Operator : Hello, ladies and gentlemen, and welcome to AMCOL’s Second Quarter 2010 results conference call.

This conference call may contain certain forward-looking statements regarding AMCOL’s expected performance for future periods and actual results for such periods might materially differ.

Such forward-looking statements are subject to uncertainties, which include but are not limited to actual growth in AMCOL’s various markets, utilization of AMCOL’s plants, currency exchange rates, currency devaluation, delays in development, production, and marketing of new products, integration of acquired businesses, and other factors detailed from time to time in AMCOL’s annual report and other reports filed with the Securities and Exchange Commission. .

Also as a reminder, today’s conference is being recorded. .

Joining us today are Mr. Larry Washow, President and CEO; Mr. Don Pearson, Vice President and CFO. .

I would now like now to turn the call over to Mr. Larry Washow. Please go ahead, sir.

Larry Washow:Thank you and welcome everybody. It’s good to report a nice quarter of top-line growth at AMCOL. I hope you've had a chance to take a look at the second quarter results that went out this morning. It’s pretty much a solid picture all the way around the different segments.

Environmental as we expected does pick up in Q2 and Q3. We saw some evidence of that in Q2, recognizing that we did have a bit of carryover from Q1 as well. Oilfield as well had a nice jump in revenue and the bottom line result was very solid.

The encouraging thing to me is the top-line acceleration from Q1. When you look at all of the numbers, clearly minerals are a big part of the driver.

So let’s talk about minerals for a second. The metal casting market around the world is very solid. I'm sure you’re reading about the automotive sales in the US and in China which seems to be very stable, steady business. The heavy equipment markets are also very strong.

So, all in all, we’re seeing a very good, steady business out of our metalcasting group. Additionally, the other markets that we talk about in minerals, oil and gas drilling for example, has picked up in the US as the rig count has been moving up.

Iron ore pelletizing, which is not a big business for us, but is used in making steel has picked up as well. Pretty much around the world, the minerals business is good and kind of steady as she goes.

I thought I might mention our South African project. As we mentioned last time, the plant was completed towards the end of Q2. We’re really now getting all of the startup process underway and getting the bugs worked out, making sure that we can really produce the high quality product that we've talked to the market about.

Our expectations are that we will have production to ship from that operation this quarter and will go to customers for trials and evaluation, but not really much of an impact in Q3.

By year-end we expect to see some of the benefit of the materials coming out of that plant, but as we've talked, it’s really more of a 2011 benefit for our chrome sand business.

Environmental had good revenue growth but again, a reminder that some of that did carry over because we had tough weather in Q1, but second and the third quarter should be in pretty good shape for environmental.

Margins are down though. The reason for that, if you look at the breakdown of business, is because our building materials sales are down. Those are the products primarily related to commercial construction. That business continues to be soft around the world and all of the forecasts that we see suggest that it’s going to remain that way for quite some time. The bright spot is lining tech. Our primary business in that segment is growing and had good activity in Europe, as well as other parts of the world. It’s good solid growth there, but it’s also not quite the same margin as the building materials group.

It’s a similar story with contracting services. We’re starting to see a little bit of traction there and a bit of growth this quarter, but, again, the margins are a little bit softer than they are in our other product lines with the environmental group.

Oilfield services, it’s a good positive story here as well. This is the third quarter of sequential growth in the margin and the top line as well. We do see a lot more activity these days in oilfield and expect that to continue. We expect the margins to continue to improve as well.

The challenge, of course, in Q3 is the weather. As you've probably noted, they’re taking people out of the Gulf right now as a tropical storm heads that way. This is the hurricane season, so we don't really know what’s going to happen with all of the storms, but that does have an impact on Q3. Taking that out of the equation, we really think we’re in a good spot in the business and expect that business to continue to go and grow throughout the balance of the year.

The international side, as you'll know from the numbers we provide, is up as well. It takes a while to really get penetration there, but last quarter more than 15% of our business was outside the Gulf of Mexico and that is growing.

Overall, I think it’s very positive and good to see the revenue growth. Again, the minerals being a strong driver, we look for that to be steady as she goes going forward.

And with that, we'll have Don run through some of the financial metrics.

Don Pearson: Thanks Larry. Starting off with the income statement and the FX impact it was certainly much softer than in prior quarters. The dollar, compared to the prior years weakened and that helps our top line as we translate into more dollars. But again, it was a relatively small impact.

Looking at the margins, I'm happy to say that on a sequential basis over Q1 of the year, we had margin improvement in gross margins and operating margins in every segment.

I do want to point out in minerals that if you go back about two years ago, we were in single digits in minerals operating margins. For the last two quarters we've been enjoying an operating margin of about 15%, which we think is probably the new normal, plus or minus, and ought to be sustainable.

Looking at the effective tax rate, 25% is what we did in the quarter and what we’re expecting for the year. When you compare it to last year, last year was abnormally low. We had a disproportionate amount of international income relative to the US income. So, we’re looking again for about a 25% effective tax rate for the balance of the year.

On the joint venture line, which we do report a quarter in arrears, we saw improvement in all joint ventures. So, they all were profitable in the quarter, although pretty close to breakeven, but this is substantial improvement from the prior year.

Moving to the balance sheet, I’m happy to report that all metrics on the balance sheet are strong and continue to improve. The focus on working capital continues and while we have a large increase in receivables, if you look at the performance relative to DSO we've improved. Inventory is flat from year-end, so the metrics there on the day’s inventories outstanding has improved.

Debt is up about $16 million from year-end, which I'm comfortable with. That includes the funding of the South African plant, or the majority of that, and certainly the large increase in working capital. Our debt-to-EBITDA metrics continue to improve as well.

On the cash flow statement, I call the attention to the operating cash flow line of about $7 million. This certainly pales in comparison to last year’s $65 million, but last year was really benefited by the substantial decline we had in revenues and the acute reduction in working capital in the prior year.

If we look at the capital expenditures and we exclude the corporate building because that was a sales leaseback; that was an in and an out, so we’re really just looking at the capital expenditure line, there was about $26 million for the first six months of the year compared to $32 million last year.

This year, we funded the plant in South Africa which is about $13 million. In the prior-year period, we acquired the first 53% of the South African mine for about $15 million.

So, if you pull South Africa out, we did about $16 million in capital the first six months of this year versus $17 million of last year. You can probably look for about $53 million to $55 million of capital for the full year.

Larry did talk about oilfield a bit. We’re looking to continue to expand there. We'll spend more capital on oilfield in the second half, really looking to make some investments both up in the shales in the US and additional capital spending internationally to continue that expansion.

So with that, I'll turn it back to you, Larry.

Larry Washow: Thank you, Don. Miranda, we'll take questions now. Okay, Miranda, we’re ready for questions.

Operator: Certainly. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your touchtone phone. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, that’s star 1 for any questions at this time. We'll pause for just one moment to assemble the queue.

We'll go first to Todd Vencil with Davenport.

Todd Vencil: Hey, good morning, guys.

Male: Good morning.

Male: Good morning.

Todd Vencil: Thinking about the chromite plant, can you kind of give us an update on how you’re thinking about the market there? I realize that you've just started that thing up, but do you have a view right now as to when you think you might hit your run rate on that? .

Larry Washow: The run rate will take a while. It is a 100,000-ton operation obviously, so getting the market penetration will take us well through next year I would guess. But, we’re really comfortable that we've got the relationships with the customers to get the product in there for trials. All our data, testing and the work we've done we believe will demonstrate that the product is superior. Once the customer runs that and proves that and we work with them, we think we’re going to have a pretty steady conversion rate. It’s not going to be a big chunk of business that shows up day one, but I think we'll have a nice, slow, steady build as we get into Q4 and then throughout 2011.

It’s going to take some time, but so far so good in terms of plant’s on track, on budget, on time, and (getting through) the process issues now, which are nothing unusual for a new operation. Then the key thing is getting the product in front of the customers.

Todd Vencil: Sure. If you think about how this rolls out, if you think about where you might be at the end of this year, are we talking 25% utilization maybe?

Larry Washow: No, not quite that high, Todd. I think we'll certainly be running the plant through the end of this year, but by the time your shipments go from South Africa and get to a customer, they do their trial, they give some feedback, we work out contractual deals or whatever the commercial arrangements are and then get the process really going, that will take a few months just by itself. So, as we get into next year, I think we'll start to see some pretty reasonable run rates, but not a great deal the balance of this year.

Todd Vencil: Got it. What are you seeing on chromite prices right now per ton?

Larry Washow: They are starting to creek up. I think the ferrochrome pricing has definitely moved up in the last couple of quarters and that translates through to the foundry chrome. As you know, our strategy as we establish a true foundry product will be to de-link those, but right now they’re still fairly well connected, but they are moving up.

Todd Vencil: So, can you tell me what the level is on that roughly? What is the range?

Larry Washow: We’re in the $450 to $500 range right now.

Todd Vencil: Okay. When you look at the basic materials in the breakout in the minerals business, sales were up I think it was 120% year over year. Is there something special going on there? Or, is that just sort of a nice pickup that you've had? Is there anything specific I guess is what I'm asking.

Larry Washow: A lot of that is the drilling activity that has actually picked up quite a bit in the US. The rig count is up a lot from what it was last year and so the drilling gel side, which we supply through our minerals group, is a big part of that.

Todd Vencil: Okay. In minerals, the SG&A was $1 million higher than we had modeled. You've mentioned increases in the press release, the increase in comp and benefits there. Do you think it’s going to be sustaining at this higher rate or how should we think about that?

Don Pearson: Yes, it will probably be around that level. It’s certainly some buildup of some headcount in South Africa and then some compensation items as well.

Todd Vencil: Okay.

Don Pearson: Across the segment.

Todd Vencil: Okay. Thanks a lot, guys.

Larry Washow: Thank you.

Operator: We'll go next to Al Kaschalk with Wedbush Securities.

Al Kaschalk: Good morning, guys.

Larry Washow: Good morning, Al.

Al Kaschalk: I think it would be an understatement to say that the execution was pretty strong in the quarter. But it’s where I wanted to focus my effort on the questions and tying it to the chromite business as you look out here.

The minerals was very strong and I want to try to tease out, Larry, how much of this is a function of just modest recovery in volumes and because of cost containment drove the margins to pretty good levels versus say a normal seasonal period would margins have been where they’re at?

And then secondly, as you look at the chromite business as it comes online, how much in 2010 will be a drag on the performance in this segment and then as you look out to 2011 what type of commentary can you provide on the operating performance or contribution of expectation for the chromite business?

Larry Washow: Okay, let me start with the first question, Al. The minerals volume is actually up pretty substantially from last year. If you look at the metalcasting business today, it is in a much stronger position. As the numbers show, it was up 60% I believe is the revenue side. The vast majority of that, there’s certainly some pricing in there, was volume.

What we’re seeing now over the last several years we've talked about our operational improvements and changes to improve efficiencies. We’re seeing the benefit of that additional volume going through our more cost-effective plants and providing them the benefit of really being able to take advantage of the pricing that was primarily put in place a year or so ago, improving the cost. The end result is margins on the gross margin side in the 25%, 26% range, which has kind of been our target for some time. And so I think that’s a very sustainable position.

We’re very comfortable with that. The challenge I think in the minerals side is everything is moving and humming along very nicely. It’s hard to see a lot of growth in the automotive sector in the US. China is talking about being a little bit softer in the automotive as well.

So, you know, we look at the second half of the year in minerals and I think it’s going to be very good. I think the second quarter is a nice demonstration of what'll happen in the rest of the year. But in terms of growth, it’s probably not a great deal. That’s where chromite does come in. In 2011, we do expect a meaningful impact for the chromite on our minerals business. It’s a 100,000-ton plant and I would certainly hope that our average run rate by the end of the year or throughout the year anyways, gets to that 50%-plus position in that operation. If we’re as successful as we think, the ramp could be a lot quicker in 2011.

This year in terms of costs, a modest impact, but I don't think it’s going to be a big factor. The GS&A that Don mentioned is probably the biggest place you'll see some of that cost element because of the initial overhead we've brought in.

Operationally it’s not a high-cost plant from a staffing perspective. We think we’re in pretty good shape. We will be producing material out of there and we will be selling material out of there. I don't think it’s going to be a plus, but it shouldn't be a big minus either.

Al Kaschalk: Okay. That’s very helpful. On the specialty materials component of the segment or business unit, how should we take away the $27 million or so you did in the quarter as it relates to what generally is a very strong Q3 as well I believe?

In other words, there’s no reason to believe any of these components within minerals should have a challenge in Q3 partly because of easier comps, but also your end markets are firming up is the takeaway we should read through on this. Is that correct?

Larry Washow: I think you’re right, Al. I think the specialty materials, a lot of those are our consumer-related products. A year ago we were just finishing up an expansion of a plant in Thailand and getting China underway for some of those products. Those operations are both running very nicely now and selling well.

Our European business has picked up a good bit from last year as we've improved our plants there and our capability, as well as the quality of the products and the range of products we can sell. So, we've seen a nice jump in that business.

And again, I would agree with your assessment kind of steady as she goes from here. Except for the comps, I don't look for that sort of jump. But if you look at sequentially, I think third quarter minerals-wise will reflect again another good, very solid quarter, but probably not substantial growth from Q2.

Al Kaschalk: Okay and then my final question if I may on oilfield services. If you take out any of the weather concerns and you look at the operations, 400-basis point improvement sequentially was obviously better than we thought you would do. Are we expected to see another 300 to 400 sequential Q3 improvement if the volumes hang in there? Or, is the business still struggling to get back to that upper teens operating margin? In other words, we should see quarterly improvement year over year obviously in the 200-basis point level or just help us walk through what’s happening fundamentally there to translate into expectations on the margin side?

Larry Washow: Sure. Yes, the oilfield business you definitely saw improvement in Q2. We will see more improvement in Q3 and more activity. There’s more business out there. The international business, which is growing, tends to be a higher margin business for us.

The activity in the Gulf of Mexico, now that it is picking up, we are able to get pricing more in line with what it was when we had better margins. So looking forward, I do expect another sequential improvement in margins in Q3 and 4. It might take us a few quarters to get back into the upper teens where we were kind of at the peak years of oilfield, but we've got a lot of good things going on there.

Our coil tubing business is very busy and we see the prospects for that looking very strong the balance of the year, at better rates than we started the year. So, it doesn't jump by leaps and bounds, but I think that steady improvement in margin in Q3, again, ignoring the weather for now, will be there, and hopefully again in Q4.

Al Kaschalk: And if I may, I'm sorry. The other one I wanted to add. Can you comment broadly on how much of your oil and gas or what we know with the drilling mud and stuff, how much of your revenue or business is tied to absolute exploration activities versus production? I was surprised by the comment about the drilling moratorium may have some disruption in your business outlook. I would've expected less of an impact, but the fact that you called it out implies that we may have a little bit of misperception issue here.

Larry Washow: Well, I think with the moratorium, the real issue there is more uncertainty than anything else. If you look at our business, a lot of it is more production-related. The wells when they’re drilled, we do some well tests and we do some work on them but it is definitely more production-related. I think the question on the moratorium brings it to bear what happens next.

So far, there have only been a couple of rigs pulled out of the Gulf of Mexico, which is very good. Hopefully that continues to be the case. I think there needs to be a lot more clarity from the government as to what the plans are and what the outcome is going to be. That will give people more comfort that we know what we have to do in the Gulf and we’re going to stay and work hard and do our thing.

So, the moratorium is not necessarily saying we’re related to exploration as much as it is a concern about we’re not quite sure what the new rules are going to come down, how they’re going to impact us, where they’re going to cause us to have to do different things and is the Gulf the right place for us to be. I do hope we get some clarity on that over the next several weeks, but it is one of the common questions you hear down there.

Al Kaschalk: Thank you.

Operator: We'll go next to Rich Wesolowski with Sidoti & Company.

Rich Wesolowski: Thanks. Good morning.

Larry Washow: Good morning, Rich.

Don Pearson: Hey Rich.

Rich Wesolowski: It sounds from initial second quarter earnings reports the companies in the transportation business, trucking and rail, have pricing power, plus we've also seen fuel costs, diesel prices close to $3. Do your minerals contracts automatically index for items like these or must you raise them individually? And if it’s the latter, are you raising pricing in the North American minerals in 2010?

Larry Washow: We don't have a lot of annual contracts for things. Those that we do most often will have some type of energy metric in there. So as we see the costs impacting us, if we don't have a contract, we do go back to the customers and talk about the impact of what we need to do on pricing. It hasn't had a really big impact yet. I definitely see some costs moving up, but the diesel pricing has been up and down the first half of the year and depending on where oil goes, obviously that'll provide some guidance as to where that ends up. We’re comfortable on the margins that if the costs do go up, we’re positioned well to increase prices as we need to.

Rich Wesolowski: Okay. Do you have plans to press the minerals product strategy in China in the second half? We had spoken previously about giving customers a choice of either moving to a blended material or accepting a higher price for the local material?

Larry Washow: It’s a strategy that’s ongoing. We started with it several quarters ago and the endgame we want to get to is really to be providing a higher value, higher performing blended product.

It’s a new concept for that part of the world, although we are dealing with some customers with the same type of operations they have in places we already supply a blended product, so we are seeing some interest and some success there.

But clearly we’re positioning ourselves to long term have that higher value market segment as the primary focus. It will take time. In the US it took a long time to get everybody on that mode, so I think we’re several years away from really having a significant market penetration of that type of blended product.

In the meantime we’re supplying local products at nice margins. We’re shipping material from the US at nice margins and it’s really the Chinese business that is very strong and looks to be continuing to grow.

Rich Wesolowski: How much of those Asia Pacific minerals $21 million was from China just on back of the envelope numbers? And how much of your Chinese material that you sold was the locally-sourced versus imported?

Larry Washow: The majority would be locally-sourced and China I would guess, I don't have the numbers in front of me, is certainly more than half the business, probably 60%-ish.

Rich Wesolowski: 60% of the minerals in Asia?

Larry Washow: Yes.

Rich Wesolowski: Excellent. Third, also on the minerals and over on the chromite, you mentioned ferrochrome pricing has risen during the past few quarters. But I've also read there’s been very tough demand from stainless steel producers in China specifically during the past month or two. Would you say your effort to decouple the pricing of the Hevi-Sand versus the commodity material is going to depend on an improvement in the stainless steel market? Or would you expect to get your price even if demand was weak for the commodity material?

Larry Washow: I think over time we will be able to decouple that and get the pricing we want. It obviously would be easier if the ferrochrome pricing were higher but the whole strategy is to demonstrate that the quality of the product we provide is different than everything they've seen and it deserves a better price because it provides a better value for the customer. So, we recognize there’s a good bit of work involved to make sure that they see the benefits, they see the value, and they’re comfortable where we’re going on the pricing.

We’re pretty comfortable that given the plant capabilities that we have built into that operation, that once we get the product in the customer’s hands that they will see that difference and we'll be able to really command the value that provides the benefit. Ultimately, it actually ends up saving the customer money, even though it'll be a higher-priced product.

Rich Wesolowski: Would you agree that if the commodity market remained about where it is today for the next 18 months that you would probably not be able to get your ideal price during the validation stage for your product?

Larry Washow: That’s probably a fair comment. It’s hard to know and we really have to demonstrate what it can do, but the corollary is certainly true. If the ferrochrome market was robust and very strong and people were just taking all of the material into that, then our strategy would be easier to get going.

It’s going to have to take a little bit of work and we've got to be cognizant of the fact that there are other materials out there and the pricing will be somewhat different. But, we’re pretty comfortable that we can demonstrate the value in this product. It does take more time if there’s a lot of material out there than it would if it was a tight market.

Rich Wesolowski: Great. Thank you.

Larry Washow: Thank you.

Operator: We'll go next to Torin Eastburn with CJS Securities.

Torin Eastburn: Good morning.

Larry Washow: Good morning.

Torin Eastburn: You mentioned in the release, in environmental, you think you maybe pulled some sales out of Q1 because of the weather. Can you quantity that at all? Was it material?

Don Pearson: Yes, we saw a nice increase in lining tech. I'd say there was a substantial amount, maybe not quite half of it, but it was somewhat meaningful.

Torin Eastburn: Okay. You also mentioned in the release increasing competition in lining tech. Can you say any more about that?

Larry Washow: Yes, the landfill market is, particularly in the US, declining. That’s in part because there’s less garbage being produced. A lot of the garbage for landfills comes from construction and construction is way down so all of that is sort of a natural course of events. The business levels in the US are a bit soft just because of the landfill market. We’re providing lining tech materials to lots of other markets in Europe, but there are also several competitive producers in Europe and there are also different technologies. When we’re bidding on a mineral leach pad, for example, we will come in and there will be several other geosynthetic clay liner producers that are bidding. The guys that make HDPE and other plastic materials will also be bidding.

So, given the softer economic environment any job of any size, everybody hears about and everybody’s in there bidding. So by virtue of that, it ends up being more pressure on the margins. We are getting our fair share or more of that business. We've got an excellent reputation, great products, great service, great people, but it is not always at the price we'd like.

Torin Eastburn: Okay. Also contracting, I haven't heard you say anything about that today. Can you give us an update on what’s happening there?

Larry Washow: Sure. There’s a little bit of growth in contracting year over year for the quarter and we are starting to get a little more success on some projects as we look at the second half of the year.

I think that strategy will be more visible in terms of how it’s growing in the second half of the year. It’s kind of steady as she goes in the first half. We are still involved in looking at some substantial projects, but the bidding process seems to be protracted.

The award process is very protracted, so we’re not really looking the balance of the year at any huge projects, but there are a number of very nice-sized, smaller, $1 million, $2 million to $3 million projects out there that we’re in good shape on. I think the second half will definitely be better than the first half in contracting.

We continue to build a team and the people and the strategy in place. So, I think in 2011 we'll see that be a more meaningful part of environmental.

Torin Eastburn: Okay and then last question, Don, can you update me on the CAPEX for South Africa for the rest of the year and then also for companywide?

Don Pearson: Yes. So as I said earlier, we did about $13 million on the plant in the first half, Torin. The total cost of that plant is around $17 million, and we did spend some of it last year. So, there’s really just several million left on the plant. For the full year for CAPEX it should be probably $53 million, $55 million in total.

Torin Eastburn: Okay. Thank you.

Operator: And, ladies and gentlemen, once again, it is star 1 for any questions at this time. We'll go next to Jay Harris with Goldsmith & Harris.

Jay Harris: Good morning.

Larry Washow: Good morning.

Don Pearson: Good morning.

Jay Harris: I guess as a question for Don, what’s the outlook for free cash flow going forward let’s say from mid-year this year to mid-year 2011? It seems to me that given the long lines of shipping out of South Africa that that business would take probably more working capital per dollar of revenue than some of your other businesses. Do you expect to be a net borrower over the next 12 months? I'd like some commentary on these subjects.

Don Pearson: Yes, I think we'll probably be slightly a net borrower, but not materially. You’re right about South Africa. There probably could be some step-change incremental investments in working capital. CAPEX in 2011 should start to come down a bit, however. Each of the last two years we've had $15-ish million in South Africa, although we will have the purchase of the last half of the mine in the first quarter of 2011. We've got the option and they've got an option as well. So, all in all, I'd say it’s probably pretty close to a push with some potential for debt reduction.

Jay Harris: So a year from now we might be within $5 million of the current debt levels?

Don Pearson: Yes, I think that’s possible.

Jay Harris: All right. I guess a year or so ago you were trying to improve your Turkish operations. Have you achieved your goals there?

Larry Washow: We have. One of the improvements you see in specialty minerals and minerals overall is the Turkish operation went from kind of a bit of a pain the first 12 to 18 months we had it to a very, very nice contributor now and an operation that we’re going to be investing more to expand our capability because we’re not quite but almost sold out there. So, it’s really a very nice turnaround story and a very good operation.

Jay Harris: And is that an above-average margin component of your plant base at this point in time?

Larry Washow: It’s probably in line with margins because we have several different businesses that come out of there, some of the bleaching earth, for example, probably above average. Some of the bulk materials for supplying our customers are average to what our normal minerals are. So, put it all together and it's a good, solid contributor at the kind of numbers that we report for the segment.

Jay Harris: And did it start to hit its stride in the June quarter or earlier?

Larry Washow: Earlier. It was actually towards the end of last year we really saw the benefit of that come around.

Jay Harris: (All right). Larry, what has to happen for you to or can you get back to prerecession gross margins in environmental and oilfield services?

Larry Washow: Oilfield services are actually an easier answer. The activity level there as I mentioned is picking up. We've got a good team in place now on the sales and marketing side. The services we provide, we've got great operators out there. We're building the reputation for some of the things that are new to us into that marketplace and now seeing the benefit of that. So, I think oilfield services in 2011 we will be back to the type of margins we saw in our best years.

Environmental is a little tougher. The contracting services business, which will be a component of growth there and an important component, tends to be a bit lower margin than just selling the product itself.

So I think environmental, we’re probably realistically looking at gross margins in the low 30s as opposed to the mid 30s where we were historically. That low 30s number, probably at least for the next 18 months, is realistic. I don't see it getting to the mid 30s just given the nature of the product mix and the activity levels we see out there now.

Jay Harris: When do you think the tonnage and the margin impact from the chrome business will start to raise the margins in minerals?

Larry Washow: It should be in 2011. It really depends, again, on the adoption rate and how quickly we can ramp up.

Jay Harris: Well, do you think mid-year or earlier in the year or the last half?

Larry Washow: Mid year is probably a good target, Jay. Obviously we've got to build the volume to demonstrate we can produce the margins and get enough through the plant to more than cover the cost and provide a good contribution. So, mid 2011 is a good date.

Jay Harris: Yeah and last question, is there anything that occurred in the June quarter that is not a sustainable level of business, forgetting for a moment about hurricanes.

Larry Washow: No, I think the second quarter is a very good model going forward. We don't see anything at this juncture absent hurricanes, economic collapse, and things like that, that really should impact us in Q3 and Q4. The normal cyclicality, seasonality of environmental obviously, but other than that I think we're at a base that should continue.

Jay Harris: Well, you guys did a great job. Thank you very much.

Larry Washow: Thanks Jay.

Operator: And we'll take a follow-up question from Rich Wesolowski with Sidoti & Company.

Rich Wesolowski: Thank you. Halliburton earlier this week said they would have further price increases in their North American onshore activity but they would be moderate relative to what they saw in the first half, and also that they’re seeing inflation in their commodities and freight and labor. Are you confident you could reach and sustain that mid-teens operating margin in oilfield even in an inflationary cost environment?

Larry Washow: At this point, we are. We’re going to have to really see what happens to the cost. So far they have been pretty manageable in terms of containing and managing the costs well. It’s going to be a few quarters before we get back to that type of level, but if the signs continue to go forward as we see them today and the market continues to development as we see it today, I think we can get there next year.

Rich Wesolowski: Okay. Is there any geographic concentration to the onshore oilfield services business? There seems to be much more activity in these so-called wet gas basins than in the conventional basins. I was wondering if that’s affecting you?

Larry Washow: To the plus side it is. In fact, some of the capital equipment we’re purchasing now will enable us to do more work in the shale areas where there’s a lot of high pressure opportunities, which tend to be higher margin. But, you’re got to have the right equipment so we've had a great deal of interest from the companies that are active in those areas and we will be increasing our presence there. Everything at least so far, continues to demonstrate that that can really be a significant impact on the natural gas supply.

There are some of those that are oil plays as well, especially that Eagle Ford area. There’s a lot of oil down there that the people are looking at. So that type of onshore development has a big impact potentially on us.

The offshore margins, especially in deepwater, are still better. It’s a very important area for us, which is why that international component in Brazil, Nigeria and Malaysia are very important. But, the land-based higher-value plays are probably going to be those shale areas where we are active.

Rich Wesolowski: Is your equipment for the onshore fully utilized already or are you buying ahead for business that you see coming down the line a few quarters out?

Larry Washow: Our utilization is good. It’s not fully utilized as you've got all of the issues with transport and time and getting back and forth. We have a very extensive quality control program, so when equipment comes in, we go through a complete review and testing to make sure it really is ready to go back out before it goes out. So, our utilization rate, it’s never 100% obviously. But the equipment we are adding to our fleet is equipment that'll be utilized as soon as it comes in.

Rich Wesolowski: On the offshore, is it fair to say the actual deepwater drilling moratorium coupled with a tighter regulatory climate in the Gulf will curtail your domestic offshore growth prospects for the next couple years?

Larry Washow: It’s hard to know, but it’s probably a concern that we have. That’s why I mentioned the moratorium because I think it is that unpredictability that makes it difficult. We’re positioned well to expand around the world and we’re doing that, but the Gulf of Mexico is the primary area where we’re generating revenue and profitability, so anything that occurs that impacts that in a negative way doesn't help us for sure.

Rich Wesolowski: Okay. So last one, if you look three to five years out in your oilfield business, would you expect the land-based work to take a greater share of revenue than it does today?

Larry Washow: I think overall for the segment, no. I think the international business will be in three years, 30%, 35%, maybe 40% of our business, most of which is deepwater. It will be in the deepwater in the Gulf. The land-based activity will pick up, particularly for some of our nitrogen and some of the other services we offer in that segment. But, I think the deepwater’s going to continue to be the major play there.

Rich Wesolowski: Great. Thanks again.

Larry Washow: Thanks Rich.

Operator: And we have no further questions from the phone audience at this time. I'd like to turn the conference back over to our speakers for any additional or closing remarks.

Larry Washow: Thank you very much. I appreciate you joining the call today and I look forward to talking with you in a quarter. Thank you.

Operator: Ladies and gentlemen, that does conclude today’s conference call. We'd like to thank you all for your participation.

END