Amcol International 10-Q 2008 Q1 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 March 31, 2008

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	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 xNo 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 o Accelerated filer x 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 oNo 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 April 30, 2008
(Common stock, $.01 par value)	30,165,361 Shares

1

AMCOL INTERNATIONAL CORPORATION

INDEX

		Page No.
Part I - Financial Information
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets -
	March 31, 2008 and December 31, 2007	3
	Condensed Consolidated Statements of Operations -
	three months ended March 31, 2008 and 2007	5
	Condensed Consolidated Statements of Comprehensive Income -
	three months ended March 31, 2008 and 2007	6
	Condensed Consolidated Statements of Cash Flows -
	three months ended March 31, 2008 and 2007	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4	Controls and Procedures	25
Part II - Other Information
Item 1A	Risk Factors	26
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 6	Exhibits	26

2

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

Item 1. Financial Statements
 

	March 31,		December 31,
ASSETS	2008		2007
	(unaudited)		*
Current assets:
Cash and cash equivalents	$	33,163	$	25,282
Accounts receivable, net		170,285		166,835
Inventories		93,845		91,367
Prepaid expenses		15,292		13,529
Deferred income taxes		4,074		4,374
Income tax receivable		2,760		2,768
Other		7,713		475
Total current assets		327,132		304,630
Investment in and advances to affiliates and joint ventures		53,349		49,309
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights		21,488		21,394
Depreciable assets		369,478		352,100
		390,966		373,494
Less: accumulated depreciation and depletion		203,400		196,904
		187,566		176,590
Other assets:
Goodwill		60,226		59,840
Intangible assets, net		39,855		41,257
Deferred income taxes		5,153		5,513
Other assets		14,270		15,007
		119,504		121,617
	$	687,551	$	652,146

Continued…

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31,		December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY	2008		2007
	(unaudited)		*
Current liabilities:
Accounts payable	$	41,517	$	44,274
Accrued liabilities		52,544		57,833
Total current liabilities		94,061		102,107
Long-term debt		188,127		164,232
Long-term debt - corporate building		10,321		-
Total long-term debt		198,448		164,232
Minority interests in subsidiaries		543		327
Pension liabilities		8,934		7,559
Other liabilities		25,585		25,598
		35,062		33,484
Stockholders’ equity:
Common stock		320		320
Additional paid in capital		82,160		81,599
Retained earnings		261,969		258,164
Accumulated other comprehensive income		36,968		33,248
		381,417		373,331
Less:
Treasury stock		21,437		21,008
		359,980		352,323
	$	687,551	$	652,146

*Condensed from audited financial statements.

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 OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended March 31,
	2008		2007
Net sales	$191,409		$163,728
Cost of sales	145,059		120,229
Gross profit	46,350		43,499
General, selling and administrative expenses	33,638		28,805
Operating profit	12,712		14,694
Other income (expense):
Interest expense, net	(2,401)		(1,942)
Other, net	(235)		(167)
	(2,636)		(2,109)
Income before income taxes and income from
affiliates and joint ventures	10,076		12,585
Income tax expense	2,717		3,311
Income before income from affiliates and
joint ventures	7,359		9,274
Income from affiliates and joint ventures	1,262		1,566
Net income	$	8,621	$	10,840
Weighted average common shares outstanding		30,260		30,153
Weighted average common and common equivalent shares outstanding		30,889		31,017
Basic earnings per share	$	0.28	$	0.36
Diluted earnings per share	$	0.28	$	0.35
Dividends declared per share	$	0.16	$	0.14

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)

	Three Months Ended   March 31,
	2008			2007
Net income	$	8,621		$	10,840
Other comprehensive income (loss):
Foreign currency translation adjustment		5,239			1,405
Unrealized loss on interest rate swap agreement		(2,112	)		-
Other		593			85
Comprehensive income	$	12,341		$	12,330

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)

	Three Months Ended March 31,
	2008			2007
Cash flow from operating activities:
Net income	$	8,621		$	10,840
Adjustments to reconcile from net income to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization		7,435			6,714
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets		(5,671	)		(7,091	)
Decrease (increase) in noncurrent assets		(301	)		(954	)
Increase (decrease) in current liabilities		(5,624	)		(6,634	)
Increase (decrease) in noncurrent liabilities		(112	)		(133	)
Other		(70	)		3,513
Net cash provided by (used in) operating activities		4,278			6,255
Cash flow from investing activities:
Capital expenditures		(12,932	)		(10,876	)
Capital expenditures - corporate building		(2,831	)		-
Acquisitions, net of cash		(1,148	)		(27,204	)
Investments in and advances to affiliates and joint ventures		(2,107	)		(2,466	)
Investments in restricted cash		(36	)		(957	)
Other		(5,931	)		489
Net cash used in investing activities		(24,985	)		(41,014	)
Cash flow from financing activities:
Net change in outstanding debt		23,404			42,800
Net change in outstanding debt - corporate building		9,463			-
Proceeds from sales of treasury stock		753			886
Purchases of treasury stock		(2,062	)		-
Dividends		(4,816	)		(4,204	)
Excess tax benefits from stock-based compensation		669			927
Net cash provided by (used in) financing activities		27,411			40,409
Effect of foreign currency rate changes on cash		1,177			389
Net increase (decrease) in cash and cash equivalents		7,881			6,039
Cash and cash equivalents at beginning of period		25,282			17,805
Cash and cash equivalents at end of period	$	33,163		$	23,844

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

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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:

	Three Months Ended   March 31,
	2008		2007
Minerals		52%		52%
Environmental		30%		30%
Oilfield services		13%		13%
Transportation		7%		7%
Intersegment shipping		-2%		-2%
		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, 2007, is unaudited. The condensed consolidated balance sheet as of December 31, 2007 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, 2007. 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 March 31, 2008 and 2007, and our financial position as of March 31, 2008, 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, 2007.

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.

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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 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 our environmental segment, which varies due to the seasonal nature of the construction industry, and our oilfield services segment, which varies due to seasonality of weather in its various markets.

New Accounting Standards

In September 2006, Financial Accounting Standard Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“FAS 157”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. In February 2008, FASB issued FASB Staff Position FAS157-2, Effective Date of FASB Statement No. 157, which delays our effective date of FAS 157 to January 1, 2009, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis.  Therefore, FAS 157 applies to financial instruments, and items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis. The adoption of FAS 157 on January 1, 2008 did not have a material impact on our financial statements.

In March 2008, the FASB issued Statement of Financial Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (“FAS 161”). This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. We do not believe this standard will have a material impact on our financial statements when we adopt it on January 1, 2009.

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

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.

	Three Months Ended March 31,
	2008		2007
Weighted average number of common shares outstanding		30,259,799		30,152,857
Dilutive impact of stock options		629,113		863,954
Weighted average number of common and common equivalent shares outstanding for the period		30,888,912		31,016,811
Number of common shares outstanding at the end of the period		30,156,968		30,100,384
Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share		553,334		187,388

Note 3:ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at March 31, 2008 and December 31, 2007 are comprised of the following components:

  

		March 31,		December 31,
		2008		2007
Crude stockpile inventories	$	28,077	$	25,601
In-process and finished goods inventories		36,860		39,473
Other raw material, container, and supplies inventories		28,908		26,293
	$	93,845	$	91,367

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

10

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended March 31,
	2008			2007
Balance at beginning of period	$	5,699		$	5,715
Settlement of obligations		(384	)		(399	)
Liabilities incurred and accretion expense		532			626
Balance at end of period	$	5,847		$	5,942

Note 4:BUSINESS SEGMENT INFORMATION

As previously mentioned, we operate in five business segments. 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.

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

	Three Months Ended March 31,
	2008			2007
Net sales:
Minerals	$	99,344		$	85,813
Environmental		58,219			48,698
Oilfield services		24,143			21,964
Transportation		14,350			10,893
Intersegment shipping		(4,647	)		(3,640	)
Total	$	191,409		$	163,728
Operating profit (loss):
Minerals	$	7,687		$	9,257
Environmental		5,971			6,243
Oilfield services		3,949			3,166
Transportation		780			540
Corporate		(5,675	)		(4,512	)
Total	$	12,712		$	14,694
		As of Mar. 31, 2008			As of Dec. 31, 2007
Assets:
Minerals	$	334,612		$	319,921
Environmental		194,249			184,992
Oilfield services		98,209			95,866
Transportation		3,876			3,807
Corporate		56,605			47,560
Total	$	687,551		$	652,146

11

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended March 31,
	2008		2007
Depreciation, depletion and amortization:
Minerals	$	3,674	$	3,434
Environmental		1,575		1,421
Oilfield services		1,774		1,612
Transportation		9		18
Corporate		403		229
Total	$	7,435	$	6,714
Capital expenditures:
Minerals	$	7,687	$	4,398
Environmental		858		2,555
Oilfield services		3,284		1,719
Transportation		12		-
Corporate		3,922		2,204
Total	$	15,763	$	10,876
Research and development expense:
Minerals	$	1,276	$	927
Environmental		644		535
Oilfield services		119		3
Corporate		148		103
Total	$	2,187	$	1,568

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 5:EMPLOYEE BENEFIT PLANS

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

	Three Months Ended March 31,
	2008			2007
Service cost	$	418		$	415
Interest cost		593			552
Expected return on plan assets		(781	)		(674	)
Amortization of prior service cost		1			17
Net periodic benefit cost	$	231		$	310

We previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007 that we expected to contribute $1,000 to our pension plan in 2008. That full contribution was made in the first quarter of 2008.

Note 6:INCOME TAXES

Our effective tax rate for the three months ended March 31, 2008 was 27.0%, which differs from the U.S. Federal statutory rate of 35.0% largely due to depletion deductions and differences in local tax rates on the income from our foreign subsidiaries. Additionally, the 27.0% includes an increase to income tax expense of $33 for changes in estimates related to provision to return differences. Excluding the $33, the effective tax rate would have been 26.6%.

Our effective tax rate for the three months ended March 31, 2007 was 26.3%, which varies from the U.S. Federal statutory rate of 35.0% for the same depletion and foreign tax rates mentioned above. Additionally, the 26.3% includes an increase to income tax expense of $143 for changes in estimates related to provision to return differences. Excluding the $143, the effective tax rate would have been 25.2%.

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.

Note 7:ACQUISITIONS

We made payments of $1,148 in the three months ended March 31, 2008 to former owners of businesses we acquired pursuant to contingent payment arrangements associated with those acquisitions.

13

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share amounts)

Note 8:SALE-LEASEBACK TRANSACTION

On March 10, 2008, we entered into a sale-leaseback transaction involving a new corporate facility which will be completed in late 2008. During construction, we have and will continue to record the expenditures for land and building on our balance sheet as land and construction in progress assets, respectively. The total carrying value of the property was approximately $10.5 million as of March 31, 2008. Upon completion of construction through the lease term, we will sell and leaseback the facility under an operating lease commitment with rental payments occurring January 2009 through December 2028. Lease payments in fiscal 2009 approximate $2.5 million and increase 2% annually thereafter.

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, building materials and water treatment. Our oilfield services segment provides both onshore and offshore water treatment filtration, pipeline separation, and well testing data services for the oil and gas industry. Our transportation segment provides trucking services for our domestic businesses as well as third parties. 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.

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.

15

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 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. 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, 2007. In general, the significance of these risks has not materially changed over the past year.

16

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, 2007.

Analysis of Results of Operations

Following is a discussion and analysis that describes certain factors that have affected, and may continue to affect, our financial position and operating results. This discussion should be read with the accompanying condensed consolidated financial statements.

Three months ended March 31, 2008 vs. March 31, 2007

Consolidated Review

The following table compares our operating results for the quarters ended March 31, 2008 and March 31, 2007:

17

		Three Months Ended March 31,
Consolidated		2008			2007		2008 vs. 2007
		(Dollars in Thousands)
Net sales	$	191,409		$	163,728		16.9	%
Cost of sales		145,059			120,229
Gross profit		46,350			43,499		6.6	%
margin %		24.2	%		26.6	%
General, selling and administrative expenses		33,638			28,805		16.8	%
Operating profit		12,712			14,694		-13.5	%
margin %		6.6	%		9.0	%
Other income (expense):
Interest expense, net		(2,401	)		(1,942	)	23.6	%
Other, net		(235	)		(167	)	40.7	%
		(2,636	)		(2,109	)
Income before income taxes and income from affiliates and joint ventures		10,076			12,585
Income tax expense		2,717			3,311		-17.9	%
effective tax rate		27.0	%		26.3	%
Income before income from affiliates and joint ventures		7,359			9,274
Income from affiliates and joint ventures		1,262			1,566		-19.4	%
Net income		8,621			10,840		-20.5	%

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	4.7	%	2.8	%	0.8	%	8.3	%
Environmental	3.2	%	0.8	%	1.8	%	5.8	%
Oilfield services	1.3	%	0.0	%	0.0	%	1.3	%
Transportation	1.5	%	0	%	0.0	%	1.5	%
Total	10.7	%	3.6	%	2.6	%	16.9	%
% of growth	63.3	%	21.3	%	15.4	%	100.0	%

In addition, the following 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:

	Americas			EMEA			Asia Pacific			Total
Minerals		37.3	%		7.2	%		7.4	%		51.9	%
Environmental		15.0	%		13.8	%		1.7	%		30.4	%
Oilfield services		10.7	%		1.6	%		0.4	%		12.6	%
Transportation		5.1	%		0.0	%		0.0	%		5.1	%
Total - current year's period		68.1	%		22.5	%		9.5	%		100.0	%
Total from prior year's comparable period		68.3	%		22.9	%		8.8	%		100.0	%

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Net sales:

Our overall increase in net sales was driven by increases from base businesses (those operations owned for greater than one year) predominantly within our minerals and environmental segments. Marginal increases in net sales resulted from foreign currency and acquisitions, the latter of which was generated by our Turkish acquisition and our Mexican joint-venture.

Gross profit:

Overall gross profit increased due to the increase in net sales. Gross profit margins decreased, however, across all segments except our oilfield services segment. The decreased gross margins in our minerals segment had the largest effect on the overall decrease in margins.

General, selling & administrative expenses (GS&A):

Increased GS&A expenses in the minerals, environmental and corporate segments drove the overall increase in GS&A. The increase in our GS&A is predominantly driven by employee related expenses in our corporate segment and acquisitions, which increased GS&A approximately $1.0 million over the prior-year’s period.

Operating profit:

Although sales increased, operating profit declined due to the decreased gross margins and increased GS&A expenses previously discussed. Our oilfield services segment, however, experienced an increase in operating profit and operating margins by leveraging increased sales without commensurate increases in GS&A expenses.

Interest expense, net:

Net interest expense increased due to increased average debt levels required to fund increased capital spending and working capital levels. We began 2008 with debt levels significantly greater than those that existed at the beginning of 2007 due to increased capital spending and acquisitions in 2007. The majority of our long-term debt has a variable rate of interest which is primarily influenced by changes in LIBOR.

Other income / (expense):

In the current reporting period, we recognized 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:

The effective tax rate in the first quarter of 2008 is 27.0% whereas the prior year’s comparable period had a rate of 26.3%; this equates to a difference in tax expense of less than $0.6 million. Our effective tax rate in both reporting periods continues to differ from the U.S. Federal statutory 35.0% 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.

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Income from affiliates & joint ventures:

Our India-based investments contributed the majority of the income from joint ventures and affiliates in the first quarters of 2008 and 2007. Those investments also accounted for the current period decrease in the income from the prior period and resulted from decreased bauxite shipments.

Net income:

The decrease in current-period net income results largely from the decrease in operating profits previously discussed.

Diluted earnings per share:

Earnings per share decreased commensurately with the decrease in net income. Weighted average common and common equivalent shares outstanding remained relatively constant compared to the prior year period. The weighted average common and common shares outstanding increased by 0.1 million shares.

Segment analysis:

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

Minerals Segment

		Three Months Ended March 31,
Minerals		2008				2007				2008 vs. 2007
		(Dollars in Thousands)
Net sales	$	99,344	100.0	%	$	85,813	100.0	%	$	13,531		15.8	%
Cost of sales		82,667	83.2	%		69,014	80.4	%
Gross profit		16,677	16.8	%		16,799	19.6	%		(122	)	-0.7	%
General, selling and
administrative expenses		8,990	9.0	%		7,542	8.8	%		1,448		19.2	%
Operating profit		7,687	7.8	%		9,257	10.8	%		(1,570	)	-17.0	%

		Three months ended Mar 31,
Minerals Product Line Sales		2008		2007	% change
		(Dollars in Thousands)
Metalcasting	$	40,678	$	36,586	11.2	%
Specialty materials		25,663		20,068	27.9	%
Pet products		19,523		16,488	18.4	%
Basic minerals		12,041		10,927	10.2	%
Other product lines		1,439		1,744	*
Total		99,344		85,813
* Not meaningful.

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Base businesses, on a constant currency basis, accounted for 57% of the growth in revenues. Approximately one-third of the organic growth was driven by increased pass-thru freight revenues. The pet products division had greater shipments which led to the increased organic and freight revenues. Greater demand in Asia for metalcasting products and for certain specialty materials products also contributed to the organic increase in sales. Several of our businesses and product lines experienced increased sales prices, but these were in lower priced products, thereby creating an increased concentration of sales in lower priced products.

Net sales from acquisitions and foreign currency accounted for 33% and 10%, respectively, of the increase in net sales. Our Turkish operations and Mexican joint-venture mainly comprised the increase in sales from acquisitions. The appreciation of the British Pound and certain Asia-Pacific currencies led to the increase in net sales attributable to foreign currency fluctuations.

Gross profit margin decreased mainly due to increased energy, production and mining costs in the United States. The decrease was also impacted by unfavorable product mix, as mentioned earlier with increased concentration of sales in lower priced products, and greater concentration of sales being derived from freight revenues, which do not generate profits.

The majority of the increase in GS&A expenses, approximately $0.8 million, is attributable to acquisitions. The remainder is attributable to greater expenditures on research and development activities within our specialty materials division and personnel costs in our Asia-Pacific businesses.

Operating margin decreased due to decreased gross margins and increased GS&A expenses as previously discussed.

Environmental Segment

		Three Months Ended March 31,
Environmental		2008				2007				2008 vs. 2007
		(Dollars in Thousands)
Net sales	$	58,219	100.0	%	$	48,698	100.0	%	$	9,521		19.6	%
Cost of sales		38,798	66.6	%		31,163	64.0	%
Gross profit		19,421	33.4	%		17,535	36.0	%		1,886		10.8	%
General, selling and
administrative expenses		13,450	23.1	%		11,292	23.2	%		2,158		19.1	%
Operating profit		5,971	10.3	%		6,243	12.8	%		(272	)	-4.4	%

		Environmental Product Line Sales Three months ended Mar 31,
		2008		2007	% change
		(Dollars in Thousands)
Lining technologies	$	32,495	$	23,992	35.4	%
Building materials		19,995		19,583	2.1	%
Other product lines		5,729		5,123	*
Total		58,219		48,698

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Base businesses, on a constant currency basis, accounted for approximately 55% of the growth in net sales; this was in large part due to the burgeoning economies our Polish operations serve, especially in the installation and building materials divisions. Greater shipments in United States lining technologies product lines also contributed to the increase in net sales.

Our Polish and other European businesses were also the main drivers of the increase in net sales attributable to foreign currency fluctuations, which comprised 31% of the environmental segment’s net sales growth. Net sales growth from acquisitions was 14%.

Gross profit increased due to increased sales. However, gross profit margins decreased due to a greater concentration of sales occurring in less profitable product lines. In addition, increased production costs in the United States negatively impacted gross margins.

GS&A expenses increased mostly due to greater employee related costs and increased sales commissions at our Polish operations.

Operating profits decreased slightly due to the decline in gross profit margins and increases in GS&A expenses as discussed. Operating profit margins decreased due to the decrease in gross margin mentioned above.

Oilfield Services Segment

	Three Months Ended March 31,
Oilfield Services	2008					2007					2008 vs. 2007
	(Dollars in Thousands)
Net sales	$ 24,143		100.0		%	$ 21,964		100.0		%	$ 2,179		9.9%
Cost of sales		15,441		64.0	%		14,077		64.1	%
Gross profit		8,702		36.0	%		7,887		35.9	%		815		10.3	%
General, selling and
administrative expenses		4,753		19.7	%		4,721		21.5	%		32		0.7	%
Operating profit		3,949		16.3	%		3,166		14.4	%		783		24.7	%

Base business, organic growth comprised nearly all of the net sales increase for our oilfield services segment. This growth was generated by greater demand for water treatment services in the Gulf of Mexico with additional improvement coming from emerging markets in Asia and Africa.

Gross profit margins and GS&A expenses remained relatively constant. Operating profit increased due to increased sales; operating profit margin increased due to a greater leveraging of sales without commensurate increases in GS&A expenses.

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Transportation Segment

		Three Months Ended March 31,
Transportation		2008				2007				2008 vs. 2007
		(Dollars in Thousands)
Net sales	$	14,350	100.0	%	$	10,893	100.0	%	$	3,457	31.7	%
Cost of sales		12,800	89.2	%		9,615	88.3	%
Gross profit		1,550	10.8	%		1,278	11.7	%		272	21.3	%
General, selling and
administrative expenses		770	5.4	%		738	6.8	%		32	4.3	%
Operating profit		780	5.4	%		540	4.9	%		240	44.4	%

Traffic levels increased as compared to the prior year period due to greater demand from consumer products shippers, leading to the increase in net sales. Unrecovered fuel surcharges led to the decrease in gross profit margins. Operating profits and margins increased due to the increase in sales and stability of GS&A costs.

Corporate Segment

		Three Months Ended March 31,
Corporate		2008			2007		2008 vs. 2007
		(Dollars in Thousands)
Intersegment shipping sales	$	(4,647	)	$	(3,640	)	(1,007	)
Intersegment shipping costs		(4,647	)		(3,640	)
Gross profit		-			-		-
General, selling
and administrative expenses		5,675			4,512		1,163		25.8	%
Operating loss		5,675			4,512		1,163		25.8	%

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

Corporate GS&A expenses increased due to greater employee benefit related 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 current businesses for the foreseeable future. However, we will need additional credit facilities in order to pursue additional acquisitions, when and if these opportunities become available. If necessary, we believe we will be able to obtain such credit at terms substantially similar to our current facilities. 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.

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Cash Flows ($ in millions)	Three Months Ended March 31,
	2008			2007
Net cash provided by (used in) operating activities	$	4.3		$	6.3
Net cash provided by (used in) investing activities	$	(25.0	)	$	(41.0	)
Net cash provided by (used in) financing activities	$	27.4		$	40.4

Cash flows from operating activities decreased from the prior year period largely due to less net income being generated and fluctuations in working capital levels. Historically, cash flows from operations have increased over the course of the year and we anticipate this pattern will continue for the remainder of 2008.

Cash flows used in investing activities decreased in the 2008 period largely because the 2007 period included $26.1 million more of outflows for acquisitions, largely related to the Liquid Boot Technologies and Microsponge® acquisitions. Excluding acquisitions, cash outflows for investing activities in the current period were $10.0 million greater than the prior year period primarily due to a $6 million loan made to a third party related to the agreement to invest in a chrome mine in South Africa and $4.9 million of increased capital expenditures, of which $2.8 million relates to the construction of a new corporate building. Capital expenditures for 2008 are estimated to be in the range of $45 million to $55 million.

Cash flows provided by financing activities decreased in the 2008 period as we required less external debt funding to support our operations. This mainly results from the decreased acquisition activity as mentioned above. Dividends declared increased to $0.16 per share from $0.14 per share in the prior-year quarter. We repurchased 80 thousand shares in the current year period at an average price of $25.45 per share; as of March 31, 2008, we have $6.6 million of funds available to repurchase shares under a program which expires on November 10, 2008.

Financial Position ($ in millions)	As at
	March 31, 2008		December 31, 2007
Working capital	$	233.1	$	202.5
Goodwill & intangible assets	$	100.1	$	101.1
Total assets	$	687.6	$	652.1
Long-term debt	$	198.4	$	164.2
Other long-term obligations	$	35.1	$	33.5
Stockholder's equity	$	360.0	$	352.3

Working capital at March 31, 2007, increased over the amount at December 31, 2007 due to loans made to a third party as mentioned above, a decrease in accrued liabilities related to certain annual payments made only in the first quarter of each year, and an increase in other working capital items, such as inventories and accounts receivable, commensurate with our increase in sales. Our current ratio was 3.5-to-1 and 3.0-to-1 at March 31, 2008, and December 31, 2007, respectively.

Long-term debt increased due to increased financing needs for working capital requirements and capital expenditures. Consequently, long-term debt relative to total capitalization rose to 36% at March 31, 2008, compared with 32% at December 31, 2007. We have approximately $50.5 million of borrowing capacity available from our revolving credit facility at March 31, 2008. We are in compliance with financial covenants related to the revolving credit facility as of March 31, 2008.

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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, 2007 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, 2007.

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.

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.

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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, 2007. There have been no material changes from the risk factors disclosed therein.

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

In 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 2008 and the amount remaining under this program:

2008	Total Number of Shares Repurchased as Part of the Stock Repurchase Program		Average Price Paid Per Share		Maximum Value of Shares that May Yet Be Repurchased Under the Program
Balance at the beginning of the year					$ 8,593,575
Activity in 2008 calendar month of:
January		60,000	$	25.35	$	7,072,792
February		20,000	$	25.77	$	6,557,434
March		-	$	-	$	6,557,434
		80,000	$	25.45	$	6,557,434

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:May 9, 2008	By:	/s/ Lawrence E. Washow
		Lawrence E. Washow President and Chief Executive Officer

Date:May 9, 2008	By:	/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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