UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________________________________________________________

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2009
	For the quarterly period ended December 31, 2009
	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 0 1-~~10068~~8327

ICO, INC.

(Exact name of registrant as specified in its charter)

TEXAS	76-0566682
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1811 Bering Drive, Suite 200
Houston, Texas	77057
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number (713) 351-4100

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.

~~YESx NO o~~YES x NOo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o NO o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated ~~filer x~~ filerx

Non-accelerated ~~filero~~filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~YES o~~ YESo NO x

There were 27,~~627~~724,~~092~~ 820 shares of common stock without par value

outstanding as of ~~July~~January 2427, ~~2009~~2010.

ICO, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

Part I. Financial Information		Page
	Item 1. Financial Statements
	Consolidated Balance Sheets as of June 30, 2009 and September 30, 2008	3
	Consolidated Balance Sheets as of December 31, 2009 and September 30, 2009	3
	Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2009 and 2008	4
	Consolidated Statements of Operations for the Three Months Ended December 31, 2009 and 2008	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2009 and 2008	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended December 31, 2009 and 2008	5
	Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2009 and 2008	6
	Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2009 and 2008	6
	Notes to Consolidated Financial Statements	7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	3628
	Item 4. Controls and Procedures	3730
Part II. Other Information
	Item 1. Legal Proceedings	3830
	Item 1A. Risk Factors	3830
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 6. Exhibits	31
	Item 6. Exhibits	38

-2-

PART I ― FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ICO, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited and in ~~thousands~~Thousands, except share data)

		June 30,			September 30,
	December 31,				September 30,
ASSETS	2009	~~2009~~			~~2008~~2009
Current Assets:
Cash and cash equivalents	$	2313,~~589~~921		$	~~5,589~~$	21,880
Trade receivables (less allowance for doubtful accounts
of $3,971 and $2,973, respectively)		54,155			75,756
of $3,688 and $3,746, respectively)		57,444				57,124
Inventories		3440,~~886~~997			~~53,458~~	37,397
Deferred income taxes		1,~~844~~751			~~2,056~~	1,848
Prepaid and other current assets		56,~~379~~178			~~10,514~~	6,446
Total current assets		~~119~~120,~~853~~291			~~147,373~~	124,695
Property, plant and equipment, net		5756,~~321~~158			~~61,164~~	57,144
Goodwill		4,549			~~8,689~~	4,549
Deferred income taxes		34,~~785~~596			~~2,709~~	4,128
Other assets		1,~~316~~767			~~1,161~~	1,757
Total assets	$	~~186~~187,~~824~~361		$	~~221,096~~$	192,273
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings under credit facilities	$	~~159~~557		$	~~9,607~~$	-
Current portion of long-term debt		1311,~~138~~935			~~15,201~~	12,980
Accounts payable		32,~~215~~410			~~37,674~~	33,281
Accrued salaries and wages		4,~~604~~435			~~5,978~~	4,997
Other current liabilities		89,~~402~~414			~~11,912~~	9,344
Total current liabilities		58,~~518~~751			~~80,372~~	60,602
Long-term debt, net of current portion		2016,~~214~~420			~~25,122~~	18,823
Deferred income taxes		4,~~644~~717			~~5,039~~	4,786
Other long-term liabilities		2,~~472~~108			~~2,728~~	2,907
Total liabilities		8581,~~848~~996			~~113,261~~	87,118
Commitments and contingencies		-			-	-
Stockholders' equity:
Undesignated preferred stock, without par value -
500,000 shares authorized, no shares issued and outstanding		-			-	-
Common stock, without par value - 50,000,000 shares authorized;
Common stock, without par value - 50,500,000 shares authorized;
28,205,173 and 27,817,673 shares issued, respectively		55,247			54,756
28,302,921 and 28,205,173 shares issued, respectively		55,787				55,248
Additional paid-in capital		7271,~~814~~905			~~72,241~~	73,081
Accumulated other comprehensive income		~~408~~2,524			~~3,022~~	2,723
Accumulated deficit		(2421,~~476~~834	)		~~(21,641~~	)(22,880	)
Treasury stock, at cost, 578,081 and 90,329 shares, respectively		(3,017	)		(543	)
Treasury stock, at cost, 578,081 shares		(3,017	)			(3,017	)
Total stockholders' equity		~~100~~105,~~976~~365			~~107,835~~	105,155
Total liabilities and stockholders' equity	$	~~186~~187,~~824~~361		$	~~221,096~~$	192,273

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

-3-

ICO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in ~~thousands~~Thousands, except share and per share data)

	Three Months Ended						~~Nine Months Ended~~
	June 30,						June 30,
	December 31,
	2009			2008			~~2009~~			~~2008~~
Revenues:
Revenues	$	85,371		$	79,358
Sales	$	62,870		$	105,494		$	198,144		$	308,802
Cost and expenses:
Services		7,127			10,224			21,341			29,907
Cost of sales and services (exclusive of depreciation
Total revenues		69,997			115,718			219,485			338,709
shown below)		70,800			69,248
Cost and expenses:
Selling, general and administrative		10,152			9,138
Cost of sales and services (exclusive of depreciation
Depreciation and amortization		2,022			1,713
shown below)		57,383			97,234			184,878			281,845
Long-lived asset impairment, restructuring and other costs (income)		142			(293	)
Selling, general and administrative		8,677			10,441			26,825			31,431
Operating income (loss)		2,255			(448	)
Depreciation and amortization		1,835			1,932			5,267			5,580
Other expense:
Goodwill Impairment		-			-			3,450			-
Interest expense, net		(527	)		(639	)
Impairment, restructuring and other costs (income)		(87	)		(356	)		(360	)		(1,756	)
Other		(8	)		(331	)
Operating income (loss)		2,189			6,467			(575	)		21,609
Income (loss) before income taxes		1,720			(1,418	)
Other income (expense):
Provision (benefit) for income taxes		674			(342	)
Interest expense, net		(539	)		(1,039	)		(1,713	)		(3,158	)
Net income (loss) applicable to Common Stock	$	1,046		$	(1,076	)
Other income (expense)		(192	)		165			(571	)		(36	)
Basic net income (loss) per common share	$	.04		$	(.04	)
Income (loss) from continuing operations before income taxes		1,458			5,593			(2,859	)		18,415
Diluted net income (loss) per common share	$	.04		$	(.04	)
Provision (benefit) for income taxes		199			960			(24	)		5,263
Basic weighted average shares outstanding		27,691,000			27,412,000
Income (loss) from continuing operations		1,259			4,633			(2,835	)		13,152
Diluted weighted average shares outstanding		28,025,000			27,412,000
Income (loss) from discontinued operations, net of
provision (benefit) for income taxes of $0, $0,
$0 and $(9), respectively		-			-			-			(16	)
Net income (loss)	$	1,259		$	4,633		$	(2,835	)	$	13,136
Preferred Stock dividends		-			-			-			(1	)
Net income (loss) applicable to Common Stock	$	1,259		$	4,633		$	(2,835	)	$	13,135
Basic income (loss) per share:
Income (loss) from continuing operations	$	.05		$	.17		$	(.10	)	$	.48
Income (loss) from discontinued operations		-			-			-			-
Net income (loss) per common share	$	.05		$	.17		$	(.10	)	$	.48
Diluted income (loss) per share:
Income (loss) from continuing operations	$	.05		$	.17		$	(.10	)	$	.47
Income from discontinued operations		-			-			-			-
Net income (loss) per common share	$	.05		$	.17		$	(.10	)	$	.47
Basic weighted average shares outstanding		27,077,000			27,433,000			27,083,000			27,202,000
Diluted weighted average shares outstanding		27,221,000			27,975,000			27,083,000			27,975,000

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

-4-

ICO, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited and in ~~thousands)~~ Thousands)

	Three Months Ended						~~Nine Months Ended~~
	June 30,						June 30,
	December 31,
	2009			2008			~~2009~~			~~2008~~
Net income (loss)	$	1,~~259~~046		$	4(1,~~633~~076	)	$	~~(2,835~~	)	$	~~13,136~~
Other comprehensive income (loss)
Foreign currency translation adjustment		~~5,299~~(596	)		~~170~~(4,418	)		~~(1,373~~	)		~~4,594~~
Unrealized gain (loss) on foreign currency hedges		~~(190~~340	)		~~404~~(864	)		~~(776~~	)		~~813~~
Unrealized loss on interest rate swaps		(39	)		-			(465	)		-
Unrealized gain (loss) on interest rate swaps		57			(458	)
Comprehensive income (loss)	$	~~6,329~~847		$	5(6,~~207~~816	)	$	~~(5,449~~	)	$	~~18,543~~

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

-5-

ICO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in ~~thousands)~~ Thousands)

	Nine Months Ended
	Three Months Ended
	June 30,
	December 31,
	2009			2008
Cash flows provided by (used for) operating activities:
Net income (loss)	$	(21,~~835~~046	)	$	13(1,~~136~~076	)
Loss from discontinued operations		-			16
Depreciation and amortization		2,022			1,713
Depreciation and amortization		5,267			5,580
Stock based compensation expense		249			148
Gain on involuntary conversion of fixed assets		-			(500	)
Long-lived asset impairment, restructuring and other costs		-			(520	)
Stock based compensation expense		527			683
Goodwill impairment		3,450			-
Changes in assets and liabilities providing/(requiring) cash:
Receivables		~~19,404~~(578	)		1012,~~444~~192
Inventories		16(5,~~776~~045	)		(814,~~342~~411	)
Other assets		~~2,846~~(22	)		531,728
Income taxes payable		~~(756~~529	)		~~(602~~18	)
Deferred taxes		(~~1,408~~412	)		(~~629~~871	)
Accounts payable		~~(5,574~~592	)		(1411,~~847~~527	)
Other liabilities		(~~1,591~~986	)		(12,~~105~~695	)
Net cash provided by operating activities by continuing operations		36,106			3,887
Net cash provided by (used for) operating activities by continuing operations		(2,605	)		13,521
Net cash used for operating activities by discontinued operations		(103	)		(59	)
Net cash provided by operating activities by discontinued operations		-			184
Net cash provided by operating activities		36,003			3,828
Net cash provided by (used for) operating activities		(2,605	)		13,705
Cash flows provided by (used for) investing activities:
Cash flows used for investing activities:
Capital expenditures		(21,~~358~~015	)		(111,~~026~~364	)
Proceeds from dispositions of property, plant and equipment		-			56
Net cash used for investing activities		(1,015	)		(1,364	)
Cash received from involuntary conversion of fixed assets		480			2,337
Net cash used for investing activities for continuing operations		(1,878	)		(8,633	)
Cash flows provided by (used for) financing activities:
Common stock transactions		44			2,583
Common stock issued		12			44
Purchases of Treasury Stock		~~(1,990~~-	)		-(1,990	)
Redemption of Preferred Stock		-			(200	)
Payment of dividend on Common Stock		(1,386	)		-
Payment of dividend on Preferred Stock		-			(1,312	)
Increase (decrease) in short-term borrowings under credit facilities, net		557			(2,446	)
Increase (decrease) in short-term borrowings under credit facilities, net		(8,356	)		(3,437	)
Repayments of long-term debt		(3,448	)		(2,507	)
Proceeds from long-term debt		400			8,265
Net cash used for financing activities		(4,265	)		(6,899	)
Repayments of long-term debt		(6,993	)		(6,001	)
Effect of exchange rates on cash		(74	)		(56	)
Net cash used for financing activities for continuing operations		(16,895	)		(102	)
Net increase (decrease) in cash and equivalents		(7,959	)		5,386
Effect of exchange rates on cash		770			255
Cash and cash equivalents at beginning of period		21,880			5,589
Net increase (decrease) in cash and equivalents		18,000			(4,652	)
Cash and cash equivalents at end of period	$	13,921		$	10,975
Cash and cash equivalents at beginning of period		5,589			8,561
Cash and cash equivalents at end of period	$	23,589		$	3,909

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

-6-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF FINANCIAL STATEMENTS

The interim financial statements furnished reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of the interim period presented and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). All such adjustments are of a normal recurring nature. The fiscal year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three ~~and nine~~ months ended December ~~June 30~~31, 2009 are not necessarily indicative of the results expected for the year ended September 30, ~~2009~~2010. These interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2008~~2009. The accounting policies for the periods presented are the same as described in Note 1 – “Summary of Significant Accounting Policies” to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2008~~ 2009.

NOTE 2. ~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~ MERGER

In On December ~~2007~~2, 2009, the ~~Financial~~Company ~~Accounting~~signed ~~Standards~~a ~~Board~~definitive ~~(“FASB”)~~merger ~~issued~~agreement ~~Statement of Financial Accounting Standard No. 141~~ (~~revised~~the ~~2007), Business Combinations (~~“~~SFAS 141 (R)~~merger agreement”) ~~and~~with ~~SFAS No~~A. ~~160~~Schulman, ~~Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No~~Inc. 51 (“~~SFAS~~A. ~~160~~Schulman”)~~. The~~ ~~goal~~in ofa ~~these~~combined ~~standards~~cash isand tostock transaction ~~improve,~~pursuant ~~simplify,~~to ~~and~~which ~~converge~~100% ~~internationally~~of the ~~accounting~~outstanding ~~for~~stock ~~business~~of ~~combinations and~~ the ~~reporting~~Company ofwill be ~~noncontrolling~~acquired ~~interests~~by ~~in consolidated financial statements~~A. ~~SFAS~~ ~~141~~Schulman (R)the ~~replaces SFAS No~~“merger”). Under ~~141 and provides greater consistency in~~ the ~~accounting~~terms ~~and financial reporting~~ of ~~business combinations. SFAS 141 (R) requires~~ the ~~acquiring~~ ~~entity~~merger inagreement, athe ~~business~~total ~~combination~~consideration tois ~~recognize~~comprised ~~all~~of ~~assets~~$105.0 ~~acquired~~million ~~and liabilities assumed~~ in ~~the transaction~~ cash and ~~any~~5.1 ~~non-controlling~~million ~~interest~~shares ~~in the acquiree at the acquisition date, measured at the fair value as~~ of ~~that date~~A. ~~This~~Schulman ~~includes~~common ~~the~~stock. ~~measurement~~Closing of the ~~acquirer~~transaction is ~~shares~~subject ~~issued~~to inapproval ~~consideration~~by ~~for~~at aleast ~~business~~two-thirds ~~combination, the recognition~~ of ~~contingent consideration,~~ the ~~accounting~~votes ~~for~~entitled ~~pre-acquisition~~to ~~gain~~be ~~and loss contingencies, the recognition of capitalized in-process research and development, the accounting~~cast ~~for~~by ~~acquisition-related~~holders ~~restructuring cost accruals, the treatment~~ of ~~acquisition-related transaction costs and~~ the ~~recognition of changes in the acquirer’~~Company's ~~income~~Common ~~tax~~Stock, ~~valuation~~regulatory ~~allowance~~approvals and ~~deferred~~other customary ~~taxes. SFAS~~closing ~~160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements~~conditions. ~~SFAS~~On ~~141~~January ~~(R)~~18, is2010, ~~effective for business combinations for which~~ the ~~acquisition~~Federal ~~date is~~Trade onCommission orgranted ~~after~~early ~~the~~termination ~~beginning~~ of the ~~first~~waiting ~~annual reporting~~ period ~~beginning~~under onthe Hart-Scott-Rodino orAntitrust ~~after~~Improvements ~~December~~Act ~~15,~~of ~~2008~~1976. ~~Early adoption is not permitted.~~ ~~The~~If ~~provisions of SFAS 141 (R) are effective for~~ the ~~Company~~merger agreement ~~on October 1, 2009. As SFAS 141 (R) will apply to future acquisitions, it~~ is ~~not~~terminated ~~possible~~before ~~at this time for~~ the Company tocompletes ~~determine~~ the ~~impact~~merger, ofunder ~~adopting this standard. Similarly~~certain circumstances, ~~SFAS 160 is effective for~~ the Company ~~for~~may ~~the~~be ~~fiscal~~required ~~year~~to ~~2010,~~pay ~~with~~either ~~early~~a ~~adoption~~termination ~~also~~fee ~~being~~to ~~prohibited~~A. ~~The~~Schulman ~~Company~~in ~~is assessing~~ the ~~impact~~amount ~~that~~of ~~SFAS~~$6.8 ~~160~~million ~~may~~or ~~have~~up onto ~~its~~$1.0 ~~financial~~million ~~position,~~in ~~results~~expense reimbursement instead of ~~operations~~the ~~and~~termination ~~cash flows~~fee.

In March 2008, the FASB issued SFAS No. 161 (“SFAS 161”), Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This Statement changes the disclosureNOTE ~~requirements for derivative instruments and hedging activities~~3. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company adopted the provisions of SFAS 161 in the RECENTLY ~~second~~ISSUED ~~fiscal~~ACCOUNTING ~~quarter of 2009, but it did not have a significant impact on its financial position, results of operations or cash flows.~~PRONOUNCEMENTS

InBusiness Combinations ~~April~~in ~~2008,~~Consolidated Financial Statements – In December 2007, the Financial Accounting Standards Board (“FASB”) issued ~~FSP~~authoritative ~~FAS~~guidance that ~~142-3,~~establishes ~~Determination~~the ofprinciples ~~the~~and ~~Useful~~requirements ~~Life~~for ofhow ~~Intangible~~an ~~Assets~~acquirer (~~"FSP~~i) recognizes ~~FAS~~and ~~142-3").~~measures ~~FSP~~in ~~FAS~~its ~~142-3~~financial ~~amends~~statements the ~~factors~~identifiable ~~that~~assets acquired, ~~should~~the beliabilities ~~considered~~assumed, inand ~~developing~~any ~~renewal~~noncontrolling orinterest ~~extension~~in ~~assumptions~~the acquiree; ~~used~~(ii) torecognizes ~~determine~~and measures the ~~useful~~goodwill ~~life~~acquired ofin athe ~~recognized intangible~~business ~~asset~~combination ~~under~~or ~~SFAS~~a ~~No.~~gain ~~142,~~from ~~Goodwill~~a bargain purchase; and ~~Other~~(iii) ~~Intangible~~determines ~~Assets~~what information ~~("SFAS~~to ~~142").~~disclose ~~The~~to ~~intent~~enable users of ~~FSP~~the ~~FAS~~financial ~~142-3~~statements is to ~~improve~~evaluate the nature and financial effects of the ~~consistency~~business ~~between~~combination. The new accounting rules require the ~~useful~~acquiring ~~life~~entity ofin a ~~recognized~~business ~~intangible~~combination ~~asset~~to recognize ~~under~~all ~~SFAS~~assets ~~142~~acquired and liabilities assumed in the ~~period~~transaction ofand ~~expected~~any non-controlling ~~cash~~interest ~~flows~~in ~~used~~the toacquiree ~~measure~~at the acquisition date, measured at the fair value as of that date. This includes the ~~asset~~measurement ~~under~~of ~~SFAS~~the ~~141(R)~~acquirer shares ~~and~~issued ~~other~~in ~~applicable~~consideration for a business combination, the recognition of contingent consideration, the accounting ~~literature.~~for ~~FSP~~pre-acquisition ~~FAS~~gain ~~142~~and loss contingencies, the recognition of capitalized in-3process isresearch ~~effective~~and development, the accounting for ~~financial~~acquisition-related ~~statements~~restructuring ~~issued~~cost ~~for~~accruals, the ~~fiscal~~treatment ~~years~~of ~~beginning~~acquisition ~~after~~related ~~December~~transaction ~~15,~~costs ~~2008.~~and the recognition of changes in the acquirer’s income tax valuation allowance and deferred taxes. The guidance was effective for the Company ~~does~~on ~~not~~October ~~anticipate~~1, 2009.For ~~that~~any acquisitions completed during fiscal year 2010, the ~~adoption~~Company ofexpects ~~FSP~~the ~~FAS~~adoption ~~142-3~~of the guidance will have aan ~~material~~ impact on its ~~results~~consolidated financial statements; however, the magnitude of ~~operations~~the orimpact ~~financial~~will ~~position~~depend upon the nature, terms and size of any acquisitions the Company consummates.

InNoncontrolling Interests ~~June~~– ~~2008~~In December 2007, the FASB issued ~~FASB~~new ~~Staff~~accounting ~~Position~~guidance ~~(“FSP”)~~on ~~Emerging~~noncontrolling interests. ~~Issues~~The ~~Task~~new ~~Force~~accounting ~~(“EITF”)~~rules ~~03-6-1,~~clarify ~~Determining~~that ~~Whether~~a ~~Instruments~~noncontrolling ~~Granted~~interest in ~~Share-Based~~a subsidiary ~~Payment~~is ~~Transactions~~an ~~Are~~ownership ~~Participating~~interest ~~Securities. This~~in ~~FSP~~the ~~addresses~~consolidated ~~whether~~entity ~~instruments~~that should be ~~granted~~reported as equity in ~~share-based~~the ~~payment~~consolidated ~~transactions~~financial ~~are~~statements. ~~participating~~The ~~securities~~implementation of ~~prior~~new accounting rules related to ~~vesting~~noncontrolling ~~and~~interests, ~~therefore~~effective October 1, ~~need~~2009, todid benot ~~included~~have ina ~~computing~~material ~~earnings~~impact ~~per~~on ~~share~~the ~~under~~Company’s financial position, results of operations or cash flows, as the ~~two-class~~Company ~~method~~had ~~described~~no noncontrolling ininterests ~~SFAS~~during ~~No.~~the ~~128,~~three ~~Earnings~~months ~~Per~~ended ~~Share. This~~December ~~FSP~~31, 2009.

Share-based payment transactions and participating securities – In June 2008, the FASB issued authoritative guidance governing whether instruments granted in share-based payment transactions are participating securities. This guidance addresses whether these instruments are participating securities prior to vesting and therefore need to be included in computing earnings per share under the two-class method. The implementation of this new guidance, effective October 1, 2009, changed reported weighted average shares outstanding but it did not have a material impact on the Company’s earnings per share calculation.

-7-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~will~~Variable Interest beEntities ~~effective~~- ~~for~~In June 2009, the ~~Company~~FASB ~~beginning~~issued ~~with~~guidance that amends the ~~first~~consolidation ~~quarter~~guidance applicable to variable interest entities. The provisions of this guidance significantly affect the overall consolidation analysis under previous guidance. It is effective as of the beginning of the first fiscal year ~~2010~~that ~~and~~begins after November 15, 2009; specifically it will be effective ~~applied~~for ~~retrospectively~~the Company beginning in October 1, 2010. The Company isdoes ~~currently~~not expect ~~evaluating~~ the ~~impact~~provisions of ~~adopting~~ this ~~new~~guidance ~~standard~~to have a material effect on our consolidated financial condition, results of operations or cash flows.

In December 2008, the FASB issued FASB Staff Position (“FSP”) FAS 132 (R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which amends SFAS No. 132, Employers’ Disclosures about PensionsNOTE ~~and Other Postretirement Benefits~~4. ~~This FSP provides guidance on an employer~~ STOCKHOLDERS’s ~~disclosures about plan assets of a defined benefit pension~~EQUITY

orIn September ~~other~~2008, ~~postretirement~~the ~~plan. The~~Company ~~objectives~~announced that its Board of ~~these~~Directors ~~disclosures~~authorized ~~are~~the repurchase of up to ~~provide~~$12.0 ~~users~~million of ~~financial~~its ~~statements~~outstanding ~~with~~Common Stock through September 2010 (the “Share Repurchase Plan”). Through December 2, 2009, 578,081 shares had been repurchased for total cash consideration of $3.0 million at an ~~understanding~~average price of: $ 5.22 per share. In connection with the merger agreement, on December 2, 2009, the Board of Directors terminated the Share Repurchase Plan.

aNOTE 5. EARNINGS PER ~~how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies;~~SHARE

bThe Company presents both basic and diluted earnings per share (“EPS”) amounts. Basic EPS is computed by dividing income available to common shareholders by the ~~major~~weighted-average ~~categories~~number of ~~plan~~common ~~assets;~~shares outstanding for the period. Diluted EPS assumes the conversion of all dilutive securities.

cThe difference between basic and diluted weighted-average common shares results from the assumed exercise of outstanding stock options. There were no potentially dilutive securities for the ~~inputs~~three ~~and~~months ~~valuation~~ended ~~techniques~~December ~~used~~31, to2008 ~~measure~~due to the ~~fair~~Company reporting ~~value~~a net loss. The following presents the number of incremental ~~plan~~weighted-average ~~assets;~~shares used in computing diluted EPS amounts:

d. the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and

	Three Months Ended December 31,
Weighted-average shares outstanding:	2009		2008

Basic		27,691,000		27,412,000
Incremental shares from stock – based compensation		334,000		-
Diluted		28,025,000		27,412,000

e.The ~~significant~~total amount ~~concentrations~~ of ~~risk~~anti-dilutive ~~within~~securities ~~plan~~for ~~assets.~~the three months ended December 31, 2009 and 2008 were as follows:

The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. This FSP will be effective for the Company beginning with the fiscal year ending financial statements at September 30, 2010. The Company is currently evaluating the impact of adopting this new standard.

	Three Months Ended
	December 31,
	2009		2008
Total shares of anti-dilutive securities		609,000		979,000

~~In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting~~NOTE Principles (“SFAS 168”), which establishes the FASB Accounting Standards CodificationTM (the “Codification”) which supersedes all existing accounting standard documents and will become the single source of authoritative non-governmental U6.S. GAAP. All other accounting literature not included in the Codification will be considered non-authoritative. The Codification was implemented on July 1, 2009 and will be effective for interim and annual periods ending after September 15, 2009. We expect to conform our financial statements and related Notes to the new Codification for the quarter ended September 30, 2009. INVENTORIES

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”), which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements. SFAS 165 distinguishes between events requiring recognition in theInventories ~~financial~~consisted ~~statements and those that may require disclosure in the financial statements. Furthermore, SFAS 165 requires disclosure~~ of the date through which subsequent events were evaluated. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. We adopted the provisions of SFAS 165 during the period ended June 30, 2009, and the Company did not have any material recognizable subsequent events. However, the Company did have unrecognizable subsequent events as discussed further in Note 16, Subsequent Events. The Company performed an evaluation of subsequent events through August 7, 2009, which is the date these financial statements were issued.following:

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46 (R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in October 2011. The Company does not expect the provisions of SFAS 167 to have a material effect on the consolidated financial position, results of operations or cash flows of the Company.

	December 31,		September 30,
	2009		2009
	(Dollars in Thousands)
Raw Materials	$	21,754	$	18,407
Finished Goods		18,149		17,879
Supplies		1,094		1,111
Total Inventories	$	40,997	$	37,397

In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FAS 141(R)-1”), which applies to all assets acquired and liabilities assumed in a businessNOTE ~~combination that arise from contingencies that would be within the scope of SFAS No~~7. 5, Accounting for Contingencies (“SFAS No. 5”), if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141(R), Business Combinations (“SFAS No. 141-(R)”). FAS INCOME 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The provisions of FAS 141 (R)-1 are effective for the Company on October 1, 2009. As FAS 141 (R)-1 will apply to future acquisitions, it is not possible at this time for the Company to determine the impact of adopting this standard.TAXES

The amounts of income (loss) before income taxes attributable to domestic and foreign operations are as follows:

-8-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3. STOCKHOLDERS’ EQUITY

	Three Months Ended December 31,
	2009		2008
	(Dollars in Thousands)
Domestic	$	84	$	60
Foreign		1,636		(1,478	)
Total	$	1,720	$	(1,418	)

InThe provision ~~September 2008, the Company announced that its Board of Directors authorized the repurchase of up to $12.0 million of its outstanding Common Stock over a two year period ending September 2010~~ (~~the “Share Repurchase Plan”~~benefit)~~. The~~ ~~specific~~for ~~timing~~income ~~and~~taxes ~~amount~~consists of ~~repurchases~~the ~~will vary based on market conditions and other factors. The Share Repurchase Plan may be modified, extended or terminated at any time.~~following:

In September 2008, the Company repurchased 90,329 shares of Common Stock under the Share Repurchase Plan at an average price (excluding commissions) of $5.99 per share, for total cash consideration of $0.5 million. In October 2008, the Company repurchased 487,752 shares of Common Stock under the Share Repurchase Plan at an average price (excluding commissions) of $5.04 per share, for total cash consideration of $2.5 million. The Company did not repurchase any shares of its common stock during the second or third fiscal quarters of 2009.

	Three Months Ended December 31,
	2009			2008
	(Dollars in Thousands)
Current	$	1,063		$	204
Deferred		(389	)		(546	)
Total	$	674		$	(342	)

As Reconciliations of ~~September~~the ~~30,~~income ~~2007,~~tax ~~there~~expense ~~were 185,523 depositary certificates~~ (~~“Depositary Shares”~~benefit) ~~representing~~at the ~~Company’s~~federal ~~$6.75~~statutory ~~convertible~~rate ~~exchangeable preferred stock (“Preferred Stock”) outstanding, for which dividends in arrears~~ of ~~$1.2~~35% ~~million~~to ~~were owed. During~~ the ~~first quarter of fiscal year~~ ~~2008,~~Company's ~~the~~effective ~~holders~~rate offor ~~177,518 of~~ the ~~outstanding~~three ~~Depositary~~months ~~Shares~~ended ~~converted~~December ~~such Depositary Shares into 486~~31,~~321~~ ~~shares~~2009 ~~of Common Stock,~~ and ~~the~~2008 are Company redeemed the remaining 8,005 Depositary Shares at $25 per Depositary Share for a total consideration of $0.2 million. All the outstanding Depositary Shares representing the Preferred Stock were canceled by the Company at the time of redemption. No shares of Preferred Stock or Depositary Shares were outstanding as ~~of September 30, 2008.~~follows:

NOTE 4. EARNINGS PER SHARE

	Three Months Ended
	December 31,
	2009			2008
	(Dollars in Thousands)
Tax expense (benefit) at statutory rate	$	602		$	(496	)
Chargeback Reimbursement		-			(61	)
Foreign tax rate differential		(94	)		151
State taxes, net of federal benefit		-			22
Reinvestment Allowance tax credit		(31	)		-
Non-deductible transaction costs		240			-
Non-deductible expenses and other, net		(43	)		42
Income tax provision (benefit)	$	674		$	(342	)
Effective income tax rate		39%			24%

The Company’s ~~presents~~effective ~~both~~income ~~basic~~tax rates were a provision of 39% and ~~diluted~~a ~~earnings~~benefit ~~per~~of 24% ~~share~~during ~~(“EPS”)~~the ~~amounts~~three months ended December 31, 2009 and 2008, respectively. ~~Basic~~The ~~EPS~~higher iseffective ~~computed~~tax byrate ~~dividing~~during ~~income~~the ~~available~~three tomonths ended ~~common~~December ~~shareholders~~31, by2009 ~~the~~was ~~weighted-average~~primarily ~~number~~due ofto ~~common~~permanent ~~shares~~differences ~~outstanding~~from transaction ~~for~~costs associated with the ~~period. Diluted~~pending ~~EPS~~merger ~~assumes~~that ~~the~~will ~~conversion~~not ofbe ~~all~~deductible if ~~dilutive~~the ~~securities~~merger is completed. ~~There were~~ noThe ~~potentially~~lower ~~dilutive~~effective ~~securities~~tax ~~for~~rate in the ~~nine~~three months ended ~~June~~December 3031, ~~2009~~2008 ~~due~~was toprimarily a result of the ~~Company~~mix ~~reporting~~of apretax income or loss ~~from~~generated ~~continuing~~by the Company’s operations in various taxing jurisdictions and the impact of nondeductible items and other permanent differences.

The Company ~~difference~~does ~~between~~not ~~basic~~provide ~~and~~for ~~diluted~~U.S. ~~weighted-average~~income ~~common~~taxes ~~shares~~on ~~results~~foreign ~~from~~subsidiaries’ undistributed ~~the~~earnings ~~assumed~~intended ~~exercise~~to ofbe ~~outstanding~~permanently ~~stock~~reinvested ~~options~~in ~~and~~foreign operations. It ~~vesting~~is ofnot ~~restricted~~practicable ~~stock~~to ~~and~~estimate ~~assumed~~the ~~conversion~~amount of additional ~~the~~tax ~~Depositary~~that ~~Shares~~might ~~representing~~be payable should the ~~Preferred~~earnings ~~Stock~~be ~~which~~remitted ~~were~~or ~~outstanding~~should the ~~during~~Company asell ~~portion~~its stock in the subsidiaries. As of December 31, 2009, the ~~nine~~Company ~~months~~has ~~ended~~unremitted ~~June~~earnings ~~30,~~from ~~2008~~foreign subsidiaries of approximately $26.5 million. The ~~following~~ ~~presents~~Company has determined that the ~~number~~undistributed earnings of ~~incremental~~foreign ~~weighted-average~~subsidiaries, ~~shares~~exclusive ~~used~~of inthose ~~computing~~repatriated ~~diluted~~under ~~EPS~~the American ~~amounts:~~Jobs Creation Act, will be permanently reinvested.

	Three Months Ended June 30,		Nine Months Ended June 30,
Weighted-average shares outstanding:	2009	2008	2009	2008
Basic	27,077,000	27,433,000	27,083,000	27,202,000
Incremental shares from stock – based compensation	144,000	542,000	-	729,000
Incremental shares from preferred stock	-	-	-	44,000
Diluted	27,221,000	27,975,000	27,083,000	27,975,000

The total amount of anti-dilutive securities for the three and nine months ended June 30, 2009 and 2008 were as follows:

	Three Months Ended		Nine Months Ended
	June 30,		June 30,
	2009	2008	2009	2008
Total shares of anti-dilutive securities	1,400,000	841,000	1,544,000	682,000

-9-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~NOTE~~The Company 5files income tax returns in the U. ~~INVENTORIES~~S. federal jurisdiction, various states and foreign jurisdictions. The Company is no longer subject to U.S. income tax examinations for periods preceding 2006. In the Company’s other major tax jurisdictions, the earliest years remaining open to examination are as follows: France - 2007, Australia – 2005, Italy - 2005 and the Netherlands – 2004. Additionally, in its other foreign jurisdictions, the Company is no longer subject to tax examinations for periods preceding 2002.

~~Inventories~~At ~~consisted~~December of31, 2009, the Company ~~following:~~had no unrecognized tax benefits or liabilities. In the event that the Company incurs interest and penalties related to tax matters in the future, such interest and penalties will be reported as income tax expense. The Company does not anticipate that any tax contingencies which may arise in the next twelve months will have a material impact on its financial position or results of operations.

	June 30,		September 30,
	2009		2008
	(Dollars in Thousands)
Raw Materials	$	19,745	$	26,166
Finished Goods		14,054		25,868
Supplies		1,087		1,424
Total Inventories	$	34,886	$	53,458

NOTE 8. COMMITMENTS AND CONTINGENCIES

~~NOTE~~The Company 6has letters of credit outstanding in the United States of approximately $1. ~~INCOME~~7 ~~TAXES~~million as of both December 31, 2009 and September 30, 2009, and foreign letters of credit outstanding of $0.7 million as of both December 31, 2009 and September 30, 2009.

~~The~~Thibodaux Litigation. Since September 2004, the Company has been a defendant in litigation pending in District Court in the Parish of Orleans, Louisiana (the “Thibodaux Lawsuit”) filed by C.M. Thibodaux Company (“Thibodaux”). Other defendants in the case include Intracoastal Tubular Services, Inc. (“ITCO”), thirty different oil companies (the “Oil Company Defendants”), several insurance companies and four trucking companies. Thibodaux, the owner of industrial property located in Amelia, Louisiana that has historically been leased to tenants conducting oilfield services businesses, contends that the property has been contaminated with naturally occurring radioactive material (“NORM”). NORM is found naturally occurring in the earth, and when pipe is removed from the ground it is not uncommon for the corroded rust on the pipe to contain very small amounts of NORM. The ~~income~~Company’s ~~before~~former ~~income~~Oilfield ~~taxes~~Services ~~attributable~~business leased a portion of the subject property from Thibodaux. Thibodaux contends that the subject property was contaminated with NORM generated during the servicing of oilfield equipment by the Company and other tenants, and further alleges that the Oil Company Defendants (customers of Thibodaux’s tenants) and trucking companies (which delivered tubular goods and other oilfield equipment to ~~domestic~~the subject property) allowed or caused the uncontrolled dispersal of NORM on Thibodaux’s property. Thibodaux seeks recovery from the defendants for clean-up costs, diminution or complete loss of property values, and ~~foreign~~other damages. Discovery ~~continuing~~in the Thibodaux Lawsuit is ongoing, and the Company intends to assert a vigorous defense in this litigation. At this time, the Company does not believe it has any liability in this matter. In the event the Company is found to have liability, the Company believes it has sufficient insurance coverage applicable to this claim subject to a $1.0 million self-insured retention. However, an adverse judgment against the Company, combined with a lack of insurance coverage, could have a material adverse effect on the Company's financial condition, results of operations ~~are~~or ascash ~~follows:~~flows.

	Three Months Ended June 30,					Nine Months Ended June 30,
	2009			2008		2009			2008
	(Dollars in Thousands)
Domestic	$	(370	)	$	2,239	$	348		$	8,710
Foreign		1,828			3,354		(3,206	)		9,705
Total	$	1,458		$	5,593	$	(2,858	)	$	18,415

Wastewater Discharge Permit. In the second quarter of fiscal year 2009, the Company self-reported to the Texas Commission on Environmental Quality (“TCEQ”) facts surrounding certain events of noncompliance with its Bayshore Industrial facility’s Texas Pollutant Discharge Elimination System wastewater discharge permit, and subsequently received notification from the TCEQ that it is conducting an investigation into the matter. The Company has cooperated in the investigation. The Company has taken certain corrective action with respect to the operation of its wastewater treatment facility and the requirements of its wastewater discharge permit. In July 2009 the Company received a Notice of Violation (Notice) from the TCEQ stating that an alleged violation of the permit was noted in the TCEQ’s investigation, and requesting that the Company provide documentation of the corrective action and demonstration that compliance has been achieved for the alleged violation. The Company complied with the TCEQ’s request for information, and subsequently received notification from the TCEQ confirming that the TCEQ was satisfied that appropriate corrective action had been taken. No administrative penalties have been imposed on the Company as a result of the Notice; however, the investigation is still pending. It is possible that the investigation could result in the Company receiving civil and/or criminal penalties. An adverse finding in the investigation and any resulting penalties imposed on the Company could have a material adverse effect on the Company's financial condition, results of operations or cash flows. However, at this time, the Company does not believe that the outcome will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The provision (benefit) for income taxes from continuing operations consists of the following:

	Three Months Ended June 30,					Nine Months Ended June 30,
	2009		2008			2009			2008
	(Dollars in Thousands)
Current	$	44	$	1,253		$	894		$	5,272
Deferred		155		(293	)		(918	)		(9	)
Total	$	199	$	960		$	(24	)	$	5,263

Reconciliations of the income tax expense (benefit) for continuing operations at the federal statutory rate of 35% to the Company's effective rate for the three and nine months ended June 30, 2009 and 2008 are as follows:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(Dollars in Thousands)
Tax expense (benefit) at statutory rate	$	511		$	1,959		$	(1,001	)	$	6,447
Chargeback Reimbursement		-			-			(61	)		(147	)
Foreign tax rate differential		(16	)		(75	)		28			(102	)
Change in the deferred tax assets valuation allowance		-			(724	)		-			(698	)
Reinvestment Allowance tax credit		(70	)		(202	)		(70	)		(202	)
Non-deductilble goodwill impairment		-			-			1,225			-
Research and Development tax credits		(139	)		-			(139	)		-
Non-deductilble expenses and other, net		(87	)		2			(6	)		(35	)
Income tax provision (benefit)	$	199		$	960		$	(24	)	$	5,263
Effective income tax rate		14%			17%			1%			29%

-10-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~The Company does not provide for U~~Merger Litigation.~~S. income taxes on foreign subsidiaries’ undistributed earnings intended to be permanently reinvested in foreign operations.~~ ItFollowing ~~is not practicable to estimate~~ the ~~amount~~announcement of ~~additional tax that might be payable should~~ the ~~earnings~~proposed besale ~~remitted or should the Company sell its stock in the subsidiaries. As~~ of ~~June 30, 2009,~~ the Company ~~has~~to ~~unremitted earnings from foreign subsidiaries of approximately $23~~A.6 ~~million. The Company has determined that the undistributed earnings of foreign subsidiaries~~Schulman, ~~exclusive~~two oflawsuits ~~those~~were ~~repatriated~~filed ~~under~~as ~~the American Jobs Creation Act, will be permanently reinvested.~~follows:

~~The~~Fred ~~Company~~Wilebski v. ~~files~~Gregory ~~income~~T. Barmore, ~~tax~~et ~~returns~~al., Cause No. 2009-77782, in the U152nd Judicial District Court of Harris County, Texas.S. ~~federal~~On ~~jurisdiction~~December 7, ~~various~~2009, ~~states~~plaintiff filed this suit against the Company, all of its directors and ~~foreign~~A. ~~jurisdictions~~Schulman as a class action on behalf of all the Company’s shareholders except those affiliated with any of the defendants. ~~The~~On ~~Company~~January is12, no2010, ~~longer~~plaintiff ~~subject~~filed an amended petition, which purports to Ubring claims derivatively on behalf of the Company.S. Plaintiff ~~income~~alleges ~~tax~~that ~~examinations~~the ~~for~~director ~~periods~~defendants ~~preceding~~breached their ~~2006~~fiduciary duties, including duties of loyalty, due care, independence, good faith and fair dealing, and wasted the Company’s assets. InPlaintiff claims that the consideration to be paid to the Company’s ~~other~~shareholders ~~major~~under ~~tax~~the ~~jurisdictions,~~merger agreement is unfair and inadequate; that the ~~earliest~~termination ~~years~~fee ~~remaining~~and ~~open~~deal toprotection ~~examination~~provisions of the merger agreement are unfair, asunreasonable, and/or improper; and that the directors failed to ensure a ~~follows:~~fair ~~France~~and -proper ~~2006,~~process ~~Australia~~to –maximize ~~2005,~~value ~~Italy~~for -all ~~2004~~the Company’s shareholders and wasted corporate assets. Plaintiff further maintains that the ~~Netherlands~~Form S-4 –Registration ~~2003~~Statement filed by A. ~~Additionally,~~Schulman with the SEC in ~~its~~connection ~~other~~with the ~~foreign~~Merger ~~jurisdictions,~~fails to provide the Company’s isshareholders nowith ~~longer~~material ~~subject~~information and/or toprovides ~~tax~~them ~~examinations~~with materially misleading information. Plaintiff brings additional claims for ~~periods~~aiding ~~preceding~~and abetting ~~2002~~against the defendants and A. Schulman. Plaintiff generally seeks:

At· ~~June~~to ~~30,~~enjoin ~~2009~~ the ~~Company~~defendants ~~had~~from noeffectuating ~~unrecognized~~the ~~tax~~Merger ~~benefits~~ or, ~~liabilities. In~~in the event that the ~~Company~~transaction ~~incurs~~is ~~interest~~consummated, ~~and penalties related~~ to ~~tax~~rescind ~~matters~~it in the future, such interest and penalties will be reported as income tax expense. The Company does not anticipate that any tax contingencies which may arise in the next twelve months will have a material impact on its financial position or ~~results~~award ofrescissory ~~operations.~~damages;

~~NOTE~~· ~~7. COMMITMENTS~~monetary ~~AND~~damages ~~CONTINGENCIES~~on behalf of the Company against the defendants for all losses and/or damages suffered by the Company; and

~~The~~· ~~Company~~attorney’s ~~has~~fees ~~letters of credit outstanding in the United States of approximately $1.7 million as of June 30, 2009~~ and ~~$1.6~~expert ~~million as of September 30, 2008, and foreign letters of credit outstanding of $1~~fees.~~2 million and $5.1 million as of June 30, 2009 and September 30, 2008, respectively.~~

Thibodaux Litigation. Since September 2004, the Company has been a defendant in litigation pending in District Court in the Parish of Orleans, Louisiana (the “Thibodaux Lawsuit”) filed by C.M. Thibodaux Company (“Thibodaux”). Other defendantsOn inJanuary ~~the case include Intracoastal Tubular Services~~14, ~~Inc. (“ITCO”)~~2010, ~~thirty~~counsel different oil companies (the “Oil Company Defendants”), several insurance companies and four trucking companies. Thibodaux, the owner of industrial property located in Amelia, Louisiana that has historically been leased to tenants conducting oilfield services businesses, contends that the property has been contaminated with naturally occurring radioactive material (“NORM”). NORM is found naturally occurring in the earth, and when pipe is removed from the ground it is not uncommon for ~~the corroded rust on the pipe to contain very small amounts of NORM~~Mr. ~~The~~ ~~Company’s~~Wilebski ~~former~~filed ~~Oilfield Services business leased~~ a ~~portion~~motion ofseeking the subject property from Thibodaux. Thibodaux contends that the subject property was contaminated with NORM generated during the servicing of oilfield equipment by the Company and other tenants, and further alleges that the Oil Company Defendantsexpedited ~~(customers~~proceedings ~~of Thibodaux’s tenants)~~ and ~~trucking companies (which delivered tubular goods and other oilfield equipment to the subject property) allowed or caused the uncontrolled dispersal of NORM on Thibodaux’s property~~discovery. ~~Thibodaux~~The ~~seeks~~referenced ~~recovery~~motion ~~from the defendants for clean-up costs, diminution or complete loss of property values, and other damages. Discovery in the Thibodaux Lawsuit~~ is ~~ongoing, and the Company intends to assert a vigorous defense in this litigation. At~~currently ~~this~~scheduled ~~time,~~for ~~the~~oral ~~Company~~hearing does not believe it has any liability in this matter. In the event the Company is found to have liability, the Company believes it has sufficient insurance coverage applicable to this claim subject to a $1.0 million self-insured retention. However, an adverse judgment against the Company, combined with a lack of insurance coverage, could have a material adverse effect on ~~the~~February ~~Company's financial condition~~19, ~~results of operations or cash flows~~2010.

~~Wastewater~~On January ~~Discharge~~19, ~~Permit. In the second quarter of fiscal year 2009~~2010, the ~~Company~~defendants ~~self-reported~~answered to the ~~Texas~~lawsuit. On ~~Commission~~January on20, 2010, ~~Environmental~~a ~~Quality~~Special ~~(“TCEQ”)~~Litigation ~~facts~~Committee, ~~surrounding~~was ~~certain~~formed, ~~events~~composed of ~~noncompliance with its Bayshore Industrial facility’s Texas Pollutant~~three ~~Discharge~~disinterested, ~~Elimination~~independent ~~System wastewater discharge permit~~directors, and subsequently received notification from the TCEQ that it is conducting an investigation into the matter. The Company is cooperating in the investigation. The Company has taken certain corrective action with respect to ~~the~~investigate, ~~operation~~analyze ~~of its wastewater treatment facility~~ and ~~the~~evaluate ~~requirements of its wastewater discharge permit. In July 2009~~ the ~~Company received a Notice of Violation (“NOV”) from the TCEQ stating~~ ~~that~~allegations anand ~~alleged~~claims ~~violation~~asserted ~~of the permit was noted~~ in ~~the TCEQ~~Wilebski’s ~~investigation,~~lawsuit and ~~requesting~~the ~~that~~stockholder ~~the~~demand letters ~~Company~~referenced ~~provide~~below, ~~documentation~~and ofwith ~~the~~respect ~~corrective~~to ~~action~~any ~~and~~related, ~~demonstration~~amended ~~that~~or ~~compliance~~other demand ~~has~~letters ~~been~~or ~~achieved~~lawsuits ~~for~~containing ~~the~~similar ~~alleged~~or ~~violation. No~~related ~~penalties~~claims ~~were~~that ~~imposed~~may onbe filed ~~the~~or ~~Company~~made in the ~~referenced NOV~~future. The ~~Company~~members ~~intends~~of ~~on complying with~~ the ~~TCEQ’s~~Special ~~request~~Litigation Committee ~~contained~~are inEric ~~the NOV~~O. It isEnglish, ~~possible~~David ~~that~~E. ~~the~~K. ~~investigation~~Frischkorn, ~~could result in the Company receiving civil and/or criminal penalties~~Jr. An, ~~adverse finding in the investigation~~ and ~~any~~Daniel ~~resulting~~R. Gaubert, ~~penalties~~with ~~imposed~~Mr. onEnglish ~~the~~serving ~~Company~~as ~~could~~Chairman. The ~~have~~Special aLitigation Committee ~~material~~will ~~adverse effect on the Company's financial condition~~determine, ~~results~~after ofreasonable ~~operations or cash flows; however~~inquiry, atwhether ~~this~~it ~~time~~is ~~the~~in ~~Company does not believe that~~ the ~~outcome~~best interests ~~will~~of ~~have a material adverse effect on~~ the Company’s ~~financial~~for ~~condition,~~any ~~results~~such ofclaims ~~operations~~to orbe ~~cash flows~~pursued.

On January 25, 2010, the Company filed a statement pursuant to section 21.555(b) of the Texas Business Organizations Code (the “TBOC”) advising the Court, plaintiff, and all interested parties that it had established a Special Litigation Committee and commenced an inquiry into the allegations asserted in Mr. Wilebski’s amended petition to determine what actions, if any, the Company should take. On the same day, the Company filed a motion to stay proceedings in this action pursuant to the mandatory and automatic stay provision under section 21.555 of the TBOC.

David Mraud v. A. John Knapp, et al., Cause No. 2009-79556, in the 127th Judicial District Court of Harris County, Texas. On December 15, 2009, plaintiff brought this action derivatively on behalf of the Company against all of its directors, A. Schulman, Wildcat and the Company (as nominal defendant), alleging, among other things, breach of the Company’s board of directors’ fiduciary duties and that the consideration to be received by the Company’s shareholders is inadequate. The Company’s board of directors had received a demand letter dated December 4, 2009, from counsel for Mr. Mraud, also alleging breaches of fiduciary duties by the board, and that the Merger consideration is inadequate, and demanding that the board take action to remedy the claimed breaches of fiduciary duty. On January 24, 2010, the lawsuit filed on behalf of Mr. Mraud was nonsuited.

Demand Letter. The Company’s board of directors received a demand letter dated December 4, 2009, regarding the Merger from counsel for a shareholder of the Company (this letter was separate from plaintiff David Mraud’s demand letter of the same date referenced above). The letter states, among other things, that the consideration to be paid to the Company’s shareholders under the Merger Agreement is inadequate and that the Company’s board of directors breached fiduciary duties to the shareholders and was motivated by its self interest in approving the merger. The letter demands that the Company’s board of directors initiate a lawsuit against the members of the Company’s board of directors and A. Schulman.

Other Legal Proceedings. The Company is also named as a defendant in certain other lawsuits arising in the ordinary course of business. The outcome of these lawsuits cannot be predicted with certainty, but the Company does not believe they will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

-11-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Environmental Remediation. The Comprehensive Environmental Response, Compensation, and Liability Act, as amended (“CERCLA”), also known as “Superfund,” and comparable state laws impose liability without regard to fault or the legality of the originalNOTE ~~conduct on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment~~9. These persons include the owner or operator of a disposal site or another site where the release occurred, and companies that disposed or arranged for the disposal of the hazardous substances at the site where a release occurred. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning DEBT

upTerm ~~the~~debt at ~~hazardous~~December ~~substances that have been released into the environment~~31, ~~for~~2009 ~~damages to natural resources,~~ and ~~for~~September ~~the costs of certain health studies~~30, ~~and~~2009 itconsisted ~~is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release~~ of ~~hazardous substances into~~ the ~~environment.~~ following:

The Company is identified as one of many potentially responsible parties (“PRPs”) under CERCLA in a pending claim relating to the Combe Fill South Landfill (“CFS”) superfund site in Morris County, New Jersey. The Environmental Protection Agency (“EPA”) has indicated that the Company is responsible for only de minimus levels of wastes contributed to the site, and there are numerous other PRPs identified that contributed more than 99% of the volume of waste at the site. The Company has executed a consent decree, subject to court and EPA approval, to settle its liability related to the CFS site, for an amount that is immaterial to the Company’s financial condition, results of operations and cash flows.

	December 31,		September 30,
	2009		2009
	(Dollars in Thousands)
Term loan of ICO, Inc. under the terms of the KeyBank Credit Agreement. Principal and interest paid quarterly through September 2011. The interest rate as of both December 31, 2009 and September 30, 2009 was 6.6%.	$	5,833	$	6,667

Term loan of ICO, Inc. under the terms of the KeyBank Credit Agreement. Principal and interest paid quarterly through September 2012. The interest rate as of both December 31, 2009 and September 30, 2009 was 7.9%.		3,056		3,333

Term loan of the Company’s Italian subsidiary, collateralized by a mortgage over the subsidiary’s real estate. Principal and interest paid quarterly with a fixed interest rate of 5.2% through June 2016.		5,067		5,324

Various other U.S. loans of the Company’s U.S. subsidiaries collateralized by mortgages on land and buildings and other assets of the subsidiaries. These loans had a weighted average interest rate of 6.0% and 6.1% as of December 31, 2009 and September 30, 2009, respectively, with maturity dates between November 2010 and May 2021. The interest and principal payments are made monthly.		6,674		7,545

Various other loans provided by foreign banks of the Company’s foreign subsidiaries collateralized by mortgages on land and buildings and other assets of the subsidiaries. These loans had a weighted average interest rate of 7.4% and 7.0% as of December 31, 2009 and September 30, 2009, respectively, with maturity dates between January 2010 and March 2015. The interest and principal payments are made monthly or quarterly.		7,725		8,934

Total term debt		28,355		31,803

Less current maturities of long-term debt		11,935		12,980

Long-term debt less current maturities	$	16,420	$	18,823

~~Other Legal Proceedings.~~ The Company ismaintains ~~also~~several ~~named~~lines asof acredit. The ~~defendant~~facilities inare collateralized by certain ~~other~~assets ~~lawsuits~~of ~~arising in~~ the ~~ordinary course of business~~Company. The ~~outcome~~following oftable presents ~~these~~the ~~lawsuits~~borrowing ~~cannot~~capacity, beoutstanding ~~predicted~~borrowings ~~with~~and ~~certainty,~~net ~~but~~availability under the ~~Company~~various ~~does~~credit ~~not~~facilities ~~believe~~in ~~they will have a material adverse effect on~~ the Company’s ~~financial~~domestic ~~condition,~~and ~~results of~~ foreign operations ~~or cash flows~~.

NOTE 8. DEBT

	Domestic				Foreign				Total
	As of				As of				As of
	December 31,		September 30,		December 31,		September 30,		December 31,		September 30,
	2009		2009		2009		2009		2009		2009
	(Dollars in Millions)
Borrowing Capacity (a)	$	11.7	$	10.6	$	38.3	$	39.9	$	50.0	$	50.5
Outstanding Borrowings		-		-		0.6		-		0.6		-
Net availability	$	11.7	$	10.6	$	37.7	$	39.9	$	49.4	$	50.5

(a) Based on the credit facility limits less outstanding letters of credit.

~~Term~~The Company ~~debt~~maintains ata ~~June~~Credit 30Agreement (the “Credit Agreement”) with KeyBank National Association and Wells Fargo Bank National Association, with a maturity date of October 2012. Under the Credit Agreement, there is a total of $8.9 million outstanding in the form of two term loans as of December 31, 2009. The Credit Agreement also contains a revolving credit facility of $20.0 million based on the Company’s levels of domestic receivables and inventory. As ~~September~~of 30December 31, ~~2008~~2009, ~~consisted~~the borrowing capacity was $11.7 million after subtracting $1.7 million of letters of credit outstanding. There were no borrowings under the ~~following:~~revolving credit facility as of December 31, 2009 and September 30, 2009.

		June 30,		September 30,
		2009		2008
		(Dollars in Thousands)
Term loan of ICO, Inc. under the terms of the KeyBank Credit Agreement. Principal and interest paid quarterly through September 2011. Interest rates as of June 30, 2009 and September 30, 2008 were 6.6% and 4.1%, respectively.	$	7,500	$	10,000
Term loan of ICO, Inc. under the terms of the KeyBank Credit Agreement. Principal and interest paid quarterly through September 2012. Interest rates as of June 30, 2009 and September 30, 2008 were 7.9% and 5.2%, respectively.		3,611		4,444
Term loan of the Company’s Italian subsidiary, collateralized by a mortgage over the subsidiary’s real estate. Principal and interest paid quarterly with a fixed interest rate of 5.2% through June 2016.		5,283		5,758
Various other U.S. loans of the Company’s U.S. subsidiaries collateralized by mortgages on land and buildings and other assets of the subsidiaries. These loans had a weighted average interest rate of 6.0% and 6.1% as of June 30, 2009 and September 30, 2008, respectively, with maturity dates between November 2010 and May 2021. The interest and principal payments are made monthly.		7,690		8,064
Various other loans provided by foreign banks of the Company’s foreign subsidiaries collateralized by mortgages on land and buildings and other assets of the subsidiaries. These loans had a weighted average interest rate of 6.9% and 7.2% as of June 30, 2009 and September 30, 2008, respectively, with maturity dates between January 2010 and March 2015. The interest and principal payments are made monthly or quarterly.		9,268		12,057
Total term debt		33,352		40,323
Less current maturities of long-term debt		13,138		15,201
Long-term debt less current maturities	$	20,214	$	25,122

-12-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Credit ~~Company~~Agreement ~~maintains~~contains ~~several~~a ~~lines~~variable ofinterest ~~credit~~rate and contains certain financial and nonfinancial covenants. ~~The~~During ~~facilities~~fiscal ~~are~~year ~~collateralized~~2008, bythe Company ~~certain~~entered ~~assets~~into ofinterest ~~the~~rate ~~Company~~swaps on its $5.8 million and $3.1 million term loans. The ~~following~~swaps ~~table~~lock ~~presents~~in the ~~borrowing~~Company’s ~~capacity,~~interest ~~outstanding~~rate ~~borrowings~~on ~~and~~(i) ~~net~~the $5.8 ~~availability~~million ~~under~~term loan at 2.82% plus the ~~various~~credit spread on the corresponding debt, and (ii) the $3.1 million term loan at 3.69% plus the credit ~~facilities~~spread inon the corresponding ~~Company’s~~debt. The ~~domestic~~interest rates as of December 31, 2009 were 6.6% and ~~foreign~~7.9%, ~~operations~~respectively.

	Domestic				Foreign				Total
	As of				As of				As of
	June 30,		September 30,		June 30,		September 30,		June 30,		September 30,
	2009		2008		2009		2008		2009		2008
	(Dollars in Millions)
Borrowing Capacity (a)	$	9.3	$	19.9	$	37.7	$	52.5	$	47.0	$	72.4
Outstanding Borrowings		-		-		0.1		9.6		0.1		9.6
Net availability	$	9.3	$	19.9	$	37.6	$	42.9	$	46.9	$	62.8
(a) Based on the credit facility limits less outstanding letters of credit.

The Company maintains a Credit Agreement (the “Credit Agreement”) with KeyBank National Association and Wells Fargo Bank National Association, with a maturity date of October 2012. The Credit Agreement was amended in March 2009 to modify, among other things, certain definitions related to the financial covenants within the Credit Agreement. The capacity of the Company’s revolving credit facility was also reduced from $30.0 million to $20.0 million. Under the Credit Agreement, as of June 30, 2009, there is a total of $11.1 million outstanding in the form of two term loans.

The borrowing capacity of the $20.0 million revolving credit facility is based on the Company’s levels of domestic receivables and inventory. As of June 30, 2009, the borrowing capacity was $9.3 million after subtracting $1.7 million in letters of credit outstanding. There were no borrowings under the revolving credit facility as of September 30, 2008 and June 30, 2009.

credit spread on the corresponding debt, and (ii) the $3.6 million term loan at 3.69% plus the credit spread on the corresponding debt. The interest rates as of June 30, 2009 were 6.6% and 7.9%, respectively.

The Credit Agreement establishing the credit facility contains financial covenants, including:

· A minimum tangible net worth requirement (as defined in the Credit Agreement) of $50.0 million plus 50% of each fiscal quarter’s net income. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company’s required minimum tangible net worth was $6870.82 million and $6869.27 million, respectively. The Company’s actual tangible net worth was $9698.71 million and $9597.96 million, respectively, as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009.

· A leverage ratio (as defined in the Credit Agreement) not to exceed 3.0 to 1.0. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company’s leverage ratios were 21.48 to 1.0 and 12.65 to 1.0, respectively.

· A fixed charge coverage ratio of at least 1.0 to 1.0, defined as “Adjusted EBITDA” (as defined in the Credit Agreement), plus rent expense divided by fixed charges (defined as the sum of interest expense, income tax expense, scheduled principal debt repayments in the prior four quarters, capital expenditures for the purpose of maintaining existing fixed assets and rent expense); and as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company’s fixed charge coverage ratios were 1.~~2 to~~ 1.0 ~~and 1.5~~ to 1.0~~, respectively~~.

· A requirement that “Adjusted EBITDA” less interest expense (as defined in the Credit Agreement), not be less than zero for two consecutive fiscal quarters. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company has maintained the required level of profitability above zero.

In addition, the Credit Agreement contains a number of limitations on the ability of the Company and its restricted U.S. subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or redeem any Common Stock, (iii) incur liens or other encumbrances on their assets, (iv) enter into transactions with affiliates, (v) merge with or into any other entity or (vi) sell any of their assets. Additionally, any “material adverse change” of the Company could restrict the Company’s ability to borrow under its Credit Agreement and could also be deemed an event of default under the Credit Agreement. A “material adverse change” is defined as a change in the financial or other condition, business, affairs or prospects of the Company, or its properties and assets considered as an entirety that could reasonably be expected to have a material adverse effect (as defined in the Credit Agreement) on the Company.

In addition, any “Change of Control” of the Company or its restricted U.S. subsidiaries will constitute a default under the Credit Agreement. “Change of Control,” as defined in the Credit Agreement, means: (i) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially or of record, by any person, entity, or group (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as then in effect), of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Common Stock of the Company; (ii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by individuals who were neither (A) nominated by the Company’s board of directors nor (B) appointed by directors so nominated; (iii) the occurrence of a change in control, or other similar provision, under or with respect to any “Material Indebtedness Agreement” (as defined in the Credit Agreement); or (iv) the failure of the Company to own directly or indirectly, all of the outstanding equity interests of the Company’s Bayshore Industrial L.P. and ICO Polymers North America, Inc. subsidiaries.

The merger agreement, if consummated, will result in a “Change of Control”. The Company obtained the consent of KeyBank, subject to certain terms and conditions, to the approval by our board of directors and/or shareholders of the pending merger.

The Company has various foreign credit facilities in eight foreign countries. The available credit under these facilities varies based on the levels of accounts receivable within the foreign subsidiary, or is a fixed amount. The foreign credit facilities are collateralized by assets owned by the foreign subsidiaries. These facilities either have a remaining maturity of less than twelve months, do not have a stated maturity date, or can be cancelled at the option of the lender. The aggregate amounts of available borrowings under the foreign credit facilities, based on the credit facility limits, current levels of accounts receivables, and outstanding letters of credit and borrowings, were $37.7 million as of December 31, 2009 and $39.9 million as of September 30, 2009.

-13-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock of the Company; (ii) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by individuals who were neither (A) nominated by the Company’s board of directors nor (B) appointed by directors so nominated; (iii) the occurrence of a change in control, or other similar provision, under or with respect to any “Material Indebtedness Agreement” (as defined in the Credit Agreement); or (iv) the failure of the Company to own directly or indirectly, all of the outstanding equity interests of the Company’s Bayshore Industrial L.P. and ICO Polymers North America, Inc. subsidiaries.

The Company has various foreign credit facilities in eight foreign countries. The available credit under these facilities varies based on the levels of accounts receivable within the foreign subsidiary, or is a fixed amount. The foreign credit facilities are collateralized by assets owned by the foreign subsidiaries. These facilities either have a remaining maturity of less than twelve months, do not have a stated maturity date, or can be cancelled at the option of the lender. The aggregate amounts of available borrowings under the foreign credit facilities, based on the credit facility limits, current levels of accounts receivables, and outstanding letters of credit and borrowings, were $37.6 million as of June 30, 2009 and $42.9 million as of September 30, 2008.

The following table contains the financial covenants within the Company’s foreign loan agreements. The financial covenant computations are specific to the subsidiary of the country listed.

	As of June 30, 2009
	As of December 31, 2009
	Outstanding	Available	Financial Covenant	Actual Covenant Calculation
Country	Outstanding Borrowings	Available Borrowing Capacity	Financial Covenant Requirement	December 31, 2009	September 30, 2009
Country	Borrowings	Borrowing Capacity	Requirement	June 30, 2009	September 30, 2008
Australia	$2.7 million	$0.9 million	Equity exceeds 29.9% of total assets	48%	43%
Australia	$2.8 million	$0.8 million	Equity exceeds 29.9% of total assets	68%	53%
			Earnings more than -1.6x interest expense	(a)	(a)
			Earnings more than 2x interest expense	(a)	(a)
Holland	1.4 million	5.3 million	Equity exceeds 34.9% of total assets	60%	56%
Holland	1.7 million	5.8 million	Equity exceeds 34.9% of total assets	54%	56%
Malaysia	0.3 million	1.5 million	Total debt less than 2x equity	.4x	.4x
Malaysia	02.40 million	12.40 million	~~Total~~Equity ~~debt~~greater ~~less~~ than 2xUS ~~equity~~$1.6 million	$6.5x0 million	1$5.0x6 million
Malaysia	2.2 million	2.0 million	Equity greater than US $1.6 million	$5.2 million	$4.6 million
New Zealand	-	0.6 million	Equity exceeds 39.9% of assets total	85%	56%

~~Except~~(a) asAs ~~noted~~of ~~below~~December 31, ~~all~~2009 and ~~subsidiaries~~September ~~listed~~30, ~~above~~2009, ~~were~~the inCompany ~~compliance~~did ~~with~~not ~~their~~meet ~~respective~~this ~~financial~~covenant ~~covenants~~due ~~under~~to ~~their~~losses ~~applicable~~in its ~~loan~~Australian ~~agreements~~subsidiary. At atDecember ~~June~~31, 2009 and September 30, 2009 there was $2.7 million and $2.8 million of term debt outstanding, respectively. The Company has classified all of the Australian term debt as current. The Company obtained a waiver from its Australian bank as of September 30, ~~2008~~2009 and is seeking a waiver for the December 31, 2009 covenant violation. Of the $37.7 million of total foreign credit availability as of December 31, 2009, $0.9 million related to the Company’s Australian subsidiary.

~~(a) As of June 30, 2009 and September 30, 2008, the Company did not meet this covenant due to losses in its Australian subsidiary~~NOTE 10. EMPLOYEE AtBENEFIT June 30, 2009 and September 30, 2008 there was $2.8 million and $3.9 million of term debt, respectively, and $0 and $2.1 million of short-term borrowings, respectively, outstanding. The Company has classified all of the Australian term debt as current as of June 30, 2009 and September 30, 2008. The Company obtained a waiver from its Australian bank as of June 30, 2009 that is subject to ongoing satisfaction of certain conditions. The Company is also in the process of trying to modify the financial covenant within the loan agreement with the Company’s lender in Australia. The Company can make no assurance that such modification will be executed. Of the $37.6 million of total foreign credit availability as of June 30, 2009, $0.8 million related to the Company’s Australian subsidiary.PLANS

As of September 30, 2008, the New Zealand subsidiary was in violation of a financial covenant related to a metric of profitability compared to interest expense. The Company obtained a waiver from the lender for this violation. At June 30, 2009, our New Zealand subsidiary was not in violation of any financial covenants related to any of its debt agreements.

NOTE 9. EMPLOYEE BENEFIT PLANS

The Company maintains several defined contribution plans that cover domestic and foreign employees who meet certain eligibility requirements related to age and period of service with the Company. The plan in which each employee is eligible to participate depends upon the subsidiary for which the employee works. All plans have a salary deferral feature that enables participating employees to contribute up to a certain percentage of their earnings, subject to governmental regulations. Many of the foreign plans require the Company to match employees’ contributions in cash. Employee contributions to the Company’s domestic 401(k) plan have historically been voluntarily matched by the Company with shares of ICO, Inc. Common Stock. Both foreign and domestic employees’ interests in Company matching contributions are generally vested immediately upon contribution.

-14-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company maintains a defined benefit plan for employees of the Company’s Dutch operating subsidiary (the “Dutch Plan”). Participants are responsible for a portion of the cost associated with the Dutch Plan, which provides retirement benefits at the normal retirement age of 65. This Dutch Plan is insured by an insurance contract with Aegon Levensverzekering N.V. ("Aegon"), located in The Hague, The Netherlands. The Aegon insurance contract guarantees the funding of the Company’s future pension obligations under the Dutch Plan. Pursuant to the Aegon contract, Aegon is responsible for payment of all future obligations under the provisions of the Dutch Plan, while the Company pays annual insurance premiums to Aegon. Payment of the insurance premiums by the Company constitutes an unconditional and irrevocable transfer of the related pension obligation under the Dutch Plan from the Company to Aegon. Currently, Aegon’s Standard and Poor’s financial strength rating is AA-. The premiums paid by the Company for the Aegon insurance contracts are included in pension expense.

The Company also maintains several termination plans, usually mandated by law, within certain of its foreign subsidiaries, which plans provide for a one-time payment to a covered employee upon the employee’s termination of employment.

The amount of defined contribution plan expense for the three ~~and nine~~ months ended ~~June 30~~December 31, 2009 ~~was $0.3 million~~ and ~~$0.9~~December ~~million~~31, ~~respectively,~~2008 ~~compared~~was to $0.43 million ~~and $1~~.~~2 million for the three and nine months ended June 30, 2008, respectively.~~ The amount of defined benefit plan pension expense for the three ~~and nine~~ months ended ~~June~~December 3031, 2009 ~~was $0.1 million~~ and ~~$0.3~~December ~~million~~31, ~~respectively,~~2008 ~~compared~~was to $0.1 million ~~and $0~~.~~3 million for the three and nine months ended June 30, 2008, respectively.~~

NOTE 10 11. ~~GOODWILL~~ LONG-LIVED ASSET IMPAIRMENT, RESTRUCTURING AND OTHER COSTS (INCOME)

~~Goodwill~~During the isthree ~~tested~~months ~~for~~ended ~~impairment~~December on31, an2009, ~~annual basis and between annual tests when events occur or circumstances change that would more likely than not reduce~~ the ~~fair~~Company ~~value~~incurred restructuring charges of ~~a reporting unit below its carrying value~~$0. ~~Our~~1 ~~annual~~million ~~goodwill~~related ~~impairment~~to ~~testing~~relocation ~~date~~costs isincurred ~~September 30~~in Australia. In ~~assessing~~the ~~whether~~three ormonth ~~not~~period ~~goodwill should~~ended beDecember ~~tested~~31, ~~for impairment on an interim basis at each of our reporting units~~2008, ~~we consider~~ the Company ~~collective~~recorded ~~weight of~~ a ~~number~~net ofbenefit ~~data~~from ~~points~~insurance ~~including,~~proceeds ~~but not limited to the recent operating performances~~ of ~~our~~$0.4 ~~reporting~~million ~~units~~at ~~including~~its Bayshore ~~factors~~Industrial ~~that~~location ~~contributed~~resulting tofrom ~~those~~Hurricane ~~performances~~Ike ~~(i.e.~~and ~~whether~~a ~~operating~~net ~~performances~~benefit ~~were~~from insurance ~~reflective~~proceeds of ~~the~~$0.1 ~~core~~million ~~operations~~related orto ~~whether they were impacted positively or negatively by significant or unusual items of~~ a ~~non-recurring~~fire ~~nature),~~suffered ~~the~~at ~~future prospects for~~ the Company’s ~~reporting~~facility ~~units, the competitive landscape~~ in ~~the~~New ~~markets~~Jersey ~~within which our reporting units operate, the legal and regulatory environment~~ in ~~the~~July ~~markets within which our reporting units operate~~2008. Additionally, ~~and~~ the ~~market~~Company recorded ~~performance~~a ~~of our common stock and the stocks of our peer companies within our industry~~$0. We2 domillion ~~not~~impairment ~~consider~~related ~~any single data point on its own~~ to ~~be an indicator that goodwill should be tested on an interim basis. During the quarter ended March 31~~property, ~~2009,~~plant ~~the operating performance declined~~ and ~~the~~equipment ~~outlook for our Australia~~ and plant ~~New~~closure ~~Zealand~~costs ~~reporting units weakened~~ in ~~part due to~~ the ~~global~~three ~~economic~~months ~~downturn~~ended ~~and~~December ~~the competitive landscape became more challenging~~31, ~~and~~2008 ~~the~~related ~~market value for our stock declined. As a consequence we concluded that it was necessary~~ to ~~test~~its former ~~goodwill~~United ~~for~~Arab ~~impairment~~Emirates ~~on an interim basis during the quarter ended March 31, 2009~~plant.

~~The impairment test was performed through the application of a two~~-step fair value test. The first step compares the book value of our reporting units to their estimated fair values at the respective test dates. The estimated fair values of the reporting units were determined by utilizing a combination of the income approach derived from a discounted cash flow methodology and the market approach derived from comparable public companies. Significant assumptions used in this analysis include: expected future revenue growth rates, operating unit profit margins, and working capital levels; a discount rate; and a terminal value multiple. The fair value of the reporting unit is then compared to its carrying value. If the reporting unit’s fair value is less than its carrying value, a second step must be performed to quantify the amount of the impairment, if any.14-

In the second step, the Company calculated the implied fair value of goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets. The estimated implied fair value of goodwill is then compared to its respective carrying value and any excess carrying value of the goodwill is recorded as an impairment charge.

The interim test resulted in an impairment of goodwill and accordingly, the Company recorded a non-cash charge of $3.5 million in the quarter ended March 31, 2009. The goodwill impairments were $2.3 million and $1.2 million, respectively, at the Company’s Australia and New Zealand reporting units. No tax benefit was recognized on these goodwill impairments.

-15-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

After the recognition of these impairment losses, the remaining goodwill in the Company’s reporting units is $4.5 million, all of which is related to the Company’s Bayshore Industrial segment.

The change in the carrying amount of goodwill for the current fiscal year through June 30, 2009 is as follows:

Balance at October 1, 2008	$	8.7 million
Foreign currency translation		(0.7) million
Impairment		(3.5) million
Balance at June 30, 2009	$	4.5 million

The company did not experience any events or circumstances during the third quarter of fiscal year 2009 that would trigger the need for a goodwill impairment test.

NOTE 11. IMPAIRMENT, RESTRUCTURING AND OTHER COSTS (INCOME)

On July 26, 2008, the Company’s facility in New Jersey suffered a fire which caused damage to one of the facility’s buildings. The Company recorded a net benefit from insurance proceeds of $0.1 million and $0.4 million in the three and nine months ended June 30, 2009, respectively. During fiscal year 2008, the Company moved its New Jersey operations to Allentown, Pennsylvania and is no longer operating in New Jersey.

During the three months ended December 31, 2008, the Company recorded a net insurance reimbursement of $0.4 million related to financial losses resulting from the loss of power experienced at its Bayshore Industrial location as a result of Hurricane Ike which hit the Gulf Coast area in the fourth quarter of fiscal year 2008.

During the fourth quarter of fiscal year 2008, the Company decided to close its plant in the United Arab Emirates, effective with the expiration of its lease agreement on January 31, 2009. As a result of the closure, the Company recorded a $0.2 million impairment related to property, plant and equipment and plant closure costs in the three months ended December 31, 2008. Additional impairment charges of $0.2 million were recorded in the three months ended March 31, 2009.

During the three and nine month periods ended June 30, 2008, the Company recorded a net benefit of $0.4 million and $1.8 million, respectively, as a result of a fire that occurred in the Company’s facility in New Jersey on July 2, 2007.

NOTE 12. DISCONTINUED OPERATIONS

During fiscal year 2002, the Company completed the sale of substantially all of its Oilfield Services business to National Oilwell Varco, Inc., formerly Varco International, Inc. The Oilfield Services results of operations are presented as discontinued operations, net of income taxes, in the Consolidated Statement of Operations. Legal fees and other expenses incurred related to discontinued operations are expensed as incurred to discontinued operations.

NOTE 13. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain market risks as part of its ongoing business operations, including debt obligations that carry variable interest rates, foreign currency exchange risk, and resin price risk that could impact the Company’s financial condition, results of operations or cash flows. The Company manages its exposure to these and other market risks through regular operating and financing activities, including the use of derivative financial instruments. The Company’s intention is to use these derivative financial instruments as risk management tools and not for trading purposes or speculation.

~~As mentioned above, the~~ The Company’s revenues and profitability are impacted by changes in resin prices. The Company uses various resins (primarily polyethylene) to manufacture its products. As the price of resin increases or decreases, market prices for the Company’s products will also generally increase or decrease. This will typically lead to higher or lower average selling prices and will impact the Company’s operating income and operating margin. The impact on operating income is due to a lag in matching the change in raw material cost of goods sold and the change in product sales prices. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company had $1921.78 million and $2618.24 million of raw material inventory and $1418.1 million and $2517.9 million of finished goods inventory, respectively. The Company attempts to minimize its exposure to resin price changes by monitoring and carefully managing the quantity of its inventory on hand and product sales prices.

As of December 31, 2009, the Company had $73.3 million of net investment in foreign wholly-16owned subsidiaries. The Company does not hedge the foreign exchange rate risk inherent with this non-U.S. Dollar denominated investment.

~~NOTES~~The Company TOenters ~~CONSOLIDATED~~into ~~FINANCIAL~~forward ~~STATEMENTS~~currency ~~(UNAUDITED)~~exchange contracts related to both future purchase obligations and other forecasted transactions denominated in non-functional currencies, primarily repayments of foreign currency intercompany transactions. Certain of these forward currency exchange contracts qualify as cash flow hedging instruments and are highly effective. In accordance with authoritative guidance over accounting for derivative instruments and hedging activities, the Company recognizes the amount of hedge ineffectiveness for these hedging instruments in the Consolidated Statement of Operations. The hedge ineffectiveness on the Company’s designated cash flow hedging instruments was not a significant amount for the three months ended December 31, 2009 and 2008, respectively. The Company’s principal foreign currency exposures relate to the Euro, British Pound, Australian Dollar, New Zealand Dollar, Malaysian Ringgit and Brazilian Real. The Company’s forward contracts have original maturities of one year or less.

byThe following ~~monitoring~~table ~~and~~includes ~~carefully managing~~ the ~~quantity~~total ofvalue ~~its inventory on hand and product sales prices. As~~ of ~~June 30, 2009, the Company had $68.5 million of net investment in~~ foreign ~~wholly-owned~~exchange ~~subsidiaries. The~~contracts outstanding ~~Company~~for ~~does~~which ~~not~~ hedge ~~the~~accounting ~~foreign~~is ~~exchange~~being ~~rate~~applied ~~risk~~as ~~inherent~~of ~~with~~December ~~this~~31, ~~non-U.S.~~2009 and ~~Dollar~~September ~~denominated~~30, ~~investment.~~2009

The Company does, however, enter into forward currency exchange contracts related to both future purchase obligations and other forecasted transactions denominated in non-functional currencies, primarily repayments of foreign currency intercompany transactions. Certain of these forward currency exchange contracts qualify as cash flow hedging instruments and are highly effective. In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, the Company recognizes the amount of hedge ineffectiveness for these hedging instruments in the Consolidated Statement of Operations. The hedge ineffectiveness on the Company’s designated cash flow hedging instruments was not a significant amount for the three or nine months ended June 30, 2009 and 2008. The Company’s principal foreign currency exposures relate to the Euro, British Pound, Australian Dollar, New Zealand Dollar, Malaysian Ringgit and Brazilian Real. The Company’s forward contracts have original maturities of one year or less. The following table includes the total value of foreign exchange contracts outstanding for which hedge accounting is being applied as of June 30, 2009 and September 30, 2008:

	As of
	December 31,	September 30,
	2009	2009

Notional value	$2.9 million	$5.5 million
Fair market value	$0.0 million	$(0.3) million
Maturity Dates	January through April 2010	October 2009
		through January 2010

	As of
	June 30,	September 30,
	2009	2008
Notional value	$3.5 million	$8.3 million
Fair market value	$0.3 million	$(0.5) million
Maturity Dates	July through October 2009	October 2008
		through February 2009

When it is determined that a derivative has ceased to be a highly effective hedge, or that forecasted transactions have not occurred as specified in the hedge documentation, hedge accounting is discontinued prospectively. As a result, these derivatives are marked to market, with the resulting gains and losses recognized in the Consolidated Statements of Operations.

~~Foreign Currency Intercompany Accounts and Notes Receivable. As mentioned above, from time~~-to15-time, the Company’s U.S. subsidiaries provide capital to the Company’s foreign subsidiaries through U.S. Dollar denominated interest bearing promissory notes. In addition, certain of the Company’s foreign subsidiaries also provide other foreign subsidiaries with access to capital through foreign currency denominated interest bearing promissory notes. Such funds are generally used by the Company’s foreign subsidiaries to purchase capital assets and for general working capital needs. The Company’s U.S. subsidiaries also sell products to the Company’s foreign subsidiaries in U.S. Dollars on trade credit terms. In addition, the Company’s foreign subsidiaries sell products to other foreign subsidiaries denominated in foreign currencies that may not be the functional currency of one or more of the foreign subsidiaries that are parties to such intercompany agreements. These intercompany debts are accounted for in the local functional currency of the contracting foreign subsidiary, and are eliminated in the Company’s Consolidated Balance Sheet. At June 30, 2009, the Company had the following significant outstanding intercompany amounts as described above:

Country of subsidiary with	Country of subsidiary with	Amount in US$ as of	Currency denomination
intercompany receivable	intercompany payable	June 30, 2009	of receivable
United States	Australia	$5.0 million	United States Dollar
Holland	Australia	$2.4 million	Australian Dollar
Holland	United Kingdom	$2.0 million	Great Britain Pound
United States	Malaysia	$1.3 million	United States Dollar

Because these intercompany lending transactions are denominated in various foreign currencies and are subject to financial exposure from foreign exchange rate movement from the date a loan is recorded to the date it is settled or revalued, any appreciation or depreciation of the foreign currencies in which the transactions are denominated could result in a gain or loss, respectively, to the Consolidated Statement of Operations, subject to forward currency exchange contracts that may be entered into. To mitigate this risk, the Company sometimes enters into foreign currency exchange contracts. The following table includes the total value of foreign exchange contracts outstanding for which hedge accounting is not being applied as of June 30, 2009 and September 30, 2008.

-17-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	As of
	June 30,	September 30,
	2009	2008
Notional value	$8.5 million	$5.4 million
Fair market value	$0.0 million	$(0.8) million
Maturity Dates	July through September 2009	October 2008
		through February 2009

Foreign Currency Intercompany Accounts and Notes Receivable. From time-to-time, the Company’s U.S. subsidiaries provide capital to the Company’s foreign subsidiaries through U.S. Dollar denominated interest bearing promissory notes. In addition, certain of the Company’s foreign subsidiaries also provide other foreign subsidiaries with access to capital through foreign currency denominated interest bearing promissory notes. Such funds are generally used by the Company’s foreign subsidiaries to purchase capital assets and for general working capital needs. The Company’s U.S. subsidiaries also sell products to the Company’s foreign subsidiaries in U.S. Dollars on trade credit terms. In addition, the Company’s foreign subsidiaries sell products to other foreign subsidiaries denominated in foreign currencies that may not be the functional currency of one or more of the foreign subsidiaries that are parties to such intercompany agreements. These intercompany debts are accounted for in the local functional currency of the contracting foreign subsidiary, and are eliminated in the Company’s Consolidated Balance Sheet. At December 31, 2009, the Company had the following significant outstanding intercompany amounts as described above:

The Company also marks to market the underlying transactions related to these foreign exchange contracts which offsets the fluctuation in the fair market value of the derivative instruments. As of June 30, 2009, the net unrealized gain or loss on these derivative instruments and their underlyings was insignificant.

Country of subsidiary with	Country of subsidiary with	Amount in US$ as of	Currency denomination
intercompany receivable	intercompany payable	December 31, 2009	of receivable
US	Australia	$5.1 million	United States Dollar
Holland	UK	$3.5 million	Great Britain Pound
Holland	Australia	$2.8 million	Australian Dollar
US	Malaysia	$1.3 million	United States Dollar

~~Interest~~Because these ~~Rate~~intercompany ~~Risk.~~lending ~~The~~transactions ~~Company’s~~are ~~interest~~denominated in various foreign currencies and are subject to financial exposure from foreign exchange rate movement ~~risk~~from ~~management~~the ~~objective~~date a loan is recorded to ~~limit~~ the ~~impact~~date ofit ~~future~~is ~~interest~~settled ~~rate~~or ~~changes~~revalued, any onappreciation ~~earnings~~or ~~and~~depreciation ~~cash~~of ~~flows.~~the Toforeign ~~achieve~~currencies ~~this~~in ~~objective,~~which wethe transactions ~~attempt~~are todenominated ~~borrow~~could ~~primarily~~result onin a ~~fixed~~gain ~~rate~~or ~~basis~~loss, ~~for~~respectively, ~~longer-term~~to the ~~debt~~Consolidated ~~issuances. The Companyalso~~Statement ~~tries~~of Operations, subject to ~~manage~~forward ~~risk~~currency ~~associated~~exchange contracts ~~with~~that ~~changes~~may inbe ~~interest~~entered ~~rates~~into byto ~~monitoring~~mitigate ~~interest~~this ~~rates~~risk. The following ~~and~~table ~~future~~includes ~~cash~~the ~~requirements,~~total ~~and~~value ~~evaluating~~of ~~opportunities~~foreign toexchange ~~refinance~~contracts outstanding ~~borrowings~~for atwhich ~~various~~hedge ~~maturities~~accounting is not being applied as of December 31, 2009 and ~~interest~~September ~~rates~~30, 2009.

At June 30, 2009, $0.9 million of our borrowings carried interest rates that were variable, and the remaining borrowings carried interest at fixed rates, including $12.6 million of variable rate debt converted to fixed rate debt by interest rate swap agreements.

	As of
	December 31,	September 30,
	2009	2009

Notional value	$10.7 million	$9.0 million
Fair market value	$(0.1) million	$0.0 million
Maturity Dates	January through March 2010	October 2009
		through January 2010

~~These~~The Company ~~swaps~~also ~~have~~marks ~~been~~to ~~designated~~market asthe ~~hedges~~underlying oftransactions ~~our~~related ~~exposure~~ to ~~fluctuations~~these foreign inexchange ~~interest~~contracts ~~rates~~which onoffsets ~~outstanding~~the ~~variable~~fluctuation ~~rate~~in ~~borrowings (a cash flow hedge). As of June 30, 2009,~~ the ~~estimated~~ fair market value of the ~~$12.6~~derivative ~~million in notional interest rate swaps was a liability of $0~~instruments.~~4 million.~~ ~~The~~As ~~fair value is an estimate~~ of ~~the~~December ~~net amount that the Company would pay on June 30~~31, 2009, if the ~~agreements~~net unrealized ~~were~~gain ~~transferred~~or toloss ~~another~~on ~~party~~these orderivative ~~cancelled~~instruments byand ~~the~~their ~~Company~~underlyings was insignificant.

~~For~~Interest ~~the~~Rate ~~three~~Swaps. ~~and~~In ~~nine month period ended June 30~~some circumstances, ~~2009~~ the Company ~~recorded~~enters ininto ~~other~~interest ~~comprehensive~~rate ~~income~~swap ~~(loss)~~agreements anthat mitigate ~~unrealized~~the ~~loss~~exposure onto ~~these~~ interest rate ~~swaps~~risk ofby $0converting ~~and~~variable-rate ~~$0.5~~debt ~~million,~~to a ~~respectively~~fixed rate. ~~For~~The ~~the~~interest ~~three~~rate ~~and~~swap ~~nine~~is ~~month~~marked ~~period~~to ~~ended~~market ~~June~~in ~~30, 2009,~~ the ~~amount of hedge ineffectiveness associated with the interest rate swaps was~~balance ~~not significant~~sheet.

As of December 31, 2009, the Company has $10.1 million in notional interest rate swaps. The estimated fair value of these interest rate swaps as of December 31, 2009, was a liability of $0.3 million. The fair value is an estimate of the net amount that the Company would pay on December 31, 2009 if the agreements were transferred to another party or cancelled by the Company.

NOTE 14. SEGMENT INFORMATION

The Company’s management structure and ~~operating~~reportable segments are organized into five ~~reportable~~ business segments referred to as ICO Polymers North America, ICO Brazil, Bayshore Industrial, ICO Europe and ICO Asia Pacific. This organization is consistent with the way information is reviewed and decisions are made by executive management.

and specialty compounds, primarily for the plastic film industry, in North America and in selected export markets. The Company’s European segment includes operations in France, Holland, Italy and the U.K. The Company’s Asia Pacific segment includes operations in Australia, Malaysia, New Zealand and the United Arab Emirates (facility closed in January 2009).

-18-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended June 30, 2009	Revenue From External Customers		Inter- Segment Revenues		Operating Income (Loss)			Depreciation and Amortization		Impairment, Restructuring and Other Costs (Income)(a)			Expenditures for Additions to Long-Lived Assets
	(Dollars in Thousands)
ICO Europe	$	99,111	$	196	$	3,108		$	1,364	$	-		$	413
Bayshore Industrial		50,175		138		5,090			1,238		(382	)		257
ICO Asia Pacific		37,637		-		(6,120	)		951		3,887			249
ICO Polymers North America		23,759		1,635		1,453			1,393		(450	)		1,316
ICO Brazil		8,803		-		(40	)		150		-			95
Total from Reportable Segments		219,485		1,969		3,491			5,096		3,055			2,330
Unallocated General Corporate		-		-		(4,066	)		171		35			28
Expense
Total	$	219,485	$	1,969	$	(575	)	$	5,267	$	3,090		$	2,358

ICO Polymers North America, ICO Brazil, ICO Europe and ICO Asia Pacific primarily produce competitively priced engineered polymer powders for the rotational molding industry as well as other specialty markets for powdered polymers, including masterbatch and concentrate producers, users of polymer-based metal coatings, and non-woven textile markets. Additionally, these segments provide specialty size reduction services on a tolling basis. “Tolling” refers to processing customer owned material for a service fee. The Bayshore Industrial segment designs and produces proprietary concentrates, masterbatches and specialty compounds, primarily for the plastic film industry, in North America and in selected export markets. The Company’s European segment includes operations in France, Holland, Italy and the U.K. The Company’s Asia Pacific segment includes operations in Australia, Malaysia and New Zealand.

Nine Months Ended June 30, 2008

Revenue From External Customers

Inter- Segment Revenues

Operating Income (Loss)

Depreciation and Amortization

Impairment, Restructuring and Other Costs (Income)(a)

Expenditures for Additions to Long-Lived Assets

Three Months Ended December 31, 2009

Revenue From External Customers

Inter- Segment Revenues

Operating Income (Loss)

Depreciation and Amortization

Impairment, Restructuring and Other Costs (Income)(a)

Expenditures for Additions to Long-Lived Assets

(Dollars in Thousands)

ICO Europe

~~158~~36,~~720~~375

~~241~~143

101,~~419~~657

~~1,745~~464

46-

~~831~~281

Bayshore Industrial

7116,~~563~~864

~~251~~55

81,~~755~~818

~~1,190~~406

~~1,059~~169

ICO Asia Pacific

5817,~~989~~076

~~346~~91

~~1,612~~(192

)

~~1,130~~471

-142

~~2,394~~310

ICO Polymers North America

349,~~971~~716

~~3,448~~713

~~5,194~~742

~~1,205~~554

~~(1,802~~-

)

~~6,431~~233

ICO Brazil

145,~~466~~340

~~553~~419

~~195~~70

~~256~~12

Total from Reportable Segments

~~338~~85,~~709~~371

41,~~286~~002

264,~~533~~444

51,~~465~~965

~~(1,756~~142

)

101,~~971~~005

Unallocated General Corporate

(42,~~924~~189

)

~~115~~57

5510

Expense

Total

~~338~~85,~~709~~371

41,~~286~~002

212,~~609~~255

52,~~580~~022

~~(1,756~~142

)

111,~~026~~015

Three Months Ended June 30, 2009	Revenue From External Customers		Inter- Segment Revenues		Operating Income (Loss)			Depreciation and Amortization		Impairment, Restructuring and Other Costs (Income)(a)			Expenditures for Additions to Long-Lived Assets
Three Months Ended December 31, 2008	Revenue From External Customers		Inter- Segment Revenues		Operating Income (Loss)			Depreciation and Amortization		Impairment, Restructuring and Other Costs (Income)(a)			Expenditures for Additions to Long-Lived Assets
	(Dollars in Thousands)
ICO Europe	$	3134,~~724~~762	$	62130	$	~~1,342~~(149	)	$	~~469~~452	$	-		$	~~111~~227
Bayshore Industrial		1618,~~003~~330		32105		1,~~772~~718			~~412~~411		-(382	)		~~156~~39
ICO Asia Pacific		1114,~~974~~481		-		~~171~~(1,287	)		~~316~~329		53168			1771
ICO Polymers North America		78,~~113~~889		~~175~~897		~~210~~582			~~485~~434		(~~140~~79	)		~~136~~961
ICO Brazil		32,~~183~~896		-		(1058	)		5742		-			1864
Total from Reportable Segments		6979,~~997~~358		~~269~~1,132		~~3,485~~806			1,~~739~~668		(87293	)		~~438~~1,362
Unallocated General Corporate		-		-		(1,~~296~~254	)		9645		-			-2
Expense
Total	$	6979,~~997~~358	$	~~269~~1,132	$	~~2,189~~(448	)	$	1,~~835~~713	$	(87293	)	$	~~438~~1,364

-19-

	As of		As of
	December 31,		September 30,
Total Assets	2009 (c)		2009 (c)
	(Dollars in Thousands)
ICO Europe	$	75,351	$	76,578
Bayshore Industrial		29,838		29,725
ICO Asia Pacific		43,292		42,570
ICO Polymers North America		26,233		27,509
ICO Brazil		7,728		7,593
Total from Reportable Segments		182,442		183,975
Other (b)		4,919		8,298
Total	$	187,361	$	192,273

~~NOTES~~(a) Impairment, TOrestructuring ~~CONSOLIDATED~~and ~~FINANCIAL~~other ~~STATEMENTS~~costs (~~UNAUDITED~~income) are included in operating income (loss).

Three Months Ended June 30, 2008	Revenue From External Customers		Inter- Segment Revenues		Operating Income (Loss)			Depreciation and Amortization		Impairment, Restructuring and Other Costs (Income)(a)			Expenditures for Additions to Long-Lived Assets
	(Dollars in Thousands)
ICO Europe	$	58,226	$	12	$	3,901		$	603	$	7		$	235
Bayshore Industrial		19,044		107		2,045			405		-			683
ICO Asia Pacific		21,417		-		(11	)		408		-			305
ICO Polymers North America		12,081		1,361		1,811			411		(363	)		2,565
ICO Brazil		4,950		-		224			66		-			132
Total from Reportable Segments		115,718		1,480		7,970			1,893		(356	)		3,920
Unallocated General Corporate		-		-		(1,503	)		39		-			21
Expense
Total	$	115,718	$	1,480	$	6,467		$	1,932	$	(356	)	$	3,941

Total Assets		As of		As of
		June 30,		September 30,
		2009 (c)		2008 (c)
		(Dollars in Thousands)
ICO Europe	$	78,152	$	89,910
Bayshore Industrial		29,811		33,840
ICO Asia Pacific		34,974		55,593
ICO Polymers North America		27,019		30,050
ICO Brazil		7,279		8,624
Total from Reportable Segments		177,235		218,017
Other (b)		9,589		3,079
Total	$	186,824	$	221,096

(a) Impairment, restructuring and other costs (income) are included in operating income (loss) and includes goodwill impairment.

(b) Consists of unallocated Corporate assets.

(c) Includes goodwill of $~~0 and $~~4.~~2 million for ICO Asia Pacific as of June 30, 2009 and September 30, 2008, respectively, and $4.~~5 million for Bayshore Industrial as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009.

-17-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A reconciliation of total reportable segment operating income to income from continuing operations before income taxes is as follows:

	Three Months Ended						~~Nine Months Ended~~
	June 30,						June 30,
	December 31,
	2009			2008			~~2009~~			~~2008~~
	(Dollars in Thousands)
Reportable segments operating income	$	34,~~485~~444		$	~~7,970~~806		$	~~3,491~~		$	~~26,533~~
Unallocated general corporate expense		(12,~~296~~189	)		(1,~~503~~254	)		~~(4,066~~	)		~~(4,924~~	)
Consolidated operating income (loss)		2,~~189~~255			~~6,467~~(448	)		~~(575~~	)		~~21,609~~
Other income (expense):
Other expense:
Interest expense, net		(~~539~~527	)		(~~1,039~~639	)		~~(1,713~~	)		~~(3,158~~	)
Other		(~~192~~8	)		~~165~~(331	)		~~(571~~	)		~~(36~~	)
Income (loss) from continuing operations before income taxes	$	1,458		$	5,593		$	(2,859	)	$	18,415
Income (loss) before income taxes	$	1,720		$	(1,418	)

NOTE 15. FAIR VALUE MEASUREMENTS OF ASSETS AND LIABILITIES

~~In September 2006, FASB issued SFAS No. 157,~~ Fair value ~~Value~~is ~~Measurements~~defined ~~(“SFAS~~as ~~157”), which clarified~~ the ~~definition~~price ofthat ~~fair~~would ~~value,~~be ~~established~~received ato ~~framework~~sell ~~and~~an aasset ~~hierarchy~~or ~~based~~paid onto transfer ~~the~~a ~~level~~liability ofin ~~observability~~an ~~and~~orderly ~~judgment~~transaction ~~associated~~between ~~with~~market ~~inputs~~participants ~~used in measuring fair value,~~at ~~and~~the ~~expanded~~measurement ~~disclosures about fair value measurements~~date. ~~SFAS~~The ~~157~~FASB ~~applies~~provides ~~whenever other~~ accounting ~~pronouncements~~rules ~~require~~that orestablish ~~permit~~a ~~assets~~fair value orhierarchy ~~liabilities~~ to beprioritize ~~measured~~the atinputs ~~fair~~used ~~value~~in ~~but~~valuation ~~does~~techniques ~~not~~into ~~require~~three levels ~~any~~as ~~new fair value measurements.~~follows:

-20-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SFAS 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

·	Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 – Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

·	Level 3 – Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.

AnThe following ~~asset’s~~table orsummarizes ~~liability’s~~financial ~~categorization~~assets ~~within~~and ~~the~~financial ~~valuation~~liabilities ~~hierarchy~~measured at isfair ~~based~~value ~~upon~~on ~~the~~a ~~lowest~~recurring ~~level~~basis ofat ~~input~~December ~~that~~31, ~~is significant to the fair value measurement.~~2009:

In February 2008, the FASB issued FSP FAS 157-1, Application of FASB Statement No. 157 to FASB Statement 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (“FSP 157-1”) and FSP FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”). FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, Accounting for Leases, and its related accounting pronouncements that address leasing transactions while FSP 157-2 defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for non-financial assets and liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually.

			Fair Value Measurement Using:
	Total		Quoted Price in active		Significant Other		Significant
	Fair		markets for Identical Assets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Financial Assets:
Forward Exchange Contracts	$	52	$	-	$	52	$	-

Financial Liabilities:
Forward Exchange Contracts		158		-		158		-
Interest Rate Swaps		310		-		310		-

~~The~~“Forward exchange ~~Company~~contracts” ~~has~~represent ~~elected~~net tounrealized ~~utilize~~gains ~~this~~or ~~deferral~~losses ~~and~~on ~~has~~foreign ~~only~~currency hedges, ~~partially~~which ~~applied~~are ~~SFAS~~the ~~157~~net ~~(to~~differences ~~financial~~between ~~assets~~(i) ~~and~~the ~~liabilities~~amount ~~measured~~in atU.S. ~~fair~~Dollars, ~~value~~or local oncurrency atranslated ~~recurring~~into ~~basis)~~U.S. ~~Accordingly~~Dollars, ~~the~~to ~~Company~~be ~~will~~received ~~apply~~or ~~SFAS~~paid ~~157~~at to the contracts’ ~~its~~settlement ~~nonfinancial~~date ~~assets~~ and ~~liabilities,~~(ii) ~~which~~ the ~~Company~~U.S. ~~discloses~~Dollar ~~or recognizes at fair~~ value onof athe ~~nonrecurring~~foreign ~~basis,~~currency ~~such~~to asbe ~~goodwill~~sold ~~impairment~~or ~~and~~purchased ~~other~~at ~~assets~~the ~~and~~current ~~liabilities,~~forward inexchange rate. “Interest ~~the~~rate ~~first~~swaps” ~~quarter~~represent ofthe ~~fiscal~~net ~~year~~unrealized ~~2010.~~gains ~~The~~or losses ~~Company~~on ~~does~~interest ~~not~~rate ~~expect~~swaps ~~that~~related to the ~~application~~Company’s ofterm ~~SFAS~~loans ~~157~~in tothe ~~its~~United States ~~nonfinancial assets~~ and ~~liabilities,~~the ~~which~~United ~~the~~Kingdom. For ~~Company~~additional ~~discloses~~disclosures orrequired ~~recognizes~~by this ataccounting ~~fair~~guidance ~~value~~for onfinancial aassets ~~nonrecurring~~and ~~basis~~liabilities, ~~will~~see ~~have~~Note a13 ~~significant~~– “Quantitative ~~impact~~and onQualitative ~~its~~Disclosures ~~consolidated~~About ~~financial~~Market ~~position,~~Risk” ~~results~~to ofthe ~~operations~~Company’s consolidated orfinancial ~~cash flows~~statements.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis at June 30, 2009:

		Fair Value Measurement Using:
	Total	Quoted Price in active	Significant Other	Significant
	Fair	markets for Identical Assets	Observable Inputs	Unobservable Inputs
	Value	(Level 1)	(Level 2)	(Level 3)
	(In Thousands)
Financial Assets:
Forward Exchange Contracts	$17	$-	$17	$-
Financial Liabilities:
Forward Exchange Contracts	268	-	268	-
Interest Rate Swaps	369	-	369	-

“Forward exchange contracts” represent net unrealized gains or losses on foreign currency hedges, which are the net differences between (i) the amount in U.S. Dollars, or local currency translated into U.S. Dollars, to be received or paid at the contracts’ settlement date and (ii) the U.S. Dollar value of the foreign currency to be sold or purchased at the current forward exchange rate. “Interest rate swaps” represent the net unrealized gains or losses on interest rate swaps related to the Company’s term loans in the United States and the United Kingdom. For additional disclosures required by SFAS 157 for these assets, see Note 13 to the Company’s consolidated financial statements, “Quantitative and Qualitative Disclosures About Market Risk”.

-21-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 16. SUBSEQUENT EVENTS

The Company evaluated all events and transactions that occurred after ~~June 30,~~December 31, 2009 upand through ~~August 7~~February 4, ~~2009~~2010, the date the Company issued these financial statements. During this period, the Company did not have any material recognizable subsequent events; ~~however,~~or ~~the Company did have~~ unrecognizable subsequent ~~events as discussed~~ ~~further below~~events.

In June 2009, the Company announced that it had acquired certain intangible assets of Chroma Corporation’s rotational molding business. The transaction closed on July 1, 2009. The Company paid $0.2 million at the time of closing. Another $0.2 million will be due on the one-year anniversary of the closing if a specific sales volume target is obtained during the first year subsequent to closing. Additionally, for each of the five years subsequent to the date of closing, the Company may have to make additional payments to Chroma based on achieving specified sales volume targets.18-

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Pending Merger with A. Schulman, Inc.

On December 2, 2009, the Company signed a definitive merger agreement with A. Schulman, Inc. (“A. Schulman”) in a combined cash and stock transaction pursuant to which 100% of the outstanding stock of the Company will be acquired by A. Schulman (the “merger”). Under the terms of the merger agreement, the total consideration is comprised of $105.0 million in cash and 5.1 million shares of A. Schulman common stock. Closing of the transaction is subject to approval by at least two-thirds of the votes entitled to be cast by holders of the Company's Common Stock, regulatory approvals and other customary closing conditions. On January 18, 2010, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. If the merger agreement is terminated before we complete the merger, under certain circumstances, we may be required to pay either a termination fee to A. Schulman in the amount of $6.8 million or up to $1.0 million in expense reimbursement instead of the termination fee.

How We Generate Our Revenues

Our revenues are primarily derived from (1) product sales and (2) toll processing services in the polymer processing industry. “Toll processing services” or “tolling” refers to processing customer-owned material for a service fee. Product sales result from the sale of finished products to the customer such as polymer powders, proprietary concentrates, masterbatches and specialty compounds. The creation of such products begins with the purchase of resin (primarily polyethylene) and other raw materials which are further processed within our operating facilities. The further processing of raw materials may involve size reduction services, compounding services, and the production of masterbatches. Compounding services involve melt blending various resins and additives to produce a homogeneous material. Compounding services include the manufacture and sale of concentrates. Concentrates are polymers loaded with high levels of chemical and organic additives that are melt blended into base resins to give plastic films and other finished products desired physical properties. Masterbatches are concentrates that incorporate all additives a customer needs into a single package for a particular product manufacturing process, as opposed to requiring numerous packages. After processing, we sell our products to our customers. Our products are used by our customers to manufacture finished goods such as household items (e.g. toys, household furniture and trash receptacles), automobile parts, agricultural products (such as fertilizer and water tanks), paints, waxes, and metal and fabric coatings.

We are also a major supplier of concentrates to the plastic film industry in North America. These plastic films are predominantly used to produce plastic packaging. The concentrates we manufacture are melt-blended into base resins to produce plastic film having the desired characteristics. We sell concentrates to both resin producers and businesses that manufacture plastic films.

Toll processing services, which may involve size reduction, compounding, and other processing services, are performed on customer-owned material for a fee. We consider our toll processing services to be completed when we have processed the customer-owned material and no further services remain to be performed. Pursuant to the service arrangements with our customers, we are entitled to collect our agreed upon toll processing fee upon completion of our toll processing services. Shipping of the product to and from our facilities is determined by and paid for by the customer. The revenue we recognize for toll processing services is net of the value of our customers’ product as we do not take ownership of our customers’ material during any stage of the process.

Demand for our products and services tends to be driven by overall economic factors and, particularly, consumer spending. Accordingly, the recent downturn in the U.S. and global economies had an impact on the demand for our products and services. The trend of applicable resin prices also impacts customer demand. As resin prices fall, ascustomers ~~they~~tend ~~have~~to reduce ~~dramatically~~their ininventories ~~recent~~and ~~months,~~therefore reduce their need for our products and services as customers ~~tend~~choose to ~~reduce~~purchase resin upon demand rather than building large levels of inventory. Conversely, as resin prices are rising, customers often increase their inventories and accelerate their purchases of products and services from the Company to help control their raw material costs. Historically, ~~therefore~~resin price changes have generally followed the trend of oil and natural gas prices, ~~reduce~~and ~~their~~we ~~need~~believe that this trend will continue in the future. Additionally, demand for our products and services tends to be seasonal, with customer demand historically being weakest during our first fiscal quarter due to the ~~Company~~holiday season and also due to property taxes levied in the U.S. on customers’s inventories on January 1.

-22-

products and services as customers choose to purchase resin upon demand rather than building large levels of inventory. Conversely, as resin prices are rising, customers often increase their inventories and accelerate their purchases of products and services from the Company to help control their raw material costs. Historically, resin price changes have generally followed the trend of oil and natural gas prices, and we believe that this trend will continue in the future. Additionally, demand for our products and services tends to be seasonal, with customer demand historically being weakest during our first fiscal quarter due to the holiday season and also due to property taxes levied in the U.S. on customers’ inventories on January 1.

Cost of Sales and Services

Cost of sales and services is primarily comprised of raw materials (resins and various additives), compensation and benefits to non-administrative employees, electricity, repair and maintenance, occupancy costs and supplies.

-19-

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of compensation and related benefits paid to the sales and marketing, executive management, information technology, accounting, legal, human resources and other administrative employees of the Company, other sales and marketing expenses, communications costs, systems costs, insurance costs, consulting costs and legal and professional accounting fees.

How We Manage Our Operations

Our management structure and ~~operating~~reportable segments are organized into five ~~reportable~~ business segments defined as ICO Polymers North America, ICO Brazil, Bayshore Industrial, ICO Europe and ICO Asia Pacific. This organization is consistent with the way information is reviewed and decisions are made by executive management.

ICO Polymers North America, ICO Brazil, ICO Europe and ICO Asia Pacific primarily produce competitively priced polymer powders for the rotational molding industry as well as other specialty markets for powdered polymers, including masterbatch and concentrate producers, users of polymer-based metal coatings, and non-woven textile markets. Masterbatches are concentrates that incorporate all of the additives a customer needs into a single package for a particular product manufacturing process, as opposed to requiring numerous packages. Additionally, these segments provide specialty size reduction services on a tolling basis. The Bayshore Industrial segment designs and produces proprietary concentrates, masterbatches and specialty compounds, primarily for the plastic film industry, in North America and in selected export markets. Our ICO Europe segment includes operations in France, Holland, Italy and the U.K. Our Asia Pacific segment includes operations in Australia, Malaysia, and New Zealand.

Results of Operations

Three ~~and nine~~ months ended ~~June~~December 3031, 2009 compared to the three ~~and nine~~ months ended ~~June~~December 3031, 2008:

Executive Summary

~~Our~~Although the ~~business~~Company ~~has~~continues ~~been~~to ~~impacted~~face ~~negatively~~challenging ~~thus~~industry ~~far~~conditions, innet ~~fiscal~~income ~~year~~was $1.0 million ~~2009~~for bythe ~~two~~first ~~primary~~quarter ~~factors:~~of ~~lower~~fiscal ~~demand~~year ~~from~~2010 ~~customers~~versus as a ~~result~~loss of $1.1 ~~the~~million ~~global~~for ~~economic~~the ~~downturn~~first ~~that~~quarter isof ~~impacting~~fiscal ~~all~~year ~~industries we serve~~2009, ~~and~~ an ~~unprecedented~~increase ~~rapid~~of $2.1 million. ~~and~~This ~~steep~~increase ~~drop~~was inprimarily ~~resin~~due ~~prices~~to ~~that~~higher ~~occurred~~volumes inas ~~the~~a ~~three~~result of ~~month~~an ~~period~~improvement ~~ended~~in ~~December~~customer ~~31, 2008~~demand. Volumes ~~have~~ ~~declined~~in ~~21% year to date compared to~~ the ~~same~~first ~~period~~quarter of fiscal ~~the~~year ~~prior~~2010 ~~year~~increased as11% ~~demand~~compared ~~for~~to ~~our~~the ~~customers’~~quarter ~~products~~ended ~~has~~December ~~declined~~31, 2008 and, we6% ~~believe,~~compared ~~because~~sequentially ~~the majority of our customers are operating with relatively lean inventory positions due~~ to the ~~uncertainty~~quarter ~~surrounding~~ended ~~resin~~September ~~prices~~30, ~~and demand~~2009. ~~The~~ The unprecedented drop in resin prices in the ~~first~~ quarter ofended ~~fiscal~~December ~~year~~31, ~~2009~~2008 led to significantly reduced margins in that period. Resin prices stabilized in throughout the ~~three~~remainder ~~months~~of ~~ended~~fiscal ~~March~~year ~~31,~~ 2009, and ~~further~~along ~~improved in~~with the ~~three~~11% ~~months~~growth ~~ended~~in ~~June 30~~volumes, ~~2009,~~led to ~~which~~improved ~~helped us improve our~~ gross margins from 1612.97% in the ~~second~~ quarter ofended ~~fiscal~~December ~~year~~31, ~~2009~~2008 to 18 17.01% in the ~~third~~ quarter ofended ~~fiscal~~December ~~year~~31, 2009. ~~We have responded to the global economic downturn by reducing our headcount by 13% from September 30, 2008, and modifying the number of shifts our plants operate to match the current customer demand.~~

-23-

	Summary Financial Information
	Three Months Ended
	December 31,
	2009		2008			Change		%
	(Dollars in Thousands)
Total revenues	$	85,371	$	79,358		$	6,013		8%
SG&A (1)		10,152		9,138			1,014		11%
Operating income		2,255		(448	)		2,703	N.M.
Net income (loss)	$	1,046	$	(1,076	)	$	2,122	N.M.

Volumes (2)		71,600		64,600			7,000		11%
Gross margin (3)		17.1		12.7%			4.4%
SG&A as a percentage of revenues		11.9%		11.6%			0.3%
Operating income as a percentage of revenues		2.6%		(0.6%	)		3.2%

	Summary Financial Information
	Three Months Ended										Nine Months Ended
	June 30,										June 30,
	2009		2008		Change			%			2009			2008		Change			%
	(Dollars in Thousands)
Total revenues	$	69,997	$	115,718	$	(45,721	)		(40%	)	$	219,485		$	338,709	$	(119,224	)		(35%	)
SG&A (1)		8,677		10,441		(1,764	)		(17%	)		26,825			31,431		(4,606	)		(15%	)
Operating income		2,189		6,467		(4,278	)		(66%	)		(575	)		21,609		(22,184	)		(103%	)
Income from continuing operations		1,259		4,633		(3,374	)		(73%	)		(2,835	)		13,152		(15,987	)		(122%	)
Net income	$	1,259	$	4,633	$	(3,374	)		(73%	)	$	(2,835	)	$	13,136	$	(15,971	)		(122%	)
Volumes (2)		64,200		80,100		(15,900	)		(20%	)		193,300			245,600		(52,300	)		(21%	)
Gross margin (3)		18.0%		16.0%								15.8%			16.8%
SG&A as a percentage of revenues		12.4%		9.0%								12.2%			9.3%
Operating income as a percentage of revenues		3.1%		5.6%								(0.3%	)		6.4%
(1) “SG&A” is defined as selling, general and administrative expense (including stock option compensation expense).
(2) “Volumes” refers to total metric tons sold either selling proprietary products or toll processing services.
(3) Gross margin is calculated as the difference between revenues and cost of sales and services, divided by revenues.

N.M. – Not meaningful

Revenues. Total revenues decreased $45.7 million or 40% to $70.0 million during the three months ended June 30, 2009, compared to the same period of fiscal year 2008. During the nine month period, revenues decreased $119.2 million or 35%. The decrease in revenues was a result of a decrease in volumes sold by the Company (~~“volume”~~1)~~, unfavorable changes in selling prices and mix of finished products sold or services performed (~~ “~~price/product mix~~SG&A”) ~~and~~is ~~the~~defined impact from changes in foreign currencies relative to the U.S. Dollar (“translation effect”). Due to the variance in average prices between our product sales revenues and our toll processing revenues as ~~a result of the raw material component embedded in the average product sales price~~selling, wegeneral ~~compute the volume impacts~~ and ~~the price/product mix impacts separately for each of those components and then combine them in the table that follows~~administrative expense.

~~The~~(2) “Volumes” ~~components~~refers to total metric tons of materials for which the ~~decrease~~Company’s customers are invoiced, either in ~~revenue~~connection ~~are:~~with product sales or the performance of toll processing services.

	Three Months Ended						Nine Months Ended
	June 30, 2009						June 30, 2009
	%			$				%			$
	(Dollars in Thousands)
Volume		(22%	)	$	(24,600	)		(18%	)	$	(62,800	)
Price/product mix		(10%	)		(11,700	)		(8%	)		(27,300	)
Translation effect		(8%	)		(9,400	)		(9%	)		(29,100	)
Total decrease		(40%	)	$	(45,700	)		(35%	)	$	(119,200	)

(3) The Company has presented a measurement, gross margin (computed as gross profit divided by revenues), that is not calculated in accordance with generally accepted accounting principles in the United States (a “Non-GAAP measurement”), but that is derived from relevant items in the Company’s financial statements prepared in accordance with US GAAP. The Company presents this measurement because the Company uses this measurement as an indicator of the income the Company generates from its revenues. The material limitation of this Non-GAAP measurement is that it excludes depreciation and amortization expense. The Company mitigates this limitation by the provision of the specific detailed computation of the measurement, and by presenting this Non-GAAP measurement such that it is no more prominent in the Company’s filings than GAAP measures of profitability.

~~Year~~-~~over~~20-year decreases in volumes sold for the three and nine months ended June 30, 2009, as compared with the three and nine month periods for the previous fiscal year decreased revenues by $24.6 million and $62.8 million, respectively. The translation effect of changes in foreign currencies relative to the U.S. Dollar caused a decrease in revenues of $9.4 million for the three months ended June 30, 2009 and $29.1 million for the nine months ended June 30, 2009, due to a stronger U.S. Dollar against all foreign currencies in which the Company transacts business.

AsRevenues. Total ~~mentioned~~revenues ~~above,~~increased ~~the~~$6.0 million ~~Company’s~~or ~~revenues~~8% ~~and~~to ~~profitability~~$85.4 ~~are~~million ~~impacted~~during by the ~~change~~three inmonths ~~raw~~ended ~~material~~December ~~prices~~31, ~~(“resin”~~2009, compared ~~prices)~~to asthe ~~well~~same asperiod ~~product~~of ~~sales~~fiscal ~~mix~~year 2009. As ~~the~~The ~~price~~increase in revenues was a result of ~~resin~~an ~~increases~~increase orin ~~decreases,~~volumes ~~market~~sold ~~prices~~by ~~for~~the ~~our~~Company ~~products~~(“volume”), ~~will~~the ~~also~~positive impact ~~generally~~from ~~increase~~changes orin ~~decrease. This~~foreign ~~will~~currencies ~~typically lead~~relative to ~~higher~~the orU.S. ~~lower~~Dollar (“translation ~~average~~effect”), ~~selling~~partially ~~prices. Average~~offset ~~resin~~by ~~prices~~unfavorable ~~were~~changes ~~lower~~in ~~for~~selling prices ~~the~~and ~~current~~mix ~~year~~of ~~period~~finished ~~than~~products ~~the~~sold ~~prior~~or ~~year~~services ~~periods~~performed ~~for~~(“price/product mix”). Due ~~both~~to the ~~three~~variance ~~and~~in ~~nine~~average ~~months~~prices ~~ended~~between ~~June~~our ~~30,~~product sales ~~2009,~~revenues and ~~coupled~~our ~~with~~toll ~~unfavorable~~processing ~~changes~~revenues inas ~~product~~a ~~mix,~~result ~~caused~~of athe ~~decrease~~raw inmaterial component ~~revenues~~embedded ofin ~~$11.7~~the ~~million~~average ~~and~~product ~~$27.3~~sales ~~million~~price, ~~respectively. Although~~ we ~~participate~~compute inthe ~~numerous~~volume impacts ~~markets,~~and the ~~graph~~price/product ~~below~~mix ~~illustrates~~impacts ~~the~~separately ~~general~~for ~~trends~~each inof ~~the~~those components ~~prices~~and ofthen ~~resin~~combine wethem ~~purchased~~in the table that follows.

~~-24-~~The components of the increase (decrease) in revenue are:

	Three Months Ended
	December 31, 2009
	%				$
	(Dollars in Thousands)
Volume		10%		$	7,959
Price/product mix		(13%	)		(10,085	)
Translation effect		10%			8,139
Total increase		8%		$	6,013

As mentioned above, the Company’s revenues and profitability are impacted by the change in raw material prices (“resin” prices) as well as product sales mix. As the price of resin increases or decreases, market prices for our products will also generally increase or decrease. This will typically lead to higher or lower average selling prices. Price changes coupled with unfavorable changes in product mix caused a decrease in revenues of $10.1 million for the three months ended December 31, 2009, while increased volumes and the positive impact of the translation effect of foreign currencies against the U.S. Dollar generated increases in revenues of $8.0 million and $8.1 million, respectively, for the same period. Although we participate in numerous markets, the graph below illustrates the general trends in the prices of resin we purchased.

-21-

A comparison of revenues by segment and discussion of the significant segment changes is provided below.

Revenues by segment for the three months ended ~~June~~December 3031, 2009 compared to the three months ended ~~June~~December 3031, 2008:

	Three Months Ended
	June 30,
	December 31,
	2009		% of Total		2008		% of Total		Change			%
	(Dollars in Thousands)
ICO Europe	$	3136,~~724~~375		4543%	$	5834,~~226~~762		5044%	$	~~(26~~1,~~502~~613	)		~~(46~~5%	)
Bayshore Industrial		16,~~003~~864		2320%		1918,~~044~~330		1623%		(31,~~041~~466	)		(168%	)
ICO Asia Pacific		1117,~~974~~076		1720%		2114,~~417~~481		1918%		(92,~~443~~595	)		~~(44~~18%	)
ICO Polymers North America		79,~~113~~716		1011%		128,~~081~~889		1011%		~~(4,968~~827	)		~~(41~~9%	)
ICO Brazil		35,~~183~~340		56%		42,~~950~~896		54%		(12,~~767~~444	)		~~(36~~84%	)
Total	$	6985,~~997~~371		100%	$	~~115~~79,~~718~~358		100%	$	~~(45~~6,~~721~~013	)		~~(40~~8%	)

Three Months Ended June 30, 2009	Three Months Ended June 30, 2008
Three Months Ended December 31, 2009	Three Months Ended December 31, 2008
Revenues by Segment	Revenues by Segment

~~-25-~~ ICO Europe’s revenues increased $1.6 million or 5% primarily as a result of the translation effect of a weaker U.S. Dollar against European currencies. This resulted in an increase in revenues of $3.3 million. Additionally, higher volumes, as a result of an increase in customer demand, caused an increase in revenues of $1.6 million. An unfavorable change in price partially offset these increases, negatively impacting revenues by $3.3 million.

~~ICO Europe~~Bayshore Industrial’s revenues decreased $261.5 million or 468% ~~primarily~~ as a result of ~~lower volumes which caused a decrease in revenues of $12.7 million. The lower volumes resulted from lower customer demand caused by the global economic downturn. Additionally,~~ an unfavorable change in ~~price~~product ~~resulted~~mix inand aprice, ~~decline~~which inimpacted revenues ofby $82.32 million. Higher ~~Finally~~volumes, ~~the~~due ~~translation~~to ~~effect~~improved ofcustomer ademand, ~~stronger~~positively ~~U.S.~~impacted ~~Dollar against European currencies caused a decrease in~~ revenues ofby $50.5 7 million.

~~Bayshore~~ICO ~~Industrial~~Asia Pacific’s revenues ~~decreased~~increased $32.06 million or 1618% primarily as a result of ~~lower~~the translation ~~volumes,~~effect ~~due~~of toa ~~lower~~weaker ~~customer~~U.S. ~~demand~~Dollar against currencies of that region (Australian Dollar, ~~which~~New ~~negatively~~Zealand ~~impacted~~Dollar and Malaysian Ringgit). The translation effect of currencies against the U.S. Dollar caused an increase in revenues byof $13.5 million~~. Additionally~~, anand ~~unfavorable~~higher ~~change~~volumes incaused ~~price,~~an ~~which~~increase ~~impacted~~in revenues by of $1.57 million. Additionally, ~~contributed~~an tounfavorable ~~the~~change ~~decrease~~in price resulted in a decline in revenues of $2.6 million.

ICO Polymers ~~Asia~~North ~~Pacific~~America’s revenues ~~decreased~~increased $90.48 million or 449%. This increase was primarily ~~due~~a toresult ~~lower~~of increased volumes ~~which~~sold ~~caused~~due ato ~~decline~~improved customer indemand, ~~revenues~~producing a revenue increase of $52.02 million. ~~Additionally,~~ ~~the~~This ~~translation~~increase ~~effect~~was offset ofby ~~weaker~~the ~~foreign~~negative ~~currencies~~effect of ~~that~~price ~~region (Australian Dollar~~changes, ~~New~~which ~~Zealand Dollar and Malaysian Ringgit) compared to the U.S. Dollar resulted in~~ decreased ~~revenues~~revenue ofby $~~3.0 million. A decline in selling prices contributed another $~~1.4 million ~~to the decrease in revenues~~.

ICO ~~Polymers North America~~ Brazil’s revenues ~~decreased~~increased $52.04 million or 4184% ~~primarily~~due asto ahigher ~~result~~volumes sold, which favorably impacted revenues by $1.8 million, and the translation effect of the ~~decreased~~stronger ~~volumes~~Brazilian ~~sold~~currency ~~due~~compared to ~~lower~~the ~~customer~~U.S. ~~demand~~Dollar ~~caused~~positively impacted revenues by ~~the~~$1.3 ~~global~~million. Offsetting ~~economic~~these ~~downturn~~increases was an unfavorable price change which negatively impacted revenues by $0.6 million.

ICO Brazil’s revenues decreased $1.8 million or 36% due to the negative effect of the weaker Brazilian currency compared to the U.S. Dollar, which negatively impacted revenues by $0.9 million. Additionally, lower volumes sold due to lower customer demand negatively impacted revenues by $0.7 million. Finally, an unfavorable change in selling prices impacted revenues by $0.2 million.-22-

~~Revenues~~Selling, byGeneral ~~segment~~and Administrative. Compared ~~for~~to ~~the~~last ~~nine~~fiscal ~~months~~year, selling, general and administrative expenses (“SG&A”) increased $1.0 million or 11% in the period ended ~~June~~December 3031, 2009 ~~compared~~primarily due to an increase of $0.9 million incurred for external professional fees related to the ~~nine~~pending A. Schulman merger. As a percentage of revenues, SG&A showed a slight increase to 11.9% during the three months ended ~~June~~December 3031, ~~2008:~~2009 compared to 11.6% for the same period last year.

	Nine Months Ended
	June 30,
	2009		% of Total		2008		% of Total		Change			%
	(Dollars in Thousands)
ICO Europe	$	99,111		45%	$	158,720		47%	$	(59,609	)		(38%	)
Bayshore Industrial		50,175		23%		71,563		21%		(21,388	)		(30%	)
ICO Asia Pacific		37,637		17%		58,989		18%		(21,352	)		(36%	)
ICO Polymers North America		23,759		11%		34,971		10%		(11,212	)		(32%	)
ICO Brazil		8,803		4%		14,466		4%		(5,663	)		(39%	)
Total	$	219,485		100%	$	338,709		100%	$	(119,224	)		(35%	)

Operating income (loss) by segment and discussion of significant segment changes for the three months ended December 31, 2009 compared to the three months ended December 31, 2008 follows.

Nine Months Ended June 30, 2009	Nine Months Ended June 30, 2008
		Three Months Ended
Revenues by Segment	Revenues by Segment
Operating income (loss)		December 31,
		2009			2008			Change			%
		(Dollars in Thousands)
ICO Europe		$	1,657		$	(149	)	$	1,806		N.M.
Bayshore Industrial			1,818			1,718			100			6%
ICO Asia Pacific			(192	)		(1,287	)		1,095			85%
ICO Polymers North America			742			582			160			27%
ICO Brazil			419			(58	)		477		N.M.
Subtotal			4,444			806			3,638			451%
Unallocated General Corporate Expense			(2,189	)		(1,254	)		(935	)		75%
Consolidated		$	2,255		$	(448	)	$	2,703		N.M.

~~-26-~~* N.M. – Not meaningful

ICO Europe’s revenues decreased $59.6 million or 38% as a result of lower volumes sold, which caused a decrease in revenues of $27.2 million. The lower volumes sold were caused by lower customer demand due to the global economic downturn and the downward trend in resin prices, which led customers to reduce their levels of inventory. Additionally, a decrease in average selling prices resulted in a decrease of $15.1 million in revenues. Finally, the translation effect of weaker European currencies compared to the U.S. Dollar caused a decrease in revenues of $17.3 million.

Operating income (loss) as a percentage	Three Months Ended
of revenues	December 31,
	2009			2008			Change
ICO Europe		5%			0%			5%
Bayshore Industrial		11%			9%			2%
ICO Asia Pacific		(1%	)		(9%	)		8%
ICO Polymers North America		8%			7%			1%
ICO Brazil		8%			(2%	)		10%
Consolidated		3%			(1%	)		4%

~~Bayshore Industrial~~ICO Europe’s ~~revenues~~operating ~~decreased~~income increased $211.48 million orto ~~30%~~income ~~as a result~~ of ~~lower~~$1.7 ~~volumes~~million due ~~sold~~to ~~which~~increased ~~negatively~~tolling ~~impacted~~ revenues byof $131.74 million, asa ~~well~~$0.2 asmillion animprovement ~~unfavorable~~in feedstock ~~change~~margins in(the ~~product~~difference ~~mix~~between ~~and~~product ~~lower~~sales ~~average~~revenues ~~selling~~and ~~prices~~related costs ~~which~~of ~~negatively~~raw ~~impacted~~materials ~~revenues~~sold) byand a $70.62 million~~. The~~ ~~decline~~positive inimpact ~~volumes~~of ~~was~~the translation aeffect ~~result~~ of ~~reduced~~ ~~customer~~the ~~demand~~European ~~due~~currency to(Euro) against the ~~global economic downturn~~U.S Dollar.

~~ICO~~Bayshore Industrial’s ~~Asia~~operating ~~Pacific~~income ~~revenues~~increased ~~decreased~~ $210.41 million or 366% primarily ~~due~~from ~~to the~~ a $90.24 million improvement ~~translation~~in ~~effect~~feedstock ofmargins ~~weaker~~and ~~foreign~~a ~~currencies~~$0.1 ofmillion ~~that~~decrease ~~region~~in ~~(Australian Dollar~~operating expenses, ~~New~~offset ~~Zealand~~by ~~Dollar~~the ~~and~~lack ~~Malaysian~~of ~~Ringgit) compared to~~ the ~~U.S.~~net ~~Dollar. Additionally,~~benefit ~~lower~~from ~~average~~insurance ~~selling~~proceeds ~~prices~~in asthe amount ~~a result~~ of ~~lower resin prices negatively impacted revenues by~~ $60.94 million ~~and~~recorded ~~lower~~in ~~volumes~~the ~~negatively~~period ~~impacted~~ended ~~revenues~~December ~~by $5~~31, 2008.~~3 million.~~

ICO ~~Polymers North America~~Asia Pacific’s ~~revenues~~operating income ~~decreased~~increased $111.21 million or 3285% primarily due to ~~decreased~~not ~~volumes~~having ~~sold~~the as$0.7 million aoperating ~~result~~loss offrom ~~lower~~the ~~customer~~Company’s ~~demand~~ICO Dubai plant, which ~~negatively~~closed ~~impacted~~in January ~~revenues~~2009. byAlso contributing to the operating income increase was a $120.2 4 million, ~~and~~positive ~~was~~impact ~~partially~~from ~~offset~~increased bysales avolumes ~~favorable~~due ~~change~~to inhigher ~~price~~customer demand.

ICO Polymers ~~Brazil~~North American’s ~~revenues~~operating ~~decreased~~income increased $50.72 million or 3927% primarily ~~due~~from toan ~~lower~~increase ~~volumes sold which negatively impacted revenues by $3.2 million, and also due to the negative effect~~ of ~~the~~19% ~~weaker~~in ~~Brazilian currency compared to the U.S. Dollar, which negatively impacted revenues by $2.6 million. The~~ volumes ~~decline~~as ~~was~~a ~~due~~result toof ~~lower~~an ~~customer~~increase in customer demand.

~~Gross~~ICO Brazil’s ~~Margins. Consolidated~~operating ~~gross~~income ~~margins (calculated as the difference between revenues and cost of sales and services, divided by revenues)~~ increased ~~from 16% to 18% for the three months ended June 30, 2009 and declined from 16~~$0.8%5 tomillion ~~15.8%~~primarily ~~for the nine months ended June 30,~~caused ~~2009~~by $0.6 ~~The~~million ~~decline~~in ~~for~~higher ~~the nine months ended June 30, 2009 was primarily due to the lower~~ volumes sold ~~and~~ due to ~~lower~~improved feedstock margins (the difference between product sales revenues and related cost of raw materials sold). This decline in volumes sold was primarily caused by the global economic downturn and the dramatic downward trend in resin prices in the first quarter of fiscal year 2009, both of which led to reduced customer demand~~. The decline in feedstock margins was primarily caused by the~~, ~~unfavorable~~partially ~~resin~~offset ~~price environment in the three months ended December 31, 2008. The unfavorable resin price environment was caused~~ by ~~resin prices reaching historically high levels in the fourth quarter of fiscal year 2008, followed by the rapid and dramatic fall in resin prices in the first quarter of fiscal year 2009~~$0. ~~This~~1 ~~combination~~million ~~led to a reduction~~ in ~~our~~lower feedstock margins. ~~Product mix and lower operating costs led to the increase in gross margin in the three months ended June 30, 2009 compared to the three months ended June 30, 2008.~~

Selling, General and Administrative. Selling, general and administrative expenses (“SG&A”) decreased $1.8 million or 17%, and $4.6 million or 15%, for the three and nine months ended June 30, 2009. The decrease in SG&A for the three-monthCompared ~~comparative period was due~~ to the ~~effect~~same ofperiod ~~weaker~~last ~~foreign~~fiscal ~~currencies related to the U.S. Dollar~~year, ~~which~~Unallocated ~~decreased~~General ~~SG&A~~Corporate byExpense increased $0.9 million, ~~and lower compensation and benefits cost of $0.9 million. The decrease in SG&A of $4.6 million~~ or 1575% ~~for~~primarily ~~the nine-month comparative periods was~~ due ~~primarily~~ to ~~the~~incurring ~~translation effect of weaker foreign currencies which decreased SG&A by~~ $3.0 ~~million, and lower compensation and benefits cost of $1~~.59 million~~. As a percentage of revenues, SG&A increased to 12.4%~~ ~~and 12.2%~~ of ~~revenues~~external ~~during~~professional ~~the~~fees ~~three~~related ~~and nine months ended June 30, 2009, respectively, compared~~ to ~~9.0%~~the ~~and~~pending 9A.3% ~~for the same periods in fiscal year 2008 due to lower revenues~~Schulman merger.

Impairment, restructuring and other costs (income). On July 26, 2008, the Company’s facility in New Jersey suffered a fire which caused damage to one of the facility’s buildings. The Company recorded a net benefit from insurance proceeds of $0.1 million and $0.4 million in the three and nine months ended June 30, 2009, respectively. During fiscal year 2008, the Company moved its New Jersey operations to Allentown, Pennsylvania, and is the Company is no longer operating in New Jersey.-23-

Long-lived Asset Impairment, Restructuring and Other Costs (Income). During the three months ended December 31, 2009, the Company incurred restructuring charges of $0.1 million related to relocation costs incurred in Australia. In the three month period ended December 31, 2008, the Company recorded a net benefit from insurance ~~reimbursement~~proceeds of $0.4 million ~~related~~at toits ~~financial~~Bayshore ~~losses~~Industrial location resulting from ~~the~~Hurricane ~~loss~~Ike and a net benefit from insurance proceeds of ~~power~~$0.1 ~~experienced~~million related to a fire suffered at ~~its~~the ~~Bayshore~~Company’s ~~Industrial~~facility ~~location~~in asNew Jersey in July 2008. Additionally, the Company recorded a ~~result~~$0.2 million ofimpairment ~~Hurricane~~related ~~Ike~~to ~~which~~property, ~~hit~~plant ~~the~~and ~~Gulf~~equipment ~~Coast~~and ~~area~~plant closure costs in the ~~fourth~~three ~~quarter~~months ofended ~~fiscal~~December ~~year~~31, 2008 related to its former United Arab Emirates plant.

~~During~~Income ~~the~~Taxes. The Company’s ~~fourth~~effective ~~quarter~~income oftax ~~fiscal~~rates ~~year~~were ~~2008,~~a ~~the~~provision ~~Company~~of ~~decided~~39% toand ~~close~~a ~~its~~benefit ~~plant~~of 24% induring the ~~United~~three ~~Arab~~months ~~Emirates~~ended December 31, ~~effective~~2009 ~~with~~and ~~the~~2008, respectively. The ~~expiration~~higher ofeffective ~~its~~tax ~~lease~~rate ~~agreement~~during onthe ~~January~~three months ended December 31, 2009~~. As~~ awas ~~result~~primarily ofdue ~~the~~to ~~closure,~~permanent wedifferences ~~recorded~~from amerger related ~~$0.2~~costs ~~million~~associated ~~impairment~~with ~~related~~the topending ~~property,~~merger ~~plant~~that ~~and~~will ~~equipment~~not ~~and~~be ~~plant~~deductible ~~closure~~if the ~~costs~~merger is completed. The lower effective tax rate in the three months ended December 31, 2008~~. Additional~~ ~~impairment~~was ~~charges~~primarily a result of ~~$0.2~~the ~~million~~mix ~~were~~of ~~recorded~~pretax income or loss generated by the Company’s operations in various taxing jurisdictions and the impact ~~three~~of ~~months~~nondeductible ~~ended~~items ~~March~~and ~~31,~~other ~~2009~~permanent differences.

~~-27-~~Net Income (Loss). For the three months ended December 31, 2009, the Company had net income of $1.0 million, compared to a net loss of $1.1 million due to the factors discussed above.

~~During~~Foreign Currency Translation. The fluctuations of the ~~three~~U.S. ~~and~~Dollar ~~nine~~against ~~month~~the Euro, ~~periods~~British ~~ending~~Pound, ~~June~~New 30Zealand Dollar, ~~2008~~Brazilian Real, Malaysian Ringgit and the ~~Company~~Australian ~~recorded~~Dollar ahave ~~net~~impacted ~~benefit~~the translation of ~~$0.4~~revenues ~~million~~ and ~~$1.8~~expenses ~~million,~~of our ~~respectively,~~international asoperations. The atable ~~result~~below ofsummarizes athe ~~fire~~impact of ~~that~~changing ~~occurred~~exchange inrates for the ~~Company’s~~above ~~facility~~currencies infor ~~New~~the ~~Jersey~~three onmonths ~~July~~ended December 231, ~~2007~~2009.

Goodwill Impairment. The Company recorded an impairment of goodwill in its Asia Pacific segment in the amount of $3.5 million in the nine months ended June 30, 2009. The goodwill impairments were $2.3 million and $1.2 million, respectively, at our Australia and New Zealand reporting units. Please refer to Note 10, Goodwill, for additional disclosures related to the Company’s non-cash charge for goodwill impairment.

	Three Months Ended
	December 31, 2009

Net revenues	$8.1 million
Operating income	$0.1 million
Pre-tax income	$0.1 million
Net income	$0.1 million

Operating income by segment and discussion of significant segment changes for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 follows.

	Three Months Ended
Operating income	June 30,
	2009			2008			Change			%
	(Dollars in Thousands)
ICO Europe	$	1,342		$	3,901		$	(2,559	)		(66%	)
Bayshore Industrial		1,772			2,045			(273	)		(13%	)
ICO Asia Pacific		171			(11	)		182		N.M.*
ICO Polymers North America		210			1,811			(1,601	)		(88%	)
ICO Brazil		(10	)		224			(234	)		(104%	)
Subtotal		3,485			7,970			(4,485	)		(56%	)
Unallocated General Corporate Expense		(1,296	)		(1,503	)		207			(14%	)
Consolidated	$	2,189		$	6,467		$	(4,278	)		(66%	)

* Not meaningful

Operating income (loss) as a percentage	Three Months Ended
of revenues	June 30,
	2009		2008		Change
ICO Europe		4%		7%		(3%	)
Bayshore Industrial		11%		11%		0%
ICO Asia Pacific		1%		0%		1%
ICO Polymers North America		3%		15%		(12%	)
ICO Brazil		0%		5%		(5%	)
Consolidated		3%		6%		(3%	)

ICO Europe’s operating income decreased $2.6 million or 66% due to a decrease in volumes sold and to a lesser extent the negative impact from feedstock margins primarily within our Italian business unit due to an unfavorable change in product mix.

Bayshore Industrial’s operating income fell $0.3 million or 13% primarily as a result of a decrease in volumes sold due to lower customer demand.

ICO Asia Pacific’s operating income increased $0.2 million. The operating income increase was mainly due to lower plant operating costs and SG&A expense as a result of cost reduction efforts in the last six months. This was partially offset by the impact from lower volumes sold.

ICO Polymers North America’s operating income decreased $1.6 million or 88% primarily due to the impact from reduced volumes due to lower customer demand and a reduction of $0.3 million in net insurance benefit.

ICO Brazil’s operating income declined $0.2 million or 104% primarily caused by the reduction in volumes sold due to lower customer demand and lower feedstock margins.

Operating income (loss) by segment and discussion of significant segment changes for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 follows.

-28-

Operating income (loss)	Nine Months Ended
	June 30,
	2009			2008			Change			%
	(Dollars in Thousands)
ICO Europe	$	3,108		$	10,419		$	(7,311	)		(70%	)
Bayshore Industrial		5,090			8,755			(3,665	)		(42%	)
ICO Asia Pacific		(6,120	)		1,612			(7,732	)		(480%	)
ICO Polymers North America		1,453			5,194			(3,741	)		(72%	)
ICO Brazil		(40	)		553			(593	)		(107%	)
Subtotal		3,491			26,533			(23,042	)		(87%	)
Unallocated General Corporate Expense		(4,066	)		(4,924	)		858			(17%	)
Consolidated	$	(575	)	$	21,609		$	(22,184	)		(103%	)

Operating income (loss) as a	Nine Months Ended
percentage of revenues	June 30,
	2009			2008		Change
ICO Europe		3%			7%		(4%	)
Bayshore Industrial		10%			12%		(2%	)
ICO Asia Pacific		(16%	)		3%		(19%	)
ICO Polymers North America		6%			15%		(9%	)
ICO Brazil		0%			4%		(4%	)
Consolidated		0%			6%		(6%	)

ICO Europe’s operating income decreased $7.3 million or 70% due primarily to a decrease in volumes sold ($5.0 million impact) and feedstock margins ($0.8 million impact), as well as a negative impact from the translation effect of a stronger U.S. Dollar of $0.5 million.

Bayshore Industrial’s operating income decreased $3.7 million or 42%, primarily as a result of a decrease in volumes sold due to lower customer demand ($4.5 million impact) and to a lesser extent lower feedstock margins ($0.9 million impact). A decrease in plant operating costs of $1.6 million partially offset these items.

ICO Asia Pacific’s operating income decreased $7.7 million primarily as a result of a $3.5 million non-cash goodwill impairment charge and lower feedstock margins which contributed $2.5 million to the decline. Additionally, lower sales volumes negatively impacted operating income by $1.3 million. The Company incurred an operating loss in the nine months ended June 30, 2009 in the amount of $1.2 million compared to a loss of $0.5 million in the nine months ended June 30, 2008 in connection with its former facility in the United Arab Emirates, which was closed during the current fiscal year.

ICO Polymers North America’s operating income decreased $3.7 million or 72% primarily due to a reduction in volumes sold due to lower customer demand which impacted operating income by $2.5 million and as a result of lower net impairment, restructuring and other costs (income) of $1.3 million.

ICO Brazil’s operating income decreased $0.6 million or 107% primarily caused by the reduction in volumes sold due to lower customer demand.

Interest Expense, Net. For the three and nine months ended June 30, 2009, net interest expense decreased $0.5 million or 48% and $1.4 million or 46%, respectively, as compared with the same periods of the previous fiscal year. This was primarily a result of reduced borrowings.

Income Taxes (from continuing operations). The Company’s effective income tax rates were a provision of 14% during the three months ended June 30, 2009 and a benefit of 1% during the nine months ended June 30, 2009. The Company’s effective income tax rates were provisions of 17% and 29% during the three and nine months ended June 30, 2008, compared to the U.S. statutory rate of 35%. The lower effective tax rates during the three and nine months ended June 30, 2008 were primarily due to the reversal of the valuation allowance against the deferred tax asset of the Brazilian subsidiary. The lower effective tax rate in the nine months ended June 30, 2009 was primarily a result of the goodwill impairment of $3.5 million, which is not tax deductible. For the three months ended June 30, 2009, tax credits in the amount of $0.2 million led to the effective tax rate of 14%.

-29-

Net Income (Loss). For the three and nine months ended June 30, 2009, the Company had net income of $1.3 million and a net loss of $2.8 million, respectively, compared to net income of $4.6 million and $13.1 million for the comparable periods in fiscal year 2008, due to the factors discussed above.

Foreign Currency Translation. The fluctuations of the U.S. Dollar against the Euro, British Pound, New Zealand Dollar, Brazilian Real, Malaysian Ringgit and the Australian Dollar have impacted the translation of revenues and expenses of our international operations. The table below summarizes the impact of changing exchange rates for the above currencies for the three and nine months ended June 30, 2009.

	Three Months Ended	Nine Months Ended
	June 30, 2009	June 30, 2009
Net revenues	$(9.4) million	$(29.1) million
Operating income	$(0.2) million	$1.4 million
Pre-tax income	$(0.4) million	$1.5 million
Net income	$(0.2) million	$1.4 million

Recently Issued Accounting Pronouncements

InBusiness Combinations ~~December~~in ~~2007,~~Consolidated ~~the~~ Financial ~~Accounting~~Statements – ~~Standards~~In ~~Board~~December 2007, the (“FASB”) issued ~~Statement~~authoritative ofguidance that ~~Financial~~establishes ~~Accounting~~the ~~Standard~~principles ~~No.~~and ~~141~~requirements ~~(revised~~for ~~2007),~~how ~~Business~~an ~~Combinations~~acquirer (~~“SFAS 141 (R~~i)”) recognizes and ~~SFAS~~measures ~~No. 160, Noncontrolling Interests~~ in ~~Consolidated~~its ~~Financial~~financial ~~Statements~~statements –the anidentifiable ~~amendment~~assets acquired, ofthe ~~ARB~~liabilities ~~No.~~assumed, 51and ~~(“SFAS~~any ~~160”). The~~noncontrolling ~~goal~~interest ofin ~~these~~the acquiree; ~~standards~~(ii) isrecognizes ~~to improve, simplify,~~ and ~~converge~~measures ~~internationally~~ the ~~accounting~~goodwill ~~for~~acquired ~~business~~in ~~combinations and~~ the ~~reporting~~business combination ofor ~~noncontrolling~~a ~~interests~~gain infrom ~~consolidated~~a ~~financial~~bargain ~~statements. SFAS~~purchase; ~~141~~and (Riii) ~~replaces~~determines ~~SFAS~~what information ~~No.~~to ~~141~~disclose ~~and~~to ~~provides~~enable ~~greater~~users ~~consistency~~of inthe financial statements to evaluate the ~~accounting~~nature and financial ~~reporting~~effects of the business ~~combinations~~combination. ~~SFAS~~The ~~141~~new accounting ~~(R)~~rules ~~requires~~require the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. This includes the measurement of the acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition- related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance and deferred taxes. ~~SFAS~~ 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 141 (R) is effective for business combinations for which the acquisition date is on or afterThe ~~the~~guidance ~~beginning~~was ~~of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. The provisions of SFAS 141 (R) are~~ effective for ~~the~~us ~~Company~~ on October 1, 2009. AsFor ~~SFAS~~any acquisitions ~~141~~completed ~~(R)~~during ~~will~~fiscal ~~apply~~year ~~to future acquisitions~~2010, itwe isexpect ~~not possible at this time for~~ the ~~Company~~adoption ~~to determine the impact~~ of ~~adopting this standard. Similarly, SFAS 160 is effective for~~ the guidance ~~Company~~will ~~for~~have ~~the~~an ~~fiscal~~impact ~~year~~on ~~2010,~~our ~~with~~consolidated ~~early~~financial ~~adoption~~statements; ~~also being prohibited. The~~however, ~~Company~~the ismagnitude ~~assessing~~of the impact ~~that~~will ~~SFAS~~depend ~~160~~upon ~~may~~the ~~have~~nature, onterms ~~its~~and ~~financial~~size ~~position, results~~ of ~~operations~~any acquisitions ~~and~~we ~~cash flows~~consummate.

InNoncontrolling Interests ~~March~~– ~~2008~~In December 2007, the FASB issued ~~SFAS~~new ~~No.~~accounting ~~161~~guidance ~~(“SFAS~~on ~~161”), Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No~~noncontrolling interests. ~~133. This~~The ~~Statement~~new ~~changes~~accounting ~~the~~rules ~~disclosure requirements~~clarify ~~for~~that ~~derivative~~a ~~instruments~~noncontrolling ~~and~~interest ~~hedging~~in ~~activities. Entities are required to provide enhanced disclosures about (~~a) subsidiary ~~how~~is ~~and why~~ an ~~entity~~ownership ~~uses~~interest ~~derivative~~in ~~instruments,~~the ~~(b)~~consolidated ~~how~~entity ~~derivative~~that ~~instruments~~should ~~and~~be reported ~~related~~as ~~hedged~~equity ~~items~~in ~~are~~the ~~accounted~~consolidated ~~for~~financial ~~under~~statements. ~~Statement~~The ~~133~~implementation of ~~and~~new ~~its~~accounting ~~related~~rules ~~interpretations, and (c) how derivative instruments and~~ related ~~hedged~~to ~~items~~noncontrolling ~~affect an entity’s financial position~~interests, ~~financial performance~~effective October 1, ~~and cash flows. The Company adopted the provisions of SFAS 161 in the second fiscal quarter of~~ 2009, ~~but it~~ did not have a ~~significant~~material impact on ~~its~~our financial position, results of operations or cash flows, as we had no noncontrolling interests during the three months ended December 31, 2009.

~~In April 2008, the FASB issued FSP FAS 142~~-~~3, Determination of the Useful Life of Intangible Assets ("FSP FAS 142~~24-3"). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other applicable accounting literature. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not anticipate that the adoption of FSP FAS 142-3 will have a material impact on its results of operations or financial condition.

Share-30based payment transactions and participating securities – In June 2008, the FASB issued authoritative guidance governing whether instruments granted in share-based payment transactions are participating securities. This guidance addresses whether these instruments are participating securities prior to vesting and therefore need to be included in computing earnings per share under the two-class method. The implementation of this new guidance, effective October 1, 2009, changed reported weighted average shares outstanding but it did not have a material impact on the Company’s earnings per share calculation.

Variable Interest Entities - In June ~~2008~~2009, the FASB issued ~~FASB~~guidance ~~Staff~~that ~~Position~~amends the ~~(“FSP”)~~consolidation ~~Emerging~~guidance ~~Issues~~applicable ~~Task~~to ~~Force~~variable ~~(“EITF”)~~interest ~~03-6-1,~~entities. ~~Determining~~The provisions ~~Whether~~of ~~Instruments~~this ~~Granted~~guidance insignificantly ~~Share-Based~~affect ~~Payment~~the ~~Transactions~~overall ~~Are~~consolidation analysis ~~Participating~~under ~~Securities~~previous guidance. ~~This~~ ~~FSP~~It ~~addresses~~is ~~whether~~effective ~~instruments granted~~as inof ~~share-based~~the ~~payment~~beginning ~~transactions~~of ~~are~~the first ~~participating~~fiscal ~~securities~~year ~~prior~~that tobegins ~~vesting~~after ~~and,~~November ~~therefore~~15, ~~need~~2009; tospecifically beit ~~included~~will inbe effective ~~computing~~for ~~earnings per share under~~ the ~~two-class~~Company ~~method~~beginning ~~described~~ in ~~SFAS~~October ~~No. 128~~1, ~~Earnings Per Share~~2010. ~~This~~ ~~FSP~~The ~~will be effective for the~~ Company ~~beginning~~does ~~with~~not expect the ~~first~~provisions ~~quarter~~ of ~~fiscal~~this ~~year~~guidance ~~2010~~to ~~and~~have ~~will~~a bematerial ~~applied~~effect ~~retrospectively. We~~on ~~are~~our consolidated ~~currently~~financial ~~evaluating~~condition, ~~the~~results ~~impact~~ of ~~adopting~~operations ~~this~~or ~~new standard~~cash flows.

In December 2008, the FASB issued FASB Staff Position (“FSP”) FAS 132 (R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which amends SFAS No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits. This FSP provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The objectives of these disclosures are to provide users of financial statements with an understanding of:

a. how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies;

b. the major categories of plan assets;

c. the inputs and valuation techniques used to measure the fair value of plan assets;

d. the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period; and

e. significant concentrations of risk within plan assets.

The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact of adopting this new standard.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles ( “SFAS 168”), which establishes the FASB Accounting Standards CodificationTM (the “Codification”) which supersedes all existing accounting standard documents and will become the single source of authoritative non-governmental U.S. GAAP. All other accounting literature not included in the Codification will be considered non-authoritative. The Codification was implemented on July 1, 2009 and will be effective for interim and annual periods ending after September 15, 2009. We expect to conform our financial statements and related Notes to the new Codification for the quarter ended September 30, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”), which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements. SFAS 165 distinguishes between events requiring recognition in the financial statements and those that may require disclosure in the financial statements. Furthermore, SFAS 165 requires disclosure of the date through which subsequent events were evaluated. SFAS 165 is effective for interim and annual periods after June 15, 2009. We adopted the provisions of SFAS 165 during the period ended June 30, 2009, and the Company did not have any material recognizable subsequent events. However, the Company did have unrecognizable subsequent events as discussed further in Note 16, Subsequent Events. The Company performed an evaluation of subsequent events through August 7, 2009, which is the date these financial statements were issued.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in October 2011. The Company does not expect the provisions of SFAS 167 to have a material effect on the consolidated financial position, results of operations or cash flows of the Company.

In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FAS 141(R)-1”), which applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS No. 5, Accounting for Contingencies (“SFAS No. 5”), if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS No. 141(R), Business Combinations (“SFAS No. 141-(R)”). FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The provisions of FAS 141 (R)-1 are effective for the Company on October 1, 2009. As FAS 141 (R)-1 will apply to future acquisitions, it is not possible at this time for the Company to determine the impact of adopting this standard.

-31-

Liquidity and Capital Resources

Executive Summary. Thus far in fiscal year 2009, we have increased our cash balance by $18.0 million and reduced our debt outstanding by $16.4 million. We were able to achieve these two items as a result of the positive cash flow from operations and by reducing accounts receivable and inventory. Accounts receivable and inventory were reduced due to the lower business volumes we have experienced in fiscal year 2009 to date, lower average resin prices and our internal focus on managing accounts receivable and inventory. Our available borrowing capacity as of June 30, 2009 was $46.9 million. The primary uses of cash for other than operations are generally capital expenditures, debt service and share repurchases. Presently, the Company anticipates that cash flow from operations and availability under credit facilities will be sufficient to meet its short and long-term operational requirements.

The following are considered by management as key measures of liquidity applicable to the Company:

	June 30, 2009	September 30, 2008
	December 31, 2009	September 30, 2009
Cash and cash equivalents	$2313.69 million	$521.69 million
Working capital	$61.35 million	$6764.01 million
Total outstanding debt	$3328.59 million	$4931.98 million
Available borrowing capacity	$4649.94 million	$6250.85 million

The primary uses of cash for other than operations are generally capital expenditures, debt service and dividend payments. Presently, the Company anticipates that cash flow from operations and availability under credit facilities will be sufficient to meet its short and long-term operational requirements.

Cash Flows

Cash and cash equivalents ~~increased~~decreased $188.0 million and working capital declined $52.7 6 million during the ~~nine~~three months ended ~~June~~December 3031, 2009, as compared with the three ~~same nine~~ months ofended ~~fiscal~~December ~~year~~31, 2008, due to the factors described below.

		June 30,			June 30,
	December 31,		December 31,
	2009	~~2009~~	2008		~~2008~~
	(Dollars in Thousands)	~~(Dollars in Thousands)~~
Net cash provided by operating activities by continuing operations		$	36,106		$	3,887
Net cash provided (used for) by operating activities by continuing operations	$(2,605)		$13,521
Net cash used for operating activities by discontinued operations			(103	)		(59	)
Net cash provided by operating activities by discontinued operations	-		184
Net cash used for investing activities	(1,015)		(1,~~878~~364)	)		~~(8,633~~	)
Net cash used for financing activities	(4,265)		(166,~~895~~899)	)		~~(102~~	)
Effect of exchange rate changes	(74)		~~770~~(56)			~~255~~
Net increase/(decrease) in cash and cash equivalents	$(7,959)	$	18$5,~~000~~386		$	~~(4,652~~	)

Cash Flows From Operating Activities

During the ~~nine~~three months ended December ~~June 30~~31, 2009, wethe ~~improved~~Company ~~our~~used ~~liquidity position by generating net cash from operating activities of~~ $362.06 million, ~~compared~~of ~~with a net~~ cash ~~generation of $3.8 million~~ for ~~the same nine month period in the prior fiscal year. The $32.2 million year-over-year increase in cash provided by~~ operating activities ~~was~~by ~~primarily~~continuing ~~due~~operations toas a ~~decline~~result inof ~~inventory,~~changes ~~increasing cash available~~ in ~~the amount of $16~~working capital.8 In ~~million during~~ the ~~nine~~three ~~months~~month period ended ~~June~~December 3031, ~~2009~~2008, ~~compared~~the Company togenerated ~~a use of~~ cash ~~for inventory in the amount~~ of $813.35 million ~~during~~from ~~the~~operating ~~same~~activities ~~period~~by ~~of the previous fiscal year~~continuing operations. ~~This~~The ~~inventory~~main ~~fluctuation~~reason ~~was~~for ~~largely~~the ~~driven~~change bywas ~~decreased~~due ~~sales~~to ~~volumes,~~using ~~lower~~cash ~~average prices held~~ in the ~~inventory~~current asperiod ~~a result~~ of ~~lower~~$5.0 ~~resin~~million ~~prices~~for ~~and~~inventory ~~our~~caused ~~efforts~~by tohigher ~~reduce~~ inventory~~. Additionally,~~ levels ~~during~~while in the ~~current fiscal~~prior year, period the Company generated ~~$19.4 million in~~ cash ~~from accounts receivable, which was $9.0 million more than the cash generated~~ of $1014.4 million ~~during~~related ~~the~~to ~~same prior year period~~inventory. The ~~increased~~increase ~~cash~~in ~~generated~~inventory ~~from~~in ~~accounts~~the ~~receivable~~current period was primarily due to aan ~~decrease~~increase in ~~accounts~~sales ~~receivable~~activity ~~caused by the decline~~ in ~~revenues during~~ the ~~three~~current ~~months~~period ~~ended June 30, 2009 compared to~~ over the same ~~period~~prior ~~of fiscal~~ year ~~2008~~period. ~~The~~Also ~~positive~~contributing to the change in cash flow ~~provided~~is bythat ~~operating activities was positively impacted by a decline~~ in the ~~amount~~current ofperiod ~~cash~~the Company used ~~to fund accounts payable, which required~~ $50.6 million inof cash ~~during~~for accounts ~~the~~receivable ~~three~~while ~~months~~in ~~ended~~the ~~June~~same ~~30,~~period ~~2009~~of ~~compared~~the ~~with~~previous afiscal year it generated $1412.82 million ~~usage~~ of cash ~~in the same prior year period~~. ~~Accounts~~Offsetting ~~payable~~those ~~decreased~~two asitems awere ~~result~~cash inflows offrom ~~higher~~accounts ~~levels~~payable ~~of inventory~~ in the ~~prior~~current ~~year~~fiscal period. ~~Offsetting~~of ~~these~~$0.6 ~~benefits~~million compared ~~was~~to ~~the~~a ~~decrease~~use inof ~~income~~cash ~~from~~for ~~continuing~~accounts ~~operations~~payable of $1611.05 million ~~during~~in the ~~nine months ended June 30, 2009 compared with the~~ same period inof ~~fiscal~~the ~~year~~prior ~~2008~~year.

-3225-

Cash Flows Used for Investing Activities

Net cash used for investing activities for the ~~nine~~three months ended ~~June~~December 3031, 2009 was $1.90 million, compared to $81.64 million during the same period of the prior fiscal year, primarily caused by a reduction in capital expenditures of $80.7 4 million period over period. This reduction in cash used for capital expenditures was offset by a decrease of $1.9 million in the amount of cash received from the Company’s insurance carrier for reimbursement of costs associated with fires in the Company’s New Jersey facility in July 2007 and July 2008. Capital expenditures totaled $2.4 million during the nine months ended June 30, 2009 and were related primarily to the relocation to Pennsylvania from our New Jersey facility, which is now substantially complete. Non-discretionary capital expenditures have historically been approximately $2.0 million to $3.0 million per year. For the remainder of fiscal year ~~2009~~2010, we expect discretionary capital expenditures to be approximately $14.0 million.

Cash Flows Used For Financing Activities

During the ~~nine~~three months ended December ~~June 30~~31, 2009, the Company used $164.93 million of cash for financing activities, consisting of ~~a net decrease in~~ short and long term debt repayments of $143.94 million and $21.04 million used for ~~purchasing~~a ~~common~~dividend ~~shares~~payment. In on the ~~open~~prior ~~market~~year period, ~~which~~financing ~~were~~activities ~~converted~~used ~~into~~$6.9 ~~Treasury~~million ~~Stock. In~~of ~~the~~cash ~~prior~~primarily ~~year~~to ~~period,~~finance ~~financing~~the ~~activities~~repurchase ~~used~~of treasury stock of $02.10 million and debt repayments of ~~cash~~$5.0 million.

Financing Arrangements

We maintain several lines of credit. The facilities are collateralized by certain of our assets and are generally used to finance our working capital needs. ~~The following table presents the borrowing capacity, outstanding borrowings and net availability under the various credit facilities in the Company’s domestic and foreign operations.~~

	Domestic				Foreign				Total
	As of				As of				As of
	June 30,		September 30,		June 30,		September 30,		June 30,		September 30,
	2009		2008		2009		2008		2009		2008
	(Dollars in Millions)
Borrowing Capacity (a)	$	9.3	$	19.9	$	37.7	$	52.5	$	47.0	$	72.4
Outstanding Borrowings		-		-		0.1		9.6		0.1		9.6
Net availability	$	9.3	$	19.9	$	37.6	$	42.9	$	46.9	$	62.8
(a) Based on the credit facility limits less outstanding letters of credit.

The following table presents the borrowing capacity, outstanding borrowings and net availability under the various credit facilities in our domestic and foreign operations.

We maintain a Credit Agreement (the “Credit Agreement”) with KeyBank National Association and Wells Fargo Bank National Association with a maturity date of October 2012. The Credit Agreement was amended in March 2009 to modify, among other things, certain definitions related to the financial covenants within the Credit Agreement. The capacity of the Company’s revolving credit facility was also reduced from $30.0 million to $20.0 million. Under the Credit Agreement, there is a total of $11.1 million outstanding in the form of term loans as of June 30, 2009.

	Domestic				Foreign				Total
	As of				As of				As of
	December 31,		September 30,		December 31,		September 30,		December 31,		September 30,
	2009		2009		2009		2009		2009		2009
	(Dollars in Millions)
Borrowing Capacity (a)	$	11.7	$	10.6	$	38.3	$	39.9	$	50.0	$	50.5
Outstanding Borrowings		-		-		0.6		-		0.6		-
Net availability	$	11.7	$	10.6	$	37.7	$	39.9	$	49.4	$	50.5

(a) Based on the credit facility limits less outstanding letters of credit.

~~The~~We maintain ~~borrowing~~a ~~capacity~~Credit Agreement (the “Credit Agreement”) with KeyBank National Association and Wells Fargo Bank National Association, with a maturity date of October 2012. Under the Credit Agreement, there is a total of $208.0 9 million outstanding in the form of two term loans as of December 31, 2009. The Credit Agreement also contains a revolving credit facility isof $20.0 million based on the Company’s levels of domestic receivables and inventory. As of ~~June~~December 3031, 2009, the borrowing capacity was $911.3 7 million~~. There~~ ~~were~~after subtracting $1.7 million inof letters of credit outstanding. There ~~under~~were ~~the credit facility, but~~ no borrowings ~~were outstanding~~ under the revolving credit facility as of ~~September~~December 3031, ~~2008~~2009 and ~~June~~September 30, 2009.

The Credit Agreement contains a variable interest rate and contains certain financial and nonfinancial covenants. During fiscal year 2008, the Company entered into interest rate swaps on ~~two~~its ~~term loans which at June 30, 2009 had outstanding amounts of~~ $7.5.8 million and $3.61 million term loans. The swaps lock in the Company’s interest rate on (i) the $7.5.8 million term loan at 2.82% plus the credit spread on the corresponding debt, and (ii) on the $3.61 million term loan at 3.69% plus the credit spread on the corresponding debt. The interest rates as of ~~June~~December 3031, 2009 were 6.6% and 7.9%, respectively.

~~The~~We ~~Credit~~must meet certain financial covenants as defined in the KeyBank Credit Agreement. We ~~establishing~~were in compliance with these covenants at December 31, 2009 and at September 30, 2009. In the ~~credit~~event ~~facility~~that ~~contains~~we ~~financial~~are unable to remain in compliance with the Credit Agreement’s covenants in the future, ~~including~~our lenders would have the right to declare us in default with respect to such obligations, and consequently, certain of our debt obligations, would be deemed to also be in default. All debt obligations in default would be required to be reclassified as a current liability. In the event that we were unable to obtain a waiver from our lenders or renegotiate or refinance these obligations, a material adverse effect on our ability to conduct our operations in the ordinary course would likely result. The financial covenants in the KeyBank Credit Agreement include:

· A minimum tangible net worth requirement (as defined in the Credit Agreement) of $50.0 million plus 50% of each fiscal quarter’s net income. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, ~~our~~the Company’s required minimum tangible net worth was $6870.82 million and $6869.27 million, respectively. ~~Our~~The Company’s actual ~~minimum~~ tangible net worth was $9698.71 million and $9597.96 million, respectively, as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009.

~~-33-~~· A leverage ratio (as defined in the Credit Agreement) not to exceed 3.0 to 1.0. As of December 31, 2009 and September 30, 2009, the Company’s leverage ratios were 1.8 to 1.0 and 2.5 to 1.0, respectively.

~~· A leverage ratio (as defined in the Credit Agreement) not to exceed 3.0 to 1.0. As of June 30, 2009 and September 30, 2008, our leverage ratios were 2.4 to 1.0 and 1.6 to 1.0, respectively.~~-26-

· A fixed charge coverage ratio of at least 1.0 to 1.0, defined as “Adjusted EBITDA” (as defined in the Credit Agreement), plus rent expense divided by fixed charges (defined as the sum of interest expense, income tax expense ~~paid~~, scheduled principal debt repayments in the prior four quarters, capital ~~distributions, capital~~ expenditures for the purpose of maintaining existing fixed assets and rent expense); and as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, ~~our~~the Company’s fixed charge coverage ratios were 1.~~2 to~~ 1.0 ~~and 1.5~~ to 1.0~~, respectively~~.

· A requirement that “Adjusted EBITDA” less interest expense (as defined in the Credit Agreement), not be less than zero for two consecutive fiscal quarters. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, wethe ~~have~~Company has maintained the required level of profitability above zero.

In addition, the Credit Agreement contains a number of limitations on the ability of the Company and its restricted U.S. subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or redeem any Common Stock, (iii) incur liens or other encumbrances on their assets, (iv) enter into transactions with affiliates, (v) merge with or into any other entity or (vi) sell any of their assets. Additionally, any “material adverse change” of the Company could restrict the Company’s ability to borrow under its Credit Agreement and could also be deemed an event of default under the Credit Agreement. A “material adverse change” is defined as a change in the financial or other condition, business, affairs or prospects of the Company, or its properties and assets considered as an entirety that could reasonably be expected to have a material adverse effect, (as defined in the Credit Agreement, ) on the Company.

~~Although~~The wemerger ~~were in compliance~~ with ~~our~~A. ~~financial covenants under our Credit Agreement as of June 30~~Schulman, ~~2009, it is possible that we may violate one or more of the financial covenants~~ if ~~our operating results were to deteriorate from the levels we experienced in our quarter ended June 30~~consummated, ~~2009. In~~will ~~the~~result ~~event that we are unable to remain~~ in ~~compliance~~a ~~with~~“Change ~~one or more~~ of ~~the financial covenants in the future, our lenders would have the right to declare us in default with respect to such obligations~~Control”. The lenders would have the right to demand repayment of all outstanding borrowings under the Credit Agreement and reduce the borrowing capacity of the revolving credit facility to $0. All debt obligations in default would be required to be reclassified as a current liability (as of June 30, 2009, $6.7 million of theCompany ~~term~~obtained ~~loans was classified as long term). Due to~~ the ~~fact~~consent ~~that our total outstanding debt has declined from $49.9 million as~~ of ~~September 30~~KeyBank, ~~2008~~subject to ~~$33.5~~certain ~~million~~terms ~~as of June 30, 2009~~ and ~~our cash position has improved from $5.6 million to $23.6 million over the same time period~~conditions, we believe we would be able to obtain a waiver, renegotiate or refinance these obligations. If we were not able to obtain a waiver, renegotiate or refinance these obligations, we would explore many options available to ~~us in order to make~~ the ~~early~~approval ~~repayment~~by ofour ~~the~~board ~~outstanding borrowings, including the use~~ of ~~existing~~directors ~~cash on hand~~ and ~~we would also evaluate the possibility of reducing capacity within our operations in order to generate cash from working capital~~ /or ~~perhaps~~shareholders ~~from the sale~~ of ~~assets. We can make no assurances that we will be able to do any of these items or obtain a waiver, renegotiate or refinance these obligations, and in~~ the ~~event that we are unable to do any of these items or unable to obtain~~proposed ~~a waiver, renegotiate or refinance these obligations, a material adverse effect on our ability to conduct our operations in the ordinary course likely would result~~merger.

The Company has various foreign credit facilities in eight foreign countries. The available credit under these facilities varies based on the levels of accounts receivable within the foreign subsidiary, or is a fixed amount. The foreign credit facilities are collateralized by assets owned by the foreign subsidiaries. These facilities either have a remaining maturity of less than twelve months, or do not have a stated maturity date, or can be cancelled at the option of the lender. The aggregate amounts of available borrowings under the foreign credit facilities, based on the credit facility limits, current levels of accounts receivables, and outstanding letters of credit and borrowings, were $37.67 million as of ~~June~~December 3031, 2009 and $4239.9 million as of September 30, ~~2008~~2009.

-34-

The following table contains the financial covenants within the Company’s foreign loan agreements. The financial covenant computations are specific to the subsidiary of the country listed.

	As of June 30, 2009
	As of December 31, 2009
	Outstanding	Available	Financial Covenant	Actual Covenant Calculation
Country	Outstanding Borrowings	Available Borrowing Capacity	Financial Covenant Requirement	December 31, 2009	September 30, 2009
Country	Borrowings	Borrowing Capacity	Requirement	June 30, 2009	September 30, 2008
Australia	$2.7 million	$0.9 million	Equity exceeds 29.9% of total assets	48%	43%
Australia	$2.8 million	$0.8 million	Equity exceeds 29.9% of total assets	68%	53%
			Earnings more than -1.6x interest expense	(a)	(a)
			Earnings more than 2x interest expense	(a)	(a)
Holland	1.4 million	5.3 million	Equity exceeds 34.9% of total assets	60%	56%
Holland	1.7 million	5.8 million	Equity exceeds 34.9% of total assets	54%	56%
Malaysia	0.3 million	1.5 million	Total debt less than 2x equity	.4x	.4x
Malaysia	02.40 million	12.40 million	~~Total~~Equity ~~debt~~greater ~~less~~ than 2xUS ~~equity~~$1.6 million	$6.5x0 million	1$5.0x6 million
Malaysia	2.2 million	2.0 million	Equity greater than US $1.6 million	$5.2 million	$4.6 million
New Zealand	-	0.6 million	Equity exceeds 39.9% of assets total	85%	56%

~~Except as noted below, all subsidiaries listed above were in compliance with their respective financial covenants under their applicable loan agreements at June 30, 2009 and September 30, 2008.~~-27-

(a) As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the Company did not meet this covenant due to losses in its Australian subsidiary. At ~~June~~December 3031, 2009 and September 30, 2009 ~~2008~~ there was $2.87 million and $32.98 million of term debt, ~~respectively~~outstanding, ~~and $0 and $2.1 million of short-term borrowings,~~ respectively ~~outstanding~~. The Company has classified all of the Australian term debt as current ~~as of June 30, 2009 and September 30, 2008~~. The Company obtained a waiver from its Australian bank as of ~~June~~September 30, 2009 ~~that~~and is ~~subject~~seeking toa ~~ongoing~~waiver ~~satisfaction~~for ~~of certain conditions. The Company is also in~~ the ~~process~~December of31, ~~trying to modify the financial~~ 2009 covenant ~~within the loan agreement with the Company’s lender in Australia~~violation. ~~The Company can make no assurance that such modification will be executed.~~ Of the $37.6 7 million of total foreign credit availability as of ~~June~~December 3031, 2009, $0.89 million related to the Company’s Australian subsidiary.

AsOff-Balance ~~of September 30, 2008, the New Zealand subsidiary was in violation of a financial covenant related to a metric of profitability compared to interest expense~~Sheet Arrangements. The Company ~~obtained~~does anot ~~waiver~~have ~~from~~any ~~the~~financial ~~lender~~instruments ~~for~~classified ~~this~~as ~~violation. At~~off-balance ~~June~~sheet (other ~~30,~~than ~~2009,~~operating ~~our~~leases) ~~New~~as ~~Zealand subsidiary was not in violation~~ of ~~any~~December ~~financial~~31, ~~covenants related~~2009 toand ~~any~~September ~~of its debt agreements~~30, 2009.

Off-Balance Sheet Arrangements. The Company does not have any financial instruments classified as off-balance sheet (other than operating leases) as of June 30, 2009 and September 30, 2008.

Forward-Looking Statements

Matters discussed and statements made in this document which are not historical facts and which involve substantial risks, uncertainties and assumptions are “forward-looking statements,” within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and are intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. When words such as “anticipate,” “believe,” “estimate,” “intend,” “expect,” “plan” and similar expressions are used, they are intended to identify the statements as forward-looking. Our statements regarding future, projected or potential liquidity, acquisitions, market conditions, reductions in expenses, derivative transactions, net operating losses, tax credits, tax refunds, growth plans, trends in the marketplace, capital expenditures and financial results are examples of such forward-looking statements. Our forward looking statements can become untrue, and actual results and outcomes can differ materially from results or outcomes suggested by these forward-looking statements due to a number of factors, risks, uncertainties, and circumstances that present risks, including: ~~restrictions~~the failure to receive the approval of the merger by the Company’s shareholders; satisfaction of the conditions to the closing of the merger; costs and difficulties related to integration of businesses and operations; delays, costs and difficulties relating to the merger; restrictions imposed by our outstanding indebtedness, changes in the cost and availability of resins (polymers) and other raw materials, general economic conditions, changes in demand for our services and products, business cycles and other industry conditions, international risks, operational risks, our lack of asset diversification, the timing of new services or facilities, our ability to compete, effects of compliance with laws, fluctuation of the U.S. Dollar against ~~foreign~~ foreign currencies, matters relating to operating facilities, failure of closing conditions in any transaction to be satisfied, integration of acquired businesses, effect and cost of claims, litigation and environmental remediation, and our ability to manage global inventory, develop technology and proprietary know-how, and attract and retain key personnel, our financial condition, results of litigation, results of operations, capital expenditures and other spending requirements, and the risks and risk factors referenced below and elsewhere in this document and those described in our other filings with the SEC.

You should carefully consider the factors in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2008~~2009 and other information contained in this document. If any of the risks and uncertainties actually occurs, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In such case, the trading price of our Common Stock could decline, and you may lose all or part of your investment.

-35-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as part of our ongoing business operations, including debt obligations that carry variable interest rates, foreign currency exchange risk, and resin price risk that could impact our financial condition, results of operations and/or cash flows. We manage our exposure to these and other market risks through regular operating and financing activities, including the use of derivative financial instruments. Our intention is to use these derivative financial instruments as risk management tools and not for trading purposes or speculation.

As mentioned above, ~~the~~our ~~Company’s~~ revenues and profitability are impacted by changes in resin prices. ~~The~~We ~~Company~~use ~~uses~~ various resins (primarily polyethylene) to manufacture our ~~its~~ products. As the price of resin increases or decreases, market prices for ~~the~~our ~~Company’s~~ products will also generally increase or or decrease. This will typically lead to higher or lower average selling prices and will impact ~~the~~our ~~Company’s~~ operating income and operating margin. The impact on operating income is due to a lag in matching the change in raw material cost of goods sold and the change in product sales prices. As of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, ~~the~~we ~~Company~~ had $1921.78 million and $2618.2 4 million of raw material inventory and $1418.1 million and $2517.9 million of finished goods inventory, respectively. ~~The~~We ~~Company~~attempt ~~attempts~~ to minimize our ~~its~~ exposure to resin price changes by monitoring and carefully managing the quantity of ~~its~~our inventory on hand and product sales prices.

As of December ~~June 30~~31, 2009, ~~the~~we ~~Company~~ had $6873.53 million of net investment in foreign wholly-owned subsidiaries. ~~The~~We ~~Company~~do ~~does~~ not hedge the foreign exchange rate risk inherent with this non-U.S. Dollar denominated investment.

~~The Company does, however, enter into forward currency exchange contracts related to both future purchase obligations and other forecasted transactions denominated in non~~-functional currencies, primarily repayments of foreign currency intercompany transactions. Certain of these forward currency exchange contracts qualify as cash flow hedging instruments and are highly effective. In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, the Company recognizes the amount of hedge ineffectiveness for these hedging instruments in the Consolidated Statement of Operations. The hedge ineffectiveness on the Company’s designated cash flow hedging instruments was not a significant amount for the nine months ended June 30, 2009 and 2008, respectively. The Company’s principal foreign currency exposures relate to the Euro, British Pound, Australian Dollar, New Zealand Dollar, Malaysian Ringgit and Brazilian Real. The Company’s forward contracts have original maturities of one year or less. The following table includes the total value of foreign exchange contracts outstanding for which hedge accounting is being applied as of June 30, 2009 and September 30, 2008:28-

	As of
	June 30,	September 30,
	2009	2008
Notional value	$3.5 million	$8.3 million
Fair market value	$0.3 million	$(0.5) million
Maturity Dates	July through October 2009	October 2008
		through February 2009

We enter into forward currency exchange contracts related to both future purchase obligations and other forecasted transactions denominated in non-functional currencies, primarily repayments of foreign currency intercompany transactions. Certain of these forward currency exchange contracts qualify as cash flow hedging instruments and are highly effective. In accordance with authoritative guidance over accounting for derivative instruments and hedging activities, we recognize the amount of hedge ineffectiveness for these hedging instruments in our Consolidated Statement of Operations. The hedge ineffectiveness on our designated cash flow hedging instruments was not a significant amount for the three months ended December 31, 2009 and 2008, respectively. Our principal foreign currency exposures relate to the Euro, British Pound, Australian Dollar, New Zealand Dollar, Malaysian Ringgit and Brazilian Real. Our forward contracts have original maturities of one year or less.

The following table includes the total value of foreign exchange contracts outstanding for which hedge accounting is being applied as of December 31, 2009 and September 30, 2009:

	As of
	December 31,	September 30,
	2009	2009

Notional value	$2.9 million	$5.5 million
Fair market value	$0.0 million	$(0.3) million
Maturity Dates	January through April 2010	October 2009
		through January 2010

~~The~~Foreign Currency Intercompany Accounts and Notes Receivable. As mentioned above, from time-to-time, the Company’s ~~variable~~U.S. ~~interest~~subsidiaries ~~rates~~provide ~~subject~~capital to the Company’s toforeign subsidiaries ~~the~~through ~~risks~~U.S. ofDollar ~~increased~~denominated interest ~~costs~~bearing ~~associated~~promissory notes. In addition, certain of the Company’s foreign subsidiaries also provide other foreign subsidiaries with ~~any~~access ~~upward~~to ~~movements~~capital inthrough ~~market~~foreign currency denominated interest ~~rates~~bearing promissory notes. AsSuch offunds are ~~June~~generally ~~30,~~used ~~2009,~~by the Company’s ~~had~~foreign ~~$0.9~~subsidiaries ~~million~~to ofpurchase ~~variable~~capital assets ~~interest~~and/or ~~rate~~for ~~debt~~general working capital needs. The Company’s U.S. ~~variable~~subsidiaries ~~interest~~also ~~rates~~sell products to the Company’s foreign subsidiaries in U.S. Dollars on trade credit terms. In addition, the Company’s foreign subsidiaries sell products to other foreign subsidiaries denominated in foreign currencies that may not be the functional currency of one or more of the foreign subsidiaries that are ~~tied~~parties to ~~various~~such ~~bank~~intercompany ~~rates~~agreements. AtThese intercompany ~~June~~debts ~~30,~~are ~~2009,~~accounted ~~based~~for onin ~~our~~the ~~current~~local ~~level~~functional currency of ~~borrowings~~the contracting foreign subsidiary, aand 1%are ~~increase~~eliminated in ~~interest~~the ~~rates~~Company’s ~~would~~Consolidated Balance ~~increase~~Sheet. At ~~interest~~December ~~expense~~31, ~~annually~~2009, bythe anCompany ~~insignificant~~had ~~amount.~~the following significant outstanding intercompany amounts as described above:

Foreign Currency Intercompany Accounts and Notes Receivable. As mentioned above, from time-to-time, the Company’s U.S. subsidiaries provide capital to the Company’s foreign subsidiaries through U.S. Dollar denominated interest bearing promissory notes. In addition, certain of the Company’s foreign subsidiaries also provide other foreign subsidiaries with access to capital through foreign currency denominated interest bearing promissory notes. Such funds are generally used by the Company’s foreign subsidiaries to purchase capital assets and/or for general working capital needs. The Company’s U.S. subsidiaries also sell products to the Company’s foreign subsidiaries in U.S. Dollars on trade credit terms. In addition, the Company’s foreign subsidiaries sell products to other foreign subsidiaries denominated in foreign currencies that may


Country of subsidiary with	Country of subsidiary with	Amount in US$ as of	Currency denomination
intercompany receivable	intercompany payable	December 31, 2009	of receivable
US	Australia	$5.1 million	United States Dollar
Holland	UK	$3.5 million	Great Britain Pound
Holland	Australia	$2.8 million	Australian Dollar
US	Malaysia	$1.3 million	United States Dollar

~~-36-~~Because these intercompany lending transactions are denominated in various foreign currencies and are subject to financial exposure from foreign exchange rate movement from the date a loan is recorded to the date it is settled or revalued, any appreciation or depreciation of the foreign currencies in which the transactions are denominated could result in a gain or loss, respectively, to the Consolidated Statement of Operations, subject to forward currency exchange contracts that we enter into to mitigate this risk. The following table includes the total value of foreign exchange contracts outstanding for which hedge accounting is not being applied as of December 31, 2009 and September 30, 2009.

not be the functional currency of one or more of the foreign subsidiaries that are parties to such intercompany agreements. These intercompany debts are accounted for in the local functional currency of the contracting foreign subsidiary, and are eliminated in the Company’s Consolidated Balance Sheet. At June 30, 2009, the Company had the following significant outstanding intercompany amounts as described above:

	As of
	December 31,	September 30,
	2009	2009

Notional value	$10.7 million	$9.0 million
Fair market value	$(0.1) million	$0.0 million
Maturity Dates	January through March 2010	October 2009
		through January 2010

Country of subsidiary with	Country of subsidiary with	Amount in US$ as of	Currency denomination
intercompany receivable	intercompany payable	June 30, 2009	of receivable
United States	Australia	$5.0 million	United States Dollar
Holland	Australia	$2.4 million	Australian Dollar
Holland	United Kingdom	$2.0 million	Great Britain Pound
United States	Malaysia	$1.3 million	United States Dollar

-29-

~~Because~~The Company ~~these~~also ~~intercompany~~marks ~~lending~~to ~~transactions~~market ~~are~~the ~~denominated~~underlying intransactions ~~various~~related ~~foreign currencies and are subject~~ to ~~financial exposure from~~ these foreign exchange ~~rate~~contracts ~~movement~~which ~~from~~offsets the ~~date~~fluctuation ~~a loan is recorded to the date it is settled or revalued, any appreciation or depreciation of the foreign currencies~~ in ~~which~~ the ~~transactions~~fair ~~are denominated~~market ~~could~~value ~~result in a gain or loss, respectively, to the Consolidated Statement~~ of ~~Operations, subject to forward currency exchange contracts that may be entered into. To mitigate this risk,~~ the ~~Company~~derivative ~~sometimes enters into foreign currency exchange contracts~~instruments. ~~The~~As ~~following table includes the total value~~ of ~~foreign~~December ~~exchange~~31, ~~contracts~~2009, ~~outstanding~~the ~~for~~net unrealized ~~which~~gain ~~hedge~~or ~~accounting~~loss ison ~~not~~these ~~being~~derivative ~~applied~~instruments ~~as of June 30, 2009~~ and ~~September~~their ~~30,~~underlyings was ~~2008~~insignificant.

	As of
	June 30,	September 30,
	2009	2008
Notional value	$8.5 million	$5.4 million
Fair market value	$0.0 million	$(0.8) million
Maturity Dates	July through September 2009	October 2008
		through February 2009

Interest Rate Swaps. In some circumstances, the Company enters into interest rate swap agreements that mitigate the exposure to interest rate risk by converting variable-rate debt to a fixed rate. The interest rate swap is marked to market in the balance sheet.

~~The~~As ~~Company~~of December ~~also~~31, ~~marks~~2009, tothe ~~market~~Company ~~the~~has ~~underlying~~$10.1 ~~transactions~~million ~~related~~in tonotional interest ~~these~~rate ~~foreign~~swaps. The ~~exchange~~estimated ~~contracts~~fair ~~which~~value ~~offsets~~of ~~the~~these ~~fluctuation~~interest inrate swaps ~~the~~as ~~fair~~of ~~market~~December ~~value~~31, of2009, ~~the~~was ~~derivative~~a ~~instruments~~liability of $0.3 million. AsThe offair ~~June~~value ~~30,~~is ~~2009,~~an estimate of the net ~~unrealized~~amount ~~gain~~that the orCompany ~~loss~~would pay on ~~these~~December ~~derivative~~31, ~~instruments~~2009 ~~and~~if ~~their~~the ~~underlyings~~agreements ~~was~~were ~~insignificant~~transferred to another party or cancelled by the Company.

~~Interest~~Please refer ~~Rate~~to ~~Risk.~~Note ~~The~~15 ~~Company’s~~– ~~interest~~“Fair ~~rate~~Value ~~risk~~Measurements ~~management objective is to limit the impact~~ of ~~future~~Assets ~~interest rate changes on earnings~~ and ~~cash~~Liabilities” ~~flows. To achieve this objective, we attempt to borrow primarily on a fixed rate basis~~ for ~~longer-term debt issuances. The~~ ~~Companyalso~~additional ~~tries~~disclosures torelated ~~manage risk associated with changes in interest rates by monitoring interest rates and future cash requirements, and evaluating opportunities~~ to ~~refinance~~the ~~borrowings~~Company’s atforward ~~various~~foreign ~~maturities~~exchange contracts and interest ~~rates~~rate swaps.

These swaps have been designated as hedges of our exposure to fluctuations in interest rates on outstanding variable rate borrowings (a cash flow hedge). As of June 30, 2009, the estimated fair value of the $12.6 million in notional interest rate swaps was a liability of $0.4 million. The fair value is an estimate of the net amount that the Company would pay on June 30, 2009 if the agreements were transferred to another party or cancelled by the Company

For the three and nine month period ended June 30, 2009 the Company recorded in other comprehensive income (loss) an unrealized loss on these interest rate swaps of $0 and $0.5 million, respectively. For the three and nine month period ended June 30, 2009 the amount of hedge ineffectiveness associated with the interest rate swaps was not significant.

Please refer to Note 15, Fair Value Measurements of Assets and Liabilities, for additional disclosures related to the Company’s forward foreign exchange contracts and interest rate swaps.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rules 13a-3715 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of December 31, 2009.

time periods specified by the SEC’s rules and forms. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of June 30, 2009.

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

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of the Company’s legal proceedings, see Note 78 – “Commitments and Contingencies” to the Consolidated Financial Statements included in Part I, Item 1 of this quarterly report on Form 10-Q and Part I, Item 3 of our Annual Report on Form 10-K for the year ended September 30, ~~2008~~2009.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 7, under the heading "Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, ~~2008~~ 2009, which could materially affect our business, financial condition or future results. There have been no material changes in our Risk Factors as disclosed in our Annual Report on Form 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~-30-

In September 2008, the Company announced that its Board of Directors authorized the repurchase of up to $12.0 million of its outstanding Common Stock over a two year period ending September 2010, (the “Share Repurchase Plan”). The specific timing and amount of repurchases will vary based on market conditions and other factors. The Share Repurchase Plan may be modified, extended or terminated at any time. There were no repurchases of shares of Common Stock during the three months ended June 30, 2009.

ITEM 6. EXHIBITS

The following instruments and documents are included as Exhibits to this Form 10-Q:

Exhibit No.		Exhibit
2.1	—	Agreement and Plan of Merger, dated as of December 2, 2009, by and among A. Schulman, Inc., Wildcat Spider, LLC and ICO, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K dated December 1, 2009).
10.1	—	Limited Consent Agreement, dated as of December 1, 2009, among ICO, Inc., Bayshore Industrial L.P. and ICO Polymers North America, Inc. (as Borrowers), KeyBank National Association, Wells Fargo Bank, National Association and the other lending institutions named therein (as Lenders); and KeyBank National Association (as an LC Issuer, Lead Arranger, Bookrunner, Administrative Agent and Syndication Agent”) (incorporated by reference to Exhibit 10.1 to Form 8-K dated December 1, 2009).
31.1*	—	Certification of Chief Executive Officer and ICO, Inc. pursuant to 15 U.S.C. Section 7241.
31.2*	—	Certification of Chief Financial Officer and ICO, Inc. pursuant to 15 U.S.C. Section 7241.
32.1**	—	Certification of Chief Executive Officer of ICO, Inc. pursuant to 18 U.S.C. Section 1350.
32.2**	—	Certification of Chief Financial Officer of ICO, Inc. pursuant to 18 U.S.C. Section 1350.
Filed herewith *Furnished herewith

-3831-

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.

	ICO, Inc.
	(Registrant)
August 7, 2009	/s/ A. John Knapp, Jr.
February 4, 2010	/s/ A. John Knapp, Jr.
	A. John Knapp, Jr.
	President, Chief Executive Officer, and
	Director (Principal Executive Officer)
	/s/ Bradley T. Leuschner
	Bradley T. Leuschner
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)
	(Principal Financial and Accounting Officer)

-3932-

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