Amcol International 10-Q 2012 Q3 Quarterly report

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 September 30, 2012

or

o 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 1-14447

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.)

2870 Forbs Avenue, Hoffman Estates, IL	60192
(Address of principal executive offices)	(Zip Code)

(847) 851-1500

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).          Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer  x	Accelerated filer  o	Non-accelerated filer  o
Smaller reporting company  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 October 31, 2012
(Common stock, $.01 par value)	31,959,139 Shares

1

AMCOL INTERNATIONAL CORPORATION

INDEX

		Page No.
Part I - Financial Information
Item 1:	Financial Statements
	Condensed Consolidated Balance Sheets – September 30, 2012 and December 31, 2011	3
	Condensed Consolidated Statements of Operations – three and nine months ended September 30, 2012 and 2011	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) – three and nine months ended September 30, 2012 and 2011	6
	Condensed Consolidated Statements of Changes in Equity – nine months ended September 30, 2012 and 2011	7
	Condensed Consolidated Statements of Cash Flows – nine months ended September 30, 2012 and 2011	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4:	Controls and Procedures	52
Part II - Other Information
Item 4:	Mine Safety Disclosures	52
Item 6:	Exhibits	52

2

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

Item 1:  Financial Statements

ASSETS	September 30, 2012		December 31, 2011
	(unaudited)
Current assets:
Cash and cash equivalents	$	17.7	$	23.7
Accounts receivable, net		219.9		204.8
Inventories		160.8		144.8
Prepaid expenses		19.4		15.7
Deferred income taxes		6.8		5.9
Income tax receivable		15.1		6.9
Other		2.6		6.1
Total current assets		442.3		407.9
Noncurrent assets:
Property, plant, equipment, and mineral rights and reserves:
Land		12.9		13.9
Mineral rights		49.9		52.5
Depreciable assets		535.6		482.6
		598.4		549.0
Less: accumulated depreciation and depletion		303.4		275.5
		295.0		273.5
Goodwill		69.9		69.5
Intangible assets, net		34.8		36.6
Investment in and advances to affiliates and joint ventures		28.0		26.4
Available-for-sale securities		7.9		3.8
Deferred income taxes		9.3		8.5
Other assets		25.6		24.4
Total noncurrent assets		470.5		442.7
Total Assets	$	912.8	$	850.6

Continued…

3

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

LIABILITIES AND SHAREHOLDERS' EQUITY	September 30, 2012			December 31, 2011
	(unaudited)
Current liabilities:
Accounts payable	$	52.7		$	56.5
Accrued income taxes		18.2			2.4
Accrued liabilities		66.9			57.9
Total current liabilities		137.8			116.8
Noncurrent liabilities:
Long-term debt		244.1			260.7
Pension liabilities		35.3			34.8
Deferred compensation		10.3			8.9
Deferred income taxes		13.0			13.5
Other long-term liabilities		21.7			19.2
Total noncurrent liabilities		324.4			337.1
Shareholders' Equity:
Common stock		0.3			0.3
Additional paid in capital		100.8			94.3
Retained earnings		352.1			316.4
Accumulated other comprehensive income (loss)		(5.7	)		(15.0	)
Less: Treasury stock		(0.7	)		(3.4	)
Total AMCOL shareholders' equity		446.8			392.6
Noncontrolling interest		3.8			4.1
Total equity		450.6			396.7
Total Liabilities and Shareholders' Equity	$	912.8		$	850.6

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)

(Dollars in millions, except per share amounts)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2012			2011			2012			2011
Continuing Operations
Net sales	$	746.3		$	709.8		$	253.3		$	248.1
Cost of sales		537.7			518.8			183.9			177.5
Gross profit		208.6			191.0			69.4			70.6
Selling, general and administrative expenses		128.7			124.1			41.8			44.0
Operating profit		79.9			66.9			27.6			26.6
Other income (expense):
Interest expense, net		(7.9	)		(8.1	)		(2.5	)		(2.8	)
Other, net		(2.7	)		(0.1	)		-			(0.2	)
		(10.6	)		(8.2	)		(2.5	)		(3.0	)
Income before income taxes and income (loss) from affiliates and joint ventures		69.3			58.7			25.1			23.6
Income tax expense		19.3			14.9			7.4			5.3
Income before income (loss) from affiliates and joint ventures		50.0			43.8			17.7			18.3
Income (loss) from affiliates and joint ventures		3.4			3.9			1.1			3.0
Income (loss) from continuing operations		53.4			47.7			18.8			21.3
Discontinued Operations
Income (loss) on discontinued operations		-			(1.2	)		-			(1.3	)
Net income (loss)		53.4			46.5			18.8			20.0
Net income (loss) attributable to noncontrolling interests		(0.2	)		(0.1	)		-			(0.1	)
Net income (loss) attributable to AMCOL shareholders	$	53.6		$	46.6		$	18.8		$	20.1
Weighted average common shares outstanding		32.0			31.7			32.1			31.8
Weighted average common and common equivalent shares outstanding		32.3			32.1			32.5			32.2
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	53.6		$	47.8		$	18.8		$	21.4
Discontinued operations, net of tax		-			(1.2	)		-			(1.3	)
Net income	$	53.6		$	46.6		$	18.8		$	20.1
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	1.67		$	1.51		$	0.59		$	0.67
Discontinued operations		-			(0.04	)		-			(0.04	)
Net income	$	1.67		$	1.47		$	0.59		$	0.63
Diluted earnings (loss) per share:
Continuing operations	$	1.66		$	1.49		$	0.58		$	0.66
Discontinued operations		-			(0.04	)		-			(0.04	)
Net income	$	1.66		$	1.45		$	0.58		$	0.62
Dividends declared per share	$	0.56		$	0.54		$	0.20		$	0.18

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 (LOSS)

(Unaudited)

(Dollars in millions)

	Total					AMCOL Shareholders					Noncontrolling Interest
	Nine Months Ended September 30,					Nine Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011			2012			2011
Net income (loss)	$	53.4	$	46.5		$	53.6	$	46.6		$	(0.2	)	$	(0.1	)
Other comprehensive income (loss):
Foreign currency translation adjustment		4.5		(20.2	)		4.6		(19.6	)		(0.1	)		(0.6	)
Unrealized gain (loss) on available-for-sale securities, net of tax		4.1		(8.2	)		4.1		(8.2	)		-			-
Unrealized gain (loss) on interest rate swap agreements, net of tax		-		(1.6	)		-		(1.6	)		-			-
Pension adjustment, net of tax		0.6		0.1			0.6		0.1			-			-
Comprehensive income (loss)	$	62.6	$	16.6		$	62.9	$	17.3		$	(0.3	)	$	(0.7	)

	Total					AMCOL Shareholders					Noncontrolling Interest
	Three Months Ended September 30,					Three Months Ended September 30,					Three Months Ended September 30,
	2012		2011			2012		2011			2012		2011
Net income (loss)	$	18.8	$	20.0		$	18.8	$	20.1		$	-	$	(0.1	)
Other comprehensive income (loss):
Foreign currency translation adjustment		8.0		(22.4	)		8.0		(21.8	)		-		(0.6	)
Unrealized gain (loss) on available-for-sale securities, net of tax		4.9		(1.6	)		4.9		(1.6	)		-		-
Unrealized gain (loss) on interest rate swap agreements, net of tax		-		(1.3	)		-		(1.3	)		-		-
Pension adjustment, net of tax		0.2		0.1			0.2		0.1			-		-
Comprehensive income (loss)	$	31.9	$	(5.2	)	$	31.9	$	(4.5	)	$	-	$	(0.7	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(Dollars in millions)

				AMCOL Shareholders
	Total Equity			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock		Treasury Stock			Paid-in Capital			Noncontrolling Interest
Balance at December 31, 2010	$	395.1		$	279.6		$	28.7		$	0.3	$	(8.9	)	$	95.1		$	0.3
Net income (loss)		46.5			46.6														(0.1	)
Cash dividends		(17.1	)		(17.1	)
Issuance of treasury shares pursuant to employee stock compensation plans		6.8											4.8			2.0
Tax benefit from employee stock compensation plans		0.6														0.6
Vesting of common stock in connection with employee stock compensation plans		3.7														3.7
Purchase of noncontrolling interest		(5.7	)													(5.4	)		(0.3	)
Sale of subsidiary shares to noncontrolling interest		-						(1.4	)							(3.4	)		4.8
Other comprehensive income (loss)		(28.5	)					(27.9	)										(0.6	)
Balance at September 30, 2011		401.4			309.1			(0.6	)		0.3		(4.1	)		92.6			4.1
Balance at December 31, 2011	$	396.7		$	316.4		$	(15.0	)	$	0.3	$	(3.4	)	$	94.3		$	4.1
Net income (loss)		53.4			53.6														(0.2	)
Cash dividends		(17.9	)		(17.9	)
Issuance of treasury shares pursuant to employee stock compensation plans		4.8											2.7			2.1
Tax benefit from employee stock compensation plans		(0.1	)													(0.1	)
Vesting of common stock in connection with employee stock compensation plans		4.4														4.4
Other comprehensive income (loss)		9.2						9.3											(0.1	)
Other		0.1														0.1
Balance at September 30, 2012		450.6			352.1			(5.7	)		0.3		(0.7	)		100.8			3.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

	Nine Months Ended September 30,
	2012			2011
Cash flow from operating activities:
Net income	$	53.4		$	46.5
Adjustments to reconcile from net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization		33.3			31.2
Other non-cash charges		5.3			4.1
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets		(43.1	)		(90.3	)
Decrease (increase) in noncurrent assets		(0.5	)		2.5
Increase (decrease) in current liabilities		19.0			24.2
Increase  (decrease) in noncurrent liabilities		5.2			(1.5	)
Net cash provided by (used in) operating activities		72.6			16.7
Cash flow from investing activities:
Capital expenditures		(54.2	)		(43.8	)
Investments in and advances to affiliates and joint ventures		0.2			(0.7	)
Proceeds from sale of land and depreciable assets		1.5			1.6
Other		1.9			2.5
Net cash (used in) investing activities		(50.6	)		(40.4	)
Cash flow from financing activities:
Net change in outstanding debt		(16.8	)		14.9
Proceeds from sales of treasury stock		4.9			6.9
Dividends		(17.2	)		(17.1	)
Excess tax benefits from stock-based compensation		0.2			0.7
Net cash provided by (used in) financing activities		(28.9	)		5.4
Effect of foreign currency rate changes on cash		0.9			0.8
Net increase (decrease) in cash and cash equivalents		(6.0	)		(17.5	)
Cash and cash equivalents at beginning of period		23.7			26.8
Cash and cash equivalents at end of period	$	17.7		$	9.3

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Operations

We, AMCOL International Corporation (the “Company”), are a global company focused on long-term profitability growth through the development and application of minerals and technology products and services for use in various industrial and consumer markets.  We operate in five segments:  minerals and materials, environmental, oilfield services, transportation and corporate.

Our minerals and materials segment mines, processes and distributes minerals and products for use in various industrial and consumer markets, including metalcasting, pet care, laundry care, and drilling industries.  Additionally, this segment develops and manufactures synthetic materials principally for personal care applications.

Our environmental segment manufactures and distributes products for use as moisture and vapor barriers in commercial construction, landfills and a variety of other industrial and commercial applications and provides related services.

Our oilfield services segment provides both onshore and offshore water treatment filtration, well testing, pipeline separation, nitrogen, coil tubing and other services to the oil and natural gas industry.

Our transportation segment provides both long-haul trucking and freight brokerage services for our domestic subsidiaries as well as third parties.

Our corporate segment includes the elimination of intersegment sales as well as certain expenses associated with research and development, management, employee benefits and information technology activities for our Company.  Approximately 73% and 76% of the revenue elimination in the nine months ended September 30, 2012 and 2011, respectively, and 73% and 74% of the revenue elimination in the three months ended September 30, 2012 and 2011, respectively, represents elimination of shipping revenues between our transportation segment and its domestic sister companies.

The composition of our revenues by segment is as follows:

	Nine Months Ended September 30,
	2012			2011
Minerals and materials		51	%		50	%
Environmental		23	%		28	%
Oilfield services		25	%		20	%
Transportation		4	%		6	%
Intersegment sales		-3	%		-4	%
		100	%		100	%

Further discussion of our segment information is included in Note 5, “Business Segment Information.”

9

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Basis of Presentation

The financial information included herein has been prepared by management.  The information furnished herein includes all adjustments that are, in our opinion, necessary for a fair presentation of our results of operations and cash flows for the interim periods ended September 30, 2012 and 2011, and our financial position as of September 30, 2012, and all such adjustments are of a normal and recurring nature.  The accompanying condensed consolidated financial information should 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, 2011.

Certain items in the prior year’s condensed consolidated financial statements contained herein and notes thereto have been reclassified to conform to the condensed consolidated financial statement presentation for the three and nine months ended September 30, 2012.  These reclassifications did not have a material impact on our financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) 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.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year for a variety of reasons, including the seasonality of both our environmental segment, which varies due to the seasonal nature of the construction industry, and our oilfield services segment, which varies due to seasonal weather patterns in its various geographic markets.

Note 2: CORRECTION OF ERRORS IN PREVIOUSLY REPORTED FINANCIAL STATEMENTS

In August 2012, management in our environmental segment conducted a physical count of inventory at its operations in Spain.  Upon an evaluation of the results of that physical inventory, we determined that our inventory values as recorded were misstated and that these misstatements affected prior periods.

Our previously issued financial statements dating back to 2008 and prior years contain other errors which were not previously corrected as they were immaterial to our previously issued consolidated financial statements.  We assessed the materiality of all the errors in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality and in accordance with the rollover and iron curtain methods as described in SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements.

10

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

We concluded that these errors were individually and collectively immaterial to our previously issued financial statements.  However, under SAB 108, we concluded that there is a reasonable possibility that our financial statements for the twelve months ended December 31, 2012 will be materially misstated if we correct the prior year errors in the current year.  As a result, we decided to correct our prior year financial statements even though the errors are immaterial to the financial statements issued in those years.  Under SAB 108, correcting prior year financial statements for immaterial errors does not require our previously filed reports to be amended; rather, SAB 108 allows these corrections to be made when we file our prior period consolidated financial statements in our 2012 Form 10-K.

For all periods including and between the twelve months ended December 31, 2008 and the three months ended March 31, 2012, these errors, when combined with the errors in our Spanish operations, decreased net income available to AMCOL shareholders by $2.7.  Although there were several errors across various categories, we have summarized the errors into general categories and quantified the amount by which they increased (decreased) net income available to AMCOL shareholders as noted below:

· Spain - $2.8 decrease for errors associated with accounting for inventory and other items in our environmental segment’s Spanish operations;

· South Africa - $0.8 decrease for errors related to the accounting for the acquisition of mineral rights in our minerals and materials segment’s chromite operations in South Africa;

· Malaysia - $0.3 increase resulting from correcting errors in our oilfield services segment’s Malaysian operations, largely relating to improper recognition of expenses and errors in accounting for revenues;

· DongMing – adjustments to correct errors made in accounting for accounts payable in this China subsidiary;

· Tax - $0.2 increase resulting largely from inaccuracies in the accounting for income tax expense in our international operations; and

· $0.4 increase for other insignificant errors we have aggregated together.

Adjustments by category and increase (decrease) to Net income available to AMCOL sharesholders	Prior to			Twelve Months Ended December 31,									Three Months Ended March 31,
attributable to each category	2009			2009			2010			2011			2012			Total
Spain	$	-		$	(0.8	)	$	(0.6	)	$	(1.1	)	$	(0.3	)	$	(2.8	)
South Africa		-			(0.3	)		-			(0.5	)		-			(0.8	)
Malaysia		-			-			(0.4	)		0.7			-			0.3
DongMing		0.2			0.1			0.2			(0.5	)		-			-
Tax		(0.5	)		0.1			(1.2	)		1.5			0.3			0.2
Other		(0.3	)		(0.7	)		0.6			0.4			0.4			0.4
Total	$	(0.6	)	$	(1.6	)	$	(1.4	)	$	0.5		$	0.4		$	(2.7	)

11

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Corrections to annual periods ended December 31, 2009, December 31, 2010 and 2011 and as of December 31, 2010 and 2011

The effect of correcting these errors on our condensed consolidated statements of operations for our years ended December 31, 2009, 2010 and 2011 is as follows:

	Year Ended December 31, 2009
	Previously Reported			Adjustments																		As Adjusted
				Spain			South Africa			DongMing			Tax			Other			Total
Continuing Operations
Net sales	$	691.9		$	-		$	-		$	-		$	-		$	(3.7	)	$	(3.7	)	$	688.2
Cost of sales		505.6			0.7			0.5									(3.8	)		(2.6	)		503.0
Gross profit		186.3			(0.7	)		(0.5	)		-			-			0.1			(1.1	)		185.2
Selling, general and administrative expenses		133.4			0.3			0.1			(0.1	)					1.5			1.8			135.2
Operating profit		52.9			(1.0	)		(0.6	)		0.1			-			(1.4	)		(2.9	)		50.0
Other income (expense):
Interest expense, net		(12.2	)														0.2			0.2			(12.0	)
Other, net		(0.9	)														0.6			0.6			(0.3	)
		(13.1	)		-			-			-			-			0.8			0.8			(12.3	)
Income before income taxes and income (loss) from affiliates and joint ventures		39.8			(1.0	)		(0.6	)		0.1			-			(0.6	)		(2.1	)		37.7
Income tax expense (benefit)		5.3			(0.2	)		(0.1	)		-			(0.1	)		-			(0.4	)		4.9
Income before income (loss) from affiliates and joint ventures		34.5			(0.8	)		(0.5	)		0.1			0.1			(0.6	)		(1.7	)		32.8
Income (loss) from affiliates and joint ventures		0.1															(0.1	)		(0.1	)		-
Income (loss) from continuing operations		34.6			(0.8	)		(0.5	)		0.1			0.1			(0.7	)		(1.8	)		32.8
Discontinued Operations
Income (loss) on discontinued operations		0.3															-			-			0.3
Net income (loss)		34.9			(0.8	)		(0.5	)		0.1			0.1			(0.7	)		(1.8	)		33.1
Net income (loss) attributable to noncontrolling interests		0.1						(0.2	)								-			(0.2	)		(0.1	)
Net income (loss) attributable to AMCOL shareholders	$	34.8		$	(0.8	)	$	(0.3	)	$	0.1		$	0.1		$	(0.7	)	$	(1.6	)	$	33.2
Weighted average common shares outstanding		30.8																		30.8			30.8
Weighted average common and common equivalent shares outstanding		31.0																		31.0			31.0
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	34.5																	$	(1.6	)	$	32.9
Discontinued operations, net of tax		0.3																		-			0.3
Net income	$	34.8																	$	(1.6	)	$	33.2
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	1.12																	$	(0.05	)	$	1.07
Discontinued operations		0.01																		-			0.01
Net income	$	1.13																	$	(0.05	)	$	1.08
Diluted earnings (loss) per share:
Continuing operations	$	1.11																	$	(0.05	)	$	1.06
Discontinued operations		0.01																		-			0.01
Net income	$	1.12																	$	(0.05	)	$	1.07

12

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	Year Ended December 31, 2010
	Previously Reported			Adjustments																					As Adjusted
				Spain			South Africa			Malaysia			DongMing			Tax			Other			Total
Continuing Operations
Net sales	$	841.0		$	-		$	-		$	(0.6	)	$	-		$	-		$	(14.2	)	$	(14.8	)	$	826.2
Cost of sales		624.1			0.6															(12.7	)		(12.1	)		612.0
Gross profit		216.9			(0.6	)		-			(0.6	)		-			-			(1.5	)		(2.7	)		214.2
Selling, general and administrative expenses		146.9						(0.1	)					(0.3	)					(1.5	)		(1.9	)		145.0
Operating profit		70.0			(0.6	)		0.1			(0.6	)		0.3			-			(0.0	)		(0.8	)		69.2
Other income (expense):
Interest expense, net		(9.7	)																	0.1			0.1			(9.6	)
Other, net		1.2																		0.1			0.1			1.3
		(8.5	)		-			-			-			-			-			0.2			0.2			(8.3	)
Income before income taxes and income (loss) from affiliates and joint ventures		61.5			(0.6	)		0.1			(0.6	)		0.3			-			0.2			(0.6	)		60.9
Income tax expense (benefit)		19.4						0.1			(0.2	)		0.1			1.2			0.2			1.4			20.8
Income before income (loss) from affiliates and joint ventures		42.1			(0.6	)		-			(0.4	)		0.2			(1.2	)		(0.0	)		(2.0	)		40.1
Income (loss) from affiliates and joint ventures		(11.3	)																	0.2			0.2			(11.1	)
Income (loss) from continuing operations		30.8			(0.6	)		-			(0.4	)		0.2			(1.2	)		0.2			(1.8	)		29.0
Discontinued Operations
Income (loss) on discontinued operations		(0.9	)																	-			-			(0.9	)
Net income (loss)		29.9			(0.6	)		-			(0.4	)		0.2			(1.2	)		0.2			(1.8	)		28.1
Net income (loss) attributable to noncontrolling interests		(0.4	)																	(0.4	)		(0.4	)		(0.8	)
Net income (loss) attributable to AMCOL shareholders	$	30.3		$	(0.6	)	$	-		$	(0.4	)	$	0.2		$	(1.2	)	$	0.6		$	(1.4	)	$	28.9
Weighted average common shares outstanding		31.2																					31.2			31.2
Weighted average common and common equivalent shares outstanding		31.5																					31.5			31.5
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	31.2																				$	(1.4	)	$	29.8
Discontinued operations, net of tax		(0.9	)																				-			(0.9	)
Net income	$	30.3																				$	(1.4	)	$	28.9
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	1.00																				$	(0.04	)	$	0.96
Discontinued operations		(0.03	)																				-			(0.03	)
Net income	$	0.97																				$	(0.04	)	$	0.93
Diluted earnings (loss) per share:
Continuing operations	$	0.99																				$	(0.04	)	$	0.95
Discontinued operations		(0.03	)																				-			(0.03	)
Net income	$	0.96																				$	(0.04	)	$	0.92

13

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	Year Ended December 31, 2011
	Previously Reported			Adjustments																					As Adjusted
				Spain			South Africa			Malaysia			DongMing			Tax			Other			Total
Continuing Operations
Net sales	$	942.4		$	-		$	-		$	0.6		$	-		$	-		$	0.8		$	1.4		$	943.8
Cost of sales		689.5			1.2			0.3			-			-			-			(0.1	)		1.4			690.9
Gross profit		252.9			(1.2	)		(0.3	)		0.6			-			-			0.9			-			252.9
Selling, general and administrative expenses		165.2			0.1			-			(0.2	)		0.7			-			-			0.6			165.8
Operating profit		87.7			(1.3	)		(0.3	)		0.8			(0.7	)		-			0.9			(0.6	)		87.1
Other income (expense):
Interest expense, net		(11.5	)		-			-			-			-			-			0.2			0.2			(11.3	)
Other, net		0.2			-			-			-			-			-			-			-			0.2
		(11.3	)		-			-			-			-			-			0.2			0.2			(11.1	)
Income before income taxes and income (loss) from affiliates and joint ventures		76.4			(1.3	)		(0.3	)		0.8			(0.7	)		-			1.1			(0.4	)		76.0
Income tax expense (benefit)		21.8			(0.2	)		0.3			0.1			(0.2	)		(1.8	)		0.5			(1.3	)		20.5
Income before income (loss) from affiliates and joint ventures		54.6			(1.1	)		(0.6	)		0.7			(0.5	)		1.8			0.6			0.9			55.5
Income (loss) from affiliates and joint ventures		5.5												-			(0.3	)		0.1			(0.2	)		5.3
Income (loss) from continuing operations		60.1			(1.1	)		(0.6	)		0.7			(0.5	)		1.5			0.7			0.7			60.8
Discontinued Operations
Income (loss) on discontinued operations		(0.9	)																	(0.3	)		(0.3	)		(1.2	)
Net income (loss)		59.2			(1.1	)		(0.6	)		0.7			(0.5	)		1.5			0.4			0.4			59.6
Net income (loss) attributable to noncontrolling interests		0.1			-			(0.1	)		-			-			-			-			(0.1	)		-
Net income (loss) attributable to AMCOL shareholders	$	59.1		$	(1.1	)	$	(0.5	)	$	0.7		$	(0.5	)	$	1.5		$	0.4		$	0.5		$	59.6
Weighted average common shares outstanding		31.7																					31.7			31.7
Weighted average common and common equivalent shares outstanding		32.1																					32.1			32.1
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	60.0																				$	0.8		$	60.8
Discontinued operations, net of tax		(0.9	)																				(0.3	)		(1.2	)
Net income	$	59.1																				$	0.5		$	59.6
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	1.89																				$	0.03		$	1.92
Discontinued operations		(0.03	)																				(0.01	)		(0.04	)
Net income	$	1.86																				$	0.02		$	1.88
Diluted earnings (loss) per share:
Continuing operations	$	1.87																				$	0.02		$	1.89
Discontinued operations		(0.03	)																				(0.01	)		(0.04	)
Net income	$	1.84																				$	0.01		$	1.85

14

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The effect of correcting these errors in our condensed consolidated balance sheets as of December 31, 2010 and 2011 is as follows:

	December 31, 2010
ASSETS	Previously Reported		Adjustments																		As Adjusted
			Spain			South Africa		Malaysia			DongMing		Tax		Other			Total
Current assets:
Cash and cash equivalents	$	27.3	$	-		$	-	$	-		$	-	$	-	$	(0.5	)	$	(0.5	)	$	26.8
Accounts receivable, net		194.0		(0.4	)				(1.1	)						(2.4	)		(3.9	)		190.1
Inventories		107.5		(1.0	)											(0.9	)		(1.9	)		105.6
Prepaid expenses		12.6														0.4			0.4			13.0
Deferred income taxes		5.5														-						5.5
Income tax receivable		8.5														-						8.5
Other		6.2														-						6.2
Total current assets		361.6		(1.4	)		-		(1.1	)		-		-		(3.4	)		(5.9	)		355.7
Noncurrent assets:
Property, plant, equipment, and mineral rights and reserves:
Land		11.6														(0.7	)		(0.7	)		10.9
Mineral rights		51.4					13.6									-			13.6			65.0
Depreciable assets		454.4														(2.1	)		(2.1	)		452.3
		517.4		-			13.6		-			-		-		(2.8	)		10.8			528.2
Less: accumulated depreciation and depletion		256.9														(0.2	)		(0.2	)		256.7
		260.5		-			13.6		-			-		-		(2.6	)		11.0			271.5
Goodwill		70.9																				70.9
Intangible assets, net		42.6														(0.7	)		(0.7	)		41.9
Investment in and advances to affiliates and joint ventures		19.0														1.9			1.9			20.9
Available-for-sale securities		14.2														-						14.2
Deferred income taxes		7.6					1.6									-			1.6			9.2
Other assets		22.7							0.5							0.3			0.8			23.5
Total noncurrent assets		437.5		-			15.2		0.5			-		-		(1.1	)		14.6			452.1
Total Assets	$	799.1	$	(1.4	)	$	15.2	$	(0.6	)	$	-	$	-	$	(4.5	)	$	8.7		$	807.8

15

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	December 31, 2010
LIABILITIES AND SHAREHOLDERS' EQUITY	Previously Reported			Adjustments																					As Adjusted
				Spain			South Africa			Malaysia			DongMing			Tax			Other			Total
Current liabilities:
Accounts payable	$	53.2		$	-		$	-		$	-		$	(0.7	)				$	(1.1	)	$	(1.8	)	$	51.4
Accrued income taxes		4.1			(0.1	)					(0.2	)		0.2			1.2			(0.1	)		1.0			5.1
Accrued liabilities		55.2			0.1															(0.1	)					55.2
Total current liabilities		112.5			-			-			(0.2	)		(0.5	)		1.2			(1.3	)		(0.8	)		111.7
Noncurrent liabilities:
Long-term debt		236.2																		(0.5	)		(0.5	)		235.7
Pension liabilities		21.3																		-						21.3
Deferred compensation		8.7																		0.3			0.3			9.0
Deferred income tax		0.4						15.8									0.4			-			16.2			16.6
Other long-term liabilities		19.6																		(1.2	)		(1.2	)		18.4
Total noncurrent liabilities		286.2			-			15.8			-			-			0.4			(1.4	)		14.8			301.0
Shareholders' Equity:
Common stock		0.3																		-						0.3
Additional paid in capital		95.1																		-						95.1
Retained earnings		283.2			(1.4	)		(0.3	)		(0.4	)		0.5			(1.6	)		(0.4	)		(3.6	)		279.6
Accumulated other comprehensive income (loss)		28.9						(0.1	)											(0.1	)		(0.2	)		28.7
Less: Treasury stock		(8.9	)																	-						(8.9	)
Total AMCOL shareholders' equity		398.6			(1.4	)		(0.4	)		(0.4	)		0.5			(1.6	)		(0.5	)		(3.8	)		394.8
Noncontrolling interest		1.8						(0.2	)											(1.3	)		(1.5	)		0.3
Total equity		400.4			(1.4	)		(0.6	)		(0.4	)		0.5			(1.6	)		(1.8	)		(5.3	)		395.1
Total Liabilities and Shareholders' Equity	$	799.1		$	(1.4	)	$	15.2		$	(0.6	)	$	-		$	-		$	(4.5	)	$	8.7		$	807.8

16

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	December 31, 2011
ASSETS	Previously Reported		Adjustments																		As Adjusted
			Spain			South Africa		Malaysia			DongMing		Tax		Other			Total
Current assets:
Cash and cash equivalents	$	23.7	$	-		$	-	$	-		$	-	$	-	$	-					$	23.7
Accounts receivable, net		206.8		(1.6	)				(0.7	)						0.3			(2.0	)		204.8
Inventories		146.6		(1.8	)		0.2									(0.2	)		(1.8	)		144.8
Prepaid expenses		15.7														-						15.7
Deferred income taxes		5.9														-						5.9
Income tax receivable		6.9														-						6.9
Other		6.7														(0.6	)		(0.6	)		6.1
Total current assets		412.3		(3.4	)		0.2		(0.7	)		-		-		(0.5	)		(4.4	)		407.9
Noncurrent assets:
Property, plant, equipment, and mineral rights and reserves:
Land		13.9																				13.9
Mineral rights		41.9					10.6									-			10.6			52.5
Depreciable assets		482.3														0.3			0.3			482.6
		538.1		-			10.6		-			-		-		0.3			10.9			549.0
Less: accumulated depreciation and depletion		275.5														-						275.5
		262.6		-			10.6		-			-		-		0.3			10.9			273.5
Goodwill		69.5																				69.5
Intangible assets, net		36.6														-						36.6
Investment in and advances to affiliates and joint ventures		26.4														-						26.4
Available-for-sale securities		3.8														-						3.8
Deferred income taxes		7.8					0.7									-			0.7			8.5
Other assets		23.7							0.7							-			0.7			24.4
Total noncurrent assets		430.4		-			11.3		0.7			-		-		0.3			12.3			442.7
Total Assets	$	842.7	$	(3.4	)	$	11.5	$	-		$	-	$	-	$	(0.2	)	$	7.9		$	850.6

17

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	December 31, 2011
LIABILITIES AND SHAREHOLDERS' EQUITY	Previously Reported			Adjustments																				As Adjusted
				Spain			South Africa			Malaysia			DongMing		Tax			Other			Total
Current liabilities:
Accounts payable	$	56.4		$	-		$	-		$	-		$	-	$	-		$	0.1		$	0.1		$	56.5
Accrued income taxes		2.7			(0.3	)		0.1								0.1			(0.2	)		(0.3	)		2.4
Accrued liabilities		59.0			(0.8	)					(0.3	)							-			(1.1	)		57.9
Total current liabilities		118.1			(1.1	)		0.1			(0.3	)		-		0.1			(0.1	)		(1.3	)		116.8
Noncurrent liabilities:
Long-term debt		260.7																	-						260.7
Pension liabilities		34.8																	-						34.8
Deferred compensation		8.9																	-						8.9
Deferred income tax		0.8						12.6											0.1			12.7			13.5
Other long-term liabilities		19.2																	-						19.2
Total noncurrent liabilities		324.4			-			12.6			-			-		-			0.1			12.7			337.1
Shareholders' Equity:
Common stock		0.3																	-						0.3
Additional paid in capital		94.5						(0.2	)										-			(0.2	)		94.3
Retained earnings		319.5			(2.5	)		(0.9	)		0.3			-		(0.1	)		0.1			(3.1	)		316.4
Accumulated other comprehensive income (loss)		(14.9	)		0.2														(0.3	)		(0.1	)		(15.0	)
Less: Treasury stock		(3.4	)																-						(3.4	)
Total AMCOL shareholders' equity		396.0			(2.3	)		(1.1	)		0.3			-		(0.1	)		(0.2	)		(3.4	)		392.6
Noncontrolling interest		4.2						(0.1	)										-			(0.1	)		4.1
Total equity		400.2			(2.3	)		(1.2	)		0.3			-		(0.1	)		(0.2	)		(3.5	)		396.7
Total Liabilities and Shareholders' Equity	$	842.7		$	(3.4	)	$	11.5		$	-		$	-	$	-		$	(0.2	)	$	7.9		$	850.6

The correction of these errors had no effect on the previously reported amounts of operating, investing, and financing cash flows in our condensed consolidated statement of cash flows for the year ended December 31, 2009.  The effect of correcting these errors in our condensed consolidated statements of cash flows for the years ended December 31, 2010 and 2011 is as follows:

	Year Ended December 31, 2010
	Previously Reported			Adjustments			As Adjusted
Net cash provided by (used in) operating activities	$	48.1		$	0.1		$	48.2
Net cash (used in) investing activities		(48.1	)		(0.6	)		(48.7	)
Net cash provided by (used in) financing activities		(0.8	)		-			(0.8	)
Effect of foreign currency rate changes on cash		0.4			-			0.4
Net increase (decrease) in cash and cash equivalents		(0.4	)		(0.5	)		(0.9	)
Cash and cash equivalents at beginning of period		27.7			-			27.7
Cash and cash equivalents at end of period	$	27.3		$	(0.5	)	$	26.8

18

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	Year Ended December 31, 2011
	Previously reported			Adjustments			As Adjusted
Net cash provided by (used in) operating activities	$	38.6		$	0.2		$	38.8
Net cash (used in) investing activities		(54.7	)		0.5			(54.2	)
Net cash provided by (used in) financing activities		11.6			(0.2	)		11.4
Effect of foreign currency rate changes on cash		0.9			-			0.9
Net increase (decrease) in cash and cash equivalents		(3.6	)		0.5			(3.1	)
Cash and cash equivalents at beginning of period		27.3			(0.5	)		26.8
Cash and cash equivalents at end of period	$	23.7		$	-		$	23.7

With regards to our consolidated statement of comprehensive income for the year ended December 31, 2009, correcting these errors reduced total comprehensive income by $2.0, reflecting the $1.8 decrease to net income as previously discussed in addition to $0.2 of losses resulting from foreign currency translation.

With regards to our consolidated statement of comprehensive income for the year ended December 31, 2010, correcting these errors reduced total comprehensive income by $1.8 resulting from the $1.8 decrease to net income as previously discussed.

With regards to our consolidated statement of comprehensive income for the year ended December 31, 2011, correcting these errors increased total comprehensive income by $0.5, reflecting the $0.4 increase to net income as previously discussed in addition to $0.1 of income resulting from foreign currency translation.

With regards to our consolidated statements of equity, our retained earnings at January 1, 2009 decreased by $0.6 resulting from the decrease to net income attributable to AMCOL shareholders for the years prior to 2009.

19

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Corrections to interim periods within 2011

The effect of correcting these errors in our condensed consolidated statements of operations for each of the three months ended March 31, June 30 and September 30, 2011 is as follows:

	Quarter Ended March 31, 2011
	Previously Reported			Adjustments																			As Adjusted
				Spain			South Africa			Malaysia		DongMing		Tax			Other			Total
Continuing Operations
Net sales	$	217.8		$	-		$	-		$	0.6	$	-	$	-		$	0.2		$	0.8		$	218.6
Cost of sales		160.1			0.3			0.1										(0.3	)		0.1			160.2
Gross profit		57.7			(0.3	)		(0.1	)		0.6		-		-			0.5			0.7			58.4
Selling, general and administrative expenses		39.1																-						39.1
Operating profit		18.6			(0.3	)		(0.1	)		0.6		-		-			0.5			0.7			19.3
Other income (expense):
Interest expense, net		(2.7	)															0.1			0.1			(2.6	)
Other, net		(0.4	)															-						(0.4	)
		(3.1	)		-			-			-		-		-			0.1			0.1			(3.0	)
Income before income taxes and income (loss) from affiliates and joint ventures		15.5			(0.3	)		(0.1	)		0.6		-		-			0.6			0.8			16.3
Income tax expense (benefit)		4.3						0.1			0.1				(0.5	)		(0.1	)		(0.4	)		3.9
Income before income (loss) from affiliates and joint ventures		11.2			(0.3	)		(0.2	)		0.5		-		0.5			0.7			1.2			12.4
Income (loss) from affiliates and joint ventures		1.1													(0.1	)		-			(0.1	)		1.0
Income (loss) from continuing operations		12.3			(0.3	)		(0.2	)		0.5		-		0.4			0.7			1.1			13.4
Discontinued Operations
Income (loss) on discontinued operations		(0.1	)															-						(0.1	)
Net income (loss)		12.2			(0.3	)		(0.2	)		0.5		-		0.4			0.7			1.1			13.3
Net income (loss) attributable to noncontrolling interests		-																-						-
Net income (loss) attributable to AMCOL shareholders	$	12.2		$	(0.3	)	$	(0.2	)	$	0.5	$	-	$	0.4		$	0.7		$	1.1		$	13.3
Weighted average common shares outstanding		31.5																			31.5			31.5
Weighted average common and common equivalent shares outstanding		32.0																			32.0			32.0
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	12.3																		$	1.1		$	13.4
Discontinued operations, net of tax		(0.1	)																		-			(0.1	)
Net income	$	12.2																		$	1.1		$	13.3
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	0.39																		$	0.03		$	0.42
Discontinued operations		-																			-			-
Net income	$	0.39																		$	0.03		$	0.42
Diluted earnings (loss) per share:
Continuing operations	$	0.38																		$	0.04		$	0.42
Discontinued operations		-																			-			-
Net income	$	0.38																		$	0.04		$	0.42

20

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)
 

	Quarter Ended June 30, 2011
	Previously Reported			Adjustments																			As Adjusted
				Spain			South Africa			Malaysia		DongMing			Tax		Other			Total
Continuing Operations
Net sales	$	242.8		$	-		$	-		$	-	$	-		$	-	$	0.3		$	0.3		$	243.1
Cost of sales		180.7			0.3			0.1										-			0.4			181.1
Gross profit		62.1			(0.3	)		(0.1	)		-		-			-		0.3			(0.1	)		62.0
Selling, general and administrative expenses		40.3											0.7					-			0.7			41.0
Operating profit		21.8			(0.3	)		(0.1	)		-		(0.7	)		-		0.3			(0.8	)		21.0
Other income (expense):
Interest expense, net		(2.8	)															0.1			0.1			(2.7	)
Other, net		0.5																-						0.5
		(2.3	)		-			-			-		-			-		0.1			0.1			(2.2	)
Income before income taxes and income (loss) from affiliates and joint ventures		19.5			(0.3	)		(0.1	)		-		(0.7	)		-		0.4			(0.7	)		18.8
Income tax expense (benefit)		5.9						0.1					(0.2	)				(0.1	)		(0.2	)		5.7
Income before income (loss) from affiliates and joint ventures		13.6			(0.3	)		(0.2	)		-		(0.5	)		-		0.5			(0.5	)		13.1
Income (loss) from affiliates and joint ventures		(0.1	)															-						(0.1	)
Income (loss) from continuing operations		13.5			(0.3	)		(0.2	)		-		(0.5	)		-		0.5			(0.5	)		13.0
Discontinued Operations
Income (loss) on discontinued operations		0.2																-						0.2
Net income (loss)		13.7			(0.3	)		(0.2	)		-		(0.5	)		-		0.5			(0.5	)		13.2
Net income (loss) attributable to noncontrolling interests		-																-						-
Net income (loss) attributable to AMCOL shareholders	$	13.7		$	(0.3	)	$	(0.2	)	$	-	$	(0.5	)	$	-	$	0.5		$	(0.5	)	$	13.2
Weighted average common shares outstanding		31.7																			31.7			31.7
Weighted average common and common equivalent shares outstanding		32.2																			32.2			32.2
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	13.5																		$	(0.5	)	$	13.0
Discontinued operations, net of tax		0.2																			-			0.2
Net income	$	13.7																		$	(0.5	)	$	13.2
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	0.42																		$	(0.01	)	$	0.41
Discontinued operations		0.01																			-			0.01
Net income	$	0.43																		$	(0.01	)	$	0.42
Diluted earnings (loss) per share:
Continuing operations	$	0.42																		$	(0.02	)	$	0.40
Discontinued operations		0.01																			-			0.01
Net income	$	0.43																		$	(0.02	)	$	0.41

21

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	Quarter Ended September 30, 2011
	Previously Reported			Adjustments																			As Adjusted
				Spain			South Africa			Malaysia		DongMing		Tax			Other			Total
Continuing Operations
Net sales	$	248.1		$	-		$	-		$	-	$	-	$	-		$	-		$	-		$	248.1
Cost of sales		177.1			0.3			0.1										-			0.4			177.5
Gross profit		71.0			(0.3	)		(0.1	)		-		-		-			-			(0.4	)		70.6
Selling, general and administrative expenses		43.9													��			0.1			0.1			44.0
Operating profit		27.1			(0.3	)		(0.1	)		-		-		-			(0.1	)		(0.5	)		26.6
Other income (expense):
Interest expense, net		(2.8	)															-						(2.8	)
Other, net		(0.1	)															(0.1	)		(0.1	)		(0.2	)
		(2.9	)		-			-			-		-		-			(0.1	)		(0.1	)		(3.0	)
Income before income taxes and income (loss) from affiliates and joint ventures		24.2			(0.3	)		(0.1	)		-		-		-			(0.2	)		(0.6	)		23.6
Income tax expense (benefit)		6.7						0.1							(1.4	)		(0.1	)		(1.4	)		5.3
Income before income (loss) from affiliates and joint ventures		17.5			(0.3	)		(0.2	)		-		-		1.4			(0.1	)		0.8			18.3
Income (loss) from affiliates and joint ventures		3.0																-						3.0
Income (loss) from continuing operations		20.5			(0.3	)		(0.2	)		-		-		1.4			(0.1	)		0.8			21.3
Discontinued Operations
Income (loss) on discontinued operations		(1.0	)															(0.3	)		(0.3	)		(1.3	)
Net income (loss)		19.5			(0.3	)		(0.2	)		-		-		1.4			(0.4	)		0.5			20.0
Net income (loss) attributable to noncontrolling interests		-						(0.1	)									-			(0.1	)		(0.1	)
Net income (loss) attributable to AMCOL shareholders	$	19.5		$	(0.3	)	$	(0.1	)	$	-	$	-	$	1.4		$	(0.4	)	$	0.6		$	20.1
Weighted average common shares outstanding		31.8																			31.8			31.8
Weighted average common and common equivalent shares outstanding		32.2																			32.2			32.2
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	20.5																		$	0.9		$	21.4
Discontinued operations, net of tax		(1.0	)																		(0.3	)		(1.3	)
Net income	$	19.5																		$	0.6		$	20.1
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	0.64																		$	0.03		$	0.67
Discontinued operations		(0.03	)																		(0.01	)		(0.04	)
Net income	$	0.61																		$	0.02		$	0.63
Diluted earnings (loss) per share:
Continuing operations	$	0.64																		$	0.02		$	0.66
Discontinued operations		(0.03	)																		(0.01	)		(0.04	)
Net income	$	0.61																		$	0.01		$	0.62

22

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The effect of correcting these errors in our condensed consolidated statement of operations for the nine months ended September 30, 2011 is as follows:

	Nine Months Ended Sep 30, 2011
	Previously Reported			Adjustments																				As Adjusted
				Spain			South Africa			Malaysia		DongMing			Tax			Other			Total
Continuing Operations
Net sales	$	708.7		$	-		$	-		$	0.6	$	-		$	-		$	0.5		$	1.1		$	709.8
Cost of sales		517.9			0.9			0.3			-		-			-			(0.3	)		0.9			518.8
Gross profit		190.8			(0.9	)		(0.3	)		0.6		-			-			0.8			0.2			191.0
Selling, general and administrative expenses		123.3			-			-			-		0.7			-			0.1			0.8			124.1
Operating profit		67.5			(0.9	)		(0.3	)		0.6		(0.7	)		-			0.7			(0.6	)		66.9
Other income (expense):
Interest expense, net		(8.3	)		-			-			-		-			-			0.2			0.2			(8.1	)
Other, net		-			-			-			-		-			-			(0.1	)		(0.1	)		(0.1	)
		(8.3	)		-			-			-		-			-			0.1			0.1			(8.2	)
Income before income taxes and income (loss) from affiliates and joint ventures		59.2			(0.9	)		(0.3	)		0.6		(0.7	)		-			0.8			(0.5	)		58.7
Income tax expense (benefit)		16.9			-			0.3			0.1		(0.2	)		(1.9	)		(0.3	)		(2.0	)		14.9
Income before income (loss) from affiliates and joint ventures		42.3			(0.9	)		(0.6	)		0.5		(0.5	)		1.9			1.1			1.5			43.8
Income (loss) from affiliates and joint ventures		4.0			-			-			-		-			(0.1	)		-			(0.1	)		3.9
Income (loss) from continuing operations		46.3			(0.9	)		(0.6	)		0.5		(0.5	)		1.8			1.1			1.4			47.7
Discontinued Operations
Income (loss) on discontinued operations		(0.9	)		-			-			-		-			-			(0.3	)		(0.3	)		(1.2	)
Net income (loss)		45.4			(0.9	)		(0.6	)		0.5		(0.5	)		1.8			0.8			1.1			46.5
Net income (loss) attributable to noncontrolling interests		-			-			(0.1	)		-		-			-			-			(0.1	)		(0.1	)
Net income (loss) attributable to AMCOL shareholders	$	45.4		$	(0.9	)	$	(0.5	)	$	0.5	$	(0.5	)	$	1.8		$	0.8		$	1.2		$	46.6
Weighted average common shares outstanding		31.7																				31.7			31.7
Weighted average common and common equivalent shares outstanding		32.1																				32.1			32.1
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	46.3																			$	1.5		$	47.8
Discontinued operations, net of tax		(0.9	)																			(0.3	)		(1.2	)
Net income	$	45.4																			$	1.2		$	46.6
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	1.46																			$	0.05		$	1.51
Discontinued operations		(0.03	)																			(0.01	)		(0.04	)
Net income	$	1.43																			$	0.04		$	1.47
Diluted earnings (loss) per share:
Continuing operations	$	1.44																			$	0.05		$	1.49
Discontinued operations		(0.03	)																			(0.01	)		(0.04	)
Net income	$	1.41																			$	0.04		$	1.45

With regards to our condensed consolidated statement of comprehensive income for the three months ended March 31, 2011, correcting these errors increased total comprehensive income by $1.0, reflecting the $1.1 increase to net income as previously discussed in addition to $0.1 of losses resulting from foreign currency translation.

With regards to our condensed consolidated statement of comprehensive income for the three months ended June 30, 2011, correcting these errors reduced total comprehensive income by $0.6 resulting from the decrease to net income as previously discussed in addition to $0.1 of losses resulting from foreign currency translation.

23

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

With regards to our condensed consolidated statement of comprehensive income for the three months ended September 30, 2011, correcting these errors increased total comprehensive income by $0.7 resulting from the $0.5 increase to net income as previously discussed in addition to $0.2 of income resulting from foreign currency translation.

With regards to our condensed consolidated statement of comprehensive income for the nine months ended September 30, 2011, correcting these errors increased total comprehensive income by $1.1, reflecting the $1.1 increase to net income as previously discussed.

The effect of correcting these errors in our condensed consolidated statements of cash flows for the three months ended March 31, 2011, six months ended June 30, 2011, and nine months ended September 30, 2011 is as follows:

	Three Months Ended March 31, 2011									Six Months Ended June 30, 2011
	Previously Reported			Adjustments			As Adjusted			Previously Reported			Adjustments			As Adjusted
Net cash provided by (used in) operating activities	$	10.3		$	-		$	10.3		$	13.9		$	0.1		$	14.0
Net cash (used in) investing activities		(10.3	)		0.5			(9.8	)		(24.4	)		0.5			(23.9	)
Net cash provided by (used in) financing activities		(6.3	)		-			(6.3	)		0.4			(0.1	)		0.3
Effect of foreign currency rate changes on cash		0.2			-			0.2			0.7			-			0.7
Net increase (decrease) in cash and cash equivalents		(6.1	)		0.5			(5.6	)		(9.4	)		0.5			(8.9	)
Cash and cash equivalents at beginning of period		27.3			(0.5	)		26.8			27.3			(0.5	)		26.8
Cash and cash equivalents at end of period	$	21.2		$	-		$	21.2		$	17.9		$	-		$	17.9

	Nine Months Ended September 30, 2011
	Previously reported			Adjustments			As Adjusted
Net cash provided by (used in) operating activities	$	16.6		$	0.1		$	16.7
Net cash (used in) investing activities		(40.9	)		0.5			(40.4	)
Net cash provided by (used in) financing activities		5.5			(0.1	)		5.4
Effect of foreign currency rate changes on cash		0.8			-			0.8
Net increase (decrease) in cash and cash equivalents		(18.0	)		0.5			(17.5	)
Cash and cash equivalents at beginning of period		27.3			(0.5	)		26.8
Cash and cash equivalents at end of period	$	9.3		$	-		$	9.3

24

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Corrections to three months ended March 31, 2012

The effect of correcting these errors in our condensed consolidated statement of operations for the three months ended March 31, 2012 is as follows:

	Quarter Ended March 31, 2012
	Previously Reported			Adjustments																	As Adjusted
				Spain			South Africa			Malaysia		Tax			Other			Total
Continuing Operations
Net sales	$	235.8		$	-		$	-		$	-	$	-		$	(0.2	)	$	(0.2	)	$	235.6
Cost of sales		170.7			0.4			0.1								(0.2	)		0.3			171.0
Gross profit		65.1			(0.4	)		(0.1	)		-		-			-			(0.5	)		64.6
Selling, general and administrative expenses		43.6			(0.2	)										(0.1	)		(0.3	)		43.3
Operating profit		21.5			(0.2	)		(0.1	)		-		-			0.1			(0.2	)		21.3
Other income (expense):
Interest expense, net		(2.7	)													-						(2.7	)
Other, net		(2.1	)													(0.1	)		(0.1	)		(2.2	)
		(4.8	)		-			-			-		-			(0.1	)		(0.1	)		(4.9	)
Income before income taxes and income (loss) from affiliates and joint ventures		16.7			(0.2	)		(0.1	)		-		-			-			(0.3	)		16.4
Income tax expense (benefit)		4.8			0.1			(0.1	)				(0.3	)		(0.2	)		(0.5	)		4.3
Income before income (loss) from affiliates and joint ventures		11.9			(0.3	)		-			-		0.3			0.2			0.2			12.1
Income (loss) from affiliates and joint ventures		1.2														-						1.2
Income (loss) from continuing operations		13.1			(0.3	)		-			-		0.3			0.2			0.2			13.3
Discontinued Operations
Income (loss) on discontinued operations		(0.2	)													0.2			0.2			-
Net income (loss)		12.9			(0.3	)		-			-		0.3			0.4			0.4			13.3
Net income (loss) attributable to noncontrolling interests		0.1														-						0.1
Net income (loss) attributable to AMCOL shareholders	$	12.8		$	(0.3	)	$	-		$	-	$	0.3		$	0.4		$	0.4		$	13.2
Weighted average common shares outstanding		32.0																	32.0			32.0
Weighted average common and common equivalent shares outstanding		32.3																	32.3			32.3
Amounts attributable to AMCOL shareholders
Income from continuing operations, net of tax	$	13.0																$	0.2		$	13.2
Discontinued operations, net of tax		(0.2	)																0.2			-
Net income	$	12.8																$	0.4		$	13.2
Earnings per share attributable to AMCOL shareholders:
Basic earnings (loss) per share:
Continuing operations	$	0.41																$	-		$	0.41
Discontinued operations		(0.01	)																0.01			-
Net income	$	0.40																$	0.01		$	0.41
Diluted earnings (loss) per share:
Continuing operations	$	0.41																$	-		$	0.41
Discontinued operations		(0.01	)																0.01			-
Net income	$	0.40																$	0.01		$	0.41

With regards to our consolidated statement of comprehensive income for the three months ended March 31, 2012, correcting these errors increased total comprehensive income by $0.3, reflecting the $0.4 increase to net income as previously discussed in addition to $0.1 of losses resulting from foreign currency translation.

25

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The effect of correcting these errors in our condensed consolidated statements of cash flows for the three months ended March 31, 2012 is as follows:

	Three Months Ended March 31, 2012
	Previously Reported			Adjustments			As Adjusted
Net cash provided by (used in) operating activities	$	20.6		$	0.3		$	20.9
Net cash (used in) investing activities		(15.3	)		(0.1	)		(15.4	)
Net cash provided by (used in) financing activities		(12.1	)		(0.2	)		(12.3	)
Net increase (decrease) in cash and cash equivalents		(6.8	)		-			(6.8	)
Cash and cash equivalents at beginning of period		23.7			-			23.7
Cash and cash equivalents at end of period	$	16.9		$	-		$	16.9

Note 3: EARNINGS PER SHARE

The following table 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 attributable to AMCOL shareholders by the weighted average number of common shares outstanding during each period.  Diluted earnings per share was computed by dividing net income attributable to AMCOL shareholders by the weighted average common shares outstanding after consideration of the dilutive effect of stock compensation awards outstanding during each period.

	Nine Months Ended September 30,				Three Months Ended September 30,
	2012		2011		2012		2011
Weighted average number of common shares outstanding		32,024,603		31,671,781		32,071,202		31,799,536
Dilutive impact of stock based compensation		315,636		455,777		381,676		393,922
Weighted average number of common and common equivalent shares outstanding for the period		32,340,239		32,127,558		32,452,878		32,193,458
Number of common shares outstanding at the end of the period		31,959,139		31,666,904		31,959,139		31,666,904
Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share		635,738		186,929		276,753		218,800

26

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Note 4: ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at September 30, 2012 and December 31, 2011 are comprised of the following components:

	September 30, 2012		December 31, 2011
Crude stockpile inventories	$	61.6	$	54.5
In-process and finished goods inventories		71.4		64.4
Other raw material, container, and supplies inventories		27.8		25.9
	$	160.8	$	144.8

We mine various minerals using a surface mining process that requires the removal of overburden.  In certain areas and under various governmental regulations, we are obligated to restore the land comprising each mining site to its original condition at the completion of the mining activity.  We include an estimate of this reclamation liability in our condensed consolidated balance sheets; it is adjusted to reflect the passage of time and changes in estimated future cash outflows.  A reconciliation of the activity within our reclamation liability is as follows:

	Nine Months Ended September 30,
	2012			2011
Balance at beginning of period	$	9.3		$	7.5
Settlement of obligations		(3.1	)		(2.8	)
Liabilities incurred and accretion expense		3.8			4.4
Foreign currency		(0.1	)		(0.3	)
Balance at end of period	$	9.9		$	8.8

Note 5: BUSINESS SEGMENT INFORMATION

As previously mentioned, we operate in five segments.  We determine our operating segments based on the discrete financial information that is regularly evaluated by our chief operating decision maker, our President and Chief Executive Officer, in deciding how to allocate resources and in assessing performance.  Intersegment sales are not material and are eliminated in the corporate segment.  Our reportable measure of profit or loss for each segment is operating profit, which is defined as net sales less cost of sales and selling, general and administrative expenses related to a segment’s operations.  The costs deducted to arrive at operating profit do not include several items, such as net interest expense or income taxes.  Segment assets are those assets used in the operations of that segment.  Corporate assets include assets used in the operation of this segment as well as those used by or shared amongst our segments, including certain cash and equivalent assets, certain fixed assets, assets associated with certain employee benefit plans, and other miscellaneous assets.

27

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The following tables set forth certain financial information by segment:

	Nine Months Ended September 30,						Three Months Ended September 30,
	2012			2011			2012			2011
Net sales:
Minerals and materials	$	377.3		$	356.4		$	121.0		$	122.3
Environmental		172.8			197.6			60.4			71.1
Oilfield services		185.5			140.9			69.1			50.2
Transportation		33.5			42.3			10.7			14.8
Intersegment sales		(22.8	)		(27.4	)		(7.9	)		(10.3	)
Total	$	746.3		$	709.8		$	253.3		$	248.1
Operating profit (loss):
Minerals and materials	$	62.0		$	49.1		$	18.0		$	19.6
Environmental		13.6			17.9			6.6			7.8
Oilfield services		20.4			15.2			7.9			5.7
Transportation		0.7			1.9			0.2			0.7
Corporate		(16.8	)		(17.2	)		(5.1	)		(7.2	)
Total	$	79.9		$	66.9		$	27.6		$	26.6
	As of Sep 30, 2012			As of Dec. 31, 2011
Assets:
Minerals and materials	$	450.3		$	431.1
Environmental		173.8			160.0
Oilfield services		211.5			194.7
Transportation		3.1			3.9
Corporate		74.1			60.9
Total	$	912.8		$	850.6

28

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

	Nine Months Ended September 30,					Three Months Ended September 30,
	2012			2011		2012		2011
Depreciation, depletion and amortization:
Minerals and materials	$	14.5		$	15.5	$	5.0	$	5.5
Environmental		4.0			4.1		1.3		1.5
Oilfield services		12.6			9.5		4.4		3.4
Transportation		0.1			0.1		0.1		0.1
Corporate		2.1			2.0		0.7		0.8
Total	$	33.3		$	31.2	$	11.5	$	11.3
Capital expenditures:
Minerals and materials	$	20.7		$	17.8	$	9.9	$	8.7
Environmental		7.9			6.4		1.6		4.6
Oilfield services		20.8			17.8		7.8		4.9
Transportation		-			0.2		-		-
Corporate		4.8			1.6		2.7		0.8
Total	$	54.2		$	43.8	$	22.0	$	19.0
Research and development (income) expense:
Minerals and materials	$	5.4		$	4.7	$	1.8	$	1.6
Environmental		1.8			1.6		0.6		0.5
Oilfield services		0.6			0.2		0.2		-
Corporate		(0.1	)		0.1		-		0.3
Total	$	7.7		$	6.6	$	2.6	$	2.4

Note 6: EMPLOYEE BENEFIT PLANS

Our net periodic benefit cost for our defined benefit pension plan was as follows:

	Nine Months Ended September 30,						Three Months Ended September 30,
	2012			2011			2012			2011
Service cost	$	1.3		$	1.1		$	0.4		$	0.3
Interest cost		2.0			2.0			0.7			0.7
Expected return on plan assets		(1.9	)		(2.1	)		(0.6	)		(0.7	)
Amortization of acturial loss		0.7			-			0.2			-
Net periodic benefit cost	$	2.1		$	1.0		$	0.7		$	0.3

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, we expect to contribute $1.7 to our pension plan in 2012, of which $1.3 was contributed in the nine months ended September 30, 2012.

29

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

Note 7: INCOME TAXES

Our effective tax rate for the nine months ended September 30, 2012 and 2011 was 27.8% and 25.4%, respectively.  For both periods, the rate differs from the U.S. federal statutory rate of 35.0% largely due to depletion deductions, changes in tax reserves in 2011, and differences in local tax rates on the income from our foreign subsidiaries.

In the normal course of business, we are subject to examination by taxing authorities throughout the world.  With few exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2004.  In general, the United States Internal Revenue Service (“IRS”) has examined our federal income tax returns for all years through 2009.

Note 8: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As a multinational corporation with operations throughout the world, we are subject to certain market risks. We use a variety of practices to manage these market risks, including, when considered appropriate, derivative financial instruments. We use derivative financial instruments only for risk management and not for trading or speculative purposes.

The following table sets forth the fair values of our derivative instruments and where they are recorded within our condensed consolidated balance sheet:

		Fair Value as of
Liability Derivatives	Balance Sheet Location	September 30, 2012			December 31, 2011
Derivatives designated as hedging instruments:
Interest rate swaps	Other long-term liabilities	$	(8.9	)	$	(9.0	)

Cash flow hedges

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
Derivatives in Cash Flow Hedging Relationships	Nine Months Ended September 30,					Three Months Ended September 30,
	2012		2011			2012		2011
Interest rate swaps, net of tax	$	-	$	(1.6	)	$	-	$	(1.3	)

30

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

We use interest rate swaps to manage floating interest rate risk on debt securities.  Interest rate differentials are paid or received on these arrangements over the life of the swap.  As of September 30, 2012 and 2011, we had interest rate swaps outstanding which effectively hedge the variable interest rate on $30.0 of our senior notes to a fixed rate of 5.6% per annum and $33.0 of our borrowings under our revolving credit agreement to a fixed rate of 3.3% per annum, plus credit spread.

Other

We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies.  We are particularly sensitive to currency exchange rate fluctuations for the following currencies: Euro, pound sterling (GBP), Polish Zloty (PLN), South African rand (ZAR), Danish kroner (DKK), Swiss franc (SEK), India rupee (INR), Thai baht (THB), Chinese renminbi (CYN), and Malaysian ringgit (MYR).  When considered appropriate, we enter into foreign exchange derivative contracts to mitigate the risk of fluctuations on these exposures.

We have not designated our foreign currency derivative contracts for hedge accounting treatment and therefore, changes in fair value of these contracts are recorded in earnings as follows:

	Location of Gain or (Loss)	Amount of Gain or (Loss) Recognized in Income on Derivatives
	Recognized in Income on	Nine Months Ended September 30,					Three Months Ended September 30,
Derivatives Not Designated as Hedging Instruments	Derivatives	2012		2011			2012			2011
Foreign currency exchange contracts	Other, net	$	-	$	(0.8	)	$	(0.3	)	$	0.5

We did not have any significant foreign exchange derivative instruments outstanding as of September 30, 2012 or December 31, 2011.

Note 9: FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Our calculation of the fair value of derivative instruments includes several assumptions.  The fair value hierarchy prioritizes these input assumptions in the following three broad levels:

Level 1 – Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities we have the ability to access at the measurement date.

Level 2 – Valuation is based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and model based valuations for which all significant inputs are observable in the market.

Level 3 – Valuation is based on model based techniques that use unobservable inputs for the asset or liability. These inputs reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability.

31

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The following tables categorize our fair value instruments, measured on a recurring basis, according to the assumptions used to calculate those values:

	Fair Value Measurements Using
Description	Asset / (Liability) Balance at 9/30/2012			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swaps	$	(8.9	)	$	-	$	(8.9	)	$	-
Available-for-sale securities		7.9			7.9		-			-
Deferred compensation plan assets		9.2			-		9.2			-
Supplementary pension plan assets		8.1			-		8.1			-

	Fair Value Measurements Using
Description	Asset / (Liability) Balance at 12/31/2011			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swaps	$	(9.0	)	$	-	$	(9.0	)	$	-
Available-for-sale securities		3.8			3.8		-			-
Deferred compensation plan assets		8.0			-		8.0			-
Supplementary pension plan assets		7.6			-		7.6			-

Interest rate swaps are valued using discounted cash flows.  The key input used is the LIBOR swap rate, which is observable at commonly quoted intervals for the full term of the swap.  Available-for-sale securities are valued using quoted market prices.  Deferred compensation and supplemental pension plan assets are valued using quoted prices for similar assets in active markets.

32

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

The carrying value of our long-term debt approximates its fair value as the interest rate is near the current market rate yield.  The fair value of our long-term debt is determined using current applicable rates for similar instruments as of the balance sheet date.  The fair value of long-term debt for disclosure purpose is a Level 3 liability within the fair value category.

Note 10: NONCONTROLLING INTEREST

In January 2011, we acquired the remaining noncontrolling interest in Volclay South Africa (Proprietary) Limited, a part of our chromite business, for approximately $5.6. 

In February 2011, we sold 26% of our interest in Batlhako Mining Limited (“Batlhako”) to Vengawave (Proprietary) Limited, which is a Black Economic Empowerment enterprise (a “BEE”) in the Republic of South Africa.  Batlhako is our subsidiary dedicated strictly to mining chromite ore and selling it to one of our other subsidiaries for further processing and sale to the end customer.  South African law requires that we have a BEE as a partner in our mining operations and this transaction was consummated to comply with those regulations.

The following table sets forth the effects of these transactions on equity attributable to AMCOL’s shareholders:

	Nine Months Ended September 30,
	2012		2011
Net income attributable to AMCOL shareholders	$	53.6	$	46.6
Transfers from noncontrolling interest:
Decrease in additional paid-in capital for purchase of the remaining noncontrolling interest in  Volclay South Africa (Proprietary) Limited		-		(5.4	)
Decrease in additional paid-in capital for transfer of 26% interest in Batlhako		-		(3.4	)
Change from net income attributable to AMCOL shareholders and transfers from noncontrolling interest	$	53.6	$	37.8

Note 11: CONTINGENCIES

We are party to a number of lawsuits arising in the normal course of business.   Since the mid-1980s, we and/or our subsidiaries have been named as one of a number of defendants in product liability lawsuits relating to the minor free-silica content of our bentonite products used in the metalcasting industry.  The plaintiffs in these lawsuits are primarily employees of our foundry customers.  Our oilfield services segment is also party to two lawsuits alleging damages caused by our coiled tubing operations in Louisiana; one lawsuit alleges damages of $28 and the other of $9.  We do not believe that any of the aforementioned pending litigation will have a material adverse effect on our consolidated financial statements.

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Item 2:  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 27A of the Securities Act of 1933, as amended, and 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 markets; oil and gas prices and conditions in those industries; operating costs; seasonality of our environmental and oilfield services segments; competition and regulation; currency exchange rates and devaluations; delays in development, production and marketing of new products; integration of acquired businesses; conducting and expanding operations in international markets; and other factors set forth from time to time in our reports filed with the Securities and Exchange Commission (SEC).  We undertake no duty to update any forward looking statements to actual results or changes in our expectations.

Overview

We are a global company focused on long term profitability growth through the development and application of minerals and technology products and services for use in various industrial and consumer markets.  The majority of our revenue growth has been achieved by sustaining our products’ technological advantages, developing new products and applying them in innovative ways, bringing additional products and services to markets we already serve, and overall growth in the industries we serve.  We focus our research and development activities in areas where we can either leverage our current customer relationships and mineral reserves or enhance existing or related products and services.

For our products that use minerals, the principal mineral that we utilize is bentonite.  We own or lease bentonite reserves in the U.S., Australia, China and Turkey.  Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India, and Mexico.  We also market and develop applications for other minerals, including chromite ore from our mine in South Africa.

Bentonite is surface mined when it is commercially feasible to have it shipped to a plant for further processing, including crushing, drying, milling, and packaging.  Bentonite deposits have varying physical properties which require us to identify which markets our reserves can serve.  Nicknamed the mineral of a thousand uses, bentonite’s unique characteristics include its ability to bind, swell, adsorb, control rheology, soften fabrics, and have its surface modified through chemical and physical reactions.  Our research and development activities, including our understanding of bentonite properties, mining methods, processing and application to markets, are some of the core components of our longevity and future prospects.

34

We operate in five segments:  minerals and materials, environmental, oilfield services, transportation and corporate.  Both our minerals and materials and environmental segments operate manufacturing facilities in North America, Europe, and the Asia-Pacific region.  Our minerals and materials segment also owns and operates a chromite mine in South Africa.  Our oilfield services segment principally operates in the Gulf of Mexico and surrounding states and also has a growing presence in South America, Africa and Asia.  Additionally, we have a transportation segment that performs trucking services for our domestic minerals and materials and environmental businesses as well as third parties.

Our customers are engaged in various end-markets and geographic regions. Customers in the minerals and materials 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 litter, cosmetics and laundry care.  Customers in our environmental segment include construction contractors, engineering contractors and government agencies.  The oilfield services segment’s customer base is primarily comprised of oil and natural gas 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 sales are made pursuant to short-term agreements; therefore, terms of sale, such as pricing and volume, can change within our fiscal year.

A majority of our revenues are generated in the Americas, principally North America.  Consequently, the state of the U.S. economy, and especially the metalcasting, industrial construction, and oil and gas exploration and production industries, impacts our revenues.

Sustainable, long-term profitable 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 activities directed at bringing 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:  As we have done for decades, we continue to expand our manufacturing and marketing organizations into emerging geographic markets.  We see significant opportunities in the Asia-Pacific and Eastern European regions 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 in these areas.  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 supply.  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 bentonite mined each year.  Furthermore, we need to assure that 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.

35

· Acquisitions: We continually seek to acquire complementary businesses, as appropriate, when we believe those businesses are fairly valued and fit into 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 throughout this report as well as under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K for the year ended December 31, 2011.  In general, the significance of these risks has not materially changed since our Annual Report on Form 10-K for the period ended December 31, 2011.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of our Financial Condition and Results of Operations describes relevant aspects of our condensed consolidated financial statements, which have been 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, please read our Annual Report on Form 10-K for the year ended December 31, 2011.

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 in conjunction with the accompanying condensed consolidated financial statements.

The following consolidated income statement review and segment analysis discuss the results for the three and nine months ended September 30, 2012 and the comparable results in the prior year.  In each section, a discussion of our consolidated results is presented first, followed by a more detailed discussion of performance within our segments.

36

Three months ended September 30, 2012 vs. September 30, 2011

Consolidated Income Statement Review

The table below compares our operating results for the three months ended September 30, 2012 and 2011.

	Three Months Ended September 30,
Consolidated	2012			2011			2012 vs. 2011
	(In Millions, Except Per Share Amounts)
Continuing operations
Net sales	$	253.3		$	248.1			2.1	%
Cost of sales		183.9			177.5
Gross profit		69.4			70.6			-1.7	%
margin %		27.4	%		28.5	%
Selling, general and administrative expenses		41.8			44.0			-5.0	%
Operating profit		27.6			26.6			3.8	%
margin %		10.9	%		10.7	%
Other income (expense):
Interest expense, net		(2.5	)		(2.8	)		-10.7	%
Other, net		-			(0.2	)		*
		(2.5	)		(3.0	)
Income before income taxes and income (loss) from affiliates and joint ventures		25.1			23.6
Income tax expense		7.4			5.3			39.6	%
effective tax rate		29.5	%		22.5	%
Income before income (loss) from affiliates and joint ventures		17.7			18.3
Income (loss) from affiliates and joint ventures		1.1			3.0			*
Income (loss) from continuing operations		18.8			21.3
Discontinued operations
Income (loss) on discontinued operations		-			(1.3	)		*
Net income (loss)		18.8			20.0			-6.0	%
Net income (loss) attributable to noncontrolling interests		-			(0.1	)		*
Net income (loss) attributable to AMCOL shareholders	$	18.8		$	20.1			-6.5	%
Earnings per share attributable to AMCOL shareholders
Basic earnings (loss) per share:
Continuing operations	$	0.59		$	0.67			-11.9	%
Discontinued operations		-			(0.04	)		*
Net income	$	0.59		$	0.63			-6.3	%
Diluted earnings (loss) per share
Continuing operations	$	0.58		$	0.66			-12.1	%
Discontinued operations		-			(0.04	)		*
Net income	$	0.58		$	0.62			-6.5	%
* Not meaningful

37

We measure sales fluctuations by the relevant components: organic, acquisitions, and foreign currency translation.  Fluctuation due to foreign currency translation is measured as the change in revenues resulting from differences in currency exchange rates between periods.  If applicable, fluctuation due to acquisitions is measured as the change in revenues resulting from acquired businesses within the first year (twelve consecutive months) we own them.  Any remaining fluctuation is due to organic components.  The following table details the consolidated sales fluctuations by components over the prior year’s comparable period:

	Organic			Acquisitions			Foreign Exchange			Total
Minerals and materials		0.2	%		0.0	%		-0.7	%		-0.5	%
Environmental		-2.7	%		0.0	%		-1.6	%		-4.3	%
Oilfield services		7.9	%		0.0	%		-0.3	%		7.6	%
Transportation & intersegment shipping		-0.7	%		0.0	%		0.0	%		-0.7	%
Total		4.7	%		0.0	%		-2.6	%		2.1	%
% of change		223.8	%		0.0	%		-123.8	%		100.0	%

The following table shows the distribution of sales across our three principal geographic regions (Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific) and the comparable total from the prior year’s period:

	Americas			EMEA			Asia Pacific			Total
Minerals and materials		28.6	%		8.6	%		10.0	%		47.2	%
Environmental		10.9	%		10.7	%		2.1	%		23.7	%
Oilfield services		19.5	%		2.3	%		5.4	%		27.2	%
Transportation & intersegment shipping		1.9	%		0.0	%		0.0	%		1.9	%
Total - current year's period		60.9	%		21.6	%		17.5	%		100.0	%
Total from prior year's comparable period		62.3	%		24.2	%		13.5	%		100.0	%

Net sales & Gross profit:

Our net sales grew organically and were negatively affected by foreign currency translation.  Our oilfield services segment increased sales 37.6% whereas our three other major segments experienced a decrease in sales.  The largest decrease occurred in our environmental segment which continues to be impacted by increased competition in a declining market.  Sales were less concentrated in our EMEA region due to decreased sales in our environmental segment, and the laundry care products within our minerals and materials segment.

Overall gross profit decreased due to decreased sales levels within three of our major segments as mentioned above.  In addition, our coil tubing services (within our oilfield services segment) suffered from a combination of increased competition, which decreased revenue rates, and cost increases in delivering its services.  These factors led to the overall 110 basis point decrease in gross profit margins.

38

Selling, general and administrative expenses (SG&A):

SG&A expenses decreased $2.2 million, most of which occurred in our environmental and corporate segments.  Our environmental segment benefitted from favorable foreign currency exchange rate movements and decreased bad debt expenses.  Costs of providing employee benefits decreased in our corporate segment, largely due to gains on certain assets underpinning one of our pension plans.

Income tax expense:

Our effective tax rate for the current quarter was 29.5% versus 22.5% in the prior year’s quarter.  Our income tax expense and effective tax rate fluctuated between the periods presented due to discrete items recorded and the distribution of income between taxing jurisdictions.  The prior year period includes gains from favorable settlements of income tax audits which reduced the effective rate in the prior year period by 420 basis points.  In addition, the current quarter’s income is more heavily concentrated in our domestic businesses which typically have a higher income tax rate than our foreign operations.

Income (loss) from affiliates and joint ventures:

Income from affiliates and joint ventures decreased $1.9 million in the current period as the prior year period included a $2.1 million gain from the sale of our Belgian joint venture investment.

Diluted earnings per share from continuing operations:

Diluted earnings per share from continuing operations decreased in the quarter due to the decrease in net income resulting from the decrease gross profit, increased income tax expense and lack of gains from joint venture investment sales as previously mentioned.

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Quarterly Review of Each Segment’s Results

Following is a review of operating results for each of our five reporting segments:

Minerals and Materials Segment

	Three Months Ended September 30,
Minerals and Materials	2012				2011				2012 vs. 2011
	(Dollars in millions)
Net sales	$	121.0	100.0	%	$	122.3	100.0	%	$	(1.3	)	-1.1	%
Cost of sales		89.8	74.2	%		90.7	74.2	%
Gross profit		31.2	25.8	%		31.6	25.8	%		(0.4	)	-1.3	%
Selling, general and administrative expenses		13.2	10.9	%		12.0	9.8	%		1.2		10.0	%
Operating profit		18.0	14.9	%		19.6	16.0	%		(1.6	)	-8.2	%

	Three Months Ended September 30,
Minerals and Materials Product Line Sales	2012		2011		% change
	(Dollars in millions)
Metalcasting	$	67.8	$	66.0		2.7	%
Specialty materials		22.7		25.5		-11.0	%
Basic minerals		15.2		14.5		4.8	%
Pet products		11.9		14.1		-15.6	%
Other product lines		3.4		2.2		54.5	%
Total		121.0		122.3		-1.1	%

Approximaty $1.6 million of the decrease in sales was caused by unfavorable foreign currency exchange rate movements.  Organically, we were able to increase selling prices, particularly in our metalcasting and pet products.  However, volumes decreased in pet products, laundry care (specialty minerals), and drilling additive products (basic minerals).  Overall, basic mineral product line sales increased, though, due to increased chromite by-product sales used in the ferrochrome market.

Our metalcasting product line, which includes chromite sales to foundry customers, continues to experience an increase in demand due to growth in demand for automobile and heavy equipment castings.  Our drilling additive product sales suffered in the quarter due to inventory destocking efforts from several large customers.

The increases in SG&A expenses led to the decrease in operating profits.  SG&A costs increased due to increased headcount and compensation costs.  These increases also caused the decrease in operating profit margin.

40

Environmental Segment

	Three Months Ended September 30,
Environmental	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	60.4	100.0	%	$	71.1	100.0	%	$	(10.7	)	-15.0	%
Cost of sales		40.7	67.4	%		49.0	68.9	%
Gross profit		19.7	32.6	%		22.1	31.1	%		(2.4	)	-10.9	%
Selling, general and administrative expenses		13.1	21.7	%		14.3	20.1	%		(1.2	)	-8.4	%
Operating profit		6.6	10.9	%		7.8	11.0	%		(1.2	)	-15.4	%

	Three Months Ended September 30,
Environmental Product Line Sales	2012		2011		% change
	(Dollars in millions)
Lining technologies	$	25.1	$	29.6		-15.2	%
Building materials		20.3		21.4		-5.1	%
Drilling products		9.9		8.6		15.1	%
Contracting services		5.1		11.5		-55.7	%
Total		60.4		71.1		-15.0	%

Approximately 37% of the decrease in net sales resulted from unfavorable movements in foreign currency exchange rates, almost entirely in our European subsidiaries.  The majority of the remaining decrease also occurred in these subsidiaries as a result of our decision to exit our contracting services.  Our lining technologies product line also continues to experience weakened demand due to a declining market and increased competition.  These reductions have overshadowed increased sales of our drilling products.

The decrease in sales caused the decrease in gross profit.  However, with the decrease in lining technologies and contracting service revenues, net sales are becoming more concentrated in higher margin building materials and drilling product sales.  This, along with better cost management, has helped overall gross profit margins, which increased 150 basis points in the current period.

SG&A costs benefitted equally from decreased bad debt expenses and favorable foreign currency exchange rate movements.

Oilfield Services Segment

	Three Months Ended September 30,
Oilfield Services	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	69.1	100.0	%	$	50.2	100.0	%	$	18.9	37.6	%
Cost of sales		51.4	74.4	%		34.9	69.5	%
Gross profit		17.7	25.6	%		15.3	30.5	%		2.4	15.7	%
Selling, general and administrative expenses		9.8	14.2	%		9.6	19.1	%		0.2	2.1	%
Operating profit		7.9	11.4	%		5.7	11.4	%		2.2	38.6	%

41

This segment has experienced strong growth due to increases in demand and our service capacity. Growth also came from our international filtration operations, which generated 69.5% of the increase.  Internationally, we have been more successful at winning large, finite term contracts and have increased sales in our engineering services directed at designing and building filtration equipment for customers.  Domestically, our revenues increased in water filtration, well testing, and pipeline services. Revenues were stagnant in our coil tubing services due to pricing pressures.

Nearly all of the improvement in gross profit was derived from our international operations due to the increased sales, as mentioned above, in addition to benefitting from new management in those locations.  Our coil tubing services also experienced cost increases in delivering services, which led to the decrease in gross profit margins.  The trends in operating profit and operating profit margin followed those of gross profit and gross profit margins.

Transportation Segment

	Three Months Ended September 30,
Transportation	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	10.7	100.0	%	$	14.8	100.0	%	$	(4.1	)	-27.7	%
Cost of sales		9.6	89.7	%		13.1	88.5	%
Gross profit		1.1	10.3	%		1.7	11.5	%		(0.6	)	-35.3	%
Selling, general and administrative expenses		0.9	8.4	%		1.0	6.8	%		(0.1	)	-10.0	%
Operating profit		0.2	1.9	%		0.7	4.7	%		(0.5	)	-71.4	%

This segment provides services to third parties as well as AMCOL companies within our other segments.  Revenues decreased due to increased competition as well as decreased availability of drivers, who are being recruited to oil and gas opportunities in the Bakken shale region.  Operating profits decreased as a result of the decrease in revenues.

Corporate Segment

	Three Months Ended September 30,
Corporate	2012			2011			2012 vs. 2011
	(Dollars in Millions)
Intersegment sales	$	(7.9	)	$	(10.3	)		2.4
Intersegment cost of sales		(7.6	)		(10.2	)
Gross profit (loss)		(0.3	)		(0.1	)		(0.2	)
Selling, general and administrative expenses		4.8			7.1			(2.3	)	-32.4	%
Operating loss		(5.1	)		(7.2	)		2.1		-29.2	%

Intersegment sales are eliminated in our corporate segment.  These are mostly sales between our transportation segment and our minerals and materials and environmental segments as well as sales between our minerals and materials segment and environmental and oilfield services segments.

Corporate SG&A expenses decreased as costs of providing employee benefits decreased, largely due to less medical expenses and gains on certain assets underpinning some of our pension benefits.

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Nine months ended September 30, 2012 vs. September 30, 2011

Consolidated Income Statement Review

The table below compares our operating results for the nine month periods ended September 30, 2012 and 2011.

	Nine Months Ended September 30,
Consolidated	2012			2011			2012 vs. 2011
	(In Millions, Except Per Share Amounts)
Continuing operations
Net sales	$	746.3		$	709.8			5.1	%
Cost of sales		537.7			518.8
Gross profit		208.6			191.0			9.2	%
margin %		28.0	%		26.9	%
Selling, general and administrative expenses		128.7			124.1			3.7	%
Operating profit		79.9			66.9			19.4	%
margin %		10.7	%		9.4	%
Other income (expense):
Interest expense, net		(7.9	)		(8.1	)		-2.5	%
Other, net		(2.7	)		(0.1	)		*
		(10.6	)		(8.2	)
Income before income taxes and income (loss) from affiliates and joint ventures		69.3			58.7
Income tax expense		19.3			14.9			29.5	%
effective tax rate		27.8	%		25.4	%
Income before income (loss) from affiliates and joint ventures		50.0			43.8
Income (loss) from affiliates and joint ventures		3.4			3.9			*
Income (loss) from continuing operations		53.4			47.7
Discontinued operations
Income (loss) on discontinued operations		-			(1.2	)		*
Net income (loss)		53.4			46.5			14.8	%
Net income (loss) attributable to noncontrolling interests		(0.2	)		(0.1	)		*
Net income (loss) attributable to AMCOL shareholders	$	53.6		$	46.6			15.0	%
Earnings per share attributable to AMCOL shareholders
Basic earnings (loss) per share:
Continuing operations	$	1.67		$	1.51			10.6	%
Discontinued operations		-			(0.04	)		*
Net income	$	1.67		$	1.47			13.6	%
Diluted earnings (loss) per share
Continuing operations	$	1.66		$	1.49			11.4	%
Discontinued operations		-			(0.04	)		*
Net income	$	1.66		$	1.45			14.5	%

* Not meaningful

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The following table details the consolidated sales fluctuations by components over the prior year’s comparable period:

	Organic			Acquisitions			Foreign Exchange			Total
Minerals and materials		3.6	%		0.0	%		-0.7	%		2.9	%
Environmental		-2.0	%		0.0	%		-1.5	%		-3.5	%
Oilfield services		6.5	%		0.0	%		-0.2	%		6.3	%
Transportation & intersegment shipping		-0.6	%		0.0	%		0.0	%		-0.6	%
Total		7.5	%		0.0	%		-2.4	%		5.1	%
% of growth		147.1	%		0.0	%		-47.1	%		100.0	%

The following table shows the distribution of sales across our three principal geographic regions and the comparable total from the prior year’s period:

	Americas			EMEA			Asia Pacific			Total
Minerals and materials		31.0	%		8.5	%		10.3	%		49.8	%
Environmental		11.3	%		9.5	%		2.2	%		23.0	%
Oilfield services		19.7	%		1.7	%		3.5	%		24.9	%
Transportation & intersegment shipping		2.3	%		0.0	%		0.0	%		2.3	%
Total - current year's period		64.3	%		19.7	%		16.0	%		100.0	%
Total from prior year's comparable period		62.4	%		23.9	%		13.7	%		100.0	%

Net sales & Gross profit:

Organic increases in net sales were somewhat offset by unfavorable fluctuations in foreign currency exchange rates.  Our oilfield services segment has contributed the most to increased sales along with minerals and materials, while our environmental segment experienced a decrease in net sales.  See a discussion of those segments for further details.  Geographically, our sales have become more concentrated in the Americas due to decreases in Europe, largely in our environmental segment, and increases both domestically and in Asia, largely in our oilfield services segment.

The increase in gross profit results almost equally from increased sales and increased gross profit margins.  The increase in gross profit margins results from the 250 basis point improvement in margins within our minerals and materials segment as discussed later herein.

Selling, general and administrative expenses (SG&A):

SG&A expenses increased $4.6 million, the majority of which occurred in our oilfield services segment.  We have experienced increased operating leverage in our minerals and materials segment where SG&A expenses have increased at a substantially lower rate than sales.  Our environmental segment has been able to reduce its expenses while also benefitting from favorable foreign currency exchange rate movements.

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Other income (expense), net:

Other income (expense), net includes $1.8 million of losses on non-operating assets.  Excluding this, the remainder of the increase relates to increased losses on foreign currency transactions.

Income tax expense:

Our effective tax rate for the current period was 27.8% versus 25.4% in the prior year’s period.  Our income tax expense and effective tax rate fluctuated between the periods presented due to discrete items recorded and the distribution of income between taxing jurisdictions.  The prior year period includes gains from favorable settlements of income tax audits which depressed the effective rate in the prior year period by 170 basis points.  In addition, the current period’s income is more heavily concentrated in our domestic businesses which typically have a higher income tax rate than our foreign operations.

Income (loss) from affiliates and joint ventures:

The increase in income from affiliates and joint ventures is understated as the prior year period includes a $2.1 million gain related to our Belgian joint venture investment and $0.7 million of losses on our Russian investment; both investments were sold in 2011.

Diluted earnings per share from continuing operations:

Diluted earnings per share from continuing operations increased in the current period due largely to the increase in gross profits without significant accompanying increases in SG&A expenses.

Diluted earnings per share from discontinued operations:

Diluted earnings per share from discontinued operations contains $1.2 million of losses in the prior year period relating to the sale of our domestic contracting services business.

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Year-to-Date Review of Each Segment’s Results

Following is a review of operating results for each of our five reporting segments:

Minerals and Materials Segment

	Nine Months Ended September 30,
Minerals and Materials	2012				2011				2012 vs. 2011
	(Dollars in millions)
Net sales	$	377.3	100.0	%	$	356.4	100.0	%	$	20.9	5.9	%
Cost of sales		277.1	73.4	%		270.6	75.9	%
Gross profit		100.2	26.6	%		85.8	24.1	%		14.4	16.8	%
Selling, general and administrative expenses		38.2	10.1	%		36.7	10.3	%		1.5	4.1	%
Operating profit		62.0	16.5	%		49.1	13.8	%		12.9	26.3	%

	Nine Months Ended September 30,
Minerals and Materials Product Line Sales	2012		2011		% change
	(Dollars in millions)
Metalcasting	$	201.6	$	187.0		7.8	%
Specialty materials		75.7		78.7		-3.8	%
Basic minerals		52.2		41.3		26.4	%
Pet products		40.0		42.2		-5.2	%
Other product lines		7.8		7.2		8.3	%
Total		377.3		356.4		5.9	%

Overall organic growth was dampened 19% by unfavorable foreign currency exchange rate movements.  Selling price increases comprise 53% of the organic increase in sales with increased volumes comprising the remainder.  Our metalcasting product line revenues increased due to increased demand for our products following on from demand for automobile, heavy equipment, construction, and energy related castings.  We have also seen significant increases in basic minerals products due to increased sales of drilling additives, largely in our domestic market due to increased drilling activity especially in the first two quarters of the year.

Although selling price increases do outweigh cost increases, increased volumes contributed the most to increased gross profit and gross profit margins.  SG&A expenses have increased due to increased compensation and headcount required to support the growth in sales, but they have increased at a lower rate as compared to the rate of growth in sales; this explains the increase in operating profit and operating profit margins.

46

Environmental Segment

	Nine Months Ended September 30,
Environmental	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	172.8	100.0	%	$	197.6	100.0	%	$	(24.8	)	-12.6	%
Cost of sales		120.0	69.4	%		137.4	69.5	%
Gross profit		52.8	30.6	%		60.2	30.5	%		(7.4	)	-12.3	%
Selling, general and administrative expenses		39.2	22.7	%		42.3	21.4	%		(3.1	)	-7.3	%
Operating profit (loss)		13.6	7.9	%		17.9	9.1	%		(4.3	)	-24.0	%

	Nine Months Ended September 30,
Environmental Product Line Sales	2012		2011		% change
	(Dollars in millions)
Lining technologies	$	71.9	$	84.5		-14.9	%
Building materials		58.2		60.6		-4.0	%
Drilling products		29.0		23.3		24.5	%
Contracting services		13.7		29.2		-53.1	%
Total		172.8		197.6		-12.6	%

Approximately 43% of the decrease in net sales resulted from unfavorable movements in foreign currency exchange rates, almost entirely in our European operations.  The majority of the remaining decrease also occurred in these operations as a result of our decision to exit the contracting services in Europe.  Our lining technologies product line also continues to experience weakened demand due to a declining market and increased competition.

The decrease in sales caused the decrease in gross profit.  However, with the decrease in lining technologies and contracting service revenues, net sales are becoming more concentrated in higher margin building materials and drilling product sales.  This, along with better cost management, has helped overall gross profit margins remain comparable.

SG&A costs decreased by $3.1 million, which is almost equally divided between favorable foreign currency exchange rate movements and organic decreases.  The current year period also includes a $0.8 million gain on the favorable settlement of a lawsuit.  However, the decrease in SG&A was not large enough to offset the decrease in gross profit, leading to the overall decrease in operating profits and operating profit margin.

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Oilfield Services Segment

	Nine Months Ended September 30,
Oilfield Services	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	185.5	100.0	%	$	140.9	100.0	%	$	44.6	31.7	%
Cost of sales		133.2	71.8	%		100.3	71.2	%
Gross profit		52.3	28.2	%		40.6	28.8	%		11.7	28.8	%
Selling, general and administrative expenses		31.9	17.2	%		25.4	18.0	%		6.5	25.6	%
Operating profit		20.4	11.0	%		15.2	10.8	%		5.2	34.2	%

Our domestic revenues grew 16% while our international operations grew 110%.  Internationally, our operations have benefitted from new management, greater success at winning contracts, and an increase in the sales in our engineering services directed at designing and building filtration equipment for customers.  These international operations contributed nearly all of the growth in gross profit.

Approximately $2.1 million of the $6.5 million increase in SG&A expenses is due to increased bad debt expenses.  Other categories of expenses have increased in support of the revenue growth.

Our operating profits in this segment increased due to increased operating leverage.  However, our domestic coil tubing operations experienced a decrease in operating profit due to increased competition, which is manifested in decreased service rates, as well as cost increases overall.  Thus, nearly all the increase in operating profits was derived from our international operations.

Transportation Segment

	Nine Months Ended September 30,
Transportation	2012				2011				2012 vs. 2011
	(Dollars in Millions)
Net sales	$	33.5	100.0	%	$	42.3	100.0	%	$	(8.8	)	-20.8	%
Cost of sales		30.0	89.6	%		37.5	88.7	%
Gross profit		3.5	10.4	%		4.8	11.3	%		(1.3	)	-27.1	%
Selling, general and administrative expenses		2.8	8.4	%		2.9	6.9	%		(0.1	)	-3.4	%
Operating profit		0.7	2.0	%		1.9	4.4	%		(1.2	)	-63.2	%

This segment provides services to third parties as well as AMCOL companies within our other segments.  Revenues decreased due to increased competition as well as availability of drivers, who are being recruited to oil and gas opportunities in the Bakken shale region.  Operating profits decreased as a result of the decrease in revenues without a corresponding decrease in SG&A expenses.

48

Corporate Segment

	Nine Months Ended September 30,
Corporate	2012			2011			2012 vs. 2011
	(Dollars in Millions)
Intersegment sales	$	(22.8	)	$	(27.4	)		4.6
Intersegment cost of sales		(22.6	)		(27.0	)
Gross profit (loss)		(0.2	)		(0.4	)		0.2
Selling, general and administrative expenses		16.6			16.8			(0.2	)	-1.2	%
Operating loss		(16.8	)		(17.2	)		0.4		-2.3	%

Intersegment sales are eliminated in our corporate segment.  These are mostly sales between our transportation segment and our minerals and materials and environmental segments as well as sales between our minerals and materials segment to our environmental and oilfield services segments.

Balance Sheet Review

	As at
Financial Position ($ in millions)	September 30, 2012		December 31, 2011
Non-cash working capital	$	286.8	$	267.4
Goodwill & intangible assets		104.7		106.1
Total assets		912.8		850.6
Long-term debt		244.1		260.7
Other long-term obligations		67.3		62.9
Total equity		450.6		396.7

Non-cash working capital at September 30, 2012 increased $19.4 million as compared to the amount at December 31, 2011 due to increased working capital required to support the growth in the business.  Given the seasonality of our environmental and oilfield services segments as well as the project nature of some of our services provided in the oilfield services segment, working capital levels have historically increased in the early and middle parts of the year and then decreased later in the year; we do not see a reason why this trend would not continue.

We increased our investments in property, plant and equipment, mostly in our oilfield services and minerals and materials segments, to help grow and maintain those businesses.  Increased cash utilization, as evidenced by the decrease in our cash balance from the prior year end, and improved performance of working capital allowed us to not only fund these investments but also reduce our debt balance in the first nine months of 2012.

Our available-for-sale securities reflect the value of our equity ownership in Ashapura Minechem Limited (Ashapura), a company listed on the Bombay stock exchange, and increased $4.1 million in value as a result of the increase in value of that stock as quoted on the exchange.

49

Our accumulated other comprehensive loss decreased $9.2 million, of which $4.5 million decrease was due to the revaluation of the net assets of our foreign subsidiaries into our reporting currency, USD, during consolidation.  Although all foreign subsidiaries are subject to translation adjustments during consolidation, the exchange rate between the USD and the PLN has fluctuated significantly, causing the majority of the change in this account.  Unrealized gains on our available-for-sale securities accounted for $4.1 million of the decrease in accumulated other comprehensive loss.

Last, our treasury stock account has decreased due to the exercise of stock compensation awards by our employees.  We may exhaust our supply of treasury shares during 2012 as we provide them to employees upon exercise of stock compensation awards; if our supply is exhausted, we will issue additional shares as awards are exercised.

Liquidity and Capital Resources

Cash flows from operations, an ability to issue new debt instruments, an ability to lease equipment, and borrowings from our revolving credit facility have historically been our sources of funds to provide working capital, make capital expenditures, acquire businesses, repurchase common stock, and pay dividends to shareholders.  We believe cash flows from operations and borrowings from our unused and committed credit facility will be adequate to support our current business needs for the foreseeable future.

We may need additional debt or equity facilities in order to pursue acquisitions, when and if these opportunities become available, and we may or may not be able to obtain such facilities on terms substantially similar to our current facilities as discussed in Item 1A – Risk Factors of our Annual Report on Form 10-K filed for 2011.  Terms of any new facilities, especially interest rates or covenants, may be significantly different from those we currently have. 

All of the cash and cash equivalents on our Consolidated Balance Sheet as of September 30, 2012 and December 31, 2011 resides in our international subsidiaries.  Although the cash overseas is significantly less than the amounts these subsidiaries owe to our domestic subsidiaries, our foreign subsidiaries have cash needs which affect the ability to repatriate this cash.  Due to these liquidity needs, we consider our foreign earnings permanently reinvested and have not provided income taxes on approximately $141.8 million of foreign subsidiary earnings as of September 30, 2012.

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, Item 1 of this report.

Cash Flows ($ in millions)	Nine Months Ended September 30,
	2012			2011
Net cash provided by operating activities	$	72.6		$	16.7
Net cash used in investing activities		(50.6	)		(40.4	)
Net cash provided by (used in) financing activities		(28.9	)		5.4

Cash flows from operating activities increased from the prior year period largely due to improved management of our working capital and greater net income.  Our accounts receivable and inventory balances have increased at a slower rate as compared to the prior year period.

50

Capital expenditures for the first nine months of 2012 and 2011 were $54.2 million and $43.8 million, respectively.  In these periods, the expenditures include $7.1 million and $5.9 million, respectively, associated with establishing our South African chromite operations.  In the nine months ended September 30, 2012, the majority of our capital expenditures occurred in our oilfield services segment and our minerals and materials segment, to maintain and grow those businesses.  We expect our capital expenditures in our fiscal year for 2012 to exceed the levels experienced in recent years.

Our cash flow from financing activities decreased significantly in the current year’s period as borrowings under our debt facilities decreased.  We utilized our cash and efficiently employed our working capital to fund growth in our business.  Long-term debt as a percentage of total capitalization decreased 460 basis points to 35.1%.  We experienced decreased cash proceeds from the exercise of stock compensation awards.  Dividends declared were $0.56 per share and $0.54 per share during the nine months ended September 30, 2012 and 2011, respectively.

We have approximately $185.0 million of borrowing capacity available from our revolving credit facility as of September 30, 2012.  We are in compliance with the financial covenants related to the revolving credit facility as of the end of the period covered by this report. 

We are party to a number of lawsuits arising in the normal course of business.   Since the mid-1980s, we and/or our subsidiaries have been named as one of a number of defendants in product liability lawsuits relating to the minor free-silica content of our bentonite products used in the metalcasting industry.  The plaintiffs in these lawsuits are primarily employees of our foundry customers.  Our oilfield services segment is also party to two lawsuits alleging damages caused by our coiled tubing operations in Louisiana; one lawsuit alleges damages of $28 million and the other of $9 million.  We do not believe that any pending litigation will have a material adverse effect on our consolidated financial statements.

Contractual Obligations and Off-Balance Sheet Arrangements

Item 7 of our Annual Report on Form 10-K, for the year ended December 31, 2011 discloses our contractual obligations and off-balance sheet arrangements.  There were no material changes in our contractual obligations and off-balance sheet arrangements.

Item 3: 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, 2011 other than those discussed in Part 1, Item 2 of this report.

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Item 4: 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, they 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.

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

Item 4: Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Form 10-Q.

Item 6: Exhibits

Exhibit

Number

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

95.1 Mine Safety Disclosures

101 The following information from our Quarterly Report on Form 10-Q for the period ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language):

(i) Condensed Consolidated Balance Sheets at September 30, 2012, and December 31, 2011,

(ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011,

(iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011,

(iv) Condensed Consolidated Statements of Changes in Equity for nine months ended September 30, 2012 and 2011,

(v) Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2012 and 2011, and

(vi) Notes to Condensed Consolidated Financial Statements.

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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 7, 2012	/s/ Ryan F. McKendrick
	Ryan F. McKendrick
	President and Chief Executive Officer
Date:   November 7, 2012	/s/ Donald W. Pearson
	Donald W. Pearson
	Senior Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

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

95.1 Mine Safety Disclosures

101 The following information from our Quarterly Report on Form 10-Q for the period ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language):

(i) Condensed Consolidated Balance Sheets at September 30, 2012, and December 31, 2011,

(ii) Condensed Consolidated Statements of Operations for the three and nine months ended    September 30, 2012 and 2011,

(iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011,

(iv) Condensed Consolidated Statements of Changes in Equity for nine months ended September 30, 2012 and 2011,

(v) Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2012 and 2011, and

(vi) Notes to Condensed Consolidated Financial Statements.

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