Amcol International 10-Q 2007 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, 2007

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 0-15661

AMCOL INTERNATIONAL CORPORATION 

(Exact name of registrant as specified in its charter)

Delaware	36-0724340
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1500 West Shure Drive, Suite 500, Arlington Heights, Illinois 60004-7803
(Address of principal executive offices)	(Zip Code)

(847) 394-8730

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Large accelerated filer oAccelerated filer x Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at October 26, 2007
(Common stock, $.01 par value)	30,071,314 Shares

AMCOL INTERNATIONAL CORPORATION

INDEX

		Page No.
Part I - Financial Information
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets – September 30, 2007 and December 31, 2006	3
	Condensed Consolidated Statements of Income – three and nine months ended September 30, 2007 and 2006	5
	Condensed Consolidated Statements of Comprehensive Income – three and nine months ended September 30, 2007 and 2006	6
	Condensed Consolidated Statements of Cash Flows – nine months ended September 30, 2007 and 2006	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4	Controls and Procedures	32
Part II - Other Information
Item 1A	Risk Factors	33
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6	Exhibits	34

2

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

Item 1. Financial Statements

	September 30,		December 31,
	2007		2006
	(unaudited)		*
ASSETS
Current assets:
Cash and cash equivalents	$	20,773	$	17,805
Accounts receivable, net		173,401		133,432
Inventories		91,919		84,612
Prepaid expenses		12,375		10,142
Deferred income taxes		5,905		4,648
Other		565		1,045
Total current assets		304,938		251,684
Investment in and advances to affiliates and joint ventures		47,010		31,049
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights		20,233		17,428
Depreciable assets		336,249		305,013
		356,482		322,441
Less: accumulated depreciation		190,975		181,669
		165,507		140,772
Other assets:
Goodwill		51,384		40,341
Intangible assets, net		43,501		25,611
Deferred income taxes		7,914		6,643
Other assets		17,771		15,124
		120,570		87,719
	$	638,025	$	511,224

Continued…

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,		December 31,
	2007		2006
	(unaudited)		*
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	45,290	$	26,107
Accrued income taxes		3,107		4,844
Accrued liabilities		54,492		47,432
Total current liabilities		102,889		78,383
Long-term debt		164,241		112,448
Minority interests in subsidiaries		77		276
Pension liabilities		13,480		13,209
Other liabilities		19,279		12,090
		32,836		25,575
Stockholders’ equity:
Common stock		320		320
Additional paid in capital		80,310		76,686
Retained earnings		252,198		219,690
Accumulated other comprehensive income		26,567		16,658
		359,395		313,354
Less:
Treasury stock		21,336		18,536
		338,059		294,818
	$	638,025	$	511,224

*Condensed from audited financial statements.

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

4

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2007			2006			2007			2006
Net sales	$	549,780		$	455,637		$	203,598		$	160,172
Cost of sales		402,190			337,995			149,298			117,954
Gross profit		147,590			117,642			54,300			42,218
General, selling and administrative expenses		87,756			74,359			28,297			25,810
Operating profit		59,834			43,283			26,003			16,408
Other income (expense):
Interest expense, net		(6,506	)		(1,835	)		(2,409	)		(740	)
Other, net		(1,000	)		259			(830	)		(273	)
		(7,506	)		(1,576	)		(3,239	)		(1,013	)
Income before income taxes and income from affiliates and joint ventures		52,328			41,707			22,764			15,395
Income tax expense		12,205			8,505			4,704			1,237
Income before income from affiliates and joint ventures		40,123			33,202			18,060			14,158
Income from affiliates and joint ventures		6,118			4,462			2,086			1,876
Income from continuing operations		46,241			37,664			20,146			16,034
Income (Loss) from discontinued operations, net of tax		(286	)		585			-			585
Net income	$	45,955		$	38,249		$	20,146		$	16,619
Weighted average common shares outstanding		30,146			29,903			30,130			29,962
Weighted average common and common equivalent shares outstanding		30,934			30,874			30,887			30,825
Basic earnings per share:
Continuing operations	$	1.53		$	1.26		$	0.67		$	0.54
Discontinued operations		(0.01	)		0.02			-			0.02
Basic earnings per share	$	1.52		$	1.28		$	0.67		$	0.56
Diluted earnings per share:
Continuing operations	$	1.49		$	1.22		$	0.65		$	0.52
Discontinued operations		(0.01	)		0.02			-			0.02
Diluted earnings per share	$	1.48		$	1.24		$	0.65		$	0.54
Dividends declared per share	$	0.44		$	0.35		$	0.16		$	0.12

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

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Nine Months Ended September 30,				Three Months Ended September 30,
	2007		2006		2007		2006
Net income	$	45,955	$	38,249	$	20,146	$	16,619
Other comprehensive income (loss):
Foreign currency translation adjustment		9,737		5,292		5,170		1,078
Other		172		-		32		-
Comprehensive income	$	55,864	$	43,541	$	25,348	$	17,697

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

6

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2007			2006
Cash flow from operating activities:
Net income	$	45,955		$	38,249
Adjustments to reconcile from net income to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization		21,688			14,606
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets		(44,716	)		(33,693	)
Decrease (increase) in noncurrent assets		(1,620	)		(2,171	)
Increase (decrease) in current liabilities		23,435			13,240
Increase (decrease) in noncurrent liabilities		6,382			1,703
Other		(9,102	)		(3,064	)
Net cash provided by (used in) operating activities		42,022			28,870
Cash flow from investing activities:
Capital expenditures		(37,577	)		(29,980	)
Acquisitions, net of cash		(38,783	)		(11,722	)
Investments in and advances to affiliates and joint ventures		(7,369	)		(5,260	)
Proceeds from sale of property, plant and equipment		6,636			1,196
Investments in restricted cash		(856	)		-
Other		(173	)		615
Net cash used in investing activities		(78,122	)		(45,151	)
Cash flow from financing activities:
Net change in outstanding debt		50,368			22,257
Proceeds from sales of treasury stock		2,574			2,517
Purchases of treasury stock		(6,115	)		(5,625	)
Dividends		(13,194	)		(10,488	)
Excess tax benefits from stock-based compensation		1,463			1,931
Net cash provided by (used in) financing activities		35,096			10,592
Effect of foreign currency rate changes on cash		3,972			5,011
Net increase (decrease) in cash and cash equivalents		2,968			(678	)
Cash and cash equivalents at beginning of period		17,805			15,997
Cash and cash equivalents at end of period	$	20,773		$	15,319

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

7

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Operations

AMCOL International Corporation (the Company) operates in five segments: Minerals, Environmental, Oilfield services, Transportation and Corporate. The Minerals segment mines, processes and distributes clays and products with similar applications to various industrial and consumer markets. The Environmental segment processes and distributes clays and products with similar applications for use as a moisture barrier in commercial construction, landfill liners and in a variety of other industrial and commercial applications. The Oilfield services segment provides onshore and offshore water treatment filtration, pipeline separation, waste fluid treatment, rental tools and well testing data services for the oil and gas industry. The Transportation segment includes a long-haul trucking business and a freight brokerage business, which provide services to our other segments as well as third-party customers. Intersegment sales are insignificant, other than intersegment shipping, which is eliminated in the Corporate segment. The composition of our revenues by segment is as follows:

	Nine Months Ended September 30,		Three Months Ended September 30,
	2007	2006	2007	2006
Minerals	48%	52%	45%	49%
Environmental	35%	33%	37%	37%
Oilfield services	13%	9%	13%	9%
Transportation	7%	8%	7%	8%
Intersegment shipping	-3%	-2%	-2%	-3%
	100%	100%	100%	100%

Further discussion of segment information is included in Note 4, “Business Segment Information.”

Basis of Presentation

The financial information included herein has been prepared by management and, other than the condensed consolidated balance sheet as of December 31, 2006, is unaudited. The condensed consolidated balance sheet as of December 31, 2006 has been derived from, but does not include all of the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2006. The information furnished herein includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations and cash flows for the interim periods ended September 30, 2007 and 2006, and the financial position of the Company as of September 30, 2007, and all such adjustments are of a normal 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, 2006.

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Reclassifications

In addition to segment disclosures contained in Note 4, certain prior year amounts have been reclassified to conform to the current year’s presentation.

New Accounting Standards

In May 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“FSP FIN 48-1”). This guidance amends FASB Interpretation 48, Accounting for Uncertainty in Income Taxes, to provide guidance on how an enterprise should determine whether a tax position is effectively settled for the purposes of recognizing previously unrecognized tax benefits. Our adoption of this guidance did not have a material effect on our financial statements.

Note 2:EARNINGS PER SHARE

The table below provides further share information used in computing our earnings per share for the periods presented herein. Basic earnings per share was computed by dividing net income by the weighted average number of common shares outstanding during each period.  Diluted earnings per share was computed by dividing net income by the weighted average common shares outstanding after consideration of the dilutive effect of stock options outstanding during each period.

	Nine Months Ended September 30,				Three Months Ended September 30,
	2007		2006		2007		2006
Weighted average number of common shares outstanding		30,145,918		29,902,831		30,129,934		29,962,153
Dilutive impact of stock options		788,234		971,084		757,540		862,675
Weighted average number of common and common equivalent shares for the period		30,934,152		30,873,915		30,887,474		30,824,828
Number of common shares outstanding at the end of the period		30,031,014		29,914,446		30,031,014		29,914,446
Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share		300,730		232,660		375,675		290,200

9

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 3:ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at September 30, 2007 and December 31, 2006 are comprised of the following components:

	September 30,		December 31,
	2007		2006
Crude stockpile inventories	$	26,108	$	26,390
In-process inventories		37,273		32,640
Other raw material, container, and supplies inventories		28,538		25,582
	$	91,919	$	84,612

We mine various minerals using a surface mining process that requires the removal of overburden. Under various governmental regulations, we are obligated to restore the land comprising each mining site to its original condition at the completion of mining activity. The obligation is adjusted to reflect the passage of time and changes in estimated future cash outflows. A reconciliation of the activity within our reclamation obligation is as follows:

	Nine Months Ended			Three Months Ended
	September 30,			September 30,
	2007			2007
Balance at beginning of period	$	5,715		$	6,173
Settlement of obligations		(1,531	)		(679	)
Liabilities incurred and accretion expense		1,396			86
Balance at end of period	$	5,580		$	5,580

A reconciliation of the activity within our accrued warranty obligation is as follows:

	Nine Months Ended			Three Months Ended
	September 30,			September 30,
	2007			2007
Balance at beginning of period	$	911		$	1,046
Charged to costs and expenses		500			71
Net settlements		(413	)		(107	)
Foreign currency translation		17			5
Balance at end of period	$	1,015		$	1,015

Note 4:BUSINESS SEGMENT INFORMATION

As previously mentioned, we operate in five business segments. We identify segments based on management responsibility and the nature of the business activities of each component of the Company. We measure segment performance based on operating profit, which is defined as net sales less cost of sales and general, selling and administrative expenses related to a segment’s operations. The costs deducted to arrive at operating profit do not include interest or income taxes. Segment assets are those assets used in the operations of that segment. Corporate assets include cash and cash equivalents, corporate leasehold improvements, and other miscellaneous equipment.

10

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Effective beginning in the first quarter of 2007, we included our nanocomposite business within the Minerals segment. Those expenses were previously included within the Corporate segment. The 2006 segment results also reflect the change in reporting. Operating results and profit margins for both reporting periods were not materially impacted by the change.

The following summaries set forth certain financial information by business segment:

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Net sales:
Minerals	$	262,432		$	237,463		$	90,906		$	79,274
Environmental		189,927			151,996			76,121			59,120
Oilfield services		72,137			43,270			27,143			14,157
Transportation		38,654			38,619			14,381			13,300
Intersegment shipping		(13,370	)		(15,711	)		(4,953	)		(5,679	)
Total	$	549,780		$	455,637		$	203,598		$	160,172
Operating profit (loss):
Minerals	$	26,706		$	26,172		$	9,135		$	9,584
Environmental		31,016			21,275			14,838			8,849
Oilfield services		13,843			7,237			5,753			2,270
Transportation		2,002			2,190			730			775
Corporate		(13,733	)		(13,591	)		(4,453	)		(5,070	)
Total	$	59,834		$	43,283		$	26,003		$	16,408

	As of Sept. 30, 2007		As of Dec. 31, 2006
Assets:
Minerals	$	306,582	$	245,417
Environmental		194,031		145,884
Oilfield services		94,730		84,917
Transportation		4,130		3,722
Corporate		38,552		31,284
Total	$	638,025	$	511,224

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Depreciation, depletion and amortization:
Minerals	$	11,301	$	9,013	$	4,156	$	2,736
Environmental		4,605		3,027		1,628		1,032
Oilfield services		4,900		1,688		1,734		454
Transportation		42		58		11		22
Corporate		840		820		354		265
Total	$	21,688	$	14,606	$	7,883	$	4,509
Capital expenditures:
Minerals	$	14,960	$	19,616	$	5,818	$	7,154
Environmental		6,918		7,265		2,531		1,561
Oilfield services		7,235		2,560		3,155		579
Transportation		61		51		45		30
Corporate		8,403		488		4,122		131
Total	$	37,577	$	29,980	$	15,671	$	9,455
Research and development expense:
Minerals	$	3,107	$	2,826	$	1,253	$	856
Environmental		1,673		1,794		585		672
Oilfield services		133		-		45		-
Corporate		758		88		323		25
Total	$	5,671	$	4,708	$	2,206	$	1,553

Note 5:EMPLOYEE BENEFIT PLANS

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

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Service cost	$	1,245		$	1,303		$	415		$	434
Interest cost		1,656			1,490			552			497
Expected return on plan assets		(2,021	)		(1,891	)		(674	)		(630	)
Amortization of prior service cost		50			23			17			8
Net periodic benefit cost	$	930		$	925		$	310		$	309

We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006 that we expected to contribute $1,000 to our pension plan in 2007. That full contribution was made in the first quarter of 2007.

12

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 6:INCOME TAXES

Our effective tax rate from continuing operations for the nine months ended September 30, 2007 was 23.32%, which differs from the U.S. Federal statutory rate of 35% largely due to depletion deductions and differences in local tax rates on the income from our foreign subsidiaries. Additionally, the 23.32% includes a decrease to income tax expense of $590 largely due to the release of liabilities for uncertain tax positions for which the statute of limitations has expired. Excluding the $590, the effective tax rate would have been 24.45%.

Our effective tax rate from continuing operations for the nine months ended September 30, 2006 was 20.4%, which varies from the U.S. Federal statutory rate of 35% for the same depletion and foreign tax rates mentioned above. Additionally, the 20.4% includes a decrease to income tax expense of $2,962 largely due to our settling an IRS audit (benefit of $3,412) offset by a $450 increase in tax expense primarily for other differences. Excluding the $2,962, the effective tax rate for the nine months ended September 30, 2006 would have been 27.1%.

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 U.S. federal, state, local, or non-US income tax examinations by tax authorities for years prior to 2001. The Internal Revenue Service (“IRS”) has examined our U.S. federal income tax returns for all years through 2003.

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). Our adoption of FIN 48 resulted in a $252 decrease in retained earnings and increases to income taxes payable of $2,065, deferred tax assets of $1,876 and income tax receivables of $189. In addition, we reclassified $4,379 of income tax liabilities from current liabilities to non-current liabilities as we do not anticipate settling these liabilities within the next twelve months.

At January 1, 2007, our worldwide liability for uncertain tax positions was $4,846. Unrecognized tax benefits of $2,778 at January 1, 2007 would affect our effective tax rate if recognized. Excluding amounts related to the expiration of statutes of limitations mentioned above, there were no significant changes in components of the liability in the nine months ending September 30, 2007.

We record penalties and interest relating to uncertain tax positions in the income tax expense line item within our consolidated statement of income. At January 1, 2007, our balance sheet includes a liability of $2,064 for the possible payment of interest and penalties.

During the nine months ended September 30, 2007, we recognized a portion of our previously unrecognized benefits as a result of the expiry of statutes of limitations in certain jurisdictions. As discussed above, the amounts recognized favorably impacted our effective tax rate in the period. As a result of these closed tax years, our worldwide liability for uncertain tax positions has decreased to $4,639, of which $2,551 would affect our effective tax rate if recognized. Furthermore, our balance sheet at September 30, 2007 includes a liability of $1,626 for interest and penalties.

13

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

At September 30, 2007, approximately $1,095 of unrecognized tax benefits relate to items that are affected by expiring statute of limitations within the next 12 months. Of this amount, $850 could have an impact on our effective tax rate.

Note 7:ACQUISITIONS

In the nine months ended September 30, 2007, we paid former owners of businesses we acquired pursuant to contingent payment arrangements associated with those acquisitions and resulted in $1,063 of additional goodwill.

In January 2007, our Environmental segment acquired the business assets of LBI Technologies, Inc., whose product, Liquid Boot ®, is a spray-applied, asphalt based coating used under slabs and / or backfilled walls as part of a barrier system to prevent the intrusion of gas or organic vapors into occupied structures or buildings. We paid approximately $17,762 for the business and recognized $7,796 of goodwill and $7,150 of intangible assets. The allocation of this purchase price has not been finalized as we are in the process of determining the fair values of the assets acquired and liabilities assumed. The acquisition agreement provides for contingent consideration which, if the consideration is recognized, would result in additional goodwill.

In March 2007, our Minerals segment acquired the Microsponge ® technology and all related business assets, including an existing customer base and patent portfolio. Microsponge ® is a system of biologically inert particles that is used to deliver active ingredients in dermatological products such as lotions and ointments. We paid approximately $8,085 for the business and recognized $1,179 of goodwill and $9,010 of intangible assets for this acquisition as of September 30, 2007. The allocation of this purchase price has not been finalized as we are in the process of determining the fair values of the assets acquired and liabilities assumed. The acquisition agreement provides for contingent consideration which, if the consideration is recognized, would result in additional goodwill.

In June 2007, our Minerals segment acquired all of the shares of Bensan Aktiflestirilmis Bentonit Sanayi ve Ticaret A.S., a Turkish bentonite company which owns or controls considerable bentonite reserves and serves a diverse market base, including bleaching earth (edible oil industry), general-purpose drilling, foundry, detergents and desiccants. Turkey is the leading producer of white bentonites for specialized applications. We paid approximately $11,656 for the business and recognized $897 and $5,000 of goodwill and intangible assets, respectively, as of September 30, 2007. The allocation of this purchase price has not been finalized as we are in the process of determining the fair values of the assets acquired and liabilities assumed.

14

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 8:DEBT

On March 9, 2007, we amended our revolving credit agreement to increase the borrowing capacity from $120,000 to $150,000 and extend the maturity to April 1, 2012; all other substantive terms and conditions remained the same.

On April 2, 2007, we issued and sold $75,000 of senior notes (the “Notes”) to a qualified institutional buyer which are payable at maturity on April 2, 2017, subject to certain acceleration features upon default. The Notes are comprised of (a) $45,000 aggregate principal amount of Series 2007-A Adjustable Fixed Rate Guaranteed Senior Notes, Tranche 1, due April 2, 2017 (the “Tranche 1” notes) and (b) $30,000 aggregate principal amount of Series 2007-A Adjustable Floating Rate Guaranteed Senior Notes, Tranche 2 (the “Tranche 2” notes). Tranche 1 bears interest at 5.78%, payable semi-annually in arrears on April 2^nd and October 2^nd of each year, beginning October 2, 2007. Tranche 2 bears interest at an annual rate of 0.55% plus LIBOR in effect from time to time, adjusted quarterly, and is payable in arrears beginning July 2, 2007.

In conjunction with the issuance of the Notes, we also entered into an interest rate swap agreement with Wells Fargo Bank, N.A. (the “Interest Rate Swap Agreement”) which has the effect of converting the Tranche 2 floating interest rate into a fixed rate of 5.6% per annum over the term of the Tranche 2 notes.

Note 9:CONTINGENCIES

We are party to a number of lawsuits arising in the normal course of business. We do not believe that any pending litigation will have a material adverse effect on our consolidated financial statements.

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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 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to our Company or our operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth and levels of capital expenditures. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including without limitation the following: actual performance in our various markets; conditions in the metalcasting and construction industries; operating costs; competition; currency exchange rates and devaluations; delays in development, production and marketing of new products; integration of acquired businesses; and other factors set forth from time to time in our reports filed with the Securities and Exchange Commission. We undertake no duty to update any forward looking statements to actual results or changes in our expectations.

Overview

We are a global, specialty minerals company and earn our revenues and profits from a diverse group of industrial and consumer product lines. Our principal operations are located in North America, Europe and the Asia-Pacific region.

We operate in five segments: Minerals, Environmental, Oilfield services, Transportation and Corporate. Our Minerals segment operates in three principal markets: metalcasting, pet products and specialty minerals. The Environmental segment’s principal markets include lining technologies and building materials. Our Oilfield services segment provides both onshore and offshore water treatment filtration, pipeline separation, rental tools, well testing data services and nitrogen blanketing services. Our Transportation segment operates a national truckload carrier business through contracted relationships with owner-operators of Class 8 trucks and a leased fleet of flat-bed and dry-van trailers. It also operates a brokered truckload freight business. Intersegment shipping revenues are eliminated in our Corporate segment.

The principal mineral that we utilize to generate revenues is bentonite. We own or lease bentonite reserves in the United States, China, Turkey and Australia. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India and Mexico. Bentonite deposits have varying physical properties which require us to identify which markets our reserves can serve. We believe that our understanding of bentonite properties, mining methods, processing and application to markets are the core components of our longevity and future prospects.

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Our customers are engaged in various end-markets and geographies. Customers in the Minerals segment range from foundries that produce castings for automotive, industrial, and transportation equipment, including heavy-duty trucks and railroad cars, to producers of consumer goods, including cat box filler, cosmetics and detergents. The customers for our Environmental segment’s lining technologies and building materials products are predominantly engineering contractors. The Oilfield services customer base is primarily comprised of oil service or exploration companies. A significant portion of our products have been used in the same applications for decades and have experienced minimal technological obsolescence. A majority of our business is performed under short-term agreements; therefore, terms of sale, such as pricing and volume, can change within our fiscal year.

The majority of our revenues are generated in North America; consequently, the state of the United States economy impacts our revenues. Our fastest growing markets are in the Asia-Pacific and Central European regions, which have continued to outpace the United States in economic growth in recent years.

Sustainable, long-term profit growth is our primary objective. We employ a number of strategic initiatives to achieve this goal:

· Organic growth: The central component of our growth strategy is expansion of our product lines and market presence. We have a history of commitment to research and development and using this resource to bring innovative products to market. We believe this approach to growth offers the best probability of achieving our long-term goals at the lowest risk.

· Globalization: We have expanded our manufacturing and marketing organizations into European and Asia-Pacific regions over the last 40 years. This operating experience enables us to expand further into emerging markets. We see significant opportunities in the Asia-Pacific region for expanding our revenues and earnings over the long-term as a number of markets we serve, such as metalcasting and lining technologies, are expected to grow. We expect to take advantage of these growth areas either through our wholly-owned subsidiaries or investments in affiliates and joint ventures.

· Mineral development: Bentonite is a component in a majority of the products we produce. Since it is a natural material, we must continually expand our reserve base to maintain a long-term business. Our goal is to add new reserves to replace the bentonite mined each year. Furthermore, we need to assure new reserves meet the physical property requirements for our diverse product lines and are economical to mine. Our organization is committed to developing its global reserve base to meet these requirements.

· Acquisitions: We continually seek opportunities to add complementary businesses to our portfolio of products. Over the last four years, we have acquired a number of businesses. A strong financial position will enable us to continue to acquire businesses which, in our assessment, are fairly valued and fit with our growth strategy.

A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K for the year ended December 31, 2006. In general, the significance of these risks has not materially changed over the past year.

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Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. We evaluate the accounting policies and estimates used to prepare the financial statements on an ongoing basis. We consider the accounting policies used in preparing our financial statements to be critical accounting policies when they are both important to the portrayal of our financial condition and results of operations, and require us to make estimates, complex judgments, and assumptions, including with respect to events which are inherently uncertain. As a result, actual results could differ from these estimates. For more information on our critical accounting policies, one should also read our Annual Report on Form 10-K for the year ended December 31, 2006.

Analysis of Results of Operations

Following is a discussion and analysis that describes certain factors that have affected, and may continue to affect, our financial position and operating results. This discussion should be read with the accompanying condensed consolidated financial statements. In addition, as discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements in Item 1, we have reclassified certain prior year amounts to conform to the current year’s presentation. The following discussion and analysis of results of operations and financial condition are based upon such reclassified financial data.

Three months ended September 30, 2007 vs. September 30, 2006

Results of operations (in millions):

Net sales:

2007		2006		% Change
$	203.6	$	160.2		27	%

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

	Base Business			Acquisitions			Foreign Exchange			Total
Minerals		2.1	%		4.0	%		1.2	%		7.3	%
Environmental		7.1	%		1.7	%		1.8	%		10.6	%
Oilfield services		3.8	%		4.2	%		0.1	%		8.1	%
Transportation		1.1	%		0	%		0.0	%		1.1	%
Total		14.1	%		9.9	%		3.1	%		27.1	%
% of growth		52.3	%		36.3	%		11.4	%		100.0	%

In addition, the next table shows the distribution of the quarter’s 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:

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	Americas			EMEA			Asia Pacific			Total
Minerals		32.2	%		7.5	%		5.0	%		44.7	%
Environmental		19.6	%		15.9	%		1.9	%		37.4	%
Oilfield services		11.3	%		2.0	%		0.0	%		13.3	%
Transportation		4.6	%		0.0	%		0.0	%		4.6	%
Total - current year's quarter		67.8	%		25.4	%		6.9	%		100.0	%
Total from prior year's comparable quarter		68.8	%		23.9	%		7.3	%		100.0	%

The increase in Americas-based sales (in absolute dollar value) was due to acquisitions and the relatively large base business growth generated by our Oilfield Services segment.

Gross profit:

	2007			2006			% Change
	$	54.3		$	42.2			29	%
Margin		26.7	%		26.4	%		N/A

Increased sales were responsible for the increase in gross profit in the period. Gross margin improved by 30 basis points due to favorable segment sales distribution. Our higher growth segments, Environmental and Oilfield services, also have the highest gross margins.

General, selling &  administrative expenses:

2007		2006		% Change
$	28.3	$	25.8		10	%

The increase over the 2006 third quarter includes the benefit of a gain on the sale of vacant land, which reduced our Environmental segment’s GS&A by $2.4 million in the current 2007 quarter. Excluding this benefit, GS&A would have increased by $4.9 million, or 19 percent, over the prior-year quarter. In aggregate, acquired businesses, including amortization of intangible assets, accounted for approximately $3.3 million of the increase in the 2007 third quarter.

Operating profit:

	2007			2006			% Change
	$	26.0		$	16.4			59	%
Margin		12.8	%		10.2	%		N/A

Sales and gross profit growth led to the improvement in operating profit over the 2006 third quarter. The improvement in operating margin was principally due to the higher gross margin reported in the current period and the benefit from the gain on sale of vacant land. Excluding this benefit, operating profit would have grown by 44.0 percent and operating margin would have been 11.6 percent in the 2007 third quarter.

Interest expense, net:

2007		2006			% Change
$	( 2.4)	$	( 0.7	)		243	%

Interest expense in the current-year quarter increased due both to greater average long-term debt compared with the prior-year period and increased interest rates. The increase in long-term debt was attributed to increased capital expenditures, acquisitions and working capital funding in the current-year period. The majority of our long-term debt has a variable rate of interest which is primarily influenced by the changes in LIBOR.

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Other income / (expense):

2007		2006			% Change
$	( 0.8)	$	( 0.3	)		167	%

In the current reporting period, we recognized greater foreign exchange losses primarily resulting from transactions originated at our international subsidiaries. We do not actively hedge our exposures to foreign currencies.

Income tax expense:

	2007			2006			% Change
	$	4.7		$	1.2			292	%
Effective tax rate		20.7	%		8.0	%		N/A

Favorable adjustments to liabilities for unrecognized tax benefits reduced the effective tax rate in the 2007 quarter. These adjustments benefited income by approximately $1.0 million. Excluding these adjustments, the effective tax rate would have been 24.9 percent in this year’s quarter. Favorable tax reductions of approximately $3.4 million related to the settlement of an IRS audit caused the low tax rate in the 2006 quarter.

Income from affiliates & joint ventures:

2007		2006		% Change
$	2.1	$	1.9		11	%

Our India-based investments contributed the increase in income from joint ventures and affiliates in the current period. Those investments also accounted for a large majority of the income reported in both periods.

Net income:

	2007			2006			% Change
	$	20.1		$	16.6			21	%
Margin		9.9	%		10.4	%		N/A

Current-period net income improved due largely to greater operating profit.

Diluted earnings per share:

2007		2006		% Change
$	0.65	$	0.54		20	%

Earnings per share improved commensurate with greater net income. The gain from discontinued operations mentioned above resulted in a $0.02 per share decrease in the current-year period as compared to the prior-year period. Weighted average common and common equivalent shares outstanding remained relatively unchanged at 30.9 million in the current-year period compared with 30.8 million the 2006 period.

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Segment analysis:

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

Minerals	Three Months Ended September 30,
	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	90,906	100.0	%	$	79,274	100.0	%	$	11,632		14.7	%
Cost of sales		73,610	81.0	%		63,503	80.1	%
Gross profit		17,296	19.0	%		15,771	19.9	%		1,525		9.7	%
General, selling and administrative expenses		8,161	9.0	%		6,187	7.8	%		1,974		31.9	%
Operating profit		9,135	10.0	%		9,584	12.1	%		(449	)	-4.7	%

Base business sales, on a constant currency basis, increased by 4.3 percent from the prior-year period primarily due to export shipments from the U.S., as well as increased shipments and pricing in pet products and greater shipments in the Asia-Pacific region. An acquisition and favorable exchange rates grew sales by 8.0 percent and 2.4 percent over the prior-year quarter, respectively. The acquired business was purchased in October 2006 and is a part of our metalcasting product line. Favorable exchange rates provided growth due to strengthening of the British Pound and Asian currencies against the US dollar.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	65,533	$	57,056		14.9	%
EMEA		15,174		13,940		8.9	%
Asia Pacific		10,199		8,278		23.2	%
Total segment	$	90,906	$	79,274		14.7	%

The segment suffered a 90 basis point decline in gross margin compared with the 2006 quarter. Higher freight revenues, which generate minimal profit, in the current-year quarter caused the gross margin decline.

Acquired business expenses were approximately $1.0 million of the increase over the prior-year quarter. Base business GS&A (general, selling and administrative expenses) grew in the Asia Pacific region due to higher marketing expenses and start-up costs at the Tianjin, China facility.

Operating margin declined 210 basis points from the 2006 period in conjunction with the lower gross margin and increase in GS&A.

Effective beginning in the first quarter of 2007, we included our nanocomposite business within the Minerals segment. Those expenses were previously included within the Corporate segment. The 2006 segment results also reflect the change in reporting. Operating results and profit margins for both reporting periods were not materially impacted by the change.

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	Three Months Ended September 30,
Environmental	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	76,121	100.0	%	$	59,120	100.0	%	$	17,001		28.8	%
Cost of sales		50,839	66.8	%		39,303	66.5	%
Gross profit		25,282	33.2	%		19,817	33.5	%		5,465		27.6	%
General, selling and administrative expenses		10,444	13.7	%		10,968	18.6	%		(524	)	-4.8	%
Operating profit		14,838	19.5	%		8,849	14.9	%		5,989		67.7	%

Base business sales, on a constant currency basis, increased by 19.3 percent over the prior-year period. Growth in contracting services (based in the U.S.) and greater lining technologies and building materials shipments in Europe contributed to the base business growth over the 2006 quarter. Acquired businesses and favorable foreign currencies grew sales by 4.6 percent and 4.9 percent, respectively. Relative strengthening of the Polish Zloty, British Pound and the Asian currencies against the US dollar led to the foreign currency-based growth.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	39,987	$	33,304		20.1	%
EMEA		32,358		22,367		44.7	%
Asia Pacific		3,776		3,449		9.5	%
Total segment	$	76,121	$	59,120		28.8	%

Higher relative contribution from contracting services caused the 30 basis point decline in the Environmental segment gross margin compared with the prior-year period.

A benefit from a gain on the sale of vacant land reduced Environmental segment GS&A by $2.4 million in the current-year quarter. Acquired businesses accounted for approximately $0.8 million of the increase over the prior-year quarter within the Environmental segment. Base business GS&A increased primarily due to higher marketing and sales expenses at the European operations.

Operating margin improved by 460 basis points primarily due to the benefit from the land sale and lower relative increase in GS&A expenses in the current-year quarter. Excluding the benefit from the land sale, operating margin would have been 16.3 percent in the 2007 quarter.

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	Three Months Ended September 30,
Oilfield Services	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	27,143	100.0	%	$	14,157	100.0	%	$	12,986	91.7	%
Cost of sales		16,896	62.2	%		9,090	64.2	%
Gross profit		10,247	37.8	%		5,067	35.8	%		5,180	102.2	%
General, selling and administrative expenses		4,494	16.6	%		2,797	19.8	%		1,697	60.7	%
Operating profit		5,753	21.2	%		2,270	16.0	%		3,483	153.4	%

Base business sales, on a constant currency basis, increased by 43.5 percent over the prior-year period. Growth was led by increased filtration and pipeline service levels in the Gulf of Mexico. International markets, principally in the North Sea and West Africa, also improved over the prior-year quarter. Acquired businesses and favorable foreign currencies grew sales by 47.1 percent and 1.1 percent, respectively. The two acquired businesses - Nitrogen Services and Rental Tools and Equipment -also experienced growth over their respective annual sales rates prior to our ownership.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	23,023	$	12,178		89.1	%
EMEA		4,120		1,979		108.2	%
Asia Pacific		-		-		N/A
Total segment	$	27,143	$	14,157		91.7	%

Gross margin improved by 200 basis points primarily due to higher relative profitability contributed by the acquired businesses. Additionally, margins improved in the base business operations due to more favorable product/service mix.

Approximately $1.4 million of the increase in general, selling and administrative expenses was due to acquired businesses. Base business GS&A increased due to higher personnel costs. Operating margin improved 520 basis points due to the higher relative increase in gross profit than GS&Aover the prior-year period.

	Three Months Ended September 30,
Transportation	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	14,381	100.0	%	$	13,300	100.0	%	$	1,081		8.1	%
Cost of sales		12,906	89.7	%		11,737	88.2	%
Gross profit		1,475	10.3	%		1,563	11.8	%		(88	)	-5.6	%
General, selling and administrative expenses		745	5.2	%		788	5.9	%		(43	)	-5.5	%
Operating profit		730	5.1	%		775	5.9	%		(45	)	-5.8	%

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Traffic levels and revenue mix improved over the prior-year period. Gross profit and margins were negatively impacted by the higher net fuel surcharge costs. GS&A spending declined over the 2006 quarter in several categories.

	Three Months Ended September 30,
Corporate	2007			2006			2007 vs. 2006
	(Dollars in Thousands)
Intersegment shipping sales	$	(4,953	)	$	(5,679	)
Intersegment shipping costs		(4,953	)		(5,679	)
Gross profit		-			-
Corporate general, selling and administrative expenses		4,453			5,070			(617	)	-12.2	%
Operating loss		4,453			5,070			(617	)	-12.2	%

Intersegment shipping revenues and costs are related to billings from the Transportation segment to the domestic Minerals and Environmental segments for services. These services are invoiced to the Minerals and Environmental segments at arms-length rates and those costs are subsequently charged to customers. Intersegment sales and costs reported above reflect the elimination of these transactions.

Corporate GS&A increased principally due to professional service expenses incurred in the 2006 third quarter that related to the previously described income tax refunds.

Nine months ended September 30, 2007 vs. September 30, 2006

Results of operations (in millions):

Net sales:

2007		2006		% Change
$	549.8	$	455.6		21	%

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

	Base Business			Acquisitions			Foreign Exchange			Total
Minerals		0.7	%		3.6	%		1.2	%		5.5	%
Environmental		5.0	%		1.7	%		1.6	%		8.3	%
Oilfield services		1.9	%		4.2	%		0.2	%		6.3	%
Transportation		0.5	%		0	%		0.0	%		0.5	%
Total		8.1	%		9.5	%		3.0	%		20.6	%
% of growth		39.2	%		46.3	%		14.5	%		100.0	%

In addition, the next table shows the distribution of the period’s 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:

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	Americas			EMEA			Asia Pacific			Total
Minerals		34.9	%		7.2	%		5.6	%		47.7	%
Environmental		18.0	%		14.5	%		2.0	%		34.5	%
Oilfield services		11.2	%		1.9	%		0.0	%		13.1	%
Transportation		4.6	%		0.0	%		0.0	%		4.6	%
Total - current year's period		68.8	%		23.7	%		7.5	%		100.0	%
Total from prior year's comparable period		69.2	%		23.3	%		7.5	%		100.0	%

Acquired businesses largely generated the sales growth in the Americas. Base business growth was primarily generated in the Asia-Pacific region.

Gross profit:

	2007			2006			% Change
	$147.6			$117.6			26%
Margin		26.8	%		25.8	%		N/A

Increased sales were responsible for the increase in gross profit in the period. Gross margin improved by 100 basis points due to favorable segment sales distribution. Our higher growth segments, Environmental and Oilfield services, have the highest gross margins.

General, selling & administrative expenses:

2007		2006		% Change
$	87.8	$	74.4		18	%

Current-period GS&A is net of a benefit from a gain on the sale of vacant land, which was described earlier in this report. Excluding this benefit, GS&A would have increased by $15.8 million, or 21.2 percent, over the prior-year period. In aggregate, operating expenses associated with acquired businesses accounted for approximately $8.8 million of the increase in operating expenses over the prior-year period. Higher personnel levels and professional fee expenses represented the largest portion of the remaining increase.

Operating profit:

	2007			2006			% Change
	$	59.8		$	43.3			38	%
Margin		10.9	%		9.5	%		N/A

Sales and gross profit growth, as well as the gain on the land sale described above, led to the improvement in operating profit over the 2006 period. Excluding the benefit from the land sale, operating profit would have grown by 32.6 percent and operating margin would have been 10.4 percent in the 2007 period.

Interest expense, net:

2007		2006		% Change
$	6.5	$	1.8		261	%

Interest expense in the current-year period increased due both to greater average long-term debt compared with the prior-year period and increased interest rates. The increase in long-term debt was attributed to increased capital expenditures, acquisitions and working capital funding in the current-year period. The majority of our long-term debt has a variable rate of interest which is primarily influenced by the changes in LIBOR.

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Other income / (expense):

	2007			2006	% Change
$	(1.0	)	$	0.3	N/A

In the current reporting period, we recognized foreign exchange losses primarily resulting from transactions originated at our international subsidiaries. Conversely, we recognized foreign exchange gains in the prior-year reporting period. Fluctuation between the Polish Zloty to Euro exchange rates was the primary contributor to the losses in the current-year period. We do not actively hedge our exposures to foreign currencies.

Income tax expense:

		2007			2006		% Change
	$	12.2		$	8.5		44	%
Effective tax rate		23.3	%		20.4	%	N/A

Our effective tax rate in both reporting periods continues to differ from the U.S. Federal statutory 35% rate due to depletion deductions and differences in local tax rates on the income of our foreign subsidiaries which are generally lower than the U.S. rates. The 2006 period included an additional benefit for adjustments related to previously recorded tax liabilities. The decline in the tax rate in the 2007 period also reflects updated estimates of taxable income distribution between our domestic and overseas businesses and adjustments of previously recorded tax liabilities.

Income from affiliates& joint ventures:

2007		2006		% Change
$	6.1	$	4.5		36	%

Our India-based investments contributed the increase in income from joint ventures and affiliates in the current-year period. Those investments also accounted for a large majority of the income reported in both periods.

Net income:

	2007			2006			% Change
	$	46.0		$	38.2			20	%
Margin		8.4	%		8.4	%		N/A

Current-period net income improved due to higher operating profit and increased contribution from affiliate and joint venture investments. Discontinued operations accounted for a loss of $0.3 million in the current-year reporting period and a gain of $0.6 million in the prior-year period. The current-period loss was caused by the sale of a business based in the U.K., which was part of our Minerals segment, while the gain recorded in the prior year was generated by receipt of tax refunds that related to a business sold in 2000.

Diluted earnings per share:

2007		2006		% Change
$	1.48	$	1.24		19	%

Earnings per share improved commensurate with greater net income. Discontinued operations related to the sale of one of our U.K. businesses resulted in a $0.01 per share decrease in the current-year period whereas a gain recorded in the prior-year period accounted for $0.02 per share. Weighted average common and common equivalent shares outstanding were 30.9 million for both reporting periods.

26

Segment analysis:

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

	Nine Months Ended September 30,
Minerals	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	262,432	100.0	%	$	237,463	100.0	%	$	24,969	10.5	%
Cost of sales		212,005	80.8	%		191,152	80.5	%
Gross profit		50,427	19.2	%		46,311	19.5	%		4,116	8.9	%
General, selling and administrative expenses		23,721	9.0	%		20,139	8.5	%		3,582	17.8	%
Operating profit		26,706	10.2	%		26,172	11.0	%		534	2.0	%

Base business sales, on a constant currency basis, improved by 1.2 percent from the prior-year period. Pet products and specialty materials product line sales grew due to increased shipments and pricing in certain sectors. Higher shipments in the metalcasting business in the Asia-Pacific region also contributed to base business growth. Domestic metalcasting shipments declined due to soft end-markets.

An acquisition and favorable exchange rates grew sales 7.0 percent and 2.3 percent, respectively, over the prior-year period. The acquired business was purchased in October 2006 and is a part of our metalcasting product line. Favorable exchange rates provided the growth due to strengthening of the British Pound and Asian currencies against the US dollar.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	192,057	$	175,334		9.5	%
EMEA		39,817		36,882		8.0	%
Asia Pacific		30,558		25,247		21.0	%
Total segment	$	262,432	$	237,463		10.5	%

Gross margin declined by 30 basis points due to a number of factors. Higher sales from the pass-through of freight costs and high start-up costs at the Tianjin, China, facility accounted for the negative margin impact.

Approximately $1.9 million of the increase in general, selling and administrative expenses was due to an acquired business. Higher operating expenses at the Asia-Pacific operations caused the largest portion of the increase in base business GS&A.

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Operating margin declined by 80 basis points from the 2006 period in conjunction with the lower gross margin and increase in GS&A expenses.

Effective beginning in the first quarter of 2007, we included our nanocomposite business within the Minerals segment. Those expenses were previously included within the Corporate segment. The 2006 segment results also reflect the change in reporting. Operating results and profit margins for both reporting periods were not materially impacted by the change.

	Nine Months Ended September 30,
Environmental	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	189,927	100.0	%	$	151,996	100.0	%	$	37,931	25.0	%
Cost of sales		124,523	65.6	%		99,934	65.7	%
Gross profit		65,404	34.4	%		52,062	34.3	%		13,342	25.6	%
General, selling and administrative expenses		34,388	18.1	%		30,787	20.3	%		3,601	11.7	%
Operating profit		31,016	16.3	%		21,275	14.0	%		9,741	45.8	%

Base business sales, on a constant currency basis, increased by 15.0 percent over the prior-year period. Improved shipments of lining technology and building material products in the Europe contributed the largest portion of the increase. The U.S.-based contracting services business also increased sales over the prior-year period. Acquired businesses and favorable foreign currencies grew sales 5.1 percent and 4.9 percent, respectively. Relative strengthening of the Polish Zloty, British Pound and the Asian currencies against the US dollar led to the foreign currency-based growth.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	99,117	$	81,724		21.3	%
EMEA		79,899		61,446		30.0	%
Asia Pacific		10,911		8,826		23.6	%
Total segment	$	189,927	$	151,996		25.0	%

Gross profit improved in conjunction with sales. The 10 basis point improvement in gross margin was due to product mix and lower manufacturing costs in the U.S. operations.

A benefit from a gain on the sale of vacant land reduced GS&A by $2.4 million in the current-year period. Acquired businesses accounted for approximately $2.5 million of the increase over the prior-year period within the segment. Base business GS&A increased primarily due to higher marketing and sales expenses at the European operations. Stronger foreign currencies also caused the increase.

Operating margin improved by 230 basis points primarily due to the benefit from the land sale and lower relative increase in GS&A expenses in the current-year period. Excluding the benefit from the land sale, operating margin would have been 15.1 percent in the 2007 period.

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	Nine Months Ended September 30,
Oilfield Services	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	72,137	100.0	%	$	43,270	100.0	%	$	28,867	66.7	%
Cost of sales		44,633	61.9	%		28,558	66.0	%
Gross profit		27,504	38.1	%		14,712	34.0	%		12,792	86.9	%
General, selling and administrative expenses		13,661	18.9	%		7,475	17.3	%		6,186	82.8	%
Operating profit		13,843	19.2	%		7,237	16.7	%		6,606	91.3	%

Base businesses sales, on a constant currency basis, increased by 20.5 percent over the prior-year period. Growth was led by higher well testing and pipeline service revenues primarily generated in Texas and the Gulf of Mexico. Acquired businesses and favorable foreign currencies grew sales 44.5 percent and 1.7 percent, respectively, over the prior year’s period. The two acquired businesses - Nitrogen Services and Rental Tools and Equipment -also experienced growth over their respective annual sales rates prior to our ownership.

This table provides further details on net sales by geographical area for the segment:

	2007		2006		% Change
Americas	$	61,623	$	35,341		74.4	%
EMEA		10,514		7,929		32.6	%
Asia Pacific		-		-		N/A
Total segment	$	72,137	$	43,270		66.7	%

Gross margin improved by 410 basis points primarily due to product/service mix. The two acquired businesses also both generate higher margins than our base businesses.

Approximately $4.3 million of the increase in general, selling and administrative expenses was due to acquired businesses. Base business GS&A increased due to higher personnel costs. Operating margin improved 250 basis points due to the higher relative increase in gross profit than GS&A over the prior-year period.

	Nine Months Ended September 30,
Transportation	2007				2006				2007 vs. 2006
	(Dollars in Thousands)
Net sales	$	38,654	100.0	%	$	38,619	100.0	%	$	35		0.1	%
Cost of sales		34,399	89.0	%		34,062	88.2	%
Gross profit		4,255	11.0	%		4,557	11.8	%		(302	)	-6.6	%
General, selling and administrative expenses		2,253	5.8	%		2,367	6.1	%		(114	)	-4.8	%
Operating profit		2,002	5.2	%		2,190	5.7	%		(188	)	-8.6	%

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Overall traffic levels declined in the current-year period. Transportation services for the Environmental segment primarily led to the decline. Pricing was relatively constant compared with the prior-year period. Gross profit and margins were negatively impacted by revenue mix and higher net fuel costs. GS&A spending declined over the 2006 period in several categories.

	Nine Months Ended September 30,
Corporate	2007			2006			2007 vs. 2006
	(Dollars in Thousands)
Intersegment shipping sales	$	(13,370	)	$	(15,711	)
Intersegment shipping costs		(13,370	)		(15,711	)
Gross profit		-			-
Corporate general, selling and administrative expenses		13,733			13,591			142	1.0	%
Operating loss		13,733			13,591			142	1.0	%

Intersegment shipping revenues and costs are related to billings from the Transportation segment to the domestic Minerals and Environmental segments for services. These services are invoiced to the Minerals and Environmental segments at arms-length rates and those costs are subsequently charged to customers. Intersegment sales and costs reported above reflect the elimination of these transactions.

Corporate GS&A increased primarily due to higher personnel and professional service expenses.

Liquidity and capital resources

Cash flows from operations, borrowings from a revolving credit facility and proceeds from the exercise of stock options by employees have been our sources of funds to purchase property, plant and equipment; acquire businesses; repurchase common stock; and pay dividends to shareholders. We believe cash flows from operations and borrowings from an unused and committed revolving credit facility will be adequate to support our operating plans for the foreseeable future. Following is a discussion and analysis of our cash flow activities as presented in the Condensed Consolidated Statement of Cash Flows presented within Part 1 of this report.

	Nine Months Ended
Cash Flows	September 30,
($ in millions)	2007			2006
Net cash provided by (used in) operating activities	$	42.0		$	28.9
Net cash provided by (used in) investing activities	$	(78.1	)	$	(45.2	)
Net cash provided by (used in) financing activities	$	35.1		$	10.6

Cash flows from operating activities improved largely due to higher current-year net income and non-cash charges such as depreciation and amortization. Historically, cash flows from operations have increased over the course of the year and we anticipate this pattern will continue for the remainder of 2007.

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Cash flows used in investing activities increased in the 2007 period primarily due to acquisitions. We acquired three businesses in the current-year period, Liquid Boot Technologies, included in our Environmental segment, the Microsponge® business of Cardinal Health Care Company and a Turkish minerals company, Bensan A.S., both included in our Minerals segment. Capital expenditures totaled $37.6 million for the 2007 period compared with $30.0 million in the prior-year period. Equipment purchases for the Oilfield Services segment and expenditures related to Corporate segment projects accounted for the increase. Capital expenditures for 2007 are estimated to be in the range of $42 million to $47 million. Investments and advances to affiliates and joint ventures increased primarily due to funding for new investments in Europe and Mexico. The European venture, in which we own 50% of the shares, will be engaged in processing, marketing and selling specialty minerals to the European market. Our partner is Ashapura Minechem Limited, an industrial minerals company based in India, in which we own approximately 21% of the outstanding shares. Other investing activities are primarily represented by cash proceeds associated with the sale of land and depreciable assets.

Cash flows provided by financing activities increased in the 2007 period primarily due to additional debt borrowings to fund acquisitions. We filed a current report, on Form 8-K, in March 2007 which described principal terms of a new bank credit agreement. The agreement increased our borrowing capability to $150 million and extended the term to April 2, 2012. Financial covenants and interest rate pricing remained the same as the prior agreement. We also filed a current report, on Form 8-K, in April 2007 describing our $75 million private debt placement with Metlife Insurance Company. The debt is payable in a lump-sum on April 2, 2017. The purpose of the transaction was to fix the interest cost of a portion of our debt. The proceeds from the placement were used to repay an equivalent amount of revolving credit notes outstanding under the bank credit facility mentioned above. We also entered into an interest rate swap agreement with Wells Fargo Bank to convert the variable interest rate on $30 million of the private placement debt into a fixed interest rate.

Year-to-date dividends increased to $0.44 per share from $0.35 per share in the prior-year period, consequently increasing the financing needs this year. We spent $6.1 million repurchasing our stock on the open market through September 30, 2007. As of that date, we have $8.9 million of funds available to repurchase shares. Our Board of Directors authorized these funds on November 9, 2006; the authorization will expire on November 10, 2008.

	As at
Financial Position	September 30,		December 31,
($ in millions)	2007		2006
Working capital	$	202.0	$	173.3
Goodwill & intangible assets	$	94.9	$	66.0
Total assets	$	638.0	$	511.2
Long-term debt	$	164.2	$	112.4
Other long-term obligations	$	32.8	$	25.6
Stockholder's equity	$	338.1	$	294.8

Working capital at September 30, 2007, increased over the amount at December 31, 2006 due principally to an increase in accounts receivable commensurate with the growth in sales. Current ratio was 3.0-to-1 and 3.2-to-1 at September 30, 2007, and December 31, 2006, respectively.

Long-term debt increased commensurate with funding of the aforementioned acquisitions, greater working capital requirements and funding of capital expenditures. Consequently, long-term debt relative to total capitalization rose to 33% at September 30, 2007, compared with 28% at December 31, 2006. As described above, we renegotiated the bank credit agreement in the first quarter of 2007. We have approximately $72 million of borrowing capacity available from our revolving credit facility. We are in compliance with financial covenants related to our debt facilities as of September 30, 2007.

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We have evaluated the funding requirements of our defined benefit pension plan following passage of the Pension Reform Act of 2006. At this time, we do not anticipate any material funding requirement for our plan as a consequence of the Act.

We believe future cash flows from operations combined with financing capability from our revolving credit facility will be adequate to fund necessary investing activities planned in the future.

Since the mid 1980’s, we have been named as one of a number of defendants in product liability lawsuits relating to the minor free-silica content within our bentonite products used in the metalcasting industry. The plaintiffs in these lawsuits are primarily employees of our former and current customers. To date, we have not incurred significant costs in defending these matters. We believe we have adequate insurance coverage and do not believe the litigation will have a material adverse impact on our financial position, liquidity or results of operations.

Contractual Obligations and Off-Balance Sheet Arrangements (in millions)

Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2006 discloses our contractual obligations and off-balance sheet arrangements. Other than the increase in our long-term bank debt as disclosed in our Condensed Consolidated Financial Statements herein and the contribution to our defined benefit plan as discussed in Note 5 of the Notes to Condensed Consolidated Financial Statements within this Form 10-Q, there were no material changes in our contractual obligations and off-balance sheet arrangements.

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, 2006.

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, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting, on a timely basis, information we are required to disclose in the reports we file or submit under the Exchange Act.

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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 1A:Risk Factors

Information regarding risk factors appears in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2006. There have been no material changes from the risk factors disclosed therein.

Item 2:Unregistered Sales of Equity Securities and Use of Proceeds

On November 9, 2006, the Board of Directors announced a program to repurchase up to $15 million of our outstanding stock; this authorization expires November 10, 2008. The table below illustrates our stock repurchases in 2007 and the amount remaining under this program.

	Total Number of				Maximum Value of
	Shares Repurchased		Average		Shares that May Yet Be
	as Part of the Stock		Price Paid		Repurchased Under the
2007	Repurchase Program		Per Share		Program
Balance at the beginning of the year					$	15,000,000
Activity in 2007 calendar month of:
January		-	$	-	$	15,000,000
February		-	$	-	$	15,000,000
March		-	$	-	$	15,000,000
April		-	$	-	$	15,000,000
May		250,000	$	24.34	$	8,915,000
June		-	$	-	$	8,915,000
July		-	$	-	$	8,915,000
August		-	$	-	$	8,915,000
September		-	$	-	$	8,915,000
		250,000	$	24.34	$	8,915,000

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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*

* Filed herewith.

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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, 2007		/s/ Lawrence E. Washow
			Lawrence E. Washow
			President and Chief Executive Officer
Date:	November 7, 2007		/s/ Gary L. Castagna
			Gary L. Castagna
			Senior Vice President and Chief Financial Officer
			and Principal Accounting 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*

* Filed herewith.

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