UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q/A
(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, 2004
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-15661
AMCOL INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-0724340
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 394-8730
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12(b)-2 of the Exchange Act).
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 31, 2004
- ------------------------------ -------------------------------
(Common stock, $.01 par value) 29,360,045 Shares
AMCOL INTERNATIONAL CORPORATION
INDEX
Page No.
--------
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2004 and December 31, 2003 1
Condensed Consolidated Statements of Operations -
three and nine months ended September 30, 2004
and 2003 2
Condensed Consolidated Statements of Comprehensive
Income - three and nine months ended September 30,
2004 and 2003 2
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 2004 and 2003 3
Notes to Condensed Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 18
Item 4 Controls and Procedures 18
Part II - Other Information
Item 2e Company Repurchases of Company Stock 19
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 2004 2003
(unaudited) *
- --------------------------------------------------------------------------------
Current assets:
Cash $ 12,860 $ 13,525
Accounts receivable, net 91,166 60,997
Inventories 55,299 46,182
Prepaid expenses 9,855 5,858
Current deferred tax assets 5,529 3,289
Income taxes receivable -- 8,445
-------- --------
Total current assets 174,709 138,296
-------- --------
Investment in and advances to joint ventures 14,871 13,068
-------- --------
Property, plant, equipment, and mineral
rights and reserves:
Land and mineral rights 10,585 10,275
Depreciable assets 238,779 226,221
-------- --------
249,364 236,496
Less: accumulated depreciation 162,201 149,500
-------- --------
87,163 86,996
-------- --------
Other assets:
Goodwill 16,744 5,633
Intangible assets, net 957 1,345
Other assets 8,930 8,649
Deferred tax assets
4,729 4,790
-------- --------
31,360 20,417
-------- --------
$308,103 $258,777
======== ========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003
(unaudited) *
- --------------------------------------------------------------------------------
Current liabilities:
Notes payable $ 63 $ 844
Accounts payable 19,529 20,365
Income tax payable 4,812 --
Accrued liabilities 34,132 25,162
-------- --------
Total current liabilities 58,536 46,371
-------- --------
Long-term debt 29,766 9,006
-------- --------
Minority interests in subsidiaries 123 116
Other liabilities 20,389 18,386
-------- --------
20,512 18,502
-------- --------
Stockholders' equity:
Common stock 320 320
Additional paid in capital 68,067 67,513
Retained earnings 140,036 125,627
Accumulated other comprehensive income 8,554 8,372
-------- --------
216,977 201,832
Less:
Treasury stock 17,688 16,934
-------- --------
199,289 184,898
-------- --------
$308,103 $258,777
======== ========
- --------------------------------------------------------------------------------
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 340,535 $ 272,186 $ 121,540 $ 99,466
Cost of sales 257,013 205,001 91,502 74,101
------------ ------------ ------------ ------------
Gross profit 83,522 67,185 30,038 25,365
General, selling and administrative expenses 53,557 44,646 18,414 15,423
------------ ------------ ------------ ------------
Operating profit 29,965 22,539 11,624 9,942
------------ ------------ ------------ ------------
Other income (expense):
Interest expense, net (587) (293) (197) (91)
Other, net (69) 271 (151) 107
------------ ------------ ------------ ------------
(656) (22) (348) 16
------------ ------------ ------------ ------------
Income before income taxes and equity
in income of joint ventures 29,309 22,517 11,276 9,958
Income tax expense 8,974 7,656 3,295 3,387
------------ ------------ ------------ ------------
Income before equity in income of
joint ventures 20,335 14,861 7,981 6,571
Income from joint ventures 805 410 336 61
------------ ------------ ------------ ------------
Net income $ 21,140 $ 15,271 $ 8,317 $ 6,632
============ ============ ============ ============
Weighted average common shares outstanding 29,110,751 28,176,170 29,148,594 28,421,103
============ ============ ============ ============
Weighted average common and common equivalent 30,774,503 29,841,379 30,778,272 30,410,215
shares outstanding ============ ============ ============ ============
Basic earnings per share $ 0.73 $ 0.54 $ 0.29 $ 0.23
============ ============ ============ ============
Diluted earnings per share $ 0.69 $ 0.51 $ 0.27 $ 0.22
============ ============ ============ ============
Dividends declared per share $ 0.23 $ 0.11 $ 0.09 $ 0.04
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
- -------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- -------------------
2004 2003 2004 2003
- -------------------------------------------------------------------------------------
Net income $ 21,140 $ 15,271 $ 8,317 $ 6,632
Other comprehensive income (loss):
Reclassification of prior service cost (410) -- -- --
Foreign currency translation adjustment 592 2,779 795 497
-------- -------- -------- --------
Comprehensive income $ 21,322 $ 18,050 $ 9,112 $ 7,129
======== ======== ======== ========
- -------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
-----------------------
2004 2003
- --------------------------------------------------------------------------------
Cash flow from operating activities:
Net income $ 21,140 $ 15,271
Adjustments to reconcile from net income to net cash
used in operating activities:
Depreciation, depletion, and amortization 14,342 13,572
Changes in assets and liabilities, net
of effects of acquisitions:
Decrease (increase) in current assets (29,001) (23,590)
Decrease (increase) in noncurrent assets (1,466) (992)
Increase (decrease) in current liabilities 8,803 10,913
Increase (decrease) in noncurrent liabilities 1,737 804
Other 914 (589)
-------- --------
Net cash provided by operating activities 16,469 15,389
-------- --------
Cash flow from investing activities:
Acquisition of land, mineral rights,
and depreciable assets (12,077) (10,263)
Acquisitions, net of cash acquired (13,335) (2,957)
Other 878 797
-------- --------
Net cash (used in) provided by investing activities (24,534) (12,423)
-------- --------
Cash flow from financing activities:
Net increase (decrease) in outstanding debt 16,024 (4,067)
Proceeds from sales of treasury stock 1,222 1,794
Purchases of treasury stock (2,879) (1,593)
Dividends paid (6,731) (3,107)
-------- --------
Net cash provided by (used in) financing activities 7,636 (6,973)
-------- --------
Effect of foreign currency rate changes on cash (236) 1,857
-------- --------
Net increase (decrease) in cash and cash equivalents (665) (2,150)
-------- --------
Cash and cash equivalents at beginning of period 13,525 15,597
-------- --------
Cash and cash equivalents at end of period $ 12,860 $ 13,447
======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 645 $ 306
======== ========
Income taxes $ 6,202 $ 8,341
======== ========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
Note 1: 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,
2003, is unaudited. The condensed consolidated balance sheet as of December 31,
2003 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, 2003. The information furnished herein includes all adjustments
that are, in the opinion of management, necessary for a fair statement of the
results of operations and cash flows for the interim periods ended September 30,
2004 and 2003, and the financial position of the Company as of September 30,
2004, 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 the Company's 2003 Annual Report on Form 10-K, which accompanies the
2003 Corporate Report.
The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full years.
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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 adopted SFAS No. 143 as of January 1, 2003, and
determined that no material adjustments were required to the amounts previously
recorded. At September 30, 2004, the Company's recorded reclamation obligation
was $5,255. During the quarter ended September 30, 2004, the obligation was
increased by $113 due to payments made in relation to normal mining activities
offset by accretion and recognition of additional obligations resulting from
normal mining activities.
Note 2: INVENTORIES
Inventories at September 30, 2004 have been valued using the same methods
as at December 31, 2003. The composition of inventories at September 30, 2004
and December 31, 2003 was as follows:
4
- --------------------------------------------------------------------------------
September 30, December 31,
2004 2003
- --------------------------------------------------------------------------------
Advance mining $ 2,423 $ 2,605
Crude stockpile inventories 16,083 14,410
In-process inventories 17,724 14,190
Other raw material, container, and
supplies inventories 19,069 14,977
------- -------
$55,299 $46,182
======= =======
- --------------------------------------------------------------------------------
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(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. For both the quarter and nine months
ended September 30, 2004, the exercise price of all the outstanding stock
options was below the average market price and therefore the impact of these
options was included in the computation of diluted earnings per share.
- ---------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
------------------- --------------------
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------
Weighted average of common shares outstanding 29,110,751 28,176,170 29,148,594 28,421,103
Dilutive impact of stock options 1,663,752 1,665,209 1,629,678 1,989,112
Weighted average of common and common equivalent
shares for the period 30,774,503 29,841,379 30,778,272 30,410,215
========== ========== ========== ==========
Common shares outstanding 29,203,355 28,262,630 29,203,355 28,262,630
========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------
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 both to the Company's plants and outside customers.
The Company identifies segments based on management responsibility and the
nature of the business activities of each component of the Company. Intersegment
sales are insignificant, other than intersegment shipping, which is disclosed in
the following table. The Company measures segment performance based on operating
profit. Operating profit is defined as sales less cost of sales and
5
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.
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 for the nine and three months ended September 30, 2004 and 2003
and as of September 30, 2004 and December 31, 2003.
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------ ------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Business Segment:
Revenues:
Minerals $ 197,588 $ 158,930 $ 67,116 $ 55,211
Environmental 124,288 95,669 47,771 38,267
Transportation 30,369 28,554 10,979 10,367
Intersegment shipping (11,710) (10,967) (4,326) (4,379)
--------- --------- --------- ---------
Total $ 340,535 $ 272,186 $ 121,540 $ 99,466
========= ========= ========= =========
Operating profit (loss):
Minerals $ 23,771 $ 16,854 $ 8,098 $ 6,055
Environmental 16,195 14,875 6,964 7,171
Transportation 1,360 1,252 523 477
Corporate (11,361) (10,442) (3,961) (3,761)
--------- --------- --------- ---------
Total $ 29,965 $ 22,539 $ 11,624 $ 9,942
========= ========= ========= =========
Sept. 30, 2004 Dec. 31, 2003
================ ===============
Assets:
Minerals $ 159,707 $ 144,973
Environmental 124,436 82,453
Transportation 1,947 1,891
Corporate 22,013 29,460
--------- ---------
Total $ 308,103 $ 258,777
========= =========
- --------------------------------------------------------------------------------
At September 30, 2004 and December 31, 2003, goodwill for the minerals
segment was $4,973 and $5,394; for the environmental segment, it was $11,771 and
$239, respectively. The purchase price allocations of certain acquisitions have
not been finalized as management is in the process of determining the fair
values of the assets acquired and liabilities assumed.
Note 5: STOCK OPTION PLANS
6
Prior to 2003, the Company accounted for its fixed plan stock options
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, the Company 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.
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
148, Accounting for Stock-Based Compensation-amendment to SFAS 123, to all
employee awards granted, modified, or settled after January 1, 2003. Awards
under the Company's plans vest over three years. Therefore, the cost related to
stock-based employee compensation included in the determination of net income
for 2003 and 2004 is less than that which would have been recognized if the fair
value based method had been applied to all awards since the original effective
date of Statement No. 123. Results for prior years have not been restated.
The following table illustrates the effect on net income and earnings per
share if the fair value based method had been applied to all outstanding and
unvested awards in each period.
- ------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------- ------------------------
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Net income, as reported $ 21,140 $ 15,271 $ 8,317 $ 6,632
Add:Stock-based employee compensation expense included in
reported in net income, net of related tax effects 936 215 299 66
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects (1,161) (620) (374) (207)
---------- ---------- --------- ---------
Pro forma net income $ 20,915 $ 14,866 $ 8,242 $ 6,491
========== ========== ========= =========
Earnings per share:
Basic - as reported $ 0.73 $ 0.54 $ 0.29 $ 0.23
Basic - pro forma $ 0.72 $ 0.53 $ 0.28 $ 0.23
Diluted - as reported $ 0.69 $ 0.51 $ 0.27 $ 0.22
Diluted - pro forma $ 0.68 $ 0.50 $ 0.27 $ 0.21
- ------------------------------------------------------------------------------------------------------------------
Note 6: COMPONENTS OF PENSION AND OTHER RETIREMENT BENEFIT COST
7
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- ----------------------
2004 2003 2004 2003
- --------------------------------------------------------------------------------
Service cost $ 1,086 $ 996 $ 362 $ 332
Interest cost 1,371 1,314 457 438
Expected return on plan assets (1,452) (1,182) (484) (394)
Amortization of transition asset (102) (102) (34) (34)
Amortization of prior service cost 21 21 7 7
Amortization of net loss -- 51 -- 17
------- ------- ------- -------
Net periodic benefit cost $ 924 $ 1,098 $ 308 $ 366
======= ======= ======= =======
- --------------------------------------------------------------------------------
AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share amounts)
(Continued)
Employer Contributions
The Company previously disclosed in its financial statements for the year
ended December 31, 2003, that it expected to contribute $1,000 to its pension
plan in 2004. As of September 30, 2004, that full contribution has been made.
Note 7: ACQUISITIONS
The Company acquired all of the outstanding stock in two acquisitions
during the nine month period ended September 30, 2004. Net cash paid and notes
payable assumed totaled $13,335. Goodwill associated with these acquisitions was
$11,307. These acquisitions, individually and in the aggregate, did not
materially affect the Company's operating results or financial position in the
periods presented. The purchase price allocations of certain acquisitions have
not been finalized as management is in the process of determining the fair
values of the acquired assets and liabilities assumed.
8
Item 2: AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES
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
Operation 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.
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
operation, 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 for the year ended December 31, 2003.
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.
Three months ended September 30, 2004 vs. September 30, 2003:
Results of operations (in millions):
Net sales: 2004 2003 % Change
------- ------ --------
$ 121.5 $ 99.5 22%
Net sales from businesses acquired since the fourth quarter of 2003
accounted for approximately 32% of the growth over the prior year period, while
favorable foreign currency changes accounted for
9
approximately 11% of the increase in net sales. On an operating segment basis,
minerals accounted for approximately 54% of the increase in net sales while
environmental contributed approximately 43% of the growth. Our transportation
segment accounted for approximately 3% of the sales growth over the third
quarter of 2003.
Gross profit: 2004 2003 % Change
------ ------ --------
$ 30.0 $ 25.4 18%
Margin 24.7% 25.5% N/A
Gross profit improved in the third quarter of 2003 in conjunction with the
increase in net sales. Gross margin declined by 80 basis points due to
relatively lower gross profit earned from businesses acquired since the fourth
quarter of 2003 that were reported in the environmental segment this period.
General, selling &
administration expenses: 2004 2003 % Change
------ ------ --------
$ 18.4 $ 15.4 19%
Higher compensation and benefit costs accounted for the majority of the
increase over the 2003 third quarter. We had higher employment levels compared
with the prior year due to acquired businesses and staffing increases.
Stock-based compensation costs accounted for approximately $0.2 million of the
increase over the prior year period. Research and development expenses were
approximately $1.4 million in the third quarter of 2004 compared with $1.2
million in last year's period.
Operating profit: 2004 2003 % Change
------ ------ --------
$ 11.6 $ 9.9 17%
Margin 9.6% 10.0% N/A
Favorable foreign currency exchange rates accounted for 16% of the
increase in operating profit over the 2003 third quarter. Acquisitions had an
immaterial impact on operating profit in the current-year period. The remainder
of the increase was generated by organic growth from the minerals segment.
Operating margin declined by 40 basis points as a result of the immaterial
contribution from environmental segment acquisitions.
Interest expense, net: 2004 2003 % Change
---- ------ --------
$ 0.2 $ 0.1 100%
Interest expense in the third quarter increased due to higher average
long-term debt compared with the prior year period. The increase in long-term
debt was attributed to acquisitions completed in the first quarter of 2004 and
an increase in working capital funding in the third quarter of this year.
Income taxes: 2004 2003 % Change
------ ------ --------
$ 3.3 $ 3.4 -3%
Effective tax rate 29.2% 34.0% N/A
10
Income tax expense declined due to a lower effective income tax rate.
Businesses with lower statutory income tax rates represented a greater
proportion of pre-tax earnings in the current year period compared with the
third quarter of 2003.
Net income: 2004 2003 % Change
------ ------ --------
$ 8.3 $ 6.6 25%
Margin 6.8% 6.7% N/A
Net income improved in conjunction with the increase in operating profit
and the lower effective income tax rate in the 2004 quarter. Net margin in the
2004 period increased despite the decline in operating margin due to a lower
effective income tax rate and improvement in income from minority interests and
joint ventures.
Diluted earnings per share: 2004 2003 % Change
------ ------ --------
$ 0.27 $ 0.22 23%
Organic sales and operating profit growth contributed $0.03 per share of
the increase over the third quarter of 2003. A lower effective income tax rate
accounted for $0.02 per share of the increase over the third quarter of 2003.
Weighted average common and common equivalent shares outstanding increased by
approximately 1% over the 2003 quarter. Stock option exercises by employees
resulted in higher weighted average shares outstanding during the current
reporting period.
Segment analysis:
Following is a review of operating results for each of our four reporting
segments:
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
Minerals September 30,
-------------------------------------------------------------------
2004 2003 2004 vs. 2003
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------------------------------------
Product sales $60,603 90.3% $ 50,821 92.0%
Shipping revenue 6,513 9.7% 4,390 8.0%
---------- --------- --------- ---------
Net sales 67,116 100.0% 55,211 100.0% 11,905 21.6%
---------- --------- --------- ---------
Cost of sales - product 46,694 69.6% 40,051 72.5%
Cost of sales - shipping 6,513 9.7% 4,390 8.0%
---------- --------- --------- ---------
Cost of sales 53,207 79.3% 44,441 80.5%
---------- --------- --------- ---------
Gross profit 13,909 20.7% 10,770 19.5% 3,139 29.1%
General, selling andadministrative expenses 5,811 8.7% 4,715 8.5% 1,096 23.2%
---------- --------- --------- --------- ---------
Operating profit 8,098 12.1% 6,055 11.0% 2,043 33.7%
- -----------------------------------------------------------------------------------------------------------------------------
Approximately 80% of the segment's sales growth was organic with favorable
foreign currency exchange rates accounting for the remainder. Organic sales
growth was primarily attributed to the metalcasting and specialty minerals
businesses. Domestic metalcasting sales were positively impacted by higher
demand from rail car producers as well as automotive component manufacturers.
The metalcasting markets in the Asia/Pacific region also continued to benefit
from strong demand from automotive and transportation equipment component
manufacturers.
11
Gross profit rose in conjunction with the increase in sales. Gross margin
improved by 120 basis points over the prior-year period due to increased
production volume and increased pricing in the metalcasting and specialty
minerals business units.
General, selling and administrative costs increased primarily due to
higher bad debt expenses associated with domestic metalcasting customers.
Operating profit improved over the third quarter of 2003 due to the
increase in sales and gross profit. Operating margin increased by 110 basis
points due to the expansion in gross margin and a lower rate of increase in
general, selling and administrative expenses.
- ----------------------------------------------------------------------------------------------------
Three Months Ended
Environmental September 30,
------------------------------------------------------
2004 2003 2004 vs. 2003
- ----------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------
Product sales $44,210 92.5% $35,064 91.6%
Shipping revenue 3,561 7.5% 3,203 8.4%
------- ----- ------- -----
Net sales 47,771 100.0% 38,267 100.0% 9,504 24.8%
------- ----- ------- -----
Cost of sales - product 29,293 61.3% 21,593 56.4%
Cost of sales - shipping 3,561 7.5% 3,203 8.4%
------- ----- ------- -----
Cost of sales 32,854 68.8% 24,796 64.8%
------- ----- ------- -----
Gross profit 14,917 31.2% 13,471 35.2% 1,446 10.7%
General, selling and administrative expenses 7,953 16.6% 6,300 16.5% 1,653 26.2%
------- ----- ------- ----- -----
Operating profit 6,964 14.6% 7,171 18.7% (207) -2.9%
- ----------------------------------------------------------------------------------------------------
Approximately 65% of the increase in net sales was attributed to
acquisitions. Favorable currency exchange rates accounted for another 9% of the
increase. Organic sales growth was attributed to the European building materials
business.
Gross profit grew in conjunction with the increase in net sales; however,
gross margin declined by 400 basis points from the third quarter of 2003.
Acquired businesses earned relatively lower gross margins than existing
businesses. Gross margins earned from existing businesses were comparable to
third quarter of 2003.
General, selling and administrative expenses increased primarily due to
higher personnel levels and benefit costs. The personnel increase was primarily
associated with acquisitions completed since the third quarter of 2003. Higher
foreign currency exchange rates also contributed to the increase over 2003.
Operating profit declined as general, selling and administrative expenses
increased more than gross profits. Operating margin declined by 410 basis
points. This decline was caused by the decline in gross margin described above.
12
- ------------------------------------------------------------------------------------------------------
Three Months Ended
Transportation September 30,
--------------------------------------------------------
2004 2003 2004 vs. 20034
- ------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
Net sales $10,979 100.0% $10,367 100.0% $ 612 5.9%
Cost of sales 9,765 88.9% 9,243 89.2%
--------- --------- --------- --------- --------
Gross profit 1,214 11.1% 1,124 10.8% 90 8.0%
General, selling and administrative expenses 691 6.3% 647 6.2% 44 6.8%
--------- --------- --------- --------- --------
Operating profit 523 4.8% 477 4.6% 46 9.6%
- ------------------------------------------------------------------------------------------------------
Net sales improved due to higher traffic levels and increased pricing.
Gross margin improved by 30 basis points over the third quarter of 2003 due to
the increase in sales. General, selling and administrative expenses increased
due to higher personnel costs.
- -----------------------------------------------------------------------------------------------
Three Months Ended
Corporate September 30,
---------------------------------------
2004 2003 2004 vs. 2003
- -----------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------
Intersegment shipping sales $(4,326) $(4,379)
Intersegment shipping costs (4,326) (4,379)
------- -------
Gross profit -- --
Corporate general, selling and administrative expenses 3,045 2,802 243 8.7%
Nanocomposite business development expenses 916 959 (43) -4.5%
------- ------- -------
Operating loss (3,961) (3,761) (200) 5.3%
- -----------------------------------------------------------------------------------------------
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.
Corporate expenses increased primarily due to higher stock-based
compensation costs recorded in the current year. Corporate personnel levels and
base compensation costs were comparable to the prior year period.
Net nanocomposite operating expenses declined from the third quarter of
2003 due to lower spending on activities that are now funded by our alliance
partners. This business has alliance agreements with Mitsubishi Gas Chemical
Company and Poly One Corporation that focus on developing certain markets for
nanocomposites.
Nine months ended September 30, 2004 vs. September 30, 2003:
Results of operations (in millions):
Net sales: 2004 2003 % Change
------ ------ --------
$340.5 $272.2 25%
13
Net sales from businesses acquired since the fourth quarter of 2003
accounted for approximately 31% of the growth over the prior year period, while
favorable foreign currency changes accounted for approximately 13% of the
increase in net sales. On an operating segment basis, minerals accounted for
approximately 56% of the increase in net sales while environmental contributed
approximately 42% of the growth. The remaining increase in net sales was
contributed by the transportation segment.
Gross profit: 2004 2003 % Change
---- ---- --------
$ 83.5 $ 67.2 24%
Margin 24.5% 24.7% N/A
Gross profit improved over the 2003 nine-month period in conjunction with
the increase in net sales. The decline in gross margin arose from lower
profitability in the environmental segment.
General, selling &
administration expenses: 2004 2003 % Change
---- ---- --------
$ 53.6 $ 44.7 20%
Higher compensation and benefit costs accounted for the majority of the
increase over the 2003 nine-month period. We had higher personnel levels in the
2004 period due to acquisitions and staffing increases. Stock-based compensation
costs accounted for approximately $0.7 million of the increase over the
prior-year period. Research and development expenses were approximately $4.1
million in the current-year period compared with $3.8 million in the 2003
nine-month period.
Operating profit: 2004 2003 % Change
---- ---- --------
$ 30.0 $ 22.5 33%
Margin 8.8% 8.3% N/A
Acquisitions and favorable foreign currency exchange rates accounted for
18% and 14%, respectively, of the increase in operating profit over the 2003
nine-month period. Operating profit improved with the increase in gross profit
and net sales. The 50 basis point improvement in operating margin reflected
lower growth in operating expenses compared to gross profit gains over the
prior-year period.
Interest expense, net: 2004 2003 % Change
---- ---- --------
$ 0.6 $ 0.3 100%
Interest expense in the current year period increased due to higher
average long-term debt compared with the prior year period. The increase in
long-term debt was attributed to acquisitions completed in the first quarter of
2004 and an increase in working capital funding over the course of the year.
Income taxes: 2004 2003 % Change
---- ---- --------
$ 9.0 $ 7.7 17%
Effective tax rate 30.6% 34.0% N/A
14
Despite a lower tax rate, income tax expense increased due to the increase
in operating profits. Businesses with lower statutory income tax rates
represented a greater proportion of pre-tax earnings in the current year period
compared with the 2003 nine-month period, resulting in the decrease in the
effective tax rate.
Net income: 2004 2003 % Change
---- ---- --------
$ 21.1 $ 15.3 38%
Margin 6.2% 5.6% N/A
Net income improved in conjunction with the increase in operating profit
and the lower effective income tax rate in the 2004 period.
Diluted earnings per share: 2004 2003 % Change
---- ---- --------
$ 0.69 $ 0.51 35%
Earnings from acquired businesses, favorable foreign currency exchange
rates and a lower effective income tax rate accounted of $0.03, $0.02 and $0.03
per share, respectively, of the increase over the 2003 nine-month period.
Weighted average common and common equivalent shares outstanding increased by
3.1% over the 2003 nine-month period, which negatively impacted earnings per
share by $0.01 per share in the 2004 period. Stock option exercises by employees
resulted in higher weighted average shares outstanding in the current reporting
period. Organic sales and operating profit growth contributed the remaining
$0.11 per share of the increase over the prior-year period.
Segment analysis:
Following is a review of operating results for each of our four
reporting segments:
- -----------------------------------------------------------------------------------------------------------
Nine Months Ended
Minerals September 30,
--------------------------------------------------------------
2004 2003 2004 vs. 2003
- -----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------------------
Product sales $180,045 91.1% $144,724 91.1%
Shipping revenue 17,543 8.9% 14,206 8.9%
--------- --------- --------- ---------
Net sales 197,588 100.0% 158,930 100.0% 38,658 24.3%
--------- --------- --------- ---------
Cost of sales - product 140,046 70.9% 114,007 71.7%
Cost of sales - shipping 17,543 8.9% 14,206 8.9%
--------- --------- --------- ---------
Cost of sales 157,589 79.8% 128,213 80.7%
--------- --------- --------- ---------
Gross profit 39,999 20.2% 30,717 19.3% 9,282 30.2%
General, selling andadministrative expenses 16,228 8.2% 13,863 8.7% 2,365 17.1%
--------- --------- --------- --------- ---------
Operating profit 23,771 12.0% 16,854 10.6% 6,917 41.0%
- -----------------------------------------------------------------------------------------------------------
Acquired businesses and favorable foreign currency exchange rates
accounted for approximately 9% and 13%, respectively, of the increase in net
sales over the 2003 nine-month period. Organic sales growth was primarily
attributed to the metalcasting and specialty minerals businesses. Domestic
metalcasting sales were positively impacted by higher demand from rail car
producers as well as automotive component manufacturers. The metalcasting
markets in the Asia/Pacific region also continued to benefit from strong demand
from automotive and transportation equipment component
15
manufacturers. Specialty minerals experienced higher demand from detergent
producers while the health and beauty business continued to grow its customer
base.
Gross profit rose in conjunction with the increase in sales. Gross margin
improved by 90 basis points over the prior year period due to increased
production volume and increased pricing in the metalcasting and specialty
minerals business units.
General, selling and administrative expenses increased primarily due to
higher compensation and benefit costs and an increase in bad debt expense
associated with domestic metalcasting customers. Higher foreign currency
exchange rates also contributed to the increase over the prior year period.
Operating profit improved over the 2003 nine-month period due to the
increase in sales and gross profit. Operating margin increased by 140 basis
points due to the expansion in gross margin and a lower rate of increase in
general, selling and administrative expenses.
- --------------------------------------------------------------------------------------------------------
Nine Months Ended
Environmental September 30,
----------------------------------------------------------
2004 2003 2004 vs. 2003
- --------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- --------------------------------------------------------------------------------------------------------
Product sales $115,683 93.1% $ 88,287 92.3%
Shipping revenue 8,605 6.9% 7,382 7.7%
--------- ------- --------- -------
Net sales 124,288 100.0% 95,669 100.0% 28,619 29.9%
--------- ------- --------- -------
Cost of sales - product 75,521 60.8% 54,946 57.4%
Cost of sales - shipping 8,605 6.9% 7,382 7.7%
--------- ------- --------- -------
Cost of sales 84,126 67.7% 62,328 65.1%
--------- ------- --------- -------
Gross profit 40,162 32.3% 33,341 34.9% 6,821 20.5%
General, selling and administrative expenses 23,967 19.3% 18,466 19.3% 5,501 29.8%
--------- ------- --------- ------- -------
Operating profit 16,195 13.0% 14,875 15.5% 1,320 8.9%
- --------------------------------------------------------------------------------------------------------
Approximately 60% of the increase in net sales was attributed to
businesses acquired since the fourth quarter of 2003. Favorable currency
exchange rates accounted for another 14% of the increase. Organic sales growth
was primarily attributed to the European building materials and lining
technologies businesses.
Gross profit grew in conjunction with the increase in net sales; however,
gross margin declined by 260 basis points in comparison with the 2003 nine-month
period. Acquired businesses earned relatively lower gross margins than existing
businesses. Gross margins earned from existing businesses were comparable to the
2003 nine-month period.
General, selling and administrative expenses increased primarily due to
higher personnel levels and associated benefit costs. The personnel increase was
primarily attributed to acquired businesses since the fourth quarter of 2003.
Higher foreign currency exchange rates also contributed to the increase over
2003.
Operating profit grew due to the increase in net sales and gross profit
over the prior year period. Operating margin declined by 250 basis points as a
result of the decrease in gross margin described above.
16
- ------------------------------------------------------------------------------------------------------
Nine Months Ended
Transportation September 30,
2004 2003 2004 vs. 2003
- ------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------
Net sales $30,369 100.0% $28,554 100.0% $ 1,815 6.4%
Cost of sales 27,006 88.9% 25,427 89.0%
------- ------- -------- -------
Gross profit 3,363 11.1% 3,127 11.0% 236 7.5%
General, selling and administrative expenses 2,003 6.6% 1,875 6.6% 128 6.8%
------- ------- -------- ------- -------
Operating profit 1,360 4.5% 1,252 4.4% 108 8.6%
- ------------------------------------------------------------------------------------------------------
Net sales improved due to higher traffic levels and new customers.
Intersegment revenues also contributed to the increase. Gross margin improved
over the 2003 nine-month period by 10 basis points primarily due to higher
pricing and better asset utilization. General, selling and administrative
expenses increased due to higher personnel costs.
- ---------------------------------------------------------------------------------------------------
Nine Months Ended
Corporate September 30,
-------------------------------------------
2004 2003 2004 vs. 2003
- ---------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------
Intersegment shipping sales $(11,710) $(10,967)
Intersegment shipping costs (11,710) (10,967)
-------- --------
Gross profit -- --
Corporate general, selling and administrative expenses 8,639 7,535 1,104 14.7%
Nanocomposite business development expenses 2,722 2,907 (185) -6.4%
-------- -------- -------
Operating loss (11,361) (10,442) (919) 8.8%
- ---------------------------------------------------------------------------------------------------
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.
Corporate expenses increased primarily due to higher stock-based
compensation costs recorded in the current year period. Corporate personnel
levels and base compensation costs were comparable to the prior year period.
Nanocomposite operating expenses declined from the 2003 nine-month period
due to lower spending on activities that are now funded by our alliance
partners.
Liquidity and capital resources (in millions):
- --------------------------------------------------------------------------------
Nine Months Ended
Cash Flows September 30,
--------------------
2004 2003
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $16.5 $15.4
Net cash provided by (used in) investing activities $(24.5) $(12.4)
Net cash provided by (used in) financing activities $ 7.6 $(7.0)
- --------------------------------------------------------------------------------
Cash flows provided by operating activities improved over the 2003 period
as a result of higher net income, which increased by $5.9 million. Operating
cash flow was repressed by the increase in
17
working capital. Historically, cash flows from operations have increased over
the course of the fiscal year and we anticipate this pattern to continue for the
remainder of 2004.
Cash flows used in investing activities increased primarily due to
acquisitions completed in the first quarter of 2004. We acquired the shares of
Lafayette Well Testing, Inc. on January 7, 2004, and Linteco Geotechnische
Systeme GmbH on March 5, 2004. Capital expenditures to-date in 2004 totaled
$12.1 million compared with $10.3 million in the prior-year period. We
anticipate capital expenditures to increase over the remainder of 2004 due to
investments in capacity expansion and productivity projects. We announced the
acquisition of a production facility in October 2004 with a cost of $4.1
million. The facility will be used for expanding manufacturing operations for
our environmental segment. Our estimate of 2004 capital expenditures is in the
range of $20 million to $22 million.
Cash flows provided by financing activities increased due to debt funding
for acquisitions completed in 2004. We used our revolving credit facility to
finance the acquisitions. Additionally, we assumed approximately $4.1 million of
funded debt as part of the consideration for the Linteco acquisition. Dividends
paid to-date in 2004 increased to $6.7 million from $3.1 million in the
prior-year period. We purchased 183,400 shares of our common stock on the open
market during the first nine months of 2004 for a total value of $2.9 million,
or an average price per share of $15.70. All of the shares repurchased in 2004
were based on a board authorization approved on May 16, 2002. The 2002
authorization expired during the second quarter of 2004. On May 13, 2004, the
board of directors authorized funds to repurchase up to $10 million of our
common stock on the open market over a two-year period if we believe such a use
of our cash will enhance shareholder value. The entire $10 million remains
available to repurchase common stock as of September 30, 2004. We purchased
approximately $1.6 million of our common stock in the open market during the
first nine months of 2003.
- --------------------------------------------------------------------------------
September 30, December 31,
Financial Position 2004 2003
(unaudited)
- --------------------------------------------------------------------------------
Working capital $116.2 $ 91.9
Intangible assets $ 17.7 $ 7.0
Total assets $308.1 $258.8
Long-term debt $ 29.8 $ 9.0
Other long-term obligations $ 20.5 $ 18.5
Stockholder's equity $199.3 $184.9
- --------------------------------------------------------------------------------
Working capital at September 30, 2004 increased from December 31, 2003,
primarily due to acquisitions completed in 2004 and strong sales reported in the
period. The current ratio was 3.0-to-1 at both September 30, 2004, and December
31, 2003.
Intangible assets primarily represent goodwill associated with
acquisitions. The amount increased from December 31, 2003 as a result of
purchase price allocations for acquisitions closed in 2004. The purchase price
allocations may be subject to change since certain assets and liabilities
assumed with the acquisitions require further analysis to determine their fair
values. Consequently, intangible asset values may change as well.
Long-term debt increased to 13.0% of total capitalization at September 30,
2004 compared with 5.1% at December 31, 2003. The increase in debt levels was
principally attributed to funding of acquisitions completed in 2004 which also
included an assumption of debt. We have a $100 million
18
revolving credit facility with a consortium of U.S. banks which matures on
October 31, 2006. At September 30, 2004, we had approximately $76 million of
borrowing capacity remaining from the credit facility. The credit facility
stipulates that we must comply with a number of financial covenants. We are in
compliance with those covenants at September 30, 2004.
Other long-term obligations primarily represent liabilities associated
with our qualified and supplemental retirement plans and deferred income taxes.
We believe future cash flows from operations combined with borrowing
capacity from our revolving credit facility will be adequate to fund capital
expenditures and other investments approved by the board of directors.
Since the mid 1980's, the Company and/or its subsidiaries have been named
as one of a number of defendants in product liability lawsuits relating to the
minor free-silica content within the Company's bentonite products used in the
metalcasting industry. The plaintiffs in these lawsuits are primarily employees
of the Company's foundry customers. To date, the Company has not incurred
significant costs in defending these matters. The Company believes it has
adequate insurance coverage and does not believe the litigation will have a
material adverse impact on the financial condition, liquidity or results of the
operation of the Company.
Item 3: Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes in the Company's market risk during
the three and nine months ended September 30, 2004. See disclosures as of
December 31, 2003 in the Company's Annual Report on Form 10-K, Item 7A.
Item 4: Controls and Procedures
As of the end of the period covered by this 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.
No change in internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during
the fiscal quarter ended September 30, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting. Early work in preparation for management's attestation as required
under Section 404 of the Sarbanes-Oxley Act of 2002 has indicated that we may
have some significant deficiencies in internal controls over financial
reporting, and management is working to remediate those deficiencies as they are
identified.
The Securities and Exchange Commission, as directed by Section 404 of the
Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include
in their annual reports on Form 10-K an assessment by management of the
effectiveness of the Company's internal controls over financial reporting. In
addition, the Company's independent auditors must attest to and report on
management's
19
assessment, as well as make their own assessment of the effectiveness of the
Company's internal controls over financial reporting. This requirement will
first apply to our Annual Report on Form 10-K for the fiscal year ending
December 31, 2004.
We are currently working diligently to perform the system and process
evaluation and testing required in order to comply with Section 404, a process
which is both very costly and arduous. While we currently anticipate being able
to fully implement the requirements relating to internal controls and all other
aspects of Section 404, we cannot be certain we will be able to complete all of
our evaluation, testing and remediation actions by December 31, 2004. If we are
unable to complete this process in a timely manner, our management may be unable
to conclude that our controls over financial reporting are effective as defined
under Section 404. In addition, even if our management is able to conclude that
our controls over financial reporting are effective, if our independent auditors
are not satisfied with our internal controls over financial reporting or the
level at which these controls are documented, designed, operated or reviewed by
management, or if the independent auditors interpret the requirements, rules, or
regulations differently from us, then our independent auditors may decline to
attest to management's assessment or may issue a report that is qualified.
20
PART II - OTHER INFORMATION
Item 2(c) Company Repurchases of Company Stock
- ------------------------------------------------------------------------------------------------------------------------
Total Number of Maximum Value of
Shares Repurchased Average Shares that May Yet Be
as Part of the Stock Price Paid Repurchased Under the
Repurchase Program Per Share Program
- ------------------------------------------------------------------------------------------------------------------------
January 1, 2004 - January 31, 2004
Shares repurchased -- $ -- $ 3,704,133
February 1, 2004 - February 29, 2004
Shares repurchased -- $ -- $ 3,704,133
March 1, 2004 - March 31, 2004
Shares repurchased 12,400 $15.83 $ 3,507,839
April 1, 2004 - April 30, 2004
Shares repurchased -- $ -- $ 3,507,839
May 1, 2004 - May 31, 2004
Shares repurchased 171,000 $15.69 $ 825,448
Expiration of unused authorization -- $ -- $ --
New repurchase authorization -- $ -- $10,000,000
June 1, 2004 - June 30, 2004
Shares repurchased -- $ -- $10,000,000
July 1, 2004 - September 30, 2004 -- $ -- $10,000,000
------- -------
Total 183,400 $15.70 $10,000,000
======= =======
- ------------------------------------------------------------------------------------------------------------------------
On May 13, 2004, the Board of Directors authorized a program to repurchase up to
$10 million of the Company's outstanding stock which will expire September 30,
2006.
Item 6: Exhibits and Reports on Form 8-K
(a) See Index to Exhibits immediately following the signature page.
(b) A current report on Form 8-K was filed on July 19, 2004, furnishing
a press release disclosing the Company's operating results for the
second quarter ended June 30, 2004.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMCOL INTERNATIONAL CORPORATION
Date: November 9, 2004 /s/ Lawrence E. Washow
-----------------------------------------
Lawrence E. Washow
President and Chief Executive Officer
Date: November 9, 2004 /s/ Gary L. Castagna
-----------------------------------------
Gary L. Castagna
Senior Vice President and 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)
10.3 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)
10.15 AMCOL International Corporation 1998 Long-Term Incentive Plan (15), as
amended (21)
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)*
10.31 Credit Agreement by and among AMCOL International Corporation and Harris
Trust and Savings Bank, individually and as agent, Wells Fargo Bank, N.A.,
Bank of America N.A. and the Northern Trust Company dated October 31, 2003
(23)
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
- ----------
(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.
(4) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December
31, 1992.
(5) Exhibit is incorporated by reference to the Registrant's Form S-3 filed
with the Securities and Exchange Commission on September 15, 1993.
(6) Exhibit is incorporated by reference to the Registrant's Form 10-K filed
with the Securities and Exchange Commission for the year ended December
31, 1993.
(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.
(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.
(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.
(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.
(23) 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, 2003.
(24) 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, 2004.
*Management compensatory plan or arrangement
23