Amcol International 10Q 2009 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, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14447

AMCOL INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		36-0724340
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

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

(847) 851-1500

(Registrant’s telephone number, including area code)

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

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

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 ¨	Accelerated filer x	Non-accelerated filer ¨
Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ 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 November 3, 2009
(Common stock, $.01 par value)		30,668,570 Shares

AMCOL INTERNATIONAL CORPORATION

INDEX

		Page No.
Part I - Financial Information

Item 1:	Financial Statements
	Condensed Consolidated Balance Sheets – September 30, 2009 and December 31, 2008	3

	Condensed Consolidated Statements of Operations –
	three and nine months ended September 30, 2009 and 2008	5

	Condensed Consolidated Statements of Comprehensive Income –
	three and nine months ended September 30, 2009 and 2008	6

	Condensed Consolidated Statements of Changes in Equity – nine months ended September 30, 2009 and 2008	7

	Condensed Consolidated Statements of Cash Flows – nine months ended September 30, 2009 and 2008	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4:	Controls and Procedures	37

Part II - Other Information

Item 6:	Exhibits	37

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

Item 1: Financial Statements

	September 30,		December 31,
	2009		2008
ASSETS	(unaudited)		*
Current assets:
Cash and cash equivalents	$	19,367	$	19,441
Accounts receivable, net		165,477		197,611
Inventories		103,966		125,066
Prepaid expenses		14,190		12,812
Deferred income taxes		3,043		5,358
Income tax receivable		6,791		3,490
Other		232		7,409

Total current assets		313,066		371,187

Investment in and advances to affiliates and joint ventures		30,292		30,025

Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights		56,356		17,186
Depreciable assets		405,217		380,555

		461,573		397,741
Less: accumulated depreciation and depletion		229,387		206,398
		232,186		191,343
Other assets:
Goodwill		71,537		68,482
Intangible assets, net		48,681		53,974
Deferred income taxes		14,361		15,867
Other assets		24,449		13,702
		159,028		152,025
	$	734,572	$	744,580

Continued…

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,			December 31,
	2009			2008
LIABILITIES AND SHAREHOLDERS' EQUITY	(unaudited)			*
Current liabilities:
Accounts payable	$	47,116		$	45,297
Accrued liabilities		53,080			63,197
Total current liabilities		100,196			108,494

Long-term debt		217,064			256,821

Pension liabilities		24,920			22,939
Other liabilities		44,650			27,971
		69,570			50,910
Equity:
Common stock		320			320
Additional paid in capital		83,284			86,350
Retained earnings		269,500			262,453
Accumulated other comprehensive income (loss)		8,749			(4,721	)
		361,853			344,402
Treasury stock		(15,952	)		(18,196	)
Total AMCOL shareholders' equity		345,901			326,206

Noncontrolling interest		1,841			2,149
Total equity		347,742			328,355
	$	734,572		$	744,580

*Condensed from audited financial statements.

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2009			2008			2009			2008

Net sales	$	526,539		$	678,304		$	190,920		$	253,048
Cost of sales		382,320			505,727			137,069			189,481
Gross profit		144,219			172,577			53,851			63,567
General, selling and administrative expenses		101,047			109,061			34,626			36,214
Operating profit		43,172			63,516			19,225			27,353
Other income (expense):
Interest expense, net		(9,399	)		(8,642	)		(2,833	)		(3,404	)
Other, net		(2,595	)		(1,533	)		119			(2,128	)
		(11,994	)		(10,175	)		(2,714	)		(5,532	)
Income before income taxes and income (loss) from affiliates and joint ventures		31,178			53,341			16,511			21,821
Income tax expense		6,388			13,950			3,271			5,567
Income before income (loss) from affiliates and joint ventures		24,790			39,391			13,240			16,254
Income (loss) from affiliates and joint ventures		(921	)		(14,072	)		721			(14,697	)
Net income		23,869			25,319			13,961			1,557

Net income (loss) attributable to noncontrolling interests		296			(58	)		661			(365	)

Net income (loss) attributable to AMCOL shareholders	$	23,573		$	25,377		$	13,300		$	1,922

Weighted average common shares outstanding		30,735			30,405			30,766			30,540

Weighted average common and common equivalent shares outstanding		30,973			30,993			31,061			31,129

Basic earnings per share attributable to AMCOL shareholders	$	0.77		$	0.83		$	0.43		$	0.06

Diluted earnings per share attributable to AMCOL shareholders	$	0.76		$	0.82		$	0.43		$	0.06

Dividends declared per share	$	0.54		$	0.50		$	0.18		$	0.18

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Total						AMCOL Shareholders						Noncontrolling Interest
	Three Months Ended						Three Months Ended						Three Months Ended
	September 30,						September 30,						September 30,
	2009			2008			2009			2008			2009		2008
Net income (loss)	$	13,961		$	1,557		$	13,300		$	1,922		$	661	$	(365	)
Other comprehensive income (loss):
Foreign currency translation adjustment		8,270			(12,644	)		8,181			(12,456	)		89		(188	)
Unrealized gain (loss) on interest rate swap agreement		(344	)		(275	)		(344	)		(275	)		-		-
Other		372			57			372			57			-		-

Comprehensive income (loss)	$	22,259		$	(11,305	)	$	21,509		$	(10,752	)	$	750	$	(553	)

	Total					AMCOL Shareholders					Noncontrolling Interest
	Nine Months Ended					Nine Months Ended					Nine Months Ended
	September 30,					September 30,					September 30,
	2009		2008			2009		2008			2009		2008
Net income (loss)	$	23,869	$	25,319		$	23,573	$	25,377		$	296	$	(58	)
Other comprehensive income (loss):
Foreign currency translation adjustment		12,775		(6,026	)		12,389		(5,782	)		386		(244	)
Unrealized gain (loss) on interest rate swap agreement		975		(278	)		975		(278	)		-		-
Other		106		(13	)		106		(13	)		-		-

Comprehensive income (loss)	$	37,725	$	19,002		$	37,043	$	19,304		$	682	$	(302	)

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands)

				AMCOL Shareholders
	Total Equity			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock		Treasury Stock			Paid-in Capital			Noncontrolling Interest
Balance at December 31, 2007	$	352,650		$	258,164		$	33,248		$	320	$	(21,008	)	$	81,599		$	327
Net income (loss)		25,319			25,377														(58	)
Dividends		(15,143	)		(15,143	)
Purchase of treasury shares		(2,062	)										(2,062	)
Issuance of treasury shares pursuant to options and acquisition		5,198											4,595			603
Tax benefit from employee stock plans		1,122														1,122
Vesting of common stock in connection with employee stock plans		2,348														2,348
Comprehensive income (loss)		(6,317	)					(6,073	)										(244	)
Investments made by non-controlling interests		2,447																	2,447
Other		183																	183
Balance at September 30, 2008		365,745			268,398			27,175			320		(18,475	)		85,672			2,655

Balance at December 31, 2008	$	328,355		$	262,453		$	(4,721	)	$	320	$	(18,196	)	$	86,350		$	2,149
Net income (loss)		23,869			23,573														296
Dividends		(16,526	)		(16,526	)
Purchase of treasury shares		(304	)										(304	)
Issuance of treasury shares pursuant to options		1,342											2,548			(1,206	)
Tax benefit from employee stock plans		551														551
Vesting of common stock in connection with employee stock plans		2,127														2,127
Purchase of noncontrolling interest shares		(5,528	)													(4,538	)		(990	)
Comprehensive income (loss)		13,856						13,470											386
Balance at September 30, 2009		347,742			269,500			8,749			320		(15,952	)		83,284			1,841

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	September 30,
	2009			2008
Cash flow from operating activities:
Net income	$	23,869		$	25,319
Adjustments to reconcile from net income to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization		26,781			24,872
Undistributed (earnings) losses from affiliates and joint ventures		1,412			14,866
Other non-cash charges		7,611			2,409
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets		35,096			(86,237	)
Decrease (increase) in noncurrent assets		(1,257	)		(848	)
Increase (decrease) in current liabilities		(7,480	)		20,116
Increase (decrease) in noncurrent liabilities		4,586			788
Net cash provided by (used in) operating activities		90,618			1,285
Cash flow from investing activities:
Capital expenditures		(39,637	)		(29,686	)
Capital expenditures - corporate building		(9,651	)		(14,273	)
Proceeds from sale of depreciable assets - corporate building		9,651			-
Acquisitions, net of cash		(522	)		(42,549	)
Investments in and advances to affiliates and joint ventures		(2,647	)		(10,993	)
Receipts from (advances to) Chrome Corp		6,000			(6,000	)
Other		2,906			(849	)
Net cash provided by (used in) investing activities		(33,900	)		(104,350	)
Cash flow from financing activities:
Net change in outstanding debt		(42,467	)		105,495
Net change in outstanding debt - corporate building		-			20,692
Proceeds from sales of treasury stock		1,005			1,550
Purchases of treasury stock		(165	)		(2,062	)
Dividends		(16,526	)		(15,143	)
Excess tax benefits from stock-based compensation		464			1,087
Net cash provided by (used in) financing activities		(57,689	)		111,619
Effect of foreign currency rate changes on cash		897			(190	)
Net increase (decrease) in cash and cash equivalents		(74	)		8,364
Cash and cash equivalents at beginning of period		19,441			25,282
Cash and cash equivalents at end of period	$	19,367		$	33,646

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 1:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Operations

We, AMCOL International Corporation (the “Company”), operate 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, coil tubing 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,
	2009			2008
Minerals		46	%		48	%
Environmental		31	%		33	%
Oilfield services		18	%		15	%
Transportation		7	%		7	%
Intersegment shipping		-2	%		-3	%
		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, 2008, is unaudited. The condensed consolidated balance sheet as of December 31, 2008 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, 2008. The information furnished herein includes all adjustments that are, in our opinion, necessary for a fair presentation of our results of operations and cash flows for the interim periods ended September 30, 2009 and 2008, and our financial position as of September 30, 2009, 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, as amended, for the year ended December 31, 2008.

Certain items in the prior year’s condensed consolidated financial statements contained herein and notes thereto have been reclassified to conform to the condensed consolidated financial statement presentation for the three and nine months ended September 30, 2009. These reclassifications did not have a material impact on our financial statements.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

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

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year for a variety of reasons, including the seasonality of 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.

As appropriate, we have evaluated subsequent events that have occurred through November 9, 2009, the date of issuance for these condensed consolidated financial statements as well as the filing date of this Form 10-Q.

Recently Adopted Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” (Accounting Standards Codification (“ASC”) Topic 810-10-65). A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not directly or indirectly attributable to a parent company. This guidance establishes standards of reporting for noncontrolling interests as well as deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be clearly identified and reported within equity in the consolidated statement of financial position, albeit separate from the parent company’s equity. It also requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and noncontrolling interests rather than reporting the noncontrolling interest as a deduction in arriving at net income. The adoption of this standard on January 1, 2009 did not have a material impact on our financial statements. The presentation and disclosure requirements of this standard were applied retrospectively.

In February 2008, the FASB issued FASB Staff Position (“FSP”) FAS157-2, “Effective Date of FASB Statement No. 157,” (ASC Topic 820-10), which delayed our effective date of SFAS No. 157, “Fair Value Measurements,” (ASC Topic 820) 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 (at least annually). The adoption of this standard on January 1, 2009 did not have a material impact on our financial statements.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” (ASC Topic 815-10-65). This standard requires enhanced disclosures about an entity’s derivative and hedging activities and is intended to improve 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 ASC Topic 815, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The adoption of this standard on January 1, 2009 did not have a material impact on our financial statements. See Note 7 for additional disclosures required by this standard.

In April 2009, the FASB issued FSP No. 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” (ASC Topic 805-20). This standard amends the accounting treatment for assets and liabilities arising from contingencies in a business combination. It requires pre-acquisition contingencies assumed in a business combination to be recognized at acquisition date fair value. If the fair value cannot be determined during the measurement period, and if the information available before the end of the measurement period indicates that it is probable that an asset existed or a liability incurred at the acquisition date and such amount can reasonably be estimated, then the provisions of SFAS No. 5, “Accounting for Contingencies,” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss,” (ASC Topic 405) shall be applied. This standard did not have a material impact on our financial statements when we adopted it on January 1, 2009.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (ASC Topic 825-10-65). This standard requires disclosures about fair value of financial instruments in summarized financial information at interim periods. This standard did not have a material impact on our financial statements when we adopted it on June 30, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” (ASC Topic 855). This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. It requires disclosure of the date through which we have evaluated subsequent events. This standard did not have a material impact on our financial statements when we adopted it on June 30, 2009.

In June 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards CodificationTM (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by all non-governmental entities in the preparation of financial statements in conformity with US GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. Following the Codification, the FASB will issue ASUs instead of new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. The ASUs will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in Codification. The adoption of this ASU did not have a material impact on our financial statements when we adopted it on September 30, 2009.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Recently Issued Accounting Standards (Not Yet Adopted)

Accounting pronouncements approved by various standard setting and governmental authorities that have not yet become effective with respect to our condensed consolidated financial statements are detailed as follows, together with our assessment of the potential impact they may have on our condensed consolidated financial statements:

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” (ASC Topic 810-10). This standard amends consolidation guidance applicable to variable interest entities (“VIEs”) and requires additional disclosures concerning an enterprise’s continual involvement with VIEs. We are currently evaluating the effect this standard will have on our financial statements when we adopt it on January 1, 2010.

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

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Weighted average number of common shares outstanding		30,734,996		30,404,745		30,765,700		30,540,122
Dilutive impact of stock based compensation		238,091		588,567		295,740		589,167
Weighted average number of common and common equivalent shares outstanding for the period		30,973,087		30,993,312		31,061,440		31,129,289
Number of common shares outstanding at the end of the period		30,637,887		30,413,787		30,637,887		30,413,787

Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share		1,442,016		307,958		936,612		-

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 3:

ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at September 30, 2009 and December 31, 2008 are comprised of the following components:

	September 30,		December 31,
	2009		2008
Crude stockpile inventories	$	33,416	$	40,056
In-process and finished goods inventories		44,132		51,653
Other raw material, container, and supplies inventories		26,418		33,357
	$	103,966	$	125,066

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
	September 30,
	2009			2008
Balance at beginning of period	$	5,649		$	5,699
Settlement of obligations		(930	)		(1,191	)
Liabilities incurred and accretion expense		1,342			1,799
Acquisition of mining claims		474			-
Foreign Currency		174			-
Balance at end of period	$	6,709		$	6,307

Note 4:

BUSINESS SEGMENT INFORMATION

As previously mentioned, we operate in five 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 several items, such as net interest expense or income taxes. Segment assets are those assets used in the operations of that segment. Corporate assets include cash and cash equivalents, corporate leasehold improvements, and other miscellaneous equipment.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

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

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net sales:
Minerals	$	244,657		$	323,228		$	89,021		$	116,881
Environmental		164,096			222,393			64,493			86,133
Oilfield services		93,140			100,177			29,109			38,379
Transportation		35,336			49,216			12,487			17,983
Intersegment shipping		(10,690	)		(16,710	)		(4,190	)		(6,328	)
Total	$	526,539		$	678,304		$	190,920		$	253,048

Operating profit (loss):
Minerals	$	23,863		$	27,317		$	10,472		$	11,110
Environmental		21,603			32,945			10,755			14,719
Oilfield services		12,463			18,891			3,096			6,194
Transportation		1,683			2,571			693			958
Corporate		(16,440	)		(18,208	)		(5,791	)		(5,628	)
Total	$	43,172		$	63,516		$	19,225		$	27,353

	As of Sep. 30, 2009		As of Dec. 31, 2008
Assets:
Minerals	$	355,288	$	341,111
Environmental		169,870		177,898
Oilfield services		149,882		160,691
Transportation		3,668		4,761
Corporate		55,864		60,119
Total	$	734,572	$	744,580

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Depreciation, depletion and amortization:
Minerals	$	12,030	$	11,564	$	3,917	$	3,897
Environmental		4,607		4,857		1,604		1,677
Oilfield services		8,815		7,286		2,928		3,263
Transportation		30		25		9		9
Corporate		1,299		1,140		448		279
Total	$	26,781	$	24,872	$	8,906	$	9,125

Capital expenditures:
Minerals	$	27,473	$	15,743	$	3,826	$	3,832
Environmental		1,684		3,318		589		1,007
Oilfield services		8,924		7,593		2,459		1,384
Transportation		27		48		27		31
Corporate		11,180		17,257		3,541		8,119
Total	$	49,288	$	43,959	$	10,442	$	14,373

Research and development expense:
Minerals	$	3,976	$	3,732	$	1,278	$	1,159
Environmental		1,716		1,652		643		522
Oilfield services		503		401		168		145
Corporate		155		645		28		69
Total	$	6,350	$	6,430	$	2,117	$	1,895

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, September 30,
	2009			2008			2009			2008
Service cost	$	1,235		$	1,253		$	411		$	418
Interest cost		1,954			1,780			651			593
Expected return on plan assets		(1,609	)		(2,342	)		(536	)		(781	)
Amortization of acturial (gain) / loss		320			-			107			32
Amortization of prior service cost		47			3			16			(31	)
Net periodic benefit cost	$	1,947		$	694		$	649		$	231

As previously disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2008, we expect to contribute up to $1,000 to our pension plan in 2009.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 6:

INCOME TAXES

Our effective tax rate for the nine months ended September 30, 2009 and 2008 was 20.5% and 26.2%, respectively. For both periods, the rate 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.

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 or the statute of limitations is closed for our U.S. federal income tax returns for all years through 2004. The IRS is currently auditing our tax returns for the 2005, 2006 and 2007 tax years.

Note 7:

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITES

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

The following table sets forth the fair values of our derivative instruments:

	Balance Sheet	Fair Value as of
Liability Derivatives	Location	September 30, 2009		December 31, 2008
Derivatives designated as hedging instruments:
Interest rate swap	Other liabilities	$	4,331	$	5,997

Cash flow hedges

	Amount of Gain or (Loss) Recognized in OCI on Derivatives					Amount of Gain or (Loss) Recognized in OCI on Derivatives
	(Effective Portion)					(Effective Portion)
	Nine Months Ended September 30,					Three Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2009		2008			2009			2008
Interest rate swap	$	975	$	(278	)	$	(344	)	$	(275	)

We use interest rate swaps to manage floating interest rate risk on debt securities. Interest rate differentials are paid or received on these arrangements over the life of the agreements. At the end of September 30, 2009 and 2008, we had an interest rate swap outstanding which effectively hedges the variable interest rate of our senior notes to a fixed rate of 5.6% per annum.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Other

We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. Our primary exposures are to fluctuations in exchange rates between the U.S. dollar and the Euro, British pound and Polish zloty. We also have significant exposure to fluctuations in exchange rates between the British pound and the Euro as well as between the Polish zloty and the Euro. We have entered into a series of foreign exchange forward contracts to mitigate the risk of currency fluctuations on these exposures. We also entered into a series of foreign exchange collars to mitigate the risk of currency fluctuations on our February 2009 purchase of a chrome mine in South Africa, the purchase price of which was paid in Australian dollars.

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

	Location of Gain or (Loss)	Amount of Gain or (Loss) Recognized in Income on Derivatives					Amount of Gain or (Loss) Recognized in Income on Derivatives
	Recognized in Income on	Nine Months Ended September 30,					Three Months Ended September 30,
Derivatives Not Designated as Hedging Instruments	Derivatives	2009			2008		2009		2008

Foreign exchange derivative instruments	Other, net	$	(4,709	)	$	1,464	$	83	$	(500	)

We do not have any foreign exchange derivative instruments outstanding as of September 30, 2009.

Note 8:

FAIR VALUE MEASUREMENTS

SFAS No. 157, “Fair Value Measurements” (ASC Topic 820), defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use several inputs in the valuation technique used to calculate the fair value of each derivative instrument. The fair value hierarchy under SFAS No. 157 prioritizes these inputs in the following three broad levels:

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

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

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

The following tables show the basis used to measure fair value on a recurring basis:

Fair Value Measurements Using

Balance at

Quoted Prices in

Active Markets

for Identical

Assets

Significant Other

Observable

Inputs

Significant

Unobservable

Inputs

Description

September 30, 2009

(Level 1)

(Level 2)

(Level 3)

Interest rate swap liability

4,331

N/A

4,331

N/A

Fair Value Measurements Using

Balance at

Quoted Prices in

Active Markets

for Identical

Assets

Significant Other

Observable

Inputs

Significant

Unobservable

Inputs

Description

December 31, 2008

(Level 1)

(Level 2)

(Level 3)

Interest rate swap liability

5,997

N/A

5,997

N/A

The interest rate swap is valued using discounted cash flows. The key input used is the LIBOR swap rate, which is observable at commonly quoted intervals for the full term of the swap.

We did not have any significant assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2009.

Note 9:

ASSET IMPAIRMENT CHARGE

For the three and nine months ended September 30, 2009, our minerals segment recorded a non-cash impairment charge of $1,980 to write down certain fixed assets to their estimated fair values based on a third party appraisal (Level 2 inputs). The impairment charge is related to the closing of a plant within our minerals segment due to reduced demand. This $1,980 impairment charge is recorded within the cost of sales within our Condensed Consolidated Statements of Operations. In addition, we increased our inventory reserve by $293 (also recorded within the cost of sales) to record the excess of cost over net realizable value of the inventory located at this plant, bringing the total one-time expense associated with this write-off to $2,273.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 10:

DEBT

Our revolving credit agreement is subject to certain financial covenants and ratios. On September 18, 2009, we amended our revolving credit agreement to change the definition of senior leverage ratio to exclude contingent obligations in respect of our performance letters of credit for purposes of determining whether an event of default has occurred; all other substantive terms and conditions remained the same.

Note 11:

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.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

From time to time, certain statements we make, including statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, constitute "forward-looking statements" made in reliance upon the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to our Company or our operations that are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions, and statements relating to anticipated growth and levels of capital expenditures. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including without limitation the following: actual performance in our various markets; conditions in the metalcasting and construction industries; oil and gas prices and conditions in those 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, waste fluid treatment, rental tools, coil tubing and well testing data services for the oil and gas industries. 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 our mineral based 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, Mexico, Russia and Azerbaijan. 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 its application to markets are two of 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 litter 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 segment’s customer base is primarily comprised of oil and gas service or exploration companies.

A significant portion of our products have been used in the same applications for decades and have experienced minimal technological obsolescence. A majority of our 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; our fastest growing markets are in the Asia-Pacific and Eastern European regions, which have continued to outpace the United States in economic growth in recent years. Consequently, the state of the US and international economies impacts our revenues.

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 EMEA 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 ensure 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, as appropriate, when we believe those businesses are fairly valued and fit with our overall growth strategy. However, the existing global economy will make it more challenging for us to do this than it has in recent years.

A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks throughout this report as well as under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K, as amended, for the year ended December 31, 2008. In general, the significance of these risks has not materially changed since our Quarterly Report on From 10-Q for the period ended June, 30, 2009, except as they are affected by the global economic and credit crisis occurring in the United States and throughout many of the economies in which we operate. The ongoing credit crisis is characterized by increased volatility, and lack of available capital for short and long term financing. The credit crisis may increase the risks outlined in our latest Annual Report on Form 10-K, as amended, and our Quarterly Report on From 10-Q for the period ended June 30, 2009, especially in the areas of our reliance on key industries (which could be more adversely affected due to the credit crisis), volatility of our stock price, and increased exchange rate sensitivity. In addition, the credit crisis may affect our ability to obtain additional financing to fund acquisitions or other activities on terms substantially similar to our current debt facilities should that need arise in the future. Any of these factors could adversely affect our business opportunities and results.

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, please read our Annual Report on Form 10-K, as amended, for the year ended December 31, 2008.

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.

The following paragraphs discuss the three and nine month results ending September 30, 2009 with the comparable results in the prior year. However, on a sequential quarter basis, the three months ending September 30, 2009 include a few highlights as compared to the three months ending June 30, 2009. In particular, our minerals segment experienced an increase in both sales and margins. This is due in part to increased activity in our metalcasting business resulting from both the government’s “cash for clunkers” program as well as model year change-overs in automobile production, both of which increased foundry activity. Our minerals business is also improving in both Asia and Europe, which has a significant consumer products related business. Also, our environmental segment has more construction project activity, but customers are still cautious about starting new projects.

Three months ended September 30, 2009 vs. September 30, 2008

Consolidated Review

The following table compares our operating results for the quarters ended September 30, 2009 and September 30, 2008:

	Three Months Ended September 30,
Consolidated	2009			2008			2009 vs. 2008
	(Dollars in Thousands, Except Per Share Amounts)
Net sales	$	190,920		$	253,048			-24.6	%
Cost of sales		137,069			189,481
Gross profit		53,851			63,567			-15.3	%
margin %		28.2	%		25.1	%
General, selling and
administrative expenses		34,626			36,214			-4.4	%
Operating profit		19,225			27,353			-29.7	%
margin %		10.1	%		10.8	%
Other income (expense):
Interest expense, net		(2,833	)		(3,404	)		-16.8	%
Other, net		119			(2,128	)		-105.6	%
		(2,714	)		(5,532	)

Income before income taxes and income (loss) from affiliates and joint ventures		16,511			21,821
Income tax expense		3,271			5,567			-41.2	%
effective tax rate		19.8	%		25.5	%

Income before income (loss) from affiliates and joint ventures		13,240			16,254
Income (loss) from affiliates and joint ventures		721			(14,697	)		-104.9	%

Net income		13,961			1,557

Net income (loss) attributable to noncontrolling interests		661			(365	)		-281.1	%

Net income (loss) attributable to AMCOL shareholders	$	13,300		$	1,922			592.0	%

Basic earnings per share attributable to AMCOL shareholders	$	0.43		$	0.06

Diluted earnings per share attributable to AMCOL shareholders	$	0.43		$	0.06

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

	Organic			Acquisitions			Foreign Exchange			Total
Minerals		-9.2	%		0.0	%		-1.8	%		-11.0	%
Environmental		-5.6	%		0.2	%		-3.2	%		-8.6	%
Oilfield services		-3.2	%		0.0	%		-0.5	%		-3.7	%
Transportation & intersegment shipping		-1.3	%		0.0	%		0.0	%		-1.3	%
Total		-19.3	%		0.2	%		-5.5	%		-24.6	%
% of change		78.2	%		-0.9	%		22.7	%		100.0	%

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

	Americas			EMEA			Asia Pacific			Total
Minerals		29.0	%		9.7	%		8.0	%		46.7	%
Environmental		17.0	%		15.0	%		1.8	%		33.8	%
Oilfield services		13.7	%		0.4	%		1.1	%		15.2	%
Transportation		4.3	%		0.0	%		0.0	%		4.3	%
Total - current year's period		64.0	%		25.1	%		10.9	%		100.0	%
Total from prior year's comparable period		66.9	%		23.4	%		9.7	%		100.0	%

Net sales:

The decrease in net sales is driven by decreased revenues in all segments, mostly occurring from organic operations within our minerals and environmental segments. Please see the segment discussion for further details.

Gross profit:

Overall gross profit decreased due to the decrease in net sales mentioned above, with the decrease in our environmental segment having the largest impact. Expenses associated with a $2.3 million write off of certain U.S. metal casting operations within our Minerals segment also contributed to the decrease in gross profits. However, gross margin increased substantially due to price increases in our minerals segment, which were implemented in 2008 and thus not in full effect during the prior year’s quarter, and reduced raw material costs in our environmental segment.

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

GS&A expenses decreased due to decreased costs in our environmental segment as other segment GS&A costs remained relatively constant. Please see the segment discussion for further details.

Operating profit:

Operating profit decreased due to the decrease in gross profit mentioned earlier, partially offset by the improvement in GS&A expenses in our environmental segment. Operating profit margin decreased across all segments except the minerals segment. Please see the segment discussions for further details.

Interest expense, net:

Net interest expense decreased due to decreased average debt levels. In the 2008 comparable period, we increased debt levels due to increased spending on acquisitions, capital expenditures and investments in working capital. In 2009, we have limited our expenditures, decreased working capital, and have not made any business acquisitions. Thus, we have significantly reduced our quarterly average debt levels in 2009 as compared to 2008. The majority of our long-term debt has a variable rate of interest which is primarily influenced by changes in LIBOR.

Other income (expense):

Other expense includes foreign currency transaction gains and losses for third party and intercompany related activity as well as gains and losses on foreign currency derivatives. This line item includes income in 2009 whereas the prior year’s quarter included expenses. The improvement results primarily from our entrance into markets where our activities were not significant in the prior year, most notably Brazil and South Africa. With these countries’ currencies, the exchange rate to the US dollar moved in our favor.

Income tax expense:

Our effective tax rate decreased in 2009 because a greater proportion of our income is being derived by our foreign subsidiaries, whose tax rates are lower than the 35% US federal income tax rate.

Income (loss) from affiliates & joint ventures:

Our affiliates and joint ventures generated income during the 2009 third quarter whereas they experienced a loss in the previous year’s quarter. In the prior year, the expenses resulted from our investment in Ashapura Minechem Limited, a publicly traded Indian company (“Ashapura”), in which we hold a 21% interest accounted for using the equity method of accounting. Ashapura suffered significant foreign currency derivative expenses as a result of the derivative contracts it entered into to hedge foreign currency exposure on its receivables and payables, primarily related to the conversion of currencies between the US dollar and the Indian Rupee. US GAAP required that we record the fair value of these derivative contracts in our balance sheet as of the end of each reporting period and record the changes in such fair values in our statement of operations. Ashapura’s losses resulted in a significant non-cash charge against our income from affiliates and joint ventures. In the current year, the income was primarily generated from our other Indian investment, Ashapura Volclay.

Diluted earnings per share:

Diluted EPS increased commensurate with the increase in net income as opposed to a change in the weighted average shares outstanding, which remained relatively constant.

Segment analysis:

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

Minerals Segment

	Three Months Ended September 30,
Minerals	2009				2008				2009 vs. 2008
	(Dollars in Thousands)
Net sales	$	89,021	100.0	%	$	116,881	100.0	%	$	(27,860	)	-23.8	%
Cost of sales		69,232	77.8	%		96,206	82.3	%
Gross profit		19,789	22.2	%		20,675	17.7	%		(886	)	-4.3	%
General, selling and
administrative expenses		9,317	10.5	%		9,565	8.2	%		(248	)	-2.6	%
Operating profit		10,472	11.7	%		11,110	9.5	%		(638	)	-5.7	%

	Three Months Ended September 30,
Minerals Product Line Sales	2009		2008		% change
	(Dollars in Thousands)
Metalcasting	$	38,097	$	46,392		-17.9	%
Specialty materials		26,661		29,033		-8.2	%
Pet products		16,959		19,559		-13.3	%
Basic minerals		6,348		19,471		-67.4	%
Other product lines		956		2,426		*
Total		89,021		116,881

* Not meaningful.

Decreased sales volumes accounted for the decrease in revenues over the prior year quarter, primarily in metalcasting and drilling products (part of basic minerals) due to the global recession. The segment also experienced decreased revenues due to adverse movements in foreign currency exchange rates, primarily the British pound and Turkish Lira to the US dollar. The effect of a full period of selling price increases that were instituted in the prior year but were not in full effect in the prior year’s quarter worked to slightly ameliorate these decreases. The increased selling prices, however, were the primary driver behind the increase in gross margins. Our gross profits suffered due to the decreased sales in addition to a $2.3 million write off of certain assets within our U.S. metal casting operations.

GS&A expenses decreased marginally due to favorable foreign exchange rate movements, again primarily in European currencies. Operating margins increased due to the significant increase in gross profit margin mentioned previously.

Environmental Segment

	Three Months Ended September 30,
Environmental	2009				2008				2009 vs. 2008
	(Dollars in Thousands)

Net sales	$	64,493	100.0	%	$	86,133	100.0	%	$	(21,640	)	-25.1	%
Cost of sales		41,603	64.5	%		57,731	67.0	%
Gross profit		22,890	35.5	%		28,402	33.0	%		(5,512	)	-19.4	%
General, selling and
administrative expenses		12,135	18.8	%		13,683	15.9	%		(1,548	)	-11.3	%
Operating profit		10,755	16.7	%		14,719	17.1	%		(3,964	)	-26.9	%

	Three Months Ended September 30,
Environmental Product Line Sales	2009		2008		% change
	(Dollars in Thousands)
Lining technologies	$	44,727	$	57,320		-22.0	%
Building materials		14,227		22,237		-36.0	%
Other product lines		5,539		6,576		*
Total		64,493		86,133

* Not meaningful.

Revenues in the environmental segment decreased due to decreased demand as a result of the depressed construction activity in the U.S. and fewer large projects within our U.S. contracting services business. Also fueling the decrease were adverse movements in foreign currency exchange rates, primarily the British pound and Polish zloty to the US dollar. Gross margins improved due to decreased raw material costs, such as resin and lower freight costs.

More than 75% of the decrease in GS&A expenses is attributable to foreign currency exchange rate fluctuations which, while they reduce the value of foreign denominated revenues, also reduce foreign denominated expenses. Operating profit margin decreased due to the combination of the above reasons.

Oilfield Services Segment

	Three Months Ended September 30,
Oilfield Services	2009				2008				2009 vs. 2008
	(Dollars in Thousands)

Net sales	$	29,109	100.0	%	$	38,379	100.0	%	$	(9,270	)	-24.2	%
Cost of sales		19,491	67.0	%		25,785	67.2	%
Gross profit		9,618	33.0	%		12,594	32.8	%		(2,976	)	-23.6	%
General, selling and
administrative expenses		6,522	22.4	%		6,400	16.7	%		122		1.9	%
Operating profit		3,096	10.6	%		6,194	16.1	%		(3,098	)	-50.0	%

Several of our oilfield services segment service offerings experienced fluctuations in revenues as compared to the prior year’s period. Domestically, our nitrogen and coil tubing operations experienced large revenues decreases from the prior period as lower demand for oil and natural gas has led to reduced production activities, decreasing demand for the services we offer. Although foreign markets were down overall, our operations benefited from new revenues in Brazil that were not present in the prior year’s period as our activities were not operational in the prior year period; we also experienced growth in our Malaysian operations.

Certain of our businesses are experiencing significant selling price competition, especially our coil tubing and nitrogen businesses, due to reductions in demand and the entrance of competitors who used to primarily serve the offshore market but have focused more on the on-shore market given depressed activities offshore. All these factors led to significant decreases in gross profit, especially considering that the prior year period’s gross profit was very good as certain of our businesses, such as our European business, experienced record profits in last year’s quarter.

Operating profits decreased due to the decreased gross profits mentioned above without commensurate decreases in GS&A expenses. Operating margin decreased as the profitability of our coil tubing business was lower than other parts of the business, thereby decreasing the overall profitability.

Transportation Segment

	Three Months Ended September 30,
Transportation	2009				2008				2009 vs. 2008
	(Dollars in Thousands)
Net sales	$	12,487	100.0	%	$	17,983	100.0	%	$	(5,496	)	-30.6	%
Cost of sales		10,933	87.6	%		16,087	89.5	%
Gross profit		1,554	12.4	%		1,896	10.5	%		(342	)	-18.0	%
General, selling and
administrative expenses		861	6.9	%		938	5.2	%		(77	)	-8.2	%
Operating profit		693	5.5	%		958	5.3	%		(265	)	-27.7	%

Traffic levels decreased as compared to the prior year period due to the recession in the United States. In addition, prices for diesel fuel have decreased, leading to decreased fuel surcharges. Both of these factors contributed to the decrease in this segment’s performance.

Corporate Segment

	Three Months Ended September 30,
Corporate	2009			2008			2009 vs. 2008
	(Dollars in Thousands)
Intersegment shipping sales	$	(4,190	)	$	(6,328	)		2,138
Intersegment shipping costs		(4,190	)		(6,328	)
Gross profit		-			-
General, selling
and administrative expenses		5,791			5,628			163	2.9	%
Operating loss		5,791			5,628			163	2.9	%

Intersegment shipping revenues and costs are related to billings from our transportation segment to its domestic minerals and environmental segment sister companies for services. These services are invoiced 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 remained relatively constant from the prior year’s comparable period.

Nine months ended September 30, 2009 vs. September 30, 2008

Consolidated Review

The following table compares our operating results for the period ended September 30, 2009 and September 30, 2008:

	Nine Months Ended September 30,
Consolidated	2009			2008			2009 vs. 2008
	(Dollars in Thousands, Except Per Share Amounts)
Net sales	$	526,539		$	678,304			-22.4	%
Cost of sales		382,320			505,727
Gross profit		144,219			172,577			-16.4	%
margin %		27.4	%		25.4	%
General, selling and
administrative expenses		101,047			109,061			-7.3	%
Operating profit		43,172			63,516			-32.0	%
margin %		8.2	%		9.4	%
Other income (expense):
Interest expense, net		(9,399	)		(8,642	)		8.8	%
Other, net		(2,595	)		(1,533	)		69.3	%
		(11,994	)		(10,175	)

Income before income taxes and income (loss) from affiliates and joint ventures		31,178			53,341
Income tax expense		6,388			13,950			-54.2	%
effective tax rate		20.5	%		26.2	%

Income before income (loss) from affiliates and joint ventures		24,790			39,391
Income (loss) from affiliates and joint ventures		(921	)		(14,072	)		-93.5	%

Net income		23,869			25,319

Net income (loss) attributable to noncontrolling interests		296			(58	)		-610.3	%

Net income (loss) attributable to AMCOL shareholders	$	23,573		$	25,377			-7.1	%

Basic earnings per share attributable to AMCOL shareholders	$	0.77		$	0.83

Diluted earnings per share attributable to AMCOL shareholders	$	0.76		$	0.82

We measure sales fluctuations by the relevant components: organic, acquisitions, and foreign currency exchange. The following table details the consolidated sales fluctuations by components over the prior year’s comparable period:

	Organic			Acquisitions			Foreign Exchange			Total
Minerals		-9.2	%		0.0	%		-2.4	%		-11.6	%
Environmental		-5.0	%		0.2	%		-3.8	%		-8.6	%
Oilfield services		-1.8	%		1.1	%		-0.3	%		-1.0	%
Transportation & intersegment shipping		-1.2	%		0.0	%		0.0	%		-1.2	%
Total		-17.2	%		1.3	%		-6.5	%		-22.4	%
% of change		77.1	%		-5.9	%		28.8	%		100.0	%

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

	Americas			EMEA			Asia Pacific			Total
Minerals		29.6	%		9.5	%		7.4	%		46.5	%
Environmental		15.6	%		13.5	%		2.1	%		31.2	%
Oilfield services		16.1	%		0.5	%		1.1	%		17.7	%
Transportation		4.6	%		0.0	%		0.0	%		4.6	%
Total - current year's period		65.9	%		23.5	%		10.6	%		100.0	%
Total from prior year's comparable period		67.3	%		23.1	%		9.6	%		100.0	%

Net sales:

All segments experienced a decrease in sales as compared to the prior year period. This can largely be attributed to the global recession. Please see the segment discussions for greater explanation on a per segment basis.

Gross profit:

Overall gross profit decreased due to the decrease in net sales mentioned above. However, gross margin increased substantially due to price increases in our minerals segment, which were implemented in 2008 and thus not in full effect during the prior year’s quarter.

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

GS&A expenses decreased overall, largely due to a $6.8 million decrease in our environmental segment’s cost. See the discussion of this segment’s results outlined later herein.

Operating profit:

Operating profit decreased due to the decrease in gross profit mentioned earlier. Excluding our corporate segment, every segment experienced deteriorating operating profits as we will outline later herein. Our minerals segment, however, experienced increased operating profit margins due to the aforementioned selling price increases.

Interest expense, net:

Net interest expense increased due to increased average debt levels - we began 2009 with debt levels significantly greater than those that existed at the beginning of 2008 due to increased capital spending, an acquisition, and increased working capital levels generated in 2008. The majority of our long-term debt has a variable rate of interest which is primarily influenced by changes in LIBOR.

Other income (expense):

Income tax expense:

Our effective tax rate is lower in 2009 than in 2008 due to a greater proportion of income being derived in our foreign operations, which typically have income tax rates lower than the statutory 35% in the USA.

Income (loss) from affiliates & joint ventures:

Our affiliates and joint ventures losses in the first three quarters of 2009 are less than the prior year’s comparable period, as the prior period contained significant losses from our Ashapura investment, described above. In 2009, the losses are due to our joint-ventures being less geographically and operationally diverse than AMCOL in addition to the decrease in worldwide economic activity and the start-up nature of our Belgian joint-venture.

Diluted earnings per share:

Diluted EPS decreased commensurate with the decrease in net income as opposed to a change in the weighted average number of shares outstanding.

Segment analysis:

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

Minerals Segment

	Nine Months Ended September 30,
Minerals	2009				2008				2009 vs. 2008
	(Dollars in Thousands)
Net sales	$	244,657	100.0	%	$	323,228	100.0	%	$	(78,571	)	-24.3	%
Cost of sales		193,774	79.2	%		267,532	82.8	%
Gross profit		50,883	20.8	%		55,696	17.2	%		(4,813	)	-8.6	%
General, selling and
administrative expenses		27,020	11.0	%		28,379	8.8	%		(1,359	)	-4.8	%
Operating profit		23,863	9.8	%		27,317	8.4	%		(3,454	)	-12.6	%

	Nine Months Ended September 30,
Minerals Product Line Sales	2009		2008		% change
	(Dollars in Thousands)
Metalcasting	$	100,592	$	134,118		-25.0	%
Specialty materials		71,330		77,239		-7.7	%
Pet products		49,729		58,261		-14.6	%
Basic minerals		20,288		47,275		-57.1	%
Other product lines		2,718		6,335		*
Total		244,657		323,228

* Not meaningful.

Decreased sales volumes accounted for the reduction in revenues over the prior year period, primarily in metalcasting and drilling products (part of basic minerals) due to the global recession. Revenues also decreased due to adverse movements in foreign currency exchange rates (primarily the British pound and Turkish Lira to the US dollar), and less pass through freight revenues from customers who are procuring freight on their own now. Revenues increased, however, due to the full period effect of price increases instituted in 2008, leading to increased gross profit margins.

GS&A expenses decreased due to foreign exchange rate movements and lesser increases in other miscellaneous expenses. This overall decrease, along with the increase in gross profit margin, contributed to the increase in operating profit margins.

Environmental Segment

	Nine Months Ended September 30,
Environmental	2009				2008				2009 vs. 2008
	(Dollars in Thousands)

Net sales	$	164,096	100.0	%	$	222,393	100.0	%	$	(58,297	)	-26.2	%
Cost of sales		107,580	65.6	%		147,694	66.4	%
Gross profit		56,516	34.4	%		74,699	33.6	%		(18,183	)	-24.3	%
General, selling and
administrative expenses		34,913	21.3	%		41,754	18.8	%		(6,841	)	-16.4	%
Operating profit		21,603	13.1	%		32,945	14.8	%		(11,342	)	-34.4	%

	Nine Months Ended September 30,
Environmental Product Line Sales	2009		2008		% change
	(Dollars in Thousands)
Lining technologies	$	106,150	$	138,267		-23.2	%
Building materials		41,704		65,090		-35.9	%
Other product lines		16,242		19,036		*
Total		164,096		222,393

* Not meaningful.

Revenues in the environmental segment decreased due to unfavorable exchange rate movements and reduced activity in our domestic markets due to the recession and credit crisis. Adverse movements in foreign currency exchange rates, primarily the British pound and Polish zloty to the US dollar, drove the decrease due to exchange rates. Organic decreases across all product lines, but most notably our lining technologies (which includes contracting services) and building materials divisions, accounted for the decrease due to recessionary and credit crisis factors. These decreases also led to the decrease in gross profits as gross margins were relatively constant.

GS&A expenses decreased mostly due to the currency movements as mentioned above but also due to decreased employee incentives and third party commissions stemming from decreased sales levels. Operating profit margin decreased due to the decrease in sales without a corresponding decrease in GS&A expenses.

Oilfield Services Segment

	Nine Months Ended September 30,
Oilfield Services	2009				2008				2009 vs. 2008
	(Dollars in Thousands)

Net sales	$	93,140	100.0	%	$	100,177	100.0	%	$	(7,037	)	-7.0	%
Cost of sales		60,554	65.0	%		63,130	63.0	%
Gross profit		32,586	35.0	%		37,047	37.0	%		(4,461	)	-12.0	%
General, selling and
administrative expenses		20,123	21.6	%		18,156	18.1	%		1,967		10.8	%
Operating profit		12,463	13.4	%		18,891	18.9	%		(6,428	)	-34.0	%

Demand for offshore, deep water filtration services and pipeline services was strong in the first quarter of the year. However, uncertainty in the demand for oil and the U.S. recession has reduced oil and gas production in the second and third quarters. This has accordingly increased competition for several of our services, leading to an overall decrease in revenues in the year-to-date period. The increased competition has also led to reduced gross profits and gross margins.

GS&A expenses increased primarily due to the acquisition of our coil tubing business in May 2008 and the full period effect of our Brazil operations which we started in 2008. Operating profits decreased due to the increased GS&A expenses as well as the decreased gross profits mentioned above. Both factors also contributed to the decrease in operating margins.

Transportation Segment

	Nine Months Ended September 30,
Transportation	2009				2008				2009 vs. 2008
	(Dollars in Thousands)
Net sales	$	35,336	100.0	%	$	49,216	100.0	%	$	(13,880	)	-28.2	%
Cost of sales		31,102	88.0	%		44,081	89.6	%
Gross profit		4,234	12.0	%		5,135	10.4	%		(901	)	-17.5	%
General, selling and
administrative expenses		2,551	7.2	%		2,564	5.2	%		(13	)	-0.5	%
Operating profit		1,683	4.8	%		2,571	5.2	%		(888	)	-34.5	%

Traffic levels decreased as compared to the prior year period due to the recession in the United States. In addition, prices for gasoline have decreased, leading to decreased fuel surcharges. Both of these factors contributed to the decrease in this segment’s performance.

Corporate Segment

	Nine Months Ended September 30,
Corporate	2009			2008			2009 vs. 2008
	(Dollars in Thousands)
Intersegment shipping sales	$	(10,690	)	$	(16,710	)		6,020
Intersegment shipping costs		(10,690	)		(16,710	)
Gross profit		-			-			-
General, selling
and administrative expenses		16,440			18,208			(1,768	)	-9.7	%
Operating loss		16,440			18,208			(1,768	)	-9.7	%

Corporate GS&A expenses decreased due to reduced expenses associated with certain benefit plans.

Liquidity and Capital Resources

Cash flows from operations, an ability to issue new debt instruments, and borrowings from our revolving credit facility have been our sources of funds to provide working capital, make capital expenditures, acquire businesses, repurchase common stock, and pay dividends to shareholders. We believe cash flows from operations and borrowings from an unused and committed credit facility will be adequate to support our current business needs for the foreseeable future. Given the current economic climate and credit crisis, it is unlikely that we would pursue a substantial acquisition in 2009. However, we may need additional debt or equity facilities in order to pursue acquisitions, when and if these opportunities become available, and we may or may not be able to obtain such facilities on terms substantially similar to our current facilities as discussed in Item 1A – Risk Factors in our Form 10-K, as amended, for 2008, and in Item 1A – Risk factors in our Quarterly Report on From 10-Q for the period ended June 30, 2009. See our additional comments in the Overview section of Part 1, Item 2 of this report. Following is a discussion and analysis of our cash flow activities as presented in the Condensed Consolidated Statement of Cash Flows presented within Part 1, Item 1 of this report.

	Nine Months Ended
Cash Flows	September 30,
($ in millions)	2009			2008
Net cash provided by operating activities	$	90.6		$	1.3
Net cash used in investing activities	$	(33.9	)	$	(104.4	)
Net cash provided by (used in) financing activities	$	(57.7	)	$	111.6

Cash flows from operating activities increased substantially as compared to the prior year period due to decreased working capital levels, which we were able to reduce through better inventory management and decreased business activity resulting from the current economic environment. Historically, cash flows from operations have increased over the course of the year and we anticipate this pattern will continue for the remainder of this year.

Cash flows used in investing activities decreased in the current year period as the prior year period includes the acquisition of our coil tubing business and our investment in a Russian bentonite company. In 2009, we purchased a chrome sand mine in South Africa from Chrome Corporation for $15.1 million (included within capital expenditures). Investing activities in 2009 include the repayment of the $6 million loan from Chrome Corporation made in 2008.

Cash flows from financing activities decreased as we paid off debt whereas in the previous year we incurred more debt. We were able to pay down debt due to reduced working capital requirements and reduced investing activities. Year-to-date dividends increased in 2009 to $0.54 per share from $0.50 per share in the prior year period.

	As at
Financial Position	September 30,		December 31,
($ in millions)	2009		2008
Working capital	$	212.9	$	262.7
Goodwill & intangible assets	$	120.2	$	122.5
Total assets	$	734.6	$	744.6

Long-term debt	$	217.1	$	256.8
Other long-term obligations	$	69.6	$	50.9
Total equity	$	347.7	$	328.4

Working capital at September 30, 2009 decreased from the amount at December 31, 2008 due to decreases in accounts receivable and inventories partly commensurate with the decreased sales levels but also due to increased efforts to reduce our levels of these assets. Given the seasonality of our environmental segment and the project nature of some of our services provided in the oilfield services segment, working capital levels typically increase in the second and third quarters of the year. However, this trend may or may not continue in the current economic environment.

Long-term debt relative to total capitalization reduced to 38.4% at September 30, 2009 versus 43.9% at December 31, 2008. During 2009, we have focused on strengthening our balance sheet, including reducing our investments in working capital. We have also limited our capital expenditures to maintenance activities with minimal expansion projects given the worldwide economic situation. These activities, combined with a decrease in overall sales and business levels, have allowed us to decrease our long-term debt substantially in 2009. We have approximately $106.6 million of borrowing capacity available from our revolving credit facility at September 30, 2009. We are in compliance with financial covenants on all of our debt agreements as of the period covered by this report.

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

Item 7 of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2008 discloses our contractual obligations and off-balance sheet arrangements. Other than the decrease in our long-term bank debt as disclosed in our condensed consolidated financial statements herein 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, as amended, for the year ended December 31, 2008 other than those discussed in Part 1, Item 2 of this report.

Item 4:

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, they concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting, on a timely basis, information we are required to disclose in the reports we file or submit under the Exchange Act.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 6:

Exhibits

Exhibit Number

10.1	Fourth Amendment to Credit Agreement dated as of September 18, 2009 among AMCOL International Corporation and certain of its wholly-owned subsidiaries and Harris N.A. and certain other lenders (1)
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.

(1) Exhibit is incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 23, 2009.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		AMCOL INTERNATIONAL CORPORATION

Date:	November 9, 2009		/s/ Lawrence E. Washow

			Lawrence E. Washow
			President and Chief Executive Officer

Date:	November 9, 2009		/s/ Donald W. Pearson
			Donald W. Pearson
			Vice President and Chief Financial Officer

INDEX TO EXHIBITS

10.1	Fourth Amendment to Credit Agreement dated as of September 18, 2009 among AMCOL International Corporation and certain of its wholly-owned subsidiaries and Harris N.A. and certain other lenders (1)
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.

(1) Exhibit is incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 23, 2009.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	7th grade Good

Amcol International Inactive 10-Q2009 Q3 Quarterly report

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