amcol10q.htm

10-Q 1 amcol10q.htm AMCOL INTERNATIONAL CORPORATION 10-Q amcol10q.htm

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, 2010

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

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

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

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

Large accelerated filer 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 o No x

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

Class		Outstanding at October 22, 2010
(Common stock, $.01 par value)		31,114,231 Shares

AMCOL INTERNATIONAL CORPORATION

INDEX

		Page No.
Part I - Financial Information

Item 1:	Financial Statements
	Condensed Consolidated Balance Sheets –
	September 30, 2010 and December 31, 2009	4

	Condensed Consolidated Statements of Operations –
	three and nine months ended September 30, 2010 and 2009	6

	Condensed Consolidated Statements of Comprehensive Income –
	three and nine months ended September 30, 2010 and 2009	7

	Condensed Consolidated Statements of Changes in Equity –
	three and nine months ended September 30, 2010 and 2009	8

	Condensed Consolidated Statements of Cash Flows –
	nine months ended September 30, 2010 and 2009	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2:	Management’s Discussion and Analysis of Financial
	Condition and Results of Operations	19

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4:	Controls and Procedures	36

Part II - Other Information

Item 5:	Other Information	37

Item 6:	Exhibits	38

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

Item 1: Financial Statements

	September 30,		December 31,
ASSETS	2010		2009
	(unaudited)		*
Current assets:
Cash and cash equivalents	$	20,326	$	27,669
Accounts receivable, net		201,092		148,260
Inventories		105,469		96,173
Prepaid expenses		12,938		12,509
Deferred income taxes		7,706		6,525
Income tax receivable		9,158		2,431
Other		5,979		463

Total current assets		362,668		294,030

Noncurrent assets:
Property, plant, equipment, and mineral rights and reserves:
Land and mineral rights		60,523		57,898
Depreciable assets		448,494		414,617

		509,017		472,515
Less: accumulated depreciation and depletion		253,018		236,269

		255,999		236,246

Goodwill		71,260		71,156
Intangible assets, net		44,370		47,185
Investment in and advances to affiliates and joint ventures		33,544		32,228
Available-for-sale securities		17,917		25,563
Other assets		27,041		27,852

Total noncurrent assets		450,131		440,230
	$	812,799	$	734,260

Continued…

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,			December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY	2010			2009
	(unaudited)				*
Current liabilities:
Accounts payable	$	61,830		$	40,335
Accrued liabilities		62,029			49,981

Total current liabilities		123,859			90,316

Noncurrent liabilities:
Long-term debt		229,690			207,017
Pension liabilities		21,420			20,403
Deferred compensation		7,980			7,544
Other long-term liabilities		19,691			29,208

Total noncurrent liabilities		278,781			264,172

Equity:
Common stock		320			320
Additional paid in capital		91,666			84,830
Retained earnings		298,149			275,200
Accumulated other comprehensive income		29,378			32,174

		419,513			392,524
Treasury stock		(10,608	)		(14,377	)

Total AMCOL shareholders' equity		408,905			378,147

Noncontrolling interest		1,254			1,625

Total equity		410,159			379,772
	$	812,799		$	734,260

*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,
		2010			2009			2010			2009
Net sales	$	629,115		$	526,539		$	233,451		$	190,920
Cost of sales		465,304			382,320			174,962			137,069
Gross profit		163,811			144,219			58,489			53,851
General, selling and administrative expenses		106,785			101,047			35,967			34,626
Operating profit		57,026			43,172			22,522			19,225
Other income (expense):
Interest expense, net		(7,092	)		(9,399	)		(2,542	)		(2,833	)
Other, net		2,066			(2,595	)		2,183			119
		(5,026	)		(11,994	)		(359	)		(2,714	)
Income before income taxes and income (loss) from
affiliates and joint ventures		52,000			31,178			22,163			16,511
Income tax expense		12,894			6,388			5,193			3,271
Income before income (loss) from affiliates and
joint ventures		39,106			24,790			16,970			13,240
Income (loss) from affiliates and joint ventures		266			(921	)		337			721
Net income (loss)		39,372			23,869			17,307			13,961

Net income (loss) attributable to noncontrolling interests		(322	)		296			(110	)		661

Net income (loss) attributable to AMCOL shareholders	$	39,694		$	23,573		$	17,417		$	13,300

Weighted average common shares outstanding		31,137			30,735			31,225			30,766

Weighted average common and common equivalent shares outstanding		31,498			30,973			31,565			31,061

Basic earnings per share attributable to AMCOL shareholders	$	1.27		$	0.77		$	0.56		$	0.43

Diluted earnings per share attributable to AMCOL shareholders	$	1.26		$	0.76		$	0.55		$	0.43

Dividends declared per share	$	0.54		$	0.54		$	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
	Nine Months Ended					Nine Months Ended					Nine Months Ended
	September 30,					September 30,					September 30,
	2010			2009		2010			2009		2010			2009
Net income (loss)	$	39,372		$	23,869	$	39,694		$	23,573	$	(322	)	$	296
Other comprehensive income (loss):
Foreign currency translation adjustment		5,606			12,775		5,655			12,389		(49	)		386
Unrealized gain (loss) on available-for-sale securities, net of tax		(4,883	)		-		(4,883	)		-		-			-
Unrealized gain (loss) on interest rate swap agreements, net of tax		(3,662	)		975		(3,662	)		975		-			-
Other, net of tax		94			106		94			106		-			-

Comprehensive income (loss)	$	36,527		$	37,725	$	36,898		$	37,043	$	(371	)	$	682

	Total						AMCOL Shareholders						Noncontrolling Interest
	Three Months Ended						Three Months Ended						Three Months Ended
	September 30,						September 30,						September 30,
	2010			2009			2010			2009			2010			2009
Net income (loss)	$	17,307		$	13,961		$	17,417		$	13,300		$	(110	)	$	661
Other comprehensive income (loss):
Foreign currency translation adjustment		18,508			8,270			18,493			8,181			15			89
Unrealized gain (loss) on available-for-sale securities, net of tax		(4,215	)		-			(4,215	)		-			-			-
Unrealized gain (loss) on interest rate swap agreements, net of tax		(1,288	)		(344	)		(1,288	)		(344	)		-			-
Other, net of tax		30			372			30			372			-			-

Comprehensive income (loss)	$	30,342		$	22,259		$	30,437		$	21,509		$	(95	)	$	750

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, 2008	$	328,355		$	262,453		$	(4,721	)	$	320	$	(18,196	)	$	86,350		$	2,149
Net income (loss)		23,869			23,573														296
Cash dividends		(16,526	)		(16,526	)
Purchase of treasury shares		(304	)										(304	)
Issuance of treasury shares pursuant to
employee stock compensation plans		1,342											2,548			(1,206	)
Tax benefit from employee stock
compensation plans		551														551
Vesting of common stock in connection
with employee stock compensation
plans		2,127														2,127
Purchase of noncontrolling interest's shares		(5,528	)													(4,538	)		(990	)
Other 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

Balance at December 31, 2009	$	379,772		$	275,200		$	32,174		$	320	$	(14,377	)	$	84,830		$	1,625
Net income (loss)		39,372			39,694														(322	)
Cash dividends		(16,745	)		(16,745	)
Issuance of treasury shares pursuant to
employee stock compensation plans		5,099											3,769			1,330
Tax benefit from employee stock
compensation plans		343														343
Vesting of common stock in connection
with employee stock compensation
plans		2,462														2,462
Purchase of noncontrolling interest's shares		2,701														2,701
Other comprehensive income (loss)		(2,845	)					(2,796	)										(49	)

Balance at September 30, 2010		410,159			298,149			29,378			320		(10,608	)		91,666			1,254

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,
	2010			2009
Cash flow from operating activities:
Net income	$	39,372		$	23,869
Adjustments to reconcile from net income (loss) to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization		26,470			26,781
Other non-cash charges		3,174			9,023
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets		(69,385	)		35,096
Decrease (increase) in noncurrent assets		(2,298	)		(1,257	)
Increase (decrease) in current liabilities		34,832			(7,480	)
Increase (decrease) in noncurrent liabilities		2,999			4,586
Net cash provided by (used in) operating activities		35,164			90,618
Cash flow from investing activities:
Capital expenditures		(37,944	)		(39,637	)
Capital expenditures - corporate building		-			(9,651	)
Proceeds from sale of depreciable assets - corporate building		-			9,651
Receipts from Chrome Corp		-			6,000
Investments in and advances to affiliates and joint ventures		(2,047	)		(2,647	)
Other		1,210			2,384
Net cash used in investing activities		(38,781	)		(33,900	)
Cash flow from financing activities:
Net change in outstanding debt		21,004			(42,467	)
Purchase of noncontrolling interest		(11,873	)		-
Proceeds from sales of treasury stock		3,252			1,005
Purchases of treasury stock		-			(165	)
Dividends		(16,745	)		(16,526	)
Excess tax benefits from stock-based compensation		394			464

Net cash provided by (used in) financing activities		(3,968	)		(57,689	)
Effect of foreign currency rate changes on cash		242			897
Net increase (decrease) in cash and cash equivalents		(7,343	)		(74	)
Cash and cash equivalents at beginning of period		27,669			19,441
Cash and cash equivalents at end of period	$	20,326		$	19,367

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 and materials, environmental, oilfield services, transportation and corporate. Our minerals and materials segment mines, processes and distributes minerals and products with similar applications for use in various industrial and consumer markets, including metalcasting, pet care, detergents, iron ore pelletizing, and drilling industries. Our environmental segment manufactures and distributes products and related services for use as a moisture barrier in commercial construction, landfill liners and a variety of other industrial and commercial applications. Our oilfield services segment provides both onshore and offshore water treatment filtration, pipeline separation, waste fluid treatment, nitrogen, rental tools, coil tubing and well testing data services for the oil and natural gas industry. Our transportation segment includes both a long-haul trucking business and a freight brokerage business for our domestic subsidiaries as well as third parties. Our corporate segment includes the elimination of intersegment shipping revenues as well as certain expenses associated with research and development, management, employee benefits and information technology activities for our Company. The composition of our revenues by segment is as follows:

	Nine Months Ended
	September 30,
	2010	2009
Minerals and materials	50%	46%
Environmental	28%	31%
Oilfield services	18%	18%
Transportation	6%	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, 2009, is unaudited. The condensed consolidated balance sheet as of December 31, 2009 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, 2009. 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, 2010 and 2009, and our financial position as of September 30, 2010, 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, 2009.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

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, 2010. These reclassifications did not have a material impact on our financial statements.

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

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

Recently Adopted Accounting Standards

In June 2009, the Financial Accounting Standard Board (“FASB”) issued guidance codified in ASC Topic 810, which amends consolidation guidance applicable to variable interest entities (“VIEs”) and requires additional disclosures concerning an enterprise’s continual involvement with VIEs. The adoption of this guidance on January 1, 2010 did not have a material impact on our financial statements.

In January 2010, the FASB issued guidance codified in ASC Topic 820, which requires separate disclosure and justification for transferring fair value measurements between Level 1 and Level 2. The adoption of this guidance on January 1, 2010 relating to new disclosures for Level 1 and Level 2 fair value measurements did not have a material impact on our financial statements.

Note 2: EARNINGS PER SHARE

The table below provides further share information used in computing our earnings per share for the periods presented herein. Basic earnings per share was computed by dividing net income 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.

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
	2010		2009		2010		2009
Weighted average number of common shares outstanding		31,136,740		30,734,996		31,225,430		30,765,700
Dilutive impact of stock based compensation		361,286		238,091		339,698		295,740
Weighted average number of common and common equivalent
shares outstanding for the period		31,498,026		30,973,087		31,565,128		31,061,440
Number of common shares outstanding at the end of the period		31,100,692		30,637,887		31,100,692		30,637,887

Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share		570,259		1,442,016		511,792		936,612

Note 3: ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at September 30, 2010 and December 31, 2009 are comprised of the following components:

	September 30,		December 31,
	2010		2009
Crude stockpile inventories	$	34,663	$	30,510
In-process and finished goods inventories		44,779		40,368
Other raw material, container, and supplies inventories		26,027		25,295
	$	105,469	$	96,173

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,
	2010			2009
Balance at beginning of period	$	6,584		$	5,649
Settlement of obligations		(1,182	)		(930	)
Liabilities incurred and accretion expense		1,813			1,342
Acquisition of mining claims		-			474
Foreign currency		56			174

Balance at end of period	$	7,271		$	6,709

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 4: BUSINESS SEGMENT INFORMATION

As previously mentioned, we operate in five segments. Our segments are fairly diverse with respect to the products and services they offer as well as the customers they serve. Accordingly, we organize our segments based on the products and industries they serve. 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.

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

	Nine Months Ended						Three Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net sales:
Minerals and materials	$	314,417		$	244,657		$	110,332		$	89,021
Environmental		175,707			164,096			72,373			64,493
Oilfield services		111,052			93,140			41,204			29,109
Transportation		39,987			35,336			14,284			12,487
Intersegment shipping		(12,048	)		(10,690	)		(4,742	)		(4,190	)
Total	$	629,115		$	526,539		$	233,451		$	190,920

Operating profit (loss):
Minerals and materials	$	42,973		$	23,863		$	12,341		$	10,472
Environmental		16,348			21,603			8,551			10,755
Oilfield services		9,860			12,463			4,079			3,096
Transportation		1,964			1,683			754			693
Corporate		(14,119	)		(16,440	)		(3,203	)		(5,791	)
Total	$	57,026		$	43,172		$	22,522		$	19,225

	As of Sep. 30, 2010			As of Dec. 31, 2009
Assets:
Minerals and materials	$	416,316		$	384,896
Environmental		168,344			151,265
Oilfield services		165,125			145,981
Transportation		3,976			3,552
Corporate		59,038			48,566
Total	$	812,799		$	734,260

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

	Nine Months Ended					Three Months Ended
	September 30,					September 30,
	2010			2009		2010			2009
Depreciation, depletion and amortization:
Minerals and materials	$	12,316		$	12,030	$	4,544		$	3,917
Environmental		4,017			4,607		1,438			1,604
Oilfield services		8,807			8,815		3,028			2,928
Transportation		31			30		11			9
Corporate		1,299			1,299		427			448
Total	$	26,470		$	26,781	$	9,448		$	8,906

Capital expenditures:
Minerals and materials	$	24,367		$	27,473	$	5,297		$	3,826
Environmental		2,051			1,684		1,096			589
Oilfield services		10,264			8,924		5,358			2,459
Transportation		52			27		14			27
Corporate		1,210			11,180		240			3,541
Total	$	37,944		$	49,288	$	12,005		$	10,442

Research and development (income) expense:
Minerals and materials	$	4,331		$	3,976	$	1,572		$	1,278
Environmental		1,870			1,716		596			643
Oilfield services		510			503		188			168
Corporate		(11	)		155		(51	)		28
Total	$	6,700		$	6,350	$	2,305		$	2,117

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,
	2010			2009			2010			2009
Service cost	$	1,050		$	1,235		$	350		$	411
Interest cost		1,869			1,954			623			651
Expected return on plan assets		(1,962	)		(1,609	)		(654	)		(536	)
Amortization of acturial (gain) / loss		-			320			-			107
Amortization of prior service cost		48			47			16			16

Net periodic benefit cost	$	1,005		$	1,947		$	335		$	649

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, we expected to contribute up to $1,500 to our pension plan in 2010, of which $500 was contributed in the first quarter ended March 31, 2010 and $1,000 in October 2010.

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, 2010 and 2009 was 24.8% and 20.5%, 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 income tax examinations by tax authorities for years prior to 2004. The United States Internal Revenue Service (“IRS”) has examined our federal income tax returns for all open years through 2007.

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 and where they are recorded within our Condensed Consolidated Balance Sheet:

Liability Derivatives		Fair Value as of
	Balance Sheet Location	September 30, 2010	December 31, 2009

Derivatives designated as hedging instruments:

Interest rate swaps	Other long-term liabilities	$ 8,834	$ 3,082

Cash flow hedges

	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives
Derivatives in Cash Flow Hedging Relationships	(Effective Portion)
	Nine Months Ended September 30,		Three Months Ended September 30,
	2010	2009	2010	2009

Interest rate swaps, net of tax	$ (3,662)	$ 975	$ (1,288)	$ (344)

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

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. As of September 30, 2010 and 2009, we had an interest rate swap outstanding which effectively hedges the variable interest rate on $30,000 of our senior notes to a fixed rate of 5.6% per annum. As of September 30, 2010, we also had two other interest rate swaps outstanding which effectively hedge the variable interest rate on $33,000 of our borrowings under our revolving credit agreement to a fixed rate of 3.3% per annum plus credit spread.

Other

We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in foreign currencies. Our primary U.S. dollar exposures are to fluctuations in 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 enter into foreign exchange derivative contracts to mitigate the risk of currency fluctuations on these exposures.

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
Derivatives Not Designated as Hedging Instruments	Recognized in Income on	Nine Months Ended September 30,						Three Months Ended September 30,
	Derivatives	2010			2009			2010			2009

Foreign currency exchange contracts	Other, net	$	(347	)	$	(4,709	)	$	(158	)	$	83

We did not have any significant foreign exchange derivative instruments outstanding as of September 30, 2010 or December 31, 2009.

Note 8: FAIR VALUE MEASUREMENTS

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

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

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.

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

			Fair Value Measurements Using
Description	Balance at		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	9/30/2010		(Level 1)		(Level 2)		(Level 3)

Interest rate swaps	$	8,834	$	-	$	8,834	$	-

Available-for-sale securities		17,917		17,917		-		-

Deferred compensation plan assets		7,533		-		7,533		-

Supplementary pension plan assets		6,773		-		6,773		-

			Fair Value Measurements Using
Description	Balance at		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	12/31/2009		(Level 1)		(Level 2)		(Level 3)

Interest rate swaps	$	3,082	$	-	$	3,082	$	-

Available-for-sale securities		25,563		25,563		-		-

Deferred compensation plan assets		7,285		-		7,285		-

Supplementary pension plan assets		5,885		-		5,885		-

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

AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

We did not have any significant assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2010 or December 31, 2009.

Note 9: ASSET IMPAIRMENT CHARGE

For the three and nine months ended September 30, 2009, our minerals and materials 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 and materials segment due to reduced demand. This impairment charge is recorded within cost of sales within our Condensed Consolidated Statements of Operations. In addition, we increased our inventory reserve by $293 (also recorded within cost of sales) to record the excess of cost over net realizable value of the inventory located at this plant, bringing the total expense associated with this write-off to $2,273.

Note 10: DEBT

On April 29, 2010, we issued and sold an aggregate of $50 million of senior notes (the "Notes") to qualified institutional buyers pursuant to a note purchase agreement (the "Note Purchase Agreement"). The Notes bear interest at a fixed annual rate of 5.46%, payable semi-annually in arrears on April 29th and October 29th of each year, beginning on October 29, 2010. The principal amount of the Notes is due at maturity on April 29, 2020, subject to acceleration upon an event of default (also subject in certain cases to customary grace and cure periods), including nonpayment of principal, interest or make-whole amounts, breach of covenants or other agreements in the Note Purchase Agreement and certain events of bankruptcy or insolvency. Generally, if an event of a default occurs, a holder may accelerate payment of the Notes. The Notes will accelerate automatically if certain events of bankruptcy or insolvency occur. Our obligations under the Note Purchase Agreement are guaranteed by certain of our subsidiaries pursuant to a Subsidiary Guaranty Agreement dated as of April 29, 2010 by such subsidiaries in favor of the purchasers of the Notes.

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 markets; oil and gas prices and conditions in those industries; operating costs; seasonality of our environmental and oilfield services segments; 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 (SEC). We undertake no duty to update any forward looking statements to actual results or changes in our expectations.

Overview

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

The principal mineral that we utilize to generate revenues is bentonite. We own or lease bentonite reserves in the U.S., Australia, China and Turkey. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India, Russia, Azerbaijan and Mexico.

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

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

Our customers are engaged in various end-markets and geographic regions. Customers in the minerals and materials segment range from foundries that produce castings for automotive, industrial, and transportation equipment, including heavy-duty trucks and railroad cars, to producers of consumer goods, including cat litter box filler, cosmetics and detergents. Customers in our environmental segment include construction contractors, engineering contractors and government agencies. The oilfield services segment’s customer base is primarily comprised of oil and natural gas exploration and production (E&P) companies. A significant portion of our products have been used in the same applications for decades and have experienced minimal technological obsolescence. A majority of our sales are made pursuant to short-term agreements; therefore, terms of sale, such as pricing and volume, can change within our fiscal year.

A majority of our revenues are generated in the Americas, principally North America. Consequently, the state of the U.S. economy, and especially the metalcasting and industrial construction industries, 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 activities directed at bringing innovative products to market. We believe this approach to growth offers the best probability of achieving our long-term goals at the lowest risk.

Globalization: As we have done for decades, we continue to expand our manufacturing and marketing organizations into emerging geographic markets. We see significant opportunities in the Asia-Pacific and Eastern European regions for expanding our revenues and earnings over the long-term as a number of markets we serve, such as metalcasting, contracting services, and lining technologies, are expected to grow in these areas. We expect to take advantage of these growth areas, either through our wholly-owned subsidiaries or investments in affiliates and joint ventures.

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

Acquisitions: We continually seek to acquire complementary businesses, as appropriate, when we believe those businesses are fairly valued and fit into our growth strategy. However, the global economic and credit crisis that existed as we began fiscal 2010 continues to make it more challenging for us to do this than in periods prior to the crisis.

A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks throughout this report as well as under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K for the year ended December 31, 2009. In general, the significance of these risks has not materially changed since our Annual Report on Form 10-K for the period ended December 31, 2009.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations describes relevant aspects of our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. We evaluate the accounting policies and estimates used to prepare the financial statements on an ongoing basis. We consider the accounting policies used in preparing our financial statements to be critical accounting policies when they are both important to the portrayal of our financial condition and results of operations, and require us to make estimates, complex judgments, and assumptions, including with respect to events which are inherently uncertain. As a result, actual results could differ from these estimates. For more information on our critical accounting policies, please read our Annual Report on Form 10-K for the year ended December 31, 2009.

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 consolidated income statement review and segment analysis discuss the results for the three and nine months period ended September 30, 2010 and the comparable results in the prior year. In each section, a discussion of our consolidated results is presented first, followed by more detailed discussion of performance within our segments.

Three months ended September 30, 2010 vs. September 30, 2009

Consolidated Income Statement Review

The table below compares our operating results for the quarters ended September 30, 2010 and 2009. The comments in this section discuss our results overall and are followed with a more detailed discussion of each segment’s key operating results.

	Three Months Ended September 30,
Consolidated	2010			2009			2010 vs. 2009
	(Dollars in Thousands, Except Per Share Amounts)

Net sales	$	233,451		$	190,920			22.3	%
Cost of sales		174,962			137,069
Gross profit		58,489			53,851			8.6	%
margin %		25.1	%		28.2	%
General, selling and
administrative expenses		35,967			34,626			3.9	%
Operating profit		22,522			19,225			17.1	%
margin %		9.6	%		10.1	%
Other income (expense):
Interest expense, net		(2,542	)		(2,833	)		-10.3	%
Other, net		2,183			119			1734.5	%
		(359	)		(2,714	)

Income before income taxes and income (loss) from affiliates and joint ventures		22,163			16,511
Income tax expense		5,193			3,271			58.8	%
effective tax rate		23.4	%		19.8	%

Income before income (loss) from affiliates and joint ventures		16,970			13,240
Income (loss) from affiliates and joint ventures		337			721			-53.3	%

Net income (loss)		17,307			13,961

Net income (loss) attributable to noncontrolling interests		(110	)		661			-116.6	%

Net income (loss) attributable to AMCOL shareholders	$	17,417		$	13,300			31.0	%

Basic earnings per share attributable to AMCOL shareholders	$	0.56		$	0.43			30.2	%

Diluted earnings per share attributable to AMCOL shareholders	$	0.55		$	0.43			27.9	%

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 acquired businesses within the first year (twelve consecutive months) we own them. Any remaining fluctuation is due to organic components. The following table details the consolidated sales fluctuations by components over the prior year’s comparable period:

	Organic			Acquisitions			Foreign Exchange			Total
Minerals and materials		11.0	%		0.0	%		0.2	%		11.2	%
Environmental		4.3	%		0.2	%		-0.4	%		4.1	%
Oilfield services		5.9	%		0.0	%		0.4	%		6.3	%
Transportation & intersegment shipping		0.7	%		0.0	%		0.0	%		0.7	%
Total		21.9	%		0.2	%		0.2	%		22.3	%
% of change		97.8	%		0.9	%		1.3	%		100.0	%

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

	Americas			EMEA			Asia Pacific			Total
Minerals and materials		29.6	%		8.1	%		9.6	%		47.3	%
Environmental		14.9	%		13.7	%		2.4	%		31.0	%
Oilfield services		14.2	%		0.6	%		2.8	%		17.6	%
Transportation		4.1	%		0.0	%		0.0	%		4.1	%

Total - current year's period		62.8	%		22.4	%		14.8	%		100.0	%
Total from prior year's comparable period		64.0	%		25.1	%		10.9	%		100.0	%

Net sales:

Net sales increased largely due to organic growth in all segments, with minerals and materials contributing the most to the growth. The majority of our revenues have grown from organic business growth as currency rates have not changed significantly and we have not acquired a significant business in the last twelve months. Sales in our Asia Pacific region have increased as a percentage of total sales as the Asian minerals and materials businesses have increased revenues significantly, largely in the metalcasting markets, due to economic growth in that region.

Gross profit:

Overall gross profit increased due to the increase in sales mentioned above, and gross margins decreased due to decreases in profitability of our environmental and oilfield services segments.

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

GS&A expenses increased overall due to increases in employee compensation and benefit costs.

Operating profit:

Operating profit increased due to the increase in gross profit mentioned earlier, partially offset by the overall increase in GS&A expenses. Our overall operating margin did not decrease as significantly as our gross margin did due to the high fixed cost nature of the oilfield services business and the decrease in revenues that occurred in some of the larger product lines within in that business.

Interest expense, net:

Net interest expense decreased due to decreased average interest rates. The majority of our long-term debt has had a variable rate of interest which is primarily influenced by changes in LIBOR rates, which have decreased as compared to the prior year period.

Other, net:

Income tax expense:

Our effective tax rate increased due to less income being concentrated in our lower rate jurisdictions, primarily our foreign operations. These are somewhat offset by tax refunds we have claimed in tax returns filed in the quarter.

Diluted earnings per share:

Diluted EPS increased commensurate with the increase in net income. The change in weighted average shares outstanding did not have a material effect on diluted earnings per share.

Quarterly Review of Each Segment’s Results

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

Minerals and Materials Segment

	Three Months Ended September 30,
Minerals and Materials	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	110,332	100.0	%	$	89,021	100.0	%	$	21,311	23.9	%
Cost of sales		86,383	78.3	%		69,232	77.8	%
Gross profit		23,949	21.7	%		19,789	22.2	%		4,160	21.0	%
General, selling and
administrative expenses		11,608	10.5	%		9,317	10.5	%		2,291	24.6	%
Operating profit		12,341	11.2	%		10,472	11.7	%		1,869	17.8	%

	Three Months Ended September 30,
Minerals and Materials Product Line Sales	2010		2009		% change
	(Dollars in Thousands)
Metalcasting	$	53,632	$	38,097		40.8	%
Specialty materials		27,211		26,661		2.1	%
Pet products		15,848		16,959		-6.6	%
Basic minerals		12,015		6,348		89.3	%
Other product lines		1,626		956		*

Total		110,332		89,021		23.9	%

* Not meaningful.

Increased volumes in our domestic and Asian operations accounted for 91% of the increase in revenues over the prior year quarter. Both geographic regions increased sales of metalcasting products in response to increased demand for castings for automobiles and heavy equipment. Our basic minerals revenues also increased due to greater demand for oil and gas drilling products.

Our gross margins decreased in the current period due to the start up of our operations in South Africa; in addition, we experienced some operational issues in our personal care products group which led to increased costs in this business. These decreases overshadowed the increased operating leverage gained through our increased volumes. We believe we have addressed the issues within our personal care business and do not expect similar charges going forward.

GS&A expenses increased due to employee compensation and related benefits expenses. They also increased as a result of our ramping up our South African operations in 2010 as the chrome sand processing plant was not operational in 2009. Operating profits increased due to the significant increase in gross profits mentioned previously as well as due to greater operational leverage of our management and sales support structures.

Environmental Segment

	Three Months Ended September 30,
Environmental	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	72,373	100.0	%	$	64,493	100.0	%	$	7,880		12.2	%
Cost of sales		51,418	71.0	%		41,603	64.5	%
Gross profit		20,955	29.0	%		22,890	35.5	%		(1,935	)	-8.5	%
General, selling and
administrative expenses		12,404	17.1	%		12,135	18.8	%		269		2.2	%
Operating profit		8,551	11.9	%		10,755	16.7	%		(2,204	)	-20.5	%

	Three Months Ended September 30,
Environmental Product Line Sales	2010		2009		% change
	(Dollars in Thousands)
Lining technologies	$	33,407	$	33,484		-0.2	%
Building materials		15,822		14,227		11.2	%
Contracting services		16,148		11,243		43.6	%
Drilling products		6,996		5,539		26.3	%

Total		72,373		64,493		12.2	%

Organic demand for our environmental products increased over the prior year, when the recession was more pronounced in the commercial construction market. Our European contracting services business continues to grow in 2010 and experienced significant growth this quarter. Domestically, our construction drilling and building materials businesses also increased their sales as compared to the depressed 2009 levels of activity.

Although sales improved, gross profits decreased in response to increased competition for our lining technologies products. Our gross margins decreased not only as a result of the decreased profitability of our lining technologies products but also due to the fact that our revenues are more concentrated in our lower margin, contracting services business.

Overall operating profits and margins followed the trends in gross profits and margins.

Oilfield Services Segment

	Three Months Ended September 30,
Oilfield Services	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	41,204	100.0	%	$	29,109	100.0	%	$	12,095	41.6	%
Cost of sales		29,249	71.0	%		19,491	67.0	%
Gross profit		11,955	29.0	%		9,618	33.0	%		2,337	24.3	%
General, selling and
administrative expenses		7,876	19.1	%		6,522	22.4	%		1,354	20.8	%
Operating profit		4,079	9.9	%		3,096	10.6	%		983	31.8	%

Revenue growth was split between our domestic (52%) and international operations (48%). Our domestic growth was driven largely by our coil tubing services due to the realignment of our equipment into more productive geographic markets, an effort which we began in the second quarter of 2010. Our Australian operations contributed the majority of our international growth due to contracts in that market which began to wind down this quarter.

Gross profits increased due to increases in sales mentioned above. However, our gross margins suffered as two of our domestic product lines (well testing and pipeline) experienced significant decreases in profitability. Demand for our offshore well test services has decreased partly due to the drilling moratorium. This has caused us to sell more of our well test services for on-shore applications, resulting in the revenues being comprised more of lower margin, third party rental and labor revenues. Demand to maintain pipelines has also decreased as less maintenance activities occur during these more challenging economic times, resulting in decreased sales of our pipeline services. Given the higher fixed cost nature of our pipeline services, this has negatively impacted margins.

GS&A expenses increased due to increased compensation and personnel costs, some of which relates to increased headcounts to drive our growth in domestic sales. The changes in operating profits and related margin followed from the changes in gross profits and gross profit margin.

Transportation Segment

	Three Months Ended September 30,
Transportation	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	14,284	100.0	%	$	12,487	100.0	%	$	1,797	14.4	%
Cost of sales		12,654	88.6	%		10,933	87.6	%
Gross profit		1,630	11.4	%		1,554	12.4	%		76	4.9	%
General, selling and
administrative expenses		876	6.1	%		861	6.9	%		15	1.7	%
Operating profit		754	5.3	%		693	5.5	%		61	8.8	%

Fuel surcharges, the number of shipments, and increased pricing all contributed to the increase in revenues. However, cost pressures within our logistics services, as opposed to our brokerage services, have increased, leading to a decrease in profitability. Operating profits increased commensurate with gross profits.

Corporate Segment

	Three Months Ended September 30,
Corporate	2010			2009			2010 vs. 2009
	(Dollars in Thousands)
Intersegment shipping sales	$	(4,742	)	$	(4,190	)		(552	)
Intersegment shipping costs		(4,742	)		(4,190	)
Gross profit		-			-			-
General, selling
and administrative expenses		3,203			5,791			(2,588	)	-44.7	%
Operating loss		3,203			5,791			(2,588	)	-44.7	%

Intersegment shipping revenues and costs reflect billings for services from our transportation segment to its domestic minerals and materials and environmental segment sister companies. 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 decreased due to decreased employee benefit expenses. In addition, the third quarter of 2009 included increased fees associated with certain government filings.

Nine months ended September 30, 2010 vs. September 30, 2009

Consolidated Income Statement Review

The table below compares our operating results for the period ended September 30, 2010 and 2009.

	Nine Months Ended September 30,
Consolidated	2010			2009			2010 vs. 2009
	(Dollars in Thousands, Except Per Share Amounts)
Net sales	$	629,115		$	526,539			19.5	%
Cost of sales		465,304			382,320
Gross profit		163,811			144,219			13.6	%
margin %		26.0	%		27.4	%
General, selling and
administrative expenses		106,785			101,047			5.7	%
Operating profit		57,026			43,172			32.1	%
margin %		9.1	%		8.2	%
Other income (expense):
Interest expense, net		(7,092	)		(9,399	)		-24.5	%
Other, net		2,066			(2,595	)		-179.6	%
		(5,026	)		(11,994	)

Income before income taxes and income (loss) from affiliates and joint ventures		52,000			31,178
Income tax expense		12,894			6,388			101.8	%
effective tax rate		24.8	%		20.5	%

Income before income (loss) from affiliates and joint ventures		39,106			24,790
Income (loss) from affiliates and joint ventures		266			(921	)		-128.9	%

Net income (loss)		39,372			23,869

Net income (loss) attributable to noncontrolling interests		(322	)		296			-208.8	%

Net income (loss) attributable to AMCOL shareholders	$	39,694		$	23,573			68.4	%

Basic earnings per share attributable to AMCOL shareholders	$	1.27		$	0.77			64.9	%

Diluted earnings per share attributable to AMCOL shareholders	$	1.26		$	0.76			65.8	%

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

	Organic			Acquisitions			Foreign Exchange			Total
Minerals and materials		12.4	%		0.0	%		0.8	%		13.2	%
Environmental		1.5	%		0.2	%		0.5	%		2.2	%
Oilfield services		2.9	%		0.0	%		0.5	%		3.4	%
Transportation		0.6	%		0.0	%		0.0	%		0.6	%

Total		17.4	%		0.2	%		1.8	%		19.4	%
% of growth		89.3	%		1.0	%		9.7	%		100.0	%

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

	Americas			EMEA			Asia Pacific			Total
Minerals and materials		31.6	%		8.6	%		9.8	%		50.0	%
Environmental		13.4	%		12.0	%		2.5	%		27.9	%
Oilfield services		14.7	%		0.6	%		2.4	%		17.7	%
Transportation		4.4	%		0.0	%		0.0	%		4.4	%

Total - current year's period		64.1	%		21.2	%		14.7	%		100.0	%
Total from prior year's comparable period		65.9	%		23.5	%		10.6	%		100.0	%

Net sales:

Although all segments contributed to the increase in net sales, our minerals and materials segment was overwhelmingly the largest contributor with 68% of the increase. The majority of our revenues have grown from organic business growth as currency rates have not changed significantly and we have not acquired a significant business in the last twelve months. Sales in our Asia Pacific region have increased as a percentage of total sales as the Asian minerals and materials businesses have increased revenues significantly, largely in the metalcasting markets, due to improved economic growth in that region and our concerted efforts to diversify our geographic revenue base.

Gross profit:

Overall gross profit increased due to the increase in sales mentioned above. Our minerals and materials segment has increased its gross margins whereas all other segments have experienced a decrease. Significant fluctuations occurred within each segment and are discussed later herein.

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

Although each segment experienced fluctuations in their GS&A expenses, employee and employee related expenses are the leading factors as to why GS&A expenses increased in total.

Operating profit:

The increase in operating profit follows the increase in gross profit. In addition, operating profit margin increased as we gained leverage in incremental sales within the minerals and materials segment being generated without the need for proportional increase in expenses to support these activities. However, our environmental and oilfield services segments experienced significant decreases in operating profits and operating margins.

Interest expense, net:

Net interest expense decreased due to decreased average debt and interest rate levels.

The majority of our long-term debt has a variable rate of interest which is primarily influenced by changes in LIBOR rates, which have also decreased as compared to the prior year period. We decreased our debt levels throughout 2009 as our working capital levels decreased and as we curtailed discretionary capital expenditures in response to the economic recession occurring at that time. Thus, we began fiscal 2010 with debt levels significantly less than those that existed in the comparable 2009 period, and these factors explain why our debt levels in 2010 are less than the comparable prior year’s period on average. In 2010, we expect our debt levels to fluctuate with the seasonal nature of our businesses, our level of capital expenditures and the working capital needs of our businesses.

Other, net:

Other expense primarily represents foreign currency transaction gains and losses, which includes gains and losses on transactions as well as foreign currency derivative instruments used to manage the risks of those transaction exposures. In the 2010 period, we have benefitted from favorable foreign currency movements between the USD and currencies within our Thai, British and South African subsidiaries and also between the Euro and British pound. In addition, we have improved the effectiveness of our foreign currency hedging programs.

Income tax expense:

Income tax expense increased as a result of incremental profits. Our effective tax rate increased due to a greater concentration of income in domestic operations, which are typically subject to greater income tax rates than our foreign subsidiaries.

Diluted earnings per share:

Diluted EPS increased commensurate with the increase in net income. The change in weighted average shares outstanding did not have a material effect on diluted earnings per share.

Review of Each Segment’s Results

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

Minerals and Materials Segment

	Nine Months Ended September 30,
Minerals and Materials	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	314,417	100.0	%	$	244,657	100.0	%	$	69,760	28.5	%
Cost of sales		238,918	76.0	%		193,774	79.2	%		45,144	23.3	%
Gross profit		75,499	24.0	%		50,883	20.8	%		24,616	48.4	%
General, selling and
administrative expenses		32,526	10.3	%		27,020	11.0	%		5,506	20.4	%
Operating profit		42,973	13.7	%		23,863	9.8	%		19,110	80.1	%

	Nine Months Ended September 30,
Minerals and Materials Product Line Sales	2010		2009		% change
	(Dollars in Thousands)
Metalcasting	$	147,829	$	100,592		47.0	%
Specialty materials		80,074		71,330		12.3	%
Pet products		46,739		49,729		-6.0	%
Basic minerals		34,790		20,288		71.5	%
Other product lines		4,985		2,718		*

Total		314,417		244,657		28.5	%

* Not meaningful.

Increased volumes, primarily in our domestic and Asian businesses, drove the increase in revenues over the prior year period. Approximately 32% of the increase occurred in Asia Pacific and 62% within our domestic minerals business, most of which occurred in our metalcasting product line. Both geographic regions experienced strong demand for castings for automobiles and heavy equipment. These increases in volumes also accounted for the increase in gross profit and gross margins. We have made significant improvements in our operations, especially domestically, which have allowed us to capitalize on increased volumes without commensurate increases in cost of goods sold.

GS&A expenses increased due to employee compensation and related benefit expenses. We also experienced start up costs arising from our South African operations. However, these GS&A costs did not increase commensurate with sales as we gained significant operating leverage, which led to the increase in operating profits and operating profit margins.

Environmental Segment

	Nine Months Ended September 30,
Environmental	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	175,707	100.0	%	$	164,096	100.0	%	$	11,611		7.1	%
Cost of sales		123,634	70.4	%		107,580	65.6	%
Gross profit		52,073	29.6	%		56,516	34.4	%		(4,443	)	-7.9	%
General, selling and
administrative expenses		35,725	20.3	%		34,913	21.3	%		812		2.3	%
Operating profit		16,348	9.3	%		21,603	13.1	%		(5,255	)	-24.3	%

	Nine Months Ended September 30,
Environmental Product Line Sales	2010		2009		% change
	(Dollars in Thousands)
Lining technologies	$	84,994	$	78,768		7.9	%
Building materials		41,863		41,704		0.4	%
Contracting services		30,787		27,382		12.4	%
Drilling products		18,063		16,242		11.2	%

Total		175,707		164,096		7.1	%

Approximately 66% of the revenue growth in the 2010 period arose from organic sales increases. Most of this occurred in our lining technologies business due to some large, domestic sales in the mining industry as well as our Asian operations which experienced moderate organic growth. Our concerted efforts to grow our contracting services business have continued to result in positive improvements from this product line, especially in Europe which drove the revenue growth in this product line.

Gross profits decreased due to a change in mix of our revenues between product lines as well as increased competition in those product lines. For example, a greater portion of our revenues are now generated in contracting services, which generally have a higher cost structure due to the nature of the installation business. In addition, our contracting services are also experiencing increased competition during this slow down in construction activity, resulting in a more pronounced effect on gross profits. Gross margins decreased due to these same effects.

Overall operating profits and margins followed the decrease in gross profits and margins.

Oilfield Services Segment

	Nine Months Ended September 30,
Oilfield Services	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	111,052	100.0	%	$	93,140	100.0	%	$	17,912		19.2	%
Cost of sales		79,313	71.4	%		60,554	65.0	%
Gross profit		31,739	28.6	%		32,586	35.0	%		(847	)	-2.6	%
General, selling and
administrative expenses		21,879	19.7	%		20,123	21.6	%		1,756		8.7	%
Operating profit		9,860	8.9	%		12,463	13.4	%		(2,603	)	-20.9	%

In line with our efforts to diversify our geographic revenue base, our international operations have grown substantially in 2010. In the year-to-date period, our international operations have increased revenues by 89% and comprise 63% of the overall increase in revenues for this segment. This has most notably taken place in our Malaysian and Australian subsidiaries which have been successful in winning large contracts. Our domestic operations also grew their revenues, most notably in our coil tubing operations which experienced a 118% increase in revenues and comprise 22% of the revenues in the year-to-date period. Our coil tubing operations have benefitted from increased demand and improved management while our filtration and pipeline businesses have lagged as 2010 revenues are comprised of smaller contract jobs rather than longer and more profitable large jobs.

With respect to year to date gross profits, our domestic operations account for the decrease in gross profits given the revenue trends discussed above but also due to the fact that less work is occurring offshore, which has historically been more profitable for some of our larger service offerings. Gross profit margins decreased due to these same factors and also due to increased employee and employee related expenses, some of which has changed due to changes in job requirements.

GS&A expenses increased due to increased bad debt expenses and employee compensation and benefit expenses, such as those associated with growing our coil tubing operations. The decrease in operating profits and related margin followed from the decrease in gross profit and related margin.

Transportation Segment

	Nine Months Ended September 30,
Transportation	2010				2009				2010 vs. 2009
	(Dollars in Thousands)
Net sales	$	39,987	100.0	%	$	35,336	100.0	%	$	4,651		13.2	%
Cost of sales		35,487	88.7	%		31,102	88.0	%
Gross profit		4,500	11.3	%		4,234	12.0	%		266		6.3	%
General, selling and
administrative expenses		2,536	6.3	%		2,551	7.2	%		(15	)	-0.6	%
Operating profit		1,964	5.0	%		1,683	4.8	%		281		16.7	%

Fuel surcharges drove the increase in revenues along with price increases. As cost pressures within our logistics services, as opposed to our brokerage services, have increased, gross profit margins have decreased slightly. Operating profits have increased commensurate with increased gross profits; we have been effective in generating operating leverage, leading to an increase in operating profit margins.

Corporate Segment

	Nine Months Ended September 30,
Corporate	2010			2009			2010 vs. 2009
	(Dollars in Thousands)
Intersegment shipping sales	$	(12,048	)	$	(10,690	)		(1,358	)
Intersegment shipping costs		(12,048	)		(10,690	)
Gross profit		-			-			-
General, selling
and administrative expenses		14,119			16,440			(2,321	)	-14.1	%
Operating loss		(14,119	)		(16,440	)		2,321		-14.1	%

Corporate GS&A expenses decreased due to decreased employee benefit expenses.

Balance Sheet Review

In the first nine months of 2010, we have increased our overall investments in working capital, especially accounts receivable, in response to the growth in sales that we have generated. We have also increased our investments in property, plant and equipment, most notably for a new chromite ore processing facility in South Africa. We have funded these investments partly through increased cash utilization and increased debt levels.

In addition, in the second quarter of 2010, we issued and sold an aggregate of $50 million of senior notes to qualified institutional buyers pursuant to a note purchase agreement dated April 29, 2010 (the "Notes"). The Notes bear interest at a fixed annual rate of 5.46% and mature April 29, 2020. Please see the Notes to Condensed Consolidated Financial Statements for further information.

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 our unused and committed credit facility will be adequate to support our current business needs for the foreseeable future. Should the need arise or should we choose to, we may issue additional equity or debt instruments on a publicly traded securities exchange via a shelf registration which became effective with the SEC in January 2010.

We may need additional debt or equity facilities in order to pursue acquisitions, when and if these opportunities become available, and we may or may not be able to obtain such facilities on terms substantially similar to our current facilities as discussed in Item 1A – Risk Factors of our Annual Report on Form 10-K filed for 2009. Terms of any new facilities, especially interest rates or covenants, may be significantly different from those we currently have.

On April 29, 2010, we issued and sold an aggregate of $50 million of senior notes to a qualified institutional buyer pursuant to a note purchase agreement dated April 29, 2010. Please see the Notes to Condensed Consolidated Financial Statements for further information.

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)	2010			2009
Net cash provided by operating activities	$	35.2		$	90.6
Net cash used in investing activities	$	(38.8	)	$	(33.9	)
Net cash provided by (used in) financing activities	$	(4.0	)	$	(57.7	)

Cash flows from operating activities were not as large as the prior-year comparable period as the change in our working capital levels did not decrease in 2010 as they did in 2009. As the recession got underway in 2009, our working capital levels decreased significantly and allowed us to harvest a large amount of cash through these reductions. In 2010, as our business levels increased rather than decreased as they had in the prior-year period, we generated positive cash flows from operations through the profitability of our business and other non-cash charges rather than by harvesting working capital as in 2009. Historically, working capital levels increase in the early and middle parts of the year and then decrease later in the year in conjunction with the seasonality of our business; we do not see a reason why this trend would not continue.

Excluding our corporate building and receipts from Chrome Corp., our capital expenditure levels in 2010 are not significantly different from those of 2009. Our largest expenditures within both years relate to our investments in South Africa, not only the chrome mine itself but also the related processing facility. In the 2010 period, we made certain payments to Chrome Corp. in relation to the purchase of the remaining interest in the chrome mine in South Africa. These payments are reported in cash flows from financing activities as Purchase of noncontrolling interest.

Given the differences in the changes in working capital levels mentioned previously between 2009 and 2010, we required additional debt to fund our operations in 2010 as opposed to paying down debt as we did in 2009. Year-to-date dividends were $0.54 per share in both periods.

	As at
Financial Position	September 30,		December 31,
($ in millions)	2010		2009
Working capital	$	238.8	$	203.7
Goodwill & intangible assets	$	115.6	$	118.3
Total assets	$	812.8	$	734.3

Long-term debt	$	229.7	$	207.0
Other long-term obligations	$	49.1	$	57.2
Total equity	$	410.2	$	379.8

Working capital at September 30, 2010 increased over the amount at December 31, 2009 due to increases in accounts receivable due to the increased sales levels and the reclassification of certain loan receivables which come due in January 2011. Given the seasonality of our environmental and oilfield services segments as well as the project nature of some of our services provided in the oilfield services segment, working capital needs are typically greater in the second and third quarters of the year.

Long-term debt increased as we needed more cash to fund increased working capital levels and purchase equipment, resulting in an increase in long-term debt relative to total capitalization to 35.9% at September 30, 2010 versus 35.3% at December 31, 2009. We have approximately $142.8 million of borrowing capacity available from our revolving credit facility at September 30, 2010. We are in compliance with financial covenants related to the revolving credit facility 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, for the year ended December 31, 2009 discloses our contractual obligations and off-balance sheet arrangements. There were no material changes in our contractual obligations and off-balance sheet arrangements.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in our market risk from the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2009 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 5: Other Information

Dodd-Frank Act Disclosure of Mine Safety and Health Administration Safety Data

We have in place health and safety programs that include extensive employee training, accident prevention, workplace inspection, emergency response, accident investigation, regulatory compliance and program auditing. The objectives of our health and safety programs are to eliminate workplace incidents, comply with all mining-related regulations and improve mine safety.

The operation of our domestic mines is subject to regulation by the federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). MSHA inspects our mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. We present information below regarding certain mining safety and health citations which MSHA has issued with respect to our mining operations.

For the three-month period ended September 30, 2010, none of our mining operations received written notice from MSHA of (i) an order issued under section 104(b) of the Mine Act; (ii) a citation or order for unwarrantable failure to comply with mandatory health or safety standards under section 104 (d) of the Mine Act; (iii) a flagrant violation under section 110(b)(2) of the Mine Act; (iv) an imminent danger order under section 107(a) of the Mine Act; (v) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of our mine health or safety hazards under section 104(e) of the Mine Act; or (vi) the potential to have such a pattern. For the three-month period ended September 30, 2010, we experienced no fatalities.

The table below sets forth by mining complex the total number of citations and/or orders issued during the three-month period ended September 30, 2010 by MSHA to AMCOL and its subsidiaries under the indicated provisions of the Mine Act, together with the total dollar value of proposed MSHA assessments (dollar amounts are actual, not thousands).

Mine	Section 104 (1)	Proposed MSHA Assessments (2)
Gascoyne Mine & Mill	-	$108
Belle Fourche Mill	-	-
Lovell Mill	-	6,052
Colony West Mill	-	1,400
Colony East Mill	-	-
Yellowtail Mine	-	-
Belle/Colony Mine	-	-
Sandy Ridge Mill	4	4,649

1.	Total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a mine safety or health hazard under section 104 of the Mine Act for which AMCOL and its subsidiaries received a citation from MSHA

2.	Total dollar amount of proposed assessments received from MSHA on or before September 30, 2010, for citations and orders occurring during the three-month period ended September 30, 2010.

As of September 30, 2010, we have a total of 9 matters pending before the Federal Mine Safety and Health Review Commission. This includes legal actions that were initiated prior to the three-month period ended September 30, 2010 and which do not necessarily relate to the citations, orders or proposed assessments issued by MSHA during such three month period.

In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the mine, (ii) the number of citations issued will vary from inspector to inspector and mine to mine, and (iii) citations and orders can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes dismissed.

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

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 2, 2010	/s/ Lawrence E. Washow
	Lawrence E. Washow
	President and Chief Executive Officer

Date: November 2, 2010	/s/ Donald W. Pearson
	Donald W. Pearson
	Vice President and Chief Financial Officer

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.