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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, 2011                                                  

                                                             or

 

(    )

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  x    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 October 31, 2011
(Common stock, $.01 par value)		31,670,314 Shares

 

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AMCOL INTERNATIONAL CORPORATION

INDEX

 

				Page No.
Part I - Financial Information
Item 1:		Financial Statements Condensed Consolidated Balance Sheets – September 30, 2011 and December 31, 2010			3
		Condensed Consolidated Statements of Operations – three and nine months ended September 30, 2011 and 2010			5
		Condensed Consolidated Statements of Comprehensive Income (Loss) – three and nine months ended September 30, 2011 and 2010			6
		Condensed Consolidated Statements of Changes in Equity – nine months ended September 30, 2011 and 2010			7
		Condensed Consolidated Statements of Cash Flows – nine months ended September 30, 2011 and 2010			8
		Notes to Condensed Consolidated Financial Statements			9
Item 2:		Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3:		Quantitative and Qualitative Disclosures About Market Risk			37
Item 4:		Controls and Procedures			38
Part II - Other Information
Item 5:		Other Information			38
Item 6:		Exhibits			40

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

Item 1:

Financial Statements

 

ASSETS		September 30, 2011 (unaudited)				December 31, 2010 *
Current assets:
Cash and cash equivalents		$	9,345			$	27,262
Accounts receivable, net			215,166				193,968
Inventories			133,960				107,515
Prepaid expenses			17,538				12,581
Deferred income taxes			4,420				5,553
Income tax receivable			16,356				8,474
Other			9,683				6,211
Total current assets			406,468				361,564
Noncurrent assets:
Property, plant, equipment, and mineral rights and reserves:
Land			14,191				11,591
Mineral rights			43,096				51,435
Depreciable assets			481,120				454,351
			538,407				517,377
Less: accumulated depreciation and depletion			278,887				256,889
			259,520				260,488
Goodwill			70,174				70,909
Intangible assets, net			37,903				42,590
Investment in and advances to affiliates and joint ventures			24,516				19,056
Available-for-sale securities			4,956				14,168
Deferred income taxes			8,817				7,570
Other assets			21,326				22,748
Total noncurrent assets			427,212				437,529
Total Assets		$	833,680			$	799,093

 

Continued…

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

LIABILITIES AND SHAREHOLDERS’ EQUITY		September 30, 2011 (unaudited)				December 31, 2010 *
Current liabilities:
Accounts payable		$	53,048			$	53,167
Accrued income taxes			15,201				4,014
Accrued liabilities			61,115				55,294
Total current liabilities			129,364				112,475
Noncurrent liabilities:
Long-term debt			250,394				236,171
Pension liabilities			21,020				21,338
Other long-term liabilities			28,546				28,673
Total noncurrent liabilities			299,960				286,182
Shareholders’ Equity:
Common stock			320				320
Additional paid in capital			92,809				95,074
Retained earnings			311,553				283,189
Accumulated other comprehensive income (loss)			(457	)			28,936
Less: Treasury stock			(4,125	)			(8,945	)
Total AMCOL shareholders’ equity			400,100				398,574
Noncontrolling interest			4,256				1,862
Total equity			404,356				400,436
Total Liabilities and Shareholders’ Equity		$	833,680			$	799,093

*Condensed from audited financial statements.

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

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2011				2010				2011				2010
Continuing Operations
Net sales		$	708,708			$	621,650			$	248,044			$	228,822
Cost of sales			517,891				458,163				177,054				170,546
Gross profit			190,817				163,487				70,990				58,276
General, selling and administrative expenses			123,354				105,769				43,937				35,604
Operating profit			67,463				57,718				27,053				22,672
Other income (expense):
Interest expense, net			(8,308	)			(7,092	)			(2,824	)			(2,542	)
Other, net			83				2,146				(144	)			2,191
			(8,225	)			(4,946	)			(2,968	)			(351	)
Income before income taxes and income (loss) from affiliates and joint ventures			59,238				52,772				24,085				22,321
Income tax expense			16,935				12,877				6,675				5,219
Income before income (loss) from affiliates and joint ventures			42,303				39,895				17,410				17,102
Income (loss) from affiliates and joint ventures			4,076				266				3,080				337
Income (loss) from continuing operations			46,379				40,161				20,490				17,439
Discontinued Operations
Income (loss) on discontinued operations			(916	)			(789	)			(1,021	)			(132	)
Net income (loss)			45,463				39,372				19,469				17,307
Net income (loss) attributable to noncontrolling interests			48				(322	)			44				(110	)
Net income (loss) attributable to AMCOL shareholders		$	45,415			$	39,694			$	19,425			$	17,417
Weighted average common shares outstanding			31,672				31,137				31,800				31,225
Weighted average common and common equivalent shares outstanding			32,128				31,498				32,193				31,565
Earnings per share attributable to Amcol International Corporation shareholders:
Basic earnings (loss) per share:
Continuing operations		$	1.46			$	1.30			$	0.64			$	0.56
Discontinued operations			(0.03	)			(0.03	)			(0.03	)			-
Net income			1.43				1.27				0.61				0.56
Diluted earnings (loss) per share:
Continuing operations		$	1.44			$	1.29			$	0.63			$	0.55
Discontinued operations			(0.03	)			(0.03	)			(0.03	)			-
Net income			1.41				1.26				0.60				0.55
Amounts attributable to Amcol International Corporation shareholders
Income from continuing operations, net of tax		$	46,331			$	40,483			$	20,446			$	17,549
Discontinued operations, net of tax			(916	)			(789	)			(1,021	)			(132	)
Net income			45,415				39,694				19,425				17,417
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.

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

 

		Total								AMCOL Shareholders								Noncontrolling Interest
		Nine Months Ended September 30,								Nine Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010				2011				2010
Net income (loss)		$	45,463			$	39,372			$	45,415			$	39,694			$	48			$	(322	)
Other comprehensive income (loss):
Foreign currency translation adjustment			(20,274	)			5,606				(19,627	)			5,655				(647	)			(49	)
Unrealized gain (loss) on available-for-sale securities, net of tax			(8,189	)			(4,883	)			(8,189	)			(4,883	)			-				-
Unrealized gain (loss) on interest rate swap agreements, net of tax			(1,652	)			(3,662	)			(1,652	)			(3,662	)			-				-
Pension adjustment, net of tax			75				94				75				94				-				-
Comprehensive income (loss)		$	15,423			$	36,527			$	16,022			$	36,898			$	(599	)		$	(371	)

 

		Total								AMCOL Shareholders								Noncontrolling Interest
		Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended September 30,
		2011				2010				2011				2010				2011				2010
Net income (loss)		$	19,469			$	17,307			$	19,425			$	17,417			$	44			$	(110	)
Other comprehensive income (loss):
Foreign currency translation adjustment			(22,630	)			18,508				(21,982	)			18,493				(648	)			15
Unrealized gain (loss) on available-for-sale securities, net of tax			(1,596	)			(4,215	)			(1,596	)			(4,215	)			-				-
Unrealized gain (loss) on interest rate swap agreements, net of tax			(1,302	)			(1,288	)			(1,302	)			(1,288	)			-				-
Pension adjustment, net of tax			25				30				25				30				-				-
Comprehensive income (loss)		$	(6,034	)		$	30,342			$	(5,430	)		$	30,437			$	(604	)		$	(95	)

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

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF 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, 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			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
Balance at December 31, 2010		$	400,436			$	283,189			$	28,936			$	320			$	(8,945	)		$	95,074			$	1,862
Net income (loss)			45,463				45,415																				48
Cash dividends			(17,051	)			(17,051	)
Issuance of treasury shares pursuant to employee stock compensation plans			6,868																4,820				2,048
Tax benefit from employee stock compensation plans			598																				598
Vesting of common stock in connection with employee stock compensation plans			3,681																				3,681
Purchase of noncontrolling interest			(5,735	)																			(5,189	)			(546	)
Sale of subsidiary shares to noncontrolling interest			-								(1,390	)											(3,403	)			4,793
Deconsolidation of variable interest entity			(1,254	)																							(1,254	)
Other comprehensive income (loss)			(28,650	)							(28,003	)															(647	)
Balance at September 30, 2011			404,356				311,553				(457	)			320				(4,125	)			92,809				4,256

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

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

		Nine Months Ended September 30,
		2011				2010
Cash flow from operating activities:
Net income		$	45,463			$	39,372
Adjustments to reconcile from net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion, and amortization			30,945				26,470
Other non-cash charges			4,044				3,174
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in current assets			(89,320)				(69,385)
Decrease (increase) in noncurrent assets			1,789				(2,298)
Increase (decrease) in current liabilities			24,894				34,832
Increase (decrease) in noncurrent liabilities			(1,170)				2,999
Net cash provided by (used in) operating activities			16,645				35,164
Cash flow from investing activities:
Capital expenditures			(43,824)				(37,944)
Investments in and advances to affiliates and joint ventures			(1,237)				(2,047)
Proceeds from sale of joint ventures			2,023				-
Other			2,118				1,210
Net cash (used in) investing activities			(40,920)				(38,781)
Cash flow from financing activities:
Net change in outstanding debt			14,891				21,004
Purchase of noncontrolling interest			-				(11,873)
Proceeds from sales of treasury stock			7,000				3,252
Dividends			(17,051)				(16,745)
Excess tax benefits from stock-based compensation			669				394
Net cash provided by (used in) financing activities			5,509				(3,968)
Effect of foreign currency rate changes on cash			849				242
Net increase (decrease) in cash and cash equivalents			(17,917)				(7,343)
Cash and cash equivalents at beginning of period			27,262				27,669
Cash and cash equivalents at end of period		$	9,345			$	20,326

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

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

Note 1:           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Operations

We, AMCOL International Corporation (the “Company”), are a global company focused on long-term profitable growth through the development and application of minerals and technology products and services to various industrial and consumer markets. We operate in five segments: minerals and materials, environmental, oilfield services, transportation and corporate. Our minerals and materials segment mines, processes and distributes minerals and products with similar applications for use in various industrial and consumer markets, including metalcasting, pet care, laundry care, and drilling industries. Additionally, this segment develops and manufactures synthetic materials principally for personal care applications. Our environmental segment manufactures and distributes products and provides related services for use as moisture and vapor barriers in commercial construction, landfills and a variety of other industrial and commercial applications. Our oilfield services segment provides both onshore and offshore water treatment filtration, well testing, pipeline separation, nitrogen, coil tubing and other services to the oil and natural gas industry. Our transportation segment 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 sales as well as certain expenses associated with research and development, management, employee benefits and information technology activities for our Company. Approximately 76% and 100% of the revenue elimination in the nine months ended September 31, 2011 and 2010, respectively, and 74% and 100% of the revenue elimination in the three months ended September 30, 2011 and 2010, respectively, represents elimination of shipping revenues between our transportation segment and its domestic sister companies. The composition of our revenues by segment is as follows:

 

		Nine  Months Ended September 30,
		2011		2010
Minerals and materials		51%		51%
Environmental		27%		27%
Oilfield services		20%		18%
Transportation		6%		6%
Intersegment sales		-4%		-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, 2010, is unaudited. The condensed consolidated balance sheet as of December 31, 2010 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, 2010. The information furnished herein includes all adjustments that are, in our opinion, necessary

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

for a fair presentation of our results of operations and cash flows for the interim periods ended September 30, 2011 and 2010, and our financial position as of September 30, 2011, and all such adjustments are of a normal and recurring nature. The accompanying condensed consolidated financial information should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

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, 2011. These reclassifications did not have a material impact on our financial statements.

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

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

Recently Issued Accounting Pronouncements

Accounting pronouncements that have not yet become effective with respect to our consolidated financial statements are detailed as follows, together with our assessment of the potential impact they may have on our consolidated financial statements.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, codified in Accounting Standards Codification (“ASC”) Topic 350 – Intangibles – Goodwill and Other. ASU 2011-08 simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. We do not expect this ASU to have a material impact on our financial statements when we adopt it on January 1, 2012.

In June 2011, the FASB issued ASU 2011-05, codified in ASC Topic 220 – Comprehensive Income. The objective of this ASU is to increase the prominence of items reported in other comprehensive income (“OCI”). This ASU requires presentation of items of net income, items of OCI and total comprehensive income either in one continuous statement or two separate but consecutive statements. It also requires any reclassification adjustments between OCI and net income to be presented separately on the face of the financial statements. We do not expect this ASU to have a material impact on our financial statements when we adopt it on January 1, 2012.

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

In May 2011, the FASB issued ASU 2011-04, codified in ASC Topic 820 – Fair Value Measurements. This ASU includes amendments that clarify the intent about the application of existing fair value measurement requirements. Specifically, the guidance requires additional disclosures for fair value measurements that are based on significant inputs. We do not expect this ASU to have a material impact on our financial statements when we adopt it on January 1, 2012.

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 September 30,								Three Months Ended September 30,
		2011				2010				2011				2010
Weighted average number of common shares outstanding			31,671,781				31,136,740				31,799,536				31,225,430
Dilutive impact of stock based compensation			455,777				361,286				393,922				339,698
Weighted average number of common and common equivalent shares outstanding for the period			32,127,558				31,498,026				32,193,458				31,565,128
Number of common shares outstanding at the end of the period			31,666,904				31,100,692				31,666,904				31,100,692
Weighted average number of anti-dilutive shares excluded from the computation of diluted earnings per share			186,929				570,259				218,800				511,792

Note 3:        ADDITIONAL BALANCE SHEET INFORMATION

Our inventories at September 30, 2011 and December 31, 2010 are comprised of the following components:

 

		September 30, 2011				December 31, 2010
Crude stockpile inventories		$	41,923			$	35,308
In-process and finished goods inventories			67,463				47,510
Other raw material, container, and supplies inventories			24,574				24,697
		$	133,960			$	107,515

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

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

 

		Nine Months Ended September 30,
		2011				2010
Balance at beginning of period		$	7,529			$	6,584
Settlement of obligations			(2,769	)			(1,182	)
Liabilities incurred and accretion expense			4,386				1,813
Foreign currency			(345	)			56
Balance at end of period		$	8,801			$	7,271

We own shares of Ashapura Minechem Limited (“Ashapura”), a public company traded on the Bombay Stock Exchange Limited. We include this investment at its fair value within our Condensed Consolidated Balance Sheets with the unrealized gains or losses, resulting from fluctuations in its fair value, as a component of accumulated other comprehensive income within equity. The following table sets forth the gains recorded in accumulated comprehensive income (loss) within equity in our Condensed Consolidated Balance Sheet:

 

		September 30, 2011				December 31, 2010
Unrealized gain on avaliable-for-sale securities		$	3,657			$	12,869
Tax expense			-				1,022
Unrealized gain on avaliable-for-sale securities, net of tax expense		$	3,657			$	11,847

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 provided 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 assets used in the operation of this segment as well as those used by or shared amongst our segments, including cash and cash equivalents, certain fixed assets, assets associated with certain employee benefit plans, and other miscellaneous assets.

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

The following tables set forth certain financial information by segment:

 

		Nine Months Ended September  30,								Three Months Ended September  30,
		2011				2010				2011				2010
Net sales:
Minerals and materials		$	360,523			$	314,417			$	123,792			$	110,332
Environmental			193,512				168,242				69,543				67,744
Oilfield services			139,756				111,052				50,175				41,204
Transportation			42,331				39,987				14,877				14,284
Intersegment sales			(27,414)				(12,048)				(10,343)				(4,742)
Total		$	708,708			$	621,650			$	248,044			$	228,822
Operating profit (loss):
Minerals and materials		$	50,980			$	42,973			$	20,110			$	12,341
Environmental			17,849				17,040				7,637				8,701
Oilfield services			14,082				9,860				5,787				4,079
Transportation			1,920				1,964				770				754
Corporate			(17,368)				(14,119)				(7,251)				(3,203)
Total		$	67,463			$	57,718			$	27,053			$	22,672
		As of Sep. 30, 2011				As of Dec. 31, 2010
Assets:
Minerals and materials		$	403,582			$	402,640
Environmental			170,798				160,053
Oilfield services			192,374				173,239
Transportation			3,877				4,071
Corporate			63,049				59,090
Total		$	833,680			$	799,093

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2011				2010				2011				2010
Depreciation, depletion and amortization:
Minerals and materials		$	15,337			$	12,316			$	5,518			$	4,544
Environmental			4,110				4,017				1,495				1,438
Oilfield services			9,448				8,807				3,326				3,028
Transportation			55				31				21				11
Corporate			1,995				1,299				854				427
Total		$	30,945			$	26,470			$	11,214			$	9,448
Capital expenditures:
Minerals and materials		$	17,770			$	24,367			$	8,715			$	5,297
Environmental			6,427				2,051				4,559				1,096
Oilfield services			17,796				10,264				4,898				5,358
Transportation			198				52				44				14
Corporate			1,633				1,210				808				240
Total		$	43,824			$	37,944			$	19,024			$	12,005
Research and development (income) expense:
Minerals and materials		$	4,653			$	4,331			$	1,513			$	1,572
Environmental			1,627				1,870				577				596
Oilfield services			198				510				(6	)			188
Corporate			122				(11	)			275				(51	)
Total		$	6,600			$	6,700			$	2,359			$	2,305

Note 5:        EMPLOYEE BENEFIT PLANS

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

 

		Nine Months Ended September  30,								Three Months Ended September  30,
		2011				2010				2011				2010
Service cost		$	1,137			$	1,050			$	379			$	350
Interest cost			1,956				1,869				652				623
Expected return on plan assets			(2,144)				(1,962)				(715)				(654)
Amortization of prior service cost			48				48				16				16
Net periodic benefit cost		$	998			$	1,005			$	333			$	335

We expected to contribute $1,500 to our pension plan in 2011, and this was fully contributed in the nine months ended September 30, 2011.

 

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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, 2011 and 2010 was 28.6% and 24.4%, respectively. For both periods, the rate differs from the U.S. federal statutory rate of 35.0% largely due to depletion deductions, changes in tax reserves, differences in local tax rates on the income from our foreign subsidiaries, and the correction of an error in the nine months ended September 30, 2011, which was not material to our financial statements.

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

Note 7:        DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

The following table sets forth the fair values of our derivative instruments and where they are recorded within our Condensed Consolidated Balance Sheet:

 

Liability Derivatives		Balance Sheet Location		Fair Value as of
				September 30, 2011				December 31, 2010
Derivatives designated as hedging instruments:
Interest rate swaps		Other long-term liabilities		$	(9,271	)		$	(6,666	)

Cash flow hedges

 

Derivatives in Cash Flow Hedging Relationships		Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
		Nine Months Ended September 30,								Three Months Ended September 30,
		2011				2010				2011				2010
Interest rate swaps, net of tax		$	(1,652	)		$	(3,662	)		$	(1,302	)		$	(1,288	)

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, 2011 and 2010, we had interest rate swaps outstanding which effectively hedge the variable interest rate on $30,000 of our senior notes to a fixed rate of 5.6% per annum and $33,000 of our borrowings under our revolving credit agreement to a fixed rate of 3.3% per annum plus credit spread.

 

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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 U.S. dollar exposures are to fluctuations in the British Pound, Euro, Polish Zloty and South African Rand. 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. When we believe it appropriate, we enter into foreign exchange derivative contracts to mitigate the risk of fluctuations in these foreign currency exchange rates.

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

 

Derivatives Not Designated as Hedging Instruments		Location of  Gain or (Loss) Recognized in Income on Derivatives		Amount of Gain or (Loss) Recognized in Income on Derivatives
				Nine Months Ended September 30,								Three Months Ended September 30,
				2011				2010				2011				2010
Foreign currency exchange contracts		Other, net		$	(780	)		$	(347	)		$	544			$	(158	)

We did not have any significant foreign exchange derivative instruments outstanding as of September 30, 2011 or December 31, 2010.

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.

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.

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

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

 

										Fair Value Measurements Using
Description				Asset / (Liability) Balance at 9/30/2011						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Interest rate swaps				$	(9,271	)				$	-					$	(9,271	)				$	-
Available-for-sale securities					4,956						4,956						-						-
Deferred compensation plan assets					8,059						-						8,059						-
Supplementary pension plan assets					7,154						-						7,154						-

 

										Fair Value Measurements Using
Description				Asset / (Liability) Balance at 12/31/2010						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Interest rate swaps				$	(6,666	)				$	-					$	(6,666	)				$	-
Available-for-sale securities					14,168						14,168						-						-
Deferred compensation plan assets					8,358						-						8,358						-
Supplementary pension plan assets					7,676						-						7,676						-

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

Note 9:        DISCONTINUED OPERATIONS

In September 2011, our environmental segment sold CETCO Contracting Services Company, which comprised our domestic contracting services business. The operations of this business for current and prior periods, including the loss on the sale of $143, have been reclassified and are recorded net of income tax within Income (loss) on discontinued operations within our Condensed Consolidated Statements of Operations.

 

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AMCOL INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands)

 

Note 10:        NONCONTROLLING INTEREST

In January 2011, we acquired the remaining noncontrolling interest in Volclay South Africa (Proprietary) Limited, a part of our chromite business, for approximately $5,600.

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

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

 

		Nine Months Ended September 30, 2011
Net income attributable to AMCOL shareholders		$	45,415
Transfers from noncontrolling interest:
Decrease in additional paid-in capital for purchase of the remaining noncontrolling interest in South Africa (Proprietary) Limited			(5,189)
Decrease in additional paid-in capital for transfer of 26% interest in Batlhako			(3,403)
Change from net income attributable to AMCOL shareholders and transfers from noncontrolling interest		$	36,823

Note 11:        CONTINGENCIES

We are party to a number of lawsuits arising in the normal course of business. As our businesses continue to grow, especially in our oilfield services segment, we expect these lawsuits and claims to increase. However, we do not believe that any pending litigation will have a material adverse effect on our consolidated financial statements.

 

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Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

From time to time, certain statements we make, including statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section, constitute “forward-looking statements” made in reliance upon the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements relating to our Company or our operations that are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions, and statements relating to anticipated growth and levels of capital expenditures. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Our actual results, performance or achievements could differ materially from the results, performance or achievements expressed in, or implied by, these forward-looking statements as a result of various factors, including without limitation the following: actual performance in our various markets; conditions in the metalcasting and construction markets; oil and gas prices and conditions in those industries; operating costs; seasonality of our environmental and oilfield services segments; competition and regulation; currency exchange rates and devaluations; delays in development, production and marketing of new products; integration of acquired businesses; conducting and expanding operations in international markets; and other factors set forth from time to time in our reports filed with the Securities and Exchange Commission (SEC). We undertake no duty to update any forward looking statements to actual results or changes in our expectations.

Overview

We are a global company focused on long term profitability growth through the development and application of minerals and technology products and services 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 revenue is bentonite. We own or lease bentonite reserves in the U.S., Australia, China and Turkey. Additionally, through our affiliates and joint ventures, we have access to bentonite reserves in Egypt, India, and Mexico. We also market and develop applications for other minerals, including chromite ore from our mine in South Africa.

Bentonite is surface mined when it is commercially feasible to have it shipped to a plant for further processing, including crushing, drying, milling, and packaging. Bentonite deposits have varying physical properties which require us to identify which markets our reserves can serve. Nicknamed the mineral of a thousand uses, bentonite 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.

 

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We operate in five segments: minerals and materials, environmental, oilfield services, transportation and corporate. Both our minerals and materials and environmental segments operate manufacturing facilities in North America, Europe, and the Asia-Pacific region. Our minerals and materials segment also owns and operates a chromite mine in South Africa. Our oilfield services segment principally operates in 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, cosmetics and laundry care. Customers in our environmental segment include construction contractors, engineering contractors and government agencies. The oilfield services segment’s customer base is primarily comprised of oil and natural gas service or exploration companies. A significant portion of our products have been used in the same applications for decades and have experienced minimal technological obsolescence. A majority of our sales are made pursuant to short-term agreements; therefore, terms of sale, such as pricing and volume, can change within our fiscal year.

A majority of our revenues are generated in the Americas, principally North America. Consequently, the state of the U.S. economy, and especially the metalcasting and industrial construction industries, impacts our revenues. Our fastest growing markets are in the Asia-Pacific and European regions.

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

 

•

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

 

•

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

 

•

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

 

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•

Acquisitions: We continually seek to acquire complementary businesses, as appropriate, when we believe those businesses are fairly valued and fit into our growth strategy.

A number of risks will challenge us in meeting these long-term objectives, and there can be no assurance that we will achieve success in implementing any one or more of them. We describe certain risks throughout this report as well as under “Item 1A. Risk Factors” and “Item 7A. Quantitative and Qualitative Disclosure About Market Risk” within our Annual Report on Form 10-K for the year ended December 31, 2010. 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, 2010.

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, 2010.

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 month periods ended September 30, 2011 and the comparable results in the prior year. In each section, a discussion of our consolidated results is presented first, followed by a more detailed discussion of performance within our segments.

 

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Three months ended September 30, 2011 vs. September 30, 2010

Consolidated Income Statement Review

The table below compares our operating results for the quarters ended September 30, 2011 and 2010.

 

Consolidated		Three Months Ended September 30,
		2011				2010				2011 vs. 2010
		(Dollars in Thousands, Except Per Share Amounts)
Continuing operations
Net sales		$	248,044			$	228,822				8.4%
Cost of sales			177,054				170,546
Gross profit			70,990				58,276				21.8%
margin %			28.6%				25.5%
General, selling and administrative expenses			43,937				35,604				23.4%
Operating profit			27,053				22,672				19.3%
margin %			10.9%				9.9%
Other income (expense):
Interest expense, net			(2,824)				(2,542)				11.1%
Other, net			(144)				2,191				-106.6%
			(2,968)				(351)
Income before income taxes and income (loss) from affiliates and joint ventures			24,085				22,321
Income tax expense			6,675				5,219				27.9%
effective tax rate			27.7%				23.4%
Income before income (loss) from affiliates and joint ventures			17,410				17,102
Income (loss) from affiliates and joint ventures			3,080				337				813.9%
Income (loss) from continuing operations			20,490				17,439
Discontinued operations
Income (loss) on discontinued operations			(1,021)				(132)				673.5%
Net income (loss)			19,469				17,307
Net income (loss) attributable to noncontrolling interests			44				(110)				-140.0%
Net income (loss) attributable to AMCOL shareholders		$	19,425			$	17,417				11.5%
Earnings per share attributable to AMCOL shareholders
Basic earnings (loss) per share:
Continuing operations		$	0.64			$	0.56				14.3%
Discontinued operations			(0.03)				-				NA
Net income			0.61				0.56				8.9%
Diluted earnings (loss) per share
Continuing operations		$	0.63			$	0.55				14.5%
Discontinued operations			(0.03)				-				NA
Net income		$	0.60			$	0.55				9.1%

 

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We measure sales fluctuations by the relevant components: organic, acquisitions, and foreign currency translation. Fluctuation due to foreign currency translation is measured as the change in revenues resulting from differences in currency exchange rates between periods. 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			5.2%				0.0%				0.7%				5.9%
Environmental			-0.2%				0.0%				1.0%				0.8%
Oilfield services			3.4%				0.0%				0.5%				3.9%
Transportation & intersegment shipping			-2.2%				0.0%				0.0%				-2.2%
Total			6.2%				0.0%				2.2%				8.4%
% of change			73.7%				0.0%				26.3%				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%				9.5%				10.2%				49.3%
Environmental			12.5%				13.7%				1.5%				27.7%
Oilfield services			17.3%				1.0%				1.8%				20.1%
Transportation & intersegment shipping			2.9%				0.0%				0.0%				2.9%
Total - current year’s period			62.3%				24.2%				13.5%				100.0%
Total from prior year’s comparable period			62.8%				22.4%				14.8%				100.0%

Net sales:

Approximately 73.7% of our net sales growth was derived organically with the remainder being driven by favorable foreign currency translation. Net sales increased in each of our segments with the majority of the increase occurring in our minerals and materials and oilfield services segments, largely due to growth in our metalcasting markets and coiled tubing services respectively. Growth in our environmental segment within Europe and our South African chromite operations in our minerals and materials segment helped increase sales from the EMEA region as compared to the prior year’s period.

Gross profit:

Overall gross profit increased due to the increase in sales mentioned above. Gross margins increased nicely across our segments, driving a 310 basis point increase in gross margin. Our minerals and materials segment increased its margins by 450 basis points and helped drive the overall increase.

 

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

SG&A expenses increased across all segments. While each segment has its individual increases, the largest contributor overall is increased compensation and benefits cost as well as expenses, such as commissions, that generally increase with increased sales and profitability levels.

Operating profit:

Operating profit increased due to the increase in gross profit mentioned earlier, partially offset by the increase in SG&A expenses. Our operating margin increased by 100 basis points as some of the improvement in gross margin was offset by the growth in SG&A expenses.

Other income (expense), net:

Other income (expense), net decreased significantly, and is primarily comprised of gains and losses on foreign currency transactions as well as financial derivatives. We use financial derivatives to reduce the volatility resulting from fluctuations in foreign currency exchange rates on our net monetary assets. Thus, the decrease in Other income (expense), net results from improved management of these exposures.

Income tax expense:

Our income tax expense and effective tax rate increased in the quarter due to differences in discrete items recorded in each of the two quarters. The prior year’s quarterly effective tax rate was unusually low given the amount of favorable, discrete items recorded in that quarter.

Income from affiliates and joint ventures:

Income from affiliates and joint ventures increased $2.7 million due to a $2.1 million gain we recorded on the sale of our Belgian joint venture. In the third quarter of 2011, we also sold our interest in our Cypriot joint venture, whose operations were mainly in Russia, for neither a gain nor a loss; in Q3 2010, our Cypriot joint venture generated losses of $0.4 million.

Discontinued operations:

In September 2011, we sold our equity interest in CETCO Contracting Services Company at an immaterial loss. These operations comprised our domestic contracting services business within our environmental segment. We have presented the results of this operation as discontinued operations in all periods presented within this Form 10-Q.

Diluted earnings per share from continuing operations:

Diluted earnings per share from continuing operations increased in the quarter due to increased net income from continuing operations. Our weighted average shares outstanding increased, thereby causing diluted earnings per share from continuing operations to be $0.02 per share lower than would have otherwise been the case.

 

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Quarterly Review of Each Segment’s Results

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

Minerals and Materials Segment

 

Minerals and Materials		Three Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	123,792				100.0	%		$	110,332				100.0	%		$	13,460				12.2	%
Cost of sales			91,317				73.8	%			86,383				78.3	%
Gross profit			32,475				26.2	%			23,949				21.7	%			8,526				35.6	%
General, selling and administrative expenses			12,365				10.0	%			11,608				10.5	%			757				6.5	%
Operating profit			20,110				16.2	%			12,341				11.2	%			7,769				63.0	%

 

Minerals and Materials Product Line Sales		Three Months Ended September 30,
		2011				2010				% change
		(Dollars in Thousands)
Metalcasting		$	65,931			$	53,632				22.9	%
Specialty materials			25,533				27,211				-6.2	%
Pet products			14,168				15,848				-10.6	%
Basic minerals			14,487				12,015				20.6	%
Other product lines			3,673				1,626				125.9	%
Total			123,792				110,332				12.2	%

Increased volumes in our domestic businesses, especially in our metalcasting markets, along with increased sales of our new chromite products accounted for the majority of the increase in net sales. Our metalcasting product line, which includes chromite sales to foundry customers, continues to experience an increase in demand due to growth in demand for automobile and heavy equipment castings.

Both gross profit and gross margin increased significantly. Our gross profit results for the third quarter of 2010 included significant expenses in our personal care products group related to operational issues which we have corrected. The absence of such expenses in the third quarter of 2011 accounts for nearly two thirds of the increase in gross margin. The current quarter’s gross profit and gross margin also includes a one-time, $1.5 million improvement from the recovery of certain mining costs in our chromite operations, which accounted for about a quarter of the improvement in gross margin.

SG&A expenses increased due to increased employee levels and employee benefit costs. However, this segment generated operating leverage on its increased sales, thereby increasing operating profit and operating margin.

 

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Environmental Segment

 

Environmental		Three Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	69,543				100.0%			$	67,744				100.0%			$	1,799				2.7%
Cost of sales			47,980				69.0%				47,002				69.4%
Gross profit			21,563				31.0%				20,742				30.6%				821				4.0%
General, selling and administrative expenses			13,926				20.0%				12,041				17.8%				1,885				15.7%
Operating profit			7,637				11.0%				8,701				12.8%				(1,064	)			-12.2%

 

Environmental Product Line Sales		Three Months Ended September 30,
		2011				2010				% change
		(Dollars in Thousands)
Lining technologies		$	29,262			$	33,407				-12.4	%
Building materials			20,653				15,822				30.5	%
Contracting services			11,060				11,519				-4.0	%
Drilling products			8,568				6,996				22.5	%
Total			69,543				67,744				2.7	%

In the third quarter of 2011, we sold our equity interest in CETCO Contracting Services Company at an immaterial loss. These operations comprised our domestic contracting services business within our environmental segment. We have presented the results of this operation as discontinued operations in all periods presented within this Form 10-Q, and thus the results of this operation are excluded from the amounts presented in the two preceding tables.

Favorable foreign exchange rate movements accounted for the increase in revenues in the quarter. Our domestic lining technologies product line experienced a decrease in sales during the quarter largely due to weather related issues, such as the hurricane that occurred on the East coast. Our building materials product line sales increased from new products and competitive offerings.

Gross profits and gross margin increased slightly. However, SG&A expenses increased more rapidly than sales. Approximately 18.2% of the SG&A increase results from foreign currency exchange rate movements. The remaining increase is driven by a large bad debt expense in our European contracting services business related to a customer bankruptcy in the quarter. The growth in SG&A expenses was the primary driver of the decrease in operating profits and operating margin.

 

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Oilfield Services Segment

 

Oilfield Services		Three Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	50,175				100.0%			$	41,204				100.0%			$	8,971				21.8%
Cost of sales			34,798				69.4%				29,249				71.0%
Gross profit			15,377				30.6%				11,955				29.0%				3,422				28.6%
General, selling and administrative expenses			9,590				19.1%				7,876				19.1%				1,714				21.8%
Operating profit			5,787				11.5%				4,079				9.9%				1,708				41.9%

The majority of the revenue increase was due to greater demand for our domestic coiled tubing services due to growth in our onshore services in oil and gas bearing shale formations. However, we did see noteworthy increases in sales of our pipeline and well test services, which are benefitting from increased work in the shale regions as well as increased prices for oil. Revenues in our filtration services declined due to the lack of demand resulting from a slow-down in permits being granted for offshore drilling in the Gulf of Mexico.

The fact that revenues increased in some of our more profitable service lines helped increase gross profits and gross margins. SG&A expenses increased due to increased employee compensation benefits, some of which varies with sales levels, and other expenses incurred to support growth and expansion. The changes in operating profits and related margin followed from the changes in gross profits and gross profit margin.

Transportation Segment

 

Transportation		Three Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	14,877				100.0%			$	14,284				100.0%			$	593				4.2%
Cost of sales			13,102				88.1%				12,654				88.6%
Gross profit			1,775				11.9%				1,630				11.4%				145				8.9%
General, selling and administrative expenses			1,005				6.8%				876				6.1%				129				14.7%
Operating profit			770				5.1%				754				5.3%				16				2.1%

Fuel surcharges comprised the increase in revenues. This segment continues to see an increase in services being provided to divisions within our other domestic subsidiaries, principally our metalcasting and pet products divisions; these intercompany revenues are eliminated in the corporate segment.

 

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Corporate Segment

 

Corporate		Three Months Ended September 30,
		2011				2010				2011 vs. 2010
		(Dollars in Thousands)
Intersegment sales		$	(10,343	)		$	(4,742	)			(5,601	)
Intersegment cost of sales			(10,143	)			(4,742	)
Gross profit (loss)			(200	)			-				(200	)
General, selling and administrative expenses			7,051				3,203				3,848				120.1	%
Operating loss			(7,251	)			(3,203	)			(4,048	)			126.4	%

Intersegment sales are eliminated in our corporate segment. These are most notably sales between our transportation segment and our minerals and materials and environmental segments as well as sales between our minerals and materials segment to our environmental and oilfield services segments. Eliminations of intersegment sales and cost of sales have increased along with increased growth in each segment.

Corporate SG&A expenses increased due to losses incurred on certain investments to fund long-term employee benefit programs resulting from the fluctuations in the value of the underlying securities, in addition to increases in other employee benefits.

 

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Nine Months Ended September 30, 2011 vs. September 30, 2010

Consolidated Income Statement Review

The table below compares our operating results for the periods ended September 30, 2011 and 2010.

 

Consolidated		Nine Months Ended September 30,
		2011				2010				2011 vs. 2010
		(Dollars in Thousands, Except Per Share Amounts)
Continuing operations
Net sales		$	708,708			$	621,650				14.0%
Cost of sales			517,891				458,163
Gross profit			190,817				163,487				16.7%
margin %			26.9%				26.3%
General, selling and administrative expenses			123,354				105,769				16.6%
Operating profit			67,463				57,718				16.9%
margin %			9.5%				9.3%
Other income (expense):
Interest expense, net			(8,308)				(7,092)				17.1%
Other, net			83				2,146				-96.1%
			(8,225)				(4,946)
Income before income taxes and income (loss) from affiliates and joint ventures			59,238				52,772
Income tax expense			16,935				12,877				31.5%
effective tax rate			28.6%				24.4%
Income before income (loss) from affiliates and joint ventures			42,303				39,895
Income (loss) from affiliates and joint ventures			4,076				266				1432.3%
Income (loss) from continuing operations			46,379				40,161
Discontinued operations
Income (loss) on discontinued operations			(916)				(789)				16.1%
Net income (loss)			45,463				39,372
Net income (loss) attributable to noncontrolling interests			48				(322)				-114.9%
Net income (loss) attributable to AMCOL shareholders		$	45,415			$	39,694				14.4%
Earnings per share attributable to AMCOL shareholders
Basic earnings (loss) per share:
Continuing operations		$	1.46			$	1.30				12.3%
Discontinued operations			(0.03)				(0.03)				0.0%
Net income			1.43				1.27				12.6%
Diluted earnings (loss) per share
Continuing operations		$	1.44			$	1.29				11.6%
Discontinued operations			(0.03)				(0.03)				0.0%
Net income		$	1.41			$	1.26				11.9%

 

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

 

		Organic				Acquisitions				Foreign Exchange				Total
Minerals and materials			6.4%				0.0%				1.0%				7.4%
Environmental			3.0%				0.1%				1.0%				4.1%
Oilfield services			4.2%				0.0%				0.4%				4.6%
Transportation & intersegment shipping			-2.1%				0.0%				0.0%				-2.1%
Total			11.5%				0.1%				2.4%				14.0%
% of growth			82.1%				0.9%				17.0%				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			29.9%				9.8%				10.6%				50.3%
Environmental			12.2%				13.2%				1.6%				27.0%
Oilfield services			17.4%				0.9%				1.4%				19.7%
Transportation & intersegment shipping			3.0%				0.0%				0.0%				3.0%
Total - current year’s period			62.5%				23.9%				13.6%				100.0%
Total from prior year’s comparable period			64.1%				21.2%				14.7%				100.0%

Net sales:

Net sales increased largely due to organic growth in all segments with our metalcasting, coil tubing, and building materials businesses generating the most growth. Foreign currency translation accounted for 17.0% of the growth. The increase in revenues in our EMEA region results from growth in our South African chromite operations, which started late in the second quarter of 2010, and growth in our European businesses within our environmental segment.

Gross profit:

Overall gross profit increased due to the increase in sales mentioned above. Gross margin increased as well due to increased profitability in our minerals and materials segment, as discussed later herein.

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

Approximately 11.4% of the increase in SG&A expenses results from fluctuations in foreign currency exchange rates. While each segment has its individual increases, the largest contributor is increased compensation and benefits cost as well as expenses, such as commissions, that generally increase with increased sales and profitability levels.

 

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Operating profit:

Operating profit increased due to the increase in gross profit mentioned earlier, partially offset by the increase in SG&A expenses. As a result, operating margins increased slightly.

Interest expense, net:

Approximately 63% of the increase in interest expense, net results from increased debt levels to fund our cash needs. The remaining increase results from increased interest rates on our variable rate debt.

Other income (expense), net:

Other income (expense), net decreased significantly, and is primarily comprised of gains and losses on foreign currency transactions as well as financial derivatives. We use financial derivatives to reduce the volatility resulting from fluctuations in foreign currency exchange rates on our net monetary assets. Thus, the decrease in Other income (expense), net results from improved management of these exposures.

Income tax expense:

Our income tax expense and effective tax rate increased in the quarter due to differences in discrete items recorded in each of the year to date periods. The prior year’s year to date effective tax rate was unusually low given the amount of favorable, discrete items recorded in the nine months ended September 30, 2010.

Income from affiliates and joint ventures:

Income from affiliates and joint ventures increased $3.8 million due largely to a $2.1 million gain we recorded on the sale of our Belgian joint-venture, which we sold in 2011. Our Japanese joint-venture also improved its earnings $0.4 million in the current period as compared to the prior year’s nine months due to the economic environment there. In the third quarter of 2011, we sold our interest in our Cypriot joint venture, whose operations were mainly in Russia, at an immaterial loss; in the nine months ended September 30, 2011, this joint-venture reduced its losses by $0.6 million as compared to the prior year’s period.

Discontinued operations:

In the third quarter of 2011, we sold our equity interest in CETCO Contracting Services Company at an immaterial loss. These operations comprised our domestic contracting services business within our environmental segment. We have presented the results of this operation as discontinued operations in all periods presented within this Form 10-Q.

 

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Diluted earnings per share from continuing operations:

Diluted EPS from continuing operations increased in the quarter due to increased net income from continuing operations. Our weighted average shares outstanding increased and depressed diluted earnings per share from continuing operations by $0.03 per share of net income to AMCOL shareholders.

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

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

Minerals and Materials Segment

 

Minerals and Materials		Nine Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	360,523				100.0%			$	314,417				100.0%			$	46,106				14.7%
Cost of sales			272,598				75.6%				238,918				76.0%
Gross profit			87,925				24.4%				75,499				24.0%				12,426				16.5%
General, selling and administrative expenses			36,945				10.2%				32,526				10.3%				4,419				13.6%
Operating profit			50,980				14.2%				42,973				13.7%				8,007				18.6%

 

Minerals and Materials Product Line Sales		Nine Months Ended September 30,
		2011				2010				% change
		(Dollars in Thousands)
Metalcasting		$	190,769			$	147,829				29.0%
Specialty materials			78,729				80,074				-1.7%
Pet products			42,237				46,739				-9.6%
Basic minerals			37,527				34,790				7.9%
Other product lines			11,261				4,985				125.9%
Total			360,523				314,417				14.7%

Growth in our metalcasting product sales accounted for 93.1% of the increase in revenues due to increased demand for automobile and heavy equipment castings. Our metalcasting revenues are earned in all our geographic regions, including South Africa where our chromite operations started generating revenues late in the second quarter of 2010. Our Other product lines increased due to increased sales of intercompany and non-core segment products, including some of which are ancillary to our environmental segment.

Gross profits increased due to the increased sales. Gross margin benefitted from the lack of expenses associated with operational issues in our personal care business that occurred in 2010. The non-recurring reduction in mining costs in our chromite business of $1.5 million was offset by increased production costs and lower than expected yields on the ore processed in that facility on a year-to-date basis.

 

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SG&A expenses increased due to increased employee compensation and benefits expenses in addition to other expenses incurred to support the sales growth, such as advertising, marketing and travel.

Environmental Segment

 

Environmental		Nine Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	193,512				100.0%			$	168,242				100.0%			$	25,270				15.0%
Cost of sales			134,402				69.5%				116,493				69.2%
Gross profit			59,110				30.5%				51,749				30.8%				7,361				14.2%
General, selling and administrative expenses			41,261				21.3%				34,709				20.6%				6,552				18.9%
Operating profit (loss)			17,849				9.2%				17,040				10.2%				809				4.7%

 

Environmental Product Line Sales		Nine Months Ended September  30,
		2011				2010				% change
		(Dollars in Thousands)
Lining technologies		$	82,987			$	84,994				-2.4%
Building materials			58,868				41,863				40.6%
Contracting services			28,686				23,322				23.0%
Drilling products			22,971				18,063				27.2%
Total			193,512				168,242				15.0%

Net sales increased due to increased demand for our products and services over the prior year period, when the recession was more pronounced in the commercial construction market. Our building materials group has had significant growth due to the introduction of new products and competitive offerings. Our drilling products sales have increased due to efforts to expand these sales throughout our international markets.

Gross profits increased due to the increase in revenues and gross margin has remained roughly the same. SG&A expenses increased significantly, though, due to costs incurred to increase sales activities, such as new offices and salesmen; increased compensation and benefit costs; and a $1.1 million bad debt expense in the third quarter of 2011 resulting from the bankruptcy of a customer in Europe. The increase in SG&A expenses outpaced growth in sales, leading to a decrease in operating profit margins.

 

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Oilfield Services Segment

 

Oilfield Services		Nine Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	139,756				100.0%			$	111,052				100.0%			$	28,704				25.8%
Cost of sales			100,250				71.7%				79,313				71.4%
Gross profit			39,506				28.3%				31,739				28.6%				7,767				24.5%
General, selling and administrative expenses			25,424				18.2%				21,879				19.7%				3,545				16.2%
Operating profit			14,082				10.1%				9,860				8.9%				4,222				42.8%

Our domestic coil tubing services account for the majority of the increase in revenues due to increased penetration into the oil and gas bearing shale regions in Louisiana and Texas. Our foreign operations remained fairly constant as growth in some countries were offset mainly by the expiration of a large contract in Australia. Increased revenues from pipeline and well testing services more than offset decreased revenues from our filtration services, which continues to suffer from depressed offshore activity resulting from decreased permitting activity in the Gulf of Mexico

Gross profits increased due to the aforementioned increases in sales. Although the composition of revenues changed significantly, the distribution between higher margin and lower margin services remained roughly the same, resulting in a relatively static gross margin.

SG&A expenses increased due to increased compensation and benefit costs as well as increased expenses associated with increased sales levels, such as commissions and travel. Operating profits increased due to the increased gross profit and operating margins benefitted from increased operating leverage.

Transportation Segment

 

Transportation		Nine Months Ended September 30,
		2011								2010								2011 vs. 2010
		(Dollars in Thousands)
Net sales		$	42,331				100.0%			$	39,987				100.0%			$	2,344				5.9%
Cost of sales			37,513				88.6%				35,487				88.7%
Gross profit			4,818				11.4%				4,500				11.3%				318				7.1%
General, selling and administrative expenses			2,898				6.8%				2,536				6.3%				362				14.3%
Operating profit			1,920				4.6%				1,964				5.0%				(44)				-2.2%

Fuel surcharges comprised the increase in revenues. However, cost pressures have increased, leading to a decrease in operating profit.

 

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Corporate Segment

 

Corporate		Nine Months Ended September 30,
		2011				2010				2011 vs. 2010
		(Dollars in Thousands)
Intersegment sales		$	(27,414)			$	(12,048)				(15,366)
Intersegment cost of sales			(26,872)				(12,048)
Gross profit (loss)			(542)				-				(542)
General, selling and administrative expenses			16,826				14,119				2,707				19.2%
Operating loss			(17,368)				(14,119)				(3,249)				23.0%

Intersegment sales are eliminated in our corporate segment. These are most notably sales between our transportation segment and our minerals and materials, and environmental segments as well as sales between our minerals and materials segment to our environmental and oilfield services segments. Eliminations of intersegment sales and cost of sales have increased along with increased growth in each segment.

Corporate SG&A expenses increased due to increased expenses associated with employee benefit programs and professional services fees.

Balance Sheet Review

In the first nine months of 2011, our total assets increased by $34.6 million. We increased our overall investments in working capital, especially inventory and accounts receivable, to support our revenue growth. We also increased our investments in property, plant and equipment, mostly in our oilfield services and minerals and materials segments, to help grow and maintain those businesses. We funded these investments mainly through increased cash utilization, as evidenced by the decrease in our cash balance from the prior year end, and additional borrowings on our revolving debt facility. We believe our future cash needs will be funded through debt rather than continuing to reduce our cash balance.

Our available-for-sale securities reflect the value of our equity ownership in Ashapura Minechem Limited, a company listed on the Bombay stock exchange, and has fluctuated as shares trade on that exchange.

Our accumulated other comprehensive income decreased $29.4 million, of which $19.6 million relates to the revaluation of the net assets of our foreign subsidiaries into our reporting currency, USD, during consolidation. Although all foreign subsidiaries are subject to translation adjustments during consolidation, the exchange rates between the U.S. dollar and the Polish zloty, the South African rand, and the Turkish lira have fluctuated significantly, causing the majority of the decrease. The decrease in the value of our available-for-sale securities accounted for an additional $8.2 million decrease in our accumulated other comprehensive income.

 

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Liquidity and Capital Resources

Cash flows from operations, an ability to issue new debt instruments, an ability to lease equipment, and borrowings from our revolving credit facility have historically been our sources of funds to provide working capital, make capital expenditures, acquire businesses, repurchase common stock, and pay dividends to shareholders. We believe cash flows from operations and borrowings from our unused and committed credit facility will be adequate to support our current business needs for the foreseeable future. Should the need arise or should we choose to, we may issue additional equity or debt instruments 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 2010. Terms of any new facilities, especially interest rates or covenants, may be significantly different from those we currently have.

Following is a discussion and analysis of our cash flow activities as presented in the Condensed Consolidated Statement of Cash Flows presented within Part 1, Item 1 of this report.

 

Cash Flows ($ in millions)		Nine Months Ended September  30,
		2011				2010
Net cash provided by operating activities		$	16.6			$	35.2
Net cash used in investing activities		$	(40.9	)		$	(38.8	)
Net cash provided by (used in) financing activities		$	5.5			$	(4.0	)

Cash flows from operating activities decreased from the prior year period due to the increased working capital levels, especially increases in inventory to support our business growth, including the ramp-up of our chromite operations. 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 businesses; we do not see a reason why this trend would not continue.

Capital expenditures for the first nine months of 2011 and 2010 were $43.8 million and $37.9 million, respectively. In each of these periods, the expenditures include $5.9 million and $13.6 million, respectively, of expenditures associated with establishing our South African chromite operations. In the nine months ended September 30, 2011, the majority of our capital expenditures occurred in our oilfield services segment (to increase the size of our equipment fleet) and our minerals and materials segment (mostly for maintenance capital to ensure stability as the business experiences growth). We expect our capital expenditures in our fiscal year for 2011 to exceed the levels experienced in recent years.

In September 2010, we purchased the remaining 47% of the noncontrolling South Africa chrome mine for $11.9 million and reflected this transaction in the cash flows from financing activities in the nine months ended September 2010. Year-to-date dividends were $0.54 per share in both periods.

 

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Financial Position ($ in millions)		As at
		September 30, 2011				December 31, 2010
Non-cash working capital		$	267.8			$	221.8
Goodwill & intangible assets		$	108.1			$	113.5
Total assets		$	833.7			$	799.1
Long-term debt		$	250.4			$	236.2
Other long-term obligations		$	49.6			$	50.0
Total equity		$	404.4			$	400.4

Non-cash working capital at September 30, 2011 increased $46.0 million as compared to the amount at December 31, 2010 due to increased working capital required to support the growth in the business, especially increased inventory levels as mentioned previously. Given the seasonality of our environmental and oilfield services segments as well as the project nature of some of our services provided in the oilfield services segment, working capital levels 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.

Long-term debt increased $14.2 million to $250.4 million since our prior year-end due to increased financing needs for working capital requirements and capital expenditures. Long-term debt relative to total capitalization increased 110 basis points to 38.2%. We have approximately $109.6 million of borrowing capacity available from our revolving credit facility as of September 30, 2011. We are in compliance with the 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. We are also party to a number of claims and lawsuits in our other businesses, especially in our oilfield services segment given the growth of our services, related to specialized products and services designed to suit the specific needs of our 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, 2010 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, 2010 other than those discussed in Part 1, Item 2 of this report.

 

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Item 4:

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

PART II - OTHER INFORMATION

 

Item 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, 2011, 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, 2011, we did not have a fatality.

 

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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, 2011 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.

 

Mine		Section 104 (1)				Proposed MSHA Assessments (2)
(Amounts are actual, not thousands)
Gascoyne Mine & Mill		-				$ -
Belle Fourche Mill		7				-
Lovell Mill		1				200
Colony West Mill		5				-
Colony East Mill		2				-
Yellowtail Mine		-				-
Belle Fourche / Colony Mine		-				-
Sandy Ridge Mill		-				-

 

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 during the three-month period ended September 30, 2011.

As of September 30, 2011, we have a total of 22 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, 2011 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.

 

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Item 6:

Exhibits

 

Exhibit Number
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
32		Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350
101		The following information from our Quarterly Report on Form 10-Q for the period ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i)     Condensed Consolidated Balance Sheets at September 30, 2011, and December 31, 2010, (ii)   Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010, (iii)  Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2011 and 2010, (iv)  Condensed Consolidated Statements of Changes in Equity for nine months ended September 30, 2011 and 2010, (v)    Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2011 and 2010, and (vi)  Notes to Condensed Consolidated Financial Statements.

 

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SIGNATURES

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

AMCOL INTERNATIONAL CORPORATION

 

Date:		November 09, 2011				/s/ Ryan F. McKendrick
						Ryan F. McKendrick
						President and Chief Executive Officer

 

Date:		November 09, 2011				/s/ Donald W. Pearson
						Donald W. Pearson
						Vice President and Chief Financial Officer

 

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INDEX TO EXHIBITS

 

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
32		Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350
101		The following information from our Quarterly Report on Form 10-Q for the period ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i)     Condensed Consolidated Balance Sheets at September 30, 2011, and December 31, 2010, (ii)   Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010, (iii)  Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2011 and 2010, (iv)  Condensed Consolidated Statements of Changes in Equity for nine months ended September 30, 2011 and 2010, (v)    Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2011 and 2010, and (vi)  Notes to Condensed Consolidated Financial Statements.

 

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