 30, 2005
Results of operations (in millions):
Net sales: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 152.7 |
| $ | 136.3 |
|
| 12 | % |
Net sales from base businesses (those operations owned for greater than one year) accounted for approximately 89% of the growth, or 10.7 percentage points, over the prior year period. On an operating segment basis, the environmental segment contributed approximately 80% of the growth with the minerals segment contributing the remainder.
Gross profit: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 39.7 |
| $ | 36.6 |
|
| 9 | % |
Margin |
|
| 26.0 | % |
| 26.8 | % |
| N/A |
|
Gross profit growth was hampered by a one-time benefit recorded in the second quarter of 2005. The State of Montana exempted us from payment of certain mining-related taxes which totaled approximately $1.9 million. After factoring out this benefit from the 2005 results, our gross profit would have increased by 14% and gross margin would have increased by 54 basis points.
18
General, selling & administrative expenses: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 24.9 |
| $ | 23.1 |
|
| 8 | % |
Higher personnel and operating expenses in the environmental segment were the primary causes for the increase in G, S &A over the second quarter of 2005.
Operating profit: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 14.8 |
| $ | 13.5 |
|
| 10 | % |
Margin |
|
| 9.7 | % |
| 9.9 | % |
| N/A |
|
Similar to the issue described in the change in gross profit, growth in operating profit over the prior-year period was hampered by the one-time benefit. After factoring out the benefit from the 2005 amount, operating profit would have increased by approximately 28%. Operating margin would have increased over the 2005 period by 120 basis points. Our environmental segment was the primary contributor to the growth in operating profit.
Interest expense, net: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.6 |
| $ | 0.4 |
|
| 39 | % |
Interest expense in the 2006 second quarter increased due both to higher average long-term debt compared with the prior year period and higher interest rates. The increase in long-term debt was attributed to higher capital expenditures and working capital funding in the current-year period. The majority of our long-term debt has a variable rate of interest which is primarily influenced by the changes in LIBOR.
Other income / (expense): |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.3 |
| $ | (0.9 | ) |
| N/A |
|
In the current reporting period, we recognized foreign exchange gains primarily resulting from transactions with our foreign subsidiaries. Foreign exchange losses were the cause of the expense in the prior-year reporting period. The current period benefited from recent weakening of the U.S. dollar against European currencies. We also benefited from securing more foreign denominated borrowings this year to offset our working capital exposures to British Pounds and Euro fluctuations. We do not actively hedge our exposures to foreign currencies.
Income tax expense: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 3.9 |
| $ | 3.0 |
|
| 30 | % |
Effective tax rate |
|
| 26.6 | % |
| 24.5 | % |
| N/A |
|
Our effective tax rate in both reporting periods differs from the U.S. Federal statutory 35% rate due primarily to depletion deductions and differences in local tax rates on the income of our foreign subsidiaries. Foreign jurisdictions, in general, have lower corporate income tax rates than the U.S. Additionally, both reporting periods benefited from adjustments to estimated income tax liabilities related to prior periods. After factoring out the impact of adjustments in the 2006 expense, our effective tax rate for the period would have been approximately 26%.
19
Income from affiliates & joint ventures |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 1.2 |
| $ | 0.4 |
|
| 247 | % |
Higher earnings from our India-based investments accounted for the increase over the 2005 second quarter results. A major impact on the earnings of our largest investment in India, Ashapura Minechem Limited, is the rapid development of its bauxite business. Bauxite is primarily used in the production of alumina, which, in turn, is used to produce aluminum. Ashapura is benefiting from the high demand for aluminum in China.
Income from continuing operations |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 11.9 |
| $ | 9.5 |
|
| 25 | % |
Margin |
|
| 7.8 | % |
| 7.0 | % |
| N/A |
|
Higher operating profit, lower net non-operating expense and increased contribution from investments in affiliates and joint ventures accounted for the improvement in earnings in the 2006 period. The 80 basis point increase in net margin was principally due to the large increase in income from affiliates and joint ventures.
Discontinued operations |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.0 |
| $ | 4.8 |
|
| N/A |
|
In September 2004, we filed an amended income tax return in the State of Mississippi requesting a refund of approximately $12.5 million of taxes paid relating to the gain on the sale of the absorbent polymer segment. The sale of the segment was originally reported as a discontinued operation in 2000. With the assistance of a professional accounting firm, we concluded that a gain on the sale of a business under these circumstances was not taxable in Mississippi according to its laws. After negotiations and hearings with officials, the Board of Review of the Mississippi State Tax Commission accepted our settlement offer of $7.8 million in June 2005, and we received payment of the refund in July 2005.
Diluted earnings per share from continuing operations: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.39 |
| $ | 0.31 |
|
| 26 | % |
Earnings per share improved commensurate with higher income from operations. Weighted average common and common equivalent shares outstanding increased by less than 1% over the 2005 period.
20
Segment analysis:
Following is a review of operating results for each of our four reporting segments:
|
| Three Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Minerals |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 78,118 |
|
| 100.0 | % | $ | 74,877 |
|
| 100.0 | % | $ | 3,241 |
|
| 4.3 | % |
Cost of sales |
|
| 62,470 |
|
| 80.0 | % |
| 58,094 |
|
| 77.6 | % |
| 4,376 |
|
| 7.5 | % |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 15,648 |
|
| 20.0 | % |
| 16,783 |
|
| 22.4 | % |
| (1,135 | ) |
| -6.8 | % |
General, selling and administrative expenses |
|
| 6,177 |
|
| 7.9 | % |
| 6,118 |
|
| 8.2 | % |
| 59 |
|
| 1.0 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 9,471 |
|
| 12.1 | % |
| 10,665 |
|
| 14.2 | % |
| (1,194 | ) |
| -11.2 | % |
Base businesses accounted for all of the growth over the prior-year period. Net sales for the quarter improved entirely from growth in specialty mineral businesses. Higher volumes and pricing of drilling fluids supplied to the oil and gas market led the increase in specialty minerals revenues. Sales to the personal care market also contributed to the increase. Metalcasting and pet products revenues declined in the period. Lower U.S. export shipments caused the decrease in metalcasting revenues and lower overall shipments led to the decline in pet products sales.
Gross profit margin declined by 240 basis points due to the one-time benefit recorded in 2005 as previously discussed. Had we not recognized this one-time benefit, gross profit would have increased by approximately $0.7 million and gross margin would have increased by 10 basis points. Energy-related and raw material costs continued to increase over the 2005 period, however, price increases, for the most part, offset the impact.
Operating profit and margin trends were impacted by the aforementioned benefit recognized in 2005. Operating profit would have increased by approximately $0.7 million over the 2005 period and operating margin would have improved by 30 basis points, after factoring out the benefit.
21
|
| Three Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Environmental |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 66,859 |
|
| 100.0 | % | $ | 53,834 |
|
| 100.0 | % | $ | 13,025 |
|
| 24.2 | % |
Cost of sales |
|
| 44,324 |
|
| 66.3 | % |
| 35,585 |
|
| 66.1 | % |
| 8,739 |
|
| 24.6 | % |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 22,535 |
|
| 33.7 | % |
| 18,249 |
|
| 33.9 | % |
| 4,286 |
|
| 23.5 | % |
General, selling and administrative expenses |
|
| 12,873 |
|
| 19.3 | % |
| 10,742 |
|
| 20.0 | % |
| 2,131 |
|
| 19.8 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 9,662 |
|
| 14.4 | % |
| 7,507 |
|
| 13.9 | % |
| 2,155 |
|
| 28.7 | % |
Base businesses accounted for approximately 84% of the growth over the prior-year period. A business acquired in August 2005 accounted for a large portion of the remainder. On an absolute dollar basis, all three principal product lines within the environmental segment experienced strong growth in the 2006 quarter versus the prior year with the building materials and wastewater treatment lines having the strongest growth on a year-over-year percentage basis. Increased shipments globally and increased pricing in the U.S. market aided the increase in building materials product line. Oilfield service revenue growth was the contributor to the increase in our water treatment product line revenues over the 2005 quarter. Lining technology sales increased the least of the three on a percentage basis over the last year’s quarter; although shipments for the domestic market were delayed, our backlog remains high and we expect shipments to increase in the third quarter. Other geographical markets for lining technology products grew due to higher volumes.
Gross profit improved in conjunction with sales. Despite the increase in sales, gross margin declined primarily due to product mix. Service-related revenues comprised a larger proportion of revenues in the 2006 period and generally have lower gross margins than our manufactured products. Higher raw materials and manufacturing costs in the U.S. also negatively impacted gross margin in the period.
G, S & A grew due to higher personnel and product warranty expenses. Also, we experienced higher market development costs associated with our U.S. contracting services unit.
Operating profit and margin improved with the gross profit increase and G, S, & A spending growth.
|
| Three Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Transportation |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 12,848 |
|
| 100.0 | % | $ | 12,595 |
|
| 100.0 | % | $ | 253 |
|
| 2.0 | % |
Cost of sales |
|
| 11,336 |
|
| 88.2 | % |
| 11,059 |
|
| 87.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 1,512 |
|
| 11.8 | % |
| 1,536 |
|
| 12.2 | % |
| (24 | ) |
| -1.6 | % |
General, selling and administrative expenses |
|
| 780 |
|
| 6.1 | % |
| 816 |
|
| 6.5 | % |
| (36 | ) |
| -4.4 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 732 |
|
| 5.7 | % |
| 720 |
|
| 5.7 | % |
| 12 |
|
| 1.7 | % |
Higher traffic and pricing lead to the increase in revenues over the prior-year period. Gross profit and margins were negatively impacted by fuel surcharges. G, S & A spending declined due to a reduction in personnel recruiting costs that were incurred in the 2005 quarter.
22
|
| Three Months Ended June 30, |
| ||||||||||
|
|
| |||||||||||
Corporate |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||
|
|
|
| ||||||||||
|
| (Dollars in Thousands) |
| ||||||||||
Intersegment shipping sales |
| $ | (5,124 | ) | $ | (4,962 | ) |
|
|
|
|
|
|
Intersegment shipping costs |
|
| (5,124 | ) |
| (4,962 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
| — |
|
| — |
|
|
|
|
|
|
|
Corporate general, selling and administrative expenses |
|
| 4,266 |
|
| 4,672 |
|
| (406 | ) |
| -8.7 | % |
Nanocomposite business development expenses |
|
| 771 |
|
| 759 |
|
| 12 |
|
| 1.6 | % |
|
|
|
|
|
|
|
| ||||||
Operating loss |
|
| 5,037 |
|
| 5,431 |
|
| (394 | ) |
| -7.3 | % |
Intersegment shipping revenues 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.
The decline in G, S & A spending was attributed to the lower audit and Sarbanes-Oxley compliance-related costs. We also incurred higher product development costs in the 2005 quarter which were not a factor in this year.
Nanocomposite development costs remained relatively unchanged. These costs will be influenced by the change in sales as we continue market development activities. After completing organizational changes in the first quarter of 2006, we expect operating costs for the business to be relatively stable hereafter.
Six months ended June 30, 2006 vs. June 30, 2005
Results of operations (in millions):
Net sales: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 295.5 |
| $ | 258.4 |
|
| 14 | % |
Net sales from base businesses (those operations owned for greater than one year) accounted for approximately 94% of the growth, or 13.4 percentage points, over the prior year period. On an operating segment basis, minerals accounted for approximately 27% of the increase in net sales while environmental contributed approximately 70% of the growth. Our transportation segment accounted for the remainder of the growth over the 2005 period.
Gross profit: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 75.4 |
| $ | 66.2 |
|
| 14 | % |
Margin |
|
| 25.5 | % |
| 25.6 | % |
| N/A |
|
Gross profit margin declined primarily due to the benefit recognized in the prior-period which was previously described in this report. After factoring out this non-recurring benefit, gross profit would have increased by 17 percent and gross margin would have improved over the 2005 period by 60 basis points. The increase in gross margin, after excluding the effect of the non-recurring benefit, is due to a relatively large increase in environmental segment sales which generates our highest margins.
23
General, selling & administrative expenses: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 48.5 |
| $ | 44.6 |
|
| 9 | % |
Higher personnel and operating expenses in the environmental segment were the primary causes for the increase in G, S &A over the 2005 period. A decline in corporate segment expenses, due to lower spending on compliance and governance consulting, partially offset the increase.
Operating profit: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 26.9 |
| $ | 21.7 |
|
| 24 | % |
Margin |
|
| 9.1 | % |
| 8.4 | % |
| N/A |
|
Our environmental segment contributed nearly all of the increase in operating profit. After factoring out the 2005 non-recurring benefit, operating profit would have grown by 36% and operating margins would have improved by 140 basis points. Higher shipments and selling prices aided the increase in operating margins.
Interest expense, net: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 1.1 |
| $ | 0.8 |
|
| 36 | % |
Interest expense in the 2006 period increased due both to higher average long-term debt compared with the prior year period and higher interest rates. The increase in long-term debt was attributed to higher capital expenditures and working capital funding in the current-year period. The majority of our long-term debt has a variable rate of interest which is primarily influenced by the changes in LIBOR.
Other income/(expense): |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.5 |
| $ | (1.0 | ) |
| N/A |
|
In the current reporting period, we recognized foreign exchange gains primarily resulting from transactions with our foreign subsidiaries. Foreign exchange losses were the cause of the expense in the prior-year reporting period. The current period benefited from recent weakening of the U.S. dollar against European currencies. We also benefited from securing more foreign denominated borrowings this year to offset our working capital exposures to British Pounds and Euro fluctuations. We do not actively hedge our exposures to foreign currencies.
24
Income tax expense: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 7.3 |
| $ | 4.5 |
|
| 63 | % |
Effective tax rate |
|
| 27.6 | % |
| 22.4 | % |
| N/A |
|
Our effective tax rate in both reporting periods differs from the U.S. Federal statutory 35% rate due primarily to depletion deductions and differences in local tax rates on the income of our foreign subsidiaries. Foreign jurisdictions, in general, have lower corporate income tax rates than the U.S. Additionally, both reporting periods benefited from discrete adjustments to estimated income tax liabilities. After factoring out the impact of adjustments in the 2006 expense, our effective tax rate for the period would have been approximately 27%.
Further, we expect a significant reduction in our income tax expense that will be recorded in the three months ending September 30, 2006 due to the resolution of certain IRS audits as discussed in Note 11 of the Notes to Condensed Consolidated Financial Statements in Part I of this Form 10-Q.
Income from affiliates & joint ventures |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 2.6 |
| $ | 1.0 |
|
| 152 | % |
Higher earnings from our India-based investments accounted for the increase over the 2005 period. A major impact on the earnings of our largest investment in India, Ashapura Minechem Limited, is the rapid development of its bauxite business. Bauxite is primarily used in the production of alumina, which, in turn, is used to produce aluminum. Ashapura is benefiting from the high demand for aluminum in China.
Income from continuing operations |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 21.6 |
| $ | 16.5 |
|
| 31 | % |
Margin |
|
| 7.3 | % |
| 6.4 | % |
| N/A |
|
Higher operating profit, lower net non-operating expense and increased contribution from investments in affiliates and joint ventures accounted for the improvement in earnings in the 2006 period. The 90 basis point increase in net margin was principally due to the large increase in income from affiliates and joint ventures.
Discontinued operations: |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
|
| NA |
| $ | 4.8 |
|
| N/A |
|
In September 2004, we filed an amended income tax return in the State of Mississippi requesting a refund of approximately $12.5 million of taxes paid relating to the gain on the sale of the absorbent polymer segment. The sale of the segment was originally reported as a discontinued operation in the second quarter of 2000. With the assistance of a professional accounting firm, we concluded that a gain on the sale of a business under these circumstances was not taxable in Mississippi according to its laws. After negotiations and hearings with officials, the Board of Review of the Mississippi State Tax Commission accepted our settlement offer of $7.8 million in June 2005, and we received payment of the refund in July 2005.
25
Diluted earnings per share from continuing operations |
| 2006 |
| 2005 |
| % Change |
| |||
|
|
|
| |||||||
|
| $ | 0.70 |
| $ | 0.54 |
|
| 30 | % |
Earnings per share improved commensurate with higher income from operations. Weighted average common and common equivalent shares outstanding increased by less than 1% over the 2005 period.
Segment analysis:
Following is a review of operating results for each of our four reporting segments:
|
| Six Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Minerals |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 158,189 |
|
| 100.0 | % | $ | 148,325 |
|
| 100.0 | % | $ | 9,864 |
|
| 6.7 | % |
Cost of sales |
|
| 127,649 |
|
| 80.7 | % |
| 118,068 |
|
| 79.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 30,540 |
|
| 19.3 | % |
| 30,257 |
|
| 20.4 | % |
| 283 |
|
| 0.9 | % |
General, selling and administrative expenses |
|
| 12,302 |
|
| 7.8 | % |
| 11,797 |
|
| 8.0 | % |
| 505 |
|
| 4.3 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 18,238 |
|
| 11.5 | % |
| 18,460 |
|
| 12.4 | % |
| (222 | ) |
| -1.2 | % |
Base businesses accounted for all of the growth over the prior-year period. Net sales for the period improved entirely from growth in specialty mineral businesses. Higher volumes and pricing of drilling fluid additives supplied to the oil and gas market led the increase in specialty minerals revenues. Other contributors to the increase were the beauty care and iron binding agent product lines. Metalcasting revenues were flat compared with the 2005 period with lower domestic volumes offset by continued growth in the Asia/Pacific market. Lower U.S. export shipments caused the decrease in domestic metalcasting revenues. Additionally, domestic metalcasting revenues in the 2005 period were favorably impacted by larger price increases than the amounts realized in 2006. Pet products revenues declined slightly in the period.
Gross profit margin declined by 110 basis points primarily due to a one-time benefit, which was previously described in this report that was recorded in the 2005 period. Had we not recognized this benefit in the 2005 period, gross profit would have increased by approximately $2.1 million, or 7.6 percent; and gross margin would have increased by 20 basis points. Energy-related and raw material costs continued to increase over the 2005 period, however, price increases, for the most part, offset the impact.
G, S & A expenses increased due to Asia/Pacific operating costs related to market development activities.
Operating profit and margin trends were impacted by the aforementioned benefit recognized in 2005. Operating profit would have increased by approximately $1.6 million, or 9.9 percent, over the 2005 period and operating margin would have improved by 30 basis points, after factoring out the benefit.
26
|
| Six Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Environmental |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 121,989 |
|
| 100.0 | % | $ | 96,138 |
|
| 100.0 | % | $ | 25,851 |
|
| 26.9 | % |
Cost of sales |
|
| 80,099 |
|
| 65.7 | % |
| 63,029 |
|
| 65.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 41,890 |
|
| 34.3 | % |
| 33,109 |
|
| 34.4 | % |
| 8,781 |
|
| 26.5 | % |
General, selling and administrative expenses |
|
| 24,497 |
|
| 20.1 | % |
| 20,465 |
|
| 21.3 | % |
| 4,032 |
|
| 19.7 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 17,393 |
|
| 14.2 | % |
| 12,644 |
|
| 13.1 | % |
| 4,749 |
|
| 37.6 | % |
Base businesses accounted for approximately 89% of the growth over the prior-year period. A lining technology-related business acquired in August 2005, accounted for a large portion of the remainder. Excluding the acquisition and on a year-over-year percentage basis, our building materials and water treatment product lines had the strongest growth over the 2005 period. Shipments were higher globally for the building materials business. Higher pricing in the U.S. market also aided the increase in building materials. Oilfield service revenue growth was the contributor to the increase in our water treatment product line revenues. On a percentage basis, our base-business lining technology sales increased the least over the last year’s period. Shipments for the domestic lining technologies market were delayed, however, our backlog remains high and we expect shipments to increase in the third quarter. Other geographical markets for lining technology products grew due to higher volumes.
Gross profit improved in conjunction with sales. Despite the increase in sales, gross margin declined primarily due to product mix. Service-related revenues comprised a larger proportion of revenues in the 2006 period and generally have lower gross margins than our manufactured products. Higher raw materials and manufacturing costs in the U.S. also negatively impacted gross margin in the period.
G, S & A grew due to higher personnel and product warranty expenses. Also, we experienced higher market development costs associated with our U.S. contracting services unit.
Operating profit and margin improved with the gross profit increase and relatively modest G, S, &A spending growth.
27
|
| Six Months Ended June 30, |
| ||||||||||||||||
|
|
| |||||||||||||||||
Transportation |
| 2006 |
| 2005 |
| 2006 vs. 2005 |
| ||||||||||||
|
|
|
| ||||||||||||||||
|
| (Dollars in Thousands) |
| ||||||||||||||||
Net sales |
| $ | 25,319 |
|
| 100.0 | % | $ | 23,580 |
|
| 100.0 | % | $ | 1,739 |
|
| 7.4 | % |
Cost of sales |
|
| 22,325 |
|
| 88.2 | % |
| 20,698 |
|
| 87.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Gross profit |
|
| 2,994 |
|
| 11.8 | % |
| 2,882 |
|
| 12.2 | % |
| 112 |
|
| 3.9 | % |
General, selling and administrative expenses |
|
| 1,579 |
|
| 6.2 | % |
| 1,589 |
|
| 6.7 | % |
| (10 | ) |
| -0.6 | % |
|
|
|
|
|
|
|
|
|
| ||||||||||
Operating profit |
|
| 1,415 |
|
| 5.6 | % |
| 1,293 |
|
| 5.5 | % |
| 122 |
|
| 9.4 | % |
Higher traffic and pricing lead to the increase in revenues over the prior-year period. Gross profit was positively impacted by the improvement in revenues; however, gross margin declined due to larger fuel surcharges which were not passed through to customers.
|
| Six Months Ended June 30, |
| ||||||||||
|
|
| |||||||||||
Corporate |
| 2006 |
| 2005 |
| 2006 vs 2005 |
| ||||||
|
|
|
| ||||||||||
|
| (Dollars in Thousands) |
| ||||||||||
Intersegment shipping sales |
| $ | (10,032 | ) | $ | (9,649 | ) |
|
|
|
|
|
|
Intersegment shipping costs |
|
| (10,032 | ) |
| (9,649 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
| — |
|
| — |
|
|
|
|
|
|
|
Corporate general, selling and administrative expenses |
|
| 8,521 |
|
| 9,033 |
|
| (512 | ) |
| -5.7 | % |
Nanocomposite business development expenses |
|
| 1,650 |
|
| 1,668 |
|
| (18 | ) |
| -1.1 | % |
|
|
|
|
|
|
|
| ||||||
Operating loss |
|
| (10,171 | ) |
| (10,701 | ) |
| 530 |
|
| -5.0 | % |
Intersegment shipping revenues 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.
The decline in G, S & A spending was attributed to the lower audit and Sarbanes-Oxley compliance-related costs. We also incurred higher product development costs in the 2005 period which were not a factor in this year.
Nanocomposite development costs remained relatively unchanged. These costs will be influenced by the change in sales as we continue market development activities. After completing organizational changes in the first quarter of 2006, we expect operating costs for the business to be relatively stable hereafter.
Liquidity and capital resources
Cash flows from operations, borrowings from a revolving credit facility and proceeds from the exercise of stock options by employees have been our sources of funds to purchase property, plant and equipment; acquire businesses; repurchase common stock; and pay dividends to shareholders. We believe cash flows from operations and borrowings from an unused and committed revolving credit facility will be adequate to support our operating plans for the foreseeable future. Following is a discussion and analysis of our cash flow activities as presented in the Condensed Consolidated Statement of Cash Flows presented within Part 1 of this report.
28
|
| Six Months Ended |
| ||||
|
|
| |||||
Cash Flows |
| 2006 |
| 2005 |
| ||
|
|
| |||||
Net cash provided by (used in) operating activities |
| $ | 5.8 |
| $ | 7.0 |
|
Net cash provided by (used in) investing activities |
| $ | (21.6 | ) | $ | (13.3 | ) |
Net cash provided by (used in) financing activities |
| $ | 9.2 |
| $ | 5.9 |
|
Cash flows from operating activities decreased primarily due to a greater increase in accounts receivable relative to the prior-year period. Accounts receivable growth correlates with the increase in sales compared with the 2005 period. Additionally, our Asia/Pacific region sales growth has been higher than more established regions, which will increase accounts receivable at greater rate due to longer customer payment terms. Historically, cash flows from operations have increased over the course of the year and we anticipate this pattern to continue for the remainder of 2006.
Cash flows used in investing activities increased in the 2006 period due to increased capital expenditures. We have a number of expansion projects ongoing this year, including new manufacturing operations in Spain for the environmental segment and in China for the minerals segment. In addition, the 2006 period includes capital expenditures of approximately $2.9 million relating to the purchase of mining rights and equipment in Australia. We are also expending more funds for improving productivity at our U.S.-based mineral processing operations in 2006. Capital expenditures for 2006 are estimated to be in the range of $35 million to $40 million.
Cash flows provided by financing activities increased due to increased debt borrowings. The increase was due primarily to higher working capital and capital expenditures in the 2006 period. Dividends increased to $0.23 per share from $0.18 per share in the prior year’s corresponding period, consequently increasing the financing needs this year. We also repurchased 120,000 shares of our stock on the open market in the six months ended June 30, 2006 for an aggregate amount of $3.2 million, or an average price of $26.83 per share. We have $4.8 million remaining in funds authorized by our board of directors for the repurchase of common stock through September 30, 2006. We plan to utilize these funds for stock repurchases in the next quarter, unless we determine a better utilization of our cash or financing means. In the 2006 period, we received $2.2 million from employees on their exercise of stock options; we also recorded a $1.9 million benefit resulting from reduced tax payments on these option exercises.
|
| As at |
| ||||
|
|
| |||||
Financial Position |
| June 30, |
| December 31, |
| ||
|
|
| |||||
Working capital |
| $ | 169.4 |
| $ | 147.9 |
|
Goodwill & intangible assets |
| $ | 24.2 |
| $ | 23.7 |
|
Total assets |
| $ | 406.3 |
| $ | 368.5 |
|
Long-term debt |
| $ | 52.8 |
| $ | 34.8 |
|
Other long-term obligations |
| $ | 22.6 |
| $ | 21.6 |
|
Stockholder’s equity |
| $ | 269.4 |
| $ | 248.9 |
|
29
Working capital at June 30, 2006, increased over the amount at December 31, 2005, due to the growth in accounts receivable and less accrued liabilities that was described earlier. Current ratio was 3.8-to-1 and 3.3-to-1 at June 30, 2006, and December 31, 2005, respectively.
Long-term debt increased commensurate with higher working capital requirements and capital expenditure funding requirements. Consequently, long-term debt relative to total capitalization rose to 16% at June 30, 2006, compared with 12% at December 31, 2005. At June 30, 2006, we had approximately $79.3 million of borrowing capacity available from our revolving credit facility. We are in compliance with financial covenants related to the revolving credit facility as of June 30, 2006.
We believe future cash flows from operations combined with financing capability from our revolving credit facility will be adequate to fund necessary investing activities planned in the future.
Since the mid 1980’s, we have been named as one of a number of defendants in product liability lawsuits relating to the minor free-silica content within our bentonite products used in the metalcasting industry. The plaintiffs in these lawsuits are primarily employees of our former and current customers. To date, we have not incurred significant costs in defending these matters. We believe we have adequate insurance coverage and do not believe the litigation will have a material adverse impact on our financial position, liquidity or results of operations.
Contractual Obligations and Off-Balance Sheet Arrangements (in millions)
Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2005, as amended, discloses our contractual obligations and off-balance sheet arrangements. Other than the increase in our long-term bank debt as disclosed in our financial statements and the contribution to our defined benefit plan as discussed in Note 6 of the Notes to Condensed Consolidated Financial Statements within this Form 10-Q, there were no material changes in our contractual obligations and off-balance sheet arrangements.
Quantitative and Qualitative Disclosures About Market Risk |
There were no material changes in our market risk from the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2005, as amended.
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting, on a timely basis, information we are required to disclose in the reports we file or submit under the Exchange Act.
30
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Risk Factors |
Information regarding risk factors appears in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2005, as amended. There have been no material changes from the risk factors disclosed therein.
Unregistered Sales of Equity Securities and Use of Proceeds |
On May 13, 2004, the Board of Directors authorized a program to repurchase up to $10 million of our outstanding stock; this authorization expires September 30, 2006. The table below illustrates the stock repurchases made in 2006.
2006 |
| Total Number of |
| Average |
| Maximum Value of |
| |||
|
|
|
| |||||||
Balance at the beginning of the year |
|
|
|
|
|
|
| $ | 8,035,285 |
|
Activity in 2006 calendar month of: |
|
|
|
|
|
|
|
|
|
|
January |
|
| — |
| $ | — |
| $ | 8,035,285 |
|
February |
|
| — |
| $ | — |
| $ | 8,035,285 |
|
March |
|
| 40,000 |
| $ | 26.89 |
| $ | 6,959,825 |
|
April |
|
| 10,000 |
| $ | 29.48 |
| $ | 6,665,075 |
|
May |
|
| 30,000 |
| $ | 28.69 |
| $ | 5,804,367 |
|
June |
|
| 40,000 |
| $ | 24.70 |
| $ | 4,816,242 |
|
|
|
|
|
|
|
|
|
| ||
Total |
|
| 120,000 |
| $ | 26.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Submission of Matters to a Vote of Security Holders |
| (a) | The Annual Meeting of Shareholders was held on May 11, 2006. | |
| (b) | See Item 4(c) below. | |
| (c) | At the Annual Meeting of Shareholders, the shareholders voted on the following matters: the election of three directors to serve for a three year term, the approval of the AMCOL International Corporation 2006 Long-Term Stock Incentive Plan and the approval of the AMCOL International Corporation Annual Cash Incentive Plan. The voting results were as follows: | |
|
| (1) | In the election of directors, each nominee was elected by a vote of the shareholders as follows to serve for three years or until their successors are elected and qualified: |
Director |
| For |
| Withheld |
| ||
|
|
| |||||
Robert E. Driscoll |
|
| 24,237,838.68 |
|
| 942,635.67 |
|
Daniel P. Casey |
|
| 24,263,891.68 |
|
| 916,582.67 |
|
Dale E. Stahl |
|
| 23,699,275.48 |
|
| 1,481,198.87 |
|
|
| (2) | The proposal to approve AMCOL International Corporation 2006 Long-Term Stock Incentive Plan was approved by the shareholders as follows: |
For |
| Against |
| Abstain |
| Broker Non-Vote |
| |||
|
|
|
| |||||||
20,922,546.81 |
|
| 1,098,570.38 |
|
| 65,565.16 |
|
| 3,093,792.00 |
|
|
| (3) | The proposal to approve the AMCOL International Corporation Annual Cash Incentive Plan was approved by the shareholders as follows: |
For |
| Against |
| Abstain |
| ||
|
|
| |||||
24,840,476.14 |
|
| 283,381.01 |
|
| 56,615.19 |
|
Exhibits |
Exhibit |
|
| |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) |
32 | Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350 |
32
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: August 8, 2006 |
| /s/ Lawrence E. Washow |
|
| |
|
| Lawrence E. Washow |
|
| President and Chief Executive Officer |
|
|
|
|
|
|
Date: August 8, 2006 |
| /s/ Gary L. Castagna |
|
| |
|
| Gary L. Castagna |
|
| Senior Vice President and Chief Financial Officer |
|
| and Principal Accounting Officer |
33